[Federal Register Volume 68, Number 226 (Monday, November 24, 2003)]
[Notices]
[Pages 65969-65974]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-29294]


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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.

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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