Document ID: SEC-2015-1206-0001
Agency: sec
Document Type: Notice
Title: Applications: Horace Mann Life Insurance Co., et al.
Posted Date: 2015-07-17T04:00Z

[Federal Register Volume 80, Number 137 (Friday, July 17, 2015)]
[Notices]
[Pages 42571-42575]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17575]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31714; File No. 812-14336]

Horace Mann Life Insurance Company, et al; Notice of Application

July 13, 2015.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice of application for an order approving the substitution 
of certain securities pursuant to Section 26(c) of the Investment 
Company Act of 1940, as amended (the ``1940 Act'').

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Applicants: Horace Mann Life Insurance Company (``Horace Mann''), and 
Horace Mann Life Insurance Company Separate Account and Horace Mann 
Life Insurance Company Qualified Group Annuity Separate Account 
(collectively, the ``Separate Accounts,'' and together with Horace 
Mann, the ``Applicants'').
SUMMARY OF APPLICATION: The Applicants seek an order pursuant to 
Section 26(c) of the 1940 Act approving the substitution of shares 
issued by certain investment portfolios (the ``Existing Portfolios'') 
of registered investment companies with shares of certain investment 
portfolios (the ``Replacement Portfolios'') of registered investment 
companies, under certain variable annuity contracts (the 
``Contracts''), each funded through the Separate Accounts.

DATES:  Filing Date: The application was filed on July 25, 2014, and 
amended on January 14, 2015, and May 27, 2015.

Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on August 6, 2015, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Pursuant to Rule 0-5 under the 1940 Act, 
hearing requests should state the nature of the writer's interest, any 
facts bearing upon the desirability of a hearing on the matter, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES:  Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090; Applicants: Elizabeth E. Arthur, 
Esq., Maureen Bolinger, Horace Mann Life Insurance Company, One Horace 
Mann Plaza, Springfield, Illinois 62715.

FOR FURTHER INFORMATION CONTACT:  Michael S. Didiuk, Senior Counsel, at 
(202) 551-6839, or Holly L. Hunter-Ceci, Branch Chief, at (202) 551-
6825 (Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION:  The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. Horace Mann is a stock life insurance company organized under 
the laws of Illinois. Horace Mann is engaged in the sale of individual 
and group life insurance and annuity contracts on a non-participating 
basis. Horace Mann is an indirect wholly owned subsidiary of Horace 
Mann Educators Corporation, a publicly-held insurance holding company 
traded on the New York Stock Exchange. Horace Mann established the 
Horace Mann Life Insurance Company Separate Account on October 9, 1965, 
under Illinois law, and established the Horace Mann Life Insurance 
Company Qualified Group Annuity Separate Account on October 16, 2006, 
under Illinois law.
    2. Each of the Separate Accounts meets the definition of ``separate 
account'' as defined in Section 2(a)(37) of the 1940 Act. The Separate 
Accounts are registered with the Commission under the 1940 Act as unit 
investment trusts. The assets of the Separate Accounts support the 
Contracts, and interests in the Separate Accounts offered through such 
Contracts have been registered under the Securities Act of 1933 (``1933 
Act'') on Form N-4. The application sets forth the registration 
statement file numbers for the Contracts and the Separate Accounts. 
Horace Mann is the legal owner of the assets in the Separate Accounts. 
The assets of the Separate Accounts may not be chargeable with 
liabilities arising out of any other business of Horace Mann.
    3. The Contracts are issued either as individual or group 
contracts, with group contract participants acquiring certain ownership 
rights as described in the group contract or plan documents. Contract 
owners and participants in group contracts (each a ``Contract owner'') 
may allocate some or all of their Contract value to one or more 
subaccounts available as investment options under their respective 
Contract. Each subaccount corresponds to a portfolio of an underlying 
registered open-end management investment company in which the Separate 
Account invests. A Contract owner may also invest some or all of his/
her Contract value to a fixed account investment option, which is 
supported by assets of Horace Mann's general account.
    4. The Applicants state that under the Contracts, Horace Mann 
reserves the right to substitute shares of one portfolio for shares of 
another portfolio if: (i) Shares of a registered open-end management 
investment company are no longer available for investment by the 
Separate Account; or (ii) Horace Mann determines that further 
investments in a registered open-end management investment company are 
inappropriate in view of the purposes and objectives of a Contract.
    5. The Applicants propose the substitution of shares of the 
Existing Portfolios with shares of the Replacement Portfolios under the 
Contracts, each funded through the Separate Accounts. The Separate 
Accounts are segmented into subaccounts, and certain of these 
subaccounts invest in the Existing Portfolios. Each subaccount's 
income, gains, and losses, whether or not realized, are credited to or 
charged against the amounts allocated to that

[[Page 42572]]

subaccount in accordance with the terms of the Contracts without regard 
to other income, gains, or losses of the remaining subaccounts or of 
Horace Mann. The Applicants state that the proposed substitutions 
involve redeeming shares of the Existing Portfolios for cash. The 
proceeds of such redemptions will then be used to purchase shares of 
the corresponding Replacement Portfolio, as each subaccount of the 
Separate Accounts will invest the proceeds of its redemption from the 
Existing Portfolios in the applicable Replacement Portfolios.
    6. Applicants propose, as set forth below, to substitute shares of 
the Replacement Portfolios for shares of the Existing Portfolios 
(``Substitutions''):

------------------------------------------------------------------------
     Sub. No.           Existing portfolio        Replacement portfolio
------------------------------------------------------------------------
1................  Wilshire Mutual Funds Inc.--  Variable Insurance
                    Wilshire 5000 Index\SM\       Products Fund II--
                    Fund--Institutional Class.    Index 500 Portfolio--
                                                  Service Class 2.
2................  Wilshire Mutual Funds Inc.--  .......................
                    Wilshire 5000 Index\SM\
                    Fund--Investment Class.
3................  Variable Insurance Products   .......................
                    Fund IIII--Growth & Income
                    Portfolio--Service Class 2.
4................  Davis Variable Account Fund,  .......................
                    Inc.--Davis Value Portfolio.
5................  T. Rowe Price Equity Series,  .......................
                    Inc.--T. Rowe Price Equity
                    Income Portfolio--II.
6................  Wilshire Large Company Value  .......................
                    Portfolio--Investment Class.
7................  Fidelity Variable Insurance   .......................
                    Products Fund--Growth
                    Portfolio--Service Class 2.
8................  Wilshire Mutual Funds Inc.--  .......................
                    Wilshire Large Company
                    Growth Portfolio--
                    Institutional Class.
9................  Wilshire Large Company        .......................
                    Growth Portfolio--
                    Investment Class.
10...............  Delaware VIP Trust--Delaware  .......................
                    VIP U.S. Growth Series--
                    Service Class.
11...............  AllianceBernstein Variable    .......................
                    Products Series Fund, Inc.--
                    AllianceBernstein Large Cap
                    Growth Portfolio--Class B.
12...............  Dreyfus Investment            Calvert VP S&P MidCap
                    Portfolios--Dreyfus MidCap    400 Index Portfolio--
                    Stock Portfolio--Service      Class F.
                    Shares.
13...............  Variable Insurance Products   .......................
                    Fund III--Mid Cap
                    Portfolio--Service Class 2.
14...............  Rainier Investment            .......................
                    Management Mutual Funds--
                    Rainier Small/Mid Cap
                    Equity Fund--Original
                    Shares.
15...............  Aerial Investment Trust--     .......................
                    Ariel Appreciation Fund--
                    Investor Class.
16...............  Goldman Sachs Variable        .......................
                    Insurance Trust--Goldman
                    Sachs Mid Cap Value Fund--
                    Service Shares.
17...............  American Century Variable     .......................
                    Portfolios, Inc.--VP Mid
                    Cap Value Fund--Class 1.
18...............  Wells Fargo Variable Trust--  .......................
                    Wells Fargo Advantage VT
                    Opportunity Fund--Class 2.
19...............  AllianceBernstein Variable    .......................
                    Products Series Fund, Inc.--
                    AllianceBernstein Small/Mid
                    Cap Value Portfolio--Class
                    B.
20...............  Aerial Investment Trust--     .......................
                    Ariel Fund--Investor Class.
21...............  Lord Abbet Series Fund,       .......................
                    Inc.--Growth Opportunities
                    Portfolio--Class VC.
22...............  Putnam Variable Trust--       .......................
                    Putnam VT Multi-Cap Growth
                    Fund--Class IB.
23...............  Delaware VIP Trust--Delaware  .......................
                    VIP Smid Cap Growth Series--
                    Service Class (formerly
                    Delaware VIP Growth
                    Opportunities Series,
                    Service Class).
24...............  Goldman Sachs Variable        Dreyfus Small Cap Stock
                    Insurance Trust--Goldman      Index Portfolio--
                    Sachs Small Cap Equity        Service Shares.
                    Insights Fund--
                    Institutional Shares.
25...............  Lazard Retirement Series,     .......................
                    Inc.--Lazard Retirement US
                    Small-Mid Cap Equity
                    Portfolio--Service Shares.
26...............  Neuberger Berman Equity       .......................
                    Funds--Neuberger Berman
                    Genesis Fund--Advisor Class.
27...............  T. Rowe Price Small-Cap       .......................
                    Stock Fund, Inc.--T. Rowe
                    Price Small-Cap Stock Fund--
                    Advisor Class.
28...............  T. Rowe Price Small-Cap       .......................
                    Value Fund, Inc.--T. Rowe
                    Price Small-Cap Value Fund--
                    Advisor Class.
29...............  Wilshire Small Company Value  .......................
                    Portfolio--Investment Class.
30...............  Royce Capital Fund--Royce     .......................
                    Small-Cap Portfolio--
                    Investment Class.
31...............  AllianceBernstein Variable    .......................
                    Products Series Fund, Inc.--
                    AllianceBernstein Small Cap
                    Growth Portfolio--Class B.
32...............  Wilshire Mutual Funds Inc.--  .......................
                    Wilshire Small Company
                    Growth Portfolio--
                    Investment Class.
33...............  Delaware VIP Trust--Delaware  Variable Insurance
                    VIP REIT Series--Service      Products Fund IV--Real
                    Class.                        Estate Portfolio--
                                                  Service Class 2.
34...............  Fidelity Variable Insurance   Franklin Templeton
                    Products Fund--High Income    Variable Insurance
                    Portfolio--Service Class 2.   Products Trust--High
                                                  Income VIP Fund--Class
                                                  2.
35...............  ALPS Variable Investment      Fidelity VIP V--
                    Trust--Ibbotson               FundsManager 20%
                    Conservative ETF Asset        Portfolio--Service
                    Allocation Portfolio--Class   Class 2.
                    II.
36...............  ALPS Variable Investment      Fidelity VIP V--
                    Trust--Ibbotson Income and    FundsManager 50%
                    Growth ETF Asset Allocation   Portfolio--Service
                    Portfolio--Class II.          Class 2.
37...............  ALPS Variable Investment      Fidelity VIP V--
                    Trust--Ibbotson Balanced      FundsManager 60%
                    ETF Asset Allocation          Portfolio--Service
                    Portfolio--Class II.          Class 2.
38...............  ALPS Variable Investment      Fidelity VIP V--
                    Trust--Ibbotson Growth ETF    FundsManager 70%
                    Asset Allocation Portfolio--  Portfolio--Service
                    Class II.                     Class 2.
39...............  ALPS Variable Investment      Fidelity VIP V--
                    Trust--Ibbotson Aggressive    FundsManager 85%
                    Growth ETF Asset Allocation   Portfolio--Service
                    Portfolio--Class II.          Class 2.
40...............  Fidelity Variable Insurance   American Funds
                    Products Fund II--Emerging    Insurance Series--New
                    Markets Portfolio--Service    World Fund--Class 4.
                    Class 2.
------------------------------------------------------------------------

[[Page 42573]]

    7. The Applicants state that the proposed Substitutions involve 
substituting a Replacement Portfolio for an Existing Portfolio with 
very similar--and at times, substantially identical--investment 
objectives, investment strategies, and principal risks and therefore 
the expectations of Contract owners will continue to be met after the 
proposed Substitutions. The Applicants state that the performance for 
the Replacement Portfolios is at least comparable to that of the 
Existing Portfolios. Additional information for each Existing Portfolio 
and the corresponding Replacement Portfolio, including investment 
objectives, principal investment strategies, principal risks, and 
performance can be found in the application.
    8. Applicants represent that Contract owners with Contract value 
allocated to the subaccounts of the Existing Portfolios will have the 
same or lower total net annual operating expenses (i.e. total annual 
portfolio operating expenses after taking into account any fee waiver 
or expense reimbursement) after the proposed Substitutions as before 
the proposed Substitutions (based on the periods covered by the most 
recent prospectuses for the Existing and Replacement Portfolios), 
except for the following Substitutions: \1\
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    \1\ For Substitution #36 the total annual operating expenses of 
the Replacement Portfolio for the period covered by the most recent 
prospectus dated April 30, 2015, were lower than those of the 
Existing Portfolio for the same period only after taking into 
account any contractual fee waivers/expense reimbursement applied 
under the Replacement Portfolio.

------------------------------------------------------------------------
    Sub. No.          Existing portfolio         Replacement portfolio
------------------------------------------------------------------------
37.............  ALPS Variable Insurance      Fidelity VIP V--
                  Trust--Ibbotson Balanced     FundsManager 60%
                  ETF Asset Allocation         Portfolio.
                  Portfolio.
38.............  ALPS Variable Insurance      Fidelity VIP V--
                  Trust--Ibbotson Growth ETF   FundsManager 70%
                  Asset Allocation Portfolio.  Portfolio.
39.............  ALPS Variable Insurance      Fidelity VIP V--
                  Trust--Ibbotson Aggressive   FundsManager 85%
                  Growth ETF Asset             Portfolio.
                  Allocation Portfolio.
------------------------------------------------------------------------

    Horace Mann represents that it will solicit approval for proposed 
Substitutions #37, #38 and #39 from the respective Contract owners 
owning interests in the applicable subaccount.
    Further, Applicants represent that each Replacement Portfolio has a 
combined management and 12b-1 fee that is less than or equal to that of 
the Existing Portfolio, except for the following Substitution:

------------------------------------------------------------------------
    Sub. No.          Existing portfolio         Replacement portfolio
------------------------------------------------------------------------
1..............  Wilshire Mutual Funds Inc.-- Variable Insurance
                  Wilshire 5000 Index\SM\      Products Fund II--Index
                  Fund.                        500 Portfolio.
------------------------------------------------------------------------

    Horace Mann represents that it will solicit approval with respect 
to the Substitution involving the Wilshire 5000 Index\SM\ Fund from 
Contract owners owning interests in the subaccount.
    9. The Applicants state that the Substitutions proposed are part of 
an overall business goal of Horace Mann to improve the administrative 
efficiency and cost effectiveness, as well as the attractiveness to 
investors, of its Contracts. Horace Mann asserts that it has determined 
that a more streamlined array of investment options, concentrated in 
fewer fund families, would permit Horace Mann to lower its costs of 
administering the Contracts, increase its operational and 
administrative efficiencies, and create a more manageable investment 
process for Contract owners.
    10. The Applicants represent that Contract owners will also be 
notified of this Application by means of a prospectus supplement or 
other communication (``Pre-Substitution Notice'') for each of the 
Contracts. The Pre-Substitution Notice will notify Contract owners of 
Horace Mann's intent to implement the Substitutions; will notify 
Contract owners that Horace Mann has filed this Application to obtain 
the necessary approval from the Commission to effect the Substitutions; 
and will set forth the anticipated Substitution Date. In addition, the 
Pre-Substitution Notice will: (a) Advise Contract owners that Contract 
values attributable to investments in the Existing Portfolios will be 
transferred to the Replacement Portfolios, without any charge that 
would otherwise apply (including sales charges or surrender charges) 
and without being subject to any limitations on transfers, on the 
Substitution Date; (b) state that, from May 1, 2015, through the date 
30 days after the Substitutions, Contract owners may make one transfer 
of Contract value from the subaccounts investing in the Existing 
Portfolios (before the Substitution Date) or the Replacement Portfolios 
(after the Substitution Date) to any other available investment option 
under the Contract without any charge that would otherwise apply 
(including sales charges or surrender charges) and without imposing any 
transfer limitations; and (c) inform Contract owners that, except as 
described in the market timing/short-term trading provisions of the 
relevant prospectus, Horace Mann will not exercise any right it may 
have under the Contracts to impose additional restrictions on transfers 
between the subaccounts under the Contracts, including any limitation 
on the number of transfers permitted, for a period beginning on May 1, 
2015, through the date 30 days following the Substitution Date. 
Applicant further states that at least 30 days before the Substitution 
Date all affected Contract owners will have received the most recent 
prospectus for each applicable Replacement Portfolio. Finally, within 
five (5) business days following the Substitution Date, Contract owners 
affected by the Substitution will receive a written confirmation that 
the Substitutions were carried out as previously notified. This 
confirmation will restate the information set forth in the Pre-
Substitution Notice and will include the before and after account 
values.
    11. Each proposed Substitution will take place at relative net 
asset value determined on the Substitution Date pursuant to Section 22 
of the 1940 Act and Rule 22c-1 thereunder, with no change in the amount 
of any Contract

[[Page 42574]]

owner's Contract value or death benefit or in the dollar value of his 
or her investments in any of the subaccounts. The procedures to be 
implemented are sufficient to assure that each Contract owner's cash 
values immediately after the Substitution will be equal to the cash 
value immediately before the Substitution. Contract owners will not 
incur any fees or charges as a result of the Substitutions, nor will 
their rights or Horace Mann's obligations under the Contracts be 
altered in any way, and the Substitutions will not change Contract 
owners' insurance benefits under the Contracts.
    12. The proposed Substitution will be effected on the Substitution 
Date by having the Separate Accounts redeem shares of the Existing 
Portfolios for cash.\2\ The proceeds of such redemptions will then be 
used to purchase shares of the corresponding Replacement Portfolio, as 
each subaccount of the Separate Accounts will invest the proceeds of 
its redemption from the Existing Portfolios in the applicable 
Replacement Portfolios. Redemption requests and purchase orders will be 
placed simultaneously so that Contract values will remain fully 
invested at all times.
---------------------------------------------------------------------------

    \2\ To the extent that there are any in-kind redemptions, such 
redemptions will be effected in accordance with the conditions set 
forth in the no-action letter issued by the Commission staff to 
Signature Financial Group (pub. avail. Dec. 28, 1999).
    In the event that a Replacement Portfolio or its investment 
adviser declines to accept, on behalf of the Replacement Portfolio, 
securities redeemed in-kind by an Existing Portfolio, such Existing 
Portfolio will instead provide cash equal to the value of the 
declined securities so that the Contract owner's contract values 
will not be adversely affected or diluted.
---------------------------------------------------------------------------

    13. Horace Mann will pay all expenses incurred in connection with 
the Substitutions, including legal, accounting, transactional, and 
other fees and expenses, including brokerage commissions. Contract 
owners will not incur any fees or charges as a result of the 
Substitutions, nor will their rights or Horace Mann's obligations under 
the Contracts be altered in any way, and the Substitutions will not 
change Contract owners' insurance benefits under the Contracts. The 
Substitutions will not cause the contract fees and charges currently 
being paid by Contract owners to be greater after the Substitution than 
before the Substitution.
    14. The Applicants represent that Horace Mann will take further 
steps to ensure that those Contract owners for whom the total annual 
operating expense ratio of the Replacement Portfolio was appreciably 
higher than that of the Existing Portfolio do not incur higher expenses 
for a period of two years after the Substitution. More specifically, 
for two years following the Substitution Date, Horace Mann will 
reimburse those who were Contract owners on the Substitution Date and 
who, as a result of a Substitution, had Contract value allocated to a 
subaccount investing in a Replacement Portfolio such that the 
Replacement Portfolio's net annual operating expenses (taking into 
account any fee waivers and expense reimbursements) for such period 
will not exceed, on an annualized basis, the net annual operating 
expenses (taking into account any fee waivers and expense 
reimbursements) of the corresponding Existing Portfolio as of the 
Existing Portfolio's most recent fiscal year preceding the Substitution 
Date. Any adjustments will be made at least on a quarterly basis.

Legal Analysis

    1. Applicants request that the Commission issue an order pursuant 
to Section 26(c) of the 1940 Act approving the proposed Substitutions. 
Section 26(c) of the 1940 Act prohibits any depositor or trustee of a 
unit investment trust that invests exclusively in the securities of a 
single issuer from substituting the securities of another issuer 
without the approval of the Commission. Section 26(c) provides that 
such approval shall be granted by order of the Commission if the 
evidence establishes that the substitution is consistent with the 
protection of investors and the purposes of the 1940 Act.
    2. The Applicants submit that the Substitutions meet the standards 
set forth in Section 26(c) and that, if implemented, the Substitutions 
would not raise any of the concerns that Congress intended to address 
when the 1940 Act was amended to include this provision. As described 
in the application, each Replacement Portfolio and its corresponding 
Existing Portfolio have similar, and in some cases substantially 
similar or identical, investment objectives and strategies. The 
application also states that, except for three Substitutions noted in 
the application, the Existing Portfolios will have the same or lower 
total net annual operating expenses after the proposed Substitutions as 
before the proposed Substitutions. The application states further that 
the Existing Portfolios and the Replacement Portfolios have similar, 
and in many cases substantially similar, investment policies and risks. 
Applicants believe that, to the extent that differences in risks and 
strategies do exist, these differences do not introduce Contract owners 
to materially greater risks than before the Substitution.
    3. Applicants also maintain that the ultimate effect of the 
Substitutions would be to continue to provide Contract owners with a 
wide array of investment options and managers, while at the same time 
increasing administrative efficiencies of the Contracts and 
streamlining and simplifying the investment line-up available to 
Contract owners under the affected Contracts.
    4. Applicants state that the Contracts and the Contract 
prospectuses disclose that Horace Mann has reserved the right under the 
Contracts to substitute shares of another underlying registered open-
end management investment company for one of the current underlying 
registered open-end management investment companies offered as an 
investment option under the Contracts.
    5. Applicants also assert that the proposed Substitutions are not 
of the type that Section 26(c) was designed to prevent because they 
will not result in costly forced redemption, nor will they affect other 
aspects of the Contracts. In the current situation, Contract owners are 
contractually provided investment discretion during the accumulation 
phase of the Contracts to allocate and reallocate their Contract value 
among the investment options available under the Contracts.
    6. The proposed Substitutions will offer Contract owners the 
opportunity to transfer amounts out of the affected subaccounts without 
any cost or other penalty (other than those necessary to implement 
policies and procedures designed to detect and deter disruptive 
transfer and other ``market timing'' activity) that may otherwise have 
been imposed for a period beginning on May 1, 2015, and ending no 
earlier than 30 days after the Substitution. Applicants posit that this 
reduces the likelihood of being invested in an undesired underlying 
registered open-end management investment company, with the discretion 
remaining with the Contract owners.
    7. Applicants state that the proposed Substitutions are also unlike 
the type of substitution that Section 26(c) was designed to prevent in 
that the Substitutions have no impact on other aspects of the 
Contracts. Specifically, the proposed Substitutions will not affect the 
type of benefits offered by Horace Mann under the Contracts, or 
numerous other rights and privileges associated with the Contracts.

[[Page 42575]]

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The Substitutions will not be effected unless the Applicants 
determine that: (a) The Contracts allow the substitution of shares of 
registered open-end investment companies in the manner contemplated by 
the application; (b) the Substitutions can be consummated as described 
in the application under applicable insurance laws; and (c) any 
regulatory requirements in each jurisdiction where the Contracts are 
qualified for sale have been complied with to the extent necessary to 
complete the Substitutions.
    2. The Applicants or their affiliates will pay all expenses and 
transaction costs of the Substitutions, including legal and accounting 
expenses, any applicable brokerage expenses and other fees and 
expenses. No fees or charges will be assessed to the affected Contract 
owners to effect the Substitutions.
    3. The Substitutions will be effected at the relative net asset 
values of the respective shares in conformity with Section 22(c) of the 
1940 Act and Rule 22c-1 thereunder without the imposition of any 
transfer or similar charges by Applicants. The Substitutions will be 
effected without change in the amount or value of any Contracts held by 
affected Contract owners.
    4. The Substitutions will in no way alter the tax treatment of 
affected Contract owners in connection with their Contracts, and no tax 
liability will arise for Contract owners as a result of the 
Substitutions.
    5. The rights or obligations of the Applicants under the Contracts 
of affected Contract owners will not be altered in any way. The 
Substitutions will not adversely affect any riders under the Contracts.
    6. Affected Contract owners will be permitted to make at least one 
transfer of Contract value from the subaccount investing in the 
Existing Portfolio (before the Substitution Date) or the Replacement 
Portfolio (after the Substitution Date) to any other available 
investment option under the Contract without charge for a period 
beginning at least 30 days before the Substitution Date through at 
least 30 days following the Substitution Date. Except as described in 
any market timing/short-term trading provisions of the relevant 
prospectus, Horace Mann will not exercise any right it may have under 
the Contracts to impose restrictions on transfers between the 
subaccounts under the Contracts, including limitations on the future 
number of transfers, for a period beginning at least 30 days before the 
Substitution Date through at least 30 days following the Substitution 
Date.
    7. All affected Contract owners will be notified, at least 30 days 
before the Substitution Date about: (a) The intended substitution of 
Existing Portfolios with the Replacement Portfolios; (b) the intended 
Substitution Date; and (c) information with respect to transfers as set 
forth in Condition 6 above. In addition, the Applicants will also 
deliver to all affected Contract owners, at least 30 days before the 
Substitution Date, a prospectus for each applicable Replacement 
Portfolio.
    8. Applicants will deliver to each affected Contract owner within 
five (5) business days of the Substitution Date a written confirmation 
which will include: (a) A confirmation that the Substitutions were 
carried out as previously notified; (b) a restatement of the 
information set forth in the Pre-Substitution Notice; and (c) before 
and after account values.
    9. For two years following the Substitution Date, Horace Mann will 
reimburse those who were Contract owners on the Substitution Date and 
who, as a result of a Substitution, had Contract value allocated to a 
subaccount investing in a Replacement Portfolio such that the 
Replacement Portfolio's net annual operating expenses (taking into 
account any fee waivers and expense reimbursements) for such period 
will not exceed, on an annualized basis, the net annual operating 
expenses (taking into account any fee waivers and expense 
reimbursements) of the corresponding Existing Portfolio as of the 
Existing Portfolio's most recent fiscal year preceding the Substitution 
Date. Any adjustments will be made at least on a quarterly basis. In 
addition, for a period of at least two years following the Substitution 
Date, the Applicants will not increase the Contract fees and charges--
including asset based charges such as mortality and expense risk 
charges deducted from the subaccounts--that would otherwise be assessed 
under the terms of Contracts that are in force on the Substitution 
Date.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
 Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-17575 Filed 7-16-15; 8:45 am]
 BILLING CODE 8011-01-P