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[LOGO] ANCHOR NATIONAL
A SunAmerica Company
ANCHOR PATHWAY FUND
ANNUAL REPORT - FEBRUARY 28, 1999
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AMERICAN PATHWAY II
VARIABLE ANNUITY
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DEAR ANCHOR PATHWAY INVESTOR:
We are pleased to offer the following report on the Anchor
Pathway Fund, which serves as the underlying investment vehicle
for the American Pathway II Variable Annuity. This report covering
the three-month period from December 1, 1998 through February 28,
1999 represents a change in the fiscal year of the fund. The
fund's year-end has been changed to February 28 (February 29 in
leap year), necessitating the issuance of a new annual report. The
fiscal year change was made in order to reduce fund costs and to
facilitate timely reporting to our shareholders. 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
Global equity markets were a study in contrasts during the three
months ended February 28, 1999. Early in the new year, stock
prices spiked upward, driven by unusually strong interest in
Internet-related issues and general optimism about the advent of
the euro dollar. Prices soon fell sharply lower, however, when
investors grew concerned about the potential consequences of a
devaluation of Brazil's currency, the real. While stocks generally
ended the period higher than where they began, most sectors of the
bond market retreated, particularly in February, as
stronger-than-expected economic data rekindled fears of inflation.
Longer term, the U.S. economy's record peacetime expansion shows
few signs of subsiding. Jobs are plentiful, consumer spending is
robust, yet inflation remains remarkably quiescent. While CRMC is
cautiously optimistic, the recent volatility in virtually every
sector of the world's financial markets is an object lesson in how
quickly investors' sentiments can change. One of the benefits of a
long-term perspective is that it allows CRMC to make carefully
reasoned judgments about those changes and ultimately act on its
convictions about what is most appropriate for shareholders.
Here are brief comments on the investment activities of each
series:
THE GROWTH SERIES returned 14.5% for the three-month period
ending February 28, significantly outpacing the 6.8% figure posted
by the S&P 500 as well as the closest competitive benchmark, the
Lipper Capital Appreciation Fund Index which was up 8.9% for the
quarter. A strong representation in media/entertainment and
technology stocks, along with individual stock selections in other
industry sectors, were primary contributors to the portfolio's
returns. Regarding top 20 holdings, there was only one
change -- Analog Devices replaced SCI Systems (both are technology
firms). Of the 20, eight are technology companies and eight are in
the entertainment/cable business. This is indicative of the
series' overall strong representation in these two areas.
THE INTERNATIONAL SERIES returned 11.1% for the three-month
period ending February 28, compared to the benchmark EAFE index
return of 1.2%. Contributing to the series' strong result were a
low exposure to Asia and a concentration in Europe. Although the
broad international markets performed well in the fourth quarter
of 1998, performance in January was mixed and decidedly weak in
February. In fact, after a period of strong performance, even the
European markets have posted mixed results in recent times. Most
of the major markets in Europe (as in the U.S.) have been driven
by a relatively small number of stocks. The most successful
industry sectors include telecommunications, technology,
broadcasting and publishing, merchandising, and services.
Fortunately, these same sectors are the five-largest industry
concentrations in the series, representing more
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than 58% of total holdings. Given uncertainty about the direction
of interest rates and economic growth, CRMC notes there is reason
to expect continued divergence in the movements of the various
industry sectors and markets. As of February 28, the largest
country concentration is the U.K. at 13.2%, and Europe as the most
significant region at 65.9%. Exposure to developing markets is
approximately 6%, and cash equivalents stood at 14.3%.
THE GROWTH-INCOME SERIES returned 4.6% for the three-month
period ending February 28, compared to the Lipper Growth and
Income Fund Index of 2.1%. Given concerns over the spreading
impact of business contraction in Asia to Latin America and
elsewhere, as well as the high valuation in the U.S. equities
market, the portion of the series maintained in cash equivalents
has averaged near 15% in recent quarters. Positions in telephone
and related equipment companies, computer suppliers, entertainment
stocks, and chemical companies were trimmed over the three-month
period. The only increase was in the health and personal care
industry which, as of February 28, represented the largest
commitment, followed closely by the data processing & reproduction
industry. New entrants to the top 20 holdings included Storage
Technology, Sepracor, Ikon Office Solutions, Browning-Ferris,
Sunstrand, Schering-Plough, and Merck.
THE ASSET ALLOCATION SERIES returned 1.4% for the three-month
period ending February 28, compared to the S&P 500 return of 6.8%,
the Salomon Smith Barney Investment Grade Bond Index of -0.7%, and
the Lipper Balanced Fund Index of 2.8%. As of February 28, common
stock and convertible holdings comprised 61.2% of the series.
Fixed income holdings and short-term investments represented 27.8%
and 10.7% of the series, respectively. Top equity industry
holdings at the end of February were: banking (5.1%), aerospace
(5.1%), data processing (4.4%), health care (3.9%), and energy
(3.9%). Holdings in the energy, forest products & paper, and
insurance sectors were reduced on balance during the quarter in
which aerospace and data processing saw increases. Nokia IBM,
Household Int'l, General Mills, Corning, and Textron were the
largest equity holdings in the series at the end of the period.
THE HIGH-YIELD BOND SERIES returned 0.5% for the three-month
period ending February 28, compared to the Salomon Smith Barney
Long-Term High-Yield Index return of 1.1%, and the Salomon Smith
Barney Investment Grade Bond Index return of -0.7%. Over the last
three months, the overall high-yield market has continued to
improve from the lows seen in fourth-quarter 1998. During that
volatile quarter and into first-quarter 1999, CRMC was able to
take advantage of attractive valuations and increase exposure to
select names in the portfolio. The manager continues to have a
high degree of conviction regarding the communications sector,
which was the focus of many purchases. The communications sector,
which includes holdings in the broadcasting, publishing, cable,
and leisure industries, has performed quite well. In contrast,
areas that have experienced significant weakness of late have been
in the health care and manufacturing industries where the series
has been concentrated in merely three names as CRMC works to
discern those companies with the best long-term prospects and
those carrying too much risk. For 1999, the U.S. economic picture
is expected to remain solid, which should foster good cash flow
growth and credit profile improvement in many of the series'
holdings. Further, this stability should provide a solid
foundation for performance in the fixed income securities arena.
THE U.S. GOVERNMENT/AAA RATED SECURITIES SERIES returned -0.4%
for the three-month period ending February 28 compared to the
Salomon Smith Barney Treasury/Gov't Sponsored/Mortgage Index
return of -0.6%. After a period in the fall when the bond
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market's focus was on global liquidity concerns, the focus in the
latest quarter was on more mundane concerns. Worries about the
strength of the U.S. economy, and therefore, the Federal Reserve's
reluctance to lower rates, moved bond prices lower. Inflation has
not picked up, but the worry about inflation has impacted bond
prices. CRMC notes that in some respects, the most interesting
feature of the current bond market has been the excellent
performance of securities other than treasuries. Mortgage backed
securities, commercial mortgage backed securities, and
high-quality corporate issues have all done very well. These
non-Treasury securities had become attractive on a relative
valuation basis and are now returning to more normal levels. CRMC
has continued to reduce Treasury securities to take advantage of
this trend. In fact, since the end of August, the manager has
reduced Treasuries from 23.7% of the series to 11.1% at the end of
the three-month period. Mortgage-related securities have fallen
slightly from 20.9% to 20.6% while Federal Agency Obligations have
risen from 38.2% to 45.9%. CRMC also has reduced the average
maturity from 19.2 years at the end of November to 17.9 years as
of the end of February.
THE CASH MANAGEMENT SERIES provided investors with a return of
1.1% for the three-month period. Encouraged by signs of a
strengthening economy, the Federal Reserve maintained short-term
rates at 4.75%. The series maintains a high-quality orientation by
concentrating its assets in top-grade commercial paper (short-term
loans to major, well-known corporations), all of which carry the
highest credit ratings from Moody's Investors Service or Standard
& Poor's, and federal agency discount notes (short-term loans to
federal government agencies).
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 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 on the new semi-annual
reporting schedule in October of 1999 for the six-month period
ending August 31st, 1999.
Sincerely,
/s/ ELI BROAD
Eli Broad
Chairman, President and Chief Executive Officer,
Anchor National Life Insurance Company
March 16, 1999
--------------------------------
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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ANCHOR PATHWAY FUND
GROWTH SERIES INVESTMENT PORTFOLIO -- FEBRUARY 28, 1999
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 89.8% SHARES (IN THOUSANDS)
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<S> <C> <C>
CAPITAL EQUIPMENT -- 28.1%
Aerospace & Military Technology -- 0.2%
Gulfstream Aerospace Corp.+................................. 40,000 $ 1,790
Data Processing & Reproduction -- 11.0%
Adobe Systems, Inc. ........................................ 155,000 6,239
Ascend Communications, Inc.+................................ 30,000 2,308
Compaq Computer Corp. ...................................... 277,500 9,782
Computer Associates International, Inc. .................... 55,000 2,310
Data General Corp.+......................................... 200,000 2,762
Gateway 2000, Inc.+......................................... 30,000 2,181
Lexmark International Group, Inc., Class A+................. 30,000 3,096
Mentor Graphics Corp.+...................................... 120,000 1,680
Microsoft Corp.+............................................ 45,000 6,756
Oracle Corp.+............................................... 300,000 16,762
PeopleSoft, Inc.+........................................... 620,000 11,702
Silicon Graphics, Inc.+..................................... 500,000 7,969
Solectron Corp.+............................................ 520,000 23,237
Structural Dynamics Research Corp.+......................... 150,000 2,925
Electrical & Electronics -- 0.9%
Ericsson (L.M.) Telecommunications Co., Class B ADR......... 120,000 3,120
General Instrument Corp.+................................... 100,000 2,925
Northern Telecom Ltd. ...................................... 45,000 2,613
Electronic Components -- 14.2%
Adaptec, Inc.+.............................................. 365,000 7,277
ADC Telecommunications, Inc.+............................... 115,000 4,657
Altera Corp.+............................................... 290,000 14,101
Analog Devices, Inc.+....................................... 486,666 12,197
Corning, Inc. .............................................. 54,200 2,900
Intel Corp. ................................................ 151,200 18,135
LSI Logic Corp.+............................................ 200,000 5,187
Maxim Integrated Products, Inc.+............................ 129,800 5,411
Microchip Technology, Inc.+................................. 210,000 5,722
Micron Technology, Inc.+.................................... 27,100 1,562
Park Electrochemical Corp. ................................. 187,200 5,078
Quantum Corp.+.............................................. 150,000 2,466
Rogers Corp.+............................................... 109,200 2,826
SCI Systems, Inc.+.......................................... 240,000 7,425
Texas Instruments, Inc. .................................... 381,000 33,980
Electronic Instruments -- 1.6%
Applied Materials, Inc.+.................................... 230,000 12,794
KLA-Tencor Corp.+........................................... 30,000 1,554
Energy Equipment -- 0.2%
Schlumberger Ltd. .......................................... 40,000 1,943
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255,372
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CONSUMER GOODS -- 5.1%
Beverages & Tobacco -- 0.8%
PepsiCo, Inc. .............................................. 40,000 1,505
Philip Morris Cos., Inc. ................................... 160,000 6,260
</TABLE>
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<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
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<S> <C> <C>
CONSUMER GOODS(continued)
Food & Household Products -- 0.7%
Dole Food, Inc. ............................................ 90,000 $ 2,835
Keebler Foods Co.+.......................................... 80,000 3,120
Health & Personal Care -- 2.7%
BioChem Pharma, Inc.+....................................... 60,000 1,474
Eli Lilly & Co. ............................................ 20,000 1,894
Forest Labs, Inc.+.......................................... 45,000 2,225
Guidant Corp. .............................................. 100,000 5,700
Millenium Pharmaceuticals, Inc.+............................ 50,000 1,553
Omnicare, Inc. ............................................. 30,000 718
Pfizer, Inc. ............................................... 15,000 1,979
Pharmacia & Upjohn, Inc. ................................... 58,000 3,161
Sepracor, Inc.+............................................. 27,500 3,431
Warner-Lambert Co. ......................................... 40,000 2,762
Recreation & Other Consumer Products -- 0.3%
Hasbro, Inc. ............................................... 70,000 2,590
Textiles & Apparel -- 0.6%
Nike, Inc., Class B......................................... 100,000 5,362
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46,569
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ENERGY -- 0.8%
Energy Sources -- 0.8%
Enterprise Oil PLC ADR...................................... 300,000 1,308
Murphy Oil Corp. ........................................... 80,000 2,735
Oryx Energy Co.+............................................ 75,000 778
Pogo Producing Co. ......................................... 96,500 893
Talisman Energy, Inc.+...................................... 40,000 627
Total SA ADR................................................ 20,000 1,032
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7,373
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FINANCE -- 6.4%
Banking -- 1.9%
Charter One Financial, Inc. ................................ 184,999 5,330
M & T Bank Corp. ........................................... 3,500 1,665
Washington Mutual, Inc. .................................... 145,000 5,800
Wells Fargo Co. ............................................ 125,000 4,594
Financial Services -- 1.7%
Capital One Financial Corp. ................................ 20,000 2,553
Federal National Mortgage Association....................... 56,500 3,955
Household International, Inc. .............................. 110,000 4,469
Providian Financial Corp. .................................. 40,000 4,085
Insurance -- 2.8%
American International Group, Inc.@......................... 90,000 10,255
MGIC Investment Corp. ...................................... 85,000 2,895
Transatlantic Holdings, Inc. ............................... 60,000 4,481
XL Capital Ltd. ............................................ 130,000 7,962
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58,044
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</TABLE>
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<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
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<S> <C> <C>
MATERIALS -- 2.1%
Chemicals -- 1.5%
Air Products & Chemicals, Inc. ............................. 100,000 $ 3,213
Monsanto Co. ............................................... 87,400 3,982
Praxair, Inc. .............................................. 35,000 1,223
Valspar Corp. .............................................. 150,000 4,875
Forest Products & Paper -- 0.6%
Sealed Air Corp.+........................................... 115,000 5,836
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19,129
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SERVICES -- 44.8%
Broadcasting & Publishing -- 24.1%
BHC Communications, Inc., Class A+.......................... 55,821 6,392
Cablevision Systems Corp., Class A+......................... 280,000 18,200
Cox Communications, Inc., Class A+.......................... 170,000 12,028
Fox Entertainment Group, Inc., Class A+..................... 450,000 11,700
Knight-Ridder, Inc. ........................................ 800 40
News Corp. Ltd. ADR......................................... 680,000 19,295
Tele-Communications, Inc., Liberty Media Group, Series A+... 556,037 29,956
Tele-Communications, Inc., TCI Ventures Group, Series A+.... 27,212 753
Time Warner, Inc. .......................................... 917,500 59,179
USA Networks, Inc.+......................................... 356,500 14,171
Viacom, Inc., Class B+...................................... 530,000 46,839
Business & Public Services -- 8.9%
Allied Waste Industries, Inc.+.............................. 270,000 5,265
Avery Dennison Corp. ....................................... 40,000 2,147
Cambridge Technology Partners, Inc.+........................ 70,000 1,759
Cendant Corp.+.............................................. 1,295,562 21,458
Columbia/HCA Healthcare Corp. .............................. 203,625 3,640
Concord EFS, Inc.+.......................................... 140,000 4,471
FDX Corp.+.................................................. 250,000 23,875
First Data Corp. ........................................... 100,000 3,825
Snyder Communications, Inc.+................................ 35,000 1,199
TeleTech Holdings, Inc.+.................................... 37,400 262
Universal Health Services, Inc., Class B.................... 74,900 3,043
Waste Management, Inc. ..................................... 200,000 9,775
Leisure & Tourism -- 2.8%
Carnival Corp., Class A..................................... 94,300 4,196
Disney (Walt) Co. .......................................... 150,000 5,278
King World Productions, Inc.+............................... 150,000 3,966
Mirage Resorts, Inc.+....................................... 475,000 9,262
Starbucks Corp.+............................................ 50,000 2,644
Merchandising -- 1.8%
Cardinal Health, Inc. ...................................... 55,500 4,006
Consolidated Stores Corp.+.................................. 352,400 8,876
Limited, Inc. .............................................. 96,500 3,426
Telecommunications -- 4.4%
AirTouch Communications, Inc.+.............................. 155,000 14,115
MCI WorldCom, Inc.+......................................... 49,756 4,105
Paging Network, Inc.+....................................... 230,000 920
Teleglobe, Inc. ............................................ 165,000 5,177
Comcast Corp., Class A...................................... 220,000 15,606
</TABLE>
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<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
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<S> <C> <C>
SERVICES (continued)
Transportation: Airlines -- 2.8%
AMR Corp.+.................................................. 140,000 $ 7,761
Delta Air Lines, Inc. ...................................... 20,000 1,216
Southwest Airlines Co. ..................................... 543,750 16,381
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406,207
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OTHER COMMON STOCK -- 2.5%.................................. 22,742
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TOTAL COMMON STOCK (cost $469,728).......................... 815,436
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</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCK -- 1.0%
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<S> <C> <C>
SERVICES -- 1.0%
Broadcasting & Publishing -- 1.0%
News Corp. Ltd. ADR (cost $2,313)........................... 340,000 8,925
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TOTAL INVESTMENT SECURITIES (cost $472,041)................. 824,361
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<CAPTION>
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 9.2% (IN THOUSANDS)
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<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 6.1%
American Express Credit Corp. 4.80% due 4/15/99............. $ 11,000 10,934
Eastman Kodak Co. 4.77% due 4/13/99......................... 7,400 7,358
General Electric Capital Corp. 4.87% due 3/01/99............ 12,000 12,000
General Mills, Inc. 4.78% due 3/19/99....................... 5,300 5,287
Kellogg Co. 4.75% due 3/22/99............................... 8,000 7,978
Procter & Gamble Co. 4.76% due 3/11/99...................... 2,700 2,696
Procter & Gamble Co. 4.80% due 6/03/99...................... 9,400 9,282
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55,535
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FEDERAL AGENCY OBLIGATIONS -- 3.1%
Federal Home Loan Bank Discount Notes 4.72% due 5/07/99..... 13,600 13,480
Federal Home Loan Mortgage Discount Notes 4.75% due
5/13/99................................................... 14,400 14,261
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27,741
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TOTAL SHORT-TERM SECURITIES (cost $83,277).................. 83,276
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TOTAL INVESTMENTS --
(cost $555,318) 100.0% $907,637
Liabilities in excess of other assets -- 0.0 (317)
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NET ASSETS -- 100.0% $907,320
====== =========
</TABLE>
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+ Non-income producing security
@ Security represents an investment in an affiliated company
ADR - American Depository Receipt
See Notes to Financial Statements
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ANCHOR PATHWAY FUND
INTERNATIONAL SERIES INVESTMENT PORTFOLIO -- FEBRUARY 28, 1999
<TABLE>
<CAPTION>
VALUE
COMMON STOCK & PREFERRED STOCK -- 85.7% SHARES (IN THOUSANDS)
<S> <C> <C>
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<CAPTION>
<S> <C> <C>
AUSTRALIA -- 5.7%
Brambles Industries Ltd. (Services)......................... 100,000 $ 2,546
Broken Hill Proprietary Co. Ltd. (Energy)................... 422,267 3,170
Fosters Brewing Group Ltd. (Consumer Goods)................. 389,300 1,117
News Corp. Ltd. ADR (Services).............................. 100,000 2,838
Westpac Banking Corp. Ltd. (Finance)........................ 313,073 2,070
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11,741
---------
BRAZIL -- 0.2%
Centrais Geradoras do Sul do Brasil SA ADR+ (Energy)........ 18,300 53
Companhia Paranaense De Energia (Energy).................... 118,055,000 347
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400
---------
CANADA -- 2.7%
Northern Telecom Ltd. (Capital Equipment)................... 94,000 5,458
---------
FINLAND -- 6.6%
Nokia Corp., Class A ADR+ (Capital Equipment)............... 90,000 12,329
UPM-Kymmene OY (Materials).................................. 48,000 1,248
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13,577
---------
FRANCE -- 9.8%
Canal Plus (Services)....................................... 13,500 4,224
Carrefour SA (Services)..................................... 4,300 3,068
Peugeot SA (Consumer Goods)................................. 6,700 895
Total SA, Class B (Energy).................................. 33,876 3,538
Vivendi SA (Services)....................................... 32,000 8,356
---------
20,081
---------
GERMANY -- 9.8%
Bayerische Motoren Werke AG NV (Consumer Goods)............. 6,072 4,393
Bayerische Motoren Werke AG NV new shares+ (Consumer
Goods).................................................... 1,214 858
Bayerische Motoren Werke AG NV Preferred (Consumer Goods)... 2,604 1,059
Bayerische Motoren Werke AG NV new shares Preferred, Class
N+ (Consumer Goods)....................................... 520 217
Deutsche Telekom AG (Services).............................. 296,000 13,603
---------
20,130
---------
ITALY -- 5.3%
Telecom Italia Mobile SpA (Services)........................ 64,800 262
Telecom Italia SpA+ (Services).............................. 1,570,000 10,615
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10,877
---------
JAPAN -- 5.7%
Amway Japan Ltd. ADR (Services)............................. 36,000 149
Fujitsu Ltd. (Capital Equipment)............................ 180,000 2,246
Nintendo Co. Ltd. (Consumer Goods).......................... 11,000 927
Nippon Telegraph & Telephone Corp. (Services)............... 330 2,721
Rohm Co. Ltd. (Capital Equipment)........................... 20,000 1,956
Shohkoh Fund & Co. Ltd. (Finance)........................... 8,600 3,611
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11,610
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</TABLE>
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<TABLE>
<CAPTION>
VALUE
COMMON STOCK & PREFERRED STOCK (CONTINUED) SHARES (IN THOUSANDS)
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<S> <C> <C>
KOREA -- 0.6%
Korea Mobile Telecommunications Corp. (Services)............ 381 $ 280
LG Semiconductor Co.+ (Capital Equipment)................... 96,634 900
Samsung Electronics+ (Consumer Goods)....................... 1,157 82
---------
1,262
---------
LUXEMBOURG -- 0.8%
Safra Republic Holdings, Inc. (Finance)..................... 40,000 1,720
---------
MEXICO -- 4.1%
Cemex SA+ (Materials)....................................... 560,000 1,601
Cifra SA de CV+ (Services).................................. 49,461 64
Cifra SA de CV, Series C+ (Services)........................ 195,500 250
Grupo Televisa SA de CV GDR+ (Services)..................... 35,000 984
Telefonos de Mexico SA ADR (Services)....................... 95,200 5,444
---------
8,343
---------
NETHERLANDS -- 4.4%
AEGON NV (Finance).......................................... 35,000 3,659
Vereenigde Ned Uitgevers (Services)......................... 130,000 5,353
---------
9,012
---------
NORWAY -- 1.1%
Orkla SA (Multi-industry)................................... 160,000 2,143
---------
SPAIN -- 3.3%
Telefonica de Espana SA (Services).......................... 146,881 6,717
---------
SWEDEN -- 5.8%
Astra AB, Class A (Consumer Goods).......................... 270,000 5,359
Ericsson LM Telecommunications Co., Class B (Capital
Equipment)................................................ 190,400 5,046
Kinnevik, Series A (Multi-industry)......................... 23,900 490
Kinnevik, Series B (Multi-industry)......................... 15,000 312
Modern Times Group AB, Class A+ (Services).................. 23,900 382
Modern Times Group AB, Class B ADR+ (Services).............. 3,000 228
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11,817
---------
SWITZERLAND -- 5.8%
Nestle SA+ (Consumer Goods)................................. 1,250 2,360
Novartis AG (Consumer Goods)................................ 1,954 3,429
Swisscom AG+ (Services)..................................... 15,163 5,997
---------
11,786
---------
UNITED KINGDOM -- 13.2%
Dixons Group PLC (Services)................................. 600,000 11,330
EMI Group PLC (Consumer Goods).............................. 930,000 6,858
Orange PLC+ (Services)...................................... 325,000 4,704
Reckitt & Colman PLC (Consumer Goods)....................... 100,000 1,335
Scottish Power PLC (Energy)................................. 132,240 1,220
Zeneca Group PLC (Consumer Goods)........................... 37,900 1,578
---------
27,025
---------
OTHER COMMON STOCK -- 0.8%.................................. 1,539
---------
TOTAL INVESTMENT SECURITIES (cost $125,851)................. 175,238
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</TABLE>
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<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 14.4% (IN THOUSANDS) (IN THOUSANDS)
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<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 6.6%
Alberta Province 4.80% due 3/15/99.......................... $ 3,100 $ 3,094
Daimler Benz North America 4.83% due 3/23/99................ 3,925 3,914
General Electric Capital Corp. 4.87% due 3/01/99............ 2,480 2,480
Lloyds Bank PLC 4.83% due 4/01/99........................... 4,000 3,983
---------
13,471
---------
FEDERAL AGENCY OBLIGATIONS -- 7.8%
Federal Home Loan Mortgage Discount Notes 4.75% due
3/08/99................................................... 6,000 5,994
Federal National Mortgage Association Discount Notes 4.74%
due 4/06/99............................................... 6,000 5,972
Federal National Mortgage Association Discount Notes 4.76%
due 4/08/99............................................... 4,000 3,980
---------
15,946
---------
TOTAL SHORT-TERM SECURITIES (cost $29,417).................. 29,417
---------
TOTAL INVESTMENTS --
(cost $155,268) 100.1% $204,655
Liabilities in excess of other assets -- (0.1) (134)
------ ---------
NET ASSETS -- 100.0% $204,521
====== =========
</TABLE>
-----------------------------
+ Non-income producing security
ADR - American Depository Receipt
GDR - Global Depository Receipt
See Notes to Financial Statements
- ---------------------
10
<PAGE> 12
O
- ---------------------
ANCHOR PATHWAY FUND
GROWTH-INCOME SERIES INVESTMENT PORTFOLIO -- FEBRUARY 28, 1999
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 83.7% SHARES (IN THOUSANDS)
<S> <C> <C>
---------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 19.7%
Aerospace & Military Technology -- 2.5%
Boeing Co. ................................................. 80,000 $ 2,845
Raytheon Co., Class A....................................... 61,556 3,255
Raytheon Co., Class B....................................... 25,000 1,336
Sundstrand Corp. ........................................... 130,000 8,799
United Technologies Corp. .................................. 52,000 6,442
Data Processing & Reproduction -- 7.3%
3Com Corp.+................................................. 150,000 4,716
Adobe Systems, Inc. ........................................ 40,000 1,610
Cisco Systems, Inc.+........................................ 50,000 4,891
Computer Associates International, Inc. .................... 150,000 6,300
Hewlett-Packard Co. ........................................ 90,000 5,979
Oracle Corp.+............................................... 200,000 11,175
Silicon Graphics, Inc.+..................................... 294,400 4,692
Storage Technology Corp.+................................... 425,000 14,795
Xerox Corp. ................................................ 228,600 12,616
Electrical & Electronics -- 1.6%
Nokia Corp., Class A ADR.................................... 20,000 2,712
Northern Telecom Ltd. ...................................... 82,800 4,808
York International Corp. ................................... 184,400 6,684
Electronic Components -- 1.8%
Corning, Inc. .............................................. 85,000 4,547
Intel Corp. ................................................ 20,000 2,399
SCI Systems, Inc. .......................................... 100,000 3,094
Texas Instruments, Inc. .................................... 70,000 6,243
Electronic Instruments -- 1.1%
Applied Materials, Inc.+.................................... 100,000 5,562
Perkin-Elmer Corp. ......................................... 50,000 4,738
Energy Equipment -- 1.1%
Baker Hughes, Inc. ......................................... 184,330 3,318
Schlumberger Ltd. .......................................... 145,000 7,041
Industrial Components -- 1.1%
Dana Corp. ................................................. 50,000 1,888
Eaton Corp. ................................................ 70,000 4,856
Federal-Mogul Corp. ........................................ 75,000 3,689
Machinery & Engineering -- 3.2%
Caterpillar, Inc. .......................................... 70,000 3,189
Deere & Co. ................................................ 290,000 9,479
Ingersoll-Rand Co. ......................................... 120,000 5,700
Millipore Corp. ............................................ 150,000 4,181
New Holland N.V. ........................................... 200,000 1,988
Pall Corp. ................................................. 100,000 2,119
Parker-Hannifin Corp. ...................................... 60,000 2,228
---------
179,914
---------
</TABLE>
---------------------
11
<PAGE> 13
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS -- 12.8%
Automotive -- 0.4%
Nissan Motor Co. Ltd. ...................................... 1,000,000 $ 3,904
Beverages & Tobacco -- 2.7%
PepsiCo, Inc. .............................................. 150,000 5,644
Philip Morris Cos., Inc. ................................... 225,000 8,803
Seagram Co. Ltd. ........................................... 150,000 6,956
UST, Inc. .................................................. 100,000 2,956
Food & Household Products -- 1.2%
Bestfoods................................................... 50,000 2,347
General Mills, Inc. ........................................ 75,000 6,051
Sara Lee Corp. ............................................. 100,000 2,719
Health & Personal Care -- 7.7%
Astra AB ADR................................................ 200,000 3,963
Avon Products, Inc. ........................................ 149,800 6,235
Bristol-Myers Squibb Co. ................................... 25,000 3,148
Glaxo Wellcome PLC ADR...................................... 120,000 7,687
Guidant Corp. .............................................. 80,000 4,560
Johnson & Johnson Co. ...................................... 60,000 5,123
Kimberly-Clark Corp. ....................................... 130,000 6,142
McKesson HBOC, Inc. ........................................ 50,000 3,400
Merck & Co., Inc. .......................................... 100,000 8,175
Pfizer, Inc. ............................................... 50,000 6,597
Schering-Plough Corp. ...................................... 150,000 8,391
United HealthCare Corp. .................................... 60,000 2,959
Warner-Lambert Co. ......................................... 60,000 4,144
Textiles & Apparel -- 0.8%
Nike, Inc., Class B......................................... 50,000 2,681
V.F. Corp. ................................................. 90,000 4,331
---------
116,916
---------
ENERGY -- 7.4%
Energy Sources -- 4.9%
Ashland, Inc. .............................................. 48,800 2,172
Atlantic Richfield Co. ..................................... 105,000 5,736
BP Amoco PLC ADR............................................ 66,166 5,624
Conoco, Inc., Class A+...................................... 132,000 2,681
Kerr-McGee Corp. ........................................... 50,000 1,428
Murphy Oil Corp. ........................................... 50,000 1,709
Noble Affiliates, Inc. ..................................... 100,000 2,263
Norsk Hydro ASA ADR......................................... 50,000 1,697
Oryx Energy Co.+............................................ 200,000 2,075
Pennzenergy Co. ............................................ 9,400 88
Phillips Petroleum Co. ..................................... 60,000 2,321
Pioneer Natural Resources Co. .............................. 18,600 96
Texaco, Inc. ............................................... 80,000 3,725
Ultramar Diamond Shamrock Corp.+............................ 356,200 7,035
Valero Energy Corp. ........................................ 360,000 6,323
Utilities: Electric, Gas & Water -- 2.5%
Ameren Corp. ............................................... 100,000 3,731
DPL, Inc. .................................................. 270,000 4,809
Duke Energy Corp. .......................................... 50,000 2,844
GPU, Inc. .................................................. 100,000 3,988
TECO Energy, Inc. .......................................... 150,000 3,244
Williams Cos., Inc. ........................................ 104,400 3,863
---------
67,452
---------
</TABLE>
- ---------------------
12
<PAGE> 14
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 10.5%
Banking -- 7.2%
Bank of New York Co., Inc. ................................. 200,000 $ 6,987
Bank One Corp. ............................................. 33,000 1,774
Bank Tokyo Mitsubishi Ltd. ADR.............................. 100,000 1,188
BankAmerica Corp. .......................................... 100,000 6,531
Chase Manhattan Corp. ...................................... 70,000 5,574
First Union Corp. .......................................... 200,272 10,677
Huntington Bancshares, Inc. ................................ 91,960 2,920
Key Corp. .................................................. 170,000 5,482
Marshall & Ilsley Corp. .................................... 83,500 4,676
Morgan (J.P.) & Co., Inc. .................................. 30,000 3,343
Sakura Bank Ltd. ADR........................................ 35,000 761
SunTrust Banks, Inc. ....................................... 50,000 3,397
Wells Fargo Co. ............................................ 347,000 12,752
Financial Services -- 1.8%
Associates First Capital Corp., Class A..................... 31,072 1,262
Household International, Inc. .............................. 271,332 11,023
Transamerica Corp. ......................................... 60,000 4,354
Insurance -- 1.5%
Aetna, Inc. ................................................ 50,000 3,703
Allstate Corp. ............................................. 100,000 3,750
MGIC Investment Corp. ...................................... 70,000 2,385
St. Paul Co., Inc. ......................................... 125,000 4,047
---------
96,586
---------
MATERIALS -- 9.6%
Chemicals -- 5.4%
Dow Chemical Co. ........................................... 30,000 2,951
du Pont (E.I.) de Nemours & Co. ............................ 60,000 3,079
International Flavors & Fragrances, Inc. ................... 200,000 8,237
Mallinckrodt, Inc. ......................................... 200,000 6,188
Millenium Chemicals, Inc. .................................. 115,400 2,084
Monsanto Co. ............................................... 350,000 15,947
PPG Industries, Inc. ....................................... 50,000 2,603
Praxair, Inc. .............................................. 168,800 5,897
Witco Corp. ................................................ 120,000 2,033
Forest Products & Paper -- 3.1%
Bowater, Inc. .............................................. 160,000 6,740
Fort James Corp. ........................................... 125,000 3,734
Georgia-Pacific Corp. ...................................... 35,000 2,564
Georgia-Pacific Timber Group................................ 30,000 611
International Paper Co. .................................... 65,000 2,730
Sonoco Products Co. ........................................ 100,000 2,450
Union Camp Corp. ........................................... 105,000 7,022
Westvaco Corp. ............................................. 60,000 1,342
Weyerhaeuser Co. ........................................... 25,000 1,394
Metals: Non-ferrous -- 0.6%
Alcoa, Inc. ................................................ 140,000 5,670
Metals: Steel -- 0.2%
Allegheny Teldyne, Inc. .................................... 100,000 2,063
Metals & Minerals -- 0.3%
Crown, Cork & Seal Co., Inc. ............................... 100,000 2,775
---------
88,114
---------
</TABLE>
---------------------
13
<PAGE> 15
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
MULTI-INDUSTRY -- 1.2%
Multi-Industry -- 1.2%
Allied Signal, Inc. ........................................ 80,000 $ 3,310
FMC Corp.+.................................................. 75,000 3,839
Textron, Inc. .............................................. 50,000 3,900
---------
11,049
---------
REAL ESTATE -- 1.0%
Real Estate Investment Trusts -- 1.0%
Boston Properties, Inc. .................................... 150,000 4,847
Equity Residential Properties Trust......................... 60,000 2,460
Meditrust Corp. ............................................ 125,000 1,531
---------
8,838
---------
SERVICES -- 20.0%
Broadcasting & Publishing -- 6.7%
Fox Entertainment Group, Inc., Class A+..................... 150,000 3,900
Gannett Co., Inc. .......................................... 80,000 5,080
Harte-Hanks, Inc. .......................................... 400,000 10,350
Houston Industries, Inc. ................................... 70,000 7,665
Media General, Inc., Class A................................ 75,800 3,790
News Corp., Ltd. ADR........................................ 140,000 3,973
Tele-Communications, Inc., Liberty Media Group, Series A+... 150,000 8,081
Time Warner, Inc. .......................................... 100,000 6,450
Viacom, Inc., Class B+...................................... 140,000 12,372
Business & Public Services -- 5.5%
Alexander & Baldwin, Inc. .................................. 180,000 3,555
Allied Waste Industries, Inc.+.............................. 250,000 4,875
Browning-Ferris Industries, Inc. ........................... 290,800 9,160
Cendant Corp.+.............................................. 250,000 4,141
Electronic Data Systems Corp. .............................. 165,000 7,673
Hertz Corp., Class A........................................ 100,000 3,981
Ikon Office Solutions, Inc. ................................ 660,000 9,322
Pitney Bowes, Inc. ......................................... 60,000 3,791
Waste Management, Inc. ..................................... 79,750 3,898
Merchandising -- 3.7%
American Stores Co. ........................................ 60,000 2,025
Circuit City Stores, Inc. .................................. 225,000 12,206
Dollar General Corp. ....................................... 150,000 4,491
Federated Department Stores, Inc.+.......................... 120,000 4,568
Lowe's Cos., Inc. .......................................... 100,000 5,931
Penney (J.C.), Inc. ........................................ 115,000 4,154
Telecommunications -- 3.5%
AirTouch Communications, Inc.+.............................. 81,013 7,377
Ameritech Corp. ............................................ 65,000 4,250
AT&T Corp. ................................................. 102,100 8,385
GTE Corp. .................................................. 116,600 7,565
SBC Communications, Inc. ................................... 40,000 2,115
U.S. West, Inc. ............................................ 46,800 2,495
Transportation: Rail & Road -- 0.6%
Norfolk Southern Corp. ..................................... 195,000 5,472
---------
183,091
---------
OTHER COMMON STOCK -- 1.5%.................................. 13,553
---------
TOTAL COMMON STOCK (cost $567,351).......................... 765,513
---------
</TABLE>
- ---------------------
14
<PAGE> 16
<TABLE>
<CAPTION>
VALUE
PREFERRED STOCK 0.2% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 0.2%
Broadcasting & Publishing -- 0.2%
News Corp. Ltd. ADR (cost $1,044)........................... 80,000 $ 2,100
---------
PRINCIPAL
AMOUNT
CONVERTIBLE BONDS -- 1.1% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CONSUMER GOODS -- 1.1%
Health & Personal Care -- 1.1%
Sepracor, Inc. 6.25% 2005*# (cost $3,685)................... $ 3,650 9,892
---------
TOTAL INVESTMENT SECURITIES (cost $572,080)................. 777,505
---------
SHORT-TERM SECURITIES -- 15.1%
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 9.4%
Ameritech Corp. 4.78% due 3/02/99........................... 5,600 5,599
Ciesco L.P. 4.80% due 3/10/99............................... 10,000 9,988
Eastman Kodak Co. 4.78% due 3/17/99......................... 8,900 8,881
General Electric Capital Corp. 4.87% due 3/01/99............ 13,800 13,800
Johnson & Johnson 4.75% due 4/14/99......................... 5,000 4,971
Kellogg Co. 4.75% due 3/22/99............................... 5,000 4,986
Lucent Technologies, Inc. 4.77% due 4/07/99................. 11,800 11,742
Motorola, Inc. 5.03% due 3/23/99............................ 7,205 7,183
Procter & Gamble Co. 4.80% due 6/03/99...................... 9,000 8,887
St. Paul Cos., Inc. 4.81% due 3/24/99....................... 10,000 9,970
---------
86,007
---------
FEDERAL AGENCY OBLIGATIONS -- 5.7%
Federal Home Loan Bank Discount Notes 4.72% due 5/07/99..... 14,600 14,471
Federal Home Loan Mortgage Discount Notes 4.75% due
5/13/99................................................... 11,400 11,290
Federal National Mortgage Association Discount Notes 4.75%
due 5/18/99............................................... 26,400 26,128
---------
51,889
---------
TOTAL SHORT-TERM SECURITIES (cost $137,897)................. 137,896
---------
TOTAL INVESTMENTS --
(cost $709,977) 100.1% $915,401
Liabilities in excess of other assets -- (0.1) (1,291)
------ ---------
NET ASSETS -- 100.0% $914,110
====== =========
</TABLE>
-----------------------------
+ Non-income producing security
* Fair valued security; See Note 2
# Resale restricted to qualified institutional buyers
ADR - American Depository Receipt
See Notes to Financial Statements
---------------------
15
<PAGE> 17
O
- ---------------------
ANCHOR PATHWAY FUND
ASSET ALLOCATION SERIES INVESTMENT PORTFOLIO -- FEBRUARY 28, 1999
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 60.5% SHARES (IN THOUSANDS)
<S> <C> <C>
---------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 18.7%
Aerospace & Military Technology -- 5.1%
Boeing Co. ................................................. 40,000 $ 1,422
Raytheon Co., Class B....................................... 35,000 1,870
Sundstrand Corp. ........................................... 30,000 2,031
United Technologies Corp. .................................. 10,000 1,239
Data Processing & Reproduction -- 4.4%
Hewlett-Packard Co. ........................................ 30,000 1,993
International Business Machines Corp. ...................... 15,000 2,550
Storage Technology Corp.+................................... 35,000 1,219
Electrical & Electronics -- 3.6%
Nokia Corp., Class A ADR.................................... 20,000 2,712
York International Corp. ................................... 55,000 1,994
Electronic Components -- 1.8%
Corning, Inc. .............................................. 45,000 2,407
Energy Equipment -- 0.9%
Schlumberger Ltd. .......................................... 25,000 1,214
Industrial Components -- 2.0%
Dana Corp. ................................................. 35,000 1,321
Genuine Parts Co. .......................................... 40,000 1,198
Machinery & Engineering -- 0.9%
Deere & Co. ................................................ 35,000 1,144
---------
24,314
---------
CONSUMER GOODS -- 8.8%
Automotive -- 0.9%
General Motors Corp. ....................................... 15,000 1,238
Beverages & Tobacco -- 2.1%
PepsiCo, Inc. .............................................. 40,000 1,505
UST, Inc. .................................................. 40,000 1,183
Food & Household Products -- 1.9%
General Mills, Inc. ........................................ 30,000 2,421
Health & Personal Care -- 3.9%
Pfizer, Inc. ............................................... 15,000 1,979
SmithKline Beecham PLC ADR.................................. 20,000 1,422
Warner-Lambert Co. ......................................... 25,000 1,727
---------
11,475
---------
ENERGY -- 4.7%
Energy Sources -- 3.9%
Kerr-McGee Corp. ........................................... 30,000 857
Murphy Oil Corp. ........................................... 40,000 1,367
Oryx Energy Co.+............................................ 50,000 519
Phillips Petroleum Co. ..................................... 35,000 1,354
Ultramar Diamond Shamrock Corp.+............................ 50,000 988
</TABLE>
- ---------------------
16
<PAGE> 18
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (continued)
Utilities: Electric, Gas & Water -- 0.8%
Central & South West Corp. ................................. 40,000 $ 992
---------
6,077
---------
FINANCE -- 11.5%
Banking -- 5.1%
BankAmerica Corp. .......................................... 33,948 2,217
First Union Corp. .......................................... 32,400 1,727
KeyCorp..................................................... 35,000 1,129
Washington Mutual, Inc. .................................... 40,000 1,600
Financial Services -- 3.6%
Citigroup, Inc. ............................................ 37,500 2,203
Household International, Inc. .............................. 60,666 2,465
Insurance -- 2.8%
American General Corp. ..................................... 25,000 1,831
St. Paul Cos., Inc. ........................................ 53,598 1,735
---------
14,907
---------
MATERIALS -- 6.4%
Chemicals -- 2.9%
Air Products & Chemicals, Inc. ............................. 50,000 1,606
PPG Industries, Inc. ....................................... 15,000 781
Praxair, Inc. .............................................. 40,000 1,398
Forest Products & Paper -- 3.5%
Georgia-Pacific Corp. ...................................... 15,000 1,099
Sonoco Products Co. ........................................ 50,000 1,225
Weyerhaeuser Co. ........................................... 40,000 2,230
---------
8,339
---------
MULTI-INDUSTRY -- 1.8%
Multi-Industry -- 1.8%
Textron, Inc. .............................................. 30,000 2,340
---------
SERVICES -- 4.8%
Business & Public Services -- 2.6%
Avery Dennison Corp. ....................................... 20,000 1,074
Rentokil Initial PLC ADR.................................... 30,000 2,245
Merchandising -- 2.2%
Penney (J.C.), Inc. ........................................ 25,000 903
Walgreen Co. ............................................... 60,000 1,920
Telecommunications -- 0.0%
Nextel Communications, Inc., Class A+....................... 1,549 47
---------
6,189
---------
OTHER COMMON STOCK -- 3.8%.................................. 4,918
---------
TOTAL COMMON STOCK (cost $60,116)........................... 78,559
---------
</TABLE>
---------------------
17
<PAGE> 19
<TABLE>
<CAPTION>
VALUE
PREFERRED STOCK -- 0.6% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 0.2%
Banking -- 0.2%
NB Capital Corp., Series A 8.35%............................ 10,000 $ 265
---------
SERVICES -- 0.4%
Broadcasting & Publishing -- 0.4%
Adelphia Communications Corp., Series B 13.00%.............. 5,000 576
---------
TOTAL PREFERRED STOCK (cost $756)........................... 841
---------
<CAPTION>
PRINCIPAL
AMOUNT
BONDS & NOTES -- 27.8% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS -- 0.1%
Finance -- 0.1%
Bell Atlantic Services, Inc. 4.25% 2005#.................... $ 150 164
---------
CORPORATE BONDS -- 16.9%
Broadcasting & Publishing -- 0.9%
Time Warner, Inc. 9.13% 2013................................ 1,000 1,219
Finance -- 7.1%
Advanta Corp., Series D 6.57% 2000.......................... 1,325 1,299
Asset Backed Securities Investment Trust, Series 1997-D,
Class A 6.79% 2003++*#.................................... 110 110
Bank One Corp. 5.63% 2004................................... 500 490
Barnett Capital I 8.06% 2026................................ 500 532
Capital One Bank 6.97% 2002................................. 2,250 2,244
Capital One Financial Corp. 7.13% 2008...................... 500 463
Cei Citicorp Holdings SA 11.25% 2007*#...................... 400 264
Chevy Chase Savings Bank 9.25% 2008......................... 500 505
First Plus Home Loan Trust, Series 1997-1, Class A6 6.95%
2015++*................................................... 500 502
Fuji Bank Investment LLC Preferred 9.87% 2008#(1)........... 250 195
GS Escrow Corp 7.13% 2005#.................................. 500 484
IBJ Preferred Capital Co. LLC 8.79% 2008#(1)................ 500 383
Irvine Property 7.46% 2006*................................. 500 458
Ocwen Financial Corp. 11.88% 2003........................... 250 225
PDVSA Finance Ltd. 7.40% 2016*#(1).......................... 250 201
Socgen Real Estate Co. LLC, Series A 7.64% 2049#(1)......... 500 457
Tokai Preferred Capital LLC 9.98% 2049#(1).................. 500 419
Industrial -- 5.6%
Allegiance Corp. 7.00% 2026................................. 500 509
Container Corp. of America 9.75% 2003....................... 500 518
Dayton Hudson Corp. 8.50% 2022.............................. 500 546
Esat Holdings Ltd. zero coupon 2007@........................ 500 355
Ford Motor Credit Co. 5.80% 2009............................ 500 481
Freeport McMoRan Copper & Gold 7.20% 2026................... 500 307
Globo Comunicacoes Participacoes Ltd., Class B 10.50%
2006#..................................................... 220 119
Gruma SA de CV 7.63% 2007#.................................. 250 218
Hyundai Semiconductor 8.63% 2007#........................... 425 320
Inco Ltd. 9.60% 2022........................................ 400 370
Nextel Communications, Inc. zero coupon 2008@............... 1,500 960
Nextel International, Inc. zero coupon 2008@................ 300 137
Omnipoint Corp. 11.63% 2006................................. 250 202
Owens Illinois, Inc. 8.10% 2007............................. 250 261
Pan Pacific Industrial Investment PLC zero coupon 2007#@.... 1,000 419
Royal Caribbean Cruises Ltd. 7.00% 2007..................... 500 497
</TABLE>
- ---------------------
18
<PAGE> 20
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (continued)
Industrial (continued)
United Defense Industries, Inc. 8.75% 2007.................. $ 300 $ 301
Wharf International Finance Ltd. 7.63% 2007................. 500 405
Ziff Davis, Inc. 8.50% 2008................................. 250 250
Recreation & Other Consumer Products -- 0.1%
V2 Music Holdings PLC zero coupon 2008*#@................... 175 151
(GBP)
Telecommunications -- 0.6%
Clearnet Communications, Inc. zero coupon 2008@............. 1,000 438
(CAD)
Consorcio Ecuatoriano de Telecommunicaciones 14.00%
2002*#.................................................... 250 110
Iridium Capital Corp., Series A 13.00% 2005#................ 250 195
Transportation -- 2.6%
Airplanes Pass Through Trust, Class C 8.15% 2019++*......... 489 498
Continental Airlines Pass Through Trust 6.94% 2013++........ 931 944
Delta Airlines, Inc. 10.50% 2016............................ 500 608
Jet Equipment Trust, Class B 7.83% 2012#.................... 454 470
United Airlines Pass Through Trust, Series 1996, Class A
7.87% 2019++.............................................. 500 483
USAir, Inc., Class A 6.76% 2008............................. 464 441
---------
22,127
---------
UNITED STATES GOVERNMENT & AGENCIES -- 1.9%++
Federal National Mortgage Association 7.52% 2004............ 2,000 2,006
Government National Mortgage Association 8.50% 2027......... 379 402
---------
2,408
---------
U.S. TREASURY -- 8.9%
7.25% Bonds 2004............................................ 2,000 2,171
7.25% Bonds 2016............................................ 1,000 1,152
7.50% Bonds 2016............................................ 2,000 2,362
8.75% Bonds 2008............................................ 2,500 2,828
3.63% Notes 2002............................................ 2,000 1,989
6.50% Notes 2002............................................ 1,000 1,036
---------
11,538
---------
TOTAL BONDS & NOTES (cost $39,446).......................... 36,073
---------
<CAPTION>
WARRANTS -- 0.1%+ SHARES
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS -- 0.0%
Recreation & Other Consumer Products -- 0.0%
V2 Music Holdings PLC 4/15/08*#............................. 175 0
SERVICES -- 0.1%
Telecommunications -- 0.1%
Esat Holdings Ltd. 2/01/07*#................................ 500 47
Iridium World Communications, Inc. 7/15/05*#................ 250 19
---------
TOTAL WARRANTS (cost $15)................................... 66
---------
TOTAL INVESTMENT SECURITIES (cost $100,333)................. 115,539
---------
</TABLE>
---------------------
19
<PAGE> 21
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 10.7% (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 8.0%
Bellsouth Capital Funding Corp. 4.79% due 5/07/99........... $ 2,200 $ 2,181
General Electric Capital Corp. 4.87% due 3/01/99............ 1,100 1,100
General Mills, Inc. 4.78% due 3/19/99....................... 2,000 1,995
Lucent Technologies, Inc. 4.77% due 4/07/99................. 3,000 2,985
Oryx Energy Co. 9.50% due 11/01/99.......................... 1,500 1,530
Oryx Energy Co. 10.00% due 06/15/99......................... 500 506
---------
10,297
---------
FEDERAL AGENCY OBLIGATIONS -- 2.7%
Federal Home Loan Mortgage Discount Notes 5.10% due
3/19/99................................................... 3,000 2,992
Federal National Mortgage Association Discount Notes 4.74%
due 5/11/99............................................... 600 595
---------
3,587
---------
TOTAL SHORT-TERM SECURITIES (cost $11,906).................. 13,884
---------
TOTAL INVESTMENTS -- (cost $112,239) 99.7% $129,423
Other assets less liabilities -- 0.3 377
------ ---------
NET ASSETS -- 100.0% $129,800
====== =========
</TABLE>
-----------------------------
+ Non-income producing security
++ 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
# Resale restricted to qualified institutional buyers
@ Represents a zero-coupon bond which will convert to an
interest-bearing security at a later date
(1) Variable rate security; rate as of February 28, 1999
ADR - American Depository Receipt
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
------------------------------------------------------------------
<TABLE>
<CAPTION>
GROSS UNREALIZED
CONTRACT IN DELIVERY APPRECIATION
TO DELIVER EXCHANGE FOR DATE (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------
GBP 120,000 USD 192,199 08/10/99 $ --
</TABLE>
<TABLE>
<CAPTION>
GROSS UNREALIZED
DEPRECIATION
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------
USD 9,923 GBP 6,195 08/10/99 --
USD.. 43,245 GBP 27,000 08/10/99 --
-----
Net Unrealized Appreciation
(Depreciation)............. $ --
=====
</TABLE>
-----------------------------
CAD - Canadian Dollar
GBP - Great British Pound
USD - United States Dollar
See Notes to Financial Statements
- ---------------------
20
<PAGE> 22
O
- ---------------------
ANCHOR PATHWAY FUND
HIGH-YIELD BOND SERIES INVESTMENT PORTFOLIO -- FEBRUARY 28, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 90.7% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 6.3%
Construction & Housing -- 0.6%
CSC Holdings, Inc. 9.88% 2013............................... $ 500 $ 553
Electronic Components -- 2.9%
Dobson Communications Corp. 11.75% 2007..................... 500 535
Flextronics International Ltd. 8.75% 2007*.................. 750 780
Zilog, Inc., Series B 9.50% 2005*........................... 1,500 1,335
Electronic Instruments -- 0.4%
Global Telesystems Group 9.88% 2005......................... 400 384
Industrial Components -- 2.4%
Breed Technologies, Inc. 9.25% 2008#........................ 3,125 1,562
Impress Metal Packaging Holdings 9.88% 2007................. (DEM) 1,000 627
--------
5,776
--------
CONSUMER GOODS -- 10.4%
Appliances & Household Durables -- 0.6%
Lifestyle Furnishings International Ltd. 10.88% 2006........ 500 540
Beverages & Tobacco -- 2.2%
Canandaigua Wine, Inc. 8.75% 2003*.......................... 500 505
Delta Beverage Group, Inc. 9.75% 2003*...................... 1,000 1,063
Standard Commercial Corp. 8.88% 2005*....................... 500 405
Food & Household Products -- 4.0%
Anchor Glass Container Corp. 9.88% 2008*.................... 750 692
Anchor Glass Container Corp. 11.25% 2005.................... 500 517
Home Products International, Inc. 9.63% 2008................ 1,750 1,715
Tekni-Plex, Inc., Series B 9.25% 2008*...................... 750 767
Health & Personal Care -- 1.9%
AKI Holding Corp. zero coupon 2009*@........................ 1,250 537
AKI, Inc. 10.50% 2008*...................................... 1,250 1,219
Recreation & Other Consumer Products -- 1.2%
V2 Music Holdings PLC zero coupon 2008*#@(2)................ 2,000 1,080
Textiles & Apparel -- 0.5%
Tultex Corp. 10.63% 2005.................................... 1,250 450
--------
9,490
--------
CONSUMER SERVICES -- 1.5%
Retail -- 1.5%
Kmart Corp. 9.78% 2020...................................... 250 262
Randalls Food Markets, Inc. 9.38% 2007...................... 1,000 1,080
--------
1,342
--------
ENERGY -- 1.5%
Energy Sources -- 1.5%
Benton Oil & Gas Co. 9.38% 2007............................. 150 67
Benton Oil & Gas Co. 11.63% 2003............................ 500 270
Cross Timbers Oil Co., Class B 8.75% 2009................... 500 443
Kelley Oil & Gas Corp., Series B 10.38% 2006................ 750 480
</TABLE>
---------------------
21
<PAGE> 23
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (continued)
Energy Sources (continued)
Kelley Oil Gas Corp., Series C 10.38% 2006*................. $ 250 $ 155
--------
1,415
--------
FINANCE -- 4.6%
Banking -- 0.8%
Fuji JGB Investment LLC 9.87% 2049#(1)...................... 1,000 781
Financial Services -- 3.8%
DR Structured Finance Corp. 9.35% 2019*..................... 500 530
PTC International Finance BV zero coupon 2007@.............. 1,000 722
Spectrasite Holdings, Inc. zero coupon 2008#@............... 750 458
United States Xchange LLC 15.00% 2008*...................... 1,250 1,325
William Hill Finance PLC 10.63% 2008#....................... (GBP) 157 266
Wilshire Financial Services Group, Inc., Series B 13.00%
2004+*(3)................................................. 500 165
--------
4,247
--------
MATERIALS -- 6.4%
Chemicals -- 1.1%
Key Plastics, Inc. 10.25% 2007.............................. 1,000 980
Forest Products & Paper -- 2.9%
Container Corp. of America 9.75% 2003....................... 1,000 1,035
Container Corp. of America, Class A 11.25% 2004............. 500 530
Paperboard Industries International, Inc. 8.38% 2007........ 1,100 1,049
Metals & Minerals -- 2.4%
Doe Run Resources Corp., Series B 11.25% 2005*.............. 1,500 1,260
Kaiser Aluminum & Chemical Corp. 12.75% 2003................ 1,000 967
--------
5,821
--------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.6%
Foreign Government -- 1.6%
Republic of Venezuela 5.94% 2007(1)......................... 429 266
Republic of Argentina 11.38% 2017........................... 500 453
United Mexican States 11.38% 2016........................... 700 715
--------
1,434
--------
SERVICES -- 55.8%
Broadcasting & Publishing -- 13.7%
Chancellor Media Corp. 8.75% 2007........................... 1,000 1,050
Chancellor Media Corp. 9.38% 2004........................... 1,000 1,060
Comcast UK Cable Partners Ltd. zero coupon 2007@............ 2,365 2,063
Falcon Holding Group LP 8.38% 2010.......................... 750 761
Fox/Liberty Networks LLC zero coupon 2007@.................. 575 423
Fox/Liberty Networks LLC 8.88% 2007......................... 750 774
Gray Communications Systems, Inc. 10.63% 2006............... 1,500 1,605
Lenfest Communications, Inc. 8.25% 2008..................... 1,000 1,034
NTL, Inc. zero coupon 2005@................................. 750 709
RBS Participacoes SA 11.00% 2007*#.......................... 500 180
Sun Media Corp. 9.50% 2007.................................. 975 1,082
Telemundo Holdings, Inc. zero coupon 2008#@................. 1,000 575
Transwestern Publishing Co. 9.63% 2007...................... 750 788
TVN Entertainment Corp. 14.00% 2008*(2)..................... 500 425
Business & Public Services -- 10.7%
Boyds Collection Ltd. 9.00% 2008#........................... 500 535
Graham Packaging Co., Series B 8.75% 2008................... 1,500 1,500
Integrated Health Services, Inc., Series A 9.25% 2008....... 1,750 1,295
Integrated Health Services, Inc., Series A 9.50% 2007....... 1,825 1,369
Mariner Health Group, Inc. 9.50% 2006....................... 610 601
</TABLE>
- ---------------------
22
<PAGE> 24
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Business & Public Services (continued)
Paracelsus Healthcare Corp. 10.00% 2006..................... $ 2,750 $ 2,337
Printpack, Inc., Series B 10.63% 2006....................... 500 480
Protection One Alarm Monitoring Corp. 13.63% 2005........... 650 741
Unison Healthcare Corp. 13.75% 2006+*#(3)................... 650 130
Business Services -- 0.9%
Iron Mountain, Inc. 8.75% 2009.............................. 500 520
Safety Kleen Services, Inc. 9.25% 2008*..................... 250 260
Cellular & Paging -- 7.9%
American Cellular Corp. 10.50% 2008#........................ 1,750 1,811
Cellular Communications of Puerto Rico, Inc. 10.00% 2007*... 500 510
Nextel Communications, Inc. zero coupon 2007@............... 750 512
Nextel Communications, Inc. zero coupon 2007@............... 2,250 1,468
Nextel Communications, Inc. zero coupon 2008@............... 750 480
Nextel Communications, Inc. 9.75% 2004...................... 1,000 1,010
Omnipoint Corp. 11.63% 2006................................. 750 608
Pagemart Nationwide, Inc. zero coupon 2005@(2).............. 250 216
Pagemart Wireless, Inc. zero coupon 2008*@.................. 1,500 600
Leisure & Tourism -- 5.8%
AMF Bowling Worldwide 10.88% 2006........................... 2,000 1,605
AMF Bowling Worldwide, Series B zero coupon 2006@........... 405 237
Boyd Gaming Corp. 9.25% 2003................................ 500 529
Boyd Gaming Corp. 9.50% 2007................................ 250 256
Carmike Cinemas, Inc. 9.38% 2009#........................... 500 506
Hard Rock Hotel, Inc. 9.25% 2005............................ 100 100
Regal Cinemas, Inc. 9.50% 2008#............................. 750 745
Sun International Ltd. 9.00% 2007........................... 750 784
Telecommunications -- 17.0%
Avalon Cable Michigan, Inc. 9.38% 2008#..................... 2,000 2,110
Clearnet Communications, Inc. zero coupon 2008@............. (CAD) 6,175 2,702
Clearnet Communications, Inc. zero coupon 2007@............. (CAD) 1,000 468
COLT Telecom Group 7.63% 2008............................... (EUR) 1,750 1,008
COLT Telecom Group PLC 8.88% 2007........................... (EUR) 2,000 1,197
Comunicacion Celular SA zero coupon 2005@................... 1,000 654
Consorcio Ecuatoriano de Telecommunicaciones 14.00%
2002*@.................................................... 500 220
Crown Castle International Corp. zero coupon 2007@.......... 1,000 713
Esat Telecom Group PLC zero coupon 2007@.................... 1,500 1,065
Esat Telecom Group PLC 11.88% 2008#......................... 250 268
Globalstar LP 11.38% 2004................................... 500 335
McCaw International Ltd. zero coupon 2007................... 1,000 520
Nextlink Communications, Inc. 9.00% 2008.................... 250 237
NTL, Inc., Series B 10.00% 2007............................. 500 536
Time Warner Telecom, Inc. 9.75% 2008........................ 500 535
Viatel, Inc. zero coupon 2008*@............................. 1,000 610
Viatel, Inc. 10.00% 2011*#.................................. (EUR) 27 21
Viatel, Inc. 11.15% 2008*(2)................................ (EUR) 500 292
Viatel, Inc. 11.25% 2008*(2)................................ 2,000 2,060
Transportation -- 1.2%
USAir, Inc. 9.63% 2003...................................... 500 520
USAir, Inc. 10.38% 2013..................................... 500 541
--------
50,886
--------
</TABLE>
---------------------
23
<PAGE> 25
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES TREASURY -- 2.6%
8.13% Bonds 2019............................................ $ 1,870 $ 2,370
--------
TOTAL BONDS & NOTES (cost $89,610).......................... 82,781
--------
<CAPTION>
COMMON STOCK -- 0.1% SHARES
---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 0.1%
SERVICES -- 0.1%
Cellular & Paging -- 0.1%
Nextel Communications, Inc., Class A+ (cost $25)............ 1,549 47
--------
PREFERRED STOCK -- 0.9%
---------------------------------------------------------------------------------------------
SERVICES -- 0.9%
Telecommunications -- 0.9%
Dobson Communications Corp. 12.25%*#........................ 700 661
Viatel, Inc., Series A 10.00%*(4)........................... 1,830 183
--------
TOTAL PREFERRED STOCK (cost $752)........................... 844
--------
WARRANTS -- 0.2%+
---------------------------------------------------------------------------------------------
CONSUMER GOODS -- 0.0%
Recreation & Other Consumer Products -- 0.0%
V2 Music Holdings PLC 4/15/08*#............................. 2,000 0
--------
SERVICES -- 0.2%
Cellular & Paging -- 0.2%
Comunicacion Celular SA 11/15/03*........................... 1,000 75
Esat Telecom Group PLC 2/01/07*#............................ 500 47
Globalstar Telecommunications 2/15/04*#..................... 500 30
Heartland Wireless Communication, Inc. 4/15/00*#............ 3,000 0
Loral Orion Network Systems, Inc. 1/15/07*.................. 1,275 14
McCaw International Ltd. 4/15/07*........................... 1,000 3
Nextel Communications, Inc. 4/25/99*........................ 500 1
Telecommunications -- 0.0%
Cellnet Data Systems, Inc. 9/15/07*#........................ 1,000 6
NTL, Inc. 10/14/08*#........................................ 712 39
--------
TOTAL WARRANTS (cost $88)................................... 215
--------
TOTAL INVESTMENT SECURITIES (cost $90,475).................. 83,887
--------
</TABLE>
- ---------------------
24
<PAGE> 26
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 9.5% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 9.5%
American Home Products Corp. 4.80% due 4/19/99.............. $ 3,100 $ 3,080
Campbell Soup Co. 4.78% due 3/15/99......................... 1,700 1,697
General Electric Capital Corp. 4.87% due 3/01/99............ 3,900 3,900
--------
TOTAL SHORT-TERM SECURITIES (cost $8,677)................... 8,677
--------
TOTAL INVESTMENTS --
(cost $99,152) 101.4% $92,564
Liabilities in excess of other assets -- (1.4) (1,316)
------ --------
NET ASSETS -- 100.0% $91,248
====== ========
</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) Variable rate security; rate as of February 28, 1999
(2) Bond issued as a part of a unit which includes an equity
component
(3) Bond in default
(4) PIK ("Payment-in-Kind") payment made with additional shares in
lieu of cash
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
------------------------------------------------------------------
<TABLE>
<CAPTION>
GROSS UNREALIZED
CONTRACT IN DELIVERY APPRECIATION
TO DELIVER EXCHANGE FOR DATE (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------
EUR 365,574 USD 403,218 04/28/99 $ 21
EUR 485,727 USD 536,313 05/17/99 14
EUR 527,909 USD 583,116 05/24/99 4
EUR 789,435 USD 872,040 05/25/99 --
EUR 162,447 USD 179,446 05/25/99 --
GBP 102,430 USD 164,108 03/22/99 7
-----
Net Unrealized Appreciation.............. $ 46
=====
</TABLE>
-----------------------------
<TABLE>
<S> <C>
CAD - Canadian Dollar GBP - Great British Pound
EUR - Euro Dollar USD - United States Dollar
</TABLE>
See Notes to Financial Statements
---------------------
25
<PAGE> 27
O
- ---------------------
ANCHOR PATHWAY FUND
U.S. GOVERNMENT/
AAA-RATED SECURITIES SERIES INVESTMENT PORTFOLIO -- FEBRUARY 28, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 94.7% (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
---------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
ASSET-BACKED SECURITIES -- 12.5%++
Green Tree Financial Corp., Series 1995-9, Class A5 6.80%
2027...................................................... $1,000 $ 1,011
Nomura Asset Securities, Series D, Class A 6.28% 2028*(1)... 2,817 2,812
Sears Credit Account Master Trust, Series 1998-2, Class A
5.25% 2008................................................ 250 242
Structured Asset Securities Corp., Series 1998-RE1, Class 1
8.70% 2028*(1)............................................ 1,707 1,813
Structured Asset Securities Corp., Series 1998-RF2, Class A
8.57% 2027*(1)............................................ 3,348 3,540
-------
9,418
-------
DEVELOPMENTAL AUTHORITIES -- 3.3%
Intermediate American Development Bank 8.88% 2009........... 2,000 2,463
-------
FEDERAL AGENCY OBLIGATIONS -- 45.9%++
Federal Home Loan Bank 5.63% 2001........................... 1,000 1,004
Federal Home Loan Mortgage Corp. 6.00% 2029................. 2,020 1,959
Federal Home Loan Mortgage Corp. 6.50% 2009................. 2,000 1,976
Federal Home Loan Mortgage Corp. 8.00% 2012................. 439 448
Federal Home Loan Mortgage Corp. 9.00% 2021-2022............ 530 564
Federal Home Loan Mortgage Corp. 9.50% 2016................. 423 449
Federal Home Loan Mortgage Corp. 11.88% 2013................ 9 10
Federal Home Loan Mortgage Corp. 12.50% 2013................ 85 94
Federal National Mortgage Association 5.50% 2014............ 3,040 2,952
Federal National Mortgage Association 5.75% 2005............ 500 502
Federal National Mortgage Association 6.00% 2013............ 283 280
Federal National Mortgage Association 6.50% 2011-2028....... 4,030 4,029
Federal National Mortgage Association 6.85% 2026*........... 1,213 1,181
Federal National Mortgage Association 7.00% 2026-2027....... 1,197 1,203
Federal National Mortgage Association 7.50% 2009............ 721 743
Government National Mortgage Association 6.00% 2014......... 1,010 1,005
Government National Mortgage Association 6.50% 2013-2028.... 2,767 2,778
Government National Mortgage Association 7.00% 2023-2025.... 3,451 3,502
Government National Mortgage Association 7.50% 2023......... 422 435
Government National Mortgage Association 7.50% TBA.......... 2,000 2,065
Government National Mortgage Association 8.00% 2017-2023.... 3,392 3,550
Government National Mortgage Association 8.50% 2016......... 181 193
Government National Mortgage Association 9.00% 2016-2017.... 526 564
Government National Mortgage Association 9.50% 2009-2017.... 2,694 2,878
Government National Mortgage Association 10.00% 2016........ 25 27
Government National Mortgage Association 10.50% 2016........ 106 117
Government National Mortgage Association 11.00% 2019........ 22 25
Government National Mortgage Association 11.50% 2010........ 10 11
-------
34,544
-------
MORTGAGE-RELATED SECURITIES -- 20.6%++
Asset Backed Securities Investment Trust, Series 1997-D,
Class A 6.79% 2003*#...................................... 82 82
Chase Commercial Mortgage Secs Corp., Series 1998-2, Class
A2 6.39% 2008............................................. 250 249
Commercial Mortgage Acceptance Corp., Series 1998-C1, Class
A1 6.23% 2007............................................. 484 484
Credit Suisse First Boston Mortgage, Series 1998-C1, Class
A2A 6.26% 2040*........................................... 718 720
DLJ Mortgage Acceptance Corp., Series 1996-CF2, Class A1B
7.29% 2021#............................................... 3,800 3,926
First Chicago Master Trust, Series 1995-M, Class A 5.18%
2003#(1).................................................. 1,500 1,503
GMAC Commercial Mortgage Security, Inc., Series 1997-C1,
Class A3 6.87%
2007*..................................................... 250 255
</TABLE>
- ---------------------
26
<PAGE> 28
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-RELATED SECURITIES (continued)
Merrill Lynch Mortgage Investors, Inc., Series 1995-C3,
Class A2 6.82% 2025*(1)................................... $ 500 $ 506
Merrill Lynch Mortgage Investors, Inc., Series 1997-C1,
Class A1 6.95% 2029*(1)................................... 924 950
Merrill Lynch Mortgage Investors, Inc., Series 1995-C3,
Class A3 7.06% 2025(1).................................... 500 519
Morgan (J.P.) Commercial Mortgage Finance Corp., Series
1995-C1, Class A2 7.44% 2010*(1).......................... 1,000 1,013
Morgan Stanley Capital I, Inc., Series 1998-1, Class A5
6.75% 2013................................................ 740 735
Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A2
6.48% 2030................................................ 500 503
Mortgage Capital Funding, Inc., Series 1998-1, Class A5
6.42% 2007*#.............................................. 1,425 1,437
Norwest Asset Securities Corp., Series 1998, Class A1 6.25%
2014*..................................................... 318 316
Norwest Asset Securities Corp., Series 1998-8, Class A1
6.50% 2013................................................ 1,081 1,069
Ocwen Residential MBS Corp., Series 1998-R1, Class AWAC
1.28% 2040*(1)............................................ 1,296 1,262
-------
15,529
-------
MUNICIPAL BONDS -- 1.3%
Puerto Rico Public Finance Corp. 6.15% 2008*................ 1,000 990
-------
UNITED STATES TREASURY -- 11.1%
8.88% Bonds 2017............................................ 3,475 4,652
12.00% Bonds 2013........................................... 1,000 1,459
3.63% Notes 2008............................................ 1,269 1,243
6.38% Notes 2000............................................ 1,000 1,012
-------
8,366
-------
TOTAL INVESTMENT SECURITIES (cost $71,227).................. 71,310
-------
SHORT-TERM SECURITIES -- 4.2%
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 4.2%
General Electric Capital Corp. 4.87% due 3/01/99............ 1,200 1,200
Warner-Lambert Co. 4.79% due 5/24/99........................ 2,000 1,978
-------
TOTAL SHORT-TERM SECURITIES (cost $3,178)................... 3,178
-------
TOTAL INVESTMENTS --
(cost $74,405) 98.9% $74,488
Other assets less liabilities -- 1.1 793
------ -------
NET ASSETS -- 100.0% $75,281
====== =======
</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 the stated
maturity.
* Fair valued security; see Note 2
# Resale restricted to qualified institutional buyers
TBA - Security purchased on a forward commitment basis with an
approximate principal amount and no definitive maturity date. The
actual principal amount and maturity date will be determined upon
settlement date.
(1) Variable rate security; rate as of February 28, 1999
See Notes to Financial Statements
---------------------
27
<PAGE> 29
O
- ---------------------
ANCHOR PATHWAY FUND
CASH MANAGEMENT SERIES INVESTMENT PORTFOLIO -- FEBRUARY 28, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 94.6% (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
---------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 67.5%
American Express Credit Corp. 4.78% due 3/26/99............. $1,900 $ 1,894
American Home Products Corp. 4.80% due 3/17/99.............. 1,500 1,497
Ameritech Corp. 4.78% due 3/02/99........................... 1,900 1,900
AT&T Corp. 4.83% due 3/30/99................................ 625 622
Atlantic Richfield Co. 4.95% due 3/01/99.................... 1,500 1,500
Bell Atlantic Network Funding Corp. 4.80% due 3/05/99....... 1,000 999
Bell South Telecommunications, Inc. 4.80% due 3/25/99....... 2,100 2,093
Bestfoods 4.80% due 3/16/99................................. 2,000 1,996
Chevron USA, Inc. 4.80% due 3/22/99......................... 1,400 1,396
CIT Group Holdings, Inc. 4.81% due 3/18/99.................. 2,250 2,245
Coca-Cola Co. 4.77% due 4/06/99............................. 1,400 1,393
Colgate-Palmolive Co. 4.78% due 3/25/99..................... 1,000 997
Commercial Credit Co. 4.82% due 3/04/99..................... 1,000 1,000
Deere (John) Capital Corp. 4.82% due 4/20/99................ 1,100 1,093
Disney (Walt), Co. 4.79% due 3/15/99........................ 1,600 1,597
Eastman Kodak Co. 4.78% due 3/24/99......................... 1,400 1,396
Eli Lilly & Co. 4.83% due 3/12/99........................... 2,000 1,997
Ford Motor Credit Co. 4.79% due 3/19/99..................... 1,500 1,496
Gannett, Inc. 4.78% due 3/05/99............................. 1,400 1,399
General Motors Acceptance Corp. 4.82% due 3/11/99........... 2,250 2,247
Halliburton Corp. 4.83% due 4/08/99......................... 2,000 1,990
Heinz (H.J.) Co. 4.78% due 4/08/99.......................... 2,200 2,189
Household Finance Corp.+ 4.80% due 3/16/99.................. 2,000 1,996
International Business Machines Corp. 4.82% due 4/12/99..... 2,200 2,188
Kellogg Co. 4.78% due 3/19/99............................... 750 748
Kimberly-Clark Corp. 4.77% due 3/01/99...................... 2,000 2,000
Lucent Technologies, Inc. 4.77% due 4/05/99................. 2,000 1,991
Motorola, Inc. 4.75% due 4/01/99............................ 1,700 1,693
Pfizer, Inc. 4.80% due 3/17/99.............................. 2,100 2,095
Schering Corp. 4.81% due 4/27/99............................ 1,400 1,389
St. Paul Cos., Inc. 4.82% due 3/18/99....................... 2,100 2,095
Texaco, Inc. 4.80% due 4/08/99.............................. 2,000 1,990
Vermont American Corp. 4.77% due 3/03/99.................... 1,400 1,400
Yale University 4.79% due 4/16/99........................... 1,000 994
-------
TOTAL CORPORATE SHORT-TERM NOTES (cost: $55,515)............ 55,515
-------
FEDERAL AGENCY OBLIGATIONS -- 27.1%
Federal Home Loan Bank Discount Notes 4.72% due 3/24/99..... 985 982
Federal Home Loan Bank Discount Notes 4.73% due 3/03/99..... 1,100 1,100
Federal Home Loan Bank Discount Notes 4.74% due 3/12/99..... 1,700 1,697
Federal Home Loan Mortgage Discount Notes 4.72% due
3/31/99................................................... 2,700 2,689
Federal Home Loan Mortgage Discount Notes 4.73% due
3/23/99................................................... 2,000 1,994
Federal Home Loan Mortgage Discount Notes 4.73% due
4/09/99................................................... 459 457
Federal Home Loan Mortgage Discount Notes 4.75% due
3/10/99................................................... 1,000 999
Federal Home Loan Mortgage Discount Notes 4.76% due
4/15/99................................................... 965 959
Federal Home Loan Mortgage Discount Notes 4.76% due
4/22/99................................................... 1,096 1,089
Federal Home Loan Mortgage Discount Notes 4.79% due
4/26/99................................................... 2,000 1,985
Federal National Mortgage Association Discount Notes 4.70%
due 3/15/99............................................... 2,125 2,121
Federal National Mortgage Association Discount Notes 4.71%
due 3/10/99............................................... 1,400 1,398
Federal National Mortgage Association Discount Notes 4.75%
due 3/09/99............................................... 2,025 2,023
</TABLE>
- ---------------------
28
<PAGE> 30
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL AGENCY OBLIGATIONS (continued)
Federal National Mortgage Association Discount Notes 4.75%
due 4/22/99............................................... $1,600 $ 1,589
Federal National Mortgage Association Discount Notes 4.76%
due 3/09/99............................................... 1,200 1,199
-------
TOTAL FEDERAL AGENCY OBLIGATIONS (cost: $22,281)............ 22,281
-------
TOTAL SHORT-TERM SECURITIES (cost: $77,796)................. 77,796
-------
TOTAL INVESTMENTS --
(cost: $77,796) 94.6% $77,796
Other assets less liabilities -- 5.4 4,451
------ -------
NET ASSETS -- 100.0% $82,247
====== =======
</TABLE>
-----------------------------
See Notes to Financial Statements
---------------------
29
<PAGE> 31
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES
SERIES SERIES SERIES SERIES SERIES SERIES
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment securities, at value*.......... $824,361 $175,238 $777,505 $115,539 $83,887 $71,310
Short-term securities*.................... 83,276 29,417 137,896 13,884 8,677 3,178
Cash...................................... 21 25 102 16 6 77
Receivables for --
Sales of investments.................... 1,343 67 778 2,494 414 2,458
Dividends and accrued interest.......... 198 119 1,391 854 1,995 439
Fund shares sold........................ 128 86 82 3 118 137
Foreign currency contracts.............. -- 66 -- -- -- --
Prepaid expenses.......................... 17 3 20 3 3 2
Unrealized appreciation on forward foreign
currency contracts...................... -- -- -- -- 46 --
--------------------------------------------------------------------------------
909,344 205,021 917,774 132,793 95,146 77,601
--------------------------------------------------------------------------------
LIABILITIES:
Payables for --
Fund shares redeemed.................... 1,214 211 1,117 345 3,607 174
Purchases of investments................ 374 -- 2,102 2,559 211 2,075
Advisory fees........................... 216 95 216 31 24 19
Management fees......................... 144 38 144 21 16 13
Foreign currency contracts.............. -- 66 -- -- -- --
Other accrued expenses.................... 76 90 85 37 40 39
--------------------------------------------------------------------------------
2,024 500 3,664 2,993 3,898 2,320
--------------------------------------------------------------------------------
NET ASSETS................................ $907,320 $204,521 $914,110 $129,800 $91,248 $75,281
================================================================================
Shares of beneficial interest outstanding
(unlimited shares authorized)........... 17,487 13,068 24,944 8,343 7,077 6,824
Net asset value per share................. $ 51.89 $ 15.65 $ 36.65 $ 15.56 $ 12.89 $ 11.03
================================================================================
COMPOSITION OF NET ASSETS:
Capital paid in........................... $308,948 $123,234 $454,460 $ 83,883 $81,961 $70,627
Accumulated undistributed net investment
income.................................. 3,513 4,158 20,330 6,443 12,878 6,122
Accumulated undistributed net realized
gain (loss) on investments and foreign
currency................................ 242,540 27,742 233,896 22,290 2,951 (1,551)
Unrealized appreciation (depreciation) on
investments............................. 352,319 49,387 205,424 17,184 (6,587) 83
Unrealized foreign exchange gain on other
assets and liabilities.................. -- -- -- -- 45 --
--------------------------------------------------------------------------------
Net Assets............................ $907,320 $204,521 $914,110 $129,800 $91,248 $75,281
================================================================================
---------------
*Cost
Investment securities................... $472,041 $125,851 $572,080 $100,333 $90,475 $71,227
================================================================================
Short-term securities................... $ 83,277 $ 29,417 $137,897 $ 11,906 $ 8,677 $ 3,178
================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
ASSETS:
Investment securities, at value*.......... $ --
Short-term securities*.................... 77,796
Cash...................................... 23
Receivables for --
Sales of investments.................... --
Dividends and accrued interest.......... --
Fund shares sold........................ 4,774
Foreign currency contracts.............. --
Prepaid expenses.......................... 1
Unrealized appreciation on forward foreign
currency contracts...................... --
----------
82,594
----------
LIABILITIES:
Payables for --
Fund shares redeemed.................... 278
Purchases of investments................ --
Advisory fees........................... 18
Management fees......................... 12
Foreign currency contracts.............. --
Other accrued expenses.................... 39
----------
347
----------
NET ASSETS................................ $ 82,247
==========
Shares of beneficial interest outstanding
(unlimited shares authorized)........... 7,385
Net asset value per share................. $ 11.14
==========
COMPOSITION OF NET ASSETS:
Capital paid in........................... $78,069
Accumulated undistributed net investment
income.................................. 4,176
Accumulated undistributed net realized
gain (loss) on investments and foreign
currency................................ 2
Unrealized appreciation (depreciation) on
investments............................. --
Unrealized foreign exchange gain on other
assets and liabilities.................. --
----------
Net Assets............................ $ 82,247
==========
---------------
*Cost
Investment securities................... $ --
==========
Short-term securities................... $ 77,796
==========
</TABLE>
See Notes to Financial Statements
- ---------------------
30
<PAGE> 32
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 1, 1998 THROUGH FEBRUARY 28, 1999#
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES
SERIES SERIES SERIES SERIES SERIES SERIES
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income:
Interest................................ $ 1,126 $ 319 $ 1,674 $ 917 $ 2,437 $ 1,295
Dividends............................... 863 169 3,325 449 -- --
--------------------------------------------------------------------------------
Total income* 1,989 488 4,999 1,366 2,437 1,295
--------------------------------------------------------------------------------
Expenses:
Advisory fees........................... 676 303 692 102 76 62
Management fees......................... 451 120 461 68 50 41
Custodian fees.......................... 48 77 55 14 16 13
Auditing and legal fees................. 17 18 18 12 13 13
Reports to investors.................... 17 6 18 4 4 4
Trustees' fees.......................... 8 2 8 1 1 1
Other expenses.......................... 3 -- 3 1 -- --
--------------------------------------------------------------------------------
Total expenses before custody
credits........................ 1,220 526 1,255 202 160 134
Custody credits earned on cash
balances....................... -- -- (1) -- -- (1)
--------------------------------------------------------------------------------
Net investment income (loss).............. 769 (38) 3,745 1,164 2,277 1,162
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain on investments.......... 43,357 3,365 41,842 3,184 607 202
Net realized foreign exchange gain
on other assets and liabilities......... -- 5 -- -- 112 --
Change in unrealized appreciation/
depreciation of investments............. 74,943 17,708 (4,264) (2,522) (2,631) (1,597)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. -- (8) -- 3 24 --
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currencies...... 118,300 21,070 37,578 665 (1,888) (1,395)
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............... $119,069 $21,032 $41,323 $ 1,829 $ 389 $ (233)
================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
NET INVESTMENT INCOME:
Income:
Interest................................ $880
Dividends............................... --
----------
Total income* 880
----------
Expenses:
Advisory fees........................... 56
Management fees......................... 38
Custodian fees.......................... 8
Auditing and legal fees................. 12
Reports to investors.................... 4
Trustees' fees.......................... 1
Other expenses.......................... --
----------
Total expenses before custody
credits........................ 119
Custody credits earned on cash
balances....................... --
----------
Net investment income (loss).............. 761
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain on investments.......... 1
Net realized foreign exchange gain
on other assets and liabilities......... --
Change in unrealized appreciation/
depreciation of investments............. --
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. --
----------
Net realized and unrealized gain (loss) on
investments and foreign currencies...... 1
----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............... $762
==========
</TABLE>
- ---------------
* Net of foreign witholding taxes of $1; $11; $6 and $1 on Growth,
International, Growth-Income and Asset Allocation Series, respectively.
# The Fund changed its fiscal year end from November 30 to February 28.
See Notes to Financial Statements
---------------------
31
<PAGE> 33
O
- ---------------------
ANCHOR PATHWAY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 1, 1998 THROUGH FEBRUARY 28, 1999#
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES
SERIES SERIES SERIES SERIES SERIES SERIES
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).............. $ 769 $ (38) $ 3,745 $ 1,164 $ 2,277 $ 1,162
Net realized gain on investments.......... 43,357 3,365 41,842 3,184 607 202
Net realized foreign exchange gain on
other assets and liabilities............ -- 5 -- -- 112 --
Change in unrealized appreciation/
depreciation of investments............. 74,943 17,708 (4,264) (2,522) (2,631) (1,597)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. -- (8) -- 3 24 --
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations............... 119,069 21,032 41,323 1,829 389 (233)
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 27,772 8,280 14,357 3,124 7,120 7,030
Cost of shares repurchased................ (75,876) (18,554) (57,564) (9,222) (16,322) (11,201)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ (48,104) (10,274) (43,207) (6,098) (9,202) (4,171)
--------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS... 70,965 10,758 (1,884) (4,269) (8,813) (4,404)
NET ASSETS:
Beginning of period....................... 836,355 193,763 915,994 134,069 100,061 79,685
--------------------------------------------------------------------------------
End of period............................. $907,320 $204,521 $914,110 $129,800 $ 91,248 $75,281
================================================================================
---------------
Accumulated undistributed net investment
income.................................. $ 3,513 $ 4,158 $ 20,330 $ 6,443 $ 12,878 $ 6,122
================================================================================
Shares issued and repurchased:
Sold.................................... 541 549 393 202 551 633
Repurchased............................. (1,503) (1,229) (1,584) (597) (1,270) (1,010)
--------------------------------------------------------------------------------
Net increase (decrease)................... (962) (680) (1,191) (395) (719) (377)
================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
OPERATIONS:
Net investment income (loss).............. $ 761
Net realized gain on investments.......... 1
Net realized foreign exchange gain on
other assets and liabilities............ --
Change in unrealized appreciation/
depreciation of investments............. --
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. --
---------
Net increase (decrease) in net assets
resulting from operations............... 762
---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 65,150
Cost of shares repurchased................ (47,491)
---------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ 17,659
---------
TOTAL INCREASE (DECREASE) IN NET ASSETS... 18,421
NET ASSETS:
Beginning of period....................... 63,826
---------
End of period............................. $82,247
=========
---------------
Accumulated undistributed net investment
income.................................. $ 4,176
=========
Shares issued and repurchased:
Sold.................................... 5,878
Repurchased............................. (4,287)
---------
Net increase (decrease)................... 1,591
=========
</TABLE>
- ---------------
# The Fund changed its fiscal year end from November 30 to February 28.
See Notes to Financial Statements
- ---------------------
32
<PAGE> 34
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES
SERIES SERIES SERIES SERIES SERIES SERIES
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Income:
Interest................................ $ 4,282 $ 1,658 $ 7,243 $ 4,074 $10,447 $5,357
Dividends............................... 2,835 3,443 14,417 1,980 491 --
--------------------------------------------------------------------------------
Total income*.................... 7,117 5,101 21,660 6,054 10,938 5,357
--------------------------------------------------------------------------------
Expenses:
Advisory fees........................... 2,453 1,283 2,854 456 353 253
Management fees......................... 1,635 511 1,903 304 236 169
Custodian fees.......................... 200 352 240 63 56 43
Auditing and legal fees................. 24 30 24 21 24 24
Trustees' fees.......................... 13 3 15 2 2 1
Reports to investors.................... 4 2 5 1 2 1
Other expenses.......................... 14 5 18 3 1 1
--------------------------------------------------------------------------------
Total expenses................... 4,343 2,186 5,059 850 674 492
--------------------------------------------------------------------------------
Net investment income..................... 2,774 2,915 16,601 5,204 10,264 4,865
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain on investments.......... 199,464 26,400 192,083 19,210 2,704 1,702
Net realized foreign exchange gain (loss)
on other assets and liabilities......... -- 43 -- -- (95) --
Change in unrealized appreciation/
depreciation of investments............. (18,723) 454 (75,884) (11,352) (8,636) (136)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. -- (235) -- (3) 13 --
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currencies...... 180,741 26,662 116,199 7,855 (6,014) 1,566
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.............................. $183,515 $29,577 $132,800 $ 13,059 $ 4,250 $6,431
================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
NET INVESTMENT INCOME:
Income:
Interest................................ $3,868
Dividends............................... --
--------
Total income*.................... 3,868
--------
Expenses:
Advisory fees........................... 228
Management fees......................... 152
Custodian fees.......................... 31
Auditing and legal fees................. 24
Trustees' fees.......................... 1
Reports to investors.................... 2
Other expenses.......................... 1
--------
Total expenses................... 439
--------
Net investment income..................... 3,429
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain on investments.......... 2
Net realized foreign exchange gain (loss)
on other assets and liabilities......... --
Change in unrealized appreciation/
depreciation of investments............. --
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. --
--------
Net realized and unrealized gain (loss) on
investments and foreign currencies...... 2
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.............................. $3,431
========
</TABLE>
- ---------------
* Net of foreign witholding taxes of $42; $350; $130 and $15 on Growth,
International, Growth-Income and Asset Allocation Series, respectively.
See Notes to Financial Statements
---------------------
33
<PAGE> 35
O
- ---------------------
ANCHOR PATHWAY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 1998
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES
SERIES SERIES SERIES SERIES SERIES SERIES
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income..................... $ 2,774 $ 2,915 $ 16,601 $ 5,204 $ 10,264 $ 4,865
Net realized gain on investments.......... 199,464 26,400 192,083 19,210 2,704 1,702
Net realized foreign exchange gain (loss)
on other assets and liabilities......... -- 43 -- -- (95) --
Change in unrealized appreciation/
depreciation on investments............. (18,723) 454 (75,884) (11,352) (8,636) (136)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. -- (235) -- (3) 13 --
---------------------------------------------------------------------------------
Net increase in net assets resulting from
operations.............................. 183,515 29,577 132,800 13,059 4,250 6,431
---------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Dividends from net investment income...... (3,495) (3,310) (17,480) (5,385) (11,180) (6,410)
Distributions from net realized gains on
investments............................. (148,000) (54,645) (166,343) (18,305) (2,570) --
---------------------------------------------------------------------------------
Total dividends and distributions paid to
shareholders............................ (151,495) (57,955) (183,823) (23,690) (13,750) (6,410)
---------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 120,195 37,714 92,874 16,070 34,394 33,591
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... 151,495 57,955 183,823 23,690 13,750 6,410
Cost of shares repurchased................ (268,585) (96,865) (260,112) (50,506) (57,253) (41,946)
---------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ 3,105 (1,196) 16,585 (10,746) (9,109) (1,945)
---------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS... 35,125 (29,574) (34,438) (21,377) (18,609) (1,924)
NET ASSETS:
Beginning of period....................... 801,230 223,337 950,432 155,446 118,670 81,609
---------------------------------------------------------------------------------
End of period............................. $ 836,355 $193,763 $ 915,994 $134,069 $100,061 $ 79,685
=================================================================================
---------------
Accumulated undistributed net investment
income.................................. $ 2,744 $ 3,370 $ 16,585 $ 5,279 $ 10,471 $ 4,991
=================================================================================
Shares issued and repurchased:
Sold.................................... 2,820 2,526 2,655 1,032 2,646 3,076
Issued in reinvestment of dividends and
distributions......................... 3,611 3,971 5,274 1,547 1,052 616
Repurchased............................. (6,265) (6,477) (7,463) (3,262) (4,349) (3,842)
---------------------------------------------------------------------------------
Net increase (decrease)................... 166 20 466 (683) (651) (150)
=================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
OPERATIONS:
Net investment income..................... $ 3,429
Net realized gain on investments.......... 2
Net realized foreign exchange gain (loss)
on other assets and liabilities......... --
Change in unrealized appreciation/
depreciation on investments............. --
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. --
----------
Net increase in net assets resulting from
operations.............................. 3,431
----------
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Dividends from net investment income...... (3,995)
Distributions from net realized gains on
investments............................. --
----------
Total dividends and distributions paid to
shareholders............................ (3,995)
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 171,512
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... 3,995
Cost of shares repurchased................ (180,343)
----------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ (4,836)
----------
TOTAL INCREASE (DECREASE) IN NET ASSETS... (5,400)
NET ASSETS:
Beginning of period....................... 69,226
----------
End of period............................. $ 63,826
==========
---------------
Accumulated undistributed net investment
income.................................. $ 3,415
==========
Shares issued and repurchased:
Sold.................................... 15,669
Issued in reinvestment of dividends and
distributions......................... 375
Repurchased............................. (16,372)
----------
Net increase (decrease)................... (328)
==========
</TABLE>
See Notes to Financial Statements
- ---------------------
34
<PAGE> 36
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 on
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
---------------------
35
<PAGE> 37
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 that demonstrate the
potential for appreciation.
The INTERNATIONAL SERIES seeks long-term growth of capital by investing
primarily in common stocks or securities with common stock characteristics of
issuers that are domiciled outside the U.S., including those domiciled in
developing countries.
The GROWTH-INCOME SERIES seeks growth of capital and income by investing
primarily in common stocks or securities with common stock characteristics that
demonstrate the potential for solid growth and dividends.
The ASSET ALLOCATION SERIES seeks high total return (including income and
capital gains) consistent with preservation of capital over the long-term by
investing in a diversified portfolio of common stocks, bonds and money market
instruments.
The HIGH YIELD BOND SERIES seeks high current income with capital appreciation
as a secondary objective by investing primarily in intermediate and long-term
corporate debt obligations, with emphasis on higher yielding, higher risk, lower
rated or unrated corporate securities, which are commonly known as "junk bonds."
The U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES seeks high current income
consistent with prudent investment risk and preservation of capital by investing
primarily in a combination of securities issued or guaranteed by the U.S.
Government (i.e., backed by the full faith and credit of the U.S.) and other
debt securities rated in the highest rating category (or that 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 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. If a security's price is available from more than one
foreign exchange the Fund uses the exchange that is the primary market for the
security. 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.
- ---------------------
36
<PAGE> 38
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.
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 between the trade and settlement dates of securities
transactions, the difference between the amounts of interest, dividends, 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.
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 realized capital gains are determined and presented in accordance
with federal income tax regulations, which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Net investment income/loss, net realized gain/loss, and net
assets are not affected.
For the period December 1, 1998 through February 28, 1999, the
reclassification arising from book/tax differences primarily related to tax
adjustments on passive foreign investment companies sold and book/tax
characterization of foreign currency transactions, market discount and paydown
gains/losses. The reclassifications 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 $ -- $(1)
International Series........................................ (826) 826 --
Growth-Income Series........................................ -- -- --
Asset Allocation Series..................................... -- -- --
High-Yield Bond Series...................................... (130) 130 --
U.S. Government/AAA-Rated Securities Series................. 31 (31) --
Cash Management Series...................................... -- -- --
</TABLE>
3. OPERATING POLICIES:
FORWARD FOREIGN CURRENCY CONTRACTS: Certain series 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. On 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 Fund bears the risk of an unfavorable change in the foreign exchange rate
underlying the forward contract.
---------------------
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<PAGE> 39
4. 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 February 28,
1999, 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........................................ $377,061 $(25,044) $352,017 $555,621 $--
International Series................................. 55,599 (7,543) 48,056 156,599 --
Growth-Income Series................................. 246,889 (41,383) 205,506 709,896 --
Asset Allocation Series.............................. 23,795 (6,611) 17,184 112,239 --
High-Yield Bond Series............................... 2,344 (8,933) (6,589) 99,154 --
U.S. Government/AAA-Rated Securities Series*......... 755 (540) 215 74,272 1,549
Cash Management Series............................... -- -- -- 77,796 --
<CAPTION>
CAPITAL LOSS
UTILIZED
------------
<S> <C>
Growth Series........................................ -$-
International Series................................. --
Growth-Income Series................................. --
Asset Allocation Series.............................. --
High-Yield Bond Series............................... --
U.S. Government/AAA-Rated Securities Series*......... 216
Cash Management Series............................... --
</TABLE>
- ---------------
* Expire 2005
+ Net capital loss carryover reported as of February 28, 1999, 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.
5. BUSINESS MANAGER AND INVESTMENT ADVISER: SunAmerica Asset Management Corp.
(the "Business Manager"), pursuant to a business management agreement, manages
the business affairs and the administration of the Fund. 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.
6. PURCHASES AND SALES OF SECURITIES: Information with respect to purchases and
sales of long-term securities (dollars in thousands) for the period December 1,
1998 through February 28, 1999, were 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............ $ 46,877 $ 9,197 $ 60,678 $10,509 $ 7,968
Sales of portfolio securities................ 86,442 22,306 107,896 14,241 16,445
U.S. government securities excluded above
were as follows:
Purchases of U.S. government securities...... -- -- -- 1,500 2,420
Sales of U.S. government securities.......... -- -- -- 1,157 2,516
<CAPTION>
U.S.
GOVERNMENT/
AAA-RATED CASH
SECURITIES MANAGEMENT
SERIES SERIES
<S> <C> <C>
--------------------------
Purchases of portfolio securities............ $ 1,000 $ --
Sales of portfolio securities................ 730 --
U.S. government securities excluded above
were as follows:
Purchases of U.S. government securities...... 25,167 --
Sales of U.S. government securities.......... 21,056 --
</TABLE>
7. TRANSACTIONS WITH AFFILIATES: The following series incurred brokerage
commissions (dollars in thousands) with an affiliated broker:
<TABLE>
<CAPTION>
FSC ROYAL
SECURITIES ALLIANCE
CORP. ASSOCIATES, INC.
---------- ----------------
<S> <C> <C>
Growth Series............................................... $ 1 --$
Growth-Income Series........................................ 3 1
</TABLE>
As disclosed in the investment portfolios, certain Series own stock issued by
American International Group, Inc. ("AIG"). Effective January 1, 1999,
SunAmerica Asset Management Corp., the business manager, became a wholly owned
subsidiary of AIG.
- ---------------------
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<PAGE> 40
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- ---------------------
ANCHOR PATHWAY FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
NET REALIZED TOTAL DIVIDENDS DIVIDENDS
NET ASSET NET & UNREALIZED FROM DECLARED FROM NET NET ASSET
VALUE INVEST- GAIN (LOSS) INVEST- FROM NET REALIZED VALUE
PERIOD BEGINNING MENT ON MENT INVESTMENT GAIN ON END OF TOTAL
ENDED OF PERIOD INCOME@ INVESTMENTS OPERATIONS INCOME INVESTMENTS PERIOD RETURN*
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Series
11/30/94 $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
11/30/98 43.82 0.15 10.18 10.33 (0.20) (8.62) 45.33 25.21
2/28/99# 45.33 0.04 6.52 6.56 -- -- 51.89 14.47
International Series
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
11/30/98 16.27 0.22 2.31 2.53 (0.27) (4.44) 14.09 14.56
2/28/99# 14.09 -- 1.56 1.56 -- -- 15.65 11.07
Growth-Income Series
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
11/30/98 37.03 0.62 4.91 5.53 (0.71) (6.80) 35.05 15.07
2/28/99# 35.05 0.15 1.45 1.60 -- -- 36.65 4.56
Asset Allocation Series
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
11/30/98 16.50 0.55 0.98 1.53 (0.61) (2.08) 15.34 9.28
2/28/99# 15.34 0.14 0.08 0.22 -- -- 15.56 1.43
High-Yield Bond Series
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
11/30/98 14.05 1.22 (0.73) 0.49 (1.39) (0.32) 12.83 3.22
2/28/99# 12.83 0.31 (0.25) 0.06 -- -- 12.89 0.47
U.S. Government/AAA-Rated Securities Series
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
11/30/98 11.10 0.68 0.23 0.91 (0.94) -- 11.07 8.70
2/28/99# 11.07 0.17 (0.21) (0.04) -- -- 11.03 (0.36)
Cash Management Series
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
11/30/98 11.31 0.54 -- 0.54 (0.83) -- 11.02 5.04
2/28/99# 11.02 0.12 -- 0.12 -- -- 11.14 1.09
<CAPTION>
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
END OF EXPENSES INCOME PORTFOLIO
PERIOD PERIOD TO AVERAGE TO AVERAGE TURNOVER
ENDED (000'S) NET ASSETS NET ASSETS RATE
- --------------------- --------------------------------------------------
<S> <C> <C> <C> <C>
Growth Series
11/30/94 $712,602 0.55% 0.56% 33.79%
11/30/95 897,275 0.55 0.65 23.72
11/30/96 813,164 0.55 0.46 25.51
11/30/97 801,230 0.54 0.44 29.01
11/30/98 836,355 0.54 0.34 32.37
2/28/99 907,320 0.55+ 0.34+ 5.75
International Series
11/30/94 $259,498 1.04% 1.64% 21.68%
11/30/95 228,134 1.05 1.95 16.79
11/30/96 249,144 1.02 1.56 44.94
11/30/97 223,337 1.04 0.99 47.45
11/30/98 193,763 1.03 1.50 60.19
2/28/99 204,521 1.05+ (0.08)+ 5.28
Growth-Income Series
11/30/94 $765,971 0.55% 2.54% 32.97%
11/30/95 882,143 0.55 2.52 18.81
11/30/96 919,356 0.55 2.07 23.72
11/30/97 950,432 0.54 1.88 30.06
11/30/98 915,994 0.54 1.76 32.42
2/28/99 914,110 0.55+ 1.63+ 7.57
Asset Allocation Series
11/30/94 $142,678 0.59% 4.47% 48.53%
11/30/95 153,608 0.59 4.04 53.58
11/30/96 153,060 0.58 3.74 40.97
11/30/97 155,446 0.59 3.49 39.14
11/30/98 134,069 0.58 3.56 31.43
2/28/99 129,800 0.62+ 3.57+ 9.77
High-Yield Bond Series
11/30/94 $127,467 0.59% 8.76% 44.97%
11/30/95 146,590 0.59 9.66 31.64
11/30/96 131,337 0.58 9.09 36.99
11/30/97 118,670 0.61 8.68 64.49
11/30/98 100,061 0.60 9.18 78.82
2/28/99 91,248 0.67+ 9.61+ 12.05
U.S. Government/AAA-Rated Securities Series
11/30/94 $149,368 0.58% 7.42% 16.95%
11/30/95 134,938 0.59 7.49 43.43
11/30/96 108,852 0.59 7.03 17.12
11/30/97 81,609 0.63 6.93 46.17
11/30/98 79,685 0.63 6.20 163.75
2/28/99 75,281 0.70+ 6.08+ 29.54
Cash Management Series
11/30/94 $186,396 0.57% 3.52% --%
11/30/95 100,872 0.58 5.32 --
11/30/96 89,236 0.58 4.81 --
11/30/97 69,226 0.63 4.87 --
11/30/98 63,826 0.63 4.91 --
2/28/99 82,247 0.69+ 4.40+ --
</TABLE>
- ---------------
@ Calculated based upon average shares outstanding
* Total return is not annualized and 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.
# The Series changed its fiscal year end from November 30 to February 28.
+ Annualized
See Notes to Financial Statements
---------------------
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<PAGE> 41
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- ---------------------
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
February 28, 1999, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for each of the periods
indicated, 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
February 28, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
April 13, 1999
- ---------------------
40
<PAGE> 42
O
- ---------------------
ANCHOR PATHWAY FUND
SHAREHOLDER INFORMATION (UNAUDITED)
SUPPLEMENTAL PROXY INFORMATION: A Special Meeting of the Shareholders of the
Anchor Pathway Fund was held on December 30, 1998. Each of the applicable Series
voted in favor of adopting the following proposals, therefore, the results are
aggregated for the Series unless otherwise specified.
1. To elect a slate of four members to the Board of Trustees to hold office
until their successors are duly elected and qualified.
<TABLE>
<CAPTION>
VOTES IN VOTES
FAVOR OF ABSTAINED
-------- ---------
<S> <C> <C>
James K. Hunt............................................... 87,506,560 2,374,738
Monica C. Lozano............................................ 87,506,560 2,374,738
Allan L. Sher............................................... 87,506,560 2,374,738
William M. Wardlaw.......................................... 87,506,560 2,374,738
</TABLE>
2. To ratify the selection of independent accountants.
<TABLE>
<CAPTION>
VOTES IN FAVOR OF VOTES AGAINST VOTES ABSTAINED
- ----------------- ------------- ---------------
<S> <C> <C>
85,973,425 954,326 2,953,540
</TABLE>
TAX INFORMATION: 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 February 28, 1999 was $12,979. The
gross foreign source income for information reporting is $60,211.
---------------------
41
<PAGE> 43
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- ---------------------
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
fund's 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
AVERAGE ANNUAL TOTAL RETURN AS OF 2/28/99
- --------------------------------------------------------------------------------
1-year 28.02%
5-year 22.44%
10-year 19.95%
- --------------------------------------------------------------------------------
[GROWTH SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
GROWTH SERIES S&P 500 COMPOSITE INDEX
------------- -----------------------
<S> <C> <C>
2/89 10000 10000
11/89 12864 12287
11/90 11759 11849
11/91 14910 14268
11/92 18085 16902
11/93 21387 18604
11/94 22098 18803
11/95 30480 25752
11/96 34753 32930
11/97 43020 42336
11/98 53866 52360
2/99 61661 55902
</TABLE>
------------------------------------------------------------------
The graphs represent past performance, which is not indicative of
future results.
- ---------------------
42
<PAGE> 44
- --------------------------------------------------------------------------------
INTERNATIONAL SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 2/28/99
- --------------------------------------------------------------------------------
1-year 14.25%
5-year 13.73%
10-year N/A
Since Inception (5/9/90) 11.97%
- --------------------------------------------------------------------------------
[INTERNATIONAL SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
INTERNATIONAL SERIES MSCI EAFE INDEX
-------------------- ---------------
<S> <C> <C>
5/90 10000.00 10000.00
11/90 9680.00 9483.00
11/91 10221.00 10310.00
11/92 10253.00 9508.00
11/93 13063.00 11852.00
11/94 14130.00 13646.00
11/95 15710.00 14724.00
11/96 18857.00 16504.00
11/97 21336.00 16483.00
11/98 24442.00 19249.00
2/99 27149.00 19487.00
</TABLE>
------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH-INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 2/28/99
- --------------------------------------------------------------------------------
1-year 10.23%
5-year 19.64%
10-year 16.21%
- --------------------------------------------------------------------------------
[GROWTH-INCOME SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
GROWTH-INCOME SERIES S&P 500 COMPOSITE INDEX
-------------------- -----------------------
<S> <C> <C>
2/89 10000.00 10000.00
11/89 12370.00 12287.00
11/90 11434.00 11849.00
11/91 13851.00 14268.00
11/92 16070.00 16902.00
11/93 18053.00 18604.00
11/94 18415.00 18803.00
11/95 24579.00 25752.00
11/96 29958.00 32930.00
11/97 37333.00 42336.00
11/98 42958.00 52360.00
2/99 44919.00 55902.00
</TABLE>
------------------------------------------------------------------
The graphs represent past performance, which is not indicative of
future results.
---------------------
43
<PAGE> 45
- --------------------------------------------------------------------------------
ASSET ALLOCATION SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 2/28/99
- --------------------------------------------------------------------------------
1-year 4.99%
5-year 14.98%
10-year N/A
Since Inception (3/31/89) 12.84%
- --------------------------------------------------------------------------------
[ASSET ALLOCATION SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES S&P 500 COMPOSITE INDEX SALOMON SMITH BARNEY
----------------------- ----------------------- INVESTMENT GRADE BOND
INDEX
---------------------
<S> <C> <C> <C>
5/89 10000 10000 10000
11/89 11000 12287 11076
11/90 10827 11849 11923
11/91 12847 14268 13640
11/92 14620 16902 14882
11/93 16192 18604 16518
11/94 16056 18603 16016
11/95 21035 25752 18868
11/96 25104 32930 19997
11/97 29586 42336 21511
11/98 32332 52360 23551
2/99 32795 52467 23382
</TABLE>
------------------------------------------------------------------
- --------------------------------------------------------------------------------
HIGH-YEILD BOND SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 2/28/99
- --------------------------------------------------------------------------------
1-year -0.07%
5-year 8.26%
10-year 10.67%
- --------------------------------------------------------------------------------
[HIGH-YIELD BOND SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
HIGH-YIELD BOND SERIES SALOMON SMITH BARNEY SALOMON SMITH BARNEY
---------------------- LONG-TERM HIGH-YIELD INVESTMENT GRADE BOND
INDEX INDEX
-------------------- ---------------------
<S> <C> <C> <C>
2/89 10000.00 10000.00 10000.00
11/89 10613.00 9628.00 11327.00
11/90 10616.00 8662.00 12193.00
11/91 13721.00 12450.00 13950.00
11/92 15650.00 14838.00 15219.00
11/93 18223.00 17888.00 16893.00
11/94 17366.00 17133.00 16380.00
11/95 20660.00 21930.00 19296.00
11/96 23561.00 24123.00 20451.00
11/97 26568.00 28083.00 22000.00
11/98 27423.00 30917.00 24086.00
2/99 27551.00 31241.00 23912.00
</TABLE>
------------------------------------------------------------------
The graphs represent past performance, which is not indicative of
future results.
- ---------------------
44
<PAGE> 46
- --------------------------------------------------------------------------------
U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 2/28/99
- --------------------------------------------------------------------------------
1-year 6.11%
5-year 6.14%
10-year 8.38%
- --------------------------------------------------------------------------------
[U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
SALOMON SMITH BARNEY
U.S. GOV'T/AAA-RATED SECURITIES TREASURY/GOV'T-
SERIES SPONSORED/MORTGAGE INDEX
------------------------------- ------------------------
<S> <C> <C>
2/89 10000.00 10000.00
11/89 11033.00 11338.00
11/90 11821.00 12251.00
11/91 13428.00 13958.00
11/92 14752.00 15188.00
11/93 16608.00 16777.00
11/94 15916.00 16298.00
11/95 18454.00 19089.00
11/96 19468.00 20219.00
11/97 20652.00 21743.00
11/98 22450.00 23809.00
2/99 22369.00 23656.00
</TABLE>
------------------------------------------------------------------
The graphs represent past performance, which is not indicative of
future results.
---------------------
45
<PAGE> 47
-----------------
[LOGO] SUNAMERICA
Anchor National Life Insurance Company BULK RATE
1 SunAmerica Center U.S. POSTAGE
Los Angeles, California 90067-6022 PAID
TOWNE, INC.
-----------------
A-1201-CBD (R 4/99)
