<PAGE>
P R O S P E C T U S
AMERICAN NATIONAL FUNDS GROUP
[AMERICAN NATIONAL]
APRIL 1, 1996
AMERICAN NATIONAL GROWTH FUND, INC.
AMERICAN NATIONAL INCOME FUND, INC.
TRIFLEX FUND, INC.
ONE MOODY PLAZA, GALVESTON, TEXAS 77550
TELEPHONE NUMBER: (409) 763-8272 - TOLL FREE:
1 (800) 231-4639
DIRECTORS
<TABLE>
<S> <C>
Ralph S. Clifford Ira W. Painton
Paul D. Cummings Donald P. Stevens
Jack T. Currie Steven H. Stubbs
Michael W. McCroskey
</TABLE>
<TABLE>
<S> <C>
INVESTMENT ADVISOR AND MANAGER LEGAL COUNSEL
Securities Management and Research, Inc. Greer, Herz & Adams, L.L.P.
One Moody Plaza One Moody Plaza
Galveston, Texas 77550 Galveston, Texas 77550
UNDERWRITER AND REDEMPTION AGENT INDEPENDENT AUDIOTRS
Securities Management and Research, Inc. KPMG Peat Marwick LLP
One Moody Plaza 700 Louisiana
Galveston, Texas 77550 Houston, Texas 77002
CUSTODIAN TRANSER AGENT, REGISTRAR AND
Securities Management and Research, Inc. DIVIDEND PAYING AGENT
One Moody Plaza Securities Management and Research, Inc.
Galveston, Texas 77550 One Moody Plaza
Galveston, Texas 77550
</TABLE>
This Prospectus concisely sets forth the information a prospective investor
should know about the American National Growth Fund, Inc. ("Growth Fund"), a
long-term growth fund; American National Income Fund, Inc. ("Income Fund"), an
income fund with appreciation secondary and the Triflex Fund, Inc. ("Triflex
Fund") a balanced fund seeking conservation of principal, current income and
long-term capital appreciation, (together "the Funds" or the "American National
Funds Group") before investing. Please read and retain this Prospectus for
future reference. A Statement of Additional Information for each Fund dated
April 1, 1996, has been filed with the Securities and Exchange Commission and is
available free of charge by writing Securities Management and Research, Inc.
("SM&R") at One Moody Plaza, Galveston, Texas 77550 or calling 1-800-231-4639.
The Statements of Additional Information are incorporated herein by reference in
accordance with the Commission's rules.
While the use of this combined Prospectus subjects each Fund to possible
liability as the result of statements or omissions regarding another Fund, the
Board of Directors of each Fund considers the benefits to the respective Fund of
using a combined Prospectus to outweigh the risk.
No dealer, sales representative, or other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus (and/or each Fund's Statement of Additional Information referred
to above) and if given or made, such information or representations must not be
relied upon as having been authorized by the Funds or SM&R, the Fund's
investment adviser, manager and principal underwriter. This Prospectus does not
constitute an offer or solicitation by anyone in any state in which such offer
or solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to your registered representative,
or to the Funds at the telephone numbers or mailing address listed above.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK. FURTHER, SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Form 9090(4/96)
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SHAREHOLDER INQUIRIES..................................................... 1
THE FUNDS AT A GLANCE..................................................... 2
TABLE OF FEES AND EXPENSES................................................ 4
FINANCIAL HIGHLIGHTS...................................................... 5
PERFORMANCE............................................................... 8
INVESTMENT OBJECTIVES AND POLICIES........................................ 8
THE FUNDS AND THEIR MANAGEMENT............................................ 12
PURCHASE OF SHARES........................................................ 15
WHEN ARE PURCHASES EFFECTIVE?............................................. 15
DETERMINATION OF OFFERING PRICE........................................... 16
SPECIAL PURCHASE PLANS.................................................... 17
RETIREMENT PLANS.......................................................... 20
DIVIDENDS, CAPITAL GAINS AND FEDERAL TAXES................................ 20
HOW TO REDEEM............................................................. 24
PERFORMANCE ILLUSTRATIONS................................................. 24
APPENDIX.................................................................. 27
APPLICATION
</TABLE>
THE FUNDS AT A GLANCE
The Funds were originally incorporated as follows: Growth Fund, State of
Florida, May 5, 1953; Income Fund, State of Texas, May 1, 1970 and the Triflex
Fund, State of Texas, November 20, 1987. The Funds were subsequently
reincorporated in the State of Maryland on November 30, 1989. They are
diversified, open-end management investment companies (mutual funds) which
continuously sell and redeem their shares of common stock at the current per
share offering price.
MINIMUM PURCHASE: $100 minimum initial investment and $20 minimum for each
subsequent investment as described under "Special Purchase Plans".
INVESTMENT OBJECTIVES AND INVESTOR SUITABILITY PROFILE:
AMERICAN NATIONAL GROWTH FUND, INC. ("GROWTH FUND")
OBJECTIVE: The Growth Fund seeks long-term capital growth by investing its
assets in securities that provide an opportunity for capital appreciation.
INVESTOR SUITABILITY PROFILE: The Growth Fund is designed for investors with
modest means who want to invest small amounts of money over a period of time to
build capital for their long-range goals. These long-range goals may include
such plans as giving their children the finest education possible, retiring in
comfort, building an estate or other important long-range goals.
AMERICAN NATIONAL INCOME FUND, INC. ("INCOME FUND")
OBJECTIVE: The Income Fund seeks current income with a secondary objective of
long-term capital appreciation to protect against inflation.
INVESTOR SUITABILITY PROFILE: The Income Fund is designed for investors who are
seeking to protect the future purchasing power of their money while availing
themselves of the potential for attractive growth while reducing their exposure
to the volatility of the market as a whole.
TRIFLEX FUND, INC. ("TRIFLEX FUND")
OBJECTIVE: The Triflex Fund seeks to conserve principal, produce current income
and achieve long-term capital appreciation.
2
<PAGE>
INVESTOR SUITABILITY PROFILE: The Triflex Fund is designed for retirees, widows
or anyone seeking supplemental income and conservation of the purchasing power
of their capital.
MANAGEMENT: Securities Management and Research, Inc. ("SM&R") makes the
investment choices for the Funds. SM&R has served as investment adviser, manager
and distributor of mutual funds since 1966. Refer to "THE FUNDS AND THEIR
MANAGEMENT" for additional information.
PORTFOLIO MANAGEMENT PERSONAL INVESTING: The Funds' Boards of Directors have
approved a Code of Ethics which prescribes policies governing the personal
investment practices of its portfolio management. These policies are stated in
each of the Fund's Statement of Additional Information.
REDEMPTIONS: Procedures may be found under "HOW TO REDEEM".
DERIVATIVE INVESTMENTS: The Funds do not invest in interest only (IO) or
principal only (PO) securities. The Triflex Fund may invest in collateralized
mortgage obligations (CMO) from time to time. An explanation of CMO's can be
found in the Triflex Fund's Statement of Additional Information.
RISKS: Each Fund can be expected to have different investment results based on
its investment objective and different financial and market risks. Financial
risk refers to the ability of an issuer of a debt security to pay principal and
interest, and to the earnings stability and overall financial soundness of an
issuer of an equity security. Market risk refers to the degree to which the
price of a security will react to changes in conditions in securities market in
general, and with particular reference to debt securities, to changes in the
overall level of interest rates. As a result of these and other risks, the value
of the shares owned may be higher or lower than their cost.
PORTFOLIO TURNOVER RATES: Each Fund's portfolio turnover rates for the last ten
years are included in the Financial Highlights tables herein. A security will be
sold, and the proceeds reinvested, whenever it is considered prudent to do so
from the viewpoint of a Fund's objectives, regardless of the holding period of
the security. A higher rate of portfolio turnover may result in higher
transaction costs. Additionally, higher portfolio turnover may, in some cases,
have adverse tax effects on the Funds and their shareholders. Portfolio
turnovers are expected to be less than 90% per year for each of the Funds. An
explanation of turnover rate calculations and brokerage fees can be found in
each Fund's Statement of Additional Information.
3
<PAGE>
TABLE OF FEES AND EXPENSES
- --------------------------------------------------------------------------------
The purpose of the following table is to assist the investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly. See "PURCHASE OF SHARES" in this Prospectus. The example is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods.
SHAREHOLDER TRANSACTION EXPENSES(1)
<TABLE>
<CAPTION>
Growth Income Triflex
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 5.75% 5.75% 5.75%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None None None
Deferred Sales Load None None None
Redemption Fees(1) None None None
Exchange Fees None None None
</TABLE>
ANNUAL OPERATING EXPENSES
(as a Percentage of average net assets)
<TABLE>
<CAPTION>
Growth Income Triflex
<S> <C> <C> <C>
Investment Advisory Fee After Expense Reimbursement .58% .72% .55%(2)
Service Fee .24% .24% .25%
Other Expenses .16% .16% .46%
Total Operating Expenses After Expense Reimbursement .98% 1.12% 1.26%(2)
</TABLE>
The table shows actual expenses paid by shareholders. (See "THE FUNDS AND THEIR
MANAGEMENT" in this Prospectus for more information).
(1) An $8.00 transaction fee is charged for each expedited wire redemption.
(2) Without the reimbursement, the percentages shown for the Triflex Fund's
Investment Advisory Fees and Total Operating Expenses would have been .75%
and 1.46%, respectively.
This table is not intended to reflect in detail the fees and expenses associated
with an individual shareholder's investment in any of the Funds listed. It is
being provided to assist investors in gaining a more complete understanding of
fees, charges and expenses which are discussed in greater detail in the
appropriate sections of this Prospectus.
EXAMPLE OF EXPENSES
The following example illustrates the expenses an investor would pay on a
$1,000 investment in each Fund listed over various time periods assuming (i) 5%
annual return and (ii) redemption at the end of each period. Because the Funds
have no redemption fee, you would pay the same expenses whether or not you
redeemed your investment at the end of each period. An investor should not view
this example as a representation of past or future expenses and actual expenses
may be more or less than those shown.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Growth $67 $87 $109 $171
Income 68 91 116 186
Triflex 70 95 123 201
</TABLE>
4
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each period)
AMERICAN NATIONAL GROWTH FUND, INC.
The table that follows, for the periods after October 31, 1988, has been
audited by KPMG Peat Marwick LLP, independent auditors, whose unqualified report
thereon appears in the Statement of Additional Information. This information
should be read in conjunction with the related financial statements and notes
hereto included in the Statement of Additional Information. The information for
years prior to October 31, 1989, has been audited by the Funds former
independent Auditors.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 3.83 $ 4.15 $ 4.51 $ 5.07 $ 3.95 $ 4.25
Net investment income 0.08 0.06 0.06 0.08 0.08 0.10
Net realized and unrealized
gain (loss) on investments
during the period 0.88 0.15 0.31 (0.20) 1.38 (0.22)
------ ------ ------ ------ ---------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 0.96 0.21 0.37 (0.12) 1.46 (0.12)
Less distributions
Distributions from net
investment income (0.08) (0.06) (0.06) (0.08) (0.06) (0.09)
Distributions from capital
gains (0.32) (0.47) (0.67) (0.36) (0.28) (0.09)
------ ------ ------ ------ ---------- ---------
TOTAL DISTRIBUTIONS (0.40) (0.53) (0.73) (0.44) (0.34) (0.18)
------ ------ ------ ------ ---------- ---------
Net Asset Value,
End of Period $ 4.39 $ 3.83 $ 4.15 $ 4.51 $ 5.07 $ 3.95
------ ------ ------ ------ ---------- ---------
------ ------ ------ ------ ---------- ---------
TOTAL RETURN 25.20% 4.98% 8.17% (2.50)% 36.98% (2.94)%
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period
(000's omitted) $134,821 $113,250 $113,135 $111,811 $125,837 $97,298
Ratio of expenses to average
net assets 0.98 0.97 1.00 1.07 1.04 1.03
Ratio of net investment
income to average net assets 1.67 1.46 1.31 1.42 1.63 2.41
Portfolio turnover rate 37.00 46.26 59.67 92.28 55.95 152.13
<CAPTION>
Two Months
Ended Dec.
31, Year Ended October 31,
----------- -----------------------------------------------
1989 1989 1988 1987 1986
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 4.85 $ 4.48 $ 5.14 $ 5.05 $ 4.02
Net investment income 0.03 0.13 0.09 0.06 0.06
Net realized and unrealized
gain (loss) on investments
during the period 0.17 0.67 0.13 0.53 1.06
----------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS 0.20 0.80 0.22 0.59 1.12
Less distributions
Distributions from net
investment income (0.07) (0.12) (0.10) (0.06) (0.06)
Distributions from capital
gains (0.73) (0.31) (0.78) (0.44) (0.03)
----------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.80) (0.43) (0.88) (0.50) (0.09)
----------- -------- -------- -------- --------
Net Asset Value,
End of Period $ 4.25 $ 4.85 $ 4.48 $ 5.14 $ 5.05
----------- -------- -------- -------- --------
----------- -------- -------- -------- --------
TOTAL RETURN 4.07%** 19.90% 5.88% 12.57% 28.13%
RATIOS (IN PERCENTAGES)/SUPPL
Net Assets, end of period
(000's omitted) $108,058 $104,897 $97,302 $99,413 $94,937
Ratio of expenses to average
net assets 1.06* 1.09 1.23 1.00 0.97
Ratio of net investment
income to average net assets 3.24* 2.93 2.07 1.14 1.25
Portfolio turnover rate 13.74 70.94 46.79 44.95 25.52
</TABLE>
*Ratios annualized
**Returns are not annualized
5
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each period)
AMERICAN NATIONAL INCOME FUND, INC.
The table that follows, for the periods after July 31, 1988, has been audited
by KPMG Peat Marwick LLP, independent auditors, whose unqualified report thereon
appears in the statement of Additional Information. This information should be
read in conjunction with the related financial statements and notes thereto
included in the Statement of Additional Information. The information that
follows for years prior to July 31, 1989, has been audited by the Funds former
independent Auditors.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
----------- ----------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 18.90 $ 21.66 $ 22.09 $ 22.94 $ 19.35 $ 20.11
Net investment income 0.62 0.62 0.56 0.57 0.69 0.79
Net realized and unrealized
gain (loss) on investments
during the period 4.82 (0.75) 1.75 0.17 4.85 (0.67)
----------- ----------- --------- --------- -------- -------
TOTAL FROM INVESTMENT
OPERATIONS 5.44 (0.13) 2.31 0.74 5.54 0.12
Less distributions
Distributions from net
investment income (0.63) (0.61) (0.60) (0.53) (0.64) (0.81)
Distributions from capital
gains (1.12) (2.02) (2.14) (1.06) (1.31) (0.07)
----------- ----------- --------- --------- -------- -------
TOTAL DISTRIBUTIONS (1.75) (2.63) (2.74) (1.59) (1.95) (0.88)
----------- ----------- --------- --------- -------- -------
Net Asset Value,
End of period $ 22.59 $ 18.90 $ 21.66 $ 22.09 $ 22.94 $ 19.35
----------- ----------- --------- --------- -------- -------
----------- ----------- --------- --------- -------- -------
TOTAL RETURN 29.12% (0.61)% 10.63% 3.31% 29.06% 0.75%
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period
(000's omitted) $141,058 $114,231 $119,956 $108,076 $99,192 $74,329
Ratio of expenses to average
net assets 1.12 1.12 1.17 1.18 1.23 1.22
Ratio of net investment
income to average net assets 2.89 2.86 2.51 2.56 3.25 4.14
Portfolio turnover rate 44.00 52.46 70.71 44.03 40.23 37.51
<CAPTION>
Five
Months
Ended Dec.
31, Year Ended July 31,
---------- -----------------------------------------------
1989 1989 1988 1987 1986
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 20.75 $ 19.80 $ 23.77 $ 21.52 $ 19.67
Net investment income 0.38 0.74 0.70 0.63 0.76
Net realized and unrealized
gain (loss) on investments
during the period 1.06 3.09 (3.31) 4.33 2.88
---------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS 1.44 3.83 (2.61) 4.96 3.64
Less distributions
Distributions from net
investment income (0.44) (0.74) (0.83) (0.68) (0.77)
Distributions from capital
gains (1.64) (2.14) (0.53) (2.03) (1.02)
---------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (2.08) (2.88) (1.36) (2.71) (1.79)
---------- -------- -------- -------- --------
Net Asset Value,
End of period $ 20.11 $ 20.75 $ 19.80 $ 23.77 $ 21.52
---------- -------- -------- -------- --------
---------- -------- -------- -------- --------
TOTAL RETURN 6.99%** 32.31% (11.20)% 25.71% 19.90%
RATIOS (IN PERCENTAGES)/SUPPL
Net Assets, end of period
(000's omitted) $69,579 $67,765 $65,789 $85,817 $60,510
Ratio of expenses to average
net assets 1.17* 1.18 1.10 1.00 0.99
Ratio of net investment
income to average net assets 3.92* 3.82 3.46 3.00 3.78
Portfolio turnover rate 14.62 31.02 56.63 24.71 17.11
</TABLE>
* Ratios annualized
** Returns are not annualized
6
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each period)
TRIFLEX FUND, INC.
The table that follows, for the periods after July 31, 1988, has been audited
by KPMG Peat Marwick, LLP, independent auditors, whose unqualified report
thereon appears in the Statement of Additional Information. This information
should be read in conjunction with the related financial statements and notes
thereto included in this Statement of Additional Information. The information
that follows for years prior to July 31, 1989, has been audited by the Funds
former independent Auditors.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 14.32 $ 15.35 $ 15.81 $ 16.20 $ 13.98 $ 14.62
Net investment income 0.49 0.45 0.41 0.46 0.61 0.80
Net realized and unrealized gain
(loss) on investments during the
period 2.67 (0.22) 0.58 0.01 2.79 (0.66)
------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 3.16 0.23 0.99 0.47 3.40 0.14
Less distributions
Distributions from net investment
income (0.49) (0.45) (0.41) (0.35) (0.62) (0.70)
Distributions from capital gains (0.14) (0.81) (1.04) (0.51) (0.56) (0.08)
------- -------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.63) (1.26) (1.45) (0.86) (1.18) (0.78)
------- -------- -------- -------- -------- --------
Net Asset Value,
End of Period $ 16.85 $ 14.32 $ 15.35 $ 15.81 $ 16.20 $ 13.98
------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- --------
TOTAL RETURN 22.29% 1.49% 6.31% 3.00% 24.53% 1.37%
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period
(000's omitted) $21,757 $19,023 $20,469 $21,482 $21,916 $19,328
Ratio of expenses to average net
assets 1.26(1) 1.25(1) 1.32(1) 1.15(1) 1.28(1) 1.31
Ratio of net investment income to
average net assets 2.99 2.91 2.49 2.96 3.95 5.57
Portfolio turnover rate 16.39 46.95 70.98 61.66 104.21 184.54
<CAPTION>
Five Months
Ended Dec.
31, Year Ended July 31,
----------- -----------------------------------------------
1989 1989 1988 1987 1986
----------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 15.90 $ 14.90 $ 14.59 $ 15.30 $ 14.65
Net investment income 0.37 0.89 0.88 1.18 1.40
Net realized and unrealized gain
(loss) on investments during the
period (0.33) 1.34 0.54 (0.67) 0.65
----------- --------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.04 2.23 1.42 0.51 2.05
Less distributions
Distributions from net investment
income (0.39) (0.90) (1.11) (1.22) (1.40)
Distributions from capital gains (0.93) (0.33) 0.00 0.00 0.00
----------- --------- -------- -------- -------
TOTAL DISTRIBUTIONS (1.32) (1.23) (1.11) (1.22) (1.40)
----------- --------- -------- -------- -------
Net Asset Value,
End of Period $ 14.62 $ 15.90 $ 14.90 $ 14.59 $ 15.30
----------- --------- -------- -------- -------
----------- --------- -------- -------- -------
TOTAL RETURN 0.32%** 15.94% 10.18% 3.48% 11.94%
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL
Net Assets, end of period
(000's omitted) $21,382 $21,002 $19,687 $10,396 $7,856
Ratio of expenses to average net
assets 1.31* 1.28 1.00 0.96 0.98
Ratio of net investment income to
average net assets 5.75* 5.99 6.01 7.84 9.21
Portfolio turnover rate 116.16 36.93 130.95 27.02 11.25
</TABLE>
The shaded area on the chart represents data for fiscal years prior to the
change in investment objectives of the Fund.
(1) Expenses for these calculations are net of a reimbursement from Securities
Management and Research, Inc. Without these reimbursements, the ratio of
expenses to average net assets would have been 1.46%, 1.45%, 1.39%, 1.32% and
1.49% for the years ended December 31, 1995, 1994, 1993, 1992 and 1991,
respectively.
* Ratios annualized
**Returns are not annualized
7
<PAGE>
PERFORMANCE
Each Fund may include in advertisements, sales literature, shareholder reports
or other communications, total rate of return quotations and the Funds rankings
in the relevant fund category from sources such as the Lipper Analytical
Services, Inc. ("Lipper") and Weisenberger Investment Company Service
("Weisenberger"). If any advertised performance data does not reflect the
maximum sales charge, such advertisements will disclose that the sales charge
has not been deducted in computing the performance data, and that, if reflected,
the maximum sales charge would reduce the performance quoted. Additional
performance information is contained in the Funds Group Annual Report to
shareholders which is available upon request without charge.
The Funds may also include data comparing their performance with the
performance of non-related investment media, published editorial comments,
publications that monitor the performance of other mutual funds or mutual fund
indexes with similar objectives and policies. (See "COMPARISONS" in each of the
Funds Statement of Additional Information for a list of various media used).
Performance information may be quoted numerically or may be presented in table,
graph or other illustration.
The total return data represents past performance, which may vary for
different periods. Actual total return and principal value of an investment will
fluctuate so that investor's shares, when redeemed, may be worth more or less
than their cost. Returns include the effects of the Growth, Income and Triflex
Fund's maximum sales charge of 5.75% applied to the initial investment amount,
the change in the share price and the reinvestment at net asset value of all
dividends and capital gains (both of which are subject to applicable federal,
state and local income taxes).
AVERAGE ANNUAL RETURN
Each Fund's average annual return during specified time periods reflects the
hypothetical annually compounded return that would equate an initial one
thousand dollar investment by adding one to the computed average annual total
return, raising the sums to a power equal to the number of years covered by the
computation and multiplying the result by the one thousand dollar initial
investment. The calculation assumes deduction of the maximum sales charge from
the initial amount invested and reinvestment of all investment income dividends
and capital gain distributions on the reinvestment dates at the net asset value.
Because average annual returns tend to smooth out variations in each Fund's
return, you should recognize that they are not the same as actual year-by-year
results.
Average Annual Total Return
For the Period Ending 12/31/95
<TABLE>
<CAPTION>
20-year 10-year 5-year 1-year
<S> <C> <C> <C> <C>
Growth Fund 15.03% 11.07% 12.35% 18.11%
Income Fund 14.71% 11.03% 12.27% 21.71%
Triflex Fund -- -- 9.80% 15.29%
</TABLE>
Each Fund's performance will vary from time to time and past results are not
necessarily indicative of future results. Performance is a function of a fund's
portfolio management in selecting the type and quality of portfolio securities
and is affected by operating expenses of a Fund, market conditions and interest
rates.
CUMULATIVE TOTAL RETURN
The charts in the back of this prospectus describe the total return results of
a hypothetical $10,000 investment in each Fund for the 10-year period from
January 1, 1986 through December 31, 1995 with a maximum sales charge of 5.75%.
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has different investment objectives which it pursues through the
investment policies and techniques described below. These policies and
techniques are not fundamental and may be changed by the Board of Directors of
the Funds without shareholder approval. In addition, each Fund has adopted
certain restrictions as fundamental policies which will not be changed unless
approved by the vote, at a special meeting of stockholders, of (i) 67% of the
shares present at a meeting, at which more than 50% of each Fund's outstanding
shares are present or represented by
8
<PAGE>
proxy, or (ii) more than 50% of each Fund's outstanding shares. Each Fund's
investment restrictions adopted as fundamental policies are stated in each
Fund's Statement of Additional Information.
GROWTH FUND
The Growth Fund's portfolio investments and the composition of its total
portfolio are considered from the viewpoint of potential capital appreciation.
This composition will be adjusted from time to time to best accomplish its
investment objective under current conditions. In pursuing its objective, the
Growth Fund will invest primarily in common stocks selected in accordance with
its investment objective.
The Growth Fund may invest in convertible preferred stocks rated at least "B"
by Standard and Poor's Corporation ("S&P") or at least "b" by Moody's Investors
Service, Inc. ("Moody's") preferred stock ratings, and convertible debentures
and notes rated at least "B" by S&P's and Moody's corporate bond ratings
("convertible securities").(1) Investments in convertible securities having
these ratings may involve greater risks than convertible securities having
higher ratings. Common stocks and convertible securities purchased will be of
companies which are believed by SM&R to provide an opportunity for capital
appreciation. The proportion of assets invested in any particular type of
security can be expected to vary, depending on SM&R's appraisal of market and
economic conditions. Under normal conditions at least 50% of the Growth Fund's
total assets will be invested in common stocks. On a temporary basis the Growth
Fund may invest, in commercial paper which at the date of such investment, is
rated in one of the two top categories by one or more of the nationally
recognized statistical rating organizations ("NRSRO's"), in certificates of
deposit in domestic banks and savings institutions having at least $1 billion of
total assets and in repurchase agreements which are discussed under "Other
Investment Strategies".
INCOME FUND
The Income Fund's portfolio investments and the composition of its total
portfolio are considered not only from the viewpoint of present and potential
yield, but also from the viewpoint of potential capital appreciation. This
composition of portfolio investments will be adjusted from time to time to best
accomplish its investment objectives under current conditions.
In pursuit of its objectives, the Income Fund will invest in common stocks,
preferred stocks and marketable debt securities selected in accordance with the
Income Fund's investment objectives. Common and preferred stocks purchased will
generally be of companies with consistent and increasing dividend payment
histories which are believed by SM&R to have further earnings potential
sufficient to continue such dividend payments. Debt securities will include
publicly traded corporate bonds, debentures, notes, commercial paper, repurchase
agreements, and certificates of deposit in domestic banks and savings
institutions having at least $1 billion of total assets. The proportion of
assets invested in any particular type of security can be expected to vary,
depending on SM&R's appraisal of market and economic conditions. Under normal
conditions at least 50% of the Income Fund's assets will be invested in equity
securities rather than debt securities.
Corporate debt obligations purchased by the Income Fund will consist only of
obligations rated either Baa or better by Moody's or BBB or better by S&P. Bonds
which are rated Baa by Moody's are considered as medium grade obligations, that
is, they are neither highly protected nor poorly secured. Bonds rated BBB by S&P
are regarded as having an adequate capacity to pay interest and repay principal.
Commercial paper and notes will consist only of direct obligations of
corporations whose bonds and/or debentures are rated as set forth above.
TRIFLEX FUND
The Triflex Fund seeks to achieve its objectives by flexibly managing a
balanced portfolio of fixed-income securities such as bonds, commercial paper,
preferred stock and short-term obligations combined with common stocks and
securities convertible into common stocks. The Triflex Fund will only purchase
common stocks and convertible securities of corporations having a market
capitalization of at least $100 million, an operating history of
(1) See Appendix for a description of these ratings
9
<PAGE>
at least three (3) years and a listing on the New York Stock Exchange, American
Stock Exchange or Over-The-Counter markets. Corporate bonds purchased will
consist of obligations rated either Baa or better by Moody's or BBB or better by
S&P. Bonds which are rated Baa by Moody's are considered as medium grade
obligations, that is, they are neither highly protected nor poorly secured.
Bonds rated BBB by S&P are regarded as having an adequate capacity to pay
interest and repay principal. Commercial paper and notes will consist only of
direct obligations of corporations whose bonds and/or debentures are rated as
set forth above. The Triflex Fund may also invest in repurchase agreements. This
balanced investment policy is intended to reduce risk and to obtain results in
keeping with its objectives.
The Triflex Fund's investments will be in fixed-income securities and equity
securities as described above. However, the Triflex Fund will sometimes be more
heavily invested in equity securities and at other times it will be more heavily
invested in fixed-income securities, depending on management's appraisal of
market and economic conditions. SM&R believes that a fund that is wholly
invested in fixed-income securities carries a large interest rate risk. Interest
rate risk is the uncertainty about losses due to changes in the rate of interest
on debt instruments. The major interest rate risk for investors, however, is not
in the interest rate itself, but in the change in the market price of bonds that
results from changes in the prevailing interest rate. Higher interest rates
would mean lower bond prices and lower net asset value for the Triflex Fund's
shareholders assuming no change in its current investment objective and
portfolio. Diversifying the Triflex Fund's portfolio with investments such as
commercial paper, convertible securities and common stocks may reduce the
decline in value attributable to the increase in interest rate and resulting
decrease in the market value of bonds and will reduce the interest rate risk.
However, stock prices also fluctuate in response to a number of factors,
including, changes in general level of interest rates, economic and political
developments and other factors which impact individual companies or specific
types of companies. Such market risks cannot be avoided but can be limited
through a program of diversification and a careful and consistent evaluation of
trends in the capital market and fundamental analysis of individual equity
holdings.
The Triflex Fund's goal of preservation of capital while owning common stocks
is dependent upon various factors, including the sustained long-term growth of
the United States economy. SM&R recognizes that recessions occur but also
recognizes that the economy historically has come back from those recessions.
Therefore, SM&R believes that the United States economy will continue to grow,
that the political environment will continue to be relatively stable and that
the financial markets will continue to function in a reasonably orderly fashion.
As long as these factors occur, SM&R believes that there is a reasonable
likelihood the Triflex Fund can reach its goal of preservation of capital while
at the same time investing in common stock.
SM&R, through an ongoing program of asset allocation, will determine the
appropriate level of equity holding consistent with SM&R's outlook and
evaluation of trends in the economy and the financial markets. The Triflex
Fund's level of commitment to common stocks and specific common stock
investments will be determined as a result of this process. For example, within
an environment of rising inflation, common stocks historically have preserved
their value better than bonds; therefore, inclusion of common stocks could tend
to conserve principal better than a portfolio consisting entirely of bonds and
other debt obligations. In addition, within an environment of accelerating
growth in the economy, common stocks historically have conserved their value
better than bonds in part due to a rise in interest rates that occur
coincidentally with accelerating growth and profitability of the companies.
The Triflex Fund will not purchase a security if as a result of such purchase
less than 25% of its total assets will be in fixed-income senior securities
(including short and long-term securities, preferred stocks and convertible debt
securities and preferred stocks to the extent their value is attributable to
their fixed-income characteristics).
10
<PAGE>
OTHER INVESTMENT STRATEGIES
Each Fund, consistent with its objectives and policies, may employ one or more
of the following strategies to enhance investment results.
COMMERCIAL PAPER--Commercial paper is short-term unsecured promissory notes
issued by corporations to finance short-term credit needs. Commercial paper is
usually sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. The Fund will not invest in variable amount master demand
notes which are demand obligations that permit the investment of fluctuating
amounts at varying market rates of interest pursuant to arrangements between the
issuer and a commercial bank acting as agent for the payees of such notes,
whereby both parties have the right to buy the amount of the outstanding
indebtedness on the notes.
REPURCHASE AGREEMENTS--Each Fund may occasionally purchase repurchase agreements
in which a Fund purchases a U.S. government security subject to resale to a bank
or dealer at an agreed upon price and date. These repurchase agreements will be
entered into only with government securities dealers recognized by the Federal
Reserve Board or with member banks of the Federal Reserve System. During the
holding period, the seller must provide additional collateral if the market
value of the obligation falls below the repurchase price. The custodian for the
Fund purchasing such agreement will take title to, or actual delivery of the
security. A default by the seller might cause a Fund to experience a loss or
delay in the liquidation of the collateral securing the repurchase agreement. A
Fund might also incur disposition costs in liquidating the collateral. The Funds
will purchase only repurchase agreements maturing in seven (7) days or less of
such purchase.
CERTIFICATE OF DEPOSIT--A certificate of deposit is generally a short-term,
interest-bearing negotiable certificate issued by a commercial bank or savings
and loan association against funds deposited in the issuing institution. The
interest rate may be fixed for the stated term or may be periodically adjusted
prior to the instrument's stated maturity, based upon a specified market rate. A
bankers' acceptance is a time draft drawn on a commercial bank by a borrower,
usually in connection with an international commercial transaction to finance
the import, export, transfer or storage of goods. The borrower is liable for
payment, as is the bank, which unconditionally guarantees to pay the draft at
its face amount on the maturity date. Most bankers' acceptances have maturities
of six months or less and are traded in secondary markets prior to maturity.
Savings and loan associations whose certificates of deposit may be purchased
by the Funds are subject to regulation and examination by the Office of Thrift
Supervision. Such certificates of deposit held by the Funds do not benefit
materially from insurance from the Federal Deposit Insurance Corporation.
AMERICAN DEPOSITORY RECEIPTS ("ADRS")--ADRs are U.S. dollar-denominated
securities of foreign corporations which are traded in the U.S. on national
securities exchanges or over-the-counter and are issued by domestic banks. The
banks act as custodian of the shares of the foreign stock and collect dividends
on the stock which are either reinvested or distributed to the ADR holder in
U.S. dollars. While ADRs are not considered foreign securities, they may entail
certain political, economic and regulatory risks. Such risks may include
political or social instability, excessive taxation and limitations on the
removal of funds or other assets which could adversely affect the value of a
Fund's investments. The economies of many countries in which a Fund may invest
may not be as developed as the U.S. economy and may be subject to significantly
different forces. Foreign companies are not registered with the commission and
are not generally subject to the regulatory controls imposed on U.S. issuers.
Consequently, there is generally less public information available on foreign
securities. Foreign companies are not subject to uniform accounting, auditing,
and financial reporting standards. Income from foreign securities owned may be
reduced by a withholding tax at the source, which tax would reduce income
payable to a Fund's shareholders.
11
<PAGE>
These strategies and other investment restrictions are more fully discussed in
each Fund's Statement of Additional Information under "INVESTMENT OBJECTIVES AND
POLICIES."
THE FUNDS AND THEIR MANAGEMENT
A Board consisting of seven directors has overall responsibility for
overseeing the affairs of each Fund in a manner reasonably believed to be in the
best interest of each Fund. The Boards have delegated to SM&R, the adviser, the
management of each Fund's day to day business and affairs. In addition, SM&R
invests each Fund's assets, provides administrative services and serves as
transfer agent, dividend payment agent and underwriter.
SM&R, is a wholly-owned subsidiary of American National Insurance Company
("American National"). The Moody Foundation, a private foundation, owns
approximately 23.7% of American National's common stock and the Moody National
Bank as trustee of the Libbie Shearn Moody Trust, a private trust, owns
approximately 37.6% of such shares. SM&R was incorporated in 1964 and has
managed investment companies since 1966. SM&R is also investment adviser to
American National, a Texas insurance company having its principal office in
Galveston, Texas, the American National Investment Accounts, Inc. an investment
company used to fund benefits under variable contracts issued by American
National, SM&R Capital Funds, Inc., an investment company and for the Moody
National Bank of Galveston (the "Bank"), a national bank. SM&R may, from time to
time, serve as investment adviser to other clients including banks, employee
benefit plans, other investment companies, foundations and endowment funds.
The following persons are affiliated with SM&R and the Funds as officers:
Michael W. McCroskey, Gordon D. Dixon, Emerson V. Unger, Teresa E. Axelson and
Brenda T. Koelemay.
PORTFOLIO MANAGEMENT
SM&R's portfolio management team uses a disciplined, team approach in
providing investment advisory services to the Funds. While the following
individuals are primarily responsible for the day-to-day portfolio management of
their respective Fund, all accounts are reviewed on a regular basis by SM&R's
Investment Committee to ensure that they are being invested in accordance with
investment policies.
GORDON D. DIXON, SENIOR VICE PRESIDENT, CHIEF INVESTMENT OFFICER OF
SECURITIES MANAGEMENT AND RESEARCH, INC., VICE PRESIDENT, PORTFOLIO MANAGER OF
THE GROWTH FUND. Mr. Dixon joined Securities Management and Research, Inc. in
1993. He graduated from the University of South Dakota with a B.A. in Finance
and Accounting and from Northwestern University in 1972 with an M.B.A in Finance
and Accounting. Mr. Dixon began his investment career in 1972 as an
Administrative and Research Manager with Penmark Investments. In 1979 he began
working for American Airlines in the management of the $600 million American
Airlines Pension Portfolio, of which approximately $100 million was equities. In
1984 he was employed by C&S/ Sovran Bank in Atlanta, Georgia as Director of
Equity Strategy where he had responsibility for all research, equity trading and
quantitative services groups as well as investment policy input of a portfolio
of approximately $7 billion, of which $3.5 billion was equities.
DAVID ZIMANSKY, VICE PRESIDENT, PORTFOLIO MANAGER OF THE INCOME FUND. Mr.
Zimansky joined Securities Management and Research, Inc. in 1990. He graduated
from Stanford University with an M.B.A after graduating Magna Cum Laude with
Highest Honors in History from Harvard. He began his investment career in 1982
with Goldman, Sachs & Company in the institutional equity sales department. In
1986 he began working for First Boston Corporation as Vice President, Securities
Sales responsible for convertible securities sales, business development for
options, futures and programs business in the Dallas region. In 1987 he joined
Shearson Lehman Hutton in New York as Vice President, Convertible Arbitrage
where he worked in convertible securities with clients throughout the United
States.
WILLIAM R. BERGER, C.F.A., VICE PRESIDENT, PORTFOLIO MANAGER OF THE TRIFLEX
FUND. Mr. Berger joined Securities Management and Research, Inc.
12
<PAGE>
in 1993. He graduated from Miami University, Oxford, Ohio in 1985 with a B.S.
with Honors in Accounting and Finance and from The Wharton School, University of
Pennsylvania in 1988 with an M.B.A. in Finance and Investment Management. Mr.
Berger began his investment career in 1989 with Trinity Investment Management
Corporation as an equity and balanced portfolio manager for various
discretionary accounts worth more than $80 million for corporate, endowment,
religious and public funds. Prior to joining Trinity Investment Management
Corporation Mr. Berger was a Senior Auditor for Coopers & Lybrand. Mr. Berger is
a Chartered Financial Analyst and a Certified Public Accountant.
ADVISORY AGREEMENTS
GROWTH FUND
Under the Growth Fund Investment Advisory Agreement ("Advisory Agreement"),
dated November 30, 1989, SM&R receives a basic advisory fee (the "Basic Advisory
Fee") which is adjusted for an upward or downward movement in the investment
performance during the previous thirty-six (36) monthly periods of the Fund as
compared to the Lipper Growth Fund Index (the "Lipper Index") published by
Lipper Analytical Services, Inc. This Basic Advisory Fee is computed each month
by applying to the average daily net asset value of the Fund (computed by adding
the daily net asset values for the month and dividing the resulting total by the
number of days in the month) one-twelfth (1/12th) of the annual rate as follows:
<TABLE>
<CAPTION>
On the Portion of the Fund's Basic Advisory
Average Daily Net Assets Fee Annual Rate
<S> <C>
Not exceeding $100,000,000 .750 of 1%
Exceeding $100,000,000 but
not exceeding $200,000,000 .625 of 1%
Exceeding $200,000,000 but
not exceeding $300,000,000 .500 of 1%
Exceeding $300,000,000 .400 of 1%
</TABLE>
The Basic Advisory Fee annual rate is adjusted each month by adding to or
subtracting from such rate, when appropriate, the applicable performance
adjustment amount percentage shown in the table below. The resulting advisory
fee rate is then applied to the average daily net asset value of the Fund for
the succeeding month. The advisory fee for such month will be one-twelfth
(1/12th) of the resulting dollar figure.
The performance adjustment amount will vary with the Fund's performance as
compared to the Lipper Index as shown by the following table:
<TABLE>
<CAPTION>
Performance Performance
Compared To Lipper Adjustment
Index Amount
<S> <C>
0.10% to 0.99% above +0.02%
1.00% to 1.99% above +0.04%
2.00% to 2.99% above +0.06%
3.00% to 3.99% above +0.08%
4.00% to 4.99% above +0.10%
5.00% to 5.99% above +0.12%
6.00% to 6.99% above +0.14%
7.00% to 7.99% above +0.16%
8.00% to 8.99% above +0.18%
9.00% and above +0.20%
<CAPTION>
Performance Performance
Compared To Lipper Adjustment
Index Amount
<S> <C>
0.10% to 0.99% below -0.02%
1.00% to 1.99% below -0.04%
2.00% to 2.99% below -0.06%
3.00% to 3.99% below -0.08%
4.00% to 4.99% below -0.10%
5.00% to 5.99% below -0.12%
6.00% to 6.99% below -0.14%
7.00% to 7.99% below -0.16%
8.00% to 8.99% below -0.18%
9.00% and below -0.20%
</TABLE>
See "INVESTMENT ADVISORY AND OTHER SERVICES" in the Growth Fund's Statement of
Additional Information for a more detailed description of the method used in
calculating the performance adjustment.
13
<PAGE>
AMERICAN NATIONAL FUNDS GROUP APPLICATION
Complete This Form and Mail To:
<TABLE>
<S> <C> <C>
Home Office Use (4/96)
</TABLE>
Securities Management and Research, Inc.
<TABLE>
<S> <C> <C>
Account Number
</TABLE>
One Moody Plaza
<TABLE>
<S> <C> <C>
Account Type Social Code
</TABLE>
Galveston, TX 77550
<TABLE>
<S> <C> <C>
FI Number LOI Amount
</TABLE>
To establish IRA, SEP and TSA Plans use the special forms kit developed for
their establishment.
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION
Select ONLY ONE type of registration and complete the information associated
with that section.
- --------------------------------------------------------------------------------
/ / -- INDIVIDUAL / / -- JOINT TENANT WITH "RIGHTS OF SURVIVORSHIP"
If this is to be a Joint Tenant Account, complete all information in this
section.
<TABLE>
<S> <C> <C>
- -------------------------------------------------- ------------------------------ --------------------
Individual (First, Middle, Last) Social Security Number DOB (MM/DD/YY)
- -------------------------------------------------- ------------------------------ --------------------
Joint Tenant (First, Middle, Last) Relationship Social Security Number DOB (MM/DD/YY)
</TABLE>
- --------------------------------------------------------------------------------
/ / -- UNIFORM GIFT/TRANSFER TO MINORS
<TABLE>
<S> <C> <C>
- -------------------------------------------------- ------------------------------
Name of Custodian (One Only) (First, Middle, Last) Minor's State of Residence
- -------------------------------------------------- ------------------------------ --------------------
Minor's DOB
(MM/DD/YY)
Name of Minor (One Only) (First, Middle, Last) Minor's Social Security Number
</TABLE>
- --------------------------------------------------------------------------------
/ / -- PENSION/PROFIT SHARING, DEFERRED COMPENSATION PLANS
Plan Type: / / 401(k) / / Profit Sharing / / Money Purchase / / Defined Benefit
/ / Deferred Comp / / Other _______
<TABLE>
<S> <C> <C>
- -------------------------------------------------- ------------------------------ --------------------
Trustee(s)/Custodian Tax I.D. Number Trust Dated
- -------------------------------------------------- --------------------------------------------------------
Name of Plan For the Benefit of
</TABLE>
- --------------------------------------------------------------------------------
/ / -- INDIVIDUAL TRUST, NON-QUALIFIED, CORPORATION, ESTATES, ASSOCIATIONS,
COMPANIES, OTHERS
<TABLE>
<S> <C> <C>
- -------------------------------------------------- ------------------------------
Name(s) of Trustee(s) Tax I.D. Number
- -------------------------------------------------- --------------------------------------------------------
Name of Company or Trust For the Benefit of
</TABLE>
- --------------------------------------------------------------------------------
2 MAILING ADDRESS
----------------------------------------------------------------------------
Street Address (P.O. Box acceptable if street address
given) Apt.# City State Zip Code
----------------------------------------------------------------------------
Residence Address
<TABLE>
<S> <C> <C> <C>
( ) ( ) Citizenship: / / U.S. / / Non-U.S.
----------------------------- ------------------------- ------------------
Business Phone Home Phone Indicate Country
</TABLE>
<PAGE>
3 INITIAL INVESTMENT (CHECK ONE)
- --------------------------------------------------------------------------------
/ / MAIL ORDER
Enclosed is/are my check(s) made payable to SECURITIES MANAGEMENT AND
RESEARCH, INC. for investment.
- --------------------------------------------------------------------------------
/ / TELEPHONE BUY ORDER (Not Applicable to Primary Series)
Date: __________________Fund: __________________Person Taking Order:
_____________________
- --------------------------------------------------------------------------------
/ / FEDERAL FUND WIRE
Before making an initial investment by wire, SM&R must receive an
executed application and suitability form with proper taxpayer I.D.
certification. Then direct your Federal funds wire to Moody National
Bank Galveston, Texas. Attention: Securities Management and Research,
Inc., ABA 113100091, Wire Account #035 868 9. Include the Fund name,
your Account Number and the Account Registration.
- --------------------------------------------------------------------------------
/ / PRE-AUTHORIZED CHECKS (Complete #8 below)
This is a service available to shareholders, making possible regular
monthly purchases of Fund shares to allow dollar cost averaging. You will
receive a monthly confirmation reflecting each purchase and your bank
account will reflect the amount of the draft.
Please draw $__________________ from my checking account Monthly beginning
__________________ / / 7th / / 21st
$ ______________________________ ($20 minimum) into the
______________________________ Fund
$ ______________________________ ($20 minimum) into the
______________________________ Fund
$ ______________________________ ($20 minimum) into the
______________________________ Fund
$ ______________________________ into ANICO insurance policy
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
/ / OTHER PAYMENT METHODS
/ / Billing-Franchise # ------ / / Military Allotment / / Civil Service Allotment
Complete Form 9341 Complete Form 9340
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4 FUND SELECTION(S) & DISTRIBUTION OPTION
Please check the box beside the name of each fund being purchased, select
reinvest or cash for dividends and capital gains, and specify the dollar
amount of each purchase.
<TABLE>
<C> <S> <C> <C> <C>
X FUND NAME DIVIDENDS CAPITAL GAINS AMOUNT
Growth Fund ($100 min) / / Reinvest / / Cash / / Reinvest / / Cash $
Income Fund ($100 min) / / Reinvest / / Cash / / Reinvest / / Cash $
Triflex Fund ($100 min) / / Reinvest / / Cash / / Reinvest / / Cash $
Insurance, if any $
</TABLE>
ALL DISTRIBUTIONS MUST BE REINVESTED IF A WITHDRAWAL PLAN IS ELECTED. ALL
DISTRIBUTIONS WILL BE REINVESTED UNLESS CASH IS CHECKED ABOVE.
----------------------------------------------------------------------------
Fill in ONLY if distribution checks are to be mailed to you at another
address or paid to someone other than the registered owner(s) as shown
above.
Name: ____________________________________________________________________
Address: ___________________________________________________________________
- --------------------------------------------------------------------------------
5 SYSTEMATIC WITHDRAWAL
A Systematic Withdrawal Plan (SWP) is available to shareholders who own
shares of the Fund worth $5,000 or more. SWP is subject to restrictions
described in the Fund's Prospectus.
THIS OPTION WILL BEGIN THE MONTH FOLLOWING RECEIPT OF THIS REQUEST.
1. The amount of each withdrawal shall be $______________________________.
2. Systematic withdrawals shall be made (choose one only):
/ / Monthly / / Quarterly (Mar, June, Sept,
Dec) / / Semi-Annually / / Annually
3. Please have my withdrawals mailed. I understand that the SWP checks will
be made payable to me and sent to my account mailing address unless a
special designation is referenced below:
Withdrawals are to commence on or around the 20th of _______________
(Month, Year).
- --------------------------------------------------------------------------------
Fill in ONLY if SWP checks are to be mailed to you at another address or
paid to someone other than the registered owner(s) as shown above. If
check is to be sent to a bank account, provide a void check.
Name: __________________________________________________________________
Address: _________________________________________________________________
<PAGE>
- --------------------------------------------------------------------------------
6 LETTER OF INTENT (Not Applicable to Primary Series)
Under the terms of the current prospectus, I intend to purchase, within
thirteen months from the date of receipt, shares of one or more of the
American National Funds Group and/or Government Income and/or Tax Free
Series (Excluding the Primary Series). The total amount of my purchase (at
the offering price on the date of receipt by the transfer agent) will equal
an aggregate amount not less than:
<TABLE>
<S> <C> <C> <C> <C> <C>
/ / $50,000* / / $100,000** / / $250,000 / / $500,000 / / $1,000,000 / / $1,500,000
</TABLE>
(*Growth, Income and Triflex Funds Only) (**Government Income Series and Tax
Free Series Only)
Shares of the named Funds owned by me at the date of this Letter (including
shares owned by my spouse and our children who are under the age of majority or
such other persons as described in a "single purchaser" in the current
prospectus) are held in the below-specified accounts (Please Print):
<TABLE>
<S> <C> <C> <C>
FUND NAME ACCOUNT NUMBER ACCOUNT REGISTRATION OWNER'S RELATIONSHIP TO INVESTOR*
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*Must be self, spouse or child; if child, indicate current age
/ / This is a new Letter of Intent. Date
- ------------------------------.
/ / This is an existing Letter of Intent. The Letter of Intent was signed on
(date) __________________ for (amount) $__________________
This LOI expires on the earlier of (1) 13-months from the date of first
purchase, or (2) the release to me of my shares held in escrow.
Additionally, escrow shares are not subject to the exchange privilege and,
unless agreed to by SM&R, will not be released unless my intended
investment, equals or exceeds the specified amount.
- --------------------------------------------------------------------------------
7 RIGHT OF ACCUMULATION (Not Applicable to Primary Series)
If account is entitled to a Reduced Sales Charge under the terms of the
current Prospectus, please provide the following information.
<TABLE>
<S> <C> <C> <C>
FUND NAME ACCOUNT NUMBER ACCOUNT REGISTRATION OWNER'S RELATIONSHIP TO INVESTOR
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8 BANK OF RECORD (Please attach a voided check)
<TABLE>
<S> <C> <C>
- -------------------------------------------------- --------------------------------------------------------
Name of Bank Bank ABA Number
- -------------------------------------------------- --------------------------------------------------------
Address Bank Account Number
- -------------------------------------------------- --------------------------------------------------------
City, State, Zip Account Name
</TABLE>
- --------------------------------------------------------------------------------
9 SIGNATURE(S) & CERTIFICATION
I/We hereby authorize Securities Management and Research, Inc. ("SM&R"), or
its duly authorized agents, as agent for the American National Funds Group,
to honor any requests made in accordance with the terms of this application,
and I/we further affirm that neither SM&R ("Transfer Agent") nor the
American National Funds Group shall be held liable for any loss, liability,
cost or expense for acting in accordance with this application, or any
section thereof. I/We certify that I/we have full right, power, authority
and legal capacity to purchase shares and affirm that I/we have received and
read the Prospectus and agree to its terms. Under penalties of perjury, I/we
certify (1) that the number shown on this form is my/our correct taxpayer
identification number and (2) that I/ we are not subject to backup
withholding either because (a) I/we are exempt from backup withholding, or
(b) I/we have not been notified by the Internal Revenue Service that I/we
are subject to backup withholding as a result of a failure to report all
interest or dividends, or the Internal Revenue Service has notified me/us
that I/we are no longer subject to backup withholding. If you have been
notified by the Internal Revenue Service that you are currently subject to
backup withholding, strike out phrase (2) above.
- --------------------------------------------------------------------------------
INDIVIDUAL (OR CUSTODIAN) DATE
- --------------------------------------------------------------------------------
CO-OWNER (OR CORPORATE OFFICER, PARTNER OR TRUSTEE) DATE
- --------------------------------------------------------------------------------
(IF APPLICABLE, TRUSTEE) DATE
- --------------------------------------------------------------------------------
(IF APPLICABLE, TRUSTEE) DATE
- --------------------------------------------------------------------------------
<PAGE>
10 REPRESENTATIVE INFORMATION
/ / Yes, I have completed and attached "Investor Suitability Form" new
account information (Form 8045).
----------------------------------------------------------------------------
Representative Name (print)
---------------------------------------------------------------------------
Representative Signature
---------------------------------------------------------------------------
SM&R Representative Social Security Number
- --------------------------------------------------------------------------------
11 BROKER-DEALER USE ONLY -- Please Print
We hereby submit this application for the purchase of shares of the Fund(s)
indicated in accordance with the terms of our selling agreement with
Securities Management and Research, Inc. ("SM&R"), and with the prospectus
for the Fund(s). We agree to notify SM&R of any purchases of shares made
under a Letter of Intent or Rights of Accumulation or otherwise eligible for
reduced or eliminated sales charges. If this Application includes a
Systematic Withdrawal Plan request, we guarantee the signature(s) in this
Application.
----------------------------------------------------------------------------
Dealer Name
---------------------------------------------------------------------------
Main Office Adress
---------------------------------------------------------------------------
Branch # Rep # Representative Name (print)
---------------------------------------------------------------------------
Branch Address Phone Number
---------------------------------------------------------------------------
Authorized Signature Securities Dealer Title
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCEPTED: Securities Management and Research, Inc. By
- ------------------------ Date
- ------------------------
- --------------------------------------------------------------------------------
<PAGE>
PRE-AUTHORIZED CHECK PLAN
AUTHORIZATION
I hereby authorize _____________________________________________________________
Name of bank Branch
of ____________________________________________________________________ to honor
City State
pre-authorized checks drawn on me by SECURITIES MANAGEMENT & RESEARCH, INC., One
Moody Plaza, Galveston, Texas 77550, and to charge such checks against my
checking account until further notice to you from me. I agree there will be no
liability incurred by you for payment or non-payment of any such checks drawn on
me.
_______________ ___________________________________________________
Date Signature of Customer
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(To be completed by SM&R Home Office)
---------------------------------------------------------------------------------- ----------------------------------
Date first check to be deposited by SM&R Transit Number
32 31 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13
</TABLE>
- --------------------------------------------------------------------------------
Securities Management & Research, Inc. - One Moody Plaza - Galveston, Texas
77550
AUTHORIZATION
I hereby authorize SECURITIES MANAGEMENT & RESEARCH, INC. to deposit
pre-authorized checks:
<TABLE>
<S> <C>
/ / Monthly / / New Account
/ / Quarterly / / Existing Account
/ / 7th / / Bank Change
/ / 21st / / Accumulation Account
/ / Growth Fund $ ------------ / / IRA Account
/ / Income Fund $ ------------ / / Profit Sharing Account
/ / Triflex Fund $ ------------ / / Pension Account
/ / Government Income Series $ ------------
/ / Tax Free Series $ ------------
$20 minimum per Fund.
/ / Primary Series $ ------------
$100 minimum investment.
</TABLE>
Credit to the Account of:
- ------------------------------------ ---------------------------
Exact Name on Registration Fund Account No.(s), if known
I agree that if, at any time, such checks are not honored for payment by said
bank, the pre-authorized check plan shall be discontinued. I further understand
that all shares purchased and credited to the above named are conditional, being
subject to checks being honored for payment by said bank.
- ------------------ ---------------------------------------
Date Signature of Customer
A "VOIDED" CHECK MUST BE ATTACHED TO REVERSE OF BOTTOM HALF OF AUTHORIZATION.
Form 8006
Rev. 8/93
<PAGE>
To: The bank named on the reverse side
In order to induce you to comply with the request of your customer to provide
the service authorized on the other side of this card, Securities Management &
Research, Inc. of Galveston, Texas, (the "Company") undertakes and agrees:
(1) To indemnify you and hold harmless from any loss you may suffer as a conse-
quence of your action resulting from or in connection with the execution and
issuance of any check or drafts, whether or not genuine, purporting to be
executed or issued by or on behalf of the Company and received by you in the
regular course of business for the purpose of payment in connection with the
authorization signed by your depositors, including any costs or expenses
reasonably incurred in connection therewith. In the event that any such check or
drafts should be dishonored, whether with or without cause and whether
intentionally or inadvertently, to indemnify you for any loss even though
dishonor results in the forfeiture of insurance.
(1) To refund to you any amount erroneously paid by you to the Company on any
such check or draft if claim for the amount of such erroneous payment is made by
you within twelve months of the date of check or drafts on which such erroneous
payment was made.
Michael W. McCroskey, President
Securities Management & Research, Inc.
Authorized in a resolution adopted by the Board of Directors of Securities
Management & Research, Inc., of Galveston, Texas on September 14, 1967.
STAPLE VOIDED CHECK BELOW
- --------------------------------------------------------------------------------
<PAGE>
SM&R REPRESENTATIVE USE ONLY
INVESTOR SUITABILITY FORM--NEW ACCOUNT INFORMATION
Article III, Sections 2 & 21 of the Rules of Fair Practice require a
Representative to obtain the information contained in this form in order to
accept a new account in the American National Funds Group, SM&R Capital Funds,
Inc., and other mutual funds sold by SM&R Representatives.
FOR OUTSIDE FUNDS, ALL INFORMATION REQUESTED ON THIS FORM MUST BE COMPLETED--NO
EXCEPTIONS.
- --------------------------------------------------------------------------------
ORDER RECEIVED BY: Telephone
- --------- Letter
- --------- In Person
- --------- Other
- ---------
- ------------------ Shares or $
- ------------------ of
- --------------------------------------------- (Security Being Purchased)
SOURCE OF CUSTOMER: / / Referral / / Advertising / / Direct Mail Reply / /
Existing Client / / Friend/Relative / /
- ------------------
- --------------------------------------------------------------------------------
A. ACCOUNT TYPE:
------------------------ Individual
------------------------ Joint
Distribution Option
------------------------ Corporation
/ / Cash (Indicate
------------------------ Partnership
/ / Mo. / / Qtrly
------------------------ Other Legal Entity (Type)
------------------------
------------------------
/ / Semi-Annual)
/ / Reinvest
SIGNATORS:
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
- --------------------------------------------------------------------------------
B. SECURITIES REGISTRATION OF CUSTOMER
Name(s) DOB: Purchaser
DOB: Joint Owner
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Social Security No. (Individual, Joint Accounts, Taxpayer ID No. (Trust, Estate, Pension Trust,
Custodial Accounts for Minors) Corporation, Partnership, etc.)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
C. SOURCES OF FUNDS FOR INVESTMENT
A. / / Current Earnings C. / / Gift or Inheritance E. / / Death Benefit G. / / Other Policy Proceeds
B. / / Savings D. / / Sale of Assets F. / / Maturity Proceeds H. / / ---------------------
</TABLE>
- --------------------------------------------------------------------------------
D. Is the Customer or proposed Customer employed by or associated with a member
of the NASD or NYSE? / / Yes / / No
If yes, provide the name, address and phone number of the firm:
----------------------------------------------------------------------------
What is Customer's occupation?
----------------------------------------------------------
Name and Address of Customer's Employer:
- --------------------------------------------------------------------------------
E. Does Customer have other securities holdings?: / / Yes / / No
Types: / / Stocks / / Bonds / / Mutual Funds / / Variable
Products / / Other
Are they redeeming other mutual fund shares to make this purchase? / /
Yes / / No
- --------------------------------------------------------------------------------
F. PERTINENT ADDITIONAL INFORMATION (CHECK APPROPRIATE BOXES)
<TABLE>
<S> <C>
/ / Application Attached / / Check Attached Payable To:
/ / Prototype Attached (IRA, TSA, Pension/Profit Sharing) ----------------------------------------
/ / Letter of Intent Dated ------------ for $ ------------ / / Other ------------------------------------
/ / Signed Arbitration Agreement (reverse side.)
/ / Signed Statement of Refusal to Provide Financial Information, if applicable (reverse side.)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Registered Representative's Name (print) Representative Social Security Number
Registered Representative Signature Date
</TABLE>
- --------------------------------------------------------------------------------
ACCEPTED: Securities Management and Research, Inc. By:
- ------------------------------------ Date:
- ------------------
PURCHASER SIGNATURE REQUIRED ON REVERSE SIDE
<PAGE>
INVESTMENT SUITABILITY--TO BE COMPLETED BY REGISTERED REPRESENTATIVE AND
INDIVIDUAL INVESTOR.
NASD rules require the Registered Representative to have reasonable grounds for
believing that any sale is suitable for the customer. Therefore, Registered
Representatives are required to make inquiries concerning the financial
condition of a proposed purchaser (the "Purchaser") of securities. Purchasers
are urged to supply such information so that the representative can make an
informed judgment as to the suitability for a particular Purchaser of
securities. However, Purchasers are not required to divulge such information. If
the Purchaser chooses not to do so, the Purchaser must execute Statement of
Refusal to Provide Financial Information below signifying his/ her refusal and
acknowledge that the representative requested the suitability information.
1. OCCUPATION _______________________ Phone No. Employer ______________________
Name and Address of Employer _______________________________________________
____________________________________________________________________________
<TABLE>
<S> <C> <C> <C> <C>
2. TAX STATUS
/ / Single / / Head of Household / / Married filing separate / / Other -----------------
/ / Married filing joint / / Corporation return
return or Qualifying widow(er)
with dependent child
3. MARITAL STATUS
A. / / Married B. / / Single C. / / Widowed
4. DEPENDENTS
A. / / Spouse B. / / Children: Ages ----------------- C. / / Other -----------------
5. PRIMARY PURPOSE OF INVESTMENT:
INDIVIDUAL BUSINESS
A. / / Education D. / / Tax Shelter A. / / Retirement Plan D. / / Buy-Sell
B. / / Savings E. / / Retirement B. / / Key Man E. / / Depreciation Reserve
C. / / Estate Plan F. / / ------------- C. / / Deferred Compensation F. / / -----------------
6. INVESTMENT PROFILE
1. What is your current investment preference?
/ / High Growth Potential / / Income and Growth Potential / / Maximum Safety/Modest Return
2. What is your Risk comfort level?
/ / High / / Moderate / / Limited
3. What is your financial goal time horizon?
/ / 1-5 Years / / 5-10 Years / / 10 Years and Beyond
4. What is your age range?
/ / 21-40 / / 41-59 / / 60+
5. What is your tax bracket?
/ / 15% / / 28% / / 28%+
<CAPTION>
6.
</TABLE>
<TABLE>
<S> <C>
7. Are you responsible for the financial welfare of anyone other than your immediate family (i.e. alimony, child, or
parental support, etc.)? / / Yes / / No
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Estimated Annual Income *Estimated Net Worth Life Insurance Face Amount Is the applicant a policyholder of
$ $ $ American National?
/ / Yes / / No
</TABLE>
- --------------------------------------------------------------------------------
*Net Worth is exclusive of home, furnishings and automobile
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Purchaser Signature Joint Owner Signature
</TABLE>
- --------------------------------------------------------------------------------
FOR THE AMERICAN NATIONAL FUNDS GROUP AND SM&R CAPITAL FUNDS ONLY!
STATEMENT OF REFUSAL TO PROVIDE FINANCIAL INFORMATION (SIGNATURES REQUIRED ONLY
IF INFORMATION NOT PROVIDED.)
I(we) fully understand that the Representative, acting on behalf of Securities
Management and Research, Inc., has requested the above suitability information
to determine whether my/our purchase of securities is an appropriate investment
considering my/our financial condition. I(we) refuse to provide the requested
information and by my/our signature(s) below agree not to seek recission of the
policy or mutual fund investment or damages based on its unsuitability.
<TABLE>
<S> <C>
- ------------------------------------------------------------------ ----------------------------------------------------------
Signature of Purchaser Signature Joint Owner (Must sign)
</TABLE>
REPRESENTATIVE EXPLANATION OF CUSTOMERS REFUSAL TO PROVIDE INFORMATION ON THIS
FORM.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PURCHASERS AGREEMENT TO ARBITRATION
THIS SECTION IS NOT APPLICABLE TO MISSOURI RESIDENTS!
The following conditions are agreed to by all parties to this agreement.
1. Arbitration is final and binding on the parties.
2. The parties are waiving their right to seek remedies in court, including the
right to jury trial
3. Pre-arbitration discovery is generally more limited than and different from
court proceedings
4. The arbitrators' award is not required to include factual findings or legal
reasoning and any party's right to appeal or to seek modification of rulings
by the arbitrators is strictly limited.
5. The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry
By signature below, I(we) understand that I(we) have the right to any dispute
between us arising under the federal securities laws to be resolved through
litigation in the courts. In lieu of using the courts, I(we) may agree, after
any such dispute has arisen, to settle it by arbitration before an appropriate
group of arbitrators. However, I(we) understand that any other dispute between
us arising out of any transaction or this agreement shall be settled by
arbitration before the National Association of Securities Dealers, Inc., which
must be commenced by a written notice of intent to arbitrate. Judgment upon any
award rendered may be entered in any appropriate court.
I(we) further understand that we may not bring a putative or certified class
action to arbitration, nor seek to enforce any pre-dispute arbitration agreement
against anyone who has initiated in court a putative class action; or who is a
member of a putative class action until (a) the class certification is denied;
or (2) the class is decertified; or (3) I(we) are excluded from the class by the
court. Such forbearance to enforce an agreement to arbitrate shall not
constitute a waiver of any rights under this agreement except to the extent
stated herein.
<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
Signature of Purchaser Signature Joint Owner (Must sign)
</TABLE>
Form 8045
Rev. 4/96
<PAGE>
INCOME FUND AND TRIFLEX FUND--Under the Income and Triflex Funds Advisory
Agreements dated November 30, 1989, SM&R receives from each Fund an investment
advisory fee computed by applying to the average daily net asset value of each
Fund each month one-twelfth (1/12th) of the annual rate as follows:
<TABLE>
<CAPTION>
On the Portion of the Fund's Basic Advisory
Average Daily Net Assets Fee Annual Rate
<S> <C>
Not exceeding $100,000,000 .750 of 1%
Exceeding $100,000,000 but not
exceeding $200,000,000 .625 of 1%
Exceeding $300,000,000 .400 of 1%
</TABLE>
As compensation for its services, SM&R is paid an investment advisory fee,
which is calculated as indicated above for each Fund. SM&R received total
advisory fees from the Growth, Income and Triflex Funds for the fiscal year
ended December 31, 1995 which represented .58%, .72%, and .55%, respectively of
each Fund's average daily net assets. The ratio of total expenses to average net
assets for each Fund for the same period are 0.98%, 1.12%, and 1.26%,
respectively.
The fees payable under each Fund's Advisory Agreement are higher than the fees
paid by most other mutual funds.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best price and execution, the
Funds may give consideration to sales of their shares as a factor in the
selection of brokers and dealers to execute each Fund's portfolio transactions
when it is believed by SM&R that this can be done without causing the Funds to
pay more in brokerage commissions than they would otherwise.
ADMINISTRATIVE SERVICE AGREEMENTS
The administrative service agreements with the Funds provide for payment of an
administrative service fee to SM&R which is computed by applying to the average
daily net asset value of each Fund each month one-twelfth of the annual rate as
follows:
<TABLE>
<CAPTION>
On the Portion of of the Administrative
Fund's Average Daily Service Fee Annual
Net Assets Rate
<S> <C>
Not exceeding $100,000,000 .25 of 1%
Exceeding $100,000,000 but not
exceeding $200,000,000 .20 of 1%
Exceeding $200,000,000 but not
exceeding $300,000,000 .15 of 1%
Exceeding $300,000,000 .10 of 1%
</TABLE>
SM&R has agreed in each Fund's administrative service agreement to pay (or to
reimburse each Fund for) the Fund's expenses (including the advisory fee and
administrative service fee, if any, paid to SM&R, but exclusive of interest,
taxes, commissions and other expenses incidental to portfolio transactions) in
excess of 1.25% per year of each Fund's average daily net assets. Such
reimbursement obligation is more restrictive than required by California, the
only state still having an expense reimbursement provision applicable to the
Funds. (See "Administrative Service Agreement" in each Fund's Statement of
Additional Information for the fees paid by the Funds thereunder.)
14
<PAGE>
PURCHASE OF SHARES
Shares of the Funds may be purchased from registered representatives of SM&R
and certain other authorized broker-dealers. Such purchases will be at the
offering price for such shares determined as provided under the caption
"DETERMINATION OF OFFERING PRICE" in this Prospectus. A monthly confirmation
will be sent to the investor. Initial and subsequent purchases are to be sent
directly to SM&R at the following address:
Securities Management and Research, Inc.,
One Moody Plaza, 14th Floor
Galveston, Texas 77550.
Each Fund's shares of authorized capital stock are all common stock, are
nonassessable and fully transferable, and each has one vote.
Certificates are not normally issued for shares of the Funds in an effort to
minimize the risk of loss or theft. However, purchases are confirmed to
investors and credited to their accounts on the books maintained by SM&R and an
investor has the same rights of share ownership as if certificates had been
issued. Furthermore, a lost, stolen or destroyed certificate cannot be replaced
without obtaining a sufficient indemnity bond. The cost of such a bond is borne
by the investor and can be 2% or more of the value of the lost, stolen or
destroyed certificate.
OPENING AN ACCOUNT
Initial purchases must include a completed Fund application and completed
Investor Suitability Form. Special forms are required when establishing an
IRA/SEP or 403(b) plan. Call Investor Services at (800) 231-4639 and request
forms for establishing these plans.
SUBSEQUENT PURCHASES BY MAIL
Investors must include their name, the account number and the name of the Fund
being purchased. The investor can use the account identification form detached
from the investor's confirmation statement.
PURCHASED BY WIRE
To ensure proper crediting of the investment, an investor must have an
executed Application and Investor Suitability Form on file with the transfer
agent. The investor may then wire his investment using the following
instructions:
The Moody National Bank of Galveston
2302 Postoffice Street
Galveston, Texas 77550
For the Account of Securities Management and Research, Inc.
ABA 113100091, Wire Account #035 868 9
FBO Name of Fund/Account Number
Investor's Name
If wires are received after 3:00 p.m. Central Time or during a bank holiday or
SM&R business holiday, purchases will be made at the price determined on the
next business day.
PURCHASE AMOUNTS
The minimum initial purchase amount for each Fund is $100 and $20 for
subsequent purchases (except certain systematic investment programs, see
"SPECIAL PURCHASE PLANS" for additional information on reduction of the
minimums). The Funds reserve the right to reject any purchase.
IMPORTANT: The Funds reserve the right to (1) refuse to open an account for any
person failing to provide a taxpayer identification number, certified as correct
and (2) close an account by redeeming its shares in full, at the then current
net asset value upon receipt of notice from the IRS that the taxpayer
identification number certified as correct by the shareholder is in fact
incorrect.
WHEN ARE PURCHASES EFFECTIVE?
Purchases received in proper form by SM&R prior to the close of the New York
Stock Exchange (currently 3:00 p.m., Central Time) (the "Exchange") on any SM&R
business day, or received prior thereto on any SM&R business day by a securities
dealer having a dealer contract with SM&R and reported to SM&R prior to SM&R's
close of business (currently 4:30 p.m., Central Time) on the same day, will be
effective and executed at the applicable Offering Price determined at the close
of the Exchange on that day. It is the responsibility of any such
15
<PAGE>
dealer, and not SM&R, to establish procedures to assure that purchases received
before the close of the Exchange on an SM&R business day will be reported to
SM&R before SM&R's close of business on that same day. Purchases received after
the close of the Exchange, or customary national business holidays, or on an
SM&R holiday will be effective upon and made at the Offering Price determined as
of the close of the Exchange on SM&R's next business day such Exchange is open
for trading.
If payments for purchases are transmitted by bank wire to the Bank and
reported to SM&R prior to the close of the Exchange on any SM&R business day,
the investor will purchase at the Offering Price determined and become a
shareholder as of the close of the Exchange on that same day. Purchases by wire
payments reported by the Bank to SM&R after the close of the Exchange or on an
SM&R holiday, will be effective on and made at the Offering Price determined on
SM&R's next business day. Procedures for transmitting Federal Funds by wire are
available at any national bank, or any state bank which is a member of the
Federal Reserve System.
SM&R's business holiday's are Good Friday, Labor Day, Thanksgiving Day and the
Friday following Thanksgiving Day, two (2) days at Christmas and New Years Day.
If Christmas Day is a weekday other than Monday, Christmas Day and Christmas Eve
Day are business holidays. If Christmas Day is Monday, Christmas Day and the
preceding Friday will be business holidays. If Christmas Day is a Saturday, the
preceding Thursday and Friday will be business holidays. If Christmas Day is a
Sunday, the preceding Friday and the following Monday will be business holidays.
If New Years Day is a Saturday, the preceding Friday will be a business holiday.
If New Years Day is a Sunday the following Monday will be a business holiday.
DETERMINATION OF OFFERING PRICE
The offering price of each Fund's shares is determined once each day that such
Funds net asset value is determined, by adding a sales charge (computed at the
rates set forth in the applicable tables below) to the net asset value of the
shares. Each Fund's net asset value per share is determined by dividing the
market value of the securities owned by each Fund, plus any cash or other assets
(including dividends accrued but not collected), less all liabilities (including
accrued expenses but excluding capital and surplus), by the number of each
Fund's shares outstanding. Net asset value is currently determined as of 3:00
p.m., Central Time on each business day and on any other day in which there is a
sufficient degree of trading in each Fund's investment securities that the
current net asset value of each Fund's shares might be materially affected by
changes in the value of its portfolio of investment securities. Each Fund
reserves the right to compute its net asset value at a different time, or to
compute such value more after than once daily as provided in the Funds Group
current prospectus.
For a more complete description of the procedures involved in valuing various
Fund assets, see "Offering Price" in the Growth, Income and Triflex Funds'
Statements of Additional Information.
<TABLE>
<CAPTION>
Total Sales Charge
-----------------------------------------------------------------------------------
Dealer Concession as
Amount of Investment as a Percentage of as a Percentage of a Percentage of
at Offering Price Offering Price Net Amount Invested Offering Price
- --------------------------------------------- --------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.1% 4.75%
$50,000 but less than $100,000 4.5% 4.7% 4.0%
$100,000 but less than $250,000 3.5% 3.6% 3.0%
$250,000 but less than $500,000 2.5% 2.6% 2.0%
$500,000 and over* None None None
</TABLE>
16
<PAGE>
*In connection with purchases of $500,000 or more, SM&R may pay its
representatives and broker-dealers, in quarterly installments, from its own
profits and resources, a per annum percent of the amount invested as set forth
as follows: Year 1 - 0.35% and Year 2 - 0.25%. In the third and subsequent
years, SM&R may pay 0.075% per annum, in quarterly installments, to those
representatives and broker-dealers with accounts totaling assets of $1 million
or more.
The above breakpoints apply to purchases made at one time by the following:
(1) Any individual; (2) Any individual, his or her spouse, and trusts or
custodial agreements for their minor children; (3) A trustee or fiduciary of a
single trust estate or single fiduciary account; (4) Tax-exempt organizations
specified in Sections 501(c)(3) or (13) of the Internal Revenue Code, or
employees' trusts, pension, profit-sharing, or other employee benefit plans
qualified under Section 401 of the Internal Revenue Code; and (5) Employees or
employers on behalf of employees under any employee benefit plan not qualified
under Section 401 of the Internal Revenue Code.
Purchases by any "company" or employee benefit plans not qualified under
Section 401 of the Internal Revenue Code will qualify for the above quantity
discounts only if the Fund will realize economies of scale in sales effort and
sales related expenses as a result of the employer's or the plan's bearing the
expense of any payroll deduction plan, making the Funds prospectus available to
individual investors or employees, forwarding investments by such employees to
the Funds, and the like.
THE EDUCATION FUNDING INVESTMENT ACCOUNT PROGRAM
The following breakpoints apply to purchases made by individuals investing in
the Funds through the use of The Education Funding Investment Account Program.
<TABLE>
<CAPTION>
Total Sales Charge
-------------------------------------------------------------------------------------
Dealer Concession as a
Amount of Investment as a Percentage of as a Percentage of Percentage of Offering
as Offering Price Offering Price Net Amount Invested Price
- ------------------------------------------- --------------------- ----------------------------- -------------------------------
<S> <C> <C> <C>
Less than $100,000 4.5% 4.7% 4.0%
$100,000 but less than $250,000 3.5% 3.6% 3.0%
$250,000 but less than $500,000 2.5% 2.6% 2.0%
$500,000 and over* None None None
</TABLE>
*In connection with purchases of $500,000 or more, SM&R may pay its
representatives and broker-dealers, in quarterly installments, from its own
profits and resources, a per annum percent of the amount invested as set forth
as follows: Year 1 - 0.35% and Year 2 - 0.25%. In the third and subsequent
years, SM&R may pay 0.075% per annum, in quarterly installments, to those
representatives and broker-dealers with accounts totaling assets of $1 million
or more.
The Education Funding Investment Account Program is a service expressly
created to help investors accumulate funds for their children's or
grandchildren's college education. The maximum sales charge is 4.5% on the
purchase of shares of the Funds. To participate in this special plan, investors
must complete the special Education Funding Investment Account application
designed specifically for the Program.
All direct sales expenses, including the cost of prospectuses for prospective
shareholders, are paid by SM&R, and no sales expense is borne by any of the
Funds.
SPECIAL PURCHASE PLANS
The Funds offer the following services to their shareholders to facilitate
investment in the Funds. At this time, there is no charge to the shareholder for
these services. For additional information contact your registered
representative or SM&R. It is recommended that a shareholder considering any of
the plans described below consult a tax advisor before beginning a plan.
17
<PAGE>
RIGHT OF ACCUMULATION
Dollar amount(s) of shares being purchased plus the current offering value of
your combined holdings in the American National Funds Group, the American
National Government Income Fund Series and the American National Tax Free Fund
Series (the Government Income Fund Series, Tax Free Fund Series and the funds in
the American National Funds Group, shall be collectively referred to herein as
the "Group"). Shareholders must, at the time of purchase, give their
representative or SM&R a list of other accounts maintained in the Group to
qualify for this privilege. THERE IS NO RETROACTIVE REDUCTION OF THE SALES
CHARGE FOR SHARES PREVIOUSLY PURCHASED.
When necessary, SM&R has the right to require verification of holdings to be
included in determining the applicable sales charge rate.
LETTER OF INTENT
An investor may immediately qualify for a reduced sales charge on purchases of
shares of the Group by completing the Letter of Intent section of the
application. Under a Letter of Intent an investor expresses an intention to
invest during the next 13 months a specified amount in the Group which, if made
at one time, would qualify for a reduced sales charge. A minimum initial
investment equal to ten percent (10%) of the amount necessary for the applicable
reduced sales charge is required when a Letter of Intent is executed. Five
percent (5%) of the total intended purchase amount will be held in escrow in
shares of the Group registered in the investor's name to assure that the full
applicable sales charge will be paid if the intended purchase is not completed.
Shares held in escrow under a Letter of Intent are not subject to the exchange
privilege until the Letter of Intent is completed or canceled. A Letter of
Intent does not represent a binding obligation on the part of the investor to
purchase or the Group to sell the full amount of shares specified. (See the
Investor's Letter of Intent on the Application and "SPECIAL PURCHASE PLANS" in
the Statement of Additional Information.)
GROUP SYSTEMATIC INVESTMENT PLAN
A group of 5 or more employees may initially invest a minimum of $100 ($20 per
individual) in the Funds followed by additional payments of at least $20 for
each individual investing under a single payroll deduction plan. Any such plan
may be terminated by SM&R or the Shareholder at any time upon sixty (60) days
written notice.
PURCHASES AT NET ASSET VALUE
After receipt of a written request by SM&R, no sales charge will be imposed on
sales charge shares of the Group to: (a) present and retired directors, officers
and full-time employees of the Group; (b) present and retired directors,
officers, registered representatives and full-time employees of SM&R and their
spouses; (c) present and retired officers, directors, insurance agents and
full-time employees and their spouses of American National and its subsidiaries
and its "affiliated persons", as defined in the Investment Company Act of 1940,
and of any corporation or partnership for which any of American National's
present directors serve as a director or partner, and their spouses; (d) present
and retired partners and full-time employees of legal counsel to SM&R and
officers and directors of any professional corporations which are partners of
such legal counsel and their spouses; (e) any child, step-child, grandchild,
parent, grandparent, brother or sister of any person named in (a), (b), (c) or
(d) above and their spouses; (f) any trust, pension, profit-sharing, IRA or
other benefit plan for any of such persons mentioned in (a), (b), (c), (d), or
(e) above; (g) custodial accounts for minor children of such persons mentioned
in (a), (b), (c), (d), or (e) pursuant to the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts; (h) persons who have received a distribution from a
pension profit-sharing or other benefit plan to the extent such distribution
represents the proceeds of a redemption of shares of any fund in the Group; (i)
persons receiving rebated amounts through ANPAC's "Cash Back Program" to the
extent the proceeds represent the amount of the rebate; (j) trust companies and
bank trust departments for funds over which they exercise exlusive discretionary
investment authority or they serve as a directed trustee and which are held in a
fiduciary, agency, advisory, custodial or similar capacity; (k) accounts managed
by Securities Management and Research, Inc.; (l) stockholders of American
National Insurance Company;
18
<PAGE>
(m) policyholders of American National subsidiaries who have entered into an NAV
agreement with SM&R; (n) registered representatives and employees of securities
dealers with whom SM&R has a selling agreement; and (o) officers, directors,
trustees, employees and members of any non-profit business, trade, professional
charitable, civic or similar associations and clubs with an active membership of
at least 100 persons.
Neither the Funds nor SM&R are responsible for determining whether or not a
prospective investor qualifies under any of the above categories for receipt of
net asset value. This determination is the sole responsibility of the
prospective investor.
PRE-AUTHORIZED CHECK PLANS
An investor may invest in shares of the Funds through a pre-authorized check
plan ($20 or more). Such purchases are processed on or about the 7th and 21st of
each month and each investor may invest in up to five different accounts in the
Group on either date. Such purchases enable the investor to lower his or her
average cost per share through the principle of "dollar cost averaging". (See
"SPECIAL PURCHASE PLANS" in each Fund's Statement of Additional Information.)
WEALTH ACCUMULATION PLAN
Shareholders having account balances of at least $5,000 in the SM&R Capital
Funds American National Primary Fund Series ("Primary Series") may open a Wealth
Accumulation Account, which will provide them with an automatic dollar cost
averaging plan. Automatic monthly purchases of the shares of other funds in the
American National Funds Group will be made by exchanges from the shareholder's
Primary Series Wealth Accumulation Account. Purchases of the other funds must be
at least $100 and, unless terminated by the shareholder, will continue as long
as the balance of the Primary Series Wealth Accumulation Account is sufficient.
Additional investments may be made to a Primary Series account designated as a
Wealth Accumulation Account to extend the purchase period under the plan.
However, if additional investments are received by SM&R less than fifteen (15)
days prior to the 20th of the month, such investments will not be available for
use under the Wealth Accumulation Account until the 20th of the following month.
If the 20th of the month is an SM&R holiday, the purchase will be processed on
the next business day.
Purchases made will be subject to the applicable sales charge of the fund
whose shares are being purchased. Changes in amounts to be purchased, the funds
being purchased, and termination of a Wealth Accumulation Account will be made
within five (5) business days after written instructions are received by SM&R in
proper form (ie: signed by the owner(s) of record exactly as registered).
Shareholders' rights to make additional investments in any of the American
National Funds Group, to exchange shares within the American National Funds
Group, and to redeem shares are not affected by a shareholder's participation in
a Wealth Accumulation Plan. However, check writing privileges and expedited
redemption by telephone are not available for the Primary Series accounts
designated as a part of the Wealth Accumulation Plan.
EXCHANGE PRIVILEGE
Shareholders of the American National Funds Group and the SM&R Capital Funds,
Inc. may exchange between the Funds or series' without the payment of an
exchange fee. However, because of the variable sales charges between the Funds
or series', the following procedures have been adopted to treat all shareholders
fairly.
Shares held in accounts opened for more than one (1) year may be exchanged on
the basis of their respective net asset values, without a sales charge. THIS
PRIVILEGE IS ONLY AVAILABLE IN STATES WHERE THE VARIOUS MEMBERS OF THE GROUP ARE
REGISTERED AND THE EXCHANGE MAY BE LEGALLY MADE.
Shares of the Primary Series acquired through an exchange from one of the
members of the two groups and all additional shares acquired through reinvested
dividends on such exchanged shares may be RE-EXCHANGED for shares of the members
of the two groups. RE-EXCHANGES may not be effected through the use of the
Primary Series' check writing options (See "Check Writing Option").
19
<PAGE>
Shares of any Fund or Series in the two groups held in escrow under a Letter
of Intent are not subject to the exchange privilege and will not be released
unless the Letter of Intent balance invested during the period equals or exceeds
the Letter of Intent amount or the shareholder requests, in writing that the
Letter of Intent be canceled and adjustments made prior to the exchange.
To effect an exchange or re-exchange (a) a prospectus must be provided to the
investor covering the shares to be taken in exchange or re-exchange; (b) written
authorization requesting the exchange or re-exchange and advising that such
exchange or re-exchange is eligible for reduced or no sales charge must be
received by SM&R; (c) an appropriate application must be completed if an account
does not presently exist in the Fund or series shares are being exchanged or
re-exchanged to; and (d) the amount being exchanged or re-exchanged must at
least equal the minimum initial or subsequent investment amounts, whichever is
applicable. SM&R reserves the right, upon sixty (60) days prior written notice,
to restrict the frequency of or to otherwise modify, condition, terminate or
impose additional charges upon the exchange privilege. Furthermore, the exchange
or re-exchange of shares between a fund or a series in the groups may constitute
a sale of shares which represents a taxable event.
Any gain or loss realized on an exchange or re-exchange may have tax
consequences, therefore an investor should consult a tax advisor for information
on the tax treatment of exchanges.
RETIREMENT PLANS
An account may be established in Individual Retirement Accounts (IRAs);
Simplified Employee Pension Plans (SEPs); 403(b)(7) Custodial Accounts (TSAs)
and corporate retirement plans. These plans allow you to shelter investment
income from federal income tax while saving for retirement. The minimum initial
purchase for the Funds is $100 (if investing by Pre-Authorized Check $20). SM&R
acts as trustee or custodian for IRAs, SEPs and TSAs for the Funds. An annual
custodial fee of $7.50 will be charged for any part of a calendar year in which
an investor has an IRA, SEP or TSA in the Funds and will be automatically
deducted from each account. Documents and forms containing detailed information
regarding these plans are available from your representative or SM&R. An
individual considering a retirement plan may also wish to consult with an
attorney or tax advisor.
DIVIDENDS, CAPITAL GAINS AND FEDERAL TAXES
The Income and Triflex Funds will pay dividends from investment income, if
any, quarterly, during the months of March, June, September and December, and
distribute capital gains, if any, in December. The Growth Fund will pay
dividends from investment income, if any, semi-annually during the months of
June and December and distribute capital gains, if any, in December. Dividends
from net investment income may include net short-term capital gains, if any.
Dividends and capital gains distributions may also be made at such other times
as may be necessary to comply with the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
Dividends and capital gains distributions will be automatically reinvested in
shares at net asset value unless SM&R is instructed otherwise in writing.
Dividends and capital gains declared in December to shareholders of record in
December and paid the following January will be taxable to shareholders as if
received in December.
After a dividend or capital gains distribution is paid, each Fund's share
price will drop by the amount of the dividend or distribution. Thus, a dividend
or capital gains distribution paid shortly after purchasing shares would
represent, in substance, a return of capital (to the extent it is paid on the
shares purchased), even though subject to income taxes as discussed below.
Shareholders and the IRS will be furnished an annual statement detailing federal
tax information, including information relative to dividends and distributions
paid to such shareholder during the preceding year.
INFORMATION COMMON TO THE FUNDS
Each Fund has qualified and intends to continue to qualify for treatment as a
"regulated investment company" under Subchapter M of the Code. Each Fund intends
to distribute all of its net investment
20
<PAGE>
income and net realized capital gains to shareholders in a timely manner,
therefore, it is not expected that the Funds will be required to pay any federal
income taxes.
Each Fund intends to distribute substantially all of its ordinary income and
net realized short-term and long-term capital gains, if any, before the end of
the calendar year in accordance with minimum distribution requirements of the
Code. In the event the Funds fail to do so, the Funds will be subject to a four
percent (4%) excise tax on a portion of their undistributed income and capital
gains.
The Funds or the securities dealer effecting a redemption transaction is
required to file an informational return (1099-B) with the Internal Revenue
Service ("IRS") with respect to each sale of Funds shares by a shareholder. The
year-end statement provided to each shareholder will serve as a substitute
1099-B for purposes of reporting any gain or loss on the tax return filed by the
shareholder.
IRS WITHHOLDING INFORMATION--Each Fund and other payers are required, according
to IRS regulations), to withhold 31% of redemption payments and reportable
dividends paid to shareholders who have failed to provide a Fund with a TIN and
a certification that he is not subject to backup withholding. You will be asked
to certify on your account application or on a separate W-9 form that the tax
identification number you provided is correct and that you are exempt from
backup withholding for previous underreporting to the IRS.
Retirement plan distributions may be subject to federal income tax
withholding. Therefore, you should consult with your tax advisor prior to making
withdrawals from your account.
The foregoing description relates only to federal income tax consequences for
shareholders who are U.S. citizens or corporations. You should consult your own
tax advisor regarding state, local and other applicable tax laws. Information as
to the federal tax status of distributions will be provided to shareholders
annually.
NON-RESIDENT ALIENS--Shareholders who are classified as non-resident alien's for
purposes of federal income taxation and do not furnish a valid and effective
Form W-8 will be subject to backup withholding at a rate of 31% on dividends
received from the Funds and on proceeds from redemptions of their shares. Form
W-8 may be obtained from your local IRS office and remains in effect for three
calendar years beginning in the calendar year in which it is received by the
Fund. Regardless of whether a valid and effective Form W-8 is furnished,
non-resident aliens may be subject to U.S. withholding taxes on their account
unless such withholding taxes are reduced or eliminated under the terms of an
applicable U.S. income tax treaty and the shareholder complies with all
procedures for claiming the benefits of such a treaty. Non-resident shareholders
should consult with their financial or tax advisors with respect to the
specifications and applicability of this tax.
HOW TO REDEEM
Shares of the Funds will be redeemed at the net asset value determined on the
date the request is received in "Proper Form" as defined in "Proper Form" below,
at no extra charge. A redemption request should be addressed to Securities
Management and Research, Inc., One Moody Plaza, 14th Floor, Galveston, Texas
77550.
If uncertain of the redemption requirements investors should call or write
SM&R. Payment will be made as soon as practicable and normally within seven days
after receipt of a redemption request in Proper Form.
If the shares being redeemed were purchased by wire, certified check, money
order, or other immediately available funds, redemption proceeds will be
available immediately. For shares purchased by non-guaranteed funds (such as a
personal check), the Funds reserve the right to hold the proceeds until such
time as the Funds have received assurance that an investment check has cleared
the bank on which it was drawn.
SYSTEMATIC WITHDRAWAL PLAN
Each Fund has a "Systematic Withdrawal Plan" ("Withdrawal Account"), which
permits shareholders having an account value of $5,000 or more to automatically
withdraw a minimum of $50 monthly or each calendar quarter. The Funds and SM&R
21
<PAGE>
discourage shareholders from maintaining a Withdrawal Account while concurrently
purchasing shares of the Funds because of the sales charge involved in
additional purchases. Dividends and capital gains distributions will
automatically be reinvested in additional shares at net asset value. As with
other redemptions, a withdrawal payment is a sale for federal income tax
purposes. The Systematic Withdrawal Plan will automatically terminate if all
shares are liquidated or withdrawn from the account. Certificates are not issued
for shares held in a withdrawal account and certificates held, if any, must be
surrendered when shares are transferred to a Withdrawal Account. No account
covered by a Letter of Intent can be changed to a Systematic Withdrawal Plan
until such time as the Letter of Intent is fulfilled or terminated, nor can an
account under a Systematic Withdrawal Plan be placed under a Letter of Intent.
REINVESTMENT PRIVILEGE
Within ninety (90) days of a redemption (sixty (60) days for qualified plans),
a shareholder may invest all or part of the redemption proceeds in shares of any
of the Funds managed by SM&R at the net asset value next computed after receipt
of the proceeds to be reinvested by SM&R. The shareholder must ask SM&R for this
privilege at the time of reinvestment. Prior to reinvestment of redemption
proceeds, a shareholder is encouraged to consult with his accountant or tax
advisor to determine any possible tax ramifications of such a transaction. Each
Fund managed by SM&R may amend, suspend, or cease offering this privilege at any
time as to shares redeemed after the date of the amendment, suspension or
cessation.
For further information about the "Systematic Withdrawal Plan" and
"Reinvestment Privilege", contact a registered representative or SM&R.
Any gain or loss on the redemption of the shares is recognized for income tax
purposes, whether or not the proceeds are reinvested in accordance with this
privilege, subject, however to the "wash sale" rule described under "Exchange
Privilege" in the Statement of Additional Information.
"PROPER FORM"--means the request for redemption must include: 1) your share
certificates, if issued; 2) your letter of instruction or a stock assignment
specifying the Fund, account number, and number of shares or dollar amount to be
redeemed. Both share certificates and stock powers, if any, must be endorsed and
executed exactly as the Fund shares are registered. It is suggested that
certificates be returned by certified mail for your protection; 3) any required
signature guarantees (see "Signature Guarantees" below); and 4) other supporting
legal documents, if required in the case of estates, trusts, guardianships,
divorce, custodianships, corporations, partnerships, pension or profit sharing
plans, retirement plans and other organizations.
Please keep in mind that as a shareholder, it is your responsibility to ensure
requests are submitted to the Funds' transfer agent in Proper Form for
processing.
TEXAS OPTIONAL RETIREMENT PROGRAM
Shares in an account established under the Texas Optional Retirement Program
may not be redeemed unless satisfactory evidence is received by SM&R from the
State that one of the following conditions exists: (1) death of the employee;
(2) termination of service with the employer; or (3) retirement of the employee.
SIGNATURE GUARANTEES
This guarantee carries with it certain statutory warranties which are relied
upon by the transfer agent. This guarantee is designed to protect the investor,
the Fund, SM&R and its representatives through the signature verification of
each investor wishing to redeem or exchange shares. Signature guarantees are
required when: (1) the proceeds of the redemption exceed $25,000; (2) the
proceeds (in any amount) are to be paid to someone OTHER THAN the registered
owner(s) of the account; (3) the proceeds (in any amount) are to be sent to any
address OTHER THAN the shareholder's address of record, pre-authorized bank
account or exchanged to one of the other funds managed by SM&R; (4) in
transactions involving share certificates, if the redemption proceeds are in
excess of $25,000; or (5) the Fund or its transfer agent believes a signature
would protect against potential claims based on the transfer instructions,
including, when (a) the current address of one or more joint
22
<PAGE>
owners of an account cannot be confirmed, (b) multiple owners have a dispute or
give inconsistent instructions, (c) the Fund or transfer agent have been
notified of an adverse claim, (d) the instructions received by the Fund or
transfer agent are given by an agent, not the actual registered owner, (e) it is
determined that joint owners who are married to each other are separated or may
be subject to divorce proceedings, or (f) the authority of a representative of a
corporation, partnership, association or other entity has not been established
to the satisfaction of the Fund or transfer agent.
Acceptable guarantees can be obtained from an "eligible guarantor institution"
as defined in rules adopted by the Securities and Exchange Commission. Eligible
guarantor institutions include banks, brokers, dealers, municipal securities
dealers or brokers, government securities dealers or brokers, credit unions (if
authorized under state law), national securities exchanges, registered
securities associations and institutions that participate in the Securities
Transfer Agent Medallion Program ("STAMP") or other recognized signature
guarantee medallion program or an SM&R representative who has executed an
agreement and received authorization from SM&R. IMPORTANT: Witnessing or
notarization is not sufficient.
REDEMPTION OF SMALL ACCOUNTS
If your account balance falls below $100 as a result of redeeming shares, you
will be notified that the value of your account is less than the required
minimum indicated above and allowed given (60) days' to make an additional
investment to increase the value of your account above the required minimum.
23
<PAGE>
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 OF
AMERICAN NATIONAL GROWTH FUND, INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL RETURN
<S> <C> <C>
1986 10458
1987 11765
1988 12471
1989 15505
1990 15049
1991 20613
1992 20098
1993 21740
1994 22822
1995 28573
$28,573 Total Return
$24,084 Capital Appreciation Assuming Dividends Taken In Cash
$10,000 Purchase Price
$9,425 Net Amount Invested
<CAPTION>
CAPITAL APPRECIATION ASSUMING DIVIDENDS TAKEN IN CASH
<S> <C>
1986 10334
1987 11431
1988 11845
1989 14350
1990 13636
1991 18457
1992 17702
1993 18899
1994 19558
1995 24084
$28,573 Total Return
$24,084 Capital Appreciation Assuming Dividends Taken In Cash
$10,000 Purchase Price
$9,425 Net Amount Invested
</TABLE>
SUMMARY OF RESULTS FOR CALENDAR YEAR
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income dividends
paid and reinvested during
year $ 126 $ 200 $ 282 $ 385 $ 325 $ 220 $ 318 $ 270 $ 319
Capital gains distributions
reinvested during year 908 1,826 874 2,240 324 1,058 1,454 3,001 2,463
Value of investment at year
end assuming reinvestment
of investment income
dividends and capital gains
distributions 10,458 11,765 12,471 15,505 15,049 20,613 20,098 21,740 22,822
Value of investment at year
end assuming investment
income dividends taken in
cash $ 10,334 $ 11,431 $ 11,845 $ 14,350 $ 13,636 $ 18,457 $ 17,702 $ 18,899 $ 19,558
PERCENTAGES
- ------------------------------------------------------------------------------------------------------------------------------
Income Return 1.26% 1.91% 2.40% 3.08% 2.10% 1.46% 1.54% 1.35% 1.47%
Appreciation 3.32% 10.59% 3.60% 21.25% -5.04% 35.52% -4.03% 6.82% 3.51%
-------------------------------------------------------------------------------------------------
Total Return 4.58% 12.50% 6.00% 24.33% -2.94% 36.98% -2.49% 8.17% 4.98%
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Sales Charge 5.75%
Total Return
*(excluding sales charge) 10.97%
<CAPTION>
- ---------------------------
1995
- ---------------------------
<S> <C>
Investment income dividends
paid and reinvested during
year $ 450
Capital gains distributions
reinvested during year 1,938
Value of investment at year
end assuming reinvestment
of investment income
dividends and capital gains
distributions 28,573
Value of investment at year
end assuming investment
income dividends taken in
cash $ 24,084
PERCENTAGES
- ---------------------------
Income Return 1.97%
Appreciation 23.23%
Total Return 25.20%
Sales Charge
Total Return
*(excluding sales charge)
</TABLE>
All performance figures are as of December 31 for the applicable year. Growth
Fund's fiscal year was as of October 31 for 1986-1989.
<TABLE>
<S> <C> <C>
SUMMARY
Original Investment.....................$10,000
Dividends Paid and Reinvested............$2,895
Capital Gains Paid and Reinvested.......$16,086
Depreciation (Unrealized Capital
Losses)..................................$(408)
Total Value.............................$28,573
</TABLE>
24
<PAGE>
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
OF AMERICAN NATIONAL INCOME FUND, INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL RETURN
<S> <C> <C>
1986 10207
1987 10591
1988 11656
1989 14934
1990 15047
1991 19419
1992 20062
1993 22194
1994 22058
1995 28481
$28,481 Total Return
$20,502 Capital Appreciation Assuming Dividends Taken In Cash
$10,000 Purchase Price
$9,425 Net Amount Invested
<CAPTION>
CAPITAL APPRECIATION ASSUMING DIVIDENDS TAKEN IN CASH
<S> <C>
1986 9844
1987 9837
1988 10434
1989 12852
1990 12412
1991 15561
1992 15698
1993 16917
1994 16339
1995 20502
$28,481 Total Return
$20,502 Capital Appreciation Assuming Dividends Taken In Cash
$10,000 Purchase Price
$9,425 Net Amount Invested
</TABLE>
SUMMARY OF RESULTS FOR CALENDAR YEAR
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income dividends
paid and reinvested during
year $ 366 $ 426 $ 420 $ 536 $ 610 $ 503 $ 454 $ 548 $ 629
Capital gains distributions
reinvested during year 967 287 1,249 1,115 55 1,043 912 1,987 2,117
Value of investment at year
end assuming reinvestment
of investment income
dividends and capital gains
distributions 10,207 10,591 11,656 14,934 15,047 19,419 20,062 22,194 22,058
Value of investment at year
end assuming investment
income dividends taken in
cash $ 9,844 $ 9,837 $ 10,434 $ 12,852 $ 12,412 $ 15,561 $ 15,698 $ 16,917 $ 16,339
PERCENTAGES
- ------------------------------------------------------------------------------------------------------------------------------
Income Return 3.66% 4.17% 3.98% 4.59% 4.08% 3.34% 2.34% 2.73% 2.83%
Appreciation -1.59% -0.40% 6.09% 23.53% -3.33% 25.72% 0.98% 7.90% -3.44%
-------------------------------------------------------------------------------------------------
Total Return 2.07% 3.77% 10.07% 28.12% 0.75% 29.06% 3.32% 10.63% -0.61%
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Sales Charge 5.75%
Total Return
*(excluding sales charge) 8.29%
<CAPTION>
- ---------------------------
1995
- ---------------------------
<S> <C>
Investment income dividends
paid and reinvested during
year $ 746
Capital gains distributions
reinvested during year 1,330
Value of investment at year
end assuming reinvestment
of investment income
dividends and capital gains
distributions 28,481
Value of investment at year
end assuming investment
income dividends taken in
cash $ 20,502
PERCENTAGES
- ---------------------------
Income Return 3.38%
Appreciation 25.74%
Total Return 29.12%
Sales Charge
Total Return
*(excluding sales charge)
</TABLE>
All performance figures are as of December 31 for the applicable year. Income
Fund's fiscal year was as of July 31 for 1986-1989.
<TABLE>
<S> <C> <C>
SUMMARY
Original Investment.....................$10,000
Dividends Paid and Reinvested............$5,238
Capital Gains Paid and Reinvested.......$11,062
Depreciation (Unrealized Capital
Losses)..................................$2,181
Total Value.............................$28,481
</TABLE>
25
<PAGE>
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
OF TRIFLEX FUND, INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL RETURN
<S> <C> <C>
1987 9599
1988 10596
1989 12043
1990 12209
1991 15204
1992 15659
1993 16647
1994 16895
1995 20662
$20,662 Total Return
$15,024 Capital Appreciation Assuming Dividends Taken In Cash
$10,000 Purchase Price
$9,425 Net Amount Invested
<CAPTION>
CAPITAL APPRECIATION ASSUMING DIVIDENDS TAKEN IN CASH
<S> <C>
1987 9499
1988 9925
1989 10676
1990 10290
1991 12318
1992 12492
1993 12852
1994 12662
1995 15024
$20,662 Total Return
$15,024 Capital Appreciation Assuming Dividends Taken In Cash
$10,000 Purchase Price
$9,425 Net Amount Invested
</TABLE>
SUMMARY OF RESULTS FOR CALENDAR YEAR
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income dividends paid
and reinvested during year $ 99 $ 565 $ 632 $ 589 $ 548 $ 334 $ 411 $ 497
Capital gains distributions
reinvested during year -0- 230 715 69 501 493 1,046 892
Value of investment at year end
assuming reinvestment of investment
income dividends and capital gains
distributions 9,599 10,596 12,043 12,209 15,204 15,659 16,647 16,895
Value of investment at year end
assuming investment income
dividends taken in cash $ 9,499 $ 9,925 $ 10,676 $ 10,290 $ 12,318 $ 12,492 $ 12,852 $ 12,662
PERCENTAGES
- ---------------------------------------------------------------------------------------------------------------------------
Income Return 0.98% 5.88% 5.97% 4.90% 4.49% 2.20% 2.62% 2.94%
Appreciation -4.99% 4.50% 7.69% -3.53% 20.04% .80% 3.69% -1.45%
--------------------------------------------------------------------------------------
Total Return -4.01% 10.38% 13.66% 1.37% 24.53% 3.00% 6.31% 1.49%
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------
1995
- -----------------------------------
<S> <C>
Investment income dividends paid
and reinvested during year $ 582
Capital gains distributions
reinvested during year 169
Value of investment at year end
assuming reinvestment of investment
income dividends and capital gains
distributions 20,662
Value of investment at year end
assuming investment income
dividends taken in cash $ 15,024
PERCENTAGES
- -----------------------------------
Income Return 3.15%
Appreciation 19.14%
Total Return 22.29%
</TABLE>
All performance figures are as of December 31 for the applicable year. Triflex
Fund's fiscal year was as of July 31 for 1987-1989.
<TABLE>
<S> <C> <C>
SUMMARY
Original Investment.....................$10,000
Dividends Paid and Reinvested............$4,257
Capital Gains Paid and Reinvested........$4,115
Depreciation (Unrealized Capital
Losses)..................................$2,290
Total Value.............................$20,662
</TABLE>
26
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX
(Description of Ratings Used in Prospectus)
- --------------------------------------------------------------------------------
BOND RATINGS
Description of Standard & Poor's Corporation's bond rating:
AAA Bonds rated "AAA" have the highest rating assigned by Standard & Poor's to
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA Bonds rated "AA" have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A Bonds rated "A" have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing cir-
cumstances are more likely to lead to a weakened capacity to pay interest
and repay principal for bonds in this category than for bonds in higher
rated categories.
BB,B Bonds rated "BB,B" are regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance
with the terms of the obligation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
Description of Moody's Investor's Service, Inc.'s bond ratings:
AAA Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt-edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds be-
cause margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risks appear
somewhat greater than in Aaa securities.
A Bonds which are rated "A" possess many favorable investment attributes are
to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
BAA Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
27
<PAGE>
<TABLE>
<S> <C>
outstanding investment characteristics and in fact have speculative
characteristics as well.
BA Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
</TABLE>
PREFERRED STOCK RATING.
Description of Standard & Poor's Corporation's preferred stock rating:
B Preferred stock rated "B" are regarded on balance, as predominately
speculative with respect to the issuer's capacity to pay preferred stock
obligations. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Description of Moody's Investors Service, Inc.'s preferred stock rating:
B An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
FEDERAL FUNDS
As used in this Prospectus and in each Fund's Statement of Additional
Information, "Federal Funds" means a commercial bank's deposits in a Federal
Reserve Bank which can be transferred from one member bank's account to that of
another member bank on the same day. Federal Funds are considered to be
immediately available funds.
28
<PAGE>
PROSPECTUS
[American National Logo]
American
National
Funds
Group
// American National Growth Fund
// American National Income Fund
// Triflex Fund
Securities Management & Research, Inc.
One Moody Plaza
Galveston, TX 77550
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 14
GALVESTON, TEXAS
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated APRIL 1, 1996
- -------------------------------------------------------------------------------
TRIFLEX FUND, INC.
(a balanced fund seeking conservation of principal,
current income and long-term capital appreciation)
Mailing and Street Address: Telephone Number: (409) 763-8272
One Moody Plaza Toll Free 1-(800) 231-4639
Galveston, Texas 77550
- -------------------------------------------------------------------------------
This Statement of Additional Information is NOT a prospectus, but should be
read in conjunction with the American National Funds Group Prospectus (the
"Prospectus") dated April 1, 1996. A copy of the Prospectus may be obtained
from your registered representative or Securities Management and Research, Inc.
("SM&R"), One Moody Plaza, Galveston, Texas 77550 (Telephone No. (409) 763-8272
or Toll Free 1-(800)-231-4639). Prior to November 20, 1987, the name of the
Fund was the American National Bond Fund, Inc. and it had a different investment
objective.
-----------------------------------------------------------------------
| No dealer, sales representative, or other person has been |
| authorized to give any information or to make any representations |
| other than those contained in this Statement of Additional |
| Information (and/or the Prospectus referred to above), and if given |
| or made, such information or representations must not be relied |
| upon as having been authorized by the Fund or SM&R. Neither the |
| American National Funds Group Prospectus nor this Statement of |
| Additional Information constitutes an offer or solicitation by |
| anyone in any state in which such offer or solicitation is not |
| authorized, or in which the person making such offer or |
| solicitation is not qualified to do so, or to any person to whom it |
| is unlawful to make such offer or solicitation. |
-----------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . 2
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . 6
POLICY ON PERSONAL INVESTING . . . . . . . . . . . . . . . . . 8
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . 9
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . 9
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION. . . . . . . . 11
CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . 12
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED . 12
SPECIAL PURCHASE PLANS . . . . . . . . . . . . . . . . . . . . 15
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . 17
TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
THE UNDERWRITER. . . . . . . . . . . . . . . . . . . . . . . . 19
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 19
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . 19
COUNSEL AND AUDITORS . . . . . . . . . . . . . . . . . . . . . 20
TRANSFER AGENT AND DIVIDEND PAYING AGENT . . . . . . . . . . . 20
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . 20
COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
EXHIBIT "1" TO STATEMENT OF ADDITIONAL INFORMATION
</TABLE>
1
<PAGE>
THE FUND
On August 23, 1989, the Board of Directors of the Triflex Fund, Inc.
(the "Predecessor Fund"), a Texas corporation incorporated on January 9,
1978, caused the Fund to be incorporated under the laws of the State of
Maryland. The purpose of forming the Fund was to permit the Predecessor Fund
to change its domiciliary state from Texas to Maryland by merging into the
Fund. On November 16, 1989, the Predecessor Fund's stockholders approved
such merger and it was consummated on November 30, 1989. At that time, the
Fund, as the survivor of the merger, succeeded to all of the assets and
assumed all of the liabilities of the Predecessor Fund, which was then
dissolved. The Predecessor Fund's investment objective and policies and
investment restrictions were unchanged and are now the Fund's investment
objective and policies and the Fund is now subject to such investment
restrictions. Accordingly, and because the Fund is essentially the same as
the Predecessor Fund, no distinction is made in this Prospectus between the
two and, unless required by the context thereof, disclosures are made as
though the change of domicile had not occurred.
Prior to November 1987, the name of the Predecessor Fund was the
American National Bond Fund, Inc. and its objective was to seek the highest
level of current income consistent with preservation of capital and
maintenance of liquidity.
The Fund is a diversified open-end investment company commonly known as
a mutual fund. A mutual fund is a company in which a number of persons
invest which in turn invests in the securities of other companies. The Fund
is an open-end investment company because it generally must redeem an
investor's shares upon request. The Fund is a diversified investment company
because it offers investors an opportunity to minimize the risk inherent in
all investments in securities by spreading their investment over a number of
companies in various industries. However, diversification cannot eliminate
such risks.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Fund are conservation of principal,
current income and long-term capital appreciation. The Fund has adopted, as
a fundamental policy, that it will be a "balanced fund" which will not be
changed unless approved by the vote, at a special meeting of stockholders of
(i) 67% of the voting securities present at such meeting, if the holders of
more than 50% of the Fund's outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding voting
securities, whichever is less.
As a balanced fund, the Fund has adopted an investment policy that it
will not purchase a security if as a result of such purchase less than 25% of
its total assets would be in fixed-income senior securities (including short
and long-term debt securities, preferred stocks and convertible debt
securities and preferred stocks).
Subject to the restriction noted above, the percentage of the Fund's
assets invested in each type of security at any time shall be in accordance
with the judgment of the investment adviser.
The Fund's assets are to be invested in bonds, whether convertible or
nonconvertible, commercial paper, preferred stocks, whether convertible or
nonconvertible and common stocks in such proportions and of such type as are
deemed best adapted to the current economic and market outlooks. However,
only that portion of the value of convertible securities attributable to
their fixed-income characteristics shall be used for purposes of meeting the
25% fixed-income securities requirement.
The Fund may also invest in United States Government obligations. These
instruments are debt obligations issued by agencies or authorities controlled
or supervised by and acting as instrumentalities of the U.S. Government
established under authority granted by Congress. Such obligations include,
but are not limited to, Government National Mortgage Association, The
Tennessee Valley Authority, The Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal Land Banks and The Federal
National Mortgage Association. Some obligations of U.S. Government
agencies, authorities and other instrumentalities are supported by the full
faith and credit of the U.S. Treasury; others by the rights of the issuer to
borrow
2
<PAGE>
from the Treasury; and others only by the credit of the issuer. Obligations
of the Government National Mortgage Association are supported by the full
faith and credit of the U.S. Treasury; obligations of the other agencies,
authorities and other instrumentalities shown above are supported only by the
credit of the issuers.
The Fund's adviser will invest in U.S. obligations not backed by the
"full faith and credit" of the U.S. government only when, in its opinion, the
risk is minimal. SM&R does not presently intend to invest any significant
amount in such obligations and would do so in the future only to increase the
Fund's liquidity on a short-term basis during adverse and unusual market
conditions.
Subject to market conditions, the Fund may also try to realize income by
writing covered call options listed on a domestic securities exchange. In so
doing, the Fund forgoes the opportunity to profit from an increase in the
market price in the underlying security above the exercise price of the
option in return for the premium it received from the sale of the option.
The Fund's management believes that such premiums will increase the Fund's
distributions without subjecting it to substantial risks.
The Fund engages primarily in holding securities for investment and not
for trading purposes. Purchases and sales of portfolio securities are made
at such times and in such amounts as are deemed advisable in light of market,
economic and other conditions, irrespective of the volume of portfolio
turnover.
Portfolio turnover is calculated by dividing the lesser of annual
purchases or sales of portfolio securities by the monthly average of the
value of the Fund's portfolio securities excluding securities whose
maturities at the time of purchase are one year or less. A 100% portfolio
turnover rate would occur, for example, if all of the Fund's portfolio
securities were replaced within one year.
INVESTMENT RESTRICTIONS
The Fund is also subject to the following restrictions in implementing
its investment policies which may be changed only by vote of a "majority" of
the Fund's outstanding shares, which are used herein, means the lesser of (i)
67% of the Fund's outstanding shares present at a meeting of the holders if
more than 50% of the outstanding shares are present in person or by proxy or
(ii) more than 50% of the Fund's outstanding shares.
The Fund does not:
1. Issue senior securities.
2. Make short sales of securities.
3. Purchase securities on margin.
4. Purchase or sell commodities or commodity contracts;
5. Invest in other companies for the purpose of exercising control of
management;
6. Invest in oil, gas or other mineral leases, rights on royalty
contracts or in real estate or real estate limited partnerships.
7. Underwrite securities issued by other persons;
8. Purchase any securities as to which it would be deemed a statutory
underwriter under the Securities Act of 1933;
9. Borrow money except that the Fund may borrow an amount up to 10% of
its total assets to meet redemption requests and for the clearance of
purchases and sales of portfolio securities (this borrowing provision
is not for investment leverage but solely to facilitate management of
the portfolio to enable the Fund to meet redemption requests where the
liquidation of portfolio securities is deemed to be disadvantageous or
inconvenient and to obtain such short-term credits as may be necessary
for the clearance of purchases and sales of portfolio securities; all
borrowings at any time outstanding will be repaid before any
additional investments are made; the Fund will not mortgage, pledge or
hypothecate any assets in connection with any such borrowing in excess
of 15% of the Fund's total assets);
10. Make loans to other persons except certain call loans upon collateral
security (the Fund does not intend to make such loans; the acquisition
of
3
<PAGE>
publicly distributed bonds, debentures and other debt securities is
not considered a loan);
11. Purchase the securities of any one issuer (other than those issued or
guaranteed by the U.S. Government), if immediately after and as a
result of such purchase the market value of the Fund's holding in the
securities of such issuer exceeds 5% of the market value of the Fund's
total assets.
12. Purchase the securities of an issuer if the purchase will cause the
Fund to own more than 10% of the outstanding voting securities of the
issuer.
13. Purchase the securities of any one issuer (other than those issued or
guaranteed by the U.S. Government), if immediately after and as a
result of such purchase the market value of the Fund's holding in the
securities of such issuer exceeds 5% of the market value of the Fund's
total assets.
14. Purchase the securities of any issuer the business of which has been
in continuous operation for less than three (3) years (however, it is
the Fund's operating policy not to invest in any business which has
not been in continuous operation for at least five (5) years);
15. Retain investments in the securities of any issuer if directors or
officers of the Fund or certain other "interested" persons own more
than 5% of such securities;
16. Purchase the securities of any other investment company except in a
regular transaction in the open market. Such purchases may cause the
Fund to indirectly incur additional advisory and administrative fees;
17. Any warrants purchased by the Fund must be marketable warrants and the
Fund's investment in warrants, valued at the lower of cost or market,
may not exceed 5% of the Fund's total assets. Not more than 2% of the
Fund's total assets may be invested in warrants which are not listed
on the New York or American Stock Exchanges.
Should the Fund decide to do so in the future, it will only invest in
securities which are readily marketable, listed on a recognized domestic or
foreign exchange and in other assets for which there is a bona fide market.
The same policy is applicable to the investment practice described in
Restriction 9 above.
The Fund has adopted a policy whereby it does not presently invest in
securities which have been acquired through private placement transactions or
in real estate mortgage loans although it may invest in securities which are
secured by real estate mortgages and securities of issues which invest or
deal in real estate and/or real estate mortgages provided such securities
meet the criteria set forth in the Prospectus under "What are the Funds
Investment Objectives and Policies?"
INVESTMENT IN COVERED CALL OPTIONS
Although there is no present intent to do so, the Fund may write covered
call option contracts provided that the option is listed on a domestic
securities exchange and that no option will be written if, as a result, more
than 25% of the Fund's assets are subject to call options. A covered call
option is an option on a security which the Fund owns or can acquire by
converting a convertible security it owns. The purchaser of the option
acquires the right to buy the security from the Fund at a fixed exercise
price at any time prior to the expiration of the option, regardless of the
market price of the security at that time. A security on which an option has
been written will be held in escrow by the Fund's custodian until the option
expires, is exercised, or a closing purchase transaction is made. The Fund
thus foregoes the opportunity to profit from an increase in the market price
in the underlying security above the exercise price, in return for the
premium it receives from the purchaser of the option. The Fund's management
believes that such premiums will maximize the Fund's return without
subjecting it to substantial risks.
The Fund will purchase call options only to close out a position in an
option written by it. In order to close out a position the Fund will make a
"closing purchase transaction" if such is available. In such a transaction,
the Fund will purchase a call option on the same security with the same
exercise price and expiration date as the call option which it has previously
written. When a security is sold from the Fund's portfolio against which a
call option has been written, the Fund will effect a closing purchase
transaction so as to close out any existing call option on that security.
The Fund will realize a profit or loss from a closing purchase transaction if
the amount paid to purchase a call option is less or more than the amount
received
4
<PAGE>
as a premium from the writing thereof. A closing purchase transactions
cannot be made if trading in the option has been suspended.
The premium received by the Fund upon writing a call option will
increase the Fund's assets, and a corresponding liability will be recorded
and subsequently adjusted from day to day to the current value of the option
written. For example, if the current value of the option exceeds the premium
received, the excess would be an unrealized loss and, conversely, if the
premium exceeds the current value, such excess would be an unrealized gain.
The current value of the option will be the last sales price on the principal
exchange on which the option is traded or, in the absence of any
transactions, the mean between the closing bid and asked price.
COLLATERALIZED MORTGAGE OBLIGATIONS - The Triflex Fund may invest a portion
of its assets in collateralized mortgage obligations or "CMOs", which are
debt obligations collateralized by a portfolio or pool of mortgages,
mortgage-backed securities or U.S. Government securities. Collateralized
obligations in which the Triflex Fund may invest are issued or guaranteed by
a U.S. Government agency or instrumentality, such as the FHLMC. A variety of
types of collateralized obligations are currently available and others may
become available in the future. One should keep in mind that during periods
of rapid interest rate fluctuation, the price of a security, such as a CMO,
could either increase or decrease based on inherent interest rate risk.
Additionally, the risk of maturities shortening or lenghtening in conjunction
with interest rate movement, could magnify the overall effect of the price
fluctuation.
A CMO is often issued in multiple classes with varying maturities and
interest rates. As a result the investor may obtain greater predictability
of maturity than with direct investments in mortgage-backed securities.
Thus, classes with shorter maturities may have lower volatility and lower
yield while those with longer maturities may have higher volatility and
higher yields. This provides the investor with greater control over the
characteristics of the investment in a changing interest rate environment.
REPURCHASE AGREEMENTS
Although there is no present intent to do so, the Fund may invest in
repurchase agreements with commercial banks, brokers or dealers either for
defensive purposes due to market conditions or to generate income from its
excess cash balances. A repurchase agreement is an agreement under which the
Fund acquires a money market instrument (generally a security issued by the
United States Government or any agency thereof, a banker's acceptance or a
certificate of deposit) from a commercial bank, broker or dealer, subject to
resale to the seller at an agreed upon price and date (normally, the next
business day). A repurchase agreement may be considered a loan
collateralized by securities. The resale price reflects an agreed upon
interest rate effective for the period the instrument is held by the Fund and
is unrelated to the interest rate on the underlying instrument. In these
transactions, the securities acquired by the Fund (including accrued interest
earned thereon) must have a total value in excess of the value of the
repurchase agreement and are held by the Fund's Custodian Bank until
repurchased.
The use of repurchase agreements involves certain risks. For example,
if the other party to the agreement defaults on its obligations to repurchase
the underlying security at a time when the value of the security has
declined, the Fund may incur a loss upon disposition of the security. If the
other party to the agreement becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a court may determine
that the underlying security is collateral for a loan by the Fund not within
the control of the Fund and therefore the realization by the Fund on such
collateral may be automatically stayed. Finally, it is possible that the
Fund may not be able to substantiate its interest in the underlying security
and may be deemed an unsecured creditor of the other party to the agreement.
While the Fund's management acknowledges these risks, it is expected that
they can be controlled through careful monitoring procedures.
5
<PAGE>
LENDING OF SECURITIES
Although there is no present intent to do so, the Fund may lend its
portfolio securities to qualified institutional investors who need to borrow
securities in order to complete certain transactions, such as covering short
sales, avoiding failures to deliver securities or completing arbitrage
operations. By lending its portfolio securities, the Fund attempts to
increase its income through the receipt of interest on the loan. Any gain or
loss in the market price of the securities loaned that might occur during the
term of the loan would be for the account of the Fund. The Fund may lend its
portfolio securities to qualified brokers, dealers, banks or other financial
institutions, so long as the terms the structure and the aggregate amount of
such loans are not inconsistent with the Investment Company Act of 1940, or
the Rules and Regulations or interpretations of the Commission thereunder,
which currently require that (a) the borrower pledge and maintain with the
Fund collateral consisting of cash, a letter of credit issued by a domestic
United States bank, or securities issued or guaranteed by the United States
Government having a value at all times not less than 100% of the value of the
securities loans, (b) the borrower add to such collateral whenever the price
of the securities loaned rises (i.e., the borrower "marks to the market" on a
daily basis), (c) the loans be made subject to termination by the Fund at any
time, and (d) the Fund receive reasonable interest on the loans (which may
include the Fund's investing any cash collateral in interest bearing
short-term investments), any distribution on the loaned securities and any
increase in their market value. Loan arrangements made by the Fund will
comply with all other applicable regulatory requirements, including the rules
of the New York Stock Exchange, which rules presently require the borrower,
after notice, to redeliver the securities within the normal settlement time
of five (5) business days. All relevant facts and circumstances, including
the credit worthiness of the broker, dealer or institution, will be
considered in making decisions with respect to the lending of securities,
subject to review by the Fund's board of directors.
At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's directors. In addition, voting rights
may pass with the loaned securities, but if a material event should occur
affecting an investment on loans, the loans must be called and the securities
voted.
MANAGEMENT OF THE FUND
The names, addresses, principal occupations, and other affiliations of
the Fund's directors and executive officers are given below. Unless
otherwise specifically noted, each has had the same or similar employment or
position for at least the past five years and occupies the identical position
with the American National Growth Fund, Inc. and the American National Income
Fund, Inc., (hereinafter, sometimes collectively referred to as the "American
National Funds Group" or the "American National family of funds").
(1)(2)RALPH S. CLIFFORD (715 24TH Ave., COURT, MOLINE, ILLINOIS), Director
of the Fund; Retired attorney, Clifford, Clifford & Olson and Parsons &
Clifford; Retired Director of Henry County Bank; Retired Director of
Illini Beef Packers, Inc.; Retired Director of Industrial Relations of
Deere & Company.
(2)PAUL D. CUMMINGS (3102 BELLAIRE DRIVE, OKLAHOMA CITY, OKLAHOMA), Director
of the Fund; Retired President and Director of Globe Life and Accident
Insurance Company.
(1)JACK T. CURRIE (515 POST OAK BOULEVARD, SUITE 750, HOUSTON, TEXAS), Director
of the Fund; Personal Investments; Director of American Indemnity Financial
Corporation, holding company for casualty insurance company; Director of
Stewart & Stevenson Services, Inc., designs and constructs power generating
systems.
*MICHAEL W. MCCROSKEY (ONE MOODY PLAZA, GALVESTON, TEXAS 77550), President
and Director of the Fund; President, Chief Executive Officer and member
of the Executive Committee of SM&R; President and Director of the SM&R
Capital Funds, Inc.; President and Director of the American National
Investment Accounts, Inc.; Executive Vice President, American National;
Vice President of Standard Life and
6
<PAGE>
Accident Insurance Company; Assistant Secretary of American National
Life Insurance Company of Texas, life, health and accident insurance
companies in the American National Family of Companies; Vice President,
Garden State Life Insurance Company; Director, ANREM Corporation;
President, ANTAC Corporation, 1994 to present.
(1)IRA W. PAINTON, C.L.U. (12004 DAHOON DRIVE, OKLAHOMA CITY, OKLAHOMA),
Chairman of the Board and Director of the Fund; Retired President of the
Fund and the other American National funds; Retired President and Director
of SM&R.
(2)DONALD P. STEVENS (13111 JOHN REYNOLDS DRIVE, GALVESTON, TEXAS), Director of
the Fund; Assistant to the President for Governmental Relations of The
University of Texas Medical Branch, a medical school and hospital system;
Vice President of Jamail Galveston Foundation.
*STEVEN H. STUBBS (2885 DOMINIQUE DR., GALVESTON, TEXAS), Director of the Fund;
Former President and Chief Executive Officer of The Westcap Corporation;
and Former President and Chief Executive Officer of SM&R and the Fund.
WILLIAM R. BERGER, C.F.A. (One Moody Plaza, Galveston, Texas 77550) Vice
President and Portfolio Manager for the Triflex Fund, Inc.; Vice President,
Portfolio Manager of the Balanced Portfolio; Assistant Vice President of
Investments for American National; Former Portfolio Manager for Trinity
Investment Management, Bellefonte, Pennsylvania, investment adviser; Former
auditor for Coopers & Lybrand, Dallas, Texas.
EMERSON V. UNGER, C.L.U. (ONE MOODY PLAZA, GALVESTON, TEXAS), Vice President of
the Fund and SM&R; Vice President of the American National Investment
Accounts, Inc. and SM&R Capital Funds, Inc.
BRENDA T. KOELEMAY (ONE MOODY PLAZA, GALVESTON, TEXAS), Vice President and
Treasurer of the Fund and SM&R; Vice President and Treasurer of the
American National Investment Accounts, Inc. and SM&R Capital Funds, Inc.;
Senior Manager, KPMG Peat Marwick, July 1980 to April 1992.
TERESA E. AXELSON (ONE MOODY PLAZA, GALVESTON, TEXAS), Vice President and
Secretary of the Fund SM&R, the American National Investment Accounts, Inc.
and SM&R Capital Funds, Inc.
* "Interested" persons as defined by the Investment Company Act of 1940.
(1) Member of nominating committee.
(2) Member of audit committee.
Officers and directors of the Fund affiliated with SM&R may receive
indirect compensation from the Fund to the extent of underwriting commissions
and investment advisory and service fees paid to SM&R.
By resolution of the Board of Directors, the Fund pays the fees and
expenses of only those directors who are not officers or employees of SM&R or
the Fund. During the fiscal year ended December 31, 1995, the Fund paid
$19,231 to such directors for fees and expenses in attending meetings of
the Board of Directors.
7
<PAGE>
REMUNERATION OF DIRECTORS
Each director is reimbursed for expenses incurred in connection with each
meeting of the Board of Directors or any Committee attended. Each director
receives a fee, allocated among the American National Funds for which he serves
as a director, which consists of an annual retainer component and a meeting fee
component. Set forth below is information regarding compensation paid or
accrued during the fiscal year ended December 31, 1995 for each director of the
Fund.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM ALL
DIRECTOR FROM FUND AMERICAN NATIONAL FUNDS
- --------------------------------------------------------------------------------
<S> <C> <C>
Ralph S. Clifford $3,162 $ 9,485
Paul D. Cummings $2,945 $ 8,836
Jack T. Currie $2,833 $ 8,500
Michael W. McCroskey -- --
Ira W. Painton $4,192 $12,305
Donald P. Stevens $2,933 $ 8,800
Steven H. Stubbs $2,833 $ 8,500
</TABLE>
POLICY REGARDING PERSONAL INVESTING
The following policies have been made a part of the Fund's Code of Ethics.
A portfolio manager must use extreme care to avoid even the appearance
of a conflict of interest in trading in any personal account (or an account
in which he has a beneficial interest). Accordingly, a portfolio manager may
not trade in (or otherwise acquire) any security for his personal account if
that same security is held in, or is being considered as a potential
acquisition by, any of the Funds. Any beneficial interest in a security held
by a portfolio manager must be sold at least 24 hours prior to any investment
by the Funds. The following exceptions apply:
1. Any beneficial interest in a security owned at the time of employment
may be held or traded at any time other than within 24 hours of a
trade in the Funds for the same or related security. Dividends in
that security may be re-invested in accordance with a formal plan
offered by the issuer.
2. Any beneficial interest in a security acquired by devise or bequeath
may be held or traded at any time other than within 24 hours of a
trade in the Funds for the same or related security.
3. Any beneficial interest in a security issued by the Government or any
Agency of the United States, a State, or any political subdivision
thereof may be traded or held.
4. Any beneficial interest in a security for which a written approval is
first obtained from the President & CEO may be traded or held.
PERSONAL INVESTING BY OTHER SM&R OFFICERS AND EMPLOYEES:
Officers and employees of the Company other than portfolio managers may
trade in (or otherwise acquire) or hold any security for his own account (or an
account in which he has beneficial interest). However, the trade must not occur
within 24 hours of a trade in the Funds for the same or related security.
8
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 29, 1996, American National Insurance Company ("American
National"), a Texas life insurance company with its principal offices located
at One Moody Plaza, Galveston, Texas 77550 and Securities Management and
Research, Inc., investment adviser to the Triflex Fund, were the only
shareholders known to the Triflex Fund to own five percent (5%) or more of
its common stock. (For information about the Triflex Fund's capital stock,
see "Capital Stock" herein.) On that date, American National owned
approximately 13% and SM&R owned approximately 8%, respectively, of the
Triflex Fund's common stock. While such ownership does not directly affect a
shareholder's voting rights, it obviously gives American National and SM&R a
strong voice in the Triflex Fund's affairs. As a practical matter, such
ownership means that passage of a shareholder proposal is unlikely without
American National's or SM&R's vote therefor. (For further information about
American National, see the "Control and Management of SM&R" section herein.)
The officers and directors of the Triflex Fund as a group owned .50% of
the outstanding shares of the Triflex Fund as of February 29, 1996.
INVESTMENT ADVISORY AND OTHER SERVICES
CONTROL AND MANAGEMENT OF SM&R
SM&R has been the investment adviser, manager and underwriter of the Fund
since the Fund began business in 1978 as the American National Bond Fund, Inc.
SM&R acts pursuant to a written agreement periodically approved by the directors
or shareholders of the Fund. SM&R is also the investment adviser, manager and
underwriter of the other American National Funds Group and the American National
Investment Accounts, Inc. and the SM&R Capital Funds, Inc. SM&R's address is
that of the Fund.
SM&R is a wholly-owned subsidiary of American National, a Texas life
insurance company with its principal offices in Galveston, Texas. The Moody
Foundation (the "Foundation"), a charitable foundation established for
charitable and educational purposes, owns approximately 23.7% of American
National's common sock and the Libbie S. Moody Trust, a private trust, owns
approximately 37.6% of such shares. The trustees of the Moody Foundation are
Robert L. Moody ("RLM"), Chairman of the Board of Directors of American
National, Frances Moody Newman and Ross R. Moody.
The Moody National Bank of Galveston (the "Bank") is trustee of the Libbie
S. Moody Trust. RLM is Chairman of the Board and President, Chief Executive
Officer of the Bank, President and Director of Moody Bancshares, Inc.
("Bancshares"), the sole shareholder of Moody Bank Holding Company, Inc.
("MBHC"), and President and Director of MBHC, the Bank's controlling
stockholder. The Three R Trusts, trusts established by RLM for the benefit of
his children, owns 100% of Bancshares' Class B stock (which elects a majority of
Bancshares' and MBHC's directors) and 47.5% of its Class A Stock. The trustee
of the Three R Trusts is Irwin M. Herz, Jr., who is also a director of American
National and a partner in Greer, Herz & Adams, L.L.P., 18th Floor, One Moody
Plaza, Galveston, Texas, General Counsel to American National, the Bank,
Bancshares, MBHC, the Fund, the other American National Funds, the American
National Investment Accounts, Inc., the SM&R Capital Funds, Inc., and SM&R.
Michael W. McCroskey, President of the Fund, is also President, Chief
Executive Officer, director and a member of the executive committee of SM&R, and
President and director of the other members of the American National Funds
Group, the American National Investment Accounts, Inc. and the SM&R Capital
Funds, Inc.; Gordon D. Dixon, Senior Vice President, Chief Investment Officer
and a member of the investment committees of SM&R and Vice President, Portfolio
Manager of the American National Investment Accounts, Inc. - Growth Portfolio;
Emerson V. Unger, Vice President of the Fund, is also Vice President of SM&R and
Vice President of the other members of the American National Funds Group, the
American National Investment Accounts, Inc., and the SM&R Capital Funds, Inc.;
Brenda T. Koelemay, Vice President and Treasurer of the Fund, is also Vice
President and Treasurer of SM&R and the other members of the American National
Funds Group, the American National Investment Accounts, Inc., and the SM&R
Capital Funds, Inc.; Teresa E. Axelson, Vice President and Secretary of the
Fund, is also Vice President and Secretary of SM&R, the other members of the
American National
9
<PAGE>
Funds Group and Vice President and Secretary of the American National
Investment Accounts, Inc. and SM&R Capital Funds, Inc.
INVESTMENT ADVISORY AGREEMENT
Under an Investment Advisory Agreement (the "Advisory Agreement") between
the Fund and SM&R dated November 30, 1989, SM&R acts as investment adviser for
and provides certain administrative services to the Fund.
As investment adviser, SM&R manages the investment and reinvestment of the
Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. SM&R provides and evaluates economic, statistical and
financial information to formulate and implement Fund investment programs. All
investments are reviewed quarterly by the Fund's Board of Directors to determine
whether or not such investments are within the policies, objectives and
restrictions of the Fund.
Under the Advisory Agreement, SM&R receives from the Fund an investment
advisory fee for acting as investment adviser computed by applying to the
average daily net asset value of the Fund each month one-twelfth of the annual
rate as follows:
<TABLE>
<CAPTION>
ON THE PORTION OF THE FUND'S BASIC ADVISORY
AVERAGE DAILY NET ASSETS FEE ANNUAL RATE
- ----------------------------------------------------------------------------
<S> <C>
Not exceeding $100,000,000 .750 of 1%
Exceeding $100,000,000 but not exceeding $200,000,000 .625 of 1%
Exceeding $200,000,000 but not exceeding $300,000,000 .500 of 1%
Exceeding $300,000,000 .400 of 1%
</TABLE>
This fee is higher than the fees paid by most other mutual funds.
For the fiscal years ended December 31, 1993, 1994, and 1995, SM&R
received investment advisory fees from the Fund of $156,748, $148,225, and
$153,930, respectively. The net assets of the Fund were $21,756,692 as of
December 31, 1995.
The Advisory Agreement was effective on November 30, 1989 and will
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by the Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities of the Fund,
and, in either case, by the specific approval of a majority of directors who
are not parties to the Advisory Agreement or not "interested" persons (as
defined in the Investment Company Act of 1940, as amended) of any such
parties, cast in person at a meeting called for the purpose of voting on such
approval. Absent proposed changes, it is the policy of Fund management to
submit continuation of the Advisory Agreement annually only to the Fund's
Board of Directors for their approval or disapproval. The Advisory Agreement
was approved by the Board of Directors in accordance with such procedures on
July 20, 1995, and by the Fund's shareholders on November 16, 1989. The
Advisory Agreement may be terminated without penalty by vote of the Board of
Directors or by vote of the holders of a majority of the outstanding voting
securities of the Fund, or by SM&R, upon sixty (60) days' written notice and
will automatically terminate if assigned.
As used herein, the term "majority" when referring to approval to be
obtained from shareholders means the vote of the lesser of (1) 67% of the
Fund's shares present at a meeting if the owners of more than 50% of the
outstanding shares are present in person or by proxy; or (2) more than 50% of
the Fund's outstanding shares.
ADMINISTRATIVE SERVICE AGREEMENT
Under an Administrative Service Agreement between the Fund and SM&R
dated November 30, 1989, SM&R acts as transfer agent and provides all
management, operational and executive services to the Fund. SM&R pays the
salaries of all officers and employees administering the Fund's affairs and
maintains office facilities, furnishes statistical and research data,
clerical help, accounting, data processing, bookkeeping, transfer agency
services, dividend disbursements and certain other services required by the
Fund. The Fund has agreed to pay other expenses incurred in the operation of
the Fund, such as interest, taxes, commissions, and other expenses incidental
to portfolio transactions, Securities and Exchange Commission fees, fees of
the Custodian (See "CUSTODIAN" herein), auditing and legal expenses, fees and
expenses of qualifying Fund
10
<PAGE>
shares for sale and maintaining such qualifications under the various state
securities laws where Fund shares are offered for sale, fees and expenses of
directors not affiliated with SM&R, costs of maintaining corporate existence,
costs of printing and mailing prospectuses and shareholder reports to
existing shareholders and expenses of shareholders' meetings.
SM&R has agreed in its Administrative Service Agreement with the Fund to
pay (or to reimburse the Fund for) the Fund's expenses of any kind, exclusive
of interest, taxes, commissions and other expenses incidental to portfolio
transactions (and, with the prior approval of any state securities
commissioner deemed by the Fund's counsel to be required by law,
extraordinary expenses beyond SM&R's control), but including the management
fee, in excess of 1.25% per year of the Fund's average daily net assets.
Such reimbursement obligation is more restrictive than required by
California, the only state still having an expense reimbursement provision
applicable to the Fund. Such reimbursements, when required, will be made
monthly. During the fiscal years ended December 31, 1993, 1994, and 1995,
SM&R reimbursed $12,988, $40,023, and $40,894, respectively, in excess
expenses to the Fund.
Under the Administrative Service Agreement, SM&R receives from the Fund a
service fee for providing administrative services. The fee is computed by
applying to the average daily net asset value of the Fund each month one-twelfth
of the annual rate as follows:
<TABLE>
<CAPTION>
ADMINISTRATIVE
ON THE PORTION OF THE FUND'S SERVICE FEE ANNUAL
AVERAGE DAILY NET ASSETS RATE
- -----------------------------------------------------------------------------
<S> <C>
Not exceeding $100,000,000 .25 of 1%
Exceeding $100,000,000 but not exceeding $200,000,000 .20 of 1%
Exceeding $200,000,000 but not exceeding $300,000,000 .15 of 1%
Exceeding $300,000,000 .10 of 1%
</TABLE>
The administrative service fee is payable to SM&R whether or not the actual
expense to SM&R for providing administrative services is more or less than the
amount of such fee.
For the fiscal years ended December 31, 1993, 1994, and 1995, SM&R
received administrative service fees from the Fund pursuant to an investment
advisory agreement then in effect which contained the administrative
functions now contained in the Administrative Service Agreement. During such
periods, SM&R received administrative service fees from the Fund of $52,247,
$49,409, and $51,310, respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
SM&R, which supervises the Fund's investments, is responsible for effecting
portfolio transactions through eligible securities brokers and dealers, subject
to the general supervision of the Fund's Board of Directors. Investment
decisions are made by an Investment Committee of SM&R, and orders are placed by
persons supervised by that committee.
There is no arrangement or intention to place orders with any specific
broker or group of brokers. The paramount factors considered by SM&R in placing
orders are efficiency in the execution of orders and obtaining the most
favorable net prices for the Fund in both purchases and sales of portfolio
securities. In seeking the best prices and executions, purchases and sales of
securities which are not listed or traded on a securities exchange are generally
executed with a principal market maker acting as principal. SM&R evaluates the
brokerage fees paid by the Fund to any affiliated person by comparing such fees
to those paid by other investment companies for similar transactions as reported
in various industry surveys.
Whenever the primary consideration of best price and best execution is met
to the satisfaction of SM&R, the brokers and dealers selected will include those
who provide supplementary statistical and research services. Such research
services include advice as to the advisability of investing in, purchasing or
selling securities, as well as analyses and reports concerning securities,
economic factors and trends. While SM&R is able to fulfill its obligation to
the Fund without such information, its expenses might be materially increased if
it had to obtain and assemble such information through its
11
<PAGE>
staff. However, the value of such information is not determinable. SM&R
also uses such information when rendering investment advisory services to the
other American National Funds, the American National Investment Accounts,
Inc., the SM&R Capital Funds, Inc., and to American National and its other
accounts. SM&R will authorize the Fund to pay an amount of commission for
effecting a securities transaction in excess of the amount of commission
another broker-dealer would have charged only if it determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer. Generally,
the Fund pays higher than the lowest commission rates available.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, and subject to seeking the best price and execution, the
Fund may give consideration to sales of shares of the Fund as a factor in the
selection of brokers and dealers to execute Fund portfolio transactions.
All purchases and sales of fixed income securities by the Fund are
executed on a net-price basis based on yield quotes from dealers. Such net
prices may include undisclosed mark-ups to such dealers. SM&R has no way to
determine the existence or amount of any such mark-ups except in original
issues. During the fiscal years ended December 31, 1993, 1994, and 1995 the
Fund paid brokerage fees amounting to $59,000, $21,000, and $13,000,
respectively, for transactions in portfolio securities. Portfolio turnover
rates for these periods were 71%, 47%, and 16%, respectively. No brokerage
commissions have been paid during the Fund's three most recent periods to any
broker which is an affiliated person of the Fund, which is an affiliated
person of a broker which is an affiliated person of the Fund or an affiliated
person of which is an affiliated person of the Fund or SM&R.
The other American National Funds Group, the American National Investment
Accounts, Inc. and the SM&R Capital Funds, Inc., for which SM&R is also
investment adviser, may own securities of the same companies from time to time.
However, the Fund's portfolio security transactions will be conducted
independently, except when decisions are made to purchase or sell portfolio
securities of the Fund and the other American National Funds Group, the American
National Investment Accounts, Inc. and the SM&R Capital Funds, Inc.,
simultaneously. In such event, the transactions will be averaged as to price
and allocated as to amount (according to the proportionate share of the total
combined commitment) in accordance with the daily purchase or sale orders
actually executed.
The Fund's Board of Directors has determined that such ability to effect
simultaneous transactions may be in the best interests of the Fund. It is
recognized that in some cases these practices could have a detrimental effect
upon the price and volume of securities being bought and sold by the Fund, which
in other cases these practices could produce better executions.
CAPITAL STOCK
The Fund's authorized capital stock consists of 50,000,000 common shares
with a par value of $1.00 each. All shares are equal with respect to
distributions from income and capital gains. There are no conversion, pre-
emptive or other subscription rights. In the event of liquidation, each share
is entitled to an equal portion of all the Fund's assets after all debts and
expenses have been paid.
Each share is entitled to one vote, and the Fund's shares have non-
cumulative voting rights with respect to election of directors. This means that
the holders of more than 50% of the shares voting for the election of directors
can elect 100% of the directors if they so choose, and in such event, holders of
the remaining shares will not be able to elect any directors.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
PURCHASING SHARES
Shares of the Fund may be purchased at a public offering price which is
based on the net asset value of each share of the Fund next determined plus a
sales charge. Shares may be purchased from registered representatives of SM&R,
or through authorized investment dealers. Remittances for additional
investments may be submitted directly
12
<PAGE>
to SM&R. Except for certain systematic investment programs (See "SPECIAL
PURCHASE PLANS" herein), the minimum initial investment is $100 and
additional shares may be purchased through investment of $20 or more at any
time thereafter.
In the interest of economy, certificates representing shares purchased are
not ordinarily issued. Most investors do not choose to receive certificates for
their shares as this eliminates the problem of safekeeping and facilitates
redemptions and transfers. However, a confirmation will be sent to the investor
promptly after each share purchase. The investor will have the same ownership
rights with respect to shares purchased as if certificates had been issued.
Investors may receive a certificate representing shares by making written
request to SM&R. If a certificate is requested, it will normally be forwarded
to the investor within 14 days after receipt of the request. SM&R reserves the
right to charge a small administrative fee for issuance of any certificates.
Certificates will not be issued for fractional shares (although fractional
shares remain in your account on the books of the Fund).
DETERMINATION OF NET ASSET VALUE
The net asset value per share of Fund shares is determined by adding the
market value of its portfolio securities and other assets, subtracting
liabilities, and dividing the result by the number of the Fund shares
outstanding. Expenses and fees of the Fund, including the advisory fee and the
expense limitation reimbursement, if any, are accrued daily and taken into
account in determining net asset value. The portfolio securities of the Fund
are valued as of the close of trading on each day when the New York Stock
Exchange is open for trading other than SM&R's business holidays described
below. Securities listed on national securities exchanges are valued at the
last sales price on such day, or if there is no sale, then at the closing bid
price therefor on such day on such exchange. The value of unlisted securities
is determined on the basis of the latest bid prices therefor on such day. If no
quotations are available for a security or other property, it is valued at fair
value as determined in good faith by the Board of Directors of the Fund on a
consistent basis.
SM&R's business holidays are Good Friday, Labor Day, Thanksgiving Day and
the Friday following Thanksgiving Day, two business days at Christmas and New
Years Day. If Christmas Day is a weekday other than Monday, Christmas Day and
Christmas Eve Day are business holidays. If Christmas Day is a Monday,
Christmas Day and the preceding Friday will be business holidays. If Christmas
Day is a Saturday, the preceding Thursday and Friday will be business holidays.
If Christmas Day is a Sunday, the preceding Friday and following Monday will be
business holidays. If New Years Day is a Saturday, the preceding Friday will be
a business holiday. If New Years Day is a Sunday the following Monday will be a
business holiday.
OFFERING PRICE
Full and fractional shares are purchased at the offering price, which is
the net asset value next determined after receipt of a purchase plus the sales
charge. The sales charge is a percentage of the net asset value per share and
will vary as shown below. Purchases received by SM&R at its office in
Galveston, Texas prior to 3:00 p.m., Central Time, will be executed at the
applicable offering price determined on that day. Purchases received thereafter
will be executed at the offering price determined on the next business day.
The offering price is the net asset value per share plus a sales charge
computed at the rates set forth in the following table:
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
------------------------------------------------------------------
AMOUNT OF INVESTMENT AS A PERCENTAGE OF AS A PERCENTAGE DEALER CONCESSION AS A
AT OFFERING PRICE OFFERING PRICE OF NET AMOUNT PERCENTAGE OF OFFERING
INVESTED PRICE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.1% 4.75%
$50,000 but less than
$100,000 4.5% 4.7% 4.0%
$100,000 but less than
$250,000 3.5% 3.6% 3.0%
$250,000 but less than
$500,000 2.5% 2.6% 2.0%
$500,000 and over* None None None
</TABLE>
13
<PAGE>
*In connection with purchases of $500,000 or more, SM&R may pay its
representatives and broker-dealers, in quarterly installments, from its own
profits and resources, a per annum percent of the amount invested as follows:
Year 1 - 0.35% and Year 2 - 0.25% for the Growth Fund, Income Fund and
Triflex Fund, respectively. In the third and subsequent years, SM&R may pay
0.075% per annum, in quarterly installments, to those representatives and
broker-dealers with accounts totaling assets of $1 million or
more.
The following is an illustration of the calculation of the net asset value
and offering price per share at December 31, 1995:
NET ASSETS ($21,756,692) = Net Asset Value Per Share ($16.85)
------------------------
Shares outstanding (1,290,857)
To obtain the public offering price per share, the Fund's 5.75% sales
charge as of December 31, 1995 must be added to the net asset value obtained
above:
$16.85 = Public Offering Price Per Share ($17.88)
------
.9425
Such illustration reflects the calculation of the Fund's net asset value
and offering price per share based on the financial history of the Fund prior
to its name and investment objective change and prior to an increase in the
investment advisory fee and the imposition of a service fee. Accordingly, such
illustration should not be, and is not intended to, reflect anticipated future
valuations of net asset values and offering prices per share of the Fund.
REDUCED SALES CHARGE
The reduced sales charge rates set forth in the table above apply to
purchases of shares of the Fund, either singly or in combination with purchases
of shares of the American National Growth Fund, Inc. (the "Growth Fund"), the
American National Income Fund, Inc. (the "Income Fund"), the American National
Government Income Fund Series (the "Government Income Series") and the
American National Tax Free Series of the SM&R Capital Funds, Inc., at the
respective sales charges applicable to each, made at one time by: (1) Any
individual; (2) Any individual, his or her spouse, and trusts or custodial
agreements for their minor children; (3) A trustee or fiduciary of a single
trust estate or single fiduciary account; (4) Tax-exempt organizations specified
in Sections 501(c)(3) or (13) of the Internal Revenue Code, or employees'
trusts, pension, profit-sharing, or other employee benefit plans qualified under
Section 401 of the Internal Revenue Code; and (5) Employees or employers on
behalf of employees under any employee benefit plan not qualified under Section
401 of the Internal Revenue Code.
Purchases by any company or employee benefit plans not qualified under
Section 401 of the Internal Revenue Code will qualify for the above quantity
discounts only if the Fund will realize economies of scale in sales effort and
sales related expenses as a result of the employer's or the plan's bearing the
expense of any payroll deduction plan, making the Fund's prospectus available to
individual investors or employees, forwarding investments by such employees to
the Fund, and the like.
The rates set forth above are applicable to single, lump sum purchases made
under the provisions of the preceding paragraphs 1, 2 and 3 and to qualified
investments under a "Letter of Intent" or under the "Accumulation Privilege" as
described below.
THE EDUCATION FUNDING INVESTMENT ACCOUNT PROGRAM
The following breakpoints apply to purchases made by individuals investing
in the Funds through the use of The Education Funding Investment Account
Program.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
------------------------------------------------------
AMOUNT OF INVESTMENT AS A PERCENTAGE AS A PERCENTAGE DEALER CONCESSION
AT OFFERING PRICE OF OFFERING OF NET AMOUNT AS A PERCENTAGE OF
PRICE INVESTED OFFERING PRICE
- -------------------- --------------- --------------- ------------------
<S> <C> <C> <C>
Less than $100,000 4.5% 4.7% 4.0%
$100,000 but less than 3.5% 3.6% 3.0%
$250,000
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
------------------------------------------------------
AMOUNT OF INVESTMENT AS A PERCENTAGE AS A PERCENTAGE DEALER CONCESSION
AT OFFERING PRICE OF OFFERING OF NET AMOUNT AS A PERCENTAGE OF
PRICE INVESTED OFFERING PRICE
- -------------------- --------------- --------------- ------------------
<S> <C> <C> <C>
$250,000 but less than 2.5% 2.6% 2.0%
$500,000
$500,000 and over* None None None
</TABLE>
*In connection with purchases of $500,000 or more, SM&R may pay its
representatives and broker-dealers, in quarterly installments, from its own
profits and resources, a per annum percent of the amount invested as set
forth as follows: Year 1 - 0.35% and Year 2 - 0.25%. In the third and
subsequent years, SM&R may pay 0.075% to those representatives and
broker-dealers with accounts per annum, in quarterly installments, totaling
assets of $1 million or more.
The Education Funding Investment Account Program is a service expressly
created to help investors accumulate funds for their children's or
grandchildren's college education. The maximum sales charge is 4.5% on the
purchase of shares of the Funds. To participate in this special plan,
investors must complete the special Education Funding Investment Account
application designed specifically for the Program.
All direct sales expenses, including the cost of prospectuses for
prospective shareholders, are paid by SM&R, and no sales expense is borne by any
of the Funds.
SPECIAL PURCHASE PLANS
LETTER OF INTENT -- As indicated in the Prospectus under the heading "Letter
of Intent", investors may qualify for a reduced sales charge on the Fund
either singly or in combination with the purchase and holding of shares of
the Growth Fund, the Income Fund, the Government Income Series or the Tax
Free Series. A minimum initial investment equal to 10% of the amount
necessary for the applicable reduced sales charge is required when a Letter
of Intent is executed. Investments made under a Letter of Intent will
purchase shares at the total sales charge rate applicable to the specified
total investment. SM&R will hold in escrow from the initial investment
shares equal to 5% of the amount of the total intended investment. Such
escrow shares may not be exchanged or reinvested for shares of another fund,
or the Government Income Series or the Tax Free Series and, subject to the
right of early cancellation described below, will not be released until the
amount purchased equals the commitment set forth in the Letter of Intent. If
the intended investment is not completed during the 13 month period, the
difference between the sales charge actually paid and the sales charge
applicable to the total of such purchases made will be deducted from the
escrow shares if not paid by the investor within twenty (20) days after the
date notice thereof has been mailed to such investor.
A Letter of Intent agreement can be canceled prior to the end of the
13-month period and escrow shares released to the investor if the investor
pays the difference between the sales charge paid and the sales charge
applicable to the amount actually invested and agrees that such Letter of
Intent agreement is canceled and no longer in effect.
The offering value of the shares of the Fund, the Growth Fund, the Income
Fund, the Government Income Series or the Tax Free Series currently owned
may also be included in the aggregate amount of an investment covered by a
Letter of Intent. For example, if an investor owns shares of the Fund or shares
of the Growth Fund, the Income Fund, the Government Income Series, the Tax Free
Series or some combination of these funds, currently valued at $80,000 and
intends to invest $25,000 over the next thirteen months, such investor may
execute a Letter of Intent and the entire $25,000 will purchase shares of either
or all of such funds at the reduced sales charge rate applicable to an
investment of $100,000 or more. A Letter of Intent does not represent a binding
obligation on the part of the investor to purchase or the Fund to sell the full
amount of shares specified.
SYSTEMATIC INVESTMENT AND PRE-AUTHORIZED CHECK PLANS -- The Fund provides a
convenient, voluntary method of purchasing shares in the Fund through its
"Systematic Investment and Pre-Authorized Check Plans" (a "Plan" or "Plans").
The principal purposes of the Plans are to encourage thrift by enabling
investors to make regular purchases in amounts less than normally required, and
to employ the principle of dollar cost averaging described below.
15
<PAGE>
By acquiring Fund shares on a regular basis pursuant to a Plan, or
investing regularly on any other systematic plan, the investor takes advantage
of the principle of dollar cost averaging. Under dollar cost averaging, if a
constant amount is invested at regular intervals at varying price levels, the
average cost of all the shares will be lower than the average of the price
levels. This is because the same fixed number of dollars buys more shares when
price levels are low and fewer shares when price levels are high. It is
essential that the investor consider his other financial ability to continue
this investment program during times of market decline as well as market rise.
The principle of dollar cost averaging will not protect against loss in a
declining market, as a loss will result if the plan is discontinued when the
market value is less than cost.
After the initial minimum investment of $100 has been met, a plan may be
opened by indicating an intention to make subsequent investments of $20 or more
monthly for at least one year. The investor will receive a confirmation showing
the number of shares purchased, purchase price, and subsequent new balance of
shares accumulated.
An investor has no obligation to invest regularly or to continue
participating in a Plan, which may be terminated by the investor at any time
without penalty. Under a Plan, any distributions of income and realized capital
gains will be reinvested in additional shares at net asset value unless a
shareholder instructs SM&R in writing to pay them in cash. SM&R reserves the
right to increase or decrease the amount required to open and continue the plan,
and to terminate any shareholder's right to participate in the plan if after one
year the value of the amount invested is less than $100.
GROUP SYSTEMATIC INVESTMENT PLAN -- This plan provides employers and employees
with a convenient means for purchasing shares of the Fund under various types of
employee benefit and thrift plans, including payroll deduction and bonus
incentive plans. The plan may be started with an initial cash investment of $20
per participant for a group consisting of five or more participants. The shares
purchased by each participant under the plan will be credited to a separate
account in the name of each investor in which all dividends and capital gains
will be reinvested in additional shares of the Fund at net asset value. Such
reinvestments will be made at the start of business on the day following the
record date for such dividends and capital gains distributions. To keep his or
her account open, subsequent payments, each totaling $20 or more must be made
into each participant's account monthly. If the group is reduced to less than
five participants, the minimums set forth under "Systematic Investment and Pre-
Authorized Check Plans" shall apply. The plan may be terminated by SM&R or the
shareholder at any time upon sixty (60) days' prior written notice.
EXCHANGE PRIVILEGE -- As provided in the Prospectus under the heading
"Exchange Privilege", investors owning shares of the Fund can exchange such
shares for shares of the other funds in the American National Funds Group and
the SM&R Capital Funds, Inc. There is no administrative charge for this
privilege at this time, however, the Fund reserves the right to charge a fee
in the future.
Such exchange privileges are not options or rights to purchase such
securities, but are revocable privileges permitted under the present policies of
each of these funds, and are not available in any state or other jurisdiction
where the shares of the fund into which transfer is to be made are not
registered for sale. SM&R reserves the right to restrict the frequency of or
otherwise modify, condition, terminate or impose additional charges upon the
exchange privilege.
The minimum number of shares that may be exchanged is the number of shares
of the fund whose shares are being exchanged which have a net asset value on the
date of such exchange equal to the minimum initial or subsequent investment, as
the case may be, of the fund into which the exchange is being made.
Any gain or loss realized on such an exchange is recognized for income tax
purposes, subject, however, to the "wash sale" rule that if and to the extent
the investor reinvests in the Fund originally held within thirty (30) days after
the redemption, losses will not be recognized.
16
<PAGE>
REDEMPTION
Any shareholder may redeem all or any part of his shares by submitting a
written request to SM&R as the Fund's agent for such purpose. Such requests
must be duly executed by each registered owner and must be accompanied by
certificates endorsed for transfer, if certificates have been issued, with
signatures guaranteed by a commercial bank or securities firm. No signature
guarantees are required on the written request for redemption by a shareholder
of record when payment is to be made to such shareholder of record at such
shareholder's address of record and the value of the shares redeemed is $25,000
or less. In all other cases the signatures on the request for redemption, as
well as on certificates being tendered, must be guaranteed. On all redemption
requests for joint accounts, the signatures of all joint owners are required.
Corporations, executors, divorced persons, administrators, trustees or guardians
will be required to submit further documentation. Refer to the American
National Funds Group prospectus for signature guarantee requirements.
Shares are redeemed at the net asset value per share next computed after
the request and certificates, if any, are received in "Proper Form". (See "HOW
TO REDEEM SHARES" in the Prospectus). A shareholder may receive more or less
than he paid for his shares, depending on the prevailing market value of the
Fund's portfolio securities. Redemption checks are delivered as soon as
practicable and normally will be sent to the investor within seven days
following the date on which redemption is made.
At various times the Fund may be requested to redeem shares for which it
has not yet received good payment for prior purchases of Fund shares.
Accordingly, proceeds of the Fund will not be paid until good payment has been
received which could be as much as fifteen (15) business days after the
purchase, or until SM&R can verify that good payment (for example, cash or
certified check on a United States Bank) has been, or will be, collected for the
purchase of such shares.
The right of redemption is subject to suspension and payment postponed
during any period when the New York Stock Exchange is closed other than
customary weekend or holiday closings, or during which trading on such Exchange
is restricted; for any period during which an emergency exists, as a result of
which disposal by the Fund of its securities is not reasonably practicable or it
is not reasonably practicable for the Fund to fairly determine the value of its
net assets; or for such other periods as the Commission has by order permitted
such suspension for the protection of the Fund's security holders.
The Fund has made an election under the Investment Company Act of 1940, as
amended, to pay in cash all requests for redemption by any shareholder of
record, limited in amount with respect to each shareholder during any ninety-day
period to the lesser of (i) $250,000 or (ii) 1% of the net asset value of the
Fund at the beginning of such period. The Fund may pay the redemption price, if
any, in excess of the amounts described above in whole or in part in portfolio
securities, at the market value thereof determined as of the close of business
next following receipt of the request in proper form, if deemed advisable by the
board of directors. In such case a shareholder would incur brokerage costs if
he sold the securities received.
There is presently no charge for redeeming Fund shares. However, the Fund
reserves the right to charge for any redemption an amount, to be determined by
the Board of Directors, not to exceed 1% of the net asset value of the shares
being redeemed, but it is not the present intent of the Board of Directors to
make such a charge.
SYSTEMATIC WITHDRAWAL PLAN
As described in the Prospectus under "Systematic Withdrawal Plan", the
Fund has a Systematic Withdrawal Plan which allows shareholders having an
account value of $5,000 or more to automatically withdraw a minimum of $50
monthly or quarterly.
A Systematic Withdrawal Plan provides for regular monthly or quarterly
payments to the account investor or his designee through redemption of a portion
of the shares held in the account. Some portion of each withdrawal may be
taxable gain or loss to the account investor at the time of the withdrawal, the
amount of the gain or loss
17
<PAGE>
being determined by the investment in the Fund shares. The minimum, though
not necessarily recommended, withdrawal amount is $50.00. Shares sufficient
to provide the designated withdrawal payment are redeemed each month or
quarterly on the 20th, or the next succeeding business day, and checks are
mailed to reach the investor on or about the lst of the following month. All
income dividends and capital gains distributions are automatically reinvested
at net asset value, without sales charge. Since each withdrawal check
represents proceeds from the sale of sufficient shares equal to the
withdrawal, there can be a reduction of investment capital, particularly in a
declining market. If redemptions are consistently in excess of shares added
through reinvestment of distributions, the withdrawals will ultimately
exhaust the capital.
The shareholder may designate withdrawal payments for a fixed dollar
amount, as stated in the preceding paragraph, or a variable dollar amount based
on (1) redemption of a fixed number of shares at monthly or quarterly intervals,
or (2) redemption of a specified and increasing fraction of shares held at
monthly or quarterly intervals. To illustrate the latter option, if an investor
wanted quarterly payments for a ten-year period, the first withdrawal payment
would be the proceeds from redemption of 1/40th of the shares held in the
account. The second payment would be 1/39th of the remaining shares; the third
payment would be 1/38th of the remaining shares, etc. Under this option, all
shares would be redeemed over the ten-year period, and the payment amount would
vary each quarter, depending upon the number of shares redeemed and the
redemption price.
No charge is made for a non-qualified Systematic Withdrawal Plan, and the
account investor may change the option or payment amount at any time upon
written request received by SM&R no later than the month prior to the month of a
scheduled redemption for a withdrawal payment. A Systematic Withdrawal Plan may
also be terminated at any time by the account investor of the Fund without
penalty.
Occasionally certain limited types of qualified retirement plans are
involved in making investments and withdrawals during the same year. Under such
an arrangement, it is possible for the plan to be, in effect, charged duplicate
sales charges. In order to eliminate this possibility, the Fund will permit
additional investments, without sales charge, equal to all sums withdrawn,
providing the additional investments are made during the next twelve months
following the withdrawal or redemption, and providing that all funds withdrawn
were for the specific purpose of satisfying plan benefits of participants who
have retired, become disabled or left the plan. Furthermore, for a qualified
plan to qualify under this provision, the plan must include at least one
participant who is a non-owner employee. The Fund and SM&R discourage
shareholders from maintaining a withdrawal account while concurrently and
regularly purchasing shares of the Fund, although such practice is not
prohibited.
TAX STATUS
Shareholders are reminded that dividends are taxable whether received in
cash or reinvested and received in the form of additional shares. Furthermore,
any distribution received shortly after a purchase of shares by an investor will
have the effect of reducing the per share net asset value of his shares by the
amount of the distributions. Such distributions, although in effect a return of
capital, are subject to taxes. Furthermore, if the net asset value of each
share is reduced below the shareholder's cost as a result of a distribution,
such distribution would be a return of capital although taxed at applicable
rates.
The Fund or the securities dealer effecting a redemption transaction is
required to file an informational return (1099-B) with the IRS with respect to
each sale of Fund shares by a shareholder. The year-end statement provided to
each shareholder will serve as a substitute 1099-B for purposes of reporting any
gain or loss on the tax return filed by the shareholder. In addition, the Fund
is required by law and IRS regulations to withhold 31% of the dividends,
redemptions and other payments made to non-exempt accounts unless shareholders
have provided a corrected taxpayer identification number and made the
certifications required by the IRS as indicated in the shareholder application
when opening an account.
Distributions from the Fund may also be subject to state and local taxes.
Shareholders should consult their own tax adviser concerning tax consequences of
an investment in the Fund.
18
<PAGE>
THE UNDERWRITER
SM&R serves as principal underwriter of the shares of the Fund pursuant to
an Underwriting Agreement dated May 1, 1993 (the "Underwriting Agreement").
Such Underwriting Agreement provides that it shall continue in effect only so
long as such continuance is specifically approved at least annually by the board
of directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund and, in either case, by the specific approval of a
majority of directors who are not parties to such contract or agreement or not
"interested" persons (as defined in the Investment Company Act of 1940, as
amended) of any such parties, cast in person at a meeting called for the purpose
of voting on such approval. The Underwriting Agreement was approved by the
Board of Directors of the Fund in accordance with such procedures at a meeting
held on July 20, 1995. The Underwriting Agreement may be terminated without
penalty by vote of the Board of Directors or by vote of the holders of a
majority of the outstanding voting securities of the Fund, or by SM&R, upon
sixty (60) days' written notice and will automatically terminate if assigned (as
provided in the Investment Company Act of 1940, as amended).
As principal underwriter, SM&R continuously offers and sells shares of
the Fund through its own sales representatives and broker-dealers. As
compensation for such services, SM&R receives the sales charge, which is the
difference between the offering price at which shares are issued and the net
asset value. Prior to April 1, 1996, SM&R allowed varying portions of the
sales charge allowance to broker-dealers, ranges from a maximum of 6.1% to a
minimum of .50% of the net amount invested and from a maximum of 4.75% to a
minimum of .30% of the public offering price. Effective April 1, 1996, the
sales charge to broker-dealers, ranging from a maximum of 4.7% to a minimum
of 2.6% of the net amount invested, and from a maximum of 4.0% to a minimum
of 2.0% of the public offering price. In connection with purchases of
$500,000 or more, SM&R may pay broker-dealers, in quarterly installments,
from its own profits and resources, a per annum percent of the amount
invested as follows: Year 1 - 0.35% and Year 2 - 0.25%. In the third and
subsequent years, SM&R may pay 0.075% per annum, in quarterly installments, to
those broker-dealers with accounts totaling assets of $1 million or more.
Such allowances are the same for all broker-dealers.
The amount of such sales charge received by SM&R from the sale of Fund
shares for the fiscal years ended December 31, 1993, 1994, and 1995 was
$59,070, $43,311, and $33,172, respectively. Of such amounts received during
such periods SM&R retained approximately $17,000, $9,500, and $6,000,
respectively and $1,300 $700 and $295 was reallowed to dealers.
FINANCIAL STATEMENTS
The financial statements included as part of the Fund's Annual Report
dated December 31, 1995, filed with the Securities and Exchange Commission on
February 29, 1996, are attached hereto as "EXHIBIT 1".
CUSTODIAN
The cash and securities of the Fund are held by SM&R pursuant to a
Custodian Agreement dated September 12, 1991. As custodian, SM&R will hold
and administer the Fund's cash and securities and maintain certain financial
and accounting books and records as provided for in such Custodian Agreement.
The compensation paid to the Custodian is paid by the Fund and is based upon
and varies with the number, type and amount of transactions conducted by the
Custodian.
SM&R has entered into a sub-custodial agreement with Moody National Bank of
Galveston (the "Bank") effective July 1, 1991. Under the sub-custodian
agreement the cash and securities of the Fund will be held by the Bank which
will be authorized to use the facilities of the Depository Trust Company and the
facilities of the book-entry system of the Federal Reserve Bank with respect to
securities of the Fund held by it on behalf of SM&R for the Fund.
19
<PAGE>
COUNSEL AND AUDITORS
The Fund's General Counsel is Greer, Herz & Adams, L.L.P., 18th Floor, One
Moody Plaza, Galveston, Texas 77550. KPMG Peat Marwick LLP, 700 Louisiana,
Houston, Texas 77002, are the Fund's independent auditors and perform annual
audits of the Fund's financial statements.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
SM&R is the transfer agent and dividend paying agent for the Fund, the
American National Growth Fund, Inc., the American National Income Fund, Inc.,
the American National Investment Accounts, Inc. and the SM&R Capital Funds,
Inc.
PERFORMANCE DATA
CUMULATIVE TOTAL RETURN
The cumulative return reflects each year's hypothetical annually compounded
return that would equate a ten thousand dollar investment on November 20, 1988
(the effective date of the current investment objectives) to the redeemable
value on December 31 of each of the succeeding years by adding one to the
computed average annual total return multiplied by:
1. the $10,000 hypothetical investment for 1989 or;
2. the redeemable value of the $10,000 investment as of the preceding
December 31 for the succeeding years.
The total return percentage calculations assume the maximum sales charge
was deducted from the initial amount invested and that all income dividends and
capital gain distributions are reinvested on the reinvestment dates at the net
asset value.
The income return percentage reflects the income dividends paid during the
period divided by:
1. the $10,000 hypothetical investment for 1989 or;
2. the redeemable value of the $10,000 investment as of the preceding
December 31 for the succeeding years.
The appreciation percentage represents the difference between the $10,000
investment and the ending redemption value for 1989 and the difference between
the beginning and ending redemption values for subsequent years, less the income
dividends paid during the period divided by:
1. the $10,000 hypothetical investment for 1989; or
2. the redeemable value of the $10,000 investment as of the preceding
December 31 for the succeeding years.
The total return on the net amount invested reflects the hypothetical
return that would equate a November 20, 1988 initial ten thousand dollar
investment less the maximum $575 sales load to the redeemable value on December
31, 1988 by adding one to the computed total return and multiplying the result
by $9,425 (the initial ten thousand dollar investment less the maximum sales
load).
AVERAGE ANNUAL RETURN
The Fund's average annual return during specified time periods reflects the
hypothetical annually compounded return that would equate an initial one
thousand dollar investment to the ending redeemable value of such investment by
adding one to the computed average annual total return, raising the sum to a
power equal to the number of years covered by the computation and multiplying
the result by the one thousand dollar initial investment. The calculation
assumes deduction of the maximum sales charge from the initial amount invested
and reinvestment of all investment income
20
<PAGE>
dividends and capital gains distributions on the reinvestment dates at the
net asset value.
COMPARISONS
To help investors better evaluate how an investment in the Fund might
satisfy their investment objective, advertisements and other materials regarding
the Fund may discuss various measures of the performance as reported by various
financial publications. Materials may also compare performance (as calculated
above) to performance as reported by other investments, indices, and averages.
The following publications, indices, and averages may be used:
Dow Jones Composite Average or its component averages - an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones Industrial
Average), 15 utilities company stocks (Dow Jones Utilities Average), and 20
transportation company stocks. Comparisons of performance assume reinvestment
of dividends.
Standard & Poor's 500 Stock Index or its component indices - an unmanaged index
composed of 400 industrial stocks, 40 financial stocks, 40 utilities stocks, and
20 transportation stocks. Comparisons of performance assume reinvestment of
dividends.
The New York Stock Exchange composite or component indices - unmanaged indices
of all industrial, utilities, transportation, and finance stocks listed on the
New York Stock Exchange.
Wilshire 5000 Equity Index - represents the return on the market value of all
common equity securities for which daily pricing is available. Comparisons of
performance assume reinvestment of dividends.
Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income Fund
Performance Analysis - measure total return and average current yield for the
mutual fund industry. Rank individual mutual fund performance over specified
time periods, assuming reinvestment of all distributions, exclusive of any
applicable sales charges.
CDA Mutual Fund Report, published by CDA Investment Technologies, Inc. analyzes
price, current yield, risk, total return, and average rate of return (average
annual compounded growth rate) over specified time periods for the mutual fund
industry.
Mutual Fund Source Book, published by Morningstar, Inc. - analyzes price, yield,
risk and total return for equity funds.
Financial publications: The Wall Street Journal and Business Week, Changing
Times, Financial World, Forbes, Fortune, and Money magazines provide performance
statistics over specified time periods.
Consumer Price Index (or Cost of Living Index), published by the U.S. Bureau of
Labor Statistics - a statistical measure of change, over time, in the price of
goods and services in major expenditure groups.
Salomon Brothers Broad Bond Index or its component indices - The Aggregate Bond
Index measures yield, price and total return for Treasury, Agency, Corporate,
Mortgage, and Yankee bonds.
Standard & Poor's Bond Indices - measures yield and price of Corporate,
Municipal, and Government bonds.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the portfolio of the Fund, that the averages are
generally unmanaged, and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
figures. In addition there can be no assurance that the Fund will continue this
performance as compared to such other averages.
21
<PAGE>
- --------------------------------------------------------------------------------
A N N U A L R E P O R T
<TABLE>
<S> <C>
DIRECTORS
[LOGO] Ralph S. Clifford
Paul D. Cummings
AMERICAN Jack T. Currie
NATIONAL Michael W. McCroskey
FUNDS Ira W. Painton
GROUP Donald P. Stevens
/ / AMERICAN NATIONAL GROWTH FUND Steven H. Stubbs
/ / AMERICAN NATIONAL INCOME FUND OFFICERS
/ / TRIFLEX FUND Michael W. McCroskey, President
ANNUAL REPORT Gordon D. Dixon, Vice President and
DECEMBER 31, 1995 Portfolio Manager, Growth Fund
FORM 9092-S David Zimansky, Vice President and
RE-1 12/95 Portfolio Manager, Income Fund
William R. Berger, Vice President and
Portfolio Manager, Triflex Fund
Brenda T. Koelemay, Vice President
and Treasurer
Emerson V. Unger, Vice President
Teresa E. Axelson, Vice President
and Secretary
INVESTMENT ADVISOR AND MANAGER
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550
CUSTODIAN
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550
</TABLE>
<TABLE>
<S> <C>
LEGAL COUNSEL
Greer, Herz & Adams, L.L.P.
One Moody Plaza
Galveston, Texas 77550
UNDERWRITER AND REDEMPTION AGENT
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550
TRANSFER AGENT, REGISTRAR
AND DIVIDEND PAYING AGENT
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
700 Louisiana
Houston, Texas 77002
</TABLE>
This Annual Report must be preceeded or accompanied by a Prospectus of the
American National Funds Group.
<PAGE>
PORTFOLIO MANAGERS' DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
AMERICAN NATIONAL GROWTH FUND, INC.
This was a very good year for investors as both the fixed-income and stock
markets registered strong double-digit rates of return. These strong returns
point out the importance of investing in and staying in long-term financial
assets like stocks and bonds. Recall that 1994 was not a particularly good year
for financial assets. For example an average stock mutual fund produced a
negative 2% last year and many investors reduced their stock and bond
investments at that time in favor of safe short-term money market investments.
This "timing the market" strategy proved to be very expensive given the large
unusual returns or stocks and bonds in 1995.
In order to achieve the higher rates of returns available in the stock market
over time, you have to be invested when these large returns occur and it is
impossible to know precisely when that will happen.
The consensus outlook for the economy in 1996 is for slower growth with
inflation remaining in check. The consumer has piled on an increasing amount of
debt over the past few years and will likely curtail spending. Business capital
spending is also slowing from the torrent pace of the past few years. Monetary
and fiscal policy will capture most of the headlines due to election year
debates and posturing on those significant economic variables. As we have seen,
the financial markets react and respond with sharp price moves as they adjust to
increases or decreases in the risks associated with expected or announced
governmental actions.
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN AMERICAN NATIONAL GROWTH
FUND, INC. AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1984 1985 1986 1987 1988 1989
<S> <C> <C> <C> <C> <C> <C>
American National Growth Fund, Inc. 10,000 12,377 13,735 15,451 16,378 20,363
S&P 500 10,000 13,216 15,657 16,476 19,245 25,306
1990 1991 1992 1993 1994 1995
19,764 27,072 26,395 28,551 29,972 37525
24,504 31,990 34,443 37,884 38,380 52722
Average Annual Return
10 Year 11.07%
5 Year 12.36%
1 Year 18.11%
Past performance is not predictive of future
performance.
</TABLE>
American National Growth Fund, Inc.'s performance figures are historical and
reflect reinvestment of all dividends and capital gains distribution, changes
in net asset value and considers the effect of the Fund's 5.75% maximum sales
charge. All performance figures are as of December 31 for the applicable year.
The Fund's fiscal year was as of October 31 for 1985-1989.
2
<PAGE>
The Growth Fund is heavily diversified with an emphasis, in general, on
companies that are exposed to growth once the economy begins to expand. Another
characteristic of the current portfolio structure is that we have not paid much
of a premium price for that growth potential. For example, the consensus long
term growth rate of the companies in the portfolio is 86% higher than the
expected growth rate of average stock in the market, but the price paid for that
superior growth potential is only 8% higher! Our systematic and disciplined
approach to investing means that we will process information during 1996 in the
same manner as 1995 and 1994. We will continue to purchase companies that meet
our specific investment criteria, while companies that reach our predetermined
price targets and companies that no longer meet our specific investment criteria
will be sold.
QUARTERLY COMPARISON OF CHANGE IN VALUE
OF $10,000 INVESTMENT IN AMERICAN NATIONAL
GROWTH FUND, INC. AND LIPPER ANALYTICAL
AVERAGE GROWTH FUND (LAST NINE QUARTERS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
09/30/93 12/31/93 03/31/94 06/30/94 09/30/94
<S> <C> <C> <C> <C> <C>
American National Growth Fund, Inc. 10,000 10,804 10,622 10,636 11,317
Lipper Analytical Average Growth Fund 10,000 10,226 9,875 9,617 10,136
12/30/94 03/31/95 06/30/95 09/29/95 12/29/95
11,342 12,230 12,958 13,644 14,198
10,001 10,739 11,741 12,748 13,049
Past performance is not predictive of future
performance.
</TABLE>
3
<PAGE>
PORTFOLIO MANAGERS' DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
AMERICAN NATIONAL INCOME FUND, INC.
The American National Income Fund produced a total return of 29.12% in 1995, in
what can only be described as an outstanding environment for mutual fund
investors. The major stock market indexes, and most categories of equity mutual
funds, earned solid positive gains in each of the year's four quarters, and our
fund was no exception. The American National Income Fund's performance was quite
favorable compared with the return of 25.05% earned by the average of all equity
funds as measured by Lipper Analytical Services. It was also comparable to the
29.72% returned by the Lipper Index of Equity Income Funds. Total return is the
change in value of an investment in the Fund over a given period, assuming
reinvestment of any dividends and capital gains.
The stock market rally of 1995 was remarkable for the absence of any significant
corrections over the course of the twelve months, and for the highly visible
rally in the technology sector of the market. That the American National Income
Fund was able to produce the returns it did in that environment is a story in
itself. We had entered the year holding above average cash reserves in response
to a soft market environment in 1994 and the anticipation that greater buying
opportunities would arrive at some point. The absence of any meaningful
pullbacks made it difficult for the fund to invest at low points in the market,
and we found ourselves in a continual position of holding more cash than we
would have wished, in retrospect, as market levels continued to discourage us
from adding more stocks that might otherwise have fit our value-based stock
selection disciplines.
A second hindrance stems from our desire to reduce risk in the fund. We also
believe that many shareholders wish to view the American National Income Fund as
less risky than other types of stock funds. The fund invests in a portfolio of
stocks and convertible securities with a higher current dividend
COMPARISON OF CHANGES IN VALUE OF
$10,000 INVESTMENT IN AMERICAN NATIONAL
INCOME FUND, INC. AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1984 1985 1986 1987 1988 1989
<S> <C> <C> <C> <C> <C> <C>
American National Income Fund, Inc. 10,000 12,055 13,054 13,546 14,909 19,101
S&P 500 10,000 13,216 15,657 16,476 19,245 25,306
1990 1991 1992 1993 1994 1995
19,245 24,837 25,660 28,386 28,212 36426
24,504 31,990 34,443 37,884 38,380 52722
Average Annual Return
10 Year 11.03%
5 Year 12.27%
1 Year 21.71%
Past performance is not predictive of future
performance.
</TABLE>
American National Income Fund, Inc.'s performance figures are historical and
reflect reinvestment of all dividends and capital gains distributions, changes
in net asset value and considers the effect of the Fund's 5.75% maximum sales
charge. All performance figures are as of December 31 for the applicable year.
The Fund's fiscal year end was as of July 31 for 1985-1989.
4
<PAGE>
yield than the stock market as a whole, so that a relatively greater portion of
the securities' total return will be more assured in the form of income, with
capital appreciation being an important second consideration. It is important,
therefore, that in trying to provide for a meaningful current income to a
somewhat risk adverse investor the fund should avoid excessively speculative or
overheated issues in a volatile environment such as we have had in 1995. This
created a particular problem in that technology stocks were among the best
performers in the stock market last year, but the fact that very few issues in
that sector meet our dividend requirements made it very difficult to participate
in that rally.
The fact is that despite their well publicized strength, by year end technology
was only the third best performing of the ten major stock market segments for
1995. Recent earnings shortfalls and worries about weaker demand and inventory
building on the part of various computer related companies suggest that in 1996
investors may be quite pleased that the American National Income Fund has only a
minimal exposure to the technology sector.
The fund's strong positive returns were generated largely by our decision to go
from an underweighting in the financial sector, which had produced negative
returns in 1994, to a 50 percent overweighting in that group in 1995. It was, in
fact, the finance sector, with total return of 51.01% for the year as measured
by Lipper Analytical Services, not technology, which was the top stock market
performer for the year.
Other industry groups where the Fund maintained a significant overweighting
which proved advantageous to our investors included railroads, which returned
43.0% as a group according to Standard & Poor's, engineering/construction, which
returned 40.2% and hospital management, which returned 39.3% We continue to hold
a significant weighting of Real Estate Investment Trust issues, which we believe
are the single most attractive segment of the higher yielding universe of
stocks.
We appreciate your continued confidence in the American National Income Fund and
will do everything possible to reward that confidence in the future.
QUARTERLY COMPARISON OF CHANGE IN VALUE
OF $10,000 INVESTMENT IN AMERICAN NATIONAL
INCOME FUND, INC. AND LIPPER ANALYTICAL AVERAGE
EQUITY INCOME FUND (LAST NINE QUARTERS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
09/30/93 12/31/93 03/31/94 06/30/94 09/30/94
<S> <C> <C> <C> <C> <C>
American National Income Fund, Inc. 10,000 10,402 10,029 10,081 10,433
Lipper Analytical Avg. Equity Income Fund 10,000 10,126 9,752 9,764 10,145
12/31/94 03/31/95 06/30/95 09/30/95 12/31/95
10,339 11,180 11,919 12,786 13,348
9,885 10,615 11,316 12,135 12,825
Past performance is not predictive of future
performance.
</TABLE>
5
<PAGE>
PORTFOLIO MANAGERS' DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
TRIFLEX FUND, INC.
1995 was a remarkable year for both the stock and bond markets and the
Triflex Fund participated in the good fortune. For the year the Fund produced
a total rate of return of 22.3%, scoring positive returns in all four
quarters of 1995. Total return is the change in value of an investment in the
Fund over a given period, assuming reinvestment of any dividends and capital
gains. After outperforming the Lipper Balanced Fund Index in 1994's weak
markets, the Triflex Fund lagged the Lipper Benchmark by 2.3 percentage
points in 1995's strong market environment.
Within the financial markets, stocks produced returns of more than 30% in
1995 (37.4% for the Standard[nb]& Poor's 500 and 36.7% for the Dow Jones
Industrials), or three times the long-term average return for common stocks
of around 10% per year, according to Ibbotson Associates. The stellar returns
from stocks reflected a very strong bond market, which returned more than 15%
for the year (15.3% for the Lehman Intermediate Government/Corporate
Index)--also about three times the long-term average according to Ibbotson.
Notwithstanding a brief back-up in July, interest rates dropped consistently
throughout the year, with the yield on the 30-year U.S. Treasury bond falling
two full percentage points from 7.9% in January to 5.9% at the end of
December.
Within the equity market, the interest rate sensitive sectors like finance
and utilities were among the market's best performers for the year, with
strength also evident in healthcare and capital goods. Among the market's
laggards were the economically sensitive consumer cyclicals and basic
materials. All market sectors produced positive double digit returns for the
year. Interestingly, the technology sector, which had led the market in the
first half of 1995, dramatically underperformed in the second half, finishing
sixth among the 11 Indata sectors for the full year.
COMPARISON OF CHANGES IN VALUE OF
$10,000 INVESTMENT IN TRIFLEX FUND, INC.,
S&P 500 AND LEHMAN INTERMEDIATE
GOVERNMENT/CORP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Triflex Fund, Inc. 10,406 11,827 11,990 14,931 15,379 16,350 16,593 20,292
S&P 500 11,681 15,359 14,872 19,416 20,905 22,994 23,295 32,000
Lehman Intermediate Gov't/Corp 10,668 12,030 13,133 15,054 16,133 17,533 17,214 19,852
Average Annual Return
5 Year 9.80%
1 Year 15.29%
</TABLE>
Triflex Fund, Inc.'s performance figures are historical and reflect
reinvetment of all dividends and capital gains distributions, changes in net
asset value and considers the effect of the Fund's 5.75% maximum sales
charge. All performance figures are as of December 31 for the applicable
year. The Fund's fiscal year end was as of July 31 for 1988-1989.
6
<PAGE>
Within the Triflex Fund, our best performing sectors were finance (with
our holdings up an average of 52% for the year), healthcare (up 44%) and
technology (up 40%). On the flip side, our consumer cyclicals,
transportation, and energy holdings produced the lowest returns. Our
overweighted position in capital goods benefited the Fund while our
underweightings in the strong performing finance and utilities sectors proved
costly. The Fund's three best stocks were Sun Microsystems (up 157% for the
year), Bay Networks (up 109%) and Amgen (up 101%).
Within the Fund's fixed income portfolio, our decision to lengthen
maturities in late 1994 proved beneficial in 1995's declining interest rate
environment. Our bond portfolio outperformed the broad market indices, with
the best performance coming from our longer-dated U.S. treasuries and
agencies as well as our convertible corporate bonds. The Triflex Fund's bond
portfolio appears to be well positioned for the slow growth, low inflationary
environment that we foresee in 1996.
The outlook for 1996 is for more moderate returns than we were fortunate
to witness in 1995. The U.S. economy appears sluggish, as are the economies
of our major trading partners in North America, Europe and Japan. Interest
rates have been falling across the globe and may well continue to do so as
long as economies remain weak and inflation is under control. This
environment bodes well for bonds and, if corporate earnings continue to
advance, equities.
The Triflex Fund remains well diversified, with about 64% in equities, 30%
in bonds and 6% in cash. We are maintaining our systematic and disciplined
search for undervalued equities and a focus on high quality, intermediate
term bonds. In markets that appear to be fully valued based on their
fundamentals, this defensive and somewhat conservative strategy should
continue to reward our shareholders over the long term, much as it did in
1995.
We appreciate the confidence you have placed in us with your investment in
the Triflex Fund.
QUARTERLY COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN TRIFLEX FUND, INC.
AND LIPPER ANALYTICAL AVERAGE BALANCED FUND
(LAST NINE QUARTERS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
9/30/93 12/31/93 3/31/94 6/30/94 9/30/94
<S> <C> <C> <C> <C> <C>
Triflex Fund, Inc. 10,000 10,000 10,000 10,000 10,000
Lipper Analytical Avg. Balanced Fund 10,000 10,119 9791 9,679 9,972
12/31/94 3/31/95 6/30/95 9/30/95 12/31/95
10,339 10,990 11,681 12,159 12,641
9,862 10,462 11,205 11,824 12,324
</TABLE>
Past performance is not predictive of future performance.
7
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1995
- --------------------------------------------------------------------------------
AMERICAN NATIONAL GROWTH FUND
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
APPAREL, TEXTILE--1.12%
Guilford Mills, Incorporated 40,000 $ 815,000
Phillips-Van Heusen Corporation 70,000 691,250
-----------
1,506,250
AUTO TRUCK & PARTS MANUFACTURER--2.72%
Arvin Industries, Incorporated 46,900 773,850
Chrysler Corporation 11,000 609,125
Eaton Corporation 12,000 643,500
Ford Motor Company 20,000 580,000
General Motors Corporation 20,000 1,057,500
-----------
3,663,975
BANKS--3.41%
Comerica, Incorporated 40,000 1,605,000
Morgan (J.P.) & Company 20,000 1,605,000
NationsBank Corporation 20,000 1,392,500
-----------
4,602,500
BEVERAGES--3.13%
Coca-Cola Company 15,000 1,113,750
Cott Corporation 58,000 319,000
PepsiCo, Incorporated 50,000 2,793,750
-----------
4,226,500
BUILDING CONSTRUCTION & SUPPLIES--3.93%
Fluor Corporation 40,000 2,640,000
Foster Wheeler Corporation 45,000 1,912,500
Giant Cement Holding, Incorporated* 65,000 747,500
-----------
5,300,000
CHEMICALS--4.72%
Air Products & Chemicals,
Incorporated 25,000 1,318,750
Cabot Corporation 15,000 808,125
Du Pont (E.I.) de Nemours & Company 25,000 1,746,875
Ethyl Corporation 75,000 937,500
The Geon Company 11,500 280,313
Lyondell Petrochemical Company 10,000 228,750
Occidental Petroleum Corporation 49,000 1,047,375
-----------
6,367,688
COAL, GAS, PIPE--2.18%
Sonat, Incorporated 45,000 1,603,125
Tenneco, Incorporated 27,000 1,339,875
-----------
2,943,000
COMPUTER SOFTWARE & SERVICES--4.36%
Bay Networks, Incorporated* 15,000 616,875
BMC Software, Incorporated* 20,000 855,000
General Motors Corporation (Class E) 21,600 1,123,200
Microtest, Incorporated* 25,000 250,000
Newbridge Networks Corporation* 16,000 662,000
Sequent Computer Systems,
Incorporated* 65,000 942,500
Western Digital Corporation* 80,000 1,430,000
-----------
5,879,575
DRUGS--4.14%
Abbott Laboratories 50,000 2,087,500
Amgen, Incorporated* 20,000 1,187,500
Merck & Company, Incorporated 35,000 2,301,250
-----------
5,576,250
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
ELECTRONICS--2.35%
General Signal Corporation 45,000 $ 1,456,875
Motorola, Incorporated 30,000 1,710,000
-----------
3,166,875
ENVIRONMENTAL--3.27%
Wheelabrator Technologies,
Incorporated 85,000 1,423,750
WMX Technologies, Incorporated 100,000 2,987,500
-----------
4,411,250
EXPLORATION & DRILLING--1.21%
Noble Affiliates, Incorporated 24,000 717,000
Pogo Producing Company 5,000 141,250
Union Texas Petroleum Holdings,
Incorporated 40,000 775,000
-----------
1,633,250
FOOD PRODUCERS & RETAILERS--6.71%
Albertson's, Incorporated 40,000 1,315,000
General Mills, Incorporated 45,000 2,598,750
Hudson Foods, Incorporated (Class A) 100,000 1,725,000
McCormick & Company, Incorporated 58,000 1,399,250
Universal Foods Corporation 50,000 2,006,250
-----------
9,044,250
HOSPITAL SUPPLIES & SERVICES--4.62%
Ornda Healthcorp 34,000 790,500
Pacificare Health Systems,
Incorporated* 10,000 870,000
Tenet Healthcare Corporation 100,000 2,075,000
United Healthcare Corporation 38,000 2,489,000
-----------
6,224,500
HOUSEHOLD FURNITURE/APPLIANCES--3.24%
Black & Decker Corporation 40,000 1,410,000
Masco Corporation 20,000 627,500
The Singer Company N.V. 55,000 1,533,125
Whirlpool Corporation 15,000 798,750
-----------
4,369,375
INSURANCE--2.29%
American Re Corporation 50,000 2,043,750
The Paul Revere Corporation 50,000 1,037,500
-----------
3,081,250
MEDICAL SUPPLIES & SERVICES--1.63%
Johnson & Johnson 15,000 1,284,375
Mallinckrodt Group, Incorporated 25,000 909,375
-----------
2,193,750
METALS & MINING--1.98%
Cyprus Amax Minerals Company 40,000 1,045,000
Huntco, Incorporated (Class A) 30,000 461,250
J&L Specialty Steel, Incorporated 20,000 375,000
Quanex Corporation 20,000 387,500
Reynolds Metals Company 7,000 396,375
-----------
2,665,125
MISCELLANEOUS--6.11%
Commercial Metals Company 15,000 371,250
Dean Witter Discover and Company 15,000 705,000
Disney (Walt) Company 30,000 1,770,000
The Dun & Bradstreet Corporation 20,000 1,295,000
Procter & Gamble Company 30,000 2,490,000
Sturm, Ruger & Company, Incorporated 22,000 602,250
UST, Incorporated 30,000 1,001,250
-----------
8,234,750
</TABLE>
See notes to financial statements.
8
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1995
- --------------------------------------------------------------------------------
AMERICAN NATIONAL GROWTH FUND, CONTINUED
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
OFFICE EQUIPMENT/SERVICES--3.32%
<S> <C> <C>
COMPAQ Computer Corporation* 35,000 $ 1,680,000
Sun Microsystems, Incorporated* 30,000 1,368,750
Tandem Computers, Incorporated* 135,000 1,434,375
-----------
4,483,125
OIL DOMESTIC & INTERNATIONAL--7.81%
Amoco Corporation 25,000 1,796,875
Ashland Oil, Incorporated 40,000 1,405,000
Chevron Corporation 42,000 2,205,000
Societe Nationale Elf Aquitaine 60,000 2,205,000
Unocal Corporation 100,000 2,912,500
-----------
10,524,375
PAPER/FOREST PRODUCTS--2.03%
Louisiana-Pacific Corporation 35,000 848,750
Mead Corporation 24,000 1,254,000
Potlatch Corporation 5,000 200,000
Temple-Inland, Incorporated 10,000 441,250
-----------
2,744,000
RAILROADS--2.34%
Burlington Northern, Incorporated 15,000 1,170,000
Union Pacific Corporation 30,000 1,980,000
-----------
3,150,000
RETAIL DISCOUNT/SPECIALTY--3.26%
Price/Costco, Incorporated* 75,000 1,143,750
Toys "R" Us, Incorporated* 26,000 565,500
Wal-Mart Stores, Incorporated 120,000 2,685,000
-----------
4,394,250
SEMICONDUCTORS--1.82%
Advanced Micro Devices Incorporated 40,000 660,000
Avnet, Incorporated 40,000 1,790,000
-----------
2,450,000
TELECOMMUNICATIONS--2.91%
AT&T Company 55,000 3,561,250
VTEL Corporation* 20,000 370,000
-----------
3,931,250
TRANSPORT, TRUCKING & SHIPPING--1.19%
Arnold Industries, Incorporation 20,000 347,500
Covenant Transport, Incorporation
(Class A)* 20,000 240,000
Greenbrier Companies, Incorporated 55,000 666,875
TNT Freightways Corporation 17,500 352,187
-----------
1,606,562
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
UTILITY--TELEPHONE--2.50%
Telefonos de Mexico (Class L) ADR 20,000 $ 637,500
US West, Incorporated 50,000 1,787,500
US West Media Group, Incorporated* 50,000 950,000
-----------
3,375,000
-----------
TOTAL COMMON STOCK--90.30%
(Cost $102,237,684) 121,748,675
<CAPTION>
FACE
COMMERCIAL PAPER AMOUNT
<S> <C> <C>
ELECTRIC UTILITIES--3.47%
Commonwealth Edison Company, 6.05%,
1/05/96 $1,684,000 1,682,868
Commonwealth Edison Company, 5.95%,
1/10/96 1,855,000 1,852,241
Kentucky Power Company, 5.90%,
01/04/96 389,000 388,809
Public Service Company of Colorado,
6.20%, 01/09/96 750,000 748,967
-----------
4,672,885
FINANCIAL SERVICES--0.42%
Sunoco Credit Corporation, 6.30%,
01/04/96 569,000 568,701
FOODS--1.82%
Conagra, Incorporated, 6.07%,
01/03/96 2,325,000 2,324,216
Conagra, Incorporated, 5.90%,
01/04/96 124,000 123,939
-----------
2,448,155
RETAIL, DISCOUNT--3.10%
Rite Aid Corporation, 6.10%, 01/02/96 2,000,000 1,999,660
Rite Aid Corporation, 6.02%, 01/08/96 2,185,000 2,182,442
-----------
4,182,102
TRANSPORT MISCELLANEOUS--0.74%
Xtra, Incorporated, 6.15%, 01/11/96 1,000,000 998,292
-----------
TOTAL COMMERCIAL PAPER--9.55%
(Cost $12,870,135) 12,870,135
-----------
TOTAL INVESTMENTS--99.85%
(Cost $115,107,819) 134,618,810
CASH AND OTHER ASSETS, LESS LIABILITIES--0.15% 202,335
-----------
NET ASSETS--100% $134,821,145
-----------
-----------
ABBREVIATIONS
ADR--American Depository Receipt
*--Non-income producing securities
</TABLE>
See notes to financial statements.
9
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1995
- --------------------------------------------------------------------------------
AMERICAN NATIONAL INCOME FUND
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
AUTO TRUCK & PARTS MANUFACTURER--1.11%
Arvin Industries, Incorporated 30,000 $ 495,000
Eaton Corporation 20,000 1,072,500
-----------
1,567,500
BANKS--6.36%
Comerica, Incorporated 70,000 2,808,750
Fleet Financial Group, Incorporated 51,747 2,108,690
Morgan (J.P.) & Company 24,500 1,966,125
NationsBank Corporation 30,000 2,088,750
-----------
8,972,315
BUILDING CONSTRUCTION & SUPPLIES--2.78%
Fluor Corporation 40,000 2,640,000
Foster Wheeler Corporation 30,000 1,275,000
-----------
3,915,000
CHEMICALS--4.57%
Du Pont (E.I.) de Nemours & Company 40,000 2,795,000
Ethyl Corporation 100,000 1,250,000
The Geon Company 36,500 889,688
Mississippi Chemical Corporation 65,000 1,511,250
-----------
6,445,938
COAL, GAS, PIPE--2.42%
Sonat, Incorporated 40,000 1,425,000
Tenneco, Incorporated 40,000 1,985,000
-----------
3,410,000
DRUGS--4.25%
Abbott Laboratories 65,000 2,713,750
Schering-Plough Corporation 60,000 3,285,000
-----------
5,998,750
ELECTRONICS--2.99%
General Signal Corporation 60,000 1,942,500
Motorola, Incorporated 40,000 2,280,000
-----------
4,222,500
FOODS PRODUCERS & RETAILERS--3.89%
Albertson's, Incorporated 55,000 1,808,125
McCormick & Company, Incorporated 70,000 1,688,750
Universal Foods Corporation 49,800 1,998,225
-----------
5,495,100
HOSPITAL SUPPLIES & SERVICES--2.76%
Columbia/HCA Healthcare Corporation 25,000 1,268,750
United Healthcare Corporation 40,000 2,620,000
-----------
3,888,750
HOUSEHOLD FURNITURE/APPLIANCES--3.47%
La-Z Boy Chair Company 55,000 1,698,125
Whirlpool Corporation 60,000 3,195,000
-----------
4,893,125
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
MISCELLANEOUS--15.97%
AT&T Company 50,000 $ 3,237,500
Cyprus Amax Minerals Company 90,000 2,351,250
Dean Witter Discover and Company 45,000 2,115,000
The Dun & Bradstreet Corporation 40,000 2,590,000
Eastman Kodak Company 35,000 2,345,000
Guilford Mills, Incorporated 50,000 1,018,750
PepsiCo, Incorporated 70,000 3,911,250
Raytheon Company 50,000 2,362,500
Sturm, Ruger & Company, Incorporated 40,000 1,095,000
WMX Technologies, Incorporated 50,000 1,493,750
-----------
22,520,000
OIL DOMESTIC & INTERNATIONAL--6.75%
Atlantic Richfield Company 15,000 1,661,250
Societe Nationale Elf Aquitaine 25,000 918,750
Texaco, Incorporated 55,000 4,317,500
Unocal Corporation 90,000 2,621,250
-----------
9,518,750
PAPER/FOREST PRODUCTS--2.52%
Mead Corporation 35,000 1,828,750
Weyerhaeuser Company 40,000 1,730,000
-----------
3,558,750
RAILROADS--4.44%
Burlington Northern, Incorporated 55,000 4,290,000
Union Pacific Corporation 30,000 1,980,000
-----------
6,270,000
REAL ESTATE/REITS--7.64%
CenterPoint Properties Corporation 63,000 1,456,875
Health & Rehabilitation Properties
Trust 100,000 1,625,000
Highwood Properties, Incorporated 18,500 522,625
Hospitality Properties Trust 50,000 1,337,500
Liberty Trust Properties 50,000 1,037,500
Oasis Residential, Incorporated 55,000 1,251,250
Omega Healthcare Investors,
Incorporated 60,000 1,597,500
Post Properties, Incorporated 28,000 892,500
Security Capital Industrial Trust 60,000 1,050,000
-----------
10,770,750
TOBACCO--2.44%
RJR Nabisco Holdings Corporation 41,248 1,273,532
UST, Incorporated 65,000 2,169,375
-----------
3,442,907
TRUCKING & SHIPPING--0.89%
Arnold Industries, Incorporated 35,000 608,125
TNT Freightways Corporation 32,000 644,000
-----------
1,252,125
</TABLE>
See notes to financial statements.
10
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1995
- --------------------------------------------------------------------------------
AMERICAN NATIONAL INCOME FUND, CONTINUED
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
UTILITY ELECTRIC/GAS/TELEPHONE--7.67%
<S> <C> <C>
The Detroit Edison Company 65,000 $ 2,242,500
GTE Corporation 60,000 2,640,000
The Montana Power Company 40,000 905,000
Telefonos de Mexico (Class L) ADR 20,000 637,500
UGI Corporation 80,000 1,660,000
US West, Incorporated 50,000 1,787,500
US West Media Group, Incorporated* 50,000 950,000
-----------
10,822,500
-----------
TOTAL COMMON STOCK--82.92%
(Cost $95,770,145) 116,964,760
-----------
<CAPTION>
PREFERRED STOCK
<S> <C> <C>
AUTO & TRUCK MANUFACTURER--2.75%
Ford Motor Company (Convertible) 41,000 3,884,750
COAL, GAS, PIPE--0.70%
Western Gas Resources, Incorporated
(Convertible) 28,000 980,000
INSURANCE COMPANIES--0.80%
St Paul Capital LLC (Convertible) 20,000 1,125,000
OIL--1.46%
Ashland Oil, Incorporated
(Convertible) 35,000 2,060,625
-----------
TOTAL PREFERRED STOCK--5.71%
(Cost $6,457,764) 8,050,375
-----------
<CAPTION>
FACE
CORPORATE BONDS AMOUNT
<S> <C> <C>
AUTO RELATED--1.09%
Magna International, 5.00%, 10/15/02 $1,500,000 1,537,500
HOUSEHOLD FURNITURE/APPLIANCES--1.04%
Masco Corporation, 5.25%, 02/15/12, 1,500,000 1,470,000
Subordinated Convertible Debentures
REAL ESTATE/REITS--0.37%
Liberty Property Trust, 8.00%,
07/01/01, Subordinated Debentures 500,000 515,625
-----------
TOTAL CORPORATE BONDS--2.50%
(Cost $3,323,000) 3,523,125
-----------
<CAPTION>
FACE
COMMERCIAL PAPER AMOUNT VALUE
<S> <C> <C>
ELECTRIC UTILITIES--4.10%
Commonwealth Edison Company, 6.05%,
1/05/96 $2,135,000 $ 2,133,565
Commonwealth Edison Company, 5.95%,
1/10/96 281,000 280,582
Kentucky Power Company, 5.90%,
01/04/96 893,000 892,561
Public Service Company of Colorado,
6.20%, 01/09/96 2,480,000 2,476,583
-----------
5,783,291
FINANCIAL SERVICES--0.26%
Sunoco Credit Corporation, 6.30%,
01/04/96 365,000 364,808
FOODS--0.82%
Conagra, Incorporated, 6.07%,
01/03/96 597,000 596,799
Conagra, Incorporated, 5.90%,
01/04/96 558,000 557,726
-----------
1,154,525
RETAIL, DISCOUNT--1.88%
Rite Aid Corporation, 6.10%, 01/02/96 2,000,000 1,999,661
Rite Aid Corporation, 6.02%, 01/08/96 655,000 654,233
-----------
2,653,894
TRANSPORT MISCELLANEOUS--1.41%
Xtra, Incorporated, 6.15%, 01/11/96 2,000,000 1,996,583
-----------
TOTAL COMMERCIAL PAPER--8.47%
(Cost $11,953,101) 11,953,101
-----------
TOTAL INVESTMENTS--99.60%
(Cost $117,504,010) 140,491,361
CASH AND OTHER ASSETS, LESS LIABILITIES--0.40% 566,671
-----------
NET ASSETS--100.00% $141,058,032
-----------
-----------
ABBREVIATIONS
ADR--American Depository Receipt
REIT--Real Estate Investment Trust
*--Non-income producing security
</TABLE>
See notes to financial statements.
11
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1995
- --------------------------------------------------------------------------------
TRIFLEX FUND
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
AUTO TRUCK & PARTS MANUFACTURER--2.42%
Arvin Industries, Incorporated 4,000 $ 66,000
Chrysler Corporation 1,300 71,988
Eaton Corporation 2,500 134,062
Ford Motor Company 3,300 95,700
General Motors Corporation 3,000 158,625
-----------
526,375
BANKS--3.89%
Comerica, Incorporated 5,000 200,625
NationsBank Corporation 5,000 348,125
Norwest Corporation 9,000 297,000
-----------
845,750
BEVERAGES--1.45%
Cott Corporation 6,800 37,400
PepsiCo, Incorporated 5,000 279,375
-----------
316,775
BUILDING CONSTRUCTION & SUPPLIES--3.61%
Fluor Corporation 5,000 330,000
Foster Wheeler Corporation 5,000 212,500
Giant Cement Holding, Incorporated* 8,500 97,750
Granite Construction, Incorporated 4,600 144,900
-----------
785,150
CHEMICALS--5.11%
Air Products & Chemicals,
Incorporated 6,500 342,875
Cabot Corporation 1,800 96,975
Du Pont (E.I.) de Nemours & Company 4,000 279,500
Ethyl Corporation 8,200 102,500
The Geon Company 1,000 24,375
Mississippi Chemical Corporation 4,400 102,300
Occidental Petroleum Corporation 7,600 162,450
-----------
1,110,975
COAL, GAS, PIPE--1.43%
Sonat, Incorporated 4,300 153,188
Tenneco, Incorporated 3,200 158,800
-----------
311,988
COMPUTER SOFTWARE & SERVICES--2.29%
Bay Networks, Incorporated* 2,175 89,447
BMC Software, Incorporated* 2,600 111,150
General Motors Corporation (Class E) 2,300 119,600
Sequent Computer Systems,
Incorporated* 6,200 89,900
Western Digital Corporation* 4,900 87,588
-----------
497,685
DRUGS--3.42%
Abbott Laboratories 8,000 334,000
Amgen, Incorporated* 2,000 118,750
Warner-Lambert Company 3,000 291,375
-----------
744,125
ELECTRONICS--1.15%
General Signal Corporation 4,200 135,975
Motorola, Incorporated 2,000 114,000
-----------
249,975
ENVIRONMENTAL--2.06%
Wheelabrator Technologies,
Incorporated 9,000 150,750
WMX Technologies, Incorporated 10,000 298,750
-----------
449,500
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
EXPLORATION & DRILLING--0.84%
Noble Affiliates, Incorporated 1,700 $ 50,787
Pogo Producing Company 2,500 70,625
Union Texas Petroleum Holdings,
Incorporated 3,200 62,000
-----------
183,412
FOOD PRODUCERS & RETAILERS--3.54%
Albertson's, Incorporated 4,200 138,075
General Mills, Incorporated 5,000 288,750
Hudson Foods, Incorporated (Class A) 4,500 77,625
Ralston Purina Company 1,700 106,037
Universal Foods Corporation 4,000 160,500
-----------
770,987
HOSPITAL SUPPLIES & SERVICES--2.39%
Columbia/HCA Healthcare Corporation 1,500 76,125
Ornda Healthcorp* 3,500 81,375
Pacificare Health Systems,
Incorporated* 1,000 87,000
Tenet Healthcare Corporation 7,900 163,925
United Healthcare Corporaton 1,700 111,350
-----------
519,775
HOUSEHOLD FURNITURE/APPLIANCES--1.80%
Armstrong World Industries,
Incorporated 1,500 93,000
La-Z Boy Chair Company 2,600 80,275
Masco Corporation 2,600 81,575
The Singer Company N.V. 4,900 136,588
-----------
391,438
MEDIA--1.20%
Disney (Walt) Company 3,800 224,200
Grupo Televisa S.A 1,600 36,000
-----------
260,200
MISCELLANEOUS--9.14%
AT&T Company 4,800 310,800
Cypress Amax Minerals Company 5,500 143,687
Dean Witter Discover and Company 1,800 84,600
The Dun & Bradstreet Corporation 3,000 194,250
Eastman Kodak Company 2,800 187,600
Guilford Mills, Incorporated 3,400 69,275
Johnson & Johnson 2,500 214,062
Procter & Gamble Company 5,000 415,000
Sturm, Ruger & Company, Incorporated 2,300 62,962
Union Pacific Corporation 2,000 132,000
UST, Incorporated 5,200 173,550
-----------
1,987,786
OFFICE EQUIPMENT/SERVICES--1.45%
Sun Microsystems, Incorporated* 4,600 209,875
Tandem Computers, Incorporated* 10,000 106,250
-----------
316,125
OIL DOMESTIC & INTERNATIONAL--4.05%
Amoco Corporation 2,000 143,750
Ashland Oil, Incorporated 3,600 126,450
Chevron Corporation 4,400 231,000
Societe Nationale Elf Aquitaine 6,200 227,850
Unocal Corporation 5,200 151,450
-----------
880,500
</TABLE>
See notes to financial statements.
12
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1995
- --------------------------------------------------------------------------------
TRIFLEX FUND, CONTINUED
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
PAPER/FOREST PRODUCTS--1.61%
<S> <C> <C>
Louisiana-Pacific Corporation 5,100 $ 123,675
Mead Corporation 2,000 104,500
Weyerhaeuser Company 2,800 121,100
-----------
349,275
REAL ESTATE/REITS--0.92%
Health & Rehabilitation Properties
Trust 8,900 144,625
Highwood Properties, Incorporated 2,000 56,500
-----------
201,125
RETAIL DISCOUNT/GENERAL/SPECIALTY--0.89%
Price/Costco, Incorporated* 8,400 128,100
Toys "R" Us, Incorporated* 3,000 65,250
-----------
193,350
SEMICONDUCTORS--2.27%
Advanced Micro Devices, Incorporated 2,800 46,200
Avnet, Incorporated 10,000 447,500
-----------
493,700
TRANSPORT, TRUCKING & SHIPPING--1.07%
Arnold Industries, Incorporated 2,200 38,225
Covenant Transport, Incorporated
(Class A)* 3,500 42,000
Greenbrier Companies, Incorporated 5,600 67,900
TNT Freightways, Corporation 2,000 40,250
Transportacion Maritima Mexicana S.A
de C.V.* 5,300 44,388
-----------
232,763
UTILITY ELECTRIC/GAS/TELEPHONE--3.86%
GTE Corporation 4,000 176,000
PacifiCorp 3,500 74,375
Public Service Enterprise Group,
Incorporated 3,500 107,187
Telefonos de Mexico (Class L) ADR 1,500 47,813
United Illuminating Company 2,000 74,750
US West, Incorporated 5,200 185,900
US West Media Group, Incorporated* 5,200 98,800
Washington Water Power Company 4,300 75,250
-----------
840,075
-----------
TOTAL COMMON STOCK--61.86%
(Cost $10,944,991) 13,458,809
<CAPTION>
PREFERRED STOCK
<S> <C> <C>
COAL, GAS, PIPE--0.42%
Western Gas Resources, Incorporated
(Convertible) 2,600 91,000
-----------
TOTAL PREFERRED STOCK--0.42%
(Cost $128,279) 91,000
<CAPTION>
FACE
BONDS AND NOTES AMOUNT
<S> <C> <C>
FINANCIAL SERVICES--2.81%
Ford Motor Credit Company, 6.375%,
09/15/99 $ 600,000 611,250
RETAIL-DISCOUNT--2.19%
Costco Wholesalers Corporation,
5.75%, 05/15/02, Subordinated
Convertible Debentures 500,000 477,500
<CAPTION>
FACE
BONDS AND NOTES AMOUNT VALUE
<S> <C> <C>
GOVERNMENT AGENCIES--27.06%
Federal Home Loan Mortgage
Corporation, 7.00%, 09/15/07 $1,000,000 $ 1,041,780
Federal Home Loan Mortgage
Corporation, Pool #284839, 8.50%,
01/01/17 71,185 73,921
Federal Home Loan Mortgage
Corporation, Pool #302886, 8.00%,
05/01/17 131,700 135,898
Federal Home Loan Mortgage
Corporation, Pool #298759, 8.00%,
08/01/17 216,221 223,114
Federal National Mortgage
Association, 7.55%, 04/22/02 685,000 749,356
Federal National Mortgage
Association, 7.65%, 04/29/04 1,000,000 1,022,370
Federal National Mortgage
Association, 7.55%, 06/10/04 1,250,000 1,307,350
Federal National Mortgage
Association, Pool #041669, 8.00%,
02/01/17 105,633 109,528
Federal National Mortgage
Association, Pool #48974, 8.00%,
06/01/17 194,723 201,904
U S Treasury Note, 5.875%, 02/15/04 1,000,000 1,021,590
-----------
5,886,811
-----------
TOTAL BONDS AND NOTES--32.06%
(Cost $6,615,589) 6,975,561
<CAPTION>
COMMERCIAL PAPER
<S> <C> <C>
ELECTRIC UTILITIES--3.15%
Commonwealth Edison Company, 5.95%,
01/10/96 150,000 149,777
Pennsylvania Power and Light Company,
5.95%, 01/05/96 100,000 99,934
Pennsylvania Power and Light Company,
6.20%, 01/11/96 107,000 106,816
Public Service Company of Colorado,
6.20%, 01/09/96 330,000 329,545
-----------
686,072
FOODS--2.05%
Conagra, Incorporated, 5.90%,
01/04/96 445,000 444,781
-----------
TOTAL COMMERCIAL PAPER--5.20%
(Cost $1,130,853) 1,130,853
-----------
TOTAL INVESTMENTS--99.54%
(Cost $18,819,712) 21,656,223
CASH AND OTHER ASSETS, LESS LIABILITIES--0.46% 100,469
-----------
NET ASSETS--100.00% $21,756,692
-----------
-----------
ABBREVIATIONS
ADR--American Depository Receipt
REIT--Real Estate Investment Trust
*--Non-income producing securities
</TABLE>
See notes to financial statements.
13
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH INCOME TRIFLEX
<S> <C> <C> <C>
ASSETS
Investments, at value $134,618,810 $140,491,361 $21,656,223
Cash 797 84 22,064
Receivable for:
Dividends 215,582 444,397 24,902
Interest -- 65,320 71,336
Investments sold 3,768 98,126 --
Other assets 133,115 120,218 24,898
------------ ------------ -----------
TOTAL ASSETS 134,972,072 141,219,506 21,799,423
LIABILITIES
Payable for:
Fund shares redeemed 42,070 28,115 --
Accrued investment advisory fee 59,041 85,260 13,829
Accrued service fee 27,035 28,133 4,610
Other liabilities 22,781 19,966 24,292
------------ ------------ -----------
TOTAL LIABILITIES 150,927 161,474 42,731
------------ ------------ -----------
Net assets at value $134,821,145 $141,058,032 $21,756,692
------------ ------------ -----------
------------ ------------ -----------
Shares outstanding 30,699,798 6,244,669 1,290,857
------------ ------------ -----------
------------ ------------ -----------
Net asset value per share $ 4.39 $ 22.59 $ 16.85
------------ ------------ -----------
------------ ------------ -----------
Offering price per share
(Net asset value per share DIVIDED BY 94.25%) $ 4.66 $ 23.97 $ 17.88
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
STATEMENTS OF OPERATIONS Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH INCOME TRIFLEX
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 2,640,506 $ 4,271,258 $ 325,731
Interest 689,491 885,891 547,057
Other 357 -- --
------------ ------------ -----------
TOTAL INVESTMENT INCOME 3,330,354 5,157,149 872,788
EXPENSES
Investment advisory fee 732,251 927,331 153,930
Service fee 301,526 306,746 51,310
Insurance 63,290 64,759 11,744
Directors' fees and expenses 19,231 19,231 19,231
Custodian fees 60,275 58,872 22,532
Audit fees 13,800 13,800 11,800
Qualification fees 19,563 20,617 15,373
Shareholder reporting expenses 14,985 13,856 2,311
Reorganization expenses -- 9,476 4,711
Other 4,715 8,018 6,009
------------ ------------ -----------
TOTAL EXPENSES 1,229,636 1,442,706 298,951
LESS EXPENSES REIMBURSED -- -- 40,894
------------ ------------ -----------
NET EXPENSES 1,229,636 1,442,706 258,057
------------ ------------ -----------
NET INVESTMENT INCOME 2,100,718 3,714,443 614,731
------------ ------------ -----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 8,778,428 6,691,546 352,817
Net unrealized appreciation of investments during the year 17,009,120 21,966,913 3,149,441
------------ ------------ -----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 25,787,548 28,658,459 3,502,258
------------ ------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 27,888,266 $ 32,372,902 $ 4,116,989
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
See notes to financial statements.
14
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
AMERICAN NATIONAL GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1994
--------------- ------------
<S> <C> <C>
OPERATIONS
Net investment income $ 2,100,718 $ 1,650,229
Net realized gain on investments 8,778,428 15,927,429
Net unrealized appreciation (depreciation) of investments during the year 17,009,120 (11,860,622)
--------------- ------------
Net increase in net assets resulting from operations 27,888,266 5,717,036
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (2,151,434) (1,606,828)
Capital gains distributions (9,178,995) (12,218,934)
--------------- ------------
Total distributions to shareholders (11,330,429) (13,825,762)
CAPITAL SHARE TRANSACTIONS
Increase in net assets from capital share transactions 5,013,300 8,223,613
--------------- ------------
NET INCREASE IN NET ASSETS 21,571,137 114,887
TOTAL NET ASSETS
Beginning of year 113,250,008 113,135,121
--------------- ------------
End of year $ 134,821,145 $113,250,008
--------------- ------------
--------------- ------------
</TABLE>
AMERICAN NATIONAL INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1994
--------------- ------------
<S> <C> <C>
OPERATIONS
Net investment income $ 3,714,443 $ 3,363,890
Net realized gain on investments 6,691,546 10,595,949
Net unrealized appreciation (depreciation) of
investments during the year 21,966,913 (14,753,416)
--------------- ------------
Net increase (decrease) in net assets resulting from operations 32,372,902 (793,577)
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (3,750,365) (3,332,642)
Capital gains distributions (6,611,754) (10,992,106)
--------------- ------------
Total distributions to shareholders (10,362,119) (14,324,748)
CAPITAL SHARE TRANSACTIONS
Increase in net assets from capital share transactions 4,816,388 9,392,935
--------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS 26,827,171 (5,725,390)
TOTAL NET ASSETS
Beginning of year 114,230,861 119,956,251
--------------- ------------
End of year $ 141,058,032 $114,230,861
--------------- ------------
--------------- ------------
</TABLE>
TRIFLEX FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1994
--------------- ------------
<S> <C> <C>
OPERATIONS
Net investment income $ 614,731 $ 574,841
Net realized gain on investments 352,817 555,090
Net unrealized appreciation (depreciation) of investments
during the year 3,149,441 (852,194)
--------------- ------------
Net increase in net assets resulting from operations 4,116,989 277,737
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (627,120) (569,246)
Capital gains distributions (178,979) (1,019,270)
--------------- ------------
Total distributions to shareholders (806,099) (1,588,516)
CAPITAL SHARE TRANSACTIONS
Decrease in net assets from capital share transactions (576,725) (135,766)
--------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS 2,734,165 (1,446,545)
TOTAL NET ASSETS
Beginning of year 19,022,527 20,469,072
--------------- ------------
End of year $ 21,756,692 $ 19,022,527
--------------- ------------
--------------- ------------
</TABLE>
See notes to financial statements.
15
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of capital stock outstanding throughout the period
AMERICAN NATIONAL GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 3.83 $ 4.15 $ 4.51 $ 5.07 $ 3.95
Net investment income 0.08 0.06 0.06 0.08 0.08
Net realized and unrealized gain (loss) on investments during the
period 0.88 0.15 0.31 (0.20) 1.38
--------- --------- --------- --------- ---------
Total from investment operations 0.96 0.21 0.37 (0.12) 1.46
Less distributions
Distributions from net investment income (0.08) (0.06) (0.06) (0.08) (0.06)
Distributions from capital gains (0.32) (0.47) (0.67) (0.36) (0.28)
--------- --------- --------- --------- ---------
Total distributions (0.40) (0.53) (0.73) (0.44) (0.34)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period $ 4.39 $ 3.83 $ 4.15 $ 4.51 $ 5.07
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return 25.20% 4.98% 8.17% (2.50)% 36.98%
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's omitted) $ 134,821 $ 113,250 $ 113,135 $ 111,811 $ 125,837
Ratio of expenses to average net assets 0.98 0.97 1.00 1.07 1.04
Ratio of net investment income to average net assets 1.67 1.46 1.31 1.42 1.63
Portfolio turnover rate 37.00 46.26 59.67 92.28 55.95
</TABLE>
AMERICAN NATIONAL INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 18.90 $ 21.66 $ 22.09 $ 22.94 $ 19.35
Net investment income 0.62 0.62 0.56 0.57 0.69
Net realized and unrealized gain (loss) on investments during the
period 4.82 (0.75) 1.75 0.17 4.85
--------- --------- --------- --------- ---------
Total from investment operations 5.44 (0.13) 2.31 0.74 5.54
Less distributions
Distributions from net investment income (0.63) (0.61) (0.60) (0.53) (0.64)
Distributions from capital gains (1.12) (2.02) (2.14) (1.06) (1.31)
--------- --------- --------- --------- ---------
Total distributions (1.75) (2.63) (2.74) (1.59) (1.95)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period $ 22.59 $ 18.90 $ 21.66 $ 22.09 $ 22.94
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return 29.12% (0.61)% 10.63% 3.31% 29.06%
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's omitted) $ 141,058 $ 114,231 $ 119,956 $ 108,076 $ 99,192
Ratio of expenses to average net assets 1.12 1.12 1.17 1.18 1.23
Ratio of net investment income to average net assets 2.89 2.86 2.51 2.56 3.25
Portfolio turnover rate 44.00 52.46 70.71 44.03 40.23
</TABLE>
TRIFLEX FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.32 $ 15.35 $ 15.81 $ 16.20 $ 13.98
Net investment income 0.49 0.45 0.41 0.46 0.61
Net realized and unrealized gain (loss) on investments during the
period 2.67 (0.22) 0.58 0.01 2.79
--------- --------- --------- --------- ---------
Total from investment operations 3.16 0.23 0.99 0.47 3.40
Less distributions
Distributions from net investment income (0.49) (0.45) (0.41) (0.35) (0.62)
Distributions from capital gains (0.14) (0.81) (1.04) (0.51) (0.56)
--------- --------- --------- --------- ---------
Total distributions (0.63) (1.26) (1.45) (0.86) (1.18)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period $ 16.85 $ 14.32 $ 15.35 $ 15.81 $ 16.20
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return 22.29% 1.49% 6.31% 3.00% 24.53%
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's omitted) $ 21,757 $ 19,023 $ 20,469 $ 21,482 $ 21,916
Ratio of expenses to average net assets (1) 1.26 1.25 1.32 1.15 1.28
Ratio of net investment income to average net assets 2.99 2.91 2.49 2.96 3.95
Portfolio turnover rate 16.39 46.95 70.98 61.66 104.21
</TABLE>
(1) Expenses for these calculations are net of a reimbursement from Securities
Management & Research, Inc. Without these reimbursements, the ratio of
expenses to average net assets would have been 1.46%, 1.45%, 1.39%, 1.32%
and 1.49%, for the years ended December 31, 1995, 1994, 1993, 1992, and
1991, respectively.
See notes to financial statements.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS December 31, 1995
- --------------------------------------------------------------------------------
AMERICAN NATIONAL FUNDS GROUP
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
The American National Funds Group (the "Funds") are diversified open-end
management investment companies registered under the Investment Company Act of
1940, as amended. The Funds are comprised of the American National Growth Fund,
Inc., American National Income Fund, Inc. and the Triflex Fund, Inc. The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of their financial statements. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVESTMENT VALUATION:
Investments listed on national exchanges are valued at the last sales price of
the day, or if there were no sales, then at the last bid price. Debt obligations
that are issued or guaranteed by the U.S. Government, its agencies, authorities,
and instrumentalities are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate, maturity and
seasoning differential. Investments for which market quotations are not readily
available are valued at fair value as determined by the Board of Directors.
Investments in commercial paper are valued at cost plus amortized discount,
which approximates market value.
INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME:
Investment transactions are accounted for on the trade date (date order to buy
or sell is executed). Dividend income is recorded on the ex-dividend date for
financial reporting purposes. Interest income is accrued daily from settlement
date. Realized gains and losses from security transactions are reported on the
basis of specific identification for financial reporting and federal income tax
purposes.
FEDERAL INCOME TAXES:
For federal income tax purposes, each fund is treated as a seperate entity. The
Funds intend to comply with requirements of the Internal Revenue Code relating
to regulated investment companies and intend to distribute substantially all of
its taxable income to its shareholders. Therefore, no provision for federal
income taxes is recorded in the accompanying financial statements.
CAPITAL STOCK TRANSACTIONS AND DISTRIBUTIONS TO SHAREHOLDERS:
Fund shares are sold in a continuous public offering at net asset value plus a
sales charge. The Funds repurchase its shares at net asset value. Dividends and
other distibutions are recorded by the Fund on the ex-dividend date and may be
reinvested at the net asset value.
EXPENSES:
Operating expenses not directly attributable to a Fund's operations are prorated
among the Funds based on the relative net assets or shareholders of each Fund.
Reorganization expenses have been deferred and are being amortized over a five
year period.
NOTE 2-- INVESTMENT ADVISORY AND SERVICE FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Securities Management and Research, Inc. ("SM&R") is the investment advisor and
principal underwriter for the Fund. Investment advisory fees paid to SM&R are
computed as a percentage of the average daily net assets as follows:
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY SERVICE
NET ASSETS FEE FEE
<S> <C> <C>
Not exceeding $100,000,000 .750% .250%
Exceeding $100,000,000 but not exceeding $200,000,000 .625% .200%
Exceeding $200,000,000 but not exceeding $300,000,000 .500% .150%
Exceeding $300,000,000 .400% .100%
</TABLE>
The investment advisory agreement for the Growth Fund provides for incentive
fees that will increase or decrease the basic investment advisory fee, based on
the performance of the fund in relation to a specified industry index for the
funds with similar objectives over a rolling 36-month period. No incentive fees
were earned in 1995 and the investment advisory fee was reduced by approximately
$179,000.
SM&R has agreed to reimburse the Fund for all expenses, other than taxes,
interest, and expenses directly related to the purchase and sale of investment
securities, in excess of 1.25% per annum of the average daily net assets.
During the period ended December 31, 1995, SM&R, as principal underwriter,
received as sales charges on sale of shares of capital stock of the Funds and
made reallowances to dealers as follows:
<TABLE>
<CAPTION>
SALES CHARGES
SALES CHARGES REALLOWED TO
RECEIVED BY SM&R DEALERS
<S> <C> <C>
Growth $ 244,914 $ 4,393
Income 327,908 5,830
Triflex 33,172 295
</TABLE>
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
AMERICAN NATIONAL FUNDS GROUP
SM&R is a wholly-owned subsidiary of American National Insurance Company
("American National"). As of December 31, 1995, SM&R and American National had
the following ownership in the Funds:
<TABLE>
<CAPTION>
SM&R AMERICAN NATIONAL
------------------------------ ----------------------------
PERCENT OF SHARES PERCENT OF SHARES
SHARES OUTSTANDING SHARES OUTSTANDING
<S> <C> <C> <C> <C>
Growth 271,507 0.88% 961,244 3.13%
Income 13,475 0.22% -- --
Triflex 99,240 7.69% 166,054 12.86%
</TABLE>
NOTE 3--COST, PURCHASES, AND SALES OF INVESTMENT SECURITIES
Investments have the same cost for tax and financial statement purposes.
Aggregate purchases and sales of investment securities, other than commercial
paper and corporate short-term bonds and notes were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Growth $41,923,710 $55,616,189
Income 50,726,517 54,735,964
Triflex 3,158,747 4,397,545
</TABLE>
Gross unrealized appreciation and depreciation as of December 31, 1995, were as
follows:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION
<S> <C> <C>
Growth $25,420,531 $5,909,540
Income 26,416,231 3,428,880
Triflex 3,412,857 576,346
</TABLE>
NOTE 4--CAPITAL STOCK
AMERICAN NATIONAL GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sale of capital shares 2,337,194 $ 10,021,158 1,827,872 $ 7,709,459
Investment income dividends reinvested 473,961 2,069,798 389,322 1,539,431
Distributions made from net realized gains reinvested 2,057,863 8,931,124 3,102,860 11,951,899
---------- ------------ ---------- ------------
Subtotals 4,869,018 21,022,080 5,320,054 21,200,789
Redemptions of capital shares (3,708,002) (16,008,780) (3,062,068) (12,977,176)
---------- ------------ ---------- ------------
Net increase in capital shares outstanding 1,161,016 $ 5,013,300 2,257,986 $ 8,223,613
------------ ------------
------------ ------------
Shares outstanding at beginning of period 29,538,782 27,280,796
---------- ----------
Shares outstanding at end of period 30,699,798 29,538,782
---------- ----------
---------- ----------
The components of net assets at December 31, 1995, are as follows:
Capital Stock--30,699,798 shares of $1.00 par value outstanding
(75,000,000 authorized) (par and additional paid-in capital) $112,154,840
Undistributed net investment income 656,259
Accumulated net realized gain on investments 2,499,055
Net unrealized appreciation of investments 19,510,991
------------
Net assets $134,821,145
------------
------------
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
AMERICAN NATIONAL FUNDS GROUP
AMERICAN NATIONAL INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Sale of capital shares 560,583 $ 12,119,202 613,155 $13,077,315
Investment income dividends reinvested 166,234 3,617,673 156,088 3,207,065
Distributions made from net realized gains reinvested 286,368 6,408,920 560,907 10,618,904
--------- ------------- --------- -----------
Subtotals 1,013,185 22,145,795 1,330,150 26,903,284
Redemptions of capital shares (811,772) (17,329,407) (824,701) (17,510,349)
--------- ------------- --------- -----------
Net increase in capital shares outstanding 201,413 $ 4,816,388 505,449 $ 9,392,935
------------- -----------
------------- -----------
Shares outstanding at beginning of period 6,043,256 5,537,807
--------- ---------
Shares outstanding at end of period 6,244,669 6,043,256
--------- ---------
--------- ---------
The components of net assets at December 31, 1995, are as follows:
Capital Stock--6,244,669 shares of $1.00 par value outstanding
(50,000,000 authorized) (par and additional paid-in capital) $117,200,876
Undistributed net investment income 181,441
Accumulated net realized gain on investments 688,364
Net unrealized appreciation of investments 22,987,351
------------
Net assets $141,058,032
------------
------------
TRIFLEX FUND
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sale of capital shares 69,156 $ 1,102,436 133,602 $ 2,062,236
Investment income dividends reinvested 37,554 602,878 37,172 556,714
Distributions made from net realized gains reinvested 10,388 173,263 67,728 973,382
--------- ----------- --------- -----------
Subtotals 117,098 1,878,577 238,502 3,592,332
Redemptions of capital shares (154,950) (2,455,302) (243,603) (3,728,098)
--------- ----------- --------- -----------
Net decrease in capital shares outstanding (37,852) $ (576,725) (5,101) $ (135,766)
----------- -----------
----------- -----------
Shares outstanding at beginning of period 1,328,709 1,333,810
--------- ---------
Shares outstanding at end of period 1,290,857 1,328,709
--------- ---------
--------- ---------
The components of net assets at December 31, 1995, are as follows:
Capital Stock--1,290,857 shares of $1.00 par value outstanding
(50,000,000 authorized) (par and additional paid-in capital) $18,567,149
Undistributed net investment income 334,289
Accumulated net realized gain on investments 18,743
Net unrealized appreciation of investments 2,836,511
-----------
Net assets $21,756,692
-----------
-----------
</TABLE>
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
American National Funds Group
We have audited the accompanying statements of assets and liabilities of
American National Funds Group (comprised of American National Growth Fund, Inc.,
American National Income Fund, Inc. and Triflex Fund, Inc.), including the
schedule of investments as of December 31, 1995, the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American National Funds Group as of December 31, 1995, the results of its
operations for the year then ended and the changes in its net assets for each of
the years in the two-year period then ended and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 16, 1996
DISTRIBUTIONS
- --------------------------------------------------------------------------------
Distributions per share for the year ended December 31, 1995.
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
RECORD INVESTMENT CAPITAL CAPITAL
DATE INCOME GAIN GAIN
<S> <C> <C> <C> <C>
American National Growth Fund, Inc. 06/21/95 $ 0.0364
12/20/95 $ 0.0388 $ 0.0608 $ 0.2618
American National Income Fund, Inc. 03/29/95 $ 0.1594
06/21/95 $ 0.1415
09/25/95 $ 0.1620
12/20/95 $ 0.1696 $ 0.2399 $ 0.8752
Triflex Fund, Inc. 03/29/95 $ 0.1232
06/21/95 $ 0.1111
09/25/95 $ 0.1230
12/20/95 $ 0.1307 $ 0.0935 $ 0.0469
</TABLE>
20
