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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Horace Mann Mutual Funds. (FILE NOS. 333-15881 AND 811-07917)
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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Notes:
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HORACE MANN MUTUAL FUNDS
November 10, 1997
Dear Annuity Contractholder:
We are pleased to enclose a Notice and Proxy Statement for the Joint Special
Meeting of the Shareholders (the "Meeting") of the International Equity Fund
and the Socially Responsible Fund (each a "Fund" and, collectively, the
"Funds") of the Horace Mann Mutual Funds (the "Trust"), along with a voting
instruction/proxy card.
The Meeting is scheduled to be held at 9:00 A.M. Central Time on Monday,
December 1, 1997 at the offices of the Fund, One Horace Mann Plaza,
Springfield, Illinois. Please take the time to read the Proxy Statement and
cast your vote, since it covers matters that are important to the Funds and to
you as owner of a Horace Mann variable contract ("Contract") having an
interest in the Funds. As all or part of your Contract value was allocated to
the International Equity and/or the Socially Responsible Subaccounts on the
record date, October 31, 1997, you are entitled to receive information and
provide voting instructions to Horace Mann Life Insurance Company ("HMLIC") on
issues placed before the shareholders of the Funds. You can give voting
instructions to HMLIC based on the number of Fund shares in which you had an
interest on the record date, as shown on the enclosed voting instruction/proxy
card.
The purpose of the Meeting is to seek your approval of a new Sub-Advisory
Agreement between Horace Mann Investors, Inc. ("Investors"), the Funds'
adviser and manager, and Scudder Kemper Investments, Inc. ("Scudder Kemper").
On June 26, 1997, Scudder, Stevens & Clark, Inc. ("Scudder"), the sub-adviser
to the Funds, entered into a Transaction Agreement with Zurich Insurance
Company, ("Zurich"), pursuant to which Scudder and Zurich have agreed to form
an alliance. Under the terms of the Transaction Agreement, Zurich will acquire
a majority interest in Scudder, and Zurich Kemper Investments, Inc., a Zurich
subsidiary, will become part of Scudder. Scudder's name will be changed to
Scudder Kemper. The foregoing are referred to herein as the "Transactions."
Consummation of the Transactions would constitute an "assignment," as that
term is defined in the Investment Company Act of 1940 (the "1940 Act"), of the
Funds' current Sub-Advisory Agreement with Scudder. As required by the 1940
Act, the current Sub-Advisory Agreement, under its terms, would automatically
terminate in the event of its assignment. In anticipation of the Transactions,
a new Sub-Advisory Agreement between Investors and Scudder Kemper is being
proposed for approval by shareholders of the Funds. The new Sub-Advisory
Agreement for the Funds is on the same terms in all material respects as the
current Sub-Advisory Agreement. The only changes are the name of the sub-
adviser and the effective date.
The Board of the Trust has voted unanimously to approve the new Sub-Advisory
Agreement and to recommend its approval to shareholders. This proposal is
described in more detail in the enclosed Proxy Statement.
HMLIC will vote shares of the Trust held by the International Equity and the
Socially Responsible Subaccounts according to instructions received from
Contract owners having an interest in the Funds. If you do not give voting
instructions to HMLIC, the shares in which you have an interest will be voted
in proportion to the responses received from other Contract owners having an
interest in the Fund or Funds in which you hold an interest.
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HORACE MANN MUTUAL FUNDS
INTERNATIONAL EQUITY FUND
SOCIALLY RESPONSIBLE FUND
ONE HORACE MANN PLAZA
SPRINGFIELD, ILLINOIS 62715-0001
TELEPHONE: (217) 789-2500 OR (800) 999-1030
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 1, 1997
AND PROXY STATEMENT
November 10, 1997
To the Shareholders:
You are invited to attend a Joint Special Meeting (the "Meeting") of the
shareholders of the International Equity Fund and the Socially Responsible
Fund (each a "Fund" and, collectively, the "Funds") of the Horace Mann Mutual
Funds, a Delaware Business Trust (the "Trust"). The meeting will be held at
the offices of the Trust, One Horace Mann Plaza, Springfield, Illinois, on
Monday, December 1, 1997 at 9:00 A.M. Central Time for the following purposes
and to transact such other business, if any, as may properly come before the
Meeting:
1. To consider approval of a new Sub-Advisory Agreement between Horace Mann
Investors, Inc., the Funds' adviser and manager, and Scudder Kemper
Investments, Inc.
The Board of Trustees has fixed the close of business on October 31, 1997 as
the record date for determining the shareholders of the Funds entitled to
notice of and to vote at the Meeting. Shareholders are entitled to one vote
for each share held. The shareholders of each Fund will vote separately on
this proposal.
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED
VOTING INSTRUCTION/PROXY CARD.
SIGN, DATE AND RETURN IT IN THE ENVELOPE PROVIDED.
PLEASE MAIL YOUR VOTING INSTRUCTION/PROXY PROMPTLY.
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Ann M. Caparros
Secretary
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HORACE MANN MUTUAL FUNDS
International Equity Fund
Socially Responsible Fund
ONE HORACE MANN PLAZA
SPRINGFIELD, ILLINOIS 62715-0001
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Trustees (the "Board") of the International Equity Fund and the
Socially Responsible Fund (each a "Fund" and, collectively, the "Funds") of
the Horace Mann Mutual Funds, a Delaware Business Trust (the "Trust"), of
proxies to be voted at the Joint Special Meeting of Shareholders of the Funds
to be held on Monday, December 1, 1997, and any and all adjournments thereof
(the "Meeting"). The date of the first mailing of the Notice, Proxy Statement
and the accompanying voting instruction/proxy card will be on or about
November 10, 1997.
PROPOSAL 1: APPROVAL OF A NEW SUB-ADVISORY AGREEMENT
INTRODUCTION
Pursuant to a Management Agreement, dated March 10, 1997, with the Trust
(the "Management Agreement"), Horace Mann Investors, Inc. ("Investors" or the
"Manager") provides investment advisory, management and administrative
services to the Trust. The Management Agreement authorizes Investors to use
the services of any person Investors believes will be appropriate and helpful
to it in performing its duties to the Trust under the Management Agreement.
Pursuant to this authority, Investors has selected Scudder, Stevens & Clark,
Inc. ("Scudder" or the "Sub-Advisor"), to provide investment advisory services
to the Funds. Scudder acts as the sub-adviser to the Funds pursuant to an
Investment Sub-Advisory Agreement between Investors and Scudder, dated
February 28, 1997 (the "Current Sub-Advisory Agreement").
On June 26, 1997, Scudder entered into a Transaction Agreement (the
"Transaction Agreement") with Zurich Insurance Company ("Zurich") pursuant to
which Scudder and Zurich have agreed to form an alliance. Under the terms of
the Transaction Agreement, Zurich will acquire a majority interest in Scudder,
and Zurich Kemper Investments, Inc. ("ZKI"), a Zurich subsidiary, will become
part of Scudder. Scudder's name will be changed to Scudder Kemper Investments,
Inc. ("Scudder Kemper"). The foregoing are referred to as the "Transactions."
ZKI, a Chicago-based investment adviser and the adviser to the Kemper funds,
has approximately $80 billion under management. The headquarters of Scudder
Kemper will be in New York. Edmond D. Villani, Scudder's Chief Executive
Officer, will continue as Chief Executive Officer of Scudder Kemper and will
become a member of Zurich's Corporate Executive Board.
Consummation of the Transactions would constitute an "assignment," as that
term is defined in the Investment Company Act of 1940 (the "1940 Act"), of the
Funds' Current Sub-Advisory Agreement with Scudder. As required by the 1940
Act, the Current Sub-Advisory Agreement
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provides for its automatic termination in the event of its assignment. In
anticipation of the Transactions, a new Investment Sub-Advisory Agreement (the
"New Sub-Advisory Agreement") between Investors and Scudder Kemper is being
proposed for approval by shareholders of the Funds. A copy of the form of the
New Sub-Advisory Agreement is attached hereto as Exhibit A. THE NEW SUB-
ADVISORY AGREEMENT FOR THE FUNDS IS ON THE SAME TERMS IN ALL MATERIAL RESPECTS
AS THE CURRENT SUB-ADVISORY AGREEMENT. The material terms of the Current Sub-
Advisory Agreement are described under "Description of the Current Sub-
Advisory Agreement" below.
Proposal 1 requires the affirmative vote of a "majority of the outstanding
voting securities" of each of the Funds. The term "majority of the outstanding
voting securities," as defined in the 1940 Act, and as used in this proxy
statement, means: the lesser of (1) 67% of the voting securities of each Fund
present at the Meeting if more than 50% of the outstanding shares of each Fund
are present in person or by proxy, or (2) more than 50% of the outstanding
shares of each Fund. The shareholders of each Fund will vote separately on
this proposal.
BOARD OF TRUSTEES RECOMMENDATION
On August 7, 1997, the Board, including Trustees who are not parties to such
agreement or "interested persons" (as defined under the 1940 Act) ("Non-
interested Trustees") or any such party, voted unanimously to approve the New
Sub-Advisory Agreement and to recommend its approval to shareholders.
For information about the Board's deliberations and the reasons for its
recommendations, please see "Board of Trustees Evaluation" below.
THE BOARD OF THE TRUST RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT.
BOARD OF TRUSTEES EVALUATION
On August 7, 1997, the Board convened in person to consider the Transactions
contemplated by the Transaction Agreement between Scudder and Zurich and the
advisability of the New Sub-Advisory Agreement with Scudder Kemper. Scudder
representatives described Scudder's objectives in entering into the
Transaction Agreement and indicated their expectations for the Transactions'
effects on Scudder and the Funds. Scudder furnished the Board additional
information regarding the proposed Transactions, including information
regarding the terms of the proposed Transactions, the new Scudder Kemper
organization, the future plans of the parties, and information regarding the
Zurich and ZKI organizations. In reviewing the terms of the New Sub-Advisory
Agreement, the Board was advised by the Trust's independent counsel.
At the meeting, Scudder advised the Board that they did not expect that the
proposed Transactions would have a material effect on the operations of the
Funds or their respective shareholders. Scudder informed the Trustees that,
although they expect that various portions of the ZKI organization would be
combined with Scudder's operations, the senior executives of Scudder
overseeing those operations will remain largely unchanged. It was also noted
that the senior investment and administrative personnel providing services to
the Funds were not expected to change
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as a result of the Transactions. In their discussions with the Board, Scudder
representatives emphasized the strengths of the Zurich organization and their
commitment to provide the new Scudder Kemper organization with the resources
necessary to continue to provide high quality services to the Funds and the
other investment advisory clients of the new Scudder Kemper organization.
The Board was advised that, under the Transaction Agreement, Scudder will use
its commercially reasonable efforts to ensure the satisfaction of the
conditions set forth in Section 15(f) of the 1940 Act. Section 15(f) provides a
non-exclusive safe harbor for an investment adviser to an investment company or
any of the investment adviser's affiliated persons (as defined under the 1940
Act) to receive any amount or benefit in connection with a change in control of
the investment adviser so long as two conditions are met. First, for a period
of three years after the transaction, at least 75% of the board members of the
investment company must not be "interested persons" of such investment adviser
or its successor. The Board is currently in compliance with this provision of
Section 15(f). Second, an "unfair burden" must not be imposed upon the
investment company as a result of such transaction or any express or implied
terms, conditions or understandings applicable thereto. The term "unfair
burden" is defined in Section 15(f) to include any arrangement during the two-
year period after the transaction whereby the investment adviser, or any
interested person of any such adviser, receives or is entitled to receive any
compensation, directly or indirectly, from the investment company or its
shareholders (other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter for such
investment company). No such compensation agreements are contemplated in
connection with the Transactions. Scudder has undertaken to pay the costs of
preparing and distributing proxy materials to, and of holding the meeting of,
the Funds' shareholders as well as other fees and expenses in connection with
the Transactions, including the reasonable fees and expenses of legal counsel
to the Trust.
In evaluating the Transactions and their effect on the Funds, the Board
considered (i) the assurances of Scudder that the alliance should not affect
Scudder's ability to deliver the level of services currently provided to the
Funds and their respective shareholders and to fulfill its obligations under
the New Sub-Advisory Agreement consistent with current practices, (ii) the
undertaking by Scudder that no unfair burden would be imposed upon the Funds as
a result of the Transactions, and (iii) that the New Sub-Advisory Agreement for
the Funds, including the terms relating to the services to be provided to, and
the fees and expenses payable by, the Funds, is on the same terms in all
material respects as the Current Sub-Advisory Agreement. The Board also
considered that the New Sub-Advisory Agreement would not have an initial term
extending beyond that of the Current Sub-Advisory Agreement. The Board noted
that, in previously approving the Current Sub-Advisory Agreement, the Board,
including the Non-interested Trustees, had considered a number of other
factors. Among such factors were the projected profitability of the Current
Sub-Advisory Agreement to the Sub-adviser, the extent to which economies of
scale are to be shared with the Funds under the Current Sub-Advisory Agreement,
the nature and quality of services to be rendered to the Funds by the Sub-
adviser pursuant to the Current Sub-Advisory Agreement (including the
experience and research capabilities of the Sub-adviser in international equity
and socially responsible investing), and the prevailing level of advisory fees
in the investment industry.
3
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INFORMATION CONCERNING THE TRANSACTIONS AND ZURICH
Under the Transaction Agreement, Zurich will pay $866.7 million in cash to
acquire two-thirds of Scudder's outstanding shares and will contribute ZKI to
Scudder for additional shares, following which Zurich will have a 79.1% fully
diluted equity interest in the combined business. Zurich will then transfer a
9.6% fully diluted equity interest in Scudder Kemper to a defined contribution
plan for the benefit of Scudder and ZKI employees, as well as cash and warrants
on Zurich shares for award to Scudder employees, in each case subject to five-
year vesting schedules. After giving effect to the Transactions, current
Scudder stockholders will have a 29.6% fully diluted equity interest in Scudder
Kemper, and Zurich will have a 69.5% fully diluted interest in Scudder Kemper.
Scudder's name will be changed to Scudder Kemper Investments, Inc.
The purchase price for Scudder or for ZKI in the Transactions is subject to
adjustment based on the impact to revenues of non-consenting clients, and will
be reduced if the annualized investment management fee revenues (excluding the
effect of market changes, but taking into account new assets under management)
from clients at the time of closing, as a percentage of such revenues as of
June 30, 1997 (the "Revenue Run Rate Percentage"), is less than 90%.
At the closing, Zurich and the other stockholders of Scudder Kemper will
enter into a Second Amended and Restated Security Holders Agreement (the "New
SHA"). Under the New SHA, Scudder stockholders will be entitled to designate
three of the seven members of the Scudder Kemper board and two of the four
members of an Executive Committee, which will be the primary management-level
committee of Scudder Kemper. Zurich will be entitled to designate the other
four members of the Scudder Kemper board and the other two members of the
Executive Committee.
The names, addresses and principal occupations of the initial Scudder-
designated directors of Scudder Kemper are as follows: Lynn S. Birdsong, 345
Park Avenue, New York, New York, Managing Director of Scudder; Cornelia M.
Small, 345 Park Avenue, New York, New York, Managing Director of Scudder; and
Edmond D. Villani, 345 Park Avenue, New York, New York, President, Chief
Executive Officer and Managing Director of Scudder.
The names, addresses and principal occupations of the initial Zurich-
designated directors of Scudder Kemper are as follows: Lawrence W. Cheng,
Mythenquai 2, Zurich, Switzerland, Chief Investment Officer for Investments and
Institutional Asset Management and the corporate functions of Securities and
Real Estate for Zurich; Steven M. Gluckstern, Mythenquai 2, Zurich,
Switzerland, responsible for Reinsurance, Structured Finance, Capital Market
Products and Strategic Investments, and a member of the Corporate Executive
Board of Zurich; Rolf Hueppi, Mythenquai 2, Zurich, Switzerland, Chairman of
the Board and Chief Executive Officer of Zurich; and Markus Rohrbasser,
Mythenquai 2, Zurich, Switzerland, Chief Financial Officer and member of the
Corporate Executive Board of Zurich.
The initial Scudder-designated Executive Committee members of Scudder Kemper
will be Messrs. Birdsong and Villani (Chairman). The initial Zurich-designated
Executive Committee members will be Messrs. Cheng and Rohrbasser.
The New SHA requires the approval of a majority of the Scudder-designated
directors for certain decisions, including changing the name of Scudder Kemper,
effecting a public offering before
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April 15, 2005, causing Scudder Kemper to engage substantially in non-
investment management and related business, making material acquisitions or
divestitures, making material changes in Scudder Kemper's capital structure,
dissolving or liquidating Scudder Kemper, or entering into certain affiliated
transactions with Zurich. The New SHA also provides for various put and call
rights with respect to Scudder Kemper stock held by current Scudder employees,
limitations on Zurich's ability to purchase other asset management companies
outside of Scudder Kemper, rights of Zurich to repurchase Scudder Kemper stock
upon termination of employment of Scudder Kemper personnel, and registration
rights for stock held by continuing Scudder stockholders.
The Transactions are subject to a number of conditions, including approval by
Scudder stockholders; the Revenue Run Rate Percentages of Scudder and ZKI each
being at least 75%; Scudder and ZKI having obtained director and stockholder
approvals from U.S.-registered funds representing at least 90% of assets of
such funds under management as of June 30, 1997; the absence of any restraining
order or injunction preventing the Transactions, or any litigation challenging
the Transactions that is reasonably likely to result in an injunction or
invalidation of the Transactions; and the continued accuracy of the
representations and warranties contained in the Transaction Agreement. The
Transactions are expected to close during the fourth quarter of 1997.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services,
and have branch offices and subsidiaries in more than 40 countries throughout
the world. The Zurich Insurance Group is particularly strong in the insurance
of international companies and organizations. Over the past few years, Zurich's
global presence, particularly in the United States, has been strengthened by
means of selective acquisitions.
The information set forth in this Proxy Statement and the accompanying
materials concerning the Transactions, Scudder Kemper, Scudder and Zurich has
been provided to the Funds by Scudder.
DESCRIPTION OF THE CURRENT SUB-ADVISORY AGREEMENT
Under the Current Sub-Advisory Agreement, Scudder provides the Funds with a
continuous investment program. The Current Sub-Advisory Agreement provides that
the Sub-adviser, subject to the control of the Manager and the Board, provides
research and management with respect to all securities, investments, cash and
cash equivalents in the portfolio of the Funds. The Sub-adviser also
determines, from time to time, what securities and other investments will be
purchased, retained or sold by the Funds in accordance with the investment
criteria and policies of the Funds.
In return for the services provided by the Sub-adviser under the Current Sub-
Advisory Agreement, the Sub-adviser is entitled to receive monthly fees from
the Manager computed at an annual rate based on the average daily net assets of
each Fund. For the International Equity Fund, these fees are equal to .525% on
the first $40 million, .375% on the next $60 million, and .3375% on all assets
over $100 million. For the Socially Responsible Fund, these fees equal .55% on
the first $20 million, .45% on the next $20 million, .30% on the next $60
million, and .275% on all assets over $100 million. For its services to the
Funds, the Manager receives a fee that is computed daily
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and paid monthly based on a percentage of each Fund's daily net assets equal
to 1.1% for the International Equity Fund and .95% for the Socially
Responsible Fund. For the first year of the Funds' operations, however, the
Manager is voluntarily reducing its fee by .40% and is voluntarily reimbursing
each Fund for all ordinary operating expenses other than Trustees' fees.
The Current Sub-Advisory Agreement may be terminated on 60 days' written
notice, without penalty, by a majority vote of the Board, by the Manager or by
the Sub-adviser, and automatically terminates in the event of its assignment
or in the event that the Management Agreement is terminated.
The Current Sub-Advisory Agreement provides that the Sub-adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Funds in connection with the performance of the Current Sub-Advisory
Agreement, except that the Sub-adviser is liable to the Funds for any loss
resulting from willful misfeasance, bad faith or negligence on the part of the
Sub-adviser in the performance of its duties or from reckless disregard by it
of its obligations and duties under the Current Sub-Advisory Agreement.
Scudder has acted as the Sub-adviser for the Funds since their inception.
The Current Sub-Advisory Agreement is dated February 28, 1997, and was last
approved by the Board on December 20, 1996 and by the initial shareholder of
the Funds on December 21, 1996 and continues until November 30, 1998.
THE NEW SUB-ADVISORY AGREEMENT
The New Sub-Advisory Agreement for the Funds will be dated as of the date of
the consummation of the Transactions, which is expected to occur in the fourth
quarter of 1997, but in no event later than February 28, 1998. The New Sub-
Advisory Agreement will be in effect until November 30, 1998 and may continue
thereafter from year to year only if specifically approved at least annually
by the vote of a "majority of the outstanding voting securities" of each of
the Funds, or by the Board and, in either event, the vote of a majority of the
Non-interested Trustees, cast in person at a meeting called for such purpose.
In the event that shareholders of either of the Funds do not approve the New
Sub-Advisory Agreement, the Current Sub-Advisory Agreement will remain in
effect until the closing of the Transactions, at which time it would
terminate. In such event, the Board will take such action as it deems to be in
the best interest of the affected Fund and its shareholders. In the event the
Transactions are not consummated, Scudder will continue to provide services to
the Funds in accordance with the terms of the Current Sub-Advisory Agreement
for such period as may be approved at least annually by the Board, including a
majority of the Non-interested Trustees.
DIFFERENCES BETWEEN THE CURRENT AND NEW SUB-ADVISORY AGREEMENTS
The New Sub-Advisory Agreement is the same as the Current Sub-Advisory
Agreement in all material respects. The only changes that have been made are
to change the name of the Sub-adviser under the New Sub-Advisory Agreement to
Scudder Kemper Investments, Inc. and to modify the effective date.
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SUB-ADVISER
Scudder is one of the most experienced investment counsel firms in the United
States. It was established in 1919 as a partnership and was restructured as a
Delaware corporation in 1985. The principal source of Scudder's income is
professional fees received from providing continuing investment advice. Scudder
provides investment counsel for other investment companies as well as for many
individuals and institutions, including insurance companies, endowments,
industrial corporations and financial and banking organizations.
Scudder is a Delaware corporation. Daniel Pierce* is the Chairman of the
Board of Scudder, Edmond D. Villani# is President and Chief Executive Officer
of Scudder, Stephen R. Beckwith#, Lynn S. Birdsong#, Nicholas Bratt#, E.
Michael Brown*, Mark S. Casady*, Linda C. Coughlin*, Margaret D. Haedzima*,
Jerard K. Hartman#, Richard A. Holt@, John T. Packard+, Kathryn L. Quirk#,
Cornelia M. Small#, and Stephen A. Wohler* are the other members of the Board
of Directors of Scudder (see footnote for symbol key). The principal occupation
of each of the above named individuals is serving as a Managing Director of
Scudder.
All of the outstanding voting and nonvoting securities of Scudder are held of
record by Stephen R. Beckwith, Juris Padegs#, Daniel Pierce, and Edmond D.
Villani in their capacity as the representatives of the beneficial owners of
such securities (the "Representatives"), pursuant to a Security Holders'
Agreement among Scudder, the beneficial owners of securities of Scudder and
such Representatives. Pursuant to the Security Holders' Agreement, the
Representatives have the right to reallocate shares among the beneficial owners
from time to time. Such reallocations will be at net book value in cash
transactions. All Managing Directors of Scudder own voting and nonvoting stock
and all Principals of Scudder own nonvoting stock.
Directors, officers and employees of Scudder from time to time may enter into
transactions with various banks, including the Funds' custodian bank. It is
Scudder's opinion that the terms and conditions of those transactions will not
be influenced by existing or potential custodial or other fund relationships.
Exhibit B sets forth the fees and other information relating to other
investment companies with investment objectives similar to those of the Funds
and advised by Scudder.
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder places orders for portfolio
transactions through Scudder Investor Services, Inc., Two International Place,
Boston, Massachusetts 02110 (a corporation registered as a broker/dealer and a
subsidiary of Scudder), which in turn places orders on behalf of the Funds with
issuers, underwriters or other brokers and dealers. Scudder Investor Services,
Inc. receives no commissions, fees or other remuneration from the Funds for
this service.
- ---------
* Two International Place, Boston, Massachusetts
# 345 Park Avenue, New York, New York
+ 101 California Street, San Francisco, California
@ Two Prudential Plaza, 180 North Stetson, Suite 5400, Chicago, Illinois
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In selecting brokers and dealers with which to place portfolio transactions for
the Funds, Scudder will not consider sales of shares of funds advised by
Scudder and ZKI, although it may place such transactions with brokers and
dealers that sell shares of funds advised by Scudder and ZKI. Allocation of
portfolio transactions is supervised by Scudder.
GENERAL
The cost of preparing, printing and mailing the enclosed voting
instruction/proxy, accompanying notice and proxy statement and all other costs
incurred in connection with the solicitation of voting instructions/proxies,
including any additional solicitation made by letter, telephone or telegraph,
will be paid by Scudder. In addition to solicitation by mail, certain officers
and representatives of the Funds, officers, employees or agents of Scudder,
Investors and HMLIC and certain financial service firms and their
representatives, who will receive no extra compensation for their services, may
solicit proxies by telephone, telegram or personally.
Should shareholders require additional information regarding the voting
instruction/proxy or replacement voting instruction/proxy cards, they may
contact HMLIC toll-free at 1-800-999-1030. Any voting instruction/proxy given
by a shareholder is revocable as described above.
THE TRUST PROVIDES PERIODIC REPORTS TO ALL OF ITS SHAREHOLDERS THAT HIGHLIGHT
RELEVANT INFORMATION INCLUDING INVESTMENT RESULTS. YOU MAY RECEIVE AN
ADDITIONAL COPY OF THE MOST RECENT SEMI-ANNUAL REPORT FOR THE FUNDS WITHOUT
CHARGE BY CALLING 1-800-999-1030 OR BY WRITING THE FUNDS, C/O HORACE MANN
MUTUAL FUNDS, P.O. BOX 4657, SPRINGFIELD, ILLINOIS 62708-4657.
VOTING INFORMATION
Voting instructions/proxies are being solicited by the Board for use at the
Meeting. The shares of the Funds are offered as an investment medium for
variable annuity contracts offered by HMLIC. For contract owners having account
values invested in the Funds, the Separate Account is the owner of the shares,
but is soliciting voting instructions from contract owners as to how such
shares should be voted. All properly executed voting instructions/proxies
received in time for the Meeting will be voted by HMLIC as specified in the
voting instruction/proxy or, if no specification is made, in favor of the
proposal referred to in the proxy statement. Consistent with interpretations of
voting requirements by the staff of the Securities and Exchange Commission,
HMLIC will offer to shareholders the opportunity to instruct HMLIC as to how it
should vote shares held by it and the Separate Account on the items to be
considered at the Meeting in proportion to the timely voting instructions it
receives from contract owners. Voting instructions/proxies may be revoked at
any time by (a) submitting a subsequently dated voting instruction/proxy or (b)
by revoking in person at the time of the Meeting. Only a shareholder may
execute or revoke a proxy. Therefore, a contract owner who has given voting
instructions may revoke them only through HMLIC.
The presence at the Meeting, in person or by proxy, of the holders of one-
third of the interests of the Trust shall constitute a quorum for the
transaction of business. If a quorum is present, the affirmative vote by the
holders of 50% or more of the interests present, in person or by proxy, is
sufficient for shareholder action, unless the Investment Company Act of 1940,
other applicable law, or the Trust's organizational documents require a greater
number of affirmative votes. In the event
8
<PAGE>
that the necessary quorum to transact business or the vote required to approve
or reject the proposal is not obtained at the Meeting, the persons named as
proxies may propose one or more adjournments of the Meeting in accordance with
applicable law, to permit further solicitation of proxies. The affirmative vote
of the holders of less than 50% of the interests present, in person or by
proxy, will be sufficient for such adjournment. The persons named as proxies
will vote in favor of such adjournment if they determine that such adjournment
and additional solicitation is reasonable and in the best interest of each
Fund's shareholders.
The Board of the Trust has fixed the close of business on October 31, 1997 as
the record date for determination of shareholders entitled to notice of and to
vote at the Meeting. As of , 1997, the International Equity Fund
had shares issued and outstanding and the Socially Responsible
Fund had shares issued and outstanding.
[As of , 1997, the trustees and officers of the Trust did not
beneficially own any shares of the Funds.] The following table sets forth the
holdings of the shares of the Funds as of , 1997, of each person
known to own, control, or hold with power to vote 5 percent or more of each
Fund's outstanding voting securities:
<TABLE>
<CAPTION>
SHARES % OF SHARES
NAME OWNED OUTSTANDING
---- ------ -----------
<S> <C> <C>
INTERNATIONAL EQUITY FUND
Horace Mann Life Insurance Company Separate Account........
Horace Mann Life Insurance Company (depositor).............
SOCIALLY RESPONSIBLE FUND
Horace Mann Life Insurance Company Separate Account........
Horace Mann Life Insurance Company (depositor).............
</TABLE>
HMLIC is located at One Horace Mann Plaza, Springfield, Illinois 62715-0001.
Investors, the Funds' adviser, manager and distributor, is located at the same
address. Scudder, the Funds' sub-adviser, is located at 345 Park Avenue, New
York, New York, 10154.
PROPOSALS OF SHAREHOLDERS
As a Delaware business trust, the Trust Fund is not required to hold annual
shareholder meetings, but will hold special meetings as required or deemed
desirable. Since the Trust does not hold regular meetings of shareholders, the
anticipated date of the next special shareholders meeting cannot be provided.
Any shareholder proposal that may properly be included in the proxy
solicitation for a special shareholder meeting must be received by the Trust no
later than four months prior to the date when the proxy statements are mailed
to shareholders.
9
<PAGE>
OTHER MATTERS TO COME BEFORE THE MEETING
The Board is not aware of any matters that will be presented for action at
the Meeting other than the matters set forth herein. Should any other matters
requiring a vote of shareholders arise, the voting instruction/proxy in the
accompanying form will confer upon the person or persons entitled to vote the
shares represented by such proxy the discretionary authority to vote the shares
as to any such other matters in accordance with their best judgment of the best
interests of shareholders.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED VOTING INSTRUCTIONS/PROXY
PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees
- ----------------------------------------
Ann M. Caparros
Secretary
10
<PAGE>
EXHIBIT A
INVESTMENT SUB-ADVISORY AGREEMENT
This Agreement (Agreement) made this day of , 1997 by
and between Horace Mann Investors Inc., a registered investment adviser
(Adviser) and Scudder Kemper Investments, Inc., [a Delaware corporation] and
registered investment adviser (Sub-Adviser).
WHEREAS Adviser is the investment adviser and business manager for the
Horace Mann Mutual Funds (the Funds), an open-end diversified, management
investment company registered under the Investment Company Act of 1940, as
amended (1940 Act), currently consisting of three separate series or
portfolios including the Horace Mann Socially Responsible Fund, the Horace
Mann International Equity Fund, and the Horace Mann Small-Cap Growth Fund;
WHEREAS Adviser desires to retain the Sub-adviser to furnish investment
advisory services for the Horace Mann Socially Responsible Fund and the Horace
Mann International Equity Fund (the Fund Portfolios), upon the terms and
conditions set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser to provide certain sub-
investment advisory services to the Fund Portfolios for the period and on the
terms set forth in this Agreement. Sub-Adviser accepts such appointment and
agrees to furnish the services set forth for the compensation herein provided.
Sub-Adviser represents that it is registered as an Investment Adviser under
federal laws and any applicable state laws.
2. Sub-Adviser Services. Subject always to the supervision of the Fund's
Board of Trustees and the Adviser, Sub-Adviser will furnish an investment
program in respect of, and make investment decisions for, all assets of the
Fund Portfolios and place all orders for the purchase and sale of securities,
all on behalf of the Fund Portfolios. In the performance of its duties, Sub-
Adviser will satisfy its fiduciary duties to the Fund and Fund Portfolios and
will monitor the Fund Portfolios' investments, and will comply with the
provisions of the Fund's Declaration of Trust and By-laws, as amended from
time to time, and the stated investment objectives, policies and restrictions
of the Fund Portfolios as set forth in the prospectus and Statement of
Additional Information for the Fund Portfolios, as amended from time to time,
as well as any other objectives, policies or limitations provided by the
Adviser from time to time.
Sub-Adviser will provide reports at least quarterly to the Board of Trustees
and to Adviser. Sub-Adviser will make its officers and employees available to
Adviser and the Board of Trustees from time to time at reasonable times to
review investment policies of the Fund Portfolios and to consult with Adviser
regarding the Investment affairs of the Fund Portfolios.
Sub-Adviser agrees that it:
(a) will use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has
investment responsibilities;
1
<PAGE>
(b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission in all material respects and in addition
will conduct its activities under this Agreement in accordance with any
applicable regulations of any governmental authority pertaining to its
investment advisory activities, including all requirements necessary for
the Fund Portfolios to comply with subchapter M and section 817(h) of the
Internal Revenue Code;
(c) is authorized to and will select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Fund
Portfolios and is directed to use its best efforts to obtain best
execution, which includes most favorable net results and execution of the
Fund Portfolios' orders, taking into account all appropriate factors,
including price, dealer spread or commission, size and difficulty of the
Transaction and research or other services provided. It is understood that
the Sub-Adviser will not be deemed to have acted unlawfully, or to have
breached a fiduciary duty to the Fund or in respect of any Fund Portfolio,
or be in breach of any obligation owing to the Fund or in respect of any
Fund Portfolio under this Agreement, or otherwise, solely by reason of its
having caused the Fund to pay a member of a securities exchange, a broker
or a dealer a commission for effecting a securities transaction of the Fund
in excess of the amount of commission another member of an exchange, broker
or dealer would have charged if the Sub-Adviser determined in good faith
that the commission paid was reasonable in relation to the brokerage and
research services provided by such member, broker, or dealer, viewed in
terms of that particular transaction or the Sub-Adviser's overall
responsibilities with respect to its accounts, including the Fund, as to
which it exercises investment discretion. Some securities considered for
investment by the Fund Portfolios may also be appropriate for other funds
and/or clients served by the Sub-Adviser. To assure fair treatment of the
Fund Portfolios and all clients of the Sub-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 Fund Portfolios and clients in a manner deemed equitable by the
Sub-Adviser;
(d) will report regularly to Adviser and to the Board of Trustees and
will make appropriate persons available for the purpose of reviewing with
representatives of Adviser and the Board of Trustees on a regular basis at
reasonable times the management of the Fund Portfolios, including without
limitation, review of the general investment strategies of the Fund
Portfolios, the performance of the Fund Portfolios in relation to standard
industry indices, interest rate considerations and general conditions
affecting the marketplace and will provide various other reports from time
to time as reasonably requested by Adviser;
(e) will prepare such books and records with respect to the Fund
Portfolios' securities transactions as requested by the Adviser and will
furnish Adviser and Fund's Board of Trustees such periodic and special
reports as the Board or Adviser may reasonably request;
(f) will act upon reasonable instructions from Adviser which, in the
reasonable determination of Sub-Adviser, are not inconsistent with Sub-
Adviser's fiduciary duties under his Agreement;
3. Expense. During the terms of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commission, if any),
purchased for the Fund Portfolios.
4. Compensation. For the services provided and the expenses assumed under
this Agreement for each Fund Portfolio, Adviser will pay Sub-Adviser, and Sub-
Adviser agrees to accept as full
2
<PAGE>
compensation therefor, at the end of each calendar month a Sub-Advisory fee
computed at the annual rate set forth in Exhibit 1-Fee Schedule, applied to the
average daily net assets of the Fund Portfolio during that calendar month.
5. Services to Others. Adviser understands and has advised Fund's Board of
Trustees, that Sub-Adviser acts as an investment adviser or sub-investment
adviser to other investment companies and other advisory clients.
6. Limitation of Liability. Neither the Sub-Adviser nor any of its directors,
officers, stockholders, agents or employees shall have any liability to the
Adviser, the Fund or any shareholder of the Fund 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-Adviser of its duties hereunder
except of liability resulting from willful misfeasance, bad faith, or
negligence on Sub-Adviser's part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
7. Term, Termination, Amendment. This Agreement shall become effective with
respect to the Fund Portfolios on , provided that it has been
approved by a vote of a majority of the outstanding voting securities of each
Fund Portfolio in accordance with the requirement of the 1940 Act and shall
remain in full force until November 30, 1998, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter with respect to each Fund Portfolio, but only as long as such
continuance is specifically approved for each Fund Portfolio at least annually
in the manner required by the 1940 Act and the rules and regulations
thereunder, provided, however, that if the continuation of this Agreement is
not approved for a Fund Portfolio, the Sub-Adviser may continue to serve in
such capacity for such Fund Portfolio in the manner and to the extent permitted
by the 1940 Act and the rules and regulations thereunder.
This Agreement shall automatically terminate in the event of its assignment
and may be terminated at any time without the payment of any penalty by the
Adviser or by the Sub-Adviser on sixty days' written notice to the other party.
This Agreement may also be terminated by the Fund with respect to any Fund
Portfolio by action of the Board of Trustees or by a vote of a majority of the
outstanding voting securities of such Fund Portfolio on sixty days written
notice to Sub-Adviser by the Fund.
This Agreement may be terminated with respect to any Fund Portfolio at any
time without the payment of any penalty by the Adviser, the Board of Trustees
or by a vote of majority of the outstanding voting securities of such Fund
Portfolio in the event the Sub-Adviser or any officer or director of the Sub-
Adviser has taken any action which results in a material breach of the
covenants of the Sub-Adviser under this Agreement.
Termination of this Agreement shall not affect the right of the Sub-Adviser
to receive payments on any unpaid balance of the compensation described in
Section 4 earned prior to such termination.
This Agreement shall automatically terminate with respect to a Fund Portfolio
in the event the Investment Management Agreement between Adviser and that Fund
Portfolio is terminated, assigned or not renewed.
8. Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
3
<PAGE>
9. Limitations on Liability. All parties are expressly put on notice of the
Fund's Agreement and Declaration of Trust and all amendments thereto, all of
which are on file with the Secretary of the State of Delaware, and the
limitation of shareholder and trustee liability contained therein. The
obligations of the Fund entered in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually but only in such
capacities and are not binding upon any of the Trustees, officers, or
shareholders of the Fund individually but are binding upon only the assets and
property of the Fund, and persons dealing with the Fund must look solely to the
assets of the Fund and those assets belonging to the subject Fund Portfolio for
the enforcement of any claims.
10. Adviser Responsibility. Adviser will provide Sub-Adviser with copies of
the Fund's Declaration of Trust, By-laws, prospectus, and Statement of
Additional Information and any amendment thereto, and any objectives, policies
or limitations not appearing therein as they may be relevant to Sub-Adviser's
performance under this Agreement.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction of effect. If any
provision of this Agreement is held or made invalid by a court decision,
statue, rule or otherwise, the remainder of this Agreement will not be affected
thereby. This Agreement will be binding upon and shall inure to the benefit of
the parties and their respective successors.
12. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 10 above which will be
construed in accordance with Delaware law) the laws of the state of Illinois.
The Adviser and the Sub-Adviser have caused this Agreement to be executed as
of the date and year first above written.
Horace Mann Investors, Inc. SCUDDER KEMPER INVESTMENTS, INC.
By: _________________________________ By: _________________________________
Title: ______________________________ Title: ______________________________
By: _________________________________ By: _________________________________
Title: ______________________________ Title: ______________________________
4
<PAGE>
EXHIBIT 1
SUB-ADVISORY FEE SCHEDULE FOR HORACE MANN MUTUAL FUNDS
INTERNATIONAL EQUITY FUND
DURING THE FIRST 6 MONTHS
.35% on the First $40,000,000
.25% on the Next $60,000,000
.225% on all assets over $100,000,000
DURING THE SECOND 6 MONTHS
.525% on First $40,000,000
.375% on Next $60,000,000
.3375% on all assets over $100,000,000
THEREAFTER
.70% on the First $40,000,000
.50% on the Next $60,000,000
.45% on all assets over $100,000,000
There is no minimum annual fee.
SOCIALLY RESPONSIBLE FUND
.55% on the First $20,000,000
.45% on the Next $20,000,000
.30% on the Next $60,000,000
.275% on all assets over $100,000,000
There is no minimum annual fee.
The above fee schedule shall remain in effect for two years from March 3,
1997 and after such time fees will be subject to renegotiation.
5
<PAGE>
EXHIBIT B
COMPARABLE INVESTMENT COMPANIES
ADVISED BY THE SUB-ADVISER
As of , 1997 the Sub-Adviser or an affiliate managed in excess of
$115 billion in assets for individuals, funds and other organizations. The
following are open- and closed-end funds with investment objectives similar to
the Funds, for whom the Sub-Adviser provided advisory services:
<TABLE>
<CAPTION>
TOTAL NET
ASSETS
AS OF ADVISORY COMPENSATION
, 1997 ON AN ANNUAL BASIS BASED ON THE
NAME (000 OMITTED) VALUE OF AVERAGE DAILY NET ASSETS
---- ------------- ---------------------------------
<S> <C> <C>
</TABLE>
<PAGE>
PRELIMINARY PROXY FILING
VOTING INSTRUCTION/PROXY
HORACE MANN MUTUAL FUNDS
SOCIALLY RESPONSIBLE FUND
SHAREHOLDER MEETING OF DECEMBER 1, 1997
THIS VOTING INSTRUCTION/PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints George J. Zock and A.L. Gallop, individually
or jointly, proxies, each with the power of substitution, to vote all Fund
shares of the undersigned at the Joint Special Meeting of Shareholders, to be
held at One Horace Mann Plaza, Springfield, IL on December 1, 1997 at 9:00 a.m.
CT, or at any adjournment thereof, upon the proposal set forth in the Voting
Instruction/Proxy Statement for such meeting, and in their discretion, on such
other business as may properly come before the meeting.
(TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
PLEASE MARK YOUR [ [
[X] VOTES AS IN THIS
EXAMPLE.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
1. Approval of Sub-Advisory Agreement between Horace Mann
Investors, Inc. and Scudder Kemper Investments, Inc. [_] [_] [_]
SIGNATURE(S) __________________________________________________DATE _____________________
</TABLE>
PLEASE MARK, DATE, SIGN AND PROMPTLY RETURN THIS VOTING INSTRUCTION/PROXY CARD
USING THE ENCLOSED ENVELOPE.
IF NO CONTRARY SPECIFICATION IS MADE, THIS VOTING INSTRUCTION/PROXY WILL BE
VOTED FOR THE PROPOSAL.
NOTE: When shares are held by joint tenants, both must sign. Persons signing as
Executor, Administrator, Trustee, etc. should so indicate. Please sign
exactly as the name appears on the voting instruction/proxy.
<PAGE>
PRELIMINARY PROXY FILING
VOTING INSTRUCTION/PROXY
HORACE MANN MUTUAL FUNDS
INTERNATIONAL EQUITY FUND
SHAREHOLDER MEETING OF DECEMBER 1, 1997
THIS VOTING INSTRUCTION/PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints George J. Zock and A.L. Gallop, individually
or jointly, proxies, each with the power of substitution, to vote all Fund
shares of the undersigned at the Joint Special Meeting of Shareholders, to be
held at One Horace Mann Plaza, Springfield, IL on December 1, 1997 at 9:00 a.m.
CT, or at any adjournment thereof, upon the proposal set forth in the Voting
Instruction/Proxy Statement for such meeting, and in their discretion, on such
other business as may properly come before the meeting.
(TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
PLEASE MARK YOUR [ [
[X] VOTES AS IN THIS
EXAMPLE.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
1. Approval of Sub-Advisory Agreement between Horace Mann
Investors, Inc. and Scudder Kemper Investments, Inc. [_] [_] [_]
</TABLE>
SIGNATURE(S) _______________________________________________DATE ______________
PLEASE MARK, DATE, SIGN AND PROMPTLY RETURN THIS VOTING INSTRUCTION/PROXY CARD
USING THE ENCLOSED ENVELOPE.
IF NO CONTRARY SPECIFICATION IS MADE, THIS VOTING INSTRUCTION/PROXY WILL BE
VOTED FOR THE PROPOSAL.
NOTE: When shares are held by joint tenants, both must sign. Persons signing as
Executor, Administrator, Trustee, etc. should so indicate. Please sign
exactly as the name appears on the voting instruction/proxy.
