<PAGE> PAGE 1
000 A000000 02/28/98
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007 C020300 TAX FREE FUND SERIES
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008 A00AA01 SECURITIES MANAGEMENT AND RESEARCH, INC.
008 B00AA01 A
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010 A00AA01 SECURITIES MANAGEMENT AND RESEARCH, INC.
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012 A00AA01 SECURITIES MANAGEMENT AND RESEARCH, INC.
012 B00AA01 84-00749
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<PAGE> PAGE 2
012 C02AA01 TX
012 C03AA01 77550
013 A00AA01 TAIT, WELLER & BAKER, CPA
013 B01AA01 PHILADELPHIA
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013 B03AA01 19103
013 B04AA01 2108
014 A00AA01 SECURITIES MANAGEMENT AND RESEARCH, INC.
014 B00AA01 8-12745
015 A00AA01 SECURITIES MANAGEMENT AND RESEARCH, INC.
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022 A000003 FIRST BOSTON CO. (THE)
022 B000003 13-5659485
022 C000003 24323
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022 A000004 J. M. LUMMIS & CO.
022 B000004 06-0909285
022 C000004 8757
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022 A000005 FIRST CHICAGO CAPITAL MARKETS, INC.
022 B000005 36-3595942
022 C000005 7402
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<PAGE> PAGE 3
022 B000006 13-2618466
022 C000006 7040
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022 B000008 94-1671384
022 C000008 0
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022 A000009 SMITH BARNEY, HARRIS UPHAM
022 B000009 13-1912900
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<PAGE> PAGE 4
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<PAGE> PAGE 5
048 A010100 100000
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<PAGE> PAGE 6
066 A000100 N
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<PAGE> PAGE 7
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<PAGE> PAGE 8
028 F040200 1320
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<PAGE> PAGE 9
062 I000200 100.5
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 14
SIGNATURE BRENDA T. KOELEMAY
TITLE VP/TREASURER
[ARTICLE] 6
[CIK] 0000881166
[NAME] SM&R CAPITAL FUNDS, INC.
[SERIES]
[NUMBER] 01
[NAME] GOVERNMENT INCOME FUND SERIES
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] AUG-31-1998
[PERIOD-END] FEB-28-1998
[INVESTMENTS-AT-COST] 22966330
[INVESTMENTS-AT-VALUE] 23800003
[RECEIVABLES] 254728
[ASSETS-OTHER] 2782
[OTHER-ITEMS-ASSETS] 2740
[TOTAL-ASSETS] 24060253
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 145548
[TOTAL-LIABILITIES] 145548
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 23451334
[SHARES-COMMON-STOCK] 2266422
[SHARES-COMMON-PRIOR] 2272181
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (370302)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 833673
[NET-ASSETS] 23914705
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 852723
[OTHER-INCOME] 0
[EXPENSES-NET] 116310
[NET-INVESTMENT-INCOME] 736413
[REALIZED-GAINS-CURRENT] 2788
[APPREC-INCREASE-CURRENT] 333675
[NET-CHANGE-FROM-OPS] 1072876
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 779941
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 79608
[NUMBER-OF-SHARES-REDEEMED] 157847
[SHARES-REINVESTED] 72480
[NET-CHANGE-IN-ASSETS] 231404
[ACCUMULATED-NII-PRIOR] 43534
[ACCUMULATED-GAINS-PRIOR] (373090)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 59803
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 116310
[AVERAGE-NET-ASSETS] 24125304
[PER-SHARE-NAV-BEGIN] 10.42
[PER-SHARE-NII] 0.32
[PER-SHARE-GAIN-APPREC] 0.15
[PER-SHARE-DIVIDEND] 0.34
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.55
[EXPENSE-RATIO] 0.97
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Expenses for the calculation are not net of a reimbursement from Securities
Management & Research, Inc.
</FN>
</TABLE>
[ARTICLE] 6
[CIK] 0000881166
[NAME] SM&R CAPITAL FUNDS, INC.
[SERIES]
[NUMBER] 02
[NAME] PRIMARY FUND SERIES
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] AUG-31-1998
[PERIOD-END] FEB-28-1998
[INVESTMENTS-AT-COST] 32747063
[INVESTMENTS-AT-VALUE] 32747063
[RECEIVABLES] 3647
[ASSETS-OTHER] 2782
[OTHER-ITEMS-ASSETS] 65
[TOTAL-ASSETS] 32753557
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 175266
[TOTAL-LIABILITIES] 175266
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 32584046
[SHARES-COMMON-STOCK] 32584064
[SHARES-COMMON-PRIOR] 33050648
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (5755)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 32578291
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1019610
[OTHER-INCOME] 0
[EXPENSES-NET] 139187
[NET-INVESTMENT-INCOME] 880423
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 880423
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 880423
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 20936864
[NUMBER-OF-SHARES-REDEEMED] 22294230
[SHARES-REINVESTED] 890782
[NET-CHANGE-IN-ASSETS] (466584)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (5755)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 86992
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 172666
[AVERAGE-NET-ASSETS] 35128121
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] 0.00
[PER-SHARE-DIVIDEND] 0.03
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.80
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Expenses for the calculation are net from Securities Management & Research,
Inc. Without this reimbursement, the ratio of expenses to average net assets
would have been 0.99% (annualized) for the six months ended February 28, 1998.
</FN>
</TABLE>
[ARTICLE] 6
[CIK] 0000881166
[NAME] SM&R CAPITAL FUNDS, INC.
[SERIES]
[NUMBER] 03
[NAME] TAX FREE FUND SERIES
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] AUG-31-1998
[PERIOD-END] FEB-28-1998
[INVESTMENTS-AT-COST] 9831286
[INVESTMENTS-AT-VALUE] 10441562
[RECEIVABLES] 143067
[ASSETS-OTHER] 3211
[OTHER-ITEMS-ASSETS] 29211
[TOTAL-ASSETS] 10617051
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 61977
[TOTAL-LIABILITIES] 61977
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 9988441
[SHARES-COMMON-STOCK] 1002040
[SHARES-COMMON-PRIOR] 1041640
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (43643)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 610276
[NET-ASSETS] 10555074
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 288238
[OTHER-INCOME] 0
[EXPENSES-NET] 38389
[NET-INVESTMENT-INCOME] 249849
[REALIZED-GAINS-CURRENT] 6395
[APPREC-INCREASE-CURRENT] 271143
[NET-CHANGE-FROM-OPS] 527387
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 258193
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 23822
[NUMBER-OF-SHARES-REDEEMED] 88598
[SHARES-REINVESTED] 25176
[NET-CHANGE-IN-ASSETS] (145095)
[ACCUMULATED-NII-PRIOR] 8346
[ACCUMULATED-GAINS-PRIOR] (50038)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 26317
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 64706
[AVERAGE-NET-ASSETS] 10615706
[PER-SHARE-NAV-BEGIN] 10.27
[PER-SHARE-NII] 0.26
[PER-SHARE-GAIN-APPREC] 0.26
[PER-SHARE-DIVIDEND] 0.26
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.53
[EXPENSE-RATIO] 0.73
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0<F1>
<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 1.23% (annualized) for the six months
ended February 28, 1998.
</FN>
</TABLE>
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[DESCRIPTION] SUB-ITEM 77K: Changes in registrant's certifying accountant
Effective November 20, 1997, the Registrant's Board of Directors selected the
accounting firm of Tait, Weller & Baker to serve as the Registrant's
independent certified public accountants for the fiscal year ended August 31,
1998 to fill a vacancy in such position in accordance with Section 32(a)(2) of
the Investment Company Act of 1940 resulting from KPMG Peat Marwick LLP's resig-
nation on November 19, 1997. KPMG Peat Marwick LLP has served as the
Registrant's independent certified public accountants for each of the
Registrant's prior two years ended August 31, 1997. KPMG Peat Marwick LLP's
reports on the financial statements of the Registrant for each of the two years
in the period ended August 31, 1997 did not contain an adverse opinion or
disclaimer of opinion or were not qualified or modified as to uncertainty, audit
scope or accounting principles. There were no disagreements with KPMG Peat
Marwick LLP on any matter of accounting principles or practices. Financial
statement disclosure, or auditing scope of procedure during each of the two
years in the period ended August 31, 1997 or the interim period from September
1, 1997 through the date of their resignation.
April 30, 1998
Securities and Exchange Commission
Washington, DC 20549
Ladies and Gentlemen:
We were previously principal accountants for SM&R Capital Funds, and,
under the date of October 10, 1997, we reported on the financial statements of
American National Funds Group as of and for the two years ended August 31,
1997. On November 19, 1997, we resigned. We have read American National Funds
Group's statements as included under Sub-Item 77K of Form N-SAR dated April 30,
1998, and we agree with such statements.
Very truly yours,
KPMG PEAT MARWICK LLP
