UNITED STATES
Securities and Exchange Commission
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-6477
SM&R Investments, Inc.
P.O. Box 58969
Houston, TX 77258-8969
Securities Management and Research, Inc.
P.O. Box 58969
Houston, TX 77258-8969
(800) 231-4639
Fiscal year end: August 31
Reporting period: February 28, 2010
Item 1 Report to Shareholders
<Page>
SEMI-ANNUAL REPORT
[SM&R LOGO]
SM&R INVESTMENTS, INC.
SM&R GROWTH FUND
SM&R EQUITY INCOME FUND
SM&R BALANCED FUND
SM&R GOVERNMENT BOND FUND
SM&R MONEY MARKET FUND
SEMI-ANNUAL REPORT
FEBRUARY 28, 2010
<Page>
The report contained herein is included for the general information of our
shareholders. This report is not authorized for distribution to prospective
investors unless it is preceded or accompanied by a current prospectus. ALL
INVESTORS ARE ADVISED TO CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES
AND EXPENSES OF THE INVESTMENT COMPANIES CAREFULLY BEFORE INVESTING. THE
PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE INVESTMENT COMPANIES.
YOU SHOULD READ IT CAREFULLY BEFORE INVESTING.
The investment adviser is responsible for exercising the voting rights
associated with the securities purchased and held by the Funds. A description of
the policies and procedures the investment adviser uses in fulfilling this
responsibility is included in the Funds' Statement of Additional Information and
is available without charge, upon request, by calling 1-800-231-4639. The
policies and procedures are also available on the Securities and Exchange
Commission's (SEC) website at http://www.sec.gov. Information on how the Funds
voted proxies relating to portfolio securities during the most recent 12 month
period ended June 30 is available without charge, upon request, by calling
1-800-231-4639 and is also available on the SEC's website at http://www.sec.gov.
The Funds file their complete schedule of holdings with the SEC for the first
and third quarters of each fiscal year on Form N-Q. The Funds' Form N-Q is
available on the SEC's website, beginning with the November 30, 2004 report, at
http://www.sec.gov. You may review and make copies at the SEC's Public Reference
Room in Washington, D.C. You may also obtain copies after paying a duplicating
fee by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102
or by electronic request to publicinfo@sec.gov. A copy of the quarterly holdings
report is available, without charge, upon request, by calling 1-800-231-4639.
<Page>
AN EXAMPLE OF ONGOING EXPENSES (Unaudited)
Each shareholder of the Company may incur two types of expenses: (1)
transactional (e.g., sales charges, contingent deferred sales charges on
redemptions and redemption fees) and (2) ongoing (e.g., asset-based charges such
as investment advisory fees and distribution and/or 12b-1 fees). The example,
included below, is intended to help a shareholder better understand the ongoing
expenses of investing in this Company and to compare these expenses with other
mutual funds. The example is based on an investment of $1,000 invested at the
beginning of the period, September 1, 2009, and held for six months ending
February 28, 2010.
ACTUAL EXPENSES
The example below provides information about actual account values and actual
expenses. A shareholder may use the information in this example, together with
the amount they have invested, to estimate the expenses that they have paid over
the period. Simply divide the account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the actual column under the heading entitled "Expenses Paid During Period" to
estimate the expenses paid on their account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The example also provides information about hypothetical account values and
hypothetical expenses based on the Company's actual expense ratios and an
assumed rate of return of 5% per year before expenses, which is not the
Company's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses a shareholder
paid for the period. This information may be used to compare the ongoing
expenses of investing in the Company and other mutual funds. To do so, compare
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other mutual funds.
Please note that the expenses shown in this table are meant to help a
shareholder understand the ongoing expenses only and do not reflect any
transactional expenses, such as sales charges, contingent deferred sales charges
on redemptions or redemption fees. Therefore, the table is useful in comparing
ongoing expenses only, and will not help determine the relative total costs of
owning different funds. In addition, if these transactional expenses were
included, the expenses would have been higher.
<Table>
<Caption>
ACTUAL HYPOTHETICAL
--------------------------- ---------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES
ACCOUNT ANNUALIZED ACCOUNT PAID ACCOUNT PAID
VALUE EXPENSE VALUE DURING VALUE DURING
FUNDS (9/1/09) RATIOS (02/28/10) (1) PERIOD (2) (02/28/10) (1) PERIOD (2)
- ----- --------- ---------- -------------- ---------- -------------- ----------
Growth Fund
Class A $1,000.00 1.36% $1,090.53 $7.07 $1,018.05 $6.82
Class B 1,000.00 1.86% 1,084.06 9.63 1,015.57 9.32
Class T 1,000.00 1.24% 1,088.90 6.42 1,018.65 6.20
Equity Income Fund
Class A 1,000.00 1.26% 1,088.50 6.53 1,018.55 6.32
Class B 1,000.00 1.76% 1,086.57 9.12 1,016.06 8.82
Class T 1,000.00 1.23% 1,089.11 6.38 1,018.70 6.18
</Table>
1
<Page>
<Table>
<Caption>
ACTUAL HYPOTHETICAL
--------------------------- ---------------------------
BEGINNING ENDING EXPENSES ENDING EXPENSES
ACCOUNT ANNUALIZED ACCOUNT PAID ACCOUNT PAID
VALUE EXPENSE VALUE DURING VALUE DURING
FUNDS (9/1/09) RATIOS (02/28/10) (1) PERIOD (2) (02/28/10) (1) PERIOD (2)
- ----- --------- ---------- -------------- ---------- -------------- ----------
Balanced Fund
Class A $1,000.00 1.30% $1,068.43 $6.68 $1,018.35 $6.52
Class B 1,000.00 1.80% 1,066.25 9.23 1,015.87 9.02
Class T 1,000.00 1.25% 1,068.70 6.39 1,018.60 6.25
Government Bond Fund
Class A 1,000.00 0.73% 1,012.81 3.66 1,021.17 3.67
Class B 1,000.00 1.23% 1,011.31 6.15 1,018.67 6.18
Class T 1,000.00 0.73% 1,013.19 3.66 1,021.17 3.67
Money Market Fund 1,000.00 0.08% 1,000.00 0.38 1,024.41 0.39
</Table>
(1) The actual ending account value is based on actual total return of each
class of each of the funds for the period September 1, 2009 to February 28,
2010 after actual expenses and will differ from the hypothetical ending
account value which is based on each class of each of the funds' actual
expense ratios and a hypothetical annual return of 5% before expenses.
(2) Expenses are equal to the annualized expense ratios, shown in the table
above, multiplied by the average account value over the period, then
multiplied by 181/365 (to reflect the six month period).
2
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APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
On November 19, 2009, the Board of Directors of SM&R Investments. (the "Board")
unanimously approved the renewal and extension of the investment advisory
agreements with Securities Management and Research, Inc. (the "Manager") for the
SM&R Growth Fund, SM&R Equity Income Fund, SM&R Balanced Fund, SM&R Government
Bond Fund and SM&R Money Market Fund ("the Funds"). The Board considered a
variety of factors in connection with its review of the advisory contracts (the
"Contracts"), also taking into account information provided by the Manager
during the course of the year, as discussed below:
NATURE, EXTENT, AND QUALITY OF SERVICES
The Board considered the nature, quality and extent of the services provided to
the Funds by the Manager based upon information and discussion provided by the
Manager relating to the services performed by the Manager under the Contracts
and relating to the Manager's operations, systems, and personnel. These services
included, but were not limited to, management of the investment portfolios and a
variety of activities related to investment portfolio management.
The Board also took into account its familiarity with the Manager's investment
management for the Funds through regular Board meetings, discussions and reports
during the preceding year. The Board further considered the Manager's research
and portfolio management capabilities and that the Manager also provides
oversight of day-to-day fund operations, including fund accounting and
administration and assistance in meeting legal and regulatory requirements.
After careful consideration of these matters, the Board concluded that it was
satisfied with the nature, quality and extent of the services provided by the
Manager.
EXPENSES AND PERFORMANCE
The Board evaluated reports prepared by the Manager detailing the total audited
expense ratios of each of the Funds as compared to other open-end investment
companies deemed to be comparable based upon the Morningstar Principia Pro
database with similar Morningstar category and prospectus objective to each
Fund. The data is compiled by Morningstar by pulling the net annual expense
ratio from the fund's audited annual report. Annual report expense ratios
reflect the actual fees charged during a particular fiscal year.
The Board compared the total audited expense ratios of the Funds to funds
advised by other advisors that were deemed comparable by the Morningstar
database for the period ending September 30, 2009. The SM&R Growth Fund (Classes
A & B), SM&R Equity Income Fund (Classes A & B), SM&R Balanced Fund (Classes A &
B) and SM&R Government Bond Fund (Classes A, B & T), all had total audited
expense ratios that were the same as or lower than the Morningstar Fund Analysis
average total audited expense ratios. The total audited expense ratios for the
SM&R Growth Fund (Class T), SM&R Equity Income Fund (Class T) and SM&R Balanced
Fund (Class T) were slightly higher than the Morningstar average total audited
expense ratios.
The Board took into account that the audited expense ratios include voluntary
fee waivers and/or expense limitations by the Manager through December 31, 2010,
so that total expenses are limited to a specified percentage of average daily
net assets of each Fund.
The audited expense ratio expresses the percentage of assets deducted each
fiscal year for fund expenses, including 12b-1 fees, management fees,
administrative fees, operating costs, and all other asset-based costs incurred
by the fund. Portfolio transaction fees, or brokerage costs, as well as initial
or deferred sales charges are not included in the expense ratio. The expense
ratio, which is deducted from the fund's average net assets, is accrued on a
daily basis. If the fund's assets are small, its expense ratio can be quite high
because the fund must meet its expenses from a restricted asset
3
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base. Conversely, as the net assets of the fund grow, the expense percentage
should ideally diminish as expenses are spread across the wider base. Funds may
also opt to waive all or a portion of the expenses that make up their overall
expense ratio.
The Board reviewed the Funds' average annual total returns and compared these
returns to comparable performance measures supplied by Morningstar. On the basis
of this evaluation of investments results, the Board concluded that the Funds'
performance was satisfactory.
COST, BENEFITS, PROFITS AND ECONOMIES OF SCALE
The Board reviewed detailed information regarding the revenues received by the
Manager under the Contracts and other benefits that the Manager may have
realized from its relationship with the Funds. The Board also received
information on the direct costs incurred by the Manager as well as profits
realized. After careful consideration of this information, the Board concluded
that the Manager's profits were reasonable in light of the services provided to
the Funds.
APPROVAL OF THE CONTRACTS
As noted, the Board approved the renewal of the Contracts. No single factor was
considered in isolation or to be determinative to the decision. Rather, the
Board concluded, in light of a weighing and balancing of all factors considered,
that the advisory fee structures are fair and reasonable and that the Contracts
should be renewed.
4
<Page>
SCHEDULE OF INVESTMENTS February 28, 2010 (Unaudited)
SM&R GROWTH FUND
COMMON STOCKS
<Table>
<Caption>
SHARES VALUE
CONSUMER DISCRETIONARY--
HOTELS, RESTAURANTS & LEISURE--0.49%
Starwood Hotels & Resorts
Worldwide, Inc. 8,685 $ 336,110
HOUSEHOLD DURABLES--0.42%
Newell Rubbermaid Inc. 20,880 287,100
MEDIA--1.08%
Walt Disney Co. (The) 23,535 735,233
MULTILINE RETAIL--0.66%
J.C. Penney Co., Inc. 9,630 265,595
Target Corp. 3,600 185,472
----------
451,067
SPECIALTY RETAIL--2.71%
Bed Bath & Beyond Inc.* 7,200 299,592
Best Buy Co., Inc. 15,300 558,450
Home Depot, Inc. (The) 17,050 531,960
Limited Brands, Inc. 8,100 179,091
Lowe's Companies, Inc. 12,060 285,943
----------
1,855,036
----------
TOTAL CONSUMER DISCRETIONARY--5.36% 3,664,546
----------
CONSUMER STAPLES--
BEVERAGES--3.23%
Coca-Cola Co. (The) 21,600 1,138,752
PepsiCo, Inc. 17,100 1,068,237
----------
2,206,989
FOOD PRODUCTS--0.51%
Kraft Foods Inc. 12,350 351,110
FOOD & STAPLES RETAILING--1.60%
CVS Caremark Corp. 18,000 607,500
Wal-Mart Stores, Inc. 9,000 486,630
----------
1,094,130
HOUSEHOLD PRODUCTS--2.17%
Procter & Gamble Co. (The) 23,400 1,480,752
TOBACCO--0.57%
Philip Morris International Inc. 7,988 391,252
----------
TOTAL CONSUMER STAPLES--8.08% 5,524,233
----------
ENERGY--
ENERGY EQUIPMENT & SERVICES--3.70%
Baker Hughes Inc. 12,600 603,792
Noble Corp. 11,700 494,442
Schlumberger Ltd. 15,300 934,830
Transocean Ltd.* 2,700 215,514
Weatherford International Ltd.* 16,920 282,395
----------
2,530,973
OIL, GAS & CONSUMABLE FUELS--8.56%
Anadarko Petroleum Corp. 9,540 669,040
BP PLC ADR 10,530 560,301
Chevron Corp. 14,782 1,068,739
El Paso Corp. 41,220 431,573
Exxon Mobil Corp. 40,500 2,632,500
Royal Dutch Shell PLC, ADR 9,000 492,660
----------
5,854,813
----------
TOTAL ENERGY--12.26% 8,385,786
----------
EXCHANGE TRADED FUNDS--
Powershares QQQ 103,000 4,610,280
SPDR Trust Series 1 7,000 775,320
----------
5,385,600
----------
TOTAL EXCHANGE TRADED FUNDS--7.87% 5,385,600
----------
FINANCIALS--
CAPITAL MARKETS--3.27%
Bank of New York Mellon Corp. 18,450 526,194
Charles Schwab Corp. (The) 26,460 484,483
Goldman Sachs Group, Inc. (The) 3,600 562,860
Morgan Stanley 13,500 380,430
State Street Corp. 6,300 282,933
----------
2,236,900
COMMERCIAL BANKS--2.76%
PNC Financial Services Group, Inc. 16,200 870,912
U.S. Bancorp 18,000 442,980
Wells Fargo & Co. 21,131 577,722
----------
1,891,614
CONSUMER FINANCE--0.87%
American Express Co. 4,500 171,855
Discover Financial Services 6,750 92,138
NYSE Euronext 12,450 328,431
----------
592,424
</Table>
5
<Page>
<Table>
<Caption>
SHARES VALUE
DIVERSIFIED FINANCIAL SERVICES--1.41%
Bank of America Corp. 17,367 $ 289,334
Citigroup Inc. 34,700 117,980
JPMorgan Chase & Co. 13,298 558,117
----------
965,431
INSURANCE--2.44%
Allstate Corp. (The) 5,670 177,187
Aspen Insurance Holdings Ltd. 9,315 263,242
Brown & Brown, Inc. 11,160 187,265
Hartford Financial Services
Group, Inc. (The) 7,560 184,237
Principal Financial Group, Inc. 8,100 188,001
Prudential Financial, Inc. 7,650 400,936
RenaissanceRe Holdings Ltd. 4,860 269,050
----------
1,669,918
----------
TOTAL FINANCIALS--10.75% 7,356,287
----------
HEALTH CARE--
BIOTECHNOLOGY--4.49%
Amgen Inc.* 5,400 305,694
Celgene Corp.* 16,560 985,651
Facet Biotech Corp.* 2,628 43,073
Genzyme Corp.* 10,800 617,760
Gilead Sciences, Inc.* 21,600 1,028,376
PDL BioPharma Inc. 13,140 91,980
----------
3,072,534
HEALTH EQUIPMENT & SUPPLIES--2.05%
Covidien PLC 4,185 205,567
Given Imaging Ltd. 33,300 580,419
Hologic, Inc.* 16,200 279,450
Varian Medical Systems, Inc.* 6,840 334,955
----------
1,400,391
HEALTH CARE PROVIDERS & SERVICES--0.85%
DaVita, Inc.* 4,523 278,662
UnitedHealth Group Inc. 9,000 304,740
----------
583,402
LIFE SCIENCES TOOLS & SERVICES--0.42%
Thermo Fisher Scientific, Inc.* 5,965 290,913
PHARMACEUTICALS--6.01%
Abbott Laboratories 12,510 679,043
Cephalon, Inc.* 7,125 489,274
Endo Pharmaceuticals Holdings Inc.* 10,305 234,439
Eli Lilly & Co. 37,080 1,273,327
Merck & Co. Inc. 34,200 1,261,296
Pfizer Inc. 9,751 171,130
----------
4,108,509
----------
TOTAL HEALTH CARE--13.82% 9,455,749
----------
INDUSTRIALS--
AEROSPACE & DEFENSE--5.96%
Boeing Co. (The) 9,000 568,440
Goodrich Corp. 18,000 1,181,340
Honeywell International Inc. 13,050 524,088
Northrop Grumman Corp. 3,600 220,536
Rockwell Collins, Inc. 11,700 658,476
United Technologies Corp. 13,500 926,775
----------
4,079,655
AIR FREIGHT & LOGISTICS--1.40%
FedEx Corp. 4,230 358,535
United Parcel Service, Inc. (Class B) 10,260 602,672
----------
961,207
CONSTRUCTION & ENGINEERING--0.26%
Cemex SAB de C.V. ADR* 18,720 178,963
INDUSTRIAL CONGLOMERATES--3.06%
3M Co. 9,000 721,350
General Electric Co. 75,825 1,217,749
Tyco International Ltd. 4,185 150,911
----------
2,090,010
MACHINERY--2.76%
Barnes Group Inc. 8,640 138,758
Caterpillar Inc. 6,750 385,088
Danaher Corp. 18,400 1,361,048
----------
1,884,894
----------
TOTAL INDUSTRIALS--13.44% 9,194,729
----------
INFORMATION TECHNOLOGY--
COMMUNICATIONS EQUIPMENT--5.28%
Cisco Systems, Inc.* 76,050 1,850,297
Harris Corp. 11,790 533,144
Nokia ADR 30,690 413,394
QUALCOMM Inc. 13,500 495,315
Research In Motion Ltd.* 4,500 318,960
----------
3,611,110
</Table>
6
<Page>
<Table>
<Caption>
SHARES VALUE
COMPUTERS & PERIPHERALS--5.76%
Apple Inc.* 6,475 $ 1,324,914
EMC Corp.* 27,720 484,823
Hewlett-Packard Co. 18,450 937,075
International Business Machines Corp. 9,360 1,190,218
-----------
3,937,030
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.38%
Agilent Technologies, Inc.* 8,370 263,320
INFORMATION TECHNOLOGY SERVICES--0.26%
Amdocs Ltd.* 6,008 174,713
INTERNET SOFTWARE & SERVICES--0.31%
Akamai Technologies, Inc.* 8,190 215,397
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.64%
Analog Devices, Inc. 14,040 410,530
Intel Corp. 45,000 923,850
KLA-Tencor Corp. 10,440 304,117
Linear Technology Corp. 13,680 371,686
Marvell Technology Group Ltd.* 13,050 252,126
Maxim Integrated Products, Inc. 12,240 226,685
-----------
2,488,994
SOFTWARE--4.86%
Intuit Inc.* 22,320 722,275
Microsoft Corp. 39,960 1,145,254
Oracle Corp. 59,130 1,457,554
-----------
3,325,083
----------
TOTAL INFORMATION TECHNOLOGY--20.49% 14,015,647
----------
MATERIALS--
CHEMICALS--2.11%
Monsanto Co. 3,488 246,427
PPG Industries, Inc. 16,200 996,948
Praxair, Inc. 2,700 202,878
-----------
1,446,253
CONTAINERS & PACKAGING--0.31%
Sealed Air Corp. 10,395 212,370
----------
TOTAL MATERIALS--2.42% 1,658,623
----------
TELECOMMUNICATION SERVICES--
DIVERSIFIED TELECOMMUNICATION SERVICES--1.98%
AT&T Inc. 24,300 602,883
Verizon Communications Inc. 25,920 749,866
-----------
1,352,749
WIRELESS TELECOMMUNICATION SERVICES--0.24%
Rogers Communications, Inc. (Class B) 5,040 166,471
-----------
TOTAL TELECOMMUNICATION
SERVICES--2.22% 1,519,220
-----------
UTILITIES--
ELECTRIC UTILITIES--1.35%
Allegheny Energy, Inc. 6,255 141,676
Ameren Corp. 8,100 200,151
Exelon Corp. 4,500 194,850
FPL Group, Inc. 3,600 166,932
Wisconsin Energy Corp. 4,500 217,935
-----------
921,544
MULTI-UTILITIES--0.82%
Dominion Resources, Inc. 9,000 341,910
Sempra Energy 4,500 221,265
-----------
563,175
-----------
TOTAL UTILITIES--2.17% 1,484,719
-----------
TOTAL COMMON STOCK--98.88%
(Cost $68,566,499) 67,645,139
-----------
MONEY MARKET FUND
SM&R Money Market Fund, 0.00% (a) 616,688 616,688
-----------
TOTAL MONEY MARKET FUND--0.90%
(Cost $616,688) 616,688
-----------
TOTAL INVESTMENTS--99.78%
(Cost $69,183,187) 68,261,827
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.22% 148,620
-----------
NET ASSETS--100.00% $68,410,447
===========
</Table>
*--Non-income producing securities
ABBREVIATIONS
ADR--American Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS
(a) The rate quoted is the annualized seven-day yield of the fund at February
28, 2010. A complete listing of the fund's holdings are included in these
financial statements. This fund and the SM&R Growth Fund are affiliated by
having the same investment adviser.
See notes to financial statements.
7
<Page>
SECTOR WEIGHTINGS
BY
TOTAL INVESTMENTS
[CHART]
<Table>
Consumer Discretionary 5.37%
Consumer Staples 8.09%
Energy 12.28%
Exchange Traded Funds 7.89%
Financials 10.78%
Health Care 13.85%
Industrials 13.47%
Information Technology 20.53%
Materials 2.43%
Miscellaneous 0.90%
Telecommunication Services 2.23%
Utilities 2.18%
</Table>
8
<Page>
STATEMENT OF ASSETS AND LIABILITIES February 28, 2010 (Unaudited)
SM&R GROWTH FUND
<Table>
ASSETS
Investments in unaffiliated securities, at value (Cost $68,566,499) $67,645,139
Investment in affiliated money market fund (Cost $616,688) 616,688
-----------
Total investments (Cost $69,183,187) 68,261,827
Prepaid expenses 32,258
Receivable for:
Capital stock sold 1,392
Dividends 157,221
Expense reimbursement 1,368
Other assets 93,408
-----------
TOTAL ASSETS 68,547,474
-----------
LIABILITIES
Capital stock reacquired 39,348
Payable to investment adviser for fund expenses 38,912
Accrued:
Investment advisory fees 38,714
Administrative service fees 12,904
Distribution fees 3,146
Other liabilities 4,003
-----------
TOTAL LIABILITIES 137,027
-----------
NET ASSETS $68,410,447
===========
NET ASSETS ARE COMPRISED OF THE FOLLOWING:
Capital (par value and additional paid-in) $74,256,672
Undistributed net investment income 94,913
Accumulated net realized loss on investments (5,019,778)
Net unrealized depreciation of investments (921,360)
-----------
Net Assets $68,410,447
===========
NET ASSETS:
Class A $ 2,890,978
-----------
Class B $ 758,462
-----------
Class T $64,761,007
-----------
TOTAL NET ASSETS $68,410,447
===========
CAPITAL STOCK ($.01 PAR VALUE PER SHARE):
Class A:
Authorized 50,000,000
Outstanding 882,365
-----------
Class B:
Authorized 25,000,000
Outstanding 237,583
-----------
Class T:
Authorized 95,000,000
Outstanding 19,330,843
-----------
Class A:
Net asset value and redemption price per share $ 3.28
Offering price per share: (Net assets value of $3.28 / 95%) $ 3.45
-----------
Class B:
Net asset value and offering price per share $ 3.19
-----------
Class T:
Net asset value and redemption price per share $ 3.35
Offering price per share: (Net assets value of $3.35 / 94.25%) $ 3.55
-----------
</Table>
See notes to financial statements.
9
<Page>
STATEMENT OF OPERATIONS Six Months Ended February 28, 2010 (Unaudited)
SM&R GROWTH FUND
<Table>
INVESTMENT INCOME
Dividends (Net of foreign tax withheld of $2,682) $ 649,973
Interest 518
Interest from affiliated money market fund 11
----------
TOTAL INVESTMENT INCOME 650,502
----------
EXPENSES
Investment advisory fees 250,618
Administrative service fees 83,539
Professional fees 14,207
Custody and transaction fees 5,869
Directors' fees and expenses 4,829
Compliance expenses 4,586
Qualification fees
Class A 2,902
Class B 2,761
Class T 10,688
Shareholder reporting expenses
Class A 1,031
Class B 290
Class T 22,277
Distribution fees
Class A 3,507
Class B 2,895
Insurance expenses 16,648
Other Expenses 11
----------
TOTAL EXPENSES 426,658
LESS EXPENSES REIMBURSED (7,427)
----------
NET EXPENSES 419,231
----------
INVESTMENT INCOME--NET 231,271
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 176,831
Change in unrealized depreciation of investments 5,376,134
----------
NET GAIN ON INVESTMENTS 5,552,965
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,784,236
==========
</Table>
See notes to financial statements.
10
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
SM&R GROWTH FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31
---------------- ------------
2010 2009
---------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Investment income--net $ 231,271 $ 794,722
Net realized gain (loss) on investments 176,831 (5,162,692)
Change in unrealized appreciation (depreciation) of investments 5,376,134 (11,795,096)
----------- ------------
Net increase (decrease) in net assets resulting from operations 5,784,236 (16,163,066)
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net
Class A (10,364) (34,520)
Class B (1,564) (6,097)
Class T (254,452) (771,949)
Capital gains
Class A (1,447) (189,345)
Class B (406) (68,710)
Class T (31,981) (3,923,457)
----------- ------------
Total distributions to shareholders (300,214) (4,994,078)
----------- ------------
CAPITAL SHARE TRANSACTIONS--NET
Class A (53,575) (96,381)
Class B (91,614) (241,787)
Class T (1,509,543) 1,451,100
----------- ------------
Total capital share transactions--net (1,654,732) 1,112,932
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,829,290 (20,044,212)
NET ASSETS
Beginning of Period 64,581,157 84,625,369
----------- ------------
End of Period $68,410,447 $ 64,581,157
=========== ============
Undistributed Net Investment Income $ 94,913 $ 130,022
=========== ============
</Table>
See notes to financial statements.
11
<Page>
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated.
SM&R GROWTH FUND
<Table>
<Caption>
CLASS A SHARES
----------------------------------------------------------
(UNAUDITED)
SIX
MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ --------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------- ------- ------ ------ ------
Net asset value, beginning of Period $ 3.02 $ 4.06 $ 4.83 $ 4.31 $ 4.09 $ 3.79
Income (loss) from investment operations
Investment income--net -- 0.04 0.04 0.02 0.01 0.04
Net realized and unrealized gain (loss) on investments 0.27 (0.83) (0.64) 0.67 0.23 0.30
------ ------- ------- ------ ------ ------
Total from investment operations 0.27 (0.79) (0.60) 0.69 0.24 0.34
Less distributions
Investment income--net (0.01) (0.04) (0.05) (0.02) (0.02) (0.04)
Capital gains -- (0.21) (0.12) (0.15) -- --
------ ------- ------- ------ ------ ------
Total distributions (0.01) (0.25) (0.17) (0.17) (0.02) (0.04)
------ ------- ------- ------ ------ ------
Net asset value, end of Period $ 3.28 $ 3.02 $ 4.06 $ 4.83 $ 4.31 $ 4.09
====== ======= ======= ====== ====== ======
Total return (1) 9.05%** (18.56)% (12.73)% 16.16% 6.00% 9.05%
====== ======= ======= ====== ====== ======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $2,891 $ 2,716 $ 3,786 $5,698 $5,620 $6,154
Ratio of expenses with reimbursement to average net
assets (2) 1.36%* 1.36% 1.36% 1.36% 1.36% 1.36%
Ratio of expenses without reimbursement to average
net assets 1.66%* 1.67% 1.63% 1.47% 1.66% 1.69%
Ratio of net investment income to average net assets 0.58%* 1.22% 1.03% 0.34% 0.52% 1.03%
Portfolio turnover rate 3.00% 11.84% 11.15% 23.79% 56.05% 24.18%
</Table>
<Table>
<Caption>
CLASS B SHARES
------------------------------------------------------------
(UNAUDITED)
SIX
MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ ----------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------- ------- ------ ------ ------
Net asset value, beginning of Period $ 2.95 $ 3.97 $ 4.73 $ 4.22 $ 4.00 $ 3.72
Income (loss) from investment operations
Investment income (loss)--net (0.02) (0.04) (0.05) (0.04) -- 0.02
Net realized and unrealized gain (loss) on investments 0.27 (0.75) (0.57) 0.70 0.23 0.29
------ ------- ------- ------ ------ ------
Total from investment operations 0.25 (0.79) (0.62) 0.66 0.23 0.31
Less distributions
Investment income--net (0.01) (0.02) (0.02) -- (0.01) (0.03)
Capital gains -- (0.21) (0.12) (0.15) -- --
------ ------- ------- ------ ------ ------
Total distributions (0.01) (0.23) (0.14) (0.15) (0.01) (0.03)
------ ------- ------- ------ ------ ------
Net asset value, end of Period $ 3.19 $ 2.95 $ 3.97 $ 4.73 $ 4.22 $ 4.00
====== ======= ======= ====== ====== ======
Total return (1) 8.41%** (19.01)% (13.37)% 15.89% 5.71% 8.27%
====== ======= ======= ====== ====== ======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $ 758 $ 786 $ 1,423 $2,863 $3,218 $3,456
Ratio of expenses with reimbursement to average net
assets (2) 1.86%* 1.86% 1.86% 1.86% 1.86% 1.86%
Ratio of expenses without reimbursement to average
net assets 2.67%* 2.54% 2.24% 2.03% 2.24% 2.20%
Ratio of net investment income (loss) to average
net assets 0.08%* 0.72% 0.56% (0.17)% 0.02% 0.52%
Portfolio turnover rate 3.00% 11.84% 11.15% 23.79% 56.05% 24.18%
</Table>
* Ratios annualized
** Returns are not annualized
(1) Does not include the effect of sales charge
(2) SM&R has voluntarily agreed to waive or reduce expenses to 1.36% for Class
A and 1.86% for Class B until December 31, 2010.
See notes to financial statements.
12
<Page>
<Table>
<Caption>
CLASS T SHARES
---------------------------------------------------------------
(UNAUDITED)
SIX
MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ -----------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------- ------- ------- ------- --------
Net asset value, beginning of Period $ 3.09 $ 4.14 $ 4.95 $ 4.40 $ 4.17 $ 3.87
Income (loss) from investment operations
Investment income--net 0.01 0.04 0.06 0.03 0.03 0.05
Net realized and unrealized gain (loss) on investments 0.26 (0.84) (0.69) 0.70 0.23 0.30
------ ------- ------- ------- ------- --------
Total from investment operations 0.27 (0.80) (0.63) 0.73 0.26 0.35
Less distributions
Investment income--net (0.01) (0.04) (0.06) (0.03) (0.03) (0.05)
Capital gains -- (0.21) (0.12) (0.15) -- --
------ ------- ------- ------- ------- --------
Total distributions (0.01) (0.25) (0.18) (0.18) (0.03) (0.05)
------ ------- ------- ------- ------- --------
Net asset value, end of Period $ 3.35 $ 3.09 $ 4.14 $ 4.95 $ 4.40 $ 4.17
====== ======= ======= ======= ======= ========
Total return (1) 8.89%** (18.36)% (13.11)% 16.73% 6.28% 9.01%
====== ======= ======= ======= ======= ========
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $64,761 $61,080 $79,417 $98,760 $93,937 $101,643
Ratio of expenses with reimbursement to average
net assets 1.24%* 1.25% 1.15% 1.12% 1.18% 1.19%
Ratio of expenses without reimbursement to average
net assets 1.24%* 1.26% 1.15% 1.12% 1.18% 1.19%
Ratio of net investment income to average net assets 0.70%* 1.34% 1.27% 0.58% 0.70% 1.20%
Portfolio turnover rate 3.00% 11.84% 11.15% 23.79% 56.05% 24.18%
</Table>
* Ratios annualized
** Returns are not annualized
(1) Does not include the effect of sales charge
See notes to financial statements.
13
<Page>
SCHEDULE OF INVESTMENTS February 28, 2010 (Unaudited)
SM&R EQUITY INCOME FUND
COMMON STOCKS
<Table>
<Caption>
SHARES VALUE
CONSUMER DISCRETIONARY--
HOTELS, RESTAURANTS & LEISURE--2.29%
McDonald's Corp. 11,000 $ 702,350
Starwood Hotels & Resorts
Worldwide, Inc. 18,000 696,600
----------
1,398,950
HOUSEHOLD DURABLES--1.36%
Newell Rubbermaid Inc. 20,000 275,000
Tupperware Brands Corp. 12,000 560,760
----------
835,760
MEDIA--0.95%
CBS Corp. (Class B) 17,900 232,521
Walt Disney Co. (The) 11,100 346,764
----------
579,285
MULTILINE RETAIL--1.05%
J.C. Penney Co., Inc. 16,800 463,344
Target Corp. 3,500 180,320
----------
643,664
SPECIALTY RETAIL--2.48%
Foot Locker, Inc. 22,000 285,340
Limited Brands, Inc. 34,000 751,740
Home Depot Inc. (The) 15,400 480,480
----------
1,517,560
----------
TOTAL CONSUMER DISCRETIONARY--8.13% 4,975,219
----------
CONSUMER STAPLES--
BEVERAGES--2.48%
Coca-Cola Co. (The) 14,500 764,440
PepsiCo, Inc. 12,000 749,640
----------
1,514,080
FOOD PRODUCTS--4.05%
ConAgra Foods, Inc. 31,000 758,260
H.J. Heinz Co. 14,000 642,600
Kraft Foods Inc. (Class A) 17,000 483,310
McCormick & Co., Inc. (b) 16,000 593,760
----------
2,477,930
FOOD & STAPLES RETAILING--1.41%
Wal-Mart Stores, Inc. 16,000 865,120
HOUSEHOLD PRODUCTS--4.40%
Colgate-Palmolive Co. 8,675 719,504
Kimberly-Clark Corp. 12,000 728,880
Procter & Gamble Co. (The) 19,650 1,243,452
----------
2,691,836
PERSONAL PRODUCTS--1.06%
Alberto-Culver Co. 9,000 249,480
Avon Products, Inc. 13,000 395,720
----------
645,200
TOBACCO--1.27%
Lorillard, Inc. 5,000 365,200
Philip Morris International Inc. 8,375 410,208
----------
775,408
----------
TOTAL CONSUMER STAPLES--14.67% 8,969,574
----------
ENERGY--
ENERGY EQUIPMENT & SERVICES--1.85%
Baker Hughes Inc. 6,850 328,252
Schlumberger Ltd. 8,000 488,800
Weatherford International Ltd.* 19,000 317,110
----------
1,134,162
OIL, GAS & CONSUMABLE FUELS--10.95%
Anadarko Petroleum Corp. 10,000 701,300
Boardwalk Pipeline Partners, L.P. 14,500 798,150
BP PLC ADR 15,000 434,130
Chevron Corp. 13,101 947,202
Enterprise Products Partners L.P. 12,800 419,328
Exxon Mobil Corp. 28,000 1,820,000
Plains All American Pipeline, L.P. 7,000 387,870
Royal Dutch Shell PLC, ADR 14,000 766,360
Spectra Energy Corp. 19,300 420,740
----------
6,695,080
----------
TOTAL ENERGY--12.80% 7,829,242
----------
FINANCIALS--
CAPITAL MARKETS--1.80%
Charles Schwab Corp. (The) 24,000 439,440
Morgan Stanley 13,250 373,385
State Street Corp. 6,400 287,424
----------
1,100,249
COMMERCIAL BANKS--3.40%
Comerica Inc. 8,500 306,680
PNC Financial Services Group, Inc. 10,219 549,373
U.S. Bancorp 23,000 566,030
Wells Fargo & Co. 24,000 656,160
----------
2,078,243
CONSUMER FINANCE--0.52%
NYSE Euronext 12,000 316,560
DIVERSIFIED FINANCIAL SERVICES--3.72%
Bank of America Corp. 47,000 783,020
</Table>
14
<Page>
<Table>
<Caption>
SHARES VALUE
Citigroup Inc. 68,400 $ 232,560
JPMorgan Chase & Co. 30,000 1,259,100
-----------
2,274,680
INSURANCE--5.70%
Allstate Corp. (The) 8,000 250,000
Arthur J. Gallagher & Co. 14,000 332,220
Aspen Insurance Holdings Ltd. 20,825 588,514
Marsh & McLennan Companies, Inc. 13,600 315,792
Principal Financial Group, Inc. 17,050 395,731
Prudential Financial, Inc. 12,225 640,712
RenaissanceRe Holdings Ltd. 6,000 332,160
Travelers Companies, Inc. (The) 12,000 631,080
-----------
3,486,209
REAL ESTATE INVESTMENT TRUSTS--4.69%
AvalonBay Communities, Inc. 3,301 268,767
Boston Properties Inc. 3,700 251,341
BRE Properties, Inc. 8,600 289,906
Duke Realty Corp. 12,000 133,200
HCP, Inc. 7,000 201,460
Health Care REIT, Inc. 4,500 190,620
Liberty Property Trust 11,300 349,509
Mack-Cali Realty Corp. 6,000 201,240
National Retail Properties Inc. 9,000 190,980
ProLogis 6,000 77,340
Simon Property Group, Inc. 4,183 327,487
Weingarten Realty Investors 19,000 391,210
-----------
2,873,060
THRIFTS & MORTGAGE FINANCE--0.43%
New York Community Bancorp, Inc. 15,000 232,350
TrustCo Bank Corp NY 5,000 30,250
-----------
262,600
-----------
TOTAL FINANCIALS--20.26% 12,391,601
-----------
HEALTH CARE--
BIOTECHNOLOGY--0.69%
Genzyme Corp.* 4,000 228,800
Gilead Sciences, Inc.* 4,000 190,440
-----------
419,240
HEALTH EQUIPMENT & SUPPLIES--0.30%
Covidien PLC 3,750 184,200
PHARMACEUTICALS--9.20%
Abbott Laboratories 13,500 732,780
Eli Lilly & Co. 22,000 755,480
Johnson & Johnson 26,000 1,638,000
Merck & Co. Inc. 24,000 885,120
Pfizer Inc. 92,005 1,614,688
-----------
5,626,068
-----------
TOTAL HEALTH CARE--10.19% 6,229,508
-----------
INDUSTRIALS--
AEROSPACE & DEFENSE--2.53%
Boeing Co. (The) 6,500 410,540
Northrop Grumman Corp. 4,000 245,040
United Technologies Corp. 13,000 892,450
-----------
1,548,030
AIR FREIGHT & LOGISTICS--0.77%
United Parcel Service, Inc. (Class B) 8,000 469,920
COMMERCIAL SERVICES & SUPPLIES--0.85%
Pitney Bowes Inc. 13,000 297,700
Sovran Self Storage, Inc. 7,000 222,110
-----------
519,810
INDUSTRIAL CONGLOMERATES--3.83%
3M Co. 10,200 817,530
General Electric Co. 86,500 1,389,190
Tyco International Ltd. 3,750 135,225
-----------
2,341,945
MACHINERY--0.27%
Barnes Group Inc. 10,500 168,630
MARINE--0.42%
Seaspan Corp. 25,000 255,500
ROAD & RAIL--0.53%
Union Pacific Corp. 4,775 321,692
-----------
TOTAL INDUSTRIALS--9.20% 5,625,527
-----------
INFORMATION TECHNOLOGY--
COMMUNICATIONS EQUIPMENT--1.42%
Harris Corp. 12,750 576,555
Nokia ADR 8,000 107,760
QUALCOMM Inc. 5,075 186,202
-----------
870,517
COMPUTERS & PERIPHERALS--2.18%
Diebold, Inc. 11,000 318,560
International Business Machines Corp. 8,000 1,017,280
-----------
1,335,840
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.40%
Tyco Electronics Ltd. 9,450 242,204
</Table>
15
<Page>
<Table>
<Caption>
SHARES VALUE
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--2.97%
Intel Corp. 45,000 $ 923,850
Linear Technology Corp. 11,000 298,870
Taiwan Semiconductor Manufacturing
Company Ltd. 28,200 274,950
Texas Instruments Inc. 13,100 319,378
-----------
1,817,048
SOFTWARE--2.11%
Microsoft Corp. 45,000 1,289,700
-----------
TOTAL INFORMATION TECHNOLOGY--9.08% 5,555,309
-----------
MATERIALS--
CHEMICALS--2.04%
E. I. du Pont de Nemours and Co. 6,100 205,692
PPG Industries, Inc. 7,200 443,088
Praxair, Inc. 2,700 202,878
Sensient Technologies Corp. 15,000 396,300
-----------
1,247,958
METALS & MINING--0.33%
Alcoa Inc. 15,000 199,500
PAPER & FOREST PRODUCTS--0.43%
Potlatch Corp. 8,000 264,160
-----------
TOTAL MATERIALS--2.80% 1,711,618
-----------
TELECOMMUNICATION SERVICES--
DIVERSIFIED TELECOMMUNICATION SERVICES--4.55%
AT&T Inc. 48,000 1,190,880
Frontier Communications Corp. 20,000 155,800
Verizon Communications Inc. 36,000 1,041,480
Windstream Corp. 39,000 395,070
-----------
2,783,230
WIRELESS TELECOMMUNICATION SERVICES--0.51%
Rogers Communications, Inc. (Class B) 9,500 313,785
-----------
TOTAL TELECOMMUNICATION
SERVICES--5.06% 3,097,015
-----------
UTILITIES--
ELECTRIC UTILITIES--4.63%
Allegheny Energy, Inc. 5,000 113,250
Ameren Corp. 10,900 269,339
Consolidated Edison, Inc. 11,000 470,250
Duke Energy Corp. 33,000 539,550
FPL Group, Inc. 6,500 301,405
PPL Corp. 3,950 112,496
Pinnacle West Capital Corp. 11,000 400,510
Progress Energy, Inc. 8,000 306,320
Southern Co. 10,000 317,700
-----------
2,830,820
GAS UTILITIES--1.14%
Nicor Inc. 7,000 291,550
NiSource Inc. 27,000 405,540
-----------
697,090
MULTI-UTILITIES--0.80%
DTE Energy Co. 8,000 347,360
Sempra Energy 2,875 141,364
-----------
488,724
-----------
TOTAL UTILITIES--6.57% 4,016,634
-----------
TOTAL COMMON STOCK--98.76%
(Cost $62,872,991) 60,401,247
-----------
MONEY MARKET FUND
SM&R Money Market Fund, 0.00% (a) 258,670 258,670
-----------
TOTAL MONEY MARKET FUND--0.42%
(Cost $258,670) 258,670
-----------
TOTAL INVESTMENTS--99.18%
(Cost $63,131,661) 60,659,917
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.82% 498,917
-----------
NET ASSETS--100.00% $61,158,834
===========
</Table>
*--Non-income producing securities
ABBREVIATIONS
ADR--American Depositary Receipt
NOTE TO SCHEDULE OF INVESTMENTS
(a) The rate quoted is the annualized seven-day yield of the fund at February
28, 2010. A complete listing of the fund's holdings are included in these
financial statements. This fund and the SM&R Equity Income Fund are
affiliated by having the same investment adviser.
(b) Non-voting shares
See notes to financial statements.
16
<Page>
SECTOR WEIGHTINGS
BY
TOTAL INVESTMENTS
[CHART]
<Table>
Consumer Discretionary 8.20%
Consumer Staples 14.79%
Energy 12.91%
Financials 20.42%
Health Care 10.27%
Industrials 9.27%
Information Technology 9.16%
Materials 2.82%
Miscellaneous 0.43%
Telecommunication Services 5.11%
Utilities 6.62%
</Table>
17
<Page>
STATEMENT OF ASSETS AND LIABILITIES February 28, 2010 (Unaudited)
SM&R EQUITY INCOME FUND
<Table>
ASSETS
Investments in unaffiliated securities, at value (Cost $62,872,991) $60,401,247
Investment in affiliated money market fund (Cost $258,670) 258,670
-----------
Total investments (Cost $63,131,661) 60,659,917
Prepaid expenses 29,869
Receivable for:
Investment securities sold 265,674
Capital stock sold 11,883
Dividends 216,832
Expense reimbursement 2,423
Other assets 62,734
-----------
TOTAL ASSETS 61,249,332
-----------
LIABILITIES
Capital stock reacquired 1,405
Payable to investment adviser for fund expenses 30,514
Accrued:
Investment advisory fees 34,685
Administrative service fees 11,562
Distribution fees 6,509
Other liabilities 5,823
-----------
TOTAL LIABILITIES 90,498
-----------
NET ASSETS $61,158,834
===========
NET ASSETS ARE COMPRISED OF THE FOLLOWING:
Capital (par value and additional paid-in) $68,744,035
Undistributed net investment income 246,565
Accumulated net realized loss on investments (5,360,022)
Net unrealized depreciation of investments (2,471,744)
-----------
Net Assets $61,158,834
===========
NET ASSETS:
Class A $ 5,703,848
-----------
Class B $ 1,664,098
-----------
Class T $53,790,888
-----------
TOTAL NET ASSETS $61,158,834
===========
CAPITAL STOCK ($.01 PAR VALUE PER SHARE):
Class A:
Authorized 50,000,000
Outstanding 382,477
-----------
Class B:
Authorized 25,000,000
Outstanding 116,066
-----------
Class T:
Authorized 75,000,000
Outstanding 3,437,003
-----------
Class A:
Net asset value and redemption price per share $ 14.91
Offering price per share: (Net assets value of $14.91 / 95%) $ 15.70
-----------
Class B:
Net asset value and offering price per share $ 14.34
-----------
Class T:
Net asset value and redemption price per share $ 15.65
Offering price per share: (Net assets value of $15.65 / 94.25%) $ 16.61
-----------
</Table>
See notes to financial statements.
18
<Page>
STATEMENT OF OPERATIONS Six Months Ended February 28, 2010 (Unaudited)
SM&R EQUITY INCOME FUND
<Table>
INVESTMENT INCOME
Dividends (Net of foreign tax withheld of $4,143) $ 991,824
Interest 157
Interest from affiliated money market fund 8
-----------
TOTAL INVESTMENT INCOME 991,989
-----------
EXPENSES
Investment advisory fees 224,480
Administrative service fees 74,827
Professional fees 13,312
Custody and transaction fees 6,118
Directors' fees and expenses 4,832
Compliance expenses 4,156
Qualification fees
Class A 3,881
Class B 3,613
Class T 9,340
Shareholder reporting expenses
Class A 1,321
Class B 503
Class T 13,783
Distribution fees
Class A 6,749
Class B 6,394
Insurance expenses 14,612
Other Expenses 10
-----------
TOTAL EXPENSES 387,931
LESS EXPENSES REIMBURSED (13,948)
-----------
NET EXPENSES 373,983
-----------
INVESTMENT INCOME--NET 618,006
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (1,596,981)
Change in unrealized depreciation of investments 6,113,012
-----------
NET GAIN ON INVESTMENTS 4,516,031
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,134,037
===========
</Table>
See notes to financial statements.
19
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
SM&R EQUITY INCOME FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31
---------------- ------------
2010 2009
---------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Investment income--net $ 618,006 $ 1,738,837
Net realized loss on investments (1,596,981) (3,750,821)
Change in unrealized depreciation of investments 6,113,012 (13,816,547)
----------- ------------
Net increase (decrease) in net assets resulting from operations 5,134,037 (15,828,531)
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net
Class A (60,835) (165,164)
Class B (16,483) (57,621)
Class T (563,706) (1,660,242)
Capital gains
Class A 0 (389,113)
Class B 0 (169,665)
Class T 0 (3,947,193)
----------- ------------
Total distributions to shareholders (641,024) (6,388,998)
----------- ------------
CAPITAL SHARE TRANSACTIONS--NET
Class A 196,938 (127,502)
Class B (234,554) (258,754)
Class T (1,691,856) 668,936
----------- ------------
Total capital share transactions--net (1,729,472) 282,680
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,763,541 (21,934,849)
NET ASSETS
Beginning of Period 58,395,293 80,330,142
----------- ------------
End of Period $61,158,834 $ 58,395,293
=========== ============
Undistributed Net Investment Income $ 246,565 $ 269,583
=========== ============
</Table>
See notes to financial statements.
20
<Page>
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated.
SM&R EQUITY INCOME FUND
<Table>
<Caption>
CLASS A SHARES
-----------------------------------------------------------
(UNAUDITED)
SIX
MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ ---------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------- ------- ------- ------ ------
Net asset value, beginning of Period $13.85 $ 19.26 $ 23.40 $ 23.12 $23.22 $22.11
Income (loss) from investment operations
Investment income--net 0.16 0.40 0.48 0.64 0.45 0.35
Net realized and unrealized gain (loss) on investments 1.06 (4.20) (2.75) 1.71 1.70 1.68
------ ------- ------- ------- ------ ------
Total from investment operations 1.22 (3.80) (2.27) 2.35 2.15 2.03
Less distributions
Investment income--net (0.16) (0.46) (0.53) (0.68) (0.40) (0.39)
Capital gains -- (1.15) (1.34) (1.39) (1.85) (0.53)
------ ------- ------- ------- ------ ------
Total distributions (0.16) (1.61) (1.87) (2.07) (2.25) (0.92)
------ ------- ------- ------- ------ ------
Net asset value, end of Period $14.91 $ 13.85 $ 19.26 $ 23.40 $23.12 $23.22
====== ======= ======= ======= ====== ======
Total return (1) 8.85%** (18.71)% (10.34)% 10.31% 9.89% 9.25%
====== ======= ======= ======= ====== ======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $5,704 $ 5,113 $ 7,150 $10,524 $9,269 $9,088
Ratio of expenses with reimbursement to average
net assets (2) 1.26%* 1.26% 1.26% 1.26% 1.26% 1.26%
Ratio of expenses without reimbursement to average
net assets 1.58%* 1.59% 1.49% 1.43% 1.54% 1.50%
Ratio of net investment income to average net assets 2.05%* 3.09% 2.47% 2.57% 2.00% 1.53%
Portfolio turnover rate 6.08% 6.07% 11.88% 11.40% 47.59% 18.45%
</Table>
<Table>
<Caption>
CLASS B SHARES
-----------------------------------------------------------
(UNAUDITED)
SIX
MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ ---------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------- ------- ------- ------ ------
Net asset value, beginning of Period $13.32 $ 18.58 $ 22.63 $ 22.33 $22.49 $21.46
Income (loss) from investment operations
Investment income--net (0.03) 0.22 0.15 0.40 0.29 0.23
Net realized and unrealized gain (loss) on investments 1.18 (3.94) (2.42) 1.84 1.69 1.61
------ ------- ------- ------- ------ ------
Total from investment operations 1.15 (3.72) (2.27) 2.24 1.98 1.84
Less distributions
Investment income--net (0.13) (0.39) (0.44) (0.55) (0.29) (0.28)
Capital gains -- (1.15) (1.34) (1.39) (1.85) (0.53)
------ ------- ------- ------- ------ ------
Total distributions (0.13) (1.54) (1.78) (1.94) (2.14) (0.81)
------ ------- ------- ------- ------ ------
Net asset value, end of Period $14.34 $ 13.32 $ 18.58 $ 22.63 $22.33 $22.49
====== ======= ======= ======= ====== ======
Total return (1) 8.66%** (19.11)% (10.72)% 10.20% 9.40% 8.64%
====== ======= ======= ======= ====== ======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $1,664 $ 1,770 $ 2,863 $ 5,373 $6,759 $7,744
Ratio of expenses with reimbursement to average
net assets (2) 1.76%* 1.76% 1.76% 1.76% 1.76% 1.76%
Ratio of expenses without reimbursement to average
net assets 2.37%* 2.26% 2.09% 1.95% 2.06% 2.05%
Ratio of net investment income to average net assets 1.54%* 2.62% 1.98% 2.09% 1.45% 1.04%
Portfolio turnover rate 6.08% 6.07% 11.88% 11.40% 47.59% 18.45%
</Table>
* Ratios annualized
** Returns are not annualized
(1) Does not include the effect of sales charge
(2) SM&R has voluntarily agreed to waive or reduce expenses to 1.26% for Class
A and 1.76% for Class B until December 31, 2010.
See notes to financial statements.
21
<Page>
<Table>
<Caption>
CLASS T SHARES
-------------------------------------------------------------
(UNAUDITED)
SIX
MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ -----------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------- ------- ------- ------- -------
Net asset value, beginning of Period $ 14.52 $ 20.10 $ 24.40 $ 23.97 $ 23.97 $ 22.77
Income (loss) from investment operations
Investment income--net 0.16 0.43 0.50 0.69 0.50 0.40
Net realized and unrealized gain (loss) on investments 1.13 (4.39) (2.95) 1.81 1.76 1.72
------- ------- ------- ------- ------- -------
Total from investment operations 1.29 (3.96) (2.45) 2.50 2.26 2.12
Less distributions
Investment income--net (0.16) (0.47) (0.51) (0.68) (0.41) (0.39)
Capital gains -- (1.15) (1.34) (1.39) (1.85) (0.53)
------- ------- ------- ------- ------- -------
Total distributions (0.16) (1.62) (1.85) (2.07) (2.26) (0.92)
------- ------- ------- ------- ------- -------
Net asset value, end of Period $ 15.65 $ 14.52 $ 20.10 $ 24.40 $ 23.97 $ 23.97
======= ======= ======= ======= ======= =======
Total return (1) 8.91%** (18.74)% (10.35%) 10.60% 10.04% 9.35%
======= ======= ======= ======= ======= =======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $53,791 $51,512 $70,316 $89,034 $90,698 $95,744
Ratio of expenses to average net assets 1.23%* 1.24% 1.14% 1.12% 1.15% 1.14%
Ratio of net investment income to average net assets 2.08%* 3.13% 2.58% 2.72% 2.09% 1.66%
Portfolio turnover rate 6.08%* 6.07% 11.88% 11.40% 47.59% 18.45%
</Table>
* Ratios annualized
** Returns are not annualized
(1) Does not include the effect of sales charge
See notes to financial statements.
22
<Page>
SCHEDULE OF INVESTMENTS February 28, 2010 (Unaudited)
SM&R BALANCED FUND
COMMON STOCKS
<Table>
<Caption>
SHARES VALUE
CONSUMER DISCRETIONARY--
HOTELS, RESTAURANTS & LEISURE--1.39%
McDonald's Corp. 2,500 $ 159,625
Starwood Hotels & Resorts
Worldwide, Inc. 3,000 116,100
Wyndham Worldwide Corp. 1,020 23,450
----------
299,175
HOUSEHOLD DURABLES--0.24%
Newell Rubbermaid Inc. 3,800 52,250
MEDIA--0.99%
CBS Corp. (Class B) 2,000 25,980
Walt Disney Co. (The) 6,000 187,440
----------
213,420
MULTILINE RETAIL--1.51%
J.C. Penney Co., Inc. 4,025 111,010
Target Corp. 4,150 213,808
----------
324,818
SPECIALTY RETAIL--3.19%
Bed Bath & Beyond Inc.* 2,000 83,220
Best Buy Co., Inc. 3,000 109,500
Foot Locker, Inc. 4,800 62,256
Limited Brands, Inc. 7,600 168,036
Lowe's Companies, Inc. 5,800 137,518
Home Depot Inc. (The) 4,100 127,920
----------
688,450
----------
TOTAL CONSUMER DISCRETIONARY--7.32% 1,578,113
----------
CONSUMER STAPLES--
BEVERAGES--1.67%
Coca-Cola Co. (The) 3,500 184,520
PepsiCo, Inc. 2,800 174,916
----------
359,436
FOOD PRODUCTS--1.64%
ConAgra Foods, Inc. 2,050 50,143
H.J. Heinz Co. 2,825 129,667
Kraft Foods Inc. (Class A) 3,500 99,505
McCormick & Co., Inc. (c) 2,000 74,220
----------
353,535
FOOD & STAPLES RETAILING--1.47%
CVS Caremark Corp. 3,000 101,250
Wal-Mart Stores, Inc. 4,000 216,280
----------
317,530
HOUSEHOLD PRODUCTS--2.56%
Colgate-Palmolive Co. 1,475 122,337
Kimberly-Clark Corp. 2,200 133,628
Procter & Gamble Co. (The) 4,700 297,416
----------
553,381
PERSONAL PRODUCTS--0.66%
Alberto-Culver Co. 1,800 49,896
Avon Products, Inc. 3,050 92,842
----------
142,738
TOBACCO--0.91%
Lorillard, Inc. 1,300 94,952
Philip Morris International Inc. 2,050 100,409
----------
195,361
----------
TOTAL CONSUMER STAPLES--8.91% 1,921,981
----------
ENERGY--
ENERGY EQUIPMENT & SERVICES--1.76%
Baker Hughes Inc. 1,825 87,454
Schlumberger Ltd. 2,200 134,420
Transocean Ltd.* 900 71,838
Weatherford International Ltd.* 5,200 86,788
----------
380,500
OIL, GAS & CONSUMABLE FUELS--6.92%
Anadarko Petroleum Corp. 4,000 280,520
BP PLC ADR 3,500 186,235
Chevron Corp. 3,051 220,587
Exxon Mobil Corp. 9,000 585,000
Royal Dutch Shell PLC, ADR 3,000 164,220
Spectra Energy Corp. 2,525 55,045
----------
1,491,607
----------
TOTAL ENERGY--8.68% 1,872,107
----------
FINANCIALS--
CAPITAL MARKETS--2.89%
Bank of New York Mellon Corp. 4,350 124,062
Charles Schwab Corp. (The) 5,600 102,536
Goldman Sachs Group, Inc. (The) 1,150 179,803
Morgan Stanley 5,000 140,900
State Street Corp. 1,700 76,347
----------
623,648
COMMERCIAL BANKS--1.91%
PNC Financial Services Group, Inc. 3,000 161,280
U.S. Bancorp 5,000 123,050
Wells Fargo & Co. 4,716 128,935
----------
413,265
</Table>
23
<Page>
<Table>
<Caption>
SHARES VALUE
CONSUMER FINANCE--0.70%
Discover Financial Services 5,375 $ 73,369
NYSE Euronext 2,925 77,162
----------
150,531
DIVERSIFIED FINANCIAL SERVICES--2.26%
Bank of America Corp. 10,000 166,600
Citigroup Inc. 14,500 49,300
JPMorgan Chase & Co. 6,500 272,805
----------
488,705
INSURANCE--3.33%
Allstate Corp. (The) 2,300 71,875
Aspen Insurance Holdings Ltd. 4,125 116,572
Hartford Financial Services
Group, Inc. (The) 1,375 33,509
Principal Financial Group, Inc. 3,850 89,359
Prudential Financial, Inc. 3,000 157,230
RenaissanceRe Holdings Ltd. 1,700 94,112
Travelers Companies, Inc. (The) 2,950 155,140
----------
717,797
REAL ESTATE INVESTMENT TRUSTS--0.13%
Host Hotels & Resorts Inc. 2,312 27,073
----------
TOTAL FINANCIALS--11.22% 2,421,019
----------
HEALTH CARE--
BIOTECHNOLOGY--1.73%
Amgen Inc.* 1,300 73,593
Celgene Corp.* 2,575 153,264
Genzyme Corp.* 1,300 74,360
Gilead Sciences, Inc.* 1,500 71,415
----------
372,632
HEALTH CARE PROVIDERS & SERVICES--1.24%
DaVita, Inc.* 925 56,989
Patterson Companies Inc.* 1,500 44,520
UnitedHealth Group Inc. 2,050 69,413
WellPoint Inc.* 1,550 95,899
----------
266,821
HEALTH EQUIPMENT & SUPPLIES--0.64%
Covidien PLC 900 44,208
Hologic, Inc.* 1,750 30,188
Varian Medical Systems, Inc.* 1,300 63,661
----------
138,057
LIFE SCIENCES TOOLS & SERVICES--0.34%
Thermo Fisher Scientific, Inc.* 1,525 74,374
PHARMACEUTICALS--5.90%
Abbott Laboratories 2,500 135,700
Cephalon, Inc.* 1,675 115,022
Eli Lilly & Co. 3,850 132,209
Endo Pharmaceuticals Holdings Inc.* 1,750 39,812
Johnson & Johnson 5,000 315,000
Merck & Co. Inc. 5,300 195,464
Pfizer Inc. 19,334 339,312
----------
1,272,519
----------
TOTAL HEALTH CARE--9.85% 2,124,403
----------
INDUSTRIALS--
AEROSPACE & DEFENSE--3.05%
Boeing Co. (The) 2,075 131,057
General Dynamics Corp. 1,300 94,315
Goodrich Corp. 1,700 111,571
L-3 Communications Holdings, Inc. 900 82,278
Northrop Grumman Corp. 1,200 73,512
Rockwell Collins, Inc. 1,225 68,943
United Technologies Corp. 1,400 96,110
----------
657,786
AIR FREIGHT & LOGISTICS--0.83%
FedEx Corp. 875 74,165
United Parcel Service, Inc. (Class B) 1,775 104,264
----------
178,429
COMMERCIAL SERVICES & SUPPLIES--0.18%
Pitney Bowes Inc. 1,725 39,502
INDUSTRIAL CONGLOMERATES--2.33%
3M Co. 1,925 154,289
General Electric Co. 19,750 317,185
Tyco International Ltd. 900 32,454
----------
503,928
MACHINERY--1.44%
Barnes Group Inc. 2,000 32,120
Caterpillar Inc. 1,100 62,755
Danaher Corp. 1,000 73,970
Illinois Tool Works Inc. 1,800 81,936
Ingersoll-Rand Co. Ltd. (Class A) 1,900 60,629
----------
311,410
MARINE--0.11%
Seaspan Corp. 2,250 22,995
ROAD & RAIL--0.40%
Union Pacific Corp. 1,275 85,897
----------
TOTAL INDUSTRIALS--8.34% 1,799,947
----------
</Table>
24
<Page>
<Table>
<Caption>
SHARES VALUE
INFORMATION TECHNOLOGY--
COMMUNICATIONS EQUIPMENT--2.90%
Cisco Systems, Inc.* 10,225 $ 248,774
Harris Corp. 2,300 104,006
Nokia ADR 6,500 87,555
QUALCOMM Inc. 3,000 110,070
Research In Motion Ltd.* 1,050 74,424
-----------
624,829
COMPUTERS & PERIPHERALS--4.40%
Apple Inc.* 1,500 306,930
EMC Corp.* 6,000 104,940
Hewlett-Packard Co. 4,500 228,555
International Business Machines Corp. 2,425 308,363
-----------
948,788
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.58%
Agilent Technologies, Inc.* 2,000 62,920
Tyco Electronics Ltd. 2,400 61,512
-----------
124,432
INFORMATION TECHNOLOGY SERVICES--0.42%
Amdocs Ltd.* 1,550 45,074
Global Payments Inc. 1,075 46,021
-----------
91,095
INTERNET SOFTWARE & SERVICES--0.23%
Akamai Technologies, Inc.* 1,900 49,970
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--2.02%
Intel Corp. 11,000 225,830
Linear Technology Corp. 2,000 54,340
Taiwan Semiconductor Manufacturing 7,450 72,637
Texas Instruments Inc. 3,400 82,892
-----------
435,699
SOFTWARE--3.29%
Electronic Arts Inc.* 1,500 24,870
Microsoft Corp. 17,000 487,220
Oracle Corp. 8,000 197,200
-----------
709,290
-----------
TOTAL INFORMATION TECHNOLOGY--13.84% 2,984,103
-----------
MATERIALS--
CHEMICALS--1.65%
E. I. du Pont de Nemours and Co. 1,550 52,266
International Flavors & Fragrances Inc. 900 37,899
Monsanto Co. 875 61,819
PPG Industries, Inc. 900 55,386
Praxair, Inc. 675 50,719
Sensient Technologies Corp. 3,700 97,754
-----------
355,843
METALS & MINING--0.18%
Nucor Corp. 700 28,980
United States Steel Corp. 200 10,588
-----------
39,568
PAPER & FOREST PRODUCTS--0.11%
MeadWestvaco Corp. 1,000 22,940
-----------
TOTAL MATERIALS--1.94% 418,351
-----------
TELECOMMUNICATION SERVICES--
DIVERSIFIED TELECOMMUNICATION SERVICES--2.37%
AT&T Inc. 11,325 280,973
Verizon Communications Inc. 5,450 157,669
Windstream Corp. 7,100 71,923
-----------
510,565
WIRELESS TELECOMMUNICATION SERVICES--0.44%
American Tower Corp. (Class A)* 1,250 53,325
Rogers Communications, Inc. (Class B) 1,300 42,939
-----------
96,264
-----------
TOTAL TELECOMMUNICATION
SERVICES--2.81% 606,829
-----------
UTILITIES--
ELECTRIC UTILITIES--1.89%
Allegheny Energy, Inc. 1,600 36,240
Ameren Corp. 3,000 74,130
CenterPoint Energy, Inc. 2,000 26,760
Duke Energy Corp. 2,000 32,700
Exelon Corp. 1,400 60,620
FPL Group, Inc. 1,100 51,007
NRG Energy, Inc.* 1,250 27,300
PPL Corp. 925 26,344
Southern Co. 2,300 73,071
-----------
408,172
MULTI-UTILITIES--0.16%
Sempra Energy 675 33,190
-----------
TOTAL UTILITIES--2.05% 441,362
-----------
TOTAL COMMON STOCK--74.96%
(Cost $16,444,623) 16,168,215
-----------
</Table>
25
<Page>
<Table>
<Caption>
U S GOVERNMENT FACE
AGENCY SECURITIES-- AMOUNT VALUE
U S GOVERNMENT AGENCY SECURITIES--0.01%
Federal Home Loan Mortgage Corp.,
Pool #284839, 8.50%, 01/01/17 $ 2,245 $ 2,474
----------
TOTAL U S GOVERNMENT AGENCY
SECURITIES--0.01%
(Cost $2,225) 2,474
----------
CORPORATE BONDS
CONSUMER DISCRETIONARY--
DIVERSIFIED CONSUMER SERVICES--2.13%
Hertz Corp., 7.40%, 03/01/11 455,000 459,550
----------
TOTAL CONSUMER DISCRETIONARY--2.13% 459,550
----------
FINANCIALS--
CAPITAL MARKETS--5.00%
Ameriprise Financial, Inc.,
5.65%, 11/15/15 500,000 547,525
Goldman Sachs Group Inc. (The),
5.30%, 02/14/12 500,000 531,173
----------
1,078,698
INSURANCE--2.33%
Mony Group Inc. (The),
8.35%, 03/15/10 (b) 500,000 501,083
----------
TOTAL FINANCIALS--7.33% 1,579,781
----------
INDUSTRIALS--
ELECTRICAL EQUIPMENT--2.50%
Emerson Electric Co.,
5.25%, 10/15/18 500,000 539,856
----------
TOTAL INDUSTRIALS--2.50% 539,856
----------
MATERIALS--
CONSTRUCTION MATERIALS--2.48%
Vulcan Materials, 6.40%, 11/30/17 500,000 534,657
----------
TOTAL MATERIALS--2.48% 534,657
----------
TOTAL CORPORATE BONDS--14.44%
(Cost $2,910,339) 3,113,844
----------
</Table>
<Table>
<Caption>
MONEY MARKET FUND
SHARES VALUE
SM&R Money Market Fund,
0.00% (a) 2,051,931 $ 2,051,931
-----------
TOTAL MONEY MARKET FUND--9.51%
(Cost $2,051,931) 2,051,931
-----------
TOTAL INVESTMENTS--98.92%
(Cost $21,409,118) 21,336,464
CASH AND OTHER ASSETS,
LESS LIABILITIES--1.08% 232,235
-----------
NET ASSETS--100.00% $21,568,699
===========
</Table>
*--Non-income producing securities
ABBREVIATIONS
ADR--American Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS
(a) The rate quoted is the annualized seven-day yield of the fund at February
28, 2010. A complete listing of the fund's holdings are included in these
financial statements. This fund and the SM&R Balanced Fund are affiliated
by having the same investment adviser.
(b) Long term obligations that will mature in less than one year.
(c) Non-voting shares
See notes to financial statements.
SECTOR WEIGHTINGS
BY
TOTAL INVESTMENTS
[CHART]
<Table>
Consumer Discretionary 9.54%
Consumer Staples 9.01%
Energy 8.77%
Financials 18.75%
Health Care 9.96%
Industrials 10.97%
Information Technology 13.99%
Materials 4.47%
Miscellaneous 9.62%
Telecommunication Services 2.84%
U S Government 0.01%
Utilities 2.07%
</Table>
26
<Page>
STATEMENT OF ASSETS AND LIABILITIES February 28, 2010 (Unaudited)
SM&R BALANCED FUND
<Table>
ASSETS
Investments in unaffiliated securities, at value (Cost $19,357,187) $19,284,533
Investment in affiliated money market fund (Cost $2,051,931) 2,051,931
-----------
Total investments(Cost $21,409,118) 21,336,464
Prepaid expenses 19,715
Receivable for:
Investment securities sold 130,810
Capital stock sold 421
Dividends 46,920
Interest 61,582
Expense reimbursement 3,093
Other assets 16,122
-----------
TOTAL ASSETS 21,615,127
-----------
LIABILITIES
Capital stock reacquired 9,874
Payable to investment adviser for fund expenses 17,031
Accrued:
Investment advisory fees 12,186
Administrative service fees 4,062
Distribution fees 3,275
-----------
TOTAL LIABILITIES 46,428
-----------
NET ASSETS $21,568,699
===========
NET ASSETS ARE COMPRISED OF THE FOLLOWING:
Capital (par value and additional paid-in) $22,533,833
Undistributed net investment income 47,360
Accumulated net realized loss on investments (939,840)
Net unrealized depreciation of investments (72,654)
-----------
Net Assets $21,568,699
===========
NET ASSETS:
Class A $ 2,902,419
-----------
Class B $ 844,676
-----------
Class T $17,821,604
-----------
TOTAL NET ASSETS $21,568,699
===========
CAPITAL STOCK ($.01 PAR VALUE PER SHARE):
Class A:
Authorized 50,000,000
Outstanding 208,941
-----------
Class B:
Authorized 25,000,000
Outstanding 60,144
-----------
Class T:
Authorized 25,000,000
Outstanding 1,229,630
-----------
Class A:
Net asset value and redemption price per share $ 13.89
Offering price per share: (Net assets value of $13.89 / 95%) $ 14.62
-----------
Class B:
Net asset value and offering price per share $ 14.04
-----------
Class T:
Net asset value and redemption price per share $ 14.49
Offering price per share: (Net assets value of $14.49 / 94.25%) $ 15.37
-----------
</Table>
See notes to financial statements.
27
<Page>
STATEMENT OF OPERATIONS Six Months Ended February 28, 2010 (Unaudited)
SM&R BALANCED FUND
<Table>
INVESTMENT INCOME
Dividends (Net of foreign tax withheld of $863) $ 179,881
Interest 108,103
Interest from affiliated money market fund 13
----------
TOTAL INVESTMENT INCOME 287,997
----------
EXPENSES
Investment advisory fees 78,299
Administrative service fees 26,100
Professional fees 5,777
Custody and transaction fees 4,614
Directors' fees and expenses 4,830
Compliance expenses 1,442
Qualification fees
Class A 3,348
Class B 2,438
Class T 8,083
Shareholder reporting expenses
Class A 510
Class B 177
Class T 3,141
Distribution fees
Class A 3,516
Class B 3,183
Insurance expenses 5,204
Other Expenses 9
----------
TOTAL EXPENSES 150,671
LESS EXPENSES REIMBURSED (16,863)
----------
NET EXPENSES 133,808
----------
INVESTMENT INCOME--NET 154,189
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (61,708)
Change in unrealized depreciation of investments 1,322,875
----------
NET GAIN ON INVESTMENTS 1,261,167
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,415,356
==========
</Table>
See notes to financial statements.
28
<Page>
STATEMENT OF CHANGES IN NET ASSETS
SM&R BALANCED FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31
---------------- -----------
2010 2009
---------------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Investment income--net $ 154,189 $ 479,657
Net realized loss on investments (61,708) (878,129)
Change in unrealized appreciation (depreciation) of investments 1,322,875 (2,793,131)
----------- -----------
Net increase (decrease) in net assets resulting from operations 1,415,356 (3,191,603)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net
Class A (24,127) (69,576)
Class B (5,514) (20,312)
Class T (143,991) (418,878)
Capital gains
Class A 0 (143,495)
Class B 0 (49,091)
Class T 0 (828,203)
----------- -----------
Total distributions to shareholders (173,632) (1,529,555)
----------- -----------
CAPITAL SHARE TRANSACTIONS--NET
Class A (30,893) 241,152
Class B (115,725) (85,747)
Class T (176,114) 539,107
----------- -----------
Total capital share transactions--net (322,732) 694,512
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 918,992 (4,026,646)
NET ASSETS
Beginning of Period 20,649,707 24,676,353
----------- -----------
End of Period $21,568,699 $20,649,707
=========== ===========
Undistributed Net Investment Income $ 47,360 $ 66,803
=========== ===========
</Table>
See notes to financial statements.
29
<Page>
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the Periods
indicated.
SM&R BALANCED FUND
<Table>
<Caption>
CLASS A SHARES
--------------------------------------------------------
(UNAUDITED)
SIX
MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ ------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------- ------- ------ ------ ------
Net asset value, beginning of Period $13.11 $ 16.28 $18.37 $17.91 $18.19 $17.60
Income (loss) from investment operations
Investment income--net 0.09 0.32 0.29 0.36 0.32 0.35
Net realized and unrealized gain (loss) on investments 0.80 (2.45) (1.72) 1.57 0.50 0.65
------ ------- ------- ------ ------ ------
Total from investment operations 0.89 (2.13) (1.43) 1.93 0.82 1.00
Less distributions
Investment income--net (0.11) (0.34) (0.33) (0.37) (0.31) (0.35)
Capital gains -- (0.70) (0.33) (1.10) (0.79) (0.06)
------ ------- ------- ------ ------ ------
Total distributions (0.11) (1.04) (0.66) (1.47) (1.10) (0.41)
------ ------- ------- ------ ------ ------
Net asset value, end of Period $13.89 $ 13.11 $16.28 $18.37 $17.91 $18.19
====== ======= ======= ====== ====== ======
Total return (1) 6.84%** (12.15)% (8.01)% 11.09% 4.65% 5.73%
====== ======= ======= ====== ====== ======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $2,902 $ 2,768 $3,174 $4,376 $4,430 $5,030
Ratio of expenses with reimbursement to average net
assets (2) 1.30%* 1.30% 1.30% 1.30% 1.30% 1.30%
Ratio of expenses without reimbursement to average
net assets 1.73%* 1.74% 1.67% 1.54% 1.71% 1.73%
Ratio of net investment income to average net assets 1.45%* 2.49% 1.88% 1.93% 1.90% 1.85%
Portfolio turnover rate 5.47% 10.71% 19.79% 8.35% 21.82% 23.18%
</Table>
<Table>
<Caption>
CLASS B SHARES
--------------------------------------------------------
(UNAUDITED)
SIX
MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ ------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------- ------- ------ ------ ------
Net asset value, beginning of Period $13.25 $ 16.47 $18.56 $18.08 $18.37 $17.78
Income (loss) from investment operations
Investment income--net 0.01 0.21 0.09 0.21 0.24 0.25
Net realized and unrealized gain (loss) on investments 0.87 (2.45) (1.63) 1.67 0.51 0.66
------ ------- ------- ------ ------ ------
Total from investment operations 0.88 (2.24) (1.54) 1.88 0.75 0.91
Less distributions
Investment income--net (0.09) (0.28) (0.22) (0.30) (0.25) (0.26)
Capital gains -- (0.70) (0.33) (1.10) (0.79) (0.06)
------ ------- ------- ------ ------ ------
Total distributions (0.09) (0.98) (0.55) (1.40) (1.04) (0.32)
------ ------- ------- ------ ------ ------
Net asset value, end of Period $14.04 $ 13.25 $16.47 $18.56 $18.08 $18.37
====== ======= ======= ====== ====== ======
Total return (1) 6.63%** (12.77)% (8.48)% 10.70% 4.20% 5.15%
====== ======= ======= ====== ====== ======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $ 845 $ 909 $1,235 $2,171 $2,772 $3,095
Ratio of expenses with reimbursement to average
net assets (2) 1.80%* 1.80% 1.80% 1.80% 1.80% 1.80%
Ratio of expenses without reimbursement to average
net assets 2.57%* 2.48% 2.31% 2.07% 2.24% 2.23%
Ratio of net investment income to average net assets 0.95%* 2.00% 1.38% 1.43% 1.40% 1.36%
Portfolio turnover rate 5.47% 10.71% 19.79% 8.35% 21.82% 23.18%
</Table>
* Ratios annualized
** Returns are not annualized
(1) Does not include the effect of sales charge
(2) SM&R has voluntarily agreed to waive or reduce expenses to 1.30% for Class
A and 1.80% for Class B until December 31, 2010.
See notes to financial statements.
30
<Page>
<Table>
<Caption>
CLASS T SHARES
-------------------------------------------------------------
(UNAUDITED)
SIX
MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ -----------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------- ------- ------- ------- -------
Net asset value, beginning of Period $ 13.67 $ 16.94 $ 19.13 $ 18.60 $ 18.85 $ 18.21
Income (loss) from investment operations
Investment income--net 0.11 0.33 0.35 0.39 0.36 0.36
Net realized and unrealized gain (loss)
on investments 0.83 (2.55) (1.86) 1.65 0.51 0.68
------- ------- ------- ------- ------- -------
Total from investment operations 0.94 (2.22) (1.51) 2.04 0.87 1.04
Less distributions
Investment income--net (0.12) (0.35) (0.35) (0.41) (0.33) (0.34)
Capital gains -- (0.70) (0.33) (1.10) (0.79) (0.06)
------- ------- ------- ------- ------- -------
Total distributions (0.12) (1.05) (0.68) (1.51) (1.12) (0.40)
------- ------- ------- ------- ------- -------
Net asset value, end of Period $ 14.49 $ 13.67 $ 16.94 $ 19.13 $ 18.60 $ 18.85
======= ======= ======= ======= ======= =======
Total return (1) 6.87%** (12.24)% (8.13)% 11.28% 4.79% 5.77%
======= ======= ======= ======= ======= =======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $17,822 $16,972 $20,267 $23,651 $22,373 $22,798
Ratio of expenses with reimbursement to average
net assets 1.25%* 1.25% 1.24% 1.20% 1.25% 1.24%
Ratio of expenses without reimbursement to average
net assets 1.34%* 1.35% 1.24% 1.20% 1.29% 1.24%
Ratio of net investment income to average
net assets 1.50%* 2.54% 1.93% 2.02% 1.95% 1.92%
Portfolio turnover rate 5.47% 10.71% 19.79% 8.35% 21.82% 23.18%
</Table>
* Ratios annualized
** Returns are not annualized
(1) Does not include the effect of sales charge
See notes to financial statements.
31
<Page>
SCHEDULE OF INVESTMENTS February 28, 2010 (Unaudited)
SM&R GOVERNMENT BOND FUND
CORPORATE BONDS
<Table>
<Caption>
INTEREST/
MATURITY STATED FACE
DATE RATE(%) AMOUNT VALUE
MATERIALS--
METALS & MINING--3.78%
Carpenter Technology Corp. 05/15/13 6.625 $1,000,000 $ 1,046,508
-----------
TOTAL MATERIALS--3.78% 1,046,508
-----------
TOTAL CORPORATE BONDS--3.78%
(Cost $999,771) 1,046,508
-----------
U S GOVERNMENT AGENCY AND U S GOVERNMENT SECURITIES
U S GOVERNMENT AGENCY SECURITIES--23.07%
Federal Home Loan Mortgage Corp. 11/15/13 4.875 1,000,000 1,107,517
Federal National Mortgage Assoc. (b) 12/15/10 4.750 1,900,000 1,965,457
Federal National Mortgage Assoc. (b) 02/01/11 6.250 1,850,000 1,948,217
Federal National Mortgage Assoc. 03/15/11 5.500 1,300,000 1,367,835
-----------
6,389,026
U S GOVERNMENT SECURITIES--52.08%
U S Treasury Note 08/31/11 4.625 1,500,000 1,592,050
U S Treasury Note 10/31/11 4.625 2,500,000 2,666,798
U S Treasury Note 11/15/12 4.000 2,000,000 2,152,500
U S Treasury Note 05/15/14 4.750 1,319,000 1,472,231
U S Treasury Note 02/15/15 4.000 600,000 650,063
U S Treasury Note 05/15/15 4.125 1,500,000 1,632,774
U S Treasury Bond 05/15/16 7.250 800,000 1,005,062
U S Treasury Bond 05/15/17 8.750 2,375,000 3,252,080
-----------
14,423,558
-----------
TOTAL U S GOVERNMENT AGENCY AND
U S GOVERNMENT SECURITIES--75.15%
(Cost $19,453,138) 20,812,584
-----------
COMMERCIAL PAPER
CONSUMER DISCRETIONARY--
AUTOMOBILES--4.96%
Toyota Motor Co. 03/10/10 0.170 1,375,000 1,374,929
-----------
TOTAL CONSUMER DISCRETIONARY--4.96% 1,374,929
-----------
FINANCIALS--
DIVERSIFIED FINANCIAL SERVICES--4.69%
Nordea North America Inc. 03/16/10 0.150 1,300,000 1,299,908
-----------
TOTAL FINANCIALS--4.69% 1,299,908
-----------
TOTAL COMMERCIAL PAPER--9.65%
(Cost $2,674,837) 2,674,837
-----------
</Table>
32
<Page>
U S GOVERNMENT AGENCY SHORT-TERM OBLIGATIONS
<Table>
<Caption>
INTEREST/
MATURITY STATED FACE
DATE RATE(%) AMOUNT VALUE
U S GOVERNMENT AGENCY SECURITIES--7.22%
Federal Home Loan Bank 03/24/10 0.090 $2,000,000 $ 1,999,875
-----------
TOTAL U S GOVERNMENT
AGENCY SHORT-TERM OBLIGATIONS--7.22%
(Cost $1,999,875) 1,999,875
-----------
</Table>
MONEY MARKET FUND
<Table>
<Caption>
SHARES
SM&R Money Market Fund, 0.00% (a) 869,004 869,004
-----------
TOTAL MONEY MARKET FUND--3.14%
(Cost $869,004) 869,004
-----------
TOTAL INVESTMENTS--98.94%
(Cost $25,996,625) 27,402,808
-----------
CASH AND OTHER ASSETS, LESS LIABILITIES--1.06% 293,729
-----------
NET ASSETS--100.00% $27,696,537
===========
</Table>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) The rate quoted is the annualized seven-day yield of the fund at February
28, 2010. A complete listing of the fund's holdings are included in these
financial statements. This fund and the SM&R Government Bond Fund are
affiliated by having the same investment adviser.
(b) Long Term obligations that will mature in less than one year.
See notes to financial statements.
SECTOR WEIGHTINGS
BY
TOTAL INVESTMENTS
[CHART]
<Table>
Consumer Discretionary 5.02%
Financials 4.74%
Materials 3.82%
Miscellaneous 3.17%
U S Government 83.25%
</Table>
33
<Page>
STATEMENT OF ASSETS AND LIABILITIES February 28, 2010 (Unaudited)
SM&R GOVERNMENT BOND FUND
<Table>
ASSETS
Investments in unaffiliated securities, at value (Cost $25,127,621) $ 26,533,804
Investment in affiliated money market fund (Cost $869,004) 869,004
------------
Total investments (Cost $25,996,625) 27,402,808
Cash and cash equivalents
Prepaid expenses 23,030
Receivable for:
Capital stock sold 339
Interest 298,522
Expense reimbursement 8,140
Other assets 3,931
------------
TOTAL ASSETS 27,736,770
------------
LIABILITIES
Capital stock reacquired 7,058
Distribution payable 321
Payable to investment adviser for fund expenses 15,705
Accrued:
Investment advisory fees 10,592
Administrative service fees 5,296
Distribution fees 1,261
------------
TOTAL LIABILITIES 40,233
------------
NET ASSETS $ 27,696,537
============
NET ASSETS ARE COMPRISED OF THE FOLLOWING:
Capital (par value and additional paid-in) $ 26,745,223
Undistributed net investment income 5
Accumulated net realized loss on investments (454,874)
Net unrealized appreciation of investments 1,406,183
------------
Net Assets $ 27,696,537
============
NET ASSETS:
Class A $ 1,253,637
------------
Class B $ 281,153
------------
Class T $ 26,161,747
------------
TOTAL NET ASSETS $ 27,696,537
============
CAPITAL STOCK ($.01 PAR VALUE PER SHARE):
Class A:
Authorized 100,001,150
Outstanding 115,066
------------
Class B:
Authorized 100,000,000
Outstanding 25,846
------------
Class T:
Authorized 23,000,000
Outstanding 2,433,972
------------
Class A:
Net asset value and redemption price per share $ 10.89
Offering price per share: (Net assets value of $10.89 / 95.25%) $ 11.43
------------
Class B:
Net asset value and offering price per share $ 10.88
------------
Class T:
Net asset value and redemption price per share $ 10.75
Offering price per share: (Net assets value of $10.75 / 95.5%) $ 11.26
------------
</Table>
See notes to financial statements.
34
<Page>
STATEMENT OF OPERATIONS Six Months Ended February 28, 2010 (Unaudited)
SM&R GOVERNMENT BOND FUND
<Table>
INVESTMENT INCOME
Interest $472,900
Interest from affiliated money market fund 6
--------
TOTAL INVESTMENT INCOME 472,906
--------
EXPENSES
Investment advisory fees 75,658
Administrative service fees 37,829
Professional fees 7,510
Custody and transaction fees 2,884
Directors' fees and expenses 4,830
Compliance expenses 2,323
Qualification fees
Class A 3,935
Class B 3,081
Class T 11,041
Shareholder reporting expenses
Class A 68
Class B 17
Class T 1,698
Distribution fees
Class A 1,529
Class B 1,061
Insurance expenses 8,182
Other expenses 2
--------
TOTAL EXPENSES 161,648
LESS EXPENSES REIMBURSED (50,494)
--------
NET EXPENSES 111,154
--------
INVESTMENT INCOME--NET 361,752
--------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS
Net realized Loss on investments (5,135)
Change in unrealized appreciation of investments 23,280
--------
NET GAIN ON INVESTMENTS 18,145
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $379,897
========
</Table>
See notes to financial statements.
35
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
SM&R GOVERNMENT BOND FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
---------------- -----------
2010 2009
---------------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 361,752 $ 855,224
Net realized loss on investments (5,135) --
Change in unrealized appreciation of investments 23,280 661,930
----------- -----------
Net increase in net assets resulting from operations 379,897 1,517,154
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net
Class A (14,738) (31,839)
Class B (2,698) (9,665)
Class T (344,181) (811,793)
----------- -----------
Total distributions to shareholders (361,617) (853,297)
----------- -----------
CAPITAL SHARE TRANSACTIONS--NET
Class A (254) 91,127
Class B (25,356) (235,145)
Class T (4,526,914) 862,054
----------- -----------
Total capital share transactions--net (4,552,524) 718,036
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (4,534,244) 1,381,893
NET ASSETS
Beginning of Period 32,230,781 30,848,888
----------- -----------
End of Period $27,696,537 $32,230,781
=========== ===========
Undistributed net investment income (accumulated net investment loss) $ 5 $ (130)
=========== ===========
</Table>
See notes to financial statements.
36
<Page>
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated.
SM&R GOVERNMENT BOND FUND
<Table>
<Caption>
CLASS A SHARES
---------------------------------------------------------
(UNAUDITED)
SIX MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ ------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------ ------ ------ ------ ------
Net asset value, beginning of Period $10.88 $10.65 $10.40 $10.30 $10.50 $10.56
Income from investment operations
Investment income--net 0.13 0.29 0.36 0.42 0.36 0.25
Net realized and unrealized gain (loss)
on investments 0.01 0.23 0.25 0.10 (0.20) (0.06)
------ ------ ------ ------ ------ ------
Total from investment operations 0.14 0.52 0.61 0.52 0.16 0.19
Less distributions
Investment income--net (0.13) (0.29) (0.36) (0.42) (0.36) (0.25)
Capital gains -- -- -- -- -- (0.00)***
------ ------ ------ ------ ------ ------
Total distributions (0.13) (0.29) (0.36) (0.42) (0.36) (0.25)
------ ------ ------ ------ ------ ------
Net asset value, end of Period $10.89 $10.88 $10.65 $10.40 $10.30 $10.50
====== ====== ====== ====== ====== ======
Total return (1) 1.28%** 4.91% 5.93% 5.15% 1.57% 1.93%
====== ====== ====== ====== ====== ======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $1,254 $1,252 $1,137 $1,067 $ 976 $1,036
Ratio of expenses with reimbursement to average
net assets (2) 0.73%* 0.73% 0.73% 0.73% 0.73% 0.73%
Ratio of expenses without reimbursement to average
net assets 1.83%* 1.51% 1.76% 1.76% 2.19% 2.32%
Ratio of net investment income to average net assets 2.41%* 2.64% 3.41% 4.06% 3.46% 2.43%
Portfolio turnover rate 0.00% 0.00% 26.83% 50.01% 78.38% 51.35%
</Table>
<Table>
<Caption>
CLASS B SHARES
---------------------------------------------------------
(UNAUDITED)
SIX MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ ------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------ ------ ------ ------ ------
Net asset value, beginning of Period $10.86 $10.63 $10.39 $10.29 $10.49 $10.55
Income from investment operations
Investment income--net 0.10 0.24 0.31 0.37 0.31 0.20
Net realized and unrealized gain (loss)
on investments 0.02 0.23 0.24 0.10 (0.20) (0.06)
------ ------ ------ ------ ------ ------
Total from investment operations 0.12 0.47 0.55 0.47 0.11 0.14
Less distributions
Investment income--net (0.10) (0.24) (0.31) (0.37) (0.31) (0.20)
Capital gains -- -- -- -- -- (0.00)***
------ ------ ------ ------ ------ ------
Total distributions (0.10) (0.24) (0.31) (0.37) (0.31) (0.20)
------ ------ ------ ------ ------ ------
Net asset value, end of Period $10.88 $10.86 $10.63 $10.39 $10.29 $10.49
====== ====== ====== ====== ====== ======
Total return (1) 1.13%** 4.45% 5.31% 4.66% 1.10% 1.44%
====== ====== ====== ====== ====== ======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $ 281 $ 306 $ 529 $ 588 $ 696 $1,009
Ratio of expenses with reimbursement to average
net assets (2) 1.23%* 1.23% 1.23% 1.23% 1.23% 1.23%
Ratio of expenses without reimbursement to average
net assets 3.86%* 2.42% 2.65% 2.25% 2.55% 2.34%
Ratio of net investment income to average net assets 1.91%* 2.19% 2.93% 3.56% 2.94% 1.92%
Portfolio turnover rate 0.00% 0.00% 26.83% 50.01% 78.38% 51.35%
</Table>
* Ratios annualized
** Returns are not annualized
*** Amount less than $0.01
(1) Does not include the effect of sales charge
(2) SM&R has voluntarily agreed to waive or reduce expenses to 0.73% for Class
A and 1.23% for Class B until December 31, 2010.
See notes to financial statements.
37
<Page>
<Table>
<Caption>
CLASS T SHARES
--------------------------------------------------------------
(UNAUDITED)
SIX MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------ -----------------------------------------------
2010 2009 2008 2007 2006 2005
------------ ------- ------- ------- ------- -------
Net asset value, beginning of Period $ 10.74 $ 10.51 $ 10.27 $ 10.17 $ 10.36 $ 10.43
Income from investment operations
Investment income--net 0.13 0.29 0.36 0.41 0.35 0.25
Net realized and unrealized gain (loss)
on investments 0.01 0.23 0.24 0.10 (0.19) (0.07)
------- ------- ------- ------- ------- -------
Total from investment operations 0.14 0.52 0.60 0.51 0.16 0.18
Less distributions
Investment income--net (0.13) (0.29) (0.36) (0.41) (0.35) (0.25)
Capital gains -- -- -- -- -- (0.00)***
------- ------- ------- ------- ------- -------
Total distributions (0.13) (0.29) (0.36) (0.41) (0.35) (0.25)
------- ------- ------- ------- ------- -------
Net asset value, end of Period $ 10.75 $ 10.74 $ 10.51 $ 10.27 $ 10.17 $ 10.36
======= ======= ======= ======= ======= =======
Total return (1) 1.32%** 4.94% 5.89% 5.16% 1.65% 1.84%
======= ======= ======= ======= ======= =======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $26,162 $30,673 $29,183 $27,087 $26,194 $26,841
Ratio of expenses with reimbursement to average
net assets (2) 0.73%* 0.73% 0.73% 0.73% 0.73% 0.73%
Ratio of expenses without reimbursement to average
net assets 1.01%* 0.95% 0.93% 0.93% 0.99% 0.96%
Ratio of net investment income to average
net assets 2.40%* 2.65% 3.41% 4.06% 3.47% 2.43%
Portfolio turnover rate 0.00% 0.00% 26.83% 50.01% 78.38% 51.35%
</Table>
* Ratios annualized
** Returns are not annualized
*** Amount less than $0.01
(1) Does not include the effect of sales charge
(2) SM&R has voluntarily agreed to waive or reduce expenses to 0.73% for Class
T until December 31, 2010.
See notes to financial statements.
38
<Page>
SCHEDULE OF INVESTMENTS February 28, 2010 (Unaudited)
SM&R MONEY MARKET FUND
COMMERCIAL PAPER
<Table>
<Caption>
INTEREST/
MATURITY STATED FACE
DATE RATE(%) AMOUNT VALUE
FINANCIALS--
CONSUMER FINANCE--3.17%
Paccar Financial Corp. 03/12/10 0.100 $1,597,000 $ 1,596,951
DIVERSIFIED FINANCIAL SERVICES--9.19%
Metlife Funding 03/03/10 0.100 2,631,000 2,630,985
Nordea North America Inc. 03/16/10 0.150 2,004,000 2,003,875
-----------
4,634,860
-----------
TOTAL FINANCIALS--12.36% 6,231,811
-----------
INDUSTRIALS--
INDUSTRIAL CONGLOMERATES--3.03%
General Electric Co. 03/22/10 0.120 1,529,000 1,528,893
-----------
TOTAL INDUSTRIALS--3.03% 1,528,893
-----------
TOTAL COMMERCIAL PAPER--15.39%
(Cost $7,760,704) 7,760,704
-----------
U S GOVERNMENT AGENCY SHORT-TERM OBLIGATIONS
U S GOVERNMENT AGENCY SECURITIES--91.32%
Federal Home Loan Bank 03/01/10 0.080 4,370,000 4,370,000
Federal Home Loan Bank 03/05/10 0.060 3,721,000 3,720,975
Federal Home Loan Bank 03/10/10 0.085 6,907,000 6,906,853
Federal Home Loan Bank 03/11/10 0.050 4,375,000 4,374,939
Federal Home Loan Bank 03/17/10 0.090 6,000,000 5,999,760
Federal Home Loan Bank 03/29/10 0.085 4,518,000 4,517,701
Federal Home Loan Mortgage Corp. 03/09/10 0.070 5,937,000 5,936,908
Federal Home Loan Mortgage Corp. 03/24/10 0.070 5,732,000 5,731,744
Federal Home Loan Mortgage Corp. 03/30/10 0.110 3,465,000 3,464,693
Federal Home Loan Mortgage Corp. 04/20/10 0.110 1,028,000 1,027,843
-----------
46,051,416
-----------
TOTAL U S GOVERNMENT AGENCY SHORT-TERM OBLIGATIONS--91.32%
(Cost $46,051,416) 46,051,416
-----------
TOTAL INVESTMENTS--106.71%
(Cost $53,812,120) 53,812,120
LIABILITIES IN EXCESS OF OTHER ASSETS--(6.71)% (3,384,770)
-----------
TOTAL NET ASSETS--100.00% $50,427,350
===========
</Table>
See notes to financial statements.
39
<Page>
STATEMENT OF ASSETS AND LIABILITIES February 28, 2010 (Unaudited)
SM&R MONEY MARKET FUND
<Table>
ASSETS
Investments in unaffiliated securities, at cost and value $ 53,812,120
Cash and cash equivalents 87
Prepaid expenses 16,508
Receivable for:
Capital stock sold 28,884
Expense reimbursement 27,519
Other Assets 1,213
--------------
TOTAL ASSETS 53,886,331
--------------
LIABILITIES
Capital stock reacquired 3,406,588
Payable to investment adviser for fund expenses 14,407
Accrued:
Investment advisory fees 11,724
Administrative service fees 11,724
Other liabilities 14,538
--------------
TOTAL LIABILITIES 3,458,981
--------------
NET ASSETS $ 50,427,350
==============
NET ASSETS ARE COMPRISED OF THE FOLLOWING:
Capital (par value and additional paid-in) $ 50,427,350
--------------
NET ASSETS $ 50,427,350
==============
SHARES OUTSTANDING ($.01 par value per share) 50,427,350
==============
NET ASSET VALUE $ 1.00
==============
SHARES AUTHORIZED 3,800,000,000
</Table>
STATEMENT OF OPERATIONS Six Months Ended February 28, 2010 (Unaudited)
INVESTMENT INCOME
<Table>
Interest $ 21,349
---------
TOTAL INVESTMENT INCOME 21,349
---------
EXPENSES
Investment advisory fees 63,896
Administrative service fees 63,896
Professional fees 12,713
Custody and transaction fees 5,972
Directors' fees and expenses 4,883
Compliance expenses 3,692
Qualification fees 13,058
Shareholder reporting expenses 2,182
Insurance expenses 9,573
---------
TOTAL EXPENSES 179,865
LESS EXPENSES REIMBURSED (159,071)
---------
NET EXPENSES 20,794
---------
INVESTMENT INCOME--NET $ 555
=========
</Table>
See notes to financial statements.
40
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
SM&R MONEY MARKET FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
---------------- ------------
2010 2009
---------------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income--net $ 555 $ 426,110
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Investment income--net (555) (426,110)
CAPITAL SHARE TRANSACTIONS--NET 9,866,361 (55,478,956)
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 9,866,361 (55,478,956)
NET ASSETS
Beginning of period 40,560,989 96,039,945
----------- ------------
End of period $50,427,350 $ 40,560,989
=========== ============
</Table>
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated.
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
------------- ---------------------------------------------------
2010 2009 2008 2007 2006 2005
------------- ------- ------- -------- ------- -------
Net asset value, beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Investment income--net 0.00*** 0.00*** 0.03 0.05 0.04 0.02
------- ------- ------- -------- ------- -------
Total from investment operations 0.00*** 0.00*** 0.03 0.05 0.04 0.02
Less distributions
Investment income--net 0.00*** 0.00*** (0.03) (0.05) (0.04) (0.02)
------- ------- ------- -------- ------- -------
Total distributions 0.00*** 0.00*** (0.03) (0.05) (0.04) (0.02)
------- ------- ------- -------- ------- -------
Net asset value, end of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======== ======= =======
Total return 0.00%**^ 0.46% 2.79% 4.84% 4.04% 2.03%
======= ======= ======= ======== ======= =======
RATIOS (IN PERCENTAGES)/SUPPLEMENTAL DATA
Net assets, end of Period (000's omitted) $50,427 $40,561 $96,040 $101,585 $88,769 $76,890
Ratio of expenses with reimbursement to
average net assets 0.08%*(a) 0.31%(a) 0.50% 0.50% 0.50% 0.50%
Ratio of expenses without reimbursement to
average net assets 0.70%* 0.64% 0.60% 0.63% 0.73% 0.59%
Ratio of net investment income to average
net assets 0.00%*^ 0.50% 2.82% 4.74% 4.01% 1.98%
</Table>
* Ratios annualized
** Returns are not annualized
*** Amount less than $0.01
(a) SM&R has voluntarily agreed to waive or reduce expenses in excess of the
contractual limit.
^ Amount less than 0.01%
See notes to financial statements.
41
<Page>
NOTES TO FINANCIAL STATEMENTS February 28, 2010 (Unaudited)
SM&R INVESTMENTS, INC.
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
SM&R Investments, Inc. (the "Company"), is a diversified open-end management
investment company registered as a series fund under the Investment Company Act
of 1940, as amended. The Company is comprised of the SM&R Growth Fund ("Growth
Fund"), SM&R Equity Income Fund ("Equity Income Fund"), SM&R Balanced Fund
("Balanced Fund"), SM&R Government Bond Fund ("Government Bond Fund") and SM&R
Money Market Fund ("Money Market Fund"). The Government Bond Fund and Money
Market Fund are collectively referred to as the "Fixed Income Funds", while the
Growth Fund, Equity Income Fund and Balanced Fund are referred to as the "Equity
Funds".
The Growth Fund, Equity Income Fund, Balanced Fund and Government Bond Fund have
adopted a Multiple Class Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended. Each has three single classes of shares. Class
T shares are subject to an initial sales charge. The Class A shares are subject
to an initial sales charge and a distribution and shareholder servicing plan
("12b-1 Plan"). The Class B shares are subject to a contingent deferred sales
charge and a 12b-1 Plan.
The following is a summary of significant accounting policies consistently
followed by the Company in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 listed on national exchanges are valued at the last
sales price of the day, or if there were no sales, then at the last bid price.
Other 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 and short-term obligations are stated at amortized
cost, which is equivalent to value. Investments in the affiliated money market
fund are valued at the net asset value per share.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME:
The Company records security transactions based on trade date. Dividend income
is recognized on the ex-dividend date and interest income is recognized on an
accrual basis. Premiums and discounts on securities are amortized over the lives
of the respective securities. Withholding taxes on foreign dividends have been
provided for in accordance with the Company's understanding of the applicable
country's tax rules and rates.
On a daily basis, income, unrealized and realized gains and losses, and expenses
which are not class specific are allocated to each class based on their
respective net assets. Class specific expenses, such as distribution expenses,
are applied to the class to which they are attributed.
42
<Page>
FEDERAL INCOME TAXES:
For federal income tax purposes, each series is treated as a separate entity.
The Company intends to comply with requirements of the Internal Revenue Code
relating to regulated investment companies and intends to distribute
substantially all of its taxab
<Table>
<Caption>
TAX YEAR ENDING AUGUST 31, 2009 LOSS CARRYFORWARDS EXPIRATION DATES
- ------------------------------- ------------------ ----------------
Growth Fund $5,196,609 2017
Equity Income Fund $3,537,981 2017
Balanced Fund $ 845,956 2017
Government Bond Fund $ 167,397 2014
$ 282,342 2015
</Table>
Capital loss carryovers are available to offset future realized capital gains
and thereby reduce further taxable gain distributions.
As of August 31, 2009, the Growth Fund had $5,196,609 in post-October losses
which were deferred until September 1, 2009. As of August 31, 2009, the Equity
Income Fund had $3,547,388 in post-October losses which were deferred until
September 1, 2009. As of August 31, 2009, the Balanced Fund had $845,956 in
post-October losses which were deferred until September 1, 2009. Net Capital
losses incurred after October 31, and within the taxable year are deemed to
arise on the first day of the Fund's next taxable year.
CAPITAL STOCK TRANSACTIONS AND DISTRIBUTIONS TO SHAREHOLDERS:
Fund shares are sold in a continuous public offering at net asset value plus a
sales charge, except for Class B shares of the respective funds and for the
Money Market Fund. All transactions for the Money Market Fund is made at net
asset value. The Company may repurchase shares at net asset value. Dividends and
other distributions are recorded by the fund on the ex-dividend date and may be
reinvested at net asset value.
Each Fund may periodically make reclassifications among certain of its capital
accounts as a result of the timing and characterization of certain income and
capital gains distributions determined in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These reclassifications are due to differing
treatment for items such as deferral of wash sales, net operating losses and
post-October capital losses.
EXPENSES:
Qualification fees, distribution fees or other expenses 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 all of the series based on the relative amount of each series' net assets
or shareholders, and then allocated among the classes of that series.
SUBSEQUENT EVENTS:
Subsequent events have been evaluated through April 19, 2010, which is the date
the financial statements were issued.
43
<Page>
NOTE 2--OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEES:
Securities Management and Research, Inc. ("SM&R") is the investment adviser and
principal underwriter for the Company. Investment advisory fees paid to SM&R are
computed as a percentage of the average daily net assets as follows:
EQUITY FUNDS
<Table>
<Caption>
Investment
Growth, Equity Income and Balanced Funds
INVESTMENT
NET ASSETS ADVISORY FEE
Not exceeding $100,000,000 0.750%
Exceeding $100,000,000 but not exceeding $200,000,000 0.625%
Exceeding $200,000,000 but not exceeding $300,000,000 0.500%
Exceeding $300,000,000 0.400%
FIXED INCOME FUNDS
Government Bond Fund
NET ASSETS
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%
Money Market Fund
All average daily net assets 0.25%
</Table>
ADMINISTRATIVE SERVICE FEES:
Administrative service fees paid to SM&R by the each of the series are computed
as a percentage of average daily net assets as follows:
<Table>
<Caption>
ADMINISTRATIVE
NET ASSETS SERVICE FEES
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 contractually agreed to reimburse the Growth Fund, Equity Income Fund,
Balanced Fund and Government Bond Fund for regular operating expenses in excess
of 1.25% per year of the average daily net assets, and the Money Market Fund in
excess of 0.50%. Regular operating expenses include the advisory fee and
administrative service fee, but do not include the distribution and shareholder
servicing fee.
SM&R is waiving all or a portion of its fees due from the Money Market Fund to
prevent such fund's net yield from decreasing below zero. This fee waiver, which
is voluntary, may be discontinued by SM&R at any time.
44
<Page>
Effective June 1, 2002, and until December 31, 2010, SM&R has voluntarily agreed
to reimburse expenses which exceed the following percentages of each fund's
average daily net assets:
<Table>
<Caption>
CLASS A CLASS B CLASS T UNIVERSAL
Growth Fund 1.36% 1.86% --
Equity Income Fund 1.26% 1.76% --
Balanced Fund 1.30% 1.80% --
Government Bond Fund 0.73% 1.23% 0.73%
</Table>
Fee waivers and/or reductions, other than those stated in the Administrative
Service Agreement, may be rescinded by SM&R at any time after December 31, 2010
without notice to investors.
DISTRIBUTION AND SHAREHOLDER SERVICING FEES:
The Company has adopted a 12b-1 Plan, for each series, except the Money Market
Fund, with respect to each series' Class A shares and Class B shares (the "Class
A Plan" and the "Class B 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 Plans also permit a shareholder servicing fee to compensate
SM&R, or enable SM&R to compensate Service Providers, for providing ongoing
servicing to shareholders of the Company. These fees are computed as an annual
percentage of the average daily net assets of each class of shares of a series,
as follows:
GROWTH, EQUITY INCOME, BALANCED AND GOVERNMENT BOND FUNDS
<Table>
<Caption>
DISTRIBUTION SERVICE TOTAL 12B-1
FEE FEE FEE
Class A Shares 0.25% -- 0.25%
Class B Shares 0.50% 0.25% 0.75%
</Table>
For the period ended February 28, 2010, each series paid or accrued the
following, as compensation under the Plans:
<Table>
Growth Fund 6,402
Equity Income Fund 13,143
Balanced Fund 6,699
Government Bond Fund 2,590
</Table>
SALES CHARGES:
During the period ended February 28, 2010, SM&R, as principal underwriter,
received as sales charges on sales of capital stock of each series and made
reallowances to dealers as follows:
<Table>
<Caption>
SALES SALES
CHARGES CHARGES
RECEIVED BY SM&R REALLOWED TO DEALERS
Growth Fund $11,400 $388
Equity Income Fund $18,248 $545
Balanced Fund $ 7,672 $ 8
Government Bond Fund $ 2,645 $ 0
</Table>
45
<Page>
For the period ended February 28, 2010, SM&R received $995 for contingent
deferred sales charges imposed on the redemptions of Class B shares of capital
stock of the series.
SM&R is a wholly-owned subsidiary of American National Insurance Company
("American National"). As of February 28, 2010, SM&R and American National had
the following ownership in these series:
<Table>
<Caption>
SM&R AMERICAN NATIONAL AMERICAN NATIONAL AFFILIATES
----------------------------- ------------------------------ -----------------------------
PERCENT OF SHARES PERCENT OF SHARES PERCENT OF SHARES
SHARES OUTSTANDING SHARES OUTSTANDING SHARES OUTSTANDING
Growth Fund 273,565 1.34% 1,280,109 6.26% 1,798,043 8.79%
Equity Income Fund 31,331 0.80% -- 0.00% -- 0.00%
Balanced Fund 202,294 13.50% 108,661 7.25% 364,066 24.29%
Government Bond Fund 307,313 11.94% 216,988 8.43% 1,059,692 41.15%
Money Market Fund 4,378,506 8.68% 24,815,681 49.21% 8,663,478 17.18%
</Table>
The Company pays directors' fees and expenses for all the independent directors.
The Company also pays the salary and other expenses of the Chief Compliance
Officer.
INVESTMENTS INTO AFFILIATED MONEY MARKET FUND:
The Company has received an exemptive order issued by the Securities and
Exchange Commission ("SEC") allowing the Company to sweep uninvested cash into
the SM&R Money Market Fund. The SM&R Money Market Fund is one of the five funds
included in the Company and is therefore considered to be affiliated. The
transactions in investments in the affiliated money market fund for the period
ended February 28, 2010 were:
<Table>
Purchases 28,768,527
Sales 27,510,831
</Table>
NOTE 3--COST, PURCHASES AND SALES OF INVESTMENT SECURITIES
Aggregate purchases and sales of investments in securities, other than
commercial paper, were as follows:
<Table>
<Caption>
PURCHASES SALES
Growth Fund $1,983,656 $3,314,565
Equity Income Fund 3,624,302 4,714,568
Balanced Fund 1,061,351 2,045,053
Government Bond Fund -- 1,615,000
</Table>
Gross unrealized appreciation and depreciation as of February 28, 2010, based on
the cost for federal income tax purposes is as follows:
<Table>
<Caption>
NET APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
Growth Fund $69,183,187 $12,384,653 $13,306,013 $ (921,360)
Equity Income Fund 63,131,661 8,949,275 11,421,019 (2,471,744)
Balanced Fund 21,409,118 2,629,838 2,702,492 (72,654)
Government Bond Fund 25,996,625 1,406,183 -- 1,406,183
</Table>
46
<Page>
NOTE 4--CAPITAL STOCK
SM&R GROWTH FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2010 AUGUST 31, 2009
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
Sale of capital shares:
Class A 34,234 $ 110,002 101,985 $ 284,330
Class B 4,412 13,839 23,031 61,246
Class T 239,968 789,214 649,544 1,792,156
---------- ----------- ---------- -----------
Total sale of capital shares 278,614 913,055 774,560 2,137,732
Investment income dividends reinvested:
Class A 3,179 10,363 13,105 34,519
Class B 464 1,475 2,284 5,839
Class T 74,183 247,029 278,135 749,173
---------- ----------- ---------- -----------
Total investment income dividends reinvested 77,826 258,867 293,524 789,531
Distributions from net realized gains reinvested:
Class A 444 1,447 72,821 189,336
Class B 128 405 27,051 68,710
Class T 9,344 31,117 1,434,100 3,814,731
---------- ----------- ---------- -----------
Total distributions from net realized gains reinvested 9,916 32,969 1,533,972 4,072,777
---------- ----------- ---------- -----------
Subtotals 366,356 1,204,891 2,602,056 7,000,040
Redemptions of capital shares outstanding:
Class A (54,912) (175,387) (221,269) (604,566)
Class B (34,174) (107,333) (144,030) (377,582)
Class T (776,171) (2,576,903) (1,746,358) (4,904,960)
---------- ----------- ---------- -----------
Total redemptions of capital shares outstanding (865,257) (2,859,623) (2,111,657) (5,887,108)
---------- ----------- ---------- -----------
Net increase (decrease) in capital shares outstanding (498,901) $(1,654,732) 490,399 $ 1,112,932
=========== ===========
Shares outstanding at beginning of period 20,949,692 20,459,293
---------- ----------
Shares outstanding at end of period 20,450,791 20,949,692
========== ==========
</Table>
47
<Page>
SM&R EQUITY INCOME FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2010 AUGUST 31, 2009
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
Sale of capital shares:
Class A 31,638 $ 463,829 45,949 $ 574,696
Class B 3,275 46,318 8,030 98,841
Class T 19,679 302,529 73,030 961,661
--------- ----------- --------- -----------
Total sale of capital shares 54,592 812,676 127,009 1,635,198
Investment income dividends reinvested:
Class A 4,143 60,690 12,499 164,346
Class B 1,143 16,055 4,370 56,110
Class T 35,880 551,323 118,130 1,620,394
--------- ----------- --------- -----------
Total investment income dividends reinvested 41,166 628,068 134,999 1,840,850
Distributions from net realized gains reinvested:
Class A -- -- 31,117 388,961
Class B -- -- 14,121 169,594
Class T -- -- 295,207 3,867,212
--------- ----------- --------- -----------
Total distributions from net realized gains reinvested -- -- 340,445 4,425,767
--------- ----------- --------- -----------
Subtotals 95,758 1,440,744 602,453 7,901,815
Redemptions of capital shares outstanding:
Class A (22,508) (327,581) (91,705) (1,255,505)
Class B (21,235) (296,927) (47,764) (583,299)
Class T (165,034) (2,545,708) (438,806) (5,780,331)
--------- ----------- --------- -----------
Total redemptions of capital shares outstanding (208,777) (3,170,216) (578,275) (7,619,135)
--------- ----------- --------- -----------
Net increase (decrease) in capital shares outstanding (113,019) $(1,729,472) 24,178 $ 282,680
=========== ===========
Shares outstanding at beginning of period 4,048,565 4,024,387
--------- ---------
Shares outstanding at end of period 3,935,546 4,048,565
========= =========
</Table>
48
<Page>
SM&R BALANCED FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2010 AUGUST 31, 2009
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
Sale of capital shares:
Class A 5,798 $ 78,875 45,574 $ 593,104
Class B 840 11,738 9,725 114,089
Class T 31,379 450,825 31,291 398,497
--------- ----------- --------- -----------
Total sale of capital shares 38,017 541,438 86,590 1,105,690
Investment income dividends reinvested:
Class A 1,766 24,127 5,753 69,576
Class B 387 5,327 1,589 19,598
Class T 9,829 140,092 32,288 406,853
--------- ----------- --------- -----------
Total investment income dividends reinvested 11,982 169,546 39,630 496,027
Distributions from net realized gains reinvested:
Class A -- -- 12,620 143,495
Class B -- -- 4,265 49,091
Class T -- -- 69,073 819,206
--------- ----------- --------- -----------
Total distributions from net realized gains reinvested -- -- 85,958 1,011,792
--------- ----------- --------- -----------
Subtotals 49,999 710,984 212,178 2,613,509
Redemptions of capital shares outstanding:
Class A (9,841) (133,895) (47,693) (565,023)
Class B (9,698) (132,790) (21,958) (268,525)
Class T (53,524) (767,031) (87,189) (1,085,449)
--------- ----------- --------- -----------
Total redemptions of capital shares outstanding (73,063) (1,033,716) (156,840) (1,918,997)
--------- ----------- --------- -----------
Net increase (decrease) in capital shares outstanding (23,064) $ (322,732) 55,338 $ 694,512
=========== ===========
Shares outstanding at beginning of period 1,521,779 1,466,441
--------- ---------
Shares outstanding at end of period 1,498,715 1,521,779
========= =========
</Table>
49
<Page>
SM&R GOVERNMENT BOND FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2010 AUGUST 31, 2009
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
Sale of capital shares:
Class A 7,459 $ 81,149 10,070 $ 110,240
Class B 249 2,710 1,553 17,018
Class T 45,670 491,684 81,313 873,776
--------- ----------- --------- -----------
Total sale of capital shares 53,378 575,543 92,936 1,001,034
Investment income dividends reinvested:
Class A 1,321 14,385 2,916 31,784
Class B 248 2,698 876 9,531
Class T 31,883 342,640 75,124 807,995
--------- ----------- --------- -----------
Total investment income dividends reinvested 33,452 359,723 78,916 849,310
--------- ----------- --------- -----------
Subtotals 86,830 935,266 171,852 1,850,344
Redemptions of capital shares outstanding:
Class A (8,783) (95,788) (4,655) (50,897)
Class B (2,831) (30,764) (24,023) (261,694)
Class T (500,439) (5,361,238) (76,114) (819,717)
--------- ----------- --------- -----------
Total redemptions of capital shares outstanding (512,053) (5,487,790) (104,792) (1,132,308)
--------- ----------- --------- -----------
Net increase (decrease) in capital shares outstanding (425,223) $(4,552,524) 67,060 $ 718,036
=========== ===========
Shares outstanding at beginning of period 3,000,107 2,933,047
--------- ---------
Shares outstanding at end of period 2,574,884 3,000,107
========= =========
</Table>
SM&R MONEY MARKET FUND
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2010 AUGUST 31, 2009
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ------------ -------------
Sale of capital shares: 90,718,398 $ 90,718,398 268,304,974 $ 268,304,974
Investment income dividends reinvested 522 522 425,345 425,345
Redemptions of capital shares outstanding (80,852,559) (80,852,559) (324,209,275) (324,209,275)
----------- ------------ ------------ -------------
Net increase (decrease) in capital shares outstanding 9,866,361 $ 9,866,361 (55,478,956) $ (55,478,956)
============ =============
Shares outstanding at beginning of period 40,560,989 96,039,945
----------- ------------
Shares outstanding at end of period 50,427,350 40,560,989
=========== ============
</Table>
50
<Page>
NOTE 5--DISCLOSURE ABOUT FAIR VALUE OF ASSETS
Effective September 1, 2007, the Funds adopted Statement of Financial Accounting
Standards (FAS) 157. FAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (GAAP) and
expands disclosures about fair value measurement. FAS 157 requires funds to
classify their assets based on valuation method, using three levels. Level 1
securities are valued based on quoted prices for identical securities in active
markets that are unadjusted. Level 2 securities are valued based on external
market ("significant observable") inputs, such as quoted prices for similar
assets in active markets, quoted prices for identical or similar assets in
non-active markets, or inputs derived from or corroborated by observable market
data by correlation or other means. They reflect assumptions market participants
would use in pricing based on market data obtained from independent sources.
Level 3 securities are valued based on internal ("significant unobservable")
inputs that are based on the funds own assumptions that market participants
would use based on the best information available. The inputs or methodology
used for valuing securities are not necessarily an indication of the risk
associated with investing in those securities.
The following tables present the valuation levels of the Funds' securities as of
February 28, 2010:
Growth Fund
<Table>
<Caption>
HOLDINGS MARKET VALUE LEVEL 1 LEVEL 2 LEVEL 3
- -------------------------------------- ------------ ----------- ------- -------
Common Stock: Consumer Discretionary $ 3,664,546 $ 3,664,546 $0 $0
Common Stock: Consumer Staples 5,524,233 5,524,233 0 0
Common Stock: Energy 8,385,786 8,385,786 0 0
Common Stock: Exchange Traded Funds 5,385,600 5,385,600 0 0
Common Stock: Financials 7,356,287 7,356,287 0 0
Common Stock: Healthcare 9,455,749 9,455,749 0 0
Common Stock: Industrials 9,194,729 9,194,729 0 0
Common Stock: Information Technology 14,015,647 14,015,647 0 0
Common Stock: Materials 1,658,623 1,658,623 0 0
Common Stock: Telecomm. Services 1,519,220 1,519,220 0 0
Common Stock: Utilities 1,484,719 1,484,719 0 0
Investments in Money Market 616,688 616,688 0 0
----------- ----------- --- ---
Total Growth Fund $68,261,827 $68,261,827 $0 $0
</Table>
51
<Page>
Equity Income Fund
<Table>
<Caption>
HOLDINGS MARKET VALUE LEVEL 1 LEVEL 2 LEVEL 3
- -------------------------------------- ------------ ----------- ------- -------
Common Stock: Consumer Discretionary $ 4,975,219 $ 4,975,219 $0 $0
Common Stock: Consumer Staples 8,969,574 8,969,574 0 0
Common Stock: Energy 7,829,242 7,829,242 0 0
Common Stock: Financials 12,391,601 12,391,601 0 0
Common Stock: Healthcare 6,229,508 6,229,508 0 0
Common Stock: Industrials 5,625,527 5,625,527 0 0
Common Stock: Information Technology 5,555,309 5,555,309 0 0
Common Stock: Materials 1,711,618 1,711,618 0 0
Common Stock: Telecomm. Services 3,097,015 3,097,015 0 0
Common Stock: Utilities 4,016,634 4,016,634 0 0
Investments in Money Market 258,670 258,670 0 0
----------- ----------- --- ---
Total Equity Income Fund $60,659,917 $60,659,917 $0 $0
</Table>
Balanced Fund
<Table>
<Caption>
HOLDINGS MARKET VALUE LEVEL 1 LEVEL 2 LEVEL 3
- -------------------------------------- ------------ ----------- ---------- -------
Corporate Debt Securities $ 3,113,844 $ 0 $3,113,844 $0
Residential Mortgage Backed Securities 2,474 0 2,474 0
Common Stock: Consumer Discretionary 1,578,113 1,578,113 0 0
Common Stock: Consumer Staples 1,921,981 1,921,981 0 0
Common Stock: Energy 1,872,107 1,872,107 0 0
Common Stock: Financials 2,421,019 2,421,019 0 0
Common Stock: Healthcare 2,124,403 2,124,403 0 0
Common Stock: Industrials 1,799,947 1,799,947 0 0
Common Stock: Information Technology 2,984,103 2,984,103 0 0
Common Stock: Materials 418,351 418,351 0 0
Common Stock: Telecomm. Services 606,829 606,829 0 0
Common Stock: Utilities 441,362 441,362 0 0
Investments in Money Market 2,051,931 2,051,931 0 0
----------- ----------- ---------- ---
Total Balanced Fund $21,336,464 $18,220,146 $3,116,318 $0
</Table>
52
<Page>
Government Fund
<Table>
<Caption>
HOLDINGS MARKET VALUE LEVEL 1 LEVEL 2 LEVEL 3
- -------- ------------ -------- ----------- --------
U.S. Treasury & other U.S. Gov't.
corporations and agencies $20,812,584 $ 0 $20,812,584 $0
Corporate Debt Securities 1,046,508 0 1,046,508 0
Commercial Paper 4,674,712 0 4,674,712 0
Investments in Money Market 869,004 869,004 0 0
----------- -------- ----------- ---
Total Government Fund $27,402,808 $869,004 $26,533,804 $0
</Table>
Money Market Fund
<Table>
<Caption>
HOLDINGS MARKET VALUE LEVEL 1 LEVEL 2 LEVEL 3
- -------- ------------- ------- ----------- -------
U.S. Gov corporations and agencies
Short Term $46,051,416 $ 0 $46,051,416 $0
Commercial Paper 7,760,704 0 7,760,704 0
Investments in Money Market 87 87 0 0
----------- --- ----------- ---
Total Money Market Fund $53,812,207 $87 $53,812,120 $0
</Table>
Money market securities are valued using amortized cost, in accordance with
rules under the Investment Company Act of 1940. Generally, amortized cost
approximates the current fair value of a security, but since the value is not
obtained from a quoted price in an active market, such securities are reflected
as Level 2.
NOTE 6--SUBSEQUENT EVENTS
On February 16, 2010, the shareholders of the SM&R Primary Fund and the SM&R Tax
Free Fund approved a Plan of Liquidation whereby the Funds' assets were
liquidated and the cash proceeds were distributed to shareholders after all
liabilities were satisfied. The final distribution was made at the close of
business on February 26, 2010.
On February 18, 2010, the Board of Directors of the Company approved, subject to
the approval of each of the Agreements and Plans of Reorganization of the SM&R
Funds to allow the SM&R Growth Fund, SM&R Equity Income Fund, SM&R Balanced
Fund, SM&R Government Bond Fund and SM&R Money Market Fund, (together, the
"Funds", each a "Fund") to transfer all of their assets in a tax-free
reorganization into the Caltrust Equity Income Fund, Caltrust U.S. Government
Securities Fund and Caltrust United States Treasury Trust (each an "Acquiring
Fund"), each a series of the Caltrust Funds. The Agreements and Plans of
Reorganization allow the SM&R Growth, SM&R Equity Income and SM&R Balanced Funds
to transfer all of their assets into the Caltrust Equity Income Fund, the SM&R
Government Bond Fund to transfer all of its assets into the Caltrust U.S.
Government Securities Fund, and SM&R Money Market Fund to transfer all of its
assets into the Caltrust United States Treasury Trust. The Board of Directors of
the Funds determined that action should be taken because of the small asset size
of each Fund. The Board determined that the SM&R Funds may not continue to be a
competitive long-term investment option for current and potential investors. The
Joint Special Meeting of Shareholders will be held on June 11, 2010.
53
<Page>
SM&R INVESTMENTS, INC. 2450 South Shore Boulevard, League City, TX 77573
DIRECTORS
Florentino F. Gonzalez
Lea McLeod Matthews
Michael W. McCroskey
Ann McLeod Moody
Edwin K. Nolan
Robert V. Shattuck, Jr.
Donald P. Stevens
Steven H. Stubbs
Jamie G. Williams
OFFICERS
Michael W. McCroskey, President
Brenda T. Koelemay, Vice President and Treasurer
Teresa E. Axelson, Vice President, Secretary, and Chief Compliance Officer
INVESTMENT ADVISER AND MANAGER
Securities Management and Research, Inc.
P.O. Box 58969
Houston, TX 77258-8969
CUSTODIAN
Moody National Bank
2302 Post Office
Galveston, TX 77550
LEGAL COUNSEL
Greer, Herz & Adams, LLP
One Moody Plaza
Galveston, TX 77550
UNDERWRITER AND REDEMPTION AGENT
Securities Management and Research, Inc.
P.O. Box 58969
Houston, TX 77258-8969
TRANSFER AGENT, REGISTRAR AND DIVIDEND PAYING AGENT
Securities Management and Research, Inc.
P.O. Box 58969
Houston, TX 77258-8969
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BKD, LLP
2800 Post Oak Blvd., Suite 3200
Houston, TX 77056
Form 9202-S 04/10
Item 2 Code of Ethics.
Not applicable to this semi-annual report.
Item 3 Audit Committee Financial Expert.
Not applicable to this semi-annual report.
Item 4 Principal Accountant Fees and Services.
Not applicable to this semi-annual report.
Item 5 Audit Committee of Listed Registrants.
Not applicable
Item 6 Schedule of Investments.
The Schedule of Investments is filed under Item 1 of this form.
Item 7 Disclosure of Proxy Voting Policies and Procedures for Closed-end
Management Investment Companies.
Not applicable
Item 8 Portfolio Managers of Closed-end Management Investment Companies.
Not applicable
Item 9 Purchases of Equity Securities by Closed-end Management Investment
Company and Affiliated Purchasers.
Not applicable
Item 10 Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders
may recommend nominees to the registrants board of directors during this
period.
Item 11 Controls and Procedures.
(a) As of April 30, 2010, an evaluation was performed under the
supervision and with the participation of the officers of
Securities Management and Research, Inc. (the Company), including
the Chief Executive Officer (CEO) and Chief Financial Officer
(CFO), of the effectiveness of the Company's disclosure controls
and procedures. Based on that evaluation, the officers, including
the CEO and CFO, conclude that, as of April 30, 2010, the companys
disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940, as amended) were
reasonably designed so as to ensure that material information
relating to the Company is made known to the CEO and CFO.
(b) During the second fiscal quarter of the period covered by this
report, there have been no significant changes in the Companys
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation
and until the filing of this report, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Item 12 Exhibits.
(a) (1) Code of Ethics - not applicable to this semi-annual report.
(2) Certifications pursuant to Rule 30a-2(a) under the
Investment Act of 1940 are filed and attached hereto.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 are filed and attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SM&R Investments, Inc.
By: \S\ Michael W. McCroskey
-------------------------------------
Principal Executive Officer
Date: April 30, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registant and in the capacities and on the
dates indicated.
By: \S\ Michael W. McCroskey
-------------------------------------
Principal Executive Officer
Date: April 30, 2010
By: \S\ Brenda T. Koelemay
-------------------------------------
Principal Financial Officer
Date: April 30, 2010