<PAGE>
Registration No. 2-61491
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 29
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 25
(Check appropriate box or boxes)
TRIFLEX FUND, INC.
(Exact Name of Registrant as Specified in Charter)
One Moody Plaza, Galveston, Texas 77550
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (409) 763-2767
MICHAEL W. MCCROSKEY JERRY L. ADAMS
ONE MOODY PLAZA WITH COPY TO: GREER, HERZ & ADAMS, L.L.P.
GALVESTON, TEXAS 77550 ONE MOODY PLAZA
(Name and Address of Agent for Service) GALVESTON, Texas 77550
- -------------------------------------------------------------------------------
DECLARATION REQUIRED BY RULE 24f-2(a)(1): An indefinite number of securities
of the Registrant has been registered under the Securities Act of 1933
pursuant to RULE 24f-2 under the Investment Company Act of 1940. Notice
required by RULE 24f-2(b)(1) was filed in the Office of the Securities and
Exchange Commission on March 24, 1998.
- -------------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box):
[ ] 75 days after filing pursuant to paragraph (a) Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on APRIL 30, 1998 pursuant to paragraph (b) of Rule 485
- -------------------------------------------------------------------------------
If appropriate, check the following box:
[ ] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
- -------------------------------------------------------------------------------
EXHIBIT INDEX located at Page 29.
<PAGE>
TRIFLEX FUND, INC.
CROSS-REFERENCE SHEET
(Pursuant to Rule 485(b))
Showing Location of Information
Required by FORM N-1A
PART A ITEM AND CAPTION PROSPECTUS CAPTION
- ----------------------- ------------------
ITEM 1. COVER PAGE
(a)(i) Front Cover
(ii) Front Cover
(iii) Front Cover
(iv) Front Cover
(v) Front Cover
(vi) Not Applicable
(vii) Not Applicable
(viii) Front Cover
(b) Front Cover
ITEM 2. SYNOPSIS
(a)(i) Table of Fees and Expenses
(ii) Not Applicable
(b) The Funds at a Glance
(c) The Funds at a Glance
ITEM 3. CONDENSED FINANCIAL INFORMATION
(a) Financial Highlights -- TRIFLEX FUND, INC.
(b) Not Applicable
(c) Funds Performance
(d) Portfolio Manager Discussion and Analysis --
TRIFLEX FUND
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
(a)(i) The Funds at a Glance
(ii) The Funds at a Glance; Investment Objectives and
Policies
(b)(i) Investment Objectives And Policies
(ii) Investment Objectives And Policies
(c) Investment Objectives And Policies; The Funds
at a Glance
ITEM 5. MANAGEMENT OF THE FUND
(a) The Funds and Their Management
(b)(i) The Funds and Their Management
(ii) The Funds and Their Management
(iii) The Funds and Their Management
(c) The Funds and Their Management
(d) Not Applicable
(e) The Funds and Their Management; Cover Page
(f)(i) The Funds and Their Management
(g) Not Applicable
ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
(a) Portfolio Manager's Discussion and Analysis --
TRIFLEX FUND
(b) Portfolio Manager's Discussion and Analysis --
TRIFLEX FUND
(c) Not Applicable
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
(a)(i) How to Purchase Shares
(ii) How to Purchase Shares; How To Redeem; Special
Purchase Plans
(iii) Not Applicable
(b) Not Applicable
(c) Not Applicable
(d) Not Applicable
(e) Cover Page
(f) Dividends, Capital Gains and Federal Taxes
<PAGE>
(g)(i) Dividends, Capital Gains and Federal Taxes
(ii) Dividends, Capital Gains and Federal Taxes
(iii) Dividends, Capital Gains and Federal Taxes
(h) Not Applicable
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED
(a) How to Purchase Shares
(b)(i) Determination of Offering Price
(ii) When Are Purchases Effective?; Determination of
Offering Price
(iii) Determination of Offering Price
(iv) Determination of Offering Price
(v) Not Applicable
(c) Special Purchase Plans; Determination of Offering
Price
(d) How to Purchase Shares
(e) Not Applicable
(f)(i) Not Applicable
(ii) Not Applicable
(iii) Not Applicable
(g) Not Applicable
ITEM 8. REDEMPTION OR REPURCHASE
(a) How To Redeem
(b) Not Applicable
(c) How To Redeem
(d) How To Redeem
ITEM 9. PENDING LEGAL PROCEEDINGS
Not Applicable
PART B ITEM AND CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ----------------------- -------------------------------------------
ITEM 10. COVER PAGE
(a)(i) Cover Page
(ii) Cover Page
(iii) Cover Page
(iv) Cover Page
(b) Cover Page
ITEM 11. TABLE OF CONTENTS
Table of Contents
ITEM 12. GENERAL INFORMATION AND HISTORY
Not Applicable
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES
(a) Investment Objective and Policies -- Investment
Restrictions
(b) Investment Objective and Policies -- Investment
Restrictions
(c) Not Applicable
(d) Not Applicable
ITEM 14. MANAGEMENT OF THE FUND
(a) Management of The Fund
(b) Management of The Fund
(c) Management of The Fund
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) Not Applicable
(b) Not Applicable
(c) Control Persons and Principal Holders of
Securities
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
<PAGE>
(a)(i) Control and Management of SM&R
(ii) Control and Management of SM&R
(iii) Investment Advisory Agreement
(b) Investment Advisory Agreement
(c) Not Applicable
(d) Administrative Service Agreement
(e)(i) Not Applicable
(ii) Not Applicable
(iii) Not Applicable
(f)(i) Not Applicable
(ii) Not Applicable
(iii) Not Applicable
(g) Custodian
(h) Custodian; Counsel and Auditors
(i) Investment Advisory Agreement; Administrative
Service Agreement; Custodian; Transfer and
Dividend Paying Agent
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES
(a) Portfolio Transactions and Brokerage Allocation
(b) Not Applicable
(c) Portfolio Transactions and Brokerage Allocation
(d) Portfolio Transactions and Brokerage Allocation
(e) Not Applicable
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES
(a)(i) Capital Stock
(ii) Capital Stock
(b) Not Applicable
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
(a) Purchasing Shares; Special Purchase Plans
(b) Determination of Net Asset Value; Offering Price;
Reduced Sales Charge
(c) Not Applicable
ITEM 20. TAX STATUS
Tax Status
ITEM 21. UNDERWRITERS
(a)(i) The Underwriter
(ii) The Underwriter
(iii) The Underwriter
(b) The Underwriter
(c) Not Applicable
ITEM 22. CALCULATIONS OF PERFORMANCE DATA
(a)(i) Not Applicable
(ii) Not Applicable
(iii) Not Applicable
(iv) Not Applicable
(b)(i) Performance Data; Cumulative Total Return;
Average Annual Return; Comparisons
(ii) Not Applicable
(iii) Not Applicable
(iv) Not Applicable
ITEM 23. FINANCIAL STATEMENTS
Financial Statements are attached hereto as
EXHIBIT "1" to Part B, Statement of Additional
Information.
<PAGE>
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
[LOGO]
P R O S P E C T U S
AMERICAN NATIONAL FUNDS GROUP
APRIL 30, 1998
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
OFFICERS
Michael W. McCroskey, President and CEO
Brenda T. Koelemay, Vice President and Treasurer
Emerson V. Unger, Vice President
Teresa E. Axelson, Vice President and Secretary
<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 AUDITORS
Securities Management and Research, Inc. Tait, Weller & Baker
One Moody Plaza 8 Penn Center
Galveston, Texas 77550 Philadelphia, Pennsylvania 19103
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 30, 1998 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 representa- tions 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 (4/98)
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
SHAREHOLDER INQUIRIES........................... 1
THE FUNDS AT A GLANCE........................... 3
TABLE OF FEES AND EXPENSES...................... 4
FINANCIAL HIGHLIGHTS............................ 5
PERFORMANCE..................................... 8
PERFORMANCE ILLUSTRATIONS....................... 10
INVESTMENT OBJECTIVES AND POLICIES.............. 22
THE FUNDS AND THEIR MANAGEMENT.................. 25
HOW TO PURCHASE SHARES.......................... 28
<CAPTION>
PAGE
-----------
<S> <C>
WHEN ARE PURCHASES EFFECTIVE?................... 29
DETERMINATION OF OFFERING PRICE................. 29
SPECIAL PURCHASE PLANS AND SERVICES............. 31
RETIREMENT PLANS................................ 34
DIVIDENDS, CAPITAL GAINS AND FEDERAL TAXES...... 34
HOW TO REDEEM................................... 36
APPENDIX........................................ 39
</TABLE>
2
<PAGE>
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 money over time to build capital to meet
long-range goals. Examples of long-range goals include giving children the
finest education possible, retiring in comfort, or building an estate.
AMERICAN NATIONAL INCOME FUND, INC. ("INCOME FUND")
OBJECTIVE:--The Income Fund seeks current income with a secondary objective of
long-term capital appreciation.
INVESTOR SUITABILITY PROFILE:--The Income Fund is designed for investors seeking
to protect the purchasing power of their money while retaining the potential for
attractive growth and reducing their exposure to the volatility of the market.
TRIFLEX FUND, INC. ("TRIFLEX FUND")
OBJECTIVE:--The Triflex Fund seeks to conserve principal, produce current income
and achieve long-term capital appreciation.
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 "HOW TO PURCHASE 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
ANNUAL OPERATING EXPENSES
(as a Percentage of average net assets)
<CAPTION>
Growth Income Triflex
<S> <C> <C> <C>
Investment Advisory Fee After Expense Reimbursement .60% .69% .65%
Service Fee .23% .23% .25%
Other Expenses .13% .13% .36%
Total Operating Expenses After Expense Reimbursement .96% 1.05% 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 1.36%, respectively.
Investors should be aware that this table is not intended to reflect in detail
the fees and expenses associated with an individual shareholder's own 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 $ 86 $ 108 $ 169
Income 68 89 112 178
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 period ending December 31, 1997, has been
audited by Tait, Weller & Baker, independent auditors, whose unqualified report
on the Financial Statements appears in the Statement of Additional Information.
This information should be read in conjunction with the related financial
statements and notes included in the Statement of Additional Information. The
information for years ending December 31, 1996 and prior, has been audited by
the Growth Fund's former independent auditors.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 4.95 $ 4.39 $ 3.83 $ 4.15 $ 4.51 $ 5.07 $ 3.95 $ 4.25
Investment income--net 0.06 0.05 0.08 0.06 0.06 0.08 0.08 0.10
Net realized and unrealized
gain (loss) on investments
during the period 1.03 0.73 0.88 0.15 0.31 (0.20) 1.38 (0.22)
--------- --------- --------- --------- --------- --------- --------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 1.09 0.78 0.96 0.21 0.37 (0.12) 1.46 (0.12)
Less distributions
Distributions from
investment income--net (0.06) (0.05) (0.08) (0.06) (0.06) (0.08) (0.06) (0.09)
Distributions from capital
gains (0.74) (0.17) (0.32) (0.47) (0.67) (0.36) (0.28) (0.09)
--------- --------- --------- --------- --------- --------- --------- ----------
TOTAL DISTRIBUTIONS (0.80) (0.22) (0.40) (0.53) (0.73) (0.44) (0.34) (0.18)
--------- --------- --------- --------- --------- --------- --------- ----------
Net Asset Value,
End of Period $ 5.24 $ 4.95 $ 4.39 $ 3.83 $ 4.15 $ 4.51 $ 5.07 $ 3.95
--------- --------- --------- --------- --------- --------- --------- ----------
--------- --------- --------- --------- --------- --------- --------- ----------
TOTAL RETURN 22.24% 17.64% 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) $178,344 $152,758 $134,821 $113,250 $113,135 $111,811 $125,837 $97,298
Ratio of expenses to average
net assets .96 1.15 0.98 0.97 1.00 1.07 1.04 1.03
Ratio of net investment income
to average net assets 1.03 1.02 1.67 1.46 1.31 1.42 1.63 2.41
Portfolio turnover rate 46.79 18.72 37.00 46.26 59.67 92.28 55.95 152.13
Average commission rate paid
per share $ .0700 $ .0700 -- -- -- -- -- --
<CAPTION>
Two Months
Ended Year Ended
Dec. 31, October 31,
----------- -----------------------
1989 1989 1988
----------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 4.85 $ 4.48 $ 5.14
Investment income--net 0.03 0.13 0.09
Net realized and unrealized
gain (loss) on investments
during the period 0.17 0.67 0.13
----------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.20 0.80 0.22
Less distributions
Distributions from
investment income--net (0.07) (0.12) (0.10)
Distributions from capital
gains (0.73) (0.31) (0.78)
----------- ---------- ----------
TOTAL DISTRIBUTIONS (0.80) (0.43) (0.88)
----------- ---------- ----------
Net Asset Value,
End of Period $ 4.25 $ 4.85 $ 4.48
----------- ---------- ----------
----------- ---------- ----------
TOTAL RETURN 4.07%** 19.90% 5.88%
RATIOS (IN PERCENTAGES)/SUPPLE
Net Assets, end of period
(000's omitted) $108,058 $104,897 $97,302
Ratio of expenses to average
net assets 1.06* 1.09 1.23
Ratio of net investment income
to average net assets 3.24* 2.93 2.07
Portfolio turnover rate 13.74 70.94 46.79
Average commission rate paid
per share -- -- --
</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 period ending December 31, 1997, has been
audited by Tait, Weller & Baker, independent auditors, whose unqualified report
on the Financial Statements appears in the Statement of Additional Information.
This information should be read in conjunction with the related financial
statements and notes included in the Statement of Additional Information. The
information that follows for years ending December 31, 1996 and prior, has been
audited by the Income Fund's former independent auditors.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 25.05 $ 22.59 $ 18.90 $ 21.66 $ 22.09 $ 22.94 $ 19.35 $ 20.11
Investment income--net 0.63 0.58 0.62 0.62 0.56 0.57 0.69 0.79
Net realized and unrealized
gain (loss) on investments
during the period 4.96 3.10 4.82 (0.75) 1.75 0.17 4.85 (0.67)
--------- --------- --------- --------- --------- --------- -------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 5.59 3.68 5.44 (0.13) 2.31 0.74 5.54 0.12
Less distributions
Distributions from
investment income--net (0.64) (0.58) (0.63) (0.61) (0.60) (0.53) (0.64) (0.81)
Distributions from capital
gains (3.01) (0.64) (1.12) (2.02) (2.14) (1.06) (1.31) (0.07)
--------- --------- --------- --------- --------- --------- -------- ---------
TOTAL DISTRIBUTIONS (3.65) (1.22) (1.75) (2.63) (2.74) (1.59) (1.95) (0.88)
--------- --------- --------- --------- --------- --------- -------- ---------
Net Asset Value,
End of period $ 26.99 $ 25.05 $ 22.59 $ 18.90 $ 21.66 $ 22.09 $ 22.94 $ 19.35
--------- --------- --------- --------- --------- --------- -------- ---------
--------- --------- --------- --------- --------- --------- -------- ---------
TOTAL RETURN 22.72% 16.46% 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) $198,687 $165,786 $141,058 $114,231 $119,956 $108,076 $99,192 $74,329
Ratio of expenses to average
net assets 1.05 1.10 1.12 1.12 1.17 1.18 1.23 1.22
Ratio of net investment income
to average net assets 2.28 2.42 2.89 2.86 2.51 2.56 3.25 4.14
Portfolio turnover rate 39.14 27.07 44.00 52.46 70.71 44.03 40.23 37.51
Average commission rate paid
per share $ .0700 $ .0700 -- -- -- -- -- --
<CAPTION>
Five
Months
Ended Year Ended
Dec. 31, July 31,
--------- ---------------------
1989 1989 1988
--------- -------- --------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 20.75 $ 19.80 $ 23.77
Investment income--net 0.38 0.74 0.70
Net realized and unrealized
gain (loss) on investments
during the period 1.06 3.09 (3.31)
--------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS 1.44 3.83 (2.61)
Less distributions
Distributions from
investment income--net (0.44) (0.74) (0.83)
Distributions from capital
gains (1.64) (2.14) (0.53)
--------- -------- --------
TOTAL DISTRIBUTIONS (2.08) (2.88) (1.36)
--------- -------- --------
Net Asset Value,
End of period $ 20.11 $ 20.75 $ 19.80
--------- -------- --------
--------- -------- --------
TOTAL RETURN 6.99%** 32.31% (11.20)%
RATIOS (IN PERCENTAGES)/SUPPLE
Net Assets, end of period
(000's omitted) $69,579 $67,765 $65,789
Ratio of expenses to average
net assets 1.17* 1.18 1.10
Ratio of net investment income
to average net assets 3.92* 3.82 3.46
Portfolio turnover rate 14.62 31.02 56.63
Average commission rate paid
per share -- -- --
</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 period ending December 31, 1997, has been
audited by Tait, Weller & Baker, independent auditors, whose unqualified report
on the Financial Statements appears in the Statement of Additional Information.
This information should be read in conjunction with the related financial
statements and notes included in this Statement of Additional Information. The
information that follows for years ending December 31, 1996 and prior, has been
audited by the Triflex Fund's former independent auditors.
<TABLE>
<CAPTION>
Five
Months
Ended
Year Ended December 31, Dec. 31,
------------------------------------------------------------------------------------ ---------
1997 1996 1995 1994 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 17.90 $ 16.85 $ 14.32 $ 15.35 $ 15.81 $ 16.20 $ 13.98 $ 14.62 $ 15.90
Investment income--net 0.57 0.49 0.49 0.45 0.41 0.46 0.61 0.80 0.37
Net realized and unrealized
gain (loss) on investments
during the period 2.50 1.48 2.67 (0.22) 0.58 0.01 2.79 (0.66) (0.33)
------- ------- ------- ------- ------- ------- ------- ------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 3.07 1.97 3.16 0.23 0.99 0.47 3.40 0.14 0.04
Less distributions
Distributions from
investment income--net (0.59) (0.49) (0.49) (0.45) (0.41) (0.35) (0.62) (0.70) (0.39)
Distributions from capital
gains (2.06) (0.43) (0.14) (0.81) (1.04) (0.51) (0.56) (0.08) (0.93)
------- ------- ------- ------- ------- ------- ------- ------- ---------
TOTAL DISTRIBUTIONS (2.65) (0.92) (0.63) (1.26) (1.45) (0.86) (1.18) (0.78) (1.32)
------- ------- ------- ------- ------- ------- ------- ------- ---------
Net Asset Value,
End of Period $ 18.32 $ 17.90 $ 16.85 $ 14.32 $ 15.35 $ 15.81 $ 16.20 $ 13.98 $ 14.62
------- ------- ------- ------- ------- ------- ------- ------- ---------
------- ------- ------- ------- ------- ------- ------- ------- ---------
TOTAL RETURN 17.46% 11.86% 22.29% 1.49% 6.31% 3.00% 24.53% 1.37% 0.32%**
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period
(000's omitted) $25,838 $23,188 $21,757 $19,023 $20,469 $21,482 $21,916 $19,328 $21,382
Ratio of expenses to average
net assets 1.26(1) 1.21(1) 1.26(1) 1.25(1) 1.32(1) 1.15(1) 1.28(1) 1.31 1.31*
Ratio of net investment income
to average net assets 3.02 2.83 2.99 2.91 2.49 2.96 3.95 5.57 5.75*
Portfolio turnover rate 27.52 23.78 16.39 46.95 70.98 61.66 104.21 184.54 116.16
Average Commission Rate Paid
per share $ .0700 $ .0700 -- -- -- -- -- -- --
<CAPTION>
Year Ended
July 31,
--------------------
1989 1988
--------- --------
<S> <C> <C>
Net Asset Value,
Beginning of Period $ 14.90 $ 14.59
Investment income--net 0.89 0.88
Net realized and unrealized
gain (loss) on investments
during the period 1.34 0.54
--------- --------
TOTAL FROM INVESTMENT
OPERATIONS 2.23 1.42
Less distributions
Distributions from
investment income--net (0.90) (1.11)
Distributions from capital
gains (0.33) 0.00
--------- --------
TOTAL DISTRIBUTIONS (1.23) (1.11)
--------- --------
Net Asset Value,
End of Period $ 15.90 $ 14.90
--------- --------
--------- --------
TOTAL RETURN 15.94% 10.18%
RATIOS (IN PERCENTAGES)/SUPPLE
Net Assets, end of period
(000's omitted) $21,002 $19,687
Ratio of expenses to average
net assets 1.28 1.00
Ratio of net investment income
to average net assets 5.99 6.01
Portfolio turnover rate 36.93 130.95
Average Commission Rate Paid
per share -- --
</TABLE>
(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 1.36%, 1.34%, 1.46%, 1.45%,
1.39%, 1.32% and 1.49% for the years ended December 31, 1997, 1996, 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 shown on the following pages.
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 12/31/97
<TABLE>
<CAPTION>
20-year 10-year 5-year 1-year
<S> <C> <C> <C> <C>
Growth Fund 14.50% 12.65% 13.99% 15.25%
Income Fund 14.52% 13.74% 13.84% 15.66%
Triflex Fund -- 10.30% 10.32% 10.71%
</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 that follow describe the total return results of a hypothetical
$10,000 investment in each Fund for the 10-year period from January 1, 1988
through December 31, 1997 with a maximum sales charge of 5.75%.
8
<PAGE>
[This page intentionally left blank]
9
<PAGE>
PORTFOLIO MANAGER'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
AMERICAN NATIONAL GROWTH FUND
Looking back at 1997, U.S. economic characteristics reflected steady growth,
declining inflation, a decrease in the budget deficit, large increases in
business profits, employment and real incomes, and a continuation of
unprecedented stock market gains. Further, interest rates declined over the past
year as markets realized that with a backdrop of an appreciating dollar, global
deflationary tendencies, and excess liquidity via declining inflation, the
Federal Reserve would have no compelling reasons to alter monetary policy.
The S&P 500 ended 1997 registering its third consecutive year of +20% gains.
This ended the best calendar-three-year run since Standard and Poor's began
tracking indices in 1923. In addition, this was the first time since 1926 that
the S&P 500 produced better than 20% returns in three consecutive calendar
years. The year 1997 also featured a market of increased volatility. For 1997,
the S&P 500 closed more than 1% higher or lower than the previous day on 34% of
the trading days. In comparison, the average for the period 1990-1996 was less
than half that, at 14.5% of the trading days. For the fourth year in a row,
large capitalization stocks were the best performing size category. The S&P 500
broke 43 new record high marks during 1997, but not without a few bruises. The
9.6% decline between February 18 and April 11 stopped just short of the 10%
mark, which is traditionally the benchmark cited to declare a true market
correction. The 10% mark was crested, however, as stocks fell 10.8% between
October 7-27.
The Dow Jones World Index, which excludes the U.S. market, lost 3.0% during
the year, although performance was widely varied. Within the index, Asia/Pacific
declined 29.1% whereas Europe/Africa gained 19.9%. Also during the year, the
Merrill Lynch Domestic Bond Index rose 9.4%. Within this index, performance
varied from convertible bonds returning 16.1% to asset-backed securities
returning 7.2%. Money market returns were widely varied as well. The U.S. money
markets returned 5.1% whereas the foreign money markets fell 5.5%, reflecting
strength in the U.S. dollar.
Looking forward into the remainder of 1998, we believe the U.S. economy will
continue to grow, albeit at a reduced rate of approximately 2.0-3.0%. Inflation
will likely remain historically low (1.5-2.5%) as declining commodities costs
are countered by rising employment and wages. Such an environment will likely
lead to declining interest rates over the short run which, in turn, could
provide an ideal climate for fixed income securities as well as financial and
consumer dependent securities.
The Growth Fund seeks to identify stocks of superior companies utilizing two
valuation disciplines. These disciplines screen potential investments for both
cash flow and earnings with the goal of selecting companies suitable for long
term capital appreciation. The purpose of this approach is to purchase future
company earnings at a discount relative to peer companies, all else being equal.
The disciplines provide what we believe is a conservative and defensive group of
stocks from which to select for inclusion in the fund.
Within the Growth Fund, we noted particular strength from our holdings in the
financial, consumer cyclical and technology sectors. For 1997, our overweighting
of technology relative to the market also helped our relative performance. For
investors who owned shares for the whole year 1997, the Growth Fund produced a
total return of 22.3%, excluding sales charge (see graph for complete
performance history). The Growth Fund's growth attributes are achieved by
investing primarily in large-capitalization growth companies. The Growth Fund
makes an effort to overweight sectors by no more than twice the S&P 500 sector
weights and underweight by no more than half the S&P 500 sector weights.
We continue to seek out undervalued companies undergoing positive changes in
fundamentals and selling those issues that have hit their price targets or whose
fundamentals do not warrant inclusion in our Fund.
10
<PAGE>
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>
AMERICAN
NATIONAL
<S> <C> <C>
Growth
Fund,
Inc. S&P 500
1987 9,426 10,000
1988 9,992 11,661
1989 12,422 15,356
1990 12,057 14,879
1991 16,515 19,412
1992 16,102 20,891
1993 17,417 22,997
1994 18,284 23,300
1995 22,892 32,058
1996 26,931 39,416
1997 32,921 52,567
Average Annual Return
10 Year 12.65%
5 Year 13.99%
1 Year 15.25%
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 distributions, changes
in net asset value, and considers the effect of the Growth Fund's 5.75% maximum
sales charge. All performance figures are as-of December 31 for the applicable
year. The Growth Fund's fiscal year end was as of October 31 for 1988-1989.
11
<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>
RESULTS
ASSUMING
DIVIDENDS
<S> <C> <C>
Total Taken in
Return Cash
1988 $ 9,992 $ 9,767
1989 $ 12,422 $ 11,832
1990 $ 12,057 $ 11,243
1991 $ 16,515 $ 15,219
1992 $ 16,102 $ 14,596
1993 $ 17,417 $ 15,583
1994 $ 18,281 $ 16,126
1995 $ 22,892 $ 19,858
1996 $ 26,931 $ 23,136
1997 $ 32,921 $ 27,995
$32,921 Total Return
$27,995 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>
- ----------------------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income dividends paid and
reinvested during year $ 226 $ 308 $ 260 $ 176 $ 253 $ 216 $ 255 $ 360 $ 247 $ 320
Capital gains distributions reinvested
during year 700 1,794 259 847 1,165 2,404 1,972 1,552 865 4,027
Value of investment at year end assuming
reinvestment of investment income
dividends and capital gains
distributions 9,992 12,422 12,057 16,515 16,102 17,417 18,284 22,892 26,931 32,921
Value of investment at year end assuming
investment income dividends taken in
cash $ 9,767 $11,832 $11,243 $15,219 $14,596 $15,583 $16,126 $19,858 $23,136 $27,995
PERCENTAGES
- ----------------------------------------------------------------------------------------------------------------------------------
Income Return 2.26% 3.08% 2.10% 1.46% 1.53% 1.35% 1.47% 1.97% 1.08% 1.19%
Appreciation -2.34% 21.25% -5.04% 35.52% -4.03% 6.82% 3.51% 23.23% 16.56% 21.05%
----------------------------------------------------------------------------------------
Total Return -0.08% 24.33% -2.94% 36.98% -2.50% 8.17% 4.98% 25.20% 17.64% 22.24%
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Sales Charge 5.75%
Total Return
*(excluding sales charge) 6.00%
</TABLE>
All performance figures are as of December 31 for the applicable year. Growth
Fund's fiscal year was as of October 31 for 1988-1989.
<TABLE>
<S> <C> <C>
SUMMARY
Original Investment.....................$10,000
Dividends Paid and Reinvested............$2,621
Capital Gains Paid and Reinvested.......$15,585
Appreciation (Unrealized Capital
Gains)...................................$4,715
Total Value.............................$32,921
</TABLE>
12
<PAGE>
(This page has been left blank intentionally.)
13
<PAGE>
PORTFOLIO MANAGER'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
AMERICAN NATIONAL INCOME FUND
The Income Fund turned in a solid performance in 1997, producing a total
return of 22.7%, excluding sales charge (see graph for complete performance
history). Throughout the year, the Income Fund exceeded its target of
maintaining a dividend yield at least 50% greater than that of the Standard &
Poor's 500 stock market index. The current dividend yield of the equities
comprising the portfolio stands at 2.7%, a full 70% greater than the S&P 500's
1.5% yield.
Throughout 1997, the Income Fund benefited from its overweighted positions in
the strong performing finance and consumer cyclical sectors. Within the finance
sector, the Income Fund's holdings include banks like Nationsbank, Norwest, and
Comerica; financial services companies like Beneficial, Morgan Stanley Dean
Witter, and Reliance Group holdings; and a carefully selected group of real
estate investment trusts (REITs) such as Centerpoint Properties, Crescent,
Health & Retirement Properties. On average, these holdings produced returns of
about 40% for the year. Moreover, the Income Fund was overweighted in this
strong performing sector relative to the broad market benchmarks.
We also noted particular strength in the consumer cyclicals sector, which
includes such industries as apparel, autos, printing, and retail. For the year,
the Income Fund's holdings in this sector produced an average return of 37%,
outperforming this strong sector's performance within the broad market. In
addition, the Income Fund benefited from above-market performance from our
healthcare selections, which appreciated 47% on average versus 35% for the
sector in the S&P 500. Of our holdings, the best performance was posted by
pharmaceuticals maker Schering-Plough which rose 92% for the year and drug
distributor Bergen Brunswig, up 83% during 1997.
Weakness for the Income Fund originated in the capital goods and energy
sectors. In the case of capital goods, most of the weakness came from companies
like engineering and construction companies Fluor and Foster Wheeler, both of
which have above average exposure to emerging markets in Southeast Asia. In the
energy sector, where generous dividend yields are available from many high
quality companies, the falling price of oil hurt earnings, especially in the
fourth quarter. We are still confident in our international integrated companies
like Exxon, Chevron, and Texaco as well as our domestic companies like Amoco,
Kerr-McGee and Murphy Oil.
As mentioned elsewhere in this report, we expect the U.S. economy to continue
its moderate growth in 1998, albeit at a somewhat reduced rate. Inflation will
likely remain historically low (1.5-2.5%) as declining commodities costs are
countered by rising employment and wages. Such an environment will likely lead
to declining interest rates over the short run which, in turn, should provide an
ideal climate for fixed income securities as well as financial and consumer
dependant securities.
Within this slow growth economy, we will seek our style specific goals by
identifying, based on our conservative and defensive valuation disciplines, what
we consider to be stocks of superior companies. We will continue our quest for
undervalued companies undergoing positive changes in fundamentals, and we will
sell those issues which have hit their price targets or whose fundamentals do
not warrant inclusion within the conservatively run Income Fund. This process
has served the Income Fund well in the past.
14
<PAGE>
COMPARISON OF CHANGE 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>
AMERICAN
NATIONAL
<S> <C> <C>
Income
Fund,
Inc. S&P 500
1987 9,425 10,000
1988 10,372 11,661
1989 13,289 15,356
1990 13,389 14,879
1991 17,820 19,412
1992 17,852 20,891
1993 19,749 22,997
1994 19,628 23,300
1995 25,343 32,058
1996 29,516 39,416
1997 36,223 52,567
Average Annual
Return
10 Year 13.74%
5 Year 13.84%
1 Year 15.66%
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 Income Fund's 5.75% maximum
sales charge. All performance figures are as of December 31 for the applicable
year. The Income Fund's fiscal year end was as of July 31 for 1988-1989.
15
<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>
RESULTS
ASSUMING
DIVIDENDS
<S> <C> <C>
Total Taken in
Return Cash
1988 $ 10,372 $ 9,997
1989 $ 13,289 $ 12,313
1990 $ 13,389 $ 11,891
1991 $ 17,280 $ 14,908
1992 $ 17,852 $ 15,040
1993 $ 19,749 $ 16,208
1994 $ 19,628 $ 15,654
1995 $ 25,343 $ 19,642
1996 $ 29,516 $ 22,342
1997 $ 36,223 $ 26,805
$36,223 Total Return
$26,805 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>
- ----------------------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income dividends paid and
reinvested during year $ 374 $ 476 $ 543 $ 447 $ 404 $ 488 $ 559 $ 664 $ 654 $ 757
Capital gains distributions reinvested
during year 1,111 992 49 928 811 1,768 1,884 1,183 730 3,611
Value of investment at year end assuming
reinvestment of investment income
dividends and capital gains
distributions 10,372 13,289 13,389 17,280 17,852 19,749 19,628 25,343 29,516 36,223
Value of investment at year end assuming
investment income dividends taken in
cash $ 9,997 $12,313 $11,891 $14,908 $15,040 $16,208 $15,654 $19,642 $22,342 $26,805
PERCENTAGES
- ----------------------------------------------------------------------------------------------------------------------------------
Income Return 3.74% 4.59% 4.08% 3.34% 2.34% 2.73% 2.83% 3.38% 2.58% 2.57%
Appreciation -0.02% 23.53% -3.33% 25.72% 0.98% 7.90% -3.44% 25.74% 13.88% 20.15%
----------------------------------------------------------------------------------------
Total Return 3.72% 28.12% 0.75% 29.06% 3.32% 10.63% -0.61% 29.12% 16.46% 22.72%
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Sales Charge 5.75%
Total Return
*(excluding sales charge) 10.07%
</TABLE>
All performance figures are as of December 31 for the applicable year. Income
Fund's fiscal year was as of July 31 for 1988-1989.
<TABLE>
<S> <C> <C>
SUMMARY
Original Investment.....................$10,000
Dividends Paid and Reinvested............$5,366
Capital Gains Paid and Reinvested.......$13,067
Appreciation (Unrealized Capital
Gains)...................................$7,790
Total Value.............................$36,223
</TABLE>
16
<PAGE>
(This page has been left blank intentionally.)
17
<PAGE>
PORTFOLIO MANAGER'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
TRIFLEX FUND
The Triflex Fund (the "Fund" or "Fund's") is the lowest risk equity-dominated
portfolio in the American National Funds Group. Throughout 1997, the Fund's
conservative blend of about 55% stocks, 40% bonds and 5% cash has served the
Fund well. The equity portion of the Fund produced a total return (capital
appreciation and dividend income) of about 25% while the bond portion of the
Fund returned about 11%. Combined, the Fund produced a total return of 17.5% for
the year, excluding sales charge (see graph for complete performance history).
Within the Fund, we took advantage of high real interest rates (after
adjusting for inflation) to extend maturities and add exposure to the fixed
income portion of the Fund. We shifted about 6% of the Fund's assets from
equities and cash, and moved it into bonds during April, as the yield on the
30-year Treasury bond pushed above 7%. In retrospect, our timing was quite
fortuitous, as interest rates dropped over one percentage point by year-end,
with the 30-year bond yield closing 1997 at 5.9%.
Within the equity portion of the Triflex Fund, we utilize the same
conservative and defensive stock selection disciplines used in the American
National Income and Growth Funds. The key is identifying what we consider to be
stocks of superior companies and purchasing them at discounted valuations.
During 1997, we noted particular strength from our equity holdings in the
financial, consumer staples, and technology sectors. In all three sectors, our
holdings produced returns in excess of 30%, outperforming the respective sectors
in the S&P 500 for the year.
We weren't so fortunate with our capital goods and energy holding, however, as
both sectors underperformed both on an absolute basis and relative to their
respective S&P sectors. Within capital goods, we saw weakness in companies like
Fluor and Foster Wheeler, whose businesses are closely tied to large
infrastructure projects in the emerging markets in Southeast Asia. In the energy
sector, falling oil prices caused the shares of most companies to fall in
sympathy. We are examining our holdings in both of these sectors to determine
whether changes should be made going forward.
On balance, Triflex Fund investors were rewarded by their investment in the
Fund in 1997, with a third consecutive year of double-digit returns. Although
the Fund has not produced the spectacular returns witnessed by some funds over
the last year or two, we have achieved our goal of providing consistently
positive performance in the strong up market, while firmly believing that the
Fund is well positioned should markets turn downward.
We appreciate your investment in the Triflex Fund and will continue to do all
we can to reward our shareholders' confidence and trust.
18
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TRIFLEX FUND, INC., S&P 500 AND LEHMAN INTERMEDIATE GOVERNMENT/CORP INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LEHMAN
INTERMEDIATE
<S> <C> <C> <C>
Triflex
Fund, Gov't/Corp.
Inc. S&P 500 Index
1987 9,427 10,000 10,000
1988 10,406 11,661 10,667
1989 11,827 15,356 12,029
1990 11,990 14,879 13,130
1991 14,931 19,412 15,050
1992 15,379 20,891 16,130
1993 16,350 22,997 17,547
1994 16,593 23,300 17,208
1995 20,293 32,058 19,847
1996 22,701 39,416 20,651
1997 26,663 52,567 22,275
Average Annual Return
10 Year 10.30%
5 Year 10.32%
1 Year 10.71%
Past performance is not
predictive of future
performance.
</TABLE>
Triflex 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 Triflex Fund's 5.75% maximum sales charge. All
performance figures are as of December 31 for the applicable year. The Triflex
Fund's fiscal year end was as of July 31 for 1988-1989.
19
<PAGE>
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
OF TRIFLEX FUND, INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RESULTS
ASSUMING
DIVIDENDS
<S> <C> <C>
Total Taken in
Return Cash
1988 $ 10,406 $ 9,850
1989 $ 11,827 $ 10,595
1990 $ 11,990 $ 10,212
1991 $ 14,931 $ 12,224
1992 $ 15,379 $ 12,309
1993 $ 16,350 $ 12,755
1994 $ 16,593 $ 12,566
1995 $ 20,293 $ 14,911
1996 $ 22,701 $ 16,222
1997 $ 26,663 $ 18,490
$26,663 Total Return
$18,490 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>
- ----------------------------------------------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income dividends paid and
reinvested during year $ 555 $ 621 $ 579 $ 538 $ 328 $ 403 $ 489 $ 572 $ 598 $ 760
Capital gains distributions reinvested
during year 225 702 68 492 484 1,027 876 166 533 2,673
Value of investment at year end assuming
reinvestment of investment income
dividends and capital gains
distributions 10,406 11,827 11,990 14,931 15,379 16,350 16,593 20,293 22,701 26,663
Value of investment at year end assuming
investment income dividends taken in
cash $ 9,850 $10,595 $10,212 $12,224 $12,309 $12,755 $12,566 $14,911 $16,222 $18,490
PERCENTAGES
- ----------------------------------------------------------------------------------------------------------------------------------
Income Return 5.54% 5.97% 4.90% 4.49% 2.20% 2.62% 2.99% 3.44% 2.95% 3.35%
Appreciation -0.94% 7.69% -3.53% 20.04% .80% 3.69% -1.50% 18.85% 8.91% 14.11%
----------------------------------------------------------------------------------------
Total Return 4.60% 13.66% 1.37% 24.53% 3.00% 6.31% 1.49% 22.29% 11.86% 17.46%
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Sales Charge 5.75%
Total Return
*(excluding sales charge) 10.38%
</TABLE>
All performance figures are as of December 31 for the applicable year. Triflex
Fund's fiscal year was as of July 31 for 1988-1989.
<TABLE>
<S> <C> <C>
SUMMARY
Original Investment.....................$10,000
Dividends Paid and Reinvested............$5,443
Capital Gains Paid and Reinvested........$7,246
Appreciation (Unrealized Capital
Gains)...................................$3,974
Total Value.............................$26,663
</TABLE>
20
<PAGE>
(This page has been left blank intentionally.)
21
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each of the Funds have 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. 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 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
(1) See Appendix for a description of these ratings
22
<PAGE>
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 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
23
<PAGE>
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).
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
24
<PAGE>
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.
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.
As of April 1, 1998, SM&R and its parent, American National Insurance Company,
owned .97% and 3.61%, respectively of the outstanding shares of the Growth Fund;
.22% and 0%, respectively of the Income Fund; 8.62% and 14.67%, respectively of
the Triflex Fund. American National and SM&R reserve the right to vote these
shares as they deem appropriate.
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, DIRECTOR, SENIOR VICE PRESIDENT, CHIEF INVESTMENT OFFICER
OF SECURITIES MANAGEMENT AND RESEARCH, INC., VICE PRESIDENT, PORTFOLIO MANAGER
OF THE GROWTH FUND AND CO-MANAGER OF THE INCOME 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.
WILLIAM R. BERGER, C.F.A., VICE PRESIDENT, PORTFOLIO MANAGER OF THE TRIFLEX
FUND AND CO-MANAGER OF THE INCOME FUND. Mr. Berger joined Securities Management
and Research, Inc. in 1993. He graduated from Miami University, Oxford, Ohio in
25
<PAGE>
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.
26
<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 $200,000,000 but not
exceeding $300,000,000 .500 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, 1997 which represented .60%, .69%, and .65%, 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 .96%, 1.05%, 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 Conduct Rules (formerly 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.)
27
<PAGE>
HOW TO PURCHASE SHARES
Shares of the Funds may be purchased from registered representatives of SM&R,
from authorized broker-dealers or directly from SM&R. 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 on each account that has activity during the month. Carefully
review the monthly confirmation and promptly report any discrepancies to SM&R.
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 fully completed American National Family of
Funds Application (the "Account Application"), which includes the Purchaser
Suitability Form & Arbitration Agreement (the "Suitability Form"). If you would
like to take advantage of the electronic services available, please complete the
Account Application--Special Investor Services section and return it with your
new Account Application. Special forms are required when establishing an IRA/SEP
or 403(b) plan. Please call Investor Services at (800) 231-4639 and request the
special forms when establishing retirement plans. Keep in mind when opening an
account that transactions by telephone will only be permitted if all of your
account(s) are registered in the identical name.
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 AND SERVICES" for additional information on reduction of
the minimums). The Funds reserve the right to reject any purchase.
PURCHASES BY MAIL
Investors are to make their check(s) payable to SM&R and send the check to the
address indicated above. Please note that third party checks will not be
accepted to open a new account, except for IRA Rollover checks that are properly
endorsed. Investors making subsequent investments by mail must indicate their
name, the account number and the name of the Fund(s) being purchased. The
investor can use the remittance slip attached to the confirmation statement.
PURCHASES BY WIRE
To ensure proper crediting of a wire investment, an investor must have an
executed Account Application (including the Special Investor Services section),
and Suitability Form on file with the transfer agent. The investor may then wire
his investment by providing the following instructions to his bank:
The Moody National Bank of Galveston
ABA #113100091
Securities Management and Research, Inc.
#035 868 9
Name of Fund (eg. American National Growth Fund)
Fund Account Number (number appears on your confirmation statement)
Investor's Name (eg. Mary Smith, IRA)
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.
PURCHASES BY EXCHANGE
Call Investor Services if you have established telephone exchange privileges
on your account. See SPECIAL PLANS and SERVICES "Exchange Privilege" for
procedures and additional information
28
<PAGE>
relating to telephone exchanges. For limitations on exchanges refer to
"Excessive Trading" also under SPECIAL PLANS and SERVICES.
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 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 that 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 holidays are Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, 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 and if New Years Day is a Sunday, the
following Monday will be a business holiday. For calendar year 1998,
Independence Day will be observed on July 3, 1998.
DETERMINATION OF OFFERING PRICE
The offering price of each Fund's shares is equal to the net asset value of
such shares plus a sales charge computed at the rates set forth in the
applicable tables below. 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 often than once daily as provided in the Funds Group
current prospectus.
29
<PAGE>
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>
- ------------------------------
*In connection with purchases of $500,000 or more, SM&R may pay its
representatives and broker-dealers 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 representatives and broker-dealers with
accounts in the aggregate totaling $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 as
well as the Education IRA.
<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 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 representatives and broker-dealers with
accounts in the aggregate totaling $1 million or more.
30
<PAGE>
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 AND SERVICES
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. A shareholder considering any of the plans or services
described below should consult a tax advisor before beginning a plan.
ELECTRONIC TRANSFERS (ACH)--The electronic transfer option allows you to move
money between your Fund account(s) and your bank, savings and loan, or credit
union account using the Automated Clearing House (ACH) network. To arrange for
electronic transfers, complete the Special Investor Services section of the
Account Application at the time you open your account and specify the type of
service or services desired. Attach a voided, preprinted check or deposit slip
from your checking, savings and loan or credit union account. PASSBOOK SAVINGS
ACCOUNTS ARE NOT ELIGIBLE FOR THE ELECTRONIC TRANSFER OPTION. ADDITIONALLY, YOUR
BANK MUST BE A MEMBER OF THE AUTOMATED CLEARING HOUSE (ACH) NETWORK FOR YOU TO
TAKE ADVANTAGE OF THIS SERVICE. You will receive a confirmation verifying
initialization of the electronic transfer option and may begin conducting
transactions in your account(s) under this option approximately 20 calendar days
after receipt of the verification notice from SM&R. If this option is elected
after your account is established, it may be necessary for you to obtain a
signature guarantee for all individuals named on the account(s) desiring this
service.
TELEPHONE SERVICES--You can take advantage of this service by completing the
appropriate sections of the Account Application--Special Investor Services when
opening your account. Through this service, you will be able to purchase by ACH,
redeem and exchange shares on those accounts for which you have an executed
Account Application--Special Investor Services section on file and have received
verification from SM&R that the service has been initialized as explained under
Electronic Transfers above. If this option is elected after your account is
established, it may be necessary for you to obtain a signature guarantee for all
individuals named on the account(s) desiring this service. PLEASE NOTE THAT THE
TELEPHONE REDEMPTION OPTION IS NOT AVAILABLE TO RETIREMENT PLANS.
The Funds have implemented the following security procedures intended to
protect your account from losses resulting from unauthorized or fraudulent
telephone instructions. The caller will be required to know (i) the name of the
Fund or Funds; (ii) all digits of the account number; (iii) the exact name and
address used in the registration(s); and (iv) the Social Security or Employer
Identification Number listed on the account(s). Additionally, all telephone
transactions will be recorded for your protection.
Neither the Funds nor SM&R will be responsible for the authenticity of
transaction instructions received by telephone which comply with the current
security procedures and other requirements. SM&R believes that such security
procedures and other requirements are reasonable and, if followed, you should
bear the risk of any losses resulting from unauthorized or fraudulent telephone
transactions on your account(s).
AUTOMATIC INVESTMENT PLAN--Through this plan, a specified amount is
electronically transferred (via ACH) from your bank account and invested
monthly, bi-monthly, quarterly or annually into the designated Fund(s) at the
applicable offering price determined on the date of the electronic transfer.
DISCOUNTS THROUGH A RIGHT OF ACCUMULATION--If you already own shares of any of
the American National Funds Group, the American National Government Income Fund
Series, and/or the American National
31
<PAGE>
Tax Free Fund Series (collectively these Funds and Series shall hereinafter be
referred to as the "Group"), you may be able to receive a discount when you buy
additional shares. The offering value of the shares you already own may be
"accumulated"--i.e. combined together with the offering value of the new shares
you plan to buy--to achieve quantities eligible for discount. See "SPECIAL
PURCHASE PLANS" in the Statement of Additional Information for further
information about certain rules that apply when taking advantage of the right of
accumulation.
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 $20 for each individual investing under a single
payroll deduction plan. Any such plan may be terminated by SM&R or the
Shareholder at any time upon sixty (60) days written notice.
PURCHASES AT NET ASSET VALUE--Shares of the Group may be sold without a sales
charge to: (a) present and retired directors, officers and full-time employees
of the Group; (b) present and retired directors, officers, registered
representatives and full-time employees of SM&R and their spouses; (c) present
and retired officers, directors, insurance agents and full-time employees and
their spouses of American National and its subsidiaries and its "affiliated
persons", as defined in the Investment Company Act of 1940, and of any
corporation or partnership for which any of American National's present
directors serve as a director or partner, and their spouses; (d) present and
retired partners and full-time employees of legal counsel to SM&R and officers
and directors of any professional corporations which are partners of such legal
counsel and their spouses; (e) any child, step-child, grandchild, parent,
grandparent, brother or sister of any person named in (a), (b), (c) or (d) above
and their spouses; (f) any trust, pension, profit-sharing, IRA or other benefit
plan for any of such persons mentioned in (a), (b), (c), (d), or (e) above; (g)
custodial accounts for minor children of such persons mentioned in (a), (b),
(c), (d), or (e) pursuant to the Uniform Gifts to Minors or Uniform Transfers to
Minors Acts; (h) persons who have received a distribution from a pension
profit-sharing or other benefit plan to the extent such distribution represents
the proceeds of a redemption of shares of any fund in the Group; (i) persons
receiving refunded amounts through CA$HBACK From ANPAC-Registered Trademark- to
the extent the proceeds represent the amount of the refund; (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; (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 which
have entered into an NAV Agreement with SM&R.
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<PAGE>
Neither the Funds nor SM&R are responsible for determining whether or not a
prospective investor qualifies under any of the above categories for purchases
without a sales charge. A prospective investor must make this determination and
submit a written request to SM&R to make such purchases without a sales charge.
WEALTH ACCUMULATION ACCOUNT--Shareholders having account balances of at least
$2,500 in the SM&R Capital Funds Inc.--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 Group may be made by exchanges from the
shareholder's Primary Series Wealth Accumulation Account. Purchases of the other
funds must be at least $50 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 ten (10) business 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, to exchange shares, and
to redeem shares in the Primary Series and any of the Funds in the Group, are
not affected by a shareholder's participation in a Wealth Accumulation Account.
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 Account.
EXCHANGE PRIVILEGE--SM&R desires to make it convenient for all shareholders to
make exchanges without the payment of an exchange fee. However, some members of
the American National Funds Group and some Series of the Capital Funds have no
sales charge and/or variable sales charges which complicates the exchange
process. In an effort to simplify the procedure, but at the same time
consistently treat all investors the same, the following rules and procedures
have been adopted.
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 American National Funds Group
and the Capital Funds are registered and the exchange may be legally made. The
net asset value privilege applies only to shares exchanged from the Primary
Series through re-exchange and reinvestment of certain Primary Series shares as
described below.
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.
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"). The
RE-EXCHANGE privilege may not be used to avoid payment of a differential in
sales charge between the members of a group.
A telephone exchange request or a written request for exchange of shares of
the American National Funds Group or the Capital Funds is permitted only
33
<PAGE>
in the following circumstances: (a) the exchange must be made between accounts
having identical registrations and addresses; (b) the shares of the fund
acquired through exchange must be qualified for sale in the state in which the
shareholder resides; (c) the dollar amount of the exchange must be at least
equal to the minimum investment applicable to the shares of the fund acquired
through such exchange; (d) full payment for the shares being exchanged must have
been received by SM&R; (e) the account from which shares have been exchanged
must be coded as having a certified taxpayer identification number on file or,
in the alternative, an appropriate Internal Revenue Service Form W-8
(certificate of foreign status) or Form W-9 (certifying exempt status); (f)
newly acquired shares (through either an initial or subsequent investment) are
held in an account for at least ten (10) business days, and all other shares are
held in an account for at least one business day, prior to the exchange; (g)
certificates representing shares must be returned before such shares can be
exchanged; and (h) a prospectus for the shares being received in the exchange
must have been obtained.
The exchange privilege is not an option or right to purchase shares but is
permitted under the respective policies of the participating funds and may be
modified or discontinued by any of the participating funds or by SM&R at any
time. ANY GAIN OR LOSS REALIZED ON AN EXCHANGE OR RE-EXCHANGE MAY HAVE TAX
CONSEQUENCES, THEREFORE YOU SHOULD CONSULT YOUR TAX ADVISOR FOR INFORMATION ON
THE TAX TREATMENT OF EXCHANGES.
EXCESSIVE TRADING--Frequent trades, involving either substantial Fund assets or
a substantial portion of your account or accounts controlled by you, can disrupt
management of the Fund and raise the Fund's expenses. We define "excessive
trading" as exceeding one purchase and sale involving the same Fund within any
120-day period.
For example, you are in Fund A. You can move substantial assets from Fund A to
Fund B and, within the next 120 days, sell your shares in Fund B to return to
Fund A or move to Fund C. If you exceed the number of trades described above,
you may be barred indefinitely from further transactions of the participating
funds.
There are two types of transactions exempted from the excessive trading
guidelines. They are, redemptions that are not part of exchanges and systematic
purchases or redemptions.
RETIREMENT PLANS
An account may be established in Individual Retirement Accounts (IRA), which
includes Traditional, Roth, Education, and SIMPLE IRAs as well as Simplified
Employee Pension Plans (SEP IRAs). Additional retirement plans include 403(b)(7)
(TSA) Custodial Accounts 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. SM&R acts as
trustee or custodian for IRAs, SEPs and TSAs for the Funds. An annual custodial
fee of $7.50 per account will be charged for any part of a calendar year in
which an investor has any type of IRA, SEP or TSA accounts 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 at
net asset value in additional shares unless SM&R is instructed otherwise in
34
<PAGE>
writing. Distributions not reinvested are paid by check or transmitted to your
bank account through an ACH transaction, if elected. If the Postal Service
cannot deliver your check, or if your check remains uncashed for six months, the
Funds reserve the right to reinvest your distribution check in your account at
the net asset value on the business day of the reinvestment and to reinvest all
future distributions in shares of the Funds. 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 Internal Revenue Code.
Each Fund intends to distribute all of its net investment 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.
35
<PAGE>
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 Investor
Services 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. A wire
fee in the amount of $8.00 will be charged to the investor for redemptions by
wire under $5,000.
If the shares being redeemed were purchased by wire, certified check, money
order, or other immediately available funds, redemption proceeds will be mailed
no later than the seventh calendar day following receipt. For shares purchased
by personal check or ACH transfer, SM&R will process your redemption but will
generally delay sending you the proceeds for up to ten (10) business days to
allow the check or transfer to clear.
TELEPHONE REDEMPTIONS--You may request redemptions by telephone if you have
completed the Special Investor Services section of the Account Application and
requested this option. This redemption feature can only be used if: (a) the
redemption proceeds are to be mailed to the address of record or wired to the
pre-authorized bank account indicated on the Special Investor Services section
of the Account Application; (b) there has been no change of address of record or
pre-authorized bank account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the security procedures discussed
under the EXCHANGE PRIVILEGE have been met; and (e) the proceeds of the
redemption do not exceed $25,000.
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 on or about the 20th of the applicable month. Shareholders
maintaining a Withdrawal Account may elect to have the withdrawal proceeds
automatically deposited in their pre-authorized bank account via an ACH
transaction. This is accomplished by completing the Special Investor Services
section of the Account Application and returning it to SM&R. Refer to SPECIAL
PURCHASE PLANS and SERVICES--Electronic Transfers for additional information.
The Funds and SM&R 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 the Primary Series and any of the funds in the Group 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.
36
<PAGE>
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 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 (60) days' to make
an additional investment to increase the value of your account above the
required minimum.
RIGHTS RESERVED BY THE FUNDS--The Funds, acting through their transfer agent,
reserve the right to
37
<PAGE>
waive or lower investment minimums; to accept initial purchases by telephone
from a registered representative; to refuse any purchase order; to cancel or
rescind any purchase or exchange at any time prior to receipt by the shareholder
of written confirmation or, if later, within five (5) business days of the
transaction; to freeze an account and suspend account services when notice has
been received of a dispute involving account owners or other parties or there is
reason to believe a fraudulent transaction may occur; to restrict or refuse the
use of faxed redemptions where there is a question as to the validity of the
request or proper documents have not been received; to otherwise modify the
conditions of purchase and any services at any time; or to act on instructions
not believed to be genuine.
38
<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
39
<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.
40
<PAGE>
PRE-AUTHORIZED CHECK PLAN AUTHORIZATION
I hereby authorize _____________________________________________________________
Name of bank Branch
of ____________________________________________________________________ to honor
City State
ABA Routing # _________________________ Bank account # _________________________
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.
______________________________________ ______________________________________
Depositor's Name (Please print) Signature (exactly as appearing on
bank records)
<TABLE>
<CAPTION>
<S> <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. 4/97
41
<PAGE>
Securities Management & Research, Inc.
One Moody Plaza
Galveston, TX 77550
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 1
HOUSTON, TEXAS
PROSPECTUS
[American National Logo]
AMERICAN NATIONAL
GROWTH FUND
AMERICAN NATIONAL
INCOME FUND
TRIFLEX FUND
APRIL 30, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated APRIL 30, 1998
- -------------------------------------------------------------------------------
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 30, 1998. 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, ages, 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), 82, Director
of the Fund; Retired attorney, Clifford, Clifford & Olson ; 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 BELAIRE DRIVE, OKLAHOMA CITY, OKLAHOMA), 83,
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), 69,
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), 54, President
and Director of the Fund; Director, 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, Vice President, Garden State Life
Insurance Company; life, health and accident insurance companies in the
American National Family of Companies; Director and President, ANREM
Corporation; Director and President, ANTAC Corporation; Director,
Comprehensive Investment Services; Vice President, American National
Property and Casualty; Vice President, American National General
Insurance Company; Vice President, Pacific Property and Casualty, Inc.
(1)IRA W. PAINTON, C.L.U. (12004 DAHOON DRIVE, OKLAHOMA CITY, OKLAHOMA), 80,
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), 50,
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 (514 POPLAR AVE., PHILADELPHIA, MISSISSIPPI), 59, Director of
the Fund; Former Director, 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), 34, Vice
President and Portfolio Manager for the Triflex Fund, Inc.; Vice President,
Portfolio Manager of the Balanced Portfolio; Co-Manager of the American
National Income Fund, Inc. and the American National Investment Accounts,
Inc.--Managed Portfolio; Assistant Vice President of Investments for
American National; Vice President, Comprehensive Investment Services;
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), 52, 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), 43, 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.;
Treasurer, Comprehensive Investment Services; Senior Manager, KPMG Peat
Marwick, July 1980 to April 1992.
TERESA E. AXELSON (ONE MOODY PLAZA, GALVESTON, TEXAS), 50, 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, 1997, the Fund paid
$22,722 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, 1997 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 $3,533 $10,600
Paul D. Cummings $3,533 $10,600
Jack T. Currie $2,833 $8,499
Michael W. McCroskey -- --
Ira W. Painton $4,667 $14,000
Donald P. Stevens $3,533 $10,600
Steven H. Stubbs $3,333 $10,000
</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 April 1, 1998, 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 14.67% and SM&R owned approximately 8.62%, 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 .53% of
the outstanding shares of the Triflex Fund as of April 1, 1998.
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 stock 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, Director, Senior Vice President, Chief
Investment Officer and a member of the investment and executive committees of
SM&R, Vice President, Portfolio Manager of the American National Investment
Accounts, Inc. - Growth Portfolio and the American National Growth Fund, Inc.,
Co-Manager of the American National Income Fund, Inc. and the American
National Investment Accounts, Inc.--Managed 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, 1995, 1996 and 1997, SM&R
received investment advisory fees from the Fund of $153,930, $167,921, and
$186,693, respectively. The net assets of the Fund were $25,838,072 as of
December 31, 1997.
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
August 21, 1997, 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, 1995, 1996, and 1997,
SM&R reimbursed $40,894, $29,344, and $24,234, 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, 1995, 1996, and 1997, 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 $51,310, $55,974
and $62,231, 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, 1995, 1996, and 1997, the
Fund paid brokerage fees amounting to $13,000, $11,000 and $33,000,
respectively, for transactions in portfolio securities. Portfolio turnover
rates for these periods were 16%, 24% and 28%, 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, through certain other authorized broker-dealers or directly from SM&R.
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 monthly confirmation will be sent to the
investor reflecting all activity during the month. 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, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, 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 and the preceding Friday will be a business holiday and if New
Years Day is a Sunday, the following Monday will be a business holiday. For
calendar year 1998, Independence Day will be observed on July 3, 1998.
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 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 in the
aggregate totaling $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, 1997:
NET ASSETS ($25,838,072) = Net Asset Value Per Share ($18.32)
------------------------
Shares outstanding (1,410,260)
To obtain the public offering price per share, the Fund's 5.75% sales
charge as of December 31, 1997 must be added to the net asset value obtained
above:
$18.32 = Public Offering Price Per Share ($19.44)
------
.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 as well as the Education IRA.
<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 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 representatives and broker-dealers
with accounts in the aggregate totaling $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 per
individual 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 or about the 20th, 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 August 21, 1997. 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. The sales charge allowance to broker-dealers ranges from a
maximum of 6.1% to a minimum of 2.6% of the net amount invested and from a
maximum of 4.75% 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
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 in the aggregate totaling $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, 1995, 1996 and 1997 was
$33,172, $44,577 and $54,962, respectively. Of such amounts received during
such periods, SM&R retained approximately $6,000, $6,000 and $2,000,
respectively and $295, $390 and $353 was reallowed to dealers.
FINANCIAL STATEMENTS
The financial statements included as part of the Fund's Annual Report
dated December 31, 1997, filed with the Securities and Exchange Commission on
March 2, 1998, 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. Tait, Weller & Baker, 8 Penn Center,
Philadelphia, Pennsylvania 19103, 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
January 1, 1988 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 the first year, or;
2. the redeemable value of the $10,000 investment as of December 31 of
the preceding year for years two through ten.
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
year divided by:
1. the $10,000 hypothetical investment for the first year, or;
2. the redeemable value of the $10,000 investment as of December 31 of
the preceding year for years two through ten.
The appreciation percentage represents the change in the net asset value
during the year less the income dividends paid during the period divided by:
1. the $10,000 hypothetical investment for the first year; or
2. the redeemable value of the $10,000 investment as of December 31 of
the preceding year for years two through ten.
The total return on the net amount invested reflects the hypothetical
return that would equate a January 1, 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>
ANNUAL REPORT
American National Funds Group
- American National Growth Fund
- American National Income Fund
- Triflex Fund
December 31, 1997
This report and the financial statements contained herein are submitted for the
general information of our shareholders. The report is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
PRESIDENT'S MESSAGE
Dear Shareholders:
1997 was the third in a series of truly exceptional years for equity mutual
fund investors. At no time in history have markets returned 20%+ for three years
in a row. It is also worth noting that over the same time period, fixed income
investors have been handsomely rewarded as well. To you who have chosen to
participate with us, I say thank you and congratulations.
On the heels of such strong market performance, however, we must temper our
expectations for returns over the next several years. Remember that the
long-term average return for common stocks has been about 11% per year.
Therefore, we would expect to see more moderate returns going forward.
Still, however, we are very encouraged by the domestic and international
economic, political, social and demographic environments in which we live today.
We continue to enjoy an expanding worldwide middle class, and the roots of
democracy and capitalism are running deeper than ever. Also, the nations of the
world are trading with one another much more than they are fighting with one
another. Further, we are still enjoying a worldwide phenomenon of low interest
rates and low inflation, and the level of interest in investing, plus the money
available to invest, have never been higher.
But, are there negatives? Of course, there always are. Southeast Asia, whose
spectacular growth has dazzled the world throughout much of this decade, has run
into growing pains, which will have repercussions on the earnings of companies
with local exposure. Profit growth across the board by U.S. corporations, which
has pleasantly surprised observers for most of this decade, will most likely
slow, perhaps dramatically, in 1998. So there are certainly reasons to keep our
feet on the ground.
We are also encouraged by the time-tested nature of SM&R's investment
management philosophy. I believe in it, I believe it has served us very well
since it was put in place, and I believe the investing environment of the near
future may be ideal for our philosophy. Let me explain...at SM&R we focus on a
disciplined, bottom-up investment strategy. That means we buy and sell stocks
the same way every time, and when we search for stocks to buy, we focus on
simply identifying superior companies, whatever sector of the economy they may
be located in.
We tend to take a "value" approach to managing money. Basically, our aim is,
with the aid of sophisticated and disciplined investment tools, to roll up our
sleeves and scour the market for companies that are strong--often industry
leaders--that for some reason have been beaten down, unnecessarily maligned, or
are out of favor. Maybe the company has missed an earnings target, experienced a
short delay in getting a new product to the market or happens to be part of an
out-of-favor industry. Any number of reasons can derail the price of a stock for
a relatively short period of time. But, if we can locate out of favor companies
that are experiencing a positive change to their operation, buy them at a
depressed price and be patient, we believe that we will be amply rewarded during
positive markets and most likely cushioned if stock prices decline. We are
confident that this approach can add tremendous value over time, much as it has
since we implemented it over four years ago.
It has been widely reported over the past three years that simply throwing
money at our biggest and best brand name growth stocks, regardless of their
relative valuation, has led to the most investing success, and that is true.
Rarely in our history
<PAGE>
have the 100 largest stocks in the S&P 500 so far outperformed the remaining
400. While this kind of environment has not been ideal for those approaches
seeking to pay discounted prices for strong future corporate earnings, we are
pleased to have offered our investors strong investment returns.
For the record, we would like to remind you that in September of 1993, we
strengthened our investment staff and sharpened our investment processes with
the introduction of two new stock selection disciplines. We are happy with the
results since 9/30/93, and have displayed them in the charts that follow.
We take the responsibility of managing your money very seriously. We will
work hard to earn your continued trust. Sincerely,
/s/ Michael W. McCroskey
Michael W. McCroskey
President
2
<PAGE>
QUARTERLY COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN AMERICAN
NATIONAL GROWTH FUND AT NET ASSET VALUE AND LIPPER ANALYTICAL GROWTH FUND
AVERAGE (LAST SEVENTEEN QUARTERS UNDER CURRENT DISCIPLINES)
[GRAPH]
<TABLE>
<CAPTION>
9/30/93 12/31/93 3/31/94 6/30/94 9/30/94 12/31/94 3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUND 10000 10,804 10,622 10,636 11,318 11,342 12230.00 12959 13646 14200 14782 15320
INDEX 10000 10,226 9,875 9,617 10,136 10,001 10739.08 11741 12748.4 13049.3 13750 14360.52
<CAPTION>
9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
<S> <C> <C> <C> <C> <C> <C>
FUND 15840 16706 16739 18855 21093 20421
INDEX 14777 15634 15433.93 17875.6 19773.96 19542.6
</TABLE>
American National Growth Fund performance figures are historical and reflect
reinvestment of all dividends and capital gains distributions, changes in net
asset value and does not consider the effect of the Funds' 5.75% maximum sales
charge. All performance figures are as of December 31 for the applicable year.
The SEC Average Annual Return does reflect the effect of the Funds maximum sales
charge.
3
<PAGE>
QUARTERLY COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN AMERICAN
NATIONAL INCOME FUND AT NET ASSET VALUE AND LIPPER ANALYTICAL EQUITY INCOME FUND
AVERAGE (LAST SEVENTEEN QUARTERS UNDER CURRENT DISCIPLINES)
[GRAPH]
<TABLE>
<CAPTION>
9/30/93 12/31/93 3/31/94 6/30/94 9/30/94 12/31/94 3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUND 10000 10,402 10,029 10,081 10,433 10,339 11180 11919 12786 13349 14090 14393
INDEX 10000 10,126 9,752 9,764 10,145 9,885 10615.66 11317 12136.7 12827.3 13408.4 13787.84
<CAPTION>
9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
<S> <C> <C> <C> <C> <C> <C>
FUND 14643 15547 15566 17234 18996 19080
INDEX 14154.6 15209.1 15464.63 17451.8 18940.47 19389.36
</TABLE>
American National Income Fund performance figures are historical and reflect
reinvestment of all dividends and capital gains distributions, changes in net
asset value and does not consider the effect of the Funds' 5.75% maximum sales
charge. All performance figures are as of December 31 for the applicable year.
The SEC Average Annual Return does reflect the effect of the Funds maximum sales
charge.
4
<PAGE>
QUARTERLY COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN TRIFLEX FUND AT
NET ASSET VALUE, LEHMAN INTERMEDIATE GOVERNMENT/CORP INDEX, AND LIPPER
ANALYTICAL BALANCED FUND AVERAGE (LAST SEVENTEEN QUARTERS UNDER CURRENT
DISCIPLINES)
[GRAPH]
<TABLE>
<CAPTION>
9/30/93 12/31/93 3/31/94 6/30/94 9/30/94 12/31/94 3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUND 10000 10,246 10,038 10,059 10,429 10,399 11054 11750 12232 12717 13080 13267
INDEX 10000 10,119 9,791 9,679 9,972 9,862 10462.72 11206 11825.2 12325.4 12642.2 12944.36
LEHMAN 10000 10,020 9,817 9,758 9,838 9,827 10257.3 10770 10949 11334.4 11240.3 11311.1
<CAPTION>
9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
<S> <C> <C> <C> <C> <C> <C>
FUND 13574 14226 14227 15552 16583 16709
INDEX 13296.4 14006.5 14006.48 15433.7 16466.26 16657.26
LEHMAN 11512.4 11794.5 11782.69 12130.3 12457.8 12724.4
</TABLE>
Triflex Fund performance figures are historical and reflect reinvestment of all
dividends and capital gains distributions, changes in net asset value and does
not consider the effect of the Funds' 5.75% maximum sales charge. All
performance figures are as of December 31 for the applicable year. The SEC
Average Annual Return does reflect the effect of the Funds maximum sales charge.
5
<PAGE>
AMERICAN NATIONAL FUNDS GROUP One Moody Plaza, Galveston, Texas 77550
- --------------------------------------------------------------------------------
DIRECTORS
Ralph S. Clifford
Paul D. Cummings
Jack T. Currie
Michael W. McCroskey
Ira W. Painton
Donald P. Stevens
Steven H. Stubbs
OFFICERS
Michael W. McCroskey, President
Gordon D. Dixon, Vice President and
Portfolio Manager
William R. Berger, Vice President and
Portfolio Manager
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
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
Tait, Weller & Baker
8 Penn Center
Philadelphia, Pennsylvania 19103
6
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
AMERICAN NATIONAL GROWTH FUND
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
AUTO & TRUCK MANUFACTURERS--
1.45%
Chrysler Corporation 13,700 $ 482,069
Ford Motor Company 24,800 1,207,450
General Motors Corporation 14,700 891,187
-----------
2,580,706
AUTO PARTS MANUFACTURERS-- 0.56%
Modine Manufacturing Company 29,000 989,625
BANKS--9.12%
Banc One Corporation 35,000 1,900,938
Comerica, Incorporated 30,000 2,707,500
First Union Corporation 68,000 3,485,000
Morgan (J.P.) & Company 20,000 2,257,500
NationsBank Corporation 40,000 2,432,500
Norwest Corporation 90,000 3,476,250
-----------
16,259,688
BEVERAGES--2.03%
Anheuser-Busch Companies,
Incorporated 37,000 1,628,000
Coca-Cola Company 30,000 1,998,750
-----------
3,626,750
BROADCASTING--0.81%
US West Media Group,
Incorporated* 50,000 1,443,750
BUILDING SUPPLIES--0.84%
Giant Cement Holding,
Incorporated* 65,000 1,503,125
CHEMICALS--3.81%
Cabot Corporation 30,000 828,750
Dexter Corporation 25,000 1,079,688
Du Pont (E.I.) de Nemours &
Company 26,000 1,561,625
Hercules, Incorporated 30,600 1,531,912
Praxair, Incorporated 40,000 1,800,000
-----------
6,801,975
COMMUNICATION EQUIPMENT--0.63%
Newbridge Networks Corporation* 32,000 1,116,000
COMPUTER RELATED--9.10%
COMPAQ Computer Corporation 87,500 4,938,281
Hewlett-Packard Company 74,000 4,625,000
Sequent Computer Systems,
Incorporated* 80,000 1,600,000
Silicon Graphics, Incorporated* 48,000 597,000
Stratus Computer, Incorporated* 55,000 2,079,688
Sun Microsystems, Incorporated* 60,000 2,392,500
-----------
16,232,469
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE--5.26%
BMC Software, Incorporated* 40,000 $ 2,625,000
Cabletron Systems, Incorporated* 35,000 525,000
Electronic Data Systems
Corporation 21,600 949,050
First Data Corporation 91,000 2,661,750
MAPICS, Incorporated* 80,000 870,000
Synopsys, Incorporated* 49,000 1,751,750
-----------
9,382,550
CONSTRUCTION--0.63%
Fluor Corporation 30,000 1,121,250
COSMETICS & TOILETRIES--2.69%
Procter & Gamble Company 60,000 4,788,750
DIVERSIFIED--0.90%
Mark IV Industries, Incorporated 73,395 1,605,516
DRUGS--1.19%
Merck & Company, Incorporated 20,000 2,125,000
ELECTRIC POWER--1.01%
OGE Energy Corporation 33,000 1,804,688
ELECTRICAL EQUIPMENT--0.89%
York International Corporation 40,000 1,582,500
ELECTRONICS/INSTRUMENTS--2.93%
Analog Devices, Incorporated* 30,000 830,625
Avnet, Incorporated 40,000 2,640,000
Motorola, Incorporated 30,000 1,711,875
Raytheon Company (Class A) 937 46,206
-----------
5,228,706
ENVIRONMENTAL--2.00%
Waste Management, Incorporated 80,000 2,200,000
Wheelabrator Technologies,
Incorporated 85,000 1,365,312
-----------
3,565,312
EXPLORATION & DRILLING--1.31%
Global Marine, Incorporated* 32,000 784,000
Tidewater, Incorporated 17,000 937,125
Union Pacific Resources Group,
Incorporated 25,408 616,144
-----------
2,337,269
FINANCIAL SERVICES--2.73%
American General Corporation 20,000 1,081,250
Morgan Stanley, Dean Witter,
Discover and Company 30,000 1,773,750
Reliance Group Holdings,
Incorporated 142,000 2,005,750
-----------
4,860,750
</TABLE>
7
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
AMERICAN NATIONAL GROWTH FUND, CONTINUED
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
FOOD PRODUCERS--3.35%
Hudson Foods, Incorporated (Class
A) 50,000 $ 1,028,125
IBP, Incorporated 58,000 1,214,375
McCormick & Company, Incorporated 58,000 1,624,000
Universal Foods Corporation 50,000 2,112,500
-----------
5,979,000
FOOD RETAILERS--1.06%
Albertson's, Incorporated 40,000 1,895,000
FURNITURE & APPLIANCES--0.46%
Whirlpool Corporation 15,000 825,000
INSURANCE COMPANIES--1.07%
CIGNA Corporation 11,000 1,903,687
MACHINERY & EQUIPMENT--2.62%
Flowserve Corporation 47,000 1,313,062
General Signal Corporation 45,000 1,898,437
Pall Corporation 71,000 1,468,812
-----------
4,680,311
MEDICAL PRODUCTS & SUPPLIES--
6.27%
Abbott Laboratories 50,000 3,278,125
Allergan, Incorporated 41,000 1,376,063
Beckman Instruments, Incorporated 18,000 720,000
Bergen Brunswig Corporation
(Class A) 41,250 1,737,656
Biomet, Incorporated 82,000 2,101,250
Johnson & Johnson 30,000 1,976,250
-----------
11,189,344
MEDICAL SERVICES--3.42%
Aetna, Incorporated 23,000 1,622,938
MedPartners, Incorporated * 50,000 1,118,750
PacifiCare Health Systems,
Incorporated (Class B)* 30,000 1,571,250
United Healthcare Corporation 36,000 1,788,750
-----------
6,101,688
METALS & MINING--0.73%
Amax Gold Incorporated* 300,000 693,750
Cyprus Amax Minerals Company 40,000 615,000
-----------
1,308,750
NATURAL GAS--1.07%
Enron Corporation 46,000 1,911,875
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
OIL DOMESTIC--5.70%
Amoco Corporation 25,000 $ 2,128,125
Kerr-McGee Corporation 13,000 823,063
Murphy Oil Corporation 17,000 921,187
Occidental Petroleum Corporation 54,000 1,582,875
Union Texas Petroleum Holdings,
Incorporated 40,000 832,500
Unocal Corporation 100,000 3,881,250
-----------
10,169,000
OIL INTERNATIONAL--3.79%
Chevron Corporation 42,000 3,234,000
Societe Nationale Elf Aquitaine
ADR 60,000 3,517,500
-----------
6,751,500
PAPER/FOREST PRODUCTS--0.93%
Caraustar Industries,
Incorporated 29,000 993,250
Louisiana-Pacific Corporation 35,000 665,000
-----------
1,658,250
PHOTOGRAPHY/IMAGING--0.99%
Xerox Corporation 24,000 1,771,500
PRINTING/PUBLISHING--0.88%
Banta Corporation 58,000 1,566,000
RECREATION--0.97%
Brunswick Corporation 57,000 1,727,812
RESTAURANTS--0.33%
Applebee's International,
Incorporated 33,000 596,063
RETAIL DISCOUNT--1.79%
Toys "R" Us, Incorporated* 26,000 817,375
Wal-Mart Stores, Incorporated 60,000 2,366,250
-----------
3,183,625
RETAIL SPECIALTY--0.49%
Tiffany & Company 24,000 865,500
STEEL--0.07%
J&L Specialty Steel, Incorporated 12,000 120,750
TRUCKING & SHIPPING--0.56%
USFreightways Corporation 31,000 1,007,500
UTILITY, TELEPHONE--2.86%
Alltel Corporation 47,000 1,929,937
MasTec, Incorporated* 40,000 915,000
US West Communications Group 50,000 2,256,250
-----------
5,101,187
-----------
TOTAL COMMON STOCK--89.30%
(COST $115,523,327) 159,269,721
-----------
</TABLE>
8
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
AMERICAN NATIONAL GROWTH FUND, CONTINUED
<TABLE>
<CAPTION>
FACE
COMMERCIAL PAPER AMOUNT VALUE
<S> <C> <C>
AUTO RELATED--1.38%
Hertz Corporation, 6.00%,
01/20/98 $2,464,000 $ 2,456,197
CONTAINERS--0.98%
Crown Cork & Seal Company,
Incorporated, 5.85%, 01/30/98 1,750,000 1,741,753
DIVERSIFIED--0.20%
Growmark, Incorporated, 6.35%,
01/12/98 365,000 364,292
FINANCIAL SERVICES--0.83%
Case Credit Corporation, 7.25%,
01/08/98 1,484,000 1,481,908
NATURAL GAS--1.04%
Sonat, Incorporated, 6.20%,
01/14/98 1,860,000 1,855,836
RETAIL SPECIALTY--0.84%
The Limited, Incorporated, 6.15%,
01/02/98 1,500,000 1,499,744
<CAPTION>
FACE
COMMERCIAL PAPER AMOUNT VALUE
<S> <C> <C>
UTILITY, ELECTRIC--5.33%
Illinois Power Company, 6.15%,
01/06/98 $1,894,000 $ 1,892,382
Orange & Rockland Utilities,
Incorporated, 6.60%, 01/07/98 1,446,000 1,444,409
Pennsylvania Power & Light
Company, 6.60%, 01/09/98 1,645,000 1,642,587
Pennsylvania Power & Light
Company, 6.50%, 01/16/98 1,634,000 1,629,575
Pennsylvania Power & Light Energy
Trust, 6.08%, 01/05/98 2,896,000 2,894,044
-----------
9,502,997
-----------
TOTAL COMMERCIAL PAPER--10.60%
(COST $18,902,727) 18,902,727
-----------
TOTAL INVESTMENTS--99.90%
(COST $134,426,054) 178,172,448
CASH AND OTHER ASSETS, LESS
LIABILITIES--0.10% 171,640
-----------
NET ASSETS--100.00% $178,344,088
-----------
-----------
ABBREVIATIONS
ADR -- American Depository Receipt
* -- Non-income producing securities
</TABLE>
See notes to financial statements.
9
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
AMERICAN NATIONAL INCOME FUND
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
APPAREL, TEXTILE--1.03%
Guilford Mills, Incorporated 75,000 $ 2,053,125
AUTO & TRUCK
MANUFACTURERS--4.13%
Ford Motor Company 133,881 6,518,331
General Motors Corporation 28,000 1,697,500
-----------
8,215,831
AUTO PARTS MANUFACTURERS-- 1.22%
Modine Manufacturing Company 71,000 2,422,875
BANKS--8.33%
Banc One Corporation 70,000 3,801,875
Comerica, Incorporated 23,000 2,075,750
First Union Corporation 33,400 1,711,750
Morgan (J.P.) & Company 9,500 1,072,313
NationsBank Corporation 60,000 3,648,750
Norwest Corp 110,000 4,248,750
-----------
16,559,188
BEVERAGES--0.91%
Anheuser-Busch Companies,
Incorporated 41,000 1,804,000
BUILDING CONSTRUCTION &
SUPPLIES--0.75%
Fluor Corporation 40,000 1,495,000
CHEMICALS--4.38%
Dexter Corporation 82,000 3,541,375
Du Pont (E.I.) de Nemours &
Company 26,600 1,597,663
Hercules, Incorporated 32,600 1,632,037
Praxair, Incorporated 43,000 1,935,000
-----------
8,706,075
COMPUTER RELATED--2.52%
Hewlett-Packard Company 80,000 5,000,000
COMPUTER SOFTWARE--0.99%
Electronic Data Systems
Corporation 45,000 1,977,188
DRUGS--3.75%
Schering-Plough Corporation 120,000 7,455,000
ELECTRIC POWER--2.08%
Baltimore Gas and Electric
Company 26,300 895,844
DTE Energy Company 65,000 2,254,687
OGE Energy Corporation 18,000 984,375
-----------
4,134,906
ELECTRICAL EQUIPMENT--0.86%
York International Corporation 43,000 1,701,188
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
ELECTRONICS--2.46%
Motorola, Incorporated 40,000 $ 2,282,500
Raytheon Company (Class A) 1,785 88,023
Raytheon Company (Class B) 50,000 2,525,000
-----------
4,895,523
ENVIRONMENTAL--0.69%
Waste Management, Incorporated 50,000 1,375,000
EXPLORATION & DRILLING--0.84%
Tidewater, Incorporated 19,000 1,047,375
Union Pacific Resources Group,
Incorporated 25,408 616,144
-----------
1,663,519
FINANCIAL SERVICES--6.01%
Beneficial Corporation 26,000 2,161,250
Morgan Stanley, Dean Witter,
Discover and Company 90,000 5,321,250
Omega Healthcare Investors,
Incorporated 60,000 2,317,500
Reliance Group Holdings,
Incorporated 152,000 2,147,000
-----------
11,947,000
FOODS PRODUCERS--2.05%
McCormick & Company, Incorporated 70,000 1,960,000
Universal Foods Corporation 49,800 2,104,050
-----------
4,064,050
FOODS RETAILERS--1.31%
Albertson's, Incorporated 55,000 2,605,625
FURNITURE/APPLIANCES--1.66%
Whirlpool Corporation 60,000 3,300,000
INSURANCE--1.06%
CIGNA Corporation 12,200 2,111,363
MACHINERY & EQUIPMENT--3.08%
Flowserve Corporation 51,000 1,424,813
Foster Wheeler Corporation 30,000 811,875
General Signal Corporation 60,000 2,531,250
Pall Corporation 65,000 1,344,687
-----------
6,112,625
MEDICAL PRODUCTS &
SUPPLIES--3.98%
Abbott Laboratories 65,000 4,261,563
Allergan, Incorporated 38,000 1,275,375
Bergen Brunswig Corporation
(Class A) 56,250 2,369,531
-----------
7,906,469
MEDICAL SERVICES--0.56%
Columbia/HCA Healthcare
Corporation 37,500 1,110,937
METALS & MINING--0.70%
Cyprus Amax Minerals Company 90,000 1,383,750
</TABLE>
10
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
AMERICAN NATIONAL INCOME FUND, CONTINUED
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
NATURAL GAS--1.03%
Enron Corporation 49,000 $ 2,036,562
OIL DOMESTIC--3.00%
Amoco Corporation 17,800 1,515,225
Kerr-McGee Corporation 27,200 1,722,100
Murphy Oil Corporation 16,100 872,419
Occidental Petroleum Corporation 63,400 1,858,412
-----------
5,968,156
OIL INTERNATIONAL--3.91%
Chevron Corporation 23,200 1,786,400
Exxon Corporation 31,000 1,896,812
Societe Nationale Elf Aquitaine
ADR 25,000 1,465,625
Texaco, Incorporated 48,000 2,610,000
-----------
7,758,837
PAPER/FOREST PRODUCTS--2.39%
Caraustar Industries,
Incorporated 30,000 1,027,500
Glatfelter (P.H.) Company 94,000 1,750,750
Weyerhaeuser Company 40,000 1,962,500
-----------
4,740,750
PRINTING & PUBLISHING--1.72%
Banta Corporation 63,000 1,701,000
Deluxe Corporation 50,000 1,725,000
-----------
3,426,000
REAL ESTATE/REITS--6.14%
CenterPoint Properties
Corporation 63,000 2,212,875
Crescent Real Estate Equities
Company 65,000 2,559,375
Health & Retirement Property
Trust 100,000 2,000,000
Hospitality Properties Trust 50,000 1,643,750
Liberty Trust Properties 75,000 2,142,188
National Health Investors,
Incorporated 39,000 1,633,125
-----------
12,191,313
RECREATION--0.96%
Brunswick Corporation 63,200 1,915,750
RESTAURANTS--0.33%
Applebee's International,
Incorporated 36,000 650,250
TELEPHONE UTILITY--3.77%
Alltel Corporation 51,000 2,094,187
GTE Corporation 60,000 3,135,000
US West Communications Group 50,000 2,256,250
-----------
7,485,437
TOBACCO--1.99%
RJR Nabisco Holdings Corporation 41,248 1,546,800
UST, Incorporated 65,000 2,400,937
-----------
3,947,737
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
TRANSPORT, TRUCKING &
SHIPPING--0.56%
USFreightways Corporation 34,000 $ 1,105,000
-----------
TOTAL COMMON STOCK--81.15%
(Cost $114,003,748) 161,226,029
-----------
<CAPTION>
COVERTIBLE PREFERRED STOCK
<S> <C> <C>
FINANCIAL SERVICES--0.75%
Security Capital Industrial Trust 47,000 1,498,125
INSURANCE COMPANIES--0.73%
St Paul Capital LLC 20,000 1,440,000
OIL DOMESTIC--1.73%
Unocal Corporation 61,000 3,446,500
-----------
TOTAL CONVERTIBLE PREFERRED STOCK--3.21%
(Cost $5,414,752) 6,384,625
-----------
<CAPTION>
FACE
CORPORATE BONDS AMOUNT VALUE
<S> <C> <C>
MACHINERY/GENERAL INDUSTRIAL--
1.18%
Robbins & Meyers, Incorporated,
6.50%, 09/01/03 $1,500,000 2,351,250
Subordinated Convertible
Debentures
-----------
TOTAL CORPORATE BONDS--1.18%
(Cost $1,508,156) 2,351,250
-----------
COMMERCIAL PAPER
AUTO RELATED--2.03%
Hertz Corporation, 6.16%,
01/08/98 1,475,000 1,473,233
Hertz Corporation, 5.87%,
01/09/98 2,569,000 2,565,649
-----------
4,038,882
CONTAINERS--1.57%
Crown Cork & Seal Company,
Incorporated, 6.12%, 01/07/98 1,597,000 1,595,163
Crown Cork & Seal Company,
Incorporated, 6.10%, 01/08/98 122,000 121,856
Crown Cork & Seal Company,
Incorporated, 5.85%, 01/30/98 1,406,000 1,399,374
-----------
3,116,393
DIVERSIFIED--1.06%
Growmark, Incorporated, 6.35%,
01/12/98 610,000 608,817
Growmark, Incorporated, 6.05%,
01/20/98 1,500,000 1,495,210
-----------
2,104,027
</TABLE>
11
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
AMERICAN NATIONAL INCOME FUND, CONTINUED
<TABLE>
<CAPTION>
FACE
COMMERCIAL PAPER AMOUNT VALUE
ELECTRIC POWER--1.20%
<S> <C> <C>
Arizona Public Service, 6.45%,
01/13/98 $2,393,000 $ 2,387,855
FOODS--2.71%
ConAgra, Incorporated, 6.10%,
01/06/98 2,356,000 2,354,004
ConAgra, Incorporated, 6.07%,
01/07/98 2,493,000 2,490,478
ConAgra, Incorporated, 6.10%,
01/08/98 540,000 539,359
-----------
5,383,841
NATURAL GAS--2.58%
Penn Fuel Corporation, 7.00%,
01/13/98 989,000 986,693
Sonat, Incorporated, 6.30%,
01/12/98 2,284,000 2,279,603
Sonat, Incorporated, 6.20%,
01/14/98 1,863,000 1,858,829
-----------
5,125,125
RETAIL, SPECIALTY--1.32%
Rite Aid Corporation, 6.00%,
01/20/98 2,627,000 2,618,681
UTILITY, ELECTRIC--0.70%
Orange & Rockland Utilities,
Incorporated, 6.28%, 01/02/98 1,382,000 1,381,759
<CAPTION>
FACE
COMMERCIAL PAPER AMOUNT VALUE
<S> <C> <C>
UTILITY, TELEPHONE--1.17%
GTE Corporation, 6.05%, 01/05/98 $2,329,000 $ 2,327,434
-----------
TOTAL COMMERCIAL PAPER--14.34%
(Cost $28,483,997) 28,483,997
-----------
TOTAL INVESTMENTS--99.88%
(Cost $149,410,653) 198,445,901
CASH AND OTHER ASSETS, LESS
LIABILITIES--0.12% 241,013
-----------
NET ASSETS--100.00% $198,686,914
-----------
-----------
ABBREVIATIONS
ADR -- American Depository Receipt
REIT -- Real Estate Investment Trust
</TABLE>
See notes to financial statements.
12
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
TRIFLEX FUND
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
APPAREL/TEXTILES--0.54%
Guilford Mills, Incorporated 5,100 $ 139,613
AUTO & TRUCK MANUFACTURERS--
1.68%
Chrysler Corporation 2,600 91,487
Ford Motor Company 3,300 160,669
General Motors Corporation 3,000 181,875
-----------
434,031
AUTO PARTS MANUFACTURERS--0.36%
Modine Manufacturing Company 2,700 92,138
BANKS--5.43%
Banc One Corporation 3,100 168,369
Comerica, Incorporated 2,500 225,625
First Union Corporation 3,200 164,000
NationsBank Corporation 5,000 304,063
Norwest Corporation 14,000 540,750
-----------
1,402,807
BEVERAGES--0.51%
Anheuser-Busch Companies,
Incorporated 3,000 132,000
BROADCASTING--0.58%
US West Media Group,
Incorporated* 5,200 150,150
BUILDING SUPPLIES--0.76%
Giant Cement Holding,
Incorporated* 8,500 196,562
CHEMICALS--2.48%
Cabot Corporation 3,600 99,450
Dexter Corporation 2,300 99,331
Du Pont (E.I.) de Nemours &
Company 2,400 144,150
Hercules, Incorporated 2,800 140,175
Praxair, Incorporated 3,500 157,500
-----------
640,606
COMPUTER RELATED--1.39%
Sequent Computer Systems,
Incorporated* 6,200 124,000
Silicon Graphics, Incorporated* 4,600 57,212
Sun Microsystems, Incorporated* 4,500 179,438
-----------
360,650
COMPUTER SOFTWARE--1.59%
Electronic Data Systems
Corporation 2,300 101,056
First Data Corporation 5,300 155,025
Synopsys, Incorporated* 4,300 153,725
-----------
409,806
CONSTRUCTION--0.72%
Fluor Corporation 5,000 186,875
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
COSMETICS & TOILETRIES--2.35%
Procter & Gamble Company 7,600 $ 606,575
DIVERSIFIED--0.58%
Mark IV Industries, Incorporated 6,825 149,297
DRUGS--1.92%
Warner-Lambert Company 4,000 496,000
ELECTRICAL EQUIPMENT--0.53%
York International Corporation 3,500 138,469
ELECTRIC POWER--1.12%
Allegheny Power System,
Incorporated 2,100 68,250
DTE Energy Company 4,000 138,750
OGE Energy Corporation 1,500 82,031
-----------
289,031
ELECTRONICS/INSTRUMENTS--1.24%
Avnet, Incorporated 3,000 198,000
Motorola, Incorporated 2,000 114,125
Raytheon Company (Class A) 191 9,419
-----------
321,544
ENVIRONMENTAL--1.52%
Waste Management, Incorporated 9,000 247,500
Wheelabrator Technologies,
Incorporated 9,000 144,562
-----------
392,062
EXPLORATION & DRILLING--0.74%
Global Marine, Incorporated* 2,800 68,600
Tidewater, Incorporated 1,500 82,688
Union Pacific Resources Group,
Incorporated 1,693 41,055
-----------
192,343
FINANCIAL SERVICES--1.88%
American General Corporation 1,800 97,312
Morgan Stanley, Dean Witter,
Discover and Company 3,600 212,850
Reliance Group Holdings,
Incorporated 12,400 175,150
-----------
485,312
FOOD PRODUCERS--1.10%
IBP, Incorporated 5,500 115,156
Universal Foods Corporation 4,000 169,000
-----------
284,156
FOOD RETAILERS--0.57%
Albertson's, Incorporated 3,100 146,863
INSURANCE COMPANIES--0.67%
CIGNA Corporation 1,000 173,063
</TABLE>
13
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
TRIFLEX FUND, CONTINUED
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
MACHINERY & EQUIPMENT--2.03%
Flowserve Corporation 4,200 $ 117,337
Foster Wheeler Corporation 3,500 94,719
General Signal Corporation 4,200 177,188
Pall Corporation 6,500 134,469
-----------
523,713
MEDICAL PRODUCTS & SUPPLIES--
4.45%
Abbott Laboratories 3,000 196,688
Allergan, Incorporated 3,900 130,894
Beckman Instruments, Incorporated 1,700 68,000
Bergen Brunswig Corporation
(Class A) 5,750 242,219
Biomet, Incorporated 7,100 181,937
Johnson & Johnson 5,000 329,375
-----------
1,149,113
MEDICAL SERVICES--2.86%
Aetna, Incorporated 2,100 148,181
Columbia/HCA Healthcare
Corporation 7,650 226,631
MedPartners, Incorporated * 6,800 152,150
PacifiCare Health Systems,
Incorporated (Class B)* 1,000 52,375
United Healthcare Corporation 3,200 159,000
-----------
738,337
METALS & MINING--0.33%
Cyprus Amax Minerals Company 5,500 84,562
NATURAL GAS--0.64%
Enron Corporation 4,000 166,250
OIL DOMESTIC--2.15%
Amoco Corporation 2,000 170,250
Kerr-McGee Corporation 1,200 75,975
Murphy Oil Corporation 1,600 86,700
Occidental Petroleum Corporation 7,600 222,775
-----------
555,700
OIL INTERNATIONAL--2.72%
Chevron Corporation 4,400 338,800
Societe Nationale Elf Aquitaine
ADR 6,200 363,475
-----------
702,275
PAPER/FOREST PRODUCTS--1.21%
Caraustar Industries,
Incorporated 2,300 78,775
Louisiana-Pacific Corporation 5,100 96,900
Weyerhaeuser Company 2,800 137,375
-----------
313,050
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
PRINTING/PUBLISHING--0.57%
Banta Corporation 5,500 $ 148,500
REAL ESTATE/REITS--1.24%
Health & Retirement Property
Trust 8,900 178,000
National Health Investors,
Incorporated 3,400 142,375
-----------
320,375
RECREATION--0.59%
Brunswick Corporation 5,000 151,562
RESTAURANTS--0.20%
Applebee's International,
Incorporated 2,900 52,381
RETAIL DISCOUNT--0.37%
Toys "R" Us, Incorporated* 3,000 94,313
RETAIL SPECIALTY--0.29%
Tiffany & Company 2,100 75,731
TELEPHONE UTILITY--2.42%
Alltel Corporation 4,400 180,675
GTE Corporation 4,000 209,000
US West Communications Group 5,200 234,650
-----------
624,325
TOBACCO--0.74%
UST, Incorporated 5,200 192,075
TRUCKING & SHIPPING--0.34%
USFreightways Corporation 2,700 87,750
-----------
TOTAL COMMON STOCK--53.41%
(Cost $10,019,061) 13,799,965
-----------
<CAPTION>
COVERTIBLE PREFERRED STOCK
<S> <C> <C>
OIL DOMESTIC--0.77%
Unocal Corporation 3,500 197,750
-----------
TOTAL CONVERTIBLE PREFERRED STOCK--0.77%
(Cost $185,787) 197,750
-----------
</TABLE>
14
<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1997
- --------------------------------------------------------------------------------
TRIFLEX FUND, CONTINUED
<TABLE>
<CAPTION>
FACE
BONDS AND NOTES AMOUNT VALUE
<S> <C> <C>
FINANCIAL SERVICES--2.34%
Ford Motor Credit Company,
6.375%, 09/15/99 $ 600,000 $ 603,750
GOVERNMENT AGENCIES--23.66%
Federal Home Loan Mortgage
Corporation, 7.70%, 05/17/06 1,000,000 1,023,978
Federal Home Loan Mortgage
Corporation, 7.00%, 09/15/07 1,000,000 1,019,780
Federal Home Loan Mortgage
Corporation, Pool #284839,
8.50%, 01/01/17 56,996 59,508
Federal Home Loan Mortgage
Corporation, Pool #302886,
8.00%, 05/01/17 53,648 55,476
Federal Home Loan Mortgage
Corporation, Pool #298759,
8.00%, 08/01/17 179,700 185,823
Federal National Mortgage
Association, 7.55%, 04/22/02 685,000 726,531
Federal National Mortgage
Association, 7.55%, 06/10/04 1,250,000 1,285,062
Federal National Mortgage
Association, 7.70%, 04/10/07 1,500,000 1,557,030
Federal National Mortgage
Association, Pool #041669,
8.00%, 02/01/17 35,200 36,444
Federal National Mortgage
Association, Pool #48974,
8.00%, 06/01/17 158,372 163,965
-----------
6,113,597
U S TREASURY SECURITIES--12.99%
U S Treasury Bond, 6.000%,
02/15/26 2,350,000 2,346,639
U S Treasury Note, 5.875%,
02/15/04 1,000,000 1,009,370
-----------
3,356,009
-----------
TOTAL BONDS AND NOTES--38.99%
(Cost $9,471,005) 10,073,356
-----------
<CAPTION>
FACE
COMMERCIAL PAPER AMOUNT VALUE
<S> <C> <C>
FINANCIAL SERVICES--3.16%
Case Credit Corporation, 7.00%,
01/07/98 $ 302,000 $ 301,648
Dana Credit Corporation, 6.65%,
01/06/98 517,000 516,522
-----------
818,170
UTILITY, ELECTRIC--3.09%
Kentucky Power Company, 6.60%,
01/06/98 190,000 189,826
Orange & Rockland Utilities,
Incorporated, 6.50%, 01/05/98 109,000 108,921
Orange & Rockland Utilities,
Incorporated, 7.70%, 01/08/98 500,000 499,252
-----------
797,999
-----------
TOTAL COMMERCIAL PAPER--6.25%
(Cost $1,616,169) 1,616,169
-----------
TOTAL INVESTMENTS--99.42%
(Cost $21,292,023) 25,687,240
CASH AND OTHER ASSETS, LESS
LIABILITIES--0.58% 150,832
-----------
NET ASSETS--100.00% $25,838,072
-----------
-----------
ABBREVIATIONS
ADR -- American Depository Receipt
* -- Non-income producing securities
</TABLE>
See notes to financial statements.
15
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH INCOME TRIFLEX
<S> <C> <C> <C>
ASSETS
Investments in securities, at value $ 178,172,448 $ 198,445,901 $ 25,687,240
Cash 3,660 780 105
Receivable for:
Dividends 202,862 350,499 20,697
Interest - 32,859 146,347
Other assets 127,708 99,346 24,785
-------------- -------------- ------------
TOTAL ASSETS 178,506,678 198,929,385 25,879,174
LIABILITIES
Capital stock reacquired 40,953 76,362 7,301
Accrued:
Investment advisory fee 74,043 114,970 18,354
Service fee 34,094 37,639 5,447
Other liabilities 13,500 13,500 10,000
-------------- -------------- ------------
TOTAL LIABILITIES 162,590 242,471 41,102
-------------- -------------- ------------
NET ASSETS $ 178,344,088 $ 198,686,914 $ 25,838,072
-------------- -------------- ------------
-------------- -------------- ------------
Shares outstanding 34,031,575 7,360,452 1,410,260
-------------- -------------- ------------
-------------- -------------- ------------
Net asset value per share $ 5.24 $ 26.99 $ 18.32
-------------- -------------- ------------
-------------- -------------- ------------
Offering price per share
(Net asset value per share / 94.25%) $ 5.56 $ 28.64 $ 19.44
-------------- -------------- ------------
-------------- -------------- ------------
</TABLE>
STATEMENTS OF OPERATIONS Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH INCOME TRIFLEX
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends (Net of $15,345, $22,671 and $1,408 of foreign dividend taxes) $ 2,654,015 $ 4,992,758 $ 313,435
Interest 703,446 1,112,015 752,151
------------ ------------ -----------
TOTAL INVESTMENT INCOME 3,357,461 6,104,773 1,065,586
EXPENSES
Investment advisory fee 1,011,542 1,270,994 186,693
Service fee 387,654 416,699 62,231
Insurance 51,784 55,857 10,643
Directors' fees and expenses 22,722 22,722 22,722
Custodian fees 73,542 77,088 23,893
Audit fees 13,500 13,900 10,345
Qualification fees 21,023 25,378 13,879
Shareholder reporting expenses 33,559 35,457 6,770
Other 771 871 871
------------ ------------ -----------
TOTAL EXPENSES 1,616,097 1,918,966 338,047
LESS EXPENSES REIMBURSED - - 24,234
------------ ------------ -----------
NET EXPENSES 1,616,097 1,918,966 313,813
------------ ------------ -----------
INVESTMENT INCOME 1,741,364 4,185,807 751,773
------------ ------------ -----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 24,950,387 23,033,015 2,950,385
Change in unrealized appreciation of investments for the year 6,796,148 10,366,823 277,845
------------ ------------ -----------
NET GAIN ON INVESTMENTS 31,746,535 33,399,838 3,228,230
------------ ------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 33,487,899 $ 37,585,645 $ 3,980,003
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
See notes to financial statements.
16
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
AMERICAN NATIONAL GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income, net $ 1,741,364 $ 1,448,774
Net realized gain on investments 24,950,387 4,261,181
Change in unrealized appreciation 6,796,148 17,439,255
-------------- --------------
Net increase in net assets resulting from operations 33,487,899 23,149,210
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income, net (1,757,095) (1,419,918)
Capital gains (21,864,218) (4,921,156)
-------------- --------------
Total distributions to shareholders (23,621,313) (6,341,074)
CAPITAL SHARE TRANSACTIONS, NET 15,719,205 1,129,016
-------------- --------------
TOTAL INCREASE 25,585,791 17,937,152
NET ASSETS
Beginning of year 152,758,297 134,821,145
-------------- --------------
End of year $ 178,344,088 $ 152,758,297
-------------- --------------
-------------- --------------
</TABLE>
AMERICAN NATIONAL INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income, net $ 4,185,807 $ 3,705,098
Net realized gain on investments 23,033,015 3,943,081
Change in unrealized appreciation 10,366,823 15,681,074
-------------- --------------
Net increase in net assets resulting from operations 37,585,645 23,329,253
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income, net (4,220,053) (3,671,980)
Capital gains (19,927,051) (4,113,747)
-------------- --------------
Total distributions to shareholders (24,147,104) (7,785,727)
CAPITAL SHARE TRANSACTIONS, NET 19,462,475 9,184,340
-------------- --------------
TOTAL INCREASE 32,901,016 24,727,866
NET ASSETS
Beginning of year 165,785,898 141,058,032
-------------- --------------
End of year $ 198,686,914 $ 165,785,898
-------------- --------------
-------------- --------------
</TABLE>
See notes to financial statements.
17
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
TRIFLEX FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income, net $ 751,773 $ 632,622
Net realized gain on investments 2,950,385 599,434
Change in unrealized appreciation 277,845 1,280,861
-------------- --------------
Net increase in net assets resulting from operations 3,980,003 2,512,917
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income, net (756,610) (626,356)
Capital gains (2,597,856) (550,081)
-------------- --------------
Total distributions to shareholders (3,354,466) (1,176,437)
CAPITAL SHARE TRANSACTIONS, NET 2,024,691 94,672
-------------- --------------
TOTAL INCREASE 2,650,228 1,431,152
NET ASSETS
Beginning of year 23,187,844 21,756,692
-------------- --------------
End of year $ 25,838,072 $ 23,187,844
-------------- --------------
-------------- --------------
</TABLE>
See notes to financial statements.
18
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the year
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
AMERICAN NATIONAL GROWTH FUND 1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 4.95 $ 4.39 $ 3.83 $ 4.15 $ 4.51
Investment income, net 0.06 0.05 0.08 0.06 0.06
Net realized and unrealized gain on investments during the
year 1.03 0.73 0.88 0.15 0.31
--------- --------- --------- --------- ---------
Total from Investment Operations 1.09 0.78 0.96 0.21 0.37
Less distributions from
Investment income, net (0.06) (0.05) (0.08) (0.06) (0.06)
Capital gains (0.74) (0.17) (0.32) (0.47) (0.67)
--------- --------- --------- --------- ---------
Total distributions (0.80) (0.22) (0.40) (0.53) (0.73)
--------- --------- --------- --------- ---------
Net Asset Value, End of Year $ 5.24 $ 4.95 $ 4.39 $ 3.83 $ 4.15
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return 22.24% 17.64% 25.20% 4.98% 8.17%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of year (000's omitted) $ 178,344 $ 152,758 $ 134,821 $ 113,250 $ 113,135
Ratio of expenses to average net assets 0.96 1.15 0.98 0.97 1.00
Ratio of net investment income to average net assets 1.03 1.02 1.67 1.46 1.31
Portfolio turnover rate 46.79 18.72 37.00 46.26 59.67
Average commission rate 7.00 7.00 -- -- --
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
AMERICAN NATIONAL INCOME FUND 1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 25.05 $ 22.59 $ 18.90 $ 21.66 $ 22.09
Investment income, net 0.63 0.58 0.62 0.62 0.56
Net realized and unrealized gain (loss) on investments
during the year 4.96 3.10 4.82 (0.75) 1.75
--------- --------- --------- --------- ---------
Total from Investment Operations 5.59 3.68 5.44 (0.13) 2.31
Less distributions from
Investment income, net (0.64) (0.58) (0.63) (0.61) (0.60)
Capital gains (3.01) (0.64) (1.12) (2.02) (2.14)
--------- --------- --------- --------- ---------
Total distributions (3.65) (1.22) (1.75) (2.63) (2.74)
--------- --------- --------- --------- ---------
Net Asset Value, End of Year $ 26.99 $ 25.05 $ 22.59 $ 18.90 $ 21.66
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return 22.72% 16.46% 29.12% (0.61)% 10.63%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of year (000's omitted) $ 198,687 $ 165,786 $ 141,058 $ 114,231 $ 119,956
Ratio of expenses to average net assets 1.05 1.10 1.12 1.12 1.17
Ratio of net investment income to average net assets 2.28 2.42 2.89 2.86 2.51
Portfolio turnover rate 39.14 27.07 44.00 52.46 70.71
Average commission rate 7.00 7.00 -- -- --
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
TRIFLEX FUND 1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 17.90 $ 16.85 $ 14.32 $ 15.35 $ 15.81
Investment income, net 0.57 0.49 0.49 0.45 0.41
Net realized and unrealized gain (loss) on investments
during the year 2.50 1.48 2.67 (0.22) 0.58
--------- --------- --------- --------- ---------
Total from Investment Operations 3.07 1.97 3.16 0.23 0.99
Less distributions from
Investment income, net (0.59) (0.49) (0.49) (0.45) (0.41)
Capital gains (2.06) (0.43) (0.14) (0.81) (1.04)
--------- --------- --------- --------- ---------
Total distributions (2.65) (0.92) (0.63) (1.26) (1.45)
--------- --------- --------- --------- ---------
Net Asset Value, End of Year $ 18.32 $ 17.90 $ 16.85 $ 14.32 $ 15.35
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return 17.46% 11.86% 22.29% 1.49% 6.31%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of year (000's omitted) $ 25,838 $ 23,188 $ 21,757 $ 19,023 $ 20,469
Ratio of expenses to average net assets (1) 1.26 1.21 1.26 1.25 1.32
Ratio of net investment income to average net assets 3.02 2.83 2.99 2.91 2.49
Portfolio turnover rate 27.52 23.78 16.39 46.95 70.98
Average commission rate 7.00 7.00 -- -- --
</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 1.36%, 1.34%, 1.46%, 1.45%,
and 1.39% for the years ended 1997, 1996, 1995, 1994, and 1993,
respectively.
See notes to financial statements.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS December 31, 1997
- --------------------------------------------------------------------------------
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 its 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. Securities for which market quotations are not readily
available are valued at fair value as determined by the Board of Directors.
Commercial paper is stated at amortized cost, which is equivalent to fair value.
INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME:
Investment transactions are accounted for on the trade date (date order to buy
or sell is executed). Divided income is recognized on the ex-dividend date, and
interest income is recognized on an accrual basis. 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 separate 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 shares at net asset value. Dividends and
other distributions 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.
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 Funds. Investment advisory fees paid to SM&R are
computed as a percentage of the average daily net assets as follows:
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY
FEE SERVICE FEE
<S> <C> <C>
Net Assets
Not exceeding $100,000,000 0.750% 0.250%
Exceeding $100,000,000 but not exceeding $200,000,000 0.625% 0.200%
Exceeding $200,000,000 but not exceeding $300,000,000 0.500% 0.150%
Exceeding $300,000,000 0.400% 0.100%
</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. For the year ended
December 31, 1997 approximately $17,800 was earned in incentive fees, and the
investment advisory fee was decreased by approximately $186,300, netting a
reduction of approximately $168,500.
SM&R has agreed to reimburse the Funds 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.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
AMERICAN NATIONAL FUNDS GROUP
During the year ended December 31, 1997, 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 $ 405,080 $ 5,433
Income 697,920 9,704
Triflex 54,962 353
</TABLE>
SM&R is a wholly-owned subsidiary of American National Insurance Company
("American National"). As of December 31, 1997, SM&R and American National had
the following ownership in the Funds:
<TABLE>
<CAPTION>
SM&R AMERICAN NATIONAL
------------------------------ -----------------------------
PERCENT OF PERCENT OF
SHARES SHARES OUTSTANDING SHARES SHARES OUTSTANDING
<S> <C> <C> <C> <C>
Growth 327,110 0.96% 1,158,102 3.40%
Income 16,120 0.22% -- --
Triflex 119,925 8.50% 200,666 14.23%
</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 in securities, other than commercial
paper and corporate short-term bonds and notes, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Growth $72,223,151 $86,042,890
Income 64,457,744 74,649,926
Triflex 6,553,243 8,183,604
</TABLE>
Gross unrealized appreciation and depreciation as of December 31, 1997, were as
follows:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION
<S> <C> <C>
Growth 4$9,541,244 $5,794,850
Income 51,439,190 2,403,942
Triflex 4,853,657 458,440
</TABLE>
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
AMERICAN NATIONAL FUNDS GROUP
NOTE 4--CAPITAL STOCK
AMERICAN NATIONAL GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sale of capital shares 2,618,034 $14,523,030 2,177,792 $10,210,865
Investment income dividends reinvested 319,910 1,712,682 287,812 1,382,250
Distributions made from net realized gains reinvested 4,145,887 21,351,396 967,807 4,800,321
--------- ----------- --------- -----------
Subtotals 7,083,831 37,587,108 3,433,411 16,393,436
Redemptions of capital shares (3,923,677) (21,867,903) (3,261,788) (15,264,420)
--------- ----------- --------- -----------
Net increase in capital shares outstanding 3,160,154 $15,719,205 171,623 $ 1,129,016
----------- -----------
----------- -----------
Shares outstanding at beginning of year 30,871,421 30,699,798
---------- ----------
Shares outstanding at end of year 34,031,575 30,871,421
---------- ----------
---------- ----------
The components of net assets at December 31, 1997, are as
follows:
Capital Stock--34,031,575 shares of $1.00 par value
outstanding (75,000,000 authorized) (par and additional
paid-in capital) $129,654,480
Accumulated net realized gain on investments 4,943,214
Net unrealized appreciation of investments 43,746,394
------------
Net assets $178,344,088
------------
------------
</TABLE>
AMERICAN NATIONAL INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sale of capital shares 767,255 $20,997,880 910,789 $21,860,138
Investment income dividends reinvested 149,320 4,073,432 146,022 3,535,030
Distributions made from net realized gains reinvested 729,218 19,360,438 160,183 3,978,943
--------- ----------- --------- -----------
Subtotals 1,645,793 44,431,750 1,216,994 29,374,111
Redemptions of capital shares (903,658) (24,969,275) (843,346) (20,189,771)
--------- ----------- --------- -----------
Net increase in capital shares outstanding 742,135 $19,462,475 373,648 $ 9,184,340
----------- -----------
----------- -----------
Shares outstanding at beginning of year 6,618,317 6,244,669
--------- ---------
Shares outstanding at end of year 7,360,452 6,618,317
--------- ---------
--------- ---------
The components of net assets at December 31, 1997, are as
follows:
Capital Stock--7,360,452 shares of $1.00 par value
outstanding (50,000,000 authorized) (par and additional
paid-in capital) $145,959,922
Accumulated net realized gain on investments 3,691,744
Net unrealized appreciation of investments 49,035,248
------------
Net assets $198,686,914
------------
------------
</TABLE>
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
AMERICAN NATIONAL FUNDS GROUP
TRIFLEX FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Sale of capital shares 96,421 $1,864,777 119,915 $2,092,078
Investment income dividends reinvested 38,357 728,301 34,214 599,589
Distributions made from net realized gains reinvested 139,275 2,529,231 29,666 532,797
--------- ---------- --------- ----------
Subtotals 274,053 5,122,309 183,795 3,224,464
Redemptions of capital shares (159,550) (3,097,618) (178,895) (3,129,792)
--------- ---------- --------- ----------
Net increase in capital shares outstanding 114,503 $2,024,691 4,900 $ 94,672
---------- ----------
---------- ----------
Shares outstanding at beginning of year 1,295,757 1,290,857
--------- ---------
Shares outstanding at end of year 1,410,260 1,295,757
--------- ---------
--------- ---------
The components of net assets at December 31, 1997, are as
follows:
Capital Stock--1,410,260 shares of $1.00 par value
outstanding (50,000,000 authorized) (par and additional
paid-in capital) $21,023,928
Accumulated net realized gain on investments 418,927
Net unrealized appreciation of investments 4,395,217
-----------
Net assets $25,838,072
-----------
-----------
</TABLE>
23
<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, 1997, the related statements of
operations, the statements of changes in net assets and the financial highlights
for the year 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. The statements of changes for the year ended December 31, 1996 and the
financial highlights for each of the four years in the period ended December 31,
1996 were audited by other auditors whose report dated February 7, 1997 issued
an unqualified opinion.
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, 1997, 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, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended in conformity with generally accepted accounting principles.
Tait, Weller & Baker, CPA
Philadelphia, Pennsylvania
January 30, 1998
DISTRIBUTIONS
- --------------------------------------------------------------------------------
Distributions per share for the year ended December 31, 1997.
<TABLE>
<CAPTION>
LONG-TERM MID-TERM SHORT-TERM
RECORD INVESTMENT CAPITAL CAPITAL CAPITAL
DATE INCOME GAIN GAIN GAIN
<S> <C> <C> <C> <C> <C>
American National Growth Fund, Inc. 6/23/97 $ 0.02700
12/19/97 $ 0.03175 $ 0.2492 $ 0.3846 $ 0.1029
American National Income Fund, Inc. 3/24/97 $ 0.15500
6/23/97 $ 0.15200
9/22/97 $ 0.15500
12/19/97 $ 0.17500 $ 0.4184 $ 2.3177 $ 0.2781
Triflex Fund, Inc. 3/24/97 $ 0.12400
6/23/97 $ 0.13700
9/22/97 $ 0.15000
12/19/97 $ 0.18100 $ 0.3315 $ 1.5615 $ 0.1706
</TABLE>
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
American National Funds Group
We have audited the accompanying statement of changes in net assets of
American National Funds Group for the year ended December 31, 1996, and the
financial highlights for each of the years in the four-year period ended
December 31, 1996. The statement of changes in net assets and the financial
highlights are the responsibility of Fund management. Our responsibility is
to express an opinion on the statement of changes in net assets and the
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 the
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. 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 statement and the financial highlights referred
to above present fairly, in all material respects, the changes in net assets
of American National Funds Group for the year ended December 31, 1996 and the
financial highlights for the periods stated in the first paragraph above,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick, L.L.P.
Houston, Texas
February 7, 1997
<PAGE>
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS:
The Financial Statements required in the instructions to Form N-1A are
included in the Annual Report, a copy of which is attached as EXHIBIT
"1" to the Statement of Additional Information.
Schedules II to VII, inclusive, are omitted because the required
information is included in the financial statements filed herewith, or
because the conditions requiring their filing do not exist.
(b) EXHIBITS
1. See EXHIBIT 99.B1 to Post-Effective Amendment No. 27 to
Form N-1A for a copy of Registrant's current Articles of
Incorporation.
2. See EXHIBIT 99.B2 to Post-Effective Amendment No. 27 to
Form N-1A for a copy of Registrant's current By-Laws.
3. None.
4. See EXHIBIT 99.B4 to Post-Effective Amendment No. 27 to
Form N-1A for a specimen of Registrant's stock certificate.
5. See EXHIBIT 99.B5 to Post-Effective Amendment No. 27 to
Form N-1A for a copy of Registrant's Investment Advisory
Agreement.
6. See EXHIBIT 99.B6 to Post-Effective Amendment No. 27 to
Form N-1A for a copy of Registrant's current Underwriting
Agreement.
7. None.
8. See EXHIBIT 99.B8a to Post-Effective Amendment No. 27
to Form N-1A for a copy of Registrant's current Custodian
Agreement and EXHIBIT 99.B8b for a copy of Registrant's Sub-
Custodian Agreement.
9. None.
10. See EXHIBIT 99.B10 to this Post-Effective Amendment No. 29
to Form N-1A for consent and opinion of Registrant's counsel,
Greer, Herz & Adams, L.L.P.
11. See EXHIBIT 99.B11 to this Post-Effective Amendment No. 29
to Form N-1A for consent of KPMG Peat Marwick LLP and Tait,
Weller and Baker, independent accountants of Registrant.
12. Not Applicable.
13. None.
14. See EXHIBIT 99.B14a to Post-Effective Amendment No. 29
to Form N-1A for copies of documents used to establish Tax
Sheltered Custodial Accounts and Texas Optional Retirement
Programs and see EXHIBIT 99.B14b for copies of documents used
to establish Individual Retirement Accounts in conjunction
with which Registrant offers its securities.
15. None.
16. See EXHIBIT 99.B16 to this Post-Effective Amendment No. 29
to Form N-1A, for schedule of computation of performance
quotations provided pursuant to Item 22.
23
<PAGE>
17. See EXHIBIT 99.B17 to Post-Effective Amendment No. 27
to Form N1A, for a Power of Attorney.
18. None.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
All persons under common control with the Registrant are shown on the
list attached hereto as EXHIBIT 99.B19.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of April 1, 1998, the number of record holders of
Registrant's common stock were as follows:
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Common Stock,
$1.00 par value 1,164
ITEM 27. INDEMNIFICATION.
The Registrant has agreed to indemnify its directors to the maximum
extent permitted by applicable law against all costs and expenses
(including, but not limited to, counsel fees, amounts of judgments paid,
and amounts paid in settlement) reasonably incurred in connection with the
defense of any actual or threatened claim, action, suit or proceeding,
whether civil, criminal, administrative, or other, in which he or she may
be involved by virtue of such person being or having been such director.
Such indemnification is pursuant to Section 3.15 of the Registrant's By-
Laws, a copy of which is attached as Exhibit 99.B2 to Post-Effective
Amendment No. 27 to Form N-1A.
Registrant, together with the American National Income Fund, Inc., and
the Triflex Fund, Inc., (collectively referred to as the "American National
Funds Group"), has purchased a directors' and officers' liability policy.
At a Joint Boards of Directors' Meeting of Registrant and the other
American National Funds Group held on May 14, 1997, the Boards
of Directors authorized the renewal of an ICI Mutual Insurance Company
Directors and Officers/Errors and Omissions Liability Insurance policy.
The ICI Mutual Insurance Company, 1600 M Street - 5th Floor, Washington,
D.C. 20036. The policy contains a $5,000 per individual insured per loss
deductible, a $25,000 aggregate all individual insureds, each claim
deductible, $100,000 company reimbursement, each claim deductible and
$100,000 company coverage, each claim deductible. The aggregate limit of
liability is $5,000,000. The annual premium for all three American
National Funds Group was $117,819. The Registrant's share of such
fee, based upon the proportion of its total assets to those of the other
American National Funds Group, is $6,901.
Additionally, the Registrant is required to maintain a secured letter
of credit. However, due to the restrictions on the making of loans, the
Registrant and SM&R have entered into an undertaking whereby SM&R has
secured a letter of credit from U.S. National Bank of Galveston, Texas for
the benefit of the Registrant. Pursuant to this arrangement, the
Registrant will reimburse SM&R for its proportionate share of any expenses
incurred by SM&R in the procurement of the letter of credit and for any
annual renewal premiums paid on behalf of the Registrant by SM&R.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Securities Management and Research, Inc. ("SM&R") serves as investment
adviser to Registrant and the other American National Funds, the American
National Investment Accounts, Inc. and the SM&R Capital Funds, Inc. See
"THE FUNDS AND THEIR MANAGEMENT"
24
<PAGE>
in Part A and "Investment Advisory and Other Services" in Part B.
ROBERT A. FRUEND, CLU
DIRECTOR OF SM&R; Executive Vice President and Director of Ordinary
Agencies of American National Insurance Company; Director and Vice
President of American National Life Insurance Company of Texas, all
located at One Moody Plaza, Galveston, Texas; Director and Chairman
of the Board of American National Property and Casualty Company;
Director and Chairman of the Board of American National General
Insurance Company; and Director of American National Insurance
Service Company; Director of American National Lloyds Insurance
Company; Director and Chairman of Board, Pacific Property and
Casualty, Inc., all located at 1949 East Sunshine, Springfield,
Missouri.
R. EUGENE LUCAS
DIRECTOR AND MEMBER OF EXECUTIVE COMMITTEE OF SM&R; Director of
American National Insurance Company, One Moody Plaza, Galveston,
Texas; President and Director of Gal-Tex Hotel Corporation, 504
Moody National Bank Tower, Galveston, Texas, Gal-Tenn Hotel
Corporation, 504 Moody National Bank Tower, Galveston, Texas;
Director of ANREM Corporation, One Moody Plaza, Galveston, Texas.
MICHAEL W. MCCROSKEY
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE OFFICER AND MEMBER EXECUTIVE
COMMITTEE OF SM&R; President and Director of the Fund; President
and Director of the American National Growth Fund, Inc. and the
American National Income Fund, Inc. (hereinafter referred to as the
"American National Funds Group"); President and Director of the
American National Investment Accounts, Inc.; President and Director
of the SM&R Capital Funds, Inc.; Executive Vice President, American
National; Director and President, ANREM Corporation; Director and
President, ANTAC Corporation; Assistant Secretary of American
National Life Insurance Company of Texas; Director, Comprehensive
Investment Services, all located at One Moody Plaza, Galveston
Texas; Vice President, American National Property and Casualty;
Vice President American National General Insurance Company; Vice
President, Pacific Property and Casualty, Inc., Vice President of
Standard Life and Accident Insurance Company, 201 Robert S. Kerr
Avenue, Oklahoma City, Oklahoma; Vice President, Garden State Life
Insurance Company, 2450 South Shore Boulevard, League City, Texas.
G. RICHARD FERDINANDSTEN
DIRECTOR AND MEMBER OF EXECUTIVE COMMITTEE OF SM&R; Director,
Senior Executive Vice President and Chief Operating Officer,
American National Insurance Company; Director, Chairman of the
Board, President and Chief Executive Officer, American National
Life Insurance Company of Texas; Director, Comprehensive Investment
Services, all located at One Moody Plaza, Galveston, Texas;
Director, Vice Chairman of the Board, American National General
Insurance Company, Director and Vice Chairman of the Board,
American National Property and Casualty; Director and Vice Chairman
of the Board, Pacific Property & Casualty Company, Underwriter,
American National Lloyds Insurance Company, all located at 1949
East Sunshine, Springfield, Missouri. Director and Chairman of the
Board, Standard Life and Accident Insurance Company, 201 Robert S.
Kerr Avenue, Oklahoma City, Oklahoma; Director, Garden State Life
Insurance Company, 2450 South Shore Boulevard, League City, Texas.
RONALD J. WELCH
DIRECTOR OF SM&R; Executive Vice President and Chief Actuary of
American National Insurance Company; Senior Vice President of
American National Life Insurance Company of Texas, all located at
One Moody Plaza, Galveston, Texas; Director and Chairman of the
Board of Garden State Life Insurance Company, 2450 South Shore
Boulevard, League City, Texas; Director of Standard Life and
Accident Insurance Company, 201 Robert S. Kerr Avenue, Oklahoma
City, Oklahoma; Director of American National Property and Casualty
Company; Director of American National General Insurance Company;
Director of American National Insurance Service Company, Director
of Pacific Property and Casualty Company, all located at 1949 East
Sunshine Street, Springfield, Missouri.
GORDON D. DIXON
DIRECTOR, SENIOR VICE PRESIDENT, CHIEF INVESTMENT OFFICER AND
MEMBER OF INVESTMENT AND EXECUTIVE COMMITTEES OF SM&R; Vice
President and Portfolio Manager of the American National Growth
Fund, Inc.; Vice President, Portfolio Manager of the American
National Investment Accounts, Inc. - Growth Portfolio; Co-Manager
of the American National Income Fund, Inc. and the American
National Investment Accounts, Inc. -- Managed Portfolio; Vice
President of Stocks for American National Insurance Company,
Director and President, Comprehensive Investment Services, all
located at One Moody Plaza, Galveston, Texas; Vice President of
Investments for Garden State Life Insurance Company, 2450 South
Shore Boulevard, League City, Texas; Former Director of Equity
Strategy for C&S/Soran Bank (now Nations Bank) Atlanta, Georgia.
25
<PAGE>
K. DAVID WHEELER
SENIOR VICE PRESIDENT, INSTITUTIONAL SALES AND PRIVATE CLIENT
SERVICES OF SM&R, One Moody Plaza, Galveston, Texas; Senior
Institutional Consultant, Bank South, Atlanta, Georgia.
VERA M. YOUNG
VICE PRESIDENT, PORTFOLIO MANAGER OF SM&R; Vice President, Portfolio
Manager of American National Investment Accounts, Inc. -- Money Market
Portfolio and the SM&R Capital Funds, Inc. -- Primary Fund Series, One
Moody Plaza, Galveston, Texas; Assistant Vice President of Securities
for American National Insurance Company, One Moody Plaza, Galveston,
Texas.
EMERSON V. UNGER, C.L.U.
VICE PRESIDENT OF SM&R; Vice President of American National Funds
Group, American National Investment Accounts, Inc. and SM&R Capital
Funds, Inc., all located at One Moody Plaza, Galveston, Texas.
BRENDA T. KOELEMAY
VICE PRESIDENT AND TREASURER OF SM&R; Vice President and Treasurer of
American National Funds Group, American National Investments Accounts,
Inc. and SM&R Capital Funds, Inc.; Treasurer, Comprehensive
Investment Services, all located at One Moody Plaza, Galveston, Texas.
TERESA E. AXELSON
VICE PRESIDENT AND SECRETARY OF SM&R; Vice President and Secretary of
American National Funds Group, American National Investment Accounts,
Inc. and SM&R Capital Funds, Inc.,; Treasurer, Comprehensive
Investment Sevices, all located at One Moody Plaza, Galveston, Texas.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) SM&R also serves as the principal underwriter for the Registrant, the
other American National Funds, the American National Investment Accounts,
Inc. and the SM&R Capital Funds, Inc. See "THE FUNDS AND THEIR MANAGEMENT"
in Part A.
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICERS POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- --------------------------------------------------------------------------------------
<S> <C> <C>
Robert A. Fruend, C.L.U. Director None
One Moody Plaza
Galveston, Texas
R. Eugene Lucas Director None
Moody National Bank Tower
Galveston, Texas
Michael W. McCroskey Director and President, President and
One Moody Plaza Chief Executive Officer Director
Galveston, Texas
G. Richard Ferdinandsten Director None
One Moody Plaza
Galveston, Texas
Ronald J. Welch Director None
One Moody Plaza
Galveston, Texas
Gordon D. Dixon Director, Senior Vice None
One Moody Plaza President, Chief Investment
Galveston, Texas Officer
K. David Wheeler Senior Vice President, None
One Moody Plaza Institutional Sales and
Galveston, Texas Private Client Services
Vera M. Young Vice President, None
One Moody Plaza Portfolio Manager
Galveston, Texas
Emerson V. Unger, C.L.U. Vice President Vice President
One Moody Plaza
Galveston, Texas
Brenda T. Koelemay Vice President and Vice President and
One Moody Plaza Treasurer Treasurer
Galveston, Texas
Teresa E. Axelson Vice President and Vice President and
One Moody Plaza Secretary Secretary
Galveston, Texas
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
26
<PAGE>
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained at the office of SM&R at One
Moody Plaza, Galveston, Texas 77550.
ITEM 31. MANAGEMENT SERVICES.
There are no management-related service contracts to which the
Registrant is a party not discussed under Part A or Part B of this Post-
Effective Amendment No. 29 to Registration Statement.
ITEM 32. UNDERTAKINGS.
The Registrant undertakes to provide a copy of the Registrant's latest
Annual Report to shareholders to whom a prospectus is delivered upon
request and without charge.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, TRIFLEX FUND, INC., certifies that it meets
all of the requirements for effectiveness of this POST-EFFECTIVE AMENDMENT
NO. 29 to Registration Statement, pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this POST-EFFECTIVE AMENDMENT NO. 25 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Galveston and State of Texas, on the 20th of
April, 1998.
TRIFLEX FUND, INC.
By: MICHAEL W. MCCROSKEY
---------------------------------
Michael W. McCroskey, President
Pursuant to the requirements of the Securities Act of 1933, this POST-EFFECTIVE
AMENDMENT NO. 29 to Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated:
PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER: PRINCIPAL ACCOUNTING OFFICER:
MICHAEL W. MCCROSKEY BRENDA T. KOELEMAY
- ----------------------------------- -------------------------------------
Michael W. McCroskey, President Brenda T. Koelemay, Treasurer
Date: April 20, 1998 Date: April 20, 1998
- ----------------------------------- -------------------------------------
DIRECTORS
X RALPH S. CLIFFORD X PAUL D. CUMMINGS
- ----------------------------------- ---------------------------------------
* Ralph S. Clifford by * Paul D. Cummings by
Michael W. McCroskey, Power of Attorney Michael W. McCroskey, Power of Attorney
Date: April 20, 1998 Date: April 20, 1998
- ----------------------------------- ---------------------------------------
X JACK T. CURRIE X IRA W. PAINTON
- ----------------------------------- ---------------------------------------
* Jack T. Currie by * Ira W. Painton by
Michael W. McCroskey, Power of Attorney Michael W. McCroskey, Power of Attorney
Date: April 20, 1998 Date: April 20, 1998
- ----------------------------------- ---------------------------------------
X DONALD P. STEVENS X STEVEN H. STUBBS
- ----------------------------------- ---------------------------------------
* Donald P. Stevens by * Steven H. Stubbs by
Michael W. McCroskey, Power of Attorney Michael W. McCroskey, Power of Attorney
Date: April 20, 1998 Date: April 20, 1998
- ----------------------------------- ---------------------------------------
X MICHAEL W. MCCROSKEY
- -----------------------------------
Michael W. McCroskey
Date: April 20, 1998
- -----------------------------------
*PURSUANT TO A POWER OF ATTORNEY EXECUTED BY THE BOARD OF DIRECTORS DATED
DECEMBER 16, 1994. ATTACHED AS EXHIBIT 99.B17 TO POST-EFFECTIVE AMENDMENT
NO. 27.
28
<PAGE>
EXHIBIT INDEX
TO
POST-EFFECTIVE AMENDMENT NO. 29
UNDER THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 25
UNDER INVESTMENT COMPANY ACT OF 1940
FOR
TRIFLEX FUND, INC.
("REGISTRANT")
- -------------------------------------------------------------------------------
PART C ITEM AND CAPTION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS: - Attached as exhibit to Statement of
Additional Information
(b) EXHIBITS ATTACHED THIS FILING:
Exhibit 99.B10 Opinion of Registrant's counsel, Greer, Herz & Adams,
L.L.P.
Exhibit 99.B11 Consent of Tait, Weller, & Baker and KPMG Peat Marwick LLP,
independent accountants of Registrant
Exhibit 99.B14a Tax Sheltered Annuity Forms Kit
Exhibit 99.B14b Traditional, Roth and Education IRA Forms Kits
Exhibit 99.B16 Schedule of computation of performance quotations
provided pursuant to Item 22. of Form N-1A
Exhibit 99.B19 Control List
Exhibit 27 Triflex Fund Financial Data Schedules
29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000275039
<NAME> AMERICAN NATIONAL
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 21,292,023
<INVESTMENTS-AT-VALUE> 25,687,240
<RECEIVABLES> 167,044
<ASSETS-OTHER> 24,785
<OTHER-ITEMS-ASSETS> 105
<TOTAL-ASSETS> 25,879,174
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 41,102
<TOTAL-LIABILITIES> 41,102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,613,668
<SHARES-COMMON-STOCK> 1,410,260
<SHARES-COMMON-PRIOR> 1,295,757
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 418,927
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,395,217
<NET-ASSETS> 25,838,072
<DIVIDEND-INCOME> 313,435
<INTEREST-INCOME> 752,151
<OTHER-INCOME> 0
<EXPENSES-NET> 313,813
<NET-INVESTMENT-INCOME> 751,773
<REALIZED-GAINS-CURRENT> 2,950,385
<APPREC-INCREASE-CURRENT> 277,845
<NET-CHANGE-FROM-OPS> 3,980,003
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 756,610
<DISTRIBUTIONS-OF-GAINS> 2,597,856
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 96,421
<NUMBER-OF-SHARES-REDEEMED> 159,550
<SHARES-REINVESTED> 177,632
<NET-CHANGE-IN-ASSETS> 2,650,228
<ACCUMULATED-NII-PRIOR> 340,555
<ACCUMULATED-GAINS-PRIOR> 68,096
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 186,693
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 338,047
<AVERAGE-NET-ASSETS> 24,882,337
<PER-SHARE-NAV-BEGIN> 17.90
<PER-SHARE-NII> .57
<PER-SHARE-GAIN-APPREC> 2.50
<PER-SHARE-DIVIDEND> .59
<PER-SHARE-DISTRIBUTIONS> 2.06
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.32
<EXPENSE-RATIO> 1.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.0
</TABLE>
<PAGE>
EXHIBIT 99.B10
LEGAL OPINION
April 20, 1998
Triflex Fund, Inc.
One Moody Plaza
Galveston, Texas 77550
RE: Triflex Fund, Inc. (the "Company") Post-Effective Amendment No. 29
under the Securities Act of 1933 (the "33 Act") and Post-Effective
Amendment No. 25 to the Investment Company Act of 1940 (the "40 Act")
Gentlemen:
We have assisted you in preparing the above referenced post-effective
amendments to your '33 Act and '40 Act Registration Statements referenced
above. In connection therewith, we have examined the Company's Articles of
Incorporation and such other corporate records, prospectuses and other
material we deemed appropriate. On the basis of such examination, we are of
the opinion that the Company's shares, when sold, will be legally issued,
fully paid and non-assessable. We, of course, assume that the Company will
not sell more than the 50,000,000 shares authorized by its Articles of
Incorporation, and that all sales will be for full value received at the time
of sale.
We consent to the attachment of this opinion to and its use in connection
with the above referenced post-effective amendments.
Yours very truly,
/s/ JERRY L. ADAMS
------------------------------------
Jerry L. Adams
<PAGE>
EXHIBIT 99.B11
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated January 30, 1998 on the
financial statements and financial highlights of Triflex Fund, Inc. Such
financial statements and financial highlights appear in the 1997 Annual
Report to Shareholders which appears in the Statement of Additional
Information filed in the Post-Effective Amendment No. 29 to the Registration
Statement on Form N-1A of Triflex Fund, Inc. We also consent to the
references to our Firm in the Registration Statement and Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 20, 1998
<PAGE>
EXHIBIT 99.B11
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
American National Funds Group
We consent to the use of our report dated February 7, 1997 included herein.
KPMG Peat Marwick LLP
Houston, Texas
April 20, 1998
<PAGE>
TSA
403(b)(7)
FORMS
KIT
----------------------------------
EVERYTHING YOU NEED TO:
- OPEN A NEW SM&R TSA
403(b) ACCOUNT
- TRANSFER YOUR PRESENT TSA
403(b) ACCOUNT TO SM&R
- DIRECTLY ROLL OVER ASSETS
FROM ANOTHER INSTITUTION
- ESTABLISH AN ORP (STATE OF
TEXAS ONLY)
----------------------------------
SECURITIES MANAGEMENT & RESEARCH, INC.
One Moody Plaza // Galveston, Texas 77550
(409) 763-2767
[LOGO]
Member NASD SIPC
<PAGE>
NEW TAX LAW IMPACTS 403(b) DISTRIBUTIONS
- -------------------------------------------------------------------------------
New IRS rules have liberalized which distributions can be rolled over, but
now require plan custodians to automatically withhold 20% from all
distributions eligible for rollover received from 403(b) annuities or mutual
funds.
Under the new law effective January 1, 1993, 403(b) annuity and mutual fund
distributions that are eligible for rollover are subject to 20% mandatory
withholding unless they are directly rolled into an IRA or other eligible
plan. The 20% withholding tax is not a penalty and is paid to the IRS as a
credit toward the employee's income tax liability for that year.
The new law specifies that any 403(b) plan distribution--except those
listed below--is an "eligible rollover distribution." Distributions not
eligible for rollover that allow the participant to elect out of withholding
are:
- Required Minimum Distributions--Employees who reach age 70 1/2 are
required to take distributions. Required minimums have never been
eligible for rollover, and employees may still elect out of withholding
in these cases.
- Substantially equal periodic payments over a single or joint life
expectancy or over a period of at least 10 years--To receive a
substantially equal periodic payment, a participant must have
separated from service (for example, terminated employment).
Participants taking this type of distribution may elect out of
withholding.
- Certain excess, after-tax and "deemed" distributions--While these types
of distributions are not common, custodians should be aware that this
type of distribution cannot be rolled, therefore, is not subject to
the withholding rule, either.
Since all other distributions are eligible for rollover, the 20%
withholding tax can be avoided simply by directly rolling the distribution
into an IRA or another eligible plan.
A direct rollover is actually an easier transaction for an employee than a
"regular" rollover because the custodians do most of the work. The
custodians move the distribution directly between the two plans. The
employee avoids taking physical possession of the distribution and concern
about the 60-day rollover rule is lessened. If employees do choose a
"regular" rollover and take physical possession of the distribution before
rolling it into an IRA or other eligible plan within the allowable 60-day
period, the 20% withholding tax will be imposed.
Generally, employees will take a distribution when they change jobs or
terminate employment for other reasons, thus "triggering" the distribution.
Distributions made for other reasons, or because an employer discontinues a
plan, will generally be eligible for rollover and thus participants may not
elect out of withholding unless they chose the direct rollover option.
The following situations may assist you in understanding the new rules more
clearly.
How to Avoid 20% Withholding
IF you are changing jobs, have been laid off, have terminated
employment...
THEN you can directly roll over your distribution and avoid the mandatory
20% withholding requirement.
IF you are required to take distributions from your 403(b) plan because
you are age 70 1/2 or older...
THEN you may elect out of withholding, but you can't roll over your
distribution.
IF you are receiving "substantially equal" periodic payments because
you've separated from service...
THEN you may elect out of withholding, but you can't roll over your
distribution.
When The 20% Withholding Will Apply
IF you do not directly roll over your distribution and you decide to keep
it...
THEN you'll receive 20% less than you requested, and the entire
distribution will be subject to regular income and possible penalty
taxes as well.
IF you do not directly roll over your distribution but roll everything
you receive within the 60-day allowable time limit...
THEN this is a regular rollover (not a direct rollover), and you will
receive 20% less than you requested; you may make up the difference
from your own pocket and roll 100% of your distribution within the 60-day
limit.
IF you do not directly roll over your distribution and decide to keep
only part of what you receive and roll the rest...
THEN 20% federal income tax will be withheld on the entire distribution.
The portion of the entire distribution that is not rolled over is subject
to regular income and possible penalty taxes. You may also roll the 20%
withheld by making it up out of your own pocket.
The new withholding requirements make it important for you to receive
professional financial or tax advice before a distribution is taken, so that
20% withholding can be avoided.
2
<PAGE>
TIMELY ANSWERS TO SOME FREQUENTLY ASKED QUESTIONS ABOUT
TSA 403(b) CUSTODIAL ACCOUNTS
- -------------------------------------------------------------------------------
This kit is designed to provide you with general information about the
American National Family of Funds TSA Plan. It is not intended as a complete
or definitive explanation of the plan, the provisions of the Employee
Retirement Income Security Act of 1973 or the Tax Code. Neither the Investment
Adviser nor the Custodian is in a position to render legal or tax advice.
Please consult your legal or tax professional if you have any questions in
this regard.
WHAT IS A TAX-SHELTERED 403(b) CUSTODIAL ACCOUNT?
A 403(b) is a voluntary tax-sheltered account (TSA) that allows you to set
aside pre-tax money for retirement through a salary reduction with your
Employer.
WHO IS ELIGIBLE TO PARTICIPATE IN THE PROGRAM?
Employees of a public school or a tax-exempt, non-profit organization which
qualifies under Section 501(c)(3) of the Internal Revenue Code. This includes
hospitals, research foundations, churches, symphony orchestras, scientific
foundations, private non-profit colleges and universities, museums and zoos.
WHY SHOULD I ESTABLISH A TSA?
Contributions to a TSA are deferred from current federal income tax. The
earnings on your TSA also accumulate on a tax-deferred basis allowing your
money to work its hardest for you until you withdraw it. Participation is
voluntary so you control when and how much is contributed.
HOW MUCH CAN I CONTRIBUTE TO MY TSA?
The maximum contribution amount is based on your gross compensation, the
length of time with your current employer, the amounts already contributed to
a TSA, and the type of your employer. A Salary Reduction Maximum Allowable
Deferral Worksheet is provided in the kit to assist you in determining the
maximum amount allowable.
WILL I EVER PAY TAXES ON THIS MONEY?
Yes, your TSA contributions and earnings are tax-deferred. However, you must
pay federal income tax on these amounts once you begin to take distributions.
Usually, due to retirement age and status, your tax bracket will be lower
when your distributions begin. State tax laws vary and you will want to
consult your tax adviser regarding your particular tax situation.
WHEN CAN I WITHDRAW FROM MY 403(b) ACCOUNT?
You may only withdraw from your account upon the occurrence of one of the
following events. Additional restrictions apply if you are a participant in
the State of Texas ORP Program, please refer to the Custodial Agreement for
such restrictions.
- You have separated from service with your employer
- You have become disabled
- You have attained the age 59 1/2
- You have encountered financial hardship within the meaning of code
section 403(b)(7)(ii)
- Your beneficiary may withdraw from your account if you have died
Refer to page 2 of this kit for an explanation of the 20% mandatory
withholding requirements on distributions from your TSA.
CAN I BORROW FROM MY TSA?
No, the American National Family of Funds 403(b) plan does not permit
borrowing.
CAN I TRANSFER AN EXISTING 403(b) ACCOUNT TO THE AMERICAN NATIONAL FAMILY
OF FUNDS?
Yes, you can easily transfer the assets of your existing plan to a Fund in
the American National Family by completing the 403(b)(7) Account Application
and Transfer of Assets Request in this kit.
HOW MAY MY ACCOUNT BE DISTRIBUTED?
Distributions may be taken in lump sum or systematic payments. These
systematic payments should be scheduled over the life expectancy of the
participant, the joint life expectancy of the participant and his or her
spouse, or a specified period not exceeding the combined life expectancy of
the participant and the participant's spouse.
WHEN CAN I ROLL OVER MY TSA INTO AN IRA?
A rollover of your TSA assets into an IRA can take place if you have
separated from service with your employer, attained age 59 1/2 or become
disabled. Such a rollover is permitted subject to certain restrictions which
should be discussed with your tax adviser for further details.
HOW CAN I WITHDRAW MONEY WITHOUT A PREMATURE DISTRIBUTION PENALTY PRIOR TO
AGE 59 1/2, IF NECESSARY?
Withdrawals without a penalty can be taken if you become permanently
disabled, receive substantially equal periodic payments beginning after
termination of employment, or when you reach age 55 and have terminated
employment. If you are a participant in the State of Texas ORP Program, see
the Custodial Agreement for additional restrictions. Consult your tax adviser
for answers to specific questions you may have.
3
<PAGE>
INSTRUCTIONS FOR ESTABLISHING A 403(b)(7) ACCOUNT IN THE AMERICAN NATIONAL
FAMILY OF FUNDS
- -------------------------------------------------------------------------------
TO ESTABLISH A NEW ACCOUNT
1. Complete 403(b)(7) Account Application (Numbers 1-3, 5-7, and 9)
2. Complete Beneficiary Information, page 4
3. Submit a check for $7.50 custodian fee
TO TRANSFER FROM ANOTHER INSTITUTION
1. Complete 403(b)(7) Account Application (Numbers 1-7, and 9)
2. Complete Transfer of Assets Request Form, page 9
3. Complete Beneficiary Information, page 4
4. Submit a check for $7.50 custodian fee
TO ROLLOVER ASSETS FROM ANOTHER INSTITUTION
1. Complete 403(b)(7) Account Application (Numbers 1-7, and 9)
2. Complete Beneficiary Information, page 4
3. Attach check for amount of rollover received from the institution
4. Submit a check for $7.50 custodian fee
TO ESTABLISH AN ORP (STATE OF TEXAS ONLY)
1. Complete 403(b)(7) Account Application (Numbers 1-9)
2. Complete Beneficiary Information, page 4
3. Complete ORP Participant Acknowledgement and Disclosure Statement below
4. If both the employee and state contributions will be invested in the
Primary Series, complete two separate applications, indicate "state" on
the application for the state contribution
5. Submit a check for $7.50 custodian fee
TWO APPLICATIONS HAVE BEEN INCLUDED IN THIS KIT TO ALLOW FOR THE
ESTABLISHMENT OF BOTH ORP (STATE OF TEXAS APPROVED INSTITUTIONS ONLY) AND TSA
ACCOUNTS FOR AN INDIVIDUAL.
Mail all completed documents to:
Securities Management & Research, Inc.
One Moody Plaza, 14th Floor
Galveston, TX 77550
- -------------------------------------------------------------------------------
ORP ONLY
ORP PARTICIPANT ACKNOWLEDGEMENT AND
DISCLOSURE STATEMENT
- -------------------------------------------------------------------------------
THIS ACKNOWLEDGEMENT MUST ACCOMPANY ALL APPLICATIONS COMPLETED FOR
PARTICIPATION IN THE TEXAS OPTIONAL RETIREMENT PROGRAM.
I acknowledge that I have been informed of the restrictions imposed on
redemptions under ORP. I understand that no distribution from the custodial
account established under ORP shall be made unless satisfactory evidence of
one of the following conditions is provided to Securities Management &
Research, Inc., the Custodian, by my Employer.
1. Death of Participant
2. Termination of Service with Employer
3. Retirement of Participant
Furthermore, I understand that ORP does not allow the withdrawal of proceeds
from the Program for:
1. Financial hardship
2. Treatment as a premature distribution
3. Reaching age 59 1/2
_______________________________________
Participant's Signature
_______________________________________
Date
_______________________________________
Representative's Signature
_______________________________________
Date
4
<PAGE>
SECURITIES MANAGEMENT & RESEARCH, INC.
[Logo] One Moody Plaza, Galveston, TX 77550
Member NASD, SIPC
Distributor for the American National Family of Funds
403(b)(7) ACCOUNT APPLICATION-PART 1
|------------------------------------------|
| HOME OFFICE USE |
|------------------------------------------|
| Account Number |
|---------------------|--------------------|
| Account Type | Social Code |
|---------------------|--------------------|
| FI Number | LOI Amount |
|---------------------|--------------------|
- -------------------------------------------------------------------------------
______________________________________________________________________________
1. EMPLOYEE INFORMATION
Name _________________________________________________________________________
SSN _______________________________________________ Birthdate ________________
Address ______________________________________________________________________
City ______________________________________ State _______________ Zip ________
Phone Day _______________________________________________ Evening ____________
______________________________________________________________________________
2. EMPLOYER INFORMATION
Name _________________________________________________________________________
Address ______________________________________________________________________
City ______________________________________ State _______________ Zip ________
______________________________________________________________________________
3. ACCOUNT TYPE
/ / 403(b)(7) Account
/ / Texas Optional Retirement Program (ORP). An ORP is a 403(b) plan
available to institutions of higher education in the State of Texas. The
term 403(b) also applies to ORP accounts whenever mentioned in any 403(b)
documents in this Kit.
______________________________________________________________________________
4. TRANSFER OR ROLLOVER ACCOUNTS
Please complete this section ONLY if you are transferring your 403(b) account
to one of the Funds in the American National Family of Funds FROM ANOTHER
INSTITUTION.
/ / A transfer of funds from ANOTHER 403(b) account is pending. A transfer
request is attached and a check for the $7.50 custodian fee is enclosed.
/ / I am rolling over my 403(b) account to one of the Funds in the American
National Family of Funds from another institution. I have liquidated the
former account and attached a check for the proceeds, which are to be
invested in an American National 403(b) account. I have enclosed a check
for the $7.50 custodian fee.
______________________________________________________________________________
5. FUND SELECTION AND CONTRIBUTION INFORMATION (If more than one fund
selected, indicate amount or percentage to be invested in each fund or
series.)
Total Amount of Salary Reduction $____________________________________________
/ / 21 Growth Fund $_______________________ or ____________________%
/ / 22 Income Fund $_______________________ or ____________________%
/ / 23 Triflex Fund $_______________________ or ____________________%
/ / 26 Government
Income Series $_______________________ or ____________________%
/ / 27 Primary Series $_______________________ or ____________________%
SUBSEQUENT CONTRIBUTIONS $_____________________________________________
/ / monthly / / quarterly / / annually / / other _______________________
Billing Franchise # _________________________
______________________________________________________________________________
6. LETTER OF INTENT (Not applicable to Primary Series)
I agree to the terms of the Letter of Intent as set forth in the respective
Prospectus. Although I am not obligated to do so it is my intention to
invest over a 13 month period in shares of one or more funds an aggregate
amount at least equal to that which is checked below. If existing accounts
are to be included, list under #7 below.
/ / $50,000 / / $100,000* / / $250,000
/ / $500,000 / / $1,000,000 / / $1,500,000
(*Government Income Series begins at $100,000)
______________________________________________________________________________
7. SALES CHARGE REDUCTION (Not applicable to Primary Series)
List all Existing Accounts. There will be no retroactive reduction of the
sales charge for shares previously purchased if this section is not completed.
Fund and Account Nos. ________________________________________________________
______________________________________________________________________________
PLEASE MAKE CHECK PAYABLE TO
SECURITIES MANAGEMENT & RESEARCH, INC.
Continued on back.
5
<PAGE>
[Logo] SECURITIES MANAGEMENT & RESEARCH, INC.
ACCOUNT APPLICATION - PART 1
______________________________________________________________________________
8. ORP VESTING INFORMATION (complete only if you will be a State of Texas ORP
participant)
Please check the statement below that applies to your vesting status in the
Optional Retirement Plan (ORP).
/ / YES, I have participated in the ORP for one year and one day and am
vested in the Program.
/ / NO, I have not participated in the ORP Program long enough to have met
the vesting requirements (one year and one day).
I understand that:
1. The contributions made by my employer on my behalf will be invested in
the Primary Series until the vesting requirements have been met;
2. Once I am vested, the State's matching contributions may be exchanged
into another fund upon authorization; AND
3. I have received and read a current prospectus of the fund selected.
9. SIGNATURE
The Employee hereby: (a) appoints Securities Management and Research, Inc.
("SM&R") as Custodian of the account; (b) acknowledges that he/she has
received a current prospectus(es) of the American National Funds Group and/or
SM&R Capital Funds, Inc. and has selected and agreed to the terms as stated
in the prospectus; (c) consents to the $7.50 (per account) initial
installation fee, the $7.50 (per account) annual maintenance fee and the
$5.00 excess contribution adjustment fee. Such fees are subject to change on
30 days written notice to the Employee; (d) acknowledges that he/she has
received a copy of the Custodial Agreement; (e) has obtained Employer's
consent to participate in the Agreement and is an Employee of an Employer
defined in the Agreement; (f) acknowledges responsibility for computing the
maximum annual contribution and for notifying custodian of the amount of
excess contributions, if any; and (g) agrees to the conditions governing the
designation of beneficiary, and (h) certifies under penalty of perjury that
the information contained in this application and supporting documents, are
true, correct and complete.
______________________________________________________________________________
Employee's Signature
______________________________________________________________________________
Date
CUSTODIAN: SECURITIES MANAGEMENT AND RESEARCH, INC.
This account becomes effective on the date the Custodian, or its agent,
accepts the application by issuing an investment confirmation to the
Employee, provided the Employee is not notified to the contrary within 30
days.
REPRESENTATIVE INFORMATION
______________________________________________________________________________
Representative Name (Please Print)
______________________________________________________________________________
Representative Signature
______________________________________________________________________________
SM&R Rep. Social Security Number
DEALER INFORMATION
______________________________________________________________________________
Dealer/Representative Name & Number
______________________________________________________________________________
Dealer/Representative Signature
______________________________________________________________________________
SM&R Dealer # (Internal Use Only)
Note: For Texas ORP Plans, make a copy of Part 1 of Application,
which must be signed by the institution.
6
<PAGE>
SECURITIES MANAGEMENT & RESEARCH, INC.
[Logo] One Moody Plaza, Galveston, TX 77550
Member NASD, SIPC
Distributor for the American National Family of Funds
403(b)(7) ACCOUNT APPLICATION - PART 2
- --------------------------------------------------------------------------------
Purchaser Suitability Form & Arbitration Agreement (This form must accompany all
mutual fund applications submitted to SM&R. All information requested is
required.)
NEW INVESTOR INFORMATION
Date
---------------------------------------------------------------------------
1. Account Registration
--------------------------------------------------------
If account registered as a corporation, partnership or other legal entity,
names of any persons authorized to transact business on behalf of entity:
-----------------------------------------------------------------------------
Social Security (or Tax I.D.) No.
-------------------------------------------
2. Fund(s) being purchased
------------------------------------------------------
3. Investor's Occupation
--------------------------------------------------------
Name of Employer
-------------------------------------------------------------
Address of Employer
----------------------------------------------------------
Business Phone ( )
---------------------------------------------------------
4. Is the Investor employed by or associated with a member of the NASD or NYSE?
/ / No
/ / Yes. If yes, provide the name, address or phone no. of the firm:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. Tax Status
/ / Single / / Head of Household
/ / Married filing separate returns
/ / Married filing joint return or qualifying widow(er) with dependent child
/ / Corporation / / Other
6. Marital Status
/ / Married / / Single / / Widowed
7. Dependents
/ / Spouse / / Children: Ages
-----------
/ / Other
INVESTOR SUITABILITY INFORMATION
(TO BE COMPLETED BY INVESTOR OR REGISTERED REPRESENTATIVE)
NASD rules require Registered Representatives to have reasonable grounds for
believing the recommended investment is suitable for the customer. Therefore,
representatives are required to make inquiries concerning the financial
condition of a proposed investor. You are urged to supply such information so
that the representative can make an informed judgment as to the suitability of
your investment selection(s). However, you are not required to divulge such
information. If you choose not to do so, you must sign at the section provided
on the reverse side indicating refusal and acknowledging that the representative
did request the suitability information.
1. SOURCES OF FUNDS FOR INVESTMENT
/ / Current Earnings / / Gift or Inheritance / / Insurance Benefit
/ / Savings / / Sale of Assets / / Maturity Proceeds
/ / Other
----------------
2. PRIMARY PURPOSE OF INVESTMENT
/ / Education / / Savings / / Retirement
/ / Current Income / / Tax Shelter / / Business Purposes
/ / Other
----------------
3. INVESTMENT PROFILE
(a) What is your current investment preference?
/ / Aggressive Growth / / Growth / / Growth & Current
Income
/ / Current Income / / Maximum safety, even if modest return
(b) What is your risk comfort level?
/ / High / / High/Moderate / / Moderate
/ / Moderate/Limited / / Low
(c) What is your financial goal time horizon?
/ / 1-5 years / / 5-10 years
/ / 10 years and beyond
(d) What is your age range?
/ / 21-40 / / 41-59 / / 60+
(e) What is your tax bracket?
/ / 15% / / 28% / / 28+
(f) What is your estimated annual family income?
/ / Under $15,000 / / $15,000-$30,000 / / $30,000-$50,000
/ / $50,000-$100,000 / / Over $100,000
(g) What is your estimated net worth (exclude home, furnishings and
automobiles)?
/ / Under $25,000 / / $25,000-$50,000
/ / $50,000-$100,000 / / Over $100,000
(h) Are you responsible for the financial welfare of anyone other than your
immediate family (i.e. alimony, child or parental support, etc.)?
/ / Yes / / No
(i) Do you own other securities?
/ / Yes / / No
Types: / / Stocks / / Bonds / / Mutual Funds
/ / Variable Products / / Other
--------------------
I (we) furnished the above suitability information and it has been accurately
recorded.
Investor Signature
--------------------------------------------------------------
Joint Owner Signature
-----------------------------------------------------------
Continued on back.
7
<PAGE>
[Logo] SECURITIES MANAGEMENT & RESEARCH, INC.
403(b)(7) ACCOUNT APPLICATION - PART 2
- --------------------------------------------------------------------------------
STATEMENT OF REFUSAL TO PROVIDE FINANCIAL INFORMATION
I (we) fully understand that the Registered Representative, acting on behalf of
Securities Management & Research, Inc. (SM&R), has requested the preceding
suitability information to determine whether my (our) purchase of securities is
an appropriate investment considering my (our) financial situation. I (we)
refuse to provide the requested information and by my (our) signature(s) below
agree not to seek rescission of the investment or damages based on its
unsuitability.
- --------------------------------------------------------------------------------
Investor Signature
- --------------------------------------------------------------------------------
Joint Owner Signature
REGISTERED REPRESENTATIVE NOTICE - Should the Investor sign the above Statement
of Refusal to Provide Financial Information, it is still an NASD requirement
that you have reasonable grounds to recommend the purchase of this investment as
suitable. Therefore, YOU must complete the suitability information to the best
of your knowledge and certify that you have done so when signing the Registered
Representative's Statement below.
REGISTERED REPRESENTATIVE STATEMENT & SIGNATURE
Check appropriate boxes.
/ / Application-Part 1 attached.
/ / Custodial Agreement and Disclosure Statement detached and given to Investor.
(For IRA, TSA, SEP, or SIMPLE accounts only)
/ / Signed Arbitration Agreement
/ / Suitability information was provided by the Investor and the Investor signed
acknowledgment that information was accurately recorded.
- or -
/ / Refusal to Provide Financial Information Statement Signed by Investor.
I provided the suitability information to the best of my knowledge and have
reasonable grounds to recommend the purchase of this investment as suitable
for the investor.
- --------------------------------------------------------------------------------
Registered Representative Signature
- --------------------------------------------------------------------------------
Registered Representative Name (print)
PURCHASER 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 a jury trial.
3. Pre-arbitration discovery is generally more limited 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 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 may be entered in any appropriate court.
I (we) further understand that we may not bring a punitive or certified class
action to arbitration, nor seek to enforce any pre-dispute arbitration agreement
against anyone who has initiated in court a punitive class action; or who is a
member of a punitive class action until (1) the class action certification is
denied; or (2) the class is decertified, or (3) I (we) are excluded from the
class action by the court. Such forbearance to enforce an agreement to
arbitrate shall not constitute a waiver of any right under this agreement except
to the extent stated herein.
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Investor Signature
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Joint Owner Signature
Accepted; Securities Management & Research, Inc.
By
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Date
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8
Form 9402
06/97
<PAGE>
BENEFICIARY INFORMATION (TO BE COMPLETED AND SUBMITTED WITH APPLICATION(S))
_______________________________________________________________________________
The following designations(s) is (are) subject to the provisions of the Plan.
This designation of beneficiary(ies) remains in effect unless and until a new
designation of beneficiary form is sent, in writing, to the Custodian. This
designation may be revoked and a different beneficiary named by providing the
Custodian with a newly executed Designation of Beneficiary form. Indicate a
percentage amount for each named beneficiary to avoid the possibility of
court intervention. Special beneficiary arrangements should be outlined in
your will. If you are not survived by any designated beneficiary, your estate
will be your beneficiary.
PRIMARY BENEFICIARY
1. Name _______________________________
Date of Birth ______________________
Relationship________________________
Share %______________SSN____________
Address_____________________________
City________________________________
State___________________Zip_________
2. Name _______________________________
Date of Birth ______________________
Relationship________________________
Share %______________SSN____________
Address_____________________________
City________________________________
State___________________Zip_________
SECONDARY BENEFICIARY: (If the person(s) named above should fail to survive
me)
1. Name _______________________________
Date of Birth ______________________
Relationship________________________
Share %______________SSN____________
Address_____________________________
City________________________________
State___________________Zip_________
2. Name _______________________________
Date of Birth ______________________
Relationship________________________
Share %______________SSN____________
Address_____________________________
City________________________________
State___________________Zip_________
Payment will be made in equal shares to the primary beneficiary who survives
me, or if none, to the secondary beneficiary who survives me. If no
beneficiary survives me, payment will be made to my estate.
9
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10
<PAGE>
TRANSFER OF ASSETS REQUEST
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- -------------------------------------------------------------------------------
Contact your current custodian or insurance company for their requirements
before completing.
Complete this form to transfer your present 403(b) account held at another
institution to one of the Funds in the American National Family of Funds and
return to Securities Management and Research, Inc. Securities Management and
Research, Inc. will forward these instructions to your present custodian or
insurance company. Your current custodian may require a separate letter of
instruction, a signature guarantee or an annuity contract, if issued.
EMPLOYEE INFORMATION
Name:__________________________________________________________________________
Soc. Sec. #:___________________________________________________________________
Date of Birth: ________________________________________________________________
Address: ______________________________________________________________________
City, State, Zip ______________________________________________________________
TRANSFER FROM YOUR PRESENT 403(b) ACCOUNT
Name of Insurance Company or Present Custodian:
_______________________________________________________________________________
Address: ______________________________________________________________________
City, State, Zip: _____________________________________________________________
Account Number(s): ____________________________________________________________
EMPLOYEE'S AUTHORIZATION FOR TRANSFER
To Resigning Custodian or Trustee:
I request a / / FULL / / PARTIAL: $___________________________________
liquidation and transfer of my tax sheltered annuity or custodial account(s)
established pursuant to Internal Revenue Code Section 403(b) / / IMMEDIATELY
or / / AT MATURITY. I have established a 403(b) plan with the American
National Family of Funds and have appointed Securities Management and
Research, Inc. as the successor custodian to accept this tax-free transfer of
my present Account
_______________________________________________________________________________
Signature
_______________________________________________________________________________
Date
_______________________________________________________________________________
Signature guarantee, if required by Resigning Custodian
If you have any questions regarding the transfer request, please contact
/ / Securities Management and Research, Inc.
at 1-800-231-4639
/ / Shareholder (Daytime Phone) ( )_______________________-
INVESTMENT OF TRANSFERRED PROCEEDS
/ / I am opening a new account and have attached a completed application
/ / Please deposit the transferred proceeds in my existing 403(b) custodial
account number:
_______________________________________________________________________________
ACCEPTANCE BY NEW CUSTODIAN
Securities Management and Research, Inc. has agreed to serve as custodian for
the above individual's 403(b) custodial account. As custodian, Securities
Management and Research, Inc. will accept the transfer described above.
Please liquidate, and transfer on a custodian-to-custodian basis the amount
designated above and make check payable to Securities Management and
Research, Inc., for benefit of the above named individual account number
_________________________ and mail the check to Securities Management and
Research, Inc., One Moody Plaza, 14th Floor, Galveston, Texas 77550.
_______________________________________________________________________________
Authorized Signature Securities Management and Research, Inc.
_______________________________________________________________________________
Date
REQUIRED MINIMUM DISTRIBUTION INFORMATION
NOTE TO PRESENT CUSTODIAN: If the Employee has reached age 70 1/2, please
complete the following Election made by the Employee as of the required
beginning date. Remaining Period over which required distributions are to be
made: ______________________________ (Number of Years)
Payment method: (Select one)
/ / Declining (elapsed) years
/ / Recalculation of life expectancy
Did Employee choose Joint Life Expectancy with a Designated Beneficiary?
/ / Yes / / No
If "YES" complete following
Beneficiary Name:______________________________________________________________
Date of Birth: ________________________________________________________________
Is Beneficiary Spouse? / / Yes / / No
11
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12
<PAGE>
SAMPLE SALARY REDUCTION AGREEMENT
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- -------------------------------------------------------------------------------
This form is provided as an example of a typical salary deferral agreement
available from your employer and may be used if acceptable to your employer.
Once completed the form will be retained by your employer as authorization to
begin salary deferrals. No representations as to the validity or accuracy of
the content of this form is being made by Securities Management & Research,
Inc. or its representatives. Be sure to confirm that the American National
Family of Funds (American National Funds Group and the SM&R Capital Funds,
Inc.) have been approved by your employer for 403(b) investments.
/ / New Reduction
/ / Increasing Existing Amount
/ / Decreasing Existing Amount
It is agreed by __________________________________________________________
hereinafter referred to as "Employer", and
____________________________________________________, hereinafter referred to
as "Employee", that the employment contract between them for the 19___
through 19___ tax year be amended in the following manner:
1. The salary to be paid to the Employee by the Employer shall be reduced by
the sum of $__________ per month,(______ payments) beginning with the check
payable on _______________________________________, 19___.
2. The salary to be paid to the Employee by the Employer shall be reduced by
the sum of $__________ per month, (______ payments) beginning with the check
payable on _______________________________________, 19___ and beginning
with the check payable on _______________________________________, 19___,
my salary shall be reduced by the sum of $__________ (______ payments).
3. The sum of $__________ per month resulting from such salary reduction
shall be transmitted by the Employer for the purchase of shares of the
American National Funds to be held in a Custodial account. Such Custodial
account shall be established for the Employee in accordance with the
provision of IRC 403(b)(7) and related sections.
4. The reduction amount will be forwarded on the ____________ of the month
following the payroll deduction to:
Securities Management & Research, Inc.
One Moody Plaza
Galveston, Texas 77550
5. The Employee releases any and all rights, present and future, to
receive payment of the sums from the Employer resulting from such salary
reduction in any form except: (1) the right of the Employee to designate
beneficiary of sums to be paid from the Employee's custodial account,
together with sums withheld by the Employer but not yet forwarded to the
designated regulated investment company, upon the Employee's death; (2)
the right of the Employee, upon termination of employment by reason other
than death, personally to receive all or any part of the amount specified
for which service has been rendered but which has not been transmitted
for the purchase of shares of a regulated investment company, together
with such amount as shall be in the Employee's custodial account; or (3)
the right of the Employee as to receipts of sums so paid upon his death.
6. The Employee acknowledges that the Employer has made no representation
to the Employee regarding the advisability, appropriateness or tax
consequences of the purchase of the shares described herein. The Employee
agrees that the Employer shall have no liability whatsoever for any and
all losses suffered by the Employee with regard to his selection of the
fund; the selection of the regulated investment company; the solvency of,
operation of, or benefits provided by said regulated investment company;
or his selection and purchase of shares of regulated investment companies.
7. This amendment shall automatically apply to the employment contract
entered into between the Employer and the Employee for each succeeding
tax year unless amended or terminated by written notice to the Employer
prior to the expiration of the then current tax year.
Date: ___________________________________________________________, 19 ___
_______________________________________________________________________________
Authorized Signature (Employer)
_______________________________________________________________________________
Employee Signature
_______________________________________________________________________________
Employee Social Security Number
RETAINED BY EMPLOYER
13
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14
<PAGE>
SALARY REDUCTION MAXIMUM ALLOWABLE DEFERRAL WORKSHEET
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The following deferral worksheet will help you determine the amount of your
maximum allowable salary reduction. However, you may be required to reduce
this amount further if your employer is making plan contributions in addition
to your deferrals or you are currently making salary deferral contributions
to other retirement plans. You may keep this worksheet for your own records.
Information Required for Deferral Computation:
CURRENT SALARY =$__________
Current Annual Salary (before Salary Reductions)
YEARS OF SERVICE =___________
Years of service with Current Employer (enter whole and fractional years;
however, if less than 1 year, use "1" year)
PRIOR CONTRIBUTIONS =$__________
All contributions (excluding salary deferrals) made by your present
employer to qualified plans, including 403(b) and SEP-IRA Plans, in
prior years for your benefit.
PRIOR DEFERRALS =$__________
All salary deferrals made to 403(b) Plans (including tax-sheltered
annuities) 457 Plans (relating to State deferred compensation plans),
SAR-SEP, and 401(k) Plans on your behalf by your present employer in
prior years.
_______________________________________________________________________________
BASIC EXCLUSION ALLOWANCE FOR DEFERRALS:
1. $___________________=$___________________times________________times .20
Current Salary Years of Service
2. $___________________=$___________________plus $________________
Prior Contributions Prior Deferrals
3. $___________________= #1 minus #2
4. ____________________=(___________________times .20) plus the numeral 1
Years of Service
5. $___________________= #3 divided by #4
Basic Exclusion Allowance
6. $___________________= Enter amount in #5 or $9,500, whichever is less
Maximum Allowable Deferral
_______________________________________________________________________________
It is important that you do not exceed your maximum annual contribution with
respect to any tax year. Any such excesses may be subject to penalty taxes
and/or interest charges on unpaid taxes. Alternative calculation methods are
available to certain plan participants which may result in a larger allowance
if you are an employee of a "qualified organization".
The use of this calculation method may not be appropriate for you if you are
a church employee or if you participate in any other salary reduction plan.
PLEASE NOTE: Neither Securities Management and Research, Inc. nor its
Registered Representatives give legal or tax advice or are authorized to do
so. This Salary Reduction Maximum Allowable Deferral Worksheet is not
intended as legal advice and is a brief summary of applicable law, which is
complex and subject to change. For complete details, you should consult with
your legal and tax advisors.
RETAINED BY EMPLOYEE
15
<PAGE>
16
<PAGE>
AMERICAN NATIONAL FAMILY OF FUNDS 403(b)(7)
CUSTODIAL AGREEMENT
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The American National Family of Funds (herein referred to as "Funds",
"American National Funds" or "American National Family of Funds") 403(b)(7)
Custodial Agreement (the "Agreement") is intended for use by Employers and by
eligible employees who may wish to have their Employer's contributions held
for their benefit in an account invested in shares of eligible American
National Funds, all of which are regulated investment companies, upon the
terms and conditions set forth in this Agreement and in accordance with the
applicable provisions of the Internal Revenue Code of 1986, as amended.
This Agreement is authorized for distribution only if accompanied or
preceded by a current prospectus of one of the American National Funds, in
which a participant invests, in accordance with Section 4. Such prospectuses
contain information concerning the applicable sales charge and other
important facts.
The Employer is an organization described in Section 403(b)(1)(A) of the
Internal Revenue Code of 1986 (the "Code") and desires to provide benefits
for certain of its employees by establishing with the Custodian a custodial
account which satisfies the requirements of Section 401(f)(2) of the Code.
The Custodian is willing to accept its appointment as Custodian of such
custodial account.
Accordingly, the Employer and the Custodian agree as follows:
SECTION 1. DEFINITIONS:
As used in this Agreement, the following terms have the meaning set forth
below, unless a different meaning is clearly required by the context:
1.1 "Account" or "Accounts" means the separate account(s) established and
maintained under this Agreement in accordance with Section 403(b)(7) of
the Code to hold and manage the contributions made hereunder for the
benefit of an Employee.
1.2 "Agreement" means this American National Family of Funds 403(b)(7)
Custodial Agreement, which may constitute an amendment and restatement
of the Agreement in effect immediately prior to this custodial
agreement (the "Former Agreement"), including the information and
provisions set forth in the account application executed to establish the
Employees Account(s). The Agreement, including the account application
and any designation of beneficiary filed with the Custodian, may be
proved either by an original copy or a reproduced copy thereof.
1.3 "Application" means the Application for American National Family of
Funds 403(b)(7) Custodial Account Application executed by the Employee
providing for the establishment of the Account(s) in accordance with
the terms and conditions of the Agreement and if applicable, such other
or additional documents as may be required. The Application is attached
to, and made a part of, this Agreement.
1.4 "Beneficiary" or "Beneficiaries" means the individual or individuals
currently designated by the Employee or, where applicable, by his
surviving spouse, as the beneficiary or beneficiaries on the form
provided for this purpose and then currently on file with the
Custodian, or if no such beneficiary is alive or no designation is in
effect at the time of the Employee's death, the Employee's estate.
1.5 "Code" means the Internal Revenue Code of 1986, as amended and Treasury
Department regulations issued thereunder and applicable Internal
Revenue Service rulings.
1.6 "Contribution" means any salary reduction contribution amount transmitted
by the Employer to the Custodian, and any rollover or transfer
contribution, to be credited to the Employee's Account in accordance
with Section 3.
1.7 "Custodian" means Securities Management and Research, Inc. or any
successor Custodian, as provided in Section 8.
1.8 "Disabled" means, an individual who is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or to be of long-continued and indefinite duration. An individual shall
not be considered disabled unless he furnishes proof of the disability,
as required.
1.9 "Employee" means an individual employed by the Employer who has
obtained the Employer's consent to participate under this Agreement and
who has properly executed the Application.
1.10 "Employer" means the employer named in the Application and as described
in Section 501(c)(3) of the Code and exempt from tax under Section
501(a) of the Code; or a State, a political subdivision of a State, or
any agency or instrumentality thereof, but only with respect to
employees who perform or have performed services for an educational
organization described in Section 170(b)(1)(A)(ii) of the Code.
1.11 "Financial Hardship" The determination by the Employer of the existence
of financial hardship and the amount required to be distributed to meet
the need created by the financial hardship shall be made in accordance
with the following standards: a financial need of the Employee because of
(i) a personal accident or illness of the Employee or a person in the
Employee's immediate family, (ii) the death of a person in the Employee's
immediate family, (iii) the need for funds to acquire, construct or
reconstruct or substantially rehabilitate any dwelling unit which
within a reasonable time is to be used (determined at the time the
distribution is made) as a principal residence of the Employee or a person
in the Employee's immediate family or educational expenses of the Employee
or a person in the Employee's immediate family. Distributions made for
financial hardship purposes are subject to mandatory 20% withholding. A
distribution based upon financial hardship cannot exceed the amount
required to meet the immediate financial need created by the financial
hardship and not reasonably available from other resources of the
Employee. Distributions on account of financial hardship after December
31, 1988, shall only be made in the case of contributions made pursuant to
a Salary Reduction Agreement. The Custodian shall have no responsibility
for obtaining the determination from the Employer or evaluating the
financial hardship or the independence of the individual making the
determination. The determination of the Employer shall be final.
1.12 "Funds", "American National Funds" or "American National Family of
Funds" means the regulated investment companies, as defined in Section
851(a) of the Code, whose investment adviser and shareholder servicing
agent is Securities Management and Research, Inc., and whose shares are
authorized for purchase under this Agreement.
1.13 "Salary Reduction Agreement" means a legal binding agreement between
the Employer and the Employee whereby the Employee irrevocably agrees to
take a reduction in salary or forego an increase in salary with respect to
amounts earned after the Agreement's effective date, and whereby the
Employer agrees to contribute the amount of salary reduced or foregone by
the Employee to the Account(s). The Salary Reduction Agreement may be
terminated at any time by either the Employer or the Employee with respect
to amounts not yet earned by the Employee.
SECTION 2. ESTABLISHMENT OF ACCOUNT(S).
2.1 The Custodian shall, in accordance with the terms of this Agreement,
open and maintain an Account for the exclusive benefit of each Employee
who has properly become a party to this Agreement and the Employee's
designated beneficiaries. The Custodian shall hold and administer, in
accordance with the terms hereof, contributions to the Account(s) and any
gain or income from the investment thereof.
17
<PAGE>
2.2 The Application and the Salary Reduction Agreement are incorporated
herein by reference as part of the Agreement. The Employer shall be
deemed to have established this Account for the Employee upon the
Employer's payment to the Custodian of the initial contribution specified
in Section 3. The Account will become effective upon acceptance of the
Application by or on behalf of the Custodian at its offices, as evidenced
by a written notice to the Employee. Notice may be given by confirmation
statement confirming the establishment of the Account.
2.3 Requirements for Establishment of Texas Optional Retirement
Program Accounts. The Custodian shall open and maintain two separate
accounts for each Employee electing to invest in the State of Texas
Optional Retirement Program (ORP). The Custodian shall hold the State's
matching contribution in an SM&R Capital Funds, Inc.--American National
Primary Fund Series account for the Employee for a period of one year
and one day; and contributions made by salary reduction for the employee
will be invested in the Fund of his choice pursuant to the conditions of
ORP. The State of Texas shall maintain sole discretion over all separate
accounts containing State ORP contributions until such time as the
Custodian is directed otherwise by the State.
SECTION 3. CONTRIBUTIONS
3.1 The Custodian shall accept cash contributions from the Employer on
behalf of Employee. Each such contribution shall be accompanied by
specific written instructions from the Employer specifying the
Employees' separate accounts to which it is to be credited. Employer
contributions shall be made only pursuant to a written salary reduction
agreement between the Employer and Employee.
The Employee shall have sole responsibility for determining the
amount an Employer may contribute on his behalf. The Custodian shall not
be responsible to recommend or compel Employer contributions to the
Account. If during any taxable year the Employer contributes an amount
which is an "excess contribution," such excess contribution and any
income attributable thereto shall, upon the written request of the
Employee to the Custodian specifying the specific amount of such excess
contribution and income, be paid to the Employee by the Custodian.
3.2 The Employer or the Employee may transfer cash from another
custodial account qualified under Section 403(b)(7) of the Code and/or
from an annuity contract qualified under Section 403(b) of the Code to
the Account if the Employee certifies that the transaction meets the
requirements for a tax-free transfer of annuity contract under
Section 1035 of the Code and other applicable laws or rulings of the
Internal Revenue Service, or is a rollover contribution described in
Sections 403(b)(8), 408(d)(3)(A)(iii) or any other appropriate section
of the Code. Once transferred, such assets shall be treated as a
contribution on behalf of such Employee for purposes of this Agreement
and shall be invested, distributed and otherwise dealt with as such. The
Custodian shall not have any responsibility to the Employee for the tax
treatment of any such transfer or rollover.
3.3 The Employer or the Employee may cause the transfer, in cash, of
the balance credited to the Employee's separate account from this
Account directly to the Custodian of another custodial account qualified
under Section 403(b)(7)of the Code or to an insurance company designated
by the Employee for the purchase, for the benefit of the Employee of an
annuity contract qualified under Section 403(b) of the Code if the
Employee certifies that the transaction meets the requirements for a
tax-free transfer of annuity contracts under Section 1035 of the Code
and other applicable laws or rulings of the Internal Revenue Service.
Once transferred, such assets shall be treated as a contribution on
behalf of the Employee for purposes of the successor custodial account
and/or annuity contract and shall be invested, distributed and otherwise
dealt with as such.
3.4 Neither the Custodian nor the Distributor or its agents shall be
liable for losses arising from the acts, omissions, or delays or other
inaction of any party transferring assets to the Account or receiving
assets transferred from the Account pursuant to this Section 3 nor shall
they have responsibility for the tax treatment to the Employee of any
rollover or transfer of assets.
SECTION 4. INVESTMENT OF ACCOUNT ASSETS.
4.1 Contributions credited to the Employee's Account(s) shall be
applied by the Custodian solely to the purchase of shares, including
fractional shares carried to the third decimal place in one or more of
the Funds.
4.2 The Employer (upon request of the Employee) and/or the Employee
may direct the Custodian at any time and from time to time to exchange
any shares held in the Account for other shares of Funds in the American
National Family of Funds in accordance with the then current
prospectuses relating to such shares.
4.3 All dividends and capital gains or other distributions shall be
reinvested in additional fund shares which shall be credited to the
Employee's account.
4.4 All shares credited to the Employee's Account shall be registered
in the name of the Custodian or its registered nominee.
4.5 The Employee may not borrow funds from his account, nor may he use
the funds as security for any loan or extension of credit.
4.6 The Custodian shall not have any duty to question the directions
of the Employee or the Employee's Beneficiary, executor or administrator
regarding the investment of the assets in the Account or to advise such
persons regarding the purchase, retention or sale of such investments,
nor shall the Custodian be liable for any loss that results from the
exercise of control over the Account by the Employee or the Employee's
Beneficiary, executor or administrator. By giving investment
instructions the Employee or the Employee's Beneficiary, executor or
administrator will be deemed to have acknowledged receipt of the then
current prospectus in which the Employee or the Employee's Beneficiary,
executor or administrator instructs the Custodian to invest
contributions or assets under the terms of this Agreement.
SECTION 5. DISTRIBUTIONS
5.1 Distribution from the Account shall be made by the Custodian only
to an Employee, his surviving spouse or Beneficiary (as defined in
Section 1), and no purported sale, transfer, pledge or assignment by the
Employee, his spouse or Beneficiary of all or any part of an interest in
the Account shall be recognized by the Custodian except as provided in
Section 3.2. The interest of a Employee, his spouse or Beneficiary in
the Account shall not be subject to the debts, contracts, liabilities,
engagements or torts of such person or to attachment or legal process
against such person. This Section 5.1 shall be subject to such exceptions
as may be required by law, including without limitation, any requirements
as to the withholding of any amounts from such distributions for federal
and, if applicable, state income taxes.
5.2 "Events of Distributions" The Custodian shall distribute, or
commence distribution of, the balance credited to an Employee's
account only upon request of the Employee after receipt of written
certification and evidence satisfactory to the Custodian from the
Employee that one or more of the following events have occurred:
(a) the Employee has reached his Normal Retirement Date or
has actually reached age 70 1/2;
18
<PAGE>
(b) the Employee has attained age 59-1/2;
(c) the Employee has become disabled (refer to Section 1 for
definition of disabled);
(d) the Employee has separated from service with the Employer;
(e) the Employee has died.
5.3 Restrictions on ORP Distributions. Notwithstanding any
limitations contained in this paragraph 5.2, and in accordance with
the rules and regulations promulgated by the State of Texas in
connection with optional retirement programs, no distribution from
the custodial account shall be made unless written authorization of
one of the following three conditions is provided by the Employer
to the Custodian:
1. Death of Employee;
2. Termination of service with Employer;
3. Retirement of Employee.
Furthermore, whereby state matching contributions has been invested
in a separate account on behalf of an Employee and such Employee
terminates his employment prior to one year and one day of employment,
the distribution will be made payable and forwarded to the State.
5.4 Whether or not the distribution have commenced pursuant to
Section 5.2, all or a portion of an Employee's interest in the
Account shall be distributed to him by the Custodian upon receipt
of written notice from the Employer (following application by the
Employee) that such distribution has been authorized by the
Employer for reason of Financial hardship (as defined in Section 1).
Any such distribution shall be paid to the Employee in cash
after receipt of certification by the Employee that the
distribution amount is only of salary reduction contributions and
not earnings. Such distribution will be subject to the 20%
mandatory withholding pursuant to the Unemployment Compensation Act
of 1992.
5.5 If the distribution occurs before the Employee is age 59-1/2
(and is not directly rolled over to another qualifying plan), the
distribution is subject to a 10% federal excise tax plus a 20%
mandatory withholding, in addition to ordinary income tax, unless
the distribution is: (a) made on account of separation of service
occurring after attainment of age 55; (b) attributable to
disability; (c) made to a beneficiary or to the Employee's estate
following the death of the Employee; (d) made to an alternate payee
pursuant to a qualified domestic relations order, or (e) part of a
series of substantially equal periodic payments (commencing after
separation of service) over the Employee's single or joint life
expectancy. Such payment schedule must remain uninterrupted through
the later of attainment of age 59-1/2 or five (5) years from the
date of the first payment.
5.6 "Required Distributions" The Employee must begin receiving
distribution from his Account not later than April 1 following the
calendar year in which the Employee attains age 70-1/2, hereinafter
termed the "required beginning date". At least 30 days prior to
that date, the Employee must elect to have the balance in the
Account distributed in: (i) a single sum payment; (ii) equal, or
substantially equal, monthly, quarterly, or annual payments
commencing not later than the required beginning date and not
extending beyond the life expectancy of the Employee; or (iii)
equal, or substantially equal, monthly, quarterly, or annual
payments commencing not later than the required beginning date and
not extending beyond the joint and survivor expectancy of the lives
of the Employee and the designated Beneficiary, provided. However,
if the Employee's spouse is not the designated Beneficiary, the
method of distribution selected must assure that at least 50% of
the present value (determined at the time the distribution
commences) of the account available for distribution is paid within
the life expectancy of the Employee.
The minimum amount that must be distributed each year,
beginning with the date payments commence, is the balance in the
Account immediately prior to the distribution (to include payments
withdrawn during that year) divided by the life expectancy of the
Employee or joint life expectancy of the Employee and his/her
designated Beneficiary computed at the end of each year.
Notwithstanding that distributions may have commenced pursuant to
(i) or (ii) above, the Employee may receive a larger distribution
from the Account upon written request to the Custodian.
It shall be the duty of the Employee or, when applicable, the
Employee's Beneficiary to determine the amount of distributions
hereunder, and the Custodian shall not be liable to the Employee or
any other person for taxes or other penalties incurred as a result
of failing to distribute any minimum amount required by the Code.
5.7 "Death Benefits" If the Employee dies before receiving full
distribution of the Account, the balance in the Account must be
distributed in the following manner:
(a) If the Employee died after his/her required beginning date
for distributions, the Beneficiary will continue to receive
distributions at least as rapidly as under the method of
distribution in use prior to the Employee's death and may request
larger distributions, including a single sum payment of the balance.
(b) If the Employee died prior to his/her required beginning date, and
the designated Beneficiary is the surviving spouse, the spouse may
receive the balance in the Account:
(i) over a period (or in a single sum payment) not extending
beyond December 31 of the fifth year following the Employee's
death, or
(ii) over a period or in a single sum payment commencing not later
than December 31 of the year in which the Employee would have
attained age 70-1/2 and not extending beyond the life expectancy
of the surviving spouse.
Distributions will be treated as having been paid to the surviving
spouse even if paid to a child if the balance will be paid to the
spouse when the child reaches the age of majority.
(c) If the Employee died prior to his/her required beginning date,
and the designated Beneficiary is not the surviving spouse, the
Beneficiary must receive the balance of the Account
(i) over a period or in a single sum payment not extending beyond
December 31 or the fifth year following the
Employee's death, or
(ii) over a period commencing not later than December 31 of the
year following the year of the Employee's death and not
extending beyond the life expectancy of the Beneficiary.
5.8 "Computation of life expectancy" Life expectancies of the Employee
and Beneficiary shall be determined pursuant to tables contained in
Section 1.72-9 of the Treasury Regulations.
Unless an election to recalculate life expectancy is made by the Employee
(or surviving spouse in the case of distributions described in Section
4.4(b)(ii) above) not later than the required beginning date, payments for
any 12-consecutive-month period will be based on life expectancy, computed
prior to the first payment, minus the number of whole years passed since the
payments first commenced.
5.9 "Miscellaneous" Any distribution payment made by the Custodian
shall be subject to withholding of any income or other taxes required by
law.
SECTION 6. NONFORFEITABILITY.
A Participant's interest in the balance of his account shall at all
times be nonforfeitable.
19
<PAGE>
SECTION 7. BENEFICIARY DESIGNATION.
The Employee may designate the Beneficiary of his Account by completing
a beneficiary designation form acceptable to and filed with the Custodian.
If the Employee designates more than one Beneficiary, he shall
designate the percentage interest that each such Beneficiary shall
receive from his Account upon distribution. In the event no such
percentage interest is designated, the interest of each Beneficiary
shall be equal.
If the Employee predeceases his/her spouse before his/her entire
Account is distributed in accordance with Article 4(c) of the Plan and
the spouse is entitled to distributions and the Employee has designated
no Beneficiary for the remaining interest and if the spouse should die
before the Account is fully distributed or all such Beneficiaries shall
have predeceased the Employee's spouse, then the interest of the
Employee's spouse in the Account shall be fully vested and subject to
the terms and conditions of this Article and the Employee's spouse shall
be entitled to designate the Beneficiary of Account in accordance with
this Article.
The Employee may, at any time, change or revoke any designation made
under this Section by completing a beneficiary designation form
acceptable to and filed with the Custodian. Upon the death of the
Employee, the designation or designations made hereunder shall be
irrevocable. A change of beneficiary designation shall be effective only
if received by the Custodian prior to the death of the Employee.
If the Employee fails to designate any Beneficiary or if the Employee
revokes the designation of Beneficiary or if all Beneficiaries
designated predeceases the Employee, then the entire interest of the
Employee in his/her Account shall pass to the Employee's estate.
SECTION 8. RESPONSIBILITY AND DUTIES OF CUSTODIAN.
8.1 "Agency" The Custodian shall be an agent for the Employer and the
Employee to receive and invest contributions as directed by the
Employee, hold and distribute investments, and keep adequate records and
report thereon, all in accordance with the Agreement. The parties do not
intend to confer any fiduciary duties on the Custodian and none shall be
implied.
8.2 "Delegation of Authority" The Custodian may perform any of its
administrative duties through other persons designated by it from time
to time, except that shares must be registered as stated in Section 5.4;
but no such delegation or future change therein shall be considered as an
amendment of the Agreement.
8.3 "Written Communications" All notices, requests and other
communications to the Custodian by the Employer or any Employee (or his
spouse or Beneficiary) shall be in writing and in such form as the
Custodian may from time to time prescribe. The Custodian shall be
entitled to rely on any such instrument believed by it to be genuine.
8.4 Except as provided in Section 9.2, the Custodian shall have the
power and authority in the administration of the Account to do all acts,
to execute and deliver all instruments and to exercise for the benefit
of the Employee's and their Beneficiaries any and all powers which would
be lawful, were it in its own right the actual owner of the property
held.
8.5 "Custodian Fees" The Custodian shall receive such compensation for
its services hereunder as may be agreed upon from time to time by the
Custodian and the Employee. At least thirty (30) days notice shall be
given of any increase in the Custodian's compensation and the Employee
shall have made no objection thereto within such 30-day period. Such
compensation and any expenses incurred by the Custodian in the
administration of the Account shall be paid from the Account and shall,
unless allocable to the accounts of specific Employee's be charged
proportionately to the accounts of all Employee's.
8.6 "Resignation or Removal" The Custodian may resign at any time upon
thirty (30) days' notice in writing to the Employee and may be removed by
the Employer at any time upon thirty (30) days' notice in writing to the
Custodian and the other party. Upon such resignation or removal, the
Employer shall appoint a successor custodian, which successor shall be a
"bank" as defined in Section 501(d)(1) of the Code or such other person
who is eligible to be a custodian under Section 401(f)(2) of the Code.
If within thirty (30) days after the Custodian's resignation or removal,
the Employer has not appointed a qualified successor custodian which has
accepted such appointment, the Custodian may appoint, or may apply to a
court of competent jurisdiction for appointment of a successor custodian
which shall be a "bank" as defined in Section 401(d)(1) of the Code or
such other person eligible to be a custodian under Section 401(f)(2) of
the Code. Upon receipt by the Custodian of written acceptance of
appointment by the successor custodian, the Custodian shall transfer and
pay over to such successor the assets of the Account and all records
pertaining thereto, reserving such sum as it may deem advisable for
payment of all its fees, compensation, costs and expenses and any other
liabilities constituting a charge on or against the assets of the
Account or on or against the Custodian. The successor custodian shall
thereafter be the Custodian under this Agreement. Upon its resignation or
removal, the Custodian shall not be liable for the acts or omissions of
any successor Custodian. Upon the transfer of the assets of the Account
to a successor Custodian, the resigning or removed Custodian shall be
relieved of all further liability with respect to this Agreement, the
Account and the assets thereof.
8.7 "Liability of Custodian" The Custodian shall not be liable in any
way for the determination or collection of contributions provided for
under this Agreement, the selection of the investments for the Account,
the purpose or propriety of any distribution made pursuant to Section 5
hereof, or any other action taken at the direction of the Employer, the
Employee (or Beneficiary, where applicable) or other authorized
representative. The Custodian shall not be obliged to take any action
whatsoever with respect to the Account except upon the receipt of written
directions from the Employee (or Beneficiary, where applicable) or other
authorized representative. The Custodian shall be under no obligation to
determine the accuracy or propriety of any such directions and shall be
fully protected in acting in accordance therewith. Subject to applicable
law, the Custodian shall not be liable for taking or omitting to take any
action under this Agreement. The Custodian shall not be obligated or
expected to commence or defend any legal action or proceeding in
connection with this Agreement.
SECTION 9. REPORTS AND RETURNS.
9.1 The Custodian shall:
(a) maintain separate records of the interest of each Employee (or his
surviving spouse or Beneficiary) in the Account indicating (i) the
amounts and dates of all contributions, (ii) the investment of such
contributions, (iii) the earnings on such investments, (iv) the
amounts and dates of all distributions, and (v) such other data as
the Custodian deems useful in carrying out its duties hereunder; and
(b) mail at least once during each calendar year a statement of all
transactions in the Account during the preceding year and a
statement showing the value of the assets held in the Account as of
the end of such year. Unless the Employee sends the Custodian
written objection to a report within sixty (60) days after its
receipt, the Employee shall be deemed to have approved such report;
and, in such case, the Custodian shall be forever
20
<PAGE>
released and discharged from all liability and accountability to
anyone with respect to all matters and things included therein. The
Custodian may seek a judicial settlement of its accounts. In any
such proceeding the only necessary party thereto in addition to the
Custodian shall be the Employee.
9.2 Shares in the Account shall be voted by, or in accordance with
the instructions of, the Employee of whose benefit they are held, or
by, or in accordance with the instructions, of his surviving spouse or
Beneficiary; and the Custodian shall deliver, or cause to be delivered
to the Employee or his surviving spouse or Beneficiary all notices,
financial statements, proxies and proxy materials relating to such
Shares.
9.3 The Custodian shall file such returns or reports with respect to
the Account as are required to be filed by it under the Code and the
regulations thereunder, or by the Department of Labor, and the
Employer and each Employee shall provide the Custodian with such
information available to them as the Custodian may require to file
such reports.
SECTION 10. AMENDMENT AND TERMINATION.
10.1 This Custodial Agreement may be amended by written instrument to
any extent upon thirty (30) days written notice to the Employee.
Notwithholding the foregoing, such amendment shall be effective upon
adoption if designated by the Custodian as necessary to qualify under
Section 403(b) of the Code.
10.2 This Agreement shall terminate upon the complete distribution of
the Account or in the event that a determination is made by the
Internal Revenue Service that the Account does not satisfy the
requirements of Section 401(f)(2), Paragraph 11,700 of the Code or
that contributions thereto are not treated under Section 403(b)(7)(A)
of the Code as contributed for annuity contracts. In the event of
termination as aforesaid, the balance in the Account shall be
distributed to the Employee's (or their respective surviving spouses
or Beneficiaries, as the case may be) in accordance with their
interests in the Account.
10.3 "Salary Reduction Agreement" The Employee and the Employer may
agree to amend the Salary Reduction Agreement at any time. The
Employee and Employer shall not enter into more than one Salary
Reduction Agreement in any one taxable year.
SECTION 11. MISCELLANEOUS.
11.1 "Applicable Law" The Account is established with the intention
that it qualify as a custodial account under Section 401(f)(2) of the
Code and that contributions thereto be treated under Section
403(b)(7)(A) of the Code as amounts contributed for annuity contracts,
and the provisions of this Agreement shall be construed in accordance
with such intention. This Agreement shall be governed by the laws of
the State of Texas insofar as election of such laws is permitted.
11.2 "Pronouns" Whenever used in this Agreement, the masculine
pronoun is to be deemed to include the feminine. The singular form,
whenever used herein, shall mean or include the plural form where
applicable, and vice versa.
11.3 "Notices" Any notice, accounting, or other communication which
the Custodian may give the Employer or the Employee shall be deemed
given when mailed to the Employer or Employee at the latest address
which has been furnished to the Custodian. Any notice or other
communication which the Employer or Employee may give to the Custodian
shall not become effective until actual receipt of said notice by the
Custodian.
11.4 "No Employment Contract" This Agreement shall not be deemed to
constitute a contract of employment between the Employer and Employee,
nor shall any provision hereof restrict the right of the Employer to
discharge the Employee or of the Employee to terminate his employment.
11.5 "Disqualification" This Agreement is established and created
with the intent that it shall meet the terms of Section 403(b)(7) of
the Code. Notwithstanding any other provision contained herein, if
it is determined by the Internal Revenue Service that the Agreement is
not qualified initially and is not amended to retroactively qualify
under such Section of the Code, all assets acquired with contributions
hereunder together with income earned thereon less reasonable expense
and agreed Custodian fees, shall be distributed to the Employees and
the Agreement shall be considered to be rescinded and of no force and
effect. If the Agreement, after qualifying initially or
retroactively, shall fail to remain qualified under Section 403(b)(7)
of the Code, the assets held hereunder shall be segregated by the
Custodian, or otherwise disposed of for the exclusive benefit of
Employees within 30 days following the custodian's receipt of notice
of determination of such disqualifications.
11.6 "Tax Treatment" The tax treatment of any contributions to the
Custodial Account and of any earnings of the Custodial Account
depends, among other things, upon the tax status of the Employer and
the amount of contributions made in any year to the Account (and to
other plans, accounts, or contracts with the benefit of special tax
treatment) for the benefit of the Employee. The Custodian, and the
American National Funds and SM&R Capital Funds assume no
responsibility with respect to such matters, nor shall any term or
provision of this Agreement be construed so as to place any such
responsibility upon any of them.
11.7 The American National Family of Funds 403(b)(7) Custodial
Agreement and related documents are intended to comply with current
provisions of the Internal Revenue Code. However, the Funds
comprising the American National Family of Funds assume no
responsibility as to the effect or legal sufficiency under federal,
state or other applicable law of this Agreement in any particular
case. This Agreement is not a prototype, master plan or other similar
document approved as to form by the Internal Revenue Service.
Further information regarding 403(b) plans may be obtained from any
district office of the Internal Revenue Service.
21
<PAGE>
22
<PAGE>
23
<PAGE>
Form 9343-94
Rev. 9/97 1500
24
<PAGE>
TRADITIONAL IRA
EVERYTHING YOU NEED TO:
- - OPEN A NEW SM&R IRA ACCOUNT
- - TRANSFER YOUR PRESENT IRA ACCOUNT(S) TO AN SM&R IRA
- - DIRECTLY ROLL OVER YOUR RETIREMENT PLAN DISTRIBUTION
- - OPEN OR TRANSFER AN SEP ACCOUNT
SECURITIES MANAGEMENT & RESEARCH, INC.
One Moody Plaza * Galveston, Texas 77550
(409) 763-2767 FORMS KIT
(INCLUDES SEP)
[LOGO]
Member NASD, SIPC
<PAGE>
IT'S AS EASY AS "ABC" TO ESTABLISH A TRADITIONAL IRA
- --------------------------------------------------------------------------------
After reviewing a current prospectus for the American National Funds Group
and/or SM&R Capital Funds, Inc., carefully complete the IRA APPLICATION found
in this kit.
To make it as easy as "ABC" to establish an IRA in our family of funds,
Securities Management & Research, Inc. ("SM&R") has placed all forms required
to establish an IRA in this kit. The forms included are:
1. IRA DIRECT TRANSFER REQUEST--Complete this form, included in this kit, if
you wish to have a Trustee-to-Trustee transfer of your current IRA to SM&R
from another institution.
2. * DIRECT ROLLOVER REQUEST FORM--If you wish to roll funds directly from a
qualified retirement plan or 403(b) plan (TSA) to an IRA in the American
National Family of Funds, complete and return this form, included in
this kit.
3. * IRA ROLLOVER STATEMENT--Complete this form, included in this kit, if you
have already received a distribution from an IRA, qualified retirement
plan or 403(b) (TSA) and are rolling the proceeds into an IRA in the
American National Family of Funds within the 60th day of receiving the
funds.
IRA CONTRIBUTION DEADLINE
Contributions may be made all year long but must be completed by your tax
filing deadline (not including extensions) in order to deduct them for the
prior year. The IRS has stated that a contribution postmarked April 15 may be
considered a prior year contribution. This position is subject to change at
any time.
Furthermore, all contributions made by pre-authorized check, payroll
allotments, etc., are deemed to be current year contributions ONLY.
If you have any questions please contact your representative or call SM&R,
toll free, at 1-800-231-4639.
* Important Note: Effective January 1, 1993, eligible rollover distributions
from qualified plans and 403(b) plans are subject to a 20% mandatory
withholding tax UNLESS rolled over directly to an IRA or to another qualified
retirement plan. Please review pages 11 for a further explanation.
IS IT A TRANSFER OR A ROLLOVER?
These two terms have been used interchangeably to apply to any movement of
funds between retirement plans for years. However, there exists a major
difference--A Rollover is a reportable transaction. Below is a more thorough
explanation of the difference between the two.
TRANSFER
A transfer is essentially the movement of all or part of the assets in a
retirement plan from its current trustee or custodian to a successor trustee
or custodian. Because the assets remain in the same type of plan and are not
received by the participant, they are not reportable to the government.
To transfer IRA assets from another institution to Securities Management &
Research, Inc. ("SM&R"), you will need to complete the Transfer Request Form,
included in this kit. If you have an existing IRA you may choose to invest
the proceeds from your transfer to that account, in which case you would not
need to complete the IRA Application. However, if the proceeds are to be
invested in a new IRA, complete the Application in its entirety, and give
both the Application and Transfer Request to your representative or mail them
directly to Securities Management & Research, Inc. at the address indicated
on the Application. SM&R will handle the transfer for you and send a
confirmation statement when the transfer is completed.
ROLLOVER
A rollover occurs when plan assets become payable to a participant in a
reportable transaction and these funds are redeposited into another
retirement plan. A participant in a qualified plan or 403(b) plan can choose
either to have the distribution rolled over directly by the current plan's
trustee or custodian (a "Direct Rollover") or to receive the distribution,
less a mandatory 20% federal withholding tax, and complete the rollover
within (60) sixty days. Beginning in 1993 distributions received from
qualified retirement plans, including 403(b) plans, that are eligible for
rollover treatment are subject to a mandatory 20% federal withholding tax,
unless the distribution is rolled over directly to an IRA or another
qualified plan from the plan's trustee or custodian.
Although the amount rolled over is not subject to current taxes, the trustee
or custodian of the distribution retirement plan is required to issue IRS
Form 1099R showing the full amount of the distribution. When you roll over
the amount to an IRA, SM&R will issue a confirming Form 5498 to both you and
the IRS. Additionally, you will have to reflect the information regarding the
rollover on your tax return for the year in which the distribution occurred.
To "roll over" to an IRA, complete the IRA Rollover Statement, included in
this kit, unless you are requesting a "Direct Rollover" in which case you
should complete the Direct Rollover Request Form. Attach the appropriate form
to a completed IRA Application and give both to your representative or mail
directly to Securities Management & Research, Inc. If you have an existing
IRA, you may choose to roll over the proceeds to that IRA account; however,
by doing so, you waive the right to later "roll" the funds back into a new
employer's qualified plan and retain certain beneficial tax treatment on the
ultimate distribution of this account.
Because of the possible tax implications of transfers and rollovers, you
are encouraged to consult with your tax adviser.
PLEASE BE REMINDED--YOU ARE ALLOWED ONLY ONE IRA TO IRA ROLLOVER IN A
12-MONTH PERIOD.
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
[LOGO] AMERICAN NATIONAL FAMILY OF FUNDS |----------------------------------------------------|
Forward to: Securities Management & Research, Inc.| HOME OFFICE USE |
One Moody Plaza, Galveston, TX 77550 |----------------------------------------------------|
(800) 231-4639 |Account Number |
|--------------------------|-------------------------|
|Account Type |Social Code |
|--------------------------|-------------------------|
|FI Number |LOI Amount |
|--------------------------|-------------------------|
</TABLE>
TRADITIONAL IRA APPLICATION--PART 1
- -----------------------------------------------------------------------------
ACCOUNT REGISTRATION FORM (must be accompanied by Account Application--Part 2
Suitability Form)
This application form is for use in establishing IRA and SEP accounts in the
American National Funds Group and the SM&R Capital Funds.
ACCOUNT REGISTRATION
SM&R, Inc., Custodian for
Name __________________________________________________________________________
Date of Birth (mm/dd/yy) ______________________________________________________
Address _______________________________________________________________________
City, State, Zip ______________________________________________________________
Social Security No. ___________________________________________________________
Daytime Phone Number __________________________________________________________
Evening Phone Number __________________________________________________________
ACCOUNT TYPE
/ / Contributory IRA ($2,000 limit/$4,000 combined for Spousal IRAs)
/ / Deductible IRA
/ / Non-Deductible IRA
/ / Spousal IRA (separate application for each spouse)
/ / Transfer IRA (no dollar limit) (IRA to IRA) (Transfer Request attached,
page 6)
/ / Rollover IRA (no dollar limit) (Qualified Plan to IRA)
(Rollover request or statement attached, page 7 or 8)
/ / SEP-IRA
(5305-SEP attached, page 14)
INVESTMENT INFORMATION
METHOD OF INVESTMENT
/ / I have enclosed a check for a minimum of $100 per Fund ($1,000 for
American National Primary Series)
/ / I have enclosed a check for a minimum of $20 per Fund ($100 for
American National Primary Series) and completed the Pre-Authorized Check
Plan form #8006 located at the back of the appropriate Fund's prospectus
/ / Billing Franchise No. ___________________________________________________
/ / Military Allotment (complete form 9341.)
/ / I have NOT enclosed a check because:
/ / A Transfer Request is attached
/ / A Direct Rollover Request is attached
FUND SELECTION
INVESTMENT TAX YEAR OF
FUND SELECTION AMOUNT CONTRIBUTION
/ / A. N. Growth Fund (21) __________ ____________
/ / A. N. Income Fund (22) __________ ____________
/ / Triflex Fund (23) __________ ____________
/ / A. N. Government Income Fund (26) __________ ____________
/ / A. N. Primary Fund (27) __________ ____________
All dividends and capital gains distributions will be automatically
reinvested into the account.
PLEASE MAKE YOUR CHECK PAYABLE TO SM&R, INC.
REDUCED SALES CHARGE (Not applicable to Primary Series)
Please check the applicable category(ies) and write the account number(s)
to be included in determining the reduced sales charge under Account Numbers
below. Refer to the prospectus regarding sales charges.
/ / Right of Accumulation. I apply for this privilege, as described in the
Prospectus, based on the accounts listed in the spaces provided below
/ / Letter of Intent. By completing this section, I agree to the provisions
of the Letter of Intent as described in the Prospectus. I have listed my
other accounts that may qualify to be included under this LOI.
/ / Establish a new LOI for the amount indicated below
/ / Increase my current LOI to the amount indicated below
I plan to invest during a 13-month period a dollar amount at least:
/ / $50,000* / / $100,000 / / $250,000 / / $500,000
*(Growth, Income, and Triflex Funds only)
________________________________ ________________________________
Account Number Account Number
________________________________ ________________________________
Account Number Account Number
NET ASSET VALUE ACCOUNTS
/ / I am an employee/agent of American National or a Subsidiary
/ / I am a qualified relative
Relationship/Employee:______________________________________________________
SIGNATURES REQUIRED ON REVERSE SIDE.
2
<PAGE>
BENEFICIARY INFORMATION
I designate the following beneficiary to receive the balance in my IRA
custodial account upon my death in order to be effective, the beneficiary
designation and any subsequent change of beneficiary must be filed with the
Custodian prior to my death. The balance of my account shall be distributed
in equal amounts to the beneficiary(ies) who survives me. If no beneficiary
is designated or no primary or contingent beneficiary survives me, the
balance of my IRA will be distributed to the legal representatives of my
estate. This designation revokes any prior designations. I retain the right
to revoke this designation at any time. I hereby certify that there is no
legal impediment to the designation of this beneficiary.
PRIMARY BENEFICIARY
Name __________________________________________________________________________
Relationship __________________________________________________________________
Social Security No. _____________________________ Date of Birth _______________
SECONDARY BENEFICIARY
Name Relationship SS# Date of Birth
_______________________________________________________________________________
_______________________________________________________________________________
If you are married, live in a community property state, and your spouse is NOT
designated as the only Primary Beneficiary, your spouse must sign below.
I hereby consent to the designation of beneficiary as stated above.
Signature of Spouse ___________________________________________________________
Date __________________________________________________________________________
AUTHORIZATION AND SIGNATURE
I hereby establish an American National Funds Group and/or SM&R Capital Funds
IRA (or SEP) Account, appoint Securities Management & Research, Inc. (SM&R)
as Custodian, and
1) Consent to the $7.50 (per account) setup fee, the $7.50 (per account)
annual maintenance fee, and $5.00 excess contribution adjustment fee.
Such fees are subject to change on 30 days written notice to the
Participant; and
2) Agree to the conditions governing the designation of beneficiary.
3) Further, I certify the following Backup Withholding Status and
Citizenship (Substitute W-9):
Under penalties of perjury, I certify by my signature as
"Participant" that the social security/taxpayer identification
number furnished in this application is correct and that (check the
appropriate box and fill in citizenship status below):
/ / I am not subject to backup withholding
/ / I have been notified by the IRS that I am subject to backup
withholding for failure to report all interest and/or dividends
/ / I do not have a social security/taxpayer identification number, but
I have applied for one. I understand that if I do not provide this
number within 60 days, the required Federal tax will be withheld.
/ / I am an exempt recipient
CITIZENSHIP / / U.S. / / OTHER _________________________
SIGNATURE PROVISIONS
I certify that the information which I have provided and the information
which is included within the application and attached material, is accurate
and complete. I have received the current prospectus of the fund(s)
selected, and I agree to its terms.
Participant's signature _____________________________________________________
Date ________________________________________________________________________
REGISTERED REPRESENTATIVE INFORMATION (SM&R Reg Reps only)
/ / Yes, I have completed and attached Account Application--Part 2 Suitability
Form (#9402)
Representative Signature ____________________________________________________
Representative Name (print) _________________________________________________
Representative Social Security Number _______________________________________
CUSTODIAN SECURITIES MANAGEMENT & RESEARCH, INC.
Accepted by _________________________________________________________________
Date ________________________________________________________________________
_____________________________________________________________________________
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 & 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 Right 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 __________________________________ Dealer # _____________________
Main Office Address _________________________________________________________
Branch # _____________________________ Rep # ________________________________
Representative Name (print) _________________________________________________
Branch Address ______________________________________________________________
Phone Number ________________________________________________________________
Authorized Signature of Dealer ___________________________ Title ____________
_____________________________________________________________________________
[LOGO] SECURITIES MANAGEMENT & RESEARCH, INC.
One Moody Plaza, Galveston, TX 77550
(800) 231-4639
Member NASD, SIPC
Distributor for the American National Family of Funds
3
<PAGE>
[LOGO] SECURITIES MANAGEMENT & RESEARCH, INC.
One Moody Plaza, Galveston, TX 77550
Member NASD, SIPC
Distributor for the American National Family of Funds
ACCOUNT APPLICATION--PART 2
- --------------------------------------------------------------------------------
PURCHASER SUITABILITY FORM & ARBITRATION AGREEMENT (This form must accompany all
mutual fund applications submitted to SM&R. All information requested is
required.)
NEW INVESTOR INFORMATION
Date ___________________________________________________________________________
1. Account Registration ________________________________________________________
Social Security No. _________________________________________________________
2. Fund(s) being purchased _____________________________________________________
3. Investor's Occupation _______________________________________________________
Name of Employer ____________________________________________________________
Address of Employer _________________________________________________________
Business Phone ( ) _______________________________________________________
4. Is the Investor employed by or associated with a member of the NASD or NYSE?
/ / No
/ / Yes. If yes, provide the name, address and phone no. of the firm:
________________________________________________________________________________
________________________________________________________________________________
5. Tax Status
/ / Single / / Head of Household / / Married filing separate returns
/ / Married filing joint return or qualifying widow(er) with dependent child
/ / Corporation / / Other
6. Marital Status
/ / Married / / Single / / Widowed
7. Dependents
/ / Spouse / / Children: Ages __________ / / Other
INVESTOR SUITABILITY INFORMATION
(TO BE COMPLETED BY INVESTOR OR REGISTERED REPRESENTATIVE.)
NASD rules require Registered Representatives to have reasonable grounds for
believing the recommended investment is suitable for the customer. Therefore,
representatives are required to make inquiries concerning the financial
condition of a proposed investor. You are urged to supply such information so
that the representative can make an informed judgment as to the suitability of
your investment selection(s). However, you are not required to divulge such
information. If you choose not to do so, you must sign at the section provided
on the reverse side indicating refusal and acknowledging that the representative
did request the suitability information.
1. SOURCES OF FUNDS FOR INVESTMENT
/ / Current Earnings / / Gift or Inheritance / / Insurance Benefit
/ / Savings / / Sale of Assets / / Maturity Proceeds
/ / Other _______________
2. PRIMARY PURPOSE OF INVESTMENT
/ / Education / / Savings / / Retirement
/ / Current Income / / Tax Shelter / / Business Purposes
/ / Other _______________
3. INVESTMENT PROFILE
(a) What is your current investment preference?
/ / Aggressive Growth / / Growth / / Growth & Current
Income
/ / Current Income / / Maximum safety, even if modest return
(b) What is your risk comfort level?
/ / High / / High/Moderate / / Moderate
/ / Moderate/Limited / / Low
(c) What is your financial goal time horizon?
/ / 1-5 years / / 5-10 years / / 10 years and
beyond
(d) What is your age range?
/ / 21-40 / / 41-59 / / 60+
(e) What is your tax bracket?
/ / 15% / / 28% / / 28+
(f) What is your estimated annual family income?
/ / Under $15,000 / / $15,000-$30,000 / / $30,000-$50,000
/ / $50,000-$100,000 / / Over $100,000
(g) What is your estimated net worth (exclude home, furnishings and
automobiles)?
/ / Under $25,000 / / $25,000-$50,000
/ / $50,000-$100,000 / / Over $100,000
(h) Are you responsible for the financial welfare of anyone other than your
immediate family (i.e. alimony, child or parental support, etc.)?
/ / Yes / / No
(i) Do you own other securities?
/ / Yes / / No
Types: / / Stocks / / Bonds / / Mutual Funds
/ / Variable Products / / Other ___________________
I (we) furnished the above suitability information and it has been accurately
recorded.
Investor Signature _____________________________________________________________
CONTINUED ON REVERSE SIDE.
4
<PAGE>
[LOGO] SECURITIES MANAGEMENT & RESEARCH, INC.
ACCOUNT APPLICATION--PART 2
- --------------------------------------------------------------------------------
STATEMENT OF REFUSAL TO PROVIDE FINANCIAL INFORMATION
I (we) fully understand that the Registered Representative, acting on behalf of
Securities Management & Research, Inc. (SM&R), has requested the preceding
suitability information to determine whether my (our) purchase of securities is
an appropriate investment considering my (our) financial situation. I (we)
refuse to provide the requested information and by my (our) signature(s) below
agree not to seek rescission of the investment or damages based on its
unsuitability.
________________________________________________________________________________
Investor Signature
________________________________________________________________________________
Joint Owner Signature
REGISTERED REPRESENTATIVE NOTICE--Should the Investor sign the above Statement
of Refusal to Provide Financial Information, it is still an NASD requirement
that you have reasonable grounds to recommend the purchase of this investment as
suitable. Therefore, YOU MUST COMPLETE THE SUITABILITY INFORMATION TO THE BEST
OF YOUR KNOWLEDGE AND CERTIFY THAT YOU HAVE DONE SO WHEN SIGNING THE REGISTERED
REPRESENTATIVE'S STATEMENT BELOW.
- --------------------------------------------------------------------------------
REGISTERED REPRESENTATIVE STATEMENT & SIGNATURE
Check appropriate boxes.
/ / Application--Part 1 attached.
/ / Custodial Agreement and Disclosure Statement detached and given to Investor.
(For IRA, TSA, SEP, or SIMPLE accounts only)
/ / Signed Arbitration Agreement
/ / Suitability information was provided by the Investor and the Investor signed
acknowledgement that information was accurately recorded.
--or--
/ / REFUSAL TO PROVIDE FINANCIAL INFORMATION STATEMENT SIGNED BY INVESTOR.
I provided the suitability information to the best of my knowledge and have
reasonable grounds to recommend the purchase of this investment as suitable
for the investor.
________________________________________________________________________________
Registered Representative Signature
________________________________________________________________________________
Registered Representative Name (print)
ACCEPTED; SECURITIES MANAGEMENT & RESEARCH, INC.
BY _____________________________________________________________________________
Date ___________________________________________________________________________
PURCHASER AGREEMENT TO ARBITRATION
THIS SECTION IS NOT APPLICABLE TO MISSOURI RESIDENTS
By signing 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 may be entered in any appropriate court.
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 a jury trial.
3. Pre-arbitration discovery is generally more limited 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 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.
I (we) further understand that we may not bring a punitive or certified class
action to arbitration, nor seek to enforce any pre-dispute arbitration agreement
against anyone who has initiated in court a punitive class action; or who is a
member of a punitive class action until (1) the class action certification is
denied; or (2) the class is decertified; or (3) I (we) are excluded from the
class action by the court. Such forbearance to enforce an agreement to
arbitrate shall not constitute a waiver of any right under this agreement except
to the extent stated herein.
________________________________________________________________________________
Investor Signature
________________________________________________________________________________
Joint Owner Signature
Form 9402
02/98
5
<PAGE>
TRADITIONAL IRA TRANSFER REQUEST USE THIS FORM ONLY WHEN TRANSFERRING ASSETS
FROM AN EXISTING IRA TO AN IRA WITH SECURITIES MANAGEMENT AND RESEARCH, INC.
("SM&R").
- --------------------------------------------------------------------------------
If you do not have an existing IRA with SM&R, an IRA Application MUST be
completed prior to the transfer. If you have any questions, please contact your
SM&R representative or SM&R directly for assistance.
- --------------------------------------------------------------------------------
PARTICIPANT INFORMATION
Name_____________________________________________________________
Address__________________________________________________________
City, State, Zip_________________________________________________
Social Security No.______________________________________________
Daytime Phone Number ____________________________________________
CURRENT TRUSTEE/CUSTODIAN INFORMATION
Name of Resigning Trustee________________________________________
Address__________________________________________________________
City, State, Zip_________________________________________________
Name of mutual fund or deposit institution, if applicable
_________________________________________________________________
LIQUIDATION/TRANSFER INSTRUCTIONS
/ / Liquidate all assets and transfer proceeds
/ / Liquidate $___________ and transfer proceeds
/ / The Transfer should be made immediately.
I realize early withdrawal penalties may apply.
/ / Transfer should be made upon maturity of the current
investment. The maturity date is_____________________________.
Account number(s): (attach a copy of a recent statement, if
possible)
__________________________ ___________________________
Account Number Account Number
__________________________ ___________________________
Account Number Account Number
PARTICIPANT'S SIGNATURE AND AUTHORIZATION TO TRANSFER
Please accept this as your authorization and instruction to liquidate the
assets noted above, which your company presently holds for me, and transfer
as indicated. If a Required Minimum Distribution (RMD) is required, forward
this amount to me at my address of record. I have established an IRA with
Securities Management & Research, Inc. as the successor Custodian. I am aware
of and acknowledge early withdrawal penalties that may apply.
Signature_________________________________________________________
Date______________________________________________________________
Signature Guarantee, if necessary
__________________________________________________________________
If applicable, detach and submit to SM&R
REQUIRED MINIMUM DISTRIBUTION (RMD) ELECTION INFORMATION
THIS INFORMATION IS TO BE COMPLETED BY THE CURRENT TRUSTEE OR CUSTODIAN.
If the participant is age 70 1/2 or older this year, this section must be
completed by an authorized representative of the resigning Trustee/Custodian
indicating the Election made by the Participant. NOTE: DO NOT TRANSFER ANY
PORTION OF THE PLAN WHICH REPRESENTS THE RMD AMOUNT.
CALCULATION METHOD / / Recalculation / / Declining Years
LIFE EXPECTANCY / / Single Life / / Joint Life*
REQUIRED MINIMUM DISTRIBUTION (RMD) $______________ has been withheld from this
transfer to satisfy this year's RMD.
The factor used to calculate the RMD payment was_______________________________
_______________________________________________________________________________
Authorized Signature of Current Custodian/Trustee
_______________________________________________________________________________
Printed Name
ACCEPTANCE (to be completed by SM&R)
SECURITIES MANAGEMENT AND RESEARCH, INC. agrees to serve as custodian and
accept the transfer as indicated above.
Participant____________________________________________________________________
Account No.____________________________________________________________________
Authorized Signature
Securities Management & Research, Inc
_______________________________________________________________________________
Date___________________________________________________________________________
INSTRUCTIONS TO RESIGNING TRUSTEE/CUSTODIAN:
Make check payable to Securities Management & Research, Inc., and include the
account number (shown above) and participant's name on the check. Please
attach a copy of this form to the check.
MAIL TO:
SECURITIES MANAGEMENT AND RESEARCH, INC.
ONE MOODY PLAZA
GALVESTON, TX 77550
02/98
6
<PAGE>
DIRECT ROLLOVER REQUEST FORM (To directly roll over distributions from your
former employer's qualified plan to an SM&R Traditional IRA.)
- --------------------------------------------------------------------------------
Account No.___________________
For SM&R Use Only
Use this form if you wish to have an eligible distribution from your
qualified retirement plan, including a 403(b) plan, directly rolled over to a
Rollover IRA. Please contact your former employer to determine if a
substitute form is available or if additional forms are required.
PARTICIPANT INFORMATION
Name___________________________________________________________________________
Address________________________________________________________________________
City, State, Zip_______________________________________________________________
Social Security No.____________________________________________________________
Daytime Phone Number___________________________________________________________
ROLLOVER INFORMATION (Please check one, and complete)
/ / Rollover of qualified retirement plan funds*
/ / Rollover of 403(b) plan funds*
*You will need to reflect this rollover on your current year tax return in
order to properly offset the amount shown on the Form 1099R you will receive
from your Trustee/Custodian.
Name of Custodian
or Former Employer_____________________________________________________________
Address________________________________________________________________________
City, State, Zip_______________________________________________________________
Account Number(s)______________________________________________________________
I am requesting a / / Full / / Partial $_____________________________________
distribution from the above-referenced account(s)
Is a completed distribution request form (obtained from your employer or plan
administrator) attached? / / Yes / / No Please explain.
PARTICIPANT'S AUTHORIZATION & SIGNATURE
I hereby authorize the above named Trustee/Custodian to roll over my plan
distribution directly to (check one):
/ / My existing American National Funds IRA/Rollover IRA account no.__________
/ / A new American National Funds Rollover IRA. I have attached a completed
American National Family of Funds IRA Application.
By signing this Direct Rollover Request, I agree to the following:
1) I am irrevocably electing to have funds from my former employer's
retirement plan directly rolled over to an American National Funds
Rollover IRA.
2) The amount being rolled over, to the best of my knowledge, qualifies for
rollover treatment and does not include any after-tax employee
contributions;
3) I understand that if I commingle the rollover funds from my former
employer's retirement plan with my Contributory IRA funds held with
American National Funds, these rollover funds no longer qualify for
rollover treatment back into a new employer's retirement plan at a
later date; and
4) I understand that neither the Custodian, its agent, nor the American
National Family of Funds warrants this rollover's eligibility for
tax-deferred status.
______________________________________________________________________________
Signature of Participant
______________________________________________________________________________
Date
ACCEPTANCE (to be completed by SM&R)
SECURITIES MANAGEMENT AND RESEARCH, INC. agrees to serve as custodian and
accept the direct rollover as indicated above.
Participant____________________________________________________________________
Account No.____________________________________________________________________
Authorized Signature
Securities Management & Research, Inc.
_______________________________________________________________________________
Date___________________________________________________________________________
INSTRUCTIONS FOR RESIGNING CUSTODIAN
Please make check payable to SECURITIES MANAGEMENT AND RESEARCH, INC. and
include Account Number (shown above) and NAME OF PARTICIPANT on the check.
Please send the check with a copy of this form to the address shown below.
REQUIRED DISTRIBUTION INFORMATION: If the Participant has reached age 70 1/2,
please complete the following:
Election made by Participant as of his/her required beginning date.
1) Period over which required distributions are to be made:
_____________________ years
2) Payment method (check one):
/ / Declining (elapsed) years
/ / Recalculation of life expectancy
3) Has Participant chosen Joint Life Expectancy with a Designated
Beneficiary?
/ / Yes
/ / No
If "Yes", please complete:
Beneficiary________________________________________________________________
Spouse? / / Yes / / No
MAIL TO:
SECURITIES MANAGEMENT AND RESEARCH, INC.
ONE MOODY PLAZA
GALVESTON, TEXAS 77550
02/98
7
<PAGE>
TRADITIONAL IRA ROLLOVER STATEMENT (INDIRECT ROLLOVER)
- --------------------------------------------------------------------------------
This form must be completed in its entirety when depositing proceeds
you've already received (not a Direct Rollover) from another IRA or a
qualified retirement plan to be deposited into a new or existing IRA or
Rollover IRA account in the American National Family of Funds. AN IRA
APPLICATION IS ALSO REQUIRED WHEN ESTABLISHING A NEW IRA ACCOUNT. This form,
the check, a completed Investor Suitability form and a completed application,
if applicable, is to be mailed to:
Securities Management and Research, Inc.
One Moody Plaza, Galveston, Texas 77550
- --------------------------------------------------------------------------------
THE PROCEEDS BEING DEPOSITED in this IRA represent all or a portion of (check
one of the following):
/ / A distribution from a Contributory IRA or Individual Retirement Annuity
(R4)
/ / An eligible rollover distribution from a qualified retirement plan [IRC
401(a)] (R8)
/ / An eligible rollover distribution from a TSA [403(b)] custodial account
or annuity (R8)
/ / A distribution as a result of a Qualified Domestic Relations Order
[IRC 414(p)] (R8)
/ / A beneficiary distribution from my deceased spouse's IRA, TSA [403(b)],
or qualified plan (R8)
FURTHERMORE:
- - I understand that the proceeds being invested must be invested within 60
days of my receiving them from a retirement plan. I am investing the
proceeds within this 60 day period.
- - I understand that my election to invest these proceeds in a Rollover IRA in
the American National Family of Funds is irrevocable.
- - I understand that no after-tax employee contributions originating from a
qualified plan or TSA are allowed to be rolled over and these proceeds do
not contain any after-tax employee contributions.
- - I UNDERSTAND THAT I AM PERMITTED ONLY ONE TAX-FREE INDIRECT ROLLOVER FROM
AN IRA I HOLD IN ANOTHER INSTITUTION DURING A TWELVE MONTH PERIOD.
- - I understand that commingling rollover proceeds from a retirement plan or
TSA with contributory IRA proceeds held in any of the American National
funds prevents me from rolling the proceeds back into a new retirement plan
or TSA at a later date.
- - I understand the tax consequences of commingling rollover proceeds with a
Contributory IRA.
- - I understand that neither the Custodian, its agent or the American National
Family of Funds warrant the eligibility for tax-deferred status of rollover
proceeds.
The attached check is to be deposited as indicated below:
ACCOUNT INFORMATION
/ / Existing IRA No. ____________________________
/ / New IRA Rollover account (completed IRA application and Investor
Suitability form must be attached)
REQUIRED MINIMUM DISTRIBUTION (RMD) INFORMATION
This information is to be completed by the investor. If you are age 70 1/2 or
older this year, this section must be completed indicating the Distribution
Options you made with the previous Trustee or Custodian. NOTE: DO NOT FORWARD
ANY PORTION OF THE PROCEEDS REPRESENTING THE REQUIRED MINIMUM DISTRIBUTION (RMD)
AMOUNT.
CALCULATION METHOD / / Recalculation / / Declining Years
LIFE EXPECTANCY / / Single Life / / Joint Life
Factor used to calculate RMD __________ years
IRA PARTICIPANT INFORMATION
Signature _____________________________________________________________________
Please print name _____________________________________________________________
Social Security Number ________________________________________________________
Daytime Phone Number __________________________________________________________
Should you require assistance in completing this form,
contact an SM&R representative or SM&R directly.
02/98
8
<PAGE>
IRA ROLLOVER STATEMENT TAX IMPLICATIONS
- --------------------------------------------------------------------------------
20% MANDATORY WITHHOLDING
Effective January 1, 1993, distributions received from qualified
retirement plans and 403(b) plans that are eligible for rollover treatment
are subject to a mandatory 20% federal withholding tax, unless the
distribution is rolled over directly from the plan's custodian or trustee to
an IRA or another qualified plan.
For example, if you change jobs and are entitled to $50,000 from your
former company's pension or 401(k) plan and you choose to receive this amount
in full, you would receive a check for only $40,000. The amount would be less
the $10,000 withheld for federal taxes which you, in turn, will apply towards
the income tax you owe when filing your tax return.
However, you intended to roll over the distribution within 60 days to a
qualified retirement plan with your new employer or an IRA. How can you roll
over the full amount ($50,000) when you only received $40,000? You will have
to come up with the missing $10,000 (20%) yourself or owe taxes on the
$10,000 in addition to possible tax penalties if you are under age 59 1/2.
YOU CAN AVOID THIS TRAP
By requesting that the plan's trustee/custodian directly roll the plan
distribution to an IRA or to another qualified plan, you can avoid the
mandatory 20% withholding tax. If your plan allows, and you are over age
59 1/2, you may consider leaving your money in the plan and begin taking a
series of payments over a period of ten or more years. Remember, unless you
need immediate use of the money, you do not want to take a check for any
amount that could be directly rolled over by your plan's trustee/custodian.
DISTRIBUTIONS NOT ELIGIBLE FOR ROLLOVER TREATMENT
The following types of distributions are not eligible for rollover and
therefore exempt from the 20% withholding tax.
- - Periodic payments made over the participant's single or joint life
expectancy, or a period not less than 10 years
- - Any distribution required under the required minimum distribution (RMD)
rules under Internal Revenue Code (IRC) 401(a)(9)
- - The portion of any distribution that is not includible in gross income,
such as a return of the employee's after-tax contributions
- - Returns of excess deferrals or excess aggregate contributions made to a
qualified cash-or-deferred arrangement, such as a 401(k) plan, together
with the income allocable to these corrective distributions.
- - Loans treated as distributions under IRC 72(p) and not excepted by IRC
72(p)(2)
- - Any distribution to a non-spouse beneficiary (upon death of participant) or
to a non-spouse payee under a Qualified Domestic Relations Order
- - Loans in default that are deemed distributions
- - Dividends paid on employer securities as described in IRC404(k)
- - The costs of life insurance coverage (P.S. 58 costs)
- - Similar items designated by the Commissioner in revenue rulings, notices and
any other guidance
Source: Treasury Regulations 1.401(a)(31)-1T; Q&As 3, 4 & 10
9
<PAGE>
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
<TABLE>
<S> <C> <C>
FORM 5305-A
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
Rev January 1998 (Under Section 408(a) of the Internal Revenue Code) DO NOT File
Department of Treasury with the Internal
Internal Revenue Service Revenue Service
</TABLE>
Custodian's name SECURITIES MANAGEMENT AND RESEARCH, INC. Custodian's
principal place of business GALVESTON, TEXAS
The Custodian named herein has given to the Depositor a Disclosure Statement
required under section 1.408-6 of the Internal Revenue Code (the "Code").
The Depositor whose name appears on the IRA Application hereby establishes an
Individual Retirement Account under section 408(a) of the Code to provide for
his or her retirement and for the support of his or her beneficiaries after
death. The Depositor has given to Securities Management and Research, Inc.
the sum listed on the IRA Application (in cash) to establish an Individual
Retirement Custodial Account for the Depositor under this agreement and the
Depositor and the Custodian agree to the following:
- --------------------------------------------------------------------------------
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or
an employer contribution to a simplified employee pension plan as described
in section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled
with other property except in a common trust fund or common investment
fund (within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles
(within the meaning of section 408(m)), except as otherwise
permitted by Section 408(m)(3), which provides an exception for certain
gold, silver, and platinum coins, coins issued under the laws of any state,
and certain bullion.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall
be made in accordance with the following requirements and shall
otherwise comply with section 408(a)(6) and Proposed Regulations section
1.408-8, including the incidental death benefit provisions of Proposed
Regulations section 1.401(a)(9)-2, the provisions of which are
incorporated by reference.
2. Unless otherwise elected by the time distributions are required to
begin to the Depositor under paragraph 3, or to the surviving spouse
under paragraph 4, other than in the case of a life annuity, life
expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Depositor and the surviving spouse and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date,
(April 1 following the calendar year end in which the Depositor reaches
age 70 1/2). By that date, the Depositor may elect, in a manner
acceptable to the Custodian, to have the balance in the custodial
account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the joint and
last survivor lives of the Depositor and his or her designated
beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(a) If the Depositor dies on or after distribution of his or
her interest has begun, distribution must continue to be made in
accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either:
(i) Be distributed by the December 31 of the year
containing the fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments
over the life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Depositor would have reached age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Depositor's required beginning date, even though payments may
actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions
may be accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial account as
of the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor
expectancy of the Depositor and the Depositor's designated beneficiary, or
the life expectancy of the designated beneficiary, whichever applies). In
the case of distributions under paragraph 3, determine the initial life
expectancy (or joint life and last survivor expectancy) using the attained
ages of the Depositor and designated beneficiary as of their birthdays in
the year the Depositor reaches age 70 1/2. In the case of a distribution
in accordance with paragraph 4(b)(ii), determine life expectancy using the
attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to
satisfy the minimum distribution requirements described above. This method
permits an individual to satisfy these requirements by taking from one
individual retirement account the amount required to satisfy the requirement
for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) and the
related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be
made with the consent of the Depositor.
10
<PAGE>
ARTICLE VII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the Depositor.
ARTICLE VIII
CUSTODIAL ACCOUNT AGREEMENT
1. The Depositor appoints Securities Management and Research, Inc. as
Custodian of this Account. After deduction of all appropriate fees and
charges, the balance of Depositor's contributions shall be invested as in
hereinafter provided.
2. The Depositor directs the Custodian to invest contributions and reinvest
dividends and capital gains distributions in shares of American National
Funds as directed on the application. The designated fund(s) may be any
one or more of mutual funds sponsored, distributed or underwritten by
Securities Management and Research, Inc.
3. The Custodian shall have no investment responsibility or discretion with
respect to this Individual Retirement Custodial Account and shall not
vote the shares held therein, except as directed by Depositor.
4. This document constitutes the entire contract between Depositor and
Custodian and no representative of Securities Management and Research,
Inc., nor any broker-dealer shall be deemed to be a representative of or
acting on behalf of the Custodian nor shall any representative have any
authority to make representations or to bind the Custodian beyond the
terms of this document.
5. The Depositor shall have the right, by written notice to the Custodian,
to designate or to change a Beneficiary to receive any benefit to which
the Depositor may be entitled in the event of his death prior to the
complete distribution of such benefits. IF NO SUCH DESIGNATION IS IN
EFFECT UPON THE DEPOSITOR'S DEATH, HIS BENEFICIARY SHALL BE HIS ESTATE.
6. The Depositor shall provide information to the Custodian at such times
and in such manner and containing such information as will enable the
Custodian to prepare reports required by the Internal Revenue Service
pursuant to section 408(i) of the Revenue Code of 1954, as amended and
regulations promulgated thereunder.
7. The Custodian shall submit such reports to the Internal Revenue Service
and the Depositor, the Depositor's surviving spouse or beneficiaries as
designated by either in such manner as may be required by the Internal
Revenue Service from time to time.
8. Any income taxes or other taxes of any kind whatsoever that may be levied
or accessed upon or in respect to the Custodial Account, any transfer taxes
incurred in connection with the investment and reinvestment of the assets
of the Custodial Account, other administrative expenses incurred by the
Custodian in the performance of its duties including fees for legal
services rendered to the Custodian, and the compensation to the Custodian
shall be paid from the assets of the Account.
9. Securities Management and Research, Inc., as Custodian and as Sponsor
assumes no responsibility to make any distribution unless and until such
order specifies the occasion for such distribution, the elected manner of
distribution as described in Article IV, Section 3.(a), (d), or (e) or
any declaration required by Article V. Further, the Custodian and the
Sponsor shall not be responsible to make distribution at age 70 1/2
unless written notice is given by the Depositor. This Custodian
Agreement shall terminate upon the complete distribution of the Account
to the Depositor or his beneficiaries or to such successor individual
retirement accounts or annuities.
10. Rollover contributions will be received in cash and the Depositor will
instruct the Custodian as to which investment the proceeds are to be
deposited.
11. The Custodian may resign at any time upon written notice to the Depositor
or any current beneficiary or may be removed by the Depositor or any
current beneficiary at any time upon 30 days notice in writing to the
Custodian. Upon such resignation or removal the Depositor or current
beneficiary shall appoint a successor Custodian. If within 30 days after
the Custodian's resignation or removal, the Depositor or current
beneficiary has not appointed a successor Custodian which has accepted
such appointment, the Custodian will liquidate the assets and forward the
proceeds to the Depositor or current beneficiary.
12. The Custodian's fees shall be as published and amended from time to time.
13. If, because of an erroneous assumption as to earned income or for any
other reason, a contribution which is an excess contribution is made on
behalf of the Depositor for any year, adjustment of such excess
contribution shall be made in accordance with provisions of this
paragraph. The full amount of such excess contribution and any net income
attributable thereto shall be distributed to the Depositor, in cash or in
kind upon written notice to the Custodian from the Depositor which
states the amount of such excess contribution.
14. By execution of this Agreement Depositor consents to the amendment of
this Article VIII by the Custodian to make any changes herein which the
Custodian determines in its discretion as necessary or desirable.
15. Notwithstanding anything to the contrary, this Individual Retirement
Custodial Account Agreement shall be deemed accepted by the Custodian
when either (i) the Individual Retirement Custodial Account Application
is executed by an authorized representative of the Custodian, or (ii) the
Custodian accepts for investment Depositor's initial contribution made
in accordance with the terms of this Agreement and the Individual
Retirement Custodial Account Application.
16. This contract shall be construed under the laws of the State of Texas and
shall become effective upon execution of the Account Application by the
Custodian.
17. The acceptance of this Individual Retirement Custodial Account by the
Depositor is indicated by execution of the signature section on page 3 of
the Application.
18. The acceptance of this account by the Custodian shall be considered
effective upon establishment of the account.
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TRADITIONAL IRA DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------
This disclosure statement describes the official government rules
applicable to the operation and tax treatment of traditional individual
retirement accounts. Because legal and tax consequences may vary for each
individual, you should consult your tax adviser on whether your contributions
are tax deductible. PLEASE KEEP THIS DOCUMENT FOR FUTURE REFERENCE.
YOUR RIGHT TO REVOKE: You may revoke your individual retirement account
within seven (7) days after the date the account is established only by
mailing or delivering written notice of your intent to revoke to:
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550
(409) 763-8272
(800) 231-4639
The notice shall be deemed mailed on the date of the postmark, if
deposited in the mail in the United States, first class postage prepaid,
properly addressed to the address above. Upon revocation, the entire amount
contributed will be returned. Subsequent payments to existing IRAs cannot be
revoked!
ELIGIBILITY: Any individual who will not attain the age of 70 1/2 years before
the end of his current taxable year and who has compensation which is
includible in gross income (including an individual who is a participant in an
employer's retirement plan or a government pension plan) may contribute to an
IRA. Compensation is defined to include salaries, wages, professional fees,
self-employment income, alimony and separate maintenance payments includible
in gross income and other income for personal services included in gross
income. Income from property, such as dividends, interest or rent, does not
qualify as compensation under an IRA Plan.
LIMITATION ON CONTRIBUTIONS: Contributions must be made in cash and cannot
exceed the lesser of $2,000 or the amount of your compensation (except
rollover, SEP or SIMPLE contributions) for any taxable year. If one spouse
has no compensation, the other spouse may contribute to an IRA for such
spouse; provided two separate IRA accounts exist, the total amount
contributed does not exceed the lesser of $4,000 or 100% of the working
spouse's compensation, a joint income tax return is filed and no more than
$2,000 is contributed to any one account. If a husband and wife each receive
compensation as defined in the preceding paragraph during the year and are
otherwise eligible, each may establish his or her own IRA. The contribution
limitations are applicable to the separate compensation of each individual
without regard to any state community property laws. Your contribution may or
may not be deductible for income tax purposes. Consult your tax adviser for
more information.
If you are not eligible to make a deductible contribution to your IRA, you
may make a non-deductible contribution not to exceed the lesser of $2,000 or
100% of your compensation. Earnings on non-deductible contributions are tax
deferred until distributed.
You must indicate on your tax return the extent to which your IRA
contribution is non-deductible by filing Form 8606 with your return.
If you overstate the amount of your non-deductible contribution, a penalty
of $100 will be assessed unless it is due to reasonable cause.
INVESTMENT OF FUNDS IN LIFE INSURANCE: No part of the custodial funds may be
invested in life insurance contracts.
INVESTMENT AND HOLDING OF CONTRIBUTIONS: Contributions in an IRA are held in
a custodial account for the exclusive benefit of the investor, his surviving
spouse and his beneficiaries who may include his estate, his dependents or
any other persons he may designate in writing delivered to the custodian. Your
interest in the account is fully vested and nonforfeitable. The custodian
maintains a separate account or record for each investor and such account or
record is available for inspection during regular business hours. The
contributions will be invested in the funds described in the Application
completed by the investor.
DISTRIBUTION OF FUNDS: Distributions of benefits without a penalty tax MAY
begin as soon as the investor attains age 59 1/2. An investor may elect to
receive benefits if he becomes disabled, without regard to age. A "minimum
distribution" MUST begin on or before April 1 of the calendar year following
the calendar year in which the investor attains age 70. Subsequent "minimum
distributions" must be made by December 31 of each year. These distributions
are determined by dividing the entire balance in the IRA at the beginning of
each year by the life expectancy of the investor attains age 70, reduced by
the number of whole years elapsed since the investor attained age 70 1/2.
DISTRIBUTION OF FUNDS IN THE EVENT OF INVESTOR'S DEATH: If distributions have
begun and the investor dies before his entire interest has been distributed,
the remaining interest in the investor's account shall be distributed to the
investor's beneficiary at least as rapidly as under the method of
distribution being used as of the date of the investor's death. If
distribution has not begun prior to the investor's death, then the investor's
entire interest in the IRA must be distributed to the investor's beneficiary
within five (5) years after the death of the investor, provided that, if a
distribution begins within one (1) year after the investor's death to or for
the benefit of the investor's beneficiary over the longer of the life or life
expectancy of the investor's beneficiary, such distribution will be
considered to be distributed within such five (5) year period. If the
beneficiary is the investor's surviving spouse, the surviving spouse may
elect within the five (5) year period to have distributions begin at any time
before the date on which the investor would have attained the age of 70 1/2
and, if the surviving spouse dies prior to distribution, such surviving
spouse shall be considered as if the spouse were the investor and the
distribution rules that applied to the investor shall be the same rules that
apply to the deceased spouse. A beneficiary or surviving spouse may elect to
accelerate payments.
REQUIRED MINIMUM DISTRIBUTIONS (RMDs): IRA investors who reach age 70 1/2
must begin taking distributions for that year and every year thereafter. The
distribution for the first year may be delayed until April 1 of the year
following the 70 1/2 year. All subsequent year distributions must be taken by
December 31 of each year. This distribution can be based on the single or
joint life expectancies of the investor and/or the designated beneficiary.
A 50% penalty will be applied to amounts not withdrawn.
TAXPAYER REPORTING REQUIREMENTS: If a transaction has occurred for which a
penalty tax is imposed, such as an excess contribution, a premature
distribution or an excess accumulation (insufficient distribution), the
investor is required by the Internal Revenue Service to attach to his annual
income tax return an information return (Form 5329) prescribed for reporting
such transaction and calculating the penalty tax due.
TAX TREATMENT OF WITHDRAWALS AND DISTRIBUTIONS: Funds generally cannot be
withdrawn from the IRA without adverse tax consequences prior to the date on
which the investor attains age 59 1/2 (with the exception of the rollovers
later described, returns of excess contributions and payments on account of
the participant's death, certified disability or divorce). Any distributions
prior to that time (including amounts deemed distributed as a result of
prohibited transactions or use of part or all of the IRA as security for a
loan) are considered to be premature distributions. In addition to being
fully taxable to the investor as ordinary income at the time of distribution,
such premature distributions are subject to a penalty tax of 10% of the
amount distributed. Distributions occurring after the investor reaches
59 1/2, dies or is disabled are taxable to the recipient at ordinary income
tax rates. However, no penalty taxes are applied in the case of such
distributions.
The following distributions are also exempt from the 10% penalty tax:
a) distributions made to pay medical expenses which exceed 7.5 percent of
your adusted gross income,
b) distributions made to pay for health insurance premiums for the
participant, the participant's spouse and dependents PROVIDED the
participant has separated from employment and has received unemployment
compensation under a federal or state program for at least 12 weeks,
c) distributions made to pay for a lifetime maximum of $10,000 of qualified
first-time home purchase expenses PROVIDED the distribution is used by
the IRA holder before the close of the 120th day after the day on which
the distribution is received,
d) distributions made to pay for qualifying higher education expenses to
the extent that such distributions do not exceed the qualified higher
education expenses of the participant or his or her dependents for the
taxable year.
ROLLOVER CONTRIBUTIONS: Effective January 1, 1993, UCA-92 mandates a 20%
withholding on all eligible rollover distributions from qualified retirement
plans which are not directly rolled to an IRA or a similar qualified
retirement plan. An eligible rollover distribution consists of all or any
portion of the proceeds in a qualified retirement plan other than:
a) a distribution which is part of a series of substantially equal
periodic payments made over the life or life expectancy of the
participant, the joint lives or life expectancies of the participant
and his or her beneficiary, for a period of 5 years or to age 59 1/2,
whichever is later;
b) distributions which are not includible in the recipient's taxable
income; or
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c) distributions which represent Required Minimum Distributions (RMDs) made
to individuals 70 1/2 years of age.
An eligible retirement plan is an IRA, a qualified plan, or tax sheltered
annuity which accepts rollover contributions.
Prior to effecting a direct rollover the custodian will distribute any
required minimum distribution amount, if applicable, payable to the investor.
Rollover distribution received by the investor must be invested within sixty
(60) days from the date of distribution in certain other IRA approved
retirement plans, including IRAs in order to retain its tax deferred status.
All contributions and rollover contributions to an IRA must be made in cash.
No tax deduction, however, is allowed to the investor for the amount of a
rollover contribution contributed to an IRA.
ROLLOVER BY SURVIVING SPOUSE: A rollover of part or all of a lump sum
distribution or part or all of a qualified partial distribution (subject to
certain limitations provided by section 405(a)(5)(D) of the Code) may be made
by a qualified plan investor or by the surviving spouse of a deceased
qualified plan investor. The surviving spouse may roll over only into an IRA
and may not roll over into a qualified plan in which the spouse is an
investor. Beneficiaries other than the surviving spouse may not roll over.
Whether an individual can receive a qualified lump sum, a qualified partial
distribution or plan termination distribution depends upon the provisions of
the employee benefit plan in which the individual or the spouse was a
participant.
QUALIFIED PLAN ROLLOVER: A qualified plan distribution rolled into an IRA
may be rolled back into another qualified plan under certain circumstances.
In the case of rollovers from qualified plans, the amount rolled over must
consist solely of employer and qualified deductible voluntary employee
contributions, interest earned thereon, and interest earned on other employee
contributions. Any part of the distribution retained by the investor except
his own tax paid contributions is subject to income tax, while amounts rolled
over are not taxed until distributed from the rollover account. An investor
otherwise eligible to do so may make deductible IRA contributions to a
rollover IRA established with a qualified plan or section 403(b) annuity
distribution, but if this occurs, the law may preclude future rollover of the
funds back into a qualified plan or section 403(b) annuity. An investor may
also withdraw all or part of the funds from another IRA or individual
retirement annuity for rollover into an IRA within a one-year period. This
limitation does not, however, apply to rollovers of funds between a qualified
employer plan or annuity and an IRA. An investor may convert non-cash
property distributed from a qualified plan into cash by means of a bona fide
sale and roll over part or all of the proceeds into an IRA or another
qualified plan within the sixty (60) day period after the distribution.
PROHIBITED TRANSACTIONS: An IRA prohibits the investor, his spouse or
beneficiaries from engaging in any prohibited transactions (within the
meaning of the Internal Revenue Code section 4975). Prohibited transactions
include, but are not limited to, the sale or exchange of property, the
lending of money or other extension of credit, the furnishing of goods,
services or facilities and the transfer of income or assets to or from the
IRA to or for the benefit of his own interest or receive any compensation
from any transaction which involves the IRA assets. A disqualified person
includes, but is not limited to, the investor, his family (including other
individuals as defined in section 4975(e)(16) of the Code) and persons or
other entities (corporations, trusts, estates or partnerships) which stand in
a close relationship to the investor. If such transactions occur, the IRA
will cease to be qualified and will lose its tax exemption status. The full
balance will be treated as having been distributed and subject to the income
and penalty taxes discussed above, and the fair market value of the account
must be included in the investor's gross income. In addition, the custodian
and other disqualified parties may not engage in any prohibited transactions
with respect to the custodial account and will be subject to penalties if any
such prohibited transactions are engaged in without a statutory or
administrative exemption.
USE OF IRA ACCOUNT ASSETS AS SECURITY FOR LOANS: If the investor borrows
money and used all or any portion of his interest in the IRA as security,
the portion of the IRA used will be deemed to be distributed to the investor.
If the investor has not attained age 59 1/2 or is not disabled, the
distribution will not only be fully taxable at ordinary income tax rates but
will incur the 10% premature distribution penalty tax discussed above.
Consequently, pledging IRA assets as security for a loan is specifically
prohibited.
PENALTY FOR EXCESS CONTRIBUTIONS: As a result of the Taxpayer Relief Act of
1997 (TRA-97), the 15% excise tax imposed on the sum of all annual
distributions received during the calendar year in excess of $150,000 (or
$112,000, adjusted for cost of living increases in certain circumstances) has
been repealed. This is effective for excess distributions taken after
December 31, 1996. NOTE: THE SMALL BUSINESS JOB PROTECTION ACT OF 1996
(SBA-96) SUSPENDED THE EXCESS DISTRIBUTION TAX FOR A THREE-YEAR PERIOD FROM
1997 THROUGH 2000, BUT TRA-97 HAS PERMANENTLY REPEALED IT.
PENALTY FOR CERTAIN ACCUMULATIONS: After the investor reaches age 70 1/2, or
if he dies and payments are to be made to his beneficiary, if the required
"minimum distributions" described in "Distribution of Funds" above, do not
occur within the time required by law, a penalty tax may be incurred equal to
50% of the difference between the amount of the "minimum distribution" and the
amount actually distributed each year. The Secretary of the Treasury may waive
the penalty if the inadequate distribution is due to reasonable error and
reasonable steps are being taken to correct the situation.
PENALTY FOR EXCESS DISTRIBUTIONS: A 15% excise tax is imposed on the sum of
all annual distributions received during the calendar year in excess of
$150,000 (or $112,500, adjusted for cost of living increases in certain
circumstances). This 15% excise tax on excess distributions is reduced by the
10% tax on premature distributions, if any, that apply to excess
distribution. The excess distribution tax will not apply to a distribution
due to the investor's death (although the estate tax may be increased by 15%
of the "excess retirement accumulation"), the portion of the distribution
applying to nondeductible contributions, a distribution that is rolled over
tax free, or a distribution to an alternate payee under qualified domestic
relations order. As a result of the Small Business Job Protection Act of
1996, the excess distribution tax has been suspended for payments received in
1997, 1998, and 1999.
FINANCIAL DISCLOSURE: Earnings on the investor's IRA are the dividends and
capital gains distributions received on mutual fund shares held by the
investor's IRA, and are used to purchase additional mutual fund shares. A
sales charge is deducted on the purchase of shares of the funds being
offered. These sales charges are reduced under various circumstances
described in detail in each Fund's prospectus. You must have received a
prospectus prior to submitting your application to create an IRA. The growth
in value of the mutual fund shares held in the investor's IRA can be neither
guaranteed nor projected.
WITHDRAWALS: Withdrawal requests MUST be presented to Securities Management
and Research, Inc., One Moody Plaza, Galveston, Texas 77550, with the
appropriate withdrawal forms properly executed. You should contact your
representative or Securities Management and Research, Inc. for the required
forms and procedures to avoid any delay in the expediting of withdrawals.
ESTATE AND GIFT TAXES: All amounts held by the investor at the investor's
death are includible in his estate for federal estate tax purposes, and the
beneficiary shall report distributions received as ordinary income, except a
surviving spouse may be able to roll over the distribution. Any transfers of
the benefits during the investor's lifetime are subject to applicable gift
taxes except certain transfers to a former spouse pursuant to a divorce
decree or written instrument incident to such divorce.
ADDITIONAL INFORMATION: Additional information regarding the application and
rules governing the IRA may be obtained from any district office of the
Internal Revenue Service and from IRS Publication 590.
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SIMPLIFIED EMPLOYEE PENSION
INDIVIDUAL RETIREMENT ACCOUNTS CONTRIBUTION AGREEMENT
- --------------------------------------------------------------------------------
Form 5305-SEP Rev. January 1997
(Under section 408(k) of OMB No. 1545-0499 DO NOT File With the
the Internal Revenue Code) Internal Revenue Service
_______________________________________________________________ makes the
(Business name--employer)
following agreement under the terms of section 408(k) of the Internal Revenue
Code and the instructions to this form.
ARTICLE I--ELIGIBILITY REQUIREMENTS
(Check appropriate boxes--see INSTRUCTIONS.)
The employer agrees to provide for discretionary contributions in each
calendar year to the Individual Retirement Accounts or Individual Annuity
(IRA) of all employees who are at least _______ years old (not to exceed
21 years old) and have performed services for the employer in at least
_______ years (not to exceed 3 years) of the immediately preceding 5 years.
This simplified employee pension (SEP) / / includes / / does not include
employees covered under a collective bargaining agreement and / / includes
/ / does not include certain nonresident aliens, and / / includes / / does
not include employees whose total compensation during the year is less than
$400*.
ARTICLE II--SEP REQUIREMENTS (See INSTRUCTIONS.)
The employer agrees that contributions made on behalf of each eligible
employee will be:
- - Based only on the first $160,000* of compensation.
- - Made in an amount that is the same percentage of compensation for every
employee.
- - Limited annually to the smaller of $30,000* OR 15% of compensation.
- - Paid to the employee's IRA trustee, custodian, or insurance company (for
an annuity contract).
_______________________________________________________________________________
Signature of employer
_______________________________________________________________________________
By
_______________________________________________________________________________
Date
* This amount reflects the cost-of-living increase effective January 1, 1997.
The amount is adjusted annually. The IRS announces the increase, if any, in
a news release and in the Internal Revenue Bulletin.
If applicable, fill out this form and the form on the next page.
Submit this copy to SM&R.
14
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15
<PAGE>
SIMPLIFIED EMPLOYEE PENSION
INDIVIDUAL RETIREMENT ACCOUNTS CONTRIBUTION AGREEMENT
- --------------------------------------------------------------------------------
Form 5305-SEP Rev. January 1997
(Under section 408(k) of OMB No. 1545-0499 DO NOT File With the
the Internal Revenue Code) Internal Revenue Service
___________________________________________ makes the following agreement
(Business name--employer)
under the terms of section 408(k) of the Internal Revenue Code and the
instructions to this form.
ARTICLE I--ELIGIBILITY REQUIREMENTS
(Check appropriate boxes--see INSTRUCTIONS.)
The employer agrees to provide for discretionary contributions in each
calendar year to the Individual Retirement Accounts or Individual Annuity
(IRA) of all employees who are at least__________years old (NOT to exceed 21
years old) and have performed services for the employer in at
least_________years (not to exceed 3 years) of the immediately preceding 5
years.
This simplified employee pension (SEP) / /includes / /does not include
employees covered under a collective bargaining agreement and / /includes
/ /does not include certain nonresident aliens, and / /includes / /does not
include employees whose total compensation during the year is less than $400*.
ARTICLE II--SEP REQUIREMENTS (See INSTRUCTIONS.)
The employer agrees that contributions made on behalf of each eligible
employee will be:
- - Based only on the first $160,000* of compensation.
- - Made in an amount that is the same percentage of compensation for every
employee.
- - Limited annually to the smaller of $30,000* OR 15% of compensation.
- - Paid to the employee's IRA trustee, custodian, or insurance company (for
an annuity contract).
_______________________________________________________________________________
Signature of employer
_______________________________________________________________________________
By
_______________________________________________________________________________
Date
*This amount reflects the cost-of-living increase effective January 1, 1997.
The amount is adjusted annually. The IRS announces the increase, if any, in a
news release and in the Internal Revenue Bulletin.
THIS FORM REMAINS WITH THE CLIENT, IN THIS KIT.
PAPERWORK REDUCTION ACT NOTICE
You are not required to provide the information requested on a form that is
subject to the Paperwork Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or its instructions must
be retained as long as their contents may become material in the
administration of any Internal Revenue law. Generally, tax returns and
return information are confidential, as required by Code section 6103.
The time needed to complete this form will vary depending on individual
circumstances. The estimated average time is:
Recordkeeping. . . . . . . . . . . . . . . . . . . 1 hr., 40 min.
Learning about the law or the form . . . . . . . . 1 hr., 35 min.
Preparing the form . . . . . . . . . . . . . . . . 1 hr., 41 min.
If you have comments concerning the accuracy of these time estimates or
suggestions for making this form simpler, we would be happy to hear from you.
You can write to the Tax Forms Committee, Western Area Distribution Center,
Rancho Cordova, CA 95743-0001. DO NOT send this form to this address.
Instead, keep it for your records.
INSTRUCTIONS (Section references are to the Internal Revenue Code, unless
otherwise noted.)
PURPOSE OF FORM--Form 5305-SEP (Model SEP) is used by an employer to make an
agreement to provide benefits to all eligible employees under a SEP described
in section 408(k). DO NOT file this form with the IRS. See PUB. 560,
Retirement Plans for the Self-Employed, and PUB. 590, Individual Retirement
Arrangements (IRAs).
INSTRUCTIONS TO THE EMPLOYER
SIMPLIFIED EMPLOYEE PENSION.--A SEP is a written arrangement (a plan) which
provides the employer with a simplified way to make contributions toward an
employees' retirement income. Under a SEP, the employer is permitted to
contribute a certain amount (see below) to an employee's Individual
Retirement Account or Individual Retirement Annuity (IRAs). The employer
makes contributions directly to an IRA set up by an employee with a bank,
insurance company, or other qualified financial institution. When using Form
5305-SEP to establish a SEP, the IRA must be a model IRA established on an
IRA form or a master or prototype IRA for which the IRS has issued a
favorable opinion letter. Making the agreement on Form 5305-SEP does not
establish an employer IRA as described in section 408(c).
WHEN NOT TO USE FORM 5305-SEP.--Do not use this form if you:
- - Currently maintain any other qualified retirement plan. This does not
prevent you from maintaining another SEP.
- - Previously maintained a defined benefit plan that is now terminated.
- - Have any eligible employees for whom IRAs have not been established.
- - Use the services of leased employees (as described in section 414(n)).
- - Are a member of an affiliated service group (as described in section
414(m)), a controlled group of corporations (as described in section
414(b)), or trades or businesses under common control (as described in
section 414(c) and 414(o)), UNLESS all eligible employees of all the members
of such groups, trades, or businesses, participate in the SEP.
- - Will not pay the cost of the SEP contributions, do not use Form 5305-SEP
for a SEP that provides for elective employee contributions even if the
contributions are made under a salary reduction agreement.
Use Form 5305A-SEP, or a nonmodel SEP if you permit elective deferrals to a
SEP.
NOTE: SEPs permitting elective deferrals cannot be established after 1996.
Eligible Employees--All eligible employees must be allowed to participate in
the SEP. An eligible employee is any employee who: (1) is at least 21 years
old, and (2) has performed "service" for you in at least 3 of the immediately
preceding 5 years.
NOTE: You can establish less restrictive eligibility requirements, but not
more restrictive ones.
Service is any work performed for you for any period of time, however short,
if you are a member of an affiliated service group, a controlled group of
corporations, or trades or businesses under common control, service includes
any work performed for any period of time for any other member of such group,
trades, or businesses.
EXCLUDABLE EMPLOYEES--The following employees do not have to be covered by
the SEP: (1) employees covered by a collective bargaining agreement whose
retirement benefits were bargained for in good faith by you and their union,
(2) nonresident alien employees who did not earn U.S. source income from you,
*This amount reflects the cost-of-living increase effective January 1, 1997.
The amount is adjusted annually. The IRS announces the increase, if any, in
a news release and in the Internal Revenue Bulletin.
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<PAGE>
and (3) employees who received less than $400* in compensation during the
year.
CONTRIBUTION LIMITS--The SEP rules permit you to make an annual contribution
of up to 15% of the employee's compensation or $30,000*, whichever is less.
Compensation, for this purpose, does not include employer contributions to
the SEP or the employee's compensation in excess of $160,000*. If you also
maintain a Model Elective SEP or any other SEP that permits employees to make
elective deferrals, contributions to the two SEPs together may not exceed the
smaller of $30,000* or 15% of compensation for any employee.
Contributions cannot discriminate in favor of highly compensated employees.
You are not required to make contributions every year. But you must
contribute to the SEP-IRAs of all of the eligible employees who actually
performed services during the year of the contribution. This includes
eligible employees who die or quit working before the contribution is made.
You may also not integrate your SEP contributions with, or offset them by,
contributions made under the Federal Insurance Contributions Act (FICA).
If this SEP is intended to meet the top-heavy minimum contribution rules of
section 416, but it does not cover all your employees who participate in your
elective SEP, then you must make minimum contributions to IRAs established on
behalf of those employees.
DEDUCTING CONTRIBUTIONS--You may deduct contributions to a SEP subject to the
limits of section 404(h). This SEP is maintained on a calendar year basis and
contributions to the SEP are deductible for your tax year with or within
which the calendar year ends. Contributions made for a particular tax year
must be made by the due date of your income tax return (including extensions)
for that tax year.
COMPLETING THE AGREEMENT--This agreement is considered adopted when (1) IRAs
have been established for all of your eligible employees, (2) you have
completed all blanks on the agreement form without modification, and (3) you
have given all of your eligible employees the following information:
- - A copy of Form 5305-SEP.
- - A statement that IRAs other than the IRAs into which employer SEP
contributions will be made may provide different rates of return and different
terms concerning, among other things, transfers and withdrawals of funds
from the IRAs.
- - A statement that, in addition to the information provided to an employee at
the time the employee becomes eligible to participate, the administrator of
the SEP must furnish each participant within 30 days of the effective date
of any amendment to the SEP, a copy of the amendment and a written
explanation of its effects.
- - A statement that the administrator will give written notification to each
participant of any employer contributions made under the SEP to that
participant's IRA by the later of January 31 of the year following the year
for which a contribution is made or 30 days after the contribution is made.
Employers who have established a SEP using Form 5305-SEP and have furnished
each eligible employee with a copy of the completed Form 5305-SEP and
provided the other documents and disclosures described in INSTRUCTIONS TO THE
EMPLOYER and INFORMATION FOR THE EMPLOYEE, are not required to file the
annual information returns, Forms 5500, 5500-C/R, or 5500-EZ for the SEP.
However, under Title 1 of ERISA, relief from the annual reporting
requirements may not be available to an employer who selects, recommends, or
influences its employees to choose IRAs into which contributions will be made
under the SEP, if those IRAs are subject to provisions that impose any limits
on a participant's ability to withdraw funds (other than restrictions imposed
by the Code that apply to all IRAs). For additional information on Title I
requirements, see the Department of Labor regulation at 29 CFR 2520. 104-48.
INFORMATION FOR THE EMPLOYEE
The information below explains what a SEP is, how contributions are made,
and how to treat your employer's contributions for tax purposes. For more
information, see PUB. 590.
SIMPLIFIED EMPLOYEE PENSION--A SEP is a written arrangement (a plan) that
allows an employer to make contributions toward your retirement.
Contributions are made to an individual retirement account/annuity (IRA).
Contributions must be made to either a Model IRA executed on an IRS form or a
master or prototype IRA for which the IRS has issued a favorable opinion
letter.
An employer is not required to make SEP contributions. If a contribution is
made, it must be allocated to all the eligible employees according to the SEP
agreement. The Model SEP (Form 5305-SEP) specifies that the contribution for
each eligible employee will be the same percentage of compensation (excluding
compensation higher than $160,000*) for all employees.
Your employer will provide you with a copy of the agreement containing
participation rules and a description of how employer contributions may be
made to your IRA. Your employer must also provide you with a copy of the
completed Form 5305-SEP and a yearly statement showing any contributions to
your IRA.
All amounts contributed to your IRA by your employer belong to you even after
you stop working for that employer.
CONTRIBUTION LIMITS--Your employer will determine the amount to be contributed
to your IRA each year. However, the amount for any year is limited to the
smaller of $30,000* or 15% of your compensation for that year. Compensation
does not include any amount that is contributed by your employer to your IRA
under the SEP. Your employer is not required to make contributions every
year or to maintain a particular level of contributions.
TAX TREATMENT OF CONTRIBUTIONS--Employer contributions to your SEP-IRA are
excluded from your income unless there are contributions in excess of the
applicable limit. Employer contributions within these limits will not be
included on your Form W-2.
EMPLOYEE CONTRIBUTIONS--You may contribute the smaller of $2,000 or 100% of
your compensation to an IRA. However, the amount you can deduct may be
reduced or eliminated because, as a participant in a SEP, you are covered by
an employer retirement plan.
SEP PARTICIPATION--If your employer does not require you to participate in a
SEP as a condition of employment, and you elect not to participate, all other
employees of your employer may be prohibited from participating. If one or
more eligible employees do not participate and the employer tries to
establish a SEP for the remaining employees, it could cause adverse tax
consequences for the participating employees.
An employer may not adopt this IRS Model SEP if the employer maintains
another qualified retirement plan or has ever maintained a qualified defined
benefit plan. This does not prevent your employer from adopting this IRS
Model SEP and also maintaining an IRS Model Elective SEP or other SEP.
However, if you work for several employers, you may be covered by a SEP of
one employer and a different SEP or pension or profit-sharing plan of another
employer.
SEP-IRA AMOUNTS--ROLLOVER OR TRANSFER TO ANOTHER IRA--You can withdraw or
receive funds from your SEP-IRA if within 60 days of receipt, you place those
funds in another IRA or SEP-IRA. This is called a "rollover" and can be done
without penalty only once in any 1-year period. However, there are no
restrictions on the number of times you make "transfers" if you arrange to
have these funds transferred between the trustees or the custodians so that
you never have possession of the funds.
WITHDRAWALS--You may withdraw your employer's contribution at any time, but
any amount withdrawn is includible in your income unless rolled over. Also,
if withdrawals occur before you reach 59 1/2% you may be subject to a tax on
early withdrawal.
EXCESS SEP CONTRIBUTIONS--Contributions exceeding the yearly limitations may
be withdrawn without penalty by the due date (plus extensions) for filing
your tax return (normally April 15), but is includible in your gross income.
Excess contributions left in your SEP-IRA account after that time may have
adverse tax consequences. Withdrawals of those contributions may be taxed as
premature withdrawals.
FINANCIAL INSTITUTION REQUIREMENTS--The financial institution where your IRA
is maintained must provide you with a disclosure statement that contains the
following information in plain, nontechnical language:
1. The law that relates to your IRA.
2. The tax consequences of various options concerning your IRA.
3. Participation eligibility rules, and rules on the deductibility of
retirement savings.
4. Situations and procedures for revoking your IRA, including the name,
address, and telephone number of the person designated to receive notice
of revocation. (This information must be clearly displayed at the
beginning of the disclosure statement.)
5. A discussion of the penalties that may be assessed because of prohibited
activities concerning you IRA.
6. Financial disclosure that provides the following information:
a. Projects value growth rates of your IRA under various contribution and
retirement schedules, or describes the method of determining annual
earnings and charges that may be assessed.
b. Describes whether, and for when, the growth projections are guaranteed,
or a statement of the earnings rate and the terms on which the
projections are based.
c. States the sales commission for each year expressed as a percentage of
$1,000.
In addition, the financial institution must provide you with a financial
statement each year. You may want to keep these statements to evaluate your
IRA's investment performance.
17
<PAGE>
[LOGO]
SECURITIES MANAGEMENT & RESEARCH, INC.
Member NASD, SIPC
- --------------------------------------------------------------------------------
One Moody Plaza Galveston, Texas 77550
Call Toll Free 1-800-231-4639
- --------------------------------------------------------------------------------
AMERICAN NATIONAL FUNDS GROUP
[LOGO] - American National Growth Fund
- American National Income Fund
- Tri-Flex Fund
- --------------------------------------------------------------------------------
SM&R CAPITAL FUNDS
[LOGO] - American National Government
Income Fund
- American National Tax-Free Fund
- American National Primary Fund
SM&R is an investment advisor and mutual fund underwriter with over 30 years
experience and manages all of the portfolios of the American National Funds
Group and the SM&R Capital Funds. It is, also, a subsidiary of American
National Insurance Company, one of the nation's largest insurers.
The professional investment managers of SM&R have the experience of directing
and redirecting more than $5 billion of investments through many years of
changing economic and market conditions. This experience has helped to make
these fund groups a respected part of the investment community.
Form 9379
02/98
2,000
<PAGE>
ROTH
IRA
FORMS KIT
SECURITIES MANAGEMENT & RESEARCH, INC.
One Moody Plaza - Galveston, Texas 77550
(409)763-2767
[LOGO]
Member NASD, SIPC
<PAGE>
NOTE TO REGISTERED REPRESENTATIVE:
PLEASE RETURN the Application and Purchaser Suitability forms, PAGES 1 THROUGH
4, to:
SECURITIES MANAGEMENT & RESEARCH, INC.
ONE MOODY PLAZA
GALVESTON, TX 77550.
THE CLIENT reads and keeps the Custodial Account Agreement and Disclosure
Statement, PAGES 5 THROUGH 8. These pages contain important information
that your client will want to keep in their files.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
|------------------------------------------------------|
[GRAPHIC] AMERICAN NATIONAL FAMILY OF FUNDS | HOME OFFICE USE |
|------------------------------------------------------|
Forward to: Securities Management & Research, Inc. | Account Number |
One Moody Plaza, Galveston, TX 77550 |------------------------------------------------------|
(800) 231-4639 | Account Type |Social Code |
|------------------------------------------------------|
| LOI Amount |
|------------------------------------------------------|
</TABLE>
ROTH IRA SIMPLIFIER -- APPLICATION -- PART 1
ACCOUNT REGISTRATION FORM (must be accompanied by Account Application - Part 2
Suitability Form)
This application form is for use in establishing a Roth IRA P account in the
American National Funds Group and the SM&R Capital Funds.
ACCOUNT REGISTRATION
SM&R, Inc., Custodian for
Name _______________________________________________________________________
Date of Birth (mm/dd/yy) ___________________________________________________
Address ____________________________________________________________________
City, State, Zip ___________________________________________________________
Social Security No. ________________________________________________________
Home Phone Number __________________________________________________________
Business Phone Number ______________________________________________________
CONTRIBUTION TYPE
/ / Regular or Spousal / / Transfer / / Rollover
SOURCE OF ROLLOVER OR TRANSFER
/ / Roth IRA / / Traditional IRA (CONVERSION)
/ / Check here if this is a Roth Conversion IRA.
/ / Check here if this is an amendment to an existing Roth IRA.
SPOUSAL CONSENT
This section should be reviewed if either the trust or the residence of the Roth
IRA holder is located in a community or marital property state and the Roth IRA
holder is married. Due to the important tax consequences of giving up one's
community property interest, individuals signing this section should consult
with a competent tax or legal advisor.
CURRENT MARITAL STATUS
/ / I AM NOT MARRIED -- I understand that if I become married in the future, I
must complete a new IRA Designation of Beneficiary form.
/ / I AM MARRIED -- I understand that if I choose to designate a primary
beneficiary other than my spouse, my spouse must sign below.
I am the spouse of the above-named Roth IRA holder. I acknowledge that I have
received a fair and reasonable disclosure of my spouse's property and financial
obligations. Due to the important tax consequences of giving up my interest in
this IRA, I have been advised to see a tax professional.
I hereby give the IRA holder any interest I have in the funds or property
deposited in this IRA and consent to the beneficiary designation(s) indicated
above. I assume full responsibility for any adverse consequences that may
result. No tax or legal advice was given to me by the custodian.
___________________________________________ ________________________
Signature of Spouse Date
___________________________________________ ________________________
Signature of Witness Date
BENEFICIARY INFORMATION
The following individual(s) or entity shall be my primary and/or contingent
beneficiary(ies). IF NEITHER PRIMARY NOR CONTINGENT IS INDICATED, THE
INDIVIDUAL OR ENTITY WILL BE DEEMED TO BE A PRIMARY BENEFICIARY. If more than
one primary beneficiary is designated and no distribution percentages are
indicated, the beneficiaries will be deemed to own equal share percentages in
the Roth IRA. Multiple contingent beneficiaries with no share percentage
indicated will also be deemed to share equally.
If any primary or contingent beneficiary dies before me, his or her interest and
the interest of his or her heirs shall terminate completely, and the percentage
share of any remaining beneficiary(ies) shall be increased on a pro rata basis.
If no primary beneficiary(ies) survives me, the contingent beneficiary(ies)
shall acquire the designated share of my Roth IRA.
____________________________________________ _________________________
Name Date of Birth
____________________________________________ __________________________
Address Social Security Number
_________________________ / / Primary / / Contingent _______________________
Relationship Share Percent (%)
____________________________________________ __________________________
Name Date of Birth
____________________________________________ __________________________
Address Social Security Number
_________________________ / / Primary / / Contingent _______________________
Relationship Share Percent (%)
____________________________________________ _________________________
Name Date of Birth
____________________________________________ _________________________
Address Social Security Number
_________________________ / / Primary / / Contingent ________________________
Relationship Share Percent (%)
____________________________________________ __________________________
Name Date of Birth
____________________________________________ __________________________
Address Social Security Number
_________________________ / / Primary / / Contingent ________________________
Relationship Share Percent (%)
SIGNATURES
IMPORTANT: PLEASE READ BEFORE SIGNING.
I understand the eligibility requirements for the type of Roth IRA deposit I am
making and I state that I do qualify to make the deposit. I have received a
copy of the Application, 5305-RA Plan Agreement, Financial Disclosure and
Disclosure Statement. I understand that the terms and conditions which apply to
this Roth Individual Retirement Account are contained in this Application and
the 5305-RA Plan Agreement. I agree to be bound by those terms and conditions.
Within seven (7) days from the date I open this Roth IRA I may revoke it without
penalty by mailing or delivering a written notice to the Custodian.
I assume complete responsibility for:
1) Determining that I am eligible for a Roth IRA each year I make a
contribution.
2) Insuring that all contributions I make are within the limits set forth by the
tax laws.
3) The tax consequences of any contribution (including rollover contributions
and conversions) and distributions.
_____________________________________________ _________________________
Roth IRA Holder Date
_____________________________________________ _________________________
Witness Date
_____________________________________________ _________________________
Authorized Signature of Custodian Date
SIGNATURES REQUIRED ON REVERSE SIDE.
1
<PAGE>
ROTH IRA CONTINUED
INVESTMENT INFORMATION
METHOD OF INVESTMENT
/ / I have enclosed a check for a minimum of $100 per Fund ($1,000 for
American National Primary Series)
/ / I have enclosed a check for a minimum of $20 per Fund ($100 for
American National Primary Series) and completed the Pre-Authorized
Check Plan form #8006 located at the back of the appropriate Fund's
prospectus
/ / Billing Franchise No. _____________________________________________
/ / Military Allotment (complete form 9341.)
FUND SELECTION
INVESTMENT TAX YEAR OF
FUND SELECTION AMOUNT CONTRIBUTION
/ / A. N. Growth Fund (21) ______________ _________________
/ / A. N. Income Fund (22) ______________ _________________
/ / Triflex Fund (23) ______________ _________________
/ / A. N. Government Income Fund (26) ______________ _________________
/ / A. N. Primary Fund (27) ______________ _________________
All dividends and capital gains distributions will be automatically reinvested
into the account.
PLEASE MAKE YOUR CHECK PAYABLE TO SM&R, INC.
REDUCED SALES CHARGE (Not applicable to Primary Series)
Please check the applicable category(ies) and write the account number(s) to be
included in determining the reduced sales charge under Account Numbers below.
Refer to the prospectus regarding sales charges.
/ / Right of Accumulation. I apply for this privilege, as described in the
Prospectus, based on the accounts listed in the spaces provided below
/ / Letter of Intent. By completing this section, I agree to the
provisions of the Letter of Intent as described in the Prospectus. I
have listed my other accounts that may qualify to be included under
this LOI.
/ / Establish a new LOI for the amount indicated below
/ / Increase my current LOI to the amount indicated below
I plan to invest during a 13-month period a dollar amount at least:
/ / $50,000* / / $100,000 / / $250,000 / / $500,000
*(Growth, Income, and Triflex Funds only)
____________________________________ _________________________________
Account Number Account Number
____________________________________ _________________________________
Account Number Account Number
NET ASSET VALUE ACCOUNTS
/ / I am an employee/agent of American National & Subsidiaries
/ / I am a qualified relative
Relationship/Employee: _________________________________________________
[LOGO] SECURITIES MANAGEMENT
& RESEARCH, INC.
One Moody Plaza, Galveston, TX 77550
(800)231-4639
Member NASD, SIPC
Distributor for the American National Family of Funds
AMERICAN NATIONAL FAMILY OF FUNDS
AUTHORIZATION AND SIGNATURE
I hereby establish an American National Funds Group and/or SM&R Capital Funds
IRA Account, appoint Securities Management & Research, Inc. (SM&R) as Custodian,
and
1) Consent to the $7.50 (per account) setup fee, the $7.50 (per account) annual
maintenance fee, and $5.00 excess contribution adjustment fee. Such fees are
subject to change on 30 days written notice to the Participant; and
2) Agree to the conditions governing the designation of beneficiary.
3) Further, I certify the following Backup Withholding Status and Citizenship
(Substitute W-9):
Under penalties of perjury, I certify by my signature as "Participant"
that the social security/taxpayer identification number furnished in
this application is correct and that (check the appropriate box and
fill in citizenship status below):
/ / I AM NOT subject to backup withholding
/ / I have been notified by the IRS that I AM subject to backup
withholding for failure to report all interest and/or dividends
/ / I do not have a social security/taxpayer identification number,
but I have applied for one. I understand that if I do not provide
this number within 60 days, the required Federal tax will be
withheld
/ / I am an exempt recipient
CITIZENSHIP / / U.S. / / OTHER ____________________________________
SIGNATURE PROVISIONS
I certify that the information which I have provided and the information which
is included within the application and attached material, is accurate and
complete. I have received the current prospectus of the fund(s) selected, and I
agree to its terms.
Participant's signature ______________________________________________________
Date _________________________________________________________________________
REGISTERED REPRESENTATIVE INFORMATION (SM&G Reg Reps only)
/ / Yes, I have completed and attached Account Application--Part 2 Suitability
Form (#9402)
Representative Signature ____________________________________________________
Representative Name (print) __________________________________________________
Representative Social Security Number ________________________________________
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 & 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 Right 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 ______________________________ Dealer # ________________________
Main Office Address ________________________________________________________
Branch # __________________________ Rep # __________________________________
Representative Name (print) ________________________________________________
Branch Address _____________________________________________________________
Phone Number _______________________________________________________________
Authorized Signature of Dealer _______________ Title _______________________
CUSTODIAN SECURITIES MANAGEMENT & RESEARCH, INC.
Accepted by ________________________________________________________________
Date _______________________________________________________________________
2
<PAGE>
[LOGO] SECURITIES MANAGEMENT & RESEARCH, INC.
One Moody Plaza, Galveston, TX 77550
Member NASD, SIPC
Distributor for the American National Family of Funds
ACCOUNT APPLICATION--PART 2
PURCHASER SUITABILITY FORM & ARBITRATION AGREEMENT (This form must accompany all
mutual fund applications submitted to SM&R. All information requested is
required.)
NEW INVESTOR INFORMATION
Date ___________________________________________________________________________
1. Account Registration ________________________________________________________
If account registered as a corporation, partnership or other legal entity,
names of any persons authorized to transact business on behalf of entity:
_____________________________________________________________________________
Social Security (or Tax I.D.) No. ___________________________________________
2. Fund(s) being purchased _____________________________________________________
3. Investor's Occupation _______________________________________________________
Name of Employer ____________________________________________________________
Address of Employer _________________________________________________________
Business Phone ( ) ________________________________________________________
4. Is the Investor employed by or associated with a member of the NASD or NYSE?
/ / No
/ / Yes. If yes, provide the name, address and phone no. of the firm:
________________________________________________________________________________
________________________________________________________________________________
5. Tax Status
/ / Single / / Head of Household / / Married filing separate returns
/ / Married filing joint return or qualifying widow(er) with dependent child
/ / Corporation / / Other
6. Marital Status
/ / Married / / Single / / Widowed
7. Dependents
/ / Spouse / / Children: Ages __________ / / Other
INVESTOR SUITABILITY INFORMATION
(TO BE COMPLETED BY INVESTOR OR REGISTERED REPRESENTATIVE.)
NASD rules require Registered Representatives to have reasonable grounds for
believing the recommended investment is suitable for the customer. Therefore,
representatives are required to make inquiries concerning the financial
condition of a proposed investor. You are urged to supply such information so
that the representative can make an informed judgment as to the suitability of
your investment selection(s). However, you are not required to divulge such
information. If you choose not to do so, you must sign at the section provided
on the reverse side indicating refusal and acknowledging that the representative
did request the suitability information.
1. SOURCES OF FUNDS FOR INVESTMENT
/ / Current Earnings / / Gift or Inheritance / / Insurance Benefit
/ / Savings / / Sale of Assets / / Maturity Proceeds
/ / Other _______________
2. PRIMARY PURPOSE OF INVESTMENT
/ / Education / / Savings / / Retirement
/ / Current Income / / Tax Shelter / / Business Purposes
/ / Other _______________
3. INVESTMENT PROFILE
(a) What is your current investment preference?
/ / Aggressive Growth / / Growth / / Growth & Current
Income
/ / Current Income / / Maximum safety, even if modest return
(b) What is your risk comfort level?
/ / High / / High/Moderate / / Moderate
/ / Moderate/Limited / / Low
(c) What is your financial goal time horizon?
/ / 1-5 years / / 5-10 years / / 10 years and beyond
(d) What is your age range?
/ / 21-40 / / 41-59 / / 60+
(e) What is your tax bracket?
/ / 15% / / 28% / / 28+
(f) What is your estimated annual family income?
/ / Under $15,000 / / $15,000-$30,000 / / $30,000-$50,000
/ / $50,000-$100,000 / / Over $100,000
(g) What is your estimated net worth (exclude home, furnishings and
automobiles)?
/ / Under $25,000 / / $25,000-$50,000
/ / $50,000-$100,000 / / Over $100,000
(h) Are you responsible for the financial welfare of anyone other than your
immediate family (i.e. alimony, child or parental support, etc.)?
/ / Yes / / No
(i) Do you own other securities?
/ / Yes / / No
Types: / / Stocks / / Bonds / / Mutual Funds
/ / Variable Products / / Other ___________________
I (we) furnished the above suitability information and it has been accurately
recorded.
Investor Signature _____________________________________________________________
Joint Owner Signature __________________________________________________________
CONTINUED ON REVERSE SIDE.
3
<PAGE>
[LOGO] SECURITIES MANAGEMENT & RESEARCH, INC.
ACCOUNT APPLICATION--PART 2
STATEMENT OF REFUSAL TO PROVIDE FINANCIAL INFORMATION
I (we) fully understand that the Registered Representative, acting on behalf of
Securities Management & Research, Inc. (SM&R), has requested the preceding
suitability information to determine whether my (our) purchase of securities is
an appropriate investment considering my (our) financial situation. I (we)
refuse to provide the requested information and by my (our) signature(s) below
agree not to seek rescission of the investment or damages based on its
unsuitability.
________________________________________________________________________________
Investor Signature
________________________________________________________________________________
Joint Owner Signature
REGISTERED REPRESENTATIVE NOTICE--Should the Investor sign the above Statement
of Refusal to Provide Financial Information, it is still an NASD requirement
that you have reasonable grounds to recommend the purchase of this investment as
suitable. Therefore, YOU must complete the suitability information to the best
of your knowledge and certify that you have done so when signing the Registered
Representative's Statement below.
- --------------------------------------------------------------------------------
REGISTERED REPRESENTATIVE STATEMENT & SIGNATURE
Check appropriate boxes.
/ / Application--Part 1 attached.
/ / Custodial Agreement and Disclosure Statement detached and given to Investor.
(For IRA, TSA, SEP or SIMPLE accounts only)
/ / Signed Arbitration Agreement
/ / Suitability information was provided by the Investor and the Investor signed
acknowledgement that information was accurately recorded.
--or--
/ / Refusal to Provide Financial Information Statement Signed by Investor.
I provided the suitability information to the best of my knowledge and have
reasonable grounds to recommend the purchase of this investment as suitable
for the investor.
________________________________________________________________________________
Registered Representative Signature
________________________________________________________________________________
Registered Representative Name (print)
Accepted; Securities Management & Research, Inc.
By _____________________________________________________________________________
Date ___________________________________________________________________________
PURCHASER 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 a jury trial.
3. Pre-arbitration discovery is generally more limited 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 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 may be entered in any appropriate court.
I (we) further understand that we may not bring a punitive or certified class
action to arbitration, nor seek to enforce any pre-dispute arbitration agreement
against anyone who has initiated in court a punitive class action; or who is a
member of a punitive class action until (1) the class action certification is
denied; or (2) the class is decertified; or (3) I (we) are excluded from the
class action by the court. Such forbearance to enforce an agreement to
arbitrate shall not constitute a waiver of any right under this agreement except
to the extent stated herein.
________________________________________________________________________________
Investor Signature
________________________________________________________________________________
Joint Owner Signature
Form 9402
2/98
4
<PAGE>
ROTH IRA CUSTODIAL ACCOUNT
FORM 5305-RA
ROTH INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
(Under Section 408(a) of the Internal Revenue Code)
Rev. January 1998
Department of Treasury
Internal Revenue Service
The Depositor whose name appears on the Application is establishing a Roth
Individual Retirement Account under section 408A to provide for his or her
retirement and for the support of his or her beneficiaries after death.
The Custodian named on the Application has given the Depositor the disclosure
statement required under Regulations section 1.408-6.
The Depositor has assigned the Custodial account the sum indicated on the
Application.
The Depositor and the Custodian make the following agreement:
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion IRA, then, except
in the case of a rollover contribution described in section 408A(e), the
Custodian will accept only cash contributions and only up to a maximum
amount of $2,000 for any tax year of the Depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no contributions
other than IRA Conversion Contributions made during the same tax year will
be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single depositor, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married depositor who files jointly, between AGI of $150,000 and $160,000;
and for a married depositor who files separately, between $0 and $10,000. In
the case of a conversion, the Custodian will not accept IRA Conversion
Contributions in a tax year if the Depositor's AGI for that tax year exceeds
$100,000 or if the Depositor is married and files a separate return. Adjusted
gross income is defined in section 408A(c)(3) and does not include IRA
Conversion Contributions.
ARTICLE III
The Depositor's interest in the balance in the Custodial account is
nonforfeitable.
ARTICLE IV
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within
the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)), except as otherwise permitted by Section
408(m)(3), which provides an exception for certain gold, silver,and
platinum coins, coins issued under the laws of any state, and certain
bullion.
ARTICLE V
1. If the Depositor dies before his or her entire interest is distributed to
him or her and the Depositor's surviving spouse is not the sole
beneficiary, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of the
beneficiary or beneficiaries, either:
(a) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(b) Be distributed over the life expectancy of the designated beneficiary
starting no later than December 31 of the year following the year of
the Depositor's death.
If distributions do not begin by the date described in (b), distribution
method (a) will apply.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
3. If the Depositor's spouse is the sole beneficiary on the Depositor's date
of death, such spouse will then be treated as the Depositor.
ARTICLE VI
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VII
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this sentence will be controlling. Any
additional articles that are not consistent with section 408A, the related
regulations, and other published guidance will be invalid.
ARTICLE VIII
This agreement will be amended from time to time to comply with the provisions
of the Code, related regulations, and other published guidance. Other
amendments may be made with the consent of the persons whose signatures appear
below.
ARTICLE IX
9.01 Definitions: In this part of this Agreement (Article IX), the words "you"
and "your" mean the Depositor, the words "we", "us" and "our" mean the
Custodian and "Code" means the Internal Revenue Code.
9.02 Notices and Change of Address: Any required notice regarding this Roth IRA
will be considered effective when we mail it to the last address of the
intended recipient which we have in our records. Any notice to be given to
us will be considered effective when we actually receive it. You must
notify us of any change of address.
9.03 Representations and Responsibilities: You represent and warrant to us that
any information you have given or will give us with respect to this
Agreement is complete and accurate. Further, you agree that any directions
you give us, or action you take will be proper under this Agreement and
that we are entitled to rely upon any such information or directions. We
shall not be responsible for losses of any kind that may result from your
directions to us or your actions or failures to act and you agree to
reimburse us for any loss we may incur as a result of such directions,
actions or failures to act. We shall not be responsible for any penalties,
taxes, judgments or expenses you incur in connection with your Roth IRA.
We have no duty to determine whether your contributions or distributions
comply with the Code, regulations, rulings or this Agreement.
9.04 Service Fees: We have the right to charge an annual service fee or other
designated fees (for example, a transfer, rollover or termination fee) for
maintaining your Roth IRA. In addition, we have the right to be reimbursed
for all reasonable expenses we incur in connection with the administration
of your Roth IRA. We may charge you separately for any fees or expenses or
we may deduct the amount of the fees or expenses from the assets in your
Roth IRA at our discretion. We reserve the right to charge any additional
fee upon 30 days notice to you that the fee will be effective.
Any brokerage commissions attributable to the assets in your Roth IRA will
be charged to your Roth IRA. You cannot reimburse your Roth IRA for those
commissions.
9.05 Investment of Amounts in the Roth IRA:
(a) DIRECTION OF INVESTMENT--You have exclusive responsibility for and
control over the investment of the assets of your Roth IRA. You shall
direct all investment transactions, including earnings and the
proceeds from securities sales. Your selection of investments,
however, shall be limited to publicly traded securities, mutual funds,
money market instruments and other investments that are obtainable by
us and that we are capable of holding in the ordinary course of our
business.
In the absence of instructions from you or your instructions are not
in a form acceptable to us, we shall hold any uninvested amounts in
cash and we shall have no responsibility to invest uninvested cash
unless and until directed by you.
All transactions shall be subject to any and all applicable Federal
and State laws and regulations and the rules, regulations, customs and
usages of any exchange, market or clearing house where the transaction
is executed and to our policies and practices.
After your death, your beneficiary(ies) shall have the right to direct
the investment of your Roth IRA assets, subject to the same conditions
that applied to your during your lifetime under this Agreement
(including, without limitation, section 9.03).
(b) OUR INVESTMENT POWERS AND DUTIES--We shall have no discretion to
direct any investment in your Roth IRA. We assume no responsibility
for rendering investment advice with respect to your Roth IRA. We
assume no responsibility for rendering investment advice with respect
to your Roth IRA, nor will we offer any opinion or judgment to you on
matters concerning the value or suitability of any investment or
proposed investment for your Roth IRA. We shall exercise the voting
rights and other shareholder rights with respect to securities in your
Roth IRA but only in accordance with the instructions you give to us.
(c) DELEGATION OF INVESTMENT RESPONSIBILITY--We may, but are not required
to,
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5
<PAGE>
permit you to delegate your investment responsibility for your Roth
IRA to another party acceptable to us by giving written notice of your
delegation in a format we prescribe. We shall follow the direction of
any such party who is properly appointed and we shall be under no duty
to review or question, nor shall we be responsible for, any of that
party's directions, actions or failures to act.
9.06 BENEFICIARIES: If you die before you receive all of the amounts in your
Roth IRA, payments from your Roth IRA will be made to your beneficiaries.
You may designate one or more persons or entities as beneficiary of your
Roth IRA. This designation can only be made on a form prescribed by us and
it will only be effective when it is filed with us during your lifetime.
Each beneficiary designation you fill with us will cancel all previous
ones. The consent of a beneficiary shall not be required for you to revoke
a beneficiary designation. If you do not designate a beneficiary, your
estate will be the beneficiary.
If your surviving spouse is your sole beneficiary, your spouse may treat
your Roth IRA as his or her own Roth IRA and would not be subject to the
required minimum distribution rules. Your surviving spouse will also be
entitled to such additional beneficiary payment options as are permitted
under the law or related regulations. If the beneficiary or beneficiaries
include anyone other than your surviving spouse, distributions must
commence in accordance with Article V. If the beneficiary payment election
described in Article V is not made by December 31 of the year following the
year of your death, the payment method described as the 5 year rule will be
deemed elected.
9.07 TERMINATION: Either party may terminate this Agreement at any time by
giving written notice to the other. We can resign as Custodian at any time
effective 30 days after we mail written notice of our resignation to you.
Upon receipt of that notice, you must make arrangements to transfer your
Roth IRA to another financial organization. If you do not complete a
transfer of your Roth IRA within 30 days from the date we mail the notice
to you, we have the right to transfer your Roth IRA assets to a successor
Roth IRA trustee or custodian that we choose in our sole discretion or we
may pay your Roth IRA to you in a single sum. We shall not be liable for
any actions or failures to act on the part of any successor trustee or
custodian nor for any tax consequences you may incur that result from the
transfer or distribution of your assets pursuant to this section.
If this Agreement is terminated, we may hold back from your Roth IRA a
reasonable amount of money that we believe is necessary to cover any one or
more of the following:
- Any Fees, expenses or taxes chargeable against your Roth IRA;
- any penalties associated with the early withdrawal of any savings
instrument or other investment in your Roth IRA.
If our organization is merged with another organization (or comes under the
control of any Federal or State agency) or if our entire organization (or
any portion which includes your Roth IRA) is bought by another
organization, that organization (or agency) shall automatically become the
trustee or custodian of your Roth IRA, but only if it is the type of
organization authorized to serve as a Roth IRA trustee or custodian.
If we are required to comply with section 1.408-2(e) of the Treasury
Regulations and we fail to do so, or we are not keeping the records, making
the returns or sending the statements as are required by forms or
regulations, the IRS may, after notifying you, require you to substitute
another trustee or custodian.
9.08 AMENDMENTS: We have the right to amend this Agreement at any time. Any
amendment we make to comply with the Code and related regulations does not
require your consent. You will be deemed to have consented to any other
amendment unless, within 30 days from the date we mail the amendment, you
notify us in writing that you do not consent.
9.09 WITHDRAWALS: All requests for withdrawal shall be in writing on a form
provided by or acceptable to us. The method of distribution must be
specified in writing. The tax identification number of the recipient must
be provided to us before we are obligated to make a distribution.
Any withdrawals shall be subject to all applicable tax and other laws and
regulations including possible early withdrawal penalties and withholding
requirements.
You are not required to take a distribution from your Roth IRA at age
70 1/2. At your death, however, your beneficiaries must begin taking
distributions in accordance with Article V and section 9.06 of this
Agreement. We will make no payouts to you from your Roth IRA until you
provide us with a written request for a distribution on a form provided by
or approved by us.
9.10 TRANSFERS FROM OTHER PLANS: We can receive amounts transferred or rolled
over to this Roth IRA from the trustee or custodian of another Roth IRA as
permitted by statute or applicable regulations.
However, if this Custodial account is designated as a Roth Conversion IRA,
no contributions other than IRA Conversion Contributions made during the
same tax year will be accepted.
9.11 LIQUIDATION OF ASSETS: We have the right to liquidate assets in your Roth
IRA if necessary to make distributions or to pay fees, expenses or taxes
properly chargeable against your Roth IRA. If you fail to direct us as to
which assets to liquidate, we will decide in our complete and sole
discretion and you agree not to hold us liable for any adverse
consequences that result from our decision.
9.12 RESTRICTIONS ON THE FUND: Neither you nor any beneficiary may sell,
transfer or pledge any interest in your Roth IRA in any manner whatsoever,
except as provided by law or this Agreement.
The assets in your Roth IRA shall not be responsible for the debts,
contracts or torts of any person entitled to distributions under this
Agreement.
9.13 WHAT LAW APPLIES: This Agreement is subject to all applicable Federal and
State laws and regulations. If it is necessary to apply any State law to
interpret and administer this Agreement, the law of our domicile shall
govern.
If any part of this Agreement is held to be illegal or invalid, the
remaining parts shall not be affected. Neither your nor our failure to
enforce at any time or for any period of time any of the provisions of this
Agreement shall be construed as a waiver of such provisions, or your right
or our right thereafter to enforce each and every such provision.
INSTRUCTIONS
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE UNLESS OTHERWISE NOTED.)
PURPOSE OF FORM
Form 5305-RA is a model Custodial account agreement that meets the requirements
of section 408A and has been automatically approved by the IRS. A Roth
individual retirement account (Roth IRA) is established after the form is fully
executed by both the individual (Depositor) and the Custodian. This account
must be created in the United States for the exclusive benefit of the Depositor
or his or her beneficiaries.
Do not file Form 5305-RA with the IRS. Instead, keep it for your records.
Unlike contributions to Traditional individual retirement arrangements,
contributions to a Roth IRA are not deductible from the Depositor's gross
income; and distributions after 5 years that are made when the Depositor is
59 1/2 years of age or older or on account of death, disability, or the purchase
of a home by a first-time homebuyer (limited to $10,000), are not includible in
gross income. For more information on Roth IRAs including the required
disclosure the Depositor can get from the Custodian, get PUB. 590, INDIVIDUAL
RETIREMENT ARRANGEMENTS (IRAs).
This Roth IRA can be used by a Depositor to hold: (1) IRA Conversion
Contributions, amounts rolled over or transferred from another Roth IRA, and
annual cash contributions of up to $2,000 from the depositor; or (2) if
designated as a Roth Conversion IRA by checking the box on the Application),
only IRA Conversion Contributions for the same Tax Year.
To simplify the identification of funds distributed from Roth IRAs, Depositors
are encouraged to maintain IRA Conversion Contributions for each tax year in a
separate Roth IRA.
DEFINITIONS
ROTH CONVERSION IRA: A Roth Conversion IRA is a Roth IRA that accepts only IRA
Conversion Contributions made during the same tax year.
IRA CONVERSION CONTRIBUTIONS: IRA Conversion Contributions are amounts rolled
over, transferred, or considered transferred from a nonRoth IRA to a Roth IRA.
A nonRoth IRA is an individual retirement account or annuity described in
section 408(a) or 408(b), other than a Roth IRA.
CUSTODIAN: The Custodian must be a bank or Savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to act
as a Custodian.
DEPOSITOR: The Depositor is the person who establishes the Custodial account.
SPECIFIC INSTRUCTIONS
ARTICLE 1: The Depositor may be subject to a 6-percent tax on excess
contributions if (1) contributions to other individual retirement arrangements
of the Depositor have been made for the same tax year, (2) the Depositor's
adjusted gross income exceeds the applicable limits in Article II for the tax
year, or (3) the Depositor's and spouse's compensation does not exceed the
amount contributed for them for the tax year. The Depositor should see the
Disclosure Statement or Pub. 590 for more information.
ARTICLE IX: Article IX and any that follow it may incorporate additional
provisions that are agreed to by the Depositor and Custodian to complete the
agreement. They may include, for example, definitions, investment powers,
voting rights, exculpatory provision, amendment and termination, removal of the
Custodian, Custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the Depositor, etc. Use additional pages if
necessary and attach them to this form.
Note: From 5305-RA may be reproduced and reduced in size for adaptation to
passbook purposes.
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DISCLOSURE STATEMENT
RIGHT TO REVOKE YOUR ROTH IRA
If your receive this Disclosure Statement at the time you establish your Roth
IRA, you have the right to revoke your Roth IRA within seven (7) days of its
establishment. If revoked, you are entitled to a full return of the
contribution you made to your Roth IRA. The amount returned to you would not
include an adjustment for such items as sales commissions, administrative
expenses, or fluctuation in market value. You may make this revocation only by
mailing or delivering a written notice to the Custodian at the address listed on
the Application.
If you send your notice by first-class mail, your revocation will be deemed
mailed as of the date of the postmark.
If you have any questions about the procedure for revoking your Roth IRA, please
call the Custodian at the telephone number listed on the Application.
REQUIREMENTS OF A ROTH IRA
A. CASH CONTRIBUTIONS--Your contribution must be in cash, unless it is a
qualified rollover contribution.
B. MAXIMUM CONTRIBUTION--The total amount you may contribute to a Roth IRA for
any taxable year cannot exceed the lesser of $2,000 or 100 percent of your
compensation. If you also maintain a Traditional IRA (i.e., an IRA
subject to the limits of Internal Revenue Code (IRC) Sec. 408(a) or 408(b)
the maximum contribution to your Roth IRA is reduced by any contributions
you make to your Traditional IRA. Your total annual contribution to all
Traditional IRAs and Roth IRAs cannot exceed the lesser of $2,000 or
100 percent of your compensation.
Your Roth IRA contribution is further limited if your adjusted gross income
(AGI) exceeds $150,000 and you are a married individual filing jointly
($95,000 for single taxpayers). Married individuals filing jointly with
AGI which exceeds $160,000 may not fund a Roth IRA. Married individuals
filing separately with AGI exceeding $10,000 may not fund a Roth IRA.
Single individuals with AGI exceeding $110,000 may not fund a Roth IRA.
If you are married filing jointly and your AGI is between $150,000 and
$160,000, your maximum Roth IRA contribution is determined as follows: (1)
Subtract your AGI from $160,000, (2) divide the difference by $10,000, and
(3) multiply the result in step (2) by $2,000. For example, if your AGI is
$155,000, your maximum Roth IRA contribution is $1,000. The amount is
determined as follows: [($160,000 minus $155,000) divided by $10,000]
multiplied by $2,000.
If you are single and your AGI is between $95,000 and $110,000, your
maximum Roth IRA contribution is determined as follows: (1) Subtract your
AGI from $110,000, (2) divide the difference by $15,000, and (3) multiply
the result in step (2) by $2,000. For example, if your AGI is $98,000,
your maximum Roth IRA contribution is $1,600. This amount is determined as
follows: [($110,000 minus $98,000) divided by $15,000] multiplied by
$2,000.
Your Roth IRA contribution is not limited by your participation in a
retirement plan other than a Traditional IRA, as discussed above. In
addition, unlike traditional IRAs, you may continue to fund a Roth IRA
after age 70 1/2 so long as you have earned income and your AGI is below
the maximum thresholds discussed above.
C. NONFORFEITABILITY--Your interest in your Roth IRA is nonforfeitable.
D. ELIGIBLE CUSTODIANS--The Custodian of your Roth IRA must be a bank, savings
and loan association, credit union, or a person approved by the Secretary
of the Treasury.
E. COMMINGLING ASSETS--The assets of your Roth IRA cannot be commingled with
other property except in a common trust fund or common investment fund.
F. LIFE INSURANCE--No portion of your Roth IRA may be invested in life
insurance contracts.
G. COLLECTIBLES--You may not invest the assets of your Roth IRA in
collectibles (within the meaning of Internal Revenue Code (IRC) section
408(m)). A collectible is defined as any work of art, rug or antique,
metal or gem, stamp or coin, alcoholic beverage, or other tangible personal
property specified by the Internal Revenue Service. However, specially
minted United States gold and silver bullion coins and certain state-issued
coins are permissible investments. Platinum coins and certain gold,
silver, platinum or palladium bullion (as described in IRC Sec. 408(m)(3))
are also permitted as Roth IRA Investments.
H. BENEFICIARY PAYOUTS--If your surviving spouse is your sole beneficiary,
your spouse may treat your Roth IRA as his or her own Roth IRA and would
not be subject to the required minimum distribution rules. Your surviving
spouse will also be entitled to such additional beneficiary payment options
as are permitted under the law or related regulations. If the beneficiary
or beneficiaries include anyone other than your surviving spouse, the
entire amount remaining in your account will, at the election of your
beneficiary or beneficiaries, either
(a) be distributed by December 31 of the year containing the fifth
anniversary of your death, or
(b) be distributed in equal or substantially equal payments over the life
or life expectancy of your designated beneficiary or beneficiaries.
A nonspouse beneficiary or beneficiaries must elect either option (a) or
(b) by December 31 of the year following the year of your death. If no election
is made, distribution will be made in accordance with option (a).
INCOME TAX CONSEQUENCES OF ESTABLISHING A ROTH IRA
A. CONTRIBUTIONS NOT DEDUCTED--No deduction is allowed for Roth IRA
contributions, including transfers and rollover contributions.
B. TAX-DEFERRED EARNINGS--The investment earnings of your Roth IRA are not
subject to federal income tax as they accumulate in your Roth IRA. In
addition, distributions of your Roth IRA earnings will be free from federal
income tax if you take a qualified distribution, as discussed below.
C. TAXATION OF DISTRIBUTIONS--The taxation of a Roth IRA distribution depends
on whether the distribution is a qualified distribution or a nonqualified
distribution.
1. QUALIFIED DISTRIBUTIONS--Qualified distributions from your Roth IRA
(both the contributions and earnings) are not included in gross
income. A qualified distribution occurs when the assets have been in
the Roth IRA for five years and one of the following events occurs:
- attainment of age 59 1/2,
- disability,
- the purchase of a first home, or
- death.
For contributory IRAs, the five-year period begins with the first year
for which you make a Roth IRA contribution. For example, if you make
a contribution to your Roth IRA for 1998, the five-year period will
be completed at the end of 2002. However, a separate five-year
requirement applies to each rollover contribution from a Traditional
IRA. The five-year period for these rollovers begins with the year
in which the rollover contribution is made.
2. NONQUALIFIED DISTRIBUTIONS--If you do not meet the requirements for a
qualified distribution, any earnings you withdraw from your Roth IRA
will be included in your gross income and, if you are under age
59 1/2, may be subject to an early distribution penalty. However,
when you take a nonqualified distribution, your basis (the amounts you
contributed to the account) will generally be removed first.
Therefore, your nonqualified distributions will not be taxable to you
until your withdrawals exceed the amount of your contributions.
Special rules may apply to the distribution of conversion amounts.
D. NO REQUIRED MINIMUM DISTRIBUTIONS--You are not required to take
distribution from your Roth IRA at age 70 1/2 (as required for Traditional
and SIMPLE IRAs).
E. ROLLOVERS AND CONVERSIONS--Your Roth IRA may be rolled over to another
Roth IRA of yours, or may receive rollover contributions, provided that
all of the applicable rollover rules are followed. Rollover is a term used
to describe a tax-free movement of cash or other property to your Roth IRA
from any of your Roth or Traditional IRAs. The rollover rules are
generally summarized below. These transactions are often complex. If you
have any questions regarding a rollover, please see a competent tax
advisor.
1. ROTH IRA TO ROTH IRA ROLLOVERS--Funds distributed from your Roth IRA
may be rolled over to a Roth IRA of yours if the requirements of IRC
section 408(d)(3) are met. A proper Roth IRA to Roth IRA rollover is
completed if all or part of the distribution is rolled over not later
than 60 days after the distribution is received. You may not have
completed another Roth IRA to Roth IRA rollover from the distributing
Roth IRA during the 12 months preceding the date you receive the
distribution. Further, you may roll the same dollars or assets only
once every 12 months. Roth IRA assets may not be rolled over to other
types of IRAs (e.g., Traditional IRA, SIMPLE IRA).
2. TRADITIONAL IRA TO ROTH IRA CONVERSIONS--Unless your adjusted gross
income is more than $100,000, or you are married filing a separate tax
return, you are eligible to roll over, transfer or convert all or any
portion of your existing Traditional IRA(s) into your Roth IRA(s). A
separate Roth Conversion IRA should generally be established to hold
conversion amounts. If your Roth Conversion IRA is designated as a
Roth Conversion IRA, the only permissible contributions are amounts
converted from a Traditional IRA during the same tax year. The amount
of the conversion from your Traditional IRA to your Roth IRA will be
treated as a distribution for income tax purposes and is includible in
your gross income (except for any nondeductible contributions).
Although the conversion amount is generally included in income, the 10
percent early distribution penalty will not apply to rollovers or
conversions from a Traditional IRA to a Roth IRA, regardless of
whether you qualify for any exceptions to the 10 percent penalty.
If you convert assets from your Traditional IRA to your Roth IRA prior
to January 1, 1999, you may include the taxable amount of the
distribution in your gross income ratable over a four year period
beginning with 1998.
3. WRITTEN ELECTION--At the time you make a proper rollover to a Roth
IRA, you must designate to the Custodian, in writing, your election to
treat that contribution as a rollover. Once made, the rollover
election is irrevocable.
4. NO ROLLOVERS FROM EMPLOYER PLANS--You may not roll over distributions
from your employer's qualified retirement plan or 403(b) arrangement
into your Roth IRA.
F. CARRYBACK CONTRIBUTIONS--A contribution is deemed to have been made on the
last day of the preceding taxable year if you make a contribution by the
deadline for filing your income tax return (not including extensions), and
you designate that
#6100(12/97) -C- 1997 Universal Pensions, Inc., Brainerd, MN 56401
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contribution as a contribution for the preceding taxable year. For
example, if you are a calendar year taxpayer and you make your Roth IRA
contribution on or before April 15, your contribution is considered to have
been made for the previous tax year if you designate it as such.
LIMITATIONS AND RESTRICTIONS
A. SPOUSAL ROTH IRA--If you are married, you may make payments to a Roth IRA
established for the benefit of your spouse. You must file a joint tax
return for the year for which the contribution is made.
The amount you may contribute to your Roth IRA and your spouse's Roth IRA
is the lesser of $4,000 or 100 percent of your combined compensation.
However, you may not contribute more than $2,000 to any one Roth IRA. Your
contribution may be further limited if your AGI exceeds the levels
discussed in the section titled MAXIMUM CONTRIBUTION.
B. ESTATE TAX EXCLUSION--The $100,000 federal estate tax exclusion previously
available has been repealed for individuals dying after December 31, 1984.
No exclusion will be allowed for individuals dying after that date.
Transfers of your Roth IRA assets to a named beneficiary made during your
life and at your request or because of your failure to instruct otherwise,
may be subject to federal gift tax under IRC section 2501 if made after
October 22, 1986.
C. SPECIAL TAX TREATMENT--Capital gains treatment and the favorable five or
ten year forward averaging tax authorized by IRC section 402 do not apply
to Roth IRA distributions.
D. INCOME TAX TREATMENT--Any nonqualified withdrawal of earnings from your
Roth IRA, is subject to federal income tax withholding. You may, however,
elect not to have withholding apply to your Roth IRA withdrawal. If
withholding is applied to your withdrawal, not less than 10 percent of the
amount withdrawn must be withheld.
E. PROHIBITED TRANSACTIONS--If you or your beneficiary engage in a prohibited
transaction with your Roth IRA, as described in IRC section 4975, your Roth
IRA will lose its tax-exempt status and you must generally include the
value of the earnings in your account in your gross income for that taxable
year.
F. PLEDGING--If you pledge any portion of your Roth IRA as collateral for a
loan, the amount so pledged will be treated as a distribution and may be
included in your gross income for that year to the extent it represents
earnings.
FEDERAL TAX PENALTIES
A. EARLY DISTRIBUTION PENALTY--If you are under age 59 1/2 and receive a
nonqualified Roth IRA distribution, an additional tax of 10 percent will
apply to the amount includible in income (i.e., the earnings), unless the
distribution is made on account of death, disability, a qualifying
rollover, a direct transfer, the timely withdrawal of an excess
contribution; or if the distribution is part of a series of substantially
equal periodic payments (at least annual payments) made over your life
expectancy or the joint life expectancy of you and your beneficiary.
Payments made to pay medical expenses which exceed 7.5 percent of your
adjusted gross income and distributions to pay for health insurance by an
individual who has separated from employment and who has received
unemployment compensation under a federal or state program for at least 12
weeks are also exempt from the 10 percent tax. Payments to cover certain
qualified education expenses and distributions for first-home purchases (up
to life-time maximum of $10,000) are exempt from the 10 percent tax. This
additional tax will apply only to the portion of a distribution which is
includible in your income.
B. EXCESS CONTRIBUTION PENALTY--An excise tax of 6 percent is imposed upon any
excess contribution you make to your Roth IRA. This tax will apply each
year in which an excess remains in your Roth IRA. An excess contribution
is any contribution amount which exceeds your contribution limit, excluding
rollover and direct transfer amounts. Your contribution limit is the
lesser of $2,000 or 100 percent of your compensation for the taxable year.
Your contribution may be further limited if your AGI exceeds the levels
discussed in the section titled Maximum Contribution.
C. EXCESS ACCUMULATION PENALTY--Unless your sole beneficiary is your surviving
spouse, your designated beneficiary(ies) is required to take certain
minimum distributions after death. An additional tax of 50 percent is
imposed on the amount of the required minimum distribution which should
have been taken but was not. This tax is referred to as an excess
accumulation penalty tax.
D. PENALTY REPORTING--You must file Form 5329 with the Internal Revenue
Service to report and remit any penalties or excise taxes.
OTHER
A. IRS PLAN APPROVAL--The Agreement used to establish this Roth IRA has been
approved by the Internal Revenue Service. The Internal Revenue Service
approval is a determination only as to form. It is not an endorsement of
the plan in operation or of the investments offered.
B. ADDITIONAL INFORMATION--You may obtain further information on Roth IRAs
from your District Office of the Internal Revenue Service. In particular,
you may wish to obtain IRS Publication 590, INDIVIDUAL RETIREMENT
ARRANGEMENTS (IRAs).
#6100(12/97) -C- 1997 Universal Pensions, Inc., Brainerd, MN 56401
8
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[LOGO]
SECURITIES MANAGEMENT & RESEARCH, INC.
Member NASD, SIPC
- --------------------------------------------------------------------------------
One Moody Plaza Galveston, Texas 77550
Call Toll Free 1-800-231-4639
- --------------------------------------------------------------------------------
AMERICAN NATIONAL FUNDS GROUP
[LOGO] - American National Growth Fund
- American National Income Fund
- Tri-Flex Fund
- --------------------------------------------------------------------------------
SM&R CAPITAL FUNDS
[LOGO] - American National Government
Income Fund
- American National Tax-Free Fund
- American National Primary Fund
SM&R is an investment advisor and mutual fund underwriter with over 30 years
experience and manages all of the portfolios of the American National Funds
Group and the SM&R Capital Funds. It is, also, a subsidiary of American
National Insurance Company, one of the nation's largest insurers.
The professional investment managers of SM&R have the experience of directing
and redirecting more than $5 billion of investments through many years of
changing economic and market conditions. This experience has helped to make
these fund groups a respected part of the investment community.
Form 9382
2/98
<PAGE>
EDUCATION
IRA
FORMS KIT
SECURITIES MANAGEMENT & RESEARCH, INC.
One Moody Plaza - Galveston, Texas 77550
(409)763-2767
[LOGO]
<PAGE>
NOTE TO REGISTERED REPRESENTATIVE:
PLEASE RETURN the Application and Purchaser Suitability forms, PAGES 1 THROUGH
4, to:
SECURITIES MANAGEMENT & RESEARCH, INC.
ONE MOODY PLAZA
GALVESTON, TX 77550.
THE CLIENT reads and KEEPS the Custodial Account Agreement and Disclosure
Statement, PAGES 5 THROUGH 8. These pages contain important information that
your client will want to keep in their files. IN ADDITION, PLEASE PROVIDE
THE EDUCATION IRA MANAGER WITH A COPY OF THE EDUCATION IRA SIMPLIFIER
APPLICATION (PAGES 1 AND 2).
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
|------------------------------------------------------|
[LOGO] AMERICAN NATIONAL FAMILY OF FUNDS | HOME OFFICE USE |
|------------------------------------------------------|
FORWARD TO: SECURITIES MANAGEMENT & RESEARCH, INC. | Account Number |
ONE MOODY PLAZA, GALVESTON, TX 77550 |------------------------------------------------------|
(800) 231-4639 | Account Type |Social Code |
|------------------------------------------------------|
| LOI Amount |
|------------------------------------------------------|
</TABLE>
EDUCATION IRA SIMPLIFIER--APPLICATION--PART 1
- --------------------------------------------------------------------------------
ACCOUNT REGISTRATION FORM (must be accompanied by Account Application--Part 2
Suitability Form)
This application form is for use in establishing an Education IRA account in
the American National Funds Group and the SM&R Capital Funds.
DESIGNATED BENEFICIARY [CHILD]
Name _______________________________________________________________________
Date of Birth ______________________________________________________________
Address ____________________________________________________________________
Social Security Number _____________________________________________________
City, State, Zip ___________________________________________________________
RESPONSIBILE INDIVIDUAL
A Responsible Individual Must be designated below and must be a parent or
guardian of the Designated Beneficiary
Name _______________________________________________________________________
Relationship to Benificiary ________________________________________________
Address ____________________________________________________________________
Social Security Number _____________________________________________________
City, State, Zip ___________________________________________________________
Home Phone _________________________________________________________________
Business Phone _____________________________________________________________
Answer "Yes" or "No" to each of the following questions by checking the
appropriate box. If a box is not checked for a question the answer will be
deemed to be "No".
/ / Yes / / No The Responsible Individual may change the beneficiary
designated under this agreement to another member of the
Designated Beneficiary's family described in Section
529(e)(2) in accordance with the Custodian's procedures.
/ / Yes / / No The Responsible Individual shall continue to serve as the
Responsible Individual for the custodial account after the
Designated Beneficiary attains the age of majority under
state law and until such time as all assets have been
distributed from the custodial account and the custodial
account terminates. If the Responsible Individual becomes
incapacitated or dies after the Designated Benificiary
reaches the age of majority under state law, the Responsible
Individual shall be the Designated Beneficiary.
SUCCESSOR RESPONSIBLE INDIVIDUAL
In the event of the death or legal incapacity of the Responsible Individual
while the Designated Beneficiary is a minor under state law, the following
shall become the Responsible Individual if no successor is named, the
Successor Responsible Individual shall be the Designated Beneficiary's
remaining parent or successor guardian.
Name _______________________________________________________________________
Relationship to Benificiary ________________________________________________
Address ____________________________________________________________________
Social Security Number _____________________________________________________
City, State, Zip ___________________________________________________________
Home Phone _________________________________________________________________
Business Phone _____________________________________________________________
DEPOSITOR
/ / Check here if same as Responsible Individual
Name _______________________________________________________________________
Address ____________________________________________________________________
City, State, Zip ___________________________________________________________
Social Security No. ________________________________________________________
Home Phone Number __________________________________________________________
CONTRIBUTION TYPE
/ / Regular / / Transfer / / Rollover
/ / Check here if this is an amendment to an existing Education IRA.
SIGNATURES
IMPORTANT: PLEASE READ BEFORE SIGNING. THE SIGNATURE OF THE RESPONSIBLE
INDIVIDUAL SHOULD BE OBTAINED IF SOMEONE OTHER THAN THE DEPOSITOR WILL BE
THE RESPONSIBLE INDIVIDUAL.
I understand the eligibility requirements for the type of Education IRA
deposit I am making and I state that I do qualify to make the deposit. I
have received a copy of the Application, Custodial Account Agreement (Form
5305-EA) and Disclosure Statement. I understand that the terms and
conditions which apply to this Education Individual Retirement Account are
contained in this Application and the Custodial Account Agreement (Form
5305-EA). I agree to be bound by those terms and conditions.
I assume complete responsibility for:
1) Determining that I am eligible to contribute to an Education IRA each year
I make a contribution.
2) Insuring that all contributions I make are within the limits set forth by
the tax laws.
3) Certifying that I am qualified to assume the responsibilities of the
Responsible Individual as set forth in this Agreement, if I am designated
on this Application as the Responsible Individual.
4) Managing and administering the account and authorizing transactions
involving contributions and distributions, if I am designated on this
Application as the Responsible Individual.
_____________________________________________ _________________________
Education IRA Depositor Date
_____________________________________________ _________________________
Education IRA Responsible Individual Date
_____________________________________________ _________________________
Authorized Signature of Custodian Date
SIGNATURES REQUIRED ON REVERSE SIDE.
1
<PAGE>
EDUCATION IRA CONTINUED AMERICAN NATIONAL FAMILY OF FUNDS
- --------------------------------------------------------------------------------
INVESTMENT INFORMATION
METHOD OF INVESTMENT
/ / I have enclosed a check for a minimum of $100 per Fund ($1,000 for
American National Primary Series)
/ / I have enclosed a check for a minimum of $20 per Fund ($100 for
American National Primary Series) and completed the Pre-Authorized
Check Plan form #8006 located at the back of the appropriate Fund's
prospectus.
/ / Billing Franchise No. _____________________________________________
/ / Military Allotment (complete form 9341.)
FUND SELECTION
INVESTMENT TAX YEAR OF
FUND SELECTION AMOUNT CONTRIBUTION
/ / A.N. Growth Fund(21) ______________ _________________
/ / A.N. Income Fund(22) ______________ _________________
/ / Triflex Fund(23) ______________ _________________
/ / A.N. Government Income Fund(26) ______________ _________________
/ / A.N. Primary Fund(27) ______________ _________________
All dividends and capital gains distributions will be automatically reinvested
into the account.
PLEASE MAKE YOUR CHECK PAYABLE TO SM&R, INC.
REDUCED SALES CHARGE (Not applicable to Primary Series)
Please check the applicable category(ies) and write the account number(s) to be
included in determining the reduced sales charge under Account Numbers below.
Refer to the prospectus regarding sales charges.
/ / Right of Accumulation. I apply for this privilege, as described in the
Prospectus, based on the accounts listed in the spaces provided below.
/ / Letter of intent. By completing this section, I agree to the
provisions of the Letter of Intent as described in the Prospectus. I
have listed my other accounts that may qualify to be included under
this LOI.
/ / Establish a new LOI for the amount indicated below
/ / Increase my current LOI to the amount indicated below
I plan to invest during a 13-month period a dollar amount at least:
/ / $50,000* / / $100,000 / / $250,000 / / $500,000
*(Growth, Income and Triflex Funds only)
____________________________________ _________________________________
Account Number Account Number
____________________________________ _________________________________
Account Number Account Number
NET ASSET VALUE ACCOUNTS
/ / I am an employee/agent of American National & Subsidiaries
/ / I am a qualified relative
Relationship/Employee: _________________________________________________
[LOGO] SECURITIES MANAGEMENT
& RESEARCH, INC.
One Moody Plaza, Galveston, TX 77550
(800)231-4639
Member NASD, SIPC
Distributor for the American National Family of Funds
AUTHORIZATION AND SIGNATURE
I hereby establish an American National Funds Group and/or SM&R Capital Funds
IRA Account, appoint Securities Management & Research, Inc. (SM&R) as Custodian,
and
1) Consent to the $7.50 (per account) setup fee, the $7.50 (per account) annual
maintenance fee, and $5.00 excess contribution adjustment fee. Such fees are
subject to change on 30 days written notice to the Participant; and
2) Further, I certify the following Backup Withholding Status and Citizenship
(Substitute W-9)
Under penalties of perjury, I certify by my signature as "Participant"
that the social security/taxpayer identification number furnished in
this application is correct and that (check the appropriate box and
fill in citizenship status below):
/ / I AM NOT subject to backup withholding
/ / I have been notified by the IRS that I AM subject to backup
withholding for failure to report all interest and/or dividends
/ / I do not have a social security/taxpayer identification number,
but I have applied for one. I understand that if I do not provide
this number within 60 days, the required Federal tax will be
withheld
/ / I am an exempt recipient
CITIZENSHIP / / U.S. / / Other____________________________________
SIGNATURE PROVISIONS
I certify that the information which I have provided and the information which
is included within the application and attached material, is accurate and
complete. I have received the current prospectus of the fund(s) selected, and I
agree to its terms.
Participant's signature ______________________________________________________
Date _________________________________________________________________________
REGISTERED REPRESENTATIVE INFORMATION (SM&R Reg Reps only)
/ / Yes, I have completed and attached Account Application--Part 2 Suitability
Form (#9402)
Representative Signature ____________________________________________________
Representative Name (print) __________________________________________________
Representative Social Security Number ________________________________________
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 & 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 Right 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 ______________________________ Dealer # ________________________
Main Office Address ________________________________________________________
Branch # __________________________ Rep # __________________________________
Representative Name (print) ________________________________________________
Branch Address _____________________________________________________________
Phone Number _______________________________________________________________
Authorized Signature of Dealer _______________ Title _______________________
CUSTODIAN SECURITIES MANAGEMENT & RESEARCH, INC.
Accepted by ________________________________________________________________
Date _______________________________________________________________________
2
<PAGE>
[LOGO] SECURITIES MANAGEMENT & RESEARCH, INC.
One Moody Plaza, Galveston, TX 77550
Member NASD, SIPC
Distributor for the American National Family of Funds
ACCOUNT APPLICATION--PART 2
- --------------------------------------------------------------------------------
PURCHASER SUITABILITY FORM & ARBITRATION AGREEMENT (This form must accompany all
mutual fund applications submitted to SM&R. All information requested is
required.)
NEW INVESTOR INFORMATION
Date ___________________________________________________________________________
1. Education IRA Responsible Individual_________________________________________
Social Security (or Tax I.D.) No. ___________________________________________
2. Fund(s) being purchased _____________________________________________________
3. Investor's Occupation _______________________________________________________
Name of Employer ____________________________________________________________
Address of Employer _________________________________________________________
Business Phone ( ) ________________________________________________________
4. Is the Investor employed by or associated with a member of the NASD or NYSE?
/ / No
/ / Yes. If yes, provide the name, address and phone no. of the firm:
________________________________________________________________________________
________________________________________________________________________________
5. Tax Status
/ / Single / / Head of Household
/ / Married filing separate returns
/ / Married filing joint return or qualifying widow(er) with dependent child
/ / Corporation / / Other
6. Marital Status
/ / Married / / Single / / Widowed
7. Dependents
/ / Spouse / / Children: Ages __________ / / Other
INVESTOR SUITABILITY INFORMATION
(TO BE COMPLETED BY INVESTOR OR REGISTERED REPRESENTATIVE.)
NASD rules require Registered Representatives to have reasonable grounds for
believing the recommended investment is suitable for the customer. Therefore,
representatives are required to make inquiries concerning the financial
condition of a proposed investor. You are urged to supply such information so
that the representative can make an informed judgment as to the suitability of
your investment selection(s). However, you are not required to divulge such
information if you choose not to do so, you must sign at the section provided
on the reverse side indicating refusal and acknowledging that the representative
did request the suitability information.
1. SOURCES OF FUNDS FOR INVESTMENT
/ / Current Earnings / / Gift or Inheritance / / Insurance Benefit
/ / Savings / / Sale of Assets / / Maturity Proceeds
/ / Other _______________
2. PRIMARY PURPOSE OF INVESTMENT
/ / Education / / Savings / / Retirement
/ / Current Income / / Tax Shelter / / Business Purposes
/ / Other _______________
3. INVESTMENT PROFILE
(a) What is your current investment preference?
/ / Aggressive Growth / / Growth / / Growth & Current
Income
/ / Current Income / / Maximum safety, even if modest return
(b) What is your risk comfort level?
/ / High / / High/Moderate / / Moderate
/ / Moderate/Limited / / Low
(c) What is your financial goal time horizon?
/ / 1-5 years / / 5-10 years
/ / 10 years and beyond
(d) What is your age range?
/ / 21-40 / / 41-59 / / 60+
(e) What is your tax bracket?
/ / 15% / / 28% / / 28+
(f) What is your estimated annual family income?
/ / Under $15,000 / / $15,000-$30,000 / / $30,000-$50,000
/ / $50,000-$100,000 / / Over $100,000
(g) What is your estimated net worth (exclude home, furnishings and
automobiles)?
/ / Under $25,000 / / $25,000-$50,000
/ / $50,000-$100,000 / / Over $100,000
(h) Are you responsible for the financial welfare of anyone other than your
immediate family (i.e. alimony, child or parental support, etc.)?
/ / Yes / / No
(i) Do you own other securities?
/ / Yes / / No
Types: / / Stocks / / Bonds / / Mutual Funds
/ / Variable Products / / Other ___________________
I (we) furnished the above suitability information and it has been accurately
recorded.
Investor Signature _____________________________________________________________
CONTINUED ON REVERSE SIDE.
3
<PAGE>
[LOGO] SECURITIES MANAGEMENT & RESEARCH, INC.
ACCOUNT APPLICATION--PART 2
- --------------------------------------------------------------------------------
STATEMENT OF REFUSAL TO PROVIDE FINANCIAL INFORMATION
I (we) fully understand that the Registered Representative, acting on behalf of
Securities Management & Research, Inc. (SM&R), has requested the preceding
suitability information to determine whether my (our) purchase of securities is
an appropriate investment considering my (our) financial situation. I (we)
refuse to provide the requested information and by my (our) signature(s) below
agree not to seek rescission of the investment or damages based on its
unsuitability.
________________________________________________________________________________
Investor Signature
________________________________________________________________________________
Joint Owner Signature
REGISTERED REPRESENTATIVE NOTICE--Should the Investor sign the above Statement
of Refusal to Provide Financial Information, it is still an NASD requirement
that you have reasonable grounds to recommend the purchase of this investment as
suitable. Therefore, YOU must complete the suitability information to the best
of your knowledge and certify that you have done so when signing the Registered
Representative's Statement below.
- --------------------------------------------------------------------------------
REGISTERED REPRESENTATIVE STATEMENT & SIGNATURE
Check appropriate boxes.
/ / Application--Part 1 attached.
/ / Custodial Agreement and Disclosure Statement detached and given to Investor.
(For IRA, TSA, SEP or SIMPLE accounts only)
/ / Signed Arbitration Agreement
/ / Suitability Information was provided by the Investor and the Investor signed
acknowledgement that information was accurately recorded.
--or--
/ / Refusal to Provide Financial Information Statement Signed by Investor. I
provided the suitability information to the best of my knowledge and have
reasonable grounds to recommend the purchase of this investment as suitable
for the investor.
________________________________________________________________________________
Registered Representative Signature
________________________________________________________________________________
Registered Representative Name (print)
Accepted, Securities Management & Research, Inc.
By _____________________________________________________________________________
Date ___________________________________________________________________________
PURCHASER 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 a jury trial.
3. Pre-arbitration discovery is generally more limited 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 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 may be entered in any appropriate court.
I (we) further understand that we may not bring a punitive or certified class
action to arbitration, nor seek to enforce any pre-dispute arbitration agreement
against anyone who has initiated in court a punitive class action; or who is a
member of a punitive class action until (1) the class action certification is
denied; or (2) the class is decertified; or (3) I (we) are excluded from the
class action by the court. Such forbearance to enforce an agreement to
arbitrate shall not constitute a waiver of any right under this agreement except
to the extent stated herein.
________________________________________________________________________________
Investor Signature
________________________________________________________________________________
Joint Owner Signature
Form 9402
2/98
4
<PAGE>
FORM 5305-EA
EDUCATION INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
Rev. January 1998 (Under Section 530 of the Internal Revenue Code)
Department of Treasury
Internal Revenue Service
The Depositor whose name appears on the Application is establishing an Education
Individual Retirement Custodial Account under Section 530 for the benefit of the
Designated Beneficiary whose name appears on the Application exclusively to pay
for the qualified higher education expenses, within the meaning of Section
530(b)(2), of such Designated Beneficiary.
The Custodian named on the Application has provided the Depositor with a concise
statement disclosing the provisions governing Section 530. This disclosure
statement must include an explanation of the statutory requirements applicable
to, and the income tax consequences of establishing and maintaining an account
under Section 530. Providing the Depositor with a copy of Notice 97-60, 1997-46
I.R.B. 8 (November 17, 1996) is considered a sufficient disclosure statement.
The Custodian also will provide a copy of this form and the disclosure statement
to the Responsible Individual, as defined in Article VI below, if the
Responsible Individual is not the same person as the Depositor.
The Depositor has assigned the custodial account the sum indicated on the
Application.
- --------------------------------------------------------------------------------
The Depositor and the Custodian make the following Agreement.
ARTICLE I
The Custodian may accept additional cash contributions. These contributions may
be from the Depositor, or from any other individual, for the benefit of the
Designated Beneficiary, provided the Designated Beneficiary has not attained the
age of 18 as of the date such contributions are made. Total contributions that
are not rollover contributions described in Section 530(d)(5) are limited to a
maximum amount of $500 for the taxable year.
ARTICLE II
The maximum aggregate contribution that an individual may make to the
custodial account in any year may not exceed the $500 in total contributions
that the custodial account can receive. In addition, the maximum aggregate
contribution that an individual may make to the custodial account in any year is
phased out for unmarried individuals who have modified adjusted gross income
(AGI) between $95,000 and $110,000 for the year of the contribution and for
married individuals who file joint returns with modified AGI between $150,000
and $160,000 for the year of the contribution. Unmarried individuals with
modified AGI above $110,000 for the year and married individuals who file joint
returns and have modified AGI above $160,000 for the year may not make a
contribution for that year. Modified AGI is defined in Section 530(c)(2).
ARTICLE III
No part of the custodial account funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common investment fund (within the meaning of Section
530(b)(1)(D)).
ARTICLE IV
1. Any balance to the credit of the Designated Beneficiary on the date on
which such Designated Beneficiary attains age 30 shall be distributed to
the Designated Beneficiary within 30 days of such date.
2. Any balance to the credit of the Designated Beneficiary shall be
distributed to the estate of the Designated Beneficiary within 30 days of
the date of such Designated Beneficiary's death.
ARTICLE V
The Depositor shall have the power to direct the Custodian regarding the
investment of the amount listed on the Application assigned to the custodial
account (including earnings thereon) in the investment choices offered by the
Custodian. The Responsible Individual, however, shall have the power to
redirect the Custodian regarding the investment of such amounts, as well as the
power to direct the Custodian regarding the investment of all additional
contributions (including earnings thereon) to the custodial account. In the
event that the Responsible Individual does not direct the Custodian regarding
the investment of additional contributions (including earnings thereon), the
initial investment direction of the Depositor also will govern all additional
contributions made to the custodial account until such time as the Responsible
Individual otherwise directs the Custodian. Unless otherwise provided in this
agreement, the Responsible Individual also shall have the power to direct the
Custodian regarding the administration, management, and distribution of the
account.
ARTICLE VI
The Responsible Individual named by the Depositor shall be a parent or guardian
of the Designated Beneficiary. The custodial account shall have only one
Responsible Individual at any time. If the Responsible Individual becomes
incapacitated or dies while the Designated Beneficiary is a minor under state
law, the successor Responsible Individual shall be the person named to succeed
in that capacity by the preceding Responsible Individual in a witnessed writing
or, if no successor is so named, the successor Responsible Individual shall be
the Designated Beneficiary's other parent or successor guardian. Unless
otherwise directed by checking the option on the Application, at the time that
the Designated Beneficiary attains the age of majority under state law, the
Designated Beneficiary becomes the Responsible Individual.
ARTICLE VII
(SEE THE APPLICATION AND SECTION 11.04 OF THIS AGREEMENT FOR INFORMATION
REGARDING THE RESPONSIBLE INDIVIDUAL'S ABILITY TO CHANGE THE DESIGNATED
BENEFICIARY NAMED BY THE DEPOSITOR.)
ARTICLE VIII
1. The Depositor Agrees to provide the Custodian with the information
necessary for the Custodian to prepare any reports required under Section
530(h).
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Responsible Individual as prescribed by the Internal Revenue Service.
ARTICLE IX
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV will be controlling. Any additional
articles that are not consistent with section 530 and related regulations will
be invalid.
ARTICLE X
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the Depositor and the Custodian whose signatures appear on the
Application.
ARTICLE XI
11.01 NOTICES AND CHANGE OF ADDRESS: Any required notice regarding this
Education IRA will be considered effective when the Custodian mails it
to the last address of the intended recipient which the Custodian has
in its records. Any notice to be given to the Custodian will be
considered effective when the Custodian actually receives it. The
Responsible Individual must notify the Custodian of any change of
address.
11.02 REPRESENTATIONS AND RESPONSIBILITIES: The Depositor and the
Responsible Individual represent and warrant to the Custodian that any
information the Depositor and Responsible Individual have given or
will give the Custodian with respect to this Agreement is complete and
accurate. Further, the Depositor and the Responsible Individual agree
that any directions they give the Custodian, or action they take will
be proper under this Agreement and that the Custodian is entitled to
rely upon any such information or directions. The Custodian shall not
be responsible for losses of any kind that may result from the
Depositor's and Responsible Individual's directions to it or the
Depositor's and Responsible Individual's actions or failures to act.
The Depositor and Responsible Individual agree to reimburse the
Custodian for any loss the Custodian may incur as a result of such
directions, actions or failures to act. The Custodian has no duty to
determine whether the contributions or distributions with respect to
this Education IRA comply with the Code, regulations, rulings or this
Agreement and shall not be responsible for any penalties, taxes,
judgments or expenses of the Designated Beneficiary or any Depositor
to this Education IRA.
11.03 SERVICE FEES: The Custodian has the right to charge an annual service
fee or other designated fees (for example, a transfer, rollover or
termination fee) for maintaining this Education IRA. In addition, the
Custodian may charge the Designated Beneficiary separately for any
fees or expenses or may deduct the amount of the fees or expenses from
the assets in this Education IRA at the Custodian's discretion. The
Custodian reserves the right to charge any additional fee upon 30 days
notice to the Responsible Individual that the fee will be effective.
Any brokerage commissions attributable to the assets in the Education
IRA will be charged to the Education IRA. The Responsible Individual,
Depositor or Designated Beneficiary cannot reimburse the Education IRA
for those commissions.
#5096(1/98) -C- 1997 Universal Pensions, Inc., Brainerd, MN 56401
5
<PAGE>
11.04 DETERMINATION OF DESIGNATED BENEFICIARY: Unless indicated otherwise
on the Application, the Responsible Individual may not change the
Designated Beneficiary. If the Depositor has indicated on the
Application that the Responsible Individual may change the beneficiary
designated under this Agreement and the Responsible Individual chooses
to do so, the Responsible Individual must designate a member of the
family (as defined in Section 529(e)(2)) of the existing Designated
Beneficiary. This designation can only be made on a form prescribed
by the Custodian.
11.05 TERMINATION: Either the Custodian or the Responsible Individual may
terminate this Agreement at any time by giving written notice to the
other. The Custodian can resign as Custodian at any time effective 30
days after mailing written notice of its resignation to the
Responsible Individual. Upon receipt of that notice, the Responsible
Individual must make arrangements to transfer the Education IRA to
another financial organization. If the Responsible Individual does
not complete a transfer of the Education IRA within 30 days from the
date the Custodian mails the notice to the Responsible Individual, the
Custodian has the right to transfer the Education IRA assets to a
successor Education IRA trustee or custodian the Custodian chooses in
its sole discretion or the Custodian may pay the Education IRA balance
to the Designated Beneficiary in a single sum. The Custodian shall
not be liable for any actions or failures to act on the part of any
successor trustee or custodian nor for any tax consequences the
Designated Beneficiary may incur that result from the transfer or
distribution of the Education IRA assets pursuant to this section.
If this Agreement is terminated, the Custodian may hold back from the
Education IRA a reasonable amount of money that it believes is
necessary to cover any one or more of the following:
- any fees, expenses or taxes chargeable against the Education
IRA:
- any penalties associated with the early withdrawal of any
savings instrument or other investment in the Education IRA.
If the Custodian is merged with another organization (or comes under
the control of any Federal or State agency) or if the entire
organization (or any portion which includes the Education IRA) is
bought by another organization, that organization (or agency) shall
automatically become the trustee or custodian of the Education IRA,
but only if it is the type of organization authorized to serve as an
Education IRA trustee or custodian.
If the Custodian is required to comply with Section 1.408-2(e) of the
Treasury Regulations and fails to do so, or the Custodian is not
keeping the records, making the returns or sending the statements as
are required by forms or regulations, the IRS may, after notifying the
Responsible Individual or the Designated Beneficiary, require that a
substitute trustee or custodian be appointed.
11.06 AMENDMENTS: The Custodian shall have the right to amend this
Agreement at any time. Any amendment the Custodian makes to comply
with the Code and related regulations does not require the consent of
either the Responsible Individual or the Depositor. Notwithstanding
anything in this agreement to the contrary, other amendments may be
made with the consent of the Responsible Individual. The Responsible
Individual will be deemed to have consented to any other amendment
unless, within 30 days from the date the Custodian mails the
amendment, the Responsible Individual notifies the Custodian in
writing that the Responsible Individual does not consent.
11.07 TRANSFERS FROM OTHER PLANS: The Custodian can receive amounts
transferred to the Education IRA from the custodian or trustee of
another Education IRA.
11.08 LIQUIDATION OF ASSETS: The Custodian has the right to liquidate
assets in the Education IRA if necessary to make distributions or to
pay fees, expenses or taxes properly changeable against the Education
IRA. If the Responsible Individual fails to direct the Custodian as
to which assets to liquidate, the Custodian will decide in its
complete and sole discretion and the Responsible Individual agrees not
to hold the Custodian liable for any adverse consequences that result
from the Custodian's decision.
11.09 RESTRICTIONS ON THE FUND: Neither the Responsible Individual, the
Designated Beneficiary (nor anyone acting on behalf of the Designated
Beneficiary), the Depositor nor any contributor may sell, transfer or
pledge any interest in the Education IRA in any manner whatsoever,
except as provided by law or this Agreement.
The assets in the Education IRA shall not be responsible for the
debts, contracts or torts of the Responsible Individual, the
Designated Beneficiary, the Depositor or any person entitled to
distributions under this Agreement.
11.10 WHAT LAW APPLIES: This Agreement is subject to all applicable Federal
and State laws and regulations. If it is necessary to apply any State
law to interpret and administer this Agreement, the law of the
Custodian's domicile shall govern.
If any part of this Agreement is held to be illegal or invalid, the
remaining parts shall not be affected. Neither the Responsible
Individual's nor the Custodian's failure to enforce at any time or for
any period of time any of the provisions of this Agreement shall be
construed as a waiver of such provisions, or the parties' right
thereafter to enforce each and every such provision.
INSTRUCTIONS
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE UNLESS OTHERWISE NOTED.)
PURPOSE OF FORM
Form 5305-EA is a model Custodial account agreement that meets the requirements
of section 530(a) and has been automatically approved by the IRS. An education
individual retirement account (Ed IRA) is established after the form is fully
executed by both the Depositor and the Custodian. This account must be created
in the United States for the exclusive purpose of paying the qualified higher
education expenses of the Designated Beneficiary.
Do not file Form 5305-EA with the IRS. Instead, keep it for your records.
For more information, including information about the required disclosure you
must get from your Custodian, see notice 97-80, 1997-8 I.R.B. 8 (November 17,
1997).
DEFINITIONS
CUSTODIAN: The Custodian must be a bank or savings and loan association, as
defined in Section 408(n), or any person who has the approval of the IRS to act
as Custodian. Any person who may serve as a Custodian of a Traditional IRA may
serve as the Custodian of an ED IRA.
DEPOSITOR: The Depositor is the person who established the custodial account.
DESIGNATED BENEFICIARY: The Designated Beneficiary is the person on whose
behalf the custodial account has been established.
RESPONSIBLE INDIVIDUAL: The Responsible Individual, generally, is a parent or
guardian of the Designated Beneficiary. However, under certain circumstances,
the Responsible Individual may be the Designated Beneficiary.
IDENTIFICATION NUMBERS
The Depositor's and Designated Beneficiary's social security numbers will serve
as their identification numbers. If the Depositor is a nonresident alien and
does not have an identification number, write "Foreign" in the block where the
number is requested. An employer identification number (EIN) is required only
for an Ed IRA for which a return is filed to report unrelated business income.
An EIN is required for a common fund created for Ed IRAs.
SPECIFIC INSTRUCTIONS
ARTICLE IX: Article IX and any that follow it may incorporate additional
provisions that are agreed to by the Depositor and Custodian to complete the
agreement. They may include, for example, provisions relating to: definitions,
investment powers, voting rights, exculpatory provision, amendment and
termination, removal of the Custodian, Custodian's fees, state law requirements,
treatment of excess contributions, and prohibited transactions with the
Depositor, Designated Beneficiary, or Responsible Individual, etc. Use
additional pages as necessary and attach them to this form.
OPTIONAL PROVISIONS IN ARTICLE VI AND ARTICLE VII: Form 5305-EA may be
reproduced in a manner that provides only those optional provisions offered by
the Custodian.
NOTE: FORM 5305-EA MAY BE REPRODUCED AND REDUCED IN SIZE FOR ADAPTATION TO
PASSBOOK PURPOSES.
#5096(1/98) -C- 1997 Universal Pensions, Inc., Brainerd, MN 56401
6
<PAGE>
DISCLOSURE STATEMENT
THE FOLLOWING IS AN EXCERPT FROM IRS NOTICE 97-60 ADDRESSING EDUCATION IRAS.
Beginning January 1, 1998, taxpayers may deposit up to $500 per year into an
Education IRA for a child under age 18. Parents, grandparents, other family
members, friends, and a child him/herself may contribute to the child's
Education IRA, provided that the total contributions for the child during the
taxable year do not exceed the $500 limit. Amounts deposited in the account
grow tax-free until distributed, and the child will not owe tax on any
withdrawal from the account if the child's qualified higher education expenses
at an eligible educational institution for the year equal or exceed the amount
of the withdrawal. If the child does not need the money for postsecondary
education, the account balance can be rolled over to the Education IRA of
certain family members who can use it for their higher education. Amounts
withdrawn from an Education IRA that exceed the child's qualified higher
education expenses in a taxable year are generally subject to income tax and to
an additional tax of 10 percent. The Hope Scholarship Credit and Lifetime
Learning Credit may not be claimed for a student's expenses in a taxable year in
which the student takes a tax-free withdrawal from an Education IRA.
Q 1: WHAT IS AN EDUCATION IRA?
A 1: An Education IRA is a trust or custodial account that is created or
organized in the United States exclusively for the purpose of paying the
qualified higher education expenses of the Designated Beneficiary of the
account. The account must be designated as an Education IRA when it is
created in order to be treated as an Education IRA for tax purposes.
Q 2: FOR WHOM MAY AN EDUCATION IRA BE ESTABLISHED?
A 2: An Education IRA may be established for the benefit of any child under
age 18. Contributions to the Education IRA will not be accepted after
the Designated Beneficiary reaches his/her 18th birthday.
Q 3: WHERE MAY AN INDIVIDUAL OPEN AN EDUCATION IRA?
A 3: An individual may open an Education IRA with any bank, or other entity
that has been approved to serve as a nonbank trustee or custodian of an
individual retire account (IRA), and the bank or entity is offering
Education IRAs. Other entities that wish to offer Education IRAs but
are not approved to serve as IRA trustees or custodians may seek
approval by following the same IRS procedures used for approval of other
IRA nonbank trustees. See Notice 97-57, 1997-43 I.R.B. (October 27,
1997).
Q 4: WHEN MAY A TAXPAYER START CONTRIBUTING TO AN EDUCATION IRA FOR A CHILD?
A 4: A taxpayer may start making contributions on January 1, 1998, or at any
time thereafter.
Q 5: HOW MUCH MAY BE CONTRIBUTED TO A CHILD'S EDUCATION IRA?
A 5: Up to $500 per year in aggregate contributions may be made for the
benefit of any child. The contributions may be placed in a single
Education IRA or in multiple Education IRAs.
Q 6: WHAT HAPPENS IF MORE THAN $500 IS CONTRIBUTED TO AN EDUCATION IRA ON
BEHALF OF A CHILD IN A CALENDAR YEAR?
A 6: Aggregate contributions for the benefit of a particular child in excess
of $500 for a calendar year are treated as excess contributions. If the
excess contributions (and any earnings attributable to them) are not
withdrawn from the child's account (or accounts) before the tax return
for the year is due, the excess contributions are subject to a 6 percent
excise tax for each year the excess amount remains in the account.
Q 7: MAY CONTRIBUTIONS OTHER THAN CASH BE MADE TO A CHILD'S EDUCATION IRA?
A 7: No. Education IRAs are permitted to accept contributions made in cash
only.
Q 8: MAY CONTRIBUTORS TAKE A DEDUCTION FOR CONTRIBUTIONS MADE TO AN EDUCATION
IRA?
A 8: No.
Q 9: ARE THERE ANY RESTRICTIONS ON WHO CAN CONTRIBUTE TO AN EDUCATION IRA?
A 9: Any individual may contribute up to $500 to a child's Education IRA if
the individual's modified adjusted gross income for the taxable year is
no more than $95,000 ($150,000 for married taxpayers filing jointly).
(See Q&A 23 for a description of modified adjusted gross income.) The
$500 maximum contribution per child is gradually reduced for individuals
with modified adjusted gross income between $95,000 and $110,000
(between $150,000 and $160,000 for married taxpayers filing jointly).
For example, an unmarried taxpayer with modified adjusted gross income
of $96,500 in a taxable year could make a maximum contribution per child
of $450 for that year. Taxpayers with modified adjusted gross income
above $110,000 ($160,000 for married taxpayers filing jointly) cannot
make contributions to anyone's Education IRA.
Q 10: MAY A CHILD CONTRIBUTE TO HIS/HER OWN EDUCATION IRA?
A 10: Yes.
Q 11: DOES A TAXPAYER HAVE TO BE RELATED TO THE DESIGNATED BENEFICIARY IN
ORDER TO CONTRIBUTE TO THE DESIGNATED BENEFICIARY'S EDUCATION IRA?
A 11: No.
Q 12: HOW MANY EDUCATION IRAS MAY A CHILD HAVE?
A 12: There is no limit on the number of Education IRAs that may be
established designating a particular child as beneficiary. However, in
any given taxable year the total aggregate contributions to all the
accounts designating a particular child as beneficiary may not exceed
$500.
Q 13: MAY A DESIGNATED BENEFICIARY TAKE A TAX-FREE WITHDRAWAL FROM AN
EDUCATION IRA TO PAY QUALIFIED HIGHER EDUCATION EXPENSES IF THE
DESIGNATED BENEFICIARY IS ENROLLED LESS THAN FULL-TIME AT AN ELIGIBLE
EDUCATIONAL INSTITUTION?
A 13: Yes. Whether the Designated Beneficiary is enrolled full-time, half-time
or less than half-time, he/she may take a tax-free withdrawal to pay
qualified higher education expenses.
Q 14: WHAT HAPPENS WHEN A DESIGNATED BENEFICIARY WITHDRAWS ASSETS FROM AN
EDUCATION IRA TO PAY FOR COLLEGE?
A 14: Generally, the withdrawal is tax-free to the Designated Beneficiary to
the extent the amount of the withdrawal does not exceed the Designated
Beneficiary's qualified higher education expenses.
Q 15: WHAT ARE "QUALIFIED HIGHER EDUCATION EXPENSES"?
A 15: "Qualified higher education expenses" mean expenses for tuition, fees,
books, supplies, and equipment required for the enrollment or attendance
of the Designated Beneficiary at an eligible educational institution.
Qualified higher education expenses also include amounts contributed to
a qualified state tuition program. Qualified higher education expenses
also include room and board (generally the school's posted room and
board charge, or $2,500 per year for students living off-campus and not
at home) if the Designated Beneficiary is at least a half-time student
at an eligible educational institution. The standards for determining
whether a student is enrolled at least half-time are the same as those
used for the Hope Scholarship Credit.
Q 16: WHAT IS AN ELIGIBLE EDUCATIONAL INSTITUTION?
A 16: An eligible educational institution is any college, university,
vocational school, or other postsecondary educational institution that
is described in Section 481 of the Higher Education Act of 1965 (20
U.S.C. 1088) and, therefore, eligible to participate in the student aid
programs administered by the Department of Education. This category
includes virtually all accredited public, nonprofit, and proprietary
postsecondary institutions. (The same eligibility requirements for
institutions apply for the Hope Scholarship Credit, the Lifetime
Learning Credit, and early withdrawals from IRAs for qualified higher
education expenses.)
Q 17: WHAT HAPPENS IF A DESIGNATED BENEFICIARY WITHDRAWS AN AMOUNT FROM AN
EDUCATION IRA BUT DOES NOT HAVE ANY QUALIFIED HIGHER EDUCATION EXPENSES
TO PAY IN THE TAXABLE YEAR HE/SHE MAKES THE WITHDRAWAL?
A 17: Generally, if a Designated Beneficiary withdraws an amount from an
Education IRA and does not have any qualified higher education expenses
during the taxable year, a portion of the distribution is taxable. The
taxable portion is the portion that represents earnings that have
accumulated tax-free in the account. The taxable portion of the
distribution is also subject to a 10 percent additional tax unless an
exception applies.
Q 18: IS A DISTRIBUTION FROM AN EDUCATION IRA TAXABLE IF THE DISTRIBUTION IS
CONTRIBUTED TO ANOTHER EDUCATION IRA?
A 18: Any amount distributed from an Education IRA and rolled over to another
Education IRA for the benefit of the same Designated Beneficiary or
certain members of the Designated Beneficiary's family is not taxable.
An amount is rolled over if it is paid to another Education IRA on a
date within 60 days after the date of the distribution. Members of the
Designated Beneficiary's family include the Designated Beneficiary's
children and their descendants, stepchildren and their descendants,
siblings and their children, parents and grandparents, stepparents, and
spouses of all the foregoing. The $500 annual contribution limit to
Education IRAs does not apply to these rollover contributions. For
example, an older brother who has $2,000 balance to an Education IRA for
his younger sister who is still in high school without paying any tax on
the transfer.
#5096(1/98) -C- 1997 Universal Pensions, Inc., Brainerd, MN 56401
7
<PAGE>
Q 19: WHAT HAPPENS TO THE ASSETS REMAINING IN AN EDUCATION IRA AFTER THE
DESIGNATED BENEFICIARY FINISHES HIS/HER POSTSECONDARY EDUCATION?
A 19: There are two options. The amount remaining in the account may be
withdrawn for the Designated Beneficiary. The Designated Beneficiary
will be subject to both income tax and the additional 10 percent tax on
the portion of the amount withdrawn that represents earnings if the
Designated Beneficiary does not have any qualified higher education
expenses in the same taxable year he/she makes the withdrawal.
Alternatively, if the amount in the Designated Beneficiary Education IRA
is withdrawn and rolled over (as described in Q&A 18 of this section)
to another Education IRA for the benefit of a member of the Designated
Beneficiary's family, the amount rolled over will not be taxable.
Q 20: RATHER THAN ROLLING OVER MONEY FROM ONE EDUCATION IRA TO ANOTHER, MAY
THE DESIGNATED BENEFICIARY OF THE ACCOUNT BE CHANGED FROM ONE CHILD TO
ANOTHER WITHOUT TRIGGERING A TAX?
A 20: Yes, provided:(1) the terms of the particular trust or custodial account
permit a change in designated beneficiaries (each trustee or custodian
will control whether options like this one are available in the accounts
they offer), and (2) the new Designated Beneficiary is a member of the
previous Designated Beneficiary family. (See Q&A 18 in this section.)
Q 21: MAY A STUDENT OR THE STUDENT'S PARENTS CLAIM THE HOPE SCHOLARSHIP CREDIT
OR LIFETIME LEARNING CREDIT FOR THE STUDENT'S EXPENSES IN A TAXABLE YEAR
IN WHICH THE STUDENT RECEIVES MONEY FROM AN EDUCATION IRA ON A TAX-FREE
BASIS?
A 21: No. If a student is receiving a tax-free distribution from an Education
IRA in a particular taxable year, none of the student's expenses may be
claimed as the basis for a Hope Scholarship Credit or Lifetime Learning
Credit for that year. However, the student may waive the tax-free
treatment of the Education IRA distribution and elect to pay any tax
that would otherwise be owed on an Education IRA distribution so that
the student or the student's parents may claim a Hope Scholarship Credit
or Lifetime Learning Credit for expenses paid in the same year the
Education IRA distributions are received.
Q 22: MAY CONTRIBUTIONS BE MADE TO BOTH A QUALIFIED STATE TUITION PROGRAM AND
AN EDUCATION IRA ON BEHALF OF THE SAME DESIGNATED BENEFICIARY IN THE
SAME TAXABLE YEAR?
A 22: No. Any amount contributed to an Education IRA on behalf of a Designated
Beneficiary during any taxable year in which an amount is also
contributed to a qualified state tuition program on behalf of the same
beneficiary will be treated as an excess contribution to the Education
IRA. (See Q&A 6 in this section for the treatment of excess
contributions.)
Q 23: HOW DOES A TAXPAYER KNOW WHAT HIS/HER "MODIFIED ADJUSTED GROSS INCOME"
IS?
A 23: For most taxpayers, modified adjusted gross income is the same as
adjusted gross income. Taxpayers compute adjusted gross income as part
of completing an Federal income tax return. For those few taxpayers who
earn income abroad or received income from certain American territories
or possessions, modified adjusted gross income will be greater than
adjusted gross income. In those cases, the individual's adjusted gross
income will be increased by: (1) certain amounts that the individual
earns abroad. (2) amounts effectively connected with the individual's
conduct of a trade or business or derived from sources in Guam, American
Samoa, or the Northern Mariana Islands (if the individual is a resident
of the possession where the source of the income is located), and (3)
amounts derived from sources in Puerto Rico (if the individual is a
Puerto Rican resident).
#5096(1/98) -C- 1997 Universal Pensions, Inc., Brainerd, MN 56401
8
<PAGE>
[LOGO]
SECURITIES MANAGEMENT & RESEARCH, INC.
MEMBER NASD, SIPC
-----------------------------------------
One Moody Plaza Galveston, Texas 77550
Call Toll Free 1-800-231-4639
-----------------------------------------
AMERICAN NATIONAL FUNDS GROUP
[LOGO]
- American National Growth Fund
- American National Income Fund
- Tri-Flex Fund
-----------------------------------------
SM&R CAPITAL FUNDS
[LOGO]
- American National Government
Income Fund
- American National Tax-Free Fund
- American National Primary Fund
SM&R is an investment advisor and mutual
fund underwriter with over 30 years
experience and manages all of the
portfolios of the American National Funds
Group and the SM&R Capital Funds. It is,
also, a subsidiary of American National
Insurance Company, one of the nation's
largest insurers.
The professional investment managers of
SM&R have the experience of directing
and redirecting more than $5 billion of
investments through many years of
changing economic and market conditions.
This experience has helped to make these
fund groups a respected part of the
investment community.
Form 9382
3/98
<PAGE>
TRIFLEX FUND EXHIBIT 99.B16
INITIAL INVESTMENT 10,000
MAXIMUM SALES LOAD 575
NET AMOUNT INVESTED 9,425
BEGINNING OF PERIOD 12/31/87
NAV, BEGINNING OF PERIOD 14.15
SHARES PURCHASED 666.078
COMPUTATION OF VALUE OF INVESTMENT AT YEAR END ASSUMING
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS:
<TABLE>
<CAPTION>
(--SHARES FROM--)
INCOME CAP GAIN CUMULATIVE ENDING REDEEMABLE
REINVESTED REINVESTED SHARES NAV VALUE
<S> <C> <C> <C> <C> <C>
1988 38 16 720 14.46 10,406
1989 41 48 809 14.62 11,827
1990 42 4 855 14.01 11,990
1991 35 31 921 16.21 14,931
1992 21 30 972 15.81 15,379
1993 26 67 1065 15.35 16,350
1994 32 61 1158 14.32 16,593
1995 36 10 1204 16.85 20,293
1996 34 30 1268 17.90 22,701
1997 40 147 1455 18.32 26,663
<CAPTION>
TOTAL INCOME
RETURN RETURN APPRECIATION
<S> <C> <C> <C>
1988 4.60% 5.54% -0.94%
1989 13.66% 5.97% 7.69%
1990 1.37% 4.90% -3.53%
1991 24.53% 4.49% 20.04%
1992 3.00% 2.20% 0.80%
1993 6.31% 2.62% 3.69%
1994 1.49% 2.99% -1.50%
1995 22.29% 3.44% 18.85%
1996 11.86% 2.95% 8.91%
1997 17.46% 3.35% 14.11%
</TABLE>
COMPUTATION OF VALUE OF INVESTMENT AT YEAR END ASSUMING
INVESTMENT INCOME DIVIDEND TAKEN IN CASH:
<TABLE>
<CAPTION>
SHARES FROM
CAP GAIN CUMULATIVE ENDING REDEEMABLE
REINVESTED SHARES NAV VALUE
<S> <C> <C> <C> <C>
1988 15 681 14.46 9,850
1989 43 724 14.62 10,595
1990 5 729 14.01 10,212
1991 25 754 16.21 12,224
1992 24 778 15.81 12,309
1993 53 831 15.35 12,755
1994 46 877 14.32 12,566
1995 8 885 16.85 14,911
1996 21 906 17.90 16,222
1997 103 1009 18.32 18,490
</TABLE>
<PAGE>
Exhibit 99.B19
CONTROL LIST
The Registrant, Triflex Fund, Inc., is advised and managed by Securities
Management & Research, Inc. ("SM&R"), a Florida corporation and registered
investment adviser and broker-dealer. SM&R is a wholly-owned subsidiary of
American National Insurance Company, a Texas insurance company. The Libbie
Shearn Moody Trust owns approximately 37.58% of the outstanding stock of
American National Insurance Company. The Moody Foundation, which has a 75%
contingent remainder interest in the Libbie Shearn Moody Trust, owns
approximately 23.7% of the outstanding stock of American National Insurance
Company.
The Trustees of The Moody Foundation are Mrs. Frances Moody Newman, Robert
L. Moody and Ross Rankin Moody. Robert L. Moody is a life income beneficiary of
the Libbie Shearn Moody Trust and Chairman of the Board, Director, President and
Chief Executive Officer of American National Insurance Company. Robert L. Moody
has assigned his interest in the Libbie Shearn Moody Trust to National Western
Life Insurance Company, a Colorado insurance company of which he is also
Chairman of the Board, a Director and controlling shareholder.
The Moody National Bank of Galveston is the trustee of the Libbie Shearn
Moody Trust and various other trusts which, in the aggregate, own approximately
46.87% of the outstanding stock of American National Insurance Company. Moody
Bank Holding Company, Inc. owns approximately 97% of the outstanding shares of
The Moody National Bank of Galveston. Moody Bank Holding Company, Inc. is a
wholly owned subsidiary of Moody Bancshares, Inc. The Three R Trusts, trusts
created by Robert L. Moody for the benefit of his children, are controlling
stockholders of Moody Bancshares, Inc.
The Moody Foundation owns 33.0% and the Libbie Shearn Moody Trust owns
51.0% of the outstanding stock of Gal-Tex Hotel Corporation, a Texas
corporation. Gal-Tex Hotel Corporation has the following wholly-owned
subsidiaries, listed in alphabetical order:
Gal-Tenn Hotel Corporation
Gal-Tex Management Company
Gal-Tex Woodstock, Inc.
GTG Corporation
New Paxton Hotel Corporation
<PAGE>
American National owns a direct or indirect interest in the following
entities, listed in alphabetical order:
ENTITY: American Hampden Joint Venture
ENTITY FORM: a Texas joint venture
OWNERSHIP OR OTHER BASIS OF CONTROL: American National Insurance Company owns a
98% interest.
ENTITY: American National of Delaware Corporation
ENTITY FORM: a Delaware corporation (inactive)
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Insurance Company
ENTITY: American National Financial Corporation
ENTITY FORM: a Texas corporation (inactive)
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Property and Casualty Company
ENTITY: American National Financial Corporation (Delaware)
ENTITY FORM: a Delaware corporation (inactive)
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Insurance Company.
ENTITY: American National Financial Corporation (Nevada)
ENTITY FORM: a Nevada corporation (inactive)
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Insurance Company.
2
<PAGE>
ENTITY: American National General Insurance Company
ENTITY FORM: a Missouri insurance company
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Property and Casualty Company.
ENTITY: American National Growth Fund, Inc.
ENTITY FORM: a Maryland corporation - registered investment company
OWNERSHIP OR OTHER BASIS OF CONTROL: Investment Advisory Agreement with
Securities Management and Research, Inc. Also, American National Insurance
Company and Securities Management and Research, Inc. collectively own less than
five percent of the outstanding stock of the Company.
ENTITY: American National Income Fund, Inc.
ENTITY FORM: a Maryland corporation - registered investment company
OWNERSHIP OR OTHER BASIS OF CONTROL: Investment Advisory Agreement with
Securities Management and Research, Inc. Also, American National Insurance
Company and Securities Management and Research, Inc. own less than five percent
of the outstanding stock of the Company.
ENTITY: American National Insurance Service Company
ENTITY FORM: a Missouri corporation
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Property and Casualty Company.
ENTITY: American National Investment Accounts, Inc.
ENTITY FORM: a Maryland corporation - registered investment company
3
<PAGE>
OWNERSHIP OR OTHER BASIS OF CONTROL: Investment Advisory Agreement with
Securities Management and Research, Inc. Also, Securities Management and
Research, Inc. owns approximately 6.94% of the outstanding stock of the Company,
and American National Insurance Company owns approximately 93.24% of the
outstanding stock of the Company.
ENTITY: American National Life Insurance Company of Texas
ENTITY FORM: a Texas insurance company
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Insurance Company
ENTITY: American National Lloyds Insurance Company
ENTITY FORM: a Texas corporation
OWNERSHIP OR OTHER BASIS FOR CONTROL: Wholly owned subsidiary of American
National Property and Casualty Company
ENTITY: American National Property and Casualty Company
ENTITY FORM: a Missouri insurance company
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Insurance Company.
ENTITY: ANPAC General Agency of Texas
ENTITY FORM: a Texas corporation
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Property and Casualty Company.
ENTITY: ANPAC Lloyds Insurance Management, Inc.
ENTITY FORM: a Texas corporation
4
<PAGE>
OWNERSHIP OR OTHER BASIS FOR CONTROL: Wholly owned subsidiary of American
National Property and Casualty Company
ENTITY: ANREM Corporation
ENTITY FORM: a Texas corporation
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of Securities
Management and Research, Inc.
ENTITY: ANTAC, Inc.
ENTITY FORM: a Texas corporation
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Insurance Company.
ENTITY: Comprehensive Investment Services, Inc.
ENTITY FORM: a Texas corporation
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Insurance Company.
ENTITY: Garden State Life Insurance Company
ENTITY FORM: a New Jersey insurance company
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Insurance Company.
ENTITY: Gateway Park Joint Venture
ENTITY FORM: a Texas joint venture
OWNERSHIP OR OTHER BASIS OF CONTROL: South Shore Harbour Development, Ltd. has
a 50% interest.
5
<PAGE>
ENTITY: Harbour Title Company
ENTITY FORM: a Texas corporation
OWNERSHIP OR OTHER BASIS OF CONTROL: South Shore Harbour Development, Ltd. owns
50% of the outstanding stock.
ENTITY: Kearns Building Joint Venture
ENTITY FORM: a Texas joint venture
OWNERSHIP OR OTHER BASIS OF CONTROL: American National owns a 85% interest.
ENTITY: Pacific Property and Casualty Company
ENTITY FORM: a California corporation
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of American
National Property and Casualty Company
ENTITY: Panther Creek Limited Partnership
ENTITY FORM: a Texas limited partnership
OWNERSHIP OR OTHER BASIS OF CONTROL: American National Insurance Company owns a
99% limited partnership interest
ENTITY: Ridgedale Festival Joint Venture
ENTITY FORM: a Texas joint venture
OWNERSHIP OR OTHER BASIS OF CONTROL: American National Insurance Company owns a
50% interest.
ENTITY: Rutledge Partners, L.P.
6
<PAGE>
ENTITY FORM: a Texas limited partnership
OWNERSHIP OR OTHER BASIS OF CONTROL: American National Insurance Company owns a
50% interest.
ENTITY: SM&R Capital Funds, Inc.
ENTITY FORM: a Maryland corporation - a registered investment company
OWNERSHIP OR OTHER BASIS OF CONTROL: Investment Advisory Agreement with
Securities Management and Research, Inc. Also, Company consists of three (3)
different series: Government Income Fund Series, Primary Fund Series, and Tax
Free Fund Series. Securities Management and Research, Inc. owns approximately
20.01% of the outstanding stock of the Government Income Fund Series, and
American National Insurance Company owns approximately 27.44% of the outstanding
stock of the Government Income Fund Series. Securities Management and Research,
Inc. owns approximately 2.23% of the outstanding stock of the Primary Fund
Series, and American National Insurance Company owns approximately 67.40% of the
outstanding stock of the Primary Fund Series. Securities Management and
Research, Inc. owns approximately 11.71% of the outstanding stock of the Tax
Free Fund Series, and American National Insurance Company owns approximately
58.53% of the outstanding stock of the Tax Free Fund Series.
ENTITY: South Shore Harbour Development, Ltd.
ENTITY FORM: a Texas limited partnership
OWNERSHIP OR OTHER BASIS OF CONTROL: ANTAC, Inc. owns a 95% limited partnership
interest. ANREM Corp. owns a 5% general partnership interest.
ENTITY: Standard Life and Accident Insurance Company
ENTITY FORM: an Oklahoma insurance company
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned subsidiary of
7
<PAGE>
American National Insurance Company.
ENTITY: Terra Venture Bridgeton Project Joint Venture
ENTITY FORM: a Texas joint venture
OWNERSHIP OR OTHER BASIS OF CONTROL: Wholly owned by American National
Insurance Company.
ENTITY: Third and Catalina, Ltd.
ENTITY FORM: a Texas limited partnership
OWNERSHIP OR OTHER BASIS OF CONTROL: American National Insurance Company owns a
49% limited partnership interest.
ENTITY: Timbermill, Ltd.
ENTITY FORM: a Texas joint venture
OWNERSHIP OR OTHER BASIS OF CONTROL: American National Insurance Company owns a
99% limited partnership interest.
ENTITY: Town and Country Joint Venture
ENTITY FORM: a Texas joint venture
OWNERSHIP OR OTHER BASIS OF CONTROL: American National Insurance Company owns a
99% limited partnership interest.
8
