80_FR_42708 80 FR 42571 - Horace Mann Life Insurance Company, et al; Notice of Application

80 FR 42571 - Horace Mann Life Insurance Company, et al; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 137 (July 17, 2015)

Page Range42571-42575
FR Document2015-17575

Federal Register, Volume 80 Issue 137 (Friday, July 17, 2015)
[Federal Register Volume 80, Number 137 (Friday, July 17, 2015)]
[Notices]
[Pages 42571-42575]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-17575]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

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


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

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

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

-----------------------------------------------------------------------

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

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

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

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

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

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

Applicants' Representations

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

[[Page 42572]]

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

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


[[Page 42573]]

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

    \1\ For Substitution #36 the total annual operating expenses of 
the Replacement Portfolio for the period covered by the most recent 
prospectus dated April 30, 2015, were lower than those of the 
Existing Portfolio for the same period only after taking into 
account any contractual fee waivers/expense reimbursement applied 
under the Replacement Portfolio.

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

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

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

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

[[Page 42574]]

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

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

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

Legal Analysis

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

[[Page 42575]]

Applicants' Conditions

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

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



                                                                                   Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Notices                                            42571

                                                Commission and any person, other than                      variable annuity contracts (the                       Account on October 16, 2006, under
                                                those that may be withheld from the                        ‘‘Contracts’’), each funded through the               Illinois law.
                                                public in accordance with the                              Separate Accounts.                                       2. Each of the Separate Accounts
                                                provisions of 5 U.S.C. 552, will be                        DATES: Filing Date: The application was               meets the definition of ‘‘separate
                                                available for Web site viewing and                         filed on July 25, 2014, and amended on                account’’ as defined in Section 2(a)(37)
                                                printing in the Commission’s Public                        January 14, 2015, and May 27, 2015.                   of the 1940 Act. The Separate Accounts
                                                Reference Room, 100 F Street NE.,                          HEARING OR NOTIFICATION OF HEARING: An                are registered with the Commission
                                                Washington, DC 20549, on official                          order granting the requested relief will              under the 1940 Act as unit investment
                                                business days between the hours of                         be issued unless the Commission orders                trusts. The assets of the Separate
                                                10:00 a.m. and 3:00 p.m. Copies of such                    a hearing. Interested persons may                     Accounts support the Contracts, and
                                                filing also will be available for                          request a hearing by writing to the                   interests in the Separate Accounts
                                                inspection and copying at the principal                    Commission’s Secretary and serving                    offered through such Contracts have
                                                office of the Exchange. All comments                       applicants with a copy of the request,                been registered under the Securities Act
                                                received will be posted without change;                    personally or by mail. Hearing requests               of 1933 (‘‘1933 Act’’) on Form N–4. The
                                                the Commission does not edit personal                      should be received by the Commission                  application sets forth the registration
                                                identifying information from                               by 5:30 p.m. on August 6, 2015, and                   statement file numbers for the Contracts
                                                submissions. You should submit only                        should be accompanied by proof of                     and the Separate Accounts. Horace
                                                information that you wish to make                          service on applicants, in the form of an              Mann is the legal owner of the assets in
                                                available publicly. All submissions                        affidavit or, for lawyers, a certificate of           the Separate Accounts. The assets of the
                                                should refer to File Number SR–BATS–                       service. Pursuant to Rule 0–5 under the               Separate Accounts may not be
                                                2015–53 and should be submitted on or                      1940 Act, hearing requests should state               chargeable with liabilities arising out of
                                                before August 7, 2015.                                     the nature of the writer’s interest, any              any other business of Horace Mann.
                                                                                                           facts bearing upon the desirability of a                 3. The Contracts are issued either as
                                                  For the Commission, by the Division of                                                                         individual or group contracts, with
                                                Trading and Markets, pursuant to delegated                 hearing on the matter, the reason for the
                                                                                                           request, and the issues contested.                    group contract participants acquiring
                                                authority.15
                                                                                                           Persons who wish to be notified of a                  certain ownership rights as described in
                                                Brent J. Fields,                                                                                                 the group contract or plan documents.
                                                Secretary.                                                 hearing may request notification by
                                                                                                                                                                 Contract owners and participants in
                                                [FR Doc. 2015–17492 Filed 7–16–15; 8:45 am]
                                                                                                           writing to the Commission’s Secretary.
                                                                                                                                                                 group contracts (each a ‘‘Contract
                                                                                                           ADDRESSES: Secretary, U.S. Securities
                                                BILLING CODE 8011–01–P                                                                                           owner’’) may allocate some or all of
                                                                                                           and Exchange Commission, 100 F Street                 their Contract value to one or more
                                                                                                           NE., Washington, DC 20549–1090;                       subaccounts available as investment
                                                SECURITIES AND EXCHANGE                                    Applicants: Elizabeth E. Arthur, Esq.,                options under their respective Contract.
                                                COMMISSION                                                 Maureen Bolinger, Horace Mann Life                    Each subaccount corresponds to a
                                                                                                           Insurance Company, One Horace Mann                    portfolio of an underlying registered
                                                [Release No. IC–31714; File No. 812–14336]                 Plaza, Springfield, Illinois 62715.                   open-end management investment
                                                Horace Mann Life Insurance Company,                        FOR FURTHER INFORMATION CONTACT:                      company in which the Separate
                                                et al; Notice of Application                               Michael S. Didiuk, Senior Counsel, at                 Account invests. A Contract owner may
                                                                                                           (202) 551–6839, or Holly L. Hunter-Ceci,              also invest some or all of his/her
                                                July 13, 2015.                                             Branch Chief, at (202) 551–6825                       Contract value to a fixed account
                                                AGENCY:   Securities and Exchange                          (Division of Investment Management,                   investment option, which is supported
                                                Commission (‘‘Commission’’).                               Chief Counsel’s Office).                              by assets of Horace Mann’s general
                                                ACTION: Notice of application for an                       SUPPLEMENTARY INFORMATION: The                        account.
                                                order approving the substitution of                        following is a summary of the                            4. The Applicants state that under the
                                                certain securities pursuant to Section                     application. The complete application                 Contracts, Horace Mann reserves the
                                                26(c) of the Investment Company Act of                     may be obtained via the Commission’s                  right to substitute shares of one portfolio
                                                1940, as amended (the ‘‘1940 Act’’).                       Web site by searching for the file                    for shares of another portfolio if: (i)
                                                                                                           number, or an applicant using the                     Shares of a registered open-end
                                                APPLICANTS:  Horace Mann Life                              Company name box, at http://                          management investment company are
                                                Insurance Company (‘‘Horace Mann’’),                       www.sec.gov/search/search.htm or by                   no longer available for investment by
                                                and Horace Mann Life Insurance                             calling (202) 551–8090.                               the Separate Account; or (ii) Horace
                                                Company Separate Account and Horace                                                                              Mann determines that further
                                                Mann Life Insurance Company                                Applicants’ Representations                           investments in a registered open-end
                                                Qualified Group Annuity Separate                             1. Horace Mann is a stock life                      management investment company are
                                                Account (collectively, the ‘‘Separate                      insurance company organized under the                 inappropriate in view of the purposes
                                                Accounts,’’ and together with Horace                       laws of Illinois. Horace Mann is engaged              and objectives of a Contract.
                                                Mann, the ‘‘Applicants’’).                                 in the sale of individual and group life                 5. The Applicants propose the
                                                SUMMARY OF APPLICATION: The                                insurance and annuity contracts on a                  substitution of shares of the Existing
                                                Applicants seek an order pursuant to                       non-participating basis. Horace Mann is               Portfolios with shares of the
                                                Section 26(c) of the 1940 Act approving                    an indirect wholly owned subsidiary of                Replacement Portfolios under the
                                                the substitution of shares issued by                       Horace Mann Educators Corporation, a                  Contracts, each funded through the
                                                certain investment portfolios (the                         publicly-held insurance holding                       Separate Accounts. The Separate
srobinson on DSK5SPTVN1PROD with NOTICES




                                                ‘‘Existing Portfolios’’) of registered                     company traded on the New York Stock                  Accounts are segmented into
                                                investment companies with shares of                        Exchange. Horace Mann established the                 subaccounts, and certain of these
                                                certain investment portfolios (the                         Horace Mann Life Insurance Company                    subaccounts invest in the Existing
                                                ‘‘Replacement Portfolios’’) of registered                  Separate Account on October 9, 1965,                  Portfolios. Each subaccount’s income,
                                                investment companies, under certain                        under Illinois law, and established the               gains, and losses, whether or not
                                                                                                           Horace Mann Life Insurance Company                    realized, are credited to or charged
                                                  15 17   CFR 200.30–3(a)(12).                             Qualified Group Annuity Separate                      against the amounts allocated to that


                                           VerDate Sep<11>2014     20:59 Jul 16, 2015   Jkt 235001   PO 00000   Frm 00105   Fmt 4703   Sfmt 4703   E:\FR\FM\17JYN1.SGM   17JYN1


                                                42572                                  Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Notices

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

                                                    Sub.                                                   Existing portfolio                                                             Replacement portfolio
                                                    No.

                                                1 ........      Wilshire Mutual Funds Inc.—Wilshire 5000 IndexSM Fund—Institutional Class .................                   Variable Insurance Products Fund II—Index
                                                                                                                                                                                500 Portfolio—Service Class 2.
                                                2    ........   Wilshire Mutual Funds Inc.—Wilshire 5000 IndexSM Fund—Investment Class ..................
                                                3    ........   Variable Insurance Products Fund IIII—Growth & Income Portfolio—Service Class 2 ......
                                                4    ........   Davis Variable Account Fund, Inc.—Davis Value Portfolio .................................................
                                                5    ........   T. Rowe Price Equity Series, Inc.—T. Rowe Price Equity Income Portfolio—II .................
                                                6    ........   Wilshire Large Company Value Portfolio—Investment Class ..............................................
                                                7    ........   Fidelity Variable Insurance Products Fund—Growth Portfolio—Service Class 2 ...............
                                                8    ........   Wilshire Mutual Funds Inc.—Wilshire Large Company Growth Portfolio—Institutional
                                                                   Class.
                                                9 ........      Wilshire Large Company Growth Portfolio—Investment Class ...........................................
                                                10 ......       Delaware VIP Trust—Delaware VIP U.S. Growth Series—Service Class ..........................
                                                11 ......       AllianceBernstein Variable Products Series Fund, Inc.—AllianceBernstein Large Cap
                                                                   Growth Portfolio—Class B.
                                                12 ......       Dreyfus Investment Portfolios—Dreyfus MidCap Stock Portfolio—Service Shares ............                      Calvert VP S&P MidCap 400 Index Port-
                                                                                                                                                                                folio—Class F.
                                                13 ......       Variable Insurance Products Fund III—Mid Cap Portfolio—Service Class 2 ......................
                                                14 ......       Rainier Investment Management Mutual Funds—Rainier Small/Mid Cap Equity Fund—
                                                                   Original Shares.
                                                15 ......       Aerial Investment Trust—Ariel Appreciation Fund—Investor Class ....................................
                                                16 ......       Goldman Sachs Variable Insurance Trust—Goldman Sachs Mid Cap Value Fund—Serv-
                                                                   ice Shares.
                                                17 ......       American Century Variable Portfolios, Inc.—VP Mid Cap Value Fund—Class 1 ...............
                                                18 ......       Wells Fargo Variable Trust—Wells Fargo Advantage VT Opportunity Fund—Class 2 ......
                                                19 ......       AllianceBernstein Variable Products Series Fund, Inc.—AllianceBernstein Small/Mid Cap
                                                                   Value Portfolio—Class B.
                                                20    ......    Aerial Investment Trust—Ariel Fund—Investor Class .........................................................
                                                21    ......    Lord Abbet Series Fund, Inc.—Growth Opportunities Portfolio—Class VC ........................
                                                22    ......    Putnam Variable Trust—Putnam VT Multi-Cap Growth Fund—Class IB ............................
                                                23    ......    Delaware VIP Trust—Delaware VIP Smid Cap Growth Series—Service Class (formerly
                                                                   Delaware VIP Growth Opportunities Series, Service Class).
                                                24 ......       Goldman Sachs Variable Insurance Trust—Goldman Sachs Small Cap Equity Insights                                Dreyfus Small Cap Stock Index Portfolio—
                                                                   Fund—Institutional Shares.                                                                                   Service Shares.
                                                25 ......       Lazard Retirement Series, Inc.—Lazard Retirement US Small-Mid Cap Equity Portfolio—
                                                                   Service Shares.
                                                26 ......       Neuberger Berman Equity Funds—Neuberger Berman Genesis Fund—Advisor Class ....
                                                27 ......       T. Rowe Price Small-Cap Stock Fund, Inc.—T. Rowe Price Small-Cap Stock Fund—Ad-
                                                                   visor Class.
                                                28 ......       T. Rowe Price Small-Cap Value Fund, Inc.—T. Rowe Price Small-Cap Value Fund—Ad-
                                                                   visor Class.
                                                29 ......       Wilshire Small Company Value Portfolio—Investment Class ..............................................
                                                30 ......       Royce Capital Fund—Royce Small-Cap Portfolio—Investment Class ................................
                                                31 ......       AllianceBernstein Variable Products Series Fund, Inc.—AllianceBernstein Small Cap
                                                                   Growth Portfolio—Class B.
                                                32 ......       Wilshire Mutual Funds Inc.—Wilshire Small Company Growth Portfolio—Investment
                                                                   Class.
                                                33 ......       Delaware VIP Trust—Delaware VIP REIT Series—Service Class ......................................              Variable Insurance Products Fund IV—Real
                                                                                                                                                                                Estate Portfolio—Service Class 2.
                                                34 ......       Fidelity Variable Insurance Products Fund—High Income Portfolio—Service Class 2 .......                       Franklin Templeton Variable Insurance
                                                                                                                                                                                Products Trust—High Income VIP Fund—
                                                                                                                                                                                Class 2.
                                                35 ......       ALPS Variable Investment Trust—Ibbotson Conservative ETF Asset Allocation Port-                               Fidelity VIP V—FundsManager 20% Port-
                                                                  folio—Class II.                                                                                               folio—Service Class 2.
                                                36 ......       ALPS Variable Investment Trust—Ibbotson Income and Growth ETF Asset Allocation                                Fidelity VIP V—FundsManager 50% Port-
                                                                  Portfolio—Class II.                                                                                           folio—Service Class 2.
srobinson on DSK5SPTVN1PROD with NOTICES




                                                37 ......       ALPS Variable Investment Trust—Ibbotson Balanced ETF Asset Allocation Portfolio—                              Fidelity VIP V—FundsManager 60% Port-
                                                                  Class II.                                                                                                     folio—Service Class 2.
                                                38 ......       ALPS Variable Investment Trust—Ibbotson Growth ETF Asset Allocation Portfolio—                                Fidelity VIP V—FundsManager 70% Port-
                                                                  Class II.                                                                                                     folio—Service Class 2.
                                                39 ......       ALPS Variable Investment Trust—Ibbotson Aggressive Growth ETF Asset Allocation                                Fidelity VIP V—FundsManager 85% Port-
                                                                  Portfolio—Class II.                                                                                           folio—Service Class 2.
                                                40 ......       Fidelity Variable Insurance Products Fund II—Emerging Markets Portfolio—Service                               American Funds Insurance Series—New
                                                                  Class 2.                                                                                                      World Fund—Class 4.



                                           VerDate Sep<11>2014        20:59 Jul 16, 2015   Jkt 235001   PO 00000    Frm 00106    Fmt 4703   Sfmt 4703   E:\FR\FM\17JYN1.SGM      17JYN1


                                                                                   Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Notices                                                   42573

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

                                                  Sub.                                     Existing portfolio                                                       Replacement portfolio
                                                  No.

                                                37 .......    ALPS Variable Insurance Trust—Ibbotson Balanced ETF Asset                      Fidelity VIP V—FundsManager 60% Portfolio.
                                                                Allocation Portfolio.
                                                38 .......    ALPS Variable Insurance Trust—Ibbotson Growth ETF Asset Allo-                  Fidelity VIP V—FundsManager 70% Portfolio.
                                                                cation Portfolio.
                                                39 .......    ALPS Variable Insurance Trust—Ibbotson Aggressive Growth ETF                   Fidelity VIP V—FundsManager 85% Portfolio.
                                                                Asset Allocation Portfolio.



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

                                                  Sub.                                     Existing portfolio                                                       Replacement portfolio
                                                  No.

                                                1 .........   Wilshire Mutual Funds Inc.—Wilshire 5000 IndexSM Fund .............            Variable Insurance Products Fund II—Index 500 Portfolio.



                                                   Horace Mann represents that it will                     will notify Contract owners that Horace               provisions of the relevant prospectus,
                                                solicit approval with respect to the                       Mann has filed this Application to                    Horace Mann will not exercise any right
                                                Substitution involving the Wilshire                        obtain the necessary approval from the                it may have under the Contracts to
                                                5000 IndexSM Fund from Contract                            Commission to effect the Substitutions;               impose additional restrictions on
                                                owners owning interests in the                             and will set forth the anticipated                    transfers between the subaccounts
                                                subaccount.                                                Substitution Date. In addition, the Pre-              under the Contracts, including any
                                                   9. The Applicants state that the                        Substitution Notice will: (a) Advise                  limitation on the number of transfers
                                                Substitutions proposed are part of an                      Contract owners that Contract values                  permitted, for a period beginning on
                                                overall business goal of Horace Mann to                    attributable to investments in the                    May 1, 2015, through the date 30 days
                                                improve the administrative efficiency                      Existing Portfolios will be transferred to            following the Substitution Date.
                                                and cost effectiveness, as well as the                     the Replacement Portfolios, without any               Applicant further states that at least 30
                                                attractiveness to investors, of its                        charge that would otherwise apply                     days before the Substitution Date all
                                                Contracts. Horace Mann asserts that it                     (including sales charges or surrender                 affected Contract owners will have
                                                has determined that a more streamlined                     charges) and without being subject to                 received the most recent prospectus for
                                                array of investment options,                               any limitations on transfers, on the                  each applicable Replacement Portfolio.
                                                concentrated in fewer fund families,                       Substitution Date; (b) state that, from               Finally, within five (5) business days
                                                would permit Horace Mann to lower its                      May 1, 2015, through the date 30 days                 following the Substitution Date,
                                                costs of administering the Contracts,                      after the Substitutions, Contract owners              Contract owners affected by the
                                                increase its operational and                               may make one transfer of Contract value               Substitution will receive a written
                                                administrative efficiencies, and create a                  from the subaccounts investing in the                 confirmation that the Substitutions were
                                                more manageable investment process for                     Existing Portfolios (before the                       carried out as previously notified. This
                                                Contract owners.                                           Substitution Date) or the Replacement                 confirmation will restate the
                                                   10. The Applicants represent that                       Portfolios (after the Substitution Date) to           information set forth in the Pre-
                                                Contract owners will also be notified of                   any other available investment option                 Substitution Notice and will include the
                                                this Application by means of a                             under the Contract without any charge                 before and after account values.
                                                prospectus supplement or other                             that would otherwise apply (including                    11. Each proposed Substitution will
                                                communication (‘‘Pre-Substitution                          sales charges or surrender charges) and               take place at relative net asset value
srobinson on DSK5SPTVN1PROD with NOTICES




                                                Notice’’) for each of the Contracts. The                   without imposing any transfer                         determined on the Substitution Date
                                                Pre-Substitution Notice will notify                        limitations; and (c) inform Contract                  pursuant to Section 22 of the 1940 Act
                                                Contract owners of Horace Mann’s                           owners that, except as described in the               and Rule 22c–1 thereunder, with no
                                                intent to implement the Substitutions;                     market timing/short-term trading                      change in the amount of any Contract
                                                  1 For Substitution #36 the total annual operating        April 30, 2015, were lower than those of the          expense reimbursement applied under the
                                                expenses of the Replacement Portfolio for the              Existing Portfolio for the same period only after     Replacement Portfolio.
                                                period covered by the most recent prospectus dated         taking into account any contractual fee waivers/



                                           VerDate Sep<11>2014     20:59 Jul 16, 2015   Jkt 235001   PO 00000   Frm 00107   Fmt 4703   Sfmt 4703   E:\FR\FM\17JYN1.SGM   17JYN1


                                                42574                            Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Notices

                                                owner’s Contract value or death benefit                  incur higher expenses for a period of                 introduce Contract owners to materially
                                                or in the dollar value of his or her                     two years after the Substitution. More                greater risks than before the
                                                investments in any of the subaccounts.                   specifically, for two years following the             Substitution.
                                                The procedures to be implemented are                     Substitution Date, Horace Mann will                      3. Applicants also maintain that the
                                                sufficient to assure that each Contract                  reimburse those who were Contract                     ultimate effect of the Substitutions
                                                owner’s cash values immediately after                    owners on the Substitution Date and                   would be to continue to provide
                                                the Substitution will be equal to the                    who, as a result of a Substitution, had               Contract owners with a wide array of
                                                cash value immediately before the                        Contract value allocated to a subaccount              investment options and managers, while
                                                Substitution. Contract owners will not                   investing in a Replacement Portfolio
                                                                                                                                                               at the same time increasing
                                                incur any fees or charges as a result of                 such that the Replacement Portfolio’s
                                                                                                                                                               administrative efficiencies of the
                                                the Substitutions, nor will their rights or              net annual operating expenses (taking
                                                                                                                                                               Contracts and streamlining and
                                                Horace Mann’s obligations under the                      into account any fee waivers and
                                                                                                                                                               simplifying the investment line-up
                                                Contracts be altered in any way, and the                 expense reimbursements) for such
                                                                                                         period will not exceed, on an                         available to Contract owners under the
                                                Substitutions will not change Contract                                                                         affected Contracts.
                                                owners’ insurance benefits under the                     annualized basis, the net annual
                                                Contracts.                                               operating expenses (taking into account                  4. Applicants state that the Contracts
                                                   12. The proposed Substitution will be                 any fee waivers and expense                           and the Contract prospectuses disclose
                                                effected on the Substitution Date by                     reimbursements) of the corresponding                  that Horace Mann has reserved the right
                                                having the Separate Accounts redeem                      Existing Portfolio as of the Existing                 under the Contracts to substitute shares
                                                shares of the Existing Portfolios for                    Portfolio’s most recent fiscal year                   of another underlying registered open-
                                                cash.2 The proceeds of such                              preceding the Substitution Date. Any                  end management investment company
                                                redemptions will then be used to                         adjustments will be made at least on a                for one of the current underlying
                                                purchase shares of the corresponding                     quarterly basis.                                      registered open-end management
                                                Replacement Portfolio, as each                           Legal Analysis                                        investment companies offered as an
                                                subaccount of the Separate Accounts                                                                            investment option under the Contracts.
                                                will invest the proceeds of its                             1. Applicants request that the
                                                                                                         Commission issue an order pursuant to                    5. Applicants also assert that the
                                                redemption from the Existing Portfolios                                                                        proposed Substitutions are not of the
                                                in the applicable Replacement                            Section 26(c) of the 1940 Act approving
                                                                                                         the proposed Substitutions. Section                   type that Section 26(c) was designed to
                                                Portfolios. Redemption requests and                                                                            prevent because they will not result in
                                                purchase orders will be placed                           26(c) of the 1940 Act prohibits any
                                                                                                         depositor or trustee of a unit investment             costly forced redemption, nor will they
                                                simultaneously so that Contract values                                                                         affect other aspects of the Contracts. In
                                                will remain fully invested at all times.                 trust that invests exclusively in the
                                                                                                         securities of a single issuer from                    the current situation, Contract owners
                                                   13. Horace Mann will pay all                                                                                are contractually provided investment
                                                expenses incurred in connection with                     substituting the securities of another
                                                                                                         issuer without the approval of the                    discretion during the accumulation
                                                the Substitutions, including legal,                                                                            phase of the Contracts to allocate and
                                                accounting, transactional, and other fees                Commission. Section 26(c) provides that
                                                                                                         such approval shall be granted by order               reallocate their Contract value among
                                                and expenses, including brokerage                                                                              the investment options available under
                                                commissions. Contract owners will not                    of the Commission if the evidence
                                                                                                         establishes that the substitution is                  the Contracts.
                                                incur any fees or charges as a result of
                                                the Substitutions, nor will their rights or              consistent with the protection of                        6. The proposed Substitutions will
                                                Horace Mann’s obligations under the                      investors and the purposes of the 1940                offer Contract owners the opportunity to
                                                Contracts be altered in any way, and the                 Act.                                                  transfer amounts out of the affected
                                                                                                            2. The Applicants submit that the                  subaccounts without any cost or other
                                                Substitutions will not change Contract
                                                                                                         Substitutions meet the standards set                  penalty (other than those necessary to
                                                owners’ insurance benefits under the
                                                                                                         forth in Section 26(c) and that, if                   implement policies and procedures
                                                Contracts. The Substitutions will not
                                                                                                         implemented, the Substitutions would                  designed to detect and deter disruptive
                                                cause the contract fees and charges
                                                                                                         not raise any of the concerns that                    transfer and other ‘‘market timing’’
                                                currently being paid by Contract owners
                                                                                                         Congress intended to address when the                 activity) that may otherwise have been
                                                to be greater after the Substitution than                1940 Act was amended to include this
                                                before the Substitution.                                                                                       imposed for a period beginning on May
                                                                                                         provision. As described in the                        1, 2015, and ending no earlier than 30
                                                   14. The Applicants represent that
                                                                                                         application, each Replacement Portfolio
                                                Horace Mann will take further steps to                                                                         days after the Substitution. Applicants
                                                                                                         and its corresponding Existing Portfolio
                                                ensure that those Contract owners for                                                                          posit that this reduces the likelihood of
                                                                                                         have similar, and in some cases
                                                whom the total annual operating                                                                                being invested in an undesired
                                                                                                         substantially similar or identical,
                                                expense ratio of the Replacement                                                                               underlying registered open-end
                                                                                                         investment objectives and strategies.
                                                Portfolio was appreciably higher than                                                                          management investment company, with
                                                                                                         The application also states that, except
                                                that of the Existing Portfolio do not                                                                          the discretion remaining with the
                                                                                                         for three Substitutions noted in the
                                                                                                         application, the Existing Portfolios will             Contract owners.
                                                   2 To the extent that there are any in-kind

                                                redemptions, such redemptions will be effected in        have the same or lower total net annual                  7. Applicants state that the proposed
                                                accordance with the conditions set forth in the no-      operating expenses after the proposed                 Substitutions are also unlike the type of
                                                action letter issued by the Commission staff to          Substitutions as before the proposed                  substitution that Section 26(c) was
                                                Signature Financial Group (pub. avail. Dec. 28,          Substitutions. The application states                 designed to prevent in that the
srobinson on DSK5SPTVN1PROD with NOTICES




                                                1999).
                                                                                                         further that the Existing Portfolios and              Substitutions have no impact on other
                                                   In the event that a Replacement Portfolio or its
                                                investment adviser declines to accept, on behalf of      the Replacement Portfolios have similar,              aspects of the Contracts. Specifically,
                                                the Replacement Portfolio, securities redeemed in-       and in many cases substantially similar,              the proposed Substitutions will not
                                                kind by an Existing Portfolio, such Existing             investment policies and risks.                        affect the type of benefits offered by
                                                Portfolio will instead provide cash equal to the
                                                value of the declined securities so that the Contract
                                                                                                         Applicants believe that, to the extent                Horace Mann under the Contracts, or
                                                owner’s contract values will not be adversely            that differences in risks and strategies              numerous other rights and privileges
                                                affected or diluted.                                     do exist, these differences do not                    associated with the Contracts.


                                           VerDate Sep<11>2014   20:59 Jul 16, 2015   Jkt 235001   PO 00000   Frm 00108   Fmt 4703   Sfmt 4703   E:\FR\FM\17JYN1.SGM   17JYN1


                                                                                 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Notices                                                  42575

                                                Applicants’ Conditions                                   limitations on the future number of                   SECURITIES AND EXCHANGE
                                                   Applicants agree that any order                       transfers, for a period beginning at least            COMMISSION
                                                granting the requested relief will be                    30 days before the Substitution Date
                                                                                                                                                               [Release No. 34–75444; File No. SR–NYSE–
                                                subject to the following conditions:                     through at least 30 days following the                2015–15]
                                                   1. The Substitutions will not be                      Substitution Date.
                                                effected unless the Applicants                              7. All affected Contract owners will be            Self-Regulatory Organizations; New
                                                determine that: (a) The Contracts allow                  notified, at least 30 days before the                 York Stock Exchange LLC; Notice of
                                                the substitution of shares of registered                 Substitution Date about: (a) The                      Filing of Amendment No. 2 and Order
                                                open-end investment companies in the                     intended substitution of Existing                     Granting Accelerated Approval of a
                                                manner contemplated by the                               Portfolios with the Replacement                       Proposed Rule Change, as Modified by
                                                application; (b) the Substitutions can be                Portfolios; (b) the intended Substitution             Amendment No. 2, To Amend NYSE
                                                consummated as described in the                          Date; and (c) information with respect to             Rule 13 and Related Rules Governing
                                                application under applicable insurance                   transfers as set forth in Condition 6                 Order Types and Modifiers
                                                laws; and (c) any regulatory                             above. In addition, the Applicants will               July 13, 2015.
                                                requirements in each jurisdiction where                  also deliver to all affected Contract
                                                the Contracts are qualified for sale have                owners, at least 30 days before the                   I. Introduction
                                                been complied with to the extent                         Substitution Date, a prospectus for each                 On March 24, 2015, New York Stock
                                                necessary to complete the Substitutions.                 applicable Replacement Portfolio.                     Exchange LLC (‘‘Exchange’’ or ‘‘NYSE’’)
                                                   2. The Applicants or their affiliates                                                                       filed with the Securities and Exchange
                                                                                                            8. Applicants will deliver to each
                                                will pay all expenses and transaction                                                                          Commission (‘‘Commission’’), pursuant
                                                                                                         affected Contract owner within five (5)
                                                costs of the Substitutions, including                                                                          to Section 19(b)(1) of the Securities
                                                                                                         business days of the Substitution Date a
                                                legal and accounting expenses, any                                                                             Exchange Act of 1934 (‘‘Act’’) 1 and Rule
                                                                                                         written confirmation which will
                                                applicable brokerage expenses and other                                                                        19b–4 thereunder,2 a proposed rule
                                                                                                         include: (a) A confirmation that the
                                                fees and expenses. No fees or charges                                                                          change to amend Exchange Rule 13, and
                                                                                                         Substitutions were carried out as
                                                will be assessed to the affected Contract                                                                      related Exchange rules, governing order
                                                                                                         previously notified; (b) a restatement of
                                                owners to effect the Substitutions.                                                                            types and modifiers. The proposed rule
                                                   3. The Substitutions will be effected                 the information set forth in the Pre-
                                                                                                         Substitution Notice; and (c) before and               change was published for comment in
                                                at the relative net asset values of the                                                                        the Federal Register on April 14, 2015.3
                                                respective shares in conformity with                     after account values.
                                                                                                                                                               On May 14, 2015, the Exchange filed
                                                Section 22(c) of the 1940 Act and Rule                      9. For two years following the                     Partial Amendment No. 1 to the
                                                22c–1 thereunder without the                             Substitution Date, Horace Mann will                   proposed rule change 4 On May 27,
                                                imposition of any transfer or similar                    reimburse those who were Contract                     2015, pursuant to Section 19(b)(2) of the
                                                charges by Applicants. The                               owners on the Substitution Date and                   Act,5 the Commission designated a
                                                Substitutions will be effected without                   who, as a result of a Substitution, had               longer period within which to approve
                                                change in the amount or value of any                     Contract value allocated to a subaccount              the proposed rule change, disapprove
                                                Contracts held by affected Contract                      investing in a Replacement Portfolio                  the proposed rule change, or institute
                                                owners.                                                  such that the Replacement Portfolio’s                 proceedings to determine whether to
                                                   4. The Substitutions will in no way                   net annual operating expenses (taking                 disapprove the proposed rule change.6
                                                alter the tax treatment of affected                      into account any fee waivers and
                                                Contract owners in connection with                       expense reimbursements) for such                        1 15  U.S.C. 78s(b)(1).
                                                their Contracts, and no tax liability will               period will not exceed, on an                           2 17  CFR 240.19b–4.
                                                arise for Contract owners as a result of                 annualized basis, the net annual                         3 See Securities Exchange Act Release No. 74678

                                                the Substitutions.                                       operating expenses (taking into account               (April 8, 2015), 80 FR 20053 (‘‘Notice’’). Prior to
                                                   5. The rights or obligations of the                   any fee waivers and expense                           filing this proposal, the Exchange filed a similar
                                                                                                                                                               proposal to amend Rule 13, and related Exchange
                                                Applicants under the Contracts of                        reimbursements) of the corresponding                  rules, governing order types and modifiers. See
                                                affected Contract owners will not be                     Existing Portfolio as of the Existing                 Securities Exchange Act Release No. 73703
                                                altered in any way. The Substitutions                    Portfolio’s most recent fiscal year                   (November 28, 2014), 79 FR 72039 (December 4,
                                                will not adversely affect any riders                     preceding the Substitution Date. Any                  2014) (SR–NYSE–2014–59). For that proposal, the
                                                                                                                                                               Commission extended the time period for action,
                                                under the Contracts.                                     adjustments will be made at least on a                see Securities Exchange Act Release No. 74051
                                                   6. Affected Contract owners will be                   quarterly basis. In addition, for a period            (January 14, 2015), 80 FR 2983 (January 21, 2015)
                                                permitted to make at least one transfer                  of at least two years following the                   (SR–NYSE–2014–59), and for an almost identical
                                                of Contract value from the subaccount                    Substitution Date, the Applicants will                filing of NYSE MKT LLC (‘‘NYSE MKT’’), the
                                                                                                                                                               Commission instituted proceedings to determine
                                                investing in the Existing Portfolio                      not increase the Contract fees and                    whether to approve or disapprove NYSE MKT’s
                                                (before the Substitution Date) or the                    charges—including asset based charges                 proposal, see Securities Exchange Act Release No.
                                                Replacement Portfolio (after the                         such as mortality and expense risk                    74298 (February 18, 2015), 80 FR 9770 (February
                                                Substitution Date) to any other available                charges deducted from the                             24, 2015) (SR–NYSEMKT–2014–95). Prior to the
                                                                                                                                                               conclusion of those proceedings for NYSE MKT’s
                                                investment option under the Contract                     subaccounts—that would otherwise be                   proposal, both NYSE and NYSE MKT withdrew
                                                without charge for a period beginning at                 assessed under the terms of Contracts                 their respective proposals. See Securities Exchange
                                                least 30 days before the Substitution                    that are in force on the Substitution                 Act Release Nos. 74642 (April 3, 2015), 80 FR 19096
                                                Date through at least 30 days following                  Date.                                                 (April 9, 2015) (SR–NYSE–2014–59) and 74643
                                                                                                                                                               (April 3, 2015), 80 FR 19102 (April 9, 2015) (SR–
                                                the Substitution Date. Except as
srobinson on DSK5SPTVN1PROD with NOTICES




                                                                                                           For the Commission, by the Division of              NYSEMKT–2014–95).
                                                described in any market timing/short-                    Investment Management, under delegated                   4 The Exchange subsequently withdrew Partial

                                                term trading provisions of the relevant                  authority.                                            Amendment No. 1 on May 20, 2015.
                                                prospectus, Horace Mann will not                                                                                  5 15 U.S.C. 78s(b)(2).
                                                                                                         Robert W. Errett,                                        6 See Securities Exchange Act Release No. 75048,
                                                exercise any right it may have under the
                                                                                                         Deputy Secretary.                                     80 FR 31419 (June 2, 2015). The Commission
                                                Contracts to impose restrictions on                                                                            designated July 13, 2015, as the date by which it
                                                transfers between the subaccounts                        [FR Doc. 2015–17575 Filed 7–16–15; 8:45 am]
                                                                                                                                                               should approve, disapprove, or institute
                                                under the Contracts, including                           BILLING CODE 8011–01–P                                                                          Continued




                                           VerDate Sep<11>2014   20:59 Jul 16, 2015   Jkt 235001   PO 00000   Frm 00109   Fmt 4703   Sfmt 4703   E:\FR\FM\17JYN1.SGM    17JYN1



Document Created: 2018-02-23 09:21:32
Document Modified: 2018-02-23 09:21:32
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
ActionNotice of application for an order approving the substitution of certain securities pursuant to Section 26(c) of the Investment Company Act of 1940, as amended (the ``1940 Act'').
DatesFiling Date: The application was filed on July 25, 2014, and amended on January 14, 2015, and May 27, 2015.
ContactMichael S. Didiuk, Senior Counsel, at (202) 551-6839, or Holly L. Hunter-Ceci, Branch Chief, at (202) 551- 6825 (Division of Investment Management, Chief Counsel's Office).
FR Citation80 FR 42571 

2024 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR