<PAGE>
SEMI-ANNUAL REPORT
SM&R
SM&R INVESTMENTS INC.
FIXED INCOME FUNDS
GOVERNMENT BOND FUND
[GRAPHIC]
PRIMARY FUND
MONEY MARKET FUND
"THE FINANCIAL STATEMENTS 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, 2000
TAX FREE FUND
<PAGE>
SCHEDULE OF INVESTMENTS February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
INTEREST/
MATURITY STATED FACE
COMMERCIAL PAPER DATE RATE(%) AMOUNT VALUE
<S> <C> <C> <C> <C>
GOVERNMENT AGENCIES--1.75%
Federal Agricultural Mortgage Corporation 03/01/00 5.770 $ 100,000 $ 100,000
Federal Home Loan Bank 03/20/00 5.700 107,000 106,678
Federal Home Loan Mortgage Corporation 03/09/00 5.700 80,000 79,898
Federal Home Loan Mortgage Corporation 04/20/00 5.760 109,000 108,128
-----------
TOTAL COMMERCIAL PAPER--1.75%
(COST $394,704) 394,704
-----------
<CAPTION>
CORPORATE BONDS
AUTO & TRUCK MANUFACTURERS--4.11%
<S> <C> <C> <C> <C>
General Motors Corporation 05/01/08 6.375 1,000,000 928,507
BANKS--4.05%
Chase Manhattan Corporation 02/15/08 6.375 1,000,000 915,943
FINANCIAL SERVICES--12.87%
Bear Stearns Companies, Incorporated 03/30/03 6.200 175,000 167,442
CNA Financial Corporation 01/15/08 6.450 1,000,000 894,680
Household Finance Corporation 06/17/08 6.400 1,000,000 904,634
Morgan Stanley, Dean Witter & Discover 03/01/07 6.875 1,000,000 943,112
-----------
2,909,868
MEDICAL SERVICES--4.26%
Aetna Services, Incorporated 08/15/36 6.970 1,000,000 963,767
NATURAL GAS--2.21%
National Fuel Gas Company 02/01/04 7.750 500,000 499,480
-----------
TOTAL CORPORATE BONDS--27.50%
(Cost $6,775,266) 6,217,565
-----------
<CAPTION>
U S GOVERNMENT AGENCY AND
U S GOVERNMENT SECURITIES
U S GOVERNMENT AGENCY SECURITIES--67.61%
<S> <C> <C> <C> <C>
Federal Home Loan Bank 08/05/04 7.380 1,000,000 1,008,728
Federal Home Loan Bank 08/19/04 7.570 1,000,000 1,016,024
Federal Home Loan Bank 10/25/05 6.230 150,000 143,003
Federal Home Loan Mortgage Corporation 08/01/05 6.750 165,000 161,182
Federal Home Loan Mortgage Corporation 09/15/06 7.000 129,753 129,252
Federal Home Loan Mortgage Corporation 03/15/07 7.000 749,084 742,282
Federal Home Loan Mortgage Corporation 09/15/07 7.000 1,000,000 985,730
Federal Home Loan Mortgage Corporation 04/15/23 7.000 1,000,000 977,290
Federal Home Loan Mortgage Corporation 06/15/27 7.500 1,000,000 1,002,260
Federal National Mortgage Association 02/11/02 7.500 1,585,000 1,602,799
Federal National Mortgage Association 09/12/05 6.550 100,000 96,920
Federal National Mortgage Association 04/10/07 7.700 300,000 293,253
Federal National Mortgage Association 07/25/07 7.000 994,955 985,294
Federal National Mortgage Association 03/16/09 6.320 250,000 231,158
Federal National Mortgage Association 04/29/09 6.500 1,000,000 927,294
Federal National Mortgage Association 05/18/09 6.500 1,500,000 1,424,385
</TABLE>
1
<PAGE>
SCHEDULE OF INVESTMENTS February 29, 2000 (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>
Federal National Mortgage Association 11/18/15 6.350 $ 568,749 $ 564,552
Private Export Funding 01/15/10 7.200 1,000,000 995,946
Tennessee Valley Authority 12/15/17 6.250 300,000 272,111
Vende 12/15/14 6.500 929,627 915,060
Vende 09/15/15 6.500 820,397 809,215
-----------
15,283,738
U S GOVERNMENT SECURITIES--2.12%
U S Treasury Bonds 02/15/26 6.000 500,000 478,281
-----------
TOTAL U S GOVERNMENT AGENCY and U S GOVERNMENT SECURITIES--69.73%
(COST $15,915,089) 15,762,019
-----------
TOTAL INVESTMENTS--98.98%
(COST $23,085,059) 22,374,288
CASH AND OTHER ASSETS, LESS LIABILITIES--1.02% 231,656
-----------
TOTAL NET ASSETS--100.00% $22,605,944
===========
</TABLE>
See notes to financial statements.
2
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
GOVERNMENT BOND FUND
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value $ 22,374,288
Cash 19,441
Prepaid expenses 36,627
Receivable for:
Investment securities sold 5,639
Capital stock sold 3,112
Interest 207,998
Expense reimbursement 1,561
Other assets 2,782
--------------
TOTAL ASSETS 22,651,448
--------------
LIABILITIES
Capital stock reacquired 1,317
Distribution payable 3,752
Accrued:
Investment advisory fee 8,927
Service fee 4,463
Other liabilities 27,045
--------------
TOTAL LIABILITIES 45,504
--------------
NET ASSETS (applicable to shares outstanding) $ 22,605,944
==============
NET ASSETS:
Class A $ 74,564
----------------------------------------------------------------------------
Class B $ 56,038
----------------------------------------------------------------------------
Class C $ 11,102
----------------------------------------------------------------------------
Class T $ 22,464,240
----------------------------------------------------------------------------
TOTAL NET ASSETS $ 22,605,944
----------------------------------------------------------------------------
CAPITAL STOCK, $0.01 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
Outstanding 7,435
----------------------------------------------------------------------------
Class B:
Authorized 100,000,000
Outstanding 5,596
----------------------------------------------------------------------------
Class C:
Authorized 100,000,000
Outstanding 1,113
----------------------------------------------------------------------------
Class T:
Authorized 23,000,000
Outstanding 2,262,278
----------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share $ 10.03
Offering price per share: (Net Assets value of $10.03 /
95.25%) $ 10.53
----------------------------------------------------------------------------
Class B:
Net asset value and offering price per share $ 10.01
----------------------------------------------------------------------------
Class C:
Net asset value and redemption price per share $ 9.97
Offering price per share: (Net Assets value of $9.97 /
99.00%) $ 10.07
----------------------------------------------------------------------------
Class T:
Net asset value and redemption price per share $ 9.93
Offering price per share: (Net Assets value of $9.93 /
95.5%) $ 10.40
----------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
3
<PAGE>
STATEMENT OF OPERATIONS Six Months Ended February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
GOVERNMENT BOND FUND
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 786,391
EXPENSES
Investment advisory fees 57,344
Service fees 28,673
Professional fees 6,487
Custody and transaction fees 6,774
Directors' fees 4,295
Qualification fees 15,734
Shareholder reporting expenses 511
Insurance expenses 1,012
Distribution Fees 319
---------
TOTAL EXPENSES 121,149
LESS EXPENSES REIMBURSED (6,127)
---------
NET EXPENSES 115,022
---------
INVESTMENT INCOME--NET 671,369
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (35,673)
Change in unrealized depreciation of investments for the
period (353,198)
---------
NET LOSS ON INVESTMENTS (388,871)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 282,498
=========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, AUGUST 31,
2000 1999
---------------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 671,369 $ 1,347,702
Net realized gain (loss) on investments (35,673) 45,700
Change in unrealized depreciation (353,198) (1,198,180)
----------- -----------
Net increase in net assets resulting from operations 282,498 195,222
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net
Class A (2,016) (651)
Class B (1,185) (209)
Class C (268) (131)
Class T (667,931) (1,346,738)
----------- -----------
Total distributions to shareholders (671,400) (1,347,729)
CAPITAL SHARE TRANSACTIONS--NET
Class A 7,024 69,763
Class B 49,424 8,079
Class C 268 11,131
Class T (517,558) 537,687
----------- -----------
Total net capital share transactions (460,842) 626,660
----------- -----------
TOTAL DECREASE (849,744) (525,847)
NET ASSETS
Beginning of Period 23,455,688 23,981,535
----------- -----------
End of Period $22,605,944 $23,455,688
=========== ===========
</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 29, YEAR ENDED AUGUST 31,
------------- ------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 10.10 $ 10.60 $ 10.42 $ 10.14 $ 10.51 $ 10.07
Investment income--net 0.29 0.59 0.64 0.67 0.65 0.70
Net realized and unrealized gain
(loss) on investments (0.17) (0.50) 0.20 0.26 (0.37) 0.44
------- ------- ------- ------- ------- -------
Total from Investment Operations 0.12 0.09 0.84 0.93 0.28 1.14
Less distributions from
Investment income--net (0.29) (0.59) (0.66) (0.65) (0.65) (0.70)
------- ------- ------- ------- ------- -------
Total Distributions (0.29) (0.59) (0.66) (0.65) (0.65) (0.70)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 9.93 $ 10.10 $ 10.60 $ 10.42 $ 10.14 $ 10.51
======= ======= ======= ======= ======= =======
Total Return 1.24 %** 0.76 % 8.31 % 9.37 % 2.63 % 11.85 %
======= ======= ======= ======= ======= =======
RATIOS (IN
PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's
omitted) $22,464 $23,368 $23,982 $23,683 $21,127 $20,466
Ratio of expenses with
reimbursement to average net
assets 1.00 %* 1.00 % 1.00 % 1.00 % 1.00 % 0.70 %
Ratio of expenses without
reimbursement to average net
assets 1.05 %* 1.11 % 1.00 % 1.07 % 1.20 % 1.06 %
Ratio of net investment income to
average net assets 5.86 %* 5.58 % 6.08 % 6.46 % 6.17 % 6.90 %
Portfolio turnover rate 19.80 % 22.86 % 32.71 % 9.06 % 30.17 % 2.20 %
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------------------------------ ------------------------------ ------------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
SIX MONTHS JANUARY 1, 1999 SIX MONTHS JANUARY 1, 1999 SIX MONTHS JANUARY 1, 1999
ENDED TO ENDED TO ENDED TO
FEBRUARY 29, AUGUST 31, FEBRUARY 29, AUGUST 31, FEBRUARY 29, AUGUST 31,
------------ --------------- ------------ --------------- ------------ ---------------
2000 1999 2000 1999 2000 1999
------------ --------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 10.20 $ 10.62 $ 10.16 $ 10.62 $ 10.15 $ 10.62
Investment
income--net 0.28 0.30 0.23 0.33 0.24 0.30
Net realized and
unrealized gain
(loss) on
investments (0.17) (0.42) (0.15) (0.46) (0.18) (0.47)
------- ------- ------- ------- ------- -------
Total from Investment
Operations 0.11 (0.12) 0.08 (0.13) 0.06 (0.17)
Less distributions
from
Investment income--
net (0.28) (0.30) (0.23) (0.33) (0.24) (0.30)
------- ------- ------- ------- ------- -------
Total Distributions (0.28) (0.30) (0.23) (0.33) (0.24) (0.30)
------- ------- ------- ------- ------- -------
Net Asset Value, End
of Period $ 10.03 $ 10.20 $ 10.01 $ 10.16 $ 9.97 $ 10.15
======= ======= ======= ======= ======= =======
Total Return** 1.09 % (1.17)% 0.78 % (1.30)% 0.63 % (1.64)%
======= ======= ======= ======= ======= =======
RATIOS (IN
PERCENTAGES)/
SUPPLEMENTAL DATA
Net Assets, end of
period $74,564 $68,792 $56,038 $ 7,743 $11,102 $11,022
Ratio of expenses
with reimbursement
to average net
assets * 1.25 % 1.25 % 1.75 % 1.75 % 2.00 % 2.00 %
Ratio of expenses
without
reimbursement to
average net assets * 1.55 % 1.42 % 2.21 % 1.77 % 2.38 % 2.25 %
Ratio of net
investment income to
average net assets * 5.62 % 5.25 % 5.02 % 4.86 % 4.86 % 4.54 %
Portfolio turnover
rate 19.80 % 22.86 % 19.80 % 22.86 % 19.80 % 22.86 %
</TABLE>
* Ratios annualized
** Returns are not annualized
See notes to financial statements.
5
<PAGE>
SCHEDULE OF INVESTMENTS February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
PRIMARY FUND
<TABLE>
<CAPTION>
INTEREST/
MATURITY STATED FACE
COMMERCIAL PAPER DATE RATE(%) AMOUNT VALUE
<S> <C> <C> <C> <C>
AUTO PARTS MANUFACTURERS--3.48%
Goodyear Tire & Rubber Company (The) 03/14/00 5.900 $ 927,000 $ 925,007
BEVERAGES--4.19%
Whitman Corporation 03/03/00 5.950 1,115,000 1,114,631
CHEMICALS--3.82%
Air Products & Chemicals Incorporated 03/08/00 5.900 1,015,000 1,013,834
COMMUNICATION EQUIPMENT--4.86%
Cox Enterprises Incorporated 04/04/00 6.000 1,299,000 1,291,616
CONSTRUCTION--4.18%
Centex Corporation 03/01/00 5.950 1,112,000 1,112,000
CONTAINERS--5.53%
Crown Cork & Seal Company, Incorporated 03/17/00 5.900 1,472,000 1,468,109
ELECTRONICS--5.07%
AVNET Incorporated 03/28/00 5.980 1,353,000 1,346,927
FOOD PRODUCERS--3.78%
ConAgra Incorporated 04/05/00 6.020 1,010,000 1,004,066
FOOD RETAILERS--5.29%
Safeway Incorporated 04/13/00 6.100 1,416,000 1,405,646
LODGING/HOTELS--4.39%
Marriott International, Incorporated 04/06/00 6.050 1,173,000 1,165,887
MACHINERY/EQUIPMENT--5.26%
Case Corporation 03/07/00 5.950 1,400,000 1,398,610
METALS & MINING--5.29%
Reynolds Metals Company 03/06/00 5.920 1,406,000 1,404,842
NATURAL GAS--5.32%
Sierra Pacific Power Company 03/29/00 6.000 1,421,000 1,414,366
PAPER/FOREST PRODUCTS--5.04%
International Paper Company 03/02/00 5.920 1,340,000 1,339,779
RETAIL-SPECIALTY--4.40%
Mattel, Incorporated 03/23/00 5.940 1,174,000 1,169,734
TRUCKING & SHIPPING--3.50%
Ryder Systems, Incorporated 03/30/00 5.920 934,000 929,521
U S GOVERNMENT AGENCY SECURITIES--2.96%
Federal National Mortgage Association 03/16/00 5.700 789,000 787,108
UTILITY-MISCELLANEOUS--4.42%
Indiana Michigan Power Company 03/22/00 6.000 1,179,000 1,174,862
-----------
TOTAL COMMERCIAL PAPER--80.78%
(Cost $21,466,545) 21,466,545
-----------
<CAPTION>
CORPORATE BONDS
BUILDING SUPPLIES--1.78%
<S> <C> <C> <C> <C>
Armstrong World Industries, Incorporated 08/15/03 6.350 500,000 473,244
ELECTRIC POWER--1.81%
West Penn Power Company 06/01/04 6.375 500,000 479,421
</TABLE>
6
<PAGE>
SCHEDULE OF INVESTMENTS February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
PRIMARY FUND, CONTINUED
<TABLE>
FINANCIAL SERVICES--4.51%
<CAPTION>
INTEREST/
MATURITY STATED FACE
COMMERCIAL PAPER DATE RATE(%) AMOUNT VALUE
<S> <C> <C> <C> <C>
Finova Capital Corporation 03/15/04 6.125 $ 500,000 $ 472,077
Household Finance Corporation 08/15/03 6.250 265,000 253,538
Transamerica Financial Corporation 05/14/04 6.370 500,000 472,925
-----------
1,198,540
LEISURE TIME/GAMING--1.44%
Carnival Cruise Lines 10/01/03 6.150 400,000 383,552
MEDIA-TV/RADIO/CABLE--1.83%
TCI Communications, Incorporated 05/01/03 6.375 500,000 486,185
TELECOM-LONG DISTANCE--1.86%
WorldCom, Incorporated 08/15/01 6.125 500,000 494,057
-----------
TOTAL CORPORATE BONDS--13.23%
(COST $3,617,316) 3,514,999
-----------
<CAPTION>
MUNICIPAL BONDS
WATER & SEWER--1.84%
<S> <C> <C> <C> <C>
Lower Colorado River Authority, Texas Revenue
Bonds, Refunding and Improvement Series C
(Rating(a) Aaa/AAA) 05/15/04 6.820 500,000 488,890
-----------
TOTAL MUNICIPAL BONDS--1.84%
(Cost $500,938) 488,890
-----------
<CAPTION>
U S GOVERNMENT AGENCY AND
U S GOVERNMENT SECURITIES
U S GOVERNMENT AGENCY SECURITIES--0.72%
<S> <C> <C> <C> <C>
Federal Home Loan Bank 11/10/03 5.750 200,000 191,004
U S GOVERNMENT SECURITIES--3.24%
U S Treasury Bonds 02/15/29 5.250 1,000,000 862,500
-----------
TOTAL U S GOVERNMENT AGENCY and U S GOVERNMENT SECURITIES--3.96%
(Cost $1,076,219) 1,053,504
-----------
TOTAL INVESTMENTS--99.81%
(Cost $26,661,018) 26,523,938
CASH AND OTHER ASSETS, LESS LIABILITIES--0.19% 50,844
-----------
TOTAL NET ASSETS--100.00% $26,574,782
===========
</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.
See notes to financial statements.
7
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
PRIMARY FUND
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value $26,523,938
Prepaid expenses 4,564
Receivable for:
Capital stock sold 9,182
Interest 86,457
Expense reimbursement 5,852
Other assets 2,782
-----------
TOTAL ASSETS 26,632,775
-----------
LIABILITIES
Distribution payable 10,777
Capital stock reacquired 25,038
Accrued:
Service fee 5,621
Other liabilities 16,557
-----------
TOTAL LIABILITIES 57,993
-----------
NET ASSETS $26,574,782
===========
Shares of capital stock outstanding, (1,176,000,000 shares
authorized, $.01 par value per share) 26,725,750
===========
Net asset value $ 0.99
===========
</TABLE>
STATEMENT OF OPERATIONS Six Months Ended February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Interest $910,887
EXPENSES
Investment advisory fees 74,523
Service fees 37,262
Professional fees 4,378
Custody and transaction fees 11,956
Directors' fees 4,295
Qualification fees 8,341
Shareholder reporting expenses 16,060
Other 741
--------
TOTAL EXPENSES 157,556
LESS EXPENSES REIMBURSED (37,667)
--------
NET EXPENSES 119,889
--------
INVESTMENT INCOME--NET 790,998
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (23,912)
Change in unrealized depreciation of investments for the
period (86,079)
--------
NET LOSS ON INVESTMENTS (109,991)
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $681,007
========
</TABLE>
See notes to financial statements.
8
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (Unuadited)
--------------------------------------------------------------------------------
PRIMARY FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, AUGUST 31,
2000 1999
---------------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 790,998 $ 1,549,925
Net realized loss on investments (23,912) (12,564)
Change in unrealized depreciation (86,079) (51,001)
----------- -----------
Net increase in net assets resulting from operations 681,007 1,486,360
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net (790,998) (1,549,925)
CAPITAL SHARE TRANSACTION--NET (4,153,524) (3,675,020)
----------- -----------
TOTAL DECREASE (4,263,515) (3,738,585)
NET ASSETS
Beginning of Period 30,838,297 34,576,882
----------- -----------
End of Period $26,574,782 $30,838,297
=========== ===========
</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 29, YEAR ENDED AUGUST 31,
---------------- ------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
---------------- ------------ ------------ ------------ ------------ ------------
<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 0.03 0.05 0.05 0.05 0.05 0.05
Net realized and unrealized
gain (loss) on investments (0.01) -- -- -- -- --
------- ------- ------- ------- ------- -------
Total from Investment
Operations 0.02 0.05 0.05 0.05 0.05 0.05
Less distributions from
Investment income--net (0.03) (0.05) (0.05) (0.05) (0.05) (0.05)
------- ------- ------- ------- ------- -------
Total Distributions (0.03) (0.05) (0.05) (0.05) (0.05) (0.05)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 0.99 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total Return 1.63 %** 4.75 % 5.15 % 4.98 % 5.07 % 5.01 %
======= ======= ======= ======= ======= =======
RATIOS (IN
PERCENTAGES)/SUPPLEMENTAL
DATA
Net Assets, end of period
(000's omitted) $26,575 $30,838 $34,577 $33,045 $37,465 $20,984
Ratio of expenses with
reimbursement to average net
assets 0.80 %* 0.80 % 0.80 % 0.80 % 0.81 % 0.84 %
Ratio of expenses without
reimbursement to average net
assets 1.05 %* 1.06 % 0.98 % 1.01 % 1.15 % 1.21 %
Ratio of net investment income
to average net assets 5.28 %* 4.66 % 5.02 % 4.86 % 4.93 % 4.91 %
Portfolio turnover rate 18.34 % 30.47 % -- -- -- --
</TABLE>
* Ratios annualized
** Returns are not annualized
See notes to financial statements.
9
<PAGE>
SCHEDULE OF INVESTMENTS Februrary 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
TAX FREE FUND
<TABLE>
<CAPTION>
INTEREST/
MUNICIPAL BONDS MATURITY STATED FACE
RATING(A) DATE RATE (%) AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
CALIFORNIA--4.18%
Aa3/AA- California State General Obligation Bonds Unlimited 06/01/11 5.250 $ 25,000 $ 25,081
Aaa/AAA Sacramento, California Municipal Utility District
Electric Revenue Bonds, Series I 01/01/15 5.750 200,000 201,954
Aaa/AAA San Francisco, California City and County Sewer
Revenue Refunding Bonds 10/01/16 5.375 250,000 239,275
-----------
466,310
-----------
FLORIDA--11.54%
Aaa/AAA Dade County, Florida Water & Sewer System Revenue
Bonds 10/01/16 5.375 400,000 385,316
Aaa/AAA Miami-Dade County Solid Waste System Revenue Bonds 10/01/18 4.375 400,000 340,424
Aaa/AAA Miami-Dade County, Florida Expressway Authority
Toll System Revenue Bonds 07/01/29 6.375 400,000 419,216
Aa2/AA+ State of Florida- State Board of Education, Public
Education Capital Outlay Bonds, 1992 Series E 06/01/19 5.750 145,000 143,488
-----------
1,288,444
-----------
GEORGIA--1.56%
A3/A Municipal Electric Authority of Georgia-Power
Revenue Bonds, Series AA 01/01/07 5.400 175,000 174,591
-----------
ILLINOIS--13.31%
Aaa/AAA Chicago, Illinois-General Obligation Bonds
Unlimited 01/01/25 5.125 100,000 85,917
Aaa/AAA Chicago, Illinois-Park District General Obligation
Bonds Unlimited, Series C 01/01/16 4.850 230,000 201,130
Aa2/AA Illinois Health Facilities Authority-Revenue Bonds,
Series A, (Northwestern Memorial Hospital) 08/15/24 6.000 100,000 96,521
Aa2/AA Illinois Health Facilities Authority-Revenue Bonds,
Series 1994A, (Northwestern Memorial Hospital) 08/15/14 6.100 200,000 201,478
Aaa/AAA Illinois State Toll Highway Authority-Highway
Prioity Revenue Bonds, Series A-FGIC 01/01/17 5.750 175,000 182,268
Aaa/AAA Regional Transportation Authority of Illinois
Revenue Bonds, Refunding MBIA 06/01/18 5.500 200,000 190,682
Aaa/NR Rockford, Illinois-General Obligation Bonds
Unlimited 12/15/18 4.500 180,000 145,096
Aa2/AAA State of Illinois-Build Illinois Bonds, Sales Tax
Revenue Bonds, Series V 06/15/17 6.375 200,000 206,980
Aaa/AAA State of Illinois-General Obligation Bonds
Unlimited 03/01/19 5.000 200,000 176,058
-----------
1,486,130
-----------
LOUISIANA--5.46%
Aaa/AAA Louisiana Public Facilities Authority Hospital
Revenue Bonds, Series C 07/01/19 5.000 400,000 343,096
Aaa/AAA New Orleans, Louisiana Sewer Service Revenue Bonds 06/01/18 5.000 300,000 266,964
-----------
610,060
-----------
MASSACHUSETTS--4.15%
Aaa/AAA Massachusetts State Water Revenues Authority,
General Purpose--Series A 11/01/21 5.500 450,000 463,509
-----------
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 5.300 100,000 100,091
-----------
</TABLE>
10
<PAGE>
SCHEDULE OF INVESTMENTS Februrary 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
TAX FREE FUND, CONTINUED
<TABLE>
NEW YORK--7.17%
<CAPTION>
INTEREST/
MUNICIPAL BONDS MATURITY STATED FACE
RATING(A) DATE RATE (%) AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
A3/A- New York City, New York-General Obligation Bonds
Unlimited, Series J 08/01/18 5.000 $200,000 $ 174,644
Aaa/AAA New York City, New York-General Obligation Bonds
Unlimited, Series J 02/15/07 5.000 100,000 99,072
Aa3/AA New York City, New York-Transititional Financial
Authority Revenue Bonds, Series C 05/01/19 5.000 250,000 219,400
Aa3/A+ Triborough Bridge & Tunnel Authority, New York,
Revenue Bonds, General Purpose-Series B 01/01/27 5.200 350,000 307,041
-----------
800,157
-----------
NORTH CAROLINA--0.94%
Aaa/AAA City of Charlotte, North Carolina-General
Obligation Public Improvement Bonds, Series 1994 02/01/08 5.700 100,000 104,400
-----------
OHIO--3.58%
Aaa/AAA Franklin County, Ohio-General Obligation Bonds
Limited 12/01/08 5.100 300,000 299,766
Aaa/AAA Franklin County, Ohio-General Obligation Bonds
Limited 12/01/11 5.300 100,000 100,117
-----------
399,883
-----------
OKLAHOMA--0.85%
Aaa/NR Oklahoma Housing Finance Agency-Single Family
Mortgage Revenue Bonds (Homeownership Loan
Program), 1994
Series A-1 (b) 09/01/07 6.250 95,000 94,719
-----------
OREGON--1.89%
A1/A+ City of Portland, Oregon-Sewer System Revenue
Bonds, 1994 Series A 06/01/15 6.250 200,000 211,236
-----------
PENNSYLVANIA--0.89%
Aa3/AA Pennsylvania State General Obligation Bonds
Unlimited, Refunding & Projects-First Series 04/15/06 5.000 100,000 99,421
-----------
PUERTO RICO--2.09%
Baa1/A Commonwealth of Puerto Rico-Public Improvement
Refunding Bonds, Series 1992A, General Obligation
Bonds 07/01/14 6.000 100,000 101,360
Baa1/AAA Puerto Rico Electric Power Authority-Power Revenue
Bonds, Series R 07/01/17 6.250 125,000 131,571
-----------
232,931
-----------
RHODE ISLAND--0.90%
Aa2/AA+ Rhode Island Housing & Mortgage Financial
Corporation, Homeownership Opportunity, Series
20-A 04/01/17 6.150 100,000 100,181
-----------
TENNESSEE--1.77%
A1/AA Tennessee Housing Development Agency-Mortgage
Finance Program Bonds, 1994 Series B (b) 01/01/09 6.200 200,000 197,602
-----------
</TABLE>
11
<PAGE>
SCHEDULE OF INVESTMENTS Februrary 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
TAX FREE FUND, CONTINUED
<TABLE>
TEXAS--17.97%
<CAPTION>
INTEREST/
MUNICIPAL BONDS MATURITY STATED FACE
RATING(A) DATE RATE (%) AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
Aaa/AAA Baytown, Texas-Water and Sewer Revenue Bonds 02/01/14 5.950 $100,000 $ 101,234
Aaa/AAA Board of Regents of The University of Texas
System-Permanent University Fund, Refunding Bonds,
Series 1992A 07/01/13 6.250 200,000 204,596
Aaa/AAA City of Austin, Texas-Combined Utility Systems
Revenue Refunding Bonds, Series 1994 05/15/16 6.250 80,000 82,296
Aaa/AAA Collin County, Texas-Community College District,
Consolidated Fund, Revenue Bonds 02/01/15 5.250 400,000 380,124
Aaa/AAA Dallas-Fort Worth International Airport-Dallas-Fort
Worth Regional Airport, Joint Revenue Refunding
Bonds, Series 1994A 11/01/10 6.000 100,000 103,285
Aaa/A+ Flower Mound, Texas-Refunding and Improvement,
General Obligation Bonds Unlimited 03/01/17 5.500 200,000 193,358
Aa1/AA Harris County, Texas-Tax and Revenue Certificates
of Obligation, Series 1994 10/01/12 6.100 135,000 141,071
Aa1/AA Harris County, Texas-Tax and Revenue Certificates
of Obligation, Series 1994 10/01/13 6.100 125,000 130,621
Aaa/AAA Mission Texas Consolidated Independent School
District-General Obligation Bonds Unlimited 02/15/18 4.500 200,000 163,284
AAA/NR Tarrant County Health Facilities Development
Corporation-Health System Revenue Bonds, (Harris
Methodist Health System), Series 1994 (c ) 09/01/14 6.000 200,000 209,038
Aaa/AAA Texas Turnpike Authority-Dallas North Tollway
System Revenue Bonds, Series 1995 (President
George Bush Turnpike) 01/01/15 5.400 100,000 96,471
Aaa/NR Weslaco, Texas Independent School District General
Obligation Bonds 02/15/13 5.650 100,000 100,398
Aaa/AAA West University Place, Texas-General Obligation
Bonds Limited, Permanent Improvement 02/01/14 5.650 100,000 99,804
-----------
2,005,580
-----------
UTAH--1.64%
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 30,000 30,760
Aa2/NR Utah State Housing Financial Agency-Single Family
Mortgage Bonds, Series F1 07/01/13 6.000 55,000 55,587
Aa2/AA Utah State Housing Financial Agency-Single Family
Revenue Bonds (b) 07/01/21 6.000 100,000 96,269
-----------
182,616
-----------
VIRGINIA--0.91%
Aaa/AAA Virginia State Housing Development Authority
Commonwealth Mortgage Bonds, Series A, Subseries
A-4 (b) 07/01/15 6.300 100,000 101,221
-----------
</TABLE>
12
<PAGE>
SCHEDULE OF INVESTMENTS Februrary 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
TAX FREE FUND, CONTINUED
<TABLE>
WASHINGTON--12.71%
<CAPTION>
INTEREST/
MUNICIPAL BONDS MATURITY STATED FACE
RATING(A) DATE RATE (%) AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
Aaa/AAA City of Richland, Washington-Water and Sewer
Improvement Revenue Bonds, 1993 04/01/07 5.550 $300,000 $ 308,616
NR/AAA King County, Washington-Department of Metropolitan
Services, Limited Tax General Obligation Bonds,
1994 Series A 01/01/08 5.800 200,000 208,320
Aa1/AA+ King County, Washington-Limited Tax General
Obligation and Refunding Bonds, 1993 Series A 12/01/10 6.000 100,000 103,723
Aaa/AAA Municipality of Metropolitan Seattle Sewer
Refunding Revenue Bonds, Series X 01/01/15 5.400 100,000 96,375
Aa1/AA+ Port of Seattle, Washington-General Obligation
Bonds (b) 05/01/14 5.750 100,000 99,226
Aaa/AAA Seattle, Washington-Municipal Light & Power Revnue
Bonds, Series B 06/01/24 5.000 100,000 84,816
Aa1/AA+ State of Washington-General Obligation Bonds,
Series 1994B 05/01/09 5.750 100,000 101,694
Aa1/AA+ State of Washington-General Obligation Bonds,
Series 1994B 09/01/16 6.000 100,000 100,822
Aa1/AA+ State of Washington-General Obligation Bonds
Unlimited,
Series B 05/01/18 5.500 300,000 290,601
Aaa/AAA Washington State Public Power Supply System Nuclear
Project Number 1 Refunding Revenue Bonds, Series C 07/01/10 5.500 25,000 25,015
-----------
1,419,208
-----------
WISCONSIN--1.84%
Aa2/AA City of Green Bay-General Obligation Refunding
Bonds,
Series 1994B 04/01/09 5.900 200,000 205,140
-----------
TOTAL MUNICIPAL BONDS--96.25%
(Cost $10,946,856) 10,743,430
-----------
<CAPTION>
COMMERCIAL PAPER
TELEPHONE--1.79%
<S> <C> <C> <C> <C> <C>
BellSouth Telecommunications Incorporated 03/03/00 5.850 200,000 199,935
-----------
TOTAL COMMERCIAL PAPER--1.79%
(Cost $199,935) 199,935
-----------
TOTAL INVESTMENTS--98.04%
(Cost $11,146,791) 10,943,365
CASH AND OTHER ASSETS, LESS LIABILITIES--1.96% 218,782
-----------
TOTAL NET ASSETS--100.00% $11,162,147
===========
</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.
13
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
TAX FREE FUND
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value $ 10,943,365
Cash 33,888
Prepaid expenses 36,932
Receivable for:
Capital stock sold 650
Interest 162,465
Expense reimbursement 5,747
Other assets 3,211
--------------
TOTAL ASSETS 11,186,258
--------------
LIABILITIES
Distribution payable 1,228
Accrued:
Investment advisory fee 4,423
Service fee 2,211
Other liabilities 16,249
--------------
TOTAL LIABILITIES 24,111
--------------
NET ASSETS (applicable to shares outstanding) $ 11,162,147
==============
NET ASSETS:
Class A $ 197,482
----------------------------------------------------------------------------
Class B $ 98,277
----------------------------------------------------------------------------
Class C $ 5,625
----------------------------------------------------------------------------
Class T $ 10,860,763
----------------------------------------------------------------------------
TOTAL NET ASSETS $ 11,162,147
==============
CAPITAL STOCK, $0.01 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
Outstanding 19,829
----------------------------------------------------------------------------
Class B:
Authorized 100,000,000
Outstanding 9,885
----------------------------------------------------------------------------
Class C:
Authorized 100,000,000
Outstanding 569
----------------------------------------------------------------------------
Class T:
Authorized 21,000,000
Outstanding 1,099,186
----------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share $ 9.96
Offering price per share:
(Net Assets value of $9.96 / 95.25%) $ 10.46
----------------------------------------------------------------------------
Class B:
Net asset value and offering price per share $ 9.94
----------------------------------------------------------------------------
Class C:
Net asset value and redemption price per share $ 9.88
Offering price per share:
(Net Assets value of $9.88 / 99.00%) $ 9.98
----------------------------------------------------------------------------
Class T:
Net asset value and redemption price per share $ 9.88
Offering price per share:
(Net Assets value of $9.88 / 95.5%) $ 10.35
----------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
14
<PAGE>
STATEMENT OF OPERATIONS Six Months Ended February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
TAX FREE FUND
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $320,839
EXPENSES
Investment advisory fees 27,972
Service fees 13,986
Professional fees 4,237
Custody and transaction fees 5,545
Directors' fees 4,295
Qualification fees 12,344
Shareholder reporting expenses 180
Insurance expenses 758
Distribution fees 474
--------
TOTAL EXPENSES 69,791
LESS EXPENSES REIMBURSED (27,170)
--------
NET EXPENSES 42,621
--------
INVESTMENT INCOME--NET 278,218
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 11,240
Change in unrealized depreciation of investments for the
period (297,836)
--------
NET LOSS ON INVESTMENTS (286,596)
--------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (8,378)
========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, AUGUST 31,
2000 1999
---------------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 278,218 $ 526,797
Net realized gain on investments 11,240 26,918
Change in unrealized depreciation (297,836) (608,365)
----------- -----------
Net decrease in net assets resulting from operations (8,378) (54,650)
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net
Class A (4,574) (2,378)
Class B (2,323) (1,020)
Class C (111) (333)
Class T (271,283) (523,038)
Capital Gains
Class A (87) --
Class B (33) --
Class C (3) --
Class T (4,932) --
----------- -----------
Total distributions from shareholders (283,346) (526,769)
CAPITAL SHARE TRANSACTIONS--NET
Class A 7,570 202,353
Class B (12,295) 116,889
Class C 113 6,889
Class T (73,717) 729,824
----------- -----------
Total net capital share transactions (78,329) 1,055,955
----------- -----------
TOTAL INCREASE (DECREASE) (370,053) 474,536
NET ASSETS
Beginning of Period 11,532,200 11,057,664
----------- -----------
End of Period $11,162,147 $11,532,200
=========== ===========
</TABLE>
See notes to financial statements.
15
<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
ENDED
FEBRUARY 29, YEAR ENDED AUGUST 31,
------------- ----------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 10.14 $ 10.64 $ 10.27 $ 9.93 $ 9.95 $ 9.62
Investment income--net 0.25 0.48 0.49 0.51 0.53 0.51
Net realized and unrealized gain
(loss) on investments (0.26) (0.50) 0.37 0.33 (0.02) 0.33
------- ------- ------- ------- ------ ------
Total from Investment Operations (0.01) (0.02) 0.86 0.84 0.51 0.84
Less distributions from net
investment income (0.25) (0.48) (0.49) (0.50) (0.53) (0.51)
------- ------- ------- ------- ------ ------
Total Distributions (0.25) (0.48) (0.49) (0.50) (0.53) (0.51)
------- ------- ------- ------- ------ ------
Net Asset Value, End of Period $ 9.88 $ 10.14 $ 10.64 $ 10.27 $ 9.93 $ 9.95
======= ======= ======= ======= ====== ======
Total Return (0.06)%** (0.28)% 8.58 % 8.61 % 5.18 % 9.15 %
======= ======= ======= ======= ====== ======
RATIOS (IN
PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's
omitted) $10,861 $11,218 $11,058 $10,700 $9,148 $8,399
Ratio of expenses with
reimbursement to average net
assets 0.75 %* 0.73 % 0.75 % 0.54 % -- --
Ratio of expenses without
reimbursement to average net
assets 1.24 %* 1.23 % 1.25 % 1.27 % 1.18 % 1.25 %
Ratio of net investment income to
average net assets 4.99 %* 4.53 % 4.60 % 4.97 % 5.27 % 5.43 %
Portfolio turnover rate 7.13 % 5.09 % 12.77 % 22.15 % 18.44 % 12.63 %
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------------------------- ----------------------------------- ----------------
PERIOD FROM PERIOD FROM
SIX MONTHS ENDED JANUARY 1, 1999 SIX MONTHS ENDED JANUARY 1, 1999 SIX MONTHS ENDED
FEBURARY 29, TO AUGUST 31, FEBURARY 29, TO AUGUST 31, FEBURARY 29,
---------------- ---------------- ---------------- ---------------- ----------------
2000 1999 2000 1999 2000
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 10.22 $ 10.68 $ 10.20 $ 10.68 $ 10.14
Investment income--net 0.24 0.21 0.21 0.18 0.20
Net realized and
unrealized gain (loss) on
investments (0.26) (0.46) (0.26) (0.48) (0.26)
-------- -------- ------- -------- -------
Total from Investment
Operations (0.02) (0.25) (0.05) (0.30) (0.06)
Less distributions from
Investment income--net (0.24) (0.21) (0.21) (0.18) (0.20)
-------- -------- ------- -------- -------
Total Distributions (0.24) (0.21) (0.21) (0.18) (0.20)
-------- -------- ------- -------- -------
Net Asset Value, End of
Period $ 9.96 $ 10.22 $ 9.94 $ 10.20 $ 9.88
======== ======== ======= ======== =======
Total Return ** (0.18)% (2.37)% (0.44)% (2.85)% (0.57)%
======== ======== ======= ======== =======
RATIOS (IN PERCENTAGES)/
SUPPLEMENTAL DATA
Net Assets, end of period $197,482 $194,917 $98,277 $113,143 $ 5,625
Ratio of expenses with
reimbursement to average
net assets * 1.00 % 1.51 % 1.50 % 2.01 % 1.75 %
Ratio of expenses without
reimbursement to average
net assets * 1.38 % 2.02 % 1.90 % 2.52 % 2.15 %
Ratio of net investment
income to average net
assets * 4.74 % 3.69 % 4.30 % 3.20 % 3.99 %
Portfolio turnover rate 7.13 % 5.09 % 7.13 % 5.09 % 7.13 %
<CAPTION>
CLASS C SHARES
----------------
PERIOD FROM
JANUARY 1, 1999
TO AUGUST 31,
----------------
1999
----------------
<S> <C>
Net Asset Value, Beginning
of Period $ 10.68
Investment income--net 0.25
Net realized and
unrealized gain (loss) on
investments (0.54)
-------
Total from Investment
Operations (0.29)
Less distributions from
Investment income--net (0.25)
-------
Total Distributions (0.25)
-------
Net Asset Value, End of
Period $ 10.14
=======
Total Return ** (2.72)%
=======
RATIOS (IN PERCENTAGES)/
SUPPLEMENTAL DATA
Net Assets, end of period $ 5,657
Ratio of expenses with
reimbursement to average
net assets * 2.28 %
Ratio of expenses without
reimbursement to average
net assets * 2.78 %
Ratio of net investment
income to average net
assets * 2.92 %
Portfolio turnover rate 5.09 %
</TABLE>
* Ratios annualized
** Returns are not annualized
See notes to financial statements.
16
<PAGE>
SCHEDULE OF INVESTMENTS February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
<CAPTION>
INTEREST/
MATURITY STATED FACE
COMMERCIAL PAPER DATE RATE(%) AMOUNT VALUE
<S> <C> <C> <C> <C>
CHEMICAL-SPECIALTY--3.51%
Eastman Kodak Company 04/25/00 5.82 $ 2,211,000 $ 2,191,296
GOVERNMENT AGENCIES--89.76%
Federal Farm Credit Bank 03/01/00 5.57 7,015,000 7,015,000
Federal Home Loan Bank 03/03/00 5.63 7,795,000 7,792,561
Federal Home Loan Bank 03/31/00 5.62 6,694,000 6,662,413
Federal Home Loan Mortgage Corporation 03/02/00 5.62 3,450,000 3,449,461
Federal Home Loan Mortgage Corporation 03/21/00 5.65 6,195,000 6,175,450
Federal National Mortgage Association 03/07/00 5.68 3,380,000 3,376,794
Federal National Mortgage Association 03/15/00 5.66 8,200,000 8,181,914
Federal National Mortgage Association 04/13/00 5.68 13,570,000 13,477,351
-----------
56,130,944
MEDICAL PRODUCTS/SUPPLIES--1.38%
Becton Dickinson & Company 03/10/00 5.71 865,000 863,758
TELEPHONE--3.43%
US WEST Communications Incorporated 03/09/00 5.85 2,149,000 2,146,206
TRANSPORTATION-MISCELLANEOUS--2.87%
Hertz Corporation 03/02/00 5.73 1,795,000 1,794,714
-----------
TOTAL INVESTMENTS--100.95%
(Cost $63,126,918) 63,126,918
LIABILITIES IN EXCESS OF OTHER ASSETS--(0.95%) (594,371)
-----------
TOTAL NET ASSETS--100.00% $62,532,547
===========
</TABLE>
See notes to financial statements.
17
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value $63,126,918
Cash 631,300
Prepaid expenses 22,253
Receivable for:
Distribution 5,639
Capital stock sold 11,990
Interest 643
Expense reimbursement 4,049
-----------
TOTAL ASSETS 63,802,792
-----------
LIABILITIES
Capital stock reacquired 1,245,029
Accrued:
Investment advisory fee 9,890
Service fee 9,890
Other liabilities 5,436
-----------
TOTAL LIABILITIES 1,270,245
-----------
NET ASSETS $62,532,547
===========
Shares of capital stock outstanding, (1,000,000,000 shares
authorized, $.01 par value per share) 62,532,547
===========
Net asset value $ 1.00
===========
</TABLE>
STATEMENT OF OPERATIONS Six Months Ended February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $765,135
EXPENSES
Investment advisory fees 33,093
Service fees 33,093
Professional fees 4,348
Custody and transaction fees 10,214
Directors' fees 4,295
Qualification fees 8,437
Shareholder reporting expenses 200
Insurance expenses 506
Other 402
--------
TOTAL EXPENSES 94,588
LESS EXPENSES REIMBURSED (27,635)
--------
NET EXPENSES 66,953
--------
INVESTMENT INCOME--NET $698,182
========
</TABLE>
See notes to financial statements.
18
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
--------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS JANUARY 1, 1999
ENDED TO
FEBRUARY 29, AUGUST 31,
2000 1999
------------ ---------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 698,182 $ 137,393
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net (698,182) (137,393)
CAPITAL SHARE TRANSACTIONS--NET 51,851,066 10,681,481
----------- -----------
TOTAL INCREASE 51,851,066 10,681,481
NET ASSETS
Beginning of Period 10,681,481 --
----------- -----------
End of Period $62,532,547 $10,681,481
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (Unaudited)
--------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the period.
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS JANUARY 1, 1999
ENDED TO
FEBRUARY 29, AUGUST 31,
------------ ---------------
2000 1999
------------ ---------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00
Investment income--net 0.03 0.03
------- -------
Total from Investment Operations 0.03 0.03
Less distributions from
Investment income--net (0.03) (0.03)
------- -------
Total Distributions (0.03) (0.03)
------- -------
Net Asset Value, End of Period $ 1.00 $ 1.00
======= =======
Total Return** 2.55 % 2.89 %
======= =======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net Assets, end of period (000's omitted) $62,533 $10,681
Ratio of expenses with reimbursement to average net assets * 0.50 % 0.50 %
Ratio of expenses without reimbursement to average net
assets * 0.70 % 1.22 %
Ratio of net investment income to average net assets * 5.18 % 4.45 %
</TABLE>
* Ratios annualized
** Returns are not annualized
See notes to financial statements.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS February 29, 2000 (Unaudited)
--------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
The SM&R Investments, Inc. (the "Funds"), is a diversified open-end management
investment company registered as a series fund under the Investment Company Act
of 1940, as amended. The Funds' 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"), SM&R Primary Fund ("Primary
Fund"), SM&R Tax Free Fund ("Tax Free Fund"), 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, 1999, the funds' tax year-end, the Government Bond
Fund and the Primary Fund had capital loss carryforwards that will expire in
2004 of approximately $247,000 and $55,000, respectively.
20
<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 and qualification 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.
The organizational cost for the Money Market Fund and the Government Bond and
Tax Free Funds' Class A, Class B and Class C shares were paid by Securities
Management and Research, Inc.
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:
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 2--OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
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>
PRIMARY FUND
MONEY MARKET FUND
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%. 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
reimburse the Primary Fund for regular operating expenses in excess of 0.80% per
annum of average daily net assets, the Tax Free Fund for regular operating
expenses in excess of 0.75% 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 29, 2000.
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.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 2--OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
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 six months ended February 29, 2000, the Government Bond Fund
and Tax Free Fund paid $319 and $474, respectively as compensation under the
Plans.
SALES CHARGES:
SM&R, as principal underwriter, received as sales charges on sales of Class T, A
and C shares, for the six months ended February 29, 2000, of capital stock of
the Funds as follows:
<TABLE>
<CAPTION>
SALES
CHARGES
RECEIVED BY SM&R
<S> <C>
Government Bond Fund $ 2,167
Tax Free Fund $ 2,546
</TABLE>
For the six months ended February 29, 2000, SM&R received $1,907 for contingent
deferred sales charges imposed on the redemptions of 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 29, 2000, 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 524,911 23% 750,434 33%
Primary -- -- 19,199,526 72%
Tax Free 134,889 12% 672,979 60%
Money Market 690,726 1% 17,525,789 28%
</TABLE>
The Funds pay directors' fees and expenses for all the disinterested directors
and three interested directors.
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 $4,478,514 $4,349,142
Primary $ 986,260 $ 932,940
Tax Free $ 824,156 $ 767,377
</TABLE>
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 3--COST, PURCHASES AND SALES OF INVESTMENT SECURITIES--CONTINUED
Gross unrealized appreciation and depreciation as of February 29, 2000, were as
follows:
<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION
<S> <C> <C>
Government Bond $ 94,458 $805,229
Primary -- $137,080
Tax Free $177,562 $380,988
</TABLE>
NOTE 4--CAPITAL STOCK
GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sale of capital shares:
Class T 21,891 $ 221,285 85,399 $ 902,135
Class A 1,021 10,422 6,805 70,359
Class B 4,819 49,274 742 7,870
Class C -- -- 1,073 11,000
----------- ------------ ----------- ------------
Total sale of capital shares 27,731 280,981 94,019 991,364
Investment income dividends reinvested:
Class T 64,463 646,795 124,312 1,298,156
Class A 153 1,554 43 444
Class B 29 289 20 209
Class C 27 268 13 131
----------- ------------ ----------- ------------
Total investment income dividends reinvested 64,672 648,906 124,388 1,298,940
Redemptions of capital shares outstanding:
Class T (137,390) (1,385,638) (159,122) (1,662,604)
Class A (486) (4,952) (101) (1,040)
Class B (14) (139) -- --
Class C -- -- -- --
----------- ------------ ----------- ------------
Total redemptions of capital shares outstanding (137,890) (1,390,729) (159,223) (1,663,644)
----------- ------------ ----------- ------------
Net increase (decrease) in capital shares outstanding (45,487) $ (460,842) 59,184 $ 626,660
============ ============
Shares outstanding at beginning of period 2,321,909 2,262,725
----------- -----------
Shares outstanding at end of period 2,276,422 2,321,909
=========== ===========
Net assets as of February 29, 2000 are comprised of the
following:
Capital (par value and additional paid-in) $ 23,576,228
Accumulated net realized loss on investments (259,513)
Net unrealized depreciation of investments (710,771)
------------
Net Assets $ 22,605,944
============
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 4--CAPITAL STOCK--CONTINUED
<TABLE>
<S> <C> <C> <C> <C>
PRIMARY FUND
<S> <C> <C> <C> <C>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
Sale of capital shares 9,714,042 $ 9,683,178 33,873,860 $ 33,873,860
<S> <C> <C> <C> <C>
Investment income dividends reinvested 738,859 735,143 1,473,935 1,473,949
Redemptions of capital shares outstanding (14,634,772) (14,571,845) (39,022,829) (39,022,829)
----------- ------------ ----------- ------------
Net decrease in capital shares outstanding (4,181,871) $ (4,153,524) (3,675,034) $ (3,675,020)
============ ============
Shares outstanding at beginning of period 30,907,621 34,582,655
----------- -----------
Shares outstanding at end of period 26,725,750 30,907,621
=========== ===========
Net assets as of February 29, 2000 are comprised of the following:
Capital (par value and additional paid-in) $ 26,754,093
Accumulated net realized loss on investments (42,231)
Net unrealized depreciation of investments (137,080)
------------
Net Assets $ 26,574,782
============
</TABLE>
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 4--CAPITAL STOCK--CONTINUED
<TABLE>
<S> <C> <C> <C> <C>
TAX FREE FUND
<S> <C> <C> <C> <C>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
Sale of capital shares:
<S> <C> <C> <C> <C>
Class T 10,355 $ 102,361 72,514 $ 769,888
Class A 295 2,951 19,748 209,198
Class B 4,884 48,870 11,098 116,931
Class C -- -- 2,475 26,359
----------- ------------ ----------- ------------
Total sale of capital shares 15,534 154,182 105,835 1,122,376
Investment income dividends reinvested:
Class T 26,632 263,893 48,162 507,956
Class A 454 4,532 226 2,345
Class B 233 2,323 98 1,019
Class C 11 111 32 333
----------- ------------ ----------- ------------
Total investment income dividends reinvested 27,330 270,859 48,518 511,653
Distributions from net realized gain reinvested:
Class T 486 4,837 -- --
Class A 8 87 -- --
Class B 3 33 -- --
Class C -- 2 -- --
----------- ------------ ----------- ------------
Total distributions from net realized gain reinvested 497 4,959 -- --
Redemptions of capital shares outstanding:
Class T (44,509) (444,808) (53,448) (548,020)
Class A -- -- (902) (9,190)
Class B (6,327) (63,521) (104) (1,061)
Class C -- -- (1,949) (19,803)
----------- ------------ ----------- ------------
Total redemptions of capital shares outstanding (50,836) (508,329) (56,403) (578,074)
Net increase (decrease) in capital shares outstanding (7,475) $ (78,329) 97,950 $ 1,055,955
============ ============
Shares outstanding at beginning of period 1,136,944 1,038,994
----------- -----------
Shares outstanding at end of period 1,129,469 1,136,944
=========== ===========
Net assets as of February 29, 2000 are comprised of the following:
Capital (par value and additional paid-in) $ 11,353,953
Accumulated net realized gain on investments 11,620
Net unrealized appreciation of investments (203,426)
------------
Net Assets $ 11,162,147
============
</TABLE>
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
--------------------------------------------------------------------------------
SM&R INVESTMENTS, INC.
NOTE 4--CAPITAL STOCK--CONTINUED
<TABLE>
<CAPTION>
MONEY MARKET
<S> <C> <C> <C> <C>
SIX MONTHS ENDED EIGHT MONTHS ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- -----------
Sale of capital shares 98,771,349 $ 98,771,349 13,546,991 $13,546,991
Investment income dividends reinvested 703,255 703,255 138,407 138,407
Redemptions of capital shares outstanding (47,623,538) (47,623,538) (3,003,917) (3,003,917)
----------- ------------ ----------- -----------
Net increase in capital shares outstanding 51,851,066 $ 51,851,066 10,681,481 $10,681,481
============ ===========
Shares outstanding at beginning of period 10,681,481 --
----------- -----------
Shares outstanding at end of period 62,532,547 10,681,481
=========== ===========
Net assets as of February 29, 2000 are comprised of the following:
Capital (par value and additional paid-in) $ 62,532,547
------------
Net Assets $ 62,532,547
============
</TABLE>
27
<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
8 Penn Center Plaza, Suite 800
Philadelphia, Pennsylvania 19103-2108
<PAGE>
SM&R EQUITY FUNDS
SM&R Growth Fund, Inc.
SM&R Equity Income Fund, Inc.
SM&R Balanced Fund, Inc.
SM&R INVESTMENTS, INC.
SM&R Government Bond Fund
SM&R Tax Free Fund
SM&R Primary Fund
SM&R Money Market Fund
HOW TO REACH US:
SHAREHOLDER SERVICES SALES AND MARKETING
(800)231-4639 (800)526-8346
FUND QUOTES AND INVESTOR HOTLINE TO REQUEST A PROSPECTUS
(877)239-2049 (800)231-4639
VISIT OUR WEBSITE AT: WWW.SMRINVEST.COM
[LOGO] SECURITIES MANAGEMENT
AND RESEARCH, INC.
MANAGER & DISTRIBUTOR
-------------------------------------
MEMBER NASD, SIPC
2450 SOUTH SHORE BLVD., SUITE 400 - LEAGUE CITY, TX 77573 - (281)334-2469
