[Federal Register Volume 76, Number 116 (Thursday, June 16, 2011)]
[Notices]
[Pages 35245-35249]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-14859]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-29691; File No. 812-13865]


Country Investors Life Assurance Company, et al.

June 9, 2011.
AGENCY: Securities and Exchange Commission (the ``Commission'').

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

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Applicants: COUNTRY Investors Life Assurance Company (the ``Company''), 
COUNTRY Investors Variable Life Account (the ``Life Account'') and 
COUNTRY Investors Variable Annuity Account (the ``Annuity Account'') 
(together, the ``Applicants'').
SUMMARY: Applicants seek an order pursuant to Section 26(c) of the 1940 
Act approving the substitution of: (1) Shares of the Fidelity VIP Index 
500

[[Page 35246]]

Portfolio (``Replacement Portfolio A'') of the Fidelity Variable 
Insurance Products Funds II (the ``Fidelity Fund II'') for shares of 
the COUNTRY VP Growth Fund (``Replaced Portfolio A'') of the COUNTRY 
Mutual Funds Trust (the ``COUNTRY Fund''); and (2) shares of the 
Fidelity VIP Investment Grade Bond Portfolio (``Replacement Portfolio 
B'') of the Fidelity Variable Insurance Products Fund V (the ``Fidelity 
Fund V'') for shares of the COUNTRY VP Bond Fund (``Replaced Portfolio 
B'') of the COUNTRY Fund. Shares of Replacement Portfolio A, 
Replacement Portfolio B, Replaced Portfolio A, and Replaced Portfolio B 
currently are held by the Life Account and the Annuity Account (each an 
``Account,'' together, the ``Accounts'') to support variable life 
insurance or variable annuity contracts, respectively, issued by the 
Company (each a ``Contract,'' collectively, the ``Contracts'').

DATES:  Filing Date: The Application was filed on February 1, 2011 and 
amended and restated on May 13, 2011.
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 July 5, 2011, and should 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 requester's interest, 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 Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090. Applicants, c/o Virginia L. Eves, 
Assistant General Counsel, Country Investors Life Assurance Company, 
1701 N. Towanda Avenue, Bloomington, IL 61702-2901. Copies to Thomas E. 
Bisset, Esq., Sutherland Asbill & Brennan LLP, 1275 Pennsylvania 
Avenue, NW., Washington, DC 20004-2415.

FOR FURTHER INFORMATION CONTACT: Alison T. White, Senior Counsel, or 
Joyce M. Pickholz, Branch Chief, Office of Insurance Products, Division 
of Investment Management, at (202) 551-6795.

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 for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.

Applicants' Representations

    1. The Company is a stock life insurance company organized under 
Illinois law in 1981. The Company is principally engaged in the 
offering of life insurance policies and annuity contracts, and is 
admitted to do business in 43 states. For purposes of the Act, the 
Company is the depositor and sponsor of each of the Accounts, as those 
terms have been interpreted by the Commission with respect to variable 
life insurance and variable annuity separate accounts.
    2. Under the insurance law of Illinois, the assets of each Account 
attributable to the Contracts issued through that Account are owned by 
the Company, but are held separately from the other assets of the 
Company for the benefit of the owners of, and the persons entitled to 
payment under, those Contracts. Each Account is a ``separate account'' 
as defined by Rule 0-1(e) under the Act. Each Account is registered 
with the Commission as a unit investment trust (File No. 811-21394 (the 
Life Account); File No. 811-21330 (the Annuity Account)). Each Account 
is comprised of a number of subaccounts and each subaccount invests 
exclusively in one of the insurance dedicated mutual fund portfolios 
made available as investment options underlying the Contracts.
    3. The Life Account is currently divided into 57 subaccounts. The 
assets of the Life Account support variable life insurance contracts, 
and interests in the Account offered through such contracts have been 
registered under the Securities Act of 1933, as amended (the ``1933 
Act'') on Form N-6 (File No. 333-106757).
    4. The Annuity Account is currently divided into 57 subaccounts. 
The assets of the Annuity Account support variable annuity contracts, 
and interests in the Account offered through such contracts have been 
registered under the 1933 Act on Form N-4 (File No. 333-104424).
    5. The Contracts are flexible premium variable life insurance and 
variable annuity contracts. The variable life insurance Contracts 
provide for the accumulation of values on a variable basis, a fixed 
basis, or a combination of both, throughout the insured's life, and for 
a death benefit upon the death of the insured. The variable annuity 
Contracts provide for the accumulation of values on a variable basis, a 
fixed basis, or a combination of both, during the accumulation period, 
and provide settlement or annuity payment options on a variable basis, 
a fixed basis, or a combination of both, during the income period. 
Under each of the Contracts, the Company reserves the right to 
substitute shares of one underlying fund for shares of another, or of 
another investment portfolio, including a portfolio of a different 
management investment company. The prospectuses for the Contracts and 
the Accounts contain the appropriate disclosure of this right.
    6. For as long as a variable life insurance Contract remains in 
force or a variable annuity Contract remains in force and has not yet 
been annuitized, a Contract owner may transfer all or any part of the 
Contract value from one subaccount to any other subaccount without 
limit, although certain restrictions apply to transfers to and from the 
fixed account interest investment option under the Contract funded by 
the Company's general account (the ``Declared Interest Option''). The 
Company reserves the right to revoke or modify the transfer privilege 
to discourage excessive trading by Contract owners or to prevent 
transfers that may have a detrimental effect upon Contract owners, 
subaccount unit values, the insurance dedicated mutual fund portfolios 
underlying the subaccounts or the Declared Interest Option. The 
Contracts reserve to the Company the right to assess a charge of $25 
for transfers in excess of twelve per Contract year.
    7. The Company began offering the variable life insurance Contracts 
in January, 2004 (the ``Original VLI Contracts'') and discontinued 
offering the Original VLI Contracts on or about December 1, 2008 once 
the Company received state approval to offer an enhanced version of the 
Original VLI Contracts (the ``New VLI Contracts''). Likewise, the 
Company began offering the variable annuity Contracts in January, 2004 
(the ``Original VA Contracts'') and discontinued offering the Original 
VA Contracts on or about December 1, 2008 once the Company received 
state approval to offer an enhanced version of the Original VA 
Contracts (the ``New VA Contracts''). The Company discontinued offering 
the New VLI Contracts and New VA Contracts on or about November 30, 
2010.
    8. Currently, there are 34 underlying mutual fund investment 
options available under the Original VLI Contracts and the Original VA 
Contracts. Following the substitution transactions there will be 32 
underlying mutual fund investment options

[[Page 35247]]

available under the Original VLI Contracts and the Original VA 
Contracts.
    9. Under the New VLI Contracts and the New VA Contracts, there are 
36 underlying mutual fund investment options available under the 
Contracts. Following the substitution transactions there will be 34 
underlying mutual fund investment options available under the New VLI 
Contracts and the New VA Contracts.
    10. The COUNTRY Fund is organized as a Delaware business trust and 
registered as an open-end management investment company under the Act 
(File No. 811-10475). The COUNTRY Fund currently offers 4 separate 
investment portfolios, two of which would be involved in the proposed 
substitutions, the Replaced Portfolios. The COUNTRY Fund issues a 
separate series of shares of beneficial interest in connection with 
each Replaced Portfolio and has registered such shares under the 1933 
Act on Form N-1A (File No. 333-68270). COUNTRY Fund Management 
(``COUNTRY Advisor''), a separately identifiable department of COUNTRY 
Trust Bank, serves as the investment adviser to each Replaced 
Portfolio.
    11. The Fidelity Fund II is registered as an open-end management 
investment company under the Act (File No. 811-05511) and currently 
offers three (3) investment portfolios, each with multiple share 
classes. The Fidelity Fund II issues a series of shares of beneficial 
interest in connection with each portfolio and has registered such 
shares under the 1933 Act on Form N-1A (File No. 033-20773). Each 
portfolio of the Fidelity Fund II has entered into a management 
agreement with Fidelity Management & Research Company (``FMR'') under 
which FMR acts as investment adviser for the portfolio. Under the 
management agreement and pursuant to an exemptive order issued by the 
Commission, FMR also acts as a manager of managers for Replacement 
Portfolio A, meaning that FMR has the responsibility to oversee sub-
advisers for Replacement Portfolio A and recommend the hiring, 
termination and replacement of such sub-advisers. Subject to the 
approval of the Fidelity Fund II board of trustees but without a 
shareholder approval, FMR may replace or hire unaffiliated sub-advisers 
or amend the terms of their existing sub-advisory agreements.
    12. The Fidelity Fund V is registered as an open-end management 
investment company under the Act (File No. 811-05361) and currently 
offers thirty-one (31) investment portfolios, each with multiple share 
classes. The Fidelity Fund V issues a series of shares of beneficial 
interest in connection with each portfolio and has registered such 
shares under the 1933 Act on Form N-1A (File No. 033-17704).
    13. The investment objectives of each Replaced Portfolio and 
Replacement Portfolio are as follows:
    a. Replaced Portfolio A and Replacement Portfolio A: The COUNTRY VP 
Growth Fund seeks growth of capital and dividend income, if any, will 
be incidental to this objective. The Fidelity VIP Index 500 Portfolio 
seeks investment results that correspond to the total return of common 
stocks publicly traded in the United States, as represented by the S&P 
500 Index.
    b. Replaced Portfolio B and Replacement Portfolio B: The COUNTRY VP 
Bond Fund seeks maximum total return consistent with preservation of 
capital. The Fidelity VIP Investment Grade Bond Portfolio seeks as high 
a level of current income as is consistent with the preservation of 
capital.
    14. The advisory fees, other expenses and total operating expenses 
(before and after any contractual waivers and reimbursements) for the 
year ended December 31, 2010, expressed as an annual percentage of 
average daily net assets, of the Replaced Portfolios and the 
Replacement Portfolios are as follows:

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                                       Replaced Portfolio A  COUNTRY VP    Replacement Portfolio A  Fidelity VIP
                                            Growth Fund  (percent)            Index 500  Portfolio  (percent)
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Advisory Fees.......................  .75                                 .10
Distribution and/or 12b-1 Fees......  N/A                                 .25
Other Expenses......................  .65                                 0.00
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    Total Operating Expenses........  1.40                                .35
Less Contractual Fee Waivers and      (.50)                               0.00
 Expense Reimbursements.
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        Net Operating Expenses......  .90                                 .35
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                                             Replaced Portfolio B                 Replacement Portfolio B
                                      COUNTRY Bond Fund                   Fidelity VIP Investment
                                      (percent)                           Grade Bond Portfolio
                                                                          (percent)
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Advisory Fees.......................  .50                                 .32
Other Expenses......................  .67                                 .11
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    Total Operating Expenses........  1.17                                .43
Less Contractual Fee Waivers and      (.46)                               (.01)
 Expense Reimbursements.
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        Net Operating Expenses......  .71                                 .42
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    15. The investment performance of each Replacement Portfolio 
compares favorably to the investment performance of the corresponding 
Replaced Portfolio. For the last fiscal year, the investment 
performance of Replacement Portfolio B significantly exceeded the 
investment performance of Replaced Portfolio B while the investment 
performance of Replacement Portfolio A slightly trailed the investment 
performance of Replaced Portfolio A. For the last five fiscal year 
period and ten fiscal year/since inception period, the investment 
performance of Replacement Portfolio A trailed the investment 
performance of Replaced Portfolio A, however, much of that 
underperformance can be traced directly to the extraordinary market 
conditions that existed in fiscal year 2008. In that regard, 
Replacement

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Portfolio A significantly outperformed Replaced Portfolio A in fiscal 
year 2009. For the last five fiscal year period and for the ten fiscal 
year/since inception period, the investment performance of Replacement 
Portfolio B exceeded the investment performance of Replaced Portfolio 
B. In addition, each Replacement Portfolio has a longer history of 
investment performance than that of the corresponding Replaced 
Portfolio.
    16. For those Contracts that are in force on the date of the 
proposed substitutions, the Company will take the following action 
during the twenty-four months following the date of the proposed 
substitutions. On the last day of each fiscal period (not to exceed a 
fiscal quarter), the Company will reimburse Contract owners to the 
extent that the sum of the operating expenses of the Replacement 
Portfolio (taking into account any fee waivers and expense 
reimbursements) and subaccount expenses for such period exceed, on an 
annualized basis, the sum of the operating expenses of the 
corresponding Replaced Portfolio (taking into account any fee waivers 
and expense reimbursements) and subaccount expenses for the fiscal year 
preceding the date of the proposed substitution. In addition, for 
twenty-four months following the proposed substitutions, the Company 
will not increase asset-based fees or charges for Contracts outstanding 
on the date of the proposed substitutions.
    17. The Board of Trustees of the COUNTRY Fund voted to close the 
Replaced Portfolios to new investment as of April 29, 2011, and to 
liquidate the Replaced Portfolios on or before June 30, 2012, the 
Liquidation Date. In turn, the COUNTRY VP Growth Fund Subaccount and 
the COUNTRY VP Bond Fund Subaccount (together the ``Discontinued 
Subaccounts'') that invest in Replaced Portfolio A and Replaced 
Portfolio B, respectively, also are no longer available for new 
investments (allocation of premium payments and transfers) as of April 
29, 2011 (the ``Closing Date'') and will be discontinued altogether 
under the Contracts on a date no later than the Liquidation Date.
    18. If the Commission grants this request for substitution relief, 
Contract owners' investment in the COUNTRY VP Growth Fund Subaccount 
and the COUNTRY VP Bond Fund Subaccount will automatically be 
transferred to the applicable Fidelity VIP Index 500 Portfolio 
Subaccount and the Fidelity VIP Investment Grade Bond Portfolio 
Subaccount (the ``Replacement Subaccounts''), respectively, as of a 
date determined by the Company following receipt of a Commission order 
granting substitution relief (the ``Substitution''). Contract owners 
will receive advance notice of the date of the Substitution (the 
``Substitution Date'').
    19. By supplements to the prospectuses for the registration 
statements of the Accounts filed with the Commission on February 2, 
2011 (collectively, the ``2011 Supplements''), the Company notified 
owners of the Contracts of its intention to take the necessary actions, 
including seeking the order requested by this amended and restated 
application, to carry out the proposed substitutions as described 
herein.
    20. The 2011 Supplements advised Contract owners that accumulated 
Contract value may continue to remain in the Discontinued Subaccounts 
after the Closing Date until the Substitution Date. After the Closing 
Date, however, Contract owners will not be able to allocate premium 
payments or transfer accumulated Contract value to the Discontinued 
Subaccounts from the Declared Interest Option or from the other 
subaccounts available under the Contract. Prospectuses for the 
Contracts dated May 1, 2011 also provided Contract owners the same 
information included in the 2011 Supplements as well as more detailed 
information regarding each Replaced Portfolio and each Replacement 
Portfolio.
    21. In addition, the Company has forwarded to each Contract owner 
invested in a Replaced Portfolio the most recent prospectus for the 
Replaced Portfolio and the corresponding Replacement Portfolio.
    22. From the date of the 2011 Supplements, Contract owners may 
transfer accumulated Contract value from the Discontinued Subaccounts 
to the Declared Interest Option and the other subaccounts available 
under the Contract free of charge and without such transfers counting 
against the number of free transfers allowed each Contract year. For 30 
days following the Substitution Date, Contract owners whose accumulated 
Contract value was transferred to the Replacement Subaccounts as a 
result of the Substitution may transfer accumulated Contract value from 
the Replacement Subaccounts to the Declared Interest Option and the 
other subaccounts available under the Contract free of charge and 
without such transfers counting against the number of free transfers. 
Although the Company has no present intention to increase the charge 
for transfers under the Contracts, the Company will agree not to 
exercise any rights reserved by it under the Contracts to impose 
additional charges for transfers until at least 30 days after the 
Substitution Date.
    23. Within five days after the Substitution Date, Contract owners 
who are affected by the substitutions will be sent a written notice 
informing them that the substitutions were carried out. The notice also 
will reiterate the facts that: (1) For at least 30 days after the 
Substitution Date, the Company will not exercise any rights reserved by 
it under the Contract to impose additional charges for transfers; and 
(2) for 30 days following the Substitution Date, Contract owners may 
transfer accumulated Contract value that was transferred into the 
Replacement Subaccounts as a result of the substitution out of the 
Replacement Subaccounts and into the Declared Interest Option and the 
other subaccounts available under the Contracts free of charge and 
without such transfers counting against the number of free transfers 
allowed each Contract year.
    24. The Company will carry out the proposed substitutions by 
redeeming shares of each Replaced Portfolio held by the Accounts for 
cash and applying the proceeds to the purchase of shares of the 
corresponding Replacement Portfolio. Redemption requests and purchase 
orders will be placed simultaneously so that Contract values will 
remain fully invested at all times. All redemptions of shares of the 
Replaced Portfolios and purchases of shares of the Replacement 
Portfolios will be effected in accordance with Rule 22c-1 of the Act.
    25. The proposed substitutions will take place at relative net 
asset value and will not result in a change in the amount of any 
Contract owner's accumulated Contract value or death benefit, or in the 
dollar value of his or her investment in any of the Accounts. Contract 
owners will not incur any fees or charges as a result of the proposed 
substitutions, nor will their rights or the Company's obligations under 
the Contracts be altered in any way. All applicable expenses incurred 
in connection with the proposed substitutions, including brokerage 
commissions and legal, accounting, and other fees and expenses, will be 
paid by the Company. In addition, the proposed substitutions will not 
result in adverse tax consequences for, and will not alter, the tax 
benefits to Contract owners. The proposed substitutions will not cause 
the Contract fees and charges currently being paid by existing Contract 
owners to be greater after the proposed substitutions than before the 
proposed substitutions.

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    26. Applicants believe that Contract owners will be better off with 
the Replacement Portfolios than with the Replaced Portfolios, and that 
the proposed substitutions also are unlike the type of substitution 
that Section 26(c) was designed to prevent.

Conclusion

    For the reasons and upon the facts set forth above, Applicants 
submit that the requested order meets the standards set forth in 
Section 26(c). Applicants request an order of the Commission, pursuant 
to Section 26(c) of the Act, approving the Substitutions.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-14859 Filed 6-15-11; 8:45 am]
BILLING CODE 8011-01-P