<PAGE> 1
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DEAR ANCHOR PATHWAY INVESTOR:
We are pleased to offer the following report on the Anchor
Pathway Fund, which serves as the underlying investment vehicle
for the American Pathway II Variable Annuity. This report covers
the 12 months ended February 29, 2000. As we mentioned in our last
report to you, the fund's year-end was changed to February 28
(February 29 in leap year), in order to reduce fund costs and to
facilitate timely reporting to our shareholders. The following
commentary on the economy in general and the investment activities
of each of the series has been provided by Capital Research and
Management Company (CRMC), the investment adviser to the Anchor
Pathway Fund.
ECONOMIC REVIEW
For most of the year ended February 29, 2000, global equity
markets continued their strong march upward. As economies around
the world improved further, investors maintained a high level of
confidence, and stock prices rapidly appreciated. The U.S. was a
part of this trend early in the period; however, it was not an
active participant in this market euphoria over the past few
months. Another notable exception was the United Kingdom.
In general, most sectors of the world enjoyed stronger economic
growth than has been seen for the past several years (prior to the
Asian contagion that spread through most of the world in 1997 and
1998). Europe's economies rebounded from their doldrums
experienced in early 1999 -- to such a level, in fact, that the EU
Economic Ministers found it necessary to begin raising interest
rates over the past couple of months. European stock markets, like
their U.S. counterparts last year, were able to ignore the rising
rate scenario and proceed to higher ground. U.S. markets, on the
other hand, may be seeing the first signs of inflationary and
higher-interest-rate worries impacting stock prices. CRMC notes
that while the broad indices have been in positive territory for
the past 12 months, it has been an extremely volatile period
nonetheless.
Longer term, the U.S. economy continues to grow at a healthy --
although potentially troublesome -- pace. Unemployment remains at
historically low levels, consumer spending and income growth are
robust, and inflation remains subdued. While the U.S. economy is
now in its tenth year of expansion, other economies throughout the
world are just beginning to enjoy the fruits of growth. With
virtually all economies in the world in a growth mode it can be
easy to be lulled into an euphoric state; however, as market
volatility over the past few years has shown, investors'
enthusiasm for stocks can change quite rapidly. By maintaining a
long-term perspective, CRMC can assess the opportunities that
exist, and ultimately act on its convictions about what is most
appropriate for contractholders.
Here are brief comments on the investment activities of each
series:
THE GROWTH SERIES gained 58.1% for the 12 months ending February
29, compared to the benchmarks S&P 500, which posted 11.72%. The
series' primary objective is growth of capital, and CRMC is
pleased to note that the majority of holdings increased in price.
The series was especially well served by its sizable exposure to
technology-related companies, including one of the largest
holdings, Texas Instruments. That said, concern about the current
valuations of many technology stocks has led CRMC to consider
other sectors, such as healthcare, for better values. The
portfolio invests primarily in U.S. companies, although most do a
significant amount of business abroad.
------------------------------------------------------------------------
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1
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THE INTERNATIONAL SERIES increased 65.4% for the 12 months ended
February 29, compared to the benchmark MSCI EAFE index return of
25.77%. The Series benefited from exposure to the
telecommunications-related stocks, strength in Japanese stock
prices and a rebound in Asian markets. Some of the period's
biggest gainers include Nortel, Telefonos de Mexico, and Rohm, all
of which are large holdings. While Europe was generally weak,
major holdings in investments such as Deutsche Telekom, CANAL+,
Ericsson, and Nokia helped the series.
THE GROWTH-INCOME SERIES appreciated only 2.8% for the 12 months
ended February 29, reflecting the broad market decline in the last
two months, compared to the S&P 500 return of 11.72%. The series'
focus on value-oriented, dividend-paying stocks also constrained
results since last summer, as investors fretted about the possible
negative impact on earnings of a new round of rising interest
rates. However, a number of portfolio holdings, including Cisco,
Nokia, 3Com, Applied Materials, Corning and Texas Instruments
realized 12-month gains of 170% to 270%. In addition, significant
gains were evident among media and oil holdings, but our large
commitment to the pharmaceutical and banking industries detracted
from results over the past year. Given the substantial level of
speculation CRMC is seeing in the market, the manager has
maintained a fairly high reserve of cash and equivalents as a
buying reserve.
THE ASSET ALLOCATION SERIES returned 6.6% for the 12 months
ended February 29, compared to the S&P 500 return of 11.72% and
the Salomon Smith Barney Investment Grade Bond Index of 1.08%. The
series is managed by CRMC as though it constitutes the complete
U.S. portfolio of a prudent investor, with a balance of stocks,
bonds and short-term instruments. The equity portion, accounting
for more than 60% of net assets, emphasizes large, solid
businesses across a wide range of industries. Of the companies
represented, large holdings include Corning, Nokia, Citigroup and
Hewlett-Packard. Nonetheless, overall results were dampened by the
bonds in the portfolio, which fell as interest rates rose. About
30% of assets are invested in bonds and 9% of assets are held in
cash and equivalents.
THE HIGH-YIELD BOND SERIES declined 1.6% for the year ended
February 29, compared to the Salomon Smith Barney Long-Term
High-Yield Index return of -0.03%, and the Salomon Smith Barney
Investment Grade Bond Index return of 1.08%. Despite a robust
equity market and a strong economy, the environment for high-yield
bonds was challenged over the past 12 months by rising interest
rates, poor market liquidity, and increased default rates. The
series' poor performance not only stemmed from the weak market
conditions, but also from its exposure to the solid waste,
healthcare, and auto parts industries, which posted particularly
depressed returns. The loss was tempered somewhat by the series'
investment selections in the media, paper and packaging, and
telecommunications areas, which performed quite well during the
reporting period.
THE U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES posted a 1.8 %
return for the year ended February 29, compared to the Salomon
Smith Barney Treasury/Gov't Sponsored/ Mortgage Index return of
1.40%. Shorter term U.S. Treasury yields rose during the period,
pushed up by two 25 basis point increases in the Federal funds
rate. The Federal Reserve increased rates due to rising
commodities prices, robust economic growth and the tightest labor
market in three decades. Longer term Treasuries rose much less due
to a reduction in issuance of Treasuries and implementation of a
Treasury buyback program concentrated in the long end of the
curve.
THE CASH MANAGEMENT SERIES provided a 12-month return of 4.7%
through February 29. Yields on short-term instruments rose
modestly in response to credit tightening by
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2
<PAGE> 3
- ---------------------
the Federal Reserve. Managed for relative stability and a
reasonable rate of return, the series can be an important
diversification tool, as well as a base for making tax-free
investments into other portfolios in the series. About
three-quarters of assets are concentrated in top-grade commercial
paper, with the balance invested in U.S. Treasury and federal
agency bills.
The seven series in the Anchor Pathway Fund offer you a wide
range of investment options to help you reach your long-term
financial goals. CRMC remains committed to helping you achieve
these goals by striving to find the best values that financial
markets have to offer.
We look forward to reporting to you again in six months.
Sincerely,
/s/ Eli Broad
Eli Broad
Chairman, President and Chief Executive Officer,
Anchor National Life Insurance Company
March 17, 2000
--------------------------------
Performance figures quoted are for the Anchor Pathway Fund;
therefore, they are not net of the fees and charges associated
with the variable annuity. Past performance is no guarantee of
future results. Investments in stocks and bonds are subject to
risk, including stock market and interest rate fluctuations.
Investments in non-U.S. stocks and bonds are subject to additional
risks, including political and social instability, differing
securities regulations and accounting standards and limited public
information. High-yield bonds tend to be subject to greater price
swings than higher-rated bonds and, of course, payment of interest
and principal is not assured. Mortgage-backed securities are
subject to prepayment, which can result in reinvestment of
principal at lower yields. Money market instruments generally
offer stability and income, but an investment in these securities,
like investments in the other series, is not guaranteed.
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3
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O
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ANCHOR PATHWAY FUND
GROWTH SERIES INVESTMENT PORTFOLIO -- FEBRUARY 29, 2000
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 85.3% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 44.7%
Data Processing & Reproduction -- 10.3%
3Com Corp.+................................................. 270,000 $ 26,460
Adobe Systems, Inc. ........................................ 310,000 31,620
Cadence Design Systems, Inc.+............................... 200,000 3,987
Compaq Computer Corp. ...................................... 232,500 5,783
Computer Associates International, Inc. .................... 75,000 4,823
Dell Computer Corp.+........................................ 40,000 1,633
Fujitsu Ltd. ............................................... 400,000 13,287
Lexmark International Group, Inc., Class A+................. 24,000 2,862
Mentor Graphics Corp.+...................................... 120,000 2,055
Oracle Corp.+............................................... 170,000 12,622
PeopleSoft, Inc.+........................................... 795,000 16,447
Silicon Graphics, Inc.+..................................... 300,000 2,944
Storage Technology Corp.+................................... 185,000 2,359
Structural Dynamics Research Corp.+......................... 150,000 2,138
Electrical & Electronics -- 2.5%
Lucent Technologies, Inc. .................................. 49,500 2,945
NEC Corp. .................................................. 500,000 11,171
Nokia Corp. ADR............................................. 10,000 1,983
Nortel Networks Corp. ...................................... 130,000 14,495
Electronic Components -- 28.4%
Adaptec, Inc.+.............................................. 365,000 14,965
Analog Devices, Inc.+....................................... 486,666 76,407
Applied Micro Circuits Corp.+............................... 6,000 1,650
Cypress Semiconductor Corp.+................................ 50,000 2,281
EMC Corp.+.................................................. 62,500 7,438
Intel Corp. ................................................ 272,400 30,781
LSI Logic Corp.+............................................ 400,000 25,625
Maxim Integrated Products, Inc.+............................ 100,000 6,681
Microchip Technology, Inc.+................................. 315,000 19,668
Micron Technology, Inc.+.................................... 16,000 1,569
Newbridge Networks Corp.+................................... 46,000 1,604
Park Electrochemical Corp. ................................. 187,200 4,259
Rogers Corp.+............................................... 109,200 6,409
SCI Systems, Inc.+.......................................... 400,000 16,100
Solectron Corp.+............................................ 520,000 34,060
Texas Instruments, Inc. .................................... 640,000 106,560
Electronic Instruments -- 3.5%
Applied Materials, Inc.+.................................... 145,000 26,526
KLA-Tencor Corp.+........................................... 205,000 15,977
Teradyne, Inc.+............................................. 20,000 1,740
-----------
559,914
-----------
CONSUMER GOODS -- 6.0%
Beverages & Tobacco -- 0.5%
Coca-Cola West Japan Co. Ltd. .............................. 100,000 2,584
Philip Morris Cos., Inc. ................................... 160,000 3,210
Food & Household Products -- 0.2%
Dole Food, Inc. ............................................ 210,000 3,229
</TABLE>
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<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS (continued)
Health & Personal Care -- 4.9%
American Home Products Corp. ............................... 300,000 $ 13,050
Cardinal Health, Inc. ...................................... 287,500 11,859
Forest Laboratories, Inc.+.................................. 45,000 3,074
Guidant Corp.+.............................................. 100,000 6,738
Omnicare, Inc. ............................................. 230,000 2,113
Pfizer, Inc. ............................................... 560,000 17,990
Pharmacia & Upjohn, Inc. ................................... 58,000 2,762
Warner-Lambert Co. ......................................... 40,000 3,423
Recreation & Other Consumer Products -- 0.2%
Hasbro, Inc. ............................................... 140,000 2,205
Textiles & Apparels -- 0.2%
Nike, Inc., Class B......................................... 100,000 2,844
-----------
75,081
-----------
ENERGY -- 1.3%
Energy Sources -- 1.1%
Enterprise Oil PLC.......................................... 300,000 1,513
EOG Resources, Inc. ........................................ 190,000 2,898
Murphy Oil Corp. ........................................... 80,000 4,050
Pogo Producing Co. ......................................... 227,500 5,261
Utilities: Electric, Gas & Water -- 0.2%
Questar Corp. .............................................. 160,000 2,230
-----------
15,952
-----------
FINANCE -- 1.8%
Banking -- 0.5%
Charter One Financial, Inc. ................................ 224,248 3,532
Washington Mutual, Inc. .................................... 155,000 3,429
Financial Services -- 0.9%
Capital One Financial Corp. ................................ 125,000 4,602
Federal National Mortgage Association....................... 50,000 2,650
Household International, Inc. .............................. 110,000 3,513
Insurance -- 0.4%
XL Capital Ltd., Class A.................................... 130,000 5,257
-----------
22,983
-----------
MATERIALS -- 1.5%
Chemicals -- 1.0%
Monsanto Co. ............................................... 194,500 7,549
Valspar Corp. .............................................. 150,000 4,922
Forest Products & Paper -- 0.5%
Sealed Air Corp.+........................................... 115,000 5,714
-----------
18,185
-----------
SERVICES -- 28.6%
Broadcasting & Publishing -- 16.2%
AMFM, Inc.+................................................. 100,000 6,138
AT&T Corp.-Liberty Media Group, Inc., Class A+.............. 235,200 12,289
BHC Communications, Inc., Class A+.......................... 55,821 8,903
Fox Entertainment Group, Inc., Class A+..................... 600,000 15,788
News Corp. Ltd. ADR......................................... 680,000 39,652
Time Warner, Inc. .......................................... 679,800 58,123
USA Networks, Inc.+......................................... 713,000 15,998
Viacom, Inc., Class B+...................................... 820,000 45,715
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Business & Public Services -- 5.9%
Allied Waste Industries, Inc.+.............................. 350,000 $ 1,969
Cendant Corp.+.............................................. 1,295,562 23,077
Columbia/HCA Healthcare Corp. .............................. 468,625 9,050
FedEx Corp.+................................................ 400,000 13,975
Juniper Networks, Inc.+..................................... 37,500 10,287
Quintiles Transnational Corp.+.............................. 90,000 2,672
Universal Health Services, Inc., Class B.................... 74,900 2,912
Waste Management, Inc. ..................................... 200,000 3,000
Wellpoint Health Networks, Inc.+............................ 100,000 6,750
Cellular & Paging -- 1.7%
Crown Castle International Corp.+........................... 60,000 1,935
Nextel Communications, Inc., Class A+....................... 15,000 2,051
Nippon Telephone & Telegraph Mobile Communications Corp.+... 425 17,134
Leisure & Tourism -- 1.1%
Carnival Corp., Class A..................................... 120,000 3,458
Seagram Co. Ltd. ........................................... 125,000 7,344
Starbucks Corp.+............................................ 100,000 3,512
Merchandising -- 1.0%
Consolidated Stores Corp.+.................................. 352,400 3,964
Sunglass Hut International, Inc.+........................... 734,000 6,285
The Limited, Inc. .......................................... 80,237 2,728
Telecommunications -- 0.4%
Teleglobe, Inc. ............................................ 212,000 5,432
Transportation: Airlines -- 2.3%
AMR Corp. .................................................. 230,000 12,161
Delta Air Lines, Inc. ...................................... 20,000 913
Southwest Airlines Co. ..................................... 815,625 15,038
-----------
358,253
-----------
OTHER COMMON STOCK -- 1.4%.................................. 17,944
-----------
TOTAL COMMON STOCK (cost $513,610).......................... 1,068,312
-----------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCK -- 1.4%
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 1.4%
Broadcasting & Publishing -- 1.4%
News Corp. Ltd. ADR (cost $2,313)........................... 340,000 17,106
-----------
TOTAL INVESTMENT SECURITIES (cost $515,923)................. 1,085,418
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 12.5% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 11.1%
Alcoa, Inc. 5.76% due 3/10/00............................... $ 1,625 1,623
Associates Financial Services Co. 5.90% due 4/25/00......... 933 925
AT&T Corp. 5.75% due 3/02/00................................ 4,000 4,000
AT&T Corp. 5.77% due 3/16/00................................ 2,000 1,995
AT&T Corp. 5.80% due 4/06/00................................ 5,000 4,971
Atlantic Richfield Co. 5.70% due 3/02/00.................... 1,500 1,500
Bell Atlantic Financial Services 5.70% due 3/03/00.......... 3,700 3,699
Bell Atlantic Network Funding 5.80% due 3/10/00............. 2,620 2,616
Bestfoods 5.82% due 4/05/00................................. 4,400 4,375
Bestfoods 5.89% due 5/04/00................................. 3,660 3,621
</TABLE>
---------------------
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<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES (continued)
CIT Group Holdings, Inc. 5.88% due 3/01/00.................. $ 7,840 $ 7,840
Coca-Cola Co. 5.80% due 4/04/00............................. 2,000 1,989
Eastman Kodak Co. 5.70% due 3/07/00......................... 3,000 2,997
Eastman Kodak Co. 5.83% due 4/26/00......................... 9,000 8,918
Equilon Enterprises LLC 5.83% due 4/12/00................... 1,000 993
Estee Lauder Cos., Inc. 5.82% due 4/03/00................... 3,000 2,984
EW Scripps Co. 5.73% due 3/21/00............................ 5,000 4,984
EW Scripps Co. 5.90% due 5/08/00............................ 2,975 2,942
Ford Motor Credit Co. 5.85% due 4/20/00..................... 4,000 3,967
GE Financial Assurance Holdings 5.80% due 4/03/00........... 6,000 5,968
Household Finance Corp. 5.73% due 3/20/00................... 1,400 1,396
John Hancock Capital Corp. 5.78% due 3/06/00................ 2,540 2,538
John Hancock Capital Corp. 5.83% due 4/18/00................ 2,550 2,530
Marsh USA, Inc. 5.81% due 4/07/00........................... 7,000 6,958
Monsanto Co. 5.87% due 4/25/00.............................. 2,900 2,874
Motiva Enterprises LLC 5.70% due 3/13/00.................... 1,500 1,497
Motiva Enterprises LLC 5.80% due 3/22/00.................... 2,000 1,993
National Rural Utilities Cooperative Finance Corp. 5.72% due
3/07/00................................................... 7,000 6,993
Park Avenue Recreation Corp. 5.80% due 3/01/00.............. 3,200 3,200
Park Avenue Recreation Corp. 5.86% due 4/06/00.............. 5,000 4,971
Preferred Receivables Funding Corp. 5.75% due 3/02/00....... 7,000 6,999
Preferred Receivables Funding Corp. 5.75% due 3/15/00....... 5,000 4,989
Preferred Receivables Funding Corp. 5.85% due 4/11/00....... 4,665 4,634
Preferred Receivables Funding Corp. 5.87% due 4/10/00....... 3,620 3,596
Sherwin Williams Co. 5.82% due 4/17/00...................... 8,800 8,733
Sherwin Williams Co. 5.83% due 4/10/00...................... 2,555 2,539
-----------
139,347
-----------
FEDERAL AGENCY OBLIGATIONS -- 1.4%
Federal Home Loan Mortgage Discount Notes 5.66% due
3/07/00................................................... 3,000 2,997
Federal Home Loan Mortgage Discount Notes 5.75% due
3/15/00................................................... 829 827
Federal Home Loan Mortgage Discount Notes 5.82% due
5/25/00................................................... 5,000 4,932
Federal National Mortgage Association Discount Notes 5.70%
due 3/02/00............................................... 975 975
Federal National Mortgage Association Discount Notes 5.70%
due 4/06/00............................................... 500 497
Federal National Mortgage Association Discount Notes 5.80%
due 5/25/00............................................... 5,000 4,932
Federal National Mortgage Association Discount Notes 5.81%
due 5/05/00............................................... 990 980
Federal National Mortgage Association Discount Notes 5.89%
due 3/30/00............................................... 1,200 1,194
-----------
17,334
-----------
TOTAL SHORT-TERM SECURITIES (cost $156,681)................. 156,681
-----------
TOTAL INVESTMENTS --
(cost $672,604) 99.2% $1,242,099
Other assets less liabilities -- 0.8 9,834
------ -----------
NET ASSETS -- 100.0% $1,251,933
====== ===========
</TABLE>
-----------------------------
+ Non-income producing security
ADR - American Depository Receipt
See Notes to Financial Statements
- ---------------------
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ANCHOR PATHWAY FUND
INTERNATIONAL SERIES INVESTMENT PORTFOLIO -- FEBRUARY 29, 2000
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 84.7% SHARES (IN THOUSANDS)
-----------------------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA -- 0.5%
Telefonica de Argentina SA ADR (Services)................... 30,000 $ 1,371
--------
AUSTRALIA -- 5.3%
Brambles Industries Ltd. (Services)......................... 100,000 2,517
Broken Hill Proprietary Co. Ltd. (Energy)................... 435,742 4,316
Foster's Brewing Group Ltd. (Consumer Goods)................ 389,300 1,025
News Corp. Ltd. ADR (Services).............................. 100,000 5,831
Westpac Banking Corp. Ltd. (Finance)........................ 313,073 2,004
--------
15,693
--------
BRAZIL -- 0.7%
Centrais Geradoras do Sul do Brasil SA ADR (Energy)......... 18,300 107
Companhia Energetica de Minas Gerais ADR (Energy)........... 73,400 1,208
Companhia Paranaense de Energia (Energy).................... 118,055,000 671
--------
1,986
--------
CANADA -- 7.0%
Nortel Networks Corp. (Capital Equipment)................... 188,000 20,962
--------
FINLAND -- 7.1%
Nokia Oyj (Capital Equipment)............................... 100,000 19,961
UPM-Kymmene Oyj (Materials)................................. 48,000 1,333
--------
21,294
--------
FRANCE -- 6.6%
Canal Plus (Services)....................................... 54,000 15,257
Total Fina SA, Class B (Energy)............................. 33,876 4,492
--------
19,749
--------
GERMANY -- 8.2%
Deutsche Telekom AG (Services).............................. 296,000 24,576
--------
HONG KONG -- 1.8%
China.com Corp., Class A (Services)......................... 20,000 2,458
China Telecom (Services)+................................... 326,000 3,005
--------
5,463
--------
ITALY -- 1.3%
Telecom Italia SpA (Services)+.............................. 484,900 3,834
--------
JAPAN -- 10.3%
Fujisawa Pharmaceutical Co. Ltd. (Consumer Goods)........... 120,000 3,942
Fujitsu Ltd. (Capital Equipment)............................ 180,000 5,979
NEC Corp. (Capital Equipment)............................... 170,000 3,798
Nintendo Co. Ltd. (Consumer Goods).......................... 11,000 2,401
Nippon Telegraph & Telephone Corp. (Services)............... 330 4,565
Rohm Co. Ltd. (Capital Equipment)........................... 20,000 6,489
Shohkoh Fund & Co. Ltd. (Finance)........................... 6,090 1,258
Toshiba Corp. (Capital Equipment)........................... 300,000 2,449
--------
30,881
--------
</TABLE>
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<PAGE> 9
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
-----------------------------------------------------------------------------------------------
<S> <C> <C>
MEXICO -- 6.0%
Cemex SA de CV (Materials).................................. 3 $ 0
Cemex SA de CV ADR (Materials)+............................. 116,302 2,486
Cifra SA de CV (Services)+.................................. 49,461 118
Grupo Televisa SA GDR (Services)+........................... 35,000 2,688
Telefonos de Mexico SA ADR (Services)....................... 190,400 12,519
--------
17,811
--------
NETHERLANDS -- 3.8%
Aegon NV (Finance).......................................... 35,000 2,417
VNU NV (Services)........................................... 130,000 8,982
--------
11,399
--------
NORWAY -- 0.8%
Orkla ASA (Multi-industry).................................. 160,000 2,445
--------
PHILIPPINES -- 0.6%
Ayala Land, Inc. (Real Estate).............................. 6,200,000 1,074
Philippine Long Distance Telephone Co. (Services)........... 35,000 760
--------
1,834
--------
SPAIN -- 4.4%
Telefonica SA (Services)+................................... 458,443 13,196
--------
SWEDEN -- 6.1%
Ericsson LM Telecommunications Co., Class B (Capital
Equipment)................................................ 190,400 18,252
--------
SWITZERLAND -- 1.9%
Nestle SA (Consumer Goods).................................. 1,250 2,110
Swisscom AG (Services)...................................... 11,197 3,655
--------
5,765
--------
THAILAND -- 0.2%
Bangkok Bank Public Co. Ltd. (Finance)+..................... 300,000 484
--------
UNITED KINGDOM -- 8.6%
AstraZeneca Group PLC (Consumer Goods)...................... 136,215 4,521
Dixons Group PLC (Services)................................. 400,000 8,588
ScottishPower PLC (Energy).................................. 132,240 1,003
Vodafone AirTouch PLC (Services)............................ 1,849,248 10,349
Zeneca Group PLC (Consumer Goods)+.......................... 37,900 1,239
--------
25,700
--------
OTHER COMMON STOCK -- 3.5%.................................. 10,416
--------
TOTAL COMMON STOCK (cost $110,847).......................... 253,111
--------
<CAPTION>
WARRANTS -- 0.0%+
-----------------------------------------------------------------------------------------------
<S> <C> <C>
MEXICO -- 0.0%
Cemex SA ADR 12/13/02 (Materials) (cost $12)................ 7,268 21
--------
TOTAL INVESTMENT SECURITIES (cost $110,859)................. 253,132
--------
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 15.1% (IN THOUSANDS) (IN THOUSANDS)
-----------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 15.1%
American Honda Finance Corp. 5.90% due 5/11/00.............. $ 2,000 $ 1,977
Anheuser-Busch Cos., Inc. 5.75% due 3/29/00................. 3,700 3,683
Arco British Ltd. 5.80% due 3/01/00......................... 2,500 2,500
Corporate Asset Funding Co. 5.85% due 4/25/00............... 2,500 2,478
DaimlerChrysler AG 5.75% due 3/13/00........................ 5,300 5,290
Eksportfinans A/S 5.72% due 3/07/00......................... 4,400 4,396
Eksportfinans A/S 5.75% due 3/29/00......................... 1,730 1,722
Emerson Electric Co. 5.85% due 4/27/00...................... 3,000 2,972
Ford Motor Credit Co. 5.82% due 4/11/00..................... 5,000 4,967
General Electric Capital Corp. 5.85% due 3/01/00............ 2,350 2,350
General Motors Acceptance Corp. 5.73% due 3/14/00........... 2,200 2,195
Halifax PLC 5.73% due 3/13/00............................... 4,000 3,992
Motiva Enterprises LLC 5.82% due 4/05/00.................... 2,500 2,486
Preferred Receivables Funding 5.85% due 3/17/00............. 4,300 4,289
--------
TOTAL SHORT-TERM SECURITIES (cost $45,297).................. 45,297
--------
TOTAL INVESTMENTS --
(cost $156,156) 99.8% $298,429
Other assets less liabilities -- 0.2 545
------ --------
NET ASSETS -- 100.0% $298,974
====== ========
</TABLE>
-----------------------------
+ Non-income producing securities
ADR - American Depository Receipt
GDR - Global Depository Receipt
See Notes to Financial Statements
---------------------
A-7
<PAGE> 11
O
- ---------------------
ANCHOR PATHWAY FUND
GROWTH-INCOME SERIES INVESTMENT PORTFOLIO -- FEBRUARY 29, 2000
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 78.9% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 16.1%
Aerospace & Military Technology -- 1.0%
Raytheon Co., Class A....................................... 112,200 $ 2,223
United Technologies Corp. .................................. 105,800 5,389
Data Processing & Reproduction -- 6.1%
3Com Corp.+................................................. 80,000 7,840
Cadence Design Systems, Inc.+............................... 150,000 2,990
Cisco Systems, Inc.+........................................ 50,000 6,609
Computer Associates International, Inc. .................... 175,000 11,255
Onvia.com, Inc.+............................................ 2,000 42
Silicon Graphics, Inc.+..................................... 294,400 2,889
Storage Technology Corp.+................................... 600,000 7,650
Xerox Corp. ................................................ 400,000 8,675
Electrical & Electronics -- 1.6%
Harris Corp. ............................................... 70,000 2,231
Hitachi Ltd. ............................................... 150,000 2,046
Lucent Technologies, Inc. .................................. 30,000 1,785
Nokia Corp. ADR............................................. 18,000 3,570
York International Corp. ................................... 184,400 3,342
Electronic Components -- 2.8%
Corning, Inc. .............................................. 40,000 7,520
SCI Systems, Inc.+.......................................... 150,000 6,038
Texas Instruments, Inc. .................................... 50,000 8,325
Electronic Instruments -- 1.5%
Applied Materials, Inc.+.................................... 30,000 5,488
PE Corp.-PE Biosystems Group................................ 60,000 6,330
Energy Equipment -- 0.3%
Schlumberger Ltd. .......................................... 30,000 2,216
Industrial Components -- 1.0%
Dana Corp. ................................................. 50,000 1,066
Eaton Corp. ................................................ 70,000 5,245
Federal-Mogul Corp. ........................................ 125,000 1,703
Machinery & Engineering -- 1.8%
Caterpillar, Inc. .......................................... 70,000 2,454
CNH Global NV............................................... 200,000 2,213
Deere & Co. ................................................ 95,000 3,396
Ingersoll-Rand Co. ......................................... 120,000 4,598
Pall Corp. ................................................. 100,000 1,975
---------
127,103
---------
CONSUMER GOODS -- 12.5%
Beverages & Tobacco -- 1.4%
PepsiCo, Inc. .............................................. 150,000 4,838
Philip Morris Cos., Inc. ................................... 225,000 4,514
UST, Inc. .................................................. 100,000 1,931
Food & Household Products -- 2.6%
Campbell Soup Co. .......................................... 150,000 4,256
Flowers Industries, Inc. ................................... 250,000 3,234
</TABLE>
- ---------------------
A-8
<PAGE> 12
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS (continued)
Food & Household Products (continued)
General Mills, Inc. ........................................ 100,000 $ 3,294
Sara Lee Corp. ............................................. 650,000 9,750
Health & Personal Care -- 7.5%
AstraZeneca Group PLC ADR+.................................. 80,000 2,650
Avon Products, Inc. ........................................ 369,800 10,008
Bergen Brunswig Corp., Class A.............................. 375,000 1,852
Cardinal Health, Inc. ...................................... 70,000 2,888
Glaxo Wellcome PLC ADR...................................... 80,000 3,900
Guidant Corp.+.............................................. 80,000 5,390
Kimberly-Clark Corp. ....................................... 130,000 6,719
Mallinckrodt, Inc. ......................................... 200,000 4,925
McKesson HBOC, Inc. ........................................ 50,000 969
Merck & Co., Inc. .......................................... 100,000 6,156
Pfizer, Inc. ............................................... 50,000 1,606
Schering-Plough Corp. ...................................... 100,000 3,487
United HealthCare Corp. .................................... 60,000 3,067
Warner-Lambert Co. ......................................... 60,000 5,134
Recreation & Other Consumer Products -- 0.5%
Pennzoil-Quaker State Co. .................................. 450,000 3,937
Textiles & Apparels -- 0.5%
Nike, Inc., Class B......................................... 50,000 1,422
V.F. Corp. ................................................. 100,000 2,469
---------
98,396
---------
ENERGY -- 7.7%
Energy Sources -- 5.7%
Ashland, Inc. .............................................. 48,800 1,519
Atlantic Richfield Co. ..................................... 50,000 3,550
Conoco, Inc., Class A....................................... 132,000 2,533
Conoco, Inc., Class B....................................... 49,138 967
Kerr-McGee Corp. ........................................... 75,000 3,356
Murphy Oil Corp. ........................................... 50,000 2,531
Noble Affiliates, Inc. ..................................... 100,000 2,250
Petro-Canada................................................ 200,000 2,888
Phillips Petroleum Co. ..................................... 60,000 2,295
Texaco, Inc. ............................................... 130,000 6,167
Ultramar Diamond Shamrock Corp. ............................ 461,000 9,998
Valero Energy Corp. ........................................ 260,000 6,630
Utilities: Electric, Gas & Water -- 2.0%
Ameren Corp. ............................................... 100,000 3,000
DPL, Inc. .................................................. 240,000 5,160
Duke Energy Corp. .......................................... 50,000 2,425
GPU, Inc. .................................................. 100,000 2,488
TECO Energy, Inc. .......................................... 150,000 2,700
---------
60,457
---------
FINANCE -- 10.0%
Banking -- 7.1%
Bank of America Corp. ...................................... 275,000 12,667
Bank of New York Co., Inc. ................................. 100,000 3,331
Bank One Corp. ............................................. 153,000 3,949
Bank Tokyo Mitsubishi Ltd. ADR.............................. 100,000 1,237
Chase Manhattan Corp. ...................................... 70,000 5,574
First Union Corp. .......................................... 296,172 8,737
KeyCorp..................................................... 170,000 2,879
Morgan (J.P.) & Co., Inc. .................................. 30,000 3,330
</TABLE>
---------------------
A-9
<PAGE> 13
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Banking (continued)
Sakura Bank Ltd. ADR........................................ 35,000 $ 1,998
SunTrust Banks, Inc. ....................................... 50,000 2,541
Wells Fargo Co. ............................................ 297,000 9,820
Financial Services -- 1.3%
Associates First Capital Corp., Class A..................... 90,000 1,789
Household International, Inc. .............................. 271,332 8,666
Insurance -- 1.6%
Aetna, Inc. ................................................ 59,400 2,443
Allstate Corp. ............................................. 300,000 5,850
MGIC Investment Corp. ...................................... 50,000 1,869
Royal & Sun Alliance Insurance Group PLC.................... 450,000 2,445
---------
79,125
---------
MATERIALS -- 5.7%
Chemicals -- 2.5%
CK Witco Corp. ............................................. 110,904 1,178
International Flavors & Fragrances, Inc. ................... 200,000 6,000
Millenium Chemicals, Inc. .................................. 250,000 3,500
Monsanto Co. ............................................... 140,100 5,438
PPG Industries, Inc. ....................................... 65,000 3,209
Forest Products & Paper -- 2.6%
Bowater, Inc. .............................................. 135,000 6,640
Fort James Corp. ........................................... 125,000 2,351
International Paper Co. .................................... 138,816 5,110
Sonoco Products Co. ........................................ 100,000 1,844
Westvaco Corp. ............................................. 60,000 1,654
Weyerhaeuser Co. ........................................... 50,000 2,566
Metals: Non-ferrous -- 0.3%
Alcoa, Inc. ................................................ 40,000 2,740
Metals: Steel -- 0.1%
Allegheny Technologies, Inc. ............................... 50,000 847
Metals & Minerals -- 0.2%
Crown, Cork & Seal Co., Inc. ............................... 100,000 1,400
---------
44,477
---------
MULTI-INDUSTRY -- 2.3%
Multi-industry -- 2.3%
Citizens Utilities Co., Class B............................. 497,600 7,588
FMC Corp. .................................................. 75,000 3,624
Honeywell International, Inc. .............................. 80,000 3,850
Textron, Inc. .............................................. 50,000 3,050
---------
18,112
---------
REAL ESTATE -- 0.9%
Real Estate Investment Trusts -- 0.9%
Boston Properties, Inc. .................................... 150,000 4,547
Equity Residential Properties Trust......................... 60,000 2,396
Meditrust Cos............................................... 125,000 352
---------
7,295
---------
SERVICES -- 20.1%
Broadcasting & Publishing -- 5.2%
Fox Entertainment Group, Inc., Class A+..................... 150,000 3,947
Gannett Co., Inc. .......................................... 55,000 3,586
Harte-Hanks, Inc. .......................................... 305,100 6,655
</TABLE>
- ---------------------
A-10
<PAGE> 14
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Broadcasting & Publishing (continued)
Knight-Ridder, Inc. ........................................ 70,000 $ 3,281
News Corp. Ltd. ADR......................................... 100,000 5,831
Sinclair Broadcast Group, Inc., Class A+.................... 200,000 1,900
Time Warner, Inc. .......................................... 40,000 3,420
Viacom, Inc., Class B+...................................... 215,000 11,986
Business & Public Services -- 4.8%
Alexander & Baldwin, Inc. .................................. 180,000 3,684
Allied Waste Industries, Inc.+.............................. 1,075,000 6,047
Cendant Corp.+.............................................. 150,000 2,672
Digex, Inc., Class A+....................................... 35,000 5,670
FedEx Corp.+................................................ 120,000 4,192
Ikon Office Solutions, Inc. ................................ 660,000 4,620
Pitney Bowes, Inc. ......................................... 70,000 3,465
Service Corp. International+................................ 600,000 2,213
The ServiceMaster Co. ...................................... 220,000 2,420
Waste Management, Inc. ..................................... 200,000 3,000
Leisure & Tourism -- 1.1%
Seagram Co. Ltd. ........................................... 150,000 8,813
Merchandising -- 4.4%
Albertson's, Inc. .......................................... 352,800 8,644
Circuit City Stores, Inc. .................................. 40,000 1,615
Dillards, Inc., Class A..................................... 380,000 6,602
Dollar General Corp. ....................................... 43,900 919
Federated Department Stores, Inc.+.......................... 90,000 3,302
Lowe's Cos., Inc. .......................................... 75,000 3,572
Penney (J.C.) Co., Inc. .................................... 315,000 4,961
The Limited, Inc. .......................................... 100,000 3,400
Too, Inc.+.................................................. 55,000 1,320
Telecommunications -- 3.1%
AT&T Corp. ................................................. 80,000 3,955
GTE Corp. .................................................. 80,000 4,720
SBC Communications, Inc. ................................... 40,000 1,520
U.S. West, Inc. ............................................ 195,000 14,162
Transportation: Airlines -- 0.2%
Southwest Airlines Co. ..................................... 100,000 1,844
Transportation: Rail & Road -- 1.3%
Burlington Northern Santa Fe Corp. ......................... 150,000 2,953
Canadian National Railway Co. .............................. 200,000 4,712
Norfolk Southern Corp. ..................................... 195,000 2,645
---------
158,248
---------
OTHER COMMON STOCK -- 3.6%.................................. 28,364
---------
TOTAL COMMON STOCK (cost $604,806).......................... 621,577
---------
<CAPTION>
PREFERRED STOCK -- 0.5%
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 0.5%
Broadcasting & Publishing -- 0.5%
News Corp. Ltd. ADR (cost $1,044)........................... 80,000 4,025
---------
</TABLE>
---------------------
A-11
<PAGE> 15
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
CONVERTIBLE BONDS -- 2.0% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS -- 1.7%
Health & Personal Care -- 1.7%
Sepracor, Inc. 6.25% 2005*#................................. $ 2,350 $ 10,537
Sepracor, Inc. 6.25% 2005*.................................. 650 2,914
---------
13,451
---------
SERVICES -- 0.3%
Telecommunications -- 0.3%
Telefonos de Mexico SA 4.25% 2004........................... 1,660 2,449
---------
TOTAL CONVERTIBLE BONDS (cost $4,641)....................... 15,900
---------
TOTAL INVESTMENT SECURITIES (cost $610,491)................. 641,502
---------
<CAPTION>
SHORT-TERM SECURITIES -- 18.4%
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 16.4%
American Express Credit Corp. 5.82% due 4/10/00............. 5,000 4,968
Anheuser-Busch Cos., Inc. 5.75% due 3/30/00................. 3,000 2,986
Anheuser-Busch Cos., Inc. 5.75% due 4/03/00................. 3,000 2,984
AT&T Corp. 5.75% due 3/02/00................................ 4,000 3,999
Bell Atlantic Financial Services 5.68% due 3/07/00.......... 5,000 4,995
Bell Atlantic Financial Services 5.70% due 3/03/00.......... 2,900 2,899
Bell Atlantic Network Funding 5.80% due 3/16/00............. 5,800 5,786
BellSouth Capital Funding Corp. 5.65% due 3/06/00........... 2,500 2,498
Bestfoods 5.70% due 3/21/00................................. 3,355 3,344
Bestfoods 5.87% due 5/10/00................................. 810 801
CIT Group Holdings, Inc. 5.88% due 3/01/00.................. 288 288
Coca-Cola Co. 5.71% due 4/04/00............................. 2,600 2,586
Corporate Asset Funding Co. 5.75% due 3/27/00............... 5,000 4,979
du Pont (E.I.) de Nemours & Co. 5.74% due 4/07/00........... 5,000 4,970
du Pont (E.I.) de Nemours & Co. 5.75% due 4/19/00........... 5,000 4,961
Eastman Kodak Co. 5.70% due 3/07/00......................... 3,000 2,997
Eastman Kodak Co. 5.73% due 3/29/00......................... 2,400 2,389
Eastman Kodak Co. 5.74% due 4/06/00......................... 6,360 6,324
Emerson Electric Co. 5.83% due 4/17/00...................... 3,944 3,914
Equilon Enterprises LLC 5.72% due 3/24/00................... 2,688 2,678
Estee Lauder Cos., Inc. 5.78% due 4/10/00................... 727 723
Estee Lauder Cos., Inc. 5.85% due 5/03/00................... 2,857 2,827
EW Scripps Co. 5.80% due 3/21/00............................ 500 498
Ford Motor Credit Co. 5.70% due 3/17/00..................... 3,000 2,993
GE Financial Assurance Holdings 5.80% due 4/03/00........... 5,000 4,974
Household Finance Corp. 5.72% due 3/16/00................... 3,660 3,652
Household Finance Corp. 5.73% due 3/20/00................... 5,250 5,234
Motiva Enterprises LLC 5.72% due 3/22/00.................... 2,600 2,591
National Rural Utilities Cooperative Finance Corp. 5.72% due
3/07/00................................................... 12,400 12,388
Park Avenue Recreation Corp. 5.80% due 3/01/00.............. 3,780 3,780
Preferred Receivables Funding Corp. 5.75% due 3/02/00....... 4,000 3,999
Preferred Receivables Funding Corp. 5.75% due 3/10/00....... 1,666 1,664
Preferred Receivables Funding Corp. 5.75% due 3/15/00....... 5,000 4,989
USAA Capital Corp. 5.80% due 4/03/00........................ 4,700 4,675
USAA Capital Corp. 5.86% due 5/11/00........................ 3,000 2,965
---------
129,298
---------
FEDERAL AGENCY OBLIGATIONS -- 2.0%
Federal Home Loan Mortgage Discount Notes 5.66% due
3/07/00................................................... 5,000 4,995
Federal National Mortgage Association Discount Notes 5.63%
due 3/09/00............................................... 400 399
Federal National Mortgage Association Discount Notes 5.67%
due 3/09/00............................................... 5,100 5,094
</TABLE>
- ---------------------
A-12
<PAGE> 16
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL AGENCY OBLIGATIONS (continued)
Federal National Mortgage Association Discount Notes 5.70%
due 4/06/00............................................... $ 500 $ 497
Federal National Mortgage Association Discount Notes 5.70%
due 4/13/00............................................... 5,000 4,966
---------
15,951
---------
TOTAL SHORT-TERM SECURITIES (cost $145,250)................. 145,249
---------
TOTAL INVESTMENTS --
(cost $755,741) 99.8% $786,751
Other assets less liabilities -- 0.2 1,189
------ ---------
NET ASSETS -- 100.0% $787,940
====== =========
</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> 17
O
- ---------------------
ANCHOR PATHWAY FUND
ASSET ALLOCATION SERIES INVESTMENT PORTFOLIO -- FEBRUARY 29, 2000
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 59.8% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 24.9%
Aerospace & Military Technology -- 1.3%
Raytheon Co., Class B....................................... 25,000 $ 462
United Technologies Corp. .................................. 20,000 1,019
Data Processing & Reproduction -- 10.1%
Autodesk, Inc. ............................................. 50,000 2,234
Computer Associates International, Inc. .................... 30,000 1,929
Gateway, Inc.+.............................................. 20,000 1,375
Hewlett-Packard Co. ........................................ 20,000 2,690
International Business Machines Corp. ...................... 15,000 1,530
Storage Technology Corp.+................................... 70,000 893
Xerox Corp. ................................................ 30,000 651
Electrical & Electronics -- 4.2%
Emerson Electric Co. ....................................... 15,000 683
Nokia Corp. ADR............................................. 15,000 2,975
York International Corp. ................................... 55,000 997
Electronic Components -- 5.1%
Corning, Inc. .............................................. 30,000 5,640
Energy Equipment -- 1.3%
Schlumberger Ltd. .......................................... 20,000 1,477
Industrial Components -- 2.0%
Dana Corp. ................................................. 50,000 1,066
Genuine Parts Co. .......................................... 50,000 1,128
Machinery & Engineering -- 0.9%
Millipore Corp. ............................................ 20,000 1,069
---------
27,818
---------
CONSUMER GOODS -- 5.9%
Beverages & Tobacco -- 1.8%
PepsiCo, Inc. .............................................. 40,000 1,290
UST, Inc. .................................................. 40,000 772
Food & Household Products -- 1.2%
General Mills, Inc. ........................................ 40,000 1,318
Health & Personal Care -- 2.9%
SmithKline Beecham PLC ADR.................................. 20,000 1,124
Warner-Lambert Co. ......................................... 25,000 2,139
---------
6,643
---------
ENERGY -- 5.8%
Energy Sources -- 5.2%
Kerr-McGee Corp. ........................................... 20,000 895
Murphy Oil Corp. ........................................... 20,000 1,013
Phillips Petroleum Co. ..................................... 35,000 1,339
Texaco, Inc. ............................................... 30,000 1,423
Ultramar Diamond Shamrock Corp. ............................ 50,000 1,084
</TABLE>
- ---------------------
A-14
<PAGE> 18
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (continued)
Utilities: Electric, Gas & Water -- 0.6%
Central & South West Corp. ................................. 40,000 $ 672
---------
6,426
---------
FINANCE -- 10.0%
Banking -- 5.6%
Bank of America Corp. ...................................... 33,948 1,564
Bank One Corp. ............................................. 35,000 904
Citigroup, Inc. ............................................ 56,250 2,907
Washington Mutual, Inc. .................................... 40,000 885
Financial Services -- 1.8%
Household International, Inc. .............................. 60,666 1,937
Insurance -- 2.6%
Allstate Corp. ............................................. 45,000 877
American General Corp. ..................................... 25,000 1,305
Aon Corp. .................................................. 35,000 733
---------
11,112
---------
MATERIALS -- 2.7%
Chemicals -- 1.5%
Monsanto Co. ............................................... 25,000 970
PPG Industries, Inc. ....................................... 15,000 741
Forest Products & Paper -- 1.2%
Sonoco Products Co. ........................................ 15,000 277
Weyerhaeuser Co. ........................................... 20,000 1,026
---------
3,014
---------
MULTI-INDUSTRY -- 1.0%
Multi-industry -- 1.0%
Dover Corp. ................................................ 30,000 1,157
---------
SERVICES -- 9.5%
Broadcasting & Publishing -- 1.1%
New York Times Co., Class A................................. 30,000 1,268
Business & Public Services -- 3.1%
Pitney Bowes, Inc. ......................................... 50,000 2,475
Rentokil Initial PLC ADR.................................... 30,000 967
Merchandising -- 3.9%
Albertson's, Inc. .......................................... 40,000 980
May Department Stores Co. .................................. 50,000 1,309
Penney (J.C.) Co., Inc. .................................... 30,000 473
Walgreen Co. ............................................... 60,000 1,549
Telecommunications -- 1.4%
Sprint Corp. ............................................... 25,000 1,525
---------
10,546
---------
TOTAL COMMON STOCK (cost $57,802)........................... 66,716
---------
</TABLE>
<TABLE>
PREFERRED STOCK -- 0.7%
---------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 0.2%
Banking -- 0.2%
NB Capital Corp. 8.35%...................................... 10,000 224
---------
</TABLE>
---------------------
A-15
<PAGE> 19
<TABLE>
<CAPTION>
VALUE
PREFERRED STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 0.5%
Broadcasting & Publishing -- 0.5%
Adelphia Communications Corp., Series B 13.00%*............. 5,000 $ 545
---------
TOTAL PREFERRED STOCK (cost $756)........................... 769
---------
<CAPTION>
PRINCIPAL
AMOUNT
BONDS & NOTES -- 29.8% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS -- 0.2%
Business & Public Services -- 0.2%
Waste Management, Inc. 4.00% 2002........................... $ 300 267
---------
CORPORATE BONDS -- 17.6%
Asset-Backed Securities -- 0.7%++
First Plus Home Loan Trust Series 1997-1, Class A6 6.95%
2015...................................................... 500 494
PP&L Transition Bond Co., LLC Series 1991-1, Class A7 7.05%
2009...................................................... 250 247
Broadcasting & Publishing -- 2.3%
American Media Operations, Inc. 10.25% 2009................. 350 346
British Sky Broadcasting Group 8.20% 2009................... 500 487
Charter Communications Holdings zero coupon 2011@........... 750 431
Time Warner, Inc. 9.13% 2013................................ 1,000 1,089
Ziff-Davis, Inc. 8.50% 2008................................. 250 262
Finance -- 4.5%
Capital One Financial Corp. 7.13% 2008...................... 500 467
Cei Citicorp Holdings SA 11.25% 2007#....................... 400 388
Chevy Chase Savings Bank 9.25% 2008......................... 500 467
Ford Motor Credit Co. 5.80% 2009............................ 500 435
Fuji JGB Investment Preferred LLC 9.87% 2049#(1)............ 250 251
GS Escrow Corp. 7.13% 2005.................................. 500 447
IBJ Preferred Capital Co., LLC 8.79% 2008#(1)............... 500 472
Jet Equipment Trust, Class B 7.83% 2012..................... 442 432
Providian National Bank 6.65% 2004.......................... 500 472
Socgen Real Estate Co. LLC, Series A 7.64% 2008#(1)......... 500 467
Tokai Preferred Capital Co. LLC 9.98% 2008#(1).............. 250 251
Wharf International Finance Ltd. 7.63% 2007................. 500 474
Forest Products & Paper -- 0.5%
Container Corp. of America 9.75% 2003....................... 500 506
Industrial -- 3.7%
Allegiance Corp. 7.00% 2026................................. 500 480
Allied Waste Industries NA, Inc. 10.00% 2009................ 500 409
Ceridian Corp. 7.25% 2004................................... 500 472
Conoco, Inc. 6.35% 2009..................................... 250 230
Dayton Hudson Corp. 8.50% 2022.............................. 500 513
Equistar Chemicals, LP 8.75% 2009........................... 500 487
Freeport-McMoRan Copper & Gold, Inc. 7.20% 2026............. 500 322
Gruma SA de CV 7.63% 2007................................... 250 219
Hyundai Semiconductor America, Inc. 8.63% 2007#............. 425 380
Inco Ltd. 9.60% 2022........................................ 400 387
Owens-Illinois, Inc. 8.10% 2007............................. 250 243
Merchandising -- 0.8%
Penney (J.C.) Co., Inc. 7.95% 2017.......................... 975 833
Recreation & Other Consumer Products -- 0.9%
Horseshoe Gaming LLC 8.63% 2009............................. 500 457
Royal Caribbean Cruises Ltd. 7.00% 2007..................... 500 461
V2 Music Holdings PLC zero coupon 2008*#@(2)................ (GBP) 175 75
</TABLE>
- ---------------------
A-16
<PAGE> 20
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (continued)
Telecommunications -- 2.9%
Clearnet Communications, Inc. zero coupon 2008@.............(CAD)$ 1,000 $ 442
Consorcio Ecuatoriano de Telecommunicaciones 14.00%
2002(3)................................................... 250 138
Esat Telecom Group PLC zero coupon 2007*@................... 500 445
Globo Comunicacoes Participacoes Ltd., Class B 10.50%
2006#..................................................... 220 192
Nextel Communications, Inc. zero coupon 2008@............... 1,500 1,065
Nextel International, Inc. zero coupon 2008@................ 300 189
NTL Communications Corp. 11.50% 2009#....................... 900 531
Omnipoint Corp. 11.63% 2006................................. 250 268
Transportation -- 1.3%
Airplanes Pass Through Trust, Class C 8.15% 2019++.......... 470 432
Delta Air Lines, Inc. 10.50% 2016++......................... 500 573
United Airlines Pass Through Trust, Series 1996, Class A2
7.87% 2019++.............................................. 500 461
---------
19,589
---------
UNITED STATES GOVERNMENT & AGENCIES -- 0.2%
Government National Mortgage Association 8.50% 2029......... 250 256
---------
UNITED STATES TREASURY -- 11.8%
7.25% Bonds 2016............................................ 2,000 2,153
7.50% Bonds 2016............................................ 2,000 2,206
8.75% Bonds 2008............................................ 2,500 2,651
3.63% Notes 2002............................................ 2,102 2,083
6.50% Notes 2002............................................ 1,000 999
6.63% Notes 2007............................................ 1,000 997
7.25% Notes 2004............................................ 2,000 2,043
---------
13,132
---------
TOTAL BONDS & NOTES (cost $35,411).......................... 33,244
---------
<CAPTION>
WARRANTS -- 0.1%+*# SHARES
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS -- 0.0%
Recreation & Other Consumer Products -- 0.0%
V2 Music Holdings PLC 5/07/08............................... 175 0
SERVICES -- 0.1%
Telecommunications -- 0.1%
Esat Holdings Ltd. 02/01/07................................. 500 97
---------
TOTAL WARRANTS (cost $15)................................... 97
---------
TOTAL INVESTMENT SECURITIES (cost $93,984).................. 100,826
---------
</TABLE>
---------------------
A-17
<PAGE> 21
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 9.0% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 7.6%
CIT Group Holdings, Inc. 5.88% due 3/01/00.................. $ 1,790 $ 1,790
Eastman Kodak Co. 5.73% due 3/29/00......................... 500 498
Eastman Kodak Co. 5.80% due 4/24/00......................... 890 882
Ford Motor Credit Co. 5.70% due 3/17/00..................... 1,000 997
GE Financial Assurance Holdings 5.80% due 4/03/00........... 1,000 995
Heinz (H.J.) Co. 5.85% due 4/10/00.......................... 500 497
Household Finance Corp. 5.72% due 3/16/00................... 740 738
Household Finance Corp. 5.73% due 3/20/00................... 500 499
Monsanto Co. 5.76% due 3/08/00.............................. 600 599
National Rural Utilities Cooperative Finance Corp. 5.72% due
3/07/00................................................... 1,000 999
---------
8,494
---------
FEDERAL AGENCY OBLIGATIONS -- 1.4%
Federal Home Loan Bank Consolidated Discount Notes 5.75% due
4/19/00................................................... 572 568
Federal National Mortgage Association Discount Notes 5.63%
due 3/09/00............................................... 400 399
Federal National Mortgage Association Discount Notes 5.80%
due 4/06/00............................................... 540 537
---------
1,504
---------
TOTAL SHORT-TERM SECURITIES (cost $9,998)................... 9,998
---------
TOTAL INVESTMENTS -- (cost $103,982) 99.4% $110,824
Other assets less liabilities -- 0.6 650
------ ---------
NET ASSETS -- 100.0% $111,474
====== =========
</TABLE>
-----------------------------
+ Non-income producing security
++ Pass-through securities are backed by a pool of mortgages or
other loans on which principal payments are periodically made.
Therefore, the effective maturity is shorter than stated
maturity.
* Fair valued security; see Note 2
# Resale restricted to qualified institutional buyers
@ Represents a zero-coupon bond which will convert to an
interest-bearing security at a later date
(1) Variable rate security; rate as of February 29, 2000
(2) Bond issued as part of a unit which includes an equity
component
(3) Bond in default
ADR - American Depository Receipt
CAD - Canadian Dollar
GBP - Great British Pound
See Notes to Financial Statements
- ---------------------
A-18
<PAGE> 22
O
- ---------------------
ANCHOR PATHWAY FUND
HIGH-YIELD BOND SERIES INVESTMENT PORTFOLIO -- FEBRUARY 29, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 90.7% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 1.8%
Electronic Components -- 1.8%
Fairchild Semiconductor Corp. 10.38% 2007................... $ 250 $ 249
Flextronics International Ltd. 8.75% 2007*.................. 750 712
Zilog, Inc., Series B 9.50% 2005............................ 250 228
--------
1,189
--------
CONSUMER GOODS -- 5.0%
Beverages & Tobacco -- 2.2%
Canandaigua Wine, Inc. 8.75% 2003........................... 500 494
Delta Beverage Group, Inc. 9.75% 2003*...................... 1,000 985
Food & Household Products -- 2.0%
Home Products International, Inc. 9.63% 2008................ 1,500 1,380
Health & Personal Care -- 0.0%
Mariner Health Group, Inc. 9.50% 2006*(3)................... 610 6
Recreation & Other Consumer Products -- 0.8%
V2 Music Holdings PLC zero coupon 2008*#@(2)................ 2,000 540
--------
3,405
--------
CONSUMER SERVICES -- 0.4%
Retail -- 0.4%
Kmart Corp. 9.78% 2020...................................... 250 248
--------
ENERGY -- 0.7%
Energy Sources -- 0.7%
HS Resources, Inc. 9.25% 2006............................... 500 482
--------
FINANCE -- 3.2%
Banking -- 0.8%
Fuji JGB Investment Preferred LLC 9.87% 2049#(1)............ 500 502
Financial Services -- 2.4%
DR Structured Finance Corp. 9.35% 2019*..................... 500 474
Salton, Inc. 10.75% 2005.................................... 500 507
William Hill Finance PLC 10.63% 2008........................ (GBP) 407 665
--------
2,148
--------
MATERIALS -- 6.6%
Chemicals -- 0.3%
Key Plastics, Inc. 10.25% 2007*(3).......................... 1,000 250
Forest Products & Paper -- 4.5%
Container Corp. of America 9.75% 2003....................... 1,250 1,266
Kappa Beheer BV 10.63% 2009#................................ (EUR) 1,000 1,022
Pacifica Papers, Inc. 10.00% 2009........................... 250 249
Packaging Corp. of America 9.63% 2009....................... 500 500
Metals & Minerals -- 1.8%
Doe Run Resources Corp., Series B 11.25% 2005*.............. 250 228
Kaiser Aluminum & Chemical Corp. 12.75% 2003................ 1,000 982
--------
4,497
--------
</TABLE>
---------------------
A-19
<PAGE> 23
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
MULTI-INDUSTRY -- 3.0%
Multi-industry -- 3.0%
Graham Packaging Co., Series B 8.75% 2008................... $ 1,500 $ 1,342
Tekni-Plex, Inc., Series B 9.25% 2008*...................... 750 720
--------
2,062
--------
NON-U.S. GOVERNMENT OBLIGATIONS -- 2.0%
Foreign Government -- 2.0%
Republic of Argentina 11.38% 2017........................... 500 493
United Mexican States 11.38% 2016........................... 700 826
--------
1,319
--------
SERVICES -- 64.7%
Broadcasting & Publishing -- 22.5%
American Media Operations, Inc. 10.25% 2009................. 1,750 1,733
Chancellor Media Corp. 8.75% 2007........................... 1,000 1,015
Charter Communications Holdings zero coupon 2011@........... 1,750 1,006
Charter Communications Holdings 10.00% 2009#................ 500 495
Comcast UK Cable Partners Ltd. zero coupon 2007@............ 2,365 2,276
Fox Liberty Networks LLC zero coupon 2007@.................. 575 461
Fox Liberty Networks LLC 8.88% 2007......................... 1,000 1,015
Gray Communications Systems, Inc. 10.63% 2006............... 1,250 1,272
Polestar Corp. 10.50% 2008.................................. (GBP) 225 343
Spectrasite Holdings, Inc. zero coupon 2008@................ 750 495
Spectrasite Holdings, Inc. zero coupon 2009@................ 1,500 870
STC Broadcasting, Inc. 11.00% 2007.......................... 1,250 1,238
Sun Media Corp. 9.50% 2007.................................. 1,475 1,438
Telemundo Holdings, Inc. zero coupon 2008@.................. 1,000 660
Transwestern Publishing Co. 9.63% 2007...................... 750 720
TVN Entertainment Corp. 14.00% 2008*#....................... 500 190
Business & Public Services -- 2.9%
Columbia/HCA Healthcare Corp. 6.91% 2005.................... 250 223
Printpack, Inc. 10.63% 2006................................. 1,500 1,477
Protection One Alarm Monitoring Corp. 13.63% 2005........... 400 256
Business Services -- 3.0%
Allied Waste North America, Inc. 10.00% 2009................ 1,000 817
Iron Mountain, Inc. 8.75% 2009.............................. 500 448
Safety Kleen Services, Inc. 9.25% 2008...................... 250 220
Stericycle, Inc. 12.38% 2009#............................... 500 514
Cellular & Paging -- 9.5%
Nextel Communications, Inc. zero coupon 2007@............... 500 381
Nextel Communications, Inc. zero coupon 2007@............... 2,250 1,614
Nextel Communications, Inc. zero coupon 2008@............... 250 178
Nextel Partners, Inc. zero coupon 2009@..................... 500 335
Nextel Partners, Inc. 11.00% 2010#.......................... 250 250
Omnipoint Corp. 11.50% 2009#................................ 500 540
Omnipoint Corp. 11.63% 2006................................. 750 802
Pagemart Wireless, Inc. zero coupon 2008*#@................. 1,000 490
PTC International Finance BV zero coupon 2007@.............. 1,000 673
Voicestream Wire 10.38% 2009#............................... 500 518
Voicestream Wireless Corp. zero coupon 2009#@............... 1,000 625
</TABLE>
- ---------------------
A-20
<PAGE> 24
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Leisure & Tourism -- 5.8%
AMF Bowling Worldwide, Inc., Series B zero coupon 2006@..... $ 405 $ 122
Boyd Gaming Corp. 9.50% 2007................................ 250 235
Carmike Cinemas, Inc. 9.38% 2009............................ 500 385
Florida Panthers Holdings, Inc. 9.88% 2009*................. 750 690
Horseshoe Gaming LLC 8.63% 2009............................. 1,000 915
International Game Technology 7.88% 2004.................... 250 238
Jupiters Ltd. 8.50% 2006.................................... 500 477
Premier Parks, Inc. zero coupon 2008@....................... 250 160
Premier Parks, Inc. 9.75% 2007.............................. 500 500
Premier Parks, Inc. 9.75% 2007.............................. 250 237
Telecommunications -- 21.0%
Allegiance Telecom, Inc. zero coupon 2008@.................. 500 365
Allegiance Telecom, Inc. 12.88% 2008........................ 500 558
Clearnet Communications, Inc. zero coupon 2008@............. (CAD) 4,925 2,176
Clearnet Communications, Inc. zero coupon 2007@............. (CAD) 750 375
COLT Telecom Group 7.63% 2008............................... (EUR) 750 355
COLT Telecom Group PLC 8.88% 2007........................... (EUR) 1,500 769
Comunicacion Celular SA zero coupon 2005#@.................. 1,000 675
Consorcio Ecuatoriano de Telecommunicaciones 14.00%
2002(3)................................................... 500 276
Crown Castle International Corp. zero coupon 2007@.......... 1,000 722
Crown Castle International Corp. zero coupon 2011@.......... 500 313
Esat Telecom Group PLC zero coupon 2007*@................... 1,250 1,112
Esat Telecom Group PLC 11.88% 2008.......................... 250 290
Leap Wireless International, Inc. zero coupon 2010@(2)...... 500 260
Leap Wireless International, Inc. 12.50% 2010(2)............ 500 508
McCaw International Ltd. zero coupon 2007@.................. 1,000 723
Nextlink Communications, Inc. 9.00% 2008.................... 250 232
Time Warner Telecom, Inc. 9.75% 2008........................ 1,250 1,256
United States Xchange LLC 15.00% 2008*...................... 1,000 628
Versatel Telecom International NV 11.88% 2009+*............. (EUR) 500 512
Viatel, Inc. 11.15% 2008.................................... (EUR) 500 238
Viatel, Inc. 11.25% 2008.................................... (EUR)2,000 1,870
--------
43,760
--------
UNITED STATES TREASURY -- 3.3%
10.75% Bonds 2003........................................... 2,000 2,217
--------
TOTAL BOND & NOTES (cost $67,358)........................... 61,327
--------
<CAPTION>
COMMON STOCK -- 0.1% SHARES
---------------------------------------------------------------------------------------------
<S> <C> <C>
OTHER COMMON STOCK (cost $1,108)............................ 63
--------
<CAPTION>
PREFERRED STOCK -- 2.0%
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 2.0%
Broadcasting & Publishing -- 0.8%
Cumulus Media, Inc. 13.75%(4)............................... 500 575
Telecommunications -- 1.2%
Dobson Communications Corp. 12.25%*(4)...................... 791 805
--------
TOTAL PREFERRED STOCK (cost $1,224)......................... 1,380
--------
</TABLE>
---------------------
A-21
<PAGE> 25
<TABLE>
VALUE
WARRANTS -- 0.3%+*# SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS -- 0.0%
Recreation & Other Consumer Products -- 0.0%
V2 Music Holdings PLC 04/15/08.............................. 2,000 $ 0
--------
SERVICES -- 0.3%
Broadcasting & Publishing -- 0.0%
TVN Entertainment Corp. 8/01/08............................. 500 0
Cellular & Paging -- 0.0%
Globalstar Telecommunications 02/15/04...................... 250 27
Telecommunications -- 0.3%
Comunicacion Celular SA 08/15/03............................ 1,000 0
Esat Holdings Ltd. 02/01/07................................. 500 97
McCaw International Ltd. 04/15/07........................... 1,000 3
NTL, Inc. 10/14/08.......................................... 712 85
--------
TOTAL WARRANTS (cost $81)................................... 212
--------
TOTAL INVESTMENT SECURITIES (cost $69,771).................. 62,982
--------
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 6.1% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 4.9%
CIT Group Holdings, Inc. 5.88% due 3/01/00.................. $ 1,790 1,790
Household Finance Corp. 5.73% due 3/20/00................... 950 947
President & Fellows Harvard 5.80% due 4/03/00............... 573 570
--------
3,307
--------
FEDERAL AGENCY OBLIGATIONS -- 1.2%
Federal National Mortgage Association Discount Notes
5.69% due 3/03/00......................................... 790 790
--------
TOTAL SHORT-TERM SECURITIES (cost $4,097)................... 4,097
--------
TOTAL INVESTMENTS --
(cost $73,868) 99.2% $67,079
Other assets less liabilities -- 0.8 550
------ --------
NET ASSETS -- 100.0% $67,629
====== ========
</TABLE>
-----------------------------
+ Non-income producing security
* Fair valued security; see Note 2
# Resale restricted to qualified institutional buyers
@ Represents a zero-coupon bond which will convert to an
interest-bearing security at a later date
(1) Variable rate security; rate as of February 29, 2000
(2) Bond issued as a part of a unit which includes an equity
component
(3) Bond in default
(4) PIK ("Payment-in-Kind") payment made with additional shares in
lieu of cash
- ---------------------
A-22
<PAGE> 26
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
----------------------------------------------------------------
<TABLE>
<CAPTION>
GROSS UNREALIZED
CONTRACT IN DELIVERY APPRECIATION
TO DELIVER EXCHANGE FOR DATE (IN THOUSANDS)
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EUR 475,000 USD 460,640 05/22/00 $ 10
EUR 589,000 USD 571,274 05/24/00 25
EUR 1,000,000 USD 974,109 07/24/00 50
GBP 245,000 USD 386,760 03/14/00 8
GBP 102,000 USD 161,017 03/17/00 2
GBP 92,000 USD 145,228 03/22/00 3
GBP 122,000 USD 192,580 04/26/00 9
GBP 59,000 USD 93,133 04/27/00 4
----
Net Unrealized Appreciation.................. $111
====
</TABLE>
-----------------------------
<TABLE>
<S> <C>
CAD - Canadian Dollar GBP - Great British Pound
EUR - Euro Dollar USD - United States Dollar
</TABLE>
See Notes to Financial Statements
---------------------
A-23
<PAGE> 27
O
- ---------------------
ANCHOR PATHWAY FUND
U.S. GOVERNMENT/
AAA RATED SECURITIES INVESTMENT PORTFOLIO -- FEBRUARY 29, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 95.5% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES -- 16.9%++
Green Tree Financial Corp., Series 1995-9, Class A5 6.80%
2026...................................................... $ 1,000 $ 994
Nomura Asset Securities, Series 1998-D6, Class A1A 6.28%
2028(1)................................................... 2,588 2,473
NPF XII, Inc., Series 1999-2, Class A 7.05% 2003*#.......... 1,125 1,099
Peco Energy Transport Trust, Series 1999-A, Class A7 6.13%
2009...................................................... 750 687
PP&L Transition Bond Co., LLC, Series 1999-1, Class A8 7.15%
2009...................................................... 725 717
Structured Asset Securities Corp., Series 1998-RE1, Class 1
8.67%
2025#(1).................................................. 1,368 1,397
Structured Asset Securities Corp., Series 1998-RF2, Class A
8.54% 2027#(1)............................................ 2,693 2,738
-------
10,105
-------
DEVELOPMENTAL AUTHORITIES -- 1.4%
Intermediate American Development Bank 8.88% 2009........... 750 824
-------
FEDERAL AGENCY OBLIGATIONS -- 38.6%++
Federal Home Loan Mortgage Corp. 5.13% 2008................. 1,700 1,473
Federal Home Loan Mortgage Corp. 6.50% 2009................. 2,000 1,912
Federal Home Loan Mortgage Corp. 7.00% TBA.................. 260 255
Federal Home Loan Mortgage Corp. 8.00% 2012................. 275 278
Federal Home Loan Mortgage Corp. 9.00% 2021-2022............ 451 467
Federal Home Loan Mortgage Corp. 9.50% 2016................. 358 372
Federal Home Loan Mortgage Corp. 11.88% 2013................ 7 7
Federal Home Loan Mortgage Corp. 12.50% 2013................ 54 59
Federal National Mortgage Association 5.25% 2009............ 500 435
Federal National Mortgage Association 5.50% 2014............ 2,333 2,143
Federal National Mortgage Association 6.00% 2008-2013....... 629 587
Federal National Mortgage Association 6.25% 2029............ 700 628
Federal National Mortgage Association 6.50% 2011............ 1,636 1,581
Federal National Mortgage Association 6.85% 2026*........... 1,299 1,142
Federal National Mortgage Association 7.00% 2027............ 500 477
Federal National Mortgage Association 11.50% 2029........... 183 202
Government National Mortgage Association 6.50% 2013-2028.... 725 689
Government National Mortgage Association 7.00% 2023-2029.... 3,282 3,159
Government National Mortgage Association 7.50% 2022-2023.... 1,882 1,859
Government National Mortgage Association 8.00% 2017-2023.... 2,581 2,606
Government National Mortgage Association 8.50% 2016......... 133 137
Government National Mortgage Association 9.00% 2016-2017.... 369 384
Government National Mortgage Association 9.50% 2009-2017.... 2,016 2,129
Government National Mortgage Association 10.00% 2016........ 9 10
Government National Mortgage Association 10.50% 2016........ 73 80
-------
23,071
-------
MORTGAGE-RELATED SECURITIES -- 17.7%++
Chase Commercial Mortgage Securities Corp., Series 1998-2,
Class A2 6.39% 2008....................................... 250 230
Credit Suisse First Boston Mortgage, Series 1998-C1, Class
A1A 6.26% 2007............................................ 655 624
DLJ Mortgage Acceptance Corp., Series 1996-CF2, Class A1B
7.29% 2021#............................................... 3,800 3,713
GMAC Commercial Mortgage Security, Inc., Series 1997-C1,
Class A3 6.87% 2007....................................... 250 235
Merrill Lynch Mortgage Investors, Inc., Series 1995-C3,
Class A2 6.81% 2025(1).................................... 500 490
Merrill Lynch Mortgage Investors, Inc., Series 1995-C3,
Class A3 7.05% 2025(1).................................... 500 486
</TABLE>
- ---------------------
A-24
<PAGE> 28
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-RELATED SECURITIES (continued)
Morgan (J.P.) Commercial Mortgage Finance Corp., Series
1995-C1, Class A2 7.42% 2010(1)........................... $ 1,000 $ 984
Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A2
6.48% 2030................................................ 500 463
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class A2
6.53% 2031................................................ 750 694
Mortgage Capital Funding, Inc., Series 1998-MC1, Class A1
6.42% 2007................................................ 1,319 1,266
Norwest Asset Securities Corp., Series 1998-31, Class A1
6.25% 2014................................................ 280 264
Ocwen Residential MBS Corp., Series 1998-R1, Class AWAC
4.34% 2040#(1)............................................ 1,137 1,113
-------
10,562
-------
MUNICIPAL BONDS -- 1.5%
Puerto Rico Public Finance Corp., Series 1999-1, Class A
6.15% 2008*............................................... 951 912
-------
UNITED STATES TREASURY -- 19.4%
5.25% Bonds 2029............................................ 1,000 864
7.13% Bonds 2023............................................ 300 326
8.75% Bonds 2017............................................ 1,500 1,848
8.88% Bonds 2017............................................ 5,125 6,389
5.50% Notes 2009............................................ 2,000 1,852
5.88% Notes 2002............................................ 300 295
-------
11,574
-------
TOTAL INVESTMENT SECURITIES (cost $58,985).................. 57,048
-------
SHORT-TERM SECURITIES -- 2.8%
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 2.8%
Albertson's, Inc. 5.76% due 3/03/00......................... 700 700
CIT Group Holdings, Inc. 5.88% due 3/01/00.................. 981 981
-------
TOTAL SHORT-TERM SECURITIES (cost $1,681)................... 1,681
-------
TOTAL INVESTMENTS --
(cost $60,666) 98.3% $58,729
Other assets less liabilities -- 1.7 1,018
------ -------
NET ASSETS -- 100.0% $59,747
====== =======
</TABLE>
-----------------------------
++ Pass-through securities are backed by a pool of mortgages or
other loans on which principal payments are periodically made.
Therefore, the effective maturity is shorter than the stated
maturity.
* Fair valued security; see Note 2
# Resale restricted to qualified institutional buyers
TBA - Security purchased on a forward commitment basis with an
approximate principal amount and no definitive maturity
date. The actual principal amount and maturity date will be
determined upon settlement date.
(1) Variable rate security; rate as of February 29, 2000
See Notes to Financial Statements
---------------------
A-25
<PAGE> 29
O
- ---------------------
ANCHOR PATHWAY FUND
CASH MANAGEMENT SERIES INVESTMENT PORTFOLIO -- FEBRUARY 29, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 105.1% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 75.9%
American Express Credit Corp. 5.77% due 3/27/00............. $ 2,100 $ 2,091
American General Corp. 5.70% due 3/10/00.................... 2,000 1,997
Anheuser-Busch Cos., Inc. 5.80% due 4/07/00................. 2,200 2,187
Bell Atlantic Financial Services 5.68% due 3/07/00.......... 2,000 1,998
BellSouth Telecommunications, Inc. 5.67% due 3/02/00........ 2,100 2,100
Bestfoods 5.82% due 4/05/00................................. 1,700 1,690
Chevron Transport Corp. 5.73% due 3/14/00................... 2,000 1,996
Ciesco L.P. 5.68% due 3/01/00............................... 2,000 2,000
Coca-Cola Co. 5.80% due 4/10/00............................. 2,000 1,987
Colgate-Palmolive Co. 5.75% due 3/10/00..................... 1,500 1,498
du Pont (E.I.) de Nemours & Co. 5.67% due 3/20/00........... 1,000 997
Eastman Kodak Co. 5.70% due 3/16/00......................... 2,000 1,995
Emerson Electric Co. 5.69% due 3/17/00...................... 1,300 1,297
Emerson Electric Co. 5.85% due 4/27/00...................... 1,100 1,090
Ford Motor Credit Co. 5.85% due 4/28/00..................... 2,300 2,278
General Motors Acceptance Corp. 5.82% due 4/06/00........... 2,100 2,088
Heinz (H.J.) Co. 5.68% due 3/08/00.......................... 2,000 1,998
Household Finance Corp. 5.73% due 3/06/00................... 1,973 1,971
IBM Credit Corp. 5.81% due 4/18/00.......................... 1,400 1,389
John Hancock Capital Corp. 5.83% due 4/17/00................ 1,650 1,638
Marsh USA, Inc. 5.81% due 4/03/00........................... 1,403 1,396
Monsanto Co. 5.77% due 3/15/00.............................. 2,000 1,996
Motiva Enterprises LLC 5.70% due 3/13/00.................... 2,100 2,096
Motorola, Inc. 5.75% due 3/31/00............................ 2,000 1,990
Pfizer, Inc. 5.75% due 3/02/00.............................. 2,100 2,100
Preferred Receivables Funding Corp. 5.73% due 3/06/00....... 2,000 1,998
Procter & Gamble Co. 5.80% due 4/04/00...................... 1,100 1,094
USAA Capital Corp. 5.80% due 4/03/00........................ 800 796
Wal-Mart Stores, Inc. 5.82% due 4/25/00..................... 2,000 1,982
Warner-Lambert Co. 5.76% due 3/20/00........................ 1,200 1,196
-------
TOTAL CORPORATE SHORT-TERM NOTES (cost $52,929)............. 52,929
-------
FEDERAL AGENCY OBLIGATIONS -- 29.2%
Federal Home Loan Bank Discount Notes 5.66% due 3/24/00..... 2,100 2,092
Federal Home Loan Bank Discount Notes 5.74% due 4/12/00..... 2,900 2,881
Federal Home Loan Bank Discount Notes 5.77% due 4/24/00..... 2,346 2,326
Federal Home Loan Mortgage Discount Notes 5.63% due
3/21/00................................................... 1,000 997
Federal Home Loan Mortgage Discount Notes 5.65% due
3/07/00................................................... 526 526
Federal Home Loan Mortgage Discount Notes 5.74% due
4/11/00................................................... 2,400 2,384
Federal Home Loan Mortgage Discount Notes 5.78% due
4/18/00................................................... 3,600 3,572
Federal Home Loan Mortgage Discount Notes 5.78% due
4/20/00................................................... 480 476
Federal National Mortgage Association Discount Notes 5.59%
due 3/09/00............................................... 1,799 1,797
Federal National Mortgage Association Discount Notes 5.60%
due 3/16/00............................................... 2,000 1,995
Federal National Mortgage Association Discount Notes 5.65%
due 3/09/00............................................... 600 599
</TABLE>
- ---------------------
A-26
<PAGE> 30
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL AGENCY OBLIGATIONS (continued)
Federal National Mortgage Association Discount Notes 5.66%
due 3/01/00............................................... $ 499 $ 499
Federal National Mortgage Association Discount Notes 5.75%
due 4/03/00............................................... 200 199
-------
TOTAL FEDERAL AGENCY OBLIGATIONS (cost $20,343)............. 20,343
-------
TOTAL SHORT-TERM SECURITIES (cost $73,272).................. 73,272
-------
TOTAL INVESTMENTS --
(cost $73,272) 105.1% $73,272
Liabilities in excess of other assets -- (5.1) (3,579)
------ -------
NET ASSETS -- 100.0% $69,693
====== =======
</TABLE>
-----------------------------
See Notes to Financial Statements
---------------------
A-27
<PAGE> 31
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 2000
(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*........... $1,085,418 $253,132 $641,502 $100,826 $62,982 $57,048
Short-term securities*.................... 156,681 45,297 145,249 9,998 4,097 1,681
Cash...................................... 17 35 1 10 61 1
Foreign Cash.............................. -- 3 -- -- -- --
Receivables for --
Sales of investments.................... 15,483 354 2,754 -- -- 1,165
Fund shares sold........................ 3,666 431 70 -- 1 --
Dividends and accrued interest.......... 368 222 1,533 776 1,289 453
Foreign currency contracts.............. -- 460 -- -- -- --
Prepaid expenses.......................... 11 3 12 2 1 1
Unrealized appreciation on forward foreign
currency contracts...................... -- -- -- -- 111 --
----------------------------------------------------------------------------------
1,261,644 299,937 791,121 111,612 68,542 60,349
----------------------------------------------------------------------------------
LIABILITIES:
Payables for --
Purchases of investments................ 7,938 98 1,665 -- 759 509
Fund shares redeemed.................... 1,180 64 1,102 55 84 26
Advisory fees........................... 289 140 194 28 18 16
Management fees......................... 192 56 129 19 12 10
Foreign currency contracts.............. -- 456 -- -- -- --
Other accrued expenses.................... 112 149 91 36 40 41
----------------------------------------------------------------------------------
9,711 963 3,181 138 913 602
----------------------------------------------------------------------------------
NET ASSETS................................ $1,251,933 $298,974 $787,940 $111,474 $67,629 $59,747
==================================================================================
Shares of beneficial interest outstanding
(unlimited shares authorized)........... 20,629 13,791 28,799 8,727 6,700 5,858
Net asset value per share................. $ 60.69 $ 21.68 $ 27.36 $ 12.77 $ 10.09 $ 10.20
==================================================================================
COMPOSITION OF NET ASSETS:
Capital paid in........................... $ 418,748 $130,911 $550,235 $ 85,811 $75,612 $60,081
Accumulated undistributed net investment
income.................................. 2,033 691 17,763 4,383 8,148 4,263
Accumulated undistributed net realized
gain (loss) on investments, futures,
options and foreign currency............ 261,658 25,111 188,932 14,438 (9,450) (2,660)
Unrealized appreciation/depreciation on
investments............................. 569,495 142,273 31,010 6,842 (6,789) (1,937)
Unrealized foreign exchange gain (loss) on
other assets and liabilities............ (1) (12) -- -- 108 --
----------------------------------------------------------------------------------
Net Assets............................ $1,251,933 $298,974 $787,940 $111,474 $67,629 $59,747
==================================================================================
---------------
* Cost
Investment securities................... $ 515,923 $110,859 $610,491 $ 93,984 $69,771 $58,985
==================================================================================
Short-term securities................... $ 156,681 $ 45,297 $145,250 $ 9,998 $ 4,097 $ 1,681
==================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
ASSETS:
Investment securities at value*........... $ --
Short-term securities*.................... 73,272
Cash...................................... 128
Foreign Cash.............................. --
Receivables for --
Sales of investments.................... --
Fund shares sold........................ 55
Dividends and accrued interest.......... --
Foreign currency contracts.............. --
Prepaid expenses.......................... 1
Unrealized appreciation on forward foreign
currency contracts...................... --
----------
73,456
----------
LIABILITIES:
Payables for --
Purchases of investments................ --
Fund shares redeemed.................... 3,690
Advisory fees........................... 18
Management fees......................... 12
Foreign currency contracts.............. --
Other accrued expenses.................... 43
----------
3,763
----------
NET ASSETS................................ $69,693
==========
Shares of beneficial interest outstanding
(unlimited shares authorized)........... 6,291
Net asset value per share................. $ 11.08
==========
COMPOSITION OF NET ASSETS:
Capital paid in........................... $66,201
Accumulated undistributed net investment
income.................................. 3,493
Accumulated undistributed net realized
gain (loss) on investments, futures,
options and foreign currency............ (1)
Unrealized appreciation/depreciation on
investments............................. --
Unrealized foreign exchange gain (loss) on
other assets and liabilities............ --
----------
Net Assets............................ $69,693
==========
---------------
* Cost
Investment securities................... $ --
==========
Short-term securities................... $73,272
==========
</TABLE>
See Notes to Financial Statements
- ---------------------
A-28
<PAGE> 32
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 29, 2000
(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................................ $ 4,470 $ 1,287 $ 8,672 $ 3,498 $ 8,240 $ 4,772
Dividends............................... 3,061 2,563 13,998 1,610 17 --
--------------------------------------------------------------------------------
Total income*.................... 7,531 3,850 22,670 5,108 8,257 4,772
--------------------------------------------------------------------------------
Expenses:
Advisory fees........................... 3,064 1,363 2,744 391 257 220
Management fees......................... 2,043 544 1,829 261 171 147
Custodian fees.......................... 289 414 222 61 60 51
Auditing and legal fees................. 39 37 39 33 34 34
Reports to investors.................... 35 6 37 4 4 4
Trustees' fees.......................... 14 3 13 2 1 1
Other expenses.......................... 13 3 15 2 2 1
--------------------------------------------------------------------------------
Total expenses before custody
credits........................ 5,497 2,370 4,899 754 529 458
Custody credits earned on cash
balances....................... (4) (3) (5) (2) (4) (3)
--------------------------------------------------------------------------------
Net investment income..................... 2,038 1,483 17,776 4,356 7,732 4,317
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments... 261,869 25,593 188,936 14,475 (9,210) (1,187)
Net realized foreign exchange gain (loss)
on other assets and liabilities......... 2 72 (3) (1) 237 --
Change in unrealized appreciation/
depreciation of investments............. 217,176 92,886 (174,414) (10,342) (202) (2,020)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. (1) (12) -- -- 63 --
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments, foreign currency and other
assets and liabilities.................. 479,046 118,539 14,519 4,132 (9,112) (3,207)
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............... $481,084 $120,022 $ 32,295 $ 8,488 $(1,380) $ 1,110
================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
NET INVESTMENT INCOME:
Income:
Interest................................ $3,979
Dividends............................... --
----------
Total income*.................... 3,979
----------
Expenses:
Advisory fees........................... 244
Management fees......................... 162
Custodian fees.......................... 39
Auditing and legal fees................. 34
Reports to investors.................... 4
Trustees' fees.......................... 1
Other expenses.......................... 1
----------
Total expenses before custody
credits........................ 485
Custody credits earned on cash
balances....................... (3)
----------
Net investment income..................... 3,497
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments... (1)
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, foreign currency and other
assets and liabilities.................. (1)
----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............... $3,496
==========
</TABLE>
- ---------------
* Net of foreign witholding taxes of $53; $302; $117; and $12 on Growth,
International, Growth-Income and Asset Allocation Series, respectively.
See Notes to Financial Statements
---------------------
A-29
<PAGE> 33
O
- ---------------------
ANCHOR PATHWAY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED FEBRUARY 29, 2000
(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..................... $ 2,038 $ 1,483 $ 17,776 $ 4,356 $ 7,732 $ 4,317
Net realized gain (loss) on investments... 261,869 25,593 188,936 14,475 (9,210) (1,187)
Net realized foreign exchange gain (loss)
on other assets and liabilities......... 2 72 (3) (1) 237 --
Change in unrealized appreciation/
depreciation of investments............. 217,176 92,886 (174,414) (10,342) (202) (2,020)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. (1) (12) -- -- 63 --
----------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations............... 481,084 120,022 32,295 8,488 (1,380) 1,110
----------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Dividends from net investment income...... (3,520) (5,485) (20,340) (6,450) (12,930) (6,130)
Distributions from net realized gains on
investments............................. (242,808) (27,757) (233,900) (22,292) (2,960) --
----------------------------------------------------------------------------------
Total dividends and distributions paid to
shareholders............................ (246,328) (33,242) (254,240) (28,742) (15,890) (6,130)
----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 132,553 37,555 48,945 5,501 16,572 14,814
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... 246,328 33,242 254,240 28,742 15,890 6,130
Cost of shares repurchased................ (269,024) (63,124) (207,410) (32,315) (38,811) (31,458)
----------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ 109,857 7,673 95,775 1,928 (6,349) (10,514)
----------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS... 344,613 94,453 (126,170) (18,326) (23,619) (15,534)
NET ASSETS:
Beginning of period....................... 907,320 204,521 914,110 129,800 91,248 75,281
----------------------------------------------------------------------------------
End of period............................. $1,251,933 $298,974 $ 787,940 $111,474 $ 67,629 $ 59,747
==================================================================================
---------------
Accumulated undistributed net investment
income.................................. $ 2,033 $ 691 $ 17,763 $ 4,383 $ 8,148 $ 4,263
==================================================================================
Shares issued and repurchased:
Sold.................................... 2,526 2,101 1,514 387 1,387 1,404
Issued in reinvestment of dividends and
distributions......................... 5,723 2,331 8,734 2,254 1,591 620
Repurchased............................. (5,107) (3,709) (6,393) (2,257) (3,355) (2,990)
----------------------------------------------------------------------------------
Net increase (decrease)................... 3,142 723 3,855 384 (377) (966)
==================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
OPERATIONS:
Net investment income..................... $ 3,497
Net realized gain (loss) on investments... (1)
Net realized foreign exchange gain (loss)
on other assets and liabilities......... --
Change in unrealized appreciation/
depreciation of investments............. --
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. --
----------
Net increase (decrease) in net assets
resulting from operations............... 3,496
----------
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Dividends from net investment income...... (4,180)
Distributions from net realized gains on
investments............................. (2)
----------
Total dividends and distributions paid to
shareholders............................ (4,182)
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 165,254
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... 4,182
Cost of shares repurchased................ (181,304)
----------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ (11,868)
----------
TOTAL INCREASE (DECREASE) IN NET ASSETS... (12,554)
NET ASSETS:
Beginning of period....................... 82,247
----------
End of period............................. $ 69,693
----------
Accumulated undistributed net investment
income.................................. $ 3,493
----------
Shares issued and repurchased:
Sold.................................... 14,913
Issued in reinvestment of dividends and
distributions......................... 388
Repurchased............................. (16,395)
----------
Net increase (decrease)................... (1,094)
----------
</TABLE>
See Notes to Financial Statements
- ---------------------
A-30
<PAGE> 34
O
- ---------------------
ANCHOR PATHWAY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 1, 1998 THROUGH FEBRUARY 28, 1999#
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES
SERIES SERIES SERIES SERIES SERIES SERIES
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).............. $ 769 $ (38) $ 3,745 $ 1,164 $ 2,277 $ 1,162
Net realized gain on investments.......... 43,357 3,365 41,842 3,184 607 202
Net realized foreign exchange gain on
other assets and liabilities............ -- 5 -- -- 112 --
Change in unrealized appreciation/
depreciation of investments............. 74,943 17,708 (4,264) (2,522) (2,631) (1,597)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. -- (8) -- 3 24 --
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations............... 119,069 21,032 41,323 1,829 389 (233)
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 27,772 8,280 14,357 3,124 7,120 7,030
Cost of shares repurchased................ (75,876) (18,554) (57,564) (9,222) (16,322) (11,201)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ (48,104) (10,274) (43,207) (6,098) (9,202) (4,171)
--------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS... 70,965 10,758 (1,884) (4,269) (8,813) (4,404)
NET ASSETS:
Beginning of period....................... 836,355 193,763 915,994 134,069 100,061 79,685
--------------------------------------------------------------------------------
End of period............................. $907,320 $204,521 $914,110 $129,800 $ 91,248 $ 75,281
================================================================================
Accumulated undistributed net investment
income.................................. $ 3,513 $ 4,158 $ 20,330 $ 6,443 $ 12,878 $ 6,122
================================================================================
Shares issued and repurchased:
Sold.................................... 541 549 393 202 551 633
Repurchased............................. (1,503) (1,229) (1,584) (597) (1,270) (1,010)
--------------------------------------------------------------------------------
Net increase (decrease)................... (962) (680) (1,191) (395) (719) (377)
================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
OPERATIONS:
Net investment income (loss).............. $ 761
Net realized gain on investments.......... 1
Net realized foreign exchange gain on
other assets and liabilities............ --
Change in unrealized appreciation/
depreciation of investments............. --
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. --
----------
Net increase (decrease) in net assets
resulting from operations............... 762
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 65,150
Cost of shares repurchased................ (47,491)
----------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ 17,659
----------
TOTAL INCREASE (DECREASE) IN NET ASSETS... 18,421
NET ASSETS:
Beginning of period....................... 63,826
----------
End of period............................. $ 82,247
----------
Accumulated undistributed net investment
income.................................. $ 4,176
----------
Shares issued and repurchased:
Sold.................................... 5,878
Repurchased............................. (4,287)
-----------
Net increase (decrease)................... 1,591
-----------
</TABLE>
- ---------------
# The Fund changed its fiscal year end from November 30 to February 28.
See Notes to Financial Statements
---------------------
A-31
<PAGE> 35
O
- ---------------------
ANCHOR PATHWAY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 1998
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
U.S.
GOVERNMENT/
ASSET HIGH-YIELD AAA-RATED
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION BOND SECURITIES
SERIES SERIES SERIES SERIES SERIES SERIES
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income..................... $ 2,774 $ 2,915 $ 16,601 $ 5,204 $ 10,264 $ 4,865
Net realized gain on investments.......... 199,464 26,400 192,083 19,210 2,704 1,702
Net realized foreign exchange gain (loss)
on other assets and liabilities......... -- 43 -- -- (95) --
Change in unrealized appreciation/
depreciation on investments............. (18,723) 454 (75,884) (11,352) (8,636) (136)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. -- (235) -- (3) 13 --
---------------------------------------------------------------------------------
Net increase in net assets resulting from
operations.............................. 183,515 29,577 132,800 13,059 4,250 6,431
---------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Dividends from net investment income...... (3,495) (3,310) (17,480) (5,385) (11,180) (6,410)
Distributions from net realized gains on
investments............................. (148,000) (54,645) (166,343) (18,305) (2,570) --
---------------------------------------------------------------------------------
Total dividends and distributions paid to
shareholders............................ (151,495) (57,955) (183,823) (23,690) (13,750) (6,410)
---------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 120,195 37,714 92,874 16,070 34,394 33,591
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... 151,495 57,955 183,823 23,690 13,750 6,410
Cost of shares repurchased................ (268,585) (96,865) (260,112) (50,506) (57,253) (41,946)
---------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ 3,105 (1,196) 16,585 (10,746) (9,109) (1,945)
---------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS... 35,125 (29,574) (34,438) (21,377) (18,609) (1,924)
NET ASSETS:
Beginning of period....................... 801,230 223,337 950,432 155,446 118,670 81,609
---------------------------------------------------------------------------------
End of period............................. $ 836,355 $193,763 $ 915,994 $134,069 $100,061 $ 79,685
=================================================================================
Accumulated undistributed net investment
income.................................. $ 2,744 $ 3,370 $ 16,585 $ 5,279 $ 10,471 $ 4,991
=================================================================================
Shares issued and repurchased:
Sold.................................... 2,820 2,526 2,655 1,032 2,646 3,076
Issued in reinvestment of dividends and
distributions......................... 3,611 3,971 5,274 1,547 1,052 616
Repurchased............................. (6,265) (6,477) (7,463) (3,262) (4,349) (3,842)
---------------------------------------------------------------------------------
Net increase (decrease)................... 166 20 466 (683) (651) (150)
=================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
OPERATIONS:
Net investment income..................... $ 3,429
Net realized gain on investments.......... 2
Net realized foreign exchange gain (loss)
on other assets and liabilities......... --
Change in unrealized appreciation/
depreciation on investments............. --
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. --
-----------
Net increase in net assets resulting from
operations.............................. 3,431
-----------
DIVIDENDS AND DISTRIBUTIONS
PAID TO SHAREHOLDERS:
Dividends from net investment income...... (3,995)
Distributions from net realized gains on
investments............................. --
-----------
Total dividends and distributions paid to
shareholders............................ (3,995)
------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 171,512
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... 3,995
Cost of shares repurchased................ (180,343)
-----------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ (4,836)
-----------
TOTAL INCREASE (DECREASE) IN NET ASSETS... (5,400)
NET ASSETS:
Beginning of period....................... 69,226
-----------
End of period............................. $ 63,826
-----------
Accumulated undistributed net investment
income.................................. $ 3,415
-----------
Shares issued and repurchased:
Sold.................................... 15,669
Issued in reinvestment of dividends and
distributions......................... 375
Repurchased............................. (16,372)
-----------
Net increase (decrease)................... (328)
-----------
</TABLE>
See Notes to Financial Statements
- ---------------------
A-32
<PAGE> 36
O
- ---------------------
ANCHOR PATHWAY FUND
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION: Anchor Pathway Fund (the
"Fund") is a Massachusetts Business Trust. Its Agreement and Declaration of
Trust permits the issuance of an unlimited number of shares ($.01 par value per
share) of beneficial interest in seven separate series, with shares of each
series representing an interest in a separate portfolio of assets and operating
as a distinct fund. The Fund is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company.
Shares of the Fund are offered only to Variable Separate Accounts, a separate
account of Anchor National Life Insurance Company which offers annuity
contracts.
The investment objectives for each series are as follows:
The GROWTH SERIES seeks growth of capital by investing primarily in common
stocks or securities with common stock characteristics that demonstrate the
potential for appreciation.
The INTERNATIONAL SERIES seeks long-term growth of capital by investing
primarily in common stocks or securities with common stock characteristics of
issuers that are domiciled outside the U.S., including those domiciled in
developing countries.
The GROWTH-INCOME SERIES seeks growth of capital and income by investing
primarily in common stocks or securities with common stock characteristics that
demonstrate the potential for solid growth and dividends.
The ASSET ALLOCATION SERIES seeks high total return (including income and
capital gains) consistent with preservation of capital over the long-term by
investing in a diversified portfolio of common stocks, bonds and money market
instruments.
The HIGH YIELD BOND SERIES seeks high current income with capital appreciation
as a secondary objective by investing primarily in intermediate and long-term
corporate debt obligations, with emphasis on higher yielding, higher risk, lower
rated or unrated corporate securities, which are commonly known as "junk bonds."
The U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES seeks high current income
consistent with prudent investment risk and preservation of capital by investing
primarily in a combination of securities issued or guaranteed by the U.S.
Government (i.e., backed by the full faith and credit of the U.S.) and other
debt securities rated in the highest rating category (or that are determined to
be of comparable quality by the investment adviser).
The CASH MANAGEMENT SERIES seeks high current yield while preserving capital by
investing in high quality money market instruments.
2. SIGNIFICANT ACCOUNTING POLICIES: The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from these estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
SECURITY VALUATIONS: Stocks are stated at value based upon closing sales prices
reported on recognized securities exchanges or, for listed securities having no
sales reported and for unlisted securities, upon last-reported bid prices.
Nonconvertible bonds, debentures, other long-term debt securities, and
short-term securities with original or remaining maturities in excess of 60 days
are valued at prices obtained for the day of valuation from a bond pricing
service or a major dealer in bonds when such prices are available; however, in
circumstances where the investment adviser deems it appropriate to do so, an
over-the-counter or exchange quotation at the mean of representative bid or
asked prices may be used. Securities traded primarily on securities exchanges
outside the United States are valued at the last sale price on such exchanges on
the day of valuation, or if there is no sale on the day of valuation, at the
last reported bid price. If a security's price is available from more than one
foreign exchange the Fund uses the exchange that is the primary market for the
security. Short-term securities with 60 days or less to maturity are amortized
to maturity based on their cost to the Fund if acquired within 60 days of
maturity or, if already held by the Fund on the 60th day, are amortized to
maturity based on the value determined on the 61st day. Securities for which
quotations are not readily available are valued at fair value as determined in
good faith under the direction of the Fund's Trustees.
---------------------
A-33
<PAGE> 37
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained
in U.S. dollars. Assets and liabilities denominated in foreign currencies and
commitments under forward foreign currency contracts are translated into U.S.
dollars at the mean of the quoted bid and asked prices of such currencies
against the U.S. dollar.
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 February 29, 2000, 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............................................... $ 55 $ 2 $(57)
International Series........................................ (539) 535 4
Growth-Income Series........................................ 3 (3) --
Asset Allocation Series..................................... (34) 34 --
High-Yield Bond Series...................................... (468) 468 --
U.S. Government/AAA-Rated Securities Series................. 78 (46) (32)
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-34
<PAGE> 38
4. FEDERAL INCOME TAXES: It is the Fund's policy to continue to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income, including any net
realized gain on investments, to its shareholders. Therefore, no federal tax
provision is required.
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for tax purposes, including short-term securities at February 29,
2000, were as follows (dollars in thousands):
<TABLE>
<CAPTION>
NET
AGGREGATE AGGREGATE UNREALIZED
UNREALIZED UNREALIZED GAIN COST OF CAPITAL LOSS
GAIN (LOSS) (LOSS) INVESTMENTS CARRYOVER+
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------
Growth Series........................................ $622,003 $ (52,775) $569,228 $672,871 $--
International Series................................. 148,773 (6,500) 142,273 156,156 --
Growth-Income Series................................. 163,416 (132,406) 31,010 755,741 --
Asset Allocation Series.............................. 21,601 (14,759) 6,842 103,982 --
High-Yield Bond Series*.............................. 1,189 (7,978) (6,789) 73,868 8,406
U.S. Government/AAA-Rated Securities Series*......... 252 (2,189) (1,937) 60,666 1,945
Cash Management Series*.............................. -- -- -- 73,272 1
<CAPTION>
EXPIRATION
DATE
<S> <C>
-----------
Growth Series........................................ --
International Series................................. --
Growth-Income Series................................. --
Asset Allocation Series.............................. --
High-Yield Bond Series*.............................. 2008
U.S. Government/AAA-Rated Securities Series*......... 2005-2008
Cash Management Series*.............................. 2008
</TABLE>
- ---------------
* Post 10/31/99 Capital Loss Deferral: High-Yield Bond Series $1,044, U.S.
Government/AAA-Rated Securities Series $712, and Cash Management Series $1.
+ Net capital loss carryover reported as of February 29, 2000, which are
available to the extent provided in regulations to offset future capital
gains. To the extent that these carryovers are used to offset future capital
gains, it is probable that the gains so offset will not be distributed.
5. BUSINESS MANAGER AND INVESTMENT ADVISER: SunAmerica Asset Management Corp.
(the "Business Manager"), pursuant to a business management agreement, manages
the business affairs and the administration of the Fund. Effective January 1,
1999, SunAmerica Asset Management Corp., the business manager, became a wholly
owned subsidiary of AIG. 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 February
29, 2000, were as follows:
<TABLE>
<CAPTION>
ASSET
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION HIGH-YIELD
SERIES SERIES SERIES SERIES BOND SERIES
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------
Purchases of portfolio securities............ $276,560 $31,254 $242,187 $30,368 $29,264
Sales of portfolio securities................ 494,176 75,670 374,109 50,758 42,751
U.S. government securities excluded above
were as follows:
Purchases of U.S. government securities...... -- -- -- 2,498 5,196
Sales of U.S. government securities.......... -- -- -- 2,375 5,225
<CAPTION>
U.S.
GOVERNMENT/
AAA-RATED CASH
SECURITIES MANAGEMENT
SERIES SERIES
<S> <C> <C>
-------------------------
Purchases of portfolio securities............ $ 3,298 $--
Sales of portfolio securities................ 6,205 --
U.S. government securities excluded above
were as follows:
Purchases of U.S. government securities...... 28,885 --
Sales of U.S. government securities.......... 31,016 --
</TABLE>
7. TRANSACTIONS WITH AFFILIATES: The following series incurred brokerage
commissions (dollars in thousands) with an affiliated broker:
<TABLE>
<CAPTION>
FSC
SECURITIES
CORP.
----------
<S> <C>
Growth Series............................................... $1
Growth-Income Series........................................ 1
Asset Allocation Series..................................... 1
</TABLE>
---------------------
A-35
<PAGE> 39
O
- ---------------------
ANCHOR PATHWAY FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
NET REALIZED TOTAL DIVIDENDS DIVIDENDS
NET ASSET NET & UNREALIZED FROM DECLARED FROM NET NET ASSET
VALUE INVEST- GAIN (LOSS) INVEST- FROM NET REALIZED VALUE
PERIOD BEGINNING MENT ON MENT INVESTMENT GAIN ON END OF TOTAL
ENDED OF PERIOD INCOME@ INVESTMENTS OPERATIONS INCOME INVESTMENTS PERIOD RETURN*
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth Series
11/30/95 $34.08 $0.25 $12.02 $12.27 $(0.20) $ (2.65) $43.50 37.93%
11/30/96 43.50 0.18 5.10 5.28 (0.28) (6.22) 42.28 14.02
11/30/97 42.28 0.18 8.30 8.48 (0.21) (6.73) 43.82 23.78
11/30/98 43.82 0.15 10.18 10.33 (0.20) (8.62) 45.33 25.21
2/28/99# 45.33 0.04 6.52 6.56 -- -- 51.89 14.47
2/29/00 51.89 0.11 23.85 23.96 (0.22) (14.94) 60.69 58.15
International Series
11/30/95 $13.26 $0.26 $ 1.11 $ 1.37 $(0.23) $ (0.50) $13.90 11.18%
11/30/96 13.90 0.22 2.46 2.68 (0.46) (0.31) 15.81 20.03
11/30/97 15.81 0.17 1.78 1.95 (0.27) (1.22) 16.27 13.15
11/30/98 16.27 0.22 2.31 2.53 (0.27) (4.44) 14.09 14.56
2/28/99# 14.09 -- 1.56 1.56 -- -- 15.65 11.07
2/29/00 15.65 0.11 8.68 8.79 (0.46) (2.30) 21.68 65.36
Growth-Income Series
11/30/95 $26.46 $0.71 $ 7.46 $ 8.17 $(0.76) $ (2.23) $31.64 33.47%
11/30/96 31.64 0.67 5.87 6.54 (0.77) (2.10) 35.31 21.88
11/30/97 35.31 0.66 6.91 7.57 (0.75) (5.10) 37.03 24.62
11/30/98 37.03 0.62 4.91 5.53 (0.71) (6.80) 35.05 15.07
2/28/99# 35.05 0.15 1.45 1.60 -- -- 36.65 4.56
2/29/00 36.65 0.65 1.03 1.68 (0.88) (10.09) 27.36 2.79
Asset Allocation Series
11/30/95 $12.62 $0.55 $ 3.16 $ 3.71 $(0.68) $ (0.38) $15.27 31.01%
11/30/96 15.27 0.56 2.17 2.73 (0.63) (1.14) 16.23 19.34
11/30/97 16.23 0.55 2.00 2.55 (0.63) (1.65) 16.50 17.86
11/30/98 16.50 0.55 0.98 1.53 (0.61) (2.08) 15.34 9.28
2/28/99# 15.34 0.14 0.08 0.22 -- -- 15.56 1.43
2/29/00 15.56 0.50 0.52 1.02 (0.85) (2.96) 12.77 6.57
High-Yield Bond Series
11/30/95 $13.05 $1.26 $ 0.99 $ 2.25 $(1.56) $ (0.13) $13.61 18.97%
11/30/96 13.61 1.21 0.56 1.77 (1.53) -- 13.85 14.05
11/30/97 13.85 1.19 0.44 1.63 (1.43) -- 14.05 12.76
11/30/98 14.05 1.22 (0.73) 0.49 (1.39) (0.32) 12.83 3.22
2/28/99# 12.83 0.31 (0.25) 0.06 -- -- 12.89 0.47
2/29/00 12.89 1.09 (1.33) (0.24) (2.09) (0.47) 10.09 (1.63)
U.S. Government/AAA-Rated Securities Series
11/30/95 $11.53 $0.86 $ 0.85 $ 1.71 $(1.20) $ (0.06) $11.98 15.95%
11/30/96 11.98 0.80 (0.21) 0.59 (1.06) -- 11.51 5.49
11/30/97 11.51 0.76 (0.14) 0.62 (1.03) -- 11.10 6.09
11/30/98 11.10 0.68 0.23 0.91 (0.94) -- 11.07 8.70
2/28/99# 11.07 0.17 (0.21) (0.04) -- -- 11.03 (0.36)
2/29/00 11.03 0.68 (0.52) 0.16 (0.99) -- 10.20 1.78
Cash Management Series
11/30/95 $11.47 $0.61 $ 0.01 $ 0.62 $(0.44) $ -- $11.65 5.53%
11/30/96 11.65 0.55 -- 0.55 (0.82) -- 11.38 4.94
11/30/97 11.38 0.54 0.01 0.55 (0.62) -- 11.31 5.03
11/30/98 11.31 0.54 -- 0.54 (0.83) -- 11.02 5.04
2/28/99# 11.02 0.12 -- 0.12 -- -- 11.14 1.09
2/29/00 11.14 0.51 -- 0.51 (0.57) -- 11.08 4.74
<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
11/30/95 $ 897,275 0.55% 0.65% 23.72%
11/30/96 813,164 0.55 0.46 25.51
11/30/97 801,230 0.54 0.44 29.01
11/30/98 836,355 0.54 0.34 32.37
2/28/99 907,320 0.55+ 0.34+ 5.75
2/29/00 1,251,933 0.54 0.20 29.85
International Series
11/30/95 $ 228,134 1.05% 1.95% 16.79%
11/30/96 249,144 1.02 1.56 44.94
11/30/97 223,337 1.04 0.99 47.45
11/30/98 193,763 1.03 1.50 60.19
2/28/99 204,521 1.05+ (0.08)+ 5.28
2/29/00 298,974 1.04 0.65 15.52
Growth-Income Series
11/30/95 $ 882,143 0.55% 2.52% 18.81%
11/30/96 919,356 0.55 2.07 23.72
11/30/97 950,432 0.54 1.88 30.06
11/30/98 915,994 0.54 1.76 32.42
2/28/99 914,110 0.55+ 1.63+ 7.57
2/29/00 787,940 0.54 1.96 32.46
Asset Allocation Series
11/30/95 $ 153,608 0.59% 4.04% 53.58%
11/30/96 153,060 0.58 3.74 40.97
11/30/97 155,446 0.59 3.49 39.14
11/30/98 134,069 0.58 3.56 31.43
2/28/99 129,800 0.62+ 3.57+ 9.77
2/29/00 111,474 0.60 3.50 29.03
High-Yield Bond Series
11/30/95 $ 146,590 0.59% 9.66% 31.64%
11/30/96 131,337 0.58 9.09 36.99
11/30/97 118,670 0.61 8.68 64.49
11/30/98 100,061 0.60 9.18 78.82
2/28/99 91,248 0.67+ 9.61+ 12.05
2/29/00 67,629 0.66 9.70 46.72
U.S. Government/AAA-Rated Securities Series
11/30/95 $ 134,938 0.59% 7.49% 43.43%
11/30/96 108,852 0.59 7.03 17.12
11/30/97 81,609 0.63 6.93 46.17
11/30/98 79,685 0.63 6.20 163.75
2/28/99 75,281 0.70+ 6.08+ 29.54
2/29/00 59,747 0.67 6.41 49.34
Cash Management Series
11/30/95 $ 100,872 0.58% 5.32% --%
11/30/96 89,236 0.58 4.81 --
11/30/97 69,226 0.63 4.87 --
11/30/98 63,826 0.63 4.91 --
2/28/99 82,247 0.69+ 4.40+ --
2/29/00 69,693 0.64 4.65 --
</TABLE>
- ---------------
@ Calculated based upon average shares outstanding
* Total return is not annualized and does not reflect expenses that apply to
the separate accounts of Anchor National Life Insurance Company. If such
expenses had been included, total return would have been lower for each
period presented.
# The Series changed its fiscal year end from November 30 to February 28.
+ Annualized
See Notes to Financial Statements
- ---------------------
A-36
<PAGE> 40
O
- ---------------------
ANCHOR PATHWAY FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND SHAREHOLDER OF ANCHOR PATHWAY FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolios, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Growth Series, International
Series, Growth-Income Series, Asset Allocation Series, High-Yield Bond Series,
U.S. Government/AAA-Rated Securities Series and Cash Management Series
(constituting the Anchor Pathway Fund, hereafter referred to as the "Fund") at
February 29, 2000, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States. 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 auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at February 29, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
April 14, 2000
---------------------
A-37
<PAGE> 41
O
- ---------------------
ANCHOR PATHWAY FUND
SHAREHOLDER TAX INFORMATION
(UNAUDITED)
Certain tax information regarding the Anchor Pathway Fund is required to
be provided to the shareholder based upon each Fund's income and
distributions for the year ended February 29, 2000.
During the year ended February 29, 2000 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................................. $15.16 $0.22 $0.36 $14.58 85.54%
International Series.......................... 2.76 0.46 0.35 1.95 --
Growth-Income Series.......................... 10.97 0.88 0.88 9.21 44.95
Asset Allocation Series....................... 3.81 0.85 0.18 2.78 27.48
High-Yield Bond Series........................ 2.56 2.09 0.05 0.42 4.01
U.S. Government/AAA-Rated Securities Series... 0.99 0.99 -- -- --
Cash Management Series........................ 0.57 0.57 -- -- --
</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 February 29, 2000 was $304,929. The
gross foreign source income for information reporting is $2,576,310.
- ---------------
* Short-term capital gains are treated as ordinary income for tax purposes.
- ---------------------
A-38
<PAGE> 42
O
- ---------------------
COMPARISONS: PORTFOLIOS VS. INDEXES
The following graphs compare the performance of a $10,000
investment in certain of the Anchor Pathway Fund portfolios to a
$10,000 investment in a securities index. Each index has been
chosen by Capital Research and Management Company (CRMC), the
fund's money manager, as an appropriate comparison.
THESE GRAPHS COMPARE THE PERFORMANCE OF THE PORTFOLIOS AT THE
ANCHOR PATHWAY FUND LEVEL AND INCLUDE ALL FUND EXPENSES BUT NO
INSURANCE COMPANY EXPENSES AND NO CONTINGENT DEFERRED SALES
CHARGE. IF THESE CHARGES HAD BEEN TAKEN INTO CONSIDERATION, THE
PERFORMANCE SHOWN FOR THE PORTFOLIOS WOULD BE REDUCED. NO EXPENSES
ARE DEDUCTED FROM THE PERFORMANCE OF THE INDEXES AND ALL DIVIDENDS
ARE ASSUMED TO BE REINVESTED.
[GROWTH SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
GROWTH SERIES S&P 500 COMPOSITE INDEX
------------- -----------------------
<S> <C> <C>
2/90 10000 10000
11/90 9610 9972
11/91 12166 12008
11/92 14781 14225
11/93 17479 15657
11/94 18061 15825
11/95 24911 21673
11/96 28404 27713
11/97 35160 35628
11/98 44025 44064
2/99 50396 47045
2/00 79699 52558
</TABLE>
------------------------------------------------------------------
------------------------------------------------
GROWTH SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 2/29/00
------------------------------------------------
1-year 58.15%
5-year 32.63%
10-year 23.07%
------------------------------------------------
The graph represents past performance, which is not indicative of
future results.
---------------------
A-39
<PAGE> 43
[INTERNATIONAL SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
INTERNATIONAL SERIES MSCI EAFE INDEX
-------------------- ---------------
<S> <C> <C>
5/90 10000 10000
11/90 9680 9483
11/91 10221 10310
11/92 10253 9508
11/93 13063 11852
11/94 14130 13646
11/95 15710 14724
11/96 18857 16504
11/97 21336 16483
11/98 24442 19249
2/99 27149 19487
2/00 44892 24508
</TABLE>
------------------------------------------------
INTERNATIONAL SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 2/29/00
------------------------------------------------
1-year 65.36%
5-year 26.69%
10-year N/A
Since Inception (5/9/90) 16.50%
------------------------------------------------
------------------------------------------------------------------
[GROWTH-INCOME SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
GROWTH-INCOME SERIES S&P 500 COMPOSITE INDEX
-------------------- -----------------------
<S> <C> <C>
2/90 10000 10000
11/90 9656 9972
11/91 11698 12008
11/92 13572 14225
11/93 15247 15657
11/94 15559 15825
11/95 20758 21673
11/96 25301 27713
11/97 31530 35628
11/98 36281 44064
2/99 37937 47045
2/00 38984 52558
</TABLE>
------------------------------------------------
GROWTH-INCOME SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 2/29/00
------------------------------------------------
1-year 2.79%
5-year 18.72%
10-year 14.58%
------------------------------------------------
------------------------------------------------------------------
The graphs represent past performance, which is not indicative of
future results.
- ---------------------
A-40
<PAGE> 44
[ASSET ALLOCATION SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES S&P 500 COMPOSITE INDEX SALOMON SMITH BARNEY
----------------------- ----------------------- INVESTMENT GRADE BOND
INDEX
---------------------
<S> <C> <C> <C>
2/90 10000.00 10000.00 10000.00
11/90 10028.00 9972.00 10842.00
11/91 11899.00 12008.00 12404.00
11/92 13541.00 14225.00 13533.00
11/93 14998.00 15657.00 15021.00
11/94 14872.00 15825.00 14565.00
11/95 19464.00 21673.00 17158.00
11/96 23252.00 27713.00 18185.00
11/97 27404.00 35628.00 19562.00
11/98 29947.00 44064.00 21417.00
2/99 30376.00 47045.00 21263.00
2/00 32373.00 52558.00 21493.00
</TABLE>
------------------------------------------------
ASSET ALLOCATION SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 2/29/00
------------------------------------------------
1-year 6.57%
5-year 15.10%
10-year 12.68%
------------------------------------------------
------------------------------------------------------------------
[HIGH-YIELD BOND SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
HIGH-YIELD BOND SERIES SALOMON SMITH BARNEY SALOMON SMITH BARNEY
---------------------- LONG-TERM HIGH-YIELD INVESTMENT GRADE BOND
INDEX INDEX
-------------------- ---------------------
<S> <C> <C> <C>
2/90 10000.00 10000.00 10000.00
11/90 10072.00 9499.00 10842.00
11/91 13146.00 13651.00 12404.00
11/92 14096.00 16269.00 13533.00
11/93 17461.00 19613.00 15021.00
11/94 16640.00 18785.00 14565.00
11/95 19797.00 24044.00 17158.00
11/96 22577.00 26449.00 18185.00
11/97 25458.00 30791.00 19562.00
11/98 26277.00 33899.00 21417.00
2/99 26400.00 34254.00 21263.00
2/00 25970.00 34243.00 21493.00
</TABLE>
------------------------------------------------
HIGH-YIELD BOND SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 2/29/00
------------------------------------------------
1-year -1.63%
5-year 8.36%
10-year 10.01%
------------------------------------------------
------------------------------------------------------------------
The graphs represent past performance, which is not indicative of
future results.
---------------------
A-41
<PAGE> 45
[RATED SECURITIES SERIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
SALOMON SMITH BARNEY
U.S. GOV'T/AAA-RATED SECURITIES TREASURY/GOV'T-
SERIES SPONSORED/MORTGAGE INDEX
------------------------------- ------------------------
<S> <C> <C>
2/90 10000.00 10000.00
11/90 10790.00 10881.00
11/91 12257.00 12395.00
11/92 13465.00 13489.00
11/93 15150.00 14900.00
11/94 14527.00 14474.00
11/95 16844.00 16954.00
11/96 17769.00 17957.00
11/97 18850.00 19311.00
11/98 20491.00 21146.00
2/99 20417.00 21010.00
2/00 20780.00 21804.00
</TABLE>
------------------------------------------------
U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES
AVERAGE ANNUAL TOTAL RETURN AS OF 2/29/00
------------------------------------------------
1-year 1.78%
5-year 6.44%
10-year 7.59%
------------------------------------------------
------------------------------------------------------------------
The graph represents past performance, which is not indicative of
future results.
- ---------------------
A-42
