<PAGE> 1
---------------------
DEAR ANCHOR PATHWAY INVESTOR:
We are pleased to offer the following semiannual report on the
Anchor Pathway Fund, which serves as the underlying investment
vehicle for the American Pathway II Variable Annuity. This report
covers the six months ended August 31, 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; as a
result, you can expect to receive the semiannual report in late
October each year. 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
According to CRMC, this was a turbulent time in the stock and
bond markets with a severe correction in the tech-dominated NASDAQ
and a downturn in the broader markets. While the major U.S.
indexes rebounded, several ended the period below where they
began. Investors' infatuation with Internet and high-tech stocks,
which had fueled much of the NASDAQ market's rise, reached its
zenith on March 10. From that high, the NASDAQ Composite Index
lost 37.3%, and then rebounded, ending the six months down 10.44%.
The unmanaged Standard & Poor's 500 Composite Index, which tracks
the largest U.S. stocks, gained 11.69% during the six-month
period, and the Dow Jones Industrial Average gained 11.57%.
Lower stock prices can be traced, in part, to rising short-term
interest rates and investors' growing impatience with high-tech
and Internet-related companies that have no earnings. By the end
of the period, the Federal Reserve Board had raised the federal
funds rate -- the rate banks charge each other on overnight loans
-- five times within 12 months, three times since the beginning of
the year.
The bond market had a mixed reaction to the Fed's actions. While
high-yield and short-term securities declined for most of the
period, long-term U.S. Treasury bonds gained in value. The
catalyst was a government decision to use part of the budget
surplus to buy back Treasuries with the longest maturities. As
investors weighed the prospects of significantly diminished
Treasury supply, prices rose steadily. The unmanaged Salomon Smith
Barney Broad Investment-Grade (BIG) Bond Index gained 5.44%, while
the unmanaged Salomon Smith Barney Long-Term High-Yield Index
gained 1.82%.
The Fed's actions slowed economic expansion and hurt stock
prices, although prices of many so-called "old economy" companies
rose as investors appeared to rediscover the value of earnings. In
this mixed environment, CRMC believes it is not surprising that
results varied among the series in the fund.
Here are brief comments on the investment activities of each
series:
THE GROWTH SERIES gained 8.0% in the six-month period ended
August 31, 2000, compared to the benchmark S&P 500, which posted
11.7%. CRMC views this an excellent result, especially given the
series' commitment to technology stocks, and the NASDAQ's return
of -10.4% over the same period. CRMC's long-term, research-based
approach put the manager in a good position, as its technology
investments tended to be in relatively strong and/or less
expensive semiconductor, software, and networking companies, and
it tended to shun the more speculative pure Internet companies.
This enabled CRMC to avoid the full brunt of the correction. The
manager will continue to search for the most attractive
opportunities, whether in technology or in other areas such as
media or
------------------------------------------------------------------------
---------------------
1
<PAGE> 2
---------------------
healthcare. CRMC notes that it expects volatility to continue. The
series invests primarily in U.S. companies, although most do a
significant amount of business abroad.
THE INTERNATIONAL SERIES declined 6% in the six-month period,
compared to the benchmark MSCI EAFE index return of -3.48%, as
investors reacted to news of a slowdown in the US consumer demand.
The series was helped by the high weighting of over 20% in cash,
which resulted from the earlier liquidation of several European
technology stocks (such as Nokia, Deutsche Telekom and Telefonica
Espana). Geographically, Europe remains the largest area of
investment at 40% of assets, with Japan at 14%. Looking forward,
the manager believes the outlook for non-U.S. markets is expected
to be volatile. The series will seek opportunities to invest down
the cash, in defensive names.
THE GROWTH-INCOME SERIES, which primarily focuses on
dividend-paying companies with growth potential, gained 12.1%
during the recent six months, while the broader market, as
measured by the unmanaged S&P 500, increased 11.7%. CRMC has
continued to embrace a cautious investment posture which it
maintained during the speculative surge in the Internet and
high-tech stocks over the last two years. Over the last six
months, CRMC has witnessed a rolling adjustment in these
high-growth stocks and the manager expects this unwinding of the
speculative excess to continue, probably into next year. In the
meantime, investors seem to have again begun to appreciate the
value of dividends and earnings -- the cornerstones of the series'
investment philosophy -- and reflecting that, this more
value-oriented portfolio is producing solid comparative results.
THE ASSET ALLOCATION SERIES returned 10.6% during the six-month
period, compared to the S&P 500 return of 11.7% for the same
period. The series' 60.5% equity position at period end was
relatively unchanged from the 59.8% position at the start of the
period. Hence, the series maintained a relatively neutral stance.
The Finance and Consumer Goods categories rose in weight while
Capital Equipment and Energy were reduced. The series continues to
strive for high total return, including income, consistent with
preservation of capital.
THE HIGH YIELD BOND SERIES produced a 4.1% return during the
six-month period, compared to the Salomon Smith Barney Long-Term
High-Yield Index return of 1.82%, despite continued worries over a
slowing economy -- increasing default rates among High Yield
issuers and poor stock market performance. The series' performance
was driven by holdings in the wireless communications, media,
energy, and leisure sectors which have been experiencing positive
fundamentals. In addition, the high level of merger and
acquisition activity in the media and wireless communications
sectors particularly benefited the series' returns.
THE U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES gained 5.3%
during the six-month period, compared to the Salomon Smith Barney
Treasury/Gov't Sponsored/ Mortgage Index return of 5.75% for the
same period. Although the Fed pushed short-term rates higher,
price of U.S. Treasury bonds rose when the Treasury Department
announced it would no longer issue 30-year bonds. The series has
22.7% of its assets in U.S. Treasury bonds and notes and 21.2% in
securities issued by the Government National Mortgage Association,
which are backed by the full faith and credit of the U.S.
government.
THE CASH MANAGEMENT SERIES provided a six-month return of 2.9%,
reflecting higher yields on short-term instruments. The yields
rose as the Fed pushed short-term rates higher. The series' assets
are concentrated in top-grade commercial paper, with some
investments in U.S. government agency bills. As this concentration
suggests, the fund is managed for stability and a reasonable rate
of return, which can make it an important diversification tool for
your portfolio.
---------------------
2
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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
September 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.
---------------------
3
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---------------------
ANCHOR PATHWAY FUND
GROWTH SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 87.7% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 33.4%
Data Processing & Reproduction -- 4.3%
Cadence Design Systems, Inc.+............................... 100,000 $ 2,125
Compaq Computer Corp........................................ 232,500 7,920
Intuit, Inc.+............................................... 125,000 7,484
Lexmark International Group, Inc., Class A+................. 80,000 5,425
Mentor Graphics Corp.+...................................... 120,000 2,265
Microsoft Corp.+............................................ 50,000 3,491
Palm, Inc.+................................................. 444,962 19,578
PeopleSoft, Inc.+........................................... 65,000 2,096
Silicon Graphics, Inc.+..................................... 300,000 1,406
Structural Dynamics Research Corp.+......................... 150,000 2,419
Electrical & Electronics -- 2.1%
Alcatel Alsthom ADR......................................... 37,260 3,088
Juniper Networks, Inc.+..................................... 75,000 16,031
NEC Corp.................................................... 18,000 515
Nokia Corp. ADR............................................. 169,300 7,608
Electronic Components -- 25.7%
Adaptec, Inc.+.............................................. 365,000 8,943
Analog Devices, Inc.+....................................... 973,332 97,820
EMC Corp.+.................................................. 125,000 12,250
Intel Corp.................................................. 80,000 5,990
LSI Logic Corp.+............................................ 400,000 14,375
Microchip Technology, Inc.+................................. 315,000 21,440
Micron Technology, Inc.+.................................... 32,000 2,616
MIPS Technologies, Inc., Class B+........................... 41,574 2,151
Park Electrochemical Corp................................... 187,200 7,523
Rogers Corp.+............................................... 218,400 7,617
SCI Systems, Inc.+.......................................... 400,000 24,700
Solectron Corp.+............................................ 1,040,000 47,125
Texas Instruments, Inc...................................... 1,120,000 74,970
Electronic Instruments -- 1.3%
Applied Materials, Inc.+.................................... 140,000 12,083
Corvis Corp.+............................................... 4,400 457
KLA-Tencor Corp.+........................................... 70,000 4,594
-----------
426,105
-----------
CONSUMER GOODS -- 11.8%
Beverages & Tobacco -- 1.0%
Coca Cola Co................................................ 100,000 5,262
Coca-Cola West Japan Co. Ltd................................ 100,000 3,029
Philip Morris Cos., Inc..................................... 160,000 4,740
Food & Household Products -- 0.2%
Dole Food Co., Inc.......................................... 210,000 2,966
Health & Personal Care -- 10.4%
American Home Products Corp................................. 450,000 24,384
AstraZeneca Group PLC ADR................................... 100,000 4,492
Bristol-Myers Squibb Co..................................... 70,000 3,710
Cardinal Health, Inc........................................ 287,500 23,521
Forest Laboratories, Inc.+.................................. 45,000 4,404
</TABLE>
---------------------
4
<PAGE> 5
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS (continued)
Health & Personal Care (continued)
Gillette Co................................................. 250,000 $ 7,500
Pfizer, Inc................................................. 900,000 38,925
Pharmacia Corp.............................................. 429,020 25,125
Recreation & Other Consumer Products -- 0.2%
Hasbro, Inc................................................. 140,000 1,724
-----------
149,782
-----------
ENERGY -- 1.8%
Energy Sources -- 1.5%
Enterprise Oil PLC ADR...................................... 300,000 2,388
EOG Resources, Inc.......................................... 150,000 5,737
Murphy Oil Corp............................................. 80,000 5,340
Pogo Producing Co........................................... 227,500 6,114
Utilities: Electric, Gas & Water -- 0.3%
Questar Corp................................................ 160,000 3,470
-----------
23,049
-----------
FINANCE -- 8.3%
Banking -- 0.8%
Charter One Financial, Inc.................................. 224,248 5,326
Washington Mutual, Inc...................................... 155,000 5,425
Financial Services -- 2.8%
Capital One Financial Corp.................................. 133,200 8,034
Federal National Mortgage Association....................... 410,000 22,037
Household International, Inc................................ 110,000 5,280
Insurance -- 4.7%
Berkshire Hathaway, Inc., Class A+.......................... 325 18,752
Marsh & McLennan Cos., Inc.................................. 175,000 20,781
Progressive Corp............................................ 150,000 11,372
XL Capital Ltd., Class A.................................... 130,000 8,962
-----------
105,969
-----------
MATERIALS -- 0.7%
Chemicals -- 0.3%
Valspar Corp................................................ 122,000 3,599
Forest Products & Paper -- 0.4%
Sealed Air Corp.+........................................... 115,000 5,901
-----------
9,500
-----------
SERVICES -- 30.2%
Broadcasting & Publishing -- 16.9%
AT&T Corp.-Liberty Media Corp., Class A+.................... 225,000 4,809
BHC Communications, Inc., Class A........................... 55,821 8,541
Clear Channel Communications, Inc.+......................... 238,000 17,225
Fox Entertainment Group, Inc., Class A+..................... 600,000 17,363
News Corp. Ltd. ADR......................................... 680,000 35,785
Time Warner, Inc............................................ 679,800 58,123
UnitedGlobalCom, Inc., Class A+............................. 20,000 766
USA Networks, Inc.+......................................... 753,000 18,119
Viacom, Inc., Class B+...................................... 820,000 55,196
Business & Public Services -- 3.5%
Allied Waste Industries, Inc.+.............................. 350,000 3,216
Cendant Corp.+.............................................. 600,000 7,912
FedEx Corp.+................................................ 400,000 16,140
iXL Enterprises, Inc........................................ 400,000 3,825
</TABLE>
---------------------
5
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<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Business & Public Services (continued)
Sabre Holdings Corp......................................... 166,209 $ 4,633
Waste Management, Inc....................................... 200,000 3,788
Yahoo!, Inc.+............................................... 40,000 4,860
Cellular & Paging -- 0.2%
Crown Castle International Corp.+........................... 61,300 2,126
Healthcare -- 2.5%
HCA Healthcare Co........................................... 468,625 16,168
Quintiles Transnational Corp.+.............................. 90,000 1,254
Universal Health Services, Inc., Class B+................... 74,900 5,299
Wellpoint Health Networks, Inc.+............................ 100,000 8,631
Leisure & Tourism -- 3.2%
Carnival Corp., Class A..................................... 489,400 9,757
Seagram Co. Ltd............................................. 121,400 7,307
Starbucks Corp.+............................................ 120,000 4,395
Walt Disney Co.............................................. 500,000 19,469
Merchandising -- 1.3%
Consolidated Stores Corp.+.................................. 352,400 4,801
Lowe's Cos., Inc............................................ 75,000 3,361
Sunglass Hut International, Inc.+........................... 734,000 5,322
The Limited, Inc............................................ 160,474 3,210
Telecommunications -- 0.5%
Coreexpress, Inc.*.......................................... 364,196 4,500
Nextel Communications, Inc., Class A+....................... 30,000 1,663
Transportation: Airlines -- 2.1%
AMR Corp.+.................................................. 230,000 7,547
Delta Air Lines, Inc........................................ 20,000 990
Southwest Airlines Co....................................... 815,625 18,454
-----------
384,555
-----------
OTHER COMMON STOCK -- 1.5%.................................. 18,693
-----------
TOTAL COMMON STOCK (cost $583,795).......................... 1,117,653
-----------
</TABLE>
<TABLE>
PREFERRED STOCK -- 1.2%
<S> <C> <C>
<CAPTION>
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 1.2%
Broadcasting & Publishing -- 1.2%
News Corp. Ltd. ADR (cost $2,313)........................... 340,000 15,045
-----------
TOTAL INVESTMENT SECURITIES (cost $586,108)................. 1,132,698
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 11.2% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 8.7%
Alcoa, Inc. 6.47% due 9/07/00............................... $ 14,400 14,384
Alcoa, Inc. 6.50% due 9/06/00............................... 7,100 7,094
American Express Credit Corp. 6.50% due 9/13/00............. 9,400 9,380
du Pont (E.I.) de Nemours & Co. 6.47% due 9/26/00........... 7,200 7,168
Duke Power Co. 6.47% due 9/12/00............................ 13,400 13,373
Equilon Enterprises LLC 6.51% due 10/04/00.................. 5,000 4,970
General Electric Capital Corp. 6.65% due 9/01/00............ 8,360 8,360
General Motors Acceptance Corp. 6.48% due 9/25/00........... 12,000 11,948
</TABLE>
---------------------
6
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES (continued)
Gillette Co. 6.50% due 9/08/00.............................. $ 15,000 $ 14,981
John Hancock Capital Corp. 6.48% due 9/01/00................ 6,100 6,100
Preferred Receivables Funding Corp. 6.50% due 9/22/00....... 9,600 9,563
Sherwin Williams Co. 6.48% due 9/14/00...................... 4,000 3,991
-----------
111,312
-----------
FEDERAL AGENCY OBLIGATIONS -- 2.5%
Federal Home Loan Mortgage Discount Notes 6.41% due
9/14/00................................................... 5,000 4,988
Federal Home Loan Mortgage Discount Notes 6.42% due
9/21/00................................................... 5,075 5,057
Federal Home Loan Mortgage Discount Notes 6.46% due
9/14/00................................................... 10,456 10,432
Federal National Mortgage Association Discount Notes 6.45%
due 9/14/00............................................... 900 898
Federal National Mortgage Association Discount Notes 6.46%
due 9/14/00............................................... 10,000 9,977
-----------
31,352
-----------
TOTAL SHORT-TERM SECURITIES (cost $142,664)................. 142,664
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS --
(cost $728,772) 100.1% $1,275,362
Liabilities in excess of other assets -- (0.1) (1,634)
------- -----------
NET ASSETS -- 100.0% $1,273,728
======= ===========
</TABLE>
-----------------------------
+ Non-income producing security
* Fair valued security; See Note 2
ADR - American Depository Receipt
See Notes to Financial Statements
---------------------
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---------------------
ANCHOR PATHWAY FUND
INTERNATIONAL SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 76.6% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 6.3%
Brambles Industries Ltd. (Services)......................... 100,000 $ 2,838
Broken Hill Proprietary Co. Ltd. (Energy)................... 435,742 4,766
Foster's Brewing Group Ltd. (Consumer Goods)................ 389,300 920
News Corp. Ltd. ADR (Services).............................. 100,000 5,262
Westpac Banking Corp. Ltd. (Finance)........................ 313,073 2,284
--------
16,070
--------
BRAZIL -- 0.9%
Centrais Geradoras do Sul do Brasil SA ADR (Energy)......... 18,300 146
Companhia Energetica de Minas Gerais ADR (Energy)........... 73,400 1,291
Companhia Paranaense de Energia (Energy).................... 118,055,000 892
--------
2,329
--------
CANADA -- 2.8%
Nortel Networks Corp. (Capital Equipment)................... 88,000 7,178
--------
FINLAND -- 2.6%
Nokia Oyj (Capital Equipment)............................... 124,800 5,470
UPM-Kymmene Oyj (Materials)................................. 48,000 1,212
--------
6,682
--------
FRANCE -- 5.4%
Canal Plus (Services)....................................... 54,000 8,816
Total Fina Elf SA, Class B (Energy)......................... 33,876 5,025
--------
13,841
--------
HONG KONG -- 3.3%
China Mobile Ltd. (Services)+............................... 326,000 2,508
China Resources Enterprise Ltd. (Real Estate)............... 4,000,000 5,950
--------
8,458
--------
ISRAEL -- 3.6%
Check Point Software Technologies Ltd. (Services)+.......... 64,000 9,332
--------
ITALY -- 3.9%
ENI SpA (Energy)............................................ 700,000 4,082
Telecom Italia Mobile SpA (Services)........................ 600,000 2,983
Telecom Italia SpA (Services)............................... 484,900 2,880
--------
9,945
--------
JAPAN -- 13.7%
Fujitsu Ltd. (Capital Equipment)............................ 380,000 11,010
Marubeni Corp. (Services)................................... 1,714,000 4,741
NEC Corp. (Capital Equipment)............................... 170,000 4,862
Nintendo Co. Ltd. (Consumer Goods).......................... 11,000 1,902
Nippon Telegraph & Telephone Corp. (Services)............... 330 3,929
Rohm Co. Ltd. (Capital Equipment)........................... 20,000 5,691
Toshiba Corp. (Capital Equipment)........................... 300,000 2,951
--------
35,086
--------
KOREA -- 2.4%
Hyundai Electronics Industries Co. Ltd. (Capital
Equipment)+............................................... 338,683 6,201
--------
</TABLE>
---------------------
8
<PAGE> 9
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
MEXICO -- 6.1%
Cemex SA de CV (Materials).................................. 3 $ 0
Cemex SA de CV ADR (Materials)+............................. 121,719 2,853
Grupo Televisa SA GDR (Services)+........................... 35,000 2,266
Telefonos de Mexico SA de CV ADR (Services)................. 190,400 10,365
Wal-Mart de Mexico SA de CV (Services)...................... 49,461 124
--------
15,608
--------
NETHERLANDS -- 5.2%
Aegon NV (Finance).......................................... 70,000 2,728
ASM Lithography Holdings NV (Capital Equipment)+............ 100,000 3,776
VNU NV (Services)........................................... 130,802 6,967
--------
13,471
--------
NORWAY -- 1.1%
Orkla ASA (Multi-industry).................................. 160,000 2,844
--------
PHILIPPINES -- 0.6%
Ayala Land, Inc. (Real Estate).............................. 7,440,000 874
Philippine Long Distance Telephone Co. (Services)........... 35,000 594
--------
1,468
--------
SWEDEN -- 3.0%
Ericsson LM Telecommunications Co., Class B (Capital
Equipment)................................................ 381,600 7,701
--------
SWITZERLAND -- 1.0%
Nestle SA (Consumer Goods).................................. 1,250 2,694
--------
THAILAND -- 0.1%
Bangkok Bank Public Co. Ltd. (Finance)+..................... 300,000 310
--------
UNITED KINGDOM -- 10.0%
AstraZeneca Group PLC (Consumer Goods)...................... 37,900 1,727
AstraZeneca Group PLC ADR (Consumer Goods).................. 136,215 6,118
New Dixons Group PLC (Services)+............................ 1,561,904 5,411
ScottishPower PLC (Energy).................................. 132,240 1,007
Shell Transport & Trading PLC ADR (Energy).................. 75,000 3,858
Vodafone Group PLC (Services)............................... 1,849,247 7,467
--------
25,588
--------
OTHER COMMON STOCK -- 4.6%.................................. 11,858
--------
TOTAL COMMON STOCK (cost $132,381).......................... 196,664
--------
<CAPTION>
WARRANTS -- 0.0%+
---------------------------------------------------------------------------------------------
<S> <C> <C>
MEXICO -- 0.0%
Cemex SA ADR 12/13/02 (Materials) (cost $12)................ 7,268 16
--------
TOTAL INVESTMENT SECURITIES (cost $132,393)................. 196,680
--------
<CAPTION>
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 22.1% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 20.6%
American Honda Finance Corp. 6.48% due 10/27/00............. $ 5,000 4,950
Barclays US Funding Corp. 6.48% due 9/11/00................. 4,300 4,292
BMW US Capital Corp. 6.51% due 9/08/00...................... 1,500 1,498
Deutsche Bank Fina 6.55% due 9/20/00........................ 5,000 4,983
Eastman Kodak Co. 6.50% due 9/20/00......................... 5,000 4,983
General Electric Capital Corp. 6.65% due 9/01/00............ 6,400 6,400
Monte Rosa Capital Corp. 6.50% due 10/02/00................. 4,600 4,574
Park Avenue Recreation Corp. 6.50% due 9/07/00.............. 3,800 3,796
</TABLE>
---------------------
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<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES (continued)
Rio Tinto America, Inc. 6.48% due 9/14/00................... $ 4,000 $ 3,991
Sony Capital Corp. 6.51% due 9/06/00........................ 5,000 4,995
Svenska Handelsbanken, Inc. 6.52% due 9/29/00............... 6,000 5,970
Verizon Global Funding Corp. 6.50% due 10/31/00............. 2,480 2,453
--------
52,885
--------
FEDERAL AGENCY OBLIGATIONS -- 1.5%
Federal Home Loan Bank Discount Notes 6.46% due 9/27/00..... 4,000 3,981
--------
TOTAL SHORT-TERM SECURITIES (cost $56,866).................. 56,866
--------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS --
(cost $189,259) 98.7% $253,546
Other assets less liabilities -- 1.3 3,356
------- --------
NET ASSETS -- 100.0% $256,902
======= ========
</TABLE>
-----------------------------
+ Non-income producing security
ADR - American Depository Receipt
GDR - Global Depository Receipt
See Notes to Financial Statements
---------------------
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---------------------
ANCHOR PATHWAY FUND
GROWTH-INCOME SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 79.7% SHARES (IN THOUSANDS)
<S> <C> <C>
---------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 14.1%
Aerospace & Military Technology -- 2.4%
Lockheed Martin Corp. ...................................... 237,300 $ 6,734
Raytheon Co., Class A....................................... 118,900 3,158
Raytheon Co., Class B....................................... 100,000 2,781
United Technologies Corp. .................................. 105,800 6,606
Data Processing & Reproduction -- 3.9%
3Com Corp.+................................................. 80,000 1,330
Cadence Design Systems, Inc.+............................... 150,000 3,187
Computer Associates International, Inc. .................... 125,000 3,969
International Business Machines Corp. ...................... 25,000 3,300
Palm, Inc.+................................................. 118,656 5,221
Silicon Graphics, Inc.+..................................... 294,400 1,380
Storage Technology Corp.+................................... 425,000 6,720
Xerox Corp. ................................................ 400,000 6,425
Electrical & Electronics -- 1.8%
Cisco Systems, Inc.+........................................ 60,000 4,118
Harris Corp. ............................................... 70,000 2,104
Lucent Technologies, Inc. .................................. 30,000 1,254
Nokia Corp. ADR............................................. 55,000 2,472
York International Corp. ................................... 184,400 4,587
Electronic Components -- 2.0%
MIPS Technologies, Inc., Class B+........................... 40,797 2,111
SCI Systems, Inc.+.......................................... 125,000 7,719
Texas Instruments, Inc. .................................... 100,000 6,694
Electronic Instruments -- 0.8%
Applied Materials, Inc.+.................................... 30,000 2,589
PE Corp-PE Biosystems Group................................. 40,000 3,935
Energy Equipment -- 0.3%
Schlumberger Ltd. .......................................... 30,000 2,559
Industrial Components -- 1.0%
Dana Corp. ................................................. 50,000 1,234
Eaton Corp. ................................................ 70,000 4,646
Federal-Mogul Corp. ........................................ 58,300 601
TRW, Inc. .................................................. 40,000 1,828
Machinery & Engineering -- 1.9%
Caterpillar, Inc. .......................................... 70,000 2,572
CNH Global NV............................................... 200,000 1,963
Deere & Co. ................................................ 94,600 3,116
Ingersoll-Rand Co. ......................................... 120,000 5,467
Pall Corp. ................................................. 100,000 2,138
---------
114,518
---------
</TABLE>
---------------------
11
<PAGE> 12
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS -- 12.8%
Beverages & Tobacco -- 1.9%
PepsiCo, Inc. .............................................. 150,000 $ 6,394
Philip Morris Cos., Inc. ................................... 225,000 6,666
UST, Inc. .................................................. 100,000 2,162
Food & Household Products -- 2.8%
Campbell Soup Co. .......................................... 150,000 3,806
General Mills, Inc. ........................................ 100,000 3,213
Heinz (H.J.) Co. ........................................... 100,000 3,812
Sara Lee Corp. ............................................. 650,000 12,106
Health & Personal Care -- 6.9%
Avon Products, Inc. ........................................ 269,800 10,573
Bergen Brunswig Corp., Class A.............................. 375,000 3,516
Cardinal Health, Inc. ...................................... 70,000 5,727
Guidant Corp.+.............................................. 80,000 5,385
Kimberly-Clark Corp. ....................................... 130,000 7,605
McKesson HBOC, Inc. ........................................ 50,000 1,247
Merck & Co., Inc. .......................................... 100,000 6,987
Pfizer, Inc. ............................................... 132,500 5,731
Schering-Plough Corp. ...................................... 100,000 4,012
Service Corp. International+................................ 600,000 1,387
UnitedHealth Group, Inc. ................................... 40,000 3,780
Recreation & Other Consumer Products -- 0.7%
Pennzoil-Quaker State Co. .................................. 450,000 5,597
Textiles & Apparels -- 0.5%
Nike, Inc., Class B......................................... 50,000 1,978
V.F. Corp. ................................................. 100,000 2,288
---------
103,972
---------
ENERGY -- 7.5%
Energy Sources -- 4.9%
Ashland, Inc. .............................................. 48,800 1,720
Conoco, Inc., Class A....................................... 132,000 3,325
Conoco, Inc., Class B....................................... 49,138 1,284
Devon Energy Corp. ......................................... 70,000 4,099
Petro-Canada................................................ 200,000 4,246
Phillips Petroleum Co. ..................................... 210,000 12,994
Texaco, Inc. ............................................... 150,000 7,725
Ultramar Diamond Shamrock Corp. ............................ 51,000 1,195
Valero Energy Corp. ........................................ 100,000 3,013
Utilities: Electric, Gas & Water -- 2.6%
Ameren Corp. ............................................... 100,000 4,044
Dominion Resources, Inc. ................................... 125,000 6,625
Duke Energy Corp. .......................................... 50,000 3,741
GPU, Inc. .................................................. 100,000 3,062
TECO Energy, Inc. .......................................... 150,000 3,684
---------
60,757
---------
FINANCE -- 13.8%
Banking -- 8.6%
Bank of America Corp. ...................................... 370,000 19,818
Bank of New York Co., Inc. ................................. 100,000 5,244
Bank One Corp. ............................................. 139,000 4,900
Bank Tokyo Mitsubishi Ltd. ADR.............................. 100,000 1,225
Chase Manhattan Corp. ...................................... 105,000 5,867
First Union Corp. .......................................... 296,172 8,570
</TABLE>
---------------------
12
<PAGE> 13
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Banking (continued)
KeyCorp..................................................... 170,000 $ 3,432
Morgan (J.P.) & Co., Inc. .................................. 15,000 2,508
Sakura Bank Ltd. ADR........................................ 35,000 2,585
SunTrust Banks, Inc. ....................................... 50,000 2,469
Wells Fargo Co. ............................................ 297,000 12,827
Financial Services -- 1.9%
Associates First Capital Corp., Class A..................... 90,000 2,531
Household International, Inc. .............................. 271,332 13,024
Insurance -- 3.3%
Aetna, Inc. ................................................ 70,000 3,915
Allmerica Financial Corp. .................................. 60,500 3,683
Allstate Corp. ............................................. 320,000 9,300
American General Corp. ..................................... 50,000 3,641
MGIC Investment Corp. ...................................... 50,000 2,941
Royal & Sun Alliance Insurance Group PLC.................... 450,000 3,134
---------
111,614
---------
MATERIALS -- 4.9%
Chemicals -- 1.6%
Crompton Corp. ............................................. 110,904 998
International Flavors & Fragrances, Inc. ................... 200,000 5,150
Millennium Chemicals, Inc. ................................. 250,000 4,125
PPG Industries, Inc. ....................................... 65,000 2,633
Forest Products & Paper -- 2.6%
Bowater, Inc. .............................................. 135,000 6,936
Fort James Corp. ........................................... 125,000 3,953
International Paper Co. .................................... 138,816 4,425
Sonoco Products Co. ........................................ 100,000 1,931
Westvaco Corp. ............................................. 60,000 1,642
Weyerhaeuser Co. ........................................... 50,000 2,316
Metals & Minerals -- 0.7%
Crown, Cork & Seal Co., Inc. ............................... 150,000 1,940
Owens-Illinois, Inc.+....................................... 300,000 3,919
---------
39,968
---------
MULTI-INDUSTRY -- 1.0%
Multi-industry -- 1.0%
FMC Corp. .................................................. 75,000 5,086
Honeywell International, Inc. .............................. 80,000 3,085
---------
8,171
---------
REAL ESTATE -- 1.1%
Real Estate Investment Trusts -- 1.1%
Boston Properties, Inc. .................................... 130,000 5,257
Equity Residential Properties Trust......................... 60,000 2,880
Meditrust Cos. ............................................. 125,000 289
---------
8,426
---------
SERVICES -- 20.4%
Broadcasting & Publishing -- 4.4%
Fox Entertainment Group, Inc., Class A+..................... 150,000 4,341
Gannett Co., Inc. .......................................... 60,000 3,398
Harte-Hanks, Inc. .......................................... 205,100 5,153
News Corp. Ltd. ADR......................................... 100,000 5,262
Time Warner, Inc. .......................................... 40,000 3,420
Viacom, Inc., Class B+...................................... 215,000 14,472
</TABLE>
---------------------
13
<PAGE> 14
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Business & Public Services -- 6.2%
Alexander & Baldwin, Inc. .................................. 180,000 $ 4,736
Allied Waste Industries, Inc.+.............................. 1,075,000 9,877
Cendant Corp.+.............................................. 150,000 1,978
Digex, Inc.+................................................ 30,000 2,541
FedEx Corp.+................................................ 120,000 4,842
Ikon Office Solutions, Inc. ................................ 660,000 3,300
Interpublic Group of Cos., Inc. ............................ 150,000 5,738
Pitney Bowes, Inc. ......................................... 190,000 6,947
SAVVIS Communications Corp.+................................ 68,000 599
The ServiceMaster Co. ...................................... 220,000 2,131
United Parcel Service, Inc., Class B........................ 62,800 3,481
Waste Management, Inc. ..................................... 200,000 3,788
Cellular & Paging -- 0.4%
Dobson Communications Corp.+................................ 136,900 2,952
Leisure & Tourism -- 0.5%
Seagram Co. Ltd. ........................................... 70,000 4,213
Merchandising -- 5.6%
Albertson's, Inc. .......................................... 315,000 6,772
Circuit City Stores, Inc. .................................. 68,100 1,766
Dillards, Inc., Class A..................................... 380,000 4,869
Dollar General Corp. ....................................... 250,000 5,141
Federated Department Stores, Inc. +......................... 100,000 2,763
Gap, Inc. .................................................. 115,000 2,580
Lowe's Cos., Inc. .......................................... 75,000 3,361
May Department Stores Co. .................................. 230,000 5,276
Penney (J.C.) Co., Inc. .................................... 315,000 4,410
The Limited, Inc. .......................................... 200,000 4,000
Too, Inc.+.................................................. 55,000 1,354
Walgreen Co. ............................................... 100,000 3,287
Telecommunications -- 1.8%
AT&T Corp. ................................................. 130,000 4,095
NorthPoint Communications Group, Inc.+...................... 125,000 1,430
Qwest Communications International, Inc.+................... 100,000 5,162
SBC Communications, Inc. ................................... 40,000 1,670
Sprint Corp. ............................................... 75,000 2,513
Transportation: Airlines -- 0.3%
Southwest Airlines Co. ..................................... 100,000 2,263
Transportation: Rail & Road -- 1.2%
Burlington Northern Santa Fe Corp. ......................... 150,000 3,356
CSX Corp. .................................................. 100,000 2,387
Norfolk Southern Corp. ..................................... 265,000 4,257
---------
165,881
---------
OTHER COMMON STOCK -- 4.1%.................................. 33,414
---------
TOTAL COMMON STOCK (cost $589,343).......................... 646,721
---------
<CAPTION>
PREFERRED STOCK -- 0.4%
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 0.4%
Broadcasting & Publishing -- 0.4%
News Corp. Ltd. ADR (cost $1,044)........................... 80,000 3,540
---------
</TABLE>
---------------------
14
<PAGE> 15
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
CONVERTIBLE BONDS -- 1.3% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS -- 1.0%
Health & Personal Care -- 1.0%
Sepracor, Inc. 6.25% 2005*#................................. $ 1,750 $ 8,190
---------
SERVICES -- 0.3%
Telecommunications -- 0.3%
Telefonos de Mexico SA 4.25% 2004........................... 1,660 2,130
---------
TOTAL CONVERTIBLE BONDS (cost $3,391)....................... 10,320
---------
TOTAL INVESTMENT SECURITIES (cost $593,778)................. 660,581
---------
<CAPTION>
SHORT-TERM SECURITIES -- 17.8%
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 13.9%
Bell Atlantic Financial Services 6.51% due 9/22/00.......... 2,000 1,993
Bell Atlantic Financial Services 6.52% due 9/20/00.......... 2,540 2,531
BellSouth Telecommunications, Inc. 6.47% due 10/02/00....... 10,000 9,944
Coca-Cola Co. 6.50% due 10/19/00............................ 5,400 5,353
du Pont (E.I.) de Nemours & Co. 6.47% due 9/26/00........... 11,200 11,150
Eastman Kodak Co. 6.55% due 9/18/00......................... 700 698
Equilon Enterprises LLC 6.51% due 10/04/00.................. 5,850 5,815
Estee Lauder Cos., Inc. 6.50% due 9/18/00................... 2,000 1,994
General Electric Capital Corp. 6.65% due 9/01/00............ 20,500 20,500
General Motors Acceptance Corp. 6.48% due 9/11/00........... 8,600 8,584
General Motors Acceptance Corp. 6.48% due 9/25/00........... 10,000 9,957
Gillette Co. 6.47% due 9/05/00.............................. 15,200 15,189
Pharmacia Corp. 6.49% due 10/10/00.......................... 16,200 16,086
Sherwin Williams Co. 6.50% due 9/05/00...................... 3,000 2,998
---------
112,792
---------
FEDERAL AGENCY OBLIGATIONS -- 3.9%
Federal Home Loan Bank Discount Notes 6.46% due 9/06/00..... 7,000 6,994
Federal Home Loan Mortgage Discount Notes 6.41% due
9/12/00................................................... 5,400 5,389
Federal Home Loan Mortgage Discount Notes 6.41% due
10/17/00.................................................. 4,500 4,463
Federal Home Loan Mortgage Discount Notes 6.42% due
9/21/00................................................... 4,598 4,582
Federal National Mortgage Association Discount Notes 6.45%
due 9/14/00............................................... 300 299
Federal National Mortgage Association Discount Notes 6.46%
due 9/14/00............................................... 10,000 9,977
---------
31,704
---------
TOTAL SHORT-TERM SECURITIES (cost $144,496)................. 144,496
---------
TOTAL INVESTMENTS --
(cost $738,274) 99.2% 805,077
Other assets less liabilities -- 0.8 6,790
------ ---------
NET ASSETS -- 100.0% $811,867
====== =========
</TABLE>
-----------------------------
+ Non-income producing security
* Fair valued security; see Note 2
# Resale restricted to qualified institutional buyers
ADR - American Depository Receipt
See Notes to Financial Statements
---------------------
15
<PAGE> 16
O
---------------------
ANCHOR PATHWAY FUND
ASSET ALLOCATION SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCK -- 60.5% SHARES (IN THOUSANDS)
<S> <C> <C>
---------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 19.9%
Aerospace & Military Technology -- 1.7%
Raytheon Co., Class B....................................... 25,000 $ 695
United Technologies Corp.................................... 20,000 1,249
Data Processing & Reproduction -- 5.8%
Autodesk, Inc............................................... 50,000 1,406
Computer Associates International, Inc...................... 30,000 953
Hewlett-Packard Co.......................................... 20,000 2,415
International Business Machines Corp........................ 10,000 1,320
Xerox Corp.................................................. 30,000 482
Electrical & Electronics -- 4.1%
Emerson Electric Co......................................... 15,000 993
Nokia Corp. ADR............................................. 50,000 2,247
York International Corp..................................... 55,000 1,368
Electronic Components -- 4.4%
Corning, Inc................................................ 15,000 4,919
Electronic Instruments -- 0.4%
Agilent Technologies, Inc.+................................. 7,628 460
Energy Equipment -- 1.5%
Schlumberger Ltd............................................ 20,000 1,706
Industrial Components -- 2.0%
Dana Corp................................................... 50,000 1,234
Genuine Parts Co............................................ 50,000 1,028
---------
22,475
---------
CONSUMER GOODS -- 9.5%
Beverages & Tobacco -- 1.5%
PepsiCo, Inc................................................ 40,000 1,705
Food & Household Products -- 1.9%
General Mills, Inc.......................................... 40,000 1,285
Sara Lee Corp............................................... 50,000 931
Health & Personal Care -- 6.1%
AstraZeneca Group PLC ADR................................... 31,000 1,392
Bristol-Myers Squibb Co..................................... 35,000 1,855
Pfizer, Inc................................................. 50,000 2,163
Pharmacia Corp.............................................. 25,000 1,464
---------
10,795
---------
ENERGY -- 4.0%
Energy Sources -- 3.3%
Phillips Petroleum Co....................................... 35,000 2,166
Texaco, Inc................................................. 30,000 1,545
Utilities: Electric, Gas & Water -- 0.7%
American Electric Power Co., Inc............................ 24,000 846
---------
4,557
---------
</TABLE>
---------------------
16
<PAGE> 17
<TABLE>
<CAPTION>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 13.2%
Banking -- 3.0%
Bank of America Corp........................................ 40,000 $ 2,143
Bank One Corp............................................... 35,000 1,234
Financial Services -- 6.3%
Citigroup, Inc.............................................. 53,333 3,113
Federal National Mortgage Association....................... 20,000 1,075
Household International, Inc................................ 60,666 2,912
Insurance -- 3.9%
Allstate Corp............................................... 45,000 1,308
American General Corp....................................... 25,000 1,820
Aon Corp.................................................... 35,000 1,306
---------
14,911
---------
MATERIALS -- 1.4%
Chemicals -- 0.6%
PPG Industries, Inc......................................... 15,000 608
Forest Products & Paper -- 0.8%
Weyerhaeuser Co............................................. 20,000 926
---------
1,534
---------
MULTI-INDUSTRY -- 1.3%
Multi-industry -- 1.3%
Dover Corp.................................................. 30,000 1,466
---------
SERVICES -- 9.4%
Broadcasting & Publishing -- 1.1%
New York Times Co., Class A................................. 30,000 1,176
Business & Public Services -- 2.2%
Pitney Bowes, Inc........................................... 50,000 1,828
Rentokil Initial PLC ADR.................................... 30,000 690
Leisure & Tourism -- 0.7%
Carnival Corp., Class A..................................... 40,000 797
Merchandising -- 3.9%
Albertson's, Inc............................................ 40,000 860
May Department Stores Co.+.................................. 50,000 1,147
Penney (J.C.) Co., Inc...................................... 30,000 420
Walgreen Co................................................. 60,000 1,972
Telecommunications -- 1.5%
CenturyTel, Inc............................................. 30,000 864
Sprint Corp................................................. 25,000 838
---------
10,592
---------
OTHER COMMON STOCK -- 1.8%.................................. 2,078
---------
TOTAL COMMON STOCK (cost $56,086)........................... 68,408
---------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCK -- 0.7%
---------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 0.2%
Banking -- 0.2%
NB Capital Corp. 8.35%...................................... 10,000 237
---------
</TABLE>
---------------------
17
<PAGE> 18
<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 $ 500
---------
TOTAL PREFERRED STOCK (cost $756)........................... 737
---------
<CAPTION>
PRINCIPAL
AMOUNT
BONDS & NOTES -- 27.7% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS -- 0.3%
Business & Public Services -- 0.3%
Waste Management, Inc. 4.00% 2002........................... $ 300 283
Recreation & Other Consumer Products -- 0.0%
V2 Music Holdings 6.50% 2012#*@(2)..........................(GBP) 145 57
---------
340
---------
CORPORATE BONDS -- 15.1%
Asset-Backed Securities -- 1.1%
Airplanes Pass Through Trust, Class C 8.15% 2019++.......... 466 436
First Plus Home Loan Trust Series 1997-1, Class A6 6.95%
2015...................................................... 500 497
PP&L Transition Bond Co. LLC, Series 1999-1, Class A7 7.05%
2009...................................................... 250 251
Broadcasting & Publishing -- 2.7%
American Media Operations, Inc. 10.25% 2009................. 350 349
British Sky Broadcasting Group 8.20% 2009................... 500 466
Charter Communications Holdings LLC zero coupon 2011@....... 750 448
Globo Communicacoes Participacoes Ltd., Class B 10.50%
2006#..................................................... 220 199
NTL Communications Corp., Series B 11.50% 2009@............. 900 440
Time Warner, Inc. 9.13% 2013................................ 1,000 1,111
Finance -- 3.4%
Capital One Financial Corp. 7.13% 2008...................... 500 448
Cei Citicorp Holdings SA 11.25% 2007#....................... 400 392
Chevy Chase Savings Bank 9.25% 2008......................... 500 455
Ford Motor Credit Co. 5.80% 2009............................ 500 440
Fuji JGB Investment Preferred LLC 9.87% 2008#(1)............ 250 244
GS Escrow Corp. 7.13% 2005.................................. 500 458
IBJ Preferred Capital Co. LLC 8.79% 2008#(1)................ 500 458
Socgen Real Estate Co. LLC, Series A 7.64% 2007#(1)......... 500 463
Tokai Preferred Capital Co. LLC 9.98% 2008#(1).............. 250 242
Wharf International Finance Ltd. 7.63% 2007................. 250 235
Forest Products & Paper -- 0.4%
Container Corp. of America 9.75% 2003....................... 500 501
Industrial -- 2.4%
Allied Waste Industries NA, Inc., Series B 10.00% 2009...... 500 447
Conoco, Inc. 6.35% 2009..................................... 250 237
Equistar Chemicals, LP 8.75% 2009*.......................... 500 490
Freeport-McMoRan Copper & Gold, Inc. 7.20% 2026............. 500 329
Gruma SA de CV 7.63% 2007................................... 250 215
Hyundai Semiconductor America, Inc. 8.63% 2007#............. 425 367
Inco Ltd. 9.60% 2022........................................ 400 395
Owens-Illinois, Inc. 8.10% 2007............................. 250 232
Merchandising -- 1.0%
Dayton Hudson Corp. 8.50% 2022.............................. 500 501
Penney (J.C.) Co., Inc. 6.88% 2015.......................... 1,000 672
Recreation & Other Consumer Products -- 0.8%
Horseshoe Gaming Holdings Corp., Series B 8.63% 2009........ 500 485
Royal Caribbean Cruises Ltd. 7.00% 2007..................... 500 439
</TABLE>
---------------------
18
<PAGE> 19
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (continued)
Telecommunications -- 2.1%
Clearnet Communications, Inc. zero coupon 2008@.............(CAD)$ 1,000 $ 550
Leap Wireless International, Inc. zero coupon 2010#@........ 500 200
Nextel Communications, Inc. zero coupon 2008@............... 1,500 1,140
Nextel International, Inc. zero coupon 2008@................ 300 195
Voicestream Wireless Corp. 10.38% 2009...................... 269 291
Transportation -- 1.2%
Delta Air Lines, Inc., Series 93 Class A2 10.50% 2016++..... 500 551
Jet Equipment Trust, Class B 7.83% 2012#.................... 435 424
United Airlines Pass Through Trust, Series 1996, Class A2
7.87% 2019++.............................................. 500 433
---------
17,126
---------
U.S. GOVERNMENT & AGENCIES -- 0.2%
Government National Mortgage Association 8.50% 2029......... 230 236
---------
U.S. TREASURY -- 12.1%
3.63% Bonds 2002............................................ 2,151 2,304
7.25% Bonds 2016............................................ 2,000 2,263
7.50% Bonds 2016............................................ 2,000 2,318
8.75% Bonds 2008............................................ 2,500 2,670
6.50% Notes 2002............................................ 1,000 1,004
6.63% Notes 2007............................................ 1,000 1,035
7.25% Notes 2004............................................ 2,000 2,076
---------
13,670
---------
TOTAL BONDS & NOTES (cost $32,890).......................... 31,372
---------
<CAPTION>
WARRANTS -- 0.0%+*# SHARES
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS -- 0.0%
Recreation & Other Consumer Products -- 0.0%
V2 Music Holdings PLC 5/07/08............................... 175 0
---------
OTHER WARRANTS -- 0.0%...................................... 27
---------
TOTAL WARRANTS (cost $80)................................... 27
---------
TOTAL INVESTMENT SECURITIES (cost $89,812).................. 100,544
---------
</TABLE>
<TABLE>
---------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 10.5% (IN THOUSANDS)
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 8.5%
AT&T Corp. 6.49% due 9/06/00................................ $ 1,500 1,498
AT&T Corp. 6.51% due 9/06/00................................ 300 300
Eastman Kodak Co. 6.55% due 9/18/00......................... 1,500 1,495
Estee Lauder Cos., Inc. 6.48% due 9/20/00................... 1,600 1,595
EW Scripps Co. 6.50% due 9/14/00............................ 900 898
General Electric Capital Corp. 6.65% due 9/01/00............ 1,700 1,700
Heinz (H.J.) Co. 6.50% due 9/06/00.......................... 900 899
John Hancock Capital Corp. 6.48% due 9/15/00................ 1,000 998
Kellogg Co. 6.50% due 9/05/00............................... 200 200
---------
9,583
---------
</TABLE>
---------------------
19
<PAGE> 20
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL AGENCY OBLIGATIONS -- 2.0%
Federal Home Loan Bank Discount Notes 6.42% due 9/27/00..... $ 1,400 $ 1,393
Federal Home Loan Mortgage Discount Notes 6.42% due
9/08/00................................................... 940 939
---------
2,332
---------
TOTAL SHORT-TERM SECURITIES (cost $11,915).................. 11,915
---------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS --
(cost $101,727) 99.4% $112,459
Other assets less liabilities -- 0.6 678
------- ---------
NET ASSETS -- 100.0% $113,137
======= =========
</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 August 31, 2000
(2) Bond issued as part of a unit which includes an equity
component
ADR - American Depository Receipt
CAD - Canadian Dollar
GBP - Great British Pound
See Notes to Financial Statements
---------------------
20
<PAGE> 21
O
---------------------
ANCHOR PATHWAY FUND
HIGH-YIELD BOND SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 89.2% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL EQUIPMENT -- 1.6%
Electronic Components -- 1.6%
Fairchild Semiconductor Corp. 10.38% 2007................... $ 500 $ 511
Flextronics International Ltd. 8.75% 2007................... 250 245
Zilog, Inc., Series B 9.50% 2005............................ 250 228
--------
984
--------
CONSUMER GOODS -- 3.4%
Beverages & Tobacco -- 0.8%
Canandaigua Wine, Inc. 8.75% 2003........................... 500 499
Food & Household Products -- 0.5%
Home Products International, Inc. 9.63% 2008................ 500 310
Health & Personal Care -- 0.0%
Mariner Health Group, Inc. 9.50% 2006*(2)................... 610 6
Recreation & Other Consumer Products -- 2.1%
Horseshoe Gaming Holdings, Series B 8.63% 2009.............. 1,000 970
V2 Finance SA 6.50% 2012*#.................................. 1,101 297
--------
2,082
--------
ENERGY -- 2.2%
Energy Sources -- 1.4%
Clark Oil & Refining Corp. 9.50% 2004....................... 850 771
Clark Refining & Marketing, Inc. 8.38% 2007*................ 150 122
Utilities: Electric, Gas & Water -- 0.8%
AES Drax Holdings Ltd. 10.41% 2020#......................... 250 262
CFW Communications Co. 13.00% 2010*#........................ 250 245
--------
1,400
--------
FINANCE -- 3.2%
Banking -- 0.8%
Fuji JGB Investment Preferred LLC 9.87% 2008#(1)............ 500 487
Financial Services -- 2.4%
DR Structured Finance Corp. 9.35% 2019*..................... 500 410
Salton, Inc. 10.75% 2005*................................... 500 486
William Hill Finance PLC 10.63% 2008........................ (GBP) 407 597
--------
1,980
--------
MATERIALS -- 7.6%
Chemicals -- 0.1%
Key Plastics, Inc. 10.25% 2007*(2).......................... 1,000 90
Forest Products & Paper -- 6.0%
Container Corp. of America 9.75% 2003....................... 1,250 1,252
Delta Beverage Group, Inc. 9.75% 2003*...................... 1,000 1,030
Kappa Beheer NV 10.63% 2009*................................ (EUR) 1,000 914
Packaging Corp. of America 9.63% 2009....................... 500 513
</TABLE>
---------------------
21
<PAGE> 22
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
Metals & Minerals -- 1.5%
Kaiser Aluminum & Chemical Corp. 12.75% 2003................ $ 1,000 $ 920
--------
4,719
--------
MULTI-INDUSTRY -- 2.9%
Multi-industry -- 2.9%
Graham Packaging Co., Series B 8.75% 2008................... 1,500 1,305
South Carolina Holding Corp. 12.00% 2009.................... 250 267
Tekni Plex, Inc. 12.75% 2010*#.............................. 250 252
--------
1,824
--------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.7%
Foreign Government -- 1.7%
Republic of Argentina 11.38% 2017........................... 250 223
United Mexican States 11.38% 2016........................... 700 825
--------
1,048
--------
SERVICES -- 66.6%
Broadcasting & Publishing -- 24.9%
American Media Operations, Inc. 10.25% 2009................. 1,500 1,496
Chancellor Media Corp. 8.75% 2007........................... 1,000 1,020
Charter Communications Holdings 10.00% 2009#................ 500 501
Charter Communications Holdings LLC zero coupon 2011@....... 1,750 1,046
Comcast UK Cable Partners Ltd. zero coupon 2007@............ 2,365 2,217
Cumulus Media, Inc. 10.38% 2008*............................ 1,000 890
Fox Liberty Networks LLC zero coupon 2007@.................. 575 477
Fox Liberty Networks LLC 8.88% 2007......................... 1,000 1,010
Gray Communications Systems, Inc. 10.63% 2006............... 1,250 1,256
Spectrasite Holdings, Inc. zero coupon 2008@................ 750 518
Spectrasite Holdings, Inc. zero coupon 2009@................ 1,500 892
STC Broadcasting, Inc. 11.00% 2007.......................... 1,250 1,238
Sun Media Corp. 9.50% 2007.................................. 1,475 1,475
Telemundo Holdings, Inc. zero coupon 2008@.................. 1,000 710
Transwestern Publishing Co. 9.63% 2007*..................... 750 737
Business & Public Services -- 3.5%
Columbia/HCA Healthcare Corp. 6.91% 2005.................... 500 465
Printpack, Inc. 10.63% 2006................................. 1,500 1,425
Protection One Alarm Monitoring Corp. 13.63% 2005@.......... 400 312
Business Services -- 1.6%
Iron Mountain, Inc. 8.75% 2009.............................. 500 471
Stericycle, Inc. 12.38% 2009................................ 500 520
Cellular & Paging -- 10.7%
Nextel Communications, Inc. zero coupon 2007@............... 500 405
Nextel Communications, Inc. zero coupon 2007@............... 2,250 1,732
Nextel Partners, Inc. zero coupon 2009@..................... 325 227
Nextel Partners, Inc. 11.00% 2010*#......................... 500 499
Omnipoint Corp. 11.50% 2009#................................ 500 559
Pagemart Wireless, Inc. zero coupon 2008@................... 1,000 395
PTC International Finance BV zero coupon 2007@.............. 1,000 730
Telecorp PCS, Inc. 10.63% 2010#............................. 250 259
Voicestream Wireless Corp. zero coupon 2009@................ 1,000 725
Voicestream Wireless Corp. 10.38% 2009...................... 1,056 1,140
Industrial -- 1.4%
Allied Waste NA, Inc., Series B 10.00% 2009................. 1,000 894
Leisure & Tourism -- 6.3%
AMF Bowling Worldwide, Inc., Series B zero coupon 2006@..... 405 57
Boyd Gaming Corp. 9.25% 2003................................ 250 249
</TABLE>
---------------------
22
<PAGE> 23
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Leisure & Tourism (continued)
Boyd Gaming Corp. 9.50% 2007................................ $ 500 $ 480
Carmike Cinemas, Inc. 9.38% 2009(2)......................... 100 22
Florida Panthers Holdings, Inc. 9.88% 2009*................. 750 724
International Game Technology 7.88% 2004.................... 250 243
International Game Technology 8.38% 2009.................... 250 244
Jupiters Ltd. 8.50% 2006.................................... 500 485
Mirage Resorts, Inc. 6.75% 2008............................. 250 227
Premier Parks, Inc. zero coupon 2008@....................... 250 169
Premier Parks, Inc. 9.75% 2007.............................. 500 502
Premier Parks, Inc. 9.75% 2007.............................. 250 238
Station Casinos, Inc. 9.88% 2010#........................... 250 249
Merchandising -- 1.7%
Kmart Corp. 9.78% 2020...................................... 250 207
Levi Strauss & Co. 6.80% 2003............................... 750 615
Penney (J.C.) Co., Inc. 7.38% 2004.......................... 250 226
Telecommunications -- 15.7%
Allegiance Telecom, Inc. zero coupon 2008@.................. 500 355
Allegiance Telecom, Inc. 12.88% 2008........................ 500 530
Clearnet Communications, Inc. zero coupon 2008@............. (CAD) 4,925 2,710
Clearnet Communications, Inc. zero coupon 2007@............. (CAD) 750 450
COLT Telecom Group 7.63% 2008............................... (EUR) 750 301
COLT Telecom Group PLC 8.88% 2007........................... (EUR) 1,250 545
Comunicacion Celular SA zero coupon 2005#@.................. 1,000 770
Crown Castle International Corp. zero coupon 2007@.......... 1,000 773
Crown Castle International Corp. zero coupon 2011@.......... 500 326
Dobson Communications Corp. 10.88% 2010#.................... 250 253
Hyperion Telecommunications, Inc. zero coupon 2003@......... 500 425
Leap Wireless International, Inc. 12.50% 2010............... 750 667
Leap Wireless International, Inc. zero coupon 2010#@........ 500 200
Nextlink Communications, Inc. 9.00% 2008.................... 250 225
Versatel Telecom International NV 11.88% 2009*.............. (EUR) 500 408
Viatel, Inc. 11.25% 2008.................................... (EUR) 1,500 855
Transportation -- 0.8%
Eletson Holdings, Inc. 9.25% 2003*.......................... 500 477
--------
41,448
--------
TOTAL BOND & NOTES (cost $61,692)........................... 55,485
--------
<CAPTION>
COMMON STOCK -- 0.1% SHARES
---------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 0.1%
Banking -- 0.1%
Wilshire Financial Services Group, Inc. (cost $531)......... 51,465 83
--------
<CAPTION>
PREFERRED STOCK -- 2.2%
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES -- 2.2%
Broadcasting & Publishing -- 0.9%
Cumulus Media, Inc. 13.75%(3)............................... 664 545
</TABLE>
---------------------
23
<PAGE> 24
<TABLE>
<CAPTION>
VALUE
PREFERRED STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES (continued)
Telecommunications -- 1.3%
Dobson Communications Corp. 12.25%*(3)...................... 838 $ 785
--------
TOTAL PREFERRED STOCK (cost $1,340)......................... 1,330
--------
<CAPTION>
WARRANTS -- 0.2%+*#
---------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER GOODS -- 0.0%
Recreation & Other Consumer Products -- 0.0%
V2 Music Holdings PLC 4/15/08............................... 2,000 0
--------
SERVICES -- 0.0%
Cellular & Paging -- 0.0%
Globalstar Telecommunications 2/15/04....................... 250 0
Telecommunications -- 0.0%
Comunicacion Celular SA 8/15/03............................. 1,000 0
McCaw International Ltd. 4/15/07............................ 1,000 3
NTL, Inc. 10/14/08.......................................... 712 32
--------
35
--------
OTHER WARRANTS -- 0.2% 110
--------
TOTAL WARRANTS (cost $108).................................. 145
--------
TOTAL INVESTMENT SECURITIES (cost $63,671).................. 57,043
--------
<CAPTION>
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 6.3% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 2.4%
General Electric Capital Corp. 6.65% due 9/01/00............ $ 1,500 1,500
--------
FEDERAL AGENCY OBLIGATIONS -- 3.9%
Federal Home Loan Mortgage Discount Notes 6.42% due
9/05/00................................................... 1,700 1,699
Federal Home Loan Mortgage Discount Notes 6.45% due
9/26/00................................................... 400 398
Federal Home Loan Mortgage Discount Notes 6.45% due
9/07/00................................................... 350 350
--------
TOTAL SHORT-TERM SECURITIES (cost $3,947)................... 3,947
--------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS --
(cost $67,618) 98.0% $60,990
Other assets less liabilities -- 2.0 1,238
------- --------
NET ASSETS -- 100.0% $62,228
======= ========
</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 August 31, 2000
(2) Bond in default
(3) PIK ("Payment-in-Kind") payment made with additional shares in
lieu of cash
CAD - Canadian Dollar
EUR - Euro Dollar
---------------------
24
<PAGE> 25
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>
<CAPTION>
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EUR 1,350,000 USD 1,254,960 10/24/00 $53
EUR 323,000 USD 296,353 11/17/00 9
EUR 589,000 USD 531,484 11/19/00 6
GBP 205,000 USD 309,970 09/12/00 12
GBP 102,000 USD 153,097 09/19/00 5
GBP 92,000 USD 139,339 09/22/00 6
---
Net Unrealized Appreciation............... $91
===
</TABLE>
-----------------------------
<TABLE>
<S> <C>
EUR - Euro Dollar
GBP - Great British Pound
USD - United States Dollar
</TABLE>
See Notes to Financial Statements
---------------------
25
<PAGE> 26
O
---------------------
ANCHOR PATHWAY FUND
U.S. GOVERNMENT/
AAA RATED SECURITIES INVESTMENT PORTFOLIO -- AUGUST 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES -- 92.3% (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
---------------------------------------------------------------------------------------------
<S> <C> <C>
<CAPTION>
<S> <C> <C>
ASSET-BACKED SECURITIES -- 16.9%++
Illinois Power Special Purpose Trust, Series 1998-1, Class
A7 5.65% 2010............................................. $ 500 $ 458
Nomura Asset Securities, Series 1998-D6, Class A1A 6.28%
2028...................................................... 2,459 2,391
NPF XII, Inc., Series 1999-2, Class A 7.05% 2003*#.......... 1,125 1,118
Peco Energy Transport Trust, Series 1999-A, Class A7 6.13%
2009...................................................... 750 711
PP&L Transition Bond Co., LLC, Series 1999-1, Class A8 7.15%
2009...................................................... 725 731
Security National Mortgage Loan Trust, Series 2000-1, Class
A2 8.75% 2024*#........................................... 300 297
Structured Asset Securities Corp., Series 1998-RF1, Class 1
8.67% 2027#(1)............................................ 1,249 1,279
Structured Asset Securities Corp., Series 1998-RF2, Class A
8.54% 2027#(1)............................................ 2,479 2,532
-------
9,517
-------
FEDERAL AGENCY OBLIGATIONS -- 33.5%++
Federal Home Loan Mortgage Corp. 5.13% 2008................. 1,450 1,292
Federal Home Loan Mortgage Corp. 7.00% 2015................. 252 249
Federal Home Loan Mortgage Corp. 8.00% 2012................. 221 223
Federal Home Loan Mortgage Corp. 9.00% 2021................. 45 47
Federal Home Loan Mortgage Corp. 9.50% 2016................. 344 355
Federal Home Loan Mortgage Corp. 11.88% 2013................ 6 7
Federal Home Loan Mortgage Corp. 12.50% 2013................ 47 50
Federal National Mortgage Association 6.00% 2008-2013....... 615 585
Federal National Mortgage Association 6.25% 2029............ 200 185
Federal National Mortgage Association 6.50% 2011............ 1,502 1,473
Federal National Mortgage Association 6.63% 2009............ 1,050 1,031
Federal National Mortgage Association 6.85% 2026............ 1,344 1,202
Federal National Mortgage Association 11.50% 2029........... 166 182
Government National Mortgage Association 6.50% 2013-2028.... 3,562 3,429
Government National Mortgage Association 7.00% 2023-2029.... 3,223 3,168
Government National Mortgage Association 7.50% 2022-2023.... 1,757 1,762
Government National Mortgage Association 8.00% 2017-2023.... 1,086 1,108
Government National Mortgage Association 8.50% 2016......... 131 136
Government National Mortgage Association 9.00% 2016-2017.... 341 357
Government National Mortgage Association 9.50% 2009-2017.... 1,808 1,886
Government National Mortgage Association 10.50% 2016........ 72 78
-------
18,805
-------
MORTGAGE-RELATED SECURITIES -- 17.6%++
Chase Commercial Mortgage Securities Corp., Series 1998-2,
Class A2 6.39% 2008....................................... 250 237
DLJ Mortgage Acceptance Corp., Series 1996-CF2, Class A1B
7.29% 2021#............................................... 3,800 3,807
GMAC Commercial Mortgage Security, Inc., Series 1997-C1,
Class A3 6.87% 2007....................................... 250 244
Merrill Lynch Mortgage Investors, Inc., Series 1995-C3,
Class A2 6.83% 2000(1).................................... 500 496
Merrill Lynch Mortgage Investors, Inc., Series 1995-C3,
Class A3 7.07% 2000(1).................................... 500 497
Morgan (J.P.) Commercial Mortgage Finance Corp., Series
1995-C1, Class A2 7.42% 2010(1)........................... 1,000 1,000
Morgan Stanley Capital I, Inc., Series 1998-HF2, Class A2
6.48% 2030................................................ 500 478
Morgan Stanley Capital I, Inc., Series 1999-FNV1, Class A2
6.53% 2031................................................ 750 713
Mortgage Capital Funding, Inc., Series 1998-MC1, Class A1
6.42% 2007................................................ 1,259 1,227
</TABLE>
---------------------
26
<PAGE> 27
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-RELATED SECURITIES (continued)
Norwest Asset Securities Corp., Series 1998-31, Class A1
6.25% 2014................................................ $ 264 $ 253
Ocwen Residential MBS Corp., Series 1998-R1, Class AWAC
4.84% 2000*#(1)........................................... 925 912
-------
9,864
-------
MUNICIPAL BONDS -- 1.6%
Puerto Rico Public Finance Corp., Series 1999-1, Class A
6.15% 2008*............................................... 927 883
-------
UNITED STATES TREASURY -- 22.7%
5.25% Bonds 2029............................................ 2,400 2,211
8.75% Bonds 2017............................................ 1,400 1,809
8.88% Bonds 2017............................................ 5,325 6,966
5.50% Notes 2009............................................ 1,850 1,798
-------
12,784
-------
TOTAL INVESTMENT SECURITIES (cost $52,344).................. 51,853
-------
SHORT-TERM SECURITIES -- 7.9%
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 4.7%
Bell Atlantic Financial Services 6.50% due 9/05/00.......... 700 700
General Electric Capital Corp. 6.65% due 9/01/00............ 1,230 1,230
Heinz (H.J.) Co. 6.50% due 9/06/00.......................... 700 699
-------
2,629
-------
FEDERAL AGENCY OBLIGATIONS -- 3.2%
Federal Home Loan Bank Discount Notes 6.42% due 9/27/00..... 700 697
Federal Home Loan Mortgage Discount Notes 6.41% due
9/14/00................................................... 621 619
Federal Home Loan Mortgage Discount Notes 6.42% due
9/05/00................................................... 500 500
-------
1,816
-------
TOTAL SHORT-TERM SECURITIES (cost $4,445)................... 4,445
-------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS --
(cost $56,789) 100.2% $56,298
Liabilities in excess of other assets -- (0.2) (122)
------- --------
NET ASSETS -- 100.0% $56,176
======= ========
</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
(1) Variable rate security; rate as of August 31, 2000
See Notes to Financial Statements
---------------------
27
<PAGE> 28
O
---------------------
ANCHOR PATHWAY FUND
CASH MANAGEMENT SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 102.3% (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
---------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 63.3%
Alcoa, Inc. 6.50% due 9/06/00............................... $1,050 $ 1,049
American Express Credit Corp. 6.48% due 10/02/00............ 1,100 1,094
AT&T Corp. 6.47% due 9/05/00................................ 1,600 1,599
Bell Atlantic Financial Services 6.50% due 9/08/00.......... 1,500 1,498
BellSouth Capital Funding Corp. 6.47% due 10/13/00.......... 1,300 1,290
Ciesco L.P. 6.48% due 9/19/00............................... 1,600 1,595
Colgate-Palmolive Co. 6.47% due 9/27/00..................... 1,000 995
du Pont (E.I.) de Nemours & Co. 6.47% due 9/18/00........... 1,400 1,396
Eastman Kodak Co. 6.50% due 9/18/00......................... 1,500 1,495
Emerson Electric Co. 6.50% due 9/05/00...................... 1,200 1,199
Estee Lauder Cos., Inc. 6.54% due 9/05/00................... 1,000 999
Ford Motor Credit Co. 6.49% due 9/08/00..................... 1,300 1,298
General Electric Capital Corp. 6.65% due 9/01/00............ 970 970
General Motors Acceptance Corp. 6.48% due 10/11/00.......... 1,500 1,489
Golden Peanut Co. 6.52% due 10/02/00........................ 1,500 1,492
Heinz (H.J.) Co. 6.50% due 9/06/00.......................... 1,400 1,399
Hewlett Packard Co. 6.47% due 9/13/00....................... 1,000 998
Kimberly-Clark Corp. 6.47% due 10/13/00..................... 1,700 1,687
Lucent Technologies, Inc. 6.48% due 9/05/00................. 1,500 1,499
Merck & Co., Inc. 6.47% due 9/20/00......................... 1,200 1,196
Motiva Enterprises LLC 6.50% due 9/11/00.................... 1,500 1,497
Park Avenue Recreation Corp. 6.50% due 9/08/00.............. 1,700 1,698
Pharmacia Corp. 6.49% due 10/10/00.......................... 1,700 1,688
Preferred Receivables Funding Corp. 6.52% due 9/07/00....... 1,300 1,299
Procter & Gamble Co. 6.48% due 9/14/00...................... 1,200 1,197
Schering Corp. 6.48% due 9/27/00............................ 500 498
--------
TOTAL CORPORATE SHORT-TERM NOTES (cost $34,114)............. 34,114
--------
FEDERAL AGENCY OBLIGATIONS -- 39.0%
Federal Home Loan Bank Discount Notes 6.38% due 9/15/00..... 2,600 2,594
Federal Home Loan Bank Discount Notes 6.41% due 9/13/00..... 2,300 2,295
Federal Home Loan Bank Discount Notes 6.46% due 9/22/00..... 2,000 1,992
Federal Home Loan Mortgage Corp. 6.41% due 10/10/00......... 800 795
Federal Home Loan Mortgage Discount Notes 6.40% due
9/05/00................................................... 4,000 3,997
Federal Home Loan Mortgage Discount Notes 6.41% due
9/14/00................................................... 2,683 2,677
Federal Home Loan Mortgage Discount Notes 6.41% due
10/03/00.................................................. 4,000 3,977
Federal Home Loan Mortgage Discount Notes 6.42% due
9/12/00................................................... 1,000 998
Federal National Mortgage Association Discount Notes 6.47%
due 9/25/00............................................... 1,200 1,195
Federal National Mortgage Association Discount Notes 6.48%
due 9/29/00............................................... 500 497
--------
TOTAL FEDERAL AGENCY OBLIGATIONS (cost $21,017)............. 21,017
--------
TOTAL SHORT-TERM SECURITIES (cost $55,131).................. 55,131
--------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS --
(cost $55,131) 102.3% $55,131
Liabilities in excess of other assets -- (2.3) (1,227)
------- --------
NET ASSETS -- 100.0% $53,904
======= ========
</TABLE>
-----------------------------
See Notes to Financial Statements
---------------------
28
<PAGE> 29
O
---------------------
ANCHOR PATHWAY FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000 (UNAUDITED)
(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*........... $1,132,698 $196,680 $660,581 $100,544 $57,043 $51,853
Short-term securities*.................... 142,664 56,866 144,496 11,915 3,947 4,445
Cash...................................... 4 95 69 55 22 6
Foreign cash.............................. -- 3,273 -- -- -- --
Receivables for --
Fund shares sold........................ 1,151 197 1,320 -- 1 --
Sales of investments.................... 912 -- 4,248 -- -- 742
Dividends and accrued interest.......... 502 355 1,819 726 1,237 412
Foreign currency contracts.............. 60 -- -- -- -- --
Prepaid expenses.......................... 14 3 10 1 2 1
Unrealized appreciation on forward foreign
currency contracts...................... -- -- -- -- 91 --
----------------------------------------------------------------------------------
1,278,005 257,469 812,543 113,241 62,343 57,459
----------------------------------------------------------------------------------
LIABILITIES:
Payables for --
Purchases of investments................ 2,194 -- -- -- -- 1,188
Fund shares redeemed.................... 1,467 318 299 36 65 47
Advisory fees........................... 315 131 208 30 17 16
Management fees......................... 210 52 139 20 12 11
Foreign currency contracts.............. 60 -- -- -- -- --
Other accrued expenses.................... 31 66 30 18 21 21
----------------------------------------------------------------------------------
4,277 567 676 104 115 1,283
----------------------------------------------------------------------------------
NET ASSETS................................ $1,273,728 $256,902 $811,867 $113,137 $62,228 $56,176
==================================================================================
Shares of beneficial interest outstanding
(unlimited shares authorized)........... 19,435 12,669 26,483 8,015 5,924 5,229
Net asset value per share................. $ 65.54 $ 20.28 $ 30.66 $ 14.12 $ 10.50 $ 10.74
==================================================================================
COMPOSITION OF NET ASSETS:
Capital paid in........................... $ 345,521 $107,651 $481,965 $ 76,107 $67,748 $53,554
Accumulated undistributed net investment
income.................................. 5,114 2,391 28,171 6,475 11,268 5,980
Accumulated undistributed net realized
gain (loss) on investments, futures,
options and foreign currency............ 376,503 82,615 234,928 19,823 (10,249) (2,867)
Unrealized appreciation/depreciation on
investments............................. 546,590 64,287 66,803 10,732 (6,628) (491)
Unrealized foreign exchange gain (loss) on
other assets and liabilities............ -- (42) -- -- 89 --
----------------------------------------------------------------------------------
Net Assets............................ $1,273,728 $256,902 $811,867 $113,137 $62,228 $56,176
==================================================================================
---------------
* Cost
Investment Securities................... $ 586,108 $132,393 $593,778 $ 89,812 $63,671 $52,344
==================================================================================
Short-term Securities................... $ 142,664 $ 56,866 $144,496 $ 11,915 $ 3,947 $ 4,445
==================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
ASSETS:
Investment securities at value*........... $ --
Short-term securities*.................... 55,131
Cash...................................... 6
Foreign cash.............................. --
Receivables for --
Fund shares sold........................ 556
Sales of investments.................... --
Dividends and accrued interest.......... --
Foreign currency contracts.............. --
Prepaid expenses.......................... 1
Unrealized appreciation on forward foreign
currency contracts...................... --
----------
55,694
----------
LIABILITIES:
Payables for --
Purchases of investments................ --
Fund shares redeemed.................... 1,740
Advisory fees........................... 16
Management fees......................... 10
Foreign currency contracts.............. --
Other accrued expenses.................... 24
----------
1,790
----------
NET ASSETS................................ $53,904
==========
Shares of beneficial interest outstanding
(unlimited shares authorized)........... 4,730
Net asset value per share................. $ 11.40
==========
COMPOSITION OF NET ASSETS:
Capital paid in........................... $48,704
Accumulated undistributed net investment
income.................................. 5,202
Accumulated undistributed net realized
gain (loss) on investments, futures,
options and foreign currency............ (2)
Unrealized appreciation/depreciation on
investments............................. --
Unrealized foreign exchange gain (loss) on
other assets and liabilities............ --
----------
Net Assets............................ $53,904
==========
---------------
* Cost
Investment Securities................... $ --
==========
Short-term Securities................... $55,131
==========
</TABLE>
See Notes to Financial Statements
---------------------
29
<PAGE> 30
O
---------------------
ANCHOR PATHWAY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 2000 (UNAUDITED)
(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................................ $ 4,411 $ 1,655 $ 4,784 $ 1,641 $ 3,340 $1,919
Dividends............................... 2,071 1,401 7,849 795 -- --
--------------------------------------------------------------------------------
Total income*.................... 6,482 3,056 12,633 2,436 3,340 1,919
--------------------------------------------------------------------------------
Expenses:
Advisory fees........................... 1,890 826 1,242 181 106 96
Management fees......................... 1,260 332 828 121 70 64
Custodian fees.......................... 220 180 126 29 30 29
Auditing and legal fees................. 14 16 12 11 13 13
Reports to investors.................... 7 3 7 1 1 --
Trustees' fees.......................... 6 1 4 1 -- --
Other expenses.......................... 7 1 7 1 1 --
--------------------------------------------------------------------------------
Total expenses before custody
credits........................ 3,404 1,359 2,226 345 221 202
Custody credits earned on cash
balances....................... (3) (3) (1) (1) (1) --
--------------------------------------------------------------------------------
Net investment income..................... 3,081 1,700 10,408 2,092 3,120 1,717
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments... 114,856 57,612 46,001 5,386 (1,056) (207)
Net realized foreign exchange gain (loss)
on other assets and liabilities......... (11) (108) (5) (1) 257 --
Change in unrealized appreciation/
depreciation of investments............. (22,905) (77,986) 35,793 3,890 161 1,446
Change in unrealized foreign exchange gain
(loss) on other assets and
liabilities............................. 1 (30) -- -- (19) --
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments, foreign currency and other
assets and liabilities.................. 91,941 (20,512) 81,789 9,275 (657) 1,239
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............... $ 95,022 $(18,812) $92,197 $11,367 $ 2,463 $2,956
================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
NET INVESTMENT INCOME:
Income:
Interest................................ $1,919
Dividends............................... --
----------
Total income*.................... 1,919
----------
Expenses:
Advisory fees........................... 101
Management fees......................... 67
Custodian fees.......................... 30
Auditing and legal fees................. 13
Reports to investors.................... --
Trustees' fees.......................... --
Other expenses.......................... 1
----------
Total expenses before custody
credits........................ 212
Custody credits earned on cash
balances....................... (2)
----------
Net investment income..................... 1,709
----------
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............... $1,708
==========
</TABLE>
---------------
* Net of foreign witholding taxes of $28; $172; $117; and $4 on Growth,
International, Growth-Income and Asset Allocation Series, respectively.
See Notes to Financial Statements
---------------------
30
<PAGE> 31
O
---------------------
ANCHOR PATHWAY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED AUGUST 31, 2000 (UNAUDITED)
(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..................... $ 3,081 $ 1,700 $ 10,408 $ 2,092 $ 3,120 $ 1,717
Net realized gain (loss) on investments... 114,856 57,612 46,001 5,386 (1,056) (207)
Net realized foreign exchange gain (loss)
on other assets and liabilities......... (11) (108) (5) (1) 257 --
Change in unrealized appreciation/
depreciation of investments............. (22,905) (77,986) 35,793 3,890 161 1,446
Change in unrealized foreign exchange gain
(loss) on other assets and
liabilities............................. 1 (30) -- -- (19) --
----------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations............... 95,022 (18,812) 92,197 11,367 2,463 2,956
----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 73,013 13,411 19,512 2,498 4,217 2,530
Cost of shares repurchased................ (146,240) (36,671) (87,782) (12,202) (12,081) (9,057)
----------------------------------------------------------------------------------
Net decrease in net assets resulting from
capital share transactions.............. (73,227) (23,260) (68,270) (9,704) (7,864) (6,527)
----------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN
NET ASSETS.......................... 21,795 (42,072) 23,927 1,663 (5,401) (3,571)
NET ASSETS:
Beginning of period....................... 1,251,933 298,974 787,940 111,474 67,629 59,747
----------------------------------------------------------------------------------
End of period............................. $1,273,728 $256,902 $811,867 $113,137 $ 62,228 $56,176
==================================================================================
---------------
Accumulated undistributed net investment
income.................................. $ 5,114 $ 2,391 $ 28,171 $ 6,475 $ 11,268 $ 5,980
==================================================================================
Shares issued and repurchased:
Sold.................................... 1,177 640 659 183 422 243
Repurchased............................. (2,371) (1,762) (2,975) (895) (1,198) (872)
----------------------------------------------------------------------------------
Net decrease.............................. (1,194) (1,122) (2,316) (712) (776) (629)
==================================================================================
<CAPTION>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
<S> <C>
OPERATIONS:
Net investment income..................... $ 1,709
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............... 1,708
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 66,527
Cost of shares repurchased................ (84,024)
----------
Net decrease in net assets resulting from
capital share transactions.............. (17,497)
----------
TOTAL INCREASE (DECREASE) IN
NET ASSETS.......................... (15,789)
NET ASSETS:
Beginning of period....................... 69,693
----------
End of period............................. $ 53,904
==========
---------------
Accumulated undistributed net investment
income.................................. $ 5,202
==========
Shares issued and repurchased:
Sold.................................... 5,929
Repurchased............................. (7,490)
----------
Net decrease.............................. (1,561)
==========
</TABLE>
See Notes to Financial Statements
---------------------
31
<PAGE> 32
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
---------------------
32
<PAGE> 33
O
---------------------
ANCHOR PATHWAY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
---------------------
33
<PAGE> 34
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.
---------------------
34
<PAGE> 35
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 August 31, 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........................................ $587,571 $(41,005) $546,566 $728,796 $--
International Series................................. 72,384 (8,097) 64,287 189,259 --
Growth-Income Series................................. 164,969 (98,084) 66,885 738,192 --
Asset Allocation Series.............................. 22,034 (11,302) 10,732 101,727 --
High-Yield Bond Series*.............................. 1,009 (7,637) (6,628) 67,618 8,406
U.S. Government/AAA-Rated Securities Series*......... 665 (1,059) (394) 56,692 1,945
Cash Management Series*.............................. -- -- -- 55,131 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 six months ended
August 31, 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............ $197,930 $47,464 $113,951 $10,636 $ 9,440
Sales of portfolio securities................ 242,486 83,515 176,752 20,361 12,517
U.S. government securities excluded above
were as follows:
Purchases of U.S. government securities...... -- -- -- -- --
Sales of U.S. government securities.......... -- -- -- -- 2,201
<CAPTION>
U.S.
GOVERNMENT/
AAA-RATED CASH
SECURITIES MANAGEMENT
SERIES SERIES
<S> <C> <C>
------------------------
----------------
Purchases of portfolio securities............ $ 736 $--
Sales of portfolio securities................ 3,329 --
U.S. government securities excluded above
were as follows:
Purchases of U.S. government securities...... 15,545 --
Sales of U.S. government securities.......... 17,715 --
</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-Income Series........................................ $2
</TABLE>
---------------------
35
<PAGE> 36
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
8/31/00(1) 60.69 0.15 4.70 4.85 -- -- 65.54 7.99
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
8/31/00(1) 21.68 0.13 (1.53) (1.40) -- -- 20.28 (6.46)
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
8/31/00(1) 27.36 0.38 2.92 3.30 -- -- 30.66 12.06
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
8/31/00(1) 12.77 0.25 1.10 1.35 -- -- 14.12 10.57
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)
8/31/00(1) 10.09 0.49 (0.08) 0.41 -- -- 10.50 4.06
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
8/31/00(1) 10.20 0.31 0.23 0.54 -- -- 10.74 5.29
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
8/31/00(1) 11.08 0.31 0.01 0.32 -- -- 11.40 2.89
<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
8/31/00(1) 1,273,728 0.54+ 0.49+ 17.86
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
8/31/00(1) 256,902 0.98+ 1.23+ 21.69
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
8/31/00(1) 811,867 0.54+ 2.54+ 17.23
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
8/31/00(1) 113,137 0.60+ 3.65+ 10.33
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
8/31/00(1) 62,228 0.68+ 10.37+ 15.90
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
8/31/00(1) 56,176 0.70+ 5.93+ 30.89
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 --
8/31/00(1) 53,904 0.69+ 5.60+ --
</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
(1) Unaudited
See Notes to Financial Statements
---------------------
36
