ANCHOR PATHWAY FUND, 485BPOS, 1997-01-27

ANCHOR PATHWAY FUND
485BPOS, 1997-01-27

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<PAGE> 1
As filed with the Securities and Exchange Commission on January 27, 1997

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. 13 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 14 /X/
(Check appropriate box or boxes)

ANCHOR PATHWAY FUND
(Exact Name of Registrant as Specified in Charter)

1 SunAmerica Center
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:
Susan L. Harris, Esq.
Senior Vice President and General Counsel
SunAmerica Inc.
1 SunAmerica Center
Los Angeles, CA 90067-6022

Margery K. Neale, Esq.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022

It is proposed that this filing will become effective (check appropriate box)

/ / immediately upon filing pursuant to paragraph (b)

/X/ on January 28, 1997 pursuant to paragraph (b)

/ / 60 days after filing pursuant to paragraph (a)

/ / on (date) pursuant to paragraph (a) of Rule 485

----------------------

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, 1996 was
filed on January 17, 1997.
<PAGE> 2
ANCHOR PATHWAY FUND

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
Item Number
in Form N-1A Caption
PART A - PROSPECTUS
<S> <C>
1. Cover Page........................... Cover Page

2. Synopsis - Fee Table................. *

3. Condensed Financial Information...... Financial Highlights

4. General Description of Registrant.... The Fund, Its Investment
Objectives and Policies;
Description of Securities
and Investment Techniques

5. Management of the Fund............... Management

5A Management's Discussion of Fund
Performance.......................... #

6. Capital Stock and Other Securities... Dividends, Distributions
and Federal Taxes;
Shareholder Voting
Rights; Shareholder
Inquiries

7. Purchase of Securities Being Offered.. Price of Shares;
Purchases and Redemptions

8. Redemption or Repurchase............. Purchases and Redemptions

9. Pending Legal Proceedings............ *
<CAPTION>
PART B - STATEMENT OF ADDITIONAL INFORMATION
<S> <C>
10. Cover Page.......................... Cover Page

11. Table of Contents................... Table of Contents

12. General Information and History..... The Fund

13. Investment Objectives and Policies.. Investment Policies;
Investment Restrictions

14. Management of the Fund.............. Fund Officers and
Trustees

15. Control Persons and Principal
Holders of Securities............... The Fund

16. Investment Advisory and Other
Services............................ Investment Advisory
Agreement; Business
Management Agreement;
General Information

17. Brokerage Allocation and Other
Practices Transactions.............. Execution of Portfolio

18. Capital Stock and Other Securities.. *

19. Purchase, Redemption and Pricing of
Securities Being Offered............ Price of Shares

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.

# Included in the Annual Report to Shareholders for the fiscal year ended
November 30, 1996.

<PAGE> 3

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 common stocks or securities with common stock characteristics 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, bonds and other intermediate and long-term fixed-income
securities and money market instruments in any combination.

The HIGH-YIELD BOND SERIES seeks high 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 (also known as "junk bonds"), are subject to greater
fluctuations in value 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 or Aaa.

The CASH MANAGEMENT SERIES seeks high current yield while preserving
capital by investing in a diversified selection of high quality money market
instruments.

YOU MAY LOSE MONEY BY INVESTING IN THE SERIES. GENERALLY, THE LIKELIHOOD OF
LOSS IS GREATER IF YOU INVEST FOR A SHORTER PERIOD OF TIME. YOUR INVESTMENT IN
THE FUND IS NOT A DEPOSIT OR OBLIGATION OF, OR INSURED, OR GUARANTEED BY, ANY
ENTITY OR PERSON INCLUDING THE U.S. GOVERNMENT AND THE FEDERAL DEPOSIT INSURANCE
CORPORATION.

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 NOR HAS THE SECURITIES AND EXCHANGE
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 28, 1997.

<PAGE> 4

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....................................................................... 6
High-Yield Bond Series........................................................................ 7
U.S. Government/AAA-Rated Securities Series................................................... 8
Cash Management Series........................................................................ 8
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES................................................ 8
MANAGEMENT......................................................................................... 11
PORTFOLIO TURNOVER................................................................................. 13
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES......................................................... 14
PRICE OF SHARES.................................................................................... 14
PURCHASES AND REDEMPTIONS.......................................................................... 14
SHAREHOLDER VOTING RIGHTS.......................................................................... 15
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL.......................................................... 15
SHAREHOLDER INQUIRIES.............................................................................. 15
STATEMENT OF ADDITIONAL INFORMATION -- TABLE OF CONTENTS........................................... 16
APPENDIX
</TABLE>

2
<PAGE> 5

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, 1996 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, 1996, 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
Period value Invest- gain (loss) from invest- gain on value end of
ended beginning ment on investment ment Invest- end Total period
Nov. 30 period income Investments operations income ments of period Return (000's)
- -------------------- --------- ------ ------------ ---------- --------- ------------ --------- ------ ----------
GROWTH SERIES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1987................ $ 15.66 $0.14 $(0.78) $(0.64) $ (0.11) $(0.34) $ 14.57 (4.34)% $ 98,447
1988................ 14.57 0.23 2.88 3.11 (0.12) (0.61) 16.95 21.83 93,801
1989................ 16.95 0.37 7.85 8.22 (0.13) (0.09) 24.95 48.76 190,185
1990................ 24.95 0.36 (2.37) (2.01) (0.31) (1.62) 21.01 (8.60) 268,174
1991................ 21.01 0.37 5.25 5.62 (0.77) (0.29) 25.57 26.80 458,719
1992................ 25.57 0.23 5.21 5.44 (0.01) (0.04) 30.96 21.29 644,060
1993................ 30.96 0.24@ 5.32 5.56 (0.23) (0.53) 35.76 18.26 735,400
1994................ 35.76 0.19@ 1.04 1.23 (0.25) (2.66) 34.08 3.33 712,602
1995................ 34.08 0.25@ 12.02 12.27 (0.20) (2.65) 43.50 37.93 897,275
1996................ 43.50 0.18@ 5.10 5.28 (0.28) (6.22) 42.28 14.02 813,164
<CAPTION>

INTERNATIONAL SERIES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1990#............... $ 10.00 $0.07 $(0.39) $(0.32) $ -- $ -- $ 9.68 (3.20)% $ 13,704
1991................ 9.68 0.16 0.38 0.54 (0.09) -- 10.13 5.59 50,654
1992................ 10.13 0.15 (0.12) 0.03 (0.14) (0.02) 10.00 0.31 85,919
1993................ 10.00 0.18@ 2.54 2.72 (0.14) (0.01) 12.57 27.41 192,162
1994................ 12.57 0.22@ 0.81 1.03 (0.12) (0.22) 13.26 8.17 259,498
1995................ 13.26 0.26@ 1.11 1.37 (0.23) (0.50) 13.90 11.18 228,134
1996................ 13.90 0.22@ 2.46 2.68 (0.46) (0.31) 15.81 20.03 249,144
<CAPTION>
GROWTH-INCOME SERIES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987................ $ 17.46 $0.47 $(1.87) $(1.40) $ (0.46) $(0.08) $ 15.52 (8.59)% $217,141
1988................ 15.52 0.61 2.82 3.43 (0.30) (0.18) 18.47 22.49 210,992
1989................ 18.47 0.79 5.18 5.97 (0.60) -- 23.84 32.94 364,096
1990................ 23.84 0.74 (2.48) (1.74) (0.54) (0.85) 20.71 (7.57) 423,733
1991................ 20.71 0.73 3.62 4.35 (0.87) (0.40) 23.79 21.14 584,668
1992................ 23.79 0.64 3.12 3.76 (0.72) (0.58) 26.25 16.02 777,448
1993................ 26.25 0.71@ 2.44 3.15 (0.63) (0.54) 28.23 12.34 862,716
1994................ 28.23 0.69@ (0.14) 0.55 (0.76) (1.56) 26.46 2.00 765,971
1995................ 26.46 0.71@ 7.46 8.17 (0.76) (2.23) 31.64 33.47 882,143
1996................ 31.64 0.67@ 5.87 6.54 (0.77) (2.10) 35.31 21.88 919,356

Ratio of net
Ratio of investment Average
Period expenses income Portfolio commission
ended to average to average turnover per
Nov. 30 net assets net assets rate share++++
- -------------------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C>

1987................ 0.63%+ 0.97%+ 14.00% $ N/A
1988................ 0.65 1.30 10.40 N/A
1989................ 0.53 2.16 47.00 N/A
1990................ 0.56 2.38 17.70 N/A
1991................ 0.62 1.51 12.30 N/A
1992................ 0.56 0.88 14.31 N/A
1993................ 0.55 0.71 21.99 N/A
1994................ 0.55 0.56 33.79 N/A
1995................ 0.55 0.65 23.72 N/A
1996................ 0.55 0.46 25.51 0.0561

1990#............... 1.85%+ 3.21%+ 4.10% $ N/A
1991................ 1.40 2.20 14.30 N/A
1992................ 1.19 1.88 21.04 N/A
1993................ 1.12 1.62 22.56 N/A
1994................ 1.04 1.64 21.68 N/A
1995................ 1.05 1.95 16.79 N/A
1996................ 1.02 1.56 44.94 0.0196

1987................ 0.59%+ 2.85%+ 6.80% $ N/A
1988................ 0.61 3.32 12.90
1989................ 0.53 4.16 29.60 N/A
1990................ 0.56 4.11 13.80 N/A
1991................ 0.59 3.45 21.20 N/A
1992................ 0.56 2.88 18.81 N/A
1993................ 0.55 2.60 29.22 N/A
1994................ 0.55 2.54 32.97 N/A
1995................ 0.55 2.52 18.81 N/A
1996................ 0.55 2.07 23.72 0.0564
</TABLE>

- ------------

@ Calculated based upon average shares outstanding.

* Information from December 1, 1986 through November 30, 1987, is that of
American Pathway Fund. Information for the year ended November 30, 1988
includes the results of operations of American Pathway Fund from December
1, 1987 through March 28, 1988.

+ Annualized.

# Commenced operations May 9, 1990.
++ Commenced operations March 31, 1989.
++++ The average commission per share is derived by taking the agency
commissions paid on equity securities trades and dividing by the number
of shares purchased or sold.

3
<PAGE> 6

<TABLE>
<CAPTION>
Dividends Dividends
Net realized declared from
Net asset Net & unrealized Total from net net realized Net asset Net assets
Period value Invest- gain (loss) from invest- gain on value end of
ended beginning ment on investment ment Invest- end Total period
Nov. 30 period income Investments operations income ments of period Return (000's)
- -------------------- --------- ------ ------------ ---------- --------- ------------ --------- ------ ----------
ASSET ALLOCATION SERIES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1989++.............. $ 10.00 $0.18 $ .82 $ 1.00 $ -- $ -- $ 11.00 10.00% $ 23,318
1990................ 11.00 0.56 (0.73) (0.17) (0.21) -- 10.62 (1.57) 54,985
1991................ 10.62 0.56 1.32 1.88 (0.60) (0.02) 11.88 18.66 78,271
1992................ 11.88 0.50 1.10 1.60 (0.53) (0.05) 12.90 13.80 134,100
1993................ 12.90 0.63 @ 0.72 1.35 (0.46) (0.13) 13.66 10.76 166,555
1994................ 13.66 0.58 @ (0.69) (0.11) (0.62) (0.31) 12.62 (0.84) 142,678
1995................ 12.62 0.55 @ 3.16 3.71 (0.68) (0.38) 15.27 31.01 153,608
1996................ 15.27 0.56 @ 2.17 2.73 (0.63) (1.14) 16.23 19.34 153,060

<CAPTION>
HIGH-YIELD BOND SERIES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987................ $ 13.49 $1.35 $(0.94) $ 0.41 $ (1.36) $(0.32) $ 12.22 2.96% $ 70,098
1988................ 12.22 1.24 0.64 1.88 (0.71) (0.17) 13.22 15.92 78,335
1989................ 13.22 1.36 (0.25) 1.11 (1.16) -- 13.17 8.86 85,778
1990................ 13.17 1.53 (1.53) 0.00 (1.09) -- 12.08 0.02 79,099
1991................ 12.08 1.19 2.16 3.35 (1.52) -- 13.91 29.25 117,714
1992................ 13.91 1.20 0.65 1.85 (1.16) -- 14.60 14.06 147,951
1993................ 14.60 1.27 @ 1.02 2.29 (1.22) -- 15.67 16.44 190,515
1994................ 15.67 1.24 @ (1.88) (0.64) (1.49) (0.49) 13.05 (4.70) 127,467
1995................ 13.05 1.26 @ 0.99 2.25 (1.56) (0.13) 13.61 18.97 146,590
1996................ 13.61 1.21 @ 0.56 1.77 (1.53) -- 13.85 14.05 131,337

U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987................ $ 11.62 $0.85 $(1.21) $(0.36) $ (0.79) $ -- $ 10.47 (3.17)% $ 47,089
1988................ 10.47 0.89 0.12 1.01 (0.43) -- 11.05 10.00 44,586
1989................ 11.05 0.69 0.53 1.22 (0.81) -- 11.46 11.79 85,924
1990................ 11.46 0.78 0.00 0.78 (0.46) -- 11.78 7.15 128,369
1991................ 11.78 0.74 0.78 1.52 (0.81) -- 12.49 13.59 192,330
1992................ 12.49 0.85 0.31 1.16 (0.78) -- 12.87 9.84 230,798
1993................ 12.87 0.95 @ 0.61 1.56 (0.91) (0.18) 13.34 12.58 228,569
1994................ 13.34 0.90 @ (1.43) (0.53) (1.11) (0.17) 11.53 (4.17) 149,368
1995................ 11.53 0.86 @ 0.85 1.71 (1.20) (0.06) 11.98 15.95 134,938
1996................ 11.98 0.80 @ (0.21) 0.59 (1.06) -- 11.51 5.49 108,852
<CAPTION>

CASH MANAGEMENT SERIES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987................ $ 10.65 $0.54 $ 0.08 $ 0.62 $ (0.54) -- $ 10.73 6.01% $ 57,197
1988................ 10.73 0.64 0.09 0.73 (0.35) -- 11.11 7.03 64,046
1989................ 11.11 0.86 0.10 0.96 (0.69) -- 11.38 9.05 79,377
1990................ 11.38 0.54 0.34 0.88 (0.48) -- 11.78 7.93 163,979
1991................ 11.78 0.60 0.07 0.67 (0.57) -- 11.88 5.85 197,942
1992................ 11.88 0.40 (0.03) 0.37 (0.75) -- 11.50 3.26 203,548
1993................ 11.50 0.29 @ -- 0.29 (0.39) -- 11.40 2.57 192,384
1994................ 11.40 0.40 @ -- 0.40 (0.33) -- 11.47 3.56 186,396
1995................ 11.47 0.61 @ 0.01 0.62 (0.44) -- 11.65 5.53 100,872
1996................ 11.65 0.55 @ -- 0.55 (0.82) -- 11.38 4.94 89,236

1989++.............. 0.54%+ 5.36%+ 12.80% $ N/A
1990................ 0.65 6.48 18.10 N/A
1991................ 0.77 5.50 16.50 N/A
1992................ 0.63 4.84 21.86 N/A
1993................ 0.60 4.70 22.66 N/A
1994................ 0.59 4.47 48.53 N/A
1995................ 0.59 4.04 53.58 N/A
1996................ 0.58 3.74 40.97 0.0573

1987................ 0.63%+ 10.89%+ 61.90% $ N/A
1988................ 0.65 9.91 38.30 N/A
1989................ 0.64 10.47 36.50 N/A
1990................ 0.66 11.50 34.90 N/A
1991................ 0.69 10.51 24.40 N/A
1992................ 0.62 9.40 75.27 N/A
1993................ 0.59 8.43 59.03 N/A
1994................ 0.59 8.76 44.97 N/A
1995................ 0.59 9.66 31.64 N/A
1996................ 0.58 9.09 36.99 N/A

1987................ 0.67% 8.24% 105.60% $ N/A
1988................ 0.70 8.25 54.30 N/A
1989................ 0.59 8.35 19.40 N/A
1990................ 0.61 8.85 26.10 N/A
1991................ 0.66 7.96 30.90 N/A
1992................ 0.59 7.32 47.58 N/A
1993................ 0.58 7.19 9.14 N/A
1994................ 0.58 7.42 16.95 N/A
1995................ 0.59 7.49 43.43 N/A
1996................ 0.59 7.03 17.12 N/A

1987................ 0.68%+ 5.90%+ -- $ N/A
1988................ 0.65 6.75 -- N/A
1989................ 0.66 8.53 -- N/A
1990................ 0.58 7.63 -- N/A
1991................ 0.64 5.59 -- N/A
1992................ 0.61 3.21 -- N/A
1993................ 0.58 2.59 -- N/A
1994................ 0.57 3.52 -- N/A
1995................ 0.58 5.32 -- N/A
1996................ 0.58 4.81 -- N/A
</TABLE>

- ------------

@ Calculated based upon average shares outstanding.

+ Annualized.

<PAGE> 7

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 likely to be
incidental to the objective of capital growth. Ordinarily, the Series seeks to
achieve this objective by investing primarily in common stocks or securities
with common stock characteristics. 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. 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, although there is no requirement that the
Series maintain investments in non-U.S. issuers. See "Risks of Investing in
Various Countries."

Up to 10% of the Growth Series' assets may be invested in straight debt
securities rated BB or below by Standard & Poor's Ratings Services, a Division
of the McGraw-Hill Companies, Inc. ("S&P") and Ba or below 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 the last day of the Series'
most recent fiscal year, the Series did not hold any junk bonds.

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. The Series' investment approach is based on
the belief that economic and political developments help to create new
opportunities outside the U.S.

The Series may also invest in securities through depositary receipts which
may be denominated in various currencies. For example, the Series may purchase
American Depositary 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 invest in securities convertible into common stocks, straight
debt securities (generally rated in the top three quality categories by S&P or
Moody's or unrated but determined to be of equivalent quality by the Investment
Adviser), U.S. government securities or nonconvertible preferred stocks. Up to
5% of the Series' assets may also be invested in lower rated straight debt
securities (including securities commonly referred to as "junk bonds" or
"high-yield, high-risk bonds") or in unrated securities that are determined to
be of equivalent quality. 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 various bond ratings. These securities may
also be issued by non-U.S. entities.

5
<PAGE> 8

Under normal circumstances, the Series will invest at least 65% of its
assets in equity securities (including depositary receipts) of issuers domiciled
outside the U.S., including those domiciled in developing countries. The Series
may at times hold a portion of its assets in various currencies or in cash
equivalents which may be denominated in U.S. dollars or other currencies
(including U.S. Government securities, certificates of deposit, time deposits,
commercial paper, bankers' acceptances and other high-quality short-term debt
securities). Additionally, for temporary defensive purposes, the Series may at
times maintain all or any part of its assets in cash and cash equivalents.

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 Series will invest primarily in common stocks. But the Series
may invest in other types of securities, including other equity-type securities
(such as convertible bonds), bonds (and other types of fixed income securities)
and money market instruments, to the extent consistent with the Series'
investment objective. See "Description of Securities and Investment Techniques."

Up to 5% of the Growth-Income Series' assets may be invested in straight
debt securities rated BB or below by S&P and Ba or below by Moody's or in
unrated securities that are determined to be of equivalent quality by the
Investment Adviser. 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. Up to 10% of the Series' assets may be invested in
the equity securities of issuers domiciled outside of the U.S. and which are not
included in the Standard & Poor's 500 Composite Index (a broad measure of the
U.S. stock market), provided those securities are either held through depository
receipts which are U.S. dollar denominated or are traded on the New York Stock
Exchange ("NYSE"). Since the Series limits its investments in non-U.S.
securities as described above, the Series has no current intention to engage in
forward currency transactions.

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
objective by investing in a diversified portfolio that can include common stocks
and other equity-type securities (such as convertible bonds), 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 depositary receipts which are U.S. dollar denominated or are traded on
the New York Stock Exchange. Since the Series limits its investments in non-U.S.
securities as described above, the Series has no current intention to engage in
forward currency transactions. See "Risks of Investing in Various Countries."

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. 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 recent 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/AAA -- 10.20%;
Aa/AA -- 0.72%; A/A -- 3.67%; Baa/BBB -- 5.13%; Ba/BB -- 1.57%; B/B -- 2.29%;
and Caa/CCC -- 0.29%. Non-rated

6
<PAGE> 9

investments, equity-type securities, and cash or cash equivalents amounted to
0.32%, 66.61% and 9.20%, respectively. Some or all of the non-rated securities
were determined to be of equivalent quality to securities rated by Moody's or
S&P as follows: Baa/BBB -- 0.32%.

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 in fixed-income
securities, with emphasis on higher yielding, higher risk, lower rated or
unrated corporate bonds.

High-yield, high-risk bonds (also known as "junk bonds") generally include
any bonds rated Ba or below by Moody's and BB or below by S&P or unrated but
determined 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 CC by S&P (or in
bonds that are unrated but determined to be of equivalent quality). 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 in bonds that are unrated but determined to be of equivalent
quality). See the Appendix for a description of bond ratings. During the recent
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/AAA -- 3.29%; Baa/BBB -- 0.69%; Ba/BB -- 25.90%;
B/B -- 54.57%; and Caa/CCC -- 1.07%. Non-rated investments, equity-type
securities, and cash or cash equivalents amounted to 1.35%, 0.03% and 13.10%,
respectively. Some or all of the non-rated securities were determined to be of
equivalent quality to securities rated by Moody's or S&P as follows:
Ba/BB -- 0.02%; Caa/CCC -- 1.33%.

Up to 25% of 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. The Series can purchase and sell currencies to facilitate securities
transactions and enter into forward currency contracts to hedge against changes
in currency exchange rates.

Under normal market conditions, the Series will invest primarily in higher
yielding obligations which may include loan participations in addition to
corporate bonds. The Series also may invest in securities of the U.S.
Government, its agencies and instrumentalities, cash and money market
instruments. See "Description of Securities and Investment Techniques" below.

"High-yield, high risk" bonds, also known as "junk bonds," have speculative
characteristics and involve greater risk of default or price changes due to
changes in the issuer's creditworthiness, or they may already be in default. The
market prices of these securities may fluctuate more than higher-quality
securities and may decline significantly. It may be more difficult to dispose
of, or to determine the value of, high-yield, high-risk bonds.

High-yield, high-risk bonds may be very sensitive to adverse economic
changes and may be less sensitive to interest rate changes. In addition, periods
of economic uncertainty and changes may increase volatility of market prices and
yields of high-yield, high-risk bonds and in turn, the Series' net asset value.
High-yield, high-risk bonds may contain redemption or call provisions which, if
exercised during a period of declining interest rates, may cause the Series to
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. Furthermore, 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.

The Investment Adviser attempts to reduce the risks described above 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.

There can be, of course, no assurance that the Series' investment objective
will be realized or that the net return on an investment in the Series will
equal or exceed that which could have been obtained through other investment or
savings vehicles. Contract owners should carefully review the investment
objectives and policies of the Series and consider their ability to assume the
risks involved before making any investment in the Series.

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. Equity-type securities normally will be purchased as
part of a unit with fixed-income

7
<PAGE> 10

securities or when an unusual opportunity for capital appreciation is perceived
due to an anticipated improvement in the issuer's credit quality or ratings.

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 (i.e., if backed by the full faith and credit
of the United States) 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). The Series may purchase obligations of non-
U.S. corporations or governmental entities, provided such obligations are U.S.
dollar denominated and highly liquid. 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 Series anticipates it will invest in 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 (or Aaa), the Series is not
required to dispose of the security.

CASH MANAGEMENT SERIES

The investment objective of the Cash Management Series is high current
yield while preserving capital. It seeks to achieve this objective by investing
in high quality money market instruments that mature, or may be redeemed or
resold, in 13 months or less (25 months or less in the case of U.S. Government
securities). The Series invests only in such instruments that are determined, in
accordance with procedures established by the Fund's Board of Trustees, to
present minimal credit risks. The Series' investments may include, but are not
limited to, commercial paper rated in the highest rating category by Moody's and
S&P, instruments issued, guaranteed or insured by the U.S. Government, its
agencies or instrumentalities as to the payment of principal and interest, and
other securities 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 or S&P. The Series also may enter into repurchase agreements. See
"Securities and Investment Techniques" below.

Although there is no guarantee that the Series' investment objective will
be achieved, investments in the Cash Management Series should present the least
market risk of any of the Series because it invests only in high-quality
short-term debt obligations. However, an investment in this Series is subject to
the risks of changes in market interest rates and the economy as a whole. Also,
the return on an investment in the Cash Management Series should not be the same
as the return on an investment in a money market fund available directly to the
public even where gross yields are equivalent, due to fees imposed at the
contract level.

DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES

EQUITY SECURITIES -- Equity securities represent an ownership position in a
company. These securities include common stocks and securities with equity
conversion or purchase rights. The prices of equity securities fluctuate based
on changes in the financial condition of their issuers and on market and
economic conditions. The Series' results will be related to the overall market
for these securities.

DEBT SECURITIES -- Bonds and other debt securities are used by issuers to
borrow money. Issuers pay investors interest and must repay the amount borrowed
at maturity. Some debt securities, such as zero coupon bonds, do not pay current
interest

8
<PAGE> 11

but are purchased at a discount from their face values. The prices of debt
securities fluctuate depending on such factors as interest rates, credit quality
and maturity. In general their prices decline when interest rates rise and vice
versa.

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.

Certain 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, FNMA MORTGAGE-BACKED OBLIGATIONS -- The Series may
invest in various types of mortgage-related securities and the U.S.
Government/AAA-Rated Securities Series expects to invest substantially in these
securities. Mortgage-related securities may be issued by governmental agencies
(such as GNMA or the Federal Home Loan Mortgage Corporation ("FHLMC")), by the
Federal National Mortgage Association ("FNMA"), which is a federally chartered
and privately-owned corporation, or by private financial institutions such as
commercial banks, savings and loan associations, mortgage bankers and securities
broker-dealers (or separate trusts or affiliates of such institutions
established to issue these securities).

Most mortgage-related securities, including the securities issued by GNMA,
FHLMC and FNMA, are so-called "pass-through" securities representing interests
in a pool of underlying mortgage loans, on which the regular interest and
principal payments (including any prepayments) are passed through to the holder
of the securities. Although the mortgage loans in a pool will have stated
maturities of up to 30 years, due to both normal principal repayment and
prepayments, the average effective maturities of these securities will vary and
will tend to fall when interest rates fall and to rise when interest rates rise.
Their value also may change due to changes in the market's perception of the
creditworthiness of the entity that issues or guarantees them.

OTHER 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).

MONEY MARKET INSTRUMENTS. -- These are shorter-term debt securities
maturing in one year or less include (1) commercial bank obligations
(certificates of deposit, interest bearing time deposits, bankers' acceptances
(time drafts on a commercial bank where the bank accepts an irrevocable
obligation 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 that changes at least annually and generally more frequently) have
maturities in excess of one year, they are also considered short-term debt
securities.

9
<PAGE> 12

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. 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.

FORWARD COMMITMENTS -- Each Series may enter into commitments to purchase
or sell securities at a future date. When a Series agrees to purchase such
securities it assumes the risk of any decline in value of the securities
beginning on the date of the agreement. When a Series agrees to sell such
securities, it does not participate in further gains or losses with respect to
the securities beginning on the date of the agreement. If the other party to
such transaction fails to deliver or pay for the securities, the Series could
miss a favorable price or yield opportunity, or could experience a loss.

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 to purchase similar, but not
identical securities at a future date.

U.S. PRIVATE PLACEMENTS -- The Growth Series, the International Series, the
Growth-Income Series, the Asset Allocation Series and the High-Yield Bond Series
may invest in private placements. Private placements may be either purchased
from another institutional investor that originally acquired the securities in a
private placement or directly from the issuers of the securities. Generally,
securities acquired in such private placements are subject to contractual
restrictions on resale and may not be resold except pursuant to a registration
statement under the Securities Act of 1933 or in reliance upon an exemption from
the registration requirements under the Act. Accordingly, all such private
placements will be considered illiquid unless they have been specifically
determined to be liquid taking into account factors such as the frequency and
volume of trading and the commitment of dealers to make markets under procedures
adopted by the Fund's Board of Trustees. Additionally, the liquidity of any
particular security will depend on such factors as the availability of
"qualified" institutional investors and the extent of investor interest in the
security, which can change from time to time.

RISKS OF INVESTING IN VARIOUS COUNTRIES -- The Growth, International,
Growth-Income, Asset Allocation and the High-Yield Bond Series may invest in
securities of issuers domiciled outside the U.S. which may be denominated in
currencies other than the U.S. dollar.

Investing outside the U.S. involves special risks, particularly in certain
developing countries, caused by, among other things, fluctuating currency
values; different accounting, auditing, and financial reporting regulations and
practices in some countries; changing local and regional economic, political,
and social conditions; greater market volatility; differing securities market
structures; and various administrative difficulties such as delays in clearing
and settling portfolio transactions or in receiving payment of dividends.
However, in the opinion of Capital Research and Management Company, investing
outside the U.S. also can reduce certain portfolio risks due to greater
diversification opportunities.

Additional costs could be incurred in connection with the Series'
investment activities outside the U.S. Brokerage commissions are generally
higher outside the U.S., and the Series will bear certain expenses in connection
with their currency transactions. Furthermore, increased custodian costs may be
associated with the maintenance of assets in certain jurisdictions.

The Growth-Income Series and the Asset Allocation Series may invest in the
equity securities of issuers domiciled outside the U.S., provided those
securities are either held through depositary receipts which are U.S. dollar
denominated or are traded on the NYSE. In addition, the U.S.
Government/AAA-Rated Securities Series may purchase obligations of non-U.S.
corporations or governmental entities, provided they are U.S. dollar denominated
and highly liquid. Accordingly, while the risks mentioned above are still
present, they are present to a lesser extent.

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.

10
<PAGE> 13

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.

CURRENCY TRANSACTIONS -- The Growth Series, the International Series and
the High-Yield Bond Series may purchase and sell currencies to facilitate
securities transactions and to enter into forward currency contracts to hedge
against changes in currency exchange rates. While entering into forward
transactions could minimize the risk of loss due to a decline in the value of
the hedged currency, it could also limit any potential gain which might result
from an increase in the value of the currency. The Series will not generally
attempt to protect against all potential changes in exchange rates.

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 -- Capital Research and Management Company, a large and
experienced investment management organization founded in 1931, is the
investment adviser to the Fund. Capital Research and Management Company, a
wholly owned subsidiary of the Capital Group Companies, Inc., is headquartered
at 333 South Hope Street, Los Angeles, CA 90071. Capital Research and Management
Company manages the investment portfolios and business affairs of the Fund.

The compensation paid to the Investment Adviser for the most recent fiscal
year as a percentage of average net assets amounted to the following: 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 -- .32% and Cash Management Series -- .32%.

MULTIPLE PORTFOLIO COUNSELOR SYSTEM -- The basic investment philosophy of
the Investment Adviser 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
which are managed by individual counselors. Each counselor decides how their
segment will be invested (within the limits provided by each Series' objectives
and by the Investment Advisers investment committee). In addition, the
Investment Adviser's research professionals make investment decisions with
respect to a portion of each Series' portfolio.

11
<PAGE> 14

The primary individual portfolio counselors for the Fund are listed below:

<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>
Timothy D. Armour Senior Vice President, Asset Allocation 14 14
Capital Research Company.* Series -- 1 year
- --------------------------------------------------------------------------------------------------------------------------------
David C. Barclay Executive Vice President, High-Yield Bond 9 16
Capital Research Company* Series --
8 years
- --------------------------------------------------------------------------------------------------------------------------------
Martial Chaillet Senior Vice President, International Series -- 4 25 25
Capital Research Company* years
- --------------------------------------------------------------------------------------------------------------------------------
Gordon Crawford Senior Vice President and Growth Series -- 3 years 26 26
Director, Capital Research (plus 5 years as a
and Management Company research professional
prior to becoming a
portfolio counselor for
the Series)
- --------------------------------------------------------------------------------------------------------------------------------
James E. Drasdo Senior Vice President and Growth Series -- 11 years 20 25
Director, Capital Research
and Management Company
- --------------------------------------------------------------------------------------------------------------------------------
James K. Dunton Senior Vice President and Growth-Income Series -- 35 35
Director, Capital Research since the Series began
and Management Company operations in 1984
- --------------------------------------------------------------------------------------------------------------------------------
Abner D. Goldstine Senior Vice President and Asset Allocation 29 45
Director, Capital Research Series -- since the
and Management Company series began operations
in 1989; Government/AAA
Series -- since the
Series began operations
in 1985
- --------------------------------------------------------------------------------------------------------------------------------
Alwyn Heong Vice President, Capital International Series -- 1 5 5
Research and Management year
Company
- --------------------------------------------------------------------------------------------------------------------------------
Claudia P. Huntington Senior Vice President, Growth-Income Series -- 3 19 21
Capital Research Company* years (plus 5 years as a
research professional
prior to becoming
portfolio counselor for
the series)
- --------------------------------------------------------------------------------------------------------------------------------
Robert W. Lovelace Executive Vice President, International Series -- 12 12
Capital Research Company* 3 years
- --------------------------------------------------------------------------------------------------------------------------------
Robert G. O'Donnell Senior Vice President and Growth-Income Series -- 22 25
Director, Capital Research 7 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 -- 6 years 11 11
Research and Management (plus 4 years as a
Company research professional
prior to becoming a
portfolio counselor for
the Series)
- --------------------------------------------------------------------------------------------------------------------------------

* Company affiliated with Capital Research and Management Company.
- --------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE> 15

</TABLE>

BUSINESS MANAGER -- The Fund's business manager is Anchor Investment
Adviser, Inc., 1 SunAmerica Center, 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, 1996, the Series paid to the Business Manager a fee equal to the
following percentages of average daily net assets; Growth Series -- .20%,
International Series -- .24%, Growth-Income Series -- .20%, Asset Allocation
Series -- .21%, High-Yield Bond Series -- .21%, U.S. Government/AAA-Rated
Series -- .21% 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

Portfolio changes will be made without regard to the length of time
particular investments may have been held. High portfolio turnover involves
correspondingly greater transaction costs in the form of dealer spreads or
brokerage commissions, and may result in the realization of net capital gains,
which are taxable when distributed to shareholders. Fixed-income securities are
generally traded on a net basis and usually neither brokerage commissions nor
transfer taxes are involved. A Series portfolio turnover rate would equal 100%
if each security in the Series' portfolio were replaced once per year.

13
<PAGE> 16

DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES

It is the Fund's policy to distribute to the shareholders (the variable
separate account) all of its investment income and capital gains realized during
each fiscal year. Each Series of the Fund is subject to 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. There are also alternative diversification tests which may be
satisfied by the Series under the regulation. The Fund intends to comply with
the diversification regulations. 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.

Each Series of the Fund intends to operate as a "regulated investment
company" under the Code. In any fiscal year in which a Series so qualifies and
distributes to shareholders its net investment income and realized capital
gains, the Series itself is relieved of federal income tax.

See the applicable contract prospectus for information regarding the
federal income tax treatment of the contracts and distributions to the separate
accounts.

PORTFOLIO TRANSACTIONS -- Orders for the Fund's portfolio securities
transactions are placed by Capital Research and Management Company which strives
to obtain the best available prices, taking into account the costs and quality
of executions. There is no agreement or commitment to place orders with any
broker-dealer. Fixed-income securities are generally traded on a "net" basis
with a dealer acting as principal for its own account without a stated
commission, although the price of the security usually includes a profit to the
dealer. In underwritten offerings, securities are usually purchased at a fixed
price which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. On occasion, securities
may be purchased directly from an issuer, in which case no commissions or
discounts are paid.

Subject to the above policy, when two or more brokers are in a position to
offer comparable prices and executions, preference may be given to brokers that
have sold Contracts or have provided investment research, statistical and other
related services for the benefit of the Fund and/or of other funds served by
Capital Research and Management Company.

PRICE OF SHARES

The Fund is open for business on any day the NYSE is open for regular
trading. Shares of each Series of the Fund are sold at the net asset value per
share calculated once daily at the close of regular trading on the NYSE
(generally, 4:00 p.m. Eastern time). 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 redemption charges 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.

14
<PAGE> 17

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 firms of Blazzard, Grodd & Hasenauer and Shereff, Friedman, Hoffman &
Goodman, LLP provide legal services 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.

15
<PAGE> 18

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................................................................ 23
General Information................................................................................ 25
Financial Statements............................................................................... 26
</TABLE>

16
<PAGE> 19

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 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> 20
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
28, 1997. 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 28, 1997

<PAGE> 21
TABLE OF CONTENTS

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................................................. 26
</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.

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<PAGE> 22
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. Capital Research and Management Company ("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

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<PAGE> 23
institutional investors through or with the assistance of 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 in which the Series may invest include the following:

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) representing direct or contingent obligations of commercial banks with
total assets in excess of $1 billion, based on the latest published reports, and
documented discount notes (corporate promissory discount notes accompanied by a
commercial bank guarantee to pay at maturity). 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 U.S. Government.

SAVINGS ASSOCIATION OBLIGATIONS - Certificates of deposit
(interest-bearing time deposits) issued by savings banks or savings and loan
associations with assets in excess of $1 billion based on the latest published
reports. The Cash Management Series may also invest in obligations issued by
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 U.S. Government.

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 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
Appendix contained in the Fund's prospectus for a description of the ratings.
The commercial paper in which the Cash Management Series may invest includes
variable amount master demand notes.

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<PAGE> 24

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.

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 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.

- 5 -
<PAGE> 25

ASSET ALLOCATION SERIES AND U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES

GNMA CERTIFICATES, FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS - The
Series may purchase certificates issued by the Government National Mortgage
Association (GNMA) and the U.S. Government/AAA-Rated Securities Series expects
to invest in these securities. 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.

The Federal National Mortgage Association ("FNMA"), a federally chartered and
privately owned corporation, issues pass-through securities representing
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 U.S. Government,
issues participation certificates which 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.

MORTGAGE-RELATED SECURITIES - The Series may invest in
mortgage-related securities issued by financial institutions such as commercial
banks, savings and loan associations, mortgage bankers and securities
broker-dealers (or separate trusts or affiliates of such institutions
established to issue the securities) including collateralized mortgage
obligations ("CMO's") and mortgage backed bonds. CMO's (including real estate
mortgage investment conduits as authorized under the Internal Revenue Code of
1986, as amended) are issued in series that are 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

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<PAGE> 26

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.

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).

U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES AND 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 liquid assets, which
will be marked to market daily, 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. 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.

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<PAGE> 27

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
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. Each Series will limit its loans of
portfolio securities to an aggregate of 10% of the value of its total assets,
determined at the time any such loan is made.

PORTFOLIO TRADING OF FIXED-INCOME SECURITIES - The Series intends to
engage in portfolio trading of fixed-income securities when it is believed that
the sale of a fixed-income security owned and the purchase of another security
of better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value in light of what is
evaluated as an expected rise in prevailing yields, or a security may be
purchased in anticipation of a market rise (a decline in prevailing yields). A
security also may be sold and a comparable security purchased coincidentally in
order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities.

ROLL TRANSACTIONS - Although the Asset Allocation Series, the
High-Yield Bond Series, and the U.S. Government/AAA-Rated Securities Series have
no current intention of doing so during the next 12 months, these Series may
engage in "roll" transactions. A "roll" transaction is the sale of GNMA
certificates or other securities together with a commitment to purchase similar,
but not identical securities at a future date. The Series intend to treat "roll"
transactions as two separate transactions; one involving the purchase of a
security and a separate transaction involving the sale of a security. Since the
Series do not intend to enter into "roll" transactions for financing purposes,
they may treat these transactions as not falling within the definition of
borrowing set forth in Section 2(a)(23) of the 1940 Act. The Series will
segregate liquid assets, which will be marked to market daily, in an amount
sufficient to meet their payment obligations in these transactions. Although
these transactions will not be entered into for leveraging purposes, to the
extent a Series' aggregate commitments under these transactions exceed its
holding of cash and securities that do not fluctuate in value (such as
short-term money market instruments), the Series temporarily will be in a
leveraged position, as set forth in Section 18 of the 1940 Act, (i.e., it
will have an amount greater than its net assets

- 8 -
<PAGE> 28

subject to market risk). Should the market value of a Series' portfolio
securities decline while the Series is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such a
position. As the Series' aggregate commitments under these transactions
increase, the opportunity for leverage similarly increases.

GROWTH SERIES, INTERNATIONAL SERIES AND HIGH-YIELD BOND SERIES

CURRENCY TRANSACTIONS - The Growth Series, International Series and
High-Yield Bond Series have the ability to enter into forward currency contracts
to protect against changes in currency exchange rates. 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 will
segregate liquid assets which will be marked to market daily to meet its forward
contract commitments to the extent required by the Securities and Exchange
Commission.

Although it has no current intention to do so (at least during the
next 12 months), 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 Series 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 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.

Although it has no current intention to do so (at least during the
next 12 months), the High-Yield Bond Series may attempt to accomplish objectives
similar to those involved in 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

- 9 -
<PAGE> 29

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.

Certain provisions of the Internal Revenue Code may affect the
extent to which the Series may enter into forward contracts. Such transactions
may also affect, for U.S. federal income tax purposes, the character and timing
of income, gain or loss recognized by the Series.

GROWTH SERIES, ASSET ALLOCATION SERIES AND HIGH-YIELD BOND SERIES

CERTAIN RISK FACTORS RELATING TO HIGH-YIELD BONDS - The Growth
Series, 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 proceedings, the Series may incur losses
or expenses in seeking recovery of amounts owed to it. In addition, periods of
economic

- 10 -
<PAGE> 30
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 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.

- 11 -
<PAGE> 31
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 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

- 12 -
<PAGE> 32
"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).

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).

- 13 -
<PAGE> 33
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. Restricted securities eligible for resale pursuant to
Rule 144A under the Securities Act that have a readily available market, and
commercial paper exempted from registration under the Securities Act pursuant
to Section 4(2) of that Act that may be offered and sold to "qualified
institutional buyers" as defined in Rule 144A which the investment Adviser has
determined to be liquid pursuant to guidelines established by the Trustees,
will not be considered illiquid for purposes of this 10% limitation on
restricted securities. 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.

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

- 14 -
<PAGE> 34
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 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

- 15 -
<PAGE> 35
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, Los
Angeles, California 90067-6022.

FRANK L. ELLSWORTH (53), President, the Independent
Trustee Colleges of Southern California
(1991 to present).

NORMAN J. METCALFE (54), Vice Chairman and Chief
Trustee Financial Officer, The Irvine
Company (March 1993 to January
1997); 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).
</TABLE>

- 16 -
<PAGE> 36

<TABLE>
<CAPTION>
Name, Age and Position(s) Principal Occupation(s)
Held With the Fund During the Past Five Years
- ------------------------- --------------------------
<S> <C>
JAMES K. HUNT (45), Trustee, Executive Vice President,
Chairman and President* SunAmerica Investments, Inc.
(1993 to present) and
President, SunAmerica Corporate
Finance (since January 1994);
Senior Vice President,
SunAmerica Investments Inc.
(1990-1993).

SCOTT L. ROBINSON (50) Senior Vice President and
Senior Vice President, Controller, SunAmerica Inc.
Treasurer and Controller (since 1991); Senior Vice
President and Director, Anchor
National (since 1988). (joined
SunAmerica in 1978)

SUSAN L. HARRIS (39) Senior Vice President (since
Vice President, Counsel and November 1995), Secretary
Secretary (since 1989) and General
Counsel (since December 1994),
SunAmerica Inc.; Senior Vice
President and Secretary, Anchor
National (since 1990) and
Director (since 1991) (joined
SunAmerica Inc. in 1985).

PETER C. SUTTON (32) Vice President, SAAMCo, since
Vice President September, 1994; Treasurer,
The SunAmerica Center SunAmerica Mutual Funds since
733 Third Avenue February 1996; Vice President,
New York, NY 10017-3204 SunAmerica Series Trust since
October 1994; Controller,
SunAmerica Mutual Funds (March
1993 to February 1996);
</TABLE>

- -------------------

*A Trustee who may be deemed to be an "interested person" of the Fund as that
term is defined in the 1940 Act.

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. For the
fiscal year ended November 30, 1996, the Fund paid Trustees' fees and expenses
which totaled $49,500.

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, 1996. Trustees who are affiliated with the
Company do not receive any compensation.

- 17 -
<PAGE> 37

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 $22,000
Frank L. Ellsworth $13,000 N/A $22,000
Gordon F. Hampton $11,750 N/A $20,250
Norman J. Metcalfe $11,750 N/A $20,250
</TABLE>

* Information is as of November 30, 1996 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 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 18, 1996. 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

- 18 -
<PAGE> 38
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.

The following table sets forth the total advisory fees received by
the Adviser from each Fund pursuant to the Advisory Agreement for the fiscal
years ended November 30, 1996, 1995 and 1994.

ADVISORY FEES

<TABLE>
<CAPTION>
FUND 1996 1995 1994
<S> <C> <C> <C>
Growth Series $2,478,000 $2,484,000 $2,232,000
International Series $1,412,000 $1,419,000 $1,501,000
Growth-Income Series $2,672,000 $2,478,000 $2,484,000
Asset Allocation Series $ 472,000 $ 461,000 $ 492,000
High-Yield Bond Series $ 421,000 $ 447,000 $ 497,000
U.S. Government/AAA-Rated
Securities Series $ 380,000 $ 449,000 $ 582,000
Cash Management Series $ 318,000 $ 442,000 $ 560,000
</TABLE>

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 Business 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

- 19 -
<PAGE> 39
$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%.

The following table sets forth the total administrative fees paid by
the Fund to the Business Manager pursuant to the Business Management Agreement
for the fiscal years ended November 30, 1996, 1995 and 1994.

BUSINESS MANAGEMENT FEES

<TABLE>
<CAPTION>
FUND 1996 1995 1994
<S> <C> <C> <C>
Growth Series $1,653,000 $1,656,000 $1,488,000
International Series $ 564,000 $ 567,000 $ 601,000
Growth-Income Series $1,781,000 $1,652,000 $1,656,000
Asset Allocation Series $ 314,000 $ 307,000 $ 328,000
High-Yield Bond Series $ 281,000 $ 298,000 $ 331,000
U.S. Government/AAA-Rated
Securities Series $ 253,000 $ 300,000 $ 338,000
Cash Management Series $ 212,000 $ 295,000 $ 373,000
</TABLE>

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 (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, 1996. 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.

- 20 -
<PAGE> 40
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); (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) and (ii) not more than 25% of the value of its assets are
invested in the securities of any one issuer (other than government securities
or the securities of other regulated investment companies; and (d) distribute at
least 90% of its investment company taxable income (including short-term capital
gains).

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. Shareholders
are urged to consult their tax advisors regarding specific questions as to
Federal, state and local taxes.

PRICE OF SHARES

The Fund is open for business any day the NYSE is open for regular
trading. Shares are valued each day as of the close of regular trading on the
NYSE (generally, 4:00 p.m., Eastern time). Each Fund calculates the net asset
value of each class of its shares separately by dividing the total value of
each class's net assets by the shares of such class outstanding. The net asset
value of a Fund's shares will also be computed on each other day in which there
is a sufficient degree of trading in such Fund's securities that the net asset
value of its shares might be materially affected by changes in the values of
the portfolio securities; provided, however, that on such day the Trust
receives a request to purchase or redeem such Fund's shares. The days and times
of such computation may, in the future, be changed by the

- 21 -
<PAGE> 41

Trustees in the event that the portfolio securities are traded in significant
amounts in markets other than the NYSE, or on days or at times other than those
during which the NYSE is open for trading.

Stocks and convertible bonds and debentures traded on the NYSE 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 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

- 22 -
<PAGE> 42
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 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.

The following tables set forth the brokerage commissions paid by the
Funds and the amounts of the brokerage commissions which were paid to affiliated
broker-dealers by the Funds for the fiscal years ended November 30, 1996, 1995
and 1994.

- 23 -
<PAGE> 43

1996 BROKERAGE COMMISSIONS

<TABLE>
<CAPTION>
AGGREGATE AMOUNT PAID TO PERCENTAGE PAID TO
BROKERAGE AFFILIATED BROKER- AFFILIATED BROKER-
SERIES COMMISSIONS DEALERS DEALERS
<S> <C> <C> <C>
Growth Series $545,267 $4,076 0.75%
International Series $501,956 -- --
Growth-Income Series $574,225 $4,220 0.74%
Asset Allocation
Series $ 79,496 $ 120 0.15%
High-Yield Bond
Series -- -- --
U.S. Government/AAA-
Rated Securities
Series -- -- --
Cash Management
Series -- -- --
</TABLE>

1995 BROKERAGE COMMISSIONS

<TABLE>
<CAPTION>
AGGREGATE AMOUNT PAID TO PERCENTAGE PAID TO
BROKERAGE AFFILIATED BROKER- AFFILIATED BROKER-
SERIES COMMISSIONS DEALERS DEALERS
<S> <C> <C> <C>
Growth Series $531,082 $ 900 0.17%
International Series $184,500 -- --
Growth-Income Series $563,815 $2,262 0.40%
Asset Allocation
Series $168,685 $2,460 1.46%
High-Yield Bond
Series $ 0 -- --
U.S. Government/AAA-
Rated Securities
Series $ 0 -- --
Cash Management
Series $ 0 -- --
</TABLE>

- 24 -
<PAGE> 44

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. Of the total brokerage commissions
paid, the Fund paid affiliated brokers as follows: Royal Alliance Associates,
Inc. $5,766 and SunAmerica Securities, Inc. $180 which constitute .33% and
.01%, respectively, of the total brokerage commissions paid for the period.

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 LLP 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 firms of Blazzard, Grodd & Hasenauer, North Ocean Drive,
Hollywood, FL 33019 and Shereff Friedman, Hoffman & Goodman, LLP, 919 Third
Avenue, New York, NY 10022, provide legal services 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
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

- 25 -
<PAGE> 45
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, 1996, follow.

- 26 -
<PAGE> 46
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, 1996.

(b) Exhibits

<TABLE>
<S> <C>
(1) Declaration of Trust, as Amended................... Previously Filed
(2) By-Laws............................................ Previously Filed
(3) Voting Trust Agreement............................. Not Applicable
(4) Shares of Beneficial Interest...................... Not Applicable
(5) (a) Investment Advisory Agreement.................. Previously Filed
(b) Business Management Agreements................. Previously Filed
(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 to the
Investment Adviser................................. Herewith
(11) (a) Consent of Independent Accountants............. 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................................. Previously Filed
(27) Financial Data Schedules........................... 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> 47
Item 26. Number of Holders of Securities

As of January 22, 1997, 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.
<PAGE> 48
(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 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
<PAGE> 49
Person is entitled to be indemnified by the Fund 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
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
<PAGE> 50
without limitation, any error of judgment or mistake or law or 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 Management 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> 51
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, 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> 52
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
(the "1933 Act") and the Investment Company Act of 1940, as amended, Registrant
certifies that it meets all of the requirements for effectiveness of this
Post-Effective Amendment No. 13 to the Registration Statement (the
"Post-Effective Amendment") pursuant to Rule 485(b) under the 1933 Act and that
Registrant has duly caused this Post-Effective Amendment 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, 1997.

ANCHOR PATHWAY FUND

By: /s/ Peter C. Sutton
Peter C. Sutton
Vice President

Pursuant to the requirements of the 1933 Act, the Post-Effective
Amendment No. 13 to the Registrant's Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date
indicated.

<TABLE>
<CAPTION>
<S> <C> <C>
* Chairman, President January 24, 1997
James K. Hunt and Trustee
(Principal Executive Officer)

* Senior Vice President, January 24, 1997
Scott L. Robinson Treasurer and Controller
(Principal Financial and
Accounting Officer)

* Trustee January 24, 1997
Richards D. Barger

* Trustee January 24, 1997
Frank L. Ellsworth

* Trustee January 24, 1997
Norman J. Metcalfe
</TABLE>

*By: /s/ Robert M. Zakem
Attorney-in-Fact
Robert M. Zakem
<PAGE> 53
ANCHOR PATHWAY FUND

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No. Name
<S> <C>
10 Opinion and Consent of Counsel of the
Investment Adviser

11 Consent of Price Waterhouse

27 Financial Data Schedules
</TABLE>

<PAGE> 1
CAPITAL RESEARCH AND MANAGEMENT COMPANY

333 South Hope Street, Los Angeles, California 90071 - Telephone
(213) 486-9200 - Fax (213) 486-9455

January 23, 1997

VIA EDGAR

Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549

RE: Post-Effective Amendment No. 13 under the Securities Act of
1933 for Anchor Pathway Fund (File No. 33-14227 and 811-
5157)

Ladies and Gentlemen:

This letter is being submitted in connection with the above referenced
Post-Effective Amendment.

Capital Research and Management Company serves as the investment adviser
(the "adviser") for Anchor Pathway Fund. As counsel for the adviser, I have
reviewed this Post-Effective Amendment which is being file pursuant to paragraph
(b) of rule 485 under the Securities Act of 1933. I hereby represent that the
Amendment does not contain disclosures that would render it ineligible to become
effective under this paragraph.

If you have any questions concerning the foregoing, please call the
undersigned at (213) 486-9425 or Kristine Nishiyama at (213) 486-9652.

Sincerely,

/s/Michael J. Downer
Michael J. Downer
Counsel

<PAGE> 1
Consent of Independent Accountants

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 13 to the
registration statement on Form N-1A (the "Registration Statement") of
our report dated January 15, 1997, relating to the financial statements
and financial highlights of Anchor Pathway Fund, which appears in such
Statement of Additional Information. We also consent to the references
to us under the heading "Independent Accountants and Legal Counsel" in
such Statement of Additional Information and to the references to us
under the headings "Financial Highlights" and "Independent Accountants
and Legal Counsel" in the Prospectus which also constitutes part of
this Registration Statement.

/s/Price Waterhouse
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
January 24, 1997

<ARTICLE> 6
<CIK> 0000814150
<NAME> ANCHOR PATHWAY FUND
<SERIES>
<NUMBER> 01
<NAME> ANCHOR PATHWAY CASH MANAGEMENT FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 90,088
<INVESTMENTS-AT-VALUE> 90,088
<RECEIVABLES> 53
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 173
<TOTAL-ASSETS> 90,314
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,078
<TOTAL-LIABILITIES> 1,078
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 83,388
<SHARES-COMMON-STOCK> 7,841
<SHARES-COMMON-PRIOR> 8,662
<ACCUMULATED-NII-CURRENT> 4,848
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 89,236
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,438
<OTHER-INCOME> 0
<EXPENSES-NET> (583)
<NET-INVESTMENT-INCOME> 4,855
<REALIZED-GAINS-CURRENT> 1
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,856
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,520)
<DISTRIBUTIONS-OF-GAINS> (1)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,136
<NUMBER-OF-SHARES-REDEEMED> (23,640)
<SHARES-REINVESTED> 683
<NET-CHANGE-IN-ASSETS> (11,636)
<ACCUMULATED-NII-PRIOR> 7,513
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 530
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 583
<AVERAGE-NET-ASSETS> 101,039
<PER-SHARE-NAV-BEGIN> 11.65
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.82)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.38
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000814150
<NAME> ANCHOR PATHWAY
<SERIES>
<NUMBER> 02
<NAME> ANCHOR PATHWAY HIGH-YIELD FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 122,872
<INVESTMENTS-AT-VALUE> 128,589
<RECEIVABLES> 2,741
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 111
<TOTAL-ASSETS> 131,441
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 104
<TOTAL-LIABILITIES> 104
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115,245
<SHARES-COMMON-STOCK> 9,484
<SHARES-COMMON-PRIOR> 10,773
<ACCUMULATED-NII-CURRENT> 12,657
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,282)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,717
<NET-ASSETS> 131,337
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,020
<OTHER-INCOME> 0
<EXPENSES-NET> (784)
<NET-INVESTMENT-INCOME> 12,236
<REALIZED-GAINS-CURRENT> 1,680
<APPREC-INCREASE-CURRENT> 3,974
<NET-CHANGE-FROM-OPS> 17,890
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13,970)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,028
<NUMBER-OF-SHARES-REDEEMED> (5,421)
<SHARES-REINVESTED> 1,104
<NET-CHANGE-IN-ASSETS> (15,253)
<ACCUMULATED-NII-PRIOR> 13,964
<ACCUMULATED-GAINS-PRIOR> (3,535)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 784
<AVERAGE-NET-ASSETS> 134,631
<PER-SHARE-NAV-BEGIN> 13.61
<PER-SHARE-NII> 1.21
<PER-SHARE-GAIN-APPREC> 0.56
<PER-SHARE-DIVIDEND> (1.53)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.85
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000814150
<NAME> ANCHOR PATHWAY SERIES
<SERIES>
<NUMBER> 03
<NAME> ANCHOR PATHWAY GROWTH INCOME FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 653,922
<INVESTMENTS-AT-VALUE> 919,574
<RECEIVABLES> 1,990
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 95
<TOTAL-ASSETS> 921,660
<PAYABLE-FOR-SECURITIES> 1,048
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,256
<TOTAL-LIABILITIES> 2,304
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 511,441
<SHARES-COMMON-STOCK> 26,038
<SHARES-COMMON-PRIOR> 27,885
<ACCUMULATED-NII-CURRENT> 18,313
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 123,950
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 265,652
<NET-ASSETS> 919,356
<DIVIDEND-INCOME> 18,473
<INTEREST-INCOME> 4,673
<OTHER-INCOME> 0
<EXPENSES-NET> 4,825
<NET-INVESTMENT-INCOME> 18,321
<REALIZED-GAINS-CURRENT> 124,360
<APPREC-INCREASE-CURRENT> 32,410
<NET-CHANGE-FROM-OPS> 175,091
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (20,695)
<DISTRIBUTIONS-OF-GAINS> (55,955)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,343
<NUMBER-OF-SHARES-REDEEMED> (6,652)
<SHARES-REINVESTED> 2,462
<NET-CHANGE-IN-ASSETS> 37,217
<ACCUMULATED-NII-PRIOR> 20,687
<ACCUMULATED-GAINS-PRIOR> 55,709
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,453
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,825
<AVERAGE-NET-ASSETS> 884,576
<PER-SHARE-NAV-BEGIN> 31.64
<PER-SHARE-NII> 0.67
<PER-SHARE-GAIN-APPREC> 5.87
<PER-SHARE-DIVIDEND> (0.77)
<PER-SHARE-DISTRIBUTIONS> (2.10)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 35.31
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000814150
<NAME> ANCHOR PATHWAY SERIES
<SERIES>
<NUMBER> 04
<NAME> ANCHOR PATHWAY GROWTH SERIES

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 523,722
<INVESTMENTS-AT-VALUE> 802,930
<RECEIVABLES> 11,313
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 127
<TOTAL-ASSETS> 814,371
<PAYABLE-FOR-SECURITIES> 371
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 836
<TOTAL-LIABILITIES> 1,207
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 411,699
<SHARES-COMMON-STOCK> 19,232
<SHARES-COMMON-PRIOR> 20,627
<ACCUMULATED-NII-CURRENT> 3,789
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 118,468
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 279,208
<NET-ASSETS> 813,164
<DIVIDEND-INCOME> 4,725
<INTEREST-INCOME> 3,554
<OTHER-INCOME> 0
<EXPENSES-NET> (4,483)
<NET-INVESTMENT-INCOME> 3,796
<REALIZED-GAINS-CURRENT> 118,807
<APPREC-INCREASE-CURRENT> (22,910)
<NET-CHANGE-FROM-OPS> 99,693
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,500)
<DISTRIBUTIONS-OF-GAINS> (120,665)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,762
<NUMBER-OF-SHARES-REDEEMED> (9,518)
<SHARES-REINVESTED> 3,361
<NET-CHANGE-IN-ASSETS> (84,111)
<ACCUMULATED-NII-PRIOR> 5,493
<ACCUMULATED-GAINS-PRIOR> 120,611
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,131
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,483
<AVERAGE-NET-ASSETS> 820,125
<PER-SHARE-NAV-BEGIN> 43.50
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 5.10
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> (6.22)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 42.28
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000814150
<NAME> ANCHOR PATHWAY SERIES
<SERIES>
<NUMBER> 05
<NAME> ANCHOR PATHWAY U.S. GOVERNMENT/AAA

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 105,777
<INVESTMENTS-AT-VALUE> 107,307
<RECEIVABLES> 1,249
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 416
<TOTAL-ASSETS> 108,972
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 120
<TOTAL-LIABILITIES> 120
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,543
<SHARES-COMMON-STOCK> 9,461
<SHARES-COMMON-PRIOR> 11,262
<ACCUMULATED-NII-CURRENT> 8,429
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,650)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,530
<NET-ASSETS> 108,852
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,188
<OTHER-INCOME> 0
<EXPENSES-NET> (709)
<NET-INVESTMENT-INCOME> 8,479
<REALIZED-GAINS-CURRENT> 118
<APPREC-INCREASE-CURRENT> (2,756)
<NET-CHANGE-FROM-OPS> 5,841
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,160)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,469
<NUMBER-OF-SHARES-REDEEMED> (4,300)
<SHARES-REINVESTED> 1,030
<NET-CHANGE-IN-ASSETS> (26,086)
<ACCUMULATED-NII-PRIOR> 11,152
<ACCUMULATED-GAINS-PRIOR> (1,810)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 633
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 709
<AVERAGE-NET-ASSETS> 120,675
<PER-SHARE-NAV-BEGIN> 11.98
<PER-SHARE-NII> 0.80
<PER-SHARE-GAIN-APPREC> (0.21)
<PER-SHARE-DIVIDEND> (1.06)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.51
<EXPENSE-RATIO> 0.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000814150
<NAME> ANCHOR PATHWAY SERIES
<SERIES>
<NUMBER> 06
<NAME> ANCHO PATHWAY ASSET ALLOCATION FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 123,301
<INVESTMENTS-AT-VALUE> 152,750
<RECEIVABLES> 912
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 44
<TOTAL-ASSETS> 153,706
<PAYABLE-FOR-SECURITIES> 500
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 146
<TOTAL-LIABILITIES> 646
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103,083
<SHARES-COMMON-STOCK> 9,431
<SHARES-COMMON-PRIOR> 10,057
<ACCUMULATED-NII-CURRENT> 5,687
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,841
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,449
<NET-ASSETS> 153,060
<DIVIDEND-INCOME> 2,500
<INTEREST-INCOME> 4,030
<OTHER-INCOME> 0
<EXPENSES-NET> (873)
<NET-INVESTMENT-INCOME> 5,657
<REALIZED-GAINS-CURRENT> 14,891
<APPREC-INCREASE-CURRENT> 5,929
<NET-CHANGE-FROM-OPS> 26,477
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,985)
<DISTRIBUTIONS-OF-GAINS> (10,955)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,045
<NUMBER-OF-SHARES-REDEEMED> (2,849)
<SHARES-REINVESTED> 1,178
<NET-CHANGE-IN-ASSETS> (548)
<ACCUMULATED-NII-PRIOR> 5,977
<ACCUMULATED-GAINS-PRIOR> 10,943
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 786
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 873
<AVERAGE-NET-ASSETS> 151,274
<PER-SHARE-NAV-BEGIN> 15.27
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 2.17
<PER-SHARE-DIVIDEND> (0.63)
<PER-SHARE-DISTRIBUTIONS> (1.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.23
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000814150
<NAME> ANCHOR PATHWAY SERIES
<SERIES>
<NUMBER> 07
<NAME> ANCHOR PATHWAY INTERNATIONAL SERIES

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 192,595
<INVESTMENTS-AT-VALUE> 248,958
<RECEIVABLES> 544
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 126
<TOTAL-ASSETS> 249,628
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 484
<TOTAL-LIABILITIES> 484
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 171,204
<SHARES-COMMON-STOCK> 15,763
<SHARES-COMMON-PRIOR> 16,407
<ACCUMULATED-NII-CURRENT> 3,943
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,634
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 56,363
<NET-ASSETS> 249,144
<DIVIDEND-INCOME> 4,318
<INTEREST-INCOME> 1,739
<OTHER-INCOME> 0
<EXPENSES-NET> (2,398)
<NET-INVESTMENT-INCOME> 3,659
<REALIZED-GAINS-CURRENT> 17,931
<APPREC-INCREASE-CURRENT> 21,406
<NET-CHANGE-FROM-OPS> 42,996
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,250)
<DISTRIBUTIONS-OF-GAINS> (4,980)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,811
<NUMBER-OF-SHARES-REDEEMED> (6,335)
<SHARES-REINVESTED> 880
<NET-CHANGE-IN-ASSETS> 21,010
<ACCUMULATED-NII-PRIOR> 7,246
<ACCUMULATED-GAINS-PRIOR> 4,971
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,976
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,398
<AVERAGE-NET-ASSETS> 235,126
<PER-SHARE-NAV-BEGIN> 13.90
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> 2.46
<PER-SHARE-DIVIDEND> (0.46)
<PER-SHARE-DISTRIBUTIONS> (0.31)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.81
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>