Document ID: SEC-2007-0199-0001
Agency: sec
Document Type: Notice
Title: Country Investors Life Assurance Company, et al.
Posted Date: 2007-02-08T05:00Z

[Federal Register: February 8, 2007 (Volume 72, Number 26)]
[Notices]               
[Page 6013-6016]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08fe07-85]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27695; File No. 812-13325]

 
Country Investors Life Assurance Company, et al.

February 2, 2007.
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 EquiTrust High 
Grade Bond Portfolio (``Replacement Portfolio A'') of the EquiTrust 
Variable Insurance Series Fund (the ``EquiTrust Fund'') for shares of 
the COUNTRY VP Short-Term Bond Fund (``Replaced Portfolio A'') of the 
COUNTRY Mutual Funds Trust (the ``COUNTRY Fund''); and (2) shares of 
the T. Rowe Price Personal Strategy Balanced Portfolio (``Replacement 
Portfolio B'') of the T. Rowe Price Equity Series, Inc. (the ``T. Rowe 
Price Fund'') for shares of the COUNTRY VP Balanced 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 (collectively, the ``Contracts'').

Filing Date: The Application was filed on September 5, 2006 and amended 
and restated on January 24, 2007.

Hearing or Notification of Hearing: An order granting the application 
will be

[[Page 6014]]

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 
February 27, 2007, 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, Esq., 
General Attorney, Country Investors Life Assurance Company, 1701 N. 
Towanda Avenue, Bloomington, IL 61702-2901. Copy 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 is available for a fee from the 
Public Reference Branch of the Commission.

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 41 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 36 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 36 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.
    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 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 9 separate 
investment portfolios (each, a ``Portfolio''), two of which would be 
involved in the proposed substitutions. The COUNTRY Fund issues a 
separate 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. 33-68270). COUNTRY Trust Bank (``COUNTRY Advisor'') 
serves as the investment adviser to each Portfolio, including both 
Replaced Portfolio A and Replaced Portfolio B.
    8. The EquiTrust Fund is an open-end diversified management 
investment company registered under the Act (File No. 811-5069) 
consisting of six portfolios, each with its own investment 
objective(s), investment policies, restrictions, and attendant risks. 
One of those portfolios, the EquiTrust High Grade Bond Portfolio, is 
involved in the proposed substitution. The EquiTrust Fund issues a 
separate series of shares of beneficial interest in connection with 
each of those portfolios, and has registered such shares under the 1933 
Act on Form N-1A (File No. 33-12791). EquiTrust Investment Management 
Services, Inc. is the investment adviser and manager to the EquiTrust 
Fund portfolios. Neither the EquiTrust Fund nor any of its portfolios 
is affiliated with the Applicants.
    9. The T. Rowe Price Fund is a Maryland corporation that is 
registered as an open-end management investment company under the Act 
(File No. 811-07143) and currently offers seven investment portfolios, 
one of which--the T. Rowe Price Personal Strategy Balanced Portfolio--
is involved in the proposed substitution. The T. Rowe Price Fund 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. 33-52161). T. Rowe Price Associates, Inc., based in 
Baltimore, Maryland, acts as investment adviser to the T. Rowe Price 
Personal Strategy Balanced Portfolio. Neither the T. Rowe Price Fund 
nor any of its portfolios is affiliated with the Applicants.
    10. The investment objectives of each Replaced Portfolio and 
Replacement Portfolio are as follows:
    a. Replaced Portfolio A and Replacement Portfolio A: The Country VP 
Short-Term Bond Fund seeks to achieve a high level of current income

[[Page 6015]]

consistent with preservation of capital and maintenance of liquidity. 
The EquiTrust High Grade Bond Portfolio seeks to generate as high a 
level of current income as is consistent with investment in a 
diversified portfolio of high-grade income-bearing debt securities.
    b. Replaced Portfolio B and Replacement Portfolio B: The Country VP 
Balanced Fund seeks growth of capital and current income. The T. Rowe 
Price Strategy Balanced Portfolio seeks the highest total return over 
time consistent with emphasis on both capital appreciation and income.
    11. The advisory fees, other expenses and total operating expenses 
(before and after any contractual waivers and reimbursements) for the 
year ended December 31, 2005, expressed as an annual percentage of 
average daily net assets, of the Replaced Portfolios and the 
Replacement Portfolios are as follows:

------------------------------------------------------------------------
                                             Replaced       Replacement
                                           Portfolio A      Portfolio A
                                        --------------------------------
                                                          EquiTrust High
                                            Country VP      Grade Bond
                                         Short-Term Bond     Portfolio
                                         Fund  (Percent)     (Percent)
------------------------------------------------------------------------
Advisory Fees..........................             .50              .30
Other Expenses.........................             .75              .15
Total Operating Expenses...............            1.25              .45
Less Contractual Fee Waivers and                   (.55)             N/A
 Expense Reimbursements................
Net Operating Expenses.................             .70              .45
------------------------------------------------------------------------

------------------------------------------------------------------------
                                             Replaced       Replacement
                                           Portfolio B      Portfolio B
                                        --------------------------------
                                                           T. Rowe Price
                                                             Personal
                                            Country VP       Strategy
                                          Balanced Fund      Balanced
                                            (Percent)        Portfolio
                                                             (Percent)
------------------------------------------------------------------------
Advisory Fees..........................             .75          \1\ .90
Other Expenses.........................             .79              .00
Total Operating Expenses...............            1.54              .90
Less Contractual Fee Waivers and                   (.64)             N/A
 Expense Reimbursements................
Net Operating Expenses.................             .90             .90
------------------------------------------------------------------------
\1\ Unified fee.

    12. The investment performance of each Replacement Portfolio 
compares favorably to the investment performance of the corresponding 
Replaced Portfolio. For each of the last three fiscal years, the life 
of each Replaced Portfolio, the investment performance of each 
Replacement Portfolio has significantly exceeded the investment 
performance of the corresponding Replaced Portfolio. In addition, each 
Replacement Portfolio has a longer history of investment performance 
than that of the corresponding Replaced Portfolio.
    13. Currently, under each Contract 36 different variable investment 
options are available for investment. Following the proposed 
substitution of shares of each Replacement Portfolio for shares of the 
corresponding Replaced Portfolio, 34 different variable investment 
options will be available under each Contract.
    14. 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 the Contract owners 
investing in the Replacement Portfolios 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.
    15. The Board of Trustees of the COUNTRY Fund voted to close the 
Replaced Portfolios to new investment as of July 31, 2006, and to 
liquidate both Replaced Portfolios on or before August 31, 2007, the 
Liquidation Date. In turn, Replaced Portfolio A and Replaced Portfolio 
B are no longer available for new investment under the Contracts 
(allocation of Contract value) as of July 31, 2006 (the ``Closing 
Date'') and will be discontinued altogether under the Contracts on a 
date no later than the Liquidation Date.
    16. Accumulated Contract value invested in the COUNTRY VP Short-
Term Bond Fund and the COUNTRY VP Balanced Fund will automatically be 
transferred to the EquiTrust High Grade Bond Fund and the T. Rowe Price 
Personnel Strategy Balanced Fund, 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'').
    17. By supplements dated July 6, 2006 (collectively, the ``2006 
Supplements'') to the prospectuses for the registration statements of 
the Accounts, the Company notified owners of the Contracts of its 
intention to take the necessary actions, including seeking an order 
requested to carry out the proposed substitutions.
    18. The 2006 Supplements advised Contract owners that accumulated 
Contract value may continue to remain in the Replaced Portfolios after 
the

[[Page 6016]]

Closing Date until the Substitution Date. After the Closing Date, 
Contract owners will not be able to allocate Contract value to the 
Replaced Portfolios from the alternative investment options available 
under the Contract.
    19. From the date of the 2006 Supplements, Contract owners may 
transfer accumulated Contract value invested in the Replaced Portfolios 
to the other investment options 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 
invested in the Replaced Portfolios as of the Substitution Date and 
subsequently invested in the Replacement Portfolios as a result of the 
Substitution may transfer that accumulated Contract value from the 
Replacement Portfolios to the alternative investment options 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 
Contract, the Company will not exercise any rights reserved by it under 
the Contract to impose additional charges for transfers until at least 
30 days after the Substitution Date.
    20. Further, all Contract owners invested in a Replaced Portfolio 
will have received the most recent corresponding Replacement Portfolio 
prospectus prior to the Substitution Date.
    21. Within five days after the proposed substitutions, 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: (a) 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 (b) for 30 days following the proposed substitutions, 
Contract owners may transfer accumulated Contract value invested in the 
Replacement Portfolios as a result of the Substitution out of the 
Replacement Portfolios and into the alternative investment options 
available under the Contracts free of charge and without such transfers 
counting against the number of free transfers allowed each Contract 
Year.
    22. 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.
    23. 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.

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.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 07-554 Filed 2-7-07; 8:45 am]

BILLING CODE 8010-01-P