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<PAGE>
SEMI-ANNUAL REPORT
SM&R
SM&R INVESTMENTS, INC.
FIXED INCOME FUNDS
GOVERNMENT BOND FUND
PRIMARY FUND
TAX FREE FUND
MONEY MARKET FUND
"Financial statement contained herein are included for the general
information of our shareholders. This report is not authorized for
distribution to prospective investors unless preceded or
accompanied by an effective prospectus."
Semi-Annual Report
February 28, 1999
<PAGE>
SCHEDULE OF INVESTMENTS February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
INTEREST/
MATURITY STATED FACE
COMMERCIAL PAPER DATE RATE(%) AMOUNT VALUE
<S> <C> <C> <C> <C>
GOVERNMENT AGENCIES--1.88%
Federal Home Loan Mortgage Corporation 03/18/99 4.75% $ 257,000 $ 256,354
Federal Home Loan Mortgage Corporation 04/01/99 4.75% 100,000 99,564
World Banks 03/01/99 4.75% 100,000 99,974
----------
TOTAL COMMERCIAL PAPER--1.88%
(Cost $455,892) 455,892
----------
<CAPTION>
CORPORATE BONDS
<S> <C> <C> <C> <C>
AUTO & TRUCK MANUFACTURERS--4.18%
General Motors Corporation 05/01/08 6.375% 1,000,000 1,012,216
BANKS--4.11%
Chase Manhattan Corporation 02/15/08 6.375% 1,000,000 997,366
COMMUNICATION EQUIPMENT--2.23%
Tele-Communications, Incorporated 01/15/03 8.25% 500,000 539,810
FINANCIAL SERVICES--17.17%
Bear Stearns Companies, Incorporated 03/30/03 6.20% 175,000 173,940
CNA Financial Corporation 01/15/08 6.45% 1,000,000 952,913
Household Finance Corporation 06/17/08 6.40% 1,000,000 995,656
Morgan Stanley, Dean Witter & Discover 03/01/07 6.875% 1,000,000 1,031,035
Salomon, Incorporated 03/01/00 6.50% 1,000,000 1,005,831
----------
4,159,375
MEDICAL SERVICES--4.16%
Aetna Services, Incorporated 08/15/36 6.97% 1,000,000 1,007,403
----------
TOTAL CORPORATE BONDS--31.85%
(Cost $7,828,100) 7,716,170
----------
<CAPTION>
U S GOVERNMENT AGENCY AND
U S GOVERNMENT SECURITIES
<S> <C> <C> <C> <C>
U S GOVERNMENT AGENCY SECURITIES--62.30%
Federal Home Loan Bank 08/05/04 7.38% 1,000,000 1,074,741
Federal Home Loan Bank 08/19/04 7.57% 1,000,000 1,084,003
Federal Home Loan Bank 10/25/05 6.23% 150,000 153,750
Federal Home Loan Mortgage Corporation 08/01/05 6.75% 165,000 173,529
Federal Home Loan Mortgage Corporation 09/15/06 7.00% 213,934 216,178
Federal Home Loan Mortgage Corporation 11/15/06 7.00% 1,500,000 1,514,688
Federal Home Loan Mortgage Corporation 03/15/07 7.00% 1,000,000 1,015,367
Federal Home Loan Mortgage Corporation 09/15/07 7.00% 1,000,000 1,023,423
Federal Home Loan Mortgage Corporation 08/15/08 7.00% 1,600,000 1,619,134
Federal National Mortgage Association 02/11/02 7.50% 1,585,000 1,669,192
Federal National Mortgage Association 04/22/02 7.55% 200,000 211,368
Federal National Mortgage Association 09/12/05 6.55% 100,000 104,184
Federal National Mortgage Association 02/02/07 7.50% 1,500,000 1,517,467
Federal National Mortgage Association 02/07/07 7.49% 250,000 253,295
Federal National Mortgage Association 04/10/07 7.70% 300,000 306,053
Federal National Mortgage Association 07/25/07 7.00% 1,000,000 1,015,237
Federal National Mortgage Association 11/18/15 6.35% 820,204 825,494
</TABLE>
1
<PAGE>
SCHEDULE OF INVESTMENTS February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
GOVERNMENT BOND FUND, CONTINUED
<TABLE>
<CAPTION>
INTEREST/
U S GOVERNMENT AGENCY AND MATURITY STATED FACE
U S GOVERNMENT SECURITIES DATE RATE(%) AMOUNT VALUE
<S> <C> <C> <C> <C>
Tennessee Valley Authority 12/15/17 6.25% $ 300,000 $ 304,956
Vendee Mortgage Trust VA99-1 2A 09/15/15 6.50% 1,000,000 1,009,062
----------
15,091,121
U S GOVERNMENT SECURITIES--2.62%
U S Treasury Bonds 02/15/26 6.00% 500,000 514,375
U S Treasury Bonds 08/15/28 5.50% 125,000 121,133
----------
635,508
----------
TOTAL U S GOVERNMENT AGENCY and U S GOVERNMENT SECURITIES--64.92%
(Cost $15,185,032) 15,726,629
----------
TOTAL INVESTMENTS--98.65%
(Cost $23,469,024) 23,898,691
CASH AND OTHER ASSETS, LESS LIABILITIES--1.35% 325,991
----------
TOTAL NET ASSETS--100.00% $24,224,682
----------
----------
</TABLE>
See notes to financial statements.
2
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
GOVERNMENT BOND FUND
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value $ 23,898,691
Cash 109,517
Prepaid expenses 37,339
Receivable for:
Investment securities sold 21,040
Capital stock sold 3,934
Interest 206,276
Expense reimbursement 1,977
Other assets 2,782
-------------
TOTAL ASSETS 24,281,556
-------------
LIABILITIES
Capital stock reacquired 35,000
Accrued:
Investment advisory fee 9,374
Service fee 4,687
Other liabilities 7,813
-------------
TOTAL LIABILITIES 56,874
-------------
NET ASSETS (applicable to shares outstanding) $ 24,224,682
-------------
-------------
NET ASSETS:
Class A $ 4,081
- -----------------------------------------------------------------------------------------------------------
Class B $ 5,939
- -----------------------------------------------------------------------------------------------------------
Class C $ 993
- -----------------------------------------------------------------------------------------------------------
Class T $ 24,213,669
- -----------------------------------------------------------------------------------------------------------
CAPITAL STOCK, $0.01 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
Outstanding 388.852
- -----------------------------------------------------------------------------------------------------------
Class B:
Authorized 100,000,000
Outstanding 566.485
- -----------------------------------------------------------------------------------------------------------
Class C:
Authorized 100,000,000
Outstanding 94.794
- -----------------------------------------------------------------------------------------------------------
Class T:
Authorized 23,000,000
Outstanding 2,322,426.362
- -----------------------------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share $ 10.49
Offering price per share: (Net Assets value of $10.49 / 95.25%) $ 11.01
- -----------------------------------------------------------------------------------------------------------
Class B:
Net asset value and offering price per share $ 10.48
- -----------------------------------------------------------------------------------------------------------
Class C:
Net asset value and redemption price per share $ 10.48
Offering price per share: (Net Assets value of $10.48 / 99.00%) $ 10.59
- -----------------------------------------------------------------------------------------------------------
Class T:
Net asset value and redemption price per share $ 10.43
Offering price per share: (Net Assets value of $10.43 / 95.5%) $ 10.92
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
3
<PAGE>
STATEMENT OF OPERATIONS Six Months Ended February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
GOVERNMENT BOND FUND
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 780,629
EXPENSES
Investment advisory fees 59,658
Service fees 29,829
Professional fees 7,145
Custody and transaction fees 8,630
Directors' fees 4,930
Qualification fees 13,087
Shareholder reporting expenses 870
Insurance expenses 1,148
Other 71
------------
TOTAL EXPENSES 125,368
LESS EXPENSES REIMBURSED (3,747)
------------
NET EXPENSES 121,621
------------
INVESTMENT INCOME--NET 659,008
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 15,753
Change in unrealized depreciation of investments for the period (410,940)
------------
NET LOSS ON INVESTMENTS (395,187)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 263,821
------------
------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1999 1998
--------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 659,008 $ 1,457,183
Net realized gain on investments 15,753 103,599
Change in unrealized appreciation (depreciation) (410,940) 340,609
--------------- -------------
Net increase in net assets resulting from operations 263,821 1,901,391
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net
Class A (21) --
Class B (25) --
Class C (7) --
Class T (666,641) (1,500,708)
--------------- -------------
Total distributions to shareholders (666,694) (1,500,708)
CAPITAL SHARE TRANSACTIONS--NET
Class A 4,149 --
Class B 6,025 --
Class C 1,007 --
Class T 634,839 (102,449)
--------------- -------------
Total net capital share transactions 646,020 (102,449)
--------------- -------------
TOTAL INCREASE 243,147 298,234
NET ASSETS
Beginning of Period 23,981,535 23,683,301
--------------- -------------
End of Period $ 24,224,682 $ 23,981,535
--------------- -------------
--------------- -------------
</TABLE>
See notes to financial statements.
4
<PAGE>
FINANCIAL HIGHLIGHTS (Unaudited)
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the period.
GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
CLASS T SHARES
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------- -------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.60 $ 10.42 $ 10.14 $ 10.51 $ 10.07 $ 10.87
Investment income--net 0.29 0.64 0.67 0.65 0.70 0.54
Net realized and unrealized gain
(loss) on investments (0.17) 0.20 0.26 (0.37) 0.44 (0.79)
------------- ------------- ------------- ------------- ------------- -------------
Total from Investment Operations 0.12 0.84 0.93 0.28 1.14 (0.25)
Less distributions from
Investment income--net (0.29) (0.66) (0.65) (0.65) (0.70) (0.55)
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.29) (0.66) (0.65) (0.65) (0.70) (0.55)
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value, End of Period $ 10.43 $ 10.60 $ 10.42 $ 10.14 $ 10.51 $ 10.07
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
Total Return 1.12%** 8.31% 9.37% 2.63% 11.85% (2.41)%
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL
DATA
Net Assets, end of period (000's
omitted) $ 24,225 $ 23,982 $ 23,683 $ 21,127 $ 20,466 $ 19,790
Ratio of expenses to average net
assets 1.02%* 1.00% 1.00% 1.00% 0.70% 1.12%
Ratio of net investment income to
average net assets 5.50%* 6.08% 6.46% 6.17% 6.90% 5.11%
Portfolio turnover rate 9.23% 32.71% 9.06% 30.17% 2.20% 45.48%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
---------------- ---------------- ----------------
<S> <C> <C> <C>
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, 1999 JANUARY 1, 1999 JANUARY 1, 1999
TO TO TO
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
---------------- ---------------- ----------------
<CAPTION>
1999 1999 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.62 $ 10.62 $ 10.62
Investment income--net 0.05 0.07 0.06
Net realized and unrealized gain (loss) on investments (0.13) (0.14) (0.13)
------- ------- -------
Total from Investment Operations (0.08) (0.07) (0.07)
Less distributions from
Investment income--net (0.05) (0.07) (0.07)
------- ------- -------
Total Distributions (0.05) (0.07) (0.07)
------- ------- -------
Net Asset Value, End of Period $ 10.49 $ 10.48 $ 10.48
------- ------- -------
------- ------- -------
Total Return ** (0.71)% (0.62)% (0.66)%
------- ------- -------
------- ------- -------
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's omitted) $ 4,081 $ 5,940 $ 993
Ratio of expenses to average net assets * 1.26% 1.82% 2.12%
Ratio of net investment income to average net assets * 5.11% 4.85% 4.42%
Portfolio turnover rate 9.23% 9.23% 9.23%
</TABLE>
* Ratios annualized
** Returns are not annualized
See notes to financial statements.
5
<PAGE>
SCHEDULE OF INVESTMENTS February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
PRIMARY FUND
<TABLE>
<CAPTION>
INTEREST/
MATURITY STATED RATE FACE
DATE (%) AMOUNT VALUE
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
APPAREL--4.05%
VF Corporation 03/01/99 5.00% $1,410,000 $ 1,410,000
BUILDING SUPPLIES--2.89%
Armstrong World Industries 03/15/99 4.98% 1,010,000 1,008,041
CHEMICALS--6.99%
ICI Wilmington 03/23/99 5.00% 1,246,000 1,242,189
PraxAir Incorporated 03/04/99 4.94% 1,193,000 1,192,507
-----------
2,434,696
CONSTRUCTION--4.29%
Centex Corporation 03/29/99 5.00% 1,499,000 1,493,161
CONTAINERS--2.09%
Crown Cork & Seal Company, Incorporated 03/31/99 4.98% 730,000 726,963
ELECTRIC POWER--8.75%
Minnesota Power & Light Company 03/19/99 5.00% 1,700,000 1,695,736
Western Resources, Incorporated 03/17/99 4.98% 1,355,000 1,351,996
-----------
3,047,732
ENERGY--MISCELLANEOUS--2.79%
Penn Fuel Corporation 04/05/99 5.05% 975,000 970,210
ENVIRONMENTAL--2.89%
Browning Ferris Industries 03/22/99 4.93% 1,010,000 1,007,091
FINANCIAL SERVICES--19.06%
Comdisco, Incorporated 03/24/99 5.00% 1,136,000 1,132,358
Dana Credit Corporation 04/06/99 4.98% 1,700,000 1,691,506
GATX Capital Corporation 03/16/99 5.02% 1,504,000 1,500,846
Kerr McGee Credit Corporation 03/12/99 5.05% 1,119,000 1,117,262
Sprint Capital Corporation 03/18/99 4.98% 1,200,000 1,197,165
-----------
6,639,137
FOOD PRODUCERS--3.93%
ConAgra, Incorporated 03/10/99 4.94% 1,370,000 1,368,302
FOOD RETAILERS--4.30%
Safeway, Incorporated 03/30/99 4.95% 1,502,000 1,496,007
HOUSEHOLD PRODUCTS/HOUSEWARES--2.61%
Universal Corporation 03/05/99 4.95% 908,000 907,498
LODGING/HOTELS--4.40%
Marriott International, Incorporated 03/03/99 4.95% 1,534,000 1,533,576
MEDICAL SERVICES--3.13%
Humana, Incorporated 03/02/99 4.96% 1,090,000 1,089,849
OIL DOMESTIC--4.40%
Anadarko Petroleum Corporation 03/11/99 4.94% 1,536,000 1,533,885
OIL SERVICES--3.18%
UOP 04/12/99 5.05% 1,114,000 1,107,415
PAPER/FOREST PRODUCTS--3.98%
Union Camp Corporation 03/08/99 4.93% 1,388,000 1,386,664
PRINTING/PUBLISHING--4.12%
Cox Enterprises, Incorporated 04/20/99 5.02% 1,446,000 1,435,914
RAILROADS--3.00%
CSX Corporation 03/25/99 4.98% 1,050,000 1,046,502
TRUCKING & SHIPPING--4.86%
Ryder Systems, Incorporated 03/26/99 4.97% 1,700,000 1,694,128
UTILITY-ELECTRIC/MISCELLANEOUS--4.32%
Entech Incorporated 03/09/99 5.00% 1,506,000 1,504,320
-----------
TOTAL INVESTMENTS--100.03%
(Cost $34,841,091) 34,841,091
LIABILITIES IN EXCESS OF OTHER ASSETS--(0.03%) (10,530)
-----------
TOTAL NET ASSETS--100.00% $34,830,561
-----------
-----------
</TABLE>
See notes to financial statements.
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
PRIMARY FUND
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value $34,841,091
Cash 230,935
Prepaid expenses 17,742
Receivable for:
Capital stock sold 32,346
Expense reimbursement 5,630
Other assets 2,782
-----------
TOTAL ASSETS 35,130,526
-----------
LIABILITIES
Distribution payable 1,478
Capital stock reacquired 266,052
Accrued:
Investment advisory fee 13,626
Service fee 6,813
Other liabilities 11,996
-----------
TOTAL LIABILITIES 299,965
-----------
NET ASSETS $34,830,561
-----------
-----------
Shares of capital stock outstanding, (1,176,000,000 shares authorized, $.01 par
value per share) 34,836,348
-----------
-----------
Net asset value $ 1.00
-----------
-----------
</TABLE>
STATEMENT OF OPERATIONS Six Months Ended February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Interest $ 990,480
EXPENSES
Investment advisory fees 88,206
Service fees 44,103
Professional fees 2,062
Custody and transaction fees 11,486
Directors' fees 5,680
Qualification fees 15,451
Shareholder reporting expenses 2,281
Insurance expenses 1,339
Other 2,014
-----------
TOTAL EXPENSES 172,622
LESS EXPENSES REIMBURSED (31,796)
-----------
NET EXPENSES 140,826
-----------
INVESTMENT INCOME--NET $ 849,654
-----------
-----------
</TABLE>
See notes to financial statements.
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
- --------------------------------------------------------------------------------
PRIMARY FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1999 1998
--------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 849,654 $ 1,767,808
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net (849,654) (1,767,808)
CAPITAL SHARE TRANSACTIONS--NET 253,679 1,532,007
--------------- -------------
TOTAL INCREASE 253,679 1,532,007
NET ASSETS
Beginning of Period 34,576,882 33,044,875
--------------- -------------
End of Period $ 34,830,561 $ 34,576,882
--------------- -------------
--------------- -------------
</TABLE>
FINANCIAL HIGHLIGHTS (Unaudited)
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the period.
<TABLE>
<CAPTION>
CLASS T SHARES
-------------------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
---------------- -------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Investment income--net 0.02 0.05 0.05 0.05 0.05 0.03
------- ------------- ------------- ------------- ------------- -------------
Total from Investment Operations 0.02 0.05 0.05 0.05 0.05 0.03
Less distributions from
Investment income--net (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
------- ------------- ------------- ------------- ------------- -------------
Total Distributions (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
------- ------------- ------------- ------------- ------------- -------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------------- ------------- ------------- ------------- -------------
------- ------------- ------------- ------------- ------------- -------------
Total Return 2.42%** 5.15% 4.98% 5.07% 5.01% 2.91%
------- ------------- ------------- ------------- ------------- -------------
------- ------------- ------------- ------------- ------------- -------------
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL
DATA
Net Assets, end of period (000's
omitted) $ 34,831 $ 34,577 $ 33,045 $ 37,465 $ 20,984 $ 15,208
Ratio of expenses to average net
assets * 0.80% 0.80% 0.80% 0.81% 0.84% 0.79%
Ratio of net investment income to
average net assets * 4.83% 5.02% 4.86% 4.93% 4.91% 2.88%
</TABLE>
* Ratios annualized
** Returns are not annualized
See notes to financial statements.
8
<PAGE>
SCHEDULE OF INVESTMENTS February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
TAX FREE FUND
<TABLE>
<CAPTION>
INTEREST/
MUNICIPAL BONDS MATURITY STATED RATE FACE
RATING(a) DATE (%) AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
CALIFORNIA--4.90%
Aa3/A+ California State General Obligation Bonds Unlimited 06/01/11 5.250% $ 100,000 $ 105,958
Aaa/AAA Sacramento, California Municipal Utility District Electric
Revenue Bonds, Series I 01/01/15 5.750% 200,000 213,628
Aaa/AAA San Francisco, California City and County Sewer Revenue
Refunding Bonds 10/01/16 5.375% 250,000 255,863
------------
575,449
FLORIDA--8.19%
Aaa/AAA Dade County, Florida Water & Sewer System Revenue Bonds 10/01/16 5.375% 400,000 418,572
Aaa/AAA Miami Dade County Solid Waste System Revenue Bonds 10/01/18 4.375% 400,000 387,096
Aa2/AA+ State of Florida-State Board of Education, Public
Education Capital Outlay Bonds, 1992 Series E 06/01/19 5.750% 145,000 154,899
------------
960,567
GEORGIA--1.57%
A3/A Municipal Electric Authority of Georgia-Power Revenue
Bonds, Series AA 01/01/07 5.400% 175,000 184,464
------------
ILLINOIS--8.94%
Aaa/AAA Chicago, Illinois-General Obligation Bonds Unlimited 01/01/25 5.125% 100,000 99,074
Aa2/AA Illinois Health Facilities Authority-Revenue Bonds, Series
A, (Northwestern Memorial Hospital) 08/15/24 6.000% 100,000 107,554
Aa2/AA Illinois Health Facilities Authority-Revenue Bonds, Series
1994A,(Northwestern Memorial Hospital) 08/15/14 6.100% 200,000 217,578
Aaa/AAA Illinois State Toll Highway Authority-Highway Priority
Revenue Bonds, Series A-FGIC 01/01/17 5.750% 175,000 190,454
Aaa/AAA Regional Transportation Authority of Illinois Revenue
Bonds, Refunding MBIA 06/01/18 5.500% 200,000 207,508
Aa2/AAA State of Illinois-Build Illinois Bonds, Sales Tax Revenue
Bonds, Series V 06/15/17 6.375% 200,000 226,456
------------
1,048,624
LOUISIANA--5.88%
Aaa/AAA Louisiana Public Facilities Authority Hospital Revenue
Bonds, Series C 07/01/19 5.000% 400,000 390,000
Aaa/AAA New Orleans, Louisiana Sewer Service Revenue Bonds 06/01/18 5.000% 300,000 299,241
------------
689,241
MASSACHUSETTS--4.24%
Aaa/AAA Massachusetts State Water Revenues Authority, General
Purpose-Series A 11/01/21 5.500% 450,000 496,921
------------
NEW MEXICO--0.90%
Aaa/AAA Central Consolidated School District No.22 San Juan
County, New Mexico General Obligation School Building
Bonds 08/15/09 5.300% 100,000 105,421
------------
NEW YORK--5.59%
A3/A- New York City, New York-General Obligation Bonds
Unlimited, Series J 08/01/18 5.000% 200,000 198,032
Aaa/AAA New York City, New York-General Obligation Bonds
Unlimited, Series J 02/15/07 5.000% 100,000 105,162
Aa3/A+ Triborough Bridge & Tunnel Authority, New York, Revenue
Bonds, General Purpose-Series B 01/01/27 5.200% 350,000 352,930
------------
656,124
</TABLE>
9
<PAGE>
SCHEDULE OF INVESTMENTS February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
TAX FREE FUND, CONTINUED
<TABLE>
<CAPTION>
INTEREST/
MUNICIPAL BONDS MATURITY STATED RATE FACE
RATING(a) DATE (%) AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
NORTH CAROLINA--1.84%
Aaa/AAA City of Charlotte, North Carolina-General Obligation
Public Improvement Bonds, Series 1994 02/01/08 5.700% $ 100,000 $ 110,080
Baa1/BBB North Carolina Eastern Municipal Power Agency-Power System
Revenue Bonds, Refunding Series 1993 B 01/01/12 6.250% 100,000 105,899
------------
215,979
OHIO--3.65%
Aaa/AAA Franklin County, Ohio-General Obligation Bonds Limited 12/01/08 5.100% 300,000 321,654
Aaa/AAA Franklin County, Ohio-General Obligation Bonds Limited 12/01/11 5.300% 100,000 106,914
------------
428,568
OKLAHOMA--0.98%
Aaa/NR Oklahoma Housing Finance Agency-Single Family Mortgage
Revenue Bonds (Homeownership Loan Program), 1994 Series
A-1 (b) 09/01/07 6.250% 110,000 114,677
------------
OREGON--1.91%
A1/A+ City of Portland, Oregon-Sewer System Revenue Bonds, 1994
Series A 06/01/15 6.250% 200,000 223,992
------------
PENNSYLVANIA--0.89%
Aa3/AA Pennsylvania State General Obligation Bonds Unlimited,
Refunding & Projects-First Series 04/15/06 5.000% 100,000 104,733
------------
PUERTO RICO--2.08%
Baa1/A Commonwealth of Puerto Rico-Public Improvement Refunding
Bonds, Series 1992A, General Obligation Bonds 07/01/14 6.000% 100,000 107,060
Baa1/BBB+ Puerto Rico Electric Power Authority-Power Revenue Bonds,
Series R 07/01/17 6.250% 125,000 137,097
------------
244,157
RHODE ISLAND--0.91%
Aa2/AA+ Rhode Island Housing & Mortgage Financial Corporation,
Homeownership Opportunity, Series 20-A 04/01/17 6.150% 100,000 106,526
------------
TENNESSEE--1.76%
A1/A+ Tennessee Housing Development Agency-Mortgage Finance
Program Bonds, 1994 Series B (b) 01/01/09 6.200% 200,000 206,668
------------
TEXAS--23.64%
Aaa/AAA Baytown, Texas-Water and Sewer Revenue Bonds 02/01/14 5.950% 100,000 108,880
Aaa/AAA Board of Regents of The University of Texas
System-Permanent University Fund, Refunding Bonds Series
1992A 07/01/13 6.250% 200,000 214,344
Aaa/AAA City of Austin, Texas-Combined Utility Systems Revenue
Refunding Bonds, Series 1994 05/15/16 6.250% 100,000 111,679
Aa2/AA City of Dallas, Texas-Waterworks and Sewer System Revenue
Bonds, Series 1994 04/01/07 5.600% 100,000 104,194
Aaa/AAA Collin County, Texas-Community College District,
Consolidated Fund, Revenue Bonds 02/01/15 5.250% 400,000 412,276
Aaa/AAA Dallas-Fort Worth International Airport-Dallas-Fort Worth
Regional Airport, Joint Revenue Refunding Bonds, Series
1994A 11/01/10 6.000% 100,000 109,164
Aaa/AAA Denton, Texas-General Obligation Bonds Limited 02/15/08 5.500% 130,000 139,793
Aaa/AAA Denton, Texas-General Obligation Bonds Limited 02/15/09 5.600% 120,000 129,232
Aaa/NR Flower Mound, Texas-Refunding and Improvement, General
Obligation Unlimited 03/01/17 5.500% 200,000 208,142
</TABLE>
10
<PAGE>
SCHEDULE OF INVESTMENTS February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
TAX FREE FUND, CONTINUED
<TABLE>
<CAPTION>
INTEREST/
MUNICIPAL BONDS MATURITY STATED RATE FACE
RATING(a) DATE (%) AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
TEXAS--CONTINUED
Aaa/AAA Galveston Independent School District-Unlimited Tax
Schoolhouse Bonds, Series 1994 02/01/07 5.200% $ 100,000 $ 106,100
Aa2/AA Harris County, Texas-Tax and Revenue Certificates of
Obligation, Series 1994 10/01/12 6.100% 135,000 150,015
Aa2/AA Harris County, Texas-Tax and Revenue Certificates of
Obligation, Series 1994 10/01/13 6.100% 125,000 138,903
Aaa/AAA Laredo, Texas-General Obligation Bonds Unlimited 02/15/11 5.250% 100,000 104,931
Aaa/AAA Mission Texas Consolidated Independent School
District-General Obligation Bonds Unlimited 02/15/18 4.500% 200,000 187,602
AAA/NR Tarrant County Health Facilities Development
Corporation-Health System Revenue Bonds, (Harris
Methodist Health System), Series 1994 (c) 09/01/14 6.000% 200,000 228,560
Aaa/AAA Texas Turnpike Authority-Dallas North Tollway System
Revenue Bonds, Series 1995 (President George Bush
Turnpike) 01/01/15 5.400% 100,000 104,395
Aaa/AAA West University Place, Texas-General Obligation Bonds
Limited, Permanent Improvement 02/01/14 5.650% 100,000 107,258
Aaa/NR Weslaco, Texas Independent School District General
Obligation Bonds 02/15/13 5.650% 100,000 107,605
------------
2,773,073
UTAH--1.04%
Aa2/AA Utah Housing Finance Agency-Single Family Mortgage Bonds,
1995 Issue A, (Federally Insured or Guaranteed Mortgage
Loans) (b) 07/01/12 7.150% 45,000 48,383
Aa2/NR Utah State Housing Financial Agency-Single Family Mortgage
Bonds, Series F1 07/01/13 6.000% 70,000 73,804
------------
122,187
VIRGINIA--0.92%
Aaa/AAA Virginia State Housing Development Authority Commonwealth
Mortgage Bonds, Series A, Subseries A-4 (b) 07/01/15 6.300% 100,000 107,488
------------
WASHINGTON--9.13%
Aaa/AAA City of Richland, Washington-Water and Sewer Improvement
Revenue Bonds, 1993 04/01/07 5.550% 300,000 317,499
Aa1/AA+ King County, Washington-Department of Metropolitan
Services, Limited Tax General Obligation Bonds, 1994
Series A 01/01/08 5.800% 200,000 220,222
Aa1/AA+ King County, Washington-Limited Tax General Obligation and
Refunding Bonds, 1993 Series A 12/01/10 6.000% 100,000 109,052
Aaa/AAA Municipality of Metropolitan Seattle Sewer Refunding
Revenue Bonds, Series X 01/01/15 5.400% 100,000 103,052
Aa1/AA+ Port of Seattle, Washington-General Obligation Bonds (b) 05/01/14 5.750% 100,000 105,954
Aa1/AA+ State of Washington-General Obligation Bonds, Series 1994B 05/01/09 5.750% 100,000 107,769
Aa1/AA+ State of Washington-General Obligation Bonds, Series 1994B 09/01/16 6.000% 100,000 108,062
------------
1,071,610
</TABLE>
11
<PAGE>
SCHEDULE OF INVESTMENTS February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
TAX FREE FUND, CONTINUED
<TABLE>
<CAPTION>
INTEREST/
MUNICIPAL BONDS MATURITY STATED RATE FACE
RATING(a) DATE (%) AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
WISCONSIN--2.76%
Aa2/AA City of Green Bay-General Obligation Refunding Bonds,
Series 1994B 04/01/09 5.900% $ 200,000 $ 214,768
AAA/AA State of Wisconsin-General Obligation Bonds Unlimited,
Series C(c) 05/01/09 5.400% 100,000 108,590
------------
323,358
TOTAL MUNICIPAL BONDS--91.72%
(Cost $10,061,154) 10,759,827
------------
<CAPTION>
COMMERCIAL PAPER
<S> <C> <C> <C> <C> <C>
GOVERNMENT AGENCIES--3.26%
Federal Home Loan Bank 03/01/99 4.800% 100,000 99,973
Federal Home Loan Mortgage Company 03/04/99 4.750% 283,000 282,813
------------
382,786
MANUFACTURING-SPECIALTY--1.19%
Aluminum Company of America 03/08/99 4.850% 139,000 138,832
------------
RETAIL-SPECIALTY--2.43%
Toys "R" Us, Incorporated 03/03/99 4.860% 285,000 284,846
------------
TOTAL COMMERCIAL PAPER--6.88%
(Cost $806,464) 806,464
------------
TOTAL INVESTMENTS--98.60%
(Cost $10,867,618) 11,566,291
CASH AND OTHER ASSETS, LESS LIABILITIES--1.40% 164,740
------------
TOTAL NET ASSETS--100.00% $ 11,731,031
------------
------------
</TABLE>
Notes to Schedule of Investments
(a) Ratings assigned by Moody's Investor's Service, Inc. (Moody's) and Standard
& Poor's Corporation (S&P). Ratings are unaudited.
(b) Security subject to the alternative minimum tax.
(c) Issuer has defeased these bonds, collateral for such defeasance is U.S.
Government obligations.
See notes to financial statements.
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
TAX FREE FUND
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value $ 11,566,291
Prepaid expenses 33,033
Receivable for:
Capital stock sold 3,090
Interest 135,737
Expense reimbursement 7,129
Other assets 3,211
-------------
TOTAL ASSETS 11,748,491
-------------
LIABILITIES
Accrued:
Investment advisory fee 4,372
Service fee 2,185
Other liabilities 10,903
-------------
TOTAL LIABILITIES 17,460
-------------
NET ASSETS (applicable to shares outstanding) $ 11,731,031
-------------
-------------
NET ASSETS:
Class A $ 8,054
- -----------------------------------------------------------------------------------------------------------
Class B $ 1,005
- -----------------------------------------------------------------------------------------------------------
Class C $ 3,104
- -----------------------------------------------------------------------------------------------------------
Class T $ 11,718,868
- -----------------------------------------------------------------------------------------------------------
CAPITAL STOCK, $0.01 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
Outstanding 752.494
- -----------------------------------------------------------------------------------------------------------
Class B:
Authorized 100,000,000
Outstanding 94.056
- -----------------------------------------------------------------------------------------------------------
Class C:
Authorized 100,000,000
Outstanding 290.432
- -----------------------------------------------------------------------------------------------------------
Class T:
Authorized 21,000,000
Outstanding 1,099,206.434
- -----------------------------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share $ 10.70
Offering price per share: (Net Assets value of $10.70 / 95.25%) $ 11.23
- -----------------------------------------------------------------------------------------------------------
Class B:
Net asset value and offering price per share $ 10.69
- -----------------------------------------------------------------------------------------------------------
Class C:
Net asset value and redemption price per share $ 10.69
Offering price per share: (Net Assets value of $10.69 / 99.00%) $ 10.80
- -----------------------------------------------------------------------------------------------------------
Class T:
Net asset value and redemption price per share $ 10.66
Offering price per share: (Net Assets value of $10.66 / 95.5%) $ 11.16
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
13
<PAGE>
STATEMENT OF OPERATIONS Six Months Ended February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
TAX FREE FUND
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 291,558
EXPENSES
Investment advisory fees 27,569
Service fees 13,784
Professional fees 2,612
Custody and transaction fees 6,477
Directors' fees 5,680
Qualification fees 14,720
Shareholder reporting expenses 802
Insurance expenses 861
Other 250
---------
TOTAL EXPENSES 72,755
LESS EXPENSES REIMBURSED (32,792)
---------
NET EXPENSES 39,963
---------
INVESTMENT INCOME--NET 251,595
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 24,003
Change in unrealized depreciation of investments for the period (4,102)
---------
NET GAIN ON INVESTMENTS 19,901
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 271,496
---------
---------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1999 1998
--------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 251,595 $ 491,640
Net realized gain on investments 24,003 28,603
Change in unrealized appreciation (depreciation) (4,102) 363,642
--------------- -------------
Net increase in net assets resulting from operations 271,496 883,885
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net
Class A (22) --
Class B (5) --
Class C (4) --
Class T (254,740) (499,989)
--------------- -------------
Total distributions from shareholders (254,771) (499,989)
CAPITAL SHARE TRANSACTIONS--NET
Class A 8,091 --
Class B 1,005 --
Class C 3,104 --
Class T 644,442 (26,401)
--------------- -------------
Total net capital share transactions 656,642 (26,401)
--------------- -------------
TOTAL INCREASE 673,367 357,495
NET ASSETS
Beginning of Period 11,057,664 10,700,169
--------------- -------------
End of Period $ 11,731,031 $ 11,057,664
--------------- -------------
--------------- -------------
</TABLE>
See notes to financial statements.
14
<PAGE>
FINANCIAL HIGHLIGHTS (Unaudited)
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the period.
TAX FREE FUND
<TABLE>
<CAPTION>
CLASS T SHARES
----------------------------------------------------------------------------------------
SIX MONTHS PERIOD
ENDED ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31, AUGUST 31,
------------- ---------------------------------------------------------- -------------
1999 1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.64 $ 10.27 $ 9.93 $ 9.95 $ 9.62 $ 10.00
Investment income--net 0.24 0.49 0.51 0.53 0.51 0.24
Net realized and unrealized gain (loss)
on investments 0.02 0.37 0.33 (0.02) 0.33 (0.38)
------------- ------------- ------------- ------ ------ ------
Total from Investment Operations 0.26 0.86 0.84 0.51 0.84 (0.14)
Less distributions from Investment
income--net (0.24) (0.49) (0.50) (0.53) (0.51) (0.24)
------------- ------------- ------------- ------ ------ ------
Total Distributions (0.24) (0.49) (0.50) (0.53) (0.51) (0.24)
------------- ------------- ------------- ------ ------ ------
Net Asset Value, End of Period $ 10.66 $ 10.64 $ 10.27 $ 9.93 $ 9.95 $ 9.62
------------- ------------- ------------- ------ ------ ------
------------- ------------- ------------- ------ ------ ------
Total Return 2.44%** 8.58% 8.61% 5.18% 9.15% 1.49%**
------------- ------------- ------------- ------ ------ ------
------------- ------------- ------------- ------ ------ ------
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's omitted) $ 11,731 $ 11,058 $ 10,700 $ 9,148 $ 8,399 $ 7,295
Ratio of expenses to average net assets 0.71%* 0.75% 0.54% -- -- 1.11%*
Ratio of net investment income to average
net assets 4.49%* 4.60% 4.97% 5.27% 5.43% 2.50%*
Portfolio turnover rate 4.17% 12.77% 22.15% 18.44% 12.63% 16.49%
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------- ----------------- -----------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, 1999 JANUARY 1, 1999 JANUARY 1, 1999
TO TO TO
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
----------------- ----------------- -----------------
1999 1999 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.68 $ 10.68 $ 10.68
Investment income--net 0.05 0.04 0.04
Net realized and unrealized gain (loss) on investments 0.02 0.02 0.01
------ ------ ------
Total from Investment Operations 0.07 0.06 0.05
Less distributions from
Investment income--net (0.05) (0.05) (0.04)
------ ------ ------
Total Distributions (0.05) (0.05) (0.04)
------ ------ ------
Net Asset Value, End of Period $ 10.70 $ 10.69 $ 10.69
------ ------ ------
------ ------ ------
Total Return ** 0.67% 0.56% 0.50%
------ ------ ------
------ ------ ------
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's omitted) $ 8,054 $ 1,005 $ 3,104
Ratio of expenses to average net assets * 1.47% 2.11% 2.38%
Ratio of net investment income to average net assets * 3.50% 3.05% 2.75%
Portfolio turnover rate 4.17% 4.17% 4.17%
</TABLE>
* Ratios annualized
** Returns are not annualized
See notes to financial statements.
15
<PAGE>
SCHEDULE OF INVESTMENTS February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
<CAPTION>
INTEREST/
MATURITY STATED FACE
COMMERCIAL PAPER DATE RATE(%) AMOUNT VALUE
<S> <C> <C> <C> <C>
FINANCIAL SERVICES--9.21%
GE Capital Corporation 03/03/99 4.83% $ 145,000 $ 144,961
National Rural Utilities 03/08/99 4.85% 130,000 129,877
----------
274,838
GOVERNMENT AGENCIES--80.57%
Federal Farm Credit Bank 03/16/99 4.70% 335,000 334,343
Federal Home Loan Bank 03/10/99 4.72% 295,000 294,652
Federal Home Loan Mortgage Corporation 03/02/99 4.72% 1,000,000 999,869
Federal Home Loan Mortgage Corporation 03/05/99 4.75% 776,000 775,590
----------
2,404,454
MANUFACTURING-SPECIALTY--4.86%
Aluminum Company of America 03/04/99 4.85% 145,000 144,941
RETAIL-SPECIALTY--3.35%
Toys "R" Us, Incorporated 03/01/99 4.87% 100,000 100,000
----------
TOTAL INVESTMENTS--97.99%
(Cost $2,924,233) 2,924,233
CASH AND OTHER ASSETS, LESS LIABILITIES--2.01% 60,106
----------
TOTAL NET ASSETS--100.00% $2,984,339
----------
----------
</TABLE>
See notes to financial statements.
16
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value $2,924,233
Cash 875
Prepaid expenses 28,348
Receivable for:
Capital stock sold 30,656
Expense reimbursement 3,840
----------
TOTAL ASSETS 2,987,952
----------
LIABILITIES
Capital stock reacquired 384
Accrued:
Investment advisory fee 413
Service fee 413
Other liabilities 2,403
----------
TOTAL LIABILITIES 3,613
----------
NET ASSETS $2,984,339
----------
----------
Shares of capital stock standing, (1,000,000,000 shares authorized, $.01 par value
per share) 2,984,339
----------
----------
Net asset value $ 1.00
----------
----------
</TABLE>
STATEMENT OF OPERATIONS Two Months Ended February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 16,848
EXPENSES
Investment advisory fees 653
Service fees 653
Professional fees 739
Custody and transaction fees 513
Directors' fees 2,000
Qualification fees 5,472
-----------
TOTAL EXPENSES 10,030
LESS EXPENSES REIMBURSED (8,170)
-----------
NET EXPENSES 1,860
-----------
INVESTMENT INCOME--NET $ 14,988
-----------
-----------
</TABLE>
See notes to financial statements.
17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
- --------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1999
TO
FEBRUARY 28,
1999
--------------
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 14,988
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net (14,988)
CAPITAL SHARE TRANSACTIONS--NET 2,984,339
--------------
TOTAL INCREASE 2,984,339
NET ASSETS
Beginning of Period --
--------------
End of Period $ 2,984,339
--------------
--------------
</TABLE>
FINANCIAL HIGHLIGHTS (Unaudited)
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the period.
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1999
TO
FEBRUARY 28,
----------------
1999
----------------
<S> <C>
Net Asset Value, Beginning of Period $ 1.00
Investment income--net 0.01
------
Total from Investment Operations 0.01
Less distributions from
Investment income--net (0.01)
------
Total Distributions (0.01)
------
Net Asset Value, End of Period $ 1.00
------
------
Total Return** 0.64%
------
------
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's omitted) $ 2,984
Ratio of expenses to average net assets * 0.52%
Ratio of net investment income to average net assets * 4.23%
</TABLE>
* Ratios annualized
** Returns are not annualized
See notes to financial statements.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
The SM&R Investments, Inc. (the "Funds"), formerly the SM&R Capital Funds, Inc.,
is a diversified open-end management investment company registered as a series
fund under the Investment Company Act of 1940, as amended. The Funds name change
and the names of each of Funds' series became effective January 1, 1999. The
Funds are comprised of the SM&R Government Bond Fund ("Government Bond Fund"),
formerly American National Government Income Fund Series, SM&R Primary Fund
("Primary Fund"), formerly American National Primary Fund Series, SM&R Tax Free
Fund ("Tax Free Fund"), formerly American National Tax Free Fund Series, and
SM&R Money Market Fund ("Money Market Fund"). Operations commenced March 16,
1992, for the Government Bond Fund and Primary Fund. The Tax Free Fund began
operations September 9, 1993 and the Money Market Fund commenced operations
January 1, 1999.
The Funds adopted the Multiple Class Plan for two of the Funds' series: the
Government Bond Fund and the Tax Free Fund. Each had a single class of shares,
and are offering five new classes as of January 1, 1999. The existing shares are
the Class T shares, and the newly offered classes are: the Class A shares
subject to an initial sales charge of up to 4.75% and a distribution and
shareholder servicing plan ("12b-1 Plan"); the Class B shares subject to a
contingent deferred sales charge and a 12b-1 Plan; the Class C shares subject to
an initial sales charge of 1.00%, a contingent deferred sales charge, and a
12b-1 Plan; the Class J shares (Network class) subject to a 12b-1 Plan, only;
and the Class Y shares (Institutional class) subject to no charges. The Class J
and Y have not commenced operations. The Primary Fund and Money Market Fund have
one class of shares, subject to no sales charge and no 12b-1 Plan.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
SECURITY VALUATION:
Investments in securities are valued based on market quotations or at fair value
as determined by a pricing service approved by the Board of Directors. Prices
provided by the pricing service represent valuations at bid prices or on a basis
determined without exclusive reliance on quoted prices and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, yield quality, coupon rate, maturity, type of issue, individual
trading characteristics and other market data. Securities for which market
quotations are not readily available are valued as determined by the Board of
Directors. Commercial paper is stated at amortized cost, which is equivalent to
value.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME:
Investment transactions are accounted for on the trade date (date order to buy
or sell is executed). Dividend income is recognized on the ex-dividend date, and
interest income is recognized on an accrual basis. Realized gains and losses
from security transactions are reported on the basis of identified cost for
financial reporting and federal income tax purposes.
FEDERAL INCOME TAXES:
For federal income tax purposes, each series is treated as a separate entity.
The Funds intend to comply with requirements of the Internal Revenue Code
relating to regulated investment companies and intend to distribute
substantially all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is recorded in the accompanying financial
statements. At December 31, 1998, the funds' tax year-end, the Government Bond
Fund, Primary Fund and the Tax Free Fund had capital loss carryforwards that
will expire in 2004 of approximately $267,000, $6,000 and $17,000, respectively.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
CAPITAL STOCK TRANSACTIONS AND DISTRIBUTIONS TO SHAREHOLDERS:
Fund shares are sold in a continuous public offering and may be redeemed on any
business day.
SM&R GOVERNMENT BOND FUND
The Government Bond Fund invest primarily in the agencies or
instrumentalities of the U.S. Government. Dividends to shareholders from
net investment income are declared and paid monthly.
SM&R PRIMARY FUND
The Primary Fund's objective is to seek maximum current income consistent
with capital preservation and liquidity through investment primarily in
commercial paper. All capital stock transactions are made at net asset
value. Distributions are computed daily and distributed monthly.
SM&R TAX FREE FUND
The Tax Free Fund's objective is to provide as high a level of interest
income largely exempt from federal income taxes as is consistent with
preservation of capital through investment of at least 80% of its net
assets in tax-exempt securities during normal market conditions. Dividends
to shareholders from net investment income are declared and paid monthly.
SM&R MONEY MARKET FUND
The Money Market Fund's objective is to seek the highest current income
consistent with the stability of principal and maintenance of liquidity.
All capital stock transactions are made at net asset value. Distributions
are computed daily and distributed monthly.
EXPENSES:
Distribution, qualification fees or other fees directly attributable to a
series' class of shares are charged to that series' class operations. All other
operating expenses not directly attributable to a series are prorated among the
series based on the relative amount of each series' net assets or shareholders,
and then allocated among the classes of that series.
NOTE 2--OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEES:
Securities Management and Research, Inc. ("SM&R") is the investment advisor and
principal underwriter for the Funds. Investment advisory fees paid to SM&R are
computed as a percentage of the average daily net assets as follows:
GOVERNMENT BOND FUND
TAX FREE FUND
<TABLE>
<CAPTION>
INVESTMENT
NET ASSETS ADVISORY FEE
<S> <C>
Not exceeding $100,000,000 0.50%
Exceeding $100,000,000 but not exceeding $300,000,000 0.45%
Exceeding $300,000,000 0.40%
</TABLE>
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 2--OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
PRIMARY FUND
<TABLE>
<S> <C>
All average daily net assets 0.50%
</TABLE>
MONEY MARKET FUND
<TABLE>
<S> <C>
All average daily net assets 0.25%
</TABLE>
ADMINISTRATIVE SERVICE FEES:
Administrative fees paid to SM&R by the Funds are computed as a percentage of
average daily net assets as follows:
<TABLE>
<CAPTION>
NET ASSETS SERVICE FEES
<S> <C>
Not exceeding $100,000,000 0.25%
Exceeding $100,000,000 but not exceeding $200,000,000 0.20%
Exceeding $200,000,000 but not exceeding $300,000,000 0.15%
Exceeding $300,000,000 0.10%
</TABLE>
SM&R has agreed to reimburse the Funds for regular operating expenses in excess
of 1.25% per annum of the average daily net assets, except for the Money Market
Fund which is in excess of 0.50%. SM&R has voluntarily agreed to reimburse the
Primary Fund for regular operating expenses in excess of 0.80% per annum of
average daily net assets and the Government Bond Fund for regular operating
expenses in excess of 1.00% per annum of average daily net assets for the six
months ended February 28, 1999. Regular operating expenses include the advisory
fee and administrative service fee, but does not include the distribution and
shareholder servicing fee.
SM&R has voluntarily agreed to waive investment advisory fees leaving the Tax
Free Fund responsible for all other expenses.
DISTRIBUTION AND SHAREHOLDER SERVICING FEES:
The Funds have adopted a 12b-1 Plan, pursuant to Rule 12b-1 under the Investment
Company Act of 1940, for two of the Funds' series: the Government Bond Fund and
the Tax Free Fund, with respect to the Funds' Class A shares, Class B shares and
Class C shares (the "Class A Plan", the "Class B Plan" and the "Class C Plan",
respectively and collectively, the "Plans"). The Plans permit each class a
distribution fee to compensate SM&R, or enable SM&R to compensate other persons,
including Distributors, for distribution costs such as service fees paid to
dealers, printing and distribution of prospectuses to prospective investors,
sales literature and other sales and distribution related activities. The Funds
pay compensation for Class A shares at 0.25% per annum of the average daily net
assets, for Class B shares at 0.50% per annum of the average daily net assets
and for Class C shares at 0.75% per annum of the average daily net assets.
The Class B and Class C Plans also permit a shareholder servicing fee of 0.25%
per annum of the average daily net assets to compensate SM&R, or enable SM&R to
compensate Service Providers, for providing ongoing servicing to shareholders of
the Funds. For the two months ended February 28, 1999, no payments were made as
compensation under the Plans.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 2--OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
SALES CHARGES:
SM&R, as principal underwriter, received as sales charges on sales of Class T
shares, for six months ended February 28, 1999, and Class A and C shares, for
the two months ended February 28, 1999, of capital stock of the Funds as
follows:
<TABLE>
<CAPTION>
SALES
CHARGES
RECEIVED BY SM&R
<S> <C>
Government Bond Fund $ 6,431
Tax Free Fund $ 12,061
</TABLE>
For the two months ended February 28, 1999, SM&R received no payment for
contingent deferred sales charges imposed on the Class B and C shares of capital
stock of the Funds.
SM&R is a wholly-owned subsidiary of American National Insurance Company
("American National"). As of February 28, 1999, SM&R and American National had
the following ownership in the Funds:
<TABLE>
<CAPTION>
SM&R AMERICAN NATIONAL
------------------------------- ---------------------------------
PERCENT OF SHARES PERCENT OF SHARES
SHARES OUTSTANDING SHARES OUTSTANDING
<S> <C> <C> <C> <C>
Government Bond 495,366 21% 679,025 29%
Primary -- -- 16,334,010 47%
Tax Free 128,505 12% 641,112 58%
Money Market 1,158,349 39% -- --
</TABLE>
NOTE 3--COST, PURCHASES AND SALES OF INVESTMENT SECURITIES
Investments have the same cost for tax and financial statement purposes.
Aggregate purchases and sales of investments in securities, other than
commercial paper, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
Government Bond $ 2,574,475 $ 2,164,207
Tax Free $ 690,538 $ 445,700
</TABLE>
Gross unrealized appreciation and depreciation as of February 28, 1999, were as
follows:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION
<S> <C> <C>
Government Bond $ 553,683 $ 124,016
Tax Free $ 704,697 $ 6,024
</TABLE>
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 4--CAPITAL STOCK
GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Sale of capital shares:
Class T 70,585 $ 749,982 107,893 $ 1,143,207
Class A 387 4,128 -- --
Class B 564 6,000 -- --
Class C 94 1,000 -- --
Investment income dividends reinvested:
Class T 60,404 641,403 148,408 1,562,712
Class A 2 21 -- --
Class B 2 25 -- --
Class C 1 7 -- --
Redemptions of capital shares outstanding:
Class T (71,288) (756,546) (265,757) (2,808,368)
Class A -- -- -- --
Class B -- -- -- --
Class C -- -- -- --
------------ ------------- ------------ -------------
Net increase (decrease) in capital shares outstanding 60,751 $ 646,020 (9,456) ($ 102,449)
------------- -------------
------------- -------------
Shares outstanding at beginning of period 2,262,725 2,272,181
------------ ------------
Shares outstanding at end of period 2,323,476 2,262,725
------------ ------------
------------ ------------
Net assets as of February 28, 1999 are comprised of the following:
Capital (par value and additional paid-in) $ 24,048,744
Accumulated net realized loss on investments (253,729)
Net unrealized appreciation of investments 429,667
-------------
Net Assets $ 24,224,682
-------------
-------------
</TABLE>
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 4--CAPITAL STOCK--CONTINUED
<TABLE>
<S> <C> <C> <C> <C>
PRIMARY FUND
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Sale of capital shares:
Class T 20,161,128 $ 20,161,128 35,251,969 $ 35,251,969
Investment income dividends reinvested:
Class T 826,942 826,928 1,891,922 1,891,922
Redemptions of capital shares outstanding:
Class T (20,734,377) (20,734,377) (35,611,884) (35,611,884)
------------ ------------- ------------ -------------
Net increase (decrease) in capital shares outstanding 253,693 $ 253,679 1,532,007 $ 1,532,007
------------- -------------
------------- -------------
Shares outstanding at beginning of period 34,582,655 33,050,648
------------ ------------
Shares outstanding at end of period 34,836,348 34,582,655
------------ ------------
------------ ------------
Net assets as of February 28, 1999 are comprised of the following:
Capital (par value and additional paid-in) $ 34,836,316
Accumulated net realized loss on investments (5,755)
-------------
Net Assets $ 34,830,561
-------------
-------------
TAX FREE FUND
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Sale of capital shares:
Class T 43,896 $ 469,959 59,089 $ 621,304
Class A 751 8,074 -- --
Class B 94 1,000 -- --
Class C 290 3,100 -- --
Investment income dividends reinvested:
Class T 23,124 247,508 51,288 536,758
Class A 2 17 -- --
Class B -- 5 -- --
Class C -- 4 -- --
Redemptions of capital shares outstanding:
Class T (6,808) (73,025) (113,023) (1,184,463)
Class A -- -- -- --
Class B -- -- -- --
Class C -- -- -- --
------------ ------------- ------------ -------------
Net increase (decrease) in capital shares outstanding 61,349 $ 656,642 (2,646) $ (26,401)
------------- -------------
------------- -------------
Shares outstanding at beginning of period 1,038,994 1,041,640
------------ ------------
Shares outstanding at end of period 1,100,343 1,038,994
------------ ------------
------------ ------------
Net assets as of February 28, 1999 are comprised of the following:
Capital (par value and additional paid-in) $ 11,029,793
Accumulated net realized gain on investments 2,565
Net unrealized appreciation of investments 698,673
-------------
Net Assets $ 11,731,031
-------------
-------------
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 4--CAPITAL STOCK--CONTINUED
<TABLE>
<CAPTION>
MONEY MARKET
<S> <C> <C>
TWO MONTHS ENDED
FEBRUARY 28, 1999
--------------------
SHARES AMOUNT
--------- ---------
Sale of capital shares 2,972,576 $2,972,576
Investment income dividends reinvested 15,769 15,769
Redemptions of capital shares outstanding (4,006) (4,006)
--------- ---------
Net increase in capital shares outstanding 2,984,339 $2,984,339
---------
---------
Shares outstanding at beginning of period --
---------
Shares outstanding at end of period 2,984,339
---------
---------
Net assets as of February 28, 1999 are comprised of the following:
Capital (par value and additional paid-in) $2,984,339
---------
Net Assets $2,984,339
---------
---------
</TABLE>
25
<PAGE>
SM&R INVESTMENTS, INC. 2450 South Shore Blvd, League City, Texas 77573
- --------------------------------------------------------------------------------
DIRECTORS
Ernest S. Barratt, Ph.D.
Allan W. Matthews
Lea McLeod Matthews
Michael W. McCroskey
Ann McLeod Moody
Edwin K. Nolan
Robert V. Shattuck, Jr.
Jamie G. Williams
Frank P. Williamson
OFFICERS
Michael W. McCroskey, President
Brenda T. Koelemay, Vice President and Treasurer
Emerson V. Unger, Vice President
Teresa E. Axelson, Vice President and Secretary
Terry E. Frank, Vice President and Portfolio Manager
INVESTMENT ADVISOR AND MANAGER
Securities Management and Research, Inc.
P.O. Box 58969
Houston, Texas 77258-8969
CUSTODIAN
Securities Management and Research, Inc.
P.O. Box 58969
Houston, Texas 77258-8969
LEGAL COUNSEL
Greer, Herz & Adams, L.L.P.
One Moody Plaza
Galveston, Texas 77550
UNDERWRITER AND REDEMPTION AGENT
Securities Management and Research, Inc.
P.O. Box 58969
Houston, Texas 77258-8969
TRANSFER AGENT, REGISTRAR AND DIVIDEND PAYING AGENT
Securities Management and Research, Inc.
P.O. Box 58969
Houston, Texas 77258-8969
INDEPENDENT AUDITORS
Tait, Weller & Baker, CPA
8 Penn Center Plaza, Suite 800
Philadelphia, Pennsylvania 19103-2108
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
SM&R EQUITY FUND
GROWTH
SM&R Growth Fund, Inc.
EQUITY INCOME
SM&R Equity Income Fund, Inc.
BALANCED
SM&R Balanced Fund, Inc.
SM&R INVESTMENTS, INC.
CURRENT INCOME AND HIGH DEGREE OF SAFETY
SM&R Government Bond Fund
CURRENT TAX FREE INCOME
SM&R Tax Free Fund
STABILITY, LIQUIDITY AND CURRENT INCOME
SM&R Primary Fund
STABILITY, LIQUIDITY AND CURRENT INCOME
SM&R Money Market Fund
HOW TO REACH US:
SHAREHOLDER SERVICES
(800) 231-4639
FUND QUOTES
(800) 526-8346 ext. 268
SALES AND MARKETING
(800) 526-8346
TO REQUEST A PROSPECTUS
(800) 231-4639
SM&R SECURITIES MANAGEMENT
AND RESEARCH, INC.
MANAGER & DISTRIBUTOR
----------------------
MEMBER NASD, SIPC
2450 South Shore Blvd. - League City, TX 77573
(281) 334-2469
SEMI-ANNUAL REPORT
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000881166
<NAME> SM&R INVESTMENTS, INC.
<SERIES>
<NUMBER> 01
<NAME> GOVERNMENT BOND FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 23469024
<INVESTMENTS-AT-VALUE> 23898691
<RECEIVABLES> 233227
<ASSETS-OTHER> 40121
<OTHER-ITEMS-ASSETS> 109517
<TOTAL-ASSETS> 24281556
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 56874
<TOTAL-LIABILITIES> 56874
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24025509
<SHARES-COMMON-STOCK> 2323476
<SHARES-COMMON-PRIOR> 2262725
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (253729)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 429667
<NET-ASSETS> 24224682
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 780629
<OTHER-INCOME> 0
<EXPENSES-NET> 121621
<NET-INVESTMENT-INCOME> 659008
<REALIZED-GAINS-CURRENT> 15753
<APPREC-INCREASE-CURRENT> (410940)
<NET-CHANGE-FROM-OPS> 263821
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (666694)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 71630
<NUMBER-OF-SHARES-REDEEMED> (71288)
<SHARES-REINVESTED> 60409
<NET-CHANGE-IN-ASSETS> 243147
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (269482)
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 59658
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 125368
<AVERAGE-NET-ASSETS> 24433989
<PER-SHARE-NAV-BEGIN> 10.60
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> (0.17)
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.43
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
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<NAME> SM&R INVESTMENTS, INC.
<SERIES>
<NUMBER> 02
<NAME> PRIMARY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 34841091
<INVESTMENTS-AT-VALUE> 34841091
<RECEIVABLES> 37976
<ASSETS-OTHER> 20524
<OTHER-ITEMS-ASSETS> 230935
<TOTAL-ASSETS> 35130526
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 299965
<TOTAL-LIABILITIES> 299965
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34487953
<SHARES-COMMON-STOCK> 34836348
<SHARES-COMMON-PRIOR> 34582655
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5755)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 34830561
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 990480
<OTHER-INCOME> 0
<EXPENSES-NET> 140826
<NET-INVESTMENT-INCOME> 849654
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 849654
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (849654)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20161128
<NUMBER-OF-SHARES-REDEEMED> (20734377)
<SHARES-REINVESTED> 826942
<NET-CHANGE-IN-ASSETS> 253693
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (5755)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 88206
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 172622
<AVERAGE-NET-ASSETS> 35500274
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000881166
<NAME> SM&R INVESTMENTS, INC.
<SERIES>
<NUMBER> 03
<NAME> TAX FREE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 10867618
<INVESTMENTS-AT-VALUE> 11566291
<RECEIVABLES> 145956
<ASSETS-OTHER> 36244
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11748491
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17460
<TOTAL-LIABILITIES> 17460
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11018790
<SHARES-COMMON-STOCK> 1100343
<SHARES-COMMON-PRIOR> 1038994
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2565
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 698673
<NET-ASSETS> 11731031
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 291558
<OTHER-INCOME> 0
<EXPENSES-NET> 39963
<NET-INVESTMENT-INCOME> 251595
<REALIZED-GAINS-CURRENT> 24003
<APPREC-INCREASE-CURRENT> (4102)
<NET-CHANGE-FROM-OPS> 271496
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (254771)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 45031
<NUMBER-OF-SHARES-REDEEMED> (6808)
<SHARES-REINVESTED> 23126
<NET-CHANGE-IN-ASSETS> 61349
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<ACCUMULATED-GAINS-PRIOR> (21438)
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<PER-SHARE-NAV-END> 10.66
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
<TABLE> <S> <C>
<PAGE>
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<CIK> 0000881166
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<SERIES>
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<S> <C>
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<APPREC-INCREASE-CURRENT> 0
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<NUMBER-OF-SHARES-SOLD> 2972576
<NUMBER-OF-SHARES-REDEEMED> (4006)
<SHARES-REINVESTED> 15769
<NET-CHANGE-IN-ASSETS> 2984339
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 10030
<AVERAGE-NET-ASSETS> 2351014
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.01
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</TABLE>
|
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