ANCHOR PATHWAY FUND, 485BPOS, 1999-01-29

ANCHOR PATHWAY FUND
485BPOS, 1999-01-29

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<PAGE> 1

As filed with the Securities and Exchange Commission on January 29, 1999

Securities Act File No. 33-14227

Investment Company Act File No. 811-5157

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]

POST-EFFECTIVE AMENDMENT NO. 16 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 16 [X]

(Check appropriate box or boxes)

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

1 SunAmerica Center
Los Angeles, CA 90067-6022
(Address of Principal Executive Office)(Zip Code)

Registrant's telephone number, including area code: (310) 772-6000

Robert M. Zakem
Senior Vice President and General Counsel
SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue - 3rd Floor
New York, NY 10017-3204
(Name and Address for Agent for Service)

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

Margery K. Neale, Esq.
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, NY 10022

Approximate Date of Proposed Public Offering: As soon as practicable
after this Registration Statement becomes effective.

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

[X] immediately upon filing pursuant to paragraph (b)

[ ] on (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on (date) pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

[ ] This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
<PAGE> 2

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

PROSPECTUS

JANUARY 29, 1999

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

[ANCHOR PATHWAY FUND]
----------------------------------------------

-- Growth Series

-- International Series

-- Growth-Income Series

-- Asset Allocation Series

-- High-Yield Bond Series

-- U.S. Government/AAA-Rated
Securities Series

-- Cash Management Series

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED
UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C>
FUND HIGHLIGHTS............................................. 3

MORE INFORMATION ABOUT THE SERIES........................... 12

Investment Strategies..................................... 12

Glossary.................................................. 16

Investment Terminology................................. 16

Risk Terminology....................................... 17

MANAGEMENT.................................................. 18

ACCOUNT INFORMATION......................................... 22

FINANCIAL HIGHLIGHTS........................................ 23

FOR MORE INFORMATION........................................ 24
</TABLE>

2
<PAGE> 4

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

FUND HIGHLIGHTS
- --------------------------------------------------------------------------------

The following questions and answers are designed to give you an overview of
Anchor Pathway Fund (the "Fund"), and to provide you with information about the
Fund's seven investment portfolios, or "Series," and their investment goals and
principal strategies. More complete investment information is provided in the
chart, under "More Information About the Series," which is on page 12, and the
glossary that follows on page 16.

Q: WHAT ARE THE SERIES' INVESTMENT GOALS AND STRATEGIES?

A: Each Series operates as a separate mutual fund, and has its own investment
goal, which may not be changed without shareholder approval, and a strategy
for pursuing its goal. There can be no assurance that any Series' investment
goal will be met or that the net return on an investment in a Series will
exceed what could have been obtained through other investment or savings
vehicles.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
SERIES INVESTMENT GOAL PRINCIPAL INVESTMENT STRATEGY
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Series growth of capital invests primarily in common stocks or
securities with common stock
characteristics that demonstrate the
potential for appreciation.
---------------------------------------------------------------------------------------------------
International long-term growth of capital invests primarily in common stocks or
Series securities with common stock
characteristics of issuers that are
domiciled outside the U.S., including
those domiciled in developing countries.
---------------------------------------------------------------------------------------------------
Growth-Income growth of capital and invests primarily in common stocks or
Series income securities with common stock
characteristics that demonstrate the
potential for solid growth and dividends.
---------------------------------------------------------------------------------------------------
Asset Allocation high total return invests in a diversified portfolio of
Series (including income and common stocks, bonds and money market
capital gains) consistent instruments; under normal market
with preservation of conditions the portfolio will include:
capital over the long-term 40%-80% in equity securities, 20%-50% in
fixed-income securities, and 0% to 40% in
money market instruments.
---------------------------------------------------------------------------------------------------
High-Yield Bond high current income with invests primarily in intermediate and
Series capital appreciation as a long-term corporate debt securities, with
secondary objective emphasis on higher yielding, higher risk,
lower rated or unrated corporate bonds,
which are commonly known as "junk bonds."
---------------------------------------------------------------------------------------------------
U.S. Government/ high current income invests primarily in a combination of
AAA-Rated consistent with prudent securities issued or guaranteed by the
Securities Series investment risk and U.S. government (i.e., backed by the full
preservation of capital 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).
---------------------------------------------------------------------------------------------------
Cash Management high current yield while invests primarily in high quality money
Series preserving capital market instruments.
---------------------------------------------------------------------------------------------------
</TABLE>

3
<PAGE> 5

Q: WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

A: The Growth, International and Growth-Income Series invest
primarily in equity securities. In addition, the Asset
Allocation Series invests significantly in equities. As with
any equity fund, the value of your investment in any of these
Series may fluctuate in response to stock market movements.

The High-Yield Bond and U.S. Government/AAA-Rated Securities
Series invest primarily in bonds. In addition, the Asset
Allocation Series invests significantly in bonds. As a result,
as with any bond fund, the value of your investment in these
Series may go up or down in response to changes in interest
rates or defaults (or even the potential for future default)
by bond issuers. In addition, there is a risk the securities
selected for any Series will underperform the markets
generally.

The High-Yield Bond Series invests primarily in high yield,
high risk securities, also known as "junk bonds," which are
considered speculative. The Growth, International,
Growth-Income and Asset Allocation Series may also invest in
junk bonds. While the Fund's Investment Adviser seeks to
diversify the Series and to engage in a credit analysis of
each junk bond issuer in which it invests, junk bonds carry a
substantial risk of default or may already be in default. The
market price for junk bonds may fluctuate more than
higher-quality securities and may decline significantly. In
addition, it may be more difficult for a Series to dispose of
junk bonds or to determine their value. Junk bonds may contain
redemption or call provisions that, if exercised during a
period of declining interest rates, may force a Series to
replace the security with a lower yielding security, which
would decrease the return on such Series.

While an investment in the Cash Management Series should
present the least market risk of any of the Series since it
invests only in high-quality short-term debt obligations, you
should be aware that an investment in the Cash Management
Series will be subject to changes in interest rates. You
should also be aware that your return on an investment in the
Cash Management Series will be affected by fees at the
contract level. The Cash Management Series does not seek to
maintain a stable net asset value of $1.00.

All of the Series may invest to some degree in foreign
securities. The Growth, International, Growth-Income, Asset
Allocation and High-Yield Bond Series may purchase foreign
securities denominated in currencies other than U.S. dollars.
The U.S. Government/AAA-Rated Securities and Cash Management
Series may purchase only foreign securities that are U.S.
dollar denominated and highly liquid. Investing outside the
U.S. presents special risks, particularly in certain
developing countries. While investing internationally may
reduce your risk by increasing the diversification of your
investment, the value of your investment may be affected by
fluctuating currency values, changing local and regional
economic, political and social conditions, greater market
volatility, differing securities regulations, and
administrative difficulties such as delays in clearing and
settling portfolio transactions. In addition, foreign
securities may not be as liquid as domestic securities.

In addition, shares of a Series are not bank deposits and are
not guaranteed or insured by any bank, government entity or
the Federal Deposit Insurance Corporation. As with any mutual
fund, there is no guarantee that a Series will be able to
achieve its investment goals. If the value of the assets of a
Series goes down, you could lose money.

"GROWTH" COMPANIES
are considered to have
a historical record of
above-average growth
rate; to have
significant growth
potential; to have
above-average earnings
growth or value or the
ability to sustain
earnings growth; to
offer proven or unusual
products or services;
or to operate in
industries experiencing
increasing demand.

"HIGH-QUALITY"
INSTRUMENTS
have a very strong
capacity to pay
interest and repay
principal; they reflect
the issuers' high
creditworthiness and
low risk of default.

4
<PAGE> 6

Q: HOW HAVE THE SERIES PERFORMED HISTORICALLY?

A: The following Risk/Return Bar Charts and Tables provide some indication of
the risks of investing in the Series by showing changes in the Series'
performance from year to year, and compare the Series' average annual returns to
those of an appropriate market index for the calendar years presented. Fees and
expenses incurred at the contract level are not reflected in the bar chart. If
these amounts were reflected, returns would be less than those shown. Of course,
past performance is not necessarily an indication of how a Series will perform
in the future.

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

GROWTH SERIES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GROWTH SERIES '1989' '1990' '1991' '1992' '1993' '1994' '1995' '1996' '1997' '1998'
- ------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
37.89% -3.96% 22.60% 24.46% 18.98% 0.46% 34.47% 14.56% 28.14% 36.35%
</TABLE>

During the 10-year period shown in the bar chart, the highest return for a
quarter was 29.38% (quarter ended 12/31/98) and the lowest return for a quarter
was -18.38% (quarter ended 09/30/90).

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION***
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Growth Series 36.35% 22.01% 20.59% 18.77%
- -----------------------------------------------------------------------------------------------
S&P 500(R) Index* 28.52% 24.02% 19.16% 18.28%
- -----------------------------------------------------------------------------------------------
Consumer Price Index** 1.61% 2.37% 3.12% 3.24%
- -----------------------------------------------------------------------------------------------
</TABLE>

* The S&P 500(R) is the Standard & Poor's 500 Composite Stock Price Index, a
widely recognized, unmanaged index of common stock prices.

** The Consumer Price Index (or Cost of Living Index) is published by the U.S.
Bureau of Labor Statistics and is a statistical measure of periodic change
in the price of goods and services in major expenditure groups.

*** Inception date is February 7, 1984. Except for the S&P 500(R), the since
inception returns for the comparative indices are based on the nearest
month-end inception date.

5
<PAGE> 7

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

INTERNATIONAL SERIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>

1991 1992 1993 1994 1995 1996 1997 1998
6.99 0.71 34.48 -0.72 13.43 21.43 12.13 19.16

</TABLE>

During the 8-year period shown in the bar chart, the highest return for a
quarter was 16.81% (quarter ended 12/31/98) and the lowest return for a quarter
was -12.07% (quarter ended 09/30/98).

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

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION***
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
International Series 19.16% 12.81% N/A 11.49%
- -----------------------------------------------------------------------------------------------
Morgan Stanley Capital International (MSCI)
EAFE Index* 20.33% 9.50% 5.85% 7.67%
- -----------------------------------------------------------------------------------------------
Consumer Price Index** 1.61% 2.37% 3.12% 2.82%
- -----------------------------------------------------------------------------------------------
</TABLE>

* The MSCI EAFE Index is an arithmetic, market value-weighted average of
performance of over 900 securities on the stock exchanges of countries in
Europe, Australia and the Far East.

*** Inception date is May 9, 1990. The since inception returns for the
comparative indices are based on the nearest month-end inception date.

6
<PAGE> 8

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

GROWTH-INCOME SERIES
- --------------------------------------------------------------------------------

During the 10-year period shown in the bar chart, the highest return for a
quarter was 17.68% (quarter ended 12/31/98) and the lowest return for a quarter
was -14.05% (quarter ended 09/30/90).

S&P 500(R) Index* 28.52% 24.02% 19.16% 18.28%
- -----------------------------------------------------------------------------------------------
Consumer Price Index** 1.61% 2.37% 3.12% 3.24%
- -----------------------------------------------------------------------------------------------
</TABLE>

* The S&P 500(R) is the Standard & Poor's 500 Composite Stock Price Index, a
widely recognized, unmanaged index of common stock prices.

*** Inception date is February 7, 1984. Except for the S&P 500(R), the since
inception returns for the comparative indices are based on the nearest
month-end inception date.

7
<PAGE> 9

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

ASSET ALLOCATION SERIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>

1990 1991 1992 1993 1994 1995 1996 1997 1998
- -0.27 21.16 10.11 10.52 -0.52 30.86 15.77 20.65 10.04

</TABLE>

During the 9-year period shown in the bar chart, the highest return for a
quarter was 11.80% (quarter ended 12/31/98) and the lowest return for a quarter
was -9.62% (quarter ended 09/30/98).

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

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION****
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Asset Allocation Series 10.04% 14.88% N/A 12.94%
- ------------------------------------------------------------------------------------------------

S&P 500(R) Index* 28.52% 24.02% 19.16% 18.96%
- ------------------------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment-Grade
(BIG) Bond Index** 8.71% 7.30% 9.31% 9.42%
- ------------------------------------------------------------------------------------------------
Consumer Price Index*** 1.61% 2.37% 3.12% 3.05%
- ------------------------------------------------------------------------------------------------
</TABLE>

* The S&P 500(R) is the Standard & Poor's 500 Composite Stock Price Index, a
widely recognized, unmanaged index of common stock prices.

** The Salomon Smith Barney Broad Investment-Grade Bond Index is a
market-weighted index that contains approximately 4700 individually priced
investment grade corporate bonds rated "BBB" or better, U.S.
Treasury/agency issues and Mortgage pass through securities.

*** The Consumer Price Index (or Cost of Living Index) is published by the
U.S. Bureau of Labor Statistics and is an statistical measure of periodic
change in the price of goods and services in major expenditure groups.

**** Inception date is March 31, 1989. Except for the S&P 500(R), the since
inception returns for the comparative indices are based on the nearest
month-end inception date.

8
<PAGE> 10

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

HIGH-YIELD BOND SERIES
- --------------------------------------------------------------------------------

During the 10-year period shown in the bar chart, the highest return for a
quarter was 12.10% (quarter ended 03/31/91) and the lowest return for a quarter
was -6.98% (quarter ended 09/30/98).

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION****
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
High-Yield Bond Series 1.99% 8.33% 10.81% 12.13%
- ------------------------------------------------------------------------------------------------
Salomon Smith Barney Long-Term High-Yield
Index* 9.23% 11.54% 12.32% 12.52%
- ------------------------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment-
Grade (BIG) Bond Index** 8.71% 7.30% 9.31% 10.28%
- ------------------------------------------------------------------------------------------------
Consumer Price Index*** 1.61% 2.37% 3.12% 3.24%
- ------------------------------------------------------------------------------------------------
</TABLE>

* The Salomon Smith Barney Long-Term High-Yield Index generally represents
the performance of high-yield debt securities during various market
conditions.

*** The Consumer Price Index (or Cost of Living Index) is published by the
U.S. Bureau of Labor Statistics and is a statistical measure of periodic
change in the price of goods and services in major expenditure groups.

**** Inception date is February 7, 1984. The since inception returns for the
comparative indices are based on the nearest month-end inception date.

9
<PAGE> 11

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

U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES
- --------------------------------------------------------------------------------

During the 10-year period shown in the bar chart, the highest return for a
quarter was 6.06% (quarter ended 09/30/91) and the lowest return for a quarter
was -3.03% (quarter ended 03/31/94).

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR YEARS YEARS INCEPTION***
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
U.S. Government/AAA-Rated Securities Series 8.02% 6.19% 8.58% 8.53%
- -----------------------------------------------------------------------------------------------
Salomon Smith Barney Treasury/ Government-
Sponsored/Mortgage Index* 8.76% 7.20% 9.18% 9.14%
- -----------------------------------------------------------------------------------------------
Consumer Price Index** 1.61% 2.37% 3.12% 3.17%
- -----------------------------------------------------------------------------------------------
</TABLE>

* The Salomon Smith Barney Treasury/Government Sponsored/Mortgage Bond Index
is a market-capitalization weighted index and includes fixed-rate Treasury,
Government-Sponsored, and Mortgage issues with a maturity of one year or
longer. The minimum amount outstanding for U.S. Treasury and mortgage
issues is $1 billion for both entry and exit. For Government-sponsored
issues, the entry and exit amount is $100 million.

*** Inception date is December 1, 1985. The since inception returns for the
comparative indices are based on the nearest month-end inception date.

10
<PAGE> 12

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

CASH MANAGEMENT SERIES
- --------------------------------------------------------------------------------

During the 10-year period shown in the bar chart, the highest return for a
quarter was 2.23% (quarter ended 06/30/89) and the lowest return for a quarter
was 0.60% (quarter ended 03/31/93).

* Inception date is February 7, 1984.

11
<PAGE> 13

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

MORE INFORMATION ABOUT THE SERIES
- --------------------------------------------------------------------------------

INVESTMENT STRATEGIES

Each Series has its own investment goal and a strategy for pursuing it. The
chart summarizes information about each Series' investment strategy. We have
included a glossary to define the investment and risk terminology used in the
chart and throughout this Prospectus.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
GROWTH INTERNATIONAL GROWTH-INCOME
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
What is the Series' growth of capital long-term growth of growth of capital and
investment goal? capital income
- ------------------------------------------------------------------------------------------

What are the common stocks or common stocks or common stocks or
Series' principal securities with securities with securities with
investments (under common stock common stock common stock
normal market characteristics that characteristics of characteristics that
conditions)? demonstrate the issuers domiciled demonstrate the
potential for outside the U.S., potential for solid
appreciation including those growth and dividends
domiciled in
developing countries
- ------------------------------------------------------------------------------------------

What are the - stock market - stock market - stock and bond
Series' principal volatility volatility market volatility
risks? - securities - securities - securities
selection selection selection
- foreign exposure
- illiquidity
- ------------------------------------------------------------------------------------------
What other
investments can the
Series use?

- Types of fixed
income
securities:

U.S. government Yes Yes Yes
securities

Investment grade Yes Yes Yes
corporate bonds

Junk bonds Yes Yes Yes
(up to 10%) (up to 5%) (up to 5%)

No No No
Inflation-indexed
bonds

Pass-through Yes Yes Yes
securities
- ------------------------------------------------------------------------------------------
</TABLE>

12
<PAGE> 14

- Common stocks a principal a principal a principal
investment investment investment
(see above) (see above) (see above)

- Convertible Yes Yes Yes
securities

- Non-convertible Yes Yes Yes
preferred stocks

- Warrants Yes Yes Yes

- Short-term Yes Yes Yes
investments

- Defensive Yes Yes Yes
investments

- Foreign Yes a principal Yes
securities (up to 10%) investment (up to 10%)
(see above)

- Currency Yes Yes Yes
transactions

- Illiquid Yes Yes Yes
securities (up to 15%) (up to 15%) (up to 15%)

What other - interest rate - interest rate - interest rate
potential risks can fluctuations fluctuations fluctuations
affect the Series? - foreign exposure - illiquidity - foreign exposure
- illiquidity - hedging - illiquidity
- prepayment - prepayment - hedging
- issuer default - issuer default - prepayment
- credit quality - credit quality - issuer default
- credit quality
- ------------------------------------------------------------------------------------------
</TABLE>

13
<PAGE> 15

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
GOVERNMENT/AAA-
RATED CASH MANAGEMENT
ASSET ALLOCATION HIGH-YIELD BOND SECURITIES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
What is the Series' high total return high current income high current income high current yield
investment goal? (including income with capital consistent with while preserving
and capital gains) appreciation as a prudent investment capital
consistent with secondary objective risk and
preservation of preservation of
capital over the capital
long-term
- ---------------------------------------------------------------------------------------------------------

What are the common stocks, intermediate and securities issued high quality money
Series' principal bonds and money long-term corporate or guaranteed by market instruments
investments (under market instruments; debt securities, the U.S. government
normal market under normal market with emphasis on (i.e., backed by
conditions)? conditions the higher yielding, the full faith and
portfolio will higher risk, lower credit of the
include: 40%-80% in rated or unrated U.S.); and other
equity securities; corporate bonds debt securities
20%-50% in fixed (junk bonds) rated in the
income securities; highest rating
and 0%-40% in money category (or that
market instruments are determined to
be of comparable
quality by the
Investment
Adviser.)
- ---------------------------------------------------------------------------------------------------------

What are the - stock and bond - bond market - bond market - interest rate
Series' principal market volatility volatility volatility fluctuations
risks? - securities - securities - interest rate - securities
selection selection fluctuations selection
- interest rate - interest rate - prepayment
fluctuations fluctuations - securities
- issuer default - issuer default selection
- credit quality - credit quality
- illiquidity
- ---------------------------------------------------------------------------------------------------------

What other
investments can the
Series use?

- Types of fixed
income
securities:

U.S. government Yes Yes a principal a principal
securities investment investment
(see above) (see above)

Investment grade Yes Yes a principal Yes
corporate bonds investment
(see above)
- ---------------------------------------------------------------------------------------------------------
</TABLE>

14
<PAGE> 16

- Types of fixed
income
securities:
(cont'd)

Junk bonds Yes a principal No No
(up to 25% of investment
fixed-income (see above)
securities)

Inflation-indexed Yes Yes Yes No
bonds

Pass-through Yes Yes Yes Yes
securities

- Common stocks a principal Yes No No
investment (up to 25%)
(see above)

- Convertible Yes Yes No No
securities

- Non-convertible Yes Yes No No
preferred stocks

- Warrants Yes Yes No No

- Short-term Yes Yes Yes a principal
investments investment
(see above)

- Defensive Yes Yes Yes No
investments

- Foreign Yes Yes Yes Yes
securities (up to 10% in (up to 25%) (5%, only U.S. (only U.S. dollar
equity securities; dollar denominated denominated and
up to 5% in fixed and highly-liquid highly liquid
income securities) obligations) obligations)

- Currency Yes Yes No No
transactions

- Illiquid Yes Yes Yes Yes
securities (up to 15%) (up to 15%) (up to 15%) (up to 10%)

What other - foreign exposure - foreign exposure - foreign exposure - foreign exposure
potential risks can - illiquidity - prepayment - prepayment - prepayment
affect the Series? - prepayment
- issuer default
- credit quality
- ---------------------------------------------------------------------------------------------------------
</TABLE>

15
<PAGE> 17

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

GLOSSARY
- --------------------------------------------------------------------------------

INVESTMENT TERMINOLOGY

FIXED INCOME SECURITIES, which issuers use to borrow money, provide consistent
interest or dividend payments. They include corporate bonds, notes, debentures,
preferred stocks, convertible securities, U.S. government securities and
mortgage-backed and asset-backed securities. The issuer of a senior fixed income
security is obligated to make payments on this security ahead of other payments
to security holders.

U.S. GOVERNMENT SECURITIES are issued or guaranteed by the U.S. government, its
agencies and instrumentalities. Some U.S. government securities are issued or
unconditionally guaranteed by the U.S. Treasury. They are of the highest
possible credit quality. While these securities are subject to variations in
market value due to fluctuations in interest rates, they will be paid in full if
held to maturity. Other U.S. government securities are neither direct
obligations of, nor guaranteed by, the U.S. Treasury. However, they involve
federal sponsorship in one way or another. For example some are backed by
specific types of collateral; some are supported by the issuer's right to borrow
from the Treasury; some are supported by the discretionary authority of the
Treasury to purchase certain obligations of the issuer; and others are supported
only by the credit of the issuing government agency or instrumentality.

An INVESTMENT GRADE fixed income security is rated in one of the top four
ratings categories by a debt rating agency (or is considered of comparable
quality by the Investment Adviser). The two best-known debt rating agencies are
Standard & Poor's Rating Services, a Division of The McGraw-Hill Companies, Inc.
and Moody's Investors Service, Inc. "Investment grade" refers to any security
rated "BBB" or above by Standard & Poor's or "Baa" or above by Moody's.

A JUNK BOND is a high yield, high risk bond that does not meet the credit
quality standards of investment grade securities.

The principal value of an INFLATION-INDEXED BOND is periodically adjusted
according to changes in the rate of inflation.

PASS-THROUGH SECURITIES involve various debt obligations that are backed by a
pool of mortgages or other assets. Principal and interest payments made on the
underlying asset pools are typically passed through to investors. Types of
pass-through securities include "mortgage-backed securities," "collateralized
mortgage obligations," "commercial mortgage-backed securities," and
"asset-backed securities."

EQUITY SECURITIES include common and preferred stocks, convertible securities,
warrants and rights.

COMMON STOCKS are units of ownership of a public corporation.

CONVERTIBLE SECURITIES are securities (such as bonds or preferred stocks) that
may be converted into common stock or other securities of the same or a
different company.

WARRANTS are rights to buy common stock of a company at a specified price during
the life of the warrant.

SHORT-TERM INVESTMENTS include money market securities such as short-term U.S.
government obligations, repurchase agreements, commercial paper, bankers'
acceptances and certificates of deposit. These securities provide a Series with
sufficient liquidity to meet redemptions and cover expenses.

DEFENSIVE INVESTMENTS generally include cash and money market instruments. A
Series may make temporary defensive investments in response to adverse market,
economic, political or other conditions, and such investments may protect a
Series during a market downturn. When a Series takes a defensive position, it
may miss out on investment opportunities over the short term that could have
resulted from investing in accordance with its principal investment strategy. As
a result, a Series may not achieve its investment goal.

16
<PAGE> 18

FOREIGN SECURITIES are issued by companies located outside of the United States,
including developing countries. Foreign securities may include American
Depositary Receipts (ADRs) or other similar securities that convert into foreign
securities. Although there is no universally accepted definition, a developing
country is generally considered to be a country in the initial stages of its
industrialization cycle with a lower per capita gross national product.

CURRENCY TRANSACTIONS include the purchase and sale of currencies to facilitate
securities transactions, and forward currency contracts, which are used to hedge
against changes in currency exchange rates.

ILLIQUID SECURITIES are subject to legal or contractual restrictions that may
make them difficult to sell. A security that cannot easily be sold within seven
days will generally be considered illiquid. Certain restricted securities (such
as Rule 144A securities) are not generally considered illiquid because of their
established trading market.

RISK TERMINOLOGY

MARKET VOLATILITY: The stock and/or bond markets as a whole could go up or down
(sometimes dramatically). This could affect the value of the securities in a
Series' portfolio.

SECURITIES SELECTION: A strategy used by a Series, or securities selected by
its portfolio manager, may fail to produce the intended return.

INTEREST RATE FLUCTUATIONS: Volatility of the bond market is due principally to
changes in interest rates. As interest rates rise, bond prices typically fall;
and as interest rates fall, bond prices typically rise. Longer-term and lower
coupon bonds tend to be more sensitive to changes in interest rates.

CREDIT QUALITY: An issuer with a lower credit rating will be more likely than a
higher rated issuer to default or otherwise become unable to honor its financial
obligations. This type of issuer will typically issue JUNK BONDS, which, in
addition to the risk of default, may be more volatile, less liquid, more
difficult to value and more susceptible to adverse economic conditions or
investor perceptions than other bonds.

PREPAYMENT: Prepayment risk is the possibility that the principal of the loans
underlying mortgage-backed or other asset-backed securities may be prepaid at
any time. As a general rule, prepayments increase during a period of falling
interest rates and decrease during a period of rising interest rates. As a
result of prepayments, in periods of declining interest rates a Series may be
required to reinvest its assets in securities with lower interest rates. In
periods of increasing interest rates, prepayments generally may decline, with
the effect that the securities subject to prepayment risk held by a Series may
exhibit price characteristics of longer-term debt securities.

FOREIGN EXPOSURE: Investments in foreign countries are subject to a number of
risks. A principal risk is that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. In
addition, there may be less publicly available information about a foreign
company and it may not be subject to the same uniform accounting, auditing and
financial reporting standards as U.S. companies. Foreign governments may not
regulate securities markets and companies to the same degree as in the U.S.
Foreign investments will also be affected by local political or economic
developments and governmental actions. Consequently, foreign securities may be
less liquid, more volatile and more difficult to price than U.S. securities.
These risks may heighten when the issuer is in a developing market.

ILLIQUIDITY: Certain securities may be difficult or impossible to sell at the
time and the price that the seller would like.

HEDGING: Certain Series may enter into forward currency contracts to hedge
against changes in currency exchange rates. While entering into forward currency
transactions could minimize the risk of loss due to a decline in the value of
the hedged currency, it could also limit any potential gain that might result
from an increase in the value of the currency. The Series will generally not
attempt to protect against all potential changes in exchange rates.

17
<PAGE> 19

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

MANAGEMENT
- --------------------------------------------------------------------------------

INVESTMENT ADVISER Capital Research and Management Company, a large and
experienced investment management organization founded in 1931, is the
investment adviser to the Fund and other funds, including those in The American
Funds Group. For the fiscal year ended November 30, 1998 each Series paid the
Investment Adviser an annual fee equal to the following percentage of average
daily net assets:

<TABLE>
<CAPTION>
FUND FEE
- ---- ---
<S> <C>
Growth...................................................... 0.30%
International............................................... 0.60%
Growth-Income............................................... 0.30%
Asset Allocation............................................ 0.31%
High-Yield Bond............................................. 0.32%
U.S. Government/AAA-Rated Securities........................ 0.32%
Cash Management............................................. 0.33%
</TABLE>

The Investment Adviser is headquartered at 333 South Hope Street, Los Angeles,
California 90071.

The basic investment philosophy of the Investment Adviser is to seek fundamental
values at reasonable prices, using a system of multiple portfolio counselors in
managing mutual fund assets. Under this system, the portfolios of the Series are
divided into segments managed by individual counselors. Each counselor decides
how his or her segment will be invested, within the limits prescribed by each
Series' investment goal and the Investment Adviser's investment committee. In
addition, the Investment Adviser's research professionals make investment
decisions with respect to a portion of each Series' portfolio. The primary
portfolio counselor for each Series is set forth in the following table.

18
<PAGE> 20

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
YEARS OF EXPERIENCE IN
THE INVESTMENT INDUSTRY
-------------------------------------------------------------------------------------------------------------
WITH CAPITAL
RESEARCH AND
YEARS OF EXPERIENCE AS MANAGEMENT
PORTFOLIO COUNSELORS PRIMARY TITLE(S) PORTFOLIO COUNSELOR COMPANY OR TOTAL
FOR THE FUND FOR THE SERIES ITS AFFILIATES YEARS
INDICATED AS INVESTMENT
(APPROXIMATE) COUNSELOR
OR RESEARCH
PROFESSIONAL
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Timothy D. Armour Chairman and Chief Asset Allocation 16 16
Executive Officer, Series -- 2 years
Capital Research
Company*
-------------------------------------------------------------------------------------------------------------
David C. Barclay Senior Vice High-Yield Bond 11 18
President, Capital Series -- 10 years
Research Company*
-------------------------------------------------------------------------------------------------------------
Alan N. Berro Senior Vice Growth-Income 8 13
President, Capital Series -- 2 years
Research Company*
-------------------------------------------------------------------------------------------------------------
Martial Chaillet Senior Vice International 26 26
President and Series -- 6 years
Director, Capital
Research Company*
-------------------------------------------------------------------------------------------------------------
Gordon Crawford Senior Vice Growth Series -- 5 28 28
President and years (plus 5 years
Director, Capital as a research
Research and professional for the
Management Company Series prior to
becoming a portfolio
counselor for the
Series)
-------------------------------------------------------------------------------------------------------------
James E. Drasdo Senior Vice Growth Series -- 13 22 27
President and years
Director, Capital
Research and
Management Company
-------------------------------------------------------------------------------------------------------------
James K. Dunton Senior Vice Growth-Income 37 37
President and Series -- since the
Director, Capital Series began
Research and operations in 1984
Management Company
-------------------------------------------------------------------------------------------------------------
Abner D. Goldstine Senior Vice Asset Allocation 30 46
President and Series -- since the
Director, Capital series began
Research and operations in 1989;
Management Company High-Yield Bond
Series -- less than 1
year
-------------------------------------------------------------------------------------------------------------
</TABLE>

19
<PAGE> 21

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
YEARS OF EXPERIENCE IN
THE INVESTMENT INDUSTRY
-------------------------------------------------------------------------------------------------------------
WITH CAPITAL
RESEARCH AND
YEARS OF EXPERIENCE AS MANAGEMENT
PORTFOLIO COUNSELORS PRIMARY TITLE(S) PORTFOLIO COUNSELOR COMPANY OR TOTAL
FOR THE FUND FOR THE SERIES ITS AFFILIATES YEARS
INDICATED AS INVESTMENT
(APPROXIMATE) COUNSELOR
OR RESEARCH
PROFESSIONAL
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alwyn Heong Vice President- International 7 10
Investment Series -- 3 years
Management Group,
Capital Research
and Management
Company
-------------------------------------------------------------------------------------------------------------
Claudia P. Senior Vice Growth-Income 21 23
Huntington President, Capital Series -- 5 years
Research and (plus 5 years as a
Management Company research professional
for the Series prior
to becoming portfolio
counselor for the
Series)
-------------------------------------------------------------------------------------------------------------
Robert W. Lovelace Executive Vice International 13 13
President and Series -- 5 years
Director, Capital
Research Company*
-------------------------------------------------------------------------------------------------------------
Robert G. O'Donnell Senior Vice Growth-Income 24 27
President and Series -- 9 years
Director, Capital (plus 1 year as a
Research and research professional
Management Company for the Series prior
to becoming a
portfolio counselor
for the Series)
-------------------------------------------------------------------------------------------------------------
Donald D. O'Neal Vice President, Growth Series -- 7 13 13
Capital Research years (plus 4 years
and Management as a research
Company professional for the
Series prior to
becoming a portfolio
counselor for the
Series)
-------------------------------------------------------------------------------------------------------------
Victor M. Parachini Senior Vice Asset Allocation 22 37
President, Capital Series -- 2 years
Research and
Management Company
-------------------------------------------------------------------------------------------------------------
</TABLE>

20
<PAGE> 22

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

BUSINESS MANAGER SunAmerica Asset Management Corp., which was organized in 1982
under the laws of Delaware, manages the business affairs and the administration
of the Fund. The Business Manager receives a monthly fee, accrued daily, based
on the average daily net assets of each Series of the Fund other than the
International Series, at the annual rate of 0.24% of that portion of each
Series' average daily net assets not exceeding $30 million, and 0.20%
thereafter. The Business Manager receives a monthly fee, accrued daily, based on
the average daily net assets of the International Series, at the annual rate of
0.24%. For the fiscal year ended November 30, 1998 each Series paid the Business
Manager a fee equal to the following percentage of average daily net assets:

<TABLE>
<CAPTION>
FUND FEE
- ---- ---
<S> <C>
Growth...................................................... 0.20%
International............................................... 0.24%
Growth-Income............................................... 0.20%
Asset Allocation............................................ 0.21%
High-Yield Bond............................................. 0.21%
U.S. Government/AAA-Rated Securities........................ 0.22%
Cash Management............................................. 0.22%
</TABLE>

The Business Manager is located in The SunAmerica Center, 733 Third Avenue, New
York, New York 10017.

YEAR 2000 Many computer and computer-based systems cannot distinguish the year
2000 from the year 1900 because of the way they encode and calculate dates
(commonly known as the "Year 2000 Issue"). The Year 2000 Issue could potentially
have an adverse impact on the handling of security trades, the payment of
interest and dividends, pricing and account services. We recognize the
importance of the Year 2000 Issue and are taking appropriate steps necessary in
preparation for the year 2000. The Fund's management fully anticipates that
their systems will be adapted in time for the year 2000, and to further this
goal they have coordinated a plan to repair, adapt or replace their systems as
necessary. They have also obtained representations from their outside service
providers that they are doing the same. The Fund's management completed their
plan significantly by the end of the 1998 calendar year and expects to perform
appropriate systems testing during the 1999 calendar year. If the problem has
not been fully addressed, however, the Fund could be negatively impacted. The
Year 2000 Issue could also have a negative impact on the companies in which the
Fund invests, which could hurt the Fund's investment returns.

21
<PAGE> 23

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

ACCOUNT INFORMATION
- --------------------------------------------------------------------------------

Shares of the Series are not offered directly to the public. Instead, shares are
currently offered only to the Variable Separate Account, which is a separate
account of Anchor National Life Insurance Company. So if you would like to
invest in a Series, you must purchase a variable annuity contract from Anchor
National. You should be aware that the contracts involve fees and expenses that
are not described in this Prospectus, and that the contracts also may involve
certain restrictions and limitations. Certain Series may not be available in
connection with a particular contract. You will find information about
purchasing a variable annuity contract in the prospectus that offers the
contracts, which accompanies this Prospectus.

TRANSACTION POLICIES

VALUATION OF SHARES The net asset value per share (NAV) for each Series is
determined each business day at the close of regular trading on the New York
Stock Exchange (generally 4:00 p.m., Eastern time) by dividing its net assets by
the number of its shares outstanding. Investments for which market quotations
are readily available are valued at market. All other securities and assets are
valued at "fair value" following procedures approved by the Trustees.

The International Series may invest to a large extent in securities that are
primarily listed on foreign exchanges that trade on weekends or other days when
the Fund does not price its shares. As a result, the value of this Series'
shares may change on days when the Fund is not open for purchases or
redemptions.

BUY AND SELL PRICES The Variable Separate Account buys and sells shares of a
Series at NAV, without any sales or other charges.

EXECUTION OF REQUESTS The Fund is open on those days when the New York Stock
Exchange is open for regular trading. Buy and sell requests are executed at the
next NAV to be calculated after the request is accepted by the Fund. If the
order is received by the Fund before the Fund's close of business (generally
4:00 p.m., Eastern time), the order will receive that day's closing price. If
the order is received after that time, it will receive the next business day's
closing price.

During periods of extreme volatility or market crisis, a Series may temporarily
suspend the processing of sell requests, or may postpone payment of proceeds for
up to seven business days or longer, as allowed by federal securities laws.

DIVIDEND POLICIES AND TAXES

DISTRIBUTIONS Each Series annually declares and distributes substantially all
of its net investment income in the form of dividends and capital gains
distributions.

DISTRIBUTION REINVESTMENT The dividends and distributions will be reinvested
automatically in additional shares of the same Series on which they were paid.

TAXABILITY OF A SERIES Each Series intends to continue to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as
amended. As long as each Series is qualified as a regulated investment company,
it will not be subject to federal income tax on the earnings that it distributes
to its shareholders.

22
<PAGE> 24

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

FINANCIAL HIGHLIGHTS
(SHARES OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD)

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

The Financial Highlights table for each Series is intended to help you
understand the Series' financial performance for the past 5 years. Certain
information reflects financial results for a single Series share. The total
returns in each table represent the rate that an investor would have earned on
an investment in the Series (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with each Series' financial statements, are included in the
Statement of Additional Information (SAI), which is available upon request.

<TABLE>
<CAPTION>
NET
REALIZED RATIO OF
& DIVIDENDS DIVIDENDS NET NET EXPENSES
NET ASSET UNREALIZED DECLARED FROM NET ASSET ASSETS TO
VALUE NET GAIN (LOSS) TOTAL FROM FROM NET REALIZED VALUE TOTAL END OF AVERAGE
PERIOD BEGINNING INVESTMENT ON INVESTMENT INVESTMENT GAIN ON END OF RETURN PERIOD NET
ENDED OF PERIOD INCOME(1) INVESTMENTS OPERATIONS INCOME INVESTMENTS PERIOD (2) (000'S) ASSETS
- ------ --------- ---------- ----------- ---------- ---------- ----------- ------ ------ -------- --------
<S> <C> <C> <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% $712,602 0.55%
11/30/95 34.08 0.25 12.02 12.27 (0.20) (2.65) 43.50 37.93 897,275 0.55
11/30/96 43.50 0.18 5.10 5.28 (0.28) (6.22) 42.28 14.02 813,164 0.55
11/30/97 42.28 0.18 8.30 8.48 (0.21) (6.73) 43.82 23.78 801,230 0.54
11/30/98 43.82 0.15 10.18 10.33 (0.20) (8.62) 45.33 25.21 836,355 0.54
INTERNATIONAL SERIES
11/30/94 $12.57 $0.22 $ 0.81 $ 1.03 ($0.12) ($0.22) $13.26 8.17% $259,498 1.04%
11/30/95 13.26 0.26 1.11 1.37 (0.23) (0.50) 13.90 11.18 228,134 1.05
11/30/96 13.90 0.22 2.46 2.68 (0.46) (0.31) 15.81 20.03 249,144 1.02
11/30/97 15.81 0.17 1.78 1.95 (0.27) (1.22) 16.27 13.15 223,337 1.04
11/30/98 16.27 0.22 2.31 2.53 (0.27) (4.44) 14.09 14.56 193,763 1.03
GROWTH-INCOME SERIES
11/30/94 $28.23 $0.69 ($0.14) $ 0.55 ($0.76) ($1.56) $26.46 2.00% $765,971 0.55%
11/30/95 26.46 0.71 7.46 8.17 (0.76) (2.23) 31.64 33.47 882,143 0.55
11/30/96 31.64 0.67 5.87 6.54 (0.77) (2.10) 35.31 21.88 919,356 0.55
11/30/97 35.31 0.66 6.91 7.57 (0.75) (5.10) 37.03 24.62 950,432 0.54
11/30/98 37.03 0.62 4.91 5.53 (0.71) (6.80) 35.05 15.07 915,994 0.54
ASSET ALLOCATION SERIES
11/30/94 $13.66 $0.58 ($0.69) ($ 0.11) ($0.62) ($0.31) $12.62 (0.84)% $142,678 0.59%
11/30/95 12.62 0.55 3.16 3.71 (0.68) (0.38) 15.27 31.01 153,608 0.59
11/30/96 15.27 0.56 2.17 2.73 (0.63) (1.14) 16.23 19.34 153,060 0.58
11/30/97 16.23 0.55 2.00 2.55 (0.63) (1.65) 16.50 17.86 155,446 0.59
11/30/98 16.50 0.55 0.98 1.53 (0.61) (2.08) 15.34 9.28 134,069 0.58
HIGH-YIELD BOND SERIES
11/30/94 $15.67 $1.24 ($1.88) ($ 0.64) ($1.49) ($0.49) $13.05 (4.70)% $127,467 0.59%
11/30/95 13.05 1.26 0.99 2.25 (1.56) (0.13) 13.61 18.97 146,590 0.59
11/30/96 13.61 1.21 0.56 1.77 (1.53) -- 13.85 14.05 131,337 0.58
11/30/97 13.85 1.19 0.44 1.63 (1.43) -- 14.05 12.76 118,670 0.61
11/30/98 14.05 1.22 (0.73) 0.49 (1.39) (0.32) 12.83 3.22 100,061 0.60
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)% $149,368 0.58%
11/30/95 11.53 0.86 0.85 1.71 (1.20) (0.06) 11.98 15.95 134,938 0.59
11/30/96 11.98 0.80 (0.21) 0.59 (1.06) -- 11.51 5.49 108,852 0.59
11/30/97 11.51 0.76 (0.14) 0.62 (1.03) -- 11.10 6.09 81,609 0.63
11/30/98 11.10 0.68 0.23 0.91 (0.94) -- 11.07 8.70 79,685 0.63
CASH MANAGEMENT SERIES
11/30/94 $11.40 $0.40 $ -- $ 0.40 ($0.33) $ -- $11.47 3.56% $186,396 0.57%
11/30/95 11.47 0.61 0.01 0.62 (0.44) -- 11.65 5.53 100,872 0.58
11/30/96 11.65 0.55 -- 0.55 (0.82) -- 11.38 4.94 89,236 0.58
11/30/97 11.38 0.54 0.01 0.55 (0.62) -- 11.31 5.03 69,226 0.63
11/30/98 11.31 0.54 -- 0.54 (0.83) -- 11.02 5.04 63,826 0.63

RATIO OF
NET
INVESTMENT
INCOME TO
PERIOD AVERAGE PORTFOLIO
ENDED NET ASSETS TURNOVER
- ------ ---------- ---------
<S> <C> <C>
GROWTH SERIES
11/30/94 0.56% 33.79%
11/30/95 0.65 23.72
11/30/96 0.46 25.51
11/30/97 0.44 29.01
11/30/98 0.34 32.37
INTERNATIONAL SERIES
11/30/94 1.64% 21.68%
11/30/95 1.95 16.79
11/30/96 1.56 44.94
11/30/97 0.99 47.45
11/30/98 1.50 60.19
GROWTH-INCOME SERIES
11/30/94 2.54% 32.97%
11/30/95 2.52 18.81
11/30/96 2.07 23.72
11/30/97 1.88 30.06
11/30/98 1.76 32.42
ASSET ALLOCATION
SERIES
11/30/94 4.47% 48.53%
11/30/95 4.04 53.58
11/30/96 3.74 40.97
11/30/97 3.49 39.14
11/30/98 3.56 31.43
HIGH-YIELD BOND SERIES
11/30/94 8.76% 44.97%
11/30/95 9.66 31.64
11/30/96 9.09 36.99
11/30/97 8.68 64.49
11/30/98 9.18 78.82
U.S.
GOVERNMENT/AAA-RATED
SECURITIES SERIES
11/30/94 7.42% 16.95%
11/30/95 7.49 43.43
11/30/96 7.03 17.12
11/30/97 6.93 46.17
11/30/98 6.20 163.75
CASH MANAGEMENT SERIES
11/30/94 3.52% --%
11/30/95 5.32 --
11/30/96 4.81 --
11/30/97 4.87 --
11/30/98 4.91 --
</TABLE>

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

(1) Calculated based upon average shares outstanding

(2) 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.

23
<PAGE> 25

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

FOR MORE INFORMATION
- --------------------------------------------------------------------------------

The following documents contain more information about the Series and are
available free of charge upon request:
ANNUAL/SEMI-ANNUAL REPORTS. Contain financial statements, performance
data and information on portfolio holdings. The annual report also
contains a written analysis of market conditions and investment
strategies that significantly affected a Series' performance for the
most recently completed fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI). Contains additional
information about the Series' policies, investment restrictions and
business structure. This prospectus incorporates the SAI by reference.

You may obtain copies of these documents or ask questions about the Series by
contacting:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
1-800-445-7862

Information about the Series (including the SAI) can be reviewed and copied at
the Public Reference Room of the Securities and Exchange Commission, Washington,
D.C. Call (800) SEC-0330 for information on the operation of the Public
Reference Room. Information about the Series is also available on the Securities
and Exchange Commission's web-site at http://www.sec.gov and copies may be
obtained upon payment of a duplicating fee by writing the Public Reference
Section of the Securities and Exchange Commission, Washington, D.C. 20549-6009.

You should rely only on the information contained in this prospectus. No one is
authorized to provide you with any different information.

[ANCHOR NATIONAL]

Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, California 90067-6022

INVESTMENT COMPANY ACT
- - File No. 811-5157
24
<PAGE> 26
Statement of Additional Information

ANCHOR PATHWAY FUND

This Statement of Additional Information is not a prospectus, but should
be read in conjunction with the current Prospectus of the Fund, dated January
29, 1999. This Statement of Additional Information incorporates the Prospectus
by reference. The Prospectus may be obtained without charge by writing to the
Fund at the address below or by calling (800) 445-7862. Capitalized terms used
herein but not defined have the meanings assigned to them in the Prospectus.

P.O. Box 54299
Los Angeles, California 90054-0299

January 29, 1999

<PAGE> 27

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Topic Page
<S> <C>
The Fund......................................................... B-2
Investment Policies.............................................. B-3
Investment Restrictions.......................................... B-15
Fund Officers and Trustees....................................... B-20
Investment Advisory Agreement.................................... B-24
Business Management Agreement.................................... B-25
Dividends, Distributions and Federal Taxes....................... B-27
Shareholder Voting Rights........................................ B-27
Price of Shares.................................................. B-28
Execution of Portfolio Transactions.............................. B-29
General Information.............................................. B-32
Financial Statements............................................. B-33
</TABLE>

THE FUND

The Fund, organized as a Massachusetts business trust on March 23,
1987, is a diversified, open-end management investment company. It was
established to provide a funding medium for Variable Separate Account (the
"Account"), a separate account of Anchor National Life Insurance Company (the
"Company"). The sole shareholder of the Fund is the Account. The Company may
issue variable life contracts that also will use the Fund as the underlying
investment. The offering of Fund shares to variable annuity and variable life
separate accounts is referred to as "mixed funding." It may be disadvantageous
for variable annuity separate accounts and variable life separate accounts to
invest in the Fund simultaneously. Although neither the Company nor the Fund
currently foresees such disadvantages either to variable annuity or variable
life contract owners, the Board of Trustees of the Fund would monitor events in
order to identify any material conflicts to determine what action, if any,
should be taken in response thereto. Shares of the Fund may be offered to
separate accounts of other life insurance companies that are affiliates of the
Company.

The Company is a wholly-owned subsidiary of SunAmerica Life
Insurance Company, an Arizona corporation, which is, in turn, wholly-owned by
SunAmerica Inc., a Maryland corporation, which is, in turn, wholly-owned by
American International Group, Inc., the leading U.S.-based international
insurance organization.

B-2
<PAGE> 28
INVESTMENT POLICIES

The investment objective and policies of each of the Series are
described in the Fund's Prospectus. Certain types of securities in which the
Series may invest and certain investment practices the Series may employ, which
are described under "More Information About the Series" in the Prospectus, are
discussed more fully below. The stated percentage limitations are applied to an
investment at the time of purchase unless indicated otherwise.

GENERAL

ILLIQUID AND RESTRICTED SECURITIES. Each of the Series may invest no
more than 15% (10% in the case of the Cash Management Series) of its net assets,
determined as of the date of purchase, in illiquid securities or in other
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale. Historically, illiquid
securities have included securities subject to contractual or legal restrictions
on resale because they have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), securities that are otherwise not
readily marketable and repurchase agreements having a maturity of longer than
seven days. Securities that have not been registered under the Securities Act
are referred to as private placements or restricted securities and are purchased
directly from the issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and uncertainty in
valuation. Limitations on resale may have an adverse effect on the marketability
of portfolio securities and a mutual fund might be unable to dispose of
restricted or other illiquid securities promptly or at reasonable prices and
might thereby experience difficulty satisfying redemptions within seven days. A
mutual fund might also have to register such restricted securities in order to
dispose of them, resulting in additional expense and delay. There generally will
be a lapse of time between a mutual fund's decision to sell an unregistered
security and the registration of such security promoting sale. Adverse market
conditions could impede a public offering of such securities. When purchasing
unregistered securities, the Series will seek to obtain the right of
registration at the expense of the issuer.

In recent years, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.

Restricted securities eligible for resale pursuant to Rule 144A
under the Securities Act for which there is a readily available market will not
be deemed to be illiquid under procedures adopted by the Fund's Board of
Trustees. Capital Research and Management Company ("CRMC" or the "Investment
Adviser"), will monitor the liquidity of such restricted securities. In reaching
liquidity decisions, the Investment Adviser will consider, inter alia, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (3) dealer undertakings to make a market

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in the security; and (4) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer).

The Cash Management Series may invest in commercial paper issues,
which include securities issued by major corporations without registration under
the Securities Act in reliance on the exemption from such registration afforded
by Section 3(a)(3) thereof, and commercial paper issued in reliance on the
so-called private placement exemption from registration afforded by Section 4(2)
of the Securities Act ("Section 4(2) paper"). In addition, each Series may
invest in Section 4(2) paper. Section 4(2) paper is restricted as to disposition
under the federal securities laws in that any resale must similarly be made in
an exempt transaction. Section 4(2) paper is normally resold to other
institutional investors through or with the assistance of investment dealers who
make a market in Section 4(2) paper, thus providing liquidity. Section 4(2)
paper that is issued by a company that files reports under the Securities
Exchange Act of 1934, as amended, is generally eligible to be sold in reliance
on the safe harbor of Rule 144A described above. The Investment Adviser believes
that Section 4(2) commercial paper meets its criteria for liquidity and is quite
liquid. Each Series intends, therefore, to treat Section 4(2) commercial paper
as liquid and not subject to the investment limitation applicable to illiquid
securities.

MONEY MARKET INSTRUMENTS - These are shorter-term debt securities
maturing in one year or less including (1) commercial bank obligations
(certificates of deposit, interest bearing time deposits, bankers' acceptances
(time drafts on a commercial bank where the bank accepts an irrevocable
obligation to pay at maturity)), (2) savings association obligations
(certificates of deposit issued by mutual savings banks or savings and loan
associations), (3) commercial paper (short-term notes (up to 9 months) issued by
corporations or governmental bodies), and (4) corporate bonds and notes
(corporate obligations that mature, or that may be redeemed, in one year or
less). Although certain floating or variable rate obligations (securities whose
coupon rate changes at least annually and generally more frequently) have
maturities in excess of one year, they are also considered short-term debt
securities. For more information on money market instruments, see "Cash
Management Series," below.

FIXED INCOME SECURITIES - Fixed income securities are broadly
characterized as those that provide for periodic payments to the holder of the
security at a stated rate. Most fixed income securities, such as bonds,
represent indebtedness of the issuer and provide for repayment of principal at a
stated time in the future. Others do not provide for repayment of a principal
amount, although they may represent a priority over common stockholders in the
event of the issuer's liquidation. Many fixed income securities are subject to
scheduled retirement, or may be retired or "called" by the issuer prior to their
maturity dates. The interest rate on certain fixed income securities, known as
"variable rate obligations," is determined by reference to or is a percentage of
an objective standard, such as a bank's prime rate, the 90-day Treasury bill
rate, or the rate of return on commercial paper or bank certificates of deposit,
and is periodically adjusted. Certain variable rate obligations may have a
demand feature entitling the holder to resell the securities at a predetermined
amount. The interest rate on certain fixed income securities, called "floating
rate instruments," changes whenever there is a change in a designated base rate.

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The market values of fixed income securities tend to vary inversely
with the level of interest rates -- when interest rates rise, their values will
tend to decline; when interest rates decline, their values generally will tend
to rise. The potential for capital appreciation with respect to variable rate
obligations or floating rate instruments will be less than with respect to
fixed-rate obligations. Long-term instruments are generally more sensitive to
these changes than short-term instruments. The market value of fixed income
securities and therefore their yield are also affected by the perceived ability
of the issuer to make timely payments of principal and interest.

Up to 10% of the Growth Series' assets may be invested in straight
debt securities rated BB or below by Standard & Poor's Ratings Services, a
Division of the McGraw-Hill Companies, Inc. ("S&P") and Ba or below by Moody's
Investors Service, Inc. ("Moody's") or in unrated securities that are determined
to be of equivalent quality, provided the Investment Adviser determines that
these securities have characteristics similar to the equity securities eligible
for purchase by the Growth Series. These securities are commonly referred to as
"junk bonds" or "high-yield, high-risk" bonds, carry a higher degree of
investment risk than higher rated bonds and are considered speculative.

Up to 5% of the International Series' assets may be invested in
straight debt securities rated BB or below by S&P or Ba or below by Moody's or
in unrated securities that are determined to be of equivalent quality.

Up to 5% of the Growth-Income Series' assets may be invested in
straight debt securities rated BB or below by S&P and Ba or below by Moody's or
in unrated securities that are determined to be equivalent quality by the
Investment Adviser.

Up to 25% of the Asset Allocation Series' fixed-income assets may be
invested in securities rated BB or below by S&P or Ba or below by Moody's,
including securities rated as low as CC by S&P or Ca by Moody's.

The High-Yield Bond Series may invest without limitation in bonds
rated as low as Ca by Moody's or CC by S&P (or in bonds that are unrated but
determined to be of equivalent quality). In addition, the Series may invest up
to 10% of its total assets in bonds rated C by Moody's or D by S&P (or in bonds
that are unrated but determined by the Investment Adviser to be of equivalent
quality).

The U.S. Government/AAA-Rated Securities Series (the "Government/AAA
Series") may not purchase any security, other than a U.S. Government security,
not rated AAA by S&P or Aaa by Moody's (or that has not received a rating but is
determined to be of comparable quality by the Investment Adviser). However, if
the rating of a security currently held by the Series is reduced below AAA (or
Aaa), the Series is not required to dispose of the security.

The Cash Management Series invests only in high-quality short-term
debt obligations.

See "Certain Risks Relates to High-Yield, High-Risk Bonds," below.

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<PAGE> 31

OTHER SECURITIES - Certain securities have both equity and debt
characteristics, such as non-convertible preferred stocks and convertible
securities. These securities may at times resemble equity more than debt and
vice versa. Non-convertible preferred stocks are similar to debt in that they
have a stated dividend rate akin to the coupon of a bond or note even though
they are often classified as equity securities. The prices and yields of
non-convertible preferred stocks generally move with changes in interest rates
and the issuer's credit quality, similar to the factors affecting debt
securities.

Bonds, preferred stocks, and other securities may sometimes be
converted into common stock or other securities at a stated exchange ratio.
These securities prior to conversion pay a fixed rate of interest or a dividend.
Because convertible securities have both debt and equity characteristics, their
value varies in response to many factors, including the value of the underlying
equity, general market and economic conditions, convertible market valuations,
as well as changes in interest rates, credit spreads, and the issuer's credit
quality.

CASH MANAGEMENT SERIES

The Cash Management Series seeks to achieve its investment objective
by investing in a diversified selection of money market instruments. The other
Series may also invest to various degrees in money market instruments. The money
market instruments in which a Series may invest include the following:

COMMERCIAL BANK OBLIGATIONS - Certificates of deposit
(interest-bearing time deposits), bankers' acceptances (time drafts drawn on a
commercial bank where the bank accepts an irrevocable obligation to pay at
maturity) and documented discount notes (corporate promissory discount notes
accompanied by a commercial bank guarantee to pay at maturity) representing
direct or contingent obligations of commercial banks with total assets in excess
of $1 billion, based on the latest published reports. The Cash Management Series
may also invest in obligations issued by commercial banks with total assets of
less than $1 billion if the principal amount of these obligations owned by the
Cash Management Series is fully insured by the U.S. Government.

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<PAGE> 32

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

COMMERCIAL PAPER - Short-term notes (up to 9 months) issued by
corporations or governmental bodies. The Cash Management Series may purchase
commercial paper only if judged by the Investment Adviser to be of suitable
investment quality. This includes commercial paper that is (a) rated in the two
highest categories by S&P and by Moody's or (b) other commercial paper deemed on
the basis of the issuer's creditworthiness to be of a quality appropriate for
the Cash Management Series. (No more than 5% of the Cash Management Series'
assets may be invested in commercial paper in the second highest rating
category; no more than the greater of 1% of the Cash Management Series' assets
or $1 million may be invested in such securities of any one issuer.) See the
Appendix at the end of this Statement of Additional Information for a
description of the ratings. The commercial paper in which the Cash Management
Series may invest includes variable amount master demand notes. Variable amount
master demand notes permit the Cash Management Series to invest varying amounts
at fluctuating rates of interest pursuant to the agreement in the master note.
These are direct lending obligations between the lender and borrower, they are
generally not traded, and there is no secondary market. Such instruments are
payable with accrued interest in whole or in part on demand. The amounts of the
instruments are subject to daily fluctuations as the participants increase or
decrease the extent of their participation. Investments in these instruments are
limited to those that have a demand feature enabling the Cash Management Series
unconditionally to receive the amount invested from the issuer upon seven or
fewer days' notice. Generally, the Cash Management Series attempts to invest in
instruments having a one-day notice provision. In connection with master demand
note arrangements, the Investment Adviser, subject to the direction of the
Trustees, monitors on an ongoing basis the earning power, cash flow and other
liquidity ratios of the borrower, and its ability to pay principal and interest
on demand. The Investment Adviser also considers the extent to which the
variable amount master demand notes are backed by bank letters of credit. These
notes generally are not rated by Moody's or S&P and the Cash Management Series
may invest in them only if it is determined that at the time of investment the
notes are of comparable quality to the other commercial paper in which the
Series may invest. Master demand notes are considered to have a maturity equal
to the repayment notice period unless the Investment Adviser has reason to
believe that the borrower could not make timely repayment upon demand.

CORPORATE BONDS AND NOTES - The Cash Management Series may purchase
corporate obligations that mature or that may be redeemed in one year or less.
These obligations originally may have been issued with maturities in excess of
one year. The Cash Management Series may invest only in corporate bonds or notes
of issuers having outstanding short-term securities rated in the top two rating
categories by S&P and Moody's. See the Appendix attached hereto for a
description of investment-grade ratings by S&P and Moody's.

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<PAGE> 33

FLOATING RATE OBLIGATIONS - These securities have a coupon rate that
changes at least annually and generally more frequently. The coupon rate is set
in relation to money market rates. The obligations, issued primarily by banks,
other corporations, governments and semi-governmental bodies, may have a
maturity in excess of one year. In some cases, the coupon rate may vary with
changes in the yield on Treasury bills or notes or with changes in LIBOR (London
Interbank Offering Rate). The Investment Adviser considers floating rate
obligations to be liquid investments because a number of U.S. and foreign
securities dealers make active markets in these securities.

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

GNMA CERTIFICATES, FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS - The
Asset Allocation Series and Government/AAA Series will - and each Series may -
purchase certificates issued by the Government National Mortgage Association
("GNMA"). The Government/AAA Series expects to invest substantially in these
securities. These certificates are mortgage-backed securities representing part
ownership of a pool of mortgage loans that are issued by lenders such as
mortgage bankers, commercial banks, savings and loan associations and securities
broker-dealers (or separate trusts or affiliates of such institutions
established to issue these securities), and are either insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. A pool of
these mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. The timely payment of interest and
principal on each mortgage is guaranteed by GNMA and backed by the full faith
and credit of the United States Government. Principal is paid back monthly by
the borrower over the term of the loan. Because both interest and principal
payments (including prepayments) are passed through to the holder of the
certificate, GNMA certificates are called "pass-through" securities.

The Federal National Mortgage Association ("FNMA"), a federally
chartered and privately owned corporation, issues pass-through securities
representing interests in a pool of conventional mortgage loans. FNMA guarantees
the timely payment of principal and interest, but this guarantee is not backed
by the full faith and credit of the U.S. Government. The Federal Home Loan
Mortgage Corporation ("FHLMC"), a corporate instrumentality of the U.S.
Government, issues participation certificates that represent an interest in a
pool of conventional mortgage loans. FHLMC guarantees the timely payment of
interest and the ultimate collection of principal and maintains reserves to
protect holders against losses due to default, but the certificates are not
backed by the full faith and credit of the U.S. Government. As is the case with
GNMA certificates, the actual maturity of and realized yield on particular FNMA
and FHLMC pass-through securities will vary based on the prepayment experience
of the underlying pool of mortgages.

Certain securities issued by the U.S. Government instrumentalities
and certain federal agencies are neither direct obligations of, nor are they
guaranteed by, the Treasury. However, they involve federal sponsorship in one
way or another. For example, some are backed by specific types of collateral;
some are supported by the issuer's right to borrow from the Treasury; some are

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<PAGE> 34

supported by the discretionary authority of the Treasury to purchase certain
obligations of the issuer; and others are supported only by the credit of the
issuing government agency or instrumentality. These agencies and
instrumentalities include, but are not limited to Federal Land Banks, Farmer's
Home Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks and Federal Home Loan Banks.

MORTGAGE-RELATED SECURITIES - The Series may invest in
mortgage-related securities issued by financial institutions such as commercial
banks, savings and loan associations, mortgage bankers and securities
broker-dealers (or separate trusts or affiliates of such institutions
established to issue the securities) including collateralized mortgage
obligations ("CMOs") and mortgage-backed bonds. CMOs (including real estate
mortgage investment conduits as authorized under the Internal Revenue Code of
1986, as amended (the "Code")) are issued in series that are made up of a group
of bonds that together are fully collateralized directly or indirectly by a pool
of mortgages on which the payments of principal and interest are dedicated to
payment of principal and interest on the bonds in the series. Each class of
bonds in the series has a different maturity than the other classes of bonds in
the series and may bear a different coupon rate. The different maturities come
from the fact that all principal payments, both regular principal payments as
well as any prepayments of principal, are passed through first to the holders of
the class with the shortest maturity until it is completely retired. Thereafter,
principal payments are passed through to the next class of bonds in the series,
until all the classes have been paid off. As a result, an acceleration in the
rate of prepayments that may be associated with declining interest rates
shortens the expected life of each class, with the greatest impact on those
classes with the shortest maturities. Similarly, should prepayments slow down,
as may happen in times of rising interest rates, the expected life of each class
lengthens, again with the greatest impact on those classes with the shortest
maturities. In the case of some CMO series, each class may receive a differing
proportion of the monthly interest and principal payments on the underlying
collateral. In these series the classes having proportionately greater interests
on principal repayments generally would be more affected by acceleration (or
slowing) in the rate of prepayments.

Mortgage-backed bonds are general obligations of the issuer fully
collateralized directly or indirectly by a pool of mortgages. The mortgages
serve as collateral for the issuer's payment obligations on the bonds, but
interest and principal payments on the mortgages are not passed through either
directly (as with GNMA certificates and FNMA and FHLMC pass-through securities)
or on a modified basis (as with CMOs). Accordingly, a change in the rate of
prepayments on the pool of mortgages could change the effective maturity of a
CMO but not that of a mortgage-backed bond (although, like many bonds,
mortgage-backed bonds can provide that they are callable by the issuer prior to
maturity).

U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES AND REVERSE REPURCHASE
AGREEMENTS - The Government/AAA Series is authorized to enter into reverse
repurchase agreements. A reverse repurchase agreement is the sale of a security
by the Government/AAA Series and its agreement to repurchase the security at a
specified time and price. The

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<PAGE> 35

Government/AAA Series segregates liquid assets, which will be marked to market
daily in an amount sufficient to cover its obligations under reverse repurchase
agreements with broker-dealers (but no collateral is required on reverse
repurchase agreements with banks). Under the Investment Company Act of 1940, as
amended (the "1940 Act"), reverse repurchase agreements may be considered
borrowings by the Government/AAA Series. The use of reverse repurchase
agreements by the Government/AAA Series creates leverage that increases the
Government/AAA Series' investment risk. If the income and gains on securities
purchased with the proceeds of reverse repurchase agreements exceed the cost of
the agreements, the Government/AAA Series' earnings and net asset value will
increase faster than otherwise would be the case; conversely, if the income and
gains fail to exceed the costs, earnings and net asset value would decline
faster than otherwise would be the case.

U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES AND RISKS OF INVESTING
IN VARIOUS COUNTRIES - The U.S. Government/AAA-Rated Securities Series may
purchase obligations of non-U.S. corporations or governmental entities,
provided they are U.S. dollar denominated and highly liquid. Accordingly, while
the risks described below (under "Risks of Investing in Various Countries") are
still present, they are present to a lesser extent.

ASSET ALLOCATION SERIES, HIGH-YIELD BOND SERIES AND U.S. GOVERNMENT/AAA-RATED
SECURITIES SERIES

LOANS OF PORTFOLIO SECURITIES - The Asset Allocation Series,
High-Yield Bond Series and Government/AAA Series are authorized to lend
portfolio securities to broker-dealers or to other institutional investors whose
financial condition is monitored by the Investment Adviser. The borrower must
maintain collateral with the Fund's custodian consisting of cash or equivalent
collateral that is equal to at least 102% of the market value, determined daily,
of the loaned securities. Each Series may at any time call a loan of its
portfolio securities and obtain the return of the loaned securities. The Series
receives any interest paid on the loaned securities and a fee or a portion of
the interest earned on the collateral. Each Series will limit its loans of
portfolio securities to an aggregate of 10% of the value of its total assets,
determined at the time any such loan is made.

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

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<PAGE> 36

ROLL TRANSACTIONS - The Asset Allocation Series, the High-Yield Bond
Series and the Government/AAA Series, may engage in "roll" transactions. A
"roll" transaction is the sale of mortgage-backed securities or other securities
together with a commitment to purchase similar, but not identical securities at
a future date. The Series intend to treat "roll" transactions as two separate
transactions; one involving the purchase of a security and a separate
transaction involving the sale of a security. To the extent the Series do not
enter into "roll" transactions for financing purposes, they may treat these
transactions as not falling within the definition of borrowing set forth in
Section 2(a)(23) of the 1940 Act. The Series will segregate liquid assets, which
will be marked to market daily, in an amount sufficient to meet their payment
obligations in these transactions. Although these transactions will not be
entered into for leveraging purposes, to the extent a Series' aggregate
commitments under these transactions exceed its holding of cash and securities
that do not fluctuate in value (such as short-term money market instruments),
the Series temporarily will be in a leveraged position, as set forth in Section
18 of the 1940 Act, (i.e., it will have an amount greater than its net assets
subject to market risk). Should the market value of a Series' portfolio
securities decline while the Series is in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such a
position. As the Series' aggregate commitments under these transactions
increase, the opportunity for leverage similarly increases.

INFLATION-INDEXED BONDS - The Asset Allocation Series, High-Yield
Bond Series, and Government/AAA Series may invest in inflation-indexed bonds
issued by governments, their agencies or instrumentalities and corporations. The
principal value of this type of bond is periodically adjusted according to
changes in the rate of inflation. The interest rate is generally fixed at
issuance; however, interest payments are based on an inflation adjusted
principal value. For example, in a period of falling inflation, principal value
will be adjusted downward, reducing the interest payable.

Repayment of the original bond principal upon maturity (as adjusted
for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed
bonds, even during a period of deflation. However, the current market value of
the bonds is not guaranteed, and will fluctuate. The Series may also invest in
other bonds that may or may not provide a similar guarantee. If a guarantee of
principal is not provided, the adjusted principal value of the bond repaid at
maturity may be less than the original principal.

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

CURRENCY TRANSACTIONS - The Growth Series, International Series,
Growth-Income Series, Asset Allocation Series and High-Yield Bond Series have
the ability to enter into forward currency contracts to protect against changes
in currency exchange rates. A forward currency contract is an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the

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<PAGE> 37

time of the contract. The Series will segregate liquid assets, which will be
marked to market daily to meet its forward contract commitments to the extent
required by the Securities and Exchange Commission (the "Commission").

The High-Yield Bond Series may also enter into exchange-traded
futures contracts relating to foreign currencies in connection with investments
in securities of foreign issuers in anticipation of, or to protect against,
fluctuations in exchange rates. In addition, forward currency contracts may be
used by the Series to purchase or sell a currency against another currency at a
future date and price as agreed upon by the parties. An exchange traded futures
contract relating to foreign currency is similar to a forward foreign currency
contract but has a standardized size and exchange rate. Although currency
contracts typically will involve the purchase and sale of a foreign currency
against the U.S. dollar, a Series also may enter into currency contracts not
involving the U.S. dollar. In connection with these futures transactions, the
Fund has filed a notice of eligibility with the Commodity Futures Trading
Commission (the "CFTC") that exempts the Series from CFTC registration as a
"commodity pool operator" as defined under the Commodities Exchange Act.
Pursuant to this notice, these Series will observe certain CFTC guidelines with
respect to its futures transactions that, among other things, limit initial
margin deposits in connection with the use of futures contracts and related
options for purposes other than "hedging" (as defined by CFTC rules) to 5% of a
Series' assets.

The High-Yield Bond Series may attempt to accomplish objectives
similar to those involved in its currency contracts by purchasing put or call
options on currencies. A put option gives the Series, as purchaser, the right
(but not the obligation) to sell a specified amount of currency at the exercise
price until the expiration of the option. A call option gives the Series, as
purchaser, the right (but not the obligation) to purchase a specified amount of
currency at the exercise price until its expiration. The Series might purchase a
currency put option, for example, to protect itself during the contract period
against a decline in the U.S. dollar value of a currency in which it holds or
anticipates holding securities. If the currency's value should decline against
the U.S. dollar, the loss in currency value should be offset, in whole or in
part, by an increase in the value of the put. If the value of the currency
instead should rise against the U.S. dollar, any gain to the Series would be
reduced by the premium it had paid for the put option. A currency call option
might be purchased, for example, in anticipation of, or to protect against, a
rise in the value against the U.S. dollar of a currency in which a Series
anticipates purchasing securities.

Currency options may be either listed on an exchange or traded
over-the-counter ("OTC options"). Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation), and have standardized strike prices
and expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. A Series will not purchase an OTC option unless it
believes that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in that OTC options are transacted
with dealers directly and not through a clearing corporation (which guarantees
performance). Consequently, there is a risk of non-performance by the dealer.
Since no exchange is involved, OTC options are valued on the basis of a quote
provided by the

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<PAGE> 38

dealer. In the case of OTC options, there can be no assurance that a liquid
secondary market will exist for any particular option at any specific time.

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

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

CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS - The
Growth Series, International Series, Growth-Income Series, Asset Allocation
Series and High-Yield Bond Series may invest in high-yield, high-risk bonds.
These bonds present certain risks, discussed below:

Sensitivity to Interest Rate and Economic Changes - High-yield,
high-risk bonds are very sensitive to adverse economic changes and
corporate developments. During an economic downturn or substantial period
of rising interest rates, highly leveraged issuers may experience
financial stress that would adversely affect their ability to service
their principal and interest payment obligations, to meet projected
business goals, and to obtain additional financing. If the issuer of a
bond defaulted on its obligations to pay interest or principal or entered
into bankruptcy proceedings, the Series may incur losses or expenses in
seeking recovery of amounts owed to it. In addition, periods of economic
uncertainty and changes can be expected to result in increased volatility
of market prices of high-yield bonds and the Series' net asset value.

Payment Expectations - High-yield, high-risk bonds may contain
redemption or call provisions. If an issuer exercised these provisions in
a declining interest rate market, the Series would have to replace the
security with a lower yielding security, resulting in a decreased return
for investors. Conversely, a high-yield bond's value will decrease in a
rising interest rate market, as will the value of the Series' assets. If
the Series experiences unexpected net redemptions, this may force it to
sell high-yield bonds without regard to their investment merits, thereby
decreasing the asset base upon which expenses can be spread and possibly
reducing the Series' rate of return.

Liquidity and Valuation - There may be little trading in the
secondary market for particular bonds, which may affect adversely the
Series' ability to value accurately or dispose of such bonds. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high-yield bonds,
especially in a thin market.

WARRANTS AND RIGHTS - Warrants are usually issued together with
bonds or preferred stocks. Warrants generally entitle the holder to buy a
proportionate amount of common stock at a specified price, usually higher than
the current market price. Warrants may be issued with an

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<PAGE> 39

expiration date or in perpetuity. Rights are similar to warrants except that
they normally entitle the holder to purchase common stock at a lower price than
the current market price. Rights represent a preemptive right of stockholders to
purchase additional shares of a stock at the time of a new issuance before the
stock is offered to the general public, allowing the stockholder to retain the
same ownership percentage after the new stock offering. Rights generally expire
in less than four weeks.

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

Investing outside the U.S. involves special risks, particularly in
certain developing countries, caused by, among other things: fluctuating
currency values; different accounting, auditing, and financial reporting
regulations and practices in some countries; changing local and regional
economic, political, and social conditions; expropriation or confiscatory
taxation; foreign taxation or income from foreign sources; greater market
volatility; differing securities market structures; and various administrative
difficulties such as delays in clearing and settling portfolio transactions or
in receiving payment of dividends. However, in the opinion of the Investment
Adviser, investing outside the U.S. also can reduce certain portfolio risks due
to greater diversification opportunities. A developing country is one that the
World Bank, the International Finance Corporation or the United Nations or its
authorities has determined to have a low or middle income economy.

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

The U.S. Government/AAA Series may purchase obligations of foreign
corporation or governmental entities, provided they are U.S. dollar denominated
and highly liquid.

HIGH-YIELD BOND SERIES

LOAN PARTICIPATIONS - Loan participations, which can also include
loan assignments, typically involve loans made by a syndicate of banks to U.S.
and non-U.S. corporate or governmental borrowers for a variety of purposes. The
underlying loans may be secured or unsecured and will vary in term and legal
structure. Typically, price quotations with respect to loan participations are
available from the originating bank (the bank that makes the underlying loan).
The originating bank also serves as the market maker for the resale of loan
participations. When purchasing such instruments, the Series may assume the
credit risks associated with the original bank lender as well as the credit
risks associated with the borrower. In addition, if the loan is foreclosed, the
Series could be part owner of any collateral, and could bear the costs and
liabilities of owning and disposing of the collateral. Loan participations
generally are not rated by major rating agencies and may not be protected by the
securities laws. Also loan participations may be liquid or illiquid. To the
extent these instruments are illiquid, the Series may have difficulty
determining their value

B-14

<PAGE> 40

or selling the instruments as generally there is no secondary market. The Series
will purchase these instruments only to the extent that such a purchase would be
consistent with its investment policies regarding debt securities and/or
illiquid securities.

In determining whether to purchase a particular loan participation,
the Investment Adviser will take into account all relevant factors including the
instrument's potential volatility, liquidity and risks (including whether the
Series could be put in an undesirable position as lender and/or owner of the
collateral).

INVESTMENT RESTRICTIONS

The Fund has adopted certain investment restrictions for each Series
that cannot be changed without approval by a majority of its outstanding shares.
Such majority is defined as the vote of the lesser of (i) 67 percent or more of
the outstanding shares of the Series present at a meeting, if the holders of
more than 50 percent of the outstanding shares of the Series are present in
person or by proxy or (ii) more than 50 percent of the outstanding shares of the
Series.

INVESTMENT RESTRICTIONS OF THE CASH MANAGEMENT SERIES

The Cash Management Series has adopted the following restrictions
that are fundamental policies. These fundamental policies, as well as the Cash
Management Series' investment objective, cannot be changed without approval by a
majority of its outstanding shares. All percentage limitations expressed in the
following investment restrictions are measured immediately after the relevant
transaction is made. The Cash Management Series may not:

1. Invest more than 5% of the value of its total assets in the securities
of any one issuer, provided that this limitation shall apply only to 75% of the
value of the Series' total assets, and, provided further, that the limitation
shall not apply to obligations of the government of the U.S. or of any
corporation organized as an instrumentality of the U.S. under a general act of
Congress. The short-term obligations of commercial banks are excluded from this
5% limitation with respect to 25% of the Series' total assets.

2. As to 75% of its total assets, purchase more than 10% of the
outstanding voting class of securities of an issuer.

3. Invest more than 25% of the Series' total assets in the securities of
issuers in the same industry. Obligations of the U.S. Government, its agencies
and instrumentalities, are not subject to this 25% limitation on industry
concentration. In addition, the Series may, if deemed advisable, invest more
than 25% of its assets in the obligations of domestic commercial banks.

4. Make loans to others except for the purchase of the debt securities
listed above under its Investment Policies. The Series may, however, enter into
repurchase agreements.

5. Borrow money, except from banks for temporary purposes, and then in an
amount not in excess of 5% of the value of the Series' total assets. Moreover,
in the event that the asset

B-15

<PAGE> 41

coverage for such borrowings falls below 300%, the Series will reduce within
three days the amount of its borrowings in order to provide for 300% asset
coverage.

6. Sell securities short except to the extent that the Series
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short.

7. Act as underwriter of securities issued by others, engage in
distribution of securities for others, or make investments in other companies
for the purpose of exercising control or management.

The following additional restrictions are not fundamental policies and
may be changed by the Trustees without a vote of shareholders. The Cash
Management Series may not:

8. Enter into any repurchase agreement maturing in more than seven days
or invest in any other illiquid security if, as a result, more than 10% of the
Series' total assets would be so invested. Restricted securities eligible for
resale pursuant to Rule 144A under the Securities Act that have a readily
available market, and commercial paper exempted from registration under the
Securities Act pursuant to Section 4(2) of that Act that may be offered and sold
to "qualified institutional buyers" as defined in Rule 144A, which the
Investment Adviser has determined to be liquid pursuant to guidelines
established by the Trustees, will not be considered illiquid for purposes of
this limitation on illiquid securities.

9. Pledge or hypothecate its assets.

10. Invest in puts, calls, straddles, spreads or any combination thereof,
except as permitted by the Prospectus and Statement of Additional Information,
as amended from time to time.

11. Invest in securities of other investment companies, except to the
extent permitted by applicable law and the Prospectus and Statement of
Additional Information, as amended from time to time.

Notwithstanding investment restriction Number 1 above, in order to comply
with Rule 2a-7 under the 1940 Act, the Cash Management Series has adopted a more
restrictive policy (which may be changed by the Trustees without shareholder
approval) of investing no more than 5% of its assets (measured at the time of
purchase) in the securities of any one issuer (other than the U.S. government);
provided however, that the Cash Management Series may invest, as to 25% of its
assets, more than 5% of its assets in certain high-quality securities (as
defined in the Rule) of a single issuer for a period of up to three business
days. The purchase by the Cash Management Series of securities that have "put"
or "stand-by" commitment features are not considered "puts" for purposes of
investment restriction Number 10 above.

B-16
<PAGE> 42

INVESTMENT RESTRICTIONS OF THE GROWTH SERIES, THE INTERNATIONAL SERIES, THE
GROWTH-INCOME SERIES, THE ASSET ALLOCATION SERIES AND THE HIGH-YIELD BOND SERIES

The Growth Series, the International Series, the Growth-Income Series,
the Asset Allocation Series and the High-Yield Bond Series have each adopted the
following investment restrictions that are fundamental policies. These
fundamental policies, as well as each Series' investment objective, cannot be
changed without the approval of the holders of a majority of the outstanding
shares of the respective Series. All percentage limitations expressed in the
following investment restrictions are measured immediately after the relevant
transaction is made. The Growth Series, the International Series, the
Growth-Income Series, the Asset Allocation Series and the High-Yield Bond Series
may not:

1. Invest more than 5% of the value of the total assets of the Series in
the securities of any one issuer, provided that this limitation shall apply only
to 75% of the value of the Series' total assets and, provided further, that the
limitation shall not apply to obligations of the government of the United States
or of any corporation organized as an instrumentality of the U.S. under a
general Act of Congress. The short-term obligations of commercial banks are
excluded from this 5% limitation with respect to 25% of the Series' total
assets.

2. As to 75% of its total assets, purchase more than 10% of the
outstanding voting class of securities of an issuer.

3. Invest more than 25% of the Series' total assets in the securities of
issuers in the same industry. Obligations of the U.S. Government, its agencies
and instrumentalities are not subject to this 25% limitation on industry
concentration. The Series may, if deemed advisable, invest more than 25% of its
assets in the obligations of domestic commercial banks.

4. Invest in real estate (including limited partnership interests but
excluding securities of companies, such as real estate investment trusts, that
deal in real estate or interests therein).

5. Purchase commodities or commodity contracts; except that the
International Series, the Asset Allocation Series and the High-Yield Bond Series
may engage in transactions involving currencies (including forward and futures
contracts or put and call options).

6. Make loans to others except for (a) the purchase of debt securities;
(b) entering into repurchase agreements; and (c) the lending of its portfolio
securities.

7. Borrow money, except to the extent permitted by applicable law.

8. Purchase securities on margin.

B-17
<PAGE> 43

The following additional restrictions are not fundamental policies and
may be changed by the Trustees without a vote of shareholders. The Growth
Series, the International Series, the Growth-Income Series, the Asset Allocation
Series and the High-Yield Bond Series may not:

9. Enter into any repurchase agreement maturing in more than seven days
or invest in any other illiquid security if, as a result, more than 15% of the
Series' total assets would be so invested. Restricted securities eligible for
resale pursuant to Rule 144A under the Securities Act that have a readily
available market, and commercial paper exempted from registration under the
Securities Act pursuant to Section 4(2) of that Act that may be offered and sold
to "qualified institutional buyers" as defined in Rule 144A, which the
Investment Adviser has determined to be liquid pursuant to guidelines
established by the Trustees, will not be considered illiquid for purposes of
this limitation on illiquid securities.

10. Pledge or hypothecate its assets.

11. Invest in puts, calls, straddles, spreads or any combination thereof,
except as permitted by the Prospectus and Statement of Additional Information,
as amended from time to time.

12. Invest in securities of other investment companies, except to the
extent permitted by applicable law and the Prospectus and Statement of
Additional Information, as amended from time to time.

13. Invest in companies for the purpose of exercising control or
management.

14. Engage in underwriting of securities issued by others, except to the
extent it may be deemed to be acting as an underwriter in the purchase and
resale of portfolio securities.

15. Sell securities short, except to the extent permitted by applicable
law.

INVESTMENT RESTRICTIONS OF THE U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES

The Government/AAA Series has adopted the following investment
restrictions that are fundamental policies. These fundamental policies, as well
as the Government/AAA Series' investment objective, cannot be changed without
approval of a majority of its outstanding shares. All percentage limitations
expressed in the following investment restrictions are measured immediately
after the relevant transaction is made. The Government/AAA Series may not:

1. Purchase any security (other than securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities ("U.S. government
securities")) if, immediately after and as a result of such investment, more
than 5% of the value of the Government/AAA Series' total assets would be
invested in securities of the issuer.

B-18

<PAGE> 44

2. Invest 25% or more of the value of its total assets in the securities
of issuers conducting their principal business activities in the same industry,
except that this limitation shall not apply to U.S. government securities or
other securities to the extent they are backed by or represent interests in U.S.
government securities or U.S. government-guaranteed mortgages.

3. Invest in companies for the purpose of exercising control or
management.

4. Buy or sell real estate or commodities or commodity contracts in the
ordinary course of its business; however, the Government/AAA Series may purchase
or sell readily marketable debt securities secured by real estate or interests
therein or issued by companies that invest in real estate or interests therein,
including real estate investment trusts.

5. Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may technically
cause the Series to be considered an underwriter as that term is defined under
the Securities Act.

6. Make loans to others except for (a) the purchase of debt securities;
(b) entering into repurchase agreements; and (c) the lending of its portfolio
securities.

7. Sell securities short, except to the extent that the Government/AAA
Series contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short.

8. Purchase securities on margin, except that the Series may obtain
necessary short-term credits for the clearance of purchases and sales of
securities.

9. Borrow money, except from banks for temporary or emergency purposes
not in excess of 5% of the value of the Government/AAA Series' total assets,
except that the Series may enter into reverse repurchase agreements.

10. Write, purchase or sell puts, calls or combinations thereof.

The following additional restrictions are not fundamental policies and
may be changed by the Trustees without a vote of shareholders. The
Government/AAA Series may not:

11. Enter into any repurchase agreement maturing in more than seven days
or invest or invest in any other illiquid security if, as a result, more than
15% of the Series' total assets would be so invested. Restricted securities
eligible for resale pursuant to Rule 144A under the Securities Act that have a
readily available market, and commercial paper exempted from registration under
the Securities Act pursuant to Section 4(2) of that Act that may be offered and
sold to "qualified institutional buyers" as defined in Rule 144A, which the
Investment Adviser has determined to be liquid pursuant to guidelines
established by the Trustees, will not be considered illiquid for purposes of
this limitation on illiquid securities.

B-19

<PAGE> 45

12. Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the sale of securities pursuant to a reverse
repurchase agreement.

13. Invest in securities of other investment companies, except to the
extent permitted by applicable law and the Prospectus and Statement of
Additional Information, as amended from time to time.

FUND OFFICERS AND TRUSTEES

The Trustees and executive officers of the Fund and their principal
occupations for the past five years are set forth below. Unless otherwise noted,
the address of each executive officer and trustee is 1 SunAmerica Center, Los
Angeles, California 90067-6022.

<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position with the Fund During Past Five Years
- --------------------- ---------------------- ----------------------
<S> <C> <C>
James K. Hunt, *47 Trustee, Chairman and Executive Vice President,
President SunAmerica Investments, Inc.
(1993 to Present); President,
SunAmerica Corporate Finance,
(since January 1994); Trustee,
Chairman and President,
SunAmerica Series Trust and
Seasons Series Trust (since 1994).

Monica C. Lozano, 42 Trustee Associate Publisher, La Opinion
3257 Purdue Avenue (newspaper publishing concern)
Los Angeles, CA 90066 (since 1995); Director, First
Interstate Bank of California (1994-
1996); Editor, La Opinion (1991-
1995). Trustee, SunAmerica Series
Trust and Seasons Series Trust.

Allan L. Sher, 67 Trustee Retired; Trustee, SunAmerica
Series Trust (since 1994) and
Seasons Series Trust (since 1997).
</TABLE>

B-20

<PAGE> 46

<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position with the Fund During Past Five Years
- --------------------- ---------------------- ----------------------
<S> <C> <C>

William M. Wardlaw, 51 Trustee Principal, Freeman Spogli & Co.
(investment banking) (1988-
Present), Vice President and
Director, MCC International
Holdings (cable) (since April
1996); Trustee, SunAmerica
Series Trust and Seasons Series
Trust.

Scott L. Robinson, 52 Senior Vice President, Senior Vice President and
Treasurer and Controller, SunAmerica Inc. (since
Controller 1991); Senior Vice President of
Anchor National (since 1988);
Senior Vice President,
Treasurer and Controller,
SunAmerica Series Trust (since
1993) and Seasons Series Trust
(since 1997); Joined
SunAmerica Inc. in 1978.
</TABLE>

B-21

<PAGE> 47

<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position with the Fund During Past Five Years
- --------------------- ---------------------- ----------------------
<S> <C> <C>
Susan L. Harris, 41 Vice President, Senior Vice President (since
Counsel and Secretary November 1995), Secretary (since
1989) and General
Counsel-Corporate Affairs
(since December 1994),
SunAmerica Inc.; Senior Vice
President and Secretary,
Anchor National (since 1990);
Vice President, Counsel and
Secretary, SunAmerica Series
Trust (since 1993) and Seasons
Series Trust (since 1997);
Joined SunAmerica Inc. in
1985.

Peter C. Sutton, 34 Vice President and Senior Vice President, SunAmerica
The SunAmerica Center Assistant Treasurer Asset Management Corp. (since
733 Third Avenue April 1997); Treasurer (since
New York, NY 10017-3204 February 1996), SunAmerica
Mutual Funds, Anchor Series Trust
and Style Select Series, Inc. (since
1996); Vice President and Assistant
Treasurer, SunAmerica Series Trust
and Seasons Series Trust (since
1994); formerly, Vice President,
SunAmerica (1994-1997); Controller,
SunAmerica Mutual Funds and Anchor
Series Trust (March 1993 to February
1996); Assistant Controller,
SunAmerica Mutual Funds and Anchor
Series Trust (1990-1993).

Robert M. Zakem, 41 Vice President and Vice President and Assistant
The SunAmerica Center Assistant Secretary Secretary, SunAmerica Series Trust
733 Third Avenue (since 1993) and Seasons Series
New York, NY 10017-3204 Trust (since 1997); Secretary and
Chief Compliance Officer,
SunAmerica Mutual Funds and
Anchor Series Trust (since 1993)
and Style Select Series (since
1996); Senior Vice President and
General Counsel, SunAmerica
Asset Management Corp. (since
April 1993); Executive Vice
President, General Counsel and
Director, SunAmerica Capital
Services, Inc. (since February
1993); Vice President, General
Counsel and Assistant Secretary,
SunAmerica Fund Services, Inc.
(since January 1994).
</TABLE>

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

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

B-22
<PAGE> 48

As of January 1, 1999, the officers and Trustees as a group owned an
aggregate of less than 1% of the shares of each Series.

The Trustees of the Fund are responsible for the overall supervision
of the operation of the Fund and each Series and perform various duties imposed
on trustees of investment companies by the 1940 Act and under the Fund's
Declaration of Trust. The Fund pays no salaries or compensation to any of its
officers, all of whom are officers or employees of the Company or its
affiliates.

The following table sets forth information summarizing the
compensation of each Trustee of the Fund for their services as Trustees for the
fiscal year ended November 30, 1998. Trustees who are affiliated with the
Company do not receive any compensation. Ms. Lozano became a Trustee as of
December 30, 1998.

B-23

<PAGE> 49

COMPENSATION TABLE

<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED FROM REGISTRANT AND
COMPENSATION AS PART OF FUND FUND COMPLEX PAID
TRUSTEE FROM REGISTRANT EXPENSES TO TRUSTEES*
------- --------------- -------- ------------
<S> <C> <C> <C>
Richards D. Barger** $13,000 N/A $24,000
Monica C. Lozano ---- N/A --
Norman J. Metcalfe** $13,000 N/A $24,000
Allan L. Sher $13,000 N/A $24,000
William M. Wardlaw $11,750 N/A $21,750

</TABLE>

* Information is as of November 30, 1998 for the three investment companies in
the complex (the Fund, SunAmerica Series Trust and Seasons Series Trust) that
pay fees to these Trustees.

** Messrs. Barger and Metcalfe served as Trustees until October 1998.

INVESTMENT ADVISORY AGREEMENT

The Fund is advised by CRMC of Los Angeles, California, which is a
wholly-owned subsidiary of the Capital Group Companies, Inc., and is
headquartered at 333 South Hope Street, Los Angeles California 90071. The
Amended and Restated Investment Advisory Agreement between the Fund and the
Investment Adviser, dated March 14, 1990, provides that the Investment Adviser
shall determine what securities are purchased or sold by the Fund.

The Investment Advisory Agreement continues in effect with respect to each
Series from year to year provided that such continuance is specifically approved
at least annually by (i) the Board of Trustees, or by the vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of each Series,
and (ii) the vote of a majority of Trustees who are not parties to the Agreement
or interested persons (as defined in the 1940 Act) of any such party, cast in
person, at a meeting called for the purpose of voting on such approval. The
Agreement also provides that it may be terminated by either party without
penalty upon 60 days' written notice to the other party. The Agreement provides
for automatic termination upon assignment.

As compensation for its services, the Investment Adviser receives from the
Fund a fee, accrued daily and payable monthly, based on the net assets of each
Series. For all the Series except the International Series, the fee is equal to
0.36% (on an annualized basis) of that portion of each Series' average daily net
assets not exceeding $30 million, plus 0.30% of that portion of the Series'
average daily net assets in excess of $30 million. The Investment Adviser
receives a fee, accrued daily and payable monthly, based on the net assets of
the International Series, at the annual rate of 0.66% of that portion of the
Series' average daily net assets not exceeding $60 million, plus 0.58%

B-24

<PAGE> 50

of that portion of the Series' average daily net assets in excess of $60
million.

The following table sets forth the total advisory fees received by
the Investment Adviser from each Series pursuant to the Investment Advisory
Agreement for the fiscal years ended November 30, 1998, 1997 and 1996.

ADVISORY FEES

<TABLE>
<CAPTION>
FUND 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Growth Series $2,453,000 $2,411,000 $2,478,000
International Series $1,283,000 $1,504,000 $1,412,000
Growth-Income Series $2,854,000 $2,809,000 $2,672,000
Asset Allocation Series $ 456,000 $ 481,000 $ 472,000
High-Yield Bond Series $ 353,000 $ 394,000 $ 421,000
U.S. Government/AAA-Rated
Securities Series $ 253,000 $ 292,000 $ 380,000
Cash Management Series $ 228,000 $ 264,000 $ 318,000
</TABLE>

BUSINESS MANAGEMENT AGREEMENT

SunAmerica Asset Management Corp. (the "Business Manager"), organized in
1982 under the laws of Delaware, provides administrative services to the Fund.
The Business Manager is an indirect wholly-owned subsidiary of Anchor National
Life Insurance Company, an indirect subsidiary of SunAmerica Inc., an
investment-grade financial services company that, as of September 30, 1998,
earns fees or spreads income on approximately $110 billion in assets. SunAmerica
Inc. is wholly-owned by American International Group, Inc., the leading
U.S.-based international insurance organization, which, through its affiliates,
is also engaged in a range of financial services activities. The Business
Management Agreement between the Fund and the Business Manager, dated January 1,
1999, provides that the Business Manager will manage the business affairs of the
Fund and perform the administrative functions required of a registered
investment company at all times in accordance with the organizational documents
and current prospectus of the Fund.

As compensation for its services, the Business Manager receives a fee,
accrued daily and payable monthly, based on the net assets of each Series of the
Fund other than the International Series, at the annual rate of 0.24% of that
portion of each Series' average daily net assets not exceeding $30 million, plus
0.20% on that portion of the Series' average daily net assets in excess

B-25

<PAGE> 51

of $30 million. The Business Manager receives a monthly fee, accrued daily,
based on the average daily net assets of the International Series at the annual
rate of 0.24%.

The following table sets forth the total administrative fees paid by the
Fund to the Business Manager and its predecessor, Anchor Investment Adviser,
Inc., pursuant to the Business Management Agreement for the fiscal years ended
November 30, 1998, 1997 and 1996.

BUSINESS MANAGEMENT FEES

<TABLE>
<CAPTION>
FUND 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Growth Series $1,635,000 $1,607,000 $1,653,000
International Series $ 511,000 $ 602,000 $ 564,000
Growth-Income Series $1,903,000 $1,873,000 $1,781,000
Asset Allocation Series $ 304,000 $ 320,000 $ 314,000
High-Yield Bond Series $ 236,000 $ 263,000 $ 281,000
U.S. Government/AAA-Rated
Securities Series $ 169,000 $ 195,000 $ 253,000
Cash Management Series $ 152,000 $ 176,000 $ 212,000
</TABLE>

The Business Management Agreement provides that it will continue in effect
for two years after initial approval, unless terminated, and may be renewed from
year to year thereafter as to each Series provided that such continuance is
specifically approved at least annually by (i) the Board of Trustees of the
Fund, or a vote of the majority (as defined in the 1940 Act) of the outstanding
voting securities of each Series, and (ii) the vote of a majority of Trustees
who are not parties to the Management Agreement or interested persons (as
defined in said Act) of any such party, cast in person at a meeting called for
the purpose of voting on such approval. The Business Management Agreement also
provides that it may be terminated by either party without penalty upon 60 days'
written notice to the other party. The Agreement provides for its automatic
termination upon assignment.

The Fund pays certain expenses not assumed by the Business Manager
including, but not limited to, expenses of shareholder meetings; reports to
shareholders and the printing of proxies and prospectuses; insurance premiums;
legal and auditing fees; dividend disbursement expenses; the expenses of
issuance, transfer and redemption of shares; custodian fees; printing and
preparation of registration statements; taxes; and the compensation of trustees
who are not interested persons of the Fund.

B-26

<PAGE> 52

DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES

FEDERAL TAXES - Each Series is qualified and intends to remain qualified
and elect to be treated as a regulated investment company under Subchapter M
under the Code. To remain qualified as a regulated investment company, a Series
generally must, among other things, (a) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stocks, securities or foreign currencies, or
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stocks, securities or currencies; (b) diversify its holdings so that, at the end
of each fiscal quarter, (i) 50% of the market value of the Series' assets is
represented by cash, government securities and other securities limited in
respect of any one issuer to 5% of the Series' net assets and to not more than
10% of the voting securities of any one issuer (other than government
securities) and (ii) not more than 25% of the value of its assets are invested
in the securities of any one issuer (other than government securities or the
securities of other regulated investment companies); and (c) distribute at least
90% of its investment company taxable income (including short-term capital
gains).

Each Series will comply with asset diversification regulations prescribed
by the U.S. Treasury Department under the Code. In general, these regulations
effectively provide that, as of the end of each calendar quarter or within 30
days thereafter, no more that 55% of the total assets of the Series may be
represented by any one investment, no more than 70% by any two investments, no
more than 80% by any three investments, and no more than 90% by any four
investments. For this purpose, all securities of the same issuer are considered
a single investment, but each U.S. agency or instrumentality is treated as a
separate issuer. There are also alternative diversification tests that may be
satisfied by the Series under the regulation. Each Series intends to comply with
the diversification regulations. If a Series fails to comply with these
regulations, the contracts invested in that Series will not be treated as
annuity, endowment or life insurance contracts under the Code.

Income received by a Series from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is impossible to determine in advance the effective rate of
foreign tax to which a Series will be subject, since the amount of that Series'
assets to be invested in various countries is not known. Shareholders are urged
to consult their tax advisors regarding specific questions as to Federal, state
and local taxes.

SHAREHOLDER VOTING RIGHTS

All shares of the Fund have equal voting rights and may be voted in the
election of Trustees and on other matters submitted to the vote of the
shareholders. Shareholders' meetings ordinarily will not be held unless required
by the 1940 Act. As permitted by Massachusetts law, there normally will be no
shareholders' meetings for the purpose of electing Trustees unless and until
such time as fewer than a majority of the Trustees holding office have been
elected by shareholders. At that time, the Trustees then in office will call a
shareholders' meeting for the election of Trustees. The Trustees must call a
meeting of shareholders for the purpose of voting upon the removal of any
Trustee when requested to do so by the record holders of 10 percent of the
outstanding shares of the Fund. A Trustee may be removed after the holders of
record of not less than two-thirds of the outstanding shares have declared that
the Trustee be removed either by declaration in writing or by votes cast in
person or by proxy. Except as set forth above, the Trustees shall continue to
hold office and may

B-27

<PAGE> 53

appoint successor Trustees, provided that immediately after the appointment of
any successor Trustee, at least two-thirds of the Trustees have been elected by
the shareholders. Shares do not have cumulative voting rights. Thus, holders of
a majority of the shares voting for the election of Trustees can elect all the
Trustees. No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Fund, except
that amendments to conform the Declaration to the requirements of applicable
federal laws or regulations or the regulated investment company provisions of
the Code may be made by the Trustees without the vote or consent of
shareholders. If not terminated by the vote or written consent of a majority of
its outstanding shares, the Fund will continue indefinitely.

In matters affecting only a particular Series, the matter shall have been
effectively acted upon by a majority vote of that Series even though: (1) the
matter has not been approved by a majority vote of any other Series; or (2) the
matter has not been approved by a majority vote of the Fund as a whole.

PRICE OF SHARES

Shares of the Fund are currently offered only to the Variable Separate
Account. The Fund is open for business on any day the NYSE is open for regular
trading. The price paid for shares is the net asset value per share calculated
once daily at the close of regular trading on the NYSE (generally, 4:00 p.m.,
Eastern time). Each Series calculates the net asset value of its shares
separately by dividing the total value of its net assets by its shares
outstanding.

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.
Non-convertible bonds, debentures, other long-term debt securities and
short-term securities with original or remaining maturities in excess of 60
days, are normally valued at prices obtained for the day of valuation from a
bond pricing service of a major dealer in bonds, when such prices are available;
however, in circumstances in which the Investment Adviser deems it appropriate
to do so, an over-the-counter or exchange quotation at the mean of
representative bid or asked prices may be used. Securities traded primarily on
securities exchanges outside the United States are valued at the last sale price
on such exchanges on the day of valuation, or if there is no sale on the day of
valuation, at the last-reported bid price. If a security's price is available
from more than one foreign exchange, a Series 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. Options
traded on national securities exchanges are valued as of the close of the
exchange on which they are traded. Futures and options traded on commodities
exchanges are valued at their last sale price as of the close of such exchange.
Other securities are valued on the basis of last sale or bid price (if a last
sale price is not available) in what is, in the opinion of the Investment
Adviser, the broadest and most representative market, that may be either a
securities exchange or the over-the-counter market. Where quotations are not
readily available, securities are valued at fair value as determined in good
faith in accordance with procedures adopted by the Board of Trustees. The fair
value of all other assets is added to the value of securities to arrive at the
respective Series' total assets.

B-28

<PAGE> 54

A Series' liabilities, including proper accruals of expense items, are
deducted from total assets.

EXECUTION OF PORTFOLIO TRANSACTIONS

Orders for the Fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best available
prices in its portfolio transactions taking into account the costs and
promptness of executions. When circumstances relating to a proposed transaction
indicate that a particular broker (either directly or through their
correspondent clearing agents) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a broker
who has provided investment research statistical, or other related services to
the Investment Adviser or has sold shares of the Fund or other funds served by
the Investment Adviser or Business Manager. The Fund does not consider that it
has an obligation to obtain the lower available commission rate to the exclusion
of price, service and qualitative considerations.

A factor in the selection of brokers is the receipt of research services
- -- analyses and reports concerning issuers, industries, securities, economic
factors and trends -- and other statistical and factual information. Research
and other statistical and factual information provided by brokers is considered
to be in addition to and not in lieu of services required to be performed by the
Investment Adviser.

The extent to which commissions may reflect the value of research services
cannot be presently determined. To the extent that research services of value
are provided by broker-dealers with or through whom the Investment Adviser
places the Fund's portfolio transactions, the Investment Adviser may be relieved
of expenses it might otherwise bear. Research services furnished by
broker-dealers could be useful and of value to the Investment Adviser in serving
other clients as well as the Fund and research services obtained by the
Investment Adviser as a result of the placement of portfolio brokerage of other
clients could be useful and of value in serving the Fund.

There are occasions on which portfolio transactions for the Fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other Funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either advantageous
or disadvantageous to the Fund, they are effected only when the Investment
Adviser believes that to do so is in the interest of the Fund. When such
concurrent authorizations occur, the objective is to allocate the executions in
an equitable manner. The Fund does not intend to pay a mark-up in exchange for
research in connection with principal transactions.

Purchases and sales of money market and other fixed income instruments
usually are principal transactions. Normally, no brokerage commissions are paid
by the Fund for such purchases. Money market instruments are generally purchased
directly from the issuer or from an

B-29

<PAGE> 55

underwriter or market maker for the securities. Purchases from underwriters
include an underwriting commission or concession and purchases from dealers
serving as market makers include the spread between the bid and asked price. In
the over-the-counter market, securities are generally traded on a "net" basis
with dealers acting as principal for their own accounts without a stated
commission (although the price of the security usually includes a profit to the
dealer). Where transactions are made in the over-the-counter market, the Series
deals with the primary market makers unless more favorable prices are
obtainable.

The policy of the Fund with respect to brokerage practices is reviewed by
the Board of Trustees from time to time. Because of the possibility of further
regulatory developments affecting the securities exchanges and brokerage
practices generally, the foregoing practices may be modified.

The following tables set forth the brokerage commissions paid by the
Series and the amounts of the brokerage commissions that were paid to affiliated
broker-dealers by the Series for the fiscal years ended November 30, 1998, 1997
and 1996.

1998 BROKERAGE COMMISSIONS

<TABLE>
<CAPTION>
AGGREGATE AMOUNT PAID TO PERCENTAGE PAID TO
BROKERAGE AFFILIATED BROKER- AFFILIATED BROKER-
SERIES COMMISSIONS DEALERS DEALERS
------ ----------- ------- -------
<S> <C> <C> <C>
Growth Series $537,003 $ 4,400 0.82%
International Series $485,903 -- --
Growth-Income Series $615,135 $ 5,605 .91%

Asset Allocation Series $ 57,341 -- --

High-Yield Bond Series 100 -- --

U.S. Government/AAA-
Rated Securities Series -- -- --

Cash Management Series -- -- --
</TABLE>

1997 BROKERAGE COMMISSIONS

B-30

<PAGE> 56

<TABLE>
<S> <C> <C> <C>
International Series $593,093 -- --
Growth-Income Series $645,724 $ 10,961 1.70%
Asset Allocation Series $ 78,768 $ 1,250 1.59%
High-Yield Bond Series -- -- --
U.S. Government/AAA-
Rated Securities Series -- -- --
Cash Management Series -- -- --
</TABLE>

1996 BROKERAGE COMMISSIONS

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

U.S. Government/AAA-
Rated Securities Series -- -- --
Cash Management Series -- -- --
</TABLE>

B-31

<PAGE> 57

GENERAL INFORMATION

CUSTODIAN - State Street Bank and Trust Company ("State Street"),
225 Franklin Street, Boston, Massachusetts 02110, serves as the Fund's
custodian. In this capacity, State Street maintains the portfolio securities
held by the Fund, administers the purchase and sale of portfolio securities and
performs certain other duties. State Street also serves as transfer agent and
dividend disbursing agent for the Fund.

INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL - PricewaterhouseCoopers
LLP, 1177 Avenue of the Americas, New York, New York 10036, are the Fund's
independent accountants. PricewaterhouseCoopers LLP performs an annual audit of
the Fund's financial statements and provides tax consulting, tax return
preparation and accounting services relating to filings with the Commission. The
firms of Blazzard, Grodd & Hasenauer, 943 Coast Road East, Westport, CT 06881
and Swidler Berlin Shereff Friedman, LLP, 919 Third Avenue, New York, NY 10022,
provide legal services to the Fund.

REPORTS TO SHAREHOLDERS - Contract owners are provided at least
semiannually with reports showing the investment portfolio, financial statements
and other information.

SHAREHOLDER AND TRUSTEE RESPONSIBILITY - Shareholders of a
Massachusetts business trust may, under certain circumstances, be held
personally liable as partners for the obligations of such trust. The risk of a
shareholder of the Fund incurring any financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be unable
to meet its obligations. The Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Fund and provides that
notice of the disclaimer must be given in each agreement, obligation or
instrument entered into or executed by the Fund or Trustees. The Declaration of
Trust provides for indemnification of any shareholder held personally liable for
the obligations of the Fund and also provides for the Fund to reimburse the
shareholder for all legal and other expenses reasonably incurred in connection
with any such claim or liability.

Under the Declaration of Trust, the Trustees or officers are not
liable for actions or failure to act; however, they are not protected from
liability by reason of their willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of their office. The
Fund provides indemnification to its Trustees and officers as authorized by its
By-Laws and by the 1940 Act and the rules and regulations thereunder.

B-32

<PAGE> 58

REGISTRATION STATEMENT - A registration statement has been filed
with the Commission under the Securities Act and the 1940 Act. The Prospectus
and this Statement of Additional Information do not contain all information set
forth in the registration statement, its amendments and exhibits thereto, that
the Fund has filed with the Commission, Washington, D.C., to all of which
reference is hereby made.

FINANCIAL STATEMENTS

Set forth following this Statement of Additional Information are the
audited financial statements of the Fund with respect to the Registrant's fiscal
year ended November 30, 1998.

B-33

<PAGE> 59

APPENDIX

DESCRIPTION OF COMMERCIAL PAPER AND BAND RATINGS

COMMERCIAL PAPER RATINGS -- Moody's employs the designations
"Prime-1," "Prime-2" and "Prime-3" to indicate commercial paper having the
highest capacity for timely repayment. Issuers rated Prime-1 have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

S&P's ratings of commercial paper are graded into four categories
ranging from "A" for the highest quality obligations to "D" for the lowest. A --
Issues assigned its highest rating are regarded as having the greatest capacity
for timely payment. Issues in this category are delineated with numbers 1, 2,
and 3 to indicate the relative degree of safety. A-1 -- This designation
indicates that the degree of safety regarding timely payment is either
overwhelming or very strong. Those issues determined to possess overwhelming
safety characteristics will be denoted with a plus (+) sign designation. A-2 --
Capacity for timely payments on issues with this designation is strong. However,
the relative degree of safety is not as high as for issues designated "A-1."

CORPORATE DEBT SECURITIES -- Moody's rates the long-term debt
securities issued by various entities from "Aaa" to "C." Aaa -- Best quality.
These securities carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a larger, or by
an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of these issues. Aa --
High quality by all standards. They are rated lower than the best bond because
margins of protection may not be as large as in Aaa securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat greater. A -- Upper medium
grade obligations. These bonds possess many favorable investment attributes.
Factors giving security to principal and interest are considered adequate, but
elements may be present that suggest a susceptibility to impairment sometime in
the future. Baa -- medium grade obligations. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such

B-34

<PAGE> 60

bonds lack outstanding investment characteristics and, in fact, have speculative
characteristics as well. Ba -- Have speculative elements; future cannot be
considered as well assured. The protection of interest and principal payments
may be very moderate and thereby not well safeguarded during both good and bad
times over the future. Bonds in this class are characterized by uncertainty of
position. B -- Generally lack characteristics of the desirable investment;
assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Caa -- Of poor standing.
Issues may be in default or there may be present elements of danger with respect
to principal or interest. Ca -- Speculative in a high degree; often in default
or have other marked shortcomings. C -- Lowest rated class of bonds; can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.

S&P rates the long-term securities debt of various entities in
categories ranging from "AAA" to "D" according to quality. AAA -- Highest
rating. Capacity to pay interest and repay principal is extremely strong. AA --
High grade. Very strong capacity to pay interest and repay principal. Generally,
these bonds differ from AAA issues only in a small degree. A -- Have a strong
capacity to pay interest and repay principal, although they are somewhat more
susceptible to the adverse effects of change in circumstances and economic
conditions than debt in higher rated categories. BBB -- Regarded as having
adequate capacity to pay interest and repay principal. These bonds normally
exhibit adequate protection parameters, but adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal than for debt in higher rated categories. BB, B,
CCC, CC, C -- Regarded, on balance, as predominately speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation. BB indicated the lowest degree of speculation and C the highest
degree of speculation. While this debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions. C1 --Reserved for income bonds on which no
interest is being paid. D -- In default and payment of interest and or principal
is in arrears.

B-35

<PAGE> 61

<PAGE> 1

[ARROW UP]
- ---------------------

ANCHOR PATHWAY FUND
GROWTH SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1998

<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 88.1% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 29.9%
Aerospace & Military Technology -- 0.2%
Gulfstream Aerospace Corp.+................................. 40,000 $ 2,055

Data Processing & Reproduction -- 11.2%
Adobe Systems, Inc. ........................................ 155,000 6,936
Ascend Communications, Inc.+................................ 164,500 9,243
Compaq Computer Corp. ...................................... 277,500 9,019
Computer Associates International, Inc. .................... 40,000 1,770
Data General Corp.+......................................... 200,000 3,625
Gateway 2000, Inc.+......................................... 30,000 1,684
Lexmark International Group, Inc., Class A+................. 30,000 2,291
Mentor Graphics Corp. +..................................... 120,000 1,035
Microsoft Corp.+............................................ 50,000 6,100
Oracle Corp.+............................................... 440,000 15,070
PeopleSoft, Inc. +.......................................... 530,000 10,898
Siebel Systems, Inc.+....................................... 1,032 25
Silicon Graphics, Inc.+..................................... 500,000 6,125
Solectron Corp.+............................................ 260,000 17,209
Structural Dynamics Research Corp.+......................... 150,000 2,616

Electrical & Electronics -- 1.4%
Ericsson (L.M.) Telecommunications Co., Class B ADR......... 240,000 6,630
General Instrument Corp.+................................... 100,000 2,812
Northern Telecom Ltd. ...................................... 45,000 2,101

Electronic Components -- 15.6%
Adaptec, Inc.+.............................................. 380,000 6,175
ADC Telecommunications, Inc.+............................... 115,000 3,436
Altera Corp.+............................................... 340,000 16,681
Analog Devices, Inc.+....................................... 486,666 9,946
Intel Corp. ................................................ 176,200 18,963
LSI Logic Corp.+............................................ 200,000 3,100
Microchip Technology, Inc.+................................. 205,000 7,137
Micron Technology, Inc.+.................................... 117,100 4,838
Newbridge Networks Corp.+................................... 100,000 2,925
Park Electrochemical Corp. ................................. 187,200 3,592
Quantum Corp.+.............................................. 110,000 2,434
Rogers Corp.+............................................... 109,200 2,962
SCI Systems, Inc.+.......................................... 240,000 11,670
Texas Instruments, Inc. .................................... 411,000 31,390
Xilinx, Inc.+............................................... 100,000 5,075

Electronic Instruments -- 1.2%
Applied Materials, Inc.+.................................... 270,000 10,463

Energy Equipment -- 0.3%
Baker Hughes, Inc. ......................................... 25,500 467
Schlumberger Ltd. .......................................... 40,000 1,787
--------
250,285
--------
</TABLE>

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

A-1
<PAGE> 2

<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS -- 4.5%
Beverages & Tobacco -- 1.3%
PepsiCo, Inc. .............................................. 40,000 $ 1,547
Philip Morris Cos., Inc. ................................... 160,000 8,950

Food & Household Products -- 0.3%
Dole Food, Inc. ............................................ 40,000 1,265
Keebler Foods Co.+.......................................... 40,000 1,348

Health & Personal Care -- 2.2%
BioChem Pharma, Inc.+....................................... 60,000 1,462
Forest Labs, Inc.+.......................................... 45,000 2,098
Guidant Corp. .............................................. 50,000 4,291
Omnicare, Inc. ............................................. 30,000 859
Pfizer, Inc. ............................................... 15,000 1,674
Pharmacia & Upjohn, Inc. ................................... 58,000 3,020
Sepracor, Inc.+............................................. 27,500 2,282
Warner-Lambert Co. ......................................... 40,000 3,020

Recreation & Other Consumer Products -- 0.2%
Hasbro, Inc. ............................................... 44,100 1,546
Midway Games, Inc.+......................................... 55,100 562

Textiles & Apparel -- 0.5%
Nike, Inc., Class B......................................... 100,000 4,000
--------
37,924
--------
ENERGY -- 1.0%
Energy Sources -- 1.0%
Enterprise Oil PLC ADR...................................... 300,000 1,648
Murphy Oil Corp. ........................................... 80,000 3,190
Oryx Energy Co.+............................................ 75,000 1,036
Pogo Producing Co. ......................................... 86,500 1,006
Talisman Energy, Inc.+...................................... 40,000 697
Total SA ADR................................................ 20,000 1,222
--------
8,799
--------
FINANCE -- 6.9%
Banking -- 2.1%
Charter One Financial, Inc. ................................ 184,999 5,492
M & T Bank Corp. ........................................... 3,500 1,745
Washington Mutual, Inc. .................................... 145,000 5,619
Wells Fargo Co. ............................................ 125,000 4,500

Financial Services -- 1.6%
Capital One Financial Corp. ................................ 20,000 2,200
Federal National Mortgage Association....................... 95,000 6,911
Household International, Inc. .............................. 110,000 4,304

Insurance -- 3.2%
American International Group, Inc. ......................... 90,000 8,460
EXEL Ltd., Class A.......................................... 130,000 9,766
MGIC Investment Corp. ...................................... 85,000 3,735
Transatlantic Holdings, Inc. ............................... 60,000 4,560
--------
57,292
--------
</TABLE>

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

A-2
<PAGE> 3

Forest Products & Paper -- 0.6%
Sealed Air Corp.+........................................... 115,000 5,074
--------
19,017
--------
SERVICES -- 41.5%
Broadcasting & Publishing -- 22.8%
BHC Communications, Inc., Class A........................... 55,821 6,224
Cablevision Systems Corp., Class A+......................... 280,000 11,585
Comcast Corp., Class A...................................... 235,000 11,398
Cox Communications, Inc., Class A+.......................... 253,200 13,341
Fox Entertainment Group, Inc., Class A+..................... 150,000 3,544
News Corp. Ltd. ADR, Inc. TCI............................... 680,000 19,040
Tele-Communications, Inc. Liberty Media Group, Series A+.... 556,037 22,415
Tele-Communications, Inc., TCI Group, Series A+............. 96,081 4,059
Tele-Communications, Inc., TCI Ventures Group, Series A+.... 27,212 539
Time Warner, Inc. .......................................... 478,750 50,628
USA Networks, Inc.+......................................... 356,500 11,252
Viacom, Inc., Class B+...................................... 550,000 36,609

Business & Public Services -- 9.8%
Allied Waste Industries, Inc.+.............................. 165,400 3,370
America Online, Inc.+....................................... 65,000 5,692
APAC Teleservices, Inc.+.................................... 69,900 454
Avery Dennison Corp. ....................................... 40,000 1,917
Cambridge Technology Partners, Inc.+........................ 207,100 4,323
Cendant Corp.+.............................................. 1,295,562 24,616
Columbia/HCA Healthcare Corp. .............................. 238,625 5,876
Concord EFS, Inc.+.......................................... 140,000 4,454
FDX Corp.+.................................................. 250,000 16,219
First Data Corp. ........................................... 100,000 2,669
TeleTech Holdings, Inc.+.................................... 40,000 365
Universal Health Services, Inc., Class B.................... 74,900 4,017
Waste Management, Inc. ..................................... 190,586 8,171

Leisure & Tourism -- 2.5%
Carnival Corp., Class A..................................... 94,300 3,253
Disney (Walt) Co. .......................................... 200,000 6,438
King World Productions, Inc.+............................... 150,000 4,088
Mirage Resorts, Inc.+....................................... 445,000 6,619

Merchandising -- 1.8%
Cardinal Health, Inc., Class A.............................. 55,500 3,809
Consolidated Stores Corp.+.................................. 352,400 7,576
Limited, Inc. .............................................. 96,500 2,792
Venator Group, Inc.+........................................ 77,800 613

Telecommunications -- 2.0%
AirTouch Communications, Inc.+.............................. 195,000 11,151
MCI WorldCom, Inc.+......................................... 49,756 2,936
Paging Network, Inc.+....................................... 230,000 1,423
Teleglobe, Inc. ............................................ 51,000 1,387
</TABLE>

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

A-3
<PAGE> 4
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Transportation: Airlines -- 2.6%
AMR Corp.+.................................................. 140,000 $ 9,231
Delta Airlines, Inc. ....................................... 20,000 1,074
Southwest Airlines Co. ..................................... 543,750 11,690
--------
346,857
--------
OTHER COMMON STOCK -- 2.0%.................................. 16,694
--------
TOTAL COMMON STOCK (cost $465,744).......................... 736,868
--------

<CAPTION>
VALUE
PREFERRED STOCK -- 1.0% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 1.0%
Broadcasting & Publishing -- 1.0%
News Corp. Ltd. ADR (cost $2,313)........................... 340,000 8,564
--------
TOTAL INVESTMENT SECURITIES (cost $468,057)................. 745,432
--------
<CAPTION>
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 11.2% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 9.3%
AI Credit Corp. 5.08% due 12/14/98.......................... $ 9,000 8,984
AI Credit Corp. 5.08% due 1/6/99............................ 2,500 2,487
Duke Energy Co. 5.10% due 12/11/98.......................... 7,400 7,390
International Lease Finance Corp. 5.00% due 1/19/99......... 10,000 9,932
Lucent Technologies, Inc. 5.10% due 12/14/98................ 7,000 6,987
Monsanto Co. 5.15% due 2/12/99.............................. 21,000 20,782
Motorola, Inc. 5.15% due 12/1/98............................ 8,500 8,500
Motorola, Inc. 5.15% due 12/17/98........................... 10,000 9,977
Xerox Corp. 5.17% due 12/3/98............................... 2,500 2,499
--------
77,538
--------
FEDERAL AGENCY OBLIGATIONS -- 1.9%
Federal Home Loan Bank Discount Notes 4.80% due 12/2/98..... 14,300 14,298
Federal Home Loan Bank Discount Notes 5.00% due 1/13/99..... 1,500 1,491
--------
15,789
--------
TOTAL SHORT-TERM SECURITIES (cost $93,326).................. 93,327
--------

TOTAL INVESTMENTS --
(cost $561,383) 100.3% 838,759
Liabilities in excess of other assets -- (0.3) (2,404)
------ --------
NET ASSETS -- 100.0% $836,355
====== ========
</TABLE>

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

+ Non-income producing security

ADR - American Depository Receipt

See Notes to Financial Statements

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

A-4
<PAGE> 5

[ARROW UP]
- ---------------------

ANCHOR PATHWAY FUND
INTERNATIONAL SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1998

<TABLE>
<CAPTION>
VALUE
COMMON & PREFERRED STOCK -- 86.2% SHARES (IN THOUSANDS)
-----------------------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA -- 1.3%
Telefonica de Argentina SA ADR (Services)................... 75,400 $ 2,441
---------

AUSTRALIA -- 6.0%
Brambles Industries Ltd. (Services)......................... 100,000 2,451
Broken Hill Proprietary Co., Ltd. (Materials)............... 422,267 3,357
Coca-Cola Amatil Ltd. (Consumer Goods)...................... 262,517 882
News Corp. Ltd. ADR (Services).............................. 100,000 2,800
Westpac Banking Corp. Ltd. (Finance)........................ 306,514 2,045
---------
11,535
---------

BRAZIL -- 0.4%
Centrais Geradoras do Sul do Brasil SA ADR (Energy)......... 18,300 125
Companhia Paranaense De Energia -- Copel (Energy)........... 118,055,000 757
---------
882
---------

CANADA -- 2.4%
Northern Telecom Ltd. (Capital Equipment)................... 94,000 4,389
Teck Corp., Class B (Materials)............................. 40,000 271
---------
4,660
---------

FINLAND -- 6.7%
Nokia (AB) OY, Series K (Capital Equipment)................. 40,000 3,916
Nokia Corp., Class A ADR+ (Capital Equipment)............... 80,000 7,832
UPM-Kymmene Oyj (Materials)................................. 48,000 1,256
---------
13,004
---------

FRANCE -- 9.6%
Canal Plus (Services)....................................... 13,500 3,102
Carrefour SA (Services)..................................... 4,300 3,042
Peugeot SA (Consumer Goods)................................. 6,700 1,060
Total SA, Class B (Energy).................................. 33,876 4,198
Vivendi SA (Services)....................................... 32,000 7,233
---------
18,635
---------

GERMANY -- 7.9%
Bayerische Motoren Werke AG (Consumer Goods)................ 6,072 4,689
Bayerische Motoren Werke AG new shares (Consumer Goods)..... 1,214 916
Bayerische Motoren Werke AG Preferred (Consumer Goods)...... 2,604 1,205
Bayerische Motoren Werke AG NV, new shares Preferred
(Consumer Goods).......................................... 520 225
Deutsche Telekom AG (Services).............................. 296,000 8,305
---------
15,340
---------

ITALY -- 3.2%
Telecom Italia Mobile SpA (Services)........................ 64,800 273
Telecom Italia SpA+ (Services).............................. 954,100 5,958
---------
6,231
---------
</TABLE>

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

A-5
<PAGE> 6

<TABLE>
<CAPTION>
VALUE
COMMON & PREFERRED STOCK (continued) SHARES (IN THOUSANDS)
-----------------------------------------------------------------------------------------------
<S> <C> <C>
JAPAN -- 9.0%
Advantest Corp. (Capital Equipment)......................... 33,000 $ 2,202
Amway Japan Ltd. ADR (Services)............................. 36,000 180
Fujitsu Ltd. (Capital Equipment)............................ 180,000 2,078
Nintendo Co. Ltd. (Consumer Goods).......................... 11,000 1,019
Nippon Telegraph & Telephone Corp. (Services)............... 630 4,704
Rohm Co. Ltd. (Capital Equipment)........................... 20,000 1,688
Shohkoh Fund & Co. Ltd. (Consumer Goods).................... 17,100 5,635
---------
17,506
---------

KOREA -- 0.4%
Korea Mobile Telecommunications Corp. (Services)............ 370 258
LG Semiconductor Co.+ (Capital Equipment)................... 48,900 549
Samsung Electronics (Consumer Goods)........................ 1,097 59
---------
866
---------

LUXEMBOURG -- 1.0%
Safra Republic Holdings, Inc. (Finance)..................... 40,000 1,920
---------

MEXICO -- 3.6%
Cemex SA+ (Capital Equipment)............................... 560,000 1,345
Cifra SA de CV (Services)................................... 49,461 61
Cifra SA de CV, Series C (Services)......................... 195,500 239
Grupo Televisa SA de CV GDR+ (Services)..................... 35,000 890
Telefonos de Mexico SA ADR (Services)....................... 95,200 4,433
---------
6,968
---------

NETHERLANDS -- 5.9%
AEGON NV (Finance).......................................... 35,000 3,744
Philips Electronics (Consumer Goods)........................ 50,000 3,163
Vereenigde Ned Uitgevers (Services)......................... 130,000 4,466
---------
11,373
---------

NORWAY -- 1.4%
Orkla SA (Multi-industry)................................... 160,000 2,671
---------

SPAIN -- 3.6%
Telefonica de Espana SA (Services).......................... 146,881 6,899
---------

SWEDEN -- 5.0%
Astra AB, Class A (Consumer Goods).......................... 150,000 2,746
Ericsson LM Telecommunications Co., Class B (Capital
Equipment)................................................ 190,400 5,288
Kinnevik, Series A (Multi-industry)......................... 23,900 661
Kinnevik, Series B (Multi-industry)......................... 15,000 426
Modern Times Group AB, Class A+ (Services).................. 23,900 305
Modern Times Group AB, Class B ADR+ (Services).............. 3,000 192
---------
9,618
---------

SWITZERLAND -- 5.9%
Nestle SA+ (Consumer Goods)................................. 1,250 2,596
Novartis AG (Consumer Goods)................................ 1,954 3,667
Swisscom AG+ (Services)..................................... 15,163 5,104
---------
11,367
---------
</TABLE>

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

A-6
<PAGE> 7

<TABLE>
<CAPTION>
VALUE
COMMON & PREFERRED STOCK (continued) SHARES (IN THOUSANDS)
-----------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM -- 11.8%
Coca-Cola Beverage (Consumer Goods)......................... 262,517 $ 546
Dixons Group PLC (Services)................................. 600,000 7,294
EMI Group (Consumer Goods).................................. 930,000 5,538
Guardian Royal Exchange PLC (Finance)....................... 590,110 3,212
Orange PLC+ (Services)...................................... 325,000 3,324
Scottish Power PLC (Energy)................................. 132,240 1,402
Zeneca Group PLC (Consumer Goods)........................... 37,900 1,575
---------
22,891
---------
OTHER COMMON STOCK -- 1.1%.................................. 2,134
---------
TOTAL COMMON & PREFERRED STOCK (cost $135,292).............. 166,941
---------
RIGHTS -- 0.1%+
-----------------------------------------------------------------------------------------------
KOREA -- 0.1%
LG Semiconductor Co. (Capital Equipment) (cost $258)........ 47,734 287
---------
TOTAL INVESTMENT SECURITIES (cost $135,550)................. 167,228
---------
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 14.6% (IN THOUSANDS)
-----------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 14.6%
Abbey National North America 5.22% due 1/13/99.............. $ 3,000 2,982
British Gas Capital, Inc. 5.25% due 2/11/99................. 4,000 3,958
Canada Government 5.32% due 12/01/98........................ 2,500 2,500
Diageo Capital PLC 5.10% due 12/10/98....................... 3,000 2,996
Diageo Capital PLC 5.17% due 12/10/98....................... 1,200 1,199
General Electric Capital Corp. 5.45% due 12/01/98........... 885 885
International Lease Finance Corp. 5.19% due 1/14/99......... 3,650 3,627
Rio Tinto America, Inc. 5.15% due 1/08/99................... 4,400 4,376
Sony Capital Corp. 5.22% due 12/14/98....................... 3,200 3,194
Unilever Corp 5.00% due 12/04/98............................ 2,500 2,499
---------
TOTAL SHORT-TERM SECURITIES (cost $28,215).................. 28,216
---------
</TABLE>

<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS --
(cost $163,765) 100.9% $195,444
Liabilities in excess of other
assets -- (0.9) (1,681)
----- --------
NET ASSETS -- 100.0% $193,763
===== ========
</TABLE>

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

+ Non-income producing security

ADR - American Depository Receipt

GDR - Global Depository Receipt

See Notes to Financial Statements

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

A-7
<PAGE> 8

[ARROW UP]
- ---------------------

ANCHOR PATHWAY FUND
GROWTH-INCOME SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1998

<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 84.7% SHARES (IN THOUSANDS)
<S> <C> <C>
---------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 18.8%
Aerospace & Military Technology -- 2.2%
Boeing Co. ................................................. 80,000 $ 3,250
Raytheon Co., Class A....................................... 61,556 3,366
Raytheon Co., Class B....................................... 25,000 1,385
Sundstrand Corp............................................. 130,000 7,020
United Technologies Corp.................................... 52,000 5,574

Data Processing & Reproduction -- 6.3%
3Com Corp.+................................................. 240,000 9,285
Adobe Systems, Inc.......................................... 40,000 1,790
Cisco Systems, Inc.+........................................ 50,000 3,769
Computer Associates International, Inc...................... 150,000 6,637
Hewlett-Packard Co.......................................... 100,000 6,275
Oracle Corp.+............................................... 397,300 13,608
Silicon Graphics, Inc.+..................................... 294,400 3,606
Xerox Corp. ................................................ 114,300 12,287

Electrical & Electronics -- 2.2%
Nokia Corp., Class A ADR.................................... 35,000 3,430
Northern Telecom Ltd........................................ 82,800 3,866
Siemens AG.................................................. 80,000 5,564
York International Corp. ................................... 184,400 7,745

Electronic Components -- 1.6%
Corning, Inc................................................ 85,000 3,411
Intel Corp.................................................. 30,000 3,229
Texas Instruments, Inc. .................................... 100,000 7,637

Electronic Instruments -- 1.9%
Applied Materials, Inc.+.................................... 200,000 7,750
Perkin-Elmer Corp........................................... 100,000 9,325

Energy Equipment -- 1.1%
Baker Hughes, Inc........................................... 184,330 3,375
Schlumberger Ltd............................................ 145,000 6,480

Industrial Components -- 0.7%
Dana Corp................................................... 50,000 1,950
Eaton Corp.................................................. 70,000 4,782

Machinery & Engineering -- 2.8%
Caterpillar, Inc............................................ 70,000 3,461
Deere & Co. ................................................ 290,000 10,132
Ingersoll-Rand Co. ......................................... 120,000 5,618
New Holland N.V............................................. 179,100 2,451
Pall Corp. ................................................. 100,000 2,325
Parker-Hannifin Corp. ...................................... 60,000 2,085
---------
172,468
---------
</TABLE>

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

A-8
<PAGE> 9

<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS -- 11.5%
Beverages & Tobacco -- 3.4%
Anheuser-Busch Cos., Inc.................................... 70,000 $ 4,244
PepsiCo, Inc................................................ 150,000 5,803
Philip Morris Cos., Inc..................................... 225,000 12,586
Seagram Co. Ltd............................................. 150,000 5,147
UST, Inc.................................................... 100,000 3,475

Food & Household Products -- 0.9%
Bestfoods................................................... 50,000 2,906
General Mills, Inc.......................................... 75,000 5,663

Health & Personal Care -- 6.5%
Astra AB ADR................................................ 200,000 3,700
Avon Products, Inc. ........................................ 149,800 6,086
Glaxo Wellcome PLC ADR...................................... 120,000 7,620
Guidant Corp................................................ 40,000 3,432
Johnson & Johnson Co. ...................................... 60,000 4,875
Kimberly-Clark Corp. ....................................... 110,000 5,789
Merck & Co., Inc. .......................................... 50,000 7,744
Pfizer, Inc. ............................................... 50,000 5,581
Schering-Plough Corp. ...................................... 75,000 7,978
Warner-Lambert Co. ......................................... 80,000 6,040

Textiles & Apparel -- 0.7%
Nike, Inc., Class B......................................... 50,000 2,000
V.F. Corp. ................................................. 90,000 4,415
---------
105,084
---------
ENERGY -- 8.8%
Energy Sources -- 6.2%
Amoco Corp. ................................................ 100,000 5,894
Ashland, Inc. .............................................. 48,800 2,373
Atlantic Richfield Co. ..................................... 135,000 8,977
Conoco, Inc., Class A+...................................... 132,000 3,127
Kerr-McGee Corp. ........................................... 50,000 1,975
Murphy Oil Corp. ........................................... 50,000 1,994
Noble Affiliates, Inc. ..................................... 100,000 2,531
Norsk Hydro ASA ADR......................................... 50,000 1,831
Oryx Energy Co.+............................................ 200,000 2,763
Pennzoil Co. ............................................... 50,000 1,856
Phillips Petroleum Co. ..................................... 60,000 2,520
Pioneer Natural Resources Co. .............................. 18,600 246
Texaco, Inc. ............................................... 80,000 4,605
Ultramar Diamond Shamrock Corp.+............................ 331,600 8,539
Valero Energy Corp. ........................................ 360,000 7,560

Utilities: Electric, Gas & Water -- 2.6%
Ameren Corp. ............................................... 100,000 4,119
DPL, Inc. .................................................. 270,000 5,400
Duke Energy Corp. .......................................... 50,000 3,128
GPU, Inc. .................................................. 100,000 4,382
TECO Energy, Inc. .......................................... 150,000 4,031
Williams Cos., Inc. ........................................ 104,400 3,008
---------
80,859
---------
</TABLE>

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

A-9
<PAGE> 10

<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 10.7%
Banking -- 7.4%
Bank of New York Co., Inc. ................................. 320,000 $ 10,960
Bank One Corp. ............................................. 33,000 1,693
Bank Tokyo Mitsubishi Ltd ADR............................... 100,000 1,056
BankAmerica Corp. .......................................... 45,264 2,951
Chase Manhattan Corp. ...................................... 70,000 4,441
First Union Corp. .......................................... 200,272 12,167
Huntington Bancshares, Inc. ................................ 91,960 2,724
KeyCorp. ................................................... 170,000 5,217
Marshall & Ilsley Corp. .................................... 125,300 6,382
Morgan (J.P.) & Co., Inc. .................................. 30,000 3,206
Sakura Bank Ltd. ADR ....................................... 35,000 980
SunTrust Banks, Inc. ....................................... 50,000 3,491
Wells Fargo Co. ............................................ 347,000 12,492

Financial Services -- 1.7%
Associates First Capital Corp., Class A..................... 15,536 1,210
Household International, Inc. .............................. 271,332 10,616
Transamerica Corp. ......................................... 30,000 3,187

Insurance -- 1.6%
Aetna, Inc. ................................................ 50,000 3,865
Allstate Corp. ............................................. 100,000 4,075
General Reinsurance Corp.+.................................. 16,500 3,853
MGIC Investment Corp. ..................................... 70,000 3,076
---------
97,642
---------
INDUSTRIAL & COMMERCIAL -- 0.4%
Industrial -- 0.4%
Crown, Cork & Seal Co., Inc. ............................... 100,000 3,375
---------

MATERIALS -- 10.9%
Chemicals -- 6.3%
Dow Chemical Co. ........................................... 30,000 2,921
du Pont (E.I.) de Nemours & Co. ............................ 60,000 3,525
International Flavors & Fragrances, Inc. ................... 200,000 8,375
Mallinckrodt, Inc. ......................................... 200,000 6,463
Millenium Chemicals, Inc. .................................. 8,400 201
Monsanto Co. ............................................... 350,000 15,859
Morton International, Inc. ................................. 275,000 8,095
PPG Industries, Inc. ....................................... 50,000 3,059
Praxair, Inc. .............................................. 168,800 6,446
Witco Corp. ................................................ 120,000 2,288

Forest Products & Paper -- 3.7%
Bowater, Inc. .............................................. 160,000 6,320
Fort James Corp. ........................................... 125,000 4,891
Georgia Pacific Timber Group................................ 30,000 690
Georgia-Pacific Corp. ...................................... 65,000 3,689
International Paper Co. .................................... 80,000 3,475
Sonoco Products Co. ........................................ 100,000 2,994
Union Camp Corp. ........................................... 140,000 9,056
Westvaco Corp. ............................................. 60,000 1,687
Weyerhaeuser Co. ........................................... 25,000 1,253

Metals: Steel -- 0.2%
Allegheny Teldyne, Inc. .................................... 100,000 2,056
</TABLE>

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

A-10
<PAGE> 11

<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS (continued)
Metals & Minerals -- 0.7%
Aluminum Co. of America..................................... 85,000 $ 6,301
---------
99,644
---------
MULTI-INDUSTRY -- 1.3%
Multi-Industry -- 1.3%
AlliedSignal, Inc. ......................................... 80,000 3,520
FMC Corp.+.................................................. 75,000 4,360
Textron, Inc. .............................................. 50,000 3,884
---------
11,764
---------
REAL ESTATE -- 1.0%
Real Estate Companies -- 0.2%
Meditrust Co. .............................................. 125,000 1,899

Real Estate Investment Trusts -- 0.8%
Boston Properties, Inc. .................................... 150,000 4,734
Equity Residential Properties Trust......................... 60,000 2,539
---------
9,172
---------
SERVICES -- 18.9%
Broadcasting & Publishing -- 5.8%
Fox Entertainment Group, Inc., Class A+..................... 150,000 3,544
Gannett Co., Inc. .......................................... 80,000 5,165
Harte Hanks Communications Co. ............................. 400,000 9,450
Houston Industries, Inc. ................................... 70,000 6,440
Media General, Inc. ........................................ 75,800 3,596
News Corp. Ltd. ADR......................................... 140,000 3,920
Tele-Communications, Inc. Liberty Media Group, Series A+.... 150,000 6,047
Time Warner, Inc. .......................................... 50,000 5,287
Viacom, Inc., Class B+...................................... 150,000 9,984

Business & Public Services -- 4.6%
Alexander & Baldwin, Inc. .................................. 180,000 4,140
Avery Dennison Corp. ....................................... 25,500 1,223
Browning-Ferris Industries, Inc. ........................... 255,800 7,546
Cendant Corp.+.............................................. 250,000 4,750
Electronic Data Systems Corp. .............................. 180,000 7,020
Hertz Corp., Class A........................................ 100,000 3,675
Ikon Office Solutions, Inc. ................................ 660,000 6,435
Pitney Bowes, Inc. ......................................... 60,000 3,360
Waste Management, Inc. ..................................... 79,750 3,419

Leisure & Tourism -- 0.6%
Disney (Walt) Co. .......................................... 180,000 5,794

Merchandising -- 3.1%
American Stores Co. ........................................ 60,000 2,014
Circuit City Stores, Inc. .................................. 225,000 8,142
Federated Department Stores, Inc.+.......................... 120,000 5,003
Lowe's Cos., Inc. .......................................... 100,000 4,225
Penney (J.C.), Inc. ........................................ 25,000 1,375
Wal-Mart Stores, Inc. ...................................... 100,000 7,531

Telecommunications -- 4.2%
AirTouch Communications, Inc.+.............................. 81,013 4,633
Ameritech Corp. ............................................ 150,000 8,119
AT&T Corp. ................................................. 165,000 10,281
GTE Corp. .................................................. 164,800 10,218
SBC Communications, Inc. ................................... 40,000 1,917
U.S. West, Inc. ............................................ 46,800 2,913
</TABLE>

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

A-11
<PAGE> 12

<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Transportation: Rail & Road -- 0.6%
Norfolk Southern Corp. ..................................... 195,000 $ 5,923
---------
173,089
---------
OTHER COMMON STOCK -- 2.4%.................................. 22,403
---------
TOTAL COMMON STOCK (cost $569,734).......................... 775,500
---------

PREFERRED STOCK -- 0.2%
---------------------------------------------------------------------------------------------
SERVICES -- 0.2%
Broadcasting & Publishing -- 0.2%
News Corp. Ltd. ADR (cost $1,044)........................... 80,000 2,015
---------
PRINCIPAL
AMOUNT
CONVERTIBLE BONDS -- 1.0% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CONSUMER GOODS -- 0.7%
Health & Personal Care -- 0.7%
Sepracor, Inc. 6.25% 2005#.................................. $ 3,650 6,898
---------
SERVICES -- 0.3%
Business & Public Services -- 0.3%
CUC International, Inc. 3.00% 2002#......................... 3,000 2,730
---------
TOTAL CONVERTIBLE BONDS (cost $6,678)....................... 9,628
---------
TOTAL INVESTMENT SECURITIES (cost $577,456)................. 787,143
---------

SHORT-TERM SECURITIES -- 13.8%
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 9.7%
Coca-Cola Co. 5.30% due 12/01/98............................ 24,000 24,000
Kellogg Co. 4.83% due 12/08/98.............................. 5,000 4,997
Kellogg Co. 5.32% due 12/08/98.............................. 700 699
Lucent Technologies, Inc. 5.12% due 12/10/98................ 5,000 4,994
Lucent Technologies, Inc. 5.25% due 1/04/99................. 9,000 8,955
Monsanto Co. 5.15% due 2/12/99.............................. 13,900 13,755
Motorola, Inc. 5.15% due 12/01/98........................... 14,500 14,500
Paccar Financial Corp. 5.13% due 12/03/98................... 10,000 9,997
Pfizer, Inc. 5.05% due 12/04/98............................. 6,400 6,397
---------
88,294
---------
</TABLE>

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

A-12
<PAGE> 13

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES (continued) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL AGENCY OBLIGATIONS -- 4.1%
Federal Home Loan Bank Discount Notes 4.86% due 1/29/99..... $ 18,000 $ 17,857
Federal Home Loan Mortgage Discount Notes 5.28% due
12/22/98.................................................. 20,000 19,938
---------
37,795
---------
TOTAL SHORT-TERM SECURITIES (cost $126,088)................. 126,089
---------
</TABLE>

<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS --
(cost $703,544) 99.7% 913,232
Other assets less liabilities -- 0.3 2,762
------ ---------
NET ASSETS -- 100.0% $915,994
====== =========
</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

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

A-13
<PAGE> 14

[ARROW UP]
- ---------------------

ANCHOR PATHWAY FUND
ASSET ALLOCATION SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1998

<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 60.5% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 16.0%
Aerospace & Military Technology -- 3.4%
Boeing Co. ................................................. 40,000 $ 1,625
Raytheon Co., Class A....................................... 10,000 547
Raytheon Co., Class B....................................... 25,000 1,384
United Technologies Corp. .................................. 10,000 1,072

Data Processing & Reproduction -- 3.9%
Hewlett-Packard Co. ........................................ 30,000 1,882
International Business Machines Corp. ...................... 20,000 3,300

Electrical & Electronics -- 3.0%
Nokia Corp., Class A ADR.................................... 20,000 1,960
York International Corp. ................................... 50,000 2,100

Electronic Components -- 2.8%
AMP, Inc. .................................................. 39,251 1,899
Corning, Inc................................................ 45,000 1,805

Industrial Components -- 2.0%
Dana Corp. ................................................. 35,000 1,365
Genuine Parts Co. .......................................... 40,000 1,318

Machinery & Engineering -- 0.9%
Deere & Co. ................................................ 35,000 1,223
---------
21,480
---------
CONSUMER GOODS -- 8.2%
Automotive -- 0.8%
General Motors Corp. ....................................... 15,000 1,050

Beverages & Tobacco -- 2.2%
PepsiCo, Inc................................................ 40,000 1,547
UST, Inc. .................................................. 40,000 1,390

Food & Household Products -- 1.7%
General Mills, Inc. ........................................ 30,000 2,265

Health & Personal Care -- 3.5%
Pfizer, Inc. ............................................... 15,000 1,674
SmithKline Beecham PLC ADR.................................. 20,000 1,219
Warner-Lambert Co. ......................................... 25,000 1,888
---------
11,033
---------
ENERGY -- 6.2%
Energy Sources -- 6.2%
Amoco Corp. ................................................ 20,000 1,179
Atlantic Richfield Co. ..................................... 20,000 1,330
Kerr-McGee Corp. ........................................... 30,000 1,185
Murphy Oil Corp. ........................................... 35,000 1,395
Oryx Energy Co.+............................................ 50,000 691
Phillips Petroleum Co. ..................................... 35,000 1,470
Ultramar Diamond Shamrock Corp.+............................ 40,000 1,030
---------
8,280
---------
</TABLE>

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

A-14
<PAGE> 15

<TABLE>
<CAPTION>
VALUE
COMMON STOCK (continued) shares (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 11.9%
Banking -- 5.1%
BankAmerica Corp. .......................................... 33,948 $ 2,213
First Union Corp. .......................................... 32,400 1,968
KeyCorp. ................................................... 35,000 1,074
Washington Mutual, Inc. .................................... 40,000 1,550

Financial Services -- 3.2%
Citigroup, Inc. ............................................ 37,500 1,882
Household International, Inc. .............................. 60,666 2,374

Insurance -- 3.6%
American General Corp. ..................................... 25,000 1,761
General Reinsurance Corp.+.................................. 5,000 1,168
St. Paul Cos., Inc. ........................................ 53,598 1,889
---------
15,879
---------
MATERIALS -- 8.0%
Chemicals -- 3.3%
Air Products & Chemicals, Inc............................... 50,000 1,906
PPG Industries, Inc. ....................................... 15,000 918
Praxair, Inc. .............................................. 40,000 1,528

Forest Products & Paper -- 4.7%
Georgia-Pacific Corp. ...................................... 30,000 1,702
Sonoco Products Co. ........................................ 45,000 1,347
Union Camp Corp. ........................................... 20,000 1,294
Weyerhaeuser Co. ........................................... 40,000 2,005
---------
10,700
---------
MULTI-INDUSTRY -- 1.7%
Multi-Industry -- 1.7%
Textron, Inc................................................ 30,000 2,331
---------

SERVICES -- 6.8%
Business & Public Services -- 4.6%
Alexander & Baldwin, Inc. .................................. 7,500 173
Avery Dennison Corp. ....................................... 30,000 1,438
Morton International, Inc. ................................. 40,000 1,177
Rentokil Initial PLC ADR.................................... 30,000 2,047
Reuters Group PLC ADR....................................... 21,700 1,248

Merchandising -- 2.2%
Penney (J.C.), Inc. ........................................ 25,000 1,375
Walgreen Co. ............................................... 30,000 1,611

Telecommunications -- 0.0%
Nextel Communications, Inc., Class A+....................... 1,549 33
---------
9,102
---------
OTHER COMMON STOCK -- 1.7%.................................. 2,277
---------
TOTAL COMMON STOCK (cost $60,736)........................... 81,082
---------
</TABLE>

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

A-15
<PAGE> 16
<TABLE>
<CAPTION>
VALUE
PREFERRED STOCK -- 0.4% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 0.4%
Broadcasting & Publishing -- 0.4%
Adelphia Communications Corp., Series B (cost $500)......... 5,000 $ 582
---------

<CAPTION>
PRINCIPAL
AMOUNT
BONDS & NOTES -- 27.9% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>

CONVERTIBLE BONDS -- 0.1%
Finance -- 0.1%
Bell Atlantic Financial Services, Inc. 4.25% 2005#.......... $ 150 154
---------
CORPORATE BONDS -- 16.8%
Broadcasting & Publishing -- 0.9%
Time Warner, Inc. 9.13% 2013................................ 1,000 1,247

Business Services -- 0.1%
Ziff Davis, Inc. 8.50% 2008................................. 250 238

Finance -- 6.4%
Advanta Corp., Series D 6.57% 2000.......................... 1,325 1,268
Asset Backed Securities Investment Trust, Series 1997-D,
Class A 6.79% 2003++*#.................................... 283 284
Barnett Capital I 8.06% 2026................................ 500 558
Capital One Bank 6.97% 2002................................. 2,250 2,253
Cei Citicorp Holdings SA 11.25% 2007*#...................... 400 272
Chevy Chase Savings Bank 9.25% 2008......................... 500 495
First Plus Home Loan Trust, Series 1997-1, Class A6 6.95%
2015++.................................................... 500 504
Fuji Bank Investment Preferred LLC 9.87% 2049#(1)........... 250 178
GS Escrow Corp. 7.13% 2005#................................. 500 492
IBJ Preferred Capital Co. LLC 8.79% 2049#(1)................ 500 436
Irvine Property 7.46% 2006*................................. 500 502
Ocwen Financial Corp. 11.88% 2003........................... 250 220
PDVSA Finance Ltd. Series D 7.40% 2016#(1).................. 250 215
Socgen Real Estate Co. LLC, Series A 7.64% 2049#(1)......... 500 467
Tokai Preferred Capital LLC 9.98% 2049#(1).................. 500 437

Industrial -- 4.5%
Allegiance Corp. 7.00% 2026................................. 500 532
CBS Radio Inc. 11.38% 2009(2)............................... 526 615
Container Corp. of America 9.75% 2003....................... 500 510
Dayton Hudson Corp. 8.50% 2022.............................. 500 559
Esat Holdings Ltd. zero coupon 2007@........................ 500 333
Freeport McMoRan Copper & Gold 7.20% 2026................... 500 342
Globo Comunicacoes Participacoes Ltd., Class B 10.50%
2006*#.................................................... 220 167
Gruma SA de CV 7.63% 2007*#................................. 250 227
Hyundai Semiconductor 8.63% 2007*#.......................... 425 303
Inco Ltd. 9.60% 2022........................................ 400 439
Omnipoint Corp. 11.63% 2006................................. 250 161
Owens Illinois, Inc. 8.10% 2007............................. 250 264
Pan Pacific Industrial Investment PLC zero coupon 2007*#@... 1,000 350
Royal Caribbean Cruises Ltd. 7.00% 2007..................... 500 494
United Defense Industries, Inc. 8.75% 2007.................. 300 305
Wharf International Finance Ltd. 7.63% 2007................. 500 404

Recreation & Other Consumer Products -- 0.1%
V2 Music Holdings PLC zero coupon 2008*@#.................. (GBP) 175 153

Telecommunications -- 2.1%
Clearnet Communications, Inc. zero coupon 2008@............. 1,000 354
Consorcio Ecuatoriano de Telecommunicaciones 14.00%
2002*#.................................................... 250 140
Iridium Capital Corp., Series A 13.00% 2005#................ 250 220
</TABLE>

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

A-16
<PAGE> 17
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (continued) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (continued)
Telecommunications (continued)
Nextel Communications, Inc. zero coupon 2008#@.............. $1,500 $ 930
Nextel International, Inc. zero coupon 2008#@............... 300 140
Qwest Communications International, Inc. zero coupon
2007@..................................................... 500 387
Tele-Communications, Inc. 9.25% 2023........................ 500 588

Transportation -- 2.7%
Airplanes Pass Through Trust, Class C, 8.15% 2019++*........ 491 506
Continental Airlines Pass Through Trust 6.94% 2013++........ 954 983
Delta Airlines, Inc. 10.50% 2016............................ 500 642
Jet Equipment Trust, Class B 7.83% 2012..................... 462 485
United Airlines Pass Through Trust, Series 1996, Class A
7.87% 2019++.............................................. 500 495
USAir, Inc., Class A 6.76% 2008............................. 464 461
---------
22,555
---------

UNITED STATES GOVERNMENT & AGENCIES -- 3.0%++
Federal National Mortgage Association 6.53% 2006............ 1,500 1,498
Federal National Mortgage Association 7.52% 2004............ 2,000 2,011
Government National Mortgage Association 8.50% 2027......... 414 440
---------
3,949
---------

UNITED STATES TREASURY -- 8.0%
3.63% Bonds 2002............................................ 2,000 1,996
7.25% Bonds 2004............................................ 2,000 2,242
7.50% Bonds 2016............................................ 2,000 2,505
8.75% Bonds 2008............................................ 2,500 2,927
6.50% Notes 2002............................................ 1,000 1,059
---------
10,729
---------
TOTAL BONDS & NOTES (cost $37,943).......................... 37,387
---------

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 16
Iridium World Communications, Inc. 7/15/05.................. 250 37
---------
TOTAL WARRANTS (cost $15)................................... 53
---------
TOTAL INVESTMENT SECURITIES (cost $99,450).................. 119,104
---------
</TABLE>

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

A-17
<PAGE> 18
<TABLE>
<CAPTION>

<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 10.7% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 4.9%
General Electric Capital Corp. 5.45% due 12/1/98............ $2,700 $ 2,700
Lucent Technologies, Inc. 5.10% due 12/2/98................. 1,800 1,800
Oryx Energy Co. 9.50% due 11/1/99........................... 1,500 1,543
Oryx Energy Co. 10.00% due 6/15/99.......................... 500 511
---------
6,554
---------

FEDERAL AGENCY OBLIGATIONS -- 5.8%
Federal Home Loan Bank Discount Notes 5.00% due 1/13/99..... 2,000 1,988
Federal Home Loan Mortgage Discount Notes 5.10% due
3/19/99................................................... 3,000 2,955
Federal National Mortgage Association Discount Notes 5.06%
due 1/8/99................................................ 2,900 2,885
---------
7,828
---------
TOTAL SHORT-TERM SECURITIES (cost $14,330).................. 14,382
---------
</TABLE>

<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS -- (cost $113,780) 99.6% 133,486
Other assets less liabilities -- 0.4 583
------ ---------
NET ASSETS -- 100.0% $134,069
====== =========
</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 November 30, 1998

(2) PIK ("Payment-in-Kind") payment made with additional shares
in lieu of cash

ADR - American Depository Receipt

OPEN FORWARD FOREIGN CURRENCY CONTRACTS

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

<TABLE>
<CAPTION>
GROSS UNREALIZED
DEPRECIATION
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------
GBP 120,000 USD 196,340 08/10/99 (4)
----
Net Unrealized Depreciation............. $(3)
====
</TABLE>

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

GBP - British Pound USD - United States Dollar

See Notes to Financial Statements

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

A-18
<PAGE> 19

[ARROW UP]
- ---------------------

ANCHOR PATHWAY FUND
HIGH-YIELD BOND SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1998

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 93.5% (IN THOUSANDS) (IN THOUSANDS)
-----------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 6.7%
Construction & Housing -- 1.6%
CSC Holdings, Inc. 7.88% 2007............................... $ 500 $ 528
CSC Holdings, Inc. 9.88% 2013............................... 1,000 1,110

Electronic Components -- 1.9%
Flextronics International Ltd. 8.75% 2007................... 750 763
Zilog, Inc., Series B 9.50% 2005*........................... 1,500 1,170

Electronic Instruments -- 0.4%
Global Telesystems Ltd. 9.88% 2005.......................... 400 376

Industrial Components -- 2.8%
Breed Technologies, Inc. 9.25% 2008#........................ 2,500 2,150
Impress Metal Packaging Holdings 9.88% 2007................. (DEM) 1,000 650

---------
6,747
---------
CONSUMER GOODS -- 10.9%
Appliances & Household Durables -- 1.1%
Lifestyle Furnishings International Ltd. 10.88% 2006........ 1,000 1,073

Beverages & Tobacco -- 2.1%
Canandaigua Wine, Inc. 8.75% 2003*.......................... 500 512
Delta Beverage Group, Inc. 9.75% 2003*...................... 1,000 1,055
Standard Commercial Corp. 8.88% 2005........................ 500 496

Food & Household Products -- 4.1%
Anchor Glass Container Corp. 9.88% 2008..................... 750 754
Anchor Glass Container Corp. 11.25% 2005.................... 500 515
Favorite Brands International, Inc. 10.75% 2006#............ 500 410
Home Products International, Inc. 9.63% 2008*............... 1,750 1,697
Tekni-Plex, Inc., Series B 9.25% 2008....................... 750 780

Health & Personal Care -- 1.7%
AKI Holding Corp. zero coupon 2009*#@....................... 1,250 481
AKI, Inc. 10.50% 2008*#..................................... 1,250 1,200

Recreation & Other Consumer Products -- 1.1%
V2 Music Holdings PLC zero coupon 2008*@.................... 2,000 1,060

Textiles & Apparel -- 0.8%
Tultex Corp. 10.63% 2005.................................... 1,250 831
---------
10,864
---------
CONSUMER SERVICES -- 1.3%
Retail -- 1.3%
Kmart Corp. 9.78% 2020...................................... 250 274
Randalls Food Markets, Inc. 9.38% 2007...................... 1,000 1,060
---------
1,334
---------
ENERGY -- 2.3%
Energy Sources -- 2.3%
Benton Oil & Gas Co. 9.38% 2007............................. 300 183
Benton Oil & Gas Co. 11.63% 2003............................ 500 375
Cross Timbers Oil Co., Class B 8.75% 2009................... 500 475
Kelley Oil & Gas Corp., Series B 10.38% 2006................ 750 559
</TABLE>

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

A-19
<PAGE> 20

<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 $ 197
Ocean Energy, Inc. 8.88% 2007............................... 500 520
---------
2,309
---------
FINANCE -- 1.9%
Banking -- 0.4%
Fuji Bank Investment LLC 9.87% 2049#(1)..................... 500 355

Financial Services -- 1.5%
DR Structured Finance Corp. 9.35% 2019*..................... 500 510
PTC International Finance BV zero coupon 2007*@............. 1,000 670
William Hill Finance PLC 10.63% 2008#.......................(GBP) 157 262

Wilshire Financial Services Group, Inc.,
Series B 13.00%2004 ........................................ 500 83
---------
1,880
---------
MATERIALS -- 7.2%
Building Materials -- 0.5%
Consumers International, Inc. 10.25% 2005#.................. 500 536

Chemicals -- 1.0%
Key Plastics, Inc. 10.25% 2007.............................. 1,000 950

Forest Products & Paper -- 3.6%
Container Corp. of America 9.75% 2003....................... 2,000 2,040
Container Corp. of America, Class A 11.25% 2004............. 500 515
Paperboard Industries International, Inc. 8.38% 2007........ 1,100 1,089

Metals & Minerals -- 2.1%
Doe Run Resources Corp., Series B 11.25% 2005*.............. 1,500 1,095
Kaiser Aluminum & Chemical Corp. 12.75% 2003................ 1,000 990
---------
7,215
---------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.5%
Foreign Government -- 1.5%
Republic of Venezuela 6.63% 2007*........................... 452 253
Republic of Argentina 11.38% 2017*.......................... 500 508
United Mexican States 11.38% 2016*.......................... 700 751
---------
1,512
---------
REAL ESTATE -- 0.5%
Real Estate Investment Trusts -- 0.5%
Felcor Suites Hotels, Inc. 7.38% 2004....................... 500 462
---------
SERVICES -- 58.7%
Broadcasting & Publishing -- 15.8%
Adelphia Communications Corp. 8.38% 2008.................... 1,000 1,013
CBS Radio Corp. 11.38% 2009(2).............................. 1,047 1,222
Chancellor Media Corp. 8.75% 2007........................... 1,000 1,027
Chancellor Media Corp. 9.38% 2004........................... 1,000 1,060
Comcast UK Cable Partners Ltd. zero coupon 2007@............ 2,365 2,046
Falcon Holding Group LP 8.38% 2010#......................... 1,250 1,287
Fox Liberty Networks LLC zero coupon 2007@.................. 575 411
Fox Liberty Networks LLC 8.88% 2007......................... 750 773
Gray Communications Systems, Inc. 10.63% 2006............... 1,500 1,612
International CableTel, Inc. zero coupon 2005@.............. 750 675
Lenfest Communications, Inc. 8.25% 2008#.................... 1,000 1,020
Newsquest Capital PLC 11.00% 2006........................... 450 501
RBS Participacoes SA 11.00% 2007*#.......................... 500 325
Sun Media Corp. 9.50% 2007.................................. 975 1,073
</TABLE>

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

A-20
<PAGE> 21

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (Continued) (IN THOUSANDS) (IN THOUSANDS)
-----------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Broadcasting & Publishing (continued)
Telemundo Holdings, Inc. zero coupon 2008#@................. $1,000 $ 581
Transwestern Publishing Co. 9.63% 2007...................... 750 785
TVN Entertainment Corp. 14.00% 2008*(3)..................... 500 440

Business & Public Services -- 11.9%
Allied Waste North America, Inc. 10.25% 2006................ 2,000 2,340
Graham Packaging Co., Series B 8.75% 2008................... 1,500 1,523
Integrated Health Services, Inc. 9.25% 2008................. 1,750 1,706
Integrated Health Services, Inc. 9.50% 2007................. 1,825 1,802
Mariner Health Group, Inc. 9.50% 2006....................... 385 377
Paracelsus Healthcare Corp. 10.00% 2006..................... 2,750 2,503
Printpack, Inc. 10.63% 2006................................. 500 520
Protection One Alarm Monitoring Corp. 13.63% 2005........... 650 741
Tenet Healthcare Corp. 8.00% 2005........................... 250 259
Unison Healthcare Corp. 13.75% 2006#(4)+.................... 650 159

Business Services -- 0.8%
Iron Mountain, Inc. 8.75% 2009.............................. 500 510
LES, Inc. 9.25% 2008*....................................... 250 260

Leisure & Tourism -- 4.9%
AMF Group, Inc. 10.88% 2006................................. 2,000 1,700
AMF Group, Inc., Series B zero coupon 2006@................. 405 231
Boyd Gaming Corp. 9.25% 2003................................ 500 513
Boyd Gaming Corp. 9.50% 2007................................ 250 244
Friendly Ice Cream Corp. 10.50% 2007........................ 625 642
Regal Cinemas, Inc. 9.50% 2008#............................. 750 787
Sun International Ltd. 9.00% 2007........................... 750 788

Merchandising -- 0.5%
Boyds Collection Ltd. 9.00% 2008*#.......................... 500 515

Telecommunications -- 23.7%
American Cellular Corp. 10.50% 2008#........................ 1,000 990
Cellular Communications of Puerto Rico, Inc. 10.00% 2007*... 500 508
Centennial Cellular Corp. 8.88% 2001........................ 2,500 2,650
Clearnet Communications, Inc. zero coupon 2007@.............(CAD) 1,000 405
Clearnet Communications, Inc. zero coupon 2008@.............(CAD) 6,175 2,187
COLT Telecom Group 7.63% 2008...............................(DEM) 1,750 1,034
COLT Telecom Group PLC 8.88% 2007#..........................(DEM) 2,000 1,246
Comcast Cellular Holdings, Inc. 9.50% 2007.................. 1,500 1,620
Comunicacion Celular SA zero coupon 2003*@.................. 1,000 700
Consorcio Ecuatoriano de Telecommunicaciones 14.00% 2002*... 500 280
Esat Holdings Ltd. zero coupon 2007@........................ 500 333
Esat Telecom Group PLC 11.88% 2008.......................... 250 259
Globalstar LP 11.38% 2004................................... 500 386
McCaw International Ltd. zero coupon 2007................... 1,000 540
Nextel Communications, Inc. zero coupon 2007@............... 750 497
Nextel Communications, Inc. zero coupon 2004@............... 1,500 1,470
Nextel Communications, Inc. zero coupon 2007@............... 2,250 1,423
Nextel Communications, Inc. zero coupon 2008#@.............. 750 465
Nextlink Communications, Inc. 9.00% 2008#................... 250 240
NTL, Inc. 10.00% 2007....................................... 500 520
Omnipoint Corp. 11.63% 2006................................. 750 482
Pagemart Wireless, Inc. zero coupon 2008*@.................. 1,500 705
Time Warner Telecom, Inc. 9.75% 2008........................ 500 530
United States Xchange LLC 15.00% 2008*#..................... 1,250 1,312
Viatel, Inc. zero coupon 2008*@............................. 1,000 610
Viatel, Inc. 10.00% 2011*#..................................(DEM) 26 18
</TABLE>

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

A-21
<PAGE> 22
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (Continued) (IN THOUSANDS) (IN THOUSANDS)
-----------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Telecommunications (continued)
Viatel, Inc. 11.15% 2008*(3)................................(DEM) 500 $ 290
Viatel, Inc. 11.25% 2008*(3)................................ $2,000 2,000

Transportation -- 1.1%
USAir, Inc. 9.63% 2003...................................... 500 528
USAir, Inc. 10.38% 2013..................................... 500 564
---------
58,763
---------
UNITED STATES TREASURY -- 2.5%
6.88% Notes 2006............................................ 2,210 2,496
---------
TOTAL BONDS & NOTES (cost $97,785).......................... 93,582
---------

<CAPTION>
COMMON STOCK -- 0.1% SHARES
-----------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 0.1%
Cellular & Paging -- 0.1%
Nextel Communications, Inc., Class A+ (cost $25)............ 1,549 33
---------

PREFERRED STOCK -- 0.1%
-----------------------------------------------------------------------------------------------
SERVICES -- 0.1%
Telecommunications -- 0.1%
Viatel, Inc., Series A*(2) (cost $107)...................... 1,743 115
---------

WARRANTS -- 0.3%+
-----------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 0.0%
Electronic Instruments -- 0.0%
Cellnet Data Systems, Inc. 9/15/07#......................... 1,000 9
---------
CONSUMER GOODS -- 0.0%
Recreation & Other Consumer Products -- 0.0%
V2 Music Holdings PLC 4/15/08*#............................. 2,000 0
---------
SERVICES -- 0.3%
Cellular & Paging -- 0.3%
Cellular Communications International, Inc. 8/15/03*........ 2,250 162
Comunicacion Celular SA 8/15/03*#........................... 1,000 80
Esat Holdings Ltd. 2/01/07*#................................ 500 16
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 15
McCaw International Ltd. 4/15/07#........................... 1,000 3
Nextel Communications, Inc. 4/25/99*........................ 500 4
---------
310
---------
TOTAL WARRANTS (cost $88)................................... 319
---------
TOTAL INVESTMENT SECURITIES (cost $98,005).................. 94,049
---------
</TABLE>

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

A-22
<PAGE> 23
<TABLE>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 4.2% (IN THOUSANDS) (IN THOUSANDS)
-----------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 4.2%
General Electric Capital Corp. 5.45% due 12/1/98............ $2,200 $ 2,200
St Paul Cos., Inc. 5.16% due 12/10/98....................... 2,000 1,997
---------
TOTAL SHORT-TERM SECURITIES (cost $4,197)................... 4,197
---------

TOTAL INVESTMENTS --
(cost $102,202) 98.2% 98,246
Other assets less liabilities -- 1.8 1,815
------ ---------
NET ASSETS -- 100.0% $100,061
====== =========

</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 November 30, 1998

(2) PIK ("Payment-in-Kind") payment made with additional shares in
lieu of cash

(3) Bond issued as part of a unit which includes an equity
component

(4) Bond in default

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>
------------------------------------------------------------
DEM 715,000 USD 422,665 01/28/99 $12
DEM 950,000 USD 562,048 02/17/99 5
DEM 1,032,500 USD 611,010 02/23/99 5
GBP 102,430 USD 168,820 12/21/98 2
----
24
----
</TABLE>

<TABLE>
<CAPTION>
GROSS UNREALIZED
DEPRECIATION
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------
DEM 1,861,720 USD 1,101,814 02/25/99 (4)
----
Net Unrealized Appreciation.... $20
====
</TABLE>

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

<TABLE>
<S> <C> <C> <C> <C> <C>
CAD - Canadian Dollar GBP - British Pound
DEM - Deutsche Mark USD - United States Dollar
See Notes to Financial Statements
</TABLE>

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

A-23
<PAGE> 24

[ARROW UP]
- ---------------------

ANCHOR PATHWAY FUND
U.S. GOVERNMENT/
AAA-RATED SECURITIES SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1998

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 98.7% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES -- 12.7%++
EQCC Home Equity Loan Trust, Series A, Class A2 6.95%
2012...................................................... $ 243 $ 244
Green Tree Financial Corp., Series 1995-9, Class A5 6.80%
2027...................................................... 1,000 1,011
Nomura Asset Securities Corp., Series D, Class A 6.28%
2028...................................................... 2,869 2,921
Sears Credit Account Master Trust, Series 1998-2, Class A
5.25% 2008................................................ 250 244
Structured Asset Securities Corp., Series 1998-RE1, Class 1
8.71% 2028(1)............................................. 1,809 1,943
Structured Asset Securities Corp., Series 1998-RF2, Class A
8.58% 2027*(1)............................................ 3,517 3,758
--------
10,121
--------
DEVELOPMENTAL AUTHORITIES -- 3.2%
Intermediate American Development Bank 8.88% 2009........... 2,000 2,536
--------
FEDERAL AGENCY OBLIGATIONS -- 38.2%++
Federal Home Loan Mortgage Corp. 6.50% 2009*................ 2,000 2,004
Federal Home Loan Mortgage Corp. 8.00% 2012................. 499 514
Federal Home Loan Mortgage Corp. 9.00% 2021-2022............ 669 708
Federal Home Loan Mortgage Corp. 9.50% 2016................. 460 493
Federal Home Loan Mortgage Corp. 11.88% 2013................ 10 11
Federal Home Loan Mortgage Corp. 12.50% 2013................ 85 96
Federal National Mortgage Association 5.75% 2005............ 500 518
Federal National Mortgage Association 6.00% 2013............ 291 291
Federal National Mortgage Association 6.50% 2028............ 4,031 4,058
Federal National Mortgage Association 6.85% 2026*........... 1,193 1,195
Federal National Mortgage Association 7.00% 2026-2027....... 1,232 1,256
Federal National Mortgage Association 7.50% 2009............ 842 866
Government National Mortgage Association 6.00% 2028......... 2,961 2,932
Government National Mortgage Association 6.50% 2028......... 4,233 4,276
Government National Mortgage Association 7.00% 2023-2025.... 3,657 3,753
Government National Mortgage Association 7.50% 2023-2028.... 739 764
Government National Mortgage Association 8.00% 2017-2023.... 1,623 1,700
Government National Mortgage Association 8.50% 2016-2022.... 953 1,015
Government National Mortgage Association 9.00% 2016-2017.... 580 624
Government National Mortgage Association 9.50% 2009-2017.... 2,949 3,168
Government National Mortgage Association 10.00% 2016........ 25 27
Government National Mortgage Association 10.50% 2016........ 116 127
Government National Mortgage Association 11.00% 2019........ 27 30
Government National Mortgage Association 11.50% 2010........ 10 11
--------
30,437
--------
MORTGAGE-RELATED SECURITIES -- 20.9%++
Asset Backed Securities Investment Trust, Series 1997-D,
Class A 6.79% 2003*#...................................... 212 213
Chase Commercial Mortgage Securities Corp., Series 1998-2,
Class A2 6.39% 2008....................................... 250 258
Commercial Mortgage Acceptance Corp., Series 1998-C1, Class
A1 6.23% 2007............................................. 491 500
Credit Suisse First Boston Mortgage, Series 1998-C1, Class
A2A 6.26% 2040*........................................... 730 745
DLJ Mortgage Acceptance Corp., Series 1996-CF2, Class A1B
7.29% 2021#............................................... 3,800 4,011
First Chicago Master Trust, Series 1995-M, Class A 5.52%
2003(1)................................................... 1,500 1,495
GMAC Commercial Mortgage Security, Inc., Series 1997-C1,
Class A3 6.87% 2007....................................... 250 265
</TABLE>

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

A-24
<PAGE> 25

<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 $ 512
Merrill Lynch Mortgage Investors, Inc., Series 1997-C1,
Class A1 6.95% 2029*...................................... 934 972
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 7.40% 2010*(1)................................... 1,000 1,014
Morgan Stanley Capital I Inc., Series 1998-1, Class A5 6.75%
2013*..................................................... 847 856
Morgan Stanley Capital I Inc., Series 1998-HF2, Class A2
6.48% 2030................................................ 1,000 1,037
Mortgage Capital Funding, Inc., Series 1998-1, Class A5
6.42% 2007*#.............................................. 1,448 1,492
Norwest Asset Securities Corp., Series 1998, Class A1 6.25%
2013(2)................................................... 325 323
Norwest Asset Securities Corp., Series 1998-8, Class A1
6.50% 2013................................................ 1,166 1,171
Ocwen Residential MBS Corp., Series 1998-R1, Class AWAC
1.08% 2040#(1)............................................ 1,296 1,292
--------
16,675
--------
UNITED STATES TREASURY -- 23.7%
8.00% Bonds 2021............................................ 1,090 1,470
8.88% Bonds 2017............................................ 3,850 5,465
12.00% Bonds 2013........................................... 1,000 1,530
5.88% Notes 2005............................................ 2,975 3,181
6.25% Notes 2007............................................ 1,540 1,691
6.63% Notes 2007............................................ 1,700 1,910
7.25% Notes 2004............................................ 3,255 3,650
--------
18,897
--------
TOTAL INVESTMENT SECURITIES (cost $76,986).................. 78,666
--------

SHORT-TERM SECURITIES -- 3.6%
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 1.7%
General Electric Capital Corp. 5.45% due 12/1/98............ 1,380 1,380
--------

FEDERAL AGENCY OBLIGATIONS -- 1.9%
Federal Home Loan Mortgage Discount Notes 5.15% due
2/5/99(3)................................................. 1,500 1,486
--------
TOTAL SHORT-TERM SECURITIES (cost $2,866)................... 2,866
--------

TOTAL INVESTMENTS --
(cost $79,852) 102.3% 81,532
Liabilities in excess of other assets -- (2.3) (1,847)
------ --------
NET ASSETS -- 100.0% $79,685
====== ========
</TABLE>

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

<TABLE>
<S> <C> <C>
++ 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
(1) Variable rate security; rate as of November 30, 1998
(2) The security was purchased on a when-issued or delayed
delivery basis. Securities purchased on a when-issued basis
are purchased for delivery beyond normal settlement date at
a stated price. Purchasing securities on a when-issued basis
may involve a risk that the market price at the time of
delivery may be lower than the agreed upon purchase price.
(3) The security or a portion thereof represents collateral for
a when-issued security.
</TABLE>

See Notes to Financial Statements

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

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ANCHOR PATHWAY FUND
CASH MANAGEMENT SERIES INVESTMENT PORTFOLIO -- NOVEMBER 30, 1998

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 100.3% (IN THOUSANDS) (IN THOUSANDS)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 73.0%
A.I. Credit Corp. 5.14% due 1/04/99................................. $ 800 $ 796
American Express Credit Corp. 5.15% due 12/03/98.................... 2,000 1,999
Ameritech Corp. 5.00% due 1/12/99................................... 2,000 1,988
Bell South Telecommunications, Inc. 5.15% due 1/19/99............... 1,500 1,490
Chevron Transport Corp. 5.22% due 12/08/98.......................... 2,100 2,098
Coca-Cola Co. 5.03% due 1/15/99..................................... 2,000 1,987
Colgate-Palmolive Co. 5.15% due 12/01/98(#)......................... 2,000 2,000
Commercial Credit Co. 5.14% due 1/19/99............................. 2,000 1,986
Consolidated Natural Gas Co. 5.12% due 12/10/98..................... 2,000 1,998
Deere & Co. 5.25% due 1/14/99....................................... 1,800 1,789
Duke Energy Co. 4.83% due 12/11/98.................................. 2,000 1,997
Eastman Kodak Co. 5.11% due 12/07/98................................ 2,100 2,098
Ford Motor Credit Co. 5.16% due 1/20/99............................. 1,500 1,489
Gannett, Inc. 4.98% due 1/11/99..................................... 500 497
General Electric Capital Corp. 5.15% due 12/02/98................... 2,500 2,500
General Motors Acceptance Corp. 5.11% due 12/10/98.................. 1,200 1,199
Heinz (H.J.) Co. 5.15% due 12/01/98................................. 2,000 2,000
Hershey Foods Corp. 4.97% due 12/03/98.............................. 1,500 1,500
International Lease Finance Corp. 5.20% due 12/14/98................ 2,000 1,996
Lucent Technologies, Inc. 5.05% due 1/08/99......................... 900 895
Lucent Technologies, Inc. 5.05% due 1/13/99......................... 980 974
Minnesota Mining & Manufacturing Co. 5.06% due 12/15/98............. 1,500 1,497
PepsiCo, Inc. 5.03% due 1/13/99..................................... 2,000 1,988
Procter & Gamble Co. 5.00% due 1/19/99.............................. 1,500 1,490
Sara Lee Corp. 4.93% due 12/21/98................................... 2,000 1,995
SBC Communications, Inc. 5.15% due 1/21/99(#)....................... 2,000 1,985
St. Paul Cos., Inc. 5.16% due 12/16/98.............................. 1,200 1,197
Vermont American Corp. 4.82% due 12/31/98(#)........................ 1,200 1,195
-------
TOTAL CORPORATE SHORT-TERM NOTES.................................... 46,623
-------
FEDERAL AGENCY OBLIGATIONS -- 27.3%
Federal Home Loan Bank Discount Notes 4.99% due 12/16/98............ 1,108 1,106
Federal Home Loan Bank Discount Notes 5.05% due 12/09/98............ 2,500 2,497
Federal Home Loan Bank Discount Notes 5.06% due 12/04/98............ 1,000 1,000
Federal Home Loan Mortgage Discount Notes 5.02% due 12/30/98........ 1,800 1,793
Federal Home Loan Mortgage Discount Notes 5.03% due 12/10/98........ 1,000 999
Federal Home Loan Mortgage Discount Notes 5.06% due 12/02/98........ 2,500 2,499
Federal Home Loan Mortgage Discount Notes 5.11% due 1/15/99......... 2,000 1,987
Federal National Mortgage Association Discount Notes 5.00% due
12/22/98.......................................................... 2,000 1,994
Federal National Mortgage Association Discount Notes 5.07% due
12/04/98.......................................................... 1,130 1,129
Federal National Mortgage Association Discount Notes 5.11% due
1/15/99........................................................... 2,400 2,385
-------
TOTAL FEDERAL AGENCY OBLIGATIONS.................................... 17,389
-------
TOTAL SHORT-TERM SECURITIES (cost: $64,012)......................... 64,012
-------
</TABLE>

TOTAL INVESTMENTS --
(cost $64,012) 100.3% $64,012
Liabilities in excess of other assets -- (0.3) (186)
------ -------
NET ASSETS -- 100.0% $63,826
====== =======
</TABLE>

-----------------------------
(#) Resale restricted to qualified institutional buyers

See Notes to Financial Statements

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

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ANCHOR PATHWAY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998

(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*.......... $745,432 $167,228 $787,143 $119,104 $ 94,049 $78,666
Short-term securities*.................... 93,327 28,216 126,089 14,382 4,197 2,866
Cash...................................... 234 5 1,717 44 513 10
Receivables for --
Sales of investments.................... 1,824 -- 883 165 -- --
Fund shares sold........................ 161 32 224 51 17 43
Dividends and accrued interest.......... 146 412 1,498 756 2,190 608
Foreign currency contracts.............. -- 1,504 -- -- -- --
Prepaid expenses.......................... 20 4 23 4 3 2
Unrealized appreciation on forward foreign
currency contracts...................... -- -- -- 1 24 --
--------------------------------------------------------------------------------
841,144 197,401 917,577 134,507 100,993 82,195
--------------------------------------------------------------------------------
LIABILITIES:
Payables for --
Purchases of investments................ 3,545 1,504 343 224 589 2,077
Fund shares redeemed.................... 840 408 789 118 259 364
Advisory fees........................... 202 95 226 34 25 21
Management fees......................... 135 38 151 23 17 14
Foreign currency contracts.............. -- 1,498 -- -- -- --
Other accrued expenses.................... 67 95 74 35 38 34
Unrealized depreciation on forward foreign
currency contracts...................... -- -- -- 4 4 --
--------------------------------------------------------------------------------
4,789 3,638 1,583 438 932 2,510
--------------------------------------------------------------------------------
NET ASSETS:............................... $836,355 $193,763 $915,994 $134,069 $100,061 $79,685
================================================================================
Shares of beneficial interest outstanding
(unlimited shares authorized)........... 18,449 13,748 26,135 8,738 7,796 7,201
Net asset value per share................. $ 45.33 $ 14.09 $ 35.05 $ 15.34 $ 12.83 $ 11.07
================================================================================
COMPOSITION OF NET ASSETS:
Capital paid in........................... $357,053 $133,508 $497,667 $ 89,981 $ 91,163 $74,798
Accumulated undistributed net investment
income.................................. 2,744 3,370 16,585 5,279 10,471 4,991
Accumulated undistributed net realized
gain (loss) on investments and foreign
currency................................ 199,182 25,198 192,054 19,106 2,362 (1,784)
Unrealized appreciation (depreciation) on
investments............................. 277,376 31,679 209,688 19,706 (3,956) 1,680
Unrealized foreign exchange gain (loss) on
other assets and liablities............. -- 8 -- (3) 21 --
--------------------------------------------------------------------------------
Net Assets............................ $836,355 $193,763 $915,994 $134,069 $100,061 $79,685
================================================================================
---------------
*Cost
Investment securities................... $468,057 $135,550 $577,456 $ 99,450 $ 98,005 $76,986
================================================================================
Short-term securities................... $ 93,326 $ 28,215 $126,088 $ 14,330 $ 4,197 $ 2,866
================================================================================

CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
ASSETS:
Investment securities, at value*.......... $ --
Short-term securities*.................... 64,012
Cash...................................... 133
Receivables for --
Sales of investments.................... --
Fund shares sold........................ 196
Dividends and accrued interest.......... --
Foreign currency contracts.............. --
Prepaid expenses.......................... 1
Unrealized appreciation on forward foreign
currency contracts...................... --
-------
64,342
-------
LIABILITIES:
Payables for --
Purchases of investments................ --
Fund shares redeemed.................... 450
Advisory fees........................... 19
Management fees......................... 12
Foreign currency contracts.............. --
Other accrued expenses.................... 35
Unrealized depreciation on forward foreign
currency contracts...................... --
-------
516
-------
NET ASSETS:............................... $63,826
=======
Shares of beneficial interest outstanding
(unlimited shares authorized)........... 5,794
Net asset value per share................. $ 11.02
=======
COMPOSITION OF NET ASSETS:
Capital paid in........................... $60,410
Accumulated undistributed net investment
income.................................. 3,415
Accumulated undistributed net realized
gain (loss) on investments and foreign
currency................................ 1
Unrealized appreciation (depreciation) on
investments............................. --
Unrealized foreign exchange gain (loss) on
other assets and liablities............. --
-------
Net Assets............................ $63,826
=======
---------------
*Cost
Investment securities................... $ --
=======
Short-term securities................... $64,012
=======
</TABLE>

See Notes to Financial Statements

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

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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
================================================================================

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

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

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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)
=================================================================================

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

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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

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

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ANCHOR PATHWAY FUND
NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION: Anchor Pathway Fund (the
"Fund") is a Massachusetts Business Trust. Its Agreement and Declaration of
Trust permits the issuance of an unlimited number of shares ($.01 par value per
share) of beneficial interest in seven separate series, with shares of each
series representing an interest in a separate portfolio of assets and operating
as a distinct fund. The Fund is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company.
Shares of the Fund are offered only to Variable Separate Accounts, a separate
account of Anchor National Life Insurance Company which offers annuity
contracts.

The investment objectives for each series are as follows:

The GROWTH SERIES seeks growth of capital by investing primarily in common
stocks or securities with common stock characteristics, such as convertible
preferred stocks, which demonstrate the potential for appreciation.

The INTERNATIONAL SERIES seeks long-term growth of capital by investing
primarily in securities of issuers domiciled outside the United States.

The GROWTH-INCOME SERIES seeks growth of capital and income by investing
primarily in common stocks or securities which demonstrate the potential for
appreciation and/or dividends.

The ASSET ALLOCATION SERIES seeks high total return (including income and
capital gains) consistent with preservation of capital over the long-term
through a diversified portfolio that can include common stocks and other
equity-type securities (such as convertible bonds and preferred stocks), bonds
and other intermediate and long-term fixed-income securities and money market
instruments (debt securities maturing in one year or less) in any combination.

The HIGH YIELD BOND SERIES seeks a high level of current income and secondarily
seeks capital appreciation by investing primarily in intermediate and long-term
corporate obligations, with emphasis on higher yielding, higher risk, lower
rated or unrated securities.

The U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES seeks a high level of current
income consistent with prudent investment risk and preservation of capital by
investing primarily in a combination of securities guaranteed by the U.S.
Government and other debt securities rated AAA by Standard & Poor's Ratings
Services or Aaa by Moody's Investors Service, Inc. or that have not received a
rating but are determined to be of comparable quality by the investment adviser.

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

2. SIGNIFICANT ACCOUNTING POLICIES: The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from these estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.

SECURITY VALUATIONS: Stocks are stated at value based upon closing sales prices
reported on recognized securities exchanges or, for listed securities having no
sales reported and for unlisted securities, upon last-reported bid prices.
Nonconvertible bonds, debentures, other long-term debt securities, and
short-term securities with original or remaining maturities in excess of 60 days
are valued at prices obtained for the day of valuation from a bond pricing
service or a major dealer in bonds when such prices are available; however, in
circumstances where the investment adviser deems it appropriate to do so, an
over-the-counter or exchange quotation at the mean of representative bid or
asked prices may be used. Securities traded primarily on securities exchanges
outside the United States are valued at the last sale price on such exchanges on
the day of valuation, or if there is no sale on the day of valuation, at the
last reported bid price. 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.

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

A-31
<PAGE> 32

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 year ended November 30, 1998, 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............................................... $ 14 $ (14) $ --
International Series........................................ (1,224) 1,224 --
Growth-Income Series........................................ -- -- --
Asset Allocation Series..................................... (86) 86 --
High-Yield Bond Series...................................... (234) 234 --
U.S. Government/AAA-Rated Securities Series................. (158) 191 (33)
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.

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

A-32
<PAGE> 33

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 November 30,
1998, 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........................................ $309,677 $(32,603) $277,074 $561,685 $--
International Series***.............................. 41,127 (10,503) 30,624 164,820 --
Growth-Income Series................................. 240,869 (31,100) 209,770 703,462 --
Asset Allocation Series.............................. 23,873 (4,167) 19,706 113,780 --
High-Yield Bond Series**............................. 2,714 (6,673) (3,959) 102,205 --
U.S. Government/AAA-Rated Securities Series**........ 1,894 (99) 1,795 79,737 1,765
Cash Management Series............................... -- -- -- 64,012 --

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**........ 1,513
Cash Management Series............................... 1
</TABLE>

- ---------------
* Expire 2004-2005
** Post 10/31/98 Capital Loss Deferral: High-Yield Bond $488, U.S.
Government/AAA-Rated Securities $17
*** Post 10/31/98 Currency Loss Deferral: International $29
+ Net capital loss carryover reported as of November 30, 1998, 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"), an indirect wholly owned subsidiary of Anchor National
Life Insurance Company, which is an indirect subsidiary of SunAmerica Inc.,
pursuant to a business management agreement, manages the business affairs and
the administration of the Fund. 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 year ended November
30, 1998, was as follows:
<TABLE>
<CAPTION>

ASSET
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION HIGH-YIELD
SERIES SERIES SERIES SERIES BOND SERIES
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------
Purchases of portfolio securities............ $237,423 $109,301 $263,041 $ 28,889 $76,741
Sales of portfolio securities................ 414,917 154,141 403,105 50,159 95,812
U.S. government securities excluded above
were as follows:
Purchases of U.S. government securities...... -- -- -- 13,079 5,527
Sales of U.S. government securities.......... -- -- -- 18,023 522

<CAPTION>
U.S.
GOVERNMENT/
AAA-RATED CASH
SECURITIES MANAGEMENT
SERIES SERIES
<S> <C> <C>
-------------------------------------------------------------------
Purchases of portfolio securities............ $24,316 $ --
Sales of portfolio securities................ 10,398 --
U.S. government securities excluded above
were as follows:
Purchases of U.S. government securities...... 104,440 --
Sales of U.S. government securities.......... 108,024 --
</TABLE>

7. TRANSACTIONS WITH AFFILIATES: The following series incurred brokerage
commissions (dollars in thousands) with an affiliated broker:

<TABLE>
<CAPTION>
FSC
SECURITIES SPELMAN &
CORP. CO., INC.
---------- ---------
<S> <C> <C>
Growth Series............................................... $ 3 $ 1
Growth-Income Series........................................ 6 --
</TABLE>

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

A-33
<PAGE> 34

8. SUBSEQUENT EVENTS: On January 1, 1999, SunAmerica Inc., pursuant to the
terms of an agreement entered into with American International Group, Inc.
("AIG"), merged with and into AIG, and consequently, SunAmerica Asset Management
Corp. ("SAAMCo"), which acts as Business Manager of the Fund, became an indirect
wholly owned subsidiary of AIG. In connection therewith on January 1, 1999,
SAAMCo entered into a new Business Management Agreement with the Fund. The new
agreement has no effect on the fees or expenses payable by the Fund or its
shareholders.

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

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<PAGE> 35

[ARROW UP]
- ---------------------

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

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

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

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

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

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

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

<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
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
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
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
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
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
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 --
</TABLE>

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

@ Calculated based upon average shares outstanding

* Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company. If such expenses had been included, total
return would have been lower for each period presented.

See Notes to Financial Statements

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

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<PAGE> 36

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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
November 30, 1998, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
November 30, 1998 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
January 13, 1999

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

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<PAGE> 37

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

ANCHOR PATHWAY FUND
SHAREHOLDER TAX INFORMATION (UNAUDITED)

Certain tax information regarding the Anchor Pathway Fund is required to be
provided to the shareholder based upon each Fund's income and distributions for
the year ended November 30, 1998.

During the year ended November 30, 1998 the Funds paid the following dividends
per share along with the percentage of ordinary income dividends that qualified
for the 70% dividends received deductions for corporations:

<TABLE>
<CAPTION>
NET NET NET QUALIFYING % FOR THE
TOTAL INVESTMENT SHORT-TERM LONG-TERM 70% DIVIDENDS
DIVIDENDS INCOME CAPITAL GAINS CAPITAL GAINS RECEIVED DEDUCTION
--------- ---------- ------------- ------------- --------------------
<S> <C> <C> <C> <C> <C>
Growth Series................................ $8.82 $0.20 $1.22 $7.40 12.41%
International Series......................... 4.71 0.27 0.33 4.11 --
Growth-Income Series......................... 7.51 0.71 0.91 5.89 37.83
Asset Allocation Series...................... 2.69 0.61 0.03 2.05 36.08
High-Yield Bond Series....................... 1.71 1.39 0.12 0.20 2.72
U.S. Government/AAA-Rated Securities
Series..................................... 0.94 0.94 -- -- --
Cash Management Series....................... 0.83 0.83 -- -- --
</TABLE>

The International Series makes an election under Internal Revenue Code Section
853 to pass through foreign taxes paid by the International Series to its
shareholder. The total amount of foreign taxes passed through to the shareholder
for the fiscal year ended November 30, 1998 was $374,208. The gross foreign
source income for information reporting is $3,036,018.

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

A-37

<PAGE> 62
PART C

OTHER INFORMATION

Item 23: Exhibits.

(a) Declaration of Trust, as Amended. Incorporated herein by
reference to Post-Effective Amendment No. 12 to the
Registrant's Registration Statement on Form N-1A (File No.
33-14227) filed on January 26, 1996.

(b) By-Laws. Incorporated herein by reference to Post-Effective
Amendment No. 12 to the Registrant's Registration Statement on
Form N-1A (File No. 33-14227) filed on January 26, 1996.

(d) (i) Investment Advisory and Management Agreement.
Incorporated herein by reference to Post-Effective
Amendment No. 12 to the Registrant's Registration
Statement on Form N-1A (File No. 33-14227) filed on
January 26, 1996.

(ii) Business Management Agreement.

(e) Not applicable.

(f) Not applicable.

(g) Custodian Agreement.

(h) Form of Fund Participation Agreement.

(i) Opinion and Consent of Counsel.

(j) Consent of Independent Accountants.

(k) Not applicable.

(l) Not applicable.

(m) Not applicable.

(n) Financial Data Schedules.

(o) (i) Not applicable.

C-1
<PAGE> 63

(ii) Powers of Attorney.

Item 24. Persons Controlled by or Under Common Control with Registrant

There are no persons controlled by or under common control with
Registrant.

Item 25. Indemnification

Article VI of the Registrant's By-Laws relating to the indemnification
of officers and trustees is quoted below:

ARTICLE VI

INDEMNIFICATION

The Fund shall provide any indemnification required by applicable law
and shall indemnify trustees, officers, agents and employees as follows:

(a) the Fund shall indemnify any director or officer of the Fund who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than action by or in the right of the Fund) by reason of
the fact that such Person is or was such Trustee or officer or an employee or
agent of the Fund, or is or was serving at the request of the Fund as a
director, officer, employee or agent of another corporation, partnership, joint
venture, Fund or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such Person in connection with such action, suit or proceeding, provided such
Person acted in good faith and in a manner such Person reasonably believed to be
in or not opposed to the best interests of the Fund, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such Person's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Person did not
reasonably believe his or her actions to be in or not opposed to the best
interests of the Fund, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that such Person's conduct was unlawful.

(b) The Fund shall indemnify any Trustee or officer of the Fund who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Fund to procure a judgment in
its favor by reason of the fact that such Person is or was such Trustee or
officer or an employee or agent of the Fund, or is or was serving at the request
of the Fund as a director, officer, employee or agent of another corporation,
partnership, joint venture, Fund or other enterprise, against expenses
(including attorneys' fees), actually and reasonably incurred by such Person in
connection with the defense or settlement of such action or suit if such Person
acted in good faith and in a manner such Person reasonably believed to be in or
not opposed to the best interests of the Fund, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such Person
shall have been adjudged to be liable for negligence or misconduct in the
performance of such Person's duty to the Fund unless and only to the extent that
the court in which such action or suit was brought, or any other court having
jurisdiction in the premises, shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the case, such
Person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.

(c) To the extent that a Trustee or officer of the Fund has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subparagraphs (a) or (b) above or in defense of any
claim, issue or matter therein, such Person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
Person in connection therewith, without the necessity for the determination as
to the standard of conduct as provided in subparagraph (d).

(d) Any indemnification under subparagraph (a) or (b) (unless ordered
by a court) shall be made by the Fund only as authorized in the specific case
upon a determination that indemnification of the Trustee or officer is proper in
view of the standard of

C-2
<PAGE> 64
conduct set forth in subparagraph (a) or (b). Such determination shall be made
(i) by the Board by a majority vote of a quorum consisting of Trustees who were
disinterested and not parties to such action, suit or proceedings, or (ii) if
such a quorum of disinterested Trustees so directs, by independent legal counsel
in a written opinion; and any determination so made shall be conclusive and
binding upon all parties.

(e) Expenses incurred in defending a civil or criminal action, writ or
proceeding may be paid by the Fund in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking by or on behalf of the Trustee or officer to repay such amount
unless it shall ultimately be determined that such Person is entitled to be
indemnified by the Fund as authorized herein. Such determination must be made by
disinterested Trustees or independent legal counsel.

Prior to any payment being made pursuant to this paragraph, a majority
of quorum of disinterested, non-party Trustees of the Fund, or an independent
legal counsel in a written opinion, shall determine, based on a review of
readily available facts that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.

(f) Agents and employees of the Fund who are not Trustees or officers
of the Fund may be indemnified under the same standards and procedures set forth
above, in the discretion of the Board.

(g) Any indemnification pursuant to this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled and
shall continue as to a Person who has ceased to be a Trustee or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
Person.

(h) Nothing in the Declaration or in these By-Laws shall be deemed to
protect any Trustee or officer of the Fund against any liability to the Fund or
to its Shareholders to which such Person would otherwise be subject by reason of
willful malfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Person's office.

(i) The Fund shall have power to purchase and maintain insurance on
behalf of any Person against any liability asserted against or incurred by such
Person, whether or not the Fund would have the power to indemnify such Person
against such liability under the provisions of this Article. Nevertheless,
insurance will not be purchased or maintained by the Fund if the purchase or
maintenance of such insurance would result in the indemnification of any Person
in contravention of any rule or regulation and/or interpretation of the
Securities and Exchange Commission.

* * * * * * * * * * * * * *

The Investment Advisory Agreement provides that in absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of office on the part of the Investment Adviser (and its
officers, directors, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Investment Adviser to perform or
assist in the performance of its obligations under each Agreement) the
Investment Adviser shall not be subject to liability to the Fund or to any
shareholder of the Fund for any act or omission in the course of, or connected
with, rendering services, including without limitation, any error of judgment or
mistake or law or for any loss suffered by any of them in connection with the
matters to which each Agreement relates, except to the extent specified in
Section 36(b) of the Investment Company Act of 1940 concerning loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services.

SunAmerica Inc., the parent of Anchor National Life Insurance Company,
provides, without cost to the Fund, indemnification of individual trustees. By
individual letter agreement, SunAmerica Inc. indemnifies each trustee to the
fullest extent permitted by law against expenses and liabilities (including
damages, judgments, settlements, costs, attorney's fees, charges and expenses)
actually and reasonably incurred in connection with any action which is the
subject of any threatened, asserted, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, investigative or otherwise
and whether formal or informal to which any trustee was, is or is threatened to
be made a party by reason of facts which include his being or having been a
trustee.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the

C-3
<PAGE> 65
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

Item 26. Business and other Connections of Investment Adviser

Information concerning the business and other connections of Capital
Research and Management Company ("CRMC") is incorporated herein by reference
from CRMC's Form ADV (File No. 801-8055), which is currently on file with the
Securities and Exchange Commission.

Item 27. Principal Underwriters

Not applicable.

Item 28. Location of Accounts and Records

State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, acts as custodian, transfer agent and dividend paying
agent. It maintains books, records and accounts pursuant to the
instructions of the Fund.

Capital Research and Management Company, the Investment Adviser, is
located at 333 South Hope Street, Los Angeles, California 90071. It
maintains the books, accounts and records required to be maintained
pursuant to Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder.

SunAmerica Asset Management Corp., the Business Manager, is located at 733
Third Avenue, New York, New York 10017. It maintains the books, accounts
and records required to be maintained pursuant to Section 31(a) of the
Investment Company Act of 1940 and the rules promulgated thereunder.

Item 29. Management Services

Not applicable.

Item 30. Undertakings

Not applicable.

C-4
<PAGE> 66
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
(the "1933 Act") and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all of the requirements for effectiveness of
this Post-Effective Amendment No. 16 to the Registration Statement under 485(b)
and has duly caused this Post-Effective Amendment No. 16 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York, on the 29th day of
January, 1999.

ANCHOR PATHWAY FUND

By: /s/ PETER C. SUTTON
-------------------
Peter C. Sutton
Vice President

Pursuant to the requirements of the 1933 Act, the Post-Effective Amendment
No. 16 to the Registrant's Registration Statement on Form N-1A has been signed
below by the following persons in the capacities and on the date indicated:

<TABLE>
<S> <C> <C>
* Chairman, President January 29, 1999
- ------------------------------------ and Trustee
James K. Hunt (Principal Executive Officer)

* Senior Vice President, January 29, 1999
- ------------------------------------ Treasurer and Controller
Scott L. Robinson (Principal Financial and
Accounting Officer)

* Trustee January 29, 1999
- ------------------------------------
Monica C. Lozano

* Trustee January 29, 1999
- ------------------------------------
Allan L. Sher

* Trustee January 29, 1999
- ------------------------------------
William M. Wardlaw

*By: /S/ ROBERT M. ZAKEM January 29, 1999
--------------------------------
Attorney-in-Fact
Robert M. Zakem
</TABLE>

C-5
<PAGE> 67

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit Description
Number
<S> <C>
(d)(ii) Business Management Agreement.
(g) Custodian Agreement
(h) Form of Fund Participation Agreement
(i) Opinion and Consent of Counsel
(j) Consent of Independent Accountants
(n) Financial Data Schedules
(o)(ii) Powers of Attorney
</TABLE>

C-6

<PAGE> 1
BUSINESS MANAGEMENT AGREEMENT

THIS AGREEMENT is dated as of January 1, 1999, by and between Anchor
Pathway Fund (the "Trust"), a Massachusetts business trust registered as a
management investment company under the Investment Company Act of 1940, as
amended("1940 Act") and SunAmerica Asset Management Corp. (the "Business
Manager").

WITNESSETH:

WHEREAS, the Trust is authorized to issue shares in separate series,
with each such series representing interest in a separate portfolio of
securities and other assets, and intends initially to offer shares of seven
series designated The Cash Management Series, The High-Yield Bond Series, The
Growth-Income Series, the Growth Series, the U.S. Government
Guaranteed/AAA-Rated Securities Series, the International Series and the Asset
Allocation Series (the "Series").

WHEREAS, the Trust desires that Business Manager shall act as business
manager of the Trust and provide the administrative services necessary to
administer the affairs of the Trust, and the Business Manager desires to so act,

NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the Business Manager and the Trust agree as
follows:

1. The Trust hereby employs Business Manager to manage the business
affairs and the administration of the Trust, subject to the general supervision
of the Board of Trustees of the Trust, for the period and on the terms herein
set forth. The Business Manager hereby accepts such employment and agrees to
render the services and assume the obligations set forth herein, for the
compensation herein provided. The Business Manager shall, for all purposes
herein, be deemed an independent contractor and not an agent of the Trust or the
Series.

2. It is understood and agreed that this Agreement shall take effect on
September 22, 1998 provided that prior to that date, the terms of this Agreement
have been approved by a vote of a majority of the members of the Board of
Trustees of the Trust, including a majority of the Trustees who are not parties
to this Agreement or "interested persons" (as defined in the 1940 Act) of any
such party, cast in person at a meeting called for the purpose of voting on such
approval.

3. Business Manager shall:

a. manage the business affairs of the Trust and perform the
administrative functions required of a registered investment company at
all times in accordance with the Declaration of Trust, By-laws,
Registration Statement and current Prospectus of the Trust;
<PAGE> 2
b. if desired by the Board of Trustees, permit officers,
directors and employees of the Business Manager to serve without
compensation from the Trust as officers, Trustees, employees or agents
of the Trust;

c. arrange for the presentation and evaluation of contracts
for (i) custodianship of the Trust's assets, (ii) a registrar and
transfer agent for Trust shares, (iii) a dividend disbursing agent,
(iv) the daily pricing of Trust shares and (vi) appropriate fidelity
and liability bond coverages;

d. oversee the work of the custodian, dividend disbursing
agent, transfer agent and accountants on behalf of the Trust to assure
compliance with the Declaration of Trust, By-Laws and the 1940 Act;

e. assist the Trust in maintaining books and records,
financial information, reporting to shareholders, conducting meetings
of Trustees and shareholders and filings with the Securities and
Exchange Commission; and

f. provide adequate facilities and office space and qualifies
employees necessary to conduct the operations of the Trust.

4. The services of the Business Manager to the Trust hereunder are not
to be deemed exclusive, and the Business Manager shall be free to render similar
services to others so long as its services hereunder be not impaired thereby.

5. (a) Each series of the Trust, except for the International Series,
shall pay the Business Manager as full compensation for all services rendered
hereunder a fee which shall be accrued daily and paid monthly at an annual rate
of:

(i) 0.24% of that portion of the average daily net assets of
each series of the Trust not exceeding $30 million; and

(ii) 0.20% of average daily net assets of each series of the
Trust in excess of $30 million.

(b) The International Series shall pay the Business Manager as
full compensation for all services rendered hereunder a fee, which shall be
accrued daily and paid monthly, at an annual rate of 0.24% of the average daily
net assets of the International Series.

The average net assets are to be computed in the manner used for the
determination of the offering price of shares of the Trust. The fee for each
month shall be payable to the Business Manager not later than the tenth day of
the following month.

The fee shall be accrued daily at 1/365th of the applicable annual rate
set forth above.

-2-
<PAGE> 3
The net assets of the Series shall be determined in the manner and on the dates
set forth in the prospectus of the Trust and, on days on which the net assets
are not determined, shall be as of the last preceding day on which the net
assets shall have been determined.

Upon any termination of this Agreement on a day other than the last day
of the month, the fee for the period from the beginning of the month in which
termination occurs to the date of termination shall be prorated according to the
proportion which such period bears to the full month.

6. Except to the extent expressly assumed by the Business Manager
herein, and as provided in paragraph 8 below, the Trust shall be responsible to
pay all costs and expenses in connection with its operations not expressly
assumed by the Business Manager. Without limiting the generality of the
foregoing, such costs and expenses to be incurred by the Trust shall include the
following: investment advisory fees; subsequent registration and filing fees
with Federal and state agencies; any required Blue Sky expenses; expenses of
shareholders' meetings; the expense of reports to existing shareholders;
expenses of printing shareholder reports; proxies and prospectuses; insurance
premiums; legal and auditing fees; dividend disbursement expenses; the expense
of the issuance, transfer, and redemption of Trust shares; custodian fees;
printing and preparation of registration statements; taxes; compensation of
Trustees who are not interested persons of the Trust; association dues; and
costs of stationery, forms and certificates prepared exclusively for the Trust.

7. It is understood and agreed that the services provided to the Trust
by the Business Manager pursuant to this Agreement do not include the service of
principal underwriter for the Trust's shares, insofar as the Trust will not
utilize such a person to distribute its shares.

8. It is understood and agreed that Capital Research and Management
Company (the "Adviser") has agreed to provide supervision of the portfolios of
the Series and to determine what securities or other property shall be
purchased, held or sold by each Series, pursuant to a written investment
advisory contract with the Trust. The Adviser has also agreed to provide
adequate facilities and qualified personnel for the placement of orders for the
purchase, or other acquisition, and sale, or other disposition, of portfolio
securities for the Series.

9. Applicable state expense guarantee limitations will be observed in
regard to fees payable to Business Manager.

10. It is understood that Trustees, officers, agents and stockholders
of the Trust are or may be interested in the Business Manager as directors,
officers, stockholders, or otherwise and that directors, officers, agents and
stockholders of the Business Manager are or may be interested in the Trust as
Trustees, officers, stockholders or otherwise, that the Business Manager may be
interested in the Trust and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Declaration of Trust for the Trust and Articles of
Incorporation of the Business Manager or by specific provision of applicable
law.

-3-
<PAGE> 4
11. This agreement shall, unless sooner terminated as hereinafter
provided, remain in effect for a period of two years from the date hereof.
Thereafter, this Agreement shall continue in effect from year to year as to each
Series only so long as such continuance is specifically approved at least
annually by affirmative vote of the Board of Trustees of the Trust, or by
affirmative vote of a majority of the outstanding shares of each Series entitled
to be cast and, in either event, by a majority of those members of the Board who
are not parties to the Agreement or "interested persons" of any such party, cast
in person at a meeting called for the purpose of voting on such continuance. Any
continuance of this Agreement with respect to a Series by the vote of a majority
of the outstanding voting securities of that Series, or by the Trustees of the
Trust which shall include a majority of the non-interested Trustees, shall be
effective to continue this Agreement with respect to that Series notwithstanding
(a) that such continuance has not been so approved as to any other Series or (b)
that such continuance has not been approved by the vote of a majority of the
outstanding voting securities of the Trust as a whole.

12. This Agreement may be terminated as to any Series or the entire
Trust at any time on 60 days' written notice, without the payment of any
penalty, by the Board of Trustees of the Trust, by the vote of a majority of the
outstanding shares of such Series or the Trust, or by the Business Manager;
provided, however, that this Agreement may not be terminated by Business Manager
unless another business management agreement has been approved by the Trust in
accordance with the 1940 Act.

13. This Agreement shall terminate automatically in the event of its
assignment by either party. For the purpose of this paragraph, the term
"Assignment" shall have the meaning set forth in section 2(a)(4) of the 1940
Act.

14. This Agreement may be modified by mutual consent; however, such
consent on the part of the Trust requires the vote of a majority of the
outstanding voting securities of each Series of the Trust upon recommendation by
a vote of a majority of the Board of Trustees which shall include a vote of a
majority of the Trustees who are not interested persons of the Trust (other than
as Trustees) or the Business Manager and who have no direct or indirect interest
in the operations of the Trust, this Agreement, or the Business Manager, cast in
person at a meeting called for that purpose.

15. The Business Manager assumes no responsibility under the Agreement
other than to render the services called for hereunder. The Business Manager
shall be liable, in carrying out its duties under this Agreement (a) for actions
and omissions constituting violations of the 1940 Act, the 1933 Act or other
Federal securities laws, (b) in circumstances where the Business Manager has
failed to conform to reasonable business standards, and (c) by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties and
obligations hereunder (disabling conduct). The Business Manager shall have no
liability to the Trust, or its shareholders or creditors pursuant to (c) above,
provided it is determined by reasonable and fair means, including (a) a final
decision on the merits by a court or other body before whom the proceeding was
brought that the Business Manager was not liable by means of disabling conduct,
or (b) in the absence of such a decision, a

-4-
<PAGE> 5
reasonable determination, based upon a review of the facts, that Business
Manager was not liable by reason of disabling conduct, by (i) the vote of a
majority of a quorum of Trustees who are neither "interested persons" of the
Trust as defined in Section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (ii) an independent legal counsel in a written opinion.

16. The Business Manager and the Trust agree to maintain and preserve
for such period or periods as the Securities and Exchange Commission may
prescribe by rules and regulations, such accounts, books and other documents as
constitute the records forming the basis for all reports, including financial
statements required to be filed pursuant to the 1940 Act and for the Trust
auditor's certification relating thereto. The Business Manager and the Trust
agree that all accounts, books and other records maintained and preserved by
each as required hereby shall be subject at any time, and from time to time, to
such reasonable periodic, special and other examinations by the Securities and
Exchange Commission, and The Trust's auditors, the Trust or any representative
of the Trust, or any governmental agency or other instrumentality having
regulatory authority over the Trust. It is expressly understood and agreed that
the books and records maintained by the Business Manager on behalf of the Trust
shall, at all times, remain the property of the Trust. Moreover, the Trust
agrees to supply the Business Manager with copies of all documents filed with
the Securities and Exchange Commission, and with such other information relating
to the Trust's affairs as the Business Manager may reasonably request.

17. The obligations of the Trust under this Contract are not binding
upon any of the Trustees, officers, employees, agents or shareholders of the
Trust individually, but bind only the Trust estate. The Business Manager agrees
to look solely to the assets of the Trust or each Series for the satisfaction of
any liability in respect of the Trust or such Series under this Contract and
will not seek recourse against such Trustees, officers, employees, agents, or
shareholders, or any of them, or any of their personal assets for such
satisfaction.

18. This writing constitutes the entire agreement between the parties
and no conditions or warranties shall be implied herefrom unless expressly set
forth herein.

19. This Agreement is executed and delivered in the State of California
and shall be governed by the laws of such state and the 1940 Act.

-5-
<PAGE> 6
IN WITNESS WHEREOF, the Business Manager and the Trust have executed
this Agreement on the day first written above.

ANCHOR PATHWAY FUND

By: /s/ Susan L. Harris
--------------------------------
Susan L. Harris
Vice President & Secretary

Attest:

By: /s/ Robert M. Zakem
--------------------------------
Robert M. Zakem
Vice President and Assistant Secretary

SUNAMERICA ASSET MANAGEMENT CORP.

By: /s/ Peter A. Harbeck
--------------------------------
Peter A. Harbeck
President

Attest:

By: /s/ Robert M. Zakem
--------------------------------
Robert M. Zakem
Assistant Secretary

-6-

<PAGE> 1

CUSTODIAN CONTRACT
BETWEEN
ANCHOR PATHWAY FUND
AND
STATE STREET BANK AND TRUST COMPANY

<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Employment of Custodian and Property to be Held by It . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Duties of the Custodian with Respect to Property of the Fund Held by the Custodian in the United States . . . . . . . 2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Registration of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Availability of Federal Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Collection of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Payment of Fund Monies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 Liability for Payment in Advance of Receipt of Securities Purchased. . . . . . . . . . . . . . . . . . . . . 11
2.9 Appointment of Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Deposit of Fund Assets in Securities Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10A Fund Assets Held in the Custodian's Direct Paper System. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.11 Segregated Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.12 Ownership Certificates for Tax Purposes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.13 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.14 Communications Relating to Portfolio Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States. . . . . . . . . . . 17
3.1 Appointment of Foreign Sub-Custodians. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 Assets to be Held. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.3 Foreign Securities Depositories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4 Segregation of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.5 Agreements with Foreign Banking Institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.6 Access of Independent Accountants of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.7 Reports by Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.8 Transactions in Foreign Custody Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.9 Liability of Foreign Sub-Custodians. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.10 Liability of Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.11 Reimbursement for Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.12 Monitoring Responsibilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.13 Branches of U.S. Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

4. Payment for Sales or Repurchases or Redemptions of Share of the Fund. . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>

-i-
<PAGE> 3

<TABLE>
<S> <C> <C>
5. Proper Instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

6. Actions Permitted Without Express Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

7. Evidence of Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

8. Duties of Custodian With Respect to the Books of Account and Calculation of Net Asset Value and Net Income. . . . . 26

9. Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

10. Opinion of Fund's Independent Accountant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

11. Reports to Fund by Independent Public Accountants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

12. Compensation of Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

13. Responsibility of Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

14. Effective Period, Termination and Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

15. Successor Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

16. Interpretive and Additional Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

17. Additional Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

18. Massachusetts Law to Apply. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

19. Prior Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>

-ii-
<PAGE> 4
CUSTODIAN CONTRACT

This Contract between Anchor Pathway Fund, a business trust organized
and existing under the laws of Massachusetts, having its principal place of
business at 2201 East Camelback Road, Phoenix, Arizona 85016, hereinafter
called the "Fund", and State Street Bank and Trust Company, a Massachusetts
trust company, having its principal place of business at 225 Franklin Street,
Boston, Massachusetts 02110, hereinafter called the "Custodian".

W I T N E S S E T H :

WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and

WHEREAS, the Fund intends to initially offer shares in five series,
the Cash Management Series, High-Yield Bond Series, Growth-Income Series,
Growth Series, and U.S. Government Guaranteed/AAA-Rated Securities Series (such
series together with all other series subsequently established by the Fund and
made subject to this Contract in accordance with paragraph 17, being herein
referred to as the "Portfolio(s)");

NOW, THEREFOR, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:

1. Employment of Custodian and Property to be Held by It

The Fund hereby employs the Custodian as the custodian of the assets
of the Portfolios of the Fund, including securities which the Fund, on behalf
of the applicable Portfolio desires to be held in places within the United
States ("domestic securities") and securities it desires to be held outside the
United States ("foreign securities") pursuant to the provisions of the
Declaration of Trust. The Fund on behalf of the Portfolio(s) agrees to deliver
to the Custodian all securities and

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cash of the Portfolios, and all payments of income, payments of principal or
capital distributions received by it with respect to all securities owned by
the Portfolio(s) from time to time, and the cash consideration received by it
for such new or treasury shares of beneficial interest of the Fund representing
interests in the Portfolios, ("Shares") as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of a Portfolio
held or received by the Portfolio and not delivered to the Custodian.

Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only
in accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.

2. Duties of the Custodian with Respect to Property of the Fund Held by
the Custodian in the United States

2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by
such Portfolio, other than (a) securities which are maintained
pursuant to Section 2.10 in a clearing agency which acts as a
securities

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depository or in a book-entry system authorized by the U.S. Department
of the Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian pursuant to Section 2.10A.

2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund on behalf of
the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:

(1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;

(2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into
by the Portfolio;

(3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.10
hereof;

(4) To the depository agent in connection with tender or
other similar offers for securities of the Portfolio;

(5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise become
payable; provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;

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(6) To the issuer thereof, or its agent, for transfer
into the name of the Portfolio or into the name of any nominee
or nominees of the Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.9 or into the
name or nominee name of any sub-custodian appointed pursuant
to Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;

(7) Upon the sale of such securities for the account of
the Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;

(8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;

(9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of such
warrants, rights or similar securities or the surrender of
interim receipts or temporary securities for definitive
securities; provided that, in

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any such case, the new securities and cash, if any, are to be
delivered to the Custodian;

(10) For delivery in connection with any loans of
securities made by the Portfolio, but only against receipt of
adequate collateral as agreed upon from time to time by the
Custodian and the Fund on behalf of the Portfolio, which may
be in the form of cash or obligations issued by the United
States government, its agencies or instrumentalities, except
that in connection with any loans for which collateral is to
be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;

(11) For delivery as security in connection with any
borrowings by the Fund on behalf of the Portfolio requiring a
pledge of assets by the Fund on behalf of the Portfolio, but
only against receipt of amounts borrowed;

(12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio of the Fund;

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(13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Portfolio of the Fund;

(14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund, related to the Portfolio
("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and

(15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions from the Fund
on behalf of the applicable Portfolio, a certified copy of a
resolution of the Board of Trustees or of the Executive
Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, specifying the
securities of the Portfolio to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities shall be
made.

2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee

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of the Fund on behalf of the Portfolio or of any nominee of the
Custodian which nominee shall be assigned exclusively to the
Portfolio, unless the Fund has authorized in writing the appointment
of a nominee to be used in common with other registered investment
companies having the same investment adviser as the Portfolio, or in
the name or nominee name of any agent appointed pursuant to Section
2.9 or in the name or nominee name of any sub-custodian appointed
pursuant to Article 1. All securities accepted by the Custodian on
behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form.

2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all case received by it
from or for the account of the Portfolio, other than cash maintained
by the Portfolio in a bank account established and used in accordance
with Rule 17f-3 under the Investment Company Act of 1940. Funds held
by the Custodian for a Portfolio may be deposited by it to its credit
as Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every such bank or
trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust
company shall on behalf of each applicable Portfolio be approved by
vote of a majority of the Board of

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Trustees of the Fund. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.

2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
on behalf of each applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the Fund
on behalf of a Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received in payment for
Shares of such Portfolio which are deposited into the Portfolio's
account.

2.6 Collection of Income. The Custodian shall collect on a timely basis
all income and other payments with respect to registered domestic
securities held hereunder to which each Portfolio shall be entitled
either by law or pursuant to custom in the securities business and
shall collect on a timely basis all income and other payments with
respect to bearer domestic securities if, on the date of payment by
the issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when they
become due and shall collect interest when due on securities held
hereunder. Income due each Portfolio on securities loaned pursuant to
the provisions of Section 2.2(10) shall be the responsibility of the
Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging

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for the timely delivery to the Custodian of the income to which the
Portfolio is properly entitled.

2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:

1) Upon the purchase of domestic securities, options,
futures contracts for the account of the Portfolio but only
(a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the
name of the Portfolio or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper form
for transfer; (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth
in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.10A; (d) in the case of
repurchase agreements entered into between the Fund on behalf
of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii)

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against delivery of the receipt evidencing purchase by the
Portfolio of securities owned by the Custodian along with
written evidence of the agreement by the Custodian to
repurchase such securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund
as defined in Article 5;

2) In connection with conversion, exchange or surrender
of securities owned by the Portfolio as set forth in Section
2.2 hereof;

3) For the redemption or repurchase of Shares issued by
the Portfolio as set forth in Article 4 hereof;

4) For the payment of any expense or liability incurred
by the Portfolio, including but not limited to the following
payments for the account of the Portfolio: interest, taxes,
management, accounting, transfer agent and legal fees, and
operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as deferred
expenses;

5) For the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing documents of the
Fund;

6) For payment of the amount of dividends received in
respect of securities sold short;

7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund on behalf
of the Portfolio, a certified copy of a

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resolution of the Board of Trustees or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.

2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received
by the Custodian.

2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.

2.10 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by

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the U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:

1) The Custodian may keep securities of the Portfolio in
a Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;

2) The records of the Custodian with respect to
securities of the Portfolio which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Portfolio;

3) The Custodian shall pay for securities purchased for
the account of the Portfolio upon (i) receipt of advice from
the Securities System that such securities have been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such payment and
transfer for the account of the Portfolio. The Custodian
shalltransfer securities sold for the account of the Portfolio
upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Portfolio. Copies of all advices from the Securities
System of transfers of securities for the account of the
Portfolio shall identify the Portfolio,

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be maintained for the Portfolio by the Custodian and be
provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Portfolio.

4) The Custodian shall provide the Fund for the
Portfolio with any report obtained by the Custodian on the
Securities System's accounting system, internal accounting
control and procedures for safeguarding securities deposited
in the Securities System;

5) The Custodian shall have received from the Fund on
behalf of the Portfolio the initial or annual certificate, as
the case may be, required by Article 14 hereof;

6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the Fund for
the benefit of the Portfolio for any loss or damage to the
Portfolio resulting from use of the Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent
to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of
any such loss or

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damage if and to the extent that the Portfolio has not been
made whole for any such loss or damage.

2.10A Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by a Portfolio
in the Direct Paper System of the Custodian subject to the following
provisions:

1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of Proper
Instructions from the Fund on behalf of the Portfolio;

2) The Custodian may keep securities of the Portfolio in
the Direct Paper System only if such securities are
represented in an account ("Account") of the Custodian in the
Direct Paper System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;

3) The records of the Custodian with respect to
securities of the Portfolio which are maintained in the Direct
Paper System shall identify by book-entry those securities
belonging to the Portfolio;

4) The Custodian shall pay for securities purchased for
the account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such payment and
transfer of securities to the account of the Portfolio. The
Custodian shall transfer securities sold for the account of
the Portfolio upon the making of an entry on the records of
the Custodian to reflect such transfer and receipt of payment
for the account of the Portfolio;

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5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account of
the Portfolio;

6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal accounting
control as the Fund may reasonably request from time to time.

2.11 Segregated Accounts. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options

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purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii)
for the purposes of compliance by the Portfolio with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.

2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.

2.13 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Portfolio such proxies, all
proxy soliciting materials and all notices relating to such
securities.

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2.14 Communications Relating to Portfolio Securities. The Custodian shall
transmit promptly to the Fund for each Portfolio all written
information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of
futures contracts purchased or sold by the Portfolio) received by the
Custodian from issuers of the securities being held for the Portfolio.
With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Portfolio all written information received by
the Custodian from issuers of the securities whose tender or exchange
is sought and from the party (or his agents) making the tender or
exchange offer. If the Portfolio desires to take action with respect
to any tender offer, exchange offer or any other similar transaction,
the Portfolio shall notify the Custodian at least three business days
prior to the date on which the Custodian is to take such action.

3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States.

3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the
Portfolio's securities and other assets maintained outside the United
States the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined
in Section 5 of this Contract, together with a certified resolution of
the Fund's Board of Trustees, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate additional
foreign

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banking institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Portfolio's assets.

3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to:
(a) "foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Portfolio's foreign
securities transactions.

3.3 Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Custodian and the Fund, assets of the
Portfolios shall be maintained in foreign securities depositories only
through arrangements implemented by the foreign banking institutions
serving as sub-custodians pursuant to the terms hereof. Where
possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.5 hereof.

3.4 Segregation of Securities. The Custodian shall identify on its books
as belonging to each applicable Portfolio of the Fund, the foreign
securities of such Portfolios held by each foreign sub-custodian.
Each agreement pursuant to which the Custodian employs a foreign
banking institution shall require that such institution establish a
custody account for the Custodian on behalf of the Fund for each
applicable Portfolio of the Fund and physically segregate in each
account, securities and other assets of the Portfolios, and, in the
event that such institution deposits the securities of one or more of
the Portfolios in a

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foreign securities depository, that it shall identify on its books as
belonging to the Custodian, as agent for each applicable Portfolio,
the securities so deposited.

3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and shall provide that: (a) the assets of
each Portfolio will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of payment for
their safe custody or administration; (b) beneficial ownership for the
assets of each Portfolio will be freely transferable without the
payment of money or value other than for custody or administration;
(c) adequate records will be maintained identifying the assets as
belonging to each applicable Portfolio; (d) officers of or auditors
employed by, or other representatives of the Custodian, including to
the extent permitted under applicable law the independent public
accountants for the Fund, will be given access to the books and
records of the foreign banking institution relating to its actions
under its agreement with the Custodian; and (e) assets of the
Portfolio held by the foreign sub-custodian will be subject only to
the instructions of the Custodian or its agents.

3.6 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.

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3.7 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio(s) securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio, the identity of
the entity having physical possession of such securities.

3.8 Transactions in Foreign Custody Account.

a) Except as otherwise provided in paragraph (b) of this Section
3.8, the provision of Sections 2.2 and 2.7 of this Contract
shall apply, mutatis mutandis to the foreign securities of the
Fund held outside the United States by foreign sub-custodians.

b) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received for
the account of each applicable Portfolio and delivery of
securities maintained for the account of each applicable
Portfolio may be effected in accordance with the customary
established securities trading or securities processing
practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.

20
<PAGE> 24
c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such nominee
harmless from any liability as a holder of record of such
securities.

3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable
care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and each Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or
claim.

3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omission of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 3.13 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or otherwise
resulting from a bank or a securities depository failure to exercise
reasonable care. Notwithstanding the foregoing

21
<PAGE> 25
provisions of this paragraph 3.10, in delegating custody duties to
State Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil strife or armed
hostilities) or (b) other risk of loss (excluding a bankruptcy or
insolvency of State Street London Ltd. not caused by political risk)
for which neither the Custodian nor State Street London Ltd. would be
liable (including, but not limited to, losses due to Acts of God,
nuclear incident or other losses under circumstances where the
Custodian and State Street London Ltd. have exercised reasonable
care).

3.11 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, changes, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefore and should the Fund fail to
repay the Custodian promptly, the custodian shall be entitled to
utilize available cash and to dispose of such Portfolios assets to the
extent necessary to obtain reimbursement.

3.12 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the

22
<PAGE> 26
Custodian. Such information shall be similar in kind and scope to
that furnished to the Fund in connection with the initial approval of
this Contract. In addition, the Custodian will promptly inform the
Fund in the event that the Custodian learns of a material adverse
change in the financial condition of a foreign sub-custodian or any
material loss of the assets of the Fund or in the case of any foreign
sub-custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200 million (U.S. dollars
or the equivalent thereof) or that its shareholders'equity has
declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles).

3.13 Branches of U.S. Banks.

a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Portfolios
assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of
the Investment Company Act of 1940 meeting the qualifications
set forth in Section 26(a) of said Act. The appointment of
any such branch as a sub-custodian shall be governed by
paragraph 1 of this Contract.

b) Cash held for each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account established
for the Fund with the Custodian's London branch, which account
shall be subject to the direction of the Custodians, State
Street London Ltd. or both.

23
<PAGE> 27
4. Payment for Sales or Repurchases or Redemptions of Share of the Fund.
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer
Agent of any receipt by it of payments for Shares of such Portfolio.

From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board
of Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agency a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt
of instructions from the Transfer Agency to wire funds to or through a
commercial bank designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares of the Fund, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, when presented to the
Custodian inaccordance with such procedures and controls as are mutually agreed
upon from time to time between the Fund and the Custodian.

5. Proper Instructions. Proper Instructions as used throughout this
Contract means a writing signed or initialed by one or more person or persons
as the Board of Trustees shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such action
is requested. Oral instructions will be considered Proper Instructions if the
Custodian reasonably

24
<PAGE> 28
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause
all oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Trustees of the Fund accompanied by a detailed description of
procedures approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and the Custodian are satisfied
that such procedures afford adequate safeguards for the Portfolios' assets.
For purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three - party agreement which
requires a segregated asset account in accordance with Section 2.11.

6. Actions Permitted Without Express Authority. The Custodian may in its
discretion, without express authority from the Fund on behalf of each
applicable portfolio:

1) make payments to itself or others for minor expenses
of handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;

2) surrender securities in temporary form for securities
in definitive form;

3) endorse for collection, in the name of the Portfolio,
check, drafts and other negotiable instruments; and

4) in general, attend to all non-discretionary details
in connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the

25
<PAGE> 29
securities and property of the Portfolio except as otherwise
directed by the Board of Trustees of the Fund.

7. Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been properly
executed by or on behalf of the Fund. The Custodian may receive and accept a
certified copy of a vote of the Board of Trustees of the Fund as conclusive
evidence (a) of the authority of any person to act in accordance with such vote
or (b) of any determination or of any action by the Board of Trustees pursuant
to the Declaration of Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.

8. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income. The custodian shall cooperate
with and supply necessary information to the entity or entities appointed by
the Board of Trustees of the Fund to keep the books of account of each
Portfolio and/or compute the net asset value per share of the outstanding
shares of each Portfolio or, if directed in writing to do so by the Fund on
behalf of the Portfolio, shall itself keep such books of account and/or compute
such net asset value per share. If so directed, the Custodian shall also
calculate daily the net income of the Portfolio as described in the Fund's
currently effective prospectus related to such Portfolio and shall advise the
Fund and the Transfer Agency daily of the total amounts of such net income and,
if instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agency periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the

26
<PAGE> 30
daily income of each Portfolio shall be made at the time or times described
from time to time in the Fund's currently effective prospectus related to such
Portfolio.

9. Records. The Custodian shall with respect to each Portfolio create
and maintain all records relating to its activities and obligations under this
Contract in such manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, with particular attention to Section 31 thereof
and rules 31a-1 and 31a-2 thereunder, applicable federal and state tax laws and
any other law or administrative rules or procedures which may be applicable to
the Fund. All such records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian be open for inspection
by duly authorized officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities owned by each
Portfolio and held by the Custodian and shall, when requested to do so by the
Fund and for such compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations.

10. Opinion of Fund's Independent Accountant. The Custodian shall take
all reasonable action, as the Fund on behalf of each applicable Portfolio may
from time to time request, to obtain from year to year favorable opinions from
the Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or
other annual reports to the Securities and Exchange Commission and with respect
to any other requirements of such Commission.

11. Reports to Fund by Independent Public Accountants. The Custodian
shall provide the Fund, on behalf of each of the portfolios at such times as
the Fund may reasonably require, with

27
<PAGE> 31
reports by independent public accountants on the accounting systems, internal
accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities deposited
and/or maintained in a Securities System, relating to the services provided by
the Custodian under this Contract; such reports, shall be of sufficient scope
and in sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so
state.

12. Compensation of Custodian. The Custodian shall be entitled to
reasonable compensation for its services and expenses as Custodian, as agreed
upon from time to time between the Fund on behalf of each applicable Portfolio
and the Custodian.

13. Responsibility of Custodian. So long as and to the extent that it is
in the exercise of reasonable care, the Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Contract and shall be held
harmless in acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be signed by the
proper party or parties, including any futures commission merchant acting
pursuant to the terms of a three - party futures or options agreement. The
Custodian shall be held to the exercise of reasonable care in carrying out the
provisions of this Contract, but shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted by it in good
faith without negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall
be without liability for any action reasonably taken or omitted pursuant to
such advice. Notwithstanding the foregoing, the responsibility of the
Custodian with

28
<PAGE> 32
respect to redemptions effected by check shall be in accordance with a separate
Agreement entered into between the Custodian and the Fund.

The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.10)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.11 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody or any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency
restrictions, or acts of war or terrorism.

If the Fund behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money
or which action may, in the opinion of the Custodian, result in the Custodian
or its nominee assigned to the Fund of the Portfolio being liable for the
payment of money or incurring liability of some other form, the Fund on behalf
of the Portfolio, as a prerequisite to the requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.

If the Fund requires the Custodian to advance cash or securities for
any purpose for the benefit of a Portfolio including the purchase or sale of
foreign exchange or of contracts for foreign exchange or in the event that the
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of

29
<PAGE> 33

this Contract, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property at any
time held for the account of the applicable Portfolio shall be security
therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.

14. Effective Period, Termination and Amendment. This Contract shall
become effective as of its execution, shall continue in full force and effect
until terminated as hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30) days after the date
of such delivery or mailing; provided, however that the Custodian shall not
with respect to a Portfolio act under Section 2.10 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Trustees of the Fund has approved the initial use of a
particular Securities System by such Portfolio and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of
Trustee has reviewed the use by such Portfolio of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of 1940,
as amended and that the Custodian shall not with respect to a Portfolio act
under Section 2.10A hereof in the absence of receipt of an initial certificate
of the Secretary or an Assistant Secretary that the Board of Trustees has
approved the initial use of the Direct Paper System by such Portfolio and the
receipt of an annual certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has reviewed the use by such Portfolio of the Direct
Paper System; provided further, however, that the Fund shall not amend or
terminate this

30
<PAGE> 34
Contract in contravention of any applicable federal or state regulations, or
any provision of the Declaration of Trust, and further provided, that the Fund
on behalf of one or more of the Portfolios, may at any time by action of its
Board of Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.

Upon termination of the Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.

15. Successor Custodian. If a successor custodian for the Fund, of one or
more of the Portfolios shall be appointed by the Board of Trustees of the Fund,
the Custodian shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer, all
securities of each applicable Portfolio then held by it hereunder and shall
transfer to an account of the successor custodian all of the securities of each
such Portfolio held in a Securities System.

If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Trustees of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.

In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Trustees shall have been delivered
to the Custodian on or before the date

31
<PAGE> 35
when such termination shall become effective, then the Custodian shall have the
right to deliver to a bank or trust company, which is a "bank" as defined in
the Investment Company Act of 1940, doing business in Boston, Massachusetts, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of each
applicable Portfolio and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract on behalf of each
applicable Portfolio and to transfer to an account of such successor custodian
all of the securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Contract.

In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.

16. Interpretive and Additional Provisions. In connection with the
operation of this Contract, the Custodian and the Fund on behalf of each of the
Portfolios, may from time to time agree on such provisions interpretive of or
in addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto,

32
<PAGE> 36
provided that no such interpretive or additional provisions shall contravene
any applicable federal or state regulations or any provision of the Declaration
of Trust of the Fund. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an amendment of this
Contract.

17. Additional Funds. In the event that the Fund establishes one or more
series of Shares in addition to Cash Management Series, High-Yield Bond Series,
Growth-Income Series, Growth Series, and U.S. Government Guaranteed/AAA-Rated
Securities Series with respect to which it desires to have the Custodian render
services as custodian under the terms hereof, it shall so notify the Custodian
in writing, and if the Custodian agrees in writing to provide such services,
such series of Shares shall become a Portfolio hereunder.

18. Massachusetts Law to Apply. This Contract shall be construed and the
provisions thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.

19. Prior Contracts. This Contract supersedes and terminates, as of the
date hereof, all prior contracts between the Fund on behalf of each of the
Portfolios and the Custodian relating to the custody of the Fund's assets.

33
<PAGE> 37
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the 23rd day of February, 1988.

ATTEST ANCHOR PATHWAY FUND

By
- --------------------------------- -------------------------------------
Secretary Executive Vice President - OPS

ATTEST STATE STREET BANK AND TRUST COMPANY

By
- --------------------------------- -------------------------------------
Assistant Secretary Vice President

34
<PAGE> 38
AMENDMENT TO CUSTODIAN CONTRACT

WHEREAS, Anchor Pathway Fund (the "Fund") and State Street
Bank and Trust Company (the "Custodian") are parties to a Custodian Contract
dated February 23, 1988 (the "Agreement").

WHEREAS, the Fund and the Custodian desire to amend the
Agreement respecting the Custodian's responsibilities in circumstances in which
it delegates responsibility to State Street London Ltd.

NOW, THEREFORE, the parties hereto hereby agree to amend the
Agreement as follows:

Notwithstanding any of the provisions of the Agreement to the
contrary, in delegating custody duties to State Street London Ltd., the
Custodian shall not be relieved of any responsibility to the Fund for any loss
due to such delegation except such loss as may result from (a) political risk
(including, but not limited to, exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil strife or armed
hostilities) or (b) other risk of loss (excluding a bankruptcy or insolvency of
State Street London Ltd. not caused by political risk) for which neither the
Custodian or State Street London Ltd. would be liable (including, but not
limited to, losses due to Acts of God, nuclear incident or other losses under
circumstances where the Custodian and State Street London Ltd. have exercised
reasonable care).

35
<PAGE> 39
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly authorized
representative, and its seal to be hereunder affixed as of the 14th day of
March 1990.

ATTEST: ANCHOR PATHWAY FUND

By:
- --------------------------------- -------------------------------------
Susan L. Harris Robert P. Saltzman
Vice President & Secretary Chief Executive Officer

ATTEST: STATE STREET BANK AND TRUST COMPANY

By:
- --------------------------------- -------------------------------------
Vice President

36
<PAGE> 40
AMENDMENT TO CUSTODIAN CONTRACT

Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and Anchor Pathway Fund (the "Trust").

WHEREAS, the Custodian and the Trust are parties to a custodian
contract dated February 23, 1988 as amended March 14, 1990 (the "Custodian
Contract") governing the terms and conditions under which the Custodian
maintains custody of the securities and other assets of the Trust; and

WHEREAS, the Custodian and the Trust desire to amend the terms and
conditions under which the Custodian maintains the Trust's securities and other
non-cash property in the custody of certain foreign sub-custodians in
conformity with the requirements of Rule 17f-5 under the Investment Company Act
of 1940, as amended;

NOW THEREFORE, in consideration of the premises and covenants
contained herein, the Custodian and the Trust hereby amend the Custodian
Contract by the addition of the following terms and provisions;

1. Notwithstanding any provisions to the contrary set forth in
the Custodian Contract, the Custodian may hold securities and other non-cash
property for all of its customers, including the Trust, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash property
of the Trust which are maintained in such account shall identify by book-entry
those securities and other non-cash property belonging to the Trust and (ii)
the Custodian shall require that securities and other non-cash property so held
by the foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.

2. Except as specifically superseded or modified herein, the
terms and provisions of the Custodian Contract shall continue to apply with
full force and effect.

IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed as a sealed instrument in its name and behalf by its duly
authorized representative this 22nd day of April, 1996.

ANCHOR PATHWAY FUND

By:
---------------------------------
Robert M. Zakem
Title: Assistant Secretary

STATE STREET BANK AND TRUST COMPANY

By:
---------------------------------
Title: Vice President

<PAGE> 1
FUND PARTICIPATION AGREEMENT

AGREEMENT, made on this 29th day of March, 1988, as amended on January
22, 1998, between ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Anchor"), a life
insurance company organized under the laws of the State of California, on
behalf of itself and on behalf of VARIABLE SEPARATE ACCOUNT (f/k/a "AMERICAN
PATHWAY II - SEPARATE ACCOUNT OF ANCHOR NATIONAL LIFE INSURANCE COMPANY,")
("Variable Account"), a separate account of Anchor existing pursuant to the
laws of the State of California, and ANCHOR PATHWAY FUND ("Fund"), an open-end
management investment company established pursuant to the laws of the
Commonwealth of Massachusetts under a Declaration of Trust dated March 23,
1987, as amended on January 19, 1990, which is composed of multiple investment
series ("Portfolios").

WITNESSETH:

WHEREAS, Anchor, by resolution, has established the Variable Account
on its books of account for the purpose of funding certain variable annuity
contracts issued by it; and

WHEREAS, the Variable Account is divided into various portfolios
("Divisions") under which the income, gains and losses, whether or not
realized, from assets allocated to each such Division are, in accordance with
the applicable variable annuity contracts, credited to or charged against such
Division without regard to any income, gains or losses of other Divisions or
separate accounts of Anchor; and

WHEREAS, the Variable Account is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940 ("Act"); and

WHEREAS, the Fund, a registered, open-end, diversified management
investment company, is divided into various Portfolios, each Portfolio being
subject to separate investment objectives and restrictions which may not be
changed without a majority vote of the shareholders of each such Portfolio: and

WHEREAS, the Variable Account desires to purchase shares of the Fund
in connection with the issuance of certain variable annuity contracts to be
marketed under the name Polaris (collectively with other contracts and policies
that may be funded through the Fund, "Contracts"); and

WHEREAS, the Fund agrees to make shares of certain of its Portfolios
available to serve as underlying investment media for the corresponding
Divisions of the Variable Account; and

WHEREAS, SUNAMERICA CAPITAL SERVICES, INC. ( "Distributor"), which
serves as the distributor for the Contracts funded in the Variable Account
pursuant to an agreement with Anchor on behalf of itself and the Variable
Account is a broker-dealer registered as such under the

<PAGE> 2
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc.;

NOW, THEREFORE, in consideration of the foregoing and of mutual
covenants and conditions set forth herein and for other good and valuable
consideration, Anchor (on behalf of itself and the Variable Account) and the
Fund hereby agree as follows:

1. The Contracts funded by the Variable Account will provide for
the allocation of net amounts among certain Divisions of the Variable Account
for investment in the shares of the particular portfolio of the Fund underlying
each such Division. The selection of a particular Division is to be made (and
such selection may be changed) in accordance with the terms of the applicable
Contract.

2. No representation is made as to the number or amount of such
Contracts to be sold. Anchor, pursuant to its agreement with Distributor, will
make reasonable efforts to market those Contracts it determines from time to
time to offer for sale and, although it is not required to offer for sale new
Contracts, Anchor will accept payments and otherwise service existing Contracts
funded in the Variable Account

3. Fund shares to be made available to the respective Divisions
of the Variable Account shall be sold by each of the respective Portfolios of
the Fund and purchased by Anchor for that Division at the net asset value next
computed after receipt of each order, as established in accordance with the
provisions of the then current prospectus of the Fund. Shares of a particular
Portfolio of the Fund shall be ordered in such quantities and at such times as
determined by Anchor to be necessary to meet the requirements of those
Contracts having amounts allocated to the Division for which the Fund Portfolio
shares serve as the underlying investment medium. Orders and payments for
shares purchased will be sent promptly to the Fund and will be made payable in
the manner established from time to time by the Fund for the receipt of such
payments. The Fund reserves the right to delay transfer of its shares until
the payment check has cleared. The Fund has the obligation to insure that its
shares to be made available to the appropriate Division(s) under the Contracts
are registered at all times under the Securities Act of 1933 ("1933 Act").

4. The Fund will redeem the shares of the various Portfolios when
requested by Anchor on behalf of the corresponding Division of the Variable
Account at the net asset value next computed after receipt of each request for
redemption, for the purpose of (a) paying to Anchor the Contract Administration
Charges, Premium Taxes, Contingent Deferred Sales Charges, Expense Risk
Charges, Distribution Expense Risk Charges, Mortality Risk Premiums and all
other amounts payable to Anchor as specified in the Contracts to be charged
against Variable Account or to be deducted from the Net Contract Value upon
withdrawal, and (b) funding all amounts due the holder of the Contract. The
Fund will make payment in the manner established from time to time by the Fund
for the receipt of such redemption requests, but in no event shall payment be
delayed for a greater period than is permitted by the Act.

2
<PAGE> 3
5. Transfer of the Fund's shares will be by book entry only. No
stock certificates will be issued to the Variable Account. Shares ordered from
a particular Portfolio to the Fund will be recorded in an appropriate title for
the corresponding Division of the Variable Account.

6. The Fund shall furnish notice promptly to Anchor of any
dividend or distribution payable on its shares which are subject to this
Agreement. All of such dividends and distributions as are payable on each of
the Portfolio shares in the title for the corresponding Division of the
Variable Account shall be automatically reinvested in additional shares of that
Portfolio of the Fund. The Fund shall notify Anchor of the number of shares so
issued.

7. All expenses incident to the performance of the Fund under
this Agreement shall be paid by the Fund. The Fund shall ensure that all of
its shares which are subject to this Agreement are registered and authorized
for issue in accordance with applicable federal and state laws prior to their
purchase by the Variable Account. Anchor shall bear none of the expenses for
the cost of registration of the Fund's shares, preparation of the Fund's
prospectuses, proxy materials and reports, the distribution of such items to
shareholders, the preparation of all statements and notices required by any
federal or state law or any taxes on the issue or transfer of the Fund's shares
subject to this Agreement.

8. Anchor, either directly or through Distributor, shall make no
representations concerning the Fund's shares which are subject to this
Agreement other than those contained in the then current prospectus of the Fund
and in printed information subsequently issued by the Fund as supplemental to
such prospects.

9. Anchor and the Fund acknowledge that in the future, the Fund's
shares may become available for investment by separate accounts of other
insurance companies, which may or may not be affiliated persons (as that term
is defined in the Act) of Anchor (collectively with Anchor, "Participating
Insurers"). In such event, (a) the Fund shall undertake that its Board of
Trustees ("Board") will monitor the Fund for the existence of material
irreconcilable conflicts that may arise between the Contract owners of
Participating Insurers, for the purpose of identifying and remedying any such
conflict and (b) paragraphs 10, 11 and 12 shall apply. In discharging its
responsibilities under paragraphs 10, 11 and 12 hereinafter, Anchor will
cooperate and coordinate, to the extent necessary, with the Board and with
other Participating Insurers. The Fund agrees that it will require, as a
condition to participation, that all Participating Insurers shall have
obligations and responsibilities regarding conflicts of interest corresponding
to those that are agreed to herein by Anchor pursuant to such paragraphs 10, 11
and 12 and pursuant to this paragraph 9.

10. Anchor shall provide pass-through voting privileges to all
variable Contract owners so long as the U.S. Securities and Exchange Commission
continues to interpret the Act to require pass-through voting privileges for
variable Contract owners. Anchor shall be responsible for assuring that the
Variable Account calculates voting privilege in a manner consistent with
separate accounts of other Participating Insurers, as determined by the Board.
Anchor will vote shares for

3
<PAGE> 4
which it has not received voting instructions in the same proportion as it
votes shares for which it has received instructions.

11. Anchor will report to the Board any potential or existing
conflicts of which it is or becomes aware between any of its Contract owners or
between any of its Contract owners and Contract owners of other Participating
Insurers. Anchor will be responsible for assisting the Board in carrying out
its responsibilities to identify material conflicts by providing the Board with
all information available to it that is reasonably necessary for the Board to
consider any issues raised, including information as to a decision by Anchor to
disregard voting instructions of its Contract owners.

12. The Board's determination of the existence of an
irreconcilable material conflict and its implications shall be made known
promptly by it to Anchor and other Participating Insurers. An irreconcilable
material conflict may arise for a variety of reasons, including: (a) an action
by any state insurance regulatory authority; (b) a change in applicable federal
or state insurance tax, or securities laws or regulations, or a public ruling,
private letter ruling, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity Contract owners and variable life insurance Contract owners or by
Contract owners of different Participating Insurers; or (f) a decision by a
Participating Insurer to disregard the voting instructions of variable Contract
owners.

13. If it is determined by a majority of the Board or a majority
of its disinterested Trustees that a material irreconcilable conflict exists
that affects the interests of Anchor Contract owners, Anchor shall, in
cooperation with other Participating Insurers whose Contract owners' interests
are also affected by the conflict, take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, which steps could include:
(a) withdrawing the assets allocable to the Variable Account from the Fund or
any portfolio and reinvesting such assets in a different investment medium,
including another Portfolio of the Fund, or submitting the question of whether
such segregation should be implemented to a vote of all affected Contract
owners and, as appropriate, segregating the assets of any particular group
(e.g., annuity Contract owners or life insurance Contract owners) that votes in
favor of such segregation, or offering to the affected Contract owners of the
option of making such a change; and (b) establishing a new registered
management investment company or managed separate account. Anchor shall take
such steps at its expense if the conflict affects solely the interests of the
owners of Anchor Contracts, but shall bear only its equitable portion of any
such expense if the conflict also affects the interest of the Contract owners
of one or more Participating Insurers other than Anchor, provided: that this
sentence shall not be construed to require the Fund to bear any portion of such
expense. If a material irreconcilable conflict arises because of Anchor's
decision to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, Anchor may be
required, at Fund's election, to withdraw the Variable Account's investment in
the Fund, and no charge or penalty will be imposed against the Variable Account
as a result of such a withdrawal. Anchor agrees to take such remedial action
as may be required under this paragraph 13 with a view only to

4
<PAGE> 5
the interests of its Contract owners. For purposes of this paragraph 13, a
majority of the disinterested members of the Board shall determine whether or
not any proposed action adequately remedies any irreconcilable conflict, but in
no event will Fund be required to establish a new funding medium for any
variable Contracts. Anchor shall not be required by this paragraph 13 to
establish a new funding medium for any variable Contract if an offer to do so
has been declined by vote of a majority of affected Contract owners.

14. This Agreement shall terminate:

(a) at the option of Anchor or the Fund upon 60 days'
advance written notice to all other parties to this
Agreement; or

(b) at the option of Anchor if any of the Fund's shares
are not reasonably available to meet the requirements
of the Contracts funded in the Variable Account as
determined by Anchor. Prompt notice of election to
terminate shall be furnished by Anchor; or

(c) at the option of Anchor upon institution of formal
proceedings against the Fund by the Securities and
Exchange Commission; or

(d) upon the vote of Contract owners having an interest
in a particular Division of the Variable Account to
substitute the shares of another investment company
for the corresponding Fund Portfolio shares in
accordance with the terms of the Contracts for which
those Fund shares had been selected to serve as the
underlying investment medium. Anchor will give 30
days' prior written notice to the Fund of the date of
any proposed action to replace the Fund's shares; or

(e) in the event the Fund's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of
such shares as the underlying investment medium of
the Contracts funded in the Variable Account. Prompt
notice shall be given by each party to all other
parties in the event that the conditions stated in
subsections (b), (c) or (d) of this Paragraph 14
should occur.

15. Notwithstanding any other provisions of this Agreement, the
obligations of the Fund hereunder are not personally binding upon any of the
trustees, shareholders, officers, employees or agents of the Fund; resort in
satisfaction of such obligations shall be had only to the assets and property of
the Fund and not to the private property of any of such Fund's trustees,
shareholders, officers, employees or agents.

16. This Agreement shall be construed in accordance with the laws
of the State of California.

5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.

ANCHOR NATIONAL LIFE INSURANCE COMPANY

By:
-------------------------------------
Susan L. Harris
Senior Vice President and Secretory

VARIABLE SEPARATE ACCOUNT
(f/k/a AMERICAN PATHWAY II - SEPARATE ACCOUNT
OF ANCHOR NATIONAL LIFE INSURANCE
COMPANY)

BY: ANCHOR NATIONAL LIFE INSURANCE
COMPANY

By:
-------------------------------------
Susan L. Harris
Senior Vice President and Secretary

ANCHOR PATHWAY FUND

By:
------------------------------------
Robert M. Zakem
Vice President and Assistant Secretary

Acknowledged and Agreed:

SUNAMERICA CAPITAL SERVICES, INC.

By: Dated: January 22, 1998
---------------------------------------
J. Steven Neamtz
President

<PAGE> 1

[SUNAMERICA ASSET MANAGEMENT CORP. LETTERHEAD]

January 29, 1999

Gentlemen:

This opinion is being furnished in connection with the filing by Anchor
Pathway Fund, a Massachusetts business trust (the "Trust"), of Post-Effective
Amendment No. 16 (the "Amendment") to the Registration Statement on Form N-1A
(the "Registration Statement") which registers an indefinite number of shares
of beneficial interest of each series of the Trust, without par value, (the
"Shares") under the Securities Act of 1933, as amended, pursuant to the Trust's
Registration Statement.

As counsel for the business manager of the Trust, I am familiar with the
proceedings taken by the Trust in connection with the authorization, issuance
and sale of the Shares. In addition, I have examined the Trust's Declaration of
Trust, By-Laws and such other documents that have been deemed relevant to the
matters referred to herein.

Based upon the foregoing, I am of the opinion that, upon issuance and sale
of the Shares in the manner referred to in the Amendment, the Shares will be
legally issued, fully paid and nonassessable shares of beneficial interest of
the Trust. However, I note that as set forth in the Registration Statement,
shareholders of Anchor Pathway Fund might, under certain circumstances, be
liable for transactions effected by the Trust.

I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Amendment, and to the filing of this
opinion under the securities laws of any state.

Very truly yours,

/s/ ROBERT M. ZAKEM

Robert M. Zakem

<PAGE> 1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 16 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
January 13, 1999, relating to the financial statements and financial highlights
of Anchor Pathway Fund, which appears in such Statement of Additional
Information and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "General Information -
Independent Accountants and Legal Counsel" in such Statement of Additional
Information and to the reference to us under the heading "Financial Highlights"
in such Prospectus.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
January 13, 1999

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<APPREC-INCREASE-CURRENT> (8,623)
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<DIVIDEND-INCOME> 14,417
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<APPREC-INCREASE-CURRENT> (136)
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<NUMBER-OF-SHARES-REDEEMED> (3,842)
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 3,328
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 492
<AVERAGE-NET-ASSETS> 78,437
<PER-SHARE-NAV-BEGIN> 11.10
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<PER-SHARE-DIVIDEND> (0.94)
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000814150
<NAME> ANCHOR PATHWAY FUND
<SERIES>
<NUMBER> 006
<NAME> ANCHOR PATHWAY FUND ASSET ALLOCATION SERIES

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 113,780
<INVESTMENTS-AT-VALUE> 133,486
<RECEIVABLES> 972
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 44
<TOTAL-ASSETS> 134,507
<PAYABLE-FOR-SECURITIES> 224
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 214
<TOTAL-LIABILITIES> 438
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,981
<SHARES-COMMON-STOCK> 8,738
<SHARES-COMMON-PRIOR> 9,421
<ACCUMULATED-NII-CURRENT> 5,279
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 19,106
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,703
<NET-ASSETS> 134,069
<DIVIDEND-INCOME> 1,980
<INTEREST-INCOME> 4,074
<OTHER-INCOME> 0
<EXPENSES-NET> 850
<NET-INVESTMENT-INCOME> 5,204
<REALIZED-GAINS-CURRENT> 19,210
<APPREC-INCREASE-CURRENT> (11,355)
<NET-CHANGE-FROM-OPS> 13,059
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,385
<DISTRIBUTIONS-OF-GAINS> 18,305
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,032
<NUMBER-OF-SHARES-REDEEMED> (3,262)
<SHARES-REINVESTED> 1,547
<NET-CHANGE-IN-ASSETS> (21,377)
<ACCUMULATED-NII-PRIOR> 5,374
<ACCUMULATED-GAINS-PRIOR> 18,287
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 456
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 850
<AVERAGE-NET-ASSETS> 145,983
<PER-SHARE-NAV-BEGIN> 16.50
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0.98
<PER-SHARE-DIVIDEND> (0.61)
<PER-SHARE-DISTRIBUTIONS> (2.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.34
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000814150
<NAME> ANCHOR PATHWAY FUND
<SERIES>
<NUMBER> 007
<NAME> ANCHOR PATHWAY FUND INTERNATIONAL SERIES

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 163,765
<INVESTMENTS-AT-VALUE> 195,444
<RECEIVABLES> 1,948
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 4
<TOTAL-ASSETS> 197,401
<PAYABLE-FOR-SECURITIES> 1,504
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,134
<TOTAL-LIABILITIES> 3,638
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 133,508
<SHARES-COMMON-STOCK> 13,748
<SHARES-COMMON-PRIOR> 13,728
<ACCUMULATED-NII-CURRENT> 3,370
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 25,198
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31,687
<NET-ASSETS> 193,763
<DIVIDEND-INCOME> 3,443
<INTEREST-INCOME> 1,658
<OTHER-INCOME> 0
<EXPENSES-NET> 2,186
<NET-INVESTMENT-INCOME> 2,915
<REALIZED-GAINS-CURRENT> 26,443
<APPREC-INCREASE-CURRENT> 219
<NET-CHANGE-FROM-OPS> 29,577
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,310
<DISTRIBUTIONS-OF-GAINS> 54,645
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,526
<NUMBER-OF-SHARES-REDEEMED> (6,477)
<SHARES-REINVESTED> 3,971
<NET-CHANGE-IN-ASSETS> (29,574)
<ACCUMULATED-NII-PRIOR> 2,541
<ACCUMULATED-GAINS-PRIOR> 54,624
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,283
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,186
<AVERAGE-NET-ASSETS> 212,946
<PER-SHARE-NAV-BEGIN> 16.27
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> 2.31
<PER-SHARE-DIVIDEND> (0.27)
<PER-SHARE-DISTRIBUTIONS> (4.44)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.09
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE> 1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and trustees
of Anchor Pathway Fund, Seasons Series Trust and SunAmerica Series Trust do
hereby severally constitute and appoint Susan L. Harris, Scott L. Robinson,
Peter C. Sutton and Robert M. Zakem or any of them, the true and lawful agents
and attorneys-in-fact of the undersigned with respect to all matters arising in
connection with any Registration Statement on Form N-1A and any and all
amendments (including post-effective amendments) thereto, with full power and
authority to execute said Registration Statement for and on behalf of the
undersigned, in our names and in the capacities indicated below, and to file the
same, together with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission. The undersigned hereby
give to said agents and attorneys-in-fact full power and authority to act in the
premises, including, but not limited to, the power to appoint a substitute or
substitutes to act hereunder with the same power and authority as said agents
and attorneys-in-fact would have if personally acting. The undersigned hereby
ratify and confirm all that said agents and attorneys-in-fact, or any substitute
or substitutes, may do by virtue hereof.

WITNESS the due execution hereof on the date and in the capacity set forth
below.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES K. HUNT Trustee, Chairman and President January 12, 1999
- ------------------------------------ (Principal Executive Officer)
James K. Hunt

/s/ SCOTT L. ROBINSON Senior Vice President, January 12, 1999
- ------------------------------------ Treasurer and Controller
Scott L. Robinson (Principal Financial and
Accounting Officer)

/s/ MONICA C. LOZANO Trustee January 12, 1999
- ------------------------------------
Monica C. Lozano

/s/ ALLAN L. SHER Trustee January 12, 1999
- ------------------------------------
Allan L. Sher

/s/ WILLIAM M. WARDLAW Trustee January 12, 1999
- ------------------------------------
William M. Wardlaw

</TABLE>