<PAGE>
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 Income Fund, Inc. (FILE NOS. 2-81831 AND 811-3664)
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
March 25, 1997
Notice to Annuity Contractholders:
Subject: Separate Account Voting Instructions
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, Inc., the Horace Mann Balanced Fund, Inc., the Horace Mann Income
Fund, Inc., or the Horace Mann Short-Term Investment Fund, Inc. (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. 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. As provided in the prospectus
any Fund shares attributed to investment by HMLIC will also be voted in
proportion to the vote by 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 Combined Special meeting of
Shareholders. (See enclosed Notice of Combined Special Meeting of Shareholders
for date, time and place.)
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE,
SIGN AND PROMPTLY RETURN THE ENCLOSED VOTING INSTRUCTIONS(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>
Preliminary Proxy
-----------------
HORACE MANN MUTUAL FUNDS
ONE HORACE MANN PLAZA
SPRINGFIELD, ILLINOIS 62715-0001
TELEPHONE: (217) 527-2307 or (800) 999-1030
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
April 23, 1997
AND PROXY STATEMENT
To the Shareholders:
You are invited to attend a Joint Special Meeting of the shareholders of Horace
Mann Growth Fund, Inc. ("Growth Fund"), Horace Mann Balanced Fund, Inc.
("Balanced Fund"), Horace Mann Income Fund, Inc. ("Income Fund"), and Horace
Mann Short-Term Investment Fund, Inc. ("Short-Term Fund") (individually, a
"Fund" and collectively, the "Funds"). The meeting will be held on Wednesday,
April 23, 1997 at One Horace Mann Plaza, Springfield, Illinois 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 seven (7) Board Members to the Board of each Fund.
2. To approve the Management Agreement between each Fund and Horace Mann
Investors, Inc.
3. To approve the Investment Subadvisory Agreement between Horace Mann
Investors, Inc. and Wellington Management Company, LLP.
4. To approve an Agreement and Plan of Reorganization and the transactions
contemplated thereby, the net effect of which would be to reorganize the
Funds into series of Horace Mann Mutual Funds.
5. To approve a proposed change to the Balanced Fund's and Income Fund's
fundamental investment policy with respect to investments in illiquid and
restricted securities.
6. To approve a proposed change to the Income Fund's investment objective.
7. To transact such other business as may properly come before the meeting.
The Board of each Fund has fixed the close of business on February 28, 1997 as
the record date for determining the shareholders of each Fund entitled to notice
of and to vote at the meeting. Shareholders are entitled to one vote for each
share held.
THE BOARD OF EACH FUND RECOMMENDS THAT YOU VOTE FOR ALL ITEMS.
- -------------------------------------------------------------------------------
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
SIGN, DATE AND RETURN IT IN THE ENVELOPE PROVIDED.
PLEASE MAIL YOUR PROXY PROMPTLY.
- -------------------------------------------------------------------------------
<PAGE>
The accompanying proxy is solicited by the Board of Directors of each Fund for
voting at the Joint Special Meeting of shareholders to be held on Wednesday,
April 23, 1997, and any and all adjournments thereof (the "Meeting"). The
shareholders of each Fund will vote separately on the items presented at the
Meeting. This Notice, Proxy Statement and the accompanying voting instruction/
proxy card(s) were first mailed to shareholders on or about March 26, 1997.
Voting instructions/proxies are being solicited by the Board of Directors of the
Funds for use at the Meeting. For shareholders having account balances invested
in the Funds, Horace Mann Life Insurance Company is the owner of the shares, but
is soliciting voting instructions from shareholders as to how such shares should
be voted. Consistent with interpretations of voting requirements by the staff of
the Securities and Exchange Commission, HMLIC will offer to shareholders the
opportunity to instruct HMLIC as to how it should vote shares held by it and the
separate accounts of HMLIC on the items to be considered at the Meeting. In
addition, proxies are being solicited from shareholders of the Growth Fund who
own shares directly. Voting instructions/proxies may be revoked at any time by
(a) submitting a subsequently dated voting instruction/proxy or (b) by
personally attending the Meeting and voting in person. The cost of holding the
shareholders' meeting, including the cost of proxy solicitation, will be paid by
Horace Mann Life Insurance Company.
The following table indicates which Fund's shareholders are solicited with
respect to each Item:
<TABLE>
<CAPTION>
===========================================================================================
Item Growth Balanced Income Short-Term
Fund Fund Fund Fund
===========================================================================================
<S> <C> <C> <C> <C>
1. Elect Board Members X X X X
2. Approve Management Agreement X X X X
3. Approve Investment Subadvisory Agreement X X X X
a4. Approve Agreement and Plan of Reorganization X X X X
5. Approve Amended Fundamental Investment Policy X X
6. Approve Amended Investment Objective X
=========================================================================================
</TABLE>
THE APPROVAL OF ITEM 4 FOR EACH FUND IS CONTINGENT UPON THE APPROVAL OF ITEMS 1,
2 AND 3 FOR SUCH FUND. THEREFORE, DESPITE ANY APPROVAL OF ITEM 4 FOR A
PARTICULAR FUND, THE REORGANIZATION WILL NOT BE EFFECTED UNLESS THE FUND
SHAREHOLDERS ALSO APPROVE ITEMS 1, 2 AND 3.
The Board of each Fund has fixed the close of business on February 28, 1997 as
the record date for determination of shareholders entitled to notice of and to
vote at the Meeting. As of February 28, 1997, shares of the Funds were issued
and outstanding as follows:
<TABLE>
<CAPTION>
Fund Shares
---- ------
<S> <C>
Growth Fund 18,474,081.513
Balanced Fund 16,155,153.011
Income Fund 813,244.518
Short-Term Fund 125,277.376
</TABLE>
2
<PAGE>
Capital Stock Ownership. The following table sets forth the holdings of the
shares of each Fund as of February 28, 1997, of each person known to own,
control, or hold with power to vote 5 percent or more of the Fund's outstanding
voting securities:
<TABLE>
<CAPTION>
Name Growth Balanced Income Short-Term
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Horace Mann Life Insurance Company
("HMLIC")
Shares Owned....................
Percent of Shares Outstanding...
HMLIC
Separate Account
Shares Owned....................
Percent of Shares Outstanding...
HMLIC
Separate Account B
Shares Owned....................
Percent of Shares Outstanding...
Horace Mann Service Corporation
401(k) Plan
Shares Owned....................
Percent of Shares Outstanding...
HMLIC
Allegiance Separate Account A
Shares Owned....................
Percent of Shares Outstanding...
</TABLE>
- ---------------------
N/A indicates "not applicable."
Horace Mann Life Insurance Company and its separate accounts are located at One
Horace Mann Plaza, Springfield, Illinois.
Item 1. Election of Board Members
It is intended that the proxies will be voted for the election as Board Members
of the nominees described below. Each Board Member so elected will serve as a
Board Member of the respective Fund until the next meeting of shareholders, if
any, called for the purpose of electing Board Members and until the election and
qualification of a successor or until such Board Member sooner dies, resigns or
is removed as provided in the organizational documents of each Fund. A. Thomas
Arisman, Larry K. Becker, A.L. Gallop and Harriet A. Russell were last elected
at the 1992 annual joint meeting of shareholders. George J. Zock was appointed
to the Board of each Fund in _____.
All nominees listed below have consented to serve as Board Members of the
respective Funds, if elected. In case any nominee shall be unable or shall fail
to stand for election as a Board Member by virtue of an unexpected occurrence,
the proxies may be voted for such other person(s) as shall be determined by the
persons acting under the proxies in their discretion.
3
<PAGE>
<TABLE>
<CAPTION>
Fund Shares Beneficially
Name (Age), Owned as of Principal Occupation For
Position(s) with Funds, February 28, 1997, Last Five Years,
Address Director Since Directorships
- ---------------------------- ------------------------------------ ------------------------------------------------------
<S> <C> <C>
A. Thomas Arisman* Growth Fund Senior Vice President, Horace Mann Life Insurance
(50) _____ shares Company and Horace Mann Service Corporation;
Director 1989 Director and President, Horace Mann Investors, Inc.;
and positions with Horace Mann Educators Corporation
One Horace Mann Plaza Balanced Fund and its subsidiaries
Springfield, IL 62715 _____ shares
1989
Income Fund
_____ shares
1989
Short-Term Fund
_____ shares
1989
- ------------------------------------------------------------------------------------------------------------------------------------
Larry K. Becker* Growth Fund Director, Executive Vice President, and Chief Financial
(48) _____ shares Officer, Horace Mann Life Insurance Company and
Director and Vice President 1989 Horace Mann Service Corporation; Director, Horace
Mann Investors, Inc.; and positions with Horace Mann
One Horace Mann Plaza Balanced Fund Educators Corporation and its subsidiaries.
Springfield, IL 62715 _____ shares
1989
Income Fund
_____ shares
1989
Short-Term Fund
_____ shares
1989
- ------------------------------------------------------------------------------------------------------------------------------------
A. L. Gallop Growth Fund Executive Director (Retired), Minnesota Education
(71) _____ shares Association; formerly Director, Horace Mann Educators
Director 1957 Corporation (1968-1983).
Balanced Fund
- ------------------ _____ shares
- ------------------ 1983
Income Fund
_____ shares
1983
Short-Term Fund
_____ shares
1983
- ------------------------------------------------------------------------------------------------------------------------------------
Richard D. Lang Growth Fund Executive Director, Vermont National Education
(59) _____ shares Association
Nominee Nominee
Balanced Fund
- --------------- _____ shares
- --------------- Nominee
Income Fund
_____ shares
Nominee
Short-Term Fund
_____ shares
Nominee
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Fund Shares Beneficially
Name (Age), Owned as of Principal Occupation for
Position(s) with Funds, February 28, 1997 Last Five Years,
Address Director Since** Directorships
- ----------------------- ------------------------ ------------------------
<S> <C> <C>
Edward L. Najim* Growth Fund Director and Executive Vice President, Horace Mann
(53) _____ shares Life Insurance Company and Horace Mann Service
Nominee Nominee Corporation; and positions with Horace Mann Educators
Corporation and its subsidiaries.
One Horace Mann Plaza Balanced Fund
Springfield, IL 61715 _____ shares
Nominee
Income Fund
_____ shares
Nominee
Short-Term Fund
_____ shares
Nominee
Harriet A. Russell Growth Fund Trustee member, Cincinnati Board of Education;
(54) _____ shares Director and Vice President, Greater Cincinnati School
Director 1992 Employer Credit Union; teacher (Retired), Walnut Hills
High School; former Director, Horace Mann Growth
_______________ Balanced Fund Fund, 1974 to 1983.
_______________ _____ shares
1992
Income Fund
_____ shares
1992
Short-Term Fund
_____ shares
1992
George J. Zock* Growth Fund Director, Senior Vice President and Treasurer, Horace
(46) _____ shares Mann Life Insurance Company and Horace Mann
Director _____ Service Corporation; Director, Horace Mann Investors,
Inc.; and positions with Horace Mann Educators
One Horace Mann Plaza Balanced Fund Corporation and its subsidiaries.
Springfield, IL 62715 _____ shares
_____
Income Fund
_____ shares
_____
Short-Term Fund
_____ shares
_____
----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Director is considered an "interested person" as that term is defined in the
Investment Company Act of 1940.
** As of February 28, 1997, the directors and nominees of the Trust held in the
aggregate directly and beneficially less than 1% of the outstanding shares of
the Growth Fund. Directors and nominees do not directly own any shares of the
Income Fund, Balanced Fund or Short-Term Fund; however, they may invest
indirectly in the Growth Fund, Income Fund, Balanced Fund and/or Short-Term Fund
through annuity contracts issued by Horace Mann Life Insurance Company and the
401(k) plan of Horace Mann Service Corporation.
The Board of Directors of each Fund held ___ regular meetings during the Funds'
fiscal year ended December 31, 1996. In addition, the standing committees of
each Board of Directors are: the Securities Committee, Audit/Insurance Committee
and Nominating Committee. Each then current Board member attended 75% or more of
the respective meetings of the Board and the committees (if then a member
thereof) held during the 1996 fiscal year.
Unless otherwise provided by resolution of the Board or the provision of
applicable law and with certain specified exceptions, the Executive Committee
may exercise all the powers of the Board when the Board is not in session. A.
Thomas Arisman, Larry K. Becker, and George J. Zock serve on this Committee. The
Executive Committee met ___ times during the 1996 fiscal year.
5
<PAGE>
The Securities Committee coordinates and communicates with the investment
adviser on behalf of the Board; reviews and oversees investment management
activities; recommends changes or adjustments to the investment advisory
agreement; creates and revises standards of investment performance and advises
the Board on investment related issues. A. Thomas Arisman, Larry K. Becker and
George J. Zock serve on the Securities Committee. The Securities Committee met
___ times during the 1996 fiscal year.
It is the function of the Audit/Insurance Committee to serve as the Board's
liaison with the Fund's independent public accountants, to review the financial
operations of the Fund and to make periodic reports of these reviews to the
Board along with appropriate recommendations regarding the proper and efficient
financial operation of the Fund. Additional responsibilities include the review
and assurance of the adequacy of insurance coverage for the Fund. A. Thomas
Arisman, A.L. Gallop and George J. Zock serve on the Audit/Insurance Committee.
The Audit/Insurance Committee met ___ times during the 1996 fiscal year.
The Nominating Committee is responsible for the selection of appropriate,
qualified persons as Director nominees to be presented to Fund Shareholders for
their consideration. The Nominating Committee has no formal policy with respect
to prospective Director nominees recommended by Shareholders, but Shareholders
are free to make recommendations. Larry K. Becker and Harriet Russell served on
the Nominating Committee. The Nominating Committee met ___ times during the 1996
fiscal year.
Each Fund pays Board Members who are not "interested persons" of such Fund a
$1,000 annual retainer plus expenses, and an attendance fee of $1,000 for each
Board Meeting, $200 for each committee meeting and $500 for each telephonic
meeting attended. As reflected above, several Board Members currently serve as
board members of Horace Mann Investors, Inc. Board Members or officers who are
"interested persons" receive no compensation from any Fund.
The table below shows, for each Board Member entitled to receive compensation
from the Funds, the aggregate compensation paid or accrued during each Fund's
fiscal year ended December 31, 1996 and the total compensation that the Horace
Mann fund complex paid or accrued during the calendar year ended December 31,
1996.
<TABLE>
<CAPTION>
Aggregate Compensation from Fund
----------------------------------
Total Compensation
from Funds and Fund
Growth Balanced Income Short-Term Complex Paid to
Name of Board Member Fund Fund Fund Fund Board Members
- -------------------- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C>
A.L. Gallop
Richard D. Lang
Harriet A. Russell
</TABLE>
6
<PAGE>
Fund Officers. Information about the executive officers of the Fund, with their
respective ages and terms as Fund officers indicated, is set forth below.
Ann M. Caparros (44), Secretary and Ethics Compliance Officer since __________;
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, was associated with John Deere Insurance Group and
Affiliates serving as Vice President and General Counsel.
Roger W. Fisher (44), Controller since __________; 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 (50), Treasurer and Regulatory Compliance Officer since
__________; Treasurer and Regulatory Compliance Officer, Horace Mann Investors,
Inc.; Vice President, Horace Mann Life Insurance Company; Vice President-
Transfer Agent, Horace Mann Service Corporation.
The officers of each Fund are elected by the Board of the Fund on an annual
basis to serve until their successors are elected and qualified.
7
<PAGE>
Current Contractual Arrangements
Business Manager. Currently, Horace Mann Investors, Inc. ("Investors"), serves
as the business manager of each Fund. Investors provides for the management of
the business affairs of each Fund including, but not limited, to office space,
secretarial and clerical services, bookkeeping services, wire and telephone
communications services and other services of this nature necessary for the
proper management of each Fund's business affairs.
Currently, Investors charges each Fund a pro rata fee computed on the aggregate
total net assets of all the Funds equal to 0.25% of the aggregate total net
assets of all Funds up to $100 million and 0.20% of aggregate total net assets
exceeding that amount. The management fee is accrued daily and paid monthly
based upon the aggregate daily total net assets determined as of the close of
business on each day during the month. For fiscal year ended December 31, 1996,
the Growth Fund paid $_____ and the Balanced Fund paid $_____ to Investors.
Investors waived this fee for the Income and Short-Term Funds.
The Business Management Agreements with Investors do not cover the Funds'
expenses related to legal, custodial, independent accounting and auditing,
transfer agent, registrars' and other agents' services; costs related to
reports, notices and proxy material; compensation and expenses of independent
directors; stock issuance expenses; brokers' commissions; taxes and fees payable
to governmental agencies; and expenses of shareholders' and directors' meetings.
Investment Adviser. Under the current Investment Management Agreements, each
Fund employs Wellington Management Company, LLP ("Wellington Management") to
manage the investment and reinvestment of the its assets and to continuously
review, supervise and administer its investment programs. The current Investment
Advisory Agreements were last approved by the majority of the outstanding voting
securities of each Fund on October 30, 1990 and each last approved by the Board
of Directors on August 6, 1996. Wellington Management, located at 75 State
Street, Boston, Massachusetts 02109, is a professional investment counseling
firm which provides investment services to investment companies, employee
benefit plans, endowments, foundations, and other institutions and individuals.
As of February 28, 1997, Wellington Management had discretionary management
authority with respect to approximately $_____ billion of assets. Wellington
Management and its predecessor organizations have provided investment advisory
services to investment companies since 1933 and to investment counseling clients
since 1960.
8
<PAGE>
Currently, each Fund pays Wellington Management advisory fees at the end of each
month. These fees are accrued daily and are calculated by applying a rate, based
on the following annual percentage rate, to the Fund's average daily net assets
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 Fund On Initial $100 million 0.125%
On Next $100 million 0.100%
Over $200 million 0.075%
- -------------------------------------------------------------------------------
</TABLE>
For fiscal year ended December 31, 1996, the Growth Fund paid $_____, the Income
Fund paid $_____ and the Balanced Fund paid $_____ to Wellington Management. The
Short-Term Fund's fee of $_____ was paid to Wellington Management by Horace Mann
Investors, Inc.
The current Investment Advisory Agreements authorize Wellington Management
(subject to the discretion and control of the Funds' Board of Directors) to
select the brokers or dealers that will execute the purchases and sales of
portfolio securities and require Wellington to use its best efforts to obtain
the best available price and most favorable execution.
9
<PAGE>
Proposed Contractual Arrangements
As explained in Item 2 and Item 3 below, the Directors have approved the
adoption of, and recommend that the shareholders of each Fund adopt and ratify:
(i) a new Management Agreement between the Fund and Investors (the "New
Management Agreement") in a form substantially similar to Exhibit B, and (ii) a
Subadvisory Agreement between Investors and Wellington Management in a form
substantially similar to Exhibit C.
The Board of Directors has approved Investors becoming the investment manager
for each of the Funds. Under the new Management Agreements, Investors will be
responsible for providing a continuous investment program and for supervising
the subadviser. In addition, Investors will be responsible for the
administrative services that it previously performed under the Business
Management Agreements. For such services, Investors will retain as compensation
(after payment to Wellington Management of its subadvisory fee) the same
compensation as it is currently receiving under the current Business Management
Agreement. The Board of Directors also has approved Wellington Management
becoming the subadviser for each Fund, subject to the supervision of Investors.
Under the Subadvisory Agreements, Wellington Management will have the same
responsibilities as it had under the current Investment Advisory Agreements for
the same compensation.
Item 2. Approval of Management Agreement
Under the New Management Agreements, the Funds would employ Investors to manage
the investment and reinvestment of the assets of the Funds and to continuously
review, supervise and administer the Funds' investment programs. Additionally,
Investors would provide for the management of the business affairs of each Fund
including, but not limited to, office space, secretarial and clerical services,
bookkeeping services, wire and telephone communications services and other
services of this nature necessary for the proper management of each Fund's
business affairs. The New Management Agreement covers both the services provided
under the current Investment Advisory Agreement and the current Business
Management Agreement.
Investors is a newly registered investment adviser and has not previously
advised a registered investment company, however, its personnel are responsible
for overseeing the investment of Horace Mann Life Insurance Company's $2.8
billion of assets. Investors is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Investors and Allegiance Life Insurance Company
("ALIC") are wholly-owned subsidiaries of Horace Mann Educators Corporation
("HMEC"). Horace Mann Life Insurance Company ("HMLIC"), which sponsors HMLIC's
separate accounts, is a wholly-owned subsidiary of ALIC. HMEC holds indirectly
all of the stock of HMLIC. The registered separate accounts of HMLIC hold % of
the Growth Fund's shares, % of the Balanced Fund's shares and % of the
Income Fund's shares; HMLIC, together with its registered separate accounts,
holds % of the Short-Term Fund's shares.
10
<PAGE>
Under the New Management Agreements, each Fund would pay Investors a fee equal
to the sum of the fees payable under both the current Investment Advisory
Agreement and the current Business Management Agreement for each Fund.
Accordingly, under the proposed Management Agreement, there would be no change
in the amount payable by shareholders for advisory and management services in
the aggregate. Each Fund would pay Investors a two-part advisory fee at the end
of each month. For part one, each Fund's advisory fee would be accrued daily and
would be 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>
Part 1
- ------
Net Assets Rate
---------- ----
<S> <C> <C>
All Funds On initial $100 million .250%
Over $100 million .200%
For part two, each Fund's advisory fee would be accrued daily and would be
calculated by applying the following annual percentage rates to the average
daily net assets of each Fund for the respective month:
Part 2
- ------
Net Assets Rate
---------- ----
<S> <C> <C>
Growth Fund On initial $100 million .400%
On next $100 million .300%
Over $200 million .250%
Balanced Fund On initial $100 million .325%
On next $100 million .275%
On next $300 million .225%
Over $500 million .200%
Income Fund On initial $100 million .250%
On next $100 million .200%
Over $200 million .150%
Short-Term Fund On initial $100 million .125%
On next $100 million .100%
Over $200 million .075%
</TABLE>
The New Management Agreement authorizes Investors (subject to the discretion and
control of the Funds' Board of Trustees) to select the brokers or dealers that
will execute the purchases and sales of portfolio securities and requires
Investors to use its best efforts to obtain the best available price and most
favorable execution.
The Funds would continue to bear the expenses related to their legal, custodial,
independent accounting and auditing, transfer agent, registrars' and other
agents' services; costs related to reports, notices and proxy material;
compensation and expenses of independent Directors; stock issuance expenses;
brokers' commissions; taxes and fees payable to governmental agencies; and
expenses of shareholders' and Directors' meetings.
At its meeting on February 6, 1997, the Directors, including each of the
Directors who are not "interested persons" (as defined in the Investment Company
Act of 1940 (the "1940 Act")) of the Funds (the "Independent Directors"),
considered the fact that under the New Management Agreement, the level of fees
would be the same as the current fee structure and the parties providing
services to the Funds and the nature of those services would remain the same.
In addition, the considered (i) information regarding the nature and quality of
the services provided by Investors; (ii) Investor's cost in providing such
services; (iii) the extent to which Investors realized economies of scale if the
asset size of a Fund grew larger and the extent to which these economies are
shared with a Fund's shareholders; (iv) the investment performance, expense
ratio, and management fees for comparable investment companies; (v) the
profitability of Investors; (vi) the role played by the Independent Directors;
and (vii) the impact, if any, that other activities of Investors or its
affiliates may have on the management of the Funds. The Directors received all
information they deemed necessary to their evaluation of the terms and
conditions of the Current Management Agreement and the New Management Agreement.
Based upon the Directors' review and evaluations of these materials and their
considerations of all factors deemed relevant, the Directors determined that the
New Management Agreement is reasonable, fair, and in the best interests of each
Fund and its shareholders. Accordingly, the Directors, including all of the
Independent Directors, approved the adoption of the New Management Agreement and
its submittal to each Fund's
11
<PAGE>
shareholders for adoption and ratification. If the New Management Agreement is
adopted by shareholders of a Fund, it will remain in effect through October 31,
1998, and will be thereafter subject to continuation by such Fund's Directors.
If the Revised Agreement is not adopted, the existing Agreement will continue in
effect through October 31, 1997, and thereafter will be subject to continuation
by such Fund's Directors.
The management agreements are required to be approved annually by each Fund's
Directors or by vote of a majority of such Fund's outstanding voting securities
(as defined in the 1940 Act). In either case, such annual renewal must be
approved by the vote of a majority of the Independent Directors, cast in person
at a meeting called for the purpose of voting on such approval. The New
Management Agreement is terminable, without penalty, on 60 days' written notice
by the Directors of a Fund, by vote of a majority of such Fund's outstanding
voting securities, or by the Investors. In addition, the Agreement will
terminate automatically in the event of assignment.
Transfer Agent and Dividend Disbursing Agent. Horace Mann Service Corporation,
One Horace Mann Plaza, Post Office Box 4657, Springfield, Illinois 62708-4657,
acts as the transfer agent and dividend-paying agent to the Funds. The fees
received and the services provided as transfer agent and dividend-disbursing
agent are in addition to the fees received and services provided under the
advisory agreement.
In addition to the foregoing services, the Manager provides certain printing and
mailing services for the Funds, such as printing and mailing of shareholder
account statements, checks and tax forms. For all of the foregoing services in
1996, the Growth, Balanced, Income and Short-Term Investment Funds paid
$__________, $__________, $__________ and $__________ respectively.
Brokerage Allocation. The Management Agreement and the Subadvisory Agreement
authorizes Investors and Wellington Management, respectively (collectively, the
"Advisers") (subject to the discretion and control of each Fund's Board of
Directors) to select the brokers or dealers that will execute the purchases and
sales of portfolio securities and direct the Advisers to use their best efforts
to obtain the best available price and most favorable execution. Subject to
policies established by the Directors of the Funds, the Advisers may also be
authorized to effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the value
of the brokerage or research services provided, viewed in terms of either the
particular transaction or the Adviser's overall responsibilities with respect to
each Fund and other clients.
In placing portfolio transactions, each of the Advisers will use its best
judgment to choose the broker most capable of providing the brokerage services
necessary to obtain best available price and most favorable execution. The full
range and quality of brokerage services available will be considered in making
these determinations. In those instances where it is reasonably determined that
more than one broker can offer the brokerage services needed to obtain the best
available price and most favorable execution, consideration may be given to
those brokers which supply investment research and other services in addition to
execution services. Such services may include factual and statistical
information or other items of supplementary research assistance. Each of the
Advisers considers such information useful in the performance of its obligations
under the advisory agreements, but is unable to determine the amount by which
such services may reduce its expenses. In addition, within the parameters of
achieving best price and execution, brokerage services may be used to generate
commission credits which are used to pay for pricing agent and custodial
services.
Some securities considered for investment by a Fund may also be appropriate for
other funds and/or clients served by the Advisers. To assure fair treatment of
each fund and all clients of the Adviser in situations in which two or more
clients' accounts participate simultaneously in a buy or sell program involving
the same security, such transactions will be allocated among the Funds and
clients in a manner deemed equitable by the Adviser.
12
<PAGE>
Item 3. Approval of Investment Subadvisory Agreement
The Boards of Directors propose that the shareholders of each Fund approve
Wellington Management Company, LLP ("Wellington Management") as the subadviser
to the Funds pursuant to a subadvisory agreement with Horace Mann Investors,
Inc. (the "Subadvisory Agreement").
Under the Subadvisory Agreement, Wellington Management, a registered investment
adviser, would serve as the investment subadviser of each Fund. Wellington
Management would be responsible for managing the Fund, subject to the direction
of the Board of Directors and Investors.
Under the Subadvisory Agreements, the fee structure under which Wellington
Management would be compensated is identical to the fee structure under the
current Investment Management Agreements. THEREFORE, WELLINGTON MANAGEMENT WOULD
CONTINUE TO RECEIVE THE SAME FEES AS THEY WOULD HAVE UNDER THE CURRENT
INVESTMENT ADVISORY AGREEMENTS. Under the Subadvisory Agreement, Investors would
pay Wellington Management a percentage rate based on the Fund's average daily
net assets for the respective month. The rates are as follows:
<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%
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Net Assets Rate
---------- ----
<S> <C> <C>
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 Fund On initial $100 million 0.125%
On next $100 million 0.100%
Over $200 million 0.075%
</TABLE>
Wellington Management is a Massachusetts limited liability partnership with
principal offices at 75 State Street, Boston, Massachusetts 02109. Wellington
Management is a professional investment counseling firm which provides
investment services to investment companies, employee benefit plans, endowments,
foundations and other institutions and individuals. Wellington Management's
predecessor organizations have provided investment advisory services for over 60
years. As of February 28, 1997, Wellington Management had investment management
auhtority with respect to approximately $139.6 billion in assets and managed 84
investment companies.
Wellington is managed by its active partners. The managing partners of
Wellington Management as of February 28, 1997 were Robert W. Doran, Duncan M.
McFarland and John R. Ryan. Exhibit D identifies the individuals who were
general partners and Senior Vice Presidents of Wellington Management as of
February 28, 1997, each of whom may be reached at the principal offices of the
firm.
Wellington Management also serves as investment adviser or subadviser to
registered investment company portfolios which have investment objectives
similar to the Funds. The following chart identifies those portfolios, states
their approximate net assets (as of December 31, 1996) and indicates whether
Wellington Management has waived, reduced or otherwise agreed to reduce its
compensation.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Category Fund Advisory Fee Rate Asset Size
- -------------------------------------------------------------------------
Growth
Balanced
Income
Short-Term
</TABLE>
At its meeting on February 6, 1997, the Directors, including each of the
Directors who are not "interested persons" (as defined in the 1940 Act) of the
Funds or Investors (the "Independent Directors"), considered the fact that under
the Subadvisory Agreement this fee paid to Wellington management would be the
same as the fees currently paid and that the nature of the services provided by
Wellington management would be the same. They also considered (i) information
regarding the nature and quality of the services provided by Wellington, (ii)
Wellington's cost in providing such services, and (iii) the investment
performance, expense ratios, and management fees for comparable investment
companies. The Directors received all information they deemed necessary to their
evaluation of the terms and conditions of the Subadvisory Agreement. Based upon
the Directors' review and evaluations of these materials and their consideration
of all factors deemed relevant, the Directors determined that the Subadvisory
Agreement is reasonable, fair, and in the best interests of the Fund and its
shareholders. Accordingly, the Directors, including all of the Independent
Directors, approved the Subadvisory Agreement and its submission to each Fund's
shareholders for approval and ratification. If the Subadvisory Agreement is not
approved and ratified by a Fund's shareholders, the Advisory Agreement between
Wellington and each Fund and the Management Agreement between Investors and
each Fund will continue in effect through October 31, 1997, and thereafter will
be subject to continuation by each Fund's Directors.
Additional Information Concerning the Subadvisory Agreement and Subadvisor. The
Subadvisory Agreement is required to be approved annually by the Fund's
Directors or by vote of a majority of a Fund's outstanding voting securities (as
defined in the 1940 Act). In either case, such annual renewal must be approved
by the vote of a majority of each Fund's Directors who are Independent
Directors, cast in person at a meeting called for the purpose of voting on such
approval. On February 6, 1997, the Directors of each Fund, including all
independent directors, voted unanimously to initially approve the Subadvisory
Agreement for each Fund, commencing April 30, 1997 subject to approval of each
Fund's shareholders. The Subadvisory Agreement may be terminated at any time,
without payment of any penalty, by a vote of the Directors of a Fund or by a
vote of a majority of the outstanding voting securities of a Fund on 60 days'
written notice to Wellington. The Subadvisory Agreement may be terminated by
Wellington upon 60 days' notice for any reason. The Subadvisory Agreement will
terminate automatically in the event of assignment.
Under the terms of the Subadvisory Agreement, Wellington furnishes investment
advisory and portfolio management services to the Fund with respect to its
investments. Wellington is responsible for decisions to buy
14
<PAGE>
and sell the Fund's investments and all other transactions related to investment
therein and the negotiation of brokerage commissions, if any. During the term of
the Subadvisory Agreement, Wellington will bear all expenses incurred by it in
connection with its services under such agreement.
Item 4. Approval of Agreement and Plan of Reorganization
The Board of each Fund unanimously approved an Agreement and Plan of
Reorganization (the "Reorganization Agreement") for each Fund in the form
attached hereto as Exhibit A. The Reorganization Agreement provides for the
reorganization (the "Reorganization") of each Fund into a new series of Horace
Mann Mutual Funds.
The purpose of the Reorganization is to assimilate each Fund into a single
mutual fund in order to eliminate differing forms of charter documents and to
eliminate duplicative regulatory filings. The Board of each Fund believes that
such changes will help to promote operational efficiencies and allow for the
future addition of other portfolios in the most efficient manner, which should
benefit the Funds. The Board considered all material issues associated with the
Reorganization and determined that the Reorganization is in the best interests
of shareholders. The table below shows the structure of the Funds before and
after the Reorganization:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Before After
- -----------------------------------------------------------------------------
<S> <C>
Horace Mann Mutual Funds
Horace Mann Growth Fund, Inc. Growth Fund
Horace Mann Balanced Fund, Inc. Balanced Fund
Horace Mann Income Fund, Inc. Income Fund
Horace Mann Short-Term Investment Fund, Inc. Short-Term Investment Fund
- --------------------------------------------------------------------------
</TABLE>
Each Reorganization contemplates that (i) the Fund will transfer all its assets
to a series ("New Fund") of Horace Mann Mutual Funds, a Delaware business trust
(the "Trust"), in exchange for shares of the same class of the New Fund and the
assumption by New Fund of certain of the liabilities of the Fund; (ii)
distribution by the Fund to each shareholder of the Fund of a number of New Fund
shares of the same class (including any fractional shares) equal in value and
number to such shareholder's Fund shares; and (iii) the subsequent termination
of the Fund and cancellation of the outstanding shares of the Fund.
If shareholders of a Fund do not approve the Reorganization, the Fund will
continue in business in its current corporate form.
Procedures for Reorganization. In connection with the Reorganization, after the
close of business on the date of effectiveness of the Reorganization (the
"Effective Date"), but prior to its completion, one share of each class of the
New Fund will be issued to the Fund. The Fund, as the sole shareholder of each
class of the New Fund, will then take the following actions:
(1) approve a proposed new Management Agreement and Subadvisory Agreement
on behalf of the respective class of the New Fund on the same terms as
the then existing agreements;
(2) ratify the selection of KPMG Peat Marwick LLP as auditors for the New
Fund; and
15
<PAGE>
(3) ratify the election as board members of the Trust the same persons who
are nominated as Board Members in Item 1.
Thereafter, on the Effective Date, the Fund will transfer all its assets to the
New Fund in exchange for shares of New Fund and the assumption by New Fund of
all the liabilities of the Fund, the Fund will distribute to each shareholder of
the Fund shares of the New Fund in a number equal to the number of shares
(including any fractional share) of the Fund then owned by such shareholder and
having the same net asset value per share as the net asset value of the Fund on
the Effective Date, the shares of the Fund owned by the shareholder will be
cancelled and the Fund will then terminate. A shareholder of the Fund will
therefore acquire the same pro rata interest in the New Fund as of the effective
time of the Reorganization as the shareholder had in the Fund immediately prior
to the Reorganization. The New Fund will then operate in the same manner and
with the same investment objectives and policies as the Fund, giving effect to
the results of the shareholder votes on the other items included in this proxy,
including any change of fundamental investment policies.
Confirmations of the shares of the New Fund received in the Reorganization in
exchange for shares of the Fund will not be issued to shareholders because the
number and value of shares held by a shareholder will not be changed by the
Reorganization. It will not be necessary for a shareholder holding certificates
of a Fund to exchange those certificates for new certificates representing
shares of the New Fund following consummation of the Reorganization.
Certificates for shares of a Fund issued prior to the Reorganization will
represent shares of the New Fund after the Reorganization.
If approved by shareholders of the Fund, it is expected that the Reorganization
will be made effective on April 30, 1997, but it may be effective at a different
time.
Certain Comparative Information about the Trust and the Funds. As a Delaware
business trust, the Trust's operations will be governed by the Declaration of
Trust, the Bylaws of Horace Mann Mutual Funds and applicable Delaware law rather
than each individual Fund's Articles of Incorporation, Bylaws and applicable
Maryland law. The operations of the Trust will continue to be subject to the
provisions of the Investment Company Act of 1940 and the rules and regulations
of the Securities and Exchange Commission thereunder and applicable state
securities laws.
Shareholders' Meetings. Under the Declaration of Trust, shareholders'
meetings may be called at any time by a majority of the trustees and must
be called by any trustee upon written request of shareholders holding, in
the aggregate, not less than 10% of the shares (or series or class
thereof). Under the Funds' governing documents, on the other hand, annual
meetings generally are not held, and are not required to be held in any
year when the election of directors is not required to be acted upon under
the Investment Company Act of 1940. Special meetings of the Shareholders
may be called at any time by the Chairman of the Board of Directors and
must be called upon the written request shareholders entitled to cast at
least 25% of all the votes entitled to be cast at such meeting. If the
purpose of the special meeting is to vote on the removal of a director from
office, a meeting must be held upon the written request of Shareholders
entitled to cast at least 10% of all the votes entitled to be cast at such
meeting.
16
<PAGE>
Quorum. The Declaration of Trust provides, for the Trust, that one-third of
the outstanding shares constitutes a quorum at shareholders' meetings.
However, for each of the Funds, the governing documents provide that a
majority of shares entitled to cast votes at the meeting is necessary for a
quorum.
Election of Trustees. The Declaration of Trust provides that Trustees are
elected by a plurality of shareholders entitled to vote, or, to the extent
permitted by the 1940 Act, a majority vote of the Trustees continuing in
office acting by written instrument or instruments. Whereas, the governing
documents for each of the Funds provide that directors are elected by vote
of the holders of a majority of the shares present in person or by proxy
and entitled to vote in the election of directors.
Removal of Trustees. The Declaration of Trust provides that Trustees may be
removed by the affirmative vote of two-thirds of the shareholders with or
without cause or by the Trustees with cause by the action of two-thirds of
the remaining Trustees or without cause by the action of eighty percent of
the remaining Trustees. By contrast, the governing documents for each of
the Funds provide that the stockholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast on the matter,
remove any director or directors from office with or without cause.
Amendment of Governing Documents. The Declaration of Trust provides that
the Declaration of Trust may be amended by an instrument in writing signed
by a majority of the Trustees or by an officer of the Trust pursuant to the
vote of a majority of such Trustees, except that the vote of the lesser of
(i) 67% or more of the shares present or represented at a meeting of
shareholders (provided that the holders of more than 50% of the shares are
present or represented by proxy) or (ii) more than 50% of the shares is
required for an amendment that would change any rights with respect to any
interest in the Trust by reducing the amount payable thereon upon
liquidation of the Trust, by repealing the limitations on personal
liability of any shareholder or Trustee or by diminishing or eliminating
any voting rights pertaining thereto. For each of the Funds, however,
amendments to the Articles of Incorporation require the affirmative vote of
a majority of the aggregate number of the votes entitled to be cast on the
matter; the Board has the power to amend the bylaws, however, the
shareholders, by the affirmative vote of the holders of a majority of the
outstanding stock of the corporation, may modify or rescind a Board
initiated amendment and may amend the bylaws at any shareholders' meeting.
Dissolution of Trust. The Declaration of Trust provides that the Trust may
be terminated (i) by the affirmative vote of not less than two-thirds of
the shareholders, (ii) by an instrument in writing, without a meeting,
signed by a majority of the Trustees and consented to by not less than two-
thirds of the shareholders or (iii) by the Trustees by written notice to
shareholders; while the Funds' governing documents do not contain any
provisions governing the termination of the Funds. Under Maryland law,
dissolution of the Funds requires the affirmative vote of a majority of all
the votes entitled to be cast on the matter.
Federal Income Tax Consequences. It is anticipated that the transactions
contemplated by the Reorganization will be tax-free for federal income tax
purposes. Each Fund has received an opinion of Vedder, Price, Kaufman & Kammholz
that under the Internal Revenue Code of 1986, the reorganization of the Fund
into the New Fund pursuant to the Reorganization will not give rise to the
recognition of income, deductions, gain or loss for federal income tax purposes
to the Fund, the Company, or the shareholders of the Fund. A shareholder's
adjusted basis for tax purposes in shares of the New Fund after the
Reorganization will be the same as his adjusted basis for tax purposes in the
shares of the Fund immediately before the Reorganization. The holding period of
the shares of the New Fund received by the shareholders of the Fund will include
the holding period of shares of the Fund exchanged therefor, provided that at
the time of the exchange the shares of the Fund were held as capital assets.
Approval of the Reorganization for each Fund requires approval by the
affirmative vote of a majority of the shares outstanding of a Fund.
17
<PAGE>
Each Reorganization is contingent upon the shareholders of the applicable Fund
electing those persons who are nominated as Board Members in Item 1, approving
the Management Agreement in Item 2 and approving the Subadvisory Agreement in
Item 3.
Adoption of Certain Investment Limitations
Currently, the Growth Fund, Balanced Fund, Income Fund and Short-Term Investment
Fund each operates under the same fundamental and non-fundamental investment
restrictions. A Fund's fundamental investment restrictions cannot be changed
without the approval of "a majority of the outstanding voting securities" of
such Fund, which is defined in the Investment Company Act of 1940 to mean the
lesser of (i) 67% of the Fund's shares present at a meeting where more than 50%
of the outstanding shares are present in person or by proxy or (ii) more than
50% of the Fund's outstanding shares. By contrast, the Funds' non-fundamental
investment policies may be changed by the Funds' Board of Directors without
shareholder approval.
This section discusses proposed changes to one of the Balanced and Income Funds'
fundamental investment policies and the changes that have been made to the
Growth, Balanced and Income Funds' non-fundamental investment policies, as well
as a proposed change to the Income Fund's investment objective. The changes to
the Income Fund's investment objective, the Income Fund's and the Balanced
Fund's fundamental investment policy and the non-fundamental investment policies
of the Growth, Balanced and Income Funds will become effective on or about May
1, 1997. If shareholders do not approve some or all of these proposed changes,
the current objective and/or investment policies will remain the same.
If approved by shareholders, Items 5 and 6 would revise the investment
restrictions that apply to the Growth, Balanced and Income Funds. Specifically,
Item 5 pertains to a proposed change in the fundamental investment policy of the
Balanced and Income Funds regarding investment in "restricted" and illiquid
securities. The primary purpose of the proposed change is to allow the Funds to
invest in securities that are eligible for resale under Rule 144A of the
Securities Act of 1933 and, to a limited extent, in illiquid securities. Item 6
relates to a proposed change in the Income Fund's investment objective, the
purpose of which is to achieve a long-term total rate of return in excess of the
U.S. bond market over a full market cycle, which is usually considered to be ten
years.
In connection with the proposed change in the Income Fund's investment
objective, the Income Fund's Board of Directors has adopted certain non-
fundamental investment policies that are designed to take advantage of current
market conditions and broaden permissible types of investments and investment
techniques. Under the new non-fundamental operating policies, the Fund may now
(i) invest up to 15% of its total assets in non-U.S. dollar-denominated debt
obligations of foreign issuers that are rated in the highest ratings category if
such securities are fully hedged back into U.S. dollars and (ii) invest up to
25% of its assets in certain non-investment grade debt obligations of U.S. and
non-U.S. issuers.
The above changes to the Income Fund's non-fundamental investment policies also
impact the non-fundamental investment policies of the Growth Fund and the
Balanced Fund. The Balanced Fund holds the same kinds of bonds held separately
by the Income Fund. Therefore, the Balanced Fund may now (1) invest up to 15% of
its total assets in non-U.S. dollar-denominated debt obligations of foreign
issuers that are rated in the highest ratings category if such securities are
fully hedged back into U.S. dollars and (ii) invest up to 25% of their assets in
certain non-investment grade debt obligations of U.S. and non-U.S. issuers. In
addition, the non-fundamental investment policies of the Income Fund and the
bond portion of the Balanced Funds have been amended so that each of these Funds
may now invest up to 15% of the value of their total assets in forward foreign
currency exchange contracts for hedging purposes.
Item 5. Proposed Change in Fundamental Investment Policy (Balanced Fund and
Income Fund only)
The Board of Directors has proposed that the Balanced Fund's and Income Fund's
fundamental investment policy regarding investment in illiquid and "restricted"
securities be amended. The primary purpose of this proposal is to allow each
Fund to invest in illiquid and restricted securities to a limited extent.
Restricted securities are unregistered securities issued under an exemption from
the Securities Act of 1933 (the "Securities Act"). Restricted securities
generally cannot be resold without registration and, subject to certain
exceptions, they are considered to be illiquid. However, in certain cases, the
SEC has allowed restricted securities which may be resold to institutional
investors under Rule 144A of the Securities Act (a "Rule 144A security") to be
deemed liquid under guidelines adopted by a fund's board of directors. In
determining whether a Rule 144A security is liquid, the following factors may be
considered: (i) the frequency of trades or quotes for the security; (ii) the
number of dealers willing to purchase or sell the security and the number of
potential buyers; (iii) the willingness of dealers to undertake to make a market
in the security; (iv) the nature of the security and the nature of the
marketplace trades, such as the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer; and (v) the
likelihood that security's marketability will be maintained throughout the
anticipated holding period. As a matter of operating policy, each Fund will
purchase only Rule 144A securities that carry registration rights, will invest
only in Rule 144A securities that are deemed
18
<PAGE>
to be liquid and will limit its investment in Rule 144A securities to 20% of
each Fund's net assets. Each Fund's current fundamental investment policy on
purchasing restricted securities is as follows:
The Fund may not "underwrite the securities of other issuers, purchase
securities subject to restrictions on disposition under the Securities Act
of 1933 (so called "restricted securities") or purchase securities not
freely marketable."
Under the proposal, the fundamental limitation on restricted securities for each
Fund would be replaced with the following fundamental policy:
"Each Fund may not invest more than 10% of its net assets in illiquid
securities or invest in securities subject to restriction on disposition
under the Securities Act of 1933, except for securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933."
Under the proposal, the Balanced Fund and Income Fund would each be able to
invest up to 10% of its total net assets in illiquid securities. An illiquid
investment is a security or other position that cannot be disposed of quickly in
the normal course of business. The lack of a liquid secondary market may have an
adverse impact on the market price of the security. As a result, a Fund's net
asset value and ability to dispose of particular securities, when necessary to
meet a Fund's liquidity needs or in response to a specific economic event, may
be impacted. The lack of a liquid secondary market may also make it more
difficult for a Fund to obtain accurate market quotations for purposes of
valuing a Fund's portfolio.
In addition, the Balanced Fund and Income Fund would be able to purchase
securities which are not registered under the Securities Act of 1933 (the "1933
Act") but which can be sold to "qualified institutional buyers" in accordance
with Rule 144A under the 1933 Act. Any such security will not be considered
illiquid so long as it is determined by the Subadvisor that an adequate trading
market exists for that security. This investment practice could have the effect
of increasing the level of illiquidity in a Fund during any period that
qualified institutional buyers become uninterested in purchasing these
restricted securities.
Item 6. Proposed Change in Investment Objective (Income Fund only)
The Directors unanimously recommend that the shareholders of the Income Fund
vote to replace the Fund's current investment objectives as noted below.
The Fund's current investment objectives state:
"The primary investment objective of the Income Fund is to maximize current
income consistent with prudent investment risk. A secondary objective is
preservation of capital."
The Fund's proposed investment objective states:
"The investment objective of the Income Fund is to achieve a long-term total
rate of return in excess of the U.S. bond market over a full market cycle."
The purpose of the proposed objective is to provide for a more aggressive
investment management style that is designed to achieve a long-term total rate
of return in excess of the U.S. bond market over a full market cycle, which is
usually considered to be 10 years. For this purpose, the Fund will use the
Lehman Brothers Aggregate Bond Index to represent the U.S. bond market. The
proposed investment objective focuses on the pursuit of total return over the
long-term instead of the pursuit of current income and preservation of capital.
The Fund's current investment objectives suggest that a relatively low level of
risk will be taken in pursuit of current income, while the proposed investment
objective compares the Fund's overall performance to a different objective
measure of return with a higher degree of risk.
Miscellaneous
General. The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs in connection with
solicitation of proxies will be paid by Horace Mann Life Insurance Company,
including any additional solicitation made by letter, telephone or telegraph. In
addition to solicitation by mail, certain officers and representatives of the
Funds and officers and employees of Investors and its affiliates who will
receive no extra compensation for their services, may solicit proxies by
telephone, telegram or personally. Failure of a quorum to be present at the
Meeting for a Fund will necessitate adjournment for that Fund and may subject
that Fund to additional expense. A copy of the Fund's annual report is available
without charge upon request by writing to such Fund, One Horace Mann Plaza,
Springfield, Illinois 62715-0001 or by calling 1-800-999-1030.
Proposals of Shareholders. Any shareholder proposal that may properly be
included in the proxy solicitation material for a Fund's next annual shareholder
meeting, if any, must be received by such Fund no later than _______________.
Other Matters to Come Before the Meeting. The Boards are not aware of any
matters that will be presented for action at the Meeting other than those set
forth herein. Should any other matters requiring a vote of shareholders arise,
the proxy in the accompanying form will confer upon the person or persons
entitled to vote the shares represented by such proxy the discretionary
authority to vote the shares with respect to any such other matters in
accordance with their best judgment in the interest of the Fund.
Voting, Quorum. Shareholders may vote only on matters that concern the Fund or
Funds in which they hold shares. The record holders of outstanding shares of
each Fund are entitled to one vote per share (and a fractional vote per
fractional share) on all matters presented before the Meeting. Each valid proxy
will be voted in accordance with the instructions on the proxy and as the
persons named in the proxy determine on such other business as may come before
the Meeting. If no instructions are given, the proxy will be voted for the
election as Board members of the persons who have been nominated for such Fund
and as recommended by the Board on each other item. Interests of shareholders
for which no voting instructions are received will be voted in proportion to the
instructions that are timely received. Shareholders who execute proxies may
revoke them at any time before they are voted, either by writing to the Fund or
in person at the time of the Meeting. If not so revoked, the shares represented
by the proxy will be voted at the Meeting and any adjournments thereof.
Attendance by a shareholder at the Meeting does not in itself revoke a proxy.
Proxies 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 Board Members for a Fund,
requires the vote of the holders of a majority of the shares of each Fund
present in person or by proxy and entitled to vote on the election of directors.
Items 2, 3, 5 and 6, approval of the Management Agreement and Subadvisory
Agreement and approval of the investment objective and investment policy each
require the affirmative vote of "a majority of the outstanding voting
19
<PAGE>
securities" of a Fund as defined in the 1940 Act, which means the affirmative
vote of the lesser of (1) 67% of the voting securities of a Fund present at the
meeting if more than 50% of the outstanding shares of a Fund are present in
person or by proxy or (2) more than 50% of the outstanding shares of a Fund.
Item 4, approval of the Agreement and Plan of Reorganization, requires the
affirmative vote of a majority of the aggregate number of the votes entitled to
be cast on the matter.
At least 50% of the shares of a Fund must be present, in person or by proxy, in
order to constitute a quorum for that Fund. Thus, the meeting for a particular
Fund could not take place on its scheduled date if less than 50% of the shares
of that Fund were represented. In the event that a quorum is present at the
Meeting but sufficient votes to approve any of the proposals are not received,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. Any such adjournment will be approved
if the votes cast in favor of such adjournment exceed the votes cast opposing
such adjournment. It is anticipated that the persons named as proxies would vote
in favor of such adjournment. In tallying shareholder votes, abstentions and
broker non-votes (i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on a particular matter) will be counted for determining whether a
quorum is present for purposes of convening the Meeting and will be considered
present at the Meeting. On Item 1, broker non-votes will have no effect on any
matter voted on at the Meeting. On Items 2, 3, 4, 5 and 6, a broker non-vote
will have the effect of a vote against the proposal.
THE BOARD OF EACH FUND RECOMMENDS AN AFFIRMATIVE VOTE ON ALL ITEMS APPLICABLE TO
THAT FUND.
Please complete, sign and return the enclosed proxy promptly. No postage is
required if mailed in the United States.
By order of the Boards,
Ann M. Caparros
Secretary
20
<PAGE>
EXHIBIT A
---------
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
Horace Mann Growth Fund, Inc.; Horace Mann Income Fund, Inc.; Horace Mann
Balanced Fund, Inc.; Horace Mann Short-Term Investment Fund, Inc., each a
Maryland corporation (each referred to herein as a "Company"), and Horace Mann
Mutual Funds (the "Trust"), a Delaware business trust, on behalf of its series
of shares designated as the Growth Fund; the Income Fund; the Balanced Fund; and
the Short-Term Investment Fund (each a "New Fund"), agree upon the following
plan of reorganization with regard to each Company:
1. Prior to the closing provided for in section 4, below, the Company and the
Trust will execute and file articles of transfer with respect to the
transactions contemplated hereby with the Department of Assessments and Taxation
of the State of Maryland. The Company shall transfer to the corresponding New
Fund all of the assets of the Company (including the share of the New Fund owned
by the Company, which shall thereafter be cancelled), in exchange for which the
New Fund shall simultaneously assume all of the liabilities of the Company, and
shall issue to the Company a number of New Fund shares equal in number and net
asset value to the number and net asset value of shares (including fractional
shares) of the Company then outstanding. The Company then will distribute to
each registered shareholder of the Company shares of the New Fund in a number
and net asset value equal to the number and net asset value of shares (including
any fractional share) of the Company then owned by the shareholder, in exchange
for and cancellation of the shareholder's shares of the Company.
2. The distribution to the shareholders of the Company shall be accomplished by
establishing an account on the share records of the New Fund in the name of each
registered shareholder of the Company, and crediting that account with a number
of shares of the New Fund equal to the number of shares (including any
fractional share) of the Company owned of record by the shareholder at the time
of the distribution. Outstanding certificates representing shares of the Company
shall thereafter represent an equal number of shares of the same class of the
New Fund.
3. Promptly thereafter, the Company shall be terminated.
4. The transaction in section 1 above shall occur at the close of business on
April 30, 1997, at the offices of the Trust, or at such other date, time or
place as may be agreed upon by the parties (the "Closing").
5. The obligations of each Company and the Trust to effect the transactions
contemplated hereunder shall be subject to the satisfaction of each of the
following conditions:
a. All necessary filings shall have been made with the Securities and
Exchange Commission and state securities commissions and no order or
directive shall have been received that any other or further action is
required to permit the parties to carry out the transactions contemplated
by this Plan.
b. The Company and the Trust shall have received an opinion from its legal
counsel to the effect that for federal income tax purposes: (i) no gain or
loss will be recognized by the Company upon the transfer of its assets and
liabilities to the corresponding New Fund; (ii) the tax basis of the assets
of the Company in the hands of the corresponding New Fund will be the same
as the tax basis of such assets in the hands of the Company immediately
prior to the transfer; (iii) the holding period of the assets of the
Company transferred to the corresponding New Fund will include the period
during which such assets were held by the Company; (iv) no gain or loss
will be recognized by the New Fund upon the receipt of the assets of the
Company in exchange for shares of the New Fund and the assumption by the
New Fund of the liabilities and obligations of the Company; (v) no gain or
loss will be recognized by the shareholders of the Company upon receipt of
the shares of the New Fund; (vi) the basis of the shares of the New Fund
received by the shareholders of the Company will be the same as the basis
of
<PAGE>
the shares of the Company exchanged therefore; and (vii) the holding period
of shares of the New Fund received by the shareholders of the Company will
include the holding period of the shares of the Company exchanged
therefore, provided that at the time of the exchange the shares of the
Company were held as capital assets; and as to such other matters as it may
reasonably request.
c. This Plan and the reorganization contemplated hereby shall have been
adopted and approved by the affirmative vote of the holders of the
requisite number of the outstanding shares of the Company entitled to vote
thereon as required by law at the time such vote is taken.
d. The Trustees of the Trust shall have authorized, and the New Fund shall
have issued, one share of the New Fund to the Company in consideration of
the payment equal to the net asset value of one share of the Company on the
day of the Closing for the purpose of enabling the Company to approve as
sole shareholder of the New Fund the investment management between the
Trust and Horace Mann Investors, Inc. and a subadvisory agreement between
Horace Mann Investors, Inc. and Wellington Management Company, LLP, for the
New Fund, such approval shall have taken place and the New Fund shall have
become subject to said in accordance with the terms thereof.
At any time prior to the Closing, any of the foregoing conditions may be
waived by the Company and the Trust if such a waiver will not have a material
adverse effect on the interests of the shareholders of the Company or the Trust,
as the case may be.
6. This Plan may be amended at any time, and may be terminated at any time
before the completion of the transaction in section 1, regardless of whether or
not this Plan has been approved by the shareholders of the Company, by agreement
of the Company and the Trust, provided that no amendment shall have a material
adverse effect upon the interests of shareholders of the Company. In any case,
this Plan may be terminated by either the Company or the Trust, if the
transaction in section 1 has not occurred by the close of business on December
31, 1997.
7. A copy of the Trust's Certificate of Trust is on file with the Secretary of
the State of Delaware, and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Trust as the Trustees of the Trust and
not individually and that the obligations under this instrument are not binding
upon any of the Trustees, officers or shareholders of the Trust individually,
but binding only upon the assets and property of the New Fund.
8. At any time after the completion of the transaction in section 1, the Company
acting through its officers, or if then dissolved through its last officers,
shall execute and deliver to the New Trust, such additional instruments of
transfer or other written assurances as the Trust may reasonably request in
order to vest in the Trust, acting for the New Fund, title to the assets
transferred by the Company under this Plan.
9. This Plan shall be construed in accordance with applicable federal law and
the laws of the State of Illinois, except as to the provisions of section 7
hereof, which shall be construed in accordance with the laws of the State of
Delaware.
A-2
<PAGE>
10. The distribution of shares of the New Fund to the Company's shareholders and
the cancellation of the Company's shares will be effected pursuant to an
amendment to the articles of incorporation of the Company in accordance with the
Maryland General Corporation Law.
Dated February 6, 1997
Horace Mann Growth Fund, Inc.
Horace Mann Income Fund, Inc.
Horace Mann Balanced Fund, Inc.
Horace Mann Short-Term Investment Fund, Inc.
By: /s/ George J. Zock
-----------------------------------------
President
Horace Mann Mutual Funds
By: /s/ George J. Zock
-----------------------------------------
President
A-3
<PAGE>
Exhibit B
FORM OF MANAGEMENT AGREEMENT
----------------------------
This Management Agreement is made as of this ___________, 199_ between
__________, a Maryland corporation (herein called the "Company"), and HORACE
MANN INVESTORS, INC., a Delaware corporation (herein called the "Manager").
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 Manager under this Agreement to
render investment advisory and management services to the Company; and
WHEREAS, the Company desires to retain the Manager to provide management
and administrative services for the Company, and the Manager is willing 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 Manager. The Company hereby appoints the Manager as
manager on the terms and for the period set forth in this Agreement and the
Manager hereby accepts such appointment and agrees to perform the services and
duties set forth herein on the terms herein provided. The Manager 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
under applicable law and are under common control with the Manager 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 Manager.
2. Administrative Services and Duties. Subject to the supervision and
control of the Company's Board of Directors, the Manager shall provide to the
Company facilities, equipment, statistical and research data, clerical,
accounting and bookkeeping services, internal auditing and legal services, and
personnel to carry out all management services required for operation of the
1
<PAGE>
business and affairs of the Company other than those services to be performed by
a distributor of the Company's shares pursuant to a Distribution Agreement,
those services to be performed by the Company's custodian pursuant to the
Company's Custody Agreement, those services to be performed by the Company's
transfer agent pursuant to the Company's Transfer Agency Agreement, those
accounting services to be provided pursuant to an accounting agreement or
custody agreement and those services normally performed by the Company's counsel
and auditors.
(A) The Manager's oversight responsibilities shall include:
(1) Overseeing the performance of the Custodian under the Custody
Agreement; and
(2) Overseeing the performance of the Transfer Agent under the
Transfer Agency Agreement.
(B) The Manager shall participate in the periodic updating of the Company's
prospectuses and statements of additional information and shall accumulate
information for and, subject to approval by the Company's Treasurer and legal
counsel, coordinate the preparation, filing, printing and dissemination of
reports to the Company's shareholders and the Securities and Exchange Commission
(the "Commission"), including but not limited to annual reports and semi-annual
reports on Form N-SAR, notices pursuant to Rule 24f-2 and proxy materials
pertaining to the Company.
(C) The Manager shall calculate dividends and capital gain distributions to
be paid by the Company in conformity with subchapter M of the Internal Revenue
Code of 1986, as amended.
(D) The Manager shall pay all costs and expenses of maintaining the offices
of the Company, wherever located, and shall arrange for payment by the Company
of all expenses payable by the Company.
(E) The Manager shall maintain such other books and records with respect to
the Company as may be required by law or may be required for the proper
operation of the business and affairs of the Company, other than those required
to be maintained under the Fund Accounting Agreement and by the Manager under
Section 3 of this Agreement. Without limiting the foregoing, the Manager shall
be responsible for the proper maintenance of the records to be maintained by it,
throughout the term of this Agreement.
(F) The Manager shall prepare the Company's federal, state and local income
tax returns.
(G) The Manager shall prepare and, subject to approval of the Company's
Treasurer, disseminate to the Company's trustees each Company's quarterly
financial statements and schedules of investments, and shall prepare such other
reports relating to the business and affairs
2
<PAGE>
of the Company (not otherwise appropriately prepared by the Company's counsel,
auditors or other Company service providers) as the officers and trustees of the
Company may from time to time reasonably request in connection with performance
of their duties.
(H) The Manager shall assist the Custodian, Transfer Agent, counsel
and auditors as required to carry out the business and operations of the
Company.
3. Investment Services and Duties. Subject to the supervision of the
Company's Board of Directors, the Manager shall provide a continuous investment
program for the Company, including investment, research and management with
respect to all securities and investments and cash equivalents in the Company.
The Manager shall determine from time to time what securities and other
investments will be purchased, retained or sold by the Company with respect to
the Company. The Manager shall provide the services under this Section 3 in
accordance with the Company's investment objectives, policies and restrictions
as stated in the Company's then current registration statement and resolutions
of the Company's Board of Directors.
(A) The Manager shall place all orders for the purchase and sale of
portfolio securities for the account of the Company with brokers or dealers
selected by the Manager. In executing portfolio transactions and selecting
brokers or dealers, the Manager will use its best efforts to seek on behalf of
each Fund the best overall terms available. In assessing the best overall terms
available for any transaction the Manager shall consider all facts it deems
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In evaluating the best overall terms
available, and in selecting the broker or dealer to execute a particular
transaction, the Manager may also consider the brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) provided to the Company and/or other accounts over which the Manager or
any affiliate of the Manager exercise investment discretion. The Manager is
authorized to pay to a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for any Company
which is in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction if, but only if, the Manager
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of that particular transaction or in terms of the overall
responsibilities of the Manager to the Company. In no instance may portfolio
securities be purchased from or sold to the Manager, any sub-adviser, or an
affiliated person of any of them acting as principal or as broker, except as
permitted by law. In executing portfolio transactions for the Company the
Manager may, to the extent permitted by applicable laws and regulations, but
shall not be obligated to, aggregate the securities to be sold or purchased with
those of other investment portfolios and its other clients where such
aggregation is not inconsistent with the policies set forth in the Company's
registration statement. In such event, the Manager shall allocate the securities
so purchased or sold, and the expenses incurred in the transaction, in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Company and such other clients.
3
<PAGE>
(B) In performing the investment advisory services hereunder, the
Manager is authorized to purchase, sell or otherwise deal with securities or
other instruments for which (i) the Manager, (ii) any affiliate of the Manager,
(iii) an entity in which the Manager has a direct or indirect interest, and (iv)
another member of a syndicate or other intermediary (where an entity referred to
in (i), (ii) or (iii) above was a member of the syndicate), has acted, now acts
or in the future will act as an underwriter, syndicate member, market-maker,
dealer, broker or in any other similar capacity, whether the purchase, sale or
other dealing occurs during the life of the syndicate or after the close of the
syndicate, provided such purchase, sale or dealing is permitted under the 1940
Act and the rules thereunder. Insofar as permitted by law, any rules of or
under applicable law prohibiting or restricting in any way an agent or fiduciary
from dealing with itself or from dealing with respect to any matter in which it
may or does have a personal interest shall not apply to the Manager, to the
extent its actions are authorized under this paragraph.
(C) The Manager shall maintain books and records with respect to the
securities transactions of the Fund, and furnish the Company's Board of
Directors such periodic special reports as the Board may request.
(D) The Manager shall review, monitor and report to the Board of
Directors regarding the performance and investment procedures of any sub-adviser
appointed by the Board of Directors, and shall assist and consult with any sub-
adviser in connection with the Company's continuous investment program.
4. Compliance with Governing Instruments and Laws. In performing its
duties as Manager, the Manager 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 Directors of
the Company. In addition, the Manager 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.
5. Services Not Exclusive. The Manager 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 Directors 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 Manager hereunder are not
deemed exclusive, and the Manager shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
6. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Manager 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 Manager further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
4
<PAGE>
7. Subcontractors. It is understood that the Manager may from time to
time employ or associate with itself such person or persons as the Manager may
believe to be particularly fitted to assist in the performance of this
Agreement; provided, however, that the compensation of such person or persons
shall be paid by the Manager and that the Manager shall be as fully responsible
to the Company for the acts and omissions of any subcontractor as it is for its
own acts and omissions. Without limiting the generality of the foregoing, it is
understood that the Manager and the Company intend to enter into an agreement
with the Fund Accountant under which said institution will provide certain
accounting, bookkeeping, pricing and dividend and distribution calculation
services with respect to the Company at its expense.
8. Expenses Assumed as Manager. Except as otherwise stated in this
Agreement, the Manager shall pay all expenses incurred by it in performing its
services and duties hereunder as Manager (other than the cost of securities
purchased for the Company). The Company shall bear other expenses incurred in
the operation of the Company, including without limitation taxes, interest,
brokerage fees and commissions, if any, fees of directors who are not officers,
directors, partners, employees or holders of 5 percent or more of the
outstanding voting securities of the Manager or any of its affiliates,
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 the
corporation's existence, costs of preparing and printing prospectuses or any
supplements or amendments thereto necessary for the continued effective
registration of the Shares under federal or state securities laws, costs of
printing and distributing any prospectus, supplement or amendment thereto for
existing shareholders of the Company described therein, 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.
9. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Company shall pay the Manager a fee, computed
daily and payable monthly, at the annual rate as set forth in the attached fee
schedule based on the average net assets of the Company. Notwithstanding
anything to the contrary herein, if in any fiscal year the aggregate expenses of
the Company (as defined under the securities regulations of any state having
jurisdiction over the Company) exceed the expense limitations of any such state,
the Company may deduct from the fees to be paid pursuant to this Agreement, or
the Manager shall bear such excess, to the extent required by state law. Such
deduction or payment, if any, will be estimated and accrued daily and paid on a
monthly basis. The Company shall reduce the advisory fee to be paid to the
Manager by the amount of any advisory fees paid to other investment companies
relating to the Company's investment in such investment company's securities.
10. Confidentiality. The Manager shall treat confidentially and as
proprietary information of the Company all records and other information
relative to the Company and prior
5
<PAGE>
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 Manager 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, however, shall prohibit the Manager 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 Company.
11. Limitations of Liability. Subject to the provisions of Section 7
hereof concerning the Manager's responsibility for the acts and omissions of
persons employed or associated with the Manager, the Manager shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Company or by the Company in connection with the matters to which this Agreement
relates, except a loss resulting from a 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 this
Agreement. Any person, even though also an officer, director, employee or agent
of the Manager, 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 the
Company, or acting on any business of the Company (other than services or
business in connection with the Manager's duties as Manager hereunder or under
any other agreement with the Company) to be rendering such services to or acting
solely for the Company and not as an officer, director, employee or agent or one
under the control or direction of the Manager even though paid by the Manager.
The Manager acknowledges and agrees that the Articles of Incorporation
of the Company provides that the Directors 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.
12. 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, 19__. Thereafter, this Agreement will be
extended with respect to a particular 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 Directors 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
6
<PAGE>
Company's Board of Directors or by vote of a majority of the outstanding voting
securities of the Company. This Agreement may be terminated by the Company at
any time, without the payment of any penalty, by vote of a majority of the
entire Board of Directors of the Company or by a vote of a majority of the
outstanding voting securities of the Company on 60 days' written notice to the
Manager, or by the Manager at any 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.
13. Names. The name "Horace Mann Fund" refers to the Company created
and the directors, as directors but not individually or personally, acting from
time to time under the Articles of Incorporation dated ____________, 19__, as
amended, which is hereby referred to and a copy of which is on file at the
principal office of the Company. The directors, 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 directors 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.
14. Notices. Notices of any kind to be given to the Company hereunder by
the Manager 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
7
<PAGE>
or at such other address or to such individual as shall be so specified by the
Company to the Manager. Notices of any kind to be given to the Manager
hereunder by the Company shall be in writing and shall be duly given if mailed
or delivered to the Manager at:
or at such other address or to such individual as shall be so specified by the
Manager to the Company.
15. 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 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 12 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.
8
<PAGE>
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 ______ FUND, INC.
By: _________________________________________
(name)_______________________________________
(title)______________________________________
Attest: _____________________________
(name)_______________________
(title)______________________
HORACE MANN INVESTORS, INC.
By: ________________________________________
(name)______________________________________
(title)_____________________________________
Attest: ____________________________
(name)______________________
(title)_____________________
9
<PAGE>
FEE SCHEDULE
[Growth Fund]
[Income Fund]
[Balanced Fund]
[Short-Term Investments Fund]
10
<PAGE>
EXHIBIT C
INVESTMENT SUB-ADVISORY AGREEMENT
This Agreement (Agreement) made this _____ day of _____ 1997 by and between
Horace Mann Investors, Inc., a registered investment adviser (Adviser) and
Wellington Management Company, LLP, a limited liability partnership 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 Horace Mann Growth Fund, the Horace
Mann Income Fund, and the Horace Mann Short-Term Investment Fund;
Whereas Adviser desires to retain the Sub-Adviser to furnish investment
advisory services for the Horace Mann Growth Fund, the Horace Mann Income
Fund, the Horace Mann Balanced Fund and the Horace Mann Short-Term
Investment 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 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;
<PAGE>
Page 2 - Wellington Agreement
(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. Expenses During the terms of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commission, if any),
purchased for the Fund Portfolios.
4. Compensation For the services provided and the expenses assumed under this
Agreement for each Fund Portfolio, Adviser will pay Sub-Adviser, and Sub-Adviser
agrees to accept as full 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.
<PAGE>
Page 3 - Wellington Agreement
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
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.
7. Term, Termination, Amendment This Agreement shall become effective with
respect to the Fund Portfolios on May 1, 1997, provided that it has been
approved by a vote of a majority of the outstanding voting securities of each
Fund Portfolio in accordance with the requirement of the 1940 Act and shall
remain in full force until November 30, 1998, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter with respect to each Fund Portfolio, but only as long as such
continuance is specifically approved for each Fund Portfolio at least annually
in the manner required by the 1940 Act and the rules and regulations thereunder,
provided, however, that if the continuation of this Agreement is not approved
for a Fund Portfolio, the Sub-Adviser may continue to serve in such capacity for
such Fund Portfolio in the manner and to the extent permitted by the 1940 Act
and the rules and regulations thereunder.
This Agreement shall automatically terminate in the event of its assignment and
may be terminated at any time without the payment of any penalty by the Adviser
or by the Sub-Adviser on sixty days written notice to the other party. This
Agreement may also be terminated by the Fund with respect to any Fund Portfolio
by action of the Board of Trustees or by a vote of a majority of the outstanding
voting securities of such Fund Portfolio on sixty days written notice to Sub-
Adviser by the Fund.
This Agreement may be terminated with respect to any Fund Portfolio any time
without the payment of any penalty by the Adviser, the Board of Trustees or by a
vote of majority of the outstanding voting securities of such Fund Portfolio in
the event the Sub-Adviser or any officer or director of the Sub-Adviser has
taken any action which results in a material breach of the covenants of the Sub-
Adviser under this Agreement.
Termination of this Agreement shall not affect the right of the Sub-Adviser to
receive payments on any unpaid balance of the compensation described in Section
4 earned prior to such termination.
This Agreement shall automatically terminate with respect to a Fund Portfolio in
the event the Investment Management Agreement between Adviser and that Fund
Portfolio is terminated, assigned or not renewed.
8. Notice Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
9. Limitations on Liability All parties are expressly put on notice of the
Fund's Agreement and Declaration of Trust and all amendment 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.
<PAGE>
Page 4 - Wellington Agreement
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 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.
12. Applicable Law This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 9 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. WELLINGTON MANAGEMENT COMPANY LLP
By _____________________________ By ______________________________
Title __________________________ Title ___________________________
By _____________________________ By ______________________________
Title __________________________ Title ___________________________
<PAGE>
Exhibit 1
SUB-ADVISORY FEE SCHEDULE FOR HORACE MANN MUTUAL FUNDS
Growth Fund
.400% on the First $100,000,000
.300% on the Next $100,000,000
.250% on all assets over $200,000,000
Income Fund
.250% on the First $100,000,000
.200% on the Next $100,000,000
.150% on all assets over $200,000,000
Balanced Fund
.325% on the First $100,000,000
.275% on the Next $100,000,000
.225% on the Next $300,000,000
.200% on all assets over $500,000,000
Short-Term Investment Fund
.125% on the First $100,000,000
.100% on the Next $100,000,000
.075% on all assets over $200,000,000
<PAGE>
EXHIBIT D
List of Partners of Wellington Capital Management, LLP
as of 12/31/96
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)
Nancy T. August Senior Vice President(Partner)
James H. Averill Senior Vice President(Partner)
Marie-Claude Bernal Senior Vice President(Partner)
William N. Booth Senior Vice President(Partner)
Paul Braverman Senior Vice President & Chief Financial
Officer(Partner)
William D. Dilanni Senior Vice President(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)
William C.S. Hicks Senior Vice President(Partner)
Paul D. Kaplan Senior Vice President(Partner)
John C. Keogh 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)
Edward P. Owens Senior Vice President(Partner)
Saul J. Pannell Senior Vice President(Partner)
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(Managing 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)
Harriett 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)
<PAGE>
Preliminary Proxy Filing
------------------------
VOTING INSTRUCTION/PROXY
Horace Mann Income Fund, Inc.
Shareholder Meeting of April 23, 1997
This Voting Instruction/Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints George J. Zock and A.L. Gallop, individually or
jointly, proxies, each with the power of substitution, to vote all Fund shares
of the undersigned at the Special Meeting of Shareholders, to be held at One
Horace Mann Plaza, Springfield, IL on April 23, 1997 at 9:00 a.m. CT, or at any
adjournment thereof, upon the matters 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. ELECTION OF DIRECTORS FOR
All nominees listed below
(Except as marked to the contrary below)
WITHHOLD AUTHORITY
to vote for all nominees listed below
INSTRUCTION: To withhold authority to vote for any individual nominee strike
- ------------ a line through the nominee's name in the list below:
A. Thomas Arisman, Larry K. Becker, A.L. Gallop, Richard D. Lang, Edward L.
Najim, Harriet A. Russell, George J. Zock
2. Approval of Management Agreement with Horace Mann Investors, Inc.
FOR AGAINST ABSTAIN
3. Approval of Investment Subadvisory Agreement with Wellington Management
Company, LLP
FOR AGAINST ABSTAIN
4. Approval of Agreement and Plan Reorganization
FOR AGAINST ABSTAIN
5. Approval of amendment to the investment limitation regarding restricted
securities
FOR AGAINST ABSTAIN
6. Approval of amendment to the investment objective
FOR AGAINST ABSTAIN
(BACK SIDE)
Share Balance as of Dated___________________________1997
-----------------------------------
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.
PLEASE MARK, DATE, SIGN AND
PROMPTLY RETURN THIS VOTING
INSTRUCTION/PROXY CARD USING THE
ENCLOSED ENVELOPE.
IF NO CONTRARY SPECIFICATION IS MADE, THIS VOTING INSTRUCTION/
PROXY WILL BE VOTED FOR THE PROPOSALS IN ITEMS 1, 2, 3, 4, 5 AND 6.
