<PAGE>
Exhibit (p) 1.
CODE OF ETHICS OF
SM&R INVESTMENTS, INC.
The Board of Directors of the SM&R INVESTMENTS, INC. (the "Fund"), a
registered investment company, has adopted the following Code of Ethics
("Code"), designed to prevent persons to which it applies from employing
devises, schemes, or artifices to defraud the Fund, making untrue statements of
material facts to the Fund, or such statements which are misleading due to the
omission to state material facts, engaging in acts, practices or courses of
business which operate or would operate as a fraud or deceit upon the Fund, or
engaging in any manipulative practice with respect to the Fund, and to institute
procedures reasonably necessary to prevent violations of the provisions of this
Code.
STATEMENT OF GENERAL PRINCIPLES
This Code is based on the principle that the officers, directors and
employees of the Fund owe a fiduciary duty to the shareholders of the Fund to
conduct their personal securities transactions in a manner which does not
interfere with Fund portfolio transactions or otherwise take unfair advantage of
their relationship to the Fund. Persons covered by this Code must adhere to this
general principle as well as comply with the Code's specific provisions. It
bears emphasis that technical compliance with the Code's procedures will not
automatically insulate from scrutiny trades which show a pattern of abuse of the
individual's fiduciary duties to the Fund or a portfolio within the Fund.
Furthermore, officers, directors and employees of the Fund's investment
adviser, Securities Management and Research, Inc. ("SM&R") are governed by
SM&R's Code of Ethics and the Corporate Policies and Conflict of Interest and
Sensitive Transaction Policies of SM&R's parent, American National Insurance
Company.
CODE OF ETHICS
SECTION 1. DEFINITIONS
This Code uses certain terms which are defined as follows:
1. "Fund" means SM&R Investments, Inc. transaction or any access person to
which the Code applies is related.
2. "Access Person" means any director, officer, general partner or
advisory person of the Fund or of the Fund's investment adviser.
3. "Advisory Person" means
(a) any employee of the Fund or the Fund's investment adviser (or
any company in a control relationship to the Fund or the
Fund's adviser), who, in connection with his/her regular
functions and duties, makes, participates in, or obtains
current information regarding the purchase or sale of a
security by the Fund, or whose functions relate to the making
of any recommendation with respect to such purchases or sales;
and
(b) any natural person in a control relationship to the Fund or
the Fund's investment adviser who obtains current information
concerning recommendations made to the Fund with regard to the
purchase or sale of a security by the Fund.
THE TERM "ADVISORY PERSON" SHALL NOT INCLUDE AN EMPLOYEE OF
THE FUND OR OTHER COMPANY IN A CONTROL RELATIONSHIP TO THE
FUND WHO ASSISTS IN THE PREPARATION OF OR RECEIVES PUBLIC
REPORTS, BUT WHO RECEIVES NO INFORMATION ABOUT CURRENT
RECOMMENDATIONS TO OR TRADING BY THE FUND. THE TERM "ADVISORY
PERSON" SHALL NOT INCLUDE AN EMPLOYEE OF A COMPANY IN A
CONTROL RELATIONSHIP TO THE FUND WHERE SUCH EMPLOYEE IS
COVERED BY A CODE OF ETHICS OF SUCH COMPANY, WHICH CODE IS
REQUIRED BY AND COMPLIES WITH THE PROVISIONS OF RULE 17(J)-1
OF THE SECURITIES AND EXCHANGE COMMISSION.
1
<PAGE>
4. A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated in any manner to the Fund, and, with respect to the person
making the recommendation, when such person seriously considers making
such a recommendation.
5. "Beneficial Ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions
of Section 16 of the Securities and Exchange Act of 1934 and the rules
and regulations thereunder, except that the determination of direct or
indirect beneficial ownership shall apply to ALL securities (ie:
whether or not issued by a company registered pursuant to Section 12 of
the Securities and Exchange Act) which an access person has or
acquires.(1)
6. "Control" shall mean the power to exercise a controlling influence over
the management or policies of the Fund unless such power is solely the
result of an official position with the Fund, and shall be interpreted
in accordance with the provisions of Section 2(a)(9) of the Investment
Company Act of 1940.(2)
7. "Disinterested Director" means a director of the Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19)
of the Investment Company Act of 1940.(3)
8. "Purchase or sale of security" includes, but is not limited to, the
writing of an option to purchase or sell a security.
9. "Security" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in
any profit-sharing agreement, collateral trust certificate,
preorganization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of deposit
for a security, fractional undivided interest in oil, gas, or other
mineral rights, any put, call, straddle, option, or privilege on any
security (including a certificate of deposit) or on any group or index
of securities (including any interest therein or based on the value
thereof), or any put, call, straddle, option, or privilege entered into
on a national securities exchange relating to foreign currency, or, in
general, any interest or instrument commonly known as a "security", or
any certificate for, receipt for, guarantee of, or warrant or right to
subscribe to or purchase, any of the foregoing. Provided, however, the
term "security" shall not include securities issued by the government
of the United States, or short term debt securities issued or
guaranteed as to principal or interest by the United States or by a
person controlled or supervised by and acting as an instrumentality of
the government of the United States pursuant to authority granted by
the Congress of the United States, bankers' acceptances, bank
certificates of deposit, commercial paper and shares of registered
open-end investment companies.
SECTION 2. EXEMPTED TRANSACTIONS
The prohibitions of Section 3 of this Code shall not apply to:
1. Purchases or sales effected in any account over which the access person
has no direct or indirect influence or control.
2. Purchases or sales of securities which are not eligible for purchase or
sale by the Fund.
3. Purchases or sales which are non-volitional on the part of either the
access person or the Fund.
4. Purchases which are part of an automatic dividend reinvestment plan.
5. Purchases effected upon the exercise of rights issued by an issuer
prorata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
6. Purchases or sales which receive the prior approval of the President
and Chief Executive Officer of the Fund because they are only remotely
potentially harmful to the Fund because they would be very unlikely to
affect a highly institutional market, or because they clearly are not
related economically to the securities to be purchased, sold or held by
the Fund. Such approval shall be given or confirmed by a writing which
shall specify upon which of the foregoing grounds the approval is
given.
2
<PAGE>
SECTION 3. PERSONAL INVESTING
PORTFOLIO MANAGERS
A portfolio manager must use extreme care to avoid even the appearance
of a conflict of interest in trading in any personal account (or an account in
which he has a beneficial interest). Accordingly, a portfolio manager may not
trade in (or otherwise acquire) any security for his personal account if that
same security is held in, or is being considered as a potential acquisition by,
any of the Funds managed by the adviser. Any beneficial interest in a security
held by a portfolio manager must be sold at least 24 hours prior to any
investment by the Funds. The following exceptions apply:
1. Any beneficial interest in a security owned at the time of
employment may be held or traded at any time other than within
24 hours of a trade in the Funds for the same or related
security. Dividends in that security may be re-invested in
accordance with a formal plan offered by the issuer.
2. Any beneficial interest in a security acquired by devise or
bequeath may be held or traded at any time other than within
24 hours of a trade in the Funds for the same or related
security.
3. Any beneficial interest in a security issued by the Government
or any Agency of the United States, a State, or any political
subdivision thereof may be traded or held.
4. Any beneficial interest in a security for which a written
approval is first obtained from the President & CEO may be
traded or held.
Furthermore, portfolio managers are prohibited from acquiring any
security of an initial public offering and must receive prior written approval
from the Chief Executive Officer before investing an any private placement
securities.
PERSONAL INVESTING BY OTHER SM&R OFFICERS AND EMPLOYEES
Officers and employees of the Company other than portfolio managers may
trade in (or otherwise acquire) or hold any security for his own account (or an
account in which he has beneficial interest). However, the trade must not occur
within 24 hours of a trade in the Funds for the same or related security.
ALL OTHER ACCESS PERSONS
No access person shall purchase or sell, directly or indirectly, any security in
which he has, or by reason of such transactions acquires any direct or indirect
beneficial ownership and which said person actually knows at the time of such
purchase or sale:
1. is being considered for purchase or sale by the Fund; or
2. is being purchased or sold by the Fund.
3
<PAGE>
SECTION 4. REPORTING
1. Every access person shall report to the Fund the information described in
Section 4.5. of this Code with respect to transactions in any security and
which such access person has, or by reason of such transactions acquires,
any direct or indirect beneficial ownership in a security; provided,
however, that an access person shall not be required to make a report with
respect to transactions effected for any account over which such person
does not have any direct or indirect influence.
2. A disinterested director of the Fund need only report a transaction in a
security if such director, at the time of the transaction, knew, or in the
ordinary course of fulfilling his official duties as a director of the
Fund, should have known that, during the 15-day period immediately
preceding the date of the transaction by the director, such security was
purchased or sold by the Fund or was being considered for purchase by its
investment adviser.
3. Portfolio managers and investment personnel are required to disclose to the
Fund all personal securities holdings at the commencement of employment and
are required to instruct their broker to forward copies of all future trade
confirmations and account statements directly to the Compliance Officer of
SM&R. Transactions will be verified quarterly by the portfolio managers and
investment personnel through a review of confirmations received by
Compliance.
4. Every access person shall provide to the Fund, annually, a report of all
holdings as of the calendar year-end.
5. Every report shall be made no later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates was
effected, and shall contain the following information.
(i) the date of the transactions, the title, the interest rate and
maturity date (if applicable), the number of shares, and the
principal amount of each securities involved;
(ii) the nature of the transactions (ie: purchase, sale, or any
other type of acquisition or disposition);
(iii) the price at which the transaction was effected;
(iv) the name of the broker, dealer, or bank with or through whom
the transaction was effected; and
(v) the date that the report is submitted by the access person.
6. Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he has
any direct or indirect beneficial ownership in the security to which
the report relates.
SECTION 5. SANCTIONS
Upon discovery of a violation of this Code, the Board of Directors of the Fund
may impose such sanctions as it deems appropriate, including but not limited to,
a letter of censure or suspension, or termination of the employment of the
violator.
--------------------------------------------------------------------------------
4
<PAGE>
FOOTNOTES
FOOTNOTE 1. "Beneficial Ownership" as the term has been construed in the
application of Section 16 of the Securities and Exchange Act of 1934, includes
securities as to which a person, directly or indirectly, has or shares the
powers to vote or direct the voting of such security, the power to dispose, or
to direct the disposition of, such security, securities held in the name of his
or her spouse and their minor children, any security as to which the person can
vest or revest ownership in himself at once or at some future time, securities
held in the name of another person if by reason of any contract, understanding,
relationship, agreement or other arrangement he obtains benefits substantially
equivalent to those of ownership, securities held as trustee where a trustee or
members of his immediate family have a vested interest in the income or corpus
of the trust, the ownership of a vested beneficial interest in a trust, or
ownership of securities of a settlor of a trust in which the settlor has the
power to revoke without the consent of all beneficiaries, or an interest as a
partner in a partnership which holds any equity securities.
FOOTNOTE 2. In addition to the definition of "control" set out in the Code,
Section 2(9) of the Investment Company Act of 1940 provides the following
guidelines to determine the existence of control:
Any person who owns beneficially, either directly or through one or more
controlled companies, more than 25% of the voting securities of a company shall
be presumed to control such company. Any person who does not so own more than
25% of the voting securities of any company shall be presumed not to control
such company. A natural person shall be presumed not to be a controlled person
within the meaning of this subchapter. Any such presumption may be rebutted by
evidence, but except as hereinafter provided, shall continue until a
determination to the contrary made by the Commission by order either on its own
motion or on application by an interested person.
FOOTNOTE 3. "Interested Person" as defined by Section 2(19) of the
Investment Company Act of 1940 is defined as follows:
(A) when used with respect to an investment company:
(i) any affiliated person of such company,
(ii) any member of the immediate family of any natural person who
is an affiliated person of such company,
(iii) any interested person of any investment adviser of or
principal underwriter for such company,
(iv) any person or partner or employee of any person who at any
time since the beginning of the last two fiscal years of such
company has acted as legal counsel for such company,
(v) any broker or dealer registered under the Securities Exchange
Act of 1934 or any affiliated person of such a broker or
dealer, and
(vi) any natural person whom the Commission by order shall have
determined to be an interested person by reason of having had,
at any time since the beginning of the last two fiscal years
of such company, a material business or professional
relationship with such company or with the principal executive
officer of such company or with any other investment company
having the same investment adviser or principal underwriter or
with the principal executive officer of such other investment
company;
PROVIDED, That no person shall be deemed to be an interested
person of an investment company solely by reason of (aa) his
being a member of its board of directors or advisory board or
an owner of its securities, or (bb) his membership in the
immediate family of any person specified in clause (aa) of
this proviso; and
(B) when used with respect to an investment adviser or principal
underwriter for any investment company:
(i) any affiliated person of such investment adviser or principal
underwriter,
(ii) any member of the immediate family of any natural person who
is an affiliated person of such investment adviser or
principal underwriter,
(iii) any person who knowingly has any direct or indirect beneficial
interest in, or who is designated as trustee, executor, or
guardian of any legal interest in, any security issued either
by such investment adviser or principal underwriter or by a
controlling person of such investment adviser or principal
underwriter,
(iv) any person or partner or employee of any person who at any
time since the beginning of the last two fiscal years of such
investment company has acted as legal counsel for such
investment adviser or principal underwriter,
(v) any broker or dealer registered under the Securities Exchange
Act of 1934 or any affiliated person of such a broker or
dealer, and
(vi) any natural person whom the Commission by order shall have
determined to be an interested person by reason of having had
at any time since the beginning of the last two fiscal years
of such investment company a material business or professional
relationship with such investment adviser or principal
underwriter or with the principal executive officer or any
controlling person of such investment adviser or principal
underwriter.
For the purposes of this paragraph (19), "member of the
immediate family" means any parent, spouse of a parent, child,
spouse of a child, spouse, brother or sister and includes step
and adoptive relatives.
"Affiliated Person" of another person is defined as (i)any
person directly or indirectly owning, controlling, or holding
with power to vote, 5% or more of the outstanding voting
securities of such other power; (ii)any person 5% or more of
whose outstanding voting securities are directly or indirectly
so owned by another; (iii)any person directly or indirectly
controlling, controlled by, or under common control with, such
other persons; (iv)any officer, director, partner, co-partner,
or employee of such other person; and (v)any investment
adviser of or member of an advisory board of an investment
company.
5
