[Federal Register: November 24, 2003 (Volume 68, Number 226)]
[Notices]
[Page 65969-65974]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24no03-132]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-26257; File No. 812-13028]
AIG SunAmerica Life Assurance Company, et al.; Notice of
Application
November 18, 2003.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of an application for an order (the ``Order'') of
approval pursuant to Section 26(c) of the Investment Company Act of
1940 (the ``1940 Act'') and an order of exemption pursuant to Section
17(b) of the 1940 Act from Section 17(a) of the 1940 Act.
-----------------------------------------------------------------------
Applicants: AIG SunAmerica Life Assurance Company and Variable Separate
Account of AIG SunAmerica Life Assurance Company (collectively, the
``Applicants.'')
Summary of the Application: The Applicants request an order (a)
permitting the substitution of Growth Series, International Series,
Growth-Income Series, Asset Allocation Series, High-Yield Bond Series,
U.S. Government/AAA Rated Securities Series and Cash Management Series
(the ``Replaced Portfolios''), each a series of the Anchor Pathway Fund
(``Anchor Fund ``), for Class 3 shares of the Growth Fund,
International Fund, Growth-Income Fund, Asset Allocation Fund, High-
Income Bond Fund, U.S. Government/AAA-Rated Securities Fund and Cash
Management Fund (the ``Replacement Portfolios''), each a series of the
American Funds Insurance Series (``AFIS''); and (b) permitting certain
in-kind transactions in connection with the proposed substitutions (the
``Substitutions'').
Filing Date: The application was filed on January 28, 2003, amended and
restated on September 22, 2003, and amended on November 14, 2003.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing on the application by writing to the Secretary of the
SEC and serving Applicants with a copy of the request, personally or by
mail. Hearing requests must be received by the SEC by 5:30 p.m. on
December 12, 2003, 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 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 SEC.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW., Washington, DC 20549-0609. Applicants: c/o Jorden Burt
LLP, 1025 Thomas Jefferson Street, NW., East Lobby, Suite 400,
Washington, DC 20007, Attention: Joan E. Boros, Esq.
FOR FURTHER INFORMATION CONTACT: Mark Cowan, Senior Counsel, or Zandra
Y. Bailes, Branch Chief, at (202) 942-0670 (Division of Investment
Management, Office of Insurance Products).
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 SEC, 450 Fifth Street, NW., Washington,
DC 20549-0102 [tel. (202) 942-8090].
Applicants' Representations
1. AIG SunAmerica Life Assurance Company (``AIG SunAmerica'') is a
stock life insurance company originally organized under the laws of the
state of California in April 1965, and redomesticated under the laws of
the state of Arizona on January 1, 1996. AIG SunAmerica is a wholly-
owned subsidiary of SunAmerica Life Insurance Company, an Arizona
corporation, which is, in turn, wholly-owned by AIG SunAmerica Inc., a
Delaware corporation, which is, in turn, wholly-owned by American
International Group, Inc. AIG SunAmerica was previously known as Anchor
National Life Insurance Company. AIG SunAmerica is authorized to
conduct annuity and life insurance business in the District of Columbia
and all states except New York.
2. Variable Separate Account of AIG SunAmerica (the ``Separate
Account'') was established by AIG SunAmerica on June 25, 1981, in
accordance with the laws of the state of California and is currently
authorized under the laws of the state of Arizona as a result of AIG
SunAmerica's redomestication on January 1, 1996. The Separate Account
is registered as a unit investment trust under the 1940 Act. The
Separate Account is used to fund the contract under which the proposed
Substitutions are to take place (the ``Contract'') and other annuity
contracts issued by AIG SunAmerica and is currently divided into a
total of sixty-six (66) variable accounts (``Variable Accounts'');
however, only seven (7) of the Variable Accounts and portfolios
(``Portfolios'') in which they invest are available on an exclusive
basis, under the Contract that is the subject of the application.
[[Page 65970]]
3. The Contract issued by AIG SunAmerica through its Separate
Account, the American Pathway II Variable Annuity, is an individual
flexible premium deferred non-participating variable annuity contract
that currently utilizes only the Replaced Portfolios as underlying
investments. AIG SunAmerica discontinued new sales of the Contract as
of the close of business on August 31, 1993, but continues to accept
subsequent purchase payments on existing Contracts and to issue the
Contract to new participants in existing qualified retirement plans
using the Contract as a funding vehicle.
4. The Replaced Portfolios, each of which offers a single class of
shares, constitute each of the separate series available through the
Anchor Fund. The Anchor Fund was organized as a Massachusetts business
trust on March 23, 1987, and established to provide a funding medium
for the Variable Accounts of the Separate Account that are its sole
shareholders. The Separate Account buys and sells shares of the Anchor
Fund at net asset value that is net of the management fees (``Business
Management Fee''), which range from .20% to .24% of average daily net
assets, paid to SunAmerica Asset Management Corp. (``SAAMCO''), an
affiliate of AIG SunAmerica, to manage the business affairs of the
Anchor Fund and to provide administrative services pursuant to a
written agreement (``Business Management Agreement''). The Anchor Fund
is registered as a diversified, open-end management investment company
under the 1940 Act, and its shares are registered as securities under
the Securities Act of 1933 (the ``1933 Act''). Capital Research and
Management Company (``Capital Research'' or the ``Adviser'') serves as
the investment adviser to the Anchor Fund. Capital Research is not
affiliated with AIG SunAmerica.
5. The Replacement Portfolios represent the Class 3 shares of seven
(7) of the thirteen (13) series of AFIS, each of which also offers
Class 1 and Class 2 shares. AFIS is registered as a diversified, open-
end management investment company under the 1933 Act and was organized
as a Massachusetts business trust on September 13, 1983. Its Class 1
and Class 2 shares are sold currently only to separate accounts of
various insurance companies to provide a funding medium for their
variable annuity contracts and variable life policies. The Replacement
Portfolios, which the Separate Account will purchase, will be offered
at net asset value subject to a plan adopted pursuant to Rule 12b-1
under the 1940 Act (the ``Rule 12b-1 Plan''). Pursuant to the plan,
AFIS will pay .18%, subject to the condition discussed below with
respect to the Growth Fund, of the average daily net assets attributed
to the Class 3 shares to reimburse AIG SunAmerica for performing
administrative services (the ``Service Fee'').
6. Once registered, the Class 3 shares of the Replacement
Portfolios will initially be sold only to the Separate Account to serve
as the exclusive funding medium for the Variable Accounts under the
Contract. However, AFIS would be permitted to offer shares of the
Replacement Portfolios to other insurance companies. Capital Research
serves as the investment adviser to AFIS. Capital Research is not
affiliated with AIG SunAmerica.
7. The application covers all of the available Portfolios in which
the Separate Account invests under the Contract. AIG SunAmerica
reviewed the Portfolios available under the Contract. The primary goal
of the review was to consider and determine whether to replace certain
or all of the Portfolios based on a review of their investment
objectives and principal investment strategies, total annual expenses,
net asset size, and performance. The review resulted in the proposal
that AIG SunAmerica discontinue offering Variable Accounts investing in
the Replaced Portfolios as investment options under the Contract and
substitute shares of the Replacement Portfolios. Taking into account
that the Contract is no longer offered for sale and will not be offered
for sale after the Substitutions occur, this proposal was due primarily
to AIG SunAmerica's conclusion that the larger and growing asset size
of the Replacement Portfolios would provide the only feasible means of
maintaining lower total annual expenses and maintaining effective asset
management with the goal of improving performance. No other contract is
funded through investment in the Replaced Portfolios, and therefore,
there is no growth potential for the Replaced Portfolios.
8. The Applicants represent that each of the Replacement Portfolios
has investment objectives, policies, and restrictions substantially
identical in all material respects to those of its corresponding
Replaced Portfolio. In addition, the Replacement Portfolios utilize the
same investment adviser as the Replaced Portfolios, Capital Research, a
well-known and respected investment adviser.
9. The Applicants represent that each of the Replacement Portfolios
has lower total annual expenses than those of its corresponding
Replaced Portfolio (except for the Growth Fund, which has slightly
higher total annual expense than the Growth Series), as set forth in
the following chart.
Expense Ratios
[As a percentage of average daily net assets]
------------------------------------------------------------------------
Replacement portfolios
Replaced portfolios (one year (one year period
period ended 2/28/03)\1\ ended 12/31/02)
growth series growth fund
------------------------------------------------------------------------
Advisory Fee.................. 0.30 Advisory Fee.......... 0.38
Business Mgmt. Fee............ 0.20 Service (12b-1) Fee... 0.18
Other Expenses................ 0.05 Other Expenses........ 0.02
Total Operating Expenses...... 0.55 Total Operating 0.58
Expenses.
-------------------------------
International Series International Fund
----------------------------------------
Advisory Fee.................. 0.62 Advisory Fee.......... 0.57
Business Mgmt. Fee............ 0.24 Service (12b-1) Fee... 0.18
Other Expenses................ 0.16 Other Expenses........ 0.06
Total Operating Expenses...... 1.02 Total Operating 0.81
Expenses.
-------------------------------
Growth-Income Series Growth-Income Fund
----------------------------------------
Advisory Fee.................. 0.30 Advisory Fee.......... 0.34
[[Page 65971]]
Business Mgmt. Fee............ 0.20 Service (12b-1) Fee... 0.18
Other Expenses................ 0.05 Other Expenses........ 0.01
Total Operating Expenses...... 0.55 Total Operating 0.53
Expenses.
-------------------------------
Asset Allocation Series Asset Allocation Fund
----------------------------------------
Advisory Fee.................. 0.32 Advisory Fee.......... 0.43
Business Mgmt. Fee............ 0.21 Service (12b-1) Fee... 0.18
Other Expenses................ 0.11 Other Expenses........ 0.02
Total Operating Expenses...... 0.64 Total Operating 0.63
Expenses.
-------------------------------
High-Yield Bond Series High-Income Bond Fund
----------------------------------------
Advisory Fee.................. 0.34 Advisory Fee.......... 0.50
Business Mgmt. Fee............ 0.22 Service (12b-1) Fee... 0.18
Other Expenses................ 0.17 Other Expenses........ 0.02
Total Operating Expenses...... 0.73 Total Operating 0.70
Expenses.
-------------------------------
U.S. Government/AAA-Rated Securit U.S. Government/AAA-Rated
Series Securities Fund
----------------------------------------
Advisory Fee.................. 0.33 Advisory Fee.......... 0.45
Business Mgmt. Fee............ 0.22 Service (12b-1) Fee... 0.18
Other Expenses................ 0.12 Other Expenses........ 0.02
Total Operating Expenses...... 0.67 Total Operating 0.65
Expenses.
-------------------------------
Cash Management Series Cash Management Fund
----------------------------------------
Advisory Fee.................. 0.34 Advisory Fee.......... 0.44
Business Mgmt. Fee............ 0.23 Service (12b-1) Fee... 0.18
Other Expenses................ 0.17 Other Expenses........ 0.02
Total Operating Expenses...... 0.74 Total Operating 0.64
Expenses.
------------------------------------------------------------------------
\1\ February 28, 2003 is the fiscal year end for the Anchor Fund.
10. The Applicants represent that each of the Replacement
Portfolios has a significantly larger asset base than that of its
corresponding Replaced Portfolio. Moreover, AIG SunAmerica believes
that it is no longer economical to continue to offer the Replaced
Portfolios as their smaller and dwindling asset size will make it more
difficult to manage such assets so as to keep expense ratios down and
to maintain performance.
11. The Applicants represent that each of the Replacement
Portfolios has a performance record comparable to that of its
corresponding Replaced Portfolio.
12. The Applicants will effect the proposed Substitutions by first
redeeming shares of each of the Replaced Portfolios wholly on an in-
kind basis at their net asset value and then immediately contributing
those assets in-kind to the corresponding Replacement Portfolio to
purchase their respective shares (the ``In-Kind Transactions''). The
In-Kind Transactions will be done in a manner consistent with the
investment objectives, policies and restrictions, and diversification
requirements of the Replaced and Replacement Portfolios. Capital
Research will review the In-Kind Transactions, and given that it is the
investment adviser and employs the same system of multiple portfolio
counselors in managing assets for both the Replaced and Replacement
Portfolios, which have substantially identical investment objectives,
policies and restrictions, Applicants anticipate that all redeemed
assets of the Replaced Portfolios will be suitable for the
corresponding Replacement Portfolios. For these same reasons,
Applicants also submit that the portfolio securities to be contributed
in-kind for shares of the Replacement Portfolios will be of the type
and quality that each Replacement Portfolio could have acquired,
respectively, with the proceeds from the sale of its shares had the
shares been sold for cash. In effecting the In-Kind Transactions,
Applicants will follow the requirements of Rule 17a-7 under the 1940
Act to the extent possible and all assets and liabilities will be
valued based on the normal valuation procedures of the Replaced and
Replacement Portfolios, as set forth, respectively, in the Anchor Fund
and AFIS's registration statements.
13. At all times, before and after the Substitutions, monies
attributable to owners of the Contract (``Owners'') then invested in
the Replaced Portfolios will remain fully invested and will result in
no change in the amount of any Owner's Contract value, death benefit or
investment in the Separate Account so that the full net asset value of
the redeemed shares held by the Separate Account will be reflected in
the Owners' accumulation values or annuity unit values following the
Substitutions. In addition, AIG SunAmerica hereby undertakes to assume
all transaction costs and expenses relating to the Substitutions,
including any direct or indirect costs of liquidating the assets of the
Replaced Portfolios such as legal and accounting fees (or any brokerage
commissions, if any redemptions are effected otherwise on an in-kind
basis), so that the full net asset value of redeemed shares of the
Replaced Portfolios held by the Separate Account will be reflected in
the Owners' accumulation values or annuity unit values following the
Substitutions.
14. Owners will not incur any fees or charges as a result of the
Substitutions, nor will the rights of Owners or obligations of AIG
SunAmerica under the Contract be altered in any way. The
[[Page 65972]]
proposed Substitutions will not have any adverse tax consequences to
Owners. The proposed Substitutions will not cause Contract fees and
charges currently being paid by existing Owners to be greater after the
proposed Substitutions than before the proposed Substitutions. The
proposed Substitutions will not be treated as transfers for the purpose
of transfer limits or assessing transfer charges.
15. AIG SunAmerica will schedule the Substitutions to occur after
issuance of the requested order and any required state insurance
department approvals. Further, although the Substitutions will result
in the replacement of the Portfolios of all the available Variable
Accounts under the Contract, AIG SunAmerica will not exercise any right
it may have under the Contract to collect transfer fees or impose any
additional restrictions on Owners who may wish to make transfers among
the available Variable Accounts funded by the Replacement Portfolios
for a period of at least thirty (30) days following mailing of the
Notice, as defined below, of the proposed Substitutions (the ``Free
Transfer Period''). During the Free Transfer Period, transfers among
the available Variable Accounts funded by the Replacement Portfolios
will be permitted without those transfers being counted against any
limit on free transfers under the Contract.
16. Upon filing the Application, AIG SunAmerica supplemented the
prospectus for the Contract to reflect the proposed Substitutions.
Within five days after the Substitutions, AIG SunAmerica will send to
its Owners written notice of the Substitutions (the ``Notice''),
identifying the shares of the Replaced Portfolios that have been
eliminated and the shares of the Replacement Portfolios that have been
substituted. AIG SunAmerica will also include in the mailing of the
Notice the applicable prospectus supplement for the Contract describing
the Substitutions and a copy of the prospectus for the Replacement
Portfolios to Owners who have not already received a copy of that
prospectus in the ordinary course. The Notice will further advise
Owners that during the Free Transfer Period, Owners may transfer all
assets, as substituted, among the available Variable Accounts funded by
the Replacement Portfolios without limit or charge and without those
transfers being counted against any limit on free transfers under their
Contract.
Applicable Law
Section 26(c) of the 1940 Act
1. Section 26(c) of the 1940 Act provides that ``[i]t shall be
unlawful for any depositor or trustee of a registered unit investment
trust holding the security of a single issuer to substitute another
security for such security unless the [SEC] shall have approved such
substitution.''
2. Applicants represent that the proposed Substitution involves a
substitution of securities within the meaning of meaning of Section
26(c) of the 1940 Act. The Applicants, therefore, request an order from
the SEC pursuant to Section 26(c) approving the proposed Substitution.
3. Applicants represent that the Substitutions do not present the
type of costly forced redemption or other harms that Section 26(c) was
intended to guard against and is consistent with the protection of
investors and the purposes fairly intended by the 1940 Act for the
following reasons:
a. The Substitutions will continue to fulfill Owners' objectives
and risk expectations, because the Replacement Portfolios corresponding
to the Replaced Portfolios have objectives, policies, and restrictions
substantially identical in all material respects to the objectives,
policies, and restrictions of the Replaced Portfolios;
b. After receipt of the Notice informing an Owner of the
Substitutions, an Owner may request that his or her assets be
reallocated among the available Variable Accounts funded by the
Replacement Portfolios at any time during the Free Transfer Period
without any limit or charge and without those transfers being counted
against any limit on free transfers under the Contract. This right also
will be granted to Owners who are receiving variable payments based on
the Replaced Portfolios. The Free Transfer Period will provide
sufficient time for Owners to consider their reinvestment and
withdrawal options;
c. The Substitutions will be at net asset value of the respective
shares, without the imposition of any transfer or similar charge, so
that there will be not change in the Owners' accumulation values or any
other contract values following the Substitution;
d. AIG SunAmerica has undertaken to assume all expenses and
transaction costs, including, but not limited to, legal and accounting
fees (or any brokerage commissions, if any redemptions are effected
otherwise than on an in-kind basis), in connection with the
Substitutions involving the Separate Account;
e. The Substitutions will in no way alter the contractual
obligations of AIG SunAmerica or the rights and privileges of Owners
under the Contract;
f. The proposed Substitutions will not have any adverse tax
consequences to Owners;
g. The Substitutions are expected to confer certain economic
benefits on Owners by virtue of generally lower expenses currently or
in the long term;
h. At the time of the Substitutions, the total annual expenses of
each Replacement Portfolio (except for the Growth Fund which has
slightly higher total annual expenses than the Growth Series) are
expected to be lower than those of the corresponding Replaced
Portfolio;
i. It is anticipated that the Substitutions will be effected by
redeeming shares of each of the Replaced Portfolios wholly on an in-
kind basis and contributing those assets in-kind to the corresponding
Replacement Portfolio to purchase their respective shares; and
j. The In-Kind Transactions will be done in a manner consistent
with the investment objectives, policies and restrictions, and
diversification requirements of the Replaced and Replacement
Portfolios; and Capital Research will review the In-Kind Transactions.
4. Applicants anticipate that all redeemed assets of the Replaced
Portfolios will be suitable for the corresponding Replacement
Portfolios.
5. AIG SunAmerica represents that it and its affiliates currently
do not, and will not for a period of three years from the date of the
Order requested herein, receive any direct or indirect benefit from the
Replacement Portfolios their adviser (or their adviser's affiliates) or
underwriters and affiliates, in connection with assets attributable to
the Contract affected by the Substitutions, at a higher rate, as a
percentage of its Separate Account assets invested in such Replacement
Portfolios, than it or any affiliate had received from the
corresponding Replaced Portfolio its adviser, (or its adviser's
affiliates) or underwriters and affiliates, including without
limitation 12b-1, shareholder service, administrative or other service
fees, revenue sharing or other arrangements.
6. AIG SunAmerica further represents that the proposed
Substitutions involving the Replaced and Replacement Portfolios and its
selection of the Replacement Portfolios were not motivated by any
financial consideration paid or to be paid to it or to any of its
affiliates by the Replacement Portfolios, their adviser or
[[Page 65973]]
underwriters, or by affiliates of the Replacement Portfolios, their
adviser or underwriters.
7. As explained more fully in the application, SAAMCO is entitled
to receive a Business Management Fee from each Replaced Portfolio in
return for certain business management and administrative services.
Further, AIG SunAmerica will be entitled to receive a Service Fee from
each Replacement Portfolio, to cover the expense of providing certain
administrative services. Each Replacement Portfolio's Service Fee will
be lower than the current Business Management Fee imposed on its
corresponding Replaced Portfolio by between two and six basis points.
Notwithstanding that advisory fees (including the Service Fees) for the
Replacement Portfolios will be higher than the advisory fees (including
the Business Management Fee) for the Replaced Portfolios (except for
the International Fund, which has lower advisory fees), each
Replacement Portfolio has a lower total expense ratio than its
corresponding Replaced Portfolio (except for the Growth Fund, which has
a slightly higher total annual expense than the Growth Series).
8. Applicants represent that, in the event that the Growth Fund's
total annualized expenses are not equal to or lower than the total
annual expenses of the Growth Series at February 28, 2003 during the
12-month period following the Substitution, as determined quarterly,
the amount of the Service Fee imposed on the Growth Fund for a period
of one-year following the Substitution will be reduced for such quarter
by an amount equal to the disparity between the lower total annual
expenses of the Growth Series and the then higher total annualized
expenses of the Growth Fund.
9. The Applicants represent that, in the event that the Growth Fund
total annualized expenses are not equal to or lower than the total
annual expenses of the Growth Series at February 28, 2003 during the
12-month period following the Substitution, as determined quarterly,
and waiver of the entire .18 basis point of Service Fees is
insufficient to offset any excess of the Growth Fund fees over the
expenses of the Growth Series, Applicants will make a corresponding
reduction in the corresponding separate account sub-account expenses on
the last day of each such quarterly period, such that the amount of the
Growth Fund expenses, together with those of the corresponding sub-
account will, on an annualized basis, be no greater than the sum of the
net expenses of the Growth Series and the net expenses of the sub-
account on February 28, 2003.
10. AIG SunAmerica will not increase any Contract fees or reduce
any services to the Growth Series during the 12-month period following
the Substitution.
11. The Applicants, on the basis of the facts and circumstances
described in the Application, assert that the proposed Substitution is
consistent with the protection of investors and the purposes fairly
intended by the policy and purposes of the1940 Act and therefore
request that the Substitution should be granted.
Section 17(a) of the 1940 Act
1. Section 17(a)(1) of the 1940 Act, in relevant part, prohibits
any affiliated person of a registered investment company, or any
affiliated person of such person, acting as principal, from knowingly
selling any security or other property to that company. Section
17(a)(2) of the 1940 Act generally prohibits the persons described
above, acting as principals, from knowingly purchasing any security or
other property from the registered investment company.
2. Section 17(b) of the 1940 Act provides that the SEC may, upon
application, grant an order exempting any transaction from the
prohibitions of Section 17(a) if the 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, as recited in its registration statement and reports
filed under the 1940 Act; and (c) the proposed transaction is
consistent with the general purposes of the 1940 Act.
3. Applicants request an order pursuant to Section 17(b) of the
1940 Act exempting them from the provisions of Section 17(a) to the
extent necessary to permit them to carry out the In-Kind Transactions.
4. Applicants submit that the terms of their proposed
Substitutions, including the consideration to be paid and received, as
described in their application, are reasonable and fair and do not
involve overreaching on the part of any person concerned. Applicants
also submit that their proposed Substitutions are consistent with the
policies of the Anchor Fund (and each of its Replaced Portfolios) as
recited in its current registration statement and reports filed under
the 1940 Act, and AFIS (and each of its Replacement Portfolios), as
recited in its registration statements and reports to be filed under
the 1940 Act. As more fully described in the application, the In-Kind
Transactions will be done in a manner consistent with the investment
objectives, policies and restrictions, and diversification requirements
of the Replaced and Replacement Portfolios, and Capital Research will
review the In-Kind Transactions. The Applicants anticipate that all
redeemed assets of the Replaced Portfolios will be suitable for the
corresponding Replacement Portfolios.
5. Applicants submit that the proposed In-Kind Transactions are
consistent with the general purposes of the 1940 Act.
6. The In-Kind Transactions effecting the Substitutions will be
carried out in conformity with Section 22(c) of the 1940 Act and Rule
22c-1 thereunder, and will substantially comply with the conditions of
Rule 17a-7 under the 1940 Act. Owners will not incur any fees or
charges as a result of the transfer of Contract value pursuant to the
Substitutions. Owners' rights and privileges under the Contract and AIG
SunAmerica's obligations thereunder will not be affected by the
Substitutions. The Substitutions will not increase Contract or separate
account fees and charges after the Substitutions. Expenses incurred in
connection with the Substitutions including, but not limited to, legal
and accounting fees (or any brokerage commissions, if any redemptions
are effected otherwise than on an in-kind basis), will not be borne by
Owners. Contract values will remain unchanged and fully invested
following consummation of the Substitutions. Accordingly, Owner
interests after the Substitutions, in practical economic terms, will
not differ in any measurable way from such interests immediately prior
to the Substitutions. In each case, the consideration to be received
and paid is, therefore, reasonable and fair.
7. As more fully discussed in the application, the investment
objectives of each of the Replacement Portfolios are substantially
identical to the investment objectives of the corresponding Replaced
Portfolios. In this regard, the Substitutions are consistent with the
findings required under Section 17(b) of the 1940 Act.
8. The proposed In-Kind Transactions do not present any of the
issues or abuses that the 1940 Act is designed to prevent. Moreover,
the proposed In-Kind Transactions will be effected in a manner
consistent with the public interest and the protection of investors as
Owners will be fully informed of the terms of the Substitutions through
the
[[Page 65974]]
prospectus supplement for the Replacement Portfolios, the Notice and
the prospectus for the Replacement Portfolios, and will have a
opportunity during the Free Transfer Period to make transfers among the
available Variable Accounts funded by the Replacement Portfolios
without limit or charge and without those transfers being counted
against any limit on free transfers under their Contract.
Conclusion
For the reasons set forth in the application, the Applicants
respectively state that the proposed Substitution and the related In-
Kind Transactions meet the standards of Section 26(c) of the 1940 Act
and Section 17(b) of the 1940 Act and respectfully request that the SEC
issue an order of approval pursuant to Section 26(c) of the 1940 Act
and order of exemption pursuant to Section 17(b) of the 1940 Act.
For the SEC, by the Division of Investment Management, pursuant
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-29294 Filed 11-21-03; 8:45 am]
BILLING CODE 8010-01-P