HORACE MANN MUTUAL FUNDS, PRES14A, 1998-11-25

HORACE MANN MUTUAL FUNDS
PRES14A, 1998-11-25

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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
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(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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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:
<PAGE>

NOTICE TO ANNUITY CONTRACTHOLDERS:
SUBJECT: SEPARATE ACCOUNT VOTING INSTRUCTIONS

December 4, 1998

The variable portion of your annuity contract is invested through one of
Horace Mann Life Insurance Company's ("HMLIC") separate accounts. The separate
accounts invest in one or more of the following mutual funds: the Horace Mann
Growth Fund, the Horace Mann Balanced Fund, the Horace Mann Income Fund, the
Horace Mann Short-Term Investment Fund, the Horace Mann Socially Responsible
Fund, the Horace Mann Small Cap Fund or the Horace Mann International Equity
Fund (collectively, the "Funds").

Because you have a beneficial interest in a separate account, you're
entitled to receive information and vote on issues placed before the
Shareholders of the Fund or Funds in which your account value is invested. The
Funds' Shareholders will consider the issues described in the enclosed voting
instruction/proxy materials. You can give voting instructions to HMLIC's
separate account based on your number of Fund shares. Your shares, equivalent
to the number of separate account units, are shown on the enclosed voting
instruction/proxy card(s). If you have invested in more than one Fund you will
receive a card for each Fund and can vote on each of those cards. These cards
may be received separately.

HMLIC will vote shares of the Funds held by the separate account according
to instructions received from Annuity Contractholders who have separate
account units. If you don't give voting instructions to the insurance company,
your shares will be voted in proportion to the responses received from other
Annuity Contractholders who have separate account units.

Please complete and return the voting instruction/proxy card(s) in the
enclosed postage-paid envelope if you want to exercise your voting rights. You
may also cast your vote in person at the Special Meeting of Shareholders.

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE,
SIGN AND PROMPTLY RETURN THE ENCLOSED VOTING INSTRUCTION(S)/PROXY(IES). IF YOU
WISH TO ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOU MAY REVOKE YOUR
VOTING INSTRUCTION(S)/PROXY(IES) AT THE MEETING.

Horace Mann Life Insurance Company

Thomas Arisman, CLU
Senior Vice President
<PAGE>

HORACE MANN MUTUAL FUNDS
ONE HORACE MANN PLAZA
SPRINGFIELD, ILLINOIS 62715-0001
TELEPHONE: (217) 789-2500 OR (800) 999-1030

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JANUARY 13, 1999
AND VOTING INSTRUCTION/PROXY STATEMENT

December 4, 1998

To the Shareholders:

You are invited to attend a special meeting (the "Meeting") of the
shareholders of the Growth Fund, Balanced Fund, Income Fund, Short-Term
Investment Fund, Small Cap Growth Fund, International Equity Fund, and
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 Wednesday, January 13, 1999 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 elect six (6) Trustees to the Board of Trustees.

2. To ratify or reject the selection of KPMG Peat Marwick LLP as
independent auditors for the current fiscal year.

3. To approve or disapprove an investment advisory agreement with Wilshire
Associates Incorporated.

4. To approve or disapprove a proposal to permit Wilshire Associates
Incorporated to replace sub-advisers or add sub-advisers to the Funds,
and to enter into sub-advisory agreements with those sub-advisers,
without further shareholder approval.

5. FOR INTERNATIONAL EQUITY FUND AND SOCIALLY RESPONSIBLE FUND SHAREHOLDERS
ONLY: To approve or disapprove a new sub-advisory agreement with Scudder
Kemper Investments, Inc.

6a. FOR GROWTH FUND SHAREHOLDERS ONLY: To approve or disapprove a sub-
advisory agreement with Mellon Equity Associates, LLP.

6b. FOR GROWTH FUND SHAREHOLDERS ONLY: To approve or disapprove a sub-
advisory agreement with Brinson Partners, Inc.

7a. FOR BALANCED FUND SHAREHOLDERS ONLY: To approve or disapprove a change
to the Balanced Fund's fundamental investment restriction with respect
to allowing the Fund to hold larger investments in fewer companies.

7b. FOR BALANCED FUND SHAREHOLDERS ONLY: To approve or disapprove a change
to the Balanced Fund's fundamental investment restriction with respect
to investment in other investment companies.

8. To transact such other business as may come before the meeting.

The Board of Trustees has fixed the close of business on November 30, 1998
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.

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.

<PAGE>

HORACE MANN MUTUAL FUNDS
ONE HORACE MANN PLAZA
SPRINGFIELD, ILLINOIS 62715-0001

PROXY STATEMENT

The accompanying voting instruction/proxy is solicited by the Board of
Trustees of the Horace Mann Mutual Funds (the "Trust") for voting at the
special meeting of shareholders of the Trust to be held on Wednesday, January
13, 1999, and at any and all adjournments of the meeting (the "Meeting"). The
Trust is a "series company" that issues various series of shares. (Each series
is referred to in this voting instruction/proxy statement as a "Fund.") Each
series has its own investment objective and policies and operates
independently for purposes of investments, dividends, and redemptions. The
series of the Trust are the Growth Fund ("GF"), Balanced Fund ("BF"), Income
Fund ("IF"), Short-Term Investment Fund ("STIF"), Small Cap Growth Fund
("SCGF"), International Equity Fund ("IEF"), and Socially Responsible Fund
("SRF").

The Trust is the funding vehicle for variable annuity contracts offered by
the separate account of Horace Mann Life Insurance Company. Individual
variable annuity contract holders are not the "shareholders" of the Trust.
Rather, the Horace Mann Life Insurance Company and its separate account are
the shareholders. To the extent required to be consistent with interpretations
of voting requirements by the staff of the Securities and Exchange Commission,
the Horace Mann Life Insurance Company will offer contract owners the
opportunity to instruct it as to how it should vote shares held by it and its
separate account on the items to be considered at the Meeting. This voting
instruction/proxy is being furnished to contract owners entitled to give
voting instructions with regard to each series of the Trust. The voting
instruction/proxy was first mailed to contract owners and shareholders on or
about December 4, 1998.

On Item 1 (election of trustees) and Item 2 (ratification of selection of
auditors), the Trust will vote in the aggregate and not by series. On Item 3
(approval of investment advisory agreement) and Item 4 (approval of new method
for selecting and replacing sub-advisers), each series of the Trust will vote
separately. On Item 5 (approval of a new sub-advisory agreement with Scudder
Kemper), Item 6a (approval of a sub-advisory agreement with Mellon Equity),
Item 6b (approval of a sub-advisory agreement with Brinson Partners), Item 7a
(approval of a change in the Fund's fundamental investment restriction with
respect to issuer diversification), and Item 7b (approval of a change in the
Fund's fundamental investment restriction with respect to investment in other
investment companies), each affected series of the Trust will vote separately.
The Board recommends an affirmative vote on all items. The vote required to
approve each item is described under the section of this voting
instruction/proxy statement entitled "Miscellaneous."

1
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The following table indicates which shareholders are solicited with respect
to each Item:

<TABLE>
<CAPTION>
ITEM GF BF IF STIF SCGF IEF SRF
---- --- --- --- ---- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Election of Board Members (Item 1) X X X X X X X
Ratification of Selection of Auditors (Item 2) X X X X X X X
Approval of Investment Advisory Agreement (Item
3) X X X X X X X
Approval of New Method of Selecting and
Replacing Sub-Advisers (Item 4) X X X X X X X
Approval of Investment Sub-Advisory Agreement
with Scudder Kemper (Item 5) X X
Approval of Investment Sub-Advisory Agreement
with Mellon Equity (Item 6a) X
Approval of Sub-Advisory Agreement with Brinson
Partners (Item 6b) X
Approval of Changes in Fundamental Investment
Restriction with Respect to Issuer
Diversification (Items 7a) X
Approval of Changes in Fundamental Investment
Restriction with Respect to Investment in Other
Investment Companies (Item 7b) X
</TABLE>

The Board has fixed the close of business on November 30, 1998 as the record
date for the determination of shareholders of the Trust entitled notice of and
to vote at the Meeting. As of , 1998, the Growth Fund had
shares issued and outstanding, the Balanced Fund had
shares issued and outstanding, the Income Fund had
shares issued and outstanding, the Short-Term Investment Fund
had shares issued and outstanding, the Small Cap Growth Fund had
shares issued and outstanding, the International Equity Fund
had shares issued and outstanding, and the Socially Responsible
Fund had shares issued and outstanding.

ITEM 1. ELECTION OF BOARD OF TRUSTEES

At the meeting, six (6) Trustees are to be elected to constitute the Board
of the Trust. All nominees (except Mr. Richard A. Holt) were elected to the
Board of Trustees by the initial shareholder of each Fund on April 30, 1997.
Your voting instruction/proxy will be voted for the election of the
individuals listed below. Each of the nominees listed below have consented to
serve as Trustees, if elected. In case any nominee is unable to or fails to
act as a Trustee by virtue of an unexpected occurrence, your voting
instruction/proxy may be voted for such other person(s) as determined by the
persons acting as your proxies under your voting instruction/proxy in their
discretion.

2
<PAGE>

A. L. GALLOP (72), TRUSTEE Growth, Balanced, Income, and
Executive Director (retired), Minnesota Short-Term Investment Funds: 1997
Education Association; former Director, Horace Small Cap, International Equity, and
Mann Educators Corporation (1968-1983); and Socially Responsible Funds: 1996
former Director, Horace Mann Growth Fund, Inc.
(1957-1997), Horace Mann Balanced Fund, Inc.
(1983-1997), Horace Mann Income Fund, Inc.
(1983-1997), and Horace Mann Short-Term
Investment Fund, Inc. (1983-1997)

RICHARD A. HOLT (57), NOMINEE**** Nominee
Senior Relationship Manager (retired), Scudder
Insurance Asset Management

RICHARD D. LANG (67), TRUSTEE* Growth, Balanced, Income, and
Executive Director (retired), Vermont National Short-Term Investment Funds: 1997
Education Association; former member of Horace Small Cap, International Equity, and
Mann Educators Corporation Educator Advisory Socially Responsible Funds: 1996
Board; and former Director, Horace Mann Growth
Fund, Inc. (1997), Horace Mann Balanced Fund,
Inc. (1997), Horace Mann Income Fund, Inc.
(1997), and Horace Mann Short-Term Investment
Fund, Inc. (1997)

HARRIET A. RUSSELL (55), TRUSTEE Growth, Balanced, Income, and
Member, Cincinnati Board of Education; Director Short-Term Investment Funds: 1997
and Vice President, Greater Cincinnati School Small Cap, International Equity, and
Employer Credit Union; teacher (retired), Walnut Socially Responsible Funds: 1996
Hills High School; former Director, Horace Mann
Growth Fund, Inc. (1992-1997), Horace Mann
Balanced Fund, Inc. (1992-1997), Horace Mann
Income Fund, Inc. (1992-1997), and Horace Mann
Short-Term Investment Fund, Inc. (1992-1997);
and former Director, Horace Mann Growth Fund
(1974-1983)
</TABLE>

3
<PAGE>

<TABLE>
<CAPTION>
NAME (AGE), PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS,
AND AFFILIATIONS YEAR FIRST BECAME A TRUSTEE**
- --------------------------------------------------------- -----------------------------
<S> <C>
GEORGE J. ZOCK (47), TRUSTEE* Growth, Balanced, Income, and
President, Horace Mann Mutual Funds since 1996; Short-Term Investment Funds: 1997
Director and Executive Vice President, Horace Small Cap, International Equity, and
Mann Life Insurance Company and Horace Mann Socially Responsible Funds: 1996
Service Corporation; Director, Horace Mann
Investors, Inc.; positions with Horace Mann
Educators Corporation and its subsidiaries;
former Director, Horace Mann Growth Fund, Inc.
(1995-1997), Horace Mann Balanced Fund, Inc.
(1995-1997), Horace Mann Income Fund, Inc.
(1995-1997), and Horace Mann Short-Term
Investment Fund, Inc. (1995-1997)
</TABLE>
- --------
* Trustee is considered an "interested person" as that term is defined in
the Investment Company Act of 1940, as amended. Messrs. Arisman and Zock
are considered "interested persons" because, among other reasons, they
are employees of Horace Mann Service Corporation. Mr. Lang is considered
an "interested person" because he owns securities in Horace Mann
Educators Corporation.
** Effective April 30, 1997, the Horace Mann Growth Fund, Inc., the Horace
Mann Balanced Fund, Inc., the Horace Mann Income Fund, Inc., and the
Horace Mann Short-Term Investment Fund, Inc. (the "old" Funds) each were
reorganized into a corresponding series of the Horace Mann Mutual Funds
pursuant to a "change in domicile" reorganization. As indicated in the
table above, Messrs. Arisman, Gallop, Lang, and Zock and Ms. Russell
each served as Directors of the old Funds.
*** Mr. Arisman previously served as a Trustee of each Fund from its
inception until November 6, 1997, when he resigned from the Board of
Trustees and became a member of the Trust's Advisory Board.
**** From 1972 to 1997, Mr. Holt was an employee of Scudder Kemper
Investments, Inc. ("Scudder Kemper") (and of its predecessor, Scudder,
Stevens & Clark, Inc.), the sub-adviser to the International Equity Fund
and the Socially Responsible Fund. Mr. Holt does not have an ongoing
relationship with Scudder Kemper. However, Mr. Holt and his family
participate in Scudder Kemper's medical and benefit plans available to
former employees.

The full Board of Trustees met three times during the fiscal year ended
December 31, 1997. During the Trust's 1997 fiscal year, the Board of Trustees
had an Audit and Compliance Committee and a Nominating Committee. These
committees have subsequently been eliminated. The functions performed by each
of these committees are described below. Each Trustee attended 75% or more of
the respective meetings of the full Board and of any committees of which he or
she was a member that were held during the fiscal year ended December 31,
1997.

The Audit and Compliance Committee served as the Board's liaison with the
Trust's independent auditors, reviewed the financial operation of the Funds,
and made periodic reports of these reviews to the Board, along with
appropriate recommendations regarding the proper and efficient financial
operation of the Funds. Additional responsibilities included the review and
assurance of the adequacy of insurance coverage for the Trust. Mr. Gallop,
along with Mr. Arisman

4
<PAGE>

and Mr. Larry K. Becker (members of the Trust's Advisory Board) and Mr. Donald
G. Heth (a former Trustee), served on this committee. The Audit and Compliance
Committee met two times during the Funds' 1997 fiscal year.

The Nominating Committee was responsible for the selection of qualified
persons to serve as Trustees of the Funds. Although the Funds have no formal
policy with respect to the recommendation of nominees by shareholders,
shareholders are free to make recommendations. Ms. Russell and Mr. Becker
served on the Nominating Committee. The Nominating Committee met one time
during the Funds' 1997 fiscal year.

For their services to the Funds, the Trust compensates each Trustee who is
not affiliated with Horace Mann Investors, Inc., the Funds' current investment
adviser. Each such Trustee receives a $1,000 annual retainer, $1,000 for each
meeting of the Trust, $200 for each committee meeting, and $500 for each
telephonic meeting.

The table below shows, for each Trustee entitled to receive compensation
from the Trust, the aggregate compensation that each Fund paid or accrued to
each Trustee and the total compensation that the Horace Mann Mutual Funds paid
or accrued to each Trustee during the Trust's fiscal year ended December 31,
1997:

<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION
NAME OF TRUSTEE PAID BY EACH FUND HORACE MANN MUTUAL FUNDS PAID TO TRUSTEES
- --------------- ---------------------- -----------------------------------------
<S> <C> <C> <C>
A.L. Gallop Growth Fund $ $5,200
Balanced Fund $
Income Fund $
Short-Term Investment Fund $
Small Cap Growth Fund $
International Equity Fund $
Socially Responsible Fund $
Donald G. Heth* Growth Fund $ $3,000
Balanced Fund $
Income Fund $
Short-Term Investment Fund $
Small Cap Growth Fund $
International Equity Fund $
Socially Responsible Fund $
Richard D. Lang Growth Fund $ $4,000
Balanced Fund $
Income Fund $
Short-Term Investment Fund $
Small Cap Growth Fund $
International Equity Fund $
Socially Responsible Fund $
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
AGGREGATE COMPENSATION PAID BY TOTAL COMPENSATION
NAME OF TRUSTEE EACH FUND HORACE MANN MUTUAL FUNDS PAID TO TRUSTEES
- --------------- ------------------------------ -----------------------------------------
<S> <C> <C>
Harriet
A.
Russell Growth Fund $ $5,000
Balanced Fund $
Income Fund $
Short-Term Investment Fund $
Small Cap Growth Fund $
International Equity Fund $
Socially Responsible Fund $
</TABLE>
- --------
*Former Trustee.

OFFICERS. The Trust's officers are elected by the Board of Trustees on an
annual basis to serve until their successors are elected and qualified. Except
for Mr. Zock, a Trustee and President of the Horace Mann Mutual Funds,
information about the executive officers of the Trust, with their respective
ages and terms of office indicated, is set forth below. Such information for
Mr. Zock appears in the table that begins on page 3 of this voting
instruction/proxy statement. The officers of the Trust do not receive any
compensation from the Trust for their services.

ANN M. CAPARROS (45), Secretary and Ethics Compliance Officer since 1996;
Director, Vice President, and Corporate Secretary, Horace Mann Life Insurance
Company and Horace Mann Service Corporation; Secretary, Horace Mann Investors,
Inc.; and positions with Horace Mann Educators Corporation and its
subsidiaries; prior to March 1994, Vice President and General Counsel, John
Deere Insurance Group and Affiliates.

ROGER W. FISHER (45), Controller since 1996; Vice President and Controller,
Horace Mann Life Insurance Company and Horace Mann Service Corporation;
Controller, Horace Mann Investors, Inc.; and positions with Horace Mann
Educators Corporation and its subsidiaries.

WILLIAM J. KELLY (51), Treasurer and Regulatory Compliance Officer since
1996; Treasurer, Horace Mann Investors, Inc.; Vice President, Horace Mann Life
Insurance Company; and Vice President, Horace Mann Service Corporation.

SHARE OWNERSHIP INFORMATION. As of the date of this voting instruction/proxy
statement, the Trustees and Officers do not directly own any shares of the
Funds other than the Growth Fund. The Trustees and Officers may invest
indirectly in the Funds through annuity contracts issued by Horace Mann Life
Insurance Company and the 401(k) plan of Horace Mann Service Corporation. As
of the date of this voting instruction/proxy statement, the Trustees and
Officers of the Trust held in the aggregate directly and beneficially less
than 1% of the outstanding shares each Fund.

6
<PAGE>

The following table sets forth the holdings of the shares of the Funds as of
November 30, 1998, of each person known to own, control, or hold with power to
vote 5% or more of each Fund's outstanding voting securities:

<TABLE>
<CAPTION>
NAME GF BF IF STIF SCGF IEF SRF
- ---- --- --- --- ---- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
HMLIC (DEPOSITOR)
Shares owned....................................
Percent of shares outstanding...................
HMLIC SEPARATE ACCOUNT
Shares owned....................................
Percent of shares outstanding...................
HMLIC 401(K) SEPARATE ACCOUNT
Shares owned....................................
Percent of shares outstanding...................
</TABLE>

THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE TO APPROVE THE ELECTION OF
THE TRUSTEES.

ITEM 2. RATIFICATION OF AUDITORS

A majority of the members of the Board who are not "interested persons" of
the Trust have selected KPMG Peat Marwick LLP, independent auditors, to audit
the books and records of the Trust for the current fiscal year. KPMG has
served in this capacity for the Trust since the Trust was organized in 1996
and has no direct or indirect financial interest in the Trust except as
independent auditors. The selection of KPMG as independent auditors of the
Trust is being submitted to you for your ratification. A representative of
KPMG is expected to be present at the Meeting to respond to appropriate
questions and may make a statement.

THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE TO RATIFY THE SELECTION OF
KPMG AS THE FUNDS' INDEPENDENT AUDITORS.

ITEM 3. APPROVAL OF NEW INVESTMENT ADVISER

INTRODUCTION. Presently, Horace Mann Investors, Inc. (the "Manager") serves
as the Funds' investment adviser and business manager. Subject to your
approval, effective March 1, 1999, the responsibilities of the Manager will be
redefined to eliminate its investment advisory responsibilities. Under this
new arrangement, Wilshire Associates Incorporated (the "Adviser") would manage
the investment and reinvestment of the assets of each Fund and would
continuously review, supervise, and administer each Fund's investment program.
The Manager would continue to manage the business affairs of each Fund under a
separate agreement. A copy of the form of the new investment advisory
agreement is attached to this voting instruction/proxy statement as Exhibit A.

CURRENT MANAGEMENT AGREEMENT. The Trust currently employs the Manager to
manage the investment and reinvestment of the Funds' assets and to
continuously review, supervise, and administer each Fund's investment program.
To assist it in performing its advisory duties to the Funds, the Manager has
entered into agreements with three sub-advisers. Wellington Management
Company, LLP serves as the sub-adviser to the Growth Fund, the Balanced Fund,
the Income Fund, and the Short-Term Investment Fund. BlackRock, Inc. serves as
the sub-adviser to the Small Cap

7
<PAGE>

Growth Fund. Scudder Kemper Investments, Inc. serves as the sub-adviser to the
International Equity Fund and the Socially Responsible Fund.

In addition to providing investment advisory services to the Funds, the
Manager 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 similar services necessary for the proper management of each Fund's
business affairs. Under the current management agreement, the Trust agrees to
assume and pay the charges and expenses of its operations, including, by way
of example, the compensation of Trustees other than those affiliated with the
Manager, charges and expenses of independent auditors, of legal counsel, of
any transfer or dividend disbursing agent, of the custodian, all costs of
acquiring and disposing of portfolio securities, interest, if any, on
obligations incurred by the Trust, reports and notices to shareholders, other
like miscellaneous expenses, and all taxes and fees to federal, state, or
other governmental agencies.

For the services and facilities furnished to the Small Cap Growth Fund, the
International Equity Fund, and the Socially Responsible Fund, the Manager
receives a monthly management fee based upon each Fund's average daily net
assets. This fee is equal on an annual basis to 1.40% for the Small Cap Growth
Fund, 1.10% for the International Equity Fund, and 0.95% for the Socially
Responsible Fund.

For the services and facilities furnished to the Growth Fund, Balanced Fund,
Income Fund, and Short-Term Investment Fund the Manager receives a two-part
advisory fee at the end of each month, as follows:

PART 1

For part one, each Fund's advisory fee is accrued daily and is calculated on
a pro rata basis by applying the following annual percentage rates to the
aggregate of all four Funds' daily net assets for the respective month:

<TABLE>
<CAPTION>
NET ASSETS RATE
---------- ----
<S> <C> <C>
GROWTH FUND
BALANCED FUND On initial $100 million 0.250%
INCOME FUND Over $100 million 0.200%
SHORT-TERM INVESTMENT FUND
</TABLE>

8
<PAGE>

PART 2

For part two, each Fund's advisory fee is accrued daily and calculated by
applying the following annual percentage rates to the average daily net assets
of each Fund for the respective month:

<TABLE>
<CAPTION>
NET ASSETS RATE
---------- ----
<S> <C> <C>
GROWTH FUND On initial $100 million 0.400%
On next $100 million 0.300%
Over $200 million 0.250%
BALANCED FUND On initial $100 million 0.325%
On next $100 million 0.275%
On next $300 million 0.225%
Over $500 million 0.200%
INCOME FUND On initial $100 million 0.250%
On next $100 million 0.200%
Over $200 million 0.150%
SHORT-TERM INVESTMENT FUND On initial $100 million 0.125%
On next $100 million 0.100%
Over $200 million 0.075%
</TABLE>

The current management agreement provides that the Manager will not be
liable for any error of judgment or of law, or for any loss suffered by the
Trust or by any Fund in connection with the matters to which the management
agreement relates, except a loss resulting from the breach of fiduciary duty
with respect to the receipt of compensation for services or a loss resulting
from willful misfeasance, bad faith, or negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under the management agreement.

The current management agreement may be terminated by the Trust at any time
with respect to any Fund without penalty upon 60 days' written notice by
either party, or by a majority vote of the outstanding shares of such Fund. In
addition, the management agreement automatically terminates in the event of
its assignment.

The Manager's principal office is located at One Horace Mann Plaza,
Springfield, Illinois. The Manager and Allegiance Life Insurance Company are
wholly-owned subsidiaries of Horace Mann Educators Corporation. Horace Mann
Life Insurance Company, which sponsors Horace Mann Life Insurance Company's
separate accounts, is a wholly-owned subsidiary of Allegiance Life Insurance
Company. Horace Mann Educators Corporation is located at One Horace Mann
Plaza, Springfield, Illinois 62715-0001.

The Manager has acted as investment adviser and manager for each Fund since
its inception. The current management agreement, dated March 10, 1997 (as
amended by a letter agreement dated March 11, 1997) was approved by the
initial shareholder of each of the Small Cap Growth Fund, the International
Equity Fund, and the Socially Responsible Fund on December 21, 1996, and was
approved by the initial shareholder of each of the Growth Fund, Balanced Fund,
Income Fund, and Short-Term Investment Fund on April 30, 1997. At a meeting
held on October 29, 1998, the Board approved the extension of the current
management agreement until October 31, 1999. If you approve the new investment
advisory agreement with Wilshire Associates Incorporated, the current
management agreement with the Manager will terminate effective March 1, 1999.

9
<PAGE>

The names and principal occupations of the principal executive officer and
the directors of the Manager are as follows:

<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
---- --------------------
<C> <S>
A. Thomas Arisman Director, Chairman of the Board and President, Horace Mann
Investors, Inc.
Senior Vice President, Horace Mann Life Insurance Company,
Horace Mann Service Corporation and related insurance
companies
Larry K. Becker Director, Horace Mann Investors, Inc.
Director, Executive Vice President and Chief Financial
Officer, Horace Mann Life Insurance Company, Horace Mann
Service Corporation and related insurance companies
George J. Zock Director, Horace Mann Investors, Inc.
Trustee and President, Horace Mann Mutual Funds
Executive Vice President, Horace Mann Life Insurance
Company, and Horace Mann Service Corporation; and positions
with Horace Mann Educators Corporation and its subsidiaries
William J. Kelly Treasurer, Horace Mann Investors, Inc.
Treasurer and Regulatory Compliance Officer, Horace Mann
Mutual Funds
Vice President, Horace Mann Life Insurance Company, Horace
Mann Service Corporation and related insurance companies
Ann M. Caparros Secretary, Horace Mann Investors, Inc.
Secretary, Horace Mann Mutual Funds
Director, Vice President, Corporate Secretary, Horace Mann
Life Insurance Company, Horace Mann Service Corporation and
related insurance companies
Roger W. Fisher Controller, Horace Mann Investors, Inc.
Controller, Horace Mann Mutual Funds
Senior Vice President, Horace Mann Service Corporation,
Horace Mann Life Insurance Company and related insurance
companies
</TABLE>

The address for each of these individuals is One Horace Mann Plaza,
Springfield, Illinois 62715-0001. Mr. Zock is a trustee of the Funds. Ms.
Caparros and Messrs. Fisher and Kelly are officers of the Funds.

NEW INVESTMENT ADVISORY AGREEMENT. The Board of Trustees has approved an
investment advisory agreement with the Adviser. This agreement is being
submitted for your approval at the Meeting. The Adviser's principal office is
located at 1299 Ocean Avenue, Santa Monica, California 90401-1085. The Adviser
is an independent California corporation.

10
<PAGE>

The name and principal occupation of the principal executive officer and
each director of Wilshire Associates Incorporated are as follows:

<TABLE>
<CAPTION>
NAME AND ADDRESS TITLE(S) AND PRINCIPAL OCCUPATION
---------------- ---------------------------------
<C> <S>
Dennis A. Tito President and Director
Rosalind M. Hewsenian Director
Robert C. Kuberek Director
Stephen L. Nesbitt Director; Senior Vice President and Principal
Cecilia I. Loo Director
Robert J. Raab, Jr. Director
Thomas J. Ryan Director
Thomas D. Stevens Director
Howard T. Yata Director
</TABLE>

Each director is a full-time employee of the Adviser. Each of these
individuals may be reached at the Adviser's principal business address given
above.

Although the Adviser has not previously served in the formal capacity of
investment adviser to a registered investment company, through consulting
arrangements, the Adviser has provided the same types of services to
registered investment companies as are proposed to be provided under the
investment advisory agreement. As of October 29, 1998, the Adviser's
consulting division had approximately 210 clients, well in excess of $500
billion in assets, for which the Adviser provides a variety of services, very
often including evaluation, selection, and monitoring of investment advisers,
as well as negotiating investment advisory contracts for the management of
clients' assets.

DIFFERENCES BETWEEN THE CURRENT MANAGEMENT AGREEMENT AND THE NEW INVESTMENT
ADVISORY AGREEMENT. The new investment advisory agreement is different from
the current management agreement with respect to the scope of the services
that would be provided and the fees that would be paid for such services. The
new investment advisory agreement also would contain a new indemnification
provision under which the Trust would agree to indemnify and hold harmless the
Adviser from and against all liabilities, damages, costs, and expenses that
the Adviser may incur in connection with any action, suit, investigation, or
proceeding arising out of or otherwise based on any action actually or
allegedly taken or omitted to be taken by the Adviser with respect to the
performance of its duties or obligations under the investment advisory
agreement or otherwise as an investment adviser of the Trust and the Funds.
Such indemnification would not be available, however, with respect to any
liability to the Trust or its shareholders by reason of the Adviser's breach
of fiduciary duty with respect to the receipt of compensation for services or
the willful misfeasance, bad faith, or gross negligence on the part of the
Adviser in the performance of its duties, or by reason of the Adviser's
reckless disregard of its obligations and duties under the agreement. In
addition, the new agreement contains an arbitration clause providing that any
claim or controversy arising out of or relating to the agreement must be
arbitrated in Santa Monica, California in accordance with American Arbitration
Association rules. The effective date of the new investment advisory agreement
would be March 1, 1999. The agreement would remain in effect for an initial
term ending on December 31, 2000. The remaining provisions of the new
investment advisory agreement would be substantially similar to those of the
current management agreement.

11
<PAGE>

Investment Services and Duties. The Adviser's duties under the investment
advisory agreement would include recommending to the Board of Trustees one or
more unaffiliated sub-advisers to provide a continuous investment program for
each Fund or a portion of such Fund's assets designated from time to time by
the Adviser, including investment, research, and management with respect to
all securities and investments and cash equivalents for the Fund or a
designated portion of such Fund's assets. The Adviser would also review,
monitor, and report to the Board of Trustees regarding the performance and
investment procedures of each sub-adviser and would assist and consult with
each sub-adviser in connection with the Fund's continuous investment program.
In addition, the Adviser would maintain books and records with respect to its
services under the new investment advisory agreement and would furnish the
Board of Trustees with such periodic special reports as the Board may request.
These duties exclude the various administrative responsibilities that the
Manager presently performs under the current management agreement, and would
continue to perform for the Funds under a separate management agreement with
the Trust.

Administrative Services and Duties. At its meeting on October 29, 1998, the
Board of Trustees also approved a new management agreement with Horace Mann
Investors, Inc. under which Horace Mann Investors would continue to perform
the same administrative services for the Funds that it currently performs as
the Funds' business manager. As compensation for such services, Horace Mann
Investors would receive a fee based upon the combined assets of the Funds as
follows: 0.25% of the first $1 billion of assets and 0.20% of assets in excess
of $1 billion. This agreement does not require shareholder approval and would
become effective with the new investment advisory agreement on March 1, 1999.

Support Services and Duties. At its October 29, 1998 meeting, the Board of
Trustees approved a Support Services Agreement between the Trust and Horace
Mann Life Insurance Company under which the Trust has retained Horace Mann
Life Insurance Company to provide certain administrative services to the Trust
with respect to the Funds in the manner and on the terms set forth in the
Support Services Agreement. The Support Services Agreement does not require
shareholder approval. As the Trusts' servicer, Horace Mann Life Insurance
Company will provide those administrative and support services reasonably
necessary to coordinate the activities of the Funds with those of the separate
account of Horace Mann Life Insurance Company (for which the Funds serve as
the underlying investment medium) other than the administrative services
provided by Horace Mann Investors under to the management agreement. As
compensation for its services under the Support Services Agreement, Horace
Mann Life Insurance Company will receive a fee equal to 0.15% on the first $1
billion in net assets and 0.10% on all assets over $1 billion. If the fund of
funds structure for the Balanced Fund is approved (see Item 7 below), the
assets of the Balanced Fund that are invested in the Growth Fund or in the
Income Fund will not be subject to this fee. It is currently anticipated that
the Support Services Agreement would become effective on March 1, 1999,
contingent upon shareholder approval of the new investment advisory agreement
with Wilshire.

12
<PAGE>

Comparison of Fees. For the services provided and the expenses assumed
pursuant to the investment advisory agreement, the Adviser would receive a fee
based on each Fund's average daily net assets, computed daily and payable
monthly, at the following annual rates:

<TABLE>
<CAPTION>
FUND RATE
---- ------
<S> <C>
Growth Fund...................... 0.400%
Balanced Fund.................... 0.400%*
Income Fund...................... 0.400%
Short-Term Investment Fund....... 0.125%
Small Cap Growth Fund............ 1.150%
International Equity Fund........ 0.850%
Socially Responsible Fund........ 0.700%
</TABLE>
- --------
* As discussed below under Items 7a and 7b, subject to shareholder approval,
the Balanced Fund will operate as a fund of funds structure, primarily
investing in shares of the Growth Fund and the Income Fund. If shareholders
approve the fund of funds structure, the Adviser will receive a fee of
0.400% of the average daily net assets of the Balanced Fund that are not
invested in another Fund.

The table below compares the current fees payable by each Fund for
investment advisory and management services to the aggregate fees that would
be payable by each Fund under the proposed new investment advisory agreement
and the new management agreement based upon the Funds' net assets as of
October 23, 1998:

<TABLE>
<CAPTION>
AGGREGATE FEES UNDER NEW
INVESTMENT ADVISORY
FEES UNDER CURRENT AGREEMENT
FUND MANAGEMENT AGREEMENT AND NEW MANAGEMENT AGREEMENT
- ---- -------------------- ----------------------------
<S> <C> <C>
Growth........................ 0.488% 0.645%
Balanced...................... 0.468% 0.645%*
Income........................ 0.455% 0.645%
Short-Term Investment......... 0.330% 0.370%
Small Cap Growth.............. 1.400% 1.395%
International Equity.......... 1.100% 1.095%
Socially Responsible.......... 0.950% 0.945%
</TABLE>
- --------
* As discussed below, this aggregate rate would apply to the assets of the
Balanced Fund that are not invested in the Growth Fund or in the Income
Fund under the proposed fund of funds structure. However, Horace Mann
Investors has indicated that it intends to waive the majority of its
management fees for the Balanced Fund if the Fund is operated as a fund of
funds.

BOARD RECOMMENDATION. On October 29, 1998, the Board of Trustees, including
each of the Trustees who is not an "interested person" (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), the principal
federal statute that governs the operation of the Funds) approved the new
investment advisory agreement. In approving the agreement, and in recommending
its approval to shareholders, the Board obtained substantial information
regarding the management, financial position, and business of the Adviser, the
history of the Adviser's business and operations, the Adviser's prior
performance in managing other similar mutual funds, and the anticipated effect
of the change in investment advisers on the Trust and its shareholders. The
Board believes hiring

13
<PAGE>

separate firms to perform the Funds' investment advisory and management
functions is likely to produce better investment results, which will justify
the payment of higher aggregate investment advisory and management fees by
certain of the Funds. Moreover, the Board concluded that the proposed fees
were reasonable based upon public information regarding the fees of
competitive firms for such services and were therefore necessary to support
this level of service to the Funds. In addition, the Board considered that the
overall fees and expenses payable by certain contract holders invested in the
Funds may decrease if a related proposal to reduce the mortality and expense
risk fees were adopted. In reviewing the terms of the new investment advisory
agreement, the Board was advised by counsel. As a result of its review and
consideration of the new investment advisory agreement, at its meeting on
October 29, 1998, the Board of Trustees determined that hiring Wilshire as the
new investment adviser to the Funds would be in the best interest of
shareholders and voted unanimously to approve the new investment advisory
agreement and to recommend it for your approval.

AFFILIATED BROKERAGE. The Adviser or an affiliated person of the Adviser may
act as broker for the Funds or any portion thereof in connection with the
purchase or sale of securities or other investments for the Funds or any
portion thereof, subject to: (a) the requirement that the Adviser seek to
obtain best execution as set forth above; (b) the provisions of the Investment
Advisers Act of 1940, as amended (the "Advisers Act"); (c) the provisions of
the Securities Exchange Act of 1934, as amended; and (d) other applicable
provisions of law. Such brokerage services are not within the scope of the
duties of the Adviser under this Agreement. Subject to the requirements of
applicable law and any procedures adopted by the Funds' Board of Trustees, the
Adviser or its affiliated persons may receive brokerage commissions, fees or
other remuneration from the Funds for such services in addition to the
Adviser's fees for services under this Agreement.

THE BOARD RECOMMENDS THAT YOU VOTE TO APPROVE THE INVESTMENT ADVISORY
AGREEMENT WITH WILSHIRE ASSOCIATES INCORPORATED.

ITEM 4. APPROVAL OF NEW METHOD OF SELECTING AND REPLACING SUB-ADVISERS

INTRODUCTION. As discussed above under Item 3, Horace Mann Investors, Inc.
presently manages the investment and reinvestment of the assets of each Fund
and continuously reviews, supervises, and administers each Fund's investment
program. Subject to your approval, the Trust plans to retain Wilshire
Associates Incorporated to perform the investment advisory functions currently
performed by Horace Mann Investors, effective March 1, 1999.

Under the proposed investment advisory agreement, Wilshire would be
permitted to employ sub-advisers from time to time to assist Wilshire in
performing its investment advisory duties. As discussed below under Items 6a
and 6b, Wilshire plans to employ two new sub-advisers, each of which will
manage a portion of the assets of the Growth Fund along with Wellington
Management Company, LLP, the Growth Fund's current sub-adviser. It is
presently contemplated that the remaining Funds will retain their current sub-
advisers. Wilshire would review, monitor, and report to the Board regarding
the performance and investment procedures of the sub-advisers and would assist
and consult with the sub-advisers in connection with each Fund's continuous
investment program. Wilshire believes its strength and expertise lies in its
ability to set appropriate investment policies and to evaluate, select, and
supervise those sub-advisers that can best effectuate those policies and add
the most value to your investment in the Funds.

THE PROPOSED ARRANGEMENT. The Trust has applied for an exemptive order from
the Securities and Exchange Commission (the "SEC") that, if granted, would
permit Wilshire, without your approval as normally would be required under the
1940 Act, to replace or add sub-advisers and to enter into sub-advisory
agreements with those sub-advisers upon approval of the Board of Trustees.
(See "Requirement for SEC Exemptive Relief" below.) This order will not become
effective unless and until this Item has been approved by you.

14
<PAGE>

The relief sought in the exemptive application is subject to certain
conditions. For example, within sixty days of the hiring of any new sub-
adviser or the implementation of any proposed material change to a sub-
advisory agreement, you will be furnished with an information statement that
contains all information that would be included in a proxy statement regarding
the new sub-adviser or sub-advisory agreement. Moreover, Wilshire will not
enter into a sub-advisory agreement with any sub-adviser that is an
"affiliated person," as defined in the 1940 Act, of the Trust or Wilshire,
other than by reason of serving as a sub-adviser to one or more of the Funds,
without your approval. In addition, whenever a sub-adviser is hired or fired,
Wilshire will provide the Board of Trustees with information showing the
expected impact on Wilshire's profitability and will report such impact
quarterly.

The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust, Wilshire, or the sub-advisers (in
consultation with counsel), believe the authority to replace sub-advisers or
to add sub-advisers, and to enter into sub-advisory agreements with Wilshire
would allow Wilshire to better perform the functions the Funds will be paying
it to perform (i.e., selecting sub-advisers, monitoring their performance, and
making whatever changes to the roster of sub-advisers as Wilshire deems
appropriate, subject to approval by the Board of Trustees). The Trustees
further believe requiring your approval of each new sub-advisory agreement
results in unnecessary administrative expenses to the Funds and may result in
delays in executing changes in sub-advisers or their sub-advisory agreements,
which may be detrimental to the Funds.

As under the Funds' current advisory and sub-advisory arrangements, each
sub-adviser's fees will be paid by Wilshire out of the advisory fees that
Wilshire receives from each of the Funds. Fees paid to a sub-adviser of a Fund
with multiple sub-advisers will depend upon the fee rate negotiated with
Wilshire and upon the percentage of the Fund's assets allocated to that sub-
adviser by Wilshire, which may vary from time to time. Thus, the basis for
fees paid to any such sub-adviser will not be constant, and the relative
amounts of fees paid to the various sub-advisers of a Fund will fluctuate.
These internal fluctuations, however, will not affect the total advisory fees
paid by a Fund, which will remain fixed on the terms described above under
Item 3. Wilshire may, however, determine in its discretion to waive a portion
of its fee if internal fluctuations in the fee to be paid to the sub-advisers
results in excess profit to Wilshire. Because Wilshire will pay each sub-
adviser's fees out of its own fees from the Funds, there will not be any
"duplication" of advisory fees paid by the Funds.

Shareholders should recognize, however, that in engaging new sub-advisers
and entering into sub-advisory agreements, Wilshire will negotiate fees with
those sub-advisers and, because these fees are paid by Wilshire and not
directly by each Fund, any fee reduction negotiated by Wilshire may inure to
Wilshire's benefit and any increase will inure to its detriment. The fees paid
to Wilshire by the Funds and the fees paid to the sub-advisers by Wilshire are
considered by the Board in approving the Funds' advisory and sub-advisory
arrangements. Any change in fees paid by a Fund to Wilshire would require your
approval.

REQUIREMENT FOR SEC EXEMPTIVE RELIEF. The proposed change in the way that
the Funds' sub-advisers are selected and replaced is subject to the receipt of
an order from the SEC granting an exemption from certain provisions of the
1940 Act. The Funds have filed an application for an order of exemptive relief
from these provisions to the extent that they would limit the Fund's ability
to operate in the manner proposed. The application describes in detail the
proposed arrangement, which has been structured to be consistent with other
similar arrangements that the SEC has previously

15
<PAGE>

approved. In the application, the Trust and Wilshire have agreed to abide by
certain conditions that the SEC has required in other similar arrangements.

If granted, the order would permit Wilshire, without your approval as
normally would be required under the 1940 Act, to replace or add sub-advisers
and to enter into sub-advisory agreements with those sub-advisers upon
approval of the Board of Trustees. Although there can be no assurance that the
SEC will grant the order of exemption, it is believed it is likely that such
an order will be granted. If the SEC imposes additional restrictions as a
condition to granting the order, it is believed any such restrictions would
not substantially affect the description of the arrangement described above.

THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE TO APPROVE THE NEW METHOD OF
SELECTING AND REPLACING THE FUNDS' SUB-ADVISERS.

ITEM 5. APPROVAL OF SUB-ADVISER TO INTERNATIONAL EQUITY AND SOCIALLY
RESPONSIBLE FUNDS

INTRODUCTION. Pursuant to the current management agreement, Horace Mann
Investors, Inc. provides investment advisory, management, and administrative
services to the Trust. The management agreement authorizes Horace Mann
Investors to use the services of any person it believes will be appropriate
and helpful to it in performing its duties to the Trust under the management
agreement. Pursuant to this authority, Horace Mann Investors has selected
Scudder Kemper Investments, Inc., to provide investment advisory services to
the International Equity Fund and the Socially Responsible Fund. Scudder
Kemper (or its predecessor, Scudder, Stevens & Clark, Inc.) has provided such
services to the Funds since their inception.

The Zurich-B.A.T Transaction. On December 22, 1997, Zurich Insurance Company
("Zurich") and B.A.T Industries plc ("B.A.T") entered into a definitive
agreement (the "Merger Agreement") pursuant to which businesses of Zurich
(including Zurich's almost 70% ownership interest in Scudder Kemper) were to
be combined with the financial services businesses of B.A.T (the "Zurich-B.A.T
Transaction" or the "Transaction"). On October 12, 1997, Zurich and B.A.T
confirmed that they were engaged in discussions concerning a possible business
combination; on October 16, 1997, Zurich and B.A.T announced that they had
entered into an Agreement in Principle, dated as of October 15, 1997 (the
"Agreement in Principle"), to merge B.A.T's financial services businesses with
Zurich's businesses. The Merger Agreement superseded the Agreement in
Principle.

To effect this combination, Zurich and B.A.T first reorganized their
respective operations. Zurich became a subsidiary of a new Swiss holding
company, Zurich Allied AG, and Zurich shareholders became Zurich Allied AG
shareholders. At the same time, B.A.T separated its financial services
business from its tobacco-related businesses by spinning off to its
shareholders a new British company, Allied Zurich plc, which held B.A.T's
financial services businesses.

Zurich Allied AG then contributed its interest in Zurich, and Allied Zurich
plc contributed the B.A.T financial services businesses, to a jointly owned
company, Zurich Financial Services ("Zurich Financial Services"), in each case
in exchange for shares of Zurich Financial Services. These transactions were
completed on September 7, 1998. As a result, upon the completion of the
Transaction, the former Zurich shareholders became the owners (through Zurich
Allied AG) of 57% of the voting stock of Zurich Financial Services, and former
B.A.T shareholders initially became the

16
<PAGE>

owners (through Allied Zurich plc) of 43% of the voting stock of Zurich
Financial Services. Zurich Financial Services now owns Zurich and the financial
services businesses previously owned by B.A.T.

Below is a simplified chart showing the corporate structure of Zurich
Financial Services after these transactions:

Former B.A.T. Former Zurich
shareholders shareholders
| |
- ------------------ ----------------
ALLIED ZURICH ZURICH ALLIED
(UK listed holding (Swiss listed
company) holding company)
- ------------------ ----------------
\ 43% 57% /
\ /
----------------------------------------------------
Zurich Financial Services
(Swiss holding company)
----------------------------------------------------
|
|
--------------------------------------------------------
| | |
| | |
---------------- --------------- ---------------
Allied Zurich Farmers Zurich
Holdings Group, Inc. Insurance
---------------- --------------- ---------------
| | |

Subsidiaries Subsidiaries Subsidiaries--
including 70%
interest in Scudder
Kemper
Investments

Corporate Governance. At the closing of the Zurich-B.A.T Transaction, the
parties entered into a Governing Agreement that establishes the corporate
governance structure for Zurich Allied AG, Allied Zurich plc, and Zurich
Financial Services.

The Board of Directors of Zurich Financial Services consists of ten members,
five of whom were initially selected by Zurich and five by B.A.T. Mr. Rolf
Huppi, Zurich's Chairman and Chief

17
<PAGE>

Executive Officer, became Chairman and Chief Executive Officer of Zurich
Financial Services. In addition to his vote by virtue of his position on the
Board of Directors, as Chairman, Mr. Huppi will have a tie-breaking vote on
all matters except recommendations of the Audit Committee, recommendations of
the Remuneration Committee in respect of the remuneration of the Chairman and
the CEO, appointment and removal of the Chairman and CEO, appointments to the
Nominations, Audit and Remuneration Committees and nominations to the Board of
Directors not made through the Nominations Committee.

The Group Management Board of Zurich Financial Services has been given
responsibility by the Board of Directors for the executive management of
Zurich Financial Services and has wide authority for such purpose. Of the 11
initial members of the Group Management Board, eight were members of the
Corporate Executive Board of Zurich (including Mr. Edmond D. Villani, CEO of
Scudder Kemper, who is responsible for Global Asset Management for Zurich
Financial Services), and three were B.A.T executives.

The Board of Directors of Zurich Allied AG initially consists of 11 members,
eight of whom were Zurich directors and three of whom were proposed by B.A.T.
The Board of Directors of Allied Zurich plc also initially consists of 11
members, eight of whom were B.A.T directors and three of whom were proposed by
Zurich. The parties have agreed that, as soon as possible, the Boards of
Directors of Zurich Financial Services, Zurich Allied AG, and Allied Zurich
plc will have identical membership.

Shareholder resolutions of Zurich Financial Services in general require
approval by at least 58% of all shares outstanding.

The Governing Agreement also contains provisions relating to dividend
equalization and provisions intended to ensure equal treatment of Zurich
Allied AG and Allied Zurich plc shareholders in the event of a takeover bid
for either company.

The B.A.T financial services businesses, which, since the closing of the
Transaction, are owned by Zurich Financial Services, include the Farmers Group
of Insurance companies; the Eagle Star Insurance business, primarily in the
U.K.; Allied-Dunbar, one of the leading U.K. unit-linked life insurance and
pensions companies; and Threadneedle Asset Management, which was formed
initially to manage the investment assets of Eagle Star and Allied-Dunbar, and
which, at December 31, 1997, had $58.8 billion under management. Overall, at
year-end 1997, the financial services businesses of B.A.T had $79 billion in
assets under management, including $18 billion in third party assets.

Zurich has informed the Funds that the financial services businesses of
B.A.T do not include any of B.A.T's tobacco businesses and that, after careful
review, Zurich has concluded that the tobacco-related liabilities connected
with B.A.T's tobacco business should not adversely affect Zurich or the
present Zurich subsidiaries, including Scudder Kemper.

Governance arrangements that were put in place at the time of the
acquisition of Zurich's 70% interest in Scudder Kemper (which are discussed
below under "Scudder Kemper") remain unaffected by the Transaction. These
arrangements preclude the making of certain major decisions affecting Scudder
Kemper without the approval of Scudder Kemper directors elected by the non-
Zurich shareholders of Scudder Kemper.

18
<PAGE>

Consummation of the Transaction may be deemed to have constituted an
"assignment" as that term is defined in the 1940 Act, of the existing sub-
advisory agreement for the International Equity Fund and the Socially
Responsible Fund between Horace Mann Investors, Inc. and Scudder Kemper dated
December 31, 1997 (the "Old Sub-Advisory Agreement"). As required by the 1940
Act, the Old Sub-Advisory Agreement provided for its automatic termination in
the event of its assignment. Therefore, a new agreement must be approved.

Scudder Kemper has received an exemptive order from the SEC permitting it to
implement, without prior shareholder approval, the New Sub-Advisory Agreement
for a period of up to 150 days after the consummation of the Transaction. On
October 29, 1998, the Board of Trustees approved a new investment sub-advisory
agreement ("New Sub-Advisory Agreement"), under which Scudder Kemper is
providing the same services for the same fees as under the Old Sub-Advisory
Agreement. Pending your approval of the New Sub-Advisory Agreement, Horace
Mann Investors is holding the sub-advisory fees in escrow. If the New Sub-
Advisory Agreement is approved by you, Scudder Kemper will also be reimbursed
for investment advisory services provided to the Funds during the period from
September 7, 1998 through October 29, 1998 at the same rate as provided under
the New Sub-Advisory Agreement. A copy of the form of the New Sub-Advisory
Agreement is attached to this voting instruction/proxy statement as Exhibit B.
THE NEW SUB-ADVISORY AGREEMENT IS ON THE SAME TERMS IN ALL MATERIAL RESPECTS
AS THE OLD SUB-ADVISORY AGREEMENT. The material terms of the New Sub-Advisory
Agreement are described below under the heading "Old Sub-Advisory Agreement."

BOARD RECOMMENDATION. On October 26, 1998, the Board, including the Trustees
who are not parties to the New Sub-Advisory Agreement or "interested persons,"
as defined in the 1940 Act, of any such party, voted unanimously to approve
the New Sub-Advisory Agreement and to recommend its approval to you.

For information about the Board's deliberations and the reasons for its
recommendations, please see "Board Evaluation" below.

OLD SUB-ADVISORY AGREEMENT. Under the Old Sub-Advisory Agreement, Scudder
Kemper provided the Funds with a continuous investment program. The Old Sub-
Advisory Agreement provided that Scudder Kemper, subject to the control of
Horace Mann Investors and the Board, supplied research and management with
respect to all securities, investments, cash and cash equivalents in the
portfolio of the Funds. Scudder Kemper also determined, from time to time,
what securities and other investments would 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 Scudder Kemper under the Old Sub-
Advisory Agreement, Scudder Kemper was entitled to receive monthly fees from
Horace Mann Investors computed at an annual rate based on the average daily
net assets of each Fund. For the International Equity Fund, these fees were
equal to 0.70% on the first $40 million, 0.50% on the next $60 million, and
0.45% on all assets over $100 million. For the Socially Responsible Fund,
these fees were equal to 0.55% on the first $20 million, 0.45% on the next $20
million, 0.30% on the next $60 million, and 0.275%

19
<PAGE>

on all assets over $100 million. For the Funds' fiscal year ended December 31,
1997, the aggregate sub-advisory fees paid to Scudder Kemper were $13,713 for
the International Equity Fund and $18,391 for the Socially Responsible Fund.
For its services to the Funds, Horace Mann Investors receives a fee that is
computed daily and paid monthly based on a percentage of each Fund's daily net
assets equal to 1.10% for the International Equity Fund and 0.95% for the
Socially Responsible Fund. For the Funds' fiscal year ended December 31, 1997,
Horace Mann Investors waived its advisory fee for each Fund.

The Old Sub-Advisory Agreement provided that it could be terminated on 60
days' written notice, without penalty, by a majority vote of the Board, by
Horace Mann Investors or by Scudder Kemper, and that it would automatically
terminate in the event of its assignment or in the event that the management
agreement was terminated. The Old Sub-Advisory Agreement also provided that
Scudder Kemper would 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 Old Sub-Advisory Agreement, except that Scudder Kemper would be liable to
the Funds for any loss resulting from willful misfeasance, bad faith, or
negligence on the part of Scudder Kemper in the performance of its duties or
from reckless disregard by it of its obligations and duties under the Old Sub-
Advisory Agreement.

Scudder Kemper has acted as the sub-adviser for the Funds since their
inception. The Old Sub-Advisory Agreement was dated December 31, 1997, was
last approved by the Board on August 7, 1997 (and ratified by the Board on
November 6, 1997) and was last approved by shareholders on December 1, 1997 in
connection with the merger of Scudder, Stevens & Clark, Inc., Scudder Kemper's
predecessor, and Zurich Insurance Company.

NEW SUB-ADVISORY AGREEMENT. On October 29, 1998, the Board of Trustees
approved the New Sub-Advisory Agreement for the Funds between Horace Mann
Investors and Scudder Kemper. The New Sub-Advisory Agreement for the Funds is
identical to the Old Sub-Advisory Agreement except for the commencement date.
The New Sub-Advisory Agreement is dated October 29, 1998 and was for an
initial term ending on November 30, 1998. At its October 29, 1998 meeting, the
Board also approved the renewal of the New Sub-Advisory Agreement for an
additional one-year term ending on November 30, 1999. The New Sub-Advisory
Agreement may continue thereafter from year to year if specifically approved
at least annually by the vote of "a majority of the outstanding voting
securities" of each Fund, as defined under the 1940 Act, or by the Board and,
in either event, the vote of a majority of Board members who are not parties
to the New Sub-Advisory Agreement or "interested persons" of any such party,
cast in person at a meeting called for such purpose.

BOARD EVALUATION. On October 29, 1998, the Board convened in person to
consider the Zurich-B.A.T Transaction and the advisability of the New Sub-
Advisory Agreement with Scudder Kemper. At this time, Scudder Kemper
represented to the Board that (i) the Transaction will have no effect on the
operational management of the Funds; (ii) the Transaction will not result in
any significant changes in the operations of Scudder Kemper; (iii) the
Transaction will not result in any changes in the portfolio managers of the
Funds; (iv) there will not be any increases in the advisory fees or any change
in any other provision, other than the term, of the Funds' sub-advisory
agreement as a result of the Transaction; (v) the Transaction will not
adversely affect Scudder Kemper's financial condition; and (vi) the
Transaction should expand Scudder Kemper's global asset management
capabilities and enhance Scudder Kemper's research capabilities, particularly
with respect to the

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<PAGE>

United Kingdom and Europe. The Board also noted Zurich's representation that
any tobacco-related liability connected with B.A.T's tobacco business should
not adversely affect Zurich or Scudder Kemper and the services Scudder Kemper
provides to the Funds. (See "Corporate Governance" above). Scudder Kemper also
furnished the Board additional information regarding the Transaction,
including information regarding the terms of the Transaction and the new
Zurich organization. In reviewing the terms of the New Sub-Advisory Agreement,
the Board was advised by counsel.

The Board was advised that Scudder Kemper 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 the transaction. 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 Transaction. Zurich 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 Transaction, including the reasonable fees and expenses of legal counsel
to the Trust.

In evaluating the Transaction and its effect on the Funds, the Board
considered (i) the assurances of Scudder Kemper that the Transaction should
not affect Scudder Kemper's ability to deliver the level of services currently
provided to the Funds and its shareholders and fulfill its obligations under
the New Sub-Advisory Agreement consistent with current practices; (ii) the
undertaking by Scudder Kemper that no unfair burden would be imposed upon the
Funds as a result of the Transaction; 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 Old Sub-Advisory Agreement. The Board
also took into consideration the fact that it had within the past year
considered the Old Sub-Advisory Agreement and that the New Sub-Advisory
Agreement would not have an initial term extending beyond that of the Old Sub-
Advisory Agreement.

SCUDDER KEMPER. Scudder Kemper, which resulted from the combination (the
"Scudder-Zurich Transaction") of the businesses of Scudder, Stevens & Clark,
Inc. ("Scudder") and Zurich Kemper Investments, Inc. ("Kemper"), an indirect
subsidiary of Zurich, is one of the largest and most experienced investment
counsel firms in the United States. Scudder was established in 1919 as

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<PAGE>

a partnership and was restructured as a Delaware corporation in 1985. Scudder
launched its first fund in 1928. Kemper launched its first fund in 1948. Since
December 31, 1997, Scudder Kemper has served as investment adviser to both
Scudder and Kemper funds. As of August 31, 1998, Scudder Kemper has more than
$241.1 billion in assets under management. The principal source of Scudder
Kemper's income is professional fees received from providing continuing
investment advice. Scudder Kemper provides investment counsel for many
individuals and institutions, including insurance companies, endowments,
industrial corporations, and financial and banking organizations.

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. Zurich owns approximately 70% of Scudder Kemper, with the balance
owned by Scudder Kemper's officers and employees.

As stated above, Scudder Kemper is a Delaware corporation. Rolf Huppi* is
the Chairman of the Board and Director, Edmond D. Villani# is the President,
Chief Executive Officer and Director, Stephen R. Beckwith# is the Treasurer
and Chief Financial Officer, Kathryn L. Quirk# is the General Counsel, Chief
Compliance Officer and Secretary, Lynn S. Birdsong# is a Corporate Vice
President and Director, Cornelia M. Small# is a Corporate Vice President and
Director, Laurence Cheng* is a Director and, effective November 1, 1998, each
of Gunther Gose* and William H. Bolinder+ is a Director of Scudder Kemper. The
principal occupation of each of Edmond D. Villani, Stephen R. Beckwith,
Kathryn L. Quirk, Lynn S. Birdsong and Cornelia M. Small is serving as a
Managing Director of Scudder Kemper, the principal occupation of Rolf Huppi is
serving as an officer of Zurich; the principal occupation of Laurence Cheng is
serving as a senior partner of Capital Z Partners, an investment fund. The
principal occupations of Gunther Gose is serving as the Chief Financial
Officer of Zurich Financial Services, the principal occupation of William H.
Bolinder is serving as a member of the Group Executive Board of Zurich
Financial Services.

The outstanding voting securities of Scudder Kemper are held of record
36.63% by Zurich Holding Company of America ("ZHCA"), a subsidiary of Zurich;
32.85% by ZKI Holding Corp. ("ZKIH"), a subsidiary of Zurich; 20.86% by
Stephen R. Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M. Small,
and Edmond D. Villani, in their capacity as representatives (the "Management
Representatives") of Scudder Kemper's management holders and retiree holders
pursuant to a Second Amended and Restated Security Holders Agreement (the
"Security Holders Agreement") among Scudder Kemper, Zurich, ZHCA, ZKIH, the
Management Representatives, the management holders, the retiree holders and
Edmond D. Villani, as trustee of Scudder Kemper Investments, Inc. Executive
Defined Contribution Plan Trust (the "Plan Trust"); and 9.66% by the Plan
Trust. There are no outstanding non-voting securities of Scudder Kemper.
- --------
* Mythenquai 2, 8002 Zurich, Switzerland.
# 345 Park Avenue, New York, New York.
+ 1400 American Lane, Schaumburg, Illinois.

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<PAGE>

Pursuant to the Security Holders Agreement (which was entered into in
connection with the Scudder-Zurich Transaction), the Board of Directors of
Scudder Kemper consists of four directors designated by ZHCA and ZKIH and
three directors designated by the Management Representatives.

The Security Holders Agreement require the approval of a majority of the
Scudder-designated directors for certain decisions, including changing the
name of Scudder Kemper, effecting an initial public offering before 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 Security Holders Agreement also provides for various put and
call rights with respect to Scudder Kemper stock held by persons who were
employees of Scudder at the time of the Scudder-Zurich Transaction,
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 stockholders of Scudder continuing after the Scudder-
Zurich Transaction.

Directors, officers, and employees of Scudder Kemper, from time to time, may
enter into transactions with various banks, including the Fund's custodian
bank. It is Scudder Kemper's opinion that the terms and conditions of those
transactions will not be influenced by existing or potential custodial or
other Fund relationships.

Exhibit C sets forth the fees and other information regarding investment
companies advised by Scudder Kemper that have similar investment objectives to
the Funds.

BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS. To the maximum extent
feasible, Scudder Kemper places orders for portfolio transactions through
Scudder Investor Services, Inc. ("SIS"), Two International Place, Boston,
Massachusetts 02110, which in turn places orders on behalf of the Funds with
issuers, underwriters or other brokers and dealers. SIS is a corporation
registered as a broker/dealer and a subsidiary of Scudder Kemper. When it can
be done consistently with the policy of obtaining the most favorable net
results, Scudder Kemper may place such orders with brokers and dealers who
supply research, market, and statistical information to a Fund or to Scudder
Kemper. SIS does not receive any commissions, fees, or other remuneration from
the Funds for this service. Allocation of portfolio transactions is supervised
by Scudder Kemper.

THE BOARD RECOMMENDS THAT YOU VOTE TO APPROVE THE SUB-ADVISORY AGREEMENT
WITH SCUDDER KEMPER.

ITEM 6. APPROVAL OF TWO ADDITIONAL SUB-ADVISERS TO THE GROWTH FUND

As discussed above under Item 3, the Trustees have approved Wilshire
Associates Incorporated as the new investment adviser to the Funds and are
submitting a proposed investment advisory agreement with Wilshire for
shareholder approval at the Meeting. Under the proposed investment advisory
agreement, Wilshire's duties include recommending to the Board of Trustees one
or more unaffiliated sub-advisers to provide a continuous investment program
for each Fund or a portion of such Fund designated from time to time by
Wilshire, including investment, research, and management with respect to all
securities and investments and cash equivalents for the Fund or designated
portion of such Fund. Each sub-adviser will determine from time to time what
securities and other investments will be purchased, retained, or sold with
respect to the Fund or portion of such Fund served by such sub-adviser.

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<PAGE>

WELLINGTON MANAGEMENT COMPANY, LLP. The Growth Fund currently has a single
sub-adviser, Wellington Management Company, LLP ("Wellington Management"), 75
State Street, Boston, Massachusetts. Wellington Management is a Massachusetts
limited liability partnership. The firm is focused solely on providing
investment management services to mutual funds, institutions, and individuals.

Wellington Management is owned and managed by its active partners. As of
November 1, 1998, the managing partners of Wellington Management were Robert
W. Doran, Duncan M. McFarland, and John R. Ryan. In addition, Exhibit D
identifies the individuals who, as of November 1, 1998, were general partners
of Wellington Management and states their principal occupations. Each of these
individuals may be reached at Wellington Management's principal business
address given above.

CURRENT WELLINGTON MANAGEMENT SUB-ADVISORY AGREEMENT. Wellington Management
currently serves as the Growth Fund's sub-adviser pursuant to an Investment
Sub-Advisory Agreement with Horace Mann Investors, Inc. Under the agreement,
Wellington Management furnishes a continuous investment program in respect of,
and makes investment decisions for, all assets of the Fund and places all
orders for the purchase and sale of securities on behalf of the Fund. The
Wellington Management Sub-Advisory Agreement continues in force from year to
year, provided that such continuation is specifically approved at least
annually in the manner required by the 1940 Act and the rules under the 1940
Act. If such continuation is not approved, Wellington Management may continue
to serve as the sub-adviser to the Fund in the manner and to the extent
permitted by the 1940 Act and the rules under the 1940 Act. The Wellington
Management Sub-Advisory Agreement is dated May 1, 1997, was approved by the
Growth Fund's initial shareholder on April 30, 1997, and was last renewed by
the Board of Trustees at an in person meeting held on October 29, 1998 for a
term ending on December 31, 2000.

As compensation for its services to the Fund, Horace Mann Investors pays
Wellington Management a sub-advisory fee out of the advisory fee that Horace
Mann Investors receives from the Fund. Wellington Management's sub-advisory
fee is paid at the end of each calendar month and is computed at the annual
rate of 0.400% on the first $100 million of the Fund's average daily net
assets during the applicable month, 0.300% on the next $100 million of net
assets, and 0.250% on all net assets over $200 million. For the Fund's fiscal
year ended December 31, 1997, Wellington Management's sub-advisory fees for
the services that it provided to the Growth Fund totaled $1,514,865.

The Wellington Management Sub-Advisory Agreement provides that it will
terminate automatically in the event of its assignment and may be terminated
at any time without the payment of any penalty by Horace Mann Investors or
Wellington Management on sixty days' written notice to the other party. The
Board of Trustees or the holders of a majority of the Fund's outstanding
securities (as defined in the 1940 Act) may also terminate the agreement on
sixty days' written notice without penalty. In addition, Horace Mann
Investors, the Board of Trustees, or the holders of a majority of the Fund's
outstanding securities (as defined in the 1940 Act) may terminate the
agreement at any time without the payment of any penalty if Wellington
Management or any officer or director of Wellington Management has taken any
action that results in a material breach of Wellington Management's covenants
under the agreement.

24
<PAGE>

PROPOSED MULTIPLE SUB-ADVISER STRUCTURE. At the direction of the Board of
Trustees, Wilshire has identified and selected two new sub-advisers for the
Growth Fund: Mellon Equity Associates, LLP and Brinson Partners, Inc. In
addition, Wellington will continue to manage a portion of the Growth Fund's
assets under a new sub-advisory agreement between Wilshire and Wellington
Management, as described below. The Growth Fund's current large cap value
style will be maintained. At the Meeting, you are being asked to approve a
sub-advisory agreement between Mellon Equity and Wilshire and a sub-advisory
agreement between Brinson Partners and Wilshire.

NEW SUB-ADVISORY AGREEMENT WITH WELLINGTON. If the new advisory agreement
with Wilshire is approved, Wilshire intends to enter into a new sub-advisory
agreement with Wellington Management, which would be substantially similar to
the current sub-advisory agreement, except that Wellington Management would
manage only a portion of the Growth Fund's assets and that the fees would be
lower. The new fees would be as follows: 0.325% on the first $50 million,
0.275% on the next $150 million, 0.225% on the next $300 million, and 0.175%
on all assets over $500 million. A form of the new sub-advisory agreement is
attached to this proxy statement as Exhibit E.

ITEM 6A. APPROVAL OF MELLON EQUITY ASSOCIATES, LLP AS AN ADDITIONAL SUB-
ADVISER TO THE GROWTH FUND

MELLON EQUITY ASSOCIATES, LLP. At an in person meeting held on October 29,
1998, the Board of Trustees approved a sub-advisory agreement between Mellon
Equity and Wilshire under which Mellon Equity would initially manage 40% of
the Growth Fund's assets. You are now being asked to approve this agreement.
Mellon Equity, 500 Grant St., Suite 3700, Pittsburgh, Pennsylvania 15258,
employs a highly quantitative approach for large capitalization value equity
management. Mellon Bank, One Mellon Bank Center, Pittsburgh, Pennsylvania
15258, spun off Mellon Equity in 1987 from the investment management division
of the Bank's trust department. While it remains a wholly-owned subsidiary of
Mellon Bank, Mellon Equity is a stand-alone operating entity that directly
manages all of its research, portfolio management, marketing, and client
contact functions.

William P. Rydell is the President and Chief Executive Officer of Mellon
Equity. In addition, Exhibit F identifies the individuals who, as of November
1, 1998, were principals of Mellon Equity and states their principal
occupations. Each of these individuals may be reached at Mellon Equity's
principal business address given above.

Mellon Equity also serves as an investment adviser or sub-adviser to other
funds that have investment objectives similar to that of the Growth Fund.
Exhibit G contains a table that identifies those funds, states their
approximate net assets as of November 2, 1998, and indicates whether Mellon
Equity has waived, reduced, or otherwise agreed to reduce its compensation
under any applicable contract.

Under the proposed agreement, Mellon Equity would furnish a continuous
investment program in respect of, and would make investment decisions for,
such portion of the Fund's assets as Wilshire will from time to time designate
and place all orders for the purchase and sale of securities on behalf of such
designated portion of the fund's assets. The agreement would continue in force
from year to year, provided that such continuation is specifically approved at
least annually in the manner required by the 1940 Act and the rules under the
1940 Act. If such continuation is not approved, Mellon

25
<PAGE>

Equity may continue to serve as the sub-adviser to the Fund in the manner and
to the extent permitted by the 1940 Act and the rules under the 1940 Act. The
agreement will be dated March 1, 1999, for an initial term ending on December
31, 2000.

As compensation for its services to the Fund, the Fund's adviser would pay
Mellon Equity a sub-advisory fee out of the advisory fee that the adviser
received from the Fund. Mellon Equity's sub-advisory fee would be paid at the
end of each calendar month and would be computed at the annual rate of 0.200%
of net assets.

The agreement would provide that it will terminate automatically in the
event of its assignment and that it may be terminated at any time without the
payment of any penalty by the adviser or Mellon Equity on sixty days' written
notice to the other party. The Board of Trustees or the holders of a majority
of the Fund's outstanding securities (as defined in the 1940 Act) may also
terminate the agreement on sixty days' written notice without penalty. In
addition, the adviser, the Board of Trustees, or the holders of a majority of
the Fund's outstanding securities (as defined in the 1940 Act) may terminate
the agreement at any time without the payment of any penalty if Mellon Equity
or any officer or director of Mellon Equity has taken any action that results
in a material breach of Mellon Equity's covenants under the agreement. A form
of the proposed sub-advisory agreement is attached to this voting
instruction/proxy statement as Exhibit E.

BOARD RECOMMENDATION. On October 29, 1998, the Board of Trustees, including
each of the Trustees who is not an "interested person" (as defined in the 1940
Act) approved the Mellon Equity sub-advisory agreement. In approving the
agreement, and in recommending its approval to shareholders, the Board
obtained substantial information regarding the management, financial position,
and business of Mellon Equity; the history of Mellon Equity's business and
operations; Mellon Equity's prior investment performance with respect to
similar mutual funds; and the anticipated effect of the addition of Mellon
Equity as a sub-adviser to the Growth Fund on the Fund and its shareholders.
As a result of its review and consideration of the Mellon Equity sub-advisory
agreement, the Board unanimously determined that hiring Mellon Equity as a
sub-adviser to the Growth Fund would be in the best interest of shareholders
and voted unanimously to approve the sub-advisory agreement and recommend it
for your approval. In reviewing the terms of the proposed sub-advisory
agreement, the Board was advised by counsel.

BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS. Under the proposed sub-
advisory agreement, Mellon Equity or an affiliated person of Mellon Equity may
act as broker for the Growth Fund in connection with the purchase or sale of
securities or other investments for the Fund, subject to (a) the requirement
that Mellon Equity seek to obtain best execution; (b) the provisions of the
Investment Advisers Act of 1940, as amended; (c) the provisions of the
Securities Exchange Act of 1934, as amended; and (d) other applicable
provisions of law. Such brokerage services are not within the scope of the
duties of Mellon Equity under the sub-advisory agreement. Subject to the
requirements of applicable law and any procedures adopted by the Board of
Trustees, Mellon Equity or its affiliated persons may receive brokerage
commissions, fees, or other remuneration from the Fund or the Trust for such
services in addition to its fees under the sub-advisory agreement.

ITEM 6B. APPROVAL OF BRINSON PARTNERS, INC. AS AN ADDITIONAL SUB-ADVISER TO
THE GROWTH FUND

BRINSON PARTNERS, INC. At an in person meeting held on October 29, 1998, the
Board of Trustees approved a sub-advisory agreement between Brinson Partners
and Wilshire under which

26
<PAGE>

Brinson Partners would initially manage 40% of the Growth Fund's assets. You
are now being asked to approve this proposed agreement. Brinson Partners, 209
South LaSalle Street, Chicago, Illinois, is a wholly-owned subsidiary of UBS
AG, a Swiss banking corporation located at Gessnerallee 3, 8021 Zurich,
Switzerland.

Gary P. Brinson, Brinson Partners' Chief Executive Officer, plays a key role
in the UBS Brinson global organization. In addition, Exhibit H identifies the
individuals who, as of November 1, 1998, were members of the Board of
Directors of Brinson Partners and states their principal occupations. Each of
these individuals may be reached at Brinson Partners' principal business
address given above.

Brinson Partners also serves as an investment adviser or sub-adviser to
other funds that have investment objectives similar to that of the Growth
Fund. Exhibit I contains a table that identifies those funds, states their
approximate net assets as of November 2, 1998, and indicates whether Brinson
Partners has waived, reduced, or otherwise agreed to reduce its compensation
under any applicable contract.

Under the proposed agreement, Brinson Partners would furnish a continuous
investment program in respect of, and would make investment decisions for,
such portion of the Fund's assets as Wilshire will from time to time designate
and place all orders for the purchase and sale of securities on behalf of such
designated portion of the Fund's assets. The agreement would continue in force
from year to year, provided that such continuation is specifically approved at
least annually in the manner required by the 1940 Act and the rules under the
1940 Act. If such continuation is not approved, Brinson Partners may continue
to serve as the sub-adviser to the Fund in the manner and to the extent
permitted by the 1940 Act and the rules under the 1940 Act. The agreement will
be dated March 1, 1999, for an initial term ending on December 31, 2000.

As compensation for its services to the Fund, the Fund's adviser would pay
Brinson Partners a sub-advisory fee out of the advisory fee that the adviser
received from the Fund. Brinson Partners's sub-advisory fee would be paid at
the end of each calendar month and would be computed at the annual rate of
0.200% of net assets.

The agreement would provide that it will terminate automatically in the
event of its assignment and that it may be terminated at any time without the
payment of any penalty by the adviser or Brinson Partners on sixty days'
written notice to the other party. The Board of Trustees or the holders of a
majority of the Fund's outstanding securities (as defined in the 1940 Act) may
also terminate the agreement on sixty days' written notice without penalty. In
addition, the adviser, the Board of Trustees, or the holders of a majority of
the Fund's outstanding securities (as defined in the 1940 Act) may terminate
the agreement at any time without the payment of any penalty if Brinson
Partners or any officer or director of Brinson Partners has taken any action
that results in a material breach of Brinson Partners' covenants under the
agreement. A form of the proposed sub-advisory agreement is attached to this
voting instruction/proxy statement as Exhibit E.

BOARD RECOMMENDATION. On October 29, 1998, the Board of Trustees, including
each of the Trustees who is not an "interested person" (as defined in the 1940
Act) approved the Brinson Partners sub-advisory agreement. In approving the
agreement, and in recommending its approval to shareholders, the Board
obtained substantial information regarding the management, financial

27
<PAGE>

position, and business of Brinson Partners; the history of Brinson Partners'
business and operations; Brinson Partners' prior performance with respect to
other similar mutual funds; and the anticipated effect of the addition of
Brinson Partners as a sub-adviser to the Growth Fund on the Fund and its
shareholders. As a result of its review and consideration of the Brinson
Partners sub-advisory agreement, the Board unanimously determined that hiring
Brinson Partners as a sub-adviser to the Growth Fund would be in the best
interest of shareholders and voted unanimously to approve the sub-advisory
agreement and recommend it for your approval. In reviewing the terms of the
proposed sub-advisory agreement, the Board was advised by counsel.

BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS. Under the proposed sub-
advisory agreement, Brinson Partners or an affiliated person of Brinson
Partners may act as broker for the Growth Fund in connection with the purchase
or sale of securities or other investments for the Fund, subject to (a) the
requirement that Brinson Partners seek to obtain best execution; (b) the
provisions of the Investment Advisers Act of 1940, as amended; (c) the
provisions of the Securities Exchange Act of 1934, as amended; and (d) other
applicable provisions of law. Such brokerage services are not within the scope
of the duties of Brinson Partners under the sub-advisory agreement. Subject to
the requirements of applicable law and any procedures adopted by the Board of
Trustees, Brinson Partners or its affiliated persons may receive brokerage
commissions, fees, or other remuneration from the Fund or the Trust for such
services in addition to its fees under the sub-advisory agreement.

ITEM 7. APPROVAL OF "FUND OF FUNDS" ARRANGEMENT

INTRODUCTION. One of the purposes of the Meeting is to seek the approval of
the Balanced Fund's shareholders to amend two of the Fund's fundamental
investment restrictions to allow the Fund to invest directly in shares of the
Growth Fund and of the Income Fund. Item 3, Item 7a, and Item 7b are related.
If you do not approve Item 3, Item 7a, and/or Item 7b, then the fund of funds
arrangement will not be implemented as proposed.

The Board of Trustees has approved a change in the operations of the
Balanced Fund so that, instead of purchasing the same individual securities
purchased separately by the Growth Fund and the Income Fund, the Balanced Fund
would invest directly in shares of the Growth Fund and of the Income Fund.
This is known as a "fund of funds" arrangement. For the reasons discussed
below under the heading "Reasons for the Proposed Fund of Funds Arrangement,"
the Trustees have determined that the fund of funds arrangement will benefit
the Balanced Fund's shareholders. In the future, if the Trustees determine
that the fund of funds arrangement is no longer in shareholders' best
interest, then the Trustees may discontinue the arrangement without your
approval.

The Balanced Fund currently is subject to certain fundamental investment
restrictions that limit its ability to serve as a fund of funds. Therefore,
the Balanced Fund's conversion to a fund of funds is contingent upon your
approval of certain changes to two of the Fund's fundamental investment
restrictions (Item 7a and Item 7b). In addition, the conversion is contingent
upon the approval of Wilshire Associates Incorporated as the investment
adviser to the funds (Item 3) and the receipt of an order of exemption from
the Securities and Exchange Commission (the "SEC") from certain provisions of
the 1940 Act. The order of exemption, if granted, would allow the Balanced
Fund to operate as a fund of funds. The Fund and Wilshire Associates
Incorporated, the Fund's proposed new investment adviser, have applied for an
order of exemption, which is described in more detail below under the heading
"Requirement for Exemptive Relief from the SEC." It is anticipated that the
SEC

28
<PAGE>

will issue the necessary order. However, there is no assurance that the order
will be granted. If the SEC does not grant the order, the Balanced Fund will
retain its current operational structure.

STRUCTURE OF THE FUND OF FUNDS

How the Fund Will Operate as a Fund of Funds. If the Fund operates as a fund
of funds, it intends to invest in two investment companies that are also
series of the Trust: the Growth Fund and the Income Fund. The Balanced Fund
also would be permitted to invest in individual securities. The Balanced Fund
currently invests in the same kinds of stocks and bonds held separately by the
Growth Fund and the Income Fund. The stock portion of the Balanced Fund's
portfolio is currently managed by the same portfolio manager as the Growth
Fund; the bond portion of the Balanced Fund's portfolio is currently managed
by the same portfolio manager as the Income Fund. Both portfolio managers are
employed by Wellington Management Company, LLP, the current sub-adviser to the
Growth, Income, and Balanced Funds. Currently, Horace Mann Investors, Inc.
serves as the Funds' investment adviser and manager. As discussed in detail
under Items 3, 6a and 6b above, shareholders are being asked to approve
Wilshire Associates Incorporated as the Funds' investment adviser, and Mellon
Equity Associates, LLP and Brinson Partners, Inc. as additional sub-advisers
to the Growth Fund. Horace Mann Investors will remain the Funds' manager.

Although the investment styles of Horace Mann Investors and Wilshire
presumably will differ somewhat, the Balanced Fund's investment objective will
remain the same. Horace Mann Investors currently manages the Fund such that
its mix of investments is regularly adjusted between the equity sector and the
fixed-income sector to capitalize on perceived variations in return potential
produced by changing financial market and financial conditions. However, such
adjustments generally are not substantial. Wilshire intends to manage the
Balanced Fund such that it will not attempt to time the market. The Balanced
Fund currently may employ financial futures contracts and options on
securities and securities indices to facilitate the reallocation of the
Balanced Fund's assets among the various sectors. Both Horace Mann Investors
and Wilshire believe using these investment techniques may, in general,
provide a hedge against changes in market conditions while minimizing
transaction costs to the Fund in connection with the reallocation of its
assets. Although the use of these instruments is not risk free, it is
contemplated that the Balanced Fund will continue to employ these techniques
when the adviser deems it appropriate to do so. If the SEC grants the order of
exemption, Wilshire (or the sub-advisers, if any) may invest a portion of the
Balanced Fund's assets in options and futures and other securities to provide
for flexibility in managing the relative positions of the equity sector
securities and fixed-income sector securities in the Balanced Fund.

Expense Information. Following its conversion to a fund of funds, the
Balanced Fund will be structured to avoid unnecessary duplication or layering
of fees and expenses. Assuming that shareholders approve Wilshire Associates
Incorporated as the Funds' new investment Adviser (see Item 3 above), the
portion of the Balanced Fund's assets that are not invested in the Growth Fund
or in the Income Fund will be subject to an advisory fee payable to Wilshire
at the annual rate of 0.400% of average daily net assets. The portion of the
Balanced Fund's assets invested in shares of the Growth or Income Funds would
also be subject to its proportionate share of the advisory fees of the
underlying fund. In combination, the overall advisory fee of the Balanced Fund
under the fund of funds arrangement is anticipated to be, on an annual basis,
0.400% of average daily net assets. Wilshire will provide additional services
to the Balanced Fund, which will consist primarily of

29
<PAGE>

allocating and reallocating the Balanced Fund's assets among the various
investment sectors. These allocation services will be provided in addition to,
and thus will not be duplicative of, the advisory services provided at the
underlying fund level and at the Balanced Fund level in connection with
investments in individual securities, including options and futures.

In addition to advisory fees, the Balanced Fund would be subject to the fees
payable to Horace Mann Investors, Inc. as the Funds' business manager. These
management fees are anticipated to be, on an annual basis, 0.245% of average
daily net assets under the proposed terms of the new management agreement.
However, Horace Mann Investors has indicated that it intends to waive the
majority of its management fees for the Balanced Fund if the fund of funds
structure is implemented. Under the fund of funds structure, it is anticipated
that total Fund operating expenses will decrease slightly. Other operating
expenses currently applicable to you, including fees for custodial services,
trustees' fees, legal and accounting services, and transfer agency services,
will be incurred at both the Balanced Fund level and the underlying fund
level. Although certain of these expenses may be reduced upon the Balanced
Fund's conversion to a fund of funds structure, there may be some unavoidable
duplication.

It is anticipated that you will bear a reduced amount of portfolio
transaction costs under a fund of funds structure. By the Balanced Fund
investing in the Growth Fund and the Income Fund, you may benefit from reduced
brokerage and other transaction costs associated with investment in individual
securities, except to the extent that the Balanced Fund continues to invest in
small lots of individual securities. Although you will be subject to your
proportionate share of the transaction costs at the underlying fund level,
such costs will reflect the generally lower costs associated with trading
larger blocks of securities and are expected to reduce such costs for you.

The following table shows the estimated annual operating expenses of the
Balanced Fund based upon the Fund's net assets as of October 23, 1998, and
shows the estimated annual operating expenses (both direct and indirect)
following the Balanced Fund's conversion to a fund of funds structure:

<TABLE>
<CAPTION>
ESTIMATED
ESTIMATED EXPENSES EXPENSES
IF NOT OPERATED AS IF OPERATED AS
FUND OF FUNDS FUND OF FUNDS
------------------ --------------
<S> <C> <C>
Advisory Fees........................... 0.400% 0.400%
Management Fees......................... 0.245% 0.245%
Other Expenses.......................... 0.180% 0.160%
------ ------
Total Operating Expenses.............. 0.825% 0.805%
</TABLE>

REASONS FOR THE PROPOSED FUND OF FUNDS ARRANGEMENT. The Trustees believe the
proposed fund of funds arrangement will benefit you in several respects. Since
its inception, the Balanced Fund has attempted to provide investors with the
opportunity to invest in both the equity and fixed-income markets through a
single fund, to benefit from ongoing professional portfolio allocation
services, and to save the costs and inconvenience of establishing multiple
accounts with the Trust. The Balanced Fund allocates its investments among
three sectors: stocks, bonds, and money market instruments. Currently, the
Balanced Fund separately holds the same individual securities held by the
Growth Fund and the Income Fund. Since its inception, the majority of the
Balanced Fund's assets typically have been invested the equity sector. The
fund of funds structure is expected to benefit Balanced

30
<PAGE>

Fund Shareholders in two ways. First, rather than making two separate
investments in the same securities (i.e., one for the Growth Fund or Income
Fund and one for the Balanced Fund), the Funds will be able to invest in a
single, larger block of securities, which should result in lower transaction
costs. Second, it is expected that the Balanced Fund's total operating
expenses will decrease slightly.

Moreover, allowing the Balanced Fund to invest directly in the Income Fund
will provide greater diversification for the Income Fund, which has been
unable to take full advantage of investment opportunities that are available
to the Balanced Fund due to the Income Fund's relatively small asset base. In
addition, the lack of a sufficient cash flow into the Income Fund has made it
more difficult and costly for the Income Fund to re-position itself into
investments with varying lengths of maturity and duration. As of December 31,
1997, the Income Fund's portfolio was divided among 58 corporate debt,
mortgage-backed and U.S. Treasury securities, and the remainder in cash
instruments. In comparison, on that date the Balanced Fund held 163 different
fixed-income securities. The Funds and Wilshire believe the relative inability
of the Income Fund to achieve greater diversification and greater cash flows
has resulted in a level of performance below the level that could have been
achieved had the Balanced Fund been able to invest in the Income Fund during
its lifetime.

REQUIREMENT FOR SEC EXEMPTIVE RELIEF. The proposed change in the Balanced
Fund's structure is subject to the receipt of an order from the SEC granting
an exemption from certain provisions of the 1940 Act. The 1940 Act provides,
in general, that an investment company such as the Fund may not invest more
than an aggregate of 10% of its total assets in other investment companies,
and provides other limits on investments in individual investment companies.
The 1940 Act also restricts certain transactions between affiliated investment
companies. The Fund has filed an application for an order of exemptive relief
from these provisions of the 1940 Act to the extent that they would limit the
Fund's ability to operate as a fund of funds. The application describes in
detail the proposed fund of funds arrangement, which has been structured to be
consistent with other fund of funds arrangements that the SEC has previously
approved. In the application, the Trust and Wilshire Associates Incorporated
have agreed to abide by certain conditions that the SEC has required in other
fund of funds arrangements.

If granted, the order would enable the Balanced Fund to exceed the 10%
aggregate limit and certain other limitations on investing in shares of other
investment companies provided in the 1940 Act, subject to certain conditions
required by the SEC. The order would also permit the Fund to engage in
transactions with affiliated investment companies, to the extent necessary to
operate as proposed, with Wilshire serving as the investment adviser to each
of the underlying investment companies. Although there can be no assurance
that the SEC will grant the order of exemption, it is believed it is likely
that such an order will be granted. If the SEC imposes additional restrictions
as a condition to granting the order, it is believed any such restrictions
would not substantially affect the description of the fund of funds
arrangement described above.

If for any reason all of the necessary approvals are not received to
implement the proposed fund of funds arrangement, Wilshire Associates
Incorporated, the proposed new investment adviser to the Funds, has
recommended using the same sub-adviser structure for the equity portion of the

31
<PAGE>

Balanced Fund as that proposed for the Growth Fund (see Item 6a and Item 6b
above) and the same sub-adviser for the fixed-income portion of the Balanced
Fund as that currently in place for the Income Fund.

ITEM 7A. PROPOSAL TO CHANGE THE BALANCED FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO ISSUER DIVERSIFICATION

As described above, it is necessary that you approve changes to two of the
Fund's fundamental investment restrictions for the Fund to operate as a fund
of funds. One limitation proposed to be amended is the Fund's limitation with
respect to the percentage of the Fund's assets that the Fund may invest in the
securities of any one issuer and the percentage of assets of a single issuer
permitted to be owned by the Fund.

CURRENTLY, THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION PROVIDES:

[The Fund may not] . . . purchase the securities of any issuer (other than
obligations issued or guaranteed as to principal and interest by the
Government of the United States, its agencies or instrumentalities) if, as
a result, (a) more than 5% of the Fund's total assets (taken at current
value) would be invested in the securities of that issuer, or (b) [the]
Fund would hold more than 10% of any class of securities of that issuer
(for this purpose, all debt obligations of an issuer maturing is less than
one year are treated as a single class of securities).

AS PROPOSED, THE AMENDED FUNDAMENTAL INVESTMENT RESTRICTION WOULD READ AS
FOLLOWS (NEW LANGUAGE APPEARS IN ITALICS):

[The Fund may not] . . . purchase the securities of any issuer (other than
obligations issued or guaranteed as to principal and interest by the
Government of the United States, its agencies or instrumentalities, or, for
the Balanced Fund only, any security issued by any investment company or
series thereof) if, as a result, (a) more than 5% of the Fund's total
assets (taken at current value) would be invested in the securities of that
issuer, or (b) the Fund would hold more than 10% of any class of securities
of that issuer (for this purpose, all debt obligations of an issuer
maturing is less than one year are treated as a single class of
securities).

The current restriction limits the extent to which the Balanced Fund may
invest in any one issuer. This limitation is intended to protect the Fund's
value from excessive volatility as a result of the price fluctuations of a
single security owned by the Fund and to prevent the Fund from acquiring
control of too high a percentage of an issuer. However, the 1940 Act
explicitly states that investment in other investment companies need not be
subject to this limitation. The proposed amendment would give the Fund the
full flexibility afforded under the 1940 Act. The Fund would continue to be
"diversified," as that term is defined in the 1940 Act.

If the proposed amendment is approved by you, the Balanced Fund will be able
to invest in other investment companies without regard to the limitations
applicable to investment in securities of other types of issuers. To the
extent that the Fund continues to purchase individual securities that are not
U.S. government securities, this restriction would still apply. If approved,
the amended investment restriction would permit the Fund to own more than 10%
of the securities of any mutual fund in which it invests. To the extent that
the Fund acquires this level of ownership in another mutual fund from time to
time, management does not believe there would be any material adverse

32
<PAGE>

effects on the Fund or you. As a fund of funds, the Balanced Fund should in
fact increase its level of diversification because it intends to invest in the
Growth Fund, which owns a larger pool of individual securities.

The proposed amendment does not require that investments in other investment
companies be limited to funds in the same family or group of investment
companies. However, to invest more than in the stated percentage of assets in
unaffiliated investment companies, the Balanced Fund would require further
exemptive relief from the SEC. The Fund does not intend to seek such
additional exemptive relief. In addition, the proposed amendment to the
restriction in Item 7b explicitly limits the Balanced Fund's mutual fund
investments to funds advised by Wilshire Associates Incorporated or an
affiliate of Wilshire.

The Trustees have approved the amendment to this investment restriction and
recommend that you approve the amendment at the Meeting. The Trustees believe
adoption of this amended fundamental investment restriction would be in the
best interest of the Balanced Fund's shareholders.

THE BOARD RECOMMENDS THAT YOU VOTE TO APPROVE THIS CHANGE IN THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTION.

ITEM 7B. PROPOSAL TO CHANGE THE BALANCED FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION WITH RESPECT TO INVESTMENT IN OTHER INVESTMENT COMPANIES

In addition to expanding the Balanced Fund's ability to invest in a single
issuer described above in Item 7a, you are being asked to approve an amendment
to the Balanced Fund's fundamental investment restriction that limits its
ability to invest in other investment companies. To implement the fund of
funds arrangement, it is proposed that this restriction be amended to permit
the Fund to invest without limit in other investment companies advised by
Wilshire Associates Incorporated or an affiliate of Wilshire.

CURRENTLY, THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION PROVIDES:

[The Fund may not] . . . invest in securities of other investment
companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets.

AS PROPOSED, THE AMENDED FUNDAMENTAL INVESTMENT RESTRICTION WOULD READ AS
FOLLOWS (NEW LANGUAGE APPEARS IN ITALICS):

[The Fund may not] . . . invest in securities of other investment
companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets, and except that during any period
in which the Balanced Fund operates as a "fund of funds" in accordance with
the Prospectus and applicable law, the Balanced Fund may purchase without
limit shares of the Growth Fund, the Income Fund, and any other mutual fund
currently existing or hereafter created whose investment adviser is the
Balanced Fund's adviser or an affiliate thereof, or the respective
successors in interest of any such mutual fund or adviser.

In its current form, this investment restriction does not allow the Balanced
Fund to invest in other investment companies, except where the shares of
another mutual fund are acquired by the Balanced Fund as part of a merger,
consolidation, or acquisition of assets. To operate as a fund of funds, you
must approve the amended version of this restriction, which would remove this
limitation

33
<PAGE>

during any period in which the Balanced Fund operates as a fund of funds. In
the future, if it is determined that the Balanced Fund should cease to be a
fund of funds, the percentage limitations applicable to investment in other
investment companies would apply. Under the amended investment restriction,
the Balanced Fund could invest a substantial portion of its assets only in
investment companies that are advised by Wilshire or an affiliate of Wilshire.

The limitation on investment in other investment companies specified in the
current investment restriction is even more restrictive than those of under
the 1940 Act, which permits investment companies to invest in other investment
companies subject to certain percentage limitations. To function as a fund of
funds, it will be necessary to receive an order of exemption from the SEC, as
described above under "The Fund of Funds Arrangement--Requirement for
Exemption for the SEC." In addition to securing your approval of the amended
restriction. It is believed the exemption that the Balanced Fund is seeking is
substantially similar to exemptions obtained by other mutual fund companies
that have adopted a fund of funds arrangement.

The Trustees have approved the amendment to this investment restriction and
recommend that you approve the amendment at the Meeting. As described in
detail above under "The Fund of Funds Arrangement," the Trustees believe
approval of the proposed fundamental investment restriction regarding
investment in other investment companies as part of the fund of funds
arrangement will be in the best interest of the Balanced Fund's shareholders.

THE BOARD RECOMMENDS THAT YOU VOTE TO APPROVE THIS CHANGE IN THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTION.

OTHER INFORMATION

GENERAL. The cost of preparing, printing and mailing the enclosed voting
instruction/proxy, accompanying notice and voting instruction/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 the Trust, except that portion of the
costs related to the approval of the new sub-advisory agreement with Scudder
Kemper, which will be paid by Zurich. In addition to solicitation by mail,
certain officers and representatives of the Funds, officers, employees or
agents of Horace Mann Investors, Inc. and Horace Mann Life Insurance Company,
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. A COPY OF YOUR FUNDS' ANNUAL REPORT AND ANY
MORE RECENT SEMI-ANNUAL REPORT ARE AVAILABLE WITHOUT CHARGE UPON REQUEST 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.

PROPOSALS OF SHAREHOLDERS. As a Delaware business trust, the Trust 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 voting instruction/proxy statements are mailed to shareholders.

34
<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 in this voting instruction/proxy statement. 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 voting instruction/proxy the discretionary
authority to vote the shares as to any such other matters in accordance with
their best judgment in the interest of the Funds.

VOTING, QUORUM. Each share of the Fund is entitled to one vote on each
matter submitted to a vote of the shareholders at the Meeting. No shares have
cumulative voting rights.

Each valid voting instruction/proxy will be voted in accordance with the
instructions on the voting instruction/proxy as the persons named in the
voting instruction/proxy determine on such other business as may come before
the Meeting. If no designation is given, the proxy will be voted FOR the
election of the persons who have been nominated as trustees and FOR Items 2,
3, 4, and, if applicable, FOR Items 5, 6a, 6b, 7a, and 7b. Interests of
contract owners from whom no voting instructions are received will be voted in
proportion to the instructions that are timely received. Contract owners who
are executing voting instructions may revoke them at any time before they are
voted by executing and submitting a revised voting instruction form, by
writing to the Funds, or by revoking the voting instruction in person at 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
Horace Mann Life Insurance Company. Voting instructions given by telephone or
electronically transmitted instruments may be counted if obtained pursuant to
procedures designed to verify that such instructions have been authorized.

Item 1 (election of trustees) requires a plurality vote of the shares of the
Funds. This means that the six nominees receiving the largest number of votes
will be elected. Item 2 (ratification of selection of independent auditors)
requires the affirmative vote of more than 50% of the shares present in person
or by proxy. Item 3 (approval of an advisory agreement with Wilshire), Item 4
(approval of new method of selecting and replacing subadvisers), Item 5
(approval of a sub-advisory agreement with Scudder Kemper), Item 6a (approval
of a sub-advisory agreement with Mellon Equity), Item 6b (approval of a sub-
advisory agreement with Brinson Partners), Item 7a (approval of change in
Balanced Fund's investment restriction with respect to issuer
diversification), and Item 7b (approval of change in Balanced Fund's
investment restriction with respect to investment in other investment
companies) each requires the affirmative vote of a "majority of the
outstanding voting securities" of the applicable Fund. The term "majority of
the outstanding voting securities" as defined in the 1940 Act means the
affirmative vote of the lesser of (i) 76% of the voting securities of the Fund
present at the Meeting if more than 50% of the outstanding shares of the Trust
are present in person or by proxy, or (ii) more than 50% of the outstanding
shares of the Trust.

The Declaration of Trust provides that the presence at the Meeting, in
person or by proxy, of the holders of one-third of the interests of the Trust
constitutes 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 voting instruction/proxy, is sufficient for shareholder
action, unless the 1940 Act, other applicable law, or the Trust's
organizational documents require a greater number of affirmative votes. If the
necessary quorum to transact business, or the vote required to approve or
reject an item, 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

35
<PAGE>

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 interest of the
respective Fund's shareholders.

In tallying votes, abstentions will be counted for purposes of determining
whether a quorum is present for purposes of convening the Meeting. On Item 1,
abstentions will have no effect. The six nominees having the most votes will
be elected. On Items 2, 3, 4, 5, 6a, 6b, 7a, and 7b, abstentions will have the
effect of being counted as voted against the Items.

The Board of Trustees recommends an affirmative vote on all Items.

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

36
<PAGE>

EXHIBIT A

FORM OF INVESTMENT ADVISORY AGREEMENT

This Investment Advisory Agreement is made as of this , 199
between HORACE MANN MUTUAL FUNDS, a Delaware business trust (herein called the
"Company"), and WILSHIRE ASSOCIATES INCORPORATED, a California corporation
(herein called the "Advisor").

WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act"); and

WHEREAS, the Company wishes to retain the Advisor under this Agreement to
render investment advisory services to the portfolios of the Company known as
the Horace Mann Growth Fund, Balanced Fund, Income Fund, Short Term Fund,
Small Cap Growth Fund, International Equity Fund and Socially Responsible Fund
(the "Initial Fund(s)", together with any other Company portfolios which may
be established later and served by the Advisor hereunder, being herein
referred to collectively as the "Funds" and each individually as a "Fund"),
and Advisor wishes to render such services;

NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:

1. Appointment of Advisor.

(A) The Company hereby appoints the Advisor as the investment adviser of
each Fund on the terms and for the period set forth in this Agreement and
the Advisor hereby accepts such appointment and agrees to perform the
services and duties set forth herein on the terms herein provided. The
Advisor may, in its discretion, provide such services through its own
employees or the employees of one or more affiliated companies that are
qualified to provide such services to the Trust under applicable law and
are under common control with the Advisor provided (i) that all persons,
when providing services hereunder, are functioning as part of an organized
group of persons, and (ii) that such organized group of persons is managed
at all times by authorized officers of the Advisor.

(B) In the event that the Company establishes one or more portfolios
other than the Initial Fund(s) with respect to which it desires to retain
the Advisor to render investment advisory services hereunder, it shall
notify the Advisor in writing. If the Advisor is willing to render such
services, it shall notify the Company in writing whereupon such portfolio
or portfolios shall become a Fund or Funds hereunder.

2. Investment Services and Duties. The Advisor shall recommend to the Board
of Trustees one or more investment advisers who are not affiliated with the
Advisor (herein referred to collectively as the "Sub-Advisors" and each
individually as a "Sub-Advisor") to provide a continuous investment program
for each Fund or a portion thereof designated from time to time by the
Advisor, including investment, research, and management with respect to all
securities and investments and cash equivalents for the Fund or designated
portion thereof. Upon approval of a Sub-Advisor by the Board of Trustees, the
Advisor shall enter into an agreement with such Sub-Advisor, in a form
approved by the Board of Trustees, for the provision of such services, subject
to the supervision of the Board of Trustees and the Advisor.
<PAGE>

(A) The Advisor shall review, monitor and report to the Board of Trustees
regarding the performance and investment procedures of each Sub-Advisor and
shall assist and consult with each Sub-Advisor in connection with the
Fund's continuous investment program. The Advisor shall provide its
services under this Section 3 in accordance with the Funds' investment
objectives, policies and restrictions as stated in the Funds' then current
registration statement and resolutions of the Company's Board of Trustees.

(B) Each Sub-Advisor shall determine from time to time what securities
and other investments will be purchased, retained or sold by the Company
with respect to the Fund or portion thereof served by such Sub-Advisor. The
Company acknowledges and agrees that, subject to the provisions of
paragraph (A) hereof, the Advisor shall not be responsible for any such
determinations by any Sub-Advisor. Each Sub-Advisor shall provide services
to the Funds in accordance with the Funds' investment objectives, policies
and restrictions as stated in the Funds' then current registration
statement and resolutions of the Company's Board of Trustees.

(C) With respect to any assets of a Fund that are not being managed by a
Sub-Advisor, the Advisor shall determine from time to time what securities
and other investments will be purchased, retained or sold by the Company
with respect to the Fund or portion thereof served by such Sub-Advisor. The
Advisor shall provide services to the Funds in accordance with the Funds'
investment objectives, policies and restrictions as stated in the Funds'
then current registration statement and resolutions of the Company's Board
of Trustees.

(D) The Advisor shall maintain books and records with respect to its
services hereunder and furnish the Company's Board of Trustees such
periodic special reports as the Board may request. The Company acknowledges
and agrees that the Sub-Advisors will be responsible for maintenance of
books and records with respect to the securities transactions of the Funds.

3. Compliance with Governing Instruments and Laws. In performing its duties
as Advisor for the Funds, the Advisor shall act in conformity with the
Company's Declaration of Trust, Bylaws, prospectuses and statements of
additional information, and the instructions and directions of the Board of
Trustees of the Company. In addition, the Advisor shall conform to and comply
with the requirements of the 1940 Act, the Rules and Regulations of the
Commission, the requirements of subchapter M and Section 817(h) of the
Internal Revenue Code of 1986, as amended, and all other applicable federal or
state laws and regulations.

4. Services Not Exclusive. The Advisor shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Trustees from time to time, have
no authority to act for or represent the Company in any way or otherwise be
deemed its agent. The services furnished by the Advisor hereunder are not
deemed exclusive, and the Advisor shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.

5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the Company are the property of the Company and further agrees
to surrender promptly to the Company any such records upon the Company's
request. The Advisor further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act the records required to be maintained by it in
connection with its services hereunder by Rule 31a-1 under the 1940 Act.

6. Expenses Assumed as Advisor. Except as otherwise stated in this
Agreement, the Advisor shall pay all expenses incurred by it in performing its
services and duties hereunder as Advisor

A-2
<PAGE>

(including without limitation all compensation of Sub-Advisors to the Funds
pursuant to its agreements with such Sub-Advisors). The Company shall bear all
other expenses incurred in the operation of the Funds, including without
limitation taxes, interest, brokerage fees and commissions, if any, fees of
trustees who are not officers, directors, partners, employees or holders of 5
percent or more of the outstanding voting securities of the Advisor or any
Sub-Advisor or any of their affiliates, Securities and Exchange Commission
("Commission") fees and state blue sky registration and qualification fees,
charges of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, outside auditing and legal expenses, costs of maintaining
trust existence, costs of preparing and printing prospectuses or any
supplements or amendments thereto necessary for the continued effective
registration of the Funds' shares ("Shares") under federal or state securities
laws, costs of printing and distributing any prospectus, supplement or
amendment thereto for existing shareholders of the Funds, costs of
shareholders' reports and meetings, and any extraordinary expenses. It is
understood that certain advertising, marketing, shareholder servicing,
administration and/or distribution expenses to be incurred in connection with
the Shares may be paid by the Company as provided in any plan which may in the
sole discretion of the Company be adopted in accordance with Rule 12b-1 under
the 1940 Act, and that such expenses shall be paid apart from any fees paid
under this Agreement.

7. Compensation. For the services provided and the expenses assumed pursuant
to this Agreement, the Company shall pay the Advisor a fee, computed daily and
payable monthly, at the annual rate as set forth in the attached fee schedule
based on the average daily net assets of each Fund determined as set forth in
the current prospectus and statement of additional information of the Company
with respect to the Fund as amended from time to time. Such fee as is
attributable to each Fund shall be a separate (and not joint or joint and
several) obligation of each such Fund. The Company shall reduce the advisory
fee to be paid by each Fund to the Advisor by the amount of any advisory fees
paid indirectly by such Fund to other investment companies as a result of the
Fund's investment in such investment companies' securities.

8. Affiliated Broker. The Advisor or an affiliated person of the Advisor may
act as broker for the Funds or any portion thereof in connection with the
purchase or sale of securities or other investments for the Funds or any
portion thereof, subject to: (a) the requirement that the Advisor seek to
obtain best execution as set forth above; (b) the provisions of the Investment
Advisers Act of 1940, as amended (the "Advisers Act"); (c) the provisions of
the Securities Exchange Act of 1934, as amended; and (d) other applicable
provisions of law. Such brokerage services are not within the scope of the
duties of the Advisor under this Agreement. Subject to the requirements of
applicable law and any procedures adopted by the Funds' Board of Trustees, the
Advisor or its affiliated persons may receive brokerage commissions, fees or
other remuneration from the Funds for such services in addition to the
Advisor's fees for services under this Agreement.

9. Confidentiality. The Advisor shall treat confidentially and as
proprietary information of the Company all records and other information
relative to the Company and prior or present shareholders or those persons or
entities who respond to the Distributor's inquiries concerning investment in
the Company, and shall not use such records and information for any purpose
other than performance of its responsibilities and duties hereunder or under
any other agreement with the Company except after prior notification to and
approval in writing by the Company, which approval shall not be unreasonably
withheld and may not be withheld where the Advisor may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by the
Company. Nothing contained herein,

A-3
<PAGE>

however, shall prohibit the Advisor from advertising to or soliciting the
public generally with respect to other products or services, including, but
not limited to, any advertising or marketing via radio, television,
newspapers, magazines or direct mail solicitation, regardless of whether such
advertisement or solicitation may coincidentally include prior or present
Company shareholders or those persons or entities who have responded to
inquiries with respect to the Funds.

10. Limitations of Liability; Indemnification.

(A) The Advisor shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Company or by any Fund in connection
with the matters to which this Agreement relates, except a loss resulting
from a breach of the Advisor's fiduciary duty with respect to the receipt
of compensation for services or a loss resulting from the Advisor's willful
misfeasance, bad faith or negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under
this Agreement. Any person, even though also an officer, director, employee
or agent of the Advisor, who may be or become an officer, director,
employee or agent of the Company, shall be deemed when rendering services
to the Company or to any Fund, or acting on any business of the Company or
of any Fund (other than services or business in connection with the
Advisor's duties as Advisor hereunder or under any other agreement with the
Company), to be rendering such services to or acting solely for the Company
or Fund and not as an officer, director, employee or agent or one under the
control or direction of the Advisor even though paid by the Advisor.

(B) The Company shall indemnify and hold harmless the Advisor from and
against all liabilities, damages, costs and expenses that the Advisor may
incur in connection with any action, suit, investigation or proceeding
arising out of or otherwise based on any action actually or allegedly taken
or omitted to be taken by the Advisor with respect to the performance of
its duties or obligations hereunder or otherwise as an investment adviser
of the Company and the Funds; provided, however, that the Advisor will not
be entitled to indemnification with respect to any liability to the Company
or its shareholders by reason of the Advisor's breach of fiduciary duty
with respect to the receipt of compensation for services or the willful
misfeasance, bad faith or gross negligence on the part of the Advisor in
the performance of its duties, or by reason of the Advisor's reckless
disregard of its obligations and duties under this Agreement.

(C) The Advisor acknowledges and agrees that the Declaration of Trust of
the Company provides that the Trustees of the Company and the officers of
the Company executing this Agreement on behalf of the Company shall not be
personally bound hereby or liable hereunder, nor shall resort be had to
their private property or the private property of the shareholders of the
Company for the satisfaction of any claim or obligation under this
Agreement.

11. Duration or Termination. This Agreement shall become effective as of the
date first written above and, unless sooner terminated as provided herein,
shall continue until October 31, . Thereafter, this Agreement will be
extended with respect to each Fund for successive one-year periods ending on
October 31st of each year provided each such extension is specifically
approved at least annually (a) by vote of a majority of those members of the
Company's Board of Trustees who are not interested persons of any party to
this Agreement, cast in person at a meeting called for the purpose of voting
on such approval, and (b) by the Company's Board of Trustees or by vote of a
majority of the outstanding voting securities of such Fund. This Agreement may
be terminated by the Company at any time with respect to any Fund, without the
payment of any penalty, by vote of a majority of the entire Board of Trustees
of the Company or by a vote of a majority of the outstanding voting securities
of such Fund on 60 days' written notice to the Advisor, or by the Advisor at
any

A-4
<PAGE>

time, without payment of penalty, on 60 days' written notice to the Company.
This Agreement will immediately terminate in the event of its assignment. As
used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same
meanings as such terms have in the 1940 Act.

12. Representations and Warranties.

(A) The Company represents and warrants to the Advisor that: (i) it is a
business trust duly organized and existing and in good standing under the
laws of the State of Delaware and is duly qualified to conduct its business
in the State of Delaware and in such other jurisdictions wherein the nature
of its activities or its properties owned or leased makes such
qualification necessary; (ii) it is a registered open-end management
investment company under the 1940 Act; (iii) a registration statement on
Form N-1A under the Securities Act of 1933, as amended, on behalf of the
Funds is currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to be made,
with respect to all Shares of the Funds being offered for sale; (iv) it is
empowered under applicable laws and by its Declaration of Trust and Bylaws
to enter into and perform this Agreement; and (iv) all requisite trust
proceedings have been taken to authorize it to enter into and perform this
Agreement.

(B) The Advisor represents and warrants to the Company that: (i) it is a
corporation duly organized and existing and in good standing under the laws
of the State of California and is duly qualified to conduct its business in
the State of California and in such other jurisdictions wherein the nature
of its activities or its properties owned or leased makes such
qualification necessary; (ii) it is a registered investment adviser under
the Investment Advisers Act of 1940; (iii) it is empowered under applicable
laws to enter into and perform this Agreement; and (iv) all requisite
corporate proceedings have been taken to authorize it to enter into and
perform this Agreement.

13. Arbitration of Disputes. Any claim or controversy arising out of or
relating to this Agreement which is not settled by agreement of the parties
shall be settled by arbitration in Santa Monica, California before a panel of
three arbitrators in accordance with the commercial arbitration rules of the
American Arbitration Association then in effect. The parties agree that such
arbitration shall be the exclusive remedy hereunder, and each party expressly
waives any right it may have to seek redress in any other forum. Any
arbitrator acting hereunder shall be empowered to assess no remedy other than
payment of fees and out-of-pocket damages. Each party shall bear its own
expenses of arbitration, and the expenses of the arbitrators and of a
transcript of any arbitration proceeding shall be divided equally between the
parties. Any decision and award of the arbitrators shall be binding upon the
parties, and judgment thereon may be entered in the Superior Court of the
State of California or any other court having jurisdiction. If litigation is
commenced to enforce any such award, the prevailing party will be entitled to
recover reasonable attorneys' fees and costs.

14. Names. The name "Horace Mann Mutual Funds" refers to the trust created
and the trustees, as trustees but not individually or personally, acting from
time to time under a Declaration of Trust dated November 7, 1996, as amended,
which is hereby referred to and a copy of which is on file at the principal
office of the Company. The Trustees, officers, employees and agents of the
Company shall not personally be bound by or liable under any written
obligation, contract, instrument, certificate or other interest or undertaking
of the Company made by the trustees or by any officer, employee or agent of
the Company, in his or her capacity as such, nor shall resort be had to their
private property for the satisfaction of any obligation or claim thereunder.
All persons dealing with any series or class of shares of the Company may
enforce claims against the Company only against the assets belonging to such
series or class.

A-5
<PAGE>

15. Notices. Notices of any kind to be given to the Company hereunder by the
Advisor shall be in writing and shall be duly given if mailed or delivered to
the Company at the following:

With a copy to:

Cathy G. O'Kelly, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, 26th Floor
Chicago, Illinois 60601

or at such other address or to such individual as shall be so specified by the
Company to the Advisor. Notices of any kind to be given to the Advisor
hereunder by the Company shall be in writing and shall be duly given if mailed
or delivered to the Advisor at:

Wilshire Associates Incorporated
1299 Ocean Avenue, Suite 700
Santa Monica, California 90401
Attention:

or at such other address or to the attention of such other individual as shall
be so specified by the Advisor to the Company.

16. Miscellaneous. This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof and may be amended only by
written consent of both parties. 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 or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. Subject to the provisions of Section 10 hereof, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by Delaware law
(without regard to principles of conflicts of law); provided, however, that
nothing herein shall be construed in a manner inconsistent with the 1940 Act
or any rule or regulation of the Commission thereunder.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.

HORACE MANN MUTUAL FUNDS

By: _________________________________
(title) ___________________________

Attest: _______________________________
(name) ____________________________
(title) ___________________________

WILSHIRE ASSOCIATES INCORPORATED

By: _________________________________
(name) ____________________________
(title) ___________________________

Attest: _______________________________
(name) ____________________________
(title) ___________________________

A-6
<PAGE>

FEE SCHEDULE

<TABLE>
<S> <C>
GROWTH FUND.............................................. 0.400% OF NET ASSETS
BALANCED FUND............................................ 0.400% OF NET ASSETS
INCOME FUND.............................................. 0.400% OF NET ASSETS
SHORT TERM FUND.......................................... 0.125% OF NET ASSETS
SMALL CAP GROWTH FUND.................................... 1.150% OF NET ASSETS
INTERNATIONAL EQUITY FUND................................ 0.850% OF NET ASSETS
SOCIALLY RESPONSIBLE FUND................................ 0.700% OF NET ASSETS
</TABLE>
<PAGE>

EXHIBIT B

FORM OF INVESTMENT SUB-ADVISORY AGREEMENT

This Agreement (Agreement) made this 29th day of October, 1998 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 seven separate series or
portfolios, including the Growth Fund, the Small Cap Growth Fund, the
International Equity Fund, the Socially Responsible Fund, the Balanced
Fund, the Income Fund, and the Short-Term Investment 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;

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
<PAGE>

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 this 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.

B-2
<PAGE>

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 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 October 29, 1998, provided that it is
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 , 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.

B-3
<PAGE>

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.

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.

By: ___________________________________
Title: ________________________________
Scudder Kemper
Investments, Inc.

By: _______________________________
Title: ____________________________

B-4
<PAGE>

EXHIBIT 1

SUB-ADVISORY FEE SCHEDULE FOR HORACE MANN MUTUAL FUNDS

INTERNATIONAL EQUITY FUND

.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 through March 3, 1999, and
after such time fees will be subject to renegotiation.
<PAGE>

EXHIBIT C

COMPARABLE INVESTMENT COMPANIES
ADVISED BY SCUDDER KEMPER

Scudder Kemper also serves as an investment adviser or sub-adviser to other
funds that have investment objectives similar to that of the International
Equity and Socially Responsible Funds. The following table identifies those
funds, states their approximate net assets as of November 2, 1998, sets forth
the annual contractual investment advisory fee rate, and indicates whether
Scudder Kemper has waived, reduced, or otherwise agreed to reduce its
compensation under any applicable contract.

<TABLE>
<CAPTION>
ASSETS
NAME OBJECTIVE (000S) FEE RATE
---- --------- ------ --------
<C> <S> <C> <C>
Scudder International Long-term growth $2,851.5 .900% to $500 million
Fund................ of capital .850% next $500 million
primarily .800% next $1 billion
through a .750% next $1 billion
diversified .700% thereafter
portfolio of
marketable
foreign equity
securities
Scudder Growth and Long-term growth $7,452.1 .600% to $500 million
Income Fund......... of capital, .550% next $500 million
current income .500% next $500 million
and growth of .475% next $500 million
income primarily .450% next $1 billion
from common .425% next $1.5 billion
stocks, .405% thereafter
preferred stocks
and securities
convertible into
common stocks
</TABLE>
<PAGE>

EXHIBIT D

LIST OF PARTNERS OF WELLINGTON MANAGEMENT COMPANY LLP
AS OF 11/1/98

<TABLE>
<C> <S>
Kenneth L. Abrams..... Senior Vice President (Partner)
Nicholas C. Adams..... Senior Vice President (Partner)
Rand L. Alexander..... Senior Vice President (Partner)
Deborah L. Allinson... Senior Vice President (Partner)
James H. Averill...... Senior Vice President (Partner)
Karl E. Bandtel....... Senior Vice President (Partner)
Marie-Claude Bernal... Senior Vice President (Partner)
William N. Booth...... Senior Vice President (Partner)
Robert A. Bruno....... Senior Vice President (Partner)
Paul Braverman........ Senior Vice President & Chief
Financial Officer (Partner)
Pamela Dippel......... Senior Vice President & Director of Mutual
Fund Business Group (Partner)
Robert W. Doran....... Chairman (Managing Partner)
Charles T. Freeman.... Senior Vice President (Partner)
Laurie A. Gabriel..... Senior Vice President (Partner)
Frank J. Gilday....... Senior Vice President (Partner)
John H. Gooch......... Senior Vice President (Partner)
Nicholas P. Greville.. Senior Vice President & Director of
International Business Development (Partner)
Paul Hamel............ Senior Vice President (Partner)
William C. S. Hicks... Senior Vice President (Partner)
Paul D. Kaplan........ Senior Vice President (Partner)
John C. Keogh......... Senior Vice President (Partner)
George C. Lodge, Jr... Senior Vice President (Partner)
Mark T. Lynch......... Senior Vice President (Partner)
Nancy T. Lukitsh...... Senior Vice President (Partner) & Director
of Marketing
Christine S. Manfredi. Senior Vice President (Partner)
Patrick J. McCloskey.. Senior Vice President (Partner)
Earl E. McEvoy........ Senior Vice President (Partner)
Duncan M. McFarland... President & Chief Executive Officer
(Managing Partner)
Paul M. Mecray, III... Senior Vice President (Partner)
Matthew E. Megargel... Senior Vice President (Partner)
James N. Mordy........ Senior Vice President (Partner)
Diane C. Nordin....... Senior Vice President (Partner)
Stephen T. O'Brien.... Senior Vice President (Partner)
Edward P. Owens....... Senior Vice President (Partner)
Saul J. Pannell....... Senior Vice President (Partner)
</TABLE>
<PAGE>

<TABLE>
<S> <C>
Thomas L. Pappas.................. Senior Vice President (Partner)
David M. Parker................... Senior Vice President (Partner)
Jonathan M. Payson................ Senior Vice President & Director of
Institutional Client Services Group (Partner)
Stephen M. Pazuk.................. Senior Vice President & Treasurer (Partner)
Robert D. Rands................... Senior Vice President (Partner)
Eugene E. Record, Jr.............. Senior Vice President (Partner)
John R. Ryan...................... Senior Vice President (Partner)
Joseph H. Schwartz................ Senior Vice President (Partner)
David W. Scudder.................. Senior Vice President (Partner)
Binkley C. Shorts................. Senior Vice President (Partner)
Trond Skramstad................... Senior Vice President (Partner)
Catherine A. Smith................ Senior Vice President (Partner)
Stephen A. Soderberg.............. Senior Vice President (Partner)
Harriet Tee Taggart............... Senior Vice President (Partner)
Perry M. Traquina................. Senior Vice President (Partner)
Gene R. Tremblay.................. Senior Vice President (Partner)
Mary Ann Tynan.................... Senior Vice President & Secretary (Partner)
Ernst H. von Metzsch.............. Senior Vice President (Partner)
Clare Villari..................... Senior Vice President (Partner)
James L. Walters.................. Senior Vice President & Director of
Business Planning (Partner)
Kim Williams...................... Senior Vice President (Partner)
Frank V. Wisneski................. Senior Vice President (Partner)
</TABLE>

D-2
<PAGE>

EXHIBIT E

FORM OF INVESTMENT SUB-ADVISORY AGREEMENT

This Investment Sub-Advisory Agreement ("Agreement") is made as of the
day of , 1999 by and between Wilshire Associates Incorporated, a
California corporation ("Adviser") and , a ("Sub-Adviser").

WHEREAS Adviser is the investment adviser of the Horace Mann Mutual Funds
(the "Fund"), an open-end diversified, management investment company
registered under the Investment Company Act of 1940, as amended ("1940 Act"),
currently consisting of seven separate series or portfolios including the
Horace Mann Growth Fund, the Horace Mann Income Fund, the Horace Mann Balanced
Fund, the Horace Mann Short-Term Investment Fund, 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 Sub-Adviser to furnish investment advisory
services for the Fund (the "Fund Portfolio"), and Sub-
Adviser wishes to provide such services, upon the terms and conditions set
forth herein;

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 Portfolio for the period and on the
terms set forth in this Agreement. Sub-Adviser hereby accepts such appointment
and agrees to furnish the services set forth for the compensation herein
provided.

2. SUB-ADVISER SERVICES Subject always to the supervision of the Fund's
Board of Trustees and Adviser, Sub-Adviser will furnish an investment program
in respect of, and make investment decisions for, such portion of the assets
of the Fund Portfolio as Adviser shall from time to time designate (the
"Portfolio Segment") and place all orders for the purchase and sale of
securities on behalf of the Portfolio Segment. In the performance of its
duties, Sub-Adviser will satisfy its fiduciary duties to the Fund and the Fund
Portfolio and will monitor the Portfolio Segment's 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 Portfolio as set forth in the prospectus and
Statement of Additional Information for the Fund Portfolio, as amended from
time to time, as well as any other objectives, policies or limitations as may
be provided by Adviser to Sub-Adviser in writing 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 Portfolio with respect to the Portfolio
Segment and to consult with Adviser regarding the investment affairs of the
Portfolio Segment.

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;
<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 portfolio diversification
requirements necessary for the Portfolio Segment to comply with subchapter
M of the Internal Revenue Code as if it were a regulated investment company
thereunder;

c. is authorized to and will select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Portfolio
Segment and is hereby authorized as the agent of the Fund to give
instructions to the Fund's custodian as to deliveries of securities or
other investments and payments of cash of the Portfolio Segment for the
account of the Fund Portfolio. In making such selection, Sub-Adviser is
directed to use its best efforts to obtain best execution, which includes
most favorable net results and execution of the Portfolio Segment's 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 Sub-Adviser will not be deemed to
have acted unlawfully, or to have breached a fiduciary duty to the Fund or
in respect of the Fund Portfolio, or be in breach of any obligation owing
to the Fund or in respect of the Fund Portfolio under this Agreement, or
otherwise, solely by reason of its having caused the Fund Portfolio to pay
a member of a securities exchange, a broker or a dealer a commission for
effecting a securities transaction of the Fund Portfolio in excess of the
amount of commission another member of an exchange, broker or dealer would
have charged if 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 Sub-Adviser's overall responsibilities with
respect to its accounts, including the Fund, as to which it exercises
investment discretion;

d. is authorized to consider for investment by the Portfolio Segment
securities that may also be appropriate for other funds and/or clients
served by Sub-Adviser. To assure fair treatment of the Portfolio Segment
and all other clients of Sub-Adviser in situations in which two or more
clients' accounts participant simultaneously in a buy or sell program
involving the same security, such transactions will be allocated among the
Portfolio Segment and other clients in a manner deemed equitable by Sub-
Adviser. Sub-Adviser is authorized to aggregate purchase and sale orders
for securities held (or to be held) in the Portfolio Segment with similar
orders being made on the same day for other client accounts or portfolios
managed by Sub-Adviser. When an order is so aggregated, the actual prices
applicable to the aggregated transaction will be averaged and the Portfolio
Segment and each other account or portfolio participating in the aggregated
transaction will be treated as having purchased or sold its portion of the
securities at such average price, and all transaction costs incurred in
effecting the aggregated transaction will be shared on a pro-rata basis
among the accounts or portfolios (including the Portfolio Segment)
participating in the transaction;

e. 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 Portfolio Segment, including without
limitation, review of the general investment strategies of the Portfolio
Segment, the performance of the Portfolio Segment 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-2
<PAGE>

f. will prepare such books and records with respect to the Portfolio
Segment's securities transactions as requested by Adviser and will furnish
Adviser and the Fund's Board of Trustees such periodic and special reports
as the Board or Adviser may reasonably request;

g. will vote all proxies with respect to securities in the Portfolio
Segment; and

h. 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 this Agreement.

3. EXPENSES During the term of this Agreement, Sub-Adviser will provide the
office space, furnishings, equipment and personnel required to perform its
activities under this Agreement, and will pay all customary management
expenses incurred by it in connection with its activities under this
Agreement, which shall not include the cost of securities (including brokerage
commissions, if any) purchased for the Portfolio Segment.

4. COMPENSATION For the services provided and the expenses assumed under
this Agreement, Adviser will pay Sub-Adviser, and Sub-Adviser agrees to accept
as full compensation therefor, at a sub-advisory fee computed and paid as set
forth in Exhibit 1--Fee Schedule.

5. OTHER SERVICES Sub-Adviser will for all purposes herein be deemed to be
an independent contractor and will, unless otherwise expressly provided or
authorized, have no authority to act for or represent Adviser, the Fund or the
Fund Portfolio or otherwise be deemed an agent of Adviser, the Fund or the
Fund Portfolio. Adviser understands and has advised the 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. Sub-Adviser
understands that during the term of this Agreement Adviser may retain one or
more other sub-advisers with respect to any portion of the assets of the Fund
Portfolio other than the Portfolio Segment.

6. AFFILIATED BROKER Sub-Adviser or an affiliated person of Sub-Adviser may
act as broker for the Fund Portfolio in connection with the purchase or sale
of securities or other investments for the Portfolio Segment, subject to: (a)
the requirement that Sub-Adviser seek to obtain best execution as set forth
above; (b) the provisions of the Investment Advisers Act of 1940, as amended
(the "Advisers Act"); (c) the provisions of the Securities Exchange Act of
1934, as amended; and (d) other applicable provisions of law. Such brokerage
services are not within the scope of the duties of Sub-Adviser under this
Agreement. Subject to the requirements of applicable law and any procedures
adopted by the Fund's Board of Trustees, Sub-Adviser or its affiliated persons
may receive brokerage commissions, fees or other remuneration from the
Portfolio or the Fund for such services in addition to Sub-Adviser's fees for
services under this Agreement.

7. REPRESENTATIONS OF SUB-ADVISER Sub-Adviser is registered with the
Securities and Exchange Commission under the Advisers Act. Sub-Adviser shall
remain so registered throughout the term of this Agreement and shall notify
Adviser immediately if Sub-Adviser ceases to be so registered as an investment
adviser. Sub-Adviser: (a) is duly organized and validly existing under the
laws of the state of its organization with the power to own and possess its
assets and carry on its business as it is now being conducted, (b) has the
authority to enter into and perform the services contemplated by this
Agreement, (c) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement, (d) has met, and will
continue to seek to

E-3
<PAGE>

meet for the duration of this Agreement, any other applicable federal or state
requirements, and the applicable requirements of any regulatory or industry
self-regulatory agency, necessary to be met in order to perform its services
under this Agreement, and (e) will promptly notify Adviser of the occurrence
of any event that would disqualify it from serving as an investment adviser to
an investment company pursuant to Section 9(a) of the 1940 Act.

8. BOOKS AND RECORDS Sub-Adviser will maintain, in the form and for the
period required by Rule 31a-2 under the 1940 Act, all records relating to the
Portfolio Segment's investments that are required to be maintained by the Fund
pursuant to the requirements of paragraphs (b)(5), (b)(6), (b)(7), (b)(9),
(b)(10) and (f) of Rule 31a-1 under the 1940 Act. Sub-Adviser agrees that all
books and records which it maintains for the Fund Portfolio or the Fund are
the property of the Fund and further agrees to surrender promptly to the
Adviser or the Fund any such books, records or information upon the Adviser's
or the Fund's request (provided, however, that Sub-Adviser may retain copies
of such records). All such books and records shall be made available, within
five business days of a written request, to the Fund's accountants or auditors
during regular business hours at Sub-Adviser's offices. Adviser and the Fund
or either of their authorized representative shall have the right to copy any
records in the possession of Sub-Adviser which pertain to the Fund Portfolio
or the Fund. Such books, records, information or reports shall be made
available to properly authorized government representatives consistent with
state and federal law and/or regulations. In the event of the termination of
this Agreement, all such books, records or other information shall be returned
to Adviser or the Fund (provided, however, that Sub-Adviser may retain copies
of such records as required by law).

Sub-Adviser agrees that it will not disclose or use any records or
confidential information obtained pursuant to this Agreement in any manner
whatsoever except as authorized in this Agreement or in writing by Adviser or
the Fund, or if such disclosure is required by federal or state regulatory
authorities. Sub-Adviser may disclose the investment performance of the
Portfolio Segment, provided that such disclosure does not reveal the identity
of Adviser, the Fund Portfolio or the Fund or the composition of the Portfolio
Segment. Sub-Adviser may, however, disclose that Adviser, the Fund and the
Fund Portfolio are its clients.

9. CODE OF ETHICS Sub-Adviser has adopted a written code of ethics complying
with the requirements of Rule 17j-1(b) and (c) under the 1940 Act and will
provide Adviser and the Fund with a copy of such code. Within 20 days of the
end of each calendar quarter during which this Agreement remains in effect,
the president or a vice president of Sub-Adviser shall certify to Adviser or
the Fund that Sub-Adviser has complied with the requirements of Rule 17j-1
during the previous quarter and that there have been no violations of Sub-
Adviser's code of ethics or, if such a violation has occurred, the nature of
such violation and of the action taken in response to such violation.

10. LIMITATION OF LIABILITY Neither Sub-Adviser nor any of its directors,
officers, stockholders, agents or employees shall have any liability to
Adviser, the Fund or any shareholder of the Fund for any error of judgment,
mistake of law, or loss arising out of any investment, or for any other act or
omission in the performance by Sub-Adviser of its duties hereunder, except for
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, except to the extent
otherwise provided in Section 36(b) of the 1940 Act concerning loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation
for services.

E-4
<PAGE>

Sub-Adviser agrees to indemnify and defend Adviser, its officers, directors,
employees and any person who controls Adviser for any loss or expense
(including reasonable attorneys' fees) arising out of or in connection with
any claim, demand, action, suit or proceeding relating to any actual or
alleged material misstatement or omission in the Fund's registration
statement, any proxy statement, or any communication to current or prospective
investors in the Fund Portfolio, made by Sub-Adviser and provided to Adviser
or the Fund by Sub-Adviser.

11. TERM AND TERMINATION This Agreement shall become effective with respect
to the Portfolio Segment on , 199 , and shall remain in full force until
, unless sooner terminated as hereinafter provided. This Agreement shall
continue in force from year to year thereafter with respect to the Fund
Portfolio, but only as long as such continuance is specifically approved for
the 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 the Fund Portfolio, Sub-
Adviser may continue to serve in such capacity for the Fund Portfolio in the
manner and to the extent permitted by the 1940 Act and the rules and
regulations thereunder.

This Agreement shall terminate as follows:

a. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act) and may be terminated at any time
without the payment of any penalty by Adviser or by Sub-Adviser on sixty
days written notice to the other party. This Agreement may also be
terminated by the Fund with respect to the Fund Portfolio by action of the
Board of Trustees or by a vote of a majority of the outstanding voting
securities of the Fund Portfolio (as defined in the 1940 Act) on sixty days
written notice to Sub-Adviser by the Fund.

b. This Agreement may be terminated with respect to the Fund Portfolio
any time without payment of any penalty by Adviser, the Board of Trustees
or a vote of majority of the outstanding voting securities of the Fund
Portfolio in the event that Sub-Adviser or any officer or director of Sub-
Adviser has taken any action which results in a material breach of the
covenants of Sub-Adviser under this Agreement.

c. This Agreement shall automatically terminate in the event the
Investment Management Agreement between Adviser and the Fund with respect
to the Fund Portfolio is terminated, assigned or not renewed.

Termination of this Agreement shall not affect the right of Sub-Adviser to
receive payments of any unpaid balance of the compensation described in
Section 4 earned prior to such termination.

12. NOTICE Any notice under this Agreement by a party shall be in writing,
addressed and personally delivered, mailed postage prepaid, or sent by
facsimile transmission with confirmation of receipt, to the other party at
such address as such other party may designate for the receipt of such notice.

13. LIMITATIONS ON LIABILITY All parties are expressly put on notice of the
Fund's Agreement and Declaration of Trust and all amendments thereto, and the
limitation of shareholder and trustee liability contained therein. The
obligations of the Fund entered into in the name or on behalf thereof by any
of its 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

E-5
<PAGE>

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 Fund Portfolio for the enforcement of any claims.

14. 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; provided, however, that no changes or
modifications to the foregoing shall be bind on Sub-Adviser until it is
notified thereof.

15. ARBITRATION OF DISPUTES Any claim or controversy arising out of or
relating to this Agreement which is not settled by agreement of the parties
shall be settled by arbitration in Santa Monica, California before a panel of
three arbitrators in accordance with the commercial arbitration rules of the
American Arbitration Association then in effect. The parties agree that such
arbitration shall be the exclusive remedy hereunder, and each party expressly
waives any right it may have to seek redress in any other forum. Any
arbitrator acting hereunder shall be empowered to assess no remedy other than
payment of fees and out-of-pocket damages. Each party shall bear its own
expenses of arbitration, and the expenses of the arbitrators and of a
transcript of any arbitration proceeding shall be divided equally between the
parties. Any decision and award of the arbitrators shall be binding upon the
parties, and judgment thereon may be entered in the Superior Court of the
State of California or any other court having jurisdiction. If litigation is
commenced to enforce any such award, the prevailing party will be entitled to
recover reasonable attorneys' fees and costs.

16. MISCELLANEOUS This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof and may be amended only by
written consent of both parties. 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 or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, 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.

17. 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
California.

Adviser and Sub-Adviser have caused this Agreement to be executed as of the
date and year first above written.

WILSHIRE ASSOCIATES INCORPORATED ___________________________________

By ____________________________________ By ________________________________
Title _________________________________ Title _____________________________
By ____________________________________ By ________________________________
Title _________________________________ Title _____________________________

E-6
<PAGE>

EXHIBIT 1
FEE SCHEDULE

Adviser shall pay Sub-Adviser, promptly after receipt by Adviser of its
advisory fee from the Fund with respect to the Fund Portfolio each calendar
month during the term of this Agreement, a fee based on the average daily net
assets of the Portfolio Segment, at the following annual rate:

Sub-Adviser's fee shall be accrued daily at 1/365th of the annual rate set
forth above. For the purpose of accruing compensation, the net assets of the
Portfolio Segment will be determined in the manner and on the dates set forth
in the current prospectus of the Fund with respect to the Fund Portfolio and,
on days on which the net assets are not so determined, the net asset value
computation to be used will be as determined on the immediately preceding day
on which the net assets were determined. Upon the termination of this
Agreement, all compensation due through the date of termination will be
calculated on a pro-rata basis through the date of termination and paid within
thirty business days of the date of termination.
<PAGE>

EXHIBIT F

PRINCIPALS
MELLON EQUITY ASSOCIATES, LLP

<TABLE>
<S> <C>
Kenneth A. Barker.................... Senior Vice President
Director, Quantitative Analysis & Research
John J. Dagenhard.................... Senior Vice President
Director, Client Service
Scott E. Desmond..................... Senior Vice President
Director, Information Systems
Steven A. Falci, CFA................. Senior Vice President
Portfolio Manager
Ronald P. Gala, CFA.................. Senior Vice President
Portfolio Manager
Lisa A. Gallagher.................... Vice President
Director, Cash Management
John W. Keller....................... Senior Vice President
Director, Equity Trading
Patricia K. Nichols.................. Executive Vice President
Chief Operating Officer
John R. O'Toole, CFA................. Senior Vice President
Portfolio Manager
David K. Penz........................ Senior Vice President
Director, Sales & Marketing
William P. Rydell.................... President
Chief Operating Officer
Robert A. Wilk, CFA.................. Senior Vice President
Portfolio Manager
</TABLE>
<PAGE>

EXHIBIT G

COMPARABLE INVESTMENT COMPANIES
ADVISED BY MELLON EQUITY

Mellon Equity also serves as an investment adviser or sub-adviser to other
funds that have investment objectives similar to that of the Growth Fund. The
following table identifies those funds, states their approximate net assets as
of September 30, 1998, sets forth the annual contractual investment advisory
fee rate, and indicates whether Mellon Equity has waived, reduced, or
otherwise agreed to reduce its compensation under any applicable contract.

<TABLE>
<CAPTION>
FEE
NAME OBJECTIVE ASSETS* RATE
- ---- --------- ------- ----
<S> <C> <C> <C>
Market Street Fund, Long-term capital appreciation $ 19,761,145 0.30%
Inc.--
All Pro Large Cap
Value Portfolio
SEI Institutional Long-term growth of capital and income $599,565,899 0.35%
Managed Trust--Large
Cap Value Portfolio
SEI Institutional Long-term growth of capital and income $242,744,407 0.40%
Investments Trust--
Large Cap Fund
</TABLE>
*Assets shown represent only the portion of such fund's assets being managed
by Mellon Equity Associates. LLP.
<PAGE>

EXHIBIT H
DIRECTORS
BRINSON PARTNERS, INC.

<TABLE>
<S> <C>
Gary P. Brinson.................................... President
Samuel W. Anderson................................. Vice President and Secretary
Henry Doorn, Jr.................................... Treasurer
Benjamin F. Lenhardt, Jr........................... Managing Director
</TABLE>
<PAGE>

EXHIBIT I

COMPARABLE INVESTMENT COMPANIES
ADVISED BY BRINSON PARTNERS

Brinson Partners also serves as an investment adviser or sub-adviser to
other funds that have investment objectives similar to that of the Growth
Fund. The following table identifies those funds, states their approximate net
assets as of November 2, 1998, sets forth the annual contractual investment
advisory fee rate, and indicates whether Brinson Partners has waived, reduced,
or otherwise agreed to reduce its compensation under any applicable contract.

<TABLE>
<CAPTION>
ASSETS
NAME OBJECTIVE (IN 000S) FEE RATE
- ---- --------- --------- --------
<S> <C> <C> <C>
The Brinson Funds-- Maximization of total $18,022 0.70%*
U.S. Large return, consisting of
Capitalization Equity capital appreciation and
Fund.................. current income, while
controlling risk, through
investment in equity
securities of large capitalization U.S.
companies
</TABLE>

- --------
*Brinson Partners has agreed to waive its fees and reimburse certain
expenses so that total operating expenses do not exceed 0.80% per annum.
<PAGE>

VOTING INSTRUCTION/PROXY (To be signed on reverse side)
Horace Mann Mutual Funds
Balanced Fund
SHAREHOLDER MEETING OF JANUARY 13, 1999
This Voting Instruction/Proxy is Solicited on Behalf of your 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 Balanced Fund
shares of the undersigned at the Special Meeting of Shareholders of the Horace
Mann Mutual Funds, to be held at One Horace Mann Plaza, Springfield, IL on
January 13, 1999 at 9:00 a.m. CT, or at any adjournment thereof, upon the
proposals 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.

1. Item 1: Election of Trustees. [_] FOR all nominees listed below (except as
marked to the contrary below)

[_] WITHHOLD AUTHORITY to vote for all
nominees listed below

2. Item 2: Ratification of KPMG Peat Marwick LLP as independent auditors for
the Fund. [_] FOR [_] AGAINST [_] ABSTAIN

3. Item 3: Approval of an Investment Advisory Agreement between the Horace
Mann Mutual Funds and Wilshire Associates Incorporated.
[_] FOR [_] AGAINST [_] ABSTAIN

4. Item 4: Approval of a proposal to permit Wilshire Associates Incorporated
to replace subadvisers or add subadvisors to the Fund, and to
enter into subadvisory agreements with those subadvisers, without
further shareholder approval. [_] FOR [_] AGAINST [_] ABSTAIN

5. Item 7a: Approval of a proposal to amend the Fund's fundamental investment
restriction with respect to allowing the Fund to hold larger
investments in fewer companies. [_] FOR [_] AGAINST [_] ABSTAIN

6. Item 7b: Approval of a proposal to amend the Fund's fundamental investment
restriction with respect to investment in other investment
companies. [_] FOR [_] AGAINST [_] ABSTAIN

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Share Balance as of November 30, 1998 Dated:_______________________________ 199____

_____________________________________________
Signature

_____________________________________________
Signature (if held jointly)

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.

----------------------------------------
IF NO CONTRARY SPECIFICATION IS MADE, PLEASE MARK, DATE, SIGN AND PROMPTLY
THIS VOTING INSTRUCTION/PROXY WILL BE RETURN THIS VOTING INSTRUCTION/PROXY
VOTED FOR THE PROPOSALS IN ITEMS CARD USING THE ENCLOSED ENVELOPE.
1, 2, 3, 4, 7a AND 7b. ----------------------------------------

HF-JCL 147

</TABLE>

<PAGE>

VOTING INSTRUCTION/PROXY (To be signed on reverse side)
Horace Mann Mutual Funds
Growth Fund
SHAREHOLDER MEETING OF JANUARY 13, 1999
This Voting Instruction/Proxy is Solicited on Behalf of your Board of Trustees

The undersigned hereby appoints George J. Zook and A.L. Gallop, individually or
jointly, proxies, each with the power of substitution, to vote all Growth Fund
shares of the undersigned at the Special Meeting of Shareholders of the Horace
Mann Mutual Funds, to be held at One Horace Mann Plaza, Springfield, IL on
January 13, 1999 at 9:00 a.m. CT, or at any adjournment thereof, upon the
proposals 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.

1. Item 1: Election of Trustees [_] FOR all nominees listed below (except as
marked to the contrary below)
[_] WITHHOLD AUTHORITY to vote for all
nominees listed below

INSTRUCTION: To withhold voting authority for any individual nominee, strike a
line through the nominee's name in the list below:
A. Thomas Arisman, A.L. Gallop, Richard A. Holt, Richard D. Lang,
Harriet A. Russell, George J. Zock
2. Item 2: Ratification of KPMG Peat Marwick LLP as independent auditors for
the Fund.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Item 3: Approval of an Investment Advisory Agreement between the Horace
Mann Mutual Funds and Wilshire Associates Incorporated.
[_] FOR [_] AGAINST [_] ABSTAIN
4. Item 4: Approval of a proposal to permit Wilshire Associates Incorporated
to replace subadvisers or add subadvisers to the Fund, and to
enter into subadvisory agreements with those subadvisers, without
further shareholder approval.
[_] FOR [_] AGAINST [_] ABSTAIN
5. Item 6a: Approval of an Investment Sub-Advisory Agreement between Mellon
Equity Associates, LLP and Wilshire Associates Incorporated.
[_] FOR [_] AGAINST [_] ABSTAIN
6. Item 6b: Approval of an Investment Sub-Advisory Agreement between Brinson
Partners, Inc. and Wilshire Associates Incorporated.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Share Balance as of November 30, 1998 Dated:_______________________________ 199____

_____________________________________________
Signature

_____________________________________________
Signature (if held jointly)

----------------------------------------
IF NO CONTRARY SPECIFICATION IS MADE, PLEASE MARK, DATE, SIGN AND PROMPTLY
THIS VOTING INSTRUCTION/PROXY WILL BE RETURN THIS VOTING INSTRUCTION/PROXY
VOTED FOR THE PROPOSALS IN ITEMS CARD USING THE ENCLOSED ENVELOPE.
1, 2, 3, 4, 6a AND 6b. ----------------------------------------

HF-JCL 145

</TABLE>

<PAGE>

VOTING INSTRUCTION/PROXY (To be signed on reverse side)
Horace Mann Mutual Funds
Income Fund
SHAREHOLDER MEETING OF JANUARY 13, 1999
This Voting Instruction/Proxy is Solicited on Behalf of your 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 Income Fund
shares of the undersigned at the Special Meeting of Shareholders of the Horace
Mann Mutual Funds, to be held at One Horace Mann Plaza, Springfield, IL on
January 13, 1999 at 9:00 a.m. CT, or at any adjournment thereof, upon the
proposals 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.

1. Item 1: Election of Trustees. [_] FOR all nominees listed below (except as
marked to the contrary below)

[_] WITHHOLD AUTHORITY to vote for all
nominees listed below

INSTRUCTION: To withhold voting authority for any individual nominee, strike a
line through the nominee's name in the list below:

A. Thomas Arisman, A.L. Gallop, Richard A. Holt, Richard D. Lang,
Harriet A. Russell, George J. Zock

2. Item 2: Ratification of KPMG Peat Marwick LLP as independent auditors for
the Fund. [_] FOR [_] AGAINST [_] ABSTAIN

3. Item 3: Approval of an Investment Advisory Agreement between the Horace
Mann Mutual Funds and Wilshire Associates Incorporated.
[_] FOR [_] AGAINST [_] ABSTAIN

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Share Balance as of November 30, 1998 Dated:_______________________________ 199____

_____________________________________________
Signature

_____________________________________________
Signature (if held jointly)

HF-JCL 146

</TABLE>

<PAGE>

VOTING INSTRUCTION/PROXY (To be signed on reverse side)
Horace Mann Mutual Funds
International Equity Fund
SHAREHOLDER MEETING OF JANUARY 13, 1999
This Voting Instruction/Proxy is Solicited on Behalf of your 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 International
Equity Fund shares of the undersigned at the Special Meeting of Shareholders of
the Horace Mann Mutual Funds, to be held at One Horace Mann Plaza, Springfield,
IL on January 13, 1999 at 9:00 a.m. CT, or at any adjournment thereof, upon the
proposals 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.

1. Item 1: Election of Trustees [_] FOR all nominees listed below (except as
marked to the contrary below)

[_] WITHHOLD AUTHORITY to vote for all
nominees listed below

2. Item 2: Ratification of KPMG Peat Marwick LLP as independent auditors for
the Fund. [_] FOR [_] AGAINST [_] ABSTAIN

3. Item 3: Approval of an Investment Advisory Agreement between the Horace
Mann Mutual Funds and Wilshire Associates Incorporated.
[_] FOR [_] AGAINST [_] ABSTAIN

4. Item 4: Approval of a proposal to permit Wilshire Associates Incorporated
to replace subadvisers or add subadvisers to the Fund, and to
enter into subadvisory agreements with those subadvisers, without
further shareholder approval. [_] FOR [_] AGAINST [_] ABSTAIN

5. Item 5: Approval of an Investment Sub-Advisory Agreement between Scudder
Kemper Investments, Inc. and Horace Mann Investors, Inc.
[_] FOR [_] AGAINST [_] ABSTAIN

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Share Balance as of November 30, 1998 Dated:_______________________________ 199____

_____________________________________________
Signature

_____________________________________________
Signature (if held jointly)

HF-JCL 150

</TABLE>

<PAGE>

VOTING INSTRUCTION/PROXY (To be signed on reverse side)
Horace Mann Mutual Funds
Short-Term Investment Fund
SHAREHOLDER MEETING OF JANUARY 13, 1999
This Voting Instruction/Proxy is Solicited on Behalf of your 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 Short-Term
Investment Fund shares of the undersigned at the Special Meeting of Shareholders
of the Horace Mann Mutual Funds, to be held at One Horace Mann Plaza,
Springfield, IL on January 13, 1999 at 9:00 a.m. CT, or at any adjournment
thereof, upon the proposals 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.

1. Item 1: Election of Trustees. [_] FOR all nominees listed below (except as
marked to the contrary below)

[_] WITHHOLD AUTHORITY to vote for all
nominees listed below

2. Item 2: Ratification of KPMG Peat Marwick LLP as independent auditors for
the Fund. [_] FOR [_] AGAINST [_] ABSTAIN

3. Item 3: Approval of an Investment Advisory Agreement between the Horace
Mann Mutual Funds and Wilshire Associates Incorporated.
[_] FOR [_] AGAINST [_] ABSTAIN

<TABLE>
<CAPTION>
<S> <C>
Share Balance as of November 30, 1998 Dated:_______________________________ 199____

_____________________________________________
Signature

_____________________________________________
Signature (if held jointly)

HF-JCL 148

</TABLE>

<PAGE>

VOTING INSTRUCTION/PROXY (To be signed on reverse side)
Horace Mann Mutual Funds
Small Cap Growth Fund
SHAREHOLDER MEETING OF JANUARY 13, 1999
This Voting Instruction/Proxy is Solicited on Behalf of your 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 Small Cap
Growth Fund shares of the undersigned at the Special Meeting of Shareholders of
the Horace Mann Mutual Funds, to be held at One Horace Mann Plaza, Springfield,
IL on January 13, 1999 at 9:00 a.m. CT, or at any adjournment thereof, upon the
proposals 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.

1. Item 1: Election of Trustees. [_] FOR all nominees listed below (except as
marked to the contrary below)

[_] WITHHOLD AUTHORITY to vote for all
nominees listed below

2. Item 2: Ratification of KPMG Peat Marwick LLP as independent auditors for
the Fund. [_] FOR [_] AGAINST [_] ABSTAIN

3. Item 3: Approval of an Investment Advisory Agreement between the Horace
Mann Mutual Funds and Wilshire Associates Incorporated.
[_] FOR [_] AGAINST [_] ABSTAIN

<TABLE>
<CAPTION>
<S> <C>
Share Balance as of November 30, 1998 Dated:_______________________________ 199____

_____________________________________________
Signature

_____________________________________________
Signature (if held jointly)

HF-JCL 151

</TABLE>

<PAGE>

VOTING INSTRUCTION/PROXY (To be signed on reverse side)
Horace Mann Mutual Funds
Socially Responsible Fund
SHAREHOLDER MEETING OF JANUARY 13, 1999
This Voting Instruction/Proxy is Solicited on Behalf of your 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 Socially
Responsible Fund shares of the undersigned at the Special Meeting of
Shareholders of the Horace Mann Mutual Funds, to be held at One Horace Mann
Plaza, Springfield, IL on January 13, 1999 at 9:00 a.m. CT, or at any
adjournment thereof, upon the proposals 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.

1. Item 1: Election of Trustees. [_] FOR all nominees listed below (except as
marked to the contrary below)

[_] WITHHOLD AUTHORITY to vote for all
nominees listed below

2. Item 2: Ratification of KPMG Peat Marwick LLP as independent auditors for
the Fund. [_] FOR [_] AGAINST [_] ABSTAIN

3. Item 3: Approval of an Investment Advisory Agreement between the Horace
Mann Mutual Funds and Wilshire Associates Incorporated.
[_] FOR [_] AGAINST [_] ABSTAIN

5. Item 5: Approval of an Investment Sub-Advisory Agreement between Scudder
Kemper Investments, Inc. and Horace Mann Investors, Inc.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Share Balance as of November 30, 1998 Dated:_______________________________ 199____

_____________________________________________
Signature

_____________________________________________
Signature (if held jointly)

HF-JCL 149

</TABLE>