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DEAR ANCHOR PATHWAY INVESTOR:
We are pleased to report that the Anchor Pathway Fund -- which
serves as the underlying investment vehicle for the American
Pathway II Variable Annuity -- posted another year of solid gains.
Fiscal 1997, representing the 12 months ended November 30, 1997,
marks the third consecutive year of positive results for every
series in the fund. The following commentary on the economy in
general and the investment activities of each of the series has
been provided by Capital Research and Management Company (CRMC),
the investment adviser to the Anchor Pathway Fund.
ECONOMIC OVERVIEW
Fiscal year 1997 coincided with another strong period for U.S.
financial markets. The nation's economic expansion, now in its
seventh year, has been feeding on a heady combination of
productivity gains, rising corporate profits and exceptionally low
inflation. This unusual convergence of strong growth and low
inflation buoyed investor confidence and spurred advances in both
stock and bond prices. The S&P 500 Composite Index, which is an
unmanaged measure of the largest U.S. stocks, rose 28.6% (with
dividends reinvested), marking its third consecutive year of gains
over 20% -- the first time this has happened in this century. Bond
markets appreciated as well, recovering from weakness in the first
half of the year. The unmanaged Salomon Brothers Broad Investment
Grade Bond Index increased 7.6%.
The investment landscape was far from placid, however,
especially after late October when a major decline in currency
values and stock prices in Southeast Asia caught investors by
surprise. While non-Asian markets have recovered, CRMC notes that
the crisis has injected considerable uncertainty into the
investment outlook. It remains to be seen how individual companies
with interests in Asia will be affected over the next year or so.
While CRMC continues to monitor the markets, the investment
adviser's primary focus continues to be on finding good values
among individual securities, especially in fluctuating markets.
Here are brief comments on the investment activities of each
series:
The GROWTH SERIES was the Fund's second-biggest gainer for the
year, rising 23.78%. Many of the series' largest holdings did
extremely well, posting excellent returns. Enthusiasm for
information technology stocks, one of the series' largest sector
concentrations, boosted a wide range of businesses that supply
computer parts and services. They included one of the series'
largest holdings, Internet service provider America Online
(+113%), and Analog Devices (+74%), which manufactures circuit
boards and other computer components. On a cautionary note,
despite excellent long-term growth prospects, CRMC believes a
number of factors -- the "Asian flu," stiff pricing competition
and a manufacturing capacity glut -- may adversely affect some
technology stocks over the near term. Elsewhere, media and
entertainment issues rebounded strongly from a somewhat
disappointing 1996. Portfolio holdings such as Cablevision Systems
(+172%) and Home Shopping Network operator HSN (+80%) have
benefited from recent alliances and attempts to cut costs and
provide new services. At the other end of the spectrum, software
producer Oracle Systems (+2%) took a breather from last year's
gains, while Viacom (-7%), the entertainment conglomerate, is
still struggling with management issues arising from recent
acquisitions. On November 30, 1997, the series was invested in
stocks of 128 companies.
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The INTERNATIONAL SERIES posted a return of 13.15% at November
30, 1997. World markets presented investors with a mixed
bag -- broad strength in Europe and Latin America and widespread
weakness in Asia. In Europe, a favorable combination of low
interest rates, benign inflation and fiscal restraint bolstered
investor confidence and sent stock prices higher. With nearly half
of net assets invested in Europe, the series was well-positioned
to benefit from those trends. Most markets posted double-digit
gains for the year, although a strong U.S. dollar trimmed returns
somewhat for American investors. Investments in Latin America also
made positive contributions to results. Among the series' most
successful holdings for the year was Telefonos de Mexico (+63%).
Unfortunately, events in Southeast Asia, where about 21% of net
assets was invested, hobbled the series' results. Lax lending
policies, a shaky real estate market and an overbuilding of
manufacturing capacity sparked a currency crisis and stock market
rout that began in Thailand and quickly spread throughout the
region. Japan, already struggling with a contracting economy and
unstable financial institutions, saw stock prices plummet 25% in
dollar terms. While many of CRMC's Asian investments lost ground,
good stock selection meant that a number of the manager's
individual holdings increased during the year. Although CRMC
obviously is concerned about the short-term consequences of the
turmoil in these markets, the manager remains optimistic about
long-term prospects for the region.
The GROWTH-INCOME SERIES posted the highest return this year,
rising 24.62%. U.S. stocks continued their extraordinary upward
march, propelled by the economy's solid footing and sustained
infusions of capital from enthusiastic investors. Corporate
profits surged as restructuring activity and increased
productivity more than offset rising wages. CRMC was especially
successful with its investments in health care and banks in fiscal
1997. Among the latter, of note are Northern Trust (+71%) and
Norwest (+60%). In health care, outstanding results were achieved
by two of the series' largest holdings: Schering-Plough (+76%) and
Pfizer (+62%). The largest single investment in the series at both
the beginning and end of the year was AT&T (+49%), which enjoyed
substantial appreciation, particularly in the second part of the
year. With continuing cash flow in a robust stock market, CRMC
used the opportunity to add to many current holdings, as well as
purchase stocks of new companies, including several in the
technology and business services sectors. Overall, the series is
broadly diversified, with 164 companies in 27 categories. About
84.8% of the portfolio is held in stocks. The portfolio's
short-term securities, currently near 14.1% of net assets, serves
as a buying reserve but would help cushion the portfolio in a
market decline.
The ASSET ALLOCATION SERIES returned 17.86% for the year. The
series, which CRMC manages as though it constitutes the entire
investment program of a prudent investor, participated in
increases in all three major asset classes. The series' asset mix
on November 30 reflected the relative gains in each market. About
61.3% was allocated to stocks, 29.3% to bonds and the remaining
8.7% to short-term securities. The equity portion, which is
similar to a conservative growth and income portfolio, emphasizes
large U.S. corporations with long histories of paying dividends.
In a market run-up driven by blue-chip stocks, most of the series'
equity holdings posted positive returns for the year. Among the
series' largest holdings, retailers such as Wal-Mart Stores (+57%)
and Walgreen (+54%) benefited from a rise in consumer spending.
Other sectors, including banking and health care, also did well.
On the fixed-income side, the series holds a combination of U.S.
corporate and government bonds with an average weighted maturity
of 9.1 years. During
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the year, declining longer term interest rates boosted bond prices
and contributed to the series' gains, according to CRMC.
The HIGH-YIELD BOND SERIES posted a 12.76% gain for the 12
months ended November 30. The market for lower-rated securities
continued to flourish, charged by dual currents -- robust stock
prices, which raised the credit standing of many corporate
issuers, and lower interest rates, which sent investors clamoring
for yield. CRMC believes the demand for these bonds has created a
certain amount of market "froth," without regard to company
fundamentals. In this environment, proprietary research is
particularly critical, given the higher risks of high-yield bonds
and a lack of knowledge on Wall Street about many issuers. CRMC's
analysts spend considerable time researching each company under
consideration for the series. The manager also selects securities
on an issue-by-issue basis, with a focus not only on yield but
also on capital appreciation. The series continues to emphasize
rapidly growing industries such as networking and wireless
communication. It also invests in companies with relatively stable
cash flows, including forest and paper businesses (Container Corp.
of America), cable television operators (Cablevision Systems) and
health care providers (Integrated Health Services). At the close
of the fiscal year, 84.3% of net assets was invested in
lower-rated issues -- Ba and BB or below -- with the balance in
other bonds, short-term securities and stocks, notes the manager.
The U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES rose 6.09% in
fiscal year 1997. U.S. Treasuries did particularly well in the
rally that pushed bond prices higher in the second half of 1997.
With scant evidence of inflation on the horizon, optimistic
investors sent yields on 10-year Treasury bonds down to a low of
5.8% in October, 1997. Although most fixed-income securities
benefited from the stream of positive economic data, CRMC believes
Treasuries were further helped by increased demand from foreign
buyers for dollar-denominated investments, a lower federal budget
deficit and the comfort of a government guarantee. The series
seeks attractive income and preservation of principal from the
highest quality bonds, with investments limited primarily to
obligations issued or guaranteed by the U.S. Treasury and federal
agencies. As of November 30, Treasuries accounted for 47% of net
assets. Roughly the same amount, 42%, was held in mortgage-and
asset-backed securities, which helped provide a yield advantage
and good total return during the year. The remainder was invested
in high-grade short-term securities.
The CASH MANAGEMENT SERIES had a 5.03% return for the year. The
series, which is managed for relatively stable value, provided a
quiet harbor in the comparatively stormy seas of stock and bond
markets. The Federal Reserve kept a light touch on monetary
policy, raising short-term rates only once (in March), in a
preemptive strike against inflation. Since then, consumer prices
have risen only slightly, and short-term rates have remained
relatively flat. The series continues to emphasize quality by
concentrating its assets in high-grade commercial paper
(short-term loans to major corporations) and federal agency
discount notes (short-term loans to government agencies). All the
money market securities in the portfolio carry the highest credit
rating from Standard & Poor's and Moody's Investor Service. Many
investors choose the series as a diversification tool in their
overall financial programs, while others use it as a base from
which to make regular investments into other series, a strategy
known as dollar cost averaging, notes CRMC.
The seven series in the Anchor Pathway Fund offer you a wide
range of investment options to help you reach your long-term
financial goals. CRMC remains committed to
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helping you achieve these goals by striving to find the best
values that financial markets have to offer.
We look forward to reporting to you again in six months.
Sincerely,
/s/ Eli Broad
Eli Broad
Chairman, President and Chief Executive Officer,
Anchor National Life Insurance Company
January 15, 1998
-----------------------------------------------
Performance figures quoted are for the Anchor Pathway Fund;
therefore, they are not net of the fees and charges associated
with the variable annuity. Past performance is no guarantee of
future results.
Investments in stocks and bonds are subject to risk, including
stock market and interest rate fluctuations. Investments in
non-U.S. stocks and bonds are subject to additional risks,
including political and social instability, differing securities
regulations and accounting standards and limited public
information. High-yield bonds tend to be subject to greater price
swings than higher-rated bonds and, of course, payment of interest
and principal is not assured. Mortgage-backed securities are
subject to prepayment, which can result in reinvestment of
principal at lower yields. Money market instruments generally
offer stability and income, but an investment in these securities,
like investments in the other series, is not guaranteed.
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ANNUAL REPORT - NOVEMBER 30, 1997
-----------------------------------------------
ANCHOR
PATHWAY
FUND
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ANCHOR PATHWAY FUND
GROWTH SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 91.0% SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 26.3%
Aerospace & Military Technology -- 0.3%
Gulfstream Aerospace Corp.+.......................................... 70,000 $ 2,056
Data Processing & Reproduction -- 10.1%
3Com Corp.+.......................................................... 120,000 4,350
Adobe Systems, Inc................................................... 155,000 6,510
Ascend Communications, Inc.+......................................... 54,500 1,359
Compaq Computer Corp................................................. 131,250 8,195
Computer Associates International, Inc............................... 30,000 1,562
Data General Corp.+.................................................. 200,000 3,587
Digital Equipment Corp.+............................................. 75,000 3,694
Mentor Graphics Corp.+............................................... 120,000 1,140
Netscape Communications Corp.+....................................... 218,750 6,234
Oracle Systems Corp.+................................................ 590,000 19,654
PeopleSoft, Inc.+.................................................... 40,000 2,617
Siebel Systems, Inc.+................................................ 517 22
Silicon Graphics, Inc.+.............................................. 739,500 9,706
Solectron Corp.+..................................................... 260,000 9,474
Sybase, Inc.+........................................................ 214,400 3,002
Electrical & Electronics -- 1.2%
Ericsson (L.M.) Telecommunications Co., Class B ADR.................. 158,000 6,389
Nextlevel Systems, Inc............................................... 69,300 918
Nokia Corp., Class A ADR............................................. 30,000 2,494
Electronic Components -- 14.3%
Adaptec, Inc.+....................................................... 220,000 10,890
Advanced Micro Devices, Inc.+........................................ 75,000 1,636
Analog Devices, Inc.+................................................ 486,666 15,269
Bay Networks, Inc.+.................................................. 30,000 902
Intel Corp........................................................... 281,200 21,828
LSI Logic Corp.+..................................................... 320,000 7,440
Microchip Technology, Inc.+.......................................... 65,000 2,275
Newbridge Networks Corp.+............................................ 100,000 4,213
Park Electrochemical Corp............................................ 187,200 4,914
Rogers Corp.+........................................................ 109,200 4,457
SCI Systems, Inc.+................................................... 200,000 9,162
Texas Instruments, Inc............................................... 627,200 30,890
Xilinx, Inc.+........................................................ 20,000 691
Energy Equipment -- 0.4%
Schlumberger Ltd..................................................... 40,000 3,293
---------
210,823
---------
CONSUMER GOODS -- 6.0%
Beverages & Tobacco -- 1.2%
PepsiCo, Inc......................................................... 80,000 2,950
Philip Morris Cos., Inc.............................................. 160,000 6,960
</TABLE>
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<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS (continued)
Health & Personal Care -- 3.2%
Alpha Beta Technology, Inc.+......................................... 70,000 $ 206
Avon Products, Inc................................................... 15,000 867
BioChem Pharma, Inc.+................................................ 60,000 1,530
Dura Pharmaceuticals, Inc.+.......................................... 60,000 2,632
Forest Labs, Inc.+................................................... 60,000 2,685
Gillette Co.......................................................... 20,000 1,846
Medtronic, Inc....................................................... 15,600 745
Omnicare, Inc........................................................ 230,000 6,641
Pharmacia & Upjohn, Inc.............................................. 58,000 1,958
Shared Medical Systems Corp.......................................... 58,000 3,712
Universal Health Services, Inc.+..................................... 60,000 2,621
Recreation & Other Consumer Products -- 1.3%
Electronic Arts, Inc.+............................................... 100,000 3,350
Mattel, Inc.......................................................... 180,000 7,211
Textiles & Apparel -- 0.3%
Nike, Inc., Class B.................................................. 35,000 1,704
Nine West Group, Inc.+............................................... 30,000 816
---------
48,434
---------
ENERGY -- 2.5%
Energy Sources -- 2.3%
Murphy Oil Corp...................................................... 80,000 4,400
Oryx Energy Co.+..................................................... 200,000 5,400
Pogo Producing Co.................................................... 36,500 1,145
Talisman Energy, Inc.+............................................... 40,000 1,168
Union Texas Petroleum Holdings, Inc.................................. 275,000 5,999
Utilities: Electric, Gas & Water -- 0.2%
KN Energy, Inc....................................................... 40,000 1,870
---------
19,982
---------
FINANCE -- 4.9%
Banking -- 1.5%
Charter One Financial, Inc........................................... 77,175 4,572
Norwest Corp......................................................... 100,000 3,744
Washington Mutual, Inc............................................... 54,000 3,733
Financial Services -- 1.4%
Capital One Financial Corp........................................... 50,000 2,265
Federal Home Loan Mortgage Corp...................................... 20,000 825
Federal National Mortgage Association................................ 150,000 7,922
Insurance -- 2.0%
Aetna, Inc........................................................... 30,000 2,261
Everest Reinsurance Holdings, Inc.................................... 40,000 1,518
EXEL Ltd............................................................. 130,000 7,995
Transatlantic Holdings, Inc.......................................... 60,000 4,286
---------
39,121
---------
MATERIALS -- 1.1%
Chemicals -- 1.1%
Air Products & Chemicals, Inc........................................ 25,000 1,917
Valspar Corp......................................................... 218,200 6,628
---------
8,545
---------
</TABLE>
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<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 45.2%
Broadcasting & Publishing -- 19.3%
Adelphia Communications Corp.+....................................... 205,000 $ 2,973
BHC Communications, Inc., Class A+................................... 55,821 7,006
Cablevision Systems Corp., Class A+.................................. 70,000 5,736
Comcast Corp., Class A............................................... 360,000 10,080
Cox Communications, Inc., Class A+................................... 270,000 9,163
HSN, Inc.+........................................................... 178,250 7,954
News Corp., Ltd. ADR................................................. 680,000 14,747
Tele-Communications Liberty Media Group, Inc., Series A+............. 504,025 17,011
Tele-Communications, Inc., Series A+................................. 569,982 13,056
Time Warner, Inc..................................................... 843,750 49,148
Viacom, Inc., Class B+............................................... 515,000 18,025
Business & Public Services -- 11.0%
America Online, Inc.+................................................ 566,500 42,771
Avery Dennison Corp.................................................. 80,000 3,350
Columbia/HCA Healthcare Corp......................................... 168,125 4,960
CUC International, Inc.+............................................. 165,000 4,744
Ecolab, Inc.......................................................... 50,000 2,550
Electronic Data Systems Corp......................................... 105,000 3,990
Federal Express Corp.+............................................... 250,000 16,766
Manpower, Inc........................................................ 41,400 1,392
Pacificare Health Systems, Inc+...................................... 2,877 148
Quorum Health Group, Inc.+........................................... 1,500 36
USA Waste Services, Inc.+............................................ 120,000 3,967
Waste Management, Inc................................................ 141,912 3,494
Leisure & Tourism -- 8.4%
Carnival Corp., Class A.............................................. 50,000 2,703
Disney (Walt) Co..................................................... 320,000 30,380
Harrah's Entertainment, Inc.+........................................ 160,000 3,210
HFS, Inc.+........................................................... 155,000 10,637
Host Marriott Corp.+................................................. 500,000 10,406
King World Productions, Inc.+........................................ 75,000 4,078
Marriott International, Inc.......................................... 50,000 3,622
Mirage Resorts, Inc.+................................................ 100,000 2,375
Merchandising -- 2.2%
Barnes & Noble, Inc.+................................................ 110,000 3,403
Consolidated Stores Corp.+........................................... 175,000 8,509
Limited, Inc......................................................... 96,500 2,322
Spiegel, Inc., Class A+.............................................. 366,600 1,971
Woolworth Corp.+..................................................... 77,800 1,683
Telecommunications -- 1.2%
AirTouch Communications, Inc.+....................................... 50,000 1,963
Tele-Communications TCI Ventures Group, Series A+.................... 325,000 7,353
Transportation: Airlines -- 3.1%
AMR Corp.+........................................................... 70,000 8,483
Delta Air Lines, Inc................................................. 10,000 1,114
Southwest Airlines Co................................................ 607,500 14,846
---------
362,125
---------
OTHER COMMON STOCK -- 5.0%........................................... 40,187
---------
TOTAL COMMON STOCK (cost $437,869)................................... 729,217
---------
</TABLE>
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<TABLE>
<CAPTION>
VALUE
PREFERRED STOCK -- 0.9% SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 0.9%
Broadcasting & Publishing -- 0.9%
News Corp., Ltd. ADR (cost $2,313)................................... 340,000 $ 6,715
---------
RIGHTS -- 0.3%
--------------------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 0.3%
Data Processing & Reproduction -- 0.3%
Structural Dynamics Research Corp. (cost $2,154)..................... 150 2,503
---------
TOTAL INVESTMENT SECURITIES (cost $442,336).......................... 738,435
---------
<CAPTION>
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 7.4% (IN THOUSANDS)
<S> <C> <C>
--------------------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 7.4%
Abbott Laboratories, Inc. 5.56% due 12/22/97......................... $ 6,900 6,878
AI Credit Corp. 5.47% due 12/5/97.................................... 7,400 7,396
Bell Atlantic Financial Services 5.52% due 12/16/97.................. 15,000 14,965
Emerson Electric Co. 5.50% due 12/19/97.............................. 8,200 8,177
General Mills, Inc. 5.62% due 1/9/98................................. 4,000 3,976
Hershey Foods Corp. 5.51% due 12/22/97............................... 6,200 6,180
IBM Credit Corp. 5.51% due 12/12/97.................................. 3,400 3,394
Wal-Mart Stores, Inc. 5.49% due 12/1/97.............................. 8,400 8,400
---------
TOTAL SHORT-TERM SECURITIES (cost $59,366)........................... 59,366
---------
TOTAL INVESTMENTS --
(cost $501,702) 99.6% 797,801
Other assets less liabilities -- 0.4 3,429
------ ----- ---------
NET ASSETS -- 100.0% $ 801,230
===== =========
</TABLE>
-----------------------------
+ Non-income producing security
ADR -- American Depository Receipt
See Notes to Financial Statements
---------------------
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ANCHOR PATHWAY FUND
INTERNATIONAL SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE
COMMON & PREFERRED STOCK -- 82.7% SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA -- 1.1%
Telefonica de Argentina SA ADR (Services)............................ 75,400 $ 2,493
---------
AUSTRALIA -- 4.3%
Australia & New Zealand Bank Group (Finance)......................... 550,000 3,771
Brambles Industries Ltd. (Services).................................. 100,000 1,912
Coca-Cola Amatil Ltd. (Consumer Goods)............................... 262,517 1,954
Westpac Banking Corp., Ltd. (Finance)................................ 300,000 1,883
---------
9,520
---------
BRAZIL -- 3.4%
Centrais Eletricas Brasileiras S/A-Eletrobras ADR (Energy)........... 183,000 4,495
Companhia Energetica de Sao Paulo ADR (Energy)....................... 85,000 1,678
Companhia Paranaense de Energia-Copel (Energy)....................... 118,055,000 1,458
---------
7,631
---------
CANADA -- 5.5%
Bank of Nova Scotia (Finance)........................................ 103,400 4,486
Imasco Ltd. (Multi-industry)......................................... 82,000 2,928
Northern Telecom Ltd. (Capital Equipment)............................ 47,000 4,221
Teck Corp., Class B (Materials)...................................... 40,000 581
---------
12,216
---------
FINLAND -- 0.7%
Nokia (AB) OY Corp., Series K (Capital Equipment).................... 20,000 1,606
---------
FRANCE -- 3.6%
France Telecom SA+ (Services)........................................ 80,000 2,938
Moet-Hennessy Louis Vuitton (Consumer Goods)......................... 8,500 1,466
Total SA, Class B (Energy)........................................... 33,876 3,558
---------
7,962
---------
GERMANY -- 4.0%
Bayerische Motoren Werke AG (Consumer Goods)......................... 6,072 4,534
Bayerische Motoren Werke AG NV Preferred (Consumer Goods)............ 2,604 1,366
Mannesmann AG (Services)............................................. 6,300 2,933
---------
8,833
---------
HONG KONG -- 6.8%
Hong Kong Electric Holdings+ (Energy)................................ 1,032,000 3,491
Hong Kong Telecommunications Ltd. (Services)......................... 1,370,000 2,605
Hutchison Whampoa Ltd. (Multi-industry).............................. 1,350,000 8,994
---------
15,090
---------
INDONESIA -- 0.7%
PT Indosat ADR (Services)............................................ 49,100 1,099
PT Indosat (Services)................................................ 199,000 451
---------
1,550
---------
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
VALUE
COMMON & PREFERRED STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
ITALY -- 3.6%
Seat SpA-RNC+ (Services)............................................. 240,000 $ 62
Seat SpA+ (Services)................................................. 120,000 48
Telecom Italia Mobile SpA (Services)................................. 1,673,050 6,774
Telecom Italia Mobile SpA-RNC (Services)............................. 64,800 142
Telecom Italia SpA (Services)........................................ 240,000 946
---------
7,972
---------
JAPAN -- 13.0%
Amway Japan Ltd. ADR (Services)...................................... 36,000 315
Fuji Bank Ltd. (Finance)............................................. 320,000 1,718
Mazda Motor Corp.+ (Consumer Goods).................................. 645,000 1,804
Minebea Co., Ltd. (Capital Equipment)................................ 300,000 3,338
Mitsubishi Corp. (Services).......................................... 65,000 507
Sankyo Co., Ltd. (Consumer Goods).................................... 260,000 8,291
Shohkoh Fund & Co. (Finance)......................................... 34,100 9,699
Suzuki Motor Corp. (Consumer Goods).................................. 179,000 1,950
Tokyo Electron Ltd. (Capital Equipment).............................. 40,000 1,533
---------
29,155
---------
KOREA -- 0.4%
Korea Electric Power Corp. (Energy).................................. 39,000 440
Korea Electric Power Corp. ADR (Energy).............................. 26,000 236
Korea Mobile Telecommunications Corp. (Services)..................... 360 117
Samsung Electronics (Consumer Goods)................................. 1,097 39
---------
832
---------
LUXEMBOURG -- 0.9%
Safra Republic Holdings, Inc. (Finance).............................. 20,000 2,020
---------
MEXICO -- 3.2%
Cifra SA de CV, Series A (Services).................................. 23,911 47
Cifra SA de CV, Series C+ (Services)................................. 195,500 378
Grupo Financiero Banamex-Accival SA de CV, Series B+ (Finance)....... 324,000 714
Grupo Financiero Banamex-Accival SA de CV, Series L+ (Finance)....... 26,406 52
Grupo Televisa SA de CV ADR+ (Services).............................. 35,000 1,295
Telefonos de Mexico SA ADR (Services)................................ 95,200 4,712
---------
7,198
---------
NETHERLANDS -- 1.4%
Vereenigde Ned Uitgevers (Services).................................. 130,000 3,114
---------
PHILIPPINES -- 0.9%
Philippine Long Distance Telephone Co. (Services).................... 40,000 961
Philippine Long Distance Telephone Co. ADR (Services)................ 40,000 990
---------
1,951
---------
SPAIN -- 6.1%
Telefonica de Espana SA (Services)................................... 400,000 11,535
Telefonica de Espana SA ADR (Services)............................... 24,000 2,076
---------
13,611
---------
SWEDEN -- 3.3%
Astra AB, Class A (Consumer Goods)................................... 150,000 2,603
Ericsson LM Telecommunications Co., Class B (Capital Equipment)...... 95,200 3,884
Ericsson LM Telecommunications Co., Class B CV ADR (Capital
Equipment)......................................................... 3,500 20
Kinnevik, Series A (Multi-industry).................................. 23,900 433
Kinnevik, Series B (Multi-industry).................................. 15,000 286
</TABLE>
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<TABLE>
<CAPTION>
VALUE
COMMON & PREFERRED STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SWEDEN (continued)
Modern Times Group MTG AB, Class A+ (Services)....................... 23,900 $ 149
Modern Times Group MTG AB, Class B ADR+ (Services)................... 3,000 96
---------
7,471
---------
SWITZERLAND -- 6.1%
Nestle SA (Consumer Goods)........................................... 1,250 1,840
Novartis AG (Consumer Goods)......................................... 7,454 11,909
---------
13,749
---------
UNITED KINGDOM -- 12.8%
Bank of Scotland (Finance)........................................... 930,500 7,905
British Aerospace PLC (Capital Equipment)............................ 140,000 3,821
Kingfisher PLC (Services)............................................ 225,000 3,101
Lloyds TSB Group PLC (Finance)....................................... 550,000 6,270
Reckitt & Colman PLC (Consumer Goods)................................ 180,000 2,624
Rentokil Initial PLC (Services)...................................... 900,000 3,792
Scottish Power PLC (Energy).......................................... 132,240 1,072
---------
28,585
---------
OTHER COMMON STOCK -- 0.9%........................................... 1,997
---------
TOTAL COMMON & PREFERRED STOCK (cost $153,331)....................... 184,556
---------
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 17.3% (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 15.1%
Bayer Corp. 5.57% due 1/20/98........................................ $ 5,000 4,961
Caisse D Amortissement 5.60% due 2/13/98............................. 6,000 5,930
Deutsche Bank Financial, Inc. 5.49% due 1/06/98...................... 4,000 3,978
France Telecom 5.55% due 12/04/97.................................... 5,000 4,998
General Electric Capital Corp. 5.80% due 12/01/97.................... 1,300 1,300
Heinz (H.J.) Co. 5.55% due 1/08/98................................... 5,000 4,971
Rank Xerox Capital Europe PLC 5.55% due 1/14/98...................... 6,000 5,959
Telstra Corp. Ltd. 5.55% due 1/21/98................................. 1,600 1,588
---------
33,685
---------
FEDERAL AGENCY OBLIGATIONS -- 2.2%
Federal Home Loan Mortgage Discount Notes 5.45% due 12/11/97......... 5,000 4,992
---------
TOTAL SHORT-TERM SECURITIES (cost $38,677)........................... 38,677
---------
TOTAL INVESTMENTS --
(cost $192,008) 100.0% 223,233
Other assets less liabilities -- 0.0 104
------ ---------
NET ASSETS -- 100.0% $ 223,337
====== =========
</TABLE>
-----------------------------
+ Non-income producing security
ADR -- American Depository Receipt
---------------------
A-7
<PAGE> 13
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
---------------------------------------------------------------------
GROSS UNREALIZED
CONTRACT IN DELIVERY APPRECIATION
TO DELIVER EXCHANGE FOR DATE (IN THOUSANDS)
---------------------------------------------------------------------
<S> <C> <C> <C>
JPY 1,118,700,000 USD 9,117,359 2/12/98 $246
</TABLE>
-----------------------------
<TABLE>
<S> <C>
JPY -- Japanese Yen USD -- United States Dollar
</TABLE>
See Notes to Financial Statements
---------------------
A-8
<PAGE> 14
O
- ---------------------
ANCHOR PATHWAY FUND
GROWTH-INCOME SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 84.8% SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 11.3%
Aerospace & Military Technology -- 2.1%
Boeing Co............................................................ 40,000 $ 2,125
General Motors Corp., Class H........................................ 85,000 5,695
Raytheon Co.......................................................... 25,000 1,398
Sundstrand Corp...................................................... 130,000 6,671
United Technologies Corp............................................. 46,800 3,507
Data Processing & Reproduction -- 2.5%
3Com Corp.+.......................................................... 130,000 4,712
Adobe Systems, Inc................................................... 40,000 1,680
Oracle Systems Corp.+................................................ 150,000 4,997
Silicon Graphics, Inc.+.............................................. 294,400 3,864
Xerox Corp........................................................... 110,000 8,546
Electrical & Electronics -- 1.6%
Ericsson (L.M.) Telecommunications Co., Class B ADR.................. 80,000 3,235
Nokia Corp., Class A ADR............................................. 110,000 9,144
York International Corp.............................................. 64,800 3,001
Energy Equipment -- 1.0%
Schlumberger Ltd..................................................... 75,000 6,174
Western Atlas, Inc.+................................................. 50,000 3,478
Industrial Components -- 0.4%
Dana Corp............................................................ 50,000 2,337
Echlin, Inc.......................................................... 40,000 1,268
Machinery & Engineering -- 3.7%
Caterpillar, Inc..................................................... 230,000 11,026
Crompton & Knowles Corp.............................................. 120,000 3,180
Deere & Co........................................................... 190,000 10,414
Ingersoll-Rand Co.................................................... 120,000 4,905
New Holland NV....................................................... 100,000 2,506
Parker-Hannifin Corp................................................. 72,000 3,204
---------
107,067
---------
CONSUMER GOODS -- 15.0%
Automotive -- 1.0%
Chrysler Corp........................................................ 100,000 3,431
Ford Motor Co........................................................ 150,200 6,459
Beverages & Tobacco -- 3.1%
PepsiCo, Inc......................................................... 210,000 7,744
Philip Morris Cos., Inc.............................................. 255,000 11,092
Seagram Co. Ltd...................................................... 220,000 7,109
UST, Inc............................................................. 100,000 3,087
Food & Household Products -- 1.4%
CPC International, Inc............................................... 25,000 2,584
General Mills, Inc................................................... 25,000 1,850
McCormick & Co., Inc................................................. 200,000 5,300
Unilever NV.......................................................... 60,000 3,484
</TABLE>
---------------------
A-9
<PAGE> 15
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS (continued)
Health & Personal Care -- 8.2%
American Home Products Corp.......................................... 59,600 $ 4,165
Astra AB ADR......................................................... 200,000 3,400
Avon Products, Inc................................................... 74,900 4,330
Glaxo Holdings PLC ADR............................................... 150,000 6,853
Guidant Corp......................................................... 90,000 5,782
Johnson & Johnson Co................................................. 60,000 3,776
Kimberly-Clark Corp.................................................. 40,000 2,083
Merck & Co., Inc..................................................... 125,000 11,820
Pfizer, Inc.......................................................... 225,000 16,369
Schering-Plough Corp................................................. 205,000 12,851
Warner-Lambert Co.................................................... 50,000 6,994
Recreation & Other Consumer Products -- 0.6%
Harley-Davidson, Inc................................................. 200,000 5,288
Textiles & Apparel -- 0.7%
Nike, Inc., Class B.................................................. 50,000 2,434
V.F. Corp............................................................ 90,000 4,157
---------
142,442
---------
ENERGY -- 10.8%
Energy Sources -- 8.3%
Amoco Corp........................................................... 100,000 9,000
Ashland, Inc......................................................... 48,800 2,278
Atlantic Richfield Co................................................ 160,000 13,040
Kerr-McGee Corp...................................................... 50,000 3,316
Murphy Oil Corp...................................................... 50,000 2,750
Norsk Hydro ASA ADR.................................................. 50,000 2,591
Pennzoil Co.......................................................... 37,100 2,472
Phillips Petroleum Co................................................ 60,000 2,906
Pioneer Natural Resources Co......................................... 20,000 639
Repsol SA ADR........................................................ 150,000 6,469
Texaco, Inc.......................................................... 180,000 10,170
Total SA ADR......................................................... 96,338 5,064
Ultramar Diamond Shamrock Corp....................................... 331,600 10,093
Valero Energy Corp................................................... 260,000 8,157
Utilities: Electric, Gas & Water -- 2.5%
Consolidated Edison Co. of New York, Inc............................. 100,000 3,775
DPL, Inc............................................................. 180,000 4,725
Duke Energy Corp..................................................... 95,000 4,940
GPU, Inc............................................................. 100,000 3,950
Union Electric Co.................................................... 80,000 3,185
Williams Cos., Inc................................................... 52,200 2,789
---------
102,309
---------
FINANCE -- 11.1%
Banking -- 7.9%
Banc One Corp........................................................ 30,000 1,541
Bank of New York Cos., Inc........................................... 160,000 8,600
Bank Tokyo Mitsubishi Ltd. ADR....................................... 100,000 1,450
BankAmerica Corp..................................................... 40,000 2,920
Chase Manhattan Corp................................................. 35,000 3,802
Citicorp............................................................. 30,000 3,598
CoreStates Financial Corp............................................ 58,000 4,484
First Chicago Corp................................................... 45,100 3,529
First Union Corp..................................................... 100,000 4,875
Hibernia Corp., Class A.............................................. 200,000 3,625
</TABLE>
---------------------
A-10
<PAGE> 16
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Banking (continued)
Huntington Bancshares, Inc........................................... 83,600 $ 2,842
KeyCorp.............................................................. 85,000 5,732
Marshall & Ilsley Corp............................................... 125,300 6,657
Morgan (J.P.) & Co., Inc............................................. 30,000 3,426
Northern Trust Corp.................................................. 40,000 2,490
Norwest Corp......................................................... 280,000 10,483
Sakura Bank Ltd...................................................... 35,000 1,260
SunTrust Banks, Inc.................................................. 50,000 3,550
Financial Services -- 0.8%
Associates First Capital Corp., Class A.............................. 5,000 321
Beneficial Corp...................................................... 20,000 1,553
FINOVA Group, Inc.................................................... 50,000 2,356
Household International, Inc......................................... 30,000 3,780
Insurance -- 2.4%
Allstate Corp........................................................ 50,000 4,294
Gallagher (Arthur J.) & Co........................................... 44,800 1,601
General Reinsurance Group Corp....................................... 50,000 9,925
Liberty Corp......................................................... 75,000 3,375
St. Paul Co., Inc.................................................... 40,000 3,200
---------
105,269
---------
MATERIALS -- 10.0%
Chemicals -- 4.2%
Dow Chemical Co...................................................... 50,000 4,938
du Pont (E.I.) de Nemours & Co....................................... 100,000 6,056
Lyondell Petrochemical Co............................................ 60,000 1,526
Mallinckrodt, Inc.................................................... 64,300 2,379
Millenium Chemicals, Inc............................................. 100,000 2,300
Monsanto Co.......................................................... 150,000 6,553
PPG Industries, Inc.................................................. 75,000 4,346
Praxair, Inc......................................................... 147,600 6,485
Witco Corp........................................................... 120,000 5,175
Forest Products & Paper -- 4.0%
Bowater, Inc......................................................... 160,000 7,180
Fort James Corp...................................................... 125,000 4,891
Georgia-Pacific Corp................................................. 65,000 5,549
International Paper Co............................................... 100,000 4,744
Sonoco Products Co................................................... 75,000 2,461
Union Camp Corp...................................................... 175,000 10,511
Westvaco Corp........................................................ 60,000 1,957
Weyerhaeuser Co...................................................... 25,000 1,320
Metals & Minerals -- 1.8%
Aluminum Co. of America.............................................. 125,900 8,467
Potash Corp. Saskatchewan, Inc....................................... 110,000 8,655
---------
95,493
---------
MULTI-INDUSTRY -- 1.7%
Multi-Industry -- 1.7%
AlliedSignal, Inc.................................................... 80,000 2,970
FMC Corp.+........................................................... 75,000 5,480
Tenneco, Inc......................................................... 90,000 3,898
Textron, Inc......................................................... 70,000 4,139
---------
16,487
---------
</TABLE>
---------------------
A-11
<PAGE> 17
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 23.9%
Broadcasting & Publishing -- 4.3%
Gannett Co., Inc..................................................... 80,000 $ 4,645
Harte Hanks Communications Co........................................ 200,000 6,900
Houston Industries, Inc.............................................. 29,700 1,648
Media General, Inc................................................... 109,800 4,680
News Corp. Ltd. ADR.................................................. 140,000 3,036
Tele-Communications Liberty Media Group, Inc., Series A+............. 217,500 7,341
Time Warner, Inc..................................................... 100,000 5,825
Viacom, Inc., Class B+............................................... 200,000 7,000
Business & Public Services -- 6.9%
Alexander & Baldwin, Inc............................................. 180,000 4,860
Avery Dennison Corp.................................................. 100,000 4,187
Browning-Ferris Industries, Inc...................................... 255,800 9,129
Cognizant Corp....................................................... 130,000 5,574
Electronic Data Systems Corp......................................... 280,000 10,640
Hertz Corp........................................................... 361,600 14,261
Ikon Office Solutions, Inc........................................... 200,000 6,088
Manpower, Inc........................................................ 75,000 2,522
Pitney Bowes, Inc.................................................... 30,000 2,522
Waste Management, Inc................................................ 241,912 5,957
Leisure & Tourism -- 1.6%
Disney (Walt) Co..................................................... 140,000 13,291
Host Marriott Corp.+................................................. 110,000 2,290
Merchandising -- 5.1%
Cardinal Health, Inc................................................. 22,600 1,712
Circuit City Stores, Inc............................................. 225,000 7,383
Federated Department Stores, Inc.+................................... 120,000 5,467
Gap, Inc............................................................. 100,000 5,369
Giant Foods, Inc., Class A........................................... 150,000 5,062
Lowe's Co., Inc...................................................... 50,000 2,297
Penney (J.C.) Co., Inc............................................... 192,000 12,336
Wal-Mart Stores, Inc................................................. 225,000 8,986
Telecommunications -- 4.8%
AirTouch Communications, Inc.+....................................... 81,013 3,180
Ameritech Corp....................................................... 135,000 10,403
AT&T Corp............................................................ 305,000 17,042
SBC Communications, Inc.............................................. 40,000 2,913
Telefonos de Mexico SA ADR........................................... 80,000 3,960
U.S. West Communications Group....................................... 171,800 7,763
Transportation: Rail & Road -- 1.2%
Norfolk Southern Corp................................................ 195,000 6,203
Union Pacific Corp................................................... 80,000 4,800
---------
227,272
---------
OTHER COMMON STOCK -- 1.0%........................................... 9,710
---------
TOTAL COMMON STOCK (cost $521,402)................................... 806,049
---------
<CAPTION>
PREFERRED STOCK -- 0.2%
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 0.2%
Broadcasting & Publishing -- 0.2%
News Corp. Ltd. ADR (cost $1,044).................................... 80,000 1,580
---------
</TABLE>
---------------------
A-12
<PAGE> 18
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
CONVERTIBLE BONDS -- 0.3% (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 0.3%
Business & Public Services -- 0.3%
CUC International, Inc. 3.00% 2002 (cost $2,994)..................... $ 3,000 $ 3,383
---------
TOTAL INVESTMENT SECURITIES (cost $525,440).......................... 811,012
---------
SHORT-TERM SECURITIES -- 14.1%
--------------------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 13.2%
Abbott Laboratories, Inc. 5.48% due 12/3/97.......................... 11,300 11,297
AI Credit Corp. 5.53% due 12/10/97................................... 5,900 5,892
Bell Atlantic Network Funding 5.53% due 12/3/97...................... 5,000 4,998
Coca-Cola Co. 5.52% due 1/12/98...................................... 12,300 12,221
Electronic Data Systems Corp. 5.55% due 12/19/97..................... 10,000 9,972
Emerson Electric Co. 5.52% due 12/5/97............................... 5,900 5,896
General Electric Capital Corp. 5.80% due 12/1/97..................... 11,150 11,150
Hershey Foods Corp. 5.51% due 12/22/97............................... 12,400 12,360
Kimberly-Clark Corp. 5.50% due 12/11/97.............................. 11,500 11,482
Motorola, Inc. 5.52% due 12/22/97.................................... 9,500 9,469
Penney (J.C.) Funding Corp. 5.50% due 12/9/97........................ 16,700 16,680
Sara Lee Corp. 5.46% due 12/22/97.................................... 9,000 8,971
Sara Lee Corp. 5.53% due 12/3/97..................................... 5,000 4,999
---------
125,387
---------
FEDERAL AGENCY OBLIGATIONS -- 0.9%
Federal Home Loan Mortgage Discount Notes 5.50% due 12/30/97......... 3,475 3,460
Federal Home Loan Mortgage Discount Notes 5.55% due 1/23/98.......... 5,000 4,959
---------
8,419
---------
TOTAL SHORT-TERM SECURITIES (cost $133,806).......................... 133,806
---------
TOTAL INVESTMENTS --
(cost $659,246) 99.4% 944,818
Other assets less liabilities -- 0.6 5,614
----- ---------
NET ASSETS -- 100.0% $ 950,432
===== =========
</TABLE>
-----------------------------
+ Non-income producing security
ADR -- American Depository Receipt
See Notes to Financial Statements
---------------------
A-13
<PAGE> 19
O
- ---------------------
ANCHOR PATHWAY FUND
ASSET ALLOCATION SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 60.5% SHARES (IN THOUSANDS)
<S> <C> <C>
--------------------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 11.6%
Aerospace & Military Technology -- 3.9%
Boeing Co............................................................ 35,000 $ 1,859
General Motors Corp., Class H........................................ 41,000 2,747
Raytheon Co.......................................................... 25,000 1,399
Data Processing & Reproduction -- 1.4%
International Business Machines Corp................................. 20,000 2,191
Electrical & Electronics -- 2.1%
Hubbell, Inc., Class B............................................... 30,000 1,363
Nokia Corp., Class A ADR............................................. 10,000 831
York International Corp.............................................. 25,000 1,158
Electronic Components -- 1.1%
AMP, Inc............................................................. 40,000 1,738
Industrial Components -- 2.0%
Dana Corp............................................................ 35,000 1,636
Genuine Parts Co..................................................... 45,000 1,440
Machinery & Engineering -- 1.1%
Deere & Co........................................................... 30,000 1,644
---------
18,006
---------
CONSUMER GOODS -- 10.7%
Automotive -- 0.8%
General Motors Corp.................................................. 20,000 1,220
Beverages & Tobacco -- 1.8%
PepsiCo, Inc......................................................... 40,000 1,475
UST, Inc............................................................. 40,000 1,235
Food & Household Products -- 1.4%
General Mills, Inc................................................... 30,000 2,220
Health & Personal Care -- 6.7%
Gillette Co.......................................................... 9,040 835
Pfizer, Inc.......................................................... 60,000 4,365
SmithKline Beecham PLC ADR........................................... 50,000 2,481
Warner-Lambert Co.................................................... 20,000 2,797
---------
16,628
---------
ENERGY -- 8.9%
Energy Sources -- 8.2%
Amoco Corp........................................................... 15,000 1,350
Atlantic Richfield Co................................................ 20,000 1,630
Chevron Corp......................................................... 20,000 1,604
Kerr-McGee Corp...................................................... 30,000 1,989
Murphy Oil Corp...................................................... 35,000 1,925
Phillips Petroleum Co................................................ 35,000 1,695
</TABLE>
---------------------
A-14
<PAGE> 20
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (continued)
Energy Sources (continued)
Royal Dutch Petroleum Co. ADR........................................ 24,000 $ 1,264
Ultramar Diamond Shamrock Corp....................................... 40,000 1,218
Utilities: Electric, Gas & Water -- 0.7%
MCN Corp............................................................. 30,000 1,146
---------
13,821
---------
FINANCE -- 7.7%
Banking -- 5.3%
BankAmerica Corp..................................................... 30,000 2,190
Citicorp............................................................. 15,000 1,799
CoreStates Financial Corp............................................ 20,000 1,546
Fleet Financial Group, Inc........................................... 25,000 1,652
KeyCorp.............................................................. 15,000 1,012
Insurance -- 2.4%
American General Corp................................................ 15,000 808
General Reinsurance Group Corp. ..................................... 10,000 1,985
USF&G Corp........................................................... 50,000 1,009
---------
12,001
---------
MATERIALS -- 11.3%
Chemicals -- 5.4%
Air Products & Chemicals, Inc........................................ 25,000 1,917
Dow Chemical Co...................................................... 15,000 1,481
du Pont (E.I.) de Nemours & Co....................................... 30,000 1,817
PPG Industries, Inc.................................................. 25,000 1,448
Praxair, Inc......................................................... 40,000 1,758
Forest Products & Paper -- 4.0%
Georgia-Pacific Corp................................................. 30,000 2,561
Sonoco Products Co................................................... 21,700 712
Union Camp Corp...................................................... 20,000 1,201
Weyerhaeuser Co...................................................... 32,600 1,722
Metals: Steel -- 0.6%
Allegheny Teldyne, Inc............................................... 35,000 901
Metals & Minerals -- 1.3%
Aluminum Co. of America.............................................. 30,000 2,018
---------
17,536
---------
MULTI-INDUSTRY -- 1.1%
Multi-Industry -- 1.1%
Textron, Inc......................................................... 30,000 1,774
---------
SERVICES -- 9.2%
Business & Public Services -- 2.1%
Alexander & Baldwin, Inc............................................. 30,000 810
Avery Dennison Corp.................................................. 30,000 1,256
Rentokil Initial PLC ADR............................................. 30,000 1,253
Merchandising -- 5.0%
Circuit City Stores, Inc............................................. 6,800 223
Giant Foods, Inc., Class A........................................... 30,000 1,013
Penney (J.C.), Inc................................................... 35,000 2,249
Wal-Mart Stores, Inc................................................. 60,000 2,396
Walgreen Co.......................................................... 60,000 1,931
</TABLE>
---------------------
A-15
<PAGE> 21
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Telecommunications -- 0.9%
Century Telephone Enterprises, Inc................................... 30,000 $ 1,382
Transportation: Rail & Road -- 1.2%
Union Pacific Corp................................................... 30,000 1,800
---------
14,313
---------
OTHER COMMON STOCK -- 0.0%........................................... 39
---------
TOTAL COMMON STOCK (cost $64,096).................................... 94,118
---------
PREFERRED STOCK -- 0.8%
--------------------------------------------------------------------------------------------------------
SERVICES -- 0.8%
Broadcasting & Publishing -- 0.8%
Adelphia Communications Corp.+#...................................... 5,000 580
American Radio Systems Corp.+#....................................... 5,264 615
---------
TOTAL PREFERRED STOCK (cost $1,028).................................. 1,195
---------
PRINCIPAL
AMOUNT
BONDS & NOTES -- 29.3% (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 0.2%
Broadcasting & Publishing -- 0.2%
Time Warner, Inc. zero coupon 2013................................... $ 500 251
---------
CORPORATE BONDS -- 17.4%
Energy Sources -- 1.4%
Oryx Energy Co. 9.50% 1999........................................... 1,500 1,573
Oryx Energy Co. 10.00% 1999.......................................... 500 523
Finance -- 6.4%
Advanta Corp., Series D 6.57% 2000................................... 1,325 1,301
Asset Backed Securities Investment Trust, Series 1997-D, Class A
6.79% 2003*#....................................................... 1,000 1,005
Barnett Capital I 8.06% 2026......................................... 500 529
Capital One Bank 6.97% 2002.......................................... 2,250 2,260
Capital One Bank 8.13% 2000.......................................... 500 517
Central Fidelity Capital Trust I, Series A 6.76% 2027(1)............. 500 506
Chevy Chase Savings Bank 9.25% 2008.................................. 500 510
First Plus Home Loan Trust, Series 1997-1, Class A6 6.95% 2015....... 500 506
Green Tree Financial Group, Series 1995-A, Class A 7.25% 2005........ 599 599
IMC Home Equity Loan Trust, Series 1996-2, Class A2 6.78% 2011....... 401 401
Irvine Property 7.46% 2006*.......................................... 500 503
Ocwen Financial Corp. 11.88% 2003.................................... 250 280
Saul (B.F.) Real Estate Investment Trust, Class B 11.63% 2002........ 500 535
Socgen Real Estate Co. LLC, Series A 7.64% 2049#(1).................. 500 505
Industrial -- 5.6%
Allegiance Corp. 7.00% 2026.......................................... 500 513
CenCall Communications Corp. zero coupon 2004@....................... 1,000 874
CLN Holdings, Inc. zero coupon 2001.................................. 250 159
Container Corp. of America 9.75% 2003................................ 500 537
Dayton Hudson Corp. 8.50% 2022....................................... 500 535
Esat Holdings Ltd. zero coupon 2007*@................................ 500 350
Freeport McMoRan Copper & Gold 7.20% 2026............................ 500 489
Globo Comunicacoes Participacoes Ltda., Class B 10.50% 2006#......... 400 375
Gruma Sa de CV 7.63% 2007#........................................... 250 243
Hyundai Semiconductor 8.63% 2007#.................................... 425 361
</TABLE>
---------------------
A-16
<PAGE> 22
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (continued) (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (continued)
Industrial (continued)
Inco Ltd. 9.60% 2022................................................. $ 400 $ 453
Omnipoint Corp. 11.63% 2006.......................................... 250 265
Owens Illinois, Inc. 8.10% 2007...................................... 250 265
Pan Pacific Industrial Investment PLC zero coupon 2007#.............. 1,000 363
Royal Caribbean Cruises Ltd. 7.00% 2007.............................. 500 501
Time Warner Pass Through Asset Trust 6.10% 2001#..................... 500 487
Time Warner, Inc. 9.13% 2013......................................... 1,000 1,176
United Defense Industries, Inc. 8.75% 2007#.......................... 300 298
Wharf International Finance Ltd. 7.63% 2007.......................... 500 483
Telecommunications -- 1.5%
Cei Citicorp Holdings SA 11.25% 2007*#............................... 500 430
Consorcio Ecuatoriano de Telecommunicaciones 14.00% 2002*#........... 250 252
Iridium Capital Corp., Series A 13.00% 2005.......................... 250 257
Qwest Communications International, Inc. zero coupon 2007#........... 500 323
Tele-Communications, Inc. 9.25% 2023................................. 500 550
United States West Capital Funding, Inc. 6.95% 2037.................. 500 509
Transportation -- 2.5%
Airplanes Pass Through Trust, Series 1, Class C 8.15% 2019*.......... 500 529
Continental Airlines 6.90% 2018...................................... 250 254
Continental Airlines Pass Through Trust, Series 1996-A 6.94% 2013.... 980 1,001
Delta Air Lines, Inc. 10.50% 2016.................................... 500 645
Jet Equipment Trust, Class B 7.83% 2012#............................. 474 510
United Airlines Pass Through Trust, Series 1996, Class A2 7.87%
2019............................................................... 500 533
USAir, Inc., Class A 6.76% 2008...................................... 475 485
---------
27,058
---------
NON-U.S. GOVERNMENT OBLIGATIONS -- 0.3%
Republic of Argentina 11.75% 2007#................................... 500 473
---------
U.S. GOVERNMENT & AGENCIES -- 4.6%
Federal National Mortgage Association 6.53% 2006..................... 1,500 1,478
Federal National Mortgage Association 7.52% 2004..................... 2,000 2,030
Government National Mortgage Association 8.00% 2026.................. 2,859 2,955
Government National Mortgage Association 8.50% 2025.................. 648 678
---------
7,141
---------
UNITED STATES TREASURY -- 6.8%
7.50% Bonds 2016..................................................... 250 288
10.75% Bonds 2003.................................................... 5,000 6,113
3.63% Notes 2002..................................................... 2,000 2,004
7.25% Notes 2004..................................................... 2,000 2,147
---------
10,552
---------
TOTAL BONDS & NOTES (cost $44,641)................................... 45,475
---------
<CAPTION>
WARRANTS -- 0.0%+ SHARES
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 0.0%
Telecommunications -- 0.0%
Esat Holdings Ltd. 2/1/07*#.......................................... 500 15
Iridium World Communications, Inc. 7/15/05#.......................... 250 35
---------
TOTAL WARRANTS (cost $15)............................................ 50
---------
TOTAL INVESTMENT SECURITIES (cost $109,780).......................... 140,838
---------
</TABLE>
---------------------
A-17
<PAGE> 23
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 8.7% (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 8.7%
Abbott Laboratories, Inc. 5.54% due 12/18/97......................... $ 1,700 $ 1,695
AI Credit Corp. 5.50% due 12/11/97................................... 1,500 1,498
American Express Credit Corp. 5.53% due 12/22/97..................... 1,300 1,296
Duke Energy Co. 5.56% due 12/9/97.................................... 1,275 1,273
Ford Motor Credit Co. 5.55% due 12/2/97.............................. 2,000 2,000
General Electric Capital Corp. 5.80% due 12/1/97..................... 3,300 3,300
Lucent Technologies, Inc. 5.51% due 12/1/97.......................... 2,500 2,500
---------
TOTAL SHORT-TERM SECURITIES (cost $13,562)........................... 13,562
---------
TOTAL INVESTMENTS --
(cost $123,342) 99.3% 154,400
Other assets less liabilities -- 0.7 1,046
------ ----- ---------
NET ASSETS -- 100.0% $ 155,446
===== =========
</TABLE>
-----------------------------
+ Non-income producing security
* Fair valued security; see Note 2
# Resale restricted to qualified institutional buyers
@ Represents a zero-coupon bond which will convert to an
interest-bearing security at a later date
ADR -- American Depository Receipt
(1) Variable rate security; rate as of November 30, 1997
See Notes to Financial Statements
---------------------
A-18
<PAGE> 24
O
- ---------------------
ANCHOR PATHWAY FUND
HIGH-YIELD BOND SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 87.1% (IN THOUSANDS) (IN THOUSANDS)
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 3.7%
Aerospace & Military Technology -- 0.9%
Derlan Manufacturing, Inc. 10.00% 2007............................ $ 1,000 $ 1,050
Construction & Housing -- 1.3%
Mcdermott, Inc. 9.38% 2002........................................ 1,500 1,595
Electronic Components -- 1.5%
Flextronics International Ltd. 8.75% 2007#........................ 1,750 1,738
---------
4,383
---------
CONSUMER GOODS -- 2.8%
Beverages & Tobacco -- 2.8%
Canandaigua Wine, Inc. 8.75% 2003................................. 1,000 1,004
Dr. Pepper Bottling Co., Inc. 10.25% 2000......................... 1,750 1,776
Standard Commercial Tobacco Co., Inc. 8.88% 2005#................. 500 504
---------
3,284
---------
CONSUMER SERVICES -- 1.5%
Food Retail -- 1.5%
Bruno's, Inc. 10.50% 2005......................................... 500 175
Quality Food Centers, Inc. 8.70% 2007............................. 500 538
Randalls Food Markets, Inc. 9.38% 2007#........................... 1,000 1,015
---------
1,728
---------
ENERGY -- 9.3%
Energy Sources -- 5.2%
Abraxas Petroleum Corp. 11.50% 2004............................... 500 540
Benton Oil & Gas Co. 9.38% 2007#.................................. 1,500 1,513
Benton Oil & Gas Co. 11.63% 2003.................................. 500 551
Forcenergy, Inc. 8.50% 2007....................................... 500 501
Forcenergy, Inc. 9.50% 2006....................................... 1,250 1,316
Kelley Oil & Gas Corp. 10.38% 2006................................ 750 791
Lomak Petroleum, Inc. 8.75% 2007.................................. 500 500
Ocean Energy, Inc. 8.88% 2007..................................... 500 518
Utilities: Electric, Gas & Water -- 4.1%
California Energy, Inc. 10.25% 2004............................... 4,000 4,371
Globalstar LP 11.38% 2004......................................... 500 501
---------
11,102
---------
FINANCE -- 0.7%
Financial Services -- 0.7%
ITT Publimedia BV 9.38% 2007#..................................... 250 260
PTC International Finance BV zero coupon 2007#@................... 1,000 636
---------
896
---------
</TABLE>
---------------------
A-19
<PAGE> 25
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (continued) (IN THOUSANDS) (IN THOUSANDS)
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL -- 2.9%
Industrial -- 2.9%
CLN Holdings, Inc. zero coupon 2001............................... $ 500 $ 318
Comcast Cellular Holdings, Inc. 9.50% 2007........................ 1,500 1,552
Consumers International, Inc. 10.25% 2005#........................ 500 544
Newsquest Capital PLC 11.00% 2006................................. 900 1,000
---------
3,414
---------
MATERIALS -- 9.9%
Chemicals -- 2.0%
Key Plastics, Inc. 10.25% 2007.................................... 1,000 1,040
Texas Petrochemicals Corp. 11.13% 2006............................ 1,250 1,375
Forest Products & Paper -- 5.4%
Anchor Glass Container Corp. 11.25% 2005#......................... 500 540
Container Corp. of America 9.75% 2003............................. 4,500 4,837
Pacific Lumber Co. 10.50% 2003.................................... 1,000 1,030
Metals & Minerals -- 2.5%
A.K. Steel Corp. 9.13% 2006....................................... 750 773
A.K. Steel Corp. 10.75% 2004...................................... 500 535
Kaiser Aluminum & Chemical Corp. 12.75% 2003...................... 1,000 1,070
UCAR Global Enterprises, Inc. 12.00% 2005......................... 500 560
---------
11,760
---------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.3%
Republic of Argentina 6.69% 2005.................................. 960 851
Republic of Argentina 11.38% 2017................................. 500 529
United Mexican States 11.38% 2016................................. 200 226
---------
1,606
---------
SERVICES -- 55.0%
Broadcasting & Publishing -- 9.6%
American Media Operations, Inc. 11.63% 2004....................... 1,750 1,899
Cablevision Systems Corp. 8.13% 2009#............................. 500 509
Cablevision Systems Corp. 9.88% 2013.............................. 1,000 1,085
Chancellor Media Corp. 8.75% 2007................................. 1,000 1,010
Chancellor Media Corp. 9.38% 2004................................. 1,500 1,564
Fox Liberty Networks LLC 8.88% 2007#.............................. 250 248
Gray Communications Systems, Inc. 10.63% 2006..................... 1,500 1,597
Heartland Wireless Communication, Inc. 13.00% 2003*#.............. 500 175
Katz Media Corp. 10.50% 2007...................................... 500 551
Sun Media Corp. 9.50% 2007#....................................... 500 531
Sun Media Corp. 9.50% 2007#....................................... 450 479
TransWestern Publishing Company LP 9.63% 2007#.................... 250 254
Viacom, Inc. 7.75% 2005........................................... 1,500 1,512
Business & Public Services -- 10.8%
Allied Waste North America, Inc. 10.25% 2006#..................... 2,000 2,180
Integrated Health Services, Inc. 9.25% 2008#...................... 750 748
Integrated Health Services, Inc. 9.50% 2007#...................... 1,825 1,843
Mariner Health Group, Inc. 9.50% 2006............................. 385 393
Omnipoint Corp. 11.63% 2006....................................... 1,750 1,855
Paracelsus Healthcare Corp. 10.00% 2006........................... 2,000 2,080
Printpack, Inc. 10.63% 2006....................................... 500 530
Protection One Alarm Monitoring Corp. zero coupon 2005............ 1,000 1,095
Sun Healthcare Group, Inc. 9.50% 2007#............................ 500 508
</TABLE>
---------------------
A-20
<PAGE> 26
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (continued) (IN THOUSANDS) (IN THOUSANDS)
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Business & Public Services (continued)
Tenet Healthcare Corp. 8.00% 2005................................. $ 500 $ 505
Unison Healthcare Corp. 13.00% 2006#.............................. 650 527
Universal Health Services, Inc. 8.75% 2005........................ 500 525
Food Retail -- 0.9%
Foodmaker, Inc. 9.25% 1999........................................ 1,000 1,022
Leisure & Tourism -- 6.8%
AMF Bowling Worldwide, Series B 10.875% 2006...................... 750 816
AMF Bowling Worldwide, Series B zero coupon 2006@................. 1,250 972
Boyd Gaming Corp. 9.25% 2003...................................... 500 518
Boyd Gaming Corp. 9.50% 2007...................................... 1,250 1,287
Friendly Ice Cream Corp. 10.50% 2007.............................. 500 504
Rio Hotel and Casino, Inc. 9.50% 2007............................. 750 793
Station Casinos, Inc. 9.63% 2003.................................. 1,500 1,500
Sun International Ltd. 9.00% 2007................................. 500 515
Wyndham Hotel Corp. 10.50% 2006................................... 1,000 1,165
Merchandising -- 0.8%
Loehmann's, Inc. 11.88% 2003...................................... 1,000 1,010
Telecommunications -- 23.4%
Brooks Fiber Properties, Inc. 10.00% 2007......................... 1,000 1,140
Cellnet Data Systems, Inc. zero coupon 2007#@(1).................. 1,000 509
Cellular Communications International, Inc. zero coupon 2000...... 1,000 785
Cellular Communications International, Inc. zero coupon 2000(1)... 2,250 1,811
Cellular Communications of Puerto Rico, Inc. 10.00% 2007.......... 500 490
Centennial Cellular Corp. 8.88% 2001.............................. 3,000 3,045
COLT Telecom Group PLC 8.88% 2007#................................ 1,000 567
Comcast UK Cable Partners Ltd. zero coupon 2007@.................. 2,000 1,595
Comunicacion Celular SA zero coupon 2003*@........................ 1,000 755
Consorcio Ecuatoriano de Telecommunicaciones 14.00% 2002*#........ 500 505
Esat Holdings Ltd. zero coupon 2007*@............................. 500 350
Hermes Europe Railtel BV 11.50% 2007*#............................ 500 549
Intercel, Inc. zero coupon 2006@.................................. 500 357
Intermedia Communications, Inc. zero coupon 2007@................. 1,000 685
International CableTel, Inc. zero coupon 2005@.................... 750 611
McCaw International Ltd. zero coupon 2007@........................ 1,000 588
Mobile Telecommunication Technologies Corp. 13.50% 2002........... 500 571
MobileMedia Communications, Inc. zero coupon 2003@................ 1,000 115
Multicanal Participacoes SA 12.63% 2004........................... 1,000 957
Nextel Communications, Inc. zero coupon 2007#@.................... 2,750 1,588
Nextlink Communications, Inc. 9.63% 2007.......................... 500 505
NTL, Inc. 10.00% 2007............................................. 500 524
Orion Network Systems, Inc. 11.25% 2007........................... 1,275 1,439
Pricellular Wireless Corp. zero coupon 2003@...................... 1,000 1,001
Pricellular Wireless Corp. 14.00% 2001............................ 1,000 1,105
RBS Participacoes SA 11.00% 2007*#................................ 500 453
RCN Corp. 10.00% 2007#............................................ 500 501
TCI Communications, Inc. 6.38% 1999............................... 500 499
Teleport Communications Group 9.88% 2006.......................... 500 550
</TABLE>
---------------------
A-21
<PAGE> 27
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (continued) (IN THOUSANDS) (IN THOUSANDS)
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Telecommunications (continued)
Telewest Communications PLC zero coupon 2007@..................... $ 1,000 $ 763
Videotron Holdings PLC zero coupon 2004@.......................... 2,000 1,890
Worldcom, Inc. 9.38% 2004......................................... 871 922
Transportation -- 2.7%
USAir, Inc. 9.63% 2003............................................ 1,250 1,344
USAir, Inc. 10.00% 2003........................................... 1,000 1,015
USAir, Inc. 10.38% 2013........................................... 750 836
---------
65,225
---------
TOTAL BONDS & NOTES (cost $99,640)................................ 103,398
---------
COMMON STOCK -- 0.0% SHARES
-----------------------------------------------------------------------------------------------------
SERVICES -- 0.0%
Telecommunications -- 0.0%
Nextel Communications, Inc., Class A+* (cost $25)................. 1,549 39
---------
PREFERRED STOCK -- 4.9%
-----------------------------------------------------------------------------------------------------
SERVICES -- 4.9%
Broadcasting & Publishing -- 4.9%
American Radio Systems Corp....................................... 20,934 2,444
Chancellor Media Corp............................................. 28,588 3,359
---------
TOTAL PREFERRED STOCK (cost $5,018)............................... 5,803
---------
WARRANTS -- 0.2%+
-----------------------------------------------------------------------------------------------------
SERVICES -- 0.2%
Broadcasting & Publishing -- 0.0%
Heartland Wireless Communication, Inc. 4/15/00 *#................. 3,000 0
Business & Public Services -- 0.0%
Protection One Alarm Monitoring Corp. 6/30/05*.................... 3,200 35
Telecommunications -- 0.2%
Comunicacion Celular SA 11/15/03*................................. 1,000 60
Esat Holdings Ltd. 2/1/07*........................................ 500 15
Globalstar Telecommunications 2/15/04#............................ 500 60
McCaw International 4/15/07....................................... 1,000 2
Nextel Communications, Inc. 4/25/99............................... 500 0
Orion Network Systems, Inc. 1/15/07*.............................. 1,275 20
---------
TOTAL WARRANTS (cost $99)......................................... 192
---------
</TABLE>
---------------------
A-22
<PAGE> 28
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
U.S. GOVERNMENT AND AGENCIES -- 1.8% (IN THOUSANDS) (IN THOUSANDS)
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES TREASURY -- 1.8%
6.63% Notes 2002.................................................. $ 1,000 $ 1,029
8.00% Notes 2001.................................................. 1,000 1,066
---------
TOTAL U.S. GOVERNMENT AND AGENCIES (cost $2,066).................. 2,095
---------
TOTAL INVESTMENT SECURITIES (cost $106,847)....................... 111,527
---------
SHORT-TERM SECURITIES -- 3.7%
-----------------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 3.7%
Abbott Laboratories, Inc. 5.56% due 12/22/97...................... 1,400 1,395
General Electric Capital Corp. 5.80% due 12/1/97.................. 3,000 3,000
---------
TOTAL SHORT-TERM SECURITIES (cost $4,395)......................... 4,395
---------
TOTAL INVESTMENTS --
(cost $111,242) 97.7% 115,922
Other assets less liabilities -- 2.3 2,748
------ ---------
NET ASSETS -- 100.0% $ 118,670
====== =========
</TABLE>
-----------------------------
+ Non-income producing security
* Fair valued security; see Note 2
# Resale restricted to qualified institutional buyers
@ Represents a zero-coupon bond which will convert to an
interest-bearing security at a later date
(1) Bond issued as a part of a unit which includes an equity
component
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
-----------------------------------------------------------------
GROSS UNREALIZED
CONTRACT IN DELIVERY APPRECIATION
TO DELIVER EXCHANGE FOR DATE (IN THOUSANDS)
-----------------------------------------------------------------
<S> <C> <C>
DEM 944,000 USD 546,170 2/25/98 $8
====
</TABLE>
-----------------------------
<TABLE>
<S> <C>
DEM -- Deutsche Mark USD -- United States Dollar
</TABLE>
See Notes to Financial Statements
---------------------
A-23
<PAGE> 29
O
- ---------------------
ANCHOR PATHWAY FUND
U.S. GOVERNMENT/
AAA-RATED SECURITIES SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 88.7% (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES -- 9.4%++
EQCC Home Equity Loan Trust, Series 1996-A, Class A2 6.95% 2012...... $ 300 $ 301
Green Tree Financial Corp., Series 1995-9, Class A5 6.80% 2027....... 1,000 1,007
Standard Credit Card Master Trust, Series 1991-3, Class A 8.88%
1999............................................................... 4,500 4,573
UCFC Loan Trust, Series 1996-D1, Class A5 6.92% 2018................. 1,750 1,772
---------
7,653
---------
FEDERAL AGENCY OBLIGATIONS -- 22.3%++
Federal Home Loan Mortgage Corp. 6.50% 2009*......................... 2,000 1,954
Federal Home Loan Mortgage Corp. 9.00% 2021 - 2022................... 1,143 1,228
Federal Home Loan Mortgage Corp. 9.50% 2016.......................... 540 579
Federal Home Loan Mortgage Corp. 11.88% 2013......................... 13 14
Federal Home Loan Mortgage Corp. 12.50% 2013......................... 111 122
Federal National Mortgage Association 6.85% 2026*.................... 1,095 1,075
Federal National Mortgage Association 7.50% 2009..................... 1,300 1,332
Federal National Mortgage Association 8.50% 2023..................... 1,580 1,667
Government National Mortgage Association 8.00% 2017.................. 1,438 1,506
Government National Mortgage Association 8.50% 2016 - 2026........... 3,180 3,339
Government National Mortgage Association 9.00% 2016 - 2017........... 679 735
Government National Mortgage Association 9.50% 2009 - 2017........... 3,998 4,332
Government National Mortgage Association 10.00% 2016................. 36 39
Government National Mortgage Association 10.50% 2016 - 2019.......... 213 240
Government National Mortgage Association 11.00% 2019................. 47 54
Government National Mortgage Association 11.50% 2010 - 2015.......... 14 16
---------
18,232
---------
MORTGAGE-RELATED SECURITIES -- 10.0%++
Asset Backed Securities Investment Trust, Series 1997-D, Class A
6.79% 2003*........................................................ $ 750 $ 754
DLJ Mortgage Acceptance Corp., Series 1996-CF2, Class A1B 7.29%
2021............................................................... 3,800 3,946
Merrill Lynch Mortgage Investors, Inc., Series 1995-C3, Class A2
6.85% 2025*........................................................ 500 507
Merrill Lynch Mortgage Investors, Inc., Series 1997-C1, Class A1
6.95% 2029*........................................................ 975 996
Morgan (J.P.) Commercial Mortgage Finance Corp., Series 1995-C1,
Class A2 7.39% 2010*............................................... 1,000 1,044
Prudential Home Mortgage Corp., Series 1992-33, Class A12 7.50%
2022............................................................... 901 899
---------
8,146
---------
UNITED STATES TREASURY -- 47.0%
8.88% Bonds 2017..................................................... 10,700 14,044
10.38% Bonds 2012.................................................... 2,500 3,300
10.75% Bonds 2003.................................................... 14,000 17,117
12.00% Bonds 2013.................................................... 1,000 1,463
7.25% Notes 2004..................................................... 2,250 2,415
---------
38,339
---------
TOTAL INVESTMENT SECURITIES (cost $70,554)........................... 72,370
---------
</TABLE>
---------------------
A-24
<PAGE> 30
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 10.5% (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 10.5%
Bell Atlantic Financial Services 5.59% due 12/02/97.................. $ 2,700 $ 2,700
General Electric Capital Corp. 5.80% due 12/01/97.................... 2,770 2,770
Sara Lee Corp. 5.54% due 12/15/97.................................... 2,100 2,095
Wal-Mart Stores, Inc. 5.50% due 12/01/97............................. 1,000 1,000
--------
TOTAL SHORT-TERM SECURITIES(cost $8,565)............................. 8,565
--------
TOTAL INVESTMENTS --
(cost $79,119) 99.2% 80,935
Other assets less liabilities -- 0.8 674
------ --------
NET ASSETS -- 100.0% $ 81,609
====== ========
</TABLE>
-----------------------------
++ Pass-through securities are backed by a pool of mortgages or
other loans on which principal payments are periodically made.
Therefore, the effective maturity is shorter than stated
maturity.
* Fair valued security; see Note 2
See Notes to Financial Statements
---------------------
A-25
<PAGE> 31
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- ---------------------
ANCHOR PATHWAY FUND
CASH MANAGEMENT SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 100.9% (IN THOUSANDS) (IN THOUSANDS)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 74.2%
Associates Corp. of North America 5.75% due 12/01/97................. $ 340 $ 340
Bell Atlantic Financial Services 5.68% due 1/16/98................... 2,000 1,985
Beneficial Corp. 5.50% due 12/19/97.................................. 1,500 1,496
Coca-Cola Co. 5.55% due 1/09/98...................................... 2,000 1,988
Commercial Credit Co. 5.50% due 12/15/97............................. 1,000 998
CPC International, Inc. 5.52% due 12/16/97........................... 1,100 1,097
Deere (John) Capital Corp. 5.52% due 12/11/97........................ 2,500 2,496
Disney (Walt), Co. 5.60% due 1/08/98................................. 2,000 1,988
du Pont (E.I.) de Nemours & Co. 5.51% due 12/26/97................... 1,000 996
Duke Power Co. 5.48% due 12/04/97.................................... 2,000 1,999
Ford Motor Credit Co. 5.50% due 12/18/97............................. 2,100 2,095
Gannett, Inc. 5.55% due 1/08/98...................................... 1,900 1,889
General Electric Capital Corp. 5.70% due 1/20/98..................... 1,800 1,786
Gillette Co. 5.48% due 12/05/97...................................... 2,000 1,999
Heinz (H.J.) Co. 5.48% due 12/10/97.................................. 2,000 1,997
Hershey Foods Corp. 5.51% due 12/22/97............................... 1,900 1,894
IBM Credit Corp. 5.52% due 12/12/97.................................. 2,000 1,997
International Lease Finance Corp. 5.55% due 1/05/98.................. 2,000 1,989
Lucent Technologies, Inc. 5.53% due 1/02/98.......................... 2,000 1,990
Monsanto Co. 5.48% due 12/09/97...................................... 2,000 1,998
Motorola, Inc. 5.50% due 12/04/97.................................... 2,400 2,399
Penney (J.C.) Funding Corp. 5.70% due 1/12/98........................ 2,000 1,987
Pfizer, Inc. 5.50% due 12/02/97...................................... 2,000 2,000
Pitney Bowes Credit Corp. 5.60% due 1/09/98.......................... 2,000 1,988
Vermont American Corp. 5.48% due 12/01/97............................ 1,800 1,800
Wal-Mart Stores, Inc. 5.50% due 12/01/97............................. 2,000 2,000
Xerox Corp. 5.48% due 12/03/97....................................... 2,200 2,199
Yale University 5.50% due 12/23/97................................... 2,000 1,993
--------
TOTAL CORPORATE SHORT-TERM NOTES (cost $51,383)...................... 51,383
--------
FEDERAL AGENCY OBLIGATIONS -- 26.7%
Federal Home Loan Mortgage Discount Notes 5.40% due 12/05/97......... 1,000 999
Federal Home Loan Mortgage Discount Notes 5.40% due 12/10/97......... 1,800 1,798
Federal Home Loan Mortgage Discount Notes 5.45% due 12/11/97......... 2,400 2,396
Federal Home Loan Mortgage Discount Notes 5.45% due 12/17/97......... 1,100 1,097
Federal Home Loan Mortgage Discount Notes 5.46% due 12/03/97......... 560 560
Federal Home Loan Mortgage Discount Notes 5.47% due 12/22/97......... 1,600 1,595
Federal Home Loan Mortgage Discount Notes 5.48% due 12/11/97......... 800 799
Federal Home Loan Mortgage Discount Notes 5.50% due 1/09/98.......... 1,100 1,093
Federal National Mortgage Association Discount Notes 5.47% due
12/23/97........................................................... 1,100 1,096
Federal National Mortgage Association Discount Notes 5.48% due
12/04/97........................................................... 2,500 2,499
Federal National Mortgage Association Discount Notes 5.49% due
12/19/97........................................................... 2,530 2,523
Federal National Mortgage Association Discount Notes 5.50% due
12/18/97........................................................... 2,000 1,995
--------
TOTAL FEDERAL AGENCY OBLIGATIONS (cost $18,450)...................... 18,450
--------
TOTAL SHORT-TERM SECURITIES (cost $69,833)........................... 69,833
--------
TOTAL INVESTMENTS --
(cost $69,833) 100.9% 69,833
Liabilities in excess of other assets -- (0.9) (607)
------ --------
NET ASSETS -- 100.0% $ 69,226
====== ========
</TABLE>
See Notes to Financial Statements
---------------------
A-26
<PAGE> 32
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED CASH
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES MANAGEMENT
SERIES SERIES SERIES SERIES SERIES SERIES SERIES
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment
securities, at
value*............ $738,435 $ 184,556 $ 811,012 $ 140,838 $ 111,527 $72,370 $ --
Short-term
securities*....... 59,366 38,677 133,806 13,562 4,395 8,565 69,833
Cash................ 43 85 14 33 1,074 10 2
Foreign cash........ -- 81 -- -- -- -- --
Receivables for --
Sales of
investments..... 3,576 -- 5,099 310 672 -- --
Fund shares
sold............ 955 3 195 17 13 7 489
Dividends and
accrued
interest........ 205 320 1,702 850 2,231 766 --
Foreign currency
contracts....... -- 138 -- -- -- -- --
Prepaid expenses.... 10 3 12 2 1 1 1
Unrealized
appreciation on
forward foreign
currency
contracts......... -- 246 -- -- 8 -- --
---------------------------------------------------------------------------------------------------------
802,590 224,109 951,840 155,612 119,921 81,719 70,325
---------------------------------------------------------------------------------------------------------
LIABILITIES:
Payables for --
Purchases of
investments..... 782 294 148 -- 1,075 -- --
Advisory fees..... 199 111 233 40 30 22 21
Fund shares
redeemed........ 139 32 755 53 75 27 1,018
Management fees... 133 44 156 26 20 14 14
Foreign currency
contracts....... -- 138 -- -- -- -- --
Other accrued
expenses.......... 107 153 116 47 51 47 46
---------------------------------------------------------------------------------------------------------
1,360 772 1,408 166 1,251 110 1,099
---------------------------------------------------------------------------------------------------------
NET ASSETS.......... $801,230 $ 223,337 $ 950,432 $ 155,446 $ 118,670 $81,609 $ 69,226
=========================================================================================================
Shares of beneficial
interest
outstanding
(unlimited shares
authorized)..... 18,283 13,728 25,669 9,421 8,447 7,351 6,122
Net asset value per
share............. $ 43.82 $ 16.27 $ 37.03 $ 16.50 $ 14.05 $ 11.10 $ 11.31
=========================================================================================================
COMPOSITION OF NET
ASSETS:
Capital paid in..... $353,948 $ 134,704 $ 481,082 $ 100,727 $ 100,272 $76,776 $ 65,246
Accumulated
undistributed net
investment
income............ 3,479 2,541 17,464 5,374 11,153 6,345 3,981
Accumulated
undistributed net
realized
gain (loss) on
investments,
futures,
options and
foreign
currency........ 147,704 54,624 166,314 18,287 2,557 (3,328) (1)
Unrealized
appreciation on
investments....... 296,099 31,225 285,572 31,058 4,680 1,816 --
Unrealized foreign
exchange gain
on other assets
and
liabilities..... -- 243 -- -- 8 -- --
---------------------------------------------------------------------------------------------------------
Net Assets...... $801,230 $ 223,337 $ 950,432 $ 155,446 $ 118,670 $81,609 $ 69,226
=========================================================================================================
- ---------------
* Cost
Investment
securities.... $442,336 $ 153,331 $ 525,440 $ 109,780 $ 106,847 $70,554 $ --
=========================================================================================================
Short-term
securities.... $59,366 $38,677 $133,806 $13,562 $4,395 $8,565 $69,833
=========================================================================================================
</TABLE>
See Notes to Financial Statements
---------------------
A-27
<PAGE> 33
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED CASH
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES MANAGEMENT
SERIES SERIES SERIES SERIES SERIES SERIES SERIES
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT
INCOME:
Income:
Interest.......... $ 4,254 $ 1,338 $ 6,426 $ 4,168 $ 11,300 $ 6,902 $ 4,498
Dividends*........ 3,561 3,746 16,087 2,126 331 -- --
---------------------------------------------------------------------------------------------------------
Total
income... 7,815 5,084 22,513 6,294 11,631 6,902 4,498
---------------------------------------------------------------------------------------------------------
Expenses:
Advisory fees..... 2,411 1,504 2,809 481 394 292 264
Management fees... 1,607 602 1,873 320 263 195 176
Custodian fees.... 203 421 235 68 54 41 31
Reports to
investors....... 53 29 63 15 17 15 15
Auditing and legal
fees............ 25 31 26 21 25 24 24
Trustees' fees.... 16 5 19 3 2 2 1
Other expenses.... 15 6 17 5 4 3 2
---------------------------------------------------------------------------------------------------------
Total
expenses... 4,330 2,598 5,042 913 759 572 513
---------------------------------------------------------------------------------------------------------
Net investment
income............ 3,485 2,486 17,471 5,381 10,872 6,330 3,985
---------------------------------------------------------------------------------------------------------
REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS AND
FOREIGN
CURRENCIES:
Net realized gain
(loss) on
investments....... 146,719 54,711 166,979 18,372 5,128 (1,673) (1)
Net realized foreign
exchange loss
on other assets
and
liabilities..... -- (19) (1) -- -- -- --
Change in unrealized
appreciation/
depreciation of
investments....... 16,891 (25,138) 19,920 1,609 (1,037) 286 --
Change in unrealized
foreign exchange
gain/loss on other
assets and
liabilities....... -- 243 -- -- 8 -- --
---------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
investments and
foreign
currencies........ 163,610 29,797 186,898 19,981 4,099 (1,387) (1)
---------------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS... $167,095 $ 32,283 $ 204,369 $ 25,362 $ 14,971 $ 4,943 $ 3,984
=========================================================================================================
</TABLE>
- ---------------
* Net of foreign withholding taxes of $33; $436; $138 and $12 on Growth,
International, Growth-Income and Asset Allocation Series, respectively.
See Notes to Financial Statements
---------------------
A-28
<PAGE> 34
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 1997
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED CASH
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES MANAGEMENT
SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............ $ 3,485 $ 2,486 $ 17,471 $ 5,381 $ 10,872 $ 6,330 $ 3,985
Net realized gain
(loss) on
investments....... 146,719 54,711 166,979 18,372 5,128 (1,673) (1)
Net realized foreign
exchange loss
on other assets
and liabilities. -- (19) (1) -- -- -- --
Change in unrealized
appreciation/
depreciation of
investments....... 16,891 (25,138) 19,920 1,609 (1,037) 286 --
Change in unrealized
foreign exchange
gain/loss on other
assets and
liabilities....... -- 243 -- -- 8 -- --
----------------------------------------------------------------------------------------------------------
Net increase in net
assets resulting
from
operations........ 167,095 32,283 204,369 25,362 14,971 4,943 3,984
----------------------------------------------------------------------------------------------------------
DIVIDENDS AND
DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Dividends from net
investment
income............ (3,795) (3,950) (18,320) (5,690) (12,665) (8,435) (4,852)
Distributions from
net realized gains
on investments.... (118,520) (17,640) (124,190) (14,930) -- -- --
----------------------------------------------------------------------------------------------------------
Total dividends and
distributions paid
to shareholders... (122,315) (21,590) (142,510) (20,620) (12,665) (8,435) (4,852)
----------------------------------------------------------------------------------------------------------
CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold.............. 136,992 78,283 69,784 15,741 36,139 10,319 244,501
Proceeds from shares
issued for
reinvestment of
dividends and
distributions..... 122,315 21,590 142,510 20,620 12,665 8,435 4,852
Cost of shares
repurchased....... (316,021) (136,373) (243,077) (38,717) (63,777) (42,505) (268,495)
----------------------------------------------------------------------------------------------------------
Net decrease in net
assets resulting
from capital share
transactions...... (56,714) (36,500) (30,783) (2,356) (14,973) (23,751) (19,142)
----------------------------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS............ (11,934) (25,807) 31,076 2,386 (12,667) (27,243) (20,010)
NET ASSETS:
Beginning of
period............ 813,164 249,144 919,356 153,060 131,337 108,852 89,236
----------------------------------------------------------------------------------------------------------
End of period....... $ 801,230 $ 223,337 $ 950,432 $ 155,446 $ 118,670 $ 81,609 $ 69,226
==========================================================================================================
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulated
undistributed net
investment
income............ $ 3,479 $ 2,541 $ 17,464 $ 5,374 $ 11,153 $ 6,345 $ 3,981
==========================================================================================================
Shares issued and
repurchased:
Sold.............. 3,275 4,723 2,012 994 2,669 949 21,803
Issued in
reinvestment of
dividends and
distributions... 3,424 1,442 4,590 1,438 990 816 444
Repurchased....... (7,648) (8,200) (6,971) (2,442) (4,696) (3,875) (23,966)
----------------------------------------------------------------------------------------------------------
Net decrease........ (949) (2,035) (369) (10) (1,037) (2,110) (1,719)
==========================================================================================================
</TABLE>
See Notes to Financial Statements
---------------------
A-29
<PAGE> 35
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 1996
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED CASH
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES MANAGEMENT
SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income............ $ 3,796 $ 3,659 $ 18,321 $ 5,657 $ 12,236 $ 8,479 $ 4,855
Net realized gain on
investments....... 118,807 17,946 124,360 14,891 1,680 118 1
Net realized foreign
exchange loss on
other assets and
liabilities....... -- (15) -- -- -- -- --
Change in unrealized
appreciation/
depreciation of
investments....... (22,910) 21,406 32,410 5,929 3,974 (2,756) --
----------------------------------------------------------------------------------------------------------
Net increase in net
assets resulting
from operations... 99,693 42,996 175,091 26,477 17,890 5,841 4,856
----------------------------------------------------------------------------------------------------------
DIVIDENDS AND
DISTRIBUTIONS
PAID TO
SHAREHOLDERS:
Dividends from net
investment
income............ (5,500) (7,250) (20,695) (5,985) (13,970) (11,160) (7,520)
Distributions from
net realized gains
on investments.... (120,665) (4,980) (55,955) (10,955) -- -- (1)
----------------------------------------------------------------------------------------------------------
Total dividends and
distributions paid
to shareholders... (126,165) (12,230) (76,650) (16,940) (13,970) (11,160) (7,521)
----------------------------------------------------------------------------------------------------------
CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold.............. 186,903 69,110 75,454 15,816 40,043 16,512 250,835
Proceeds from shares
issued for
reinvestment of
dividends and
distributions..... 126,165 12,230 76,650 16,940 13,970 11,160 7,521
Cost of shares
repurchased....... (370,707) (91,096) (213,332) (42,841) (73,186) (48,439) (267,327)
----------------------------------------------------------------------------------------------------------
Net decrease in net
assets resulting
from capital share
transactions...... (57,639) (9,756) (61,228) (10,085) (19,173) (20,767) (8,971)
----------------------------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS............ (84,111) 21,010 37,213 (548) (15,253) (26,086) (11,636)
NET ASSETS:
Beginning of
period............ 897,275 228,134 882,143 153,608 146,590 134,938 100,872
----------------------------------------------------------------------------------------------------------
End of period....... $ 813,164 $ 249,144 $ 919,356 $ 153,060 $ 131,337 $ 108,852 $ 89,236
==========================================================================================================
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulated
undistributed net
investment
income............ $ 3,789 $ 3,943 $ 18,313 $ 5,687 $ 12,657 $ 8,429 $ 4,848
==========================================================================================================
Shares issued and
repurchased:
Sold.............. 4,762 4,811 2,343 1,045 3,028 1,469 22,136
Issued in
reinvestment of
dividends and
distributions... 3,361 880 2,462 1,178 1,104 1,030 683
Repurchased....... (9,518) (6,335) (6,652) (2,849) (5,421) (4,300) (23,640)
----------------------------------------------------------------------------------------------------------
Net decrease........ (1,395) (644) (1,847) (626) (1,289) (1,801) (821)
==========================================================================================================
</TABLE>
See Notes to Financial Statements
---------------------
A-30
<PAGE> 36
O
- ---------------------
ANCHOR PATHWAY FUND
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION: Anchor Pathway Fund (the
"Fund") is a Massachusetts Business Trust. Its Agreement and Declaration of
Trust permits the issuance of an unlimited number of shares ($.01 par value per
share) of beneficial interest in seven separate series, with shares of each
series representing an interest in a separate portfolio of assets and operating
as a distinct fund. The Fund is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company.
Shares of the Fund are offered only to Variable Separate Accounts, a separate
account of Anchor National Life Insurance Company which offers annuity
contracts.
The investment objectives for each series are as follows:
The GROWTH SERIES seeks growth of capital by investing primarily in common
stocks or securities with common stock characteristics, such as convertible
preferred stocks, which demonstrate the potential for appreciation.
The INTERNATIONAL SERIES seeks long-term growth of capital by investing
primarily in securities of issuers domiciled outside the United States.
The GROWTH-INCOME SERIES seeks growth of capital and income by investing
primarily in common stocks or securities which demonstrate the potential for
appreciation and/or dividends.
The ASSET ALLOCATION SERIES seeks high total return (including income and
capital gains) consistent with preservation of capital over the long-term
through a diversified portfolio that can include common stocks and other
equity-type securities (such as convertible bonds and preferred stocks), bonds
and other intermediate and long-term fixed-income securities and money market
instruments (debt securities maturing in one year or less) in any combination.
The HIGH YIELD BOND SERIES seeks a high level of current income and secondarily
seeks capital appreciation by investing primarily in intermediate and long-term
corporate obligations, with emphasis on higher yielding, higher risk, lower
rated or unrated securities.
The U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES seeks a high level of current
income consistent with prudent investment risk and preservation of capital by
investing primarily in a combination of securities guaranteed by the U.S.
Government and other debt securities rated AAA by Standard & Poor's Ratings
Services or Aaa by Moody's Investors Service, Inc. or that have not received a
rating but are determined to be of comparable quality by the investment adviser.
The CASH MANAGEMENT SERIES seeks high current yield while preserving capital by
investing in a diversified selection of high quality money market instruments.
2. SIGNIFICANT ACCOUNTING POLICIES: The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from these estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
SECURITY VALUATIONS: Stocks are stated at value based upon closing sales prices
reported on recognized securities exchanges or, for listed securities having no
sales reported and for unlisted securities, upon last-reported bid prices.
Nonconvertible bonds, debentures, other long-term debt securities, and
short-term securities with original or remaining maturities in excess of 60 days
are valued at prices obtained for the day of valuation from a bond pricing
service or a major dealer in bonds when such prices are available; however, in
circumstances where the investment adviser deems it appropriate to do so, an
over-the-counter or exchange quotation at the mean of representative bid or
asked prices may be used. Securities traded primarily on securities exchanges
outside the United States are valued at the last sale price on such exchanges on
the day of valuation, or if there is no sale on the day of valuation, at the
last reported bid price. Short-term securities with 60 days or less to maturity
are amortized to maturity based on their cost to the Fund if acquired within 60
days of maturity or, if already held by the Fund on the 60th day, are amortized
to maturity based on the value determined on the 61st day. Securities for which
quotations are not readily available are valued at fair value as determined in
good faith under the direction of the Fund's Trustees.
---------------------
A-31
<PAGE> 37
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained
in U.S. dollars. Assets and liabilities denominated in foreign currencies and
commitments under forward foreign currency contracts are translated into U.S.
dollars at the mean of the quoted bid and asked prices of such currencies
against the U.S. dollar. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated at rates of exchange prevailing when
earned or incurred.
The Fund does not isolate that portion of the results of operations arising as
a result of changes in the foreign exchange rates from the changes in the market
prices of securities held at fiscal year-end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the changes in the
market prices of portfolio securities sold during the year.
Realized foreign exchange gains and losses on other assets and liabilities and
change in unrealized foreign exchange gains and losses on other assets and
liabilities include realized foreign exchange gains and losses from currency
gains or losses realized between the trade and settlement dates of securities
transactions, forward foreign currency contracts, the difference between the
amounts of interest, dividends, discount and foreign withholding taxes recorded
on the Fund's books and the U.S. dollar equivalent amounts actually received or
paid and changes in the unrealized foreign exchange gains and losses relating to
other assets and liabilities arising as a result of changes in the exchange
rate.
FORWARD FOREIGN CURRENCY CONTRACTS: Certain funds may enter into forward
foreign currency contracts ("forward contracts") to attempt to protect
securities and related receivables and payables against changes in future
foreign exchange rates. A forward contract is an agreement between two parties
to buy or sell currency at a set price on a future date. The market value of the
contract will fluctuate with changes in currency exchange rates. The contract is
marked-to-market daily using the forward rate and the change in market value is
recorded by the Fund as unrealized gain or loss. Upon settlement date, the Fund
records either realized gains or losses when the contract is closed equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. Forward contracts involve elements of risk
in excess of the amount reflected in the Statement of Assets and Liabilities.
The Trust bears the risk of an unfavorable change in the foreign exchange rate
underlying the forward contract.
SECURITIES TRANSACTIONS, DIVIDENDS, INVESTMENT INCOME AND EXPENSES: Securities
transactions are recorded on a trade date basis. Interest income is accrued
daily except when collection is not expected. Dividend income is recorded on the
ex-dividend date except for certain dividends from foreign securities which are
recorded as soon as the Fund is informed after the ex-dividend date. The Fund
does not amortize premiums or accrete discounts on fixed income securities,
other than short-term securities, except those original issue discounts for
which amortization is required for federal income tax purposes; gains and losses
realized upon the sale of such securities are based on their identified cost.
Funds which earn foreign income and capital gains may be subject to foreign
withholding taxes at various rates.
Common expenses incurred by the Fund are allocated among the series based upon
their relative net asset values or other appropriate allocation methods. In all
other respects, expenses are charged to each series as incurred on a specific
identification basis.
The Fund records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net capital gains are determined and presented in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Net investment income/loss, net realized gain/loss, and net
assets are not affected.
---------------------
A-32
<PAGE> 38
For the year ended November 30, 1997, the reclassification arising from
book/tax differences resulted in increases (decreases) to the components of net
assets as follows, (dollars in thousands):
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET REALIZED NET INVESTMENT IN
GAIN/(LOSS) INCOME/(LOSS) CAPITAL
--------------------------------------------
<S> <C> <C> <C>
Growth Series.............................................................. $ 1,037 $ -- $(1,037)
International Series....................................................... (62) 62 --
Growth-Income Series....................................................... (424) -- 424
Asset Allocation Series.................................................... 4 (4) --
High-Yield Bond Series..................................................... (289) 289 --
U.S. Government/AAA-Rated Securities Series................................ (5) 21 (16)
Cash Management Series..................................................... -- -- --
</TABLE>
3. FEDERAL INCOME TAXES: It is the Fund's policy to continue to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments, to its shareholders. Therefore, no federal tax
provision is required.
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for tax purposes, including short-term securities at November 30,
1997, were as follows (dollars in thousands):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE NET
UNREALIZED UNREALIZED UNREALIZED COST OF CAPITAL LOSS
GAIN (LOSS) GAIN INVESTMENTS CARRYOVER*+
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Growth Series.................................... $ 326,990 $ (31,165) $ 295,825 $ 501,976 $ --
International Series............................. 42,235 (11,524) 30,711 192,522 --
Growth-Income Series............................. 292,929 (7,275) 285,654 659,164 --
Asset Allocation Series.......................... 31,930 (872) 31,058 123,342 --
High-Yield Bond Series........................... 6,547 (1,867) 4,680 111,242 --
U.S. Government/AAA-Rated Securities Series**.... 2,186 (226) 1,960 78,975 3,232
Cash Management Series........................... -- -- -- 69,833 1
<CAPTION>
CAPITAL LOSS
UTILIZED
<S> <C>
Growth Series.................................... $ --
International Series............................. --
Growth-Income Series............................. --
Asset Allocation Series.......................... --
High-Yield Bond Series........................... 2,160
U.S. Government/AAA-Rated Securities Series**.... --
Cash Management Series........................... --
</TABLE>
- ---------------
* Expire 2003-2005
** Post 10/31/97 Capital Loss Deferral: U.S. Government/AAA-Rated Securities
Series $73
+ Net capital loss carryover reported as of November 30, 1997, which are
available to the extent provided in regulations to offset future capital
gains. To the extent that these carryovers are used to offset future capital
gains, it is probable that the gains so offset will not be distributed.
4. BUSINESS MANAGER AND INVESTMENT ADVISER: SunAmerica Asset Management Corp.
(the "Business Manager"), an indirect wholly-owned subsidiary of Anchor National
Life Insurance Company, which is an indirect subsidiary of SunAmerica Inc.,
pursuant to a business management agreement, manages the business affairs and
the administration of the Fund. During the fiscal year ended November 30, 1997,
Anchor Investment Adviser, Inc., an indirect wholly-owned subsidiary of Anchor
National Life Insurance Company, served as business manager of the Fund through
July 14, 1997, until succeeded by SunAmerica Asset Management Corp. on July 15,
1997. For providing these services, the Business Manager receives a monthly fee
which is accrued daily based on the average net assets of each series of the
Fund. Except for the International Series, the Business Manager fee accrues at
the annual rate of .24% on that portion of each series' average daily net assets
not exceeding $30,000,000 and .20% on that portion of the series' average daily
net assets in excess of $30,000,000. The Business Manager fee for the
International Series accrues at the annual rate of .24% on the series' average
daily net assets.
Advisory fees paid to Capital Research and Management Company (the "Investment
Adviser") are based on the net assets of each series at the following annual
rates: .36% on that portion of each series' (except for the International
Series) average daily net assets not exceeding $30,000,000 and .30% on that
portion of the series' average net assets in excess of $30,000,000. The advisory
fee for the International Series accrues at the annual rate of .66% on that
portion of the series' average daily net assets not exceeding $60,000,000 and
.58% on that portion of the series' average daily net assets in excess of
$60,000,000.
---------------------
A-33
<PAGE> 39
5. PURCHASES AND SALES OF SECURITIES: Information with respect to purchases and
sales of long-term securities (dollars in thousands) for the year ended November
30, 1997, was as follows:
<TABLE>
<CAPTION>
ASSET
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION HIGH-YIELD
SERIES SERIES SERIES SERIES BOND SERIES
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Purchases of portfolio securities........ $206,486 $ 105,870 $ 239,596 $ 44,778 $68,713
Sales of portfolio securities............ 372,190 175,763 422,506 62,100 78,410
U.S. government securities excluded above
were as follows:
Purchases of U.S. government
securities............................. -- -- -- 10,233 4,616
Sales of U.S. government securities...... -- -- -- 13,033 11,477
<CAPTION>
U.S.
SECURITIES MANAGEMENT
SERIES SERIES
<S> <C> <C>
Purchases of portfolio securities........ $ 7,465 $ --
Sales of portfolio securities............ 9,864 --
U.S. government securities excluded above
were as follows:
Purchases of U.S. government
securities............................. 31,310 --
Sales of U.S. government securities...... 50,113 --
</TABLE>
6. TRANSACTIONS WITH AFFILIATES: The following series incurred brokerage
commissions (dollars in thousands) with an affiliated broker:
<TABLE>
<CAPTION>
ROYAL ALLIANCE
ASSOCIATES, INC.
----------------
<S> <C>
Growth Series $ 1
Growth-Income Series 11
Asset Allocation Series 1
</TABLE>
---------------------
A-34
<PAGE> 40
O
- ---------------------
ANCHOR PATHWAY FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
NET REALIZED TOTAL DIVIDENDS DIVIDENDS
NET ASSET NET & UNREALIZED FROM DECLARED FROM NET NET ASSET
VALUE INVEST- GAIN (LOSS) INVEST- FROM NET REALIZED VALUE
PERIOD BEGINNING MENT ON MENT INVESTMENT GAIN ON END OF TOTAL
ENDED OF PERIOD INCOME@ INVESTMENTS OPERATIONS INCOME INVESTMENTS PERIOD RETURN**
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Growth Series
11/30/93 $ 30.96 $ 0.24 $ 5.32 $ 5.56 $(0.23) $ (0.53) $ 35.76 18.26%
11/30/94 35.76 0.19 1.04 1.23 (0.25) (2.66) 34.08 3.33
11/30/95 34.08 0.25 12.02 12.27 (0.20) (2.65) 43.50 37.93
11/30/96 43.50 0.18 5.10 5.28 (0.28) (6.22) 42.28 14.02
11/30/97 42.28 0.18 8.30 8.48 (0.21) (6.73) 43.82 23.78
International Series
11/30/93 $ 10.00 $ 0.18 $ 2.54 $ 2.72 $(0.14) $ (0.01) $ 12.57 27.41%
11/30/94 12.57 0.22 0.81 1.03 (0.12) (0.22) 13.26 8.17
11/30/95 13.26 0.26 1.11 1.37 (0.23) (0.50) 13.90 11.18
11/30/96 13.90 0.22 2.46 2.68 (0.46) (0.31) 15.81 20.03
11/30/97 15.81 0.17 1.78 1.95 (0.27) (1.22) 16.27 13.15
Growth-Income Series
11/30/93 $ 26.25 $ 0.71 $ 2.44 $ 3.15 $(0.63) $ (0.54) $ 28.23 12.34%
11/30/94 28.23 0.69 (0.14) 0.55 (0.76) (1.56) 26.46 2.00
11/30/95 26.46 0.71 7.46 8.17 (0.76) (2.23) 31.64 33.47
11/30/96 31.64 0.67 5.87 6.54 (0.77) (2.10) 35.31 21.88
11/30/97 35.31 0.66 6.91 7.57 (0.75) (5.10) 37.03 24.62
Asset Allocation Series
11/30/93 $ 12.90 $ 0.63 $ 0.72 $ 1.35 $(0.46) $ (0.13) $ 13.66 10.76%
11/30/94 13.66 0.58 (0.69) (0.11) (0.62) (0.31) 12.62 (0.84)
11/30/95 12.62 0.55 3.16 3.71 (0.68) (0.38) 15.27 31.01
11/30/96 15.27 0.56 2.17 2.73 (0.63) (1.14) 16.23 19.34
11/30/97 16.23 0.55 2.00 2.55 (0.63) (1.65) 16.50 17.86
High-Yield Bond Series
11/30/93 $ 14.60 $ 1.27 $ 1.02 $ 2.29 $(1.22) $ -- $ 15.67 16.44%
11/30/94 15.67 1.24 (1.88) (0.64) (1.49) (0.49) 13.05 (4.70)
11/30/95 13.05 1.26 0.99 2.25 (1.56) (0.13) 13.61 18.97
11/30/96 13.61 1.21 0.56 1.77 (1.53) -- 13.85 14.05
11/30/97 13.85 1.19 0.44 1.63 (1.43) -- 14.05 12.76
U.S. Government/AAA-Rated Securities Series
11/30/93 $ 12.87 $ 0.95 $ 0.61 $ 1.56 $(0.91) $ (0.18) $ 13.34 12.58%
11/30/94 13.34 0.90 (1.43) (0.53) (1.11) (0.17) 11.53 (4.17)
11/30/95 11.53 0.86 0.85 1.71 (1.20) (0.06) 11.98 15.95
11/30/96 11.98 0.80 (0.21) 0.59 (1.06) -- 11.51 5.49
11/30/97 11.51 0.76 (0.14) 0.62 (1.03) -- 11.10 6.09
Cash Management Series
11/30/93 $ 11.50 $ 0.29 $ -- $ 0.29 $(0.39) $ -- $ 11.40 2.57%
11/30/94 11.40 0.40 -- 0.40 (0.33) -- 11.47 3.56
11/30/95 11.47 0.61 0.01 0.62 (0.44) -- 11.65 5.53
11/30/96 11.65 0.55 -- 0.55 (0.82) -- 11.38 4.94
11/30/97 11.38 0.54 0.01 0.55 (0.62) -- 11.31 5.03
<CAPTION>
NET RATIO OF NET
ASSETS RATIO OF INVESTMENT
END OF EXPENSES INCOME PORTFOLIO AVERAGE
PERIOD PERIOD TO AVERAGE TO AVERAGE TURNOVER COMMISSION
ENDED (000'S) NET ASSETS NET ASSETS RATE PER SHARE#
- ------------------------------------------------------------------------
<S> <C>
Growth Series
11/30/93 $735,400 0.55% 0.71% 21.99% $ N/A
11/30/94 712,602 0.55 0.56 33.79 N/A
11/30/95 897,275 0.55 0.65 23.72 N/A
11/30/96 813,164 0.55 0.46 25.51 0.0561
11/30/97 801,230 0.54 0.44 29.01 0.0477
International Series
11/30/93 $192,162 1.12% 1.62% 22.56% $ N/A
11/30/94 259,498 1.04 1.64 21.68 N/A
11/30/95 228,134 1.05 1.95 16.79 N/A
11/30/96 249,144 1.02 1.56 44.94 0.0196
11/30/97 223,337 1.04 0.99 47.45 0.0043
Growth-Income Series
11/30/93 $862,716 0.55% 2.60% 29.22% $ N/A
11/30/94 765,971 0.55 2.54 32.97 N/A
11/30/95 882,143 0.55 2.52 18.81 N/A
11/30/96 919,356 0.55 2.07 23.72 0.0564
11/30/97 950,432 0.54 1.88 30.06 0.0493
Asset Allocation Series
11/30/93 $166,555 0.60% 4.70% 22.66% $ N/A
11/30/94 142,678 0.59 4.47 48.53 N/A
11/30/95 153,608 0.59 4.04 53.58 N/A
11/30/96 153,060 0.58 3.74 40.97 0.0573
11/30/97 155,446 0.59 3.49 39.14 0.0507
High-Yield Bond Series
11/30/93 $190,515 0.59% 8.43% 59.03% $ N/A
11/30/94 127,467 0.59 8.76 44.97 N/A
11/30/95 146,590 0.59 9.66 31.64 N/A
11/30/96 131,337 0.58 9.09 36.99 N/A
11/30/97 118,670 0.61 8.68 64.49 N/A
U.S. Government/AAA-Rated Securities Series
11/30/93 $228,569 0.58% 7.19% 9.14% $ N/A
11/30/94 149,368 0.58 7.42 16.95 N/A
11/30/95 134,938 0.59 7.49 43.43 N/A
11/30/96 108,852 0.59 7.03 17.12 N/A
11/30/97 81,609 0.63 6.93 46.17 N/A
Cash Management Series
11/30/93 $192,384 0.58% 2.59% --% $ N/A
11/30/94 186,396 0.57 3.52 -- N/A
11/30/95 100,872 0.58 5.32 -- N/A
11/30/96 89,236 0.58 4.81 -- N/A
11/30/97 69,226 0.63 4.87 -- N/A
</TABLE>
- ---------------
@ Calculated based upon average shares outstanding
# The average commission per share is derived by dividing the agency
commissions paid on equity securities trades by the number of shares
purchased or sold.
** Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company. If such expenses had been included, total
return would have been lower for each period presented.
See Notes to Financial Statements
---------------------
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<PAGE> 41
O
- ---------------------
ANCHOR PATHWAY FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholder of Anchor Pathway Fund
In our opinion, the accompanying statements of assets and liabilities, including
the investment portfolios, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Growth Series, International
Series, Growth-Income Series, Asset Allocation Series, High-Yield Bond Series,
U.S. Government/AAA-Rated Securities Series and Cash Management Series
(constituting the Anchor Pathway Fund, hereafter referred to as the "Fund") at
November 30, 1997, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
November 30, 1997 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
January 13, 1998
---------------------
A-36
<PAGE> 42
O
- ---------------------
ANCHOR PATHWAY FUND
SHAREHOLDER TAX INFORMATION (UNAUDITED)
Certain tax information regarding the Anchor Pathway Fund is required to be
provided to the shareholder based upon each Fund's income and distributions for
the year ended November 30, 1997.
During the year ended November 30, 1997 the Funds paid the following dividends
per share along with the percentage of ordinary income dividends that qualified
for the 70% dividends received deductions for corporations:
<TABLE>
<CAPTION>
NET NET NET
TOTAL INVESTMENT SHORT-TERM LONG-TERM
DIVIDENDS INCOME CAPITAL GAINS CAPITAL GAINS
--------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Growth Series.................................. $6.94 $ .21 $ .80 $5.93
International Series........................... 1.49 .27 .13 1.09
Growth-Income Series........................... 5.85 .75 .37 4.73
Asset Allocation Series........................ 2.28 .63 .28 1.37
High-Yield Bond Series......................... 1.43 1.43 -- --
U.S. Government/AAA-Rated Securities Series.... 1.03 1.03 -- --
Cash Management Series......................... .62 .62 -- --
<CAPTION>
QUALIFYING %
FOR THE
70% DIVIDENDS
RECEIVED DEDUCTION
------------------
<S> <C>
Growth Series.................................. 22.68%
International Series........................... --
Growth-Income Series........................... 63.81
Asset Allocation Series........................ 28.84
High-Yield Bond Series......................... 2.61
U.S. Government/AAA-Rated Securities Series.... --
Cash Management Series......................... --
</TABLE>
The International Series makes an election under Internal Revenue Code Section
853 to pass through foreign taxes paid by the International Series to its
shareholder. The total amount of foreign taxes passed through to the shareholder
for the fiscal year ended November 30, 1997 was $403,820. The gross foreign
source income for information reporting is $4,362,866.
---------------------
A-37
<PAGE> 43
O
- ---------------------
COMPARISONS: PORTFOLIOS VS. INDEXES
The following graphs compare the performance of a $10,000
investment in certain of the Anchor Pathway Fund portfolios to a
$10,000 investment in a securities index. Each index has been
chosen by Capital Research and Management Company (CRMC), the
portfolios' money manager, as an appropriate comparison.
THESE GRAPHS COMPARE THE PERFORMANCE OF THE PORTFOLIOS AT THE
ANCHOR PATHWAY FUND LEVEL AND INCLUDE ALL FUND EXPENSES BUT NO
INSURANCE COMPANY EXPENSES AND NO CONTINGENT DEFERRED SALES
CHARGE. NO EXPENSES ARE DEDUCTED FROM THE PERFORMANCE OF THE
INDEXES AND ALL DIVIDENDS ARE ASSUMED TO BE REINVESTED.
Growth Series
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) GROWTH SERIES S&P 500 COMPOSITE INDEX
<S> <C> <C>
NOV-87 10000 10000
NOV-88 12183 12332
NOV-89 18123 16136
NOV-90 16566 15557
NOV-91 21006 18731
NOV-92 25478 22202
NOV-93 30129 24441
NOV-94 31132 24687
NOV-95 42940 33832
NOV-96 48961 43267
NOV-97 60606 55623
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------
GROWTH SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 11/30/97
- ------------------------------------------
<S> <C>
1-year 23.78%
5-year 18.92%
10-year 19.74%
- ------------------------------------------
</TABLE>
------------------------------------------------------------------
The graphs represent past performance, which is not indicative of
future results.
---------------------
A-38
<PAGE> 44
International Series
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) International Series MSCI EAFE Index
<S> <C> <C>
May-90 10000 10000
Nov-90 9680 9483
Nov-91 10221 10310
Nov-92 10253 9508
Nov-93 13063 11852
Nov-94 14130 13646
Nov-95 15710 14724
Nov-96 18857 16504
Nov-97 21336 16483
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------
INTERNATIONAL SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 11/30/97
- ------------------------------------------
<S> <C>
1-year 13.15%
5-year 15.79%
10-year N/A
Since Inception (5/9/90) 10.51%
- ------------------------------------------
</TABLE>
------------------------------------------------------------------
Growth-Income Series
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Growth-Income Series S&P 500 Composite Index
<S> <C> <C>
Nov-87 10000 10000
Nov-88 12248 12332
Nov-89 16282 16136
Nov-90 15050 15557
Nov-91 18232 18731
Nov-92 21153 22202
Nov-93 23763 24441
Nov-94 24240 24887
Nov-95 32363 33832
Nov-96 39433 43267
Nov-97 49141 55623
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------
GROWTH INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 11/30/97
- ------------------------------------------
<S> <C>
1-year 24.62%
5-year 18.36%
10-year 17.26%
- ------------------------------------------
</TABLE>
------------------------------------------------------------------
The graphs represent past performance, which is not indicative of
future results.
---------------------
A-39
<PAGE> 45
Asset Allocation Series
<TABLE>
<CAPTION>
Measurement Period Asset Allocation S&P 500 Composite Salomon Broad
(Fiscal Year Covered) Series Index Investment Grade Index
<S> <C> <C> <C>
Mar-89 10000 10000 10000
Nov-89 11000 11530 11076
Nov-90 10827 11116 11923
Nov-91 12847 13384 13640
Nov-92 14620 15869 14882
Nov-93 16192 17463 16518
Nov-94 16056 17639 16018
Nov-95 21035 24172 18888
Nov-96 25104 30913 19997
Nov-97 29586 39743 21511
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------
ASSET ALLOCATION SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 11/30/97
- ------------------------------------------
<S> <C>
1-year 17.86%
5-year 15.14%
10-year N/A
Since Inception (3/31/89) 13.33%
- ------------------------------------------
</TABLE>
------------------------------------------------------------------
High-Yield Bond Series
<TABLE>
<CAPTION>
Measurement Period Salomon Bros. High- Salomon Broad
(Fiscal Year Covered) High-Yield Bond Series Yield Index Investment Grade Index
<S> <C> <C> <C>
Nov-87 10000 10000 10000
Nov-88 11629 11692 10926
Nov-89 12660 11667 12479
Nov-90 12663 10497 13433
Nov-91 18367 15087 15368
Nov-92 18668 17981 16767
Nov-93 21737 21678 18811
Nov-94 20715 20762 18045
Nov-95 24644 26574 21258
Nov-96 28105 29232 22530
Nov-97 31692 34081 24237
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------
HIGH-YIELD BOND SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 11/30/97
- ------------------------------------------
<S> <C>
1-year 12.76%
5-year 11.17%
10-year 12.23%
- ------------------------------------------
</TABLE>
------------------------------------------------------------------
The graphs represent past performance, which is not indicative of
future results.
---------------------
A-40
<PAGE> 46
U.S. Government/AAA-Rated Securities Series
<TABLE>
<CAPTION>
Measurement Period U.S. Gov't/AAA-Rated Salmon Bros. Treasury/Gov't-
(Fiscal Year Covered) Securities Series Sponsored/Mortgage Index
<S> <C> <C>
Nov-87 10000 10000
Nov-88 11000 10661
Nov-89 12290 12434
Nov-90 13468 13436
Nov-91 14968 15306
Nov-92 16433 16658
Nov-93 18500 18300
Nov-94 17729 17872
Nov-95 20557 20935
Nov-96 21686 22174
Nov-97 23006 23845
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------
U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 11/30/97
- -------------------------------------------
<S> <C>
1-year 6.09%
5-year 6.96%
10-year 8.69%
- -------------------------------------------
</TABLE>
------------------------------------------------------------------
The graphs represent past performance, which is not indicative of
future results.
---------------------
A-41
