<PAGE>
GOVERNMENT INCOME FUND SERIES
[AMERICAN NATIONAL]
PRIMARY FUND SERIES
TAX FREE FUND SERIES
[SM&R CAPITAL FUNDS]
P R O S P E C T U S
SM&R CAPITAL FUNDS, INC. - One Moody Plaza - Galveston,
Texas 77550
Telephone Number: (409) 763-8272 - Toll Free: 1 (800)
231-4639
December 29, 1995
<TABLE>
<S> <C> <C>
DIRECTORS OFFICERS
Samuel K. Finegan Michael W. McCroskey Michael W. McCroskey, President and CEO
Brent E. Masel, M.D. Andrew J. Mytelka Brenda T. Koelemay, Vice President and Treasurer
Allan W. Matthews Edwin K. Nolan Emerson V. Unger, Vice President
Lea McLeod Matthews Louis E. Pauls, Jr. Teresa E. Axelson, Vice President and Secretary
Shannon L. Moody
</TABLE>
INVESTMENT ADVISOR AND MANAGER UNDERWRITER AND REDEMPTION AGENT
Securities Management and Research, Inc. Securities Management and Research,
Inc.
One Moody Plaza One Moody Plaza
Galveston, Texas 77550 Galveston, Texas 77550
CUSTODIAN TRANSFER AGENT, REGISTRAR AND DIVIDEND PAYING AGENT
Securities Management and Research, Inc. Securities Management and Research,
Inc.
One Moody Plaza One Moody Plaza
Galveston, Texas 77550 Galveston, Texas 77550
LEGAL COUNSEL INDEPENDENT AUDITORS
Greer, Herz & Adams, L.L.P. KPMG Peat Marwick LLP
One Moody Plaza 700 Louisiana
Galveston, Texas 77550 Houston, Texas 77002
- --------------------------------------------------------------------------------
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. SHARES OF THE FUND
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK.
FURTHER, SHARES OF THE FUND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND 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.
Information contained in this Prospectus should be read carefully by a
prospective investor before an investment is made. Additional information about
the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information dated December 29, 1995 which information is
incorporated herein by reference and is available without charge upon written
request to Securities Management and Research, Inc. ("SM&R"), One Moody Plaza,
14th Floor, Galveston, Texas 77550, or by phoning Toll Free 1-800-231-4639 or
1-409-763-8272.
This Prospectus contains information about the SM&R Capital Funds, Inc. (the
"Fund") a diversified, open-end management investment company consisting of
three separate series ("Series") each of which has its own investment objective
designed to meet different investment goals. These investment objectives and
suitability are further described under "The Fund at a Glance" and "Investment
Objectives and Policies". For investment purposes, each Series is a separate
fund and a separate series of capital securities is issued for each Series.
1
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TABLE OF CONTENTS
<TABLE>
<S> <C>
THE FUND AT A GLANCE...................................................... 2
TABLE OF FEES AND EXPENSES................................................ 4
FINANCIAL HIGHLIGHTS...................................................... 5
PERFORMANCE............................................................... 8
INVESTMENT OBJECTIVES AND POLICIES........................................ 8
Government Income Series................................................ 8
Primary Series.......................................................... 10
Tax Free Series......................................................... 11
ADDITIONAL INVESTMENT POLICIES AND TECHNIQUES............................. 13
THE FUND AND ITS MANAGEMENT............................................... 14
PURCHASE OF SHARES........................................................ 16
WHEN ARE PURCHASES EFFECTIVE?............................................. 16
APPLICATIONS
DETERMINATION OF OFFERING PRICE........................................... 17
SPECIAL PURCHASE PLANS.................................................... 19
RETIREMENT PLANS.......................................................... 21
DIVIDENDS AND DISTRIBUTIONS............................................... 21
TAXES..................................................................... 21
HOW TO REDEEM............................................................. 23
OTHER INFORMATION CONCERNING THE FUND..................................... 25
APPENDIX.................................................................. 27
</TABLE>
THE FUND AT A GLANCE
SM&R Capital Funds, Inc. (the "Fund") was incorporated under the laws of
Maryland on November 6, 1991. The Fund offers three separate Series each of
which pursues unique investment objectives. The investment objectives and
investor suitability profile of each Series are as follows:
AMERICAN NATIONAL GOVERNMENT INCOME FUND SERIES ("GOVERNMENT INCOME SERIES")
OBJECTIVE: To provide a high level of current income, liquidity and safety of
principal consistent with prudent investment risks through investment in a
portfolio consisting primarily of securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
INVESTOR SUITABILITY PROFILE: The Government Income Series is for the investor
desiring the security of investing primarily in the strength and stability of
the U.S. Government, its agencies or instrumentalities in order to meet their
current needs. However, an investor should keep in mind the Series may invest in
other instruments in order to meet it's objectives.
AMERICAN NATIONAL PRIMARY FUND SERIES ("PRIMARY SERIES")
OBJECTIVE: To seek maximum current income consistent with capital preservation
and liquidity through investment primarily in commercial paper.
INVESTOR SUITABILITY PROFILE: The Primary Series is for the fixed income
investor who desires minimal investment risk yet is looking to move cautiously
into the investment arena.
AMERICAN NATIONAL TAX FREE FUND SERIES ("TAX FREE SERIES")
OBJECTIVE: To provide as high a level of interest income largely exempt from
federal income taxes as is consistent with preservation of capital through
investment of at least 80% of its net assets in tax-exempt securities during
normal market conditions.
INVESTOR SUITABILITY PROFILE: The Tax Free Series is for the investor desiring
income exempt from federal income tax and, under certain conditions, exempt from
state and local taxes based on his tax bracket. An investor must keep in mind
that income may be subject to the Alternative Minimum Tax (AMT) under certain
conditions.
2
<PAGE>
Each Series is, for investment purposes, in effect a separate investment fund,
and a separate class of capital stock is issued for each. In other respects, the
Fund is treated as one entity. Each share of capital stock issued with respect
to a Series represents a pro-rata interest in the assets of that Series and has
no interest in the assets of any other Series. Each Series bears its own
liabilities. An investor should keep in mind that investments in the Primary
Series are not insured or guaranteed by the U.S. Government.
PORTFOLIO TURNOVER RATES: Turnover rates since inception of each Series can be
found on pages 5, 6 and 7. Each of the Series do not expect their portfolio
turnover rates to exceed eighty percent (80%). An explanation of turnover rate
calculations and brokerage fees can be found in the Fund's Statement of
Additional Information.
MANAGEMENT: Securities Management and Research, Inc. ("SM&R") makes the
investment choices for the Fund. SM&R has served as adviser and distributor to
mutual funds since 1966. Refer to THE FUND AND ITS MANAGEMENT for additional
information.
PORTFOLIO MANAGEMENT PERSONAL INVESTING: The Fund's Board of Directors has
approved a Code of Ethics which prescribes policies relative to the personal
investment practices of its portfolio management. These policies are stated in
the Fund's Statement of Additional Information.
PURCHASING SHARES: Shares of the Government Income Series and the Tax Free
Series are offered at their respective net asset value plus a sales charge of
4.5% of the public offering price which is reduced on purchases of $100,000 or
more. Shares of the Primary Series are offered at net asset value. The
Government Income Series and Tax Free Series minimum initial and subsequent
investments are $100 and $20, respectively. The Primary Series' minimum initial
and subsequent investments are $1,000 and $100, respectively. See "SPECIAL
PURCHASE PLANS" and "PURCHASE OF SHARES".
REDEMPTIONS: Information on redeeming shares can be found under the heading
"HOW TO REDEEM".
The Fund does not do business in or with any person or group of persons located
in South Africa as of the date of this Prospectus. Investors may contact the
California Secretary of State by writing to the following address for current
information regarding the business activity of corporations with South Africa.
The address and phone number is: South Africa Business Notice, California
Secretary of State, 1230 J Street, Room 100, Sacramento, California 93814 or
call (916) 327-6427.
3
<PAGE>
TABLE OF FEES AND EXPENSES
- --------------------------------------------------------------------------------
The purpose of the following table is to assist an investor in understanding the
various costs and expenses that an investor will bear directly or indirectly.
The fees and expenses are based on the average net assets of each Series of the
Fund for the fiscal year ended August 31, 1995. Total operating expenses have
been adjusted to reflect current expense reimbursement levels. If there were no
fee waivers or expense reimbursements, management fees, service fees and other
expenses, respectively, would have been .50%, .25%, and .31% with respect to the
Government Income Series, .50%, .25%, and .46% with respect to the Primary
Series, and .50%, .25%, and .50% with respect to the Tax Free Series for the
periods ended August 31, 1995.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Government Primary Tax Free
Income Series Series Series
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None 4.50%
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price) None None None
Deferred Sales Load None None None
Redemption Fees* None None None
Exchange Fees None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(As a Percentage of Average Net Assets)
<TABLE>
<CAPTION>
Government Primary Tax Free
Income Series Series Series
<S> <C> <C> <C>
Management Fee, After Expense
Reimbursement 0.44%** 0.13%** 0.00%**
Service Fee 0.25% 0.25% 0.00%**
Other Expenses After Expense
Reimbursement 0.31% 0.46% 0.00%**
Total Fund Operating Expense After
Expense Reimbursement 1.00%** 0.84%** 0.00%**
</TABLE>
*An $8.00 transaction fee is charged for each expedited wire redemption.
**After fee waivers or expense reimbursements.
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 series 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 the Prospectus.
EXAMPLE OF EXPENSES
The following example illustrates the expenses an investor would pay on a
$1,000 investment in each series over various time periods, assuming (1) 5%
annual return and (2) redemption at the end of each period. Because the Series
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>
Government Income
Series $55 $75 $98 $162
Primary Series 8 25 44 98
Tax Free Series 45 45 45 45
</TABLE>
4
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each period)
GOVERNMENT INCOME SERIES
The table that follows has been audited by KPMG Peat Marwick LLP, independent
auditors, whose unqualified report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with the
related financial statements and notes thereto included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
March 16, 1992
(date
operations
commenced) thru
Year Ended August 31 August 31
-------------------------- ---------------
1995 1994 1993 1992
------ ------ ------ ---------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.07 $10.87 $10.56 $10.00
Investment income from
investment operations
Net investment income 0.70 0.54 0.50 0.25
Net realized and
unrealized gain
(loss) on
investments during
the period 0.44 (0.79) 0.49 0.55
------ ------ ------ -------
TOTAL FROM
INVESTMENT
OPERATIONS 1.14 (0.25) 0.99 0.80
------ ------ ------ -------
Less Distributions
Distributions from
net investment
income (0.70) (0.55) (0.50) (0.24)
Distributions from
capital gains 0.00 0.00 (0.18) 0.00
------ ------ ------ -------
TOTAL DISTRIBUTIONS (0.70) (0.55) (0.68) (0.24)
------ ------ ------ -------
Net Asset Value End of
period $10.51 $10.07 $10.87 $10.56
------ ------ ------ -------
------ ------ ------ -------
TOTAL RETURN 11.85% (2.41)% 10.23% 7.96%**
------ ------ ------ -------
------ ------ ------ -------
</TABLE>
RATIOS/SUPPLEMENTAL DATA
<TABLE>
<S> <C> <C> <C> <C>
Net Assets, End of Period
(000's omitted) $20,466 $19,790 $19,783 $12,529
Ratio of Expenses to average
net assets 0.70%(1) 1.12% 1.07% 1.00%*
Ratio of Net investment income
to average net assets 6.90% 5.11% 5.07% 4.82%*
Portfolio turnover rate 2.20% 45.48% 18.14% 49.70%
</TABLE>
*Ratios annualized
**Amounts are not annualized.
(1) Expenses for the calculation are net of a reimbursement from Securities
Management and Research, Inc. Without this reimbursement, the ratio of expenses
to average net assets would have been 1.06% for the year ended August 31, 1995.
5
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each period)
PRIMARY SERIES
The table below has been audited by KPMG Peat Marwick LLP, independent
auditors, whose unqualified report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with the
related financial statements and notes thereto included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
March 16, 1992
(date
operations
commenced) thru
Year Ended August 31, August 31
-------------------------- ---------------
1995 1994 1993 1992
------ ------ ------ ---------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Investment income from
investment operations
Net investment
income 0.05 0.03 0.02 0.015
------ ------ ------ -------
TOTAL FROM
INVESTMENT
OPERATIONS 0.05 0.03 0.02 0.015
------ ------ ------ -------
Less Distributions
Dividends from net
investment income (0.05) (0.03) (0.02) (0.015)
------ ------ ------ -------
Net Asset Value End of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ -------
------ ------ ------ -------
TOTAL RETURN 5.01% 2.91% 2.59% 1.50%**
------ ------ ------ -------
------ ------ ------ -------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000's
omitted) $20,984 $15,208 $15,539 $12,432
Ratio of Expenses to
average net
assets(1) 0.84% 0.79% 0.85% 0.70%*
Ratio of Net
investment income
to average net
assets 4.91% 2.88% 2.47% 2.99%*
Portfolio turnover
rate(2) 0.00% 0.00% 0.00% 0.00%
</TABLE>
* Ratios annualized
** Amounts are not annualized
(1) Expenses for the calculation are net of a reimbursement from Securities
Management and Research, Inc. Without this reimbursement the ratio of expenses
to average net assets would have been 1.21%, 1.20%, 1.23% and 1.04% (annualized)
for the years ended August 31, 1995, 1994, 1993 and the period ended August 31,
1992, respectively.
(2) The Primary Series experienced no portfolio turnover because the
majority of securities held during such periods had maturities of one year or
less at the time of acquisition.
6
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each period)
TAX FREE SERIES
The table below has been audited by KPMG Peat Marwick LLP, independent
auditors, whose unqualified report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with the
related financial statements and notes thereto included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
September 9, 1993
(date operations
Year Ended commenced) thru
August 31 August 31
---------- -----------------
1995 1994
---------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 9.62 $10.00
Investment income from investment operations
Net investment income 0.51 0.24
---------- -------
Net realized and unrealized gain (loss) on investments
during the period 0.33 (0.38)
---------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.84 (0.14)
---------- -------
Less Distributions
Dividends from net investment income (0.51) (0.24)
---------- -------
Net Asset Value End of Period $ 9.95 $ 9.62
---------- -------
---------- -------
TOTAL RETURN 9.15% (1.49%)*
---------- -------
---------- -------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) $8,399 $7,259
Ratio of Expenses to average net assets -- (1) 1.11%*
Ratio of Net investment income to average net assets 5.43% 2.50%*
Portfolio turnover rate 12.63% 16.49%
</TABLE>
* Ratios annualized
(1) Expenses for the calculation are net of a reimbursement from Securities
Management and Research, Inc. Without this reimbursement, the ratio of expenses
to average net assets would have been 1.25% for the year ended August 31, 1995.
7
<PAGE>
PERFORMANCE
Each Series' performance may be quoted in advertising in terms of yield or
total return. All advertisements will disclose the maximum sales charge to which
investments in shares of each Series may be subject. If any advertised
performance data does not reflect the maximum sales charge (if any), such
advertisement 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. See the Statement of Additional Information
for further details concerning performance comparisons used in advertisements by
each Series. Further information regarding each Series' performance is contained
in the Fund's Annual Report to shareholders which is available upon request and
without charge. An investor should keep in mind when reviewing performance that
past performance of a fund is not indicative of future results, but is an
indication of the return to the investor only for the limited historical period.
Standardized total return for shares of a Series reflects the deduction of the
maximum initial sales charge at the time of purchase. A Series' total return
shows it's overall change in value, including changes in share price and
assuming all the Series' dividends and capital gain distributions are reinvested
and that all charges and expenses are deducted. A cumulative total return
reflects a Series performance over a stated period of time. An average annual
total return reflects the hypothetical annually compounded return that would
have produced the same cumulative total return if the Series performance had
been constant over the entire period. Because average annual returns tend to
even out variations in a Series' return, investors should recognize that such
returns are not the same as actual year-by-year results. To illustrate the
components of overall performance, a Series may separate its cumulative and
average annual returns into income results and capital gain or loss. The average
annual total return for the twelve month period ending August 31, 1995 and from
inception to June 30, 1995 for the Government Income Fund was 6.86% and 6.32%,
respectively; the Primary Fund was 5.01% and 3.39%, respectively; and the Tax
Free Fund was 4.27% and .23%, respectively.
A Series' performance is a function of its portfolio management in selecting
the type and quality of portfolio securities and is affected by operating
expenses of the Series and market conditions. A shareholder's investment in a
Series is not insured or guaranteed. These factors should be carefully
considered by the investor before making any investment in any Series.
INVESTMENT OBJECTIVES AND POLICIES
Each Series of the Fund pursues its own investment objective 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 Fund without the approval of the shareholders. In addition, the Fund has
adopted certain restrictions as fundamental policies for each Series of the
Fund, which may not be changed without shareholder approval. (See the Fund's
Statement of Additional Information for a description of the investment
restrictions adopted as fundamental policies). Since each Series has a different
investment objective, each can be expected to have different investment results
and incur different market and financial risks. The Fund may in the future
establish other series with different investment objectives.
Because of the market risks inherent in any investment, attainment of each
Series' investment objective cannot be assured. In addition, effective
management of each Series is subject to general economic conditions and to the
ability and investment techniques of management. The net asset value of each
Series' shares will vary and the redemption value of shares owned may be either
higher or lower than the shareholder's cost.
GOVERNMENT INCOME SERIES
The Government Income Series seeks to achieve its objectives through
investment of 65% of its total assets in securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities ("U.S. Government
Obligations") which include, but are not limited to, U.S. Treasury Bonds, Notes
and Bills and securities issued by instrumentalities of the U.S. Government.
There are two broad categories of U.S. Government Obligations; (1) direct
obligations of the U.S. Treasury and (2) obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government. Some obligations issued or
guaranteed by
8
<PAGE>
agencies or instrumentalities of the U.S. Government are backed by the full
faith and credit of the United States (such as Government National Mortgage
Association Certificates) and others are backed exclusively by the agency or
instrumentality with limited rights of the issuer to borrow from the U.S.
Treasury (such as Federal National Mortgage Association Bonds). No assurance can
be given that the U.S. Government would lend money to or otherwise provide
financial support to U.S. Government sponsored instrumentalities as it is not
obligated by law to do so.
MORTGAGE-BACKED SECURITIES--It is anticipated that a substantial portion of the
Government Income Series' portfolio will consist of mortgage-backed securities
("Mortgage-Backed Securities") issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. These securities represent part ownership of
pools of mortgage loans secured by real property, such as certificates issued by
the Government National Mortgage Association ("GNMA" or "Ginnie Mae"), the
Federal National Mortgage Association ("FNMA" or "Fannie Mae") and the Federal
Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac"). Mortgage-Backed
Securities also include mortgage pass-through certificates representing
participation interests in pools of mortgage loans originated by the U.S.
Government and guaranteed by U.S. Government agencies such as GNMA, FNMA or
FHLMC. Such certificates, which are ownership interests in the underlying
mortgage loans, differ from conventional debt securities which provide for
periodic payment of interest in fixed amounts and principal payments at maturity
or on specified dates. Pass-through certificates, both principal and interest
payments, including prepayments, are passed through to the holder of the
certificate and provide for monthly payments of interest and principal. GNMA, a
federal agency, issues pass-through certificates that are guaranteed as to
timely payment of principal and interest. FNMA, a federally chartered and
privately owned corporation, issues mortgage pass-through securities and
guarantees them as to timely payment of principal and interest. FHLMC, a
corporate instrumentality of the United States, issues participation
certificates that represent an interest in mortgages from FHLMC's portfolio.
FHLMC guarantees the timely payment of interest and the ultimate collection of
principal. FNMA and FHLMC are not backed by the full faith and credit of the
United States, although FNMA and FHLMC are authorized to borrow from the U.S.
Treasury to meet their obligations. Those mentioned are but a few of the
Mortgage-Backed Securities currently available. The Government Income Series
will not purchase interest-only or principal-only mortgage-backed securities.
The yield characteristics of Mortgage-Backed Securities differ from
traditional debt securities. Among the major differences are that interest and
principal payments are made more frequently, usually monthly, and that principal
may be prepaid at any time because the underlying mortgage loans generally may
be prepaid at any time. The average mortgage in a pool may be expected to be
repaid within about twelve (12) years. If mortgage interest rates decrease, the
value of the Fund's securities will generally increase, however, it is
anticipated that the average life of the mortgages in the pool will decrease as
borrowers refinance and prepay mortgages to take advantage of lower interest
rates. The proceeds to the Fund from such prepayments will have to be invested
at the then prevailing lower interest rates. On the other hand, if interest
rates increase, the value of the Fund's securities generally will decrease while
it is anticipated that borrowers will not refinance and, therefore, the average
life of the mortgages in the pool will be longer. In addition, if the Government
Income Series purchases such a security at a premium, a prepayment rate faster
than expected will reduce yield to maturity, while a prepayment rate slower than
expected will have the opposite effect of increasing yield to maturity.
Conversely, if the Government Income Series purchases these securities at a
discount, faster than expected prepayments will increase yield to maturity,
while slower than expected prepayments will reduce yield to maturity.
COLLATERALIZED MORTGAGE OBLIGATIONS--The Government Income Series 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 Government Income Series 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
9
<PAGE>
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 lengthening 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. A more complete description of CMOs is
contained in the Statement of Additional Information.
The Government Income Series may also invest in parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. PAC
Bonds generally require payments of a specified amount of principal on each
payment date. PAC Bonds are always parallel pay CMOs with the required principal
payment on such securities having the highest priority after interest has been
paid to all classes.
ZERO COUPON BONDS--The Government Income Series may invest in zero coupon bonds,
which are debt obligations issued or purchased at a significant discount from
face value. The Government Income Series will only purchase zero coupon bonds
which are U.S. Government Obligations. The discount approximates the total
amount of interest the bonds will accrue and compound over the period until
maturity or the first interest payment date at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon bonds do not
entitle the holder to any periodic payments of interest prior to maturity. Its
value as an investment consists of the difference between its face value at the
time of maturity and the price for which it was acquired which is generally an
amount significantly less than face value (sometimes referred to as a "deep
discount" price). Zero coupon bonds require a higher rate of return to attract
investors who are willing to defer receipt of cash. Accordingly, although not
providing current income, SM&R believes that zero coupon bonds can be
effectively used to lock in a higher rate of return in a declining interest
environment. Such investments may experience greater volatility in market value
than debt obligations which make regular payments of interest. The Series will
accrue income on such investments for tax and accounting purposes, as required,
which is distributable to shareholders and which, because no cash is received at
the time of accrual, may require the liquidation of other portfolio securities
to satisfy the Series' distribution obligations.
OTHER INVESTMENTS--The Government Income Series shall also invest in commercial
paper, certificates of deposit and repurchase agreements of the same type and
rating as the Primary Series may invest (See "PRIMARY SERIES").
PRIMARY SERIES
The Primary Series seeks to achieve its objective by investing primarily in
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 Primary Series will invest only 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
("NRSROs")(See the "Appendix" hereto for information about such ratings and such
rating organizations).
OTHER INVESTMENTS--The Primary Series may invest in (i) U. S. Government
Obligations (Refer to the "GOVERNMENT INCOME SERIES" above for an explanation of
U. S. Government Obligations); (ii) other corporate obligations, such as bonds,
debentures or notes maturing in five (5) years or less at the time of purchase
which at the date of the investment are rated "A" or higher by an NRSRO; and
(iii) negotiable certificates of deposit of banks (including U. S. dollar
denominated obligations of foreign branches of U. S. banks and U. S. branches of
foreign banks and savings and loan associations and banker's acceptances of U.
S. banks which banks and savings and loan associations have total assets at the
date of investment (as of the date of their most recent published financial
statements) of at least $1 billion (See "INVESTMENT OBJECTIVES AND POLICIES",
"Certificates of Deposit" in the Statement of Additional Information for a
description of the securities) and (iv) repurchase agreements with respect to
any type of instrument in
10
<PAGE>
which the Primary Series is authorized to invest even though the underlying
instrument may mature in more than two (2) years. (See "Repurchase Agreements"
heading.) Obligations of foreign branches of U.S. banks are subject to somewhat
different risk than those of domestic banks. These risks include foreign
economic and political developments, foreign governmental restrictions which may
adversely effect payment of principal and interest on the obligations, foreign
withholding and other taxes on interest income, and difficulties in obtaining
and enforcing a judgement against a foreign branch of a domestic bank. In
addition, different risks may result from the fact that foreign branches of U.S.
banks and U.S. branches of foreign banks are not necessarily subject to the same
or similar regulatory requirements that apply to domestic banks. For instance,
such branches may not be subject to the types of requirements imposed on
domestic banks with respect to mandatory reserves, loan limitations,
examinations, accounting, auditing, record keeping and the public availability
of information. Such obligations are not traded on any national securities
exchange. While the Primary Series does not presently invest in obligations of
foreign branches of U.S. banks, it may do so in the future. Investments in such
obligations will not be made in excess of 5% of the Primary Series' total assets
and will be made only when SM&R believes the risks described above are minimal.
TAX FREE SERIES
The Tax Free Series, as a matter of fundamental policy, will seek to achieve
its objective by investing at least 80% of the value of its net assets in
municipal securities the interest on which is exempt from federal income taxes.
The Tax Free Series has no restrictions on the maturity of municipal
securities in which it may invest. Accordingly, it will seek to invest in
municipal securities of such maturities which, in the judgement of SM&R, the
adviser, will provide a high level of current income consistent with prudent
investment, with consideration given to market conditions.
The Tax Free Series will invest, without percentage limitations, in municipal
securities having at the time of purchase one of the four highest municipal
ratings by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Corporation ("S&P") or Fitch Investors Service in securities which are not
rated, provided that, in the opinion of the adviser, such securities are
comparable in quality to those within the four highest ratings. The rating
agencies consider that bonds rated in the fourth highest category may have some
speculative characteristics and that changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. SM&R will only
purchase bonds rated in such fourth category if it is of the opinion that the
purchase of such bonds is consistent with the Tax Free Series' investment
objective. In the event the rating of an issue held by the Tax Free Series is
changed by the rating service, such change will be considered by the Tax Free
Series in its evaluation of the overall investment merits of that security but
such change will not necessarily result in an automatic sale of the security.
Any security held which is subsequently downgraded below BB by S&P or Ba by
Moody's will be sold as soon as it is advantageous to do so after the downgrade.
A description of the ratings may be found in the Appendix to this Prospectus.
Purchasing unrated municipal securities, which may be less liquid than
comparable rated municipal securities, involves somewhat greater risk and
consequently the Tax Free Series may not invest more than 20% of its net assets
in unrated municipal securities. To attempt to minimize the risk of such
investments SM&R will, prior to acquiring unrated securities, consider the terms
of the offering and various other factors to determine the issuers comparative
credit rating and whether the securities are consistent with the Tax Free
Series' investment objective and policies. In making such determinations SM&R
will typically (a) interview representatives of the issuer at the issuer's
offices, conduct a tour and inspection of the physical facilities of the issuer
in an effort to evaluate the issuer and its operations, (b) perform an analysis
of the issuer's financial and credit position, including comparisons of all
appropriate ratios, and (c) compare other similar securities offerings to the
issuer's proposed offering.
During normal market conditions, the Tax Free Series will have at least 80% of
its net assets invested in municipal securities the income of which is fully
exempt from federal income taxation. Furthermore, under normal market conditions
up to 20% of the Tax Free Series' net assets, and up to 50% of its net assets as
a temporary defensive measure during abnormal market conditions, may be invested
in
11
<PAGE>
the following types of taxable fixed income obligations: (1) obligations issued
or guaranteed by the U.S. Government, its agencies, instrumentalities or
authorities (Refer to "GOVERNMENT INCOME SERIES" above for an explanation of
U.S. Government obligations); (2) corporate debt securities which at the date of
the investment are rated A or higher by Moody's or by S&P; (3) commercial paper
which at the date of the investment is rated in one of the two top categories by
Moody's or by S&P or if not rated, is issued by a company which at the date of
the investment has an outstanding debt issue rated A or higher by Moody's or A
or higher by S&P; (4) certificates of deposit issued by U.S. banks which at the
date of the investment have capital surplus and undivided profits of $1 billion
as of the date of their most recently published financial statements; and (5)
repurchase agreements secured by U.S. Government securities, provided that no
more than 15% of the Series' net assets will be invested in illiquid securities
including repurchase agreements with maturities in excess of seven days. To the
extent income dividends include income from taxable sources, a portion of a
shareholder's dividend income may be taxable. (See "DIVIDENDS AND
DISTRIBUTIONS").
MUNICIPAL SECURITIES
The term "municipal securities," as used in this Prospectus means obligations
issued by or on behalf of states, territories and possessions of the U.S. and
the District of Columbia and their political subdivisions, agencies, and
instrumentalities, the interest on which is exempt from federal income tax. An
opinion as to the tax-exempt status of a municipal security generally is
rendered to the issuer by the issuer's counsel at the time of issuance of the
security.
Municipal securities are used to raise money for various public purposes such
as constructing public facilities and making loans to public institutions.
Certain types of municipal bonds are issued to obtain funding for privately
operated facilities. Further information on the maturity and funding
classifications of municipal securities is included in the Statement of
Additional Information.
Yields on municipal securities vary, depending on a variety of factors,
including the general condition of the financial markets and of the municipal
securities market, the size of a particular offering, the maturity of the
obligation and the credit rating of the issuer. Like other interest-bearing
securities, the value of municipal securities changes as interest rates
fluctuate. For example, if interest rates increase from the time a security is
purchased, if sold, the security may be at a price less than its purchase cost.
Conversely, if interest rates decline from the time a security is purchased, if
sold, the security may be sold at a price greater than its purchase cost.
Generally, municipal securities of longer maturities produce higher current
yields than municipal securities with shorter maturities but are subject to
greater price fluctuation due to changes in interest rates, tax laws and other
general market factors. Lower-rated municipal securities generally produce a
higher yield with shorter maturities than higher-rated municipal securities due
to the perception of a greater degree of risk as to the ability of the issuer to
pay principal and interest.
The Tax Free Series may purchase municipal bonds for which the payments of
principal and interest are secured by an escrow account of securities backed by
the full faith and credit of the U.S. Government ("defeased") and municipal
securities whose principal and interest payments are insured by a commercial
insurance company as long as the underlying credit is investment grade (BBB or
better by S&P and Fitch and Baa or better by Moody's) ("insured"). The Tax Free
Series may also purchase unrated securities of issuers which the adviser
believes would have been rated BBB or Baa had the issuer requested a rating from
S&P, Fitch or Moody's. Such implied investment grade rating will be determined
by the adviser upon its performance of a credit analysis of the issue and the
issuer. Such credit analysis may consist of a review of such items as the
issuer's debt characteristics, financial information, structure of the issue,
liquidity of the issue, quality of the issuer, current economic climate,
financial adviser and underwriter. Insured and defeased bonds are further
described in the Statement of Additional Information. In general, these types of
municipal securities will not be treated as an obligation of the original
municipality for purposes of determining industry concentration.
OTHER INVESTMENTS--The Tax Free Series may purchase "floating rate" and
"variable rate" obligations. These obligations bear interest at rates that are
not fixed, but vary with changes in specified market rates or indices on
pre-designated dates. See the Statement of Additional Information for details of
these types of investments.
12
<PAGE>
The Series may purchase and sell municipal securities on a "when-issued" and
"delayed-delivery" basis (See "ADDITIONAL INVESTMENT POLICIES AND
TECHNIQUES--When Issued and Delayed Delivery Purchases" below). Zero coupon
bonds may also be purchased as part of the Tax Free Series portfolio and are
explained above under the Government Income Series.
ADDITIONAL INVESTMENT POLICIES AND TECHNIQUES
The following policies and techniques are available to one or more of the
Series:
LENDING OF SECURITIES. In order to increase the return on its investment, the
Government Income Series may lend portfolio securities to broker-dealers and
other financial institutions in amounts up to 10% of the value of the net assets
of such series. Loans of portfolio securities will always be collateralized by
cash to at least 102% of the market value of the securities loaned including
accrued interest and will be made to borrowers deemed by the adviser to be
creditworthy. Lending portfolio securities involves risk of delay in the
recovery of the loaned securities and in some cases the loss of rights in the
collateral should the borrower fail financially (See the Statement of Additional
Information).
WHEN-ISSUED AND DELAYED DELIVERY PURCHASES. The Government Income Series and Tax
Free Series may purchase and sell portfolio securities on a "when-issued" and
"delayed delivery" basis. No income accrues in connection with such transactions
prior to actual delivery of such securities. These transactions are subject to
market fluctuation; the value of the securities at delivery may be more or less
than their purchase price, and yields generally available on comparable
securities when delivery occurs may be higher than yields on the securities
obtained pursuant to such transactions. While awaiting delivery of the
securities purchased on a when-issued and delayed delivery basis, the Series
will hold in a segregated account cash, short-term money market instruments,
high quality debt securities or portfolio securities sufficient to cover any
commitment or limit any potential risk. (See "When Issued and Delayed Delivery
Transactions" in the Statement of Additional Information).
REPURCHASE AGREEMENTS. Each Series may occasionally enter into repurchase
agreements. Under a repurchase agreement, a series will acquire and hold an
obligation (government security, certificate of deposit, or banker's acceptance)
for not more than seven days, subject to the agreement by the seller (a Federal
Reserve System member bank or a registered securities dealer) to repurchase the
obligation at an agreed upon repurchase price and date, thereby determining the
yield during the Series' holding period. During the holding period, the seller
must provide additional collateral if the market value of the obligation falls
below the repurchase price. Refer to the Statement of Additional Information for
a further explanation.
ILLIQUID SECURITIES. Each of the Series may invest up to 15% of its net assets
in illiquid securities, including foreign securities not listed on foreign or
domestic exchanges and repurchase agreements maturing in excess of seven days.
RISK FACTORS. The risk inherent in investing in any series of the Fund is that
common to any security, that the value of its shares will fluctuate in response
to changes in economic conditions, interest rates and the market's perception of
the underlying portfolio securities held by each series of the Fund. Market
prices of the securities in which a Series invests will fluctuate and will tend
to vary inversely with changes in prevailing interest rates. If interest rates
increase from the time a security is purchased, such security, if sold, might be
sold at a price less than its purchase cost. Conversely, if interest rates
decline from the time a security is purchased, such security, if sold, might be
sold at a price greater than its purchase cost. Substantial redemptions could
require a Series to sell portfolio securities at a time when a sale might not be
favorable.
Investments in U.S. Government obligations are not all backed by the "full
faith and credit" of the United States Government. Some are backed only by the
rights of the issuer to borrow from the U.S. Treasury and others are supported
only by the credit of the issuing instrumentality. No assurance can be given
that the U.S. Government would lend money to or otherwise provide financial
support to U.S. Government sponsored instrumentalities as it is not obligated by
law to do so. 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 it is satisfied
that the credit risk with respect thereto is minimal.
The Primary Series, consistent with its investment objective, will attempt to
maximize yield by trying to
13
<PAGE>
take advantage of changing conditions and trends. It may also attempt to take
advantage of what are believed to be disparities in yield relationships between
different instruments. This procedure may increase or decrease the portfolio
yield depending upon the Primary Series' ability to correctly time and execute
such transactions. Although the Primary Series' assets will be invested in
securities with short maturities, the Primary Series will manage its portfolio
as described above. (See "PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION" in
the Statement of Additional Information.)
The Tax Free Series' ability to achieve its objective depends partially on the
prompt payment by issuers of the interest on and principal of the municipal
securities held. A moratorium, default or other non-payment of interest or
principal when due could, in addition to affecting the market value and
liquidity of the particular security, affect the market value and liquidity of
the other municipal securities held. Additionally, the market for municipal
securities is often thin and can be temporarily affected by large purchases and
sales. As a result, the Tax Free Series will attempt to minimize risk by
diversifying its investments by investing no more than 5% of its net assets in
the securities of any one issuer (limitation does not apply to investments
issued or guaranteed by the U.S. Government or its instrumentalities) and by
investing no more than 25% of its net assets in municipal securities issued in
any one state or territory. Each political subdivision, agency, instrumentality
and each multi-state agency of which a state is a member will be regarded as a
separate issuer for the purpose of determining diversification.
THE FUND AND ITS MANAGEMENT
A Board consisting of seven directors has overall responsibility for
overseeing the affairs of the Fund in a manner reasonably believed to be in the
best interest of the Fund. The Board has delegated to SM&R, the adviser, the
management of the Fund's day-to-day business and affairs. In addition, SM&R
invests the Fund's assets, provides administrative services and serves as
transfer agent, dividend paying 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 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 three other registered investment companies, the
American National Growth Fund, Inc., American National Income Fund, Inc., and
the Triflex Fund, Inc. (collectively, the "American National Funds Group"). SM&R
also serves as investment adviser to the American National Investment Accounts,
Inc., an investment company used to fund benefits under contracts issued by
American National 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 employee benefit plans, other investment companies, banks,
foundations and endowment funds.
The following persons are officers of both SM&R and the Fund: Michael W.
McCroskey, Vera M. Young, Emerson V. Unger, Teresa E. Axelson and Brenda T.
Koelemay.
PORTFOLIO MANAGEMENT
While the following individuals are primarily responsible for the day-to-day
portfolio management of their respective Series, 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 polices.
Vera M. Young, Vice President of Securities Management and Research, Inc.,
Vice President, Portfolio Manager of the Primary Series. Ms. Young has served as
Portfolio Manager of the Primary Series since its inception. She also serves as
Portfolio Manager of the American National Investment Accounts, Inc.--Money
Market Portfolio, a series mutual fund used exclusively for variable contracts
issued by American National. She also serves as Assistant Vice President,
Securities for American National. Ms. Young has been managing fixed income
investments for American National since 1964 and has served as portfolio manager
for various funds for over ten years.
Terry E. Frank, Vice President, Portfolio Manager of the Government Income
Series and Tax Free Series. Ms. Frank has served as Portfolio Manager of the
Government Income Series for two years and the Tax Free Series since its
inception. She joined SM&R's investment staff in 1990 and prior to that time she
held positions with American Capital Asset
14
<PAGE>
Management and Gibraltar Savings Association as a securities analyst and
Equitable Investment Services as a research analyst.
ADVISORY AGREEMENT
Under its Advisory Agreement with the Fund, SM&R receives the following
investment advisory fees:
GOVERNMENT INCOME SERIES AND TAX FREE SERIES-- A monthly investment advisory fee
computed by applying to the average daily net asset value of each Series each
month one-twelfth (1/12th) of the annual rate as follows:
<TABLE>
<CAPTION>
On the Portion of Each Series Investment Advisory
Average Daily Net Assets Fee Annual Rate
<S> <C>
Not exceeding $100,000,000 .50 of 1%
Exceeding $100,000,000 but not
exceeding $300,000,000 .45 of 1%
Exceeding $300,000,000 .40 of 1%
</TABLE>
PRIMARY SERIES--An investment advisory fee, computed and paid monthly, at the
annual rate of .50 of 1% of the Primary Series' average daily net asset value.
As compensation for its services, SM&R is paid an investment advisory fee,
which is calculated separately for each Series. SM&R received total advisory
fees from the Government Income Series, Primary Series and Tax Free Series for
the fiscal year ended August 31, 1995 which represented 0.14%, 0.13% and 0.00%,
respectively, of each Series average daily net assets. The ratio of total
expenses to average net assets for each Series can be found on pages 5, 6 and 7.
ADMINISTRATIVE SERVICE AGREEMENT
Under its Administrative Service Agreement with the Fund, SM&R receives a
management and administrative service fee from each Series which is computed by
applying to the aggregate average daily net asset value of each Series of the
Fund each month one-twelfth (1/12th) of the annual rate as follows:
<TABLE>
<CAPTION>
Administrative
On the Portion of the Series's Service Fee
Average Daily Net Assets Annual 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 to pay (or to reimburse each Series for) each Series' 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 such
Series' average daily net assets. SM&R received service fees of 0.25% for the
Government Income Series; 0.25% for the Primary Series and 0% for the Tax Free
Series for the fiscal year ended August 31, 1995 of each Series average daily
net assets.
FEE WAIVERS
In order to improve the yield and total return of any Series of the Fund, SM&R
may, from time to time, voluntarily waive or reduce all or any portion of its
advisory fee, administrative fee and/or assume certain or all expenses of any
Series of the Fund while retaining its ability to be reimbursed for such fees
prior to the end of the fiscal year. Fee waivers and/or reductions, other than
those stated in the Administrative Service Agreement, may be rescinded by SM&R
at any time without notice to investors. Effective September 1, 1995, SM&R has
agreed to continue to waive advisory and administrative service fees and/or
reimburse expenses incurred by the Fund's Series to the extent that total
expenses exceed average daily net assets as follows: Primary Series--.80%
through August 31, 1996; Government Income Series--1.00% through February 29,
1996; and Tax Free Series--100% through February 29, 1996.
For additional information about the expenses of the Fund, see the Statement
of Additional Information.
15
<PAGE>
PURCHASE OF SHARES
Shares of each Series of the Fund may be purchased from registered
representatives of SM&R and certain other authorized broker-dealers. Such
purchases will be at the offering price (the "Offering Price") for such shares
determined as and when provided below. (See "DETERMINATION OF OFFERING PRICE" in
this Prospectus). A monthly confirmation will be sent to the investor. Initial
and subsequent purchases are to be sent directly to SM&R at the following
address:
Securities Management and Research, Inc.
One Moody Plaza, 14th Floor
Galveston, Texas 77550
Certificates are not normally issued for shares of each Series 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.
OPENING AN ACCOUNT: To purchase shares an investor must submit a fully
completed Application and Investor Suitability Form. Special forms are required
when establishing an IRA/SEP or 403(b) plan. Call the Shareholder Relations
Department (800) 231-4639 and request forms for establishing these plans.
SUBSEQUENT PURCHASES BY MAIL: Investors must include their name, the account
number and the name of the Fund being purchased.
PURCHASES BY WIRE: To ensure proper crediting of the investment, an investor
must have an executed Application and Investor Suitability Form on file with the
transfer agent. The investor may then wire his investment using the following
instructions:
The Moody National Bank of Galveston
2302 Postoffice Street
Galveston, Texas 77550
For the Account of Securities Management
and Research, Inc.
ABA 113100091, Wire Acct. #035 868 9
FBO Name of Fund / Fund Account Number
Investor's Name
If wires are received after 3:00 p.m. Central Time or during a bank holiday or
SM&R business holiday, purchases will be made at the price determined on the
next business day.
PURCHASE AMOUNTS. The minimum initial and subsequent purchase amounts is $100
and $20, respectively, for the Government Income and Tax Free Series' and $1,000
and $100, respectively, for the Primary Series (except as a part of certain
systematic investment programs, see "SPECIAL PURCHASE PLANS" for additional
information on reduction of the minimums). The Fund reserves the right to reject
any purchase.
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, on customary national business holidays, or on an SM&R holiday will be
effective upon and made at the Offering Price determined as of the close of the
Exchange on SM&R's next business day such Exchange is open for trading.
If payments for purchases are transmitted by bank wire to the Bank and
reported to SM&R prior to the close of the Exchange on any SM&R business day,
the investor will purchase at the Offering Price determined and become a
shareholder as of the close of the Exchange on that same day. Purchases by wire
payments reported by the Bank to SM&R after the close of the Exchange, on
customary national business holidays, 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 wires are available at any national
bank, or any state bank which is a member of the Federal Reserve System.
16
<PAGE>
TO BE COMPLETED FOR
AMERICAN NATIONAL PRIMARY SERIES ACCOUNTS ONLY (12/95)
<TABLE>
<S> <C>
REDEMPTION BY Primary Series Account
TELEPHONE OR No. ----------------------------------------------------------------------------------------------------------
WIRE
(Bank) / / I (we) hereby authorize American National Primary Series (the "Series") and SM&R (the "Transfer
Agent") to honor any telephonic or telegraphic instructions for redemption, without signature
guarantee, of any or all shares held in my (our) account, provided that the proceeds are transmitted
only to the bank account designated below. If the procedure for telephone redemption, as described in
the Prospectus, have been followed, neither the Series nor the Transfer Agent shall have any liability
to me (us) for acting upon such instructions regardless of the authority or absence thereof of the
person giving the instructions, and I (we) will indemnify and hold harmless the Series and the
Transfer Agent from and against all losses, claims, expenses and liabilities that may arise out of or
be in any way connected with a redemption of shares under the telephone redemption procedure, as
described in the prospectus.
(NOT AVAILABLE FOR TAX QUALIFIED PLANS)
------------------------------------------------------------------------------------------------------------
Name of Account at Bank Bank Account No.
------------------------------------------------------------------------------------------------------------
Name of Bank (including name of branch and bank's routing code) ABA/Routing No.
------------------------------------------------------------------------------------------------------------
Clearing Bank Information, if applicable (name of bank and ABA No.)
------------------------------------------------------------------------------------------------------------
Address of Bank City State Zip
( )
------------------------------------------------------------------------------------------------------------
Phone Number of Bank
TELEPHONE (SM&R) / / I (we) hereby authorize American National Primary Series (the "Series") and SM&R (the "Transfer
EXCHANGE Agent") to honor any telephonic or telegraphic instructions for redemption, without signature
BETWEEN FUNDS guarantee of any or all shares held in my (our) account, provided that the proceeds are transmitted
only to the account designated below. Neither the Series nor the Transfer Agent shall have any
liability to me (us) for acting upon such instructions regardless of the authority or absence
thereof of the person giving the instructions, and I (we) will indemnify and hold harmless the
Series and the Transfer Agent from and against all losses, claims, expenses, and liabilities that
may arise out of or be in any way connected with the redemption of shares under the telephone
redemption procedure, as described in the Prospectus.
-------------------------------------------------------------------------
Name of Fund Account Number
(Registration on accounts must be identical)
---------------------------------- ----------------------------------
Signature Owner Signature Joint Owner
CHECK WRITING / / I (we) hereby elect redemption by special check drawn against my (our) American National Primary Series
OPTION Account (minimum check $250). NOTE: WHEN ELECTING CHECK WITHDRAWAL, SIGN THE SIGNATURE CARD ON THE
Not Available APPROPRIATE SIGNATURE LINES ON THE SPECIAL CHECK WRITING OPTION SIGNATURE CARD BELOW.
for IRA, SEP, I (we) understand there is a fifteen (15) business day hold on all monies invested and no check will be
TSA honored prior to the proceeds being available.
</TABLE>
------------------------------------------------------------------------------
SPECIAL CHECK WRITING OPTION SIGNATURE CARD
AMERICAN NATIONAL PRIMARY SERIES ONLY
Account Number: _____________________ Date: ______________________________
- --------------------------------------------------------------------------------
Print or type name(s) of registered owner(s) of American National Primary Series
Account
All registered owner(s) of the Account named above must sign below. By signing
this card, the signatory(s) agree(s) to all the terms and conditions set forth
on the reverse hereof.
<TABLE>
<S> <C>
SIGNATURES SOCIAL SECURITY OR TAX I.D. NUMBER
- ------------------------------------------------- -------------------------------------------------
- ------------------------------------------------- -------------------------------------------------
- ------------------------------------------------- -------------------------------------------------
- ------------------------------------------------- -------------------------------------------------
</TABLE>
/ / Check here if both signatures are required on checks.
/ / Check here if only one signature is required on checks.
IF NO BOX IS CHECKED, BOTH SIGNATURES WILL BE REQUIRED.
If a Pension or Corporate account, indicate below how checks are to be printed.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
Form 9354
<PAGE>
TERMS AND CONDITIONS
1. REDEMPTION AUTHORIZATION: The Signatory(s) whose signature(s) appear on
the reverse side, intending to be legally bound, hereby agree each with the
other and with SM&R ("Transfer Agent") that the Transfer Agent is appointed
agent for such person(s) and, as such agent, is directed to redeem shares of the
Primary Series (the "Series") registered in the name of such Signatory(s) upon
receipt of, and in the amount of, checks drawn upon the above numbered account
and to deposit the proceeds of such redemptions in said account or otherwise
arrange for application of such proceeds to payments of said checks. The
Transfer Agent is expressly authorized to commingle such proceeds in this
account with the proceeds of the redemption of the shares of other stockholders
of the Series.
The Transfer Agent is expressly authorized to honor checks as redemption
instructions hereunder without requiring signature guarantees, and shall not be
liable for any loss or liability resulting from the absence of any such
guarantee. The Transfer Agent will arrange for the shareholder's checks to be
honored by Moody National Bank (the "Bank") for this purpose.
2. CHECK PAYMENT: The Signatory(s) authorize and direct the Transfer Agent
to have the Bank pay each check presented hereunder, subject to all laws and
Bank rules and regulations pertaining to checking accounts. In addition the
Signatory(s) agree(s) that:
(a) No check shall be issued or honored, or any redemption effected, in
an amount less than $250.
(b) No check shall be issued or honored, or redemption effected, for any
amounts represented by shares for which certificates have been issued.
(c) No check shall be issued or honored, or redemption effected, for any
amounts represented by shares unless payment for such shares has been made
in full and any checks given in such payment have been collected through
normal banking channels.
(d) Checks issued hereunder cannot be cashed over the counter at any
Bank; and
(e) Checks shall be subject to any further limitations set forth in the
Prospectus issued by the Series, including without limitation any additions,
amendments and supplements thereto.
3. DUAL OWNERSHIP: If more than one person is indicated as a registered
owner of the shares of the Series, as by joint ownership, ownership in common,
or tenants by the entireties, then (a) each registered owner must sign this
signature card, (b) each registered owner must sign each check issued hereunder
unless the parties have indicated on the face of this card that only one need
sign, in which case the Transfer Agent is authorized to act upon such signature,
and (c) each Signatory guarantees to the Transfer Agent the genuineness and
accuracy of the signature of the other Signatory(s).
4. TERMINATION: The Transfer Agent or the Series may at any time terminate
this account, related share redemption service for the Signatory(s) hereto
without prior notice by the Transfer Agent to any of the Signatory(s).
5. HEIRS AND ASSIGNS: These terms and conditions shall bind the respective
heirs, executors, administrators, and assigns of the Signatory(s).
<PAGE>
SM&R CAPITAL FUNDS, INC. APPLICATION
Complete This Form and Mail To:
<TABLE>
<S> <C> <C>
Home Office Use (12/95)
</TABLE>
Securities Management and Research, Inc.
<TABLE>
<S> <C> <C>
Account Number
</TABLE>
One Moody Plaza
<TABLE>
<S> <C> <C>
Account Type Social Code
</TABLE>
Galveston, TX 77550
<TABLE>
<S> <C> <C>
FI Number LOI Amount
</TABLE>
To establish IRA, SEP and TSA Plans use the special forms kit developed for
their establishment.
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION
Select ONLY ONE type of registration and complete the information associated
with that section.
- --------------------------------------------------------------------------------
/ / -- INDIVIDUAL / / -- JOINT TENANT WITH "RIGHTS OF SURVIVORSHIP"
If this is to be a Joint Tenant Account, complete all information in this
section.
<TABLE>
<S> <C> <C>
- -------------------------------------------------- ------------------------------ --------------------
Individual (First, Middle, Last) Social Security Number DOB (MM/DD/YY)
- -------------------------------------------------- ------------------------------ --------------------
Joint Tenant (First, Middle, Last) Relationship Social Security Number DOB (MM/DD/YY)
</TABLE>
- --------------------------------------------------------------------------------
/ / -- UNIFORM GIFT/TRANSFER TO MINORS
<TABLE>
<S> <C> <C>
- -------------------------------------------------- ------------------------------
Name of Custodian (One Only) (First, Middle, Last) State Under Minors Act
- -------------------------------------------------- ------------------------------ --------------------
Name of Minor (One Only) (First, Middle, Last) Minor's Social Security Number DOB (MM/DD/YY)
</TABLE>
- --------------------------------------------------------------------------------
/ / -- PENSION/PROFIT SHARING, DEFERRED COMPENSATION PLANS
Plan Type: / / 401(k) / / Profit Sharing / / Money Purchase / / Defined Benefit
/ / Deferred Comp / / Other _______
<TABLE>
<S> <C> <C>
- -------------------------------------------------- ------------------------------ --------------------
Trustee(s)/Custodian Tax I.D. Number Trust Dated
- -------------------------------------------------- --------------------------------------------------------
Name of Plan For the Benefit of
</TABLE>
- --------------------------------------------------------------------------------
/ / -- INDIVIDUAL TRUST, NON-QUALIFIED, CORPORATION, ESTATES, ASSOCIATIONS,
COMPANIES, OTHERS
<TABLE>
<S> <C> <C>
- -------------------------------------------------- ------------------------------
Name(s) of Trustee(s) Tax I.D. Number
- -------------------------------------------------- --------------------------------------------------------
Name of Company or Trust For the Benefit of
</TABLE>
- --------------------------------------------------------------------------------
2 MAILING ADDRESS
----------------------------------------------------------------------------
Street Address (P.O. Box acceptable if street address
given) Apt.# City State Zip Code
<TABLE>
<S> <C> <C> <C>
( ) ( ) Citizenship: / / U.S. / / Non-U.S.
----------------------------- ------------------------- --------------------
Business Phone Home Phone Indicate Country
</TABLE>
<PAGE>
3 INITIAL INVESTMENT (CHECK ONE)
- --------------------------------------------------------------------------------
/ / MAIL ORDER
Enclosed is/are my check(s) made payable to SECURITIES MANAGEMENT AND
RESEARCH, INC. for investment.
- --------------------------------------------------------------------------------
/ / TELEPHONE BUY ORDER (Not Applicable to Primary Series)
Date: __________________Fund: __________________Person Taking Order:
_____________________
- --------------------------------------------------------------------------------
/ / FEDERAL FUND WIRE
Before making an initial investment by wire, SM&R must receive an
executed application and suitability form with proper taxpayer I.D.
certification. Then direct your Federal funds wire to Moody National
Bank Galveston, Texas. Attention: Securities Management and Research,
Inc., Wire Account #035 868.9. Include the Fund name, your Account
Number and the Account Registration.
- --------------------------------------------------------------------------------
/ / PRE-AUTHORIZED CHECKS
Please draw on my bank account a check for $__________________ Monthly
beginning _______________________________ / / 7th / / 21st
(Attach Form 8006 or Form 8007 and a voided check) (month)
$20 minimum for Government Income Series and Tax Free Series; $100 minimum
for Primary Series.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
/ / OTHER PAYMENT METHODS
/ / Billing-Franchise # ------ / / Military Allotment / / Civil Service Allotment
Complete Form 9341 Complete Form 9340
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4 FUND SELECTION(S) & DISTRIBUTION OPTION
Please check the box beside the name of each fund being purchased, select
reinvest or cash for dividends and capital gains, and specify the dollar
amount of each purchase.
<TABLE>
<C> <S> <C> <C> <C>
X FUND NAME DIVIDENDS CAPITAL GAINS AMOUNT
Government Income Series ($100 min) / / Reinvest / / Cash / / Reinvest / / Cash $
Tax Free Series ($100 min) / / Reinvest / / Cash / / Reinvest / / Cash $
Primary Series ($1,000 min) / / Reinvest / / Cash / / Reinvest / / Cash $
Insurance, if any $
</TABLE>
ALL DISTRIBUTIONS MUST BE REINVESTED IF A WITHDRAWAL PLAN IS ELECTED. ALL
DISTRIBUTIONS WILL BE REINVESTED UNLESS CASH IS CHECKED ABOVE.
----------------------------------------------------------------------------
Fill in ONLY if distribution checks are to be mailed to you at another
address or paid to someone other than the registered owner(s) as shown
above.
Name: ____________________________________________________________________
Address: ___________________________________________________________________
- --------------------------------------------------------------------------------
5 SYSTEMATIC WITHDRAWAL
A Systematic Withdrawal Plan (SWP) is available to shareholders who own
shares of the Fund worth $5,000 or more. SWP is subject to restrictions
described in the Fund's Prospectus.
THIS OPTION WILL BEGIN THE MONTH FOLLOWING RECEIPT OF THIS REQUEST.
1. The amount of each withdrawal shall be $______________________________.
2. Systematic withdrawals shall be made (choose one only):
/ / Monthly / / Quarterly (Mar, June, Sept,
Dec) / / Semi-Annually / / Annually
3. Please have my withdrawals mailed. I understand that the SWP checks will
be made payable to me and sent to my account mailing address unless a
special designation is referenced below:
Withdrawals are to commence on or around the 20th of _______________
(Month, Year).
- --------------------------------------------------------------------------------
Fill in ONLY if SWP checks are to be mailed to you at another address or
paid to someone other than the registered owner(s) as shown above. If
check is to be sent to a bank account, provide a void check.
Name: __________________________________________________________________
Address: _________________________________________________________________
<PAGE>
- --------------------------------------------------------------------------------
6 LETTER OF INTENT (Not Applicable to Primary Series)
Under the terms of the current prospectus, I intend to purchase, within
thirteen months from the date of receipt, shares of one or more of the
American National Funds Group and/or Government Income and/or Tax Free
Series (Excluding the Primary Series). The total amount of my purchase (at
the offering price on the date of receipt by the transfer agent) will equal
an aggregate amount not less than:
<TABLE>
<S> <C> <C> <C> <C> <C>
/ / $50,000* / / $100,000** / / $250,000 / / $500,000 / / $1,000,000 / / $1,500,000
</TABLE>
(*Growth, Income and Triflex Funds Only) (**Government Income Series and Tax
Free Series Only)
Shares of the named Funds owned by me at the date of this Letter (including
shares owned by my spouse and our children who are under the age of majority or
such other persons as described in a "single purchaser" in the current
prospectus) are held in the below-specified accounts (Please Print):
<TABLE>
<S> <C> <C> <C>
FUND NAME ACCOUNT NUMBER ACCOUNT REGISTRATION OWNER'S RELATIONSHIP TO INVESTOR*
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*Must be self, spouse or child; if child, indicate current age
/ / This is a new Letter of Intent. Date
- ------------------------------.
/ / This is an existing Letter of Intent. The Letter of Intent was signed on
(date) __________________ for (amount) $__________________
This LOI expires on the earlier of (1) 13-months from the date of first
purchase, or (2) the release to me of my shares held in escrow.
Additionally, escrow shares are not subject to the exchange privilege and,
unless agreed to by SM&R, will not be released unless my intended
investment, equals or exceeds the specified amount.
- --------------------------------------------------------------------------------
7 RIGHT OF ACCUMULATION (Not Applicable to Primary Series)
If account is entitled to a Reduced Sales Charge under the terms of the
current Prospectus, please provide the following information.
<TABLE>
<S> <C> <C> <C>
FUND NAME ACCOUNT NUMBER ACCOUNT REGISTRATION OWNER'S RELATIONSHIP TO INVESTOR
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8 SIGNATURE(S) & CERTIFICATION
I/We hereby authorize Securities Management and Research, Inc. ("SM&R"), or
its duly authorized agents, as agent for the SM&R Capital Funds, Inc., to
honor any requests made in accordance with the terms of this application,
and I/we further affirm that neither SM&R ("Transfer Agent") nor SM&R
Capital Funds, Inc. shall be held liable for any loss, liability, cost or
expense for acting in accordance with this application, or any section
thereof. I/We certify that I/we have full right, power, authority and legal
capacity to purchase shares and affirm that I/we have received and read the
Prospectus and agree to its terms. Under penalties of perjury, I/we certify
(1) that the number shown on this form is my/our correct taxpayer
identification number and (2) that I/we are not subject to backup
withholding either because (a) I/we are exempt from backup withholding, or
(b) I/we have not been notified by the Internal Revenue Service that I/we
are subject to backup withholding as a result of a failure to report all
interest or dividends, or the Internal Revenue Service has notified me/us
that I/we are no longer subject to backup withholding. If you have been
notified by the Internal Revenue Service that you are currently subject to
backup withholding, strike out phrase (2) above.
- --------------------------------------------------------------------------------
INDIVIDUAL (OR CUSTODIAN) DATE
- --------------------------------------------------------------------------------
CO-OWNER (OR CORPORATE OFFICER, PARTNER OR TRUSTEE) DATE
- --------------------------------------------------------------------------------
(IF APPLICABLE, TRUSTEE) DATE
- --------------------------------------------------------------------------------
(IF APPLICABLE, TRUSTEE) DATE
- --------------------------------------------------------------------------------
<PAGE>
9 REPRESENTATIVE INFORMATION
/ / Yes, I have completed and attached "Investor Suitability Form" new
account information (Form 8045).
/ / Primary Series Account Only Information (Form 9354), if applicable.
----------------------------------------------------------------------------
Representative Name (print)
---------------------------------------------------------------------------
Representative Signature
---------------------------------------------------------------------------
SM&R Representative Social Security Number
- --------------------------------------------------------------------------------
10 DEALER INFORMATION, if applicable
----------------------------------------------------------------------------
Dealer Name
---------------------------------------------------------------------------
Dealer Representative Name (print) Representative Number
---------------------------------------------------------------------------
Dealer/Representative Signature
---------------------------------------------------------------------------
SM&R Dealer Number (Internal Use Only)
<PAGE>
PRE-AUTHORIZED CHECK PLAN
AUTHORIZATION
I hereby authorize _________________________________________________________
Name of bank Branch
of ________________________________________________________________ to honor
City State
pre-authorized checks drawn on me by SECURITIES MANAGEMENT & RESEARCH, INC.,
One Moody Plaza, Galveston, Texas 77550, and to charge such checks against
my checking account until further notice to you from me. I agree there will
be no liability incurred by you for payment or non-payment of any such
checks drawn on me.
_____________ ___________________________________________________
Date Signature of Customer
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(To be completed by SM&R Home Office)
---------------------------------------------------------------------------------- ----------------------------------
Date first check to be deposited by SM&R Transit Number
32 31 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13
</TABLE>
- --------------------------------------------------------------------------------
Securities Management & Research, Inc. - One Moody Plaza - Galveston, Texas
77550
AUTHORIZATION
I hereby authorize SECURITIES MANAGEMENT & RESEARCH, INC. to deposit
pre-authorized checks:
<TABLE>
<S> <C>
/ / Monthly / / New Account
/ / Quarterly / / Existing Account
/ / 7th / / Bank Change
/ / 21st / / Accumulation Account
/ / Growth Fund $ ------------ / / IRA Account
/ / Income Fund $ ------------ / / Profit Sharing Account
/ / Triflex Fund $ ------------ / / Pension Account
/ / Government Income Series $ ------------
/ / Tax Free Series $ ------------
$20 minimum per Fund.
/ / Primary Series $ ------------
$100 minimum investment.
</TABLE>
Credit to the Account of:
- ------------------------------------ ---------------------------
Exact Name on Registration Fund Account No.(s), if known
I agree that if, at any time, such checks are not honored for payment by said
bank, the pre-authorized check plan shall be discontinued. I further understand
that all shares purchased and credited to the above named are conditional, being
subject to checks being honored for payment by said bank.
- ------------------ ---------------------------------------
Date Signature of Customer
A "VOIDED" CHECK MUST BE ATTACHED TO REVERSE OF BOTTOM HALF OF AUTHORIZATION.
Form 8006
Rev. 8/93
<PAGE>
To: The bank named on the reverse side
In order to induce you to comply with the request of your customer to provide
the service authorized on the other side of this card, Securities Management &
Research, Inc. of Galveston, Texas, (the "Company") undertakes and agrees:
(1) To indemnify you and hold harmless from any loss you may suffer as a conse-
quence of your action resulting from or in connection with the execution and
issuance of any check or drafts, whether or not genuine, purporting to be
executed or issued by or on behalf of the Company and received by you in the
regular course of business for the purpose of payment in connection with the
authorization signed by your depositors, including any costs or expenses
reasonably incurred in connection therewith. In the event that any such check or
drafts should be dishonored, whether with or without cause and whether
intentionally or inadvertently, to indemnify you for any loss even though
dishonor results in the forfeiture of insurance.
(1) To refund to you any amount erroneously paid by you to the Company on any
such check or draft if claim for the amount of such erroneous payment is made by
you within twelve months of the date of check or drafts on which such erroneous
payment was made.
Michael W. McCroskey, President
Securities Management & Research, Inc.
Authorized in a resolution adopted by the Board of Directors of Securities
Management & Research, Inc., of Galveston, Texas on September 14, 1967.
STAPLE VOIDED CHECK BELOW
- --------------------------------------------------------------------------------
<PAGE>
INVESTOR SUITABILITY FORM
NEW ACCOUNT INFORMATION
This form must accompany all applications
to establish new accounts in the American
National Funds Group, SM&R Capital Funds, Inc.,
and other mutual funds
- --------------------------------------------------------------------------------
Date Registered Representative
- --------------------------------------------------------------------------------
Order
Received / / By Telephone / / By Letter / / In Person / / Other _________
- --------------------------------------------------------------------------------
A. BUY Name of Security Being Purchased
Distribution Option
/ / Cash (Indicate
____________ Shares or $ ____________ of ____________
/ / Mo. / / Qtrly
- ------------------------------
/ / Semi-Annual)
/ / Reinvest
B. SECURITIES REGISTRATION OF CUSTOMER
- --------------------------------------------------------------------------------
Name(s) and Age(s)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Social Security No. (Individual, Joint Accounts Taxpayer ID No. (Trust, Estate, Pension Trust,
Custodial Accounts for Minors) Corporation, Partnership, etc.)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
C. SOURCE OF FUNDS FOR INVESTMENT
A. / / Current Earnings C. / / Gift or Inheritance E. / / Death Benefit G. / / Other Policy Proceeds
B. / / Savings D. / / Sale of Assets F. / / Maturity Proceeds H. / / ---------------------
</TABLE>
- --------------------------------------------------------------------------------
D. Is the Customer or proposed Customer employed by or associated with a member
of the NASD or NYSE?
/ / Yes / / No
If he/she is, provide the name, address and phone number of the firm:
- --------------------------------------------------------------------------------
E. PERTINENT ADDITIONAL INFORMATION (CHECK APPROPRIATE BOXES)
<TABLE>
<S> <C>
/ / Application Attached / / Check Attached Payable To:
/ / Prototype Attached (IRA, TSA, Pension/Profit Sharing)
-------------------------------------------
/ / Letter of Intent Dated ------------ for $ ------------ / / Other ------------------------------------
/ / Signed Arbitration Agreement (reverse side.)
/ / Signed Statement of Refusal to Provide Financial Information, if applicable (reverse side.)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ------------------------------------------------ ---------------------------------------------------------
Registered Representative's Signature Personal Code Number
- --------------------------------------- ---------------------------------------------------------
B/O--PSO# Home Office Approval Date Received
</TABLE>
- --------------------------------------------------------------------------------
SIGNATURE REQUIRED ON THE REVERSE SIDE.
<PAGE>
INVESTMENT SUITABILITY--TO BE COMPLETED BY REGISTERED REPRESENTATIVE AND
INDIVIDUAL INVESTOR.
NASD rules require the Registered Representative to have reasonable grounds for
believing that any sale is suitable for the customer. Therefore, Registered
Representatives are required to make inquiries concerning the financial
condition of a proposed purchaser (the "Purchaser") of securities. Purchasers
are urged to supply such information so that the representative can make an
informed judgment as to the suitability for a particular Purchaser of
securities. However, Purchasers are not required to divulge such information. If
the Purchaser chooses not to do so, the Purchaser must execute Statement of
Refusal to Provide Financial Information below signifying his/ her refusal and
acknowledge that the representative requested the suitability information.
1. OCCUPATION _______________________ Phone No. Employer ______________________
Name and Address of Employer _______________________________________________
____________________________________________________________________________
<TABLE>
<S> <C> <C> <C> <C>
2. TAX STATUS
/ / Single / / Head of Household / / Married filing separate / / Other --------------------
/ / Married filing joint / / Corporation return
return or Qualifying widow(er)
with dependent child
3. MARITAL STATUS
A. / / Married B. / / Single C. / / Widowed
4. DEPENDENTS
A. / / Spouse B. / / Children: Ages -------------------- C. / / --------------------
5. PRIMARY PURPOSE OF INVESTMENT:
INDIVIDUAL BUSINESS
A. / / Education D. / / Tax Shelter A. / / Retirement Plan D. / / Buy-Sell
B. / / Savings E. / / ---------------- B. / / Key Man E. / / Depreciation Reserve
C. / / Estate Plan C. / / Deferred Compensation F. / / --------------------
6. SOURCE OF CLIENT:
A. / / Referred Lead C. / / Direct Mail Reply E. / / Friend/Relative
B. / / Advertising D. / / Existing Client F. / / ----------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
7. PERSONAL INVESTMENT ATTITUDES
Rank the following investment objectives from 1 to 6 with "1" being the most important and "6" being the least important.
Safety of principal/income (0-6) --------- Speculation (0-6) ---------
Moderate Growth (0-6) --------- High Current Income (0-6) ---------
Aggressive Growth (0-6) --------- Tax Liability Reduction (0-6) ---------
Please indicate the Preferred Risk Level which best describes the risk-reward relationship with which you are generally most
comfortable.
(Check Only one.)
Limited (L) / / Moderate (M) / / Higher (H) / /
</TABLE>
<TABLE>
<S> <C> <C>
8. PERSONAL INVESTMENT GOALS
1. Are you planning any major expenditure greater than 10% of your investment assets:
a. Within the next year: / / Yes / / No b. Within the next 5 years: / / Yes / / No c. Within 5 to 10
years: / / Yes / / No
2. Are you planning to provide for your children's higher education: / / Yes / / No
If yes, what percent do you plan to provide: ---------------- (1% - 100%)
3. Are you concerned with having adequate income during retirement: / / Yes / / No
4. Are you responsible for the financial welfare of anyone other than your immediate family (i.e. alimony, child, or
parental support, etc.) / / Yes / / No
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Estimated Annual Income Estimated Net Worth Life Insurance Face Amount Is the applicant a policyholder of
$ $ $ American National?
/ / Yes / / No
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF REFUSAL TO PROVIDE FINANCIAL INFORMATION (SIGNATURES REQUIRED ONLY
IF INFORMATION NOT PROVIDED.)
I fully understand that the Registered Representative, acting on behalf of
Securities Management and Research, Inc., has requested the above suitability
information to determine whether my purchase of securities is an appropriate
investment considering my financial condition. I refuse to provide the requested
information and by my/ our signature(s) below agree not to seek rescission of
the policy or mutual fund investment or damages based on its unsuitability.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------ ----------------------------------------------------
Signature of Purchaser Signature Joint Owner (Must sign)
</TABLE>
PURCHASER AGREEMENT TO ARBITRATION (SIGNATURES REQUIRED FOR ALL ACCOUNTS
ESTABLISHED) THIS SECTION IS NOT APPLICABLE TO MISSOURI RESIDENTS.
This agreement shall inure to the benefit of your successors and assigns, shall
be binding on the undersigned, his heirs, executors, administrators and assigns,
and shall be governed by the laws of the State of Texas. I understand that I
have the right to any dispute between us arising under the federal securities
laws resolved through litigation in the courts. In lieu of using the courts, we
may agree, after any such dispute has arisen, to settle it by arbitration before
an appropriate tribunal. However, I understand that any other dispute between us
arising out of any transaction or this agreement shall be settled by arbitration
before the National Association of Securities Dealers, Inc., which must be
commenced by a written notice of intent to arbitrate, judgment upon any award
rendered may be entered in any appropriate court.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------ ----------------------------------------------------
Signature of Purchaser Signature Joint Owner (Must sign)
Form 8045
Rev 2/92
</TABLE>
<PAGE>
SM&R's business holiday's are Good Friday, 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.
DETERMINATION OF OFFERING PRICE
The offering price for shares of each Series is determined once each day that
such Series' net asset value is determined. Net asset value per share is
determined by dividing the market value of the securities owned by the Series,
plus any cash or other assets (including dividends accrued but not collected),
less all liabilities of such Series (including accrued expenses but excluding
capital and surplus), by the number of shares of the Series 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 such Series' investment securities that the current net asset value
of such Series' shares might be materially affected by changes in the value of
its portfolio of investment securities. Each Series of the Fund reserves the
right to compute such Series' net asset value at a different time, or to compute
such value more often than once daily as provided in the Fund's current
prospectus.
The offering price for shares of the Government Income Series and the Tax Free
Series is that Series' net asset value plus the sales charge computed at the
rates set forth in the applicable tables below. Shares of the Primary Series may
be purchased without a sales charge. Accordingly, the offering price for shares
of the Primary Series is that Series' net asset value. During such times that
the Primary Series is invested primarily in commercial paper having maturities
of less than sixty (60) days, the offering price for such series will be
relatively stable. However, even during such times, the Primary Series cannot
assure a dollar for dollar return on the amount invested.
For a more complete description of the procedures involved in valuing various
fund assets, see "Offering Price" in the Fund's Statement of Additional
Information.
17
<PAGE>
GOVERNMENT INCOME SERIES AND TAX FREE SERIES
<TABLE>
<CAPTION>
(2)
(1) Sales Charge as a (3)
Sales Charge as a Percentage of Discount to Selected
Percentage of Net Amount Dealers as a Percentage
Amount of Investment Offering Price Invested of Offering Price
<S> <C> <C> <C>
Less of $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 but less than $1,000,000 1.5% 1.5% 1.0%
$1,000,000 but less than
$1,500,000 1.0% 1.0% 0.8%
$1,500,000 and over 0.5% 0.5% 0.3%*
</TABLE>
* Such discount may result in such dealers being deemed to be underwriters for
purposes of the Securities Act of 1933.
The reduced sales charge rates set forth above apply to purchases of the
Government Income Series and Tax Free Series, either singly or in combination
with purchases of shares of the American National Funds Group 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.
Purchases in the Government Income Series will also receive a reduction in
sales charge pursuant to the rates set forth in the table above for purchases
either singly or in combination with purchases of shares of the American
National Funds Group at the respective sales charges applicable to each, made at
one time by:
(1) 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
(2) Employees or employers on behalf of employees under any employee benefit
plan not qualified under Section 401 of the Internal Revenue Code.
Furthermore, 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 Government Income Series 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 prospectus available to individual investors or employees,
forwarding investments by such employees to the Fund, and the like.
MEMBERS OF ASSOCIATIONS
The following breakpoints apply to purchases made at one time by members of
non-profit business, trade, professional or similar associations with an active
membership of at least 1,000 persons:
<TABLE>
<CAPTION>
(1) (2) (3)
Sales Charge as a Sales Charge as a Discount to Selected
Percentage of Percentage of Net Dealers as a Percentage
Amount of Investment Offering Price Amount Invested of Offering Price
<S> <C> <C> <C>
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 but less than $1,000,000 1.5% 1.5% 1.0%
$1,000,000 but less than
$1,500,000 1.0% 1.0% 0.8%
$1,500,000 and over 0.5% 0.5% 0.3%*
</TABLE>
* Such discount may result in such dealers being deemed to be underwriters for
purposes of the Securities Act of 1933.
All direct sales expenses, including the cost of prospectuses for prospective
shareholders, are paid by SM&R, and no sales expense is borne by the Fund.
18
<PAGE>
SPECIAL PURCHASE PLANS
The Fund offers the following services to its shareholders to facilitate
investment in the Fund. At this time, there is no charge to the shareholder for
these services. For additional information contact your registered
representative or SM&R.
RIGHT OF ACCUMULATION--Dollar amount(s) of shares being purchased plus the
current offering value of your combined holdings of the Government Income
Series, the Tax Free Series and the American National Funds Group (the
Government Income Series, the Tax Free Series and the funds in the American
National Funds Group, shall be collectively referred to hereinafter as the
"Group"). Shareholders of the Government Income Series or the Tax Free Series
must, at the time of purchase, give their representative or SM&R a list of other
accounts maintained in the Group to qualify for this privilege. There is no
retroactive reduction of the sales charge for shares previously purchased. When
necessary, SM&R has the right to require verification of holdings to be included
in determining the applicable sales charge.
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 Government Income Series or
Tax Free Series followed by additional payments of at least $20 for each
individual investing under a single payroll deduction plan. Any such plan may be
terminated by SM&R or the shareholder at any time upon sixty (60) days written
notice.
PURCHASES AT NET ASSET VALUE--After written request to SM&R, shares of the
Government Income Series and the Tax Free Series may be sold without a sales
charge to: (a) present and retired directors, officers and full-time employees
of the Fund; (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 trust, pension, profit-sharing, IRA or other
benefit plan for any of such persons mentioned in (a), (b), (c) or (d), their
spouses or their minor children; (f) custodial accounts for minor children of
such persons mentioned in (a), (b), (c) or (d) pursuant to the Uniform Gifts to
Minors or Uniform Transfers to Minors Acts; (g) 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 the
Government Income Series and/or any fund in the Group; (h) persons receiving
rebated amounts through ANPAC's "Cash Back Program" to the extent the proceeds
represent the amount of the rebate and (i) trust companies and bank trust
departments for funds over
19
<PAGE>
which they exercise exclusive discretionary investment authority or they serve
as a directed trustee and which are held in a fiduciary, agency, advisory,
custodial or similar capacity.
Shares of the Tax Free Series may also be purchased without a sales charge,
upon proper notification to SM&R, by those individuals mentioned in (a), (b),
(c), (d), (g), (h) and (i) above.
PRE-AUTHORIZED CHECK PLANS--An investor may invest in shares of each Series
through the use of a pre-authorized check plan ($20 dollars or more in the case
of investments in the Government Income Series and Tax Free Series and $100
dollars or more in the case of investments in the Primary Series). Such
purchases are processed on or about the 7th and 21st of each month and each
investor may invest in up to five different accounts in the Group on either
date. Such purchases will enable an investor in the Government Income Series to
lower his or her average cost per share through the principle of "dollar cost
averaging". As discussed earlier, (See DETERMINATION OF OFFERING PRICE) the
Primary Series may have a relatively stable price per share. During such times,
the benefits of "dollar cost averaging" may not be available to investors in
such Series. (See "SPECIAL PURCHASE PLANS" in the Statement of Additional
Information.)
EXCHANGE PRIVILEGE--SM&R desires to make it convenient for all shareholders to
exchange from one Series to another within the Fund and the American National
Funds Group without the payment of an exchange fee. However, some Series and
some members of the American National Funds Group have no sales charges 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 various members of the Group are
registered and the exchange may be legally made. The Exchange Privilege is not
available to shareholders of the Primary Series.
Shares of any Series or fund held in escrow under a Letter of Intent are not
eligible for 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 Group and all additional shares acquired through reinvested
dividends on such exchanged shares may be RE-EXCHANGED for shares of the members
of the Group. RE-EXCHANGES may not be effected through the use of the Primary
Series check writing option. (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 the Group.
To effect an exchange or re-exchange (a) a prospectus must be provided to the
investor covering the shares to be taken in exchange; (b) written authorization
requesting the exchange and advising that such exchange is eligible for reduced
or no sales charges must be received by SM&R; (c) an appropriate application
must be completed if an account does not presently exist in the Series or fund
shares being exchanged to; and (d) the amount being exchanged must at least
equal the minimum initial or subsequent investment amounts, whichever is
applicable. SM&R reserves the right, upon sixty (60) days prior written notice,
to restrict the frequency of or to otherwise modify, condition, terminate or
impose additional charges upon the exchange privilege. Furthermore, the exchange
of a Series or fund shares may constitute a sale of shares which represents a
taxable event.
Any gain or loss realized on such an exchange may be recognized for federal
and state income tax purposes. The investor should consult its own tax adviser
for the treatment of exchanges for tax purposes.
20
<PAGE>
RETIREMENT PLANS
The following retirement plans may be funded with shares of the Government
Income Series or the Primary Series: Individual Retirement Accounts (IRAs);
Simplified Employee Pension Plans (SEPs); 403(b) Custodial Accounts (TSAs) and
corporate retirement plans. Information concerning IRAs and TSAs and the forms
necessary to adopt such plans, can be obtained by contacting your registered
representative or calling SM&R. A regular Fund application should be used when
establishing a corporate retirement plan. The minimum initial purchase for each
Series is $100. The minimum subsequent purchase is $20 for the Government Income
Series and $100 for the Primary Series. SM&R acts as trustee or custodian for
IRAs, SEPs and TSAs for the Fund. An annual custodial fee of $7.50 will be
charged for any part of a calendar year in which an investor has an IRA, SEP or
TSA in the Fund 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 wish to consult with an attorney or tax adviser.
Because IRAs, SEPs, TSAs, other tax exempt persons and other qualified plans
are exempt from federal income tax, they will be unable to benefit from the
general tax-exempt nature of the Tax Free Series. Accordingly, the Tax Free
Series is not generally considered to be suited for such plans or persons.
DIVIDENDS AND DISTRIBUTIONS
The Government Income Series and Tax Free Series will declare and pay
dividends from net investment income monthly and net realized short-term or
long-term capital gains, if any, annually.
At 3:00 p.m., Central Time, on each day that the Exchange is open for trading
other than SM&R's business holidays described above, the Primary Series will
declare a dividend of all of its net investment income to shareholders already
of record. Such dividends will be paid monthly.
Unless the shareholder elects otherwise in writing to SM&R or on the
application, dividends and capital gains will be automatically reinvested in the
shareholder's account in additional shares of the respective Series making such
distribution. Such reinvestment will be made at the net asset value on the
distribution date, without sales charge. 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. This is a convenient
way to accumulate additional shares and maintain or increase the shareholder's
earning base. Of course, any shares so acquired remain at market risk.
Shareholders have the right to change their election with respect to the
receipt of distributions by notifying SM&R in writing, but any such change will
be effective only as to distributions for which the record date is seven or more
business days after SM&R has received the shareholder's written request.
In order to be entitled to a dividend, an investor must have acquired shares
of a series prior to the close of business on the record date. A shareholder
should be cautioned, however, before purchasing shares of a series immediately
prior to a distribution. Dividends and distributions paid by the Fund have the
effect of reducing net asset value per share on the record date by the amount of
the payment. Therefore, a dividend or distribution of record shortly after the
purchase of shares by an investor represents in substance, a return of capital.
TAXES
Each Series of the Fund is treated as a separate entity for federal income tax
purposes. The Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code. The 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 Fund will be required to pay
federal income taxes.
For federal income tax purposes, any income dividends derived from taxable
investments which the shareholder receives from such Series of the Fund, as well
as any distributions derived from net short-term capital gain are treated as
ordinary income
21
<PAGE>
whether the shareholder has elected to receive them in cash or in additional
shares. Distributions derived from net long-term capital gain will be taxable as
long-term capital gains regardless of the length of time the shareholder has
owned such Series' shares and regardless of whether such distributions are
received in cash or in additional shares. In determining the amount of capital
gains, if any, available for distribution, net capital gains are offset against
available net capital losses, if any, carried forward from previous years.
The Tax Free Series expects the dividends it pays to shareholders from
interest on municipal securities generally to be exempt from federal income tax
because the Series intends to satisfy certain requirements of the Internal
Revenue Code, as amended. Such exempt-interest dividends are derived from
interest income exempt from regular federal income tax, and not subject to
regular federal income tax for the Series' shareholders. Shareholders will,
however, be required to disclose on their federal income tax return the amount
of tax-exempt interest earned during the year, including exempt-interest
dividends received.
Current federal tax law limits the types and volume of securities qualifying
for the federal income tax exemption of interest and makes interest on certain
tax-exempt securities and distributions by the Tax Free Series of such interest
a tax preference item for purposes of the individual and corporate alternative
minimum tax. All exempt-interest dividends may affect a corporate shareholder's
alternative minimum tax liability. Current federal tax law may also affect the
availability of municipal obligations for investment by the Series and the value
of the Series' portfolio.
Redemptions and exchanges of shares in each Series of the Fund are taxable
events on which a shareholder may realize a gain or loss. Shareholders of the
Tax Free Series should be careful about redeeming shares immediately prior to
the record date of an "exempt-interest dividend" because the redemption may
cause the shareholder to realize a taxable gain even though a portion of the
redemption proceeds may represent a pro rata share of tax exempt interest earned
by the Series. Shareholders should consult with their tax advisers concerning
the tax reporting requirements in effect on the redemption or exchange of such
shares.
The Fund may be required to report to the Internal Revenue Service ("IRS") any
taxable dividends or other reportable payment (including share redemption
proceeds) and withhold 31% of any such payments made to individuals and other
non-exempt shareholders who have not provided a correct taxpayer identification
number and made certain required certifications that appear in the Application.
A shareholder may also be subject to backup withholding if the IRS or a broker
notifies the Fund that the number furnished by the shareholder is incorrect or
that the shareholder is subject to backup withholding for previous
under-reporting of interest or dividend income.
Shareholders who are not U.S. persons for purposes of federal income taxation
should consult with their financial or tax advisors regarding the applicability
of U.S. withholding taxes to distributions received by them from the Fund.
Many states grant tax-free status to dividends paid to shareholders of mutual
funds from interest income earned by the fund from direct obligations of the
U.S. Government, subject in some states to minimum investment requirements that
must be met within the fund.
At the end of each calendar year, the Fund will advise its shareholders
regarding the tax status of all distributions made during each taxable year,
including the portion of the dividends which comprise taxable income, exempt
income and interest income that is a tax preference item under the alternative
minimum tax. Shareholders should consult their own tax advisers with respect to
the application of their state and their local tax laws to these distributions
and redemption proceeds received from the Fund. Additional information regarding
taxation is included in the Statement of Additional Information.
IMPORTANT: The Fund reserves 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,
22
<PAGE>
upon receipt of notice from the IRS that the taxpayer identification number
certified as correct by the shareholder is in fact incorrect.
HOW TO REDEEM
Shares of the Fund will be redeemed at the net asset value determined on the
date the request is received by SM&R in "Proper Form", as defined in "PROPER
FORM" below, at no charge. A redemption request must be addressed to Securities
Management and Research, Inc., One Moody Plaza, 14th Floor, Galveston, Texas
77550.
If uncertain of the redemption requirements, investors should call or write
SM&R. Payment will be made as soon as practicable and normally within seven days
after receipt of a redemption request in Proper Form.
If the shares being redeemed were purchased by wire, certified check, money
order, or other immediately available funds, redemption proceeds will be
available immediately. For shares purchased by non-guaranteed funds (such as a
personal check), the Fund reserves the right to hold the proceeds until such
time as the Fund has received assurance that an investment check has cleared the
bank on which it was drawn.
SYSTEMATIC WITHDRAWAL PLAN--The Fund has a Systematic Withdrawal Plan,
("Withdrawal Account") which permits shareholders having an account value of
$5,000 or more to automatically withdraw a minimum of $50 monthly or each
calendar quarter. The Fund and SM&R discourage shareholders from maintaining a
Withdrawal Account while concurrently purchasing shares of the Government Income
Series or the Tax Free Series because of the sales charge involved in additional
purchases. Dividends and capital gains distributions will automatically be
reinvested in additional shares at net asset value. As with other redemptions, a
withdrawal payment is a sale for federal income tax purposes. The Systematic
Withdrawal Plan will automatically terminate if all shares are liquidated or
withdrawn from the account. Certificates are not issued for shares held in a
Withdrawal Account and certificates held, if any, must be surrendered when
shares are transferred to a Withdrawal Account. No account covered by a Letter
of Intent can be changed to a Systematic Withdrawal Plan until such time as the
Letter of Intent is fulfilled or terminated, nor can an account under a
Systematic Withdrawal Plan be placed under a Letter of Intent.
REINVESTMENT PRIVILEGE--Within ninety (90) days of a redemption (sixty (60) days
for qualified plans), a shareholder may invest all or part of the redemption
proceeds in shares of any of the funds managed by SM&R at the net asset value
next computed after receipt of the proceeds to be reinvested by SM&R. The
shareholder must ask SM&R for this privilege at the time of reinvestment. Prior
to reinvestment of redemption proceeds, a shareholder is encouraged to consult
with his accountant or tax advisor to determine any possible tax ramifications
of such a transaction. Each fund managed by SM&R may amend, suspend or cease
offering this privilege at any time as to shares redeemed after the date of the
amendment, suspension or cessation.
For further information about the "Systematic Withdrawal Plan" and
"Reinvestment Privilege", contact a registered representative or SM&R.
"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 Series,
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 Series shares are registered. It is suggested that
certificates be returned by certified mail for the investor's 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.
23
<PAGE>
Please keep in mind that as a shareholder, it is your responsibility to ensure
that all requests are submitted to the Fund's transfer agent in Proper Form for
processing.
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. Examples of when signature must guarantees are required are: (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) share certificates, if the redemption
proceeds are in excess of $25,000; or (5) the Fund or its transfer agent
believes a signature guarantee 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 broker, 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.
TEXAS OPTIONAL RETIREMENT PROGRAM GOVERNMENT INCOME SERIES AND PRIMARY SERIES
ONLY--Redemption of shares in any 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 exist. (1) death of
the employee; (2) termination of service with the employer; or (3) retirement of
employee.
EXPEDITED TELEPHONE REDEMPTION PRIMARY SERIES ONLY--Shareholders redeeming at
least $1,000 of the Primary Series may redeem by telephoning SM&R at
1-800-231-4639. An authorization form must have been completed and filed with
SM&R before a telephone redemption request will be honored. To minimize the
risks associated with telephone redemptions, telephone redemptions will only be
made after the caller has provided the shareholder's account number and other
information deemed appropriate by the transfer agent. To further reduce the risk
of an attempted fraudulent use of the telephone redemption procedure, payment
will only be made by check to either the bank account designated on the
authorization form or, at the shareholder's direction, to purchase shares of one
or more of the other American National Funds for the shareholder's account with
an identical registration.
A check will be mailed on the next business day following receipt of the
telephone request. There is no charge for this service unless the shareholder
requests that the redemption proceeds be wired as provided below.
EXPEDITED WIRE REDEMPTION PRIMARY SERIES ONLY--Shareholders redeeming at least
$1,000 of the Primary Series and who have filed an expedited redemption
authorization form with SM&R, may at the time of redemption, request that
Federal Funds be wired to the bank designated on the form. Redemption proceeds
will normally be wired on the
24
<PAGE>
next banking day following receipt of the redemption request. However, if the
request is received after 3:00 p.m., Central Time, proceeds normally will be
wired no later than the second banking day following receipt of the request.
There is a $8.00 per transaction fee for this service which will be
automatically deducted from the shareholder's account and the fee is subject to
change without further notice. Subject to compliance with the same risk
minimizing procedures utilized in expedited telephone redemptions, SM&R
currently permits shareholder's to request expedited wire redemptions by
telephone.
Despite the precautions stated above, shareholders electing the telephone
redemption option and having the option of using the telephone to request an
expedited wire redemption are giving up a measure of security that they would
have if they were to redeem their shares or request an expedited wire redemption
only in writing. If SM&R does not follow the above procedures, the Series'
and/or SM&R may be liable for any losses arising from such activity.
CHECK WRITING OPTION PRIMARY SERIES ONLY--A check writing option is available in
connection with the Primary Series to investors having $1,000 or more of such
Series. $250 is the minimum check amount under the check writing option. This
option is not available on IRA's, SEP's or TSA's. Shareholders wishing to avail
themselves of this option must complete the check writing option signature card
in the prospectus. After obtaining specimen signatures and the fully executed
card, SM&R will order checks and arrange for the shareholder's checks to be
honored by a bank. Investments made by personal check or third party check will
be held for fifteen (15) business days following the investment during which
time checks may not be drawn on the amount of such investment. This service may
be terminated or suspended or additional charges may be imposed for this
service. Shareholders will be provided the initial checkbook free of charge.
There will be a $5 fee for re-orders. Shareholders will be allowed to write ten
(10) checks free each calendar quarter.
When a check is presented for payment, SM&R, as the shareholder's agent, will
cause the Fund to redeem a sufficient number of full and fractional shares to
cover the amount of the check. Shareholders will continue to be entitled to
dividends on their shares up to the time the check is presented to SM&R for
payment. If the amount of the check is greater than the value of the shares held
in the shareholder's account for more than fifteen (15) business days at the
time the check is presented for payment, the check will be returned to the payee
as not being covered by sufficient funds, and the shareholder will be subject to
extra charges as a result.
NOTE: The Fund reserves the right to redeem shares in any account (which will be
promptly paid to the shareholder) if, due to your redemptions, the value of your
account falls below $100 in the case of the Government Income Series and Tax
Free Series or $1,000 in the Primary Series. You will be notified that the value
of your account is less than the required minimum indicated above and allowed at
least 60 days to make an additional investment to increase the value of your
account above the required minimum.
Additionally, the Fund reserves the right to close a Tax-Sheltered Retirement
Plan Account if there have been no investments in the account during the twelve
months prior to notification and the net asset value is less than $100 in the
case of the Government Income Series or $1,000 in the Primary Series. Retirement
plan participants will be notified that the value of their account is less than
the required minimum indicated above and allowed twelve months to make the
minimum number of investments necessary to meet the minimum through the
appropriate investment means. The Board of Directors may, from time to time,
change such required minimum investment.
OTHER INFORMATION CONCERNING THE FUND
SHARING OF FUND EXPENSES. Each Series bears its proportionate share of the
Fund's general expenses not susceptible of direct allocation. Such general
expenses include the Fund's organizational expenses, directors' fees and joint
fidelity bonds, which are pro-rated based on the relative amount of
25
<PAGE>
each Series' assets, and prospectus and shareholder report expenses, which are
pro-rated based on the relative number of each Series' shareholders.
Organizational expenses for the Tax-Free Series were paid by the adviser.
AUTHORIZED STOCK. The authorized capital stock of the Fund consists of Two
Hundred Million (200,000,000) shares, par value $.01 per share. The shares of
capital stock are divided into three Series: the Government Income Series
(50,000,000 shares), the Primary Series (100,000,000 shares) and the Tax Free
Series (50,000,000 shares). The shares of each Series, when issued, will be
fully paid and non-assessable, will have no conversion or similar rights, and
will be freely transferable.
Each share of stock will have a pro-rata interest in the assets of the Series
to which the stock of that class relates and will have no interest in the assets
of any other Series. Holders of shares of any Series are entitled to redeem
their shares as set forth under HOW TO REDEEM.
VOTING RIGHTS. Within the respective Series, all shares have equal voting,
participation and liquidation rights, but have no subscription, preemptive,
conversion or cumulative voting rights.
On certain matters, such as the election of directors, all shares of each
Series vote together, with each share having one vote. On other matters
affecting a particular Series, such as the Investment Advisory Contract or
fundamental investment policies, only shares of that Series are entitled to
vote, and a majority of the shares of that Series are required for approval of
the proposal.
ADDITIONAL INFORMATION. This Prospectus and the Statement of Additional
Information referred to on the cover page do not contain all the information set
forth in the registration statement, certain portions of which have been omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
The omitted information may be obtained from the Commission's principal office
in Washington, D.C., upon payment of the fees prescribed by the Commission.
For further information, shareholders may also contact SM&R, whose address and
phone number are set forth on the cover of this Prospectus.
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<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 a 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 circum-
stances 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 predominately 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 and
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
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great length of time. Such bonds lack 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>
Description of Fitch Investors Service bond ratings:
AAA Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable
events.
AA Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in
the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+".
A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and cir-
cumstance, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than bonds with
higher ratings.
MUNICIPAL NOTE RATINGS
Description of Moody's Investor Service Inc.'s municipal note ratings:
MIG-1/VMG1 Notes are of the best quality enjoying strong protection from
established cash flows of funds for their servicing or from
established and broad- based access to the market for refinancing,
or both.
MIG-2/VMG2 Notes are of high quality, with margins of protection ample,
although not so large as in the preceding group.
MIG-3/VMG3 Notes are of favorable quality, with all security elements accounted
for, but lacking the undeniable strength of the preceding grades.
Market access for refinancing, in particular, is likely to be less
well established.
MIG-4/VMG3 Notes are of adequate quality, carrying specific risk but having
protection and not distinctly or predominantly speculative.
Description of Standard and Poor's municipal note ratings:
Until June 29, 1984, S&P used the same rating symbols for notes and bonds.
After June 29, 1984, for new municipal note issues due in three years or less
the ratings below usually will be assigned. Notes maturing beyond three years
will most likely receive a bond rating of the type recited above.
SP-1 Issues carrying this designation have a very strong or strong capacity to
pay principal and interest. Issues determined to possess overwhelming
safety characteristics will be given a "plus" (+) designation.
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SP-2 Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
</TABLE>
COMMERCIAL PAPER RATINGS
Description of Standard & Poor's Corporation's three highest commercial paper
ratings:
Commercial paper rated "A" by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is generally rated "A" or better. The issuer has access to
at least two additional channels of borrowing. Basic earnings and cash flow have
an upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. the reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3. A-1 is the highest
commercial paper rating assigned by Standard & Poor's Corporation. A-2 is the
second highest of such ratings.
Description of Moody's Investors Service, Inc.'s three highest commercial
paper ratings:
Among the factors considered by Moody's Investors Service, Inc. is assigning
commercial paper ratings are the following: (1) evaluation of the management of
the issuer; (2) economic evaluation of the issuer's industry or industries and
an appraisal of the risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition of the management
of obligations which may be present or may arise as a result of public interest
questions and proportions to meet such obligations. Relative differences in
strength and weakness in respect to these criteria would establish a rating in
one of three classifications; P-1, P-2 or P-3. P-1 is the highest commercial
paper rating assigned by Moody's Investors Service, Inc. P-2 is the second
highest of such ratings.
Description of Fitch Investors Service commercial paper, medium-term notes,
and municipal and investment notes.
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2 Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as for issues assigned "F-1+" and "F-1" ratings.
F-3 Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse changes could cause these securities to be
rated below investment grade.
F-5 Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic
conditions.
Description of Duff & Phelp's two highest commercial ratings:
Duff & Phelp's commercial paper ratings place emphasis on liquidity,
considering not only cash from operations, but access to alternative sources of
funds, including trade credit, bank lines and capital markets. Relative
differences in strength and weakness is rated by Duff & Phelp's as Duff-1 or
Duff-2; Duff-1 being the highest commercial paper rating and Duff-2 being the
second highest rating.
Description of Thompson Bankwatch, Inc.'s two highest commercial ratings:
Thompson Bankwatch, Inc.'s ratings of United States commercial banks, thrifts,
and non-bank banks, non-United States banks, and broker-dealers are based upon
among other things, five years's financial information and the issuer's most
recent
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regulatory filings. Relative differences in strength and weakness are rated by
Thompson Bankwatch, Inc. as TBW-1 or TBW-2; TBW-1 being the highest commercial
paper rating and TBW-2 being the second highest rating.
FEDERAL FUNDS
As used in this Prospectus and in the 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.
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PROSPECTUS
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