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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SM&R CAPITAL FUNDS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SM&R CAPITAL FUNDS, INC
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ONE MOODY PLAZA (409) 763-2767 GALVESTON, TEXAS 77550
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
MAY 28, 1998
To the Stockholders of SM&R Capital Funds, Inc.:
NOTICE IS HEREBY GIVEN THAT a Special Meeting (the "Special Meeting") of the
Stockholders of SM&R Capital Funds, Inc. (the "Fund") will be held at the
principal executive offices of the Fund and of Securities Management and
Research, Inc., One Moody Plaza, 17th Floor, Galveston, Texas 77550, on May 28,
1998, at 9:00 a.m. Central Time, for the following purposes:
1. To ratify or reject the appointment of Tait, Weller & Baker as
independent auditors of the Fund for its fiscal year ending December 31,
1998.
2. To approve or reject certain amendments to the Fund's Articles of
Incorporation.
3. To approve or reject changes to the Fund's investment restrictions.
4. To act on such other matters as may properly come before the meeting or
any adjournment or adjournments thereof.
Only the stockholders of record at the close of business on April 15, 1998, are
entitled to notice of, and to vote at, the Special Meeting. After the Special
Meeting, the Fund does not presently anticipate holding regular annual meetings
except to the extent required by law. A list of the Fund's stockholders is held
in the office of the Fund, One Moody Plaza, Galveston, Texas 77550.
By Order of the Board of Directors
Teresa E. Axelson,
SECRETARY
April , 1998
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IMPORTANT
YOUR COOPERATION IS SOLICITED!
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN, SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY VOTING BALLOT IN THE ENVELOPE
PROVIDED SO THAT A QUORUM WILL BE PRESENT AND THE MAXIMUM NUMBER OF SHARES MAY
BE VOTED. IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO SIGN AND DATE
YOUR PROXY VOTING BALLOT AND RETURN IT. THE PROXY VOTING BALLOT IS REVOCABLE AT
ANY TIME PRIOR TO ITS USE.
A MAJORITY OF THE OUTSTANDING SHARES OF THE FUND MUST BE PRESENT IN PERSON OR BY
PROXY AT THE SPECIAL MEETING. ADDITIONALLY, A MAJORITY OF THE OUTSTANDING SHARES
OF EACH SERIES MUST BE PRESENT IN PERSON OR BY PROXY AT THE SPECIAL MEETING FOR
APPROVAL OF THE PROPOSED CHANGE TO THE INVESTMENT RESTRICTIONS OF THE FUND FOR
EACH SERIES.
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<PAGE>
PROXY STATEMENT FOR
SM&R CAPITAL FUNDS, INC.
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ONE MOODY PLAZA (409) 763-2767 GALVESTON, TEXAS 77550
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GENERAL INFORMATION
This Proxy Statement is being mailed to the stockholders of each series of SM&R
Capital Funds, Inc. (the "Fund") on or about April , 1998, and is furnished in
connection with solicitation of proxies by the Board of Directors of the Fund
for use at the Fund's Special Meeting of Stockholders (the "Special Meeting") to
be held on May 28, 1998, and at any adjournment of such meeting.
A proxy may be revoked at any time prior to the voting thereof by written notice
to the Secretary of the Fund at the address shown above, by personal attendance
at the Special Meeting, or by submitting a proxy bearing a later date. The cost
of printing and mailing this Proxy Statement, the attached Notice and Proxy will
be paid by Securities Management and Research, Inc. ("SM&R"), the Fund's
underwriter and investment adviser.
The Fund is a Maryland corporation consisting of three separate series: the
American National Government Income Fund Series (the "Government Income Fund"),
the American National Primary Fund Series (the "Primary Fund") and the American
National Tax Free Fund Series (the "Tax Free Fund").
April 15, 1998 (the "Record Date") has been fixed as the record date for the
determination of stockholders entitled to notice of and to vote at the Special
Meeting. The Fund had 38,426,174 shares of common stock (the "Common Stock")
outstanding on the record date, consisting of 2,276,045 shares of the Government
Income Fund, 35,139,620 shares of the Primary Fund and 1,010,509 shares of the
Tax Free Fund. Each share of Common Stock outstanding is entitled to one vote,
but votes may not be cumulated. A majority of the outstanding common shares of
the Fund must be present in person or by proxy to constitute a quorum for the
approval of any matter which properly comes before the Special Meeting.
Abstentions and proxies signed and returned by brokers without voting on a
proposal ("Broker Non-Votes") will not be counted for or against the proposal,
but will be counted as votes present for purposes of determining whether a
quorum is present.
If, at the time of the Special Meeting nears, sufficient votes for a quorum have
not been received, the officers of the Fund may make phone calls to certain of
the stockholders in order to gather enough votes for a quorum.
As of the Record Date, SM&R and its parent, American National, together owned
more than 25% of the outstanding voting securities of the Fund and of each
Series, and more than 50% of the outstanding voting securities of the Fund, the
Primary Fund Series and the Tax Free Fund Series. As a holder of more than 25%
of the outstanding voting securities of the Fund and each Series, SM&R and
American National are deemed to control the Fund and the Series, as "control" is
defined the Investment Company Act of 1940 (the "1940 Act"). Moreover, for
purposes of voting on matters submitted to shareholders, SM&R and American
National, as holders of more than 50% of the outstanding voting securities of
the Fund or a Series, generally would be able to cast the deciding vote. Each of
SM&R and American National reserves the right to vote the shares it owns in the
Fund and the Series in its sole discretion, and may or may not vote all of such
shares in the same proportion as votes made by other stockholders of the Fund.
<PAGE>
The following table indicates which shareholders are entitled to vote on each
proposal:
SUMMARY OF VOTING ON PROPOSALS
<TABLE>
<CAPTION>
PROPOSAL SHAREHOLDERS SOLICITED
-------------------------------------------------------------------- ------------------------------------
<S> <C> <C>
1. To ratify or reject the appointment of Tait, Weller & Baker as Shares of all of the Series voting
independent auditors of the Fund for its fiscal year ending December together as one group.
31, 1998.
2. To approve or reject certain amendments to the Fund's Articles of Shares of all of the Series voting
Incorporation together as one group.
3(a) The approval or disapproval of the amendment of the Series' Shares of each Series voting as
investment restriction on issuer diversification. separate groups.
3(b) The approval or disapproval of the restatement of the Series' Shares of each Series voting as
investment restriction on industry concentration. separate groups.
3(c) The approval or disapproval of the amendment of the Series' Shares of each Series voting as
investment restriction on borrowing, margin purchasing, and pledging separate groups.
or mortgaging assets.
3(d) The approval or disapproval of the restatement of the Series' Shares of each Series voting as
investment restriction on lending securities. separate groups.
3(e) The approval or disapproval of the restatement of the Series' Shares of each Series voting as
investment restriction on underwriting. separate groups.
3(f) The approval or disapproval of the restatement of the Series' Shares of each Series voting as
investment restriction on investment in real estate. separate groups.
3(g) The approval or disapproval of the amendment of the Series' Shares of each Series voting as
investment restriction on commodities. separate groups.
3(h) The approval or disapproval of the amendment of the Series' Shares of each Series voting as
investment restriction on senior securities. separate groups.
3(i) The approval or disapproval of the elimination of the Series' Shares of each Series voting as
investment restriction on short sales of securities. separate groups.
3(j) The approval or disapproval of the elimination of the Series' Shares of each Series voting as
investment restriction on investments to exercise control or separate groups.
management.
3(k) The approval or disapproval of the elimination of the Series' Shares of each Series voting as
investment restriction on investing in other investment companies. separate groups.
3(l) The approval or disapproval of the elimination of the Series' Shares of each Series voting as
investment restriction on investment in restricted securities. separate groups.
3(m) The approval or disapproval of the elimination of the Series' Shares of each Series voting as
investment restriction on investments in securities of companies separate groups.
with less than three years' continuous operations.
3(n) The approval or disapproval of the elimination of the Series' Shares of each Series voting as
investment restriction on investments in foreign securities. separate groups.
</TABLE>
2
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<TABLE>
<CAPTION>
PROPOSAL SHAREHOLDERS SOLICITED
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<S> <C> <C>
3(o) The approval or disapproval of the elimination of the Series' Shares of each Series voting as
investment restriction on investments in an issuer of which Fund separate groups.
officers and directors or portfolio managers own more than a certain
percentage.
3(m) The approval or disapproval of the elimination of the Series' Shares of each Series voting as
investment restriction on purchasing warrants. separate groups.
</TABLE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND OFFICERS AND DIRECTORS
According to the Fund's records, the following stockholders owned five percent
(5%) or more of the outstanding Common Stock as of the Record Date:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS SERIES OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ------------------------------------------ ----------------------------------- -------------------- ----------
<S> <C> <C> <C> <C>
Common Stock Government Income American National Insurance 648,445 (direct) 28%
Fund Company(1)
Common Stock Primary Fund American National Insurance 10,197,182 (direct) 29%
Company(1) 14,046,956 40%
(indirect)
Common Stock Tax Free Fund American National Insurance 615,269 (direct) 61%
Company(1)
Common Stock Government Income SM&R(1) 469,916 (direct) 21%
Fund
Common Stock Primary Fund SM&R(1) 779,097 (direct) 2%
Common Stock Tax Free Fund SM&R(1) 123,054 (direct) 12%
Common Stock Government Income The Moody Endowment 306,298 (direct) 14%
Fund 1528 Postoffice
Galveston, Texas 77550
</TABLE>
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(1) The address of American National Insurance Company ("American National") and
SM&R is One Moody Plaza, Galveston, Texas 77550.
The Fund is not aware of any other person (including any "group" as such term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934) who held, of
record or beneficially, more than 5% of Fund Common Stock outstanding on the
Record Date.
SM&R, the investment adviser, manager and underwriter of the Fund, is a
wholly-owned subsidiary of American National. 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 Foundation are Robert L. Moody ("RLM"),
Chairman of the Board, President and Chief Executive Officer of American
National, Frances Moody Newman, RLM's mother, and Ross R. Moody, RLM's son.
The Moody National Bank of Galveston (the "Bank") is the trustee of the Libbie
S. Moody Trust. RLM is Chairman of the Board, President and Chief Executive
Officer of the Bank and 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, own 100% of Bancshares Class B Common Stock (which elects a
majority of Bancshares' directors) and 47.5% of its Class A Common Stock. The
trustee of the Three R Trusts is Irwin M. Herz, Jr., who is also a director of
American National and a
3
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partner in Greer, Herz & Adams, L.L.P., 18th Floor, One Moody Plaza, Galveston,
Texas, General Counsel to American National, SM&R, the Bank, Bancshares, MBHC,
and the Fund.
SECURITY OWNERSHIP OF MANAGEMENT
As of the Record Date, each of the Fund's directors, and the Fund's directors
and officers as a group, had the following ownership in the Fund:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS SERIES OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ----------------- ----------------------------- ---------------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Common Stock Government Income Fund Michael W. McCroskey 2,849 (direct) *
Common Stock Primary Fund Michael W. McCroskey 37,110 (direct) *
Common Stock Tax Free Fund Michael W. McCroskey 3,678 (direct) *
Common Stock Primary Fund Edwin K. Nolan 1,704 (direct) *
Common Stock Government Income Fund Directors and Executive 2,913 (direct) *
Officers as a group
Common Stock Primary Fund Directors and Executive 55,678 (direct) *
Officers as a group
Common Stock Tax Free Fund Directors and Executive 3,678 (direct) *
Officers as a group
</TABLE>
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* Less than 1% owned. The information above was furnished by the Fund's
directors and officers.
PROPOSAL 1. AUDITORS
(ITEM 1 ON PROXY CARD)
The Audit Committee and Board of Directors appointed Tait, Weller & Baker
("TWB") as the Fund's independent auditors for the fiscal year ended August 31,
1998. KPMG Peat Marwick ("KPMG") served as the Fund's auditor for the last
fiscal year, however, due to a concern over a potential conflict of interest,
the Audit Committee and Board of Directors decided not to appoint KPMG for the
current fiscal year.
There is no disagreement between the Fund and KPMG. At no time did KPMG's report
on the Fund's financial statements contain an adverse opinion or a disclaimer of
opinion or any qualification or modification as to uncertainty, audit scope, or
accounting principles. At no time were there any disagreements with KPMG on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of KPMG, would have caused it to make a reference to the subject
matter of the disagreements in connection with its reports.
The Fund does not expect representatives of KPMG or Tait, Weller & Baker to
attend this Special Meeting.
REQUIRED VOTE
Ratification of the selection of TWB as independent auditors requires, as to the
entire Fund, the affirmative vote of a majority of the shares present (in person
or by proxy) at the Meeting, provided that at least a majority of the
outstanding shares entitled to be cast are present at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF TWB AS THE FUND'S
INDEPENDENT AUDITORS.
PROPOSAL 2. PROPOSED AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION
(ITEM 2 ON PROXY CARD)
Recently, mutual funds with "multi-classes" have become increasing popular.
Issuing different "classes" of shares with different expenses (such as sales
charge) would allow the Fund substantially more flexibility in
4
<PAGE>
the marketing of its shares. Such flexibility would open up additional
distribution channels and opportunities which could result in substantial growth
for the Fund.
In a multi-class fund, each "series" (or portfolio) of shares is divided into
"classes." The underlying investments of each class in a series are the same,
but different sales and other charges are imposed on the different classes to
facilitate distribution through different channels or to investors with
different preferences as to charges.
The multi-class structure would also permit adoption of 12b-1 plans for one or
more of the new classes. A 12b-1 plan allows the Fund to assess asset-based fees
in order to cover distribution expenses. Of course, if such a plan is adopted
and it applies to existing shareholders, such shareholders would need to approve
the plan.
The Fund's Board of Directors proposes changes in the Fund's Articles of
Incorporation to allow for different classes of shares in each Series with
different sales loads and other fees and expenses and/or different services. It
is currently anticipated that such classes of shares would be created and sold
as soon as reasonably practicable, probably in the last quarter of 1998. In
conjunction with this plan, sales of new accounts in the current class would
probably end, but existing shareholders would still be allowed to make
additional investments in their accounts, and their fees and expenses would not
be increased as a result of this plan. On the other hand, the plan is intended
to increase the Fund's assets through sales of the other classes and the
increased asset base could have a positive effect on performance and could also
reduce the Fund's expense ratio. A vote in favor of the revisions to the
Articles of Incorporation is therefore a vote in favor of the plan to create new
classes of shares.
In addition, the Fund's Board of Directors has approved certain other "clean-up"
amendments to the Fund's Articles of Incorporation. Most of these "clean-up"
amendments are intended to conform the Fund's articles of incorporation with
those of other funds advised by SM&R. The amendments can be summarized as
follows:
<TABLE>
<S> <C>
Article III, Section The changes are simply to add a comma after the words in parentheses
(1): and insert the words "in any way" before the phrase "incidental
thereto".
Article III, Section The changes are simply to make the works "amount" and "kind" plural.
(3):
Article V: The modifications to this Article were necessary to provide for
multiple series and classes of capital stock and the preferences,
conversion and other rights, voting powers, restrictions, and
limitations associated therewith.
Article VII, Section The words "and qualify" are being deleted.
(2):
Article VII, Section The word "full" is being changed to "fullest" and the word "may" is
(5): being deleted before the phrase "be in effect".
Article VII, Section As amended, the Amended and Restated Articles of Incorporation for
(7): the Fund would read as shown in Appendix A.
</TABLE>
REQUIRED VOTE
The amendment of the Articles of Incorporation requires, as to the entire Fund,
the affirmative vote of a majority of all of the votes entitled to be cast at
the Meeting, provided that at least a majority of the outstanding shares
entitled to be cast are present at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF EACH SERIES VOTE "FOR"
THE APPROVAL OF THE PROPOSED AMENDMENT AND RESTATEMENT OF THE FUND'S ARTICLES OF
INCORPORATION.
5
<PAGE>
PROPOSALS 3(a) - 3(p). APPROVAL OR DISAPPROVAL OF THE AMENDMENT,
RESTATEMENT OR ELIMINATION OF THE SERIES' INVESTMENT RESTRICTIONS
(ITEM 3 ON PROXY CARD)
For each proposed change or element of this Proposal the relevant current
self-designated restriction is described below. The effect of a "FOR" vote on
each element of Proposal 3 is detailed, i.e., whether the current
self-designated restriction will be: (i) amended; (ii) restated; or (iii)
eliminated entirely. If a proposed restriction will amend or restate the current
self-designated restriction, then such proposed amendment or restatement is also
described in detail.
The Board of Directors recommends to shareholders of each Series that they
approve proposals to amend, restate or eliminate the Series' current investment
restrictions. These investment restrictions are fundamental policies that may be
changed by a Series only with the approval of a majority of the outstanding
shares of that Series, as determined by the provisions of the 1940 Act. The
entire slate of proposed fundamental restrictions as well as the current
fundamental restrictions are provided in Exhibit B for your reference when
deciding whether to vote on the proposed changes as a group or individually.
Each proposed fundamental restriction is also specifically discussed below where
appropriate. Each Series may adopt additional or supplemental fundamental
investment restrictions if required by federal regulators or if determined by
the Board of Directors to be necessary or desirable. The proposed restrictions
meet all of the requirements of the 1940 Act and no other fundamental investment
restrictions beside those set forth in Exhibit B are presently required by the
1940 Act.
One reason for amending, restating or eliminating the Series' investment
restrictions is to adopt, insofar as possible, a uniform statement of investment
restrictions for the mutual funds advised by SM&R, as well as for funds that may
be created in the future. Such uniformity would facilitate the comparison of the
investment restrictions of different funds, as well as the administration of the
investment restrictions by the portfolio managers. The proposals would also
result in a clearer and simpler statement of these investment restrictions.
Another reason for amending, restating or eliminating the Series' investment
restrictions is to modernize the investment restrictions. Certain of the
fundamental investment restrictions reflect regulatory, business or industry
conditions, practices or requirements which at one time led the Board of
Directors to impose them on the management of the Series' investments. The
Directors believe that the passage of time, changes in regulatory standards, or
the development of new practices have rendered certain of the Series'
fundamental investment restrictions unnecessary or unwarranted. In certain
cases, investment restrictions were adopted in response to state securities laws
and regulations restricting certain types of investment company practices and
investments. Because the states no longer have the power to enforce these
investment restrictions in light of the National Securities Markets Improvement
Act of 1996 ("NSMIA"), the elimination of these restrictions may expand the
range of investment opportunities and techniques available in connection with
the management of the Series' portfolios. In other cases, fundamental
restrictions reflect federal, regulatory requirements that remain in effect, but
that are not required to be fundamental restrictions.
The Directors propose to amend or eliminate those investment restrictions that
are redundant or that are inconsistent with current regulatory standards or
industry practice. In particular, the Directors propose to eliminate certain
fundamental investment restrictions that are no longer legally required, and to
amend certain fundamental investment restrictions that are more restrictive than
currently is required by law. The Directors believe that eliminating or amending
such restrictions would afford the Series greater flexibility in responding to
investment opportunities that may arise from time to time.
The Directors also propose to eliminate other fundamental investment
restrictions that are not required to be fundamental. It is anticipated that, if
the shareholders of a Series vote to eliminate such a fundamental investment
restriction, the Board of Directors would adopt a new non-fundamental policy in
lieu of that
6
<PAGE>
restriction. Non-fundamental investment restrictions may be adopted or changed
by the Board of Directors, without seeking approval from shareholders. The
Directors believe that reducing the number of restrictions that can be changed
only by shareholder vote will result in an enhanced ability to modify investment
policies, as appropriate, to respond to changing markets and new investment
opportunities, and will minimize costs and delay associated with soliciting
shareholders when new opportunities or market changes arise. Finally, the
Directors propose to restate certain of the Series' investment restrictions, as
described below, in order to render clearer and simpler statements of the
Series' fundamental policies.
The Directors do not anticipate that the proposed amendment, restatement, or
elimination of the Series' investment restrictions will result in a material
change in the level of risk associated with an investment in any Series. If the
proposed changes are approved by shareholders of a Series at the Meeting, the
Fund's registration statement, including its prospectus and statement of
additional information, would be revised, as appropriate, to reflect such
changes and, as necessary, to reflect modified investment policies. Any
amendment, restatement or elimination of an investment restriction would be
effective upon the effective date of the revised registration statement. In the
event that an amendment, restatement, or elimination of a restriction or
restrictions is not approved by a Series' shareholders, that Series will retain
the current fundamental restriction or restrictions, as applicable.
VOTING PROCEDURES
Each element of Proposal 3, as discussed below and presented on the proxy voting
ballot, may be voted on either (i) as a group or (ii) by each element (not
both). If the entire slate of Proposal 3 is approved, each Series will have no
fundamental investment policies or investment restrictions except those set
forth in Exhibit B.
If shareholders of a Series approve some, but not all, of the proposed
modifications, a Series will have a combination of certain current
self-designated restrictions and certain proposed restrictions. In that event,
each Series would have as its only fundamental restrictions the combination of
(i) approved proposed restrictions, and (ii) current self-designated
restrictions which were retained by shareholder vote.
A vote on the entire group of proposed modifications will be counted as if it
were a vote on each separate proposed modification. For example, a vote "FOR"
the entire group of proposed modifications on the proxy voting ballot will be
counted as a vote "FOR" each proposed modification. In the event that a proxy
voting ballot is returned with a vote on the entire slate and a vote on a
specific element of Proposal 3, the vote on the entire slate of proposed will be
considered determinative of, and counted as, the shareholder's intended vote. If
any part of Proposal 3 is adopted, then the Fund's Prospectus and Statement of
Additional Information will be revised to reflect the changes in the Fund's
fundamental investment policies and restrictions when such changes become
effective.
The Board of Directors believes that submitting each element of Proposal 3 to
each Series shareholders at this time is in the shareholders' and each Series
best interest because it takes advantage of the opportunity afforded the need to
submit Proposal 2 above to the Fund's shareholders. This will potentially spare
each Series the extra cost and time delay of having a subsequent shareholder
meeting to consider changes to each Series current self-designated restrictions.
PROPOSAL 3(a): THE APPROVAL OR DISAPPROVAL OF THE AMENDMENT OF THE SERIES'
INVESTMENT RESTRICTION ON ISSUER DIVERSIFICATION.
Each Series' current investment restrictions prohibit it: (i) from investing
more than 5% of the value of the net assets of the Series, at the time of
purchase, in the securities of any one issuer (other than securities issued or
guaranteed by the U.S. government or its instrumentalities), and (ii) from
purchasing any security (other than U.S. government obligations) if, as a
result, the Fund would hold more than 10% of the total value of any class of
outstanding securities or 10% of the outstanding voting securities of an issuer.
7
<PAGE>
To be diversified under the 1940 Act, a Series must not, with respect to 75% of
its total assets, invest more than 5% of its total assets in the securities of
any one issuer or acquire more than 10% of the outstanding voting securities of
any one issuer. These restrictions apply only at the time of investment. A
Series may invest up to 25% of its total assets without regard to these
restrictions. In addition, these restrictions do not apply to holdings of or
investments in cash, cash items, U.S. Government securities, or securities of
other investment companies. The Board of Directors proposes amending the
investment restrictions of each Series to be uniform and to require
diversification only to the extent that is required under the 1940 Act.
Additional diversification requirements are required for the Series to be
treated as regulated investment companies for federal income tax purposes. These
tax-based requirements are not required to be reflected in the proposed
investment restrictions and will not be affected by the proposal.
The Board of Directors proposes that each Series adopt the following investment
restriction in lieu of its current fundamental policy on issuer diversification:
THE SERIES, WITH RESPECT TO 75% OF THE SERIES' TOTAL ASSETS, MAY NOT PURCHASE
SECURITIES OF AN ISSUER (OTHER THAN CASH OR CASH ITEMS, OR SECURITIES OF THE
U.S. GOVERNMENT, ITS AGENCIES, OR INSTRUMENTALITIES OR OF OTHER INVESTMENT
COMPANIES), IF (I) SUCH PURCHASE WOULD CAUSE MORE THAN 5% OF THE SERIES' TOTAL
ASSETS TAKEN AT MARKET VALUE TO BE INVESTED IN THE SECURITIES OF SUCH ISSUER, OR
(II) SUCH PURCHASE WOULD AT THE TIME RESULT IN MORE THAN 10% OF THE OUTSTANDING
VOTING SECURITIES OF SUCH ISSUER BEING HELD BY THE SERIES.
PROPOSAL 3(b): THE APPROVAL OR DISAPPROVAL OF THE RESTATEMENT OF THE SERIES'
INVESTMENT RESTRICTION ON INDUSTRY CONCENTRATION.
The 1940 Act requires that an open-end investment company adopt a policy, which
cannot be changed without shareholder approval, stating whether 25% or more of
the fund's assets can be invested or "concentrated" in the securities of issuers
in any one industry. The limitation does not apply to investments in U.S.
Government securities. Each of the Series has adopted a policy not to
concentrate in the securities of issuers in any one industry. While not
representing a change in investment policy, management recommends that it would
be in the best interest of the Series to conform the wording of their investment
policies on industry concentration.
The Board of Directors proposes that each Series adopt the following investment
restriction in lieu of its current fundamental policy on industry concentration:
THE SERIES MAY NOT INVEST 25% OR MORE OF ITS TOTAL ASSETS IN THE SECURITIES OF
ONE OR MORE ISSUERS CONDUCTING THEIR PRINCIPAL BUSINESS ACTIVITIES IN THE SAME
INDUSTRY (EXCLUDING THE U.S. GOVERNMENT OR ANY OF ITS AGENCIES OR
INSTRUMENTALITIES).
PROPOSAL 3(c): THE APPROVAL OR DISAPPROVAL OF THE AMENDMENT OF THE SERIES'
INVESTMENT RESTRICTION ON BORROWING, MARGIN PURCHASING, AND PLEDGING OR
MORTGAGING ASSETS.
The 1940 Act requires that a mutual fund adopt a policy, which cannot be changed
without shareholder approval, on borrowing. Each Series currently has a
limitation upon borrowing except for temporary or emergency purposes in an
amount not to exceed 10% of net assets. The 1940 Act prohibits an open-end
investment company from issuing any senior security (including debt), except
that an open-end investment company may borrow from banks in an amount not
exceeding 33 1/3% of its total assets. The Board of Directors is recommending
that the Series adopt a uniform borrowing policy (i) permitting borrowing up to
the maximum allowed by the 1940 Act, and (ii) permitting the Series to enter
into mortgage dollar rolls accounted for as a financing. For purposes of the
Series' policy on borrowing, the Series do not consider certain investments and
practices to be borrowings, including short sales, currency transactions,
mortgage dollar rolls which are not accounted for as financing, forward
contracts, swaps, interest rate caps, floors and collars, options, futures
contracts, options on futures contracts, and forward commitment transactions.
Each Series also has a fundamental investment policy limiting the purchase of
securities on margin. Margin purchases involve the purchase of securities with
money borrowed from a broker. "Margin" is the cash or
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<PAGE>
eligible securities that the borrower places with its broker as collateral for
this loan. In general, each Series' current fundamental policy prohibits the
Series from purchasing securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions.
The Series' fundamental policy on pledging or mortgaging their respective assets
was a requirement imposed by state securities laws that no longer applies to the
Series. Consequently, it is proposed that such restriction be eliminated.
The Board of Directors proposes that each Series adopt the following investment
restriction in lieu of its current fundamental policies on borrowing, margin
purchases, and pledging assets:
THE SERIES MAY NOT BORROW MONEY, EXCEPT (A) THE SERIES MAY BORROW FROM BANKS (AS
DEFINED IN THE ACT) OR THROUGH REVERSE REPURCHASE AGREEMENTS IN AMOUNTS UP TO
33 1/3% OF ITS TOTAL ASSETS (INCLUDING THE AMOUNT BORROWED), (B) THE SERIES MAY,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROW UP TO AN ADDITIONAL 5% OF ITS
TOTAL ASSETS FOR TEMPORARY PURPOSES, (C) THE SERIES MAY OBTAIN SUCH SHORT-TERM
CREDITS AS MAY BE NECESSARY FOR THE CLEARANCE OF PURCHASES AND SALES OF
PORTFOLIO SECURITIES, (D) THE SERIES MAY PURCHASE SECURITIES ON MARGIN TO THE
EXTENT PERMITTED BY APPLICABLE LAW, AND (E) THE SERIES MAY ENGAGE IN
TRANSACTIONS IN MORTGAGE DOLLAR ROLLS WHICH ARE ACCOUNTED FOR AS FINANCINGS.
PROPOSAL 3(d): THE APPROVAL OR DISAPPROVAL OF THE RESTATEMENT OF THE SERIES'
INVESTMENT RESTRICTION ON LENDING SECURITIES.
The 1940 Act requires that a mutual fund adopt a policy, which cannot be changed
without shareholder approval, on loans. The current policy prohibits loans other
than by the purchase of publicly distributed bonds, debentures, notes,
to-be-announced securities or other debt securities, but does allow securities
of the Government Income Series to be loaned to broker-dealers or other
institutional investors in an amount not to exceed ten percent of that Series'
net assets. The proposed restatement of the Series' policy would prohibit the
Series from making loans except through the purchase of debt obligations,
repurchase agreements, and loans of securities as permitted by applicable law.
The Board of Directors proposes that each Series adopt the following investment
restriction in lieu of its current fundamental policy on lending securities:
THE SERIES MAY NOT MAKE LOANS, EXCEPT THROUGH (A) THE PURCHASE OF DEBT
OBLIGATIONS IN ACCORDANCE WITH THE SERIES' INVESTMENT OBJECTIVE AND POLICIES,
(B) REPURCHASE AGREEMENTS WITH BANKS, BROKERS, DEALERS, AND OTHER FINANCIAL
INSTITUTIONS, AND (C) LOANS OF SECURITIES AS PERMITTED BY APPLICABLE LAW.
PROPOSAL 3(e): THE APPROVAL OR DISAPPROVAL OF THE RESTATEMENT OF THE SERIES'
INVESTMENT RESTRICTION ON UNDERWRITING.
The 1940 Act requires that a mutual fund adopt a policy, which cannot be changed
without shareholder approval, on underwriting securities issued by other
issuers. The proposed restatement of the Series' policy, which does not
represent a material change in investment policy, would prohibit the Series from
underwriting the securities of other issuers (which is not a part of the normal
activities of a mutual fund).
The Board of Directors proposes that each Series adopt the following investment
restriction in lieu of its current fundamental policy on underwriting:
THE SERIES MAY NOT UNDERWRITE SECURITIES ISSUED BY OTHERS, EXCEPT TO THE EXTENT
THAT THE SALE OF PORTFOLIO SECURITIES BY THE SERIES MAY BE DEEMED TO BE AN
UNDERWRITING.
PROPOSAL 3(f): THE APPROVAL OR DISAPPROVAL OF THE RESTATEMENT OF THE SERIES'
INVESTMENT RESTRICTIONS ON INVESTMENT IN REAL ESTATE.
The 1940 Act requires that a mutual fund adopt a policy, which cannot be changed
without shareholder approval, on acquiring interests in real estate. The current
investment restrictions prohibit a Series from acquiring, leasing or holding
real estate except such as may be necessary or advisable for the maintenance of
its offices. A separate restriction discussed in Proposal 3(g) allows Series to
invest in securities which are
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<PAGE>
secured by real estate or real estate mortgages and securities of issuers which
invest or deal in real estate mortgages. The proposed new restriction relating
to real estate combines the two current restrictions.
The Board of Directors proposes that each Series adopt the following investment
restriction in lieu of its current fundamental policy on investment in real
estate:
THE SERIES MAY NOT PURCHASE, HOLD OR DEAL IN REAL ESTATE, ALTHOUGH THE SERIES
MAY PURCHASE AND SELL SECURITIES THAT ARE SECURED BY REAL ESTATE OR INTERESTS
THEREIN, SECURITIES OF REAL ESTATE INVESTMENT TRUSTS, AND MORTGAGE-RELATED
SECURITIES AND MAY HOLD AND SELL REAL ESTATE ACQUIRED BY THE SERIES AS A RESULT
OF THE OWNERSHIP OF SECURITIES.
PROPOSAL 3(g): THE APPROVAL OR DISAPPROVAL OF THE AMENDMENT OF THE SERIES'
INVESTMENT RESTRICTION ON COMMODITIES.
The 1940 Act requires that a mutual fund have a fundamental investment policy
regarding investments in commodities. The current investment restriction
provides that the Series will not invest in commodities and commodity contracts,
put or call options or any combination thereof, or interests in oil, gas or
other mineral exploration or development programs. However, this restrictions
allows any Series to 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. (The real estate implications of this restriction are
discussed in Proposal 3(f) above.) While the Series do not invest in physical
commodities or commodity contracts, the Series may, in certain circumstances,
appropriately enter into financial futures contracts, options on futures and, in
certain cases, currency contracts. Any financial futures contract or related
option is considered to be a commodity contract. Other types of financial
instruments, such as forward commitments and swaps, might also be deemed to be
commodity contracts. The amendment is being proposed to enable each Series to
enter into financial futures contracts and related options for hedging and other
permissible purposes and to clarify that certain practices in which a Series
engages (such as forward foreign currency contracts) or might in the future
engage (such as swaps) are not subject to this restriction.
The existing restriction on investment in puts, calls, or any combination
thereof was imposed by state law and is no longer required. While the Series do
not intend to invest in puts or calls or combinations thereof, it is proposed
that the restriction on these interests be eliminated. The existing restriction
on investment in oil and gas interests also was imposed by state law and is no
longer required. While the Series do not intend to invest in such interests or
in securities of issuers who invest in such interests, it is proposed that the
restriction on oil and gas interests be eliminated.
The Board of Directors proposes that each Series adopt the following investment
restriction in lieu of its current fundamental policy with respect to
commodities:
THE SERIES MAY NOT INVEST IN COMMODITIES OR COMMODITY CONTRACTS, EXCEPT THAT THE
SERIES MAY INVEST IN CURRENCY AND FINANCIAL INSTRUMENTS AND CONTRACTS THAT ARE
COMMODITIES OR COMMODITY CONTRACTS.
PROPOSAL 3(h): THE APPROVAL OR DISAPPROVAL OF THE AMENDMENT OF THE SERIES'
INVESTMENT RESTRICTION ON SENIOR SECURITIES.
The current investment restrictions prohibit the issuance of "senior
securities." The 1940 Act restricts the ability of an open-end investment
company to issue senior securities as defined in the 1940 Act and requires that
an a mutual fund adopt a fundamental policy with respect to the issuance of such
securities. The proposed amendment would make the investment restriction on
senior securities uniform among the Series and clarify that the Series are
permitted to issue senior securities to the extent permitted by applicable law.
As discussed above, under the 1940 Act, a mutual fund is not permitted to issue
senior securities except for borrowings from banks. In addition to permitting
the borrowing contemplated above, the amendment clarifies that the Series do not
consider certain investment practices, such as forward purchases of securities
and currencies, options and futures transactions, which may have a leverage
effect
10
<PAGE>
on the Series to be senior securities if such practices are conducted in a
manner consistent with current law and the interpretive positions of the
Securities and Exchange Commission.
The Board of Directors proposes that each Series adopt the following investment
restriction in lieu of its current fundamental policy on senior securities:
THE SERIES MAY NOT ISSUE SENIOR SECURITIES TO THE EXTENT SUCH ISSUANCE WOULD
VIOLATE APPLICABLE LAW.
PROPOSAL 3(i): THE APPROVAL OR DISAPPROVAL OF THE ELIMINATION OF THE SERIES'
INVESTMENT RESTRICTION ON SHORT SALES OF SECURITIES.
The Series have a fundamental investment policy limiting short sales of
securities. In a short sale, an investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. The
Board of Directors recommends that shareholders vote to eliminate this
fundamental investment restriction. If shareholders approve the elimination of
this investment restriction, the Board of Directors plans to adopt a
non-fundamental investment policy prohibiting the Series from engaging in the
strategy of short sales of securities. Under this investment policy, which could
be changed by the Board without shareholder approval, entering into short sales
"against the box" would not be deemed to be engaging in the strategy of short
sales of securities. In a short sale "against the box," a Series could engage in
short sale if it owned, or, by virtue of its ownership of other securities, had
the right to obtain, securities equivalent in kind and amount to the securities
sold short.
The Board of Directors proposes that each Series adopt the following
non-fundamental investment restriction in lieu of its current fundamental policy
on short sales of securities:
THE SERIES MAY NOT ENGAGE IN THE STRATEGY OF SHORT SALES OF SECURITIES.
PROPOSAL 3(j): THE APPROVAL OR DISAPPROVAL OF THE ELIMINATION OF THE SERIES'
INVESTMENT RESTRICTION ON INVESTMENTS TO EXERCISE CONTROL OR MANAGEMENT.
The Series currently have a fundamental investment restriction that prohibits
them from investing in a company for the purpose of exercising control or
management. This restriction was mandated by certain state securities laws. The
1940 Act currently does not contain any equivalent restrictions. As a result of
the recent enactment of NSMIA, state law restrictions on investment to exercise
control or management no longer apply to the Series. The Board of Directors
therefore has concluded that it is in the best interests of each Series and its
shareholders to eliminate such restriction.
PROPOSAL 3(k): THE APPROVAL OR DISAPPROVAL OF THE ELIMINATION OF THE SERIES'
INVESTMENT RESTRICTION ON INVESTING IN OTHER INVESTMENT COMPANIES.
The Series currently have a fundamental investment restriction regarding
investments in securities issued by other investment companies, except pursuant
to a plan of merger, consolidation, or acquisition of assets approved by
shareholders. The 1940 Act limits the extent to which mutual fund may invest in
other investment companies. The 1940 Act does not, however, require investment
companies to adopt a fundamental restriction with respect to investment in other
investment companies. The Series' current fundamental investment restriction is
redundant in that it merely recites prohibitions set forth in the 1940 Act with
respect to investments in other investment companies. The Board of Directors
believes that such fundamental investment restriction is unnecessary, and should
be eliminated. Moreover, the Board believes that the 1940 Act provisions
regarding investment in other investment companies may change from time to time,
and therefore the fundamental restriction on such investment should be
eliminated in order to permit a Series maximum flexibility in responding to a
changing regulatory environment. The Directors believe it is in the best
interests of each Series and its shareholders to eliminate the current
restriction on investment in other investment companies.
11
<PAGE>
PROPOSAL 3(l): THE APPROVAL OR DISAPPROVAL OF THE ELIMINATION OF THE SERIES'
RESTRICTION ON INVESTMENT IN RESTRICTED SECURITIES.
The Board of Directors is recommending that the current investment restriction
be changed to limit each Series' investments in "illiquid" (rather than
"restricted") securities to 15% of its net assets (10% for any money market
Series). This will permit a Series to invest in certain securities such as Rule
144A securities, foreign securities, or so-called "Section 4(2)" commercial
paper that, while presumptively restricted, could be determined under procedures
approved by the Board to be "liquid."
The Series currently have a fundamental investment restriction limiting
investment in restricted securities. Restricted securities are those that are
subject to legal or contractual delays on resale. The current fundamental
investment restriction limits investment in all restricted securities, including
"liquid" and "illiquid" restricted securities. Illiquid securities are those
which may not be sold or disposed of in the ordinary course of business within
seven days at approximately the value at which a Series has valued the
investment. The types of securities that are considered illiquid will vary over
time based on changing market conditions and regulatory interpretations. Under
current SEC staff interpretations, a mutual fund, other than a money market
mutual fund, must limit investment in illiquid securities to 15% of its net
assets. A money market mutual fund must limit illiquid investments to 10% of its
net assets.
The Board of Directors believes that the Series' current fundamental investment
restriction on restricted securities is more limiting than is required under
current law in that it encompasses both liquid and illiquid restricted
securities. The Board proposes that the fundamental investment restriction on
restricted securities be eliminated. If the shareholders of a Series vote to
eliminate that Series' investment restriction on restricted securities, it is
anticipated that the Board of Directors would adopt a non-fundamental policy on
investment in illiquid securities that is consistent with the SEC staff
position. The change would expand a Series' ability to invest in securities that
have restrictions on resale but that may be determined to be liquid pursuant to
guidelines and procedures adopted by the Board of Directors. Such liquid
restricted securities would include securities with restrictions on resale that
nonetheless have a readily available institutional market, such as commercial
paper and securities eligible for resale under Rule 144A under the Securities
Act of 1933. The Board of Directors believes that eliminating the Series'
fundamental restriction on restricted securities will permit these Series to
take advantage of the increasingly liquid institutional trading markets.
The Board of Directors proposes that each Series adopt the following
non-fundamental investment restriction in lieu of its current fundamental policy
on restricted securities:
THE SERIES MAY NOT PURCHASE ANY SECURITY WHICH IS AN "ILLIQUID SECURITY" IF MORE
THAN 15% (10% FOR A MONEY MARKET SERIES) OF THE NET ASSETS OF THE SERIES TAKEN
AT MARKET VALUE WOULD BE INVESTED IN SUCH SECURITIES.
PROPOSAL 3(m): THE APPROVAL OR DISAPPROVAL OF THE ELIMINATION OF THE SERIES'
INVESTMENT RESTRICTION ON INVESTMENTS IN SECURITIES OF COMPANIES WITH LESS THAN
THREE YEARS' CONTINUOUS OPERATIONS.
The Series currently have a fundamental investment restriction that prohibits
purchasing any securities issued by a corporation which has not been in
continuous operation for three years (typically referred to as "unseasoned
issuers"). This investment restriction is based on restrictions on investment in
unseasoned issuers contained in certain state securities laws and regulations.
The 1940 Act currently does not contain any equivalent restrictions. As a result
of the recent enactment of NSMIA, state law restrictions on permissible
investments no longer apply to the Series. The Directors therefore have
concluded that it is in the best interests of the Series and their shareholders
to eliminate the policy on unseasoned issuers. In addition, the Directors
believe that elimination of this policy will increase the Series' flexibility to
invest in unseasoned issuers that otherwise might meet their investment
objectives and policies.
Securities of unseasoned issuers may be subject to greater risk than securities
of more established companies because these issuers have only a brief operating
history and may have more limited markets and financial resources. However, the
Directors believe that the increasing prevalence of unseasoned
12
<PAGE>
issuers, the investment opportunities offered by such issuers, and the fact that
any such investments will be made in accordance with the investment objectives
and policies of the Series warrants the elimination of the current policy.
The Directors believe it is in the best interests of the Series and their
shareholders to eliminate the current restriction on investment in unseasoned
issuers.
PROPOSAL 3(n): THE APPROVAL OR DISAPPROVAL OF THE ELIMINATION OF THE SERIES'
INVESTMENT RESTRICTION ON INVESTMENTS IN FOREIGN SECURITIES.
The Series currently have a fundamental investment restriction that prohibits
them from investing in foreign securities. This restriction was required by
certain state securities laws. The 1940 Act does not contain any specific
restrictions on investing in foreign securities. As a result of the recent
enactment of NSMIA, state law restrictions on permissible investments no longer
apply to the Series. The Directors therefore have concluded that it is in the
best interests of each Series and its shareholders to eliminate the current
restriction on investing in foreign securities.
PROPOSAL 3(o): THE APPROVAL OR DISAPPROVAL OF THE ELIMINATION OF THE SERIES'
INVESTMENT RESTRICTION ON INVESTMENTS IN AN ISSUER OF WHICH FUND OFFICERS AND
DIRECTORS OR PORTFOLIO MANAGERS OWN MORE THAN A CERTAIN PERCENTAGE.
The Series currently have a fundamental investment restriction that prohibits
them from investing in the 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 own more than 5% of
the securities of that issuer. This restriction was mandated by certain state
securities laws. The 1940 Act currently does not contain any equivalent
restrictions. As a result of the recent enactment of NSMIA, state law percentage
restrictions on investment by Fund management no longer apply to the Series. The
Directors therefore have concluded that it is in the best interests of each
Series and its shareholders to eliminate such restriction.
PROPOSAL 3(p): THE APPROVAL OR DISAPPROVAL OF THE ELIMINATION OF THE SERIES'
INVESTMENT RESTRICTION ON PURCHASING WARRANTS.
The Series currently have a fundamental investment restriction that prohibits
them from purchasing warrants. This restriction was mandated by certain state
securities laws. The 1940 Act does not contain any specific restrictions on
purchasing warrants. The Directors therefore have concluded that it is in the
best interests of each Series and its shareholders to eliminate the current
restriction on purchasing warrants.
REQUIRED VOTE
Approval of each proposed amendment, restatement or elimination of a Series'
fundamental investment restrictions requires the affirmative vote of a majority
of the outstanding shares of that Series, as determined by the provisions of the
1940 Act. Pursuant to the 1940 Act, a "vote of a majority of the Fund's
outstanding voting securities" means the approval by the lesser of (i) more than
50% of the Fund's outstanding voting securities, or (ii) 67% or more of the
Fund's outstanding voting securities present at a meeting if the holders of more
than 50% of the outstanding voting securities of the Fund are present (in person
or by proxy). If a proposed amendment is not approved with respect to a Series,
the current investment restriction will continue in effect unchanged for a
Series.
BOARD OF DIRECTORS' RECOMMENDATION
The Board of Directors believes that each proposed amendment, restatement, or
elimination of the Series' fundamental investment restrictions will more clearly
reflect current regulatory practice, will provide a more complete range of
investment opportunities, and will clarify and simplify the Series'
restrictions.
13
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF EACH SERIES VOTE "FOR"
THE APPROVAL OF THE AMENDMENT, RESTATEMENT, OR ELIMINATION OF EACH SERIES'
INVESTMENT RESTRICTIONS.
STOCKHOLDER PROPOSALS
As a general matter, the Fund does not hold annual meetings of shareholders,
and, therefore, the anticipated date of the next special meeting of shareholders
of a Series cannot be provided. Any shareholder proposal that properly may be
included in proxy solicitation materials for a special meeting of shareholders
must be received by the Fund a reasonable time prior to the date voting
instructions or proxy materials are mailed to shareholders. Any such proposals
must comply with the requirements of Rule 14a-8 promulgated under the Securities
Exchange Act of 1934.
ANNUAL REPORT
The financial statements of the Fund, as contained in the Annual Report, should
be read in conjunction with this Proxy Statement. A copy of the Annual Report of
the Fund for the fiscal year ended August 31, 1997, including financial
statements, was mailed to stockholders in October, 1997. The Fund will furnish,
without charge, a copy of the Annual Report to a stockholder upon request. Any
such request should be made to Teresa E. Axelson, Secretary of the Fund, at One
Moody Plaza, Galveston, Texas 77550 or (800) 526-8346, ext. 229.
OTHER BUSINESS
Management knows of no other business which will be presented for consideration
at the meeting other than as stated above. If any other business shall properly
come before the meeting, the enclosed Proxy authorizes the persons named therein
to vote on any such other business in accordance with their best judgement.
All shares represented by proxies received by management, not revoked, will be
voted at the meeting or at any adjournment thereof. Accordingly, we hope that
you will be able to attend the meeting, but if not, we ask that you promptly
mark, sign and mail the enclosed Proxy in the enclosed envelope.
By Order of the Board of Directors
Teresa E. Axelson,
SECRETARY
14
<PAGE>
- --------------------------------------------------------------------------------
FOR EDGAR FILING, LANGUAGE THAT WILL BE ADDED IS PRECEDED BY A "<*>" AND
FOLLOWED BY A "</*>". LANGUAGE THAT WILL BE ELIMINATED IS PRECEDED BY A "<#>"
AND FOLLOWED BY A "</#>".
- --------------------------------------------------------------------------------
APPENDIX A
<*>[RESTATED]</*> 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 <*>[in any way]</*> 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}</#>
<*>[amounts]</*> or <#>{kind}</#> <*>[kinds]</*> 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, 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
Appendix A-1
<PAGE>
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 <*>[capital]</*> stock <#>{ which}</#>
<*>[that]</*> 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}</#>
<*>[two billion (2,000,000,000) shares, of the par value of one cent ($0.01) per
share and ]</*>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.}</#> <*>[twenty million
dollars ($20,000,000), all of which two billion (2,000,000,000) shares are
designated Common Shares.]</*>
<#>{(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 Common Shares shall}</#> <*>[(2) The
Board of Directors of the Corporation is authorized, from time to time, to
classify or to reclassify, as the case may be, any unissued shares of, or any
shares previously issued and reacquired by, the Corporation, whether now or
hereafter authorized, in separate series and classes that may]</*> be
established and designated<#>{, and relative}</#> <*>[from time to time. The
shares of said series and classes of stock shall have such]</*> preferences,
conversion <#>{and}</#> <*>[or]</*> 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 <*>[from time to time]</*> by the
Board of Directors<#>{;
Appendix A-2
<PAGE>
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 Board of
Directors is authorized to increase or decrease the number of shares of any
series or class, but the number of shares of any series or class shall not be
decreased by the Board of Directors below the number of shares thereof then
outstanding.]</*>
<#>{The following is a description of}</#> <*>[(3) The Board of Directors may
redesignate a class or series of shares of capital stock whether or not shares
of such class or series are issued and outstanding, provided that such
redesignation does not in itself affect]</*> the preferences, conversion <#>{
and}</#> <*>[or]</*> other rights, voting powers, restrictions, limitations as
to dividends, qualifications <#>{and}</#> <*>[or]</*> terms <#>{and}</#>
<*>[or]</*> 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}</#><*>[such
shares of stock.
(4) There is hereby established and classified three separate series of stock,
the "American National Primary Fund Series" to be comprised of one billion one
hundred seventy six million (1,176,000,000) shares, each with a par value of one
cent ($0.01), the "American National Government Income Fund Series" to be
comprised of twenty three million (23,000,000) shares, each with a par value of
one cent ($0.01), and the "American National Tax Free Fund Series" to be
comprised of twenty one million (21,000,000) shares. Without limiting the
authority of]</*> 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).}</#> <*>[set forth herein to establish and designate any
further series or classes, and to classify and reclassify any unissued shares,
and subject to such authority, shares of each series, now authorized and
hereafter authorized, shall be subject to the following provisions:]</*>
<#>{(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.}</#><*>[(a) As more fully set forth hereafter, the assets and
liabilities and the income and expenses of each series shall be determined
separately and, accordingly, the net asset value, the dividends payable to
holders, and the amounts distributable in the event of dissolution of the
Corporation to holders of shares of the Corporation's stock may vary from
series to series.]</*>
(b) All consideration received by the Corporation for the issue or sale of
<#>{Common Shares}</#> <*>[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}</#> <*>[all]</*>proceeds derived from the sale, exchange
or liquidation <#>{of such assets}</#> <*>[thereof]</*>, 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 }</#><*>[and shall be referred to as "assets belonging to" that
series. The assets belonging to a particular series]</*> 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,
Appendix A-3
<PAGE>
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.}</#> <*>[the Corporation. ]</*>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 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}</#><*>['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}</#> <*>[Shares of each series shall be entitled to such
dividends and distributions, in shares or in cash or both, as may be
declared from time to time by]</*> 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}</#><*>[, acting in its
sole discretion, with respect to such series, provided that dividends and
distributions shall be paid on shares of a series only out of lawfully
available]</*> assets belonging to that series <#>{or class, as the
}</#><*>[. Dividends may be declared daily or otherwise pursuant to a
standing resolution or resolutions adopted only once or with such frequency
as the Board of]</*> 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}</#>
<*>[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}</#><*>[(e)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}</#> <*>[gain
distributions) an amount]</*> sufficient, in the opinion of the Board of
Directors, to
Appendix A-4
<PAGE>
enable <#>{the respective}</#> <*>[each]</*> series <#>{or classes}</#>
<*>[of the Corporation]</*> to qualify as <*>[a]</*> regulated investment
<#>{companies}</#> <*>[company under the Internal Revenue Code of 1986, as
from time to time amended, or any successor or comparable statute thereto,
and regulations promulgated thereunder,]</*> and to avoid liability of
<#>{such series or class for Federal income tax for such fiscal}</#>
<*>[each series of the Corporation for federal income and excise taxes in
respect of that]</*> 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
}</#><*>[as a]</*> regulated investment <#>{companies}</#> <*>[company]</*>
and to avoid liability of <#>{such}</#> <*>[any]</*> series <#>{or
classes}</#> <*>[of the Corporation]</*> for such <#>{tax}</#>
<*>[taxes]</*>.<#>{</#>
<#>}</#>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").
(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) }</#><*>['40 Act and as determined by the Board of Directors of the
Corporation.
(f) In the event of the liquidation or dissolution of the Corporation or of
a particular series, the stockholders of a series that has been established
and designated and is being liquidated shall be entitled to receive, as a
series, when and as declared by the Board of Directors, out of the assets of
the Corporation available for distribution to stockholders, the assets
belonging to that series. The assets so distributable to the stockholders of
a series shall be distributed among such stockholders in proportion to the
number of shares of that series held by them and recorded on the books of
the Corporation or, in the event that the series is divided into classes, in
the manner determined by the Board of Directors in accordance with the '40
Act. In the event that there are any assets available for distribution which
are not readily identifiable as belonging to any particular series, such
assets shall be
Appendix A-5
<PAGE>
allocated by the Directors to and among any one or more of the series
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, and
then distributed to the holders of stock of each series as aforesaid. Each
allocation of such assets by the Directors shall be conclusive and binding
upon the stockholders of all series for all purposes.
(g) If a series is divided into multiple classes, the classes may be
invested with one or more other classes in the common investment portfolio
comprising the series. Notwithstanding the foregoing provisions of this
Article V(4) of these Articles of Incorporation, if two or more classes are
invested in a common investment portfolio, the shares of each such class of
stock of the Corporation shall be subject to the following preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption, and, if
there are other classes of stock invested in a different investment
portfolio comprising a different series, shall also be subject to the
provisions of Article V(4)(a) through (f) of these Articles of Incorporation
at the series level as if the classes invested in the common investment
portfolio were one class:</*>
<*>(i) The income and expenses of the series shall be allocated
among the classes comprising the series in such manner as may be
determined by the Board of Directors in accordance with law.</*>
<*>(ii) As more fully set forth in this Article V(4)(g) of these
Articles of Incorporation, the liabilities and expenses of the classes
comprising the series shall be determined separately from those of each
other and, accordingly, the net asset values, the dividends and
distributions payable to holders, and the amounts distributable in the
event of liquidation of the Corporation or termination of a series to
holders of shares of the Corporation's stock may vary within the classes
comprising the series. Except for these differences and certain other
differences set forth in this Article V(4)(g) or elsewhere in these
Articles of Incorporation, the classes comprising a series shall have the
same preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption.</*>
<*>(iii) The dividends and distributions of investment income and
capital gains with respect to the classes comprising a series shall be in
such amounts as may be declared from time to time by the Board of
Directors, and such dividends and distributions may vary among the
classes comprising the series to reflect differing allocations of the
expenses and liabilities of the Corporation among the classes and any
resultant differences between the net asset values per share of the
classes, to such extent and for such purposes as the Board of Directors
may deem appropriate. The allocation of investment income, capital gains,
expenses and liabilities of the Corporation among the classes comprising
a series shall be determined by the Board of Directors in a manner that
is consistent with applicable law.</*>
<*>(h) 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 accordance with applicable
laws and regulations. The proceeds of the redemption of the shares of any
class of stock of the Corporation may be reduced by the amount of any
contingent deferred sales charge, liquidation charge, or other charge (which
charges may vary within and among the classes) payable on such redemption
pursuant to the terms of issuance of such shares, all in accordance with the
'40 Act and applicable rules and regulations of the National Association of
Securities Dealers, Inc. and NASD Regulation, Inc. (together, the "NASD").
(i) To the extent permitted by the '40 Act and Maryland General Corporation
Law, the Corporation may redeem shares of Common Shares 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").
(j) Notwithstanding Article V(4)(i) of these Articles of Incorporation, to
the extent permitted by the '40 Act and Maryland General Corporation Law,
the Corporation may redeem shares of Common
Appendix A-6
<PAGE>
Shares of any series or class not offered for redemption held by any
shareholder without regard to the value of such shares.
(k) If shares of stock are redeemed pursuant to Articles V(4)(i) or V(4)(j)
of these Articles of Incorporation, the Corporation shall pay the redemption
price in cash or in kind in such manner as is consistent with and not in
contravention of the '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 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.
(l) At such times (which may vary between and among the holders of
particular classes) as may be determined by the Board of Directors (or with
the authorization of the Board of Directors, by the officers of the
Corporation) in accordance with the '40 Act and applicable rules and
regulations of the NASD and reflected in the pertinent registration
statement of the Corporation, shares of any particular class of stock of the
Corporation may be automatically converted into shares of another class of
stock of the Corporation based on the relative net asset values of such
classes at the time of conversion, subject, however, to any conditions of
conversion that may be imposed by the Board of Directors (or with the
authorization of the Board of Directors, by the officers of the Corporation)
and reflected in the pertinent registration statement of the Corporation as
aforesaid.</*>
<*>Except as provided above, all provisions of the Articles of Incorporation
relating to stock of the Corporation shall apply to shares of, and to the
holders of, all classes of stock.
(5)] </*>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}</#> <*>[("Single]</*> Class <#>{ Voting")}</#> <*>[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}</#> <*>['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)}</#><*>[(6)]</*> The establishment and designation of any series or
class of <#>{common}</#> <*>[Common]</*> Shares shall be effective upon
<*>[(1)]</*> 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 <*>[(2)]</*> 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 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}</#><*>[(7)
Unless otherwise required by the '40 Act, the presence in person or by proxy of
the holders of one-third (1/3) of the shares of capital stock of the Corporation
outstanding and entitled to vote thereat shall constitute a quorum for the
transaction of business at a stockholders' meeting, except that where any
provision of law or of the Charter of the Corporation permit or require that
holders]</*> 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
Appendix A-7
<PAGE>
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.}</#> <*>[shall vote as
a separate series or class, then one-third (1/3) of the aggregate number of
shares of capital stock of that series or class, as applicable, outstanding and
entitled to vote shall constitute a quorum for the transaction of business by
that series or class, as applicable.]</*>
<#>{Notwithstanding the foregoing,}</#><*>[(8) No holder of stock of the
Corporation by virtue of being such a holder shall have any right to purchase,
subscribe for, or otherwise acquire any shares of the Corporation or any other
security that]</*> the Corporation may <*>[issue or sell (whether out of the
number of shares authorized by the Charter of the Corporation or out of any
shares of the Corporation's capital stock that the Corporation may acquire)
other than a right that]</*> <#>{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 <*>[in
its discretion may determine to grant.
(9) All persons who shall acquire stock in the Corporation shall acquire the
same subject to the provisions of the Charter of Corporation and the By-Laws of
the Corporation, as from time to time amended or supplemented.
(10) ]</*><#>{.}</#>
<#>{(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}</#> <*>[Common Shares]</*> 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)}</#><*>[(11)]</*> 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)}</#><*>[(12)]</*> The Board of Directors of the Corporation shall have
the final decision upon questions concerning the method of computing <#>{ Net
Asset Value}</#> <*>[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}</#> <*>[Corporation's]</*> Common
<#>{Stock}</#> <*>[Shares]</*>.
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.
Appendix A-8
<PAGE>
ARTICLES VII
NUMBER AND POWERS OF DIRECTORS
(1) The number of directors of the Corporation shall be such number, not less
than three (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}</#> <*>[fullest]</*> 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}</#> <*>[agent]</*> 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 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.
Appendix A-9
<PAGE>
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 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.
Appendix A-10
<PAGE>
- --------------------------------------------------------------------------------
FOR EDGAR FILING, LANGUAGE THAT WILL BE ADDED IS PRECEDED BY A "<*>" AND
FOLLOWED BY A "</*>". LANGUAGE THAT WILL BE ELIMINATED IS PRECEDED BY A "<#>"
AND FOLLOWED BY A "</#>".
- --------------------------------------------------------------------------------
APPENDIX B
CURRENT AND PROPOSED FUNDAMENTAL RESTRICTIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
<*>EXISTING FUNDAMENTAL</*> <*>PROPOSED FUNDAMENTAL</*>
<*>RESTRICTIONS</*> <*>RESTRICTIONS</*>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Issuer The Fund does not invest more than 5% The Series, with respect to 75% of the
Diversification of the value of the net assets of a Series' <*>total assets</*>, may not
Proposal 3(a) Series, at the time of purchase in the purchase securities of an issuer (OTHER
securities of any one issuer, but this THAN CASH OR CASH ITEMS, OR SECURITIES
limitation does not apply to OF THE U.S. GOVERNMENT, ITS AGENCIES,
investments in securities issued or OR INSTRUMENTALITIES OR OF OTHER
guaranteed by the U.S. government or INVESTMENT COMPANIES), if, (i) such
its instrumentalities. purchase would cause more than 5% of
the Series' <*>total assets</*> taken
The Fund does not purchase any security at market value to be invested in the
(other than United States Government securities of such issuer, or (ii) such
obligations) if, as a result, the Fund purchase would at the time result in
would hold more than (a) 10% of the more than 10% of the outstanding voting
total value of any class of outstanding securities of such issuer being held by
securities of an issuer, or (b) 10% of the Series.
the outstanding voting securities of an
issuer.
- -------------------------------------------------------------------------------------------------------
Industry The Fund does not concentrate more than The Series may not invest 25% or more
Concentration 25% of the net assets of a Series in of its <*>total assets</*> in the
Proposal 3(b) any one industry or group of securities of one or more issuers
industries; ;provided however, there is conducting their principal business
no limitation with respect to activities in the same industry
investments in obligations issued or (EXCLUDING THE U.S. GOVERNMENT OR ANY
guaranteed by the United States OF ITS AGENCIES OR INSTRUMENTALITIES).
Government or its agencies or
instrumentalities. For purposes of this
restriction, telephone, gas and
electric and public utilities are each
regarded as separate industries.
- -------------------------------------------------------------------------------------------------------
Borrowing and Margin The Fund does not borrow money, except The Series may not borrow money, except
Purchases Proposal for such action by any Series for (i) the Series may borrow from banks
3(c) temporary or emergency purposes in an (as defined in the Act) or through
amount not to exceed 10% of such reverse repurchase agreements in
Series' net assets. amounts up to 33 1/3%, of its <*>total
assets</*> (including the amount
The Fund does not purchase securities borrowed), (ii) the Series may, to the
on margin (but it may obtain such extent permitted by applicable law,
short-term credits as may be necessary borrow up to an additional 5% of its
for the clearance of purchases and <*>total assets</*> for temporary
sales of securities. purposes, (iii) the Series may obtain
such short-term credits as may be
necessary for the clearance of
purchases and sales of portfolio
securities, (iv) the Series may
purchase securities on margin to the
extent permitted by applicable law, and
(v) the Series may engage in
transactions in mortgage dollar rolls
which are accounted for as financings.
- -------------------------------------------------------------------------------------------------------
</TABLE>
Appendix B-1
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
<*>EXISTING FUNDAMENTAL</*> <*>PROPOSED FUNDAMENTAL</*>
<*>RESTRICTIONS</*> <*>RESTRICTIONS</*>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loan Restriction The Fund does not lend any funds or The Series may not make loans, except
(restated) Proposal other assets of any Series, except that through (i) the purchase of debt
3(d) the Government Income Series may from obligations in accordance with the
time to time lend the securities it Series' investment objective and
holds to qualified broker-dealers or policies (ii) repurchase agreements
other institutional investors. Such with banks brokers, dealers and other
loans shall not exceed ten percent financial institutions, and (iii) loans
(10%) of the Government Income Series of securities as permitted by
net assets at the time of the most applicable law.
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.
- -------------------------------------------------------------------------------------------------------
Underwriting The Fund does not act as underwriter of The Series may not underwrite
Restriction securities issued by other persons securities issued by others, except to
(restated) Proposal except insofar as the Fund may be the extent that the sale of portfolio
3(e) technically deemed an underwriter under securities by the Series may be deemed
the federal securities laws in to be an underwriting.
connection with the disposition of
portfolio securities.
- -------------------------------------------------------------------------------------------------------
</TABLE>
Appendix B-2
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
<*>EXISTING FUNDAMENTAL</*> <*>PROPOSED FUNDAMENTAL</*>
<*>RESTRICTIONS</*> <*>RESTRICTIONS</*>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Real Estate and Oil The Fund does not acquire, lease or The Series may not purchase, hold or
and Gas (restated) hold real estate except such as may be deal in real estate, although the
Proposal 3(f) necessary or advisable for the Series may purchase and sell securities
maintenance of offices. that are secured by real estate or
interests therein, securities of real
The Fund does not invest in oil, gas or estate investment trusts, and
other mineral exploration or mortgage-related securities and may
development programs. However, any hold and sell real estate acquired by
Series may invest in securities which the Series as a result of the ownership
are secured by real estate or real of securities.
estate mortgages, securities of issuers
which invest in or sponsor oil, gas, or
other mineral exploration, provided
such securities meet the criteria set
forth under "Investment Objectives and
Policies" in the Prospectus.
- -------------------------------------------------------------------------------------------------------
Commodities Proposal The Fund does not purchase or sell The Series may not invest in
3(g) commodities or commodity contracts commodities or commodity contracts,
including future contracts. except that the Series may invest in
currency and financial instruments and
contracts that are commodities or
commodity contracts.
- -------------------------------------------------------------------------------------------------------
Senior Securities The Fund does not issue senior The Series may not issue senior
Proposal 3(h) securities. securities to the extent such issuance
would violate applicable law.
- -------------------------------------------------------------------------------------------------------
Short Sales of The Fund does not make short sales of N/A
Securities Proposal securities.
3(i)
- -------------------------------------------------------------------------------------------------------
Exercise Control of The Fund does not invest in companies N/A
Management Proposal for the purpose of exercising control
3(j) of management.
- -------------------------------------------------------------------------------------------------------
Investment in other The Fund does not purchase the N/A
Investment Companies securities of other investment
Proposal 3(k) companies except pursuant to a plan of
merger, consolidation or acquisition or
assets approved by the Fund's
shareholders.
- -------------------------------------------------------------------------------------------------------
Restricted Securities The Fund does not invest no more than N/A
Proposal 3(l) 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.
- -------------------------------------------------------------------------------------------------------
</TABLE>
Appendix B-3
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
<*>EXISTING FUNDAMENTAL</*> <*>PROPOSED FUNDAMENTAL</*>
<*>RESTRICTIONS</*> <*>RESTRICTIONS</*>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Continuous Operation The Fund does not purchase securities N/A
Proposal 3(m) issued by a corporation which has not
been in continuous operation for three
years, but such period may include the
operation of a predecessor.
- -------------------------------------------------------------------------------------------------------
Foreign Securities The Fund does not invest in foreign N/A
Proposal 3(n) securities
- -------------------------------------------------------------------------------------------------------
Officer, Director, The Fund does not purchase or retain N/A
Portfolio Manager securities of any issuer if any officer
Ownership Proposal or director of the Fund or of its
3(o) 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.
- -------------------------------------------------------------------------------------------------------
Warrants Proposal The Fund does not purchase warrants. N/A
3(p)
- -------------------------------------------------------------------------------------------------------
</TABLE>
Appendix B-4
<PAGE>
PROXY VOTING BALLOT
SM&R CAPITAL FUNDS, INC.
AMERICAN NATIONAL GOVERNMENT INCOME FUND SERIES
SPECIAL SHAREHOLDERS' MEETING ON MAY 28, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints EDWIN K. NOLAN and MICHAEL W. McCROSKEY, and
each of them, as proxies with full power of substitution, and hereby authorizes
each of them to represent and to vote, as designated below, all the shares of
the American National Government Income Fund Series that the undersigned is
entitled to vote at the special meeting of shareholders to be held in Galveston,
Texas, on Thursday, May 28, 1998, and at any postponement or adjournment thereof
for each of the Proposals contained in the Proxy Statement.
You are encouraged to specify your choices by marking the appropriate boxes by
each Proposal presented. YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. IF YOU SIGN THIS FORM
WITHOUT CHECKING A BOX WITH RESPECT TO THE ELECTION OF DIRECTORS, OR ANY OTHER
PROPOSAL LISTED BELOW, THE TIMELY RETURN OF THIS PROXY VOTING BALLOT WILL BE
DEEMED AN INSTRUCTION TO VOTE FOR THE ELECTION OF ALL NOMINEES IDENTIFIED IN
ITEM ONE OR TO VOTE IN FAVOR OF THE PROPOSALS. THE NAMED PROXIES CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS PROXY VOTING BALLOT IN THE ENVELOPE
PROVIDED. In their discretion, the named proxies will vote on such other
business as is properly brought before the meeting and any adjournment or
adjournments thereof.
(Record Date Shares)
Name
Name
Address
Address
Address
Address
YOUR VOTE IS IMPORTANT TO US
THANK YOU FOR TAKING THE TIME TO VOTE THIS PROXY BALLOT!!!
VOTE ON PROPOSALS (The Board of Directors recommends a vote FOR Items 1, 2 and
3.)
1. To ratify the appointment of Tait, Weller & Baker as independent auditors
for the Fund.
/ / FOR / / AGAINST / / ABSTAIN
2. To approve certain amendments to the Fund's Articles of Incorporation.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve amending, restating or eliminating the Government Income Fund
Series fundamental investment restrictions as described in Proposal 3 of the
Proxy Statement:
Mark one of the boxes below to vote on the entire slate of Proposal 3 in the
aggregate.
/ / FOR / / AGAINST / / ABSTAIN
STOP HERE AND SIGN ON THE REVERSE SIDE, AS DIRECTED
UNLESS YOU WOULD LIKE TO VOTE ON EACH ELEMENT OF PROPOSAL 3 INDIVIDUALLY.
To vote on each amendment, restatement or elimination separately:
3(a) Proposed Change in Restriction Regarding Issuer Diversification:
/ / FOR / / AGAINST / / ABSTAIN
3(b) Proposed Change in Restriction Regarding Concentration of Investments:
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
3(c) Proposed Changes in Restrictions Regarding Borrowing, Margins, Pledging
or Mortgaging Property:
/ / FOR / / AGAINST / / ABSTAIN
3(d) Proposed Change in Restriction Regarding Lending:
/ / FOR / / AGAINST / / ABSTAIN
3(e) Proposed Change in Restriction Regarding Underwriting of Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(f) Proposed Change in Restriction Regarding Real Estate Investments:
/ / FOR / / AGAINST / / ABSTAIN
3(g) Proposed Change in Restriction Regarding Investment in Commodities:
/ / FOR / / AGAINST / / ABSTAIN
3(h) Proposed Change in Restriction Regarding Issuance of Senior Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(i) Proposed Change in Restriction Regarding Short Sales of Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(j) Proposed Change in Restriction Regarding Investing to Exercise Control
or Management:
/ / FOR / / AGAINST / / ABSTAIN
3(k) Proposed Change in Restriction Regarding Investing in Other Investment
Companies:
/ / FOR / / AGAINST / / ABSTAIN
3(l) Proposed Change in Restriction Regarding Investment Restricted
Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(m) Proposed Change in Restriction Regarding Investments in Companies Based
on Company's Years in Continuous Operation:
/ / FOR / / AGAINST / / ABSTAIN
3(n) Proposed Change in Restriction Regarding Investment in Foreign
Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(o) Proposed Change in Restriction Regarding Purchasing Securities in Which
Certain Affiliated Persons Also Invest:
/ / FOR / / AGAINST / / ABSTAIN
3(p) Proposed Change in Restriction Regarding Investments in Warrants:
/ / FOR / / AGAINST / / ABSTAIN
4. To act on such other matters as may properly come before the meeting or any
adjournment thereof.
________________________________________________________________________________
I HEREBY REVOKE ANY AND ALL PROXIES WITH RESPECT TO SHARES OF THE FUND
HERETOFORE GIVEN BY ME. I ACKNOWLEDGE RECEIPT OF THE PROXY STATEMENT DATED APRIL
, 1998. THIS PROXY VOTING BALLOT MAY BE REVOKED AT ANY TIME PRIOR TO THE
MEETING BY NOTIFYING THE SECRETARY OF THE FUND IN WRITING.
Date:______________________________________
______________________________________________________
Signature of Owner
______________________________________________________
Signature of Co-Owner (if account held
jointly)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR ON THE PROXY VOTING
BALLOT. JOINT OWNERS MUST EACH SIGN THE PROXY VOTING BALLOT TO HAVE YOUR VOTE
COUNT. WHEN SIGNING AS A FIDUCIARY (IE. ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, OR GUARDIAN), GIVE THE FULL TITLE AS TO THE CAPACITY IN WHICH YOU ARE
SIGNING.
<PAGE>
PROXY VOTING BALLOT
SM&R CAPITAL FUNDS, INC.
AMERICAN NATIONAL PRIMARY FUND SERIES
SPECIAL SHAREHOLDERS' MEETING ON MAY 28, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints EDWIN K. NOLAN and MICHAEL W. McCROSKEY, and
each of them, as proxies with full power of substitution, and hereby authorizes
each of them to represent and to vote, as designated below, all the shares of
the American National Primary Fund Series that the undersigned is entitled to
vote at the special meeting of shareholders to be held in Galveston, Texas, on
Thursday, May 28, 1998, and at any postponement or adjournment thereof for each
of the Proposals contained in the Proxy Statement.
You are encouraged to specify your choices by marking the appropriate boxes by
each Proposal presented. YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. IF YOU SIGN THIS FORM
WITHOUT CHECKING A BOX WITH RESPECT TO THE ELECTION OF DIRECTORS, OR ANY OTHER
PROPOSAL LISTED BELOW, THE TIMELY RETURN OF THIS PROXY VOTING BALLOT WILL BE
DEEMED AN INSTRUCTION TO VOTE FOR THE ELECTION OF ALL NOMINEES IDENTIFIED IN
ITEM ONE OR TO VOTE IN FAVOR OF THE PROPOSALS. THE NAMED PROXIES CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS PROXY VOTING BALLOT IN THE ENVELOPE
PROVIDED. In their discretion, the named proxies will vote on such other
business as is properly brought before the meeting and any adjournment or
adjournments thereof.
(Record Date Shares)
Name
Name
Address
Address
Address
Address
YOUR VOTE IS IMPORTANT TO US
THANK YOU FOR TAKING THE TIME TO VOTE THIS PROXY BALLOT!!!
VOTE ON PROPOSALS (The Board of Directors recommends a vote FOR Items 1, 2 and
3.)
1. To ratify the appointment of Tait, Weller & Baker as independent auditors
for the Fund.
/ / FOR / / AGAINST / / ABSTAIN
2. To approve certain amendments to the Fund's Articles of Incorporation.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve amending, restating or eliminating the Primary Fund Series
fundamental investment restrictions as described in Proposal 3 of the Proxy
Statement:
Mark one of the boxes below to vote on the entire slate of Proposal 3 in the
aggregate.
/ / FOR / / AGAINST / / ABSTAIN
STOP HERE AND SIGN ON THE REVERSE SIDE, AS DIRECTED
UNLESS YOU WOULD LIKE TO VOTE ON EACH ELEMENT OF PROPOSAL 3 INDIVIDUALLY.
To vote on each amendment, restatement or elimination separately:
3(a) Proposed Change in Restriction Regarding Issuer Diversification:
/ / FOR / / AGAINST / / ABSTAIN
3(b) Proposed Change in Restriction Regarding Concentration of Investments:
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
3(c) Proposed Changes in Restrictions Regarding Borrowing, Margins, Pledging
or Mortgaging Property:
/ / FOR / / AGAINST / / ABSTAIN
3(d) Proposed Change in Restriction Regarding Lending:
/ / FOR / / AGAINST / / ABSTAIN
3(e) Proposed Change in Restriction Regarding Underwriting of Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(f) Proposed Change in Restriction Regarding Real Estate Investments:
/ / FOR / / AGAINST / / ABSTAIN
3(g) Proposed Change in Restriction Regarding Investment in Commodities:
/ / FOR / / AGAINST / / ABSTAIN
3(h) Proposed Change in Restriction Regarding Issuance of Senior Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(i) Proposed Change in Restriction Regarding Short Sales of Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(j) Proposed Change in Restriction Regarding Investing to Exercise Control
or Management:
/ / FOR / / AGAINST / / ABSTAIN
3(k) Proposed Change in Restriction Regarding Investing in Other Investment
Companies:
/ / FOR / / AGAINST / / ABSTAIN
3(l) Proposed Change in Restriction Regarding Investment in Restricted
Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(m)Proposed Change in Restriction Regarding Investments in Companies Based
on Company's Years in Continuous Operation:
/ / FOR / / AGAINST / / ABSTAIN
3(n) Proposed Change in Restriction Regarding Investment in Foreign
Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(o) Proposed Change in Restriction Regarding Purchasing Securities in Which
Certain Affiliated Persons Also Invest:
/ / FOR / / AGAINST / / ABSTAIN
3(p) Proposed Change in Restriction Regarding Investments in Warrants:
/ / FOR / / AGAINST / / ABSTAIN
4. To act on such other matters as may properly come before the meeting or any
adjournment thereof.
________________________________________________________________________________
I HEREBY REVOKE ANY AND ALL PROXIES WITH RESPECT TO SHARES OF THE FUND
HERETOFORE GIVEN BY ME. I ACKNOWLEDGE RECEIPT OF THE PROXY STATEMENT DATED APRIL
, 1998. THIS PROXY VOTING BALLOT MAY BE REVOKED AT ANY TIME PRIOR TO THE
MEETING BY NOTIFYING THE SECRETARY OF THE FUND IN WRITING.
Date:______________________________________
______________________________________________________
Signature of Owner
______________________________________________________
Signature of Co-Owner (if account held
jointly)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR ON THE PROXY VOTING
BALLOT. JOINT OWNERS MUST EACH SIGN THE PROXY VOTING BALLOT TO HAVE YOUR VOTE
COUNT. WHEN SIGNING AS A FIDUCIARY (IE. ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, OR GUARDIAN), GIVE THE FULL TITLE AS TO THE CAPACITY IN WHICH YOU ARE
SIGNING.
<PAGE>
PROXY VOTING BALLOT
SM&R CAPITAL FUNDS, INC.
AMERICAN NATIONAL TAX FREE FUND SERIES
SPECIAL SHAREHOLDERS' MEETING ON MAY 28, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints EDWIN K. NOLAN and MICHAEL W. McCROSKEY, and
each of them, as proxies with full power of substitution, and hereby authorizes
each of them to represent and to vote, as designated below, all the shares of
the American National Tax Free Fund Series that the undersigned is entitled to
vote at the special meeting of shareholders to be held in Galveston, Texas, on
Thursday, May 28, 1998, and at any postponement or adjournment thereof for each
of the Proposals contained in the Proxy Statement.
You are encouraged to specify your choices by marking the appropriate boxes by
each Proposal presented. YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. IF YOU SIGN THIS FORM
WITHOUT CHECKING A BOX WITH RESPECT TO THE ELECTION OF DIRECTORS, OR ANY OTHER
PROPOSAL LISTED BELOW, THE TIMELY RETURN OF THIS PROXY VOTING BALLOT WILL BE
DEEMED AN INSTRUCTION TO VOTE FOR THE ELECTION OF ALL NOMINEES IDENTIFIED IN
ITEM ONE OR TO VOTE IN FAVOR OF THE PROPOSALS. THE NAMED PROXIES CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS PROXY VOTING BALLOT IN THE ENVELOPE
PROVIDED. In their discretion, the named proxies will vote on such other
business as is properly brought before the meeting and any adjournment or
adjournments thereof.
(Record Date Shares)
Name
Name
Address
Address
Address
Address
YOUR VOTE IS IMPORTANT TO US
THANK YOU FOR TAKING THE TIME TO VOTE THIS PROXY BALLOT!!!
VOTE ON PROPOSALS (The Board of Directors recommends a vote FOR Items 1, 2 and
3.)
1. To ratify the appointment of Tait, Weller & Baker as independent auditors
for the Fund.
/ / FOR / / AGAINST / / ABSTAIN
2. To approve certain amendments to the Fund's Articles of Incorporation.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve amending, restating or eliminating the Tax Free Fund Series
fundamental investment restrictions as described in Proposal 3 of the Proxy
Statement:
Mark one of the boxes below to vote on the entire slate of Proposal 3 in the
aggregate.
/ / FOR / / AGAINST / / ABSTAIN
STOP HERE AND SIGN ON THE REVERSE SIDE, AS DIRECTED
UNLESS YOU WOULD LIKE TO VOTE ON EACH ELEMENT OF PROPOSAL 3 INDIVIDUALLY.
To vote on each amendment, restatement or elimination separately:
3(a) Proposed Change in Restriction Regarding Issuer Diversification:
/ / FOR / / AGAINST / / ABSTAIN
3(b) Proposed Change in Restriction Regarding Concentration of Investments:
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
3(c) Proposed Changes in Restrictions Regarding Borrowing, Margins, Pledging
or Mortgaging Property:
/ / FOR / / AGAINST / / ABSTAIN
3(d) Proposed Change in Restriction Regarding Lending:
/ / FOR / / AGAINST / / ABSTAIN
3(e) Proposed Change in Restriction Regarding Underwriting of Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(f) Proposed Change in Restriction Regarding Real Estate Investments:
/ / FOR / / AGAINST / / ABSTAIN
3(g) Proposed Change in Restriction Regarding Investment in Commodities:
/ / FOR / / AGAINST / / ABSTAIN
3(h) Proposed Change in Restriction Regarding Issuance of Senior Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(i) Proposed Change in Restriction Regarding Short Sales of Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(j) Proposed Change in Restriction Regarding Investing to Exercise Control
or Management:
/ / FOR / / AGAINST / / ABSTAIN
3(k) Proposed Change in Restriction Regarding Investing in Other Investment
Companies:
/ / FOR / / AGAINST / / ABSTAIN
3(l) Proposed Change in Restriction Regarding Investment in Restricted
Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(m)Proposed Change in Restriction Regarding Investments in Companies Based
on Company's Years in Continuous Operation:
/ / FOR / / AGAINST / / ABSTAIN
3(n) Proposed Change in Restriction Regarding Investment in Foreign
Securities:
/ / FOR / / AGAINST / / ABSTAIN
3(o) Proposed Change in Restriction Regarding Purchasing Securities in Which
Certain Affiliated Persons Also Invest:
/ / FOR / / AGAINST / / ABSTAIN
3(p) Proposed Change in Restriction Regarding Investments in Warrants:
/ / FOR / / AGAINST / / ABSTAIN
4. To act on such other matters as may properly come before the meeting or any
adjournment thereof.
________________________________________________________________________________
I HEREBY REVOKE ANY AND ALL PROXIES WITH RESPECT TO SHARES OF THE FUND
HERETOFORE GIVEN BY ME. I ACKNOWLEDGE RECEIPT OF THE PROXY STATEMENT DATED APRIL
, 1998. THIS PROXY VOTING BALLOT MAY BE REVOKED AT ANY TIME PRIOR TO THE
MEETING BY NOTIFYING THE SECRETARY OF THE FUND IN WRITING.
Date:______________________________________
______________________________________________________
Signature of Owner
______________________________________________________
Signature of Co-Owner (if account held
jointly)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR ON THE PROXY VOTING
BALLOT. JOINT OWNERS MUST EACH SIGN THE PROXY VOTING BALLOT TO HAVE YOUR VOTE
COUNT. WHEN SIGNING AS A FIDUCIARY (IE. ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, OR GUARDIAN), GIVE THE FULL TITLE AS TO THE CAPACITY IN WHICH YOU ARE
SIGNING.
