Horace Mann Life Insurance Company
Separate Account Prospectus
Horace Mann Mutual Funds Prospectus
March 1, 1999
<PAGE>
Prospectus
March 1, 1999
Variable tax deferred annuity contracts
Qualified and non-qualified plans
Horace Mann Life Insurance Company
Separate accounts
March 1, 1999
<PAGE>
Individual Single Payment and Individual and Group Flexible Payment
Variable Deferred Annuity Contracts Issued By
Horace Mann Life Insurance Company Separate Account
This Prospectus offers combination fixed and variable annuity contracts
to individuals, as single payment contracts, and to individuals and groups, as
flexible payment contracts, issued by Horace Mann Life Insurance Company
("HMLIC") in connection with retirement plans or arrangements, some of which may
qualify for special tax treatment under the Internal Revenue Code as amended.
Amounts transferred to Horace Mann Life Insurance Company Separate Account as
directed by a Participant or Contract Owner are invested in one or more of seven
Subaccounts. Each Subaccount in turn purchases shares in a corresponding
portfolio of the Horace Mann Mutual Funds, as registered investment company. The
Horace Mann Mutual Funds consist of the following funds,:
Growth Fund--a fund investing primarily in common stocks of domestic
companies.
Balanced Fund--a fund investing in common stocks, debt securities and
money market instruments.
Income Fund--a fund investing primarily in investment grade debt securities.
Short-Term Investment Fund--a fund investing in short-term debt
instruments.
Small Cap Growth Fund--a fund investing primarily in small cap equity
securities with earnings growth potential.
International Equity Fund--a fund investing in marketable foreign equity
securities.
Socially Responsible Fund--a fund investing primarily in marketable
equity securities of United States-chartered
companies which are determined to be socially
responsible pursuant to criteria set forth in
the Fund's Prospectus.
This Prospectus sets forth concisely the information a prospective
investor should know before investing. Additional information about the Horace
Mann Life Insurance Company Separate Account has been filed with the Securities
and Exchange Commission in a Statement of Additional Information, dated May 1,
1998, and is incorporated herein by reference. The Statement of Additional
Information is available upon request, without charge, by writing to Horace Mann
Life Insurance Company, P.O. Box 4657, Springfield, Illinois 62708-4657, by
sending a telefacsimile (FAX) transmission to (217) 535-7123, or by telephoning
(217) 789-2500 or (800) 999-1030 (toll-free). The Table of Contents of the
Statement of Additional Information appears on page 20 of this Prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE
FUNDS.* BOTH PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE INVESTING AND
RETAINED FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS ANY REPRESENTATION TO
THE CONTRACY IS A CRIMINAL OFFENSE.
The date of this Prospectus is March 1, 1999.
*The Funds' Prospectus follows page 20 of the Horace Mann Life Insurance
Company Separate Account Prospectus.
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
- -------------------------------------------------------------------------------------
Page
<S> <C>
Definitions .................................................................... 3
Summary ........................................................................ 4
Condensed Financial Information ................................................ 8
Horace Mann Life Insurance Company, The Account and The Horace Mann Mutual Funds 10
Horace Mann Life Insurance Company .................................... 10
The Account ........................................................... 10
The Horace Mann Mutual Funds .......................................... 10
Administraor: Horace Mann Investors, Inc............................... 11
The Contract ................................................................... 11
Contract Owners' Rights ............................................... 11
Purchasing the Contract ............................................... 11
Purchase Payments ..................................................... 12
Amount and Frequency of Purchase Payments ........................... 12
Allocation of Purchase Payments ..................................... 12
Accumulation Units and Accumulation Unit Value ...................... 12
Transactions .......................................................... 12
Transfers ........................................................... 12
Changes in Allocation Instructions .................................. 12
Surrender Before Commencement of Annuity Period ..................... 13
Reinvestment Priviledge ............................................. 13
Deferment ........................................................... 14
Confirmations ....................................................... 14
Deductions and Expenses ............................................... 14
Annual Maintenance Charge ........................................... 14
Mortality and Expense Risk Fee ...................................... 14
Operating Expenses of the Horace Mann Mutual Funds .................. 14
Premium Taxes ....................................................... 14
Death Benefit Proceeds ................................................ 14
Mandatory Minimum Distribution ........................................ 15
Income Payments ....................................................... 15
Income Payment Options .............................................. 15
Amount of Fixed and Variable Income Payments ........................ 16
Misstatement of Age ................................................... 17
Modification of the Contract .......................................... 17
Tax Consequences ............................................................... 17
Separate Account ...................................................... 17
Contract Owners ....................................................... 17
Contributions ....................................................... 17
Distributions Under Qualified Contracts ............................. 18
Distributions Under Non-Qualified Contracts ......................... 18
Penalty Tax ......................................................... 19
Voting Rights .................................................................. 19
Other Information .............................................................. 19
Additional Information ......................................................... 20
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF, OR SOLICITATION OF AN
OFFER TO ACQUIRE, ANY INTEREST OR PARTICIPATION IN THE CONTRACTS OFFERED BY THIS
PROSPECTUS IN ANY STATE TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION IN SUCH STATE.
2
<PAGE>
Definitions
- ------------------------------------------------------------------------------
ACCOUNT: Horace Mann Life Insurance Company Separate Account, a
segregated variable investment account consisting of seven Subaccounts each of
which invests in the corresponding Horace Mann Mutual Fund. The Account was
established by Horace Mann Life Insurance Company under Illinois law and
registered as a unit investment trust under the Investment Company Act of 1940.
ACCUMULATION UNIT: A unit of measurement used to determine the value
of a Contract Owner's interest in a Subaccount before Income Payments begin.
ANNUITANT: The recipient of Income Payments.
ANNUITY PERIOD: The period during which income payments are made to
the Annuitant or the last surviving Joint Annuitant, if any.
ANNUITY UNIT: A unit of measurement used in determining the amount of
variable Income Payment during the Annuity Period.
CERTIFICATE: Each Participant under a group Contract is issued a
Certificate summarizing the provisions of the Contract and showing
participation in the retirement plan adopted by the Contract Owner.
CONTRACT: This Prospectus offers combination fixed and variable annuity
Contracts to individuals as single payment Contracts and to both individuals and
groups as flexible payment Contracts. The term "Contract" in this Prospectus
generally will be used to describe Contracts issued to individuals and
Certificates issued to Participants in a group plan.
CONTRACT OWNER: The individual or entity to whom the Contract is
issued. Under a group contract, all references to the Contract Owner refer to
the Participant in a group plan.
CONTRACT YEAR: A year measured from the date a Contract (or a
Certificate) was issued to an individual Contract Owner (or a Participant) and
each anniversary of this date.
FUNDS: The Horace Mann Mutual Funds ("Trust") consist of seven
portfolios: Growth Fund, Balanced Fund, Income Fund, Short-Term Investment Fund
("Short-Term Fund"), Small Cap Growth Fund, International Equity Fund and
Socially Responsible Fund. The Trust is an open-end, diversified, management
investment company registered under the Investment Company Act of 1940.
INCOME PAYMENTS: A series of payments that may be for life; for life
with a guaranteed number of payments; for the joint lifetimes of the Annuitant
and another person, and thereafter, during the lifetime of the survivor; or for
some fixed period. A fixed annuity provides a series of payments that will be
substantially equal in amount throughout the annuity payout period. A fixed
annuity does not participate in the investment experience of any subaccount. A
variable annuity provides a series of payments that vary in amount depending
upon the investment experience of the Subaccount(s) selected by the Contract
Owner.
MATURITY DATE: The date Income Payments begin. The individual
Contracts offered by this Prospectus describe the criteria for determining
Maturity Dates.
In addition, tax qualified plans often place certain limitations upon
election of a Maturity Date. Generally, distributions under tax qualified plans
must begin by April 1 following the calendar year in which the Contract Owner or
Participant reaches age 701/2. See "The Contract--Mandatory Minimum
Distribution."
NET PURCHASE PAYMENT: The balance of each Purchase Payment received by
Horace Mann Life Insurance Company after deducting any applicable premium taxes,
or the balance of any transfer amount from other Subaccounts after applicable
charges, or dividends reinvested after applicable charges.
PARTICIPANT: A person to whom a Certificate showing participation
under a group Contract has been issued.
PURCHASE PAYMENT: An amount paid to Horace Mann Life Insurance Company
as consideration for the Contract, the amount transferred from other
Subaccounts, and any dividends reinvested.
QUALIFIED PLAN: A tax-sheltered annuity as defined in Section 403(b) or
a simplified employee pension plan as defined in Section 408(k) of the Internal
Revenue Code ("IRC"). IRAs as defined in Section 408 could be qualified in some
situations.
SUBACCOUNT: A division of the Separate Account of Horace Mann Life
Insurance Company which invests in shares of the corresponding portfolio of the
Horace Mann Mutual Funds.
SURRENDER CHARGE: (a contingent deferred sales charge) An amount kept
by Horace Mann Life Insurance Company if a withdrawal is made or if the Contract
is surrendered. The charge is intended to compensate Horace Mann Life Insurance
Company for the cost of selling the product.
VALUATION DATE: The Valuation Date ends at the earlier of
3:00 p.m. central time or at the closing of the New York Stock Exchange. No
valuations are made for any day that the New York Stock Exchange is closed. For
1998 no valuations are made for the day after Thanksgiving.
VALUATION PERIOD: The period from the end of a Valuation Date to the
end of the next Valuation Date, excluding the day the period begins and
including the day it ends.
3
<PAGE>
Summary
- ------------------------------------------------------------------------------
This summary is intended to provide a brief overview of the more
significant aspects of the Contract. Further information can be found in this
Prospectus, the HMLIC Separate Account Statement of Additional Information, and
the Contract. This Prospectus is intended to serve as a disclosure document for
the variable portion of the Contracts only. As used in this Prospectus,
"variable" means that the value varies based on the investment performance of
the portfolio selected from the Horace Mann Mutual Funds. For information
regarding the fixed account, refer to the Contract.
Detailed information about the Horace Mann Mutual Funds is contained in
the Funds' Prospectus which immediately follows this Prospectus for Horace Mann
Life Insurance Company Separate Account, and in the Funds' Statement of
Additional Information. Each Fund's expenses, including advisory and management
fees, are found in the Table of Annual Operating Expenses shown on page 6 of
this Summary.
WHAT IS "THE SEPARATE ACCOUNT"?
HMLIC established the Horace Mann Life Insurance Company Separate
Account (the "Account") to segregate assets dedicated to the variable portion of
the combination fixed and variable Contracts offered herein. The Account is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940 as a unit investment trust. The Account consists of seven
Subaccounts, each investing solely in shares of the corresponding portfolio of
the Horace Mann Mutual Funds: Growth Fund, Balanced Fund, Income Fund,
Short-Term Fund, Small Cap Growth Fund, International Equity Fund and Socially
Responsible Fund.
WHO MAY PURCHASE A HORACE MANN ANNUITY OFFERED BY THIS PROSPECTUS?
Individuals, as well as groups, may purchase the combination fixed and
variable flexible payment annuity. Individuals may also purchase the single
payment plan. The Contracts offered by this Prospectus are designed to provide
retirement benefits in connection with Section 403(b) Annuities, Individual
Retirement Annuities ("IRAs"), Roth IRAs, Simplified Employee Pension Plans
("SEPs"), Savings Incentive Match Plan for Employees ("SIMPLE") and
non-qualified Retirement Annuities.
The Contract is offered and sold by HMLIC through its licensed life
insurance sales personnel, who are registered representatives of Horace Mann
Investors, Inc. ("Investors"). HMLIC has entered into a distribution agreement
with Investors an affiliated broker-dealer registered under the Securities and
Exchange Act of 1934. Investors is a member of the National Association of
Securities Dealers, Inc. (NASD).
IS THERE A MINIMUM PURCHASE PAYMENT?
The minimum annual Purchase Payment under a flexible payment Contract
during any Contract Year is $225. The minimum Purchase Payment under a single
payment Contract is $2,000. No Purchase Payments are required after the first
Contract Year. Contract Owners may elect to allocate all or part of the Purchase
Payments to one or more Subaccount(s). The minimum Purchase Payment allocated to
any Subaccount within any given Contract Year must equal or exceed $100. Under
certain group plans the minimum may be reduced or eliminated.
WHAT ARE MY INVESTMENT CHOICES?
(a) SEPARATE ACCOUNT
Includes seven Subaccounts each of which invests in one of the
following funds:
GROWTH FUND--a fund investing primarily in common stocks of domestic
companies.
BALANCED FUND--a fund investing in common stocks, debt securities
and money market instruments.
INCOME FUND--a fund investing primarily in investment grade debt
securities.
SHORT-TERM FUND--a fund investing in short-term debt instruments.
SMALL CAP GROWTH FUND--a fund investing primarily in small cap equity
securities with earnings growth potential.
INTERNATIONAL EQUITY FUND--a fund investing in marketable foreign
equity securities.
SOCIALLY RESPONSIBLE FUND--a fund investing primarily in marketable
equity securities of United States-chartered companies which are determined to
be socially responsible pursuant to criteria set forth in the funds' prospectus.
(b) FIXED ACCOUNT (See the Contract)
At any time before the Contract's Maturity Date, amounts may be
transferred from one Subaccount to another, and to and from the fixed account of
the Contract. (Transfers from the fixed account of the Contract into a
Subaccount are treated like any other partial withdrawal from the fixed account
of the Contract, except that no surrender charge is imposed and the early
withdrawal penalty is waived. If an amount transferred from the fixed account is
surrendered within 365 days, the amount transferred will be subject to the
applicable surrender and withdrawal penalties as if the money had been withdrawn
from the fixed account.) The minimum amount that can be transferred is $100 or
the entire dollar value of the Subaccount, whichever is less. See "The
Contract--Transactions--Transfers."
4
<PAGE>
MAY I WITHDRAW ALL OR PART OF THE CONTRACT VALUE BEFORE THE MATURITY DATE?
Unless restricted by his or her retirement plan or by the Internal
Revenue Code (IRC), a Contract Owner may at any time before the Maturity Date
surrender his or her Contract in whole or withdraw in part for cash. Partial
withdrawals are subject to a $100 minimum. Each surrender or partial withdrawal
is processed on the basis of the net asset value(s) of an accumulation unit of
the Subaccount(s) from which the value is being surrendered or withdrawn.
Surrenders and withdrawals may be subject to Surrender Charges as described on
page 12 in this Prospectus.
WHAT ARE THE CHARGES OR DEDUCTIONS?
Contracts are subject to deductions for applicable state or local
government premium taxes. Premium taxes presently range from 0 to 3.5%.
A Mortality and Expense Risk Fee (M&E Fee), computed and accrued
weekly, is deducted from the account value. This fee will not exceed 1.25% of
the Contract Owner's average value in a Subaccount on an annual basis, but may
be lower on certain group plans.
A fixed annual maintenance charge of $25 is assessed against the
Contract on each anniversary, unless the Contract value equals or exceeds
$10,000, in which case such charge is waived. This charge may be waived or
lowered on certain group plans.
No deduction for sales expense is charged on Purchase Payments, but a
decreasing surrender charge is assessed against certain withdrawals and
surrenders during the first five contract years. In the first Contract Year the
charge is 8% of the amount withdrawn for the Flexible Payment Contract and 5%
for the Single Premium Contract. The charge is taken from the Contract Owner's
value in the Subaccount(s) from which the withdrawal is made. In no event will
the charges exceed 8.5% of the Net Purchase Payments to the Subaccount(s). See
"The Contract--Transactions--Surrender Before Commencement of Annuity Period."
Under certain group plans these charges may be reduced or eliminated.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF INVESTING IN THIS CONTRACT?
The IRC provides penalties for premature distributions under various
retirement plans. Values may not be withdrawn from Section 403(b) Contracts
except under certain circumstances. See "Tax Consequences." This Contract might
not be suitable for a short-term investment. See "The Contract--Transactions--
Surrender Before Commencement of Annuity Period."
IF I RECEIVE MY CONTRACT AND AM DISSATISFIED, MAY I RETURN IT?
Subject to various state insurance laws, generally the Contract Owner
may return the Contract to HMLIC within 30 days of receipt of the Contract. The
market value of the assets purchased by payments paid to the Account, less any
taxes will be refunded.
WHEN CAN I BEGIN RECEIVING INCOME PAYMENTS, AND WHAT OPTIONS ARE AVAILABLE?
Payments will begin on the Maturity Date selected by the Contract
Owner. Variable Income Payments are made in monthly installments. A lump sum
payment will be made if the total Contract value is less than $2,000 or if
monthly Income Payments at the Maturity Date would be less than $20. An optional
Maturity Date and various income payment options are available under the
Contract.
Income Payments may be fixed or variable or a combination of fixed and
variable payments. The following options are available for receiving Income
Payments: Life Annuity with or without Period Certain, Joint and Survivor Life
Annuity, Income for Fixed Period, Income for Fixed Amount, and Interest Income
Payments.
5
<PAGE>
<TABLE>
<CAPTION>
Table of Annual Operating Expenses
- -------------------------------------------------------------------------------
The following is a summary of costs and expenses borne by the Contract
Owner in connection with an investment in the Account.
HORACE MANN LIFE INSURANCE COMPANY SEPARATE ACCOUNT
<S> <C>
Contract Owner Transaction Expenses:(1)
Maximum Surrender Charge as a percentage of redemption proceeds(2)
--for Single Payment Contracts ................................... 5.00%
--for Flexible Payment Contracts ................................. 8.00%
Annual Maintenance Charge(3)................................................. $25
Separate Account M&E Fee, as a percentage of average account value:
Mortality Risk ..................................................... 0.45%
Expense Risk ....................................................... 0.80%
Total Separate Account M&E Fee .............................................. 1.25%
HORACE MANN MUTUAL FUNDS
Annual Operating Expenses of the Horace Mann Mutual Funds, as a
percentage of average daily net assets (net of reimbursements and fee waivers):
<CAPTION>
Short- Small Cap International Socially
Growth(7) Balanced(7) Income(4) Term(5) Growth(6) Equity(6) Responsible(6)
Fund Fund Fund Fund Fund Fund Fund
------- -------- ------- ------ -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees(8) 0.642% 0.642% 0.642% 0.367% 1.392% 1.092% 0.942%
Other Expenses 0.185% 0.186% 0.570% 2.397% 0.530% 1.148% 0.377%
------ -------- ------ ----- ------ ------ ------
Total Fund
Operating Expense 0.827% 0.828% 1.212% 2.764% 1.922% 2.240% 1.319%
<FN>
(1)Premium taxes, currently ranging between 0 and 3.5%, are not included. The
rate of the premium tax varies depending upon the state of residence, and not
all states impose premium taxes. Also, depending on the state, taxes are taken
from Purchase Payments or are levied at annuitization.
(2)In some cases, the Surrender Charge does not apply. See "The Contract--
Transactions--Surrender Before Commencement of Annuity Period."
(3)The annual maintenance charge equals $25 per year, unless the Contract
value equals or exceeds $10,000 at each anniversary. The annual maintenance
charge is not deducted after the Maturity Date. This charge may be reduced or
eliminated on certain group plans.
(4)The expenses are shown for the fiscal year ending December 31, 1998 plus
the support services agrement dated March 1, 1999.
(5)Total Fund Operating Expenses for the Short-Term Fund for the year ended
December 31, 1998, adjusted for waivers or expense reimbursements, were 0.832%.
With waivers, management fees and other expense would have been 0.267% and
0.465% respectively.
(6)The expenses are shown based on actual amounts for the fiscal year ended
December 31, 1998. Horace Mann Investors, Inc. voluntarily agreed to waive a
portion of its management fee and reimburse certain expenses during 1998. With
such waiver, the management fee, other expenses and total fund operating
expenses, respectively, would have been: 0.942%, 0.282% and 1.674% for the
Small Cap Growth Fund; 1.092%, 0.547% and 1.639% for the International Equity
Fund; and 0.942%, 0.282% and 1.224% for the Socially Responsible Fund. See the
"Management" section of the Horace Mann Mutual Funds Prospectus for a
description of the contractual fee rates.
(7)Commission Credits--Wellington Management Company, LLP, subadvisor for
the Growth and Balanced Funds, seeks the best price and execution on each
transaction and negotiates commission rates solely on the execution requirements
of each trade. Occasionally, they place, under a directed brokerage arrangement,
common stock trades with a broker/dealer who credits to the Funds part of the
commissions paid. With such commission credits the other expenses and total fund
operating expenses, respectively, would have been: 0.167% and 0.809% for the
Growth Fund and 0.171% and 0.813% for the Balanced Fund.
(8) The "Management fees" include both the advisory fee paid to Wilshire
Associates, Inc. and the administration fee paid to Horace Mann Investors, Inc.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Example(1)
Short- Small Cap Socially
Growth Balanced Income Term Growth International Responsible
Fund Fund Fund Fund Fund Equity Fund Fund
------- -------- ------- ------ -------- ---------- ---------
<S> C> <C> <C> <C> <C> <C> <C>
For Flexible Payment Contracts
- ------------------------------
If you surrender your Contract
at the end of the applicable
time period:
You would pay the following
expenses on a $1,000 investment,
assuming 5% annual return on assets:
1 year $104 $104 $108 $122 $114 $117 $109
3 years $133 $133 $144 $186 $163 $172 $147
5 years $116 $116 $135 $209 $170 $185 $140
10 years $249 $249 $287 $428 $355 $383 $298
If you do NOT surrender your Contract:
You would pay the following expenses on
a $1,000 investment, assuming 5%
annual return on assets:
1 year $ 22 $ 22 $ 26 $ 41 $ 33 $ 36 $ 27
3 years $ 67 $ 67 $ 79 $124 $100 $109 $ 82
5 years $116 $116 $135 $209 $170 $185 $140
10 years $249 $249 $287 $428 $355 $383 $298
For Single Payment Contracts If you
surrender your Contract at the end of
the applicable time period: You would
pay the following expenses on a $1,000
investment, assuming 5% annual
return on assets:
1 year $ 73 $ 73 $ 77 $ 92 $ 84 $ 87 $ 78
3 years $100 $100 $111 $155 $132 $141 $114
5 years $116 $116 $135 $209 $170 $185 $140
10 years $249 $249 $287 $428 $355 $383 $298
If you do NOT surrender your Contract:
You would pay the following
expenses on a $1,000 investment,
assuming 5% annual return on assets:
1 year $ 22 $ 22 $ 26 $ 41 $ 33 $ 36 $ 27
3 years $ 67 $ 67 $ 79 $124 $100 $109 $ 82
5 years $116 $116 $135 $209 $170 $185 $140
10 years $249 $249 $287 $428 $355 $383 $298
</TABLE>
(1)The EXAMPLE should not be considered a representation of past or future
expenses. Amounts shown are based on the "Other Expenses" shown on the fee table
and average cash value of the average number of annuity Contracts in the
accumulation phase during the 1998 calendar year. Actual expenses may by greater
or less than those shown. There is no assumption for premium taxes, applicable
in certain states, in these examples.
THE PURPOSE OF THE TABLE IS TO ASSIST CONTRACT OWNERS IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT THEY BEAR DIRECTLY OR INDIRECTLY. THE TABLE
REFLECTS EXPENSES OF THE SEPARATE ACCOUNT AS WELL AS THOSE OF THE UNDERLYING
FUNDS. SEE "THE CONTRACT-DEDUCTIONS AND EXPENSES."
7
<PAGE>
<TABLE>
<CAPTION>
Condensed Financial Information
- --------------------------------------------------------------
The following information is taken from the Separate Account financial
statements and is covered by the report of the Separate Account Independent
Auditors. A copy of the financial statements and report are contained in the
Annual Report for the Separate Account and are incorporated herein by reference
and may be obtained by calling or writing Horace Mann Life Insurance Company.
The Small Cap Growth Fund, International Equity Fund and Socially Responsible
Fund each commenced operations on March 10, 1997.
Accumulation Accumulation # Units
Unit Value Unit Value Outstanding
Beginning of End of End of
Year Ended Period Period Period
---------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Growth Fund 12/31/98 $25.66 $24.34 22,401,337
12/31/97 23.76 25.66 18,317,985
12/31/96 21.66 23.76 13,503,527
12/31/95 17.64 21.66 9,499,642
12/31/94 19.85 17.64 7,444,937
12/31/93 19.49 19.85 5,271,528
12/31/92 19.15 19.49 3,847,269
12/31/91 16.64 19.15 3,244,626
12/31/90 18.88 16.64 2,748,244
12/31/89 17.30 18.88 2,349,405
Balanced Fund 12/31/98 $19.82 $18.90 21,781,222
12/31/97 18.94 19.82 18,709,483
12/31/96 18.00 18.94 15,151,785
12/31/95 15.26 18.00 12,085,917
12/31/94 16.72 15.26 10,010,131
12/31/93 16.22 16.72 7,470,133
12/31/92 15.91 16.22 5,352,185
12/31/91 14.19 15.91 4,274,088
12/31/90 15.10 14.19 3,528,857
12/31/89 13.48 15.10 2,697,026
Income Fund 12/31/98 $13.00 $13.24 1,006,166
12/31/97 12.69 13.00 718,041
12/31/96 13.03 12.69 817,803
12/31/95 12.02 13.03 776,272
12/31/94 13.06 12.02 746,535
12/31/93 12.95 13.06 694,843
12/31/92 12.92 12.95 566,223
12/31/91 12.26 12.92 473,423
12/31/90 12.35 12.26 415,716
12/31/89 11.64 12.35 346,639
Short-Term
Fund 12/31/98 $ 9.99 $ 9.98 125,460
12/31/97 10.03 9.99 114,103
12/31/96 10.00 10.03 112,004
12/31/95 10.08 10.00 95,982
12/31/94 10.07 10.08 103,526
12/31/93 10.09 10.07 106,595
12/31/92 10.10 10.09 99,345
12/31/91 10.37 10.10 94,194
12/31/90 10.73 10.37 106,548
12/31/89 10.49 10.73 96,997
Small Cap
Fund 12/31/98 $11.70 $12.38 2,063,019
12/31/97 10.00 11.70 1,219,124
International
Equity Fund 12/31/98 $10.27 $12.13 758,622
12/31/97 10.00 10.27 451,401
Socially
Responsible
Fund 12/31/98 $12.10 $12.99 2,513,258
12/31/97 10.00 12.10 692,571
</TABLE>
8
<PAGE>
Accumulation Unit Values shown above are reduced annually for dividend
distributions from each underlying mutual fund. Dividend distributions are used
to purchase additional Accumulation Units.
Financial statements of the Account and of HMLIC are available with the
Statement of Additional Information. A copy of the Statement of Additional
Information and of the financial statements may be obtained without charge by
mailing a written request to Horace Mann Life Insurance Company, P.O. Box 4657,
Springfield, Illinois 62708-4657, by sending a telefacsimile (FAX) transmission
request to (217) 535-7123, or by telephoning (217) 789-2500 or (800) 999-1030
(toll-free).
From time to time the Account may advertise total return for the
subaccount. Total return may be used for all seven subaccounts. Total return
performance figures represent past performance and are not intended to indicate
future performance. Investment return and the principal value of an investment
may fluctuate. A Contract Owner's shares, when redeemed, may be worth more or
less than their original cost. Total return is computed by finding the average
annual compounded rate of return that would equate the initial amount invested
to the ending redeemable value.
To the extent required, all charges shown in the Table of Annual
Operating Expenses are reflected in the calculations of the performance figures.
Because the median contract value exceeds $10,000, the annual maintenance charge
of $25 has not been deducted. However, contracts with a value of less than
$10,000 would be subject to the annual maintenance fee, which would reduce
performance. Total return may be calculated to reflect the fact that certain
expenses have been reimbursed or waived. In addition, total return calculations
assume redemption at the end of the stated period and, therefore, reflect the
applicable Surrender Charge. However, comparative figures may be presented that
do not assume redemption.
9
<PAGE>
Horace Mann Life Insurance Company,
The Account and The Horace Mann Mutual Funds
HORACE MANN LIFE INSURANCE COMPANY
Horace Mann Life Insurance Company ("HMLIC") located at One Horace Mann
Plaza, Springfield, Illinois 62715-0001, is an Illinois stock life insurance
company organized in 1949. HMLIC is licensed to do business in 48 states and in
the District of Columbia. HMLIC writes individual and group life insurance and
annuity contracts on a nonparticipating basis.
HMLIC is an indirect wholly-owned subsidiary of Horace Mann Educators
Corporation ("HMEC"), a publicly-held insurance holding company traded on the
New York Stock Exchange.
THE ACCOUNT
On October 9, 1965, HMLIC established the Account under Illinois law.
The Account is registered with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940. The Account and each
subaccount are administered and accounted for as a part of the business of
HMLIC. However, the income gains and losses, whether or not realized, of each
subaccount are credited to or charged against the amounts allocated to that
subaccount in accordance with the terms of the Contracts without regard to other
income, gains or losses of the remaining subaccounts or of HMLIC. The assets of
the Account may not be charged with liabilities arising out of any other
business of HMLIC. All obligations arising under the Contracts, including the
promise to make Income Payments, are general corporate. obligations of HMLIC.
Accordingly, all of HMLIC's assets are available to meet its obligations and
expenses under the Contracts. While HMLIC is obligated to make payments under
the Contracts, the amount of variable Income Payments are not guaranteed since
the payment amounts fluctuate in accordance with the performance of the
subaccounts.
THE HORACE MANN MUTUAL FUNDS
The Horace Mann Mutual Funds ("Trust") is an open-end, diversified,
management investment company registered under the Investment Company Act of
1940. The Trust is made up of a series of portfolios ("Funds"). The Trust issues
shares of beneficial interest that are continually offered for sale. The Funds,
advised by Wilshire Associates, Incorporated ("Wilshire"), invest in securities
of different issuers and industry classifications in an attempt to spread and
reduce the risks inherent in all investing. Wilshire has entered into an
agreement with investment subadviser(s) for each of the Funds whereby the
subadviser(s) manage the investment and reinvestment of the assets of a Fund.
The primary investment objective of the Growth Fund is long-term
capital growth; conservation of principal and production of income are secondary
objectives. The Growth Fund invests substantially all of its assets in common
stocks of domestic companies. Wellington Management, LLP ("Wellington
Management"), Brinson Partners Inc. ("Brinson Partners") and Mellon Equity
Associates, LLP ("Mellon Equity") serve as the investment subadvisers to the
Growth Fund.
The primary investment objective of the Balanced Fund is to realize
high long-term total rate of return consistent with prudent investment risks.
The Balanced Fund's assets are invested in a mix of common stocks, debt
securities and money market instruments. Wellington Management, Brinson Partners
and Mellon Equity serve as the investment subadvisers to the Balanced Fund.
The primary 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 Income Fund invests primarily in U.S. Investment grade fixed
income securities. Wellington Management serves as the investment subadviser to
the Income Fund.
The primary investment objective of the Short-Term Fund is to realize
maximum current income to the extent consistent with liquidity. Preservation of
principal is a secondary objective. The Short-Term Fund attempts to realize its
objectives through investments in short-term debt instruments; it is not a money
market fund and does not maintain a stable net asset value per share. Wellington
Management, serves as the investment subadviser to the Short-Term Fund.
The investment objective of the Small Cap Growth Fund is long-term
capital appreciation through small cap stocks with earnings growth potential.
The Small Cap Growth Fund invests primarily in small cap stocks, which the
subadviser considers to have favorable and above-average earnings growth
prospects. BlackRock Financial Management, Inc. (Blackrock) serves as investment
subadviser to the Small Cap Growth Fund.
The primary investment objective of the International Equity Fund is
long term capital growth primarily through diversified holding of marketable
foreign equity investments. The International Equity Fund invests primarily in
equity securities of established companies, listed on foreign exchanges, which
the subadviser believes have favorable characteristics. It may also invest in
fixed income securities of foreign governments and companies. Scudder Kemper
Investments, Inc. (Scudder Kemper) serves as the investment subadviser to the
International Equity Fund.
The investment objective of the Socially Responsible Fund is long term
capital growth, above average current income and growth of income. The Socially
Responsible Fund invests primarily in marketable equity securities, (including
common stocks, preferred stocks, and debt securities convertible into common
stocks of seasoned financially strong U.S.-based companies). Investments in
equity securities are limited to issuers which the subadviser determines:
10
<PAGE>
1. Do not produce tobacco products;
2. Do not produce alcoholic beverages;
3. Do not own and/or operate casinos or manufacture
gaming devices;
4. Do not produce pornographic materials;
5. Do not produce nuclear weapons or guidance and/or
delivery systems, specifically for nuclear weapons;
6. By popular standards, maintain non-discriminatory
employment practices throughout a company's facilities;
and
7. By popular standards, maintain environmental policies,
practices and procedures which are currently
acceptable, or which are exhibiting improvement.
Scudder Kemper serves as the investment subadviser to the Socially
Responsible Fund.
ADMINISTRATOR: HORACE MANN INVESTORS, INC.
Horace Mann Investors, Inc. ("Investors"), a wholly-owned subsidiary of
Horace Mann Educators Corporation which is the indirect owner of Horace Mann
Life Insurance Company ("HMLIC"), serves as administrator to the Funds pursuant
to an Administration Agreement dated March 1, 1999 with the Trust (the
"Administration Agreement"). 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 similar services necessary for the proper
management of each Fund's business affairs. Under the current administration
agreement, the Funds agree to assume and pay the charges and expenses of its
operations, including, by way of example, the compensation of Trustees other
than those affiliated with Investors, charges and expenses of independent
auditors, of legal counsel, of any transfer or dividend disbursing agent, of the
custodian, all costs of acquiring and disposing of portfolio securities,
interest, if any, on obligations incurred by the Funds, reports and notices to
shareholders, other like miscellaneous expenses, and all taxes and fees to
federal, state, or other governmental agencies.
For the services and facilities furnished to the Funds, Investors
receives a fee based upon the combined assets of the Funds as follows: 0.25% of
the first $1 billion of assets and 0.20% of assets in excess of $1 billion.
Under the fund of funds structure for the Balanced Fund, the administration fee
would be based upon all assets in the Balanced Fund. However, Investors has
indicated that it intends to waive the majority of such fees. Balanced Fund
shareholders will indirectly pay the administration fee of the assets invested
in the Growth Fund and Income Fund. Therefore, the aggregate administration fees
directly and indirectly borne by shareholders of the Balanced Fund will be
higher.
Support Services Agreement. The Trust has a support services
agreement(the "Support Services Agreement") with HMLIC under which the Trust has
retained HMLIC to provide certain administrative services to the Trust. As the
Trust's servicer, HMLIC will provide those administrative and support services
reasonably necessary to coordinate the activities of the Funds with those of the
separate account of HMLIC (for which the Funds serve as the underlying
investment medium) other than the administrative services provided by Investors
under the Administration Agreement. As compensation for its services, HMLIC will
receive a fee equal to 0.15% on the first $1 billion in net assets and 0.10% on
all assets over $1 billion.
Detailed information on the Funds is contained in the Funds' Prospectus
which accompanies this Prospectus.
THE CONTRACT
CONTRACT OWNERS' RIGHTS
A Contract may be issued under a retirement plan on a qualified basis
as defined in the IRC or on a non-qualified basis. Qualified and non-qualified
contracts receive different tax treatment. See "Tax Consequences."
To participate in a qualified plan, the Contract Owner may be required
to forego certain rights granted by the Contract and should refer to the
provisions of his or her Contract, the provisions of the plan or trust
instrument, and/or applicable provisions of the IRC.
Unless otherwise provided by law, and subject to the terms of any
governing plan or trust, the Contract Owner may exercise all privileges of
ownership, as defined in the Contract, without the consent of any other person.
These privileges include the right during the period specified in the Contract
to change the beneficiary designated in the Contract, to designate a payee and
to agree to a modification of the Contract terms.
This Prospectus describes only the variable portions of the Contract.
On the Maturity Date, the Contract Owner has limited rights to acquire fixed
annuity payout options. See the Contract for details regarding fixed Income
Payments.
PURCHASING THE CONTRACT
The Contract is offered and sold by HMLIC through its licensed life
insurance sales personnel who are also registered representatives of Horace Mann
Investors, Inc. ("Investors"). HMLIC has entered into a distribution agreement
with Investors. Investors, located at One Horace Mann Plaza, Springfield,
Illinois 62715-0001, is a broker-dealer registered under the Securities Exchange
Act of 1934. Investors is a member of the NASD and is a wholly-owned subsidiary
of Horace Mann Educators Corporation.
In order to purchase a Contract offered by this Prospectus, an
applicant must complete an application bearing all requested
11
<PAGE>
signatures and in some states a properly completed suitability questionnaire.
For a Contract issued pursuant to Section 403(b) of the IRC, the applicant must
also submit a signed acknowledgment of the IRC restrictions on withdrawals
applicable to such contracts. For an IRA, Roth IRA, SIMPLE or a Contract issued
under a SEP plan, the applicant must also acknowledge receipt of the IRA
disclosure form.
Applications for Contracts are to be sent to HMLIC's Home Office. If an
incomplete application is received, HMLIC will promptly request that the
applicant furnish additional information needed to process the application. The
initial Purchase Payment will be held in a suspense account, without interest,
for a period not exceeding five business days. If the necessary information is
not received within these five business days HMLIC will return the initial
Purchase Payment, unless otherwise directed by the applicant.
Sales commissions are paid by HMLIC. Sales commissions typically range
from 2% to 6% of Purchase Payments received.
PURCHASE PAYMENTS
AMOUNT AND FREQUENCY OF PURCHASE PAYMENTS--The minimum acceptable
annual Purchase Payment under a flexible payment Contract is $225. No Purchase
Payments are required after the first Contract Year. Payments may be made in
lump sum or installments. The minimum acceptable monthly Purchase Payment is
$25. The minimum acceptable Purchase Payment under a single payment Contract is
$2,000. Under certain group plans the minimum may be reduced or eliminated.
The IRC limits the amounts which may be contributed to qualified plans.
See "Tax Consequences--Contract Owners-- Contributions."
ALLOCATION OF PURCHASE PAYMENTS--All or part of the Purchase Payments
made may be allocated to one or more subaccounts. The minimum Purchase Payment
amount allocated to any subaccount in any given Contract Year must equal or
exceed $100.
ACCUMULATION UNITS AND ACCUMULATION UNIT VALUE--The number of
Accumulation Units purchased by Purchase Payments is determined by dividing the
dollar amount credited to each subaccount by the applicable accumulation unit
value next determined following receipt of the payment by HMLIC.
Accumulation Units are valued on each Valuation Date. The accumulation
unit value of each subaccount is equal to the net asset value of the underlying
Fund (computed by dividing the net assets of a mutual fund by the outstanding
number of mutual fund shares on each Valuation Date). Dividends declared by the
underlying Fund of each subaccount, net of applicable deductions and charges,
are used to purchase additional Accumulation Units. To the extent that
deductions and charges exceed dividends, Accumulation Units will be surrendered.
The accumulation unit value of the Growth Fund was established at $16.87 on
October 9, 1965. The accumulation unit value of the Balanced Fund, Income Fund
and Short-Term Investment Fund was established at $10.00 on February 1, 1983.
The accumulation unit value of the Small Cap Growth Fund, International Equity
Fund and Socially Responsible Fund was established at $10.00 on March 10, 1997.
TRANSACTIONS
TRANSFERS--Amounts may be transferred from one subaccount to another,
and to and from the fixed account of the Contract, prior to the Maturity Date.
(Transfers from the fixed account of the Contract into a subaccount are treated
like any other partial withdrawal from the fixed account, except that the early
withdrawal penalty is being waived. If an amount transferred from the fixed
account is surrendered or withdrawn within 365 days, the amount transferred will
be subject to the applicable surrender charge and early withdrawal penalty as if
the money had been withdrawn from the fixed account). The minimum amount that
can be transferred is $100 or the entire dollar value of the subaccount(s),
whichever is less.
A Contract Owner may elect to transfer funds between subaccounts and
fixed account by submitting a written request to Horace Mann Life Insurance
Company at P.O. Box 4657, Springfield, Illinois 62708-4657 or by calling (800)
999-1030. Telefacsimile (FAX) transmissions of the request also will be accepted
if sent to (217) 527-2307. The request must: (1) be signed by the Contract Owner
or, for telephone transactions, be made by the Contract Owner, (2) include the
name of the Contract Owner and the Contract number, and (3) specifically state
either the dollar amount or the number of accumulation units to be transferred.
The request also must specify the subaccounts from which and to which the
transfer is to be made. Transfers are effective either on a date specified in
the request, provided that date falls on or after receipt of the request at the
Home Office, or on the first Valuation Date following receipt of the request by
the Home Office.
Up to twelve transfers may be pre-scheduled at any point in time. The
twelve transfers cannot extend beyond a twelve month period. A signed written
request or form may be completed or by calling (800) 999-1030. Telefacsimile
(FAX) transmissions of the request also will be accepted if sent to (217)
527-2307. See "Other Information-Forms Availability." If a Contract Owner
decides to cancel a pre-scheduled transfer arrangement, he or she should notify
the Home Office either in writing or by calling (800) 999-1030 or Telefacsimile
(FAX) (217) 527-2307 prior to the next designated transfer date.
CHANGES IN ALLOCATION INSTRUCTIONS--A Contract Owner may elect to
change the allocation of future Purchase Payments at any time by mailing a
written request to Horace Mann Life Insurance Company at P.O. Box 4657,
Springfield, Illinois 62708-4657 or by calling (800) 999-1030. Telefacsimile
(FAX) transmissions of the request also will be accepted if sent to (217)
527-2307. The request must: (1) be signed by the Contract
12
<PAGE>
Owner, (2) include the Contract Owner's name and Contract number, and (3)
specify the new allocation percentage for each subaccount. If allocations are
made to the fixed portion of the Contract or to one or more subaccounts, the
percentages must total 100%. Changes in allocation instructions are effective
either on a date specified in the request, provided that date falls on or after
receipt of the request in the Home Office, or on the first Valuation Date
following receipt of the request by the Home Office. See "Other
Information-Forms Availability."
SURRENDER BEFORE COMMENCEMENT OF ANNUITY PERIOD--Values may not be
withdrawn from Section 403(b) Contracts except under certain circumstances. (See
"Tax Consequences.") However, if not restricted by the IRC or applicable
retirement plan under which the Contract is issued, a Contract Owner may
surrender the Contract in whole or withdraw in part for cash before Income
Payments begin.
The surrender or partial withdrawal value is determined on the basis of
the accumulation unit value next computed following the receipt of the request
for surrender or partial withdrawal. A surrender or partial withdrawal may
result in adverse federal income tax consequences to the Contract Owner. These
consequences include current taxation of payments received, and may include
penalties resulting from premature distribution. See "Tax Consequences."
A Contract Owner eligible to surrender or request a partial withdrawal
may elect to do so by submitting a signed, written request to Horace Mann Life
Insurance Company at its Home Office at P.O. Box 4657, Springfield, Illinois
62708-4657. A partial withdrawal request must be in a form acceptable by HMLIC;
telefacsimile (FAX) transmissions of the request will be accepted if the
proceeds are sent to the Contract Owner. A surrender request must be in a form
acceptable to HMLIC; telefacsimile (FAX) transmissions of the request will not
be accepted. See "Tax Consequences and Other Information-Forms Availability."
Partial withdrawals and surrenders will be processed either on a date
specified by you in a request, provided the date specified occurs on or after
receipt of the request at the Home Office, or on the first Valuation Date
following receipt of the request at the Home Office.
Any partial withdrawal is subject to a $100 minimum and may not reduce
the Contract Owner's interest in a subaccount to less than $100. A complete
surrender may be made at any time, unless otherwise restricted by the retirement
plan or the IRC.
Surrenders and partial withdrawals from any variable subaccount are
subject to the following Surrender Charges:
During Flexible Single
Contract Payment Payment
Year Contracts Contracts
1 8% 5%
2 8% 4%
3 6% 3%
4 4% 2%
5 2% 1%
Thereafter 0% 0%
Surrender Charges are applied to withdrawals based on the date the account is
opened and not on the date the premium is paid. Under certain group plans the
surrender charges may be reduced.
Partial withdrawals may be made without charge if (1) the withdrawal
does not exceed 15% of the variable portion of the Contract value; and (2) the
Contract has been in force for two or more Contract Years; and (3) more than
twelve months have passed since the date of the last partial withdrawal.
Contract value is computed on the first Valuation Date following receipt of the
request in good form by the Home Office. If all three conditions are not met,
partial withdrawals are subject to Surrender Charges.
Any request for partial withdrawal, where the withdrawal is subject to
a Surrender Charge, will be increased by the amount of the Surrender Charge. For
example, a request to withdraw $3,000 at a 4% Surrender Charge will require a
withdrawal of $3,125. This withdrawal represents a cash distribution of $3,000
and a Surrender Charge of $125. Any taxes withheld will reduce the dollar amount
of the distribution.
The Surrender Charge is assessed on the basis of the amount surrendered
or withdrawn from the subaccount(s), but will never exceed 8.5% of Net Purchase
Payment(s) to a subaccount during the lifetime of the Contract. For example, if
a Contract Owner's subaccount value is $12,000 and Purchase Payments to date
equal $10,000 and the Contract Owner withdraws $2,000 (i.e., one sixth of the
subaccount value), then the Surrender Charge may not exceed 8.5% of $1,666.66
(one sixth of the Purchase Payment(s) to which the withdrawal relates).
If premium taxes are deducted prior to surrender or partial withdrawal,
any reduction of HMLIC's premium tax liability due to the surrender or partial
withdrawal will be to HMLIC's benefit.
REINVESTMENT PRIVILEGE--You may elect to reinvest all of the proceeds
received from a surrender or partial withdrawal within 30 days after such
withdrawal has been made by returning the uncashed check and a written request.
Upon receipt of your uncashed check we will credit your contract with
Accumulation Units based on the amount reinvested and the Accumulation Unit
Value next computed following receipt. Reinvested amounts
13
<PAGE>
will be allocated to the applicable investment options in the same proportion
as they were allocated at the time of withdrawal. The reinvestment privilege
may be used only once.
DEFERMENT--HMLIC ordinarily completes a transaction within seven
calendar days after receipt of a proper request to transfer, surrender,
partially withdraw or commence Income Payments at the Maturity Date. The value
of the Contract is determined as of the Valuation Date on which the request is
received or on the Maturity Date for Income Payments. However, determination of
Contract value and processing the transaction may be deferred for (1) any period
during which the New York Stock Exchange is closed for other than customary
weekend or holiday closings or during which trading is restricted by the
Securities and Exchange Commission; (2) any emergency period when it is not
reasonably practicable to sell securities or fairly determine accumulation unit
values or annuity unit values; or (3) any other period designated by the
Securities and Exchange Commission to protect persons with interests in the
Account.
CONFIRMATIONS--HMLIC mails written confirmations of Purchase Payments
to Contract Owners within five business days following the end of each calendar
quarter. Written confirmations of transfers, changes in allocations, partial
withdrawals, and surrenders, are mailed to Contract Owners within seven calendar
days of the date the transaction occurred.
If a Contract Owner believes that the confirmation statement contains
an error, the Contract Owner should notify HMLIC as soon as possible after
receipt of the confirmation statement. Notice may be provided by writing to
HMLIC, P.O. Box 4657, Springfield, Illinois 62708-4657, by sending a
telefacsimile (FAX) transmission to (217) 527-2307, or by telephoning (217)
789-2500 or (800) 999-1030 (toll free).
DEDUCTIONS AND EXPENSES
ANNUAL MAINTENANCE CHARGE--An annual maintenance charge of $25 is
deducted from each Contract on the Contract anniversary date unless the contract
value equals or exceeds $10,000. This charge may be reduced or eliminated on
certain group plans. The annual maintenance charge is deducted from the
subaccount containing the greatest dollar amount or from the fixed account of
the Contract when none of the variable subaccounts have any value.
Charges for annual maintenance cease once Income Payments begin. No
annual maintenance charge is taken, in whole or in part, in the event of a
complete surrender unless the surrender occurs on the Contract anniversary date.
The annual maintenance charge is intended to reimburse HMLIC for actual
expenses incurred in administering the Contract. HMLIC does not expect to profit
from such annual maintenance charge and assumes the risk that this annual
maintenance charge may be insufficient to cover the actual costs of
administering the Contract.
MORTALITY AND EXPENSE RISK FEE--For assuming mortality and expense
risk, HMLIC applies a fee to the subaccount value of each Contract. The fee for
mortality and expense risk may not exceed the annual rate of 1.25% of the
average net variable account value based on the date of calculation (0.45% for
mortality risk, and 0.80% for expense risk); however, HMLIC reserves the right
to change the fee (subject to the 1.25% ceiling) in the future. The fee
accumulates on a weekly basis at a rate of .023826% of the net variable account
value as of the date of the calculation. The accumulated value of the fee is
deducted annually (usually at the time the Trust declares dividends) from each
subaccount or upon any surrender, partial withdrawal or transfer of value
accruing before such annual deduction with the necessary number of units, at the
then current accumulation unit value, being redeemed to equal the dollar amount
of the charges owed. Under certain group plans this fee may be reduced.
OPERATING EXPENSES OF THE HORACE MANN MUTUAL FUNDS--There are
deductions from and expenses paid out of the assets of the Funds that are
described in the Funds' Prospectus which accompanies this Prospectus.
PREMIUM TAXES--Certain state and local governments levy a premium tax,
presently ranging from 0 to 3.5%, on the amount of Purchase Payments made under
this Contract. The premium tax, if any, is deducted either when payments are
received or when an amount is applied to provide an annuity at the Maturity
Date, depending upon the applicable law.
DEATH BENEFIT PROCEEDS
If a Contract Owner dies before the Maturity Date, the Contract value,
or the amount of Purchase Payments less any withdrawals, whichever is greater,
will be applied toward the purchase of an income payment option payable to the
beneficiary designated by the Contract Owner. The Contract value is determined
as of the date proof of death is received by HMLIC from the beneficiary. Under
certain group plans the death benefit may include an annual increase in value.
Proof of death includes a certified death certificate and a completed claimant's
statement. The option purchased will be one elected by the Contract Owner.
If no option was elected, the beneficiary may elect an income payment option.
All or part of the death benefit proceeds may be paid to the
beneficiary in a lump sum or under one of the income payment options described
under "Income Payments-Income Payment Options." If the form of Income Payment
selected requires that payment be made by HMLIC after the death of the
beneficiary, payments will be made to a payee designated by the beneficiary or,
if no subsequent payee has been designated, to the beneficiary's estate.
For all Contracts issued in connection with this Prospectus, except
Roth IRAs, if the Contract Owner dies before Income Payments begin and the
designated beneficiary is not a surviving spouse, the IRC requires the complete
distribution of proceeds
14
<PAGE>
by December 31 of the calendar year of the fifth anniversary of the owner's
death; i.e., "the five-year rule." This requirement can be satisfied by an
annuity for life or a period certain not exceeding the life expectancy of a
designated beneficiary, provided the Income Payments begin no later than
December 31 of the calendar year following the Contract Owner's death. Any
part of a Contract Owner's interest payable to a minor child will be
paid to the child's legal guardian for the benefit of the child.
If the designated beneficiary is the Contract Owner's surviving spouse,
Income Payments may be deferred until April 1 following the calendar year in
which the Annuitant would have reached age 70 1/2. For non-qualified annuities,
a designated beneficiary which is a surviving spouse may defer distributions
until he or she reaches age 70 1/2. However, if the surviving spouse dies before
distributions begin under any non-qualified Contract issued in connection with
this Prospectus, the five-year rule and its exceptions, explained in the
preceding paragraph, will apply to his or her beneficiary.
If the Contract Owner dies on or after the Maturity Date, the
remaining portion of the interest in the Contract undistributed at the time of
the Contract Owner's death must be distributed at least as rapidly as under the
method of distribution in force at the time of the Contract Owner's death.
MANDATORY MINIMUM DISTRIBUTION
Qualified plans are subject to distribution requirements of the IRC. A
distribution must occur each calendar year once a Contract Owner reaches age
701/2. The Contract Owner may elect to defer the first distribution until April
1 of the year following his or her attainment of age 70 1/2. Should the first
payment be deferred, the Contract Owner must take two distributions in the
calendar year following attainment of age 70 1/2.
Generally, the amount of the mandatory minimum distribution depends on
the Contract value and the life expectancy of the Contract Owner. Under
Mandatory Minimum Distribution requirements, distributions must be made for the
life (or lives) or a period not exceeding the life expectancy (or joint life
expectancy) of the Contract Owner (or the Contract Owner and a designated
beneficiary). To begin mandatory distributions the Contract Owner must contact
the Home Office at P. O. Box 4657, Springfield, Illinois 62708-4657.
The Internal Revenue Service has indicated that a Contract Owner who
can verify the December 31, 1986 balance in his or her Section 403(b) annuity,
can delay distribution of that amount until the end of the calendar year in
which he or she turns age 75. At that time, the December 31, 1986 balance is
subject to the minimum distribution requirements. The December 31, 1986 balance
includes deposits received and any interest earned as of December 31, 1986.
Deposits received after that date, interest on those deposits, and interest
earned on the December 31, 1986 balance are subject to the age 70 1/2
distribution requirements.
Failure to take the required distributions results in the imposition of
a penalty tax equal to one-half (50%) of the difference between what was and
what should have been distributed. In addition, income tax is due on the full
amount that should have been distributed. Further, any distribution from a
403(b) contract in excess of the mandatory minimum distribution is subject to a
20% federal income tax withholding. Roth IRAs are not subject to Mandatory
Distribution. See "Tax Consequences."
INCOME PAYMENTS
The Contract provides for fixed or variable income payment options or a
combination of both. The Contract Owner may elect to have Income Payments made
under any one or more of the options described below or may elect a lump sum
payment. To begin receiving Income Payments a properly completed request form
must be received in the Home Office. The request will be processed so that the
Income Payments begin on the first of the month following the month of receipt
unless a later date is requested and approved by the Company. If a fixed payment
option is elected, the variable account value will be transferred to the fixed
account on the date the request is received in the Home Office. In addition, if
a variable payment is elected, any money in the fixed account will be
transferred to the variable account on the date we received the request in the
Home Office. Generally, at the time an income payment option is selected, a
Contract Owner must elect whether to withhold for federal and state income
taxes. See "Other Information--Forms Availability" and "Tax Consequences."
In general, the longer Income Payments are guaranteed, the lower the
amount of each payment. Fixed Income Payments are paid in monthly, quarterly,
semi-annual & annual installments. Variable Income Payments are paid only on a
monthly basis. If the Contract value to be applied under any one fixed or
variable income payment option is less than $2,000 or if the option chosen would
provide Income Payments less than $20 per month at the Maturity Date, then the
Contract value will be paid in a lump sum.
INCOME PAYMENT OPTIONS
The following income payment options are available on a variable basis
unless otherwise stated.
LIFE ANNUITY WITH OR WITHOUT PERIOD CERTAIN--The life option guarantees
Income Payments for the lifetime of the Annuitant. If a period certain is
selected (10, 15 or 20 years) and the Annuitant dies before the end of the
period, Income Payments are guaranteed to the beneficiary until the end of the
period selected or the beneficiary may request the commuted value, if any, of
the remaining period certain payments. If no beneficiary is living at the time
of the Annuitant's death, the commuted value, if any, of the remaining period
certain payments will be paid in a single sum to the estate of the Annuitant.
Under the life without period certain option, it is possible that only one
Income Payment may be made if the Annuitant's death occurred before the due date
of the second Income Payment. This option usually provides the largest
15
<PAGE>
Income Payments. The Annuitant cannot make unscheduled withdrawals or change to
another option after the first Income Payment has been made.
JOINT AND SURVIVOR LIFE ANNUITY--This life only option provides
lifetime Income Payments during the lifetimes of two Annuitants. After one
annuitant dies, the Income Payments will continue during the lifetime of the
survivor in an amount reduced to two-thirds of the monthly payments that would
have been paid had the joint lifetime of the two Annuitants continued. The
Income Payments cease after the last payment paid prior to the survivor's death.
It could be possible for only one payment to be made under this option if both
Annuitants die before the due date of the second payment. The Annuitants cannot
make unscheduled withdrawals or change to another income option after the first
Income Payment has been made.
INCOME FOR FIXED PERIOD--This option provides Income Payments for a
fixed period not less than one year nor exceeding 30 years; however, payments
may not extend beyond the life expectancy of the Annuitant. Upon the Annuitant's
death, the beneficiary will be paid the remaining Income Payments due, if any,
or the beneficiary may request the commuted value, if any, of the remaining
period certain payments. If no beneficiary is living at the time of the
Annuitant's death, the commuted value, if any, of the remaining Income Payments
will be paid in a lump sum to the estate of the Annuitant. The Annuitant has the
right to change to another income option or make unscheduled withdrawals from
the remaining commuted value subject to IRC requirements. This option is
available on a fixed payment basis only.
INCOME FOR FIXED AMOUNT--This option provides payments of a fixed
amount until the account value, with interest, has been paid; however, payments
may not extend beyond the life expectancy of the Annuitant. Upon the Annuitant's
death, the beneficiary will be paid the remaining Income Payments due, if any,
or the beneficiary may request the commuted value, if any, of the remaining
Income Payments. If no beneficiary is living at the time of the Annuitant's
death, the commuted value, if any, of the remaining Income Payments will be paid
in a lump sum to the estate of the Annuitant. The Annuitant has the right to
change to another income option or make unscheduled withdrawals from the
remaining commuted value subject to IRC requirements. This option is available
on a fixed payment basis only.
INTEREST INCOME PAYMENTS--This option provides Income Payments based on
interest earned from the proceeds of the Contract, at a rate determined by
HMLIC, but never less than the annual guaranteed interest rate. Interest will be
credited at the end of each payment period. Once the Annuitant reaches age
701/2, mandatory minimum distribution requirements will not allow Interest
Income Payments to continue. The Annuitant may elect another income option at
the end of any payment period, or subject to IRC requirements, may withdraw the
Contract value in whole or in part upon written request. The request must be
made prior to the end of the period that the Annuitant agreed to receive Income
Payments. See "Mandatory Minimum Distribution." This option is available on a
fixed payment basis only.
OTHER INCOME OPTIONS--If the Annuitant does not wish to elect one or
more income payment options, the Annuitant may:
a) receive the proceeds in a lump sum, or
b) leave the Contract with HMLIC and receive the value
under the mandatory minimum distribution requirements
of IRC Section 401(a)(9), see "Mandatory Minimum
Distribution," or
c) elect any other option that HMLIC makes available.
AMOUNT OF FIXED AND VARIABLE INCOME PAYMENTS
In general, the dollar amount of Income Payments under the Contract
depends on Contract value. Contract value equals the value of the fixed account
of the Contract plus the value of each subaccount. The value of each subaccount
is determined by multiplying the number of Accumulation Units credited to each
subaccount by its respective accumulation unit value, less Purchase Payments
allocated to the Contract.
FIXED INCOME PAYMENTS--The amount of each payment under a fixed income
payment option is determined from the income option tables in the Contract.
These tables show the monthly payment for each $1,000 of Contract value
allocated to provide a fixed Income Payment. Guaranteed fixed Income Payments
will not change regardless of investment, mortality or expense experience.
Higher Income Payments may be made at the sole discretion of HMLIC.
VARIABLE INCOME PAYMENTS--The amount of the first monthly variable
Income Payment is determined from the income option tables in the Contract. The
tables show the amount of the Income Payment for each $1,000 of value allocated
to provide Income Payments. The income option tables vary with the form of
income option payment selected and adjusted age of the Annuitant(s).
The first monthly variable Income Payment is used to calculate the
number of variable annuity units for each subsequent monthly Income Payment. The
number of variable annuity units remains constant over the payment period except
when a joint and survivor option is chosen. The number of variable annuity units
will be reduced upon the death of either Annuitant by one-third.
The amount of monthly Income Payments following the first variable
Income Payment varies from month to month to reflect the investment experience
of each subaccount funding those payments. Income Payments are determined each
month by multiplying the variable annuity units by the applicable variable
annuity unit value at the date of payment. The variable annuity
16
<PAGE>
unit value will change between Valuation Dates to reflect the investment
experience of each subaccount.
ASSUMED INTEREST RATE--The selection of an assumed interest rate
affects both the first monthly variable Income Payment and the pattern of
subsequent payments. One divided by the sum of the assumed interest rate and the
mortality and expense risk fee, adjusted to a monthly rate, is the investment
multiplier. If the investment performance of a subaccount funding variable
Income Payments is the same as the investment multiplier, the monthly payments
will remain level. If its investment performance exceeds the investment
multiplier, the monthly payments will increase. Conversely, if investment
performance is less than the investment multiplier, the payments will decrease.
Unless otherwise provided, the assumed interest rate is 4.0% per annum.
ANNUITY UNIT VALUE--The variable annuity unit value for the Growth,
Balanced, and Income Funds was set at $10.00 as of the date amounts first were
allocated to provide Income Payments. The variable annuity unit value for the
Small Cap Growth Fund, International Equity Fund, Socially Responsible Fund and
Short-Term Fund also has been set at $10.00, however, no Income Payments have
been paid from these subaccounts. The current variable annuity unit value is
equal to the prior variable annuity unit value on the Valuation Date when
payments were last determined, multiplied by the applicable net investment
factor. The net investment factor reflects the investment performance of the
subaccount during the current month plus the value of any dividends and
distributions during the current month. This factor is computed by dividing the
net asset value of a share of the underlying Fund on the last business day of
the current month, plus any dividends or other distributions, by the net asset
value of a share on the last business day of the preceding month, and
multiplying this result by the investment multiplier.
MISSTATEMENT OF AGE
If the age of the Annuitant has been misstated, any Income Payment
amount shall be adjusted to reflect the correct age. If the Income Payments were
too large because of a misstatement of age, HMLIC will deduct the difference
with interest, at an effective annual interest rate of 6%, from future payments
until totally repaid. If the Income Payments were too small, HMLIC will add the
difference with interest, at an effective annual interest rate of 6%, to the
next payment.
MODIFICATION OF THE CONTRACT
The Contract provides that it may be modified by HMLIC to maintain
continued compliance with applicable state and federal laws. Contract Owners
will be notified of any modification. Only officers designated by HMLIC may
modify the terms of the Contract.
HMLIC reserves the right to offer Contract Owners, at some future date
and in accordance with the requirements of the Investment Company Act of 1940,
the option to direct that their Purchase Payments be allocated to a portfolio
within the Trust other than one or more of the seven currently offered Horace
Mann Mutual Funds. If any shares of the Trust's seven portfolios are not
available for purchase by the Account, or if in the judgment of HMLIC further
investment in these shares is no longer appropriate in view of the purposes of
the Account or subaccount, then (i) shares of another portfolio may be
substituted for existing Fund shares held in the affected subaccount and/or (ii)
payments received after a date specified by HMLIC may be applied to the purchase
of shares of another portfolio. No substitution will be made without prior
approval of the Securities and Exchange Commission. Any substitution would be
for shares of a portfolio with investment objectives similar to those of the
Fund it replaces.
TAX CONSEQUENCES
SEPARATE ACCOUNT
The operations of the Account form part of the operations of HMLIC;
however, the IRC provides that no federal income tax will be payable by HMLIC on
the investment income and capital gains of the Account if certain conditions are
met. Provided the investments of the underlying Funds continue to meet the
diversification requirements of IRC Section 817(h), the Contract Owner will not
pay federal income tax on the investment income and capital gains under a
Contract until Income Payments begin or a full or partial withdrawal is made.
CONTRACT OWNERS
CONTRIBUTIONS--Under IRC Section 403(b), Purchase Payments made by
public school systems, churches, or certain tax-exempt organizations to purchase
annuities for their employees are excludable from the gross income of the
employee to the extent that aggregate Purchase Payments for the employee do not
exceed certain limitations imposed by the IRC. Further, any amounts credited to
the Contract Owner's account are not taxable until such amounts are distributed.
If the Contract is used for a tax-sheltered annuity described in IRC Section
403(b) or a simplified employee pension plan described in IRC Section 408(k) or
("qualified plans"), contributions made by an employer through a salary
reduction plan are permitted up to prescribed limits.
Generally, IRC Section 403(b) imposes a limitation on the amount of
tax-deferred Purchase Payments that may be made in a calendar year equal to 20%
of an employee's compensation includable in gross income for that year.
Adjustments to this limitation are made based upon the Contract Owner's years of
service with his or her employer and take into account the Contract Owner's
prior and current contributions to qualified plans. The Section 403(b)
limitation also is adjusted for any amounts deferred in prior taxable years
under an eligible deferred compensation plan as defined by IRC Section 457. In
addition, IRC Section 415 imposes a 25% limitation on total pre-tax
contributions to all tax-qualified plans. No limitations are imposed on the
amount of contributions made to a non-qualified contract.
17
<PAGE>
If the Contract is used as a traditional IRA, subject to certain
limitations, all or a portion of the contribution up to $2,000 ($4,000 if
combined with a spousal IRA) may be deductable from gross income. The same
contribution limits apply to the Roth IRA, however, it is funded with after tax
dollars. The maximum contributions for all IRAs is $2,000. Contributions to a
simplified employee pension plan Contract generally may not exceed 15% of
compensation or $30,000, whichever is less. Until a taxable distribution occurs,
no federal income tax is payable by the Contract Owner on Purchase Payments and
investment earnings of a Contract purchased for a qualified plan or a deductable
IRA. The earnings distributed from a Roth IRA are tax-free if certain conditions
have been met.
Effective January 1, 1989, the IRC imposes restrictions on
distributions (i.e., partial withdrawals or surrenders) from annuity contracts
qualified under IRC Section 403(b). IRC Section 403(b)(11) requires that for
these annuity contracts to receive tax-deferred treatment, the following
distribution restrictions must be applied to contributions and all earnings
credited after December 31, 1988.
Distributions may be paid only:
(1) When the employee attains age 59 1/2, separates from
service, dies, or becomes disabled (within the meaning of IRC Section
72(m)(7)), or
(2) In hardship cases and cannot exceed contributions made
through a salary reduction agreement. Distribution of any income
attributable to these contributions is prohibited.
DISTRIBUTIONS UNDER QUALIFIED CONTRACTS--The IRC subjects qualified
plans to certain mandatory minimum distribution requirements. See "The
Contract--Mandatory Minimum Distribution."
If certain requirements are met, full or partial distributions other
than mandatory minimum distributions, either may be rolled over or exchanged on
a tax-free basis from one plan to another in accordance with IRC Section 1035 or
Revenue Ruling 90-24. Distributions from an IRC Section 403(b) Contract may be
rolled over to another IRC Section 403(b) Contract or to an IRA. Distributions
from an IRA may be rolled over to another IRA or to an IRC Section 403(b)
Contract if the IRA contains only amounts rolled over from a 403(b) plan. Roth
IRAs can only accept rollover money from a traditional IRA or another Roth IRA.
Effective January 1, 1993, federal tax law requires HMLIC to withhold
for ordinary income tax purposes, 20% of any distributions from annuity
Contracts or plans qualified under IRC Section 403 with the exception of the
following:
(1) eligible rollover distributions made directly to
another trustee,
(2) periodic payments received over the Contract Owner's
lifetime,
(3) periodic payments received under the minimum required
distribution rules, or
(4) periodic payments received over a period of ten years or
more.
The Contract Owner, after receiving a distribution that is subject to
the 20% withholding tax, may elect to rollover the distribution within 60 days
of receiving it. However, in order to qualify the entire distribution as a
rollover, the Contract Owner must replace the 20% withheld when making the
rollover payment. If the 20% is not replaced, the amount withheld will be
subject to ordinary income taxes and a possible 10% tax penalty if the
distribution occurred before age 59 1/2.
All distributions, with the exception of a return of nondeductible
employee contributions and certain Roth distributions, received from a qualified
plan or an IRA are includable in gross income in the year paid. Once Income
Payments begin, any nondeductible contributions are recovered tax-free as a
portion of each Income Payment. Under certain limited circumstances, an
individual may elect forward averaging with respect to a lump sum distribution.
For any distribution not subject to the 20% withholding, HMLIC is
required to withhold federal income tax unless the Contract Owner elects not to
have federal income tax withheld. After an election is made with respect to
Income Payments, a Contract Owner may revoke the election at any time. HMLIC
will notify the Contract Owner at least annually of his or her right to revoke
the election. Contract Owners are required by law to provide their correct
taxpayer identification numbers ("TIN") to HMLIC. If the Contract Owner is an
individual, the TIN is his or her Social Security number.
If the designated beneficiary is not the Contract Owner's spouse, then
at least 50% of the present value of the amount available for distribution must
be paid within the life expectancy of the Contract Owner of an IRA or a
qualified plan. Each payment to the beneficiary must be no less than each
payment to the Contract Owner.
DISTRIBUTIONS UNDER NON-QUALIFIED CONTRACTS--Contract Owners of
non-qualified Contracts are not subject to federal income tax on earnings until
Income Payments are received under the Contract.
A distribution by surrender or partial withdrawal during the
accumulation period may subject the Contract Owner to federal income tax. For
this purpose, an assignment or pledge (or agreement to assign or pledge) is
considered a distribution.
18
<PAGE>
If the distribution is a full surrender, the Contract Owner is taxed on
the amount distributed, less Purchase Payments reduced by any prior partial
withdrawals which were not subject to income tax.
A distribution by partial withdrawal is deemed to come first from any
previously untaxed accumulation and then from principal. The Contract Owner is
subject to income tax on any previously untaxed accumulation which is
distributed.
Purchase Payments may be made by means of a full or partial tax free
exchange of annuity contracts under IRC Section 1035. Contracts exchanged under
IRC Section 1035 after January 18, 1985 will be subject to the annuity income
tax rules of IRC Section 72 in effect after that date, with exceptions set forth
below regarding the first-in first-out treatment of contracts issued prior to
August 14, 1982. See below "Penalty Tax."
If distributions are made pursuant to an income payment option, that
portion of each Income Payment which represents the Contract Owner's investment
in the Contract is excluded from gross income for federal income tax purposes.
The "investment in the Contract" is equal to total Purchase Payments to the
Contract less the portion of any periodic distributions that were excluded from
the individual's gross income. Once the Contract Owner's investment is returned
in full, the entire amount of each Income Payment is taxable as ordinary income.
PENALTY TAX--Distributions to a Contract Owner under a qualified plan
or IRA are subject to an IRS 10% penalty unless the
distributions are received:
(1) on or after age 59 1/2,
(2) on account of death,
(3) on account of disability, as defined in IRC Section
72(m)(7),
(4) pursuant to a qualified domestic relations order, as
defined in IRC 414(p),
(5) for deductible medical expenses in excess of 7 1/2% of
adjusted gross income,
(6) on account of separation from service after age 55, or
(7) as a series of substantially equal payments for the life
or a period not exceeding life expectancy of the Contract Owner, or the
lives or a period not exceeding the joint life expectancy of the
Contract Owner and a designated beneficiary.
Taxable distributions from non-qualified Contracts received prior to age 59
1/2 are also subject to an IRS 10% penalty unless the distribution is made after
the Contract Owner's death or disability, received as part of substantially
equal periodic payments for the Contract Owner's lifetime, or attributable to
Purchase Payments made prior to August 14, 1982. In addition, for non-qualified
Contracts issued during the period August 14, 1982 through January 18, 1985 and
for additional Purchase Payments to non-qualified Contracts issued prior to
August 14, 1982, the penalty will not apply to distributions attributable to
Purchase Payments paid ten years or more prior to the distribution. For this
purpose, distributions will be attributed to Purchase Payments on a "first-in
first-out" basis (i.e. to the earliest Purchase Payment which has not been fully
allocated to prior distributions.)
Roth IRAs are not subject to the 10% penalty if;
The contract has been inforce for five years, and;
The annuitant has attained age 59 1/2; or when used to
purchase a first home not to exceed $10,000 (as adjusted by
the IRC); or
The annuitant becomes disabled as defined in IRC
Section 72(m)(7); or
The distribution is made after the death of the Annuitant.
The preceding discussion is informational only and is not to be
considered tax advice. Contract Owners are urged to consult a competent
tax adviser before taking any action that could have tax consequences.
VOTING RIGHTS
Unless otherwise restricted by the plan under which a Contract is
issued, each Contract Owner has the right to instruct HMLIC with respect to
voting his or her interest in the shares of the Funds held by the Separate
Account at all shareholder meetings.
The number of votes that may be cast by a Contract Owner is based on
the number of units owned as of the record date of the meeting. Shares for which
no instructions are received are voted in the same proportion as the shares for
which instructions have been received. Any Fund shares attributable to
investment by HMLIC will be voted in proportion to the vote by Contract Owners
who have Separate Account units. Contract Owners receive various materials, such
as proxy materials and voting instruction forms, that relate to voting Fund
shares.
OTHER INFORMATION
LEGAL PROCEEDINGS--There are no legal proceedings to which the Separate
Account is a party or to which the assets of the Separate Account are subject.
HMLIC is engaged in various kinds of routine litigation that, in HMLIC's
judgment, are not material to its financial condition. None of this litigation
relates to the Separate Account.
19
<PAGE>
REGISTRATION STATEMENT--A registration statement has been filed with
the Securities and Exchange Commission under the Securities Act of 1933 with
respect to the Contract. This Prospectus does not contain all information set
forth in the registration statement, its amendments and exhibits. Statements
contained in this Prospectus as to the content of the Contract and other legal
instruments are summaries. For a complete statement of the terms thereof,
reference is made to these instruments as filed.
CONTRACT OWNER COMMUNICATIONS--To ensure receipt of communications,
Contract Owners must notify HMLIC of address changes. Notice of a change in
address may be sent to Horace Mann Life Insurance Company, Annuity Customer
Service, P.O. Box 4657, Springfield, Illinois 62708-4657. Contract Owners may
also provide notice of an address change by sending a telefacsimile (FAX)
transmission to (217) 527-2307 or by calling (217) 789-2500 or (800) 999-1030
(toll free).
HMLIC will attempt to locate Contract Owners for whom no current
address is on file. In the event HMLIC is unable to locate a Contract Owner,
HMLIC may be forced to surrender the value of the Contract to the Contract
Owner's last known state of residence in accordance with the state's abandoned
property laws.
CONTRACT OWNER INQUIRIES--A toll free number, (800) 999-1030, is
available to telephone HMLIC's Annuity Customer Service Department. Written
questions should be sent to Horace Mann Life Insurance Company, Annuity Customer
Service, P.O. Box 4657, Springfield, Illinois 62708-4657.
FORMS AVAILABILITY--Specific forms are available from HMLIC to aid the
Contract Owner in effecting many transactions allowed under the Contract. These
forms may be obtained by calling the Annuity Customer Service Department toll
free at (800) 999-1030.
NASD REGULATION'S PUBLIC DISCLOSURE PROGRAM--Information about Horace
Mann Investors, Inc. and your agent is available from the National Association
of Securities Dealers (NASD) at www.nasdr.com or by calling (800) 289-9999.
YEAR 2000 READINESS--HMLIC relies on computer systems to maintain
customer accounts and records and process customer account transactions. Because
of the way that computers have historically stored dates, some of these systems
currently may not be able to correctly process activity occurring in the year
2000. By early 1995, HMLIC had a comprehensive plan developed to update these
systems. HMLIC expects, but there can be no absolute assurance that, the
necessary work will be completed on a timely basis.
ADDITIONAL INFORMATION
A copy of the Statement of Additional Information providing more
detailed information about the Account is available, without charge, upon
request. The Table of Contents of this Statement follows:
Topic Page
- ------ ----
General Information and History.................. 2
Investment Experience............................ 2
Underwriter...................................... 3
Financial Statements............................. 3
To receive, without charge, a copy of the 1997 Annual Report of the
Horace Mann Family of Funds and the Horace Mann Life Insurance Company Separate
Account and/or a copy of the Statement of Additional Information for Horace Mann
Life Insurance Company Separate Account and/or the Horace Mann Mutual Funds,
please complete the following request form and mail it to the address indicated
below, or send it by telefacsimile (FAX) transmission to (217) 535-7123 or
telephone (217) 789-2500 or (800) 999-1030 (toll-free).
Horace Mann Life Insurance Company
P.O. Box 4657
Springfield, Illinois 62708-4657
- -------------------------------------------------------------------------------
Please provide free of charge the following information:
1998 Annual Report of the Horace Mann Family of Funds and the Horace
Mann Life Insurance Company Separate Account.
Statement of Additional Information dated May 1, 1998 for the Horace
Mann Mutual Funds.
Statement of Additional Information dated May 1, 1998 for the Horace
Mann Life Insurance Company Separate Account.
Please mail the above documents to:
--------------------------------------------
(Name)
--------------------------------------------
(Address)
--------------------------------------------
(City/State/Zip)
20
