<PAGE>
SEMI-ANNUAL REPORT
[LOGO]
SM&R MUTUAL FUNDS
EQUITY FUNDS
GROWTH FUND
EQUITY INCOME FUND
BALANCED FUND
"The financial statements contained herein are included for the general
information of our shareholders. This report is not authorized for
distribution to prospective investors unless preceded or
accompanied by an effective prospectus."
Semi-Annual Report
June 30, 2000
<PAGE>
SCHEDULE OF INVESTMENTS June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R GROWTH FUND
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
AEROSPACE/DEFENSE--0.86%
Boeing Company 28,000 $ 1,170,750
Goodrich (B.F.) Company 22,400 763,000
------------
1,933,750
AUTO & TRUCK MANUFACTURERS--1.05%
DaimlerChrysler AG 8,541 444,666
Ford Motor Company 24,800 1,066,400
General Motors Corporation 14,700 853,519
------------
2,364,585
AUTO PARTS MANUFACTURERS--0.24%
Dana Corporation 23,300 493,669
Visteon Corporation 3,247 39,371
------------
533,040
BANKS--4.11%
Bank of America
Corporation 40,000 1,720,000
Comerica, Incorporated 40,000 1,795,000
Morgan (J.P.) & Company 15,000 1,651,875
PNC Financial Services
Group 30,000 1,406,250
U.S. Bancorp 60,700 1,168,475
Wells Fargo Company 40,000 1,550,000
------------
9,291,600
BEVERAGES--1.98%
Anheuser-Busch Companies,
Incorporated 37,000 2,763,438
Coca-Cola Company 30,000 1,723,125
------------
4,486,563
BIO/SPECIALTY PHARMACEUTICALS--3.36%
Amgen Incorporated* 17,900 1,257,475
Biogen, Incorporated* 11,600 748,200
Enzon, Incorporated* 28,400 1,207,000
Genentech, Incorporated* 7,000 1,204,000
Immunex Corporation* 21,300 1,053,019
Pharmacia Corporation 41,200 2,129,525
------------
7,599,219
CHEMICALS--0.66%
Praxair, Incorporated 40,000 1,497,500
COMMUNICATION EQUIPMENT--5.92%
Lucent Technologies,
Incorporated 69,162 4,097,848
Nortel Networks
Corporation 136,000 9,282,000
------------
13,379,848
COMPUTER RELATED--13.19%
Apple Computer,
Incorporated* 48,400 2,534,950
Cisco Systems,
Incorporated* 112,800 7,169,850
EMC Corporation* 90,000 6,924,375
Network Appliance,
Incorporated* 7,600 611,800
Sun Microsystems,
Incorporated* 138,200 12,567,562
------------
29,808,537
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES--8.13%
Exodus Communications,
Incorporated* 9,600 $ 442,200
Inktomi Corporation* 4,900 579,425
Microsoft Corporation* 74,800 5,984,000
Novell, Incorporated* 166,000 1,535,500
Oracle Corporation* 9,400 790,188
Peregrine Systems,
Incorporated* 12,200 423,188
QLogic Corporation* 5,600 369,950
VERITAS Software
Corporation* 71,850 8,120,171
ZipLink, Incorporated* 20,000 120,000
------------
18,364,622
COSMETICS/TOILETRIES--1.12%
Procter & Gamble Company 44,200 2,530,450
DIVERSIFIED--0.43%
Minnesota Mining and
Manufacturing Company 11,900 981,750
DRUGS--4.70%
American Home Products
Corporation 42,700 2,508,625
Bristol-Myers Squibb
Company 37,400 2,178,550
Merck & Company,
Incorporated 40,000 3,065,000
Pfizer, Incorporated 59,800 2,870,400
------------
10,622,575
ELECTRIC POWER--1.75%
Calpine Corporation* 60,200 3,958,150
ELECTRICAL EQUIPMENT--5.30%
General Electric Company 189,000 10,017,000
Solectron Corporation* 46,600 1,951,375
------------
11,968,375
ELECTRONICS--0.97%
PMC-Sierra, Incorporated* 4,300 764,056
Vitesse Semiconductor
Corporation* 8,800 647,350
Xilinx, Incorporated* 9,600 792,600
------------
2,204,006
EXPLORATION/DRILLING--1.26%
Global Marine,
Incorporated* 32,000 902,000
Kerr-McGee Corporation 13,000 766,187
Tidewater, Incorporated 17,000 612,000
Union Pacific Resources
Group, Incorporated 25,408 558,976
------------
2,839,163
</TABLE>
1
<PAGE>
SCHEDULE OF INVESTMENTS June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R GROWTH FUND, CONTINUED
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
FINANCIAL SERVICES--5.41%
American General
Corporation 20,000 $ 1,220,000
Citigroup, Incorporated 119,250 7,184,812
Countrywide Credit
Industries, Incorporated 44,000 1,333,750
Morgan Stanley, Dean
Witter, Discover and
Company 30,000 2,497,500
------------
12,236,062
FOOD PRODUCERS--3.26%
IBP, Incorporated 58,000 895,375
Interstate Bakeries
Corporation 66,000 924,000
McCormick & Company,
Incorporated 58,000 1,885,000
Smithfield Foods,
Incorporated* 65,000 1,824,062
Universal Foods
Corporation 100,000 1,850,000
------------
7,378,437
FOOD RETAILERS--1.65%
Albertson's, Incorporated 40,000 1,330,000
Safeway, Incorporated* 53,000 2,391,625
------------
3,721,625
FURNITURE/APPLIANCES/TOOLS--0.66%
Black & Decker Corporation 38,200 1,501,737
HOMEBUILDING/SUPPLIES--0.29%
Centex Corporation 27,700 650,950
INSURANCE COMPANIES--1.49%
CIGNA Corporation 33,000 3,085,500
Conseco, Incorporated 28,800 280,800
------------
3,366,300
LEISURE TIME/GAMING--0.42%
Brunswick Corporation* 57,000 944,062
MEDICAL PRODUCTS/SUPPLIES--2.97%
Beckman Coulter,
Incorporated 18,000 1,050,750
Johnson & Johnson 30,000 3,056,250
Medtronic, Incorporated 21,400 1,065,987
Molecular Devices
Corporation* 22,100 1,529,044
------------
6,702,031
METALS & MINING--1.08%
Alcoa Incorporated 45,200 1,310,800
Newmont Mining Corporation 52,000 1,124,500
------------
2,435,300
MANUFACTURING-DIVERSIFIED--0.92%
Tyco International LTD 44,000 2,084,500
NATURAL GAS--2.63%
Enron Corporation 92,000 5,934,000
OIL DOMESTIC--1.47%
Unocal Corporation 100,000 3,312,500
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
OIL INTERNATIONAL--4.52%
BP Amoco p.l.c. ADR 60,000 $ 3,393,750
Chevron Corporation 44,000 3,731,750
Royal Dutch Petroleum
Company ADR 50,000 3,078,125
------------
10,203,625
RETAIL - DISCOUNT--1.53%
Wal-Mart Stores,
Incorporated 60,000 3,457,500
RETAIL - GENERAL--0.82%
Federated Department
Stores, Incorporated* 37,000 1,248,750
J. C. Penney Company,
Incorporated 33,200 612,125
------------
1,860,875
RETAIL - SPECIALTY--0.69%
Group 1 Automotive,
Incorporated* 70,000 840,000
Lowe's Companies,
Incorporated 17,500 718,594
------------
1,558,594
SEMICONDUCTORS--4.40%
Broadcom Corporation
(Class A)* 3,300 722,494
Conexant Systems,
Incorporated* 5,200 252,850
Intel Corporation 67,000 8,957,062
------------
9,932,406
SPECIALTY PRINTING/SERVICES--0.49%
Banta Corporation 58,000 1,098,375
STEEL--0.34%
USX-U. S. Steel Group 42,000 779,625
TELECOM - CELLULAR--0.24%
Nextel Communications,
Incorporated (Class A)* 9,000 550,688
TELECOM - LONG DISTANCE--3.47%
AT&T Corporation 136,660 4,321,872
WorldCom, Incorporated* 76,500 3,509,438
------------
7,831,310
TELEPHONE--3.44%
Alltel Corporation 47,000 2,911,062
NEXTLINK Communications,
Incorporated (Class A)* 12,000 455,250
U S West, Incorporated New 51,365 4,404,549
------------
7,770,861
TRUCKING & SHIPPING--0.34%
USFreightways Corporation 31,000 761,438
------------
TOTAL COMMON STOCK--97.56%
(Cost $135,982,663) 220,436,534
------------
</TABLE>
2
<PAGE>
SCHEDULE OF INVESTMENTS June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R GROWTH FUND, CONTINUED
<TABLE>
<CAPTION>
FACE
COMMERCIAL PAPER AMOUNT VALUE
EXPLORATION/DRILLING--0.81%
<S> <C> <C>
Anadarko Petroleum
Corporation, 7.15%,
07/07/00 $1,833,000 $ 1,830,815
FINANCIAL SERVICES--0.77%
Dana Credit Corporation,
7.10%, 07/06/00 1,250,000 1,248,767
Ford Motor Credit Company,
6.77%, 07/03/00 506,000 505,810
------------
1,754,577
------------
FOOD PRODUCERS--0.68%
ConAgra, Incorporated,
6.92%, 07/05/00 1,536,000 1,534,818
------------
TOTAL COMMERCIAL PAPER--2.26%
(Cost $5,120,210) 5,120,210
------------
TOTAL INVESTMENTS--99.82%
(Cost $141,102,873) 225,556,744
CASH AND OTHER ASSETS, LESS
LIABILITIES--0.18% 397,424
------------
NET ASSETS--100.00% $225,954,168
============
ABBREVIATIONS
ADR--American Depository Receipt
*--Non-income producing securities
</TABLE>
See notes to financial statements.
3
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R GROWTH FUND
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value $225,556,744
Cash 228,975
Prepaid Expenses 31,788
Receivable for:
Capital stock sold 68,046
Dividends 174,976
Expense reimbursement 117
Other assets 95,123
------------
TOTAL ASSETS 226,155,769
------------
LIABILITIES
Capital stock reacquired 26,303
Accrued:
Investment advisory fee 86,261
Service fee 40,057
Distribution fee 9,293
Other liabilities 39,687
------------
TOTAL LIABILITIES 201,601
------------
NET ASSETS (applicable to shares outstanding) $225,954,168
============
NET ASSETS:
Class A $ 5,792,544
--------------------------------------------------------------------------
Class B $ 2,898,648
--------------------------------------------------------------------------
Class C $ 185,407
--------------------------------------------------------------------------
Class T $217,077,569
--------------------------------------------------------------------------
TOTAL NET ASSETS: $225,954,168
============
CAPITAL STOCK, $0.01 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
Outstanding 888,291
--------------------------------------------------------------------------
Class B:
Authorized 200,000,000
Outstanding 448,218
--------------------------------------------------------------------------
Class C:
Authorized 200,000,000
Outstanding 27,398
--------------------------------------------------------------------------
Class T:
Authorized 100,000,000
Outstanding 33,013,463
--------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share $ 6.52
Offering price per share: (Net Assets value of $6.52 /
95.00%) $ 6.86
--------------------------------------------------------------------------
Class B:
Net asset value and offering price per share $ 6.47
--------------------------------------------------------------------------
Class C:
Net asset value and redemption price per share $ 6.77
Offering price per share: (Net Assets value of $6.77 /
99.00%) $ 6.84
--------------------------------------------------------------------------
Class T:
Net asset value and redemption price per share $ 6.58
Offering price per share: (Net Assets value of $6.58 /
94.25%) $ 6.98
--------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
4
<PAGE>
STATEMENT OF OPERATIONS Six Months Ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R GROWTH FUND
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 1,127,851
Interest 468,973
------------
TOTAL INVESTMENT INCOME 1,596,824
EXPENSES
Investment advisory fees 525,616
Service fees 243,825
Professional fees 23,711
Custodian and transactions fees 44,197
Directors' fees 11,657
Qualification fees 21,440
Shareholder reporting expenses 27,959
Insurance expenses 17,863
Distribution fees 15,097
------------
TOTAL EXPENSES 931,365
LESS EXPENSES REIMBURSED (711)
------------
NET EXPENSES 930,654
------------
INVESTMENT INCOME--NET 666,170
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 11,557,617
Change in unrealized depreciation of investments for the
period (16,650,505)
------------
NET LOSS ON INVESTMENTS (5,092,888)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (4,426,718)
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
---------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 666,170 $ 900,553
Net realized gain on investments 11,557,617 10,640,352
Change in unrealized appreciation (depreciation) (16,650,505) 35,737,960
------------ ------------
Net increase (decrease) in net assets resulting from
operations (4,426,718) 47,278,865
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net
Class A (10,054) (4,775)
Class B -- --
Class C -- --
Class T (660,971) (860,216)
Capital gains
Class A (43,016) (138,389)
Class B (21,611) (57,657)
Class C (1,341) (4,941)
Class T (1,606,450) (8,774,058)
------------ ------------
Total distributions to shareholders (2,343,443) (9,840,036)
CAPITAL SHARE TRANSACTIONS--NET
Class A 2,125,667 3,388,463
Class B 1,383,365 1,388,166
Class C 58,272 115,090
Class T (6,503,278) (9,779,453)
------------ ------------
Total net capital share transactions (2,935,974) (4,887,734)
------------ ------------
TOTAL INCREASE (DECREASE) (9,706,135) 32,551,095
NET ASSETS
Beginning of period 235,660,303 203,109,208
------------ ------------
End of period $225,954,168 $235,660,303
============ ============
</TABLE>
See notes to financial statements.
5
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the period.
SM&R GROWTH FUND
<TABLE>
<CAPTION>
CLASS T SHARES
---------------------------------------------------------------------------------------------
(UNAUDITED)
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------- -----------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 6.77 $ 5.69 $ 5.24 $ 4.95 $ 4.39 $ 3.83
Investment income--net 0.02 0.03 0.04 0.06 0.05 0.08
Net realized and unrealized
gain (loss) on investments (0.14) 1.35 0.85 1.03 0.73 0.88
-------- -------- -------- -------- -------- --------
Total from Investment
Operations (0.12) 1.38 0.89 1.09 0.78 0.96
Less distributions from
Investment income--net (0.02) (0.03) (0.04) (0.06) (0.05) (0.08)
Capital gains (0.05) (0.27) (0.40) (0.74) (0.17) (0.32)
-------- -------- -------- -------- -------- --------
Total Distributions (0.07) (0.30) (0.44) (0.80) (0.22) (0.40)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period $ 6.58 $ 6.77 $ 5.69 $ 5.24 $ 4.95 $ 4.39
======== ======== ======== ======== ======== ========
Total Return @ (1.79)%** 24.49 % 18.35 % 22.24 % 17.64 % 25.20 %
======== ======== ======== ======== ======== ========
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period
(000's omitted) $217,078 $230,203 $203,109 $178,344 $152,758 $134,821
Ratio of expenses to average
net assets 0.81 %* 0.87 % 0.85 % 0.96 % 1.15 % 0.98 %
Ratio of net investment
income to average net
assets 0.62 %* 0.44 % 0.69 % 1.03 % 1.02 % 1.67 %
Portfolio turnover rate 10.42 % 16.13 % 27.31 % 46.79 % 18.72 % 37.00 %
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
PERIOD FROM PERIOD FROM PERIOD FROM
(UNAUDITED) JANUARY 1, (UNAUDITED) JANUARY 1, (UNAUDITED) JANUARY 1,
SIX MONTHS 1999 SIX MONTHS 1999 SIX MONTHS 1999
ENDED TO ENDED TO ENDED TO
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
------- ------- ------- ------- ------- -------
<CAPTION>
2000 1999 2000 1999 2000 1999
----------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 6.73 $ 5.69 $ 6.66 $ 5.69 $ 6.91 $ 5.69
Investment
income--net 0.01 0.01 -- -- (0.02) --
Net realized and
unrealized gain
(loss) on
investments (0.16) 1.30 (0.14) 1.24 (0.07) 1.49
------- ------- ------- ------- ------- -------
Total from Investment
Operations (0.15) 1.31 (0.14) 1.24 (0.09) 1.49
Less distributions
from
Investment income--
net (0.01) -- -- -- -- --
Capital gains (0.05) (0.27) (0.05) (0.27) (0.05) (0.27)
------- ------- ------- ------- ------- -------
Total Distributions (0.06) (0.27) (0.05) (0.27) (0.05) (0.27)
------- ------- ------- ------- ------- -------
Net Asset Value, End
of Period $ 6.52 $ 6.73 $ 6.47 $ 6.66 $ 6.77 $ 6.91
======= ======= ======= ======= ======= =======
Total Return @ ** (2.22)% 23.45% (2.12)% 22.04% (1.32)% 26.44%
======= ======= ======= ======= ======= =======
RATIOS (IN
PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of
period (000's
omitted) $ 5,792 $ 3,776 $ 2,899 $ 1,547 $ 185 $ 134
Ratio of expenses
with reimbursement
to average net
assets * 1.21 % 1.51 % 1.82 % 2.01 % 2.25 % 2.26 %
Ratio of expenses
without
reimbursement to
average net
assets * -- -- -- -- 3.00% --
Ratio of net
investment income to
average net
assets * 0.20 % (0.19)% (0.42)% (0.69)% (0.85)% (0.94)%
Portfolio turnover
rate 10.42 % 16.13 % 10.42 % 16.13 % 10.42 % 16.13 %
</TABLE>
* Ratios annualized
@ Does not include the effect of sales charge
** Returns are not annualized
See notes to financial statements.
6
<PAGE>
SCHEDULE OF INVESTMENTS June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R EQUITY INCOME FUND
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
AEROSPACE/DEFENSE--1.92%
Boeing Company 18,600 $ 777,713
Goodrich (B.F.) Company 75,000 2,554,688
------------
3,332,401
AUTO & TRUCK MANUFACTURERS--2.18%
Ford Motor Company 50,381 2,166,383
General Motors Corporation 28,000 1,625,750
------------
3,792,133
AUTO PARTS MANUFACTURERS--0.33%
Dana Corporation 23,000 487,312
Visteon Corporation 6,596 79,981
------------
567,293
BANKS--6.87%
Bank of America
Corporation 60,000 2,580,000
Comerica, Incorporated 34,500 1,548,188
Morgan (J.P.) & Company 9,500 1,046,187
PNC Financial Services
Group 33,400 1,565,625
U.S. Bancorp 121,400 2,336,950
Wells Fargo Company 73,500 2,848,125
------------
11,925,075
BEVERAGES--2.15%
Anheuser-Busch Companies,
Incorporated 50,000 3,734,375
BIO/SPECIALTY PHARMACEUTICALS--0.89%
Amgen Incorporated * 14,400 1,011,600
Biogen, Incorporated * 8,300 535,350
------------
1,546,950
CHEMICALS--0.73%
Hercules, Incorporated 32,600 458,437
Praxair, Incorporated 21,500 804,906
------------
1,263,343
COMMUNICATION EQUIPMENT--2.40%
Nortel Networks
Corporation 61,000 4,163,250
COMPUTER RELATED--7.15%
Cisco Systems,
Incorporated * 52,800 3,356,100
EMC Corporation * 74,400 5,724,150
Sun Microsystems,
Incorporated * 36,600 3,328,313
------------
12,408,563
COMPUTER SOFTWARE/SERVICES--1.75%
Microsoft Corporation * 38,000 3,040,000
DIVERSIFIED--0.38%
Minnesota Mining and
Manufacturing Company 7,900 651,750
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
DRUGS--8.28%
Bristol-Myers Squibb
Company 37,600 $ 2,190,200
Merck & Company,
Incorporated 33,300 2,551,612
Pfizer, Incorporated 58,800 2,822,400
Schering-Plough
Corporation 80,000 4,040,000
Watson Pharmaceuticals,
Incorporated * 51,600 2,773,500
------------
14,377,712
ELECTRIC POWER--1.68%
Constellation Energy Group 26,300 856,394
DTE Energy Company 40,000 1,222,500
UtiliCorp United,
Incorporated 42,000 834,750
------------
2,913,644
EXPLORATION/DRILLING--2.51%
Kerr-McGee Corporation 27,200 1,603,100
Tidewater, Incorporated 40,000 1,440,000
Union Pacific Resources
Group, Incorporated 60,000 1,320,000
------------
4,363,100
FINANCIAL SERVICES--8.56%
Citigroup, Incorporated 122,250 7,365,563
Morgan Stanley, Dean
Witter, Discover and
Company 90,000 7,492,500
------------
14,858,063
FOODS PRODUCERS--4.02%
ConAgra, Incorporated 40,000 762,500
Interstate Bakeries
Corporation 73,000 1,022,000
McCormick & Company,
Incorporated 70,000 2,275,000
Nabisco Group Holdings
Corporation 41,248 1,069,870
Universal Foods
Corporation 99,600 1,842,600
------------
6,971,970
FOODS RETAILERS--1.05%
Albertson's, Incorporated 55,000 1,828,750
FURNITURE/APPLIANCES/TOOLS--2.52%
Black & Decker Corporation 40,000 1,572,500
Whirlpool Corporation 60,000 2,797,500
------------
4,370,000
INSURANCE COMPANIES--2.15%
CIGNA Corporation 36,600 3,422,100
Conseco, Incorporated 31,100 303,225
------------
3,725,325
LEISURE TIME/GAMING--0.60%
Brunswick Corporation 63,200 1,046,750
MACHINERY/EQUIPMENT--2.13%
Deere & Company 100,000 3,700,000
</TABLE>
7
<PAGE>
SCHEDULE OF INVESTMENTS June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R EQUITY INCOME FUND, CONTINUED
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
MEDICAL PRODUCTS/SUPPLIES--3.34%
Abbott Laboratories 43,400 $ 1,934,012
Allergan, Incorporated 19,300 1,437,850
Beckman Coulter,
Incorporated 18,600 1,085,775
Johnson & Johnson 13,200 1,344,750
------------
5,802,387
METALS & MINING--0.67%
Phelps Dodge Corporation 31,500 1,171,406
NATURAL GAS--1.82%
Enron Corporation 49,000 3,160,500
OIL INTERNATIONAL--8.12%
BP Amoco p.l.c. ADR 47,110 2,664,659
Chevron Corporation 30,000 2,544,375
Exxon Mobil Corporation 40,000 3,140,000
Royal Dutch Petroleum
Company ADR 51,700 3,182,781
Texaco, Incorporated 48,000 2,556,000
------------
14,087,815
OIL SERVICES--0.86%
Schlumberger Limited 20,000 1,492,500
PAPER/FOREST PRODUCTS--0.55%
Glatfelter (P.H.) Company 94,000 957,625
REAL ESTATE/REITS--4.02%
CenterPoint Properties
Corporation 63,000 2,567,250
Crescent Real Estate
Equities Company 65,000 1,332,500
Hospitality Properties
Trust 50,000 1,128,125
Liberty Trust Properties 75,000 1,945,313
------------
6,973,188
RETAIL-GENERAL--0.71%
J. C. Penney Company,
Incorporated 66,400 1,224,250
RETAIL-SPECIALTY--0.31%
Lowe's Companies,
Incorporated 13,000 533,812
SEMICONDUCTORS--2.36%
Intel Corporation 30,600 4,090,838
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
SPECIALTY PRINTING/SERVICES--1.37%
Banta Corporation 63,000 $ 1,193,063
Deluxe Corporation 50,000 1,178,125
------------
2,371,188
STEEL--0.90%
Allegheny Technologies,
Incorporated 30,000 540,000
LTV Corporation 200,000 575,000
USX-U. S. Steel Group 24,000 445,500
------------
1,560,500
TELECOM-CELLULAR--1.79%
GTE Corporation 50,000 3,112,500
TELECOM-LONG DISTANCE--1.69%
AT&T Corporation 41,400 1,309,275
WorldCom, Incorporated * 35,350 1,621,681
------------
2,930,956
TELEPHONE-UTILITY--3.83%
Alltel Corporation 38,250 2,369,109
US West, Incorporated New 50,000 4,287,500
------------
6,656,609
TOBACCO--3.14%
Philip Morris Companies
Incorporated 87,600 2,326,875
R.J. Reynolds Tobacco
Holdings, Incorporated 77,749 2,172,113
UST, Incorporated 65,000 954,688
------------
5,453,676
TRUCKING & SHIPPING--0.48%
USFreightways Corporation 34,000 835,125
------------
TOTAL COMMON STOCK--96.21%
(Cost $134,029,158) 166,995,322
------------
<CAPTION>
FACE
COMMERCIAL PAPER AMOUNT VALUE
<S> <C> <C>
ELECTRIC POWER--1.06%
GPU Incorporated, 7.15%,
07/06/00 $1,845,000 1,843,167
FINANCIAL SERVICES--0.26%
Ford Motor Credit Company,
6.77%, 07/03/00 452,000 451,830
FOOD PRODUCERS--0.33%
ConAgra, Incorporated,
6.92%, 07/05/00 576,000 575,557
</TABLE>
8
<PAGE>
SCHEDULE OF INVESTMENTS June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R EQUITY INCOME FUND, CONTINUED
<TABLE>
<S> <C> <C>
OIL DOMESTIC--2.14%
Anadarko Petroleum
Corporation, 7.15%,
07/07/00 3,714,000 $ 3,709,573
------------
TOTAL COMMERCIAL PAPER--3.79%
(Cost $6,580,127) 6,580,127
------------
TOTAL INVESTMENTS--100.00%
(Cost $140,609,285) 173,575,449
CASH AND OTHER ASSETS, LESS
LIABILITIES--0.00% 2,799
------------
NET ASSETS--100.00% $173,578,248
============
ABBREVIATIONS
ADR--American Depository Receipt
REIT--Real Estate Investment Trust
*--Non-income producing securities
</TABLE>
See notes to financial statements.
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R EQUITY INCOME FUND
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value $ 173,575,449
Cash 12,356
Prepaid Expenses 31,103
Receivable for:
Capital stock sold 8,978
Dividends 374,690
Other assets 62,725
----------------
TOTAL ASSETS 174,065,301
----------------
LIABILITIES
Capital stock reacquired 305,991
Accrued:
Investment advisory fee 101,382
Service fee 33,262
Distribution fee 13,144
Other liabilities 33,274
----------------
TOTAL LIABILITIES 487,053
----------------
NET ASSETS (applicable to shares outstanding) $ 173,578,248
================
NET ASSETS:
Class A $ 5,536,096
------------------------------------------------------------------------------
Class B $ 4,770,018
------------------------------------------------------------------------------
Class C $ 139,337
------------------------------------------------------------------------------
Class T $ 163,132,797
------------------------------------------------------------------------------
TOTAL NET ASSETS: $ 173,578,248
================
CAPITAL STOCK, $0.01 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
Outstanding 224,424
------------------------------------------------------------------------------
Class B:
Authorized 200,000,000
Outstanding 196,696
------------------------------------------------------------------------------
Class C:
Authorized 200,000,000
Outstanding 5,572
------------------------------------------------------------------------------
Class T:
Authorized 50,000,000
Outstanding 6,469,620
------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share $ 24.67
Offering price per share: (Net Assets value of $24.67 /
95.00%) $ 25.97
------------------------------------------------------------------------------
Class B:
Net asset value and offering price per share $ 24.25
------------------------------------------------------------------------------
Class C:
Net asset value and redemption price per share $ 25.01
Offering price per share: (Net Assets value of $25.01 /
99.00%) $ 25.26
------------------------------------------------------------------------------
Class T:
Net asset value and redemption price per share $ 25.22
Offering price per share: (Net Assets value of $25.22 /
94.25%) $ 26.76
------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
10
<PAGE>
STATEMENT OF OPERATIONS Six Months Ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R EQUITY INCOME FUND
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 2,152,947
Interest 682,904
-----------
TOTAL INVESTMENT INCOME 2,835,851
EXPENSES
Investment advisory fees 625,901
Service fees 205,469
Professional fees 14,801
Custodian and transactions fees 37,392
Directors' fees 11,657
Qualification fees 20,469
Shareholder reporting expenses 18,191
Insurance expenses 19,507
Distribution fees 24,368
-----------
TOTAL EXPENSES 977,755
LESS EXPENSES REIMBURSED (783)
-----------
NET EXPENSES 976,972
-----------
INVESTMENT INCOME--NET 1,858,879
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 6,587,871
Change in unrealized depreciation of investments for the
period (6,601,218)
-----------
NET LOSS ON INVESTMENTS (13,347)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,845,532
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
---------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 1,858,879 $ 4,162,424
Net realized gain on investments 6,587,871 14,349,426
Change in unrealized depreciation (6,601,218) (21,207,921)
------------ ------------
Net increase (decrease) in net assets resulting from
operations 1,845,532 (2,696,071)
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net
Class A (52,583) (78,842)
Class B (35,002) (70,041)
Class C (674) (3,669)
Class T (1,765,732) (3,930,511)
Capital gains
Class A (44,719) (275,259)
Class B (39,732) (286,638)
Class C (1,121) (17,868)
Class T (1,301,697) (12,377,832)
------------ ------------
Total distributions to shareholders (3,241,260) (17,040,660)
CAPITAL SHARE TRANSACTIONS--NET
Class A 733,132 5,364,444
Class B 445,218 4,939,043
Class C (131,379) 313,991
Class T (23,481,731) (12,451,982)
------------ ------------
Total net capital share transactions (22,434,760) (1,834,504)
------------ ------------
TOTAL DECREASE (23,830,488) (21,571,235)
NET ASSETS
Beginning of period 197,408,736 218,979,971
------------ ------------
End of period $173,578,248 $197,408,736
============ ============
</TABLE>
See notes to financial statements.
11
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the period.
SM&R EQUITY INCOME FUND
<TABLE>
<CAPTION>
CLASS T SHARES
---------------------------------------------------------------------------------------------
(UNAUDITED)
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------- -----------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 25.30 $ 28.02 $ 26.99 $ 25.05 $ 22.59 $ 18.90
Investment income--net 0.27 0.54 0.62 0.63 0.58 0.62
Net realized and unrealized
gain (loss) on investments 0.11 (0.96) 2.50 4.96 3.10 4.82
-------- -------- -------- -------- -------- --------
Total from Investment
Operations 0.38 (0.42) 3.12 5.59 3.68 5.44
Less distributions from
Investment income--net (0.26) (0.54) (0.62) (0.64) (0.58) (0.63)
Capital gains (0.20) (1.76) (1.47) (3.01) (0.64) (1.12)
-------- -------- -------- -------- -------- --------
Total Distributions (0.46) (2.30) (2.09) (3.65) (1.22) (1.75)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period $ 25.22 $ 25.30 $ 28.02 $ 26.99 $ 25.05 $ 22.59
======== ======== ======== ======== ======== ========
Total Return@ 1.53 %** (1.39 ) % 12.11 % 22.72 % 16.46 % 29.12%
======== ======== ======== ======== ======== ========
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period
(000's omitted) $163,133 $187,988 $218,980 $198,687 $165,786 $141,058
Ratio of expenses to average
net assets 1.05 %* 1.05 % 1.01 % 1.05 % 1.10 % 1.12 %
Ratio of net investment
income to average net
assets 2.11 %* 1.94 % 2.22 % 2.28 % 2.42 % 2.89 %
Portfolio turnover rate 14.90 % 9.81 % 19.29 % 39.14 % 27.07 % 44.00 %
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------------ ------------------------------ ------------------------------
(UNAUDITED) PERIOD FROM (UNAUDITED) PERIOD FROM (UNAUDITED) PERIOD FROM
SIX MONTHS JANUARY 1, 1999 SIX MONTHS JANUARY 1, 1999 SIX MONTHS JANUARY 1, 1999
ENDED TO ENDED TO ENDED TO
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
----------- ---------------- ----------- ---------------- ----------- ----------------
2000 1999 2000 1999 2000 1999
----------- ---------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $24.79 $28.02 $24.38 $28.02 $24.90 $28.02
Investment income--net 0.24 0.58 0.16 0.47 (0.08) 0.38
Net realized and unrealized
gain (loss) on investments 0.08 (1.47) 0.09 (1.88) 0.46 (1.36)
------ ------ ------ ------ ------ ------
Total from Investment
Operations 0.32 (0.89) 0.25 (1.41) 0.38 (0.98)
Less distributions from
Investment income--net (0.24) (0.58) (0.18) (0.47) (0.07) (0.38)
Capital gains (0.20) (1.76) (0.20) (1.76) (0.20) (1.76)
------ ------ ------ ------ ------ ------
Total Distributions (0.44) (2.34) (0.38) (2.23) (0.27) (2.14)
------ ------ ------ ------ ------ ------
Net Asset Value, End of
Period $24.67 $24.79 $24.25 $24.38 $25.01 $24.90
====== ====== ====== ====== ====== ======
Total Return @ ** 1.30 % (3.01 ) % 1.04 % (4.86 ) % 1.54 % (3.32 ) %
====== ====== ====== ====== ====== ======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL
DATA
Net Assets, end of period
(000's omitted) $5,536 $4,802 $4,770 $4,343 $ 139 $ 275
Ratio of expenses with
reimbursement to average
net assets * 1.42 % 1.51 % 1.95 % 2.01 % 2.25 % 2.26 %
Ratio of expenses without
reimbursement to average
net assets * -- -- -- -- 3.03% --
Ratio of net investment
income to average net
assets * 1.70 % 1.53 % 1.19 % 1.03 % 1.01 % 0.78 %
Portfolio turnover rate 14.90 % 9.81 % 14.90 % 9.81 % 14.90 % 9.81 %
</TABLE>
* Ratios annualized
@ Does not include the effect of sales charge
** Returns are not annualized
See notes to financial statements.
12
<PAGE>
SCHEDULE OF INVESTMENTS June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R BALANCED FUND
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
AEROSPACE/DEFENSE--0.59%
Boeing Company 2,200 $ 91,988
Goodrich (B.F.) Company 3,136 106,820
-----------
198,808
AUTO & TRUCK MANUFACTURERS--0.94%
Ford Motor Company 3,300 141,900
General Motors Corporation 3,000 174,187
-----------
316,087
AUTO PARTS MANUFACTURERS--0.15%
Dana Corporation 2,100 44,494
Visteon Corporation 432 5,239
-----------
49,733
BANKS--2.35%
Bank of America Corporation 5,000 215,000
Comerica, Incorporated 3,750 168,281
PNC Financial Services Group 3,200 150,000
U.S. Bancorp 5,300 102,025
Wells Fargo Company 4,000 155,000
-----------
790,306
BEVERAGES--0.67%
Anheuser-Busch Companies,
Incorporated 3,000 224,063
BIO/SPECIALTY PHARMACEUTICALS--0.43%
Amgen Incorporated * 1,300 91,325
Biogen, Incorporated * 800 51,600
-----------
142,925
CHEMICALS--0.51%
Hercules, Incorporated 2,800 39,375
Praxair, Incorporated 3,500 131,031
-----------
170,406
COMMUNICATION EQUIPMENT--2.38%
Lucent Technologies,
Incorporated 6,600 391,050
Nortel Networks Corporation 6,000 409,500
-----------
800,550
COMPUTER RELATED--7.65%
Cisco Systems, Incorporated* 12,000 762,750
EMC Corporation * 13,200 1,015,575
Sun Microsystems,
Incorporated * 8,700 791,156
-----------
2,569,481
COMPUTER SOFTWARE/SERVICES--3.39%
Microsoft Corporation * 6,700 536,000
Novell, Incorporated * 7,200 66,600
VERITAS Software Corporation* 4,750 536,824
-----------
1,139,424
COSMETICS & TOILETRIES--1.01%
Procter & Gamble Company 5,900 337,775
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
DIVERSIFIED--0.22%
Minnesota Mining and
Manufacturing Company 900 $ 74,250
DRUGS--4.44%
Bristol-Myers Squibb Company 3,500 203,875
Merck & Company,
Incorporated 3,100 237,537
Pfizer, Incorporated 11,175 536,400
Schering-Plough Corporation 5,100 257,550
Watson Pharmaceuticals,
Incorporated * 4,800 258,000
-----------
1,493,362
ELECTRIC POWER--0.74%
Allegheny Energy,
Incorporated 2,100 57,488
DTE Energy Company 4,000 122,250
UtiliCorp United,
Incorporated 3,450 68,569
-----------
248,307
ELECTRICAL EQUIPMENT--3.38%
General Electric Company 16,200 858,600
Solectron Corporation * 6,600 276,375
-----------
1,134,975
EXPLORATION/DRILLING--1.16%
Global Marine, Incorporated* 2,800 78,925
Kerr-McGee Corporation 1,200 70,725
Tidewater, Incorporated 1,500 54,000
Union Pacific Resources
Group, Incorporated 8,393 184,646
-----------
388,296
FINANCIAL SERVICES--3.54%
American General Corporation 1,800 109,800
Citigroup, Incorporated 10,500 632,625
Countrywide Credit
Industries, Incorporated 6,000 181,875
Morgan Stanley, Dean Witter,
Discover and Company 3,200 266,400
-----------
1,190,700
FOOD PRODUCERS--1.49%
IBP, Incorporated 5,500 84,906
Interstate Bakeries
Corporation 9,000 126,000
Smithfield Foods,
Incorporated * 5,000 140,313
Universal Foods Corporation 8,000 148,000
-----------
499,219
FOOD RETAILERS--1.29%
Albertson's, Incorporated 3,100 103,075
Safeway, Incorporated * 7,300 329,412
-----------
432,487
HOMEBUILDING/SUPPLIES--0.15%
Centex Corporation 2,200 51,700
</TABLE>
13
<PAGE>
SCHEDULE OF INVESTMENTS June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R BALANCED FUND, CONTINUED
<TABLE>
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
INSURANCE COMPANIES--0.96%
CIGNA Corporation 3,000 $ 280,500
Conseco, Incorporated 4,200 40,950
-----------
321,450
LEISURE TIME/GAMING--0.25%
Brunswick Corporation 5,000 82,813
MEDICAL PRODUCTS/SUPPLIES--1.45%
Allergan, Incorporated 1,800 134,100
Beckman Coulter,
Incorporated 1,700 99,237
Johnson & Johnson 2,500 254,688
-----------
488,025
MANUFACTURING-DIVERSIFIED--0.80%
Tyco International LTD 5,700 270,037
NATURAL GAS--1.54%
Enron Corporation 8,000 516,000
OIL INTERNATIONAL--3.41%
BP Amoco p.l.c. ADR 5,292 299,329
Chevron Corporation 4,400 373,175
Royal Dutch Petroleum
Company ADR 7,700 474,031
-----------
1,146,535
RETAIL-GENERAL--0.45%
Federated Department Stores,
Incorporated * 3,000 101,250
J. C. Penney Company,
Incorporated 2,800 51,625
-----------
152,875
RETAIL-SPECIALTY--0.31%
Lowe's Companies,
Incorporated 1,500 61,594
Toys 'R' Us, Incorporated * 3,000 43,688
-----------
105,282
SEMICONDUCTORS--2.23%
Intel Corporation 5,600 748,650
SPECIALTY PRINTING/SERVICES--0.31%
Banta Corporation 5,500 104,156
STEEL--0.46%
Allegheny Technologies,
Incorporated 2,000 36,000
LTV Corporation 16,000 46,000
USX-U. S. Steel Group 4,000 74,250
-----------
156,250
<CAPTION>
COMMON STOCK SHARES VALUE
<S> <C> <C>
TELECOM-CELLULAR--0.74%
GTE Corporation 4,000 $ 249,000
TELECOM-LONG DISTANCE--2.08%
AT&T Corporation 12,554 397,028
WorldCom, Incorporated * 6,600 302,775
-----------
699,803
TELEPHONE--2.17%
Alltel Corporation 4,400 272,525
US West, Incorporated New 5,342 458,076
-----------
730,601
TRUCKING & SHIPPING--0.20%
US Freightways Corporation 2,700 66,319
-----------
TOTAL COMMON STOCK--53.84%
(Cost $11,188,971) 18,090,650
-----------
<CAPTION>
FACE
BONDS AND NOTES AMOUNT VALUE
<S> <C> <C>
AUTO & TRUCK MANUFACTURERS--1.44%
DaimlerChrysler North
America, 7.20%, 09/01/09 $ 500,000 483,030
AUTO PARTS MANUFACTURERS--2.90%
Cooper Tire & Rubber
Company, 7.75%, 12/15/09 1,000,000 973,502
BANKS--2.67%
Morgan (J.P.) & Company,
Incorporated, 6.00%,
01/15/09 500,000 443,191
Royal Bank of Scotland,
yankee, 6.40%, 04/01/09 500,000 454,636
-----------
897,827
ELECTRONICS--1.85%
Koninklijke Philips
Electronics, yankee,
8.375%, 09/15/06 600,000 621,713
</TABLE>
14
<PAGE>
SCHEDULE OF INVESTMENTS June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R BALANCED FUND, CONTINUED
<TABLE>
<CAPTION>
FACE
BONDS AND NOTES AMOUNT VALUE
<S> <C> <C>
GOVERNMENT AGENCIES--10.10%
Federal Home Loan Mortgage
Corporation, 7.00%,
09/15/07 $1,000,000 $ 988,460
Federal Home Loan Mortgage
Corporation, Pool #298759,
8.00%, 08/01/17 94,827 95,178
Federal Home Loan Mortgage
Corporation, Pool #284839,
8.50%, 01/01/17 29,289 29,803
Federal National Mortgage
Association, 7.55%,
04/22/02 685,000 692,256
Federal National Mortgage
Association, 7.70%,
04/10/07 1,500,000 1,473,840
Federal National Mortgage
Association, Pool #041669,
8.00%, 02/01/17 16,953 17,114
Federal National Mortgage
Association, Pool #48974,
8.00%, 06/01/17 97,636 98,566
-----------
3,395,217
INSURANCE COMPANIES--1.46%
The Mony Group Incorporated,
8.35%, 03/15/10 500,000 491,005
REAL ESTATE/REITS--1.38%
Weingarten Realty Investors,
7.35%, 07/20/09 500,000 462,427
U S TREASURY SECURITIES--9.77%
U S Treasury Bond, 6.000%,
02/15/26 2,350,000 2,297,125
U S Treasury Note, 5.875%,
02/15/04 1,000,000 986,250
-----------
3,283,375
-----------
TOTAL BONDS AND NOTES--31.57%
(Cost $10,431,075) 10,608,096
-----------
<CAPTION>
FACE
COMMERCIAL PAPER AMOUNT VALUE
<S> <C> <C>
FINANCIAL SERVICES--2.06%
Dana Credit Corporation,
7.12%, 07/06/00 $ 692,000 $ 691,315
FOOD PRODUCERS--2.28%
ConAgra, Incorporated,
6.92%, 07/05/00 768,000 767,409
LODGING/HOTELS--2.94%
Marriott International
Incorporated, 7.10%,
07/10/00 990,000 988,242
METALS & MINING--2.96%
Commercial Metals Company,
7.10%, 07/07/00 997,000 995,819
OIL DOMESTIC--2.29%
Anadarko Petroleum
Corporation, 7.05%,
07/11/00 770,000 768,492
TRANSPORTATION-MISCELLANEOUS--1.29%
CSX Corporation, 6.90%,
07/03/00 433,000 432,834
-----------
TOTAL COMMERCIAL PAPER--13.82%
(Cost $4,644,111) 4,644,111
-----------
TOTAL INVESTMENTS--99.23%
(Cost $26,264,157) 33,342,857
CASH AND OTHER ASSETS, LESS
LIABILITIES--0.77% 259,655
-----------
NET ASSETS--100.00% $33,602,512
===========
ABBREVIATIONS
ADR--American Depository Receipt
REIT--Real Estate Investment Trust
*--Non-income producing securities
</TABLE>
See notes to financial statements.
15
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R BALANCED FUND
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value $ 33,342,857
Cash 46,120
Prepaid Expenses 22,398
Receivable for:
Capital stock sold 10,347
Dividends 16,990
Interest 194,517
Expense reimbursement 2,384
Other assets 15,322
------------
TOTAL ASSETS 33,650,935
------------
LIABILITIES
Capital stock reacquired 300
Accrued:
Investment advisory fee 20,616
Service fee 6,872
Distribution fee 4,258
Other liabilities 16,377
------------
TOTAL LIABILITIES 48,423
------------
NET ASSETS (applicable to shares outstanding) $ 33,602,512
============
NET ASSETS:
Class A $ 2,101,532
--------------------------------------------------------------------------
Class B $ 1,765,709
--------------------------------------------------------------------------
Class C $ 9,643
--------------------------------------------------------------------------
Class T $ 29,725,628
--------------------------------------------------------------------------
TOTAL NET ASSETS: $ 33,602,512
============
CAPITAL STOCK, $0.01 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
Outstanding 101,917
--------------------------------------------------------------------------
Class B:
Authorized 200,000,000
Outstanding 84,339
--------------------------------------------------------------------------
Class C:
Authorized 200,000,000
Outstanding 469
--------------------------------------------------------------------------
Class T:
Authorized 50,000,000
Outstanding 1,414,100
--------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share $ 20.62
Offering price per share: (Net Assets value of $20.62 /
95.00%) $ 21.71
--------------------------------------------------------------------------
Class B:
Net asset value and offering price per share $ 20.94
--------------------------------------------------------------------------
Class C:
Net asset value and redemption price per share $ 20.57
Offering price per share: (Net Assets value of $20.57 /
99.00%) $ 20.78
--------------------------------------------------------------------------
Class T:
Net asset value and redemption price per share $ 21.02
Offering price per share: (Net Assets value of $21.02 /
94.25%) $ 22.30
--------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
16
<PAGE>
STATEMENT OF OPERATIONS Six Months Ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R BALANCED FUND
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 115,174
Interest 517,245
----------
TOTAL INVESTMENT INCOME 632,419
EXPENSES
Investment advisory fees 123,119
Service fees 41,040
Professional fees 7,798
Custodian and transactions fees 15,467
Directors' fees 11,657
Qualification fees 15,759
Shareholder reporting expenses 1,968
Insurance expenses 3,412
Distribution fees 7,493
----------
TOTAL EXPENSES 227,713
LESS EXPENSES REIMBURSED (14,966)
----------
NET EXPENSES 212,747
----------
INVESTMENT INCOME--NET 419,672
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 1,873,617
Change in unrealized depreciation of investments for the
period (1,092,486)
----------
NET GAIN ON INVESTMENTS 781,131
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,200,803
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
---------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 419,672 $ 636,619
Net realized gain on investments 1,873,617 1,497,455
Change in unrealized appreciation (depreciation) (1,092,486) 1,358,236
----------- -----------
Net increase in net assets resulting from operations 1,200,803 3,492,310
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net
Class A (24,234) (33,803)
Class B (16,997) (17,701)
Class C (78) (82)
Class T (366,442) (597,705)
Capital gains
Class A (16,940) (65,054)
Class B (14,024) (39,133)
Class C (78) (200)
Class T (238,852) (1,121,320)
----------- -----------
Total distributions to shareholders (677,645) (1,874,998)
----------- -----------
CAPITAL SHARE TRANSACTIONS--NET
Class A 294,759 1,735,203
Class B 628,275 1,087,152
Class C 986 8,444
Class T (894,265) (765,616)
----------- -----------
Total net capital share transactions 29,755 2,065,183
----------- -----------
TOTAL INCREASE 552,913 3,682,495
NET ASSETS
Beginning of period 33,049,599 29,367,104
----------- -----------
End of period $33,602,512 $33,049,599
=========== ===========
</TABLE>
See notes to financial statements.
17
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the period.
SM&R BALANCED FUND
<TABLE>
<CAPTION>
CLASS T SHARES
---------------------------------------------------------------------------------------
(UNAUDITED)
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------ ------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 20.67 $ 19.63 $ 18.32 $ 17.90 $ 16.85 $ 14.32
Investment income--net 0.27 0.42 0.48 0.57 0.49 0.49
Net realized and unrealized gain
on investments 0.51 1.84 1.96 2.50 1.48 2.67
------- ------- ------- ------- ------- -------
Total from Investment Operations 0.78 2.26 2.44 3.07 1.97 3.16
Less distributions from
Investment income--net (0.26) (0.42) (0.47) (0.59) (0.49) (0.49)
Capital gains (0.17) (0.80) (0.66) (2.06) (0.43) (0.14)
------- ------- ------- ------- ------- -------
Total Distributions (0.43) (1.22) (1.13) (2.65) (0.92) (0.63)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 21.02 $ 20.67 $ 19.63 $ 18.32 $ 17.90 $ 16.85
======= ======= ======= ======= ======= =======
Total Return @ 3.76 %** 11.87 % 13.83 % 17.46 % 11.86 % 22.29 %
======= ======= ======= ======= ======= =======
RATIOS (IN
PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's
omitted) $29,726 $30,146 $29,367 $25,838 $23,188 $21,757
Ratio of expenses with
reimbursement to average net
assets 1.25 %* 1.25 % 1.25 % 1.26 % 1.21 % 1.26 %
Ratio of expenses without
reimbursement to average net
assets 1.33 %* 1.41 % 1.37 % 1.36 % 1.34 % 1.46 %
Ratio of net investment income to
average net assets 2.60 %* 2.15 % 2.55 % 3.02 % 2.83 % 2.99 %
Portfolio turnover rate 8.60 % 18.01 % 16.01 % 27.52 % 23.78 % 16.39 %
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
------------------------------ ------------------------------
(UNAUDITED) PERIOD FROM (UNAUDITED) PERIOD FROM
SIX MONTHS JANUARY 1, 1999 SIX MONTHS JANUARY 1, 1999
ENDED TO ENDED TO
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
----------- ---------------- ----------- ----------------
2000 1999 2000 1999
----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $20.30 $19.63 $20.64 $19.63
Investment income--net 0.26 0.47 0.23 0.40
Net realized and unrealized
gain on investments 0.48 1.47 0.46 1.81
------ ------ ------ ------
Total from Investment
Operations 0.74 1.94 0.69 2.21
Less distributions from
Investment income--net (0.25) (0.47) (0.22) (0.40)
Capital gains (0.17) (0.80) (0.17) (0.80)
------ ------ ------ ------
Total Distributions (0.42) (1.27) (0.39) (1.20)
------ ------ ------ ------
Net Asset Value, End of
Period $20.62 $20.30 $20.94 $20.64
====== ====== ====== ======
Total Return @ ** 3.63 % 10.13 % 3.35 % 11.52 %
====== ====== ====== ======
RATIOS (IN PERCENTAGES)/
SUPPLEMENTAL DATA
Net Assets, end of period
(000's omitted) $2,102 $1,777 $1,766 $1,119
Ratio of expenses with
reimbursement to average net
assets * 1.50 % 1.51 % 2.00 % 2.01 %
Ratio of expenses without
reimbursement to average net
assets * 1.76 % -- 2.13 % --
Ratio of net investment
income to average net assets* 2.35 % 1.87 % 1.86 % 1.36 %
Portfolio turnover rate 8.60 % 18.01 % 8.60 % 18.01 %
<CAPTION>
CLASS C SHARES
------------------------------
(UNAUDITED) PERIOD FROM
SIX MONTHS JANUARY 1, 1999
ENDED TO
JUNE 30, JUNE 30,
----------- ----------------
2000 1999
----------- ----------------
<S> <C> <C>
Net Asset Value, Beginning of
Period $20.25 $19.63
Investment income--net 0.18 0.41
Net realized and unrealized
gain on investments 0.48 1.42
------ ------
Total from Investment
Operations 0.66 1.83
Less distributions from
Investment income--net (0.17) (0.41)
Capital gains (0.17) (0.80)
------ ------
Total Distributions (0.34) (1.21)
------ ------
Net Asset Value, End of
Period $20.57 $20.25
====== ======
Total Return @ ** 3.24 % 9.58 %
====== ======
RATIOS (IN PERCENTAGES)/
SUPPLEMENTAL DATA
Net Assets, end of period
(000's omitted) $ 10 $ 8
Ratio of expenses with
reimbursement to average net
assets * 2.25 % 2.26 %
Ratio of expenses without
reimbursement to average net
assets * 9.56 % --
Ratio of net investment
income to average net assets* 1.62 % 1.13 %
Portfolio turnover rate 8.60 % 18.01 %
</TABLE>
* Ratios annualized
@ Does not include the effect of sales charge
** Returns are not annualized
See notes to financial statements.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R EQUITY FUNDS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
The SM&R Equity Funds (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 SM&R Growth Fund, Inc., SM&R Equity
Income Fund, Inc. and SM&R Balanced Fund, Inc. Operations commenced January 31,
1969 for the SM&R Growth Fund, May 1, 1970 for the SM&R Equity Income Fund and
November 20, 1987 for the SM&R Balanced Fund for performance and tracking
information.
The Funds have adopted a Multiple Class Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. Each had a single class of shares,
and are offering five new classes as of January 1, 1999. The existing shares are
the Class T shares, and the newly offered classes are: the Class A shares
subject to an initial sales charge of up to 5.00% and a distribution and
shareholder servicing plan ("12b-1 Plan"); the Class B shares subject to a
contingent deferred sales charge and a 12b-1 Plan; the Class C shares subject to
an initial sales charge of 1.00%, a contingent deferred sales charge, and a
12b-1 Plan; the Class J shares (Network class) subject to a 12b-1 Plan, only;
and the Class Y shares (Institutional class) subject to no charges. The Class J
and Y shares have not commenced operations.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of 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.
SECURITY VALUATION:
Investments in securities 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 represent valuations at bid prices or on a basis determined without
exclusive reliance on quoted prices and may reflect appropriate factors such as
institution-size trading in similar groups of securities, yield quality, coupon
rate, maturity, type of issue, individual trading characteristics and other
market data. Securities for which market quotations are not readily available
are valued as determined by the Board of Directors. Commercial paper is stated
at amortized cost, which is equivalent to value.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME:
Investment transactions are accounted for on the trade date (date order to buy
or sell is executed). Dividend income is 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 identified cost 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 Funds on the ex-dividend date and may be
reinvested at net asset value.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
SM&R EQUITY FUNDS
EXPENSES:
Distribution, qualification fees or other fees directly attributable to the
funds' class of shares are charged to that funds class operations. All other
operating expenses not directly attributable to a Funds' operations are prorated
among the Funds based on the relative amount of each Funds' net assets or
shareholders, and then allocated among the classes of that fund.
NOTE 2--OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICE FEES:
Securities Management and Research, Inc. ("SM&R") is the investment advisor and
principal underwriter for the Funds. Investment advisory and service fees paid
to SM&R are computed as a percentage of the average daily net assets as follows:
<TABLE>
<CAPTION>
INVESTMENT SERVICE
NET ASSETS ADVISORY FEE FEE
<S> <C> <C>
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 six months
ended June 30, 2000, the investment advisory fee was decreased by approximately
$223,855.
SM&R has agreed to reimburse the Funds for regular operating 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. Regular operating expenses include the advisory fee and administrative
service fee, but does not include the distribution and shareholder servicing
fee.
DISTRIBUTION AND SHAREHOLDER SERVICING FEES:
The Funds have adopted a 12b-1 Plan, with respect to the Funds' Class A shares,
Class B shares and Class C shares (the "Class A Plan", the "Class B Plan" and
the "Class C Plan", respectively and collectively, the "Plans"). The Plans
permit each class a distribution fee to compensate SM&R, or enable SM&R to
compensate other persons, including Distributors, for distribution costs such as
service fees paid to dealers, printing and distribution of prospectuses to
prospective investors, sales literature and other sales and distribution related
activities. The Funds pay compensation for Class A shares at 0.25% per annum of
the average daily net assets, for Class B shares at 0.50% per annum of the
average daily net assets and for Class C shares at 0.75% per annum of the
average daily net assets.
The Class B and Class C Plans also permit a shareholder servicing fee of 0.25%
per annum of the average daily net assets to compensate SM&R, or enable SM&R to
compensate Service Providers, for providing ongoing servicing to shareholders of
the Funds. For the six months ended June 30, 2000, the Growth Fund, Equity
Income Fund and Balanced Fund paid $5,804, $11,224 and $3,235, respectively as
compensation under the Plans.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
SM&R EQUITY FUNDS
NOTE 2--OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
SALES CHARGES:
During the six months ended June 30, 2000, 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 SALES
CHARGES CHARGES
RECEIVED BY SM&R REALLOWED TO DEALERS
<S> <C> <C>
Growth $182,926 $1,162
Equity Income $141,165 $1,665
Balanced $ 17,803 $ 152
</TABLE>
SM&R is a wholly-owned subsidiary of American National Insurance Company
("American National"). As of June 30, 2000, SM&R and American National had the
following ownership in the Funds:
<TABLE>
SM&R AMERICAN NATIONAL
----------------------- ------------------------
PERCENT OF PERCENT OF
SHARES SHARES
SHARES OUTSTANDING SHARES OUTSTANDING
<S> <C> <C> <C> <C>
Growth 223,240 0.65% 1,841,900 5.36%
Equity Income 19,482 0.28% -- --
Balanced 138,269 8.64% 265,146 16.56%
</TABLE>
NOTE 3--COST, PURCHASES AND SALES OF INVESTMENTS
Investments have the same cost for tax and financial statement purposes.
Aggregate purchases and sales of investments in securities, other than
commercial paper and short-term bonds and notes, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Growth $31,333,645 $22,003,719
Equity Income $38,632,941 $23,317,027
Balanced $ 3,660,645 $ 2,389,511
</TABLE>
Gross unrealized appreciation and depreciation as of June 30, 2000, were as
follows:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION
<S> <C> <C>
Growth $98,753,277 $14,299,406
Equity Income $50,935,429 $17,969,265
Balanced $ 8,533,086 $ 1,454,386
</TABLE>
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
SM&R EQUITY FUNDS
NOTE 4--CAPITAL STOCK
SM&R GROWTH FUND
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
------------------------- -------------------------
<S> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Sale of capital shares:
Class T 1,539,442 $ 10,041,215 2,035,769 $ 12,211,276
Class A 410,228 2,671,299 588,609 3,552,451
Class B 226,729 1,452,121 231,719 1,382,526
Class C 20,019 138,297 26,871 160,112
---------- ------------ ---------- ------------
Total sale of capital shares 2,196,418 14,302,932 2,882,968 17,306,365
Investment income dividends reinvested:
Class T 97,778 645,331 135,539 838,061
Class A 1,522 9,967 737 4,653
Class B -- -- -- --
Class C -- -- -- --
---------- ------------ ---------- ------------
Total investment income dividends reinvested 99,300 655,298 136,276 842,714
Distributions from net realized gains reinvested:
Class T 238,406 1,573,435 1,351,172 8,566,392
Class A 6,512 42,645 21,368 134,830
Class B 3,325 21,611 9,225 57,657
Class C 197 1,341 762 4,941
---------- ------------ ---------- ------------
Total distributions from net realized gains 248,440 1,639,032 1,382,527 8,763,820
Redemptions of capital shares outstanding:
Class T (2,877,026) (18,763,259) (5,230,280) (31,395,182)
Class A (91,194) (598,244) (49,491) (303,471)
Class B (14,072) (90,367) (8,708) (52,017)
Class C (12,166) (81,366) (8,285) (49,963)
---------- ------------ ---------- ------------
Total redemptions of capital shares outstanding (2,994,458) (19,533,236) (5,296,764) (31,800,633)
---------- ------------ ---------- ------------
Net decrease in capital shares outstanding (450,300) $ (2,935,974) (894,993) $ (4,887,734)
============ ============
Shares outstanding at beginning of period 34,827,670 35,722,663
---------- ----------
Shares outstanding at end of period 34,377,370 34,827,670
========== ==========
Net assets as of June 30, 2000, are comprised of the following:
Capital (par value and additional paid-in) $129,867,959
Undistributed net investment income 30,707
Accumulated net realized gain on investments 11,601,631
Net unrealized appreciation of investments 84,453,871
------------
Net Assets $225,954,168
============
</TABLE>
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
SM&R EQUITY FUNDS
NOTE 4--CAPITAL STOCK--CONTINUED
SM&R EQUITY INCOME FUND
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales of capital shares:
Class T 160,552 $ 3,952,536 397,021 $ 11,261,285
Class A 57,013 1,372,521 191,346 5,356,418
Class B 38,299 906,249 171,923 4,819,232
Class C 91 2,230 10,458 300,119
---------- ------------ ---------- ------------
Total sale of capital shares 255,955 6,233,536 770,748 21,737,054
Investment income dividends reinvested:
Class T 67,262 1,697,802 138,309 3,781,416
Class A 2,093 51,736 3,176 78,839
Class B 1,404 34,107 2,803 68,163
Class C 27 674 147 3,669
---------- ------------ ---------- ------------
Total investment income dividends reinvested 70,786 1,784,319 144,435 3,932,087
Distributions from net realized gains reinvested:
Class T 49,229 1,257,810 486,492 11,987,183
Class A 1,763 44,061 11,388 275,259
Class B 1,616 39,692 12,064 286,638
Class C 44 1,121 737 17,868
---------- ------------ ---------- ------------
Total distributions from net realized gains 52,652 1,342,684 510,681 12,566,948
Redemptions of capital shares outstanding:
Class T (1,236,803) (30,389,879) (1,406,392) (39,481,866)
Class A (30,159) (735,186) (12,196) (346,072)
Class B (22,725) (534,830) (8,688) (234,990)
Class C (5,655) (135,404) (277) (7,665)
---------- ------------ ---------- ------------
Total redemptions of capital shares outstanding (1,295,342) (31,795,299) (1,427,553) (40,070,593)
---------- ------------ ---------- ------------
Net decrease in capital shares outstanding (915,949) $(22,434,760) (1,689) $ (1,834,504)
============ ============
Shares outstanding at beginning of period 7,812,261 7,813,950
---------- ----------
Shares outstanding at end of period 6,896,312 7,812,261
========== ==========
Net assets as of June 30, 2000, are comprised of the following:
Capital (par value and additional paid-in) $133,874,195
Undistributed net investment income 84,249
Accumulated net realized gain on investments 6,653,640
Net unrealized appreciation of investments 32,966,164
------------
Net Assets $173,578,248
============
</TABLE>
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
SM&R EQUITY FUNDS
NOTE 4--CAPITAL STOCK--CONTINUED
SM&R BALANCED FUND
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30,2000 DECEMBER 31, 1999
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales of capital shares:
Class T 68,627 $ 1,433,811 82,302 $ 1,632,418
Class A 13,742 280,255 85,863 1,702,510
Class B 30,677 638,868 51,561 1,034,545
Class C 47 936 406 8,177
--------- ----------- --------- -----------
Total sale of capital shares 113,093 2,353,870 220,132 4,377,650
Investment income dividends reinvested:
Class T 16,684 354,882 29,462 581,088
Class A 1,162 24,233 1,721 33,823
Class B 796 16,825 886 17,701
Class C 4 78 4 82
--------- ----------- --------- -----------
Total investment income dividends reinvested 18,646 396,018 32,073 632,694
Distributions from net realized gains reinvested:
Class T 10,983 230,865 55,122 1,104,641
Class A 822 16,940 3,303 65,034
Class B 670 14,024 1,954 39,133
Class C 4 78 10 200
--------- ----------- --------- -----------
Total distributions from net realized gains reinvested 12,479 261,907 60,389 1,209,008
Redemptions of capital shares outstanding:
Class T (140,795) (2,913,823) (204,696) (4,083,763)
Class A (1,320) (26,669) (3,376) (66,164)
Class B (1,997) (41,442) (208) (4,227)
Class C (5) (106) (1) (15)
--------- ----------- --------- -----------
Total redemptions of captial shares outstanding (144,117) (2,982,040) (208,281) (4,154,169)
--------- ----------- --------- -----------
Net increase in capital shares outstanding 101 $ 29,755 104,313 $ 2,065,183
=========== ===========
Shares outstanding at beginning of period 1,600,724 1,496,411
--------- ---------
Shares outstanding at end of period 1,600,825 1,600,724
========= =========
Net assets as of June 30, 2000, are comprised of the following:
Capital (par value and additional paid in capital) $24,636,942
Accumulated net realized gain on investments 1,886,870
Net unrealized appreciation of investments 7,078,700
-----------
Net Assets $33,602,512
===========
</TABLE>
24
<PAGE>
SM&R EQUITY FUNDS 2450 South Shore Blvd, League City, Texas 77573
--------------------------------------------------------------------------------
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
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.
P.O. Box 58969
Houston, Texas 77258-8969
CUSTODIAN
Securities Management and Research, Inc.
P.O. Box 58969
Houston, Texas 77258-8969
LEGAL COUNSEL
Greer, Herz & Adams, L.L.P.
One Moody Plaza
Galveston, Texas 77550
UNDERWRITER AND REDEMPTION AGENT
Securities Management and Research, Inc.
P.O. Box 58969
Houston, Texas 77258-8969
TRANSFER AGENT, REGISTRAR AND DIVIDEND PAYING AGENT
Securities Management and Research, Inc.
P.O. Box 58969
Houston, Texas 77258-8969
INDEPENDENT AUDITORS
Tait, Weller & Baker
8 Penn Center, Suite 800
Philadelphia, Pennsylvania 19103-2108
<PAGE>
SM&R EQUITY FUNDS
SM&R Growth Fund, Inc.
SM&R Equity Income Fund, Inc.
SM&R Balanced Fund, Inc.
SM&R INVESTMENTS, INC.
SM&R Government Bond Fund
SM&R Tax Free Fund
SM&R Primary Fund
SM&R Money Market Fund
HOW TO REACH US:
SHAREHOLDER SERVICES SALES AND MARKETING
(800) 231-4639 (800) 526-8346
FUND QUOTES AND INVESTOR HOTLINE TO REQUEST A PROSPECTUS
(877) 239-2049 (800) 231-4639
VISIT OUR WEBSITE AT: www.smrinvest.com
[LOGO] SECURITIES MANAGEMENT
AND RESEARCH, INC.
MANAGER & DISTRIBUTOR
---------------------
MEMBER NASD, SIPC
2450 SOUTH SHORE BLVD., SUITE 400 - LEAGUE CITY, TX 77573 - (281)334-2469
Form 9092S - 8/2000
