AIG SunAmerica Life Assurance Company and Variable Annuity Account Seven, Notice of Application, 64323-64326 [E6-18349]
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Federal Register / Vol. 71, No. 211 / Wednesday, November 1, 2006 / Notices
Commission may require by rule.6 Rule
17i–8 requires that an SIBHC to notify
the Commission upon the occurrence of
certain events that would indicate a
decline in the financial and operational
well-being of the firm.
The collections of information
included in Rule 17i–8 are necessary to
allow the Commission to effectively
determine whether supervision of an
IBHC as an SIBHC is necessary or
appropriate in furtherance of the
purposes of section 17 of the Act and
allow the Commission to supervise the
activities of these SIBHCs. Rule 17i–8
also enhances the Commission’s
supervision of the SIBHCs’ subsidiary
broker-dealers through collection of
additional information and inspections
of affiliates of those broker-dealers.
Without these notices, the Commission
would be unable to adequately
supervise an SIBHC, nor would it be
able to determine whether continued
supervision of an IBHC as an SIBHC
were necessary and appropriate in
furtherance of the purposes of section
17 of the Act.
We estimate that three IBHCs will file
Notices of Intention with the
Commission to be supervised by the
Commission as SIBHCs. An SIBHC will
require about one hour to create a notice
required to be submitted to the
Commission pursuant to Rule 17i–8.
However, as these notices only need be
filed in certain situations indicative of
financial or operational difficulty, only
one SIBHC may be required to file
notice pursuant to the Rule every other
year. Thus, we estimate that the annual
burden of Rule 17i–8 for all SIBHCs
would be about 30 minutes.
The reports and notices required to be
filed pursuant to Rule 17i–8 must be
preserved for a period of not less than
three years.7 The collection of
information is mandatory and the
information required to be provided to
the Commission pursuant to this Rule is
deemed confidential pursuant to section
17(j) of the Securities Exchange Act of
1934 8 and Section 552(b)(3)(B) of the
Freedom of Information Act,9
notwithstanding any other provision of
law. In addition, paragraph 17i–8(c)
specifies that the notices and reports
filed in accordance with Rule 17i–8 will
be accorded confidential treatment to
the extent permitted by law.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
6 15
U.S.C. 78q(i)(3)(A).
CFR 240.17i–5(b)(4).
8 15 U.S.C. 78q(j).
9 5 U.S.C. 552(b)(3)(B).
7 17
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unless it displays a currently valid
control number.
Comments should be directed to: (i)
The Desk Officer for the Securities and
Exchange Commission, Office of
Information and Regulatory Affairs,
Office of Management and Budget,
Room 10102, New Executive Office
Building, Washington, DC 20503 or by
sending an e-mail to:
David_Rostker@omb.eop.gov; and (ii) R.
Corey Booth, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Shirley Martinson,
6432 General Green Way, Alexandria,
Virginia 22312 or send an e-mail to:
PRA_Mailbox@sec.gov. Comments must
be submitted to OMB within 30 days of
this notice.
Dated: October 23, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. E6–18355 Filed 10–31–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission Office of Filings and
Information Services, Washington, DC
20549.
Extension: Rule 17Ad–15; SEC File No.
270–360; OMB Control No. 3235–0409.
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget a
request for extension of the previously
approved collection of information
discussed below.
Rule 17Ad–15—Signature Guarantees
Rule 17Ad–15 (17 CFR 240.17Ad–15)
under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.) (the ‘‘Act’’)
requires approximately 760 transfer
agents to establish written standards for
accepting and rejecting guarantees of
securities transfers from eligible
guarantor institutions. Transfer agents
are also required to establish procedures
to ensure that those standards are used
by the transfer agent to determine
whether to accept or reject guarantees
from eligible guarantor institutions.
Transfer agents must maintain, for a
period of three years following the date
of a rejection of transfer, a record of all
transfers rejected, along with the reason
for the rejection, identification of the
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guarantor, and whether the guarantor
failed to meet the transfer agent’s
guarantee standard. These
recordkeeping requirements assist the
Commission and other regulatory
agencies with monitoring transfer agents
and ensuring compliance with the rule.
There are approximately 760
registered transfer agents. The staff
estimates that every transfer agent will
spend about 40 hours annually to
comply with Rule 17Ad–15. The total
annual burden for all transfer agents is
30,400 hours. The average cost per hour
is approximately $50. Therefore, the
total cost of compliance for all transfer
agents is $1,520,000.
The retention period for the
recordkeeping requirement under Rule
17Ad–15 is three years following the
date of a rejection of transfer. The
recordkeeping requirement under the
rule is mandatory to assist the
Commission and other regulatory
agencies with monitoring transfer agents
and ensuring compliance with the rule.
This rule does not involve the collection
of confidential information. An agency
may not conduct or sponsor, and a
person is not required to respond to, a
collection of information unless it
displays a currently valid control
number.
Comments should be directed to: (i)
Desk Officer for the Securities and
Exchange Commission, Office of
Information and Regulatory Affairs,
Office of Management and Budget,
Room 10102, New Executive Office
Building, Washington, DC 20503 or by
sending an e-mail to:
David_Rostker@omb.eop.gov; and (ii) R.
Corey Booth, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Shirley Martinson,
6432 General Green Way, Alexandria,
Virginia 22312 or by sending an e-mail
to: PRA_Mailbox@sec.gov. Comments
must be submitted to OMB within 30
days of this notice.
Dated: October 23, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. E6–18361 Filed 10–31–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–27540; File No. 812–13300]
AIG SunAmerica Life Assurance
Company and Variable Annuity
Account Seven, Notice of Application
October 26, 2006.
Securities and Exchange
Commission (‘‘SEC’’).
AGENCY:
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Federal Register / Vol. 71, No. 211 / Wednesday, November 1, 2006 / Notices
Applicants’ Representations
1. AIG SunAmerica is a stock life
insurance company originally organized
under the laws of the State of California
in April 1965. AIG SunAmerica,
redomesticated under the laws of the
Applicants: AIG SunAmerica Life
State of Arizona on January 1, 1996. AIG
Assurance Company (‘‘AIG
SunAmerica is a wholly-owned
SunAmerica’’), and Variable Annuity
subsidiary of SunAmerica Life
Account Seven (collectively, the
Insurance Company, an Arizona
‘‘Applicants’’).
corporation, which is, in turn, whollySummary of the Application: The
owned by AIG Retirement Services, a
Applicants request an order permitting
Delaware corporation, which is, in turn,
the substitution of the Equity Income
wholly-owned by American
Fund (the ‘‘Replaced Portfolio’’) with
International Group, Inc. AIG
the Davis Venture Value Portfolio (the
SunAmerica is authorized to write
‘‘Replacement Portfolio’’) both of which annuities and life insurance in the
are Portfolios of the SunAmerica Series
District of Columbia and all states
Trust (‘‘SAST’’) (the ‘‘Substitution’’).
except New York.
2. Separate Account Seven (the
Filing Date: The application was filed
‘‘Separate Account’’) was established by
on June 2, 2006, and an amended and
AIG SunAmerica on August 28, 1998, in
restated application was filed on
accordance with the laws of the State of
October 19, 2006. Applicants have
Arizona. The Separate Account is
agreed to file an amendment during the
notice period, the substance of which is registered as a unit investment trust
under the 1940 Act. The Separate
reflected in this notice.
Hearing or Notification of Hearing: An Account is used to fund the Contract
and other annuity contracts issued by
order granting the application will be
AIG SunAmerica and is currently
issued unless the SEC orders a hearing.
divided into a total of 42 subaccounts
Interested persons may request a
hearing on the application by writing to (the ‘‘Sub-Accounts’’). Each of the
available Sub-Accounts invests in
the Secretary of the SEC and serving
shares of the available portfolios of the
Applicants with a copy of the request,
SAST. One of the Sub-Accounts
personally or by mail. Hearing requests
currently invests in the Replaced
must be received by the SEC by 5:30
p.m. on November 16, 2006, and should Portfolio.
3. The Polaris Plus Contract (the
be accompanied by proof of service on
Applicants in the form of an affidavit or, ‘‘Contract’’), issued by AIG SunAmerica
through the Separate Account, is a
for lawyers, a certificate of service.
Hearing requests should state the nature flexible premium group and individual
of the writer’s interest, the reason for the deferred annuity contract that currently
utilizes the Replaced Portfolio as one of
request, and the issues contested.
many underlying investments. AIG
Persons may request notification of a
SunAmerica discontinued offering the
hearing by writing to the Secretary of
Contract as of the close of business on
the SEC.
February 28, 2002. Existing
ADDRESSES: Secretary, Securities and
Contractowners (‘‘Owners’’) may
Exchange Commission, 100 F Street,
continue to allocate purchase payments
NE., Washington, DC 20549–1090.
to and transfer among the available SubApplicants: c/o Jorden Burt LLP, 1025
Accounts, including the Sub-Account
Thomas Jefferson Street, NW., East
that currently invests in the Replaced
Lobby, Suite 400, Washington, DC
Portfolio (the ‘‘Equity Income Sub20007–5208, Attention: Joan E. Boros,
Account’’). The allocation/transfer
Esq.
rights will continue until one week
prior to the date of the proposed
FOR FURTHER INFORMATION CONTACT:
Substitution requested by the
Jeffrey Foor, Esq., Senior Counsel, or
application. The Contract is the only
Zandra Y. Bailes, Esq., Branch Chief,
Office of Insurance Products, Division of contract investing in the Equity Income
Sub-Account, and no other sub-account
Investment Management, at (202) 551–
of any other separate account invests in
6795.
the Replaced Portfolio. During the
accumulation period, there are no limits
SUPPLEMENTARY INFORMATION: The
on the number of transfers Owners can
following is a summary of the
application. The complete application is make among the available Sub-Accounts
under the Contract and/or the Contract
available for a fee from the Public
fixed accounts. Transfers resulting from
Reference Branch of the SEC, 100 F
Street, NE., Room 1580, Washington, DC participation in the Dollar Cost
Averaging or Asset Rebalancing
20549 (202–551–8090).
Notice of an application for an
order (the ‘‘Order’’) of approval
pursuant to section 26(c) of the
Investment Company Act of 1940, as
amended (the ‘‘1940 Act’’).
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Programs do not count against the
fifteen (15) free transfers per contract
year. All transfers in excess of fifteen
(15) transfer requests per contact year
must be submitted by mail until the
next contract anniversary and may be
subject to further restrictions.
4. SAST was organized as a
Massachusetts business trust on
September 11, 1992. SAST was
established and serves to provide a
funding medium for the Sub-Accounts
which constitute its sole shareholders.
SAST is registered as an open-end
management investment company
under the 1940 Act (File No. 811–
07238), and its offering of its shares is
registered under the Securities Act of
1933 (File No. 033–52742).
5. The Replaced Portfolio, which
offers a single class of shares,
constitutes a separate series available
through SAST. The inception date of the
Replaced Portfolio was December 14,
1998, and it has been offered in the
Separate Account since the inception
date of the Contract on March 19, 1999.
6. The Separate Account buys and
sells shares of the Replaced Portfolio at
net asset value that is net of the advisory
fee of 0.650% based on average daily net
assets, paid to the investment adviser,
AIG SunAmerica Asset Management
(‘‘AIG SAAMCo’’), to manage the
business affairs of the Replaced
Portfolio and to provide administrative
services pursuant to a written
investment advisory agreement (the
‘‘Advisory Agreement’’). The Replaced
Portfolio’s other expenses were 1.25%
for the fiscal year ended January 31,
2006. The Replaced Portfolio’s total
annual operating expenses for this
period were 1.90%, subject to voluntary
fee waivers and expense reimbursement
by AIG SAAMCo that provided for total
annual net operating expenses of 1.35%.
FAF Advisors, Inc., formerly U.S.
Bancorp Asset Management, Inc.
(‘‘FAF’’) serves as subadviser to the
Replaced Portfolio. AIG SAAMCo is
affiliated with AIG SunAmerica, but
FAF is not affiliated with AIG
SunAmerica.
7. The Replaced Portfolio is a
portfolio in which the Separate Account
invests under the Contract as one of the
42 Sub-Account investment alternatives
currently available. If the requested
Order is granted, the Substitution will
result in the reduction of the available
investment alternatives by one. Shares
of the Replacement Portfolio will be
offered at net asset value that is net of
the current Replacement Portfolio’s
advisory fee of 0.71% which is paid to
AIG SAAMCo to manage the business
affairs of the Replacement Portfolio and
to provide administrative services
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pursuant to the Advisory Agreement.
The Replacement Portfolio’s other
expenses are 0.05%, and the
Replacement Portfolio’s total annual
operating expenses are 0.76% for Class
1 shares. The Replacement Portfolio
does not pay Rule 12b–1 fees for
distribution activities. Davis Selected
Advisers, L.P. d/b/a Davis Advisers
(‘‘Davis’’) serves as the sub-adviser to
the Replacement Portfolio. Davis is not
affiliated with AIG SunAmerica.
8. The application covers a single
portfolio in which the Separate Account
invests under the Contract. Applicants
propose the Substitution due to the
Replaced Portfolio’s declining assets
and relatively high total expenses.
Applicants note that since the Replaced
Portfolio’s inception on December 14,
1998, the Replaced Portfolio has
accumulated only $5.8 million in assets
as of January 31, 2006. Applicants note
further that the Equity Income SubAccount is the only sub-account that
invests in the Replaced Portfolio, that
the Equity Income Sub-Account is
offered as an investment option in only
one variable contract (the Contract), and
that the Contract is no longer offered to
new contract owners. Applicants also
note that the Replaced Portfolio’s total
net annual expenses of 1.35% exceed
the median for its peer group by 0.43%.
The Replaced Portfolio’s sub-adviser
announced its intention to terminate the
voluntary expense reimbursement
agreement within the current fiscal
period. As a result, the Replaced
Portfolio’s total net annual expenses can
be expected to increase significantly,
further limiting the Replaced Portfolio’s
ability to achieve competitive
performance. AIG SunAmerica
undertook to review the various
alternative investment portfolios to
determine which would be a suitable
replacement for the Replaced Portfolio.
AIG SunAmerica determined that the
Replacement Portfolio is an appropriate
and suitable replacement for the
Replaced Portfolio based on the
following conclusions: (1) The
Replacement Portfolio has investment
objectives, policies, and restrictions
substantially similar to those of the
Replaced Portfolio; (2) the Replaced
Portfolio and the Replacement Portfolio
take on comparable levels of risk; (3) the
Replacement Portfolio has significantly
lower total annual expense ratios than
the Replaced Portfolio prior to and after
voluntary fee waivers and
reimbursements for the Replaced
Portfolio; (4) the Replacement Portfolio
has a significantly greater number of
outstanding shares than the Replaced
Portfolio; (5) the Replacement Portfolio
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has a significantly larger asset base than
the Replaced Portfolio. The
Replacement Portfolio’s total assets at
January 31, 2006, were approximately
$2.4 billion, while the Replaced
Portfolio’s assets at January 31, 2006
were approximately $5.8 million. The
larger asset base of the Replacement
Portfolio provides the potential for a
future reduction in the total annual
expenses of all its share classes, in
addition to providing potential
enhanced performance. Moreover, the
larger asset base of the Replacement
Portfolio provides greater protection
against adverse effects on expenses and
performance occasioned by large
redemptions; and (6) the Replacement
Portfolio has a performance record
significantly superior to that of the
Replaced Portfolio, and the potential for
enhanced future performance.
9. The Applicants note that the
Replaced Portfolio will process
redemption requests and the
Replacement Portfolio will process
purchase orders at prices based on the
current net asset values next computed
after receipt of the requests and orders
in a manner consistent with Rule 22c–
1 under the 1940 Act. The Applicants
will effect the proposed Substitution by
redeeming shares of the Replaced
Portfolio in cash at net asset value and
then immediately contributing those
assets to the Replacement Portfolio to
purchase their Class 1 shares. At all
times, before and after the Substitution,
monies attributable to Owners that have
allocated assets to the Equity Income
Sub-Account will remain fully invested,
and no change will result in the amount
of any Owner’s Contract value, death
benefit or investment in the Equity
Income Sub-Account so that the full net
asset value of the redeemed shares will
be reflected in the Owners’
accumulation values or annuity unit
values following the Substitution. In
addition, AIG SunAmerica undertakes
to assume all transaction costs and
expenses relating to the Substitution so
that the full net asset value of redeemed
shares of the Replaced Portfolio held by
the Equity Income Sub-Account will be
reflected in the Owners’ accumulation
values or annuity unit values following
the Substitution.
10. Owners will not incur any fees or
charges as a result of the Substitution,
nor will the rights of Owners or
obligations of AIG SunAmerica under
the Contract be altered in any way. The
proposed Substitution will not have any
adverse tax consequences to Owners.
The proposed Substitution will not
cause Contract fees and charges
currently being paid by existing Owners
to be greater after the proposed
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Substitution than before the proposed
Substitution. The proposed Substitution
will not be treated as a transfer for the
purpose of transfer limits or assessing
transfer charges.
11. AIG SunAmerica will schedule
the Substitution to occur after issuance
of the requested Order and any required
state insurance department approvals.
Further, although the Substitution will
result in the replacement of the
Replaced Portfolio as the investment of
the Equity Income Sub-Account 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
from the Equity Income Sub-Account
among the other available Sub-Accounts
for a period of at least thirty (30) days
following mailing of the Notice, as
defined below, of the proposed
Substitution (the ‘‘Free Transfer
Period’’). During the Free Transfer
Period, Owners may transfer all assets,
as substituted, from the Equity Income
Sub-Account to other available SubAccounts without charge or limitation
and without those transfers being
counted against any limit on free
transfers under the Contract, or any
requirements for the method of
submitting transfer requests.
12. Upon filing the application, AIG
SunAmerica supplemented the
prospectus for the Contract to reflect the
proposed Substitution. Within five days
after the Substitution, AIG SunAmerica
will send to its Owners written notice
of the Substitution (‘‘Notice’’)
identifying the shares of the Replaced
Portfolio that have been eliminated and
the shares of the Replacement Portfolio
that have been substituted. AIG
SunAmerica will include in the mailing
the applicable prospectus supplement
for the Contract describing the
Substitution. AIG SunAmerica will also
mail a copy of the prospectus for the
Replacement Portfolio 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,
from the Equity Income Sub-Account to
the other available Sub-Accounts
without limit or charge and without
those transfers being counted against
any limit on free transfers under their
Contracts, or any requirements for the
method of submitting transfer requests.
Applicant’s Legal Analysis
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
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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 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 submit that the
Substitution does 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: (i) The Substitution
will continue to fulfill Owners’
objectives and risk expectations,
because the Replacement Portfolio has
substantially similar objectives, policies,
and restrictions to the objectives,
policies, and restrictions of the
Replaced Portfolio and comparable risk
characteristics; (ii) after mailing of the
Notice informing an Owner of the
Substitution, an Owner may request that
his or her assets in the Equity Income
Sub-Account be reallocated among the
other available Sub-Accounts 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, or any requirements for the
method of submitting transfer requests.
This right also will be granted to
Owners, if any, who are receiving
variable payments based on the
Replaced Portfolio. The Free Transfer
Period provides sufficient time for
Owners to consider and effect their
reinvestment and withdrawal options;
(iii) the Substitution will be at net asset
value of the respective shares
determined on the date of the
Substitution in accordance with section
22 of the 1940 Act and Rule 22c–1
thereunder, without the imposition of
any transfer or similar charge; (iv) AIG
SunAmerica has undertaken to assume
all expenses and transaction costs,
including, but not limited to, legal and
accounting fees and any brokerage
commissions, in connection with the
Substitution; (v) the Substitution will in
no way alter the contractual obligations
of AIG SunAmerica or the rights and
privileges of Owners under the Contract;
(vi) the Substitution will in no way alter
the tax treatment of Owners in
connection with their Contracts, and no
tax liability will arise for Owners as a
result of the Substitution; (vii) the
Substitution is expected to confer
certain future economic benefits on
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Owners by virtue of the greater asset
base or lower portfolio expenses; (viii)
at the time of the Substitution, the total
annual expenses of the Replacement
Portfolio’s shares are expected to be
lower than the Replaced Portfolio; (ix)
the Substitution which will be effected
in accordance with section 22 of the
1940 Act and Rule 22c–1 thereunder by
redeeming shares of the Replaced
Portfolio in cash to be conveyed
immediately to the Replacement
Portfolio to purchase its respective
shares; and (x) AIG SunAmerica
represents that at no time after date of
the Substitution (the ‘‘Substitution
Date’’) will AIG SunAmerica increase
Contract charges or total Separate
Account charges (net of any waiver or
reimbursements) of the Sub-Account
that currently invests in the
Replacement Portfolio (the ‘‘Davis SubAccount’’). If the total operating
expenses for the Replacement Portfolio
(taking into account any expense waiver
or reimbursement) for any fiscal quarter
following the Substitution Date, exceed
on an annualized basis the net expense
ratio for the Replaced Portfolio for the
fiscal year ended January 31, 2006, AIG
SunAmerica will reduce (through
reimbursement) the Separate Account
expenses paid during that quarter of the
Davis Sub-Account to the extent
necessary to offset the amount by which
the Replacement Portfolio’s net expense
ratio for such period exceeds, on an
annualized basis, 1.35%.
4. AIG SunAmerica has determined
that the Replacement Portfolio is an
appropriate replacement for the
Replaced Portfolio. The Replacement
Portfolio has investment objectives,
policies, and restrictions substantially
similar to the Replaced Portfolio with
comparable levels of risk. The
Replacement Portfolio has a
significantly lower total expense ratio
than the Replacement Portfolio. Also,
the Replacement Portfolio has a
significantly larger asset base than the
Replacement Portfolio. In addition, the
average annual total returns of the
Replacement Portfolio are clearly
superior to those of the Replacement
Portfolio, other than with respect to the
year to date performance.
Conclusion
For the reasons set forth in the
application, the Applicants state that
the proposed Substitution and the
related transactions meet the standards
of section 26(c) of the 1940 Act and that
the requested Order should be granted.
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For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6–18349 Filed 10–31–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54654; File No. SR–NASD–
2006–060]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Order Approving
Proposed Rule Change To Require
Members To File Regulatory Notices
With NASD Electronically
October 26, 2006.
On May 16, 2006, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’) filed a proposed rule change
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’ or
‘‘Exchange Act’’) 1 and Rule 19b–4
under the Act.2 The proposed rule
change adopts NASD Rule 3170 to
provide the NASD with the authority to
require member firms to file or submit
electronically with the NASD any
regulatory notice or other document that
member firms are required to file with
(or otherwise submit to) the NASD. The
NASD may specify the electronic format
to be used. The proposed rule change
does not specify the particular
regulatory notices or documents that the
NASD will require members to file
electronically. Instead, the NASD’s
proposed rule change would give the
NASD the authority to require members
to file or submit electronically with the
NASD any specified regulatory notice or
document.
The NASD plans to require members
to file certain specified notices with the
NASD via an electronic, Internet-based
receiving and processing system
(‘‘System’’), using templates developed
by the NASD for each notice. The
System will be available to members on
the NASD’s Internet Web site. Initially,
the NASD plans to require members to
file notices that must be filed with the
NASD under the following Exchange
Act Rules electronically: 3
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The NASD has requested relief on behalf of its
members from the Commission with respect to
these Exchange Act rules. See Letter from Patrice
Gliniecki, Senior Vice President and General
Counsel, NASD, to Michael A. Macchiaroli,
Associate Director, Division of Market Regulation,
2 17
E:\FR\FM\01NON1.SGM
01NON1
]]>Agencies
[Federal Register Volume 71, Number 211 (Wednesday, November 1, 2006)]
[Notices]
[Pages 64323-64326]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-18349]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-27540; File No. 812-13300]
AIG SunAmerica Life Assurance Company and Variable Annuity
Account Seven, Notice of Application
October 26, 2006.
AGENCY: Securities and Exchange Commission (``SEC'').
[[Page 64324]]
ACTION: Notice of an application for an order (the ``Order'') of
approval pursuant to section 26(c) of the Investment Company Act of
1940, as amended (the ``1940 Act'').
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Applicants: AIG SunAmerica Life Assurance Company (``AIG
SunAmerica''), and Variable Annuity Account Seven (collectively, the
``Applicants'').
Summary of the Application: The Applicants request an order
permitting the substitution of the Equity Income Fund (the ``Replaced
Portfolio'') with the Davis Venture Value Portfolio (the ``Replacement
Portfolio'') both of which are Portfolios of the SunAmerica Series
Trust (``SAST'') (the ``Substitution'').
Filing Date: The application was filed on June 2, 2006, and an
amended and restated application was filed on October 19, 2006.
Applicants have agreed to file an amendment during the notice period,
the substance of which is reflected in this notice.
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 November 16, 2006, 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, 100 F Street,
NE., Washington, DC 20549-1090. Applicants: c/o Jorden Burt LLP, 1025
Thomas Jefferson Street, NW., East Lobby, Suite 400, Washington, DC
20007-5208, Attention: Joan E. Boros, Esq.
FOR FURTHER INFORMATION CONTACT: Jeffrey Foor, Esq., Senior Counsel, or
Zandra Y. Bailes, Esq., 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 SEC, 100 F Street, NE., Room 1580,
Washington, DC 20549 (202-551-8090).
Applicants' Representations
1. AIG SunAmerica is a stock life insurance company originally
organized under the laws of the State of California in April 1965. AIG
SunAmerica, 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 Retirement Services, a Delaware corporation,
which is, in turn, wholly-owned by American International Group, Inc.
AIG SunAmerica is authorized to write annuities and life insurance in
the District of Columbia and all states except New York.
2. Separate Account Seven (the ``Separate Account'') was
established by AIG SunAmerica on August 28, 1998, in accordance with
the laws of the State of Arizona. The Separate Account is registered as
a unit investment trust under the 1940 Act. The Separate Account is
used to fund the Contract and other annuity contracts issued by AIG
SunAmerica and is currently divided into a total of 42 subaccounts (the
``Sub-Accounts''). Each of the available Sub-Accounts invests in shares
of the available portfolios of the SAST. One of the Sub-Accounts
currently invests in the Replaced Portfolio.
3. The Polaris Plus Contract (the ``Contract''), issued by AIG
SunAmerica through the Separate Account, is a flexible premium group
and individual deferred annuity contract that currently utilizes the
Replaced Portfolio as one of many underlying investments. AIG
SunAmerica discontinued offering the Contract as of the close of
business on February 28, 2002. Existing Contractowners (``Owners'') may
continue to allocate purchase payments to and transfer among the
available Sub-Accounts, including the Sub-Account that currently
invests in the Replaced Portfolio (the ``Equity Income Sub-Account'').
The allocation/transfer rights will continue until one week prior to
the date of the proposed Substitution requested by the application. The
Contract is the only contract investing in the Equity Income Sub-
Account, and no other sub-account of any other separate account invests
in the Replaced Portfolio. During the accumulation period, there are no
limits on the number of transfers Owners can make among the available
Sub-Accounts under the Contract and/or the Contract fixed accounts.
Transfers resulting from participation in the Dollar Cost Averaging or
Asset Rebalancing Programs do not count against the fifteen (15) free
transfers per contract year. All transfers in excess of fifteen (15)
transfer requests per contact year must be submitted by mail until the
next contract anniversary and may be subject to further restrictions.
4. SAST was organized as a Massachusetts business trust on
September 11, 1992. SAST was established and serves to provide a
funding medium for the Sub-Accounts which constitute its sole
shareholders. SAST is registered as an open-end management investment
company under the 1940 Act (File No. 811-07238), and its offering of
its shares is registered under the Securities Act of 1933 (File No.
033-52742).
5. The Replaced Portfolio, which offers a single class of shares,
constitutes a separate series available through SAST. The inception
date of the Replaced Portfolio was December 14, 1998, and it has been
offered in the Separate Account since the inception date of the
Contract on March 19, 1999.
6. The Separate Account buys and sells shares of the Replaced
Portfolio at net asset value that is net of the advisory fee of 0.650%
based on average daily net assets, paid to the investment adviser, AIG
SunAmerica Asset Management (``AIG SAAMCo''), to manage the business
affairs of the Replaced Portfolio and to provide administrative
services pursuant to a written investment advisory agreement (the
``Advisory Agreement''). The Replaced Portfolio's other expenses were
1.25% for the fiscal year ended January 31, 2006. The Replaced
Portfolio's total annual operating expenses for this period were 1.90%,
subject to voluntary fee waivers and expense reimbursement by AIG
SAAMCo that provided for total annual net operating expenses of 1.35%.
FAF Advisors, Inc., formerly U.S. Bancorp Asset Management, Inc.
(``FAF'') serves as subadviser to the Replaced Portfolio. AIG SAAMCo is
affiliated with AIG SunAmerica, but FAF is not affiliated with AIG
SunAmerica.
7. The Replaced Portfolio is a portfolio in which the Separate
Account invests under the Contract as one of the 42 Sub-Account
investment alternatives currently available. If the requested Order is
granted, the Substitution will result in the reduction of the available
investment alternatives by one. Shares of the Replacement Portfolio
will be offered at net asset value that is net of the current
Replacement Portfolio's advisory fee of 0.71% which is paid to AIG
SAAMCo to manage the business affairs of the Replacement Portfolio and
to provide administrative services
[[Page 64325]]
pursuant to the Advisory Agreement. The Replacement Portfolio's other
expenses are 0.05%, and the Replacement Portfolio's total annual
operating expenses are 0.76% for Class 1 shares. The Replacement
Portfolio does not pay Rule 12b-1 fees for distribution activities.
Davis Selected Advisers, L.P. d/b/a Davis Advisers (``Davis'') serves
as the sub-adviser to the Replacement Portfolio. Davis is not
affiliated with AIG SunAmerica.
8. The application covers a single portfolio in which the Separate
Account invests under the Contract. Applicants propose the Substitution
due to the Replaced Portfolio's declining assets and relatively high
total expenses. Applicants note that since the Replaced Portfolio's
inception on December 14, 1998, the Replaced Portfolio has accumulated
only $5.8 million in assets as of January 31, 2006. Applicants note
further that the Equity Income Sub-Account is the only sub-account that
invests in the Replaced Portfolio, that the Equity Income Sub-Account
is offered as an investment option in only one variable contract (the
Contract), and that the Contract is no longer offered to new contract
owners. Applicants also note that the Replaced Portfolio's total net
annual expenses of 1.35% exceed the median for its peer group by 0.43%.
The Replaced Portfolio's sub-adviser announced its intention to
terminate the voluntary expense reimbursement agreement within the
current fiscal period. As a result, the Replaced Portfolio's total net
annual expenses can be expected to increase significantly, further
limiting the Replaced Portfolio's ability to achieve competitive
performance. AIG SunAmerica undertook to review the various alternative
investment portfolios to determine which would be a suitable
replacement for the Replaced Portfolio. AIG SunAmerica determined that
the Replacement Portfolio is an appropriate and suitable replacement
for the Replaced Portfolio based on the following conclusions: (1) The
Replacement Portfolio has investment objectives, policies, and
restrictions substantially similar to those of the Replaced Portfolio;
(2) the Replaced Portfolio and the Replacement Portfolio take on
comparable levels of risk; (3) the Replacement Portfolio has
significantly lower total annual expense ratios than the Replaced
Portfolio prior to and after voluntary fee waivers and reimbursements
for the Replaced Portfolio; (4) the Replacement Portfolio has a
significantly greater number of outstanding shares than the Replaced
Portfolio; (5) the Replacement Portfolio has a significantly larger
asset base than the Replaced Portfolio. The Replacement Portfolio's
total assets at January 31, 2006, were approximately $2.4 billion,
while the Replaced Portfolio's assets at January 31, 2006 were
approximately $5.8 million. The larger asset base of the Replacement
Portfolio provides the potential for a future reduction in the total
annual expenses of all its share classes, in addition to providing
potential enhanced performance. Moreover, the larger asset base of the
Replacement Portfolio provides greater protection against adverse
effects on expenses and performance occasioned by large redemptions;
and (6) the Replacement Portfolio has a performance record
significantly superior to that of the Replaced Portfolio, and the
potential for enhanced future performance.
9. The Applicants note that the Replaced Portfolio will process
redemption requests and the Replacement Portfolio will process purchase
orders at prices based on the current net asset values next computed
after receipt of the requests and orders in a manner consistent with
Rule 22c-1 under the 1940 Act. The Applicants will effect the proposed
Substitution by redeeming shares of the Replaced Portfolio in cash at
net asset value and then immediately contributing those assets to the
Replacement Portfolio to purchase their Class 1 shares. At all times,
before and after the Substitution, monies attributable to Owners that
have allocated assets to the Equity Income Sub-Account will remain
fully invested, and no change will result in the amount of any Owner's
Contract value, death benefit or investment in the Equity Income Sub-
Account so that the full net asset value of the redeemed shares will be
reflected in the Owners' accumulation values or annuity unit values
following the Substitution. In addition, AIG SunAmerica undertakes to
assume all transaction costs and expenses relating to the Substitution
so that the full net asset value of redeemed shares of the Replaced
Portfolio held by the Equity Income Sub-Account will be reflected in
the Owners' accumulation values or annuity unit values following the
Substitution.
10. Owners will not incur any fees or charges as a result of the
Substitution, nor will the rights of Owners or obligations of AIG
SunAmerica under the Contract be altered in any way. The proposed
Substitution will not have any adverse tax consequences to Owners. The
proposed Substitution will not cause Contract fees and charges
currently being paid by existing Owners to be greater after the
proposed Substitution than before the proposed Substitution. The
proposed Substitution will not be treated as a transfer for the purpose
of transfer limits or assessing transfer charges.
11. AIG SunAmerica will schedule the Substitution to occur after
issuance of the requested Order and any required state insurance
department approvals. Further, although the Substitution will result in
the replacement of the Replaced Portfolio as the investment of the
Equity Income Sub-Account 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 from the Equity Income Sub-Account among the other
available Sub-Accounts for a period of at least thirty (30) days
following mailing of the Notice, as defined below, of the proposed
Substitution (the ``Free Transfer Period''). During the Free Transfer
Period, Owners may transfer all assets, as substituted, from the Equity
Income Sub-Account to other available Sub-Accounts without charge or
limitation and without those transfers being counted against any limit
on free transfers under the Contract, or any requirements for the
method of submitting transfer requests.
12. Upon filing the application, AIG SunAmerica supplemented the
prospectus for the Contract to reflect the proposed Substitution.
Within five days after the Substitution, AIG SunAmerica will send to
its Owners written notice of the Substitution (``Notice'') identifying
the shares of the Replaced Portfolio that have been eliminated and the
shares of the Replacement Portfolio that have been substituted. AIG
SunAmerica will include in the mailing the applicable prospectus
supplement for the Contract describing the Substitution. AIG SunAmerica
will also mail a copy of the prospectus for the Replacement Portfolio
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, from the Equity Income Sub-Account to the other available
Sub-Accounts without limit or charge and without those transfers being
counted against any limit on free transfers under their Contracts, or
any requirements for the method of submitting transfer requests.
Applicant's Legal Analysis
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
[[Page 64326]]
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 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 submit that the Substitution does 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: (i) The Substitution will continue to fulfill
Owners' objectives and risk expectations, because the Replacement
Portfolio has substantially similar objectives, policies, and
restrictions to the objectives, policies, and restrictions of the
Replaced Portfolio and comparable risk characteristics; (ii) after
mailing of the Notice informing an Owner of the Substitution, an Owner
may request that his or her assets in the Equity Income Sub-Account be
reallocated among the other available Sub-Accounts 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, or any requirements for the method of submitting transfer
requests. This right also will be granted to Owners, if any, who are
receiving variable payments based on the Replaced Portfolio. The Free
Transfer Period provides sufficient time for Owners to consider and
effect their reinvestment and withdrawal options; (iii) the
Substitution will be at net asset value of the respective shares
determined on the date of the Substitution in accordance with section
22 of the 1940 Act and Rule 22c-1 thereunder, without the imposition of
any transfer or similar charge; (iv) AIG SunAmerica has undertaken to
assume all expenses and transaction costs, including, but not limited
to, legal and accounting fees and any brokerage commissions, in
connection with the Substitution; (v) the Substitution will in no way
alter the contractual obligations of AIG SunAmerica or the rights and
privileges of Owners under the Contract; (vi) the Substitution will in
no way alter the tax treatment of Owners in connection with their
Contracts, and no tax liability will arise for Owners as a result of
the Substitution; (vii) the Substitution is expected to confer certain
future economic benefits on Owners by virtue of the greater asset base
or lower portfolio expenses; (viii) at the time of the Substitution,
the total annual expenses of the Replacement Portfolio's shares are
expected to be lower than the Replaced Portfolio; (ix) the Substitution
which will be effected in accordance with section 22 of the 1940 Act
and Rule 22c-1 thereunder by redeeming shares of the Replaced Portfolio
in cash to be conveyed immediately to the Replacement Portfolio to
purchase its respective shares; and (x) AIG SunAmerica represents that
at no time after date of the Substitution (the ``Substitution Date'')
will AIG SunAmerica increase Contract charges or total Separate Account
charges (net of any waiver or reimbursements) of the Sub-Account that
currently invests in the Replacement Portfolio (the ``Davis Sub-
Account''). If the total operating expenses for the Replacement
Portfolio (taking into account any expense waiver or reimbursement) for
any fiscal quarter following the Substitution Date, exceed on an
annualized basis the net expense ratio for the Replaced Portfolio for
the fiscal year ended January 31, 2006, AIG SunAmerica will reduce
(through reimbursement) the Separate Account expenses paid during that
quarter of the Davis Sub-Account to the extent necessary to offset the
amount by which the Replacement Portfolio's net expense ratio for such
period exceeds, on an annualized basis, 1.35%.
4. AIG SunAmerica has determined that the Replacement Portfolio is
an appropriate replacement for the Replaced Portfolio. The Replacement
Portfolio has investment objectives, policies, and restrictions
substantially similar to the Replaced Portfolio with comparable levels
of risk. The Replacement Portfolio has a significantly lower total
expense ratio than the Replacement Portfolio. Also, the Replacement
Portfolio has a significantly larger asset base than the Replacement
Portfolio. In addition, the average annual total returns of the
Replacement Portfolio are clearly superior to those of the Replacement
Portfolio, other than with respect to the year to date performance.
Conclusion
For the reasons set forth in the application, the Applicants state
that the proposed Substitution and the related transactions meet the
standards of section 26(c) of the 1940 Act and that the requested Order
should be granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6-18349 Filed 10-31-06; 8:45 am]
BILLING CODE 8011-01-P
