-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LWTALMfyAe5Do9SlPZWdfyB7AvMOsX0SewL2SC4cO9qWWNu0bVjUToWUM1shjA67 XoeAtjry2cuiQEKtFjg98w== 0000950131-01-001411.txt : 20010307 0000950131-01-001411.hdr.sgml : 20010307 ACCESSION NUMBER: 0000950131-01-001411 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20010302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANN HORACE LIFE INSURANCE CO SEPARATE ACCOUNT CENTRAL INDEX KEY: 0000110698 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 370726637 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 002-24256 FILM NUMBER: 1560392 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 811-01343 FILM NUMBER: 1560393 BUSINESS ADDRESS: STREET 1: #1 HORACE MANN PLZ CITY: SPRINGFIELD STATE: IL ZIP: 62715-0001 BUSINESS PHONE: 2177892500 MAIL ADDRESS: STREET 1: PO BOX 4657 CITY: SPRINGFIELD STATE: IL ZIP: 62708-4657 485APOS 1 0001.txt HORACE MANN LIFE INSURANCE CO SEPERATE ACCOUNT File Nos. 2-24256 811-1343 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 ------------------------------ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 70 and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ------------------------------ HORACE MANN LIFE INSURANCE COMPANY SEPARATE ACCOUNT --------------------------------------------------- (Exact Name of Registrant) Horace Mann Life Insurance Company ---------------------------------- (Name of Depositor) One Horace Mann Plaza, Springfield, Illinois 62715 -------------------------------------------------- (Address of Depositor's Principal Executive Offices) (217) 789-2500 ------------ (Depositor's Telephone Number) Ann M. Caparros One Horace Mann Plaza Springfield, Illinois 62715 ---------------------------- (Name and Address of Agent for Service) Copies of Communications to: Cathy G. O'Kelly Vedder, Price, Kaufman & Kammholz 222 North LaSalle Street Chicago, Illinois 60601-1003 ----------------------------- It is proposed that this filing will become effective: ___ Immediately upon filing pursuant to paragraph (b) of Rule 485 ___ On May 1, 2001 pursuant to paragraph (b) of Rule 485 ___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485 X On May 1, 2001 pursuant to paragraph (a)(1) of Rule 485 --- If appropriate, check the following box: ___this post-effective amendment designates a new effective date for a previously filed post-effective amendment. - -------------------------------------------------------------------------------- HORACE MANN LIFE INSURANCE COMPANY SEPARATE ACCOUNT Cross Reference Sheet Required by Rule 495(a) Item Number in Form N-4 Caption - ------------------------ ------- Part A - Prospectus ------------------- 1. Cover Page Cover 2. Definitions Definitions 3. Synopsis (a) (b) (c) Summary (d) * 4. Condensed Financial Information (a) (b) (c) Condensed Financial Information 5. General Description of Registrant, Depositor, and Portfolio Companies (a) (b) (c) (d) (e) (f) Cover; Summary; Horace Mann Life Insurance Company, The Account and The Horace Mann Mutual Funds; Voting Rights 6. Deductions (a) (b) (c) (d) (e) Summary; Purchasing the Contract; Deductions and Expenses (f) * 7. General Description of Variable Annuity Contracts (a) (b) (c) (d) Summary; Contract Owners' Rights; Purchasing the Contract; Transactions; Death Benefit Proceeds; Mandatory Minimum Distribution; Income Payments; Modification of the Contract; Tax Consequences; Other Information 8. Annuity Period (a) (b) (c) (d) (e) (f) Income Payments; Mandatory Minimum Distribution; Transfers 9. Death Benefit (a) (b) Death Benefit Proceeds; Tax Consequences 10. Purchases and Contract Value (a) (b) (c) (d) Summary; Purchasing the Contract; Purchase Payments 11. Redemptions (a) (c) (e) Summary; Surrender Before Commencement of Annuity Period; Deferment (b) (d) * 12. Taxes (a) (b) (c) Surrender Before Commencement of Annuity Period; Tax Consequences 13. Legal Proceedings Other Information 14. Table of Contents of Additional Information Statement of Additional Information PART B - STATEMENT OF ADDITIONAL INFORMATION -------------------------------------------- 15. Cover Page Cover 16. Table of Contents Table of Contents 17. General Information and History (a) (b) * (c) General Information and History 18. Services (c) Financial Statements (a) (b) (d) (e) (f) * 19. Purchase of Securities Being Offered (a) Underwriter (b) * 20. Underwriters (a) (b) (c) Underwriter (d) * 21. Calculation of Performance Data (b) Investment Experience (a) * 22. Annuity Payments * 23. Financial Statements (a) (b) Financial Statements PART C ------ Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C of this Registration Statement. *Omitted from the Prospectus or Statement of Additional Information because the Item is not applicable. SUPPLEMENT TO PROSPECTUS DATED MAY 1, 2001 Horace Mann Life Insurance Company Separate Account For Contracts Issued on Forms 66-3A and 66-4A The variable annuity Contracts issued by Horace Mann Life Insurance Company on Forms 66-3A and 66-4A are no longer offered or sold by Horace Mann Life Insurance Company. These earlier Contracts remain in effect but differ from the Contracts described in the Prospectus in the following material respects. Please refer to the Contracts on Forms 66-3A and 66-4A for a complete description of their provisions. 1. In lieu of the Surrender Charge, 6% of each Purchase Payment (gross stipulated payment) plus $.50, without any yearly limitation, is deducted for sales and administrative expenses and death benefit charges. It is estimated that of the 6% deduction, 4% is for sales expenses and 2% for the death benefit risk. The additional $.50 deduction is for administrative expenses. All Purchase Payments, net of applicable deductions, including premium taxes if applicable, are invested by the Account in shares of Horace Mann Equity Fund. There is no annual maintenance fee or transfer charge. 2. In lieu of the Mortality and Expense Risk Fee ("M&E Fee") described in the Prospectus, a fee is deducted from all distributions paid by the Equity Fund to the Account or, if the fee is accrued and unpaid, from the value of a Participant's individual account upon withdrawal or transfer from the Account. This fee is computed weekly at the rate of .0075% of the net assets of the Account (not to exceed .39% on an annual basis). It is estimated that .31% is for mortality risk and .08% is for expense risk. 3. The "present value factor" used in calculating the actuarial liability of the Variable Retirement Annuity Account is computed using the Progressive Annuity Mortality Table with interest at 4%. 4. With respect to the group Contract issued on Form 66-4A, if the Annuitant is no longer in the class of eligible Participants or elects not to continue to participate in the group Contract, the Annuitant may elect, within 31 days after the date of termination, to purchase from Horace Mann Life Insurance Company its individual annuity Contract most nearly similar in benefits and provisions to the group Contract. The individual annuity Contract will be issued at the then attained age of the Annuitant and at the same annual Purchase Payment as the group Contract Certificate, unless otherwise agreed to by Horace Mann Life Insurance Company. Form 66-3A and 66-4A Contracts Contract Owner Transaction Expenses, (1) as a percentage of Purchase Payments: Sales Expense Charge................................... 4.00% Death Benefit Risk Charge.............................. 2.00% Administration Expense Charge......................$.50 per payment plus $10.00 issuance fee Separate Account Annual M&E Fee, as a percentage of average account value: Mortality Risk.................................... 0.31% Expense Risk...................................... 0.08% Total Separate Account Annual M&E Fee........................ 0.39% Annual Operating Expenses of Equity Fund, (2) as a percentage of average net assets for the December 31, 2000 fiscal year: Management Fees....................................... % Other Expenses........................................ % Total Equity Fund Operating Expenses......................... % Example(3) - ---------- 1 Year 3 Years 5 Years 10 Years 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) Premium taxes, currently ranging between 0 and 3.5%, are not included. The rate varies depending upon 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) The Operating Expenses of the Equity Fund are borne indirectly by Contract Owners. (3) The EXAMPLE should not be considered a representation of past or future expenses. Amounts shown are based on the average cash value of the average number of annuity Contracts in the accumulation phase during the 2000 calendar year. Actual expenses may be greater or less than those shown. 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 EQUITY FUND. The date of this Supplement is May 1, 2001. SUPPLEMENT TO PROSPECTUS DATED MAY 1, 2001 Horace Mann Life Insurance Company Separate Account For Contracts Issued on Form 66-2A The variable annuity Contract issued by Horace Mann Life Insurance Company on Form 66-2A is no longer offered or sold by Horace Mann Life Insurance Company. This earlier Contract remains in effect but differs from the Contracts described in the Prospectus in the following material respects. Please refer to the Contract on Form 66-2A for a complete description of its provisions. 1. In lieu of the Surrender Charge, 6% of each Purchase Payment (gross stipulated payment) plus $.50, without any yearly limitation, is deducted for sales and administrative expenses and death benefit charges. It is estimated that of the 6% deduction, 4% is for sales expenses and 2% for the death benefit risk. The additional $.50 deduction is for administrative expenses. All Purchase Payments, net of applicable deductions including premium taxes if applicable, are invested by the Account in shares of Horace Mann Equity Fund. There is no annual maintenance fee or transfer charge. 2. In lieu of the Mortality and Expense Risk Fee ("M&E Fee") described in the Prospectus, a fee is deducted from distributions paid by the Equity Fund to the Account or, if the fee is accrued and unpaid, from the value of a Contract Owner's individual account upon withdrawal or transfer from the Account. This fee is computed weekly at the rate of .0075% of the net assets of the Account (not to exceed .39% on an annual basis). It is estimated that .31% is for mortality risk and .08% is for expense risk. Form 66-2A Contracts Contract Owner Transaction Expenses, (1) as a percentage of Purchase Payments: Sales Expense Charge................................... 4.00% Death Benefit Risk Charge.............................. 2.00% Administration Expense Charge................... $.50 per payment plus $10.00 issuance fee Separate Account Annual M&E Fee, as a percentage of average account value: Mortality Risk.................................. 0.31% Expense Risk.................................... 0.08% Total Separate Account Annual M&E Fee......................... 0.39% Annual Operating Expenses of Equity Fund, (2) as a percentage of average net assets for the December 31, 2000 fiscal year: Management Fees..................................... % Other Expenses...................................... % Total Equity Fund Operating Expenses.......................... % Example(3) 1 Year 3 Years 5 Years 10 Years 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) Premium taxes, currently ranging between 0 and 3.5%, are not included. The rate varies depending upon 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) The Operating Expenses of the Equity Fund are borne indirectly by Contract Owners. (3) The EXAMPLE should not be considered a representation of past or future expenses. Amounts shown are based on the average cash value of the average number of annuity Contracts in the accumulation phase during the 2000 calendar year. Actual expenses may be greater or less than those shown. 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 EQUITY FUND. The date of this Supplement is May 1, 2001. SUPPLEMENT TO PROSPECTUS DATED MAY 1, 2001 Horace Mann Life Insurance Company Separate Account For Contracts Issued on Form 527-GC The group variable annuity Contract issued by Horace Mann Life Insurance Company on Form 527-GC is no longer offered or sold by Horace Mann Life Insurance Company. This earlier Contract remains in effect but differs from the Contracts described in the Prospectus in the following material respects. Please refer to the Contract on Form 527-GC for a complete description of its provisions. 1. The Contract may be terminated or discontinued by the Group Contract Owner upon written notice to Horace Mann Life Insurance Company. The written notice must specify the date for termination which may not be earlier than 30 days following the date such notice is received by Horace Mann Life Insurance Company. The Contract may be discontinued by Horace Mann Life Insurance Company upon 90 days' written notice to the Group Contract Owner. 2. If the Contract is terminated or the Annuitant ceases to be in the class of eligible Annuitants, the Annuitant may elect within 90 days thereafter to purchase from Horace Mann Life Insurance Company the individual annuity Contract most similar in benefits and provisions to those of the Annuitant's Certificate. 3. At the end of each fiscal year, Horace Mann Life Insurance Company may, in its discretion, determine an experience credit to be equitably applied based on the mortality experience and administration costs of the Contract. 4. The Contract's minimum Purchase Payment is $10. Minimum annual Purchase Payments that may be allocated to the Account are $200. In lieu of the Surrender Charge, 5% of each Purchase Payment plus $.50 is deducted for sales and administrative expenses and death benefit charges. The $.50 charge may not exceed $6.00 in any Contract Year. If Purchase Payments are allocated to both the Fixed Accumulation Account and the Separate Account, the per payment fee is $.75, not to exceed $9.00 in any Contract Year. It is estimated that of the 5% deduction, 3.2% is for sales expenses, 0.2% is for the death benefit risk and 1.6% is for administrative expenses. Premium taxes payable, if applicable, are deducted from each payment. All Purchase Payments net of applicable deductions, are invested by the Account in shares of the Equity Fund. There is no annual maintenance charge or transfer charge. 5. In lieu of the Mortality and Expense Risk Fee ("M&E Fee") described in the Prospectus, a fee for mortality and expense risk, computed weekly at the rate of .005575% of the net assets of the Account (not to exceed .29% on an annual basis), will be deducted from dividends and other distributions paid by the Equity Fund to the Account or to the extent such distributions are accrued and unpaid, from the value of a Participant's account upon withdrawal or transfer of the Participant's interest out of the Account. It is estimated that .24% is for mortality risk and .05% is for expense risk. 6. The "present value factor" used in calculating the actuarial liability of the Variable Retirement Annuity Account is computed using the Progressive Annuity Mortality Table with interest at 3.5%. Consequently, the interest rate used to compute the value of a Variable Retirement Annuity Unit is 3.79% (of which .29% represents the charge for mortality and expense risks). Form 527-GC Contracts Contract Owner Transaction Expenses, (1) as a percentage of Purchase Payments: Sales Expense Charge............................... 3.20% Death Benefit Risk Charge.......................... 0.20% Administration Expense Charge.....................1.60% and $.50 per payment plus $20.00 issuance fee Separate Account Annual M&E Fee, as a percentage of total net assets: Mortality Risk................................... 0.24% Expense Risk..................................... 0.05% Total Separate Account Annual M&E Fee......................... 0.29% Annual Operating Expenses of Equity Fund,(2) as a percentage of average net assets for the December 31, 2000 fiscal year: Management Fees...................................... % Other Expenses....................................... % Total Equity Fund Operating Expenses...............................% Example(3) 1 Year 3 Years 5 Years 10 Years 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) Premium taxes, currently ranging between 0 and 3.5%, are not included. The rate varies depending upon 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) The Operating Expenses of the Equity Fund are borne indirectly by Contract Owners. (3) The EXAMPLE should not be considered a representation of past or future expenses. Amounts shown are based on the average cash value of the average number of annuity Contracts in the accumulation phase during the 2000 calendar year. Actual expenses may be greater or less than those shown. 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 EQUITY FUND. The date of this Supplement is May 1, 2001. SUPPLEMENT TO PROSPECTUS DATED MAY 1, 2001 Horace Mann Life Insurance Company Separate Account For Contracts Issued on Form 529 The individual variable annuity Contract issued by Horace Mann Life Insurance Company on Form 529 is no longer offered or sold by Horace Mann Life Insurance Company. These earlier Contracts remain in effect but differ from the Contracts described in the Prospectus in the following material respects. Please refer to the Contract on Form 529 for a complete description of its provisions. 1. The Contract's minimum Purchase Payment (gross stipulated payment) is $10. Minimum annual Purchase Payments that may be allocated to the Account are $200. In lieu of the Surrender Charge, 5% of each Purchase Payment plus $.50 is deducted for sales and administrative expenses and death benefit charges. The $.50 charge may not exceed $6.00 in any Contract Year. If Purchase Payments are allocated to both the Fixed Accumulation Account and the Separate Account, the per payment fee is $.75, not to exceed $9.00 per Contract Year. It is estimated that of the 5% deduction, 3.2% is for sales expenses, 0.2% is for the death benefit risk and 1.6% is for administrative expenses. Premium taxes payable, if applicable, are deducted from each Purchase Payment. All Purchase Payments, net of applicable deductions, are invested by the Account in shares of the Equity Fund. There is no annual maintenance charge or transfer charge. 2. In lieu of the Mortality and Expense Risk Fee ("M&E Fee") described in the Prospectus, a fee for mortality and expense risk, computed weekly at the rate of .005575% of the net assets of the Account (not to exceed .29% on an annual basis), will be deducted from dividends and other distributions paid by the Equity Fund to the Account, or to the extent such distributions are accrued and unpaid, from the value of a Contract Owner's account upon withdrawal or transfer of the Contract Owner's interest out of the Account. It is estimated that .24% of such charge is for mortality risk and .05% is for expense risk. 3. The "present value factor" used in calculating the actuarial liability of the Variable Retirement Annuity Account is computed using the Progressive Annuity Mortality Table with interest at 3.5%. Consequently, the interest rate used to compute the value of a Variable Retirement Annuity Unit is 3.79% (of which .29% represents the charge for mortality and expense risks). Form 529 Contracts Contract Owner Transaction Expenses, (1) as a percentage of Purchase Payments: Sales Expense Charge............................. 3.20% Death Benefit Risk Charge........................ 0.20% Administration Expense Charge............1.60% and $.50 per payment plus $20.00 issuance fee Separate Account Annual M&E Fee, as a percentage of total net assets: Mortality Risk............................ 0.24% Expense Risk.............................. 0.05% Total Separate Account Annual M&E Fee................... 0.29% Annual Operating Expenses of Equity Fund, (2) as a percentage of average net assets for the December 31, 2000 fiscal year: Management Fees................................ % Other Expenses................................. % Total Equity Fund Operating Expenses................... % Example(3) 1 Year 3 Years 5 Years 10 Years 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) Premium taxes, currently ranging between 0 and 3.5%, are not included. The rate varies depending upon 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) The Operating Expenses of the Equity Fund are borne indirectly by Contract Owners. (3) The EXAMPLE should not be considered a representation of past or future expenses. Amounts shown are based on the average cash value of the average number of annuity Contracts in the accumulation phase during the 2000 calendar year. Actual expenses may be greater or less than those shown. 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 EQUITY FUND. The date of this Supplement is May 1, 2001. Prospectus Qualified variable tax deferred annuity contracts Prospectus Horace Mann Life Insurance Company Separate Account for Annuity Alternatives Contracts May 1, 2001 Qualified Variable Deferred Annuity Contracts Issued By Horace Mann Life Insurance Company Separate Account Single Premium Contracts for Individuals Flexible Premium Contracts for Individuals and Groups This prospectus offers combination fixed and variable, qualified annuity contracts to individuals and groups. These contracts are issued by Horace Mann Life Insurance Company ("HMLIC") and can be issued as flexible premium contracts or, for individuals, as single premium contracts. They are issued in connection with retirement plans or arrangements 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 the subaccounts (sometimes referred to as variable investment options or variable accounts). Each subaccount purchases shares in a corresponding mutual fund. The mutual funds are: Large Company Stock Funds Small Company Stock Funds Large Blend Small Blend J.P. Morgan U.S. Disciplined Equity T. Rowe Price Small-Cap Stock Portfolio Fund--Advisor Class Fidelity VIP Growth & Income Portfolio Neuberger Berman Genesis Fund Wilshire 5000 Index Portfolio (1) Advisor Class Fidelity VIP Index 500 Portfolio Small Growth Large Growth Horace Mann Small Cap Growth Fund Fidelity VIP Growth Portfolio Warburg Pincus Small Company Alliance Premier Growth Portfolio Growth Portfolio Wilshire Large Company Growth Wilshire Small Company Growth Portfolio Portfolio (1) Small Value Large Value Ariel Fund Horace Mann Equity Fund T. Rowe Price Small-Cap Value Horace Mann Socially Responsible Fund Fund--Advisor Class Davis Value Portfolio Wilshire Small Company Value Portfolio Wilshire Large Company Value Portfolio International Stock Funds Mid-Size Company Stock Funds Horace Mann International Equity Fund Mid Blend Fidelity VIP Overseas Portfolio Fidelity VIP Mid Cap Portfolio Rainier Small/Mid Cap Equity Portfolio Balanced Fund Mid Growth Horace Mann Balanced Fund Putnam VT Vista Fund Strong Mid Cap Growth Fund II Bond Funds Mid Value Horace Mann Income Fund Ariel Appreciation Fund Horace Mann Short-Term Fund Strong Opportunity Fund II Fidelity VIP High Income Portfolio Fidelity VIP Investment Grade Bond Portfolio
(1)For contracts issued prior to September 5, 2000, the subaccounts of the Horace Mann Separate Account invest in the Institutional Class of shares of each Fund. For contracts issued on or after September 5, 2000, the subaccounts invest in the Investment Class of shares of each Fund. This Prospectus sets forth the information an investor should know. Additional information about the HMLIC Separate Account has been filed with the Securities and Exchange Commission in a Statement of Additional Information, dated May 1, 2001. The Statement of Additional Information is incorporated by reference and is available upon request, without charge. You may obtain the Statement of Additional Information by writing to Horace Mann Life Insurance Company, 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). The table of contents of the Statement of Additional Information appears on page 23 of this prospectus. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE ANNUITIES OFFERED BY HMLIC ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. THEY ARE NOT DEPOSITS, OBLIGATIONS, OR GUARANTEED BY ANY BANK. THEY INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. The date of this Prospectus is May 1, 2001.
Table of Contents - --------------------------------------------------------------------------------------------------------------------------- Page ---- Definitions.......................................................................................................... 4 Summary.............................................................................................................. 5 Condensed Financial Information...................................................................................... 12 Horace Mann Life Insurance Company, The Account and The Underlying Funds............................................. 14 Horace Mann Life Insurance Company.......................................................................... 14 The Account................................................................................................. 14 The Underlying Funds........................................................................................ 14 The Contract(s)...................................................................................................... 14 Contract Owners' Rights..................................................................................... 14 Purchasing the Contract..................................................................................... 15 Purchase Payments........................................................................................... 15 Amount and Frequency of Purchase Payments.......................................................... 15 Allocation of Purchase Payments.................................................................... 15 Accumulation Units and Accumulation Unit Value..................................................... 15 Transactions................................................................................................ 15 Transfers.......................................................................................... 16 Dollar Cost Averaging.............................................................................. 16 Rebalancing........................................................................................ 16 Changes to Purchase Payment Allocations............................................................ 16 Surrender or Withdrawal Before Commencement of Annuity Period...................................... 16 Deferment.......................................................................................... 16 Confirmations...................................................................................... 16 Deductions and Expenses..................................................................................... 17 Annual Maintenance Charge.......................................................................... 17 Mortality and Expense Risk Fee..................................................................... 17 Surrender Charge(s)................................................................................ 17 Operating Expenses of the Underlying Funds......................................................... 17 Premium Taxes...................................................................................... 17 Death Benefit Proceeds...................................................................................... 17 Mandatory Minimum Distribution.............................................................................. 18 Income Payments............................................................................................. 18 Income Payment Options............................................................................. 19 Amount of Fixed and Variable Income Payments....................................................... 20 Misstatement of Age......................................................................................... 20 Modification of the Contract................................................................................ 20 Tax Consequences..................................................................................................... 21 Separate Account............................................................................................ 21 Contract Owners............................................................................................. 21 Contributions...................................................................................... 21 Distributions Under Qualified Contracts............................................................ 21 Penalty Tax........................................................................................ 22 Voting Rights........................................................................................................ 22 Other Information.................................................................................................... 22
Additional Information............................................................................................... 23 Appendix A........................................................................................................... 24
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. Definitions - ----------- Account: Horace Mann Life Insurance Company Separate Account, a segregated variable investment account consisting of subaccounts each of which invests in a corresponding Underlying 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. Accumulation Unit Value: The value of an accumulation unit on any valuation date. 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 a 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 premium contracts and to both individuals and groups as flexible premium 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. 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 70 1/2. See "The Contract--Mandatory Minimum Distribution." Mutual Fund(s): Open-end management investment companies in which the assets of the subaccount(s) will be invested. These companies are generally registered under the Investment Company Act of 1940. 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. Participant: A person to whom a certificate showing participation under a group contract has been issued. 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 Underlying Fund. 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. Underlying Funds: All mutual funds listed in Appendix A that are available for investment by the Horace Mann Life Insurance Company Separate Account. Valuation Date: The valuation date ends at 3:00 p.m. central time. No valuations are made for any day that the New York Stock Exchange is closed, and for 2001 no valuations are made for the day after Thanksgiving or December 24th. 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. 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 accumulated value varies based on the investment performance of the subaccount selected. For information regarding the fixed portion, refer to the Contract. Detailed information about the Underlying Funds is contained in each Underlying Fund's Prospectus and in each Underlying Fund Statement of Additional Information. The expenses for the Underlying Funds, including advisory and management fees, are found in the Table of Annual Operating Expenses shown on page 7 of this Summary. What is "the Separate Account"? The Horace Mann Life Insurance Company Separate Account (the "Account") segregates 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 subaccounts, each investing in shares of a corresponding Underlying 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 premium annuity. Individuals may also purchase the single premium 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, and Simplified Employee Pension Plans ("SEPs"). The contract is offered and sold by HMLIC through its licensed life insurance sales personnel. These insurance sales personnel are registered representatives of Horace Mann Investors, Inc. ("HM Investors"). HM Investors is a broker/dealer registered under the Securities and Exchange Act of 1934. HMLIC has entered into a distribution agreement with HM Investors. HM 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 premium contract during any contract year is $225. Certain Individual Flexible Premium contracts may have larger minimums. The minimum purchase payment under a single premium contract is $2,000. Contract owners may elect to allocate all or part of the net 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. No purchase payments are required after the first contract year. Under certain group plans the minimum may be reduced or waived. What are my investment choices? You may have money allocated to or invested in no more than 24 subaccounts at any one time. (a) Separate Account Includes subaccounts each of which invests in one of the following Underlying Funds: Large Company Stock Funds Large Blend J.P. Morgan U.S. Disciplined Equity Portfolio Fidelity VIP Growth & Income Portfolio Wilshire 5000 Index Portfolio(1) Fidelity VIP Index 500 Portfolio Large Growth Fidelity VIP Growth Portfolio Alliance Premier Growth Portfolio Wilshire Large Company Growth Portfolio(1) Large Value Horace Mann Equity Fund Horace Mann Socially Responsible Fund Davis Value Portfolio Wilshire Large Company Value Portfolio Mid-Size Company Stock Funds Mid Blend Fidelity VIP Mid Cap Portfolio Rainier Small/Mid Cap Equity Portfolio Mid Growth Putnam VT Vista Fund Strong Mid Cap Growth Fund II Mid Value Ariel Appreciation Fund Strong Opportunity Fund II Small Company Stock Funds Small Blend T. Rowe Price Small-Cap Stock Fund--Advisor Class Neuberger Berman Genesis Fund Advisor Class Small Growth Horace Mann Small Cap Growth Fund Warburg Pincus Small Company Growth Portfolio Wilshire Small Company Growth Portfolio Small Value Ariel Fund T. Rowe Price Small-Cap Value Fund--Advisor Class Wilshire Small Company Value Portfolio International Stock Funds Horace Mann International Equity Fund Fidelity VIP Overseas Portfolio Balanced Fund Horace Mann Balanced Fund Bond Funds Horace Mann Income Fund Horace Mann Short-Term Fund Fidelity VIP High Income Portfolio Fidelity VIP Investment Grade Bond Portfolio (1) For contracts issued prior to September 5, 2000, the subaccounts of the Horace Mann Separate Account invest in the Institutional Class of shares of each Fund. For contracts issued on or after September 5, 2000, the subaccounts invest in the Investment Class of shares of each Fund. (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 could be subject to certain charges if the transferred amount is withdrawn or surrendered. The minimum amount that can be transferred is $100 or the entire dollar value of the subaccount(s), whichever is less. For complete details see "The Contract--Transactions--Transfers." 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 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 in "Deductions and Expenses--Surrender Charges." What are the charges or deductions? Contracts may be 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) is deducted from the Variable Account. This fee is computed on a daily basis and will not exceed an annual rate of 1.25% of the daily net assets of the Variable Account. This fee may be lower on some group plans and certain individual flexible premium products. 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. Certain individual flexible premium products do not include this charge. 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 to eight contract years depending on the contract you purchase. The charge may be lower on certain individual and group plans. In the first contract year the charge is 8% for the Flexible Premium 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." 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 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, if applicable, will be refunded. When can I begin receiving Income Payments, and what options are available? Payments will begin on the maturity date set by the terms of your contract. Variable income payments are made in monthly installments. A lump sum payment may 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 Certain Period, Joint and Survivor Life Annuity, Income for Fixed Period, Income for Fixed Amount, and Interest Income Payments. 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. A contract owner who invests in the Fixed Account would be subject to the annual maintenance charge and surrender charges. Horace Mann Life Insurance Company Separate Account Contract Owner Transaction Expenses:(1) Maximum Surrender Charge as a percentage of amount surrendered(2) --for Single Payment Contracts.................. 5.00% --for Flexible Premium Contracts................ 8.00% Annual Maintenance Charge(3)........................ $ 25 Separate Account annual expenses, as a percentage of average account value: Mortality Risk.............................. 0.45% Expense Risk................................ 0.80% Total Separate Account M&E Fee....................... 1.25% Underlying Funds Annual Operating Expenses of the Underlying Funds, as a percentage of average daily net assets, as of 12/31/00 unless otherwise noted:
Total Fund Management 12b-1 Other Operating Fee fees Expenses Expense ----------------------------------------- Large Company Stock Funds Large Blend JP Morgan U.S. Disciplined Equity Portfolio..................................... 0.35% 0.50% 0.85% Fidelity VIP Growth and Income Portfolio SC 2(12)............................... 0.48% 0.25% 0.12% 0.85% Wilshire 5000 Index Portfolio (Institutional)(5)(7A)(11)........................ 0.10% 0.62% 0.72% Wilshire 5000 Index Portfolio (Investment)(5)(7A)(11)........................... 0.10% 0.25% 0.62% 0.97% Fidelity VIP Index 500 Portfolio SC 2(12B)...................................... 0.24% 0.25% 0.27% 0.76% Large Growth Fidelity VIP Growth Portfolio SC 2(12).......................................... 0.57% 0.25% 0.09% 0.91% Alliance Premier Growth Portfolio............................................... 1.00% 0.25% 0.05% 1.30% Wilshire Large Company Growth Portfolio (Institutional)(5)(11).................. 0.25% 0.28% 0.53% Wilshire Large Company Growth Portfolio (Investment)(5)(11)..................... 0.25% 0.25% 0.34% 0.84% Large Value Horace Mann Equity Fund(4)(6)................................................... 0.64% 0.18% 0.82% Horace Mann Socially Responsible Fund(4)(6)..................................... 0.94% 0.22% 1.16% Davis Value Portfolio(14)....................................................... 0.75% 0.26% 1.01% Wilshire Large Company Value Portfolio(5)....................................... 0.25% 0.25% 0.51% 1.01% Mid-Size Company Stock Funds
Mid Blend Fidelity VIP Mid Cap Portfolio SC 2(12)...................................... 0.57% 0.25% 0.17% 0.99% Rainier Small/Mid Cap Equity Portfolio(9).................................... 0.85% 0.25% 0.15% 1.25% Mid Growth Putnam VT Vista Fund........................................................ 0.60% 0.15% 0.07% 0.82% Strong Mid Cap Growth Fund II(13)........................................... 1.00% 0.19% 1.19% Mid Value Ariel Appreciation Fund..................................................... 0.75% 0.25% 0.31% 1.31% Strong Opportunity Fund II(13).............................................. 1.00% 0.10% 1.10% Small Company Stock Funds Small Blend T. Rowe Price Small-Cap Stock Fund--Advisor Class(10)....................... 0.77% 0.25% 0.18% 1.20% Neuberger Berman Genesis Fund Advisor Class(8).............................. 1.13% 0.25% 0.21% 1.59% Small Growth Horace Mann Small Cap Growth Fund(4)(6)..................................... 1.39% 0.32% 1.71% Warburg Pincus Small Company Growth Portfolio............................... 0.90% 0.21% 1.11% Wilshire Small Company Growth Portfolio(5)(7B).............................. 0.25% 0.25% 1.21% 1.71% Small Value Ariel Fund.................................................................. 0.65% 0.25% 0.34% 1.24% T. Rowe Price Small-Cap Value Fund--Advisor Class(10)....................... 0.67% 0.25% 0.18% 1.10% Wilshire Small Company Value Portfolio(5)(7)................................ 0.25% 0.25% 0.82% 1.32% International Stock Funds Horace Mann International Equity Fund(4)(6)................................. 1.09% 0.67% 1.76% Fidelity VIP Overseas Portfolio SC 2(12).................................... 0.72% 0.25% 0.18% 1.15% Balanced Fund Horace Mann Balanced Fund(4)(6)............................................ 0.64% 0.18% 0.82% Bond Funds Horace Mann Income Fund(4)(6).............................................. 0.64% 0.43% 1.07% Horace Mann Short-Term Fund(4)(6).......................................... 0.37% 1.58% 1.95% Fidelity VIP High Income Portfolio SC 2 ................................... 0.58% 0.25% 0.18% 1.01% Fidelity VIP Investment Grade Bond Portfolio SC 2(12A)..................... 0.43% 0.25% 1.07% 1.75%
(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 deducted at the time of purchase 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 individual contracts and group plans. (4) The Other Expenses for the Horace Mann Mutual Funds are shown based on actual amounts for the fiscal year ended December 31, 2000. The subadvisers seek the best price and execution on each transaction and negotiate 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 Horace Mann Mutual Funds part of the commissions paid (Commission Credits). Horace Mann Investors voluntarily waived a portion of its Management Fee on the Short-Term Fund and subsidized specific expenses for certain funds during 2000. The Funds' advisor, Wilshire Associates Incorporated, waived a portion of its advisory fee during 2000 for each fund. With these waivers, commission credits or subsidization the Management Fee, Other Expenses and Total Fund Operating Expenses, respectively, were: 0.64%, 0.16% and 0.80% for the Equity Fund; 0.64%, 0.16% and 0.80% for the Balanced Fund; 0.64%, 0.43% and 1.07% for the Income Fund; 0.37%, 1.26% and 1.63% for the Short-Term Fund; 1.39%, 0.23% and 1.62% for the Small Cap Fund; 1.09%, 0.28% and 1.37% for the International Fund; and 0.94%, 0.16% and 1.10% for the Socially Responsible Fund. (5) The Total Expenses for the Wilshire Target Funds, Inc. are based on the 2000 fiscal year. Wilshire Target Funds, Inc. fiscal year ends on August 31. (6) The "Management Fees" include both the advisory fee payable to Wilshire Associates Incorporated and the administration fee payable to Horace Mann Investors, Inc. for the Horace Mann Mutual Funds. (7) Wilshire Associates Incorporated has agreed to waive a portion of its advisory fees for this Portfolio until further notice. After this waiver, the Management Fee is expected to be 0.10%, and Total Fund Operating Expense is expected to be 1.17%. (7A) Wilshire Associates Incorporated has agreed to reimburse expenses to maintain the total expenses of the Portfolio's Institutional Class (other than 12(b)-1 fees) at 0.35% of the Portfolio's average daily net assets until at least September 30, 2000, subject to later recoupment. Without this agreement the "Other Expenses" would be 0.98% and "Total Fund Operating Expenses" would be 1.38% and 1.08% for the Investment Class and Institutional Class, respectively. (7B) Wilshire Associates Incorporated has agreed to waive a portion of its advisory fees for this Portfolio until further notice. After this waiver, the Management Fee is expected to be 0.10%, and Total Fund Operating Expense is expected to be 1.56%. (8) Neuberger Berman Genesis Fund Advisor Class has a fiscal year end of August 31. The numbers in this chart reflect the expenses based on the 2000 fiscal year end. (9) The Rainier Small/Mid Cap Equity Portfolio has a fiscal year end of March 31. The numbers in this chart reflect the expenses based on the 2000 fiscal year end. (10) The T. Rowe Price funds started a new class of shares effective March 31, 2000. The expenses shown in the chart are as of December 31, 2000. (11) For contracts issued prior to September 5, 2000, the subaccounts of the Horace Mann Separate Account invest in the Institutional Class of shares of each Fund. For contracts issued on or after September 5, 2000, the subaccounts invest in the Investment Class of shares of each Fund. (12) Actual annual class operating expenses were lower because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expenses, and/or because through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's custodian expenses. See the accompanying fund prospectus for details. (12A) The fund's manager has voluntarily agreed to reimburse the class's expenses if they exceed a certain level. Including this reimbursement, the annual class operating expenses were 1.05%. This arrangement may be discontinued by the fund's manager at any time. (12B) The fund's manager has voluntarily agreed to reimburse the class's expenses if they exceed a certain level. Including this reimbursement, the annual class operating expenses were 0.53%. This arrangement may be discontinued by the fund's manager at any time. (13) On the Strong Opportunity Fund II, the Fund's advisor is currently absorbing expense of 0.04%. With these absorptions, the expense ratio would be 1.10%. On the Strong Mid Cap Growth Fund II, the Fund's advisor is currently absorbing expenses of 0.02%. With this absorption the expense ratio would be 1.15%. (14) Davis Selected Advisers, L.P. has agreed to cap the Portfolio's total expenses at 1.00% until May 1, 2002. With this agreement the Management Fee would be 0.75%, the Other Expenses would be 0.25% and the Total Expenses would be 1.00%. Example - ------- The following chart shows the expenses that would be incurred under this contract assuming a $1,000 deposit and a 5% return. The Example should not be considered a representation of past or future expenses. Amounts shown are based on the "Total Expenses" shown on the fee table and average cash value of the average number of annuity contracts in the accumulation phase during the 2000 calendar year and assume that all fee waivers and reimbursements continue for the time periods shown. Actual expenses may be greater or less than those shown. There is no assumption for premium taxes, applicable in certain states, in these examples.
If you surrender If you surrender your your Flexible Single Premium Premium Contract at If you do not surrender Contract If you do not surrender your the end of the your Flexible Premium at the end of the Single Premium applicable time Contract at the end of the applicable time Contract at the end of the period applicable time period period applicable time period - ------------------------------------------------------------------------------------------------------------------ 1yr 3yrs 5yrs 10yrs 1yr 3yrs 5yrs 10yrs 1yr 3yrs 5yrs 10yrs 1yr 3yrs 5yrs 10yrs - --------------------------------------------------------------------------------------------------------------------- Large Company Stock Funds Large Blend JP Morgan U.S. Disciplined Equity Portfolio...... Fidelity VIP Growth & Income Portfolio...... Wilshire 5000 Index Portfolio (Institutional). Wilshire 5000 Index Portfolio (Investment)... Fidelity VIP Index 500 Portfolio...... Large Growth Fidelity VIP Growth Portfolio...... Alliance Premier Growth Portfolio...... Wilshire Large
Company Growth Portfolio (Institutional). Wilshire Large Company Growth Portfolio (Investment)... Large Value Horace Mann Equity Fund.... Horace Mann Socially Responsible Fund........... Davis Value Portfolio...... Wilshire Large Company Value Portfolio...... Mid-Size Company Stock Funds Mid Blend Fidelity VIP Mid Cap Portfolio.. Rainier Small/Mid Cap Equity Portfolio...... Mid Growth Putnam VT Vista Fund........... Strong Mid Cap Growth Fund II. Mid Value Ariel Appreciation Fund Strong Opportunity Fund II........ Small Company Stock Funds Small Blend T. Rowe Price Small-Cap Stock Fund--Advisor Class.................. Neuberger Berman Genesis Fund Advisor Class.
Small Growth Horace Mann Small Cap Growth Fund............ Warburg Pincus Small Company Growth Portfolio.............. Wilshire Small Company Growth Portfolio....... Small Value Ariel Fund T. Rowe Price Small-Cap Value Fund--Advisor Class.................. Wilshire Small Company Value Portfolio........ International Stock Funds Horace Mann International Equity Fund................... Fidelity VIP Overseas Portfolio.............. Balanced Fund Horace Mann Balanced Fund................... Bond Funds Horace Mann Income Fund. Horace Mann Short-Term Fund................... Fidelity VIP High Income Portfolio.............. Fidelity VIP Investment Grade Bond Portfolio...
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 CONTACT--DEDUCTIONS AND EXPENSES." 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. The financial statements and reports 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 Horace Mann Small Cap Growth Fund, Horace Mann International Equity Fund and Horace Mann Socially Responsible Fund each commenced operations on March 10, 1997. The Wilshire 5000 Index Portfolio and the Wilshire Large Company Growth Portfolio subaccounts were added to the Separate Account on May 1, 2000. The other Underlying Funds except the Ariel Fund and the Ariel Appreciation Fund were added to the Separate Account on August 9, 2000. The Ariel Fund and the Ariel Appreciation Fund are not included below because they were not added to the Separate Account until May 1, 2001.
Accumulation Accumulation # Units Unit Value Unit Value Outstanding Account Year Beginning of End of End of Division Ended Period Period Period - ------------------------------------------------------------------------------------------------------------ J.P. Morgan U.S. Disciplined Equity Portfolio 12/31/00 $ $ Fidelity VIP Growth & Income Portfolio 12/31/00 $ $ Wilshire 5000 Index Portfolio 12/31/00 $ $ Fidelity VIP Index 500 Portfolio 12/31/00 $ $ Fidelity VIP Growth Portfolio 12/31/00 $ $ Alliance Premier Growth Portfolio 12/31/00 $ $ Wilshire Large Company Growth Portfolio 12/31/00 $ $ Horace Mann Equity Fund 12/31/00 $ $ 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
Horace Mann Socially Responsible Fund 12/31/00 $ $ 12/31/99 12/31/98 12/31/97 Davis Value Portfolio 12/31/00 $ $ Wilshire Large Company Value Portfolio 12/31/00 $ $ Fidelity VIP Mid Cap Portfolio 12/31/00 $ $ Rainier Small/Mid Cap Equity Portfolio 12/31/00 $ $ Putnam VT Vista Fund 12/31/00 $ $ Strong Mid Cap Growth Fund II 12/31/00 $ $ Strong Opportunity Fund II 12/31/00 $ $ T. Rowe Price Small-Cap Stock Fund--Advisor Class 12/31/00 $ $ Neuberger Berman Genesis Fund Advisor Class 12/31/00 $ $ Horace Mann Small Cap Growth Fund 12/31/00 $ $ 12/31/99 12/31/98 12/31/97 Warburg Pincus Small Company Growth Portfolio 12/31/00 $ $ Wilshire Small Company Growth Portfolio 12/31/00 $ $ T. Rowe Price Small-Cap Value Fund--Advisor Class 12/31/00 $ $ Wilshire Small Company Value Portfolio 12/31/00 $ $ Horace Mann International Equity Fund 12/31/00 $ $ 12/31/99 12/31/98 12/31/97 Fidelity VIP Overseas Portfolio 12/31/00 $ $ Horace Mann Balanced Fund 12/31/00 $ $ 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 Horace Mann Income Fund 12/31/00 $ $ 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 Horace Mann Short-Term Fund 12/31/00 $ $ 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 Fidelity VIP High Income Portfolio 12/31/00 $ $ Fidelity VIP Investment Grade Bond Portfolio 12/31/00 $ $
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) 527-2307, 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 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. Horace Mann Life Insurance Company, The Account and The Underlying 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 amounts of variable income payments are not guaranteed since the payment amounts fluctuate in accordance with the performance of the subaccounts. The account is divided into subaccounts. Horace Mann Life Insurance Company uses the assets of each subaccount to buy shares of the Underlying Funds based on contract owner instructions. The Underlying Funds The Underlying Funds are listed in Appendix A along with their primary investment objectives and a description of each adviser to such Underlying Fund. Detailed information on the Underlying Funds can be found in the current prospectus for each Underlying Fund. Prospectuses for the Underlying Funds should be read in conjunction with this prospectus. A copy of each prospectus may be obtained without charge from the Company by calling 1-800-999-1030, sending a telefacsimile transmission to (217) 527-2307 or writing to P.O. Box 4657, Springfield, IL 62708-4657. You may also access the prospectus on the company website at www.horacemann.com in the "Retirement Planning/Financial Services" link. The Contract(s) Contract Owners' Rights A Contract may be issued under a retirement plan on a qualified basis as defined in the IRC. Qualified contracts are subject to certain tax restrictions. 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 certain 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 HM Investors. HMLIC has entered into a distribution agreement with HM Investors, principal underwriter of the Account. HM Investors, located at One Horace Mann Plaza, Springfield, Illinois 62715-0001, is a broker-dealer registered under the Securities Exchange Act of 1934. HM 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 signatures and a properly endorsed suitability questionnaire. For a contract issued pursuant to Section 403(b) of the IRC, the applicant must sign an 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 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 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 annual purchase payment under a flexible premium contract is $225. Payments may be made in a lump sum or installments. The minimum monthly purchase payment is $25. No purchase payments are required after the first contract year. The minimum purchase payment under a single premium contract is $2,000. Under certain individual contracts and group plans the minimum may be reduced or waived. In addition, some individual contracts require a minimum purchase payment of $50,000, $100,000 or $250,000. 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 net 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. A request to change the allocation of purchase payments will be effective on the date of receipt. Accumulation Units and Accumulation Unit Value--The number of accumulation units purchased by net 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. The value of an accumulation unit is based on the investment experience of the Underlying Fund. Accumulation units are valued on each valuation date. The accumulation unit value for each subaccount was established on the date and for the value indicated below:
Accumulation Subaccount Date Unit Value ---------- ---- ---------- J. P. Morgan U.S. Disciplined Equity Portfolio 09/05/00 $ Fidelity VIP Growth & Income Portfolio 09/05/00 Wilshire 5000 Index Portfolio 05/01/00 Fidelity VIP Index 500 Portfolio 09/05/00 Fidelity VIP Growth Portfolio 09/05/00 Alliance Premier Growth Portfolio 09/05/00 Wilshire Large Company Growth Portfolio 05/01/00 Horace Mann Equity Fund 10/09/65 Horace Mann Socially Responsible Fund 03/10/97 Davis Value Portfolio 09/05/00 Wilshire Large Company Value Portfolio 09/05/00 Fidelity VIP Mid Cap Portfolio 09/05/00 Rainier Small/Mid Cap Equity Portfolio 09/05/00 Putnam VT Vista Fund 09/05/00 Strong Mid Cap Growth Fund II 09/05/00 Ariel Appreciation Fund 05/01/01 Strong Opportunity Fund II 09/05/00 T. Rowe Price Small-Cap Stock Fund--Advisor Class 09/05/00 Neuberger Berman Genesis Fund Advisor Class 09/05/00 Horace Mann Small Cap Growth Fund 03/10/97 Warburg Pincus Small Company Growth Portfolio 09/05/00 Wilshire Small Company Growth Portfolio 09/05/00 Ariel Fund 05/01/01
T. Rowe Price Small-Cap Value Fund--Advisor Class 09/05/00 Wilshire Small Company Value Portfolio 09/05/00 Horace Mann International Equity Fund 03/10/97 Fidelity VIP Overseas Portfolio 09/05/00 Horace Mann Balanced Fund 02/01/83 Horace Mann Income Fund 02/01/83 Horace Mann Short-Term Fund 02/01/83 Fidelity VIP High Income Portfolio 09/05/00 Fidelity VIP Investment Grade Bond Portfolio 09/05/00 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. You may transfer value from one existing investment option into as many as 10 other investment options. The minimum amount that can be transferred is $100 or the entire dollar value of the subaccount(s), whichever is less. On Annuity Alternatives contracts, for transfers from the fixed portion of the contract into a subaccount, 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 early withdrawal penalty as if the money had been withdrawn from the fixed account. The penalty will not be charged if (1) the transfer occurred on a Scheduled Update (renewal date) or (2) the Scheduled Update occurred between the transfer and withdrawal or surrender date(s). A contract owner may elect to transfer funds between subaccounts and the 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 or by accessing the company website at www.horacemann.com and looking in the "Retirement Planning/Financial Services" section. Telefacsimile (FAX) transmissions of the request also will be accepted if sent to (217) 527-2307. Depending on the means used to request a transfer, the request must: (1) be signed by the contract owner, or for telephone and company website transactions, be made by the contract owner, (2) include the name of the contract owner and the contract number, and (3) specifically state the dollar amount, a whole percentage 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 on the first valuation date following receipt of the request by the Home Office. See "Other Information--Forms Availability." Dollar Cost Averaging--You may preschedule a series of transfers between investment options to take advantage of dollar cost averaging. You may select from a 3 month, 6 month or 12 month period to complete the dollar cost averaging program. Prescheduled transfers will begin on the first valuation date following receipt of the request in the Home Office. You may transfer value from one existing investment option into as many as 10 other investment options. You may request dollar cost averaging by the same means as described above for transfers. Subsequent transfers will occur on the same calendar day each month until the program is completed. If the original request is received on the 29th, 30th, or 31st of the month, subsequent transfers will be processed on the 28th day. If you should decide to cancel an existing dollar cost averaging program, you must notify the Home Office either in writing or by calling (800) 999-1030 or by telefascimile (FAX) transmission by dialing (217) 527-2307 or by accessing our website at www.horacemann.com and looking in the "Retirement Planning/Financial Services" section. All requests must identify the contract owner's name and contract number, specify the amounts and the investment options to be utilized and include proper authorization such as a signature on a form or validating information if using the telephone or company website. Rebalancing--You may request a rebalancing of your portfolio either once or on a periodic basis. For periodic rebalancing requests, you may select from a quarterly, semiannual or annual period. You may rebalance your portfolio value into as many as 10 other investment options. You may request rebalancing by the same means as described above for transfers. For periodic rebalancing requests, subsequent rebalancing of your portfolio will continue to occur on the same calendar day of each scheduled month. If the original request is received on the 29th, 30th or 31st of the month, subsequent rebalancing of your portfolio will be processed on the 28th day. If you should decide to cancel an existing rebalancing program, you must notify the Home Office either in writing or by calling (800) 999-1030 or by telefacsimile (FAX) transmission by dialing (217) 527-2307 or by accessing our website at www.horacemann.com and looking in the "Retirement Planning/Financial Services" section. All requests must identify the contract owner's name and contract number, specify the amounts and the investment options to be utilized and include proper authorization such as a signature on a form or validating information if using the telephone or company website. Changes to Purchase Payment Allocations --A contract owner may elect to change the allocation of future net 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 or by accessing the company website at www.horacemann.com and looking in the "Retirement Planning/Financial Services" section. 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, (2) include the contract owner's name and contract number, and (3) specify the new allocation percentage for each subaccount (in whole percentages). 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 on the first valuation date following receipt of the request by the Home Office. See "Other Information--Forms Availability." Surrender or Withdrawal 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 (rollover, exchange, etc.) is determined on the basis of the accumulation unit value next computed following the receipt of a valid request for surrender or partial withdrawal in the Home Office. 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 to HMLIC; telefacsimile (FAX) transmissions of the request will be accepted if the proceeds are sent to the contract owner and the request is sent to (217) 527-2307. 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 a valid 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 surrender charges shown in "Deductions and Expenses--Surrender Charges." HMLIC surrender charges are applied to the withdrawals based on the date the account is opened and not on the date the purchase payment 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 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 may be 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 net 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. If you request a partial withdrawal from your tax-deferred annuity contract (TDA) using the hardship withdrawal regulations of the IRC, any periodic contributions you are making to the contract must be temporarily suspended for a period of twelve months. After the twelve-month period is completed, you may resume making contributions to your tax-deferred annuity contract. 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. The value of the contract is determined as of the valuation date on which a valid request is received. 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 on a quarterly basis 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 individual contracts and on some group plans. The annual maintenance charge is deducted from the subaccount containing the greatest dollar amount or from the fixed portion of the contract when none of the variable subaccount(s) have any value. Charges for annual maintenance cease on the maturity date. 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 an asset charge to the Variable Account. The fee for mortality and expense risk may not exceed the annual rate of 1.25% of the daily net assets of the Variable Account (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 is computed on a daily basis. Mortality and Expense Contract value at issue Risk Fee - ----------------------------------------------------------------------------- Less than $50,000.............................................. 1.25% $ 50,000+*..................................................... 1.15% $100,000+*..................................................... 1.05% $250,000+*..................................................... 0.95% * HMLIC started selling these products on September 1, 1999 where state approvals have been received. Surrender charges--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 products reflected below may not be available in all states. Flexible Premium Single (based on cash value at issue) Premium ------------------------------ ------- Under age 55 (age at issue) - ------------------------------------------------------------------------------ During Contract Under Year $50,000 $50,000+* $100,000+* $250,000+* - ------------------------------------------------------------------------ 1 8% 7% 6% 6% 5% 2 8% 6% 5% 5% 4% 3 6% 5% 5% 5% 3% 4 4% 5% 5% 5% 2% 5 2% 5% 5% 5% 1% Thereafter 0% 0% 0% 0% 0% Age 55+ (age at issue) - ------------------------------------------------------------------------------- 1 8% 7% 6% 6% 2 8% 6% 5% 5% 3 6% 5% 4% 4% 4 4% 4% 3% 3% 5 2% 3% 2% 2% 6 0% 2% 1% 1% 7 0% 1% 0% 0% Thereafter 0% 0% 0% 0% * HMLIC started selling these products on September 1, 1999 where state approvals have been received. For further information regarding surrender or partial withdrawals see "Surrender or Withdrawal Before Commencement of Annuity Period." Operating Expenses of the Underlying Funds--There are deductions from and expenses paid out of the assets of the Underlying Funds that are described in each Underlying Fund's 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 purchase 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 net purchase payments less any withdrawals, whichever is greater, will be paid 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 some group plans and certain individual flexible premium products the death benefit may include an annual increase in value. Proof of death includes a certified death certificate and a completed claimant's statement. All or part of the death benefit proceeds may be paid to the beneficiary 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 by December 31 of the calendar year of the fifth anniversary of the 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. 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. These requirements are amended from time to time. A distribution must occur each calendar year once a contract owner reaches age 70 1/2. 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. Also, 403(b) contract owners who have not separated from service can delay their distributions until after they separate from service (i.e., quit teaching). 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. Under some individual contracts if the contract owner selects a lifetime option the company will pay a bonus which equals a percentage of the amount placed on the settlement option. 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 as of 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 receive the request in the Home Office. Your purchase payment allocation(s) will be changed to the Fixed Account or Variable Account, depending on the payment option elected. 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 and 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 may 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 certain period is selected (5, 10, 15, 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. If no beneficiary is living at the time of the annuitant's death, the present value, if any, of the remaining certain period 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 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 based on the survivor percentage elected (i.e., 100%, 50%, etc.). 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. If no beneficiary is living at the time of the annuitant's death, the present 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 subject to surrender penalties, if applicable, from the remaining present value, subject to IRC requirements. To determine the surrender penalty rate, contract years are counted from the original effective date of the accumulation contract. Refer to "Deductions and Expenses--Surrender Charges" for the appropriate rate. 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. If no beneficiary is living at the time of the annuitant's death, the present 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 subject to surrender penalties, if applicable, from the remaining present value, subject to IRC requirements. To determine the surrender penalty rate, contract years are counted from the original effective date of the accumulation contract. Refer to "Deductions and Expenses-- Surrender Charges" for the appropriate rate. 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 70 2, interest income payments may continue, however, the total annual distribution must meet the minimum mandatory distribution requirements of the IRC. 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, subject to surrender penalties if applicable. 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 portion 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 within the contract by its respective accumulation unit value. Contract value may be more or less than the amount of net purchase payments allocated to the contract. Fixed Income Payments--The amount of each payment under a fixed income payment option is determined from the guaranteed income option tables in the contract. These tables show the monthly payment for each $1,000 of contract value allocated to provide a guaranteed fixed income payment. These 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 guaranteed 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 to the survivor percentage elected. 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 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 charge, 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 3.0% per annum. See your contract for additional information. Annuity Unit Value--The variable annuity unit value for the Horace Mann Equity Fund, Horace Mann Balanced Fund, and Horace Mann Income Fund subaccounts was set at $10.00 as of the date amounts first were allocated to provide income payments. The variable annuity unit value for the following subaccounts is established at $10.00, however, no income payments have been paid from these subaccounts: J.P. Morgan U.S. Disciplined Equity Portfolio Fidelity VIP Growth & Income Portfolio Wilshire 5000 Index Portfolio Fidelity VIP Index 500 Portfolio Fidelity VIP Growth Portfolio Alliance Premier Growth Portfolio Wilshire Large Company Growth Portfolio Horace Mann Socially Responsible Fund Davis Value Portfolio Wilshire Large Company Value Portfolio Fidelity VIP Mid Cap Portfolio Rainier Small/Mid Cap Equity Portfolio Putnam VT Vista Fund Strong Mid Cap Growth Fund II Ariel Appreciation Fund Strong Opportunity Fund II T. Rowe Price Small-Cap Stock Fund--Advisor Class Neuberger Berman Genesis Fund Advisor Class Horace Mann Small Cap Growth Fund Warburg Pincus Small Company Growth Portfolio Wilshire Small Company Growth Portfolio Ariel Fund T. Rowe Price Small-Cap Value Fund--Advisor Class Wilshire Small Company Value Portfolio Horace Mann International Equity Fund Fidelity VIP Overseas Portfolio Horace Mann Short-Term Fund Fidelity VIP High Income Portfolio Fidelity VIP Investment Grade Bond Portfolio 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, including 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 current valuation date, plus any dividends or other distributions, by the net asset value of a share on the valuation date of the preceding valuation period, 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 net purchase payments be allocated to a subaccount within the Account other than one or more of those currently offered. If shares of the portfolios underlying the subaccounts 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 Simplified Employee Pension Plan described in IRC Section 408(k) ("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. 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 including a spouse) may be deducted from gross income. The same contribution limits apply to the Roth IRA, however, it is funded with after-tax dollars. The maximum annual contribution for all IRAs (including Roth IRA's) 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 deductible IRA. 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 (IRC 403(b)(11)(B)). 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. 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. Penalty Tax--Distributions to a contract owner under a qualified plan or IRA are subject to a 10% penalty tax 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. Roth IRAs are not subject to the 10% penalty if: The contract has been in force for five years; and The annuitant has attained age 59 1/2; or 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 Used for qualified higher education expenses of the owner, spouse, children or grandchildren; 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 Underlying 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. 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. Communications to Contract Owners--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. 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................................ 4 To receive, without charge, a copy of the 2000 Annual Report of the Horace Mann Mutual 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, please complete the following request form and mail it to the address indicated below, or send it by telefacsimile (FAX) transmission to (217) 527-2307 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: 2000 Annual Report of the Horace Mann Mutual Funds and the Horace Mann Life Insurance Company Separate Account. Statement of Additional Information dated May 1, 2001 for the Horace Mann Life Insurance Company Separate Account. Please mail the above documents to: ------------------------------- (Name) ------------------------------- (Address) ------------------------------- (City/State/Zip) Appendix A The Underlying Funds The following mutual funds are available for investment by the subaccounts which are a part of the contracts offered in this prospectus. 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 ("Horace Mann Funds"). The Trust issues shares of beneficial interest that are continually offered for sale. The Horace Mann 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 Horace Mann Funds whereby the subadviser(s) manage the investment and reinvestment of the assets of a fund. The primary investment objective of the Horace Mann Equity Fund is long-term capital growth; conservation of principal and production of income are secondary objectives. The Equity Fund invests substantially all of its assets in common stocks of domestic companies. Wellington Management Company, LLP ("Wellington Management"), Alliance Capital Management LP ("Alliance") successor of Sanford C. Bernstein and Co., Inc. ("Sanford Bernstein") and Mellon Equity Associates, LLP ("Mellon Equity") serve as the investment subadvisers to the Equity Fund. This fund was referred to as the Growth Fund prior to May 1, 2000. The primary investment objective of the Horace Mann 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 through investments in the Equity Fund and Income Fund. The primary investment objective of the Horace Mann 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. Western Asset Management Company ("Western Asset") and Western Asset Management Limited ("WAML") serve as the investment subadvisers to the Income Fund. The primary investment objective of the Horace Mann Short-Term Investment Fund ("Horace Mann 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. Western Asset serves as the investment subadviser to the Short-Term Fund. The investment objective of the Horace Mann 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. Accordingly, their stock prices may rise faster, but can also decline more in unfavorable business climates. As a result of these "higher highs" and "lower lows," they are more volatile. BlackRock Financial Management, Inc. ("BlackRock") serves as investment subadviser to the Small Cap Growth Fund. The primary investment objective of the Horace Mann 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. Investing in foreign securities may involve a greater degree of risk than investing in domestic securities due to the possibility of currency fluctuations, more volatile markets, less securities regulation and political instability. Zurich Scudder Investments, Inc. ("Zurich Scudder") serves as the investment subadviser to the International Equity Fund. The investment objective of the Horace Mann Socially Responsible Fund is long-term growth of capital, 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: 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. Because this fund invests in companies with socially responsible business practices, it has limitations that may have an impact on performance. Zurich Scudder serves as the investment subadviser to the Socially Responsible Fund. Alliance The investment objective of the Alliance Premier Growth Portfolio is growth of capital by pursuing aggressive investment policies. The Portfolio invests primarily in equity securities of U.S. companies. Unlike most equity funds, the Portfolio focuses on a relatively small number of intensively researched companies. Alliance selects the Portfolio's investments from a research universe of more than 600 companies that have strong management, superior industry positions, excellent balance sheets, and superior earnings growth prospects. The Alliance Premier Growth Portfolio is a series of the Alliance Variable Products Series and is advised by Alliance Capital Management. Ariel Mutual Funds The investment objective of the Ariel Appreciation Fund is long-term capital appreciation. It seeks this objective primarily through investing in the stocks of medium-sized companies with market capitalizations between $1 billion and $10 billion at the time of investment. Ariel Appreciation Fund seeks stocks whose underlying value is currently unrecognized, but should increase over time. The fund is advised by Ariel Capital Management, Inc. The investment objective of the Ariel Fund is long-term capital appreciation. It seeks this objective primarily through investing in the stocks of small companies with a market capitalization under $2 billion at the time of investment. Ariel Fund seeks stocks whose underlying value is currently unrecognized, but should increase over time. The fund is advised by Ariel Capital Management, Inc. Davis Davis Value Portfolio's investment objective is growth of capital. The Fund invests primarily in common stock of U.S. companies with market capitalizations of at least $5 billion that are believed to be of high quality and whose shares are selling at attractive prices. The Fund's adviser selects stocks with the intention of holding them for the long term. The Fund's adviser believes that managing risk is the key to delivering superior long-term investment results; therefore, it considers how much could potentially be lost on an investment before considering how much might be gained. The Davis Value Portfolio is a series of the Davis Variable Account Fund and is advised by Davis Selected Advisers, L.P. Fidelity The investment objective of the Fidelity VIP Growth Portfolio is to achieve capital appreciation. The fund invests primarily in common stocks and invests in both domestic and foreign companies that it believes have above-average growth potential. The Fidelity VIP Growth Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP Overseas Portfolio is to seek long-term growth of capital. The fund invests at least 65% of the total assets in foreign securities, primarily common stocks. The investments are allocated across countries and regions considering the size of the market in each country and region relative to the size of the international market as a whole. The Fidelity VIP Overseas Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP High Income Portfolio is to seek a high level of current income while also considering growth of capital. The fund invests at least 65% of its total assets in income-producing debt securities, preferred stocks and convertible securities, with an emphasis on lower-quality debt securities. The fund may also invest in non-income producing securities, including defaulted securities and common stocks. It may also invest in companies whose financial condition is troubled or uncertain. It may also invest in securities of foreign issuers in addition to securities of domestic issuers. The Fidelity VIP High Income Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP Investment Grade Bond Portfolio is to seek as high a level of current income as is consistent with the preservation of capital. The fund invests in U.S. dollar-denominated investment- grade bonds with different market sectors and maturities. The adviser attempts to maintain an overall interest rate risk similar to the Lehman Brothers Aggregate Bond Index. The Fidelity VIP Investment Grade Bond Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP Mid Cap Portfolio is to seek long-term growth of capital. The fund invests primarily in common stocks and invests at least 65% of its total assets in securities of companies with medium market capitalizations. The fund invests in either "growth" stocks or "value" stocks or both. The Fidelity VIP Mid Cap Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP Growth & Income Portfolio is to seek high total return through a combination of current income and capital appreciation. The fund invests a majority of its assets in common stocks with a focus on those that pay current dividends and show potential for capital appreciation. It also potentially invests in bonds, including lower-quality debt securities, as well as stocks that are not currently paying dividends, but offer prospects for future income or capital appreciation. The Fidelity VIP Growth & Income Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP Index 500 Portfolio is to seek investment results that correspond to the total return of common stocks publicly traded in the United States, as represented by the S&P 500. The fund invests at least 80% of its assets in commons stocks included in the S&P 500. The Fidelity VIP Index 500 Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. J.P. Morgan The investment objective of the J.P. Morgan U.S. Disciplined Equity Portfolio is to provide high total return from a portfolio of selected equity securities. The portfolio invests primarily in large and medium-capitalization U.S. companies. Industry by industry, the portfolio's weightings are similar to those of the S&P 500. The portfolio does not look to overweight or underweight industries. The J.P. Morgan U.S. Disciplined Equity Portfolio is a series of the J.P. Morgan Series Trust II and is advised by J.P. Morgan Investment Management. Neuberger Berman The investment objective of Neuberger Berman Genesis Fund Advisor Class is to invest mainly in common stocks of small-capitalization companies, which it defines as those with a total market value of no more than $1.5 billion at the time the fund first invests in them. The fund may continue to hold or add to a position in a stock after it has grown beyond $1.5 billion. The fund seeks to reduce risk by diversifying among many companies and industries. Neuberger Berman Genesis Fund Advisor Class is advised by Neuberger Berman Management Inc. and subadvised by Neuberger Berman, LLC. Putnam The investment objective of the Putnam VT Vista Fund is to seek capital appreciation. The fund invests mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that Putnam believes are fast-growing and whose earnings Putnam believes are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. The fund invests mainly in midsized companies. The Putnam VT Vista Fund is a series of the Putnam Variable Trust and is advised by Putnam Investment Management. Rainier The investment objective of the Rainier Small/Mid Cap Equity Portfolio is to seek to maximize long-term appreciation. In pursuing its goal, the Portfolio invests primarily in the common stocks of smaller U.S. companies with the prospects of strong earnings growth selling at attractive valuations. The Portfolio normally will invest at least 65% of its total assets in equity securities of companies with small and medium-size capitalizations. The Rainier Small/Mid Cap Equity Portfolio is advised by Rainier Investment Management, Inc. Strong The investment objective of the Strong Opportunity Fund II is to seek capital growth. The fund invests primarily in stocks of medium-capitalization companies that the fund's manager believes are underpriced, yet have attractive growth prospects. The manager determines a company's private market value based on a fundamental analysis of a company's cash flows, asset valuations, competitive situation, and franchise value. The Strong Opportunity Fund II is advised by Strong Capital Management Inc. The investment objective of the Strong Mid Cap Growth Fund II is to seek capital growth. The fund invests at least 65% of its assets in stocks of medium-capitalization companies that the fund's managers believe have favorable prospects for accelerating growth of earnings but are selling at reasonable valuations based on earnings, cash flow, or asset value. The fund defines "medium-capitalization companies" as those companies with a market capitalization substantially similar to that of companies in the S&P MidCap 400 Index at the time of investment. The Strong Mid Cap Growth Fund II is advised by Strong Capital Management Inc. T. Rowe Price The investment objective of the T. Rowe Price Small-Cap Value Fund--Advisor Class is to seek long-term capital growth by investing primarily in small companies whose common stocks are believed to be undervalued. Reflecting a value approach to investing, the fund will seek the stocks of companies whose current stock prices do not appear to adequately reflect their underlying value as measured by assets, earnings, cash flow, or business franchises. Normally, the fund will invest at least 65% of its total assets in companies with a market capitalization of $1 billion or less. The T. Rowe Price Small-Cap Value Fund--Advisor Class is advised by T. Rowe Price Associates. The investment objective of the T. Rowe Price Small-Cap Stock Fund--Advisor Class is to provide long-term capital growth by investing primarily in stocks of small companies. To achieve this result the fund invests at least 65% of its total assets in stocks and equity-related securities of small companies. A small company is defined as having a market capitalization that falls within the range of companies in the Russell 2000 Index, a widely used benchmark for small-cap stock performance. Stock selection may reflect either a growth or value investment approach. The T. Rowe Price Small-Cap Stock Fund--Advisor Class is advised by T. Rowe Price Associates. Warburg Pincus The investment objective of the Warburg Pincus Small Company Growth Portfolio is to seek capital growth. To pursue this goal, it invests primarily in equity securities of small U.S. growth companies. The Portfolio considers a "small" company to be one whose market capitalization is within a range of capitalizations of companies in the Russell 2000 Index. As of December 31, 1999, the Russell 2000 Index included companies with market capitalizations between $178 million and $1.3 billion. Small companies may outgrow the definition of a small company after purchase but will continue to be considered small for purposes of the Portfolio's allocation to small company equities. The Warburg Pincus Small Company Growth Portfolio is a series of the Warburg Pincus Trust and is advised by Credit Suisse Asset Management, LLC. Wilshire Target Funds, Inc. Wilshire Target Funds, Inc. ("Wilshire Funds") is an open-end management investment company registered under the Investment Company Act of 1940. The Wilshire Funds are made up of a series of portfolios. The Wilshire Funds issues shares that are continually offered for sale. The Wilshire Funds are advised by Wilshire Associates Incorporated. The investment objective of the Wilshire Large Company Growth Portfolio is to provide investment results of a portfolio of publicly traded common stocks of companies in the large company growth sub-category of the Wilshire 5000 Index. The Wilshire Large Company Growth Portfolio focuses on the large company segment of the U.S. equity market and invests in companies with above average earnings or sales growth histories and retention of earnings. Often such companies will have above average price/earnings ratios. The Wilshire Large Company Growth Portfolio primarily invests in stocks of companies with the largest market capitalizations (extending down to $2.1 billion). Because this fund invests in large companies it may be more volatile than a fund that invests in a broader market segment. The investment objective of the Wilshire 5000 Index Portfolio is to replicate as closely as possible the performance of the Wilshire 5000 Index before the deduction of fund expenses. This Portfolio is an index fund and primarily invests in the common stocks of companies included in the Index that are representative of the entire Index. The Wilshire 5000 Index Portfolio normally holds stocks representing at least 90% of the total market value of the Index. Since the Portfolio does not invest in all of the stocks included in the Index it may be more volatile than the Index. The investment objective of the Wilshire Large Company Value Portfolio is to provide investment results of a portfolio of publicly traded common stocks of companies in the large company value sub-category of the Wilshire 5000 Index. The Wilshire Large Company Value Portfolio focuses on the large company value segment of the U.S. equity market. Typically such companies have relatively low price to book value ratios, low price to earnings ratios and higher than average dividend yields. The Wilshire Large Company Value Portfolio primarily invests in stocks with the largest market capitalization (extending down to $2.1 billion). Because this fund invests in large companies it may be more volatile than a fund that invests in a broader market segment. The investment objective of the Wilshire Small Company Value Portfolio is to provide investment results of a portfolio of publicly traded common stocks of companies in the small company value sub-category of the Wilshire 5000 Index. The Wilshire Small Company Value Portfolio focuses on the small company value segment of the U.S. equity market. Typically such companies have relatively low price to book value ratios, low price to earnings ratios and relatively high dividend yields. The Wilshire Small Company Value Portfolio primarily invests in stocks with smaller market capitalizations (between $2.1 billion and $219 million). Because this fund invests in small companies it may be more volatile than a fund that invests in a broader market segment. The investment objective of the Wilshire Small Company Growth Portfolio is to provide investment results of a portfolio of publicly traded common stocks of companies in the small company growth sub-category of the Wilshire 5000 Index. The Wilshire Small Company Growth Portfolio focuses on the small company growth segment of the U.S. equity market. Typically such companies have above average earnings or sales growth histories and retention of earnings, and often they have higher price to earnings ratios. The Wilshire Small Company Growth Portfolio primarily invests in stocks with smaller market capitalizations (between $2.1 billion and $219 million). Because this fund invests in small companies it may be more volatile than a fund that invests in a broader market segment. Administrator: Horace Mann Investors, Inc. HM 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 Horace Mann Mutual Funds (the "Trust") pursuant to an Administration Agreement dated March 1, 1999 (the "Administration Agreement"). HM Investors provides for the management of the business affairs of the Trust, 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 the Trust's business affairs. Under the current administration agreement, the Trust agrees to assume and pay the charges and expenses of its operations, including, by way of example, the compensation of Trustees other than those affiliated with HM 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 Trust, reports and notices to shareholders, other like miscellaneous expenses, and all taxes and fees to federal, state, or other governmental agencies. For the services and facilities furnished to the Trust, HM Investors receives a fee based upon the combined assets of the Trust as follows: 0.25% of the first $1 billion of assets and 0.20% of assets in excess of $1 billion. An administration fee is charged directly against all assets in the Horace Mann Balanced Fund. However, in order to avoid duplication of charges under the fund of funds structure, HM Investors has indicated that it intends to waive the majority of the administrative fees charged to the Horace Mann Balanced Fund directly. In addition, Horace Mann Balanced Fund shareholders will indirectly pay the administration fee of the assets invested in the Horace Mann Equity Fund and Horace Mann Income Fund under the fund of funds structure. Therefore, the aggregate administration fees directly and indirectly borne by shareholders of the Horace Mann Balanced Fund will be higher than the fees shareholders would bear if they invested directly in the Horace Mann Equity Fund and Horace Mann Income Fund. Prospectus Non-qualified variable tax deferred annuity contracts Prospectus Horace Mann Life Insurance Company Separate Account for Annuity Alternatives Contracts May 1, 2001 Non-Qualified Variable Deferred Annuity Contracts Issued By Horace Mann Life Insurance Company Separate Account Single Premium Contracts for Individuals Flexible Premium Contracts for Individuals and Groups This prospectus offers combination fixed and variable, non-qualified annuity contracts to individuals and groups. These contracts are issued by Horace Mann Life Insurance Company ("HMLIC") and can be issued as flexible premium contracts or, for individuals, as single premium contracts. 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 the subaccounts (sometimes referred to as variable investment options or variable accounts). Each subaccount purchases shares in a corresponding mutual fund. The mutual funds are: Large Company Stock Funds International Stock Funds Large Blend Horace Mann International Equity Fund J.P. Morgan U.S. Disciplined Equity Portfolio Fidelity VIP Overseas Portfolio Fidelity VIP Growth & Income Portfolio Fidelity VIP Index 500 Portfolio Balanced Fund Large Growth Horace Mann Balanced Fund Fidelity VIP Growth Portfolio Alliance Premier Growth Portfolio Bond Funds Large Value Horace Mann Income Fund Horace Mann Equity Fund Horace Mann Short-Term Fund Horace Mann Socially Responsible Fund Fidelity VIP High Income Portfolio Davis Value Portfolio Fidelity VIP Investment Grade Bond Portfolio Mid-Size Company Stock Funds Mid Blend Fidelity VIP Mid Cap Portfolio Mid Growth Putnam VT Vista Fund Strong Mid Cap Growth Fund II Mid Value Strong Opportunity Fund II Small Company Stock Funds Small Growth Horace Mann Small Cap Growth Fund Warburg Pincus Small Company Growth Portfolio
This Prospectus sets forth the information an investor should know. Additional information about the HMLIC Separate Account has been filed with the Securities and Exchange Commission in a Statement of Additional Information, dated May 1, 2001. The Statement of Additional Information is incorporated by reference and is available upon request, without charge. You may obtain the Statement of Additional Information by writing to Horace Mann Life Insurance Company, 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). The table of contents of the Statement of Additional Information appears on page 18 of this prospectus. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE ANNUITIES OFFERED BY HMLIC ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. THEY ARE NOT DEPOSITS, OBLIGATIONS, OR GUARANTEED BY ANY BANK. THEY INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. The date of this Prospectus is May 1, 2001. Table of Contents - -----------------
Page ---- Definitions.............................................................................................................. 3 Summary.................................................................................................................. 4 Condensed Financial Information.......................................................................................... 9 Horace Mann Life Insurance Company, The Account and The Underlying Mutual Funds.......................................... 11 Horace Mann Life Insurance Company.............................................................................. 11 The Account..................................................................................................... 11 The Underlying Funds............................................................................................ 11 The Contract(s).......................................................................................................... 11 Contract Owners' Rights......................................................................................... 11 Purchasing the Contract......................................................................................... 11 Purchase Payments............................................................................................... 11 Amount and Frequency of Purchase Payments.............................................................. 12 Allocation of Purchase Payments........................................................................ 12 Accumulation Units and Accumulation Unit Value......................................................... 12 Transactions.................................................................................................... 12 Transfers.............................................................................................. 12 Dollar Cost Averaging.................................................................................. 12 Rebalancing............................................................................................ 12 Changes to Purchase Payment Allocations................................................................ 12 Surrender or Withdrawal Before Commencement of Annuity Period.......................................... 12 Deferment.............................................................................................. 13 Confirmations.......................................................................................... 13 Deductions and Expenses......................................................................................... 13 Annual Maintenance Charge.............................................................................. 13 Mortality and Expense Risk Fee......................................................................... 14 Surrender Charges...................................................................................... 14 Operating Expenses of the Underlying Funds............................................................. 14 Premium Taxes.......................................................................................... 14 Death Benefit Proceeds.......................................................................................... 14 Income Payments................................................................................................. 14 Income Payment Options................................................................................. 15 Amount of Fixed and Variable Income Payments........................................................... 15 Misstatement of Age............................................................................................. 16 Modification of the Contract.................................................................................... 16 Tax Consequences......................................................................................................... 16 Separate Account................................................................................................ 16 Contract Owners................................................................................................. 17 Contributions.......................................................................................... 17 Distributions Under Non-Qualified Contracts............................................................ 17 Penalty Tax............................................................................................ 17 Voting Rights............................................................................................................ 17 Other Information........................................................................................................ 17 Additional Information................................................................................................... 18 Appendix A............................................................................................................... 19
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. Definitions - ----------- Account: Horace Mann Life Insurance Company Separate Account, a segregated variable investment account consisting of subaccounts each of which invests in a corresponding Underlying 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. Accumulation Unit Value: The value of an accumulation unit on any valuation date. 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 a 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 premium contracts and to both individuals and groups as flexible premium 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. 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. Mutual Fund(s): Open-end management investment companies in which the assets of the subaccount(s) will be invested. These companies are generally registered under the Investment Company Act of 1940. 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. Participant: A person to whom a certificate showing participation under a group contract has been issued. Subaccount: A division of the Separate Account of Horace Mann Life Insurance Company which invests in shares of the corresponding Underlying Fund. 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. Underlying Funds: All mutual funds listed in Appendix A that are available for investment by the Horace Mann Life Insurance Company Separate Account. Valuation Date: The valuation date ends at 3:00 p.m. central time. No valuations are made for any day that the New York Stock Exchange is closed, and for 2001 no valuations are made for the day after Thanksgiving or December 24th. 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. 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 accumulated value varies based on the investment performance of the subaccount selected. For information regarding the fixed portion, refer to the contract. Detailed information about the Underlying Funds is contained in each Underlying Funds' Prospectus and in each Underlying Fund Statement of Additional Information. The expenses for the Underlying Funds, 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"? The Horace Mann Life Insurance Company Separate Account (the "Account") segregates 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 subaccounts, each investing in shares of a corresponding Underlying 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 premium annuity. Individuals may also purchase the single premium plan. The contracts offered by this prospectus are designed to provide non-qualified retirement annuities. The contract is offered and sold by HMLIC through its licensed life insurance sales personnel. These insurance sales personnel are registered representatives of Horace Mann Investors, Inc. ("HM Investors"). HM Investors is a broker/dealer registered under the Securities and Exchange Act of 1934. HMLIC has entered into a distribution agreement with HM Investors. HM 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 premium contract during any contract year is $1,200 if deposited using payroll deduction or electronic funds transfer, otherwise the minimum is $2,000. The minimum purchase payment under a single premium contract is $2,000. Contract owners may elect to allocate all or part of the net 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. No purchase payments are required after the first contract year. What are my investment choices? You may have money allocated to or invested in no more than 24 subaccounts at any one time. (a) Separate Account Includes subaccounts each of which invests in one of the following Underlying Funds: Large Company Stock Funds Large Blend J. P. Morgan U.S. Disciplined Equity Portfolio Fidelity VIP Growth & Income Portfolio Fidelity VIP Index 500 Portfolio Large Growth Fidelity VIP Growth Portfolio Alliance Premier Growth Portfolio Large Value Horace Mann Equity Fund Horace Mann Socially Responsible Fund Davis Value Portfolio Mid-Size Company Stock Funds Mid Blend Fidelity VIP Mid Cap Portfolio Mid Growth Putnam VT Vista Fund Strong Mid Cap Growth Fund II Mid Value Strong Opportunity Fund II Small Company Stock Funds Small Growth Horace Mann Small Cap Growth Fund Warburg Pincus Small Company Growth Portfolio International Stock Funds Horace Mann International Growth Fund Fidelity VIP Overseas Portfolio Balanced Fund Horace Mann Balanced Fund Bond Funds Horace Mann Income Fund Horace Mann Short-Term Fund Fidelity VIP High Income Portfolio Fidelity VIP Investment Grade Bond Portfolio (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 could be subject to certain charges if the transferred amount is withdrawn or surrendered. The minimum amount that can be transferred is $100 or the entire dollar value of the subaccount(s), whichever is less. For full details see "The Contract--Transactions--Transfers." May I withdraw all or part of the contract value before the Maturity Date? Unless restricted 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 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 in "Deductions and Expenses--Surrender Charges." What are the charges or deductions? Contracts may be 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), is deducted from the Variable Account. This fee is computed on a daily basis and will not exceed an annual rate of 1.25% of the daily net assets of the Variable Account. 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. 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 to eight contract years depending on the contract you purchase. The charge in the first contract year on flexible premium contracts is 8% and on a single payment contract the charge is 5%. 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 purchases payments to the subaccount(s). See "The Contract--Transactions--Surrender Before Commencement of Annuity Period." What are the federal income tax consequences of investing in this contract? The IRC provides penalties for premature distributions under various investment plans. See "Tax Consequences." This contract might not be suitable for 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, if applicable, will be refunded. When can I begin receiving income payments, and what options are available? Payments will begin on the maturity date set by the terms of your contract. Variable income payments are made in monthly installments. A lump sum payment may 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 Certain Period, Joint and Survivor Life Annuity, Income for Fixed Period, Income for Fixed Amount, and Interest Income Payments. 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. A contract owner who invests in the Fixed Account would be subject to the annual maintenance charge and surrender charges. Horace Mann Life Insurance Company Separate Account Contract Owner Transaction Expenses:(1) Maximum Surrender Charge as a percentage of amount surrendered(2) --for Single Payment Contracts...................................... 5.00% --for Flexible Premium Contracts.................................... 8.00% Annual Maintenance Charge(3)............................................ $ 25 Separate Account annual expenses, as a percentage of average account value: Mortality Risk........................................................ 0.45% Expense Risk.......................................................... 0.80% Total Separate Account M&E Fee.......................................... 1.25% Underlying Funds Annual Operating Expenses of the Underlying funds, as a percentage of average daily net assets, as of 12/31/00 unless otherwise noted:
Total Fund Management 12-b1 Other Operating Fee fees Expenses Expense -------------------------------------------- Large Company Stock Funds Large Blend JP Morgan U.S. Disciplined Equity Portfolio................... 0.35% 0.50% 0.85% Fidelity VIP Growth & Income Portfolio SC 2(6)................ 0.48% 0.25% 0.12% 0.85% Fidelity VIP Index 500 Portfolio SC 2(6B)..................... 0.24% 0.25% 0.27% 0.76% Large Growth Fidelity VIP Growth Portfolio SC 2(6)......................... 0.57% 0.25% 0.09% 0.91% Alliance Premier Growth Portfolio............................. 1.00% 0.25% 0.05% 1.30% Large Value Horace Mann Equity Fund(4)(5)................................. 0.64% 0.18% 0.82% Horace Mann Socially Responsible Fund(4)(5)................... 0.94% 0.22% 1.16% Davis Value Portfolio(8)...................................... 0.75% 0.26% 1.01% Mid-Size Company Stock Funds Mid Blend Fidelity VIP Mid Cap Portfolio SC 2(6)........................ 0.57% 0.25% 0.17% 0.99% Mid Growth Putnam VT Vista Fund.......................................... 0.60% 0.15% 0.07% 0.82% Strong Mid Cap Growth Fund II(7).............................. 1.00% 0.19% 1.19% Mid Value Strong Opportunity Fund II(7)................................. 1.00% 0.10% 1.10% Small Company Stock Funds Small Growth
Horace Mann Small Cap Growth Fund(4)(5)...................... 1.39% 0.32% 1.71% Warburg Pincus Small Company Growth Portfolio................ 0.90% 0.21% 1.11% International Stock Funds Horace Mann International Equity Fund(4)(5).................. 1.09% 0.67% 1.76% Fidelity VIP Overseas Portfolio SC 2(6)...................... 0.72% 0.25% 0.18% 1.15% Balanced Fund Horace Mann Balanced Fund(4)(5).............................. 0.64% 0.18% 0.82% Bond Funds Horace Mann Income Fund(4)(5)................................. 0.64% 0.43% 1.07% Horace Mann Short-Term Fund(4)(5)............................. 0.37% 1.58% 1.95% Fidelity VIP High Income Portfolio SC 2 ...................... 0.58% 0.25% 0.18% 1.01% Fidelity VIP Investment Grade Bond Portfolio SC 2(6A)......... 0.43% 0.25% 1.07% 1.75%
(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 deducted at the time of purchase 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 or the dollar value for the waiver may be reduced or eliminated on certain individual contracts and group plans. (4) The Other Expenses for the Horace Mann Mutual Funds are shown based on actual amounts for the fiscal year ended December 31, 2000 except for the Support Services agreement which went into effect March 1, 1999 and is reflected at the contractual amount for the full calendar year. The subadvisers seek the best price and execution on each transaction and negotiate 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 Horace Mann Mutual Funds part of the commissions paid (Commission Credits). Horace Mann Investors, voluntarily waived a portion of its Management Fee on the Short-Term Fund and subsidized specific expenses for certain funds during 1999. The Funds' advisor, Wilshire Associates Incorporated, waived a portion of its advisory fee during 1999 for each fund. With these waivers, commission credits or subsidization the Management Fee, Other Expenses and Total Fund Operating Expenses, respectively, were: 0.64%, 0.16% and 0.80% for the Equity Fund; 0.64%, 0.16% and 0.80% for the Balanced Fund; 0.64%, 0.43% and 1.07% for the Income Fund; 0.37%, 1.26% and 1.63% for the Short-Term Fund; 1.39%, 0.23% and 1.62% for the Small Cap Fund; 1.09%, 0.28% and 1.37% for the International Fund; and 0.94%, 0.16% and 1.10% for the Socially Responsible Fund. (5) The "Management Fees" include both the advisory fee payable to Wilshire Associates Incorporated and the administration fee payable to Horace Mann Investors, Inc. for the Horace Mann Mutual Funds. (6) Actual annual class operating expenses were lower because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expenses, and/or because through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's custodian expenses. See the accompanying fund prospectus for details. (6A) The fund's manager has voluntarily agreed to reimburse the class's expenses if they exceed a certain level. Including this reimbursement, the annual class operating expenses were 1.05%. This arrangement may be discontinued by the fund's manager at any time. (6B) The fund's manager has voluntarily agreed to reimburse the class's expenses if they exceed a certain level. Including this reimbursement, the annual class operating expenses were 0.53%. This arrangement may be discontinued by the fund's manager at any time. (7) On the Strong Opportunity Fund II, the Fund's advisor is currently absorbing expenses of 0.04%. With these absorptions, the expense ratio would be 1.10%. On the Strong Mid Cap Growth Fund II, the Fund's advisor is currently absorbing expenses of 0.02%. With this absorption the expense ratio would be 1.15%. (8) Davis Selected Advisers, L.P. has agreed to cap the Portfolio's total expenses at 1.00% until May 1, 2002. With this agreement the Management Fee would be 0.75%, the Other Expenses would be 0.25% and the Total Expenses would be 1.00%. Example The following chart shows the expenses that would be incurred under this contract assuming a $1,000 deposit and a 5% return. The example should not be considered a representation of past of future expenses. Amounts shown are based on the "Total Expenses" shown on the fee table and average cash value of the average number of annuity contracts in the accumulation phase during the 2000 calendar year and assume that all fee waivers and reimbursements continue for the time periods shown. Actual expenses may be greater or less than those shown. There is no assumption for premium taxes, applicable in certain states, in these examples.
If you surrender your If you do not surrender If you surrender your If you do not surrender Flexible Premium your Flexible Premium Single Premium Contract your Single Premium Contract at the end of the Contract at the end of the at the end of the Contract at the end of the applicable time period applicable time period applicable time period applicable time period 1yr 3yrs 5yrs 10yrs 1yr 3yrs 5yrs 10yrs 1yr 3yr 5yrs 10yrs 1yr 3yrs 5yrs 10yrs Large Company Stock Funds Large Blend J.P. Morgan U.S. Disciplined Equity Portfolio.............. Fidelity VIP Growth & Income Portfolio...................... Fidelity VIP Index 500 Portfolio. Large Growth Fidelity VIP Growth Portfolio.... Alliance Premier Growth Portfolio...................... Large Value Horace Mann Equity Fund.......... Horace Mann Socially Responsible Fund........................... Davis Value Portfolio............ Mid-Size Company Stock Funds Mid Blend Fidelity VIP Mid Cap Portfolio... Mid Growth Putnam VT Vista Fund............. Strong Mid Cap Growth Fund II.... Mid Value Strong Opportunity Fund II....... Small Company Stock Funds Small Growth Horace Mann Small Cap Growth Fund........................... Warburg Pincus Small Co Growth Portfolio...................... International Stock Funds Horace Mann International Equity Fund........................... Fidelity VIP Overseas Portfolio.. Balanced Fund Horace Mann Balanced Fund........ Bond Funds Horace Mann Income Fund.......... Horace Mann Short-Term Fund...... Fidelity VIP High Income Portfolio...................... Fidelity VIP Investment Grade Bond Portfolio......................
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." 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. The financial statements and reports 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 Horace Mann Small Cap Growth Fund, Horace Mann International Equity Fund and Horace Mann Socially Responsible Fund each commenced operations on March 10, 1997. The other Underlying Funds were added to the Separate Account on August 9, 2000.
Accumulation Accumulation # Units Unit Value Unit Value Outstanding Beginning of End of End of Account Division Year Ended Period Period Period - ------------------------------------------------------------------------------------------------------------------------------------ J.P. Morgan U.S. Disciplined Equity Portfolio 12/31/00 $ $ Fidelity VIP Growth & Income Portfolio 12/31/00 $ $ Fidelity VIP Index 500 Portfolio 12/31/00 $ $ Fidelity VIP Growth Portfolio 12/31/00 $ $ Alliance Premier Growth Portfolio 12/31/00 $ $ Horace Mann Equity Fund 12/31/00 $ $ 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 Horace Mann Socially Responsible 12/31/00 $ $ Fund 12/31/99 12/31/98 12/31/97 Davis Value Portfolio 12/31/00 $ $
Fidelity VIP Mid Cap Portfolio 12/31/00 $ $ Putnam VT Vista Fund 12/31/00 $ $ Strong Mid Cap Growth Fund II 12/31/00 $ $ Strong Opportunity Fund II 12/31/00 $ $ Horace Mann Small Cap Growth 12/31/00 $ $ Fund 12/31/99 12/31/98 12/31/97 Warburg Pincus Small Company Growth Portfolio 12/31/00 $ $ Horace Mann International Equity Fund 12/31/00 $ $ 12/31/99 12/31/98 12/31/97 Fidelity VIP Overseas Portfolio 12/31/00 $ $ Horace Mann Balanced Fund 12/31/00 $ $ 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 Horace Mann Income Fund 12/31/00 $ $ 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 Horace Mann Short-Term Fund 12/31/00 $ $
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 Fidelity VIP High Income Portfolio 12/31/00 $ $ Fidelity VIP Investment Grade Bond Portfolio 12/31/00 $ $
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) 527-2307, 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 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. Horace Mann Life Insurance Company, The Account and The Underlying 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 amounts of variable income payments are not guaranteed since the payment amounts fluctuate in accordance with the performance of the subaccounts. The account is divided into subaccounts. HMLIC uses the assets of each subaccount to buy shares of the Underlying Funds based on contract owner instructions. The Underlying Funds The Underlying Funds are listed in Appendix A along with their primary investment objectives and a description of each adviser to such Underlying Fund. Detailed information on the Underlying Funds can be found in the current prospectus for each Underlying Fund. Prospectuses for the Underlying Funds should be read in conjunction with this prospectus. A copy of each prospectus may be obtained without charge from the Company by calling 1-800-999-1030, sending a telefacsimile transmission to (217) 527-2307 or writing to P.O. Box 4657, Springfield, IL 62708-4657. You may also access the prospectus on the company website at www.horacemann.com in the "Retirement Planning/Financial Services" link. The Contract Contract Owners' Rights A Contract may be issued on a non-qualified basis. Non-qualified contracts are subject to certain tax restrictions. See "Tax Consequences." 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 certain 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 HM Investors. HMLIC has entered into a distribution agreement with HM Investors, principal underwriter of the Account. HM Investors, located at One Horace Mann Plaza, Springfield, Illinois 62715-0001, is a broker-dealer registered under the Securities Exchange Act of 1934. HM 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 signatures and a properly endorsed suitability questionnaire. Applications for contracts are to be sent to HMLIC's Home Office. If an incomplete application is received, HMLIC will promptly request 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 annual purchase payment under flexible premium contracts is $1,200 if the deposits are sent by payroll deduction or electronic funds transfer; otherwise the minimum is $2,000. Payments may be made in a lump sum or installments. The minimum monthly purchase payment is $100. No purchase payments are required after the first contract year. The minimum purchase payment under a single premium contract is $2,000. In certain individual and group contracts these minimums may be lowered. Allocation of Purchase Payments--All or part of the net 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. A request to change the allocation of purchase payments will be effective on the date of receipt. Accumulation Units and Accumulation Unit Value--The number of accumulation units purchased by net 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. The value of an accumulation unit is based on the investment experience of the Underlying Fund. Accumulation units are valued on each valuation date. The accumulation unit value for each subaccount was established on the date and for the value indicated below:
Accumulation Subaccount Date Unit Value ---------- ---- ---------- J.P. Morgan U.S. Disciplined Equity Portfolio 09/05/00 $ Fidelity VIP Growth and Income Portfolio 09/05/00 Fidelity VIP Index 500 Portfolio 09/05/00 Fidelity VIP Growth Portfolio 09/05/00 Alliance Premier Growth Portfolio 09/05/00 Horace Mann Equity Fund 10/09/65 Horace Mann Socially Responsible Fund 03/10/97 Davis Value Portfolio 09/05/00 Fidelity VIP Mid Cap Portfolio 09/05/00 Putnam VT Vista Fund 09/05/00 Strong Mid Cap Growth Fund II 09/05/00 Strong Opportunity Fund II 09/05/00 Horace Mann Small Cap Growth Fund 03/10/97 Warburg Pincus Small Company Growth Portfolio 09/05/00 Horace Mann International Equity Fund 03/10/97 Fidelity VIP Overseas Portfolio 09/05/00 Horace Mann Balanced Fund 02/01/83 Horace Mann Income Fund 02/01/83 Horace Mann Short-Term Fund 02/01/83 Fidelity VIP High Income Portfolio 09/05/00 Fidelity VIP Investment Grade Bond Portfolio 09/05/00
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. You may transfer value from one existing investment option into as many as 10 other investment options. The minimum amount that can be transferred is $100 or the entire dollar value of the subaccount(s), whichever is less. On Annuity Alternatives contracts, for transfers from the fixed portion of the contract into a subaccount, 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 early withdrawal penalty as if the money had been withdrawn from the fixed account. The penalty will not be charged if (1) the transfer occurred on a Scheduled Update (renewal date) or (2) if the Scheduled Update occurred between the transfer and withdrawal or surrender date(s). A contract owner may elect to transfer funds between subaccounts and the 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 or by accessing the company website at www.horacemann.com and looking in the "Retirement Planning/Financial Services" section. Telefacsimile (FAX) transmissions of the request also will be accepted if sent to (217) 527-2307. Depending on the means used to request a transfer, the request must: (1) be signed by the contract owner, or for telephone and company website transactions, be made by the contract owner, (2) include the name of the contract owner and the contract number, and (3) specifically state the dollar amount, a whole percentage 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 on the first valuation date following receipt of the request by the Home Office. See "Other Information--Forms Availability." Dollar Cost Averaging--You may preschedule a series of transfers between investment options to take advantage of dollar cost averaging. You may select from a 3 month, 6 month or 12 month period to complete the dollar cost averaging program. Prescheduled transfers will begin on the first valuation date following receipt of the request in the Home Office. You may transfer value from one existing investment option into as many as 10 other investment options. You may request dollar cost averaging by the same means as described above for transfers. Subsequent transfers will occur on the same calendar day each month until the program is completed. If the original request is received on the 29th, 30th, or 31st of the month, subsequent transfers will be processed on the 28th day. If you should decide to cancel an existing dollar cost averaging program, you must notify the Home Office either in writing or by calling (800) 999-1030 or by telefacsimile (FAX) transmission by dialing (217) 527-2307 or by accessing our website at www.horacemann.com and looking in the "Retirement Planning/Financial Services" section. All requests must identify the contract owner's name and contract number, specify the amounts and the investment options to be utilized and include proper authorization such as a signature on a form or validating information if using the telephone or company website. Rebalancing--You may request a rebalancing of your portfolio either once or on a periodic basis. For periodic rebalancing requests, you may select from a quarterly, semiannual or annual period. You may rebalance your portfolio value into as many as 10 other investment options. You may request rebalancing by the same means as described above for transfers. For periodic rebalancing requests, subsequent rebalancing of your portfolio will continue to occur on the same calendar day of each scheduled month. If the original request is received on the 29th, 30th or 31st of the month, subsequent rebalancing of your portfolio will be processed on the 28th day. If you should decide to cancel an existing rebalancing program, you must notify the Home Office either in writing or by calling (800) 999-1030 or by telefacsimile (FAX) transmission by dialing (217) 527-2307 or by accessing our website at www.horacemann.com and looking in the "Retirement Planning/Financial Services" section. All requests must identify the contract owner's name and contract number, specify the amounts and the investment options to be utilized and include proper authorization such as a signature on a form or validating information if using the telephone or company website. Changes to Purchase Payment Allocations --A contract owner may elect to change the allocation of future net 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 or by accessing the company website at www.horacemann.com and looking in the "Retirement Planning/Financial Services" section. 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, (2) include the contract owner's name and contract number, and (3) specify the new allocation percentage for each subaccount (in whole percentages). 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 on the first valuation date following receipt of the request by the Home Office. See "Other Information-- Forms Availability." Surrender or Withdrawal Before Commencement of Annuity Period--If not restricted by the IRC, 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 (rollover, exchange, etc.) is determined on the basis of the accumulation unit value next computed following the receipt of a valid request for surrender or partial withdrawal in the Home Office. 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 to HMLIC; telefacsimile (FAX) transmissions of the request will be accepted if the proceeds are sent to the contract owner and the request is sent to (217)527-2307. 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 a valid 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 surrender charges shown in "Deductions and Expenses--Surrender Charges". HMLIC surrender charges are applied to the withdrawals based on the date the account is opened and not on the date the purchase payment is paid. Partial withdrawals may be made without charge if (1) the withdrawal does not exceed 15% 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 may be 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 on cash value 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 net 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. 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. The value of the contract is determined as of the valuation date on which a valid request is received. 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 on a quarterly basis 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. The annual maintenance charge is deducted from the subaccount containing the greatest dollar amount or from the fixed portion of the contract when none of the variable subaccount(s) have any value. Charges for annual maintenance cease on the maturity date. 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 an asset charge to the Variable Account. The fee for mortality and expense risk may not exceed the annual rate of 1.25% of the daily net assets of the Variable Account (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 is computed on a daily basis. Surrender Charges--If not restricted by the IRC, a contract owner may surrender the contract in whole or withdraw in part for cash before income payments begin. Annuity Alternatives contracts have been issued since 1982. Flexible Single Premium Premium 1 8% 5% 2 8% 4% 3 6% 3% 4 4% 2% 5 2% 1% Thereafter 0% 0% For further information regarding surrender or partial withdrawals see "Surrender or Withdrawal Before Commencement of Annuity Period." Operating Expenses of the Underlying Funds--There are deductions from and expenses paid out of the assets of the Underlying Funds that are described in each Underlying Fund's 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 purchase 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 net purchase payments less any withdrawals, whichever is greater, will be paid 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. Proof of death includes a certified death certificate and a completed claimant's statement. All or part of the death benefit proceeds may be paid to the beneficiary 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, 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 by December 31 of the calendar year of the fifth anniversary of the 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. For non-qualified annuities, a designated beneficiary who 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. 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 as of 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 receive the request in the Home Office. Your purchase payment allocation(s) will be changed to the Fixed Account or Variable Account, depending on the payment option elected. 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 may 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 certain period is selected (5, 10, 15, 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. If no beneficiary is living at the time of the annuitant's death, the present value, if any, of the remaining certain period 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 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 based on the survivor percentage elected (i.e., 100%, 50%, etc.). 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. If no beneficiary is living at the time of the annuitant's death, the present 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 subject to surrender penalties, if applicable, from the remaining present value, subject to IRC requirements. To determine the surrender penalty rate, contract years are counted from the original effective date of the accumulation contract. Refer to "Deductions and Expenses--Surrender Charges" for the appropriate rate. 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. If no beneficiary is living at the time of the annuitant's death, the present 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 subject to surrender penalties, if applicable, from the remaining present value, subject to IRC requirements. To determine the surrender penalty rate, contract years are counted from the original effective date of the accumulation contract. Refer to "Deductions and Expenses--Surrender Charges" for the appropriate rate. 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. The annuitant may elect another income option at the end of any payment period, or may withdraw the contract value in whole or in part upon written request subject to surrender penalties if applicable. The request must be made prior to the end of the period that the annuitant agreed to receive income payments. 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, 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 portion 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 within the contract by its respective accumulation unit value. Contract value may be more or less than the amount of net purchase payments allocated to the contract. Fixed Income Payments--The amount of each payment under a fixed income payment option is determined from the guaranteed income option tables in the contract. These tables show the monthly payment for each $1,000 of contract value allocated to provide a guaranteed fixed income payment. These 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 guaranteed 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 to the survivor percentage elected. 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 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 charge, 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 3.0% per annum. See your contract for additional information. Annuity Unit Value--The variable annuity unit value for the Horace Mann Equity Fund, Horace Mann Balanced Fund and Horace Mann Income Fund subaccounts was set at $10.00 as of the date amounts first were allocated to provide income payments. The variable annuity unit value for the following subaccounts is established at $10.00, however, no income payments have been paid from these subaccounts: J.P. Morgan U.S. Disciplined Equity Portfolio Fidelity VIP Growth and Income Portfolio Fidelity VIP Index 500 Portfolio Fidelity VIP Growth Portfolio Alliance Premier Growth Portfolio Horace Mann Socially Responsible Fund Davis Value Portfolio Fidelity VIP Mid Cap Portfolio Putnam VT Vista Fund Strong Mid Cap Growth Fund II Strong Opportunity Fund II Horace Mann Small Cap Growth Fund Warburg Pincus Small Company Growth Portfolio Horace Mann International Equity Fund Fidelity VIP Overseas Portfolio Horace Mann Short-Term Fund Fidelity VIP High Income Portfolio Fidelity VIP Investment Grade Bond Portfolio 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, including 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 current valuation date, plus any dividends or other distributions, by the net asset value of a share on the valuation date of the preceding valuation period, 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 net purchase payments be allocated to a subaccount within the Account other than one or more of those currently offered Horace Mann Mutual Funds. If shares of the portfolios underlying the subaccounts 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--No limitations are imposed on the amount of contributions made to a non-qualified contract. 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. Contract owners of non-qualified contracts are not subject to the minimum distribution requirements. 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. If the distribution is a full surrender, the contract owner is taxed on the amount distributed, less net 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 also be made by means of a full 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--Taxable distributions from non-qualified contracts received prior to age 59 1/2 are also subject to a 10% penalty tax 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 tax 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). 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 Underlying 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. 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. Communications to Contract Owners--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. 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.................................................... 4 To receive, without charge, a copy of the 2000 Annual Report of the Horace Mann Mutual 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, please complete the following request form and mail it to the address indicated below, or send it by telefacsimile (FAX) transmission to (217) 527-2307 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: 2000 Annual Report of the Horace Mann Mutual Funds and the Horace Mann Life Insurance Company Separate Account. Statement of Additional Information dated May 1, 2001 for the Horace Mann Life Insurance Company Separate Account. Please mail the above documents to: (Name) (Address) (City/State/Zip) Appendix A The Underlying Funds The following mutual funds are available for investment by the subaccounts which are a part of the contracts offered in this prospectus. 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 ("Horace Mann Funds"). The Trust issues shares of beneficial interest that are continually offered for sale. The Horace Mann 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 Horace Mann Funds whereby the subadviser(s) manage the investment and reinvestment of the assets of a fund. The primary investment objective of the Horace Mann Equity Fund is long-term capital growth; conservation of principal and production of income are secondary objectives. The Equity Fund invests substantially all of its assets in common stocks of domestic companies. Wellington Management Company, LLP ("Wellington Management"), Alliance Capital Management LP ("Alliance") successor of Sanford C. Bernstein and Co., Inc. ("Sanford Bernstein") and Mellon Equity Associates, LLP ("Mellon Equity") serve as the investment subadvisers to the Equity Fund. This fund was referred to as the Growth Fund prior to May 1, 2000. The primary investment objective of the Horace Mann 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 through investments in the Equity Fund and Income Fund. The primary investment objective of the Horace Mann 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. Western Asset Management Company ("Western Asset") and Western Asset Management Limited ("WAML") serve as the investment subadvisers to the Income Fund. The primary investment objective of the Horace Mann Short-Term Investment Fund ("Horace Mann 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. Western Asset serves as the investment subadviser to the Short-Term Fund. The investment objective of the Horace Mann 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. Accordingly, their stock prices may rise faster, but can also decline more in unfavorable business climates. As a result of these "higher highs" and "lower lows," they are more volatile. BlackRock Financial Management, Inc. ("BlackRock") serves as investment subadviser to the Small Cap Growth Fund. The primary investment objective of the Horace Mann 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. Investing in foreign securities may involve a greater degree of risk than investing in domestic securities due to the possibility of currency fluctuations, more volatile markets, less securities regulation and political instability. Zurich Scudder Investments, Inc. ("Zurich Scudder") serves as the investment subadviser to the International Equity Fund. The investment objective of the Horace Mann Socially Responsible Fund is long-term growth of capital, 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: 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. Because this fund invests in companies with socially responsible business practices, it has limitations that may have an impact on performance. Zurich Scudder serves as the investment subadviser to the Socially Responsible Fund. Alliance The investment objective of the Alliance Premier Growth Portfolio is growth of capital by pursuing aggressive investment policies. The Portfolio invests primarily in equity securities of U.S. companies. Unlike most equity funds, the Portfolio focuses on a relatively small number of intensively researched companies. Alliance selects the Portfolio's investments from a research universe of more than 600 companies that have strong management, superior industry positions, excellent balance sheets, and superior earnings growth prospects. The Alliance Premier Growth Portfolio is a series of the Alliance Variable Products Series and is advised by Alliance Capital Management. Davis Davis Value Portfolio's investment objective is growth of capital. The Fund invests primarily in common stock of U.S. companies with market capitalizations of at least $5 billion that are believed to be of high quality and whose shares are selling at attractive prices. The Fund's adviser selects stocks with the intention of holding them for the long term. The Fund's adviser believes that managing risk is the key to delivering superior long-term investment results; therefore, it considers how much could potentially be lost on an investment before considering how much might be gained. The Davis Value Portfolio is a series of the Davis Variable Account Fund and is advised by Davis Selected Advisers, L.P. Fidelity The investment objective of the Fidelity VIP Growth is to achieve capital appreciation. The fund invests primarily in common stocks and invests in both domestic and foreign companies that it believes have above-average growth potential. The Fidelity VIP Growth Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP Overseas Portfolio is to seek long-term growth of capital. The fund invests at least 65% of the total assets in foreign securities, primarily common stocks. The investments are allocated across countries and regions considering the size of the market in each country and region relative to the size of the international market as a whole. The Fidelity VIP Overseas Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP High Income Portfolio is to seek a high level of current income while also considering growth of capital. The fund invests at least 65% of its total assets in income-producing debt securities, preferred stocks and convertible securities, with an emphasis on lower-quality debt securities. The fund may also invest in non-income producing securities, including defaulted securities and common stocks. It may, also invest in companies whose financial condition is troubled or uncertain. It may also invest in securities of foreign issuers in addition to securities of domestic issuers. The Fidelity VIP High Income Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP Investment Grade Bond Portfolio is to seek as high a level of current income as is consistent with the preservation of capital. The funds invests in U.S. dollar-denominated investment-grade bonds with different market sectors and maturities. The adviser attempts to maintain an overall interest rate risk similar to the Lehman Brothers Aggregate Bond Index. The Fidelity VIP Investment Grade Bond Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP Mid Cap Portfolio is to seek long-term growth of capital. The fund invests primarily in common stocks and invests at least 65% of its total assets in securities of companies with medium market capitalizations. The fund invests in either "growth" stocks or "value" stocks or both. The Fidelity VIP Mid Cap Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP Growth & Income Portfolio is to seek high total return through a combination of current income and capital appreciation. The fund invests a majority of its assets in common stocks with a focus on those that pay current dividends and show potential for capital appreciation. It also potentially invests in bonds, including lower-quality debt securities, as well as stocks that are not currently paying dividends, but offer prospects for future income or capital appreciation. The Fidelity VIP Growth & Income Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. The investment objective of the Fidelity VIP Index 500 Portfolio is to seek investment results that correspond to the total return of common stocks publicly traded in the United States, as represented by the S&P 500. The fund invests at least 80% of its assets in commons stocks included in the S&P 500. The Fidelity VIP Index 500 Portfolio is a series of the Fidelity VIP Series and is advised by Fidelity Management & Research. J.P. Morgan The investment objective of the J.P. Morgan U.S. Disciplined Equity Portfolio is to provide high total return from a portfolio of selected equity securities. The portfolio invests primarily in large and medium-capitalization U.S. companies. Industry by industry, the portfolio's weightings are similar to those of the S&P 500. The portfolio does not look to overweight or underweight industries. The J.P. Morgan U.S. Disciplined Equity Portfolio is a series of the J.P. Morgan Series Trust II and is advised by J.P. Morgan Investment Management. Putnam The investment objective of the Putnam VT Vista Fund is to seek capital appreciation. The fund invests mainly in common stocks of U.S. companies with a focus on growth stocks. Growth stocks are issued by companies that Putnam believes are fast-growing and whose earnings Putnam believes are likely to increase over time. Growth in a company's earnings may lead to an increase in the price of its stock. The fund invests mainly in midsized companies. The Putnam VT Vista Fund is a series of the Putnam Variable Trust and is advised by Putnam Investment Management. Strong The investment objective of the Strong Opportunity Fund II is to seek capital growth. The fund invests primarily in stocks of medium-capitalization companies that the fund's manager believes are underpriced, yet have attractive growth prospects. The manager determines a company's private market value based on a fundamental analysis of a company's cash flows, asset valuations, competitive situation, and franchise value. The Strong Opportunity Fund II is advised by Strong Capital Management Inc. The investment objective of the Strong Mid Cap Growth Fund II is to seek capital growth. The fund invests at least 65% of its assets in stocks of medium-capitalization companies that the fund's managers believe have favorable prospects for accelerating growth of earnings but are selling at reasonable valuations based on earnings, cash flow, or asset value. The fund defines "medium-capitalization companies" as those companies with a market capitalization substantially similar to that of companies in the S&P MidCap 400 Index at the time of investment. The Strong Mid Cap Growth Fund II is advised by Strong Capital Management Inc. Warburg Pincus The investment objective of the Warburg Pincus Small Company Growth Portfolio is to seek capital growth. To pursue this goal, it invests primarily in equity securities of small U.S. growth companies. The Portfolio considers a "small" company to be one whose market capitalization is within a range of capitalizations of companies in the Russell 2000 Index. As of December 31, 1999, the Russell 2000 Index included companies with market capitalizations between $178 million and $1.3 billion. Small companies may outgrow the definition of a small company after purchase but will continue to be considered small for purposes of the Portfolio's allocation to small company equities. The Warburg Pincus Small Company Growth Portfolio is a series of the Warburg Pincus Trust and is advised by Credit Suisse Asset Management, LLC. Administrator: Horace Mann Investors, Inc. HM 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 Horace Mann Mutual Funds (the "Trust") pursuant to an Administration Agreement dated March 1, 1999 (the "Administration Agreement"). HM Investors provides for the management of the business affairs of the Trust, 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 the Trust's business affairs. Under the current administration agreement, the Trust agrees to assume and pay the charges and expenses of its operations, including, by way of example, the compensation of Trustees other than those affiliated with HM 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 Trust, reports and notices to shareholders, other like miscellaneous expenses, and all taxes and fees to federal, state, or other governmental agencies. For the services and facilities furnished to the Trust, HM Investors receives a fee based upon the combined assets of the Trust as follows: 0.25% of the first $1 billion of assets and 0.20% of assets in excess of $1 billion. An administration fee is charged directly against all assets in the Horace Mann Balanced Fund. However, in order to avoid duplication of charges under the fund of funds structure, HM Investors has indicated that it intends to waive the majority of the administrative fees charged to the Horace Mann Balanced Fund directly. In addition, Horace Mann Balanced Fund shareholders will indirectly pay the administration fee of the assets invested in the Horace Mann Equity Fund and Horace Mann Income Fund under the fund of funds structure. Therefore, the aggregate administration fees directly and indirectly borne by shareholders of the Horace Mann Balanced Fund will be higher than the fees shareholders would bear if they invested directly in the Horace Mann Equity Fund and Horace Mann Income Fund. Statement of Additional Information Variable tax deferred annuity contracts Qualified and non-qualified plans Horace Mann Life Insurance Company Separate Account May 1, 2001 STATEMENT OF ADDITIONAL INFORMATION HORACE MANN LIFE INSURANCE COMPANY SEPARATE ACCOUNT Individual and Group Flexible Payment and Individual Single Payment Variable Tax Deferred Annuity Contracts Horace Mann Life Insurance Company This Statement of Additional Information is not a prospectus, but should be read in conjunction with the Prospectuses, dated May 1, 2001, for Horace Mann Life Insurance Company Separate Account. A copy of the Prospectuses may be obtained 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 toll-free (800) 999-1030. May 1, 2001 TABLE OF CONTENTS
Topic Page General Information and History.. 2 Investment Experience............ 2 Underwriter...................... 3 Financial Statements............. 4
1 GENERAL INFORMATION AND HISTORY Horace Mann Life Insurance Company ("HMLIC") sponsors the Horace Mann Life Insurance Company Separate Account (the "Account"). 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. INVESTMENT EXPERIENCE (Applies to Annuity Alternative Contracts Only)/(5)/ December 31, 2000 TOTAL RETURN DATA AVERAGE ANNUAL TOTAL RETURN/(1)/ SINCE (Based on a $1,000 investment)/(2)/ INCEPTION(6) 1 YR 5 YRS 10 YRS J.P. Morgan U.S. Disciplined Equity Portfolio With Redemption(3) Without Redemption Fidelity VIP Growth & Income Portfolio With Redemption(3) Without Redemption Wilshire 5000 Index Portfolio With Redemption(3) Without Redemption Fidelity VIP Index 500 Portfolio With Redemption(3) Without Redemption Fidelity VIP Growth Portfolio With Redemption(3) Without Redemption Alliance Premier Growth Portfolio With Redemption(3) Without Redemption Wilshire Large Company Growth Portfolio With Redemption(3) Without Redemption Horace Mann Equity Fund With Redemption(3) Without Redemption Horace Mann Socially Responsible Fund(4) With Redemption(3) Without Redemption Davis Value Portfolio With Redemption(3) Without Redemption Wilshire Large Company Value Portfolio With Redemption(3) Without Redemption Fidelity VIP Mid Cap Portfolio With Redemption(3) Without Redemption Rainier Small/Mid Cap Equity Portfolio With Redemption(3) Without Redemption Putnam VT Vista Fund With Redemption(3) Without Redemption Strong Mid Cap Growth Fund II With Redemption(3) Without Redemption Strong Opportunity Fund II With Redemption(3) Without Redemption T. Rowe Price Small-Cap Stock Fund-Advisor Class With Redemption(3) Without Redemption Neuberger Berman Genesis Fund Advisor Class With Redemption(3) Without Redemption Horace Mann Small Cap Growth Fund(4) With Redemption(3) Without Redemption Warburg Pincus Small Company Growth Portfolio With Redemption(3) Without Redemption Wilshire Small Company Growth Portfolio With Redemption(3) Without Redemption T. Rowe Price Small-Cap Value Fund-Advisor Class With Redemption(3) Without Redemption Wilshire Small Company Value Portfolio With Redemption(3) Without Redemption Horace Mann International Equity Fund(4) With Redemption(3) Without Redemption Fidelity VIP Overseas Portfolio With Redemption(3) Without Redemption Horace Mann Balanced Fund With Redemption(3) Without Redemption Horace Mann Income Fund With Redemption(3) Without Redemption Horace Mann Short-Term Investment Fund With Redemption(3) Without Redemption Fidelity VIP High Income Portfolio With Redemption(3) Without Redemption Fidelity VIP Investment Grade Bond Portfolio With Redemption(3) Without Redemption 1 In some cases, actual performance reflects subsidization where total return has been enhanced due to expenses of each Fund being waived or paid by affiliates of the Funds. 2 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 charge, 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. 3 With redemption reflects performance of a surrendered contract. Redemption has no effect on return after the initial five-year contract period. 4 Horace Mann Small Cap Growth Fund, Horace Mann International Equity Fund and Horace Mann Socially Responsible Fund each commenced operations on March 10, 1997. 5 Annuity Alternatives refers to the Combination Annuity Contracts offered by Horace Mann Life Insurance Co. 6 Since inception refers to performance since the date the subaccount was added to the Separate Account. These dates are listed in the Prospectus in "The Contract(s)--Purchase Payments--Accumulation Units and Accumulation Unit Value." This performance data represents past performance. Investment return and the principal value of an investment may fluctuate. An investor's shares, when redeemed, may be worth more or less than their original cost. All charges as shown in the Prospectus fee tables are reflected in this data, with the exception of the annual maintenance charge and premium taxes. The total return quotations are based on the average annual compounded rates of return over one, five, and ten year periods ended December 31, 2000. Horace Mann Small Cap Growth, International Equity and Socially Responsible Funds commenced operations on March 10, 1997. Total return is computed by finding the average annual compounded rates of return that would equate the initial amount invested to the ending redeemable value. The performance data contained in this Statement of Additional Information is based on the fees and charges for the flexible payment Contracts currently offered by the Company. Prior Contracts, single premium contracts, and certain Individual and group plans have different fees and charges; therefore these performance calculations are not valid for those contracts. UNDERWRITER HMLIC offers and sells the Contracts on a continuous basis through its licensed life insurance sales personnel who are also registered representatives of Horace Mann Investors, Inc. ("HM Investors"), a broker/dealer registered with the Securities and Exchange Commission and a member of the National Association of Securities Dealers, Inc. (NASD). HMLIC contracts with HM Investors, principal underwriter of the Account, to distribute the variable contracts of HMLIC. HM Investors, located at One Horace Mann Plaza, Springfield, Illinois 62715-0001, is an affiliate of HMLIC and a wholly-owned subsidiary of HMEC. Commissions paid to HM Investors were $7,465,597, $5,811,107, and $4,925,095 for the years ended 1998, 1999, and 2000, respectively. HM Investors does not retain any of these commissions. Commissions received by HM Investors are paid to registered representatives who sell contracts offered by this Prospectus. FINANCIAL STATEMENTS KPMG LLP, independent auditors for the Account and HMLIC, has offices at 303 East Wacker Drive, Chicago, Illinois 60601. KPMG LLP representatives perform an audit of the financial statements of the Account annually and provide accounting advice and services related to Securities and Exchange Commission filings throughout the year and perform an annual audit of the statutory financial statements of HMLIC. The financial statements of the Account, including the auditors' reports thereon, are incorporated herein by reference from the Annual Report for the Account for the year ended December 31, 2000. A copy of this Annual Report accompanies the Statement of Additional Information. Additional copies may be obtained, upon request and without charge, by contacting Horace Mann Life Insurance Company, P.O. Box 4657, Springfield, Illinois 62708-4657, or by telephoning (217) 789-2500 or (800) 999-1030 (toll-free). The statutory financial statements for HMLIC, including the auditors' reports thereon, which are included herein, should be considered only as bearing upon the ability of HMLIC to meet its obligations under the Contracts. HORACE MANN LIFE INSURANCE COMPANY Statutory Financial Statements December 31, 2000 and 1999 (With Independent Auditors' Report Thereon) 4 Independent Auditors' Report The Board of Directors Horace Mann Life Insurance Company: We have audited the accompanying statutory statements of admitted assets, liabilities and capital and surplus of Horace Mann Life Insurance Company as of December 31, 1999 and 1998, and the related statutory statements of operations, capital and surplus, and cash flow for each of the years in the three-year period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described more fully in notes 1 and 7 to the statutory financial statements, the Company prepared these statutory financial statements using accounting practices prescribed or permitted by the Department of Insurance of the State of Illinois, which practices differ from generally accepted accounting principles. The effects on the statutory financial statements of the variances between the statutory basis of accounting and generally accepted accounting principles, although not reasonably determinable, are presumed to be material. In our opinion, because of the effects of the matter discussed in the preceding paragraph, the statutory financial statements referred to above do not present fairly, in conformity with generally accepted accounting principles, the financial position of Horace Mann Life Insurance Company as of December 31, 1999 and 1998, or the results of its operations or its cash flows for each of the years in the three-year period ended December 31, 1999. Also, in our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities and capital and surplus of Horace Mann Life Insurance Company as of December 31, 1999 and 1998, and the results of its operations and its cash flow for each of the years in the three-year period ended December 31, 1999, on the basis of accounting described in note 1. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information included in the accompanying Schedule is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ KPMG LLP April 7, 2000 PART C OTHER INFORMATION HORACE MANN LIFE INSURANCE COMPANY SEPARATE ACCOUNT Item 24. Financial Statements and Exhibits - ------------------------------------------- (a) Financial Statements ------------------------ Part A Condensed financial information of the Account Part B The following Financial statements of the Account which will be filed on or about March 02, 2001 are incorporated by reference into this Post Effective Amendment 70 -the Annual Report for the Registrant: -Report of Independent Auditors -Statements of Net Assets - December 31, 2000 -Statements of Operations - For the Year Ended December 31, 2000 -Statements of Changes in Net Assets For the Year Ended December 31, 2000 -Statements of Changes in Net Assets For the Year Ended December 31, 1999 -Notes to Financial Statements - December 31, 2000 Financial statements for Horace Mann Life Insurance Company -Report of Independent Auditors -Statutory Statements of Admitted Assets, Liabilities and Capital and Surplus -As of December 31, 2000 and 1999 -Statutory Statements of Operations - For the Years Ended December 31, 2000, 1999 and 1998 -Statutory Statements of Capital and Surplus - For the ears Ended December 31, 2000, 1999 and 1998 -Statutory Statements of Cash Flow - For the Years Ended December 31, 2000, 1999 and 1998 -Notes to Statutory Financial Statements - December 31, 2000, 1999 and 1998 (b) Exhibits ------------- (1) Resolution of Board of Directors........... Post Effective Amendment 63 (2) Agreements for custody.................................. Not Applicable (3) Underwriting Agreement....................... Post Effective Amendment 63 (4) Form of Variable Annuity Contract............. Post Effective Amendment 65 (5) Form of application........................... Post Effective Amendment 63 (6) Certificate of incorporation and bylaws.....Initial Registration Statement (7) Contract of Reinsurance..................................... Not Applicable (8) Other Contracts............................................. Not Applicable (9) Opinion and Consent of Counsel................. to be filed with (b) filing (10) Consent of Independent Auditors................ to be filed with (b) filing (11) Financial Statement Schedules for Horace Mann Life Insurance Company an the Independent Auditors' Report thereon.......... to be filed with (b) filing (12) Agreement regarding initial capital........ Initial Registration Statement (13) Performance Quotation Computations........ Post-Effective Amendment #57 (14) Power of Attorney....................................... Not Applicable (15) Horace Mann Educators Corporation and its Subsidiaries.............................. Post-Effective Amendment #57 C-1 Item 25. Directors and Officers of the Depositor - ------------------------------------------------- The directors and officers of Horace Mann Life Insurance Company, who are engaged directly or indirectly in activities relating to the registrant or the variable annuity contracts offered by the registrant, are listed below. Their principal business address is One Horace Mann Plaza, Springfield, Illinois 62715. Name Position & Office with Depositor - ---- -------------------------------- Peter H. Heckman Director and Executive Vice President, Chief Financial Officer Ann M. Caparros Director, Vice President, General Counsel, Corporate Secretary & Chief Compliance Officer Valerie A. Chrisman Director Louis G. Lower II Director,Chairman, President & Chief Executive Officer Michael R. Vignola Executive Vice President George J. Zock Director and Senior Vice President & Controller A. Thomas Arisman Senior Vice President J. Michael Henderson Vice President & Treasurer William J. Kelly Vice President Item 26. Controlled by or Under Common Control with the Depositor or Registrant - -------------------------------------------------------------------------------- The Registrant is a separate account of Horace Mann Life Insurance Company. Horace Mann Life Insurance Company is a wholly owned subsidiary of Allegiance Life Insurance Company. Allegiance Life Insurance Company and Horace Mann Investors, Inc., principal underwriter of the Registrant, are wholly-owned subsidiaries of Horace Mann Educators Corporation, a publicly held corporation. See Exhibit No. 15. Item 27. Number of Contract Owners - ----------------------------------- As of January 26, 2001, the number of Contract Owners of Horace Mann Life Insurance Company Separate Account was 82,147, of which 78,330 were qualified Contract Owners and 3,817 were non-qualified Contract Owners. C-2 Item 28. Indemnification - ------------------------- Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 29. Principal Underwriters - -------------------------------- Horace Mann Investors, Inc., the underwriter of Horace Mann Life Insurance Company Separate Account, acts as principal underwriter for Horace Mann Life Insurance Company Separate Account B and Horace Mann Life Insurance Company Allegiance Separate Account A. The following are the directors and officers of Horace Mann Investors, Inc. Their principal business address is One Horace Mann Plaza, Springfield, Illinois 62715. Name Position with Underwriter - ---- ------------------------- A. Thomas Arisman Director and President Peter Heckman Director George J. Zock Director Ann M. Caparros Secretary William J. Kelly Treasurer and Broker/Dealer Compliance Officer Diane M. Barnett Tax Compliance Officer Richard D. Wilson Assistant Treasurer Harry L. Mitchell Marketing Officer The following is a listing of the commissions and other compensation received by the principal underwriter from the Registrant during the fiscal year ended December 31, 2000: Net Underwriting Compensation on Name of Principal Discounts and Redemption or Brokerage Underwriter Commissions Annuitization Commissions Compensation - ----------- ----------- ------------- ----------- ------------ Horace Mann $4,925,095 N/A N/A N/A Investors, Inc. C-3 Item 30. Location of Accounts and Records - ------------------------------------------ Horace Mann Investors, Inc., underwriter of the Registrant, is located at One Horace Mann Plaza, Springfield, Illinois 62715. It maintains those accounts and records associated with its duties as underwriter required to be maintained pursuant to Section 31(a) of the Investment Company Act and the rules promulgated thereunder. Horace Mann Life Insurance Company, the depositor, is located at One Horace Mann Plaza, Springfield, Illinois 62715. It maintains those accounts and records required to be maintained pursuant to Section 31(a) of the Investment Company Act of 1940 and the rules promulgated thereunder that are not maintained by Horace Mann Investors, Inc. Item 31. Management Services - ----------------------------- Not applicable. Item 32. Undertakings - ---------------------- (a) Registrant undertakes to file a Post-Effective Amendment to this Registration Statement as frequently as is necessary to ensure that the audited financial statements in the Registration Statement are never more than 16 months old for so long as payments under variable annuity Contracts may be accepted. (b) Registrant undertakes to include a written communication in the Prospectus that the applicant can remove to send for a Statement of Additional Information. (c) Registrant undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form N-4 promptly upon written or oral request. (d) Horace Mann Life Insurance Company and the Registrant are relying on a no-action letter from the Securities and Exchange Commission that was issued to the American Council of Life Insurance and made publicly available on November 28, 1988. That letter outlines conditions that must be met if a company offering registered annuity contracts imposes the limitations on surrenders and withdrawals on section 403(b) contracts as required by the Internal Revenue Code. Horace Mann Life Insurance Company and the Registrant are in compliance with the conditions of that no-action letter. (e) Horace Mann Life Insurance Company represents that the fees and charges deducted under the Variable Annuity Contract in the aggregrate are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the insurance company. C-4 SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned,thereto duly authorized in the City of Springfield and State of Illinois, on this 1st day of Marcht, 2001. HORACE MANN INSURANCE COMPANY SEPARATE ACCOUNT By: Horace Mann Life Insurance Company ---------------------------------- (Depositor) Attest: /s/ ANN M. CAPARROS By: /s/ LOUIS G. LOWER II ------------------- --------------------- Ann M. Caparros Louis G. Lower II, President and Corporate Secretary Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Post- Effective Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated. SIGNATURE TITLE DATE - --------- ----- ---- /s/ LOUIS G. LOWER II Director, President and March 1, 2001 - --------------------- Chief Executive Officer Louis G. Lower II /s/ PETER H. HECKMAN Director, Executive Vice March 1, 2001 - -------------------- President and Chief Peter H. Heckman Financial Officer /s/ ANN M. CAPARROS Director, Vice President, March 1, 2001 - ------------------- General Counsel and Ann M. Caparros Corporate Secretary /s/ VALERIE A. CHRISMAN Director, March 1, 2001 - ----------------------- Senior Vice President Valerie A. Chrisman /s/ GEORGE J. ZOCK Director and Executive March 1, 2001 - ------------------ Vice President George J. Zock /s/ THOMAS A. ARISMAN Senior Vice President March 1, 2001 - --------------------- Thomas A. Arisman C-5 INDEX TO EXHIBITS ----------------- Exhibit Number Title - ------ ----- (1) Resolution of Board of Directors.............Post Effective Amendment 63 (2) Agreements for custody................................... Not Applicable (3) Underwriting Agreement.......................Post Effective Amendment 63 (4) Form of Variable Annuity Contract............Post Effective Amendment 65 (5) Form of application..........................Post Effective Amendment 63 (6) Certificate of incorporation and bylaws...Initial Registration Statement (7) Contract of Reinsurance....................................Not Applicable (8) Other Contracts............................................Not Applicable (9) Opinion and Consent of Counsel.................to be filed with (b) filing (10) Consent of Independent Auditors................to be filed with (b) filing (11) Financial Statement Schedules for Horace Mann Life Insurance Company and the Independent Auditors' Report thereon..................to be filed with (b) filing (12) Agreement regarding initial capital.......Initial Registration Statement (13) Performance Quotation Computations..........Post-Effective Amendment #57 (14) Power of Attorney.........................................Not Applicable (15) Horace Mann Educators Corporation and its Subsidiaries................................Post-Effective Amendment #57 C-6 -----END PRIVACY-ENHANCED MESSAGE-----