UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5157
---------------------------------------------
Anchor Pathway Fund
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311
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(Address of principal executive offices) (Zip code)
Robert M. Zakem, Esq.
Senior Vice President & General Counsel
AIG SunAmerica Asset Management Corp.
Harborside Financial Center,
3200 Plaza 5
Jersey City, NJ 07311
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (201) 324-6363
----------------------------
Date of fiscal year end: February 28
-------------------------
Date of reporting period: August 31, 2003
------------------------
Item 1. Reports to Shareholders
Anchor Pathyway Fund, Semiannual Report at August 31, 2003.
LOGO
ANCHOR PATHWAY FUND
- - SEMIANNUAL REPORT - AUGUST 31, 2003
--------------------------------------------------
AMERICAN
PATHWAY II
VARIABLE ANNUITY
TABLE OF CONTENTS
<Table>
SHAREHOLDER LETTER.......................................... 1
PORTFOLIO INFORMATION
Growth Series.......................................... 2
International Series................................... 5
Growth -- Income Series................................ 8
Asset Allocation Series................................ 13
High-Yield Bond Series................................. 17
U.S. Government/AAA-Rated Securities Series............ 23
Cash Management Series................................. 27
STATEMENT OF ASSETS AND LIABILITIES......................... 29
STATEMENT OF OPERATIONS..................................... 30
STATEMENT OF CHANGES IN NET ASSETS.......................... 31
NOTES TO FINANCIAL STATEMENTS............................... 33
FINANCIAL HIGHLIGHTS........................................ 37
TRUSTEE INFORMATION......................................... 38
</Table>
- ---------------------
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 contains the investment information and the financial
statements of the Anchor Pathway Fund series for the reporting
period ended August 31, 2003. Capital Research and Management
Company (CRMC) is the investment adviser to the Anchor Pathway
Fund.
If you have any questions regarding your variable annuity,
please contact your investment representative, or you may
contact us directly at 1-800-445-SUN2.
Thank you for the confidence you place in us with your
retirement assets, and we look forward to reporting to you once
again in six months.
Sincerely,
/s/ JAY S. WINTROB
Jay S. Wintrob
Chief Executive Officer
AIG SunAmerica Life Assurance Company
First SunAmerica Life Insurance Company
October 9, 2003
----------------------------------
Note: Annuities are long-term investment vehicles designed for
retirement purposes. Early withdrawal may be subject to
withdrawal charges and if taken prior to age 59 1/2, a 10%
federal tax penalty may apply. 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 that
concentrate on one economic sector or geographic region are
generally subject to greater volatility than more diverse
investments. Technology companies may be subject to additional
risks. They may be affected by short product cycles, aggressive
pricing of products and services, competition from new market
entrants and obsolescence of existing technology. As a result,
this portfolio's returns may be considerably more volatile than
a fund that does not invest in technology companies.
International investing may involve special risks, such as
foreign taxation, currency risks, risks associated with possible
differences in financial standards and other monetary and
political risks associated with future political and economic
developments. Investments in high-yield bonds have a higher
degree of risk than investment in investment grade bonds.
Changes in economic conditions or other circumstances may
adversely affect a high-yield bond issuer's ability to make
principal and interest payments. Money market instruments
generally offer stability and income, but an investment in these
securities, like investments in other portfolios, are not
guaranteed by the U.S. government or any other federal
government entity.
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ANCHOR PATHWAY FUND
GROWTH SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2003
(UNAUDITED)
<Table>
<Caption>
VALUE
COMMON STOCK -- 84.6% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 16.8%
Aerospace & Military Technology -- 1.9%
Northrop Grumman Corp. ..................................... 25,000 $ 2,387
Raytheon Co. ............................................... 246,000 7,887
Data Processing & Reproduction -- 1.7%
Microsoft Corp. +........................................... 230,000 6,100
Peoplesoft, Inc. +.......................................... 175,000 3,167
Electronic Components -- 13.2%
Altera Corp. +.............................................. 195,000 4,376
Analog Devices, Inc. +...................................... 375,000 15,375
Applied Materials, Inc. +................................... 310,000 6,696
Flextronics International, Ltd. +........................... 455,000 6,138
General Electric Co. ....................................... 70,000 2,070
Texas Instruments, Inc. .................................... 1,000,000 23,850
Tyco International, Ltd. ................................... 325,000 6,688
Xilinx, Inc. +.............................................. 200,000 6,168
---------
90,902
---------
CONSUMER GOODS -- 19.6%
Beverages & Tobacco -- 8.8%
Altria Group, Inc. ......................................... 690,000 28,442
Anheuser Busch Cos., Inc. .................................. 150,000 7,731
PepsiCo, Inc. .............................................. 250,000 11,135
Food & Beverage -- 2.9%
Performance Food Group Co. +................................ 400,000 15,684
Health & Personal Care -- 3.4%
AstraZeneca, PLC............................................ 230,000 9,131
Forest Laboratories, Inc. +................................. 200,000 9,400
Retail -- 4.5%
Kohl's Corp. +.............................................. 50,000 3,163
Lowe's Cos, Inc. ........................................... 100,000 5,486
Michaels Stores, Inc. +..................................... 170,000 7,726
Target Corp. ............................................... 200,000 8,120
---------
106,018
---------
ENERGY -- 3.9%
Energy Sources
EOG Resources, Inc. ........................................ 75,000 3,180
Murphy Oil Corp. ........................................... 130,000 7,505
Pogo Producing Co. ......................................... 227,500 10,456
---------
21,141
---------
FINANCE -- 9.0%
Financial Services -- 1.8%
Fannie Mae.................................................. 67,000 4,341
Paychex, Inc. .............................................. 150,000 5,400
</Table>
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2
<Table>
<Caption>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
FINANCE (continued)
Insurance -- 7.2%
Arthur J. Gallagher & Co. .................................. 270,000 $ 7,290
Berkshire Hathaway, Inc., Class A +......................... 100 7,578
Progressive Corp. .......................................... 200,000 14,148
XL Capital, Ltd., Class A................................... 130,000 9,847
---------
48,604
---------
SERVICES -- 34.2%
Broadcasting & Publishing -- 12.3%
AOL Time Warner, Inc. +..................................... 1,346,250 22,025
Clear Channel Communications, Inc. +........................ 133,800 6,037
Comcast Corp., Class A +.................................... 29,115 866
Comcast Corp., Special Class A +............................ 450,000 12,762
Viacom, Inc., Class B +..................................... 545,000 24,525
Business & Public Services -- 4.6%
Allied Waste Industries, Inc. +............................. 350,000 3,871
Ebay, Inc. +................................................ 110,000 6,092
FedEx Corp. ................................................ 100,000 6,710
Yahoo!, Inc. +.............................................. 250,000 8,350
Cellular & Paging -- 3.0%
AT&T Wireless Services, Inc. +.............................. 1,340,000 11,551
Sprint Corp.-PCS Group +.................................... 437,100 2,269
Vodafone Group, PLC......................................... 452,000 825
Vodafone Group, PLC ADR..................................... 85,000 1,555
Hotels & Restaurants -- 0.2%
Harrahs Entertainment, Inc. ................................ 20,000 828
Leisure & Tourism -- 7.4%
Interactive Corp. .......................................... 753,000 27,868
Sabre Holdings Corp., Class A +............................. 166,209 3,760
Starbucks Corp. +........................................... 300,000 8,532
Telecommunications -- 2.6%
Cisco Systems, Inc. +....................................... 300,000 5,745
Telefonos de Mexico SA de CV ADR............................ 270,000 8,184
Transportation: Airlines -- 4.1%
Ryanair Holdgs, PLC......................................... 125,000 5,286
Southwest Airlines Co....................................... 1,000,000 17,090
---------
184,731
---------
OTHER COMMON STOCK -- 1.1%.................................. 5,875
---------
TOTAL COMMON STOCK (cost $332,742).......................... 457,271
---------
<Caption>
PREFERRED STOCK -- 3.8%
---------------------------------------------------------------------------------------------
SERVICES -- 3.8%
Broadcasting & Publishing -- 3.8%
News Corp., Ltd. ADR 0.79% (cost $11,907)................... 715,000 20,678
---------
TOTAL INVESTMENT SECURITIES (cost $344,649)................. 477,949
---------
</Table>
---------------------
3
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 8.9% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 7.1%
CAFCO, LLC 1.05% due 9/23/03................................ $ 4,000 $ 3,997
Du Pont (E.I.) de Nemours and Co. 1.03% due 10/02/03........ 5,000 4,995
General Electric Capital Corp. 1.09% due 9/02/03............ 5,700 5,700
Golden Peanut Co. 1.02% due 9/03/03......................... 5,900 5,900
International Business Machines Corp. 1.00% due 9/02/03..... 4,300 4,300
Preferred Receivables Funding 1.05% due 9/22/03............. 1,700 1,699
Receivables Capital Corp. 1.06% due 9/15/03................. 4,000 3,998
Verizon Network Fund 1.03% due 9/29/03...................... 7,800 7,794
---------
TOTAL CORPORATE SHORT-TERM NOTES (cost $38,383)............. 38,383
---------
U.S. GOVERNMENT & AGENCIES -- 0.6%
Federal Home Loan Bank Disc. Notes 0.93% due 9/05/03 (cost
$3,500)................................................... 3,500 3,500
---------
UNITED STATES TREASURY -- 1.2%
United States Treasury Bills 0.91% due 10/02/03 (cost
$6,295)................................................... 6,300 6,295
---------
TOTAL SHORT-TERM SECURITIES (cost $48,178).................. 48,178
---------
</Table>
<Table>
TOTAL INVESTMENTS --
(cost $392,827) 97.3% $526,127
Other assets less liabilities -- 2.7 14,621
------- ---------
NET ASSETS -- 100.0% $540,748
======= =========
</Table>
-----------------------------
+ Non-income producing security
ADR -- American Depository Receipt
See Notes to Financial Statements.
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ANCHOR PATHWAY FUND
INTERNATIONAL SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2003
(UNAUDITED)
<Table>
<Caption>
VALUE
COMMON STOCK -- 87.4% SHARES (IN THOUSANDS)
-----------------------------------------------------------------------------------------
AUSTRALIA -- 9.3%
Foster's Group, Ltd. (Consumer Goods)....................... 1,158,046 $ 3,414
News Corp., Ltd. ADR (Services)............................. 100,000 3,435
Qantas Airways, Ltd. (Services)............................. 1,450,000 3,051
---------
9,900
---------
BELGIUM -- 2.3%
Groupe Bruxelles Lambert SA (Finance)....................... 54,000 2,474
---------
BRAZIL -- 1.3%
Petroleo Brasileiro SA ADR (Energy)......................... 62,500 1,381
---------
DENMARK -- 1.5%
Novo Nordisk A/S, Class B (Consumer Goods).................. 46,000 1,635
---------
FINLAND -- 4.2%
UPM-Kymmene Oyj (Materials)................................. 246,000 4,462
---------
FRANCE -- 3.5%
Sanofi-Synthelabo SA (Consumer Goods)....................... 45,000 2,533
Vivendi Universal SA (Services)............................. 70,000 1,178
---------
3,711
---------
GERMANY -- 4.3%
Deutsche Bank AG (Finance) +................................ 32,000 1,852
Deutsche Telekom AG (Services).............................. 187,000 2,672
---------
4,524
---------
HONG KONG -- 1.0%
Hang Lung Group, Ltd (Housing).............................. 1,075,000 1,103
---------
ITALY -- 2.6%
ENI-Ente Nazionale Idrocarburi, SpA (Energy)................ 180,000 2,723
---------
JAPAN -- 19.7%
Canon, Inc. (Consumer Goods)................................ 28,000 1,346
Daito Trust Construction Co., Ltd. (Home Building & Real
Estate)................................................... 40,000 1,076
Hirose Electric Co., Ltd. (Capital Equipment)............... 27,300 2,922
Honda Motor Co., Ltd. (Consumer Goods)...................... 23,500 957
Hoya Corp. (Capital Equipment).............................. 8,400 643
KDDI Corp. (Services)....................................... 145 742
Mitsubishi Estate Co., Ltd. (Housing)....................... 267,000 2,393
NEC Corp. (Capital Equipment)............................... 96,000 716
Nitto Denko Corp. (Materials)............................... 38,000 1,677
Rohm Co., Ltd. (Capital Equipment).......................... 23,000 3,004
Shionogi & Co., Ltd. (Consumer Goods)....................... 140,000 2,059
TonenGeneral Sekiyu K.K. (Energy)........................... 300,000 2,041
Toyota Motor Corp. (Consumer Goods)......................... 47,000 1,297
---------
20,873
---------
</Table>
---------------------
5
<Table>
<Caption>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
-----------------------------------------------------------------------------------------
MEXICO -- 1.4%
Grupo Televisa SA GDR (Services) +.......................... 35,000 $ 1,312
Wal-Mart de Mexico SA de CV, Series C (Consumer Services)... 659 2
Wal-Mart de Mexico SA de CV, Series V (Consumer Services)... 49,461 135
---------
1,449
---------
NETHERLANDS -- 13.2%
Abn Amro Holdings NV (Finance).............................. 115,000 2,017
ASML Holding NV (Capital Equipment) +....................... 100,000 1,578
Koninklijke KPN NV (Services) +............................. 374,000 2,594
Reed Elsevier NV (Finance).................................. 175,000 1,932
Unilever NV (Consumer Goods)................................ 31,000 1,735
VNU NV (Services)........................................... 135,359 4,211
---------
14,067
---------
NORWAY -- 2.9%
Orkla ASA (Multi-industry).................................. 160,000 3,044
---------
PHILIPPINES -- 0.3%
Philippine Long Distance Telephone Co. (Services) +......... 35,000 341
---------
SINGAPORE -- 1.4%
Singapore Telecommunications, Ltd. (Services)............... 1,550,000 1,503
---------
SOUTH KOREA -- 3.8%
Samsung Electro-Mechanics Co., Ltd. (Capital Equipment)..... 28,000 1,011
Samsung Electronics Co., Ltd. (Capital Equipment)........... 5,700 2,111
Samsung SDI Co., Ltd. (Capital Equipment)................... 9,400 884
---------
4,006
---------
SWITZERLAND -- 5.2%
Compagnie Financiere Richemont AG (Consumer Services)....... 47,600 911
Nestle SA (Consumer Goods).................................. 21,250 4,631
---------
5,542
---------
UNITED KINGDOM -- 7.8%
HBOS, PLC (Finance)......................................... 95,000 1,055
HSBC Holdings, PLC (Finance)................................ 90,000 1,171
mm02, PLC (Services)........................................ 1,374,000 1,149
Scottish Power, PLC (Energy)................................ 132,240 756
Shell Transport & Trading Co., PLC ADR (Energy)............. 48,000 1,845
Vodafone Group, PLC (Services).............................. 1,245,000 2,273
---------
8,249
---------
OTHER COMMON STOCK -- 1.7%.................................. 1,785
---------
TOTAL COMMON STOCK (cost $85,430)........................... 92,772
---------
<Caption>
PREFERRED STOCK -- 2.0%
-----------------------------------------------------------------------------------------
BRAZIL
Cia Vale do Rio Doce (Materials)(1) (cost $1,652)........... 62,000 2,122
---------
TOTAL INVESTMENT SECURITIES (cost $87,082).................. 94,894
---------
</Table>
- ---------------------
6
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 10.3% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES
American Honda Finance Corp. 1.03% due 9/03/03.............. $ 2,319 $ 2,319
Archer Daniels Midland Co. 1.05% due 9/30/03................ 1,800 1,798
Danske Corp. 1.05% due 9/19/03.............................. 1,700 1,699
General Electric Capital Corp. 1.09% due 9/02/03............ 1,500 1,500
KFW International Finance, Inc. 1.05% due 11/13/03.......... 2,000 1,996
Rabobank USA Financial Corp. 1.04% due 10/21/03............. 1,650 1,648
---------
TOTAL SHORT TERM SECURITIES (cost $10,960).................. 10,960
---------
</Table>
<Table>
TOTAL INVESTMENTS --
(cost $98,042) 99.7% $105,854
Other assets less liabilities -- 0.3 268
------- ---------
NET ASSETS -- 100.0% $106,122
======= =========
</Table>
-----------------------------
+ Non-income producing security
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(1) Fair valued security -- See Note 2
See Notes to Financial Statements.
---------------------
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ANCHOR PATHWAY FUND
GROWTH-INCOME SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2003
(UNAUDITED)
<Table>
<Caption>
VALUE
COMMON STOCK -- 90.9% SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 18.9%
Aerospace & Military Technology -- 5.1%
General Dynamics Corp. ..................................... 80,000 $ 6,889
Honeywell International, Inc. .............................. 142,500 4,131
Lockheed Martin Corp. ...................................... 80,000 4,098
Northrop Grumman Corp. ..................................... 21,428 2,046
Raytheon Co. ............................................... 80,000 2,565
United Technologies Corp. .................................. 105,800 8,490
Data Processing & Reproduction -- 3.9%
Dell, Inc. +................................................ 60,000 1,958
Hewlett-Packard Co. ........................................ 100,000 1,992
International Business Machines Corp. ...................... 100,000 8,201
Microsoft Corp. +........................................... 120,000 3,182
Oracle Corp. +.............................................. 240,000 3,067
Xerox Corp. +............................................... 300,000 3,234
Electronic Components -- 7.0%
Applera Corp. -- Applied Biosystems Group................... 40,000 870
Applied Materials, Inc. +................................... 160,000 3,456
EMC Corp. +................................................. 290,600 3,705
Emerson Electric Co. ....................................... 25,000 1,394
General Electric Co. ....................................... 380,000 11,237
Intel Corp. ................................................ 90,000 2,576
LSI Logic Corp. +........................................... 150,000 1,731
Sanmina-SCI Corp. +......................................... 200,000 1,796
Taiwan Semiconductor Manufacturing Co., Ltd. ADR +.......... 270,000 3,181
Texas Instruments, Inc. .................................... 360,000 8,586
Energy Equipment -- 1.4%
Schlumberger, Ltd. ......................................... 150,000 7,427
Industrial Components -- 1.5%
Dana Corp. ................................................. 50,000 771
Ingersoll-Rand Co. Class A.................................. 120,000 7,142
---------
103,725
---------
CONSUMER GOODS -- 25.5%
Automotive -- 1.9%
General Motors Corp. ....................................... 160,000 6,576
Magna International, Inc. .................................. 50,000 4,180
Beverages & Tobacco -- 1.6%
Altria Group, Inc. ......................................... 150,000 6,183
Coca-Cola Co. .............................................. 55,000 2,394
Food Retail -- 1.2%
Albertson's, Inc. .......................................... 320,000 6,726
Food & Household Products -- 3.3%
Crown Holdings, Inc. +...................................... 150,000 1,113
Del Monte Foods Co. +....................................... 300,000 2,694
General Mills, Inc. ........................................ 100,000 4,636
HJ Heinz Co. ............................................... 110,000 3,560
Sara Lee Corp. ............................................. 325,000 6,168
</Table>
- ---------------------
8
<Table>
<Caption>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------
CONSUMER GOODS (continued)
Health & Personal Care -- 10.0%
AstraZeneca, PLC ADR........................................ 156,500 $ 6,205
Avon Products, Inc. ........................................ 140,000 8,974
Biogen, Inc. +.............................................. 60,000 2,368
Bristol-Myers Squibb Co. ................................... 180,000 4,567
Cardinal Health, Inc. ...................................... 90,000 5,124
Eli Lilly & Co. ............................................ 140,000 9,314
Johnson & Johnson........................................... 60,000 2,975
Kimberly-Clark Corp. ....................................... 40,000 2,044
Merck & Co., Inc. .......................................... 50,000 2,516
Pfizer, Inc. ............................................... 155,000 4,637
Schering-Plough Corp. ...................................... 125,000 1,899
Sepracor, Inc. +............................................ 73,887 1,989
Service Corp. International +............................... 600,000 2,400
Industrial Machinery -- 0.4%
Illinois Tool Works, Inc. .................................. 30,000 2,169
Retail -- 5.9%
Circuit City Stores, Inc. .................................. 145,000 1,512
Dollar General Corp. ....................................... 250,000 5,732
Federated Department Stores, Inc. +......................... 85,000 3,715
Gap, Inc. .................................................. 250,000 5,222
Limited Brands.............................................. 225,000 3,816
Lowe's Cos, Inc. ........................................... 80,000 4,389
May Department Stores Co. .................................. 140,000 3,861
Target Corp. ............................................... 75,000 3,045
Walgreen Co. ............................................... 40,000 1,303
Textiles & Apparels -- 1.2%
Nike, Inc. Class B.......................................... 40,000 2,279
VF Corp. ................................................... 100,000 4,010
---------
140,295
---------
ENERGY -- 8.4%
Energy Sources -- 6.4%
ChevronTexaco Corp. ........................................ 111,600 8,132
ConocoPhillips.............................................. 23,385 1,306
Devon Energy Corp. ......................................... 70,000 3,622
Exxon Mobil Corp. .......................................... 60,000 2,262
Halliburton Co. ............................................ 40,000 967
Marathon Oil Corp. ......................................... 220,000 6,136
Petro-Canada................................................ 160,000 6,310
Royal Dutch Petroleum Co. .................................. 80,000 3,590
Unocal Corp. ............................................... 100,000 3,062
Utilities: Electric, Gas & Water -- 2.0%
Dominion Resources, Inc. ................................... 25,000 1,514
Duke Energy Corp. .......................................... 400,600 6,842
Progress Energy, Inc. ...................................... 40,000 1,620
TECO Energy, Inc. .......................................... 85,000 1,006
---------
46,369
---------
FINANCE -- 14.5%
Banks -- 5.3%
Bank of America Corp. ...................................... 70,000 5,548
Bank of New York Co., Inc. ................................. 100,000 2,942
City National Corp. ........................................ 60,000 3,102
Deutsche Bank AG............................................ 40,000 2,315
HSBC Holdings, PLC.......................................... 42,800 2,753
SunTrust Banks, Inc. ....................................... 25,000 1,528
</Table>
---------------------
9
<Table>
<Caption>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------
FINANCE (continued)
Banks (continued)
Wachovia Corp. ............................................. 125,000 $ 5,269
Wells Fargo & Co. .......................................... 110,000 5,515
Financial Services -- 5.3%
American Express Co. ....................................... 80,000 3,604
Citigroup, Inc. ............................................ 66,000 2,861
Fannie Mae.................................................. 60,000 3,887
FleetBoston Financial Corp. ................................ 75,000 2,219
JP Morgan Chase & Co. ...................................... 280,000 9,582
MGIC Investment Corp. ...................................... 50,000 2,818
Mitsubishi Tokyo Financial Group, Inc. ADR.................. 100,000 587
PNC Financial Services Group, Inc. ......................... 60,000 2,856
Sumitomo Mitsui Financial Group, Inc. ADR +(1).............. 210,000 704
Insurance -- 3.9%
Allstate Corp. ............................................. 145,000 5,184
Cigna Corp. ................................................ 85,000 4,053
Jefferson-Pilot Corp. ...................................... 60,000 2,656
Manulife Financial Corp. ................................... 150,000 4,536
Royal & Sun Alliance Insurance Group........................ 600,000 1,311
XL Capital, Ltd., Class A................................... 50,000 3,787
---------
79,617
---------
HOUSING -- 0.7%
Home Building & Real Estate -- 0.7%
Boston Properties, Inc. .................................... 45,000 1,933
Equity Residential.......................................... 60,000 1,745
---------
3,678
---------
MATERIALS -- 3.7%
Chemicals -- 1.1%
Ashland, Inc. .............................................. 48,800 1,613
Dow Chemical Co. ........................................... 35,000 1,209
Millennium Chemicals, Inc. ................................. 300,000 3,246
Forest Products & Paper -- 1.9%
International Paper Co. .................................... 90,000 3,650
MeadWestvaco Corp. ......................................... 58,200 1,475
Sonoco Products Co. ........................................ 100,000 2,277
Weyerhaeuser Co. ........................................... 50,000 2,975
Metals: Non-ferrous -- 0.7%
Rio Tinto, PLC.............................................. 170,000 3,730
---------
20,175
---------
SERVICES -- 16.9%
Broadcasting & Publishing -- 2.6%
AOL Time Warner, Inc. +..................................... 420,000 6,871
Comcast Corp., Class A +.................................... 45,290 1,347
Dow Jones & Co., Inc. ...................................... 60,000 2,548
Gannett Co., Inc. .......................................... 20,000 1,569
Viacom, Inc., Class B +..................................... 45,000 2,025
Business & Public Services -- 5.8%
Allied Waste Industries, Inc. +............................. 1,075,000 11,889
Avery Dennison Corp. ....................................... 60,000 3,285
Ikon Office Solutions, Inc. ................................ 200,000 1,442
Interpublic Group of Cos., Inc. ............................ 150,000 2,273
Pitney Bowes, Inc. ......................................... 170,000 6,630
Yahoo!, Inc. +.............................................. 200,000 6,680
</Table>
- ---------------------
10
<Table>
<Caption>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
--------------------------------------------------------------------------------------------
SERVICES (continued)
Business Services -- 1.8%
Automatic Data Processing, Inc. ............................ 60,000 $ 2,395
Electronic Data Systems Corp. .............................. 115,000 2,510
ServiceMaster Co. .......................................... 520,000 5,205
Cellular & Paging -- 1.5%
AT&T Wireless Services, Inc. +.............................. 700,000 6,034
Nextel Communications, Inc. Class A +....................... 100,000 1,928
Leisure & Tourism -- 0.7%
Carnival Corp. ............................................. 50,000 1,730
McDonald's Corp. ........................................... 100,000 2,242
Telecommunications -- 2.9%
AT&T Corp. ................................................. 154,000 3,434
Cisco Systems, Inc. +....................................... 400,000 7,660
Nokia Oyi ADR............................................... 125,000 2,036
SBC Communications, Inc. ................................... 40,000 900
Sprint Corp.-FON Group...................................... 120,000 1,772
Transportation: Airlines -- 0.5%
Southwest Airlines Co. ..................................... 150,000 2,564
Transportation: Rail & Road -- 1.1%
Burlington Northern Santa Fe Corp. ......................... 155,000 4,394
Norfolk Southern Corp. ..................................... 90,000 1,714
---------
93,077
---------
OTHER COMMON STOCK -- 2.3%.................................. 12,621
---------
TOTAL COMMON STOCK (cost $484,195).......................... 499,557
---------
<Caption>
PREFERRED STOCK -- 1.6%
--------------------------------------------------------------------------------------------
FINANCE -- 0.1%
Financial Services -- 0.1%
SMFG Finance 2.25% (Convertible) (1)........................ 60,000,000 702
---------
SERVICES -- 1.5%
Broadcasting & Publishing -- 0.4%
News Corp., Ltd. ADR 0.79%.................................. 80,000 2,313
Telecommunications -- 1.1%
Lucent Technologies, Inc. 8.00% (1)......................... 6,000 6,013
---------
8,326
---------
TOTAL PREFERRED STOCK (cost $5,614)......................... 9,028
---------
TOTAL INVESTMENT SECURITIES (cost $489,809)................. 508,585
---------
</Table>
---------------------
11
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 7.1% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 4.0%
Coca-Cola Co. due 1.00% 10/03/03............................ $ 2,000 $ 1,998
Du Pont (E.I.) de Nemours and Co. 1.03% due 10/02/03........ 5,800 5,795
General Electric Capital Corp. 1.09% due 9/02/03............ 4,000 4,000
International Business Machines Corp. 1.00% due 9/02/03..... 3,000 3,000
Receivables Capital Corp. 1.06% due 9/15/03................. 4,400 4,398
Verizon Network Fund 1.03% due 9/29/03...................... 3,000 2,998
---------
TOTAL CORPORATE SHORT-TERM NOTES (cost $22,189)............. 22,189
---------
U.S. GOVERNMENT & AGENCIES -- 1.2%
Federal Home Loan Bank Disc. Notes 1.00% due 9/05/03 (cost
$6,499)................................................... 6,500 6,499
---------
UNITED STATES TREASURY -- 1.9%
United States Treasury Bills 0.89% due 10/02/03............. 4,500 4,497
United States Treasury Bills 0.91% due 10/02/03............. 6,000 5,995
---------
TOTAL UNITED STATES TREASURY (cost $10,492)................. 10,492
---------
TOTAL SHORT-TERM SECURITIES (cost $39,180).................. 39,180
---------
</Table>
<Table>
TOTAL INVESTMENTS --
(cost $528,989) 99.6% $547,765
Other assets less liabilities -- 0.4 2,057
------- ---------
NET ASSETS -- 100.0% $549,822
======= =========
</Table>
-----------------------------
ADR -- American Depository Receipt
+ Non-income producing security
(1) Fair valued security -- See Note 2
See Notes to Financial Statements.
- ---------------------
12
O
- ---------------------
ANCHOR PATHWAY FUND
ASSET ALLOCATION SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2003
(UNAUDITED)
<Table>
<Caption>
VALUE
COMMON STOCK -- 70.4% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 14.7%
Aerospace & Military Technology -- 3.3%
Honeywell International, Inc. .............................. 45,000 $ 1,305
Raytheon Co. ............................................... 40,000 1,282
Data Processing & Reproduction -- 3.1%
Hewlett-Packard Co. ........................................ 60,000 1,195
International Business Machines Corp. ...................... 15,000 1,230
Electronic Components -- 3.4%
General Electric Co. ....................................... 50,000 1,478
Texas Instruments, Inc. .................................... 50,000 1,193
Energy Equipment -- 1.7%
Schlumberger, Ltd. ......................................... 27,000 1,337
Industrial Components -- 1.8%
Genuine Parts Co. .......................................... 45,000 1,441
Machinery & Engineering -- 1.4%
Dover Corp. ................................................ 30,000 1,140
--------
11,601
--------
CONSUMER GOODS -- 21.1%
Automotive -- 2.6%
General Motors Corp. ....................................... 50,000 2,055
Food Retail -- 1.1%
Albertson's, Inc. .......................................... 40,000 841
Food & Household Products -- 2.9%
General Mills, Inc. ........................................ 30,000 1,391
Sara Lee Corp. ............................................. 50,000 949
Health & Personal Care -- 8.5%
AstraZeneca, PLC............................................ 31,000 1,231
AstraZeneca, PLC ADR........................................ 19,000 753
Bristol-Myers Squibb Co. ................................... 50,000 1,268
Eli Lilly & Co. ............................................ 20,000 1,331
Schering-Plough Corp. ...................................... 50,000 760
Unilever NV................................................. 25,000 1,399
Retail -- 6.0%
May Department Stores Co. .................................. 50,000 1,379
Target Corp. ............................................... 35,000 1,421
Walgreen Co. ............................................... 60,000 1,954
--------
16,732
--------
ENERGY -- 7.7%
Energy Sources -- 4.7%
ChevronTexaco Corp. ........................................ 29,250 2,131
Petro-Canada................................................ 40,000 1,578
</Table>
---------------------
13
<Table>
<Caption>
VALUE
COMMON STOCK (CONTINUED) SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
ENERGY (continued)
Utilities: Electric, Gas & Water -- 3.0%
American Electric Power Co., Inc. .......................... 14,100 $ 399
Duke Energy Corp. .......................................... 60,000 1,025
El Paso Corp. .............................................. 130,000 954
--------
6,087
--------
FINANCE -- 9.3%
Banks -- 2.0%
Bank of America Corp. ...................................... 20,000 1,585
Financial Services -- 5.5%
Citigroup, Inc. ............................................ 30,000 1,301
Fannie Mae.................................................. 20,000 1,296
FleetBoston Financial Corp. ................................ 60,000 1,775
Insurance -- 1.8%
Allstate Corp. ............................................. 40,000 1,430
--------
7,387
--------
MATERIALS -- 5.4%
Chemicals -- 1.9%
Dow Chemical Co. ........................................... 45,000 1,554
Forest Products & Paper -- 2.2%
Weyerhaeuser Co. ........................................... 30,000 1,785
Metals & Minerals -- 1.3%
Alcoa, Inc. ................................................ 35,000 999
--------
4,338
--------
SERVICES -- 9.5%
Business & Public Services -- 2.2%
Pitney Bowes, Inc. ......................................... 45,000 1,755
Leisure & Tourism -- 2.6%
Carnival Corp............................................... 60,000 2,075
Telecommunications -- 4.7%
AT&T Corp. ................................................. 40,000 892
CenturyTel, Inc. ........................................... 55,000 1,912
Sprint Corp.-FON Group...................................... 60,000 886
--------
7,520
--------
OTHER COMMON STOCK -- 2.7%.................................. 2,232
--------
TOTAL COMMON STOCK (cost $53,779)........................... 55,897
--------
<Caption>
PRINCIPAL
AMOUNT
BONDS & NOTES -- 23.6% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
ENERGY -- 0.3%
Energy Sources -- 0.3%
Conoco, Inc. 6.35% 2009..................................... $ 250 276
--------
FINANCE -- 4.3%
Banks -- 0.7%
Chevy Chase Savings Bank 9.25% 2008......................... 500 503
</Table>
- ---------------------
14
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BONDS & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
FINANCE (continued)
Financial Services -- 3.6%
Capital One Financial Corp. 7.13% 2008...................... $ 500 $ 520
Ford Motor Credit Co. 5.80% 2009............................ 500 485
Mizuho JGB Investment, LLC 9.87% 2008 *(1).................. 250 263
Mizuho Preferred Capital Co., LLC 8.79% 2008 *(1)........... 500 504
PP&L Transition Bond Co., LLC, Series 1999-1 Class A7 7.05%
2009...................................................... 250 280
Societe Generale Real Estate Co., LLC 7.64% 2007 *(1)....... 500 558
Tokai Preferred Capital Co., LLC 9.98% 2008 *(1)(2)......... 250 266
--------
3,379
--------
MATERIALS -- 0.6%
Chemicals -- 0.6%
Equistar Chemicals LP 8.75% 2009............................ 500 465
--------
SERVICES -- 4.3%
Broadcasting & Publishing -- 2.3%
British Sky Broadcasting, PLC 8.20% 2009.................... 500 571
Time Warner, Inc. 9.13% 2013................................ 1,000 1,222
Business Services -- 0.7%
Allied Waste North America, Inc. 10.00% 2009................ 500 541
Leisure & Tourism -- 0.6%
Royal Caribbean Cruises, Ltd. 7.00% 2007.................... 500 499
Transportation: Airlines -- 0.7%
Delta Air Lines, Inc., Series 93A2 10.50% 2016 (2).......... 500 350
Jet Equipment Trust 7.83% 2012 *(2)......................... 403 28
United AirLines, Inc. 7.87% 2019 (3)........................ 500 197
--------
3,408
--------
U.S. GOVERNMENT & AGENCIES -- 0.1%
Government National Mtg. Assoc. 8.50% 2029.................. 48 52
--------
UNITED STATES TREASURY -- 14.0%
United States Treasury Bonds 7.25% 2016..................... 2,000 2,445
United States Treasury Bonds 8.75% 2008..................... 2,500 2,538
United States Treasury Notes 6.63% 2007..................... 3,600 4,070
United States Treasury Notes 7.25% 2004..................... 2,000 2,085
--------
11,138
--------
TOTAL BONDS & NOTES (cost $18,982).......................... 18,718
--------
TOTAL INVESTMENT SECURITIES (cost $72,761).................. 74,615
--------
</Table>
---------------------
15
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 5.2% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 4.3%
Colgate-Palmolive Co. 1.02% due 9/18/03..................... $ 800 $ 799
Du Pont (E.I.) de Nemours and Co. 1.01% due 9/09/03......... 1,350 1,350
General Electric Capital Corp. 1.09% due 9/02/03............ 1,300 1,300
--------
TOTAL CORPORATE SHORT-TERM NOTES (cost $3,449).............. 3,449
--------
U.S. GOVERNMENT & AGENCIES -- 0.9%
Federal Home Loan Bank Disc. Notes 0.93% due 9/05/03 (cost
$700)..................................................... 700 700
--------
TOTAL SHORT-TERM SECURITIES (cost $4,149)................... 4,149
--------
</Table>
<Table>
TOTAL INVESTMENTS -- (cost $76,910) 99.2% $78,764
Other assets less liabilities -- 0.8 598
------- --------
NET ASSETS -- 100.0% $79,362
======= ========
</Table>
-----------------------------
* Securities exempt from registration under rule 144A of the
Securities Act of 1993. These securities may be sold in
transactions exempt from registration, normally to qualified
institutional buyers. At August 31, 2003 the aggregate value
of these securities was $1,619 (in thousands) representing
2.0% of net assets.
(1) Variable rate security -- the rate reflected is as of August
31, 2003; maturity date reflects next reset date.
(2) Fair valued security -- See Note 2
(3) Bond in default
See Notes to Financial Statements.
- ---------------------
16
O
- ---------------------
ANCHOR PATHWAY FUND
HIGH-YIELD BOND SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2003
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BOND & NOTES -- 84.3% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 10.9%
Data Processing & Reproduction -- 0.7%
Xerox Corp. 7.13% 2010...................................... $ 375 $ 363
Electronic Components -- 5.9%
Amkor Technology, Inc. 7.75% 2013........................... 110 107
Amkor Technology, Inc. 9.25% 2008........................... 135 145
Fairchild Semiconductor International, Inc. 10.50% 2009..... 375 413
Flextronics International, Ltd. 9.75% 2010.................. 500 605
On Semiconductor Corp. 13.00% 2008.......................... 175 184
Sanmina-SCI Corp. 10.38% 2010 *............................. 250 285
Solectron Corp. 9.63% 2009.................................. 750 808
Stoneridge, Inc. 11.50% 2012................................ 350 392
TriQuint Semiconductor, Inc. 4.00% 2007..................... 50 43
Industrial Components -- 0.3%
Dura Operating Corp. 8.63% 2012............................. 125 127
Industrial Machinery -- 1.4%
Teekay Shipping Corp. 8.88% 2011............................ 625 679
Machinery & Engineering -- 2.6%
AGCO Corp. 9.50% 2008....................................... 350 380
NMHG Holding Co. 10.00% 2009 (2)............................ 250 275
Terex Corp. 9.25% 2011...................................... 375 400
Terex Corp. 10.38% 2011..................................... 250 277
--------
5,483
--------
CONSUMER GOODS -- 7.8%
Appliances & Household Durables -- 0.3%
Salton, Inc. 10.75% 2005.................................... 175 168
Automotive -- 0.7%
General Motors Corp. 7.20% 2011............................. 125 127
TRW Automotive, Inc. 9.38% 2013 *........................... 175 194
TRW Automotive, Inc. 11.00% 2013 *.......................... 25 29
Beverages & Tobacco -- 0.8%
Constellation Brands, Inc. 8.13% 2012....................... 375 390
Food Retail -- 0.5%
Delhaize America, Inc. 7.38% 2006........................... 250 264
Food & Household Products -- 2.0%
Burns Philp Capital Property, Ltd. 9.75% 2012 *............. 560 543
Del Monte Corp. 8.63% 2012 *................................ 300 313
Dole Food, Inc. 8.88% 2011.................................. 125 131
Health & Personal Care -- 1.1%
Columbia HCA Healthcare Corp. 7.00% 2007.................... 500 525
Mariner Health Group, Inc. 9.50% 2006 (2)................... 610 19
Recreation & Other Consumer Products -- 0.5%
Tyco International Group SA 6.13% 2008...................... 250 251
</Table>
---------------------
17
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BOND & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CONSUMER GOODS (continued)
Retail -- 1.9%
Dillard's, Inc. 7.88% 2023.................................. $ 125 $ 108
Gap, Inc. 6.90% 2007........................................ 125 132
J.C. Penney Co., Inc. 8.00% 2010............................ 250 259
J.C. Penney Co., Inc. 8.25% 2022............................ 213 212
Kmart Corp. 9.78% 2020 (1).................................. 216 84
Petco Animal Supplies, Inc. 10.75% 2011..................... 125 141
Saks, Inc. 7.38% 2019....................................... 25 24
--------
3,914
--------
CONSUMER SERVICES -- 0.4%
Food & Beverage -- 0.4%
Ahold Finance USA, Inc. 6.25% 2009.......................... 50 47
Ahold Finance USA, Inc. 8.25% 2010.......................... 175 177
--------
224
--------
ENERGY -- 4.3%
Energy Sources -- 2.4%
Clark Refining & Marketing, Inc. 8.88% 2007................. 500 505
Dynegy Holdings, Inc. 10.13% 2013........................... 250 259
Newfield Exploration Co. 7.45% 2007......................... 250 267
Petrozuata Finance, Inc 8.22% 2017.......................... 250 203
Utilities: Electric, Gas & Water -- 1.9%
AES Corp. 8.75% 2013........................................ 600 611
AES Corp. 9.50% 2009........................................ 68 65
Edison Mission Energy 7.73% 2009............................ 125 97
Homer City Funding LLC 8.73% 2026........................... 100 103
Mission Energy Holding Co. 13.50% 2008...................... 125 70
--------
2,180
--------
FINANCE -- 1.7%
Financial Services -- 1.7%
DR Structured Finance Corp. 9.35% 2019...................... 461 180
Ford Motor Credit C0. 7.88% 2010............................ 175 183
Mizuho JGB Investment, LLC 9.87% 2008 *(2)(3)............... 250 263
Mizuho Preferred Capital Co., LLC 8.79% 2049 *(2)(3)........ 250 252
--------
878
--------
HOUSING -- 2.9%
Home Building & Real Estate -- 2.9%
Beazer Homes USA, Inc. 8.38% 2012........................... 250 264
D.R. Horton Inc. 8.00% 2009................................. 125 133
Host Marriot LP, Series E 8.38% 2006........................ 250 257
MeriStar Hospitality Operating Partnership LP 10.50% 2009... 125 127
Ryland Group, Inc. 9.75% 2010............................... 250 277
Technical Olympic USA, Inc. 10.38% 2012..................... 250 253
WCI Communities, Inc. 10.63% 2011........................... 125 133
--------
1,444
--------
MATERIALS -- 12.9%
Building Materials -- 1.1%
American Standard, Inc. 8.25% 2009.......................... 250 279
Technical Olympic USA, Inc. 9.00% 2010...................... 250 252
</Table>
- ---------------------
18
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BOND & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
MATERIALS (continued)
Chemicals -- 0.9%
Key Plastics Holdings, Inc. 10.25% 2007 (1)(2).............. $ 1,000 $ 13
Lyondell Chemical Co. 9.50% 2008............................ 25 24
Lyondell Chemical Co. 10.50% 2013........................... 50 50
Lyondell Chemical Co. 10.88% 2009........................... 250 239
Lyondell Chemical Co. 11.13% 2012........................... 125 128
Containers & Storage -- 1.4%
Owens Brockway Glass Container 8.75% 2012................... 125 131
Owens-Illinois, Inc. 8.10% 2007............................. 250 253
Stone Container Corp. 9.75% 2011............................ 275 298
Forest Products & Paper -- 4.1%
Abitibi-Consolidated, Inc 6.00% 2013........................ 275 248
Abitibi-Consolidated, Inc. 5.25% 2008....................... 125 117
Fort James Corp. 6.88% 2007................................. 125 125
Georgia-Pacific Corp. 8.13% 2011............................ 500 496
Kappa Beheer BV 10.63% 2009................................. 250 290
Longview Fibre Co. 10.00% 2009.............................. 250 274
Potlatch Corp. 10.00% 2011.................................. 250 273
Riverwood International Corp. 10.88% 2008................... 250 258
Metals: Steel -- 1.8%
AK Steel Corp. 7.75% 2012................................... 175 133
AK Steel Corp. 7.88% 2009................................... 350 276
Allegheny Technologies, Inc. 8.38% 2011..................... 250 223
Oregon Steel Mills, Inc. 10.00% 2009........................ 375 298
Metals & Minerals -- 3.6%
Earle M. Jorgensen Co. 9.75% 2012........................... 400 422
Freeport McMoRan Copper & Gold, Inc. 10.13% 2010 *.......... 400 435
Graphic Packaging International Corp. 8.50% 2011............ 625 653
Jefferson Smurfit Corp. US 7.50% 2013....................... 100 101
Kaiser Aluminum & Chemical Corp. 12.75% 2049 (1)............ 1,000 85
Steel Dynamics, Inc. 9.50% 2009............................. 120 129
--------
6,503
--------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.9%
Foreign Government -- 1.9%
Dominican Republic 9.04% 2013 *............................. 125 118
Federative Republic of Brazil 10.25% 2013................... 250 237
Federative Republic of Brazil 14.50% 2009................... 250 293
Republic of Panama 8.25% 2008............................... 130 144
Republic of Panama 10.75% 2020.............................. 120 142
--------
934
--------
SERVICES -- 41.5%
Broadcasting & Publishing -- 5.7%
CanWest Media, Inc. 10.63% 2011............................. 125 139
Chancellor Media Corp. 8.00% 2008........................... 250 284
Charter Communications Holdings, LLC 10.00% 2009............ 125 97
Comcast UK Cable Partners, Ltd. 11.20% 2007 (4)............. 240 238
DirectTV Holdings, LLC. 8.38% 2013 *........................ 125 137
Emmis Communications Corp. zero coupon 2011 (4)............. 125 109
Frontiervision Operating Partners, L.P. 11.00% 2006 (1)..... 150 151
Gray Television, Inc. 9.25% 2011............................ 125 136
Liberty Media Corp. 8.25% 2030.............................. 50 54
Mediacom, LLC 9.50% 2013.................................... 175 177
Quebecor Media, Inc. 11.13% 2011............................ 220 243
</Table>
---------------------
19
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BOND & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
SERVICES (continued)
Broadcasting & Publishing (continued)
Radio One, Inc. 8.88% 2011.................................. $ 250 $ 273
Young Broadcasting, Inc. 8.75% 2007......................... 255 258
Young Broadcasting, Inc. 10.00% 2011........................ 549 590
Business & Public Services -- 1.6%
KinderCare Learning Centers, Inc. 9.50% 2009................ 375 377
RH Donnelley Finance Corp. I 10.88% 2012 *.................. 375 436
Business Services -- 4.2%
Allied Waste North America, Inc. 8.50% 2008................. 125 133
Allied Waste North America, Inc. 8.88% 2008................. 375 402
Allied Waste North America, Inc. 10.00% 2009................ 975 1,055
Iron Mountain, Inc 7.75% 2015............................... 125 128
Stericycle, Inc. 12.38% 2009................................ 325 374
Cellular & Paging -- 10.1%
American Tower Corp. 5.00% 2010............................. 250 220
American Tower Corp. 9.38% 2009............................. 825 835
American Tower Escrow Corp. zero coupon 2008 *.............. 250 165
Centennial Communications Corp. 10.13% 2013................. 295 305
Crown Castle International Corp. 9.00% 2011................. 100 102
Crown Castle International Corp. 10.38% 2011 (4)............ 550 539
Crown Castle International Corp. 11.13% 2011 (4)............ 125 123
Nextel Communications, Inc. 7.38% 2015...................... 175 175
Nextel Communications, Inc. 9.75% 2007 (4).................. 800 824
Nextel Partners, Inc. 8.13% 2011............................ 225 217
Nextel Partners, Inc. 11.00% 2010........................... 250 269
Nextel Partners, Inc. 12.50% 2009........................... 125 141
Triton PCS, Inc. 8.50% 2013................................. 145 155
Triton PCS, Inc. 8.75% 2011................................. 225 227
Univision Communications, Inc. 7.85% 2011................... 335 381
VoiceStream Wireless Corp. 10.38% 2009...................... 0 0
Western Wireless Corp. 9.25% 2013........................... 375 375
Leisure & Tourism -- 14.0%
AMC Entertainment, Inc 9.88% 2012........................... 125 135
AMC Entertainment, Inc. 9.50% 2011.......................... 65 68
Argosy Gaming Co. 10.75% 2009............................... 125 137
Boyd Gaming Corp. 9.25% 2009................................ 250 276
Buffets, Inc. 11.25% 2010................................... 125 124
Carmike Cinemas, Inc. 10.38% 2009........................... 100 105
Cinemark USA, Inc. 9.00% 2013 *............................. 520 554
Circus & Eldorado Joint Venture 10.13% 2012................. 250 247
Eldorado Resorts, LLC 10.50% 2006........................... 250 254
Extended Stay America, Inc. 9.88% 2011...................... 125 133
Felcor Lodging, Ltd. 8.50% 2011............................. 125 128
Florida Panthers Holdings, Inc. 9.88% 2009.................. 500 526
Hilton Hotels Corp. 7.20% 2009.............................. 50 52
Hilton Hotels Corp. 7.63% 2008.............................. 75 79
HMH Properties, Inc. 7.88% 2005............................. 215 219
Horseshoe Gaming Holdings Corp. 8.63% 2009.................. 750 789
ITT Corp. 6.75% 2005........................................ 250 261
Jupiters, Ltd. 8.50% 2006................................... 500 535
Mirage Resorts, Inc. 6.75% 2007............................. 250 266
Mohegan Tribal Gaming Authority 6.38% 2009.................. 275 276
Regal Cinemas, Inc. 9.38% 2012.............................. 430 477
Royal Caribbean Cruises, Ltd 8.00% 2010..................... 125 130
Royal Caribbean Cruises, Ltd. 7.00% 2007.................... 125 125
Sbarro, Inc. 11.00% 2009.................................... 250 212
Six Flags, Inc. 8.88% 2010.................................. 375 345
</Table>
- ---------------------
20
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BOND & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
SERVICES (continued)
Leisure & Tourism (continued)
Six Flags, Inc. 9.50% 2009.................................. $ 125 $ 117
Six Flags, Inc. 9.75% 2007.................................. 250 241
Six Flags, Inc. 9.75% 2013.................................. 275 256
Telecommunications -- 4.5%
ACC Escrow Corp. 10.00% 2011................................ 125 133
CFW Communications Co. 13% 2010 (1)(2)...................... 250 168
Cincinnati Bell, Inc. 7.25% 2013............................ 370 363
Echostar DBS Corp. 9.13% 2009............................... 125 138
Motorola, Inc. 5.22% 2097................................... 50 37
Motorola, Inc. 6.50% 2028................................... 50 46
Motorola, Inc. 7.50% 2025................................... 50 51
Motorola, Inc. 8.00% 2011................................... 125 139
Qwest Services Corp. 13.00% 2007 *.......................... 620 685
Qwest Services Corp. 13.50% 2010 *.......................... 159 182
Sprint Capital Corp. 6.00% 2007............................. 120 126
Sprint Capital Corp. 7.13% 2006............................. 55 59
Sprint Capital Corp. 7.63% 2011............................. 10 11
Telewest Communications, PLC 11.00% 2007 (1)................ 125 52
Telewest Communications, PLC 11.25% 2008 (1)................ 125 53
Transportation -- 0.4%
General Maritime Corp. 10.00% 2013.......................... 190 207
Transportation: Rail & Road -- 1.0%
Grupo Transportacion Ferroviaria Mexicana SA de CV 11.75%
2009 (4).................................................. 25 25
Grupo Transportacion Ferroviaria Mexicana SA de CV 12.50%
2012...................................................... 100 108
Kansas City Southern Railway Co. 7.50% 2009................. 250 255
Railamerica Transportation Corp. 12.88% 2010................ 125 135
--------
20,884
--------
TOTAL BOND & NOTES (cost $43,741)........................... 42,444
--------
<Caption>
LOAN AGREEMENTS -- 0.0%
---------------------------------------------------------------------------------------------
SERVICES -- 0.0%
Cellular & Paging
Leap Cricket International, Inc. 8.50% 2007 (2) (cost
$42)...................................................... 60 26
--------
<Caption>
COMMON STOCK -- 3.4% SHARES
---------------------------------------------------------------------------------------------
FINANCE -- 0.4%
Banks -- 0.4%
Wilshire Financial Services Group, Inc. +................... 51,465 217
--------
SERVICES -- 3.0%
Telecommunications -- 3.0%
Spectrasite, Inc. (2)....................................... 54,306 1,477
--------
TOTAL COMMON STOCK (cost $2,380)............................ 1,694
--------
<Caption>
PREFERRED STOCK -- 2.3%
---------------------------------------------------------------------------------------------
SERVICES
Telecommunications
Dobson Communications Corp. 12.25% (2)(5) (cost $671)....... 1,134 1,145
--------
</Table>
---------------------
21
<Table>
<Caption>
VALUE
WARRANTS -- 0.1% SHARES (IN THOUSANDS)
---------------------------------------------------------------------------------------------
American Tower Escrow Corp. Warrants+(2) (cost $16)......... 250 $ 33
--------
TOTAL INVESTMENT SECURITIES (cost $46,850).................. 45,342
--------
<Caption>
PRINCIPAL
AMOUNT
SHORT-TERM SECURITIES -- 6.9% (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES
Abbott Laboratories 1.02% due 9/03/03....................... $ 1,500 $ 1,500
General Electric Capital Corp. 1.09% due 9/02/03............ 700 700
Preferred Receivables Funding 1.05% due 9/22/03............. 400 400
Receivables Capital Corp. 1.06% due 9/15/03................. 900 899
--------
TOTAL SHORT-TERM SECURITIES (cost $3,499)................... 3,499
--------
</Table>
<Table>
TOTAL INVESTMENTS -- (cost $50,349) 97.0% $48,841
Other assets less liabilities -- 3.0 1,517
------- --------
NET ASSETS -- 100.0% $50,358
======= ========
</Table>
-----------------------------
+ Non income producing security
* Securities exempt from registration under rule 144A of the
Securities Act of 1993. These securities may be sold in
transactions exempt from registration, normally to qualified
institutional buyers. At August 31, 2003 the aggregate value
of these securities was $4,591 (in thousands) representing
9.1% of net assets.
(1) Bond in default
(2) Fair valued security -- see Note 2
(3) Variable rate security -- the rate reflected is as of August
31, 2003; maturity date reflects next reset date.
(4) Security is a "step up" bond where the coupon rate increases
or steps up at a predetermined rate. Rate shown reflects the
increased rate.
(5) PIK ("Payment-in-kind") payment made with additional
securities in lieu of cash.
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<Table>
<Caption>
------------------------------------------------------
NET
UNREALIZED
CONTRACT IN DELIVERY DEPRECIATION
TO DELIVER EXCHANGE FOR DATE (IN THOUSANDS)
------------------------------------------------------
EUR 214,000 USD 232,345 11/26/03 (2)
</Table>
-----------------------------
USD -- United States Dollar
EUR -- Euro
See Notes to Financial Statements.
- ---------------------
22
O
- ---------------------
ANCHOR PATHWAY FUND
U.S. GOVERNMENT/
AAA-RATED SECURITIES SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2003
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BOND & NOTES -- 98.0% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 1.1%
Systems 2001 Asset Trust 6.66% 2013 *....................... $ 402 $ 439
Vanderbilt Acquisition Loan Trust, Series 2002-1 Class A3
5.70% 2023................................................ 225 229
--------
668
--------
CONSUMER GOODS -- 2.4%
AESOP Funding II, LLC 3.85% 2006 *.......................... 200 205
Capital One Auto Finance Trust 4.03% 2006................... 200 204
Chase Manhattan Auto Owner Trust 3.49% 2006................. 182 184
Coast-to-Coast Motor Vehicle Owner Trust 7.33% 2006 *....... 191 193
Franklin Auto Trust 4.51% 2010.............................. 200 209
Household Automotive Trust 4.37% 2008....................... 225 233
MMCA Automobile Trust 4.30% 2010............................ 225 227
--------
1,455
--------
ENERGY -- 1.3%
Chilquinta Energia Finance Co., LLC 6.47% 2008 *............ 250 270
Rowan Cos., Inc. 5.88% 2012................................. 492 534
--------
804
--------
FINANCE -- 22.5%
Banc America Mtg. Securities Corp. zero coupon 2033 (1)..... 358 357
KFW International Finance, Inc. 2.50% 2005.................. 250 251
ACLC Business Loan Receivables Trust 5.41% 2003 *(1)........ 146 149
Ameriquest Mtg. Securities, Inc. 2.43% 2033................. 450 450
Banc of America Commercial Mtg., Inc. 6.50% 2036............ 200 218
Bear Stearns Adjustable Rate Mortgage Trust 3.70% 2003...... 250 251
Bear Stearns Adjustable Rate Mortgage Trust 4.24% 2003...... 157 158
Brazilian Diversified Payment Rights 1.86% 2003 *(1)(2)..... 100 99
Brazilian Diversified Payment Rights Finance Co. 1.94% 2003
*(1)(2)................................................... 200 198
California Infrastructure SCE-1 6.38% 2003.................. 300 321
Capital Auto Receivables Trust 2.89% 2009................... 125 124
Capital One Master Trust 6.31% 2011......................... 225 243
Chase Commercial Mtg. Securities Corp., Series 1998-2 Class
A2 6.39% 2030............................................. 250 274
Comed Transitional Funding Trust 5.63% 2009................. 325 349
Countrywide Home Loans, Inc. 3.58% 2003 (1)................. 237 233
Credit Suisse First Boston Mtg. Corp 1.46% 2010 (2)......... 250 250
Credit Suisse First Boston Mtg. Corp. 4.37% 2033............ 224 222
Credit Suisse First Boston Mtg. Corp. 4.64% 2037............ 246 256
General Electric Capital Corp. 6.75% 2032................... 300 321
GGP Mall Properties Trust 5.01% 2011 *...................... 123 129
GMAC Commercial Mtg. Security, Inc. 5.83% 2033.............. 134 142
GMAC Commercial Mtg. Security, Inc., Series 1997-C1 Class A3
6.87% 2029................................................ 250 275
GRCT Consumer Loan Trust 6.25% 2020 *....................... 196 197
Merrill Lynch Mtg. Investors, Inc., Series 1995-C3 Class A3
7.12% 2003 (3)............................................ 83 85
Morgan Stanley Capital I, Inc., Series 1998-HF2 Class A2
6.48% 2030................................................ 500 550
Mortgage Capital Funding, Inc., Series 1998-MC-1 Class A1
6.42% 2030................................................ 747 792
Nomura Asset Securities Corp., Series 1998-D6 Class A1A
6.28% 2030................................................ 766 819
</Table>
---------------------
23
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BOND & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
FINANCE (continued)
Nordstrom Private Label Credit Card Master Note Trust,
Series 2001-1A 4.82% 2010 *............................... $ 250 $ 261
Ocwen Residential MBS Corp., Series 1998-R1 Class AWAC 5.07%
2040 *(3)................................................. 471 449
Pass-Through Amortizing Credit Card Trust, Series 2002-1A
Class A1FL 1.86% 2003 *(2)................................ 140 140
Peco Energy Transition Trust, Series 1999-A Class A6 6.05%
2009...................................................... 325 353
PF Export Receivables Master Trust 6.60% 2011 *............. 250 272
PP&L Transition Bond Co., LLC, Series 1999-1 Class A8 7.15%
2009...................................................... 725 826
Residential Asset Mtg. Products, Inc. 3.50% 2003 (1)........ 275 278
Residential Funding Mtg. Securities II, Series 2001-HI3
Class AI4 6.09% 2015...................................... 300 301
Residential Funding Mtg. Securities II, Series 2001-HS2
Class A4 6.43% 2016....................................... 88 90
Saxon Asset Securities Trust, Series 2002-2 Class AF3 4.61%
2003...................................................... 225 231
Security National Mtg. Loan Trust, Series 2000-1 Class A2
8.75% 2024 *(1)........................................... 215 228
SLM Student Loan Trust 1.67% 2003 (2)....................... 200 199
Southern Capital Corp. 5.70% 2023 *......................... 201 207
Structured Asset Securities Corp. zero coupon 2033 (1)...... 165 161
Structured Asset Securities Corp., Series 1998-RF1 Class 1
8.68% 2003 *(3)........................................... 294 334
Structured Asset Securities Corp., Series 1998-RF2 Class A
8.52% 2003 *(3)........................................... 460 521
Structured Asset Securities Corp., Series 1999-RF1 Class A
7.88% 2003 *(3)........................................... 285 308
Washington Mutual Mortgage Pass Through Certificates 4.39%
2033 (1).................................................. 113 113
Washington Mutual 3.84% 2033 (1)............................ 239 235
Washington Mutual 3.57% 2033 (3)............................ 250 251
WFS Financial Owner Trust, Series 2002-3 Class A4 3.50%
2010...................................................... 250 255
--------
13,726
--------
U.S. GOVERNMENT & AGENCIES -- 44.4%
Federal Home Loan Mtg. Corp. 1.88% 2008..................... 100 100
Federal Home Loan Mtg. Corp. 4.10% 2008..................... 605 610
Federal Home Loan Mtg. Corp. 4.50% 2013..................... 625 598
Federal Home Loan Mtg. Corp. 4.50% TBA...................... 500 491
Federal Home Loan Mtg. Corp. 5.25% 2006..................... 1,000 1,065
Federal Home Loan Mtg. Corp. 5.50% 2013..................... 78 79
Federal Home Loan Mtg. Corp. 5.50% TBA...................... 750 744
Federal Home Loan Mtg. Corp. 5.75% 2009..................... 250 256
Federal Home Loan Mtg. Corp. 6.00% 2016-2032................ 1,295 1,323
Federal Home Loan Mtg. Corp. 6.50% 2016-2017................ 651 683
Federal Home Loan Mtg. Corp. 6.75% 2031..................... 250 279
Federal Home Loan Mtg. Corp. 7.00% 2015-2017................ 295 312
Federal Home Loan Mtg. Corp. 7.20% 2006 (1)................. 986 1,101
Federal Home Loan Mtg. Corp. 7.50% 2029..................... 88 94
Federal Home Loan Mtg. Corp. 8.00% 2012-2017................ 104 112
Federal Home Loan Mtg. Corp. 12.50% 2013.................... 20 20
Federal Home Loan Mtg. Corp. Structured Pass Through
Securities 4.76% 2021..................................... 150 153
Federal Home Loan Mtg. Corp. Structured Pass Through
Securities 5.50% 2042..................................... 325 332
Federal National Mtg Assoc. 3.42% 2027...................... 7 7
Federal National Mtg Assoc. 4.23% 2033...................... 733 729
Federal National Mtg. Assoc. 4.77% 2010..................... 253 261
Federal National Mtg. Assoc. 4.80% 2022..................... 475 490
Federal National Mtg. Assoc. 5.0% 2018...................... 448 451
Federal National Mtg. Assoc. 5.10% 2042..................... 225 228
Federal National Mtg. Assoc. 5.50% 2016 -- 2021............. 668 674
Federal National Mtg. Assoc. 6.00% 2013 -- 2016............. 1,307 1,357
Federal National Mtg. Assoc. 6.25% 2029..................... 125 131
Federal National Mtg. Assoc. 6.50% 2011 -- 2032............. 1,635 1,713
Federal National Mtg. Assoc. 6.85% 2026..................... 557 602
Federal National Mtg. Assoc. 7.00% 2017 -- 2041............. 461 492
Federal National Mtg. Assoc. 7.25% 2030..................... 725 856
</Table>
- ---------------------
24
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
BOND & NOTES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCIES (continued)
Federal National Mtg. Assoc. 7.50% 2029 -- 2031............. $ 179 $ 193
Federal National Mtg. Assoc. 10.15% 2003 (3)................ 397 458
Federal National Mtg. Assoc. 11.83% 2003 (3)................ 233 259
Government National Mtg. Assoc. 4.78% 2018.................. 147 154
Government National Mtg. Assoc. 5.00% TBA................... 870 843
Government National Mtg. Assoc. 5.50% TBA................... 125 125
Government National Mtg. Assoc. 6.00% 2013 -- 2029.......... 1,134 1,170
Government National Mtg. Assoc. 6.50% 2023 -- 2028.......... 831 1,588
Government National Mtg. Assoc. 7.00% 2017 -- 2029.......... 1,042 1,107
Government National Mtg. Assoc. 7.50% 2022 -- 2032.......... 626 670
Government National Mtg. Assoc. 8.00% 2017 -- 2030.......... 576 624
Government National Mtg. Assoc. 8.50% 2016.................. 31 34
Government National Mtg. Assoc. 9.50% 2009.................. 697 761
Small Business Administration 5.76% 2021.................... 184 189
Small Business Administration 6.07% 2003.................... 193 200
Small Business Administration Participation Certificates
4.75% 2022................................................ 343 329
Small Business Administration Participation Certificates
4.84% 2023................................................ 541 520
Small Business Administration Participation Certificates
5.08% 2022................................................ 172 168
Small Business Administration Participation Certificates
6.44% 2021................................................ 932 988
Small Business Administration Participation Certificates
6.63% 2021................................................ 248 265
--------
26,988
--------
UNITED STATES TREASURY -- 26.3%
United States Treasury Bonds 5.25% 2029..................... 1,925 1,893
United States Treasury Bonds 6.88% 2025..................... 125 149
United States Treasury Bonds 7.88% 2021..................... 750 977
United States Treasury Bonds 8.13% 2019..................... 400 529
United States Treasury Inflation Indexed Bond 3.38% 2007.... 1,447 1,567
United States Treasury Inflation Indexed Bond 3.63% 2008.... 851 938
United States Treasury Notes 4.38% 2007..................... 250 263
United States Treasury Notes 5.00% 2011..................... 1,750 1,842
United States Treasury Notes 5.75% 2005..................... 4,500 4,856
United States Treasury Notes 6.00% 2004 -- 2009............. 1,500 1,586
United States Treasury Notes 6.63% 2007..................... 750 848
United States Treasury Notes 6.88% 2006..................... 500 559
--------
16,007
--------
TOTAL INVESTMENT SECURITIES (cost $58,618).................. 59,648
--------
</Table>
---------------------
25
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 5.8% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES
Abbott Laboratories 1.02% due 9/03/03....................... $1,100 $ 1,099
E.W. Scripps Co. 1.01% due 9/10/03 (4)...................... 400 400
General Electric Capital Corp. 1.09% due 9/02/03 (4)........ 1,000 1,000
Receivables Capital Corp. 1.06% due 9/15/03 (4)............. 1,000 1,000
--------
TOTAL SHORT-TERM SECURITIES (cost $3,499)................... 3,499
--------
</Table>
<Table>
TOTAL INVESTMENTS --
(cost $62,117) 103.8% $63,147
Liabilities in excess of other assets -- (3.8) (2,305)
----------- --------
NET ASSETS -- 100.0% $60,842
----------- --------
----------- --------
</Table>
-----------------------------
* Securities exempt from registration under rule 144A of the
Securities Act of 1993. These securities may be sold in
transactions exempt from registration, normally to qualified
institutional buyers. At August 31, 2003 the aggregate value
of these securities was $3,889 (in thousands) representing
6.4% of net assets.
TBA Securities purchased on a forward commitment basis with an
approximate principal amount and no definitive maturity date.
The actual principal and maturity date will be determined upon
settlement date.
(1) Fair valued security -- see Note 2
(2) Security is a "floating rate" bond where the coupon rate
fluctuates. The rate steps up or down for each downgrade or
upgrade. The rate reflected is as of August 31, 2003.
(3) Variable rate security -- the rate reflected is as of August
31, 2003; maturity date reflects next reset date.
(4) The security or a portion thereof represents collateral for
TBA's.
See Notes to Financial Statements.
- ---------------------
26
O
- ---------------------
ANCHOR PATHWAY FUND
CASH MANAGEMENT SERIES INVESTMENT PORTFOLIO -- AUGUST 31, 2003
(UNAUDITED)
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES -- 101.0% (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 83.4%
American Express Credit Corp. 1.03% due 10/03/03............ $1,200 $ 1,199
Anheuser Busch, Inc. 1.00% due 9/17/03...................... 1,200 1,199
CAFCO, LLC 1.05% due 9/24/03................................ 600 600
CAFCO, LLC 1.07% due 10/21/03............................... 500 499
Clorox Co. 1.01% due 10/08/03............................... 800 799
Coca-Cola Co. 1.02% due 10/03/03............................ 1,200 1,199
Colgate Palmolive Co. 1.00% due 9/24/03..................... 1,000 999
Du Pont (E.I.) de Nemours and Co. 1.02% due 9/26/03......... 1,100 1,099
E.W. Scripps Co. 1.01% due 9/10/03.......................... 1,300 1,300
Exxon Asset Management Co. 1.00% due 9/10/03................ 1,000 1,000
Gannett Co, Inc. 1.02% due 9/04/03.......................... 1,200 1,200
General Electric Capital Corp. 1.09% due 9/02/03............ 1,100 1,100
Golden Peanut Co. 1.02% due 9/03/03......................... 800 800
Harley-Davidson Dealer Funding 1.01% due 10/03/03........... 800 799
Harley-Davidson Dealer Funding 1.03% due 9/08/03............ 350 350
Kimberly- Clark Corp. 1.00% due 10/20/03.................... 1,000 999
Merck & Co., Inc. 1.02% due 9/29/03......................... 720 719
Merck & Co., Inc. 1.02% due 10/20/03........................ 400 400
Netjets, Inc. 1.02% due 9/17/03............................. 500 500
Netjets, Inc. 1.04% due 10/10/03............................ 300 300
Netjets, Inc. 1.04% due 10/16/03............................ 400 399
Park Avenue Recreation Corp. 1.05% due 9/22/03.............. 1,000 999
Pfizer, Inc. 1.01% due 9/11/03.............................. 700 700
Pfizer, Inc. 1.01% due 9/24/03.............................. 500 499
Preferred Receivables Funding 1.05% due 9/15/03............. 1,200 1,199
Receivables Capital Corp. 1.05% due 9/18/03................. 600 600
Triple A One Funding Corp. 1.06% due 9/04/03................ 1,200 1,200
Verizon Network Fund 1.03% due 9/12/03...................... 900 900
Wells Fargo Bank NA 1.06% due 10/17/03...................... 1,000 1,000
Yale University 1.06% due 10/10/03.......................... 1,000 999
--------
TOTAL CORPORATE SHORT-TERM NOTES (cost $25,555)............. 25,555
--------
</Table>
---------------------
27
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM SECURITIES (CONTINUED) (IN THOUSANDS) (IN THOUSANDS)
---------------------------------------------------------------------------------------------
UNITED STATES TREASURY -- 17.6%
United States Treasury Bills .85% due 9/25/03............... $1,800 $ 1,799
United States Treasury Bills .91% due 10/30/03.............. 2,700 2,696
United States Treasury Bills .91% due 10/02/03.............. 900 899
--------
TOTAL UNITED STATES TREASURY (cost $5,394).................. 5,394
--------
</Table>
<Table>
TOTAL INVESTMENTS -- (cost $30,949) 101.0% $30,949
Liabilities in excess of other assets -- (1.0) (312)
------- --------
NET ASSETS -- 100.0% $30,637
======= =======
</Table>
<Table>
Allocation of investments as a percentage of net assets by industry as of
August 31, 2003:
Financial Services.......................................... 20.5%
U.S. Government & Agencies.................................. 17.6%
Food & Household Products................................... 16.3%
Health & Personal........................................... 10.8%
Broadcasting & Publishing................................... 8.1%
Business Services........................................... 6.8%
Energy...................................................... 6.8%
Transportation.............................................. 3.9%
Machinery & Equipment....................................... 3.7%
Appliances & Household Durables............................. 3.6%
Telecommunications.......................................... 2.9%
-----
101%
=====
</Table>
See Notes to Financial Statements.
- ---------------------
28
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2003 (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
----------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investment securities, at value*.......... $477,949 $ 94,894 $508,585 $74,615 $ 45,342 $59,648
Short-term securities*.................... 48,178 10,960 39,180 4,149 3,499 3,499
Cash...................................... 72 4 76 95 47 13
Foreign cash.............................. 822 363 619 -- -- --
Receivables for --........................ -- -- -- -- -- --
Fund shares sold........................ 30 15 92 69 -- --
Dividends and accrued interest.......... 164 372 1,379 546 838 438
Sales of investments.................... 23,748 -- 1,159 -- 712 8
Prepaid expenses.......................... 5 1 6 1 1 1
--------------------------------------------------------------------------------
550,968 106,609 551,096 79,475 50,439 63,607
--------------------------------------------------------------------------------
LIABILITIES:
Payables for --
Fund shares redeemed.................... 157 34 164 41 24 212
Purchases of investments................ 9,777 321 818 -- -- 2,495
Advisory fees........................... 134 55 138 22 14 17
Business manager fees................... 89 21 92 14 10 11
Other accrued expenses.................... 63 56 62 36 31 30
Unrealized depreciation on forward foreign
currency contracts...................... -- -- -- -- 2 --
--------------------------------------------------------------------------------
10,220 487 1,274 113 81 2,765
--------------------------------------------------------------------------------
NET ASSETS................................ $540,748 $106,122 $549,822 $79,362 $ 50,358 $60,842
================================================================================
Shares of beneficial interest outstanding
(unlimited shares authorized)........... 21,273 14,539 28,073 7,984 5,784 5,537
Net asset value, offering and redemption
price per share......................... $ 25.42 $ 7.30 $ 19.59 $ 9.94 $ 8.71 $ 10.99
================================================================================
COMPOSITION OF NET ASSETS:
Capital paid in........................... $456,907 $114,025 $525,770 $76,100 $ 64,734 $56,824
Accumulated undistributed net investment
income (loss)........................... 1,333 2,127 13,402 3,654 6,082 4,180
Accumulated undistributed net realized
gain (loss) on investments and foreign
currency transactions................... (50,811) (17,851) (8,140) (2,246) (18,948) (1,192)
Unrealized appreciation (depreciation) on
investments............................. 133,300 7,812 18,776 1,854 (1,508) 1,030
Unrealized foreign exchange gain (loss) on
other assets and liabilities............ 19 9 14 -- (2) --
--------------------------------------------------------------------------------
Net Assets:........................... $540,748 $106,122 $549,822 $79,362 $ 50,358 $60,842
================================================================================
---------------
*Cost
Investment securities................... $344,649 $ 87,082 $489,809 $72,761 $ 46,850 $58,618
================================================================================
Short-term securities................... $ 48,178 $ 10,960 $ 39,180 $ 4,149 $ 3,499 $ 3,499
================================================================================
Foreign cash............................ $ 803 $ 356 $ 605 $ -- $ -- $ --
================================================================================
<Caption>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
ASSETS:
Investment securities, at value*.......... $ --
Short-term securities*.................... 30,949
Cash...................................... 31
Foreign cash.............................. --
Receivables for --........................ --
Fund shares sold........................ 58
Dividends and accrued interest.......... --
Sales of investments.................... --
Prepaid expenses.......................... 1
----------
31,039
----------
LIABILITIES:
Payables for --
Fund shares redeemed.................... 354
Purchases of investments................ --
Advisory fees........................... 10
Business manager fees................... 6
Other accrued expenses.................... 32
Unrealized depreciation on forward foreign
currency contracts...................... --
----------
402
----------
NET ASSETS................................ $30,637
==========
Shares of beneficial interest outstanding
(unlimited shares authorized)........... 2,945
Net asset value, offering and redemption
price per share......................... $ 10.40
==========
COMPOSITION OF NET ASSETS:
Capital paid in........................... $30,188
Accumulated undistributed net investment
income (loss)........................... 450
Accumulated undistributed net realized
gain (loss) on investments and foreign
currency transactions................... (1)
Unrealized appreciation (depreciation) on
investments............................. --
Unrealized foreign exchange gain (loss) on
other assets and liabilities............ --
----------
Net Assets:........................... $30,637
==========
---------------
*Cost
Investment securities................... $ --
==========
Short-term securities................... $30,949
==========
Foreign cash............................ $ --
==========
</Table>
See Notes to Financial Statements.
---------------------
29
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 2003 (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
----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME:
Income:
Interest................................ $ 183 $ 239 $ 188 $ 694 $1,987 $1,426
Dividends............................... 1,828 1,599 5,772 778 90 --
--------------------------------------------------------------------------------
Total income*.................... 2,011 1,838 5,960 1,472 2,077 1,426
--------------------------------------------------------------------------------
EXPENSES:
Advisory fees........................... 761 316 781 126 88 114
Business management fees................ 507 121 520 84 59 76
Custodian fees.......................... 64 74 73 27 26 28
Audit and tax fees...................... 10 16 10 10 13 13
Reports to investors.................... 14 2 13 1 -- --
Trustees' fees.......................... 6 1 6 1 1 1
Legal fees.............................. 3 1 4 1 1 1
Insurance expense....................... 2 1 2 -- -- --
Other expenses.......................... 2 -- 2 -- -- --
--------------------------------------------------------------------------------
Total expenses................... 1,369 532 1,411 250 188 233
--------------------------------------------------------------------------------
Net investment income (loss).............. 642 1,306 4,549 1,222 1,889 1,193
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments... 26,272 (834) (6,634) 481 696 394
Net realized foreign exchange gain (loss)
on other assets and liabilities......... (25) 14 (4) -- 1 --
Change in unrealized appreciation
(depreciation) on investments........... 95,989 19,870 110,786 9,736 3,101 (1,927)
Change in unrealized foreign exchange gain
(loss) on other assets and
liabilities............................. 16 (5) 13 -- (3) --
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currencies...... 122,252 19,045 104,161 10,217 3,795 (1,533)
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............... $122,894 $20,351 $108,710 $11,439 $5,684 $ (340)
================================================================================
<Caption>
CASH
MANAGEMENT
SERIES
-----------------------------------------------------------------
NET INVESTMENT INCOME:
Income:
Interest................................ $201
Dividends............................... --
----------
Total income*.................... 201
----------
EXPENSES:
Advisory fees........................... 61
Business management fees................ 41
Custodian fees.......................... 26
Audit and tax fees...................... 13
Reports to investors.................... --
Trustees' fees.......................... --
Legal fees.............................. 1
Insurance expense....................... --
Other expenses.......................... --
----------
Total expenses................... 142
----------
Net investment income (loss).............. 59
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments... --
Net realized foreign exchange gain (loss)
on other assets and liabilities......... --
Change in unrealized appreciation
(depreciation) on investments........... --
Change in unrealized foreign exchange gain
(loss) on other assets and
liabilities............................. --
----------
Net realized and unrealized gain (loss) on
investments and foreign currencies...... --
----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............... $ 59
==========
</Table>
- ---------------
* Net of foreign witholding taxes of $19; $198; $80 and $11 (in thousands)
on Growth, International, Growth-Income and Asset Allocation Series,
respectively.
See Notes to Financial Statements.
- ---------------------
30
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED AUGUST 31, 2003 (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
----------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss).............. $ 642 $ 1,306 $ 4,549 $ 1,222 $ 1,889 $ 1,193
Net realized gain (loss) on investments... 26,272 (834) (6,634) 481 696 394
Net realized foreign exchange gain (loss)
on other assets and liabilities......... (25) 14 (4) -- 1 --
Change in unrealized appreciation
(depreciation) on investments........... 95,989 19,870 110,786 9,736 3,101 (1,927)
Change in unrealized foreign exchange gain
(loss) on other assets and
liabilities............................. 16 (5) 13 -- (3) --
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations............. 122,894 20,351 108,710 11,439 5,684 (340)
--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS PAID TO
SHAREHOLDERS:
From net investment income................ -- -- -- -- -- --
From net realized gains................... -- -- -- -- -- --
--------------------------------------------------------------------------------
Total dividends and distributions paid to
shareholders............................ -- -- -- -- -- --
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 15,519 2,218 13,406 3,235 5,378 3,214
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... -- -- -- -- -- --
Cost of shares repurchased................ (38,504) (10,938) (41,631) (8,070) (10,106) (17,220)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ (22,985) (8,720) (28,225) (4,835) (4,728) (14,006)
--------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS:................................. 99,909 11,631 80,485 6,604 956 (14,346)
NET ASSETS:
Beginning of period....................... 440,839 94,491 469,337 72,758 49,402 75,188
--------------------------------------------------------------------------------
End of period............................. $540,748 $106,122 $549,822 $79,362 $ 50,358 $ 60,842
================================================================================
---------------
Accumulated undistributed net investment
income (loss)........................... $ 1,333 $ 2,127 $ 13,402 $ 3,654 $ 6,082 $ 4,180
================================================================================
Shares issued and repurchased:
Sold.................................... 680 333 749 341 648 291
Issued in reinvestment of dividends and
distributions......................... -- -- -- -- -- --
Repurchased............................. (1,701) (1,662) (2,367) (856) (1,194) (1,551)
--------------------------------------------------------------------------------
Net increase (decrease)................... (1,021) (1,329) (1,618) (515) (546) (1,260)
================================================================================
<Caption>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
OPERATIONS:
Net investment income (loss).............. $ 59
Net realized gain (loss) on investments... --
Net realized foreign exchange gain (loss)
on other assets and liabilities......... --
Change in unrealized appreciation
(depreciation) on investments........... --
Change in unrealized foreign exchange gain
(loss) on other assets and
liabilities............................. --
----------
Net increase (decrease) in net assets
resulting from operations............. 59
----------
DIVIDENDS AND DISTRIBUTIONS PAID TO
SHAREHOLDERS:
From net investment income................ --
From net realized gains................... --
----------
Total dividends and distributions paid to
shareholders............................ --
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 12,447
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... --
Cost of shares repurchased................ (23,102)
----------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ (10,655)
----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS:................................. (10,596)
NET ASSETS:
Beginning of period....................... 41,233
----------
End of period............................. $ 30,637
==========
---------------
Accumulated undistributed net investment
income (loss)........................... $ 450
==========
Shares issued and repurchased:
Sold.................................... 1,197
Issued in reinvestment of dividends and
distributions......................... --
Repurchased............................. (2,222)
----------
Net increase (decrease)................... (1,025)
==========
</Table>
See Notes to Financial Statements.
---------------------
31
O
- ---------------------
ANCHOR PATHWAY FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED FEBRUARY 28, 2003
(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
-----------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss).............. $ 803 $ 1,265 $ 8,897 $ 2,718 $ 4,257 $ 2,767
Net realized gain (loss) on investments... (14,684) (2,222) 1,022 (720) (3,333) 671
Net realized foreign exchange gain (loss)
on other assets and liabilities......... (43) (267) 8 1 (45) --
Change in unrealized appreciation
(depreciation) on investments........... (128,664) (24,593) (140,768) (16,509) 1,441 1,669
Change in unrealized foreign exchange gain
(loss) on other assets and
liabilities............................. 56 323 1 -- 1 --
---------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations............. (142,532) (25,494) (130,840) (14,510) 2,321 5,107
---------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS PAID TO
SHAREHOLDERS:
From net investment income................ (986) (1,684) (9,860) (3,170) (4,730) (3,240)
From net realized gains................... -- -- (13,785) -- -- --
---------------------------------------------------------------------------------
Total dividends and distributions paid to
shareholders............................ (986) (1,684) (23,645) (3,170) (4,730) (3,240)
---------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 38,129 8,557 24,084 8,779 9,578 33,652
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... 986 1,684 23,645 3,170 4,730 3,240
Cost of shares repurchased................ (141,249) (31,771) (114,224) (18,184) (13,352) (22,057)
---------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ (102,134) (21,530) (66,495) (6,235) 956 14,835
---------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS... (245,652) (48,708) (220,980) (23,915) (1,453) 16,702
NET ASSETS:
Beginning of period....................... 686,491 143,199 690,317 96,673 50,855 58,486
---------------------------------------------------------------------------------
End of period............................. $ 440,839 $ 94,491 $ 469,337 $ 72,758 $ 49,402 $ 75,188
=================================================================================
---------------
Accumulated undistributed net investment
income (loss)........................... $ 691 $ 821 $ 8,853 $ 2,432 $ 4,193 $ 2,987
=================================================================================
Shares issued and repurchased:
Sold.................................... 1,674 1,201 1,303 917 1,208 3,043
Issued in reinvestment of dividends and
distributions......................... 47 264 1,446 356 658 298
Repurchased............................. (6,497) (4,672) (6,323) (1,928) (1,681) (2,013)
---------------------------------------------------------------------------------
Net increase (decrease)................... (4,776) (3,207) (3,574) (655) 185 1,328
=================================================================================
<Caption>
CASH
MANAGEMENT
SERIES
------------------------------------------ ----------
OPERATIONS:
Net investment income (loss).............. $ 397
Net realized gain (loss) on investments... --
Net realized foreign exchange gain (loss)
on other assets and liabilities......... --
Change in unrealized appreciation
(depreciation) on investments........... --
Change in unrealized foreign exchange gain
(loss) on other assets and
liabilities............................. --
----------
Net increase (decrease) in net assets
resulting from operations............. 397
----------
DIVIDENDS AND DISTRIBUTIONS PAID TO
SHAREHOLDERS:
From net investment income................ (1,338)
From net realized gains................... --
----------
Total dividends and distributions paid to
shareholders............................ (1,338)
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................. 67,857
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... 1,338
Cost of shares repurchased................ (76,151)
----------
Net increase (decrease) in net assets
resulting from capital share
transactions............................ (6,956)
----------
TOTAL INCREASE (DECREASE) IN NET ASSETS... (7,897)
NET ASSETS:
Beginning of period....................... 49,130
----------
End of period............................. $ 41,233
==========
---------------
Accumulated undistributed net investment
income (loss)........................... $ 391
==========
Shares issued and repurchased:
Sold.................................... 6,398
Issued in reinvestment of dividends and
distributions......................... 129
Repurchased............................. (7,183)
----------
Net increase (decrease)................... (656)
==========
</Table>
See Notes to Financial Statements.
- ---------------------
32
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 American Pathway II Variable Annuity, a
separate account of AIG SunAmerica Life Assurance Company (formerly Anchor
National Life Insurance Company) which offers annuity contracts. AIG SunAmerica
Life Assurance Company is a wholly-owned subsidiary of AIG SunAmerica Life
Insurance Company, an Arizona Corporation, which is a wholly-owned subsidiary of
AIG SunAmerica, Inc., a Delaware Corporation, which in turn is a wholly-owned
subsidiary of American International Group, Inc. ("AIG"), a Delaware
Corporation.
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 appreciation 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. Under normal market conditions the portfolio will include:
40% - 80% in equity securities, 20% - 50% in fixed-income securities, and
0% - 40% in money market instruments.
The HIGH-YIELD BOND SERIES seeks high current income with capital appreciation
as a secondary objective by investing under normal circumstances, at least 80%
of net assets in higher yielding, higher risk, lower rated or unrated corporate
bonds.
The U.S. GOVERNMENT/AAA-RATED SECURITIES SERIES seeks high current income
consistent with prudent investment risk and preservation of capital by investing
under normal circumstances, at least 80% of net assets in a combination of
securities guaranteed (i.e., backed by the full faith and credit of the U.S.
government) or sponsored by the U.S. Government and other debt securities rated
in the highest rating category or unrated but determined to be of equivalent
quality.
The CASH MANAGEMENT SERIES seeks high current yield while preserving capital by
investing in high quality money market instruments.
INDEMNIFICATIONS: Under the Fund's organizational documents, its officers and
trustees are indemnified against certain liability arising out of the
performance of their duties to the Fund. In addition, in the normal course of
business the Fund enters into contracts that contain a variety of
representations and warranties which provide general indemnifications. The
Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund expects the risk of loss to be remote.
2. SIGNIFICANT ACCOUNTING POLICIES: The preparation of financial statements in
accordance with accounting principles generally accepted in the United States of
America 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 generally valued based upon closing sales
prices reported on recognized securities exchanges. Securities listed on the
NASDAQ exchange are valued using the NASDAQ Official Closing Price ("NOCP").
Generally, the NOCP will be the last sale price unless the reported trade for
the securities is outside the range of the bid/ask price. In such cases, the
NOCP will be normalized to the nearer of the bid or ask price. For listed
securities having no sales reported and for unlisted securities, such securities
will be valued based upon the last reported bid price. 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
---------------------
33
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 or if a
development/event occurs that may significantly impact the value of the
securities then these securities are fair valued as determined pursuant to
procedures adopted in good faith under the direction of the Fund's Trustees.
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 based on the exchange rate of such currencies against U.S. dollars on
the date of valuation.
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 the end of the period. 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 located in the statement of operations 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.
MORTGAGE-BACKED DOLLAR ROLLS: During the six months ended August 31, 2003, the
U.S. Government/AAA-Rated Securities Series entered into dollar rolls using "to
be announced" ("TBA") mortgage-backed securities ("TBA Rolls"). TBA transactions
are recorded for book purposes, based on the type of the transaction. For TBA
transactions that are entered into as financing transactions (selling a
mortgage-backed security for delivery in the future and simultaneously
contracting to purchase a substantially similar security at a specified future
date), income is recorded for the difference between the current sale price and
the lower forward price for the future purchase. For TBA transactions for which
delivery of the security is accepted, the transaction is treated as a
purchase/sale transaction and a realized gain or loss is recorded on the date
that the transaction is entered into for the difference between the purchase and
sale price. The U.S. Government/AAA-Rated Securities Series had TBA Rolls
outstanding at period-end, which are included in the payable for investments
purchased in the Statement of Assets and Liabilities.
INVESTMENT SECURITIES LOANED: During the six months ended August 31, 2003, the
International Series participated in securities lending with qualified brokers.
The International Series may lend portfolio securities to the extent of
one-third of the Series' total assets. In lending portfolio securities to
brokers, the Series receives cash as collateral against the loaned securities,
which must be maintained at not less than 100% of the market value of the loaned
securities during the period of the loan. The Series may use the cash collateral
received to invest in short-term investments, which earn interest income or to
cover bank overdrafts. Any interest earned from the investment of the collateral
is recorded by the Series, net of the portion of interest that is rebated to the
borrowing broker. If the amounts are used to cover bank overdrafts, the broker
rebates incurred are reflected as interest expense on the Statement of
Operations. As with other extensions of credit, should the borrower of the
securities fail financially, the Series may bear the risk of delay in recovery
or may be subject to replacing the loaned securities by purchasing them with the
cash collateral held, which may be less than 100% of the market value of such
securities at the time of replacement. At August 31, 2003, there were no
securities on loan in the Fund.
SECURITIES TRANSACTIONS, DIVIDENDS, INVESTMENT INCOME AND EXPENSES: Security
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. For financial statements purposes, the Fund amortizes all
premiums and accretes all discounts on fixed income securities. 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. Interest earned on cash balances held at the custodian are
shown as custody credits on the Statement of Operations.
Dividends from net investment income and capital gain distributions, if any,
are paid annually.
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 accounting principles
generally accepted in the United States of America. 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 as of the
Fund's fiscal year end 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.
- ---------------------
34
It is the Fund's policy to continue to comply with the requirements of the
Internal Revenue Code, as amended, 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. Each Fund is considered a separate entity for tax purposes.
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 or to enhance return. 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.
3. FEDERAL INCOME TAXES: The following details the tax basis of distributions
as well as the components of distributable earnings. The tax basis components of
distributable earnings differ from the amounts reflected in the Statement of
Assets and Liabilities by temporary book/tax differences primarily arising from
wash sales, post October losses, investments in passive foreign investment
companies, and derivatives transactions (dollars in thousands).
<Table>
<Caption>
FOR THE YEAR ENDED FEBRUARY 28, 2003
----------------------------------------------------------------
DISTRIBUTABLE EARNINGS TAX DISTRIBUTIONS
------------------------------------- ------------------------
UNREALIZED
ORDINARY LONG-TERM APPRECIATION ORDINARY LONG-TERM
INCOME GAINS (DEPRECIATION) INCOME CAPITAL GAINS
----------------------------------------------------------------
Growth Series........................................ 690 (69,368) 37,311 986 --
International Series................................. 852 (12,707) (12,058) 1,684 --
Growth-Income Series................................. 12,731 18,133 (93,226) 13,670 9,975
Asset Allocation Series.............................. 2,801 (1,056) (8,227) 3,170 --
High-Yield Bond Series............................... 4,200 (18,947) (4,523) 4,730 --
U.S. Government/AAA-Rated Securities Series.......... 3,276 (1,581) 2,591 3,240 --
Cash Management Series............................... 392 (1) -- 1,338 --
</Table>
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for federal tax purposes, including short-term securities were as
follows (dollars in thousands):
<Table>
<Caption>
AS OF AUGUST 31, 2003
---------------------------------------------------
AGGREGATE AGGREGATE NET
UNREALIZED UNREALIZED UNREALIZED COST OF
GAIN (LOSS) GAIN (LOSS) INVESTMENTS
---------------------------------------------------
Growth Series*....................................... $152,033 $(18,733) $133,300 $392,827
International Series*#............................... 15,267 (7,455) 7,812 98,042
Growth-Income Series*#............................... 83,904 (66,316) 17,588 530,177
Asset Allocation Series*............................. 9,688 (8,179) 1,509 77,255
High-Yield Bond Series*#............................. 3,139 (4,561) (1,422) 50,263
U.S. Government/AAA-Rated Securities Series*#........ 1,640 (946) 694 62,453
Cash Management Series............................... -- -- -- --
<Caption>
AS OF FEBRUARY 28, 2003
-----------------------
CAPITAL CAPITAL
LOSS LOSS
CARRYOVER+ UTILIZED
-----------------------
Growth Series*....................................... $69,368 $ --
International Series*#............................... 12,707 --
Growth-Income Series*#............................... -- --
Asset Allocation Series*............................. 1,056 324
High-Yield Bond Series*#............................. 18,947 --
U.S. Government/AAA-Rated Securities Series*#........ 1,581 284
Cash Management Series............................... 1 --
</Table>
- ---------------
* Post 10/31/02 Capital Loss Deferrals: Growth Series $7,689, International
Series $4,324, Growth-Income Series $22,261, Asset Allocation Series
$1,698, High-Yield Bond Series $692.
# Post 10/31/02 Currency Loss Deferrals: International Series $15,
Growth-Income Series $6 and High-Yield Bond Series $18.
+ Net capital loss carryovers reported as of February 28, 2003, 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. These carryovers expire 2005-2011.
4. BUSINESS MANAGER AND INVESTMENT ADVISER: AIG SunAmerica Asset Management
Corp. (the "Business Manager"), an indirect wholly-owned subsidiary of AIG,
pursuant to a business management agreement, manages the business affairs and
the administration of the Fund. For providing these services, the Business
Manager receives a monthly fee which is accrued daily based on the average net
assets of each series of the Fund. Except for the International Series, the
Business Manager fee accrues at the annual rate of .24% on that portion of each
series' average daily net assets not exceeding $30,000,000 and .20% on that
---------------------
35
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.
5. 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, 2003, were as follows (dollars in thousands):
<Table>
<Caption>
U.S.
GOVERNMENT/
ASSET AAA-RATED CASH
GROWTH INTERNATIONAL GROWTH-INCOME ALLOCATION HIGH-YIELD SECURITIES MANAGEMENT
SERIES SERIES SERIES SERIES BOND SERIES SERIES SERIES
----------------------------------------------------------------------------------------------
Purchases of portfolio
securities.................. 65,311 12,278 44,115 3,920 13,371 2,808 --
Sales of portfolio
securities.................. 123,196 19,822 75,715 10,339 7,641 1,729 --
U.S. government securities
excluded above were as
follows:
Purchases of U.S. government
securities.................. -- -- -- 2,958 -- 10,365 --
Sales of U.S. government
securities.................. -- -- -- 2,594 -- 12,142 --
</Table>
6. COMMITMENTS AND CONTINGENCIES: The Fund has established committed and
uncommitted lines of credit with State Street Bank and Trust Company, the Fund's
custodian. Interest is currently payable at the Federal Funds rate plus 50 basis
points on the committed line and State Street's discretionary bid rate on the
uncommitted line of credit. There is also a commitment fee of 10 basis points
per annum for the daily unused portion of the $75 million committed line of
credit, which is included in other expenses in the Statement of Operations.
During the six months ended August 31, 2003, there were no borrowings under
either line of credit.
7. INVESTMENT CONCENTRATION: Some of the Series may invest internationally,
including in "emerging markets" countries. These securities may be denominated
in currencies other than U.S. dollars. While investing internationally may
reduce portfolio risk by increasing the diversification of portfolio investment,
the value of the investment may be affected by fluctuating currency values,
changing local and regional economic, political and social conditions, and
greater market volatility. In addition, foreign securities may not be as liquid
as domestic securities. At August 31, 2003, the International Series had 19.7%
of its net assets invested in equity securities of companies domiciled in Japan.
8. OTHER INFORMATION: On or about January 16, 2004 pursuant to exemptive relief
granted by the Securities and Exchange Commission, AIG SunAmerica Life Assurance
Company will substitute shares of the Growth Series, International Series,
Growth-Income Series, Asset Allocation Series, High-Yield Bond Series, U.S.
Government/AAA-Rated Securities Series, and Cash Management Series of the Anchor
Pathway Fund for class 3 shares of the Growth Fund, International Fund, Growth-
Income Fund, Asset Allocation Fund, High-Income Bond Fund, U.S.
Government/AAA-Rated Securities Fund, and Cash Management Fund of the American
Funds Insurance Series.
- ---------------------
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*
- -----------------------------------------------------------------------------------------------------------------------------
Growth Series
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
2/28/01 60.69 0.29 (7.49) (7.20) (0.11) (13.87) 39.51 (14.50)
2/28/02 39.51 0.04 (5.03) (4.99) (0.28) (8.88) 25.36 (12.81)
2/28/03 25.36 0.03 (5.58) (5.55) (0.04) -- 19.77 (21.89)
8/31/03(2) 19.77 0.03 5.62 5.65 -- -- 25.42 28.58
International Series
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
2/28/01 21.68 0.22 (4.90) (4.68) (0.06) (2.07) 14.87 (22.31)
2/28/02 14.87 0.12 (1.41) (1.29) (0.26) (5.81) 7.51 (7.78)
2/28/03 7.51 0.07 (1.53) (1.46) (0.10) -- 5.95 (19.51)
8/31/03(2) 5.95 0.09 1.26 1.35 -- -- 7.30 22.69
Growth-Income Series
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
2/28/01 27.36 0.65 3.97 4.62 (0.69) (7.37) 23.92 18.10
2/28/02 23.92 0.31(1) (0.65)(1) (0.34) (0.62) (2.21) 20.75 (1.01)
2/28/03 20.75 0.28 (4.42) (4.14) (0.33) (0.47) 15.81 (20.09)
8/31/03(2) 15.81 0.16 3.62 3.78 -- -- 19.59 23.91
Asset Allocation Series
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
2/28/01 12.77 0.48 1.35 1.83 (0.56) (1.86) 12.18 15.13
2/28/02 12.18 0.35(1) (0.29)(1) 0.06 (0.50) (1.18) 10.56 0.75
2/28/03 10.56 0.31 (1.93) (1.62) (0.38) -- 8.56 (15.52)
8/31/03(2) 8.56 0.15 1.23 1.38 -- -- 9.94 16.12
High-Yield Bond Series
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)
2/28/01 10.09 0.92 (0.21) 0.71 (1.46) -- 9.34 7.96
2/28/02 9.34 0.82(1) (0.79)(1) 0.03 (1.09) -- 8.28 0.24
2/28/03 8.28 0.70 (0.36) 0.34 (0.82) -- 7.80 4.95
8/31/03(2) 7.80 0.30 0.61 0.91 -- -- 8.71 11.67
U.S. Government/AAA-Rated Securities Series
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
2/28/01 10.20 0.63 0.64 1.27 (0.83) -- 10.64 12.98
2/28/02 10.64 0.55(1) 0.15(1) 0.70 (0.65) -- 10.69 6.53
2/28/03 10.69 0.45 0.41 0.86 (0.49) -- 11.06 8.12
8/31/03(2) 11.06 0.23 (0.30) (0.07) -- -- 10.99 (0.63)
Cash Management Series
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
2/28/01 11.08 0.63 -- 0.63 (0.69) -- 11.02 5.76
2/28/02 11.02 0.29 (0.01) 0.28 (0.68) -- 10.62 2.57
2/28/03 10.62 0.09 0.01 0.10 (0.33) -- 10.39 0.94
8/31/03(2) 10.39 0.02 (0.01) 0.01 -- -- 10.40 0.10
<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
- --------------------- --------------------------------------------------
Growth Series
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
2/28/01 934,195 0.55 0.52 40.05
2/28/02 686,491 0.56 0.13 13.32
2/28/03 440,839 0.55 0.15 25.35
8/31/03(2) 540,748 0.54+ 0.26+ 14.13
International Series
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
2/28/01 193,042 1.00 1.18 59.68
2/28/02 143,199 1.09 1.07 19.64
2/28/03 94,491 1.02 1.06 47.19
8/31/03(2) 106,122 1.05+ 2.58+ 13.54
Growth-Income Series
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
2/28/01 793,681 0.55 2.37 34.01
2/28/02 690,317 0.56 1.38(1) 28.86
2/28/03 469,337 0.55 1.54 25.29
8/31/03(2) 549,822 0.55+ 1.76+ 9.25
Asset Allocation Series
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
2/28/01 109,834 0.61 3.69 14.43
2/28/02 96,673 0.65 3.02(1) 10.51
2/28/03 72,758 0.64 3.21 24.03
8/31/03(2) 79,362 0.64+ 3.23+ 9.42
High-Yield Bond Series
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
2/28/01 60,726 0.71 9.42 29.26
2/28/02 50,855 0.75 9.01(1) 69.21
2/28/03 49,402 0.73 8.85 39.31
8/31/03(2) 50,358 0.71+ 7.01+ 16.53
U.S. Government/AAA-Rated Securities Series
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
2/28/01 57,544 0.72 6.01 74.76
2/28/02 58,486 0.74 5.11(1) 115.42
2/28/03 75,188 0.67 4.14 53.55
8/31/03(2) 60,842 0.66+ 4.01+ 20.04
Cash Management Series
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 --
2/28/01 50,042 0.72 5.61 --
2/28/02 49,130 0.78 2.61 --
2/28/03 41,233 0.74 0.90 --
8/31/03(2) 30,637 0.82+ 0.34+ --
</Table>
- ---------------
@ Calculated based upon average shares outstanding
* Total return is not annualized and does not reflect expenses that apply to
the separate accounts of AIG Sun America Life Assurance 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) As discussed in the Notes to the Financial Statements, the Fund has adopted
the provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began accreting discount and amortizing premium on debt
securities. The per share effect of this changes for the year ended February
28, 2002 on net investment income (with the offset to net realized and
unrealized gains and losses) was 0.00, (0.01), 0.01, and (0.03) for the
Growth-Income Series, Asset Allocation Series, High-Yield Bond Series, and
U.S. Government/AAA-Rated Securities Series, respectively. The effect of
this change on the ratio of net investment income to average net assets was
0.00%, (0.06)%, 0.08%, and (0.26)% for the Growth-Income Series, Asset
Allocation Series, High-Yield Bond Series, and U.S. Government/AAA-Rated
Securities Series, respectively. Per share information and the ratios for
the years prior to February 28, 2002 have not been restated to reflect this
change in accounting policy.
(2) Unaudited
See Notes to Financial Statements.
---------------------
37
O
- ---------------------
ANCHOR PATHWAY FUND
TRUSTEE INFORMATION (UNAUDITED)
The following table contains information regarding the Trustees that oversee
operations of the Portfolios and other investment companies within the Fund
complex.
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
NAME, FUND COMPLEX
ADDRESS AND POSITION HELD DATE SERVICE PRINCIPAL OCCUPATION(S) OVERSEEN BY
DATE OF BIRTH* WITH TRUST BEGAN DURING PAST 5 YEARS TRUSTEE(1)
-------------- ------------- ------------ ----------------------------- -------------
INDEPENDENT TRUSTEES
Carl D. Covitz Trustee Feb. 2001 Owner and President, Landmark 59
DOB: March 31, 1939 Capital, Inc. (since 1973)
Monica C. Lozano Trustee Dec. 1998 President and Chief Operating 59
DOB: July 21, 1956 Officer (since 2000) La
Opinion (newspaper publishing
concern) and Associate
Publisher (1991-1999) and
Executive Editor (1995-1999)
thereof
Gilbert T. Ray Trustee Feb. 2001 Retired Partner, O'Melveny & 59
DOB: September 18, Myers LLP (since 2000); and
1944 Attorney (1972-2000) thereof
Allan L. Sher Trustee Jan. 1997 Retired Brokerage Executive 59
DOB: October 19, 1931 (since 1992)
Bruce G. Willison Trustee Feb. 2001 Dean, Anderson School at UCLA 59
DOB: October 16, 1948 (since 1999)
INTERESTED TRUSTEE
Jana W. Greer(3) Trustee and Feb. 2001 President, AIG SunAmerica 59
DOB: December 30, Chairman Retirement Markets, Inc.
1951 (since 1996); and Executive
Vice President thereof
(1994-1996); Senior Vice
President and Director, AIG
SunAmerica, Inc. (since 1991)
<Caption>
NAME,
ADDRESS AND OTHER DIRECTORSHIPS HELD
DATE OF BIRTH* BY TRUSTEE(2)
-------------- --------------------------------------
INDEPENDENT TRUSTEES
Carl D. Covitz Trustee, SunAmerica Series Trust
DOB: March 31, 1939 ("SAST") and Seasons Series Trust
("Seasons"); Director, Kayne Anderson
Mutual Funds (since 1995); Director,
Arden Realty, Inc. (since 1995).
Monica C. Lozano Trustee, SAST and Seasons; Trustee,
DOB: July 21, 1956 University of Southern California
(since 1991); Director, California
Healthcare Foundation (since 1998);
Director, Tenet Healthcare Corporation
(since 2002); Director, The Walt
Disney Company (since 2000); Director,
Union Bank of California (since 2001).
Gilbert T. Ray Trustee, SAST and Seasons; Director,
DOB: September 18, Advance Auto Parts, Inc. (retail auto
1944 and home supply store) (since 2002);
Director, Watts, Wyatt & Company
(services-management consulting
services) (since 2000).
Allan L. Sher Trustee, SAST and Seasons; Director,
DOB: October 19, 1931 Bowl America, Inc. (since 1997).
Bruce G. Willison Trustee, SAST and Seasons; Director,
DOB: October 16, 1948 Nordstrom, Inc. (since 1997);
Director, Homestore, Inc. (real estate
agents and managers) (since 2003);
Director, Healthnet International,
Inc. (business services) (since 2000).
INTERESTED TRUSTEE
Jana W. Greer(3) Trustee, SAST and Seasons; Director,
DOB: December 30, National Association for Variable
1951 Annuities (since 1999).
</Table>
- ---------------
* The business address for each Trustee is 1 SunAmerica Center, Los Angeles,
CA 90067-6022.
(1) The "Fund Complex" consists of all registered investment company portfolios
for which SAAMCo serves as investment advisor or business manager. The "Fund
Complex" includes the SunAmerica Equity Funds (7 funds), SunAmerica Income
Funds (6 funds), SunAmerica Money Market Funds (2 funds), SunAmerica Senior
Floating Rate Fund, Inc. (1 fund), SunAmerica Strategic Investment Series,
Inc. (7 funds), SunAmerica Style Select Series, Inc. (15 portfolios), Anchor
Pathway Fund (7 funds), Anchor Series Trust (8 portfolios), Seasons Series
Trust (19 portfolios), SunAmerica Series Trust (33 portfolios), VALIC
Company I (22 funds), and VALIC Company II (15 funds).
(2) Directorships of companies required to report to the Securities and Exchange
Commission under the Securities Exchange Act of 1934 (i.e. "public
companies") or other investment companies registered under the Investment
Company Act of 1940.
(3) Interested Trustee, as defined within the Investment Company Act of 1940
because she serves as President of AIG SunAmerica Retirement Markets, Inc.
Additional information concerning the Trustees is contained in the Statement
of Additional Information and is available without charge by calling (800)
445-SUN2.
- ---------------------
38
(THIS PAGE INTENTIONALLY LEFT BLANK)
---------------------
39
(THIS PAGE INTENTIONALLY LEFT BLANK)
- ---------------------
40
[AIG SunAmerica LOGO]
1 SunAmerica Center
Los Angeles, California 90067-6022
ADDRESS SERVICE REQUESTED
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE PURCHASERS UNLESS
ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS.
P-1201-SAR (R 10/03)
- --------------------------------------------------------------------------------
Presorted
Standard
U.S. Postage Paid
Towne, Inc.
- --------------------------------------------------------------------------------
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Reserved.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Reserved.
Item 9. Controls and Procedures.
(a) An evaluation was performed within 90 days of the filing of this report,
under the supervision and with the participation of the registrant's
management, including the President and Treasurer, of the effectiveness of
the design and operation of the registrant's disclosure controls and
procedures. Based on that evaluation, the registrant's management,
including the President and Treasurer, concluded that the registrant's
disclosure controls and procedures are effective.
(b) There was no change in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act)
that occurred during the Registrant's last fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) Not applicable.
(b) (1) Certification pursuant to Rule 30a-2 under the Investment Company Act
of 1940 (17 CFR 270.30a-2) attached hereto as Exhibit 99.CERT.
(2) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Anchor Pathway Fund
By: /s/ Robert M. Zakem
Robert M. Zakem President
Date: November 7, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert M. Zakem
Robert M. Zakem President
Date: November 7, 2003
By: /s/ Donna M. Handel
Donna M. Handel
Treasurer
Date: November 7, 2003