<PAGE> 1
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PROSPECTUS
APRIL 20, 2000
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LOGO
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-- Growth Series
-- International Series
-- Growth-Income Series
-- Asset Allocation Series
-- High-Yield Bond Series
-- U.S. Government/AAA-Rated
Securities Series
-- Cash Management Series
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED
UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 2
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FUND HIGHLIGHTS............................................. 3
Q&A....................................................... 3
MORE INFORMATION ABOUT THE SERIES........................... 12
Investment Strategies..................................... 12
Glossary.................................................. 14
Investment Terminology................................. 14
Risk Terminology....................................... 14
MANAGEMENT.................................................. 16
Investment Advisor........................................ 16
Business Manager.......................................... 16
Portfolio Management...................................... 16
Custodian, Transfer and Dividend Paying Agent............. 19
ACCOUNT INFORMATION......................................... 20
Transaction Policies...................................... 20
Dividend Policies and Taxes............................... 20
FINANCIAL HIGHLIGHTS........................................ 21
FOR MORE INFORMATION........................................ 22
</TABLE>
2
<PAGE> 3
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FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
The following questions and answers are designed to give you an overview of
Anchor Pathway Fund (the "Fund"), and to provide you with information about the
Fund's seven investment portfolios, or "Series," and their investment goals and
principal strategies. More complete investment information is provided in the
chart, under "More Information About the Series," which is on page 12, and the
glossary that follows on page 14.
Q: WHAT ARE THE SERIES' INVESTMENT GOALS AND PRINCIPAL INVESTMENT STRATEGIES?
A: Each Series operates as a separate mutual fund, and has its own investment
goal, which may not be changed without shareholder approval, and a principal
investment strategy for pursuing its goal. There can be no assurance that
any Series' investment goal will be met or that the net return on an
investment in a Series will exceed what could have been obtained through
other investment or savings vehicles.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
SERIES INVESTMENT GOAL PRINCIPAL INVESTMENT STRATEGY
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Series growth of capital invests primarily in common stocks or
securities with common stock
characteristics that demonstrate the
potential for appreciation.
---------------------------------------------------------------------------------------------------
International long-term growth of capital invests primarily in common stocks or
Series securities with common stock
characteristics of issuers that are
domiciled outside the U.S., including
those domiciled in developing countries.
---------------------------------------------------------------------------------------------------
Growth-Income growth of capital and invests primarily in common stocks or
Series income securities with common stock
characteristics that demonstrate the
potential for solid growth and dividends.
---------------------------------------------------------------------------------------------------
Asset Allocation high total return invests in a diversified portfolio of
Series (including income and common stocks, bonds and money market
capital gains) consistent instruments; under normal market
with preservation of conditions the portfolio will include:
capital over the long-term 40%-80% in equity securities, 20%-50% in
fixed-income securities, and 0% to 40% in
money market instruments.
---------------------------------------------------------------------------------------------------
High-Yield Bond high current income with invests primarily in intermediate and
Series capital appreciation as a long-term corporate debt securities, with
secondary objective emphasis on higher yielding, higher risk,
lower rated or unrated corporate bonds,
which are commonly known as "junk bonds."
---------------------------------------------------------------------------------------------------
U.S. Government/ high current income invests primarily in a combination of
AAA-Rated consistent with prudent securities issued or guaranteed by the
Securities Series investment risk and U.S. government (i.e., backed by the full
preservation of capital faith and credit of the U.S. government)
and other debt securities rated in the
highest rating category (or that are
determined to be of comparable quality by
the Investment Adviser).
---------------------------------------------------------------------------------------------------
Cash Management high current yield while invests primarily in high quality money
Series preserving capital market instruments.
---------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
Q: WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE SERIES?
A: The following section describes the principal risks of each Series, while
the charts beginning on page 12 describe various additional risks.
Risks of Investing in Equity Securities
The GROWTH, INTERNATIONAL and GROWTH-INCOME SERIES invest primarily in
equity securities. In addition, the ASSET ALLOCATION Series invests
significantly in equities. As with any equity fund, the value of your
investment in any of these Series may fluctuate in response to stock market
movements. Growth Stocks are historically volatile, which will particularly
affect the GROWTH, INTERNATIONAL and GROWTH-INCOME SERIES. You should be
aware that the performance of different types of equity stocks may rise or
decline under varying market conditions -- for example, "value" stocks may
perform well under circumstances in which "growth" stocks have fallen, and
vice versa. In addition, individual stocks selected for a Series may
underperform the market generally.
Risks of Investing in Bonds
The HIGH-YIELD BOND and U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES invest
primarily in bonds. In addition, the ASSET ALLOCATION SERIES invests
significantly in bonds. As a result, as with any bond fund, the value of
your investment in these Series may go up or down in response to changes in
interest rates or defaults (or even the potential for future default) by
bond issuers. In addition, there is a risk the securities selected for any
Series will underperform the markets generally.
Risks of Investing in Junk Bonds
The HIGH-YIELD BOND SERIES invests primarily in high yield, high risk
securities, also known as "junk bonds," which are considered speculative.
The ASSET ALLOCATION SERIES may also invest significantly in junk bonds.
While the Fund's Investment Adviser seeks to diversify the Series and to
engage in a credit analysis of each junk bond issuer in which it invests,
junk bonds carry a substantial risk of default or may already be in
default. The market price for junk bonds may fluctuate more than
higher-quality securities and may decline significantly. In addition, it
may be more difficult for a Series to dispose of junk bonds or to determine
their value. Junk bonds may contain redemption or call provisions that, if
exercised during a period of declining interest rates, may force a Series
to replace the security with a lower yielding security, which would
decrease the return on such Series.
Risks in Investing in Money Market Securities
While an investment in the CASH MANAGEMENT SERIES should present the least
market risk of any of the Series since it invests only in high-quality
short-term debt obligations, you should be aware that an investment in the
CASH MANAGEMENT SERIES will be subject to changes in interest rates. You
should also be aware that your return on an investment in the CASH
MANAGEMENT SERIES will be affected by fees at the contract level. The CASH
MANAGEMENT SERIES does not seek to maintain a stable net asset value of
$1.00.
Risks of Investing in Foreign Securities
The INTERNATIONAL SERIES invests primarily, and each other Series may
invest to some degree, in foreign securities. Investing outside the U.S.
presents special risks, particularly in certain developing countries. While
investing internationally may reduce your risk by increasing the
diversification of your investment, the value of your investment may be
affected by fluctuating currency values, changing local and regional
economic, political and social conditions, greater market volatility,
differing securities regulations, and administrative difficulties such as
delays in clearing and settling portfolio transactions. In addition,
foreign securities may not be as liquid as domestic securities.
Additional Principal Risks
Shares of a Series are not bank deposits and are not guaranteed or insured
by any bank, government entity or the Federal Deposit Insurance
Corporation. As with any mutual fund, there is no guarantee that a Series
will be able to achieve its investment goals. If the value of the assets of
a Series goes down, you could lose money.
4
<PAGE> 5
Q: HOW HAVE THE SERIES PERFORMED HISTORICALLY?
A: The following Risk/Return Bar Charts and Tables provide some indication of
the risks of investing in the Series by showing changes in the Series'
performance from year to year, and compare the Series' average annual
returns to those of an appropriate market index for the calendar years
presented. Fees and expenses incurred at the contract level are not
reflected in the bar chart. If these amounts were reflected, returns would
be less than those shown. Of course, past performance is not necessarily an
indication of how a Series will perform in the future. In addition you
should be aware that the comparative indices are unmanaged and therefore not
subject to sales charges, commissions and expenses.
- --------------------------------------------------------------------------------
GROWTH SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH
------
<S> <C>
1990 -3.96
1991 35.84
1992 12.34
1993 18.98
1994 0.46
1995 34.47
1996 14.56
1997 28.14
1998 36.35
1999 47.49
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was 29.38% (quarter ended 12/31/98) and the lowest return for a quarter
was -18.38% (quarter ended 09/30/90). For the most recent calendar quarter ended
3/31/00 the return was 16.88%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1999) YEAR YEARS YEARS INCEPTION***
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Growth Series 47.49% 31.75% 21.40% 20.40%
- -----------------------------------------------------------------------------------------------
S&P 500(R)* 21.01% 28.49% 18.17% 18.59%
- -----------------------------------------------------------------------------------------------
Consumer Price Index** 2.68% 2.37% 2.93% 3.21%
- -----------------------------------------------------------------------------------------------
</TABLE>
* The S&P 500(R) Composite Stock Price Index (S&P 500(R)) is an unmanaged,
weighted index of 500 large company stocks that is widely recognized as
representative of the performance of the U.S. stock market.
** The Consumer Price Index (or Cost of Living Index) is published by the U.S.
Bureau of Labor Statistics and is a statistical measure of periodic change
in the price of goods and services in major expenditure groups.
*** Inception date for the Series is February 8, 1984. Except for the S&P
500(R), the since inception returns for the comparative indices are based
on the nearest month-end inception date.
5
<PAGE> 6
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INTERNATIONAL SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
-------------
<S> <C>
1991 9.42
1992 -1.53
1993 34.48
1994 -0.72
1995 13.43
1996 21.43
1997 12.13
1998 19.16
1999 63.24
</TABLE>
During the 9-year period shown in the bar chart, the highest return for a
quarter was 37.69% (quarter ended 12/31/99) and the lowest return for a quarter
was -12.07% (quarter ended 09/30/98). For the most recent calendar quarter ended
3/31/00 the return was 7.02%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1999) YEAR YEARS YEARS INCEPTION***
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
International Series 63.24% 24.61% N/A 16.01%
- -----------------------------------------------------------------------------------------------
MSCI EAFE Index* 27.30% 13.15% 7.33% 10.18%
- -----------------------------------------------------------------------------------------------
Consumer Price Index** 2.68% 2.37% 2.93% 2.80%
- -----------------------------------------------------------------------------------------------
</TABLE>
* The Morgan Stanley Capital International (MSCI) Europe, Australia and Far
East (EAFE) Index is an arithmetic, market value-weighted average of
performance of over 900 securities on the stock exchanges of countries in
Europe, Australia and the Far East.
** The Consumer Price Index (or Cost of Living Index) is published by the U.S.
Bureau of Labor Statistics and is a statistical measure of periodic change
in the price of goods and services in major expenditure groups.
*** Inception date for the Series is May 9, 1990. The since inception returns
for the comparative indices are based on the nearest month-end inception
date.
6
<PAGE> 7
- --------------------------------------------------------------------------------
GROWTH-INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH-INCOME
-------------
<S> <C>
1990 -4.51
1991 27.65
1992 7.33
1993 13.18
1994 0.86
1995 33.77
1996 19.14
1997 28.09
1998 17.82
1999 9.30
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was 17.68% (quarter ended 12/31/98) and the lowest return for a quarter
was -14.05% (quarter ended 09/30/90). For the most recent calendar quarter ended
3/31/00 the return was 2.04%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1999) YEAR YEARS YEARS INCEPTION***
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Growth-Income Series 9.30% 21.33% 14.66% 16.22%
- -----------------------------------------------------------------------------------------------
S&P 500(R)* 21.01% 24.02% 18.17% 18.59%
- -----------------------------------------------------------------------------------------------
Consumer Price Index** 2.68% 2.37% 2.93% 3.21%
- -----------------------------------------------------------------------------------------------
</TABLE>
* The S&P 500(R) Composite Stock Price Index (S&P 500(R)) is an unmanaged,
weighted index of 500 large company stocks that is widely recognized as
representative of the performance of the U.S. stock market.
** The Consumer Price Index (or Cost of Living Index) is published by the U.S.
Bureau of Labor Statistics and is a statistical measure of periodic change
in the price of goods and services in major expenditure groups.
*** Inception date for the Series is February 8, 1984. Except for the S&P
500(R), the since inception returns for the comparative indices are based
on the nearest month-end inception date.
7
<PAGE> 8
- --------------------------------------------------------------------------------
ASSET ALLOCATION SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION
----------------
<S> <C>
1990 -0.27
1991 23.00
1992 8.46
1993 10.52
1994 -0.52
1995 30.86
1996 15.77
1997 20.65
1998 10.04
1999 10.39
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was 11.80% (quarter ended 12/31/98) and the lowest return for a quarter
was -9.62% (quarter ended 09/30/98). For the most recent calendar quarter ended
3/31/00 the return was 3.41%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1999) YEAR YEARS YEARS INCEPTION****
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Asset Allocation Series 10.39% 17.29% 12.50% 12.83 %
- ------------------------------------------------------------------------------------------------
S&P 500(R)* 21.01% 28.49% 18.17% 18.88 %
- ------------------------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment-Grade
(BIG) Bond Index** -0.83% 7.74% 7.75% 8.32 %
- ------------------------------------------------------------------------------------------------
Consumer Price Index*** 2.68% 2.37% 2.93% 2.98 %
- ------------------------------------------------------------------------------------------------
</TABLE>
* The S&P 500(R) Composite Stock Price Index (S&P 500(R)) is an unmanaged,
weighted index of 500 large company stocks that is widely recognized as
representative of the performance of the U.S. stock market.
** The Salomon Smith Barney Broad Investment-Grade (BIG) Bond Index is a
market-weighted index that contains approximately 4700 individually priced
investment grade corporate bonds rated "BBB" or better, U.S.
Treasury/agency issues and Mortgage pass through securities.
*** The Consumer Price Index (or Cost of Living Index) is published by the
U.S. Bureau of Labor Statistics and is an statistical measure of periodic
change in the price of goods and services in major expenditure groups.
**** Inception date for the Series is May 5, 1989. Except for the S&P 500(R),
the since inception returns for the comparative indices are based on the
nearest month-end inception date.
8
<PAGE> 9
- --------------------------------------------------------------------------------
HIGH-YIELD BOND SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH-YIELD BOND
---------------
<S> <C>
1990 1.73
1991 28.96
1992 13.18
1993 16.04
1994 -5.03
1995 20.07
1996 13.69
1997 12.82
1998 1.99
1999 -1.54
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was 12.10% (quarter ended 03/31/91) and the lowest return for a quarter
was -6.98% (quarter ended 09/30/98). For the most recent calendar quarter ended
3/31/00 the return was -1.79%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1999) YEAR YEARS YEARS INCEPTION****
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
High-Yield Bond Series -1.54% 9.11% 9.69% 11.21%
- ------------------------------------------------------------------------------------------------
Salomon Smith Barney Long-Term High-Yield
Index* 0.27% 12.46% 12.48% 11.71%
- ------------------------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment-Grade
(BIG) Bond Index** 0.83% 7.74% 7.75% 9.54%
- ------------------------------------------------------------------------------------------------
Consumer Price Index*** 2.68% 2.37% 2.93% 3.21%
- ------------------------------------------------------------------------------------------------
</TABLE>
* The Salomon Smith Barney Long-Term High-Yield Index generally represents
the performance of high-yield debt securities during various market
conditions.
** The Salomon Smith Barney Broad Investment-Grade (BIG) Bond Index is a
market-weighted index that contains approximately 4700 individually priced
investment grade corporate bonds rated "BBB" or better, U.S.
Treasury/agency issues and mortgage pass-through securities.
*** The Consumer Price Index (or Cost of Living Index) is published by the
U.S. Bureau of Labor Statistics and is a statistical measure of periodic
change in the price of goods and services in major expenditure groups.
**** Inception date for the Series is February 8, 1984. The since inception
returns for the comparative indices are based on the nearest month-end
inception date.
9
<PAGE> 10
- --------------------------------------------------------------------------------
U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT/AAA-RATED SECURITIES
------------------------------------
<S> <C>
1990 8.41
1991 16.37
1992 7.52
1993 11.18
1994 -3.85
1995 16.59
1996 3.01
1997 8.27
1998 8.02
1999 -0.04
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was 6.06% (quarter ended 09/30/91) and the lowest return for a quarter
was -3.03% (quarter ended 03/31/94). For the most recent calendar quarter ended
3/31/00 the return was 2.58%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1999) YEAR YEARS YEARS INCEPTION***
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
U.S. Government/AAA-Rated Securities Series -0.04% 7.02% 7.37% 7.87%
- -----------------------------------------------------------------------------------------------
Salomon Smith Barney Treasury/ Government-
Sponsored/Mortgage Index* -0.59% 7.66% 7.64% 8.42%
- -----------------------------------------------------------------------------------------------
Consumer Price Index** 2.68% 2.37% 2.93% 3.13%
- -----------------------------------------------------------------------------------------------
</TABLE>
* The Salomon Smith Barney Treasury/Government Sponsored/Mortgage Bond Index
is a market-capitalization weighted index and includes fixed-rate Treasury,
Government-Sponsored, and Mortgage issues with a maturity of one year or
longer. The minimum amount outstanding for U.S. Treasury and mortgage
issues is $1 billion for both entry and exit. For Government-sponsored
issues, the entry and exit amount is $100 million.
** The Consumer Price Index (or Cost of Living Index) is published by the U.S.
Bureau of Labor Statistics and is a statistical measure of periodic change
in the price of goods and services in major expenditure groups.
*** Inception date for the Series is November 19, 1985. The since inception
returns for the comparative indices are based on the nearest month-end
inception date.
10
<PAGE> 11
- --------------------------------------------------------------------------------
CASH MANAGEMENT SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH MANAGEMENT
---------------
<S> <C>
1990 7.91
1991 5.58
1992 3.19
1993 2.58
1994 3.74
1995 5.52
1996 4.95
1997 5.03
1998 4.96
1999 4.64
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was 1.99% (quarter ended 03/31/90) and the lowest return for a quarter
was 0.60% (quarter ended 03/31/93). For the most recent calendar quarter ended
3/31/00 the return was 1.27%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE PAST TEN RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1999) YEAR YEARS YEARS INCEPTION*
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Cash Management Series 4.64% 5.02% 4.80% 5.79%
- -----------------------------------------------------------------------------------------------
</TABLE>
* Inception date for the Series is February 8, 1984.
11
<PAGE> 12
- --------------------------------------------------------------------------------
MORE INFORMATION ABOUT THE SERIES
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
Each Series has its own investment goal and principal strategy for pursuing it
as described in the charts on page 3. The following charts summarize information
about each Series' investments. We have included a glossary to define the
investment and risk terminology used in the charts and throughout this
Prospectus. Unless otherwise indicated, investment restrictions, including
percentage limitations, apply at the time of purchase.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
SERIES
- ------------------------------------------------------------------------------------------------------
GROWTH INTERNATIONAL GROWTH-INCOME
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
What are the - Equity securities: - Equity securities: - Equity securities:
Series' PRINCIPAL - common stocks - common stocks - common stocks
investments? - Foreign securities
- ------------------------------------------------------------------------------------------------------
In what other types - Foreign securities N/A - Foreign securities
of investments may (up to 10% outside the (up to 10% outside the
the Series U.S. and not in the S&P U.S. and not in the S&P
SIGNIFICANTLY 500(R)) 500(R))
invest?
- ------------------------------------------------------------------------------------------------------
What other types of - Short-term investments - Short-term investments - Short-term investments
investments may the
Series use as part
of efficient
portfolio
management or to
enhance return?
- ------------------------------------------------------------------------------------------------------
What risks NORMALLY - Market volatility - Market volatility - Market volatility
affect the Series? - Securities selection - Securities selection - Securities selection
- Growth stocks - Growth stocks - Growth stocks
- Foreign exposure
- Currency volatility
- ------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SERIES
- ---------------------------------------------------------------------------------------------------------
GOVERNMENT/ AAA-
RATED
ASSET ALLOCATION HIGH-YIELD BOND SECURITIES CASH MANAGEMENT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
What are the - Equity - Fixed income - Fixed income - Short-term
Series' PRINCIPAL securities: securities: securities: investments
investments? - common stocks - junk bonds - U.S. government
securities
- pass-through
securities
- ---------------------------------------------------------------------------------------------------------
In what other types - Fixed income - Foreign N/A - U.S. government
of investments may securities securities securities
the Series - Junk bonds (up to 25%)
SIGNIFICANTLY (up to 25% of - Equity securities
invest? fixed-income (up to 15%)
securities)
- Foreign
securities
(up to 10% in
equity securities
outside the U.S.
and not in the S&P
500(R); up to 5% in
fixed-income
securities)
- ---------------------------------------------------------------------------------------------------------
What other types of - U.S. government - Short-term - Short-term N/A
investments securities investments investments
may the Series - Short-term
use as part of investments
efficient portfolio
management or to
enhance return?
- ---------------------------------------------------------------------------------------------------------
What risks NORMALLY - Market volatility - Market volatility - Market volatility - Interest rate
affect the Series? - Securities - Securities - Interest rate fluctuations
selection selection fluctuations - Securities
- Interest rate - Interest rate - Prepayment selection
fluctuation fluctuations - Securities
- Credit quality - Credit quality selection
- Foreign exposure - Foreign exposure
- ---------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
INVESTMENT TERMINOLOGY
EQUITY SECURITIES, such as COMMON STOCKS, represent shares of equity ownership
in a corporation. Common stocks may or may not receive dividend payments.
FIXED INCOME SECURITIES are broadly classified as securities that provide for
periodic payment, typically interest or dividend payments, to the holder of the
security at a stated rate. Most fixed income securities, such as bonds,
represent indebtedness of the issuer and provide for repayment of principal at a
stated time in the future. Other do not provide for repayment of a principal
amount. The issuer of a SENIOR FIXED INCOME SECURITY is obligated to make
payments on this security ahead of other payments to security holders.
Investments in fixed income securities may include:
- U.S. GOVERNMENT SECURITIES are issued or guaranteed by the U.S.
government, its agencies and instrumentalities. Some U.S. government
securities are issued or unconditionally guaranteed by the U.S.
Treasury. They are of the highest possible credit quality. While
these securities are subject to variations in market value due to
fluctuations in interest rates, they will be paid in full if held to
maturity. Other U.S. government securities are neither direct
obligations of, nor guaranteed by, the U.S. Treasury. However, they
involve federal sponsorship in one way or another. For example, some
are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported
by the discretionary authority of the Treasury to purchase certain
obligations of the issuer; and others are supported only by the
credit of the issuing government agency or instrumentality.
- A JUNK BOND is a high yield, high risk bond that does not meet the
credit quality standards of an investment grade security. Junk bonds
are considered speculative.
- PASS-THROUGH SECURITIES involve various debt obligations that are
backed by a pool of mortgages or other assets. Principal and
interest payments made on the underlying asset pools are typically
passed through to investors. Types of pass-through securities
include mortgage-backed securities, collateralized mortgage
obligations, commercial mortgage-backed securities, and asset-backed
securities.
FOREIGN SECURITIES are issued by companies located outside of the United States,
including developing countries. Foreign securities may include foreign corporate
and government bonds, foreign equity securities, foreign investment companies,
passive foreign investment companies (PFICs), American Depositary Receipts
(ADRs) or other similar securities that represent interests in foreign equity
securities, such as European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs). A DEVELOPING COUNTRY is generally one with a low or middle
income or economy or that is in the early stages of its industrialization cycle.
For fixed income investments, developing countries includes those where the
sovereign credit rating is below investment grade. Developing countries may
change over time depending on market and economic conditions.
SHORT-TERM INVESTMENTS include money market securities such as short-term U.S.
government obligations, repurchase agreements, commercial paper, bankers'
acceptances and certificates of deposit. These securities provide a Series with
sufficient liquidity to meet redemptions and cover expenses.
RISK TERMINOLOGY
CREDIT QUALITY: The creditworthiness of the issuer is always a factor in
analyzing fixed income securities. An issuer with a lower credit rating will be
more likely than a higher rated issuer to default or otherwise become unable to
honor its financial obligations. This type of issuer will typically issue JUNK
BONDS. In addition to the risk of default, junk bonds may be more volatile, less
liquid, more difficult to value and more susceptible to adverse economic
conditions or investor perceptions than other bonds.
14
<PAGE> 15
CURRENCY VOLATILITY: The value of a Series's foreign investments may fluctuate
due to changes in currency rates. A decline in the value of foreign currencies
relative to the U.S. dollar generally can be expected to depress the value of
the Series's non-U.S. dollar denominated securities.
FOREIGN EXPOSURE: Investors in foreign countries are subject to a number of
risks. A principal risk is that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. In
addition, there may be less publicly available information about a foreign
company and it may not be subject to the same uniform accounting, auditing and
financial reporting standards as U.S. companies. Foreign governments may not
regulate securities markets and companies to the same degree as in the U.S.
Foreign investments will also be affected by local, political or economic
developments and governmental actions. Consequently, foreign securities may be
less liquid, more volatile and more difficult to price than U.S. securities.
These risks are heightened when an issuer is in a DEVELOPING COUNTRY.
Historically, the markets of DEVELOPING countries have been more volatile than
more developed markets; however, such markets can provide higher rates of return
to investors.
GROWTH STOCKS: Growth stocks can be volatile for several reasons. Since the
issuers usually reinvest a high portion of earnings in their own business,
growth stocks may lack the comfortable dividend yield associated with value
stocks that can cushion total return in a bear market. Also, growth stocks
normally carry a higher price/earnings ratio than many other stocks.
Consequently, if earnings expectations are not met, the market price of growth
stocks will often go down more than other stocks. However, the market frequently
rewards growth stocks with price increases when expectations are met or
exceeded.
INTEREST RATE FLUCTUATIONS: The volatility of fixed income securities is due
principally to changes in interest rates. The market value of bonds and other
fixed income securities usually tends to vary inversely with the level of
interest rates. As interest rates rise the value of such securities typically
falls, and as interest rates fall, the value of such securities typically rise.
Longer-term and lower coupon bonds tend to be more sensitive to changes in
interest rates.
MARKET VOLATILITY: The stock and/or bond markets as a whole could go up or down
(sometimes dramatically). This could affect the value of the securities in a
Series's portfolio.
PREPAYMENT: Prepayment risk is the possibility that the principal of the loans
underlying mortgage-backed or other pass-through securities may be prepaid at
any time. As a general rule, prepayments increase during a period of falling
interest rates and decrease during a period of rising interest rates. As a
result of prepayments, in periods of declining interest rates a Series may be
required to reinvest its assets in securities with lower interest rates. In
periods of increasing interest rates, prepayments generally may decline, with
the effect that the securities subject to prepayment risk held by a Series may
exhibit price characteristics of longer-term debt securities.
SECURITIES SELECTION: A strategy used by a Series, or securities selected by
its portfolio manager, may fail to produce the intended return.
15
<PAGE> 16
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Capital Research and Management Company, a large and experienced investment
management organization founded in 1931, is the Investment Adviser to the Fund
and other funds, including those in The American Funds Group. The Investment
Adviser is headquartered at 333 South Hope Street, Los Angeles, California
90071. For the fiscal year ended February 29, 2000 each Series paid the
Investment Adviser an annual fee equal to the following percentage of average
daily net assets:
<TABLE>
<CAPTION>
SERIES FEE
- ------ ---
<S> <C>
Growth...................................................... 0.30%
International............................................... 0.60%
Growth-Income............................................... 0.30%
Asset Allocation............................................ 0.31%
High-Yield Bond............................................. 0.32%
U.S. Government/AAA-Rated Securities........................ 0.33%
Cash Management............................................. 0.32%
</TABLE>
BUSINESS MANAGER
SunAmerica Asset Management Corp. (SAAMCo) manages the business affairs and the
administration of the Fund. The Business Manager, located at The SunAmerica
Center, 733 Third Avenue, New York, New York 10017, is a corporation organized
in 1982 under the laws of the state of Delaware. In addition to serving as
Business Manager to the Fund, SAAMCo serves as adviser and/or administrator to
Anchor Series Trust, Seasons Series Trust, SunAmerica Style Select Series, Inc.,
SunAmerica Equity Funds, SunAmerica Income Funds, SunAmerica Money Market Funds,
Inc., SunAmerica Series Trust, SunAmerica Strategic Investment Series, Inc. and
Brazos Mutual Funds. For the fiscal year ended February 29, 2000 each Series
paid the Business Manager a fee equal to the following percentage of average
daily net assets:
<TABLE>
<CAPTION>
SERIES FEE
- ------ ---
<S> <C>
Growth...................................................... 0.20%
International............................................... 0.24%
Growth-Income............................................... 0.20%
Asset Allocation............................................ 0.21%
High-Yield Bond............................................. 0.22%
U.S. Government/AAA-Rated Securities........................ 0.22%
Cash Management............................................. 0.22%
</TABLE>
PORTFOLIO MANAGEMENT
The basic investment philosophy of the Investment Adviser is to seek fundamental
values at reasonable prices, using a system of multiple portfolio counselors in
managing mutual fund assets. Under this system, the portfolios of the Series are
divided into segments managed by individual counselors. Each counselor decides
how his or her segment will be invested, within the limits prescribed by each
Series' investment goal and the Investment Adviser's investment committee. In
addition, the Investment Adviser's research professionals make investment
decisions with respect to a portion of each Series' portfolio. The primary
portfolio counselors for each Series is set forth in the following table.
16
<PAGE> 17
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
YEARS OF EXPERIENCE IN
THE INVESTMENT INDUSTRY
----------------------------------------
WITH CAPITAL
RESEARCH AND
YEARS OF EXPERIENCE AS MANAGEMENT
PORTFOLIO COUNSELORS PRIMARY TITLE(S) PORTFOLIO COUNSELOR COMPANY OR TOTAL
FOR THE FUND FOR THE SERIES ITS AFFILIATES YEARS
INDICATED AS INVESTMENT
(APPROXIMATE) COUNSELOR
OR RESEARCH
PROFESSIONAL
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Timothy D. Armour Chairman and Chief Asset Allocation 17 17
Executive Officer, Series -- 4 years
Capital Research
Company*
-------------------------------------------------------------------------------------------------------------
David C. Barclay Senior Vice High-Yield Bond 12 19
President, Capital Series -- 11 years
Research Company*
-------------------------------------------------------------------------------------------------------------
Alan N. Berro Senior Vice Growth-Income 9 14
President, Capital Series -- 3 years
Research Company* Asset Allocation
Series -- less than 1
year
-------------------------------------------------------------------------------------------------------------
Martial Chaillet Senior Vice International 28 28
President and Series -- 7 years
Director, Capital
Research Company*
-------------------------------------------------------------------------------------------------------------
Gordon Crawford Senior Vice Growth Series -- 6 29 29
President and years (plus 5 years
Director, Capital as a research
Research and professional for the
Management Company Series prior to
becoming a portfolio
counselor for the
Series)
-------------------------------------------------------------------------------------------------------------
James E. Drasdo Senior Vice Growth Series -- 14 23 28
President and years
Director, Capital
Research and
Management Company
-------------------------------------------------------------------------------------------------------------
James K. Dunton Senior Vice Growth-Income 38 38
President and Series -- since the
Director, Capital Series began
Research and operations in 1984
Management Company
-------------------------------------------------------------------------------------------------------------
Abner D. Goldstine Senior Vice Asset Allocation 33 48
President and Series -- since the
Director, Capital Series began
Research and operations in 1989
Management Company
-------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
YEARS OF EXPERIENCE IN
THE INVESTMENT INDUSTRY
----------------------------------------
WITH CAPITAL
RESEARCH AND
YEARS OF EXPERIENCE AS MANAGEMENT
PORTFOLIO COUNSELORS PRIMARY TITLE(S) PORTFOLIO COUNSELOR COMPANY OR TOTAL
FOR THE FUND FOR THE SERIES ITS AFFILIATES YEARS
INDICATED AS INVESTMENT
(APPROXIMATE) COUNSELOR
OR RESEARCH
PROFESSIONAL
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alwyn Heong Vice President, International 8 12
Capital Research Series -- 4 years
Company
-------------------------------------------------------------------------------------------------------------
Thomas Hogh Vice President, Growth-Income 10 13
Investment Series -- 1 year
Management Group,
Capital Research
and Management
Company
-------------------------------------------------------------------------------------------------------------
Claudia P. Senior Vice Growth-Income 25 27
Huntington President, Capital Series -- 6 years
Research and (plus 5 years as a
Management Company research professional
for the Series prior
to becoming portfolio
counselor for the
Series)
-------------------------------------------------------------------------------------------------------------
Robert W. Lovelace Executive Vice International 15 15
President and Series -- 6 years
Director, Capital
Research Company*
-------------------------------------------------------------------------------------------------------------
Robert G. O'Donnell Senior Vice Growth-Income 25 28
President and Series -- 10 years
Director, Capital (plus 1 year as a
Research and research professional
Management Company for the Series prior
to becoming a
portfolio counselor
for the Series)
-------------------------------------------------------------------------------------------------------------
Donald D. O'Neal Vice President, Growth Series -- 9 15 15
Capital Research years (plus 4 years
and Management as a research
Company professional for the
Series prior to
becoming a portfolio
counselor for the
Series)
-------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
YEARS OF EXPERIENCE IN
THE INVESTMENT INDUSTRY
----------------------------------------
WITH CAPITAL
RESEARCH AND
YEARS OF EXPERIENCE AS MANAGEMENT
PORTFOLIO COUNSELORS PRIMARY TITLE(S) PORTFOLIO COUNSELOR COMPANY OR TOTAL
FOR THE FUND FOR THE SERIES ITS AFFILIATES YEARS
INDICATED AS INVESTMENT
(APPROXIMATE) COUNSELOR
OR RESEARCH
PROFESSIONAL
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John H. Smet Vice President, U.S. Government/ 17 18
Capital Research AAA-Rated Securities
and Management Series -- 8 years
Company
-------------------------------------------------------------------------------------------------------------
Susan M. Tolson Senior Vice High-Yield Bond 10 12
President and Series -- 2 years
Director, Capital
Research Company*
-------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* Company affiliated with Capital Research and Management Company.
CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT
State Street Bank and Trust Company, Boston, Massachusetts, acts as Custodian of
the Fund's assets as well as Transfer and Dividend Paying Agent and in so doing
performs certain bookkeeping, data processing and administrative services.
19
<PAGE> 20
- --------------------------------------------------------------------------------
ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
Shares of the Series are not offered directly to the public. Instead, shares are
currently offered only to the Variable Separate Account, which is a separate
account of Anchor National Life Insurance Company. So if you would like to
invest in a Series, you must purchase a variable annuity contract from Anchor
National. You should be aware that the contracts involve fees and expenses that
are not described in this Prospectus, and that the contracts also may involve
certain restrictions and limitations. Certain Series may not be available in
connection with a particular contract. You will find information about
purchasing a variable annuity contract in the prospectus that offers the
contracts, which accompanies this Prospectus.
TRANSACTION POLICIES
VALUATION OF SHARES The net asset value per share (NAV) for each Series is
determined each business day at the close of regular trading on the New York
Stock Exchange (generally 4:00 p.m., Eastern time) by dividing its net assets by
the number of its shares outstanding. Investments for which market quotations
are readily available are valued at market. All other securities and assets are
valued at "fair value" following procedures approved by the Trustees.
The International Series may invest to a large extent in securities that are
primarily listed on foreign exchanges that trade on weekends or other days when
the Fund does not price its shares. As a result, the value of this Series'
shares may change on days when the Fund is not open for purchases or
redemptions.
BUY AND SELL PRICES The Variable Separate Account buys and sells shares of a
Series at NAV, without any sales or other charges.
EXECUTION OF REQUESTS The Fund is open on those days when the New York Stock
Exchange is open for regular trading. Buy and sell requests are executed at the
next NAV to be calculated after the request is accepted by the Fund. If the
order is received by the Fund before the Fund's close of business (generally
4:00 p.m., Eastern time), the order will receive that day's closing price. If
the order is received after that time, it will receive the next business day's
closing price.
During periods of extreme volatility or market crisis, a Series may temporarily
suspend the processing of sell requests, or may postpone payment of proceeds for
up to seven business days or longer, as allowed by federal securities laws.
DIVIDEND POLICIES AND TAXES
DISTRIBUTIONS Each Series annually declares and distributes substantially all
of its net investment income in the form of dividends and capital gains
distributions.
DISTRIBUTION REINVESTMENT The dividends and distributions will be reinvested
automatically in additional shares of the same Series on which they were paid.
TAXABILITY OF A SERIES Each Series intends to continue to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as
amended. As long as each Series is qualified as a regulated investment company,
it will not be subject to federal income tax on the earnings that it distributes
to its shareholders.
20
<PAGE> 21
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SHARES OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD)
- --------------------------------------------------------------------------------
The Fund's Financial Highlights, which are intended to help you understand the
Series' financial performance for the past five years, are incorporated herein
by reference to the Fund's 2000 annual report to shareholders which accompanies
this Prospectus. The Financial Highlights have been audited by
PricewaterhouseCoopers LLP, whose report, along with each Series' financial
statements, are incorporated by reference into the Statement of Additional
Information (SAI), which is available upon request. For a description of the
information contained in the Fund's annual report and SAI please refer to
section entitled "For More Information" on page 22 of the Prospectus.
21
<PAGE> 22
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
The following documents contain more information about the Series and are
available free of charge upon request:
ANNUAL/SEMI-ANNUAL REPORTS. Contain financial statements, performance
data and information on portfolio holdings. The annual report also
contains a written analysis of market conditions and investment
strategies that significantly affected a Series' performance for the
most recently completed fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI). Contains additional
information about the Series' policies, investment restrictions and
business structure. This prospectus incorporates the SAI by reference.
You may obtain copies of these documents or ask questions about the Series at no
charge by calling (800) 445-7862 or by writing the Fund at P.O. Box 54299, Los
Angeles, California 90054-0299.
Information about the Series (including the SAI) can be reviewed and copied at
the Public Reference Room of the Securities and Exchange Commission, Washington,
D.C. Call (800) SEC-0330 for information on the operation of the Public
Reference Room. Information about the Series is also available on the Securities
and Exchange Commission's web-site at http://www.sec.gov and copies may be
obtained upon payment of a duplicating fee by electronic request at the
following e-mail address: [email protected], or by writing the Public Reference
Section of the Securities and Exchange Commission, Washington, D.C. 20549-6009.
You should rely only on the information contained in this prospectus. No one is
authorized to provide you with any different information.
INVESTMENT COMPANY ACT
- - File No. 811-5157
22
