<PAGE>
REGISTRATION NO. 33-44021
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
[Check appropriate box or boxes.]
Post-Effective Amendment No. 7
SM&R CAPITAL FUNDS, INC.
[Exact Name of Registrant as Specified in Charter]
<TABLE>
<S> <C>
One Moody Plaza, Galveston, Texas 77550
[Address of Principal Executive Offices] [Zip Code]
</TABLE>
Registrant's Telephone Number, Including Area Code (409) 763-2767
<TABLE>
<S> <C> <C>
Michael W. McCroskey Jerry L. Adams
One Moody Plaza With Copy To: Greer, Herz & Adams,
Galveston, Texas 77550 L.L.P.
One Moody Plaza
Galveston, Texas 77550
</TABLE>
[Name and Address of Agent for Service]
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on December 29, 1995 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on (date) pursuant to paragraph (a)(1) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(2) Rule 485
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
- --------------------------------------------------------------------------------
If appropriate, check the following box:
/ / this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
- --------------------------------------------------------------------------------
Declaration Required By Rule 24f-2(a)(1): An indefinite number of securities of
the Registrant has been registered under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940. Notice required by Rule
24f-2(b)(1) was filed in the office of the Securities and Exchange Commission on
October 30, 1995.
- --------------------------------------------------------------------------------
EXHIBIT INDEX ON PAGE 92.
This filing consists of 201 pages.
<PAGE>
SM&R CAPITAL FUNDS, INC.
CROSS-REFERENCE SHEET
[PURSUANT TO RULE 495(A)]
SHOWING LOCATION OF INFORMATION
REQUIRED BY FORM N-1A
<TABLE>
<CAPTION>
PART A ITEM AND CAPTION PROSPECTUS CAPTION
- -------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C>
ITEM 1. COVER PAGE
(a) (i) Front Cover
(ii) Front Cover
(iii) Front Cover
(iv) Front Cover
(v) Front Cover
(vi) Front Cover
(vii) Front Cover
(b) Front Cover
ITEM 2. SYNOPSIS
(a) (i) Table of Fees and Expenses
(ii) Not Applicable
(b) The Fund At A Glance
(c) The Fund At A Glance
ITEM 3. CONDENSED FINANCIAL INFORMATION
(a) Financial Highlights--Government Income Series;
Financial Highlights-- Primary Series; Financial
Highlights--Tax Free Series
(b) Financial Highlights--Government Income Series;
Financial Highlights-- Primary Series; Financial
Highlights--Tax Free Series
(c) Not applicable
(d) Financial Highlights
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
(a) (i) The Fund At A Glance
(ii) Investment Objectives and Policies; Additional
Investment Policies and Techniques
(b) Investment Objectives and Policies; Additional
Investment Policies and Techniques
(c) Investment Objectives and Policies; Additional
Investment Policies and Techniques
ITEM 5. MANAGEMENT OF THE FUND
(a) The Fund and Its Management
(b) (i) The Fund and Its Management
(ii) The Fund and Its Management and Table of Fees and
Expenses
(iii) The Fund and Its Management and Table of Fees and
Expenses
(c) The Fund and Its Management
(d) The Fund and Its Management and Table of Fees and
Expenses
(e) The Fund and Its Management and Table of Fees and
Expenses
(f) The Fund and Its Management and Table of Fees and
Expenses
(g) (i) Not Applicable
(ii) Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART A ITEM AND CAPTION PROSPECTUS CAPTION
- -------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C>
ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Annual Report
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
(a) How To Redeem; Other Information Concerning The
Fund--Voting Rights
(b) Other Information Concerning The Fund--Authorized
Stock
(c) Not Applicable
(d) Not Applicable
(e) Other Information Concerning The Fund--Additional
Information
(f) Dividends and Distributions
(g) Retirement Plans; Taxes
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED
(a) The Fund and Its Management and Table of Fees and
Expenses
(b) (i) Determination of Offering Price
(ii) Purchase of Shares; Determination of Offering Price
(iii) Determination of Offering Price
(iv) Determination of Offering Price
(v) Purchase of Shares
(c) Special Purchase Plans
(d) Purchase of Shares
(e) Not Applicable
(f) Not Applicable
ITEM 8. REDEMPTION OR REPURCHASE
(a) How to Redeem
(b) Not Applicable
(c) How to Redeem
(d) How to Redeem
ITEM 9. PENDING LEGAL PROCEEDINGS
Not Applicable
<CAPTION>
PART B ITEM AND CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- -------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C>
ITEM 10. COVER PAGE
(a) (i) Cover Page
(ii) Cover Page
(iii) Cover Page
(iv) Cover Page
(b) Cover Page
ITEM 11. TABLE OF CONTENTS
Table of Contents
ITEM 12. GENERAL INFORMATION AND HISTORY
The Fund
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES
(a) Investment Objective and Policies
(b) Investment Objective and Policies
(c) Not Applicable
(d) Portfolio Turnover
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B ITEM AND CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- -------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C>
ITEM 14. MANAGEMENT OF THE FUND
(a) Management of the Fund
(b) Management of the Fund
(c) Not Applicable
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) Control Persons and Principal Holders of Securities
(b) Control Persons and Principal Holders of Securities
(c) Control Persons and Principal Holders of Securities
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
(a) (i) Control Persons and Principal Holders of
Securities--Control and Management of SM&R; Control
Persons and Principal Holders of
Securities--Investment Advisory Agreement
(ii) Control Persons and Principal Holders of
Securities--Control and Management of SM&R; Control
Persons and Principal Holders of
Securities--Investment Advisory Agreement
(iii) Control Persons and Principal Holders of
Securities--Investment Advisory Agreement
(b) Control Persons and Principal Holders of
Securities--Investment Advisory Agreement
(c) Not Applicable
(d) Control Persons and Principal Holders of
Securities--Administrative Service Agreement
(e) Not Applicable
(f) (i) Underwriter
(ii) Underwriter
(iii) Underwriter
(g) Custodian
(h) Custodian; Counsel; Auditors and Financial
Statements
(i) Custodian, Transfer Agent and Dividend Paying Agent;
Investment Advisory Agreement; Administrative
Service Agreement
ITEM 17. BROKERAGE ALLOCATION
(a) Portfolio Transactions and Brokerage Allocation
(b) (i) Not Applicable
(ii) Not Applicable
(iii) Not Applicable
(c) Portfolio Transactions and Brokerage Allocation
(d) Not Applicable
(e) Not Applicable
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES
(a) (i) Capital Stock
(ii) Capital Stock
(b) Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B ITEM AND CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- -------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C>
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
(a) Purchase, Redemption and Pricing of Securities Being
Offered; Special Purchase Plans
(b) Purchase, Redemption and Pricing of
Shares--Determination of Net Asset Value; Purchase,
Redemption and Pricing of Shares--Offering Price
(c) Not Applicable
ITEM 20. TAX STATUS Not Applicable
ITEM 21. UNDERWRITERS
(a) (i) Underwriter
(ii) Underwriter
(iii) Underwriter
(b) Not Applicable
(c) Not Applicable
ITEM 22. CALCULATIONS OF PERFORMANCE DATA
Not Applicable
ITEM 23. FINANCIAL STATEMENTS
Attached hereto as Exhibit "1" to Part B, Statement
of Additional Information
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
</TABLE>
<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
<PAGE>
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.
26
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX
(Description of Ratings Used in Prospectus)
- --------------------------------------------------------------------------------
BOND RATINGS
Description of Standard & Poor's Corporation's bond rating:
AAA Bonds rated "AAA" have the highest rating assigned by Standard & Poor's to
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA Bonds rated "AA" have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in 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
27
<PAGE>
<TABLE>
<S> <C>
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.
28
<PAGE>
<TABLE>
<S> <C>
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
29
<PAGE>
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.
30
<PAGE>
PROSPECTUS
[American National Logo]
Government
Income Fund
Series
Primary
Fund Series
Tax Free
Fund Series
[SM&R CAPITAL FUNDS LOGO]
Securities Management & Research, Inc.
One Moody Plaza
Galveston, TX 77550
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 14
GALVESTON, TEXAS
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated December 29, 1995
- ----------------------------------------------------------------------
SM&R CAPITAL FUNDS, INC.
Mailing and Street Address: Telephone Number: (409) 763-8272
One Moody Plaza, 14th Floor Toll Free 1-(800) 231-4639
Galveston, Texas 77550
- ----------------------------------------------------------------------
This Statement of Additional Information is NOT a prospectus, but
should be read in conjunction with the Prospectus (the "Prospectus")
dated December 29, 1995. A copy of the Prospectus may be obtained
from your registered representative or Securities Management and
Research, Inc. ("SM&R"), One Moody Plaza, 14th Floor, Galveston, Texas
77550 (Telephone No. (409)-763-8272 or Toll Free 1-(800)-231-4639).
- ----------------------------------------------------------------------
No dealer, sales representative, or other person has been
authorized to give any information or to make any representations
other than those contained in this Statement of Additional Information
(and/or the Prospectus referred to above), and if given or made, such
information or representations must not be relied upon as having been
authorized by the Fund or SM&R. Neither the Prospectus nor this
Statement of Additional Information constitutes an offer or
solicitation by anyone in any state in which such offer or
solicitation is not authorized, or in which the person making such
offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation.
- ----------------------------------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------------------------
THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . 3
Lending of Portfolio Securities . . . . . . . . . . . . . . . 5
U.S. Treasury Securities. . . . . . . . . . . . . . . . . . . 5
Obligations Issued or Guaranteed by U.S.
Government Agencies and Instrumentalities . . . . . . . . . 6
Mortgage-Backed Securities Issued or
Guaranteed by U.S. Government Instrumentalities . . . . . . 6
Collateralized Obligations. . . . . . . . . . . . . . . . . . 7
Municipal Securities. . . . . . . . . . . . . . . . . . . . . 7
Risks Relating to Municipal Securities . . . . . . . . . . . 9
Taxable Securities. . . . . . . . . . . . . . . . . . . . . . 10
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . 10
Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
When Issued and Delayed Delivery Transactions . . . . . . . . 11
Certificate of Deposit. . . . . . . . . . . . . . . . . . . . 11
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . 12
Other Policies . . . . . . . . . . . . . . . . . . . . . . . 12
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . 12
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . 12
Remuneration of Directors . . . . . . . . . . . . . . . . . . 14
POLICY ON PERSONAL INVESTING . . . . . . . . . . . . . . . . . . . 15
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . . . 15
Control and Management of SM&R. . . . . . . . . . . . . . . . 16
Investment Advisory Agreement . . . . . . . . . . . . . . . . 16
Administrative Service Agreement. . . . . . . . . . . . . . . 17
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION . . . . . . . . . 18
<PAGE>
CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED . . . 20
Determination of Net Asset Value. . . . . . . . . . . . . . . 20
Offering Price . . . . . . . . . . . . . . . . . . . . . . . 21
Reduced Sales Charge. . . . . . . . . . . . . . . . . . . . . 22
SPECIAL PURCHASE PLANS . . . . . . . . . . . . . . . . . . . . . . 23
Letter of Intent. . . . . . . . . . . . . . . . . . . . . . . 23
Systematic Investment and Pre-Authorized Check Plans . . . . 24
Group Systematic and Investment Plans . . . . . . . . . . . . 24
Exchange Privilege. . . . . . . . . . . . . . . . . . . . . . 24
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Systematic Withdrawal Plan. . . . . . . . . . . . . . . . . . 26
THE UNDERWRITER. . . . . . . . . . . . . . . . . . . . . . . . . . 27
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
AUDITORS AND FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . 27
TRANSFER AGENT AND DIVIDEND PAYING AGENT . . . . . . . . . . . . . 27
OTHER PERFORMANCE QUOTATIONS . . . . . . . . . . . . . . . . . . . 28
COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
FINANCIAL STATEMENTS OF THE FUND
THE FUND
SM&R Capital Funds, Inc. (the "Fund") is a diversified, open-end
management investment company incorporated under the laws of Maryland
on November 6, 1991.
The Fund consists of three (3) separate series: the American
National Government Income Fund Series (the "Government Income
Series"), the American National Primary Fund Series (the "Primary
Series") and the American National Tax Free Series (the "Tax Free
Series"). 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 and also its proportionate shares of the general
liabilities of the Fund.
The Fund is registered under the Investment Company Act of 1940
(the "1940 Act") as a diversified, open-end management investment
company, commonly called a "mutual fund". This registration does not
imply any supervision by the Securities and Exchange Commission (the
"Commission") over the Fund's management or its investment policies or
practices.
INVESTMENT OBJECTIVES AND POLICIES
As noted in the Prospectus (See "INVESTMENT OBJECTIVES AND
POLICIES" on page 10 of the Prospectus), each Series has its own
investment objective and follows policies and techniques designed to
achieve those objectives. In addition, the following restrictions
have been adopted as fundamental policies for all Series of the Fund,
which means that they may not be changed without the approval of
shareholders. Exceptions may become applicable as new series are
added to the Fund.
The Fund does not:
1. Issue senior securities.
2. Make short sales of securities.
3. Purchase securities on margin (but it may obtain such
short-term credits as may be necessary for the clearance of
purchases and sales of securities).
4. Acquire, lease or hold real estate except such as may
be necessary or advisable for the maintenance of its
offices.
5. Write or purchase from others, put and call options, or
any combination thereof.
<PAGE>
6. Purchase or sell commodities or commodity contracts including
futures contracts.
7. Invest in companies for the purpose of exercising control or
management.
8. Invest in oil, gas or other mineral exploration or
development programs. However, any Series may invest in
securities which are secured by real estate or real estate
mortgages; securities of issuers which invest or deal in
real estate mortgages and securities of issuers which invest
in or sponsor oil, gas, or other mineral exploration,
provided such securities meet the criterion set forth under
"INVESTMENT OBJECTIVES AND POLICIES" in the Prospectus.
9. Act as underwriter of securities issued by other persons
except insofar as the Fund may be technically deemed
an underwriter under the federal securities laws in
connection with the disposition of portfolio securities.
10. Borrow money, except for such action by any Series for
temporary or emergency purposes in an amount not to exceed
10% of such Series' net assets.
11. Lend any funds or other assets of any Series, except
that the Government Income Series may from time to time lend
the securities it holds to qualified broker-dealers or other
institutional investors. Such loans shall not exceed ten
percent (10%) of the Government Income Series' net assets at
the time of the most recent loan and shall be made pursuant
to written agreements and shall be continuously secured by
collateral in the form of cash, U.S. Government securities,
or irrevocable standby letters of credit in an amount equal
to at least 102% of the market value at all times of the
loaned securities plus the accrued interest and dividends.
During the time securities are on loan, the Government
Income Series will continue to receive the interest and
dividends, or amounts equivalent thereto, on the loaned
securities while receiving a fee from the borrower or
earning interest on the investment of the cash collateral.
The right to terminate the loan will be given to either
party subject to appropriate notice. Upon termination of
the loan, the borrower will return to the lender securities
identical to the loaned securities. The Government Income
Series will not have the right to vote securities on loan,
but would terminate the loan and retain the right to vote if
that were considered important with respect to the
investment.
12. Pledge or mortgage any of the assets of any Series,
except for such action by any Series for temporary or
emergency purposes in an amount not to exceed 10% of such
Series' net assets.
13. Invest more than 5% of the value of the net assets of a
Series, at time of purchase in the securities of any one
issuer, but this limitation does not apply to investments in
securities issued or guaranteed by the U.S. government or
its instrumentalities.
14. Purchase any security (other than United States
Government obligations) if, as a result, the Fund would hold
more than (a) 10% of the total value of any class of
outstanding securities of an issuer or (b) 10% of the
outstanding voting securities of an issuer.
15. Concentrate more than 25% of the net assets of a Series
in any one industry or group of industries; provided
however, there is no limitation with respect to investments
in obligations issued or guaranteed by the United States
Government or its agencies or instrumentalities. For
purposes of this restriction, telephone, gas and electric
public utilities are each regarded as separate industries.
16. Purchase any securities issued by a corporation which
has not been in continuous operation for three years, but
such period may include the operation of a predecessor.
17. Will not purchase or retain securities of any issuer if
any officer or
<PAGE>
director of the Fund or of its investment manager own
individually more than one-half of one percent (1/2
of 1%) of the securities of that issuer, and collectively
the officers and directors of the Fund and investment
manager together own more than 5% of the securities of that
issuer.
18. Purchase securities of other investment companies except
pursuant to a plan of merger, consolidation or
acquisition of assets approved by the Fund's shareholders.
19. Invest no more than 15% of its net assets in restricted
securities for which there are no readily available market
quotations, or foreign securities which are not listed on
foreign or domestic exchanges, including securities
restricted as to disposition under the Federal Securities
Laws and repurchase agreements maturing more than seven days
from the date of acquisition.
20. Invest in foreign securities.
21. Purchase warrants.
If a percentage restriction on investment or utilization of
assets as set forth is adhered to at the time an investment is made, a
later change in the percentage resulting from a change in the value or
cost of a Series' assets will not be considered a violation of the
restriction except as provided in 17. above.
In order to change any of the foregoing restrictions, approval
must be obtained by stockholders of each Series that would be
affected. Such approval requires the affirmative vote of the lesser
of (i) 67% or more of the voting securities present at a meeting if
the holders of more than 50% of voting securities are represented at
that meeting or (ii) more than 50% of the outstanding voting
securities.
LENDING OF PORTFOLIO SECURITIES - Consistent with applicable
regulatory requirements, the Government Income Series may lend its
portfolio securities to broker-dealers and other financial
institutions, to a maximum of 10% of the value of the net assets of
such Series at the time of the most recent loan where such loans are
callable at any time and are continuously secured by cash collateral,
which collateral is equal at all times to at least 102% of the market
value of the securities loaned, including accrued interest. The
market value of the securities loaned shall be monitored daily. Such
cash collateral shall be invested in sufficiently liquid securities to
provide for repayment to the borrower upon demand. Such investments
shall be segregated from other short-term securities of the Government
Income Series. The Government Income Series will receive amounts
equal to earned income for having made the loan. Any cash collateral
pursuant to these loans will be invested in short-term instruments.
The Government Income Series will be the beneficial owner of the
loaned securities in that any gain or loss in the market price during
the loan inures to the Government Income Series and its shareholders.
Thus, when the loan is terminated, the value of the securities may be
more or less than their value at the beginning of the loan. In
determining whether to lend its portfolio securities to a broker-
dealer or other financial institution, the Government Income Series
will take into account the creditworthiness of such borrower and will
monitor such creditworthiness on an ongoing basis inasmuch as default
by the other party may cause delays or other collection difficulties.
The Government Income Series may pay placing brokers' fees in
connection with loans of its portfolio securities.
The primary risk in lending securities is that the borrower may
become insolvent on a day on which the loaned security is rapidly
advancing in price. In such event, if the borrower fails to return
the loaned securities, the existing collateral might be insufficient
to purchase back the full amount of the security loaned, and the
borrower would be unable to furnish additional collateral. The
borrower would be liable for any shortage; but the Government Income
Series would be unsecured creditors with respect to such shortage and
might not be able to recover all or any of it. However, this risk may
be minimized by a careful selection of borrowers and securities to be
lent and by monitoring collateral.
The Government Income Series will not lend securities to broker-
dealers affiliated with SM&R. This restriction will not affect the
ability of either Series to maximize its securities lending
opportunities.
<PAGE>
U.S. Treasury Securities - Any Series may invest in U.S. Treasury
securities, including bills, notes and bonds issued by the U.S.
Treasury. These instruments are direct obligations of the U.S.
Government and, as such, are backed by the full faith and credit of
the United States. They differ primarily in their interest rates, the
lengths of their maturities and the dates of their issuances.
OBLIGATIONS ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES - Any Series may invest in direct or implied
obligations of the U.S. Government, its agencies or instrumentalities
established or sponsored by the U.S. Government ("U. S. Government
Obligations"). These U. S. Government Obligations, including those
that are guaranteed by federal agencies or instrumentalities, may or
may not be backed by the full faith and credit of the United States.
Obligations of the Government National Mortgage Association ("GNMA" or
"Ginnie Mae"), the Farmers Home Administration and the Export-Import
Bank are backed by the full faith and credit of the United States.
Securities in which the Fund may invest that are not backed by the
full faith and credit of the United States include, among others,
obligations issued by the Tennessee Valley Authority, the Resolution
Trust Corporation, the Federal National Mortgage Association ("FNMA"
or "Fannie Mae"), the Federal Home Loan Mortgage Corporation ("FHLMC"
or "Freddie Mac") and the United States Postal Service, each of which
has the right to borrow from the United States Treasury to meet its
obligations, and obligations of the Federal Farm Credit Bank and the
Federal Home Loan Bank, the obligations of which may be satisfied only
by the individual credit of the issuing agency. Investments in
Freddie Mac, and Fannie Mae and other obligations may include
collateralized mortgage obligations and real estate mortgage
investment conduits issued or guaranteed by such entities. In the
case of U. S. Government Obligations not backed by the full faith and
credit of the United States, the Fund must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment
and may not be able to assert a claim against the U.S. if the agency
or instrumentality does not meet its commitments.
MORTGAGE-BACKED SECURITIES ISSUED OR GUARANTEED BY U.S. GOVERNMENT
INSTRUMENTALITIES - The Government Income Series may invest in
mortgage-backed securities issued or guaranteed by U.S. Government
agencies such as GNMA, FNMA or FHLMC and representing undivided
ownership interests in pools of mortgages. The mortgages backing
these securities may include conventional 30-year fixed rate
mortgages, 15-year fixed rate mortgages, graduated payment mortgages
and adjusted rate mortgages. The U.S. Government or the issuing
agency guarantees the payment of the interest on and principal of
these securities. However, the guarantees do not extend to the
securities' yield or value, which are likely to vary inversely with
fluctuations in interest rates, nor do the guarantees extend to the
yield or value of the Government Income Series' shares. These
securities are in most cases "pass-through" instruments, through which
the holders receive a share of all interest and principal payments
from the mortgages underlying the securities, net of certain fees.
Because the principal amounts of such underlying mortgages may
generally be prepaid in whole or in part by the mortgagees at any time
without penalty and the prepayment characteristics of the underlying
mortgages vary, it is not possible to predict accurately the average
life of a particular issue of pass-through securities. Mortgage-
backed securities are subject to more rapid repayment than their
stated maturity date would indicate as a result of the pass-through of
prepayments on the underlying mortgage obligations. The remaining
maturity of a mortgage-backed security will be deemed to be equal to
the average maturity of the mortgages underlying such security
determined by SM&R on the basis of assumed prepayment rates with
respect to such mortgages. The remaining expected average life of a
pool of mortgages underlying a mortgage-backed security is a
prediction of when the mortgages will be repaid and is based upon a
variety of factors such as the demographic and geographic
characteristics of the borrowers and the mortgaged properties, the
length of time that each of the mortgages has been outstanding, the
interest rates payable on the mortgages and the current interest rate
environment. While the timing of prepayments of graduated payment
mortgages differs somewhat from that of conventional mortgages, the
prepayment experience of graduated payment mortgages is basically the
same as that of the conventional mortgages of the same maturity dates
over the life of the pool. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities
can be expected to accelerate. When the mortgage obligations are
prepaid, the Government Income Series reinvests the prepaid amounts in
other income producing securities, the yields of which reflect
interest rates prevailing at the time. Therefore, the Government
Income Series' ability to maintain a portfolio of high-yielding
mortgage-backed securities will be adversely affected to the extent
that prepayments of mortgages must be reinvested in securities which
have lower yields than the prepaid mortgage-backed
<PAGE>
securities. Moreover, prepayments of mortgages which underlie
securities purchased by the Government Income Series at a premium
would result in capital losses.
COLLATERALIZED OBLIGATIONS - The Government Income Series may invest a
portion of its assets in collateralized mortgage obligations or "CMOs"
issued or guaranteed by a U.S. Government agency or instrumentality,
such as the FHLMC. A collateralized mortgage obligation is a debt
security issued by a corporation, trust or custodian or by a U.S.
Government agency or instrumentality, that is collateralized by a
portfolio or pool of mortgages, mortgage-backed securities or U.S.
Government securities. The issuer's obligation to make interest and
principal payments is secured by the underlying pool or portfolio of
securities. A variety of types of collateralized obligations are
available currently and others may become available in the future.
The Government Income Series will currently INVEST ONLY IN
COLLATERALIZED OBLIGATIONS THAT ARE FULLY COLLATERALIZED. Fully
collateralized means that the collateral will generate cash flows
sufficient to meet obligations to holders of the collateralized
obligations under even the most conservative prepayment and interest
rate projections. Thus, the collateralized obligations are structured
to anticipate a worst case prepayment condition and to minimize the
reinvestment rate risk for cash flows between coupon dates for the
collateralized obligations. A worst case prepayment condition
generally assumes immediate prepayment of all securities purchased at
a premium and zero prepayment of all securities purchased at a
discount. Reinvestment rate risk may be minimized by assuming very
conservative reinvestment rates and by other means such as by
maintaining the flexibility to increase principal distributions in a
low interest rate environment. The requirements as to
collateralization are determined by the issuer or sponsor of the
collateralized obligation in order to satisfy the U.S. Government
agency or instrumentality guaranteeing the obligation.
Collateralized obligations are designed to be retired as the
underlying securities are repaid. In the event of prepayment on or
call of such securities, the class of collateralized obligations first
to mature generally will be paid down first. Therefore, although in
most cases the issuer of collateralized obligations will not supply
additional collateral in the event of such prepayment, there will be
sufficient collateral to secure collateralized obligations that remain
outstanding.
MUNICIPAL SECURITIES - The Tax Free Series intends under normal
market conditions to invest at least 80% of its net assets in
municipal securities.
As used in the Prospectus and this Statement of Additional
Information, the term "municipal securities" means obligations
including municipal bonds and notes and tax exempt commercial paper
issued by or on behalf of states, territories and possessions of the
United States, the District of Columbia and their political
subdivisions, agencies and instrumentalities, the interest from which
is, in the opinion of counsel to the issuers of such securities,
exempt from federal income tax. To the extent that an investment in
municipal securities does not run counter to any of the investment
policies of the Tax Free Series or any of the investment restrictions
to which the Tax Free Series is subject, the Series may invest in any
combination of the various types of municipal securities described
below which, in the judgment of SM&R, the adviser, will contribute to
the attainment of the Series' investment objective. Such combination
of municipal securities may vary from time to time.
Discussed below are the major attributes of the various municipal
and other securities in which the Tax Free Series may invest.
MUNICIPAL BONDS, which meet longer term capital needs and generally
have maturities of more than one year when issued, have two principal
classifications: general obligation bonds and revenue bonds.
General Obligation Bonds - Issuers of general obligation bonds
include states, counties, cities, towns and regional districts. The
proceeds of these obligations are used to fund a wide range of public
projects, including construction or improvement of schools, highways
and roads and water and sewer systems. The basic security behind
general obligation bonds is the issuer's pledge of its full faith and
credit and taxing power for the payment of principal and interest.
The taxes that can be levied for the payment of debt service may be
limited or unlimited as to the rate or amount of special assessments.
REVENUE BONDS - The principal security for a revenue bond is
generally the net
<PAGE>
revenues derived from a particular facility, group of facilities,
or, in some cases, the proceeds of a special excise or other specific
revenue source. Revenue bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and
sewer systems; highways, bridges, and tunnels; port and airport
facilities; colleges and universities; and hospitals. Although the
principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund whose
money may be used to make principal and interest payments on the
issuer's obligations. Housing finance authorities have a wide range
of security, including partially or fully insured mortgages, rent
subsidized and/or collateralized mortgages, and/or the net revenues
from housing or other public projects. Some authorities provide
further security in the form of a state's ability (without obligation)
to make up deficiencies in the debt service reserve fund.
Industrial Development Bonds are, in most cases, revenue bonds
and are issued for or on behalf of public authorities to raise money
to finance various privately operated facilities for business and
manufacturing, housing, sports and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports and parking. The payment of the principal and interest
on such bonds is dependent solely on the ability of the facilities
user to meet its financial obligations and the pledge, if any, of real
and personal property so financed as security for such payment. The
Tax Free Series will purchase Industrial Revenue Development Bonds
only to the extent the interest paid is tax-exempt pursuant to the Tax
Reform Act of 1986, which limited the types of facilities that may be
financed with tax-exempt industrial development and private activity
bonds.
MUNICIPAL NOTES generally are used to provide for short-term working
capital needs and generally have maturities of one year or less.
Municipal notes include:
Tax Anticipation Notes which are issued to finance working
capital needs of municipalities and are issued in anticipation of
various seasonal tax revenue, such as income, sales, use and business
taxes, and are payable from these specific future taxes.
Revenue Anticipation Notes which are issued in expectation of
receipt of other types of revenue, such as federal revenues available
under federal revenue sharing programs.
Bond Anticipation Notes which are issued to provide interim
financing until long-term financing can be arranged. In most cases,
the long-term bonds then provide the money for the repayment of the
notes.
Construction Loan Notes which are sold to provide construction
financing. After successful completion and acceptance, many projects
receive permanent financing through the Federal Housing Administration
under "Fannie Mae" (the Federal National Mortgage Association) or
"Ginnie Mae" (the Government National Mortgage Association).
Tax-Exempt Commercial Paper (Short-Term Discount Notes) which is
a short-term obligation with a stated maturity of 365 days or less.
It is issued by state and local governments or their agencies to
finance seasonal working capital needs or as short-term financing in
anticipation of longer-term financing.
VARIABLE OR FLOATING RATE DEMAND NOTES ("VRDNs") are tax-exempt
obligations which contain a floating or variable interest rate
adjustment formula and an unconditional right of demand to receive
payment of the unpaid principal balance plus accrued interest upon a
short notice period (generally up to 30 days) prior to specified
dates, either from the issuer or by drawing on a bank letter of
credit, a guarantee or insurance issued with respect to such
instrument. The interest rates are adjustable at intervals ranging
from daily to up to six months to some prevailing market rate for
similar investments, such adjustment formula being calculated to
maintain the market value of the VRDN at approximately the par value
of the VRDN upon the adjustment date. The adjustments are typically
based upon the prime rate of a bank or some other appropriate interest
rate adjustment index. The Tax Free Series will decide which variable
or floating rate demand instruments it will purchase in accordance
with procedures prescribed by its Board of Directors to minimize
credit risks. Any VRDN must be of high quality as determined by the
adviser and subject to review by the Board with respect to both its
long-term and short-term aspects, except where credit support for the
instrument is provided even in the event of default on the underlying
security, the Series may rely only on the high quality character of
the short-term aspect of the
<PAGE>
demand instrument.
DEFEASED BONDS OR ESCROW SECURED BONDS are created when an issuer
refunds in advance of maturity (or pre-refunds) an outstanding bond
issue which is not immediately callable, and it becomes necessary or
desirable to set aside funds for redemption of the bonds at a future
date. In an advance refunding, the issuer will use the proceeds of a
new bond issue to purchase high grade, interest bearing debt
securities which are then deposited in an irrevocable escrow account
held by a trustee bank to secure all future payments of principal and
interest of the advance refunded bond. Escrow secured bonds will
often receive a triple A rating from Moody's and S&P. The Tax Free
Series will purchase escrow secured bonds without additional insurance
only when the escrow is invested in U.S. government securities backed
by the full faith and credit of the U.S. government.
INSURED BONDS are bonds that, in addition to being secured by the
issuer's revenues, are also backed by insurance policies written by
commercial insurance companies. Issuers of municipal bonds enter into
a contractual agreement with an insurance company to pay the
bondholder any principal and interest that is due on a stated maturity
date which has not been paid by the issuer. Once issued, this default
insurance usually extends for the term of the issue and cannot be
canceled by the insurance company. The bondholder who has not
received payments for principal or interest on the stated due dates
for the insured bond must notify the insurance company and surrender
any unpaid bonds and coupons for payment of the face amount of the
insured principal and interest. The commercial insurance companies
represent some of the largest and financially strongest insurance
companies in the U.S.
Although insured municipal bonds sell at yields lower than they
would without the insurance, they tend to have yields higher than
Aaa/AAA-rated noninsured municipal bonds.
In addition, other types of municipal securities similar to the
above described municipal bonds and municipal notes are, or may become
available. For the purpose of the Fund's investment restrictions set
forth in this Statement of Additional Information, the identification
of the "issuer" of a municipal security which is not a general
obligation bond is made by the adviser on the basis of the
characteristics of the obligation, the most significant of which is
the source of funds for the payment of principal and interest on such
security.
RISKS RELATING TO MUNICIPAL SECURITIES - There can be no assurance
that the Tax Free Series will achieve its investment objective.
Yields on municipal securities are dependent on a variety of factors,
including the general conditions of the money market and the municipal
bond market, the size of a particular offering, the maturity of the
obligations and the rating of the issue. Municipal securities with
longer maturities tend to produce higher yields and are generally
subject to potentially greater capital appreciation and depreciation
than obligations with shorter maturities and lower yields. The market
prices of municipal securities usually vary, depending upon available
yields. An increase in interest rates will generally reduce the value
of portfolio investments, and a decline in interest rates will
generally increase the value of portfolio investments. The ability of
the Series to achieve its investment objective is also dependent on
the continuing ability of the issuers of municipal securities in which
the Series invests to meet their obligations for the payment of
interest and principal when due. The ratings of Moody's and Standard
& Poor's represent their opinion as to the quality of municipal
securities which they undertake to rate. Ratings are not absolute
standards of quality; consequently, municipal securities with the same
maturity, coupon and rating may have different yields. There are
variations in municipal securities, both within a particular
classification and between classifications, depending on numerous
factors. It should also be pointed out that, unlike other types of
investments, municipal securities have traditionally not been subject
to regulation by, or registration with, the Securities and Exchange
Commission, although there have been proposals which would provide for
such regulation in the future.
The federal bankruptcy statutes relating to the debts of
political subdivisions and authorities of states of the United States
provide that, in certain circumstances, such subdivisions or
authorities may be authorized to initiate bankruptcy proceedings
without prior notice to or consent of creditors, which proceedings
could result in material and adverse changes in the rights of holders
of their obligations.
<PAGE>
Lawsuits challenging the validity under state constitutions of
present systems of financing public education have been initiated or
adjusted in a number of states, and legislation has been introduced to
effect changes in public school financing in some states. In other
instances there have been lawsuits challenging the issuance of
pollution control revenue bonds or the validity of their issuance
under state or federal law which could ultimately affect the validity
of those municipal securities or the tax-free nature of the interest
thereon.
TAXABLE SECURITIES - The Government Income Series and Primary Series
are expected to invest primarily in securities the income from which
(either in the form of dividends or interest) is taxable as ordinary
income. While the Tax Free Series may also invest a portion of its
net assets (up to 20% under normal market conditions and more as a
defensive measure under extraordinary circumstances, as described in
the Prospectus) in taxable securities.
Interest earned on investments in taxable securities may be
taxable to shareholders as ordinary income. Investors should be aware
that investments in taxable securities by the Tax Free Series are
restricted to:
U.S. Government Securities which consist of obligations issued or
guaranteed by the U.S. Government, its agencies, authorities or
instrumentalities. Some of these securities are supported by the full
faith and credit of the U.S. Government; others are supported by the
right of the issuer to borrow from the U.S. Treasury; and the
remainder are supported only by the credit of the instrumentality.
Corporate Debt Securities which at the date of the investment are
rated A or higher by Moody's and Standard & Poor's.
Commercial Paper which at the date of the investment is rated P-1
by Moody's or A-1 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 and Standard & Poor's.
Bank Obligations which include certificates of deposit, bankers'
acceptances, and other short-term obligations of U.S. banks which at
the date of the investment have a capital, surplus and undivided
profits of $1 billion as of the date of their most recently published
financial statements (See Certificate of Deposits below).
REPURCHASE AGREEMENTS - Any Series may enter into "repurchase
agreements" with banks or with government securities dealers,
recognized by the Federal Reserve Board and which have been approved
by the Board of Directors, who agree to repurchase the securities at a
predetermined price within a specified time (normally one day to one
week). In these transactions, the securities purchased shall have an
initial total value in excess of the value of the repurchase
agreement.
The custodian for the Series purchasing such repurchase agreement
will hold the securities underlying such repurchase agreement or such
securities may be part of the Federal Reserve Book Entry system. If
the seller defaults or becomes insolvent, a Series could realize
delays, costs or a loss in asserting its rights to, or in liquidating,
the collateral in satisfaction of the seller's repurchase agreement.
The Series will enter into repurchase agreements only with sellers who
are believed to present minimal credit risks and will monitor the
value of the collateral during the holding period. Credit risks are
evaluated pursuant to guidelines adopted and regularly reviewed by the
Fund's Board of Directors which set forth credit worthiness standards
for the banks and registered government security dealers with whom the
series may enter into such repurchase agreements. Such arrangements
permit a Series to keep all of its assets at work while retaining
flexibility in pursuit of investments of a longer-term nature. No
Series will purchase repurchase agreements maturing more than seven
(7) days after such purchase.
RATINGS - If the rating of a security purchased by a Series is
subsequently reduced below the minimum rating required for purchase or
a security purchased by the Series ceases to be rated, neither event
will require the sale of the security. However, the adviser will
consider any such event in determining whether the Series should
continue to hold the security.
When-Issued and Delayed Delivery Transactions - The Government Income
Series and Tax Free Series may also purchase and sell portfolio
securities on a "when issued" and "delayed delivery" basis. No income
accrues to the either Series on securities in
<PAGE>
connection with such transactions prior to the date it actually
takes delivery of such securities. These transactions are subject
to market fluctuations; 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. Because the Government Income Series and Tax Free
Series rely on the buyer or seller, as the case may be, to
consummate the transactions, failure by the other party to complete
the transaction may result in it missing the opportunity of obtaining
a price or yield considered to be advantageous. When the Government
Income Series or Tax Free Series is the buyer in such transactions,
however, it will maintain, in a segregated account with its
custodian, cash, short-term money market instruments, high quality
debt securities or portfolio securities having an aggregate value
equal to the amount of such purchase commitments until payment is
made. The Government Income Series or Tax Free Series will make
commitments to purchase securities on such basis only with the
intention of actually acquiring these securities, but it may sell such
securities prior to the settlement date if such sale is considered to
be advisable. No specific limitation exists as to the percentage of
the Government Income Series' or Tax Free Series' assets which may be
used to acquire securities on a "when issued" or "delayed delivery"
basis. To the extent either Series engages in "when issued" and
"delayed delivery" transactions, it will do so for the purpose of
acquiring securities for it's portfolio consistent with the it's
investment objective and policies and not for the purpose of
investment leverage.
CERTIFICATE OF DEPOSIT - A certificate of deposit is generally a
short-term, interest-bearing negotiable certificate issued by a
commercial bank or savings and loan association against funds
deposited in the issuing institution. The interest rate may be
fixed for the stated term or may be periodically adjusted prior to
the instrument's stated maturity, based upon a specified market rate.
A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with an international commercial
transaction to finance the import, export, transfer or storage of
goods. The borrower is liable for payment, as is the bank, which
unconditionally guarantees to pay the draft at its face amount on
the maturity date. Most bankers' acceptances have maturities of
six months or less and are traded in secondary markets prior to
maturity.
Savings and loan associations whose certificates of deposit may
be purchased by the Primary Series are subject to regulation and
examination by the Office of Thrift Supervision. Such certificates of
deposit held by the Primary Series do not benefit materially from
insurance from the Federal Deposit Insurance Corporation.
The Primary Series may not invest in any certificate of deposit
or bankers' acceptance of a commercial bank unless: the bank is
organized and operating in the United States, has total assets of at
least $1 billion and is a member of the Federal Deposit Insurance
Corporation; or the bank is a foreign branch of a United States bank
or a United States branch of a foreign bank which bank has $1 billion
of total assets.
RISK FACTORS - Obligations of foreign branches of United States banks
are subject to somewhat different risks than those of domestic banks.
These risks include foreign economic and political developments,
foreign governmental restrictions which may adversely affect payment
of principal and interest on the obligations, foreign withholding and
other taxes on interest income, and difficulties in obtaining and
enforcing a judgment against a foreign branch of a domestic bank. In
addition, different risks may result from the fact that foreign
branches of United States banks and United States 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 United States
banks, it may do so in the future. Investments in such obligations
will not be made in excess of 10% of the Primary Series' total assets
and will be made only when SM&R believes the risks described above are
minimal.
OTHER POLICIES - There are no restrictions or limitations on
investments in U. S. Government Obligations. In the case of all
Series, the underlying assets may be retained in cash, including cash
equivalents which are Treasury bills, commercial paper and short-term
bank obligations such as certificates of deposit and bankers'
<PAGE>
acceptances. However, it is intended that only as much of the
underlying assets of each Series be retained in cash as is deemed
desirable or expedient under then-existing market conditions.
PORTFOLIO TURNOVER
Portfolio turnover (as referred to in the Prospectus) is
calculated by dividing the lesser of annual purchases or sales of
portfolio securities by the monthly average of the value of each
Series' portfolio securities, excluding securities whose maturities at
the time of purchase are one (1) year or less. It is intended that
portfolio changes in the Government Income Series and Tax Free Series
be made as infrequently as possible, consistent with market and
economic factors generally, and special considerations affecting any
particular security such as the limitation of loss or realization of
price appreciation at a time believed to be opportune. (See
"ADDITIONAL INVESTMENT POLICIES AND TECHNIQUES" in the Prospectus.)
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS OF THE FUND
The Board of Directors has the responsibility for the overall
management of the Fund, including general supervision and review of
its investment activities. The directors, in turn, elect the officers
of the Fund who are responsible for administering day-to-day
operations of the Fund. The affiliations of the officers and
directors and their principal occupations for the past five years are
listed below. Directors who are deemed to be "interested persons" of
the Fund, as defined in the Investment Company Act of 1940 ("1940
Act"), are indicated by an asterisk(*).
SAMUEL K. FINEGAN - DIRECTOR(2)
(5228 AVE. U, GALVESTON, TEXAS 77551) Assistant District Attorney,
Galveston County, Galveston, Texas; Accounting Manager, Browning
Ferris Industries (Waste Disposal), Houston, Texas, May, 1988 to May,
1989; Internal Auditor, Stewart Title Guaranty Company (Title
Insurance), Houston, Texas, July, 1985 to May, 1988.
BRENT ELLIS MASEL, M.D. - DIRECTOR(1)(2)
(1528 POSTOFFICE, GALVESTON, TEXAS 77553) Doctor of Neurology;
Clinical Assistant Professor in Neurology, University of Texas Medical
Branch, 1978 to present; Staff Physician, St. Mary's Hospital,
Galveston, Texas, 1979 to present; Staff Physician, Mainland Center
Hospital, 1978 to present; Clinical Assistant Professor in Family
Medicine, Galveston, Texas, 1979 to present; Director, American
National Investment Accounts, Inc. (an affiliated mutual fund), One
Moody Plaza, Galveston, Texas, 1990 to present; President and
Executive Administrator, Transitional Learning Center, Galveston,
Texas, July 1992 to Present.
ALLAN W. MATTHEWS - DIRECTOR*(1)
(7114 YOUPON, GALVESTON, TEXAS 77551) Program Officer, The Moody
Foundation (a charitable foundation), April, 1991 to present;
Management Trainee, National Western Life Insurance Company, Austin,
Texas, October, 1988 to April, 1991; Program Coordinator, South Shore
Fitness Center, Gal-Tex Hotel Corporation (Hotel Management Company),
March, 1988 to October, 1988.
LEA McLEOD MATTHEWS - DIRECTOR*
(850 E. ANDERSON LANE, AUSTIN, TEXAS 78752-1602) Publications Editor,
National Western Life Insurance Co., 1990 to present; Director of
American National Investment Accounts, Inc., (an affiliated mutual
fund) 1994 to present; Public Relations, Moody Gardens, Galveston,
Texas, 1988 to 1990; Director of Garden State Life Insurance Company,
1993 to present.
MICHAEL W. McCROSKEY - DIRECTOR AND PRESIDENT*(1)
(ONE MOODY PLAZA, GALVESTON, TEXAS 77550) President, Chief Executive
Officer and member of the Executive Committee of SM&R, June 1994 to
present; President and Director of the Fund, June 1994 to present;
President and Director of the American National Growth Fund, Inc.,
American National Income Fund, Inc., and Triflex Fund, Inc.
(hereinafter referred to as the "American National Funds Group"), June
1994 to present; President and Director of the American National
Investment Accounts, Inc., June 1994 to present; Executive Vice
President, American National, 1971 to present; Vice President of
Standard Life and Accident Insurance Company, 1988 to present;
Assistant
<PAGE>
Secretary of American National Life Insurance Company of Texas,
1986 to present, life, health and accident insurance companies in
the American National Family of Companies; Vice President, Garden
State Life Insurance Company, 1994 to present; Director, ANREM
Corporation, 1977 to present; President and Director of ANTAC
Corporation, 1994 to present.
SHANNON L. MOODY - DIRECTOR*
(1501 WOOLRIDGE, AUSTIN, TEXAS 78703) Assistant Special Events
Director, Galveston Historical Foundation, March, 1989 to April, 1991.
ANDREW J. MYTELKA - DIRECTOR*
(7746 BEAUDELAIRE, GALVESTON, TEXAS 77551) Attorney, Greer, Herz &
Adams, L.L.P, Galveston, Texas, 1986 to present.
EDWIN K. NOLAN - DIRECTOR(2)
(#7 MT. LOOKOUT DRIVE, CANYON LAKE, TEXAS 78133) Attorney, Law
Offices, EDWIN K. NOLAN, P. C., Canyon Lake, Texas, 1977 to present;
Director, Deer Meadows, Inc. (Real Estate Development), Canyon Lake,
Texas, 1982 to 1990; Director, Summit Resort Development, Inc. (Real
Estate Development), Canyon Lake, Texas, 1982 to 1990; Director, Rocky
Creek Ranch, Inc. (Real Estate Development), Canyon Lake, Texas, 1989
to 1990; Director/Owner, Canyon Lake Aviation, Inc. (Aviation
Service), Canyon Lake, Texas, 1986 to present; Director/Owner, Canyon
Lake Airport, Inc. (Airport), Canyon Lake, Texas, 1985 to present.
LOUIS E. PAULS, JR. - DIRECTOR
(1413 TREMONT, SUITE 200, GALVESTON, TEXAS 77550) Owner of Louis
Pauls & Co., a sole proprietorship, 1959 to present; Director,
National Western Life Insurance Co., Austin, Texas, 1971 to present;
Director Seal Fleet, Galveston, Texas, 1970 to present; Director
American National Investment Accounts, Inc. (an affiliated mutual
fund), 1994 to present.
EMERSON V. UNGER, C.L.U. - VICE PRESIDENT
ONE MOODY PLAZA, GALVESTON, TEXAS Vice President SM&R, American
National Growth Fund, Inc., American National Income Fund, Inc.,
American National Investment Accounts, Inc. and Triflex Fund, Inc.,
mutual funds.
BRENDA T. KOELEMAY - VICE PRESIDENT AND TREASURER
ONE MOODY PLAZA, GALVESTON, TEXAS Vice President and Treasurer SM&R,
American National Growth Fund, Inc., American National Income Fund,
Inc., American National Investment Accounts, Inc. and Triflex Fund,
Inc., mutual funds; Senior Manager, KPMG Peat Marwick, July 1980 to
April, 1992.
TERESA E. AXELSON - VICE PRESIDENT AND SECRETARY
ONE MOODY PLAZA, GALVESTON, TEXAS Vice President and Secretary of
SM&R, American National Investment Accounts, Inc., American National
Growth Fund, Inc., American National Income Fund, Inc., and Triflex
Fund, Inc., mutual funds.
VERA M. YOUNG - VICE PRESIDENT AND PORTFOLIO MANAGER
One Moody Plaza, Galveston, Texas Vice President and Portfolio
Manager of the Primary Series and member of the Fixed Income
Investment Committee of SM&R; Portfolio Manager of Money Market
Portfolio of the American National Investment Accounts, Inc., mutual
funds; Assistant Vice President, Securities, American National.
TERRY E. FRANK - VICE PRESIDENT AND PORTFOLIO MANAGER
ONE MOODY PLAZA, GALVESTON, TEXAS Vice President and Portfolio
Manager of the Government Income Series and the Tax Free Series and a
member of the Fixed Income Investment Committee of SM&R; Former
research analyst, Equitable Investment Services, Des Moines, Iowa;
Former securities analyst, Gibraltar Savings Association, Houston,
Texas; Former Senior Money Market Trader, American Capital Asset
Management, Houston, Texas.
* "Interested persons" as defined by the Investment Company Act of
1940.
(1) Member of the Fund's nominating committee.
(2) Member of the Fund's audit committee.
<PAGE>
Officers and directors of the Fund affiliated with SM&R may
receive indirect compensation from the Fund to the extent of
underwriting commissions and investment advisory and service fees paid
to SM&R.
During the year ended August 31, 1995, the Fund paid or accrued
approximately $34,000 to such directors for fees and expenses in
attending meetings of the Board of Directors.
REMUNERATION OF DIRECTORS
Each director is reimbursed for expenses incurred in connection
with each meeting of the Board of Directors or any Committee meeting
attended. Each director receives a fee, allocated among the Series,
which consists of an annual retainer component and a meeting fee
component.
Set forth below is information regarding compensation paid or
accrued during the fiscal year ended August 31, 1995 for each director
of the Fund.
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
DIRECTOR COMPENSATION FROM ALL AMERICAN
FROM FUND NATIONAL FUNDS
- -------------------------------------------------------------
<S> <C> <C>
Samuel K. Finegan $3,500 $3,500
Brent E. Masel, M.D. $3,500 $7,000
Allan W. Matthews $3,500 $3,500
Lea McLeod Matthews $3,500 $6,500
Michael W. McCroskey $0 $0
Shannon L. Moody $3,500 $3,500
Andrew J. Mytelka $3,000 $3,500
Edwin K. Nolan $3,500 $3,500
Louis E. Pauls, Jr. $3,000 $6,500
</TABLE>
POLICY REGARDING PERSONAL INVESTING
The following policies have been made a part of the Fund's Code
of Ethics.
PERSONAL INVESTING BY PORTFOLIO MANAGERS
A portfolio manager must use extreme care to avoid even the
appearance of a conflict of interest in trading in any personal
account (or an account in which he has a beneficial interest).
Accordingly, a portfolio manager may not trade in (or otherwise
acquire) any security for his personal account if that same security
is held in, or is being considered as a potential acquisition by, any
of the Funds. Any beneficial interest in a security held by a
portfolio manager must be sold at least 24 hours prior to any
investment by the Funds. The following exceptions apply:
1. Any beneficial interest in a security owned at the time of
employment may be held or traded at any time other than within 24
hours of a trade in the Funds for the same or related security.
Dividends in that security may be re-invested in accordance with
a formal plan offered by the issuer.
2. Any beneficial interest in a security acquired by devise or
bequeath may be held or traded at any time other than within 24
hours of a trade in the Funds for the same or related security.
3. Any beneficial interest in a security issued by the Government or
any Agency of the United States, a State, or any political
subdivision thereof may be traded or held.
4. Any beneficial interest in a security for which a written
approval is first obtained from the President & CEO may be traded
or held.
<PAGE>
PERSONAL INVESTING BY OTHER SM&R OFFICERS AND EMPLOYEES:
Officers and employees of the Company other than portfolio
managers may trade in (or otherwise acquire) or hold any security for
his own account (or an account in which he has beneficial interest).
However, the trade must not occur within 24 hours of a trade in the
Funds for the same or related security.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of November 30, 1995, the officers and directors of the Fund
as a group owned 0.1% of the outstanding shares of the Fund. As of
November 30, 1995, American National and SM&R owned 50.6% and 12.63%
of the outstanding shares of the Fund, respectively. See the "Control
and Management of SM&R" below.
CONTROL AND MANAGEMENT OF SM&R
SM&R has been the investment adviser, manager and underwriter of
the Fund since the Fund began business in 1992. SM&R acts pursuant to
a written agreement periodically approved by the directors or
shareholders of the Fund. SM&R is also the investment adviser and
underwriter of the American National Funds Group and the American
National Investment Accounts, Inc. SM&R's address is that of the
Fund.
SM&R is a wholly-owned subsidiary of American National Insurance
Company ("American National"), a Texas life insurance company with its
principal offices in Galveston, Texas. The Moody Foundation (the
"Foundation"), a charitable foundation established for charitable and
educational purposes, owns approximately 23.7% of American National's
common stock and the Libbie S. Moody Trust, a private trust, owns
approximately 37.6% of such shares. The trustees of the Moody
Foundation are Robert L. Moody ("RLM"), Chairman of the Board of
Directors of American National, Frances Moody Newman and Ross R.
Moody.
The Moody National Bank of Galveston (the "Bank") is trustee of
the Libbie S. Moody Trust. RLM is Chairman of the Board and
President, Chief Executive Officer of the Bank, President and Director
of Moody Bancshares, Inc. ("Bancshares"), the sole shareholder of
Moody Bank Holding Company, Inc. ("MBHC"), and President and Director
of MBHC, the Bank's controlling stockholder. The Three R Trusts,
trusts established by RLM for the benefit of his children, owns 100%
of Bancshares' Class B stock (which elects a majority of Bancshares'
and MBHC's directors) and 47.5% of its Class A Stock. The trustee of
the Three R Trusts is Irwin M. Herz, Jr., who is also a director of
American National and a partner in Greer, Herz & Adams, L.L.P., 18th
Floor, One Moody Plaza, Galveston, Texas, General Counsel to American
National, the Bank, Bancshares, MBHC, the Fund, the other American
National Funds, the American National Investment Accounts, Inc. and
SM&R.
Michael W. McCroskey, President and Director of the Fund, is also
President, Chief Executive Officer, Director and a member of the
Executive Committee of SM&R, and President and Director of the
American National Funds Group and the American National Investment
Accounts, Inc.; Emerson V. Unger, Vice President of the Fund, is also
Vice President of SM&R and Vice President of the American National
Funds Group and the American National Investment Accounts, Inc.;
Teresa E. Axelson, Vice President, Secretary of the Fund, is also Vice
President and Secretary of SM&R, the American National Investment
Accounts, Inc., and the American National Funds Group; Brenda T.
Koelemay, Vice President and Treasurer of the Fund, is also Vice
President and Treasurer of SM&R, the American National Investment
Accounts, Inc. and the American National Funds Group; Vera M. Young,
Vice President and Portfolio Manager of the Primary Series is also
Vice President and Portfolio Manager of the Money Market Portfolio of
the American National Investment Accounts, Inc., and a member of the
Fixed Income Investment Committee of SM&R and is affiliated with
American National as Assistant Vice President, Securities Investment;
and Terry E. Frank is Vice President and Portfolio Manager of the
Government Income Series and Tax Free Series and a member of the Fixed
Income Investment Committee.
INVESTMENT ADVISORY AGREEMENT
Under Investment Advisory Agreements (the "Advisory Agreement")
between the Fund and SM&R dated February 19, 1992, and July 1, 1993
for the Tax Free Series SM&R acts as investment adviser for and
provides certain investment-related administrative
<PAGE>
services to the Fund.
As investment adviser, SM&R manages the investment and
reinvestment of the Fund's assets, including the placing of orders for
the purchase and sale of portfolio securities. SM&R provides and
evaluates economic, statistical and financial information to formulate
and implement Fund investment programs. All investments are reviewed
quarterly by the Fund's Board of Directors to determine whether or not
such investments are within the policies, objectives and restrictions
of the Fund.
INVESTMENT ADVISORY FEE
Under its Advisory Agreements 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 the Government Income Series each month one-twelfth (1/12th) of the
annual rate as follows:
<TABLE>
<CAPTION>
ON THE PORTION OF EACH SERIES' INVESTMENT
AVERAGE DAILY NET ASSETS ADVISORY FEE
ANNUAL RATE
<S> <C>
Not exceeding $100,000,000 .50 of 1%
Exceeding $100,000,000 but not exceeding .45 of 1%
$300,000,000
Exceeding $300,000,000 .40 of 1%
</TABLE>
PRIMARY SERIES - An investment advisory fee, computed and paid
monthly, at the annual rate of 0.50 of 1% of the Primary Series'
average daily net asset value.
For the years ended August 31, 1995, 1994, 1993 and the period
ended August 31, 1992, SM&R received investment advisory fees from the
Fund of $216,492, $211,039, $92,863 and $28,392, respectively.
ADMINISTRATIVE SERVICE AGREEMENT
Under an Administrative Service Agreement between the Fund and
SM&R dated July 1, 1993, SM&R acts as transfer agent and provides all
management, operational and executive services to the Fund. SM&R pays
the salaries of all officers and employees administering the Fund's
affairs and maintains office facilities, furnishes statistical and
research data, clerical help, accounting, data processing,
bookkeeping, transfer agency services, dividend disbursements and
certain other services required by the Fund. The Fund has agreed to
pay other expenses incurred in the operation of the Fund, such as
interest, taxes, commissions and other expenses incidental to
portfolio transactions, Securities and Exchange Commission fees, fees
of the Custodian (See "The Custodian" herein), auditing and legal
expenses, fees and expenses of qualifying Fund shares for sale and
maintaining such qualifications under the various state securities
laws where Fund shares are offered for sale, fees and expenses of
directors not affiliated with SM&R, costs of maintaining corporate
existence, costs of printing and mailing prospectuses and shareholder
reports to existing shareholders and expenses of shareholders'
meetings.
ADMINISTRATIVE SERVICE FEE
Under an 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 EACH SERIES' 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 .25 of 15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Exceeding $200,000,000 but not exceeding $300,000,000 .15 of 1%
Exceeding $300,000,000 .10 of 1%
</TABLE>
Under its Administrative Service Agreement with the Fund, 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.
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
voluntarily agreed 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 - 0.80% through August 31,1996; the Government Income
Series -1.00% through February 29, 1996 and the Tax Free Series - 100%
through February 29, 1996.
During the years ended August 31, 1995, 1994, 1993 and the period
ended August 31, 1992, SM&R reimbursed the Fund $226,597, $62,394,
$50,579 and $18,065, respectively for expenses in excess of the
expense limitation and/or any undertaking then in existence.
The administrative service fee is payable to SM&R whether or not
the actual expenses to SM&R for providing administrative services is
more or less than the amount of such fee. For the years ended August
31, 1995, 1994, 1993 and the period ended August 31, 1992, SM&R
received administrative service fees from the Fund of $108,246,
$105,530, $71,464 and $23,139, respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
SM&R, which supervises the Fund's investments, is responsible for
effecting portfolio transactions through eligible securities brokers
and dealers, subject to the general supervision of the Fund's Board of
Directors. Investment decisions are made by an Investment Committee
of SM&R, and orders are placed by persons supervised by that
committee.
There is no arrangement or intention to place orders with any
specific broker or group of brokers. The paramount factors considered
by SM&R in placing orders are efficiency in the execution of orders
and obtaining the most favorable prices for the Fund in both purchases
and sales of portfolio securities. In seeking the best prices and
executions, purchases and sales of securities which are not listed or
traded on a securities exchange are generally executed with a
principal market maker acting as principal. SM&R continuously
evaluates the brokerage fees paid by each Series to any affiliated
person by comparing such fees to those paid by other investment
companies for similar transactions as reported in various industry
surveys.
Whenever the primary consideration of best price and best
execution is met to the satisfaction of SM&R, the brokers and dealers
selected will include those who provide supplementary statistical and
research services. Such research services include advice as to the
advisability of investing in, purchasing or selling securities, as
well as analyses and reports concerning securities, economic factors
and trends. While SM&R is able to fulfill its obligation to the Fund
without such information, its expenses might be materially increased
if it had to obtain and assemble such information through its staff.
However, the value of such information is not determinable. SM&R also
uses such information when rendering investment advisory services to
the American National Funds Group, the American National Investment
Accounts, Inc. and to American National and its other accounts. SM&R
will authorize each Series of the Fund to pay an amount of commission
for effecting a securities transaction in excess of the amount of
commission another broker-dealer would have charged only if it
determines in good faith
<PAGE>
that such amount of commission is reasonable in relation to the
value of the brokerage and research services provided by such
broker-dealer. Generally, the Series pay higher than the lowest
commission rates available. During the years ended August 31, 1995,
1994, 1993 and the period ended August 31, 1992, the Fund paid no
brokerage fees for transactions in Portfolio securities. The Portfolio
turnover rate for this same period for the Government Income Series
was 2.20%, 45.48%, 18.14% and 49.70%, respectively. The Tax Free
turnover rate was 12.63% and 16.49% for the year ended August 31, 1995
and the period ended August 31, 1994. The Primary Series
experienced no portfolio turnover as the majority of securities owned
during the period had maturities of one year or less at the time of
acquisition. No brokerage commissions have been paid during the
period to any broker which is an affiliated person of the Fund, which
is an affiliated person of a broker which is an affiliated person of
the Fund or an affiliated person of which is an affiliated person of
the Fund or SM&R.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, and subject to seeking the best
price and execution, the Fund may give consideration to sales of
shares of the Fund as a factor in the selection of brokers and dealers
to execute Fund portfolio transactions.
If purchases or sales of securities of the Series and one or more
other investment companies or clients managed by the Adviser are
considered at or about the same time, transactions in such securities
will be allocated among the several investment companies and clients
in a manner deemed equitable to all by the Adviser, taking into
account the respective sizes of the Series and such other investment
companies and clients and the amount of securities to be purchased or
sold.
The Fund's Board of Directors has determined that such ability to
effect simultaneous transactions may be in the best interests of each
Series. It is recognized that in some cases these practices could
have a detrimental effect upon the price and volume of securities
being bought and sold by each Series, while in other cases these
practices could produce better executions.
CAPITAL STOCK
The Fund's authorized capital stock consists of Two Hundred
Million (200,000,000) shares of common stock with a par value of $0.01
per share, issuable in separate series. Currently three such series
have been established - the Government Income Series, the Primary
Series and the Tax Free Series. All shares are equal with respect to
distributions from income and capital gains. There are no conversion,
pre-emptive or other subscription rights. In the event of
liquidation, each share is entitled to an equal portion of all the
Fund's assets after all debts and expenses have been paid.
Each share is entitled to one vote, and the Fund's shares have
non-cumulative voting rights with respect to election of directors.
This means that the holders of more than 50% of the shares voting for
the election of directors can elect 100% of the directors if they so
choose, and in such event, holders of the remaining shares will not be
able to elect any directors.
Prior to the Fund's offering of any shares to investors, SM&R
provided the Fund with initial capital by purchasing 100,000 shares of
the Primary Series at a purchase price of $1.00 per share and 10,000
shares of the Government Income Series at a purchase price of $10.00
per share. In addition, SM&R purchased an additional 190,000 shares
of the Government Income Series at a purchase price of $10.00 per
share, and American National purchased 400,000 shares of the
Government Income Series at a price of $10.00 per share. Such
additional shares of the Government Income Series were acquired by
SM&R and American National in connection with the formation of the
Fund, were acquired for investment and can be disposed of only by
redemption.
The Tax Free Series initial capital was provided by SM&R through
the purchase of 10,000 shares at a price of $10.00 per share. In
addition, SM&R purchased an additional 90,000 shares and American
National purchased 500,000 shares at a price of $10.00 per share.
These additional shares were acquired by SM&R and American National in
connection with the formation of the Series for investment and can
only be disposed of by redemption.
Both SM&R's and American National's shares will be redeemed only
when permitted by the Investment Company Act of 1940 and when the
other assets of the Series are large enough that such redemption will
not have a material adverse effect upon investment
<PAGE>
performance.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
Certificates representing shares purchased are not ordinarily
issued in an effort to minimize the risk of loss or theft. Most
investors do not choose to receive certificates for their shares as
this eliminates the problem of safekeeping and facilitates redemptions
and transfers. However, a confirmation will be sent to the investor
promptly after each share purchase. The investor will have the same
ownership rights with respect to shares purchased as if certificates
had been issued. Investors may receive a certificate representing
shares by making written request to SM&R. If a certificate is
requested, it will normally be forwarded to the investor within 14
days after receipt of the request. SM&R reserves the right to charge
a small administrative fee for issuance of any certificates.
Certificates will not be issued for fractional shares (although
fractional shares remain in your account on the books of each Series
of the Fund).
All purchases must be in (or payable in) United States dollars.
All checks must be drawn in United States dollars on a United States
bank. Investors will be subject to a service charge on dishonored
checks. The Fund reserves the right to reject any order for the
purchase of its shares when in the judgment of management such
rejection is in the best interests of the Fund.
DETERMINATION OF NET ASSET VALUE
GOVERNMENT INCOME SERIES AND TAX FREE SERIES
The net asset value per share of the Government Income and Tax
Free Series' shares is determined by adding the market value of its
portfolio securities and other assets, subtracting liabilities, and
dividing the result by the number of the Fund shares outstanding.
Expenses and fees of such Series, including the advisory fee and the
expense limitation reimbursement, if any, are accrued daily and taken
into account in determining net asset value. The portfolio securities
of the Fund are valued as of the close of trading on each day when the
New York Stock Exchange is open for trading other than customary
national business holidays and SM&R's business holidays described
below. Securities listed on national securities exchanges are valued
at the last sales price on such day, or if there is no sale, then at
the closing bid price therefor on such day on such exchange. The
value of unlisted securities is determined on the basis of the latest
bid prices therefor on such day. Debt obligations that are issued or
guaranteed by the U.S. Government, its agencies, authorities, and
instrumentalities are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service
may be determined without exclusive reliance on quoted prices, and may
reflect appropriate factors such as yield, type of issue, coupon rate,
maturity and seasoning differential. Securities in corporate short-
term notes are valued at cost plus amortized discount, which
approximates market value. If no quotations are available for a
security or other property, it is valued at fair value as determined
in good faith by the Board of Directors of the Fund on a consistent
basis.
PRIMARY SERIES
The net asset value per share of the Primary Series is determined
by adding the market value of its portfolio securities and other
assets, subtracting liabilities, and dividing the result by the number
of such Series' shares outstanding. Expenses of the Primary Series,
if any, are accrued daily and taken into account in determining the
net asset value. The portfolio securities of the Primary Series are
valued 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, other than customary national
business holidays and SM&R's business holidays described below.
Securities listed on national exchanges are valued at the last sales
price on such day, or if there is no sale, then at the closing bid
price therefor on such day on such exchange. The value of unlisted
securities is determined on the basis of the latest bid prices
therefor on such day. Securities in corporate short-term notes are
valued at cost plus amortized discount, which approximates market
value. If no quotations are available for a security or other
property, it is valued at fair value as determined in good faith by
the Board of Directors of the Fund on a consistent basis.
<PAGE>
Securities subject to floating or variable interest rates with demand
features in compliance with applicable Rules of the Securities and
Exchange Commission may have stated maturities in excess of one year.
OFFERING PRICE
GOVERNMENT INCOME SERIES AND TAX FREE SERIES
Full and fractional shares of the Government Income Series and
Tax Free Series are purchased at the offering price, which is the net
asset value next determined after receipt of a purchase plus the sales
charge. The sales charge is a percentage of the net asset value per
share and will vary as shown below. Purchases received by SM&R at its
office in Galveston, Texas prior to 3:00 p.m., Central Time, will be
executed at the applicable offering price determined on that day.
Purchases received thereafter will be executed at the offering price
determined on the next business day.
The offering price of the Government Income Series and Tax Free
Series is the net asset value per share plus a sales charge computed
at the rates set forth in the following table:
<TABLE>
<CAPTION>
(1) (2) (3)
SALES SALES DISCOUNT TO
CHARGE AS CHARGE AS SELECTED
AMOUNT OF A A DEALERS AS A
INVESTMENT PERCENTAGE PERCENTAGE PERCENTAGE OF
OF OF NET OFFERING
OFFERING AMOUNT PRICE
PRICE INVESTED
<S> <C> <C> <C>
Less than $100,000 4.5% 4.7% 4.0%
$100,000 but less 3.5% 3.6% 3.0%
than $250,000
$250,000 but less 2.5% 2.6% 2.0%
than $500,000
$500,000 but less 1.5% 1.5% 1.0%
than $1,000,000
$1,000,000 but less 1.0% 1.0% 0.8%
than $1,500,000
$1,500,000 and 0.5% 0.5% 0.3%*
over
</TABLE>
*Such discount may result in such dealers being deemed to be
underwriters for purposes of the Securities Act of 1933.
The following illustrates the calculation of the net asset value
and offering price per share at August 31, 1995 for the Government
Income Series and the Tax Free Series.
GOVERNMENT INCOME SERIES
Net Assets ($20,465,741)
------------------------ = Net Asset Value Per Share ($10.51)
Shares outstanding (1,946,741)
$ 10.51
------------- = Public Offering Price Per Share ($11.01)
.955
TAX FREE SERIES
Net Assets ($8,399,116)
------------------------ = Net Asset Value Per Share ($9.95)
Shares outstanding (844,414)
$ 9.95
------------- = Public Offering Price Per Share ($10.42)
.955
<PAGE>
REDUCED SALES CHARGE
The reduced sales charge rates set forth in the table above apply
to purchases of shares of the Government Income Series and the 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 Fund will realize
economies of scale in sales effort and sales related expenses as a
result of the employer's or the plan's bearing the expense of any
payroll deduction plan, making the Fund's prospectus available to
individual investors or employees, forwarding investments by such
employees to the Fund, and the like.
The rates set forth above are applicable to single, lump sum
purchases made under the provisions of the preceding paragraphs 1, 2
and 3 and to qualified investments under a "Letter of Intent" or under
the "Accumulation Privilege" as described below.
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 SALES DISCOUNT TO
AS A CHARGE AS A SELECTED
AMOUNT OF PERCENTAGE OF PERCENTAGE DEALERS AS A
INVESTMENT OFFERING OF NET PERCENTAGE OF
PRICE AMOUNT OFFERING
INVESTED PRICE
<S> <C> <C> <C>
Less than 3.5% 3.6% 3.0%
$250,000
$250,000 but less 2.5% 2.6% 2.0%
than $500,000
$500,000 but less 1.5% 1.5% 1.0%
than $1,000,000
$1,000,000 but less 1.0% 1.0% 0.8%
than $1,500,000
$1,500,000 and 0.5% 0.5% 0.3%*
over
</TABLE>
*Such discount may result in such dealers being deemed to be
underwriters for purposes of the Securities Act of 1933.
SPECIAL PURCHASE PLANS
LETTER OF INTENT - Shareholders may qualify for a reduced sales
charge on the Government Income Series and the Tax Free Series by
completing a Letter of Intent (See "Letter of Intent" in the
Prospectus). A minimum initial investment
<PAGE>
equal to 10% of the amount necessary for the applicable reduced sales
charge is required when a Letter of Intent is executed. Investments
made under a Letter of Intent will purchase shares at the total sales
charge rate applicable to the specified total investment. SM&R will
hold in escrow from the initial investment shares equal to 5% of the
amount of the total intended investment. Such escrow shares may
not be exchanged for or reinvested in shares of another Series or
fund and, subject to the right of early cancellation described below,
will not be released until the amount purchased equals the commitment
set forth in the Letter of Intent. If the intended investment is not
completed during the 13-month period, the difference between the sales
charge actually paid and the sales charge applicable to the total of
such purchases made will be deducted from the escrow shares if not
paid by the investor within twenty days after the date notice thereof
has been mailed to such investor.
A Letter of Intent agreement can be canceled prior to the end of
the 13-month period and escrow shares released to the investor if the
investor pays the difference between the sales charge paid and the
sales charge applicable to the amount actually invested and agrees
that such Letter of Intent agreement is canceled and no longer in
effect.
The offering value of the shares of the Government Income Series,
the Tax Free Series and the funds in the Group currently owned may
also be included in the aggregate amount of an investment covered by a
Letter of Intent. For example, if an investor owns shares of the
Government Income Series, the Tax Free Series or shares of the Growth
Fund, the Income Fund or the Triflex Fund, or some combination of
these funds, currently valued at $80,000 and intends to invest $25,000
over the next thirteen months in the Government Income Series and/or
the Tax Free Series, such investor may execute a Letter of Intent and
the entire $25,000 will purchase shares of either or all of such funds
at the reduced sales charge rate applicable to an investment of
$100,000 or more. A Letter of Intent does not represent a binding
obligation on the part of the investor to purchase or the Government
Income Series or the Tax Free Series to sell the full amount of shares
specified.
SYSTEMATIC INVESTMENT AND PRE-AUTHORIZED CHECK PLANS - All Series
provide a convenient, voluntary method of purchasing their shares
through "Systematic Investment and Pre-Authorized Check Plans" (a
"Plan" or "Plans"). The principal purposes of such Plans are to
encourage thrift by enabling investors to make regular purchases in
amounts less than normally required, and, in the case of the
Government Income Series and the Tax Free Series, to employ the
principle of dollar cost averaging described below.
By acquiring shares of the Government Income Series and the Tax
Free Series on a regular basis pursuant to a Plan, or investing
regularly on any other systematic plan, the investor takes advantage
of the principle of Dollar Cost Averaging. Under Dollar Cost
Averaging, if a constant amount is invested at regular intervals at
varying price levels, the average cost of all the shares will be lower
than the average of the price levels. This is because the same fixed
number of dollars buys more shares when price levels are low and fewer
shares when price levels are high. It is essential that the investor
consider his or her financial ability to continue this investment
program during times of market decline as well as market rise. The
principle of Dollar Cost averaging will not protect against loss in a
declining market, as a loss will result if the Plan is discontinued
when the market value is less than cost.
A Plan may be opened by indicating an intention to invest $20 or
more (per individual) in the Government Income Series or the Tax Free
Series or $100 or more in the Primary Series monthly for at least one
year. The investor will receive a confirmation showing the number of
shares purchased, purchase price, and subsequent new balance of shares
accumulated.
An investor has no obligation to invest regularly or to continue
participating in a Plan, which may be terminated by the investor at
any time without penalty. Under a Plan, any distributions of income
and realized capital gains will be reinvested in additional shares at
net asset value unless a shareholder instructs SM&R in writing to pay
them in cash. SM&R reserves the right to increase or decrease the
amount required to open and continue the Plan, and to terminate any
shareholder's right to participate in the Plan if after one year the
value of the amount invested is less than $100 in the Government
Income Series or the Tax Free Series or $1,000 in the Primary Series.
GROUP SYSTEMATIC INVESTMENT PLAN - A Group Systematic Investment Plan
provides employers and employees with a convenient means for
purchasing shares of the Fund under
<PAGE>
various types of employee benefit and thrift plans, including payroll
deduction and bonus incentive plans. The plan may be started with
an initial cash investment of $100 ($20 per individual) in the
Government Income Series or the Tax Free Series or $1,000 in the
Primary Series for a group consisting of five or more participants.
The shares purchased by each participant under the Plan will be
credited to a separate account in the name of each investor in which
all dividends and capital gains will be reinvested in additional
shares of the applicable Series at net asset value (plus a sales
charge, if applicable). Such reinvestments will be made at the start
of business on the day following the record date for such dividends
and capital gains distributions. To keep his or her account open,
subsequent payments in the amount of $20 must be made into each
participant's account. If the group is reduced to less than five
participants, the minimums set forth under "Systematic Investment and
Pre-Authorized Check Plans" shall apply. The plan may be
terminated by SM&R or the shareholder at any time upon sixty (60)
days' prior written notice.
EXCHANGE PRIVILEGE - Investors owning shares of the Government
Income Series or the Tax Free Series can exchange such shares for
shares of funds in the American National Funds Group. There is no
administrative charge for this privilege at this time, however, the
Fund reserves the right to charge a fee in the future. (See "Exchange
Privilege" in the Prospectus)
Any gain or loss realized on such an exchange is recognized for
income tax purposes, subject, however, to the "wash sale" rule that if
and to the extent the investor reinvests in the Series or fund
originally held within thirty (30) after the redemption, losses will
not be recognized.
Such exchange privileges are not options or rights to purchase
such securities, but are revocable privileges permitted under the
present policies of each of the Government Income Series, the Tax Free
Series and such funds, and are not available in any state or other
jurisdiction where the shares of the Government Income Series, the Tax
Free Series or fund into which transfer is to be made are not
registered for sale. SM&R reserves the right to restrict the
frequency of or otherwise modify, condition, terminate or impose
additional charges upon the exchange privilege.
The minimum number of shares of the Government Income Series, the
Tax Free Series or fund that may be exchanged is the number of shares
of the such Series or fund whose shares are being exchanged which have
a net asset value on the date of such exchange equal to the minimum
initial or subsequent investment, as the case may be, of the fund into
which the exchange is being made.
REDEMPTION
Any shareholder may redeem all or any part of his shares by
submitting a written request to SM&R as the Fund's agent for such
purpose. Such requests must be duly executed by each registered owner
and must be accompanied by certificates endorsed for transfer, if
certificates have been issued, with signatures guaranteed by an
"eligible guarantor institution" as discussed in the Prospectus. No
signature guarantees are required on the written request for
redemption by a shareholder of record when payment is to be made to
such shareholder of record at such shareholder's address of record and
the value of the shares redeemed is $25,000 or less. In all other
cases the signatures on the request for redemption, as well as on
certificates being tendered, must be guaranteed. On all redemption
requests for joint accounts, the signatures of all joint owners are
required. Corporations, executors, divorced persons, administrators,
trustees or guardians will be required to submit further
documentation.
Shares are redeemed at the net asset value per share next
computed after the request and certificates, if any, are received in
"Proper Form" as set forth above. (See "HOW TO REDEEM" in the
Prospectus). A shareholder may receive more or less than he paid for
his shares, depending on the prevailing market value of the portfolio
value of the Series being redeemed.
Redemption checks are delivered as soon as practicable and
normally will be sent to the investor within seven days following the
date on which redemption is made.
At various times the Fund may be requested to redeem shares for
which it has not yet received good payment for prior purchases of Fund
shares. Accordingly, proceeds of the Fund will not be paid until good
payment has been received which could be as much as fifteen business
days after the purchase, or until SM&R can verify that good
<PAGE>
payment (for example, cash or certified check on a United States bank)
has been, or will be, collected for the purchase of such shares.
The right of redemption is subject to suspension and payment
therefor postponed during any period when the New York Stock Exchange
is closed other than customary weekend or holiday closings, or during
which trading on such Exchange is restricted; for any period during
which an emergency exists, as a result of which disposal by the Fund
of its securities is not reasonably practicable or it is not
reasonably practicable for the Fund to fairly determine the value of
its net assets; or for such other periods as the Commission has by
order permitted such suspension for the protection of the Fund's
security holders.
The Fund has made an election under the Investment Company Act of
1940, as amended, to pay in cash all requests for redemption by any
shareholder of record, limited in amount with respect to each
shareholder during any ninety-day period to the lesser of (i) $250,000
or (ii) 1% of the net asset value of the Fund at the beginning of such
period. The Fund may pay the redemption price, if any, in excess of
the amounts described above in whole or in part in portfolio
securities, at the market value thereof determined as of the close of
business next following receipt of the request in proper form, if
deemed advisable by the Board of Directors. In such case a
shareholder would incur brokerage costs if he sold the securities
received.
There is presently no charge for redeeming Fund shares. However,
the Fund reserves the right to charge for any redemption an amount, to
be determined by the Board of Directors, not to exceed 1% of the net
asset value of the shares being redeemed, but it is not the present
intent of the Board of Directors to make such a charge.
SYSTEMATIC WITHDRAWAL PLAN
As described in the Prospectus (See "Systematic Withdrawal Plan"
on page 23), the Series have a Systematic Withdrawal Plan pursuant to
which shareholders having an account value of $5,000 or more to
automatically withdraw a minimum of $50 monthly or quarterly.
A Systematic Withdrawal Plan provides for regular monthly or
quarterly payments to the account investor or his designee through
redemption of a portion of the shares held in the account. Some
portion of each withdrawal may be taxable gain or loss to the account
investor at the time of the withdrawal, the amount of the gain or loss
being determined by the investment in the Series' shares. The
minimum, though not necessarily recommended, withdrawal amount is $50.
Shares sufficient to provide the designated withdrawal payment are
redeemed each month or quarterly on the 20th, or the next succeeding
business day, and checks are mailed to reach the investor on or about
the lst of the following month. All income dividends and capital
gains distributions are automatically reinvested at net asset value,
without sales charge. Since each withdrawal check represents proceeds
from the sale of sufficient shares equal to the withdrawal, there can
be a reduction of invested capital, particularly in a declining
market. If redemptions are consistently in excess of shares added
through reinvestment of distributions, the withdrawals will ultimately
exhaust the capital.
The shareholder may designate withdrawal payments for a fixed
dollar amount, as stated in the preceding paragraph, or a variable
dollar amount based on (1) redemption of a fixed number of shares at
monthly or quarterly intervals, or (2) redemption of a specified and
increasing fraction of shares held at monthly or quarterly intervals.
To illustrate the latter option, if an investor wanted quarterly
payments for a ten-year period, the first withdrawal payment would be
the proceeds from redemption of 1/40th of the shares held in the
account. The second payment would be 1/39th of the remaining shares;
the third payment would be 1/38th of the remaining shares, etc. Under
this option, all shares would be redeemed over the ten-year period,
and the payment amount would vary each quarter, depending upon the
number of shares redeemed and the redemption price.
No charge is made for a non-qualified Systematic Withdrawal Plan,
and the account investor may change the option or payment amount at
any time upon written request received by SM&R no later than the month
prior to the month of a scheduled redemption for a withdrawal payment.
A Systematic Withdrawal Plan may also be terminated at any time by the
account investor or the Series without penalty.
<PAGE>
Occasionally certain limited types of qualified retirement plans
are involved in making investments and withdrawals during the same
year. Under such an arrangement, it is possible for the plan to be,
in effect, charged duplicate sales charges. In order to eliminate
this possibility, each Series of the Fund will permit additional
investments, without sales charge, equal to all sums withdrawn,
providing the additional investments are made during the next twelve
months following the withdrawal or redemption, and providing that all
funds withdrawn were for the specific purpose of satisfying plan
benefits of participants who have retired, become disabled or left the
plan. Furthermore, for a qualified plan to qualify under this
provision, the plan must include at least one participant who is a non-
owner employee. The Fund and SM&R discourage shareholders from
maintaining a withdrawal account while concurrently and regularly
purchasing shares of the Fund although such practice is not
prohibited.
THE UNDERWRITER
SM&R serves as principal underwriter of the shares of all Series
of the Fund pursuant to an Underwriting Agreement dated July 1, 1993
(the "Underwriting Agreement"). Such Underwriting Agreement provides
that it shall continue in effect only so long as such continuance is
specifically approved at least annually by the Board of Directors of
the Fund or by vote of a majority of the outstanding voting securities
of a Series and, in either case, by the specific approval of a
majority of directors who are not parties to such agreement or not
"interested" persons (as defined in the Investment Company Act of
1940, as amended) of any such parties, cast in person at a meeting
called for the purpose of voting on such approval. The Underwriting
Agreement was approved by the Board of Directors of the Fund in
accordance with such procedures at a meeting held on July 20, 1995.
The Underwriting Agreement may be terminated without penalty by vote
of the Board of Directors or by vote of the holders of a majority of
the outstanding voting securities of the Fund, or by SM&R, upon sixty
(60) days' written notice and will automatically terminate if assigned
(as provided in the Investment Company Act of 1940, as amended).
As principal underwriter, SM&R continuously offers and sells
shares of each Series of the Fund through its own sales
representatives and investment dealers. As compensation for such
services, SM&R receives the sales charge, which is the difference
between the offering price at which shares are issued and the net
asset value thereof. SM&R allows varying portions of such sales
charge to investment dealers, ranging from a maximum of 4.7% to a
minimum of .50% of the net amount invested, and from a maximum of 4.5%
to a minimum of .50% of the public offering price. Such allowances
are the same for all investment dealers. The amount of sales charge
received and retained by SM&R from the sale of Fund shares for the
years ended August 31, 1995, 1994, 1993 and the period ended August
31, 1992 was $46,578, $145,244, $166,682 and $96,439, and $8,654,
$44,496, $56,787 and $88,041, respectively. SM&R reallowed to dealers
less than $500 for the years ended August 31, 1995 and 1994 and $3,957
and $5,914 for the year ended August 31, 1993 and the period ended
August 31, 1992.
CUSTODIAN
The cash and securities of the Fund are held by SM&R, One Moody
Plaza, Galveston, Texas, 77550, pursuant to a Custodian Agreement
dated July 1, 1993. The Custodian holds and administers the Fund's
cash and securities as provided for in such Custodian Agreement. The
compensation paid to the Custodian is paid by the Fund and is based
upon and varies with the number, type and amount of transactions
conducted by the Custodian.
SM&R, as custodian, will hold and administer the Fund's cash and
securities and maintain certain financial and accounting books and
records as provided for in such Custodian Agreement.
COUNSEL
The Fund's General Counsel is Greer, Herz & Adams, L.L.P. 18th
Floor, One Moody Plaza, Galveston, Texas 77550.
AUDITORS AND FINANCIAL STATEMENTS
KPMG Peat Marwick LLP, 700 Louisiana, Houston, Texas 77002, are
the Fund's independent auditors and perform annual audits of the
Fund's financial statements. The audited financial statements of SM&R
Capital Funds, Inc., as of August 31, 1995 have been included herein
as Exhibit "1" in reliance upon the report of KPMG Peat Marwick
<PAGE>
and upon the authority of said firm as experts in accounting and
auditing. KPMG Peat Marwick's business address is 700 Louisiana,
Houston, Texas 77002.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
SM&R, One Moody Plaza, Galveston, Texas 77550, is the transfer
agent and dividend paying agent for the Fund, the American National
Funds Group and the American National Investments Accounts, Inc.
OTHER PERFORMANCE QUOTATIONS
With respect to those categories of investors who are permitted
to purchase shares of a Series of the Fund at net asset value, sales
literature pertaining to the Series may quote a current distribution
rate, yield, total return, average annual total return and other
measures of performance as described elsewhere in this Statement with
the substitution of net asset value for the public offering price.
Sales literature referring to the use of the Fund or any of its
Series as a potential investment for Individual Retirement Accounts
(IRAs), and other tax-advantaged retirement plans may quote a total
return based upon compounding of dividends on which it is presumed no
federal income tax applies.
COMPARISONS
To help investors better evaluate how an investment in a Series
of the Fund might satisfy their investment objective, advertisements
and other materials regarding the Fund or any of its Series may
discuss various measures of the Series' performance as reported by
various financial publications. Materials may also compare
performance (as calculated above) to performance as reported by other
investments, indices, and averages. The following publications,
indices, and averages may be used:
DOW JONES COMPOSITE AVERAGE OR ITS COMPONENT AVERAGES - an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks (Dow Jones
Utilities Average), and 20 transportation company stocks. Comparisons
of performance assume reinvestment of dividends.
STANDARD & POOR'S 500 STOCK INDEX OR ITS COMPONENT INDICES - an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks, and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
THE NEW YORK STOCK EXCHANGE COMPOSITE OR COMPONENT INDICES - unmanaged
indices of all industrial, utilities, transportation, and finance
stocks listed on the New York Stock Exchange.
LIPPER - MUTUAL FUND PERFORMANCE ANALYSIS AND LIPPER - FIXED INCOME
FUND PERFORMANCE ANALYSIS - measure total return and average current
yield for the mutual fund industry. Rank individual mutual fund
performance over specified time periods, assuming reinvestment of all
distributions, exclusive of any applicable sales charges.
CDA MUTUAL FUND REPORT, PUBLISHED BY CDA INVESTMENT TECHNOLOGIES, INC.
- -analyzes price, current yield, risk, total return, and average rate
of return (average annual compounded growth rate) over specified time
periods for the mutual fund industry.
MUTUAL FUND SOURCE BOOK, PUBLISHED BY MORNINGSTAR, INC. - analyzes
price, yield, risk and total return for equity funds.
FINANCIAL PUBLICATIONS: THE WALL STREET JOURNAL AND BUSINESS WEEK,
CHANGING TIMES, FINANCIAL WORLD, FORBES, FORTUNE, AND MONEY MAGAZINES
- - provide performance statistics over specified time periods.
CONSUMER PRICE INDEX (OR COST OF LIVING INDEX), PUBLISHED BY THE U.S.
BUREAU OF LABOR STATISTICS - a statistical measure of change, over
time, in the price of goods and services in major expenditure groups.
SALOMON BROTHERS BROAD BOND INDEX OR ITS COMPONENT INDICES - The
Aggregate Bond Index measures yield, price and total return for
Treasury, Agency, Corporate, Mortgage, and Yankee bonds.
<PAGE>
STANDARD & POOR'S BOND INDICES - measures yield and price of
Corporate, Municipal, and Government bonds.
SHEARSON LEHMAN BROTHERS AGGREGATE BOND INDEX OR ITS COMPONENT INDICES
- - The Aggregate Bond Index measures yield, price and total return for
Treasury, Agency, Corporate, Mortgage and Yankee bonds.
SHEARSON LEHMAN BROTHERS MUNICIPAL BOND INDEX (SLMBI) OR ITS COMPONENT
INDICES - SLMBI measures yield, price and total return for the
municipal bond market.
BOND BUYER'S 20-BOND INDEX - an index of municipal bond yields based
upon yields of 20 general obligation bonds maturing in 20 years.
BOND BUYER'S 30-BOND INDEX - an index of municipal bond yields based
upon yields of 20 revenue bonds maturing in 30 years.
HISTORICAL DATA supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill,
Lynch, Pierce, Fenner & Smith, Shearson Lehman Hutton and Bloomberg,
L.P.
In assessing such comparisons of performance, an investor should
keep in mind that the composition of the investments in the reported
indices and averages is not identical to the portfolio of any Series
of the Fund, that the averages are generally unmanaged, and that the
items included in the calculations of such averages may not be
identical to the formula used by any Series to calculate its figures.
In addition there can be no assurance that any series of the Fund will
continue this performance as compared to such other averages.
<PAGE>
EXHIBIT "1" TO STATEMENT OF
ADDITIONAL INFORMATION
SM&R CAPITAL FUNDS ANNUAL REPORT
- --------------------------------------------------------------------------------
PRESIDENT'S LETTER
Dear Investor:
Nineteen ninety-six will mark SM&R's 30th year of mutual fund investment
management. Back in 1966, with one fund and a few hundred shareholders, we
began with a basic idea to guide us: make investing easy and affordable for
everyone. Today, with 10 funds and tens of thousands of shareholders, and an
investment world vastly more complex, we believe in our mission more than
ever.
We all want to take charge of our money and make it work for us. Most of us
have financial dreams - a new house, a college education for our children or
grandchildren, a secure retirement - that we're hoping to reach by investing.
Unfortunately, to most people investing in securities seems complicated and
confusing. So, they never really get started. Instead, they rely on the
modest returns offered by fixed-rate savings instruments and hope for the
best.
The perceptions that keep people from participating in the opportunities
available by investing fall into three categories:
"I'M NOT BRAVE ENOUGH." --
"THERE'S RISK INVOLVED IN INVESTING. WHAT IF THERE IS A MARKET 'CRASH?' I
MIGHT LOSE MONEY."
"I'M NOT SMART ENOUGH." --
"I DON'T KNOW HOW TO STUDY THE FINANCIAL MARKETS. I'D HAVE TO BE A
WALL STREET WIZARD TO BE SUCCESSFUL AT INVESTING."
"I'M NOT RICH ENOUGH." --
"YOU'VE GOT TO HAVE A LOT OF MONEY IN ORDER TO INVEST."
Mutual funds can help people reach their financial dreams. And, SM&R's family
of mutual funds provide conservatively minded individuals, regardless of
their means, comfortable choices. With SM&R's funds:
YOU DON'T HAVE TO BE BRAVE --
SM&R's funds are well diversified. Each fund portfolio spreads its risk
by investing in many different securities.
YOU DON'T HAVE TO BE SMART --
SM&R's funds offer professional management. Full-time investment
experts make the investment decisions on your behalf.
YOU DON'T HAVE TO BE RICH --
SM&R's funds are affordable. You can open an account with as little as
$100 and add to it anytime with only $20 or more.
We believe that our thoughtful, disciplined and conservative approach to
investment management will help provide, over time, the strong performance
you expect. We thank you for your confidence in the SM&R Capital Funds.
Sincerely,
/s/ MICHAEL W. MCCROSKEY
Michael W. McCroskey
President
This annual report should be preceded or accompanied by a prospectus
of the SM&R Capital Funds, Inc.
<PAGE>
PORTFOLIO MANAGERS' DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
AMERICAN NATIONAL GOVERNMENT INCOME FUND SERIES
During the past two years, yields on the U.S. Government 30-year Treasury
Bond have gone from a low of 5.77% (October, 1993) to 8.16% (November, 1994)
and have recently settled into a trading range of 6.50% to 7.00%. The
increase in interest rates was the result of short-term interest rate
increases initiated by the Federal Reserve in response to strong economic
numbers and the threat of increasing inflation. More recent data suggests
that the economy is beginning to slow and the Federal Reserve is now
attempting to engineer a "soft landing" by reducing short-term interest rates
in July, 1995.
Last year, we repositioned the Fund in order to increase the fund's coupon
interest as well as to bring the average maturity and the average duration
more in line with the Fund's respective index. This has resulted in a total
return of 11.85% over the twelve month period ended August, 1995 and 14.23%
total return for the year-to-date through August, 1995. Total return is the
change in value of an investment in the fund over a given period assuming
reinvestment of any dividends and capital gains.
The direction for interest rates, as always, remains uncertain. Should
economic data continue to point toward a possible recession or should
Congress finally address the budget deficit by reducing spending, the Federal
Reserve Board would likely continue to reduce short-term interest rates in
order to achieve a "soft landing". Until confirmation of a slowing economy or
development of a deficit reduction package from Congress, we will be in a
trading range in interest rates. The Fund's performance will likely be the
same as the market as we will continue to attempt to keep the Fund structured
similar to its respective index.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN GOVERNMENT INCOME FUND
SERIES AND LEHMAN BROTHERS GOVERNMENT/MORTGAGE-BACKED SECURITIES INDEX
Lehman Brothers Government/Mortgage
Government Income Fund Series Backed Securities Index
3/31/92 "10,000" "10,000"
8/31/92 "10,321" "10,711"
8/31/93 "10,853" "11,832"
8/31/94 "10,117" "11,670"
8/31/95 "11,315" "12,943"
Past performance is not predictive of future performance.
The Government Income Fund Series' performance figures are historical and
reflect reinvestment of all dividends and capital gains distributions,
changes in net asset value and consider the effect of the Fund's 4.50%
maximum sales charge. The Fund's operations began March 16, 1992. The
Government Income Fund Series average return, which reflects reinvestment of
all dividends and capital gains distributions, changes in net asset value and
consider the effect of the Funds 4.50% maximum sales charge, was 6.86% for
the twelve months ended August 31, 1995 and 6.32% from inception to June 30,
1995.
<PAGE>
PORTFOLIO MANAGERS' DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
AMERICAN NATIONAL PRIMARY FUND SERIES
The American National Primary Fund Series (the "Primary Series") continued
the conservative strategy of utilizing short-term commercial paper maturing
in one to forty days (90% of the portfolio) and Agency Notes of the Federal
Government with approximately a one year maturity (9% of the portfolio). We
have anticipated an increase in short term rates for some time. Over the past
twelve months we have witnessed a dramatic flattening of the yield curve.
While the 30-year U.S. Government Treasury Bond has declined in yield from a
7.45% to 6.64%, the yield on the 90-day U.S. Government Treasury Bill has
increased from 4.66% to 5.44%. Our strategy of increasing the maturity of the
fund was to enhance shareholder returns as much as possible while continuing
with our policy of managing a conservative fund with respect to the Fund's
overall maturity.
The Federal Reserve has reversed its course of increasing interest rates with
a rate cut after its July, 1995 meeting. Should data continue to point toward
a slowing economy and inflation remain benign, the Federal Reserve may
consider another ease in order to steer the economy towards a "soft landing".
If that occurs, we may see declines in short-term rates. We will continue our
strategy of seeking to lengthen maturities and "lock in" the higher
short-term interest rates to the greatest extent possible while maintaining
our policy of managing a conservative fund with respect to the Fund's overall
maturity.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
PRIMARY FUND SERIES AND LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX
Primary Series - Comprised of
Commercial paper with maturities Lehman Government/Corporate
under 60 days and agencies with Index - Comprised of Corporate
maturities of less than one year notes and bonds and agencies
to three years. with one to three year maturities.
3/31/92 "10,000" "10,000"
8/31/92 "10,150" "10,495"
8/31/93 "10,413" "11,094"
8/31/94 "10,716" "11,292"
8/31/95 "11,252" "12,140"
Past performance is not predictive of future performance.
The Primary Fund Series' performance figures are historical and reflect
reinvestment of all dividends and capital gains distributions and changes in
net asset value. The Fund's operations began March 16, 1992. The Primary
Fund Series' average return which reflects reinvestment of all dividends and
capital gain distributions, and changes in net asset value was 5.01% for the
twelve months ended August 31, 1995 and 3.39% from inception to June 30, 1995.
<PAGE>
PORTFOLIO MANAGERS' DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
AMERICAN NATIONAL TAX FREE FUND SERIES
American National Tax Free Fund Series (Tax Free Series) was initiated in
September, 1993, during the lowest interest rate environment of nearly twenty
years. The 30-year U.S. Government Treasury Bond reached a recent record low
yield of 5.77% in October, 1993. In response to fears of increasing
inflation, the Federal Reserve began the first of several interest rate hikes
which took the long-bond up to a yield of 8.16% by November, 1994. The
increases in interest rates had the desired effect of reining in economic
growth and currently inflation appears to be very much under control.
Therefore, the Federal Reserve Board reversed directions and eased (or
reduced) interest rates slightly in July, 1995.
We have positioned the Fund very well since its inception. We maintained a
defensive posture during the first year while interest rates were at a
twenty-year low. Then, last year we began to aggressively restructure the
Fund by extending the maturities and increasing the fund's average coupon. We
also began to explore investments in sectors outside of essential service and
general obligation while continuing to maintain the rating quality. In
addition, we analyzed the expenses borne by the fund and developed a new
schedule designed to pass along to our shareholders the coupon income earned
on the portfolio, thereby enhancing the income our shareholders are receiving.
The result of our restructuring has enhanced shareholder returns for the past
year. The total return for the fund was 9.15% for the twelve months ended
August 31, 1995 and 12.90% for year-to-date through August, 1995. Total
return is the change in value of an investment in the fund over a given
period assuming reinvestment of any dividends and capital gains. We continue
with our goal to position our fund to enhance shareholder value while still
maximizing the tax-free income and passing it along to our shareholders.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TAX FREE FUND SERIES AND LEHMAN BROTHERS MUNICIPAL INDEX
Lehman Brothers
Tax Free Fund Series Municipal Index
9/9/93 "10,000" "10,000"
8/31/94 "9,398" "9,957"
8/31/95 "10,258" "10,840"
Past performance is not predictive of future performance.
The Tax Free Fund Series' performance figures are historical and reflect
reinvestment of all dividends and capital gains distributions, changes in
net asset value and consider the effect of the Fund's 4.50% maximum sales
charge. The Fund's operations began September 9, 1993. The Tax Free Fund
Series average return, which reflects reinvestment of all dividends and
capital gains distributions, changes in net asset value and consider the
effect of the Funds 4.50% maximum sales charge, was 4.27% for the twelve
months ended August 31, 1995 and .23% from inception to June 30, 1995.
<PAGE>
SCHEDULE OF INVESTMENTS August 31, 1995
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND SERIES
<TABLE>
<CAPTION>
INTEREST/
MATURITY STATED FACE
COMMERCIAL PAPER DATE RATE (%) AMOUNT VALUE
<S> <C> <C> <C> <C>
DIVERSIFIED--0.97%
Growmark, Incorporated 09/05/95 5.85 $ 100,000 $ 99,935
White Consolidated Industries 09/27/95 5.90 100,000 99,574
------------
199,509
UTILITY-ELECTRIC--0.64%
Kentucky Power Company 09/06/95 5.90 131,000 130,892
------------
TOTAL COMMERCIAL PAPER--1.61%
(Cost $330,401) 330,401
------------
GOVERNMENT AGENCIES--97.34%
Federal Home Loan Bank 08/05/04 7.38 1,000,000 1,053,290
Federal Home Loan Bank 08/19/04 7.57 1,000,000 1,066,220
Federal Home Loan Mortgage Corporation 07/07/04 7.97 1,500,000 1,555,560
Federal Home Loan Mortgage Corporation 07/27/04 7.81 1,000,000 1,040,820
Federal Home Loan Mortgage Corporation 07/28/04 7.95 1,500,000 1,549,020
Federal Home Loan Mortgage Corporation 08/19/04 8.08 1,500,000 1,554,000
Federal Home Loan Mortgage Corporation 08/01/05 6.75 165,000 167,366
Federal Home Loan Mortgage Corporation 08/03/05 7.46 250,000 254,175
Federal Home Loan Mortgage Corporation 09/15/06 7.00 585,000 588,264
Federal Home Loan Mortgage Corporation 11/15/06 7.00 1,500,000 1,509,030
Federal Home Loan Mortgage Corporation 03/15/07 7.00 1,000,000 998,730
Federal Home Loan Mortgage Corporation 09/15/07 7.00 1,000,000 1,003,230
Federal Home Loan Mortgage Corporation 08/15/08 7.00 1,600,000 1,602,448
Federal National Mortgage Association 02/11/02 7.50 1,585,000 1,675,804
Federal National Mortgage Association 04/10/02 7.90 1,500,000 1,563,045
Federal National Mortgage Association 04/22/02 7.55 200,000 212,262
Federal National Mortgage Association 04/14/04 7.60 500,000 507,815
Federal National Mortgage Association 04/29/04 7.65 500,000 509,410
Federal National Mortgage Association 07/14/04 8.05 500,000 516,855
Federal National Mortgage Association 07/25/07 7.00 1,000,000 993,780
------------
TOTAL GOVERNMENT AGENCIES--97.34%
(Cost $19,242,424) 19,921,124
------------
TOTAL INVESTMENTS--98.95%
(Cost $19,572,825) 20,251,525
CASH AND OTHER ASSETS LESS LIABILITIES--1.05% 214,284
------------
TOTAL NET ASSETS--100.00% $ 20,465,809
------------
------------
</TABLE>
See notes to financial statements.
<PAGE>
SCHEDULE OF INVESTMENTS August 31, 1995
- --------------------------------------------------------------------------------
PRIMARY FUND SERIES
<TABLE>
<CAPTION>
INTEREST/
MATURITY STATED FACE
COMMERCIAL PAPER DATE RATE (%) AMOUNT VALUE
<S> <C> <C> <C> <C>
CONTAINERS--4.90%
Crown Cork & Seal Company, Incorporated 09/19/95 5.90 $ 1,032,000 $ 1,028,956
DIVERSIFIED--17.13%
Cox Enterprises, Incorporated 09/20/95 5.84 1,058,000 1,054,739
General Signal Corporation 09/25/95 5.80 904,000 900,504
Textron, Incorporated 09/13/95 5.85 1,014,000 1,012,023
White Consolidated Industries 09/28/95 5.85 630,000 627,236
------------
3,594,502
ELECTRICAL EQUIPMENT--3.10%
Honeywell, Incorporated 09/27/95 5.76 652,000 649,288
FINANCIAL SERVICES--22.44%
Avon Capital Corporation 09/05/95 5.88 970,000 969,366
Dana Credit Corporation 09/11/95 5.85 1,000,000 998,375
GTE Finance Corporation 09/12/95 5.78 282,000 281,502
Progress Capital Holdings 09/21/95 5.75 783,000 780,499
Textron Financial Corporation 09/14/95 5.87 834,000 832,232
U S West Capital Funding 09/22/95 5.73 849,000 846,162
------------
4,708,136
FOODS--7.24%
American Home Food Products, Incorporated 10/04/95 5.77 617,000 613,736
ConAgra, Incorporated 09/15/95 5.82 908,000 905,945
------------
1,519,681
OIL DOMESTIC--9.78%
Pennzoil Company 09/18/95 5.83 1,059,000 1,056,084
Union Oil Company of California 09/29/95 5.80 1,000,000 995,489
------------
2,051,573
PAPER/FOREST PRODUCTS--4.99%
Scott Paper Company 09/26/95 5.77 1,052,000 1,047,785
RETAIL-SPECIALTY--4.24%
Rite Aid Corporation 09/06/95 5.85 322,000 321,738
Tandy Corporation 09/12/95 5.83 569,000 567,986
------------
889,724
TRANSPORTATION MISCELLANEOUS--4.68%
Union Pacific Corporation 10/16/95 5.89 990,000 982,711
UTILITY-ELECTRIC--7.06%
Kentucky Power Company 09/06/95 5.85 679,000 678,448
Public Service Electric & Gas Company 09/07/95 5.78 804,000 803,226
------------
1,481,674
UTILITY-GAS--4.93%
Illinois Power Fuel Company 09/08/95 5.90 1,036,000 1,034,812
------------
TOTAL COMMERCIAL PAPER--90.49%
(Cost $18,988,842) 18,988,842
------------
GOVERNMENT AGENCIES--9.17%
Federal Farm Credit Bank 09/01/95 5.70 1,925,000 1,925,000
------------
TOTAL GOVERNMENT AGENCIES--9.17%
(Cost $1,925,000) 1,925,000
------------
TOTAL INVESTMENTS--99.66%
(Cost $20,913,842) 20,913,842
CASH AND OTHER ASSETS LESS LIABILITIES--0.34% 70,434
------------
TOTAL NET ASSETS--100.00% $ 20,984,276
------------
------------
</TABLE>
See notes to financial statements.
<PAGE>
SCHEDULE OF INVESTMENTS August 31, 1995
- --------------------------------------------------------------------------------
TAX FREE FUND SERIES
<TABLE>
<CAPTION>
MUNICIPAL BONDS FACE
RATING(A) AMOUNT VALUE
<S> <C> <C> <C>
ARIZONA--6.90%
Aaa/AAA Central Arizona Water
Conservation District
(Central Arizona
Project)-Contract Revenue
Refunding Bonds, Series B
1994, 4.750%, 11/01/07 $ 200,000 $ 190,902
Aaa/AAA Central Arizona Water
Conservation District
(Central Arizona
Project)-Contract Revenue
Refunding Bonds, Series B
1994, 4.750%, 11/01/08 100,000 93,833
Aaa/AAA Pima County, Arizona-Sewer
Revenue Refunding Bonds,
Series 1994A, 4.400%,
07/01/03 100,000 97,216
Aa/AA Salt River Project
Agricultural Improvement
and Power District,
Arizona-Salt River Project
Electric System Refunding
Revenue Bonds, 1993 Series
C, 4.100%, 01/01/00 200,000 197,722
---------
579,673
FLORIDA--4.00%
Aa/AA State of Florida-State
Board of Education, Public
Education Capital Outlay
Bonds, 1992 Series E,
4.600%, 06/01/03 100,000 98,583
Aa/AA State of Florida-State
Board of Education, Public
Education Capital Outlay
Bonds, 1992 Series E,
5.750%, 06/01/19 145,000 140,782
Aa/AA- Orlando Utilities
Commission-Water and
Electric Subordinated
Revenue Refunding Bonds,
Series 1994A, 4.250%,
10/01/02 100,000 97,018
---------
336,383
GEORGIA--2.02%
A/A Municipal Electric
Authority of Georgia-Power
Revenue Bonds, Series AA,
5.400%, 01/01/07 175,000 169,370
ILLINOIS--6.83%
Aa/AA Illinois Health Facilities
Authority-Revenue Bonds,
Series 1994A,
(Northwestern Memorial
Hospital), 6.100%,
08/15/14 200,000 200,466
Aaa/AAA Illinois State Toll Highway
Authority-Highway Priority
Revenue Bonds, Series
A-FGIC, 5.750%, 01/01/17 $ 175,000 $ 168,534
A1/AAA State of Illinois-Build
Illinois Bonds, Sales Tax
Revenue Bonds, Series V,
6.375%, 06/15/17 200,000 205,058
---------
574,058
KANSAS--2.33%
Aa/AA State of Kansas-Department
of Transportation, Highway
Revenue Bonds, Series
1994A, 4.250%, 09/01/01 100,000 98,646
Aa/AA State of Kansas-Department
of Transportation, Highway
Revenue Bonds, Series
1994A, 4.250%, 09/01/02 100,000 97,283
---------
195,929
MARYLAND--7.97%
Aa/AA+ Anne Arundel County,
Maryland-General
Obligation Bonds,
Consolidated General
Improvements Series, 1994,
4.800%, 02/01/09 200,000 188,276
Aa/AA+ Anne Arundel County,
Maryland-General
Obligation Bonds,
Consolidated Water and
Sewer Series, 1994 4.700%,
02/01/07 100,000 95,647
Aa/AA Department of
Transportation of
Maryland-Consolidated
Transportation Bonds,
Refunding Series 1993
(Second Issue), 4.400%,
12/15/04 200,000 190,868
Aa1/AA Washington Suburban
Sanitary District,
Maryland-Sewage Disposal
Refunding Bonds of 1994,
4.375%, 06/01/03 200,000 194,536
---------
669,327
NEBRASKA--2.34%
A1/A+ Nebraska Public Power
District-Power Supply
System Revenue Bonds, 1993
Series C, 3.700%, 01/01/97 100,000 99,379
Aaa/AAA City of Omaha,
Nebraska-General
Obligation Refunding
Bonds, Series of 1993,
4.200%, 10/15/02 100,000 97,589
---------
196,968
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS August 31, 1995
- --------------------------------------------------------------------------------
TAX FREE FUND SERIES, CONTINUED
<TABLE>
<CAPTION>
MUNICIPAL BONDS FACE
RATING(A) AMOUNT VALUE
<S> <C> <C> <C>
NEW MEXICO--1.16%
Aa/AA City of Albuquerque, New
Mexico-Joint Water and
Sewer System, Refunding
and Improvement Revenue
Bonds, Series 1994A,
4.300%, 07/01/02 $ 100,000 $ 97,110
NORTH CAROLINA--2.42%
Aaa/AAA City of Charlotte, North
Carolina-General
Obligation Public
Improvement Bonds, Series
1994, 5.700%, 02/01/08 100,000 105,368
A/BBB+ North Carolina Eastern
Municipal Power
Agency-Power System
Revenue Bonds, Refunding
Series 1993 B, 6.250%,
01/01/12 100,000 97,789
---------
203,157
OHIO--1.19%
Aa/AA State of Ohio-General
Obligation Infrastructure
Improvement Bonds, Series
1993, 4.000%, 08/01/98 100,000 99,942
OKLAHOMA--2.82%
Aaa/AAA Oklahoma Municipal Power
Authority-Power Supply
System Revenue Bonds,
Series 1994B, 4.450%,
01/01/03 100,000 97,791
Aaa/NR Oklahoma Housing Finance
Agency-Single Family
Mortgage Revenue Bonds
(Homeownership Loan
Program), 1994 Series A-1,
6.250%, 09/01/07 (b) 135,000 138,671
---------
236,462
OREGON--3.99%
Aa/AA+ The Port of Portland,
Oregon-General Obligation
Refunding Bonds, Series
1993A, 3.900%, 03/01/99 130,000 128,658
A1/A+ City of Portland,
Oregon-Sewer System
Revenue Bonds, 1994 Series
A, 6.250%, 06/01/15 200,000 206,454
---------
335,112
PUERTO RICO--2.69%
Baa1/A- Puerto Rico Electric Power
Authority-Power Revenue
Bonds, Series R, 6.250%,
07/01/17 125,000 126,676
Baa1/A Commonwealth of Puerto
Rico-Public Improvement
Refunding Bonds, Series
1992A, General Obligation
Bonds, 6.000%, 07/01/14 $ 100,000 $ 99,320
---------
225,996
TENNESSEE--2.40%
A1/A+ Tennessee Housing
Development
Agency-Mortgage Finance
Program Bonds, 1994 Series
B, 6.200%, 01/01/09 (b) 200,000 201,786
TEXAS--28.04%
Aa/AA City of Austin, Texas
(Travis and Williamson
Counties)-Public
Improvement Refunding
Bonds, Series 1993A,
4.000%, 09/01/00 100,000 98,090
Aaa/AAA City of Austin,
Texas-Combined Utility
Systems Revenue Refunding
Bonds, Series 1994 6.250%,
05/15/16 100,000 102,417
Aaa/AAA Bexar Metropolitan Water
District-Waterworks System
Revenue Bonds, Series
1994, 5.100%, 05/01/08 250,000 243,162
Aaa/AAA Clear Lake City Water
Authority-Waterworks and
Sewer System Combination,
Unlimited Tax and Revenue
Refunding Bonds, Series
1994, 4.875%, 03/01/07 250,000 240,313
Aa/AA City of Dallas,
Texas-Waterworks and Sewer
System Revenue Refunding
and Improvement Bonds,
Series 1992, 5.800%,
10/01/08 100,000 101,207
Aa/AA City of Dallas,
Texas-Waterworks and Sewer
System Revenue Bonds,
Series 1994, 5.600%,
04/01/07 100,000 102,597
Aaa/AAA Dallas-Fort Worth
International
Airport-Dallas-Fort Worth
Regional Airport, Joint
Revenue Refunding Bonds,
Series 1994A, 6.000%,
11/01/10 100,000 102,756
Aaa/AAA Galveston Independent
School District-Unlimited
Tax Schoolhouse Bonds,
Series 1994, 5.200%,
02/01/07 100,000 99,570
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS August 31, 1995
- --------------------------------------------------------------------------------
TAX FREE FUND SERIES, CONTINUED
<TABLE>
<CAPTION>
MUNICIPAL BONDS FACE
RATING(A) AMOUNT VALUE
<S> <C> <C> <C>
TEXAS--CONTINUED
Aa/AA Harris County, Texas-Tax
and Revenue Certificates
of Obligation, Series
1994, 6.100%, 10/01/12 $ 135,000 $ 139,455
Aa/AA Harris County, Texas-Tax
and Revenue Certificates
of Obligation, Series
1994, 6.100%, 10/01/13 125,000 128,589
Aaa/AAA North Texas Municipal Water
District-Regional
Wastewater System
Refunding Revenue Bonds,
Series 1993, 4.300%,
06/01/01 100,000 98,394
Aaa/AAA North Texas Municipal Water
District-Regional
Wastewater System
Refunding Revenue Bonds,
Series 1993, 4.400%,
06/01/02 100,000 97,766
Aa/AA State of Texas-General
Obligation Bonds, Veterans
Housing Assistance
Program, Fund II Series
1994A Bonds, 6.700%,
06/01/09 (b) 100,000 105,255
Aa1/AA+ Tarrant County,
Texas-Limited Tax
Refunding Bonds, Series
1994, 4.400%, 07/15/02 200,000 196,156
A1/NR Tarrant County Health
Facilities Development
Corporation-Health System
Revenue Bonds, (Harris
Methodist Health System),
Series 1994, 6.000%,
09/01/14 200,000 196,664
A1/AA Texas Tech University
Health Sciences
Center-Revenue Financing
System Refunding Bonds,
First Series (1993),
4.200%, 02/15/01 100,000 97,851
Aaa/AA+ Board of Regents of The
University of Texas
System-Permanent
University Fund, Refunding
Bonds Series 1992A,
6.250%, 07/01/13 200,000 204,544
---------
2,354,786
UTAH--2.44%
Aa/AA Utah Housing Finance
Agency-Single Family
Mortgage Bonds, 1995 Issue
A, (Federally Insured or
Guaranteed Mortgage Loans),
7.150%, 07/01/12 (b) $ 100,000 $ 105,143
Aa/NR Utah State Housing
Financial Agency-Single
Family Mortgage Bonds,
Series F1, 6.000%,
07/01/13 100,000 99,557
---------
204,700
VIRGINIA--1.21%
Aaa/AAA Virginia State Housing
Development Authority
Commonwealth Mortgage
Bonds, Series A, Subseries
A-4, 6.300%, 07/01/15 (b) 100,000 101,350
WASHINGTON--10.85%
Aa1/AA+ King County, Washington-
Department of Metropolitan
Services, Limited Tax
General Obligation Bonds,
1994 Series A, 5.800%,
01/01/08 200,000 206,796
Aa1/AA+ King County,
Washington-Limited Tax
General Obligation and
Refunding Bonds, 1993
Series A, 6.000%, 12/01/10 100,000 102,670
Aa1/AA+ Port of Seattle,
Washington-General
Obligation Bonds 5.750%,
05/01/14 (b) 100,000 95,798
Aaa/AAA City of Richland,
Washington-Water and Sewer
Improvement Revenue Bonds,
1993, 5.550%, 04/01/07 300,000 304,275
Aa/AA State of Washington-General
Obligation Bonds, Series
1994B, 5.750%, 05/01/09 100,000 101,696
Aa/AA State of Washington-General
Obligation Bonds, Series
1994B, 6.000%, 09/01/16 100,000 100,413
---------
911,648
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS August 31, 1995
- --------------------------------------------------------------------------------
TAX FREE FUND SERIES, CONTINUED
<TABLE>
<CAPTION>
MUNICIPAL BONDS FACE
RATING(A) AMOUNT VALUE
<S> <C> <C> <C>
WISCONSIN--4.70%
Aa/AA City of Green Bay-General
Obligation Refunding
Bonds, Series 1994B,
5.900%, 04/01/09 $ 200,000 $ 205,018
Aa/AA State of Wisconsin-General
Obligation Bonds of 1994,
Series A, 4.500%, 05/01/05 200,000 189,746
---------
394,764
---------
TOTAL MUNICIPAL BONDS--96.30%
(Cost $8,033,889) 8,088,521
---------
GOVERNMENT AGENCIES--2.08%
Federal National Mortgage Association,
5.670%, 09/05/95 175,000 174,890
---------
TOTAL GOVERNMENT AGENCIES--2.08%
(Cost $174,890) 174,890
---------
TOTAL INVESTMENTS--98.38%
(Cost $8,208,779) 8,263,411
CASH AND OTHER ASSETS
LESS LIABILITIES -- 1.62% 135,705
---------
TOTAL NET ASSETS--100.00% $8,399,116
---------
---------
Notes to Schedule of Investments
(a) Ratings assigned by Moody's Investor's Service, Inc.
("Moody's") and Standard & Poor's Corporation ("S&P").
Ratings are unaudited.
(b) Security subject to the alternative minimum tax.
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT PRIMARY TAX FREE
INCOME FUND FUND FUND
SERIES SERIES SERIES
<S> <C> <C> <C>
ASSETS
Investments at value $20,251,525 $20,913,842 $8,263,411
Cash 10,627 591 14,700
Prepaid expenses 40,994 45,358 10,740
Receivable for:
Interest 164,652 54,863 118,006
Expense reimbursement -- -- 9,487
Other assets 30,016 21,590 4,891
----------- ----------- ----------
TOTAL ASSETS 20,497,814 21,036,244 8,421,235
----------- ----------- ----------
LIABILITIES
Payable for:
Fund shares redeemed 11,005 19,809 --
Accrued:
Investment advisory fee 8,558 9,043 3,517
Service fee 4,279 4,522 1,758
Other liabilities 8,163 18,594 16,844
----------- ----------- ----------
TOTAL LIABILITIES 32,005 51,968 22,119
----------- ----------- ----------
NET ASSETS $20,465,809 $20,984,276 $8,399,116
----------- ----------- ----------
----------- ----------- ----------
Shares outstanding, (200,000,000 shares authorized, $.01 par
value per share) 1,946,741 20,990,035 844,414
----------- ----------- ----------
----------- ----------- ----------
Net asset value $ 10.51 $ 1.00 $ 9.95
----------- ----------- ----------
----------- ----------- ----------
Offering price per share:
(Net asset value DIVIDED BY 95.5%) $ 11.01 $ 10.42
----------- ----------
----------- ----------
Offering price per share $ 1.00
-----------
-----------
</TABLE>
STATEMENTS OF OPERATIONS Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT PRIMARY TAX FREE
INCOME FUND FUND FUND
SERIES SERIES SERIES
<S> <C> <C> <C>
INVESTMENT INCOME
Interest $ 1,462,303 $ 940,824 $ 417,823
EXPENSES
Investment advisory fees 96,210 81,835 38,447
Service fees 48,105 40,918 19,223
Audit fees 6,000 6,625 5,152
Custody and transaction fees 9,546 20,181 7,901
Directors' fees 12,350 12,373 9,524
Organization expenses 11,878 11,878 --
Qualification fees 13,379 19,542 11,261
Other 6,355 5,210 4,579
----------- ----------- ----------
TOTAL EXPENSES 203,823 198,562 96,087
LESS EXPENSES REIMBURSED (69,411) (61,099) (96,087)
----------- ----------- ----------
NET EXPENSES 134,412 137,463 --
----------- ----------- ----------
NET INVESTMENT INCOME 1,327,891 803,361 417,823
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (10,778) (9) (34,685)
Net unrealized appreciation (depreciation) of investments
during the year 823,605 (1,522) 316,014
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 812,827 (1,531) 281,329
----------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,140,718 $ 801,830 $ 699,152
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND SERIES
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
OPERATIONS
Net investment income $ 1,327,891 $ 1,033,341
Net realized loss on investments (10,778) (342,422)
Net unrealized appreciation (depreciation) of investments during
the year 823,605 (1,212,031)
------------- -------------
Net increase (decrease) in net assets resulting from operations 2,140,718 (521,112)
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (1,327,891) (1,050,268)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets from capital share transactions (137,113) 1,578,050
------------- -------------
NET INCREASE IN NET ASSETS 675,714 6,670
Beginning of year 19,790,095 19,783,425
------------- -------------
End of year $ 20,465,809 $ 19,790,095
------------- -------------
------------- -------------
</TABLE>
PRIMARY FUND SERIES
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
OPERATIONS
Net investment income $ 803,361 $ 441,051
Net realized loss on investments (9) (67)
Net unrealized appreciation (depreciation) of investments during
the year (1,522) 1,837
------------- -------------
Net increase in net assets resulting from operations 801,830 442,821
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (803,361) (441,051)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets from capital share transactions 5,778,066 (332,745)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS 5,776,535 (330,975)
Beginning of year 15,207,741 15,538,716
------------- -------------
End of year $ 20,984,276 $ 15,207,741
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
TAX FREE FUND SERIES
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
AUGUST 31, AUGUST 31,
------------ ------------
1995 1994
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income $ 417,823 $ 165,751
Net realized loss on investments (34,685) (17,141)
Net unrealized appreciation (depreciation) of investments during the
period 316,014 (261,382)
------------ ------------
Net increase (decrease) in net assets resulting from operations 699,152 (112,772)
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (415,605) (165,751)
CAPITAL SHARE TRANSACTIONS
Increase in net assets from capital share transactions 820,183 7,573,909
------------ ------------
NET INCREASE IN NET ASSETS 1,103,730 7,295,386
Beginning of period 7,295,386 --
------------ ------------
End of period $ 8,399,116 $ 7,295,386
------------ ------------
------------ ------------
</TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of capital stock outstanding throughout the period.
GOVERNMENT INCOME FUND SERIES
<TABLE>
<CAPTION>
PERIOD
ENDED
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
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
--------- --------- --------- ---------
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
--------- --------- --------- ---------
(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%**
--------- --------- --------- ---------
--------- --------- --------- ---------
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
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
** Returns are not annualized
(1) Expenses for the calculation are net of a reimbursement from Securities
Management & 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.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of capital stock outstanding throughout the period.
PRIMARY FUND SERIES
<TABLE>
<CAPTION>
PERIOD
ENDED
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
Net investment income 0.05 0.03 0.02 0.015
---------- ---------- ---------- ---------
0.05 0.03 0.02 0.015
Less distributions
Distributions from net investment income (0.05) (0.03) (0.02) (0.015)
---------- ---------- ---------- ---------
(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%**
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
RATIOS (IN PERCENTAGES)/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%*
</TABLE>
TAX FREE FUND SERIES
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
AUGUST 31, AUGUST 31,
---------- -------------
1995 1994
---------- -------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 9.62 $ 10.00
Net investment income 0.51 0.24
Net realized and unrealized (loss) on investments during the period 0.33 (0.38)
---------- ---------
0.84 (0.14)
Less distributions
Distributions from net investment income (0.51) (0.24)
---------- ---------
(0.51) (0.24)
---------- ---------
Net Asset Value, End of Period $ 9.95 $ 9.62
---------- ---------
---------- ---------
Total Return 9.15% (1.49)%**
---------- ---------
---------- ---------
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's omitted) $ 8,399 $ 7,295
Ratio of expenses to average net assets (2) -- 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
** Returns are not annualized
(1) Expenses for the calculation are net of a reimbursement from Securities
Management & 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 and 1993 and
the period ended August 31, 1992, respectively.
(2) Expenses for the calculation are net of a reimbursement from Securities
Management & 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.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS August 31, 1995
- --------------------------------------------------------------------------------
SM&R CAPITAL FUNDS, INC.
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
The SM&R Capital Funds, Inc. (the "Funds") is a diversified open-end
management investment company registered as a series fund under the
Investment Company Act of 1940, as amended. The Funds are comprised of the
American National Government Income Fund Series ("Government Income Fund
Series"), American National Primary Fund Series ("Primary Fund Series"), and
American National Tax Free Fund Series ("Tax Free Fund Series"). Operations
commenced March 16, 1992, for the Government Income Fund Series and Primary
Fund Series. The Tax Free Fund Series began operations September 9, 1993.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of its financial statements.
INVESTMENT VALUATIONS:
Investments are valued based on market quotations or at fair value as
determined by a pricing service approved by the Board of Directors. Prices
provided by the pricing service represent valuations at bid prices or on a
basis determined without exclusive reliance on quoted prices and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, yield quality, coupon rate, maturity, type of issue, individual
trading characteristics and other market data. Investments for which market
quotations are not readily available are valued as determined by the Board of
Directors. Investments in short-term obligations with maturities of sixty
days or less are valued at amortized cost.
INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME:
Investment transactions are accounted for on the trade date (date order to
buy or sell is executed). Dividend income is recorded on the ex-dividend
date. Interest income is accrued from settlement date. Realized gains and
losses from security transactions are reported on the basis of identified
cost for financial reporting and federal income tax purposes.
FEDERAL INCOME TAXES:
For federal income tax purposes, each series is treated as a separate entity.
The Funds intend to comply with requirements of the Internal Revenue Code
relating to regulated investment companies and intend to distribute
substantially all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is recorded in the accompanying financial
statements. At December 31, 1994, which is the year end for the Funds for tax
purposes, the Government Income Fund Series and the Tax Free Fund Series had
capital loss carryforwards that will expire in 2009 of approximately $349,000
and $51,000, respectively.
CAPITAL STOCK TRANSACTIONS AND DISTRIBUTIONS TO SHAREHOLDERS:
Fund shares are sold in a continuous public offering and may be redeemed on
any business day.
AMERICAN NATIONAL GOVERMENT INCOME FUND SERIES; AMERICAN NATIONAL TAX FREE
FUND SERIES
Dividends to shareholders from net investment income are declared and paid
monthly. Capital gain distributions are declared and paid annually.
AMERICAN NATIONAL PRIMARY FUND SERIES
All capital stock transactions are made at net asset value. Distributions
are computed daily and distributed monthly.
EXPENSES:
Operating expenses not directly attributable to a series' shares are prorated
among the series based on the relative amount of each series' net assets or
shareholders. Organization expenses have been deferred and are being
amortized over a five-year period. All organization expenses for the Tax Free
Fund Series were paid by Securities Management & Research, Inc.
NOTE 2-- INVESTMENT ADVISORY AND SERVICE FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Securities Management & Research, Inc. ("SM&R") is the investment adviser and
principal underwriter for the Funds. Investment advisory fees paid to SM&R are
computed as a percentage of the average daily net assets as follows:
GOVERNMENT INCOME FUND SERIES
TAX FREE FUND SERIES
<TABLE>
<CAPTION>
INVESTMENT
NET ASSETS ADVISORY FEE
<S> <C>
Not exceeding $100,000,000 0.50%
Exceeding $100,000,000 but not exceeding $300,000,000 0.45%
Exceeding $300,000,000 0.40%
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
SM&R CAPITAL FUNDS, INC.
NOTE 2--CONTINUED
PRIMARY FUND SERIES
<TABLE>
<S> <C>
All Average daily net assets 0.50%
</TABLE>
Administrative fees paid to SM&R by the Fund are computed as a percentage of
average daily net assets as follows:
<TABLE>
<CAPTION>
NET ASSETS SERVICE FEES
<S> <C>
Not exceeding $100,000,000 0.25%
Exceeding $100,000,000 but not exceeding $200,000,000 0.20%
Exceeding $200,000,000 but not exceeding $300,000,000 0.15%
Exceeding $300,000,000 0.10%
</TABLE>
SM&R has agreed to reimburse the Funds for all expenses, other than
taxes, interest and expenses directly related to the purchase and sale of
investment securities, in excess of 1.25% per annum of the average daily
net assets. SM&R has voluntarily agreed to reimburse the Primary Fund
Series for expenses in excess of 0.80% per annum of average daily net
assets for the year ended August 31, 1995.
For the year ended August 31, 1995, SM&R voluntarily reimbursed the
Government Income Fund Series for expenses in excess of 0.75% per annum of
average daily net assets and the Tax Free Fund Series for all expenses.
This percentage for the Government Income Fund Series has been
increased to 1.00% per annum effective September 1, 1995 and all expenses
continue to be reimbursed for the Tax Free Fund Series.
For the year ended August 31, 1995, SM&R, as principal underwriter, received
as sales charges on sales of shares of capital stock of the Funds as follows:
<TABLE>
<CAPTION>
SALES CHARGES
RECEIVED BY SM&R
<S> <C>
Government Income $ 33,012
Tax Free 13,566
</TABLE>
SM&R is a wholly-owned subsidiary of American National Insurance
Company ("American National"). As of August 31, 1995, SM&R and American
National had the following ownership in the Funds:
<TABLE>
<CAPTION>
SM&R AMERICAN NATIONAL
------------------------------ ------------------------------
PERCENT OF SHARES PERCENT OF SHARES
SHARES OUTSTANDING SHARES OUTSTANDING
<S> <C> <C> <C> <C>
Government Income 198,388 10% 497,505 26%
Primary 2,755,583 13% 12,062,101 57%
Tax Free 108,109 13% 540,547 64%
</TABLE>
NOTE 3--COST, PURCHASES AND SALES OF INVESTMENT SECURITIES
Investments have the same cost for tax and financial statement purposes.
Aggreggate purchases and sales of investment securities, for the year ended
August 31, 1995 other than commercial paper, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Government Income $ 413,873 $ 777,875
Tax Free 1,687,808 936,934
</TABLE>
Gross unrealized appreciation and depreciation as of August 31, 1995, were as
follows:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION
<S> <C> <C>
Government Income $ 678,700 $ --
Tax Free 131,630 76,998
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
SM&R CAPITAL FUNDS, INC.
NOTE 4--CAPITAL STOCK
GOVERNMENT INCOME FUND SERIES
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1994
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Sale of capital shares 170,678 $1,735,005 403,753 $4,290,655
Investment income dividends reinvested 114,860 1,150,393 73,038 767,803
--------- ---------- --------- ----------
Subtotals 285,538 2,885,398 476,791 5,058,458
Redemptions of capital shares (304,466) (3,022,511) (330,740) (3,480,408)
--------- ---------- --------- ----------
Net increase (decrease) in capital shares outstanding (18,928) $ (137,113) 146,051 $1,578,050
---------- ----------
---------- ----------
Shares outstanding at beginning of year 1,965,669 1,819,618
--------- ---------
Shares outstanding at end of year 1,946,741 1,965,669
--------- ---------
--------- ---------
Net assets as of August 31, 1995 are comprised of the following:
Capital (par value and additional paid-in) $20,140,309
Undistributed net investment income --
Accumulated net realized loss on investments (353,200)
Net unrealized appreciation of investments 678,700
----------
Net assets $20,465,809
----------
----------
</TABLE>
PRIMARY FUND SERIES
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1994
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sale of capital shares 19,960,125 $19,960,121 17,281,220 $17,281,220
Investment income dividends reinvested 833,350 833,350 411,938 411,938
---------- ----------- ---------- -----------
Subtotals 20,793,475 20,793,471 17,693,158 17,693,158
Redemptions of capital shares (15,015,405) (15,015,405) (18,025,903) (18,025,903)
---------- ----------- ---------- -----------
Net increase (decrease) in capital shares outstanding 5,778,070 $ 5,778,066 (332,745) $ (332,745)
----------- -----------
----------- -----------
Shares outstanding at beginning of year 15,211,965 15,544,710
---------- ----------
Shares outstanding at end of year 20,990,035 15,211,965
---------- ----------
---------- ----------
Net assets as of August 31, 1995 are comprised of the
following:
Capital (par value and additional paid-in) $20,990,031
Accumulated net realized loss on investments (5,755)
-----------
Net assets $20,984,276
-----------
-----------
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
SM&R CAPITAL FUNDS, INC.
NOTE 4--CONTINUED
TAX FREE FUND SERIES
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
AUGUST 31, 1995 AUGUST 31, 1994
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sale of capital shares 60,669 $ 582,253 750,343 $7,493,016
Investment income dividends reinvested 44,973 428,694 14,631 142,989
--------- --------- --------- ---------
Subtotals 105,642 1,010,947 764,974 7,636,005
Redemptions of capital shares (19,738) (190,764) (6,464) (62,096)
--------- --------- --------- ---------
Net increase in capital shares outstanding 85,904 $ 820,183 758,510 $7,573,909
---------- ----------
---------- ----------
Shares outstanding at beginning of period 758,510 --
--------- ---------
Shares outstanding at end of period 844,414 758,510
--------- ---------
--------- ---------
Net assets as of August 31, 1995 are comprised of the following:
Capital (par value and additional paid-in) $8,394,092
Undistributed net investment income 2,218
Accumulated net realized loss on investments (51,826)
Net unrealized appreciation of investments 54,632
----------
Net assets $8,399,116
---------
---------
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
SM&R Capital Funds, Inc.
We have audited the accompanying statements of assets and liabilities of SM&R
Capital Funds, Inc. (comprised of American National Government Income Fund
Series ("Government Fund"), American National Primary Fund Series ("Primary
Fund") and American National Tax Free Fund Series ("Tax Free Fund")),
including the schedule of investments as of August 31, 1995, the related
statements of operations for the year then ended, the statements of changes
in net assets for each of the years in the two year period then ended for the
Government Fund and Primary Fund and for the year ended August 31, 1995 and
for the period September 9, 1993 (date operations commenced) through August
31, 1994 for the Tax Free Fund, and the financial highlights for each of the
years in the three year period then ended and the period March 16, 1992 (date
operations commenced) through August 31, 1992 for the Government Fund and
Primary Fund and for the year ended August 31, 1995 and for the period
September 9, 1993 (date operations commenced) through August 31, 1994 for the
Tax Free Fund. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1995, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
SM&R Capital Funds, Inc. as of August 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the years
in the two year period then ended for the Government Fund and Primary Fund
and for the year ended August 31, 1995 and for the period September 9, 1993
(date operations commenced) through August 31, 1994 for the Tax Free Fund,
and the financial highlights for each of the years in the three year period
then ended and the period March 16, 1992 (date operations commenced) through
August 31, 1992 for the Government Fund and Primary Fund and for the year
ended August 31, 1995 and for the period September 9, 1993 (date operations
commenced) through August 31, 1994 for the Tax Free Fund, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
October 16, 1995
<PAGE>
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS:
The Financial Statements required in the instructions
to this Form N-1A are attached as an Exhibit 1 to
the Statement of Additional Information.
(b) EXHIBITS:
1. See EXHIBIT 99.B1a to this Post-Effective
Amendment No. 7 for a copy of the Registrant's
Articles of Incorporation and EXHIBIT 99.B1b for a
copy of the Supplementary Articles of Incorporation.
2. See EXHIBIT 99.B2 to this Post-Effective
Amendment No. 7 for a copy of Registrant's By-Laws.
3. None.
4. See EXHIBIT 99.B4 to this Post-Effective
Amendment No. 7 for a specimen of Registrant's
stock certificate.
5. See EXHIBIT 99.B5 to this Post-Effective
Amendment No. 7 for a copy of Registrant's
Investment Advisory Agreement.
6. See EXHIBIT 99.B6 to this Post-Effective
Amendment No. 7 for copies of Registrant's
Underwriting Agreement.
7. None.
8. See EXHIBIT 99.B8a to this Post-Effective
Amendment No. 7 for a copy of Registrant's
Custodian Agreement and EXHIBIT 99.B8b for a copy of the
Sub-Custodian Agreement.
9. None.
10. See EXHIBIT 99.B10 to this Post-Effective
Amendment No. 7 for consent and opinion of
Registrant's counsel, Greer, Herz & Adams, L.L.P.
11. See EXHIBIT 99.B11 to this Post-Effective
Amendment No. 7 for consent of KPMG Peat Marwick
LLP independent accountants of Registrant.
12. Not Applicable.
13. See EXHIBIT 99.B13 to this Post-Effective
Amendment No. 7 for copies of the Stock Purchase
Letters from Securities Management and Research,
Inc. and American National Insurance Company.
14. See EXHIBIT 99.B14a to this Post Effective
Amendment No. 7 for copies of documents used to
establish Individual Retirement Plans, Tax
Sheltered Custodial Accounts and Optional
Retirement Programs and Exhibit 99.B14b for copies of
documents used to establish Individual Retirement Plans
in conjunction with which Registrant offers securities.
15. None.
16. None.
17. See EXHIBIT 99.B17 to this Post-Effective
Amendment No. 7 for a copy of the Power of
Attorney authorizing Michael W. McCroskey to
execute on the Directors' behalf any and all
amendments and supplements on Registrant's
Form N-1A.
18. Not Applicable.
19. See EXHIBIT 99.B19 to this Post-Effective
Amendment No. 7 for a revised Control Chart.
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
All persons under common control with the Registrant are
shown on the diagram provided in Exhibit 99.B19 to this Post-
Effective Amendment.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of November 30, 1995, the number of record holders of
Registrant's common stock were as follows:
TITLE OF CLASS NUMBER OF RECORD HOLDERS
American National Government Income Fund Series 548
American National Primary Fund Series 572
American National Tax Free Fund Series 96
ITEM 27. INDEMNIFICATION.
The Registrant has agreed to indemnify its directors to the
maximum extent permitted by applicable law against all costs and
expenses (including, but not limited to, counsel fees, amounts of
judgments paid, and amounts paid in settlement) reasonably
incurred in connection with the defense of any actual or
threatened claim, action, suit or proceeding, whether civil,
criminal, administrative, or other, in which he or she may be
involved by virtue of such person being or having been such
director. Such indemnification is pursuant to Section 3.15 of
the Registrant's By-Laws, EXHIBIT "2" to this Post-Effective
Amendment No. 7 to Form N-1A.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Securities Management and Research, Inc. ("SM&R") serves as
investment adviser to Registrant and American National Growth
Fund, Inc.; American National Income Fund, Inc., and Triflex
Fund, Inc. (herein referred to as "American National Funds
Group") and the American National Investment Accounts, Inc. See
"THE FUND AND ITS MANAGEMENT" in Part A and "MANAGEMENT OF THE
FUND" in Part B.
ROBERT A. FRUEND, C.L.U.
Director of SM&R; Director of American National
Investment Accounts, Inc., One Moody Plaza, Galveston,
Texas; Senior Vice President and Director of Ordinary
Agencies of American National Insurance Company, One Moody
Plaza, Galveston, Texas; Director of American National
Property and Casualty Company, 1949 East Sunshine,
Springfield, Missouri; Director of American National
General Insurance Company, 1949 East Sunshine, Springfield,
Missouri; and Director of American National Insurance
Service Company, 1722 South Glenstone, Springfield,
Missouri.
R. EUGENE LUCAS
Director of SM&R; Director of American National
Insurance Company, One Moody Plaza, Galveston, Texas;
President and Director of Gal-Tex Hotel Corporation, 504
Moody National Bank Tower, Galveston, Texas, Gal- Tenn Hotel
Corporation 504 Moody National Bank Tower, Galveston, Texas;
Director of ANREM Corporation, One Moody Plaza, Galveston,
Texas.
<PAGE>
MICHAEL W. McCROSKEY
President, Chief Executive Officer and member of the
Executive Committee of SM&R, June 1994 to present; President
and Director of the Fund, June 1994 to present; President
and Director of the American National Growth Fund, Inc.,
American National Income Fund, Inc., and Triflex Fund, Inc.
(hereinafter referred to as the "American National Funds
Group"), June 1994 to present; President and Director of the
American National Investment Accounts, Inc., June 1994 to
present; Executive Vice President, American National, 1971
to present; Vice President of Standard Life and Accident
Insurance Company, 1988 to present; Assistant Secretary of
American National Life Insurance Company of Texas, 1986 to
present, life, health and accident insurance companies in
the American National Family of Companies; Vice President,
Garden State Life Insurance Company, 1994 to present;
Director, ANREM Corporation, 1977 to present; President and
Director, ANTAC, Inc., 1994 to present.
CARL R. ROBERTSON
Director of SM&R; Senior Executive Vice President,
Home Office Administration of American National Insurance
Company, One Moody Plaza, Galveston, Texas; Director and
Assistant Secretary of Standard Life and Accident Insurance
Company, 421 N.W. 13th Street,Oklahoma City, Oklahoma;
Director of American National Property and Casualty Company,
1949 East Sunshine, Springfield, Missouri; Director and
Vice President of Administration of American National Life
Insurance Company of Texas, One Moody Plaza, Galveston,
Texas; Director of American National General Insurance
Company, 1949 East Sunshine, Springfield, Missouri;
Director and Chairman of the Board of American Printing
Company, 4400 P-1/2, Galveston, Texas; Director and Vice
President of ANREM Corporation, One Moody Plaza, Galveston,
Texas; Director of Mainsail Marina Services, Inc., 2400
South Shore Boulevard, League City, Texas; Director and
President of Exchange Management Services, Inc., Executive
Offices-3027 FM 2094, League City, Texas; Director of
Garden State Life Insurance Company, 2450 South Shore Blvd.,
Suite 301, League City, Texas.
VERA M. YOUNG
Vice President, Portfolio Manager of SM&R; Vice
President and Portfolio Manager Money Market Portfolio,
American National Investment Accounts, Inc. and SM&R Capital
Funds - Primary Series; Assistant Vice President, Securities
of American National Insurance Company, One Moody Plaza,
Galveston, Texas.
EMERSON V. UNGER
Vice President of SM&R; Vice President of SM&R Capital
Funds, Inc., One Moody Plaza, Galveston, Texas; Vice
President of the American National Funds Group, One Moody
Plaza, Galveston, Texas; Vice President of American
National Investment Accounts, Inc., One Moody Plaza,
Galveston, Texas.
BRENDA T. KOELEMAY
Vice President and Treasurer of SM&R; Vice President
and Treasurer of SM&R Capital Funds, One Moody Plaza,
Galveston, Texas; Vice President and Treasurer of the
American National Funds Group, One Moody Plaza, Galveston,
Texas; Vice President and Treasurer American National
Investment Accounts, Inc., One Moody Plaza, Galveston,
Texas.
TERESA E. AXELSON
Vice President and Secretary of SM&R; Vice President
and Secretary SM&R Capital Funds, Inc., One Moody Plaza,
Galveston, Texas; Vice President and Secretary of the
American National Funds Group, One Moody Plaza, Galveston,
Texas; Vice President and Secretary of American National
Investment Accounts, Inc., One Moody Plaza, Galveston,
Texas.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) SM&R also serves as the principal underwriter for the
Registrant, the American National Funds Group and the American
National Investment Accounts, Inc. See "THE FUND AND ITS
MANAGEMENT" in Part A.
<PAGE>
(b)
Positions and Positions and
Name and Principal Offices With Offices With
Business Address Underwriter Registrant
- ------------------ ------------- -------------
Robert A. Fruend, C.L.U. Director None
One Moody Plaza
Galveston, Texas
R. Eugene Lucas Director None
Moody National Bank Tower
Galveston, Texas
Michael W. McCroskey Director and President and
One Moody Plaza President Director
Galveston, Texas
Carl R. Robertson Director None
One Moody Plaza
Galveston, Texas
Vera M. Young Vice President, Vice President and
One Moody Plaza Portfolio Manager Portfolio Manager
Galveston, Texas
Emerson V. Unger, C.L.U. Vice President Vice President
One Moody Plaza
Galveston, Texas
Brenda T. Koelemay Vice President Vice President
One Moody Plaza and Treasurer and Treasurer
Galveston, Texas
Teresa E. Axelson Vice President Vice President
One Moody Plaza and Secretary and Secretary
Galveston, Texas
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940
and the Rules promulgated thereunder will be maintained at the
office of SM&R at One Moody Plaza, Galveston, Texas 77550.
ITEM 31. MANAGEMENT SERVICES.
There are no management-related service contracts to which
the Registrant is a party not discussed under Part A or Part B of
this Registration Statement.
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes:
(1) to call a special meeting of shareholders of the Fund for
any purpose, including, but not limited to, to consider the
removal of any director, at any time upon the written request of
shareholders of record of not less than ten percent (10%) of the
Fund's shares outstanding.
(2) to assist in communications between shareholders as required
by Section 16(c) of the Investment Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant,
SM&R CAPITAL FUNDS, INC., certifies that it meets all of the
requirements for effectiveness of this POST-EFFECTIVE
AMENDMENT NO. 7 to this Registration Statement pursuant to
Rule 485(a) under the Securities Act of 1933 and has duly
caused this POST-EFFECTIVE AMENDMENT NO. 7 to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of
Galveston and State of Texas, on the 19th day of December,
1995.
SM&R CAPITAL FUNDS, INC.
By: Michael W. McCroskey
_____________________________________
Michael W. McCroskey, President
Pursuant to the requirements of the Securities Act of
1933, this POST-EFFECTIVE AMENDMENT NO. 7 has been signed
below by the following persons in the capacities and on the
dates indicated:
PRINCIPAL EXECUTIVE AND
FINANCIAL OFFICER: PRINCIPAL ACCOUNTING OFFICER:
Michael W. McCroskey Brenda T. Koelemay
_______________________________ _____________________________
Michael W. McCroskey, President Brenda T. Koelemay, Treasurer
December 19, 1995 December 19, 1995
Date: _________________________ Date: _________________________
DIRECTORS
December 19, 1995
Samuel K. Finegan Date: _________________________
_______________________________
Samuel K. Finegan
By: Michael W. McCroskey
December 19, 1995
Brent Ellis Masel Date: _________________________
_______________________________
Brent Ellis Masel, M. D.
By: Michael W. McCroskey
December 19, 1995
Allan W. Matthews Date: _________________________
_______________________________
Allan W. Matthews
By: Michael W. McCroskey
December 19, 1995
Lea McLeod Matthews Date: _________________________
_______________________________
Lea McLeod Matthews
By: Michael W. McCroskey
December 19, 1995
Michael W. McCroskey Date: _________________________
_______________________________
Michael W. McCroskey
December 19, 1995
Shannon L. Moody Date: _________________________
_______________________________
Shannon L. Moody
By: Michael W. McCroskey
December 19, 1995
Andrew M. Mytelka Date: _________________________
_______________________________
Andrew J. Mytelka
By: Michael W. McCroskey
December 19, 1995
Edwin K. Nolan Date: _________________________
_______________________________
Edwin K. Nolan
By: Michael W. McCroskey
December 19, 1995
Louis E. Pauls, Jr. Date: _________________________
_______________________________
Louis E. Pauls, Jr.
By: Michael W. McCroskey
<PAGE>
EXHIBIT INDEX
TO
POST-EFFECTIVE AMENDMENT NO. 7
UNDER THE SECURITIES ACT OF 1933
AND
UNDER INVESTMENT COMPANY ACT OF 1940
FOR
SM&R CAPITAL FUNDS, INC.
("REGISTRANT")
Exhibit 99.Bla Registrant's Articles of Incorporation
Exhibit 99.Blb Supplementary Articles of Incorporation
Exhibit 99.B2 Registrant's By-Laws
Exhibit 99.B4 Registrant's Specimen Stock Certificate
Exhibit 99.B5 Registrant's Investment Advisory Agreement
Exhibit 99.B6 Registrant's Underwriting Agreement
Exhibit 99.B8a Registrant's Custodian Agreement
Exhibit 99.B8b Sub-Custodian Agreement
Exhibit 99.B10 Opinion of Greer, Herz & Adams, L.L.P.
Counsel for Registrant
Exhibit 99.B11 Consent of KPMG Peat Marwick LLP Accountants
for Registrant
Exhibit 99.B13 Stock Purchase letters from Securities
Management and Research, Inc. and
American National Insurance Company
Exhibit 99.B14a Documents used to establish TSAs
Exhibit 99.B14b Documents used to establish IRAs
Exhibit 99.B17 Power of Attorney
Exhibit 99.B19 Control Chart
Exhibit 27.1 Government Income Fund Series
Exhibit 27.2 Primary Fund Series
Exhibit 27.3 Tax Free Fund Series
<PAGE>
EXHIBIT 99.B1a
ARTICLES OF INCORPORATION
OF
SM&R CAPITAL FUNDS, INC.
ARTICLE I
The undersigned, Gregory S. Garrison, whose post office address is One
Moody Plaza, 14th Floor, Galveston, Texas 77550 and who is of full legal age,
does hereby declare that he is an incorporator intending to form a corporation
under and by virtue of the Maryland General Corporation Law authorizing the
formation of corporations.
ARTICLE II
The name of the Corporation is SM&R CAPITAL FUNDS, INC.
ARTICLE III
Purposes and Powers
The purpose for which the Corporation is formed and its objects, rights,
power and privileges are:
(1) To conduct and carry on the business of an open-end, management
type investment company registered under the Investment Company Act of 1940
(as amended and together with any successor act thereto and all rules,
regulations and orders thereunder, referred to as the " '40 Act") and to have
and exercise any and all rights and powers necessary and appropriate to the
conduct of such business or incidental thereto;
(2) To subscribe for, or otherwise acquire, purchase, pledge, sell,
assign, transfer, exchange, distribute or otherwise dispose of, and generally
deal in and hold all forms of securities and other investments, including, but
not limited to, stocks (preferred and common), notes, bonds, debentures,
script, warrants, participation certificates, bankers acceptances, futures,
options of all types on securities and futures, mortgages, commercial paper,
choses in action, evidences of indebtedness and other obligations of every
kind and description, precious metals and contracts and rights to acquire or
dispose of precious metals, and in connection therewith to hold part or all of
its assets in cash or cash equivalents or money market instruments;
(3) To continuously issue and sell shares of its own capital stock (all
without the vote or consent of the stockholders of the Corporation) in such
amounts and on such terms and conditions, for such purposes and for such
amount or kind of consideration now or hereafter permitted by the Maryland
General Corporation Law, or any act amendatory thereof, supplemental thereto,
or in substitution therefor (the "Maryland General Corporation Law"), and by
the Articles of Incorporation of the Corporation, as its Board of Directors
may determine;
(4) To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue, retire or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner
and to the extent now or hereafter permitted by the Maryland General
Corporation Law and by the Articles of Incorporation of the Corporation;
(5) To borrow or raise money for any purpose of the Corporation and
from time to time to draw, make, accept, endorse, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds, debentures and other
negotiable and nonnegotiable instruments and evidences of indebtedness,
1
<PAGE>
and to pledge, hypothecate and borrow upon the credit of the assets of the
Corporation;
(6) To take all such action as shall be desirable and necessary to
cause its shares to be licensed or registered for sale under the laws of the
United States and in any state, country, city or other municipality of the
United States, the territories thereof, the District of Columbia or in any
foreign country and in any town, city or subdivision thereof;
(7) To make contracts and generally to do any and all acts and things
necessary or desirable in furtherance of any of the corporate purposes or
designed to protect, preserve and/or enhance the value of the corporate
assets, all to the extent permitted to business corporations authorized under
the laws of the State of Maryland, as now or may in the future be authorized
by said laws;
(8) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes, objects or powers hereinbefore set
forth to the same extent and as fully as a natural person might or could do,
in any part of the world and either alone or in association or partnership
with other corporations, firms or individuals;
(9) To have all the rights, powers and privileges now or hereafter
conferred by the laws of the State of Maryland upon a corporation organized
under the Maryland General Corporation Law; and
(10) To do any and all such further acts or things and to exercise any
and all such further powers or rights as may be necessary, incidental,
relative, conducive, appropriate or desirable for the accomplishment, carrying
out or attainment of all or any of the foregoing purposes, objects or powers.
The foregoing clauses are and shall be regarded as independent and
separate, and the enumeration in any such clause of any specific objectives
and/or powers shall not be construed as limiting or restricting in any way the
general objectives and powers stated in any other clause; nor shall any of the
objectives and/or powers stated above, except when otherwise expressly
provided, be in any way limited or restricted by reference to, or inference
from, the terms of any other clause of these Articles of Incorporation.
ARTICLE IV
Principal Office and Resident Agent
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202. The resident agent of the Corporation in
the State of Maryland is The Corporation Trust Incorporated, a corporation of
the State of Maryland, whose post office address is 32 South Street,
Baltimore, Maryland 21202.
ARTICLE V
Capital Stock
(1) The total number of shares of stock which the Corporation initially
shall have authority to issue is Two Hundred Million (200,000,000) shares of
common stock, par value of $0.01 each, such shares to be classified as "Common
Stock", and to be of the aggregate par value of Two Million Dollars
($2,000,000.00). Unless otherwise prohibited by law, so long as the
Corporation is registered as an open-end investment company under the '40 Act,
the total number of shares which the Corporation is authorized to issue may be
increased or decreased by the Board of Directors in accordance with the
applicable provisions of the Maryland General Corporation Law.
(2) The Corporation is authorized to issue its Common Shares in two or
more series or two or more classes, and, subject to the requirements of the
'40 Act, the different series or classes of
2
<PAGE>
Common Shares shall be established and designated, and relative preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as between
the different series or classes of Common Shares shall be fixed and
determined by the Board of Directors; provided that the Board of Directors
shall not classify or reclassify any of such Common Stock into any class or
series of stock which is prior to any other class or series of Common Shares
then outstanding with respect to rights upon the liquidation, dissolution or
winding up of the affairs of, or upon any distribution of the general assets
of the Corporation, except that there may be variations so fixed and
determined between series or classes of Common Shares as to investment
objective, purchase price, right of redemption, special rights as to
dividends and on liquidation with respect to assets belonging to a particular
series or class of Common Shares, voting powers and conversion rights. All
references to Common Shares in these Articles shall be deemed to be to shares
of any or all series and classes as the context may require.
The following is a description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the series designed
as the "Government Income Fund Series" (of which there are initially
100,000,000 authorized shares), the "Reserve Asset Fund Series" (of which
there are initially 50,000,000 shares authorized) and any additional class or
series of Common Shares of the Corporation (unless provided otherwise by the
Board of Directors with respect to any such additional class or series at the
time of establishing and designating such additional class or series).
(a) The number of authorized Common Shares and the number of
Common Shares of each series or of each class that may be issued shall
be in such number as may be determined by the Board of Directors. The
Directors may classify or reclassify any unissued Common Shares or any
Common Shares previously issued and reacquired of any series or class
into one or more series or into one or more classes that may be
established and designated from time to time. The Directors may hold as
treasury shares (of the same or some other series or class), reissue for
such consideration and on such terms as they may determine, or cancel
any Common Shares of any series or any class reacquired by the
Corporation at their discretion from time to time.
(b) All consideration received by the Corporation for the issue
or sale of Common Shares of a particular series or class, together with
all assets in which such consideration is invested or reinvested, all
income, earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to that series
or class for all purposes, subject only to the rights of creditors of
that series or class, and shall be so recorded upon the books of account
of the Corporation. Such consideration, assets, income, earnings,
profits and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that series or class for all
purposes, subject only to the rights of creditors of that series or
class, and shall be so recorded upon the books of account of the
Corporation. Such considerations, assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange
or liquidation thereof and any asset derived from any reinvestment of
such proceeds in whatever form shall be referred to in these Articles of
Incorporation as "assets belonging to" or "belonging to" such series or
class. In the event that there are any assets, income, earnings,
profits and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular series or class, the
Directors shall allocate them among, and they shall then belong to, any
one or more of the series or classes established and designated from
time to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable. Each such allocation by the
3
<PAGE>
Corporation shall be conclusive and binding upon the stockholders of all
series or classes for all purposes. The Directors shall have full
discretion, to the extent not inconsistent with the '40 Act, and the
Maryland General Corporation Law to determine which items shall be
treated as income and which items shall be treated as capital; and each
such determination and allocation shall be conclusive and binding upon
the stockholders.
(c) The assets belonging to each particular series or class
shall be charged with the liabilities of the Corporation attributable to
that series or class and all expenses, costs, charges and reserves
attributable to that series or class. Any general liabilities,
expenses, costs, charges or reserves of the Corporation which are not
readily identifiable as belonging to any particular series or class
shall be allocated and charged by the Directors to and among any one or
more of the series or classes established and designated from time to
time in such manner and on such basis as the Directors in their sole
discretion deem fair and equitable. Each allocation of liabilities,
expenses, costs, charges and reserves by the Directors shall be
conclusive and binding upon the stockholders of all series or classes
for all purposes.
(d) Dividends and distributions on Common Shares of a particular
series or class may be paid with such frequency as the Directors may
determine, pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Board of Directors may determine, to
the holders of Common Shares of that series or class, from such income
and capital gains, accrued or realized, or from the assets belonging to
that series or class, as the Directors may determine, after providing
for actual and accrued liabilities belonging to that series or class.
All dividends and distributions on Common Shares of a particular series
or class shall be distributed pro-rata to the holders of that series or
class in proportion to the number of Common Shares of that series or
class held by such holders at the date and time of record established
for the payment of such dividends or distributions, except that in
connection with any dividend or distribution program or procedure, the
Board of Directors may determine that no dividend or distribution, shall
be payable on shares as to which the stockholder's purchase order or
payment has not been received by the time or times established by the
Board of Directors under such program or procedure.
The Corporation intends to have each separate series or class
qualify as a "regulated investment company" under the Internal Revenue
Code of 1986, or any successor comparable statute thereto, and
regulations promulgated thereunder. Inasmuch as the computation of net
income and gains for Federal income tax purposes may vary from the
computation thereof on the books of the Corporation, the Board of
Directors shall have the power, in its sole discretion, to distribute in
any fiscal year as dividends, including dividends designated in whole or
in part as capital gains distributions, amounts sufficient, in the
opinion of the Board of Directors, to enable the respective series or
classes to qualify as regulated investment companies and to avoid
liability of such series or class for Federal income tax for such fiscal
year. However, nothing in the foregoing shall limit the authority of
the Board of Directors to make distributions greater than or less than
the amount necessary to qualify the series or classes as regulated
investment companies and to avoid liability of such series or classes
for such tax.
Dividends and distributions may be made in cash, property or
additional shares of the same or another class or series, or a
combination thereof, as determined by the Board of Directors or pursuant
to any program that the Board of Directors may have in effect at the
time for the election by each stockholder of the mode of the making of
such dividend or distribution to that stockholder. Any such dividend or
distribution paid in shares will be paid at the net asset value thereof
as defined in the '40 Act and as determined by the Board of Directors of
the Corporation ("Net Asset Value").
4
<PAGE>
(e) Each holder of any series or class of stock of the
Corporation who surrenders his certificate in good delivery form to the
Corporation, or, if the shares in question are not represented by
certificates, who delivers to the Corporation a written request in good
order signed by the shareholder, shall be entitled to exchange the
shares of the series or class in question for shares of stock of any
other series or class of the Corporation or another open-end, management
type investment company on the basis determined by the Corporation's
Board of Directors and as provided in the Corporation's current
prospectus. Upon any exchange taking place in the Corporation, proper
transfer shall be made between the assets belonging to the various
series or classes of stock involved. The Board of Directors may impose
such conditions on a holder's right to exchange and limit this privilege
to shares which have been held for such reasonable period as the
directors may determine.
(f) In the event of the liquidation or dissolution of the
Corporation or of a particular class or series, the stockholders of each
class or series that has been established and designated and is being
liquidated shall be entitled to receive, as a class or series, when and
as declared by the Board of Directors, the excess of the assets
belonging to that class or series over the liabilities belonging to that
class or series. The holders of shares of any particular class or
series shall not be entitled thereby to any distribution upon
liquidation of any other class or series. The assets so distributable
to the stockholders of any particular class or series shall be
distributed among such stockholders in proportion to the number of
shares of that class or series held by them and recorded on the books of
the Corporation. The liquidation of any particular class or series in
which there are shares then outstanding may be authorized by vote of a
majority of the Board of Directors then in office, subject to the
approval of a majority of the outstanding securities of that class or
series, as defined in the '40 Act, and without the vote of the holders
of any other class or series. The liquidation or dissolution of a
particular class or series may be accomplished in whole or in part, by
the transfer of assets of such class or series to another class or
series or by the exchange of shares of such class or series for the
shares of another class or series.
(g) On each matter submitted to a vote of the stockholders, each
holder of a share shall be entitled to one vote for each share standing
in his name on the books of the Corporation on a date reasonably
determined by the Board of Directors of the Corporation, irrespective of
the class or series thereof, and all shares of all classes or series
shall vote as a single class or series ("Single Class Voting");
provided, however, that (i) as to any matter with respect to which a
separate vote of any class or series is required by the '40 Act, or by
the Maryland General Corporation Law, such requirement as to a separate
vote by that class or series shall apply in lieu of Single Class Voting
as described above; (ii) in the event that the separate vote
requirements referred to in (i) above apply with respect to one or more
classes or series, then, subject to (iii) below, the shares of all
other classes or series shall vote as a single class or series; and
(iii) as to any matter which does not affect the interest of particular
class or series, only the holders of shares of the one or more affected
classes or series shall be entitled to vote.
(h) The establishment and designation of any series or class of
common Shares shall be effective upon the adoption by a majority of the
then Directors of a resolution setting forth such establishment and
designation and the relative rights and preferences of such series or
class, or as otherwise provided in such instrument and the filing with
the proper authority of the State of Maryland of Articles Supplementary
setting forth such establishment and designation and relative rights and
preferences.
(3) The Corporation shall, upon due presentation of a share or shares
of stock for redemption, redeem such share or shares of stock at a redemption
price prescribed by the Board of Directors in
5
<PAGE>
accordance with applicable laws and regulations; provided that in no
event shall such price be less than the applicable Net Asset Value per share
of such class or series, less such redemption charge as is determined by the
Board of Directors, which redemption charge shall be in accordance with the
Maryland General Corporation Law and the '40 Act. To the extent permitted by
the '40 Act and Maryland General Corporation Law, the Corporation may redeem
shares of Common Stock of any series or class not offered for redemption held
by any shareholder whose shares have a value less than such minimum amount as
may be fixed by the Board of Directors (the "Minimum Required Investment").
The Corporation shall pay the redemption price in cash or in kind in such
manner as is consistent with and not in contravention of '40 Act. Redemption
prices shall be paid exclusively out of the assets of the series whose shares
are being redeemed.
Notwithstanding the foregoing, the Corporation may postpone payment of
the redemption price and may suspend the right of the holders of shares of any
class or series to require the Corporation to redeem shares of that class or
series during any period or at any time when and to the extent permissible
under the '40 Act.
The Net Asset Value of a share of any class or series of Common Stock of
the Corporation shall be determined in accordance with applicable laws and
regulations and under the supervision of such persons and at such time or
times as shall from time to time be prescribed by the Board of Directors.
(4) The Corporation may issue, sell, redeem, repurchase and otherwise
deal in and with shares of its stock in fractional denominations and such
fractional denominations shall, for all purposes be shares of common stock
having proportionately to the respective fractions represented thereby all the
rights of whole shares, including without limitation, the right to vote, the
right to receive dividends, and the right to participate upon liquidation of
the Corporation; provided that the issue of shares in fractional denominations
shall be limited to such transactions and be made upon such terms as may be
fixed by or under authority of the By-Laws.
(5) The Corporation shall not be obligated to issue certificates
representing shares of any class or series unless it shall receive a written
request therefor from the record holder thereof in accordance with procedures
established in the By-Laws or by the Board of Directors.
(6) The Board of Directors of the Corporation shall have the final
decision upon questions concerning the method of computing Net Asset Value,
valuation of assets, procedure in repurchase, and other matters in connection
with placing in effect the offering price and repurchase of the Corporation's
Common Stock.
ARTICLES VI
Preemptive Rights
No stockholder of the Corporation of any class or series, whether now or
hereafter authorized, shall have any preemptive or preferential or other right
of purchase of or subscription to any shares of any class or series of stock,
or securities convertible into, exchangeable for or evidencing the right to
purchase stock of any class or series whatever, whether or not the stock in
question is of the same class or series as may be held by such stockholders,
and whether now or hereafter authorized and whether issued for cash, property,
services or otherwise, other than such, if any, as the Board of Directors in
its discretion may from time to time fix.
ARTICLES VII
Number and Powers of Directors
(1) The number of directors of the Corporation shall be such number,
not less than three
6
<PAGE>
(3), as may be specified in or fixed in the manner prescribed by the By-Laws
of the Corporation. Until a different number is fixed as provided by the
By-Laws, the Corporation shall have seven (7) directors. Unless otherwise
provided by the By-Laws of the Corporation, directors need not be
stockholders thereof.
(2) The names of the initial directors who shall act until the first
annual meeting or until their successors are duly chosen and qualify are:
Samuel K. Finegan
Brent Ellis Masel, M.D.
Ross R. Moody
Andrew J. Mytelka
Edwin K. Nolan
Don B. Reynolds
Steven H. Stubbs
(3) So long as permitted by Maryland law by the '40 Act, directors
elected at a meeting of shareholders shall not have a specified term and
shall serve until their successors are elected and qualified. Cumulative
voting in the election of directors is prohibited.
(4) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether
now or hereafter authorized, for such consideration as the Board of Directors
may deem advisable, subject to such limitations as may be set forth in the
Charter or the By-Laws of the Corporation or in the Maryland General
Corporation Law or in the '40 Act.
(5) Each Director and each officer of the Corporation shall be
indemnified by the Corporation to the full extent permitted by the Maryland
General Corporation Law and the By-Laws of the Corporation, as such Law and
By-Laws may now or in the future may be in effect, subject only to such
limitations as may be required by the '40 Act.
(6) The Board of Directors of the Corporation may make, alter or
repeal from time to time any of the By-Laws of the Corporation except any
particular By-Law which is specified as not subject to alteration or repeal
by the Board of Directors.
(7) The Corporation may employ such custodian or custodians for the
safekeeping of the property of the Corporation and of its shares, such
dividend disbursing agent or agents, and such transfer agents or agents and
registrar or registrars for its shares, and may make and perform such
contracts for the aforesaid purposes as in the opinion of the Board of
Directors of this Corporation may be reasonable, necessary or proper for the
conduct of the affairs of the Corporation, and may pay the fees and
disbursements of such custodians, dividend disbursing agents, transfer
agents, and registrars out of the income and/or any other property of the
Corporation. Notwithstanding any other provisions of these Articles of
Incorporation or the By-Laws of the Corporation, the Board of Directors may
cause any or all of the property of the Corporation to be transferred or to
be acquired and held in the name of a custodian so appointed or in the name
of any nominee or nominees of this Corporation or nominee or nominees of such
custodian satisfactory to the said Board of Directors.
(8) The Corporation may enter into a written contract or contracts
with any person, including any firm, corporation, trust or association in
which any officer, other employee, director or stockholder of this
Corporation may be interested, providing for
7
<PAGE>
a delegation of the management of all or part of this Corporation's
securities portfolio and also for the delegation of the
performance of administrative corporate functions, subject always to the
direction of the Board of Directors. The compensation payable by this
Corporation under such contracts shall be such as is deemed fair and
equitable to both parties by the said Board of Directors. Any such contracts
shall in all respects be consistent with and subject to the requirements of
the '40 Act.
ARTICLE VIII
Stockholder Vote
Notwithstanding any provisions of Maryland law requiring the affirmative
vote of more than a majority of the votes of all classes or of any class of
stock entitled to be cast, to take or authorize any action, the Corporation,
if permitted by the '40 Act, may take or authorize any such action upon the
concurrence of a majority of the aggregate number of the votes entitled to be
cast thereon. Without intending any limitation of the foregoing sentence,
such majority approval shall be sufficient, valid and effective, after due
authorization, approval and/or other action by the Board of Directors, as
required by law, to approve and authorize the following acts of the
Corporation:
(a) the amendment of the Charter of the Corporation;
(b) the consolidation of the Corporation with one or more
corporations to form a new consolidated corporation;
(c) the merger of the Corporation into another corporation
or the merger of one or more other corporations into the
Corporation;
(d) the sale, lease, exchange or other transfer of all, or
substantially all, of the property and assets of the Corporation,
including its goodwill and franchises;
(e) the participation by the Corporation in a share
exchange (as defined by applicable Maryland laws) as the
Corporation the stock of which is to be acquired;
(f) the voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation.
ARTICLE IX
Limitation of Directors and Officers Liability
The personal liability of the Corporation's directors and officers to
the Corporation or to its stockholders shall be limited to the fullest extent
permitted by the Maryland General Corporation Law now or hereafter in effect.
In particular, but without limiting in any way the preceding sentence,
directors and officers of the Corporation shall not be personally liable to
the Corporation or to its stockholders for monetary damages arising out of any
act or omission in their capacity as director or officer, except:
(1) To the extent that it is proved that a director or
officer actually received an improper benefit or profit in money,
property, or services, such director or officer shall be liable to
the Corporation for the amount of the benefit or profit in money,
property, or services actually received; or
(2) To the extent that a judgement or other final
adjudication adverse to a director or officer is entered in a
proceeding based on a finding in the proceeding that such
8
<PAGE>
director's or officer's action, or failure to act, was the result
of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding.
ARTICLE X
Perpetual Existence
The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation and
acknowledge same to be my act on this 5th day of November, 1991.
GREGORY S. GARRISON
Gregory S. Garrison, Incorporator
WITNESS:
JERRY L. ADAMS
STATE OF TEXAS
COUNTY OF GALVESTON
This instrument was acknowledged before me on the 5th day of
November, 1991, by Gregory S. Garrison.
ALLYSON ADAME
Notary Public in and for
The State of Texas
ALLYSON ADAME
Printed or Typed Name of Notary
My Commission Expires:
JUNE 17, 1995
9
<PAGE>
EXHIBIT 99.B1b
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF SM&R CAPITAL FUNDS, INC.
Pursuant to the provisions of Article 2-604 of the Maryland General
Corporation Law, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the Corporation is SM&R CAPITAL FUNDS, INC.
ARTICLE TWO
The name of the American National Reserve Asset Fund Series, referenced
in Article V, Section 2 of the Articles of Incorporation, is changed to
American National Primary Fund Series.
ARTICLE THREE
The Directors of the Corporation unanimously passed a resolution (the
"Directors' Resolution") in a Board of Directors' meeting on February 18, 1992
recommending that the Articles of Incorporation be amended to changed the name
of the American National Reserve Asset Fund Series to the "American National
Primary Fund Series."
ARTICLE FOUR
The Directors' Resolution also declared that such an amendment is
advisable and directed that such amendment be submitted for approval by the
sole Shareholder of the Corporation.
ARTICLE FIVE
The sole Shareholder of the Corporation, Securities Management and
Research, Inc., approved the amendment of the Articles of Incorporation by
written consent dated March 5, 1992.
EXECUTED AND ACKNOWLEDGED, THIS THE 11TH DAY OF MARCH, 1992.
STEVEN H. STUBBS, PRESIDENT
ATTESTED:
TERESA E. AXELSON, SECRETARY
I, the undersigned, Secretary of SM&R CAPITAL FUNDS, INC., do hereby certify
that the Board resolution described herein was duly adopted by the Board of
Directors of SM&R CAPITAL FUNDS, INC.
And I do further certify that the resolution has never been rescinded or
reconsidered and still remains in force.
And I do further certify that the shareholder consent described above was duly
given.
In witness whereof, I have hereunto sub scribed my name and affixed the seal
of the Corporation, this the 11th day of March, 1992.
TERESA E. AXELSON, SECRETARY
SUBSCRIBED AND SWORN TO BEFORE ME this the 11th day of March, 1992.
MARY E. HEY
Notary Public for State of Texas
<PAGE>
EXHIBIT 99.B2
SM&R CAPITAL FUND, INC
BYLAWS
TABLE OF CONTENTS
Pages
Article I - Offices 1
1.1 Principal Office 1
1.2 Other Offices 1
Article II - Shareholders' Meetings 1
2.1 Place of Meeting 1
2.2 Annual Meetings 1
2.3 Special Meetings 1
2.4 Notice of Meetings 2
2.5 Quorum & Adjournment of Meetings 2
2.6 Voting Rights, Proxies 2
2.7 Vote Required 3
2.8 Inspectors of Election 3
2.9 Action by Stockholders Without Meeting 3
Article III - Directors 4
3.1 Number, Term and Qualifications 4
3.2 Powers 4
3.3 Organizational Meetings 4
3.4 Regular Meetings 4
3.5 Special Meetings 4
3.6 Notice of Special Meetings 4
3.7 Telephone Meetings 5
3.8 Quorum, Voting and Adjournments of Meetings 5
3.9 Removal 5
3.10 Vacancies 5
3.11 Action by Directors Without Meeting 5
3.12 Expenses and Fees 6
3.13 Execution of Instruments and Documents and
Signing of Checks and Other Obligations and Transfers 6
3.14 Contracts 6
3.15 Indemnification of Directors, Officers, Employees and Agents 7
Article IV - Committees 10
4.1 Executive and Other Committees 10
4.2 Advisory Committee 10
4.3 Committee Action Without Meeting 11
Article V - Officers 11
5.1 Executive Officers 11
5.2 Other Officers and Agents 11
5.3 Term, Removal and Vacancies 11
<PAGE>
5.4 Compensation of Officers 11
5.5 Power and Duties 12
5.6 The Chairman 12
5.7 The President 12
5.8 The Vice Presidents 12
5.9 The Assistant Vice Presidents 13
5.10 The Secretary 13
5.11 The Assistant Secretaries 13
5.12 The Treasurer 13
5.13 The Assistant Treasurer 13
5.14 Delegation of Duties 14
Articles VI - Capital Stock 14
6.1 Issuance of Stock 14
6.2 Certificates of Stock 14
6.3 Transfer of Stock 15
6.4 Record Date 15
6.5 Lost, Stolen, Destroyed and Mutilated Certificate 15
6.6 Registered Owners of Stock 15
6.7 Fractional Denominations 16
Articles VII - Investments 16
Articles VIII - Sale of Stock 18
Articles IX - Determination of Net Asset Value: Valuation of Portfolio
Securities and Other Assets 18
9.1 Net Asset Value 18
9.2 Valuation of Portfolio Securities and Other Assets 18
Articles X - Dividends and Distributions 19
Articles XI - Custodian 19
11.1 Appointment and Duties 19
11.2 Central Certificate System 20
Article XII - Books and Records 20
12.1 Location 20
12.2 Stock Ledgers 21
12.3 Annual Statement 21
Article XIII - Waiver of Notice 21
Article XIV - Miscellaneous
14.1 Seal 21
14.2 Fiscal Year 21
14.3 Orders for Payment of Money 21
Articles XV - Compliance with Federal Regulations 22
Articles XVI - Amendments 22
<PAGE>
BY-LAWS
OF
SM&R CAPITAL FUNDS, INC.
ARTICLE I
Offices
SECTION 1.1. Principal Office. The principal office of the Corporation
in the State of Maryland shall be in the City of Baltimore.
SECTION 1.2. Other Offices. In addition to its principal office in the
State of Maryland, the Corporation may have an office or offices in the City of
Galveston, State of Texas, and at such other places as the Board of Directors
may from time to time designate or the business of the Corporation may require.
ARTICLE II
Stockholders' Meetings
SECTION 2.1. Place of Meetings. Meetings of stockholders shall be held at
such place, within or without the State of Maryland, as may be designated from
time to time by the Board of Directors.
SECTION 2.2. Annual Meetings. Annual or other meetings of the
stockholders, unless required by the Investment Company Act of 1940, as
amended, or the Maryland General Corporation Law shall not be required to be
held but may, in the discretion of the Directors, be held notwithstanding the
absence of a requirement under the Investment Company Act of 1940, as
amended, or the Maryland General Corporation Law to hold such a meeting.
SECTION 2.3. Special Meetings. Special meetings of stockholders of the
Corporation shall be held whenever called by the Board of Directors or the
President of the Corporation. Special meetings of stockholders shall also be
called by the Secretary upon the written request of the holders of shares
entitled to vote not less than ten percent (10%) of all the votes entitled to be
cast at such meeting, which meeting may be called for any purpose including, but
not limited to, consideration of the removal of any director. Such request
shall state the purpose or purposes of such meeting and the matters proposed to
be acted on thereat. The Secretary shall inform such stockholders of the
reasonable estimated cost of preparing and mailing such notice of the meeting,
and upon payment to the Corporation of such costs, the Secretary shall give
notice stating the purpose or purposes of the meeting to all entitled to a vote
at such meeting. Unless requested by stockholders entitled to cast a majority
of all the votes entitled to be cast at the meeting, a special meeting need not
be called to consider any matter which is substantially the same as a matter
voted upon at any special meeting of stockholders held during the preceding
twelve months.
SECTION 2.4. Notice of Meetings. Written or printed notice of every
stockholders' meeting stating the place, date and time, and in the case of a
special meeting the purpose or purposes thereof, shall be given by the Secretary
not less than ten (10) nor more than ninety (90) days before such meeting to
each stockholder entitled to vote at such meeting, either by mail or by
presenting it to him personally, or by leaving it at his residence or usual
place of business. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
SECTION 2.5. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Charter of the corporation, or by these By-Laws, at all
meetings of stockholders the holders of
<PAGE>
a majority of the shares issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall be requisite and shall
constitute a quorum for the transaction of business. In the absence of a
quorum, the stockholders present or represented by proxy and entitled to vote
thereat shall have power to adjourn the meeting from time to time (but in no
event to a date more than 120 days after the original record date) without
notice other than announcement at the meeting, until a quorum shall be
present. At any adjourned meeting at which a quorum shall be present, any
business may be transacted if the meeting had been held as originally called.
SECTION 2.6. Voting Rights, Proxies. At each matter submitted to a vote of
the stockholders, each holder of a share shall be entitled to one vote for each
share standing in his name on the books of the Corporation, irrespective of the
class or series thereof, and all shares of all classes or series shall vote as a
single class or series ("Single Class Voting"); provided, however, that (i) as
to any matter with respect to which a separate vote of any class or series is
required by the Investment Company Act of 1940, as amended, or by the Maryland
General Corporation Law, such requirement as to a separate vote by that class or
series shall apply in lieu of Single Class Voting as described above; (ii) in
the event that the separate vote requirements referred to in (i) above apply
with respect to one or more classes or series, then, subject to (iii) below, the
shares of all other classes or series shall vote as a single class or series;
and (iii) as to any matter which does not affect the interest of a particular
class or series, only the holders of shares of the one or more affected classes
or series shall be entitled to vote. In all elections of directors, each share
of stock so registered in a stockholder's name on the books of the corporation
on the date fixed as the record date, may be voted for as many individuals as
there are directors to be elected and for whose election such share is entitled
to be voted. No proxy shall be valid after eleven months from its date, unless
otherwise provided in the proxy. At all meetings of stockholders, unless the
voting is conducted by inspectors, all questions relating to the qualification
of voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting.
SECTION 2.7. Vote Required. Except as otherwise provided by law, by the
Charter of the Corporation, or by these By-Laws, at each meeting of stockholders
at which a quorum is present, all matters shall be decided by a majority of the
votes cast by the stockholders present in person or represented by proxy and
entitled to vote with respect to any such matter.
SECTION 2.8. Inspectors of Election. In advance of any meeting of
stockholders, the Directors may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of stockholders may, and on the
request of any stockholder of his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Directors in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of shares of stock outstanding, the shares of stock represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, shall receive votes, ballots or consents, shall hear and determine
all challenges and questions in any way arise in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or of
any stockholder or his proxy, the Inspectors of Election shall make a report
in writing of any challenge or question or matter determined by them and
shall execute a certificate of any facts found by them.
SECTION 2.9. Action by Stockholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting if a consent
in writing setting forth the action shall be signed by all the stockholders
entitled
<PAGE>
to vote upon the action and such consent shall be filed with the records of
the Corporation.
ARTICLE III
Directors
SECTION 3.1. Number, Term and Qualifications. The Board of Directors
shall consist of not less than three (3) and not more than fifteen (15)
directors, the number of directors to be fixed from time to time within the
above-specified limits by the affirmative vote of a majority of the whole
Board of Directors. At the first meeting of stockholders and at each meeting
thereafter called for the purpose of electing directors, the stockholders
shall elect directors to hold office until their successors are elected and
qualify. Directors need not be stockholders of the Corporation. Directors
of the Corporation who are also officers or employees of the Corporation or
any of its affiliates shall no longer be qualified to be a director of the
Corporation upon their ceasing to be such officer or employee.
SECTION 3.2. Powers. The business of the Corporation shall be managed by
the Board of Directors which may exercise all powers of the Corporation and do
all lawful acts and things which are not by law or by the Charter of the
Corporation, or by these By-Laws, directed or required to be exercised or done
exclusively by the stockholders.
SECTION 3.3. Organizational Meetings. The first meeting of each newly
elected Board of Directors for the purposes of organization and the election of
officers and otherwise shall be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
directors.
SECTION 3.4. Regular Meetings. Regular meetings of the Board of Directors
may be held at such time and place as shall be determined from time to time by
the Board of Directors without further notice.
SECTION 3.5. Special Meetings. Special meetings of the Board of
Directors may be called at any time by the President and shall be called by
such President or the Secretary upon written request of any two (2) directors.
SECTION 3.6. Notice of Special Meetings. Written notice of special
meetings of the Board of Directors, stating the place, date and time thereof
shall be given not less than two (2) days before such meeting to each
director, personally, by telegram, by mail or by leaving such notice at his
place of residence or usual place of business. If mailed, such notice shall
be deemed to be given when deposited in the United States mail, postage
prepaid, directed to the director at his address as it appears on the records
of the Corporation.
SECTION 3.7. Telephone Meetings. Any member or members of the Board of
Directors or of any committee designated by the Board, may participate in a
meeting of the Board, or any such committee, as the case may be, by means of
a conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time.
Participation in a meeting by these means constitutes presence in person at
the meeting. This Section 3.7. shall not be applicable to meetings held for
the purpose of voting in respect of approval of contracts or agreements
whereby a person undertakes to serve or act as investment adviser of, or
principal underwriter for, the Corporation.
SECTION 3.8. Quorum, Voting and Adjournment of Meetings. At all meetings of
the Board of Directors, a majority of the whole Board shall be requisite to and
shall constitute a quorum for the transaction of business. If a quorum is
present, the affirmative vote of a majority of the directors present shall be
the act of the Board of Directors, unless the concurrence of a greater
proportion is
<PAGE>
expressly required for such action by law, the Charter of the Corporation or
these By-Laws. If at any meeting of the Board there be less than a quorum
present, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting until a quorum
shall have been obtained.
SECTION 3.9. Removal. Any one or more of the directors may be removed,
either with or without cause, at any time, by the affirmative vote of the
stockholders holding a majority of the outstanding shares entitled to vote
for the election of directors. The successor or successors of any director
or directors so removed may be elected by the stockholders entitled to vote
thereon at the same meeting to fill any resulting vacancies for the unexpired
term of removed directors. Except as provided by law, pending, or in the
absence of, such an election, the successor or successors of any director or
directors so removed may be chosen by the Board of Directors.
SECTION 3.10. Vacancies. Except as otherwise provided by law, any
vacancy occurring in the Board of Directors and newly created directorships
resulting from an increase in the authorized number of directors may be
filled by the vote of a majority of the directors then in office or, if only
one director shall then be in office, by such director. A director elected
by the Board of Directors to fill a vacancy shall be elected to hold office
until the next annual meeting of stockholders or until his successor is
elected and qualifies.
SECTION 3.11. Action by Directors Without Meeting. The provisions of
these By-Laws covering notices and meetings to the contrary notwithstanding,
and except as required by law, any action required or permitted to be taken
at any meeting of the Board of Directors may be taken without a meeting if a
consent in writing setting forth the action shall be signed by all of the
directors entitled to vote upon the action and such written consent is filed
with the minutes of proceedings of the Board of Directors.
SECTION 3.12. Expenses and Fees. Each director may be allowed expenses,
if any, for attendance at each regular or special meeting of the Board of
Directors and shall receive for services rendered as a director of the
Corporation such compensation as may be fixed by the Board of Directors.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
SECTION 3.13. Execution of Instruments and Documents and Signing of
Checks and Other Obligations and Transfers. All instruments, documents and
other paper shall be executed in the name and on behalf of the Corporation
and all checks, notes, drafts and other obligations for the payment of money
by the Corporation shall be signed, and all transfer of securities standing
in the name of the Corporation shall be executed, by the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Corporation as shall be designated for that purpose by vote of the Board of
Directors.
SECTION 3.14. Contracts. Except as otherwise provided by law or by the
Articles of Incorporation of the Corporation, no contract or transaction
between the Corporation and any partnership or corporation, and no act of the
Corporation, shall in any way be affected or invalidated by the fact that any
officer or director of the Corporation is pecuniarily or otherwise interested
therein or is a member, officer or director if such interest shall be known
to the Board of Directors of the Corporation. Specifically, but without
limitation of the foregoing, the Corporation may enter into one or more
contracts appointing Securities Management and Research, Inc. investment
manager of the Corporation, and may otherwise do business with Securities
Management and Research, Inc., notwithstanding the fact that one or more of
the directors of the Corporation and some or all of its officers are, have
been or may become directors, officers, members, employees, or stockholders
of Securities Management and Research, Inc.; and in the absence of fraud, the
Corporation and Securities
<PAGE>
Management and Research, Inc. may deal freely with each other, and neither
such contract appointing Securities Management and Research, Inc. shall be
invalidated or in any wise affected thereby, nor shall any director or
officer of the Corporation by reason thereof be liable to the Corporation or
to any stockholder or creditor of the Corporation or to any other person for
any loss incurred under or by reason of any such contract or transaction.
For purposes of this paragraph, any reference to "Securities Management and
Research, Inc." shall be deemed to include said company and any parent,
subsidiary or affiliate of said company and any successor (by merger,
consolidation or otherwise) to said company or any such parent, subsidiary or
affiliate.
SECTION 3.15. Indemnification of Directors, Officers, Employees and Agents.
(a) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending,
or completed action suit, or proceeding, whether civil, criminal
administrative, or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation. The
indemnification shall be against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not of itself, create a presumption that the person
did not in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interest of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending
or completed action or suit by or on behalf of the Corporation to
obtain a judgment or decree in its favor by reason of the fact that
he is or was a director, officer, employee, or agent of the
Corporation. The indemnification shall be against expenses, including
attorneys' fees actually and reasonably incurred by him in connection
with the defense or settlement of the action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue, or
matter as to which the person has been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
Corporation, except to the extent that the court in which the action
or suit was brought, or a court of equity in the county in which the
Corporation has its principal office, determines upon application
that, despite the adjudication of liability but in view of all
circumstance of the case, the expenses which the court shall deem
proper, provided such director or officer is not adjudged to be
liable by means of his willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office.
(c) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsection
(a) or (b) or in defense of any claim, issue, or matter therein, he
shall be indemnified against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection therewith.
<PAGE>
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the
Corporation only as authorized in the specific case after a
determination that indemnification of the director, officer,
employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Board of Directors, by a majority vote of a quorum
which consists of directors who were not parties to the action,
suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum
of disinterested directors so directs, by independent legal
counsel in a written opinion; or
(iii) by the stockholders.
(3) Notwithstanding the provisions of paragraphs (1)
(i) a final decision on the merits is made by a court or
other body before whom the proceeding was brought that
the person to be indemnified ("indemnitee") was not liable by
reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that
the indemnitee was not liable by reason of disabling conduct,
is made by either --
(A) a majority of a quorum of directors who are neither
"interested persons" of the Corporation, as defined in
section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the action, suit or proceeding or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a director,
officer, employee or agent of the Corporation in defending a civil
or criminal action suit or proceeding may be paid by the Corporation
in advance of the final disposition thereof if:
(1) authorized in the specific case by the Board of Directors; and
(2) the Corporation receives an undertaking by or on
behalf of the director, officer, employee or agent of the
Corporation to repay the advance if it is not ultimately
determined that such person is entitled to be indemnified by
the Corporation; and
(3) either
(i) such person provides a security for his undertaking, or
(ii) the Corporation is insured against losses by reason of
any lawful advances, or
(iii) a determination, based on a review
of readily available facts, that there is reason to
believe that such persons ultimately will be found
entitled to indemnification, is made by either --
(A) a majority of a quorum which
consists of directors who are neither "interested
persons" of the Corporation, as defined in Section
2(a)(19) of the Investment Company Act of 1940, as
amended, not parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
<PAGE>
(f) It is the intention of the Corporation to indemnify
directors, officers, employees and agents to the fullest extent
permitted by applicable law. Accordingly, the indemnification
provided by this Section shall not be deemed exclusive of any other
rights to which a person may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another
capacity while holding the office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and
inure to the benefit of the heirs, executors and administrators of
such person.
(g) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee,
or agent of the Corporation, against any liability asserted against
him and incurred by him in any such capacity, or arising out of his
status as such. However, in no event will the Corporation purchase
insurance to indemnify any officer or director against liability for
any act for which the Corporation itself is not permitted to
indemnify him.
(h) Nothing contained in this Section shall be construed to
protect any director or officer of the Corporation against any
liability to the Corporation or to its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in the conduct of his office.
ARTICLES IV
Committees
SECTION 4.1. Executive and Other Committees. The Board of Directors,
by resolution adopted by a majority of the whole Board, may designate an
Executive Committee and/or other committees, each committee to consist of two
(2) or more of the directors of the Corporation and may delegate to such
committees, in the intervals between meetings of the Board of Directors, any
or all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation, except the power to: declare
dividends or distributions of stock; issue stock; recommend to stockholders
any action requiring stockholder approval; amend the By-Laws of the
Corporation; or approve any merger or share exchange which does not require
shareholder approval. In the absence of any member, whether or not they
constitute a quorum, may appoint a member of the Board of Directors to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules
or procedure, but the presence of at least fifty percent (50%) of the members
of the whole committee shall in each case be necessary to constitute a quorum
of the committee and the affirmative vote of the majority of the members of
the committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Board of
Directors at the meeting thereof next succeeding to the taking of such action.
SECTION 4.2. Advisory Committee. The Board of Directors may appoint an
advisory committee which shall be composed of persons who do not serve the
Corporation in any other capacity and which shall have advisory functions
with respect to the investments of the Corporation but which shall have no
power to determine that any security or other investment shall be purchased,
sold or otherwise disposed of by the Corporation. The members of any such
advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Board of
Directors may from time to time determine to be appropriate.
SECTION 4.3. Committee Action Without Meeting. The provisions of these
By-Laws covering
<PAGE>
notices and meetings to the contrary notwithstanding, and except as required
by law, any action required or permitted to be taken at any meeting of any
Committee of the Board appointed pursuant to Section 4.2 of these By-Laws may
be taken without a meeting if the consent in writing setting forth the action
shall be signed by all members of the Committee entitled to vote upon the
action and such written consent is filed with the records of proceedings of
the Committee.
ARTICLE V
Officers
SECTION 5.1. Executive Officers. The executive officers of the
Corporation shall be a President, one or more Vice Presidents, a Secretary
and a Treasurer. The Board of Directors may also elect a Chairman. The
President shall be selected from among the directors but none of the other
executive officers need be a member of the Board of Directors. Two or more
offices, except those of President and any Vice President, may be held by the
same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity. The executive officers of the
Corporation shall be elected annually by the Board of Directors and each
executive officer so elected shall hold office until his successor is elected
and has qualified.
SECTION 5.2. Other Officers and Agents. The Board of Directors may
also elect one or more Assistant Vice Presidents, Assistant Secretaries and
Assistant treasurers and may elect, or may delegate to the President the
power to appoint and fix the compensation of such officers, and such other
officers and agents as the Board of Directors shall at any time or from time
to time deem advisable.
SECTION 5.3. Term, Removal and Vacancies. Each officer of the
Corporation shall hold office until his successor is elected and has
qualified. Any officer or agent of the Corporation may be removed by the
Board of Directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal shall be without
prejudice to the contractual rights, if any, of the person so removed.
SECTION 5.4. Compensation of Officers. The compensation of officers and
agents of the Corporation shall be fixed by the Board of Directors, or by the
President to the extent provided by the Board of Directors with respect to
officers appointed by the President.
SECTION 5.5. Power and Duties. All officers and agents of the
Corporation, as between themselves and the Corporation, shall have such
authority and perform such duties in the management of the Corporation as may
be provided in or pursuant to these By-Laws, or, to the extent not so
provided, as may be prescribed by the Board of Directors; provided, that no
rights of any third party shall be affected or impaired by any such By-Laws
or resolution of the Board unless he has knowledge thereof.
SECTION 5.6. The Chairman. The Chairman, if any, or in his absence the
President shall preside at all meetings of the stockholders and of the Board
of Directors; and he shall perform such other duties as the Board of
Directors may from time to time prescribe.
SECTION 5.7. The President. The President shall be the chief executive
officer of the Corporation; he shall have general and active management of
the business of the Corporation, shall see that all orders and resolutions of
the Board of Directors are carried into effect, and, in connection therewith,
shall be authorized to delegate to one or more Vice Presidents such of his
powers and duties at such times and in such manner as he may deem advisable.
Subject to the control of the Board of Directors and to the control of any
Committees of the Board of Directors, within there respective spheres, as
provided by the Board of Directors, he shall at all times exercise a general
supervision and
<PAGE>
direction over the affairs of the Corporation. He shall have the power to
employ attorneys and counsel for the Corporation and to employ such
subordinate officers, agents, clerks and employees as he may find necessary
to transact the business of the Corporation. He shall also have the power to
grant, issue, execute or sign such powers of attorney, proxies or other
documents as may be deemed advisable or necessary in furtherance of the
interests of the Corporation. The President shall have such other powers and
duties, as from time to time may be conferred upon or assigned to him by the
Board of Directors.
SECTION 5.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Board of Directors. The Vice President or, if there be more than one,
the Vice Presidents in the order of their seniority as may be determined from
time to time by the Board of Directors or the Executive Vice President shall,
in the absence or disability of the President, and the Executive Vice
President, exercise the powers and perform the duties of those officers; and
he or they shall perform such other duties as the Board of Directors or the
Executive Vice President may from time to time prescribe.
SECTION 5.9. The Assistant Vice Presidents. The Assistant Vice President
or, if there be more than one, the Assistant Vice Presidents, shall perform such
duties and have such powers as may be assigned them from time to time by the
Board of Directors or the Executive Vice President.
SECTION 5.10. The Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of the stockholders and record all
the proceedings of the meetings of the stockholders and of the Board of
Directors in a book to be kept for that purpose, and shall perform like
duties for the standing committees when required. He shall give, or cause to
be given notice of all meetings of the stockholders and special meetings of
the Board of Directors, and shall perform such other duties and have such
powers as the Board of Directors or the Executive Vice President may, from
time to time, prescribe. He shall keep in safe custody the seal of the
Corporation and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 5.11. The Assistant Secretaries. The Assistant Secretary or, if
there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors or the Executive Vice President shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors or the Executive Vice President may from time to time
prescribe.
SECTION 5.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Corporation. He shall keep or cause to be kept full and accurate
accounts or receipts and disbursements in books belonging to the Corporation,
and he shall render to the Board of Directors and the Executive Vice President,
whenever any of them require it, an account of his transactions as Treasurer and
of the financial condition of the Corporation; and he shall perform such other
duties as the Board of Directors, or the Executive Vice President may from time
to time prescribe.
SECTION 5.13. The Assistant Treasurers. The Assistant Treasurer or, if
there shall be more than one, the Assistant Treasurer in the order determined by
the Board of Directors or the Executive Vice President shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors or the Executive Vice President may from time to time
prescribe.
SECTION 5.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Board of Directors may deem it
desirable, the Board may delegate the powers and duties of an officer to any
other officer or officers or to any Director or Directors.
<PAGE>
ARTICLES VI
Capital Stock
SECTION 6.1. Issuance of Stock. The Corporation shall not issue its
shares of capital stock except as approved by the Board of Directors.
SECTION 6.2. Certificates of Stock. Certificates for shares of each
class or series of the capital stock of the Corporation shall be in such form
and of such design as the Board of Directors shall approve, subject to the
right of the Board of Directors to change such form and design at any time or
from time to time, and shall be entered in the books of the Corporation as
they are issued. Each such certificate shall bear a distinguishing number;
shall exhibit the holder's name and certify the number of full shares owned
by such holder; shall be signed by or in the name of the Corporation by the
President or a Vice President, and countersigned by the Secretary or an
Assistant Secretary or the Treasurer and an Assistant Treasurer of the
Corporation; shall be sealed with the corporate seal; and shall contain such
recitals as may be required by law. Where any stock certificate is signed by
a Transfer Agent or by a Registrar, the signature of such corporation's
officers and the corporate seal may be facsimile, printed or engraved. The
Corporation may, at its option, defer the issuance of a certificate or
certificates to evidence shares of capital stock owned of record by any
stockholder until such time as written demand therefor shall be made upon the
Corporation or its Transfer Agent, but upon the making of such demand each
stockholder shall be entitled to such certificate or certificates.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Corporation, whether because
of death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Corporation, such certificate or certificates
shall, nevertheless, be adopted by the Corporation and be issued and delivered
as though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased to
be such officer or officers of the Corporation.
No certificate shall be issued for any share of stock until such share is
fully paid.
SECTION 6.3. Transfer of Stock. Transfers of shares of the capital stock
of the Corporation shall be made only on the books of the Corporation by the
holder thereof, or by his attorney thereunto duly authorized by a power of
attorney duly executed and filed with the Corporation or a Transfer Agent of the
Corporation, if any, upon written request in proper form if no share certificate
has been issued, or in the event such certificate has been issued, upon
presentation and surrender in proper form of said certificate.
SECTION 6.4. Record Date. The Board of Directors may fix in advance a
date as the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of dividend or the allotment of any
rights, or in order to make a determination of stockholders for any other proper
purpose. Such date, in any case, shall be not more than ninety (90) days, and
in case of a meeting of stockholders not less than (10) days prior to the date
on which particular action requiring such determination of stockholders is to be
taken. In lieu of fixing a record date the Board of Directors may provide that
the stock transfer books shall be closed for a stated period but not to exceed,
in any case, twenty (20) days. If the stock transfer books are closed for the
purpose of determining stockholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting.
SECTION 6.5. Lost, Stolen, Destroyed and Mutilated Certificates. The
Board of Directors may direct a new certificate of certificates to be issued in
place of any certificate or certificates theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed, upon satisfactory
<PAGE>
proof of such loss, theft, or destruction; and the Board of Directors may, in
its discretion, require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give to the Corporation and to
such Registrar, Transfer Agent, and/or Transfer Clerk as may be authorized or
required to countersign such new certificate or certificates, a bond in such
sum and of such type as they may direct, and with such surety and sureties,
as they may direct, as indemnity against any claim that may be against them
or any of them on account of or in connection with the alleged loss, theft or
destruction of any such certificate.
SECTION 6.6. Registered Owners of Stock. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares of stock to receive dividends, and to vote as such owner,
and to hold liable for calls and assessments a person registered on its books as
the owner of shares of stock, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
SECTION 6.7. Fractional Denominations. Subject to any applicable
provisions of law and the Charter of the Corporation, the Corporation may issue
shares of is capital stock in fractional denominations, provided that the
transactions in which and the terms and conditions upon which shares in
fractional denominations may be issued may from time to time be limited or
determined by or under the authority of the Board of Directors.
ARTICLES VII
Investments
The following investment restrictions and the policies stated above are
deemed to be fundamental policies. They may be changed only by the vote of a
"majority" of the Fund's outstanding shares, which as used herein, means the
lesser of (i) 67% of the Fund's outstanding shares present at a meeting of the
holders if more than 50% of the outstanding shares are present in person or by
proxy or (ii) more than 50% of the Fund's outstanding shares.
The Fund will not:
1. Issue senior securities.
2. Borrow money or mortgage or pledge any of the assets of any Series,
except for such action by any Series for temporary or emergency purposes
in an amount not to exceed 10% of such Series' net assets.
3. Purchase securities on margin (but it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities).
4. Make short sales of securities.
5. Lend any funds or other assets of any Series, except by the purchase
of publicly distributed bonds, debentures, notes, to-be-announced
securities or other debt securities and except that securities of the
Government Income Fund Series may be loaned to broker-dealers or other
institutional investors. Such loans shall not exceed ten percent (10%) of
the American National Government Income Fund Series' net assets at the time
of the most recent loan; shall be made pursuant to written agreements and
shall be continuously secured by collateral in the form of cash, U.S.
Government Securities or irrevocable standby letters of credit in an amount
equal to at least 102% of the market value at all times of the loaned
securities plus the accrued interest and dividend.
<PAGE>
6. Act as underwriter of securities issued by other persons except
insofar as the Fund may be technically deemed an underwriter under the
federal securities laws in connection with the disposition of portfolio
securities.
7. Invest more than 5% of the value of the net assets of a Series, at the
time of purchase, in the securities of any one issuer, but this limitation
does not apply to investments in securities issued or guaranteed by the
U.S. government or its instrumentalities.
8. Concentrate more than 25% of the net assets of a Series in any one
industry or group of industries; provided however, there is no limitation
with respect to investments in obligations issued or guaranteed by the
United States Government or its agencies or instrumentalities or
obligations of domestic commercial banks (such 25% limitation does,
however, apply to obligations of foreign branches of domestic banks). For
purposes of this restriction, telephone, gas and electric public utilities
are each regarded as separate industries.
9. Purchase any security (other than United States Government obligations
in which the Fund is permitted to invest) if, as a result, the Fund would
hold more than (a) 10% of the total value of any class of outstanding
securities of an issuer or (b) 10% of the outstanding voting securities of
an issuer.
10. Will not purchase or retain securities of any issuer if any officer or
director of the Fund or of its investment manager own individually more
than one-half of one percent (1/2 of 1%) of the securities of that issuer,
and collectively the officers and directors of the Fund and investment
manager together own more than 5% of the securities of that issuer.
11. Purchase any securities issued by a corporation which has not been in
continuous operation for three years, but such period may include the
operation of a predecessor.
12. Acquire, lease or hold real estate except such as may be necessary or
advisable for the maintenance of its offices.
13. Invest in commodities and commodity contracts, puts, calls, straddles,
spreads or any combination thereof, or interests in oil, gas or other
mineral exploration or development programs. However, any Series may
invest in securities which are secured by real estate or real estate
mortgages; securities of issuers which invest or deal in real estate
mortgages and securities of issuers which invest in or sponsor oil, gas,
or other mineral exploration.
14. Invest in companies for the purpose of exercising control or management.
15. Purchase securities of other investment companies except pursuant to a
plan of merger, consolidation or acquisition of assets approved by the
Corporation's shareholders.
16. Invest more than 15% of its net assets in restricted securities for
which there are no readily available market quotations, or foreign
securities which are not listed on foreign or domestic exchanges,
including securities restricted as to disposition under the Federal
Securities Laws and repurchase agreements maturing more than seven days
from the date of acquisition.
17. Invest in foreign securities.
18. Purchase Warrants.
Any investment policy or restriction which involves a maximum percentage of
securities or
<PAGE>
assets, shall not be considered to be violated unless an excess over the
percentage occurs immediately after an acquisition of securities or
utilization of assets and results therefrom.
ARTICLES VIII
Sale of Stock
Upon the sale of each share of its Common Stock, except as otherwise
permitted by applicable laws and regulations, the Corporation shall receive in
cash or in securities valued as provided in Article IX of these By-Laws, not
less than the current net asset value thereof, exclusive of any distributing
commission or discount, and in no event less than the par value thereof.
ARTICLES IX
Determination of Net Asset Value:
Valuation Of Portfolio Securities and Other Assets
SECTION 9.1. Net Asset Value. The net asset value of a share of Common
Stock of the Corporation shall be determined in accordance with applicable laws
and regulations under the supervision of such persons and at such time or times
as shall from time to time be prescribed by the Board of Directors. Each such
determination shall be made by subtracting from the value of the assets of the
Corporation (as determined pursuant to Section 8.2 of these By-Laws) the amount
of its liabilities, dividing the remainder by the number of shares of Common
Stock issued and outstanding.
SECTION 9.2. Valuation of Portfolio Securities and Other Assets. Except
as otherwise required by any applicable law or regulation of any regulatory
agency having jurisdiction over the activities of the Corporation and the use
of the amortized cost evaluation technique for debt securities which have
maturities of 60 days or less, the Corporation shall determine the value of its
other portfolio securities and other assets as follows:
(a) securities for which market quotations are readily available shall be
valued at current market value determined in such manner as the Board of
Director may from time to time prescribe;
(b) all other securities and assets shall be valued at amounts deemed
best to reflect their fair value as determined in good faith by or under
the supervision of such persons and at such time or times as shall from
time to time be prescribed by the Board of Directors.
All quotations, sale prices, bid and asked prices and other information
shall be obtained from such sources as the persons making such determination
believe to be reliable and any determination of net asset value based thereon
shall be conclusive.
ARTICLE X
Dividends and Distributions
Subject to any applicable provisions of law and the Charter of the
Corporation, dividends and distributions upon the Common Stock of the
Corporation may be declared at such intervals as the Board of Directors may
determine, in cash, in securities or other property, or in shares of stock of
the Corporation, from any sources permitted by law, all as the Board of
Directors shall from time to time determine.
Inasmuch as the computation of net income and net profits from the sale
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the books of the Corporation, the Board of
Directors shall have power, in its discretion, to distribute as income
dividends
<PAGE>
and as capital gains distributions, respectively, amounts sufficient to
enable to the Corporation to avoid or reduce liability for federal income
taxes.
ARTICLES XI
Custodian
SECTION 11.1. Appointment and Duties. The Corporation may at any time
employ a bank, trust company or other institutions having the qualifications
specified by the Investment Company Act of 1940, as amended, as custodian with
authority as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in these By-Laws and the Investment
Company Act of 1940, as amended:
(1) to receive and hold the securities owned by the Corporation and
deliver the same upon written order;
(2) to receive and receipt for any monies due to the Corporation and
deposit the same in its own banking department or elsewhere as the
Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) to keep the books and accounts of the Corporation and furnish
clerical and accounting services;
(5) to compute the net income of the Corporation and the net asset
value of the Corporation and its shares; all upon such basis of
compensation as may be agreed upon between the Board of Directors and the
custodian. If so directed by a vote of a majority of the shares of stock
outstanding, the custodian shall deliver and pay over all property of the
Corporation held by it as specified in such vote. The Board of Directors
may also authorize the custodian to employ one or more sub-custodians from
time to time to perform such of the acts and services of the custodian and
upon such terms and conditions, as may be agreed upon between the custodian
and such sub-custodian and approved by the Board of Directors.
SECTION 11.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Directors may direct
the custodian to deposit all or any part of the securities owned by the
Corporation in a system for the central handling of securities established by
a national securities exchange or a national securities association
registered with the commission under the Securities Exchange Act of 1934, or
such other person as may be permitted by the Commission, or otherwise in
accordance with the Investment Company Act of 1940, as amended, pursuant to
which system all securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of such securities,
provided that all such deposits shall be subject to withdrawal only upon the
order of the Corporation.
ARTICLE XII
Books and Records
SECTION 12.1. Location. The books and records of the Corporation may be
kept outside the State of Maryland at such place or places as the Board of
Directors may from time to time determine, except as otherwise required by law.
SECTION 12.2. Stock Ledgers. The Corporation shall maintain at the
office of its transfer agent an original stock ledger containing the names
and addresses of all stockholders and the number
<PAGE>
of shares held by each stockholder. Such stock ledger may be in written form
or any other form capable of being converted into written form within a
reasonable time for visual inspection.
SECTION 12.3. Annual Statement. The President or a Vice President or
the Treasurer shall prepare or cause to be prepared annually a full and
correct statement of the affairs of the Corporation, including a statement of
assets and liabilities and a statement of operations for the preceding fiscal
year, which shall be submitted to the stockholders and filed with the
principal office of the Corporation at the times required by the Investment
Company Act of 1940, as amended, and to the extent not conflicting with such
statue, at the times required by the Maryland General Corporation Law.
ARTICLE XIII
Waiver of Notice
Whenever any notice of the time, place or purpose of any meeting or
stockholders, directors, or of any committee is required to be given under
the provisions of the Maryland statute, the Investment Company Act of 1940,
as amended, or under the provisions of the Charter of the Corporation of
these ByLaws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
Directors or committee in person, shall be deemed equivalent to the giving of
such notice to such person.
ARTICLE XIV
Miscellaneous
SECTION 14.1. Seal. The Board of Directors shall adopt a corporate
seal, which shall be in the form of a circle, and shall have inscribed
thereon the name of the Corporation, the year of its incorporation, and the
words "Corporate Seal - Maryland". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 14.2. Fiscal Year. The fiscal year of the corporation shall end
on such date as the Board of Directors may be resolution specify, and the
Board of Directors may by resolution change such date for future fiscal years
at any time and from time to time.
SECTION 14.3. Orders for Payment of Money. All orders or instructions
for the payment of money of the Corporation, and all notes or other evidences
of indebtedness issued in the name of the Corporation, and all notes or other
evidences of indebtedness issued in the name of the Corporation, shall be
signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate, or as may be specified in
or pursuant to the agreement between the Corporation and the bank or trust
company appointed as Custodian of the securities and funds of the Corporation.
ARTICLES XV
Compliance with Federal Regulations
The Board of Directors is hereby empowered to take such action as they
may deem to be necessary, desirable or appropriate so that the Corporation is
or shall be in compliance with any federal or state statute, rule or
regulation with which compliance by the Corporation is required.
<PAGE>
ARTICLES XVI
Amendments
These By-Laws may be amended, altered, or repealed at any annual or
special meeting of the stockholders by the affirmative vote of the holders of
a majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote, provided notice of the general purpose of
the proposed amendment, alteration or repeal is given in the notice of said
meeting; or, at any meeting of the Board of Directors, by a vote of a
majority of the whole Board of Directors, provided, however, that any By-Law
or amendment or alteration of the By-Laws adopted by the Board of Directors
may be amended, altered or repealed and any By-Law repealed by the Board of
Directors may be reinstated by vote of the stockholders of the Corporation.
<PAGE>
EXHIBIT 99.B4
REGISTRANTS STOCK CERTIFICATE
Incorporated Under the Laws of the State of Maryland
SM&R Capital Funds, Inc.
Galveston, Texas
Common Stock Number Common Stock Shares
See Reverse for
Certain Definitions
This Certifies That is the owner of
fully paid and non-assessable shares of Common Stock of SM&R Capital Funds,
Inc. of the par value of $.01 per share, transferable on the books of the
Company in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. NOTE: this Certificate has restrictions on
transferability, whether by sale, pledge or otherwise. No pledge of this
certificate shall be valid unless prior written notice is given to the
Company. The Company will furnish all restriction information to the
stockholder on request and without charge. Additionally, this Certificate is
issued by he Company and accepted by the holder subject to all the terms and
conditions pertaining to the Common Stock of the Company contained in the
Certificate of Incorporation, and all amendments thereto and in the By Laws
of the Company, and all amendments thereto, copies[ of which are on file
in the office of the Company, and to which reference is hereby made.
This Certificate is not valid unless countersigned by the Transfer Agency-
Registrar.
Witness the facsimile seal of the Company and facsimile signatures of its
duly authorized and designated officers.
Dated: Countersigned and Registered by:
Securities Management & Research, Inc.
Transfer Agent and Registrar
Authorized Signature
SM&R Capital Funds, Inc.
Incorporated
SEAL
Maryland 1991
Teresa Axelson Steven H. Stubbs
Secretary President
<PAGE>
(back of certificate)
NO HOLDER OF ANY OF THE COMMON SHARES OF THE CORPORATION OR OTHER SECURITIES
(IF ANY) OF THE CORPORATION SHALL BE ENTITLED AS A MATTER OF RIGHT TO
PURCHASE ANY UNISSUED COMMON SHARES OR OTHER SECURITIES OF THE CORPORATION AT
ANY TIME AUTHORIZED; BUT ANY UNISSUED COMMON SHARES OR OTHER SECURITIES OF
THE CORPORATION MAY BE ISSUED AND DISPOSED OF BY THE BOARD OF DIRECTORS TO
SUCH PERSONS AS THE BOARD OF DIRECTORS MAY IN ITS SOLE DISCRETION DETERMINE
WITHOUT OFFERING ANY THEREOF TO HOLDERS OF COMMON SHARES OR OTHER
SECURITIES[ OF THE CORPORATION.
The following abbreviations when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common UNIF GIFT MIN ACT- _______ custodian ______ under
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of Uniform Gifts to Minors Act _________
and not as tenants in common(State)
Additional abbreviations may also be used though not in the above list.
For value received, ___________________ hereby sell, assign and transfer unto
Please insert social security or other
identifying number of assignee
_______________________________________________________________________________
(Please print or typewrite name and address, including zip code, of assignee)
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________Attorney
to transfer the said stock on the books of the within named Company with full
power of substitution in the premises.
Dated ______________________________________________
NOTICE: The signature to this assignment must correspond with the name
as written upon the face of the certificate in every particular, without
alteration or enlargement or any change whatever.
_______________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE>
EXHIBIT 99.B5
INVESTMENT ADVISORY AGREEMENT
BETWEEN
SM&R CAPITAL FUNDS, INC.
AND
SECURITIES MANAGEMENT AND RESEARCH, INC.
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made and entered
into this 1st day of July, 1993, by and between SM&R CAPITAL FUNDS, INC., a
Maryland corporation hereinafter referred to as the "Fund", on behalf of the
American National Tax Free Fund Series (the "Tax Free Series" or the "Series")
and SECURITIES MANAGEMENT AND RESEARCH, INC., a Florida corporation hereinafter
referred to as the "Adviser".
The Tax Free Series is a series of the Fund with different investment
objectives than the other series which it pursues through separate investment
policies.
SM&R is engaged in the business of rendering investment advisory and
related services to investment companies and desires to provide such services to
the Series.
In consideration of the mutual covenants contained in this Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Adviser and the Fund hereby agree as follows:
1. Adviser shall act as investment adviser for the Series and shall, in such
capacity, supervise the investment and reinvestment of the cash, securities and
other properties comprising the assets of the Series, subject at all times to
the objectives, policies and restrictions of the Series and to the policies and
approval of the Board of Directors of the Fund. Adviser shall give the Series
the benefit of its best judgment and efforts in rendering its services as
investment adviser. In carrying out its obligations in this Agreement, the
Advisor shall be deemed to be an independent contractor and, except as
expressly provided or authorized by the Fund (whether in this Agreement or
otherwise), shall have no authority to act for or represent the Fund in any
way or otherwise be deemed to be an agent of the Fund.
2. In carrying out its obligations under paragraph (1) hereof, Adviser shall:
(a) Obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
portfolio of the Series, and whether concerning the individual companies
whose securities are included in the Series' portfolio, or the industries
in which the Series engages, or with respect to securities which the
Adviser considers desirable for inclusion in the Series' portfolio.
(b) Determine what industries and companies shall be represented in
the Series' portfolio and regularly report them to the Board of Directors
of the Fund.
(c) After such determination, formulate and implement programs for
the purchases and sales of the securities of such companies and regularly
report thereon to the Board of Directors of the Fund.
(d) Take, on behalf of the Tax Free Series of the Fund, all actions
which appear to the Adviser to be necessary to carry into effect such
purchase and sale programs, and all related supervisory and other
functions including the placing of orders for the purchase and sale of
portfolio securities for the Series.
(e) Maintain all internal bookkeeping, account and auditing services and
records in connection with the investment activities of the Series and the
computation of the Series' net asset value. As
<PAGE>
required by the rules and regulations under the Investment Company Act
of 1940, as amended (the "'40 Act"), the Adviser agrees that all records
which it may maintain for the Fund or the Series thereof are the
property of the Fund and the Series and further agrees to promptly
surrender to the Fund any of such records upon the Funds request. The
Adviser further agrees to preserve for the periods prescribed by such
rules and regulations any such records as are required to be preserved.
3. As its sole compensation for the services supplied to the Fund hereunder,
the Series shall pay to the Adviser an investment advisory fee as follows:
A monthly investment advisory fee computed by applying to the average
daily net asset value of the Series each month one-twelfth (1/12th) of the
annual rate as follows:
<TABLE>
<CAPTION>
=============================================================================================
ON THE PORTION OF THE SERIES'AVERAGE DAILY NET ASSETS | INVESTMENT ADVISORY 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>
The "average daily net asset value" of the Series of the Fund for a
particular period shall be determined by adding net asset values as regularly
computed by the Fund each day during such period and dividing the resulting
total by the number of days during such period.
The investment advisory fee for each month shall each be payable as
soon as practical after the last business day of such month.
4. Any investment program undertaken by the Adviser pursuant to this
Agreement, as well as any other activities undertaken by the Adviser on
behalf of the Fund pursuant hereto, shall at all times be subject to any
directives of the Board of Directors of the Fund, any Committee of the Fund's
Board of Directors acting pursuant to authority of the Board, and any officer
of the Fund acting pursuant to authority of the Board of Directors.
5. In carrying out its obligations under this Agreement, Adviser shall at
all times conform to:
(a) All applicable provisions of the Investment Company Act of 1940,
as amended, and any rules and regulations adopted thereunder;
(b) The provisions of the Articles of Incorporation of the Fund as
amended from time to time;
(c) The provisions of the By-Laws of the Fund as amended from time to
time;
(d) The provisions of the registration statements of the Fund under
the Securities Act of 1933 and the Investment Company Act of 1940, as
amended from time to time;
(e) Any other applicable provisions of state or federal law.
In connection with purchases or sales of portfolio securities for the
account of the Tax Free Series of the Fund, neither the Adviser nor any
officer or director of the Adviser shall act as a principal or receive any
commission other than its compensation provided for in paragraph (3) hereof.
6. Decisions with respect to placement of the Series' portfolio
transactions will be made by the Adviser. The primary consideration in
making these decisions will be efficiency in the execution of orders and
obtaining the most favorable net prices for the Series. When consistent with
these objectives, business may be placed with brokers and dealers who furnish
investment research services to the Adviser. Such research services include
advice, both directly and in writing, as to the value of securities, or
purchasers or Sellers of securities, as well as analyses and reports
concerning issues, industries,
<PAGE>
securities, economic factors and trends, portfolio strategy and the
performance of accounts. The investment research furnished by such brokers
and dealers allows the Adviser to supplement its own research activities and
enables the Adviser to obtain the views and information of individuals and
research staffs of many different securities firms prior to making investment
decisions for the Series. To the extent portfolio transactions are effected
by dealers who furnish research services to it, the Adviser receives a
benefit not susceptible of evaluation in dollar amounts, without providing
any direct monetary benefit to the Fund from these transactions. The Adviser
believes that most research obtained by it generally benefits several or all
of the investment companies which it manages, as opposed to solely benefiting
one specific fund.
Consistent with the foregoing, the Adviser may recommend that the
Series execute portfolio transactions through brokers and dealers who have
sold shares of other investment companies managed by the Adviser, but in no
event will any such recommendation be intended as a reward or compensation
for sales of such other funds' shares, nor will such sales be considered by
the Adviser as either a qualifying or disqualifying factor in the selection
of executing broker/dealers.
The Adviser shall render regular reports to the Fund, not more
frequently than monthly, regarding the total brokerage business placed with
brokers falling into either of the foregoing categories and the manner in
which the allocation has been accomplished.
The Adviser agrees that no investment recommendation will be made or
influenced by a desire to provide brokerage for allocation, except in
accordance with the foregoing, and that the recommendations for such
allocation or brokerage shall not interfere with the Adviser's paramount
consideration of obtaining the best possible price and execution for the Fund.
7. The Fund understands and acknowledges that the Adviser furnishes
investment advisory, management and underwriting services to a number of
other clients including, the three (3) mutual funds known as the "American
National Funds Group". Accordingly, the Fund agrees that the services of the
Adviser to the Fund hereunder are not deemed to be exclusive and the Adviser
is and shall continue to be free to render such services and services related
thereto to others.
The American National Funds Group and other clients for which the
Adviser is investment advisor may own securities of the same companies from
time to time. However, the Series' portfolio security transactions will be
conducted independently, except when decisions are made to purchase or sell
portfolio securities of or for the Series, the other series of the Fund, the
American National Funds Group and/or other clients of the Adviser
simultaneously. In such event, the transactions will be averaged as to price
and allocated as to amount (according to the proportionate share of the total
commitment) in accordance with the daily purchase or sale orders actually
executed.
In authorizing the execution of this Agreement, the Funds Board of
Directors and shareholders have determined that such ability to effect
simultaneous transactions may be in the best interest of the Fund and each
Series thereof. It is recognized that in some cases these practices could
have a detrimental effect upon the price and volume of securities being
bought and sold by the Fund or a Series thereof, while in other cases these
practices could produce better executions.
8. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund or any Series thereof in connection
with the matters to which this Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under this Agreement.
9. This Agreement shall become effective on the date set forth above and
shall continue in effect until July 1, 1995. Thereafter, this Agreement will
continue in effect for additional one year periods only so long as such
continuance is specifically approved at least annually by the Board of
Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Series of the Fund, and in either case by the specific
approval of a majority of the directors who are not parties to such contract
or agreement, or "interested" persons of any such parties, cast in person at
a meeting called for the purpose of voting on such approval, the term
"interested" persons for this purpose having the meaning defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended.
<PAGE>
10. This Agreement may be terminated at any time, without the payment of
any penalty, by vote of the Board of Directors of the Fund or by vote of the
holders of a majority of the outstanding voting securities of the Series of
the Fund, or by the Adviser, on sixty days' written notice to the other party.
11. This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning defined
in Section 2(a)(4) of the Investment Company Act of 1940.
12. Any notice under this Agreement shall be in writing addressed and
delivered or mailed postage paid to the other party, at such address as such
other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the Fund, the
Series of the Fund, and that of the Adviser for this purpose shall be Two
Moody Plaza, Galveston, Texas 77550.
13. No amendment to this Agreement shall be effective until approved by
vote of the holders of a majority of the outstanding shares of the Fund as
defined in the Investment Company Act of 1940.
14. This Investment Advisory Agreement is separate and distinct from, and
neither affects nor is affected by, the Underwriting Agreement to be entered
into between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate on the day and year first above written.
SM&R CAPITAL FUNDS, INC.
By: STEVEN H. STUBBS
President
SECURITIES MANAGEMENT AND RESEARCH, INC.
By: BRENDA T. KOELEMAY
Vice President
<PAGE>
EXHIBIT 99.B6
UNDERWRITING AGREEMENT
BETWEEN
SM&R CAPITAL FUNDS, INC.
AND
SECURITIES MANAGEMENT AND RESEARCH, INC.
THIS UNDERWRITING AGREEMENT (the "Agreement") is made and entered into
this 1st day of July, 1993, by and between SM&R CAPITAL FUNDS, INC., a
Maryland corporation hereinafter referred to as the "Fund", and SECURITIES
MANAGEMENT AND RESEARCH, INC., a Florida corporation hereinafter referred to
as the "Underwriter".
The Fund is a series fund and currently has three series: the American
National Government Income Fund Series (the "Government Income Series"), the
American National Primary Fund Series (the "Primary Series") and the American
National Tax Free Series Fund (the "Tax Free Series"). The Government Income
Series, the Primary Series, and the Tax Free Series (individually and
collectively, the "Series") each pursue different investment objectives
through separate investment policies.
SM&R is engaged in the business of providing underwriting and related
services to investment companies and desires to provide such services to the
Fund and to each of its Series.
In consideration of the mutual covenants contained in this Agreement
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Underwriter and the Fund hereby agree as
follows:
1. The Fund hereby appoints the Underwriter as exclusive distributor of
the shares of all Series of the Fund. During the term of this Agreement and
any continuation thereof, no Series will sell or agree to sell any of its
shares except to or through the Underwriter at a public offering price
determined in accordance with Paragraph 3 hereof; provided, however, that any
Series of the Fund may issue shares at net asset value:
(a) in connection with the merger or consolidation of any
investment company with the Fund or the acquisition by purchase or
otherwise of all or substantially all of the assets of any investment
company by the Fund;
(b) to a Series' shareholders upon their reinvestment of
dividends of such Series from net investment income or representing
distributions of such Series from net realized capital gains;
(c) to one or more unit investment trusts organized under the
Investment Company Act of 1940 and sponsored by the Underwriter; and
(d) to such other persons and entities approved or recommended
by Underwriter which the Fund's Board of Directors may from time to time
approve and which are set forth in the Fund's current prospectus.
2. The Underwriter hereby accepts appointment as exclusive underwriter and
distributor of the shares of all Series of the Fund and agrees that it will
use its best efforts to sell such shares; PROVIDED, HOWEVER, that by
accepting this appointment as exclusive underwriter and distributor of such
shares, the Underwriter does not undertake to sell all or any specified
portion of the shares of any such Series.
3. The Underwriter agrees to offer shares of the capital stock of the
Series to the public through its representatives and through dealers having
sales agreements with the Underwriter (PROVIDED, HOWEVER, that nothing
provided for in this Agreement shall obligate the Underwriter to execute
sales agreements with dealers or to sell any shares to dealers) at an
offering price equal to the sum of:
(a) in the case of sales of the shares of the GOVERNMENT INCOME SERIES
and the TAX FREE SERIES, the net asset value per share which is or becomes
effective for such order of the
<PAGE>
Government Income Series' or Tax Free Series' shares, plus such sales
charge as may be fixed by the Underwriter with the approval of the
Board of Directors of the Fund but which shall in no event exceed four
and one-half percent (4-1/2%) of the offering price of the Government
Income or Tax Free Series' shares increased to the next higher even cent;
and
(b) in the case of sales of the shares of the PRIMARY SERIES, the net
asset value per share which is or becomes effective for such order of the
Primary Series' shares.
The "net asset value" of the Series' shares shall be computed by or on
behalf of the Fund, subject to and in conformity with:
(a) the Fund's Articles of Incorporation and By-Laws; and
(b) the applicable rules and regulations under the Investment Company
Act of 1940, as amended (the "40 Act") and any other applicable rules and
regulations promulgated by the Securities and Exchange Commission, any
state securities commission or by any securities association of which the
Underwriter is a member.
The full net asset value for the Fund shares purchased shall be
remitted to the Fund promptly after payment is received by the Underwriter
and in no event later than twelve (12) days after each purchase. The sales
charge received in connection with sales of the Government Income Series or
Tax Free Series shall be retained by the Underwriter, and the Underwriter may
fix the portion of such sales charge to be allowed to its representatives or
to dealers having sales agreements with the Underwriter.
4. The Underwriter shall require each Series to issue shares only to the
extent necessary (except for reasonable allowances for clerical errors,
delays and errors of transmission and cancellation of orders) to fill
unconditional orders for shares of such Series placed with the Underwriter by
investors and dealers and not in excess of such unconditional orders, and the
Underwriter will not avail itself of any opportunity of making a profit by
expediting or withholding orders. In the event payment is not received by
the Underwriter for shares so issued by a Series, the Underwriter shall
reimburse the Series for the net asset value applicable to such purchase, and
thereafter the shares so issued will be redeemed at the net asset value
applicable at the time of redemption.
5. As recommended by the Underwriter, the Government Income Series and Tax
Free Series have agreed with certain other Funds to permit the exchange of
shares of one of such funds into the shares of the other. Such exchanges by
or into the Government Income Series, Tax Free Series and/or any future
series of the Fund shall be on terms from time to time recommended or
approved by the Underwriter any by the Fund's Board of Directors and set
forth in the Fund's current prospectus. It is understood that the
Underwriter has agreed to waive its right to that portion of the sales charge
on shares exchanged pursuant to such exchange privilege.
6. The Fund hereby authorizes the Underwriter to redeem upon the terms and
conditions hereinafter set forth, as agent of the Fund and for its account,
such shares of stock of each Series of the Fund as may be offered for
redemption to the Fund from time to time:
(a) The Underwriter may accept redemption requests from a stockholder
of record (including a request from an agent of such stockholder), to
redeem such shares at a price equal to the net asset value per share
which is or becomes effective for such redemption, computed as set forth
in paragraph 3. hereof.
(b) The Underwriter agrees that all redemptions of the Fund's shares
made by it after this Agreement becomes effective shall be made only as
agent for the account of each Series of the Fund and pursuant to the
terms and conditions herein set forth.
(c) The Fund reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension
or revocation shall be effective forthwith upon receipt of notice by an
officer of the Underwriter by telegraph or written instrument from an
officer of the Fund duly authorized by its Board of Directors. In the
event that the authorization of the Underwriter is, by terms of such
notice, suspended:
<PAGE>
(i) for more than forty-eight (48) hours, excluding from such
period any day on which the New York Stock Exchange is not open,
or
(ii) until further notice, the authorization given by this
Article 6 shall not be revived except by vote of the Board of
Directors of the Fund.
(d) The Underwriter shall have the right to terminate the operation
of this Article 6. upon giving to the Fund thirty (30) days' written
notice thereof.
(e) The Underwriter shall receive no commissions in respect of any
redemptions under the foregoing authorization and appointment as agent.
7. The Underwriter covenants and agrees that in selling the shares of each
Series of the Fund, it will in all respects duly conform with all state and
federal laws relating to the sale of such securities, and will indemnify and
save harmless the Fund and each such Series from any damage or expenses on
account of any wrongful act by it or its representatives. Neither the
Underwriter nor any dealer nor any other person is authorized by the Fund to
give any information or to make any representations other than those
contained in the Registration Statement or current prospectus filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (as said Registration Statement and prospectus may be amended from
time to time), covering the shares of any Series of the Fund or additional
sales literature supplied by the Underwriter.
8. In connection with the purchase or sale of portfolio securities for the
account of any Series of the Fund, neither the Underwriter nor any officer or
director of the Underwriter shall act as principal.
9. This Agreement shall become effective on the date hereof and shall
continue in effect for a period of two (2) years and thereafter only so long
as such continuance is specifically approved at least annually by the Board
of Directors or by a vote of a majority of the outstanding voting securities
of each Series of the Fund, and in either case, by the specific approval by a
majority of the directors, who are not parties to such contract or agreement
or "interested" persons of any such parties, cast in person at a meeting
called for the purpose of voting on such approval, the term "interested"
persons for this purpose having the meaning defined in Section 2(a)(19) of
the '40 Act.
This Agreement may be terminated at any time without the payment of any
penalty, by vote of the Board of Directors of the Fund or by vote of the
holders of a majority of the outstanding shares of either Series of the Fund,
or by the Underwriter, on sixty (60) days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning defined
in Section 2(a)(4) of the '40 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate on the day and year first above written.
SM&R CAPITAL FUNDS, INC.
By: STEVEN H. STUBBS
Steven H. Stubbs, President
SECURITIES MANAGEMENT AND RESEARCH, INC.
By: BRENDA T. KOELEMAY
Brenda T. Koelemay, Vice President
<PAGE>
EXHIBIT 99.B8a
CUSTODIAN CONTRACT
BETWEEN
SM&R CAPITAL FUNDS, INC.
AND
SECURITIES MANAGEMENT AND RESEARCH, INC.
THIS CUSTODIAN CONTRACT (the "Agreement") is made and entered into this 1st
day of July, 1993, by and between SM&R CAPITAL FUNDS, INC., a Maryland
corporation hereinafter referred to as the "Fund", and SECURITIES MANAGEMENT AND
RESEARCH, INC., a Florida corporation hereinafter referred to as the
"Custodian".
The Fund is a series fund and currently has three series: the American
National Government Income Fund Series (the "Government Income Series"), the
American National Primary Fund Series (the "Primary Series") and the American
National Tax Free Fund Series (the "Tax Free Series"). The Government Income
Series, Primary Series and the Tax Free Series (individually and collectively,
the "Series") each pursue different investment objectives through separate
investment policies.
SM&R is engaged in the business of providing custodian services to
investment companies and desires to provide such services to the Fund and to
each of its Series.
In consideration of the mutual covenants contained in this Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Custodian and the Fund hereby agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT.
The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Articles of Incorporation. The Fund agrees to
deliver to the Custodian all securities and cash owned by it, and all payments
of income, with respect to all securities owned by the Fund from time to time,
and the cash consideration received by it for such new or treasury shares of
capital stock, $0.01 par value ("Shares") of the Fund as may be issued or sold
from time to time. The Custodian shall not be responsible for any property of
the Fund held or received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section 2.17),
the Custodian shall from time to time employ one or more sub-custodians, but
only in accordance with an applicable vote by the Board of Directors of the
Fund, and provided that the Custodian shall have no more or less responsibility
or liability to the Fund on account of any actions or omissions of any sub-
custodian so employed than any such sub-custodian has to the Custodian. The
Fund acknowledges and agrees that the Custodian shall enter into a sub-custodian
agreement with The Moody National Bank of Galveston, having its principal place
of business at 2302 Postoffice Street, Galveston, Texas 77550.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN.
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of the Fund all non- cash property, including all securities
owned by the Fund, other than securities which are maintained pursuant to
Section 2.12 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System".
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities System
account of the Custodian only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
(1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
<PAGE>
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided, that in
any such case, the cash or other consideration is to be delivered to the
Custodian;
(6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the Custodian or
into the name or nominee name of any agent appointed pursuant to Section
2.11 or into the name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate face amount
or number of units; provided, that in any such case, the new securities are
to be delivered to the Custodian;
(7) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; PROVIDED that in any such case,
the Custodian shall have no responsibility or liability for any loss
arising from the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own negligence or
willful misconduct;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions for
conversion contained in such securities, or pursuant to any deposit
agreement; PROVIDED, that in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary securities for
definitive securities; PROVIDED, that in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
(10) For delivery in connection with any loans of securities made by
the Fund, BUT ONLY against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund, which may be in the form
of cash or obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans for which
collateral is to be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the Custodian
will not be held liable or responsible for the delivery of securities owned
by the Fund prior to the receipt of such collateral;
(11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, BUT ONLY against receipt of
amounts borrowed;
(12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Fund;
(13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account deposits in
connection with transactions by the Fund;
(14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the holders
of Shares in connection with distributions in kind, as may be described
from time to time in the Fund's currently effective prospectus and
statement of additional information ("prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
(15) For any other proper corporate purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions, a certified copy of a resolution of the
Board of Directors or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purposes to be proper
corporate purposes, and naming the person or persons to whom delivery of
such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund or in the
name of any nominee of the Fund or of any nominee of the Custodian which nominee
shall be assigned exclusively to the Fund, UNLESS the Fund has authorized in
writing the appointment of a nominee to
<PAGE>
be used in common with other registered investment companies having the same
investment adviser as the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.11 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted by
the Custodian on behalf of the Fund under the terms of this Contract shall be
in "street name" or other good delivery form.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or order by
the Custodian acting pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Fund, other than cash maintained by the Fund
in a bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for the Fund may be
deposited by it to its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it may in its discretion
deem necessary or desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be approved by vote of a
majority of the Board of Directors of the Fund. Such funds shall be deposited
by the Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 PAYMENT FOR SHARES. The Custodian shall receive from the distributor
for the Fund's Shares or from the Transfer Agent of the Fund and deposit into
the Fund's account such payments as are received for Shares of the Fund issued
or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund and the Transfer Agent of any receipt by it of payments
for Shares of the Fund.
2.6 INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall, upon the receipt of
Proper Instructions,
(1) invest in such instruments as may be set forth in such
instructions on the same day as received all federal funds received after a
time agreed upon between the Custodian and the Fund; and
(2) make federal funds available to the Fund as of specified times
agreed upon from time to time by the Fund and the Custodian in the amount
of checks received in payment for Shares of the Fund which are deposited
into the Fund's account.
2.7 COLLECTION OF INCOME. The Custodian shall collect on a timely basis
all income and other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held by the Custodian or agent
thereof and shall credit such income, as collected, to the Fund's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due the Fund on securities loaned pursuant to
the provisions of Section 2.2(10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of the
income to which the Fund is properly entitled.
2.8 PAYMENT OF FUND MONEY. Upon receipt of Proper Instructions, which may
continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of the Fund in the following cases only:
(1) Upon the purchase of securities, futures contracts or options on
futures contracts for the account of the Fund but only (a) against the
delivery of such securities, or evidence of title to futures contracts or
options on futures contracts, to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended, to act as a
custodian and had been designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in the name of a nominee of
the Custodian referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in Section 2.12 hereof;
or (c) in the case of repurchase agreements entered into between the Fund
and the Custodian, or another bank, or a broker-dealer which is a member of
NASD, (i) against delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the receipt
evidencing purchase by the Fund of securities owned by the Custodian along
with written evidence of the agreement by the Custodian to repurchase such
securities from the Fund;
<PAGE>
(2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares issued by the Fund as
set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by the Fund,
including, but not limited to, the following payments for the account of
the Fund: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as deferred expenses;
(5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the
Board of Directors or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the purpose
for which such payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is to be
made.
2.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
In any and every case where payment for purchase of securities for the account
of the Fund is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund to so
pay in advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by the
Custodian, except that in the case of repurchase agreements entered into by the
Fund with a bank which is a member of the Federal Reserve System, the Custodian
may transfer funds to the account of such bank prior to the receipt of written
evidence that the securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary account of the
Custodian maintained with the Federal Reserve Bank or of the safe-keeping
receipt, provided, that such securities have in fact been so transferred by
book-entry.
2.10 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND. From
such funds as may be available for the purpose but subject to the limitations of
the Articles of Incorporation and any applicable votes of the Board of Directors
of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of Shares
who have delivered to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or repurchase of Shares of
the Fund, the Custodian is authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Fund to the holder of
Shares, when presented to the Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time between the Fund and the
Custodian.
2.11 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which it itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of the
Article 2 as the Custodian may from time to time direct; PROVIDED, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by the Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act or 1934, which acts as a securities depository, or in
the book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as "Securities System"
in accordance with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
(1) The Custodian may keep securities of the fund in a Securities
System PROVIDED that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall not
include any assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify by book-
entry those securities belonging to the Fund;
<PAGE>
(3) The Custodian shall pay for securities purchased for the account
of the Fund upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such payment and transfer
for the account of the Fund. The Custodian shall transfer securities sold
for the account of the Fund upon (i) receipt of advice from the Securities
System that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Fund. Copies of
all advises from the Securities System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for the Fund by
the Custodian and be provided to the Fund at its request. Upon request,
the Custodian shall furnish the Fund confirmation of each transfer to or
from the account of the Fund in the form of a written advice or notice and
shall furnish to the Fund copies of daily transaction sheets reflecting
each day's transactions in the Securities System for the account of the
Fund.
(4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in
the Securities System;
(5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to the Fund
resulting from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian or any such
agent to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claim against
the Securities System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent that the Fund
has not been made whole for any such loss or damage.
2.13 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.12 hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures commission
merchant registered under The Commodity Exchange Act), relating to compliance
with the rules of the Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold by the Fund, (iii) for
the purposes of compliance by the Fund with procedures required by Investment
Company Act Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other proper corporate
purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Board of Directors
or of the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be proper corporate
purposes.
2.14 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and the certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of the Fund held by it and in connection with transfers of
securities.
2.15 PROXIES. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holders of such
securities, if the securities are registered otherwise than in the name of the
Fund or a nominee of the Fund, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices relating to such
securities.
2.16 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES. The Custodian
shall transmit promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased or sold by
the Fund) received by the Custodian from issuers of the securities being held
for the Fund. With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Fund all written information received by the Custodian
from issuers of the securities whose tender or exchange is sought and form the
party (or his agents) making the tender or exchange offer. If the Fund desires
to take action with respect to any tender
<PAGE>
offer, exchange offer or any other similar transaction, the Fund shall notify
the Custodian at least three (3) business days prior to the date on which the
Custodian is to take such action.
2.17 PROPER INSTRUCTIONS. Proper Instructions as used throughout this
Article 2 means a writing signed or initialed by one or more person or persons
as the Board of Directors shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Directors of the Fund accompanied by a detailed description of
procedures approved by the Board of Directors, Proper Instructions may include
communications effected directly between electromechanical or electronic devices
provided that the Board of Directors and the Custodian are satisfied that such
procedures afford adequate safeguards for the Fund's assets.
2.18 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian may in its
discretion, without express authority from the Fund:
(1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED, that all such payments shall be accounted for to the
Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Fund except as otherwise
directed by the Board of Directors of the Fund.
2.19 EVIDENCE OF AUTHORITY. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly executed by or
on behalf of the Fund. The Custodian may receive and accept a certified copy of
a vote of the Board of Directors of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote, or (b) of any
determination or of any action by the Board of Directors pursuant to the
Articles of Incorporation as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.
3. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the Fund to keep the
books of account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily the net income
of the Fund as described in the Fund's currently effective prospectus and shall
advise the Fund and Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of the Fund shall be made at the time or times described from time
to time in the Fund's currently effective prospectus.
4. RECORDS.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be
the property of the Fund and shall at all times during the regular business
hours of the Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Fund's request, supply the
Fund with a tabulation of securities owned by the Fund and held by the Custodian
and shall, when requested to do so by the Fund and for such compensation as
shall be agreed upon between the Fund and the Custodian, include certificate
numbers in such tabulations.
<PAGE>
5. OPINION OF FUND'S INDEPENDENT ACCOUNTANT.
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of the Fund's Form N-1A, Form N-SAR or other annual reports
to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
6. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS.
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, which
shall be of sufficient scope and in sufficient detail, as may reasonably be
required by the Fund, to provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and, if there are no such
inadequacies, shall so state.
7. COMPENSATION OF CUSTODIAN.
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.
8. RESPONSIBILITY OF CUSTODIAN.
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties. The Custodian shall
be held to the exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund) on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the Custodian with respect
to redemptions effected by check shall be in accordance with a separate
agreement entered into between the Custodian and the Fund.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any
purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses,assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement.
9. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT.
This Contract shall become effective as of it s execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties thereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; PROVIDED,
HOWEVER, that the Custodian shall not act under Section 2.12 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors of the Fund have approved the initial use
of a particular Securities System and the receipt of an annual certificate of
the Secretary or an Assistant Secretary that the Board of Directors have
reviewed the use by the Fund of such Securities System, to the extent required
in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended;
PROVIDED FURTHER, HOWEVER, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state regulations, or any
provision of the Articles of Incorporation, and FURTHER PROVIDED, that the Fund
may at any time by action of its Board of Directors (i) substitute another bank
or trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by
<PAGE>
the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its cots, expenses and disbursements.
10. SUCCESSOR CUSTODIAN.
If a successor custodian shall be appointed by the Board of Directors of
the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940, of
its own selection, having an aggregate capital, surplus and undivided profits,
as shown by its last published report, of not less than $25,000,000 all
securities, funds and other properties held by the Custodian and all instruments
held by the Custodian relative thereto and all other property held by it under
this Contract and to transfer to an account of such successor custodian all of
the Fund's securities held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of vote referred to or of the
Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to duties and obligations of the
Custodian shall remain in full force and effect.
11. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in writing signed by both parties and shall be
annexed hereto, PROVIDED that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
12. TEXAS LAW TO APPLY.
This Contract shall be construed and the provisions thereof interpreted
under an in accordance with laws of The State of Texas.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative on July 1,
1993.
SM&R CAPITAL FUNDS, INC.
By: STEVEN H. STUBBS
President
SECURITIES MANAGEMENT AND RESEARCH, INC.
By: BRENDA T. KOELEMAY
Vice President
<PAGE>
EXHIBIT 99.B8b
SUB-CUSTODIAN AGREEMENT BETWEEN
THE MOODY NATIONAL BANK OF GALVESTON, TEXAS
AND
SECURITIES MANAGEMENT AND RESEARCH, INC.
Securities Management and Research, Inc. (the "Custodian") request that The
Moody National Bank of Galveston (the "Sub- Custodian") open a Custody
Account (the "Account") for and in the name of the Custodian on behalf of the
SM&R Capital Funds, Inc. and all such series, as may be organized, under the
(the "Fund") and requests that the Sub-Custodian hold all securities and
other property now or hereafter deposited in or held by the Sub-Custodian for
each such series of the Account (the "Property"). The Sub-Custodian agrees
to open such Account and to provide safekeeping and accounting services, but
no investment services for each such series of the Account.
TERM OF THE AGREEMENT
The terms and conditions under which this Account shall be administered are as
follows:
HOLDING THE PROPERTY The Sub-Custodian holds the Property deposited into the
Account subject to future instructions by the Custodian. The Custodian may
deposit additional Property to the Account, subject to the Sub-Custodian's
acceptance thereof, and the Custodian may direct the Sub-Custodian to
immediately settle trades, sales or exchanges for the Account. The Sub-
Custodian shall not be liable for any losses or unfavorable result arising
from its prompt compliance with Custodian's directions.
The Custodian may withdraw all or any part of the Property from time to
time upon giving written notice and by giving the Sub-Custodian a receipt for
such withdrawn Property.
PROCEEDS FROM SALE Proceeds from the sale, redemption or exchange of
securities or other Properties held in the Account, including all receipts of
principal, shall be subject to the written instructions of the Custodian on
behalf of the Fund or as otherwise provided in this Agreement.
INCOME AND CASH BALANCES The Sub-Custodian shall use reasonable efforts to
collect principal and income on the Property, but in the absence of bad faith
or gross negligence, shall have no liability for sums not collected.
The income received by the Sub-Custodian from Property held in the
Account shall be held subject to further instructions of the Custodian.
OWNER; REGISTRATION; PROXIES The Property held in the Account shall be owned
by the Fund but, as a matter of convenience, any of the Property may be
registered or retained in the name of the Sub-Custodian's nominee. Proxies
received by the Sub-Custodian with respect to securities shall be promptly
forwarded to the Custodian.
INFORMATION FURNISHED TO ISSUERS The Custodian has no objection to the Sub-
Custodian furnishing to the companies which issued securities held in this
Account the Customer's name, address and share position, all in accordance with
applicable SEC rules. (The purpose of the rule is to facilitate communications
between issuers of securities and shareholders.)
<PAGE>
CUSTOMER'S INSTRUCTIONS All written directions in regard to this Account
must be personally signed by an authorized representative of the Custodian.
Written direction includes those directions received by facsimile
transmission. However, the Sub-Custodian, in its sole discretion, may act in
accordance with directions from the Custodian whether given orally, by
telephone, telegraph, cable radio or otherwise, if it believes such
directions to be genuine; but if such directions are not in writing then the
Sub-Custodian shall not be liable for executing, failure to execute, or for
any mistake in the execution thereof, except in the case of willful
misconduct or gross negligence. Custodian agrees to confirm all oral
instructions in writing within a reasonable period of time.
STATEMENTS After the end of each month, the Sub-Custodian shall send to the
Custodian a statement listing all income and principal transactions of the
Account and a statement listing the Property owned by the Fund. Each
statement shall be conclusive as to its contents unless the Custodian shall
deliver written objections to the Sub-Custodian within sixty (60) days after
receipt of the statement.
NO TAX LIABILITY The Sub-Custodian shall not be responsible or liable for
determination or payment of any taxes assessed with respect to the Property
or the income thereof nor shall it be responsible for the preparation of
filing of any tax returns, other than withholding required by law.
FEES AND EXPENSES The following schedule shall be used in computing the
Sub-Custodian's fee:
TRADES $22.00
HOLDING FEES 3.00
ASSET FEES .000275(Includes all out of pocket expense)
Any terminal or access to system charges shall be billed to Custodian.
TERMINATION; INDEMNIFICATION; ETC. Custodian and the Sub- Custodian, upon
execution of this Agreement, agree to be bound by all of its terms and
provisions and further agree that the Agreement shall remain in full force
and effect until June 30, 1993, or until expressly revoked or amended in
writing. Either the Custodian or the Sub-Custodian may terminate or revoke
this Agreement upon written notice delivered to the other, and the Agreement
may be amended upon the mutual agreement of both, in writing.
ACCEPTED BY SUB-CUSTODIAN: ACCEPTED BY CUSTODIAN:
THE MOODY NATIONAL BANK OF SECURITIES MANAGEMENT AND
GALVESTON RESEARCH, INC.
2302 Postoffice Two Moody Plaza
Galveston, Texas 77550 Galveston, Texas 77550
BY: CARROLL G. SUNSERI BY: STEVEN H. STUBBS
--------------------- -----------------------
Steven H. Stubbs
TITLE: Exec.VP & Senior Trust Officer TITLE: President
------------------------------ -------------------
Tax I.D.#59-1145041
<PAGE>
REVISED FEE SCHEDULE
FEES AND EXPENSES
The following schedule shall be used in computing the Sub-Custodian's fee:
TRADES 25.00
HOLDING FEES 3.50
ASSET FEES .00030 (Includes all out of pocket expenses)
Any terminal or access to system changes shall be billed to Custodian.
<PAGE>
EXHIBIT 99.B10
LEGAL OPINION
December 15, 1995
SM&R Capital Funds, Inc.
One Moody Plaza
Galveston, Texas 77550
RE: SM&R Capital Funds, Inc. (the "Fund") Post-Effective
Amendment No. 7 under the Securities Act of 1933 (the
"33 Act") and to the Investment Company Act of 1940
(the "40 Act") to Form N-1A Registration Statement
No. 33-44021
Gentlemen:
We have assisted you in preparing the above referenced post-
effective amendments to your '33 Act and '40 Act Registration
Statements referenced above. In connection therewith, and in
connection with our opinion furnished in connection with your
Rule 24f-2 Notice for your immediately preceding fiscal year, we have
examined the Company's Articles of Incorporation and such other
corporate records, prospectuses and other material we deemed
appropriate. On the basis of such examination, we are of the
opinion that the Company's shares, when sold, will be legally issued,
fully paid and non-assessable. We, of course, assume that the Company
will not sell more than the 200,000,000 shares authorized by its
Articles of Incorporation, and that all sales will be for full value
received at the time of sale.
We consent to the attachment of this opinion to and its used in
connection with the above referenced post-effective amendments.
Yours very truly,
/s/ Jerry L. Adams
____________________________
Jerry L. Adams
<PAGE>
EXHIBIT 99.B11
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
SM&R Capital Funds, Inc.
We consent to the use of our report on the SM&R Capital Funds, Inc.
dated October 16, 1995 included herein and to the references to our
firm under the headings "Financial Highlights" in the Prospectus and
"Counsel and Auditors and Financial Statements" in the Statement of
Additional Information.
KPMG Peat Marwick LLP
Houston, Texas
December 15, 1995
<PAGE>
EXHIBIT 99.B13
STOCK PURCHASE LETTERS
SM&R Capital Funds, Inc.
Two Moody Plaza
Galveston, Texas 77550
Gentlemen:
Securities Management and Research, Inc. ("SM&R") has purchased
1,900,000 shares of the American National Government Income Fund Series (the
"Government Income Series"), $1.00 par value. Such shares were purchased at
a price of $1.00 per share, for a total consideration of $1,900,000.00.
In connection with such purchase, SM&R acknowledges that such shares
were acquired in connection with the Government Income Series' formation,
were acquired for investment and can be disposed of only by redemption. SM&R
further agrees that it will redeem such shares only when the other assets of
the Government Income Series are large enough that such redemption will not
have a material adverse effect upon investment performance.
Yours very truly,
SECURITIES MANAGEMENT AND RESEARCH, INC.
By: STEVEN H. STUBBS
-------------------------------------
Steven H. Stubbs, President and
Chief Executive Officer
<PAGE>
SM&R Capital Funds, Inc.
Two Moody Plaza
Galveston, Texas 77550
Gentlemen:
American National Insurance Company (the "Company") has purchased
4,000,000 shares of the American National Government Income Fund Series (the
"Government Income Series"), $1.00 par value. Such shares were purchased at
a price of $1.00 per share, for a total consideration of $4,000,000.00.
In connection with such purchase, the Company acknowledges that such
shares were acquired in connection with the Government Income Series'
formation, were acquired for investment and can be disposed of only by
redemption. The Company further agrees that it will redeem such shares only
when the other assets of the Government Income Series are large enough that
such redemption will not have a material adverse effect upon investment
performance.
Yours very truly,
AMERICAN NATIONAL INSURANCE COMPANY
By: CARL R. ROBERTSON
---------------------------------
Carl R. Robertson, Senior
Executive Vice President
<PAGE>
SM&R Capital Funds, Inc.
Two Moody Plaza
Galveston, Texas 77550
Gentlemen:
Securities Management and Research, Inc. ("SM&R") has purchased
190,000 shares of the American National Tax Free Fund Series (the "Tax Free
Series"), $1.00 par value. Such shares were purchased at a price of $10.00
per share, for a total consideration of $1,900,000.00.
In connection with such purchase, SM&R acknowledges that such shares
were acquired in connection with the Tax Free Series' formation, were
acquired for investment and can be disposed of only by redemption. SM&R
further agrees that it will redeem such shares only when the other assets of
the Tax Free Series are large enough that such redemption will not have a
material adverse effect upon investment performance.
Yours very truly,
SECURITIES MANAGEMENT AND RESEARCH, INC.
By: STEVEN H. STUBBS
-------------------------------------
Steven H. Stubbs, President and
Chief Executive Officer
<PAGE>
SM&R Capital Funds, Inc.
Two Moody Plaza
Galveston, Texas 77550
Gentlemen:
American National Insurance Company (the "Company") has purchased
500,000 shares of the American National Tax Free Fund Series (the "Tax Free
Series"), $1.00 par value. Such shares were purchased at a price of $10.00
per share, for a total consideration of $5,000,000.00.
In connection with such purchase, the Company acknowledges that such
shares were acquired in connection with the Tax Free Series' formation, were
acquired for investment and can be disposed of only by redemption. The
Company further agrees that it will redeem such shares only when the other
assets of the Tax Free Series are large enough that such redemption will not
have a material adverse effect upon investment performance.
Yours very truly,
AMERICAN NATIONAL INSURANCE COMPANY
By: CARL R. ROBERTSON
------------------------------------
Carl R. Robertson, Senior
Executive Vice President
<PAGE>
TIMELY ANSWERS TO SOME FREQUENTLY ASKED QUESTIONS ABOUT
TSA 403(b) CUSTODIAL ACCOUNTS
===============================================================================
This kit is designed to provide you with general information about the
American National Family of Funds TSA Plan. It is not intended as a complete
or definitive explanation of the plan, the provisions of the Employee
Retirement Income Security Act of 1973 or the Tax Code. Neither the Investment
Adviser nor the Custodian is in a position to render legal or tax advice.
Please consult your legal or tax professional if you have any questions in
this regard.
WHAT IS A TAX-SHELTERED 403(b) CUSTODIAL ACCOUNT?
A 403(b) is a voluntary tax-sheltered account (TSA) that allows you to set
aside pre-tax money for retirement through a salary reduction with your
Employer.
WHO IS ELIGIBLE TO PARTICIPATE IN THE PROGRAM?
Employees of a public school or a tax-exempt, non-profit organization which
qualifies under Section 501(c)(3) of the Internal Revenue Code. This includes
hospitals, research foundations, churches, symphony orchestras, scientific
foundations, private non-profit colleges and universities, museums and zoos.
WHY SHOULD I ESTABLISH A TSA?
Contributions to a TSA are deferred from current federal income tax. The
earnings on your TSA also accumulate on a tax-deferred basis allowing your
money to work its hardest for you until you withdraw it. Participation is
voluntary so you control when and how much is contributed.
HOW MUCH CAN I CONTRIBUTE TO MY TSA?
The maximum contribution amount is based on your gross compensation, the
length of time with your current employer, the amounts already contributed to
a TSA, and the type of your employer. A Salary Reduction Maximum Allowable
Deferral Worksheet is provided in the kit to assist you in determining the
maximum amount allowable.
WILL I EVER PAY TAXES ON THIS MONEY?
Yes, your TSA contributions and earnings are tax-deferred. However, you must
pay federal income tax on these amounts once you begin to take distributions.
Usually, due to retirement age and status, your tax bracket will be lower
when your distributions begin. State tax laws vary and you will want to
consult your tax adviser regarding your particular tax situation.
WHEN CAN I WITHDRAW FROM MY 403(b) ACCOUNT?
You may only withdraw from your account upon the occurrence of one of the
following events. Additional restrictions apply if you are a participant in
the State of Texas ORP Program, please refer to the Custodial Agreement for
such restrictions.
- You have separated from service with your employer
- You have become disabled
- You have attained the age 59 1/2
- You have encountered financial hardship within the meaning of code
section 403(b)(7)(ii)
- Your beneficiary may withdraw from your account if you have died
Refer to page 2 of this kit for an explanation of the 20% mandatory
withholding requirements on distributions from your TSA.
CAN I BORROW FROM MY TSA?
No, the American National Family of Funds 403(b) plan does not permit
borrowing.
CAN I TRANSFER AN EXISTING 403(b) ACCOUNT TO THE AMERICAN NATIONAL FAMILY
OF FUNDS?
Yes, you can easily transfer the assets of your existing plan to a Fund in
the American National Family by completing the 403(b)(7) Account Application
and Transfer of Assets Request in this kit.
HOW MAY MY ACCOUNT BE DISTRIBUTED?
Distributions may be taken in lump sum or systematic payments. These
systematic payments should be scheduled over the life expectancy of the
participant, the joint life expectancy of the participant and his or her
spouse, or a specified period not exceeding the combined life expectancy of
the participant and the participant's spouse.
WHEN CAN I ROLL OVER MY TSA INTO AN IRA?
A rollover of your TSA assets into an IRA can take place if you have
separated from service with your employer, attained age 59 1/2 or become
disabled. Such a rollover is permitted subject to certain restrictions which
should be discussed with your tax adviser for further details.
HOW CAN I WITHDRAW MONEY WITHOUT A PREMATURE DISTRIBUTION PENALTY PRIOR TO
AGE 59 1/2, IF NECESSARY?
Withdrawals without a penalty can be taken if you become permanently
disabled, receive substantially equal periodic payments beginning after
termination of employment, or when you reach age 55 and have terminated
employment. If you are a participant in the State of Texas ORP Program, see
the Custodial Agreement for additional restrictions. Consult your tax adviser
for answers to specific questions you may have.
1
<PAGE>
NEW TAX LAW IMPACTS 403(b) DISTRIBUTIONS
===============================================================================
New IRS rules have liberalized which distributions can be rolled over, but
now require plan custodians to automatically withhold 20% from all
distributions eligible for rollover received from 403(b) annuities or mutual
funds.
Under the new law effective January 1, 1993, 403(b) annuity and mutual fund
distributions that are eligible for rollover are subject to 20% mandatory
withholding unless they are directly rolled into an IRA or other eligible
plan. The 20% withholding tax is not a penalty and is paid to the IRS as a
credit toward the employee's income tax liability for that year.
The new law specifies that any 403(b) plan distribution--except those
listed below--is an "eligible rollover distribution." Distributions not
eligible for rollover that allow the participant to elect out of withholding
are:
- Required Minimum Distributions--Employees who reach age 70 1/2 are
required to take distributions. Required minimums have never been
eligible for rollover, and employees may still elect out of withholding
in these cases.
- Substantially equal periodic payments over a single or joint life
expectancy or over a period of at least 10 years--To receive a
substantially equal periodic payment, a participant must have
separated from service (for example, terminated employment).
Participants taking this type of distribution may elect out of
withholding.
- Certain excess, after-tax and "deemed" distributions--While these types
of distributions are not common, custodians should be aware that this
type of distribution cannot be rolled, therefore, is not subject to
the withholding rule, either.
Since all other distributions are eligible for rollover, the 20%
withholding tax can be avoided simply by directly rolling the distribution
into an IRA or another eligible plan.
A direct rollover is actually an easier transaction for an employee than a
"regular" rollover because the custodians do most of the work. The
custodians move the distribution directly between the two plans. The
employee avoids taking physical possession of the distribution and concern
about the 60-day rollover rule is lessened. If employees do choose a
"regular" rollover and take physical possession of the distribution before
rolling it into an IRA or other eligible plan within the allowable 60-day
period, the 20% withholding tax will be imposed.
Generally, employees will take a distribution when they change jobs or
terminate employment for other reasons, thus "triggering" the distribution.
Distributions made for other reasons, or because an employer discontinues a
plan, will generally be eligible for rollover and thus participants may not
elect out of withholding unless they chose the direct rollover option.
The following situations may assist you in understanding the new rules more
clearly.
How to Avoid 20% Withholding
IF you are changing jobs, have been laid off, have terminated
employment...
THEN you can directly roll over your distribution and avoid the mandatory
20% withholding requirement.
IF you are required to take distributions from your 403(b) plan because
you are age 70 1/2 or older...
THEN you may elect out of withholding, but you can't roll over your
distribution.
IF you are receiving "substantially equal" periodic payments because
you've separated from service...
THEN you may elect out of withholding, but you can't roll over your
distribution.
When The 20% Withholding Will Apply
IF you do not directly roll over your distribution and you decide to keep
it...
THEN you'll receive 20% less than you requested, and the entire
distribution will be subject to regular income and possible penalty
taxes as well.
IF you do not directly roll over your distribution but roll everything
you receive within the 60-day allowable time limit...
THEN this is a regular rollover (not a direct rollover), and you will
receive 20% less than you requested; you may make up the difference
from your own pocket and roll 100% of your distribution within the 60-day
limit.
IF you do not directly roll over your distribution and decide to keep
only part of what you receive and roll the rest...
THEN 20% federal income tax will be withheld on the entire distribution.
The portion of the entire distribution that is not rolled over is subject
to regular income and possible penalty taxes. You may also roll the 20%
withheld by making it up out of your own pocket.
The new withholding requirements make it important for you to receive
professional financial or tax advice before a distribution is taken, so that
20% withholding can be avoided.
2
<PAGE>
INSTRUCTIONS FOR ESTABLISHING A 403(b)(7) ACCOUNT IN THE AMERICAN NATIONAL
FAMILY OF FUNDS
_______________________________________________________________________________
TO ESTABLISH A NEW ACCOUNT
1. Complete 403(b)(7) Account Application (Numbers 1-3, 5-7, and 9)
2. Complete Beneficiary Information, page 4
3. Submit a check for $7.50 custodian fee
TO TRANSFER FROM ANOTHER INSTITUTION
1. Complete 403(b)(7) Account Application (Numbers 1-7, and 9)
2. Complete Transfer of Assets Request Form, page 9
3. Complete Beneficiary Information, page 4
4. Submit a check for $7.50 custodian fee
TO ROLLOVER ASSETS FROM ANOTHER INSTITUTION
1. Complete 403(b)(7) Account Application (Numbers 1-7, and 9)
2. Complete Beneficiary Information, page 4
3. Attach check for amount of rollover received from the institution
4. Submit a check for $7.50 custodian fee
TO ESTABLISH AN ORP (STATE OF TEXAS ONLY)
1. Complete 403(b)(7) Account Application (Numbers 1-9)
2. Complete Beneficiary Information, page 4
3. Complete ORP Participant Acknowledgement and Disclosure Statement below
4. If both the employee and state contributions will be invested in the
Primary Series, complete two separate applications, indicate "state" on
the application for the state contribution
5. Submit a check for $7.50 custodian fee
TWO APPLICATIONS HAVE BEEN INCLUDED IN THIS KIT TO ALLOW FOR THE
ESTABLISHMENT OF BOTH ORP (STATE OF TEXAS APPROVED INSTITUTIONS ONLY) AND TSA
ACCOUNTS FOR AN INDIVIDUAL.
Mail all completed documents to:
Securities Management & Research, Inc.
One Moody Plaza, 14th Floor
Galveston, TX 77550
_______________________________________________________________________________
ORP ONLY
ORP PARTICIPANT ACKNOWLEDGEMENT AND
DISCLOSURE STATEMENT
______________________________________________________________________________
THIS ACKNOWLEDGEMENT MUST ACCOMPANY ALL APPLICATIONS COMPLETED FOR
PARTICIPATION IN THE TEXAS OPTIONAL RETIREMENT PROGRAM.
I acknowledge that I have been informed of the restrictions imposed on
redemptions under ORP. I understand that no distribution from the custodial
account established under ORP shall be made unless satisfactory evidence of
one of the following conditions is provided to Securities Management &
Research, Inc., the Custodian, by my Employer.
1. Death of Participant
2. Termination of Service with Employer
3. Retirement of Participant
Furthermore, I understand that ORP does not allow the withdrawal of proceeds
from the Program for:
1. Financial hardship
2. Treatment as a premature distribution
3. Reaching age 59-1/2
_______________________________________
Participant's Signature
_______________________________________
Date
_______________________________________
Representative's Signature
_______________________________________
Date
3
<PAGE>
BENEFICIARY INFORMATION (TO BE COMPLETED AND SUBMITTED WITH APPLICATION(S))
_______________________________________________________________________________
The following designations(s) is (are) subject to the provisions of the Plan.
This designation of beneficiary(ies) remains in effect unless and until a new
designation of beneficiary form is sent, in writing, to the Custodian. This
designation may be revoked and a different beneficiary named by providing the
Custodian with a newly executed Designation of Beneficiary form. Indicate a
percentage amount for each named beneficiary to avoid the possibility of
court intervention. Special beneficiary arrangements should be outlined in
your will. If you are not survived by any designated beneficiary, your estate
will be your beneficiary.
PRIMARY BENEFICIARY
1. Name _______________________________
Date of Birth ______________________
Relationship________________________
Share %______________SSN____________
Address_____________________________
City________________________________
State___________________Zip_________
2. Name _______________________________
Date of Birth ______________________
Relationship________________________
Share %______________SSN____________
Address_____________________________
City________________________________
State___________________Zip_________
SECONDARY BENEFICIARY: (If the person(s) named above should fail to survive
me)
1. Name _______________________________
Date of Birth ______________________
Relationship________________________
Share %______________SSN____________
Address_____________________________
City________________________________
State___________________Zip_________
1. Name _______________________________
Date of Birth ______________________
Relationship________________________
Share %______________SSN____________
Address_____________________________
City________________________________
State___________________Zip_________
Payment will be made in equal shares to the primary beneficiary who survives
me, or if none, to the secondary beneficiary who survives me. If no
beneficiary survives me, payment will be made to my estate.
4
<PAGE>
|------------------------------------------|
403(b)(7) ACCOUNT APPLICATION | HOME OFFICE USE |
_________________________________ |------------------------------------------|
| Account Number |
|---------------------|--------------------|
| Account Type | Social Code |
|---------------------|--------------------|
| FI Number | LOI Amount |
|---------------------|--------------------|
______________________________________________________________________________
1. EMPLOYEE INFORMATION
Name _________________________________________________________________________
SSN _______________________________________________ Birthdate ________________
Address ______________________________________________________________________
City ______________________________________ State _______________ Zip ________
Phone Day _______________________________________________ Evening ____________
______________________________________________________________________________
2. EMPLOYER INFORMATION
Name _________________________________________________________________________
Address ______________________________________________________________________
City ______________________________________ State _______________ Zip ________
______________________________________________________________________________
3. ACCOUNT TYPE
/ / 403(b)(7)
/ / Texas Optional Retirement Program (ORP). An ORP is a 403(b) plan
available to institutions of higher education in the State of Texas. The
term 403(b) also applies to ORP accounts whenever mentioned in any 403(b)
documents in this Kit.
______________________________________________________________________________
4. TRANSFER OF ROLLOVER ACCOUNTS
Please complete this section ONLY if you are transferring your 403(b) account
to one of the Funds in the American National Family of Funds FROM ANOTHER
INSTITUTION.
/ / A transfer of funds from ANOTHER 403(b) account is pending. A transfer
request is attached and a check for the $7.50 custodian fee is enclosed.
/ / I am rolling over my 403(b) account to one of the Funds in the American
National Family of Funds from another institution. I have liquidated the
former account and attached a check for the proceeds, which are to be
invested in an American National 403(b) account. I have enclosed a check
for the $7.50 custodian fee.
PLEASE MAKE CHECK PAYABLE TO
SECURITIES MANAGEMENT & RESEARCH, INC.
______________________________________________________________________________
5. FUND SELECTION AND CONTRIBUTION INFORMATION (if more than one fund
selected, indicate amount or percentage to be invested in each fund or
series.)
Total Amount of Salary Reduction $____________________________________________
/ / 21 Growth Fund $_______________________ or ____________________%
/ / 22 Income Fund $_______________________ or ____________________%
/ / 23 Triflex Fund $_______________________ or ____________________%
/ / 26 Government
Income Series $_______________________ or ____________________%
/ / 27 Primary Series $_______________________ or ____________________%
SUBSEQUENT CONTRIBUTIONS $_____________________________________________
/ / monthly / / quarterly / / annually / / other _______________________
Billing Franchise # _________________________
______________________________________________________________________________
6. LETTER OF INTENT (Not applicable to Primary Series)
I agree to the terms of the Letter of Intent as set forth in the respective
Prospectus. Although I am not obligated to do so. It is my intention to
invest over a 13 month period in shares of one or more funds an aggregate
amount at least equal to that which is checked below. If existing accounts
are to be included, list under #7 below.
/ / $50,000 / / $100,000* / / $250,000
/ / $500,000 / / $1,000,000 / / $1,500,000
(*Government Income Series begins at $100,000)
______________________________________________________________________________
7. SALES CHARGE REDUCTION (Not applicable to Primary Series)
List all Existing Accounts. There will be no retroactive reduction of the
sales charge for shares previously purchased if this section is not completed.
Fund and Account Nos. ________________________________________________________
______________________________________________________________________________
5
<PAGE>
______________________________________________________________________________
8. ORP VESTING INFORMATION (complete only if you will be a State of Texas ORP
participant)
Please check the statement below that applies to your vesting status in the
Optional Retirement Plan (ORP).
/ / YES, I have participated in the ORP for one year and one day and am
vested in the Program.
/ / NO, I have not participated in the ORP Program long enough to have met
the vesting requirements (one year and one day).
I understand that:
1. The contributions made by my employer on my behalf will be invested in
the Primary Series until the vesting requirements have been met;
2. Once I am vested, the State's matching contributions may be exchanged
into another fund upon authorization; AND
3. I have received and read a current prospectus of the fund selected.
_____________________________________________________________________________
9. SIGNATURE
The Employee hereby: (a) appoints Securities Management and Research, Inc.
("SM&R") as Custodian of the account; (b) acknowledges that he/she has
received a current prospectus(es) of the American National Funds Group and/or
SM&R Capital Funds, Inc. and has selected and agreed to the terms as stated
in the prospectus; (c) consents to the $7.50 (per account) initial
installation fee, the $7.50 (per account) annual maintenance fee and the
$5.00 excess contribution adjustment fee. Such fees are subject to change on
30 days written notice to the Employee; (d) acknowledges that he/she has
received a copy of the Custodial Agreement; (e) has obtained Employer's
consent to participate in the Agreement and is an Employee of an Employer
defined in the Agreement; (f) acknowledges responsibility for computing the
maximum annual contribution and for notifying custodian of the amount of
excess contributions, if any; and (g) agrees to the conditions governing the
designation of beneficiary, and (h) certifies under penalty of perjury that
the information contained in this application and supporting documents, are
true, correct and complete.
Employee's Signature
______________________________________________________________________________
Date: ___________________________________
CUSTODIAN: SECURITIES MANAGEMENT AND RESEARCH, INC.
This account becomes effective on the date the Custodian, or its agent,
accepts the application by issuing an investment confirmation to the
Employee, provided the Employee is not notified to the contrary within 30
days.
REPRESENTATIVE INFORMATION
______________________________________________________________________________
Representative Name (Please Print)
______________________________________________________________________________
Representative Signature
______________________________________________________________________________
SM&R Rep. Social Security Number
DEALER INFORMATION
______________________________________________________________________________
Dealer/Representative Name & Number
______________________________________________________________________________
Dealer/Representative Signature
______________________________________________________________________________
SM&R Dealer No. (Internal Use Only)
6
<PAGE>
|------------------------------------------|
403(b)(7) ACCOUNT APPLICATION | HOME OFFICE USE |
_________________________________ |------------------------------------------|
| Account Number |
|---------------------|--------------------|
| Account Type | Social Code |
|---------------------|--------------------|
| FI Number | LOI Amount |
|---------------------|--------------------|
______________________________________________________________________________
1. EMPLOYEE INFORMATION
Name _________________________________________________________________________
SSN _______________________________________________ Birthdate ________________
Address ______________________________________________________________________
City ______________________________________ State _______________ Zip ________
Phone Day _______________________________________________ Evening ____________
______________________________________________________________________________
2. EMPLOYER INFORMATION
Name _________________________________________________________________________
Address ______________________________________________________________________
City ______________________________________ State _______________ Zip ________
______________________________________________________________________________
3. ACCOUNT TYPE
/ / 403(b)(7)
/ / Texas Optional Retirement Program (ORP). An ORP is a 403(b) plan
available to institutions of higher education in the State of Texas. The
term 403(b) also applies to ORP accounts whenever mentioned in any 403(b)
documents in this Kit.
______________________________________________________________________________
4. TRANSFER OF ROLLOVER ACCOUNTS
Please complete this section ONLY if you are transferring your 403(b) account
to one of the Funds in the American National Family of Funds FROM ANOTHER
INSTITUTION.
/ / A transfer of funds from ANOTHER 403(b) account is pending. A transfer
request is attached and a check for the $7.50 custodian fee is enclosed.
/ / I am rolling over my 403(b) account to one of the Funds in the American
National Family of Funds from another institution. I have liquidated the
former account and attached a check for the proceeds, which are to be
invested in an American National 403(b) account. I have enclosed a check
for the $7.50 custodian fee.
PLEASE MAKE CHECK PAYABLE TO
SECURITIES MANAGEMENT & RESEARCH, INC.
______________________________________________________________________________
5. FUND SELECTION AND CONTRIBUTION INFORMATION (if more than one fund
selected, indicate amount or percentage to be invested in each fund or
series.)
Total Amount of Salary Reduction $____________________________________________
/ / 21 Growth Fund $_______________________ or ____________________%
/ / 22 Income Fund $_______________________ or ____________________%
/ / 23 Triflex Fund $_______________________ or ____________________%
/ / 26 Government
Income Series $_______________________ or ____________________%
/ / 27 Primary Series $_______________________ or ____________________%
SUBSEQUENT CONTRIBUTIONS $_____________________________________________
/ / monthly / / quarterly / / annually / / other _______________________
Billing Franchise # _________________________
______________________________________________________________________________
6. LETTER OF INTENT (Not applicable to Primary Series)
I agree to the terms of the Letter of Intent as set forth in the respective
Prospectus. Although I am not obligated to do so. It is my intention to
invest over a 13 month period in shares of one or more funds an aggregate
amount at least equal to that which is checked below. If existing accounts
are to be included, list under #7 below.
/ / $50,000 / / $100,000* / / $250,000
/ / $500,000 / / $1,000,000 / / $1,500,000
(*Government Income Series begins at $100,000)
______________________________________________________________________________
7. SALES CHARGE REDUCTION (Not applicable to Primary Series)
List all Existing Accounts. There will be no retroactive reduction of the
sales charge for shares previously purchased if this section is not completed.
Fund and Account Nos. ________________________________________________________
______________________________________________________________________________
7
<PAGE>
______________________________________________________________________________
8. ORP VESTING INFORMATION (complete only if you will be a State of Texas ORP
participant)
Please check the statement below that applies to your vesting status in the
Optional Retirement Plan (ORP).
/ / YES, I have participated in the ORP for one year and one day and am
vested in the Program.
/ / NO, I have not participated in the ORP Program long enough to have met
the vesting requirements (one year and one day).
I understand that:
1. The contributions made by my employer on my behalf will be invested in
the Primary Series until the vesting requirements have been met;
2. Once I am vested, the State's matching contributions may be exchanged
into another fund upon authorization; AND
3. I have received and read a current prospectus of the fund selected.
_____________________________________________________________________________
9. SIGNATURE
The Employee hereby: (a) appoints Securities Management and Research, Inc.
("SM&R") as Custodian of the account; (b) acknowledges that he/she has
received a current prospectus(es) of the American National Funds Group and/or
SM&R Capital Funds, Inc. and has selected and agreed to the terms as stated
in the prospectus; (c) consents to the $7.50 (per account) initial
installation fee, the $7.50 (per account) annual maintenance fee and the
$5.00 excess contribution adjustment fee. Such fees are subject to change on
30 days written notice to the Employee; (d) acknowledges that he/she has
received a copy of the Custodial Agreement; (e) has obtained Employer's
consent to participate in the Agreement and is an Employee of an Employer
defined in the Agreement; (f) acknowledges responsibility for computing the
maximum annual contribution and for notifying custodian of the amount of
excess contributions, if any; and (g) agrees to the conditions governing the
designation of beneficiary, and (h) certifies under penalty of perjury that
the information contained in this application and supporting documents, are
true, correct and complete.
Employee's Signature
______________________________________________________________________________
Date: ___________________________________
CUSTODIAN: SECURITIES MANAGEMENT AND RESEARCH, INC.
This account becomes effective on the date the Custodian, or its agent,
accepts the application by issuing an investment confirmation to the
Employee, provided the Employee is not notified to the contrary within 30
days.
REPRESENTATIVE INFORMATION
______________________________________________________________________________
Representative Name (Please Print)
______________________________________________________________________________
Representative Signature
______________________________________________________________________________
SM&R Rep. Social Security Number
DEALER INFORMATION
______________________________________________________________________________
Dealer/Representative Name & Number
______________________________________________________________________________
Dealer/Representative Signature
______________________________________________________________________________
SM&R Dealer No. (Internal Use Only)
8
<PAGE>
TRANSFER OF ASSETS REQUEST
===============================================================================
Contact your current custodian or insurance company for their requirements
before completing.
Complete this form to transfer your present 403(b) account held at another
institution to one of the funds in the American National Family of Funds and
return to Securities Management and Research, Inc. Securities Management and
Research, Inc. will forward these instructions to your present custodian or
insurance company. Your current custodian may require a separate letter of
instruction, a signature guarantee or an annuity contract, if issued.
EMPLOYEE INFORMATION
Name:__________________________________________________________________________
Soc. Sec. #:___________________________________________________________________
Date of Birth: ________________________________________________________________
Address: ______________________________________________________________________
City, State, Zip ______________________________________________________________
TRANSFER FROM YOUR PRESENT 403(B) ACCOUNT
Name of insurance Company or Present Custodian:
_______________________________________________________________________________
Address: ______________________________________________________________________
City, State, Zip: _____________________________________________________________
Account Number(s): ____________________________________________________________
EMPLOYEE'S AUTHORIZATION FOR TRANSFER
To Resigning Custodian or Trustee:
I request / / FULL / / PARTIAL $___________________________________
Liquidation and transfer of my tax sheltered annuity or custodial account(s)
established pursuant to Internal Revenue Code Section 403(b) / / IMMEDIATELY
or / / AT MATURITY. I have established a 403(b) plan with the American
National Family of Funds and have appointed Securities Management and
Research, Inc. as the successor custodian to accept this tax-free transfer of
my present Account
_______________________________________________________________________________
Signature
_______________________________________________________________________________
Date
_______________________________________________________________________________
Signature guarantee, if required by Resigning Custodian
If you have any questions regarding the transfer request, please contact
/ / Securities Management and Research, Inc.
at 1-800-231-4639
/ / Shareholder (Daytime Phone) ( )_______________________-
INVESTMENT OF TRANSFERRED PROCEEDS
/ / I am opening a new account and have attached a completed application
/ / Please deposit the transferred proceeds in my existing 403(b) custodial
account number:
_______________________________________________________________________________
ACCEPTANCE BY NEW CUSTODIAN
Securities Management and Research, Inc. has agreed to serve as custodian for
the above individual's 403(b) custodial account. As custodian, Securities
Management and Research, Inc. will accept the transfer described above.
Please liquidate, and transfer on a custodian-to-custodian basis the amount
designated above and make check payable to Securities Management and
Research, Inc., for benefit of the above named individual account number
_________________________ and mail the check to Securities Management and
Research, Inc., One Moody Plaza, 14th Floor, Galveston, Texas 77550.
_______________________________________________________________________________
Authorized Signature Securities Management and Research, Inc.
_______________________________________________________________________________
Date
REQUIRED MINIMUM DISTRIBUTION INFORMATION
NOTE TO PRESENT CUSTODIAN: If the Employee has reached age 70-1/2, please
complete the following Election made by the Employee as of the required
beginning date. Remaining Period over which required distributions are to be
made: ______________________________ (Number of Years)
Payment method: (Select one)
/ / Declining (elapsed) years
/ / Recalculation of life expectancy
Did Employee choose Joint Life Expectancy with a Designated Beneficiary?
/ / Yes / / No
If "YES" complete following
Beneficiary Name:______________________________________________________________
Date of Birth: ________________________________________________________________
Is Beneficiary Spouse? / / Yes / / No
9
<PAGE>
10
<PAGE>
SAMPLE SALARY REDUCTION AGREEMENT
===============================================================================
This form is provided as an example of a typical salary deferral agreement
available from your employer and may be used if acceptable to your employer.
Once completed the form will be retained by your employer as authorization to
begin salary deferrals. No representations as to the validity or accuracy of
the content of this form is being made by Securities Management & Research,
Inc. or its representatives. Be sure to confirm that the American National
Family of Funds (American National Funds Group and the SM&R Capital Funds,
(Inc.) have been approved by your employer for 403(b) Investments.
/ / New Reduction
/ / Increasing Existing Amount
/ / Decreasing Existing Amount
It is agreed by __________________________________________________________
hereinafter referred to as "Employer", and
____________________________________________________, hereinafter referred to
as "Employee", that the employment contract between them for the 19___
through 19___ tax year be amended in the following manner:
1. The salary to be paid to the Employee by the Employer shall be reduced by
the sum of $__________ per month.(______ payments) beginning with the check
payable on _______________________________________, 19___.
2. The salary to be paid to the Employee by the Employer shall be reduced by
the sum of $__________ per month, (______ payments) beginning with the check
payable on _______________________________________, 19___ and beginning
with the check payable on _______________________________________, 19___,
my salary shall be reduced by the sum of $__________ (______ payments).
3. The sum of $__________ per month resulting from such salary reduction
shall be transmitted by the Employer for the purchase of shares of the
American National Funds to be held in a Custodial account. Such Custodial
account shall be established for the Employee in accordance with the
provision of IRC 403(b)(7) and related sections.
4. The reduction amount will be forwarded on the ____________ of the month
following the payroll deduction to:
Securities Management & Research, Inc.
One Moody Plaza
Galveston, Texas 77550
5. The Employee releases any and all rights, present and future, to
receive payment of the sums from the Employer resulting from such salary
reduction in any form except: (1) the right of the Employee to designate
beneficiary of sums to be paid from the Employee's custodial account,
together with sums withheld by the Employer but not yet forwarded to the
designated regulated investment company, upon the Employee's death; (2)
the right of the Employee, upon termination of employment by reason other
than death, personally to receive all or any part of the amount specified
for which service has been rendered but which has not been transmitted
for the purchase of shares of a regulated investment company, together
with such amount as shall be in the Employee's custodial account; or (3)
the right of the Employee as to receipts of sums so paid upon his death.
6. The Employee acknowledges that the Employer has made no representation
to the Employee regarding the advisability, appropriateness or tax
consequences of the purchase of the shares described herein. The Employee
agrees that the Employer shall have no liability whatsoever for any and
all losses suffered by the Employee with regard to his selection of the
fund; the selection of the regulated investment company; the solvency of,
operation of, or benefits provided by said regulated investment company;
or his selection and purchase of shares of regulated investment companies.
7. This amendment shall automatically apply to the employment contract
entered into between the Employer and the Employee for each succeeding
tax year unless amended or terminated by written notice to the Employer
prior to the expiration of the then current tax year.
Date: ___________________________________________________________, 19 ___
_______________________________________________________________________________
Authorized Signature (Employer)
_______________________________________________________________________________
Employee Signature
_______________________________________________________________________________
Employee Social Security Number
RETAINED BY EMPLOYER
11
<PAGE>
12
<PAGE>
SALARY REDUCTION MAXIMUM ALLOWABLE DEFERRAL WORKSHEET
==============================================================================
The following deferral worksheet will help you determine the amount of your
maximum allowable salary reduction. However, you may be required to reduce
this amount further if your employer is making plan contributions in addition
to your deferrals or you are currently making salary deferral contributions
to other retirement plans. You may keep this worksheet for your own records.
Information Required for Deferral Computation:
CURRENT SALARY =$__________
Current Annual Salary (before Salary Reductions)
YEARS OF SERVICE =___________
Years of service with Current Employer (enter whole and fractional years;
however, if less than 1 year, use "1" year)
PRIOR CONTRIBUTIONS =$__________
All contributions (excluding salary deferrals) made by your present
employer to qualified plans, including 403(b) and SEP-IRA Plans, in
prior years for your benefit.
PRIOR DEFERRALS =$__________
All salary deferrals made to 403(b) Plans (including tax-sheltered
annuities) 457 Plans (relating to State deferred compensation plans),
SAR-SEP, and 401(k) Plans on your behalf by your present employer in
prior years.
_______________________________________________________________________________
BASIC EXCLUSION ALLOWANCE FOR DEFERRALS:
1. $___________________=$___________________times________________times .20
Current Salary Years of Service
2. $___________________=$___________________plus $________________
Prior Contributions Prior Deferrals
3. $___________________= #1 minus #2
4. ____________________=(___________________times .20) plus 1
Years of Service
5. $___________________= #3 divided by #4
Basic Exclusion Allowance
6. $___________________= Enter amount in #5 or $9,500, whichever is less
Maximum Allowable Deferral
_______________________________________________________________________________
It is important that you do not exceed your maximum annual contribution with
respect to any tax year. Any such excesses may be subject to penalty taxes
and/or interest charges on unpaid taxes. Alternative calculation methods are
available to certain plan participants which may result in a larger allowance
if you are an employee of a "qualified organization".
The use of this calculation method may not be appropriate for you if you are
a church employee or if you participate in any other salary reduction plan.
PLEASE NOTE: Neither Securities Management and Research, Inc. nor its
Registered Representatives give legal or tax advice or are authorized to do
so. This Salary Reduction Maximum Allowable Deferral Worksheet is not
intended as legal advice and is a brief summary of applicable law, which is
complex and subject to change. For complete details, you should consult with
your legal and tax advisors.
RETAINED BY EMPLOYEE
13
<PAGE>
AMERICAN NATIONAL FAMILY OF FUNDS 403(b)(7)
CUSTODIAL AGREEMENT
- -------------------------------------------------------------------------------
The American National Family of Funds (herein referred to as "Funds",
"American National Funds" or "American National Family of Funds") 403(b)(7)
Custodial Agreement (the "Agreement") is intended for use by Employers and by
eligible employees who may wish to have their Employer's contributions held
for their benefit in an account invested in shares of eligible American
National Funds, all of which are regulated investment companies, upon the
terms and conditions set forth in this Agreement and in accordance with the
applicable provisions of the Internal Revenue Code of 1986, as amended.
This Agreement is authorized for distribution only if accompanied or
preceded by a current prospectus of one of the American National Funds, in
which a participant invests, in accordance with Section 4. Such prospectuses
contain information concerning the applicable sales charge and other
important facts.
The Employer is an organization described in Section 403(b)(1)(A) of the
Internal Revenue Code of 1986 (the "Code") and desires to provide benefits
for certain of its employees by establishing with the Custodian a custodial
account which satisfies the requirements of Section 401(f)(2) of the Code.
The Custodian is willing to accept its appointment as Custodian of such
custodial account.
Accordingly, the Employer and the Custodian agree as follows:
SECTION 1. DEFINITIONS:
As used in this Agreement, the following terms have the meaning set forth
below, unless a different meaning is clearly required by the context:
1.1 "Account" or "Accounts" means the separate account(s) established and
maintained under this Agreement in accordance with Section 403(b)(7) of
the Code to hold and manage the contributions made hereunder for the
benefit of an Employee.
1.2 "Agreement" means this American National Family of Funds 403(b)(7)
Custodial Agreement, which may constitute an amendment and restatement
of the Agreement in effect immediately prior to this custodial
agreement (the "Former Agreement"), including the information and
provisions set forth in the account application executed to establish the
Employees Account(s). The Agreement, including the account application
and any designation of beneficiary filed with the Custodian, may be
proved either by an original copy or a reproduced copy thereof.
1.3 "Application" means the Application for American National Family of
Funds 403(b)(7) Custodial Account Application executed by the Employee
providing for the establishment of the Account(s) in accordance with
the terms and conditions of the Agreement and if applicable, such other
or additional documents as may be required. The Application is attached
to, and made a part of, this Agreement.
1.4 "Beneficiary" or "Beneficiaries" means the individual or individuals
currently designated by the Employee or, where applicable, by his
surviving spouse, as the beneficiary or beneficiaries on the form
provided for this purpose and then currently on file with the
Custodian, or if no such beneficiary is alive or no designation is in
effect at the time of the Employee's death, the Employee's estate.
1.5 "Code" means the Internal Revenue Code of 1986, as amended and Treasury
Department regulations issued thereunder and applicable Internal
Revenue Service rulings.
1.6 "Contribution" means any salary reduction contribution amount transmitted
by the Employer to the Custodian, and any rollover or transfer
contribution, to be credited to the Employee's Account in accordance
with Section 3.
1.7 "Custodian" means Securities Management and Research, Inc. or any
successor Custodian, as provided in Section 8.
1.8 "Disabled" means, an individual who is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or to be of long-continued and indefinite duration. An individual shall
not be considered disabled unless he furnishes proof of the disability,
as required.
1.9 "Employee" means an individual employed by the Employer who has
obtained the Employer's consent to participate under this Agreement and
who has properly executed the Application.
1.10 "Employer" means the employer named in the Application and as described
in Section 501(c)(3) of the Code and exempt from tax under Section
501(a) of the Code; or a State, a political subdivision of a State, or
any agency or instrumentality thereof, but only with respect to
employees who perform or have performed services for an educational
organization described in Section 170(b)(1)(A)(1) of the Code.
1.11 "Financial Hardship" The determination by the Employer of the existence
of financial hardship and the amount required to be distributed to meet
the need created by the financial hardship shall be made in accordance
with the following standards: a financial need of the Employee because of
(i) a personal accident or illness of the Employee or a person in the
Employee's immediate family, (ii) the death of a person in the Employee's
immediate family, (iii) the need for funds to acquire, construct or
reconstruct or substantially rehabilitate any dwelling unit which
within a reasonable time is to be used (determined at the time the
distribution is made) as a principal residence of the Employee or a person
in the Employee's immediate family or educational expenses of the Employee
or a person in the Employee's immediate family. Distributions made for
financial hardship purposes are subject to mandatory 20% withholding. A
distribution based upon financial hardship cannot exceed the amount
required to meet the immediate financial need created by the financial
hardship and not reasonably available from other resources of the
Employee. Distributions on account of financial hardship after December
31, 1986, shall only be made in the case of contributions made pursuant to
a Salary Reduction Agreement. The Custodian shall have no responsibility
for obtaining the determination from the Employer or evaluating the
financial hardship or the independence of the individual making the
determination. The determination of the Employer shall be final.
1.12 "Funds", "American National Funds" or "American National Family of
Funds" means the regulated investment companies, as defined in Section
851(a) of the Code, whose investment adviser and shareholder servicing
agent is Securities Management and Research, Inc., and whose shares are
authorized for purchase under this Agreement.
1.13 "Salary Reduction Agreement" means a legal binding agreement between
the Employer and the Employee whereby the Employee irrevocably agrees to
take a reduction in salary or forego an increase in salary with respect to
amounts earned after the Agreement's effective date, and whereby the
Employer agrees to contribute the amount of salary reduced or foregone by
the Employee to the Account(s). The Salary Reduction
14
<PAGE>
Agreement may be terminated at any time by either the Employer or the
Employee with respect to amounts not yet earned by the Employee.
SECTION 2. ESTABLISHMENT OF ACCOUNT(S).
2.1 The Custodian shall, in accordance with the terms of this Agreement,
open and maintain an Account for the exclusive benefit of each Employee
who has properly become a party to this Agreement and the Employee's
designated beneficiaries. The Custodian shall hold and administer, in
accordance with the terms hereof, contributions to the Account(s) and any
gain or income from the investment thereof.
2.2 The Application and the Salary Reduction Agreement are incorporated
herein by reference as part of the Agreement. The Employer shall be
deemed to have established this Account for the Employee upon the
Employer's payment to the Custodian of the initial contribution specified
in Section 3. The Account will become effective upon acceptance of the
Application by or on behalf of the Custodian at its offices, as evidenced
by a written notice to the Employee. Notice may be given by confirmation
statement confirming the establishment of the Account.
2.3 Requirements for Establishment of Texas Optional Retirement
Program Accounts. The Custodian shall open and maintain two separate
accounts for each Employee electing to invest in the State of Texas
Optional Retirement Program (ORP). The Custodian shall hold the State's
matching contribution in an SM&R Capital Funds, Inc.--American National
Primary Fund Series account for the Employee for a period of one year
and one day; and contributions made by salary reduction for the employee
will be invested in the Fund of his choice pursuant to the conditions of
ORP. The State of Texas shall maintain sole discretion over all separate
accounts containing State ORP contributions until such time as the
Custodian is directed otherwise by the State.
SECTION 3. CONTRIBUTIONS
3.1 The Custodian shall accept cash contributions from the Employer on
behalf of Employee. Each such contribution shall be accompanied by
specific written instructions from the Employer specifying the
Employees' separate accounts to which is to be credited. Employer
contributions shall be made only pursuant to a written salary reduction
agreement between the Employer and Employee.
The Employee shall have sole responsibility for determining the
amount an Employer may contribute on his behalf. The Custodian shall not
be responsible to recommend or compel Employer contributions to the
Account. If during any taxable year the Employer contributes an amount
which is an "excess contribution," such excess contribution and any
income attributable thereto shall, upon the written request of the
Employee to the Custodian specifying the specific amount of such excess
contribution and income, be paid to the Employee by the Custodian.
3.2 The Employer or the Employee may transfer cash from another
custodial account qualified under Section 403(b)(7) of the Code and/or
from an annuity contract qualified under Section 403(b) of the Code to
the Account if the Employee certifies that the transaction meets the
requirements for a tax-free transfer of annuity contract under
Section 1035 of the Code and other applicable laws or rulings of the
Internal Revenue Service, or is a rollover contribution described in
Sections 403(b)(8), 408(d)(3)(A)(iii) or any other appropriate section
of the Code. Once transferred, such assets shall be treated as a
contribution on behalf of such Employee for purposes of this Agreement
and shall be invested, distributed and otherwise dealt with as such. The
Custodian shall not have any responsibility to the Employee for the tax
treatment of any such transfer or rollover.
3.3 The Employer or the Employee may cause the transfer, in cash, of
the balance credited to the Employee's separate account from this
Account directly to the Custodian of another custodial account qualified
under Section 403(b)(7)of the Code or to an insurance company designated
by the Employee for the purchase, for the benefit of the Employee of an
annuity contract qualified under Section 403(b) of the Code if the
Employee certifies that the transaction meets the requirements for a
tax-free transfer of annuity contracts under Section 1035 of the Code
and other applicable laws or rulings of the Internal Revenue Service.
Once transferred, such assets shall be treated as a contribution on
behalf of the Employee for purposes of the successor custodial account
and/or annuity contract and shall be invested, distributed and otherwise
dealt with as such.
3.4 Neither the Custodian nor the Distributor or its agents shall be
liable for losses arising from the acts, omissions, or delays or other
inaction of any party transferring assets to the Account or receiving
assets transferred from the Account pursuant to this Section 3 nor shall
they have responsibility for the tax treatment to the Employee of any
rollover or transfer of assets.
SECTION 4. INVESTMENT OF ACCOUNT ASSETS.
4.1 Contributions credited to the Employee's Account(s) shall be
applied by the Custodian solely to the purchase of shares, including
fractional shares earned to the third decimal place in one or more of
the Funds.
4.2 The Employer (upon request of the Employee) and/or the Employee
may direct the Custodian at any time and from time to time to exchange
any shares held in the Account for other shares of Funds in the American
National Family of Funds in accordance with the then current
prospectuses relating to such shares.
4.3 All dividends and capital gains or other distributions shall be
reinvested in additional fund shares which shall be credited to the
Employee's account.
4.4 All shares credited to the Employee's Account shall be registered
in the name of the Custodian or its registered nominee.
4.5 The Employee may not borrow funds from his account, nor may he use
the funds as security for any loan or extension of credit.
4.6 The Custodian shall not have any duty to question the directions
of the Employee or the Employee's Beneficiary, executor or administrator
regarding the investment of the assets in the Account or to advise such
persons regarding the purchase, retention or sale of such investments,
nor shall the Custodian be liable for any loss that results from the
exercise of control over the Account by the Employee or the Employee's
Beneficiary, executor or administrator. By giving investment
instructions the Employee or the Employee's Beneficiary, executor or
administrator will be deemed to have acknowledged receipt of the then
current prospectus in which the Employee or the Employee's Beneficiary,
executor or administrator instructs the Custodian to invest
contributions or assets under the terms of this Agreement.
SECTION 5. DISTRIBUTIONS
5.1 Distribution from the Account shall be made by the Custodian only
to an Employee, his surviving spouse or Beneficiary (as defined in
Section 1), and no purported sale, transfer, pledge or assignment by the
Employee, his spouse or Beneficiary of all or any part of an interest in
the Account shall be recognized by the Custodian except as provided in
Section 3.2. The interest of a
15
<PAGE>
Employee, his spouse or Beneficiary in the Account shall not be subject to
the debts, contracts, liabilities, engagements or torts of such person or to
attachment or legal process against such person. This Section 5.1 shall be
subject to such exceptions as may be required by law, including without
limitation, any requirements as to the withholding of any amounts from such
distributions for federal and, if applicable, state income taxes.
5.2 "Events of Distributions" The Custodian shall distribute, or
commence distribution of, the balance credited to an Employee's
account only upon request of the Employee after receipt of written
certification and evidence satisfactory to the Custodian from the
Employee that one or more of the following events have occurred:
(a) the Employee has reached his Normal Retirement Date or
has actually reached age 70-1/2;
(b) the Employee has attained age 59-1/2;
(c) the Employee has become disabled (refer to Section 1 for
definition of disabled);
(d) the Employee has separated from service with the Employer;
(e) the Employee has died.
5.3 Restrictions on ORP Distributions. Notwithstanding any
limitations contained in this paragraph 5.2, and in accordance with
the rules and regulations promulgated by the State of Texas in
connection with optional retirement programs, no distribution from
the custodial account shall be made unless written authorization of
one of the following three conditions is provided by the Employer
to the Custodian:
1. Death of Employee;
2. Termination of service with Employer;
3. Retirement of Employee.
Furthermore, whereby state matching contributions has been invested
in a separate account on behalf of an Employee and such Employee
terminates his employment prior to one year and one day of employment,
the distribution will be made payable and forwarded to the State.
5.4 Whether or not the distribution have commenced pursuant to
Section 5.2, all or a portion of an Employee's interest in the
Account shall be distributed to him by the Custodian upon receipt
of written notice from the Employer (following application by the
Employee) that such distribution has been authorized by the
Employer for reason of Financial hardship (as defined in Section 1).
Any such distribution shall be paid to the Employee in cash
after receipt of certification by the Employee that the
distribution amount is only of salary reduction contributions and
not earnings. Such distribution will be subject to the 20%
mandatory withholding pursuant to the Unemployment Compensation Act
of 1992.
5.5 If the distribution occurs before the Employee is age 59-1/2
(and is not directly rolled over to another qualifying plan), the
distribution is subject to a 10% federal excise tax plus a 20%
mandatory withholding, in addition to ordinary income tax, unless
the distribution is: (a) made on account of separation of service
occurring after attainment of age 55; (b) attributable to
disability; (c) made to a beneficiary or to the Employee's estate
following the death of the Employee; (d) made to an alternate payee
pursuant to a qualified domestic relations order, or (e) part of a
series of substantially equal periodic payments (commencing after
separation of service) over the Employee's single or joint life
expectancy. Such payment schedule must remain uninterrupted through
the later of attainment of age 59-1/2 or five (5) years from the
date of the first payment.
5.6 "Required Distributions" The Employee must begin receiving
distribution from his Account not later than April 1 following the
calendar year in which the Employee attains age 70-1/2, hereinafter
termed the "required beginning date". At least 30 days prior to
that date, the Employee must elect to have the balance in the
Account distributed in: (i) a single sum payment; (ii) equal, or
substantially equal, monthly, quarterly, or annual payments
commencing not later than the required beginning date and not
extending beyond the life expectancy of the Employee; or (iii)
equal, or substantially equal, monthly, quarterly, or annual
payments commencing not later than the required beginning date and
not extending beyond the joint and survivor expectancy of the lives
of the Employee and the designated Beneficiary, provided. However,
if the Employee's spouse is not the designated Beneficiary, the
method of distribution selected must assure that at least 50% of
the present value (determined at the time the distribution
commences) of the account available for distribution is paid within
the life expectancy of the Employee.
The minimum amount that must be distributed each year,
beginning with the date payments commence, is the balance in the
Account immediately prior to the distribution (to include payments
withdrawn during that year) divided by the life expectancy of the
Employee or joint life expectancy of the Employee and his/her
designated Beneficiary computed at the end of each year.
Notwithstanding that distributions may have commenced pursuant to
(i) or (ii) above, the Employee may receive a larger distribution
from the Account upon written request to the Custodian.
It shall be the duty of the Employee or, when applicable, the
Employee's Beneficiary to determine the amount of distributions
hereunder, and the Custodian shall not be liable to the Employee or
any other person for taxes or other penalties incurred as a result
of failing to distribute any minimum amount required by the Code.
5.7 "Death Benefits" If the Employee dies before receiving full
distribution of the Account, the balance in the Account must be
distributed in the following manner:
(a) If the Employee died after his/her required beginning date
for distributions, the Beneficiary will continue to receive
distributions at least as rapidly as under the method of
distribution in use prior to the Employee's death and may request
larger distributions, including a single sum payment of the balance.
(b) If the Employee died prior to his/her required beginning date, and
the designated Beneficiary is the surviving spouse, the spouse may
receive the balance in the Account:
(i) over a period (or in a single sum payment) and not extending
beyond December 31 of the fifth year following the Employee's
death, or
(ii) over a period or in a single sum payment commencing not later
than December 31 of the year in which the Employee would have
attained age 70-1/2 and not extending beyond the life expectancy
of the surviving spouse.
Distributions will be treated as having been paid to the surviving
spouse even if paid to a child if the balance will be paid to the
spouse when the child reaches the age of majority.
(c) If the Employee died prior to his/her required beginning date,
and the designated Beneficiary is not the surviving spouse, the
Beneficiary must receive the balance of the Account
(i) over a period or in a single sum payment not extending beyond
December 31 or the fifth year following the
16
<PAGE>
Employee's death, or
(ii) over a period commencing not later than December 31 of the
year following the year of the Employee's death and not
extending beyond the life expectancy of the Beneficiary.
5.8 "Computation of life expectancy" Life expectancies of the Employee
and Beneficiary shall be determined pursuant to tables contained in
Section 1.72-9 of the Treasury Regulations. Unless an election to
recalculate life expectancy is made by the Employee (or surviving spouse
in the case of distributions described in Section 4.4(b)(ii) above) not
later than the required beginning date, payments for any
12-consecutive-month period will be based on life expectancy, computed
prior to the first payment, minus the number of whole years passed since
the payments first commenced.
5.9 "Miscellaneous" Any distribution payment made by the Custodian
shall be subject to withholding of any income or other taxes required by
law.
SECTION 6. NONFORFEITABILITY.
A Participant's interest in the balance of his account shall at all
times be nonforfeitable.
SECTION 7. BENEFICIARY DESIGNATION.
The Employee may designate the Beneficiary of his Account by completing
a beneficiary designation form acceptable to and filed with the Custodian.
If the Employee designates more than one Beneficiary, he shall
designate the percentage interest that each such Beneficiary shall
receive from his Account upon distribution. In the event no such
percentage interest is designated, the interest of each Beneficiary
shall be equal.
If the Employee predeceases his/her spouse before his/her entire
Account is distributed in accordance with Article 4(c) of the Plan and
the spouse is entitled to distributions and the Employee has designated
no Beneficiary for the remaining interest and if the spouse should die
before the Account is fully distributed or all such Beneficiaries shall
have predeceased the Employee's spouse, then the interest of the
Employee's spouse in the Account shall be fully vested and subject to
the terms and conditions of this Article and the Employee's spouse shall
be entitled to designate the Beneficiary of Account in accordance with
this Article.
The Employee may, at any time, change or revoke any designation made
under this Section by completing a beneficiary designation form
acceptable to and filed with the Custodian. Upon the death of the
Employee, the designation or designations made hereunder shall be
irrevocable. A change of beneficiary designation shall be effective only
if received by the Custodian prior to the death of the Employee.
If the Employee fails to designate any Beneficiary or if the Employee
revokes the designation of Beneficiary or if all Beneficiaries
designated predeceases the Employee, then the entire interest of the
Employee in his/her Account shall pass to the Employee's estate.
SECTION 8. RESPONSIBILITY AND DUTIES OF CUSTODIAN.
8.1 "Agency" The Custodian shall be an agent for the Employer and the
Employee to receive and invest contributions as directed by the
Employee, hold and distribute investments, and keep adequate records and
report thereon, all in accordance with the Agreement. The parties do not
intend to confer any fiduciary duties on the Custodian and none shall be
implied.
8.2 "Delegation of Authority" The Custodian may perform any of its
administrative duties through other persons designated by it from time
to time, except that shares must be registered as stated in Section 5.4;
but no such delegation or future change therein shall be considered as an
amendment of the Agreement.
8.3 "Written Communications" All notices, requests and other
communications to the Custodian by the Employer or any Employee (or his
spouse or Beneficiary) shall be in writing and in such form as the
Custodian may from time to time prescribe. The Custodian shall be
entitled to rely on any such instrument believed by it to be genuine.
8.4 Except as provided in Section 9.2, the Custodian shall have the
power and authority in the administration of the Account to do all acts,
to execute and deliver all instruments and to exercise for the benefit
of the Employee's and their Beneficiaries any and all powers which would
be lawful, were it in its own right the actual owner of the property
held.
8.5 "Custodian Fees" The Custodian shall receive such compensation for
its services hereunder as may be agreed upon from time to time by the
Custodian and the Employee. At least thirty (30) days notice shall be
given of any increase in the Custodian's compensation and the Employee
shall have made no objection thereto within such 30-day period. Such
compensation and any expenses incurred by the Custodian in the
administration of the Account shall be paid from the Account and shall,
unless allocable to the accounts of specific Employee's be charged
proportionately to the accounts of all Employee's.
8.6 "Resignation or Removal" The Custodian may resign at any time upon
thirty (30) days' notice in writing to the Employee and may be removed by
the Employer at any time upon thirty (30) days' notice in writing to the
Custodian and the other party. Upon such resignation or removal, the
Employer shall appoint a successor custodian, which successor shall be a
"bank" as defined in Section 501(d)(1) of the Code or such other person
who is eligible to be a custodian under Section 401(f)(2) of the Code,
if within thirty (30) days after the Custodian's resignation or removal,
the Employer has not appointed a qualified successor custodian which has
accepted such appointment, the Custodian may appoint, or may apply to a
court of competent jurisdiction for appointment of a successor custodian
which shall be a "bank" as defined in Section 401(d)(1) of the Code or
such other person eligible to be a custodian under Section 401(f)(2) of
the Code. Upon receipt by the Custodian of written acceptance of
appointment by the successor custodian, the Custodian shall transfer and
pay over to such successor the assets of the Account and all records
pertaining thereto, reserving such sum as it may deem advisable for
payment of all its fees, compensation, costs and expenses and any other
liabilities constituting a charge on or against the assets of the
Account or on or against the Custodian. The successor custodian shall
thereafter be the Custodian under this Agreement. Upon its resignation or
removal, the Custodian shall not be liable for the acts or omissions of
any successor Custodian. Upon the transfer of the assets of the Account
to a successor Custodian, the resigning or removed Custodian shall be
relieved of all further liability with respect to this Agreement, the
Account and the assets thereof.
8.7 "Liability of Custodian" the Custodian shall not be liable in any
way for the determination or collection of contributions provided for
under this Agreement, the selection of the investments for the Account,
the purpose or propriety of any distribution made pursuant to Section 5
hereof, or any other section taken at the direction of the Employer, the
Employee (or Beneficiary, where applicable) or other authorized
representative. The Custodian shall not be obliged to take any action
whatsoever with respect to the Account except upon the receipt of written
directions from the Employee (or Beneficiary, where applicable) or other
authorized representative. The Custodian
17
<PAGE>
shall be under no obligation to determine the accuracy or propriety of
any such directions and shall be fully protected in acting in
accordance therewith. Subject to applicable law, the Custodian shall
not be liable for taking or omitting to take any action under this
Agreement. The Custodian shall not be obligated or expected to
commence or defend any legal action or proceeding in connection with
this Agreement.
SECTION 9. REPORTS AND RETURNS.
9.1 The Custodian shall:
(a) maintain separate records of the interest of each
Employee (or his surviving spouse or Beneficiary) in the Account
indicating (i) the amounts and dates of all contributions, (ii)
the investment of such contributions, (iii) the earnings on such
investments, (iv) the amounts and dates of all distributions, and
(v) such other data as the Custodian deems useful in carrying out
its duties hereunder, and
(b) mail at least once during each calendar year a statement
of all transactions in the Account during the preceding year and a
statement showing the value of the assets held in the Account as of
the end of such year. Unless the Employee sends the Custodian
written objection to a report within sixty (60) days after its
receipt, the Employee shall be deemed to have approved such report;
and, in such case, the Custodian shall be forever released and
discharged from all liability and accountability to anyone with
respect to all matters and things included therein. The Custodian
may seek a judicial settlement of its accounts. In any such
proceeding the only necessary party thereto in addition to the
Custodian shall be the Employee.
9.2 Shares in the Account shall be voted by, or in accordance with
the instructions of, the Employee of whose benefit they are held, or
by, or in accordance with the instructions, of his surviving spouse or
Beneficiary; and the Custodian shall deliver, or cause to be delivered
to the Employee or his surviving spouse or Beneficiary all notices,
financial statements, proxies and proxy materials relating to such
Shares.
9.3 The Custodian shall file such returns or reports with respect to
the Account as are required to be filed by it under the Code and the
regulations thereunder, or by the Department of Labor, and the
Employer and each Employee shall provide the Custodian with such
information available to them as the Custodian may require to file
such reports.
SECTION 10. AMENDMENT AND TERMINATION.
10.1 This Custodial Agreement may be amended by written instrument to
any extent upon thirty (30) days written notice to the Employee.
Notwithholding the foregoing, such amendment shall be effective upon
adoption if designated by the Custodian as necessary to qualify under
Section 403(b) of the Code.
10.2 This Agreement shall terminate upon the complete distribution of
the Account or in the event that a determination is made by the
Internal Revenue Service that the Account does not satisfy the
requirements of Section 401(f)(2), Paragraph 11.70D of the Code or
that contributions thereto are not treated under Section 403(b)(7)(A)
of the Code as contributed for annuity contracts. In the event of
termination as aforesaid, the balance in the Account shall be
distributed to the Employee's (or their respective surviving spouses
or Beneficiaries, as the case may be) in accordance with their
interests in the Account.
10.3 "Salary Reduction Agreement" The Employee and the Employer may
agree to amend the Salary Reduction Agreement at any time. The
Employee and Employer shall not enter into more than one Salary
Reduction Agreement in any one taxable year.
SECTION 11. MISCELLANEOUS.
11.1 "Applicable Law" The Account is established with the intention
that it qualify as a custodial account under Section 401(f)(2) of the
Code and that contributions thereto be treated under Section
403(b)(7)(A) of the Code as amounts contributed for annuity contracts,
and the provisions of this Agreement shall be construed in accordance
with such intention. This Agreement shall be governed by the laws of
the State of Texas insofar as election of such laws is permitted.
11.2 "Pronouns" Whenever used in this Agreement, the masculine
pronoun is to be deemed to include the feminine. The singular form,
whenever used herein, shall mean or include the plural form where
applicable, and vice versa.
11.3 "Notices" Any notice, accounting, or other communication which
the Custodian may give the Employer or the Employee shall be deemed
given when mailed to the Employer or Employee at the latest address
which has been furnished to the Custodian. Any notice or other
communication which the Employer or Employee may give to the Custodian
shall not become effective until actual receipt of said notice by the
Custodian.
11.4 "No Employment Contract" This Agreement shall not be deemed to
constitute a contract of employment between the Employer and Employee,
nor shall any provision hereof restrict the right of the Employer to
discharge the Employee or of the Employee to terminate his employment.
11.5 "Disqualification" This Agreement is established and created
with the intent that it shall meet the terms of Section 403(b)(7) of
the Code. Notwithstanding any other provision contained herein, if
it is determined by the Internal Revenue Service that the Agreement is
not qualified initially and is not amended to retroactively qualify
under such Section of the Code, all assets acquired with contributions
hereunder together with income earned thereon less reasonable expense
and agreed Custodian fees, shall be distributed to the Employees and
the Agreement shall be considered to be rescinded and of no force and
effect. If the Agreement, after qualifying initially or
retroactively, shall fail to remain qualified under Section 403(b)(7)
of the Code, the assets held hereunder shall be segregated by the
Custodian, or otherwise disposed of for the exclusive benefit of
Employees within 30 days following the custodian's receipt of notice
of determination of such disqualifications.
11.6 "Tax Treatment" The tax treatment of any contributions to the
Custodial Account and of any earnings of the Custodial Account
depends, among other things, upon the tax status of the Employer and
the amount of contributions made in any year to the Account (and to
other plans, accounts, or contracts with the benefit of special tax
treatment) for the benefit of the Employee. The Custodian, and the
American National Funds and SM&R Capital Funds assume no
responsibility with respect to such matters, nor shall any term or
provision of this Agreement be construed so as to place any such
responsibility upon any of them.
11.7 The American National Family of Funds 403(b)(7) Custodial
Agreement and related documents are intended to comply with current
provisions of the Internal Revenue Code. However, the Funds
comprising the American National Family of Funds assume no
responsibility as to the effect or legal sufficiency under federal,
state or other applicable law of this Agreement in any particular
case. This Agreement is not a prototype, master plan or other similar
document approved as to form by the Internal Revenue Service.
Further information regarding 403(b) plans may be obtained from any
district office of the Internal Revenue Service.
18
<PAGE>
TSA
403(b)(7)
FORMS
KIT
----------------------------------
Everything you need to:
- Open a new SM&R TSA
403(b) account
- Transfer your present TSA
403(b) account to SM&R
- Directly roll over assets
from another institution
- Establish an ORP (State of
Texas only)
----------------------------------
SECURITIES MANAGEMENT & RESEARCH, INC.
One Moody Plaza // Galveston, Texas 77550
(409) 763-2767
[LOGO]
Member NASD SIPC
Form 9343-94
Rev. 9/95 1500
<PAGE>
IT'S AS EASY AS "ABC" TO ESTABLISH AN IRA
===============================================================================
After reviewing a current prospectus for the American National Funds Group
and/or SM&R Capital Funds, Inc., carefully complete the IRA APPLICATION found
on page 3.
To make it as easy as "ABC" to establish an IRA in our family of funds,
Securities Managment & Research, Inc. ("SM&R") has placed all forms required
to establish an IRA in this kit. The forms included are:
1. IRA DIRECT TRANSFER REQUEST--Complete this form, found on page 5, if you
wish to have a Trustee-to-Trustee transfer of your current IRA to SM&R
from another institution.
2. DIRECT ROLLOVER REQUEST FORM--If you wish to roll funds directly from a
qualified retirement plan or 403(b) plan (TSA) to an IRA in the American
National family of funds, complete and return this form, found on page 6.
3. IRA ROLLOVER STATEMENT--Complete this form if you have already received a
distribution from an IRA, qualified retirement plan or 403(b) (TSA) and are
rolling the proceeds into an IRA in the American National family of funds
within the 60th day of receiving the funds. (Page 7)
IRA CONTRIBUTION DEADLINE
Contributions may be made all year long but must be completed by your tax
filing deadline (not including extensions) in order to deduct them for the
prior year. The IRS has stated that a contribution postmarked April 15 may be
considered a prior year contribution. This position is subject to change at
any time.
Furthermore, all contributions made by pre-authorized check, payroll
allotments, etc., are deemed to be current year contributions ONLY.
If you have any questions please contact your representative or call SM&R,
toll free, at 1-800-231-4839.
* IMPORTANT NOTE: EFFECTIVE JANUARY 1, 1993, ELIGIBLE ROLLOVER DISTRIBUTIONS
FROM QUALIFIED PLANS AND 403(b) PLANS ARE SUBJECT TO A 20% MANDATORY
WITHHOLDING TAX UNLESS ROLLED OVER DIRECTLY TO AN IRA OR TO ANOTHER QUALIFIED
RETIREMENT PLAN. PLEASE REVIEW PAGES 2 AND 3 FOR FURTHER EXPLANATION.
1
<PAGE>
IS IT A TRANSFER OR A ROLLOVER?
===============================================================================
These two terms have been used interchangeably to apply to any movement of
funds between retirement plans for years. However, there exists a major
difference--A Rollover is a reportable transaction. Below is a more thorough
explanation of the difference between the two.
TRANSFER
A transfer is essentially the movement of all or part of the assets in a
retirement plan from its current trustee or custodian to a successor trustee
or custodian. Because the assets remain in the same type of plan and are not
received by the participant, they are not reportable to the government.
To transfer IRA assets from another institution to Securities Management &
Research, Inc. ("SM&R"), you will need to complete the Transfer Request Form
on page 5 of this kit. If you have an existing IRA you may choose to invest
the proceeds from your transfer to that account in which case you would not
need to complete the IRA Application. However, if the proceeds are to be
invested in a new IRA, complete the Application in its entirety, and give
both the Application and Transfer Request to your representative or mail them
directly to Securities Management & Research, Inc. at the address indicated
on the Application. SM&R will handle the transfer for you and send a
confirmation statement when the transfer is completed.
ROLLOVER
A rollover occurs when plan assets become payable to a participant in a
reportable transaction and these funds are redeposited into another retirement
plan. A participant in a qualified plan or 403(b) plan can choose either to
have the distribution rolled over directly by the current plan's trustee or
custodian (a "Direct Rollover") or to receive the distribution, less a
mandatory 20% federal withholding tax, and complete the rollover within (60)
sixty days. Beginning in 1993 distributions received from qualified
retirement plans, including 403(b) plans, that are eligible for rollover
treatment are subject to a mandatory 20% federal withholding tax, unless the
distribution is rolled over directly to an IRA or another qualified plan from
the plan's trustee or custodian.
Although the amount rolled over is not subject to current taxes, the trustee
or custodian of the distribution retirement plan is required to issue IRS
Form 1099R showing the full amount of the distribution. When you roll over
the amount to an IRA, SM&R will issue a confirming Form 5498 to both you and
the IRS. Additionally, you will have to reflect the information regarding the
rollover on your tax return for the year in which the distribution occurred.
To "roll over" to an IRA, complete the IRA Rollover Statement on page 7,
unless you are requesting a "Direct Rollover" in which case you should
complete the Direct Rollover Request Form. Attach the appropriate form to a
completed IRA Application and give both to your representative or mail
directly to Securities Management & Research, Inc. If you have an existing
IRA, you may choose to roll over the proceeds to that IRA account; however,
by doing so, you waive the right to later "roll" the funds back into a new
employer's qualified plan and retain certain beneficial tax treatment on the
ultimate distribution of this account.
Because of the possible tax implications of transfers and rollovers, you
are encouraged to consult with your tax adviser.
PLEASE BE REMINDED--YOU ARE ALLOWED ONLY ONE IRA TO IRA ROLLOVER IN A
12-MONTH PERIOD.
2
<PAGE>
|------------------------------------------|
| HOME OFFICE USE |
|------------------------------------------|
| Account Number |
|---------------------|--------------------|
| Account Type |Social Code |
|---------------------|--------------------|
IRA APPLICATION | FI Number |LOI Amount |
__________________________________|---------------------|--------------------|
American National Funds Group and SM&R Capital Funds, Inc.
______________________________________________________________________________
ACCOUNT REGISTRATION
SM&R, Inc., Cust for
______________________________________________________________________________
First Name M.I. Last Name
Birthdate_____________________________________________________________________
Soc Sec No.___________________________________________________________________
Street Address________________________________________________________________
City, State, Zip______________________________________________________________
Phone, Day____________________________________________________________________
Evening________________________________________________________________
______________________________________________________________________________
ACCOUNT TYPE
/ / Contributory IA ($2,000 limit/$2,250 for Spousal IRAs:
Spousal IRAs require one application per spouse)
/ / Deductible IRA / / Non-Deductible IRA / / Spousal IRA
/ / Transfer IRA (no dollar limit) (IRA to IRA)
Transfer Request (page 5) attached
/ / Rollover IRA (no dollar limit) (Qualified Plan to IRA)
Check one: / / Check & Rollover Statement (page 7) attached
/ / Direct Rollover Request (page 6) attached
/ / SEP-IRA (5305-SEP, page 19, attached)
______________________________________________________________________________
FUND SELECTION & INVESTMENT AMOUNT
Tax Year of
Contribution Contribution
/ / 21 Growth Fund $_________________________ __________________________
/ / 22 Income Fund $_________________________ __________________________
/ / 23 Triflex Fund $_________________________ __________________________
/ / 26 Government
Income Series $_________________________ __________________________
/ / 27 Primary Series $_________________________ __________________________
______________________________________________________________________________
MAKE CHECK PAYABLE TO SECURITIES MANAGEMENT & RESEARCH, INC.
Check is not enclosed because:
/ / A Transfer Request is attached
/ / A Direct Rollover Request is attached
All dividends and capital gains will be automatically reinvested into
the account.
______________________________________________________________________________
PAYMENT METHODS
/ / Pre-Authorized Check:
Please draw on my bank account a check for $______________________________
each month on the date indicated: / / 7th / / 21st
(Form 8008 from the Prospectus has been completed and attached)
/ / Billing-Franchise No.______________
/ / Military Allotment (Complete Form 9341)
______________________________________________________________________________
LETTER OF INTENT (Not applicable to Primary Series)
I agree to the terms of the Letter of Intent as set forth in the Prospectus.
Although I am not obligated to do so, it is my intention to invest over a
13-month period in shares of one or more funds an aggregate amount at least
equal to that which is checked below.
/ / $50,000 / / $100,000* / / $250,000
/ / $500,000 / / $1,000,000 / / $1,500,000
(*Government Income Series begins at $100,000)
Please write in your existing account numbers:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
SALES CHARGE REDUCTION (Not applicable to Primary Series)
List all existing accounts to be included for sales charge reduction. There
will be no retroactive reduction of the sales charge for shares previously
purchased if this section is not completed.
Account Nos.__________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
3
<PAGE>
==============================================================================
BENEFICIARY INFORMATION
PRIMARY:
NAME RELATIONSHIP SS# BIRTHDATE
______________________________________________________________________________
______________________________________________________________________________
SECONDARY (If the person(s) named above should fail to survive me)
______________________________________________________________________________
______________________________________________________________________________
If you are married, live in a community property state, and your spouse is not
designated as the only primary beneficiary, your spouse must sign below.
I hereby consent to the designation of beneficiary as stated above.
Signature of Spouse___________________________________________________________
Date__________________________________________________________________________
______________________________________________________________________________
INVESTMENT SUITABILITY
Complete the Investor Suitability Form found in the Prospectus.
______________________________________________________________________________
SIGNATURE
SM&R reserves the right to refuse to open an account without a taxpayer
identification number (TIN). Failure to provide the TIN may result in backup
withholding on payments relating to your account and/or in your inability to
qualify for any applicable treaty withholding rates.
The Participant hereby: (a) appoints SM&R as Custodian of the account; (b)
acknowledges that he/she has received a current prospectus(es) of the
American National Funds Group and/or SM&R Capital Funds, Inc. and has
selected and agreed to the terms as stated in the prospectus; (c) consents to
the $7.50 (per account) initial installation fee, the $7.50 (per account)
annual maintenance fee and the $5.00 excess contribution adjustment fee. Such
fees are subject to change on 30 days written notice to the Participant, (d)
acknowledges that he/she has read and accepts the IRA Disclosure Statement and
the reproduction of the IRS Form 5305-A (rev. 10/92); (e) agrees to the
conditions governing the designation of beneficiary, and (f) CERTIFIES UNDER
PENALTY OF PERJURY THAT THE INFORMATION CONTAINED IN THIS APPLICATION AND
SUPPORTING DOCUMENTS, IF APPLICABLE, ARE TRUE, CORRECT AND COMPLETE.
______________________________________________________________________________
Participant's Signature
______________________________________________________________________________
Date
CUSTODIAN: SECURITIES MANAGEMENT AND RESEARCH, INC.
REPRESENTATIVE INFORMATION
______________________________________________________________________________
Representative Name (please print)
______________________________________________________________________________
Representative Signature
______________________________________________________________________________
SM&R Rep. Social Security Number
DEALER INFORMATION
______________________________________________________________________________
Dealer/Representative Name & Number
______________________________________________________________________________
Dealer/Representative Signature
______________________________________________________________________________
SM&R Dealer Number (Internal Use Only)
If applicable, detach and submit to SM&R.
4
<PAGE>
IRA TRANSFER REQUEST
==============================================================================
This form is to be used ONLY when transferring assets from an existing IRA
to an IRA with Securities Management and Research, Inc. ("SM&R"). If you do
not have an existing IRA, an IRA Application must be completed prior to the
transfer. If you have any questions, please contact your SM&R representative
or SM&R directly for assistance.
- ------------------------------------------------------------------------------
PARTICIPANT INFORMATION
Name_____________________________________________________________
Address__________________________________________________________
City, State, Zip_________________________________________________
Social Security Number___________________________________________
Daytime Phone ( )_______________________________________
______________________________________________________________________________
TRANSFER FROM ACCOUNT INFORMATION
Name of Current Trustee/Custodian
_________________________________________________________________
Address__________________________________________________________
City, State, Zip_________________________________________________
Name of mutual fund or savings association, if applicable
_________________________________________________________________
_________________________________________________________________
EXECUTE LIQUIDATION/TRANSFER AS FOLLOWS
/ / Liquidate all assets and transfer proceeds
/ / Liquidate $___________ and transfer proceeds
/ / The Transfer should be made IMMEDIATELY.
I realize early withdrawal penalties may apply.
/ / Transfer should be made upon maturity of the current
investment. The maturity date is_____________________________
Account number(s): (attach a copy of recent statement, if
possible)
__________________________________________________________________
__________________________________________________________________
______________________________________________________________________________
PARTICIPANT'S SIGNATURE AND AUTHORIZATION TO TRANSFER
Please accept this as your authorization and instruction to liquidate the
assets noted above, which your company presently holds for me, and transfer
as indicated. If a required minimum distribution is required, forward this
amount to me at my address of record. I have established an IRA with
Securities Management & Research, Inc. as the successor Custodian. I am
aware of and acknowledge early withdrawal penalties that may apply.
Signature_________________________________________________________
Signature Guarantee, if necessary
If applicable, detach and submit to SM&R
REQUIRED DISTRIBUTION ELECTION INFORMATION
This information is to be completed by the current Trustee or Custodian. If
the participant is age 70 1/2 or older this year, this section must be
completed by an authorized representative of the resigning Trustee/Custodian
indicating the Election made by the Participant. NOTE: DO NOT TRANSFER ANY
PORTION OF THE PLAN WHICH REPRESENTS THE RMD AMOUNT.
CALCULATION METHOD / / Recalculation / / Declining Years
LIFE EXPECTANCY / / Single Life / / Joint Life*
CURRENT YEAR $______________ amount was withheld from this transfer to
satisfy RMD for 19______.
REQUIRED DISTRIBUTION (RMD) $___________ of any previous distributions made
to participant this year, if applicable.
The factor used to calculate the RMD payment was
_________________________________________________________________
______________________________________________________________________________
*DESIGNATED BENEFICIARY INFORMATION:
Name_____________________________________________________________
Relationship_____________________________________________________
Date of Birth (M/D/Y)____________________________________________
__________________________________________________________________
Authorized Representative Signature
__________________________________________________________________
Printed Name
__________________________________________________________________
ACCEPTANCE: Securities Management & Research, Inc. accepts the transfer and
will serve as Custodian under the applicable section of the Internal Revenue
Code. Please forward the assets with a copy of this form to:
Securities Management & Research, Inc.
One Moody Plaza, Galveston, Texas 77550
FBO_______________________________________________________________
Account No._______________________________________________________
Authorized Signature
Securities Management & Research, Inc.
__________________________________________________________________
Date:_____________________________________________________________
5
<PAGE>
DIRECT ROLLOVER REQUEST FORM
==============================================================================
Account No.___________________
For SM&R Use Only
Complete sections 1-3 of this form if you wish to have an eligible
distribution from your qualified retirement plan, including a 403(b) plan,
directly rolled over to a Rollover IRA. Then, send it to Securities
Management and Research, Inc., along with a completed IRA application and
the distribution request form required by your plan's Trustee or Custodian.
Please ask your current Trustee/Custodian about any additional requirements.
==============================================================================
1) PARTICIPANT INFORMATION (Please Print)
Name______________________________________________________________
Address___________________________________________________________
City, State, Zip__________________________________________________
Daytime Phone No._________________________________________________
Social Security No._______________________________________________
______________________________________________________________________________
2) ROLLOVER INFORMATION (Please check one, and complete)
/ / Rollover of qualified retirement plan funds*
/ / Rollover of 403(b) plan funds*
*You will need to reflect this rollover on your current year tax return in
order to properly offset the amount shown on the Form 1099R you will receive
from your Trustee/Custodian.
Current Trustee/Custodian_________________________________________
Address___________________________________________________________
City, State, Zip__________________________________________________
Account Number(s)_________________________________________________
I am requesting a / / Full / / Partial $______________________
distribution from the above-referenced account(s).
Is a completed distribution request form (obtained from your employer or plan
administrator) attached? / / Yes / / No Please explain.
______________________________________________________________________________
3) PARTICIPANT'S AUTHORIZATION
I hereby authorize the above named Trustee/Custodian to roll over my plan
distribution directly to (check one):
/ / My existing American National Fund IRA/Rollover IRA account no.__________
/ / A new American National Fund Rollover IRA, I have attached a completed
American National IRA Application.
By signing this Direct Rollover Request, I agree to the following:
1) I am irrevocably electing to have funds from my former employer's
retirement plan directly rolled over to an American National Rollover IRA.
2) The amount being rolled over, to the best of my knowledge, qualifies for
rollover treatment and does not include any after-tax employee
contributions;
3) I understand that if I commingle the rollover funds from my employer's
retirement plan with my Contributory IRA funds held at American National,
these rollover funds no longer qualify for rollover treatment back into a
new employer's retirement plan at a later date; and
4) I understand that neither the Custodian, its agent, nor the American
National Group of Funds warrants this rollover's eligibility for
tax-deferred status.
______________________________________________________________________________
Signature of Participant
______________________________________________________________________________
Date
______________________________________________________________________________
SECURITIES MANAGEMENT AND RESEARCH, INC. agrees to serve as custodian and
accept the direct rollover as indicated above. Please liquidate and transfer
all or part of the designated account as instructed above.
______________________________________________________________________________
Authorized Signature
______________________________________________________________________________
Date
Please make check payable to SECURITIES MANAGEMENT and RESEARCH, INC. and
include Account Number (shown above) and NAME OF PARTICIPANT on the check.
Please send check with a copy of this form to the address show below.
REQUIRED DISTRIBUTION INFORMATION: IF THE PARTICIPANT HAS REACHED AGE 70 1/2,
PLEASE COMPLETE THE FOLLOWING:
Election made by Participant as of his/her required beginning date.
1. Period over which required distributions are to be made:
_____________________ Years
2. Payment method (check one):
/ / Declining (elapsed) years
/ / Recalculation of life expectancy
3. Has Participant chosen Joint Life Expectancy with a Designated
Beneficiary? / / Yes / / No
If "Yes", please complete:
Beneficiary___________________________________________________
Spouse? / / Yes / / No
MAIL TO: SECURITIES MANAGEMENT AND RESEARCH, INC.
ONE MOODY PLAZA
GALVESTON, TEXAS 77550
6
<PAGE>
IRA ROLLOVER STATEMENT (INDIRECT ROLLOVER)
==============================================================================
This form MUST be completed in its entirety when depositing proceeds
you've already received (not a Direct Rollover) from another IRA or a
qualified retirement plan to be deposited into a new or existing IRA or
Rollover IRA account in the American National family of funds. AN IRA
APPLICATION IS ALSO REQUIRED WHEN ESTABLISHING A NEW IRA ACCOUNT. This form,
the check, a completed Investor Suitability form and a completed application,
if applicable, is to be mailed to:
Securities Management and Research, Inc.
One Moody Plaza, Galveston, Texas 77550
- ------------------------------------------------------------------------------
THE PROCEEDS BEING DEPOSITED in this IRA represent all or a portion of (check
one of the following):
/ / A distribution from a Contributory IRA or Individual Retirement Annuity
(R4)
/ / An eligible rollover distribution from a qualified retirement plan [IRC
401(a)] (R8)
/ / An eligible rollover distribution from a TSA [403(b)] custodial account
or annuity (R8)
/ / A distribution as a result of a Qualified Domestic Relations Order
[IRC 414(p)] (R8)
/ / A beneficiary distribution from my deceased spouse's IRA, TSA [403(b)],
or qualified plan (R8)
FURTHERMORE:
- - I understand that the proceeds being invested must be invested within 60
days of my receiving them from a retirement plan. I am investing the
proceeds within this 60 day period.
- - I understand that my election to invest these proceeds in a Rollover IRA in
the American National family of funds is irrevocable.
- - I understand that no after-tax employee contributions originating from a
qualified plan or TSA are allowed to be rolled over and these proceeds do
not contain any after-tax employee contributions.
- - I UNDERSTAND THAT I AM PERMITTED ONLY ONE TAX-FREE ROLLOVER FROM AN IRA I
HOLD IN ANOTHER INSTITUTION DURING A TWELVE MONTH PERIOD.
- - I understand that commingling rollover proceeds from a retirement plan or
TSA with contributory IRA proceeds held in any of the American National
funds prevents me from rolling the proceeds back into a new retirement plan
or TSA at a later date.
- - I understand the tax consequences of commingling rollover proceeds with a
Contributory IRA.
- - I understand that neither the Custodian, its agent or the American National
family of funds warrant the eligibility for tax-deferred status of rollover
proceeds.
- ------------------------------------------------------------------------------
The attached check is to be deposited as indicated below:
ACCOUNT INFORMATION
/ / Existing IRA No. ____________________________
/ / New IRA Rollover account (completed IRA application and Investor
Suitability form must be attached)
REQUIRED DISTRIBUTION INFORMATION
This information is to be completed by the investor. If you are age 70-1/2 or
older this year, this section must be completed indicating the Distribution
Options you made with the previous Trustee or Custodian. NOTE: DO NOT FORWARD
ANY PORTION OF THE PROCEEDS REPRESENTING THE RMD AMOUNT.
CALCULATION METHOD / / Recalculation / / Declining Years
LIFE EXPECTANCY / / Single Life / / Joint Life
Factor used to calculate RMD __________ years
IRA HOLDER INFORMATION
Signature _____________________________________
Please print name _____________________________
Social Security Number ________________________
Daytime Phone Number __________________________
Should you require assistance in completing his form, please feel free to
contact a SM&R representative or SM&R.
7 10/94
<PAGE>
IRA ROLLOVER STATEMENT TAX IMPLICATIONS
==============================================================================
20% MANDATORY WITHHOLDING
Effective January 1, 1993, distributions received from qualified
retirement plans and 403(b) plans that are eligible for rollover treatment
are subject to a mandatory 20% federal withholding tax, unless the
distribution is rolled over DIRECTLY from the plan's custodian or trustee to
an IRA or another qualified plan.
For example, if you change jobs and are entitled to $50,000 from your
former company's pension or 401(k) plan and you choose to receive this amount
in full, you would receive a check for only $40,000. The amount would be less
the $10,000 withheld for federal taxes which you, in turn, will apply towards
the income tax you owe when filing your tax return.
However, you intended to roll over the distribution within 60 days to a
qualified retirement plan with your new employer or an IRA, how can you roll
over the full amount ($50,000) when you only received $40,000? You will have
to come up with the missing $10,000 (20%) yourself or owe taxes on the
$10,000 in addition to possible tax penalties if you are under age 59-1/2.
YOU CAN AVOID THIS TRAP
By requesting that the plan's trustee/custodian directly roll the plan
distribution to an IRA or to another qualified plan, you can avoid the
mandatory 20% withholding tax. If your plan allows and you are over age
59-1/2, you may consider leaving your money in the plan and begin taking a
series of payments over a period of ten or more years. Remember, unless you
need immediate use of the money, you do not want to take a check for any
amount that could be directly rolled over by your plan's trustee/custodian.
DISTRIBUTIONS NOT ELIGIBLE FOR ROLLOVER TREATMENT
The following types of distributions are not eligible for rollover
therefore exempt from the 20% withholding tax.
- - Periodic payments made over the participant's single or joint life
expectancy, or a period not less than 10 years
- - Any distribution required under the required minimum distribution (RMD)
rules under Internal Revenue Code (IRC) 401(a)(9)
- - The portion of any distribution that is not includible in gross income,
such as a return of the employee's after-tax contributions
- - Returns of excess deferrals or excess aggregate contributions made to a
qualified cash-or-deferred arrangement, such as a 401(k) plan, together
with the income allocable to these corrective distributions.
- - Loans treated as distributions under IRC 72(p) and not excepted by IRC
72(p)(2)
- - Any distribution to a non-spouse beneficiary (upon death of participant) or
to a non-spouse payee under a Qualified Domestic Relations Order
- - Loans in default that are deemed distributions
- - Dividends paid on employer securities as described in IRC 404(k)
- - The costs of life insurance coverage (P.S. 58 costs)
- - Similar items designated by the Commissioner in revenue rulings, notices and
any other guidance
Source: Treasury Regulations 1.401(a)(31)-17; O&As 3, 4 & 10
8
<PAGE>
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
FORM 5305-A
(REV OCT 1992) INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT DO NOT FILE
DEPARTMENT OF TREASURY (UNDER SECTION 408(a) OF THE INTERNAL REVENUE CODE WITH THE INTERNAL
INTERNAL REVENUE SERVICE REVENUE SERVICE
</TABLE>
Custodian's name SECURITIES MANAGEMENT AND RESEARCH, INC. Custodian's
principal place of business GALVESTON, TEXAS
The Custodian named herein has given to the Depositor a Disclosure Statement
required under section 1.408-6 of the Internal Revenue Code (the "Code").
The Depositor whose name appears on the IRA Application hereby establishes an
Individual Retirement Account under section 408(a) of the Code to provide for
his or her retirement and for the support of his or her beneficiaries after
death. The Depositor has given to Securities Management and Research, Inc.
the sum listed on the IRA Application (in cash) to establish an Individual
Retirement Custodial Account for the Depositor under this agreement and the
Depositor and the Custodian agree to the following:
- -------------------------------------------------------------------------------
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992).
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3) of the Code, or an
employer contribution to a simplified employee pension plan as described in
section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled
with other property except in a common trust fund or common investment
fund (within the meaning of section 408(a)(5) of the Code).
2. No part of the custodial funds may be invested in collectibles
(within the meaning of section 408(m) of the Code).
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall
be made in accordance with the following requirements and shall
otherwise comply with section 408(a)(6) and Proposed Regulations section
1.408-8, including the incidental death benefit provisions of Proposed
Regulations section 1.401(a)(9)-2, the provisions of which are
incorporated by reference.
2. Unless otherwise elected by the time distributions are required to
begin to the Depositor under paragraph 3, or to the surviving spouse
under paragraph 4, other than in the case of a life annuity, life
expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Depositor and the surviving spouse and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date,
(April 1 following the calendar year end in which the Depositor reaches
age 70 1/2). By that date, the Depositor may elect, in a manner
acceptable to the Custodian, to have the balance in the custodial
account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the joint and
last survivor lives of the Depositor and his or her designated
beneficiary. Payments must begin by April 1 following the calendar
year end in which the Depositor reaches age 70 1/2.
(d) Equal or substantially equal monthly, quarterly, or
annual payments over a specified period that may not be longer
than the Depositor's life expectancy.
(e) Equal or substantially equal monthly, quarterly, or
annual payments over a specified period that may not be longer
then the joint life and last survivor expectancy of the Depositor
and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(a) If the Depositor dies on or after distribution of his or
her interest has begun, distribution must continue to be made in
accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her
required beginning date, the entire remaining interest will, at
the election of the Depositor or, if the Depositor has not so
elected, at the election of the beneficiary or beneficiaries,
either:
(i) Be distributed by the December 31 of the year
containing the fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments
over the life or life expectancy of the designated bene-
9
<PAGE>
ficiary or beneficiaries starting by December 31 of the year
following the year of the Depositor's death. If the Depositor's
spouse is the beneficiary, distributions need not commence until
December 31 of the year the Depositor would have attained age
70 1/2, if later.
(iii) Spouse may rollover entire interest to own IRA.
(c) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions
may be accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial account as
of the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor
expectancy of the Depositor and the Depositor's designated beneficiary, or
the life expectancy of the designated beneficiary, whichever applies). In
the case of distributions under paragraph 3, determine the initial life
expectancy (or joint life and last survivor expectancy) using the attained
ages of the Depositor and designated beneficiary as of their birthdays in
the year the Depositor reaches age 70 1/2. In the case of a distribution
in accordance with paragraph 4(b)(ii), determine life expectancy using the
attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 624, to
satisfy the minimum distribution requirements described above. This method
permits an individual to satisfy these requirements by taking from one
individual retirement account the amount required to satisfy the requirement
for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) of
the Code and related regulations.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) and the
related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the Depositor.
ARTICLE VIII
CUSTODIAL ACCOUNT AGREEMENT
1. The Depositor appoints Securities Management and Research, Inc. as
Custodian of this Account. After deduction of all appropriate fees and
charges, the balance of Depositor's contributions shall be invested as is
hereinafter provided.
2. The Depositor directs the Custodian to invest contributions and reinvest
dividends and capital gains distributions in shares of American National
Funds as directed on the application. The designated fund(s) may be any
one or more of mutual funds sponsored, distributed or underwritten by
Securities Management and Research, Inc.
3. The Custodian shall have no investment responsibility or discretion with
respect to this individual Retirement Custodian Account and shall not
vote the shares held therein, except as directed by Depositor.
4. This document constitutes the entire contract between Depositor and
Custodian and no representative of Securities Management and Research,
Inc., nor any broker-dealer shall be deemed to be a representative of or
acting on behalf of the Custodian nor shall any representative have any
authority to make representations or to bind the Custodian beyond the
terms of this document.
5. The Depositor shall have the right, by written notice to the Custodian,
to designate or to change a Beneficiary to receive any benefit to which
the Depositor may be entitled in the event of his death prior to the
complete distribution of such benefits. IF NO SUCH DESIGNATION IS IN
EFFECT UPON THE DEPOSITOR'S DEATH, HIS BENEFICIARY SHALL BE HIS ESTATE.
6. The Depositor shall provide information to the Custodian at such times
and in such manner and containing such information as will enable the
Custodian to prepare reports required by the Internal Revenue Service
pursuant to section 408(i) of the Revenue Code of 1954, as amended and
regulations promulgated thereunder.
7. The Custodian shall submit such reports to the Internal Revenue Service
and the Depositor, the Depositor's surviving spouse or beneficiaries by
either in such manner as may be required by the Internal Revenue Service
from time to time.
8. Any income taxes or other taxes of any kind whatsoever that may be levied
or accessed upon or in respect to the Custodial Account, any transfer taxes
incurred in connection with the investment and reinvestment of the assets
of the Custodial Account, other administrative expenses incurred by the
Custodian in the performance of its duties including fees for legal
services rendered to the Custodian, and the compensation to the Custodian
shall be paid from the assets of the Account.
9. Securities Management and Research, Inc., as Custodian and as sponsor
assumes no responsibility to make any distribution unless and until such
order specifies the occasion for such distribution, the elected manner of
distribution as described in Article IV, Section 3, (a), (d), or (e) or
any declaration required by Article V. Further, the Custodian and the
Sponsor shall not be responsible to make distribution at age 70 1/2
unless written notice is given by the Depositor. This Custodian
Agreement shall terminate upon the complete distribution of the Account
to the Depositor or his beneficiaries or to such successor individual
retirement accounts or annuities.
10. Rollover contributions will be received in cash and the
10
<PAGE>
Depositor will instruct the Custodian as to which investment the proceeds
are to be deposited.
11. The Custodian may resign at any time upon written notice to the Depositor
or any current beneficiary or may be removed by the Depositor or any
current beneficiary at any time upon 30 days notice in writing to the
Custodian. Upon such resignation or removal the Depositor or current
beneficiary shall appoint a successor Custodian. If within 30 days after
the Custodian's resignation or removal, the Depositor or current
beneficiary has not appointed a successor Custodian which has accepted
such appointment, the Custodian will liquidate the assets and forward the
proceeds to the Depositor or current beneficiary.
12. The Custodian's fees shall be as published and amended from time to time.
13. If, because of an erroneous assumption as to earned income or for any
other reason, a contribution which is an excess contribution is made on
behalf of the Depositor for any year, adjustment of such excess
contribution shall be made in accordance with provisions of this
paragraph. The full amount of such excess contribution and any net income
attributable thereto shall be distributed to the Depositor, in cash or in
kind upon written notice to the Custodian from the Depositor which
states the amount of such excess contribution.
14. By execution of this Agreement Depositor consents to the amendment of
this Article VIII by the Custodian to make any changes herein which the
Custodian determines in its discretion as necessary or desirable.
15. Notwithstanding anything to the contrary, this Individual Retirement
Custodial Account Agreement shall be deemed accepted by the Custodian
when either (i) the Individual Retirement Custodial Account Application
is executed by an authorized representative of the Custodian, or (ii) the
Custodian accepts for investment Depositor's initial contribution made
in accordance with the terms of this Agreement and the Individual
Retirement Custodial Account Application.
16. This contract shall be construed under the laws of the State of Texas and
shall become effective upon execution of the Account Application by the
Custodian.
17. The acceptance of this Individual Retirement Custodial Account by the
Depositor is indicated by execution of the signature section on page 4 of
the Application.
18. The acceptance of this account by the Custodian shall be considered
effective upon establishment of the account.
11
<PAGE>
IRA DISCLOSURE STATEMENT
==============================================================================
This disclosure statement describes the official government rules
applicable to the operation and tax treatment of individual retirement
accounts. Because legal and tax consequences may vary for each individual,
you should consult your tax adviser on whether your contributions are tax
deductible. PLEASE KEEP THIS DOCUMENT FOR FUTURE REFERENCE.
YOUR RIGHT TO REVOKE: You may revoke your individual retirement account
within seven (7) days after the date the account is established only by
mailing or delivering written notice of your intent to revoke to:
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550
(409) 763-8272
(800) 231-4839
The notice shall be deemed mailed on the date of the postmark, if
deposited in the mail in the United States, first class postage prepaid,
properly addressed to the address above. Upon revocation, the entire amount
contributed will be returned. Subsequent payments to existing IRA's cannot be
revoked.
ELIGIBILITY: Any individual who will not attain the age of 70 1/2 years before
the end of his current taxable year and who has compensation which is
includible in gross income (including an individual who is a participant in an
employer's retirement plan or a government pension plan) may contribute to an
IRA. Compensation is defined to include salaries, wages, professional fees,
self-employment income, alimony and separate maintenance payments includible
in gross income and other income for personal services included in gross
income. Income from property, such as dividends, interest or rent, does not
qualify as compensation under an IRA Plan.
LIMITATION ON CONTRIBUTIONS: Contributions must be made in cash and cannot
exceed the lesser of $2,000 or the amount of your compensation (except
rollover or SEP contributions) for any taxable year. If one spouse has no
compensation, the other spouse may contribute to an IRA for such spouse;
provided two separate IRA accounts exist, the total amount contributed does
not exceed the lesser of $2,250 or 100% of the working spouse's compensation,
a joint income tax return is filed and no more than $2,000 is contributed to
any one account. If a husband and wife each receive compensation as defined
in the preceding paragraph during the year and are otherwise eligible, each
may establish his or her own IRA. The contribution limitations are applicable
to the separate compensation of each individual without regard to any state
community property laws. Your contribution may or may not be deductible for
income tax purposes. Consult your tax adviser.
If you are not eligible to make a deductible contribution to your IRA, you
may make a non-deductible contribution not to exceed the lesser of $2,000 or
100% of your compensation. Earnings on non-deductible contributions are tax
deferred until distributed.
You must indicate on your tax return the extent to which your IRA
contribution is non-deductible by filing Form 8606 with your return. If you
overstate the amount of your non-deductible contribution, a penalty of
$100 will be assessed unless it is due to reasonable cause.
INVESTMENT OF FUNDS IN LIFE INSURANCE: No part of the custodial funds may be
invested in life insurance contracts.
INVESTMENT AND HOLDING OF CONTRIBUTIONS: Contributions in an IRA are held in
a custodial account for the exclusive benefit of the investor, his surviving
spouse and his beneficiaries who may include his estate, his dependents or
any other persons he may designate in writing delivered to the custodian. Your
interest in the account is fully vested and nonforfeitable. The custodian
maintains a separate account or record for each investor and such account or
record is available for inspection during regular business hours. The
contributions will be invested in the funds described in the Application
completed by the investor.
DISTRIBUTION OF FUNDS: Distributions of benefits without a penalty tax may
begin as soon as the investor attains age 59 1/2, but they MUST begin on or
before April 1 of the calendar year following the calendar year in which
the investor attains 70 1/2. An investor may elect to receive benefits if he
becomes disabled, without regard to age. A "minimum distribution" is required
to be made each year beginning on or before April 1 of the calendar year
following the calendar year in which the investor attains age 70 1/2. These
distributions are determined by dividing the entire balance in the IRA at the
beginning of each year by the life expectancy of the investor (or joint life
and last survivor expectancy of investor and beneficiary, if applicable)
determined as of the date the investor attains age 70, reduced by the number
of whole years elapsed since the investor attained age 70 1/12.
DISTRIBUTION OF FUNDS IN THE EVENT OF INVESTOR'S DEATH: If distributions have
begun and the investor dies before his entire interest has been distributed,
the remaining interest in the investor's account shall be distributed to the
investor's beneficiary at least as rapidly as under the method of
distribution being used as of the date of the investor's death. If
distribution has not begun prior to the investor's death, then the investor's
entire interest in the IRA must be distributed to the investor's beneficiary
within five (5) years after the death of the investor, provided that, if a
distribution begins within one (1) year after the investor's death to or for
the benefit of the investor's beneficiary over the longer of the life or life
expectancy of the investor's beneficiary, such distribution will be
considered to be distributed within such five (5) year period. If the
beneficiary is the investor's surviving spouse, the surviving spouse may
elect within the five (5) year period to have distributions begin at any time
before the date on which the investor would have attained the age of 70 1/2
and, if the surviving spouse dies prior to distribution, such surviving
spouse shall be considered as if the spouse were the investor and the
distribution rules that applied to the investor shall be the same rules that
apply to the deceased spouse. A beneficiary or surviving spouse may elect to
accelerate payments.
REQUIRED MINIMUM DISTRIBUTIONS (RMDs): IRA investors who reach age 70 1/2
must begin taking distributions for that year
12
<PAGE>
and every year thereafter. The distribution for the first year may be
delayed until April 1 of the year following the 70-1/2 year. All subsequent
year distributions must be taken by December 31 of each year. This
distribution can be based on the single or joint life expectancies of the
investor and/or the designated beneficiary. A 50% penalty will be applied to
amounts not withdrawn.
TAXPAYER REPORTING REQUIREMENTS: If a transaction has occurred for which a
penalty tax is imposed, such as an excess contribution, a premature
distribution or an excess accumulation (insufficient distribution), the
investor is required by the Internal Revenue Service to attach to his annual
income tax return an information return (Form 5329) prescribed for reporting
such transaction and calculating the penalty tax due.
TAX TREATMENT OR WITHDRAWALS AND DISTRIBUTIONS: Funds generally cannot be
withdrawn from the IRA without adverse tax consequences prior to the date on
which the investor attains age 59-1/2 (with the exception of the rollovers
later described, returns of excess contributions and payments on account of
the participant's death, certified disability or divorce). Any distributions
prior to that time (including amounts deemed distributed as a result of
prohibited transactions or use of part or all of the IRA as security for a
loan) are considered to be premature distributions. In addition to being
fully taxable to the investor as ordinary income at the time of distribution,
such premature distributions are subject to a penalty tax or 10% of the
amount distributed. Distributions occurring after the investor reaches
59-1/2, dies or is disabled are taxable to the recipient at ordinary income
tax rates. However, no penalty taxes are applied in the case of such
distributions.
ROLLOVER CONTRIBUTIONS: Effective January 1, 1993, UCA-92 mandates a 20%
withholding on all eligible rollover distributions from qualified retirement
plans which are not directly rolled to an IRA or a similar qualified
retirement plan. An eligible rollover distribution consists of all or any
portion of the proceeds in a qualified retirement plan other than:
a) a distribution which is part of a series of substantially equal
periodic payments made over the life or life expectancy of the
participant, the joint lives or life expectancies of the participant
and his or her beneficiary, for a period of 5 years or to age 59-1/2,
whichever is later;
b) distributions which are not includable in the recipients' taxable
income; or
c) distributions which represent RMDs made to individuals 70-1/2 years
of age.
An eligible retirement plan is an IRA, a qualified plan, or tax sheltered
annuity which accepts rollover contributions.
Prior to effecting a direct rollover the custodian will distribute any
required minimum distribution amount, if applicable, payable to the investor.
Rollover distribution received by the investor must be invested within sixty
(60) days from the date of distribution in certain other IRA approved
retirement plans, including IRAs in order to retain its tax deferred status.
All contributions and rollover contributions to an IRA must be made in cash.
No tax deduction, however, is allowed to the investor for the amount of a
rollover contribution contributed to an IRA.
ROLLOVERS BY SURVIVING SPOUSE: A rollover of part or all of a lump sum
distribution or part or all of a qualified partial distribution (subject to
certain limitations provided by section 405(a)(5)(D) of the Code) may be made
by a qualified plan investor or by the surviving spouse of a deceased
qualified plan investor. The surviving spouse may roll over only into an IRA
and may not roll over into a qualified plan in which the spouse is an
investor. Beneficiaries other than the surviving spouse may not roll over.
Whether an individual can receive a qualified lump sum, a qualified partial
distribution or plan termination distribution depends upon the provisions of
the employee benefit plan in which the individual or the spouse was a
participant.
QUALIFIED PLAN ROLLOVER: A qualified plan distribution rolled into an IRA
may be rolled back into another qualified plan under certain circumstances.
In the case of rollovers from qualified plans, the amount rolled over must
consist solely of employer and qualified deductible voluntary employee
contributions, interest earned thereon, and interest earned on other employee
contributions. Any part of the distribution retained by the investor except
his own tax-paid contributions is subject to income tax, while amounts rolled
over are not taxed until distributed from the rollover account. An investor
otherwise eligible to do so may make deductible IRA contributions to a
rollover IRA established with a qualified plan or section 403(b) annuity
distribution, but if this occurs, the law may preclude future rollover of the
funds back into a qualified plan or section 403(b) annuity. An investor may
also withdraw all or part of the funds from another IRA or individual
retirement annuity for rollover into an IRA within a one-year period. This
limitation does not, however, apply to rollovers of funds between a qualified
employer plan or annuity and an IRA. An investor may convert non-cash
property distributed from a qualified plan into cash by means of a bona fide
sale and roll over part or all of the proceeds into an IRA or another
qualified plan within the sixty (60) day period after the distribution.
PROHIBITED TRANSACTIONS: An IRA prohibits the investor, his spouse or
beneficiaries from engaging in any prohibited transactions (within the
meaning of the Internal Revenue Code section 4975). Prohibited transactions
include, but are not limited to, the sale or exchange of property, the
lending of money or other extension of credit, the furnishing of goods,
services or facilities and the transfer of income or assets to or from the
IRA to or for the benefit of his own interest or receive any compensation
from any transaction which involves the IRA assets. A disqualified person
includes, but is not limited to, the investor, his family (including other
individuals as defined in section 4975(e)(16) of the Code) and persons or
other entities (corporations, trusts, estates or partnerships) which stand in
a close relationship to the investor. If such transactions occur, the IRA will
cease to be qualified and will be treated as having been distributed and
subject to the income and penalty taxes discussed above, and the fair market
value of the account must be included in the investor's gross income. In
addition, the custodian and other disqualified parties may not engage in any
prohibited transactions with respect to the custodial account and will be
subject to penalties if any such prohibited transactions are engaged in
without a statutory or administrative exemption.
USE OF IRA ACCOUNT ASSETS AS SECURITY FOR LOANS: If the investor borrows
money and used all or any portion of his interest
13
<PAGE>
in the IRA as security, the portion of the IRA used will be deemed to be
distributed to the investor. If the investor has not attained age 59 1/2 or
is not disabled, the distribution will not only be fully taxable at ordinary
income tax rates but will incur the 10% premature distribution penalty tax
discussed above. CONSEQUENTLY, PLEDGING IRA ASSETS AS SECURITY FOR A LOAN IS
SPECIFICALLY PROHIBITED.
PENALTY FOR EXCESS CONTRIBUTIONS: An "excess contribution" is a contribution
to an IRA in a taxable year in excess of the maximum amount deductible or
permitted to be rolled over into an IRA for the taxable year. A penalty tax
equal to 6% of the amount of the excess contribution is imposed on an
investor who has an excess contribution in his IRA as of the close of any
taxable year.
PENALTY FOR CERTAIN ACCUMULATIONS: After the investor reaches age 70 1/2, or
if he dies and payments are to be made to his beneficiary, if the required
"minimum distributions," described in "Distribution of Funds" above, do not
occur within the time required by law, a penalty tax may be incurred equal to
50% of the difference between the amount of the "minimum distribution" and the
amount actually distributed each year. The Secretary of the Treasury may waive
the penalty if the inadequate distribution is due to reasonable error and
reasonable steps are being taken to correct the situation.
PENALTY FOR EXCESS DISTRIBUTIONS: A 15% excise tax is imposed on the sum of
all annual distributions received during the calendar year in excess of
$150,000 (or $112,500, adjusted for cost of living increases in certain
circumstances). This 15% excise tax on excess distributions is reduced by the
10% tax on premature distributions, if any, that apply to excess
distribution. The excess distribution tax will not apply to a distribution
due to the investor's death (although the estate tax may be increased by 15%
of the "excess retirement accumulation"), the portion of the distribution
applying to nondeductible contributions, a distribution that is rolled over
tax free, or a distribution to an alternate payee under qualified domestic
relations order.
FINANCIAL DISCLOSURE: Earnings on the investor's IRA are the dividends and
capital gains distributions received on mutual fund shares held by the
investor's IRA, and are used to purchase additional mutual fund shares. A
sales charge is deducted on the purchase of shares of the funds being
offered. These sales charges are reduced under various circumstances
described in detail in each Fund's prospectus. YOU MUST HAVE RECEIVED A
PROSPECTUS PRIOR TO SUBMITTING YOUR APPLICATION TO CREATE AN IRA. The growth
in value of the mutual fund shares held in the investor's IRA can be neither
guaranteed nor projected.
WITHDRAWALS: Withdrawal requests MUST be presented to Securities Management
and Research, Inc., One Moody Plaza, Galveston, Texas 77550, with the
appropriate withdrawal forms properly executed. You should contact your
representative or Securities Management and Research, Inc. for the required
forms and procedures to avoid any delay in the expedition of withdrawals.
ESTATE AND GIFT TAXES: All amounts held by the investor at the investor's
death are includible in his estate for federal estate tax purposes, and the
beneficiary shall report distributions received as ordinary income, except a
surviving spouse may be able to roll over the distribution. Any transfers of
the benefits during the investor's lifetime are subject to applicable gift
taxes except certain transfers to a former spouse pursuant to a divorce
decree or written instrument incident to such divorce.
ADDITIONAL INFORMATION: Additional information regarding the application and
rules governing the IRA may be obtained from any district office of the
Internal Revenue Service and from IRS Publication 590.
14
<PAGE>
SIMPLIFIED EMPLOYEE PENSION
INDIVIDUAL RETIREMENT ACCOUNTS CONTRIBUTION AGREEMENT
===============================================================================
Form 5305-SEP Rev March 1994
_______________________________________________________________ makes the
(Business name--employer)
following agreement under the terms of section 408(k) of the Internal Revenue
Code and the instructions to this form.
The employer agrees to provide for discretionary contributions in each
calendar year to the Individual Retirement Accounts or Individual Annuities
(IRA's) of all eligible employees who are at least _______ years old (not
over 21 years old) and have performed services for the employer in at least
_______ years (not to exceed 3 years) of the immediately preceding 5 years.
This simplified employee pension (SEP) // includes // does not include
employees covered under a collective bargaining agreement and // includes
// does not include certain non resident aliens, and // includes // does
not include employees whose total compensation during the year is less than
$396*.
The employer agrees that contributions made on behalf of each eligible
employee will:
- - Be based only on the first $150,000* of compensation.
- - Be made in an amount that is the same percentage of total compensation for
every employee.
- - Be limited annually to the smaller of $30,000 or 15% of compensation.
- - Be paid to the employee's IRA trustee, custodian, or insurance company (for
an annuity contract).
_______________________________________________________________________________
Signature of employer
_______________________________________________________________________________
By
_______________________________________________________________________________
Date
_______________________________________________________________________________
* This amount reflects the cost-of-living increase under section 408(k)(8)
effective 1-1-91. This amount is adjusted annually. Each January, IRS
announces the increase, if any, in the Internal Revenue Bulletin.
If applicable, fill out this form and the form on the next page.
Submit this copy to SM&R.
15
<PAGE>
SIMPLIFIED EMPLOYEE PENSION
INDIVIDUAL RETIREMENT ACCOUNTS CONTRIBUTION AGREEMENT
==============================================================================
Form 5305-SEP Rev. March 1994
___________________________________________ makes the following agreement
(Business name-employer)
under the terms of section 408(k) of the Internal Revenue Code and the
instructions to this form.
The employer agrees to provide for discretionary contributions in each
calendar year to the Individual Retirement Accounts or Individual Annuities
(IRA's) of all eligible employees who are at least ________ years old (not
over 21 years old) and have performed services for the employer in at least
________ years (not to exceed 3 years) of the immediately preceding 5 years.
This simplified employee pension (SEP) / / includes / / does not include
employees covered under a collective bargaining agreement and / / includes
/ / does not include certain nonresident aliens, and / / inlcudes / / does
not include employees whose total compensation during the year is less than
$396*.
The employer agrees that contributions made on behalf of each eligible
employee will:
- - Be based only on the first $150,000* of compensation.
- - Be made in an amount that is the same percentage of total compensation for
every employee.
- - Be limited annually to the smaller of $30,000 or 15% of compensation.
- - Be paid to the employee's IRA trustee, custodian, or insurance company (for
an annuity contract).
_______________________________________________________
Signature of employer
_______________________________________________________
By
_______________________________________________________
Date
*This amount reflects the cost-of-living increase under section 408(k)(8)
effective 1-1-91. This amount is adjusted annually. Each January, IRS
announces the increase, if any, in the Internal Revenue Bulletin.
THIS FORM REMAINS WITH THE CLIENT, IN THIS KIT.
- ------------------------------------------------------------------------------
INSTRUCTIONS FOR THE EMPLOYER (Section references are to the Internal
Revenue Code, unless otherwise noted.)
PAPERWORK REDUCTION ACT NOTICE--We ask for the information on this form to
carry out the Internal Revenue laws of the United States. You are required to
give us the information. We need it to determine if you are entitled to a
deduction for contributions made to a Simplified Employee Pension (SEP).
Complete this form only if you want to establish a Model SEP.
The time needed to complete this form will vary depending on individual
circumstances. The estimated average time is:
Recordkeeping ........................................ 7 min.
Learning about the law or the form ................... 26 min.
Preparing the form ................................... 20 min.
If you have comments concerning the accuracy of these time estimates or
suggestions for making this form more simple, we would be happy to hear from
you. You can write to both the Internal Revenue Service, Washington, D.C.
20224. Attention: IRS Reports Clearance Officer, PC:FP, and the Office of
Management and Budget, Paperwork Reduction Project (1545-0499). Washington,
D.C. 20503. This form is NOT to be sent to either of these offices. The Form
5305-SEP is only to be kept for your records.
NOTE CHANGE IN COMPENSATION--For years beginning after December 31, 1993, the
Revenue Reconciliation Act of 1993 (the Act), reduced to $150,000 the annual
compensation of each employee to be taken into account in making
contributions to a SEP. The $150,000 amount will be indexed for inflation
after 1994 in increments of $10,000 that will be rounded to the next lowest
multiple of $10,000. See Act section 13212 for different effective dates and
the transition rules that apply to governmental plans and plans under a
collective bargaining agreement.
PURPOSE OF FORM--Form 5305-SEP (Model SEP) is used by an employer to make an
agreement to provide benefits to all eligible employees under a SEP described
in section 408(k). This form is NOT to be filed with IRS.
WHAT IS A SEP PLAN?--A SEP is a written agreement which provides an employer
with a simplified way to make contributions toward an employee's retirement
income. Under a SEP, the employer is permitted to contribute a certain amount
(see below) to an employee's Individual Retirement Account or Individual
Retirement Annuity (IRAs). The employer makes contributions directly to an
IRA set up by an employee with a bank, insurance company, or other qualified
financial institution. When using this form to establish a SEP, the IRA must
be a model IRA established on an IRA form or a master or prototype IRA for
which IRS has issued a favorable opinion letter. Making the agreement on Form
5305-SEP does not establish an employer IRA as described under section 408(c).
THIS FORM MAY NOT BE USED BY AN EMPLOYER WHO:
- - Currently maintains any other qualified retirement plan. However, you are
not prevented from maintaining a Model Elective SEP (Form 5305A-SEP) or
other SEP to which elective or nonelective contributions are made.
17
<PAGE>
- Has maintained in the past a defined benefit plan, even if now terminated.
- Has any eligible employees for whom IRAs have not been established.
- Uses the services of leased employees (as described in section 414(n)).
- Is a member of an affiliated service group (as described in section
414(m), a controlled group of corporations (as described in section
414(b)), or trades or businesses under common control (as described in
section 414(c) and 414(o)), unless all eligible employees of all the
members of such groups, trades or businesses, participate under the SEP.
- This form should only be used if the employer will pay the cost of the
SEP contributions. This form is not suitable for a SEP that provides for
contributions at the election of the employee whether no not made
pursuant to a salary reduction agreement.
WHO MAY PARTICIPATE--Any employee who is at least 21 years old and has
performed "service" for you in at least 3 years of the immediately preceding
5 years must be permitted to participate in the SEP. However, you may establish
less restrictive eligibility requirements if you choose. "Service" is any
work provided for you for any period of time, however short. If you are a
member of an affiliated service group, a controlled group of corporations, or
trades or businesses under common control, "service" includes any work
performed for any period of time for any other member of such group, trades,
or businesses. Generally, to make the agreement, all eligible employees
(including all eligible employees, if any, of other members of an affiliated
service group, a controlled group of corporations, or trades or businesses
under common control) must be allowed to participate in the plan. However,
employees covered under a collective bargaining agreement and certain
nonresident aliens may be excluded if section 410(b)(3)(A) or 410(b)(3)(C)
applies to them. Employees whose total compensation for the year is less than
$396* may be excluded.
AMOUNT OF CONTRIBUTIONS--You are not required to make any contributions to an
employee's SEP -IRA in a given year. However, if you do make contributions,
you must make them to the IRAs of all eligible employees who actually
performed services during the year, whether or not they are still employed at
the time contributions are made. The contributions made must be the same
percentage of each employee's total compensation (up to a maximum
compensation base of $150,000*). The contributions you make in a year for any
one employee may not be more than the smaller of $30,000 or 15% of that
employee's total compensation (figured without considering the SEP-IRA
contributions).
For this purpose, compensation includes:
- - Amounts received for personal services actually performed (see Regulations
section 1.219(c)); and
- - Earned income as defined under section 401(c)(2).
You may not discriminate in favor of any employee who is highly compensated
if you use Form 5305-SEP.
Under this form you may not integrate your SEP contributions with, or
offset them by, contributions made under the Federal Insurance Contributions
Act (FICA).
Currently, employees who have established a SEP using this agreement and
have provided each participant with a copy of this form, including the
questions and answers below, are not required to file the annual information
returns. Forms 5500, 5500-C/R, or 5500EZ for the SEP.
DEDUCTING CONTRIBUTIONS--You may deduct all contributions to a SEP subject to
the limitations of section 404(h). The SEP is maintained on a calendar year
basis and contributions to the SEP are deductible for your tax year with or
within which the calendar year ends. Contributions made for a particular
taxable year and contributed by the due date of your income tax return
(including extensions) shall be deemed made in that taxable year.
MAKING THE AGREEMENT--This agreement is considered made when (1) IRAs have
been established for all of your eligible employees, (2) you have completed
all blanks on the agreement form without modification, and (3) you have given
all of your eligible employees the following information:
- - A copy of Form 5305-SEP.
- - A statement that IRAs other than IRAs into which employer SEP contributions
will be made provide different rates of return and different terms concerning,
among other things, transfers and withdrawals of funds from the IRAs.
- - A statement that, in addition to the information provided to an employee at
the time the employee becomes eligible to participate, the administrator of
the SEP must furnish each participant within 30 days of the effective date
of any amendment to the SEP, a copy of the amendment and a written
explanation of the effects.
- - A statement that the administrator will give written notification to each
participant of any employer contributions made under the SEP to that
participant's IRA by the later of January 31 of the year following the year
for which a contribution is made or 30 days after the contribution is made.
Employers who have established a SEP using Form 5305-SEP and have given
each participant a copy of Form 5305-SEP are not required to file the annual
information returns, Forms 5500, 5500-C/R, or 5500-EZ. However, under Title 1
of ERISA, relief from the annual reporting requirements is not available to an
employer who selects, recommends, or influences its employees to choose IRAs
into which employer contributions will be made, if those IRAs are subject to
provisions that prohibit withdrawal of funds for any period.
INFORMATION FOR THE EMPLOYEE
The information provided below explains what a SEP is, how contributions
are made, and how to treat your employer's contributions for tax purposes.
Please read the questions and answers carefully. For more specific
information, also see the agreement form and instructions on page 1 of this
form.
QUESTIONS AND ANSWERS
1. Q. WHAT IS A SIMPLIFIED EMPLOYEE PENSION, OR SEP?
A. A SEP is a retirement income arrangement under which your
- - This amount reflects into cost of living increase under section 408(k)(8)
effective 1-1-91. This amount is adjusted annually. Each January IRS
announces the increase, if any, in the Internal Revenue Bulletin.
18
<PAGE>
employer may contribute any amount each year up to the smaller of
$30,000 or 15% of your compensations into your own Individual Retirement
Account/Annuity (IRA).
Your employer will provide you with a copy of the agreement containing
participation requirements and a description of the basis upon which
employer contributions may be made to your IRA.
All amounts contributed to your IRA by your employer belong to you,
even after you separate from service with that employer.
2. Q. MUST MY EMPLOYER CONTRIBUTE TO MY IRA UNDER THE SEP?
A. Whether or not your employer makes a contribution to the SEP is
entirely within the employer's discretion. If a contribution is made
under the SEP, it must be allocated to all the eligible employees
according to the SEP agreement. The Model SEP specifies that the
contribution on behalf of each eligible employee will be the same
percentage of compensation (excluding compensation higher than
$222.220*) for all employees.
3. Q. HOW MUCH MAY MY EMPLOYER CONTRIBUTE TO MY SEP-IRA IN ANY YEAR?
A. Under the Model SEP (Form 5305-SEP) that your employer has
adopted, your employer will determine the amount of contribution to be
made to your IRA each year. However, the contribution for any year is
limited to the smaller of $30,000 of 15% of your compensation for that
year. The compensation used to determine this limit does not include any
amount which is contributed by your employer to your IRA under the SEP.
The agreement does not require an employer to maintain a particular
level of contributions. It is possible that for a given year no employer
contribution will be made on an employee's behalf. Also see Question 5.
4. Q. HOW DO I TREAT MY EMPLOYER'S SEP CONTRIBUTIONS FOR MY TAXES?
A. The amount your employer contributes for years beginning after
1986 is excludible from your gross income subject to certain limitations
including the lesser of $30,000 or 15% of compensation mentioned in 1.A.
above and is not includible as taxable wages on your Form W-2.
5. Q. MAY I ALSO CONTRIBUTE TO MY IRA IF I AM A PARTICIPANT IN A SEP?
A. Yes. You may still contribute the lesser of $2,000 or 100% of
your compensation to an IRA. However, the amount which is deductible
is subject to various limitations. Also see Question 11.
6. Q. ARE THERE ANY RESTRICTIONS ON THE IRA I SELECT TO DEPOSIT MY SEP
CONTRIBUTIONS IN?
A. Under the Model SEP that is approved by IRS, contributions must
be made to either a Model IRA which is executed on an IRS form or a
master or prototype IRA for which IRS has issued a favorable opinion
letter.
7. Q. WHAT IF I DON'T WANT TO PARTICIPATE IN A SEP?
A. Your employer may require that you become a participant in such
an arrangement as a condition of employment. However, if the employer
does not require all eligible employees to become participants and an
eligible employee elects not to participate, all other employees of the
same employer may be prohibited from entering into a SEP-IRA arrangement
with that employer. If one or more eligible employees do not participate
and the employer attempts to establish a SEP-IRA agreement with the
remaining employees, the resulting arrangement may result in adverse tax
consequences to the participating employees.
8. Q. CAN I MOVE FUNDS FROM MY SEP-IRA TO ANOTHER TAX-SHELTERED IRA?
A. Yes, it is permissible for you to withdraw, or receive, funds
from your SEP-IRA, and no more than 60 days later, place such funds in
another IRA, or SEP-IRA. This is called a "rollover" and may not be
done without penalty more frequently than at one-year intervals.
However, there are no restrictions on the number of times you may make
"transfers" if you arrange to have such funds transferred between the
trustees, so that you never have possession.
9. Q. WHAT HAPPENS IF I WITHDRAW MY EMPLOYER'S CONTRIBUTION FROM MY
IRA?
A. If you don't want to leave the employer's contribution in your
IRA, you may withdraw it at any time, but any amount withdrawn is
includible in your income. Also, if withdrawals occur before attainment
of age 59-1/2, and not on account of death or disability, you may be
subject to a penalty tax.
10. Q. MAY I PARTICIPATE IN A SEP EVEN THOUGH I'M COVERED BY ANOTHER
PLAN?
A. An employer may not adopt this IRS Model SEP (Form 5305-SEP) if
the employer maintains another qualified retirement plan or has ever
maintained a qualified defined benefit plan. However, if you work for
several employers you may be covered by a SEP of one employer and a
different SEP or pension or profit-sharing plan of another employer.
Also see Questions 11 and 12.
11. Q. WHAT HAPPENS IF TOO MUCH IS CONTRIBUTED TO MY SEP-IRA IN ONE
YEAR?
A. Any contribution that is more than the yearly limitations may be
withdrawn without penalty by the due date (plus extensions) for filing
your tax return (normally April 15th), for filing your gross income.
Excess contributions left in your SEP-IRA account after that time may
have adverse tax consequences. Withdrawals of those contributions may
be taxed as premature withdrawals. Also see Question 10.
12. Q. IS MY EMPLOYER REQUIRED TO PROVIDE ME WITH INFORMATION ABOUT
SEP-IRAs and SEP AGREEMENT?
A. Yes, your employer must provide you with a copy of the executed
SEP agreement (Form 5305-SEP), these Questions and Answers, and
provide a statement each year showing any contribution to your IRA.
Also see Question 4.
13. Q. IS THE FINANCIAL INSTITUTION WHERE I ESTABLISH MY IRA ALSO
REQUIRED TO PROVIDE ME WITH INFORMATION?
A. Yes, it must provide you with a disclosure statement which
19
<PAGE>
contains the following items of information in plain, nontechnical language:
(1) the statutory requirements which relate to your IRA; (2) the tax
consequences which follow the exercise of various options and what those
options are; (3) participant eligibility rules, and rules on the
deductibility and nondeductibility of retirement savings; (4) the
circumstances and procedures under which you may revoke your IRA. Including
the name, address, and telephone number of the person designated to receive
notice of revocation (this explanation must be prominently displayed at the
beginning of the disclosure statement); (5) explanations of when penalties
may be assessed against you because of specified prohibited or penalized
activities concerning your IRA; and (6) financial disclosure information
which; (a) either projects value growth rates of your IRA under various
contribution and retirement schedules, or describes the method of computing
and allocating annual earnings and charges which may be assessed; (b)
describe whether, and for what period, the growth projections for the plan
are guaranteed, or a statement of the earnings rate and terms on which the
project is based; (c) states the sales commission to be charged in each year
expressed as a percentage of $1,000; and (d) states the proportional amount
of any nondeductible life insurance which may be a feature of your IRA.
In addition to this disclosure statement, the financial institution is
required to provide you with a financial statement each year. It may be
necessary to retain and refer to statements for more than one year in order
to evaluate the investment performance of the IRA and for information on how
to report IRA distributions for tax purposes.
IRA
FORMS KIT
EVERYTHING YOU NEED TO:
- - OPEN A NEW SM&R IRA ACCOUNT
- - TRANSFER YOUR PRESENT IRA ACCOUNT(S) TO AN SM&R IRA
- - DIRECTLY ROLL OVER YOUR RETIREMENT PLAN DISTRIBUTION
- - OPEN OR TRANSFER AN SEP ACCOUNT
SECURITIES MANAGEMENT & RESEARCH, INC.
ONE MOODY PLAZA * GALVESTON TEXAS 77550
(409) 763-2767
[LOGO]
MEMBER NASD, SIPC
<PAGE>
EXHIBIT 99.B17
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT SM&R CAPITAL FUNDS, INC., a Maryland
corporation, and its undersigned officers and Directors each hereby nominate,
constitute and appoint MICHAEL W. MCCROSKEY its/his/her true and lawful
attorney-in-fact and agent, for it/him/her and on its/his/her name, place and
stead in any and all capacities, to make, execute and sign all amendments to the
Fund's Registration on Form N-1A under the Securities Act of 1933 and the
Investment Company Act of 1940, and to file with the Securities and Exchange
Commission and any other regulatory authority having jurisdiction over the offer
and sale of shares of the Funds, such amendments, and any and all amendments and
supplements thereto, and any and all exhibits and other documents requisite in
connection therewith granting unto said attorney, full power and authority to do
and perform each and every act necessary and/or appropriate as fully to all
intents and purposes as the Fund and the undersigned Officers and Directors
themselves might or could do.
IN WITNESS WHEREOF, the Fund has caused this power of attorney to be
executed in its name by its President and attested by its Secretary, and the
undersigned Officers and Directors have hereunto set their hands this 16th
day of September, 1994.
ATTEST: SM&R CAPITAL FUNDS, INC.
TERESA E. AXELSON MICHAEL W. MCCROSKEY
- ----------------------------------- ---------------------------------------
Teresa E. Axelson, Secretary Michael W. McCroskey, President
MICHAEL W. MCCROSKEY BRENDA T. KOELEMAY
- ----------------------------------- ---------------------------------------
Michael W. McCroskey, President & Brenda T. Koelemay, Treasurer, Principal
Principal Executive Officer & Accounting Officer
SAMUEL K. FINEGAN BRENT E. MASEL, M.D.
- ----------------------------------- ---------------------------------------
Samuel E. Finegan, Director Brent E. Masel, M.D., Director
ALLAN W. MATTHEWS LEA MCLEOD MATTHEWS
- ----------------------------------- ---------------------------------------
Allan W. Matthews, Director Lea McLeod Matthews, Director
SHANNON L. MOODY ANDREW J. MYTELKA
- ----------------------------------- ---------------------------------------
Shannon L. Moody, Director Andrew J. Mytelka, Director
LOUIS E. PAULS EDWIN K. NOLAN
- ----------------------------------- ---------------------------------------
Louis E. Pauls, Director Edwin K. Nolan, Director
MICHAEL W. MCCROSKEY
- -----------------------------------
Michael W. McCroskey, Director
<PAGE>
EX-99.B19
CONTROL LIST
ENTITY: SM&R Capital Funds, Inc.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Maryland
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL:
Investment Advisory Agreement with Securities Management and Research, Inc.
Securities Management and Research, Inc. and American National Insurance
Company may have start-up and/or other investments in this company from time
to time.
ENTITY: Securities Management and Research, Inc.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Florida
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by American National Insurance Company
ENTITY: American National Insurance Company
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 37.6% of
the voting securities are owned by the Libbie Shearn Moody Trust; 23.7% of
the voting securities are owned by The Moody Foundation. The trustees of the
Moody Foundation are Robert L. Moody, Frances Moody Newman (Robert L. Moody's
mother), and Ross Rankin Moody (Robert L. Moody's son). Robert L. Moody is
Chairman of the Board, Chief Executive Officer and a Director of American
National Insurance Company. Mr. Moody is also Chairman of the Board, a
Director and controlling shareholder of National Western Life Insurance
Company, a Colorado insurance company.
ENTITY: Libbie Shearn Moody Trust
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Not Applicable
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: Robert
L. Moody is a beneficiary of the Trust. The Trustee of the Trust is The Moody
National Bank of Galveston (the "Bank"). Moody Bank Holding Company, Inc.
("MBHC") owns approximately 97% of the outstanding stock of the Bank. Moody
Bancshares, Inc. ("MBI") owns all of the outstanding stock of MBHC. Mr. Moody
serves as Director and President of MBI and MBHC and as Chairman of the
Board, Director and Chief Executive Officer of the Bank. The Three R Trusts,
trusts created by Mr. Moody for the benefit of his children, own all of the
MBI Class B stock (which elects a majority of MBI directors) and 47.5% of
the MBI Class A
<PAGE>
stock.
ENTITY: American National Income Fund, Inc.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Maryland
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL:
Investment Advisory Agreement with Securities Management and Research, Inc.
Securities Management and Research, Inc. and American National Insurance
Company may have start-up and/or other investments in this company from time
to time.
ENTITY: American National Growth Fund, Inc.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Maryland
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL:
Investment Advisory Agreement with Securities Management and Research, Inc.
Securities Management and Research, Inc. and American National Insurance
Company may have start-up and/or other investments in this company from time
to time.
ENTITY: Triflex Fund, Inc.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Maryland
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL:
Investment Advisory Agreement with Securities Management and Research, Inc.
Securities Management and Research, Inc. and American National Insurance
Company may have start-up and/or other investments in this company from time
to time.
ENTITY: American National Investment Accounts, Inc.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Maryland
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL:
Investment Advisory Agreement with Securities Management and Research, Inc.
Securities Management and Research, Inc. and American National Insurance
Company may have start-up and/or other investments in this company from time
to time.
ENTITY: ANREM Corp.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF
2
<PAGE>
CONTROL: 100% owned by Securities Management and Research, Inc.
ENTITY: Base Securities Systems, Inc.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by ANREM Corp.
ENTITY: ANTAC, Inc.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by American National Insurance Company
ENTITY: Standard Life and Accident Insurance Company
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Oklahoma
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by American National Insurance Company
ENTITY: American National Life Insurance Company of Texas
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by American National Insurance Company
ENTITY: Garden State Life Insurance Company
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: New Jersey
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by American National Insurance Company
ENTITY: American National Property and Casualty Insurance Company
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Missouri
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by American National Insurance Company
ENTITY: American National Insurance Services Company
3
<PAGE>
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Missouri
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by American National Property and Casualty Insurance Company
ENTITY: American National General Insurance Company
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Missouri
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by American National Property and Casualty Insurance Company
ENTITY: ANPAC General Agency of Texas, Inc.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by American National Property and Casualty Insurance Company
ENTITY: ANPAC Lloyds Insurance Management, Inc.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by American National Property and Casualty Insurance Company
ENTITY: Gal-Tex Hotel Corp.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 34.0% of
the voting securities are owned by The Moody Foundation; 50.2% of the voting
securities are owned by the Libbie Shearn Moody Trust
Entity: Gal-Tenn Corp.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by Gal-Tex Hotel Corp.
ENTITY: Gal-Tex Management Company
4
<PAGE>
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by Gal-Tex Hotel Corp.
ENTITY: New Paxton Hotel Corporation
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by Gal-Tex Hotel Corp.
ENTITY: GTG Corporation
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by Gal-Tex Hotel Corp.
ENTITY: Ridgedale Festival Joint Venture
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 50%
owned by American National Insurance Company
ENTITY: South Shore Harbour Development, Ltd.
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns a 95% limited partnership interest
ENTITY: Harbour Title Company
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: South
Shore Harbour Development, Ltd. has a stock ownership interest
ENTITY: Gateway Park Joint Venture
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
5
<PAGE>
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: South
Shore Harbour Development, Ltd. has a joint venture interest
ENTITY: Panther Creek Limited Partnership
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns a 99% limited partnership interest
ENTITY: Maya Energy Limited Partnership
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns a 99% limited partnership interest
ENTITY: Marina Plaza Joint Venture
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns a 50% interest
ENTITY: Terra Venture Bridgeton Project Joint Venture
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: 100%
owned by American National Insurance Company
ENTITY: Rodeo Square
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns a 95% interest
ENTITY: American Hampden Joint Venture
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF
6
<PAGE>
CONTROL: American National Insurance Company owns a 98% interest
ENTITY: Timberlake Associates Joint Venture
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns approximately 98% interest
ENTITY: Marina One Joint Venture
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns a 50% interest
ENTITY: Kearns Building Joint Venture
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns a 85% interest
ENTITY: American National - Clear Lake 2 Joint Venture
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns a 88% interest
ENTITY: Third and Catalina
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns a 49% limited partnership interest
ENTITY: Timbermill
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns a 99% limited partnership interest
7
<PAGE>
ENTITY: Town and Country Joint Venture
STATE UNDER THE LAWS OF WHICH ENTITY IS ORGANIZED: Texas
THE PERCENTAGE OF VOTING SECURITIES OWNED OR OTHER BASIS OF CONTROL: American
National Insurance Company owns a 99% limited partnership interest
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000881166
<NAME> SM&R CAPITAL FUNDS, INC.
<SERIES>
<NUMBER> 01
<NAME> GOVERNMENT INCOME FUND SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 19,572,825
<INVESTMENTS-AT-VALUE> 20,251,525
<RECEIVABLES> 164,652
<ASSETS-OTHER> 10,627
<OTHER-ITEMS-ASSETS> 71,010
<TOTAL-ASSETS> 20,497,814
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,005
<TOTAL-LIABILITIES> 32,005
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,140,309
<SHARES-COMMON-STOCK> 1,946,741
<SHARES-COMMON-PRIOR> 1,965,669
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (353,200)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 678,700
<NET-ASSETS> 20,465,809
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,462,303
<OTHER-INCOME> 0
<EXPENSES-NET> 134,412
<NET-INVESTMENT-INCOME> 1,327,891
<REALIZED-GAINS-CURRENT> (10,778)
<APPREC-INCREASE-CURRENT> 823,605
<NET-CHANGE-FROM-OPS> 2,140,718
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,327,891
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 170,678
<NUMBER-OF-SHARES-REDEEMED> 304,466
<SHARES-REINVESTED> 114,860
<NET-CHANGE-IN-ASSETS> 675,714
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (342,422)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 96,210
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 203,823
<AVERAGE-NET-ASSETS> 19,246,069
<PER-SHARE-NAV-BEGIN> 10.07
<PER-SHARE-NII> .70
<PER-SHARE-GAIN-APPREC> .44
<PER-SHARE-DIVIDEND> .70
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.51
<EXPENSE-RATIO> .70<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Expenses for the caculation are net of a reimbursement from Securities
Management & 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.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000881166
<NAME> SM&R CAPITAL FUNDS, INC.
<SERIES>
<NUMBER> 02
<NAME> PRIMARY FUND SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 20,913,842
<INVESTMENTS-AT-VALUE> 20,913,842
<RECEIVABLES> 54,863
<ASSETS-OTHER> 591
<OTHER-ITEMS-ASSETS> 66,948
<TOTAL-ASSETS> 21,036,244
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,968
<TOTAL-LIABILITIES> 51,968
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,990,031
<SHARES-COMMON-STOCK> 20,990,035
<SHARES-COMMON-PRIOR> 15,211,965
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,755)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 20,984,276
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 940,824
<OTHER-INCOME> 0
<EXPENSES-NET> 137,463
<NET-INVESTMENT-INCOME> 803,361
<REALIZED-GAINS-CURRENT> (9)
<APPREC-INCREASE-CURRENT> (1,522)
<NET-CHANGE-FROM-OPS> 801,830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 803,361
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,960,125
<NUMBER-OF-SHARES-REDEEMED> 15,015,405
<SHARES-REINVESTED> 833,350
<NET-CHANGE-IN-ASSETS> 5,776,535
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (5,746)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 81,835
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 198,562
<AVERAGE-NET-ASSETS> 16,374,479
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .84<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Expenses for the calculation are net of a reimbursement from Securities
Management & Research, Inc. Without this reimbursement, the ratio of expenses
to average net assets would have been 1.21% for the year ended August 31, 1995.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000881166
<NAME> SM&R CAPITAL FUNDS, INC.
<SERIES>
<NUMBER> 03
<NAME> TAX FREE FUND SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 8,208,779
<INVESTMENTS-AT-VALUE> 8,263,411
<RECEIVABLES> 127,493
<ASSETS-OTHER> 14,700
<OTHER-ITEMS-ASSETS> 15,631
<TOTAL-ASSETS> 8,421,235
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,119
<TOTAL-LIABILITIES> 22,119
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,394,092
<SHARES-COMMON-STOCK> 844,414
<SHARES-COMMON-PRIOR> 758,510
<ACCUMULATED-NII-CURRENT> 2,218
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (51,826)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 54,632
<NET-ASSETS> 8,399,116
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 417,823
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 417,823
<REALIZED-GAINS-CURRENT> (34,685)
<APPREC-INCREASE-CURRENT> 316,014
<NET-CHANGE-FROM-OPS> 699,152
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 415,605
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 60,669
<NUMBER-OF-SHARES-REDEEMED> 19,738
<SHARES-REINVESTED> 44,973
<NET-CHANGE-IN-ASSETS> 1,103,730
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (17,141)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 38,447
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 96,087
<AVERAGE-NET-ASSETS> 7,692,452
<PER-SHARE-NAV-BEGIN> 9.62
<PER-SHARE-NII> .51
<PER-SHARE-GAIN-APPREC> .33
<PER-SHARE-DIVIDEND> .51
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.95
<EXPENSE-RATIO> 0<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Expenses for the calculation are net of a reimbursement from Securities
Management & 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.
</FN>
</TABLE>
