<PAGE> 1
ANCHOR
SERIES
TRUST
ANNUAL
REPORT
DECEMBER 31, 1996
<PAGE> 2
- ---------------------
DEAR ANCHOR SERIES TRUST INVESTOR:
With moderate but steady economic growth, stable inflation
confirmed by limited Federal Reserve intervention, and
continued, though cautious, consumer confidence, 1996 was a
relatively good year for investors. Generally, stocks
outperformed bonds and U.S. stocks did better than international
stocks. Returns for the twelve portfolios in the Anchor Series
Trust which underlie the ICAP II Variable Annuity from Anchor
National Life Insurance Company and First SunAmerica Life
Insurance Company, generally followed suit, and all were
positive for the fiscal year ended December 31, 1996.
The following information from Wellington Management Company,
LLP ("Wellington"), the Subadviser for the Anchor Series Trust,
should give you some additional insight into the markets over
the past twelve months and how conditions affected the
performance of your underlying investments.
THE U.S. STOCK MARKET: ON A ROLL OR OVER-DONE?
As the sixth year of the U.S. economic expansion continued in
1996, the S&P 500 Composite Index posted another remarkable
year, returning 23% for the past twelve months. The stock market
was led higher by a confluence of several favorable factors last
year: steady but moderate economic growth, stable inflation,
good corporate earnings gains, and strong cash flows into mutual
funds. And while inflation appears to be in check, which is
keeping the Federal Reserve from being inclined to raise
interest rates, the stock market as a whole is trading at the
high end of historical ranges of a number of key measures,
including price/earnings and price/book ratios, and dividend
yields. It seems clear that recent stock market gains reflect
investors' "above average" sentiments about the U.S. and the
market. As economic patterns change, investor sentiment can also
change quickly and unpredictably. Therefore, long-term investors
should be reminded that developing an investment plan that
considers allocation among asset classes is essential. Within
the U.S. stock market, it is also important to realize that not
all segments of the market performed equally over time. Returns
on mid- and smaller-capitalization U.S. stocks have tended to
outperform larger company stocks over time; however, in 1996
small-cap stocks were not as robust as were their larger
brethren, as evidenced by the Russell 2000 (a small-cap
benchmark) Index's 12-month return of 16.5%.
INTERNATIONAL STOCKS: CAN THEY KEEP PACE WITH THE U.S.?
Stock market returns outside the U.S. were mixed in 1996, with
several rivaling the returns of the U.S., while others lagged.
Broad international stock market averages were up for the year,
with the MSCI All Country Free (ex-U.S.) Index gaining 6.7% in
1996. European stock market returns were generally strong. Spain
led the pack with U.S. dollar returns of 41.3%, followed by
Sweden at 38.0% and most of the other Nordic countries, where
20-40% returns were seen. Countries such as the UK (+27.4%),
Italy (+13.4%) and Germany (+14.1%) also posted strong returns.
Swiss stocks were hurt by a significant currency decline, as
20.0% local returns translated to 2.8% returns in U.S. dollar
terms. Japan was very weak during the year, down -15.4% in U.S.
dollar terms. The Japanese stock market's decline came as the
yen weakened, and as local investors became increasingly
pessimistic about the future economic growth of the Japanese
economy due to impending fiscal tightening and worries about
deregulation of the financial system. In the Pacific Basin
ex-Japan, the last quarter of 1996 was a continua-
---------------------
1
<PAGE> 3
- ---------------------
tion of many of the trends in place for the full year. Hong Kong
followed Wall Street to record highs, up 33.1% for the year (in
U.S. dollars). Other markets, such as Australia and New Zealand,
which often keep an eye on the U.S. market, also put in very
strong showings with 17.8% and 18.7% returns in U.S. dollars,
respectively.
A BOND IS A BOND IS A BOND?
U.S. bond investors experienced modestly positive total
returns in 1996 as interest rates moved higher during the year,
causing bond prices to decline, offsetting a portion of the
coupon income earned on those securities. The U.S. bond market
as a whole prized higher-yielding sectors amidst an optimistic
consensus for global growth and inflation. Thus, low-quality
issues that offer the highest yields were the best performers.
This was witnessed by the 11.3% return for the Lehman Brothers
High Yield Index, while investment grade bonds as measured by
the Lehman Brothers Government/Corporate Index trailed by a wide
margin, returning 2.9%. Similarly, the investment grade Lehman
Brothers Aggregate Index (which includes mortgage-backed
securities) was only slightly better, returning 3.6% for 1996.
Within the investment grade sectors, corporate bonds and
mortgage-backed securities each outperformed comparable-duration
Treasuries by roughly one percentage point. Economic trends
continued to defy those expecting a slowdown, and inflation was
stubbornly confined. Domestic investors were net sellers of
bonds during the year, while foreign buying supported U.S.
bonds.
ANCHOR SERIES TRUST PORTFOLIOS
Within this context, the twelve Anchor Series Trust Portfolios
participated in their respective markets' returns. The Growth
Portfolio and the Capital Appreciation Portfolio returned 25.0%
and 25.1%, respectively, handily outperforming the S&P 500
Composite Index in 1996, and their respective Lipper competitive
groups. Likewise, the Growth and Income Portfolio had a good
year with a 20.2% return, which was sufficient to outperform the
Lipper Variable Annuity Growth and Income category's average
return of 20.0%. Both the Growth and Income Portfolio and its
Lipper category lagged the S&P 500 Composite Index's return of
23% for the fiscal year. The Natural Resources Portfolio
returned 14.1%, which was similar to global stock market returns
as witnessed by the MSCI World Index return of 14.0%. The
Foreign Securities Portfolio returned 11.5%, which was a premium
over most measures of foreign markets such as the MSCI All
Country Free (ex-U.S.) Index, which was up 6.7%. As would be
expected, the multi-asset portfolios, which on average are
60-70% invested in the stock markets, fell midway between stock
market returns and those of the bond market. The Multi-Asset
Portfolio, for example, returned 13.9%, outperforming the 13.5%
return of the Lipper Variable Annuity Flexible category, and the
Strategic Multi-Asset Portfolio returned 14.8%, a slight
underperformance versus the Lipper Variable Annuity Global
Flexible category, which returned on average 15.7%.
Within the investment grade fixed income universe, total
returns clustered around 2% to 3%, while returns on high yield
bonds were substantially higher. By order of risk, the Anchor
Series Trust portfolios provided the following returns: Money
Market returned 5.0%, Target '98 returned 3.7%, Government and
Quality Bond returned 2.9%, Fixed Income returned 2.4%, and High
Yield provided investors with an 11.7% return for the year.
These returns were generally in line with the Lehman Brothers
market indices. This is especially true given that bond market
indices, such as the Lehman Brothers Aggregate or the Lehman
Brothers Government/Corporate, represent "paper" portfo-
- ---------------------
2
<PAGE> 4
- ---------------------
lios and do not reflect the costs and expenses of actual
investing. It may seem unusual that money market securities (the
most conservative of securities) and high yield bonds (some of
the most aggressive of bond investments) outperformed investment
grade securities with longer duration and maturities. The
attribute that both money market securities and high yield bonds
have in common is that they are among the least sensitive to
rising interest rates. Therefore, these two types of investments
came closer to earning their coupons in 1996, and they were less
impacted by the decline in bond prices that occurred when
interest rates rose than were investment grade bonds.
1997 OUTLOOK
The outlook for 1997 is for moderate growth in major economies
around the world, with subdued inflation. In particular, fiscal
austerity will be offset by accommodative monetary policies,
which should provide a favorable backdrop for companies and
investors around the world. It is interesting to note, however,
that the value of U.S. equities surpassed the value of U.S.
bonds, and also rivaled the value of the nation's gross domestic
product (GDP) in 1996. Now more than ever, long-term investors
should look closely at the allocation of their assets among the
major asset classes to determine if they are meeting their
long-term investment plan, and periodically meet with their
financial representative.
Although the major financial markets experienced an extremely
positive year in 1996, we are optimistic about the prospects for
further positive returns in 1997. While future results may be
less robust than the returns seen in 1996, the expectation is
for many interesting investment opportunities in the various
markets represented within the Trust. We remain committed to
helping you achieve your long-term goals by striving to uncover
promising investment opportunities as they arise.
That concludes the overview from Wellington Management
Company, LLP. We look forward to reporting to you once again in
six months' time, and we appreciate the confidence you place in
us with your retirement assets.
Sincerely,
/s/ ELI BROAD
----------------------------------------
Eli Broad
Chairman and Chief Executive Officer,
Anchor National Life Insurance Company
First SunAmerica Life Insurance Company
February 24, 1997
-------------------------------
Note: All performance figures quoted are for the Anchor Series
Trust. They do not reflect fees and charges associated with the
variable annuity. Past performance is no guarantee of future
results.
Investments in stocks and bonds are subject to risk, including
stock market and interest rate fluctuations. Investments in
non-U.S. stocks and bonds are subject to additional risks,
including fluctuations, political and social instability,
differing securities regulations and accounting standards and
limited public information. High-yield bonds tend to be subject
to greater price swings than higher-rated bonds and, of course,
payment of interest and principal is not assured. Mortgage-
backed securities are subject to prepayment, which can result in
reinvestment of principal at lower yields. Investments in
securities related to gold or other precious metals and minerals
are considered speculative and are impacted by a host of
worldwide economic, financial and political factors. Money
market instruments generally offer stability and income, but an
investment in these securities is not guaranteed by the U.S.
government or any other entity.
---------------------
3
<PAGE> 5
- ---------------------
ANCHOR SERIES TRUST
MONEY MARKET PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 100.2% AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK NOTES -- 15.5%
Bank of New York Co., Inc. 5.84% due 6/03/97.......................... $ 2,000,000 $ 2,001,012
Bank of Tokyo-Mitsubishi 5.83% due 1/21/97............................ 2,000,000 2,000,011
Chase Manhattan Corp. 5.73% due 2/03/97............................... 3,000,000 3,000,000
First National Bank of Boston 5.47% due 2/12/97....................... 2,500,000 2,500,000
Wilmington Trust Co. 5.41% due 3/26/97................................ 2,000,000 2,000,000
-----------
TOTAL BANK NOTES (cost $11,501,023)................................... 11,501,023
-----------
CORPORATE SHORT-TERM NOTES -- 61.7%
Bear Stearns Cos., Inc. 5.32% due 1/27/97............................. 435,000 433,329
BHF Finance (DE), Inc. 5.30% due 4/11/97.............................. 2,000,000 1,970,556
BHP Finance Ltd. 5.30% due 2/25/97.................................... 2,000,000 1,983,806
Centric Funding Corp. 5.30% due 2/13/97............................... 2,500,000 2,484,174
Corporate Receivables Corp. 5.37% due 2/14/97......................... 2,000,000 1,986,873
Delaware Funding Corp. 5.36% due 2/28/97.............................. 2,000,000 1,982,729
Disney (Walt) Co. 5.28% due 3/03/97................................... 2,200,000 2,180,317
Falcon Asset Securitization Corp. 5.47% due 1/10/97................... 1,950,000 1,947,333
First Chicago Financial Corp. 5.31% due 2/19/97....................... 2,000,000 1,985,545
General Electric Capital Corp. 5.34% due 6/16/97...................... 2,000,000 1,950,753
General Motors Acceptance Corp. 5.40% due 3/14/97..................... 1,000,000 989,200
Gillette Co. 5.29% due 3/05/97........................................ 2,200,000 2,179,633
Goldman Sachs Group L.P. 5.31% due 3/11/97............................ 2,200,000 2,177,610
Greenwich Funding Corp. 5.35% due 1/16/97............................. 2,000,000 1,995,542
Hitachi America Ltd. 5.33% due 2/14/97................................ 1,200,000 1,192,183
Kittyhawk Funding Corp. 5.38% due 3/03/97............................. 2,000,000 1,981,768
Merrill Lynch & Co., Inc. 5.34% due 1/23/97........................... 1,970,000 1,963,571
Morgan Stanley Group, Inc. 5.32% due 1/29/97.......................... 890,000 886,317
National Fuel Gas Co. 5.37% due 1/21/97............................... 1,700,000 1,694,928
Nationsbank Corp. 5.40% due 1/06/97................................... 3,000,000 2,997,750
Pfizer, Inc. 5.30% due 3/19/97........................................ 2,200,000 2,175,061
Ranger Funding Corp. 5.33% due 2/03/97................................ 2,500,000 2,487,785
Sears Roebuck Acceptance Corp. 5.32% due 2/11/97...................... 2,000,000 1,987,882
Unifunding, Inc. 5.33% due 1/22/97.................................... 2,040,000 2,033,657
-----------
TOTAL CORPORATE SHORT-TERM NOTES (cost $45,648,302)................... 45,648,302
-----------
MISCELLANEOUS -- 6.8%
Peoples Security Life Insurance Co. 5.60% due 2/02/97(1).............. 2,000,000 2,000,000
SMM Trust 5.61% due 2/04/97(1)........................................ 3,000,000 3,000,000
-----------
TOTAL MISCELLANEOUS (cost $5,000,000)................................. 5,000,000
-----------
</TABLE>
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4
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES (continued) AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES -- 16.2%
Federal Farm Credit Banks 5.60% due 6/03/97........................... $ 2,000,000 $ 1,998,826
Student Loan Marketing Association 5.41% due 1/21/97(1)............... 10,000,000 10,000,000
-----------
TOTAL U.S. GOVERNMENT & AGENCIES (cost $11,998,826)................... 11,998,826
-----------
TOTAL SHORT-TERM SECURITIES (cost $74,148,151)........................ 74,148,151
-----------
TOTAL INVESTMENTS -- (cost $74,148,151) 100.2% 74,148,151
Liabilities in excess of other assets -- (0.2) (147,498)
------ -----------
NET ASSETS -- 100.0% $74,000,653
====== ===========
</TABLE>
-----------------------------
(1) Variable rate security -- the rate reflected is as of December
31, 1996; maturity date reflects next reset date
See Notes to Financial Statements
---------------------
5
<PAGE> 7
- ---------------------
ANCHOR SERIES TRUST
FIXED INCOME PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 97.3% AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE & MILITARY TECHNOLOGY -- 0.5%
Howmet Corp. 10.00% 2003............................................... $ 50,000 $ 54,625
Moog, Inc. 10.00% 2006................................................. 50,000 52,500
------------
107,125
------------
CABLE -- 2.0%
Cablevision Systems Corp. 9.25% 2005................................... 35,000 34,650
Comcast Corp. 9.13% 2006............................................... 35,000 35,787
Tele-Communications, Inc. 9.80% 2012................................... 350,000 378,770
------------
449,207
------------
CHEMICALS -- 0.6%
Harris Chemical North America, Inc. 10.25% 2001........................ 50,000 51,938
Rexene Corp. 11.75% 2004............................................... 50,000 56,125
Texas Petrochemicals Corp. 11.13% 2006................................. 25,000 26,875
------------
134,938
------------
COMMUNICATIONS & MEDIA -- 1.7%
360 Communications Co. 7.13% 2003...................................... 200,000 197,582
Benedek Communications Corp. zero coupon 2006(1)(2).................... 65,000 37,212
Chancellor Broadcasting Co. 9.38% 2004................................. 10,000 10,100
Lenfest Communications, Inc. 8.38% 2005................................ 25,000 24,156
MobileMedia Corp. 9.38% 2007+(3)....................................... 50,000 13,500
Rifkin Acquisitions Partners L.P. 11.13% 2006.......................... 20,000 20,850
World Color Press, Inc. 9.13% 2003..................................... 50,000 50,500
Young Broadcasting, Inc. 9.00% 2006.................................... 25,000 24,313
------------
378,213
------------
ENERGY -- 0.7%
Mesa Operating Co. 10.63% 2006......................................... 50,000 54,250
Plains Resources, Inc. 10.25% 2006..................................... 50,000 53,500
Transportadora De Gas 10.25% 2001...................................... 50,000 52,975
------------
160,725
------------
FINANCE -- 12.6%
Abbey National First Capital 8.20% 2004................................ 500,000 536,285
Banponce Financial Corp. 6.80% 2005.................................... 300,000 293,454
Japan Finance Corp. Municipal Enterprises 9.13% 2000................... 400,000 431,084
KFW International Finance, Inc. 9.13% 2001............................. 400,000 440,152
Ohio National Life Insurance Co. 8.50% 2026............................ 200,000 207,890
Security Benefit Life Co. 8.75% 2016................................... 200,000 212,160
Sun Canada Financial Co. 7.25% 2015.................................... 300,000 286,422
Tembec Finance Corp. 9.88% 2005........................................ 50,000 46,750
United States Bancorp Oregon 7.50% 2026................................ 400,000 417,992
------------
2,872,189
------------
GAMING -- 0.1%
Trump Atlantic City Associates 11.25% 2006............................. 30,000 29,700
------------
GROCERY -- 0.1%
Smith's Food & Drug Centers, Inc. 11.25% 2007.......................... 25,000 27,625
------------
</TABLE>
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6
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (continued) AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE -- 1.6%
Allegiance Corp. 7.00% 2026............................................ $ 200,000 $ 202,904
Integrated Health Services, Inc. 10.25% 2006........................... 50,000 52,500
Owens & Minor, Inc. 10.88% 2006........................................ 50,000 53,625
Quorum Health Group, Inc. 8.75% 2005................................... 50,000 51,250
------------
360,279
------------
INDUSTRIAL & COMMERCIAL -- 6.4%
Bell & Howell Co. zero coupon 2005(1).................................. 50,000 36,250
Cincinnati Milacron, Inc. 7.88% 2000................................... 150,000 151,445
Collins & Aikman Corp. 11.50% 2006..................................... 50,000 54,500
Columbia University Trustees 8.62% 2001................................ 500,000 538,030
Dominion Textile USA, Inc. 9.25% 2006.................................. 20,000 20,325
Ford Motor Co. 9.00% 2001.............................................. 500,000 546,590
Hayes Wheels International, Inc. 11.00% 2006........................... 25,000 27,281
Lear Corp. 9.50% 2006.................................................. 35,000 37,800
Walbro Corp. 9.88% 2005................................................ 50,000 51,500
------------
1,463,721
------------
INFORMATION & ENTERTAINMENT -- 1.0%
News America Holdings, Inc. 9.25% 2013................................. 200,000 224,058
------------
INFORMATION TECHNOLOGY -- 2.2%
Bellsouth Telecommunications 6.25% 2003................................ 500,000 489,965
------------
METALS & MINERALS -- 0.7%
A.K. Steel Corp. 9.13% 2006............................................ 15,000 15,413
Armco, Inc. 9.38% 2000................................................. 50,000 50,250
Northwestern Steel & Wire Co. 9.50% 2001............................... 50,000 49,000
S.D. Warren Co. 12.00% 2004............................................ 50,000 54,000
------------
168,663
------------
PAPER PRODUCTS -- 0.5%
Container Corp. of America 9.75% 2003.................................. 50,000 52,500
Fort Howard Corp. 9.25% 2001........................................... 50,000 52,125
Repap New Brunswick, Inc. 9.88% 2000................................... 15,000 15,300
------------
119,925
------------
RETAIL -- 0.1%
Guitar Center Management Co., Inc. 11.00% 2006*........................ 10,000 10,500
------------
U.S. GOVERNMENT & AGENCIES -- 61.0%
Federal Home Loan Mortgage Corp. 6.00% 2003............................ 498,515 487,139
Federal Home Loan Mortgage Corp. 6.50% 2024............................ 868,194 834,551
Federal Home Loan Mortgage Corp. 7.00% 2003 - 2026..................... 1,941,735 1,917,417
Federal Home Loan Participation 7.50% 2007............................. 601,001 606,356
Federal Home Loan Participation 11.00% 2000............................ 8,641 9,138
Government National Mortgage Association 7.00% 2023.................... 525,494 516,298
Government National Mortgage Association 7.50% 2022 - 2023............. 884,972 890,242
Government National Mortgage Association 8.00% 2023.................... 483,533 495,012
Government National Mortgage Association 10.00% 2000................... 26,778 28,334
Government National Mortgage Association 11.25% 1998................... 4,847 5,120
Government National Mortgage Association 13.25% 1999................... 1,536 1,624
United States Treasury Bonds 10.75% 2003............................... 1,400,000 1,714,118
United States Treasury Bonds 11.63% 2004............................... 270,000 356,484
United States Treasury Bonds 11.88% 2003............................... 1,000,000 1,304,530
United States Treasury Bonds 12.00% 2013............................... 2,650,000 3,790,745
United States Treasury Notes 5.50% 2000................................ 120,000 117,225
</TABLE>
---------------------
7
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (continued) AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (continued)
United States Treasury Notes 6.38% 1999................................ $ 70,000 $ 70,601
United States Treasury Notes 7.13% 1999................................ 500,000 513,830
United States Treasury Notes 7.88% 1999................................ 200,000 209,532
------------
13,868,296
------------
UTILITIES -- 5.5%
El Paso Electric Co. 8.90% 2006........................................ 50,000 52,132
Niagara Mohawk Power Corp. 5.88% 2002.................................. 750,000 705,105
Quebec Hydro 8.05% 2024................................................ 450,000 494,784
------------
1,252,021
------------
TOTAL BONDS & NOTES (cost $22,161,148)................................. 22,117,150
------------
PREFERRED STOCK -- 0.1% SHARES
----------------------------------------------------------------------------------------------------
FINANCE -- 0.1%
Chevy Chase Preferred Capital Corp., Series A 10.38% (cost $25,000).... 500 26,062
------------
TOTAL INVESTMENT SECURITIES (cost $22,186,148)......................... 22,143,212
------------
PRINCIPAL
REPURCHASE AGREEMENT -- 0.9% AMOUNT
----------------------------------------------------------------------------------------------------
Joint Repurchase Agreement Account -- Lehman Bros. (Note 3)
(cost $210,000)...................................................... $ 210,000 210,000
------------
TOTAL INVESTMENTS -- (cost $22,396,148) 98.3% 22,353,212
Other assets less liabilities -- 1.7 389,790
------ ------------
NET ASSETS -- 100.0% $22,743,002
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
(1) Represents a zero coupon bond which will convert to an
interest-bearing security at a later date
(2) Fair valued security; see Note 2
(3) Issuer of the security has filed for bankruptcy and interest
payments are in default
See Notes to Financial Statements
- ---------------------
8
<PAGE> 10
- ---------------------
ANCHOR SERIES TRUST
GOVERNMENT & QUALITY BOND
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 93.5% AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE -- 0.9%
Daimler-Benz Vehicle Trust 5.95% 2000................................ $ 736,244 $ 735,176
Premier Auto Trust 4.65% 1999........................................ 1,321,303 1,307,575
-------------
2,042,751
-------------
FINANCE -- 11.0%
Banc One Auto Grantor Trust 6.55% 2003............................... 3,711,970 3,735,170
General Electric Capital Corp. 7.50% 2035............................ 5,000,000 5,192,050
General Reinsurance Corp. 9.00% 2009................................. 5,000,000 5,729,450
Morgan (J.P.) & Co., Inc. 6.25% 2005................................. 5,000,000 4,859,300
Stanford University 6.88% 2024....................................... 5,000,000 4,795,650
-------------
24,311,620
-------------
INDUSTRIALS -- 2.6%
Postal Square L.P. 8.95% 2022........................................ 4,811,800 5,627,448
-------------
INFORMATION & ENTERTAINMENT -- 1.4%
McDonald's Corp. 7.05% 2025.......................................... 3,300,000 3,155,589
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.3%
British Columbia Province Canada 6.50% 2026.......................... 3,125,000 2,890,969
-------------
RETAIL -- 2.1%
Wal-Mart Stores, Inc. 6.75% 2023..................................... 5,000,000 4,737,700
-------------
TRANSPORTATION -- 2.6%
United Parcel Service of America, Inc. 8.38% 2020.................... 5,000,000 5,655,400
-------------
U.S. GOVERNMENT & AGENCIES -- 67.1%
Federal Home Loan Mortgage Corp. 6.00% 2008 - 2011................... 9,222,996 8,913,374
Federal Home Loan Mortgage Corp. 6.50% 2011.......................... 13,916,772 13,712,335
Federal Home Loan Mortgage Corp. 7.00% 2010 - 2011................... 19,082,099 19,087,965
Federal Home Loan Mortgage Corp. 7.29% 2004.......................... 20,000,000 19,896,800
Federal Home Loan Mortgage Corp. 14.75% 2010......................... 155,981 186,397
Federal National Mortgage Association 7.00% 2010 - 2011.............. 6,766,934 6,765,160
Federal National Mortgage Association 7.50% 2023 - 2025.............. 4,337,789 4,345,205
Federal National Mortgage Association 8.00% 2023..................... 12,399,136 12,631,619
Government National Mortgage Association 6.50% 2023.................. 8,450,345 8,059,516
Government National Mortgage Association 7.00% TBA................... 10,000,000 10,037,500
Government National Mortgage Association 7.50% 2022.................. 7,921,932 7,972,870
Government National Mortgage Association 9.50% 2016 - 2017........... 2,654,669 2,882,476
Government National Mortgage Association 10.00% 2013 - 2017.......... 2,568,426 2,788,889
Government National Mortgage Association 11.50% 2014................. 19,712 21,101
Government National Mortgage Association 12.00% 1999 - 2016.......... 143,432 153,410
Government National Mortgage Association 12.75% 2014................. 79,957 94,624
Government National Mortgage Association 13.25% 1999 - 2014.......... 20,656 24,101
Government National Mortgage Association 13.50% 2014................. 8,981 10,814
Government National Mortgage Association 13.75% 2014................. 1,426 1,687
</TABLE>
---------------------
9
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (continued) AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (continued)
United States Treasury Bonds 7.63% 2022.............................. $10,000,000 $ 11,039,100
United States Treasury Notes 6.13% 1998.............................. 20,000,000 20,092,100
-------------
148,717,043
-------------
UTILITIES -- 4.5%
Hydro Quebec Electric 8.40% 2022..................................... 5,000,000 5,460,750
US West Communications, Inc. 6.88% 2033.............................. 5,000,000 4,528,800
-------------
9,989,550
-------------
TOTAL INVESTMENT SECURITIES (cost $208,172,650)...................... 207,128,070
-------------
REPURCHASE AGREEMENTS -- 9.7%
----------------------------------------------------------------------------------------------------
Joint Repurchase Agreement Account -- First Boston (Note 3).......... 7,744,000 7,744,000
Joint Repurchase Agreement Account -- Lehman Bros. (Note 3).......... 13,835,000 13,835,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost $21,579,000)....................... 21,579,000
-------------
TOTAL INVESTMENTS -- (cost $229,751,650) 103.2% 228,707,070
Liabilities in excess of other assets -- (3.2) (7,103,993)
------ -------------
NET ASSETS -- 100.0% $221,603,077
====== =============
</TABLE>
-----------------------------
TBA - Securities purchased on a forward commitment basis with an
approximate principal amount and no definitive maturity
date. The actual principal amount and maturity date will be
determined upon settlement.
See Notes to Financial Statements
- ---------------------
10
<PAGE> 12
- ---------------------
ANCHOR SERIES TRUST
HIGH YIELD PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 92.9% AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE & MILITARY TECHNOLOGY -- 6.8%
Howmet Corp. 10.00% 2003.............................................. $ 605,000 $ 660,962
Moog, Inc. 10.00% 2006................................................ 655,000 687,750
Newport News Shipbuilding, Inc. 8.63% 2006*........................... 125,000 128,125
Northrop Grumman Corp. 9.38% 2024..................................... 250,000 276,378
Rohr, Inc. 11.63% 2003................................................ 500,000 551,250
Wyman-Gordon Co. 10.75% 2003.......................................... 750,000 798,750
------------
3,103,215
------------
CABLE -- 3.4%
Cablevision Systems Corp. 9.25% 2005.................................. 350,000 346,500
Cablevision Systems Corp. 9.88% 2006.................................. 145,000 148,625
Comcast Corp. 9.38% 2005.............................................. 350,000 363,125
Marcus Cable Operating Co. L.P. zero coupon 2004(1)................... 350,000 287,000
Tele-Communications, Inc. 9.25% 2023.................................. 150,000 145,792
Videotron Ltd. 10.25% 2002............................................ 250,000 265,625
------------
1,556,667
------------
CHEMICALS -- 5.3%
Acetex Corp. 9.75% 2003............................................... 305,000 302,560
Agriculture Minerals & Chemicals 10.75% 2003.......................... 500,000 543,750
Arcadian Partners L.P. 10.75% 2005.................................... 250,000 274,375
General Chemical Corp. 9.25% 2003..................................... 250,000 255,625
Harris Chemical North America, Inc. 10.25% 2001....................... 150,000 155,812
PMI Acquisition Corp. 10.25% 2003..................................... 350,000 357,000
Rexene Corp. 11.75% 2004.............................................. 150,000 168,375
Sterling Chemicals, Inc. 11.75% 2006.................................. 235,000 249,100
Texas Petrochemicals Corp. 11.13% 2006................................ 90,000 96,750
------------
2,403,347
------------
COMMUNICATIONS & MEDIA -- 10.3%
Benedek Communications Corp. zero coupon 2006(1)(2)................... 550,000 314,875
Big Flower Press Holdings 10.75% 2003................................. 250,000 260,625
Chancellor Broadcasting Co. 9.38% 2004................................ 500,000 505,000
Galaxy Telecom L.P. 12.38% 2005....................................... 250,000 266,250
Granite Broadcasting Corp. 10.38% 2005................................ 150,000 153,750
Granite Broadcasting Corp. 12.75% 2002................................ 350,000 381,500
Lenfest Communications, Inc. 8.38% 2005............................... 250,000 241,562
MobileMedia Corp. 9.38% 2007+(3)...................................... 500,000 135,000
Plitt Theaters, Inc. 10.88% 2004...................................... 500,000 503,750
Rifkin Acquisitions Partners L.P. 11.13% 2006......................... 500,000 521,250
Teleport Communications Group, Inc. zero coupon 2007(1)............... 175,000 119,875
World Color Press, Inc. 9.13% 2003.................................... 750,000 757,500
Young Broadcasting, Inc. 11.75% 2004.................................. 500,000 545,000
------------
4,705,937
------------
CONSUMER DISCRETIONARY -- 0.7%
Webb (Del) Corp. 9.00% 2006........................................... 350,000 341,250
------------
</TABLE>
---------------------
11
<PAGE> 13
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (continued) AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES -- 3.2%
American Safety Razor Co. 9.88% 2005.................................. $ 150,000 $ 159,375
Gruma SA de CV 9.75% 1998............................................. 250,000 257,188
Sweetheart Cup, Inc. 10.50% 2003...................................... 500,000 520,000
Westpoint Stevens, Inc. 8.75% 2001.................................... 500,000 513,750
------------
1,450,313
------------
ENERGY -- 6.3%
Energy Ventures, Inc. 10.25% 2004..................................... 150,000 162,375
Flores & Rucks, Inc. 9.75% 2006....................................... 165,000 174,900
Mesa Operating Co. zero coupon 2006(1)................................ 350,000 241,500
Mesa Operating Co. 10.63% 2006........................................ 75,000 81,375
Plains Resources, Inc. 10.25% 2006.................................... 600,000 642,000
Santa Fe Energy Resources, Inc. 11.00% 2004........................... 500,000 550,000
Seagull Energy Corp. 8.63% 2005....................................... 250,000 253,750
Transportadora De Gas 7.75% 1998...................................... 250,000 250,312
Transportadora De Gas 10.25% 2001..................................... 250,000 264,875
YPF Sociedad Anonima 8.00% 2004....................................... 250,000 241,250
------------
2,862,337
------------
FINANCE -- 4.4%
Chevy Chase Savings Bank 9.25% 2008................................... 125,000 127,500
Dime Bancorp, Inc. 10.50% 2005........................................ 500,000 550,625
First Nationwide Escrow Corp. 10.63% 2003*............................ 40,000 43,200
First Nationwide Parent Holdings 12.50% 2003.......................... 350,000 392,000
Imperial Credit Industries, Inc. 9.75% 2004........................... 400,000 410,000
Tembec Finance Corp. 9.88% 2005....................................... 500,000 467,500
------------
1,990,825
------------
GAMING -- 1.6%
Hollywood Casino, Inc. 12.75% 2003.................................... 250,000 240,000
Trump Atlantic City Associates 11.25% 2006............................ 500,000 495,000
------------
735,000
------------
GROCERY -- 1.6%
Bruno's, Inc. 10.50% 2005............................................. 85,000 90,100
Dominick's Finer Foods, Inc. 10.88% 2005.............................. 225,000 249,188
Smith's Food & Drug Centers, Inc. 11.25% 2007......................... 350,000 386,750
------------
726,038
------------
HEALTHCARE -- 5.2%
Beverly Enterprises, Inc. 9.00% 2006.................................. 250,000 251,250
Dade International, Inc. 11.13% 2006.................................. 190,000 206,150
Genesis Health Ventures, Inc. 9.75% 2005.............................. 225,000 236,250
Integrated Health Services, Inc. 10.25% 2006*......................... 250,000 262,500
OrNda HealthCorp. 11.38% 2004......................................... 500,000 577,500
Owens & Minor, Inc. 10.88% 2006....................................... 350,000 375,375
Quorum Health Group, Inc. 8.75% 2005.................................. 175,000 179,375
Tenet Healthcare Corp. 9.63% 2002..................................... 250,000 273,750
------------
2,362,150
------------
</TABLE>
- ---------------------
12
<PAGE> 14
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (continued) AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL -- 16.6%
American Standard, Inc. zero coupon 2005(1)........................... $ 500,000 $ 465,000
Amtrol, Inc. 10.63% 2006*............................................. 175,000 179,156
Associated Materials, Inc. 11.50% 2003................................ 235,000 239,700
Bell & Howell Co. zero coupon 2005(1)................................. 1,000,000 725,000
Bell & Howell Co. 9.25% 2000.......................................... 250,000 254,375
Collins & Aikman Corp. 11.50% 2006.................................... 500,000 545,000
Delco Remy International, Inc. 10.63% 2006*........................... 350,000 368,375
Doman Industries Ltd. 8.75% 2004...................................... 500,000 467,500
Dominion Textile USA, Inc. 8.88% 2003................................. 150,000 150,375
Dominion Textile USA, Inc. 9.25% 2006................................. 50,000 50,812
EnviroSource, Inc. 9.75% 2003......................................... 150,000 141,188
Essex Group, Inc. 10.00% 2003......................................... 500,000 512,500
Exide Corp. 10.75% 2002............................................... 50,000 52,250
Graphic Controls Corp. 12.00% 2005(2)................................. 225,000 249,187
Great Lakes Carbon Corp. 10.00% 2006.................................. 500,000 530,000
Hayes Wheels International, Inc. 11.00% 2006.......................... 135,000 147,319
Interlake Corp. 12.13% 2002........................................... 250,000 258,750
Johnstown America Industries, Inc. 11.75% 2005(2)..................... 380,000 362,900
K & F Industries, Inc. 10.38% 2004.................................... 350,000 369,250
K & F Industries, Inc. 11.88% 2003.................................... 150,000 161,625
Lear Seating Corp. 8.25% 2002......................................... 250,000 251,875
Mettler Toledo, Inc. 9.75% 2006....................................... 95,000 99,750
Specialty Equipment Cos., Inc. 11.38% 2003............................ 250,000 273,125
UCAR Global Enterprises, Inc. 12.00% 2005............................. 200,000 230,500
Walbro Corp. 9.88% 2005............................................... 500,000 515,000
------------
7,600,512
------------
INFORMATION TECHNOLOGY -- 3.2%
Advanced Micro Devices, Inc. 11.00% 2003.............................. 250,000 271,250
Digital Equipment Corp. 7.75% 2023.................................... 250,000 214,413
Jacor Communications Co. 9.75% 2006................................... 430,000 438,600
Unisys Corp. 12.00% 2003.............................................. 500,000 532,500
------------
1,456,763
------------
METALS & MINERALS -- 9.6%
A.K. Steel Corp. 9.13% 2006*.......................................... 260,000 267,150
A.K. Steel Corp. 10.75% 2004.......................................... 350,000 382,375
Armco, Inc. 9.38% 2000................................................ 750,000 753,750
Bethlehem Steel Corp. 10.38% 2003..................................... 500,000 528,750
Northwestern Steel & Wire Co. 9.50% 2001.............................. 500,000 490,000
NS Group, Inc. 13.50% 2003............................................ 500,000 511,250
S.D. Warren Co. 12.00% 2004........................................... 400,000 432,000
Weirton Steel Corp. 10.88% 1999....................................... 300,000 312,000
Weirton Steel Corp. 11.38% 2004....................................... 350,000 355,250
Wheeling Pittsburgh Corp. 9.38% 2003.................................. 350,000 346,500
------------
4,379,025
------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.1%
Republic of Argentina 8.38% 2003...................................... 250,000 237,500
Republic of Argentina 11.00% 2006..................................... 100,000 104,125
Republic of Brazil 6.00% 2013......................................... 250,000 179,297
------------
520,922
------------
</TABLE>
---------------------
13
<PAGE> 15
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (continued) AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
PAPER PRODUCTS -- 6.5%
Container Corp. of America 9.75% 2003................................. $ 500,000 $ 525,000
Container Corp. of America 11.25% 2004................................ 450,000 488,250
Domtar, Inc. 8.75% 2006............................................... 50,000 52,875
Fort Howard Corp. 9.25% 2001.......................................... 750,000 781,875
Grupo International Durango SA de CV 12.63% 2003...................... 115,000 124,775
Rainy River Forest Products, Inc. 10.75% 2001......................... 250,000 269,375
Repap New Brunswick, Inc. 9.88% 2000.................................. 210,000 214,200
Silgan Corp. 11.75% 2002.............................................. 150,000 159,750
Silgan Holdings, Inc. 13.25% 2002..................................... 69,000 69,431
Stone Container Corp. 11.88% 1998..................................... 250,000 263,438
------------
2,948,969
------------
RETAIL -- 1.1%
Guitar Center Management Co., Inc. 11.00% 2006*....................... 500,000 525,000
------------
SERVICES -- 1.9%
Muzak L.P. 10.00% 2003................................................ 500,000 514,375
Penda Corp. 10.75% 2004............................................... 375,000 363,281
------------
877,656
------------
UTILITIES -- 4.1%
Cabot Safety Acquisition Corp. 12.50% 2005............................ 350,000 388,500
El Paso Electric Co. 8.90% 2006....................................... 500,000 521,320
First PV Funding Corp. 10.15% 2016.................................... 164,000 174,250
Telefonica de Argentina SA 11.88% 2004................................ 250,000 276,250
Texas-New Mexico Power Co. 10.75% 2003................................ 500,000 536,250
------------
1,896,570
------------
TOTAL BONDS & NOTES (cost $40,749,545)................................ 42,442,496
------------
COMMON STOCK -- 0.1% SHARES
----------------------------------------------------------------------------------------------------
INDUSTRIAL & COMMERCIAL -- 0.1%
Triangle Wire And Cable, Inc.+(2)(4) (cost $330,000).................. 31,667 31,667
------------
PREFERRED STOCK -- 2.1%
----------------------------------------------------------------------------------------------------
COMMUNICATIONS & MEDIA -- 0.4%
Benedek Communications Corp.(2)....................................... 2,000 197,000
------------
FINANCE -- 1.5%
California Federal Bank Los Angeles 10.63%............................ 2,500 275,000
Chevy Chase Preferred Capital Corp., Series A 10.38%.................. 8,285 431,856
------------
706,856
------------
PAPER PRODUCTS -- 0.2%
Silgan Holdings, Inc. 13.25%*......................................... 74 79,055
------------
TOTAL PREFERRED STOCK (cost $932,452)................................. 982,911
------------
</TABLE>
- ---------------------
14
<PAGE> 16
<TABLE>
<CAPTION>
WARRANTS -- 0.0%+ SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS & MEDIA -- 0.0%
Benedek Communications Corp. 7/01/07(2) (cost $13,800)................ 2,000 $ 6,000
------------
TOTAL INVESTMENT SECURITIES (cost $42,025,797)........................ 43,463,074
------------
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENTS -- 2.6% AMOUNT
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Joint Repurchase Agreement Account -- First Boston (Note 3)........... $ 433,000 433,000
Joint Repurchase Agreement Account -- Lehman Bros. (Note 3)........... 740,000 740,000
------------
TOTAL REPURCHASE AGREEMENTS (cost $1,173,000)......................... 1,173,000
------------
TOTAL INVESTMENTS --
(cost $43,198,797) 97.7% 44,636,074
Other assets less liabilities -- 2.3 1,050,646
------ ------------
NET ASSETS -- 100.0% $45,686,720
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
(1) Represents a zero-coupon bond which will convert to an
interest-bearing security at a later date
(2) Fair valued security; see Note 2
(3) Issuer of the security has filed for bankruptcy and interest
payments are in default
(4) At December 31, 1996 the Portfolio held restricted securities
amounting to 0.1% of net assets. The Portfolio will not bear
any costs, including those involved in registration under the
Securities Act of 1933, in connection with the disposition of
the security:
<TABLE>
<CAPTION>
VALUATION
DATE OF UNIT AS OF
DESCRIPTION ACQUISITION SHARES COST 12/31/96
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
Triangle Wire and Cable, Inc. 3/21/94 10,556 $ 10.716654 $1.00
Triangle Wire and Cable, Inc. 3/24/94 21,111 10.273080 1.00
-----------
31,667
======
</TABLE>
See Notes to Financial Statements
---------------------
15
<PAGE> 17
- ---------------------
ANCHOR SERIES TRUST
TARGET '98 PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 97.2% AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 7.1%
American General Corp. 9.70% 1998...................................... $ 250,000 $ 259,350
International Lease Finance Corp. 7.50% 1999........................... 250,000 255,680
United Virginia Bankshares, Inc. 8.63% 1998............................ 200,000 205,480
------------
720,510
------------
SUPRANATIONALS -- 5.0%
International Bank For Reconstruction & Development zero coupon 1998... 550,000 507,101
------------
U.S. GOVERNMENT & AGENCIES -- 77.9%
Federal Judiciary Office Building zero coupon 1998..................... 1,000,000 910,470
Federal National Mortgage Association zero coupon 1998................. 2,000,000 1,817,838
Government Trust Certificates Series 3D zero coupon 1998............... 1,000,000 897,500
Government Trust Certificates Series T zero coupon 1998................ 2,600,000 2,333,500
Tennessee Valley Authority zero coupon 1998............................ 1,000,000 888,320
Treasury Investment Growth Receipts zero coupon 1998................... 500,000 449,160
United States Treasury Note Strip Prior zero coupon 1998............... 700,000 628,145
------------
7,924,933
------------
UTILITIES -- 7.2%
Michigan Bell Telephone Co. 9.25% 1998................................. 300,000 315,894
Quebec Hydroelectric 9.55% 1998........................................ 100,000 102,898
Virginia Electric & Power Co. 9.38% 1998............................... 300,000 312,306
------------
731,098
------------
TOTAL INVESTMENT SECURITIES (cost $9,617,629).......................... 9,883,642
------------
<CAPTION>
REPURCHASE AGREEMENTS -- 2.8%
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Joint Repurchase Agreement Account -- First Boston (Note 3)............ 128,000 128,000
Joint Repurchase Agreement Account -- Lehman Bros. (Note 3)............ 155,000 155,000
------------
TOTAL REPURCHASE AGREEMENTS (cost $283,000)............................ 283,000
------------
TOTAL INVESTMENTS -- (cost $9,900,629) 100.0% 10,166,642
Other assets less liabilities -- 0.0 4,899
------ ------------
NET ASSETS -- 100.0% $10,171,541
====== =============
</TABLE>
-----------------------------
See Notes to Financial Statements
- ---------------------
16
<PAGE> 18
- ---------------------
ANCHOR SERIES TRUST
GROWTH AND INCOME
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK -- 87.0% SHARES VALUE
<S> <C> <C>
--------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
CONSUMER DISCRETIONARY -- 5.4%
Retail -- 5.4%
May Department Stores Co. ........................................... 13,000 $ 607,750
Mercantile Stores Co., Inc. ......................................... 7,200 355,500
Saks Holdings, Inc.+................................................. 13,000 351,000
Wal-Mart Stores, Inc. ............................................... 22,000 503,250
---------
1,817,500
---------
CONSUMER STAPLES -- 10.8%
Food, Beverage & Tobacco -- 2.6%
PepsiCo, Inc. ....................................................... 12,000 351,000
Sara Lee Corp. ...................................................... 14,000 521,500
Household Products -- 8.2%
Colgate-Palmolive Co. ............................................... 4,000 369,000
Gillette Co. ........................................................ 7,000 544,250
Kimberly-Clark Corp. ................................................ 7,000 666,750
Procter & Gamble Co. ................................................ 7,000 752,500
Revlon, Inc., Class A+............................................... 14,000 418,250
---------
3,623,250
---------
ENERGY -- 8.9%
Energy Services -- 2.6%
Fluor Corp. ......................................................... 6,000 376,500
Schlumberger Ltd. ................................................... 5,000 499,375
Energy Sources -- 6.3%
Amoco Corp. ......................................................... 6,000 483,000
Exxon Corp. ......................................................... 6,000 588,000
Royal Dutch Petroleum Co., NY Registry Shares ....................... 3,500 597,625
Union Pacific Resources Group, Inc. ................................. 14,234 416,345
---------
2,960,845
---------
FINANCE -- 14.0%
Banks -- 6.1%
Citicorp............................................................. 5,000 515,000
First Bank System, Inc. ............................................. 7,000 477,750
First Union Corp. ................................................... 9,000 666,000
Wachovia Corp. ...................................................... 7,000 395,500
Financial Services -- 1.9%
American Express Co. ................................................ 11,000 621,500
Insurance -- 6.0%
ACE Ltd. ............................................................ 10,000 601,250
Allstate Corp. ...................................................... 11,000 636,625
American International Group, Inc. .................................. 7,000 757,750
---------
4,671,375
---------
</TABLE>
---------------------
17
<PAGE> 19
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE -- 12.6%
Drugs -- 11.1%
American Home Products Corp. ........................................ 10,000 $ 586,250
Bristol-Myers Squibb Co. ............................................ 6,000 652,500
Pfizer, Inc. ........................................................ 7,000 580,125
Pharmacia & Upjohn, Inc. ............................................ 14,000 554,750
Warner-Lambert Co. .................................................. 10,000 750,000
Zeneca Group PLC ADR................................................. 7,000 588,000
Medical Products -- 1.5%
Abbott Laboratories.................................................. 10,000 507,500
---------
4,219,125
---------
INDUSTRIAL & COMMERCIAL -- 8.2%
Aerospace & Military Technology -- 3.5%
Boeing Co. .......................................................... 7,000 744,625
United Technologies Corp. ........................................... 6,400 422,400
Electrical Equipment -- 3.8%
AMP, Inc. ........................................................... 10,000 383,750
General Electric Co. ................................................ 9,000 889,875
Transportation -- 0.9%
Union Pacific Corp. ................................................. 5,000 300,625
---------
2,741,275
---------
INFORMATION & ENTERTAINMENT -- 5.3%
Broadcasting & Media -- 3.5%
Gannett Co., Inc. ................................................... 9,000 673,875
Viacom, Inc., Class B+............................................... 15,000 523,125
Leisure & Tourism -- 1.8%
McDonald's Corp. .................................................... 13,000 588,250
---------
1,785,250
---------
INFORMATION TECHNOLOGY -- 10.1%
Communication Equipment -- 3.0%
Cisco Systems, Inc.+................................................. 7,000 445,375
Motorola, Inc. ...................................................... 9,000 552,375
Computers & Business Equipment -- 3.8%
International Business Machines Corp. ............................... 5,700 860,700
Xerox Corp. ......................................................... 8,000 421,000
Software -- 3.3%
Computer Sciences Corp.+............................................. 6,000 492,750
Electronic Data Systems Corp. ....................................... 14,078 608,873
---------
3,381,073
---------
MATERIALS -- 6.1%
Chemicals -- 4.5%
Air Products & Chemicals, Inc. ...................................... 9,000 622,125
Dow Chemical Co. .................................................... 4,000 313,500
du Pont (E.I.) de Nemours & Co. ..................................... 6,000 566,250
Metals & Minerals -- 1.6%
Phelps Dodge Corp. .................................................. 8,000 540,000
---------
2,041,875
---------
</TABLE>
- ---------------------
18
<PAGE> 20
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES -- 5.6%
Electric Utilities -- 2.9%
Central & South West Corp. .......................................... 13,000 $ 333,125
Pacific Gas & Electric Co. .......................................... 15,000 315,000
Texas Utilities Co. ................................................. 7,500 305,625
Telephone -- 2.7%
AT&T Corp. .......................................................... 11,000 478,500
SBC Communications, Inc. ............................................ 8,500 439,875
---------
1,872,125
---------
TOTAL COMMON STOCK (cost $25,357,675)................................ 29,113,693
---------
CONVERTIBLE PREFERRED STOCK -- 5.8%
--------------------------------------------------------------------------------------------------------
ENERGY -- 1.1%
Energy Sources -- 1.1%
Unocal Capital Trust 6.25%........................................... 6,696 379,998
---------
FINANCE -- 2.2%
Insurance -- 2.2%
Jefferson Pilot Corp. 7.25%.......................................... 8,000 728,000
---------
INFORMATION & ENTERTAINMENT -- 0.9%
Broadcasting & Media -- 0.9%
Cablevision Systems Corp., Series I 8.50%............................ 15,000 307,500
---------
INFORMATION TECHNOLOGY -- 0.4%
Software -- 0.4%
Microsoft Corp., Series A $2.20...................................... 1,600 128,200
---------
MATERIALS -- 1.2%
Forest Products -- 1.2%
International Paper Capital Trust 5.25%.............................. 8,500 389,937
---------
TOTAL CONVERTIBLE PREFERRED STOCK (cost $1,810,191).................. 1,933,635
---------
PRINCIPAL
CONVERTIBLE BONDS -- 5.1% AMOUNT
--------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 1.2%
Retail -- 1.2%
Home Depot, Inc. 3.25% 2001.......................................... $400,000 390,000
---------
FINANCE -- 2.3%
Financial Services -- 2.3%
First Financial Management Corp. 5.00% 1999.......................... 450,000 775,688
---------
</TABLE>
---------------------
19
<PAGE> 21
<TABLE>
<CAPTION>
PRINCIPAL
CONVERTIBLE BONDS (continued) AMOUNT VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE -- 1.6%
Health Services -- 1.6%
Tenet Healthcare Corp. 6.00% 2005.................................... $500,000 $ 532,500
---------
TOTAL CONVERTIBLE BONDS (cost $1,565,100)............................ 1,698,188
---------
TOTAL INVESTMENT SECURITIES (cost $28,732,966)....................... 32,745,516
---------
REPURCHASE AGREEMENTS -- 3.1%
--------------------------------------------------------------------------------------------------------
Joint Repurchase Agreement Account -- First Boston (Note 3).......... 399,000 399,000
Joint Repurchase Agreement Account -- Lehman Bros. (Note 3).......... 640,000 640,000
---------
TOTAL REPURCHASE AGREEMENTS (cost $1,039,000)........................ 1,039,000
---------
TOTAL INVESTMENTS -- (cost $29,771,966) 101.0% 33,784,516
Liabilities in excess of other assets -- (1.0) (319,243)
------ ---------
NET ASSETS -- 100.0% $ 33,465,273
====== =========
</TABLE>
-----------------------------
+ Non-income producing securities
ADR - American Depositary Receipts
See Notes to Financial Statements
- ---------------------
20
<PAGE> 22
- ---------------------
ANCHOR SERIES TRUST
FOREIGN SECURITIES
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK -- 88.1% SHARES VALUE
<S> <C> <C>
----------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
ARGENTINA -- 0.5%
YPF Sociedad Anonima ADR (Energy)@..................................... 10,000 $ 252,500
-----------
AUSTRALIA -- 3.5%
Amcor Ltd. (Materials)................................................. 63,964 411,310
Boral Ltd. (Materials)................................................. 42,271 120,285
Broken Hill Proprietary Ltd. (Materials)............................... 37,178 529,552
Goodman Fielder Wattie Ltd. (Consumer Staples)......................... 108,471 134,500
Pioneer International Ltd. (Materials)+................................ 90,000 268,262
Qantas Airways Ltd. ADR (Information & Entertainment)*@................ 13,600 226,838
-----------
1,690,747
-----------
AUSTRIA -- 0.8%
OMV AG (Energy)........................................................ 3,500 394,653
-----------
BELGIUM -- 0.8%
Credit Dexia/Communal Holding (Finance)+*.............................. 4,100 374,108
-----------
BRAZIL -- 0.3%
Centrais Eletricas Brasileiras SA - ELETROBRAS ADR (Utilities)......... 9,000 161,102
-----------
CANADA -- 1.8%
Canadian Pacific Ltd. ADR (Industrial & Commercial)+................... 25,000 658,183
Canwest Global Communications (Information Technology)................. 21,300 218,325
-----------
876,508
-----------
CHILE -- 0.8%
Enersis SA ADR (Utilities)............................................. 13,000 360,750
-----------
DENMARK -- 2.5%
Tele Danmark A/S, Class B ADR (Utilities)@............................. 15,400 419,650
Unidanmark A/S (Finance)............................................... 15,500 802,523
-----------
1,222,173
-----------
FINLAND -- 2.8%
Kesko (Consumer Discretionary)......................................... 100 1,411
Merita Ltd. (Finance)+................................................. 78,600 244,343
Metsa Serla Oy (Materials)............................................. 47,500 356,250
Nokia Corp., Class A ADR (Information Technology)...................... 8,500 489,813
Rauma Oy (Industrial & Commercial)..................................... 12,000 253,043
-----------
1,344,860
-----------
FRANCE -- 7.8%
Accor SA (Information & Entertainment)................................. 2,772 351,008
Assurance General de France (Finance)+*................................ 6,500 209,839
Banque Nationale de Paris (Finance).................................... 16,000 619,216
Cie de St. Gobain (Materials).......................................... 2,097 296,656
Credit Commerce France (Finance)....................................... 2,000 92,512
Elf Aquitaine SA (Energy).............................................. 5,000 455,141
</TABLE>
---------------------
21
<PAGE> 23
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
FRANCE (continued)
Havas SA (Information & Entertainment)................................. 4,089 $ 286,864
Peugeot SA (Consumer Discretionary).................................... 500 56,278
Remy Cointreau SA (Consumer Staples)................................... 6,000 169,991
Rhone-Poulenc SA (Healthcare).......................................... 15,830 539,718
Societe Generale (Finance)............................................. 3,846 415,844
Total SA, Series B (Energy)............................................ 2,956 240,423
-----------
3,733,490
-----------
GERMANY -- 3.8%
Daimler-Benz AG (Consumer Discretionary)............................... 11,500 792,176
Degussa AG (Materials)................................................. 700 316,838
Karstadt AG (Consumer Discretionary)................................... 1,100 371,718
Mannesmann AG (Industrial & Commercial)................................ 800 346,763
-----------
1,827,495
-----------
HONG KONG -- 3.6%
CITIC Pacific Ltd. (Consumer Discretionary)............................ 35,000 203,181
Hutchison Whampoa Ltd. (Real Estate)................................... 60,000 471,265
Sun Hung Kai Properties Ltd. (Real Estate)............................. 43,000 526,763
Swire Pacific Ltd., Class A (Real Estate).............................. 55,000 524,436
-----------
1,725,645
-----------
INDIA -- 0.4%
State Bank India GDR (Finance)*@....................................... 11,500 199,755
-----------
INDONESIA -- 1.0%
PT Bank Negara Indonesia (Finance)+*................................... 249,500 132,038
PT Indonesian Satellite Corp. ADR (Utilities)+*........................ 4,000 109,500
PT Jaya Real Property alien (Real Estate).............................. 154,000 215,157
-----------
456,695
-----------
IRELAND -- 0.8%
Allied Irish Banks (Finance)........................................... 21,008 141,085
Jefferson Smurfit Group (Paper Products)+.............................. 80,000 230,941
-----------
372,026
-----------
ITALY -- 3.1%
Arnaldo Mondadori Edit (Information & Entertainment)................... 40,000 325,643
Banca Commerciale Italiana SpA (Finance)............................... 111,200 202,315
Fiat SpA (Consumer Discretionary)...................................... 100,000 302,571
STET (Utilities)....................................................... 144,000 654,977
-----------
1,485,506
-----------
JAPAN -- 18.8%
77th Bank (Finance).................................................... 20,000 164,062
Asahi Organic Chemical (Industrial & Commercial)....................... 19,000 112,054
Canon Sales Co., Inc. (Industrial & Commercial)........................ 5,500 122,528
Chudenko Corp. (Industrial & Commercial)............................... 6,000 173,042
Chugai Pharmaceutical Co., Ltd. (Healthcare)........................... 22,000 184,267
Cosel Co. Ltd. (Industrial & Commercial)............................... 3,000 46,887
Dai Nippon Printing Co., Ltd. (Information & Entertainment)............ 30,000 525,861
Danto Corp. (Materials)................................................ 6,000 58,544
Fuji Machine Manufacturing Co. (Industrial & Commercial)............... 9,000 238,580
JGC Corp. (Industrial & Commercial).................................... 33,000 247,621
Kyudenko Corp. (Industrial & Commercial)............................... 15,000 155,427
Mabuchi Motor Co., Ltd. (Industrial & Commercial)...................... 6,000 302,047
Maruichi Steel Tube (Energy)........................................... 19,000 328,124
Matsushita Electric Industrial Co., Ltd. (Information Technology)+..... 32,000 522,235
Mitsubishi Heavy Industrial Ltd. (Industrial & Commercial)............. 55,000 436,923
Murata Manufacturing Co. (Information Technology)...................... 12,000 398,929
</TABLE>
- ---------------------
22
<PAGE> 24
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (continued)
NGK Spark Plug Co. Ltd. (Industrial & Commercial)...................... 40,000 $ 438,650
Nippon Express Co. Ltd. (Industrial & Commercial)...................... 25,000 171,401
Nippon Television Network (Information & Entertainment)................ 1,760 531,906
Nomura Securities International, Inc. (Finance)........................ 23,000 345,566
Onward Kashiyama (Consumer Discretionary).............................. 40,000 562,991
Sakura Bank Ltd. (Finance)............................................. 33,000 235,938
Sanwa Bank Ltd. (Finance).............................................. 14,000 191,003
Sony Corp. (Information & Entertainment)............................... 4,000 262,154
Sumitomo Realty & Development Co., Ltd. (Real Estate).................. 47,000 296,261
Sumitomo Trust & Banking Co., Ltd. (Finance)........................... 7,000 70,115
Toda Construction Co. (Industrial & Commercial)........................ 32,000 243,157
Tokio Marine & Fire Insurance Co., Ltd. (Finance)...................... 26,000 244,711
Toyo Ink Manufacturing Co. (Materials)................................. 75,000 307,616
Toyota Motor Corp. (Consumer Discretionary)............................ 14,000 402,556
World Co., Ltd. (Consumer Discretionary)............................... 7,900 327,433
Yamato Kogyo Co. (Materials)........................................... 42,000 388,049
Yamazaki Baking Co. (Consumer Staples)................................. 1,000 15,974
-----------
9,052,612
-----------
MALAYSIA -- 1.6%
Land & General Bhd (Real Estate)....................................... 70,000 167,689
Resorts World Bhd (Information & Entertainment)........................ 43,000 195,803
Sime Darby Bhd (Industrial & Commercial)............................... 98,000 386,102
-----------
749,594
-----------
MEXICO -- 1.5%
Cemex SA de CV (Materials)............................................. 50,000 180,069
Fomento Economico Mexicano SA de CV (Consumer Staples)................. 60,000 205,793
Grupo Carso SA de CV (Consumer Staples)................................ 25,000 132,431
Grupo Financiero Bancomer SA de CV, Series B (Finance)................. 350,000 140,053
Transportacion Maritima Mexicana SA de CV ADR
(Industrial & Commercial)............................................ 17,100 79,087
-----------
737,433
-----------
NETHERLANDS -- 2.7%
Internationale Nederladen Groep NV (Finance)........................... 14,765 531,934
KLM Royal Dutch Air Lines NV (Information & Entertainment)............. 12,428 349,841
PolyGram NV (Information & Entertainment).............................. 8,000 407,761
-----------
1,289,536
-----------
NEW ZEALAND -- 1.1%
Air New Zealand Ltd. (Information & Entertainment)..................... 70,561 191,555
Carter Holt Harvey Ltd. (Materials).................................... 139,000 315,440
-----------
506,995
-----------
NORWAY -- 1.4%
Fokus Bank ASA (Finance)............................................... 20,000 136,270
Nycomed ASA (Healthcare)+.............................................. 20,000 302,649
Saga Petroleum (Energy)................................................ 15,000 247,940
-----------
686,859
-----------
PHILIPPINES -- 0.4%
Philipino Telephone Corp. (Utilities).................................. 100,000 84,601
Philippine Long Distance Telephone Co. ADR (Utilities)................. 2,000 102,000
-----------
186,601
-----------
PORTUGAL -- 0.1%
Telecel -- Comunicacoes Pessoais SA (Information Technology)+*......... 500 31,925
-----------
</TABLE>
---------------------
23
<PAGE> 25
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
SINGAPORE -- 3.4%
Development Bank of Singapore alien (Finance).......................... 41,250 $ 557,153
Far East Levingston Shipbuilding Ltd. (Energy)......................... 66,000 344,315
Keppel Corp., Ltd. (Industrial & Commercial)........................... 46,000 358,322
Straits Steamship Land Ltd. (Real Estate).............................. 50,000 160,080
United Overseas Bank Ltd. alien (Finance).............................. 20,000 222,969
-----------
1,642,839
-----------
SOUTH KOREA -- 1.7%
Chosun Brewery Co., Ltd. (Consumer Staples)............................ 3,020 83,372
Commerce Bank Korea (Finance).......................................... 6,100 39,849
Daewoo Securities Co., Ltd. (Finance).................................. 5,814 74,997
Hanil Bank (Finance)................................................... 13,000 89,231
Hanwha Chemical (Materials)............................................ 7,000 54,260
Korea Electric Power Corp. (Utilities)................................. 2,000 58,225
Korean Air Lines (Industrial & Commercial)............................. 9,770 160,829
Pohang Iron & Steel Co., Ltd. ADR (Materials)@......................... 5,000 101,250
Samsung Fire & Marine Insurance (Finance)+............................. 130 53,415
Shinsegae Department Street (Consumer Discretionary)................... 2,000 83,077
-----------
798,505
-----------
SPAIN -- 2.5%
Acerinox SA (Materials)................................................ 2,250 325,130
Empresa Nacional de Electricidad ADR (Utilities)....................... 4,500 315,000
Empresa Nacional de Electricidad SA (Utilities)........................ 4,000 284,691
Telefonica de Espana SA (Utilities).................................... 12,000 278,683
-----------
1,203,504
-----------
SWEDEN -- 1.3%
BT Industries AB (Industrial & Commercial)............................. 7,200 134,078
Pharmacia & Upjohn, Inc. (Healthcare).................................. 12,000 491,796
-----------
625,874
-----------
SWITZERLAND -- 2.4%
Nestle SA (Consumer Staples)........................................... 420 450,908
Richemont Cie Finance (Consumer Staples)............................... 200 280,911
Sulzer AG (Healthcare)................................................. 780 417,243
-----------
1,149,062
-----------
THAILAND -- 0.8%
Bangkok Metropolitan Bank PCL alien (Finance).......................... 238,227 90,104
Land & Houses PCL alien (Real Estate).................................. 9,200 67,082
Siam City Cement PCL alien (Materials)................................. 18,000 94,050
Siam Commercial Bank PCL alien (Finance)............................... 20,000 145,052
-----------
396,288
-----------
UNITED KINGDOM -- 13.8%
Associated British Foods PLC (Consumer Staples)........................ 40,000 330,992
BOC Group PLC (Industrial & Commercial)................................ 21,000 314,442
Boots Co. PLC (Consumer Discretionary)................................. 45,000 464,108
British Gas PLC (Utilities)............................................ 140,000 537,262
British Telecommunications PLC (Utilities)............................. 62,000 419,565
BTR PLC (Industrial & Commercial)...................................... 110,000 537,091
Cookson Group PLC (Information Technology)............................. 60,000 243,618
De La Rue PLC (Information Technology)................................. 20,000 197,019
National Grid Group PLC (Utilities).................................... 130,000 434,299
Northern Foods PLC (Consumer Staples).................................. 68,000 235,327
PowerGen PLC (Utilities)............................................... 41,013 401,909
Rank Group PLC (Information & Entertainment)........................... 50,000 375,193
Reckitt & Colman PLC (Consumer Staples)................................ 38,950 482,454
Royal & Sun Alliance Insurance Group PLC (Finance)..................... 54,181 413,528
Royal Bank of Scotland Group PLC (Finance)............................. 40,000 385,129
</TABLE>
- ---------------------
24
<PAGE> 26
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (continued)
Sainsbury (J.) PLC (Consumer Discretionary)............................ 81,829 $ 542,536
Sun Life & Provincial Holdings PLC (Finance)+*......................... 70,000 311,804
-----------
6,626,276
-----------
VENEZUELA -- 0.3%
Compania Anon Nacional Tele De Venezuela ADR (Utilities)............... 4,800 135,000
-----------
TOTAL COMMON STOCK (cost $39,771,403).................................. 42,296,916
-----------
PREFERRED STOCK -- 1.5%
----------------------------------------------------------------------------------------------------
BRAZIL -- 0.6%
Centrais Electricas Brasileiras SA-Electrobras, Series B (Utilities)... 350,000 130,016
Petroleo Brasileiros SA (Energy)....................................... 990,000 157,680
-----------
287,696
-----------
GERMANY -- 0.6%
Hornbach Holding AG (Consumer Discretionary)........................... 4,000 285,937
-----------
VENEZUELA -- 0.3%
Quilmes Industrial Quinsa Societe (Consumer Staples)@.................. 14,300 130,488
-----------
TOTAL PREFERRED STOCK (cost $656,644).................................. 704,121
-----------
TOTAL INVESTMENT SECURITIES (cost $40,428,047)......................... 43,001,037
-----------
PRINCIPAL
SHORT-TERM SECURITIES -- 1.0% AMOUNT
----------------------------------------------------------------------------------------------------
United States Treasury Bills 4.85% due 3/20/97 @ (cost $494,746)....... $ 500,000 494,746
-----------
REPURCHASE AGREEMENTS -- 9.6%
----------------------------------------------------------------------------------------------------
Joint Repurchase Agreement Account -- First Boston @ (Note 3).......... 1,541,000 1,541,000
Joint Repurchase Agreement Account -- Lehman Bros. @ (Note 3).......... 3,080,000 3,080,000
-----------
TOTAL REPURCHASE AGREEMENTS (cost $4,621,000).......................... 4,621,000
-----------
TOTAL INVESTMENTS --
(cost $45,543,793) 100.2% 48,116,783
Liabilities in excess of other assets -- (0.2) (81,094)
------ -----------
NET ASSETS -- 100.0% $48,035,689
====== ===========
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR - American Depositary Receipts
GDR - Global Depositary Receipts
@ The security or a portion thereof represents collateral for the
following open futures contracts:
---------------------
25
<PAGE> 27
<TABLE>
<CAPTION>
OPEN FUTURES CONTRACTS
<S> <C> <C>
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION VALUE AT VALUE AS OF APPRECIATION/
CONTRACTS DESCRIPTION DATE TRADE DATE DECEMBER 31, 1996 DEPRECIATION
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
24 Short All ordinaries share March 1997 $1,113,576 $ 1,167,144 $(53,568)
price Stock Index
Future-Sydney Futures
Exchange
10 Long Deutsche Terminboerse- March 1997 1,842,930 1,884,692 41,762
Dax Stock Index Future
2 Short Hang Seng Index Future- March 1997 167,368 174,013 (6,645)
Hong Kong Futures
Exchange
80 Long IBEX 35 Future-Mercado January 1997 290,791 316,346 25,555
de Opciones y Futures
Financieras
10 Short Marche A Terme March 1997 861,304 896,553 (35,249)
International de France-
CAC 40 Stock Index
Future
3 Long Mercato Italiano Future- March 1997 310,148 315,820 5,672
MIB 30 Stock Index
Future
17 Long Stockholm Exchange-OMS January 1997 447,346 468,073 20,727
Stock Index Future
2 Long Tokyo Stock Exchange- March 1997 266,979 253,625 (13,354)
Topix Future
8 Long Toronto 35 Index Future- March 1997 875,533 918,654 43,121
Toronto Futures Exchange
----------------
Net Unrealized Appreciation................................................. $ 28,021
==============
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<CAPTION>
------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CONTRACT IN DELIVERY GROSS UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
<S> <C> <C> <C>
---------------------------------------------------------------------------
AUD 1,404,000 USD 1,115,338 3/31/97 $ 443
USD 1,005,052 DEM 1,556,273 3/20/97 11,550
USD 741,633 DEM 1,139,000 3/21/97 2,444
USD 297,519 ESP 38,734,000 1/17/97 704
USD 237,757 FRF 1,243,042 3/27/97 3,033
USD 282,515 ITL 432,813,600 3/21/97 1,732
USD 223,925 SEK 1,537,870 1/24/97 1,802
----------------
21,708
----------------
</TABLE>
<TABLE>
<CAPTION>
GROSS UNREALIZED
DEPRECIATION
<S> <C> <C> <C>
---------------------------------------------------------------------------
USD 896,435 CAD 1,217,000 3/20/97 $ (3,140)
FRF 4,418,000 USD 851,285 3/27/97 (4,529)
USD 276,122 JPY 31,378,530 3/13/97 (2,394)
USD 158,863 SEK 1,082,000 1/24/97 (48)
----------------
(10,111)
----------------
Net Unrealized Appreciation.................. $ 11,597
==============
AUD -- Australian Dollar
CAD -- Canadian Dollar
DEM -- Deutsche Mark
ESP -- Spanish Peseta
FRF -- French Franc
ITL -- Italian Lira
JPY -- Japanese Yen
SEK -- Swedish Krona
USD -- United States Dollar
</TABLE>
See Notes to Financial Statements
- ---------------------
26
<PAGE> 28
- ---------------------
ANCHOR SERIES TRUST
GROWTH PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK -- 98.3% SHARES VALUE
<S> <C> <C>
----------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
CONSUMER DISCRETIONARY -- 9.3%
Apparel & Textiles -- 0.4%
Nine West Group, Inc.+................................................ 31,900 $ 1,479,362
Automotive -- 1.9%
Ford Motor Co......................................................... 82,500 2,629,687
General Motors Corp., Class H......................................... 40,000 2,250,000
Goodyear Tire & Rubber Co............................................. 38,500 1,977,938
Housing -- 0.1%
Juno Lighting, Inc.................................................... 22,200 355,200
Retail -- 6.9%
Arbor Drugs, Inc...................................................... 124,500 2,163,187
Barnes & Noble, Inc.+................................................. 75,200 2,030,400
Ethan Allen Interiors, Inc............................................ 23,000 885,500
Gymboree Corp.+....................................................... 27,000 617,625
Home Depot, Inc....................................................... 86,000 4,310,750
May Department Stores Co.............................................. 95,000 4,441,250
Office Max, Inc.+..................................................... 121,000 1,285,625
Rite Aid Corp......................................................... 100,000 3,975,000
Saks Holdings, Inc.+.................................................. 79,000 2,133,000
Wal-Mart Stores, Inc.................................................. 160,000 3,660,000
-------------
34,194,524
-------------
CONSUMER STAPLES -- 6.8%
Food, Beverage & Tobacco -- 3.5%
General Mills, Inc.................................................... 45,000 2,851,875
PepsiCo, Inc.......................................................... 82,500 2,413,125
Philip Morris Cos., Inc............................................... 26,000 2,928,250
Sara Lee Corp......................................................... 120,600 4,492,350
Household Products -- 3.3%
Bush Boake Allen, Inc.+............................................... 65,000 1,730,625
Kimberly-Clark Corp................................................... 37,800 3,600,450
Procter & Gamble Co................................................... 65,000 6,987,500
-------------
25,004,175
-------------
ENERGY -- 6.1%
Energy Services -- 1.3%
Input/Output, Inc.+................................................... 81,100 1,500,350
Schlumberger Ltd...................................................... 35,000 3,495,625
Energy Sources -- 4.8%
Amoco Corp............................................................ 77,000 6,198,500
Barrett Resources Corp.+.............................................. 13,000 554,125
Chevron Corp.......................................................... 75,000 4,875,000
Exxon Corp............................................................ 38,700 3,792,600
Union Pacific Resources Group, Inc.................................... 70,418 2,059,727
-------------
22,475,927
-------------
</TABLE>
---------------------
27
<PAGE> 29
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 16.4%
Banks -- 6.0%
Associated Banc Corp.................................................. 41,000 $ 1,742,500
Bancorp Hawaii, Inc................................................... 59,200 2,486,400
Citicorp.............................................................. 21,000 2,163,000
First Commercial Corp................................................. 39,322 1,459,829
First Union Corp...................................................... 58,000 4,292,000
NationsBank Corp...................................................... 44,500 4,349,875
State Street Boston Corp.............................................. 70,000 4,515,000
Wilmington Trust Corp................................................. 30,000 1,185,000
Financial Services -- 4.3%
American Express Co................................................... 90,000 5,085,000
Federal National Mortgage Association................................. 200,000 7,450,000
Morgan Stanley Group, Inc............................................. 56,000 3,199,000
Insurance -- 6.1%
ACE Ltd............................................................... 52,000 3,126,500
Allstate Corp......................................................... 84,600 4,896,225
American International Group, Inc..................................... 52,500 5,683,125
Frontier Insurance Group, Inc......................................... 53,000 2,027,250
Reinsurance Group America, Inc........................................ 24,200 1,140,425
Travelers Group, Inc.................................................. 120,000 5,445,000
-------------
60,246,129
-------------
HEALTHCARE -- 12.1%
Drugs -- 6.3%
Cognizant Corp........................................................ 80,000 2,640,000
Merck & Co., Inc...................................................... 35,000 2,773,750
Pfizer, Inc........................................................... 54,000 4,475,250
Pharmacia & Upjohn, Inc............................................... 35,000 1,386,875
Rhone-Poulenc Rorer, Inc.............................................. 71,000 5,546,875
Warner-Lambert Co..................................................... 48,000 3,600,000
Zeneca Group PLC ADR.................................................. 31,000 2,604,000
Health Services -- 3.2%
Columbia/HCA Healthcare Corp.......................................... 75,000 3,056,250
Living Centers of America, Inc.+...................................... 50,000 1,387,500
Shared Medical Systems, Inc........................................... 49,000 2,413,250
Tenet Healthcare Corp.+............................................... 100,000 2,187,500
United Healthcare Corp................................................ 58,800 2,646,000
Medical Products -- 2.6%
Abbott Laboratories................................................... 90,000 4,567,500
Biomet, Inc........................................................... 85,000 1,285,625
Life Technologies, Inc................................................ 77,000 1,925,000
Nellcor Puritan Bennett, Inc.+........................................ 79,000 1,728,125
-------------
44,223,500
-------------
INDUSTRIAL & COMMERCIAL -- 13.1%
Aerospace & Military Technology -- 1.8%
Boeing Co............................................................. 36,000 3,829,500
United Technologies Corp.............................................. 44,000 2,904,000
</TABLE>
- ---------------------
28
<PAGE> 30
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (continued)
Business Services -- 3.6%
Avnet, Inc............................................................ 23,000 $ 1,339,750
Computer Sciences Corp.+.............................................. 18,000 1,478,250
Dames & Moore, Inc.................................................... 105,000 1,535,625
Foster Wheeler Corp................................................... 100,000 3,712,500
G & K Services, Inc................................................... 73,000 2,755,750
Metromail Corp.+...................................................... 100,000 1,825,000
Tetra Tech, Inc.+..................................................... 21,000 414,750
Electrical Equipment -- 3.6%
General Electric Co................................................... 64,000 6,328,000
Hubbell, Inc.......................................................... 94,000 4,065,500
Littelfuse, Inc.+..................................................... 59,000 2,861,500
Machinery -- 2.8%
Caterpillar, Inc...................................................... 35,000 2,633,750
Donaldson Co., Inc.................................................... 55,000 1,842,500
Minnesota Mining & Manufacturing Co................................... 50,000 4,143,750
MSC Industrial Direct, Inc., Class A+................................. 38,000 1,406,000
Nordson Corp.......................................................... 5,000 318,750
Transportation -- 1.3%
Air Express International Corp........................................ 64,100 2,067,225
Union Pacific Corp.................................................... 43,000 2,585,375
-------------
48,047,475
-------------
INFORMATION & ENTERTAINMENT -- 8.1%
Broadcasting & Media -- 3.9%
Advo, Inc............................................................. 105,000 1,470,000
Gannett Co., Inc...................................................... 55,000 4,118,125
Scholastic Corp.+..................................................... 15,900 1,069,275
U.S. West Media Group+................................................ 78,000 1,443,000
Viacom, Inc., Class B+................................................ 171,537 5,982,353
Entertainment Products -- 0.7%
Harley-Davidson, Inc.................................................. 28,000 1,316,000
Speedway Motorsports, Inc.+........................................... 65,000 1,365,000
Leisure & Tourism -- 3.5%
Doubletree Corp.+..................................................... 12,000 540,000
Landry's Seafood Restaurants, Inc.+................................... 29,100 622,012
McDonald's Corp....................................................... 108,000 4,887,000
Mirage Resorts, Inc.+................................................. 115,000 2,486,875
Quality Dining, Inc.+................................................. 45,000 804,375
Southwest Airlines Co................................................. 155,000 3,429,375
-------------
29,533,390
-------------
INFORMATION TECHNOLOGY -- 15.9%
Communication Equipment -- 2.8%
Cisco Systems, Inc.+.................................................. 100,000 6,362,500
Nokia Corp., Class A ADR.............................................. 70,000 4,033,750
Computers & Business Equipment -- 2.8%
Adaptec, Inc.+........................................................ 27,600 1,104,000
Compaq Computer Corp.+................................................ 35,000 2,598,750
Hewlett-Packard Co.................................................... 99,000 4,974,750
International Business Machines Corp.................................. 10,000 1,510,000
</TABLE>
---------------------
29
<PAGE> 31
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (continued)
Electronics -- 3.1%
AMP, Inc.............................................................. 100,000 $ 3,837,500
Dallas Semiconductor Corp............................................. 64,900 1,492,700
Intel Corp............................................................ 35,000 4,582,813
Maxim Integrated Products, Inc.+...................................... 32,000 1,384,000
Software -- 6.8%
American Management Systems, Inc.+.................................... 60,000 1,470,000
Automatic Data Processing, Inc........................................ 112,000 4,802,000
BISYS Group, Inc.+.................................................... 32,000 1,186,000
Cognos, Inc.+......................................................... 39,400 1,108,125
DST Systems, Inc.+.................................................... 56,000 1,757,000
First Data Corp....................................................... 72,000 2,628,000
Microsoft Corp.+...................................................... 54,000 4,461,750
Policy Management Systems Corp.+...................................... 52,000 2,398,500
Sterling Commerce, Inc.+.............................................. 40,000 1,410,000
Sterling Software, Inc.+.............................................. 61,500 1,944,937
Systems & Computer Technology Corp.+.................................. 97,000 1,552,000
Telecommunications -- 0.4%
Lucent Technologies, Inc.............................................. 34,167 1,580,224
-------------
58,179,299
-------------
MATERIALS -- 7.6%
Chemicals -- 3.6%
Air Products & Chemicals, Inc......................................... 60,000 4,147,500
Dow Chemical Co....................................................... 32,100 2,515,837
Engelhard Corp........................................................ 149,925 2,867,316
Minerals Technologies, Inc............................................ 45,000 1,845,000
Schulman A., Inc...................................................... 75,000 1,837,500
Metals & Minerals -- 2.4%
Aluminum Co. of America............................................... 44,000 2,805,000
Crown, Cork & Seal, Inc............................................... 30,000 1,631,250
Phelps Dodge Corp..................................................... 40,400 2,727,000
UCAR International, Inc.+............................................. 45,000 1,693,125
Paper Products -- 1.6%
Bemis Co., Inc........................................................ 59,700 2,201,438
International Paper Co................................................ 92,000 3,714,500
-------------
27,985,466
-------------
UTILITIES -- 2.9%
Telephone -- 2.9%
AT&T Corp............................................................. 90,000 3,727,266
Century Telephone Enterprises, Inc.................................... 47,500 1,466,562
SBC Communications, Inc............................................... 106,000 5,485,500
-------------
10,679,328
-------------
TOTAL INVESTMENT SECURITIES (cost $280,752,310)....................... 360,569,213
-------------
</TABLE>
- ---------------------
30
<PAGE> 32
<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENTS -- 1.7% AMOUNT VALUE
<S> <C> <C>
----------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
Joint Repurchase Agreement Account -- First Boston (Note 3)........... $2,724,000 $ 2,724,000
Joint Repurchase Agreement Account -- Lehman Bros. (Note 3)........... 3,430,000 3,430,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost $6,154,000)......................... 6,154,000
-------------
TOTAL INVESTMENTS --
(cost $286,906,310) 100.0% 366,723,213
Liabilities in excess of other assets -- 0.0 (120,886)
-------------------------- -------------
NET ASSETS -- 100.0% $366,602,327
==============
==========================
</TABLE>
-----------------------------
+ Non-income producing securities
ADR - American Depositary Receipts
See Notes to Financial Statements
---------------------
31
<PAGE> 33
- ---------------------
ANCHOR SERIES TRUST
CAPITAL APPRECIATION
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK -- 83.8% SHARES VALUE
<S> <C> <C>
----------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
CONSUMER DISCRETIONARY -- 8.6%
Apparel & Textiles -- 1.7%
Tommy Hilfiger Corp.+................................................ 205,000 $ 9,840,000
Retail -- 6.9%
Barnes & Noble, Inc.+................................................ 295,000 7,965,000
Bed Bath & Beyond, Inc.+............................................. 300,000 7,275,000
Gymboree Corp.+...................................................... 255,000 5,833,125
Home Depot, Inc...................................................... 100,000 5,012,500
Mercantile Stores Co., Inc........................................... 160,000 7,900,000
Saks Holdings, Inc.+................................................. 190,000 5,130,000
-------------
48,955,625
-------------
CONSUMER STAPLES -- 2.3%
Household Products -- 2.3%
Revlon, Inc., Class A+............................................... 184,800 5,520,900
Tupperware Corp...................................................... 140,000 7,507,500
-------------
13,028,400
-------------
ENERGY -- 7.4%
Energy Services -- 4.9%
ENSCO International, Inc.+........................................... 198,600 9,632,100
Input/Output, Inc.+.................................................. 200,000 3,700,000
Transocean Offshore, Inc............................................. 233,619 14,630,390
Energy Sources -- 2.5%
Alberta Energy Ltd................................................... 200,000 4,800,000
Unocal Corp.......................................................... 115,000 4,671,875
Vastar Resources, Inc................................................ 118,500 4,503,000
-------------
41,937,365
-------------
FINANCE -- 5.9%
Financial Services -- 1.2%
Imperial Credit Industries, Inc.+.................................... 190,000 3,990,000
Moneygram Payment Systems, Inc.+..................................... 225,000 2,981,250
Insurance -- 4.7%
ACE Ltd.............................................................. 165,000 9,920,625
Allstate Corp........................................................ 175,000 10,128,125
Transatlantic Holdings, Inc.......................................... 80,000 6,440,000
-------------
33,460,000
-------------
HEALTHCARE -- 13.8%
Drugs -- 6.6%
Eisai Co. Ltd........................................................ 350,000 6,890,597
Genetics Institute, Inc.+............................................ 30,000 2,542,500
Genzyme Corp.+....................................................... 365,000 7,938,750
Immunex Corp.+....................................................... 300,000 5,850,000
Rhone-Poulenc Rorer, Inc............................................. 144,000 11,250,000
Zeneca Group PLC ADR................................................. 100,000 2,818,228
</TABLE>
- ---------------------
32
<PAGE> 34
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (continued)
Health Services -- 4.4%
Beverly Enterprises, Inc.+........................................... 225,000 $ 2,868,750
GranCare, Inc.+...................................................... 130,000 2,323,750
IDX Systems Corp.+................................................... 125,000 3,578,125
Magellan Health Services, Inc.+...................................... 285,000 6,376,875
Vencor, Inc.+........................................................ 310,000 9,803,750
Medical Products -- 2.8%
Biomet, Inc.......................................................... 300,000 4,537,500
Haemonetics Corp.+................................................... 275,000 5,190,625
Sulzer AG............................................................ 11,500 6,151,662
-------------
78,121,112
-------------
INDUSTRIAL & COMMERCIAL -- 5.6%
Aerospace & Military Technology -- 3.6%
Gulfstream Aerospace Corp.+.......................................... 230,000 5,577,500
Northrop Grumman Corp................................................ 60,000 4,965,000
Precision Castparts Corp............................................. 200,000 9,925,000
Electrical Equipment -- 0.6%
York International Corp.............................................. 60,000 3,352,500
Transportation -- 1.4%
Pittston Burlington Co............................................... 230,000 4,600,000
Werner Enterprises, Inc.............................................. 175,000 3,171,875
-------------
31,591,875
-------------
INFORMATION & ENTERTAINMENT -- 19.1%
Broadcasting & Media -- 16.5%
American Radio Systems Corp., Class A+............................... 225,000 6,131,250
Canwest Global Communications........................................ 240,000 2,460,000
Central European Media Enterprises Ltd., Class A+.................... 170,000 5,397,500
Comcast Corp., Class A............................................... 98,452 1,753,676
E-Z Communications, Inc., Class A+................................... 55,000 2,014,375
Emmis Broadcasting Corp., Class A+................................... 60,000 1,965,000
Gaylord Entertainment Co., Class A................................... 325,299 7,441,215
International Cabletel, Inc.+........................................ 146,666 3,703,317
Jacor Communications, Inc.+.......................................... 225,000 6,159,375
LodgeNet Entertainment Corp.+........................................ 200,000 3,550,000
Metro Networks, Inc.+................................................ 230,000 5,807,500
Outdoor Systems, Inc.+............................................... 101,950 2,867,344
Pulitzer Publishing Co............................................... 82,766 3,838,273
Saga Communications, Inc., Class A+.................................. 100,000 1,950,000
Scholastic Corp.+.................................................... 80,000 5,380,000
Scripps Howard, Inc.................................................. 85,000 2,975,000
Tele-Communications Liberty Media Group, Class A+.................... 490,000 13,995,625
Universal Outdoor Holdings, Inc.+.................................... 125,000 2,937,500
Valuevision International, Inc., Class A+............................ 200,000 1,075,000
Viacom, Inc., Class A+............................................... 11,200 386,400
Viacom, Inc., Class B+............................................... 134,861 4,703,277
Westwood One, Inc.+.................................................. 170,000 2,826,250
Young Broadcasting, Inc., Class A+................................... 150,000 4,387,500
Leisure & Tourism -- 2.1%
AMR Corp.+........................................................... 75,000 6,609,375
Continental Airlines, Inc., Class B+................................. 100,000 2,825,000
Royal Caribbean Cruises Ltd.......................................... 100,000 2,337,500
-------------
105,477,252
-------------
</TABLE>
---------------------
33
<PAGE> 35
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY -- 19.7%
Communication Equipment -- 4.8%
APT Satellite Holdings Ltd. ADR+..................................... 148,500 $ 2,079,000
Cisco Systems, Inc.+................................................. 150,000 9,543,750
Larscom, Inc., Class A+.............................................. 175,000 1,990,625
Nokia Corp., Class A ADR............................................. 150,000 8,643,750
Oak Industries, Inc.+................................................ 150,000 3,450,000
Scitex Corp. Ltd..................................................... 145,100 1,378,450
Computers & Business Equipment -- 1.7%
Adaptec, Inc.+....................................................... 230,000 9,200,000
Integrated Technology USA, Inc.+..................................... 150,000 375,000
Electronics -- 2.5%
Gilat Satellite Networks Ltd.+....................................... 125,000 3,078,125
S3, Inc.+............................................................ 310,000 5,037,500
Sterling Commerce, Inc.+............................................. 170,964 6,026,481
Software -- 10.2%
BA Merchants Services, Inc., Class A+................................ 150,000 2,681,250
BISYS Group, Inc.+................................................... 150,000 5,559,375
BMC Software, Inc.+.................................................. 170,000 7,033,750
Cadence Design Systems, Inc.+........................................ 250,000 9,937,500
Cognos, Inc.+........................................................ 200,000 5,625,000
DST Systems, Inc.+................................................... 250,000 7,843,750
Parametric Technology Corp.+......................................... 150,000 7,706,250
Policy Management Systems Corp.+..................................... 75,000 3,459,375
Sterling Software, Inc.+............................................. 200,000 6,325,000
Systems & Computer Technology Corp.+................................. 130,000 2,080,000
Telecommunications -- 0.5%
West Teleservices Corp.+............................................. 125,000 2,843,750
-------------
111,897,681
-------------
MATERIALS -- 1.9%
Metals & Minerals -- 1.9%
Titanium Metals Corp.+............................................... 59,800 1,965,925
UCAR International, Inc.+............................................ 242,400 9,120,300
-------------
11,086,225
-------------
TOTAL COMMON STOCK (cost $377,552,647)............................... 475,555,535
-------------
PREFERRED STOCK -- 0.6%
----------------------------------------------------------------------------------------------------
INFORMATION & ENTERTAINMENT -- 0.6%
Broadcasting & Media -- 0.6%
News Corp., Ltd. ADR
(cost $3,459,640).................................................. 200,000 3,525,000
-------------
WARRANTS -- 0.0%
----------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 0.0%
Computers & Business Equipment -- 0.0%
Integrated Technology USA, Inc. 2001+
(cost $15,000)..................................................... 150,000 56,250
-------------
TOTAL INVESTMENT SECURITIES (cost $381,027,287)...................... 479,136,785
-------------
</TABLE>
- ---------------------
34
<PAGE> 36
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 0.3% AMOUNT VALUE
<S> <C> <C>
----------------------------------------------------------------------------------------------------
U.S. GOVERNMENT -- 0.3%
United States Treasury Bills 4.84% due 3/20/97....................... $ 85,000 $ 84,108
United States Treasury Bills 4.85% due 3/20/97 @..................... 990,000 979,597
United States Treasury Bills 4.94% due 3/20/97....................... 260,000 257,220
-------------
TOTAL SHORT-TERM SECURITIES (cost $1,320,925)........................ 1,320,925
-------------
<CAPTION>
REPURCHASE AGREEMENTS -- 14.9%
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Joint Repurchase Agreement Account -- First Boston (Note 3).......... 31,656,000 31,656,000
Joint Repurchase Agreement Account -- Lehman Bros. @ (Note 3)........ 53,035,000 53,035,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost $84,691,000)....................... 84,691,000
-------------
TOTAL INVESTMENTS --
(cost $467,039,212) 99.6% 565,148,710
Other assets less liabilities -- 0.4 2,523,595
------ -------------
NET ASSETS -- 100.0% $567,672,305
====== ============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR - American Depositary Receipts
@ The security or a portion thereof represents collateral for the
following open futures contracts:
<TABLE>
<CAPTION>
OPEN FUTURES CONTRACTS
------------------------------------------------------------------------------------------------------------
NUMBER OF EXPIRATION VALUE AT VALUE AS OF UNREALIZED
CONTRACTS DESCRIPTION DATE TRADE DATE DECEMBER 31, 1996 APPRECIATION
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
19 Long Russell 2000 Index March 1997 $ 3,421,125 $ 3,446,125 $ 25,000
41 Long Russell 2000 Index March 1997 7,384,500 7,436,375 51,875
75 Long Standard & Poor's 500 Index March 1997 27,601,875 27,918,750 316,875
------------
Net Unrealized Appreciation......................................................... $ 393,750
===========
</TABLE>
See Notes to Financial Statements
---------------------
35
<PAGE> 37
- ---------------------
ANCHOR SERIES TRUST
NATURAL RESOURCES
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK -- 88.4% SHARES VALUE
<S> <C> <C>
----------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
ENERGY -- 29.1%
Energy Sources -- 29.1%
Alberta Energy Co. Ltd. ............................................... 40,000 $ 955,233
Amerada Hess Corp. .................................................... 17,390 1,006,446
Barrett Resources Corp.+............................................... 30,000 1,278,750
Canadian Natural Resources Ltd.+....................................... 30,000 823,779
Chevron Corp. ......................................................... 20,000 1,300,000
Elan Energy, Inc.+..................................................... 20,000 175,272
Enron Oil & Gas Co. ................................................... 600 15,150
Imperial Oil Ltd. ..................................................... 20,000 940,000
Northstar Energy Corp.+................................................ 30,000 349,449
PanCanadian Petroleum Ltd. ............................................ 30,000 1,194,041
Poco Petroleum Ltd.+................................................... 60,000 574,016
Sun Co., Inc. ......................................................... 39,800 970,125
Talisman Energy, Inc.+................................................. 27,000 899,145
Total SA ADR........................................................... 793 31,918
Ultramar Diamond Shamrock+............................................. 20,200 638,825
Unocal Corp. .......................................................... 14,020 569,562
Vastar Resources, Inc. ................................................ 20,000 760,000
YPF Sociedad Anonima, Class D ADR...................................... 28,000 707,000
-----------
13,188,711
-----------
MATERIALS -- 59.2%
Metals & Minerals -- 47.5%
Agnico Eagle Mines Ltd. ............................................... 32,000 448,000
Algoma Steel, Inc.+.................................................... 220,000 1,144,687
Alumax, Inc.+.......................................................... 20,200 674,175
Aluminum Co. of America................................................ 17,600 1,122,000
Amax Gold, Inc.+....................................................... 94,000 599,250
Barrick Gold Corp. .................................................... 25,000 718,750
British Steel PLC ADR.................................................. 19,000 522,500
Carbide/Graphite Group, Inc.+.......................................... 42,100 826,213
Century Aluminum Co. .................................................. 17,800 307,050
Dominion Mining Ltd.+.................................................. 139,680 104,363
EASCO, Inc. ........................................................... 59,000 449,875
Freeport-McMoRan Copper & Gold, Inc., Class A.......................... 42,900 1,206,562
Hecla Mining Co.+...................................................... 17,300 97,313
Homestake Mining Co. .................................................. 29,685 423,011
Lukens, Inc. .......................................................... 52,000 1,046,500
Newcrest Mining Ltd. .................................................. 95,953 381,341
Newmont Gold Co. ...................................................... 12,600 551,250
Newmont Mining Corp. .................................................. 30,150 1,349,212
Normandy Mining Ltd. .................................................. 529,325 732,077
Phelps Dodge Corp. .................................................... 21,500 1,451,250
Placer Dome, Inc. ..................................................... 30,000 652,500
Republic Engineered Steels, Inc.+...................................... 158,900 297,938
Royal Oak Mines, Inc.+................................................. 161,000 523,250
RTZ Corp. PLC.......................................................... 10,000 160,699
Santa Fe Pacific Gold Corp. ........................................... 100,000 1,537,500
Titanium Metals Corp.+................................................. 28,600 940,225
</TABLE>
- ---------------------
36
<PAGE> 38
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS (continued)
Metals & Minerals (continued)
TVX Gold, Inc.+........................................................ 68,000 $ 527,000
UCAR International, Inc.+.............................................. 41,500 1,561,437
Usinor Sacilor......................................................... 47,000 683,916
Western Mining Corp. Holdings Ltd. .................................... 81,168 511,615
Paper Products -- 11.7%
Bowater, Inc. ......................................................... 14,000 526,750
International Paper Co. ............................................... 15,000 605,625
Longview Fibre Co. .................................................... 30,000 551,250
Temple-Inland, Inc. ................................................... 14,500 784,813
Weyerhaeuser Co. ...................................................... 30,000 1,421,250
Willamette Industries, Inc. ........................................... 20,000 1,392,500
-----------
26,833,647
-----------
TOTAL COMMON STOCK (cost $35,313,737).................................. 40,022,358
-----------
WARRANTS -- 0.1%
----------------------------------------------------------------------------------------------------
MATERIALS -- 0.1%
Metals & Minerals -- 0.1%
Dominion Mining Ltd. 12/31/98+ (cost $0)............................... 69,840 27,201
-----------
TOTAL INVESTMENT SECURITIES (cost $35,313,737)......................... 40,049,559
-----------
PRINCIPAL
REPURCHASE AGREEMENTS -- 11.5% AMOUNT
----------------------------------------------------------------------------------------------------
Joint Repurchase Agreement Account -- First Boston (Note 3)............ $1,811,000 1,811,000
Joint Repurchase Agreement Account -- Lehman Bros. (Note 3)............ 3,410,000 3,410,000
-----------
TOTAL REPURCHASE AGREEMENTS (cost $5,221,000).......................... 5,221,000
-----------
TOTAL INVESTMENTS -- (cost $40,534,737) 99.9% 45,270,559
Other assets less liabilities -- 0.1 58,642
------ -----------
NET ASSETS -- 100.0% $45,329,201
====== ===========
</TABLE>
-----------------------------
+ Non-income producing securities
ADR - American Depositary Receipts
See Notes to Financial Statements
---------------------
37
<PAGE> 39
- ---------------------
ANCHOR SERIES TRUST
MULTI-ASSET PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK -- 63.8% SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 4.7%
Automotive -- 0.4%
Ford Motor Co. ....................................................... 20,000 $ 637,500
Retail -- 4.3%
Home Depot, Inc. ..................................................... 30,000 1,503,750
May Department Stores Co. ............................................ 40,000 1,870,000
Saks Holdings, Inc.+.................................................. 43,000 1,161,000
Wal-Mart Stores, Inc. ................................................ 80,000 1,830,000
-------------
7,002,250
-------------
CONSUMER STAPLES -- 6.6%
Food, Beverage & Tobacco -- 0.9%
Sara Lee Corp. ....................................................... 35,000 1,303,750
Household Products -- 5.7%
Colgate-Palmolive Co. ................................................ 15,000 1,383,750
Gillette Co. ......................................................... 24,000 1,866,000
Kimberly-Clark Corp. ................................................. 20,000 1,905,000
Procter & Gamble Co. ................................................. 19,000 2,042,500
Revlon, Inc., Class A+................................................ 46,000 1,374,250
-------------
9,875,250
-------------
ENERGY -- 7.0%
Energy Services -- 1.8%
Fluor Corp. .......................................................... 20,000 1,255,000
Schlumberger Ltd. .................................................... 15,000 1,498,125
Energy Sources -- 5.2%
Amoco Corp. .......................................................... 30,000 2,415,000
Exxon Corp. .......................................................... 25,000 2,450,000
Union Pacific Resources Group, Inc. .................................. 37,000 1,082,250
Unocal Corp. ......................................................... 45,000 1,828,125
-------------
10,528,500
-------------
FINANCE -- 10.8%
Banks -- 4.8%
Citicorp. ............................................................ 12,000 1,236,000
First Bank System, Inc. .............................................. 30,000 2,047,500
First Union Corp. .................................................... 28,000 2,072,000
Wachovia Corp. ....................................................... 34,000 1,921,000
Financial Services -- 1.8%
American Express Co. ................................................. 40,000 2,260,000
Bancorp Hawaii, Inc. ................................................. 10,500 441,000
Insurance -- 4.2%
ACE Ltd. ............................................................. 30,000 1,803,750
Allstate Corp. ....................................................... 35,000 2,025,625
American International Group, Inc. ................................... 22,500 2,435,625
-------------
16,242,500
-------------
</TABLE>
- ---------------------
38
<PAGE> 40
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE -- 9.1%
Drugs -- 7.1%
Bristol-Myers Squibb Co. ............................................. 17,000 $ 1,848,750
Johnson & Johnson Co. ................................................ 38,000 1,890,500
Pfizer, Inc. ......................................................... 22,000 1,823,250
Pharmacia & Upjohn, Inc. ............................................. 35,000 1,386,875
Warner-Lambert Co. ................................................... 30,000 2,250,000
Zeneca Group PLC ADR.................................................. 18,000 1,512,000
Medical Products -- 2.0%
Abbott Laboratories................................................... 35,000 1,776,250
Biomet, Inc. ......................................................... 85,000 1,285,625
-------------
13,773,250
-------------
INDUSTRIAL & COMMERCIAL -- 6.3%
Aerospace & Military Technology -- 1.2%
Boeing Co. ........................................................... 17,000 1,808,375
Electrical Equipment -- 3.1%
General Electric Co. ................................................. 33,000 3,262,875
York International Corp. ............................................. 25,000 1,396,875
Machinery -- 0.9%
Illinois Tool Works, Inc. ............................................ 17,000 1,357,875
Transportation -- 1.1%
Canadian Pacific Ltd. ................................................ 65,000 1,722,500
-------------
9,548,500
-------------
INFORMATION & ENTERTAINMENT -- 5.5%
Broadcasting & Media -- 3.3%
Gannett Co., Inc. .................................................... 30,000 2,246,250
Gaylord Entertainment Co., Class A.................................... 60,486 1,383,617
Viacom, Inc., Class B+................................................ 40,000 1,395,000
Leisure & Tourism -- 2.2%
AMR Corp.+............................................................ 17,063 1,503,677
McDonald's Corp. ..................................................... 40,000 1,810,000
-------------
8,338,544
-------------
INFORMATION TECHNOLOGY -- 9.5%
Communication Equipment -- 2.2%
Cisco Systems, Inc.+.................................................. 22,000 1,399,750
Motorola, Inc. ....................................................... 23,000 1,411,625
Lucent Technologies, Inc. ............................................ 12,315 569,569
Computers & Business Equipment -- 2.1%
Hewlett-Packard Co. .................................................. 30,000 1,507,500
Xerox Corp. .......................................................... 30,000 1,578,750
Software -- 5.2%
BMC Software, Inc.+................................................... 40,000 1,655,000
Computer Sciences Corp.+.............................................. 20,000 1,642,500
Electronic Data Systems Corp. ........................................ 30,000 1,297,500
First Data Corp. ..................................................... 36,000 1,314,000
Microsoft Corp.+...................................................... 24,000 1,983,000
-------------
14,359,194
-------------
MATERIALS -- 4.3%
Chemicals -- 2.6%
Air Products & Chemicals, Inc. ....................................... 34,000 2,350,250
Dow Chemical Co. ..................................................... 20,000 1,567,500
</TABLE>
---------------------
39
<PAGE> 41
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS (continued)
Metals & Minerals -- 0.9%
Phelps Dodge Corp. ................................................... 20,000 $ 1,350,000
Paper Products -- 0.8%
International Paper Co. .............................................. 30,000 1,211,250
-------------
6,479,000
-------------
TOTAL COMMON STOCK (cost $68,417,903)................................. 96,146,988
-------------
PRINCIPAL
BONDS & NOTES -- 33.9% AMOUNT
----------------------------------------------------------------------------------------------------
FINANCE -- 7.5%
Banc One Auto Grantor Trust 6.55% 2003................................ $ 742,394 747,034
Bank of Boston Corp. 6.63% 2004....................................... 1,500,000 1,457,415
Bankers Trust New York Corp. 8.25% 2005............................... 1,000,000 1,068,035
Citicorp 6.75% 2005................................................... 1,500,000 1,469,085
Daimler-Benz Vehicle Trust 5.95% 2000................................. 368,122 367,588
First Financial Caribbean Corp. 7.84% 2006............................ 450,000 453,510
Fleet Mortgage Group, Inc. 6.50% 2000................................. 1,500,000 1,495,665
General Motors Acceptance Corp. 5.63% 2001............................ 1,000,000 964,230
IBM Credit Receivables Lease Asset Master Trust 4.55% 2000............ 302,401 300,311
Lumbermans Mutual Casualty Co. 9.15% 2026*............................ 1,000,000 1,085,660
Nissan Auto Receivables Grantor Trust 6.45% 1999...................... 376,150 378,460
Premier Auto Trust 4.65% 1999......................................... 396,391 392,272
Security Benefit Life Co. 8.75% 2016*................................. 1,000,000 1,060,800
-------------
11,240,065
-------------
INDUSTRIAL & COMMERCIAL -- 3.8%
Husky Oil Ltd. 7.13% 2006............................................. 1,000,000 1,000,040
Mobil Oil Corp. 9.17% 2000............................................ 519,500 545,288
Niagara Mohawk Power Corp. 5.88% 2002................................. 1,250,000 1,175,175
Northrop Grumman Corp. 8.63% 2004..................................... 1,000,000 1,089,880
Philips Electronics NV 7.20% 2026..................................... 1,000,000 1,013,750
TCI Communications, Inc. 6.88% 2006................................... 1,000,000 908,740
-------------
5,732,873
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.1%
Quebec Province Canada 8.80% 2003..................................... 1,500,000 1,650,915
-------------
U.S. GOVERNMENT & AGENCIES -- 21.5%
Federal Home Loan Mortgage Corp. 6.50% 2010 - 2026.................... 10,338,188 10,030,246
Federal Home Loan Mortgage Corp. 7.00% 2011........................... 2,783,003 2,785,313
Federal Home Loan Mortgage Corp. 8.50% 2001........................... 1,417,219 1,449,975
Federal National Mortgage Association 7.50% 2022 - 2025............... 1,729,915 1,735,709
Government National Mortgage Association 6.50% 2023................... 4,394,160 4,190,930
Government National Mortgage Association 7.00% TBA.................... 5,000,000 5,018,750
United States Treasury Bonds 7.63% 2022............................... 3,000,000 3,311,730
United States Treasury Bonds 10.38% 2012.............................. 3,000,000 3,863,430
-------------
32,386,083
-------------
TOTAL BONDS & NOTES (cost $51,128,578)................................ 51,009,936
-------------
TOTAL INVESTMENT SECURITIES (cost $119,546,481)....................... 147,156,924
-------------
<CAPTION>
</TABLE>
- ---------------------
40
<PAGE> 42
<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENTS -- 5.3% AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Joint Repurchase Agreement Account -- First Boston (Note 3)........... $2,929,000 $ 2,929,000
Joint Repurchase Agreement Account -- Lehman Bros. (Note 3)........... 5,060,000 5,060,000
-------------
TOTAL REPURCHASE AGREEMENTS (cost $7,989,000)......................... 7,989,000
-------------
TOTAL INVESTMENTS --
(cost $127,535,481) 103.0% 155,145,924
Liabilities in excess of other assets -- (3.0) (4,527,063)
------ -------------
NET ASSETS -- 100.0% $150,618,861
==============
======
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR - American Depositary Receipts
TBA - Securities purchased on a forward commitment basis with an
approximate principal amount and no definitive maturity
date. The actual principal amount and maturity date will be
determined upon settlement.
See Notes to Financial Statements
---------------------
41
<PAGE> 43
- ---------------------
ANCHOR SERIES TRUST
STRATEGIC MULTI-ASSET
PORTFOLIO INVESTMENT PORTFOLIO -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK -- 40.7% SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL APPRECIATION -- 14.9%
Aerospace & Military Technology -- 0.6%
Gulfstream Aerospace Corp.+............................................ 5,000 $ 121,250
Northrop Grumman Corp.................................................. 1,000 82,750
Precision Castparts Corp............................................... 3,200 158,800
Apparel & Textiles -- 0.2%
Tommy Hilfiger Corp.+.................................................. 2,200 105,600
Broadcasting & Media -- 3.8%
American Radio Systems Corp., Class A+................................. 2,500 68,125
Canwest Global Communications.......................................... 4,537 46,500
Central European Media Enterprises Ltd., Class A+...................... 5,000 158,750
E-Z Communications, Inc., Class A+..................................... 3,000 109,875
Emmis Broadcasting Corp., Class A+..................................... 1,500 49,125
Gaylord Entertainment Co., Class A..................................... 5,008 114,558
International Cabletel, Inc.+.......................................... 4,000 101,000
Jacor Communications, Inc.+............................................ 8,000 219,000
LodgeNet Entertainment Corp.+.......................................... 8,000 142,000
McKesson Corp.......................................................... 1,500 84,000
Metro Networks, Inc.+.................................................. 6,000 151,500
Outdoor Systems, Inc.+................................................. 2,350 66,094
Pulitzer Publishing Co................................................. 2,000 92,750
Saga Communications, Inc., Class A+.................................... 3,500 68,250
Scholastic Corp.+...................................................... 1,500 100,875
Scripps Howard, Inc.................................................... 1,500 52,500
Tele-Communications Liberty Media Group, Class A+...................... 7,000 199,937
Universal Outdoor Holdings, Inc.+...................................... 3,000 70,500
Valuevision International, Inc., Class A+.............................. 5,500 29,563
Viacom, Inc., Class A+................................................. 320 11,040
Viacom, Inc., Class B+................................................. 2,595 90,487
Westwood One, Inc.+.................................................... 5,000 83,125
Young Broadcasting, Inc., Class A+..................................... 3,500 102,375
Communication Equipment -- 0.8%
Cisco Systems, Inc.+................................................... 1,000 63,625
Larscom Inc., Class A+................................................. 7,000 79,625
Nokia Corp., Class A ADR............................................... 3,000 172,875
Oak Industries, Inc.+.................................................. 1,500 34,500
Scitex Corp. Ltd....................................................... 12,000 114,000
Computers & Business Equipment -- 0.3%
Adaptec, Inc.+......................................................... 4,000 160,000
Drugs -- 1.3%
Eisai Co. Ltd.......................................................... 5,000 98,437
Genzyme Corp.+......................................................... 5,500 119,625
Immunex Corp.+......................................................... 9,000 175,500
Rhone-Poulenc Rorer, Inc. ............................................. 3,000 234,375
Zeneca Group PLC ADR................................................... 4,500 126,820
Electrical Equipment -- 0.1%
York International Corp................................................ 1,000 55,875
</TABLE>
- ---------------------
42
<PAGE> 44
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL APPRECIATION (continued)
Electronics -- 0.5%
Gilat Satellite Networks Ltd.+......................................... 3,500 $ 86,187
S3, Inc.+.............................................................. 8,000 130,000
Sterling Commerce, Inc.+............................................... 2,185 77,021
Energy Services -- 0.8%
ENSCO International, Inc.+............................................. 3,900 189,150
Input/Output, Inc.+.................................................... 2,000 37,000
Transocean Offshore, Inc. ............................................. 3,889 243,549
Energy Sources -- 0.6%
Alberta Energy Ltd. ................................................... 4,000 96,000
Unocal Corp. .......................................................... 4,000 162,500
Vastar Resources, Inc. ................................................ 1,800 68,400
Financial Services -- 0.4%
Imperial Credit Industries, Inc.+...................................... 4,500 94,500
Moneygram Payment Systems, Inc.+ ...................................... 8,000 106,000
Health Services -- 0.7%
Beverly Enterprises, Inc.+............................................. 3,000 38,250
Grancare, Inc.+........................................................ 4,000 71,500
IDX Systems Corp.+..................................................... 2,000 57,250
Magellan Health Services, Inc.+........................................ 3,500 78,312
Vencor, Inc.+.......................................................... 5,000 158,125
Household Products -- 0.3%
Revlon, Inc., Class A+................................................. 2,500 74,688
Tupperware Corp. ...................................................... 2,000 107,250
Insurance -- 0.6%
ACE Ltd. .............................................................. 2,500 150,312
Allstate Corp. ........................................................ 2,500 144,688
Transatlantic Holdings, Inc. .......................................... 900 72,450
Leisure & Tourism -- 0.3%
AMR Corp.+............................................................. 500 44,063
Continental Airlines, Inc., Class B+................................... 2,000 56,500
Royal Caribbean Cruises Ltd. .......................................... 2,000 46,750
Medical Products -- 0.3%
Biomet, Inc. .......................................................... 4,000 60,500
Haemonetics Corp.+..................................................... 3,500 66,063
Sulzer AG.............................................................. 100 57,751
Metals & Minerals -- 0.4%
Titanium Metals Corp.+................................................. 1,100 36,163
UCAR International, Inc.+.............................................. 4,500 169,312
Retail -- 1.0%
Barnes & Noble, Inc.+.................................................. 3,500 94,500
Bed Bath & Beyond, Inc.+............................................... 5,000 121,250
Gymboree Corp.+........................................................ 3,500 80,062
Mercantile Stores Co., Inc. ........................................... 2,000 98,750
Saks Holdings, Inc.+................................................... 7,000 189,000
</TABLE>
---------------------
43
<PAGE> 45
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL APPRECIATION (continued)
Software -- 1.6%
BISYS Group, Inc.+..................................................... 2,500 $ 92,656
BMC Software, Inc.+.................................................... 4,000 165,500
Cadence Design Systems, Inc.+.......................................... 2,000 79,500
Cognos, Inc.+.......................................................... 3,000 84,375
DST Systems, Inc.+..................................................... 5,000 156,875
Parametric Technology Corp.+........................................... 2,000 102,750
Policy Management Systems Corp.+....................................... 1,500 69,188
Sterling Software, Inc.+............................................... 4,000 126,500
Systems & Computer Technology Corp.+................................... 1,000 16,000
Telecommunications -- 0.1%
West Teleservices Corp.+............................................... 3,500 79,625
Transportation -- 0.2%
Pittston Bulington Co. ................................................ 2,000 40,000
Werner Enterprises, Inc. .............................................. 5,000 90,625
------------
8,582,976
------------
CORE EQUITY -- 25.8%
Aerospace & Military Technology -- 0.6%
Boeing Co. ............................................................ 3,000 319,125
Banks -- 2.0%
Citicorp............................................................... 2,000 206,000
First Bank System, Inc. ............................................... 5,000 341,250
First Union Corp. ..................................................... 5,500 407,000
Wachovia Corp. ........................................................ 3,700 209,050
Broadcasting & Media -- 1.5%
Comcast Corp. ......................................................... 1,737 30,940
Gannett Co., Inc. ..................................................... 5,000 374,375
Gaylord Entertainment Co., Class A..................................... 10,263 234,766
Viacom, Inc., Class B+................................................. 6,629 231,200
Business Services -- 0.3%
Fluor Corp. ........................................................... 3,000 188,250
Chemicals -- 1.1%
Air Products & Chemicals, Inc. ........................................ 5,500 380,188
Dow Chemical Co. ...................................................... 3,000 235,125
Communication Equipment -- 0.9%
Cisco Systems, Inc.+................................................... 3,000 190,875
Lucent Technologies, Inc. ............................................. 2,138 98,883
Motorola, Inc. ........................................................ 4,000 245,500
Computers & Business Equipment -- 0.9%
Hewlett-Packard Co. ................................................... 5,000 251,250
Xerox Corp. ........................................................... 5,000 263,125
Drugs -- 2.6%
Bristol-Myers Squibb Co. .............................................. 3,000 326,250
Genetics Institute, Inc.+.............................................. 400 33,900
Pfizer, Inc. .......................................................... 3,000 248,625
Pharmacia & Upjohn, Inc. .............................................. 6,000 237,750
Warner-Lambert Co. .................................................... 4,600 345,000
Zeneca Group PLC ADR................................................... 3,500 294,000
Electrical Equipment -- 1.3%
General Electric Co. .................................................. 5,000 494,375
York International Corp. .............................................. 4,500 251,437
</TABLE>
- ---------------------
44
<PAGE> 46
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
CORE EQUITY (continued)
Energy Services -- 0.4%
Schlumberger Ltd....................................................... 2,000 $ 199,750
Energy Sources -- 2.1%
Amoco Corp. ........................................................... 5,000 402,500
Exxon Corp. ........................................................... 3,500 343,000
Union Pacific Resources Group, Inc. ................................... 7,000 204,750
Unocal Corp. .......................................................... 7,000 284,375
Financial Services -- 0.6%
American Express Co. .................................................. 6,000 339,000
Food, Beverage & Tobacco -- 0.4%
Sara Lee Corp. ........................................................ 6,500 242,125
Household Products -- 2.2%
Colgate-Palmolive Co. ................................................. 2,000 184,500
Gillette Co. .......................................................... 3,000 233,250
Kimberly-Clark Corp. .................................................. 3,000 285,750
Procter & Gamble Co. .................................................. 3,200 344,000
Revlon, Inc., Class A+................................................. 8,200 244,975
Insurance -- 1.8%
ACE Ltd. .............................................................. 5,000 300,625
Allstate Corp. ........................................................ 6,000 347,250
American International Group, Inc. .................................... 3,700 400,525
Leisure & Tourism -- 0.8%
AMR Corp.+............................................................. 2,000 176,250
McDonald's Corp. ...................................................... 7,000 316,750
Machinery -- 0.4%
Illinois Tool Works, Inc. ............................................. 3,000 239,625
Materials -- 0.5%
Phelps Dodge Corp. .................................................... 4,000 270,000
Medical Products -- 0.9%
Abbott Laboratories.................................................... 6,000 304,500
Biomet, Inc. .......................................................... 15,000 226,875
Paper Products -- 0.3%
International Paper Co. ............................................... 5,000 201,875
Retail -- 1.4%
Home Depot, Inc. ...................................................... 5,000 250,625
May Department Stores Co. ............................................. 5,000 233,750
Wal-Mart Stores, Inc. ................................................. 14,000 320,250
Software -- 2.2%
BMC Software, Inc.+.................................................... 6,000 248,250
Computer Sciences Corp.+............................................... 3,000 246,375
Electronic Data Systems Corp. ......................................... 5,000 216,250
First Data Corp. ...................................................... 6,000 219,000
Microsoft Corp.+....................................................... 4,000 330,500
</TABLE>
---------------------
45
<PAGE> 47
<TABLE>
<CAPTION>
COMMON STOCK (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
CORE EQUITY (continued)
Transportation -- 0.6%
Canadian Pacific Ltd.+................................................. 12,000 $ 318,000
------------
14,913,489
------------
TOTAL COMMON STOCK (cost $17,021,544).................................. 23,496,465
------------
PREFERRED STOCK -- 0.5%
----------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION -- 0.2%
Broadcasting & Media -- 0.1%
News Corp., Ltd. ADR................................................... 2,000 35,250
Finance -- 0.1%
Chevy Chase Preferred Capital Corp., Series A 10.38% .................. 1,655 86,267
------------
121,517
------------
BRAZIL -- 0.1%
Consumer Staples -- 0.0%
Companhia Cervejaraia Brahma........................................... 57,700 31,541
Energy Sources -- 0.1%
Petroleo Brasileiros SA................................................ 350,000 55,745
------------
87,286
------------
GERMANY -- 0.2%
Consumer Discretionary -- 0.2%
Hornbach Holding AG.................................................... 1,400 100,078
------------
TOTAL PREFERRED STOCK (cost $288,107).................................. 308,881
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 23.9% AMOUNT
----------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS & MEDIA -- 0.9%
360 Communications 7.50% 2006.......................................... $ 100,000 99,191
Benedek Communications Corp. zero coupon 2006(1)(2).................... 165,000 94,462
Chancellor Broadcasting Co. 9.38% 2004................................. 15,000 15,150
Granite Broadcasting Corp. 10.38% 2005................................. 50,000 51,250
Muzak L.P. 10.00% 2003................................................. 100,000 102,250
Young Broadcasting, Inc. 9.00% 2006.................................... 50,000 48,625
Young Broadcasting, Inc. 11.75% 2004................................... 100,000 109,000
------------
519,928
------------
CONSUMER DISCRETIONARY -- 0.2%
Webb (Del) Corp. 9.00% 2006............................................ 150,000 146,250
------------
CONSUMER STAPLES -- 0.4%
Sweetheart Cup, Inc. 10.50% 2003....................................... 200,000 208,000
------------
ENERGY -- 1.1%
Mesa Operating Co. 10.63% 2006......................................... 25,000 27,125
Phillips Petroleum Co. 9.18% 2021...................................... 250,000 275,235
Plains Resources, Inc. 10.25% 2006..................................... 45,000 48,150
Santa Fe Energy Resources, Inc. 11.00% 2004............................ 150,000 165,000
Transportadora De Gas 10.25% 2001...................................... 100,000 105,950
------------
621,460
------------
</TABLE>
- ---------------------
46
<PAGE> 48
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (continued) AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 0.4%
Dime Bancorp 10.50% 2005............................................... $ 100,000 110,125
First Nationwide Parent Holdings 12.50% 2003........................... 100,000 $ 112,000
------------
222,125
------------
HEALTHCARE -- 0.4%
OrNda HealthCorp 11.38% 2004........................................... 150,000 173,250
Owens & Minor, Inc. 10.88% 2006........................................ 60,000 64,350
------------
237,600
------------
INDUSTRIAL & COMMERCIAL -- 1.5%
American Standard, Inc. zero coupon 2005............................... 100,000 93,000
Cabot Safety Acquisition Corp. 12.50% 2005............................. 100,000 111,000
Collins & Aikman Corp. 11.50% 2006..................................... 100,000 109,000
Exide Corp. 10.75% 2002................................................ 100,000 104,500
Graphic Controls Corp. 12.00% 2005(2).................................. 50,000 55,375
Hayes Wheels International, Inc. 11.00% 2006........................... 25,000 27,281
K & F Industries, Inc. 10.38% 2004..................................... 25,000 26,375
Mettler Toledo, Inc. 9.75% 2006........................................ 15,000 15,750
Moog, Inc. 10.00% 2006................................................. 50,000 52,500
Northrop Grumman Corp. 9.38% 2024...................................... 100,000 110,551
Rohr, Inc. 11.63% 2003................................................. 125,000 137,813
------------
843,145
------------
INFORMATION & ENTERTAINMENT -- 0.4%
Cablevision Systems Corp. 9.25% 2005................................... 100,000 99,000
MCI Communications Corp. 7.13% 2000.................................... 90,000 91,905
Rifkin Acquisitions Partners L.P. 11.13% 2006.......................... 50,000 52,125
------------
243,030
------------
INFORMATION TECHNOLOGY -- 0.2%
Digital Equipment Corp. 7.75% 2023..................................... 150,000 128,647
------------
MATERIALS -- 2.6%
A.K. Steel Corp. 9.13% 2006*........................................... 155,000 159,262
A.K. Steel Corp. 10.75% 2004*.......................................... 100,000 109,250
Arcadian Partners L.P. 10.75% 2005..................................... 150,000 164,625
Armco, Inc. 9.38% 2000................................................. 275,000 276,375
Container Corp. of America 10.75% 2002................................. 225,000 243,000
Fort Howard Corp. 9.25% 2001........................................... 150,000 156,375
Rexene Corp. 11.75% 2004............................................... 25,000 28,063
S.D. Warren Co. 12.00% 2004............................................ 100,000 108,000
Sterling Chemicals, Inc. 11.75% 2006................................... 25,000 26,500
Texas Petrochemicals Corp. 11.13% 2006................................. 35,000 37,625
Weirton Steel Corp. 11.38% 2004........................................ 100,000 101,500
Wheeling Pittsburgh Corp. 9.38% 2003................................... 70,000 69,300
------------
1,479,875
------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 0.5%
British Columbia Province Canada 6.50% 2026............................ 150,000 138,767
Republic of Argentina 8.38% 2003....................................... 150,000 141,187
------------
279,954
------------
RETAIL -- 0.1%
Guitar Center Management Co., Inc. 11.00% 2006*........................ 50,000 52,500
------------
U.S. GOVERNMENT & AGENCIES -- 14.8%
Government National Mortgage Association 6.00% 2009.................... 184,160 178,865
Government National Mortgage Association 6.50% 2008 - 2009............. 1,250,027 1,238,102
Government National Mortgage Association 7.50% 2022 - 2024............. 1,047,998 1,052,011
Government National Mortgage Association 8.50% 2024.................... 342,890 356,174
United States Treasury Bonds 6.25% 2023................................ 200,000 187,500
</TABLE>
---------------------
47
<PAGE> 49
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (continued) AMOUNT VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (continued)
United States Treasury Bonds 9.25% 2016................................ $ 200,000 $ 253,906
United States Treasury Notes 5.63% 1998 - 2000......................... 500,000 495,350
United States Treasury Notes 6.25% 2003................................ 750,000 749,063
United States Treasury Notes 6.50% 2006................................ 500,000 502,735
United States Treasury Notes 7.25% 2004................................ 100,000 105,250
United States Treasury Notes 7.50% 2001................................ 750,000 789,495
United States Treasury Notes 7.75% 1999................................ 500,000 522,420
United States Treasury Notes 7.88% 1999 - 2004......................... 1,250,000 1,342,267
United States Treasury Notes 8.50% 2000................................ 750,000 800,978
------------
8,574,116
------------
UTILITIES -- 0.4%
El Paso Electric Co. 8.90% 2006........................................ 215,000 224,168
------------
TOTAL BONDS & NOTES (cost $12,981,332)................................. 13,780,798
------------
FOREIGN SECURITIES -- 31.0% SHARES
----------------------------------------------------------------------------------------------------
ARGENTINA -- 0.2%
YPF Sociedad Anonima ADR (Energy)...................................... 4,000 101,000
------------
AUSTRALIA -- 1.6%
Amcor Ltd. (Materials)................................................. 25,446 163,626
Boral Ltd. (Materials)................................................. 41,272 117,442
Broken Hill Proprietary Ltd. (Materials)............................... 17,433 248,310
Goodman Fielder Wattie Ltd. (Consumer Staples)......................... 104,132 129,120
Pioneer International Ltd. (Materials)+................................ 40,000 119,227
Qantas Airways Ltd. ADR (Information & Entertainment)*................. 7,800 130,099
------------
907,824
------------
AUSTRIA -- 0.3%
OMV AG (Energy)........................................................ 1,400 157,861
------------
BELGIUM -- 0.3%
Credit Dexia/Communal Holding (Finance)+*.............................. 1,600 145,993
------------
BRAZIL -- 0.3%
Centrais Eletricas Brasileiras SA - ELETROBRAS ADR (Utilities)......... 5,500 98,451
Telecomunicacoes Brasileirassas SA (Information Technology)............ 920,000 65,961
------------
164,412
------------
CANADA -- 0.6%
Canadian Pacific Ltd. ADR (Industrial & Commercial)+................... 10,000 263,273
Canwest Global Communications (Information Technology)................. 7,463 76,500
------------
339,773
------------
CHILE -- 0.2%
Enersis SA ADR (Utilities)............................................. 5,000 138,750
------------
DENMARK -- 0.9%
Tele Danmark A/S, Class B ADR (Utilities).............................. 6,400 174,400
Unidanmark A/S (Finance)............................................... 6,250 323,598
------------
497,998
------------
</TABLE>
- ---------------------
48
<PAGE> 50
<TABLE>
<CAPTION>
FOREIGN SECURITIES (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
FINLAND -- 0.9%
Merita Ltd. (Finance)+................................................. 30,000 $ 93,261
Metsa Serla Oy (Materials)............................................. 15,500 116,250
Nokia Corp., Class A ADR (Information Technology)...................... 3,300 190,162
Rauma Oy (Industrial & Commercial)..................................... 5,000 105,435
------------
540,824
------------
FRANCE -- 2.8%
Accor SA (Information & Entertainment)................................. 1,025 129,792
Assurance General de France (Finance)+*................................ 6,200 200,154
Banque National de Paris (Finance)..................................... 5,500 212,855
Cie de St. Gobain (Materials).......................................... 781 110,486
Credit Commerce France (Finance)....................................... 2,000 92,512
Elf Aquitaine SA (Energy).............................................. 1,200 109,234
Havas SA (Information & Entertainment)................................. 3,226 226,321
Peugeot SA (Consumer Discretionary).................................... 400 45,023
Remy Cointreau SA (Consumer Staples)................................... 2,000 56,664
Rhone-Poulenc SA (Healthcare).......................................... 6,424 219,024
Societe Generale (Finance)............................................. 1,426 154,184
Total SA, Series B (Energy)............................................ 852 69,296
------------
1,625,545
------------
GERMANY -- 1.5%
Daimler-Benz AG (Consumer Discretionary)............................... 4,000 275,539
Degussa AG (Materials)................................................. 300 135,788
Karstadt AG (Consumer Discretionary)................................... 420 141,929
Mannesmann AG (Industrial & Commercial)................................ 262 113,565
Metallgesellschaft AG (Industrial & Commercial)+....................... 11,000 225,175
------------
891,996
------------
HONG KONG -- 1.3%
China Light & Power Co., Ltd. (Utilities).............................. 17,000 75,609
CITIC Pacific Ltd. (Consumer Discretionary)............................ 15,000 87,077
Hutchison Whampoa Ltd. (Real Estate)................................... 21,000 164,943
Sun Hung Kai Properties Ltd. (Real Estate)............................. 17,000 208,255
Swire Pacific Ltd., Class A (Real Estate).............................. 19,000 181,169
Tingyi Holding Co. (Consumer Staples).................................. 200,000 52,363
------------
769,416
------------
INDIA -- 0.1%
State Bank India GDR (Finance)*........................................ 4,400 76,428
------------
INDONESIA -- 0.4%
PT Jaya Real Property alien (Real Estate).............................. 78,000 108,975
PT Kalbe Farma alien (Healthcare)...................................... 36,000 41,152
PT Bank Negara Indonesia (Finance)+*................................... 25,500 13,495
PT Bank Negara Indonesia alien (Finance)+*............................. 72,000 38,103
PT Indonesian Satellite Corp. ADR (Utilities)+*........................ 2,000 54,750
------------
256,475
------------
IRELAND -- 0.2%
Allied Irish Banks (Finance)........................................... 4,522 30,369
Jefferson Smurfit Group (Paper Products)+.............................. 30,000 86,603
------------
116,972
------------
ITALY -- 1.0%
Arnaldo Mondadori Edit (Information & Entertainment)................... 14,000 113,975
Banca Commerciale Italiana SpA (Finance)............................... 60,000 109,163
Fiat SpA (Consumer Discretionary)...................................... 30,000 90,771
</TABLE>
---------------------
49
<PAGE> 51
<TABLE>
<CAPTION>
FOREIGN SECURITIES (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
ITALY (continued)
Finanziaria Autogrill SpA (Information & Entertainment)................ 60,000 $ 58,141
STET (Utilities)....................................................... 42,000 191,035
------------
563,085
------------
JAPAN -- 5.8%
77th Bank (Finance).................................................... 10,000 82,031
Asahi Organic Chemical (Industrial & Commercial)....................... 11,000 64,874
Chudenko Corp. (Industrial & Commercial)............................... 2,000 57,681
Chugai Pharmaceutical Co., Ltd. (Healthcare)........................... 13,000 108,885
Dai Nippon Printing Co., Ltd. (Information & Entertainment)............ 11,000 192,816
Danto Corp. (Materials)................................................ 2,000 19,515
Fuji Machine Manufacturing Co. (Industrial & Commercial)............... 3,000 79,527
JGC Corp. (Industrial & Commercial).................................... 13,000 97,548
Kyudenko Corp. (Industrial & Commercial)............................... 5,000 51,809
Mabuchi Motor Co., Ltd. (Industrial & Commercial)...................... 2,000 100,682
Maruichi Steel Tube (Energy)........................................... 7,000 120,888
Matsushita Electric Industrial Co., Ltd. (Information & Technology)+... 11,000 179,518
Mitsubishi Heavy Industrial Ltd. (Industrial & Commercial)............. 20,000 158,881
Murata Manufacturing Co. (Information Technology)...................... 2,000 66,488
NGK Spark Plug Co., Ltd. (Industrial & Commercial)..................... 16,000 175,460
Nippon Express Co., Ltd. (Industrial & Commercial)..................... 14,000 95,985
Nippon Television Network (Information & Entertainment)................ 650 196,443
Nomura Securities International, Inc. (Finance)........................ 8,000 120,197
Onward Kashiyama (Consumer Discretionary).............................. 14,000 197,047
Sakura Bank Ltd. (Finance)............................................. 13,000 92,945
Sanwa Bank Ltd. (Finance).............................................. 5,000 68,215
Sony Corp. (Information & Entertainment)............................... 1,000 65,538
Sumitomo Realty & Development Co., Ltd. (Real Estate).................. 19,000 119,765
Sumitomo Trust & Banking Co., Ltd. (Finance)........................... 3,000 30,049
Toda Construction Co. (Industrial & Commercial)........................ 17,000 129,177
Tokio Marine & Fire Insurance Co., Ltd. (Finance)...................... 17,000 160,004
Toyo Ink Manufacturing Co. (Materials)................................. 30,000 123,046
Toyota Motor Corp. (Consumer Discretionary)............................ 5,000 143,770
World Co., Ltd. (Consumer Discretionary)............................... 2,700 111,907
Yamato Kogyo Co. (Materials)........................................... 16,000 147,828
Yamazaki Baking Co. (Consumer Staples)................................. 1,000 15,974
------------
3,374,493
------------
LUXEMBOURG -- 0.1%
Quilmes Industrial SA (Consumer Staples)............................... 5,300 48,363
------------
MALAYSIA -- 0.4%
Land & General Bhd (Real Estate)....................................... 40,000 95,822
MBF Capital Bhd (Finance).............................................. 22,000 35,716
Resorts World Bhd (Information & Entertainment)........................ 34,000 154,821
------------
286,359
------------
MEXICO -- 0.6%
Cemex SA de CV (Materials)............................................. 20,000 72,028
Fomento Economico Mexicano SA de CV (Consumer Staples)................. 24,000 82,317
Grupo Carso SA de CV (Consumer Staples)................................ 20,000 105,945
Grupo Financiero Bancomer SA de CV, Series B (Finance)................. 180,000 72,027
Transportacion Maritima Mexicana SA de CV ADR (Industrial &
Commercial).......................................................... 2,900 13,413
------------
345,730
------------
</TABLE>
- ---------------------
50
<PAGE> 52
<TABLE>
<CAPTION>
FOREIGN SECURITIES (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
NETHERLANDS -- 1.1%
Akzo Nobel NV (Materials).............................................. 700 $ 95,685
Internationale Nederlanden Groep NV (Finance).......................... 5,632 202,902
KLM Royal Dutch Air Lines NV (Information & Entertainment)............. 4,000 112,598
PolyGram NV (Information & Entertainment).............................. 4,000 203,880
------------
615,065
------------
NEW ZEALAND -- 0.4%
Air New Zealand Ltd. (Information & Entertainment)..................... 31,366 85,151
Carter Holt Harvey Ltd. (Materials).................................... 65,000 147,508
------------
232,659
------------
NORWAY -- 0.7%
Fokus Bank ASA (Finance)............................................... 9,000 61,321
Nycomed ASA (Healthcare)+.............................................. 16,615 251,426
Saga Petroleum (Energy)................................................ 5,000 82,647
------------
395,394
------------
PHILIPPINES -- 0.1%
Philipino Telephone Corp. (Utilities).................................. 40,000 33,840
Philippine Long Distance Telephone Co. ADR (Utilities)................. 1,000 51,000
------------
84,840
------------
PORTUGAL -- 0.0%
Telecel-Comunicacoes Pessoais SA (Information Technology)+*............ 200 12,770
------------
SINGAPORE -- 1.2%
Development Bank of Singapore alien (Finance).......................... 16,500 222,861
Far East Levingston Shipbuilding Ltd. (Energy)......................... 20,000 104,338
Keppel Corp., Ltd. (Industrial & Commercial)........................... 28,000 218,109
Straits Steamship Land Ltd. (Real Estate).............................. 20,000 64,032
United Overseas Bank Ltd. alien (Finance).............................. 9,000 100,336
------------
709,676
------------
SOUTH KOREA -- 0.4%
Chosun Brewery Co., Ltd. (Consumer Staples)............................ 3,020 83,372
Commerce Bank Korea (Finance).......................................... 2,000 13,065
Daewoo Securities Co., Ltd. (Finance).................................. 2,040 26,315
Hanil Bank (Finance)................................................... 4,000 27,456
Hanwha Chemical (Materials)............................................ 2,000 15,503
Korea Electric Power Corp. (Utilities)................................. 1,000 29,112
Korean Air Lines (Information & Entertainment)......................... 1,450 23,869
Shinsegae Department Street (Consumer Discretionary)................... 600 24,923
------------
243,615
------------
SPAIN -- 1.0%
Acerinox SA (Materials)................................................ 950 137,277
Empresa Nacional de Electricidad ADR (Utilities)....................... 2,000 140,000
Empresa Nacional de Electricidad SA (Utilities)........................ 1,500 106,759
Telefonica de Espana SA (Utilities).................................... 7,500 174,177
------------
558,213
------------
SWEDEN -- 0.5%
BT Industries AB (Industrial & Commercial)............................. 2,950 54,935
Pharmacia & Upjohn, Inc. (Healthcare).................................. 5,000 204,915
------------
259,850
------------
SWITZERLAND -- 0.9%
Nestle SA (Consumer Staples)........................................... 170 182,510
Richemont Cie Finance (Consumer Staples)............................... 60 84,274
Sulzer AG (Healthcare)................................................. 450 240,717
------------
507,501
------------
</TABLE>
---------------------
51
<PAGE> 53
<TABLE>
<CAPTION>
FOREIGN SECURITIES (continued) SHARES VALUE
----------------------------------------------------------------------------------------------------
<S> <C> <C>
THAILAND -- 0.3%
Bangkok Metropolitan Bank PCL alien (Finance).......................... 108,536 $ 41,051
Land & Houses PCL alien (Real Estate).................................. 2,700 19,687
Siam City Cement PCL alien (Materials)................................. 2,000 10,450
Siam Commercial Bank PCL alien (Finance)............................... 10,000 72,526
------------
143,714
------------
UNITED KINGDOM -- 4.8%
Amersham International (Healthcare).................................... 3,000 59,106
Associated British Foods PLC (Consumer Staples)........................ 18,000 148,946
Bank of Scotland (Finance)............................................. 20,000 105,534
BOC Group PLC (Industrial & Commercial)................................ 8,000 119,787
Boots Co. PLC (Consumer Discretionary)................................. 20,000 206,270
British Gas PLC (Utilities)............................................ 60,000 230,255
British Telecommunications PLC (Utilities)............................. 28,000 189,481
BTR PLC (Industrial & Commercial)...................................... 35,000 170,893
Cookson Group PLC (Information Technology)............................. 30,000 121,809
De La Rue PLC (Information & Technology)............................... 20,000 197,019
National Grid Group PLC (Utilities).................................... 30,000 100,223
Northern Foods PLC (Consumer Staples).................................. 23,000 79,596
PowerGen PLC (Utilities)............................................... 21,065 206,428
Rank Group PLC (Information & Entertainment)........................... 15,000 112,558
Reckitt & Colman PLC (Consumer Staples)................................ 13,300 164,740
Royal Bank of Scotland Group PLC (Finance)............................. 10,101 97,255
Royal & Sun Alliance Insurance Group PLC (Finance)..................... 16,254 124,056
Sainsbury (J.) PLC (Consumer Discretionary)............................ 35,686 236,602
Sun Life & Provincial Holdings (Finance)+*............................. 20,000 89,087
United Biscuits (Consumer Staples)..................................... 10,000 36,149
------------
2,795,794
------------
VENEZUELA -- 0.1%
Compania Anon Nacional Tele De Venezuela ADR (Utilities)............... 1,900 53,438
------------
TOTAL FOREIGN SECURITIES (cost $16,434,606)............................ 17,926,110
------------
TOTAL INVESTMENT SECURITIES (cost $46,725,589)......................... 55,512,254
------------
<CAPTION>
REPURCHASE AGREEMENTS -- 3.4%
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Joint Repurchase Agreement Account -- First Boston (Note 3)............ 635,000 635,000
Joint Repurchase Agreement Account -- Lehman Bros. (Note 3)............ 1,320,000 1,320,000
------------
TOTAL REPURCHASE AGREEMENTS (cost $1,955,000).......................... 1,955,000
------------
TOTAL INVESTMENTS --
(cost $48,680,589) 99.5% 57,467,254
Other assets less liabilities -- 0.5 276,980
------ -----------
NET ASSETS -- 100.0% $57,744,234
====== ===========
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR - American Depositary Receipts
(1) Represents a zero coupon bond which will convert to an
interest-bearing security at a later date
(2) Fair valued security; see Note 2
See Notes to Financial Statements
- ---------------------
52
<PAGE> 54
[This page is intentionally left blank]
---------------------
53
<PAGE> 55
- ---------------------
ANCHOR SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY FIXED GOVERNMENT &
MARKET INCOME QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value*............................ $ -- $22,143,212 $207,128,070 $43,463,074
Short-term securities*...................................... 74,148,151 -- -- --
Repurchase agreements (cost equals market).................. -- 210,000 21,579,000 1,173,000
Cash........................................................ 8,792 1,535 3,442 4,238
Foreign currency............................................ -- -- -- --
Receivables for --
Dividends and accrued interest............................ 223,228 423,296 2,392,444 1,042,946
Fund shares sold.......................................... 219,657 638 1,029,129 50,109
Sales of investments...................................... -- 531,768 -- --
Foreign currency contracts................................ -- -- -- --
Prepaid expenses............................................ 20,440 8,853 46,678 9,921
Unrealized appreciation on forward foreign currency
contracts................................................. -- -- -- --
-----------
74,620,268 23,319,302 232,178,763 45,743,288
-----------
LIABILITIES:
Payables for --
Fund shares redeemed...................................... 548,186 23,190 309,434 --
Management fees........................................... 31,906 12,084 116,134 27,190
Purchases of investments.................................. -- 522,006 10,062,500 --
Foreign currency contracts................................ -- -- -- --
Variation margin on futures contracts..................... -- -- -- --
Other accrued expenses...................................... 39,523 19,020 87,618 29,378
Unrealized depreciation on forward foreign currency
contracts................................................. -- -- -- --
-----------
619,615 576,300 10,575,686 56,568
-----------
NET ASSETS:................................................. $74,000,653 $22,743,002 $221,603,077 $45,686,720
===========
Shares of beneficial interest outstanding (unlimited shares
authorized)............................................... 74,000,653 1,709,571 16,209,760 5,450,139
Net asset value per share................................... $ 1.00 $ 13.30 $ 13.67 $ 8.38
===========
COMPOSITION OF NET ASSETS:
Capital paid in............................................. $74,000,653 $23,175,000 $208,048,632 $54,340,529
Accumulated undistributed net investment income............. 2,155 1,661,104 13,956,938 4,006,818
Accumulated undistributed net realized gain (loss) on
investments, futures contracts and options contracts...... (2,155) (2,050,166) 642,087 (14,097,904)
Unrealized appreciation (depreciation) of investments....... -- (42,936) (1,044,580) 1,437,277
Unrealized foreign exchange gain (loss) on other assets and
liabilities............................................... -- -- -- --
Unrealized appreciation on futures contracts................ -- -- -- --
-----------
$74,000,653 $22,743,002 $221,603,077 $45,686,720
===========
---------------
*Cost
Investment securities...................................... $ -- $22,186,148 $208,172,650 $42,025,797
===========
Short-term securities...................................... $74,148,151 $ -- $ -- $ --
===========
</TABLE>
See Notes to Financial Statements
- ---------------------
54
<PAGE> 56
- ---------------------
<TABLE>
<CAPTION>
GROWTH AND FOREIGN CAPITAL NATURAL STRATEGIC
TARGET '98 INCOME SECURITIES GROWTH APPRECIATION RESOURCES MULTI-ASSET MULTI-ASSET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$9,883,642 $32,745,516 $43,001,037 $360,569,213 $479,136,785 $40,049,559 $147,156,924 $55,512,254
-- -- 494,746 -- 1,320,925 -- -- --
283,000 1,039,000 4,621,000 6,154,000 84,691,000 5,221,000 7,989,000 1,955,000
3,780 2,535 4,460 1,118 1,690 2,818 4,144 70,238
-- -- 22 -- -- -- -- 6
21,229 64,627 124,550 409,583 158,149 57,959 641,182 296,839
308 59,069 97,717 638,497 1,922,086 227,785 14,881 37,635
-- -- 180,115 417,642 2,943,777 -- 1,414,317 426,194
-- -- 187,838 -- -- -- -- 133,071
966 3,965 4,841 46,958 24,787 3,025 31,487 14,787
-- -- 21,708 -- -- -- -- --
-----------
10,192,925 33,914,712 48,738,034 368,237,011 570,199,199 45,562,146 157,251,935 58,446,024
-----------
1,234 24,428 360,105 802,100 1,044,149 172,868 146,167 187,580
5,492 19,966 36,655 225,562 311,843 28,271 129,484 49,087
-- 376,860 25,613 493,771 388,357 -- 6,287,450 275,590
-- -- 188,405 -- -- -- -- 134,087
-- -- 11,648 -- 633,000 -- -- --
14,658 28,185 69,808 113,251 149,545 31,806 69,973 55,446
-- -- 10,111 -- -- -- -- --
-----------
21,384 449,439 702,345 1,634,684 2,526,894 232,945 6,633,074 701,790
-----------
$10,171,541 $33,465,273 $48,035,689 $366,602,327 $567,672,305 $45,329,201 $150,618,861 $57,744,234
===========
871,510 2,462,811 3,712,348 15,805,435 20,275,261 2,687,538 11,282,314 4,732,870
$ 11.67 $ 13.59 $ 12.94 $ 23.19 $ 28.00 $ 16.87 $ 13.35 $ 12.20
===========
$9,342,136 $28,676,058 $40,682,830 $238,848,041 $404,985,218 $37,003,652 $98,704,640 $38,286,430
816,095 857,047 969,165 3,059,640 1,034,306 525,994 4,119,739 1,252,720
(252,703) (80,382) 3,770,149 44,877,743 63,149,761 3,063,976 20,184,053 9,417,996
266,013 4,012,550 2,572,990 79,816,903 98,109,498 4,735,822 27,610,443 8,786,665
-- -- 12,534 -- (228) (243) (14) 423
-- -- 28,021 -- 393,750 -- -- --
-----------
$10,171,541 $33,465,273 $48,035,689 $366,602,327 $567,672,305 $45,329,201 $150,618,861 $57,744,234
===========
$9,617,629 $28,732,966 $40,428,047 $280,752,310 $381,027,287 $35,313,737 $119,546,481 $46,725,589
===========
$ -- $ -- $ 494,746 $ -- $ 1,320,925 $ -- $ -- $ --
===========
</TABLE>
---------------------
55
<PAGE> 57
- ---------------------
ANCHOR SERIES TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GOVERNMENT &
MONEY MARKET FIXED INCOME QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income:
Interest........................................................ $4,727,875 $ 1,858,312 $ 15,640,194 $ 4,284,747
Dividends....................................................... -- 209 -- 31,095
---------------------------------------------------------
Total income*............................................ 4,727,875 1,858,521 15,640,194 4,315,842
---------------------------------------------------------
Expenses:
Investment management fees...................................... 432,146 152,430 1,392,653 313,621
Custodian fees.................................................. 35,490 36,595 109,320 49,940
Audit and tax consulting fees................................... 19,500 9,365 44,585 11,830
Trustees' fees.................................................. 6,092 2,483 15,087 2,971
Reports to investors............................................ 2,365 685 22,100 1,060
Insurance expense............................................... 1,998 527 4,221 962
Legal fees...................................................... 1,810 -- 3,760 --
Other expenses.................................................. 3,055 657 7,386 1,783
---------------------------------------------------------
Total expenses........................................... 502,456 202,742 1,599,112 382,167
---------------------------------------------------------
Net investment income............................................. 4,225,419 1,655,779 14,041,082 3,933,675
---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gain on investments.................................. -- 462,470 585,700 696,575
Net realized foreign exchange gain (loss) on other assets and
liabilities..................................................... -- -- -- --
Net realized gain (loss) on futures contracts..................... -- -- -- --
Change in unrealized appreciation/depreciation on investments..... -- (1,654,211) (7,904,999) 392,992
Change in unrealized foreign exchange gain/loss on other assets
and liabilities................................................. -- -- -- --
Change in unrealized appreciation/depreciation on futures
contracts....................................................... -- -- -- --
---------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign
currencies...................................................... -- (1,191,741) (7,319,299) 1,089,567
---------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $4,225,419 $ 464,038 $ 6,721,783 $ 5,023,242
===================================================
---------------
* Net of foreign withholding taxes on interest and dividends
of:............................................................. $ -- $ -- $ -- $ --
===================================================
</TABLE>
See Notes to Financial Statements
- ---------------------
56
<PAGE> 58
<TABLE>
<CAPTION>
TARGET GROWTH AND FOREIGN CAPITAL NATURAL STRATEGIC
'98 INCOME SECURITIES GROWTH APPRECIATION RESOURCES MULTI-ASSET MULTI-ASSET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 855,740 $ 326,241 $ 230,356 $ 439,259 $ 2,543,392 $ 194,464 $ 4,043,217 $1,321,229
-- 742,030 1,098,288 5,281,153 1,885,834 722,057 1,744,009 699,655
---------
855,740 1,068,271 1,328,644 5,720,412 4,429,226 916,521 5,787,226 2,020,884
---------
72,086 220,009 473,257 2,393,836 3,030,849 302,086 1,569,359 597,679
22,265 34,210 219,110 109,740 154,070 49,825 80,570 188,340
6,015 9,675 15,300 61,560 86,405 12,650 32,855 14,375
686 2,601 4,615 22,044 27,449 2,494 11,475 3,994
-- -- 2,055 32,055 55,425 7,790 6,320 2,430
257 627 1,127 5,830 7,020 592 3,221 1,242
-- 1,575 1,575 5,470 8,130 1,225 3,620 1,810
59 1,787 1,959 10,428 10,231 556 6,153 2,091
---------
101,368 270,484 718,998 2,640,963 3,379,579 377,218 1,713,573 811,961
---------
754,372 797,787 609,646 3,079,449 1,049,647 539,303 4,073,653 1,208,923
---------
70,306 1,459,904 6,115,742 44,948,751 63,266,968 3,314,738 20,265,945 9,506,288
-- -- (43,558) -- 2,560 1,145 (44) 8,710
-- -- 414,564 -- (34,322) -- -- --
(419,896) 3,455,775 (1,580,975) 24,747,361 29,785,509 901,030 (4,163,250) (2,438,293)
-- (19) (17,987) -- (860) (512) (6) (1,533)
-- -- (16,205) -- 393,750 -- -- --
---------
(349,590) 4,915,660 4,871,581 69,696,112 93,413,605 4,216,401 16,102,645 7,075,172
---------
$ 404,782 $5,713,447 $ 5,481,227 $72,775,561 $94,463,252 $4,755,704 $20,176,298 $8,284,095
=========
$ 4,301 $ 5,490 $ 155,650 $ 27,415 $ 120,398 $ 42,040 $ 14,450 $ 62,140
=========
</TABLE>
---------------------
57
<PAGE> 59
- ---------------------
ANCHOR SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GOVERNMENT &
MONEY MARKET FIXED INCOME QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income..................................... $ 4,225,419 $ 1,655,779 $ 14,041,082 $ 3,933,675
Net realized gain on investments.......................... -- 462,470 585,700 696,575
Net realized foreign exchange gain (loss) on other assets
and liabilities......................................... -- -- -- --
Net realized gain (loss) on futures contracts............. -- -- -- --
Change in unrealized appreciation/depreciation
on investments.......................................... -- (1,654,211) (7,904,999) 392,992
Change in unrealized foreign exchange gain/loss on other
assets and liabilities.................................. -- -- -- --
Change in unrealized appreciation/depreciation on futures
contracts............................................... -- -- -- --
--------------------------------------------------------------
Net increase in net assets resulting from operations...... 4,225,419 464,038 6,721,783 5,023,242
--------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS:
Distributions from capital gains.......................... -- -- (460,000) --
Dividends from net investment income...................... (4,225,419) (1,900,000) (14,120,000) (4,670,000)
--------------------------------------------------------------
Total dividends........................................... (4,225,419) (1,900,000) (14,580,000) (4,670,000)
--------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold................................. 159,314,533 2,345,220 101,230,555 27,871,250
Proceeds from shares issued for reinvestment of dividends
and distributions....................................... 4,225,419 1,900,000 14,580,000 4,670,000
Cost of shares repurchased................................ (183,230,982) (8,041,058) (111,927,989) (34,024,510)
--------------------------------------------------------------
Net increase (decrease) in net assets resulting from
capital share transactions.............................. (19,691,030) (3,795,838) 3,882,566 (1,483,260)
--------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................... (19,691,030) (5,231,800) (3,975,651) (1,130,018)
NET ASSETS:
Beginning of period....................................... 93,691,683 27,974,802 225,578,728 46,816,738
--------------------------------------------------------------
End of period............................................. $ 74,000,653 $ 22,743,002 $221,603,077 $ 45,686,720
============================================================
---------------
Accumulated undistributed net investment income........... $ 2,155 $ 1,661,104 $ 13,956,938 $ 4,006,818
============================================================
Shares issued and repurchased:
Sold...................................................... 159,314,533 171,519 7,327,912 3,270,396
Issued in reinvestment of dividends and distributions..... 4,225,419 149,137 1,115,532 586,683
Repurchased............................................... (183,230,982) (587,362) (8,086,708) (4,025,306)
--------------------------------------------------------------
Net increase (decrease)................................... (19,691,030) (266,706) 356,736 (168,227)
============================================================
</TABLE>
See Notes to Financial Statements
- ---------------------
58
<PAGE> 60
<TABLE>
<CAPTION>
GROWTH AND FOREIGN CAPITAL NATURAL
TARGET '98 INCOME SECURITIES GROWTH APPRECIATION RESOURCES MULTI-ASSET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 754,372 $ 797,787 $ 609,646 $ 3,079,449 $ 1,049,647 $ 539,303 $ 4,073,653
70,306 1,459,904 6,115,742 44,948,751 63,266,968 3,314,738 20,265,945
-- -- (43,558) -- 2,560 1,145 (44)
-- -- 414,564 -- (34,322) -- --
(419,896) 3,455,775 (1,580,975) 24,747,361 29,785,509 901,030 (4,163,250)
-- (19) (17,987) -- (860) (512) (6)
-- -- (16,205) -- 393,750 -- --
-------------------------------------------------------------------------------------------------------------------
404,782 5,713,447 5,481,227 72,775,561 94,463,252 4,755,704 20,176,298
-------------------------------------------------------------------------------------------------------------------
-- -- -- (13,940,000) (16,280,000) (585,000) (9,825,000)
(1,210,000) (1,745,000) (810,000) (1,545,000) (935,000) (340,000) (5,330,000)
-------------------------------------------------------------------------------------------------------------------
(1,210,000) (1,745,000) (810,000) (15,485,000) (17,215,000) (925,000) (15,155,000)
-------------------------------------------------------------------------------------------------------------------
997,281 7,391,151 22,606,509 179,335,720 517,761,626 47,430,602 11,595,717
1,210,000 1,745,000 810,000 15,485,000 17,215,000 925,000 15,155,000
(4,004,707) (11,647,598) (33,661,510) (193,366,398) (400,770,612) (35,798,476) (49,395,962)
-------------------------------------------------------------------------------------------------------------------
(1,797,426) (2,511,447) (10,245,001) 1,454,322 134,206,014 12,557,126 (22,645,245)
-------------------------------------------------------------------------------------------------------------------
(2,602,644) 1,457,000 (5,573,774) 58,744,883 211,454,266 16,387,830 (17,623,947)
12,774,185 32,008,273 53,609,463 307,857,444 356,218,039 28,941,371 168,242,808
-------------------------------------------------------------------------------------------------------------------
$10,171,541 $ 33,465,273 $ 48,035,689 $ 366,602,327 $ 567,672,305 $ 45,329,201 $150,618,861
============================================================================================================================
$ 816,095 $ 857,047 $ 969,165 $ 3,059,640 $ 1,034,306 $ 525,994 $ 4,119,739
============================================================================================================================
80,381 574,026 1,828,894 8,416,003 19,407,178 2,907,359 874,874
106,327 140,273 66,942 740,555 644,274 58,213 1,220,209
(325,577) (916,670) (2,721,124) (9,155,873) (15,116,927) (2,192,057) (3,714,000)
-------------------------------------------------------------------------------------------------------------------
(138,869) (202,371) (825,288) 685 4,934,525 773,515 (1,618,917)
============================================================================================================================
<CAPTION>
STRATEGIC
MULTI-ASSET
PORTFOLIO
---------------------------
<S> <C<C>
$ 1,208,923
9,506,288
8,710
--
(2,438,293)
(1,533)
--
8,284,095
(3,785,000)
(1,800,000)
(5,585,000)
4,456,606
5,585,000
(19,022,327)
(8,980,721)
(6,281,626)
64,025,860
$ 57,744,234
$ 1,252,720
366,240
490,773
(1,560,019)
(703,006)
</TABLE>
---------------------
59
<PAGE> 61
- ---------------------
ANCHOR SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
FIXED GOVERNMENT &
MONEY MARKET INCOME QUALITY BOND HIGH YIELD
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................................. $ 6,214,069 $1,820,583 $ 14,132,112 $ 4,560,566
Net realized gain (loss) on investments................ -- 450,299 8,288,042 (574,848)
Net realized foreign exchange gain (loss) on other
assets and liabilities............................... -- -- -- --
Net realized loss on futures contracts................. -- -- -- --
Change in unrealized appreciation/depreciation on
investments.......................................... -- 2,644,460 16,257,191 4,437,941
Change in unrealized foreign exchange gain/loss on
other assets and liabilities......................... -- -- -- --
Change in unrealized appreciation/depreciation on
futures contracts.................................... -- -- -- --
-----------------------------------------------------------
Net increase in net assets resulting from operations... 6,214,069 4,915,342 38,677,345 8,423,659
-----------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS:
Dividends from net investment income................... (6,214,069) (2,175,000) (15,800,000) (5,345,000)
Distributions from net realized gains on investments... -- -- -- --
-----------------------------------------------------------
Total dividends........................................ (6,214,069) (2,175,000) (15,800,000) (5,345,000)
-----------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.............................. 174,371,348 3,593,837 82,378,525 29,986,515
Proceeds from shares issued for reinvestment of
dividends and distributions.......................... 6,214,069 2,175,000 15,800,000 5,345,000
Cost of shares repurchased............................. (212,898,151) (9,116,475) (128,007,378) (39,650,684)
-----------------------------------------------------------
Net increase (decrease) in net assets resulting from
capital share transactions........................... (32,312,734) (3,347,638) (29,828,853) (4,319,169)
-----------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................ (32,312,734) (607,296) (6,951,508) (1,240,510)
NET ASSETS:
Beginning of period.................................... 126,004,417 28,582,098 232,530,236 48,057,248
-----------------------------------------------------------
End of period.......................................... $ 93,691,683 $27,974,802 $225,578,728 $ 46,816,738
===============================================================
---------------
Undistributed net investment income.................... $ 721 $1,886,024 $ 14,101,885 $ 4,658,768
===============================================================
Shares issued and repurchased:
Sold................................................... 174,371,348 260,087 5,911,036 3,623,914
Issued in reinvestment of dividends and
distributions........................................ 6,214,069 160,992 1,159,208 669,800
Repurchased............................................ (212,898,151) (660,807) (9,292,985) (4,777,982)
-----------------------------------------------------------
Net increase (decrease)................................ (32,312,734) (239,728) (2,222,741) (484,268)
===============================================================
</TABLE>
- ---------------
* The Convertible Securities Portfolio changed its name to the Growth and
Income Portfolio on February 29, 1996.
See Notes to Financial Statements
- ---------------------
60
<PAGE> 62
<TABLE>
<CAPTION>
CONVERTIBLE FOREIGN CAPITAL NATURAL STRATEGIC
TARGET '98 SECURITIES SECURITIES GROWTH APPRECIATION RESOURCES MULTI-ASSET MULTI-ASSET
PORTFOLIO PORTFOLIO* PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,058,818 $ 1,696,598 $ 707,451 $ 1,534,546 $ 879,808 $ 331,444 $ 5,277,929 $1,729,338
(73,496) (605,935) 3,192,282 13,885,804 16,341,623 765,009 9,801,363 3,804,739
-- (843) 177,598 1,682 45,778 (594) 54,742 62,813
-- -- -- -- (49,594) -- -- --
1,322,217 3,911,087 2,451,554 48,038,490 63,564,898 3,011,630 22,147,546 7,569,691
-- 32 (113,395) -- 639 342 12 (45,810)
-- -- 44,226 -- 96,925 -- -- --
---------------------------------------------------------------------------------------------------------------------
2,307,539 5,000,939 6,459,716 63,460,522 80,880,077 4,107,831 37,281,592 13,120,771
---------------------------------------------------------------------------------------------------------------------
(1,285,000) (2,059,675) (279,273) (600,000) (2,145,000) (365,000) (5,910,000) (1,125,000)
-- (1,515,325) (55,727) (45,075,000) (2,960,000) (510,000) (12,550,000) (8,585,000)
---------------------------------------------------------------------------------------------------------------------
(1,285,000) (3,575,000) (335,000) (45,675,000) (5,105,000) (875,000) (18,460,000) (9,710,000)
---------------------------------------------------------------------------------------------------------------------
1,032,164 4,402,376 31,832,730 134,319,676 288,502,705 27,421,662 20,218,971 4,822,892
1,285,000 3,575,000 335,000 45,675,000 5,105,000 875,000 18,460,000 9,710,000
(9,739,706) (12,390,422) (53,323,700) (136,071,781) (242,708,947) (23,817,885) (53,417,004) (19,275,150)
---------------------------------------------------------------------------------------------------------------------
(7,442,542) (4,413,046) (21,155,970) 43,922,895 50,898,758 4,478,777 (14,738,033) (4,742,258)
---------------------------------------------------------------------------------------------------------------------
(6,420,003) (2,987,107) (15,031,254) 61,708,417 126,673,835 7,711,608 4,083,559 (1,331,487)
19,194,188 34,995,380 68,640,717 246,149,027 229,544,204 21,229,763 164,159,249 65,357,347
---------------------------------------------------------------------------------------------------------------------
$12,774,185 $32,008,273 $53,609,463 $307,857,444 $356,218,039 $28,941,371 $168,242,808 $64,025,860
============================================================================================================================
$ 1,203,164 $ 1,734,211 $ 738,683 $ 1,525,191 $ 918,755 $ 325,546 $ 5,315,320 $1,761,777
============================================================================================================================
80,359 362,321 2,954,097 6,859,732 13,911,588 1,917,837 1,590,143 408,481
104,727 302,453 29,698 2,382,629 213,867 56,379 1,463,918 853,251
(748,356) (1,026,033) (4,950,332) (6,977,008) (11,890,507) (1,657,363) (4,174,813) (1,615,387)
---------------------------------------------------------------------------------------------------------------------
(563,270) (361,259) (1,966,537) 2,265,353 2,234,948 316,853 (1,120,752) (353,655)
============================================================================================================================
</TABLE>
---------------------
61
<PAGE> 63
- ---------------------
ANCHOR SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION: Anchor Series Trust (the "Trust") was organized as a
business trust under the laws of the Commonwealth of Massachusetts on August 26,
1983. The Trust is registered under the Investment Company Act of 1940, as
amended, as an open-end diversified management investment company. Shares of the
Portfolios are issued and redeemed only in connection with investments in and
payments under variable annuity contracts and variable life insurance policies
("Variable Contracts") of Anchor National Life Insurance Company, First
SunAmerica Life Insurance Company, Phoenix Mutual Life Insurance Company and
Presidential Life Insurance Company (the "Life Companies"). Effective February
29, 1996, the Convertible Securities Portfolio changed its name to the Growth
and Income Portfolio.
The investment objectives for each portfolio are as follows:
The Money Market Portfolio seeks current income consistent with stability of
principal through investment in a diversified portfolio of money market
instruments maturing in 397 days or less.
The Fixed Income Portfolio seeks a high level of current income consistent with
preservation of capital and invests primarily in investment grade, fixed income
securities.
The Government & Quality Bond Portfolio seeks relatively high current income,
liquidity and security of principal.
The High Yield Portfolio seeks to produce high current income and secondarily
seeks capital appreciation by investing in high-yielding, high-risk, income
producing corporate bonds.
The Target '98 Portfolio seeks a predictable compounded investment return for
the specified time period, consistent with preservation of capital, by investing
primarily in zero coupon securities and current interest-bearing, investment
grade debt obligations which are issued by the U.S. Government, its agencies and
instrumentalities, and both domestic and foreign companies. The Fund is
scheduled to terminate operations in 1998.
The Growth and Income Portfolio seeks to provide high current income and
long-term capital appreciation by investing primarily in securities that provide
the potential for growth and offer income, such as dividend-paying stocks and
securities convertible into common stock.
The Foreign Securities Portfolio seeks long-term capital appreciation through
investment primarily in equity securities issued by foreign companies.
The Growth Portfolio seeks capital appreciation primarily through investments in
growth equity securities.
The Capital Appreciation Portfolio seeks long-term capital appreciation by
investing in growth equity securities which are widely diversified by industry
and company.
The Natural Resources Portfolio seeks a total return through investment
primarily in equity securities of U.S. or foreign companies which are expected
to provide favorable returns in periods of rising inflation.
The Multi-Asset Portfolio seeks long-term total investment return consistent
with moderate investment risk by investing in equity securities, convertible
securities, investment grade fixed income securities and money market
securities.
The Strategic Multi-Asset Portfolio seeks high long-term total investment return
by investing in equity securities, aggressive growth equity securities,
international equity securities, investment grade bonds, high-yield, high-risk
bonds and money market instruments.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES: The preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. Following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements.
SECURITY VALUATIONS: Stocks are stated at value based upon closing sales prices
reported on recognized securities exchanges or, for listed securities having no
sales reported and for unlisted securities, upon last-reported bid prices.
Bonds, debentures, and other long-term debt securities are valued at prices
obtained for the day of valuation from a bond pricing service of a major dealer
in bonds when such prices are available; however, in circumstances where the
investment adviser deems it appropriate to do so, an over-the-counter or
exchange quotation at the mean of representative bid or asked prices may be
used. Securities traded primarily on securities exchanges outside the United
States are valued at the last sale price on such exchanges on the day of
valuation, or if there is no sale on the day of valuation, at the last reported
bid price. If a security's price is available from more than one foreign
exchange, a portfolio uses the exchange that is the primary market for the
security. Except for the Money Market Portfolio, short-term securities with
original or remaining maturities in excess of 60 days are valued at the mean of
their quoted bid and ask prices. Discounts or premiums on short-term securities
with 60 days or less to maturity are amortized to maturity. Discounts and
premiums are determined based upon the cost of the securities to the Trust if
acquired within 60 days of maturity or, if already held by the
- ---------------------
62
<PAGE> 64
Trust on the 60th day, are amortized to maturity based on the value determined
on the 61st day. Securities for which quotations are not readily available are
valued at fair value as determined in good faith under the direction of the
Trust's Trustees.
For the Money Market Portfolio, securities are valued at amortized cost, which
approximates market value. The amortized cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of any discount or premium.
REPURCHASE AGREEMENTS: The Trust's custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to assure that the value, including
accrued interest, is at least 102% of the repurchase price. In the event of
default of the obligation to repurchase, the Trust has the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Trust may be delayed or limited.
FOREIGN CURRENCY TRANSLATION: The books and records of the Trust are maintained
in U.S. dollars.
Market value of investment securities are translated into U.S. dollars at the
prevailing rate of exchange on the valuation date.
Assets and liabilities denominated in foreign currencies and commitments under
forward foreign currency contracts ("forward contracts") are translated into
U.S. dollars at the mean of the quoted bid and asked prices of such currencies
against the U.S. dollar. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated at rates of exchange prevailing when
earned or incurred.
The Trust does not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in the
market prices of securities held at fiscal year-end. The Trust does not isolate
the effect of changes in foreign exchange rates from the changes in the market
prices of portfolio securities sold during the year.
Realized foreign exchange gain (loss) on other assets and liabilities and
change in unrealized foreign exchange gain (loss) on other assets and
liabilities include realized foreign exchange gains and losses from currency
gains or losses realized between the trade and settlement dates of securities
transactions, the difference between the amounts of interest, dividends,
discount and foreign withholding taxes recorded on the Trust's books and the
U.S. dollar equivalent amounts actually received or paid and changes in the
unrealized foreign exchange gains and losses relating to other assets and
liabilities arising as a result of changes in the exchange rate.
FORWARD FOREIGN CURRENCY CONTRACTS: Certain portfolios may enter into forward
contracts to attempt to protect securities and related receivables and payables
against changes in future foreign exchange rates. A forward contract is an
agreement between two parties to buy or sell currency at a set price on a future
date. The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is marked-to-market daily using the forward rate
and the change in market value is recorded by the portfolio as unrealized gain
or loss. Upon settlement date, the portfolio records either realized gains or
losses when the contract is closed equal to the difference between the value of
the contract at the time it was opened and the value at the time it was closed.
Risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
Forward contracts involve elements of risk in excess of the amount reflected in
the Statement of Assets and Liabilities. A portfolio bears the risk of an
unfavorable change in the foreign exchange rate underlying the forward contract.
FUTURES CONTRACTS: A futures contract is an agreement between two parties to
buy or sell a financial instrument at a set price on a future date. Upon
entering into such a contract the Trust is required to pledge to the broker an
amount of cash or U.S. government securities equal to the minimum "initial
margin" requirements of the exchange on which the futures contract is traded.
The contract amount reflects the extent of a portfolio's exposure in these
financial instruments. A portfolio's participation in the futures markets
involves certain risks, including imperfect correlation between movements in the
price of futures contracts and movements in the price of the securities hedged
or used for cover. The Trust's activities in futures contracts are conducted
through regulated exchanges which do not result in counterparty credit risks.
Pursuant to a contract the portfolios agree to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as "variation margin" and are recorded by the
portfolios as unrealized appreciation or depreciation. When a contract is
closed, the portfolios record a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed.
SECURITIES TRANSACTIONS, DIVIDENDS, INVESTMENT INCOME AND EXPENSES: Securities
transactions are accounted for as of the trade date. Interest income is accrued
daily except when collection is not expected. Dividend income is recorded on the
ex-dividend date except for certain dividends from foreign securities which are
recorded as soon as the Fund is informed after the ex-dividend date. The Trust
does not amortize premiums or accrete discounts on fixed income securities,
other than short-term securities, except those original issue discounts for
which amortization is required for federal income tax purposes; gains and losses
realized upon the sale of such securities are based on their identified cost.
Portfolios which earn foreign income and capital gains may be subject to
foreign withholding taxes at various rates.
Common expenses incurred by the Trust are allocated among the portfolios based
upon relative net assets. In all other respects, expenses are charged to each
portfolio as incurred on a specific identification basis.
The Trust records dividends and distributions to its shareholders on the
ex-dividend date.
---------------------
63
<PAGE> 65
The amount of dividends and distributions from net investment income and net
realized capital gains are determined and presented in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains. To the extent distributions exceed current
and accumulated earnings and profits for federal income tax purposes, they are
reported as distributions of paid-in capital. Net investment income/loss, net
realized gain/loss, and net assets are not affected.
For the year ended December 31, 1996, the reclassification arising from
book/tax differences resulted in increases (decreases) to the components of net
assets as follows:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET REALIZED NET REALIZED IN
INCOME/LOSS GAIN/LOSS CAPITAL
<S> <C> <C> <C>
-------------------------------------------------
Money Market Portfolio.................................................. $ 1,434 $ (1,434) $ --
Fixed Income Portfolio.................................................. 19,301 100,286 (119,587)
Government & Quality Bond Portfolio..................................... (66,029) 66,029 --
High Yield Portfolio.................................................... 84,375 (84,375) --
Target '98 Portfolio.................................................... 68,559 (68,559) --
Growth and Income Portfolio............................................. 70,049 (70,049) --
Foreign Securities Portfolio*........................................... 430,836 (427,736) (3,100)
Growth Portfolio........................................................ -- -- --
Capital Appreciation Portfolio.......................................... 904 (904) --
Natural Resources Portfolio............................................. 1,145 (1,145) --
Multi-Asset Portfolio................................................... 60,766 (60,767) 1
Strategic Multi-Asset Portfolio......................................... 82,020 (80,453) (1,567)
</TABLE>
* Reclassification is primarily due to deferring book/tax treatments for foreign
currency transactions.
NOTE 3. JOINT REPURCHASE AGREEMENT ACCOUNT: The Trust transfers uninvested cash
balances into two joint accounts, the daily aggregate balance of which is
invested in one or more repurchase agreements collateralized by U.S. Treasury or
federal agency obligations. As of December 31, 1996, each participating
Portfolio had a percentage of an undivided interest in the repurchase agreements
in the joint account in which it participates. The balance in each of the joint
repo accounts at December 31, 1996 and the related repurchase agreements and
collateral is as follows:
<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT DESCRIPTION AMOUNT
---------------------------------------------------------------------------------------- ------------
<S> <C> <C>
Lehman Brothers, Inc. Repurchase Agreement
6.80% dated 12/31/96, repurchase price $84,947,079
due 1/2/97 collateralized by $176,060,000 U.S. Treasury
Strip due 2/15/11 and $49,240,000 U.S. Treasury Strip
due 8/15/10, approximate aggregate value $87,250,708.................................... $ 84,915,000
=============
First Boston Corp. Repurchase Agreement, 6.75% dated
12/31/96, repurchase price $50,018,750 due 1/2/97
collateralized by $50,171,000 U.S. Treasury Notes due
10/31/01, approximate aggregate value $50,830,122....................................... $ 50,000,000
=============
</TABLE>
<TABLE>
<CAPTION>
FIRST LEHMAN
% OF UNDIVIDED INTEREST OWNED BY EACH PORTFOLIO BOSTON BROTHERS
------------------------------------------------------------------------------------------------ --------------
<S> <C> <C>
Money Market Portfolio............................................................ 0.0% 0.0%
Fixed Income Portfolio............................................................ 0.0% 0.2%
Government & Quality Bond Portfolio............................................... 15.4% 16.3%
High Yield Portfolio.............................................................. 0.9% 0.9%
Target '98 Portfolio.............................................................. 0.3% 0.2%
Growth and Income Portfolio....................................................... 0.8% 0.7%
Foreign Securities Portfolio...................................................... 3.1% 3.6%
Growth Portfolio.................................................................. 5.4% 4.0%
Capital Appreciation Portfolio.................................................... 63.3% 62.5%
Natural Resources Portfolio....................................................... 3.6% 4.0%
Multi-Asset Portfolio............................................................. 5.9% 6.0%
Strategic Multi-Asset Portfolio................................................... 1.3% 1.6%
------- -------
100.0% 100.0%
================ ================
</TABLE>
- ---------------------
64
<PAGE> 66
NOTE 4. FEDERAL INCOME TAXES: It is each portfolio's policy to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income to shareholders.
Therefore, no federal income tax provision is required. Each portfolio is
considered a separate entity for tax purposes.
At December 31, 1996, the cost of investment securities, including short-term
securities and aggregate gross unrealized gain (loss) for each portfolio were as
follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
GROSS GROSS UNREALIZED CAPITAL
UNREALIZED UNREALIZED GAIN (LOSS) COST OF LOSS
GAIN LOSS NET INVESTMENTS CARRYOVER EXPIRATION
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Money Market Portfolio............ $ -- $ -- $ -- $ 74,148,151 $ -- --*
Fixed Income Portfolio............ 150,065 (252,606) (102,541) 22,455,753 1,990,561 1997-2002
Government & Quality Bond
Portfolio....................... 2,367,111 (3,411,691) (1,044,580) 229,751,650 -- --*
High Yield Portfolio.............. 2,117,454 (680,177) 1,437,277 43,198,797 14,097,904 1997-2003
Target '98 Portfolio.............. 330,629 (64,616) 266,013 9,900,629 252,703 2002-2003
Growth and Income Portfolio....... 4,532,595 (520,045) 4,012,550 29,771,966 -- --*
Foreign Securities Portfolio...... 5,241,725 (2,668,735) 2,572,990 45,543,793 -- --
Growth Portfolio.................. 85,949,173 (6,233,556) 79,715,617 287,007,596 -- --
Capital Appreciation Portfolio.... 107,362,077 (9,252,579) 98,109,498 467,039,212 -- --**
Natural Resources Portfolio....... 6,269,189 (1,533,367) 4,735,822 40,534,737 -- --**
Multi-Asset Portfolio............. 29,518,516 (1,908,073) 27,610,443 127,535,481 -- --
Strategic Multi-Asset Portfolio... 11,470,901 (2,684,236) 8,786,665 48,680,589 -- --**
</TABLE>
The Fixed Income, High Yield, Target '98, Growth and Income and Foreign
Securities portfolios utilized capital loss carryovers of $502,774, $598,763,
$1,747, $1,470,924 and $2,275,439, respectively, to partially offset the
portfolios' net taxable gains realized and recognized in the year ended December
31, 1996. In addition $180,609 of prior year capital loss carryover for the
Fixed Income Portfolio expired as of December 31, 1996.
* Post 10/31 Capital Loss Deferrals: Money Market $2,155, Government & Quality
Bond $140,639, and Growth and Income $82,551.
** Post 10/31 Foreign Exchange Loss Deferrals: Capital Appreciation $101,
Natural Resources $754 and Strategic Multi-Asset $6,846.
NOTE 5. INVESTMENT MANAGEMENT AGREEMENTS: The Trust has entered into an
Investment Advisory and Management Agreement (the "Management Agreement") with
SunAmerica Asset Management Corp. ("SAAMCo") with respect to each portfolio.
SAAMCo serves as manager for each of the portfolios. The Management Agreements
provide that SAAMCo shall act as investment adviser to the Trust; manage the
Trust's investments; administer its business affairs; furnish offices, necessary
facilities and equipment; provide clerical, bookkeeping and administrative
services; and permit any of its officers or employees to serve, without
compensation, as trustees or officers of the Trust, if duly elected to such
positions.
The Trust pays SAAMCo a monthly fee calculated daily at the following annual
percentages of each portfolio's average daily net assets:
<TABLE>
<CAPTION>
AVERAGE DAILY MANAGEMENT
PORTFOLIO NET ASSETS FEE
- --------------------------------------------------------
<S> <C> <C>
Money Market $0-$150 million .500%
> $150 million .475%
> $250 million .450%
> $500 million .425%
Government & Quality
Bond/ $0-$200 million .625%
Fixed Income > $200 million .575%
> $500 million .500%
High Yield $0-$250 million .700%
> $250 million .575%
> $500 million .500%
Target '98 $0-$100 million .625%
> $100 million .570%
> $250 million .525%
> $500 million .500%
Growth and Income $0-$100 million .700%
> $100 million .650%
> $250 million .600%
> $500 million .575%
<CAPTION>
AVERAGE DAILY MANAGEMENT
PORTFOLIO NET ASSETS FEE
- --------------------------------------------------------
<S> <C> <C>
Foreign Securities $0-$100 million .900%
> $100 million .825%
> $250 million .750%
> $500 million .700%
Growth $0-$250 million .750%
> $250 million .675%
> $500 million .600%
Capital Appreciation $0-$100 million .750%
> $100 million .675%
> $250 million .625%
> $500 million .600%
Natural Resources > $0 .750%
Strategic Multi-Asset/ $0-$200 million 1.000%
Multi-Asset > $200 million .875%
> $500 million .800%
</TABLE>
---------------------
65
<PAGE> 67
SAAMCO has entered into Subadvisory Agreements (the "Subadvisory Agreement")
with Wellington Management Company ("WMC") to manage the investments of each
portfolio.
The portion of the investment advisory fees received by SAAMCo which are paid
to WMC are as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY WMC
PORTFOLIO NET ASSETS ALLOCATION
- --------------------------------------------------------
<S> <C> <C>
Money Market $0-$500 million .075%
> $500 million .020%
Government & Quality
Bond/ $0-$ 50 million .225%
Fixed Income > $ 50 million .125%
> $100 million .100%
High Yield $0-$ 50 million .300%
> $ 50 million .225%
> $150 million .175%
> $500 million .150%
Target '98 $0-$ 50 million .225%
> $ 50 million .150%
> $100 million .100%
> $500 million .050%
Growth/ $0-$ 50 million .325%
Growth and Income > $ 50 million .225%
> $150 million .200%
> $500 million .150%
<CAPTION>
AVERAGE DAILY WMC
PORTFOLIO NET ASSETS ALLOCATION
- --------------------------------------------------------
<S> <C> <C>
Foreign Securities $0-$ 50 million .400%
> $ 50 million .275%
> $150 million .200%
> $500 million .150%
Capital Appreciation $0-$ 50 million .375%
> $ 50 million .275%
> $150 million .200%
> $500 million .150%
Natural Resources $0-$ 50 million .350%
> $ 50 million .250%
> $150 million .200%
> $500 million .150%
Multi-Asset $0-$ 50 million .250%
> $ 50 million .175%
> $150 million .150%
Strategic Multi-Asset $0-$ 50 million .300%
> $ 50 million .200%
> $150 million .175%
> $500 million .150%
</TABLE>
For the year ended December 31, 1996, SAAMCo received fees of $10,950,011 from
the Trust, of which SAAMCo informed the Trust that $7,616,371 was retained and
$3,333,640 was allocated to WMC.
NOTE 6. SECURITIES TRANSACTIONS: The portfolios had the following purchases and
sales of long-term securities for the year ended December 31, 1996:
<TABLE>
<CAPTION>
MONEY GOVERNMENT & GROWTH
MARKET FIXED INCOME QUALITY BOND HIGH YIELD TARGET '98 AND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
Purchases.............................. $ -- $ 18,388,879 $246,789,898 $24,263,266 $ -- $33,286,649
Sales.................................. -- 21,411,694 221,470,659 25,563,232 2,995,902 36,516,128
U.S. Government Securities included
above were as follows:
Purchases of U.S. Government
Securities........................... -- 12,871,829 226,982,095 -- -- --
Sales of U.S. Government Securities.... -- 8,759,171 206,357,709 -- 1,130,738 --
<CAPTION>
FOREIGN CAPITAL NATURAL STRATEGIC
SECURITIES GROWTH APPRECIATION RESOURCES MULTI-ASSET MULTI-ASSET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Purchases.............................. $35,472,026 $166,211,860 $342,216,979 $27,337,681 $ 97,303,252 $29,742,924
Sales.................................. 45,691,188 180,448,567 283,615,002 19,170,014 117,813,662 42,432,943
U.S. Government Securities included
above were as follows:
Purchases of U.S. Government
Securities........................... -- -- -- -- 49,147,136 502,812
Sales of U.S. Government Securities.... -- -- -- -- 51,628,502 4,743,427
</TABLE>
- ---------------------
66
<PAGE> 68
NOTE 7. TRANSACTIONS WITH AFFILIATES: The Trust has executed purchases and
sales of securities through Royal Alliance Associates, Inc., SunAmerica
Securities, Inc., and Advantage Capital Corp., which are broker/dealers
affiliated with SAAMCo. For the year ended December 31, 1996, the following
portfolios of the Trust paid brokerage commissions to these affiliate companies
of:
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
Growth and Income Portfolio.................................................... $ 12
Foreign Securities Portfolio................................................... 552
Growth Portfolio............................................................... 6,310
Capital Appreciation Portfolio................................................. 25,962
Natural Resources Portfolio.................................................... 1,300
Multi-Asset Portfolio.......................................................... 750
Strategic Multi-Asset Portfolio................................................ 3,963
-------
$38,849
========
</TABLE>
NOTE 8. TRUSTEES RETIREMENT PLAN: The Trustees (and Directors) of the
SunAmerica Family of Mutual Funds have adopted the SunAmerica Disinterested
Trustees' and Directors' Retirement Plan (the "Retirement Plan") effective
January 1, 1993 for the unaffiliated Trustees. The Retirement Plan provides
generally that if an unaffiliated Trustee who has at least 10 years of
consecutive service as a Disinterested Trustee of any of the SunAmerica mutual
funds (an "Eligible Trustee") retires after reaching age 60 but before age 70 or
dies while a Trustee, such person will be eligible to receive a retirement or
death benefit from each SunAmerica mutual fund with respect to which he or she
is an Eligible Trustee. As of each birthday, prior to the 70th birthday, but in
no event for a period greater than 10 years, each Eligible Trustee will be
credited with an amount equal to 50% of his or her regular fees (excluding
committee fees) for services as a Disinterested Trustee of each SunAmerica
mutual fund for the calendar year in which such birthday occurs. In addition, an
amount equal to 8.5% of any amounts credited under the preceding clause during
prior years, is added to each Eligible Trustee's account until such Eligible
Trustee reaches his or her 70th birthday. An Eligible Trustee may receive
benefits payable under the Retirement Plan, at his or her election, either in
one lump sum or in up to fifteen annual installments. As of December 31, 1996,
the Trust had accrued $86,100 for the Retirement Plan, which is included in
accrued expenses on the Statement of Assets and Liabilities and for the year
ended December 31, 1996, expensed $34,404 for the Retirement Plan, which is
included in Trustee fees and expenses on the Statement of Operations.
---------------------
67
<PAGE> 69
- ---------------------
ANCHOR SERIES TRUST
FINANCIAL HIGHLIGHTS*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET DIVIDENDS DIVIDENDS
REALIZED TOTAL DECLARED FROM NET
NET ASSET NET & UNREALIZED FROM FROM NET REALIZED NET ASSET
VALUE INVEST- GAIN (LOSS) INVEST- INVEST- GAIN ON VALUE
PERIOD BEGINNING MENT ON MENT MENT INVEST- END OF TOTAL
ENDED OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME MENTS PERIOD RETURN**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Portfolio
12/31/92 $ 1.00 $ 0.03 $ -- $ 0.03 $ (0.03) $ -- $ 1.00 3.4%
12/31/93 1.00 0.02 -- 0.02 (0.02) -- 1.00 2.0
12/31/94 1.00 0.04 -- 0.04 (0.04) -- 1.00 3.8
12/31/95 1.00 0.05 -- 0.05 (0.05) -- 1.00 5.6
12/31/96 1.00 0.05 -- 0.05 (0.05) -- 1.00 5.0
Fixed Income Portfolio
12/31/92 14.43 0.98 (0.04) 0.94 (1.06) -- 14.31 6.5
12/31/93 14.31 0.95 0.19 1.14 (0.91) -- 14.54 8.0
12/31/94 14.54 0.89 (1.36) (0.47) (1.17) -- 12.90 (3.2)
12/31/95 12.90 0.90 1.52 2.42 (1.16) -- 14.16 19.2
12/31/96 14.16 0.93 (0.64) (0.29) (1.15) -- 13.30 2.4
Government & Quality Bond Portfolio
12/31/92 14.03 1.02 (0.05) 0.97 (1.07) -- 13.93 6.9
12/31/93 13.93 0.90 0.25 1.15 (0.86) -- 14.22 8.3
12/31/94 14.22 0.86 (1.30) (0.44) (0.73) (0.19) 12.86 (3.1)
12/31/95 12.86 0.90 1.55 2.45 (1.08) -- 14.23 19.4
12/31/96 14.23 0.87 (0.50) 0.37 (0.90) (0.03) 13.67 2.9
High Yield Portfolio
12/31/92 7.88 0.81 0.28 1.09 (0.58) -- 8.39 13.9
12/31/93 8.39 0.79 0.79 1.58 (0.54) -- 9.43 19.1
12/31/94 9.43 0.15 (0.56) (0.41) (1.15) -- 7.87 (4.5)
12/31/95 7.87 0.77 0.67 1.44 (0.98) -- 8.33 18.8
12/31/96 8.33 0.74 0.19 0.93 (0.88) -- 8.38 11.7
Target '98 Portfolio
12/31/92 13.63 0.82 0.16 0.98 (0.79) (0.25) 13.57 7.2
12/31/93 13.57 0.82 0.71 1.53 (0.93) (0.23) 13.94 11.2
12/31/94 13.94 0.83 (1.39) (0.56) (1.11) (0.07) 12.20 (4.1)
12/31/95 12.20 0.86 0.88 1.74 (1.30) -- 12.64 14.6
12/31/96 12.64 0.81 (0.37) 0.44 (1.41) -- 11.67 3.7
Growth and Income Portfolio
12/31/92 10.98 0.65 1.50 2.15 (0.64) -- 12.49 20.1
12/31/93 12.49 0.61 2.11 2.72 (0.55) (0.08) 14.58 22.0
12/31/94 14.58 0.66 (1.96) (1.30) (0.52) (1.20) 11.56 (9.7)
12/31/95 11.56 0.61 1.29 1.90 (0.83) (0.62) 12.01 16.6
12/31/96+ 12.01 0.33 2.02 2.35 (0.77) -- 13.59 20.2
<CAPTION>
NET RATIO OF NET
ASSETS RATIO OF INVESTMENT
END OF EXPENSES INCOME PORTFOLIO AVERAGE
PERIOD PERIOD TO AVERAGE TO AVERAGE TURNOVER COMMISSION
ENDED (000'S) NET ASSETS NET ASSETS RATE PER SHARE@
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market Portfolio
12/31/92 $127,262 0.6% 3.3% %-- $ NA
12/31/93 99,309 0.6 2.7 -- NA
12/31/94 126,004 0.6 3.8 -- NA
12/31/95 93,692 0.6 5.5 -- NA
12/31/96 74,001 0.6 4.9 -- NA
Fixed Income Portfolio
12/31/92 40,001 0.8 6.8 31.8 NA
12/31/93 41,116 0.8 6.3 45.9 NA
12/31/94 28,582 0.8 6.5 56.5 NA
12/31/95 27,975 0.8 6.5 76.7 NA
12/31/96 22,743 0.8 6.8 77.9 NA
Government & Quality Bond Portfolio
12/31/92 207,860 0.8 7.3 76.4 NA
12/31/93 264,660 0.7 6.2 93.2 NA
12/31/94 232,530 0.7 6.4 117.6 NA
12/31/95 225,579 0.7 6.5 135.2 NA
12/31/96 221,603 0.7 6.3 106.7 NA
High Yield Portfolio
12/31/92 47,140 0.9 9.7 134.9 NA
12/31/93 79,303 0.9 8.5 121.1 NA
12/31/94 48,057 0.9 9.0 97.9 NA
12/31/95 46,817 0.9 9.2 68.1 NA
12/31/96 45,687 0.9 8.8 58.0 NA
Target '98 Portfolio
12/31/92 19,227 0.9 6.0 37.3 NA
12/31/93 20,500 0.9 5.7 20.8 NA
12/31/94 19,194 0.8 6.5 9.2 NA
12/31/95 12,774 0.9 6.7 38.6 NA
12/31/96 10,172 0.9 6.5 -- NA
Growth and Income Portfolio
12/31/92 23,723 1.0 5.6 86.5 NA
12/31/93 41,555 0.9 4.4 86.2 NA
12/31/94 34,995 0.9 4.9 50.7 NA
12/31/95 32,008 0.9 5.2 88.8 NA
12/31/96+ 33,465 0.9 2.5 108.5 .0477
</TABLE>
- ---------------
* Selected data for a share of beneficial interest outstanding throughout each
period (calculated based upon average shares outstanding)
** Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company, First SunAmerica Life Insurance Company,
Phoenix Mutual Life Insurance Company and Presidential Life Insurance
Company. If such expenses had been included, total return would have been
lower for each period presented.
@ The average commission per share is derived by taking the Agency commissions
paid on equity securities trades and dividing by the number of shares
purchased and sold. This information was not required to be disclosed prior to
1996.
+ Prior to March 1, 1996, the portfolio was invested primarily in convertible
debt securities. After that date, the portfolio primarily invests in common
stock.
- ---------------------
68
<PAGE> 70
- ---------------------
ANCHOR SERIES TRUST
FINANCIAL HIGHLIGHTS* -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET DIVIDENDS DIVIDENDS
REALIZED TOTAL DECLARED FROM NET
NET ASSET NET & UNREALIZED FROM FROM NET REALIZED NET ASSET
VALUE INVEST- GAIN (LOSS) INVEST- INVEST- GAIN ON VALUE
PERIOD BEGINNING MENT ON MENT MENT INVEST- END OF TOTAL
ENDED OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME MENTS PERIOD RETURN**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Foreign Securities Portfolio
12/31/92 $ 10.11 $ 0.13 $(1.43) $ (1.30) $ (0.06) $ (0.28) $ 8.47 (13.1)%
12/31/93 8.47 0.05 2.50 2.55 (0.09) -- 10.93 30.2
12/31/94 10.93 0.11 (0.46) (0.35) (0.03) -- 10.55 (3.2)
12/31/95 10.55 0.13 1.19 1.32 (0.05) (0.01) 11.81 12.6
12/31/96 11.81 0.15 1.19 1.34 (0.21) -- 12.94 11.5
Growth Portfolio
12/31/92 21.40 0.09 0.99 1.08 (0.19) (0.62) 21.67 5.4
12/31/93 21.67 0.05 1.60 1.65 (0.08) (0.92) 22.32 7.8
12/31/94 22.32 0.05 (1.03) (0.98) (0.05) (3.11) 18.18 (4.7)
12/31/95 18.18 0.11 4.62 4.73 (0.05) (3.38) 19.48 26.3
12/31/96 19.48 0.20 4.57 4.77 (0.11) (0.95) 23.19 25.0
Capital Appreciation Portfolio
12/31/92 15.23 0.01 3.70 3.71 (0.07) (1.12) 17.75 25.9
12/31/93 17.75 (0.03) 3.73 3.70 (0.01) (1.16) 20.28 21.1
12/31/94 20.28 (0.02) (0.71) (0.73) -- (2.04) 17.51 (3.8)
12/31/95 17.51 0.06 6.00 6.06 (0.15) (0.20) 23.22 34.6
12/31/96 23.22 0.06 5.73 5.79 (0.06) (0.95) 28.00 25.1
Natural Resources Portfolio
12/31/92 10.06 0.21 0.05 0.26 (0.39) -- 9.93 2.5
12/31/93 9.93 0.15 3.42 3.57 (0.17) -- 13.33 36.2
12/31/94 13.33 0.23 (0.09) 0.14 (0.09) (0.09) 13.29 1.0
12/31/95 13.29 0.18 2.15 2.33 (0.21) (0.29) 15.12 17.5
12/31/96 15.12 0.22 1.89 2.11 (0.13) (0.23) 16.87 14.1
Multi-Asset Portfolio
12/31/92 13.53 0.41 0.67 1.08 (0.47) (0.35) 13.79 8.2
12/31/93 13.79 0.36 0.63 0.99 (0.44) (0.46) 13.88 7.3
12/31/94 13.88 0.39 (0.60) (0.21) (0.47) (1.49) 11.71 (1.7)
12/31/95 11.71 0.40 2.47 2.87 (0.49) (1.05) 13.04 24.9
12/31/96 13.04 0.35 1.36 1.71 (0.49) (0.91) 13.35 13.9
Strategic Multi-Asset Portfolio
12/31/92 12.63 0.23 0.25 0.48 (0.34) (0.32) 12.45 3.9
12/31/93 12.45 0.21 1.68 1.89 (0.28) -- 14.06 15.3
12/31/94 14.06 0.24 (0.53) (0.29) (0.20) (2.28) 11.29 (2.6)
12/31/95 11.29 0.32 2.18 2.50 (0.23) (1.78) 11.78 22.8
12/31/96 11.78 0.25 1.41 1.66 (0.40) (0.84) 12.20 14.8
<CAPTION>
NET RATIO OF NET
ASSETS RATIO OF INVESTMENT
END OF EXPENSES INCOME (LOSS) PORTFOLIO AVERAGE
PERIOD PERIOD TO AVERAGE TO AVERAGE TURNOVER COMMISSION
ENDED (000'S) NET ASSETS NET ASSETS RATE PER SHARE@
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Foreign Securities Portfolio
12/31/92 $ 29,204 1.3% 1.4% 144.2% $ NA
12/31/93 72,579 1.3 0.5 47.7 NA
12/31/94 68,641 1.2 1.0 73.9 NA
12/31/95 53,609 1.2 1.2 33.0 NA
12/31/96 48,036 1.4 1.2 74.3 .0062
Growth Portfolio
12/31/92 279,291 0.9 0.5 37.9 NA
12/31/93 311,050 0.9 0.2 66.3 NA
12/31/94 246,149 0.8 0.2 74.8 NA
12/31/95 307,857 0.9 0.6 92.1 NA
12/31/96 366,602 0.8 0.9 51.7 .0515
Capital Appreciation Portfolio
12/31/92 83,414 0.9 0.1 92.9 NA
12/31/93 182,515 0.9 (0.2) 111.2 NA
12/31/94 229,544 0.8 (0.1) 64.0 NA
12/31/95 356,218 0.8 0.3 60.1 NA
12/31/96 567,672 0.8 0.2 69.2 .0517
Natural Resources Portfolio
12/31/92 8,796 1.3 2.1 18.7 NA
12/31/93 18,255 1.1 1.3 34.5 NA
12/31/94 21,230 1.0 1.7 36.0 NA
12/31/95 28,941 1.0 1.3 32.0 NA
12/31/96 45,329 0.9 1.3 52.5 .0409
Multi-Asset Portfolio
12/31/92 207,533 1.1 3.1 38.6 NA
12/31/93 208,900 1.1 2.6 48.2 NA
12/31/94 164,159 1.1 3.0 82.5 NA
12/31/95 168,243 1.1 3.2 85.9 NA
12/31/96 150,619 1.1 2.6 64.1 .0517
Strategic Multi-Asset Portfolio
12/31/92 79,621 1.3 1.8 57.5 NA
12/31/93 76,466 1.3 1.2 73.9 NA
12/31/94 65,357 1.3 1.8 63.7 NA
12/31/95 64,026 1.3 2.7 36.9 NA
12/31/96 57,744 1.4 2.0 51.3 .0064
</TABLE>
- ---------------
* Selected data for a share of beneficial interest outstanding throughout each
period (calculated based upon average shares outstanding)
** Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company, First SunAmerica Life Insurance Company,
Phoenix Mutual Life Insurance Company and Presidential Life Insurance
Company. If such expenses had been included, total return would have been
lower for each period presented.
@ The average commission per share is derived by taking the Agency commissions
paid on equity securities trades and dividing by the number of shares
purchased and sold. This information was not required to be disclosed prior to
1996.
---------------------
69
<PAGE> 71
- ---------------------
ANCHOR SERIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of Anchor Series Trust
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolios, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Money Market
Portfolio, the Fixed Income Portfolio, the Government & Quality Bond
Portfolio, the High Yield Portfolio, the Target '98 Portfolio, the Growth
and Income Portfolio, the Foreign Securities Portfolio, the Growth
Portfolio, the Capital Appreciation Portfolio, the Natural Resources
Portfolio, the Multi-Asset Portfolio and the Strategic Multi-Asset Portfolio
(constituting Anchor Series Trust, hereafter referred to as the "Trust") at
December 31, 1996, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in
the period then ended and the financial highlights for each of the five
years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
December 31, 1996 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
February 13, 1997
1177 Avenue of the Americas
New York, New York 10036
- ---------------------
70
<PAGE> 72
- ---------------------
COMPARISONS: PORTFOLIOS VS. STOCKS
Wellington Management Company is pleased to provide the following
investment comments regarding the 12 Anchor Series Trust
portfolios for the fiscal year ended December 31, 1996. The
accompanying graphs compare the performance of a $10,000
investment in each portfolio (except Money Market) to a $10,000
investment in a comparable securities index since the portfolio's
inception.
To help investors gain perspective about the Anchor Series Trust
Portfolios, we have added comparative fund averages as compiled by
Lipper Analytical Services in our report this year. These Lipper
averages represent all variable annuity funds with similar
objectives and are included in each portfolio discussion to the
extent that a comparable Lipper category exists. The Lipper
returns shown include all fund expenses but exclude insurance
company expenses associated with the variable annuities. We
believe these averages may be helpful to shareholders in
evaluating the Anchor Series Trust Portfolios, since an average of
comparable funds is often a truer comparison than an unmanaged
index of securities such as the S&P 500 (which is not actively
managed and which is reported "gross" of all expenses and
transaction costs).
THE FOLLOWING GRAPHS AND TABLES SHOW THE PERFORMANCE OF THE
PORTFOLIOS AT THE ANCHOR SERIES TRUST LEVEL AND INCLUDE ALL TRUST
EXPENSES, BUT NO INSURANCE COMPANY EXPENSES ASSOCIATED WITH THE
VARIABLE ANNUITY AND NO CONTINGENT DEFERRED SALES CHARGE. NO
EXPENSES ARE DEDUCTED FROM THE PERFORMANCE OF THE INDEXES. ALL
DIVIDENDS ARE ASSUMED TO BE REINVESTED.
Investments in stocks and bonds are subject to risk, including
stock market and interest-rate fluctuations. Investments in
non-U.S. stocks are subject to additional risks, including
political and social instability, differing securities regulations
and accounting standards, and limited public information.
High-yield bonds tend to be subject to greater price swings than
higher-rated bonds and, of course, payment of interest and
principal is not assured. Mortgage-backed securities are subject
to prepayment, which can result in reinvestment of principal at
lower yields. Money market instruments generally offer stability
and income, but an investment in these securities, like
investments in other portfolios, is not guaranteed by the U.S.
government or any other entity.
- ---------------------
The Money Market Portfolio
The Money Market Portfolio met its objectives of current income
consistent with stability of principal in fiscal year 1996,
providing a 5.0% return for the year and a constant share value of
$1.00. Consensus expectations for 1997 are a continuation of
growth and inflation at similar levels as 1996. With this in mind,
it is anticipated that the Federal Reserve will keep short-term
interest rate changes on hold. Therefore, we will look for
opportunities to buy securities maturing in the three to six month
area, while we maintain the portfolio's average maturity near 60
days.
---------------------
71
<PAGE> 73
FIXED-INCOME PORTFOLIOS
[GRAPH]
FIXED INCOME PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96
1-year 2.42%
5-year 6.31%
10-year 7.45%
The Lehman Brothers Government/Corporate Index includes Treasury
and agency securities, as well as corporate bonds and Yankee
(U.S.-dollar denominated, non U.S. issuer) issues. The Lehman
Brothers Aggregate Index combines several Lehman Brothers Indexes
which include the government and corporate markets, agency
mortgage pass-through securities, and asset-backed securities. The
Lipper Variable Annuity Corporate Debt BBB-Rated category includes
funds which invest at least 65% of assets in corporate and
government debt issues rated in the top four credit rating
categories.
THE FIXED INCOME PORTFOLIO returned 2.4% in 1996, which lagged the
2.8% average return of the Lipper Variable Annuity Corporate Debt
BBB-Rated category. The underperformance is likely to have
resulted from the portfolio's relatively high credit quality
profile. At year end, approximately 75% of the portfolio's
holdings were AAA-rated. Bond market returns, however, were
greatest for lower quality securities in 1996, as evidenced by the
4.0% return for the BBB-rated component versus the 2.6% return of
the AAA component of the Lehman Brothers Aggregate Index.
The portfolio's performance also lagged the 2.9% return of the
Lehman Brothers Government/Corporate Index (which includes
Treasuries, agencies, and investment grade corporates) and the
3.6% return of the Lehman Brothers Aggregate Index (which includes
Treasuries, agencies, investment grade corporates, and mortgages).
During the year, we positioned the portfolio for an interest rate
decline by decreasing the portfolio's holdings in the corporate
sector and increasing the weighting in Treasuries and agencies.
This hampered the portfolio's performance as rates rose in 1996
and the corporate sector's 3.3% return outperformed the U.S.
government (Treasuries and agencies) sector's 2.8% return as
measured by Lehman Brothers. The portfolio's duration ranged
between 5.0-5.5 during the year, which was consistent with the
bond market.
We believe that the Lehman Government/Corporate Index is more
representative of the Lipper VA Corporate Debt BBB-Rated category
and the portfolio than is the Lehman Aggregate Index. According,
we will not be including the Lehman Aggregate Index for
comparative purposes in the future. In addition, because the
portfolio invests in mortgage-backed securities opportunistically
rather than by portfolio mandate, we feel that the Lehman
Government/Corporate Index is a more appropriate index for
comparison than the Lehman Aggregate Index.
The graph represents past performance, which is not indicative of
future results.
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FIXED-INCOME PORTFOLIOS (CONTINUED)
[GRAPH]
GOVERNMENT AND QUALITY BOND PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96
1-year 2.89%
5-year 6.63%
10-year 8.33%
The Lehman Brothers Aggregate Index combines several Lehman
Brothers Indexes which include the government and corporate
markets, agency mortgage pass-through securities, and asset-backed
securities. The Lipper Variable Annuity General U.S. Government
category includes funds which invest at least 65% of assets in
U.S. government and agency issues. The Lipper Variable Annuity
Corporate Debt A-Rated category includes funds which invest at
least 65% of assets in corporate debt issues rated "A" or better,
or government issues.
THE GOVERNMENT AND QUALITY BOND PORTFOLIO returned 2.9% for the
year, outperforming the Lipper Variable Annuity General U.S.
Government category's average return of 2.3% and the Lipper
Variable Annuity Corporate Debt A-Rated category's average return
of 2.4%. During 1996, the portfolio maintained an overweight
position in mortgage-backed securities, with approximately 40-45%
of the portfolio's holding in this sector. This contributed
positively to the portfolio's performance, as the mortgage sector
outperformed corporates, Treasuries, and agencies during the year.
Effective July 1996, Lipper changed the portfolio's variable
annuity category from Corporate Debt A-Rated to General U.S.
Government. The Lipper Variable Annuity Corporate Debt A-Rated
category requires that funds invest at least 65% of their assets
in corporate debt issues rated "A" or better or in U.S. government
issues. In comparison, the Lipper Variable Annuity General U.S.
Government category requires that funds have at least 65% of their
securities in U.S. government and agency issues. As the
portfolio's overall quality has been "AAA" compared to an "AA"
average for the Corporate Debt A-Rated category, and the
portfolio's average weighting in government and agency issues has
been approximately 70%, the General U.S. Government category was
more representative from a quality and sector standpoint.
The portfolio underperformed the Lehman Brothers Aggregate Index
return of 3.6%. The portfolio's longer duration versus the Lehman
Brothers Aggregate Index hurt relative returns during the first
half of 1996, as interest rates rose across the yield curve.
However, in the second half of the year, the portfolio's duration
bet paid off as yields fell, though not to the extent that it rose
earlier in the year.
The graph represents past performance, which is not indicative of
future results.
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FIXED-INCOME PORTFOLIOS (CONTINUED)
[GRAPH]
HIGH YIELD PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96
1-year 11.70%
5-year 11.45%
10-year 8.71%
The Lehman Brothers High Yield Index covers the universe of fixed
rate, publicly issued, noninvestment grade debt registered with
the SEC. All bonds included in the Index must be U.S.
dollar-denominated and nonconvertible. The Lehman Brothers
Aggregate Index covers the U.S. investment grade fixed rate bond
market, including the government and corporate markets, agency
mortgage pass-through securities, and asset-backed securities. The
Lipper Variable Annuity High Current Yield category includes funds
which aim at high (relative) current yield from fixed income
securities. There are no quality or maturity restrictions, though
these funds tend to invest in lower grade debt issues.
THE HIGH YIELD PORTFOLIO returned 11.7% in 1996, which was ahead
of the Lehman Brothers High Yield Index return of 11.3% and the
3.6% return of the Lehman Brothers Aggregate Index. In 1996,
"medium quality" (B-rated) instruments posted the highest returns
in the high-yield market, and returns of the "lower quality"
securities (below B-rated) were roughly in line with the
medium-quality instruments. "Higher quality" (BB-rated) high yield
securities did not fare as well, though they still posted positive
returns. During this time, the portfolio was invested
approximately 15-20% in BB-rated securities, 70-80% invested in
B-rated instruments and only 1-2% in securities rated below B or
non-rated. The portfolio's returns lagged the 12.5% average return
of the Lipper Variable Annuity High Current Yield category. The
portfolio's underperformance relative to its Lipper group is
likely a result of certain assets in the category having a much
greater exposure to lower quality instruments than the portfolio
(as compared to the Lehman Brothers High Yield Index, which
contains approximately 45-50% BB-rated securities and 45-50%
B-rated instruments). In addition, cash flow activity was volatile
in the portfolio during the year. This had a negative relative
impact on performance on the margin, as additional transaction
costs were incurred to accommodate the cash inflows/outflows.
The graph represents past performance, which is not indicative of
future results.
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<PAGE> 76
FIXED-INCOME PORTFOLIOS (CONTINUED)
[GRAPH]
TARGET '98 PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96
1-year 3.73%
5-year 6.32%
Since Inception (5/2/88) 8.81%
The Lehman Brothers Aggregate Index combines several Lehman
Brothers Indexes which include the government and corporate
markets, agency mortgage pass-through securities, and asset-backed
securities.
THE TARGET '98 PORTFOLIO returned 3.7% for the year, outperforming
the 3.6% return for the Lehman Brothers Aggregate Index. Given the
rise in yields during 1996, it comes as no surprise that the
portfolio outperformed the index, which had a longer duration
versus the portfolio. The strategy of the portfolio has been to
invest in U.S. Treasury and agency zero-coupon bonds and high
quality corporate bonds. However, going forward, mortgages may be
added to the portfolio for their incremental yield as reinvestment
risk becomes a smaller concern the closer the portfolio is to its
target maturity date. At December 31, 1996, with slightly less
than two years left to maturity, the portfolio's yield to maturity
exceeded that of the U.S. Treasury strip maturing on November 15,
1998 by 6 basis points.
The graph represents past performance, which is not indicative of
future results.
---------------------
75
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BALANCED PORTFOLIOS
[GRAPH]
MULTI-ASSET PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96
1-year 13.87%
5-year 10.19%
Since Inception (3/23/87) 10.38%
The S&P 500 Composite Index tracks the performance of 500 large
company stocks which are designed to represent price movements in
the U.S. equity market. Companies are chosen for market size and
liquidity so that, in aggregate, they represent a broad
distribution across industry groups. The index includes both
foreign and domestic stocks traded publicly in the U.S. Because it
is market weighted, the index will reflect changes in larger
companies more heavily than those in smaller companies. The Lehman
Brothers Aggregate Index combines several Lehman Brothers Indexes
which include the government and corporate markets, agency
mortgage pass-through securities, and asset-backed securities. The
Lipper VA Flexible category includes funds which allocate its
investments across various asset classes, including domestic
common stocks, bonds, and money market instruments, with a focus
on total return.
THE MULTI-ASSET PORTFOLIO returned 13.9% in 1996, which was ahead
of the 13.5% average return of the Lipper Variable Annuity
Flexible category. The portfolio's return was also in between the
23.0% return of the S&P 500 Index and the 3.6% return of the
Lehman Aggregate Index. The performance of the portfolio's fixed
income component was on par with the Lehman Brothers Aggregate
Index, primarily due to its heavy weighting in the mortgage
sector. The portfolio's U.S. equity component, however, slightly
lagged the S&P 500 Index. During the year, good stock selection in
the finance and healthcare sectors was additive to equity returns,
while a slight overweight in the information and entertainment
sector hampered returns, as this sector underperformed relative to
other sectors. At December 31, 1996, the portfolio had 64% of its
net assets invested in equities and 36% invested in bonds and
cash.
The graph represents past performance, which is not indicative of
future results.
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76
<PAGE> 78
BALANCED PORTFOLIOS (CONTINUED)
[GRAPH]
STRATEGIC MULTI-ASSET PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96
1-year 14.81%
5-year 10.47%
Since Inception (3/23/87) 9.36%
The S&P 500 Composite Index tracks the performance of 500 large
company stocks which are designed to represent price movements in
the U.S. equity market. Companies are chosen for market size and
liquidity so that, in aggregate, they represent a broad
distribution across industry groups. The index includes both
foreign and domestic stocks traded publicly in the U.S. Because it
is market weighted, the index will reflect changes in larger
companies more heavily than those in smaller companies. The Lehman
Brothers Aggregate Index combines several Lehman Brothers Indexes
which include the government and corporate markets, agency
mortgage pass-through securities, and asset-backed securities. The
Lipper Variable Annuity Global Flexible category includes funds
which allocate its investments across various asset classes,
including both domestic and foreign stocks, bonds and money market
instruments, with a focus on total return. At least 25% of its
portfolio is invested in securities traded outside of the U.S.,
including shares of gold mines gold-oriented mining finance
houses, gold coins, or bullion.
THE STRATEGIC MULTI-ASSET PORTFOLIO returned 14.8% for the year,
underperforming the 15.7% average return of the Lipper Variable
Annuity Global Flexible category. The portfolio's return was also
in between the 23.0% return of the S&P 500 Index and the 3.6%
return of the Lehman Brothers Aggregate Index. The fixed income
component enhanced the portfolio's performance, as its returns
exceeded the Lehman Brothers Aggregate Index. The aggressive
growth component also contributed positively to returns, primarily
due to good stock selection. The U.S. core equity component
performed similarly to the U.S. equity component described in the
Multi-Asset Portfolio. The foreign component outperformed the MSCI
All Country Free (ex-U.S.) Index by a considerable margin. The
portfolio's asset allocation as of December 31, 1996 was 15% in
aggressive growth equities, 26% in core U.S. equities, 31% in
foreign securities, and 28% in fixed income and cash investments.
These weightings are for the most part in line with the
portfolio's normal weightings, albeit slightly higher than normal
in aggressive growth and slightly lower in core U.S. equities.
The graph represents past performance, which is not indicative of
future results.
---------------------
77
<PAGE> 79
EQUITY PORTFOLIOS
[GRAPH]
THE GROWTH AND INCOME PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96
1-year 20.15%
5-year 13.15%
Since Inception (3/23/87) 10.24%
The S&P 500 Composite Index tracks the performance of 500 large
company stocks which are designed to represent price movements in
the U.S. equity market. Companies are chosen for market size and
liquidity so that, in aggregate, they represent a broad
distribution across industry groups. The index includes both
foreign and domestic stock traded publicly in the U.S. Because it
is market weighted, the index will reflect changes in larger
companies more heavily than those in smaller companies. The Lipper
Variable Annuity Growth and Income category includes funds which
combine a growth of earning orientation and an income requirement
for level and/or rising dividends.
THE GROWTH AND INCOME PORTFOLIO returned 20.2% in 1996,
outperforming the 20.0% average return of the Lipper Variable
Annuity Growth and Income category. Both the portfolio and the
Lipper Variable Annuity category trailed the 23.0% return of the
S&P 500 Index. Prior to March 1, 1996, this portfolio was named
the Convertible Securities Portfolio. In meeting the portfolio's
objective of high current income and capital appreciation, the
weighting in convertible securities decreased during the year from
approximately 95% in February 1996 to approximately 10% at
December 31, 1996. After the first nine months of the year, the
portfolio's returns were steadily ahead of its Lipper group.
However, the fourth quarter was a particularly difficult one in
terms of relative performance, as the portfolio's neutral
weighting in technology and slight overweights in the retail,
media, and basic industrial areas limited returns. In addition,
the 10% position in convertible issues hurt results, as these
securities typically do not keep pace with stocks in a sharply
rising market.
The graph represents past performance, which is not indicative of
future results.
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<PAGE> 80
EQUITY PORTFOLIOS (CONTINUED)
[GRAPH]
FOREIGN SECURITIES PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96
1-year 11.45%
5-year 6.56%
Since Inception (3/23/87) 5.18%
The MSCI All Country Free (ex-U.S.) Index includes performance of
2,124 securities listed in 45 countries, which includes the
countries contained in the MSCI EAFE Index, as well as North
American countries (excluding the U.S.) and other emerging markets
worldwide. The index covers approximately the top 60% of market
capitalization for each of the countries included within the
index. The MSCI EAFE GDP-Weighted Index represents the Morgan
Stanley Capital International Europe, Australia and Far East
Index. It includes the performance of 1,098 securities listed in
20 countries, weighted by each country's Gross Domestic Product.
The Lipper Variable Annuity International and Lipper Mutual Fund
International categories include funds which invest assets in
securities whose primary trading markets are outside of the U.S.
MSCI ALL COUNTRY FREE (EX-U.S.) INDEX INCEPTION DATE IS 12/31/87.
PERFORMANCE IS BASED UPON AN INITIAL INVESTMENT OF $8,686, WHICH
IS EQUIVALENT TO THE VALUE OF THE FOREIGN SECURITIES PORTFOLIO AT
12/31/87.
THE FOREIGN SECURITIES PORTFOLIO returned 11.5% for the year,
outperforming the MSCI All Country Free (ex-U.S.) Index return of
6.7% and the 8.1% return of the MSCI EAFE-GDP Weighted Index.
However, the portfolio was short of the Lipper Mutual Fund
International category's average return of 11.8% and
underperformed the Lipper Variable Annuity International
category's average return of 14.5%. The portfolio's slight
overweight in Spain, the best performing European market, and
Finland, whose financial stocks were helped by strong bonds and
currencies, were positive contributors to returns. The Pacific
Basin ex-Japan, which represented approximately 20% of the
portfolio's holdings during 1996, also posted solid performance
during the year, with the exception of Thailand and South Korea
(approximately 3% of the portfolio). The performance of the
Japanese stock market was the largest negative contributor to the
portfolio's returns. 1996 was not a good year for Japanese
equities, as they fell -15.4% in U.S. dollar terms. Most of this
decrease came in the fourth quarter, as Japanese local investors
became increasingly pessimistic about the future economic growth
of the Japanese economy due to the impending fiscal tightening and
worries about the deregulation of the financial system. The
portfolio's weighting in Japan has decreased from approximately
30% at the beginning of the year to approximately 20% at the end
of the year, and we remain relatively cautious on our outlook for
Japan. Compared to the MSCI indices, the portfolio is underweight
Japan. However, the reverse is likely true in comparison to the
Lipper Variable Annuity Average.
It should be noted that the Lipper Mutual Fund International
category contains approximately 375 funds, versus approximately 75
underlying funds in the Lipper Variable Annuity International
category. The variable annuity category also contains regional and
small capitalization funds versus the "purer" mutual fund
category. For this reason, we have shown the portfolio's
performance versus the Lipper Mutual Fund International category
in addition to the Lipper Variable Annuity International category.
Also, since the MSCI All Country Free (ex-U.S.) Index is more
representative of the investment areas in the Lipper VA
International category and portfolio than is the MSCI EAFE - GDP
Weighted Index, we have added the performance of the MSCI All
Country Free (ex-U.S.) Index this year. The MSCI All Country Free
(ex-U.S.) Index is a broader, more inclusive measure of the
world's stock markets outside of the U.S. Going forward, we will
no longer be including the performance of the MSCI EAFE - GDP
Weighted Index for comparative purposes.
The graph represents past performance, which is not indicative of
future results.
---------------------
79
<PAGE> 81
EQUITY PORTFOLIOS (CONTINUED)
[GRAPH]
THE GROWTH PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96
1-year 25.05%
5-year 11.32%
10-year 13.33%
The S&P 500 Composite Index tracks the performance of 500 large
company stocks which are designed to represent price movements in
the U.S. equity market. Companies are chosen for market size and
liquidity so that, in aggregate, they represent a broad
distribution across industry groups. The index includes both
foreign and domestic stocks traded publicly in the U.S. Because it
is market weighted, the index will reflect changes in larger
companies more heavily than those in smaller companies. The Lipper
Variable Annuity Growth category includes funds which normally
invest in companies whose long term earnings are expected to grow
significantly faster than the earnings of the stocks represented
in the major unmanaged stock indices.
THE GROWTH PORTFOLIO returned 25.0% for the year, outperforming
the S&P 500 Index return of 23.0% and the Lipper Variable Annuity
Growth category's average return of 19.8%. In 1996, the portfolio
benefited from sector overweights in information technology
(software and service companies in particular), financial
services, and healthcare, as well as an underweight in utilities.
Stock selection proved to be a substantial factor in the
portfolio's performance. Sectors where good stock selection was
additive to the portfolio's returns included information
technology, retail, healthcare, and consumer staples.
The graph represents past performance, which is not indicative of
future results.
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80
<PAGE> 82
EQUITY PORTFOLIOS (CONTINUED)
[GRAPH]
CAPITAL APPRECIATION PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96
1-year 25.14%
5-year 19.82%
Since Inception (3/23/87) 15.54%
The S&P 500 Composite Index tracks the performance of 500 large
company stocks which are designed to represent price movements in
the U.S. equity market. Companies are chosen for market size and
liquidity so that, in aggregate, they represent a broad
distribution across industry groups. The index includes both
foreign and domestic stocks traded publicly in the U.S. Because it
is market weighted, the index will reflect changes in larger
companies more heavily than those in smaller companies. The Lipper
Variable Annuity Capital Appreciation category includes funds
which aim at maximum capital appreciation.
THE CAPITAL APPRECIATION PORTFOLIO returned 25.1% in 1996, which
was ahead of the 23.0% return of the S&P 500 Index and the 16.3%
average return of the Lipper Variable Annuity Capital Appreciation
category. The main contributor to the portfolio's performance was
good stock selection in both the information and entertainment
(primarily media and broadcasting) and energy sectors. During the
year, the portfolio was overweight versus the S&P 500 Index in the
information and entertainment sector, as well as information
technology, a sector which performed well relative to other
sectors. In addition, the portfolio did not hold any utilities
stock, which added to its relative returns versus the S&P 500
Index (approximate 10% weighting in utilities), as this sector
underperformed relative to other sectors in 1996.
The graph represents past performance, which is not indicative of
future results.
---------------------
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EQUITY PORTFOLIOS (CONTINUED)
[GRAPH]
NATURAL RESOURCES PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/96
1-year 14.11%
5-year 13.57%
Since Inception (1/4/88) 9.30%
The S&P 500 Composite Index tracks the performance of 500 large
company stocks which are designed to represent price movements in
the U.S. equity market. Companies are chosen for market size and
liquidity so that, in aggregate, they represent a broad
distribution across industry groups. The index includes both
foreign and domestic stocks traded publicly in the U.S. Because it
is market weighted, the index will reflect changes in larger
companies more heavily than those in smaller companies. The Lipper
Variable Annuity Natural Resources category includes funds which
invest more than 65% of its equity commitment in natural resource
stocks.
THE NATURAL RESOURCES PORTFOLIO returned 14.1% in 1996,
underperforming the S&P 500 Index return of 23.0% and the Lipper
Variable Annuity Natural Resources category's average return of
20.9%. In 1996, energy was one of the best performing sectors due
to the upward pressure on oil and gas prices, and the portfolio
maintained its approximate one-third weighting in this sector.
Relative to its small Lipper group (10 underlying funds), the
portfolio underperformed as its energy weighting is lower than
half of the funds in its group. Looking at other sectors, the
paper and forest sector posted respectable returns, as measured by
Standard & Poor's, and the portfolio benefited from good stock
selection in that area. Returns for both the precious and
nonprecious metals sectors were weakened as metals prices fell
during the year, and the portfolio's relative returns were
impacted by the underperformance within these sectors. Long-term,
this multiple sector approach has outperformed pure energy or pure
gold funds, and we believe this strategy will once again benefit
investors in the future.
The graph represents past performance, which is not indicative of
future results.
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82
<PAGE> 84
A-1112-AR
