[Federal Register Volume 61, Number 238 (Tuesday, December 10, 1996)]
[Notices]
[Pages 65093-65095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31332]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22369; No. 812-10254]


Midland National Life Insurance Company, et al.

December 4, 1996.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of Application for an Exemption pursuant to the 
Investment Company Act of 1940 (the ``1940 Act'').

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APPLICANTS: Midland National Life Insurance Company (``Midland''), 
Midland National Life Separate Account A (``Separate Account A''), 
Midland National Life Separate Account C (``Separate Account C,'' 
together with Separate Account A, the ``Midland Separate Accounts''), 
Investors Life Insurance Company of Nebraska (``Investors''), Investors 
Life Separate Account B (``Separate Account B''), and Investors Life 
Separate Account D (``Separate Account D,'' together with Separate 
Account B, the ``Investors Separate Accounts'').

RELEVANT 1940 ACT SECTIONS: Order requested pursuant to Section 17(b) 
granting an exemption from the provisions of Section 17(a).

SUMMARY OF APPLICATION: Applicants seek an order of exemption to the 
extent necessary to permit a transfer of assets and assumption of 
liabilities of Separate Account B by Separate Account A and of Separate 
Account D by Separate Account C.

FILING DATE: The application was filed on July 15, 1996, and amended on 
December 2, 1996.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Secretary of the 
Commission and serving Applicants with a copy of the request, 
personally or by mail. Hearing requests must be received by the 
Commission by 5:30 p.m. on December 30, 1996, and must be accompanied 
by proof of service on Applicants in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the writer's interest, the reason for the request, and the 
issues contested. Persons may request notification of a hearing by 
writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th 
Street, N.W., Washington, D.C. 20549. Applicants, c/o Jack L. Briggs, 
Esq., Midland National Life Insurance Company, One Midland Plaza, Sioux 
Falls, South Dakota 57193.

FOR FURTHER INFORMATION CONTACT:
Michael Koffler, Law Clerk or Kevin M. Kirchoff, Branch Chief, Office 
of Insurance Products (Division of Investment Management), at (202) 
942-0670.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application; the complete application is available for a fee from the 
Public Reference Branch of the Commission.

Applicants' Representations

    1. Midland, a South Dakota stock life insurance company, is a 
wholly-owned subsidiary of Sammons Enterprises, Inc.
    2. Midland established the Midland Separate Accounts as separate 
accounts pursuant to South Dakota law. Each of the Midland Separate 
Accounts is a ``separate account,'' as defined by Section 2(a)(37) of 
the 1940 Act, and is registered with the Commission pursuant to the 
1940 Act as a unit investment trust.
    3. Certain variable life insurance contracts sponsored by Midland 
and issued through Separate Account A are registered with the 
Commission pursuant to the Securities Act of 1933 (the ``Securities 
Act''). Certain variable annuity contracts sponsored by Midland and 
issued through Separate Account C are registered with the Commission 
pursuant to the Securities Act.
    4. Each of the Midland Separate Accounts is divided into ten 
investment divisions, each of which invests exclusively in shares of a 
corresponding portfolio of Variable Insurance Products Fund or Variable 
Insurance Products Fund II (together, the ``funds''), open-end 
management investment companies registered with the Commission pursuant 
to the 1940 Act.
    5. Investors, a South Dakota stock life insurance company, is a 
subsidiary of Midland.
    6. Investors established the Investors Separate Accounts as 
separate accounts pursuant to South Dakota law. Each of the Investors 
Separate Accounts is a ``separate account,'' as defined by Section 
2(a)(37) of the 1940 Act, and is registered with the Commission

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pursuant to the 1940 Act as a unit investment trust.
    7. Certain variable life insurance contracts sponsored by Investors 
and issued through Separate Account B are registered with the 
Commission pursuant to the Securities Act. Certain variable annuity 
contracts sponsored by Investors and issued through Separate Account D 
are registered with the Commission pursuant to the Securities Act.
    8. Each of the Investors Separate Accounts is divided into ten 
investment divisions, each of which invests exclusively in shares of a 
corresponding portfolio of the Funds.
    9. Midland and Investors have determined to engage in transactions 
whereby Investors will be reorganized with and merged into Midland, 
with Midland as the surviving corporation (such transactions, 
collectively, the ``Reorganization''). Prior to the effective date of 
the Reorganization, an Agreement and Plan of Reorganization (the 
``Agreement'') will have been approved and adopted by the respective 
Boards of Directors of Midland and Investors, the South Dakota Division 
of Insurance and any other applicable regulatory authority.
    10. On the effective date of the Reorganization: (a) Midland will 
assume ownership of all the assets of Investors, including all the 
assets held in the Investors Separate Accounts; (b) Midland will 
conduct the business presently conducted by Investors, and will be 
responsible for satisfaction of all of the liabilities and obligations 
of Investors; and (c) Investors will cease to exist as a separate 
corporate entity. Midland will then control two separate accounts 
supporting identical variable universal life insurance contracts, and 
two separate accounts supporting identical variable annuity contracts.
    11. After considering the nature and purpose of each separate 
account, the respective Board of Directors of Midland and Investors 
have determined that the efficiency of the operations of the separate 
accounts after the Reorganization could be improved, and the overall 
administration enhanced, by merging Separate Account B into Separate 
Account A, and by merging Separate Account D into Separate Account C. 
The Reorganization will be structured so there will be no change in the 
rights and benefits of persons having an interest in any of the 
variable life insurance contracts or variable annuity contracts issued 
by the separate accounts.
    12. Following the transactions set forth in the Agreement, each 
Separate Account B contract owner will possess a number of Separate 
Account A units, (both full and fractional) that when multiplied by the 
unit value of Separate Account A units, would result in an aggregate 
unit value equal to the aggregate unit value of the units the contract 
owner had in Separate Account B immediately before the consummation of 
the Reorganization. A similar method of crediting units will apply to 
Separate Account C units credited to Separate Account D contract 
owners.
    13. Upon the effective date of the Reorganization, Midland will 
succeed to all of the business and operations of Investors, including 
the obligations pursuant to the variable life and variable annuity 
contracts issued by Investors. Midland will distribute to each Separate 
Account B and Separate Account D contract owner: (a) a contract rider 
indicating that such contracts are thereafter funded by Separate 
Account A or Separate Account C, as appropriate; (b) a prospectus 
supplement in the form of a letter informing such contract owners of 
the Reorganization; and (c) a copy of the current prospectus for 
Separate Account A or Separate Account C, as appropriate.
    14. Except for the change in the depositor and the separate account 
funding the variable life or variable annuity contracts, all the rights 
and benefits of Separate Account B and Separate Account D contract 
owners will remain unchanged after the Reorganization. In particular, 
the assets supporting the former Separate Account B and the former 
Separate Account D will continue to be invested exclusively in shares 
of the Funds. The fees deducted from the assets supporting the former 
Separate Account B and Separate Account D after the Reorganization will 
not differ in type or amount from those currently being deducted from 
Separate Account A and Separate Account C, respectively.
    15. Midland and Investors assert that the substitution of Separate 
Account A for Separate Account B as the investment vehicle for the 
variable life contracts and of Separate Account C for Separate Account 
D as the investment vehicle for the variable annuity contracts will 
have no tax consequences for contract owners. Midland and Investors 
will pay all of the costs in connection with the proposed 
Reorganization and no charges will be imposed on or other deductions 
made from the separate accounts in connection with the Reorganization.
    16. After the effective date of the Reorganization, Separate 
Account B and Separate Account D will each submit an application to the 
Commission pursuant to Section 8(f) of the 1940 Act to deregister as an 
investment company.

Applicants' Legal Analysis

    1. Section 17(a) of the 1940 Act provides generally that it is 
unlawful for any affiliated person of a registered investment company, 
or any affiliated person of such a person, acting as principal to 
knowingly purchase or sell any security or other property from or to 
such registered company.
    2. Section 17(b) of the 1940 Act provides generally that the 
Commission may grant an order exempting a transaction otherwise 
prohibited by Section 17(a) of the 1940 Act if evidence establishes 
that: (a) the terms of the proposed transaction, including the 
consideration to be paid or received, are reasonable and fair and do 
not involve overreaching on the part of any person concerned; (b) the 
proposed transaction is consistent with the policy of each registered 
investment company concerned; and (c) the proposed transaction is 
consistent with the general purposes of the 1940 Act.
    3. The Reorganization may be subject to the provisions of Section 
17(a) of the 1940 Act since an investment company (Separate Account B 
or Separate Account D) is selling its assets to another investment 
company (Separate Account A or Separate Account C) that is affiliated 
by reason of having sponsoring insurance companies that are under 
common control, or by reason of having common directors.
    4. Applicants request an order of the Commission pursuant to 
Section 17(b) of the 1940 Act to the extent necessary to exempt the 
Reorganization from the provisions of Section 17(a) of the 1940 Act.
    5. Applicants assert that the terms of the Reorganization are fair 
and reasonable and that the investment objectives, policies, 
restrictions and portfolios of the participating investment companies 
are compatible. All of the separate accounts concerned invest 
exclusively in shares of the Funds and, after the consummation of the 
Reorganization, Separate Account A and Separate Account C will continue 
to invest in shares of the Funds, providing holders of variable 
contracts issued by Investors with the same investment options. 
Accordingly, the Reorganization will not result in any change in the 
investment objectives, policies, restrictions, or portfolios of the 
separate accounts funding the variable contracts issued by Investors.
    6. The Reorganization will not result in any change in charges, 
costs, fees or expenses borne by any contract owner. No direct or 
indirect costs will be

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incurred by any separate account concerned as a result of the 
Reorganization.
    7. Applicants assert that the Reorganization does not involve 
overreaching on the part of any party involved and is consistent with 
the general purposes of the 1940 Act. The purpose of each of the 
mergers involved in the Reorganization is to consolidate two identical 
separate accounts, both of which issue identical contracts and invest 
in the same underlying Funds, into a single separate account. These 
mergers will allow for administrative efficiencies and cost savings by 
Midland because it can consolidate its separate account operations. It 
will also allow owners of contracts of Investors to participate in 
separate accounts that have sizeable net assets.
    8. Applicants represent that the Reorganization is consistent with 
the policy of each separate account as set forth in its registration 
statement. Because the assets of the Investors Separate Accounts will 
continue to be invested in shares of one or more portfolios of the 
Funds after the Reorganization, the assets underlying all of the 
various contracts will continue to be invested in accordance with the 
investment policies recited in their respective registration 
statements.
    9. Applicants represent that the Midland Separate Accounts will 
invest only in management investment companies that undertake, in the 
event the company adopts a plan to finance distribution expenses 
pursuant to Rule 12b-1 of the 1940 Act, to have a board of directors 
(or trustees), a majority of whom are not interested persons of the 
company, formulate and approve any such plan pursuant to Rule 12b-1.

Conclusion

    For the reasons summarized above, Applicants assert that the terms 
of the Reorganization, including the consideration to be paid or 
received, are reasonable and fair and do not involve overreaching on 
the part of any person concerned, are consistent with the investment 
policies of the Midland Separate Accounts and the Investors Separate 
Accounts as recited in their registration statements, are consistent 
with the general purposes of the 1940 Act, and therefore meet the 
conditions for exemptive relief established by Section 17(b).

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-31332 Filed 12-9-96; 8:45 am]
BILLING CODE 8010-01-M