<PAGE> 1
As filed with the Securities and Exchange Commission on January 26, 1996
File Nos. 33-14227: 811-5157
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 _
Pre-Effective Amendment No. _
Post-Effective Amendment No. 12 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 _
Amendment No. 13 X
(Check appropriate box or boxes)
ANCHOR PATHWAY FUND
(Exact Name of Registrant as Specified in Charter)
1 SunAmerica Center, Century City
Los Angeles, CA 90067-6022
(Address of Principal Executive Office)(Zip Code)
Registrant's telephone number, including area code: (310) 772-6000
Robert M. Zakem
Senior Vice President and General Counsel
SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue - 3rd Floor
New York, NY 10017-3204
(Name and Address of Agent for Service)
Copies to:
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Susan L. Harris, Esq. Margery K. Neale, Esq.
Senior Vice President and General Counsel Shereff, Friedman, Hoffman &
SunAmerica Inc. Goodman, LLP
1 SunAmerica Center, Century City 919 Third Avenue
Los Angeles, CA 90067-6022 New York, NY 10022
</TABLE>
It is proposed that this filing will become effective (check appropriate box)
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<S> <C>
_ immediately upon filing pursuant x on January 29, 1996 pursuant
to paragraph (b) to paragraph (b)
_ 60 days after filing pursuant _ on (date) pursuant to
paragraph (a) paragraph (a) of Rule 485
--------------------
</TABLE>
The Registrant has elected to register an indefinite number of shares of
beneficial interest, par value $.01 per share, under the Securities Act of
1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Rule 24f-2 Notice for the Registrant's fiscal year ended
November 30, 1995 was filed on January 23, 1996.
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ANCHOR PATHWAY FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item Number
in Form N-1A Caption
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PART A - PROSPECTUS
1. Cover Page Cover Page
2. Synopsis - Fee Table *
3. Condensed Financial Information Financial Highlights
4. General Description of The Fund, Its Investment Objectives and Policies;
Registrant Description of Securities and Investment Techniques
5. Management of the Fund Management
6. Capital Stock and Other Dividends, Distributions and Federal Taxes;
Securities Shareholder Voting Rights; Shareholder Inquiries
7. Purchase of Securities Price of Shares; Purchases and
Being Offered Redemptions
8. Redemption or Repurchase Purchases and Redemptions
9. Pending Legal Proceedings *
PART B - STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Fund
13. Investment Objectives Investment Policies; Investment Restrictions
and Policies
14. Management of the Fund Fund Officers and Trustees
15. Control Persons and The Fund
Principal Holders of Securities
16. Investment Advisory and Investment Advisory Agreement;
Other Services Business Management Agreement;
General Information
17. Brokerage Allocation Execution of Portfolio Transactions
18. Capital Stock and Other Securities *
19. Purchase, Redemption and Pricing Price of Shares
of Securities Being Offered
20. Tax Status Dividends, Distributions and Federal Taxes
21. Underwriters *
22. Calculation of Performance Data *
23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
* Omitted from the Prospectus or Statement of Additional Information
because the item is not applicable.
<PAGE> 3
--------------------------------------------------
[LOGO]
--------------------------------------------------
PROSPECTUS
JANUARY 29, 1996
--------------------------------------------------
<PAGE> 4
ANCHOR PATHWAY FUND
P.O. BOX 54299
LOS ANGELES, CALIFORNIA 90054-0299
TELEPHONE NUMBER: (800) 445-7862
Anchor Pathway Fund ("Fund") is an open-end diversified management investment
company. The Fund consists of seven Series, each of which has its own investment
objectives and policies.
Shares of the Fund are offered only to Variable Separate Account (the
"Account"), a separate account of Anchor National Life Insurance Company
("Company") which offers annuity contracts. Such shares may also be sold to fund
variable life contracts issued by the Company in the future. The contracts
involve fees and expenses not described in this Prospectus and also may involve
certain restrictions or limitations on the allocation of purchase payments or
contract values to one or more series of the Fund. Certain Series may not be
available in connection with a particular contract. See the applicable contract
prospectus for information regarding contract fees and expenses and any
restrictions or limitations.
The GROWTH SERIES seeks growth of capital by investing primarily in common
stocks or securities with common stock characteristics, such as convertible
preferred stocks, which demonstrate the potential for appreciation.
The INTERNATIONAL SERIES seeks long-term growth of capital by investing
primarily in securities of issuers domiciled outside the United States.
The GROWTH-INCOME SERIES seeks growth of capital and income by investing
primarily in common stocks or securities which demonstrate the potential for
appreciation and/or dividends.
The ASSET ALLOCATION SERIES seeks high total return (including income and
capital gains) consistent with preservation of capital over the long-term
through a diversified portfolio that can include common stocks and other
equity-type securities (such as convertible bonds and preferred stocks), bonds
and other intermediate and long-term fixed-income securities and money market
instruments (debt securities maturing in one year or less) in any combination.
The HIGH-YIELD BOND SERIES seeks a high level of current income and
secondarily seeks capital appreciation by investing primarily in intermediate
and long-term corporate obligations, with emphasis on higher yielding, higher
risk, lower rated or unrated securities. IN ADDITION TO OTHER RISKS, THESE
HIGH-YIELD, HIGH-RISK BONDS, WHICH ARE COMMONLY REFERRED TO AS "JUNK BONDS,"
TYPICALLY ARE SUBJECT TO GREATER MARKET FLUCTUATIONS AND RISK OF LOSS OF INCOME
AND PRINCIPAL DUE TO DEFAULT BY THE ISSUER THAN ARE INVESTMENTS IN
LOWER-YIELDING, HIGHER-RATED BONDS. SEE PAGES 7-8 FOR MORE INFORMATION.
The U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES seeks a high level of current
income consistent with prudent investment risk and preservation of capital by
investing primarily in a combination of securities guaranteed by the U.S.
Government and other debt securities rated AAA by Standard & Poor's Ratings
Services or Aaa by Moody's Investors Service, Inc. or that have not received a
rating but are determined to be of comparable quality by the investment adviser.
The CASH MANAGEMENT SERIES seeks high current yield while preserving capital
by investing in a diversified selection of high quality money market
instruments.
AS A RESULT OF THE MARKET RISK INHERENT IN ANY INVESTMENT, THERE IS NO
ASSURANCE THAT THE INVESTMENT OBJECTIVE(S) OF ANY OF THE SERIES WILL BE
REALIZED. INVESTMENTS IN A SERIES ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER ENTITY OR PERSON.
This Prospectus sets forth concisely the information a prospective investor
ought to know before investing in the Fund. Please read it carefully and retain
it for future reference. Further information about the performance of the Series
of the Fund is contained in the Fund's Annual Report to Shareholders. A
Statement of Additional Information has been filed with the Securities and
Exchange Commission. The Annual Report to Shareholders and the Statement of
Additional Information may be obtained upon request and without charge by
contacting the Fund at the above address or phone number.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JANUARY 29, 1996.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TOPIC PAGE
-----
<S> <C>
FINANCIAL HIGHLIGHTS.................................................................. 3
THE FUND, ITS INVESTMENT OBJECTIVES AND POLICIES...................................... 5
Growth Series.................................................................... 5
International Series............................................................. 5
Growth-Income Series............................................................. 6
Asset Allocation Series.......................................................... 7
High-Yield Bond Series........................................................... 7
U.S. Government/AAA-Rated Securities Series...................................... 9
Cash Management Series........................................................... 9
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES................................... 10
MANAGEMENT............................................................................ 13
PORTFOLIO TURNOVER.................................................................... 15
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES............................................ 16
PRICE OF SHARES....................................................................... 16
PURCHASES AND REDEMPTIONS............................................................. 16
SHAREHOLDER VOTING RIGHTS............................................................. 17
SHAREHOLDER INQUIRIES................................................................. 17
STATEMENT OF ADDITIONAL INFORMATION -- TABLE OF CONTENTS.............................. 18
APPENDIX
</TABLE>
2
<PAGE> 6
FINANCIAL HIGHLIGHTS*
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The Fund was established to provide an exclusive funding medium for the
annuity contracts issued by the Account. It had no operations prior to March 29,
1988. Through March 28, 1988, these contracts were funded by shares of the
American Pathway Fund. On March 29, 1988, shares of the Fund were issued in a
transaction that, in effect, transferred an equitable pro rata amount of the net
assets of American Pathway Fund (approximately 80%) to the Fund. For accounting
purposes, the Fund is considered to be the successor to the American Pathway
Fund and the financial statements of the Fund and its per share data and ratios
are those of the American Pathway Fund through March 28, 1988.
The following Financial Highlights for the eight years in the period ended
November 30, 1995 has been audited by Price Waterhouse LLP, independent
accountant, whose reports on the financial statements containing such
information for the five years in the period ended November 30, 1995, are
included in the Fund's Annual Report to Shareholders. The information in this
table should be read in conjunction with the other financial statements and
notes thereto included in the Annual Report of the Fund, which may be obtained
along with the Statement of Additional Information by writing to the Secretary
of the Fund at the address on the cover page of this Prospectus.
<TABLE>
<CAPTION>
Dividends Dividends
Net realized declared from
Net asset Net & unrealized Total from net net realized Net asset Net assets Ratio of
Period value Invest- gain (loss) from invest- gain on value end of expenses
ended beginning ment on investment ment Invest- end Total period to average
Nov. 30 period income Investments operations income ments of period Return (000's) net assets
- ---------------- --------- ------ ------------ ---------- --------- ------------ --------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH SERIES
1986............ $ 11.63 $ .10 $ 4.30 $ 4.40 $ (.13) $ (.24) $ 15.66 38.77 % $ 44,091 .71%+
1987............ 15.66 .14 (.78) (.64) (.11) (.34) 14.57 (4.34 ) 98,447 .63
1988............ 14.57 .23 2.88 3.11 (.12) (.61) 16.95 21.83 93,801 .65
1989............ 16.95 .37 7.85 8.22 (.13) (.09) 24.95 48.76 190,185 .53
1990............ 24.95 .36 (2.37) (2.01) (.31) (1.62) 21.01 (8.60 ) 268,174 .56
1991............ 21.01 .37 5.25 5.62 (.77) (.29) 25.57 26.80 458,719 .62
1992............ 25.57 .23 5.21 5.44 (.01) (.04) 30.96 21.29 644,060 .56
1993............ 30.96 .24 @ 5.32 5.56 (.23) (.53) 35.76 18.26 735,400 .55
1994............ 35.76 .19 @ 1.04 1.23 (.25) (2.66) 34.08 3.33 712,602 .55
1995............ 34.08 .25 @ 12.02 12.27 (.20) (2.65) 43.50 37.93 892,275 .55
INTERNATIONAL SERIES
1990#........... $ 10.00 $ .07 $ (.39) $ (.32) -- -- $ 9.68 (3.20 )% $ 13,704 1.85%+
1991............ 9.68 .16 .38 .54 (.09) -- 10.13 5.59 50,654 1.40
1992............ 10.13 .15 (.12) .03 (.14) (.02) 10.00 .31 85,919 1.19
1993............ 10.00 .18 @ 2.54 2.72 (.14) (.01) 12.57 27.41 192,162 1.12
1994............ 12.57 .22 @ .81 1.03 (.12) (.22) 13.26 8.17 259,498 1.04
1995............ 13.26 .26 @ 1.11 1.37 (.23) (.50) 13.90 11.18 228,134 1.05
GROWTH-INCOME SERIES
1986............ $ 13.95 $ .41 $ 3.91 $ 4.32 $ (.48) $ (.33) $ 17.46 32.10 % $129,370 .61%+
1987............ 17.46 .47 (1.87) (1.40) (.46) (.08) 15.52 (8.59 ) 217,141 .59
1988............ 15.52 .61 2.82 3.43 (.30) (.18) 18.47 22.49 210,992 .61
1989............ 18.47 .79 5.18 5.97 (.60) -- 23.84 32.94 364,096 .53
1990............ 23.84 .74 (2.48) (1.74) (.54) (.85) 20.71 (7.57 ) 423,733 .56
1991............ 20.71 .73 3.62 4.35 (.87) (.40) 23.79 21.14 584,668 .59
1992............ 23.79 .64 3.12 3.76 (.72) (.58) 26.25 16.02 777,448 .56
1993............ 26.25 .71 @ 2.44 3.15 (.63) (.54) 28.23 12.34 862,716 .55
1994............ 28.23 .69 @ (.14) .55 (.76) (1.56) 26.46 2.00 765,971 .55
1995............ 26.46 .71 @ 7.46 8.17 (.76) (2.23) 31.64 33.47 882,143 .55
ASSET ALLOCATION SERIES
1989++.......... $ 10.00 $ .18 $ .82 $ 1.00 -- -- $ 11.00 10.00 % $ 23,318 .54%+
1990............ 11.00 .56 (.73) (.17) (.21) -- 10.62 (1.57 ) 54,985 .65
1991............ 10.62 .56 1.32 1.88 (.60) (.02) 11.88 18.66 78,271 .77
1992............ 11.88 .50 1.10 1.60 (.53) (.05) 12.90 13.80 134,100 .63
1993............ 12.90 .63 @ .72 1.35 (.46) (.13) 13.66 10.76 166,555 .60
1994............ 13.66 .58 @ (.69) (.11) (.62) (.31) 12.62 (.84 ) 142,678 .59
1995............ 12.62 .55 @ 3.16 3.71 (.68) (.38) 15.27 31.01 153,608 .59
<CAPTION>
Ratio of net
investment
Period income Portfolio
ended to average turnover
Nov. 30 net assets rate
- ---------------- ------------ --------
<S> <C> <C>
1986............ .76%+ 27.40%
1987............ .97 14.00
1988............ 1.30 10.40
1989............ 2.16 47.00
1990............ 2.38 17.70
1991............ 1.51 12.30
1992............ .88 14.31
1993............ .71 21.99
1994............ .56 33.79
1995............ .65 23.72
1990#........... 3.21%+ 4.10%
1991............ 2.20 14.30
1992............ 1.88 21.04
1993............ 1.62 22.56
1994............ 1.64 21.68
1995............ 1.95 16.79
1986............ 3.08%+ 11.20%
1987............ 2.85 6.80
1988............ 3.32 12.90
1989............ 4.16 29.60
1990............ 4.11 13.80
1991............ 3.45 21.20
1992............ 2.88 18.81
1993............ 2.60 29.22
1994............ 2.54 32.97
1995............ 2.52 18.81
1989++.......... 5.36%+ 12.80%
1990............ 6.48 18.10
1991............ 5.50 16.50
1992............ 4.84 21.86
1993............ 4.70 22.66
1994............ 4.47 48.53
1995............ 4.04 53.58
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
Dividends Dividends
Net realized declared from
Net asset Net & unrealized Total from net net realized Net asset Net assets Ratio of
Period value Invest- gain (loss) from invest- gain on value end of expenses
ended beginning ment on investment ment Invest- end Total period to average
Nov. 30 period income Investments operations income ments of period Return (000's) net assets
- ---------------- --------- ------ ------------ ---------- --------- ------------ --------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HIGH-YIELD BOND SERIES
1986............ $ 13.02 $1.35 $ 1.30 $ 2.65 $ (1.98) $ (.20) $ 13.49 22.64 % $ 53,379 .67%+
1987............ 13.49 1.35 (.94) .41 (1.36) (.32) 12.22 2.96 70,098 .63
1988............ 12.22 1.24 .64 1.88 (.71) (.17) 13.22 15.92 78,335 .65
1989............ 13.22 1.36 (.25) 1.11 (1.16) -- 13.17 8.86 85,778 .64
1990............ 13.17 1.53 (1.53) .00 (1.09) -- 12.08 .02 79,099 .66
1991............ 12.08 1.19 2.16 3.35 (1.52) -- 13.91 29.25 117,714 .69
1992............ 13.91 1.20 .65 1.85 (1.16) -- 14.60 14.06 147,951 .62
1993............ 14.60 1.27 @ 1.02 2.29 (1.22) -- 15.67 16.44 190,515 .59
1994............ 15.67 1.24 @ (1.88) (.64) (1.49) (.49) 13.05 (4.70 ) 127,467 .59
1995............ 13.05 1.26 @ .99 2.25 (1.56) (.13) 13.61 18.97 146,590 .59
U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES
1986++++........ $ 10.00 $ .53 $ 1.45 $ 1.98 $ (.36) -- $ 11.62 20.01 % $ 32,457 .64%
1987............ 11.62 .85 (1.21) (.36) (.79) -- 10.47 (3.17 ) 47,089 .67
1988............ 10.47 .89 .12 1.01 (.43) -- 11.05 10.00 44,586 .70
1989............ 11.05 .69 .53 1.22 (.81) -- 11.46 11.79 85,924 .59
1990............ 11.46 .78 .00 .78 (.46) -- 11.78 7.15 128,369 .61
1991............ 11.78 .74 .78 1.52 (.81) -- 12.49 13.59 192,330 .66
1992............ 12.49 .85 .31 1.16 (.78) -- 12.87 9.84 230,798 .59
1993............ 12.87 .95 @ .61 1.56 (.91) (.18) 13.34 12.58 228,569 .58
1994............ 13.34 .90 @ (1.43) (.53) (1.11) (.17) 11.53 (4.17 ) 149,368 .58
1995............ 11.53 .86 @ .85 1.71 (1.20) (.06) 11.98 15.95 134,938 .59
CASH MANAGEMENT SERIES
1986............ $ 11.12 $ .67 $ (.02) $ .65 $ (1.12) -- $ 10.65 6.30 % $ 18,585 .85%+
1987............ 10.65 .54 .08 .62 (.54) -- 10.73 6.01 57,197 .68
1988............ 10.73 .64 .09 .73 (.35) -- 11.11 7.03 64,046 .65
1989............ 11.11 .86 .10 .96 (.69) -- 11.38 9.05 79,377 .66
1990............ 11.38 .54 .34 .88 (.48) -- 11.78 7.93 163,979 .58
1991............ 11.78 .60 .07 .67 (.57) -- 11.88 5.85 197,942 .64
1992............ 11.88 .40 (.03) .37 (.75) -- 11.50 3.26 203,548 .61
1993............ 11.50 .29 @ -- .29 (.39) -- 11.40 2.57 192,384 .58
1994............ 11.40 .40 @ -- .40 (.33) -- 11.47 3.56 186,396 .57
1995............ 11.47 .61 @ .01 .62 (.44) -- 11.65 5.53 100,872 .58
<CAPTION>
Ratio of net
investment
Period income Portfolio
ended to average turnover
Nov. 30 net assets rate
- ---------------- ------------ --------
<S> <C> <C>
1986............ 11.59%+ 56.30%
1987............ 10.89 61.90
1988............ 9.91 38.30
1989............ 10.47 36.50
1990............ 11.50 34.90
1991............ 10.51 24.40
1992............ 9.40 75.27
1993............ 8.43 59.03
1994............ 8.76 44.97
1995............ 9.66 31.64
1986++++........ 6.86% 18.70%
1987............ 8.24 105.60
1988............ 8.25 54.30
1989............ 8.35 19.40
1990............ 8.85 26.10
1991............ 7.96 30.90
1992............ 7.32 47.58
1993............ 7.19 9.14
1994............ 7.42 16.95
1995............ 7.49 43.43
1986............ 5.82%+ --
1987............ 5.90 --
1988............ 6.75 --
1989............ 8.53 --
1990............ 7.63 --
1991............ 5.59 --
1992............ 3.21 --
1993............ 2.59 --
1994............ 3.52 --
1995............ 5.32 --
</TABLE>
- ------------
(@) Calculated based upon average shares + Annualized.
outstanding. # Commenced operations May
9, 1990.
* Information from December 1, 1986, ++ Commenced operations
through November 30, 1987, is that of March 31, 1989.
American Pathway Fund. Information for ++++ Commenced operations
the year ended November 30, 1988, December 1, 1985.
includes the results of operations of
American Pathway Fund from December 1,
1987 through March 28, 1988.
4
<PAGE> 8
THE FUND, ITS INVESTMENT OBJECTIVES AND POLICIES
The Fund, organized as a Massachusetts business trust on March 23, 1987, is an
open-end diversified management investment company. It was established to
provide an exclusive funding medium for the annuity contracts issued by the
Account. These contracts were funded previously by shares of the American
Pathway Fund.
The Fund issues seven separate series of shares ("Series") each of which
represents a separate fully managed portfolio of securities with its own
investment objectives. The Board of Trustees may establish additional series in
the future. The seven Series are the Growth Series, the International Series,
the Growth-Income Series, the Asset Allocation Series, the High-Yield Bond
Series, the U.S. Government/AAA-Rated Securities Series and the Cash Management
Series. All shares may be purchased or redeemed by the Account at net asset
value without any sales or redemption charge.
Each Series has investment objectives and certain policies set forth herein.
There can be no guarantee that any Series' investment objective[s] will be
realized or that the net return on an investment in a Series will exceed that
which could have been obtained through other investment or savings vehicles.
Contract owners should carefully review the investment objectives and policies
of each Series and consider their ability to assume the risks involved before
making an investment in a Series. These risks include, but are not limited to,
the possibility of a loss of principal. Each Series has certain investment
restrictions described in the Statement of Additional Information. A Series'
fundamental investment restrictions, as well as its investment objectives, may
not be changed without a majority vote of shares of that Series. See
"Shareholder Voting Rights."
GROWTH SERIES
The investment objective of the Growth Series is to provide growth of capital.
Any current income that may be generated by the Series is incidental to the
objective of capital growth. The Growth Series' objective of capital growth is
sought by investing primarily in common stocks or securities with common stock
characteristics. Securities designated as having "common stock" characteristics
include, but are not limited to, securities convertible into or exchangeable for
common stock. The potential for appreciation of capital is the basis for
investment decisions. When the outlook for common stocks is not considered
promising, for temporary defensive purposes a substantial portion of the assets
may be invested in securities of the U.S. Government, its agencies and
instrumentalities, cash and cash equivalents (such as commercial bank and
savings association obligations, commercial paper and short-term corporate bonds
and notes) and money market instruments including repurchase agreements. Because
the securities purchased by the Growth Series in pursuing its investment
objective are selected for growth potential rather than production of income,
the market values of such securities (and therefore, to a large extent, the net
asset values per share of the Series) will tend to be more volatile in response
to market changes than they would be if income-producing securities were sought
for investment by the Series. See "Description of Securities and Investment
Techniques."
Up to 10% of the Growth Series' assets may be invested in straight debt
securities rated below BBB by Standard & Poor's Rating Services, A Division of
The McGraw-Hill Companies Inc. ("S&P") or Baa by Moody's Investors Service, Inc.
("Moody's") or in unrated securities that are determined to be of equivalent
quality, provided the Series' investment adviser, Capital Research and
Management Company (the "Investment Adviser"), determines that these securities
have characteristics similar to the equity securities eligible for purchase by
the Growth Series. These securities are commonly referred to as "junk bonds" or
"high-yield, high-risk" bonds, carry a higher degree of investment risk than
higher rated bonds and are considered speculative. See the Appendix for a
description of the ratings. As of December 30, 1995, the Series did not hold any
junk bonds.
The Series' assets may be invested in securities of non-U.S. issuers, which
are generally denominated in currencies other than the U.S. dollar. See "Risks
and Considerations Applicable to Investment in Securities of Foreign Issuers."
INTERNATIONAL SERIES
The investment objective of the International Series is to achieve long-term
growth of capital by investing primarily in securities of issuers domiciled
outside the United States. A major premise of the Series' investment approach is
the belief that economic and political developments help to create new
opportunities outside the U.S.
5
<PAGE> 9
The assets of the Series will be invested with geographic flexibility. See the
Statement of Additional Information for a more detailed description of the
Series' diversification policies.
The Series may also invest in Securities through depository receipts which may
be denominated in various currencies. For example, the Series may purchase
American Depository Receipts ("ADR's") which are U.S. dollar denominated
securities designed for use in the U.S. securities markets, which represent and
may be converted into the underlying security.
When prevailing market, economic, political or currency conditions warrant,
the Series may purchase fixed-income securities of issuers domiciled outside the
U.S. (including securities of governments other than the U.S., which may be
securities of either national, regional or local governments). For temporary
defensive purposes, the Series may at times maintain all or any part of its
assets in U.S. dollar denominated or foreign currency denominated cash or cash
equivalents (including U.S. government securities, certificates of deposit, time
deposits, commercial paper, bankers' acceptances and other high-quality
short-term debt securities). Under normal circumstances, the Series will invest
at least 65% of its assets in equity securities (including depository receipts)
of issuers domiciled outside the U.S. The Series may also hold a portion of its
assets in foreign currency denominated cash or cash equivalents and government
securities.
Of course, investing globally involves special risks, particularly in certain
developing countries, caused by, among other things: fluctuating currency
values; less stringent accounting, auditing, and financial reporting regulations
and practices in some countries; changing local and regional economic,
political, and social conditions; differing securities market structures; and
various administrative difficulties such as delays in clearing and settling
portfolio transactions or in receiving payment of dividends. The Investment
Adviser currently does not intend to invest more than 20% of the Series' total
assets (taken at cost) in issuers domiciled in, or governments of, developing
countries.
Normally, foreign exchange transactions will be conducted on a spot or cash
basis at the prevailing rate in the foreign exchange market. However, the Series
may enter into forward foreign currency exchange contracts in order to provide
protection against changes in foreign exchange rates. See "Risks and
Considerations Applicable to Investment in Securities of Foreign Issuers."
Up to 5% of the International Series' assets may be invested in straight debt
securities rated below BBB by S&P's or Baa by Moody's or in unrated securities
that are determined to be of equivalent quality, provided the Investment Adviser
determines that these securities have characteristics similar to the equity
securities eligible for purchase by the Series. These securities are commonly
referred to as "junk bonds" or "high-yield, high-risk" bonds, carry a higher
degree of investment risk than higher rated bonds and are considered
speculative. See the Appendix for a description of the ratings.
GROWTH-INCOME SERIES
The investment objective of the Growth-Income Series is growth of capital and
income. In the selection of securities for investment, the possibilities of
appreciation and potential dividends are given more weight than current yield.
Ordinarily, the assets of the Growth-Income Series consist principally of a
diversified group of common stocks, but other types of securities including
preferred stocks, corporate bonds, convertible bonds and money market
instruments, may be held when deemed advisable and to the extent consistent with
the Series' investment objective. The Investment Adviser determines the relative
amounts to be invested in common stocks, preferred stocks, bonds (including
corporate and convertible), securities of the U.S. Government, its agencies and
instrumentalities, cash and cash equivalents (such as commercial bank and
savings association obligations, commercial paper and short-term corporate bonds
and notes) and repurchase agreements. See "Description of Securities and
Investment Techniques."
Up to 5% of the Growth-Income Series' assets may be invested in straight debt
securities rated below BBB by S&P's or Baa by Moody's or in unrated securities
that are determined to be of equivalent quality, provided the Investment Adviser
determines that these securities have characteristics similar to the equity
securities eligible for purchase by the Growth-Income Series. These securities
are commonly referred to as "junk bonds" or "high-yield, high-risk" bonds, carry
a higher degree of investment risk than higher rated bonds and are considered
speculative. See the Appendix for a description of the ratings.
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ASSET ALLOCATION SERIES
The investment objective of the Asset Allocation Series is high total return
(including income and capital gains) consistent with preservation of capital
over the long-term. The Asset Allocation Series seeks to achieve its objectives
by investing in a diversified portfolio that can include common stocks and other
equity-type securities (such as convertible bonds and preferred stocks), bonds
and other intermediate and long-term fixed-income securities and money market
instruments (debt securities maturing in one year or less).
The Investment Adviser will determine the relative mix of equities,
fixed-income securities and money market instruments for the portfolio based on
its view of long-term economic and market trends and the relative risks and
opportunities for long-term total return of the different classes of assets.
Under normal conditions, the Investment Adviser expects (but is not required) to
maintain an investment mix falling within the following ranges: 40% to 80% in
equities; 20% to 50% in fixed-income securities; and 0% to 40% in money market
instruments. The Investment Adviser does not intend to make frequent shifts
within these broad ranges. Rather it intends in normal situations to make any
shifts in the Series' asset allocation gradually over time based on its views of
long-term trends and conditions.
Up to 10% of the Series' assets may be invested in the equity securities of
issuers domiciled outside of the U.S., provided those securities are either held
through depository receipts which are U.S. dollar denominated or are traded on
the New York Stock Exchange. See "Risks and Considerations Applicable to
Investment in Securities of Foreign Issuers." The Series also has the ability to
hold a portion of its assets in foreign currencies and to enter into forward
foreign currency exchange contracts although the Series has no current intention
to do so.
The Series' fixed-income investments will consist primarily of "investment
grade" bonds; that is bonds rated BBB or better by S&P or Baa or better by
Moody's or that are unrated but considered by the Investment Adviser to be of
equivalent credit quality. Up to 25% of the Series' fixed-income assets may be
invested in securities that are below investment grade as defined above,
including securities rated as low as CC by S&P or Ca by Moody's. Non-investment
grade securities are considered to have speculative characteristics and
securities rated CC or Ca are described as "speculative in a high degree; often
in default or [having] other marked shortcomings." These investments are subject
to greater market fluctuations and risk of loss of income and principal than are
investments in lower-yielding fixed-income securities. See "High-Yield Bond
Series" below for more information regarding the risks associated with an
investment in high-yield, high-risk bonds. See the Appendix for a description of
bond ratings. During the previous fiscal year, the approximate monthly average
percentages of the Series' net assets in the following categories based on the
higher of Moody's or S&P's ratings categories, were: Aaa-5.12%; A-3.83%;
Baa/BBB-7.14%; Ba/BB-1.66%; B-2.29%; and Caa/CCC-0.31%. Non-rated investments
(including equity-type securities) and cash and cash equivalents amounted to
69.37% and 10.28%, respectively, of the Series' net assets. The Series'
investments in foreign fixed-income securities will be concentrated in
securities issued or guaranteed as to principal and interest by foreign
governments or their agencies and instrumentalities or by multinational
agencies.
The Asset Allocation Series may enter into repurchase agreements, firm
commitment agreements and purchase when-issued securities. See "Description of
Securities and Investment Techniques."
HIGH-YIELD BOND SERIES
The primary investment objective of the Series is a high level of current
income; its secondary investment objective is capital appreciation.
Under normal market conditions the Series will be invested substantially in
long-term (over 10 years to maturity) and intermediate-term (3 to 10 years to
maturity) fixed-income securities, with emphasis on higher-yielding,
higher-risk, lower-rated or unrated corporate bonds. These "high-yield" bonds
typically are subject to greater market fluctuations and risk of loss of income
and principal due to default by the issuer than are investments in lower
yielding, higher rated bonds.
High-yield, high-risk bonds generally include any bonds rated Ba or below by
Moody's or BB or below by S&P or unrated but considered to be of equivalent
quality by the Series' Investment Adviser. Bonds rated Ba or BB or below are
considered speculative. The Series may invest without limitation in bonds rated
as low as Ca by Moody's or C by S&P (or unrated but considered of equivalent
quality). Bonds rated Ca or C are
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described by the rating agencies as "speculative in a high degree; often in
default or [having] other marked shortcomings." In addition, the Series may
invest up to 10% of its total assets in bonds rated C by Moody's or D by S&P (or
unrated but considered of equivalent quality). Bonds rated C or D generally are
in default or arrears and are described as having extremely poor prospects of
attaining any real investment standings. See the Appendix for a description of
bond ratings. During the previous fiscal year, the approximate monthly average
percentages of the Series' net assets in the following categories, based on the
higher of Moody's or S&P's ratings categories, were: Aaa-4.09%; Baa/BBB-0.22%;
Ba/BB-32.27%; B-50.07%; and Caa/CCC-2.45%. Non-rated investments and cash or
cash equivalents amounted to 0.14% and 10.76%, respectively, of the Series' net
assets.
The market values of fixed-income securities tend to vary inversely with the
level of interest rates -- when interest rates rise, their values will tend to
decline; when interest rates decline, their values generally will rise.
High-yield, high-risk bonds are subject to greater fluctuations in value than
are higher rated bonds because the values of high-yield bonds tend to reflect
short-term corporate, economic and market developments and investor perceptions
of the issuer's credit quality to a greater extent. In addition, it may be more
difficult to dispose of, or to determine the value of, high-yield bonds.
Although under normal market conditions longer term securities yield more than
shorter term securities, they are subject to greater price fluctuations.
Fluctuations in the value of the Series' investments will be reflected in the
Series' net asset value per share. The high-yield bond market is relatively new.
Its initial growth paralleled a long economic expansion, followed by an economic
downturn which severely disrupted the market for high-yield bonds and adversely
affected the value of outstanding bonds and the ability of the issuers to repay
principal and interest. The economy may impact the market for high-yield bonds
in a similar fashion in the future. From time to time, legislation may be
enacted which could have a negative effect on the market for high-yield bonds.
The Investment Adviser attempts to reduce these risks through diversification of
the portfolio and by credit analysis of each issuer, as well as by monitoring
broad economic trends and corporate and legislative developments. See the
Statement of Additional Information, for more information about the risks of
high-yield bonds.
In pursuing its secondary investment objective of capital appreciation, the
Series may purchase high-yield bonds that are expected by the Investment Adviser
to increase in value due to improvements in their credit quality or ratings or
anticipated declines in interest rates. In addition, the Series may invest for
this purpose up to 25% of its assets in common stocks or other equity or
equity-related securities, such as convertible debentures and preferred stocks
(which may or may not have a dividend yield). Equity-type securities normally
will be purchased as part of a unit with fixed-income securities or when an
unusual opportunity for capital appreciation is perceived due to anticipated
improvement in the issuer's credit quality or ratings. The Series also may
purchase or hold warrants or rights, subject to certain limitations set forth in
the Statement of Additional Information.
Treating high current income as its primary investment objective means that
the Series may forego opportunities that would result in capital gains and may
accept prudent risks to capital value, in each case to take advantage of
opportunities for higher current income.
Up to 25% of the Series' assets may be invested in securities of foreign
issuers, which are generally denominated in currencies other than the U.S.
dollar. The Series also has the ability to hold a portion of its assets in
foreign currencies and to enter into forward foreign currency exchange
contracts. The Series may enter into repurchase agreements and firm commitment
agreements and may purchase securities on a when-issued basis. See "Description
of Securities and Investment Techniques" below.
Under normal market conditions, the Series will invest at least 65% of its
total assets in high-yield bonds as described above. Subject to this requirement
the Series may maintain assets in cash or cash equivalents, including commercial
bank obligations (certificates of deposit, which are interest-bearing time
deposits; banker's acceptances, which are time drafts on a commercial bank for
which the bank accepts an irrevocable obligation to pay at maturity; and demand
or time deposits), commercial paper (short-term notes issued by corporations or
governmental bodies), and obligations issued or guaranteed by the U.S.
Government. See "Description of Securities and Investment Techniques" below.
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U.S. GOVERNMENT /AAA-RATED SECURITIES SERIES
The investment objective of the U.S. Government /AAA-Rated Securities Series
("Government/AAA Series") is a high level of current income consistent with
prudent investment risk and preservation of capital. It seeks to achieve its
objective by investing in a combination of (i) securities issued or guaranteed
by the U.S. government, or any agency or instrumentality thereof and (ii) other
debt securities (including corporate bonds) rated AAA by S&P or Aaa by Moody's
(or that are determined to be of comparable quality by the Investment Adviser).
Except when the Series is in a temporary defensive investment position, at least
65% of its total assets is invested in these securities, including securities
held subject to repurchase agreements.
The Fund is subject to diversification requirements prescribed by the U.S.
Treasury Department that limit each Series to investing no more than 55% of its
total assets in any one investment. For this purpose, each U.S. agency or
instrumentality is treated as an issuer. See "Dividends, Distributions and
Federal Taxes." The Government/AAA Series invests at least 45% of its total
assets in securities of issuers other than the U.S. Government, such as private
corporations or foreign governments, and invests approximately 50% of its total
assets in securities guaranteed by the U.S. Government. Under current market
conditions it is anticipated that a substantial portion of the Series'
investments in U.S. Government securities will consist of Government National
Mortgage Association ("GNMA") certificates, which are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the U.S. Government.
The Government/AAA Series also may invest in securities issued by U.S.
Government agencies or instrumentalities that are not backed by the full faith
and credit of the U.S. Government; in short-term debt securities of private
issuers (including certificates of deposit, bankers' acceptances, and commercial
paper rated A-1 by S&P or Prime-1 by Moody's); and in securities representing a
direct or indirect interest in a pool of mortgages issued by financial
institutions, such as commercial banks, savings and loan associations, mortgage
bankers and securities broker-dealers. The Government/AAA Series may not
purchase any security, other than a U.S. Government security, not rated AAA by
S&P or Aaa by Moody's (or that has not received a rating but is determined to be
of comparable quality by the Investment Adviser). However, if the rating of a
security currently held by the Series is reduced below AAA (Aaa), the Series is
not required to dispose of the security.
The Government/AAA Series may purchase when-issued securities and enter into
firm commitment agreements and repurchase agreements. The Government/AAA Series
also may purchase obligations of non-U.S. corporations or governmental entities,
provided they are dollar-denominated and highly liquid. See "Description of
Securities and Investment Techniques."
CASH MANAGEMENT SERIES
The investment objective of the Cash Management Series is to provide high
current yield while preserving capital by investing in a diversified selection
of money market instruments including: corporate bonds and notes, commercial
bank obligations, securities of the U.S. Government, its agencies and
instrumentalities, commercial paper and savings association obligations. These
securities mature in 13 months or less (25 months or less in the case of U.S.
Government securities). The Cash Management Series also may enter into
repurchase agreements and firm commitment agreements and purchase when-issued
securities. See "Description of Securities and Investment Techniques."
The Cash Management Series invests only in securities determined, in
accordance with procedures established by the Fund's Board of Trustees, to
present minimal credit risks. It is the current policy to invest only in
instruments rated in the highest rating category by Moody's and S&P (for
example, commercial paper rated "Prime-1" and "A-1" by Moody's and S&P,
respectively) or in instruments that are issued, guaranteed or insured by the
U.S. Government, its agencies or instrumentalities as to the payment of
principal and interest, or in other instruments rated in the highest two
categories by either Moody's or S&P, provided the issuer has commercial paper
rated in the highest rating category by Moody's and S&P.
Although there is no guarantee that the Series' investment objective will be
achieved, investments in the Cash Management Series should present minimal
market risk because the portfolio of the Series consists of only short-term debt
obligations. However, an investment in this Series is subject to the risks of
declining
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<PAGE> 13
interest rates and the economy as a whole. Also, the return on an investment in
the Cash Management Series would not be the same as the return on an investment
in a money market fund available directly to the public even where yields are
equivalent, due to fees imposed at the contract level.
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. GOVERNMENT SECURITIES -- Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury (such as GNMA certificates and Federal Housing
Administration debentures). For these securities, the payment of principal and
interest is unconditionally guaranteed by the U.S. Government. They are of the
highest possible credit quality. These securities are subject to variations in
market value due to fluctuations in interest rates, but if held to maturity,
will be paid in full.
Securities issued by the U.S. Government instrumentalities and certain federal
agencies are neither direct obligations of, nor are they guaranteed by, the
Treasury. However, they involve federal sponsorship in one way or another: some
are backed by specific types of collateral; some are supported by the issuer's
right to borrow from the Treasury; some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the issuer; others
are supported only by the credit of the issuing government agency or
instrumentality. These agencies and instrumentalities include, but are not
limited to Federal Land Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks and Federal Home Loan Banks.
GNMA CERTIFICATES -- GNMA certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
Government. GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in a lump sum at
maturity. Because both interest and principal payments (including prepayments)
on the underlying mortgage loans are passed through to the holder of the
certificate, GNMA certificates are called "pass-through" securities.
Although the mortgage loans in the pool have maturities of up to 30 years, the
actual average life of the GNMA certificates typically will be substantially
less because the mortgages are subject to normal principal amortization and may
be prepaid prior to maturity. Prepayment rates vary widely and may be affected
by changes in market interest rates. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of the GNMA certificates. Conversely, when interest rates are rising, the rate
of prepayment tends to decrease, thereby lengthening the actual average life of
the GNMA certificates. Accordingly, it is not possible to predict accurately the
average life of a particular pool. Based on current statistics it is standard
practice to treat GNMA certificates as having effective maturities of 12 years.
Reinvestment of prepayments may occur at higher or lower rates than the original
yield on the certificates. Due to the prepayment feature and the need to
reinvest prepayments of principal at current rates, GNMA certificates can be
less effective than typical bonds of similar maturities at "locking-in" yields
during periods of declining interest rates, although they may have comparable
risks of decline in value during periods of rising interest rates.
FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS -- The Federal National Mortgage
Association ("FNMA"), a federally chartered and privately owned corporation,
issues pass-through securities representing an interest in a pool of
conventional mortgage loans. FNMA guarantees the timely payment of principal and
interest but this guarantee is not backed by the full faith and credit of the
U.S. Government. The Federal Home Loan Mortgage Corporation ("FHLMC"), a
corporate instrumentality of the United States, issues participation
certificates that represent an interest in a pool of conventional mortgage
loans. FHLMC guarantees the timely payment of interest and the ultimate
collection of principal and maintains reserves to protect holders against losses
due to default, but the certificates are not backed by the full faith and credit
of the U.S. Government. As is the case with GNMA certificates, the actual
maturity of and realized yield on particular FNMA and FHLMC pass-through
securities will vary based on the prepayment experience of the underlying pool
of mortgages.
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MORTGAGE-RELATED SECURITIES -- The Government/AAA Series may invest in
collateralized mortgage obligations ("CMO's") or mortgage-backed bonds issued by
financial institutions such as commercial banks, savings and loan associations,
mortgage banks and securities broker-dealers (or affiliates of such institutions
established to issue these securities). CMO's are obligations fully
collateralized directly or indirectly by a pool of mortgages on which payments
of principal and interest are dedicated to payment of principal and interest on
the CMO's. Payments are passed through to the holders, although not necessarily
on a pro rata basis, on the same schedule as they are received. Mortgage-backed
bonds are general obligations of the issuer fully collateralized directly or
indirectly by a pool of mortgages. The mortgages serve as collateral for the
issuer's payment obligations on the bonds, but interest and principal payments
on the mortgages are not passed through either directly (as with GNMA
certificates and FNMA and FHLMC pass-through securities) or on a modified basis
(as with CMO's). Accordingly, a change in the rate of prepayments on the pool of
mortgages could change the effective maturity of a CMO but not that of a
mortgage-backed bond (although, like many bonds, mortgage-backed bonds may be
callable by the issuer prior to maturity).
SHORT-TERM DEBT SECURITIES -- Debt securities maturing in one year or less
include (1) commercial bank obligations (certificates of deposit, bankers'
acceptances (time drafts on a commercial bank where the bank accepts an
irrevocable obligation to pay at maturity)) and documented discount notes
(corporate promissory discount notes accompanied by a commercial bank guarantee
to pay at maturity), (2) savings association obligations (certificates of
deposit issued by mutual savings banks or savings and loan associations), (3)
commercial paper (short-term notes (up to 9 months) issued by corporations or
governmental bodies), and (4) corporate bonds and notes (corporate obligations
that mature, or that may be redeemed, in one year or less). Although certain
floating or variable rate obligations (securities whose coupon rate changes at
least annually and generally more frequently) have maturities in excess of one
year, they are also considered short-term debt securities.
REPURCHASE AGREEMENTS -- Each Series may enter into repurchase agreements,
under which the Series buys a security and obtains a simultaneous commitment
from the seller to repurchase the security at a specified time and price.
Repurchase agreements permit the Series to maintain liquidity and earn income
over periods of time as short as overnight. The seller must maintain collateral
with the Fund's custodian equal to at least 100% of the repurchase price,
including accrued interest, as monitored daily by the Investment Adviser. See
"Management". A Series only will enter into repurchase agreements involving
securities in which it could otherwise invest and with selected banks and
securities dealers whose financial condition is monitored by the Investment
Adviser, subject to the guidance of the Board of Trustees. If the seller under
the repurchase agreement defaults, the Series may incur a loss if the value of
the collateral securing the repurchase agreement has declined, and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization of the
collateral by the Series may be delayed or limited.
FIRM COMMITMENT AGREEMENTS, WHEN-ISSUED SECURITIES AND ROLL
TRANSACTIONS -- Firm commitment agreements and when-issued purchases call for
the purchase or sale of securities at an agreed-upon price on a specified future
date, and would be used, for example, when a decline in the yield of securities
of a given issuer is anticipated by the purchaser. As purchaser, the Series
assumes the risk of any decline in value of the security beginning on the date
of the agreement of purchase. The Series will not use these transactions for
leveraging purposes and accordingly will segregate U.S. Government securities,
cash or cash equivalents in an amount sufficient to meet its obligations under
the agreement.
The Asset Allocation, High-Yield Bond and Government/AAA Series also may enter
into "roll" transactions which consist of the sale of GNMA certificates or other
securities together with a commitment (for which the Series typically receives a
fee) to purchase similar, but not identical securities at a future date. Because
"roll" transactions involve both the sale and purchase of a security, they may
cause the reported portfolio turnover rate to be higher than that reflecting
normal portfolio management activities.
RISKS AND CONSIDERATIONS APPLICABLE TO INVESTMENT IN SECURITIES OF FOREIGN
ISSUERS -- Elements of risk and opportunity which must be recognized and
evaluated by the Investment Adviser when investments in foreign issuers are made
for the International, Asset Allocation and the High-Yield Bond Series include
trade
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imbalances and related economic policies; currency fluctuations; foreign
exchange control policies; expropriation or confiscatory taxation; limitation on
the removal of funds or other assets; political or social instability; the
diverse structure and liquidity of securities markets in various countries and
regions; policies of governments with respect to possible nationalization of
their industries; and other specific local political and economic
considerations. Foreign companies and foreign investment practices are generally
not subject to uniform accounting, auditing and financial reporting standards
and practices or regulatory requirements comparable to those of U.S. companies.
There may be less information publicly available about foreign companies.
Investment decisions made in the context of the International, Asset Allocation
and High-Yield Bond Series' objectives and policies necessarily require
particular attention to opportunities and risks presented by probable future
currency relationships, especially during periods of broad adjustments in such
relationships.
With respect to its non-U.S. holdings, pursuant to California Department of
Insurance diversification guidelines, a Series will invest in securities with
issuers located in at least five different foreign countries at all times with
no country representing more than 20% of the Series' non-U.S. assets. However,
this minimum number of countries is reduced to four when foreign country
investments comprise less than 80% of the Series' net assets; to three countries
when less than 60% of net assets; to two countries when less than 40% of net
assets; and to one country when less than 20% of net assets.
An additional 15% of a Series' non-U.S. assets may be invested in securities
of issuers located in any one of the following countries: Australia, Canada,
France, Japan, the United Kingdom or Germany. This policy is not deemed a
fundamental policy and therefore may be changed without shareholder approval.
The performance of investments in securities denominated in a foreign currency
("non-dollar securities") will depend on, among other things, the strength of
the foreign currency against the dollar and the interest rate environment in the
country issuing the foreign currency. Absent other events which could otherwise
affect the value of non-dollar securities (such as a change in the political
climate or an issuer's credit quality), appreciation in the value of the foreign
currency generally can be expected to increase the value of a Series' non-dollar
securities in terms of U.S. dollars. A rise in foreign interest rates or decline
in the value of foreign currencies relative to the U.S. dollar generally can be
expected to depress the value of the Series' non-dollar securities. Currencies
are evaluated on the basis of fundamental economic criteria (e.g., relative
inflation levels and trends, growth rate forecasts, balance of payments status
and economic policies) as well as technical and political data.
Additional costs could be incurred in connection with the International, Asset
Allocation and High-Yield Bond Series' investment activities. Foreign brokerage
commissions are generally higher than in the U.S. and the Series will bear
certain expenses in connection with its foreign currency transactions. Increased
custodian costs as well as administrative difficulties (such as the
applicability of foreign laws to foreign custodians in various circumstances
including bankruptcy, ability to recover lost assets, expropriation,
nationalization, record access, etc.) may be associated with the maintenance of
assets in foreign jurisdictions.
FOREIGN CURRENCY TRANSACTIONS -- Currency exchange rate fluctuations are a
major area of risk and opportunity for the International, Asset Allocation and
High-Yield Bond Series. Each Series has the ability to hold a portion of its
assets in foreign currencies and to enter into forward foreign currency exchange
contracts. Each may also purchase and sell exchange-traded futures contracts
relating to foreign currency and purchase put and call options on currencies.
The International, Asset Allocation and High-Yield Bond Series may enter into
forward foreign currency exchange contracts and purchase currency options to
reduce the risks of fluctuations in exchange rates; however, these contracts
cannot eliminate all such risks and do not eliminate fluctuations in the prices
of the Series' portfolio securities. For example, purchasing (selling) a
currency forward limits a Series' exposure to risk of loss from a rise (decline)
in the U.S. dollar value of the currency, but also limits its potential for gain
from a decline (rise) in the currency's U.S. dollar value. While purchasing
options can protect a Series against certain exchange rate fluctuations, the
Series is subject to the loss of its entire premium payment where the option is
allowed to expire without exercise.
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<PAGE> 16
The International, Asset Allocation and High-Yield Bond Series will not
speculate in currency contracts or options; that is, they will not engage in
such transactions involving an amount of currency in excess of a) the market
value of the securities denominated in that currency which it owns or has
committed to purchase or anticipates purchasing, or b) current or anticipated
payment obligations in that currency. Further, to limit any leverage in
connection with currency contract transactions, each Series will segregate
liquid assets such as cash, U.S. Government securities or other appropriate high
grade obligations in an amount sufficient to meet its payment obligations in
these transactions. Initial margin deposits made in connection with currency
futures transactions or premiums paid for currency options may each not exceed
5% of each Series' total assets. See the Statement of Additional Information for
more information regarding foreign currency transactions.
MANAGEMENT
The Fund's Board of Trustees is responsible for the overall supervision of the
operations of the Fund and performs various duties imposed on trustees of
investment companies by the Investment Company Act of 1940, as amended ("1940
Act"). The Board has retained others to provide certain services to the Fund.
INVESTMENT ADVISER -- The Fund is advised by Capital Research and Management
Company, 333 South Hope Street, Los Angeles, California 90071 (the "Investment
Adviser" or "CRMC"), a large and experienced investment management organization
founded in 1931. The research activities of the Investment Adviser are conducted
by a wholly owned subsidiary, Capital Research Company, and other affiliates
that have research facilities in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Hong Kong, Singapore and Tokyo. The
organization's research program encompasses economic and statistical services
integrated with field research based upon contacts with important decision
makers, including government officials, and officers, directors and members of
the advisory boards of many leading corporations. As of December 31, 1995, CRMC
had approximately $152 billion in assets under management.
The Investment Adviser manages the investment portfolio of each Series of the
Fund subject to the policies established by the Board of Trustees and places
orders for the Fund's portfolio securities transactions. When circumstances
relating to a proposed transaction indicate that a particular broker-dealer is
in a position to obtain the best price and execution, the order is placed with
that broker-dealer. This may or may not be a broker-dealer that has provided
research, statistical or other related services or has sold contracts. There is
no agreement or commitment to place orders with any broker-dealer; however,
subject to the requirement of seeking the best available price and execution,
the Investment Adviser may select broker-dealers that have provided research,
statistical and other related services for the benefit of the Fund and/or for
other funds served by the Investment Adviser.
Pursuant to an Investment Advisory Contract between the Fund and the
Investment Adviser, the Investment Adviser receives a monthly fee, accrued daily
and payable at the end of each month, based on net assets of each Series of the
Fund other than the International Series, at the annual rate of 0.36% of that
portion of each Series' average daily net assets not exceeding $30 million, plus
0.30% of that portion of each Series' average daily net assets in excess of $30
million. The Investment Adviser receives a monthly fee, accrued daily, based on
the net assets of the International Series, at the annual rate of 0.66% of that
portion of the Series' average daily net assets not exceeding $60 million, plus
0.58% of that portion of the Series' average daily net assets in excess of $60
million.
For the fiscal year ended November 30, 1995, the Series paid to the Investment
Adviser a fee equal to the following percentages of average daily net assets;
Growth Series -- .30%, International Series -- .60%, Growth-Income
Series -- .30%, Asset Allocation Series -- .31%, High-Yield Bond Series -- .31%,
U.S. Government/AAA Rated Series -- .31% and Cash Management Series -- .31%.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM -- The basic investment philosophy of CRMC
is to seek fundamental values at reasonable prices, using a system of multiple
portfolio counselors in managing mutual fund assets. Under this system, the
portfolios of the managed Series are divided into segments and each segment is
assigned to an individual counselor, who decides how the segment will be
invested (within the limits provided by each Series' objective and by CRMC's
investment committee). In addition, CRMC's research professionals make
investment decisions with respect to a portion of each Series' portfolio.
13
<PAGE> 17
The following individuals are primarily responsible for the day to day
management of the particular Series as indicated below:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE IN THE
INVESTMENT INDUSTRY
WITH CAPITAL
YEARS OF EXPERIENCE AS RESEARCH AND
PORTFOLIO COUNSELOR MANAGEMENT
PORTFOLIO COUNSELORS FOR THE SERIES COMPANY OR TOTAL
FOR THE FUND PRIMARY TITLE(S) INDICATED (APPROXIMATE) ITS AFFILIATES YEARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
James F. Rothenberg President and Director, Asset Allocation 26 26
Capital Research and Series --
Management Company 2 years; Growth
Series --
4 years
- -----------------------------------------------------------------------------------------------------------------------
James K. Dunton Senior Vice President and Growth-Income Series -- 34 34
Director, Capital Research since the series began
and Management Company operations 1984
- -----------------------------------------------------------------------------------------------------------------------
Abner D. Goldstine Senior Vice President and Asset Allocation 29 44
Director, Capital Research Series -- since the
and Management Company series began operations
in 1989; U.S. Government
Series --
since the series began
operations in 1985
- -----------------------------------------------------------------------------------------------------------------------
Claudia P. Huntington Senior Vice President, Growth Series -- 2 years 18 20
Capital Research Company* (plus 5 years as a
research professional
prior to becoming
portfolio counselor for
the series); Asset
Allocation Series --
1 year
- -----------------------------------------------------------------------------------------------------------------------
Dina N. Perry Vice President, Capital Asset Allocation 4 29
Research and Management Series --
Company 2 years; Growth-Income
Series -- 4 years
- -----------------------------------------------------------------------------------------------------------------------
John H. Smet Vice President, Capital U.S. Government Series -- 13 14
Research and Management 4 years
Company
- -----------------------------------------------------------------------------------------------------------------------
David C. Barclay Executive Vice President, High-Yield Bond 8 15
Capital Research Company* Series --
3 years
- -----------------------------------------------------------------------------------------------------------------------
Stephen E. Bepler Senior Vice President and International 23 30
Director, Capital Research Series -- since the
Company* series began operations
in 1990
- -----------------------------------------------------------------------------------------------------------------------
Martial Chaillet Senior Vice President, International Series -- 3 8 15
Capital Research Company* years
- -----------------------------------------------------------------------------------------------------------------------
Gordon Crawford Senior Vice President and Growth Series -- 2 years 25 25
Director, Capital Research (plus 5 years as a
Company* research professional
prior to becoming a
portfolio counselor for
the series)
- -----------------------------------------------------------------------------------------------------------------------
James E. Drasdo Senior Vice President and Growth Series -- 9 years; 19 24
Director, Capital Research Growth-Income Series --
and Management Company 2 years
- -----------------------------------------------------------------------------------------------------------------------
Robert W. Lovelace Executive Vice President, International Series -- 11 11
Capital Research Company* 2 years
- -----------------------------------------------------------------------------------------------------------------------
* Company affiliated with Capital Research and Management Company.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE IN THE
INVESTMENT INDUSTRY
WITH CAPITAL
YEARS OF EXPERIENCE AS RESEARCH AND
PORTFOLIO COUNSELOR MANAGEMENT
PORTFOLIO COUNSELORS FOR THE SERIES COMPANY OR TOTAL
FOR THE FUND PRIMARY TITLE(S) INDICATED (APPROXIMATE) ITS AFFILIATES YEARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Robert G. O'Donnell Senior Vice President and Growth-Income Series -- 21 24
Director, Capital Research 6 years (plus 1 year as a
and Management Company research professional
prior to becoming a
portfolio counselor for
the series)
- -----------------------------------------------------------------------------------------------------------------------
Donald D. O'Neal Vice President, Capital Growth Series -- 5 years 11 11
Research and Management (plus 4 years as a
Company research professional
prior to becoming a
portfolio counselor for
the series)
- -----------------------------------------------------------------------------------------------------------------------
Richard T. Schotte Senior Vice President, High-Yield Bond 18 29
Capital Research and Series --
Management Company 9 years
- -----------------------------------------------------------------------------------------------------------------------
Susan M. Tolson Vice President, Capital High-Yield Bond 6 8
Research Company* Series --
1 year (plus 2 years as a
research professional
prior to becoming a
portfolio counselor for
the series)
- -----------------------------------------------------------------------------------------------------------------------
* Company affiliated with Capital Research and Management Company.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
BUSINESS MANAGER -- The Fund's business manager is Anchor Investment Adviser,
Inc., 1 SunAmerica Center, Century City, Los Angeles, California 90067-6022(the
"Business Manager"). The Business Manager is a Maryland corporation formed on
February 6, 1987, and is an indirectly wholly owned subsidiary of the Company.
Pursuant to the Business Management Agreements, the Business Manager manages the
business affairs and the administration of the Fund. For providing these
services, the Business Manager receives a monthly fee, accrued daily, based on
the net assets of each Series of the Fund other than the International Series,
at the annual rate of 0.24% of that portion of each Series' average daily net
assets not exceeding $30 million, plus 0.20% of that portion of each Series'
average daily net assets in excess of $30 million. The Business Manager receives
a monthly fee, accrued daily, based on the average daily net assets of the
International Series at the annual rate of 0.24%. For the fiscal year ended
November 30, 1995, the Series paid to the Business Manager a fee equal to the
following percentages of average daily net assets; Growth Series -- .19%,
International Series -- .24%, Growth-Income Series -- .20%, Asset Allocation
Series -- .21%, High-Yield Bond Series -- .21%, U.S. Government/AAA-Rated
Series -- .22% and Cash Management Series -- .21%. The Fund pays certain
expenses not assumed by the Business Manager, including, but not limited to:
expenses of shareholder meetings, the expense of reports to existing
shareholders, insurance premiums, legal and auditing fees, dividend disbursement
expenses, the expense of the issuance, transfer and redemption of its shares,
custodian fees, printing and preparation of registration statements,
prospectuses and proxies, taxes, and compensation of Board of Trustees who are
not interested persons of the Fund.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT -- State Street Bank and
Trust Company ("State Street"), 225 Franklin Street, Boston, Massachusetts
02110, is the Fund's custodian, transfer agent and dividend paying agent. State
Street maintains custody of the Fund's securities and cash and the records of
each shareholder's account. State Street also performs other related shareholder
service functions.
PORTFOLIO TURNOVER
All Series effect portfolio transactions without regard to the length of time
particular investments have been held. Under certain market conditions, the
investment policies of the High-Yield Bond Series, the Government/AAA Series and
the Asset Allocation Series may result in high portfolio turnover, although the
portfolio
15
<PAGE> 19
turnover rate of each Series is not normally expected to exceed an annual rate
of 100%. The portfolio turnover policy with respect to the common stock portion
of the Asset Allocation Series will be comparable to that of its debt portfolio.
Both types of securities will be bought and sold regardless of the actual or
expected holding period. Each portion of the Asset Allocation Series is expected
to have a turnover rate of approximately 100%, but the turnover rate may be
higher should market conditions warrant changes. A 100% annual portfolio
turnover rate would occur, for example, if all the investments in a Series'
portfolio (exclusive of securities with less than one year to maturity) were
replaced within a one year period. High portfolio turnover involves
correspondingly greater brokerage commissions, to the extent such commissions
are payable, and other transaction costs that are borne directly by the Series
involved. Corporate bonds and U.S. Government securities are generally traded on
a net basis and neither brokerage commissions nor transfer taxes are usually
involved. See "Financial Highlights" on page 3 for the portfolio turnover rates
of the various Series.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The Account is subject to variable contract asset diversification regulations
prescribed by the U.S. Treasury Department under the Internal Revenue Code of
1986, as amended (the "Code"). In general, these regulations effectively provide
that, as of the end of each calendar quarter or within 30 days thereafter, no
more than 55% of the total assets of the Series may be represented by any one
investment, no more than 70% by any two investments, no more than 80% by any
three investments, and no more than 90% by any four investments. For this
purpose, all securities of the same issuer are considered a single investment,
but each U.S. agency or instrumentality is treated as a separate issuer. If a
Series fails to comply with these regulations, the contracts invested in that
Series will not be treated as annuity, endowment or life insurance contracts
under the Code.
So long as a Series qualifies as a regulated investment company, such Series
will not be subject to federal income tax on the net investment company taxable
income or net capital gains distributed to shareholders as ordinary income
dividends or capital gains dividends. It is the policy of each Series to
distribute to its shareholders substantially all of its ordinary income and net
long-term capital gains realized during each fiscal year. All distributions are
reinvested in shares of the Series at net asset value.
See the applicable contract prospectus for information regarding the federal
income tax treatment of the contracts and distributions to the separate
accounts.
PRICE OF SHARES
Shares of each Series of the Fund are sold at the net asset value per share
calculated once daily at the close of general trading (currently 4:00 p.m., New
York time) on each day the New York Stock Exchange is open. The current value of
the Series' total assets, less liabilities, is divided by the total number of
shares outstanding, and the result is the net asset value per share. Assets are
generally valued at their market value, where available, except that short-term
securities with 60 days or less to maturity are valued on an amortized cost
basis. For a complete description of the procedures involved in valuing various
Fund assets, see the Statement of Additional Information.
PURCHASES AND REDEMPTIONS
Shares of the Fund currently are offered only to the Variable Separate
Account. At present, Fund shares are used as the investment vehicle for annuity
contracts only. The Company may issue variable life contracts that also will use
the Fund as the underlying investment. The offering of Fund shares to variable
annuity and variable life separate accounts is referred to as "mixed funding."
It may be disadvantageous for variable annuity separate accounts and variable
life separate accounts to invest in the Fund simultaneously. Although neither
the Company nor the Fund currently foresees such disadvantages either to
variable annuity or variable life contract owners, the Board of Trustees of the
Fund, based upon information provided by the Company, would monitor events in
order to determine, should a material conflict arise, what action, if any, need
be taken in response thereto. All shares may be purchased or redeemed by the
separate account without any sales or
16
<PAGE> 20
redemption charge at the next computed net asset value. Purchases and
redemptions are made subsequent to corresponding purchases and redemptions of
units of the separate account without delay.
Except in extraordinary circumstances and as permissible under the 1940 Act,
the redemption proceeds are paid on or before the seventh day following the
request for redemption.
SHAREHOLDER VOTING RIGHTS
All shares of the Fund have equal voting rights and may be voted in the
election of Trustees and on other matters submitted to the vote of the
shareholders. Shareholders' meetings ordinarily will not be held unless required
by the 1940 Act. As permitted by Massachusetts law, there normally will be no
shareholders' meetings for the purpose of electing Trustees unless and until
such time as fewer than a majority of the trustees holding office have been
elected by shareholders. At that time, the trustees then in office will call a
shareholders' meeting for the election of trustees. The trustees must call a
meeting of shareholders for the purpose of voting upon the removal of any
trustee when requested to do so by the record holders of 10 percent of the
outstanding shares of the Fund. A trustee may be removed after the holders of
record of not less than two-thirds of the outstanding shares have declared that
the trustee be removed either by declaration in writing or by votes cast in
person or by proxy. Except as set forth above, the trustees shall continue to
hold office and may appoint successor trustees, provided that immediately after
the appointment of any successor trustee, at least two-thirds of the trustees
have been elected by the shareholders. Shares do not have cumulative voting
rights. Thus, holders of a majority of the shares voting for the election of
trustees can elect all the trustees. No amendment may be made to the Declaration
of Trust without the affirmative vote of a majority of the outstanding shares of
the Fund, except that amendments to conform the Declaration to the requirements
of applicable federal laws or regulations or the regulated investment company
provisions of the Code may be made by the trustees without the vote or consent
of shareholders. If not terminated by the vote or written consent of a majority
of its outstanding shares, the Fund will continue indefinitely.
In matters affecting only a particular Series, the matter shall have been
effectively acted upon by a majority vote of that Series even though: (1) the
matter has not been approved by a majority vote of any other Series; or (2) the
matter has not been approved by a majority vote of the Fund.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL
Price Waterhouse LLP has been selected as independent accountants for the
Fund. The firm of Shereff, Friedman, Hoffman and Goodman, LLP has been selected
as legal counsel to the Fund.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to Anchor National Life Insurance
Company, Annuity Service Center, P.O. Box 54299, Los Angeles, California
90054-0299, telephone number (800) 445-7862.
17
<PAGE> 21
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TOPIC PAGE
<S> <C>
The Fund.............................................................................. 2
Investment Policies................................................................... 2
Investment Restrictions............................................................... 11
Fund Officers and Trustees............................................................ 16
Investment Advisory Agreement......................................................... 18
Business Management Agreement......................................................... 19
Dividends, Distributions and Federal Taxes............................................ 21
Price of Shares....................................................................... 21
Execution of Portfolio Transactions................................................... 22
General Information................................................................... 24
Financial Statements.................................................................. 25
</TABLE>
18
<PAGE> 22
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS
COMMERCIAL PAPER RATINGS -- Moody's Investors Service, Inc. employs the
designations "Prime-1", "Prime-2" and "Prime-3" to indicate commercial paper
having the highest capacity for timely repayment. Issuers rated Prime-1 have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Standard & Poor's Ratings Services' ratings of commercial paper are graded
into four categories ranging from "A" for the highest quality obligations to "D"
for the lowest. A -- Issues assigned its highest rating are regarded as having
the greatest capacity for timely payment. Issues in this category are delineated
with numbers 1, 2, and 3 to indicate the relative degree of safety. A-1 -- This
designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics will be denoted with a plus (+) sign
designation. A-2 -- Capacity for timely payments on issues with this designation
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1".
CORPORATE DEBT SECURITIES -- Moody's Investors Service, Inc. rates the
long-term debt securities issued by various entities from "Aaa" to "C".
Aaa -- Best quality. These securities carry the smallest degree of investment
risk and are generally referred to as "gilt edge". Interest payments are
protected by a larger, or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of these issues. Aa -- High quality by all standards. They are rated
lower than the best bond because margins of protection may not be as large as in
Aaa securities, fluctuation of protective elements may be of greater amplitude,
or there may be other elements present that make the long-term risks appear
somewhat greater. A -- Upper medium grade obligations. These bonds possess many
favorable investment attributes. Factors giving security to principal and
interest are considered adequate, but elements may be present that suggest a
susceptibility to impairment sometime in the future. Baa -- Medium grade
obligations. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics as well. Ba -- Have speculative elements; future cannot be
considered as well assured. The protection of interest and principal payments
may be very moderate and thereby not well safeguarded during both good and bad
times over the future. Bonds in this class are characterized by uncertainty of
position. B -- Generally lack characteristics of the desirable investment;
assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Caa -- Of poor standing.
Issues may be in default or there may be present elements of danger with respect
to principal or interest. Ca -- Speculative in a high degree; often in default
or have other marked shortcomings. C -- Lowest rated class of bonds; can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Standard & Poor's Ratings Services rates the long-term securities debt of
various entities in categories ranging from "AAA" to "D" according to quality.
AAA -- Highest rating. Capacity to pay interest and repay principal is extremely
strong. AA -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small degree.
A -- Have a strong capacity to pay interest and repay principal, although they
are somewhat more susceptible to the adverse effects of change in circumstances
and economic conditions than debt in higher rated categories. BBB -- Regarded as
having
<PAGE> 23
adequate capacity to pay interest and repay principal. These bonds normally
exhibit adequate protection parameters, but adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal than for debt in higher rated categories. BB, B,
CCC, CC, C -- Regarded, on balance, as predominately speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation. BB indicated the lowest degree of speculation and C the highest
degree of speculation. While this debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions. C1 -- Reserved for income bonds on which
no interest is being paid. D -- In default and payment of interest and/or
repayment of principal is in arrears.
<PAGE> 24
<TABLE>
<S> <C> <C>
- ------------------------------
- ------------------------------
- ------------------------------ Stamp
</TABLE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
SERVICE CENTER
P.O. BOX 54299
LOS ANGELES, CA 90054-0299
<PAGE> 25
Please forward a copy (without charge) of the Statement of Additional
Information concerning American Pathway II Variable Annuity Contracts to:
(Please print or type and fill in all information.)
- ------------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------------
Address
- ------------------------------------------------------------------------------
City/State/Zip
- ------------------------------------------------------------------------------
Date: Signed:
--------------------------- --------------------------------------
<PAGE> 26
Statement of Additional Information
ANCHOR PATHWAY FUND
This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the current Prospectus of the Fund, dated
January 29, 1996. The Prospectus may be obtained by writing to the Fund at the
address below. Capitalized terms used herein but not defined have the meanings
assigned to them in the Prospectus.
P.O. Box 54299
Los Angeles, California 90054-0299
January 29, 1996
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Topic Page
<S> <C>
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . 11
Fund Officers and Trustees . . . . . . . . . . . . . . . . . . . . 16
Investment Advisory Agreement. . . . . . . . . . . . . . . . . . . 18
Business Management Agreement. . . . . . . . . . . . . . . . . . . 19
Dividends, Distributions and Federal Taxes . . . . . . . . . . . . 21
Price of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Execution of Portfolio Transactions. . . . . . . . . . . . . . . . 22
General Information. . . . . . . . . . . . . . . . . . . . . . . . 24
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
THE FUND
The Fund, organized as a Massachusetts business trust on March 23, 1987, is
a diversified, open-end management investment company. It was established to
provide an exclusive funding medium for the Account.
The sole shareholder of the Fund is the Account. The Company is a
wholly-owned subsidiary of SunAmerica Life Insurance Company, an Arizona
corporation, which is, in turn, owned by SunAmerica, Inc., a Maryland
corporation.
INVESTMENT POLICIES
The discussion below is intended to supplement the information contained in
the Prospectus.
GENERAL
Illiquid Securities. Each of the Series may invest no more than 10% of its
net assets, determined as of the date of purchase, in illiquid securities
including repurchase agreements which have a maturity of longer than seven days
or in other securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale. Historically,
illiquid securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), securities which are
otherwise not readily marketable and repurchase agreements having a maturity of
longer than seven days. Repurchase agreements subject to demand are deemed to
have a maturity equal to the notice period. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market.
- 2 -
<PAGE> 28
Mutual funds do not typically hold a significant amount of these restricted or
other illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay. There generally will be a lapse of time between a mutual fund's
decision to sell an unregistered security and the registration of such security
promoting sale. Adverse market conditions could impede a public offering of
such securities. When purchasing unregistered securities, the Series will seek
to obtain the right of registration at the expense of the issuer.
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment. The
fact that there are contractual or legal restrictions on resale to the general
public or to certain institutions may not be indicative of the liquidity of
such investments.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act for which there is a readily available market will not be deemed
to be illiquid under procedures adopted by the Fund's Board of Trustees. CRMC
will monitor the liquidity of such restricted securities. In reaching
liquidity decisions, the Investment Adviser will consider, inter alia, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers wishing to purchase or sell the security and the number
of other potential purchasers; (3) dealer undertakings to make a market in the
security; and (4) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).
The Cash Management Series may invest in commercial paper issues which
include securities issued by major corporations without registration under the
Securities Act in reliance on the exemption from such registration afforded by
Section 3(a)(3) thereof, and commercial paper issued in reliance on the
so-called private placement exemption from registration which is afforded by
Section 4(2) of the Securities Act ("Section 4(2) paper"). In addition each
Series may invest in Section 4(2) paper. Section 4(2) paper is restricted as
to disposition under the federal securities laws in that any resale must
similarly be made in an exempt transaction. Section 4(2) paper is normally
resold to other institutional investors through or with the assistance of
- 3 -
<PAGE> 29
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Section 4(2) paper that is issued by a company that files reports
under the Securities Exchange Act of 1934 is generally eligible to be sold in
reliance on the safe harbor of Rule 144A described above. The Investment
Adviser believes that Section 4(2) commercial paper meets its criteria for
liquidity and is quite liquid. Each Series intends, therefore, to treat
Section 4(2) commercial paper as liquid and not subject to the investment
limitation applicable to illiquid securities.
CASH MANAGEMENT SERIES
The Cash Management Series seeks to achieve its investment objective by
investing in a diversified selection of money market instruments. The money
market instruments that the Series may invest in are as follows:
Commercial Bank Obligations - Certificates of deposit (interest-bearing
time deposits), bankers' acceptances (time drafts drawn on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity) and
documented discount notes (corporate promissory discount notes accompanied by a
commercial bank guarantee to pay at maturity) representing direct or contingent
obligations of commercial banks with total assets in excess of $1 billion,
based on the latest published reports. The Cash Management Series may also
invest in obligations issued by commercial banks with total assets of less than
$1 billion if the principal amount of these obligations owned by the Cash
Management Series is fully insured by the Federal Deposit Insurance Corporation
("FDIC").
Savings Association Obligations - Certificates of deposit (interest-bearing
time deposits) issued by mutual savings banks or savings and loan associations
with assets in excess of $1 billion and whose deposits are insured by the FDIC.
The Cash Management Series may also invest in obligations issued by mutual
savings banks or savings and loan associations with total assets of less than
$1 billion if the principal amount of these obligations owned by the Cash
Management Series is fully insured by the FDIC.
Commercial Paper - Short-term notes (up to 9 months) issued by corporations
or governmental bodies. The Cash Management Series may only purchase
commercial paper judged by the Investment Adviser to be of suitable investment
quality. This includes commercial paper that is (a) rated in the two highest
categories by S&P's and by Moody's or (b) other commercial paper deemed on the
basis of the issuer's creditworthiness to be of a quality appropriate for the
Cash Management Series. (No more than 5% of the Cash Management Series' assets
may be invested in commercial paper in the second highest rating category; no
more than the greater of 1% of the Cash Management Series' assets or $1 million
may be invested in such securities of any one issuer.) See the
- 4 -
<PAGE> 30
Appendix contained in the Fund's prospectus for a description of the ratings.
The Cash Management Series will not purchase commercial paper described in (b)
above if such paper would in the aggregate exceed 15% of its total assets after
such purchase. The commercial paper in which the Cash Management Series may
invest includes variable amount master demand notes. Variable amount master
demand notes permit the Cash Management Series to invest varying amounts at
fluctuating rates of interest pursuant to the agreement in the master note.
These are direct lending obligations between the lender and borrower, they are
generally not traded, and there is no secondary market. Such instruments are
payable with accrued interest in whole or in part on demand. The amounts of
the instruments are subject to daily fluctuations as the participants increase
or decrease the extent of their participation. Investments in these
instruments are limited to those that have a demand feature enabling the Cash
Management Series unconditionally to receive the amount invested from the
issuer upon seven or fewer days' notice. Generally, the Cash Management Series
attempts to invest in instruments having a one-day notice provision. In
connection with master demand note arrangements, the Investment Adviser,
subject to the direction of the trustees, monitors on an ongoing basis, the
earning power, cash flow and other liquidity ratios of the borrower, and its
ability to pay principal and interest on demand. The Investment Adviser also
considers the extent to which the variable amount master demand notes are
backed by bank letters of credit. These notes generally are not rated by
Moody's or S&P and the Cash Management Series may invest in them only if it is
determined that at the time of investment the notes are of comparable quality
to the other commercial paper in which the Series may invest. Master demand
notes are considered to have a maturity equal to the repayment notice period
unless the Investment Adviser has reason to believe that the borrower could not
make timely repayment upon demand.
In addition, the Cash Management Series may invest in commercial paper
issued in reliance on the exemption from registration afforded by Section 4(2)
of the Securities Act. See "Illiquid Securities."
Corporate Bonds and Notes - The Cash Management Series may purchase
corporate obligations that mature or that may be redeemed in one year or less.
These obligations originally may have been issued with maturities in excess of
one year. The Cash Management Series may invest only in corporate bonds or
notes of issuers having outstanding short-term securities rated in the top two
rating categories by S&P and Moody's. See the Appendix contained in the Fund's
prospectus for a description of investment-grade ratings by S&P and Moody's.
Floating Rate Obligations - These securities have a coupon rate that
changes at least annually and generally more frequently. The coupon rate is
set in relation to money market rates. The obligations, issued primarily by
banks, other
- 5 -
<PAGE> 31
corporations, governments and semi-governmental bodies, may have a maturity in
excess of one year. In some cases, the coupon rate may vary with changes in
the yield on Treasury bills or notes or with changes in LIBOR (London Interbank
Offering Rate). The Investment Adviser considers floating rate obligations to
be liquid investments because a number of U.S. and non-U.S. securities dealers
make active markets in these securities.
U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES
Government National Mortgage Association Certificates - The Government/AAA
Series, previously known as the U.S. Government Guaranteed Securities Series,
may purchase certificates issued by GNMA. These certificates are
mortgage-backed securities representing part ownership of a pool of mortgage
loans that are issued by lenders such as mortgage bankers, commercial banks and
savings and loan associations, and are either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration. A pool of these
mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. The timely payment of interest and
principal on each mortgage is guaranteed by GNMA and backed by the full faith
and credit of the United States government. Principal is paid back monthly by
the borrower over the term of the loan. Because both interest and principal
payments (including prepayments) are passed through to the holder of the
certificate, GNMA certificates are called "pass-through" securities.
Mortgage-Related Securities - These securities are either part of a CMO
series or mortgage-backed bonds. A CMO series is made up of a group of bonds
that together are fully collateralized directly or indirectly by a pool of
mortgages on which the payments of principal and interest are dedicated to
payment of principal and interest on the bonds in the series. Each class of
bonds in the series has a different maturity than the other classes of bonds in
the series and may bear a different coupon rate. The different maturities come
from the fact that all principal payments, both regular principal payments as
well as any prepayments of principal, are passed through first to the holders
of the class with the shortest maturity until it is completely retired.
Thereafter, principal payments are passed through to the next class of bonds in
the series, until all the classes have been paid off. As a result, an
acceleration in the rate of prepayments that may be associated with declining
interest rates shortens the expected life of each class, with the greatest
impact on those classes with the shortest maturities. Similarly, should
prepayments slow down, as may happen in times of rising interest rates, the
expected life of each class lengthens, again with the greatest impact on those
classes with the shortest maturities. In the case of some CMO series, each
class may receive a differing proportion of the monthly interest and principal
payments on the underlying collateral. In these series the classes having
proportionately greater interests on principal repayments generally would be
more affected by acceleration (or slowing) in the rate of prepayments.
- 6 -
<PAGE> 32
Mortgage-backed bonds are general obligations of the issuer fully
collateralized directly or indirectly by a pool of mortgages. The mortgages
serve as collateral for the issuer's payment obligations on the bonds, but
interest and principal payments on the mortgages are not passed through either
directly (as with GNMA certificates and FNMA and FHLMC pass-through securities)
or on a modified basis (as with CMO's). Accordingly, a change in the rate of
prepayments on the pool of mortgages could change the effective maturity of a
CMO but not that of a mortgage-backed bond (although, like many bonds,
mortgage-backed bonds can provide that they are callable by the issuer prior to
maturity).
Reverse Repurchase Agreements - Although the Government/AAA series has no
current intention of doing so during the next twelve months, the Government/AAA
Series is authorized to enter into reverse repurchase agreements. A reverse
repurchase agreement is the sale of a security by the Government/AAA Series and
its agreement to repurchase the security at a specified time and price. The
Government/AAA Series maintains in a segregated account with the Fund's
custodian cash, cash equivalents or U.S. Government securities in an amount
sufficient to cover its obligations under reverse repurchase agreements with
broker-dealers (but no collateral is required on reverse repurchase agreements
with banks). Under the 1940 Act, reverse repurchase agreements may be
considered borrowings by the Government/AAA Series; accordingly, the
Government/AAA Series will limit its reverse repurchase agreements, together
with any other borrowings, to no more than one-third of its total assets. In
addition, the Government/AAA Series will enter into reverse repurchase
agreements only to the extent of ten percent of its net assets when borrowing
for general purposes, and only to the extent of twenty-five percent of its net
assets when borrowing to facilitate redemptions. The use of reverse repurchase
agreements by the Government/AAA Series creates leverage that increases the
Government/AAA Series' investment risk. If the income and gains on securities
purchased with the proceeds of reverse repurchase agreements exceed the cost of
the agreements, the Government/AAA Series' earnings and net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the costs, earnings and net asset value would decline
faster than otherwise would be the case.
U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES, ASSET ALLOCATION SERIES AND
HIGH-YIELD BOND SERIES
Loans of Portfolio Securities - Although the Government/AAA Series, Asset
Allocation Series and High-Yield Bond Series have no current intention of doing
so during the next twelve months, they are authorized to lend portfolio
securities to broker-dealers or to other institutional investors whose
financial
- 7 -
<PAGE> 33
condition is monitored by CRMC. The borrower must maintain collateral with the
Fund's custodian consisting of cash, cash equivalents or U.S. Government
securities equal to at least 100% of the value of the borrowed securities, plus
any accrued interest. The Investment Adviser monitors the adequacy of the
collateral on a daily basis. The Series may at any time call a loan of its
portfolio securities and obtain the return of the loaned securities. The
Series receives any interest paid on the loaned securities and a fee or a
portion of the interest earned on the collateral.
HIGH-YIELD BOND SERIES AND INTERNATIONAL SERIES
Currency Transactions - The International Series and High-Yield Bond Series
have the ability to hold a portion of their assets in U.S. dollars and other
currencies and to enter into certain currency contracts (on either a spot or
forward basis) in connection with investing in non-U.S. dollar denominated
securities. A forward currency contract is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. The Series might purchase a particular currency or enter into
a forward currency contract to preserve the U.S. dollar price of securities it
intends or has contracted to sell.
The International Series in addition to purchasing or selling currencies
and entering into foreign exchange contract, may enter into forward currency
contracts to hedge against changes in exchange rates relative to the U.S.
dollar. For example, the Series might enter into a forward currency contract
to protect against an anticipated decline in value of a foreign currency
against the U.S. dollar when it holds securities denominated in that foreign
currency.
The High-Yield Bond Series may also enter into exchange-traded futures
contracts relating to foreign currencies in connection with investments in
securities of foreign issuers in anticipation of, or to protect against,
fluctuations in exchange rates. In addition, forward currency contracts may be
used by the Series to purchase or sell a currency against another currency at a
future date and price as agreed upon by the parties. Although currency
contracts typically will involve the purchase and sale of a foreign currency
against the U.S. dollar, a Series also may enter into currency contracts not
involving the U.S. dollar. In connection with these futures transactions, the
Fund has filed a notice of eligibility with the Commodities Futures Trading
Commission (the "CFTC") that exempts the Fund from CFTC registration as a
"commodity pool operator" as defined under the Commodities Exchange Act.
Pursuant to this notice, a Series may (i) purchase and sell futures and options
thereon for bona fide
- 8 -
<PAGE> 34
hedging purposes, as defined under CFTC regulations, without regard to the
percentage of the Series' assets committed to margin and option premiums, and
(ii) enter into non-hedging transactions, provided that the Series may not
enter into such non-hedging transactions if, immediately thereafter, the sum of
the amount of initial margin deposits on the Series' existing futures positions
and option premiums would exceed 5% of the fair value of its portfolio, after
taking into account unrealized profits and unrealized losses on any such
transactions.
The High-Yield Bond Series may attempt to accomplish objectives similar to
those involved in their its of currency contracts by purchasing put or call
options on currencies. A put option gives the Series, as purchaser, the right
(but not the obligation) to sell a specified amount of currency at the exercise
price until the expiration of the option. A call option gives the Series, as
purchaser, the right (but not the obligation) to purchase a specified amount of
currency at the exercise price until its expiration. The Series might purchase
a currency put option, for example, to protect itself during the contract
period against a decline in the U.S. dollar value of a currency in which it
holds or anticipates holding securities. If the currency's value should
decline against the U.S. dollar, the loss in currency value should be offset,
in whole or in part, by an increase in the value of the put. If the value of
the currency instead should rise against the U.S. dollar, any gain to the
Series would be reduced by the premium it had paid for the put option. A
currency call option might be purchased, for example, in anticipation of, or to
protect against, a rise in the value against the U.S. dollar of a currency in
which a series anticipates purchasing securities.
Currency options may be either listed on an exchange or traded
over-the-counter ("OTC options"). Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation), and have standardized strike prices
and expiration dates. OTC options are two-party contracts with negotiated
strike prices and expiration dates. A Series will not purchase an OTC option
unless it believes that daily valuations for such options are readily
obtainable. OTC options differ from exchange-traded options in that OTC
options are transacted with dealers directly and not through a clearing
corporation (which guarantees performance). Consequently, there is a risk of
non-performance by the dealer. Since no exchange is involved, OTC options are
valued on the basis of a quote provided by the dealer. In the case of OTC
options, there can be no assurance that a liquid secondary market will exist
for any particular option at any specific time.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a future or related option can vary from the
previous day's settlement price; once that limit is reached, no trades may be
made that day at a price beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily limit for several
- 9 -
<PAGE> 35
consecutive days with little or no trading, thereby preventing liquidation of
unfavorable positions.
If a Series were unable to liquidate a futures or related options position
due to the absence of a liquid secondary market or the imposition of price
limits, it could incur substantial losses. The Series would continue to be
subject to market risk with respect to its position. In addition, except in
the case of purchased options, the Series would continue to be required to make
daily variation margin payments and might be required to maintain the position
being hedged by the future or option or to maintain cash or securities in a
segregated account.
Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or related options might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the futures and related options
markets are subject to daily variation margin calls and might be compelled to
liquidate futures or related option positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the futures, markets are
less onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the futures and securities markets
involving arbitrage, "program trading" and other investment strategies might
result in temporary price distortions.
To avoid having an amount greater than its net assets subject to market
risk in connection with currency contract transactions, each Series will
segregate cash, cash equivalents, or high quality debt instruments in an amount
equal to the value of the currency it has committed to purchase.
ASSET ALLOCATION SERIES AND HIGH-YIELD BOND SERIES
Certain Risk Factors Relating to High-Yield Bonds - Both the Asset
Allocation Series and the High-Yield Bond Series may invest in high yield
bonds. These bonds present certain risks which are discussed below:
Sensitivity to Interest Rate and Economic Changes - High-yield bonds
are very sensitive to adverse economic changes and corporate developments.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would adversely
affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaulted on its obligations to pay
interest or principal or entered into bankruptcy
- 10 -
<PAGE> 36
proceedings, the Series may incur losses or expenses in seeking recovery of
amounts owed to it. In addition, periods of economic uncertainty and changes
can be expected to result in increased volatility of market prices of
high-yield bonds and the Series' net asset value.
Payment Expectations - High-yield bonds may contain redemption or call
provisions. If an issuer exercised these provisions in a declining interest
rate market, the Series would have to replace the security with a lower
yielding security, resulting in a decreased return for investors. Conversely,
a high-yield bond's value will decrease in a rising interest rate market, as
will the value of the Series' assets. If the Series experiences unexpected net
redemptions, this may force it to sell high-yield bonds without regard to their
investment merits, thereby decreasing the asset base upon which expenses can be
spread and possibly reducing the Series' rate of return.
Liquidity and Valuation - There may be little trading in the secondary
market for particular bonds, which may affect adversely the Series' ability to
value accurately or dispose of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield bonds, especially in a thin market.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions for each Series
that cannot be changed without approval by a majority of its outstanding
shares. Such majority is defined as the vote of the lesser of (i) 67 percent
or more of the outstanding shares of the Series present at a meeting, if the
holders of more than 50 percent of the outstanding shares of the Series are
present in person or by proxy or (ii) more than 50 percent of the outstanding
shares of the Series.
INVESTMENT RESTRICTIONS OF THE CASH MANAGEMENT SERIES
The Cash Management Series has adopted the following restrictions that
are fundamental policies. These fundamental policies, as well as the Cash
Management Series' investment objective, cannot be changed without approval by
a majority of its outstanding shares. All percentage limitations expressed in
the following investment restrictions are measured immediately after the
relevant transaction is made. The Cash Management Series may not:
1. Invest more than 5% of the value of its total assets in the securities
of any one issuer, provided that this limitation shall apply only to 75% of the
value of the Series' total assets, and, provided further, that the limitation
shall not apply to
- 11 -
<PAGE> 37
obligations of the government of the U.S. or of any corporation organized as an
instrumentality of the U.S. under a general act of Congress. The short-term
obligations of commercial banks are excluded from this 5% limitation with
respect to 25% of the Series' total assets.
2. As to 75% of its total assets, purchase more than 10% of the
outstanding voting class of securities of an issuer.
3. Invest more than 25% of the Series' total assets in the securities of
issuers in the same industry. Obligations of the U.S. Government, its agencies
and instrumentalities, are not subject to this 25% limitation on industry
concentration. In addition, the Series may, if deemed advisable, invest more
than 25% of its assets in the obligations of domestic commercial banks.
4. Enter into any repurchase agreement maturing in more than seven days
or invest in any other illiquid security if, as a result, more than 10% of the
Series' total assets would be so invested.
5. Make loans to others except for the purchase of the debt securities
listed above under its Investment Policies. The Series may, however, enter
into repurchase agreements.
6. Borrow money, except from banks for temporary purposes, and then in an
amount not in excess of 5% of the value of the Series' total assets. Moreover,
in the event that the asset coverage for such borrowings falls below 300%, the
Series will reduce within three days the amount of its borrowings in order to
provide for 300% asset coverage.
7. Pledge or hypothecate its assets.
8. Sell securities short except to the extent that the Series
contemporaneously owns or has the right to acquire at no additional
cost securities identical to those sold short.
9. Invest in puts, calls, straddles, spreads or any combination thereof.
10. Purchase or sell securities of other investment companies (except in
connection with a merger, consolidation, acquisition or reorganization), real
estate or commodities.
11. Act as underwriter of securities issued by others, engage in
distribution of securities for others, or make investments in other companies
for the purpose of exercising control or management.
Notwithstanding investment restriction Number 1 above, in order to comply
with Rule 2a-7 under the Investment Company Act of 1940, the Cash Management
Series has adopted a more restrictive policy (that may be changed by the
trustees without shareholder approval) of investing no more than 5% of its
assets (measured at
- 12 -
<PAGE> 38
the time of purchase) in the securities of any one issuer (other than the U.S.
Government); provided however, that the Cash Management series may invest, as
to 25% of its assets, more than 5% of its assets in certain high-quality
securities (as defined in the Rule) of a single issuer for a period of up to
three business days. The purchase by the Cash Management Series of securities
that have "put" or "stand-by" commitment features are not considered "puts" for
purposes of investment restriction Number 9 above.
INVESTMENT RESTRICTIONS OF THE HIGH-YIELD BOND SERIES, THE ASSET ALLOCATION
SERIES, THE GROWTH-INCOME SERIES, THE INTERNATIONAL SERIES AND THE GROWTH
SERIES
The High-Yield Bond Series, the Asset Allocation Series, the Growth-Income
Series, the International Series and the Growth Series have each adopted the
following investment restrictions that are fundamental policies. These
fundamental policies, as well as each Series' investment objective, cannot be
changed without the approval of the holders of a majority of the outstanding
shares of the respective Series. All percentage limitations expressed in the
following investment restrictions are measured immediately after the relevant
transaction is made. The High-Yield Bond Series, the Asset Allocation Series,
the Growth-Income Series, the International Series and the Growth Series may
not:
1. Invest more than 5% of the value of the total assets of the Series in
the securities of any one issuer, provided that this limitation shall apply
only to 75% of the value of the Series' total assets and, provided further,
that the limitation shall not apply to obligations of the government of the
United States or of any corporation organized as an instrumentality of the
U.S. under a general Act of Congress. The short-term obligations of commercial
banks are excluded from this 5% limitation with respect to 25% of the Series'
total assets.
2. As to 75% of its total assets, purchase more than 10% of the
outstanding voting class of securities of an issuer.
3. Invest more than 25% of the Series' total assets in the securities of
issuers in the same industry. Obligations of the U.S. Government, its agencies
and instrumentalities are not subject to this 25% limitation on industry
concentration. The Series may, if deemed advisable, invest more than 25% of
its assets in the obligations of domestic commercial banks.
4. Enter into any repurchase agreement maturing in more than seven days
or invest in any other illiquid security if, as a result, more than 10% of the
Series' total assets would be so invested.
5. Invest in real estate (including limited partnership interests but
excluding securities of companies, such as real estate investment trusts, which
deal in real estate or interests therein).
- 13 -
<PAGE> 39
6. Purchase commodities or commodity contracts; except that the Asset
Allocation Series, the High-Yield Bond Series and the International Series may
engage in transactions involving currencies (including forward and futures
contracts or put and call options).
7. Invest in companies for the purpose of exercising control or
management.
8. Make loans to others except for (a) the purchase of debt securities;
(b) entering into repurchase agreements; and (c) with respect to the High-Yield
Bond Series and the Asset Allocation Series, the loaning of its portfolio
securities.
9. Borrow money, except from banks for temporary purposes, and then in an
amount not in excess of 5% of the value of the Series' total assets. Moreover,
in the event that the asset coverage for such borrowings falls below 300%, the
Series will reduce, within three days, the amount of its borrowings in order to
provide for 300% asset coverage.
10. Purchase securities on margin.
11. Pledge or hypothecate its assets.
12. Sell securities short except to the extent that the Series
contemporaneously owns, or has the right to acquire at no additional cost,
securities identical to those sold short.
13. Invest in puts, calls, straddles, spreads or any combination thereof;
except as described above in investment restriction number 6.
14. Purchase or sell securities of other investment companies (except in
connection with a merger, consolidation, acquisition or reorganization).
15. Engage in underwriting of securities issued by others, except to the
extent it may be deemed to be acting as an underwriter in the purchase and
resale of portfolio securities.
The High-Yield Bond Series and the International Series may invest not in
excess of 10% of the market value of their total assets in securities that are
restricted as to resale. The Asset Allocation, Growth-Income and the Growth
Series may invest not in excess of 5% of the market value of their total assets
in securities that are restricted as to resale. As a condition to the
acquisition of the type of securities mentioned herein, these Series will
ordinarily require that the issuer agree to bear the expenses of registration
under the 1933 Act, if and when the Series desires to sell the securities.
Registration could result in a delay in disposing of these securities. This
policy of the Fund is not deemed a fundamental policy and therefore may be
changed without shareholder approval.
- 14 -
<PAGE> 40
INVESTMENT RESTRICTIONS OF THE U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES
The Government/AAA Series has adopted the following investment restrictions
that are fundamental policies. These fundamental policies, as well as the
Government/AAA Series' investment objective, cannot be changed without approval
of a majority of its outstanding shares. All percentage limitations expressed
in the following investment restrictions are measured immediately after the
relevant transaction is made. The Government/AAA Series may not:
1. Purchase any security (other than securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities ("U.S. Government
securities")) if, immediately after and as a result of such investment, more
than 5% of the value of the Government/AAA Series' total assets would be
invested in securities of the issuer.
2. Invest 25% or more of the value of its total assets in the securities
of issuers conducting their principal business activities in the same industry,
except that this limitation shall not apply to U.S. Government securities or
other securities to the extent they are backed by or represent interests in
U.S. Government securities or U.S. Government-guaranteed mortgages.
3. Invest in companies for the purpose of exercising control or
management.
4. Knowingly purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition, or reorganization.
5. Buy or sell real estate or commodities or commodity contracts in the
ordinary course of its business; however, the Government/AAA Series may
purchase or sell readily marketable debt securities secured by real estate or
interests therein or issued by companies which invest in real estate or
interests therein, including real estate investment trusts.
6. Acquire securities subject to restrictions on disposition imposed by
the Securities Act of 1933, if, immediately after and as a result of such
acquisition, the value of such restricted securities and all other illiquid
securities would exceed 10% of the value of its total assets.
7. Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause the Series to be considered an underwriter as that term is
defined under the Securities Act of 1933.
8. Make loans, except that the Government/AAA Series may purchase readily
marketable debt securities and invest in repurchase agreements and make loans
of portfolio securities. The Series will not invest in repurchase agreements
maturing in more than seven days if any such investment, together with any
illiquid
- 15 -
<PAGE> 41
securities (including securities which are subject to legal or contractual
restrictions on resale) exceeds 10% of the value of its total assets.
9. Sell securities short, except to the extent that the Government/AAA
Series contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short.
10. Purchase securities on margin, except that the Series may obtain
necessary short-term credits for the clearance of purchases and sales of
securities.
11. Borrow money, except from banks for temporary or emergency purposes
not in excess of 5% of the value of the Government/AAA Series' total assets,
except that the Series may enter into reverse repurchase agreements.
12. Mortgage, pledge, or hypothecate any of its assets, provided that this
restriction shall not apply to the sale of securities pursuant to a reverse
repurchase agreement.
13. Write, purchase or sell puts, calls or combinations thereof.
FUND OFFICERS AND TRUSTEES
The trustees and executive officers of the Fund and their principal
occupations for the past five years are set forth below. Unless otherwise
noted, the address of each executive officer and trustee is 1 SunAmerica
Center, Century City, Los Angeles, California 90067-6022.
<TABLE>
<CAPTION>
Name, Age and Position(s) Principal Occupation(s)
Held With the Fund During the Past Five Years
<S> <C>
RICHARDS D. BARGER (67), Senior Partner, Law Firm of Barger & Wolen.
Trustee
FRANK L. ELLSWORTH (52), President, the Independent Colleges of Southern California
Trustee (1991 to present); President, and Professor of Political
Studies, Pitzer College (1979-1991).
GORDON F. HAMPTON (83), Senior Partner, Law Firm of Sheppard, Mullin,
Trustee Richter & Hampton (since 1938).
</TABLE>
- 16 -
<PAGE> 42
<TABLE>
<CAPTION>
Name, Age and Position(s) Principal Occupation(s)
Held With the Fund During the Past Five Years
<S> <C>
NORMAN J. METCALFE (53), Vice Chairman and Chief Financial Officer, The Irvine Company (March 1993 to
Trustee present); Executive Vice President (1986-1992) and Director (1984-1993),
SunAmerica Inc.; formerly, President, SunAmerica Investments, Inc. (1988-1992)
and Executive Vice President and Director, Anchor National (1986-1992).
JAMES K. HUNT (44), Trustee, Executive Vice President, SunAmerica Investments, Inc. (1993 to present) and
Chairman and President* President, SunAmerica Corporate Finance (since January 1994); Senior Vice
President, SunAmerica Investments Inc. (1990-1993).
SCOTT L. ROBINSON (45) Senior Vice President and Controller, SunAmerica Inc. (since 1991); Senior Vice
Senior Vice President, President, Anchor National (since 1988); Vice President and Controller,
Treasurer and Controller SunAmerica Inc. (1986 - 1991) (joined SunAmerica in 1978).
SUSAN L. HARRIS (38) Senior Vice President (since November 1995), Secretary (since 1989) and General
Vice President, Counsel and Counsel (since December 1994), SunAmerica Inc.; Senior Vice President and
Secretary Secretary, Anchor National (since 1990) (joined SunAmerica Inc. in 1985).
PETER C. SUTTON (31) Vice President, SunAmerica Asset Management Corp., since September, 1994;
Vice President Controller, SunAmerica Funds (since March 1993); Assistant Controller,
The SunAmerica Center SunAmerica Funds (1990-1993).
733 Third Avenue
New York, NY 10017-3204
</TABLE>
___________________
*A Trustee who may be deemed to be an "interested person" of the Fund as that
term is defined in the 1940 Act.
- 17 -
<PAGE> 43
The Fund pays no salaries or compensation to any of its officers, all of
whom are officers or employees of the Company or its affiliates. An annual fee
of $8,000 plus expenses is paid to each trustee who is not affiliated with the
Company for attendance at meetings of the Board. In addition, each such
non-affiliated Trustee is paid $1,250 for each meeting attended in person. For
the fiscal year ended November 30, 1995, the Fund paid Trustees' fees and
expenses which totaled $52,000.
The following table sets forth information summarizing the compensation of
each Trustee of the Fund for his services as Trustee for the fiscal year ended
November 30, 1995. Trustees who are affiliated with the Company do not receive
any compensation.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Aggregate Benefits from Registrant
Compensation Accrued as and Fund
from Part of Fund Complex Paid to
Trustee Registrant Expenses* Trustees*
<S> <C> <C> <C>
Richards D. Barger 13,000 N/A 20,000
Frank L. Ellsworth 13,000 N/A 20,000
Gordon F. Hampton 13,000 N/A 20,000
Norman J. Metcalfe 13,000 N/A 20,000
</TABLE>
* Information is as of November 30, 1995 for the two Funds in the
complex which pay fees to these trustees (the Fund and SunAmerica
Series Trust).
INVESTMENT ADVISORY AGREEMENT
The Fund is advised by CRMC of Los Angeles, California. The Amended and
Restated Investment Advisory Agreement between the Fund and the Investment
Adviser, dated March 14, 1990, provides that the Investment Adviser shall
determine what securities are purchased or sold by the Fund. The Agreement was
approved by shareholders of the Cash Management Series, the High-Yield Bond
Series, the Growth-Income Series, the Growth Series and the Government/AAA
Series on September 22, 1988, by shareholders of the Asset Allocation Series on
March 14, 1990 and by shareholders of the International Series on March 20,
1991.
The Investment Advisory Agreement provides that it will continue in effect
until September 21, 1990, unless terminated, and may be renewed from year to
year thereafter as to each Series
- 18 -
<PAGE> 44
for so long as such renewal is specifically approved at least annually by (i)
the Board of Trustees, or by the vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of each Series, and (ii) the vote of
a majority of Trustees who are not parties to the Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person, at a
meeting called for the purpose of voting on such approval. The Agreement was
last renewed on July 19, 1995. The Agreement also provides that it may be
terminated by either party without penalty upon 60 days' written notice to the
other party. The Agreement provides for automatic termination upon assignment.
As compensation for its services, the Investment Adviser receives from the
Fund a fee, accrued daily and payable monthly, based on the net assets of each
Series. For all the Series except the International Series, the fee is equal
to 0.36% (on an annualized basis) of that portion of each Series' average daily
net assets not exceeding $30 million, plus 0.30% of that portion of the Series'
average daily net assets in excess of $30 million. The Investment Adviser
receives a fee, accrued daily and payable monthly, based on the net assets of
the International Series, at the annual rate of 0.66% of that portion of the
Series' average daily net assets not exceeding $60 million, plus 0.58% of that
portion of the Series' average daily net assets in excess of $60 million. This
fee will be reduced to the extent necessary to comply with any applicable state
expense limitations. Presently, the most restrictive expense limitation
requires that the Fund's aggregate annual expenses shall not normally exceed
2.5% of the first $30 million of average net assets, 2% of the next $70 million
of average net assets and 1.5% of the remaining average net assets. For the
fiscal year ended November 30, 1995, the Fund paid to the Investment Adviser
advisory fees of $8,180,000 as follows: $2,484,000, Growth Series; $1,419,000,
International Series; $2,478,000, Growth-Income Series; $461,000, Asset
Allocation Series; $447,000, High-Yield Bond Series; $449,000, U.S.
Government/AAA-Rated Securities Series; and $442,000, Cash Management Series.
For the fiscal year ended November 30, 1994, the Fund paid to the
Investment Adviser advisory fees of $8,348,000 as follows: $2,232,000, Growth
Series; $1,501,000, International Series; $2,484,000, Growth-Income Series;
$492,000, Asset Allocation Series; $497,000, High-Yield Bond Series; $582,000,
U.S. Government/AAA-Rated Securities Series; and $560,000, Cash Management
Series.
For the fiscal year ended November 30, 1993 the Fund paid to the Investment
Adviser advisory fees of $7,887,000 as follows: $2,203,000, Growth Series;
$813,000, International Series; $2,573,000, Growth-Income Series; $489,000,
Asset Allocation Series; $555,000, High-Yield Bond Series; $741,000, U.S.
Government/AAA-Rated Securities Series; and $513,000, Cash Management Series.
- 19 -
<PAGE> 45
BUSINESS MANAGEMENT AGREEMENT
The Business Manager, a wholly-owned subsidiary of Anchor National
Financial Services, Inc., provides administrative services to the Fund. The
Business Management Agreement between the Fund and the Business Manager, dated
September 1, 1987, provides that the Business Manager will manage the business
affairs of the Fund and perform the administrative functions required of a
registered investment company at all times in accordance with the
organizational documents and current prospectus of the Fund. Shareholders of
the Cash Management Series, the High-Yield Bond Series, the Growth-Income
Series, the Growth Series and the Government/AAA Series approved the Management
Agreement on September 22, 1988. Similar Business Management Agreements were
approved by shareholders of the Asset Allocation Series on March 14, 1990 and
by shareholders of the International Series on March 20, 1991.
As compensation for its services, the Business Manager receives a fee,
accrued daily and payable monthly, based on the net assets of each Series of
the Fund other than the International Series, at the annual rate of 0.24% of
that portion of each Series' average daily net assets not exceeding $30
million, plus 0.20% on that portion of the Series' average daily net assets in
excess of $30 million. The Business Manager receives a monthly fee, accrued
daily, based on the average daily net assets of the International Series at the
annual rate of 0.24%. For the fiscal year ended November 30, 1995, the Fund
paid to the Business Manager fees of $5,075,000 as follows: $1,656,000, Growth
Series; $567,000, International Series; $1,652,000, Growth-Income Series;
$307,000, Asset Allocation Series; $298,000, High-Yield Bond Series; $300,000,
U.S. Government/AAA-Rated Securities Series; and $295,000, Cash Management
Series.
For the fiscal year ended November 30, 1994, the Fund paid to the Business
Manager fees of $5,165,000 as follows: $1,488,000, Growth Series; $601,000,
International Series; $1,656,000, Growth-Income Series; $328,000, Asset
Allocation Series; $331,000, High-Yield Bond Series; $388,000, U.S.
Government/AAA-Rated Securities Series; and $373,000, Cash Management Series.
For the fiscal year ended November 30, 1993, the Fund paid to the Business
Manager fees of $5,032,000 as follows: $1,468,000, Growth Series; $317,000,
International Series; $1,715,000, Growth-Income Series; $326,000, Asset
Allocation Series; $370,000, High-Yield Bond Series; $494,000, U.S.
Government/AAA-Rated Securities Series; and $342,000, Cash Management Series.
The Business Management Agreements provide that they will continue in
effect until September 21, 1991, unless terminated, and may be renewed from
year to year thereafter as to each Series for as long as such renewal is
specifically approved at least annually by (i) the Board of Trustees of the
Fund, or a vote of the majority
- 20 -
<PAGE> 46
(as defined in the 1940 Act) of the outstanding voting securities of each
Series, and (ii) the vote of a majority of Trustees who are not parties to the
Management Agreement or interested persons (as defined in said Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The Agreements were renewed most recently on July 19, 1995. The
Business Management Agreements also provide that they may be terminated by
either party without penalty upon 60 days' written notice to the other party.
The Agreements provide for their automatic termination upon assignment.
The Fund pays certain expenses not assumed by the Business Manager
including, but not limited to, expenses of shareholder meetings; reports to
shareholders and the printing of proxies and prospectuses; insurance premiums;
legal and auditing fees; dividend disbursement expenses; the expenses of
issuance, transfer and redemption of shares; custodian fees; printing and
preparation of registration statements; taxes; and the compensation of trustees
who are not interested persons of the Fund.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
Federal Taxes - Each Series is qualified and intends to remain qualified
and elect to be treated as a regulated investment company under Subchapter M
under the Code. To remain qualified as a regulated investment company, a
Series must, among other things, (a) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stocks, securities or foreign currencies, or
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stocks, securities or currencies; (b) derive less than 30% of its gross income
from the sale or other disposition of stock or securities or certain foreign
currencies (or options, futures or forward contracts thereon) held less than 3
months (foreign currency gains, including those derived from options, futures
and forward contracts, will not, in any event, be characterized as short-short
gains if they are directly related to the registered investment company's
investment in stocks, options or futures thereon); and (c) diversify its
holdings so that, at the end of each fiscal quarter, (i) 50% of the market
value of the Series' assets is represented by cash, government securities and
other securities limited in respect of any one issuer to 5% of the Series' net
assets and to not more than 10% of the voting securities of any one issuer
(other than government securities).
Income received by a Series from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine in advance the effective
rate of foreign tax to which a Series will be subject, since the amount of that
Series' assets to be invested in various countries is not known.
- 21 -
<PAGE> 47
Shareholders are urged to consult their tax advisors regarding specific
questions as to Federal, state and local taxes.
PRICE OF SHARES
Shares of the Fund are offered only to the Account. The price paid for
shares, the offering price, is based on the net asset value per share
calculated once daily at the close of regular trading (currently 4:00 p.m., New
York time) each day the New York Stock Exchange is open. The New York Stock
Exchange is currently closed on weekends and on the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas Day.
Stocks and convertible bonds and debentures traded on the New York Stock
Exchange are valued at the last sale price on such exchange on the day of
valuation, or if there is no sale on the day of valuation, at the last-reported
bid price. Non-convertible bonds and debentures and other long-term debt
securities normally are valued at prices obtained for the day of valuation from
a bond pricing service, when such prices are available. In circumstances where
the Investment Adviser deems it appropriate to do so, an over-the-counter or
exchange quotation (at the mean of representative quoted bid or asked prices
for such securities or, if such prices are not available, at prices for
securities of comparable maturity, quality and type) 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. U.S.
Treasury bills, and other obligations issued by the U.S. Government, its
agencies or instrumentalities, certificates of deposit issued by banks,
corporate short-term notes and other short-term investments with original or
remaining maturities in excess of 60 days are valued at the mean of
representative quoted bid and asked prices for such securities or, if such
prices are not available, for securities of comparable maturity, quality and
type. Short-term securities with 60 days or less to maturity are amortized to
maturity based on their cost to the Fund if acquired within 60 days of maturity
or, if already held by the Fund, on the 60th day, are amortized to maturity
based on the value determined on the 61st day. Options on currencies purchased
by the Series are valued at their last bid price in the case of listed options
or at the average of the last bid prices obtained from dealers in the case of
OTC options. Futures contracts involving foreign currencies traded on
exchanges are valued at their last sale or settlement price as of the close of
such exchanges or if no sales are reported, at the mean between the last
reported bid and asked prices. Other securities are valued on the basis of
last sale or bid price (if a last sale price is not available) in what is, in
the opinion of the Investment Adviser, the broadest and most representative
market, that may be either a securities exchange or the over-the-counter
market. Where quotations are not readily available, securities are valued at
fair value as determined in good faith by the Board of Trustees. The
- 22 -
<PAGE> 48
fair value of all other assets is added to the value of securities to arrive at
the respective series' total assets.
The Series' liabilities including proper accruals of expense items, are
deducted from total assets.
The net asset value of the respective Series is divided by the total number
of shares outstanding (excluding treasury shares). The result, rounded to the
nearer cent, is the net asset value per share.
EXECUTION OF PORTFOLIO TRANSACTIONS
It is the policy of the Fund, in effecting transactions in portfolio
securities, to seek the best execution at the most favorable prices. The
determination of what may constitute best execution involves a number of
considerations, including the economic result to the Fund (involving both price
paid or received and any commissions and other costs), the efficiency with
which the transaction is effected where a large block is involved, the
availability of the broker to stand ready to execute potentially difficult
transactions and the financial strength and stability of the broker. Such
considerations are judgmental and are considered in determining the overall
reasonableness of brokerage commissions paid.
A factor in the selection of brokers is the receipt of research services --
analyses and reports concerning issuers, industries, securities, economic
factors and trends -- and other statistical and factual information. Research
and other statistical and factual information provided by brokers is considered
to be in addition to and not in lieu of services required to be performed by
the Investment Adviser.
The extent to which commissions may reflect the value of research services
cannot be presently determined. To the extent that research services of value
are provided by broker-dealers with or through whom the Investment Adviser
places the Fund's portfolio transactions, the Investment Adviser may be
relieved of expenses it might otherwise bear. Research services furnished by
broker-dealers could be useful and of value to the Investment Adviser in
serving other clients as well as the Fund and research services obtained by the
Investment Adviser as a result of the placement of portfolio brokerage of other
clients could be useful and of value in serving the Fund.
Purchases and sales of money market instruments usually are principal
transactions. Normally, no brokerage commissions are paid by the Fund for such
purchases. Money market instruments are generally purchased directly from the
issuer or from an underwriter or market-maker for the securities. Purchases
from underwriters include an underwriting commission or concession and
purchases from dealers serving as market makers include the spread between the
bid and asked price. In the over-the-counter market, securities are generally
traded on a "net" basis with dealers acting as
- 23 -
<PAGE> 49
principal for their own accounts without a stated commission (although the
price of the security usually includes a profit to the dealer). Where
transactions are made in the over-the-counter market, the Fund deals with the
primary market makers unless more favorable prices are obtainable.
The policy of the Fund with respect to brokerage practices is reviewed by
the Board of Trustees from time to time. Because of the possibility of further
regulatory developments affecting the securities exchanges and brokerage
practices generally, the foregoing practices may be modified.
For the year ended November 30, 1995, the Fund paid brokerage commissions
of $1,448,082 as follows; $531,082, Growth Series; $184,500, International
Series; $563,815, Growth-Income Series; $168,685, Asset Allocation Series; $0,
High-Yield Bond Series; $0, U.S. Government/AAA-Rated Securities Series; and
$0, Cash Management Series.
For the year ended November 30, 1994, the Fund paid brokerage commissions
of $1,767,112 as follows; $578,717, Growth Series; $296,043, International
Series; $732,992, Growth-Income Series; $158,828, Asset Allocation Series;
$532, High-Yield Bond Series; $0, U.S. Government/AAA-Rated Securities Series,
and; $0, Cash Management Series. For the year ended November 30, 1993, the Fund
paid brokerage commissions of $1,328,000.
None of these commissions were directed to any broker which is an
affiliated person of the Fund or an affiliated person of such affiliated
person. However, for each of these fiscal years, brokerage transactions were
effected through persons who are affiliates of the Company:
- 24 -
<PAGE> 50
<TABLE>
<CAPTION>
Aggregate Percentage
Commissions of Total
Paid to Brokerage
Person Affiliates Commissions
<S> <C> <C>
Royal Alliance Associates,
Inc.
Fiscal 1993 $3,802 .29
1994 5,766 .33
1995 5,100 .36
Anchor National Financial
Services, Inc.
Fiscal 1993 $1,050 .08
1994 0 0
1995 0 0
SunAmerica Securities, Inc.
Fiscal 1993 $3,805 .29
1994 180 .01
1995 522 .04
</TABLE>
GENERAL INFORMATION
Custodian - State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, serves as the Fund's custodian. In this capacity,
State Street maintains the portfolio securities held by the Fund, administers
the purchase and sale of portfolio securities and performs certain other
duties. State Street also serves as transfer agent and dividend disbursing
agent for the Fund.
Independent Accountants and Legal Counsel - Price Waterhouse LLP, 1177
Avenue of the Americas, New York, New York 10036, is the Fund's independent
accountant. Price Waterhouse performs an annual audit of the Fund's financial
statements and provides tax consulting, tax return preparation and accounting
services relating to filings with the Securities and Exchange Commission. The
firm of Shereff, Friedman, Hoffman and Goodman, LLP, 919 Third Avenue, New
York, NY 10022, has been selected as legal counsel to the Fund.
Reports to Shareholders - Contract owners are provided at least
semiannually with reports showing the investment portfolio, financial
statements and other information.
Shareholder and Trustee Responsibility - Shareholders of a Massachusetts
business trust may, under certain circumstances, be held personally liable as
partners for the obligations of the Fund. The risk of a shareholder incurring
any financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
The Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Fund and provides that
- 25 -
<PAGE> 51
notice of the disclaimer must be given in each agreement, obligation or
instrument entered into or executed by the Fund or Trustees. The Declaration
of Trust provides for indemnification of any shareholder held personally liable
for the obligations of the Fund and also provides for the Fund to reimburse the
shareholder for all legal and other expenses reasonably incurred in connection
with any such claim or liability.
Under the Declaration of Trust, the trustees or officers are not liable for
actions or failure to act; however, they are not protected from liability by
reason of their willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office. The Fund
provides indemnification to its trustees and officers as authorized by its
By-Laws and by the 1940 Act and the rules and regulations thereunder.
Registration Statement - A registration statement has been filed with the
Securities and Exchange Commission under the Securities Act and the 1940 Act.
The Prospectus and this Statement of Additional Information do not contain all
information set forth in the registration statement, its amendments and
exhibits thereto, that the Fund has filed with the Securities and Exchange
Commission, Washington, D.C., to all of which reference is hereby made.
FINANCIAL STATEMENTS
The financial statements for the Fund for the year ended November 30, 1995,
follow.
- 26 -
<PAGE> 52
- ---------------------
ANCHOR PATHWAY FUND
GROWTH SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 85.7% SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 24.7%
Data Processing & Reproduction -- 9.0%
Adobe Systems, Inc. ............................................... 247,500 $ 16,737
Compuware Corp.+................................................... 220,000 4,510
Data General Corp.+................................................ 100,000 1,213
Digital Equipment Corp.+........................................... 50,000 2,944
International Business Machines Corp. ............................. 47,000 4,541
Mentor Graphics Corp.+............................................. 220,000 4,427
Oracle Systems Corp.+.............................................. 135,000 6,126
Silicon Graphics, Inc.+............................................ 620,000 22,630
Structural Dynamics Research Corp.+................................ 150,000 3,056
Sybase, Inc.+...................................................... 330,000 11,591
Tandem Computers, Inc.+............................................ 250,000 3,125
Electronic Components -- 12.2%
Analog Devices, Inc.+.............................................. 150,000 5,550
Ericsson (L.M.) Telephone Co., Class B ADR......................... 320,000 7,600
Intel Corp. ....................................................... 477,600 29,074
LSI Logic Corp.+................................................... 580,000 24,287
National Semiconductor Corp.+...................................... 50,000 1,069
Newbridge Networks Corp.+.......................................... 50,000 2,131
Park Electrochemical Corp. ........................................ 187,200 5,686
Rogers Corp.+...................................................... 109,200 2,648
SCI Systems, Inc.+................................................. 415,000 13,903
Texas Instruments, Inc. ........................................... 295,600 17,108
Electronic Instruments -- 2.6%
Applied Materials, Inc.+........................................... 472,000 22,951
Energy Equipment -- 0.7%
Schlumberger Ltd. ................................................. 105,000 6,668
Industrial Components -- 0.2%
Noble Affiliates, Inc. ............................................ 75,500 2,048
--------------
221,623
--------------
CONSUMER GOODS -- 6.0%
Appliances & Household Durables -- 0.5%
Mohawk Industries, Inc.+........................................... 270,000 4,793
Beverages & Tobacco -- 1.3%
PepsiCo, Inc. ..................................................... 80,000 4,420
Philip Morris Cos., Inc. .......................................... 80,000 7,020
Health & Personal Care -- 2.2%
Alpha Beta Technology, Inc.+....................................... 70,000 464
Bausch & Lomb, Inc. ............................................... 20,000 723
Forest Labs, Inc.+................................................. 121,000 5,142
Genetics Institute, Inc.+.......................................... 80,000 3,510
Omnicare, Inc. .................................................... 160,000 6,040
Paragon Trade Brands, Inc.+........................................ 19,500 407
Perrigo Co.+....................................................... 15,000 197
Pharmacia & Upjohn, Inc.+.......................................... 58,000 2,081
Tambrands, Inc. ................................................... 20,000 1,042
</TABLE>
---------------------
A-1
<PAGE> 53
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS (continued)
Recreation & Other Consumer Products -- 1.3%
Duracell International, Inc. ...................................... 38,500 $ 2,040
Hasbro, Inc. ...................................................... 45,000 1,373
Mattel, Inc. ...................................................... 296,247 8,295
Textiles & Apparel -- 0.7%
Fruit Of The Loom, Inc., Class A+.................................. 210,000 4,068
Phillips-Van Heusen Corp. ......................................... 210,000 2,179
--------------
53,794
--------------
ENERGY -- 0.7%
Energy Sources -- 0.7%
H S Resources, Inc.+............................................... 70,000 936
Murphy Oil Corp. .................................................. 80,000 3,150
Reading & Bates Corp.+............................................. 150,000 1,969
--------------
6,055
--------------
FINANCE -- 7.2%
Banking -- 2.9%
Banc One Corp. .................................................... 119,625 4,561
Charter One Financial, Inc. ....................................... 70,000 2,240
Commerce Bancshares, Inc. ......................................... 141,225 5,278
Huntington Bancshares, Inc. ....................................... 72,000 1,755
Mercantile Bancorp................................................. 232,500 10,666
Northern Trust Corp. .............................................. 40,000 2,090
Financial Services -- 0.7%
Federal National Mortgage Association.............................. 55,000 6,023
Insurance -- 3.6%
EXEL Ltd. ......................................................... 145,000 9,044
NAC Reinsurance Corp. ............................................. 120,000 3,960
NYMAGIC, Inc. ..................................................... 70,000 1,164
Progressive Corp., Ohio............................................ 75,000 3,338
TIG Holdings, Inc. ................................................ 115,000 3,105
Transatlantic Holdings, Inc. ...................................... 110,000 7,562
Trenwick Group, Inc. .............................................. 83,800 4,295
--------------
65,081
--------------
MATERIALS -- 2.5%
Chemicals -- 2.3%
Great Lakes Chemical Corp. ........................................ 95,000 6,757
Loctite Corp. ..................................................... 100,000 4,887
Lubrizol Corp. .................................................... 39,000 1,116
Valspar Corp. ..................................................... 170,000 6,949
Forest Products & Paper -- 0.1%
Rayonier, Inc. .................................................... 30,000 1,148
Metals -- 0.1%
Nucor Corp. ....................................................... 25,000 1,247
--------------
22,104
--------------
SERVICES -- 41.7%
Broadcasting & Publishing -- 15.0%
Adelphia Communications Corp.+ .................................... 205,000 1,538
BHC Communications, Inc., Class A+ ................................ 75,821 6,833
Cablevision Systems Corp., Class A+ ............................... 100,000 5,550
Capital Cities/ABC, Inc. .......................................... 123,000 15,206
Comcast Corp., Class A Special+ ................................... 207,500 4,098
Gaylord Entertainment Co., Class A................................. 225,000 5,681
</TABLE>
---------------------
A-2
<PAGE> 54
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Broadcasting & Publishing (continued)
Lin Television Corp. .............................................. 126,950 $ 3,650
New York Times Co. ................................................ 100,000 2,950
News Corp., Ltd. ADR............................................... 800,000 16,800
Tele-Communications Liberty Media Group+........................... 174,681 4,891
Tele-Communications TCI Group+..................................... 625,525 11,572
Time Warner, Inc. ................................................. 485,000 19,400
Turner Broadcasting Systems, Inc., Class B......................... 715,000 20,020
Viacom, Inc., Class B+............................................. 334,200 16,125
Business & Public Services -- 13.8%
ADT Ltd.+.......................................................... 400,000 5,600
Air & Water Technologies Corp., Class A+........................... 165,000 908
America Online, Inc.+.............................................. 194,600 7,954
Apria Healthcare Group Inc.+....................................... 100,000 3,025
Avery Dennison Corp. .............................................. 90,000 4,286
BHA Group, Inc., Class A........................................... 110,000 1,540
Columbia Healthcare Corp. ......................................... 88,750 4,582
CUC International, Inc.+........................................... 330,000 12,540
Ecolab, Inc. ...................................................... 100,000 2,875
Federal Express Corp.+............................................. 175,000 13,081
FHP International Corp.+........................................... 385,000 11,165
General Motors Corp., Class E...................................... 175,000 8,838
H & R Block, Inc. ................................................. 40,000 1,780
Oxford Health Plans, Inc.+......................................... 87,000 6,525
Pacificare Health Systems, Inc., Class B+.......................... 35,000 3,036
Pitney Bowes, Inc. ................................................ 65,000 2,909
U.S. HealthCare, Inc. ............................................. 40,000 1,820
United Healthcare Corp. ........................................... 255,000 16,033
Value Health, Inc.+ ............................................... 120,000 3,015
WMX Technologies, Inc. ............................................ 430,000 12,685
Leisure & Tourism -- 5.6%
Carnival Corp., Class A ADR........................................ 25,000 650
Circus Circus Enterprises, Inc.+................................... 120,000 3,330
Disney (Walt) Co. ................................................. 390,000 23,449
Harrah's Entertainment, Inc. ...................................... 195,000 4,851
Host Marriott Corp.+............................................... 280,000 3,605
Luby's Cafeterias, Inc. ........................................... 100,000 2,200
Marriott International, Inc. ...................................... 230,000 8,567
Mirage Resorts, Inc.+.............................................. 100,000 3,387
Promus Hotel Corp.+................................................ 28,700 635
Merchandising -- 2.6%
Barnes & Noble, Inc.+.............................................. 180,900 6,648
Circuit City Stores, Inc. ......................................... 20,000 580
Gap, Inc. ......................................................... 20,000 905
Home Shopping Network, Inc.+....................................... 260,000 2,437
Michaels Stores, Inc.+............................................. 60,000 990
Spiegel, Inc., Class A............................................. 366,600 3,299
Staples, Inc.+..................................................... 75,000 1,913
Toys R Us, Inc.+................................................... 70,000 1,628
Wal-Mart Stores, Inc. ............................................. 200,000 4,800
</TABLE>
---------------------
A-3
<PAGE> 55
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Telecommunications -- 2.9%
AirTouch Communications, Inc.+..................................... 175,000 $ 5,097
Associated Group, Inc., Class A.................................... 25,000 450
Associated Group, Inc., Class B.................................... 25,000 450
Cellular Communications Puerto Rico, Inc.+......................... 25,000 669
MCI Communications Corp. .......................................... 385,000 10,299
United States Cellular Corp.+...................................... 52,000 1,820
Vanguard Cellular Systems, Inc.+................................... 316,000 7,149
Transportation: Airlines -- 1.8%
AMR Corp.+......................................................... 70,000 5,364
Delta Air Lines, Inc. ............................................. 10,000 776
Southwest Airlines Co. ............................................ 395,000 9,875
Transportation: Rail & Road -- 0.0%
Southern Pacific Rail Corp. ....................................... 15,573 372
--------------
374,706
--------------
OTHER COMMON STOCK -- 2.9%......................................... 25,668
--------------
TOTAL COMMON STOCK (cost: $473,095)................................ 769,031
--------------
<CAPTION>
PREFERRED STOCK -- 1.2%
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 1.2%
Broadcasting & Publishing -- 0.8%
News Corp. Ltd. ADR................................................ 400,000 7,550
Telecommunications -- 0.4%
Cellular Communications, Inc. Cv Preferred......................... 70,187 3,360
--------------
TOTAL PREFERRED STOCK (cost: $4,728)............................... 10,910
--------------
TOTAL INVESTMENT SECURITIES (cost: $477,823)....................... 779,941
--------------
</TABLE>
---------------------
A-4
<PAGE> 56
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 12.5% (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
--------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 12.5%
Associates Corp. of North America 5.89% due 12/01/95 .............. $ 10,370 $ 10,370
Bell Atlantic Financial Services 5.71% due 12/08/95 ............... 12,000 11,987
Bell Atlantic Financial Services 5.71% due 12/12/95 ............... 4,500 4,492
CIT Group Holdings, Inc. 5.70% due 1/08/96 ........................ 4,000 3,976
CIT Group Holdings, Inc. 5.72% due 12/04/95 ....................... 13,160 13,154
Coca-Cola Co. 5.68% due 12/05/95 .................................. 5,100 5,097
Coca-Cola Co. 5.70% due 12/14/95 .................................. 10,800 10,777
Ford Motor Credit Co. 5.72% due 12/11/95 .......................... 14,000 13,978
Harvard University 5.70% due 12/15/95 ............................. 5,500 5,488
Heinz (H. J.) Co. 5.70% due 1/12/96 ............................... 5,000 4,967
Heinz (H. J.) Co. 5.72% due 12/13/95 .............................. 10,900 10,879
Kellogg Co. 5.68% due 12/15/95 .................................... 2,000 1,995
PepsiCo, Inc. 5.70% due 12/18/95 .................................. 15,000 14,960
----------
TOTAL SHORT-TERM SECURITIES (cost: $112,120)....................... 112,120
----------
TOTAL INVESTMENTS --
(cost: $589,943) 99.4% 892,061
Other assets less liabilities -- 0.6 5,214
------ ----------
NET ASSETS -- 100.0% $ 897,275
====== ==========
</TABLE>
-----------------------------
+ Non-income producing securities
ADR - American Depositary Receipt
See Notes to Financial Statements
---------------------
A-5
<PAGE> 57
- ---------------------
ANCHOR PATHWAY FUND
INTERNATIONAL SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
VALUE
COMMON STOCK, PREFERRED STOCK & WARRANTS -- 90.2% SHARES (IN THOUSANDS)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA -- 0.6%
YPF Sociedad Anonima SA ADR (Energy)............................... 73,000 $ 1,423
--------------
AUSTRALIA -- 8.2%
Australia & New Zealand Bank Group (Finance)....................... 951,008 4,235
Coca-Cola Amatil Ltd. (Consumer Goods)#............................ 490,906 3,971
Gio Australia Holdings (Finance)................................... 653,043 1,459
John Fairfax Holdings (Services)................................... 260,000 525
Lend Lease Corp. Ltd. (Multi-industry)............................. 88,701 1,227
News Corp., Ltd. Preferred ADR (Services).......................... 33,300 628
News Corp., Ltd. ADR (Services).................................... 66,600 1,399
Orbital Engine Corp. (Capital Equipment)+.......................... 162,134 143
TNT Ltd. (Services)................................................ 531,823 742
TNT Ltd., Cv Preferred (Services).................................. 1,409,900 2,051
Western Mining Corp. Holdings Ltd. ADS (Materials)................. 100,000 670
Westpac Banking Corp. (Finance).................................... 331,757 1,374
Woolworths Ltd. (Consumer Goods)................................... 156,907 367
--------------
18,791
--------------
AUSTRIA -- 0.6%
Virginia Technologies AG (Capital Equipment)#...................... 11,700 1,350
--------------
BELGIUM -- 1.3%
Groupe Bruxelles Lambert SA NV (Multi-industry).................... 17,000 2,213
Petrofina SA (Consumer Staples).................................... 2,300 681
--------------
2,894
--------------
BERMUDA -- 0.6%
Mandarin Oriental (Services)....................................... 1,288,153 1,456
--------------
BRAZIL -- 0.6%
Centrais Eletricas Brasileira SA-Electrobras ADR (Energy).......... 38,000 535
CESP-Companhia Energetica de Sao Paulo (Energy).................... 1,440,000 34
CESP-Companhia Energetica de Sao Paulo ADR (Energy)................ 53,600 435
CESP-Companhia Energetica de Sao Paulo ADR (Energy)#............... 8,416 68
CESP-Companhia Energetica de Sao Paulo ADS (Energy)................ 30,000 243
--------------
1,315
--------------
CANADA -- 1.2%
Bank Montreal Quebec (Finance)..................................... 37,000 842
Magna International Class A (Capital Equipment).................... 10,000 435
Noranda, Inc. (Materials).......................................... 35,000 744
Teck Corp. Class B (Capital Equipment)............................. 40,000 765
--------------
2,786
--------------
DENMARK -- 1.6%
Tele Denmark Class B ADR (Capital Equipment)....................... 130,000 3,624
--------------
</TABLE>
---------------------
A-6
<PAGE> 58
<TABLE>
<CAPTION>
VALUE
COMMON STOCK, PREFERRED STOCK & WARRANTS (continued) SHARES (IN THOUSANDS)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINLAND -- 2.2%
Kansallis-Osake-Pankki (Finance)................................... 686,800 $ 575
Nokia (AB) Oy Corp. Series A (Multi-industry)...................... 32,000 1,756
Nokia (AB) Oy Corp. Series K (Multi-industry)...................... 20,000 1,102
Repola (Materials)................................................. 84,000 1,634
--------------
5,067
--------------
FRANCE -- 5.8%
Canal Plus (Services).............................................. 3,823 696
Cie de St. Gobain (Materials)...................................... 11,282 1,302
Eurotunnel/Euro SA (Services)+..................................... 115,200 168
Groupe Danone (Consumer Goods)..................................... 8,000 1,252
Moet-Hennessy Louis Vuitton (Consumer Goods)....................... 3,300 628
Michelin (cie Gle), Class B (Capital Equipment).................... 84,000 3,414
Peugeot SA (Consumer Goods)........................................ 20,000 2,585
Poliet (Materials)................................................. 4,404 355
Sidel (Capital Equipment).......................................... 6,600 2,076
Total SA, Series B (Energy)........................................ 13,571 835
--------------
13,311
--------------
GERMANY -- 3.9%
Bayerische Motoren Werke AG (Consumer Goods)....................... 6,072 3,270
Bayerische Motoren Werke AG NV Preferred (Consumer Goods).......... 2,604 971
Daimler-Benz AG (Consumer Goods)................................... 2,420 1,190
GEA AG NV Preferred (Capital Equipment)............................ 1,250 398
Mannesmann AG (Capital Equipment).................................. 6,300 2,029
Munchener Ruckvers (Finance)....................................... 500 921
Munchener Ruckvers Warrants (Finance)+............................. 125 13
--------------
8,792
--------------
HONG KONG -- 4.5%
Cathay Pacific Airways Ltd. (Services)............................. 900,000 1,344
China Light & Power Co., Ltd. (Energy)............................. 90,400 425
Hong Kong Electric Holdings (Energy)............................... 1,032,000 3,462
Hutchison Whampoa (Multi-industry)................................. 230,000 1,300
Johnson Electric Holdings Ltd. (Capital Equipment)................. 110,000 228
Sing Tao (Services)................................................ 689,200 356
Sun Hung Kai Properties Ltd. (Finance)............................. 100,000 805
Swire Pacific Ltd. Class A (Multi-industry)........................ 50,000 378
Television Broadcasting Ltd. (Services)............................ 497,000 1,876
--------------
10,174
--------------
INDONESIA -- 0.6%
Bank International Indonesia (Finance)............................. 350,000 1,119
P.T. Indonesian Satellite Corp. ADR (Services)..................... 5,900 202
--------------
1,321
--------------
IRELAND -- 1.0%
Independent Newspapers (Services).................................. 197,382 1,156
Irish Life PLC (Finance)........................................... 294,624 1,137
--------------
2,293
--------------
ISRAEL -- 0.2%
Scitex Corp. Ltd. (Services)....................................... 28,000 403
--------------
</TABLE>
---------------------
A-7
<PAGE> 59
<TABLE>
<CAPTION>
VALUE
COMMON STOCK, PREFERRED STOCK & WARRANTS (continued) SHARES (IN THOUSANDS)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
ITALY -- 2.2%
STET (Services).................................................... 120,000 $ 326
STET Risp (Services)............................................... 240,000 472
Telecom Italia Mobile SPA-Savings Shares (Services)................ 64,800 63
Telecom Italia Mobile SPA (Services)............................... 1,991,950 3,214
Telecom Italia SpA (Services)...................................... 666,850 907
Telecom Italia SpA Risp (Services)................................. 64,800 71
--------------
5,053
--------------
JAPAN -- 6.6%
Amway Japan Ltd. ADR (Consumer Goods).............................. 36,000 729
Banyu Pharm (Services)............................................. 118,000 1,345
Chain Store Okuwa (Services)....................................... 20,000 287
Hitachi Ltd. (Capital Equipment)................................... 28,000 284
Ito-Yokado Co. (Miscellaneous)..................................... 10,000 552
Itochu Corp. Ltd. (Services)....................................... 120,000 796
Mitsubishi Corp. (Consumer Goods).................................. 65,000 779
Nintendo Co., Ltd. (Consumer Goods)................................ 25,000 1,976
Nippon Telegraph & Telecommunications Corp. (Services)............. 131 1,073
Nippon Yusen (Services)............................................ 79,000 461
Sony Corp. (Consumer Goods)........................................ 22,000 1,168
Sumitomo Chemical Co., Ltd. (Materials)............................ 177,000 880
Suzuki Motor Corp. (Consumer Goods)................................ 179,000 1,988
Tokyo Broadcasting Systems (Services).............................. 27,000 451
Toyota Motor Corp. (Consumer Goods)................................ 115,000 2,272
--------------
15,041
--------------
KOREA -- 0.9%
Korea Electric Power Corp. (Energy)................................ 39,000 1,549
Korea Electric Power Corp. ADR (Energy)............................ 26,000 634
--------------
2,183
--------------
LUXEMBOURG -- 0.4%
Safra Republic Holdings, Inc. (Finance)............................ 10,000 885
--------------
MEXICO -- 2.2%
Cemex SA-Series A (Materials)...................................... 161,250 492
Cifra SA de Cv-Series C (Services)................................. 195,500 206
Grupo Financiero Banamex-Accival SA de Cv-Series B (Finance)....... 324,000 497
Grupo Financiero Banamex-Accival SA de Cv-Series L (Finance)....... 16,200 23
Grupo Televisa SA de Cv ADR (Services)............................. 35,000 757
Telefonos de Mexico SA ADR (Services).............................. 95,200 3,142
--------------
5,117
--------------
NETHERLANDS -- 6.5%
ABN Amro Holdings NV (Finance)..................................... 83,726 3,728
Akzo Nobel NV (Materials).......................................... 12,000 1,356
DSM NV (Materials)................................................. 15,919 1,268
Elsevier NV (Services)............................................. 80,000 1,092
International Nederlanden Warrants (Finance)+...................... 300,000 1,013
Koninklijke PTT Nederland NV (Services)............................ 20,000 713
Philips Electronics (Consumer Goods)............................... 16,000 629
PolyGram NV ADR (Consumer Goods)................................... 45,000 2,700
Vereenigde Ned Uitgevers (Services)................................ 13,000 1,835
Wolters Kluwer (Services).......................................... 6,267 529
--------------
14,863
--------------
</TABLE>
---------------------
A-8
<PAGE> 60
<TABLE>
<CAPTION>
VALUE
COMMON STOCK, PREFERRED STOCK & WARRANTS (continued) SHARES (IN THOUSANDS)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW ZEALAND -- 4.5%
Brierley Investment Ltd. (Multi-industry).......................... 4,613,019 $ 3,494
Carter Holt Harvey Ltd. (Materials)................................ 240,197 507
Fletcher Challenge Ltd. (Materials)................................ 530,000 1,315
Fletcher Challenge Ltd. ADR (Materials)............................ 12,450 174
Fletcher Challenge Ltd.-Forests Division Shares (Materials)........ 75,200 106
Telecom Corp. of New Zealand (Services)#........................... 1,019,880 4,268
Telecom Corp. of New Zealand ADR (Services)#....................... 4,600 308
--------------
10,172
--------------
NORWAY -- 2.5%
Orkla AS (Consumer Goods).......................................... 110,000 5,613
--------------
PHILIPPINES -- 0.3%
Philippine Long Distance Cv Preferred Series III GDS (Services).... 10,000 540
Philippine National Bank (Finance)................................. 26,146 232
--------------
772
--------------
SINGAPORE -- 0.4%
Singapore Airlines Ltd. (Services)................................. 88,000 824
--------------
SPAIN -- 2.9%
Autopistas CESA (Services)......................................... 150,000 1,655
Banco de Santander ADR (Finance)................................... 1,500 69
Banco de Santander SA (Finance).................................... 23,500 1,096
Banco Popular Espanol (Finance).................................... 6,000 1,008
Corporacion Mapfre SA (Finance).................................... 11,615 654
Iberdrola SA (Energy).............................................. 142,000 1,198
Telefonica de Espana SA ADR (Services)............................. 24,000 996
--------------
6,676
--------------
SWEDEN -- 8.5%
AGA AB-Series B (Materials)........................................ 60,000 833
Asea AB-Series A (Capital Equipment)............................... 24,500 2,377
Asea AB-Series B (Capital Equipment)............................... 22,000 2,124
Astra AB-Series A (Services)....................................... 109,000 4,065
Atlas Copco AB-Series A (Capital Equipment)........................ 114,500 1,729
Electrolux AB-Series B (Consumer Goods)............................ 26,400 1,134
Ericsson LM Telephone Co. Class B Cv ADR (Capital Equipment)....... 3,500 11
Ericsson LM Telephone Co. Series B (Capital Equipment)............. 112,200 2,644
Kinnevik-Series A (Finance)........................................ 23,900 656
Kinnevik-Series B (Multi-industry)................................. 15,000 426
Sandvik AB-Class B (Capital Equipment)............................. 18,250 336
Svenska Handelsbanken, Series A (Finance).......................... 18,000 364
Svenska Handelsbanken, Series B (Finance).......................... 8,200 160
Volvo AB-Series B (Consumer Goods)................................. 125,000 2,593
--------------
19,452
--------------
SWITZERLAND -- 3.8%
BBC Brown Boveri, Bearer (Capital Equipment)....................... 2,363 2,714
Ciba-Geigy AG, Nominative Shares (Materials)....................... 2,035 1,814
Holderbank Financiere Glarus Warrants (Materials)+................. 18,960 19
Holderbank Financiere Glarus, Bearer (Materials)................... 3,792 2,826
Nestle SA (Consumer Goods)......................................... 1,250 1,332
--------------
8,705
--------------
</TABLE>
---------------------
A-9
<PAGE> 61
<TABLE>
<CAPTION>
VALUE
COMMON STOCK, PREFERRED STOCK & WARRANTS (continued) SHARES (IN THOUSANDS)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM -- 13.2%
British Airways ADR (Services)..................................... 15,000 $ 1,056
British Airways PLC (Services)..................................... 145,000 1,021
British Sky Broadcast Group PLC ADR (Services)+.................... 58,500 2,333
Cable & Wireless PLC (Services).................................... 125,104 869
Cadbury Schweppes (Consumer Goods)................................. 37,070 316
Cordiant PLC (Services)............................................ 440,997 614
English China Clays (Materials).................................... 305,000 1,534
Forte PLC (Services)............................................... 790,858 4,141
Hazlewood Foods PLC (Consumer Goods)............................... 300,000 468
News International PLC (Services).................................. 136,000 629
Pearson PLC (Multi-industry)....................................... 120,000 1,192
Pilkington PLC (Materials)......................................... 500,000 1,474
Rank Organisation PLC (Services)................................... 175,000 1,104
Reckitt & Colman (Consumer Goods).................................. 288,537 2,957
Reuters Holdings PLC (Services).................................... 208,000 1,963
Scottish Power PLC (Energy)........................................ 120,000 693
Securicor Group PLC NV (Services).................................. 38,000 541
Telewest Communications PLC ADR (Services)+........................ 71,000 1,811
Tesco PLC (Services)............................................... 408,616 1,795
Thorn EMI PLC (Consumer Goods)..................................... 104,950 2,502
Vodafone Group PLC (Services)...................................... 105,801 377
Vodafone Group PLC ADR (Services).................................. 18,000 650
--------------
30,040
--------------
UNITED STATES -- 0.2%
Partner Reinsurance Holdings Ltd. (Finance)........................ 13,600 360
--------------
OTHER COMMON STOCK -- 2.2%......................................... 5,103
--------------
TOTAL COMMON STOCK, PREFERRED STOCK, & WARRANT
(cost: $171,388)................................................. 205,859
--------------
<CAPTION>
PRINCIPAL
AMOUNT
(DENOMINATED IN
LOCAL CURRENCY)
RIGHTS -- 0.1%+ (IN THOUSANDS)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
GERMANY -- 0.0%
Munchener Ruckvers 12/01/95........................................ 1 56
--------------
UNITED KINGDOM -- 0.1%
Cordiant PLC 12/11/95.............................................. 441 202
--------------
TOTAL RIGHTS (cost: $0)............................................ 258
--------------
<CAPTION>
BONDS & NOTES -- 1.3%
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINLAND -- 0.3%
Kymmene Corp. 8.25% 2043........................................... 2,800 674
--------------
FRANCE -- 0.1%
Michelin (cie Gle) 2.50% 2001...................................... 480 256
--------------
HONG KONG -- 0.2%
Bangkok Bank Public Ltd. 3.25% 2004#............................... 500 503
--------------
</TABLE>
---------------------
A-10
<PAGE> 62
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(DENOMINATED IN
LOCAL CURRENCY) VALUE
BONDS & NOTES (continued) (IN THOUSANDS) (IN THOUSANDS)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW ZEALAND -- 0.7%
Brierley Investment Ltd. 9.00% 1998................................ 253 $ 180
New Zealand Government 9.00% 1996.................................. 2,000 1,319
--------------
1,499
--------------
TOTAL BONDS & NOTES (cost: $2,704)................................. 2,932
--------------
TOTAL INVESTMENT SECURITIES (cost: $174,092)....................... 209,049
--------------
<CAPTION>
SHORT-TERM SECURITIES -- 7.9%
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 7.9%
Associates Corp. of North America 5.89% due 12/01/95............... 2,900 2,900
Banque National De Paris 5.76% due 12/18/95........................ 5,000 5,000
Export Development Corp. 5.72% due 12/06/95........................ 5,000 4,996
Sandoz Corp. 5.72% due 12/13/95.................................... 5,000 4,991
--------------
TOTAL SHORT-TERM SECURITIES (cost: $17,887)........................ 17,887
--------------
TOTAL INVESTMENTS --
(cost: $191,979) 99.5% 226,936
Other assets less liabilities -- 0.5 1,198
------ --------------
NET ASSETS -- 100.0% $ 228,134
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
# Resale restricted to qualified institutional buyers
ADR - American Depositary Receipt
ADS - American Depositary Shares
<TABLE>
<CAPTION>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT NOVEMBER 30, 1995
<S> <C> <C> <C>
------------------------------------------------------------
<CAPTION>
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE DEPRECIATION
------------------------------------------------------------
<S> <C> <C> <C>
FRF 538 USD 110 12/29/95 (2)
</TABLE>
-----------------------------
FRF - French Franc
USD - United States Dollar
See Notes to Financial Statements
---------------------
A-11
<PAGE> 63
- ---------------------
ANCHOR PATHWAY FUND
GROWTH-INCOME SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 90.0% SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 12.1%
Aerospace & Military Technology -- 3.5%
Boeing Co. .......................................................... 170,000 $ 12,389
Coltec Industries, Inc.+............................................. 60,000 660
General Motors Corp., Class H........................................ 85,000 4,037
Litton Industries, Inc.+............................................. 91,000 4,084
Sundstrand Corp. .................................................... 95,000 6,151
United Technologies Corp. ........................................... 35,100 3,291
Data Processing & Reproduction -- 2.4%
Apple Computer, Inc. ................................................ 60,000 2,288
International Business Machines Corp. ............................... 60,000 5,797
Novell, Inc.+........................................................ 40,000 675
Xerox Corp. ......................................................... 90,000 12,341
Electrical & Electronics -- 0.4%
General Electric Co. ................................................ 50,000 3,363
Electronic Components -- 0.7%
Intel Corp. ......................................................... 50,000 3,044
Motorola, Inc. ...................................................... 40,000 2,450
Texas Instruments, Inc. ............................................. 20,000 1,157
Energy Equipment -- 0.9%
Cooper Industries, Inc. ............................................. 35,960 1,312
Schlumberger Ltd. ................................................... 70,000 4,445
Western Atlas, Inc.+................................................. 51,000 2,442
Industrial Components -- 1.6%
Dana Corp. .......................................................... 50,000 1,462
Goodyear Tire & Rubber Co. .......................................... 80,000 3,390
Johnson Controls, Inc. .............................................. 39,400 2,728
Rockwell International Corp. ........................................ 70,000 3,430
TRW, Inc. ........................................................... 40,000 2,995
Machinery & Engineering -- 2.6%
Caterpillar, Inc. ................................................... 125,000 7,672
Crompton + Knowles Corp. ............................................ 120,000 1,560
Deere & Co. ......................................................... 210,000 6,904
Ingersoll-Rand Co. .................................................. 80,000 3,070
Parker-Hannifin Corp. ............................................... 105,000 3,859
--------------
106,996
--------------
CONSUMER GOODS -- 17.9%
Appliances & Household Durables -- 0.5%
Corning, Inc. ....................................................... 100,000 3,013
LADD Furniture, Inc. ................................................ 112,333 1,502
Automotive -- 0.8%
Ford Motor Co. ...................................................... 120,000 3,390
General Motors Corp. ................................................ 70,000 3,395
</TABLE>
---------------------
A-12
<PAGE> 64
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS (continued)
Beverages & Tobacco -- 4.5%
American Brands, Inc. ............................................... 70,000 $ 2,923
Anheuser-Busch Cos., Inc. ........................................... 45,000 2,981
PepsiCo, Inc. ....................................................... 155,000 8,564
Philip Morris Cos., Inc. ............................................ 198,000 17,374
Seagrams Co., Ltd. .................................................. 220,000 8,030
Food & Household Products -- 1.5%
ConAgra, Inc. ....................................................... 90,000 3,589
CPC International, Inc. ............................................. 110,000 7,562
General Mills, Inc. ................................................. 45,000 2,481
Health & Personal Care -- 9.3%
Abbott Laboratories.................................................. 100,000 4,063
American Home Products Corp. ........................................ 85,000 7,756
Bausch & Lomb, Inc. ................................................. 20,200 730
Bristol-Myers Squibb Co. ............................................ 120,000 9,630
Johnson & Johnson Co. ............................................... 50,000 4,331
Kimberly-Clark Corp. ................................................ 21,500 1,653
Lilly (Eli) & Co. ................................................... 70,000 6,965
Merck & Co., Inc. ................................................... 257,500 15,933
Pfizer, Inc. ........................................................ 160,000 9,280
Pharmacia & Upjohn, Inc.+............................................ 116,000 4,161
Schering-Plough Corp. ............................................... 180,000 10,327
Tambrands, Inc. ..................................................... 30,000 1,564
Warner-Lambert Co. .................................................. 60,000 5,355
Recreation & Other Consumer Products -- 1.0%
American Greetings Corp., Class A.................................... 40,000 1,090
Eastman Kodak Co. ................................................... 60,000 4,080
Polaroid Corp. ...................................................... 30,000 1,384
Stanley Works........................................................ 40,000 2,025
Textiles & Apparel -- 0.3%
V.F. Corp. .......................................................... 45,000 2,340
--------------
157,471
--------------
ENERGY -- 6.8%
Energy Sources -- 5.4%
Amoco Corp. ......................................................... 105,000 7,114
Atlantic Richfield Co. .............................................. 10,000 1,084
Exxon Corp. ......................................................... 55,000 4,256
Murphy Oil Corp. .................................................... 42,600 1,677
Phillips Petroleum Co. .............................................. 260,000 8,645
Royal Dutch Petroleum Co. ADR........................................ 55,000 7,060
Texaco, Inc. ........................................................ 70,000 5,180
Tosco Corp. ......................................................... 60,000 2,287
Total SA ADR......................................................... 20,490 633
Unocal Corp. ........................................................ 160,000 4,300
Valero Energy Corp. ................................................. 215,000 5,563
Utilities: Electric, Gas & Water -- 1.4%
Consolidated Edison Co. of New York, Inc. ........................... 100,000 2,887
General Public Utilities Corp. ...................................... 40,000 1,265
Long Island Lighting Co. ............................................ 32,800 562
Pacific Gas & Electric Co. .......................................... 150,000 4,125
Union Electric Co. .................................................. 80,000 3,210
--------------
59,848
--------------
</TABLE>
---------------------
A-13
<PAGE> 65
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 12.0%
Banking -- 7.4%
Banc One Corp. ...................................................... 210,625 $ 8,030
Bank of New York, Inc. .............................................. 80,000 3,770
BankAmerica Corp. ................................................... 95,000 6,044
Bankers Trust New York Corp. ........................................ 30,000 1,946
Boatmen's Bancshares, Inc. .......................................... 100,000 3,875
Chase Manhattan Corp. ............................................... 60,000 3,653
Comerica, Inc. ...................................................... 75,000 2,803
CoreStates Financial Corp. .......................................... 80,000 3,100
First Fidelity Bancorp............................................... 60,000 4,403
First Interstate Bancorp............................................. 30,000 4,020
First Union Corp. ................................................... 65,000 3,551
KeyCorp.............................................................. 75,000 2,766
Morgan (J.P.) & Co., Inc. ........................................... 30,000 2,355
Northern Trust Corp. ................................................ 20,000 1,045
Norwest Corp. ....................................................... 20,000 660
PNC Bank Corp. ...................................................... 262,000 7,663
SunTrust Banks, Inc. ................................................ 80,000 5,460
Financial Services -- 0.6%
American Express Co. ................................................ 50,000 2,125
Beneficial Corp. .................................................... 20,000 1,015
Household International, Inc. ....................................... 40,000 2,500
Insurance -- 4.0%
Allstate Corp. ...................................................... 210,000 8,610
American General Corp. .............................................. 30,000 1,016
Cigna Corp. ......................................................... 35,000 3,850
Gallagher (Arthur J.) & Co. ......................................... 111,400 3,648
General Reinsurance Group............................................ 15,000 2,244
Liberty Corp. ....................................................... 75,000 2,485
SAFECO Corp. ........................................................ 140,000 9,940
St. Paul Cos., Inc. ................................................. 40,000 2,240
TIG Holdings, Inc. .................................................. 50,000 1,350
--------------
106,167
--------------
MATERIALS -- 10.4%
Building Materials -- 0.2%
TRINOVA Corp. ....................................................... 50,000 1,538
Chemicals -- 4.1%
Dow Chemical Co. .................................................... 78,000 5,528
du Pont (E.I.) de Nemours & Co. ..................................... 55,000 3,657
Eastman Chemical Co. ................................................ 120,000 7,875
Goodrich (B.F.) Co. ................................................. 40,000 2,805
Great Lakes Chemical Corp. .......................................... 20,000 1,423
Monsanto Co. ........................................................ 30,000 3,435
PPG Industries, Inc. ................................................ 60,000 2,722
Praxair, Inc. ....................................................... 310,000 9,029
</TABLE>
---------------------
A-14
<PAGE> 66
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS (continued)
Forest Products & Paper -- 3.3%
Federal Paper Board Co. ............................................. 60,000 $ 3,120
Georgia-Pacific Corp. ............................................... 35,000 2,721
International Paper Co. ............................................. 80,000 3,050
James River Corp. ................................................... 125,000 3,937
Rayonier, Inc. ...................................................... 92,500 3,538
Union Camp Corp. .................................................... 175,000 8,597
Westvaco Corp. ...................................................... 60,000 1,643
Weyerhaeuser Co. .................................................... 60,000 2,715
Metals & Minerals -- 2.8%
Alumax, Inc. ADR+.................................................... 20,000 665
Aluminum Co. of America.............................................. 200,000 11,700
Inco Ltd. ........................................................... 80,000 2,850
Phelps Dodge Corp. .................................................. 10,000 679
Potash Corp. of Saskatchewan, Inc. .................................. 130,000 8,986
--------------
92,213
--------------
MULTI-INDUSTRY -- 3.8%
Multi-Industry -- 3.8%
AlliedSignal, Inc. .................................................. 40,000 1,890
Hanson PLC ADR....................................................... 120,000 1,830
Harsco Corp. ........................................................ 130,000 7,670
Minnesota Mining & Manufacturing Co. ................................ 150,000 9,825
Tenneco, Inc. ....................................................... 130,000 6,240
Textron, Inc. ....................................................... 75,000 5,747
--------------
33,202
--------------
SERVICES -- 25.9%
Broadcasting & Publishing -- 6.3%
Capital Cities/ABC, Inc. ............................................ 20,000 2,473
Cox Communications, Inc.+............................................ 49,224 985
Gannett Co., Inc. ................................................... 60,000 3,660
New York Times Co. .................................................. 100,000 2,950
News Corp., Ltd. ADR................................................. 160,000 3,360
Scripps (E.W.) Co., Class A.......................................... 135,000 5,484
Tele-Communications Liberty Media Group+............................. 145,000 4,060
Tele-Communications TCI Group, Series A+............................. 580,000 10,730
Time Warner, Inc. ................................................... 250,000 10,000
Times Mirror Co., Series A .......................................... 56,056 1,822
Tribune Co. ......................................................... 60,000 3,870
U.S. West Media Group+............................................... 171,800 3,092
Viacom, Inc. Class B+................................................ 65,000 3,136
Business & Public Services -- 4.8%
Browning-Ferris Industries, Inc. .................................... 120,000 3,615
Dun & Bradstreet Corp. .............................................. 210,000 13,099
Ecolab, Inc. ........................................................ 50,000 1,438
Federal Express Corp.+............................................... 30,000 2,243
General Motors Corp., Class E........................................ 125,000 6,312
Omnicom Group........................................................ 20,000 1,335
Pitney Bowes, Inc. .................................................. 30,000 1,343
WMX Technologies, Inc. .............................................. 445,000 13,127
</TABLE>
---------------------
A-15
<PAGE> 67
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Leisure & Tourism -- 2.0%
Disney (Walt) Co. ................................................... 200,000 $ 12,025
Host Marriott Corp.+................................................. 110,000 1,416
Marriott International, Inc. ........................................ 100,000 3,725
Merchandising -- 2.6%
Gap, Inc. ........................................................... 20,000 905
Giant Foods, Inc. ................................................... 200,000 6,450
May Department Stores Co. ........................................... 80,000 3,490
Melville Corp. ...................................................... 25,000 778
Penney (J.C.), Inc. ................................................. 50,000 2,344
Wal-Mart Stores, Inc. ............................................... 289,000 6,936
Walgreen Co. ........................................................ 80,000 2,330
Telecommunications -- 7.0%
AirTouch Communications, Inc.+....................................... 81,013 2,360
Alltel Corp. ........................................................ 20,000 590
Ameritech Corp. ..................................................... 35,000 1,925
AT&T Corp. .......................................................... 330,000 21,780
MCI Communications Corp. ............................................ 380,000 10,165
Pacific Telesis Group................................................ 81,013 2,430
SBC Communications, Inc. ............................................ 40,000 2,160
Sprint Corp. ........................................................ 190,000 7,600
Telefonos de Mexico SA ADR........................................... 221,800 7,319
US West, Inc. ....................................................... 171,800 5,369
Transportation: Airlines -- 0.6%
AMR Corp.+........................................................... 65,000 4,981
Transportation: Rail & Road -- 2.6%
Conrail, Inc. ....................................................... 150,000 10,481
Norfolk Southern Corp. .............................................. 65,000 5,119
Union Pacific Corp. ................................................. 110,000 7,452
--------------
228,264
--------------
OTHER COMMON STOCK -- 1.1%........................................... 9,975
--------------
TOTAL COMMON STOCK (cost: $561,454).................................. 794,136
--------------
<CAPTION>
PREFERRED STOCK -- 0.3%
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Broadcasting & Publishing -- 0.3%
News Corp., Ltd. ADR................................................. 80,000 1,510
Times Mirror Co., Preferred Series B................................. 44,896 1,156
--------------
TOTAL PREFERRED STOCK (cost: $2,106)................................. 2,666
--------------
TOTAL INVESTMENT SECURITIES (cost: $563,560)......................... 796,802
--------------
</TABLE>
---------------------
A-16
<PAGE> 68
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 9.0% (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 6.2%
Ameritech Corp. 5.69% due 12/07/95................................... $ 2,500 $ 2,498
Associates Corp. of North America 5.89% due 12/01/95................. 13,100 13,100
CIT Group Holdings, Inc. 5.70% due 1/08/96........................... 14,000 13,916
Heinz (H. J.) Co. 5.70% due 1/12/96.................................. 3,000 2,980
Heinz (H. J.) Co. 5.72% due 12/13/95................................. 10,500 10,480
Penney (J.C.) Funding Corp. 5.68% due 1/17/96........................ 11,300 11,216
----------
TOTAL CORPORATE SHORT-TERM NOTES..................................... 54,190
----------
FEDERAL AGENCY OBLIGATIONS -- 2.8%
Federal Home Loan Bank Consolidated Discount Note 5.68%
due 12/26/95....................................................... 8,000 7,968
Federal Home Loan Mortgage Discount Note 5.68% due 12/20/95.......... 4,700 4,686
Federal National Mortgage Association Discount Note 5.67% due
12/14/95 .......................................................... 12,200 12,175
----------
TOTAL FEDERAL AGENCY OBLIGATIONS..................................... 24,829
----------
TOTAL SHORT-TERM SECURITIES (cost: $79,019).......................... 79,019
----------
TOTAL INVESTMENTS --
(cost: $642,579) 99.3% 875,821
Other assets less liabilities -- 0.7 6,322
----- ----------
NET ASSETS -- 100.0% $ 882,143
===== ==========
</TABLE>
-----------------------------
+ Non-income producing securities
ADR - American Depositary Receipt
See Notes to Financial Statements
---------------------
A-17
<PAGE> 69
- ---------------------
ANCHOR PATHWAY FUND
ASSET ALLOCATION SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 69.4% SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 10.6%
Aerospace & Military Technology -- 4.0%
Boeing Co. .......................................................... 30,000 $ 2,186
General Motors Corp., Class H........................................ 56,000 2,660
Northrop Grumman Corp. .............................................. 20,000 1,230
Data Processing & Reproduction -- 1.2%
Apple Computer, Inc. ................................................ 25,000 953
International Business Machines Corp. ............................... 10,000 966
Electrical & Electronics -- 0.8%
Hubbell, Inc. ....................................................... 21,000 1,284
Energy Equipment -- 1.0%
Cooper Industries, Inc. ............................................. 14,384 525
Schlumberger Ltd. ................................................... 15,000 953
Industrial Components -- 2.6%
Dana Corp. .......................................................... 35,000 1,024
Rockwell International Corp. ........................................ 60,000 2,940
Machinery & Engineering -- 1.0%
Crompton + Knowles Corp. ............................................ 40,000 520
Deere & Co. ......................................................... 30,000 986
--------------
16,227
--------------
CONSUMER GOODS -- 16.6%
Automotive -- 0.6%
General Motors Corp. ................................................ 20,000 970
Beverages & Tobacco -- 3.0%
PepsiCo, Inc. ....................................................... 50,000 2,763
Seagrams Co., Ltd. .................................................. 50,000 1,825
Food & Household Products -- 1.4%
Archer-Daniels-Midland Co. .......................................... 50,000 862
Heinz (H.J.) Co. .................................................... 30,000 956
Ralston Purina Co. .................................................. 5,000 320
Health & Personal Care -- 10.2%
Abbott Laboratories.................................................. 18,000 731
American Home Products Corp. ........................................ 30,000 2,737
Bausch & Lomb, Inc. ................................................. 20,000 723
Bristol-Myers Squibb Co. ............................................ 45,000 3,611
Kimberly-Clark Corp. ................................................ 10,000 769
Pfizer, Inc. ........................................................ 54,000 3,132
Smithkline Beecham PLC ADR........................................... 40,000 2,130
Tambrands, Inc. ..................................................... 20,000 1,042
Warner-Lambert Co. .................................................. 10,000 893
Recreation & Other Consumer Products -- 1.4%
American Greetings Corp., Class A.................................... 10,000 273
Eastman Kodak Co. ................................................... 20,000 1,360
Stanley Works........................................................ 10,000 506
--------------
25,603
--------------
</TABLE>
---------------------
A-18
<PAGE> 70
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY -- 6.5%
Energy Sources -- 6.5%
Amoco Corp. ......................................................... 15,000 $ 1,016
Anadarko Petroleum Corp. ............................................ 20,000 963
Atlantic Richfield Co. .............................................. 5,000 542
Chevron Corp. ....................................................... 40,000 1,975
Kerr-McGee Corp. .................................................... 25,000 1,447
Phillips Petroleum Co. .............................................. 50,000 1,662
Royal Dutch Petroleum Co. ADR........................................ 6,000 770
Texaco, Inc. ........................................................ 10,000 740
Unocal Corp. ........................................................ 30,000 806
--------------
9,921
--------------
FINANCE -- 14.9%
Banking -- 8.4%
BankAmerica Corp. ................................................... 10,000 636
Chase Manhattan Corp. ............................................... 10,000 609
Citicorp............................................................. 30,000 2,122
Comerica, Inc. ...................................................... 15,000 561
CoreStates Financial Corp. .......................................... 20,000 775
First Fidelity Bancorp............................................... 17,000 1,247
First Interstate Bancorp............................................. 20,000 2,680
Fleet Financial Group, Inc. ......................................... 25,000 1,044
KeyCorp.............................................................. 15,000 553
NationsBank Corp. ................................................... 25,000 1,784
PNC Bank Corp. ...................................................... 30,000 878
Insurance -- 6.5%
Allstate Corp. ...................................................... 43,905 1,800
AMBAC, Inc. ......................................................... 20,000 883
American General Corp. .............................................. 15,000 508
Cigna Corp. ......................................................... 40,000 4,400
SAFECO Corp. ........................................................ 33,000 2,343
--------------
22,823
--------------
MATERIALS -- 5.3%
Building Materials -- 0.5%
TRINOVA Corp. ....................................................... 25,000 769
Chemicals -- 1.8%
Eastman Chemical Co. ................................................ 15,000 984
Great Lakes Chemical Corp. .......................................... 10,000 711
Monsanto Co. ........................................................ 10,000 1,145
Forest Products & Paper -- 2.4%
Georgia-Pacific Corp. ............................................... 10,000 778
Rayonier, Inc. ...................................................... 25,500 975
Union Camp Corp. .................................................... 20,000 983
Weyerhaeuser Co. .................................................... 20,000 905
Metals & Minerals -- 0.6%
Aluminum Co. of America.............................................. 16,000 936
--------------
8,186
--------------
MULTI-INDUSTRY -- 4.0%
Multi-Industry -- 4.0%
Minnesota Mining & Manufacturing Co. ................................ 25,000 1,637
Tenneco, Inc. ....................................................... 30,000 1,440
Textron, Inc. ....................................................... 40,000 3,065
--------------
6,142
--------------
</TABLE>
---------------------
A-19
<PAGE> 71
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 10.4%
Business & Public Services -- 0.6%
H & R Block, Inc. ................................................... 20,000 $ 890
Merchandising -- 5.6%
Gap, Inc. ........................................................... 10,000 453
Hancock Fabrics, Inc. ............................................... 50,000 481
May Department Stores Co. ........................................... 30,000 1,309
Penney (J.C.), Inc. ................................................. 20,000 937
Sears Roebuck & Co. ................................................. 25,000 984
Wal-Mart Stores, Inc. ............................................... 100,000 2,400
Walgreen Co. ........................................................ 70,000 2,039
Telecommunications -- 1.2%
AT&T Corp. .......................................................... 10,000 660
Pacific Telesis Group................................................ 40,000 1,200
Transportation: Rail & Road -- 3.0%
Conrail, Inc. ....................................................... 25,000 1,747
Norfolk Southern Corp. .............................................. 20,000 1,575
Union Pacific Corp. ................................................. 20,000 1,355
--------------
16,030
--------------
OTHER COMMON STOCK -- 1.1%........................................... 1,663
--------------
TOTAL COMMON STOCK (cost: $84,171)................................... 106,595
--------------
<CAPTION>
PRINCIPAL
AMOUNT
BONDS & NOTES -- 20.2% (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE & NONCONVERTIBLES -- 14.1%
Automotive -- 0.8%
General Motors Corp. 8.80% 2021...................................... $ 1,000 1,203
Broadcasting & Publishing -- 1.4%
TCI Communications, Inc. 8.75% 2015.................................. 500 540
Tele-Communications, Inc. 9.25% 2023................................. 500 530
Time Warner, Inc. 9.13% 2013......................................... 1,000 1,106
Finance -- 3.1%
Ahmanson (H.F.) & Co. 9.88% 1999..................................... 1,000 1,129
Bankers Trust New York Corp. 8.25% 2005.............................. 500 552
Capital One Bank 6.61% 1999.......................................... 2,500 2,532
Saul (B.F.) Real Estate Investment Trust 11.63% 2002................. 500 505
Industrial -- 6.4%
Acme Metals, Inc. 12.50% 2002........................................ 500 491
CenCall Communications Corp. zero coupon 2004(1)..................... 1,000 538
Columbia Gas Systems, Inc. 7.05% 2007................................ 500 508
Container Corp. of America 9.75% 2003................................ 2,000 1,965
Inco Ltd. 9.60% 2022................................................. 400 452
Marvel Holdings, Inc. zero coupon 1998............................... 800 568
Oryx Energy Co. 9.50% 1999........................................... 1,500 1,606
Oryx Energy Co. 10.00% 1999.......................................... 500 540
Parker + Parsley Petroleum Co. 8.25% 2007............................ 500 533
Pohang Iron & Steel Ltd. 7.50% 2002.................................. 2,500 2,640
</TABLE>
---------------------
A-20
<PAGE> 72
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (continued) (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE & NONCONVERTIBLES (continued)
Transportation -- 2.4%
American Airlines 9.71% 2007......................................... $ 1,387 $ 1,587
Delta Air Lines, Inc. 10.50% 2016.................................... 500 616
Federal Express Corp. 7.53% 2006..................................... 944 986
Jet Equipment Trust 7.83% 2012#...................................... 500 525
--------------
21,652
--------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 0.3%
Poland Republic 7.75% 2000#.......................................... 500 508
--------------
U.S. GOVERNMENT & AGENCIES -- 0.7%
Government National Mortgage Association 8.50% 2025.................. 954 996
--------------
UNITED STATES TREASURY -- 5.1%
10.38% Bonds 2009.................................................... 1,000 1,307
10.38% Bonds 2012.................................................... 4,000 5,456
8.75% Notes 1997..................................................... 1,000 1,059
--------------
7,822
--------------
TOTAL BONDS & NOTES (cost: $30,029).................................. 30,978
--------------
<CAPTION>
CONVERTIBLE BONDS -- 2.0%
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Broadcasting & Publishing -- 1.5%
Turner Broadcasting Systems, Inc. zero coupon 2007#.................. 5,000 2,263
--------------
Industrial -- 0.5%
Hanson America, Inc. 2.39% 2001#..................................... 1,000 824
--------------
TOTAL CONVERTIBLE BONDS (cost: $2,940)............................... 3,087
--------------
TOTAL INVESTMENT SECURITIES (cost: $117,140)......................... 140,660
--------------
<CAPTION>
SHORT-TERM SECURITIES -- 7.8%
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 6.4%
Associates Corp. of North America 5.89% due 12/01/95................. 2,900 2,900
Bell Atlantic Financial Services 5.72% due 12/19/95.................. 2,400 2,393
Ford Motor Credit Co. 5.72% due 12/11/95............................. 3,350 3,345
Motorola Credit Corp. 5.69% due 12/08/95............................. 1,200 1,199
--------------
TOTAL CORPORATE SHORT-TERM NOTES..................................... 9,837
--------------
FEDERAL AGENCY OBLIGATIONS -- 1.4%
Federal National Mortgage Association Discount Note 5.67% due
12/14/95........................................................... 2,200 2,195
--------------
TOTAL SHORT-TERM SECURITIES (cost: $12,032).......................... 12,032
--------------
TOTAL INVESTMENTS --
(cost: $129,172) 99.4% 152,692
Other assets less liabilities -- 0.6 916
------ --------------
NET ASSETS --
100.0% $ 153,608
====== =============
</TABLE>
-----------------------------
# Resale restricted to qualified institutional buyers
(1) Represents a zero-coupon bond which will convert to an
interest-bearing security at a later date
ADR - American Depositary Receipt
See Notes to Financial Statements
---------------------
A-21
<PAGE> 73
- ---------------------
ANCHOR PATHWAY FUND
HIGH-YIELD BOND SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 89.8% (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 3.9%
Aerospace & Military Technology -- 3.5%
Coltec Industries 9.75% 1999......................................... $ 500 $ 512
Coltec Industries 9.75% 2000......................................... 4,500 4,624
Machinery & Engineering -- 0.4%
Exide Corp. 10.00% 2005.............................................. 500 538
--------------
5,674
--------------
CONSUMER GOODS -- 2.0%
Food & Household Products -- 2.0%
Dr. Pepper/Seven Up Cos., Inc. 10.25% 2000........................... 2,750 2,901
--------------
ENERGY -- 11.2%
Energy Sources -- 8.1%
Dual Drilling Co. 9.88% 2004......................................... 2,000 1,900
Flores & Rucks, Inc. 13.50% 2004..................................... 2,500 2,825
Global Marine, Inc. 12.75% 1999...................................... 2,000 2,210
TransTexas Gas Corp. 11.50% 2002..................................... 2,000 2,065
Triton Energy Corp. zero coupon 2000(1).............................. 1,500 1,391
Tuboscope Vetco International, Inc. 10.75% 2003...................... 1,500 1,478
Utilities: Electric, Gas & Water -- 3.1%
California Energy, Inc. zero coupon 2004(1).......................... 4,000 3,680
Midland Cogeneration, Series C-91 10.33% 2002........................ 402 418
Midland Cogeneration, Series C-94 10.33% 2002........................ 433 452
--------------
16,419
--------------
FINANCE -- 1.1%
Financial Services -- 1.1%
Indah Kiat International Finance Co. BV 11.88% 2002.................. 1,000 1,010
Tjiwi Kimia International Finance BV 13.25% 2001..................... 500 536
--------------
1,546
--------------
INDUSTRIAL & COMMERCIAL -- 3.2%
Industrial -- 3.2%
Magnetek, Inc. 10.75% 1998........................................... 2,500 2,600
Stater Brothers Holdings, Inc. 11.00% 2001........................... 2,000 2,020
--------------
4,620
--------------
MATERIALS -- 14.9%
Forest Products & Paper -- 11.1%
Container Corp. of America 9.75% 2003................................ 5,250 5,158
Fort Howard Corp. 8.25% 2002......................................... 500 485
Fort Howard Corp. 9.25% 2001......................................... 3,500 3,553
P T Indah Kiat Pulp & Paper 8.88% 2000#.............................. 1,500 1,395
Pacific Lumber Co. 10.50% 2003....................................... 1,000 940
Riverwood International Corp. 10.75% 2000............................ 3,000 3,210
Riverwood International Corp. 11.25% 2002............................ 500 536
Triangle Pacific Corp. 10.50% 2003................................... 1,000 1,040
</TABLE>
---------------------
A-22
<PAGE> 74
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (continued) (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS (continued)
Metals & Minerals -- 3.8%
A.K. Steel Corp. 10.75% 2004......................................... $ 2,000 $ 2,210
Acme Metals, Inc. zero coupon 2004(1)................................ 1,750 1,365
Kaiser Aluminum & Chemical Corp. 12.75% 2003......................... 1,250 1,369
Ucar Global Enterprises, Inc. 12.00% 2005............................ 535 607
--------------
21,868
--------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.9%
Federative Republic of Brazil 6.88% 1996(2).......................... 500 270
Republic of Argentina 6.81% 1996(2).................................. 2,500 1,631
Republic of Poland 3.75% 1996(2)..................................... 500 323
United Mexican States 6.25% 2019..................................... 1,000 615
--------------
2,839
--------------
SERVICES -- 51.6%
Advertising -- 1.5%
Neodata Services, Inc. zero coupon 2003(1)........................... 2,500 2,237
Broadcasting & Publishing -- 21.5%
American Media Operations, Inc. 11.63% 2004.......................... 1,250 1,269
Bell Cablemedia PLC zero coupon 2004(1).............................. 5,500 3,767
CenCall Communications Corp. zero coupon 2004(1)..................... 1,000 537
Centennial Cellular Corp. 8.88% 2001................................. 3,000 2,932
Century Communications Corp. 9.50% 2000.............................. 2,500 2,563
Comcast UK Cable Partners Ltd. zero coupon 2007(1)................... 1,500 855
Continental Cablevision, Inc. 8.63% 2003............................. 1,775 1,833
Continental Cablevision, Inc. 8.88% 2005............................. 1,000 1,040
Continental Cablevision, Inc. 10.63% 2002............................ 3,000 3,195
Heartland Wireless Communication, Inc. 13.00% 2003#.................. 500 567
Infinity Broadcasting Corp. 10.38% 2002.............................. 2,250 2,407
Mobilemedia Commerce zero coupon 2003(1)............................. 2,500 1,900
Nextel Communications, Inc. zero coupon 2003(1)...................... 2,500 1,506
Nextel Communications, Inc. zero coupon 2004(1)...................... 1,500 776
PanAmSat L.P. 9.75% 2000............................................. 1,480 1,554
Univision Television Group, Inc. 11.75% 2001......................... 500 543
Videotron Holdings PLC zero coupon 2004(1)........................... 5,500 3,699
Young Broadcasting, Inc. 10.13% 2005................................. 500 528
Business & Public Services -- 1.0%
Protection One Alarm Monitoring Corp. zero coupon 2005(1)*........... 1,000 800
Regency Health Services, Inc. 9.88% 2002............................. 750 737
Food Retail -- 5.6%
Allied Supermarkets, Inc. 6.63% 1998................................. 1,500 1,470
Foodmaker, Inc. 9.25% 1999........................................... 2,400 2,280
Foodmaker, Inc. 9.75% 2002........................................... 1,355 1,219
Marvel Holdings, Inc. zero coupon 1998............................... 2,250 1,598
Safeway Store Holdings, Inc. 10.00% 2002............................. 500 580
Star Market Co, Inc. 13.00% 2004..................................... 1,000 1,020
</TABLE>
---------------------
A-23
<PAGE> 75
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (continued) (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Leisure & Tourism -- 3.0%
Four Seasons Hotels, Inc. 9.13% 2000#................................ $ 1,000 $ 991
Harrah's Jazz Co. 14.25% 2001........................................ 500 140
Kloster Cruise Ltd. 13.00% 2003...................................... 1,500 1,245
Plitt Theatres, Inc. 10.88% 2004..................................... 1,750 1,584
Station Casinos, Inc. 9.63% 2003..................................... 500 485
Merchandising -- 4.2%
AnnTaylor, Inc. 8.75% 2000........................................... 500 423
Barnes & Noble, Inc. 11.88% 2003..................................... 1,750 1,951
Thrifty PayLess Holdings, Inc. 11.75% 2003........................... 1,000 1,078
Thrifty PayLess Holdings, Inc. 12.25% 2004........................... 2,500 2,669
Telecommunications -- 14.1%
Cellular Communications International, Inc. zero coupon 2000......... 2,250 1,297
Comunicacion Celular S A zero coupon 2003#(1)........................ 1,000 553
Dial Callable Communications, Inc. zero coupon 2004(1)............... 2,000 1,090
Horizon Cellular Telephone L.P. zero coupon 2000(1).................. 500 430
International CableTel, Inc. zero coupon 2005(1)..................... 750 457
MFS Communication zero coupon 2004(1)................................ 7,000 5,416
Paging Network, Inc. 11.75% 2002..................................... 2,200 2,425
Pricecellular Wireless Corp. zero coupon 2003(1)..................... 1,000 758
Pronet, Inc. 11.88% 2005............................................. 500 540
Rogers Cantel Mobile Communications, Inc. 10.75% 2001................ 6,318 6,650
Rogers Cantel Mobile Communications, Inc. 11.13% 2002................ 1,000 1,065
Transportation -- 0.7%
Viking Star Shipping, Inc. 9.63% 2003................................ 1,000 1,028
--------------
75,687
--------------
TOTAL BONDS & NOTES (cost: $129,981)................................. 131,554
--------------
<CAPTION>
WARRANTS -- 0.0%+ SHARES
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 0.0%
Business & Public Services -- 0.0%
Protection One Alarm Monitoring Corp.#*.............................. 3,200 18
Telecommunications -- 0.0%
Dial Page, Inc....................................................... 2,000 0
--------------
TOTAL WARRANTS (cost: $14)........................................... 18
--------------
<CAPTION>
PRINCIPAL
AMOUNT
U.S. GOVERNMENT AND AGENCIES -- 2.0% (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES TREASURY -- 2.0%
5.13% Note 1998 (cost: $2,808)....................................... $ 3,000 2,974
--------------
TOTAL INVESTMENT SECURITIES (cost: $132,803)......................... 134,546
--------------
</TABLE>
---------------------
A-24
<PAGE> 76
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 6.2% (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 6.2%
Associates Corp. of North America 5.89% due 12/01/95................. $ 4,100 $ 4,100
Wal Mart Stores, Inc. 5.70% due 12/06/95............................. 5,000 4,996
--------------
TOTAL SHORT-TERM SECURITIES (cost: $9,096)........................... 9,096
--------------
TOTAL INVESTMENTS --
(cost: $141,899) 98.0% 143,642
Other assets less liabilities -- 2.0 2,948
------ --------------
NET ASSETS -- 100.0% $ 146,590
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
# Resale restricted to qualified institutional buyers
* Fair value determined by Trustees
(1) Represents a zero-coupon bond which will convert to an
interest-bearing security at later date
(2) Variable rate security -- the rate reflected is as of November
30, 1995, maturity date reflects next reset date.
See Notes to Financial Statements
---------------------
A-25
<PAGE> 77
- ---------------------
ANCHOR PATHWAY FUND
U.S. GOVERNMENT/
AAA-RATED SECURITIES SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 95.8% (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES -- 8.1%
Green Tree Financial Corp. 6.80% 2027................................ $ 1,000 $ 1,004
MBNA Master Credit Card Trust 7.75% 1998............................. 5,000 5,075
Standard Credit Card Master Trust 8.88% 1999 -- Series 1991
Participation Certificates......................................... 4,500 4,823
--------------
10,902
--------------
DEVELOPMENTAL AUTHORITIES -- 6.9%
International American Development Bank 9.50% 1997................... 2,900 3,092
International Bank for Reconstruction & Development 7.90% 1998....... 3,000 3,148
International Bank for Reconstruction & Development 9.76% 1998....... 1,500 1,639
International Bank for Reconstruction & Development 14.90% 1997...... 1,200 1,355
--------------
9,234
--------------
FEDERAL AGENCY OBLIGATIONS -- 27.7%++
Federal Home Loan Mortgage Corp. 6.50% 2009*......................... 2,000 1,935
Federal Home Loan Mortgage Corp. 9.00% 2021-2022..................... 1,573 1,657
Federal Home Loan Mortgage Corp. 9.50% 2016.......................... 1,107 1,176
Federal Home Loan Mortgage Corp. 11.88% 2013*........................ 21 22
Federal Home Loan Mortgage Corp. 12.50% 2013*........................ 187 205
Federal National Mortgage Association zero coupon 2001 STRIPS(1)..... 5,000 4,731
Federal National Mortgage Association 7.50% 2009..................... 1,884 1,928
Federal National Mortgage Association zero coupon 2001 STRIPS(1)..... 5,000 4,701
Federal National Mortgage Association 7.70% 2004..................... 1,645 1,739
Federal National Mortgage Association 8.50% 2023..................... 2,367 2,474
Government National Mortgage Association 7.50% 2023.................. 1,499 1,530
Government National Mortgage Association 8.00% 2017.................. 2,287 2,387
Government National Mortgage Association 8.50% 2016-2025............. 4,506 4,708
Government National Mortgage Association 9.00% 2016-2017............. 927 984
Government National Mortgage Association 9.50% 2009-2017............. 6,091 6,630
Government National Mortgage Association 10.00% 2016................. 52 57
Government National Mortgage Association 10.50% 2016-2019............ 388 432
Government National Mortgage Association 11.00% 2019................. 90 101
Government National Mortgage Association 11.50% 2010-2015............ 20 23
--------------
37,420
--------------
INDUSTRIALS -- 0.6%
De Bartolo Capital Corp. Euronotes 8.00% 1996........................ 850 862
--------------
MISCELLANEOUS -- 2.9%
Columbia University Trustees NY 8.62% 2001........................... 1,500 1,674
Columbia University Trustees NY 8.65% 2003........................... 2,000 2,283
--------------
3,957
--------------
MORTGAGE-RELATED SECURITIES -- 6.1%
CMC Securities Corp. 6.50% 2008...................................... 2,801 2,695
Merrill Lynch Mortgage Investors, Inc. 6.85% 2015*................... 500 506
Morgan (J.P.) Commercial Mortgage Finance Corp. 7.35% 2010*.......... 1,000 1,059
Prudential Home Mortgage Corp. 7.50% 2022............................ 4,000 4,012
--------------
8,272
--------------
</TABLE>
---------------------
A-26
<PAGE> 78
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (continued) (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
NON-U.S. GOVERNMENT OBLIGATIONS -- 2.5%
Ontario Province Canada 15.25% 2012.................................. $ 1,000 $ 1,207
Ontario Province Canada 15.75% 2012.................................. 1,800 2,111
--------------
3,318
--------------
UNITED STATES TREASURY -- 41.0%
8.75% Bonds 2008..................................................... 2,000 2,355
8.88% Bonds 2017..................................................... 13,700 17,949
10.38% Bonds 2009.................................................... 4,500 5,882
10.38% Bonds 2012.................................................... 10,500 14,323
10.75% Bonds 2003.................................................... 3,750 4,880
11.25% Bonds 2015.................................................... 500 785
12.00% Bonds 2013.................................................... 6,000 9,118
--------------
55,292
--------------
TOTAL INVESTMENT SECURITIES (cost: $124,971)......................... 129,257
--------------
<CAPTION>
SHORT-TERM SECURITIES -- 0.7%
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 0.7%
Associates Corp. of North America 5.89% due 12/01/95 (cost: $906).... 906 906
--------------
TOTAL INVESTMENTS --
(cost: $125,877) 96.5% 130,163
Other assets less liabilities -- 3.5 4,775
------ --------------
NET ASSETS -- 100.0% $ 134,938
------ ==============
</TABLE>
-----------------------------
++ Pass-through securities are backed by a pool of mortgages or
other loans on which principal payments are periodically made.
Therefore, the effective maturity is shorter than stated
maturity.
* Fair value determined by Trustees
(1) Represents a zero-coupon bond which will convert to an
interest-bearing security at a later date
See Notes to Financial Statements
---------------------
A-27
<PAGE> 79
- ---------------------
ANCHOR PATHWAY FUND
CASH MANAGEMENT SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 101.7% (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 84.9%
Albertson's, Inc. 5.72% due 1/05/96.................................. $ 1,000 $ 994
Ameritech Corp. 5.69% due 12/07/95................................... 2,000 1,998
Anheuser - Busch Cos., Inc. 5.67% due 12/04/95....................... 2,700 2,699
Beneficial Corp. 5.70% due 12/07/95.................................. 3,300 3,297
CIT Group Holdings, Inc. 5.70% due 12/14/95.......................... 4,000 3,992
Coca-Cola Co. 5.66% due 12/15/95..................................... 3,500 3,492
Commercial Credit Co. 5.72% due 12/21/95............................. 4,400 4,386
Deere (John) Capital Corp. 5.70% due 1/11/96......................... 4,000 3,974
du Pont (E.I.) de Nemours & Co. 5.67% due 12/05/95................... 3,200 3,198
Emerson Electric Co. 5.65% due 12/12/95.............................. 4,000 3,993
Ford Motor Credit Co. 5.73% due 1/02/96.............................. 3,200 3,184
General Electric Capital Corp. 5.71% due 1/17/96..................... 3,100 3,077
Kimberly-Clark Corp. 5.68% due 12/22/95.............................. 4,000 3,987
McDonald's Corp. 5.69% due 12/11/95.................................. 2,800 2,796
Motorola, Inc. 5.69% due 12/05/95.................................... 4,000 3,998
Nordstrom Credit, Inc. 5.69% due 12/11/95............................ 4,200 4,193
Paccar Financial Corp. 5.71% due 12/08/95............................ 4,100 4,095
Penney (J.C.) Funding Corp. 5.70% due 12/06/95....................... 3,000 2,998
PepsiCo, Inc. 5.68% due 12/08/95..................................... 4,500 4,495
Raytheon Co. 5.70% due 12/04/95...................................... 1,900 1,899
Sara Lee Corp. 5.68% due 12/06/95.................................... 2,300 2,298
Sara Lee Corp. 5.68% due 12/29/95.................................... 1,000 996
Shell Oil Co. 5.69% due 12/13/95..................................... 4,000 3,992
Southwestern Bell Telephone Co. 5.68% due 12/04/95................... 2,400 2,399
Toys R Us, Inc. 5.70% due 12/01/95................................... 1,800 1,800
Weyerhaeuser Co. 5.72% due 1/02/96................................... 3,500 3,482
Xerox Corp. 5.67% due 1/08/96........................................ 4,000 3,976
--------------
TOTAL CORPORATE SHORT-TERM NOTES (cost: $85,688)..................... 85,688
--------------
FEDERAL AGENCY OBLIGATIONS -- 16.8%
Federal Farm Credit Bank Discount Note 5.65% due 12/18/95............ 2,300 2,294
Federal Home Loan Bank Consolidated Discount Note 5.66%
due 12/19/95....................................................... 3,100 3,091
Federal Home Loan Bank Consolidated Discount Note 5.68%
due 12/26/95....................................................... 3,300 3,287
Federal Home Loan Mortgage Discount Note 5.68% due 12/20/95.......... 3,700 3,689
Federal Home Loan Mortgage Discount Note 5.70% due 12/26/95.......... 3,200 3,187
Federal National Mortgage Association Discount Note 5.65%
due 12/28/95....................................................... 1,400 1,394
--------------
TOTAL FEDERAL AGENCY OBLIGATIONS (cost: $16,942)..................... 16,942
--------------
TOTAL SHORT-TERM SECURITIES (cost: $102,630)......................... 102,630
--------------
TOTAL INVESTMENTS --
(cost: $102,630) 101.7% 102,630
Liabilities in excess of other assets -- (1.7) (1,758)
------ --------------
NET ASSETS -- 100.0% $ 100,872
------ ==============
</TABLE>
See Notes to Financial Statements
---------------------
A-28
<PAGE> 80
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED NOVEMBER 30, 1995
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSET HIGH-YIELD
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND
SERIES SERIES SERIES SERIES SERIES
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment securities at value*........ $779,941 $209,049 $ 796,802 $ 140,660 $ 134,546
Short-term securities*................. 112,120 17,887 79,019 12,032 9,096
Money market accounts.................. 90 121 113 108 166
Cash................................... 1,974 22 348 21 815
Foreign cash........................... -- 196 -- -- --
Receivables for--
Sales of investments................. 6,299 172 4,203 551 381
Dividends and accrued interest....... 323 832 2,223 888 2,598
Fund shares sold..................... 438 1,880 363 54 87
Foreign currency contracts........... -- 255 -- -- --
Prepaid expenses....................... 2 1 3 -- 1
-----------------------------------------------------------------------------
901,187 230,415 883,074 154,314 147,690
-----------------------------------------------------------------------------
LIABILITIES:
Payables for--
Purchases of investments............. 2,823 1,579 83 500 496
Fund shares redeemed................. 562 116 331 99 500
Advisory fees........................ 218 110 214 39 37
Management fees...................... 146 44 142 26 25
Foreign currency contracts........... -- 255 -- -- --
Other accrued expenses................. 163 175 161 42 42
Unrealized depreciation of foreign
currency contracts................... -- 2 -- -- --
-----------------------------------------------------------------------------
3,912 2,281 931 706 1,100
-----------------------------------------------------------------------------
NET ASSETS:............................ $897,275 $228,134 $ 882,143 $ 153,608 $ 146,590
=============================================================================
Shares of beneficial interest
outstanding (unlimited shares
authorized).......................... 20,627 16,407 27,885 10,057 10,773
Net asset value per share.............. $ 43.50 $ 13.90 $ 31.64 $ 15.27 $ 13.61
=============================================================================
COMPOSITION OF NET ASSETS:
Capital paid in........................ $469,053 $180,960 $ 572,505 $ 113,168 $ 134,418
Accumulated undistributed net
investment income.................... 5,493 7,246 20,687 5,977 13,964
Accumulated undistributed net realized
gain (loss) on investments, futures
contracts and options contracts...... 120,611 4,971 55,709 10,943 (3,535)
Unrealized appreciation on
investments.......................... 302,118 34,957 233,242 23,520 1,743
-----------------------------------------------------------------------------
Net Assets......................... $897,275 $228,134 $ 882,143 $ 153,608 $ 146,590
=============================================================================
<CAPTION>
U.S.
GOVERNMENT
AAA-RATED CASH
SECURITIES MANAGEMENT
SERIES SERIES
------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investment securities at value*........ $ 129,257 $ --
Short-term securities*................. 906 102,630
Money market accounts.................. 100 84
Cash................................... 1 1
Foreign cash........................... -- --
Receivables for--
Sales of investments................. 3,377 --
Dividends and accrued interest....... 1,459 --
Fund shares sold..................... 14 454
Foreign currency contracts........... -- --
Prepaid expenses....................... -- 1
----------------------------
135,114 103,170
----------------------------
LIABILITIES:
Payables for--
Purchases of investments............. -- --
Fund shares redeemed................. 77 2,209
Advisory fees........................ 35 32
Management fees...................... 23 21
Foreign currency contracts........... -- --
Other accrued expenses................. 41 36
Unrealized depreciation of foreign
currency contracts................... -- --
----------------------------
176 2,298
----------------------------
NET ASSETS:............................ $ 134,938 $ 100,872
============================
Shares of beneficial interest
outstanding (unlimited shares
authorized).......................... 11,262 8,662
Net asset value per share.............. $ 11.98 $ 11.65
============================
COMPOSITION OF NET ASSETS:
Capital paid in........................ $ 121,310 $ 93,359
Accumulated undistributed net
investment income.................... 11,152 7,513
Accumulated undistributed net realized
gain (loss) on investments, futures
contracts and options contracts...... (1,810) --
Unrealized appreciation on
investments.......................... 4,286 --
----------------------------
Net Assets......................... $ 134,938 $ 100,872
============================
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C>
* Cost
Investment Securities............... $477,823 $174,092 $ 563,560 $ 117,140 $ 132,803
===================================================================================
Short-term Securities............... $112,120 $ 17,887 $ 79,019 $ 12,032 $ 9,096
===================================================================================
<CAPTION>
* Cost
<S> <C> <C>
Investment Securities............... $ 124,971 $ --
------------------------------
Short-term Securities............... $ 906 $ 102,630
==============================
</TABLE>
See Notes to Financial Statements
---------------------
A-29
<PAGE> 81
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1995
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES
SERIES SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income:
Dividends*........................... $ 4,980 $ 5,326 $ 20,582 $ 3,073 $ -- $ --
Interest............................. 4,897 1,767 4,651 3,762 14,669 11,625
-------------------------------------------------------------------------------------
Total income.................. 9,877 7,093 25,233 6,835 14,669 11,625
-------------------------------------------------------------------------------------
Expenses:
Advisory fees........................ 2,484 1,419 2,478 461 447 449
Management fees...................... 1,656 567 1,652 307 298 300
Custodian fees....................... 265 461 267 78 75 75
Auditing and legal fees.............. 78 25 73 16 16 15
Reports to investors................. 30 6 28 5 5 5
Trustees' fees....................... 17 5 17 3 3 3
Other expenses....................... 23 6 25 5 4 5
-------------------------------------------------------------------------------------
Total expenses................ 4,553 2,489 4,540 875 848 852
-------------------------------------------------------------------------------------
Net investment income................ 5,324 4,604 20,693 5,960 13,821 10,773
-------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on
investments.......................... 120,927 7,678 55,815 11,006 (2,317) (1,413)
Net realized foreign exchange gain on
other assets and liabilities......... 174 (2) -- -- -- --
Change in unrealized appreciation/
depreciation of investments.......... 134,125 12,035 160,433 22,856 13,271 11,975
Change in unrealized foreign exchange
gain (loss) on other assets and
liabilities.......................... -- (9) -- -- -- --
-------------------------------------------------------------------------------------
Net realized and unrealized gain on
investments, foreign currency and
other assets and liabilities......... 255,226 19,702 216,248 33,862 10,954 10,562
-------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... $ 260,550 $ 24,306 $ 236,941 $ 39,822 $ 24,775 $ 21,335
===================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
-----------
<S> <C>
NET INVESTMENT INCOME:
Income:
Dividends*........................... $ --
Interest............................. 8,338
--------
Total income.................. 8,338
--------
Expenses:
Advisory fees........................ 442
Management fees...................... 295
Custodian fees....................... 57
Auditing and legal fees.............. 16
Reports to investors................. 3
Trustees' fees....................... 3
Other expenses....................... 6
--------
Total expenses................ 822
--------
Net investment income................ 7,516
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on
investments.......................... 1
Net realized foreign exchange gain on
other assets and liabilities......... --
Change in unrealized appreciation/
depreciation of investments.......... --
Change in unrealized foreign exchange
gain (loss) on other assets and
liabilities.......................... --
--------
Net realized and unrealized gain on
investments, foreign currency and
other assets and liabilities......... 1
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... $ 7,517
========
</TABLE>
- ---------------
* Net of foreign withholding taxes of $28; $861; $121 and $8 on Growth,
International, Growth-Income and Asset Allocation Series, respectively.
See Notes to Financial Statements
---------------------
A-30
<PAGE> 82
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 1995
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES
SERIES SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................. $ 5,324 $ 4,604 $ 20,693 $ 5,960 $ 13,821 $ 10,773
Net realized gain (loss) on
investments.......................... 120,927 7,678 55,815 11,006 (2,317) (1,413)
Net realized foreign exchange gain on
other assets and liabilities......... 174 (2) -- -- -- --
Change in unrealized appreciation/
depreciation of investments.......... 134,125 12,035 160,433 22,856 13,271 11,975
Change in unrealized foreign exchange
gain (loss) on other assets and
liabilities.......................... -- (9) -- -- -- --
-------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations...................... 260,550 24,306 236,941 39,822 24,775 21,335
-------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Dividends from net investment income... (4,130) (4,020) (20,910) (7,070) (15,715) (14,600)
Distributions from net realized gains
on investments....................... (53,955) (8,900) (61,645) (3,970) (1,315) (730)
-------------------------------------------------------------------------------------
Total dividends and distributions paid
to shareholders...................... (58,085) (12,920) (82,555) (11,040) (17,030) (15,330)
-------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.............. 264,548 86,003 84,337 15,947 66,944 33,236
Proceeds from shares issued for
reinvestment of dividends and
distributions........................ 58,085 12,920 82,555 11,040 17,030 15,330
Cost of shares repurchased............. (340,425) (141,673) (205,106) (44,839) (72,596) (69,001)
-------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share
transactions......................... (17,792) (42,750) (38,214) (17,852) 11,378 (20,435)
-------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS............................... 184,673 (31,364) 116,172 10,930 19,123 (14,430)
NET ASSETS:
Beginning of period.................... 712,602 259,498 765,971 142,678 127,467 149,368
-------------------------------------------------------------------------------------
End of period.......................... $ 897,275 $ 228,134 $ 882,143 $ 153,608 $ 146,590 $ 134,938
===================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
----------
<S> <C>
OPERATIONS:
Net investment income.................. $ 7,516
Net realized gain (loss) on
investments.......................... 1
Net realized foreign exchange gain on
other assets and liabilities......... --
Change in unrealized appreciation/
depreciation of investments.......... --
Change in unrealized foreign exchange
gain (loss) on other assets and
liabilities.......................... --
---------
Net increase in net assets resulting
from operations...................... 7,517
---------
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Dividends from net investment income... (6,355)
Distributions from net realized gains
on investments....................... (1)
---------
Total dividends and distributions paid
to shareholders...................... (6,356)
---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.............. 320,102
Proceeds from shares issued for
reinvestment of dividends and
distributions........................ 6,356
Cost of shares repurchased............. (413,143)
---------
Net increase (decrease) in net assets
resulting from capital share
transactions......................... (86,685)
---------
TOTAL INCREASE (DECREASE) IN NET
ASSETS............................... (85,524)
NET ASSETS:
Beginning of period.................... 186,396
---------
End of period.......................... $ 100,872
=========
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Undistributed net investment income.... $ 5,493 $ 7,246 $ 20,687 $ 5,977 $ 13,964 $ 11,152
===================================================================================
Shares issued and repurchased:
Sold................................. 6,919 6,506 2,970 1,155 5,131 2,849
Issued in reinvestment of dividends
and distributions.................. 1,644 1,073 3,211 864 1,415 1,406
Repurchased.......................... (8,845) (10,739) (7,247) (3,268) (5,539) (5,944)
-------------------------------------------------------------------------------------
Net increase (decrease)................ (282) (3,160) (1,066) (1,249) 1,007 (1,689)
===================================================================================
<CAPTION>
<S> <C>
Undistributed net investment income.... $ 7,513
=========
Shares issued and repurchased:
Sold................................. 27,835
Issued in reinvestment of dividends
and distributions.................. 566
Repurchased.......................... (35,988)
---------
Net increase (decrease)................ (7,587)
=========
</TABLE>
See Notes to Financial Statements
---------------------
A-31
<PAGE> 83
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 1994
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES
SERIES SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................. $ 4,125 $ 4,121 $ 20,905 $ 7,058 $ 13,997 $ 13,948
Net realized gain on investments....... 53,538 8,885 62,736 3,965 1,530 1,272
Net realized foreign exchange gain
(loss) on other assets and
liabilities.......................... 1 (122) -- -- -- --
Change in unrealized appreciation/
depreciation of investments.......... (34,726) 1,677 (66,898) (12,165) (22,236) (23,321)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities.......................... -- 20 -- -- -- --
-------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations............ 22,938 14,581 16,743 (1,142) (6,709) (8,101)
-------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Dividends from net investment income... (5,158) (2,114) (22,182) (7,396) (15,525) (17,308)
Distributions from net realized gain on
investments.......................... (55,961) (4,015) (45,504) (3,647) (5,104) (2,648)
-------------------------------------------------------------------------------------
Total dividends and distributions paid
to shareholders...................... (61,119) (6,129) (67,686) (11,043) (20,629) (19,956)
-------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.............. 321,883 186,172 70,827 17,351 65,501 35,571
Proceeds from shares issued for
reinvestment of dividends and
distributions........................ 61,119 6,129 67,686 11,043 20,629 19,956
Cost of shares repurchased............. (367,619) (133,417) (184,315) (40,086) (121,840) (106,671)
-------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share
transactions......................... 15,383 58,884 (45,802) (11,692) (35,710) (51,144)
-------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS............................... (22,798) 67,336 (96,745) (23,877) (63,048) (79,201)
NET ASSETS:
Beginning of year...................... 735,400 192,162 862,716 166,555 190,515 228,569
-------------------------------------------------------------------------------------
End of year............................ $ 712,602 $ 259,498 $ 765,971 $ 142,678 $ 127,467 $ 149,368
=====================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
----------
<S> <C>
OPERATIONS:
Net investment income.................. $ 6,352
Net realized gain on investments....... --
Net realized foreign exchange gain
(loss) on other assets and
liabilities.......................... --
Change in unrealized appreciation/
depreciation of investments.......... --
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities.......................... --
---------
Net increase (decrease) in net assets
resulting from operations............ 6,352
---------
DIVIDENDS AND DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Dividends from net investment income... (4,276)
Distributions from net realized gain on
investments.......................... (1)
---------
Total dividends and distributions paid
to shareholders...................... (4,277)
---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.............. 452,279
Proceeds from shares issued for
reinvestment of dividends and
distributions........................ 4,277
Cost of shares repurchased............. (464,619)
---------
Net increase (decrease) in net assets
resulting from capital share
transactions......................... (8,063)
---------
TOTAL INCREASE (DECREASE) IN NET
ASSETS............................... (5,988)
NET ASSETS:
Beginning of year...................... 192,384
---------
End of year............................ $ 186,396
=========
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Undistributed net investment income.... $ 4,125 $ 4,015 $ 20,904 $ 7,061 $ 15,708 $ 14,593
====================================================================================
Shares issued and repurchased:
Sold................................. 9,225 13,759 2,592 1,316 4,635 2,832
Issued in reinvestment of dividends
and distributions.................. 1,770 465 2,579 870 1,506 1,689
Repurchased.......................... (10,651) (9,939) (6,775) (3,075) (8,535) (8,703)
-------------------------------------------------------------------------------------
Net increase (decrease)................ 344 4,285 (1,604) (889) (2,394) (4,182)
=====================================================================================
<CAPTION>
<S> <C>
Undistributed net investment income.... $ 6,351
Shares issued and repurchased:
Sold................................. 39,918
Issued in reinvestment of dividends
and distributions.................. 383
Repurchased.......................... (40,923)
---------
Net increase (decrease)................ (622)
=========
</TABLE>
See Notes to Financial Statements
---------------------
A-32
<PAGE> 84
- ---------------------
ANCHOR PATHWAY FUND
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION: Anchor Pathway Fund (the
"Fund") is an entity of the type commonly known as a Massachusetts Business
Trust. Its Agreement and Declaration of Trust permits the issuance of an
unlimited number of shares ($.01 par value per share) of beneficial interest in
seven separate series, with shares of each series representing an interest in a
separate portfolio of assets and operating as a distinct fund. The Fund is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. Shares of the Fund are
offered only to Variable Separate Accounts, a separate account of Anchor
National Life Insurance Company which offers annuity contracts.
In the opinion of management of the Fund, the accompanying financial
statements contain all normal and recurring adjustments necessary for the fair
presentation of the financial position of the Funds at November 30, 1995, and
the results of its operations, the changes in its net assets and financial
highlights for the periods then ended.
2. SIGNIFICANT ACCOUNTING POLICIES: Following is a summary of significant
accounting policies consistently followed by the Fund 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.
Nonconvertible 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. 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. Short-term
securities with 60 days or less to maturity are amortized to maturity based on
their cost to the Fund if acquired within 60 days of maturity or, if already
held by the Fund 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 Fund's Trustees.
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at
published rates on the following basis:
(i) market value of investment securities, other assets and liabilities -- at
the prevailing rate of exchange at the valuation date.
(ii) purchases and sales of investment securities, income and expenses -- at
the rate of exchange prevailing on the respective dates of such transactions.
Assets and liabilities denominated in foreign currencies and commitments under
forward foreign currency 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.
The Fund 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. Similarly, the Fund 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 gains and losses on other assets and liabilities and
change in unrealized foreign exchange gains and losses 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 Fund'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.
---------------------
A-33
<PAGE> 85
SECURITIES TRANSACTIONS, DIVIDENDS, INVESTMENT INCOME AND EXPENSES: As is
customary in the mutual fund industry, securities transactions are accounted for
on the date the securities are purchased or sold. 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 Fund
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 Fund are allocated among the series based upon
relative net assets. In all other respects, expenses are charged to each series
as incurred on a specific identification basis.
The Fund records dividends and distributions to its shareholders on the
ex-dividend date.
STATEMENT OF POSITION 93-2: In accordance with the requirements of Statement of
Position 93-2 Determination, Disclosure, and Financial Statement Presentation of
Income, Capital Gain, and Return of Capital Distributions by Investment
Companies, permanent book-tax differences relating to shareholder distributions
have been reclassified to paid-in-capital. Accordingly, 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 were not affected by this change.
For the year ended November 30, 1995, the reclassification arising from
book/tax differences resulted in increases (decreases) to the components of net
assets as follows, (dollars in thousands):
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET REALIZED NET INVESTMENT IN
GAIN/LOSS INCOME/LOSS CAPITAL
--------------------------------------------
<S> <C> <C> <C>
Growth Series.............................................................. $ (434) $ 174 $ 260
International Series....................................................... (2,648) 2,647 1
Growth-Income Series....................................................... 172 -- (172)
Asset Allocation Series.................................................... (26) 26 --
High-Yield Bond Series..................................................... (150) 150 --
U.S. Government/AAA-Rated Securities Series................................ (387) 386 1
Cash Management Series..................................................... (1) 1 --
</TABLE>
3. FEDERAL INCOME TAXES: It is the Fund's policy to continue to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments, to its shareholders. Therefore, no federal tax
provision is required.
Capital losses incurred after October 31 within the taxable year are deemed to
arise on the first business day of the Funds' next taxable year. Accordingly,
U.S. Government/AAA-Rated Securities Series, High-Yield Bond Series and Cash
Management Series incurred and will elect to defer net capital losses of
$317,498, $1,130,613 and $172 to the taxable year ended November 30, 1996. To
the extent these losses are used to offset future gains, it is probable that the
gains so offset will not be distributed.
At November 30, 1995 U.S. Government/AAA-Rated Securities Series and High
Yield Bond Series had net capital loss carryforwards of $1,491,040 and
$2,405,184 which are available to the extent provided in regulations to offset
future capital gains and will expire in 2003. To the extent that these
carryforward losses are used to offset capital gains, it is probable that the
gains so offset will not be distributed.
---------------------
A-34
<PAGE> 86
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities, including short-term securities at November 30, 1995 were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
UNREALIZED
AGGREGATE AGGREGATE GAIN
UNREALIZED UNREALIZED (LOSS) COST OF
GAIN (LOSS) NET INVESTMENTS
---------------------------------------------------
<S> <C> <C> <C> <C>
Growth Series...................................................... $321,568 $(19,450) $302,118 $589,196
International Series............................................... 47,129 (12,173) 34,956 191,980
Growth-Income Series............................................... 244,006 (11,387) 232,619 643,202
Asset Allocation Series............................................ 24,193 (673) 23,520 129,172
High-Yield Bond Series............................................. 4,272 (2,528) 1,744 141,898
U.S. Government/AAA-Rated Securities Series........................ 5,482 (923) 4,559 125,604
Cash Management Series............................................. -- -- -- 102,630
</TABLE>
4. BUSINESS MANAGER AND INVESTMENT ADVISER: Anchor Investment Adviser, Inc.
(the "Business Manager"), an indirect wholly owned subsidiary of Anchor National
Life Insurance Company, pursuant to a business management agreement, manages the
business affairs and the administration of the Fund. For these services, the
Business Manager receives a monthly fee which is accrued daily based on the
average net assets of each series of the Fund. Except for the International
Series, the business manager fee accrues at the annual rate of .24% on that
portion of each series' average daily net assets not exceeding $30,000,000 and
.20% on that portion of the series' average daily net assets in excess of
$30,000,000. The business manager fee for the International Series accrues at
the annual rate of .24% on the series' average daily net assets.
Advisory fees paid to Capital Research and Management Company (the "Investment
Adviser") are based on the net assets of each series at the following annual
rates: .36% on that portion of each series' (except for the International
Series) average daily net assets not exceeding $30,000,000 and .30% on that
portion of the series' average net assets in excess of $30,000,000. The advisory
fee for the International Series accrues at the annual rate of .66% on that
portion of the series' average daily net assets not exceeding $60,000,000 and
.58% on that portion of the series' average daily net assets in excess of
$60,000,000.
The Fund pays no salaries or compensation to any of its officers, all of whom
are officers or employees of SunAmerica Asset Management Corp., an affiliate of
the Business Manager, or SunAmerica Inc., the ultimate parent of the Business
Manager.
An annual fee of $13,000, plus expenses, is paid to each non-interested
Trustee for attendance at meetings of the Trustees. The interested Trustees
receive no remuneration from the Fund.
5. PURCHASES AND SALES OF SECURITIES: Information with respect to purchases and
sales of long-term securities (dollars in thousands) for the year ended November
30, 1995, was as follows:
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET AAA-RATED CASH
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION HIGH-YIELD SECURITIES MANAGEMENT
SERIES SERIES SERIES SERIES BOND SERIES SERIES SERIES
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases of portfolio securities........ $175,329 $35,003 $ 139,301 $71,686 $46,187 $59,362 $ --
Sales of portfolio securities............ 288,504 67,649 248,677 95,368 41,465 75,409 --
U.S. government securities included above
were as follows:
Purchases of U.S. government
securities............................. -- -- -- 7,633 10,681 56,837 --
Sales of U.S. government securities...... 3,039 -- -- 7,544 11,086 55,853 --
</TABLE>
---------------------
A-35
<PAGE> 87
- ---------------------
ANCHOR PATHWAY FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
NET REALIZED TOTAL DIVIDENDS DIVIDENDS
NET ASSET NET & UNREALIZED FROM DECLARED FROM NET NET ASSET
VALUE INVEST- GAIN (LOSS) INVEST- FROM NET REALIZED VALUE
PERIOD BEGINNING MENT ON MENT INVESTMENT GAIN ON END OF TOTAL
ENDED OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME INVESTMENTS PERIOD RETURN
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Series
11/30/91 $ 21.01 $ 0.37 $ 5.25 $ 5.62 $(0.77) $ (0.29) $ 25.57 26.80%
11/30/92 25.57 0.23 5.21 5.44 (0.01) (0.04) 30.96 21.29
11/30/93 30.96 0.24@ 5.32 5.56 (0.23) (0.53) 35.76 18.26
11/30/94 35.76 0.19@ 1.04 1.23 (0.25) (2.66) 34.08 3.33
11/30/95 34.08 0.25@ 12.02 12.27 (0.20) (2.65) 43.50 37.93
International Series
11/30/91 9.68 0.16 0.38 0.54 (0.09) -- 10.13 5.59
11/30/92 10.13 0.15 (0.12) 0.03 (0.14) (0.02) 10.00 0.31
11/30/93 10.00 0.18@ 2.54 2.72 (0.14) (0.01) 12.57 27.41
11/30/94 12.57 0.22@ 0.81 1.03 (0.12) (0.22) 13.26 8.17
11/30/95 13.26 0.26@ 1.11 1.37 (0.23) (0.50) 13.90 11.18
Growth-Income Series
11/30/91 20.71 0.73 3.62 4.35 (0.87) (0.40) 23.79 21.14
11/30/92 23.79 0.64 3.12 3.76 (0.72) (0.58) 26.25 16.02
11/30/93 26.25 0.71@ 2.44 3.15 (0.63) (0.54) 28.23 12.34
11/30/94 28.23 0.69@ (0.14) 0.55 (0.76) (1.56) 26.46 2.00
11/30/95 26.46 0.71@ 7.46 8.17 (0.76) (2.23) 31.64 33.47
Asset Allocation Series
11/30/91 10.62 0.56 1.32 1.88 (0.60) (0.02) 11.88 18.66
11/30/92 11.88 0.50 1.10 1.60 (0.53) (0.05) 12.90 13.80
11/30/93 12.90 0.63@ 0.72 1.35 (0.46) (0.13) 13.66 10.76
11/30/94 13.66 0.58@ (0.69) (0.11) (0.62) (0.31) 12.62 (0.84)
11/30/95 12.62 0.55@ 3.16 3.71 (0.68) (0.38) 15.27 31.01
High-Yield Bond Series
11/30/91 12.08 1.19 2.16 3.35 (1.52) -- 13.91 29.25
11/30/92 13.91 1.20 0.65 1.85 (1.16) -- 14.60 14.06
11/30/93 14.60 1.27@ 1.02 2.29 (1.22) -- 15.67 16.44
11/30/94 15.67 1.24@ (1.88) (0.64) (1.49) (0.49) 13.05 (4.70)
11/30/95 13.05 1.26@ 0.99 2.25 (1.56) (0.13) 13.61 18.97
U.S. Government/AAA-Rated Securities Series
11/30/91 11.78 0.74 0.78 1.52 (0.81) -- 12.49 13.59
11/30/92 12.49 0.85 0.31 1.16 (0.78) -- 12.87 9.84
11/30/93 12.87 0.95@ 0.61 1.56 (0.91) (0.18) 13.34 12.58
11/30/94 13.34 0.90@ (1.43) (0.53) (1.11) (0.17) 11.53 (4.17)
11/30/95 11.53 0.86@ 0.85 1.71 (1.20) (0.06) 11.98 15.95
Cash Management Series
11/30/91 11.78 0.60 0.07 0.67 (0.57) -- 11.88 5.85
11/30/92 11.88 0.40 (0.03) 0.37 (0.75) -- 11.50 3.26
11/30/93 11.50 0.29@ -- 0.29 (0.39) -- 11.40 2.57
11/30/94 11.40 0.40@ -- 0.40 (0.33) -- 11.47 3.56
11/30/95 11.47 0.61@ 0.01 0.62 (0.44) -- 11.65 5.53
<CAPTION>
NET RATIO OF NET
ASSETS RATIO OF INVESTMENT
END OF EXPENSES INCOME PORTFOLIO
PERIOD PERIOD TO AVERAGE TO AVERAGE TURNOVER
ENDED (000'S) NET ASSETS NET ASSETS RATE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
11/30/91 $458,719 0.62% 1.51% 12.30%
11/30/92 644,060 0.56 0.88 14.31
11/30/93 735,400 0.55 0.71 21.99
11/30/94 712,602 0.55 0.56 33.79
11/30/95 897,275 0.55 0.65 23.72
11/30/91 50,654 1.40 2.20 14.30
11/30/92 85,919 1.19 1.88 21.04
11/30/93 192,162 1.12 1.62 22.56
11/30/94 259,498 1.04 1.64 21.68
11/30/95 228,134 1.05 1.95 16.79
11/30/91 584,668 0.59 3.45 21.20
11/30/92 777,448 0.56 2.88 18.81
11/30/93 862,716 0.55 2.60 29.22
11/30/94 765,971 0.55 2.54 32.97
11/30/95 882,143 0.55 2.52 18.81
11/30/91 78,271 0.77 5.50 16.50
11/30/92 134,100 0.63 4.84 21.86
11/30/93 166,555 0.60 4.70 22.66
11/30/94 142,678 0.59 4.47 48.53
11/30/95 153,608 0.59 4.04 53.58
11/30/91 117,714 0.69 10.51 24.40
11/30/92 147,951 0.62 9.40 75.27
11/30/93 190,515 0.59 8.43 59.03
11/30/94 127,467 0.59 8.76 44.97
11/30/95 146,590 0.59 9.66 31.64
11/30/91 192,330 0.66 7.96 30.90
11/30/92 230,798 0.59 7.32 47.58
11/30/93 228,569 0.58 7.19 9.14
11/30/94 149,368 0.58 7.42 16.95
11/30/95 134,938 0.59 7.49 43.43
11/30/91 197,942 0.64 5.59 --
11/30/92 203,548 0.61 3.21 --
11/30/93 192,384 0.58 2.59 --
11/30/94 186,396 0.57 3.52 --
11/30/95 100,872 0.58 5.32 --
</TABLE>
- ---------------
@ Calculated based upon average shares outstanding
See Notes to Financial Statements
---------------------
A-36
<PAGE> 88
- ---------------------
ANCHOR PATHWAY FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholder of Anchor Pathway Fund
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 Growth Series, the
International Series, the Growth-Income Series, the Asset Allocation Series, the
High-Yield Bond Series, the U.S. Government/AAA-Rated Securities Series and the
Cash Management Series (constituting the Anchor Pathway Fund, hereafter referred
to as the "Fund") at November 30, 1995, 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
Fund'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 November 30, 1995 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
1177 Avenue of the Americas
New York, New York
January 15, 1996
---------------------
A-37
<PAGE> 89
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The following financial statements are included in Part A of the
Registration Statement:
Financial Highlights
The following financial statements are included in Part B of the
Registration Statement.
Financial Statements for Anchor Pathway Fund -- with respect to
Registrant's fiscal year ended November 30, 1995.
(b) Exhibits
<TABLE>
<S> <C>
( 1) Declaration of Trust, as Amended. . . . . . Filed Herewith
( 2) By-Laws . . . . . . . . . . . . . . . . . . Filed Herewith
( 3) Voting Trust Agreement. . . . . . . . . . . Not Applicable
( 4) Shares of Beneficial Interest . . . . . . . Not Applicable
( 5)(a) Investment Advisory and Management
Agreement . . . . . . . . . . . . . . . Filed Herewith
(b) Business Management Agreements. . . . . Filed Herewith
( 6) Distribution Agreement. . . . . . . . . . . Not Applicable
( 7) Bonus, Profit Sharing,
Pension or Similar Contracts. . . . . . . . Not Applicable
( 8) Custodian Agreement . . . . . . . . . . . Previously Filed
( 9) Form of Fund Participation Agreement. . . Previously Filed
(10) Opinion and Consent of Counsel. . . . . . . Not Applicable
(11) Consent of Accountants. . . . . . . . . . . Filed Herewith
(12) Financial Statements Omitted from
Item 23 . . . . . . . . . . . . . . . . . . Not Applicable
(13) Initial Capitalization Agreement. . . . . . Not Applicable
(14) Model Plan. . . . . . . . . . . . . . . . . Not Applicable
(15) Rule 12b-1 Plan . . . . . . . . . . . . . . Not Applicable
(16) Persons under Common Control with
Registrant. . . . . . . . . . . . . . . . Previously Filed
(17) Performance Computations. . . . . . . . . . Not Applicable
(18) Powers of Attorney. . . . . . . . . . . . . Filed Herewith
(27) Financial Data Schedules. . . . . . . . . . Filed Herewith
</TABLE>
All previously filed exhibits are specifically incorporated herein by
reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
Previously Filed.
<PAGE> 90
Item 26. Number of Holders of Securities
As of January 22, 1996, the number of record holders of Anchor Pathway
Fund was as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
<S> <C>
Shares of Beneficial Interest 1*
</TABLE>
* Held by the Variable Separate Account of Anchor National Life
Insurance Company.
Item 27. Indemnification
Article VI of the Registrant's By-Laws relating to the indemnification of
officers and trustees is quoted below:
ARTICLE VI
INDEMNIFICATION
The Fund shall provide any indemnification required by applicable law
and shall indemnify trustees, officers, agents and employees as follows:
(a) the Fund shall indemnify any director or officer of the Fund who was
or is a party or is threatened to be made a party of any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than action by or in the right of
the Fund) by reason of the fact that such Person is or was such Trustee or
officer or an employee or agent of the Fund, or is or was serving at the
request of the Fund as a director, officer, employee or agent of another
corporation, partnership, joint venture, Fund or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such Person in connection
with such action, suit or proceeding, provided such Person acted in good
faith and in a manner such Person reasonably believed to be in or not
opposed to the best interests of the Fund, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such
Person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Person did not reasonably believe his or her actions
to be in or not opposed to the best interests of the Fund, and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that such Person's conduct was unlawful.
(b) The Fund shall indemnify any Trustee or officer of the Fund who was or
is a part or is threatened to be made a party
<PAGE> 91
to any threatened, pending or completed action or suit by or in the right
of the Fund to procure a judgment in its favor by reason of the fact that
such Person is or was such Trustee or officer or an employee or agent of
the Fund, or is or was serving at the request of the Fund as a director,
officer, employee or agent of another corporation, partnership, joint
venture, Fund or other enterprise, against expenses (including attorneys'
fees), actually and reasonably incurred by such Person in connection with
the defense or settlement of such action or suit if such Person acted in
good faith and in a manner such Person reasonably believed to be in or not
opposed to the best interests of the Fund, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such
Person shall have been adjudged to be liable for negligence or misconduct
in the performance of such Person's duty to the Fund unless and only to
the extent that the court in which such action or suit was brought, or any
other court having jurisdiction in the premises, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, such Person is fairly and reasonably entitled
to indemnity for such expenses which such court shall deem proper.
(c) To the extent that a Trustee or officer of the Fund has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subparagraphs (a) or (b) above or in defense of
any claim, issue or matter therein, such Person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by such Person in connection therewith, without the necessity for
the determination as to the standard of conduct as provided in
subparagraph (d).
(d) Any indemnification under subparagraph (a) or (b) (unless ordered by
a court) shall be made by the Fund only as authorized in the specific case
upon a determination that indemnification of the Trustee or officer is
proper in view of the standard of conduct set forth in subparagraph (a) or
(b). Such determination shall be made (i) by the Board by a majority vote
of a quorum consisting of Trustees who were disinterested and not parties
to such action, suit or proceedings, or (ii) if such a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion, and any determination so made shall be conclusive and
binding upon all parties.
(e) Expenses incurred in defending a civil or criminal action, writ or
proceeding may be paid by the Fund in advance of the final disposition of
such action, suit or proceeding, as authorized in the particular case,
upon receipt of an undertaking by or on behalf of the Trustee or officer
to repay such amount unless it shall ultimately be determined that such
Person is entitled to be indemnified by the Fund as authorized
<PAGE> 92
herein. Such determination must be made by disinterested Trustees or
independent legal counsel.
Prior to any payment being made pursuant to this paragraph, a majority of
quorum of disinterested, non-party Trustees of the Fund, or an independent
legal counsel in a written opinion, shall determine, based on a review of
readily available facts that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
(f) Agents and employees of the Fund who are not Trustees or officers of
the Fund may be indemnified under the same standards and procedures set
forth above, in the discretion of the Board.
(g) Any indemnification pursuant to this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
and shall continue as to a Person who has ceased to be a Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a Person.
(h) Nothing in the Declaration or in these By-Laws shall be deemed to
protect any Trustee or officer of the Fund against any liability to the
Fund or to its Shareholders to which such Person would otherwise be
subject by reason of willful malfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Person's
office.
(i) The Fund shall have power to purchase and maintain insurance on
behalf of any Person against any liability asserted against or incurred by
such Person, whether or not the Fund would have the power to indemnify
such Person against such liability under the provisions of this Article.
Nevertheless, insurance will not be purchased or maintained by the Fund if
the purchase or maintenance of such insurance would result in the
indemnification of any Person in contravention of any rule or regulation
and/or interpretation of the Securities and Exchange Commission.
* * * * * * * * * * * * * *
The Investment Advisory Agreement provides that in absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of office on the part of the Investment
Adviser (and its officers, directors, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the
Investment Adviser to perform or assist in the performance of its
obligations under each Agreement) the Investment Adviser shall not be
subject to liability to the Fund or to any shareholder of the Fund for any
act or omission in the course of, or connected with, rendering services,
including without limitation, any error of judgment or mistake or law or
<PAGE> 93
for any loss suffered by any of them in connection with the matters to
which each Agreement relates, except to the extent specified in Section
36(b) of the Investment Company Act of 1940 concerning loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services.
SunAmerica Inc., the parent of Anchor National Life Insurance
Company, provides, without cost to the Fund, indemnification of individual
trustees. By individual letter agreement, SunAmerica Inc. indemnifies
each trustee to the fullest extent permitted by law against expenses and
liabilities (including damages, judgments, settlements, costs, attorney's
fees, charges and expenses) actually and reasonably incurred in connection
with any action which is the subject of any threatened, asserted, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise and whether formal or informal
to which any trustee was, is or is threatened to be made a party by reason
of facts which include his being or having been a trustee.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be permitted to
trustees, officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and other Connections of Investment Adviser
Information concerning the business and other connections of Capital
Research and Managment Company ("CRMC") is incorporated herein by reference
from CRMC's Form ADV (File No. 801-8055), which is currently on file with the
Securities and Exchange Commission.
Item 29. Principal Underwriters
There is no Principal Underwriter for the Registrant.
<PAGE> 94
Item 30. Location of Accounts and Records
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, acts as custodian, transfer agent and dividend paying
agent. It maintains books, records and accounts pursuant to the
instructions of the Fund.
Capital Research and Management Company, the Investment Adviser, is
located at 333 South Hope Street, Los Angeles, California 90071. It
maintains the books, accounts and records required to be maintained
pursuant to Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder.
Anchor Investment Adviser, Inc. the Business Manager, is located at 1
SunAmerica Center, Century City, Los Angeles, California 90067-6022. It
maintains the books, accounts and records required to be maintained
pursuant to Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder.
Item 31. Management Services
None.
Item 32. Undertakings
(c) Registrant hereby undertakes to furnish an investor to whom a
prospectus is delivered with a copy of Registrant's latest annual report
to shareholders, upon request and without charge.
<PAGE> 95
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 13 to
the Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment No. 13 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 24th
day of January, 1996.
ANCHOR PATHWAY FUND
By: /s/Peter C. Sutton
----------------------
Peter C. Sutton
Vice President
Pursuant to the requirements of the Securities Act of 1933 this
Post-Effective Amendment No. 12 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
* Chairman, President and Trustee January 24, 1996
- ------------------ (Principal Executive Officer)
James K. Hunt
* Senior Vice President, Treasurer January 24, 1996
- ------------------ and Controller
Scott L. Robinson (Principal Financial
and Accounting Officer)
* Trustee January 24, 1996
- ------------------
Richards D. Barger
* Trustee January 24, 1996
- ------------------
Frank L. Ellsworth
* Trustee January 24, 1996
- ------------------
Gordon F. Hampton
* Trustee January 24, 1996
- ------------------
Norman J. Metcalfe
*By: /s/Robert M. Zakem
--------------------
Attorney-in-Fact
Robert M. Zakem
</TABLE>
<PAGE> 96
ANCHOR PATHWAY FUND
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Name
<S> <C>
1 Declaration of Trust, as Amended
2 By-Laws
5(a) Investment Advisory and Management
Agreement
5(b) Business Management Agreements
11 Consent of Price Waterhouse
24 Powers of Attorney
27 Financial Data Schedules
</TABLE>
<PAGE> 1
EXHIBIT 1
DECLARATION OF TRUST
OF
ANCHOR PATHWAY FUND
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
<S> <C>
I. NAME AND DEFINITIONS 1
1.1 Name 1
1.2 Definitions 1
II. TRUSTEES 3
2.1 Number of Trustees 3
2.2 Term and Election 3
2.3 Resignation and Removal by Trustees 3
2.4 Removal by Shareholders 3
2.5 Vacancies 4
2.6 Delegation of Power to Other Trustees 5
III. POWERS OF TRUSTEES 5
3.1 General 5
3.2 Investments 6
3.3 Legal Title 7
3.4 Issuance and Repurchase of Shares 7
3.5 Delegation; Committees 7
3.6 Collection and Payment 8
3.7 Expenses 8
3.8 Manner of Acting 8
3.9 By-Laws 8
3.10 Miscellaneous Powers 8
3.11 Principal Transactions 9
3.12 Trustees and Officers as Shareholders 9
3.13 Litigation 10
IV. CONTRACTS 10
4.1 Agreements for the Sale of Shares 10
4.2 Investment Advisory or Management Contract 10
4.3 Transfer Agent 11
4.4 Affiliations of Trustees or Officers 11
V. LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS 12
5.1 No Personal Liability of Shareholders,
Trustees, etc. 12
5.2 Non-Liability of Trustees, etc. 12
5.3 No Bond Required of Trustees 12
5.4 No Duty of Investigation; Notice in Trust
Instruments, etc. 13
5.5 Reliance on Experts, etc. 13
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
VI. SHARES OF BENEFICIAL INTEREST 13
6.1 Beneficial Interest 13
6.2 Rights of Shareholders 14
6.3 Trust Only 15
6.4 Issuance of Shares 15
6.5 Register of shares; Share Certificates 15
6.6 Transfer of Shares 15
6.7 Notices 16
6.8 Treasury Shares 16
6.9 Voting Powers 16
6.10 Series or Classes of Shares 17
VII. REDEMPTION; REPURCHASE AND REDUCTION OF SHARES 19
7.1 Redemption of Shares 19
7.2 Price 19
7.3 Payment 19
7.4 Repurchase by Agreement 19
7.5 Redemption of Shareholder's Interest;
Redemption of Shares to Qualify as a
Regulated investment Company; Disclosure of
Holdings 20
7.6 Suspension of Right of Redemption 20
7.7 Effect of Suspension of Determination of Net
Asset Value 21
7.8 Reductions of Shares 21
VIII. DETERMINATION OF NET ASSET VALUE, NET INCOME
AND DISTRIBUTIONS 22
8.1 Net Asset Value 22
8.2 Distributions with Respect to Outstanding
Shares 22
8.3 Determination of Net income 23
8.4 Power to Modify Foregoing Procedures 23
IX. DURATION; TERMINATION OF TRUST; AMENDMENT;
MERGERS; ETC. 23
9.1 Duration 23
9.2 Termination of Trust 23
9.3 Amendment Procedure 24
9.4 Merger, Consolidation or Sale of Assets 25
9.5 Incorporation 25
X. MISCELLANEOUS 26
10.1 Filing 26
10.2 Governing Law 26
10.3 Counterparts 26
10.4 Reliance by Third Parties 27
10.5 Provisions in Conflict With Law or Regulations 27
10.6 Index and Heading for Reference Only 28
</TABLE>
<PAGE> 4
DECLARATION OF TRUST
OF
ANCHOR PATHWAY FUND
Dated March 23, 1987
DECLARATION OF TRUST made March 23, 1987, by Howard R. Fricke and
James E. Stark, (the "Trustees");
WHEREAS, the Trustees desire to establish a trust under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, the Trustees desire that the beneficial interest in the
trust assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of the holders of the shares of beneficial interest
issued pursuant to this Declaration of Trust and subject to the provisions
hereof.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1 - Name.
The name of the Trust created hereby is "Anchor Pathway Fund."
SECTION 1.2 - Definitions.
Wherever they are used herein, the following terms shall have the
following respective meaning:
(a) "By-Laws" means the By-Laws referred to in Section 3.9 hereof,
as amended from time to time.
(b) The terms "Commission," "Affiliated Person," and "Interested
Person," have the meanings given them in the Investment Company Act of 1940.
The term "vote of a majority of the Shares outstanding and entitled to vote"
shall have the same meaning as the term "vote of a majority of the outstanding
voting securities" contained in the Investment Company Act of 1940.
(c) "Custodian" means any Person other than the Trust who has
custody of any Trust Property as required by Section 17(f) of the 1940 Act.
(d) "Declaration" means this Declaration of Trust as amended from
time to time. Reference in this Declaration to "Declaration," "hereof,"
"herein" and "hereunder" shall be deemed to refer to this Declaration rather
than exclusively to the article or section in which such words appear.
(e) "Distributor" means the other Person to any contract entered
into by the Trust pursuant to Section 4.1 hereof.
<PAGE> 5
(f) "Fundamental Policies" means the investment restrictions set
forth and identified as such in the By-Laws.
(g) "his" shall be deemed to include the feminine and neuter, as
well as the masculine, genders.
(h) "Investment Adviser" means the other Person to any contract
entered into by the Trust pursuant to Section 4.2 hereof.
(i) The "1940 Act" means the Investment Company Act of 1940, as
amended from time to time.
(j) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, and other entities, whether
or not legal entities, governments and agencies and instrumentalities and
political subdivisions thereof, and quasi-governmental agencies and
instrumentalities.
(k) "Prospectus" means the Prospectus of the Trust effective from
time to time under the Securities Act of 1933, as amended from time to time.
(l) "Securities" shall include, without limitation, common and
preferred stocks; American Depository Receipts, currency futures, certificates
of deposit, finance paper, commercial paper, bankers acceptances and all kinds
of repurchase agreements and reverse repurchase agreements entered into by any
Person; warrants; options; bonds; debentures; bills; notes; other evidences of
indebtedness; negotiable or non-negotiable instruments; government securities,
including, without limitation, securities of the United States or any other
government, any state, municipality or other political subdivision thereof, or
any governmental or quasi-governmental agency or instrumentality.
(m) "Shareholder" means a record owner of outstanding Shares.
(n) "Shares" means the equal proportionate units of interest into
which the beneficial interest in the Trust shall be divided from time to time
and includes fractions of Shares as well as whole Shares. "Outstanding" Shares
means those Shares shown from time to time on the books of the Trust or its
Transfer Agent as then issued and outstanding, but shall not include Shares
which have been redeemed or repurchased by the Trust.
(o) "Transfer Agent" means the other Person to any contract entered
into by the Trust pursuant to Section 4.3 hereof.
(p) "Trust" means the Trust created by this Declaration.
(q) "Trust-Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees as such, but shall not include property owned by the
Trustees in their individual capacity.
2
<PAGE> 6
(r) "Trustees" means the Persons who have signed this Declaration, for
so long as they shall continue in office in accordance with the terms hereof,
and all other Persons who may from time to time be serving as Trustees in
accordance with the provisions of Article II hereof, and reference herein to a
Trustee or the Trustees shall refer to such Person or Persons in his capacity
as Trustee or their capacities as Trustees hereunder, and shall not refer to
his or their individual capacities except where the context requires otherwise.
ARTICLE II
TRUSTEES
SECTION 2.1 - Number of Trustees.
The number of Trustees shall be such number as shall be fixed from time to time
by written instrument by a majority of the Trustees, provided, however, that
the number of Trustees shall in no event be reduced to less than two by such an
instrument.
SECTION 2.2 - Term and Election.
The Trustees shall (except in the event of resignations or removals or
vacancies pursuant to Sections 2.3 or 3.4 hereof) hold office during the
lifetime of the Trust and until its termination as hereinafter provided.
SECTION 2.3 - Resignation and Removal by Trustees.
Any Trustee may resign as such (without need for prior or subsequent
accounting) by an instrument in writing signed by him and delivered to the
other Trustees and such resignation shall be effective upon such delivery, or
at a later date according to the terms of the instrument. Any of the Trustees
may be removed (provided the aggregate number of Trustees after such removal
shall not be less than the minimum number required by this Declaration) for
cause by the action of two-thirds of the remaining Trustees. Upon the
resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee,
he shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees any
Trust Property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence.
SECTION 2.4 - Removal by Shareholders.
The Shareholders shall have the power to remove a Trustee by the
affirmative vote of the holders of not less than two-thirds of the Shares
outstanding and entitled to vote either by declaration in writing filed with
the Custodian or by votes cast in person or by proxy at a meeting called for
the purpose of removal under this section. The Trustees shall promptly call
such a meeting of Shareholders when requested to do so by the
3
<PAGE> 7
record holders of not less than 10 percent of the Outstanding Shares.
Whenever ten or more Shareholders of record who have been
Shareholders for at least six months preceding the date of application, and who
hold in the aggregate either Shares having a net asset value of at least
$100,000 or at least 1 per centum of the Outstanding Shares, whichever is less,
shall apply to the Trustees in writing, stating that they wish to communicate
with other Shareholders with a view to obtaining signatures in order to request
a meeting pursuant to this Section 2.4, and such application shall be
accompanied by a form of communication and request that they wish to transmit;
the Trustees shall, within five business days after receipt of such
application, either:
(a) Afford to such applicants access to a list of the names and
addresses of all Shareholders as recorded on the books of the Trust; or
(b) Inform such applicants as to the approximate number of
Shareholders of record, and the approximate cost of mailing to them the
proposed communication and form of request. Upon tender by such applicants of
the amount so determined, undertake to mail such communication to Shareholders
of record.
SECTION 2.5 - Vacancies.
The term of office of a Trustee shall terminate and a vacancy shall
occur in the event of his death, resignation, removal, bankruptcy, adjudicated
incompetence or other permanent incapacity as two-thirds of the remaining
Trustees deem to have rendered him unable to perform the duties of the office
of a Trustee. No such vacancy shall operate to annul this Declaration or to
revoke any existing agency created pursuant to the terms of this Declaration.
In the case of an existing vacancy, including a vacancy existing by reason of
an increase in the number of Trustees, subject to the provisions of the 1940
Act, the remaining Trustees shall fill such vacancy by the appointment of such
other Person as they in their discretion shall see fit, pursuant to a written
instrument signed by a majority of the Trustees then in office. No such
appointment shall become effective until the Person named in the written
instrument of appointment shall have accepted such appointment in writing and
agreed in writing to be bound by the terms of this Declaration. An appointment
of a Trustee may be made in anticipation of a vacancy to occur at a later date
by reason of retirement, resignation or increase in the number of Trustees,
provided that such appointment shall not become effective prior to such
retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.5, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this Declaration. A written
instrument certifying the existence of such vacancy signed by a majority of the
Trustees shall be conclusive evidence of the existence of any such vacancy.
4
<PAGE> 8
SECTION 2.6 - Delegation of Power to Other Trustees.
Any Trustee may, by power of attorney, delegate his power for a
period not exceeding six (6) months at any one time to any other Trustee or
Trustees, provided that in no case shall less than two (2) Trustees personally
exercise the powers granted to the Trustees under this Declaration except as
herein otherwise expressly provided, and provided further that this Section
shall in no way be deemed to limit the provisions of Section 3.5.
ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1 - General.
The Trustees shall have exclusive and absolute control over the Trust
Property and over the business of the Trust to the same extent as if the
Trustees were the sole owners of the Trust Property and business in their own
right.
The Trustees are responsible for the general policies of the Trust and for
such general supervision of the business of the Trust conducted by all
officers, employees, agents, Investment Advisers, Distributors, Custodians,
Transfer Agents or independent contractors of the Trust as may be necessary to
ensure that such business conforms to the provisions of this Declaration.
However, the Trustees are not and shall not be required personally to conduct
the business of the Trust and, consistent with their ultimate responsibility as
stated above, the Trustees shall have the power to appoint, employ or contract
with any Person or Persons (including one or more of themselves or any Person
in which one or more of them may be directors, officers, agents, employees,
stockholders, partners or Trustees or with which one or more of them may be
otherwise affiliated) as the Trustees may deem necessary or proper for the
transaction of the business of the Trust, and for such purpose may grant or
delegate such authority to any such Person as the Trustees may in their sole
discretion deem necessary or desirable without regard to whether such authority
is normally granted or delegated by Trustees. The Trustees shall have the
power to determine the terms and compensation of any such Person and may
exercise broad discretion in allowing such Person to administer and regulate
the operations of the Trust, to act as agent for the Trust, to execute
documents on behalf of the Trustees or the Trust, and to make executive
decisions which conform to the general policies and general principles
previously established by the Trustees.
The Trustees shall have power to conduct the business of the Trust
and carry on its operations in any and all of its branches and maintain offices
both within and without the Commonwealth of Massachusetts, in any and all
states of the United states of America, in the District of Columbia, and in any
and all commonwealths, territories, dependencies, colonies, and possessions of
the United States of America and of foreign governments, and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order
5
<PAGE> 9
to promote the interests of the Trust, notwithstanding that such matters may
not be specifically mentioned herein. Any determination as to what is in the
interests of the Trust or as to the existence of powers or authorities
hereunder made by the Trustees in good faith shall be conclusive. In
construing the Provisions of this Declaration, there shall be a presumption in
favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed
as limiting the aforesaid powers, or as limiting Trustees to such powers. Such
powers of the Trustees may be exercised without order, and without resort to
any court.
SECTION 3.2 - Investments.
The Trustees shall have the power, subject to the Fundamental
Policies:
(a) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate to the conduct
of such business;
(b) To invest in, hold for investment, and reinvest in Securities,
or, in "when issued" or delayed delivery contracts for any Securities or retain
all or any part of the Trust Property in cash and at any time and from time to
time to change the investments of the Trust Property;
(c) To acquire (by purchase, subscription or otherwise), to hold, to
trade in and deal in, to sell or otherwise dispose of, to lend, and to pledge,
Securities;
(d) To exercise all rights, powers and privileges of ownership or
interest in all Securities included in the Trust Property, including the right
to vote thereon and otherwise act with respect thereto and to do all acts for
the preservation, protection, improvement and enhancement in value of all Trust
Property;
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, tangible or intangible, including, without limitation, cash and any
interest therein;
(f) To borrow money and, in connection therewith, to issue notes or
other evidences of indebtedness; to secure borrowings by mortgaging, pledging
or otherwise subjecting as security the Trust Property or any portion thereof;
to endorse, guarantee, or undertake the performance of any obligation or
engagement of any other Person and to lend Trust Property;
(g) To do all acts and things designed to protect, preserve, improve
or enhance the value of any Security or interest of the Trust; to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of the Trust; and
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(h) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any
objective or the furtherance of any power set forth herein, either alone or in
association with others, and to do every other act or things incidental or
appurtenant to, or growing out of, or connected with, the aforesaid business or
purposes, objectives or powers.
The foregoing clauses shall be construed both as objectives and
powers, and the foregoing enumeration of specific powers shall not be construed
to limit or restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees
be limited by any law limiting the investments which may be made by
fiduciaries.
SECTION 3.3 - Legal Title.
Legal title to all the Trust Property shall be vested in the Trustees
as joint tenants except that the Trustees shall have power to cause legal title
to any Trust Property to be held by or in the name of one or more of the
Trustees, or in the name of the Trust or a designated series thereof, or in the
name of any other Person as nominee, on such terms as the Trustees may
determine. The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each Person who may become a Trustee. Upon the
termination of a Trustee's term of office, he shall automatically cease to have
any right, title or interest in the Trust Property and such right, title, or
interest shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents
have been executed and delivered.
SECTION 3.4 - Issuance and Repurchase of Shares.
The Trustees shall have the power to issue, sell, repurchase, redeem,
retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and
otherwise deal in Shares and, subject to the provisions set forth in Articles
VII, VIII and IX, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares, any Trust Property whether capital or
surplus or otherwise, to the full extent now or hereafter not prohibited by the
laws of the Commonwealth of Massachusetts.
SECTION 3.5 - Delegation; Committees.
The Trustees shall have power to delegate from time to time to such
of their number or to officers, employees or agents of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or in the names of the Trustees or otherwise as the Trustees may deem
expedient, xcept as may be prohibited by the 1940 Act.
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SECTION 3.6 Collection and Payment.
The Trustees shall have power to collect all property due to the
Trust; to may all claims, including, without limitation, taxes, against the
Trust Property; to prosecute, defend, compromise or abandon any claims relating
to the Trust Property; to foreclose any security interest securing any
obligations, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
SECTION 3.7 - Expenses.
The Trustees shall have the power to incur and pay any expenses
which, in the opinion of the Trustees, are necessary or incidental to carrying
out any of the purposes of this Declaration; to pay themselves reasonable
compensation and to reimburse themselves for expenses incurred in the
performance of their duties as Trustees from the Trust Property. The Trustees
shall fix the compensation of all officers, employees, agents and Trustees.
SECTION 3.8 - Manner of Acting.
Except as otherwise provided herein or in the By-Laws, any action to
be taken by the Trustees may be taken by a majority of the Trustees present at
a meeting of Trustees at which a quorum is present, including any meeting held
by means of a conference telephone circuit or similar communications equipment
by which all Persons participating in the meeting can hear one another, or by
written consent of the entire number of Trustees then in office.
SECTION 3.9 - By-Laws.
The Trustees may adopt By-Laws not inconsistent with this Declaration
to provide for the conduct of the business of the Trust and may amend or repeal
such By-Laws to the extent such power is not specifically reserved to the
Shareholders.
SECTION 3.10 - Miscellaneous Powers.
The Trustees shall have the power to:
(a) Employ or contract with such Person or Persons as the Trustees
may deem desirable for the transaction of the business of the Trust;
(b) Enter into joint ventures, partnerships and any other
combinations or associations;
(c) Remove Trustees or fill vacancies in, or add to their number,
elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine;
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(d) Purchase, and pay for out of Trust Property insurance policies
insuring the Shareholders, Trustees, officers, employees, agents, Investment
Advisers, Distributors, Transfer Agents, Custodians, selected dealers or
independent contractors of the Trust against any and all claims and liabilities
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not constituting
negligence, and whether or not the Trust would have the power to indemnify such
Person against such claim or liability;
(e) Establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust;
(f) To the extent not prohibited by law, indemnify any Person with
whom the Trust had dealings, including any Investment Adviser, Distributor,
Transfer Agent and selected dealers, to such extent as the Trustees shall
determine;
(g) Guarantee indebtedness or contractual obligations of others;
(h) Determine and change the fiscal year of the Trust and the
method by which its accounts shall be kept; and
(i) Adopt a seal for the Trust, but the absence of such seal shall
not impair the validity of any instrument executed on behalf of the Trust.
SECTION 3.11 - Principal Transactions.
Except in transactions permitted by the 1940 Act or any order of
exemption issued by the Commission, or effected, to implement the provisions of
any agreement to which the Trust is a party, the Trustees shall not, on behalf
of the Trust, buy any Securities (other than Shares) from or sell any
Securities (other than Shares) to, or lend any assets of the Trust to, any
Trustee or officer of the Trust or any firm of which any such Trustee or
officer is a member acting as principal, or have any such dealings with the
Manager, Distributor or Transfer Agent or with any Affiliated Person of such
Person, but the Trust may employ any such Person, or firm or company in which
such Person is an interested Person, as broker, legal counsel, registrar,
transfer agent, dividend disbursing agent or custodian upon customary terms.
SECTION 3.12 - Trustees and Officer as Shareholders.
Any Trustee, officer, employee or agent of the Trust may acquire, own
and dispose of Shares to the same extent as if he were not such a Trustee,
officer, employee or agent; and the Trustees may issue and sell, or cause to be
issued or sold, Shares to, and buy Shares from, any such Person or any firm or
company in which he is an Interested Person.
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SECTION 3.13 - Litigation.
The Trustees shall have the power to engage in and to prosecute,
defend, compromise, abandon, or adjust, by arbitration or otherwise, any
actions, suits, proceedings, disputes, claims, and demands relating to the
Trust, and out of the assets of the Trust, to pay or to satisfy any debts,
claims or expenses incurred in connection therewith, including those of
litigation, and such power shall include without limitation the power of the
Trustees or any appropriate committee thereof, in the exercise of their or its
good faith business judgment, to dismiss any action, suit, proceeding, dispute,
claim, or demand, derivative or otherwise, brought by any Person, including a
Shareholder in its own name or the name of the Trust, whether or not the Trust
or any of the Trustees may be named individually therein or the subject matter
arises by reason of business for or on behalf of the Trust.
ARTICLE IV
CONTRACTS
SECTION 4.1 - Agreements for the Sale of Shares.
Subject to the provisions of the 1940 Act, the Trustees may, in their
discretion, from time to time enter into, renew, amend, or modify an exclusive
or non-exclusive underwriting contracts or Fund Participation Agreements
providing for the sale of the Shares to net the Trust an amount per Share not
less than the amount provided for in Section 8.1 hereof, whereby the Trustees
may agree to sell the Shares to the other party to the contract and/or appoint
such other party sales agent of the Trust for the Shares, on such terms and
conditions as may be prescribed in the By-Laws, if any, and such further terms
and conditions as the Trustees may, in their discretion, determine not
inconsistent with the provisions of this Declaration or the By-Laws; and any
such contract may also provide for the redemption or repurchase of the Shares.
SECTION 4.2 Investment Advisory or Management Contract.
Subject to the provisions of the 1940 Act, the Trustees may, in their
discretion, from time to time enter into, renew, amend, or modify an investment
advisory or management contract or contracts whereby the other party or parties
to such contract or contracts shall undertake to furnish to the Trust such
management, investment advisory, statistical, and research facilities and
services and such other facilities and service, if any and all upon such terms
and conditions as the Trustees may, in their discretion, determine, including
the grant of authority to such other party to determine what Securities shall
be purchased or Sold by the Trust and what portion of its assets shall be left
uninvested, which authority shall include the power to make chances in the
Trust's investments. Notwithstanding any provisions of this Declaration, the
Trustees may authorize the Investment Adviser (subject to such general or
specific instructions as the Trustees may from time to time adopt) to effect
purchases, sales, loans or exchanges of Securities of the
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Trust on behalf of the Trustees and may authorize any officer, employee or
Trustee, to effect such purchases, sales, loans or exchanges pursuant to
recommendations of the Investment Adviser, all without further action by the
Trustees. Any such activities shall be deemed to have been authorized by all
of the Trustees.
SECTION 4.3 - Transfer Agent.
The Trustees may in their discretion from time to time enter into a
transfer agency and Shareholder service contract or contracts whereby the other
party or parties to such contract or contracts shall undertake to furnish
transfer agency and Shareholder services to the Trust. Any such contract shall
have such terms and conditions as the Trustees may, in their discretion,
determine not inconsistent with this Declaration or the By-Laws. Such services
may be provided by one or more Persons.
SECTION 4.4 - Affiliations of Trustees or Officer, etc.
Any Shareholder, Trustee or officer of the Trust, individually, or
any firm of which any Shareholder, Trustee or officer of the Trust may be a
member, or any Person of which any Shareholder, Trustee or officer of the Trust
may be an officer or director or in which any Shareholder, Trustee or officer
of the Trust may be directly or indirectly interested as the holder of any
amount of its capital stock or otherwise, may be a party to, or may be
financially or otherwise interested in, any contract or transaction of the
Trust, and, in the absence of fraud, no contract or other transaction shall be
thereby affected or invalidated by reason of the existence of any such
relationship; nor shall any Person holding such relationship be liable merely
by reason of such relationship for any loss or expense to the Trust under or by
reason of such contract or accountable for any profit realized directly or
indirectly therefrom, provided that the fact of any such interests or
relationships shall be disclosed or shall have been known to be Trustees or a
majority thereof. Any such Shareholder, Trustee or officer of the Trust may be
counted in determining the existence of a quorum at the meeting of the Trustees
of the Trust which shall authorize any such contract or transaction, and may
vote thereat to authorize any such contract or transaction, with like force and
effect as if such other interests or relationships did not exist. In
furtherance and not in limitation of the foregoing, the Trustees of the Trust
are expressly authorized to contract for investment advisory and management
services of any nature, as described in Section 4.2, with any Person Affiliated
with any Trustee or parent or Affiliated or interested Person of any such
Person, on such terms .as the Trustees may deem desirable. The Trustees are
further expressly authorized to contract with any such Person or parent or
Affiliated or Interested Person of any such Person on such terms as the
Trustees may deem desirable for the distribution of Shares of the Trust as
described in Section 4.1 and to contract for other services, including, without
limitation services as Transfer Agent for the Trust's Shares as described in
Section 4.3 above with any such Person on such terms as the Trustees may deem
desirable. Any such Person or parent or Affiliated or Interested Person of any
such Person which enters
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into one or more of such contracts may also perform similar or identical
services for other investment companies and other Persons without restriction
by reason of the relationship with the Trust.
ARTICLE V
LIMITATIONS OF LIABILITY OF
SHAREHOLDERS, TRUSTEES AND OTHERS
SECTION 5.1 - No Personal Liability of Shareholders, Trustees, etc.
No Shareholder as such shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or the acts,
omissions, obligations or affairs of the Trust. No Trustee, officer, employee
or agent of the Trust as such shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or the affairs of
the Trust, save only that to which they would be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of their duties,
or by reason of their reckless disregard of their obligations and duties with
respect to such Person; and all Persons shall look solely to the Trust Property
for satisfaction of claims of any nature arising directly or indirectly in
connection with the affairs of the Trust. If any shareholder, Trustee,
officer, employee, or agent, as such, of the Trust is made a party to any suit
or proceeding to enforce any such liability of the Trust, he shall not, on
account thereof, be held to any personal liability. The Trust shall indemnify
and hold each Shareholder harmless from and against all claims and liabilities
to which such Shareholder may become subject by reason of his being or having
been a Shareholder, and shall reimburse such Shareholder for all legal and
other expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall
not exclude any other right to which such Shareholder may be lawfully entitled,
nor shall anything herein contained restrict the right of the Trust to
indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
SECTION 5.2 - Non-Liability of Trustees, etc.
No Trustee, officer, employee or agent of the Trust shall be liable
to the Trust, its Shareholders, or to any Shareholder, Trustee, officer,
employee, or agent thereof for any action or failure to act (including without
limitation the failure to compel in any way any former or acting Trustee to
redress any breach of Trust), except for his own bad faith, willful
misfeasance, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
SECTION 5.3 - No Bond Required of Trustees.
No Trustee shall be obligated to give any bond or other security for
the performance of any of his duties hereunder.
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SECTION 5.4 - No Duty of Investigation; Notice in Trust Instruments, etc.
No purchaser, lender, Transfer Agent, Custodian or other person
dealing with the Trustees or any officer, employee or agent of the Trust shall
be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of Trust Property paid, loaned, or delivered to
or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing whatsoever executed in
connection with or on behalf of the Trust shall be conclusively presumed to
have been executed or done by the executors thereof only in their capacity as
Trustees under this Declaration or in their capacity as officer, employees or
agents of the Trust. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking made or issued
by the Trustees may recite, in substance, that the same is executed or made by
them not individually, but as Trustees under the Declaration, and that the
obligations of the Trust under any such instrument are not binding upon any of
the Trustees or Shareholders individually, but bind only the Trust estate, and
may contain any further recital which they or he may deem appropriate, but the
omission of such recital shall not operate to bind the Trustee or Shareholders
individually. The Trustees may maintain insurance for the protection of the
Trust Property, its Shareholders, Trustees, officer, employees, and agents in
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment
shall deem advisable.
SECTION 5.5 - Reliance on Experts, etc.
Each Trustee, officer, employee, or agent of the Trust shall, in the
performance of his duties, be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust, upon an opinion of
counsel, or upon reports made to the Trust by any of its officer, employees,
agents or by the Investment Adviser, the Distributor, Transfer Agent,
Custodian, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers, or
employees of the Trust, regardless of whether any such Person may also be a
Trustee or an Interested Person of the Trust.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.1 - Beneficial Interest.
The interest of the beneficiaries of the Trust shall be divided into
transferable Shares and fractions of Shares of beneficial interest without par
value in the various series of the
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Trust. The number of Shares of beneficial interest in each series of the Trust
is unlimited. Initially, the Shares of beneficial interest shall be five
series and of one class for each series of the Trust. The five initial series
of the Trust are the CASH MANAGEMENT SERIES, the HIGH-YIELD BOND SERIES, the
GROWTH-INCOME SERIES, the GROWTH SERIES and the U.S. GOVERNMENT GUARANTEED/AAA
RATED SECURITIES SERIES. The Trustees shall have authority in their sole
discretion, however, to create additional series of Shares of beneficial
interest, on such terms and conditions as they may determine, without vote of
the Shareholders. The Trustees shall have authority, in their sole discretion,
to combine series of Shares of beneficial interest or a class of shares of
beneficial interest with another series of Shares of beneficial interest or
another class of Shares of beneficial interest, without vote of the
Shareholders, either
(a) through an exchange of Shares of beneficial interest in one series
for Shares of beneficial interest in another series, or
(b) by amendment of the terms of and conditions applicable to a series
of Shares of beneficial interest to conform such terms and conditions to
the terms and
conditions applicable to the other series of Shares of beneficial
interest;
provided that any such combination of two or more series of Shares of
beneficial interest shall always be effected in a way that will preserve the
relative net asset value of the Shares of beneficial interest affected. All
Shares of beneficial interest issued hereunder including, without, limitation,
Shares of beneficial interest issued in connection with any dividend declared
and paid in Shares of beneficial interest or any split of Shares of beneficial
interest, shall be fully paid and non-assessable.
SECTION 6.2 - Rights of Shareholders.
The ownership of the Trust Property of every description and the
right to conduct any business hereinbefore described are vested exclusively in
the Trustees, and the Shareholders shall have no interest in the Trust Property
or in the Business of the Trust other than the beneficial interest conferred by
their Shares, and they shall have no right to call for any partition,
divisions, dividends or distributions of any property, profits, rights or
interests of the Trust, nor can they be called upon personally to share or
assume any losses of the Trust or suffer an assessment of any kind by virtue of
their ownership of Shares. The Shares shall be personal property giving only
the rights specifically set forth in this Declaration. The Shares shall not
entitle the Shareholder to preference, preemptive or appraisal rights except as
the Trustees may determine with respect to each series.
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SECTION 6.3 - Trust Only.
It is the intention of the Trustees to create only the relationship
of Trustee and beneficiary between the Trustees and each Shareholder from time
to time. it is not the intention of the Trustees to create a general
partnership, limited partnership, joint stock association, joint venture,
corporation, bailment or any form of legal relationship other than a Trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
SECTION 6.4 - Issuance of Shares.
The Trustees, in their discretion, may at any time and from time to
time without vote of the Shareholders, issue Shares of one or more Trust series
to a person or persons for such amount and type of consideration, including
cash or property, and, the Trustees may also reduce the number of outstanding
Shares of one or more Trust series, at such time or times, and on such terms as
the Trustees may deem appropriate, and the Trustees may in such manner acquire
other assets (including the acquisition of assets subject to, and in connection
with the assumption of liabilities) and businesses. In connection with any
issuance of Shares of one or more Trust series, the Trustees may issue
fractional Shares. The Trustees may from time to time divide or combine the
Shares of any series into a greater or lesser number without thereby changing
the proportionate beneficial interests in the series. Contributions to a
series may be accepted for, and Shares shall be redeemed as, whole Shares
and/or 1/1,000ths of a Share or integral multiples thereof.
SECTION 6.5 - Register of Shares; Share Certificates.
A register for each series of the Trust shall be kept at the
principal office of the Trust or of an office of the Transfer Agent which shall
contain the names and addresses of the shareholders of that series and the
number of Shares of that series held by them respectively and a record of all
transfers thereof. Such register shall be conclusive as to who are the holders
of the Shares of that series and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of Shareholders of
that series. No Shareholder shall be entitled to receive payment of any
dividend or distribution, or to have notice given to him as herein or in the
By-Laws provided, until he has given his address to the Transfer Agent or such
other officer or agent of the Trustees who shall keep the register of that
series for entry thereon. It is not contemplated that certificates will be
issued for Shares; however, the Trustees, in their discretion, may authorize
the issuance of Share certificates and promulgate appropriate rules and
regulations as to their use.
SECTION 6.6 - Transfer of Shares.
Shares shall be transferable on the register of each series of the
Trust only by the record owner thereof or by his
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agent thereunto duly authorized in writing, upon delivery to the Trustees or
the Transfer Agent of a duly executed instrument of transfer, together with
such evidence of the genuineness of each such execution and authorization and
of such other matters as may be reasonably be required. Upon such delivery,
the transfer shall be recorded on the register of the particular series of the
Trust. Until such record is made, the owner of record shall be deemed to be
the holder of such Shares for all purposes hereunder and neither the Trustees
nor any Transfer Agent or registrar, if any, nor any officer, employee or
agent of the Trust shall be affected by any notice of the proposed transfer.
Any Person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, except as may otherwise be provided by the laws of the
Commonwealth of Massachusetts, shall be recorded on the register of Shares of
the Trust series as the holder of such Shares upon production of the proper
evidence thereof to the Trustees or the Transfer Agent, but until such record
is made, the Shareholder of record shall be deemed to be the holder of such
Shares for all purposes hereunder and neither the Trustees nor any Transfer
Agent or registrar, if any, nor any officer or agent of the Trust shall be
affected by any notice of such death, bankruptcy or incompetence, or other
operation of law. Nothing in this Declaration shall impose on the Trustees or
a Transfer Agent a duty, or limit their rights, to inquire into adverse claims.
SECTION 6.7 - Notices.
Any and all notices to which any Shareholder may be entitled and any
and all communications shall be deemed duly served or given if mailed, postage
prepaid, addressed to any Shareholder of record at his last known address as
recorded on the register of the Trust.
SECTION 6.8 - Treasury Shares.
Shares held in the treasury shall, until reissued pursuant to Section
6.4, not confer any voting rights on the Trustees, nor shall such Shares be
entitled to any dividends or other distributions declared with respect to the
Shares.
SECTION 6.9 - Voting Powers.
The Shareholders shall have power to vote with respect to such
matters relating to the Trust as may be required by law, this Declaration, the
By-Laws, the 1940 Act, any registration of the Trust with the Commission (or
any successor agency) or any state, or as the Trustees may consider necessary
or desirable.
Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares shall not entitle the Shareholders to preference,
appraisal, conversion, exchange or preemptive rights of any kind. Until Shares
are issued, the Trustees may exercise all rights of
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Shareholders and may take any action required by law, this Declaration or the
By-Laws to be taken by Shareholders. The By-Laws may include further
provisions for Shareholder's votes and meetings, setting of record dates, and
related matters.
SECTION 6.10 - Series or Classes of Shares.
Because the Shares of the Trust are intended to be divided into
multiple series, as provided in Section 6.1 hereof, the following provisions
shall be applicable:
(a) The number of authorized Shares and the number of Shares of
each series or of each class that may be issued shall be unlimited. The
Trustees may classify or reclassify any unissued Shares or any Shares
previously issued and reacquired of any series or class into one or more
series one or more classes that may be established and designated from
time to time. The Trustees may hold such shares as treasury Shares (of
the same or some other series or class), reissue them for such
consideration and on such terms as they may determine, or cancel any
Shares of any series or any class reacquired by the Trust at their
discretion from time to time.
(b) The power of the Trustees to invest and reinvest the Trust
Property shall be governed by Section 3.2 of this Declaration with
respect to any one series or class which represents the interests in the
assets of the Trust immediately prior to the establishment of two or more
series or classes and the power of the Trustees to invest and reinvest
assets applicable to any series or class shall be as set forth in the
instrument of the Trustees establishing such series or class which is
hereinafter described.
(c) All consideration received by the Trust for the issue or sale
of Shares of a particular series or class, together with all assets in
which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that series or class for all
purposes, subject only to the rights of creditors, and shall be so
recorded upon the books of account of the Trust. in the event that there
are any assets, income, earnings, profits, and proceeds thereof, funds,
or payments which are not readily identifiable as belonging to any
particular series or class, the Trustees shall allocate them among any
one or more of the series or classes established and designated from time
to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all
series or classes for all purposes.
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(d) The assets belonging to each particular series or class shall
be charged with the liabilities of the Trust in respect of that series or
class and all expenses, costs, charges and reserves attributable to that
series or class, and any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as belonging to
any particular series or class shall be allocated and charged by the
Trustees to and among any one or more of the series or class established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the holders of all series
or classes for all purposes. The Trustees shall have full discretion, to
the extent not inconsistent with the 1940 Act, to determine which items
shall be treated as income and which items as capital and each such
determination and allocation shall be conclusive and binding upon the
Shareholders.
(e) With respect to any series or class of Trust Shares, dividends
and distributions on Shares of a particular series or class may be paid
with such frequency as the Trustees may determine, which may be daily or
otherwise, pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may determine, to the
Shareholders of Shares of that series or class, from such of the income
and capital gains, accrued or realized, from the assets belonging to that
series or class, as the Trustees may determine, after providing for
actual and accrued liabilities belonging to that series or class. All
dividends and distributions on Shares of a particular series or class
shall be distributed pro rata to the shareholders of that series or class
in proportion to the number of Shares of that series or class held by
such shareholders at the date and time of record established 'for the
payment of such dividends or distributions.
(f) The Trustees shall have the power to determine the
designations, preferences, privileges, limitations and rights, including
voting and dividend rights, of each class and series of Shares.
(g) The establishment and designation of any series or class of
Shares shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and
designation and the relative rights and preferences of such series or
class, or as otherwise provided in such instrument. At any time that
there are no Shares outstanding of any particular series or class
previously established and designated, the Trustees may, by an instrument
executed by a majority of their number, abolish that series or class and
the
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establishment and designation thereof. Each instrument referred to
in this paragraph shall have the status of an amendment to this
Declaration.
ARTICLE VII
REDEMPTION, REPURCHASE, AND
REDUCTION OF SHARES
SECTION 7.1 - Redemption of Shares.
All Shares of the Trust shall be redeemable, at the redemption price
determined in the manner set forth in this Declaration. Redeemed or
repurchased Shares may be reissued by the Trust.
The Trust shall redeem Shares at the price determined as hereinafter set
forth, upon the appropriately verified written application of the record holder
thereof (or upon such other form of request as the Trustees may determine) at
such office or agency as may be designated from time to time for that purpose
by the Trustees. The Trustees may from, time to time specify additional
conditions not inconsistent with the 1940 Act regarding the redemption of
Shares.
SECTION 7.2 - Price.
Shares shall be redeemed at their net asset value determined as set
forth in Section 8.1 hereof as of such time as the Trustees shall have
prescribed by resolution. in the absence of such resolution, the redemption
price of Shares deposited shall be the net asset value of the particular Shares
of beneficial interest next determined as set forth in Section 8.1 after
receipt of the application required by Section 7.1.
SECTION 7.3 - Payment.
Payment for redeemed Shares shall be made at such time and in the
manner, not inconsistent with the 1940 Act or other applicable law, as may be
specified from time to time in the Prospectus, subject to the provisions of
Section 7.4 hereof.
SECTION 7.4 - Repurchase by Agreement.
The Trust may repurchase Shares of any series of the Trust directly,
or through the Distributor or another agent designated for the purpose, by
agreement with the owner thereof at a price not exceeding the net asset value
per Share next determined after the time when the purchase or contract is made
or the net asset value as of any time which may be later determined pursuant to
Section 8.1 hereof, provided payment is not made for the Shares prior to the
time as of which such net asset value is determined.
19
<PAGE> 23
SECTION 7.5 - Redemption of Shareholder's Interest; Redemption of Shares to
Qualify as a Regulated Investment Company; Disclosure of Holdings.
The Trust shall have the right at any time to redeem the shares of
any Shareholder for their then current net asset value per Share if at such
time the Shareholder owns Shares having an aggregate net asset value of less
than the minimum initial investment amount required of new Shareholders,
subject to such terms and conditions as the Trustees may approve and subject to
the Trust's giving general notice to all Shareholders of the existence of such
right, either by publication in the Trust's Prospectus, if any, or by such
other means as the Trustees may determine.
If the Trustees shall, at any time and in good faith, be of the
opinion that direct or indirect ownership of Shares or other Securities of the
Trust have or may become concentrated in any Person to an extent which would
disqualify the Trust as a regulated investment company under the Internal
Revenue Code, then the Trustees shall have the power by lot or other means
deemed equitable by them to:
(a) Call for redemption by any such Person a number, or
principal amount, of Shares or other Securities of the Trust
sufficient to maintain or bring the direct or indirect ownership of
Shares or other Securities of the Trust into conformity with the
requirements for such qualification, and
(b) Refuse to transfer or issue Shares or other Securities
of the Trust to any Person whose acquisition of the Shares or other
Securities of the Trust in question would, in the judgment of the
Trustees, be likely to result in such disqualification.
The redemption shall be effected at the redemption price.
The holders of Shares or other Securities of the Trust shall, upon
demand, disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other Securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other taxing authority.
SECTION 7.6 - Suspension of Right of Redemption.
The Trust may declare a suspension of the right of redemption or
postpone the date of payment of redemption for the whole or any part of any
period:
(a) During which the New York Stock Exchange is closed
other than customary weekend and holiday closings;
(b) During which trading on the New York Stock Exchange is
restricted;
20
<PAGE> 24
(c) During which an emergency as a result of which disposal by the
Trust of Securities owned by it is not reasonably practicable or it is
not reasonably practicable for the Trust fairly to determine the value of
its net assets; or
(d) During any other period when the Commission may for the
protection of Shareholders of the Trust by order permit suspension of the
right of redemption or postponement of the date of payment of redemption;
provided that applicable rules and regulations of the Commission shall govern
as to whether the conditions prescribed in subparagraphs (b), (c) or (d) exist.
Such suspension shall take effect at such time as the Trust shall specify but
not later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at an
end, except that the suspension shall terminate in any event on the first day
on which said stock exchange shall have reopened or the period specified in
subparagraphs (b) or (c) above shall have expired (as to which the absence of
an official ruling by the Commission, the determination of the Trust shall be
conclusive). In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the net asset value next determined after the termination of the
suspension.
SECTION 7.7 - Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 8.1, the Trustees shall declare a suspension
of the determination of net asset value, the rights of Shareholders (including
those who shall have applied for redemption pursuant to Section 7.1, but who
shall not yet have received payment) to have Shares redeemed and paid for by
the Trust and the right of the Trust to redeem Shares at its option set forth
in Section 7.5, shall be suspended until the termination of such suspension is
declared. Any Shareholder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored. The redemption price of Shares for
which redemption applications have not been revoked shall be the net asset
value of such Shares next determined as set forth in Section 7.1 hereof after
the termination of such suspension, and payment shall be made within seven (7)
days after the date upon which the application was made plus the period after
such application during which the determination of net asset value was
suspended.
SECTION 7.8 - Reductions of Shares.
The Trustees may also reduce the number of outstanding Shares of any
or all of the series.
21
<PAGE> 25
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME, AND DISTRIBUTIONS
SECTION 8.1 - Net Asset Value.
The value of the assets of each series of the Trust- shall be
determined as follows: Securities and other assets allocable to each series
shall be valued by methods, reflecting their fair value, as determined by the
Trustees in good faith.
From the total value of said assets, there shall be deducted the
liabilities of the series, including proper accruals of interest, taxes and
other expense items, amounts determined and declared as dividends or
distributions, and reserves for contingent or undetermined liabilities. The
net asset value of the series so obtained shall then be divided by the total
number of Shares of the series outstanding and the result, rounded to the
nearest one-tenth of a cent, shall be the net asset value per Share of the
series. The net asset value of the Shares of the series shall be determined
once on each business day, as of the close of trading on the New York Stock
Exchange or as of such other time or times as the Trustees shall determine.
The power and duty to make the daily calculations may be delegated by the
Trustees to the Investment Adviser, the Custodian, the Transfer Agent, or such
other Person as the Trustees by resolution may determine. The Trustees may
suspend the daily determination of net asset value if to do so is not
prohibited by the 1940 Act.
SECTION 8.2 - Distributions With Respect to outstanding Shares.
The Trustees shall, from time to time, distribute ratably among the
Outstanding Shares of each series such proportion of the net profits, surplus
(including paid-in surplus), capital, or assets of each series held by the
Trustees as they may deem proper. Such distribution may be made in cash or
property (including without limitation, any type of obligation of the Trust or
any assets thereof), and the Trustees may distribute ratably among the
Outstanding Shares of a series additional Shares of the series issuable
hereunder in such manner, at such times, and on such terms as the Trustees may
deem proper. Such distribution may be among the Outstanding Shares at the time
of declaring a distribution or among the Outstanding Shares of the series at
such later date as the Trustees shall determine. The Trustees may in their
discretion determine that, solely for the purposes of such distributions,
outstanding Shares shall exclude Shares of a series for which orders have been
placed subsequent to a specified time on the date of distribution. The
Trustees may always retain from the net profits a series of the Trust such
amount as they may deem necessary to pay the debts or expenses of the series or
to meet the obligations of the series, or as they may deem desirable to use in
the conduct of its affairs or to retain for future requirements or extensions
of the business. The Trustees may adopt and offer to Shareholders such
dividend reinvestment plans, cash dividend payout plans, or other plans as the
Trustees shall deem appropriate.
22
<PAGE> 26
Inasmuch as the computation of net income and gains for federal
income tax purposes may vary from the computation thereof on the books of the
Trust, the above provisions shall be interpreted to give the Trustees the power
in their discretion to distribute for any fiscal year as ordinary dividends and
as capital distributions, respectively, additional amounts sufficient to enable
the Trust to avoid or reduce liability for taxes.
SECTION 8.3 - Determination of Net Income.
The Trustees shall have the power to determine the net income of each
series of the Trust and from time to time to distribute such net income ratably
among the Shareholders of each series as dividends in cash or additional Shares
issuable hereunder. The determination of net income and the resultant
declaration of dividends shall be as set forth in the Prospectus. The Trustees
shall have full discretion to determine whether any cash or property received
by a series shall be treated as income or as principal and whether any item of
expense shall be charged to the income or the principal account, and their
determination made in good faith shall be conclusive upon the Shareholders of
each series. In the case of stock dividends received, the Trustees shall have
full discretion to determine, in the light of the particular circumstances, how
much, if any, of the value thereof shall be treated as income, the balance, if
any, to be treated as principal.
SECTION 8.4 - Power to Modify Foregoing Procedures.
Notwithstanding any of the foregoing provisions of this Article VIII,
the Trustees may prescribe, in their absolute discretion, such other basis and
time for determining the per Share net asset value of the Trust's Shares or net
income, or the declaration and payment of dividends and distributions as they
may deem necessary or desirable.
ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS; ETC.
SECTION 9.1 - Duration.
The Trust shall continue without limitation of time, subject to the
provisions of this Article IX.
SECTION 9.2 - Termination of Trust.
(a) the Trust may be terminated by the affirmative vote of a
majority of the Shares Outstanding and entitled to vote, at any meeting
of Shareholders or by an instrument in writing, without a meeting, signed
by a majority of the Trustees and not less than a majority of consented
to by the holders of such Shares. Upon the termination of the Trust,
23
<PAGE> 27
(i) the Trust shall carry on no business except for the
purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust shall
have been wound up, including, without limitation, the power to
fulfill or discharge the contracts of the Trust, collect its
assets, sell, convey, assign, exchange, transfer or otherwise
dispose of all or any part of the remaining Trust Property to one
or more Persons at public or private sale for consideration which
may consist in whole or in part of cash, Securities, or other
property of any kind, to discharge or pay its liabilities, and do
all other acts appropriate to liquidate its business; provided that
any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all the Trust Property shall
require Shareholder approval in accordance with Section 9.4 hereof;
and
(iii) after paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities
and refunding agreements, as they deem necessary, the Trustees may
distribute the remaining Trust Property, if any, in cash or in kind
or partly in each, among the Shareholders according to their
respective rights.
(b) After termination of the Trust and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust an instrument in writing setting
forth the fact of such termination, and the Trustees shall thereupon be
discharged from all further duties hereunder, and the rights and
interests of all Shareholders shall thereupon cease.
SECTION 9.3 - Amendment Procedure.
(a) This Declaration may be amended by a vote of a majority of the
Shares Outstanding and entitled to vote or by any instrument in writing,
without a meeting, signed by a majority of the Trustees and consented to
by the holders of a majority of the Shares Outstanding and entitled to
vote. The Trustees may also amend this Declaration without the vote or
consent of Shareholders, if they deem it necessary to conform this
Declaration to the requirements of applicable federal laws or regulations
or the requirements of the regulated investment company provisions of the
Internal Revenue Code, but the Trustees shall not be held liable for
failing to do so;
24
<PAGE> 28
(b) No amendment may be Trade under this Section 9.3 that woul d
chance any rights with respect to any Shares of the Trust by reducing the
amount payable upon liquidation of the Trust or by diminishing or
eliminating any voting rights pertaining thereto, except with the
affirmative vote of a majority of the Shares outstanding and entitled to
vote Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officer, employees and agents of the Trust or to
permit assessments upon Shareholders; and
(c) A certificate signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid or a copy of the
Declaration, as amended, and executed by a majority of the Trustees,
shall be conclusive evidence of such amendment when lodged in the records
of the Trust.
Notwithstanding any other provision hereof, until such time as a Registration
Statement under the Securities Act of 1933, as amended, covering the first
public offering of Shares shall have become effective, this Declaration may be
terminated or amended in any respect by the affirmative vote of a majority of
the Trustees or by an instrument signed by a majority of the Trustees.
SECTION 9.4 - Merger, Consolidation or Sale of Assets.
The Trust may merge or consolidate with any other Person or may sell,
lease or exchange all or substantially all of the property of any or all of the
series, including its goodwill, if any, upon such terms and conditions and for
such consideration when and as authorized, at any meeting of Shareholders
called for that purpose, by the affirmative vote of the holders of not less
than two-thirds of the Shares outstanding and entitled to vote, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of not less than two-thirds of the Shares outstanding and entitled to
vote or by such other vote as may be established by the Trustees with respect
to any series or class of Shares; provided, however, that if such merger,
consolidation, sale, lease or exchange is recommended by the Trustees, a
majority Shareholder vote shall be sufficient authorization; and any such
merger, consolidation, sale, lease or exchange shall be deemed for all purposes
to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts.
SECTION 9.5 Incorporation.
With the vote of a majority of the Shares outstanding and entitled to
vote, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction, or any other
Trust, partnership, association or other organization to take over all or
substantially all of the Trust Property or to carry on any business in which
the Trust
25
<PAGE> 29
shall directly or indirectly have any interest, and to sell, convey
and transfer all or substantially all of the Trust Property to any such
corporation, Trust, association or organization in exchange for Securities
thereof or otherwise, and to lend money to, subscribe for Securities of, and
enter into any contracts with any such corporation, trust, partnership,
corporation, or organization, or any corporation, partnership, trust,
association or organization in which the Trust holds or is about to acquire
securities or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization to the
extent not prohibited by applicable law then in effect. Nothing contained
herein shall be construed as requiring approval of Shareholders for the
Trustees to organize or assist in organizing one or more corporations, trusts,
partnerships, associations or other organizations, and selling, conveying or
transferring a portion of the Trust Property to such organization or entities.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 - Filing.
This Declaration and any amendment hereto shall be filed in the
office of the Secretary of the Commonwealth of Massachusetts and in such other
places as may be required under the laws of Massachusetts and may also be filed
or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner
provided herein, and unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing. A restated Declaration, integrating into a single
instrument all of the provisions of the Declaration which are then in effect
and operative, may be executed from time to time by a majority of the Trustees
and shall, upon filing with the Secretary of the Commonweal of Massachusetts,
be conclusive evidence of all amendments contained therein and may thereafter
be referred to in lieu of the original Declaration and the various amendments
thereto.
SECTION 10.2 - Governing Law.
This Declaration is executed by the Trustees and delivered in the
Commonwealth of Massachusetts and with reference to the laws thereof, and the
rights of all parties and the validity and construction of every provision
hereof shall be subject to and construed according to the laws of said
Commonwealth.
SECTION 10.3 - Counterparts.
This Declaration may be simultaneously executed in several
counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one
26
<PAGE> 30
and the same instrument, which shall be sufficiently evidenced by any such
original counterpart.
SECTION 10.4 - Reliance by Third Parties.
Any certificate executed by an individual who, according to the
records of the Trust appears to be a Trustee hereunder or an officer of the
Trust appointed by the Trustees, certifying to:
(a) The number or identity of Trustees or Shareholders or
agents or employees;
(b) The due authorization of the execution of any instrument
in writing;
(c) The form of any vote passed at a meeting of Trustees or
committees thereof or Shareholders;
(d) The fact that the number of Trustees or Shareholders
present at any meeting or executing any written instrument satisfies
the requirements of this Declaration;
(e) The form of any By-Laws adopted by, or the identity of,
any officers, Trustees, agents or employees; or
(f) The existence of any fact or facts which in any manner
relate to the affairs of the Trust: shall be conclusive evidence as
to the matters so certified in favor of any Person dealing with the
Trustees or their successors of the Trust.
SECTION 10. 5 - Provisions in Conflict With Law or Regulations.
(a) The Provisions of this Declaration are severable and, if
the Trustees shall determine, with the advice of counsel, that any
of such provisions is in conflict with the 1940 Act, the regulated
investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision
shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or
render invalid or improper any action taken or omitted prior to
such determination; and
(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provision in
any other jurisdiction or any other provision of this Declaration
in any jurisdiction.
27
<PAGE> 31
SECTION 10.6 - Index and Heading for Reference Only.
The index and headings preceding the text, articles and sections
hereof have been inserted for convenience and reference only and shall not be
construed to affect the meaning, construction or effect of this Declaration.
IN WITNESS WHEREOF, the undersigned, being the initial Trustees of
the Trust, have executed this instrument the day and first written.
/s/Howard R. Fricke /s/James E. Stark
- -------------------------------- ------------------------------------
Howard R. Frickey, as Trustee James E. Stark, as Trustee
and not individually and not individually
2201 E. Camelback Road 2201 E. Camelback Road
Phoenix, Arizona 85016 Phoenix, Arizona 85016
County of Maricopa, ss
State of Arizona
There personally appeared before me, the above named Howard R. Fricke who
acknowledged the foregoing, instrument to be his free act and deed this 17th
day of March, 1987.
/s/Thelma L. Grandy
------------------------------------
Notary Public
My Commission expires:
October 13, 1987
* * *
County of Suffolk, ss
Commonwealth of Massachusetts
There personally appeared before me, the above named James E. Stark who
acknowledged the foregoing instrument to be his free act and deed this 23rd day
of March, 1987.
/s/Robert Baldor
------------------------------------
Notary Public
My Commission expires: Dec. 18, 1992
28
<PAGE> 32
ANCHOR PATHWAY FUND
AMENDMENT TO DECLARATION OF TRUST
TO CREATE INTERNATIONAL SERIES
Pursuant to the provisions of Section 6.1 of ARTICLE VI of the Declaration
of Trust of American Pathway Fund, the undersigned Trustees of Anchor Pathway
Fund representing a majority of the Trustees now holding such position, do
hereby create an additional series of shares of beneficial interest of one
class. The interests of beneficiaries of the Trust in this series, which shall
be named the "International Series", shall be divided into transferable Shares
and fractions of Shares of beneficial interest without par value.
The International Series shall be operated in conformity with and fully
subject to the provisions of the Declaration of Trust including Section 6.10
thereof to the same extent as if it had existed upon execution of the
Declaration of Trust. The International Series shall be operated in such a
manner and the assets of such series shall be invested in such a manner as to
comply with its investment objectives and fundamental policies as set forth
from time to time in the registration documents filed with the Securities and
Exchange Commission.
As of the date of this instrument, the series of the Trust shall consist
of CASH MANAGEMENT SERIES, HIGH-YIELD BOND SERIES, GROWTH-INCOME SERIES, GROWTH
SERIES, U.S. GOVERNMENT GUARANTEED/ AAA-RATED SECURITIES SERIES, ASSET
ALLOCATION SERIES and INTERNATIONAL SERIES.
CERTIFICATION
This is to certify that this Amendment To Declaration Of Trust was duly
adopted by the Trustees of Anchor Pathway Fund on this 19th day of January
1990.
<TABLE>
<S> <C>
/s/Richards D. Barger /s/Norman J. Metcalfe
- ---------------------------- ----------------------------
Richards D. Barger- Trustee Norman J. Metcalfe, Trustee
/s/Frank L. Ellsworth /s/Robert P. Saltzman
- ---------------------------- ----------------------------
Frank L. Ellsworth, Trustee Robert P. Saltzman, Trustee
/s/Gordon F. Hampton
- ----------------------------
Gordon F. Hampton, Trustee
</TABLE>
<PAGE> 1
EXHIBIT 2
BY-LAWS
OF
ANCHOR PATHWAY FUND
<PAGE> 2
BY-LAWS
OF
ANCHOR PATHWAY FUND
INDEX
<TABLE>
<CAPTION>
Section and Title Page
<S> <C>
Article I. SHAREHOLDERS 1
1.01 Annual Meetings 1
1.02 Special Meetings 1
1.03 Place of Meetings 1
1.04 Notice of Meetings 1
1.05 Quorum 2
1.06 Votes Required 2
1.07 Proxies 2
1.08 List of Shareholders 2
1.09 Voting 3
1.10 Action by Shareholders Other than
at a Meeting 3
Article II. BOARD OF TRUSTEES 3
2.01 Powers 3
2.02 Number of Trustees 4
2.03 Regular Meetings 4
2.04 Special Meetings 4
2.05 Notice of Meetings 4
2.06 Quorum 5
2.07 Compensation and Expenses 5
2.08 Action by Trustees Other
than at a Meeting 5
2.09 Committees 5
2.10 Holding of Meetings by
Conference Telephone Call 6
Article III. Officers 6
3.01 Executive Officers 6
3.02 Chairman and Vice Chairman of the Board 6
3.03 President 7
3.04 Vice Presidents 7
3.05 Secretary and Assistant Secretaries 7
3.06 Treasurer and Assistant Treasurers 7
3.07 Subordinate Officers 8
3.08 Removal 8
Article IV. SHARES OF BENEFICIAL INTEREST 8
4.01 Certificates 8
4.02 Record Dates 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Article V. GENERAL. PROVISIONS 9
5.01 Checks 9
5.02 Custodian 9
5.03 Bonds 10
5.04 Inspection of Records 10
5.05 Representation of Shares 10
5.06 Offices of the Trust 10
Article VI. INDEMNIFICATION 11
Article VII. AMENDMENT OF BY-LAWS 13
</TABLE>
<PAGE> 4
BY-LAWS
OF
ANCHOR PATHWWAY FUND
ARTICLE I.
SHAREHOLDERS
Section 1.01. Annual Meetings. Unless otherwise required by law, the
Declaration of Trust as amended from time to time (the "Declaration") or by
these By-Laws, the Trust shall not be required to hold an annual meeting of
Shareholders unless the Board of Trustees determines to hold an annual meeting.
If the Board makes such a determination, the annual meeting of Shareholders
shall be held at such date and time as may be designated from time to time by
the Board for the election of Trustees and the transaction of any business
within the powers of the Trust. Any business of the Trust may be designated in
the notice, except such business as is specifically required by statute or by
the Declaration to be stated in the notice. Failure to hold an annual meeting
at the designated time shall not, however, invalidate the existence of the
Trust nor affect otherwise valid acts of the Trust.
Section 1.02. Special Meetings. Special meetings of the Shareholders may
be called any time by the Chairman of the Board of Trustees or the President,
or by a majority of the Board by vote at a meeting or in writing with or
without a meeting, or in writing by those Shareholders holding a majority of
the outstanding Shares of beneficial interest of the Trust.
Section 1.03. Place of Meetings. Meetings of the Shareholders for the
election of Trustees shall be held at such place either within or without the
Commonwealth of Massachusetts as shall be designated from time to time by the
Board of Trustees and stated in the notice of the meeting. Meetings of
Shareholders for any other purpose may be held at such time and place, within
or without the Commonwealth of Massachusetts, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 1.04. Notice of Meetings. Not less than ten days nor more than
90 days before the date of any Shareholders' meeting, the Secretary shall give
to each Shareholder entitled to vote at such meeting, written or printed notice
stating the time and place of the meeting and, in case of a special meeting,
the purpose or purposes for which the meeting is called, either by mail or by
presenting it to the Shareholder personally or by leaving it at the
Shareholder's residence or usual place of business. If mailed, such notice
shall be deemed to be given when deposited in the United States mail addressed
to the
<PAGE> 5
Shareholder at his post office address as it appears on the records of the
Trust, with postage thereon prepaid. Notwithstanding the foregoing provision,
a waiver of notice in writing, signed by the Person or Persons entitled to such
notice and filed with the records of the meeting, whether before or after the
holding thereof, or actual attendance at the meeting in person or by proxy,
shall be deemed equivalent to the giving of such notice to such Persons. Any
meeting of Shareholders, annual or special, may adjourn from time to time to
reconvene at the same or some other place, and no notice need be given of any
such adjourned meeting other than by announcement at the meeting.
Section 1.05. Quorum. At any meeting of Shareholders the presence in
person or by proxy of Shareholders entitled to cast a majority of the votes
thereat shall constitute a quorum; but this Section shall not affect any
requirement under statute or under the Declaration for the vote necessary for
the adoption of any measure. In the absence of a quorum the Shareholders
present in person or by proxy, by majority vote and without notice, may adjourn
the meeting from time to time until a quorum shall attend. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
called.
Section 1.06. Votes Required. A majority of the votes cast at a meeting
of Shareholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may properly come
before the meeting, unless more than a majority of votes cast is required by
statute or by the Declaration.
Section 1.07. Proxies. A Shareholder may vote the Shares owned of record
by him either in person or by proxy executed in writing by the Shareholder or
by the Shareholder's duly authorized attorney-in-fact. No proxy shall be valid
after eleven months from its date, unless otherwise provided in the proxy.
Every proxy shall be in writing, subscribed by the Shareholder or the
Shareholder's duly authorized attorney, and dated, but need not be sealed,
witnessed or acknowledged.
Section 1.08. List of Shareholders. At each meeting of Shareholders, a
full, true and complete list in alphabetical order of all Shareholders entitled
to vote at such meeting, certifying the number of Shares held by each, shall be
made available by the Secretary.
<PAGE> 6
Section 1.09. Voting. In all elections for Trustees every Shareholder
shall have the right to vote, in person or by proxy, the Shares owned of record
by the Shareholder, for as many Persons as there are Trustees to be elected and
for whose election the Shareholder has a right to vote. At all meetings of
Shareholders, unless the voting is conducted by inspectors, the proxies and
ballots shall be received, and all questions regarding the qualification of
voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the Chairman of the meeting. If demanded by Shareholders,
present in person or by proxy, entitled to cast 10% in number of votes, or if
ordered by the Chairman, the vote upon election or question shall be taken by
ballot. Upon like demand or order, the voting shall be conducted by two
inspectors in which event the proxies and ballots shall be received, and all
questions regarding the qualification of voters and the validity of proxies and
the acceptance or rejection of votes shall be decided, by such inspectors.
Unless so demanded or ordered, no vote need be by ballot, and voting need not
be conducted by inspectors, Inspectors may be elected by the Shareholders at
their annual meeting, to serve until the close of the next annual meeting and
their election may be held at the same times as the election of Trustees. In
case of a failure to elect inspectors, or in case an inspector shall fail to
attend, or refuse or be unable to serve, the Shareholders at any meeting may
choose an inspector or inspectors to act at such meeting, and in default of
such election the Chairman of the meeting may appoint an inspector or
inspectors.
Section 1.10. Action by Shareholders Other than at a Meeting. Any action
required or permitted to be taken at any meeting of Shareholders may be taken
without a meeting, if a consent in writing, setting forth such action, is
signed by all the Shareholders entitled to vote on the subject matter thereof
and any other Shareholders entitled to notice of a meeting of Shareholders (but
not to vote thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed with the
records of the Trust.
ARTICLE II.
BOARD OF TRUSTEES
Section 2.01. Powers. The Board may exercise all the powers of the Trust,
except such as are by statute, the Declaration, or these By-Laws conferred upon
or reserved to the Shareholders. The Board shall keep full and fair accounts
of its transactions.
<PAGE> 7
Section 2.02. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees; provided, however, the number of Trustees shall in no
event be reduced to less than three by such an instrument. The tenure of
office of a Trustee shall not be affected by any decrease in the number of
Trustees made by the Board.
Section 2.03. Regular Meetings. After any meeting of Shareholders at
which a Board of Trustees shall have been elected, the Board so elected shall
meet as soon as practicable for the purpose of organization and the transaction
of other business. No notice of such first meeting shall be necessary if held
immediately after the adjournment, and at the site, of such meeting of
Shareholders. Other regular meetings of the, Board shall be held on such dates
and at such places within or without the Commonwealth of Massachusetts as may
be designated from time to time by the Board.
Section 2.04. Special Meetings. Special meetings of the Board may be
acted at any time by the Chairman of the Board, the President or the Secretary
of the Trust, or by a majority of the Board by vote at a meeting, or in writing
with or without a meeting. Such special meetings shall be held at such place
or places within or without the Commonwealth of Massachusetts as may be
designated from time to time by the Board. In the absence of such designation,
such meetings shall be held at such places as may be designated in the calls.
Section 2.05. Notice of Meetings. Except as provided in Section 2.03,
notice of the place, day and hour of every regular and special meeting of the
Board of Trustees shall be given to each Trustee two days (or more) before the
meeting, by delivering the same personally, or by sending the same by
telegraph, or by leaving the same at the Trustee's residence or usual place of
business, or, in the alternative, by mailing such notice three days (or more)
before the meeting, postage prepaid, and addressed to the Trustee at the
Trustee's last known business or residence post office address, according to
the records of the Trust. Unless required by these By-Laws or by resolution of
the Board, no notice of any meeting of the Board need state the business to be
transacted thereat. No notice of any meeting of the Board need be given to any
Trustee who attends, or to any Trustee who in writing executed and filed with
the records of the meeting either before or after the holding thereof, waives
such notice. Any meeting of the Board, regular or special, may adjourn from
time to time to reconvene at the same or some other place, and no notice need
be given of any such adjourned meeting other than by announcement at the
adjourned meeting.
<PAGE> 8
Section 2.06. Quorum. At all meetings of the Board, one-third of the
entire Board (but in no event fewer than two trustees) shall constitute a
quorum for the transaction of business. Except in cases in which it is by
statute, by the Declaration or by these By-Laws otherwise provided, the vote of
a majority of such quorum at a duly constituted meeting shall be sufficient to
elect and pass any measure. In the absence of a quorum, the trustees present
by majority vote and without notice other than by announcement at the meeting
may adjourn the meeting from time to time until a quorum shall attend. At any
such adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 2.07. Compensation and Expenses. Trustees may, pursuant to
resolution of the Board, be paid fees for their services, which fees may
consist of an annual fee or retainer and/or fixed fee for attendance at
meetings. In addition, Trustees may in the same manner be reimbursed for
expenses incurred in connection with their attendance at meetings or otherwise
in performing their duties as Trustees. Members of committees may be allowed
like compensation and reimbursement. Nothing herein contained shall preclude
any Trustee from serving the Trust in any other capacity and receiving
compensation therefor.
Section 2.08. Action by Trustees Other than at a Meeting. Unless
otherwise required by law, any action required or permitted to be taken at any
meeting of the Board, or of any committee thereof, may be taken without a
meeting, if a written consent to such action is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
Section 2.09. Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of two or more or the Trustees. The Board may designate one or more
Trustees as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, to
the extent provided in the resolution, shall have and may exercise the powers
of the Board in the management of the business and affairs of the Trust,
provided, however, that in the absence or disqualification of any member of
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member. Such committee
or committees shall have such name or names as may be determined from time to
time by
<PAGE> 9
resolution adopted by the Board. Each committee shall keep regular minutes of
its meetings and report the same to the Board when required.
Section 2.10. Holding of Meetings by Conference Telephone Call. At any
regular or special meeting of the Board or any committee thereof, members
thereof may participate in such a meeting by means of conference telephone or
similar communications equipment by which all Persons participating in the
meeting can hear each other. Unless otherwise required by law or regulations,
participation in a meeting pursuant to this section shall constitute presence
in person at such meeting.
ARTICLE III.
OFFICERS
Section 3.01. Executive Officers. The Board of Trustees shall choose a
President and may choose a Chairman of the Board and a Vice Chairman of the
Board from among the Trustees, and shall choose a Secretary and a Treasurer who
need not be Trustees. The Board of Trustees shall designate as principal
executive officer of the Trust either the Chairman of the Board, the Vice
Chairman, or the President. The Board of Trustees may choose an Executive Vice
President, one or more Senior Vice Presidents, one or more Vice-Presidents, one
or more Assistant Secretaries and one or more Assistant Treasurers, none of
whom need be a director. Any two or more of the above-mentioned offices,
except those of President and a Vice-President, may be held by the same Person,
but no officer shall execute, acknowledge or verify any instrument in more than
one capacity if such instrument be required by law, by the Declaration of
Trust, by the By-Laws or by resolution of the Board of Trustees to be executed
by any two or more officers. Each such officer shall hold office until his
successor shall have been duly chosen and qualified, or until he shall have
resigned or shall have been removed. Any vacancy in any of the above offices
may be filled for the unexpired portion of the term of the Board of Trustees at
any regular or special meeting.
Section 3.02. Chairman and Vice Chairman of the Board. The Chairman of
the Board, if one be elected, shall preside at all meetings of the Board of
Trustees and of the Shareholders at which he is present. He shall. have and
may exercise such powers as are, from time to time, assigned to him by the
Board of Trustees. The Vice Chairman of the Board, if one be elected, shall,
when present and in the absence of the Chairman of the Board, preside at all
meetings of the Shareholders and Trustees, and he shall perform such other
duties as may from time to time be assigned to him by the Board of Trustees or
as may be required by law.
<PAGE> 10
Section 3.03. President. In the absence of the Chairman or Vice Chairman
of the Board, the President shall preside at all meetings of the Shareholders
and of the Board at which the President is present; and in general, shall
perform all duties incident to the office of a president of a Trust, and such
other duties, as from time to time, may be assigned to him by the Board.
Section 3.04. Vice Presidents. The Vice President or Vice Presidents,
including any Executive or Senior Vice Presidents, at the request of the
President, in President's absence or during the President's inability or
refusal to act, shall perform the duties and exercise the functions of the
President, and when so acting shall have the powers of the President. If there
be more than one Vice President, the Board may determine which one or more of
the Vice Presidents shall perform any of such duties or exercise any of such
functions, or if such determination is not made by the Board, the President may
make such determination. The Vice President or Vice Presidents shall have such
other powers and perform such other duties as may be assigned by the Board, the
Chairman of the Board, or the President.
Section 3.05. Secretary and Assistant Secretaries. The Secretary shall:
keep the minutes of the meetings of Shareholders, of the Board and of any
committees, in books provided for that purpose; see that all notices are duly
given in accordance with the provisions of these By-Laws or as required by law;
be custodian of the records of the Trust; see that the seal of the Trust is
affixed to all documents the execution of which, on behalf of the Trust, under
its seal, is duly authorized, and when so affixed may attest the same; and in
general perform all duties incident to the office of a secretary of a Trust,
and such other duties as, from time to time, may be assigned to him by the
Board, the Chairman of the Board, or the President.
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board, the President or the Chairman
of the Board, shall, in the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the Board may from time to time prescribe.
Section 3.06. Treasurer and Assistant Treasurers. The Treasurer shall:
have charge of and be responsible for all funds, securities, receipts and
disbursements of the Trust, all moneys or other valuable effects in such banks,
trust companies or other depositories as shall, from time to time, be selected
by the Board in accordance with Section 5.02 of these By-Laws; render to the
President, the Chairman of the Board and to the Board, whenever requested, an
account of the financial condition
<PAGE> 11
of the Trust; and in general, perform all the duties incident to the office of
a treasurer of a Trust, and such other duties as may be assigned to him by the
Board, the President or the Chairman of the Board.
The Assistant Treasurer, or if there shall be more than one, the Assistant
Treasurers in the order determined by the Board, the President, or the Chairman
of the Board shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform other duties and have such other
powers as the Board may from time to time prescribe.
Section 3.07. Subordinate Officers. The Board may from time to time
appoint such subordinate officers as it may deem desirable. Each such officer
shall hold office for such period and perform such duties as the Board, the
President or the Chairman of the Board may prescribe. The Board may, from time
to time, authorize any committee or officer to appoint and remove subordinate
officers and prescribe the duties thereof.
Section 3.08. Removal. Any officer or agent of the Trust may be removed by
the Board whenever, in its judgment, the best interests of the Trust will be
served thereby, but such removal shall be without prejudice to the contractual
rights, if any, of the Person so removed.
ARTICLE IV.
SHARES OF BENEFICIAL INTEREST
Section 4.01. Certificates. The Trust does not presently intend to issue
certificates for shares of beneficial interest. If, however, the Board
authorizes the issuance of certificates representing the Shares of beneficial
interest, such certificates shall be signed by the President, the Chairman of
the Board or a Vice President and countersigned by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with
the seal of the Trust. The signatures may be either manual, or facsimile
signatures and the seal may be either facsimile or any other form of seal. In
no event shall certificates be issued for fractional Shares. Such certificates
shall be in such form, not inconsistent with law or with the Declaration, as
shall be approved by the Board. In case any officer of the Trust who has
signed any certificate ceases to be an officer of the Trust, whether because of
death, resignation or otherwise, before such certificate is issued, the
certificate may nevertheless be issued and delivered by the Trust as if the
officer had not ceased to be such officer as of the date of its issue.
Certificates need not be issued except to Shareholders who request such
issuance in writing.
<PAGE> 12
The Board may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Trust alleged to have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming the certificate to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate or certificates, or
such owner's legal representative, to advertise the same in such manner as it
shall require and/or to give the Trust a bond in such sum as it may direct as
indemnity against any claim that may be made against the Trust with respect to
the certificate alleged to have been lost, stolen or destroyed.
Section 4.02. Record Dates. The Board is hereby empowered to fix, in
advance, a date as the record date for the purpose of determining Shareholders
entitled to notice of, or to vote at, any meeting of Shareholders, or
Shareholders entitled to receive payment of any dividend, capital gains
distribution or the allotment of any rights, or in order to make a
determination of Shareholders for any other proper purpose. Such date in any
case shall be not more than 60 days, and in case of a meeting of Shareholders,
not less than ten days, prior to the date on which the particular action,
requiring such determination of Shareholders, is to be taken.
ARTICLE V.
GENERAL PROVISIONS
Section 5.01. Checks. All checks or demands for money and notes of the
Trust shall be signed by such officer or officers or such other person or
persons as the Board may from time to time designate.
Section 5.02. Custodian. All Securities and cash of the Trust shall be
placed in the custody of a bank or trust company ("Custodian") having
(according to its last published report) not less than $2,000,000 aggregate
capital, surplus and undivided profits, provided such a Custodian can be found
ready and willing to act (or maintained in such other manner as is consistent
with Section 17(f) of the Investment Company Act of 1940 and the rules and
regulations promulgated thereunder). The Trust shall enter into a written
contract with the Custodian regarding the powers, duties and compensation of
the Custodian with respect to the cash and Securities of the Trust held by the
Board of Trustees of the Trust. The Trust shall, upon the resignation or
inability to serve of the Custodian, use its best efforts to obtain a successor
Custodian; require that the cash and Securities owned
<PAGE> 13
by the Trust be delivered directly to the successor Custodian; and in the event
that no successor Custodian can be found, submit to the Shareholders, before
permitting delivery of the cash and Securities owned by the Trust to other than
a successor Custodian, the question whether or not the Trust shall be
liquidated or shall function without a Custodian.
The Trustees may direct the Custodian to deposit all or any part of the
Securities owned by the Trust in a system for the central handling of
Securities established by a national Securities exchange or a national
Securities association registered with the Securities and Exchange Commission,
or otherwise in accordance with applicable law, pursuant to which system all
Securities of any particular class or series of any issuer deposited within the
system are treated as fungible and may be transferred or pledged by bookkeeping
entry without physical delivery of such Securities, provided that all such
deposits shall be subject to withdrawal only upon the order of the Trust.
The Trustees may direct the Custodian to accept written receipts or other
written evidence indicating purchases of Securities held in book-entry form in
the Federal Reserve System in accordance with regulations promulgated by the
Board of Governors of the Federal Reserve System and the local Federal Reserve
Banks in lieu of receipt of certificates representing such Securities.
Section 5.03. Bonds. The Board may require any officer, agent or employee
of the Trust to give a bond to the Trust, conditioned upon the faithful
discharge of such Person's duties, with one or more sureties and in such amount
as may be satisfactory to the Board.
Section 5.04. Inspection of Records. The records or the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
Shareholders of a Massachusetts business corporation.
Section 5.05. Representation of Shares. Any officer of the Trust is
authorized to vote, represent and exercise any and all rights incident to any
Shares of any corporation or other business enterprise owned by the Trust.
Section 5.06. Offices of the Trust. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the city of Boston, County of Suffolk. The principal executive office of the
Trust is hereby fixed and located at___________________,
_______________________, ________________________. The Trustees are granted
full power and authority to change from time to time the respective locations
of said principal executive office. Any such change shall be noted in the
By-Laws opposite this Section, or this
<PAGE> 14
Section may be amended to state the new location. Branch or subordinate
offices may be established at any time by the Trustees at any place or places.
ARTICLE VI.
INDEMNIFICATION
The Trust shall provide any indemnification required by applicable law and
shall indemnify directors, officers, agents and employees as follows:
(a) The Trust shall indemnify any Trustee or officer of the Trust who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than action by or in the right of the Trust) by reason
of the fact that such Person is or was such Trustee or officer or an employee
or agent of the Trust, or is or was serving at the request of the Trust as a
director, officer, employee or agent of another corporation, partnership, joint
venture, Trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such Person in connection with such action, suit or proceeding,
provided such Person acted in good faith and in a manner such Person reasonably
believed to be in or not opposed to the best interests of the Trust, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe such Person's conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contenders or its equivalent, shall not, of itself, create a presumption
that the Person did not reasonably believe his or her actions to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that such Person's
conduct was unlawful.
(b) The Trust shall indemnify any Trustee or officer of the Trust who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a judgment
in its favor by reason of the fact that such Person is or was such Trustee or
officer or an employee or agent of the Trust, or is or was serving at the
request of the Trust as a director, officer, employee or agent of another
corporation, partnership, joint venture, Trust or other enterprise, against
expenses (including attorneys' fees), actually and reasonably incurred by such
Person in connection with the defense or settlement of such action or suit if
such Person acted in good faith and in a manner such Person reasonably believed
to be in or not opposed to the best interests of the Trust, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such
<PAGE> 15
Person shall have been adjudged to be liable for negligence or misconduct in
the performance of such Person's duty to the Trust unless and only to the
extent that the court in which such action or suit was brought, or any other
court having jurisdiction in the premises, shall determine upon application
that, despite the adjudication of liability but in view of all circumstances of
the case, such Person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
(c) To the extent that a Trustee or officer of the Trust has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subparagraphs (a) or (b) above or in defense of any
claim, issue or matter therein, such Person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
Person in connection therewith, without the necessity for the determination as
to the standard of conduct as provided in subparagraph (d).
(d) Any indemnification under subparagraph (a) or (b) (unless ordered by
a court) shall be made by the Trust only as authorized in the specific case
upon a determination that indemnification of the Trustee or officer is proper
in view of the standard of conduct set forth in subparagraph (a) or (b). Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of Trustees who were disinterested and not parties to such action,
suit or proceedings, or (ii) if such a quorum of disinterested Trustees so
directs, by independent legal counsel in a written opinion; and any
determination so made shall be conclusive and binding upon all parties.
(e) Expenses incurred in defending a civil or criminal action, writ or
proceeding may be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking by or on behalf of the Trustee or officer to repay such
amount unless it shall ultimately be determined that such Person is entitled to
be indemnified by the Trust as authorized herein. Such determination must be
made by disinterested Trustees or independent legal counsel. Prior to any
payment being made pursuant to this paragraph, a majority of a quorum of the
disinterested, non-party Trustees of the Trust, or an independent legal counsel
in a written opinion, shall determine, based on a review of readily available
facts that there is reason to believe that the indemnitee ultimately will be
found entitled to indemnification.
(f) Agents and employees of the Trust who are not Trustees or officers of
the Trust may be indemnified under the same
<PAGE> 16
standards and procedures set forth above, in the discretion of the Board.
(g) Any indemnification pursuant to this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled and
shall continue as to a Person who has ceased to be a Trustee or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
Person.
(h) Nothing in the Declaration or in these By-Laws shall be deemed to
protect any Trustee or officer of the Trust against any liability to the Trust
or to its Shareholders to which such Person would otherwise be subject by
reason of willful malfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Person's office.
(i) The Trust shall have power to purchase and maintain insurance on
behalf of any Person against any liability asserted against or incurred by such
Person, whether or not the Trust would have the power to indemnify such Person
against such liability under the provisions of this Article. Nevertheless,
insurance will not be purchased or maintained by the Trust if the purchase or
maintenance of such insurance would result in the indemnification of any Person
in contravention of any rule or regulation and/or interpretation of the
Securities and Exchange Commission.
ARTICLE VII.
AMENDMENT OF BY-LAWS
These By-Laws of the Trust may be altered, amended, added to or repealed by a
majority of the Shareholders or by majority vote of the entire Board.
1292E
<PAGE> 1
1
EXHIBIT 5.(a)
AMENDED AND RESTATED
INVESTMENT ADVISORY CONTRACT
THIS CONTRACT is entered into this 14th day of March, 1990, by and
between the ANCHOR PATHWAY FUND, a Massachusetts business trust, (the "Trust"),
and CAPITAL RESEARCH AND MANAGEMENT COMPANY, a Delaware corporation, (the
"Adviser") and amends, restates and supersedes in their entirety the Investment
Advisory Contracts between the Trust and the Adviser dated September 22, 1988
and March 31, 1989. The parties agree as follows:
1.
The Trust is authorized to issue shares in separate series, with each
series representing interests in a separate portfolio of securities and other
assets, and offers shares of seven series, which are the Growth Series, the
International Series, the Growth-Income Series, the High-Yield Bond Series, the
Asset Allocation Series, the U.S. Government/AAA-Rated Securities Series and
the Cash Management Series (the "Series").
2.
The Trust hereby employs the Adviser to furnish advice to the Trust
with respect to the investment and reinvestment of the assets of each Series
of the Trust. The Adviser hereby accepts such employment and agrees to render
the services and to assume the obligations to the extent herein set forth, for
the compensation herein provided. The Adviser shall, for all purposes herein,
be deemed an independent contractor and not an agent of the Trust or the Series.
3.
The Adviser shall provide supervision of the portfolios of the Series
and determine what securities or other property shall be purchased or sold by
the Series, giving due consideration to the investment objectives and policies
of the Series as expressed in the Trust's Declaration of Trust, By-Laws,
Registration Statement under the Investment Company Act of 1940 (the "1940
Act"), Registration Statement under the Securities Act of 1933 (the "1933
Act"), and prospectus as in use from time to time, as well as to the factors
affecting the Trust's status as a regulated investment company under the
Internal Revenue Code of 1986, as amended, (the "Code") and the regulations
thereunder and the status of variable contracts under the diversification
requirements set forth in section 817(h) of the Code and the regulations
thereunder.
The Adviser shall provide adequate facilities and qualified personnel
for the placement of orders for the purchase, or other acquisition, and sale,
or other disposition, of portfolio
<PAGE> 2
2
securities for the Series. With respect to such transactions and consistent
with applicable laws and regulations, the Adviser may place orders with
broker-dealer firms which have sold shares of other mutual funds advised by the
Adviser or insurance contracts or policies for which the Trust, or any mutual
fund managed by the Adviser, serves as the underlying investment or which
furnish statistical and other information or services. Neither receipt by the
Adviser of any such statistical and other information or services, nor any
consideration given to sales of shares of mutual funds or insurance contracts
or policies in selecting broker-dealer firms, shall be deemed to give rise to
any requirements for abatement of the advisory fee payable pursuant to section
6 hereof.
4.
Except to the extent expressly assumed by the Adviser herein, and as
provided in paragraph 5 below, the Trust shall pay all costs and expenses in
connection with its operations not expressly assumed by the Adviser. Without
limiting the generality of the foregoing, such costs and expenses to be
incurred by the Trust shall include the following: registration and filing
fees with Federal and state agencies, Blue Sky expenses, if any, expenses of
shareholders' meetings, the expense of reports to existing shareholders,
expenses of printing and mailing proxies and prospectuses, insurance premiums,
legal and auditing fees; dividend disbursement expenses; the expense of the
issuance, transfer, and redemption of Trust shares; custodian fees; printing and
preparation of registration statements; taxes; compensation of Trustees who are
not interested persons of the Trust; association dues; and costs of stationery,
forms and certificates prepared exclusively for the Trust.
5.
Anchor Investment Adviser, Inc. (the "Business Manager") has agreed to
pay the expenses incurred in connection with the organization of the Trust, and
its registration as an investment company under the 1940 Act and all fees and
expenses incurred on its behalf, including fees of legal counsel to the Trust
which would otherwise be required to be paid by the Trust and which are
incurred by the Trust prior to the initial effective date of its Registration
Statement under the 1933 Act and the 1940 Act, except for the costs of any
share certificates and transfer agent fees and costs. The agreement of the
Business Manager with respect to the payment of certain Trust expenses is
contained in the Business Management Agreements(s) between the Trust and the
Business Manager.
6.
The Trust shall pay to the Adviser on or before the tenth (10th) day of
each month, as a fee in compensation for the
<PAGE> 3
3
services rendered by the Adviser during the preceding month, the sum of the
following amounts:
(a) 0.36% per annum of the first $30,000,000 of each Series'
average daily net assets for each Series of the Trust other than the
International Series during the month (0.66% per annum of the first
$60,000,000 for the International Series).
(b) 0.30% per annum of each Series' average daily net assets for
each Series of the Trust other than the International Series in excess
of $30,000,000 during the month (0.58% per annum of assets in excess of
$60,000,000 for the International Series).
The Adviser's fee shall be accrued daily at 1/365th of the applicable
annual rate set forth above. The net assets of the Series shall be determined
in the manner and on the dates set forth in the prospectus of the Trust and, on
days on which the net assets are not determined, shall be as of the last
preceding day on which the net assets shall have been determined.
Upon any termination of this Contract on a day other than the last day
of the month, the fee for the period from the beginning of the month in which
termination occurs to the date of termination shall be prorated according to
the proportion which such period bears to the full month.
7.
Nothing contained in this Contract shall be construed to prohibit the
Adviser from performing investment advisory, management or distribution
services for other investment companies and other persons or companies, nor
to prohibit affiliates of the Adviser from engaging in such businesses or in
other related or unrelated business.
8.
The Adviser shall have no liability to the Trust, or its shareholders
or creditors, for any error of judgment, mistake of law, or for any loss arising
out of any investment or for any other act or omission in the performance of
its obligations to the Trust not involving willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties hereunder.
9.
The Trust has heretofore, or shall promptly, and from time to time
furnish to the Adviser the following: (a) Declaration of Trust; (b) By-laws;
(c) Minutes of all shareholder meetings; (d) Minutes of all Board of Trustees
meetings; (e) Registration Statements filed under the 1933 Act and the 1940
Act; (f) all
<PAGE> 4
4
periodic reports filed with the Securities and Exchange Commission; and (g) all
amendments, subsidiary documents, interpretations, additions or deletions
relating to any of the documents describe in this paragraph.
Until notification and delivery of any of the foregoing by the Trust to
the Adviser, the Adviser may rely upon the documents theretofore furnished to
it.
10.
This Contract shall continue in effect until September 21, 1991.
Thereafter, this Contract may be renewed from year to year with respect to
each Series by mutual consent, provided that such renewal shall be specifically
approved at least annually (i) by the Trustees of the Trust by vote cast in
person at a meeting called for the purpose of voting on such renewal, or by
the vote of a majority of the outstanding voting securities (as defined by
the 1940 Act) of each Series with respect to which renewal is to be effected,
and (ii) by a majority of the non-interested Trustees by vote cast in person
at a meeting called for the purpose of voting on such renewal. Any approval
of this Contract or the renewal thereof with respect to a Series by the vote
of a majority of the outstanding voting securities of that Series, or by the
Trustees of the Trust which shall include a majority of the non-interested
Trustees, shall be effective to continue this Contract with respect to that
Series notwithstanding (a) that this Contract or the renewal thereof has not
been so approved as to any other Series or (b) that this Contract or the
renewal thereof has not been approved by the vote of a majority of the
outstanding voting securities of the Trust as a whole.
11.
The obligations of the Trust under this Contract are not binding upon
any of the Trustees, officers, employees, agents or shareholders of the Trust
individually, but bind only the Trust estate. The Adviser agrees to look
solely to the assets of the Trust or each Series for the satisfaction of any
liability in respect of the Trust or such Series under this Contract and will
not seek recourse against such Trustees, officers, employees, agents or
shareholders, or any of them, or any of their personal assets for such
satisfaction.
12.
This Contract may be terminated at any time as to a Series (or the
Trust), without payment of any penalty, by the Trustees or by the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
such Series (or the Trust) on sixty (60) days' written notice to the Adviser.
Similarly, the Adviser may terminate this Contact without penalty on like
notice to the Trust provided, however, that this Contract may not be terminated
by the Adviser unless another investment advisory
<PAGE> 5
5
agreement has been approved by the Trust in accordance with the 1940 Act, or
after six months' written notice, whichever is earlier. This Contract shall
automatically terminate in the event of its assignment (as defined in the 1940
Act).
13.
The Adviser shall report to the Board of Trustees of the Trust, or to
any committee or officers of the Trust acting pursuant to the authority of the
Board, at such times and in such detail as shall be reasonable and as the Board
may deem appropriate in order to enable the Trust to determine that the
investment policies of each Series are being observed and implemented and that
the obligations of the Adviser under this Contract are being fulfilled. Any
investment program undertaken by the Adviser pursuant to this Contract and any
other activities undertaken by the Adviser on behalf of the Trust shall at all
times be subject to any directives of the Board of Trustees or any duly
constituted committee or officer of the Trust acting pursuant to the authority
of the Board of Trustees.
14.
The Trust is responsible for maintaining and preserving for such period
or periods as the Securities and Exchange Commission may prescribe by rules and
regulations, such accounts, books and other documents as constitute the records
forming the basis for all reports, including financial statements required to
be filed pursuant to the 1940 Act and for the Trust auditor's certification
relating thereto. The Trust and the Adviser agree that in furtherance of the
recordkeeping responsibilities upon the Trust under Section 31 of the 1940 Act
and the rules thereunder, the Adviser will maintain the following records and
ledgers and will preserve the following records in the form and for the period
prescribed in Rule 31a-2 of the 1940 for each Series:
(a) Journals (or other records of original entry) containing an
itemized daily record in detail of all purchases and sales of
securities. Such records shall show for each such transaction the
name and quantity of securities, the unit and aggregate purchase or
sale price, commission paid, the market on which effected, the
trade date, the settlement date, and the name of the person through or
from whom purchased or received or to whom sold or delivered.
(b) Records of securities borrowed and securities loaned.
(c) Records of monies borrowed and loaned (together with a record
of the collateral therefor and substitutions in such collateral).
<PAGE> 6
6
(d) Records for each transaction in portfolio securities
indicating the broker-dealer, bank or other person with or through
which such transactions are effected, including details as to the date
of the purchase or sale, the quantity and unit and aggregate price of
such securities, and the commission or other compensation paid to such
persons. Purchases or sales effected during the same day at the same
price may be aggregated.
(e) A record of each brokerage order given by or on behalf of
each Series for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such record shall include
the name of the broker, the terms and conditions of the order and of
any modification or cancellation thereof, the time of entry or
cancellation, the price at which executed, and the time of receipt
of report of execution. The record shall indicate the name of the
person who placed the order on behalf of each Series.
(f) A record of all other portfolio purchases or sales showing
details comparable to those prescribed in paragraph (e) above.
(g) A record for each fiscal quarter, which shall be completed
within ten days after the end of such quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of portfolio securities to named brokers or dealers and the
division of brokerage commissions or other compensation on such
purchase and sale orders among named persons were made during such
quarter for each Series. The record shall indicate the consideration
given to (i) sales of shares of the Trust by brokers or dealers,
(ii) the supplying of services or benefits by brokers or underwriter
or any persons affiliated therewith, and (iii) any other considerations
other than the technical qualifications of the brokers and dealers as
such. The record shall show the nature of the services or benefits
make available, and shall describe in detail the application of any
general or specific formula or other determinant used in arriving at
such allocation of purchase and sale orders and such division of
brokerage commissions or other compensation. The record shall also
include the identities of the persons responsible for the determination
of such allocation and such division of brokerage commissions or other
compensation.
(h) A record in the form of an appropriate memorandum identifying
the person or persons, committees, or groups authorizing the purchase
or sale of portfolio securities. Where an authorization is made by a
committee or group, a record shall be kept of the names of its members
who participated in the authorization. There shall be retained as part
of the record required by this paragraph any
<PAGE> 7
7
memorandum, recommendation, or instruction supporting or authorizing
the purchase or sale of portfolio securities.
The Adviser and the Trust agree that all accounts, books and other
records maintained and preserved by each as required hereby shall be subject at
any time, and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Trust's auditors,
the Trust or any representative of the Trust, or any governmental agency or
other instrumentality having regulatory authority over the Trust. It is
expressly understood and agreed that the books and records maintained by the
Adviser on behalf of each Series shall, at all times, remain the property of
the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed in duplicate originals by their officers thereunto duly authorized, as
of the day and year first above written.
ANCHOR PATHWAY FUND
By: /S/ Robert P. Saltzman
------------------------------------
Robert P. Saltzman,
Chairman and Chief Executive Officer
Attest:
/S/ Susan L. Harris
- -------------------------------
Susan L. Harris, Vice President
and Secretary
CAPITAL RESEARCH AND MANAGEMENT COMPANY
By: /S/ James W. Ratzlaff
-----------------------------------
James W. Ratzlaff, Vice Chairman
Attest:
/S/ Thomas E. Terry
- -------------------------------
Thomas E. Terry, Vice President
and Secretary
<PAGE> 1
EXHIBIT 5.(b)
BUSINESS MANAGEMENT AGREEMENT
THIS AGREEMENT is entered into as of March 14, 1990, by and between Anchor
Pathway Fund (the "Trust"), a Massachusetts business trust registered as a
management investment company under the Investment Company Act of 1940 ("1940
Act") and Anchor Investment Adviser, Inc. (the "Business Manager").
WITNESSETH:
WHEREAS, the Trust is authorized to issue shares in separate series,
with each such series representing interest in a separate portfolio of
securities and other assets;
WHEREAS, on such series is the Asset Allocation Series ("A.A. Series"),
and the Trust desires that Business Manager shall act as business manager of the
A.A. Series and provide the administrative services necessary to administer the
affairs of the A.A. Series, and the Business Manager desires to so act,
NOW, THEREFORE, in consideration of the mutual convenants and promises
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the Business Manager and the Trust agree as
follows:
1. The Trust hereby employs Business Manager to manage the business
affairs and the administration of the A.A. Series, subject to the general
supervision of the Board of Trustees of the Trust, for the period and on
the terms herein set forth. The Business Manager hereby accepts such
employment and agrees to render the services and assume the obligations
set forth herein, for the compensation herein provided. The Business Manager
shall, for all purposes herein, be deemed an independent contractor and not an
agent of the Trust or the A.A. Series.
2. Business Manager shall:
a. pay the expenses incurred in connection with the organization of
the A.A. Series, and its registration under the 1940 Act, and all fees
and expenses including fees of legal counsel to the Trust which would
otherwise be required to be paid by the Trust and which were incurred
by the Trust prior to the initial effective date of its Registration
Statement under the Securities Act of 1933 ("1933 Act") and the 1940
Act adding the A.A. Series, except for the costs of any share
certificates and transfer agent fees and costs;
b. manage the business affairs of the A.A. Series and perform the
administrative functions required of a registered investment company at
all times in accordance with the Declaration of Trust, By-laws,
Registration Statement and current Prospectus of the Trust;
1
<PAGE> 2
c. if desired by the Board of Trustees, permit officers, directors
and employees of the Business Manager to serve without compensation from
the Trust as officers, Trustees, employees or agents of the Trust;
d. arrange for the presentation and evaluation of contracts for (i)
custodianship of the A.A. Series' assets, (ii) a registrar and transfer
agent for A.A. Series' shares, (iii) a dividend disbursing agent, (iv) the
daily pricing of A.A. Series shares and (v) appropriate fidelity and
liability bond coverages;
e. oversee the work of the custodian, dividend disbursing agent,
transfer agent and accountants on behalf of the A.A. Series to assure
compliance with the Declaration of Trust, By-Laws and the 1940 Act;
f. assist the Trust in maintaining books and records, financial
information, reporting to shareholders, conducting meetings of Trustees
and shareholders and filings with the Securities and Exchange Commission
on behalf of the A.A. Series; and
g. provide adequate facilities and office space and qualified
employees necessary to conduct the operations of the A.A. Series.
3. The services of the Business Manager to the A.A. Series hereunder
are not to be deemed exclusive, and the Business Manager shall be free to
render similar services to others so long as its services hereunder be not
impaired thereby.
4. The A.A. Series shall pay the Business Manager as full compensation
for all services rendered hereunder a fee, which shall be accrued daily and
paid monthly, at an annual rate of:
(a) 0.24% of that portion of the average daily net assets of the
A.A. Series not exceeding $30 million; and
(b) 0.20% of average daily net assets of each series of the A.A.
Series in excess of $30 million.
The average net assets are to be computed in the manner used for the
determination of the offering price of shares of the A.A. Series. The fee for
each month shall be payable to the Business Manager not later than the tenth
day of the following month.
The fee shall be accrued daily at 1/365th of the applicable annual rate
set forth above. The net assets of the A.A. Series shall be determined in the
manner and on the dates set forth in the prospectus of the Trust and, on days
on which the net assets are not determined, shall be as of the last preceding
day on which the net assets shall have been determined.
2
<PAGE> 3
Upon any termination of this Agreement on a day other than the last day of
the month, the fee for the period from the beginning of the month in which
termination occurs to the date of termination shall be prorated according to
the proportion which such period bears to the full month.
5. Except to the extent expressly assumed by the Business Manager herein,
and as provided in paragraph 7 below, the A.A. Series shall be responsible to
pay all costs and expenses in connection with its operations not expressly
assumed by the Business Manager. Without limiting the generality of the
foregoing, such costs and expenses to be incurred by the A.A. Series shall
include the following: investment advisory fees; subsequent registration and
filing fees with Federal and State agencies; any required Blue Sky expenses;
expenses of shareholder's meetings; the expense of the issuance, transfer,
and redemption of A.A. Series shares; custodian fees; printing and preparation
of registration statements; taxes' compensation of Trustees who are not
interested persons of the Trust; association dues; and costs of stationery,
forms and certificates prepared exclusively for the A.A. Series.
6. It is understood and agreed that the services provided to the
A.A. Series by the Business Manager pursuant to this Agreement do not
include the service of principal underwriter for the A.A. Series' shares,
insofar as the A.A. Series will not utilize such a person to distribute its
shares.
7. It is understood and agreed that Capital Research and Management
Company (the "Adviser") has agreed to provide supervision of the portfolio of
the A.A. Series and to determine what securities or other property shall
be purchased, held or sold by each A.A. Series, pursuant to a written
investment advisory contract. The Adviser has also agreed to provide adequate
facilities and qualified personnel for the placement of orders for the
purchase, or other acquisition, and sale, or other disposition, of portfolio
securities for the A.A. Series.
8. Applicable state expense guarantee limitations will be observed in
regard to fees payable to Business Manager.
9. It is understood that Trustees, officers, agents and stockholders of
the Trust are or may be interested in the Business Manager as directors,
officers, stockholders, or otherwise and that directors, officers, agents and
stockholders of the Business Manager are or may be interested in the Trust as
Trustees, officers, stockholders or otherwise, that the Business Manager may be
interested in the Trust and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Declaration of Trust for the Trust and Articles of
Incorporation of the Business Manager or by specific provision of applicable
law.
3
<PAGE> 4
10. This Agreement shall take effect as of the date above written.
Unless sooner terminated as hereinafter provided, this Agreement shall remain
in effect until September 21, 1990. Thereafter, this Agreement shall continue
in effect from year to year only so long as such continuance is approved
specifically at least annually by affirmative vote of the Board of Trustees of
the Trust, or by affirmative vote of a majority of the outstanding shares of
the A.A. Series entitled to be cast and, in either event, by a majority of
those members of the Board who are not parties to the Agreement or "interested
persons" of any such party, cast in person at a meeting called for the purpose
of voting on such continuance.
11. This Agreement may be terminated at any time on 60 days' written
notice, without the payment of any penalty, by the Board of Trustees of the
Trust, by the vote of a majority of the outstanding shares of the A.A.
Series, or by the Business Manager; provided, however, that this Agreement
may not be terminated by Business Manager unless another business management
agreement has been approved in accordance with the 1940 Act.
12. This Agreement shall terminate automatically in the event of its
assignment by either party. For the purpose of this paragraph, the term
"Assignment" shall have the meaning set forth in Section 2(a)(4) of the
1940 Act.
13. This Agreement may be modified by mutual consent; however, such
consent on the part of the Trust requires the vote of a majority of the
outstanding voting securities of the A.A. Series upon recommendation by a
vote of a majority of the Board of Trustees which shall include a vote of a
majority of the Trustees who are not interested persons of the Trust (other
than as Trustees) or the Business Manager and who have no direct or indirect
interest in the operations of the Trust, this Agreement, or the Business
Manager, cast in person at a meeting called for that purpose.
14. The Business Manager assumes no responsibility under the Agreement
other than to render the services called for hereunder. The Business Manager
shall be liable, in carrying out its duties under this Agreement (a) for
actions and omissions constituting violations of the 1940 Act, the 1933 Act
or other Federal securities laws, (b) in circumstances where the Business
Manager has failed to conform to reasonable business standards, and (c) by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties and obligations hereunder (disabling conduct). The
Business Manager shall have no liability to the Trust, or its shareholders or
creditors pursuant to (c) above, provided it is determined by reasonable and
fair means, including (a) a final decision on the merits by a court or other
body before whom the proceeding was brought that the Business Manager was not
liable by means of disabling conduct, or (b) in the absence of such a decision,
a reasonable
4
<PAGE> 5
determination, based upon a review of the facts, that Business Manager was not
liable by reason of disabling conduct, by (i) the vote of a majority of a
quorum of Trustees who are neither "interested persons" of the Trust as defined
in Section 2(a) (19) of the 1940 Act nor parties to the proceeding, or (ii) an
independent legal counsel in a written opinion.
15. The Business Manager and the Trust agree to maintain and preserve
for such period or periods as the Securities and Exchange Commission may
prescribe by rules and regulations, such accounts, books and other documents
as constitute the records forming the basis for all reports, including
financial statements required to be filed pursuant to the 1940 Act and for
the Trust auditor's certification relating thereto. The Business Manager and
the Trust agree that all accounts, books and other records maintained and
preserved by each as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by
the Securities and Exchange Commission, and The Trust's auditors, the Trust
or any representative of the Trust, or any governmental agency or other
instrumentality having regulatory authority over the Trust. It is expressly
understood and agreed that the books and records maintained by the Business
Manager on behalf of the A.A. Series shall, at all times, remain the property
of the Trust. Moreover, the Trust agrees to supply the Business Manager with
copies of all documents filed with the Securities and Exchange Commission,
and with such other information relating to the A.A. Series' affairs as the
Business Manager may reasonably request.
16. The obligations of the Trust on behalf of the A.A. Series under this
Contract are not binding upon any of the Trustees, officers, employees, agents
or shareholders of the Trust individually, but bind only the Trust estate. The
Business Manager agrees to look solely to the assets of the Trust or the A.A.
Series for the satisfaction of any liability in respect of the Trust or the
A.A. Series under this Contract and will not seek recourse against any of such
Trustees, officers, employees, agents, or shareholders, or any of their
personal assets for such satisfaction.
17. The writing constitutes the entire agreement between the parties
and no conditions or warranties shall be implied herefrom unless expressly set
forth herein.
18. This Agreement is executed and delivered in the State of
California and shall be governed by the laws of such state and the 1940 Act.
IN WITNESS WHEREOF, the Business Manager and the Trust have executed
this Agreement as of the date first written above.
5
<PAGE> 6
Attest: ANCHOR INVESTMENT ADVISER, INC.
/s/David H. Richardson By: /s/ James E. Stark
- ----------------------------- --------------------------------
Attest: ANCHOR PATHWAY FUND
/s/Susan L. Harris By: /s/ Scott L. Robinson
- ----------------------------- --------------------------------
6
<PAGE> 7
1
Business Management Agreement
THIS AGREEMENT is entered into as of March 14, 1990, by and between Anchor
Pathway Fund (the "Trust"), a Massachusetts business trust registered as a
management investment company under the Investment Company Act of 1940 ("1940
Act") and Anchor Investment Adviser, Inc. (the "Business Manager").
Witnesseth
WHEREAS, the Trust is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets;
WHEREAS, one such series is the International Series ("International
Series"), and the Trust desires that the Business Manager shall act as business
manager of the International Series and provide the administrative services
necessary to administer the affairs of the International Series, and the
Business Manager desires to so act,
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the Business Manager and the Trust agree as
follows:
1. The Trust hereby employs Business Manager to manage the business
affairs and the administration of the International Series, subject to the
general supervision of the Board of Trustees of the Trust, for the period and
on the terms herein set forth. The Business Manager hereby accepts such
employment and agrees to render the services and assume the obligations set
forth herein, for the compensation herein provided. The Business Manager
shall, for all purposes herein, be deemed an independent contractor and not an
agent of the Trust or the International Series.
2. Business Manager shall:
a. pay the expenses incurred in connection with the organization
of the International Series, and its registration under the 1940
Act, and all fees and expenses including fees of legal counsel to the
Trust which would otherwise be required to be paid by the Trust and
which were incurred by the Trust prior to the effective date of an
amendment to its Registration Statement under the
<PAGE> 8
2
Securities Act of 1933 ("1933 Act") and the 1940 Act adding the
International Series, except for the costs of any share certificates
and transfer agent fees and costs;
b. manage the business affairs of the International Series and
perform the administrative functions required of a registered
investment company at all times in accordance with the Declaration of
Trust, By-laws, Registration Statement and current Prospectus of the
Trust;
c. if desired by the Board of Trustees, permit officers, directors
and employees of the Business Manager to serve without compensation
from the Trust as officers, Trustees, employees or agents of the
Trust;
d. arrange for the presentation and evaluation of contracts for (i)
custodianship of the International Series' assets, (ii) a registrar
and transfer agent for International Series' shares, (iii) a dividend
disbursing agent, (iv) the daily pricing of International Series'
shares, and (vi) appropriate fidelity and liability bond coverages:
e. oversee the work of the custodian, dividend disbursing agent,
transfer agent and accountants on behalf of the International Series
to assure compliance with the Declaration of Trust, By-Laws and the
1940 Act;
f. assist the Trust in maintaining books and records, financial
information, reporting to shareholders, conducting meetings of
Trustees and shareholders and filings with the Securities and Exchange
Commission on behalf of the International Series; and
g. provide adequate facilities and office space and qualified
employees necessary to conduct the operations of the International
Series.
3. The services of the Business Manager to the International Series
hereunder are not to be deemed exclusive, and the Business Manager shall be
free to render similar services to others so long as its services hereunder
be not impaired thereby.
4. The International Series shall pay the Business Manager as full
compensation for all services rendered hereunder a fee, which shall be accrued
daily and paid monthly, at an annual rate of 0.24% of the average daily net
assets of the International Series.
<PAGE> 9
3
The average net assets are to be computed in the manner used for the
determination of the offering price of shares of the International Series.
The fee for each month shall be payable to the Business Manager not later than
the tenth day of the following month.
The fee shall be accrued daily at 1/365th of the applicable annual rate set
forth above. The net assets of the International Series shall be determined in
the manner and on the dates set forth in the prospectus of the Trust and, on
days on which the net assets are not determined, shall be as of the last
preceding day on which the net assets shall have been determined.
Upon any termination of this Agreement on a day other than the last day
of the month, the fee for the period from the beginning of the month in which
termination occurs to the date of termination shall be prorated according to
the proportion which such period bears to the full month.
5. Except to the extent expressly assumed by the Business Manager herein,
and as provided in paragraph 7 below, the International Series shall be
responsible to pay all costs and expenses in connection with its operations
not expressly assumed by the Business Manager. Without limiting the generality
of the foregoing, such costs and expenses to be incurred by the International
Series shall include the following: investment advisory fees; subsequent
registration and filing fees with Federal and state agencies; any required Blue
Sky expenses; expenses of shareholders' meetings; the expense of reports to
existing shareholders; expenses of printing shareholder reports; proxies and
prospectuses; insurance premiums; legal and auditing fees; dividend
disbursement expenses; the expense of the issuance, transfer, and redemption of
International Series shares; custodian fees; printing and preparation of
registration statements; taxes; compensation of Trustees who are not interested
persons of the Trust; association dues; and costs of stationery, forms and
certificates prepared exclusively for the International Series.
6. It is understood and agreed that the services provided to the
International Series by the Business Manager pursuant to this Agreement do not
include the service of principal underwriter for the International Series
shares, insofar as the International Series will not utilize such a person to
distribute its shares.
7. It is understood and agreed that Capital Research and Management
Company ("the Adviser") has
<PAGE> 10
4
agreed to provide supervision of the portfolio of the International Series and
to determine what securities or other property shall be purchased, held or sold
by the International Series, pursuant to a written investment advisory
contract. The Adviser has also agreed to provide adequate facilities and
qualified personnel for the placement of orders for the purchase, or other
acquisition, and sale, or other disposition, of portfolio securities for the
International Series.
8. Applicable state expense guarantee limitations will be observed in
regard to fees payable to Business Manager.
9. It is understood that Trustees, officers, agents and stockholders of
the Trust are or may be interested in the Business Manager as directors,
officers, stockholders, or otherwise and that directors, officers, agents and
stockholders of the Business Manager are or may be interested in the Trust as
Trustees, officers, stockholders or otherwise, that the Business Manager may be
interested in the Trust and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Declaration of Trust for the Trust and Articles of
Incorporation of the Business Manager or by specific provision of applicable
law.
10. This Agreement shall take effect as of the date above written. Unless
sooner terminated as hereinafter provided, this Agreement shall remain in
effect until September 21, 1991. Thereafter, this Agreement shall continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by affirmative vote of the Board of Trustees of the
Trust, or by affirmative vote of a majority of the outstanding shares of the
International Series entitled to be cast and, in either event, by a majority of
those members of the Board who are not parties to the Agreement or "interested
persons" of any such party, cast in person at a meeting called for the purpose
of voting on such continuance.
11. This Agreement may be terminated at any time on 60 days' written
notice, without the payment of any penalty, by the Board of Trustees of the
Trust, by the vote of a majority of the outstanding shares of the International
Series, or by the Business Manager, provided, however, that this Agreement may
not be terminated by Business Manager unless another business management
agreement has been approved in accordance with the 1940 Act.
<PAGE> 11
5
12. This Agreement shall terminate automatically in the event of its
assignment by either party. For the purpose of this paragraph, the term
"Assignment" shall have the meaning set forth in Section 2 (a)(4) of the 1940
Act.
13. This Agreement may be modified by mutual consent; however, such
consent on the part of the Trust requires the vote of a majority of
the outstanding voting securities of the International Series upon
recommendation by a vote of a majority of the Board of Trustees, which shall
include a vote of a majority of the Trustees who are not interested persons of
the Trust (other than as Trustees) or the Business Manager and who have no
direct or indirect interest in the operations of the Trust, this Agreement, or
the Business Manager, cast in person at a meeting called for that purpose.
14. The Business Manager assumes no responsibility under this Agreement
other than to render the services called for hereunder. The Business Manager
shall be liable, in carrying out its duties under this Agreement (a) for
actions and omissions constituting violations of the 1940 Act, the 1933 Act or
other Federal securities laws, (b) in circumstances where the Business Manager
has failed to conform to reasonable business standards, and (c) by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations hereunder (disabling conduct). The Business Manager
shall have no liability to the Trust, or its shareholders or creditors pursuant
to (c) above, provided it is determined by reasonable and fair means, including
(a) a final decision on the merits by a court or other body before whom the
proceeding was brought that the Business Manager was not liable by means of
disabling conduct, or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that Business Manager was not
liable by reason of disabling conduct, by (i) the vote of a majority of a
quorum of Trustees who are neither "interested persons" of the Trust as defined
in Section 2 (a) (19) of the 1940 Act nor parties to the proceeding, or (ii) an
independent legal counsel in a written opinion.
15. The Business Manager and the Trust agree to maintain and preserve for
such period or periods as the Securities Exchange Commission may prescribe by
rules and regulations, such accounts, books and other documents as constitute
the records forming the basis for all reports, including financial statements
required to be filed on behalf of the International
<PAGE> 12
6
Series pursuant to the 1940 Act and for the Trust auditor's certification
relating thereto. The Business Manager and the Trust agree that all accounts,
books and other records maintained and preserved by each as required hereby
shall be subject at any time, and from time to time, to such reasonable
periodic, special and other examinations by the Securities and Exchange
Commission, the Trust auditors, the Trust or any representative of the Trust,
or any governmental agency or other instrumentality having regulatory authority
over the Trust. It is expressly understood and agreed that the books and
records maintained by the Business manager on behalf of the International
Series shall, at all times, remain the property of the Trust. Moreover, the
Trust agrees to supply the Business Manager with copies of all documents filed
with the Securities and Exchange Commission, and with such other information
relating to the International Series' affairs as the Business Manager may
reasonably request.
16. The Obligations of the Trust on behalf of the International Series
under this Agreement are not binding upon any of the Trustees, officers,
employees, agents or shareholders of the Trust individually, but bind only
the Trust estate. The Business Manager agrees to look solely to the assets of
the Trust or the International Series for the satisfaction of any liability in
respect of the Trust or the International Series under this Agreement and will
not seek recourse against such Trustees, officers, employees, agents or
shareholders, or any of them, or any of their personal assets for such
satisfaction.
17. The writing constitutes the entire agreement between the parties and
no conditions or warranties shall be implied herefrom unless expressly set
forth herein.
18. This Agreement is executed and delivered in the State of California
and shall be governed by the laws of such state and the 1940 Act.
IN WITNESS WHEREOF, the Business Manager and the Trust have executed this
Agreement as of the date first written above.
Attest: ANCHOR INVESTMENT ADVISER, INC.
/S/ Susan L. Harris /S/ Lori D. Nawn
- ------------------------ --------------------------
Secretary Vice President
<PAGE> 13
7
Attest: ANCHOR PATHWAY FUND
/S/ Susan L. Harris By: /S/ Robert P. Saltzman
- ---------------------------- ---------------------------
Susan L. Harris Robert P. Saltzman
Vice President and Secretary Chairman and Chief
Executive Officer
<PAGE> 14
BUSINESS MANAGEMENT AGREEMENT
THIS AGREEMENT is entered into this 16th day of November 1987, by and
between Anchor Pathway Fund (the "Trust"), a Massachusetts business trust
registered as a management investment company under the Investment Company Act
of 1940 ("1940 Act") and Anchor Investment Adviser, Inc. (the "Business
Manager").
WITNESSETH:
WHEREAS, the Trust is authorized to issue shares in separate series, with
each such series representing interest in a separate portfolio of securities
and other assets, and intends initially to offer shares of five series
designated The Cash Management Series, The High-Yield Bond Series, The
Growth-Income Series, The Growth Series and the U. S. Government
Guaranteed/AAA-Rated Securities Series (the "Series").
WHEREAS, the Trust desires that Business Manager shall act as business
manager of the Trust and provide the administrative services necessary to
administer the affairs of the Trust, and the Business Manager desires to so
act,
NOW, THEREFORE, in consideration of the mutual convenants and promises
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the Business Manager and the Trust agree as
follows:
1. The Trust hereby employs Business Manager to manage the business
affairs and the administration of the Trust, subject to the general supervision
of the Board of Trustees of the Trust, for the period and on the terms herein
set forth. The Business Manager hereby accepts such employment and agrees to
render the services and assume the obligations set forth herein, for the
compensation herein provided. The Business Manager shall, for all purposes
herein, be deemed an independent contractor and not an agent of the Trust or
the Series.
2. It is understood and agreed that this Agreement shall take effect on
December 1, 1987 provided that prior to that date, the terms of this Agreement
have been approved by a vote of a majority of the members of the Board of
Trustees of the Trust, including a majority of the Trustees who are not parties
to this Agreement or "interested persons" (as defined in the 1940 Act) of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
3. Business Manager shall:
a. pay the expenses incurred in connection with the organization of
the Trust, and its initial registration as an investment company under the
1940 Act, and all fees and
1
<PAGE> 15
expenses including fees of legal counsel to the Trust which would
otherwise be required to be paid by the Trust and which were incurred by
the Trust prior to the initial effective date of its Registration
Statement under the Securities Act of 1933 ("1933 Act") and the 1940 Act
except for the costs of any share certificates and transfer agent fees
and costs;
b. manage the business affairs of the Trust and perform the
administrative functions required of a registered investment company at all
times in accordance with the Declaration of Trust, By-laws, Registration
Statement and current Prospectus of the Trust;
c. if desired by the Board of Trustees, permit officers, directors
and employees of the Business Manager to serve without compensation from
the Trust as officers, Trustees, employees or agents of the Trust;
d. arrange for the presentation and evaluation of contracts for (i)
custodianship of the Trust's assets, (ii) a registrar and transfer agent
for Trust shares, (iii) a dividend disbursing agent, (iv) the daily
pricing of Trust shares and (vi) appropriate fidelity and liability
bond coverages;
e. oversee the work of the custodian, dividend disbursing agent,
transfer agent and accountants on behalf of the Trust to assure compliance
with the Declaration of Trust, By-Laws and the 1940 Act;
f. assist the Trust in maintaining books and records, financial
information, reporting to shareholders, conducting meetings of Trustees and
shareholders and filings with the Securities and Exchange Commission; and
g. provide adequate facilities and office space and qualifies
employees necessary to conduct the operations of the Trust.
4. The services of the Business Manager to the Trust hereunder are not to
be deemed exclusive, and the Business Manager shall be free to render similar
services to others so long as its services hereunder be not impaired thereby.
5. The Trust shall pay the Business Manager as full compensation for all
services rendered hereunder a fee which shall be accrued daily and paid
monthly at an annual rate of:
(a) 0.24% of that portion of the average daily net assets of each
series of the Trust not exceeding $30 million; and
2
<PAGE> 16
(b) 0.20% of average daily net assets of each series of the Trust in
excess of $30 million.
The average net assets are to be computed in the manner used for the
determination of the offering price of shares of the Trust. The fee for each
month shall be payable to the Business Manager not later than the tenth day of
the following month.
The fee shall be accrued daily at 1/365th of the applicable annual rate
set forth above. The net assets of the Series shall be determined in the
manner and on the dates set forth in the prospectus of the Trust and, on days
on which the net assets are not determined, shall be as of the last preceding
day on which the net assets shall have been determined.
Upon any termination of this Agreement on a day other than the last day of
the month, the fee for the period from the beginning of the month in which
termination occurs to the date of termination shall be prorated according to
the proportion which such period bears to the full month.
6. Except to the extent expressly assumed by the Business Manager herein,
and as provided in paragraph 8 below, the Trust shall be responsible to pay all
costs and expenses in connection with its operations not expressly assumed by
the Business Manager. Without limiting the generality of the foregoing, such
costs and expenses to be incurred by the Trust shall include the following:
investment advisory fees; subsequent registration and filing fees with Federal
and state agencies; any required Blue Sky expenses; expenses of shareholder's
meetings; the expense of reports to existing shareholders; expenses of printing
shareholder reports; proxies and prospectuses insurance premiums; legal and
auditing fees; dividend disbursement expenses; the expense of the issuance,
transfer, and redemption of Trust shares; custodian fees; printing and
preparation of registration statements; taxes; compensation of Trustees who are
not interested persons of the Trust; association dues; and costs of stationery,
forms and certificates prepared exclusively for the Trust.
7. It is understood and agreed that the services provided to the Trust by
the Business Manager pursuant to this Agreement do not include the service of
principal underwriter for the Trust's shares, insofar as the Trust will not
utilize such a person to distribute its shares.
8. It is understood and agreed that Capital Research and Management
Company (the "Adviser") has agreed to provide supervision of the portfolios of
the Series and to determine what securities or other property shall be
purchased, held or sold by each Series, pursuant to a written investment
advisory contract with the Trust. The Adviser has also agreed to provide
adequate facilities and qualified personnel for the placement of orders
3
<PAGE> 17
for the purchase, or other acquisition, and sale, or other disposition, of
portfolio securities for the Series.
9. Applicable state expense guarantee limitations will be observed in
regard to fees payable to Business Manager.
10. It is understood that Trustees, officers, agents and stockholders of
the Trust are or may be interested in the Business Manager as directors,
officers, stockholders, or otherwise and that directors, officers, agents and
stockholders of the Business Manager are or may be interested in the Trust as
Trustees, officers, stockholders or otherwise, that the Business Manager may be
interested in the Trust and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Declaration of Trust for the Trust and Articles of
Incorporation of the Business Manager or by specific provision of applicable
law.
11. This agreement shall, unless sooner terminated as hereinafter
provided, remain in effect for a period of two years from the date hereof.
Thereafter, this Agreement shall continue in effect from year to year as to
each Series only so long as such continuance is specifically approved at least
annually by affirmative vote of the Board of Trustees of the Trust, or by
affirmative vote of a majority of the outstanding shares of each Series
entitled to be cast and, in either event, by a majority of those members of the
Board who are not parties to the Agreement or "interested persons" of any such
party, cast in person at a meeting called for the purpose of voting on such
continuance. Any continuance of this Agreement with respect to a Series by the
vote of a majority of the outstanding voting securities of that Series, or by
the Trustees of the Trust which shall include a majority of the non-interested
Trustees, shall be effective to continue this Agreement with respect to that
Series notwithstanding (a) that such continuance has not been so approved as to
any other Series or (b) that such continuance has not been approved by the vote
of a majority of the outstanding voting securities of the Trust as a whole.
12. This Agreement may be terminated as to any Series or the entire Trust
at any time on 60 days' written notice, without the payment of any penalty, by
the Board of Trustees of the Trust, by the vote of a majority of the
outstanding shares of such Series or the Trust, or by the Business Manager;
provided, however, that this Agreement may not be terminated by Business
Manager unless another business management agreement has been approved by the
Trust in accordance with the 1940 Act.
13. This Agreement shall terminate automatically in the event of its
assignment by either party. For the purpose of this paragraph, the term
"Assignment" shall have the meaning set forth in section 2(a) (4) of the 1940
Act.
4
<PAGE> 18
14. This Agreement may be modified by mutual consent; however, such
consent on the part of the Trust requires the vote of a majority of the
outstanding voting securities of each Series of the Trust upon recommendation
by a vote of a majority of the Board of Trustees which shall include a vote of
a majority of the Trustees who are not interested persons of the Trust (other
than as Trustees) or the Business Manager and who have no direct or indirect
interest in the operations of the Trust, this Agreement, or the Business
Manager, cast in person at a meeting called for that purpose.
15. The Business Manager assumes no responsibility under the Agreement
other than to render the services called for hereunder. The Business Manager
shall be liable, in carrying out its duties under this Agreement (a) for
actions and omissions constituting violations of the 1940 Act, the 1933 Act or
other Federal securities laws, (b) in circumstances where the Business Manager
has failed to conform to reasonable business standards, and (c) by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations hereunder (disabling conduct). The Business Manager
shall have no liability to the Trust, or its shareholders or creditors pursuant
to (c) above, provided it is determined by reasonable and fair means, including
(a) a final decision on the merits by a court or other body before whom the
proceeding was brought that the Business Manager was not liable by means of
disabling conduct, or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that Business Manager was not
liable by reason of disabling conduct, by (i) the vote of a majority of a
quorum of Trustees who are neither "interested persons" of the Trust as defined
in Section 2(a) (19) of the 1940 Act nor parties to the proceeding, or (ii) an
independent legal counsel in a written opinion.
16. The Business Manager and the Trust agree to maintain and preserve for
such period or periods as the Securities and Exchange Commission may prescribe
by rules and regulations, such accounts, books and other documents as
constitute the records forming the basis for all reports, including financial
statements required to be filed pursuant to the 1940 Act and for the Trust
auditor's certification relating thereto. The Business Manager and the Trust
agree that all accounts, books and other records maintained and preserved by
each as required hereby shall be subject at any time, and from time to time, to
such reasonable periodic, special and other examinations by the Securities and
Exchange Commission, and The Trust's auditors, the Trust or any representative
of the Trust, or any governmental agency or other instrumentality having
regulatory authority over the Trust. It is expressly understood and agreed
that the books and records maintained by the Business Manager on behalf of the
Trust shall, at all times, remain the property of the Trust. Moreover, the
Trust agrees to supply the Business Manager with copies of all documents filed
with the Securities and Exchange Commission, and
5
<PAGE> 19
with such other information relating to the Trust's affairs as the Business
Manager may reasonably request.
17. The obligations of the Trust under this Contract are not binding upon
any of the Trustees, officers, employees, agents or shareholders of the Trust
individually, but bind only the Trust estate. The Business Manager agrees to
look solely to the assets of the Trust or each Series for the satisfaction of
any liability in respect of the Trust or such Series under this Contract and
will not seek recourse against such Trustees, officers, employees, agents, or
shareholders, or any of them, or any of their personal assets for such
satisfaction.
18. The writing constitutes the entire agreement between the parties and
no conditions or warranties shall be implied herefrom unless expressly set
forth herein.
19. This Agreement is executed and delivered in the State of California
and shall be governed by the laws of such state and the 1940 Act.
6
<PAGE> 20
IN WITNESS WHEREOF, the Business Manager and the Trust have executed this
Agreement on the day first written above.
Attest: ANCHOR INVESTMENT ADVISER, INC.
/s/ James E. Stark
- --------------------------
Attest: ANCHOR PATHWAY FUND
/s/ James E. Stark
- -------------------------
7
<PAGE> 1
EXHIBIT 11
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 12 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
January 15, 1996, relating to the financial statements and financial highlights
of Anchor Pathway Fund, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
/s/Price Waterhouse LLP
- ---------------------------
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
January 15, 1996
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and trustees
of Anchor Pathway Fund do hereby severally constitute and appoint Susan L.
Harris, Scott L. Robinson, Peter C. Sutton and Robert M. Zakem or any of them,
the true and lawful agents and attorneys-in-fact of the undersigned with
respect to all matters arising in connection with the Registration Statement on
Form N-1A and any and all amendments (including post-effective amendments)
thereto, with full power and authority to execute said Registration Statement
for and on behalf of the undersigned, in our names and in the capacities
indicated below, and to file the same, together with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission. The undersigned hereby give to said agents and attorneys-in-fact
full power and authority to act in the premises, including, but not limited to,
the power to appoint a substitute or substitutes to act hereunder with the same
power and authority as said agents and attorneys-in fact would have if
personally acting. The undersigned hereby ratify and confirm all that said
agents and attorneys-in-fact, or any substitute or substitutes, may do by
virtue hereof.
WITNESS the due execution hereof on the date and in the capacities set
forth below.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/James K. Hunt Trustee, Chairman and President January 19, 1995
- ---------------------- (Principal Executive Officer)
James K. Hundt
/s/Scott L. Robinson Senior Vice President, Treasurer January 19, 1995
- ---------------------- and Controller (Principal Financial
Scott L. Robinson and Accounting Officer)
/s/Richards D. Barger Trustee January 19, 1995
- ----------------------
Richards D. Barger
/s/Frank L. Ellsworth Trustee January 19, 1995
- ----------------------
Frank L. Ellsworth
/s/Gordon F. Hampton Trustee January 19, 1995
- ----------------------
Gordon F. Hampton
/s/Norman J. Metcalfe Trustee January 19, 1995
- ----------------------
Norman J. Metcalfe
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> CASH MANAGEMENT SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 102,630
<INVESTMENTS-AT-VALUE> 102,630
<RECEIVABLES> 454
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 85
<TOTAL-ASSETS> 103,170
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,298
<TOTAL-LIABILITIES> 2,298
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93,359
<SHARES-COMMON-STOCK> 8,662
<SHARES-COMMON-PRIOR> 16,249
<ACCUMULATED-NII-CURRENT> 7,513
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100,872
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,338
<OTHER-INCOME> 0
<EXPENSES-NET> (822)
<NET-INVESTMENT-INCOME> 7,516
<REALIZED-GAINS-CURRENT> 1
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,517
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,355)
<DISTRIBUTIONS-OF-GAINS> (1)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,835
<NUMBER-OF-SHARES-REDEEMED> (35,988)
<SHARES-REINVESTED> 566
<NET-CHANGE-IN-ASSETS> (85,524)
<ACCUMULATED-NII-PRIOR> 6,351
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 737
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 822
<AVERAGE-NET-ASSETS> 141,327
<PER-SHARE-NAV-BEGIN> 11.47
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> (.44)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.65
<EXPENSE-RATIO> .58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> ANCHOR PATHWAY HIGH YIELD BOND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 141,899
<INVESTMENTS-AT-VALUE> 143,642
<RECEIVABLES> 3,066
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 981
<TOTAL-ASSETS> 147,690
<PAYABLE-FOR-SECURITIES> 496
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 604
<TOTAL-LIABILITIES> 1,100
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 134,418
<SHARES-COMMON-STOCK> 10,773
<SHARES-COMMON-PRIOR> 9,766
<ACCUMULATED-NII-CURRENT> 13,964
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,535)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,743
<NET-ASSETS> 146,590
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,669
<OTHER-INCOME> 0
<EXPENSES-NET> (848)
<NET-INVESTMENT-INCOME> 13,821
<REALIZED-GAINS-CURRENT> (2,317)
<APPREC-INCREASE-CURRENT> 13,271
<NET-CHANGE-FROM-OPS> 24,775
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15,715)
<DISTRIBUTIONS-OF-GAINS> (1,315)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,131
<NUMBER-OF-SHARES-REDEEMED> (5,539)
<SHARES-REINVESTED> 1,415
<NET-CHANGE-IN-ASSETS> 19,123
<ACCUMULATED-NII-PRIOR> 15,708
<ACCUMULATED-GAINS-PRIOR> 247
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 745
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 848
<AVERAGE-NET-ASSETS> 143,089
<PER-SHARE-NAV-BEGIN> 13.05
<PER-SHARE-NII> 1.26
<PER-SHARE-GAIN-APPREC> .99
<PER-SHARE-DIVIDEND> (1.56)
<PER-SHARE-DISTRIBUTIONS> (.13)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.61
<EXPENSE-RATIO> .59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> ANCHOR PATHWAY GROWTH-INCOME
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 642,579
<INVESTMENTS-AT-VALUE> 875,821
<RECEIVABLES> 6,789
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 461
<TOTAL-ASSETS> 883,074
<PAYABLE-FOR-SECURITIES> 83
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 848
<TOTAL-LIABILITIES> 931
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 572,505
<SHARES-COMMON-STOCK> 27,885
<SHARES-COMMON-PRIOR> 28,951
<ACCUMULATED-NII-CURRENT> 20,687
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 55,709
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 233,242
<NET-ASSETS> 882,143
<DIVIDEND-INCOME> 20,582
<INTEREST-INCOME> 4,651
<OTHER-INCOME> 0
<EXPENSES-NET> (4,540)
<NET-INVESTMENT-INCOME> 20,693
<REALIZED-GAINS-CURRENT> 55,815
<APPREC-INCREASE-CURRENT> 160,433
<NET-CHANGE-FROM-OPS> 236,941
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (20,910)
<DISTRIBUTIONS-OF-GAINS> (61,645)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,970
<NUMBER-OF-SHARES-REDEEMED> (7,247)
<SHARES-REINVESTED> 3,211
<NET-CHANGE-IN-ASSETS> 116,172
<ACCUMULATED-NII-PRIOR> 20,904
<ACCUMULATED-GAINS-PRIOR> 61,367
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,130
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,540
<AVERAGE-NET-ASSETS> 820,123
<PER-SHARE-NAV-BEGIN> 26.46
<PER-SHARE-NII> .71
<PER-SHARE-GAIN-APPREC> 7.46
<PER-SHARE-DIVIDEND> (.76)
<PER-SHARE-DISTRIBUTIONS> (2.23)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 31.64
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> GROWTH SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 589,943
<INVESTMENTS-AT-VALUE> 892,061
<RECEIVABLES> 7,060
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 2,064
<TOTAL-ASSETS> 901,187
<PAYABLE-FOR-SECURITIES> 2,823
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,089
<TOTAL-LIABILITIES> 3,912
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 469,053
<SHARES-COMMON-STOCK> 20,627
<SHARES-COMMON-PRIOR> 20,909
<ACCUMULATED-NII-CURRENT> 5,493
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 120,611
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 302,118
<NET-ASSETS> 897,275
<DIVIDEND-INCOME> 4,980
<INTEREST-INCOME> 4,897
<OTHER-INCOME> 0
<EXPENSES-NET> (4,553)
<NET-INVESTMENT-INCOME> 5,324
<REALIZED-GAINS-CURRENT> 121,101
<APPREC-INCREASE-CURRENT> 134,125
<NET-CHANGE-FROM-OPS> 260,550
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,130)
<DISTRIBUTIONS-OF-GAINS> (53,955)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,919
<NUMBER-OF-SHARES-REDEEMED> (8,845)
<SHARES-REINVESTED> 1,644
<NET-CHANGE-IN-ASSETS> 184,673
<ACCUMULATED-NII-PRIOR> 4,125
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