fp0001574_n14a.htm

SM&R GROWTH FUND

SM&R EQUITY INCOME FUND

SM&R BALANCED FUND

SM&R GOVERNMENT BOND FUND

SM&R MONEY MARKET FUND

each a series of

SM&R INVESTMENTS, INC.

2450 South Shore Boulevard

Suite 400

League City, Texas 77573

Telephone No: (281) 334-2469

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD June 11, 2010

A special meeting of the shareholders of each SM&R Fund listed above will be held at 2450 South Shore Boulevard, Suite 400, League City, Texas 77573, at 9:00 a.m. (Central time), on June 11, 2010, for the following purposes:

For shareholders of SM&R Growth Fund, to approve an Agreement and Plan of Reorganization pursuant to which Equity Income Fund, a series of California Investment Trust, would acquire all of the assets of SM&R Growth Fund in exchange for Class A Shares of Equity Income Fund to be distributed pro rata by SM&R Growth Fund to its shareholders of Class A Shares, for Class B Shares of Equity Income Fund to be distributed pro rata by SM&R Growth Fund to its shareholders of Class B Shares and for Direct Shares of Equity Income Fund to be distributed pro rata by SM&R Growth Fund to its shareholders of Class T Shares, in complete liquidation and termination of SM&R Growth Fund;

For shareholders of SM&R Equity Income Fund, to approve an Agreement and Plan of Reorganization pursuant to which Equity Income Fund, a series of California Investment Trust, would acquire all of the assets of SM&R Equity Income Fund in exchange for Class A Shares of Equity Income Fund to be distributed pro rata by SM&R Equity Income Fund to its shareholders of Class A Shares, for Class B Shares of Equity Income Fund to be distributed pro rata by SM&R Equity Income Fund to its shareholders of Class B Shares and for Direct Shares of Equity Income Fund to be distributed pro rata by SM&R Equity Income Fund to its shareholders of Class T Shares, in complete liquidation and termination of SM&R Equity Income Fund;

For shareholders of SM&R Balanced Fund, to approve an Agreement and Plan of Reorganization pursuant to which Equity Income Fund, a series of California Investment Trust, would acquire all of the assets of SM&R Balanced Fund in exchange for Class A Shares of Equity Income Fund to be distributed pro rata by SM&R Balanced Fund to its shareholders of Class A Shares, for Class B Shares of Equity Income Fund to be distributed pro rata by SM&R Balanced Fund to its shareholders of Class B Shares and for Direct Shares of Equity Income Fund to be distributed pro rata by SM&R Balanced Fund to its shareholders of Class T Shares, in complete liquidation and termination of SM&R Balanced Fund;

For shareholders of SM&R Government Bond Fund, to approve an Agreement and Plan of Reorganization pursuant to which U.S. Government Securities Fund, a series of California Investment Trust, would acquire all of the assets of SM&R Government Bond Fund in exchange for Class A Shares of U.S. Government Securities Fund to be distributed pro rata by SM&R Government Bond Fund to its shareholders of Class A Shares, for Class B Shares of U.S. Government Securities Fund to be distributed pro rata by SM&R Government Bond Fund to its shareholders of Class B Shares and for Direct Shares of U.S. Government Securities Fund to be distributed pro rata by SM&R Government Bond Fund to its shareholders of Class T Shares, in complete liquidation and termination of SM&R Government Bond Fund; and

5.	For shareholders of SM&R Money Market Fund, to approve an Agreement and Plan of Reorganization pursuant to which The United States Treasury Trust, a series of California Investment Trust, would acquire

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all of the assets of SM&R Money Market Fund in exchange for Direct Shares of The United States Treasury Trust to be distributed pro rata by SM&R Money Market Fund to its shareholders, in complete liquidation and termination of SM&R Money Market Fund.

The Board of Directors has fixed April 27, 2010, as the record date for determination of shareholders entitled to vote at the special meeting.

By Order of the Board of Directors,

Teresa E. Axelson

Vice President and Secretary

April 30, 2010

YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO ENSURE A QUORUM BY PROMPTLY SIGNING AND RETURNING THE ENCLOSED PROXY CARD. IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE SPECIAL MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

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PROSPECTUS/PROXY STATEMENT

April 30, 2010

Acquisition of the assets of:

SM&R GROWTH FUND

SM&R EQUITY INCOME FUND

SM&R BALANCED FUND

SM&R GOVERNMENT BOND FUND

SM&R MONEY MARKET FUND

each a series of

SM&R INVESTMENTS, INC.

2450 South Shore Boulevard

Suite 400

League City, Texas 77573

Telephone No: (800) 231-4639

By and in exchange for shares of:

EQUITY INCOME FUND

U.S. GOVERNMENT SECURITIES FUND

THE UNITED STATES TREASURY TRUST

each a series of

CALIFORNIA INVESTMENT TRUST

44 Montgomery Street

Suite 2100

San Francisco, California 94104

Telephone No: (415) 398-2727

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This Prospectus/Proxy Statement describes the proposals for the reorganizations (each a “Reorganization” and together the “Reorganizations”) under the five separate Agreements and Plans of Reorganization (“Plans”), pursuant to which each series (each a “SM&R Fund” and together the “SM&R Funds”) of SM&R Investments, Inc. (the “SM&R Registrant”) as described in the chart below would transfer all their assets to a certain corresponding series (each a “Caltrust Fund” and together the “Caltrust Funds”) of California Investment Trust (the “Caltrust Registrant”) in exchange for shares and classes of the respective Caltrust Funds as set forth in the following chart. For purposes of this Prospectus/Proxy Statement, the SM&R Funds and the Caltrust Funds may be referred to collectively, as the “Funds”.

SM&R Funds (Reorganizing Funds)	Caltrust Funds (Surviving Funds)
SM&R Growth Fund	Equity Income Fund
Class A Shares	Class A Shares
Class B Shares	Class B Shares
Class T Shares	Direct Shares
SM&R Equity Income Fund	Equity Income Fund
Class A Shares	Class A Shares
Class B Shares	Class B Shares
Class T Shares	Direct Shares
SM&R Balanced Fund	Equity Income Fund
Class A Shares	Class A Shares
Class B Shares	Class B Shares
Class T Shares	Direct Shares
SM&R Government Bond Fund	U.S. Government Securities Fund
Class A Shares	Class A Shares
Class B Shares	Class B Shares
Class T Shares	Direct Shares
SM&R Money Market Fund	The United States Treasury Trust
All Shares	Direct Shares

Shares of the respective Caltrust Funds will be distributed pro rata by each corresponding SM&R Fund to its shareholders in complete liquidation and dissolution of the SM&R Fund. As a result of the Reorganizations, each owner of shares of a SM&R Fund will become the owner of shares of the corresponding Caltrust Fund having a total net asset value (“NAV”) equal to the total NAV of his or her holdings in the applicable SM&R Fund on the date of the Reorganizations (the “Closing Date”), subject to the following: at the time of Reorganizations, the value of the assets of each SM&R Fund will be determined in accordance with the corresponding Caltrust Fund’s valuation procedures (although it is not anticipated that the use of Caltrust Fund’s valuation procedures will result in a material revaluation of a SM&R Fund’s assets at the time of the Reorganizations). The separate Plans are substantially identical, except for the Plan for the Reorganization involving the SM&R Money Market Fund being reorganized into The United States Treasury Trust (which contains certain money market fund-specific provisions). A copy of a form of the Plans for the Reorganizations involving the following SM&R Funds is attached to this Prospectus/Proxy Statement as Annex A-1: SM&R Growth Fund, SM&R Equity Income Fund, SM&R Balanced Fund and the SM&R Government Bond Fund. A copy of the Plan for the Reorganization involving the SM&R Money Market Fund is attached to this Prospectus/Proxy Statement as Annex A-2.

If shareholders of a SM&R Fund fail to approve a Reorganization, such SM&R Fund will not be reorganized and the SM&R Fund Board will consider other alternatives for such SM&R Fund. No Reorganization is dependent upon the approval of another Reorganization.

For a comparison of the investment policies of the SM&R Funds and the Caltrust Funds, see “Summary-Comparison of Investment Objectives, Policies, and Risks.” Information concerning shares of the Caltrust Funds, as compared to shares of the SM&R Funds, is included in this Prospectus/Proxy Statement in the sections entitled “Summary-Comparative Fee Tables” and “Information About the Reorganizations-Description of Caltrust Fund Shares and Capitalization.”

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The Board of Directors of the SM&R Funds has fixed April 27, 2010, as the record date (the “Record Date”) for determination of shareholders owning Shares of the SM&R Funds.

This Prospectus/Proxy Statement should be retained for future reference. It sets forth concisely the information about the Caltrust Funds that a prospective investor should know before voting on the Reorganizations. This Prospectus/Proxy Statement is accompanied by the Direct Shares Prospectus of the Caltrust Funds, dated January 1, 2010, as well as the Class A Shares and Class B Shares Prospectus dated April 26 2010, both of which are incorporated herein by reference. The Statement of Additional Information (“SAI”) dated April 30, 2010, relating to this Prospectus/Proxy Statement, contains additional information and has been filed by the Caltrust Registrant with the Securities and Exchange Commission (“SEC”) and is incorporated herein by reference. In addition, each of the following documents is incorporated by reference (and is legally considered to be part of the Prospectus/Proxy Statement):

1. Prospectuses and SAI for the SM&R Fund’s Class A Shares, Class B Shares and Class T Shares dated December 31, 2009;

2. SAI for the Direct Shares of the Caltrust Funds dated January 1, 2010;

3. SAI for the Class A Shares and Class B Shares of the Caltrust Funds dated April 26, 2010;

4. An Annual Report of the SM&R Fund’s Class A Shares, Class B Shares and Class T Shares dated August 31, 2009; and

5. An Annual Report for the Caltrust Fund’s Direct Shares dated August 31, 2009. Since the Caltrust Fund’s Class A Shares and Class B Shares are newly created share classes, an Annual Report for the Class A Shares and Class B Shares is not currently available.

Copies of these materials and other information about the Caltrust Funds and the SM&R Funds may be obtained without charge by writing or calling the Caltrust Funds or the SM&R Funds at the addresses and telephone numbers shown on the previous pages.

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You can copy and review information about the Funds at the SEC’s Public Reference Room in Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 942-8090. Reports and other information about the SM&R Funds and the Caltrust Funds are available on the EDGAR Database on the SEC’s Internet site at www.sec.gov. You may obtain copies of this information, after paying a duplicating fee, by electronic request to the following e-mail address: publicinfo@sec.gov, or by writing the Commission’s Public Reference Section, Washington, D.C. 20549-0102.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

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TABLE OF CONTENTS
	Page
SUMMARY	9
REASONS FOR THE PROPOSED REORGANIZATIONS	9
TAX CONSEQUENCES	13
DISTRIBUTIONS AND THE TREATMENT OF CAPITAL LOSS CARRYFORWARDS AND UNREALIZED LOSSES	13
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RISKS	15
INVESTMENT POLICIES- EACH SM&R FUND AND EACH CALTRUST FUND	29
COMPARATIVE FEE TABLES	34
COMPARISON OF POTENTIAL RISKS AND REWARDS; PERFORMANCE INFORMATION	54
FINANCIAL HIGHLIGHTS	70
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE	70
INVESTMENT ADVISERS	70
PORTFOLIO MANAGEMENT INFORMATION	71
ADVISORY FEES, SERVICE FEES, SHAREHOLDER FEES AND OTHER EXPENSES	73
PROCEDURES FOR PURCHASING, REDEEMING AND EXCHANGING SHARES	77
DIVIDENDS AND DISTRIBUTIONS; TAX INFORMATION; FREQUENT TRADING; PORTFOLIO HOLDINGS	82
INFORMATION ABOUT THE REORGANIZATIONS	85
DESCRIPTION OF THE AGREEMENTS AND PLANS OF REORGANIZATION	85
BACKGROUND AND BOARD CONSIDERATIONS REGARDING THE PROPOSED REORGANIZATIONS	86
COST OF THE REORGANIZATIONS	87
DESCRIPTION OF THE CALTRUST FUNDS SHARE CLASSES AND CAPITALIZATION	88
FEDERAL INCOME TAX CONSEQUENCES	91
AGREEMENT BETWEEN THE SM&R ADVISER AND THE CALTRUST ADVISER	93
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS	95
INFORMATION ABOUT THE SM&R FUNDS AND THE CALTRUST FUNDS	101
WHERE TO FIND ADDITIONAL INFORMATION	101
ABOUT THE PROXY SOLICITATION AND THE SPECIAL MEETING	101
PROXIES, QUORUM AND VOTING AT THE SPECIAL MEETING	102
SHARE OWNERSHIP OF THE FUNDS	104
INTERESTS OF CERTAIN PERSONS	107
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY	107
(ANNEX A-1) FORM OF AGREEMENT AND PLAN OF REORGANIZATION	1
(ANNEX A-2) AGREEMENT AND PLAN OF REORGANIZATION (SM&R MONEY MARKET FUND)	15
(ANNEX B-1) FINANCIAL HIGHLIGHTS FOR SM&R GROWTH FUND	1
(ANNEX B-2) FINANCIAL HIGHLIGHTS FOR SM&R EQUITY INCOME FUND	3
(ANNEX B-3) FINANCIAL HIGHLIGHTS FOR SM&R BALANCED FUND	6
(ANNEX B-4) FINANCIAL HIGHLIGHTS FOR SM&R GOVERNMENT BOND FUND	9
(ANNEX B-5) FINANCIAL HIGHLIGHTS FOR MONEY MARKET FUND	13
(ANNEX B-6) FINANCIAL HIGHLIGHTS FOR EQUITY INCOME FUND	14

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(ANNEX B-7) FINANCIAL HIGHLIGHTS FOR U.S. GOVERNMENT SECURITIES FUND	15
(ANNEX B-8) FINANCIAL HIGHLIGHTS FOR THE UNITED STATES TREASURY TRUST	16
(ANNEX C-1) MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE FOR EQUITY INCOME FUND	1
(ANNEX C-2) MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE FOR U.S. GOVERNMENT SECURITIES FUND	4

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SUMMARY

This summary is qualified in its entirety by reference to the additional information contained elsewhere in this Prospectus/Proxy Statement, or incorporated by reference into this Prospectus/Proxy Statement. A copy of the Forms of Agreements and Plans of Reorganization (the “Plans”) pursuant to which each reorganization (each a “Reorganization” and together the “Reorganization”) will be conducted are attached to this Prospectus/Proxy Statement as Annex A-l and Annex A-2. A copy of a form of the Plans for the Reorganizations including the following SM&R Funds is attached to this Prospectus/Proxy Statement as Annex A-1: SM&R Growth Fund, SM&R Equity Income Fund, SM&R Balanced Fund and the SM&R Government Bond Fund. A copy of the Plan for the Reorganization including the SM&R Money Market Fund is attached to this Prospectus/Proxy Statement as Annex A-2. The Financial Highlights for each of the SM&R Funds and each of the Caltrust Funds are attached to this Prospectus/Proxy Statement as Annex B-1 through Annex B-8. A copy of the Management’s Discussion of Fund Performance for Equity Income Fund and U.S. Government Securities Fund are attached to this Prospectus/Proxy Statement as Annex C-1 and Annex C-2, respectively.

For more complete information, please read the Prospectuses of the SM&R Funds and the Caltrust Funds. For purposes of this Prospectus/Proxy Statement, the SM&R Funds and the Caltrust Funds may be referred to individually as a “Fund” and, collectively, as the “Funds.” The Prospectuses for the Caltrust Funds accompany this Prospectus/Proxy Statement.

The investment adviser for the SM&R Funds is Securities Management and Research, Inc. (the “SM&R Adviser”) and the investment adviser for the Caltrust Funds is CCM Partners, A California Limited Partnership (the “Caltrust Adviser”).

REASONS FOR THE PROPOSED REORGANIZATIONS

The Board of Directors of the SM&R Registrant, including a majority of the Directors who are not “interested persons” within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as amended (“1940 Act), has determined that participation in the Reorganizations is in the best interests of the SM&R Funds. For purposes of this Prospectus/Proxy Statement, the Board of Directors of the SM&R Registrant is referred to as the “SM&R Fund Board.”

The Reorganizations are being proposed to shareholders of each SM&R Fund because, for financial and strategic reasons, the SM&R Adviser has determined to discontinue its sponsorship of the SM&R Funds, which are the subject of the Reorganizations. In reaching that conclusion, the SM&R Fund Board noted that, based on the small asset sizes of the SM&R Funds and their expected sales growth, the SM&R Funds are not expected to reach a size that will provide a reasonable expense ratio without continued subsidies from the SM&R Adviser. Accordingly, the SM&R Adviser has actively pursued alternatives that would allow shareholders of each applicable SM&R Fund to: (i) continue to pursue their investment objectives through a tax-free combination of the SM&R Funds’ assets with a Caltrust Fund; and (ii) invest in a combined fund with long-term growth prospects, which can potentially use increased asset size to achieve greater portfolio diversification, and spread relative fixed costs over a larger asset base. Each SM&R Fund and its corresponding Caltrust Fund have similar objectives and invest in similar securities. After extensive discussions between representatives of the SM&R Adviser and the Caltrust Adviser, the SM&R Adviser recommended to the SM&R Fund Board that it consider and approve the Reorganizations as being in the best interests of each of the SM&R Funds and their respective shareholders. In recommending that the SM&R Fund Board consider and approve the Reorganizations, the SM&R Adviser noted among other things, the attributes of the Caltrust Fund, the Caltrust Adviser’s commitment to growing its fund business, the attractive fee and total expense profiles of the Caltrust Funds, and the long-term performance record of those funds.

The SM&R Funds’ shareholders will be receiving shares of the Caltrust Funds in Reorganizations that are intended to be tax-free reorganizations under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). In the opinion of the SM&R Adviser, the Reorganizations would generally provide a more preferable tax result for shareholders as compared to liquidations of the SM&R Funds (which generally would result in taxable redemptions). For additional information on the tax consequences of the Reorganizations, see the sections entitled “Summary-- Tax Consequences” and “Information About the Reorganizations-- Federal Income Tax Consequences” in this Prospectus/Proxy Statement.

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The SM&R Adviser advised the SM&R Fund Board that the SM&R Funds and the Caltrust Funds would not bear any expenses associated with effecting and implementing the Reorganizations, and that all expenses associated with effecting and implementing the Reorganizations would be borne by the SM&R Adviser and the Caltrust Adviser as mutually agreed between them or their affiliates. The Caltrust Funds may bear expenses associated with Caltrust Fund Board Counsel and the qualification of the Caltrust Funds’ shares for sale in various states on an as incurred basis, and the Funds may incur transaction expenses associated with the purchase and/or sale of portfolio securities to the extent that any transition of portfolio securities is required in connection with the Reorganizations. Prior to the Reorganizations being consummated, the SM&R Adviser may sell some of the securities from the SM&R Funds’ portfolios to better align the portfolios of the SM&R Funds and the Caltrust Funds. It is currently anticipated that approximately 14% of the assets of the SM&R Growth Fund, 25% of the assets of the SM&R Balanced Fund and 25% of the assets of the SM&R Equity Income Fund will be sold in anticipation of the Reorganizations. However, the estimated brokerage commissions relating to the dispositions of such securities and the acquisition of replacement securities is anticipated to be less than $9,000 for each of the Funds. Such dispositions and acquisitions will have no impact on the Funds’ yields. It is also currently anticipated that the combined Caltrust Equity Income Fund will trade approximately 14% of the combined portfolio with commission costs of less than $8,000.

In light of the above rationale and considerations, in considering the proposed Reorganizations, the SM&R Fund Board took into account a number of factors, including:

First, the SM&R Fund Board considered the fact that each Caltrust Fund has a similar investment objective, compatible investment strategy, and generally similar investment limitations as each corresponding SM&R Fund. See “Summary-Comparison Of Investment Objectives, Policies and Risks and “Summary-Investment Policies-Each SM&R Fund and Each Caltrust Fund” in this Prospectus/Proxy Statement.”

Second, the SM&R Fund Board also considered that, while gross expenses for some of the Caltrust Funds may exceed those of the corresponding SM&R Funds in certain cases, after waivers, expenses of each of the Caltrust Funds are expected to be lower. Certain waivers are voluntary, however, and may be cancelled at any time. See “Summary-Comparative Fee Tables” in this Prospectus/Proxy Statement.

Third, the SM&R Fund Board also considered relative fund performance and generally noted that the long-term performance of the Caltrust Funds in a variety of market conditions suggested the viability of the Caltrust Funds from the perspective of long-term management results. The SM&R Fund Board noted that, while the proposed Reorganization transactions as a whole appeared advantageous to each corresponding SM&R Fund and class, there were specific periods where the SM&R Funds out performed the Caltrust Funds. Based on discussions with Caltrust Fund representatives, the SM&R Adviser advised the SM&R Fund Board that the Caltrust Funds’ performance was competitive.

Fourth, the SM&R Fund Board considered the qualifications and stability of the investment personnel for the Caltrust Funds and the management of the Caltrust Funds.

Fifth, the SM&R Fund Board noted that the Reorganization transactions were expected to be conducted on a tax-free basis and that the unrealized gains of the Funds involved indicated that it was not anticipated that the Reorganization transactions would result in a material change in the per-share levels of unrealized gains involved.

Sixth, the SM&R Fund Board noted that all fees and expenses incurred by the Funds as a direct result of the Reorganization transactions shall have been or, when due, will be paid in full by the SM&R Adviser, Caltrust Adviser, and/or their affiliates. The SM&R Fund Board also considered the SM&R Adviser’s representation that none of the costs of the Reorganization transactions would be borne by SM&R Funds’ shareholders.

Seventh, the SM&R Fund Board noted that shareholders of each SM&R Fund would not pay a sales charge to acquire shares of each corresponding Caltrust Fund in connection with the Reorganizations. Accordingly, holders of SM&R Fund Class B Shares will receive credit for the amount of time that they have held their SM&R Fund Class B Shares toward the CDSC holding period which such shareholder receives Class B Shares of the corresponding Caltrust Fund in the Reorganization.

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Eighth, the SM&R Fund Board noted the Class B Shares of the Caltrust Funds will not be sold by the Caltrust Funds after the Closing Date unless the Caltrust Registrant determines otherwise in its sole discretion.

Ninth, the SM&R Fund Board considered that the SM&R Adviser may no longer continue to subsidize the SM&R Funds if the Reorganizations are not approved.

Tenth, the SM&R Fund Board was also informed that the SM&R Funds may stop accepting new investments, and purchasing portfolio securities, a few days prior to the Closing Date of the Reorganizations in order to facilitate the transfer of their portfolio securities to the Caltrust Funds as part of the Reorganizations.

The SM&R Fund Board has unanimously voted to recommend the approval of the Plans to holders of shares of the SM&R Funds. Under the Plans, each Caltrust Fund would acquire all of the assets of each corresponding SM&R Fund in exchange for shares of the acquiring Caltrust Fund to be distributed pro rata by the SM&R Fund to its shareholders in complete liquidation and termination of the SM&R Fund. As a result of the Reorganizations, each shareholder of a SM&R Fund will become the owner of shares of the corresponding Caltrust Fund having a total NAV equal to the total NAV of his or her holdings in the SM&R Fund on the date of the Reorganizations, i.e., the Closing Date, subject to the following: at the time of the Reorganizations, the value of the assets of each SM&R Fund will be determined in accordance with the corresponding Caltrust Fund’s valuation procedures (although it is not anticipated that the use of Caltrust Fund’s valuation procedures will result in a material revaluation of a SM&R Fund’s assets at the time of the Reorganizations).

Given the above factors, the SM&R Adviser has recommended to the SM&R Fund Board, and the SM&R Fund Board concluded, that when considering the totality of the factors, the Reorganizations are in the best interests of the shareholders of the SM&R Funds and that the dissolutions of the SM&R Funds are advisable.

Based on the foregoing, at its February 18, 2010 meeting, the SM&R Fund Board, including a majority of the directors who are not “interested persons” (“Independent Directors”), through an exercise of its business judgment, approved the Plans for the Reorganizations on behalf of the SM&R Funds and determined that the Reorganizations are in the best interest of the shareholders of the SM&R Funds and that the subsequent dissolutions of the SM&R Funds are advisable. Accordingly, the SM&R Fund Board, including the Independent Directors, recommended that shareholders of the SM&R Funds approve the Plan and the Reorganization as contemplated thereby for their SM&R Fund.

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The Caltrust Adviser also recommended the Reorganizations to the Caltrust Board primarily because, in the opinion of the Caltrust Adviser, the SM&R Funds’ shareholders will benefit from the increase in the Caltrust Fund’s assets resulting from the Reorganizations. After the Reorganizations are consummated, as a result of the increase in assets, it is expected that the pro forma gross expenses would decrease as shown in the chart below.

	Caltrust Fund Total Annual Fund Gross Operating Expenses at August 31, 2009			Caltrust Fund Pro Forma Gross Operating Expenses
	Class A Shares	Class B Shares	Direct Shares	Class A Shares	Class B Shares	Direct Shares
Reorganization 1 (SM&R Growth Fund into Equity Income Fund)	1.22%	1.72%	0.97%	1.20%	1.70%	0.95%
Reorganization 2 (SM&R Equity Income Fund into Equity Income Fund)	1.22%	1.72%	0.97%	1.14%	1.64%	0.89%
Reorganization 3 (SM&R Balanced Fund into Equity Income Fund)	1.22%	1.72%	0.97%	1.20%	1.70%	0.95%
Reorganization 4 (SM&R Government Fund into U.S. Government Securities Fund)	1.11%	1.61%	0.86%	1.10%	1.60%	0.85%
Reorganization 5 (SM&R Money Market Fund into The United States Treasury Trust)	N/A	N/A	0.53%	N/A	N/A	0.53%

After the Reorganizations, it is anticipated that the Caltrust Funds’ portfolio will contain additional securities, and certain of these securities will likely be attractively priced relative to direct market alternatives. Given the shorter-term nature of certain other securities, it also is anticipated that the Caltrust Funds will likely have additional liquidity to pursue reinvestment opportunities. Based on these factors, although no guarantee can be provided, the Caltrust Board was also informed by the Caltrust Adviser that the increase in the Caltrust Funds’ assets may benefit the Caltrust Funds’ performance over time. As of February 28, 2010, the SM&R Funds had approximately $233 million in total net assets and the Caltrust Funds had approximately $75 million in total net assets. After considering a number of factors, including the opinion of the Caltrust Adviser and the factors identified in the preceding sentences, the Caltrust Adviser recommended to the Caltrust Board, and the Caltrust Board concluded, that when considering the totality of the factors, the Reorganizations are in the best interests of the shareholders of the Caltrust Funds. Based on the foregoing, at the Caltrust Board’s meeting held on March 5, 2010, the Caltrust Board, including a majority of the trustees who are not “interested persons,” through an exercise of its business judgment, approved the Plan for the Reorganizations on behalf of the Caltrust Funds and determined that the Reorganizations are in the best interests of the shareholders of the Caltrust Funds.

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TAX CONSEQUENCES

Tax-Free Reorganization under the Code

The Reorganizations are expected to qualify as tax-free reorganizations under the Code (i.e., Section 368(a) of the Code). As a condition to the Reorganizations, the SM&R Funds and the Caltrust Funds will receive an opinion of counsel that each Reorganization will be considered a tax-free “reorganization” under applicable provisions of the Code, so that no gain or loss will be recognized directly as a result of the Reorganizations by the SM&R Funds or the Caltrust Funds or the shareholders of the SM&R Funds. The aggregate tax basis of a Caltrust Fund’s Class A Shares, Class B Shares and Direct Shares (as applicable) received by the shareholders of the SM&R Funds will be the same as the aggregate tax basis of their shares in the respective SM&R Fund.

Distributions and the Treatment of Capital Loss Carryforwards and Unrealized Losses

SM&R shareholders generally will not incur capital gains or losses on the exchange of their shares for shares of the Caltrust Funds as a result of the Reorganizations. However, shareholders will be responsible for tax obligations associated with monthly, periodic or other dividend or capital gains distributions that occur prior to and after the Reorganizations. For example, there would be taxes payable in connection with taxable distributions, if any, by the SM&R Funds immediately before the Closing Date. These distributions may include capital gains realized on dispositions of portfolio securities in connection with the Reorganizations. Prior to the Reorganizations being consummated, the SM&R Adviser may sell certain portfolio securities to better align the portfolios of the SM&R Funds with the corresponding Caltrust Fund. It is currently anticipated that approximately 14% of the assets of the SM&R Growth Fund, 25% of the assets of the SM&R Balanced Fund and 25% of the assets of the SM&R Equity Income Fund will be sold prior to the Reorganizations in order to better align their portfolios with the Caltrust Funds. This may cause the SM&R Funds to deviate from their stated investment objectives and strategies. For more information on the disposition of certain portfolio securities, see the section entitled “Summary – Comparison of Investment Objectives, Policies, Limitations and Risks” in this Prospectus/Proxy Statement. It is not anticipated these sales of portfolio securities will affect the expectation that the Reorganizations would qualify as tax-free Reorganizations under Section 368(a) of the Code.

The table below shows the estimated capital gains and the per share impact on the sale of the portfolio securities by the SM&R Funds listed below. The table is based on the assumption that all of the SM&R Fund’s portfolio holdings as of February 28, 2010 are sold prior to the Closing Date. The table is designed to show the effect of the capital gains on the sale of SM&R portfolio securities by the SM&R Funds prior to the Reorganizations and by the Caltrust Funds subsequent to the Reorganizations. However, as described above it is not anticipated that all of the portfolio holdings will be sold prior to the closing date. The table is representative of market values as of February 28, 2010. Any brokerage charges associated with the disposition of portfolio securities by the SM&R Fund, prior to the Reorganizations, will be borne by that SM&R Fund.

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		Long-Term Cap Gain/Loss Amount		Short-Term Cap Gain/Loss Amount
	Total Cap Gain/Loss	Long-Term Gain/Loss	Per Share	Short-Term Gain	Per Share
SM&R Growth Fund	Net Cap Gain: $48,885 Unrealized Depreciation: $(921,360)	Long Term Cap Loss: $(308,148) Unrealized Depreciation: $(921,360)	Long Term Cap Loss: $(0.02)/share Unrealized Appreciation/Depreciation: $(0.05)/share	Short Term Gain: $357,033	Short Term Cap Gain: $0.02/share
SM&R Equity Income Fund	Net Cap Loss: $(1,618,518) Unrealized Depreciation: $(2,471,745)	Long Term Cap Loss: $(1,618,518) Unrealized Depreciation: $(2,471,745)	Long Term Cap Loss: $(0.41)/share Unrealized Depreciation: $(0.63)/share	None	None
SM&R Balanced Fund	Net Cap Loss: $(67,594) Unrealized Depreciation: $(72,654)	Long Term Cap Loss: $(67,594) Unrealized Depreciation: $(72,654)	Long Term Cap Loss: $(0.05)/share Unrealized Depreciation: $(0.05)/share	None	None
SM&R Government Bond Fund	Net Cap Loss: $(5,135) Unrealized Appreciation: $1,406,183	Long Term Cap Loss: $(5,135) Unrealized Depreciation: $1,406,183	Long Term Cap Loss: $(0.00)/share Unrealized Appreciation: $0.55/share	None	None
SM&R Money Market Fund	None	None	None	None	None

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Based upon projections as of February 28, 2010, each of the SM&R Funds included in the table below will have the following approximate capital loss carryforwards available for use. It is anticipated that a portion of the capital loss carryforwards, to the extent not limited by the annual limitations, will be used to offset capital gains realized by the appropriate SM&R Fund between February 28, 2010 and the Closing Date. It is then anticipated that the remainder of the capital loss carryforwards will be transferred to the appropriate Caltrust Fund. However, any such capital loss carryovers which are transferred to a Caltrust Fund will remain subject to the annual limitations and will not be available to offset any gains resulting from the pre-Reorganization appreciation of securities held in the Caltrust Fund portfolio as of the Closing Date.

	Taxable Year Ending	Capital Loss Carryforwards (expiration dates of the loss carryforwards are listed in parentheses)	Capital Loss Carryforwards Anticipated to be Used to Offset Capital Gains as of February 28, 2010	Capital Loss Carryforwards Anticipated to be Transferred to Caltrust Fund
SM&R Growth Fund	August 31, 2009	$5,196,609 (2017)	$(48,885)	$5,147,724
SM&R Equity Income Fund	August 31, 2009	$3,537,981 (2017)	None	$3,537,981 (2017)
SM&R Balanced Fund	August 31, 2009	$845,956 (2017)	None	$845,956 (2017)
SM&R Government Bond Fund	August 31, 2009	$167,397 (2014) $282,342 (2015) Total: $449,739	None	$167,397 (2014) $282,342 (2015) Total: $449,739
SM&R Money Market Fund	August 31, 2009	None	None	None

THE BOARD OF DIRECTORS OF THE SM&R FUNDS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE REORGANIZATIONS.

COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RISKS

This section will help you compare the investment objectives, policies and risks of each SM&R Fund with the corresponding Caltrust Fund. Please be aware that this is only a brief discussion. More complete information may be found in the SM&R Funds’ and the Caltrust Funds’ prospectuses. To avoid any possible confusion between the SM&R Equity Income Fund and the Equity Income Fund, which is a series of the Caltrust Funds, the following charts will refer to the Equity Income Fund as the “Caltrust Equity Income Fund”.

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SM&R Growth Fund and Caltrust Equity Income Fund

SM&R Growth Fund		Caltrust Equity Income Fund
Principal Investment Objective Achieve long-term capital appreciation. Secondary objective None		Principal Investment Objective Achieve a high level of income and capital appreciation (when consistent with high income) by investing primarily in income-producing U.S. equity securities. Secondary objective As a secondary objective, the Caltrust Equity Income Fund will also consider the potential for price appreciation when consistent with seeking current income.
Principal Investment Strategies The SM&R Growth Fund normally invests at least 80% of its assets in common stock. In selecting stocks, the SM&R Adviser: · chooses stocks of financially sound companies that have a proven ability to make and sustain a profit over time; and · places an emphasis on companies with growth potential. The SM&R Adviser identifies candidate stock investments based on (1) low equity valuation or low relative equity valuation and (2) improving earnings. The SM&R Adviser evaluates each candidate stock on a fundamental basis by examining past and expected financial performance, managerial skill and foresight, and relative valuation to industry peers and the market as a whole. The SM&R Growth Fund generally purchases a higher proportion of stocks (relative to their market weight) from those sectors of the market with higher growth prospects, referred to as “sector overweighting.” Examples of sectors with higher growth prospects currently include technology, healthcare, and industrials. On the other hand, the portfolio generally purchases a smaller proportion of stocks (relative to their market weight) from sectors of the market with below average growth characteristics (for example, basic materials), referred to as “sector underweighting.” The SM&R Adviser generally believes in never having less than half or more than double the market weighting in any one sector. As a result of such strategic overweighting and underweighting, the SM&R Growth Fund’s performance may differ substantially from broad market indexes like the S&P 500 and tend to incur more price volatility than these indexes.		Principal Investment Strategies In order to meet the investment goal, the Caltrust Equity Income Fund invests primarily in securities, which generate a relatively high level of dividend income and have potential for capital appreciation. These securities will generally be stocks of medium and large U.S. corporations. It is the Caltrust Equity Income Fund’s policy that under normal market conditions it will invest at least 80% of its total assets in stocks. The Caltrust Equity Income Fund invests primarily in value stocks and stocks that, in the opinion of the Caltrust Adviser, have attractive yield and/or capital appreciation opportunities. “Value stock” is a generic term and has many definitions in the market place. Generally, it is used to describe a stock that an investor considers to have a low price relative to other stocks. Among others, common characteristics of a value stock may include a high dividend yield, low price earnings ratio and/or low price-to-book ratio relative to a specific market index or another stock. Although the Fund will attempt to invest as much of its assets as is practical in income-producing stocks, the Caltrust Equity Income Fund may maintain a reasonable position in high-quality, short-term debt securities and money market instruments to meet redemption requests and other liquidity needs. The Caltrust Equity Income Fund will invest in futures contracts when the Caltrust Adviser wishes to remain fully invested in the market. Utilizing futures allows the Caltrust Adviser to maintain a high percentage of the portfolio in the market while maintaining cash for liquidity needs.

Primary Differences. The primary differences between the SM&R Growth Fund and the Caltrust Equity Income Fund are:

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(1) The Caltrust Equity Income Fund may maintain a reasonable position in high-quality, short-term debt securities and money market instruments to meet redemption requests and other liquidity needs. The SM&R Growth Fund does not participate in these types of investments to reach its investment objective.

(2) The Caltrust Equity Income Fund will invest in futures contracts when the Caltrust Adviser wishes to remain fully invested in the market. Utilizing futures allows the Caltrust Equity Income Fund to maintain a high percentage of the portfolio in the market while maintaining cash for liquidity needs. The SM&R Growth Fund does not invest in futures contracts.

(3) The Caltrust Equity Income Fund invests in value stocks to a greater extent than the SM&R Growth Fund.

(4) The SM&R Growth Fund generally believes in never having less than half or more than double the market weighting in any one sector.

Because the Caltrust Equity Income Fund and the SM&R Growth Fund have compatible investment strategies, the principal risks of the Caltrust Equity Income Fund and the SM&R Growth Fund are similar. However, the manner in which the risks are described may be different. All mutual funds take investment risks. Therefore, it is possible to lose money by investing in either Fund.

The following summarizes certain of the more significant risk factors relating to each Fund as described in the Funds’ prospectuses.

Stock Market Risks. The stock market goes up and down every day. As with any investment whose performance is linked to these markets, the value of an investment in the Funds will change. During a declining stock market, an investment in either Fund would lose money.

Economic and Political Events Risks. The impact of positive or negative events could be short-term (by causing a change in the market that is corrected in a year or less) or long-term (by causing a change in the market that may last for many years). Events may affect one sector of the economy or a single stock, but may not have a significant impact on the overall market.

Large and Medium-Sized Company Risks. The Funds invest in large and medium-sized companies from many sectors. In doing so, the Funds are not as sensitive to the movements of a single company’s stock or a single economic sector.

Investment Style Risks. The investment decisions of the SM&R Adviser and the Caltrust Adviser (such as sector weighting and individual stock selection) could fail to achieve the desired results.

The following highlights certain additional risks described in the Caltrust Equity Income Fund prospectus.

Value Investing Risks. During periods where investment alternatives such as growth stocks, small cap stocks, bonds and money market instruments out-perform value stocks, the performance of the Caltrust Equity Income Fund may underperform other mutual funds that invest in these alternatives.

Sector Risks. At times the Caltrust Equity Income Fund may hold a concentrated position in the banking and financial sector, therefore the Fund’s performance may be significantly impacted by the performance of this sector.

Futures Contracts Risks. The Caltrust Equity Income Fund may invest in futures contracts to the extent that it holds cash in the portfolio. If the futures contracts owned by the Fund do not perform well, the Fund’s performance will be impacted.

Lending Portfolio Securities Risks. Some mutual funds are able to lend portfolio securities in order to offset expenses. The Caltrust Equity Income Fund has never engaged in this strategy, however, in the event that it did, there is a risk that the practice could negatively impact the net assets value of the Fund.

Stock Futures Risks. Losses involving futures can sometimes be substantial in part because a relatively small price movement in a futures contract may result in an immediate and substantial loss for the Fund. In an effort to minimize this risk, the Caltrust Equity Income Fund will not use futures for speculative purposes or as leverage. It is the Caltrust Equity Income Fund’s policy to hold cash deposits equal or greater than the total market value of any

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futures position. The value of all futures and options contracts in which the Caltrust Equity Income Fund acquires an interest will not exceed 20% of current total assets.

The following highlights certain additional risks disclosed in the SM&R Growth Fund’s prospectus.

Growth Stock Risks. Growth stocks can have relatively wide price swings as a result of the high valuations they carry.

SM&R Equity Income Fund and Caltrust Equity Income Fund

SM&R Equity Income Fund		Caltrust Equity Income Fund
Principal Investment Objective Achieve current income. Secondary objective With a secondary objective of long-term capital appreciation.		Principal Investment Objective Achieve a high level of income and capital appreciation (when consistent with high income) by investing primarily in income-producing U.S. equity securities. Secondary objective As a secondary objective, the Caltrust Equity Income Fund will also consider the potential for price appreciation when consistent with seeking current income.
Principal Investment Strategies Pursuant to a policy adopted by the SM&R Equity Income Fund, the SM&R Adviser normally invests at least 80% of the SM&R Equity Income Fund’s assets in common stocks (primarily income producing). This policy may not be changed without providing shareholders with at least sixty (60) days prior notice. SM&R Equity Income Fund may also invest in preferred stocks and investment grade debt securities (such as publicly traded corporate bonds, debentures, notes, commercial paper, repurchase agreements, and certificates of deposit in domestic banks and savings institutions having as least $1 billion of total assets). Corporate debt obligations purchased by the Fund will be rated either Baa or better by Moody’s or BBB or better by S&P. Commercial paper and notes will consist only of direct obligations of corporations whose bonds and/or debentures are rated as set forth above. The fixed income portion of the SM&R Equity Income Fund will generally invest in medium and long-term securities. The average maturity for the fixed income portion generally is expected to be in the six to fifteen year range (some securities may have a longer or shorter maturity). The average portfolio maturity may be shorter when management anticipates that interest rates will increase, and longer when management anticipates interest rates will decrease. In selecting common and preferred stocks, the fund focuses on companies with consistent and increasing dividend payment histories and future earnings potential sufficient to continue such dividend payments. SM&R Equity Income Fund’s goal is to		Principal Investment Strategies In order to meet the investment goal, the Caltrust Equity Income Fund invests primarily in securities, which generate a relatively high level of dividend income and have potential for capital appreciation. These securities will generally be stocks of medium and large U.S. corporations. It is the Caltrust Equity Income Fund’s policy that under normal market conditions it will invest at least 80% of its total assets in stocks. The Caltrust Equity Income Fund invests primarily in value stocks and stocks that, in the opinion of the Caltrust Adviser, have attractive yield and/or capital appreciation opportunities. “Value stock” is a generic term and has many definitions in the market place. Generally, it is used to describe a stock that an investor considers to have a low price relative to other stocks. Among others, common characteristics of a value stock may include a high dividend yield, low price earnings ratio and/or low price-to-book ratio relative to a specific market index or another stock. Although the Fund will attempt to invest as much of its assets as is practical in income-producing stocks, the Caltrust Equity Income Fund may maintain a reasonable position in high-quality, short-term debt securities and money market instruments to meet redemption requests and other liquidity needs. The Caltrust Equity Income Fund will invest in futures contracts when the Caltrust Adviser wishes to remain fully invested in the market. Utilizing futures allows the Caltrust Adviser to maintain a high percentage of the portfolio in the market while maintaining cash for

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SM&R Equity Income Fund

Caltrust Equity Income Fund

maintain a portfolio dividend yield (before fees and expenses) greater than that of the S&P 500 Index.

The SM&R Adviser identifies candidate stock investments based on (1) low equity valuation and (2) improving earnings. Then, the SM&R Adviser evaluates each candidate stock on a fundamental basis by examining past and expected financial performance, managerial skill and foresight, and relative valuation to industry peers and the market as a whole.

The SM&R Equity Income Fund generally purchases a higher proportion of stocks (relative to their market weight) from those sectors of the market with greater dividend prospects, referred to as “overweighting.” On the other hand, the fund generally purchases a smaller proportion of stocks (relative to their market weight) from sectors of the market with below average dividend yields, referred to as “underweighting.” As a result of such strategic overweighting and underweighting, the SM&R Equity Income Fund’s performance may differ substantially from broad market indexes like the S&P 500.

liquidity needs.

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Primary Differences. The primary differences between the SM&R Equity Income Fund and the Caltrust Equity Income Fund are:

(1) The Caltrust Equity Income Fund may maintain a reasonable position in high-quality, short-term debt securities and money market instruments to meet redemption requests and other liquidity needs. The SM&R Equity Income Fund does not participate in these types of investments to reach it investment objective.

(2) The Caltrust Equity Income Fund will invest in futures contracts when the Caltrust Adviser wishes to remain fully invested in the market. Utilizing futures allows the Equity Income Fund to maintain a high percentage of the portfolio in the market while maintaining cash for liquidity needs. The SM&R Equity Income Fund does not invest in futures contracts.

(3) The Caltrust Equity Income Fund invests in value stocks to a greater extent then the SM&R Equity Income Fund.

(4) The SM&R Equity Income Fund’s policy regarding normally investing at least 80% of the SM&R Equity Income Fund’s assets in common stocks cannot be changed without providing shareholders with at least sixty (60) days notice. The Caltrust Equity Income Fund also has an 80% policy, but is not required to notify shareholders before changing the policy.

(5) The SM&R Equity Income Fund may also invest in preferred stocks and investment grade debt securities (such as publicly traded corporate bonds, debentures, notes, commercial paper, repurchase agreements, and certificates of deposit in domestic banks and savings institutions having as least $1 billion of total assets). The Caltrust Equity Income Fund does not invest in preferred stocks or investment grade debt securities.

Because the Caltrust Equity Income Fund and the SM&R Equity Income Fund have substantially similar investment strategies, the principal risks of the Caltrust Equity Income Fund and the SM&R Equity Income Fund are similar. However, the manner in which the risks are described may be different. All mutual funds take investment risks. Therefore, it is possible to lose money by investing in either Fund.

The following summarizes certain of the more significant risk factors relating to each Fund as described in the Funds’ prospectuses.

Large and Medium-Sized Company Risks. The Fund invests in large and medium-sized companies from many sectors. In doing so, the Funds are not as sensitive to the movements of a single company’s stock or a single economic sector.

Investment Style Risks. The investment decisions of the SM&R Adviser and the Caltrust Adviser (such as sector weighting and individual stock selection) could fail to achieve the desired results.

The following highlights certain additional risks disclosed in the Caltrust Equity Income Fund prospectus.

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Lending Portfolio Securities Risks. Some mutual funds are able to lend portfolio securities in order to offset expenses. The Caltrust Equity Income Fund has never engaged in this strategy, however, in the event that it did, there is a risk that he practice could negatively impact the net assets value of the Fund.

The following highlights certain additional risks described in the SM&R Equity Income Fund’s prospectus.

Growth Stock Risks. Growth stocks can have relatively wide price swings as a result of the high valuations they carry.

Interest Rate Risks and Maturity Risk. Interest rates could rise, causing a decline in the market value of debt securities (interest rate risk). This risk will increase as average portfolio securities maturities increase (maturity risk).

Credit Risks. Issuers of debt obligations could default or be unable to pay amounts due.

Liquidity Risks. Liquidity risk is the risk that certain securities or other investments may be difficult or impossible to sell at the time the Fund would like to sell them or at the price the fund values them. The Fund may have to sell at a lower price, sell other securities instead, or forego an investment opportunity.

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SM&R Balanced Fund and Caltrust Equity Income Fund

SM&R Balanced Fund		Caltrust Equity Income Fund
Principal Investment Objective The SM&R Balanced Fund seeks to conserve principal, produce current income, and achieve long-term capital appreciation. Secondary objective None		Principal Investment Objective Achieve a high level of income and capital appreciation (when consistent with high income) by investing primarily in income-producing U.S. equity securities. Secondary objective As a secondary objective, the Caltrust Equity Income Fund will also consider the potential for price appreciation when consistent with seeking current income.
Principal Investment Strategies The SM&R Adviser uses a “balanced” approach by investing part of the assets in common stocks and the remainder in a combination of U.S. Government bonds, investment-grade corporate bonds, collateralized mortgage obligations, mortgage-backed securities, convertible bonds, cash, and money market instruments. The proportion invested in stocks, bonds and money market instruments changes in response to changing economic conditions. This flexibility may help to reduce price volatility. The SM&R Adviser will generally select stocks based on certain growth and value considerations. A growth stock would include the stock of a company whose underlying earnings growth rate is greater than the market. An example of a value stock would be one whose stock price appears undervalued in relation to earnings, projected cash flow, or asset value per share. The stocks in the SM&R Balanced Fund are diversified and are selected based upon two models. One model is based on profitability measurements, and the other model is based on the corporation’s return on invested cash. The SM&R Adviser then evaluates each candidate stock on a fundamental basis by examining past and expected financial performance, managerial skill and foresight, and relative valuation to industry peers and the market as a whole. The bonds, meanwhile, may serve as a stabilizing force during times of eroding stock market value, as well as provide a fixed income payment stream. The SM&R Balanced Fund invests at least 25% of its assets in fixed income securities, all of which are rated BBB or better (investment grade). The fixed income portion of the SM&R Balanced Fund will generally invest in medium and long-term securities. The average maturity for the fixed income portion generally is expected to be in the six to fifteen year range (some securities may have a longer or shorter maturity). The average portfolio maturity may be shorter when		Principal Investment Strategies In order to meet the investment goal, the Caltrust Equity Income Fund invests primarily in securities, which generate a relatively high level of dividend income and have potential for capital appreciation. These securities will generally be stocks of medium and large U.S. corporations. It is the Caltrust Equity Income Fund’s policy that under normal market conditions it will invest at least 80% of its total assets in stocks. The Caltrust Equity Income Fund invests primarily in value stocks and stocks that, in the opinion of the Caltrust Adviser, have attractive yield and/or capital appreciation opportunities. “Value stock” is a generic term and has many definitions in the market place. Generally, it is used to describe a stock that an investor considers to have a low price relative to other stocks. Among others, common characteristics of a value stock may include a high dividend yield, low price earnings ratio and/or low price-to-book ratio relative to a specific market index or another stock . Although the Fund will attempt to invest as much of its assets as is practical in income-producing stocks, the Caltrust Equity Income Fund may maintain a reasonable position in high-quality, short-term debt securities and money market instruments to meet redemption requests and other liquidity needs. The Caltrust Equity Income Fund will invest in futures contracts when the Caltrust Adviser wishes to remain fully invested in the market. Utilizing futures allows the Caltrust Adviser to maintain a high percentage of the portfolio in the market while maintaining cash for liquidity needs.

STATEMENT OF ADDITIONAL INFORMATION

April ___, 2010

Acquisition of the assets of:

SM&R GROWTH FUND

SM&R EQUITY INCOME FUND

SM&R BALANCED FUND

SM&R GOVERNMENT BOND FUND

SM&R MONEY MARKET FUND

each a series of

SM&R INVESTMENTS, INC.

2450 South Shore Boulevard

Suite 400

League City, Texas 77573

Telephone No: (281) 334-2469

By and in exchange for shares of:

EQUITY INCOME FUND

U.S. GOVERNMENT SECURITIES FUND

THE UNITED STATES TREASURY TRUST

each a series of

CALIFORNIA INVESTMENT TRUST

44 Montgomery Street

Suite 2100

San Francisco, California 94104

Telephone No: (415) 398-2727

[To be Filed by Amendment]

This Statement of Additional Information dated April ___, 2010, is not a prospectus. A Prospectus/Proxy Statement dated April ___, 2010, related to the above-referenced matter may be obtained from California Investment Trust, on behalf of Equity Income Fund, U.S. Government Securities Fund and The United States Treasury Trust, by writing or calling the California Investment Trust at the address and telephone number shown above. This Statement of Additional Information should be read in conjunction with such Prospectus/Proxy Statement.

TABLE OF CONTENTS

1.	SAI for the SM&R Funds’ Class A Shares, Class B Shares and Class T Shares dated December 31, 2009.

2	SAI for the Caltrust Funds’ Direct Shares dated January 1, 2010.

3.	SAI for the Caltrust Funds’ Class A Shares and Class B Shares dated April 26, 2010.

4.	An Annual Report of the SM&R Funds’ Class A Shares, Class B Shares and Class T Shares dated August 31, 2009.

5.	An Annual Report for the Caltrust Funds’ Direct Shares dated August 31, 2009. Since the Caltrust Funds’ Class A Shares and Class B Shares are newly created share classes, an Annual Report for the Class A Shares and Class B Shares is not currently available.

6.	Pro Forma Financial Information for the acquisition of SM&R Growth Fund, a series of SM&R Investments, Inc., by Equity Income Fund, a series of California Investment Trust.

7.	Pro Forma Financial Information for the acquisition of SM&R Equity Income Fund, a series of SM&R Investments, Inc., by Equity Income Fund, a series of California Investment Trust.

8.	Pro Forma Financial Information for the acquisition of SM&R Balanced Fund, a series of SM&R Investments, Inc., by Equity Income Fund, a series of California Investment Trust.

9.	Pro Forma Financial Information for the acquisition of SM&R Government Bond Fund, a series of SM&R Investments, Inc., by U.S. Government Securities Fund, a series of California Investment Trust.

10.	Pro Forma Financial Information for the acquisition of SM&R Money Market Fund, a series of SM&R Investments, Inc., by The United States Treasury Trust, a series of California Investment Trust.

INFORMATION INCORPORATED BY REFERENCE

The Statement of Additional Information of the Class A Shares, Class B Shares and Class T Shares of 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 each a series of SM&R Investments, Inc., dated December 31, 2009, is incorporated by reference to its Post-Effective Amendment No. 30 to its Registration Statement on Form N-1A (File No. 033-44021), which was filed with the Securities and Exchange Commission on or about December 29, 2009. A copy may be obtained from SM&R Investments, Inc., at 2450 South Shore Boulevard, League City, TX, 77573 or by calling 1-800-231-4639.

The Statement of Additional Information of the Direct Shares of Equity Income Fund, U.S. Government Securities Fund and The United States Treasury Trust, each a series of California Investment Trust, dated January 1, 2010, is incorporated by reference to its Post-Effective Amendment No. 38 to its Registration Statement on Form N-1A (File No. 033-00499) which was filed with the Securities and Exchange Commission on or about December 30, 2009. A copy may be obtained from California Investment Trust, at 44 Montgomery Street, Suite 2100 San Francisco, California 94104 or by calling 1-800-225-8778.

[To be Filed by Amendment]

The Statement of Additional Information of the Class A Shares and Class B Shares of Equity Income Fund, U.S. Government Securities Fund and The United States Treasury Trust, each a series of California Investment Trust, dated ______, 2010, is incorporated by reference to its Post-Effective Amendment No. ____ to its Registration Statement on Form N-1A (File No. 033-00499) which was filed with the Securities and Exchange Commission on or about _________, 2010. A copy may be obtained from California Investment Trust, at 44 Montgomery Street, Suite 2100 San Francisco, California 94104 or by calling 1-800-225-8778.

The audited financial statements of Class A Shares, Class B Shares and Class T Shares of 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 each a series of SM&R Investments, Inc., dated August 31, 2009, are incorporated by reference to the Funds’ Annual Report to shareholders which was filed with the Securities and Exchange Commission pursuant to Section 30(b) of the Investment Company Act of 1940, as amended, on or about November 6, 2009.

The audited financial statements of Direct Shares of Equity Income Fund, U.S. Government Securities Fund and The United States Treasury Trust, each a portfolio of California Investment Trust, dated August 31, 2009, are incorporated by reference to the Funds’ Annual Report to shareholders which was filed with the Securities and Exchange Commission pursuant to Section 30(b) of the Investment Company Act of 1940, as amended, on or about November 3, 2009. Since the Caltrust Funds’ Class A Shares and Class B Shares are newly created share classes, an Annual Report for the Class A Shares and Class B Shares is not currently available.

SM&R Growth Fund and Caltrust Equity Income Fund


			EQUITY INCOME FUND				SM&R Growth Fund
			PORTFOLIO OF INVESTMENTS				PORTFOLIO OF INVESTMENTS
Common Stock

Basic Materials	(2.52	%)	Shares		Value		Shares		Value		Shares		Value

Chemicals
Praxair Inc				4,592		351,839		2,700		206,874		7,292		558,713
Sherwin-Williams Co/The				1,746		105,109						1,746		105,109
Monsanto Co.								3,488		292,573		3,488		292,573
PPG Industries, Inc.								16,200		897,480		16,200		897,480
						456,948				1,396,927				1,853,875

Iron / Steel	(0.21	%)
United States Steel Corp				4,000		175,120						4,000		175,120

Mining	(0.1	%)
Alcoa Inc				7,050		84,953						7,050		84,953

Total Basic Materials						717,021				1,396,927				2,113,948

Communications	(8.43	%)
Akamai Technologies Inc.								8,190		144,472		8,190		144,472

Media	(1.26	%)
McGraw-Hill Cos Inc/The				13,178		442,913						13,178		442,913
Walt Disney Co.								23,535		612,851		23,535		612,851
						442,913				612,851				1,055,764

Telecommunications	(7	%)
Amdocs Ltd								6,008		146,115		6,008		146,115
Arris Group Inc								20,700		274,482		20,700		274,482
AT&T Inc				21,244		553,406		24,300		633,015		45,544		1,186,421
Cisco Systems								76,050		1,642,680		76,050		1,642,680
Harris Corp.								11,790		409,467		11,790		409,467
Motorola Inc.								27,810		199,676		27,810		199,676
Nokia Oyj ADR								30,690		429,967		30,690		429,967
Qualcomm Inc.								13,500		626,670		13,500		626,670
Rogers Communications Inc								5,040		138,751		5,040		138,751
Verizon Communications Inc.								25,920		804,557		25,920		804,557
						553,406				5,305,379				5,858,785

Total Communications						996,319				6,062,702				7,059,021

Consumer, Cyclical A84	(6.05	%)
Housewares	(0.35	%)
Newell Rubbermaid Inc.								20,880		290,650		20,880		290,650
Lodging	(0.31	%)
Starwood Hotels & Resorts Inc.								8,685		258,639		8,685		258,639

Auto Manufacturers (1.37%)	(0.31	%)
Ford Motor Co*				34,500		262,200						34,500		262,200

Retail (5.96%)	(5.08	%)
Bed Bath & Beyond Inc.								7,200		262,656		7,200		262,656
Best Buy Company, Inc.								15,300		555,084		15,300		555,084
CVS Caremark Corp.								18,000		675,360		18,000		675,360
Home Depot, Inc.								11,700		319,293		11,700		319,293
Limited Brands Inc.								8,100		120,852		8,100		120,852
McDonald's Corp				6,968		391,880						6,968		391,880
Ross Stores Inc				3,692		172,195						3,692		172,195
TJX Cos Inc				7,050		253,448						7,050		253,448
Lowe's Co.								12,060		259,290		12,060		259,290
Penney (J.C.)								9,630		289,285		9,630		289,285
Target Corp.				6,939		326,133		3,600		169,200		10,539		495,333
Wal-Mart								9,000		457,830		9,000		457,830
						1,143,656				3,108,850				4,252,506

Total Consumer, Cyclical						1,405,856				3,658,139				5,063,995


Consumer, Non-Cyclical	(21.05	%)

Agriculture (5.36%)	(1.66	%)
Altria Group Inc				22,500		411,300						22,500		411,300
Philip Morris International Inc				7,500		342,825		7,988		365,131		15,488		707,956
Reynolds American Inc				5,992		273,894						5,992		273,894
						1,028,019				365,131				1,393,150

Beverages (3.69%)	(3.26	%)
Coca-Cola				14,500		707,165		21,600		1,053,432		36,100		1,760,597
PepsiCo, Inc.								17,100		969,057		17,100		969,057
						707,165				2,022,489				2,729,654
Biotechnology	(3.47	%)
Amgen Inc.								5,400		322,812		5,400		322,812
Celgene Corp.								16,560		863,935		16,560		863,935
Facet Biotech Corp								2,628		26,385		2,628		26,385
Genzyme Corp.								10,800		601,668		10,800		601,668
Gilead Science Inc.								21,600		973,296		21,600		973,296
PDL BioPharma Inc								13,140		118,917		13,140		118,917
										2,907,013				2,907,013
Commercial Services (3.55%)	(0.81	%)
Lender Processing Services Inc				10,211		350,033						10,211		350,033
Moody's Corp				5,092		138,706						5,092		138,706
Western Union Co/The				10,609		191,386						10,609		191,386
						680,125								680,125

Cosmetics / Personal Care (1.10%)	(1.76	%)
Procter & Gamble Co/The			3,880	209,947	23,400	1,266,174	27,280	1,476,121

Food (2.21%)
Kraft Foods Inc			4,384	124,286			4,384	124,286
Safeway Inc			8,000	152,400			8,000	152,400
Sara Lee Corp			15,200	147,288			15,200	147,288
Supervalu Inc.					8,415	120,755	8,415	120,755
				423,974		120,755		544,729

Healthcare - Products (3.80%)	(2.21	%)
Baxter International Inc			12,811	729,202			12,811	729,202
Covidien PLC					4,185	165,600	4,185	165,600
Given Imaging Ltd.					33,300	393,273	33,300	393,273
Hologic Inc					16,200	266,652	16,200	266,652
Varian Medical Systems Inc					6,840	294,599	6,840	294,599
				729,202		1,120,124		1,849,326
Healthcare - Services (6.74%)	(2.12	%)
Aetna Inc			8,584	244,644			8,584	244,644
Davita Inc					4,523	233,884	4,523	233,884
Healthsouth Corp*			40,000	624,400			40,000	624,400
United Health Group Inc.					9,000	252,000	9,000	252,000
WellPoint Inc*			8,000	422,800			8,000	422,800
				1,291,844		485,884		1,777,728

Household Products / Wares (0.45%)	(0.1	%)
Fortune Brands Inc			2,146	85,432			2,146	85,432

Pharmaceuticals (2.94%)	(5	%)
Abbott Labs.					12,510	565,827	12,510	565,827
AmerisourceBergen Corp			13,812	294,334			13,812	294,334
Endo Pharmaceuticals Holdings Inc					10,305	232,584	10,305	232,584
Lilly (Eli) & Co.					37,080	1,240,697	37,080	1,240,697
Merck & Co Inc			1,200	38,916	34,200	1,109,106	35,400	1,148,022
Pfizer Inc			13,900	232,130			13,900	232,130
Wyeth					9,900	473,715	9,900	473,715
				565,380		3,621,929		4,187,309

Total Consumer, Non-Cyclical				5,721,088		11,909,501		17,630,589

Energy (9.65%)	(12.19	%)

Oil & Gas (9.15%)	(9.25	%)
Anadarko Petroleum Corp.					9,540	504,380	9,540	504,380
Apache Corp			1,126	95,654			1,126	95,654
BP plc ADR					10,530	541,769	10,530	541,769
Chevron Corp			3,840	268,570	14,782	1,033,853	18,622	1,302,423
ConocoPhillips			5,348	240,820			5,348	240,820
Devon Energy Corp			3,852	236,436			3,852	236,436
ENSCO International Inc			4,170	153,873			4,170	153,873
Exxon Mobil Corp			7,736	534,944	40,500	2,800,575	48,236	3,335,519
Noble Corp					11,700	409,851	11,700	409,851
Royal Dutch Shell PLC					9,000	499,230	9,000	499,230
Transocean Ltd					2,700	204,768	2,700	204,768
Valero Energy Corp			12,000	224,880			12,000	224,880
				1,755,177		5,994,425		7,749,602

Oil & Gas Services (0.50%)	(2.48	%)
Baker Hughes			2,780	95,771	12,600	434,070	15,380	529,841
Oceaneering Int'l Inc.					6,660	347,452	6,660	347,452
Schlumberger Ltd.					15,300	859,860	15,300	859,860
Weatherford International LTD					16,920	337,554	16,920	337,554
				95,771		1,978,936		2,074,707
Pipelines	(0.45	%)
El Paso Corp.					41,220	380,461	41,220	380,461

Total Energy				1,850,948		8,353,822		10,204,770

Financial (14.24%)	(10.98	%)

Banks (5.30%)	(6.05	%)
Bank of America Corp					17,367	305,486	17,367	305,486
Citigroup Inc.					34,700	173,500	34,700	173,500
Goldman Sachs Group					3,600	595,656	3,600	595,656
JPMorgan Chase & Co.			11,500	499,790	13,298	577,931	24,798	1,077,721
Morgan Stanley, Dean Witter, Discover					13,500	390,960	13,500	390,960
PNC Financial Services Group					16,200	689,958	16,200	689,958
State Street Corp.					6,300	330,624	6,300	330,624
U.S. Bancorp			10,300	232,986	18,000	407,160	28,300	640,146
Wells Fargo Co.			10,282	282,961	21,131	581,525	31,413	864,486
				1,015,737		4,052,800		5,068,537

Diversified Financial Services (5.17%)	(2.05	%)
American Express					4,500	152,190	4,500	152,190
Charles Schwab Corp.					26,460	477,868	26,460	477,868
Discover Financial Services					6,750	92,813	6,750	92,813
Franklin Resources Inc			4,100	382,653			4,100	382,653
Morgan Stanley			21,000	608,160			21,000	608,160
				990,813		722,870		1,713,683

Insurance (3.77%)	(2.88	%)
Allstate Corp					5,670	166,641	5,670	166,641
Arthur J Gallagher & Co			7,700	183,029			7,700	183,029
Aspen Insurance Holdings Ltd					9,315	236,601	9,315	236,601

Brown & Brown Inc.					11,160	221,749	11,160	221,749
Hartford Financial Svc. Gp.					7,560	179,323	7,560	179,323
Principal Financial Group					8,100	230,040	8,100	230,040
Prudential Financial, Inc.					7,650	386,937	7,650	386,937
Renaissance Re Holdings Ltd.					4,860	264,627	4,860	264,627
MetLife Inc			7,328	276,705			7,328	276,705
StanCorp Financial Group Inc			6,950	263,058			6,950	263,058
				722,792		1,685,919		2,408,711

Total Financial				2,729,342		6,461,589		9,190,931

Industrial (7.62%)	(12.88	%)
Aerospace/Defense
Boeing Company					9,000	447,030	9,000	447,030
Goodrich Corp.					18,000	992,880	18,000	992,880
Northrop Grumman Corp.					3,600	175,716	3,600	175,716
Rockwell Collins Inc.					11,700	538,668	11,700	538,668
United Technologies					13,500	801,360	13,500	801,360
						2,955,654		2,955,654

Building Materials	(0.3	%)
Cemex SAB de CV ADR					18,720	248,602	18,720	248,602

Electronics	(0.58	%)
Agilent Technologies Inc.					8,370	214,942	8,370	214,942
Thermo Fisher Scientific Inc					5,965	269,678	5,965	269,678
						484,619		484,619
Hand/Machine Tools	(0.88	%)
Stanley Black & Decker Inc					18,000	736,740	18,000	736,740

Machinery - Construction & Mining (4.09%)
Caterpillar Inc			17,292	783,501	6,750	305,843	24,042	1,089,344

Metal Fabricate / Hardware (0.71%)	(0.16	%)
Worthington Industries Inc			10,400	136,968			10,400	136,968


Miscellaneous Manufacturing (2.22%)	(4.76	%)
3M Co			3,212	231,585	9,000	648,900	12,212	880,485
Barnes Group Inc					8,640	126,922	8,640	126,922
Danaher Corp.					18,400	1,117,064	18,400	1,117,064
General Electric Co.					75,825	1,053,968	75,825	1,053,968
Honeywell International, Inc.					13,050	479,718	13,050	479,718
ITT Corp			2,634	131,911			2,634	131,911
Leggett & Platt Inc			3,325	60,681			3,325	60,681
Tyco International Ltd.					4,185	132,623	4,185	132,623
				424,177		3,559,194		3,983,371

Sealed Air Corp.	(0.14	%)			10,395	196,569	10,395	196,569


Transportation (0.60)%	(12.88	%)
Fedex Corp.					4,230	290,643	4,230	290,643
United Parcel Services Cl B					10,260	548,500	10,260	548,500
Tidewater Inc			2,680	115,696			2,680	115,696
				115,696		839,143		954,839

Total Industrial				1,460,342		9,326,363		10,786,705

Technology (8.51%)	(12.84	%)
Computers (2.67%)	(5.14	%)
Apple Inc					6,475	1,089,160	6,475	1,089,160
Dell Inc*			12,249	193,902			12,249	193,902
EMC Corp.					27,720	440,748	27,720	440,748
Hewlett-Packard Co.			7,050	316,475	18,450	828,221	25,500	1,144,696
International Business Machines, Inc.					9,360	1,104,948	9,360	1,104,948
Research In Motion Limited					4,500	328,770	4,500	328,770
				510,377		3,791,846		4,302,223
Semiconductors (3.48%)	(3.7	%)
Analog Devices, Inc.					14,040	396,630	14,040	396,630
Intel Corp.			32,863	667,776	45,000	914,400	77,863	1,582,176
KLA-Tencor Corp.					10,440	325,728	10,440	325,728
Linear Technology Corp.					13,680	363,478	13,680	363,478
Marvell Technology Group					13,050	199,013	13,050	199,013
Maxim Integrated Products, Inc.					12,240	229,867	12,240	229,867
				667,776		2,429,115		3,096,891

Software	(12.84	%)
Intuit Inc.					22,320	619,826	22,320	619,826
Microsoft Corp			18,373	452,894	39,960	985,014	58,333	1,437,908
Oracle Corp.					59,130	1,293,764	59,130	1,293,764
				452,894		2,898,605		3,351,499
Total Technology				1,631,047		9,119,566		10,750,613

Utilities (4.65%)	(2.9	%)
Electric	(2.63	%)
Allegheny Energy Inc.					6,255	165,195	6,255	165,195
Ameren Corp.					8,100	218,457	8,100	218,457
Consolidated Edison Inc			7,700	309,463			7,700	309,463
Dominion Resources					9,000	297,720	9,000	297,720
Duke Energy Corp			9,200	142,508			9,200	142,508
Entergy Corp			2,146	169,534			2,146	169,534
Exelon Corp			3,846	192,377	4,500	225,090	8,346	417,467
FPL Group, Inc.					3,600	202,248	3,600	202,248
Progress Energy Inc			1,979	78,229			1,979	78,229
Wisconsin Energy Corp.					4,500	204,615	4,500	204,615
				892,111		1,313,325		2,205,436

Gas	(0.27	%)
Sempra Energy							4,500	225,765	4,500	225,765

Total Utilities					892,111			1,539,090		2,431,201

Exchange traded Funds
Powershares QQQ							100,000	4,003,000		4,003,000
SPDR Trust Series 1							20,000	2,049,200		2,049,200
Total Exchange traded funds								6,050,031		6,050,031

Total Common Stock (Cost $86,929,166)					17,404,074			63,877,730		81,281,804


Short-Term Investments	(2.34	%)
SM&R Money Market Fund							557,609	557,609		557,609

United States Treasury Bills (7.3%)			Par Value							199,949
United States Treasury Bill 10/22/2009 (b)				200,000	199,949					1,199,678
United States Treasury Bill 11/19/2009				1,200,000	1,199,678					1,399,627
Total United States Treasury Bills					1,399,627					1,399,627

Total Short-Term Investments (Cost $1,957,236)					1,399,627		557,609	557,609		1,957,236

Total Investments (Cost $88,886,369) (a) (98.08%)	(99.4	%)			18,803,701			64,435,339		83,239,040
Other Net Assets (1.92%)	(0.6	%)			367,529			133,460		500,989
Net Assets (100.00%)					19,171,230			64,568,799		83,740,029


(a) Aggregate cost for federal income tax purpose is $88,886,402. At August 31, 2009, unrealized appreciation (depreciation) of securities is as follows:

Unrealized appreciation					12,477,693					12,477,693
Unrealized depreciation					(17,567,413	)				-17,567,413
Net unrealized appreciation (depreciation)					(5,089,720	)				-5,089,720

(b) At August 31, 2009, certain United States Treasury Bills with a market value of $199,949 were pledged to cover margin requirements for futures contracts.

STATEMENT OF ASSETS AND LIABILITIES August 31, 2009

	SM&R GROWTH FUND			CIT EQUITY INCOME FUND			Pro Forma Adjustment			Pro Forma Combined

ASSETS
Investments in unaffiliated securities, at cost	$	70,175,224		$	17,595,927		$	-		$	87,771,151
Investment in affiliated money market fund at cost		557,609			0			-			557,609
Total cost of investments		70,732,833			17,595,927			0			88,328,760

Investments in unaffiliated securities, at value	$	63,877,730		$	18,803,701		$	-		$	82,681,431
Investment in affiliated money market fund, at value		557,609			0			-			557,609
Total market value of investments		64,435,339			18,803,701			0			83,239,040

Cash		0			114,193			0			114,193
Prepaid expenses		43,894			0			0			43,894
Receivable for:
Capital stock sold		5,534			25,522			0			31,056
Dividends		152,855			44,480			0			197,335
Investments sold		0			221,674			0			221,674
Expense reimbursement		7,715			0			0			7,715
Other assets		93,408			0			0			93,408
TOTAL ASSETS		64,738,745			19,209,570			0			83,948,315
LIABILITIES
Capital stock reacquired		12,744			20,129			0			32,873
Payable to investment adviser for fund expenses		53,245			8,061			0			61,306
Accrued:											-
Investment advisory fees		40,805			0			0			40,805
Administrative service fees		13,602			1,333			0			14,935
Shareholder service fees - K shares		0			1,041			0			1,041
Distribution fees		3,147			857			0			4,004
Other liabilities		34,045			6,919			12,358			53,322
TOTAL LIABILITIES		157,588			38,340			12,358			208,286
NET ASSETS	$	64,581,157		$	19,171,230		$	(12,358	)	$	83,740,029

NET ASSETS ARE COMPRISED OF THE FOLLOWING:
Capital (par value and additional paid-in)		75,911,404			19,842,421			0		$	95,753,825
Undistributed net investment income		130,022			12,157			(12,358	)	$	129,821
Accumulated net realized gain (loss) on investments		(5,162,775	)		(1,891,122	)		0		$	(7,053,897	)
Net unrealized appreciation (depreciation) of investments		(6,297,494	)		1,207,774			0		$	(5,089,720	)
NET ASSETS	$	64,581,157		$	19,171,230		$	(12,358	)	$	83,740,029

NET ASSETS:
Direct Shares		0			14,723,793			61,068,458			75,792,251
Class A		2,715,730			0			(401	)		2,715,329
Class B		785,784			0			(116	)		785,668
Class K		0			4,447,437			(656	)		4,446,781
Class T		61,079,643			0			(61,079,643	)		0
TOTAL NET ASSETS	$	64,581,157		$	19,171,230		$	(12,358	)	$	83,740,029

CAPITAL STOCK:
Direct shares (no par value):
Authorized			unlimited				unlimited
Outstanding				1,120,958	4,649,290			5,770,248
Class A ($.01 par value per share):
Authorized		50,000,000					unlimited
Outstanding		899,420						206,646
Class B ($.01 par value per share):
Authorized		25,000,000					unlimited
Outstanding		266,753						59,792
Class K (no par value):
Authorized			unlimited				unlimited
Outstanding				340,350				340,350
Class T ($.01 par value per share):
Authorized		95,000,000
Outstanding		19,783,519			(19,738,519	)		-
Direct Shares:
Net asset value and offering price per share			$	13.14			$	13.14
Class K:
Net asset value and offering price per share			$	13.07			$	13.07
Class A:
Net asset value and redemption price per share	$	3.02					$	13.14
Offering price per share:
(Net assets value of $3.02 / 95%)	$	3.18					$	13.14
Class B:
Net asset value and offering price per share	$	2.95					$	13.14
Class T:
Net asset value and redemption price per share	$	3.09						N/A
Offering price per share:
(Net assets value of $3.09 / 94.25%)	$	3.28						N/A

See notes to financial statements.

STATEMENT OF OPERATIONS	Year Ended August 31, 2009

	SM&R GROWTH FUND			CIT EQUITY INCOME FUND			Pro Forma Adjustment			Pro Forma Combined

INVESTMENT INCOME
Dividends	$	1,534,106		$	462,656					$	1,996,762
Interest		14,255			2,507						16,762
Interest from affiliated money market fund		352			63						415
TOTAL INVESTMENT INCOME		1,548,713			465,226						2,013,939
EXPENSES
Investment advisory fees		451,297			83,253			(150,432	)		384,118
Administrative & transfer agent		150,432			37,610			(120,476	)		67,566
Professional & accounitng fees		20,879			16,522			(12,329	)		25,072
Custody and transaction fees		15,347			1,958			(9,802	)		7,503
Directors' fees and expenses		9,973			3,602			(10,325	)		3,250
Compliance & Legal expenses		12,874			11,725			14,784			39,383
Qualification fees
Direct shares		0			1,574			1,910			3,483
Class A		4,838						0			4,838
Class B		4,662						0			4,662
Class K		0			1,574			1,910			3,483
Class T		16,127						(16,127	)		0
Shareholder reporting expenses
Direct shares					1,434			502			1,936
Class A		1,813						123			1,936
Class B		588						1,348			1,936
Class K					1,434			502			1,936
Class T		38,474						(38,474	)		0
Distribution fees
Class A		6,639									6,639
Class B		6,402									6,402
Class K					18,134						18,134
Insurance expenses		32,128			814			(32,139	)		803
Other Expenses		410						12,358			12,768
TOTAL EXPENSES		772,883			179,633			(356,668	)		595,848
LESS EXPENSES REIMBURSED		(18,892	)		0			18,892			0
NET EXPENSES		753,991			179,633			(337,776	)		595,848
INVESTMENT INCOME - NET		794,722			285,593			337,776			1,418,091
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments		(5,162,692	)		(1,287,810	)					(6,450,502	)
Net realized loss on futures contracts					(103,978	)					(103,978	)
Change in unrealized depreciation of investments		(11,795,096	)		(2,038,462	)					(13,833,558	)
NET LOSS ON INVESTMENTS		(16,957,788	)		(3,430,250	)					(20,388,038	)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	(16,163,066	)	$	(3,144,657	)		337,776		$	(18,969,947	)

PRO FORMA FOOTNOTES REGARDING THE REORGANIZATION OF SM&R GROWTH FUND INTO CALIFORNIA INVESTMENT TRUST’S EQUITY INCOME FUND AS OF AUGUST 31, 2009 (UNAUDITED)

NOTE 1 — Basis of Combination:

The Board of Trustees of SM&R Funds (the “Trust”) on behalf of its portfolio, SM&R Growth Fund (“Growth”), at a meeting held on February 18, 2010 approved the Fund’s entering into an Agreement and Plan of Reorganization (the “Plan”) pursuant to which, the Growth will transfer all of its assets, subject to its liabilities, to the California Investment Trust Equity Income Fund, (the “Equity Income” and together with Growth (the “Funds”) in exchange for a number of shares of Equity Income equal in value to the net assets of the Funds (the “Reorganization”). If the Reorganization is consummated, shares of Equity Income then will be distributed to the Growth shareholders on a prorata basis in liquidation of the Funds. The Reorganization will be accounted for as a tax-free merger of investment companies. The unaudited pro forma condensed combined schedule of investments and condensed combined statement of assets and liabilities reflect the financial position of the Funds at August 31, 2009 as if the Reorganization had occurred on that date. The unaudited pro forma condensed combined statement of operations reflects the results of operations of the Funds for the twelve months ended August 31, 2009 as if the Reorganization had occurred on September 1, 2008. These statements have been derived from the books and records of the Funds utilized in calculating daily net asset value at the dates indicated above in conformity with the accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. Actual results may differ from these estimates. As of August 31, 2009, all the securities held by the Growth comply with the compliance guidelines and/or investment restrictions of Equity Income. The historical cost of investment securities will be carried forward to the surviving entity. The Fund’s fiscal year ends are August 31. The accompanying pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of the Funds included or incorporated by reference in their respective Statements of Additional Information. Such pro forma condensed combined financial statements are presented for information purposes only and may not necessarily be representative of what the actual combined financial statements would have been had the Reorganization occurred on August 31, 2009 or September 1, 2008, as applicable. Following the Reorganization, Equity Income will be the surviving fund.

Costs with respect to the Reorganization will be borne by CCM Partners, LP and its affiliates, with the exception of certain legal fees of counsel to the board relating to certain advice provided to the board of California Investment Trust, including for the creation of new share classes, currently estimated at $40,000.

NOTE 2 — Growth Fund and Equity Income Valuation:

NOTE 3 — Capital Shares:

The pro forma net asset value per share assumes the issuance of shares of Equity Income that would have been issued at August 31, 2009 in connection with the proposed Reorganization. The number of shares of each class assumed to be issued is equal to the net asset value of the shares of Growth of that class, as of August 31, 2009, divided by the net asset value per share of the corresponding class of shares of Equity Income as of August 31, 2009. The pro forma number of shares outstanding, by class, for Equity Income consists of the following at August 31, 2009.

Class of Shares	Shares of Equity Income Fund Pre-Combination		Additional Shares Assumed Issued in Reorganization			Total Outstanding Shares Post-Combination
Direct Shares		1,120,958		4,649,290	(b)		5,770,248
Class A		0		206,646			206,646
Class B		0		59,792			59,792
Class K		340,350		0			340,350

(a) No Direct Shares or Class K shares outstanding
(b) Class T shares are being merged into the Direct Shares

NOTE 4 — Pro Forma Operating Expenses:

The pro forma condensed combined statement of operations for the twelve month period ended August 31, 2009, as adjusted, giving effect to the Reorganization reflects changes in expenses of Equity Income as if the Reorganization was consummated on September 1, 2008. Although it is anticipated that there will be an elimination of certain duplicative expenses because of the Reorganization, the actual amount of such expenses cannot be determined because it is not possible to predict the cost of future operations.

NOTE 5 — Federal Income Taxes:

The Growth and the Equity Income has elected to be taxed as a “regulated investment company” under the Internal Revenue Code of 1986, as amended (the “Code”). If the Reorganization is consummated,

unless it determines such qualification is no longer in the best interest of shareholders, Equity Income will seek to continue to qualify as a regulated investment company by complying with the provisions applicable to certain investment companies, as defined in applicable sections of the Code, and to make distributions of taxable income sufficient to relieve it from all, or substantially all, Federal income taxes. In addition, Growth will make any required income or capital gain distributions prior to consummation of this Reorganization, in accordance with provisions of the Code relating to tax-free reorganizations of investment companies. Equity Income will succeed to the capital loss carryforwards of the Growth, which will be subject to the limitations described below. Growth has capital loss carryforwards that, in the absence of the Reorganization, would generally be available to offset their capital gains. As a result of the Reorganization, however, Growth will undergo an “ownership change” for tax purposes, and accordingly, Equity Income’s use of Growth’s capital loss carryforwards will be limited by the operation of the tax loss limitation rules of the Code. The Code generally limits the amount of pre-ownership change losses that may be used to offset post-ownership change gains to a specific annual loss limitation amount (generally the product of the net asset value of Growth’s immediately prior to the ownership change and a rate established by the IRS for the month of the Closing Date (for example, such rate is 4.03% for March, 2010)). Subject to certain limitations, any unused portion of these losses may be available in subsequent years, subject to the overall eight-year capital loss carryforward limit, as measured from the date of recognition. In addition, for five years after the Closing Date of the Reorganization, the Combined Fund generally will not be allowed to offset realized gains attributable to certain pre-Reorganization built-in gains of one Fund, if any, with capital loss carryforwards attributable to the other Fund. However, unexpired pre-ownership change losses of Growth could be used to offset realized built-in gains of Growth. As of August 31st, 2009, the growth fund had capital loss carryforwards of $5,196,609 which expire in 2017.

SM&R Equity Income Fund and Caltrust Equity Income Fund

8/31/2009
												Pro Forma Equity Income
	Combined % of Net			CIT Equity Income Fund				SM&R Equity Income Fund				Combined
	Assets			Shares		Value		Shares		Value		Shares		Value
Common Stocks
Basic Materials		3.03	%
Chemicals		2.16	%
Du Pont (E.I.) De Nemours & Co.									6,100		194,773		6,100		194,773
PPG Industries, Inc.									7,200		398,880		7,200		398,880
Praxair, Inc.					4,592		351,839		2,700		206,874		7,292		558,713
Sensient Technologies Corp.									16,000		417,120		16,000		417,120
Sherwin-Williams Co/					1,746		105,109						1,746		105,109
							456,948				1,217,647				1,674,595

Forest Products&Paper		0.30	%
Potlatch Corp.									8,000		232,800		8,000		232,800
											232,800				232,800

Iron/Steel		0.23	%
United States Steel					4,000		175,120						4,000		175,120
							175,120								175,120

Mining		0.34	%
Alcoa Inc.					7,050		84,953		15,000		180,750		22,050		265,703
							84,953				180,750				265,703

Total Basic Materials							717,021				1,631,197				2,348,218

Communications		6.88	%
Media		1.18	%
CBS Corp.									17,900		185,265		17,900		185,265
McGraw-Hill Cos Inc					13,178		442,913						13,178		442,913
Walt Disney Co.									11,100		289,044		11,100		289,044
							442,913				474,309				917,222

Telecommunications		5.70	%
AT&T Inc.					21,244		553,406		48,000		1,250,400		69,244		1,803,806
Frontier Communications Corp									40,000		284,400		40,000		284,400
Harris Corp.									12,750		442,808		12,750		442,808
Nokia Oyj ADR									8,000		112,080		8,000		112,080
Qualcomm Inc.									5,075		235,582		5,075		235,582
Rogers Communications Inc									5,425		149,350		5,425		149,350
Verizon Communications Inc.									34,000		1,055,360		34,000		1,055,360
Windstream Corporation									39,000		334,230		39,000		334,230
							553,406				3,864,209				4,417,615

Total Communications							996,319				4,338,518				5,334,837

Consumer, Cyclical		7.00	%
Auto Manufacturers		0.34	%
Ford Motor Co					34,500		262,200						34,500		262,200
							262,200								262,200

Housewares		0.36	%
Newell Rubbermaid Inc.									20,000		278,400		20,000		278,400
											278,400				278,400

Lodging		0.69	%
Starwood Hotels & Resorts Inc.									18,000		536,040		18,000		536,040
											536,040				536,040

Retail		5.61	%
Foot Locker Inc.									15,400		164,164		15,400		164,164
Limited Brands Inc.									35,000		522,200		35,000		522,200
McDonald's Corp.					6,968		391,880		10,000		562,400		16,968		954,280
Penney (J.C.)									16,800		504,672		16,800		504,672
Ross Stores Inc					3,692		172,195						3,692		172,195
Target Corp.					6,939		326,133		3,500		164,500		10,439		490,633
TJX Companies Inc.					7,050		253,448		13,300		478,135		20,350		731,583
Wal-Mart									16,000		813,920		16,000		813,920
							1,143,656				3,209,991				4,353,647

Total Consumer, Cyclical							1,405,856				4,024,431				5,430,287

Consumer, Non-Cyclical		25.22	%
Agriculture		4.52	%
Altria Group Inc					22,500		411,300						22,500		411,300

Philip Morris International Inc			7,500	342,825	8,375	382,821	15,875	725,646
Reynolds American In			5,992	273,894			5,992	273,894
Beverages
Coca-Cola			14,500	707,165	14,500	707,165	29,000	1,414,330
PepsiCo, Inc.					12,000	680,040	12,000	680,040
				1,735,184		1,770,026		3,505,211

Biotechnology	0.58	%
Genzyme Corp.					4,000	222,840	4,000	222,840
Gilead Science Inc.					5,000	225,300	5,000	225,300
						448,140		448,140

Commercial Services	0.88	%
Lender Processing			10,211	350,033			10,211	350,033
Moody's Corp			5,092	138,706			5,092	138,706
Western Union Co			10,609	191,386			10,609	191,386
				680,126				680,126

Cosmetics/Personal Care	3.35	%
Alberto-Culver Co					10,575	279,074	10,575	279,074
Avon Products					13,000	414,310	13,000	414,310
Colgate-Palmolive Co.					8,675	630,673	8,675	630,673
Procter & Gamble, Inc.			3,880	209,947	19,650	1,063,262	23,530	1,273,208
				209,947		2,387,318		2,597,265

Food	3.15	%
ConAgra Foods, Inc.					31,000	636,430	31,000	636,430
Heinz (H.J.)					14,000	539,000	14,000	539,000
Kraft Foods Inc.			4,384	124,286	4,844	137,327	9,228	261,614
McCormick & Co.					16,000	521,120	16,000	521,120
Safeway Inc			8,000	152,400			8,000	152,400
Sara Lee Corp			15,200	147,288			15,200	147,288
Supervalu Inc.					13,000	186,550	13,000	186,550
				423,974		2,020,427		2,444,402

Healthcare-Products	3.16	%
Baxter International			12,811	729,202			12,811	729,202
Covidien PLC					3,750	148,388	3,750	148,388
Johnson & Johnson					26,000	1,571,440	26,000	1,571,440
				729,202		1,719,828		2,449,030

Healthcare-Services	1.93	%
Aetna Inc			8,584	244,644			8,584	244,644
Davita Inc					4,000	206,840	4,000	206,840
Healthsouth Corp.			40,000	624,400			40,000	624,400
WellPoint Inc (New)			8,000	422,800			8,000	422,800
				1,291,844		206,840		1,498,684

Household Products/ Wares	1.54	%
Fortune Brands Inc			2,146	85,432			2,146	85,432
Kimberly Clark Corp.					11,000	665,060	11,000	665,060
Tupperware Brands Corp					12,000	443,880	12,000	443,880
				85,432		1,108,940		1,194,372

Pharmaceuticals	6.11	%
Abbott Labs.					12,000	542,760	12,000	542,760
AmerisourceBergen Co			13,812	294,334			13,812	294,334
Lilly (Eli) & Co.					20,350	680,911	20,350	680,911
Merck & Co., Inc.			1,200	38,916	23,000	745,890	24,200	784,806
Pfizer, Inc.			13,900	232,130	71,000	1,185,700	84,900	1,417,830
Wyeth					21,325	1,020,401	21,325	1,020,401
				565,380		4,175,662		4,741,042

Total Consumer, Non-Cyclical				5,721,089		13,837,182		19,558,271

Energy	12.16	%
Oil&Gas	9.02	%
Anadarko Petroleum Corp.					12,000	634,440	12,000	634,440
Apache Corp			1,126	95,654			1,126	95,654
BP plc ADR					15,000	771,750	15,000	771,750
Chevron Corp.			3,840	268,570	13,101	916,284	16,941	1,184,854
ConocoPhillips			5,348	240,820			5,348	240,820
Devon Energy Corp			3,852	236,436			3,852	236,436
ENSCO International			4,170	153,873			4,170	153,873
Exxon Mobil Corp.			7,736	534,944	31,000	2,143,650	38,736	2,678,594
Royal Dutch Shell PLC					14,000	776,580	14,000	776,580
Valero Energy Corp			12,000	224,880			12,000	224,880
				1,755,177		5,242,704		6,997,881

Oil & Gas Services	1.30	%
Baker Hughes Inc			2,780	95,771			2,780	95,771
Schlumberger Ltd.					9,500	533,900	9,500	533,900
Weatherford International LTD					19,000	379,050	19,000	379,050
				95,771		912,950		1,008,721

Pipelines	1.84	%
Boardwalk Pipeline Partners L.P.					14,500	339,445	14,500	339,445
Enterprise Products Partners L.P.					12,800	345,600	12,800	345,600
Plains All American Pipeline L.P.					8,000	379,520	8,000	379,520
Spectra Energy Corp					19,300	363,226	19,300	363,226
						1,427,791		1,427,791

Total Energy				1,850,948		7,583,445		9,434,393

Financial	21.08	%
Banks	8.61	%
Bank of America Corp					47,000	826,730	47,000	826,730
Citigroup Inc.					68,400	342,000	68,400	342,000
Comerica, Inc.					18,000	480,060	18,000	480,060
JPMorgan Chase & Co.			11,500	499,790	30,000	1,303,800	41,500	1,803,590
Keycorp					17,100	113,886	17,100	113,886
Morgan Stanley, Dean Witter, Discover					13,250	383,720	13,250	383,720
PNC Financial Services Group					13,219	562,997	13,219	562,997
Regions Financial Corp.					17,782	104,203	17,782	104,203
State Street Corp.					6,400	335,872	6,400	335,872
Trustco Bank Corp NY					5,000	31,100	5,000	31,100
U.S. Bancorp			10,300	232,986	23,000	520,260	33,300	753,246
Wells Fargo Co.			10,282	282,961	24,000	660,480	34,282	943,441
				1,015,737		5,665,108		6,680,844

Diversified Finan Serv	1.96	%
Charles Schwab Corp.					29,500	532,770	29,500	532,770
Franklin Resources I			4,100	382,653			4,100	382,653
Morgan Stanley			21,000	608,160			21,000	608,160
				990,813		532,770		1,523,583

Insurance	5.99	%
Allstate Corp					8,000	235,120	8,000	235,120
Arthur J. Gallagher & Co.			7,700	183,029	11,900	282,863	19,600	465,892
Aspen Insurance Holdings Ltd					20,825	528,955	20,825	528,955
Hartford Financial Svc. Gp.					5,950	141,134	5,950	141,134
Marsh & McLennan Companies, Inc.					12,350	290,719	12,350	290,719
Metlife Inc			7,328	276,705			7,328	276,705
Principal Financial Group					17,050	484,220	17,050	484,220
Prudential Financial, Inc.					12,225	618,341	12,225	618,341
Renaissance Re Holdings Ltd.					8,000	435,600	8,000	435,600
Stancorp Financial G			6,950	263,058			6,950	263,058
The Travelers Companies, Inc.					18,000	907,560	18,000	907,560
				722,792		3,924,512		4,647,303

Investment Companies	0.07	%
Allied Capital Corp.					18,000	54,000	18,000	54,000
						54,000		54,000

REITS	4.22	%
Avalonbay Communities, Inc.					3,301	212,683	3,301	212,683
Boston Properties Inc					3,700	224,146	3,700	224,146
BRE Properties					8,600	243,122	8,600	243,122
Duke Realty Corp.					12,000	138,240	12,000	138,240
HCP Inc					7,000	199,360	7,000	199,360
Health Care REIT, Inc.					4,500	192,195	4,500	192,195
Hospitality Properties Trust					11,400	207,708	11,400	207,708
Liberty Property Trust					11,300	370,301	11,300	370,301
Mack-Cali Realty Corp.					12,000	384,360	12,000	384,360
National Retail Properties Inc.					9,000	184,680	9,000	184,680
Prologis Trust					6,000	66,720	6,000	66,720
Simon Property Group, Inc.					4,130	262,751	4,130	262,751
Sovran Self Storage					7,000	205,730	7,000	205,730
Weingarten Realty Investors					19,000	377,340	19,000	377,340
						3,269,336		3,269,336

Savings&Loans	0.22	%
New York Community Bancorp					16,000	170,240	16,000	170,240
						170,240		170,240

Total Financial				2,729,341		13,615,965		16,345,307

Industrial	8.64	%
Aerospace/Defense	1.66	%
Boeing Company					6,500	322,855	6,500	322,855
Northrop Grumman Corp.					4,000	195,240	4,000	195,240
United Technologies					13,000	771,680	13,000	771,680
						1,289,775		1,289,775

Electronics	0.28	%
Tyco Electronics Ltd					9,450	215,649	9,450	215,649
						215,649		215,649

Hand/Machine Tools	0.84	%
Stanley Black & Decker Inc					16,000	654,880	16,000	654,880
						654,880		654,880

Machinery- Constr&Mining	1.01	%
Caterpillar Inc			17,292	783,501			17,292	783,501
				783,501				783,501

Metal Fabricate/ Hardware	0.18	%
Worthington Industri			10,400	136,968			10,400	136,968
				136,968				136,968

Miscellaneous Manufactur	3.40	%
3M Co.			3,212	231,585	10,200	735,420	13,412	967,005
Barnes Group Inc					10,500	154,245	10,500	154,245
General Electric Co.					86,500	1,202,350	86,500	1,202,350
ITT Corp			2,634	131,911			2,634	131,911
Leggett & Platt Inc			3,325	60,681			3,325	60,681
Tyco International Ltd.					3,750	118,838	3,750	118,838
				424,177		2,210,853		2,635,030

Transportation	1.27	%
Burlington Northern, Inc.					3,500	290,570	3,500	290,570
Seaspan Corp					25,000	169,250	25,000	169,250
Tidewater Inc			2,680	115,696			2,680	115,696
United Parcel Services Cl B					7,700	411,642	7,700	411,642
				115,696		871,462		987,158

Total Industrial				1,460,341		5,242,619		6,702,960

Technology	6.86	%
Computers	2.20	%
Dell Inc			12,249	193,902			12,249	193,902
Diebold Inc					8,250	248,903	8,250	248,903
Hewlett-Packard Co			7,050	316,475			7,050	316,475
International Business Machines, Inc.					8,000	944,400	8,000	944,400
				510,376		1,193,303		1,703,679

Office/Business Equip	0.34	%
Pitney Bowes Inc.					11,925	266,524	11,925	266,524
						266,524		266,524

Semiconductors	2.37	%
Intel Corp.			32,863	667,776	43,100	875,792	75,963	1,543,568
Linear Technology Corp.					11,000	292,270	11,000	292,270
				667,776		1,168,062		1,835,838

Software	1.95	%
Microsoft Corp			18,373	452,894	43,000	1,059,950	61,373	1,512,844
				452,894		1,059,950		1,512,844

Total Technology				1,631,047		3,687,838		5,318,885

Utilities	5.97	%
Electric	5.00	%
Allegheny Energy Inc.					5,000	132,050	5,000	132,050
Ameren Corp.					10,900	293,973	10,900	293,973
Consolidated Edison			7,700	309,463	11,000	442,090	18,700	751,553
DTE Energy Co.					8,000	278,240	8,000	278,240
Duke Energy Corp.			9,200	142,508	33,000	511,170	42,200	653,678
Entergy Corp			2,146	169,534			2,146	169,534
Exelon Corp			3,846	192,377			3,846	192,377
FPL Group, Inc.					4,550	255,619	4,550	255,619
Pinnacle West Capital					10,000	329,100	10,000	329,100
PPL Corp.					3,950	116,130	3,950	116,130
Progress Energy, Inc.			1,979	78,230	8,000	316,240	9,979	394,470

Southern Co.								10,000	312,000	10,000	312,000
						892,112			2,986,612		3,878,724

Gas	0.97	%
Nicor								7,000	253,540	7,000	253,540
Nisource Inc.								27,000	356,670	27,000	356,670
Sempra Energy								2,875	144,239	2,875	144,239
									754,449		754,449

Total Utilities						892,112			3,741,061		4,633,173

Total Common Stock	96.84	%	(Cost $82,483,344)			17,404,074			57,702,256		75,106,329

Short-Term Investments	2.46	%

U.S. Treasury Bills	1.80	%	PAR
U.S. Treasury Bill 10/22/2009 (b)				200,000		199,949				200,000	199,949
U.S. Treasury Bill 11/19/2009				1,200,000		1,199,678				1,200,000	1,199,678
						1,399,627					1,399,627

Money Market Fund	0.66	%
SM&R Money Market Fund								512,017	512,017	512,017	512,017
									512,017		512,017

Total Short-Term Investments			(Cost $1,911,611)			1,399,627			512,017		1,911,644



Total Investments	99.31	%	(Cost $84,394,955)(a)			18,803,701			58,214,272		77,017,973


Other Net Assets	0.69	%				367,529			170,073		537,601


Net Assets	100.00	%				19,171,230			58,384,345		77,555,574


(a) Aggregate cost for federal income tax purpose is
$84,394,955. At August 31, 2009, unrealized
appreciation (depreciation) of securities is as follows:

Unrealized appreciation					$	10,949,306
Unrealized depreciation					$	(18,326,288	)
Net unrealized apppreciation					$	(7,376,982	)

(b) At August 31, 2009, certain U.S. Treasury Bills
with a market value of $199,949 were pledged to cover margin
requirements for futures contracts.

STATEMENT OF ASSETS AND LIABILITIES	August 31, 2009

	SM&R EQUITY INCOME FUND			CIT EQUITY INCOME FUND			Pro Forma Adjustment			Pro Forma Combined

ASSETS
Investments in unaffiliated securities, at cost	$	66,287,011		$	17,595,927		$	-		$	83,882,938
Investment in affiliated money market fund at cost		512,017			0			-			512,017
Total investments, cost		66,799,028			17,595,927			0			84,394,955

Investments in unaffiliated securities, at value	$	57,702,255		$	18,803,701		$	-		$	76,505,956
Investment in affiliated money market fund, at value		512,017			0			-			512,017
Total investments, value		58,214,272			18,803,701			0			77,017,973

					114,193			0			114,193
Prepaid expenses		38,027			0			0			38,027
Receivable for:
Capital stock sold		5,539			25,522			0			31,061
Dividends		209,475			44,480			0			253,955
Investments sold					221,674			0			221,674
Expense reimbursement		4,613			0			0			4,613
Other assets		62,734			0			0			62,734
TOTAL ASSETS		58,534,660			19,209,570			0			77,744,230
LIABILITIES
Capital stock reacquired		13,342			20,129			0			33,471
Payable to investment adviser for fund expenses		42,138			8,061			0			50,199
Accrued:											-
Investment advisory fees		36,727			0			0			36,727
Administrative service fees		12,242			1,333			0			13,575
Shareholder service fees - K shares					1,041			0			1,041
Distribution fees		6,348			857			0			7,205
Other liabilities		28,570			6,919			10,949			46,438
TOTAL LIABILITIES		139,367			38,340			10,949			188,656
NET ASSETS	$	58,395,293		$	19,171,230			(10,949	)	$	77,555,574

NET ASSETS ARE COMPRISED OF THE FOLLOWING:
Capital (par value and additional paid-in)		70,473,507			19,842,421			0		$	90,315,928
Undistributed net investment income		269,583			12,157			(10,949	)	$	270,791
Accumulated net realized loss on investments		(3,763,041	)		(1,891,122	)		0		$	(5,654,163	)
Net unrealized depreciation of investments		(8,584,756	)		1,207,774			0		$	(7,376,982	)
NET ASSETS	$	58,395,293		$	19,171,230		$	(10,949	)	$	77,555,574

NET ASSETS:
Direct Shares					14,723,793			51,502,860			66,226,653
Class A		5,113,147			0			(722	)		5,112,425
Class B		1,769,936			0			(250	)		1,769,686
Class K					4,447,437			(628	)		4,446,809
Class T		51,512,210			0			(51,512,210	)		0
TOTAL NET ASSETS	$	58,395,293		$	19,171,230		$	(10,949	)	$	77,555,574

CAPITAL STOCK
Direct Shares (no par value):
Authorized			unlimited			unlimited
Outstanding				1,120,958	3,921,037		5,041,995
Class A ($.01 par value per share):
Authorized		50,000,000				unlimited
Outstanding		369,204			0		389,073
Class B ($.01 par value per share):
Authorized		25,000,000				unlimited
Outstanding		132,883			0		134,679
Class K (no par value):
Authorized			unlimited			unlimited
Outstanding				340,350	0		34,350
Class T ($.01 par value per share):
Authorized		75,000,000					0
Outstanding		3,546,478			-3,546,478		0
Direct Shares:
Net asset value and offering price per share			$	13.14		$	13.14
Class K:
Net asset value and offering price per share			$	13.07		$	13.07
Class A:
Net asset value and redemption price per share	$	13.85				$	13.14
Offering price per share:
(Net assets value of $13.85 / 95%)	$	14.58				$	13.14
Class B:
Net asset value and offering price per share	$	13.32				$	13.14
Class T:
Net asset value and redemption price per share	$	14.52					N/A
Offering price per share:
(Net assets value of $14.52 / 94.25%)	$	15.41					N/A

See notes to financial statements.

STATEMENT OF OPERATIONS	Year Ended August 31, 2009

SM&R EQUITY INCOME FUND	SM&R EQUITY INCOME FUND			CIT EQUITY INCOME FUND			Pro Forma Adjustment			Pro Forma Combined

INVESTMENT INCOME
Dividends (Net of foreign tax withheld of $8,775)	$	2,430,252		$	462,656					$	2,892,908
Interest		6,430			2,507						8,937
Interest from affiliated money market fund		694			63						757
TOTAL INVESTMENT INCOME		2,437,376			465,226						2,902,602
EXPENSES
Investment advisory fees		420,622			83,253			(140,207	)		363,668
Administrative & transfer agent		140,207			37,610			(113,962	)		63,855
Professional fees		19,566			16,522			(11,016	)		25,072
Custody and transaction fees		14,151			1,958			(8,609	)		7,500
Directors' fees and expenses		9,968			3,602			(10,320	)		3,250
Compliance & Legal expenses		11,977			11,725			15,682			39,384
Qualification fees
Direct Shares					1,574			1,910			3,483
Class A		5,867									5,867
Class B		5,587									5,587
Class K					1,574			1,910			3,483
Class T		13,335						(13,335	)		0
Shareholder reporting expenses
Direct Shares					1,434			502			1,936
Class A		2,177						(241	)		1,936
Class B		878						1,058			1,936
Class K					1,434			502			1,936
Class T		22,562						(22,562	)		0
Distribution fees
Class A		11,902									11,902
Class B		14,228									14,228
Class K					18,134						18,134
Insurance expenses		29,730			814			(29,741	)		803
Other Expenses		87						10,862			10,949
TOTAL EXPENSES		722,844			179,633			(317,568	)		584,909
LESS EXPENSES REIMBURSED		(24,305	)		0			24,305			0
NET EXPENSES		698,539			179,633			(293,263	)		584,909
INVESTMENT INCOME - NET		1,738,837			285,593			293,263			2,317,693
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments		(3,750,821	)		(1,287,810	)					(5,038,631	)
Net realized loss on futures contracts					(103,978	)					(103,978	)
Change in unrealized depreciation of investments		(13,816,547	)		(2,038,462	)					(15,855,009	)
NET LOSS ON INVESTMENTS		(17,567,368	)		(3,430,250	)					(20,997,618	)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	(15,828,531	)	$	(3,144,657	)	$	293,263		$	(18,679,925	)

PRO FORMA FOOTNOTES REGARDING THE REORGANIZATION OF SM&R EQUITY INCOME FUND INTO CALIFORNIA INVESTMENT TRUST’S EQUITY INCOME FUND AS OF AUGUST 31, 2009 (UNAUDITED)

NOTE 1 — Basis of Combination:

The Board of Trustees of SM&R Funds (the “Trust”) on behalf of its portfolio, SM&R Equity Income Fund (“Equity”), at a meeting held on February 18, 2010 approved the Fund’s entering into an Agreement and Plan of Reorganization (the “Plan”) pursuant to which, the Equity will transfer all of its assets, subject to its liabilities, to the California Investment Trust Equity Income Fund, (the “Equity Income” and together with Equity (the “Funds”) in exchange for a number of shares of Equity Income equal in value to the net assets of the Funds (the “Reorganization”). If the Reorganization is consummated, shares of Equity Income then will be distributed to the Equity shareholders on a prorata basis in liquidation of the Funds. The Reorganization will be accounted for as a tax-free merger of investment companies. The unaudited pro forma condensed combined schedule of investments and condensed combined statement of assets and liabilities reflect the financial position of the Funds at August 31, 2009 as if the Reorganization had occurred on that date. The unaudited pro forma condensed combined statement of operations reflects the results of operations of the Funds for the twelve months ended August 31, 2009 as if the Reorganization had occurred on September 1, 2008. These statements have been derived from the books and records of the Funds utilized in calculating daily net asset value at the dates indicated above in conformity with the accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. Actual results may differ from these estimates. As of August 31, 2009, all the securities held by the Equity comply with the compliance guidelines and/or investment restrictions of Equity Income. The historical cost of investment securities will be carried forward to the surviving entity. The Fund’s fiscal year ends are August 31. The accompanying pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of the Funds included or incorporated by reference in their respective Statements of Additional Information. Such pro forma condensed combined financial statements are presented for information purposes only and may not necessarily be representative of what the actual combined financial statements would have been had the Reorganization occurred on August 31, 2009 or September 1, 2008, as applicable. Following the Reorganization, Equity Income will be the surviving fund.

NOTE 2 — Equity Fund and Equity Income Valuation:

NOTE 3 — Capital Shares:

The pro forma net asset value per share assumes the issuance of shares of Equity Income that would have been issued at August 31, 2009 in connection with the proposed Reorganization. The number of shares of each class assumed to be issued is equal to the net asset value of the shares of Equity of that class, as of August 31, 2009, divided by the net asset value per share of the corresponding class of shares of Equity Income as of August 31, 2009. The pro forma number of shares outstanding, by class, for Equity Income consists of the following at August 31, 2009.

Class of Shares	Shares of CIT Equity Income Fund Pre-Combination		Additional Shares Assumed Issued in Reorganization			Total Outstanding Shares Post-Combination
Direct Shares		1,120,958		3,921,037	(b)		5,041,995
Class A		0		389,073			389,073
Class B		0		134,679			134,679
Class K		340,350		0			340,350

(a) No Direct Shares or Class K shares outstanding

(b) Class T shares are being merged into the Direct Shares

NOTE 4 — Pro Forma Operating Expenses:

NOTE 5 — Federal Income Taxes:

The Equity and the Equity Income has elected to be taxed as a “regulated investment company” under the Internal Revenue Code of 1986, as amended (the “Code”). If the Reorganization is consummated, unless it determines such qualification is no longer in the best interest of shareholders, Equity Income will seek to continue to qualify as a regulated investment company by complying with the provisions applicable to certain investment companies, as defined in applicable sections of the Code, and to make distributions of taxable income sufficient to relieve it from all, or substantially all, Federal income taxes. In addition, Equity will make any required income or capital gain distributions prior to consummation of this Reorganization, in accordance with provisions of the Code relating to tax-free reorganizations of investment companies. Equity Income will succeed to the capital loss carryforwards of the Equity, which will be subject to the limitations described below. Equity has capital loss carryforwards that, in the absence of the Reorganization, would generally be available to offset their capital gains. As a result of the Reorganization, however, Equity will undergo an “ownership change” for tax purposes, and accordingly, Equity Income’s use of Equity’s capital loss carryforwards will be limited by the operation of the tax loss limitation rules of the Code. The Code generally limits the amount of pre-ownership change losses that may be used to offset post-ownership change gains to a specific annual loss limitation amount (generally the product of the net asset value of Equity’s immediately prior to the ownership change and a rate established by the IRS for the month of the Closing Date (for example, such rate is 4.03% for March, 2010)). Subject to certain limitations, any unused portion of these losses may be available in subsequent years, subject to the overall eight-year capital loss carryforward limit, as measured from the date of recognition. In addition, for five years after the Closing Date of the Reorganization, the Combined Fund generally will not be allowed to offset realized gains attributable to certain pre-Reorganization built-in gains of one Fund, if any, with capital loss carryforwards attributable to the other Fund. However, unexpired pre-ownership change losses of Equity could be used to offset realized built-in gains of Equity. As of August 31st, 2009, the Equity Income fund had capital loss carryforwards of $3,537,981 which expire in 2017.

SM&R Balanced Fund and Caltrust Equity Income Fund

			EQUITY INCOME FUND				SM& Balanced Fund
			PORTFOLIO OF INVESTMENTS
Common Stock

Basic Materials	(2.84	%)	Shares		Value		Shares		Value		Shares		Value

Chemicals
Du Pont (E.I.) De Nemours & Co.								1,550		49,492		1,550		49,492
International Flavors & Fragrances Inc								900		32,058		900		32,058
Monsanto Co.								875		73,395		875		73,395
PPG Industries, Inc.								900		49,860		900		49,860
Praxair Inc				4,592		351,839		675		51,719		5,267		403,558
Sensient Technologies Corp.								3,700		96,459		3,700		96,459
Sherwin-Williams Co/The				1,746		105,109						1,746		105,109
						456,948				352,982		-		809,930

Forest Products&Paper	(0.06	%)
Meadwestvaco Corp								1,000		21,950		1,000		21,950
Iron / Steel	(0.54	%)
Nucor Corp								700		31,178		700		31,178
United States Steel Corp				4,000		175,120		200		8,756		4,200		183,876
						175,120				39,934				215,054
Mining	(2.84	%)
Alcoa Inc				7,050		84,953						7,050		84,953
Total Basic Materials						717,021				414,866				1,131,887

Communications	(6.42	%)
Internet	(0.08	%)
Akamai Technologies Inc.								1,900		33,516		1,900		33,516
Media	(1.68	%)

CBS Corp.								2,000		20,700		2,000		20,700
McGraw-Hill Cos Inc/The				13,178		442,913						13,178		442,913
Viacom Inc.								2,000		50,080		2,000		50,080
Walt Disney Co.								6,000		156,240		6,000		156,240
						442,913				227,020				669,933

Telecommunications	(4.65	%)
Amdocs Ltd								1,550		37,696		1,550		37,696
American Tower Corp.								1,250		39,563		1,250		39,563
Arris Group Inc								6,500		86,190		6,500		86,190
AT&T Inc				21,244		553,406		11,325		295,016		32,569		848,422
Cisco Systems								10,225		220,860		10,225		220,860
Harris Corp.								2,300		79,879		2,300		79,879
Motorola Inc.								6,200		44,516		6,200		44,516
Nokia Oyj ADR								6,500		91,065		6,500		91,065
Qualcomm Inc.								3,000		139,260		3,000		139,260
Rogers Communications Inc								1,300		35,789		1,300		35,789
Verizon Communications Inc.								5,450		169,168		5,450		169,168
Windstream Corporation								7,100		60,847		7,100		60,847
						553,406				1,299,849				1,853,255

Total Communications						996,319				1,560,385				2,556,704

Consumer, Cyclical	(7.11	%)
Housewares	(0.13	%)
Newell Rubbermaid Inc.								3,800		52,896		3,800		52,896

Lodging	(0.26	%)
Starwood Hotels & Resorts Inc.								3,000		89,340		3,000		89,340
Wyndham Worldwide Corp.								1,020		15,453		1,020		15,453
										104,793				104,793
Auto Manufacturers (1.37%)	(0.66	%)
Ford Motor Co*				34,500		262,200						34,500		262,200

Retail (5.96%)	(6.05	%)
Best Buy Company, Inc.								3,000		108,840		3,000		108,840
CVS Caremark Corp.								3,000		112,560		3,000		112,560
Foot Locker Inc.								3,000		31,980		3,000		31,980
Limited Brands Inc.								7,600		113,392		7,600		113,392
Lowe's Co.								5,800		124,700		5,800		124,700
McDonald's Corp.				6,968		391,880		2,500		140,600		9,468		532,480
Penney (J.C.)								4,025		120,911		4,025		120,911
Ross Stores Inc				3,692		172,195						3,692		172,195
TJX Cos Inc				7,050		253,448		3,200		115,040		10,250		368,488

Target Corp.			6,939	326,133	4,150	195,050	11,089	521,183
Wal-Mart					4,000	203,480	4,000	203,480
				1,143,656		1,266,553		2,410,209

Total Consumer, Cyclical				1,405,856		1,424,242		2,830,098


Consumer, Non-Cyclical	(22.75	%)

Agriculture (5.36%)	(2.82	%)
Altria Group Inc			22,500	411,300			22,500	411,300
Philip Morris International Inc			7,500	342,825	2,050	93,706	9,550	436,531
Reynolds American Inc			5,992	273,894			5,992	273,894
				1,028,019		93,706		1,121,725

Beverages (3.69%)	(2.6	%)
Coca-Cola			14,500	707,165	3,500	170,695	18,000	877,860
PepsiCo, Inc.					2,800	158,676	2,800	158,676
				707,165		329,371		1,036,536
Biotechnology	(0.88	%)
Amgen Inc.					1,300	77,714	1,300	77,714
Celgene Corp.					2,575	134,338	2,575	134,338
Genzyme Corp.					1,300	72,423	1,300	72,423
Gilead Science Inc.					1,500	67,590	1,500	67,590
						352,065		352,065


Commercial Services (3.55%)	(1.82	%)
Global Payments Inc.					1,075	45,623	1,075	45,623
Lender Processing Services Inc			10,211	350,033			10,211	350,033
Moody's Corp			5,092	138,706			5,092	138,706
Western Union Co/The			10,609	191,386			10,609	191,386
				680,125		45,623		725,748

Cosmetics / Personal Care (1.10%)	(1.8	%)
Alberto-Culver Co					1,800	47,502	1,800	47,502
Avon Products					3,050	97,204	3,050	97,204
Colgate-Palmolive Co.					1,475	107,233	1,475	107,233
Procter & Gamble, Inc.			3,880	209,947	4,700	254,317	8,580	464,264
				209,947		506,255		716,202
Food (2.21%)
ConAgra Foods, Inc.					2,050	42,087	2,050	42,087
Heinz (H.J.)					2,825	108,763	2,825	108,763
Kraft Foods Inc			4,384	124,286			4,384	124,286
McCormick & Co.					2,000	65,140	2,000	65,140
Safeway Inc			8,000	152,400			8,000	152,400
Sara Lee Corp			15,200	147,288			15,200	147,288
Supervalu Inc.					3,475	49,866	3,475	49,866
				423,974		265,855		689,829



Healthcare - Products	(3.11	%)
Baxter International Inc			12,811	729,202			12,811	729,202
Covidien PLC					900	35,613	900	35,613
Hologic Inc					1,750	28,805	1,750	28,805
Johnson & Johnson					5,000	302,200	5,000	302,200
Patterson Companies Inc.					1,500	40,845	1,500	40,845
Varian Medical Systems Inc					1,300	55,991	1,300	55,991
Zimmer Holdings, Inc.					1,000	47,350	1,000	47,350
				729,202		510,804		1,240,006



Healthcare - Services	(3.71	%)
Aetna Inc			8,584	244,644			8,584	244,644
Davita Inc					925	47,832	925	47,832
United Health Group Inc.					2,050	57,400	2,050	57,400
WellPoint, Inc.					1,550	81,918	1,550	81,918
Healthsouth Corp*			40,000	624,400			40,000	624,400
WellPoint Inc*			8,000	422,800			8,000	422,800
				1,291,844		187,149		1,478,993

Household Products / Wares (0.45%)	(0.55	%)
Fortune Brands Inc			2,146	85,432			2,146	85,432
Kimberly Clark Corp.					2,200	133,012	2,200	133,012
				85,432		133,012		218,444

Pharmaceuticals (2.94%)	(3.72	%)
Abbott Labs.					2,500	113,075	2,500	113,075
AmerisourceBergen Corp			13,812	294,334			13,812	294,334
Endo Pharmaceuticals Holdings Inc					1,750	39,498	1,750	39,498
Lilly (Eli) & Co.					3,850	128,821	3,850	128,821
Merck & Co., Inc.			1,200	38,916	5,300	171,879	6,500	210,795
Pfizer, Inc.			13,900	232,130	15,000	250,500	28,900	482,630
Wyeth					4,400	210,540	4,400	210,540
				565,380		914,313	-	1,479,693


Total Consumer, Non-Cyclical				5,721,088		3,338,152		9,059,240

Energy (9.65%)	(9.21	%)

Oil & Gas (9.15%)	(8.08	%)
Anadarko Petroleum Corp.					4,000	211,480	4,000	211,480
Apache Corp			1,126	95,654			1,126	95,654
BP plc ADR					3,500	180,075	3,500	180,075
Chevron Corp			3,840	268,570	3,051	213,387	6,891	481,957
ConocoPhillips			5,348	240,820			5,348	240,820
Devon Energy Corp			3,852	236,436			3,852	236,436
ENSCO International Inc			4,170	153,873			4,170	153,873
Exxon Mobil Corp			7,736	534,944	9,000	622,350	16,736	1,157,294
Royal Dutch Shell PLC					3,000	166,410	3,000	166,410
Transocean Ltd					900	68,256	900	68,256
Valero Energy Corp			12,000	224,880			12,000	224,880
				1,755,177		1,461,958		3,217,135

Oil & Gas Services (0.50%)	(1.01	%)
Baker Hughes			2,780	95,771			2,780	95,771
Oceaneering Int'l Inc.					1,500	78,255	1,500	78,255
Schlumberger Ltd.					2,200	123,640	2,200	123,640
Weatherford International LTD					5,200	103,740	5,200	103,740
				95,771		305,635		401,406
Pipelines	(0.12	%)
Spectra Energy Corp					2,525	47,521	2,525	47,521
							-	-
Total Energy				1,850,948		1,815,113	-	3,666,061

Financial (14.24%)	(12.32	%)

Banks (5.30%)	(5.67	%)
Bank of America Corp					10,000	175,900	10,000	175,900
Citigroup Inc.					14,500	72,500	14,500	72,500
Goldman Sachs Group					700	115,822	700	115,822
JPMorgan Chase & Co.			11,500	499,790	6,500	282,490	18,000	782,280
Morgan Stanley, Dean Witter, Discover					5,000	144,800	5,000	144,800
PNC Financial Services Group					3,000	127,770	3,000	127,770
State Street Corp.					1,500	78,720	1,500	78,720
U.S. Bancorp			10,300	232,986	5,000	113,100	15,300	346,086
Wells Fargo Co.			10,282	282,961	4,716	129,784	14,998	412,745
				1,015,737		1,240,886		2,256,623

Diversified Financial Services (5.17%)	(2.85	%)
Charles Schwab Corp.					5,600	101,136	5,600	101,136
Discover Financial Services					3,000	41,250	3,000	41,250
Franklin Resources Inc			4,100	382,653			4,100	382,653
Morgan Stanley			21,000	608,160			21,000	608,160
				990,813		142,386		1,133,199

Insurance (3.77%)	(3.72	%)
Allstate Corp					2,300	67,597	2,300	67,597
Arthur J Gallagher & Co			7,700	183,029			7,700	183,029
Aspen Insurance Holdings Ltd					4,125	104,775	4,125	104,775
Hartford Financial Svc. Gp.					1,375	32,615	1,375	32,615
MetLife Inc			7,328	276,705			7,328	276,705
Principal Financial Group					3,850	109,340	3,850	109,340
Prudential Financial, Inc.					3,000	151,740	3,000	151,740
Renaissance Re Holdings Ltd.					1,700	92,565	1,700	92,565
StanCorp Financial Group Inc			6,950	263,058			6,950	263,058
The Travelers Companies, Inc.					4,000	201,680	4,000	201,680
				722,792		760,312		1,483,104

Investment Companies	(0.03	%)
Allied Capital Corp.					3,400	10,200	3,400	10,200

REITS	(0.06	%)
Host Hotels & Resorts Inc.					2,265	22,582	2,265	22,582

Total Financial				2,729,342		2,176,366		4,905,708

Industrial (7.62%)	(1.35	%)
Aerospace/Defense
Boeing Company					2,075	103,065	2,075	103,065
General Dynamics Corp.					1,300	76,947	1,300	76,947
Goodrich Corp.					1,700	93,772	1,700	93,772
L-3 Communications Holdings, Inc.					900	66,960	900	66,960
Northrop Grumman Corp.					1,200	58,572	1,200	58,572
Rockwell Collins Inc.					1,225	56,399	1,225	56,399
United Technologies					1,400	83,104	1,400	83,104
						538,819		538,819


Electronics	(0.44	%)
Agilent Technologies Inc.					2,000	51,360	2,000	51,360
Thermo Fisher Scientific Inc					1,525	68,945	1,525	68,945
Tyco Electronics Ltd					2,400	54,768	2,400	54,768
						175,073		175,073
Hand/Machine Tools	(0.35	%)
Stanley Black & Decker Inc					3,400	139,162	3,400	139,162
							-
Machinery - Construction & Mining	(2.09	%)					-
Caterpillar Inc			17,292	783,501	1,100	49,841	18,392	833,342
							-
Metal Fabricate / Hardware (0.71%)	(0.34	%)					-
Worthington Industries Inc			10,400	136,968			10,400	136,968
							-
							-
Miscellaneous Manufacturing (2.22%)	(2.74	%)					-
3M Co.			3,212	231,585	1,925	138,793	5,137	370,378
Barnes Group Inc					2,000	29,380	2,000	29,380
Danaher Corp.					1,000	60,710	1,000	60,710
General Electric Co.					19,750	274,525	19,750	274,525
Illinois Tool Works Inc.					1,800	75,276	1,800	75,276
Ingersoll Rand Plc					1,900	58,691	1,900	58,691
ITT Corp			2,634	131,911			2,634	131,911
Leggett & Platt Inc			3,325	60,681			3,325	60,681
Tyco International Ltd.					900	28,521	900	28,521
				424,177		665,896		1,090,073

Transportation (0.60)%	(0.92	%)
Burlington Northern, Inc.					950	78,869	950	78,869
Fedex Corp.					875	60,121	875	60,121
Seaspan Corp					2,250	15,233	2,250	15,233
Tidewater Inc			2,680	115,696			2,680	115,696
United Parcel Services Cl B					1,775	94,892	1,775	94,892
				115,696		249,114		364,810

Total Industrial				1,460,342		1,817,905		3,278,247

Technology (8.51%)	(8.95	%)
Computers (2.67%)	(3.57	%)
Apple Inc					1,500	252,315	1,500	252,315
Dell Inc*			12,249	193,902			12,249	193,902
EMC Corp.					6,000	95,400	6,000	95,400
Hewlett-Packard Co.			7,050	316,475	4,500	202,005	11,550	518,480
International Business Machines, Inc.					2,425	286,271	2,425	286,271
Research In Motion Limited					1,050	76,713	1,050	76,713
				510,377		912,704		1,423,081

Office/Business Equip	(0.1	%)
Pitney Bowes Inc.					1,725	38,554	1,725	38,554

Semiconductors (3.48%)	(2.58	%)

Intel Corp.			32,863	667,776	11,000	223,520	43,863	891,296
Linear Technology Corp.					2,000	53,140	2,000	53,140
Texas Instruments					3,400	83,606	3,400	83,606
				667,776		360,266		1,028,042

Software		(2.7	%)
Electronic Arts Inc.						1,500	27,330	1,500	27,330
Microsoft Corp				18,373	452,894	17,000	419,050	35,373	871,944
Oracle Corp.						8,000	175,040	8,000	175,040
					452,894		621,420		1,074,314
Total Technology					1,631,047		1,932,944		3,563,991

Utilities (4.65%)		(3.68	%)
Electric		(3.53	%)
Allegheny Energy Inc.						1,600	42,256	1,600	42,256
Ameren Corp.						3,000	80,910	3,000	80,910
Consolidated Edison Inc				7,700	309,463			7,700	309,463
Constellation Energy Group						3,000	94,950	3,000	94,950
Duke Energy Corp				9,200	142,508	2,000	30,980	11,200	173,488
Entergy Corp				2,146	169,534			2,146	169,534
Exelon Corp				3,846	192,377	1,400	70,028	5,246	262,405
FPL Group, Inc.						1,100	61,798	1,100	61,798
NRG Energy, Inc.						1,250	33,563	1,250	33,563
PPL Corp.						925	27,195	925	27,195
Progress Energy Inc				1,979	78,229			1,979	78,229
Southern Co.						2,300	71,760	2,300	71,760
					892,111		513,440		1,405,551
Gas		(0.15	%)
CenterPoint Energy, Inc.						2,000	24,800	2,000	24,800
Sempra Energy						675	33,865	675	33,865
							58,665		58,665

Total Utilities					892,111		572,104	-	1,464,215


Total Common Stock (Cost $32,718,710)					17,404,074		15,052,078		32,456,152

Total Corporate Bonds		(10.25	%)
F H L M C (PASS-THRU)
FHLMC Pool 284839, 8.500% Due 01-01-17						2641.08	2,861	2,641	2,861

F N M A (PASS-THRU)
FNMA 48974, 8.000% Due 06-01-17						18775.19	20,352	18,775	20,352
							23,213	-	23,213
CORPORATE BONDS - FINANCIAL
Consumer Discretionary
Diversified Consumer Services
Hertz Corp.	7.400% Due 03-01-11					455,000	423,150	455,000	423,150

Consumer Staples
Personal Products
Avon Products Inc.	7.150% Due 11-15-09					500,000	505,792	500,000	505,792

Financials
Capitall markets
Ameriprise Financial Inc	5.650% Due 11-15-15					500,000	490,077	500,000	490,077
Goldman Sachs Group Inc	5.300% Due 02-14-12					500,000	526,750	500,000	526,750

Diversified Financial Services
General Electric Capital Corp.	3.750% Due 12-15-09					350,000	352,674	350,000	352,674

Insurance
Mony Group Inc.	8.350% Due 03-15-10					500,000	514,176	500,000	514,176

Thrifts & Mortgage Finance
Washington Mutual	0.000% Due 01-15-11					250,000	222,500	250,000	222,500

Industrials
ElectricalEquipment
Emerson Electric Co	5.250% Due 10-15-18					500,000	539,795	500,000	539,795

Material
Construction materials
Vulcan Materials	6.400% Due 11-30-17					500,000	504,953	500,000	504,953

Total Corporate Bonds (coast 4,006,905)							4,079,867		4,079,867

Short-Term Investments		(3.46	%)
SM&R Money Market Fund (cost $1,376,232)						1,376,232	1,376,232	1,376,232	1,376,232

United States Treasury Bills (7.3%)	Par Value
United States Treasury Bill 10/22/2009 (b)		200,000	199,949				200,000	199,949
United States Treasury Bill 11/19/2009		1,200,000	1,199,678				1,200,000	1,199,678
Total United States Treasury Bills			1,399,627				-

Total Short-Term Investments (Cost $2,715,826)			1,399,627		1,376,232	1,376,232	2,776,232	2,775,859

Total Investments (Cost $39,462,696) (a) (98.78%)			18,803,701			20,531,240		39,334,941
Other Net Assets (1.22%)			367,529			114,638		482,167
Net Assets (100.00%)			19,171,230			20,645,878		39,817,108


(a) Aggregate cost for federal income tax purpose is $39,462,696. At August 31, 2009, unrealized appreciation (depreciation) of securities is as follows:

Unrealized appreciation			5,462,884
Unrealized depreciation			(5,650,639	)
Net unrealized appreciation (depreciation)			(187,755	)

(b) At August 31, 2009, certain United States Treasury Bills with a market value of $199,949 were pledged to cover margin requirements for futures contracts.

STATEMENT OF ASSETS AND LIABILITIES		August 31, 2009

		SM&R BALANCED FUND			CIT EQUITY INCOME FUND			Pro Forma Adjustment			Pro Forma Combined

ASSETS
Investments in unaffiliated securities, at cost		$	20,550,537		$	17,595,927		$	-		$	38,146,464
Investment in affiliated money market fund at cost			1,376,232			0			-			1,376,232
	Total cost of investments		21,926,769			17,595,927			0			39,522,696

Investments in unaffiliated securities, at value		$	19,155,008		$	18,803,701		$	-		$	37,958,709
Investment in affiliated money market fund, at value			1,376,232			0			-			1,376,232
	Total market value of investments		20,531,240			18,803,701			0			39,334,941

Cash			0			114,193			0			114,193
Prepaid expenses			19,083			0			0			19,083
Receivable for:
	Capital stock sold		2,506			25,522			0			28,028
	Dividends		43,960			44,480			0			88,440
	Investments sold		90			221,674			0			221,764
	Interest		77,103			0						77,103
	Expense reimbursement		8,358			0			0			8,358
Other assets			15,158			0			0			15,158
TOTAL ASSETS			20,697,498			19,209,570			0			39,907,068
LIABILITIES
Capital stock reacquired			0			20,129			0			20,129
Payable to investment adviser for fund expenses			17,038			8,061			0			25,099
Accrued:												-
	Investment advisory fees		13,020			0			0			13,020
	Administrative service fees		4,340			1,333			0			5,673
	Shareholder service fees - K shares		0			1,041			0			1,041
	Distribution fees		3,413			857			0			4,270
Other liabilities			9,980			6,919			3,829			20,728
TOTAL LIABILITIES			47,791			38,340			3,829			89,960
NET ASSETS		$	20,649,707		$	19,171,230			(3,829	)		39,817,108

NET ASSETS ARE COMPRISED OF THE FOLLOWING:
Capital (par value and additional paid-in)			22,856,565			19,842,421			0		$	42,698,986
Undistributed net investment income			66,803			12,157			(3,829	)	$	75,131
Accumulated net realized gain (loss) on investments			(878,132	)		(1,891,122	)		0		$	(2,769,254	)
Net unrealized appreciation (depreciation) of investments			(1,395,529	)		1,207,774			0		$	(187,755	)
NET ASSETS		$	20,649,707		$	19,171,230		$	(3,829	)	$	39,817,108

NET ASSETS:
Direct Shares			0			14,723,793			16,972,013			31,695,806
Class A			2,768,293			0			0			2,768,293
Class B			909,401			0			0			909,401
Class K			0			4,447,437			0			4,447,437
Class T			16,972,013			0			(16,972,013	)		0
TOTAL NET ASSETS		$	20,649,707		$	19,171,230		$	-		$	39,820,937

CAPITAL STOCK:
Direct shares (no par value):
	Authorized			unlimited				unlimited
	Outstanding				1,120,958	1,292,120			2,413,078
Class A ($.01 par value per share):
	Authorized		50,000,000			0		unlimited
	Outstanding		211,218			-			210,757
Class B ($.01 par value per share):
	Authorized		25,000,000			0		unlimited
	Outstanding		68,615			-			69,235
Class K (no par value):
	Authorized			unlimited		0		unlimited
	Outstanding				340,350	-			340,350
Class T ($.01 par value per share):
	Authorized		25,000,000
	Outstanding		1,241,946			(1,241,946	)		-
Direct Shares:
	Net asset value and offering price per share							$	13.14
Class K:
	Net asset value and offering price per share							$	13.07
Class A:
	Net asset value and redemption price per share	$	13.11					$	13.14
	Offering price per share:
	(Net assets value of $13.11 / 95%)	$	13.80					$	13.14
Class B:
	Net asset value and offering price per share	$	13.25					$	13.14
Class T:
	Net asset value and redemption price per share	$	13.67						N/A
	Offering price per share:
	(Net assets value of $13.67 / 94.25%)	$	14.50						N/A

See notes to financial statements.

STATEMENT OF OPERATIONS	Year Ended August 31, 2009

	SM&R BALANCED FUND			CIT EQUITY INCOME FUND			Pro Forma Adjustment			Pro Forma Combined

INVESTMENT INCOME
Dividends	$	405,145		$	462,656					$	867,801
Interest		318,253			2,507						320,760
Interest from affiliated money market fund		331			63						394
TOTAL INVESTMENT INCOME		723,729			465,226						1,188,955
EXPENSES
Investment advisory fees		143,621			83,253			(47,874	)		179,000
Administrative service fees		47,873			37,610			(44,268	)		41,215
Professional fees		8,854			16,522			(304	)		25,072
Custody and transaction fees		11,396			1,958			(8,492	)		4,862
Directors' fees and expenses		9,973			3,602			(10,325	)		3,250
Compliance expenses		4,098			11,725			11,533			27,356
Qualification fees
Direct shares		0			1,574			1,910			3,483
Class A		5,406						0			5,406
Class B		4,071						0			4,071
Class K					1,574			1,910			3,483
Class T		12,143						(12,143	)		0
Shareholder reporting expenses
Direct shares					1,434			502			1,936
Class A		887						1,049			1,936
Class B		328						1,608			1,936
Class K					1,434			502			1,936
Class T		5,512						(5,512	)
Distribution fees
Class A		6,401									6,401
Class B		6,825									6,825
Class K					18,134						18,134
Insurance expenses		9,335			814			(9,346	)		803
Other Expenses		82						3,747			3,829
TOTAL EXPENSES		276,805			179,633			(115,504	)		340,934
LESS EXPENSES REIMBURSED		(32,733	)		0			32,733			0
NET EXPENSES		244,072			179,633			(82,771	)		340,934
INVESTMENT INCOME - NET		479,657			285,593			82,771			848,021
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments		(878,129	)		(1,287,810	)					(2,165,939	)
Net realized loss on futures contracts					(103,978	)					(103,978	)
Change in unrealized depreciation of investments		(2,793,131	)		(2,038,462	)					(4,831,593	)
NET LOSS ON INVESTMENTS		(3,671,260	)		(3,430,250	)					(7,101,510	)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	(3,191,603	)	$	(3,144,657	)	$	82,771		$	(6,253,489	)

PRO FORMA FOOTNOTES REGARDING THE REORGANIZATION OF SM&R BALANCED FUND INTO CALIFORNIA INVESTMENT TRUST’S EQUITY INCOME FUND AS OF AUGUST 31, 2009 (UNAUDITED)

NOTE 1 — Basis of Combination:

The Board of Trustees of SM&R Funds (the “Trust”) on behalf of its portfolio, SM&R Balanced Fund (“Balance”), at a meeting held on February 18, 2010 approved the Fund’s entering into an Agreement and Plan of Reorganization (the “Plan”) pursuant to which, the Balance will transfer all of its assets, subject to its liabilities, to the California Investment Trust Equity Income Fund, (the “Equity Income” and together with Balance (the “Funds”) in exchange for a number of shares of Equity Income equal in value to the net assets of the Funds (the “Reorganization”). If the Reorganization is consummated, shares of Equity Income then will be distributed to the Balance shareholders on a prorata basis in liquidation of the Funds. The Reorganization will be accounted for as a tax-free merger of investment companies. The unaudited pro forma condensed combined schedule of investments and condensed combined statement of assets and liabilities reflect the financial position of the Funds at August 31, 2009 as if the Reorganization had occurred on that date. The unaudited pro forma condensed combined statement of operations reflects the results of operations of the Funds for the twelve months ended August 31, 2009 as if the Reorganization had occurred on September 1, 2008. These statements have been derived from the books and records of the Funds utilized in calculating daily net asset value at the dates indicated above in conformity with the accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. Actual results may differ from these estimates. As of August 31, 2009, all the securities held by the Balance comply with the compliance guidelines and/or investment restrictions of Equity Income. The historical cost of investment securities will be carried forward to the surviving entity. The Fund’s fiscal year ends are August 31. The accompanying pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of the Funds included or incorporated by reference in their respective Statements of Additional Information. Such pro forma condensed combined financial statements are presented for information purposes only and may not necessarily be representative of what the actual combined financial statements would have been had the Reorganization occurred on August 31, 2009 or September 1, 2008, as applicable. Following the Reorganization, Equity Income will be the surviving fund.

NOTE 2 — Balance Fund and Equity Income Valuation:

Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid price. If no bid price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security. Short-term securities with remaining maturities less than 60 days will be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at the net asset value each business day. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the option. For Fixed income investments such as corporate bonds, prices will be determined by a third party pricing agency in accordance with the fund practices and policies. The third party pricing agency will generally value fixed income investments based on the mean between the best bid and best offer as of the end of the day. The pricing agent may take into consideration other market information in order to determine a valuation, such as the liquidity in the market, similar securities with more recent trading activity and other factors that may shed more light on the actual value of a bond.

NOTE 3 — Capital Shares:

The pro forma net asset value per share assumes the issuance of shares of Equity Income that would have been issued at August 31, 2009 in connection with the proposed Reorganization. The number of shares of each class assumed to be issued is equal to the net asset value of the shares of Balance of that class, as of August 31, 2009, divided by the net asset value per share of the corresponding class of shares of Equity Income as of August 31, 2009. The pro forma number of shares outstanding, by class, for Equity Income consists of the following at August 31, 2009.

Class of Shares	Shares of Equity Income Fund Pre-Combination		Additional Shares Assumed Issued in Reorganization			Total Outstanding Shares Post-Combination
Direct Shares		1,120,958		1,292,120	(b)		2,413,078
Class A		0		210,757			210,757
Class B		0		69,235			69,235
Class K		340,350		0			340,350

(a) No Direct Shares or Class K shares outstanding

(b) Class T shares are being merged into the Direct Shares

NOTE 4 — Pro Forma Operating Expenses:

NOTE 5 — Federal Income Taxes:

The Balance and the Equity Income has elected to be taxed as a “regulated investment company” under the Internal Revenue Code of 1986, as amended (the “Code”). If the Reorganization is consummated,unless it determines such qualification is no longer in the best interest of shareholders, Equity Income will seek to continue to qualify as a regulated investment company by complying with the provisions applicable to certain investment companies, as defined in applicable sections of the Code, and to make distributions of taxable income sufficient to relieve it from all, or substantially all, Federal income taxes. In addition, Balance will make any required income or capital gain distributions prior to consummation of this Reorganization, in accordance with provisions of the Code relating to tax-free reorganizations of investment companies. Equity Income will succeed to the capital loss carryforwards of the Balance, which will be subject to the limitations described below. Balance has capital loss carryforwards that, in the absence of the Reorganization, would generally be available to offset their capital gains. As a result of the Reorganization, however, Balance will undergo an “ownership change” for tax purposes, and accordingly, Equity Income’s use of Balance’s capital loss carryforwards will be limited by the operation of the tax loss limitation rules of the Code. The Code generally limits the amount of pre-ownership change losses that may be used to offset post-ownership change gains to a specific annual loss limitation amount (generally the product of the net asset value of Balance’s immediately prior to the ownership change and a rate established by the IRS for the month of the Closing Date (for example, such rate is 4.03% for March, 2010)). Subject to certain limitations, any unused portion of these losses may be available in subsequent years, subject to the overall eight-year capital loss carryforward limit, as measured from the date of recognition. In addition, for five years after the Closing Date of the Reorganization, the Combined Fund generally will not be allowed to offset realized gains attributable to certain pre-Reorganization built-in gains of one Fund, if any, with capital loss carryforwards attributable to the other Fund. However, unexpired pre-ownership change losses of Balance could be used to offset realized built-in gains of Balance. As of August 31st, 2009, the Balance Fund had capital loss carryforwards of $845,956 which expire in 2017.

SM&R Balanced Fund, SM&R Equity Fund and SM&R Balanced Fund – Caltrust Equity Income Fund

			EQUITY INCOME FUND				SM& Balanced Fund				SM&R Growth Fund				SM&R Equity Income Fund				Combined

Common Stock
Basic Materials	(2.56	%)	Shares		Value		Shares		Value		Shares		Value		Shares		Value		Shares		Value
Chemicals	(2.1	%)
Du Pont (E.I.) De Nemours & Co.								1,550		49,492						6,100		194,773		7,650		244,265
International Flavors & Fragrances Inc								900		32,058										900		32,058
Monsanto Co.								875		73,395		3,488		292,573						4,363		365,968
PPG Industries, Inc.								900		49,860		16,200		897,480		7,200		398,880		24,300		1,346,220
Praxair Inc				4,592		351,839		675		51,719		2,700		206,874		2,700		206,874		10,667		817,306
Sensient Technologies Corp.								3,700		96,459						16,000		417,120		19,700		513,579
Sherwin-Williams Co/The				1,746		105,109														1,746		105,109
						456,948				352,982				1,396,927				1,217,647				3,424,504
Forest Products&Paper	(0.16	%)
Meadwestvaco Corp								1,000		21,950										1,000		21,950
Potlatch Corp.																8,000		232,800		8,000		232,800
										21,950								232,800				254,750

Iron / Steel	(0.13	%)
Nucor Corp								700		31,178										700		31,178
United States Steel Corp				4,000		175,120		200		8,756										4,200		183,876
						175,120				39,934												215,054
Mining	(0.16	%)
Alcoa Inc				7,050		84,953										15,000		180,750		22,050		265,703
						84,953												180,750				265,703
Total Basic Materials						717,021				414,866				1,396,927				1,631,197				4,160,011

Communications	(7.96	%)
Internet	(0.11	%)
Akamai Technologies Inc.								1,900		33,516		8,190		144,472						10,090		177,988

Media	(1.08	%)
CBS Corp.								2,000		20,700						17,900		185,265		19,900		205,965
McGraw-Hill Cos Inc/The				13,178		442,913														13,178		442,913
Viacom Inc.								2,000		50,080										2,000		50,080
Walt Disney Co.								6,000		156,240		23,535		612,851		11,100		289,044		40,635		1,058,135
						442,913				227,020				612,851				474,309				1,757,093

Telecommunications	(6.77	%)
Amdocs Ltd								1,550		37,696		6,008		146,115						7,558		183,811
American Tower Corp.								1,250		39,563										1,250		39,563
Arris Group Inc								6,500		86,190		20,700		274,482						27,200		360,672
AT&T Inc				21,244		553,406		11,325		295,016		24,300		633,015		48,000		1,250,400		104,869		2,731,837
Cisco Systems								10,225		220,860		76,050		1,642,680						86,275		1,863,540
Frontier Communications Corp																40,000		284,400		40,000		284,400
Harris Corp.								2,300		79,879		11,790		409,467		12,750		442,808		26,840		932,153
Motorola Inc.								6,200		44,516		27,810		199,676						34,010		244,192
Nokia Oyj ADR								6,500		91,065		30,690		429,967		8,000		112,080		45,190		633,112
Qualcomm Inc.								3,000		139,260		13,500		626,670		5,075		235,582		21,575		1,001,512
Rogers Communications Inc								1,300		35,789		5,040		138,751		5,425		149,350		11,765		323,890
Verizon Communications Inc.								5,450		169,168		25,920		804,557		34,000		1,055,360		65,370		2,029,085
Windstream Corporation								7,100		60,847						39,000		334,230		46,100		395,077
						553,406				1,299,849				5,305,379				3,864,209				11,022,843
																						0
Total Communications						996,319				1,560,385				6,062,702				4,338,518				12,957,924

Consumer, Cyclical	(6.46	%)
Housewares	(0.38	%)
Newell Rubbermaid Inc.								3,800		52,896		20,880		290,650		20,000		278,400		44,680		621,946

Lodging	(0.55	%)
Starwood Hotels & Resorts Inc.								3,000		89,340		8,685		258,639		18,000		536,040		29,685		884,019
Wyndham Worldwide Corp.								1,020		15,453										1,020		15,453
										104,793				258,639				536,040				899,472
Auto Manufacturers	(0.16	%)
Ford Motor Co*				34,500		262,200														34,500		262,200

Retail	(5.36	%)
Bed Bath & Beyond Inc.												7,200		262,656						7,200		262,656
Best Buy Company, Inc.								3,000		108,840		15,300		555,084						18,300		663,924
CVS Caremark Corp.								3,000		112,560		18,000		675,360						21,000		787,920
Foot Locker Inc.								3,000		31,980						15,400		164,164		18,400		196,144
Home Depot, Inc.												11,700		319,293						11,700		319,293
Limited Brands Inc.								7,600		113,392		8,100		120,852		35,000		522,200		50,700		756,444
Lowe's Co.								5,800		124,700		12,060		259,290						17,860		383,990
McDonald's Corp.				6,968		391,880		2,500		140,600						10,000		562,400		19,468		1,094,880
Penney (J.C.)								4,025		120,911						16,800		504,672		20,825		625,583
Ross Stores Inc				3,692		172,195														3,692		172,195
TJX Cos Inc				7,050		253,448		3,200		115,040						13,300		478,135		23,550		846,623

Penney (J.C.)												9,630		289,285						9,630		289,285
Target Corp.				6,939		326,133		4,150		195,050		3,600		169,200		3,500		164,500		18,189		854,883
Wal-Mart								4,000		203,480		9,000		457,830		16,000		813,920		29,000		1,475,230
						1,143,656				1,266,553				3,108,850				3,209,991				8,729,050

Total Consumer, Cyclical						1,405,856				1,424,242				3,658,139				4,024,431				10,512,668

Consumer, Non-Cyclical	(21.38	%)
Agriculture	(1.15	%)
Altria Group Inc				22,500		411,300														22,500		411,300
Philip Morris International Inc				7,500		342,825		2,050		93,706		7,988		365,131		8,375		382,821		25,913		1,184,483
Reynolds American Inc				5,992		273,894														5,992		273,894
						1,028,019				93,706				365,131				382,821				1,869,677

Beverages	(2.73	%)
Coca-Cola				14,500		707,165		3,500		170,695		21,600		1,053,432		14,500		707,165		54,100		2,638,457
PepsiCo, Inc.								2,800		158,676		17,100		969,057		12,000		680,040		31,900		1,807,773
						707,165				329,371				2,022,489				1,387,205				4,446,230

Biotechnology	(2.28	%)
Amgen Inc.								1,300		77,662		5,400		322,812						6,700		400,526
Celgene Corp.								2,575		134,338		16,560		863,935						19,135		998,273
Facet Biotech Corp												2,628		26,385						2,628		26,385
Genzyme Corp.								1,300		72,423		10,800		601,668		4,000		222,840		16,100		896,931
Gilead Science Inc.								1,500		67,590		21,600		973,296		5,000		225,300		28,100		1,266,186
PDL BioPharma Inc												13,140		118,917						13,140		118,917
										352,065				2,907,013				448,140				3,707,218
Commercial Services	(0.45	%)
Global Payments Inc.								1,075		45,623										1,075		45,623
Lender Processing Services Inc				10,211		350,033														10,211		350,033
Moody's Corp				5,092		138,706														5,092		138,706
Western Union Co/The				10,609		191,386														10,609		191,386
						680,125				45,623												725,748
Cosmetics / Personal Care	(2.68	%)
Alberto-Culver Co								1,800		47,502						10,575		279,074		12,375		326,576
Avon Products								3,050		97,204						13,000		414,310		16,050		511,514
Colgate-Palmolive Co.								1,475		107,233						8,675		630,673		10,150		737,905
Procter & Gamble, Inc.				3,880		209,947		4,700		254,317		23,400		1,266,174		19,650		1,063,262		51,630		2,793,700
						209,947				506,255				1,266,174				2,387,318				4,369,694

Food	(1.74	%)
ConAgra Foods, Inc.					2,050	42,087			31,000	636,430	33,050	678,517
Heinz (H.J.)					2,825	108,763			14,000	539,000	16,825	647,763
Kraft Foods Inc			4,384	124,286					4,844	137,327	9,228	261,613
McCormick & Co.					2,000	65,140			16,000	521,120	18,000	586,260
Safeway Inc			8,000	152,400							8,000	152,400
Sara Lee Corp			15,200	147,288							15,200	147,288
Supervalu Inc.					3,475	49,866	8,415	120,755	13,000	186,550	24,890	357,172
				423,974		265,855		120,755		2,020,427		2,831,012

Healthcare - Products	(2.51	%)
Baxter International Inc			12,811	729,202							12,811	729,202
Covidien PLC					900	35,613	4,185	165,600	3,750	148,388	8,835	349,601
Given Imaging Ltd.							33,300	393,273			33,300	393,273
Hologic Inc					1,750	28,788	16,200	266,652			17,950	295,457
Johnson & Johnson					5,000	302,200			26,000	1,571,440	31,000	1,873,640
Patterson Companies Inc.					1,500	40,845					1,500	40,845
Varian Medical Systems Inc					1,300	55,991	6,840	294,599			8,140	350,590
Zimmer Holdings, Inc.					1,000	47,350					1,000	47,350
				729,202		510,804		1,120,124		1,719,828		4,079,958

Healthcare - Services	(1.33	%)
Aetna Inc			8,584	244,644							8,584	244,644
Davita Inc					925	47,832	4,523	233,884	4,000	206,840	9,448	488,556
United Health Group Inc.					2,050	57,400	9,000	252,000			11,050	309,400
WellPoint, Inc.					1,550	81,918					1,550	81,918
Healthsouth Corp*			40,000	624,400							40,000	624,400
WellPoint Inc*			8,000	422,800							8,000	422,800
				1,291,844		187,149		485,884		206,840		2,171,718

Household Products / Wares	(0.82	%)
Fortune Brands Inc			2,146	85,432							2,146	85,432
Kimberly Clark Corp.					2,200	133,012			11,000	665,060	13,200	798,072
Tupperware Brands Corp									12,000	443,880	12,000	443,880
				85,432		133,012				1,108,940		1,327,384

Pharmaceuticals	(5.7	%)
Abbott Labs.					2,500	113,075	12,510	565,827	12,000	542,760	27,010	1,221,662
AmerisourceBergen Corp			13,812	294,334							13,812	294,334
Endo Pharmaceuticals Holdings Inc					1,750	39,498	10,305	232,584			12,055	272,081
Lilly (Eli) & Co.					3,850	128,821	37,080	1,240,697	20,350	680,911	61,280	2,050,429
Merck & Co., Inc.			1,200	38,916	5,300	171,879	34,200	1,109,106	23,000	745,890	63,700	2,065,791
Pfizer, Inc.			13,900	232,130	15,000	250,500			71,000	1,185,700	99,900	1,668,330
Wyeth					4,400	210,540	9,900	473,715	21,325	1,020,401	35,625	1,704,656
				565,380		914,313		3,621,929		4,175,662		9,277,284
												0
Total Consumer, Non-Cyclical				5,721,088		3,338,152		11,909,501		13,837,182		34,805,922

Energy	(12.04	%)

Oil & Gas	(8.88	%)
Anadarko Petroleum Corp.					4,000	211,480	9,540	504,380	12,000	634,440	25,540	1,350,300
Apache Corp			1,126	95,654							1,126	95,654
BP plc ADR					3,500	180,075	10,530	541,769	15,000	771,750	29,030	1,493,594
Chevron Corp			3,840	268,570	3,051	213,387	14,782	1,033,853	13,101	916,284	34,774	2,432,094
ConocoPhillips			5,348	240,820							5,348	240,820
Devon Energy Corp			3,852	236,436							3,852	236,436
ENSCO International Inc			4,170	153,873							4,170	153,873
Exxon Mobil Corp			7,736	534,944	9,000	622,350	40,500	2,800,575	31,000	2,143,650	88,236	6,101,519
Noble Corp							11,700	409,851			11,700	409,851
Royal Dutch Shell PLC					3,000	166,410	9,000	499,230	14,000	776,580	26,000	1,442,220
Transocean Ltd					900	68,256	2,700	204,768			3,600	273,024
Valero Energy Corp			12,000	224,880							12,000	224,880
				1,755,177		1,461,958		5,994,425		5,242,704		14,454,264

Oil & Gas Services	(2.02	%)
Baker Hughes			2,780	95,771			12,600	434,070			15,380	529,841
Oceaneering Int'l Inc.					1,500	78,255	6,660	347,452			8,160	425,707
Schlumberger Ltd.					2,200	123,640	15,300	859,860	9,500	533,900	27,000	1,517,400
Weatherford International LTD					5,200	103,740	16,920	337,554	19,000	379,050	41,120	820,344
				95,771		305,635		1,978,936		912,950		3,293,292

Pipelines	(0.88	%)
Boardwalk Pipeline Partners L.P.									14,500	339,445	14,500	339,445
El Paso Corp.							41,220	380,461			41,220	380,461
Spectra Energy Corp					2,525	47,521					2,525	47,521
Enterprise Products Partners L.P.									12,800	345,600	12,800	345,600
Plains All American Pipeline L.P.									8,000	379,520	8,000	379,520
Spectra Energy Corp									19,300	363,226	19,300	363,226
						47,521		380,461		1,427,791		1,855,772
												0
Total Energy				1,850,948		1,815,113		8,353,822		7,583,445		19,603,329

Financial	(15.35	%)

Banks	(7.36	%)
Bank of America Corp					10,000	175,900	17,367	305,486	47,000	826,730	74,367	1,308,116
Citigroup Inc.					14,500	72,500	34,700	173,500	68,400	342,000	117,600	588,000
Comerica, Inc.									18,000	480,060	18,000	480,060
Goldman Sachs Group					700	115,822	3,600	595,656			4,300	711,478
JPMorgan Chase & Co.			11,500	499,790	6,500	282,490	13,298	577,931	30,000	1,303,800	61,298	2,664,011
Keycorp									17,100	113,886	17,100	113,886
Morgan Stanley, Dean Witter, Discover					5,000	144,800	13,500	390,960	13,250	383,720	31,750	919,480
PNC Financial Services Group					3,000	127,770	16,200	689,958	13,219	562,997	32,419	1,380,725
Regions Financial Corp.									17,782	104,203	17,782	104,203
State Street Corp.					1,500	78,720	6,300	330,624	6,400	335,872	14,200	745,216
Trustco Bank Corp NY									5,000	31,100	5,000	31,100
U.S. Bancorp			10,300	232,986	5,000	113,100	18,000	407,160	23,000	520,260	56,300	1,273,506
Wells Fargo Co.			10,282	282,961	4,716	129,784	21,131	581,525	24,000	660,480	60,129	1,654,750
				1,015,737		1,240,886		4,052,800		5,665,108		11,974,531

Diversified Financial Services	(1.47	%)
American Express							4,500	152,190			4,500	152,190
Charles Schwab Corp.					5,600	101,136	26,460	477,868	29,500	532,770	61,560	1,111,774
Discover Financial Services					3,000	41,250	6,750	92,813			9,750	134,063
Franklin Resources Inc			4,100	382,653							4,100	382,653
Morgan Stanley			21,000	608,160							21,000	608,160
				990,813		142,386		722,870		532,770		2,388,839

Insurance	(4.36	%)
Allstate Corp					2,300	67,597	5,670	166,641	8,000	235,120	15,970	469,358
Arthur J Gallagher & Co			7,700	183,029					11,900	282,863	19,600	465,892
Aspen Insurance Holdings Ltd					4,125	104,775	9,315	236,601	20,825	528,955	34,265	870,331
Brown & Brown Inc.							11,160	221,749			11,160	221,749
Hartford Financial Svc. Gp.					1,375	32,615	7,560	179,323	5,950	141,134	14,885	353,072
Marsh & McLennan Companies, Inc.									12,350	290,719	12,350	290,719
MetLife Inc			7,328	276,705							7,328	276,705
Principal Financial Group					3,850	109,340	8,100	230,040	17,050	484,220	29,000	823,600

Prudential Financial, Inc.					3,000	151,740	7,650	386,937	12,225	618,341	22,875	1,157,018
Renaissance Re Holdings Ltd.					1,700	92,565	4,860	264,627	8,000	435,600	14,560	792,792
StanCorp Financial Group Inc			6,950	263,058							6,950	263,058
The Travelers Companies, Inc.					4,000	201,680			18,000	907,560	22,000	1,109,240
				722,792		760,312		1,685,919		3,924,512		7,093,534

Investment Companies	(0.03	%)
Allied Capital Corp.					3,400	10,200			18,000	54,000	21,400	64,200
						10,200				54,000		64,200
REITS	(2.02	%)
Avalonbay Communities, Inc.									3,301	212,683	3,301	212,683
Boston Properties Inc									3,700	224,146	3,700	224,146
BRE Properties									8,600	243,122	8,600	243,122
Duke Realty Corp.									12,000	138,240	12,000	138,240
HCP Inc									7,000	199,360	7,000	199,360
Health Care REIT, Inc.									4,500	192,195	4,500	192,195
Hospitality Properties Trust									11,400	207,708	11,400	207,708
Host Hotels & Resorts Inc.					2,265	22,582					2,265	22,582
Liberty Property Trust									11,300	370,301	11,300	370,301
Mack-Cali Realty Corp.									12,000	384,360	12,000	384,360
National Retail Properties Inc.									9,000	184,680	9,000	184,680
Prologis Trust									6,000	66,720	6,000	66,720
Simon Property Group, Inc.									4,130	262,751	4,130	262,751
Sovran Self Storage									7,000	205,730	7,000	205,730
Weingarten Realty Investors									19,000	377,340	19,000	377,340
				0		22,582		0		3,269,336		3,291,918

Savings&Loans
New York Community Bancorp									16,000	170,240	16,000	170,240
										170,240		170,240

Total Financial				2,729,342		2,176,366		6,461,589		13,615,965		24,983,262

Industrial	(10.96	%)
Aerospace/Defense	(2.94	%)
Boeing Company					2,075	103,065	9,000	447,030	6,500	322,855	17,575	872,950
General Dynamics Corp.					1,300	76,947					1,300	76,947
Goodrich Corp.					1,700	93,772	18,000	992,880			19,700	1,086,652
L-3 Communications Holdings, Inc.					900	66,960					900	66,960
Northrop Grumman Corp.					1,200	58,572	3,600	175,716	4,000	195,240	8,800	429,528
Rockwell Collins Inc.					1,225	56,399	11,700	538,668			12,925	595,067
United Technologies					1,400	83,104	13,500	801,360	13,000	771,680	27,900	1,656,144
						538,819		2,955,654		1,289,775		4,784,248
Building Materials	(0.15	%)
Cemex SAB de CV ADR							18,720	248,602			18,720	248,602

Electronics	(0.54	%)
Agilent Technologies Inc.					2,000	51,360	8,370	214,942			10,370	266,302
Thermo Fisher Scientific Inc					1,525	68,945	5,965	269,678			7,490	338,623
Tyco Electronics Ltd					2,400	54,768			9,450	215,649	11,850	270,417
						175,073		484,619		215,649		875,342
Hand/Machine Tools	(0.94	%)
Stanley Black & Decker Inc					3,400	139,162	18,000	736,740	16,000	654,880	37,400	1,530,782

Machinery - Construction & Mining	(0.7	%)
Caterpillar Inc			17,292	783,501	1,100	49,841	6,750	305,843			25,142	1,139,185
Metal Fabricate / Hardware	(0.08	%)
Worthington Industries Inc			10,400	136,968							10,400	136,968

Miscellaneous Manufacturing	(4.21	%)
3M Co.			3,212	231,585	1,925	138,793	9,000	648,900	10,200	735,420	24,337	1,754,698
Barnes Group Inc					2,000	29,380	8,640	126,922	10,500	154,245	21,140	310,547
Danaher Corp.					1,000	60,710	18,400	1,117,064			19,400	1,177,774
General Electric Co.					19,750	274,525	75,825	1,053,968	86,500	1,202,350	182,075	2,530,843
Honeywell International, Inc.					1,800	75,276	13,050	479,718			14,850	554,994
Illinois Tool Works Inc.
Ingersoll Rand Plc					1,900	58,691					1,900	58,691
ITT Corp			2,634	131,911							2,634	131,911
Leggett & Platt Inc			3,325	60,681							3,325	60,681
Tyco International Ltd.					900	28,521	4,185	132,623	3,750	118,838	8,835	279,981
				424,177		665,896		3,559,194		2,210,853		6,860,119

Sealed Air Corp.	(0.12	%)					10,395	196,569			10,395	196,569

Transportation	(1.28	%)
Burlington Northern, Inc.					950	78,869			3,500	290,570	4,450	369,439
Fedex Corp.					875	60,121	4,230	290,643			5,105	350,765
Seaspan Corp					2,250	15,233			25,000	169,250	27,250	184,483
Tidewater Inc			2,680	115,696							2,680	115,696
United Parcel Services Cl B					1,775	94,892	10,260	548,500	7,700	411,642	19,735	1,055,033
				115,696		249,114		839,143		871,462		2,075,415


Total Industrial				1,460,342		1,817,905		9,326,363		5,242,619		17,847,229

Technology	(10.06	%)
Computers	(3.94	%)
Apple Inc					1,500	252,315	6,475	1,089,160			7,975	1,341,475
Dell Inc*			12,249	193,902							12,249	193,902
Diebold Inc									8,250	248,903	8,250	248,903
EMC Corp.					6,000	95,400	27,720	440,748			33,720	536,148
Hewlett-Packard Co.			7,050	316,475	4,500	202,005	18,450	828,221			30,000	1,346,701
International Business Machines, Inc.					2,425	286,271	9,360	1,104,948	8,000	944,400	19,785	2,335,619
Research In Motion Limited					1,050	76,713	4,500	328,770			5,550	405,483
				510,377		912,704		3,791,846		1,193,303		6,408,230

Office/Business Equip	(0.19	%)
Pitney Bowes Inc.					1,725	38,554			11,925	266,524	13,650	305,078

Semiconductors	(2.84	%)
Analog Devices, Inc.							14,040	396,630			14,040	396,630
Intel Corp.			32,863	667,776	11,000	223,520	45,000	914,400	43,100	875,792	131,963	2,681,488
KLA-Tencor Corp.					2,000	53,140	10,440	325,728			12,440	378,868
Linear Technology Corp.					3,400	83,606	13,680	363,478	11,000	292,270	28,080	739,354
Marvell Technology Group							13,050	199,013			13,050	199,013
Maxim Integrated Products, Inc.							12,240	229,867			12,240	229,867
Texas Instruments
				667,776		360,266		2,429,115		1,168,062		4,625,219

Software	(3.09	%)
Electronic Arts Inc.					1,500	27,330					1,500	27,330
Intuit Inc.							22,320	619,826			22,320	619,826
Microsoft Corp			18,373	452,894	17,000	419,050	39,960	985,014	43,000	1,059,950	118,333	2,916,908
Oracle Corp.					8,000	174,960	59,130	1,293,764			67,130	1,468,804
				452,894		621,420		2,898,605		1,059,950		5,032,869

Total Technology				1,631,047		1,932,944		9,119,566		3,687,838		16,371,396

Utilities		(4.14	%)
Electric		(3.51	%)								6,255	165,195					6,255	165,195
Allegheny Energy Inc.								1,600	42,256		8,100	218,457		5,000	132,050		14,700	392,763
Ameren Corp.								3,000	80,910					10,900	293,973		13,900	374,883
Consolidated Edison Inc					7,700	309,463								11,000	442,090		18,700	751,553
Constellation Energy Group								3,000	94,950					8,000	278,240		11,000	373,190
Dominion Resources											9,000	297,720					9,000	297,720
DTE Energy Co.														33,000	511,170		33,000	511,170
Duke Energy Corp					9,200	142,508		2,000	30,980								11,200	173,488
Entergy Corp					2,146	169,534					4,500	225,090					6,646	394,624
Exelon Corp					3,846	192,377		1,400	70,028		3,600	202,248		4,550	255,619		13,396	720,272
FPL Group, Inc.								1,100	61,798					10,000	329,100		11,100	390,898
NRG Energy, Inc.								1,250	33,563								1,250	33,563
Pinnacle West Capital														3,950	116,130		3,950	116,130
PPL Corp.								925	27,195					8,000	316,240		8,925	343,435
Progress Energy Inc					1,979	78,229								10,000	312,000		11,979	390,229
Southern Co.								2,300	71,760								2,300	71,760
Wisconsin Energy Corp.											4,500	204,615					4,500	204,615
						892,111			513,440			1,313,325			2,986,612			5,705,487
Gas		(0.64	%)
CenterPoint Energy, Inc.								2,000	24,800								2,000	24,800
Nicor														7,000	253,540		7,000	253,540
Nisource Inc.														27,000	356,670		27,000	356,670
Sempra Energy								675	33,865		4,500	225,765		2,875	144,239		8,050	403,869
									58,665			225,765			754,449			1,038,879

Total Utilities						892,111			572,104			1,539,090			3,741,061			6,744,366


Exchange traded Funds
Powershares QQQ											100,000	4,003,000					100,000	4,003,000
SPDR Trust Series 1											20,000	2,049,200					20,000	2,049,200
Total Exchange traded funds												6,050,031						6,050,031

Total Common Stock (Cost $169,180,945)						17,404,074			15,051,928			63,877,730			57,702,255			154,036,137

US Govt Agency Securities		(0	%)
F H L M C (PASS-THRU)
FHLMC Pool 284839, 8.500% Due 01-01-17								2641.08	2,861								2,641	2,861

F N M A (PASS-THRU)
FNMA 48974, 8.000% Due 06-01-17								18775.19	20,352								18,775	20,352
Total US Govt Agency (Cost 21,255)									23,213
																		23,213
CORPORATE BONDS - FINANCIAL
Consumer Discretionary
Diversified Consumer Services
Hertz Corp.	7.400% Due 03-01-11							455,000	423,150								455,000	423,150

Consumer Staples
Personal Products
Avon Products Inc.	7.150% Due 11-15-09							500,000	505,792								500,000	505,792

Financials
Capitall markets
Ameriprise Financial Inc	5.650% Due 11-15-15							500,000	490,077								500,000	490,077
Goldman Sachs Group Inc	5.300% Due 02-14-12							500,000	526,750								500,000	526,750

Diversified Financial Services
General Electric Capital Corp.	3.750% Due 12-15-09							350,000	352,674								350,000	352,674

Insurance
Mony Group Inc.	8.350% Due 03-15-10							500,000	514,176								500,000	514,176

Thrifts & Mortgage Finance
Washington Mutual	0.000% Due 01-15-11							250,000	222,500								250,000	222,500

Industrials
ElectricalEquipment
Emerson Electric Co	5.250% Due 10-15-18							500,000	539,795								500,000	539,795

Material
Construction materials
Vulcan Materials	6.400% Due 11-30-17							500,000	504,953								500,000	504,953

Total Corporate Bonds (coast 4,006,905)									4,079,867									4,079,867

Short-Term Investments		(2.36	%)
SM&R Money Market Fund (cost $2,445,485)								1,376,232	1,376,232		557,609	557,609		512,017	512,017		2,445,858	2,445,858

United States Treasury Bills (7.3%)				Par Value
United States Treasury Bill 10/22/2009 (b)					200,000	199,949											200,000	199,949
United States Treasury Bill 11/19/2009					1,200,000	1,199,678											1,200,000	1,199,678
Total United States Treasury Bills						1,399,627												1,399,622

Total Short-Term Investments (Cost $3,845,452)						1,399,627		1,376,232	1,376,232		557,609	557,609		512,017	512,017		2,445,858	3,845,485

Total Investments (Cost $177,054,557) (a) (99.52%)						18,803,701			20,531,240			64,435,339			58,214,272			161,984,553
Other Net Assets (0.48%)						367,529			114,638			133,460			170,072			785,699
Net Assets (100.00%)						19,171,230			20,645,878			64,568,799			58,384,344			162,770,252


(a) Aggregate cost for federal income tax purpose is $177,054,557. At August 31, 2009, unrealized appreciation (depreciation) of securities is as follows:

Unrealized appreciation						3,549,973			1,912,911			8,927,720			7,399,333			21,789,937
Unrealized depreciation						(2,342,199	)		-3,308,440			-15,225,214			-15,984,089			-36,859,942
Net unrealized appreciation (depreciation)						1,207,774			(1,395,529	)		(6,297,494	)		(8,584,756	)		-15,070,005

STATEMENT OF ASSETS AND LIABILITIES		August 31, 2009

		SM&R GROWTH FUND			SM&R BALANCED FUND			SM&R EQUITY INCOME FUND			CIT EQUITY INCOME FUND			Pro Forma Adjustment			Pro Forma Combined

ASSETS
Investments in unaffiliated securities, at cost		$	70,175,224		$	20,550,537		$	66,287,011		$	17,595,927		$	-		$	174,608,699
Investment in affiliated money market fund at cost			557,609			1,376,232			512,017			0			-			2,445,858
	Total cost of investments		70,732,833			21,926,769			66,799,028			17,595,927			-			177,054,557

Investments in unaffiliated securities, at value		$	63,877,730		$	19,155,008		$	57,702,255		$	18,803,701		$	-		$	159,538,694
Investment in affiliated money market fund, at value			557,609			1,376,232			512,017			0			-			2,445,858
	Total market value of investments		64,435,339			20,531,240			58,214,272			18,803,701			-			161,984,552

Cash			0			0						114,193			-			114,193
Prepaid expenses			43,894			19,083			38,027			0			-			101,004
Receivable for:
	Capital stock sold		5,534			2,506			5,539			25,522			-			39,101
	Dividends		152,855			43,960			209,475			44,480			-			450,770
	Investments sold		0			90						221,674			-			221,764
	Expense reimbursement		7,715			8,358			4,613			0			-			20,686
	Interest		0			77,103			-			0						77,103
Other assets			93,408			15,158			62,734			0						171,300
TOTAL ASSETS			64,738,745			20,697,498			58,534,660			19,209,570			-			163,180,473
LIABILITIES
Capital stock reacquired			12,744			0			13,342			20,129			0			46,215
Payable to investment adviser for fund expenses			53,245			17,038			42,138			8,061			0			120,482
Accrued:																		0
	Investment advisory fees		40,805			13,020			36,727			0			0			90,552
	Administrative service fees		13,602			4,340			12,242			1,333			0			31,517
	Shareholder service fees - K shares		0			0						1,041			0			1,041
	Distribution fees		3,147			3,413			6,348			857			0			13,765
Other liabilities			34,045			9,980			28,570			6,919			27,135			106,649
TOTAL LIABILITIES			157,588			47,791			139,367			38,340			27,135			410,221
NET ASSETS		$	64,581,157		$	20,649,707		$	58,395,293		$	19,171,230		$	(27,135	)	$	162,770,252

NET ASSETS ARE COMPRISED OF THE FOLLOWING:
Capital (par value and additional paid-in)			75,911,404			22,856,565			70,473,507			19,842,421			0			189,083,897
Undistributed net investment income			130,022			66,803			269,583			12,157			(27,135	)		451,430
Accumulated net realized gain (loss) on investments			(5,162,775	)		(878,132	)		(3,763,041	)		(1,891,122	)		0			(11,695,070	)
Net unrealized appreciation (depreciation) of investments			(6,297,494	)		(1,395,529	)		(8,584,756	)		1,207,774			0			(15,070,005	)
NET ASSETS		$	64,581,157		$	20,649,707		$	58,395,293		$	19,171,230		$	(27,135	)	$	162,770,252

NET ASSETS:
Direct Shares			0			0			0			14,723,793			129,539,816			144,263,609
Class A			2,715,730			2,768,293			5,113,147			0			(1,766	)		10,595,404
Class B			785,784			909,401			1,769,936			0			(578	)		3,464,543
Class K			0			0			0			4,447,437			(741	)		4,446,696
Class T			61,079,643			16,972,013			51,512,210			0			(129,563,866	)		0
TOTAL NET ASSETS		$	64,581,157		$	20,649,707		$	58,395,293		$	19,171,230		$	(27,135	)	$	162,770,252

CAPITAL STOCK:
Direct shares (no par value):
	Authorized							unlimited			unlimited
	Outstanding								1,120,958	9,862,180		10,983,138
Class A ($.01 par value per share):
	Authorized		50,000,000		50,000,000		50,000,000			0	unlimited
	Outstanding		899,420		211,218		369,204			-		806,347
Class B ($.01 par value per share):
	Authorized		25,000,000		25,000,000		25,000,000			0	unlimited
	Outstanding		266,753		68,615		132,883			-		263,664
Class K (no par value):
	Authorized							unlimited		-	unlimited
	Outstanding								1,241,946	1,241,946		1,241,946
Class T ($.01 par value per share):
	Authorized		95,000,000		25,000,000		75,000,000					N/A
	Outstanding		19,783,519		1,241,946		3,546,478					N/A
Class A:
	Net asset value and redemption price per share	$	3.02	$	13.11	$	13.85				$	13.14
	Offering price per share:
	(Net assets value of $3.02 / 95%)	$	3.18	$	13.80	$	14.58				$	13.14
Class B:
	Net asset value and offering price per share	$	2.95	$	13.25	$	13.32				$	13.14
Class T:
	Net asset value and redemption price per share	$	3.09	$	13.67	$	14.52					N/A
	Offering price per share:
	(Net assets value of $3.09 / 94.25%)	$	3.28	$	14.50	$	15.41					N/A
Direct Shares:
	Net asset value, redemption price and offering price per share							$	13.14		$	13.14
Class K:
	Net asset value, redemption price and offering price per share							$	13.07		$	13.07

See notes to financial statements.

STATEMENT OF OPERATIONS	Year Ended August 31, 2009

	SM&R GROWTH FUND			SM&R BALANCED FUND			SM&R EQUITY INCOME FUND			CIT EQUITY INCOME FUND			Pro Forma Adjustment			Pro Forma Combined

INVESTMENT INCOME
Dividends	$	1,534,106		$	405,145		$	2,430,252		$	462,656					$	4,832,159
Interest		14,255			318,253			6,430			2,507						341,445
Interest from affiliated money market fund		352			331			694			63						1,440
TOTAL INVESTMENT INCOME		1,548,713			723,729			2,437,376			465,226						5,175,044
EXPENSES
Investment advisory fees		451,297			143,621			420,622			83,253			(338,510	)		760,283
Administrative service fees		150,432			47,873			140,207			13,857			(237,385	)		114,984
Professional fees		20,879			8,854			19,566			16,522			(40,749	)		25,072
Custody and transaction fees		15,347			11,396			14,151			25,711			(54,477	)		12,128
Directors' fees and expenses		9,973			9,973			9,968			3,602			(30,266	)		3,250
Compliance expenses		12,874			4,098			11,977			11,725			16,541			57,215
Qualification fees
Direct shares		0			0						1,574			1,922			3,496
Class A		4,838			5,406			5,867						(12,615	)		3,496
Class B		4,662			4,071			5,587						(10,825	)		3,496
Class K		0									1,574			1,922			3,496
Class T		16,127			12,143			13,335						(16,127	)		25,478
Shareholder reporting expenses
Direct shares											1,434			7,744			9,178
Class A		1,813			887			2,177									4,877
Class B		588			328			878									1,794
Class K											1,434						1,434
Class T		38,474			5,512			22,562						(66,548	)		0
Distribution fees
Class A		6,639			6,401			11,902									24,942
Class B		6,402			6,825			14,228									27,455
Class K											18,134						18,134
Insurance expenses		32,128			9,335			29,730			814						72,007
Other Expenses		410			82			87									579
TOTAL EXPENSES		772,883			276,805			722,844			179,633			(779,372	)		1,172,793
LESS EXPENSES REIMBURSED		(18,892	)		(32,733	)		(24,305	)		0						(75,930	)
NET EXPENSES		753,991			244,072			698,539			179,633			(779,372	)		1,096,863
INVESTMENT INCOME - NET		794,722			479,657			1,738,837			285,593			779,372			4,078,181
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments		(5,162,692	)		(878,129	)		(3,750,821	)		(1,287,810	)					(11,079,452	)
Net realized loss on futures contracts											(103,978	)					(103,978	)
Change in unrealized depreciation of investments		(11,795,096	)		(2,793,131	)		(13,816,547	)		(2,038,462	)					(30,443,236	)
NET LOSS ON INVESTMENTS		(16,957,788	)		(3,671,260	)		(17,567,368	)		(3,430,250	)					(41,626,666	)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	(16,163,066	)	$	(3,191,603	)	$	(15,828,531	)	$	(3,144,657	)	$	779,372		$	(37,548,485	)

PRO FORMA FOOTNOTES REGARDING THE REORGANIZATION OF SM&R BALANCED FUND, SM&R EQUITY INCOME FUND AND SM&R GROWTH FUND INTO CALIFORNIA INVESTMENT TRUST'S EQUITY INCOME FUND. AS OF AUGUST 31, 2009 (UNAUDITED).

NOTE 1 — Basis of Combination:

The Board of Trustees of SM&R Funds (the “Trust”) on behalf of its portfolios, SM&R Growth Fund (“Growth”) and SM&R Equity Income Fund (“Income”) and the SM&R Balanced Fund (“Balanced”) (collectively the “SM&R Funds”), at a meeting held on February 18, 2010 approved the Funds’ entering into an Agreement and Plan of Reorganization (the “Plan”) pursuant to which, the Funds will transfer all of their assets, subject to its liabilities, to the California Investment Trust Equity Income Fund, (the “Equity Income”) and all together (the “Funds”) in exchange for a number of shares of Equity Income equal in value to the net assets of the Funds (the “Reorganization”). If the Reorganization is consummated, shares of Equity Income then will be distributed to the SM&R Funds’ shareholders on a prorata basis in liquidation of the Funds. The Reorganization will be accounted for as a tax-free merger of investment companies. The unaudited pro forma condensed combined schedule of investments and condensed combined statement of assets and liabilities reflect the financial position of the Funds at August 31, 2009 as if the Reorganization had occurred on that date. The unaudited pro forma condensed combined statement of operations reflects the results of operations of the Funds for the twelve months ended August 31, 2009 as if the Reorganization had occurred on September 1, 2008. These statements have been derived from the books and records of the Funds utilized in calculating daily net asset value at the dates indicated above in conformity with the accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. Actual results may differ from these estimates. As of August 31, 2009, all the securities held by the SM&R Funds comply with the compliance guidelines and/or investment restrictions of Equity Income. The historical cost of investment securities will be carried forward to the surviving entity. The Funds’ fiscal year end is August 31. The accompanying pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of the Funds included or incorporated by reference in their respective Statements of Additional Information. Such pro forma condensed combined financial statements are presented for information purposes only and may not necessarily be representative of what the actual combined financial statements would have been had the Reorganization occurred on August 31, 2009 or September 1, 2008, as applicable. Following the Reorganization, Equity Income will be the surviving fund.

NOTE 2 — SM&R Funds and Equity Income Valuation:

NOTE 3 — Capital Shares:

The pro forma net asset value per share assumes the issuance of shares of Equity Income that would have been issued at August 31, 2009 in connection with the proposed Reorganization. The number of shares of each class assumed to be issued is equal to the net asset value of the shares of SM&R Funds of that class, as of August 31, 2009, divided by the net asset value per share of the corresponding class of shares of Equity Income as of August 31, 2009. The pro forma number of shares outstanding, by class, for Equity Income consists of the following at August 31, 2009.

Class of Shares	Growth Fund Pre-Combination		Shares of SM&R Equity Income Fund Pre-Combination			Shares of Balanced Fund Pre-Combination			Shares of CIT Equity Income Fund Pre-Combination		Additional Shares Assumed Issued in Reorganization			Total Outstanding Shares Post-Combination
Direct Shares	0	(a)		0	(a)		0	(a)		1,120,958		9,862,180	(b)		10,983,138
Class A	599,420			369,204			211,218			0		806,347			806,347
Class B	266,753			132,883			68,615			0		263,664			263,664
Class K	0	(a)		0	(a)		0	(a)		340,350		0			340,350

(a) No Direct Shares or Class K shares outstanding

(b) Class T shares are being merged into the Direct Shares

NOTE 4 — Pro Forma Operating Expenses:

NOTE 5 — Federal Income Taxes:

Each of the SM&R Funds and the Equity Income has elected to be taxed as a “regulated investment company” under the Internal Revenue Code of 1986, as amended (the “Code”). If the Reorganization is consummated, unless it determines such qualification is no longer in the best interest of shareholders, Equity Income will seek to continue to qualify as a regulated investment company by complying with the provisions applicable to certain investment companies, as defined in applicable sections of the Code, and to make distributions of taxable income sufficient to relieve it from all, or substantially all, Federal income taxes. In addition, Aurora will make any required income or capital gain distributions prior to consummation of this Reorganization, in accordance with provisions of the Code relating to tax-free reorganizations of investment companies. Equity Income will succeed to the capital loss carryforwards of the SM&R Funds, which will be subject to the limitations described below. SM&R Funds have capital loss carryforwards that, in the absence of the Reorganization, would generally be available to offset their capital gains. As a result of the Reorganization, however, SM&R Funds will undergo an “ownership change” for tax purposes, and accordingly, Equity Income’s use of SM&R Funds’ capital loss carryforwards will be limited by the operation of the tax loss limitation rules of the Code. The Code generally limits the amount of pre-ownership change losses that may be used to offset post-ownership change gains to a specific annual loss limitation amount (generally the product of the net asset value of SM&R Funds’ immediately prior to the ownership change and a rate established by the IRS for the month of the Closing Date (for example, such rate is 4.03% for March, 2010)). Subject to certain limitations, any unused portion of these losses may be available in subsequent years, subject to the overall eight-year capital loss carryforward limit, as measured from the date of recognition. In addition, for five years after the Closing Date of the Reorganization, the Combined Fund generally will not be allowed to offset realized gains attributable to certain pre-Reorganization built-in gains of one Fund, if any, with capital loss carryforwards attributable to the other Fund. However, unexpired pre-ownership change losses of the SM&R Funds could be used to offset realized built-in gains of SM&R Funds. As of August 31st, 2009, the Balanced Fund had capital loss carryforwards of $845,956 which expire in 2017, the Growth Fund had capital loss carryforwards of $5,196,609 which expire in 2017 and the Equity Income fund had capital loss carryforwards of $3,537,981 which expire in 2017.

SM&R Government Bond Fund and U.S. Government Securities Fund

SCHEDULE OF INVESTMENTS			August 31, 2009											August 31, 2009


				SM&R GOVERNMENT BOND FUND											US GOV'T SECURITIES FUND
				Interest/											Interest/
			Maturity	Stated			Face		Value					Maturity	Stated			Face		Value
CORPORATE BONDS			Date	Rate (%)			Amount							Date	Rate (%)			Amount

FINANCIALS --
DIVERSIFIED FINANCIAL SERVICES --	1.56	%
MBNA Master Credit Card Trust			02/15/12		7.000		$	500,000	$	501,184

TOTAL FINANCIALS --					1.55	%				501,184
MATERIALS --
METALS & MINING --	3.07	%
Carpenter Technology Corp.			05/15/13		6.625			1,000,000		990,477

TOTAL MATERIALS --					3.07	%				990,477

TOTAL CORPORATE BONDS --					4.63	%
				(Cost $1,505,021)						1,491,661

U S GOVERNMENT AGENCY AND U S GOVERNMENT SECURITIES

U S GOVERNMENT AGENCY SECURITIES --	23.55	%
Federal Home Loan Mortgage Corp.			11/15/13		4.875			1,000,000		1,098,942
Federal National Mortgage Assoc.			12/15/10		4.750			1,900,000		2,002,361
Federal National Mortgage Assoc.			02/01/11		6.250			1,850,000		1,961,228
Federal National Mortgage Assoc.			03/15/11		5.500			1,300,000		1,393,687
Federal National Mortgage Assoc. (b)			02/15/10		3.875			1,100,000		1,117,654
Private Export Funding Corp. (b)			01/15/10		7.200			15,000		15,381
										7,589,253
Government National Mortgage Association												23.55	%
Ginnie Mae														04/15/14		6.000			54,405		58,470
Ginnie Mae														04/15/14		6.000			85,349		91,726
Ginnie Mae														04/15/16		6.000			59,484		63,929
Ginnie Mae														04/15/16		6.500			106,121		113,757
Ginnie Mae														05/15/16		6.000			92,782		99,715
Ginnie Mae														09/15/18		10.000			8,503		9,540
Ginnie Mae														10/15/18		9.000			25,480		28,426
Ginnie Mae														07/15/20		5.000			1,094,390		1,158,548
Ginnie Mae														01/15/25		5.500			305,607		326,697
Ginnie Mae														01/15/26		6.000			485,345		516,386
Ginnie Mae														04/15/36		5.500			2,668,265		2,797,822
Ginnie Mae														03/15/38		5.000			2,651,952		2,735,966
Ginnie Mae														06/15/38		6.000			1,817,414		1,919,679
																					9,920,661

U S GOVERNMENT SECURITIES --	44.84	%
U S Treasury Bond			05/15/16		7.250			800,000		1,009,750				05/15/16		7.250			3,000,000		3,787,032
U S Treasury Bond			05/15/17		8.750			2,375,000		3,265,995
U S Treasury Note			08/31/11		4.625			1,500,000		1,607,812
U S Treasury Note			10/31/11		4.625			2,500,000		2,688,867
U S Treasury Note			11/15/12		4.000			2,000,000		2,153,282
U S Treasury Note			05/15/14		4.750			1,319,000		1,465,636
U S Treasury Note			02/15/15		4.000			600,000		643,547
U S Treasury Note			05/15/15		4.125			1,500,000		1,617,774
U S Treasury Note														02/28/13		2.750			300,000		310,875
U S Treasury Note														10/31/13		2.750			2,500,000		2,571,290
U S Treasury Note														11/15/18		3.750			2,900,000		2,978,620
U S Treasury Note														05/15/38		4.500			2,300,000		2,423,987
U S Treasury Note														08/15/39		4.500			6,900,000		7,277,348
										14,452,663											19,349,152
TOTAL U S GOVERNMENT AGENCY AND U S GOVERNMENT SECURITIES --					68.39	%										68.39	%
				(Cost $20,645,653)						22,041,916					(Cost $28,899,408)						29,269,813
COMMERCIAL PAPER

FINANCIALS --
CAPITAL MARKETS --	3.26	%
General Re Corp.			09/09/09		0.190			1,050,000		1,049,956

TOTAL FINANCIALS --					3.26	%				1,049,956
INDUSTRIALS --
ELECTRICAL EQUIPMENT --	4.11	%
Sharp Electronics Corp.			9/3/2009		0.250			1,325,000		1,324,982

TOTAL INDUSTRIALS --					4.11	%				1,324,982
UTILITIES --
ELECTRIC UTILITIES --	4.88	%
General Electric Co.			9/21/2009		0.210			1,575,000		1,574,816

TOTAL UTILITIES --					4.88	%				1,574,816

TOTAL COMMERCIAL PAPER --					12.25	%
				(Cost $3,949,754)						3,949,754
US GOVERNMENT AGENCY
SHORT-TERM OBLIGATIONS

US GOVERNMENT AGENCY SECURITIES --	13.58	%
Federal Home Loan Bank			09/01/09		0.150			1,096,000		1,096,000
Federal Home Loan Bank			09/16/09		0.145			2,082,000		2,081,874
Federal Home Loan Bank			09/23/09		0.140			1,200,000		1,199,897
										4,377,771
TOTAL US GOVERNMENT SHORT TERM OBLIGATIONS --					13.58	%
				(Cost $4,377,771)						4,377,771
							Shares
MONEY MARKET FUND
SM&R Money Market Fund, 0.00% (a)								92,741	$	92,741

TOTAL MONEY MARKET FUND --					0.29	%
				(Cost $92,741)						92,741

TOTAL INVESTMENTS --					99.14	%					TOTAL INVESTMENTS --					99.10	%
				(Cost $30,570,940)						31,953,843	(Cost $28,899,408) (c )										29,269,813

CASH AND OTHER ASSETS, LESS LIABILITIES --					0.86	%				272,170	CASH AND OTHER ASSETS, LESS LIABILITIES --					0.90	%				265,760

NET ASSETS --					100.00	%			$	32,226,013	NET ASSETS --					100.00	%			$	29,535,573

Notes to Schedule of Investments:											(c) Aggregate cost for federal income tax purposes is $59,470,348.
(a) The rate quoted is the annualized seven-day yield of the fund at August 31, 2009. 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.
											At August 31, 2009, unrealized appreciation (depreciation) of securities for federal incomtax purposes is as follows:
(b) Long Term obligations that will mature in less than one year.

														Unrealized Appreciation							907,890
														Unrealized Depreciation							(537,485	)
														Net unrealized appreciation						$	370,405

SCHEDULE OF INVESTMENTS			August 31, 2009


			COMBINED US GOV'T SECURITIES FUND
				Interest/
			Maturity	Stated			Face		Value
CORPORATE BONDS			Date	Rate (%)			Amount

FINANCIALS --
DIVERSIFIED FINANCIAL SERVICES --	0.81	%
MBNA Master Credit Card Trust			02/15/12		7.000		$	500,000	$	501,184

TOTAL FINANCIALS --					0.81	%				501,184
MATERIALS --
METALS & MINING --	1.60	%
Carpenter Technology Corp.			05/15/13		6.625			1,000,000		990,477

TOTAL MATERIALS --					1.60	%				990,477

TOTAL CORPORATE BONDS --					2.42	%
				(Cost $1,505,021)						1,491,661

U S GOVERNMENT AGENCY AND U S GOVERNMENT SECURITIES

U S GOVERNMENT AGENCY SECURITIES --	12.29	%
Federal Home Loan Mortgage Corp.			11/15/13		4.875			1,000,000		1,098,942
Federal National Mortgage Assoc.			12/15/10		4.750			1,900,000		2,002,361
Federal National Mortgage Assoc.			02/01/11		6.250			1,850,000		1,961,228
Federal National Mortgage Assoc.			03/15/11		5.500			1,300,000		1,393,687
Federal National Mortgage Assoc. (b)			02/15/10		3.875			1,100,000		1,117,654
Private Export Funding Corp. (b)			01/15/10		7.200			15,000		15,381
										7,589,253
Government National Mortgage Association
Ginnie Mae	16.06	%
Ginnie Mae			04/15/14		6.000			54,405		58,470
Ginnie Mae			04/15/14		6.000			85,349		91,726
Ginnie Mae			04/15/16		6.000			59,484		63,929
Ginnie Mae			04/15/16		6.500			106,121		113,757
Ginnie Mae			05/15/16		6.000			92,782		99,715
Ginnie Mae			09/15/18		10.000			8,503		9,540
Ginnie Mae			10/15/18		9.000			25,480		28,426
Ginnie Mae			07/15/20		5.000			1,094,390		1,158,548
Ginnie Mae			01/15/25		5.500			305,607		326,697
Ginnie Mae			01/15/26		6.000			485,345		516,386
Ginnie Mae			04/15/36		5.500			2,668,265		2,797,822
Ginnie Mae			03/15/38		5.000			2,651,952		2,735,966
			06/15/38		6.000			1,817,414		1,919,679
										9,920,661
U S GOVERNMENT SECURITIES --	54.73	%
U S Treasury Bond			05/15/16		7.250			3,800,000		4,796,782
U S Treasury Bond			05/15/17		8.750			2,375,000		3,265,995
U S Treasury Note			08/31/11		4.625			1,500,000		1,607,812
U S Treasury Note			10/31/11		4.625			2,500,000		2,688,867
U S Treasury Note			11/15/12		4.000			2,000,000		2,153,282
U S Treasury Note			05/15/14		4.750			1,319,000		1,465,636
U S Treasury Note			02/15/15		4.000			600,000		643,547
U S Treasury Note			05/15/15		4.125			1,500,000		1,617,774
U S Treasury Note			02/28/13		2.750			300,000		310,875
U S Treasury Note			10/31/13		2.750			2,500,000		2,571,290
U S Treasury Note			11/15/18		3.750			2,900,000		2,978,620
U S Treasury Note			05/15/38		4.500			2,300,000		2,423,987
U S Treasury Note			08/15/39		4.500			6,900,000		7,277,348
										33,801,815
TOTAL U S GOVERNMENT AGENCY AND U S GOVERNMENT SECURITIES --					83.08	%
				(Cost $49,454,061)						51,311,729
COMMERCIAL PAPER

FINANCIALS --
CAPITAL MARKETS --	1.70	%
General Re Corp.			09/09/09		0.190			1,050,000		1,049,956

TOTAL FINANCIALS --					3.26	%				1,049,956
INDUSTRIALS --
ELECTRICAL EQUIPMENT --	2.15	%
Sharp Electronics Corp.			9/3/2009		0.250			1,325,000		1,324,982

TOTAL INDUSTRIALS --					2.15	%				1,324,982
UTILITIES --
ELECTRIC UTILITIES --	2.55	%
General Electric Co.			9/21/2009		0.210			1,575,000		1,574,816

TOTAL UTILITIES --					2.55	%				1,574,816

TOTAL COMMERCIAL PAPER --					6.40	%
				(Cost $3,949,754)						3,949,754
US GOVERNMENT AGENCY
SHORT-TERM OBLIGATIONS

US GOVERNMENT AGENCY SECURITIES --	13.58	%
Federal Home Loan Bank			09/01/09		0.150			1,096,000		1,096,000
Federal Home Loan Bank			09/16/09		0.145			2,082,000		2,081,874
Federal Home Loan Bank			09/23/09		0.140			1,200,000		1,199,897
										4,377,771
TOTAL US GOVERNMENT SHORT TERM OBLIGATIONS --					7.09	%
				(Cost $4,377,771)						4,377,771
							Shares
MONEY MARKET FUND
SM&R Money Market Fund, 0.00% (a)								92,741	$	92,741

TOTAL MONEY MARKET FUND --					0.15	%
				(Cost $92,741)						92,741

TOTAL INVESTMENTS --					99.13	%
				(Cost $59,470,348)						61,223,656

CASH AND OTHER ASSETS, LESS LIABILITIES --					0.87	%				537,930

NET ASSETS --					100.00	%			$	61,761,586

STATEMENT OF ASSETS AND LIABILITIES	August 31, 2009



ASSETS	SM&R GOVERNMENT BOND FUND			CIT U.S. GOV'T SECURITIES FUN			Pro Forma Adjustment			Pro Forma Combined
Investments in unaffiliated securities, at cost	$	30,478,199		$	28,899,408					$	59,377,607
Investment in affiliated money market fund at cost		92,741			-						92,741
Total investments at cost		30,570,940			28,899,408						59,470,348

Investments in unaffiliated securities, at value	$	31,861,102		$	29,269,813					$	61,130,915
Investment in affiliated money market fund at value		92,741			-						92,741
Total investments at value		31,953,843			29,269,813						61,223,656

Prepaid expenses		33,025									33,025
Receivable for:
Capital stock sold		4,626			38,543						43,169
Interest		278,475			206,917						485,392
Expense reimbursement		12,447									12,447
Cash					97,889						97,889
Other assets		2,958									2,958
TOTAL ASSETS		32,285,374			29,613,162						61,898,536
LIABILITIES
Payable for fund shares repurchased					49,661						49,661
Distribution payable		289			5,908						6,197
Payable to investment adviser for fund expenses		22,202			8,249						30,451
Accrued:
Shareholder service fee - K shares					1,475						1,475
Investment advisory fees		13,633			8,832						22,465
Administrative service fees		6,816			2,041						8,857
Distribution fees		1,407			1,423						2,830
Other liabilities		10,246						4,768			15,014
TOTAL LIABILITIES		54,593			77,589			4,768			136,950
NET ASSETS	$	32,230,781		$	29,535,573		$	(4,768	)	$	61,761,586

NET ASSETS ARE COMPRISED OF THE FOLLOWING:
Capital (par value and additional paid-in)		31,297,747			29,955,646						61,253,393
Accumulated net investment income (loss)		(130	)		34,243			(4,768	)		29,345
Accumulated net realized loss on investments		(449,739	)		(824,721	)					(1,274,460	)
Net unrealized appreciation of investments		1,382,903			370,405						1,753,308
NET ASSETS	$	32,230,781		$	29,535,573		$	(4,768	)	$	61,761,586

NET ASSETS:
Direct Shares					22,110,768			30,668,510			52,779,278
Class K					7,424,805			(573	)		7,424,232
Class A		1,252,096						(97	)		1,251,999
Class B		306,100						(24	)		306,076
Class T		30,672,585						(30,672,585	)		-
TOTAL NET ASSETS	$	32,230,781		$	29,535,573					$	61,761,586

CAPITAL STOCK
Direct Shares (no par value):
Authorized			unlimited			unlimited
Outstanding				2,129,484	2,953,679		5,083,163
Class K (no par value):
Authorized			unlimited			unlimited
Outstanding				711,546			711,546
Class A ($.01 par value per share):
Authorized		100,001,150				unlimited
Outstanding		115,069					120,617
Class B ($.01 par value per share):
Authorized		100,000,000					29,487
Outstanding		28,180
Class T ($.01 par value per share):
Authorized		23,000,000
Outstanding		2,856,858			-2,856,858		0
Direct Shares:
Net asset value and offering price per share						$	10.38
Class K:
Net asset value and offering price per share						$	10.43
Class A:
Net asset value and redemption price per share	$	10.88				$	10.38
Offering price per share:
(Net assets value of $10.88 / 95.25%)	$	11.42				$	10.38
Class B:
Net asset value and offering price per share	$	10.86				$	10.38
Class T:
Net asset value and redemption price per share	$	10.74					N/A
Offering price per share:
(Net assets value of $10.74 / 95.5%)	$	11.25					N/A

STATEMENT OF OPERATIONS	Year Ended August 31, 2009


	SM&R GOVERNMENT BOND FUND			CIT U.S. GOV'T SECURITIES FUN			Pro Forma Adjustment			Pro Forma Combined
INVESTMENT INCOME
Interest	$	1,092,818		$	1,254,055					$	2,346,873
Interest from affiliated money market fund		960			30						990
TOTAL INVESTMENT INCOME		1,093,778			1,254,085						2,347,863
EXPENSES
Investment advisory fees		161,767			149,378			(2,337	)		308,808
Administrative & Transfer Agent		80,884			24,902			(51,035	)		54,751
Professional fees		12,812						16,617			29,429
Custody and transaction fees		6,451			3,584			(3,612	)		6,423
Directors' fees and expenses		9,973			3,596			(10,319	)		3,250
Compliance & Legal		7,029			17,212			4,211			28,452
Qualification fees
Class A		4,150									4,150
Class B		3,302									3,302
Class T		10,230						(10,230	)		-
Direct Shares								7,312			7,312
Shareholder reporting expenses
Class A		126						2,616			2,742
Class B		47						2,695			2,742
Class T		3,210						(3,210	)		-
Direct Shares								2,742			2,742
Distribution fees
Class A		3,014									3,014
Class B		3,323									3,323
Insurance expenses		12,144			1,024						13,168
Other expenses		102									102
TOTAL EXPENSES		318,564			199,696			(44,551	)		473,709
LESS EXPENSES REIMBURSED		(80,010	)		(37,562	)		2,337			(115,235	)
NET EXPENSES		238,554			162,134			(42,214	)		358,474
INVESTMENT INCOME - NET		855,224			1,091,951			42,214			1,989,389
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions					(293,004	)					(293,004	)
Change in unrealized appreciation of investments		661,930			(23,581	)					638,349
NET GAIN ON INVESTMENTS		661,930			(316,585	)					345,345
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	1,517,154		$	775,366		$	42,214		$	2,334,734

PRO FORMA FOOTNOTES REGARDING THE REORGANIZATION OF SM&R GOVERNMENT BOND FUND INTO CALIFORNIA INVESTMENT TRUST’S U.S. GOVERNMENT BOND FUND AS OF AUGUST 31, 2009 (UNAUDITED)

NOTE 1 — Basis of Combination:

The Board of Trustees of SM&R Investments, Inc. (the “Trust”) on behalf of its portfolio, SM&R Government Bond Fund (“Bond Fund”), at a meeting held on February 18, 2010 approved the Bond Fund entering into an Agreement and Plan of Reorganization (the “Plan”) pursuant to which, Bond Fund will transfer all of its assets, subject to its liabilities, to California Investment Trust’s U.S. Government Bond Fund (“Government Fund”), in exchange for a number of shares of Government Fund equal in value to the net assets of Bond Fund (the “Reorganization”). If the Reorganization is consummated, shares of Government Fund then will be distributed to Bond Fund’s shareholders on a prorata basis in liquidation of Bond Fund. The Reorganization will be accounted for as a tax-free merger of investment companies. The unaudited pro forma condensed combined schedule of investments and condensed combined statement of assets and liabilities reflect the financial position of the Funds at August 31, 2009 as if the Reorganization had occurred on that date. The unaudited pro forma condensed combined statement of operations reflects the results of operations of the Funds for the twelve months ended August 31, 2009 as if the Reorganization had occurred on September 1, 2008. These statements have been derived from the books and records of the Funds utilized in calculating daily net asset value at the dates indicated above in conformity with the accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. Actual results may differ from these estimates. As of August 31, 2009, all the securities held by Bond Fund comply with the compliance guidelines and/or investment restrictions of Government Fund. The historical cost of investment securities will be carried forward to the surviving entity. The Bond Fund’s fiscal year end is August 31.

The accompanying pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of the Funds included or incorporated by reference in their respective Statements of Additional Information. Such pro forma condensed combined financial statements are presented for information purposes only and may not necessarily be representative of what the actual combined financial statements would have been had the Reorganization occurred on August 31, 2009 or September 1, 2008, as applicable. Following the Reorganization, Government Fund will be the surviving fund. Costs with respect to the Reorganization will be borne by CCM Partners, LP and its affiliates, with the exception of certain legal fees of counsel to the board relating to certain advice provided to the board of California Investment Trust, including for the creation of new share classes, currently estimated at $40,000.

NOTE 2 — Bond Fund and Government Fund Valuation:

Portfolio securities of the Government Fund are valued by an independent pricing service that uses market quotations representing the latest available mean between the bid and ask price, prices provided by market makers or estimates of market value obtained from yield data relating to instruments or securities with similar characteristics. Portfolio securities of the Bond Fund are valued by an independent pricing service that uses market quotations representing the latest available bid price, prices provided by market makers or estimates of market value obtained from yield data relating to instruments or securities with similar characteristics.

U.S. Treasury Bills and Short-term securities with remaining maturities less than 60 days will be valued at amortized cost, which approximates fair value.

In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the market value of such investment or is not available, the investment will be valued by a method approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the investment advisor seeks to determine the price that each Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor deems relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such securities, those securities will be Fair Value Assets and be valued at their fair value as determined in good faith by the Board or by the investment advisor using a pricing service and/or procedures approved by the Board. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

NOTE 3 — Capital Shares:

The pro forma net asset value per share assumes the issuance of shares of Government Fund that would have been issued at August 31, 2009 in connection with the proposed Reorganization. The number of shares of each class assumed to be issued is equal to the net asset value of the shares of Bond Fund of that class, as of August 31, 2009, divided by the net asset value per share of the corresponding class of shares of Government Fund as of August 31, 2009. The pro forma number of shares outstanding, by class, for Government Fund consists of the following at August 31, 2009.

Class of Shares	Shares of Government Fund Pre-Combination		Additional Shares Assumed Issued in Reorganization			Total Outstanding Shares Post-Combination
Direct Shares		2,129,484		2,953,679	(a)		5,083,163
Class A		0		120,617			120,617
Class B		0		29,487			29,487
Class K		711,546		0			711,546

(a) Class T shares are being merged into the Direct Shares.

NOTE 4 — Pro Forma Operating Expenses:

The pro forma condensed combined statement of operations for the twelve month period ended August 31, 2009, as adjusted, giving effect to the Reorganization reflects changes in expenses of Government Fund as if the Reorganization was consummated on September 1, 2008. Although it is anticipated that there will be an elimination of certain duplicative expenses because of the Reorganization, the actual amount of such expenses cannot be determined because it is not possible to predict the cost of future operations.

NOTE 5 — Federal Income Taxes:

Each of Bond Fund and Government Fund has elected to be taxed as a “regulated investment company” under the Internal Revenue Code of 1986, as amended (the “Code”). If the Reorganization is consummated, unless it determines such qualification is no longer in the best interest of shareholders, Government Fund will seek to continue to qualify as a regulated investment company by complying with the provisions applicable to certain investment companies, as defined in applicable sections of the Code, and to make distributions of taxable income sufficient to relieve it from all, or substantially all, Federal income taxes. In addition, Bond Fund will make any required income or capital gain distributions prior to consummation of this Reorganization, in accordance with provisions of the Code relating to tax-free reorganizations of investment companies. Government Fund will succeed to the capital loss carryforwards of Bond Fund, which will be subject to the limitations described below. Bond Fund has capital loss carryforwards that, in the absence of the Reorganization, would generally be available to offset its capital gains. As a result of the Reorganization, however, Bond Fund will undergo an “ownership change” for tax purposes and accordingly, Government Fund’s use of Bond Fund’s capital loss carryforwards will be limited by the operation of the tax loss limitation rules of the Code. The Code generally limits the amount of pre-ownership change losses that may be used to offset post-ownership change gains to a specific annual loss limitation amount (generally the product of the net asset value of Bond Fund immediately prior to the ownership change and a rate established by the IRS for the month of the Closing Date (for example, such rate is 4.03% for March, 2010)). Subject to certain limitations, any unused portion of these losses may be available in subsequent years, subject to the overall eight-year capital loss carryforward limit, as measured from the date of recognition. In addition, for five years after the Closing Date of the Reorganization, the Combined Fund generally will not be allowed to offset realized gains attributable to certain pre-Reorganization built-in gains of one Fund, if any, with capital loss carryforwards attributable to the other Fund. However, unexpired pre-ownership change losses of Bond Fund could be used to offset realized built-in gains of Bond Fund. As of August 31st, 2009, the Government Fund had capital loss carryforwards of $167,397 which expire in 2014, and $282,342 which expire in 2015.

SM&R Money Market Fund and The United States Treasury Trust

SCHEDULE OF INVESTMENTS					August 31, 2009												August 31,2009
	SM&R MONEY MARKET FUND												CIT U.S. TREASURY TRUST FUND

					Interest/												Interest/
				Maturity	Stated		Face			Value						Maturity	Stated		Face			Value
COMMERCIAL PAPER				Date	Rate (%)		Amount									Date	Rate (%)		Amount

FINANCIALS --
CAPITAL MARKETS --		3.07	%
General Re Corp.				09/09/09		0.190	$	1,246,000		$	1,245,947

CONSUMER FINANCE --		8.87	%
American Honda Finance Corp.				09/29/09		0.200		1,744,000			1,743,729
UBS Finance Delaware LLC				09/25/09		0.260		1,855,000			1,854,678
											3,598,407
DIVERSIFIED FINANCIAL SERVICES --		4.93	%											13.98	%
JP Morgan Chase & Co.				09/17/09		0.150		2,000,000			1,999,867
Citibank (backed by full faith and credity of US Gov't)																09/08/09				4,000,000			3,999,829


TOTAL FINANCIALS --								16.87	%		6,844,221			TOTAL FINANCIALS --						13.98	%		3,999,829
HEALTH CARE --
HEALTH CARE EQUIPMENT & SUPPLIES --		4.88	%
Becton, Dickinson & Co.				09/02/09		0.170		1,978,000			1,977,991

TOTAL HEALTH CARE --								4.88	%		1,977,991
INDUSTRIALS --
INDUSTRIAL COMGLOMERATES --		2.46	%
General Electric Co.				09/21/09		0.240		1,000,000			999,867

TOTAL INDUSTRIALS --								2.47	%		999,867
MATERIALS --		2.48	%
CHEMICALS --
Praxair, Inc.				09/01/09		0.180		1,004,000			1,004,000

TOTAL MATERIALS --								2.48	%		1,004,000
UTILITIES --		9.43	%
ELECTRIC UTILITIES --
Florida Power & Light Co.				09/14/09		0.150		1,969,000			1,968,893
NSTAR				09/10/09		0.140		1,858,000			1,857,935
TOTAL UTILITIES --											3,826,828

TOTAL COMMERCIAL PAPER --								36.12	%
						(Cost $14,652,907)					14,652,907			TOTAL Commercial Paper (cost $3999,829)									3,999,829
U S GOVERNMENT AGENCY
SHORT-TERM OBLIGATIONS

U S GOVERNMENT AGENCY SECURITIES --		64.18	%
Federal Home Loan Bank				09/04/09		0.170		1,011,000			1,010,986
Federal Home Loan Bank				09/08/09		0.080		7,924,000			7,923,877
Federal Home Loan Bank				09/11/09		0.140		3,097,000			3,096,879
Federal Home Loan Bank				09/15/09		0.060		4,700,000			4,699,890
Federal Home Loan Bank				09/16/09		0.140		3,000,000			2,999,825
Federal Home Loan Bank				09/23/09		0.138		2,270,000			2,269,809
Federal Home Loan Bank				09/30/09		0.160		1,972,000			1,971,746
Federal National Mortgage Association				10/01/09		0.160		2,059,000			2,058,725
											26,031,737

TOTAL U S GOVERNMENT AGENCY SHORT-TERM OBLIGATIONS --								64.18	%
						(Cost $26,031,737)					26,031,737
U S GOVERNMENT TREASURY BILLS
SHORT-TERM OBLIGATIONS

U S GOVERNMENT TREASURY BILLS														85.98	%
United States T-Bill																09/17/09		0.076		4,800,000			4,799,713
United States T-Bill																10/01/09		0.096		8,200,000			8,198,826
United States T-Bill																11/12/09		0.127		4,400,000			4,398,502
United States T-Bill																12/17/09		0.152		7,200,000			7,195,313
																							24,592,354

														TOTAL U S TREASURY BILLS SHORT-TERM OBLIGATIONS --						85.98	%
																		(Cost $24,592,354)					24,592,354

TOTAL INVESTMENTS --								100.30	%					TOTAL INVESTMENTS --						99.96	%
						(Cost $40,684,644)					40,684,644							(Cost $28,592,183)					28,592,183

LIABILITIES IN EXCESS OF OTHER ASSETS --								(0.30	)%		(131,751	)		OTHER NET ASSETS --						0.04	%		11,405

TOTAL NET ASSETS --								100.00	%	$	40,552,893			TOTAL NET ASSETS --						100.00	%	$	28,603,588

See notes to financial statements.

		August 31, 2009
Combined U.S. Treasury Trust

			Interest/
		Maturity	Stated		Face			Value
		Date	Rate (%)		Amount


1.80	%
		09/09/09		0.190	$	1,246,000		$	1,245,947

5.20	%
		09/29/09		0.200		1,744,000			1,743,729
		09/25/09		0.260		1,855,000			1,854,678
									3,598,407
8.68	%
		09/17/09		0.150		2,000,000			1,999,867
		09/08/09				4,000,000			3,999,829
									5,999,696

TOTAL FINANCIALS --						15.68	%		10,844,050

2.86	%
		09/02/09		0.170		1,978,000			1,977,991

TOTAL HEALTH CARE --						2.86	%		1,977,991

1.45	%
		09/21/09		0.240		1,000,000			999,867

TOTAL INDUSTRIALS --						1.45	%		999,867
1.45	%

		09/01/09		0.180		1,004,000			1,004,000

				TOTAL MATERIALS --		1.45	%		1,004,000
5.53	%

		09/14/09		0.150		1,969,000			1,968,893
		09/10/09		0.140		1,858,000			1,857,935
TOTAL UTILITIES --									3,826,828

TOTAL COMMERCIAL PAPER --						26.97	%
				(Cost $18,652,736)					18,652,736



37.64	%
		09/04/09		0.170		1,011,000			1,010,986
		09/08/09		0.080		7,924,000			7,923,877
		09/11/09		0.140		3,097,000			3,096,879
		09/15/09		0.060		4,700,000			4,699,890
		09/16/09		0.140		3,000,000			2,999,825
		09/23/09		0.138		2,270,000			2,269,809
		09/30/09		0.160		1,972,000			1,971,746
		10/01/09		0.160		2,059,000			2,058,725
									26,031,737

TOTAL U S GOVERNMENT AGENCY SHORT-TERM OBLIGATIONS --						37.64	%
				(Cost $26,031,737)					26,031,737



35.56	%
		09/17/09		0.076		4,800,000			4,799,713
		10/01/09		0.096		8,200,000			8,198,826
		11/12/09		0.127		4,400,000			4,398,502
		12/17/09		0.152		7,200,000			7,195,313
									24,592,354

TOTAL U S TREASURY BILLS SHORT-TERM OBLIGATIONS --						35.56	%
				(Cost $24,592,354)					24,592,354

				TOTAL INVESTMENTS --		100.17	%
						(Cost $69,276,827)			69,276,827

LIABILITIES IN EXCESS OF OTHER ASSETS --						(0.17	)%		(120,346	)

TOTAL NET ASSETS --						100.00	%	$	69,156,481

SM&R Government Bond Fund		U.S. Government Securities Fund
Principal Investment Objective Seek to provide as high a level of current income, liquidity, and safety of principal as is consistent with prudent investment risks.		Principal Investment Objective Seek liquidity, safety from credit risk and as high a level of income as is consistent with these objectives by investing in full faith and credit obligations of the U.S. government and its agencies or instrumentalities, primarily in U.S. Treasury Securities and Government National Mortgage Association Certificates (“GNMA”).
Principal Investment Strategies Pursuant to a policy adopted by the SM&R Government Fund, the SM&R Advisor normally invests at least 80% of the SM&R Government Bond Fund’s assets in bonds issued or guaranteed by the U.S. Government, its agencies, or instrumentalities. These may include Treasuries and mortgage-backed securities, such as Ginnie Maes (issued by the Government National Mortgage Association), Freddie Macs (issued by the Federal Home Loan Mortgage Corporation), and Fannie Maes (issued by the Federal National Mortgage Association). This policy may not be changed without providing shareholders with at lease sixty (60) days prior notice. The SM&R Government Bond Fund generally invests primarily in medium and long term securities. The weighted average portfolio maturity generally is expected to be in the six to fifteen year range (some securities may have longer or shorter maturities). The average portfolio maturity may be shorter when management anticipates that interest rates will increase, and longer when management anticipates that interest rates will decrease. Securities issued by most U.S. Government agencies and instrumentalities are neither guaranteed by the United States Treasury nor supported by the full faith and credit of the U.S. Government. These include securities issued by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association. In most cases, these kinds of securities are supported only by the credit of the issuing agency, standing alone. Securities issued by the U.S. Treasury and a small number of U.S. Government agencies, such as the Government National Mortgage Association, are supported by the full faith and credit of the U.S. Government.		Principal Investment Strategies The U.S. Government Securities Fund invests primarily in high-quality bonds whose interest is guaranteed by the full faith and credit of the United States government and its agencies or instrumentalities. The Caltrust Adviser selects securities that it believes will provide the best balance between risk and return within the U.S. Government Securities Fund’s range of allowable investments. Generally, the Caltrust Adviser selects a balance between treasury bonds and GNMA securities in an attempt to maximize the overall performance of the U.S. Government Securities Fund. In managing the portfolio, a number of factors are considered including general market and economic conditions and their likely effects on the level and term-structure of interest rates, yield spreads, and mortgage prepayment rates on GNMA pass-through securities. While income is the most important part of return over time, the total return for a bond fund includes both income and price losses and gains. Under normal market conditions, it is the U.S. Government Securities Fund’s policy to invest at least 80% of its total assets in securities issued by the U.S. government and its agencies or instrumentalities, but as a general rule the percentage will be much higher.

SM&R Money Market Fund		The United States Treasury Trust
Principal Investment Objective Seek the highest current income consistent with the stability of principal and maintenance of liquidity.		Principal Investment Objective Seek capital preservation, safety, liquidity, and, consistent with these objectives, the highest attainable current income exempt from state income taxes. The United States Treasury Trust will invest its assets only in short-term U.S. Treasury securities and its income will be exempt from California (and most other states) personal income taxes.
Principal Investment Strategies The SM&R Money Market Fund seeks to achieve its objective by investing in high-quality short-term money market instruments, including the following types of debt obligations: (1) U.S. Government obligations, which are securities issued or guaranteed by the U.S. Government or by its agencies and instrumentalities; (2) certificates of deposit, which are negotiable certificates issued against funds deposited in a commercial bank for a definite period of time and earning a specified return; (3) banker’s acceptances, which are short-term instruments issued by banks, generally for the purpose of financing imports or exports; (4) commercial paper, which is short-term unsecured promissory notes issued by corporations to finance short-term credit needs; (5) collateralized mortgage obligations, which are debt obligations collateralized by a portfolio or mortgages, mortgage-backed securities, or U.S. Government securities; and (6) corporate bonds and notes. The SM&R Money Market Fund limits its investments to those short-term securities that it determines present minimal credit risk and that are rated in the two highest short-term rating categories by one or more of the nationally recognized statistical rating organizations.		Principal Investment Strategies The United States Treasury Trust primarily invests its assets in high-quality, short-term Treasury bills whose interest is guaranteed by the full faith and credit of the United States government. The United States Treasury Trust generally buys only securities that mature in 397 days or less. The United States Treasury Trust’s weighted average maturity will generally be less than 90 days. Under normal market conditions, it is The United States Treasury Trust’s policy to invest at least 80% of its total assets in securities issued by the U.S. government, but as a general rule the percentage is much higher. The Caltrust Adviser selects securities that it believes will attain the highest possible yield and maintain the $1.00 per share price. The Caltrust Adviser generally purchases only U.S. Treasury bills, notes and bonds, but may invest in other securities from time to time.

SM&R FUNDS		CALTRUST FUNDS
Borrowing Money (fundamental) A Fund may not borrow money, except (a) a Fund may borrow from banks (as defined in the 1940 Act) or through reverse repurchase agreements in amounts up to 33 1/3% of its total assets (including the amount borrowed), (b) a Fund may, to the extent permitted by applicable law, borrow up to an additional 5% of its total assets for temporary purposes, (c) a Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities, (d) a Fund may purchase securities on margin to the extent permitted by applicable law, and (e) a Fund may engage in transactions in mortgage dollar rolls which are accounted for as financings.		Borrowing Money (fundamental) A Fund may not borrow money or mortgage or pledge any of its assets, except that borrowings (and a pledge of assets therefor) for temporary or emergency purposes may be made from banks in any amount up to 10% (15% in the case of the Stock Funds) of the Fund’s total asset value. However, a Fund will not purchase additional securities while the value of its outstanding borrowings exceeds 5% of its total assets. Secured temporary borrowings may take the form of a reverse repurchase agreement, pursuant to which a Fund would sell portfolio securities for cash and simultaneously agree to repurchase them at a specified date for the same amount of cash plus an interest component. (As a matter of operating policy, the Funds currently do not intend to utilize reverse repurchase agreements, but may do so in the future.)
The SM&R Funds do not have a similar policy.		Purchases on Margin or Selling Securities Short (fundamental) A Fund may not, except as required in connection with permissible futures contracts (Caltrust Equity Income Fund only), buy any securities on “margin” or sell any securities “short,” except that it may use such short-term credits as are necessary for the clearance of transactions.
Lending (fundamental) A Fund may not make loans, except through (a) the purchase of debt obligations in accordance with the Fund’s investment objective and		Lending (fundamental) A Fund may not make loans, except (a) through the purchase of debt securities which are either publicly distributed or customarily purchased by institutional investors, (b) to the extent

policies; (b) repurchase agreements with banks, brokers, dealers, and other financial institutions; and (c) loans of securities as permitted by applicable law.		the entry into a repurchase agreement may be deemed a loan, or (c) to lend portfolio securities to broker dealers or other institutional investors if at least 100% collateral, in the form of cash or securities of the U.S. Government or its agencies and instrumentalities, is pledged and maintained by the borrower.
Underwriting (fundamental) A Fund may not underwrite securities issued by others, except to the extent that the sale of portfolio securities by a Fund may be deemed to be an underwriting.		Underwriting (fundamental) A Fund may not act as underwriter of securities issued by other persons except insofar as the Fund may be technically deemed an underwriter under the federal securities laws in connection with the disposition of portfolio securities.
Diversification (fundamental) With respect to 75% of its total assets, a Fund may not purchase securities of an issuer (other than cash or cash items, or securities of the U.S. Government, its agencies, or instrumentalities or of other investment companies), if (i) such purchase would cause more than 5% of the Fund’s total assets taken at market value to be invested in the securities of such issuer, or (ii) such purchase would at the time result in more than 10% of the outstanding voting securities of such issuer being held by the Fund.		Diversification (fundamental) A Fund may not with respect to 75% of its total assets, purchase the securities of any one issuer (except securities issued or guaranteed by the U.S. Government and its agencies or instrumentalities, as to which there are no percentage limits or restrictions) if immediately after and as a result of such purchase (a) the value of the holdings of the Fund in the securities of such issuer would exceed 5% of the value of the Fund’s total assets, or (b) the Fund would own more than 10% of the voting securities of any such issuer (both the issuer of the municipal obligation as well as the financial institution/ intermediary shall be considered issuers of a participation certificate), except that the Insured Fund may invest more than 25% of its assets in securities insured by the same insurance company.

SM&R FUNDS		CALTRUST FUNDS
The SM&R Funds do not have a similar policy.		Certain Affiliate Securities Transactions (fundamental for all Funds except Caltrust Equity Income Fund, for which it is non-fundamental) A Fund may not purchase securities from or sell to the Trust’s officers and Trustees, or any firm of which any officer or Trustee is a member, as principal, or retain securities of any issuer if, to the knowledge of the Trust, one or more of the Trust’s officers, Trustees, or investment adviser own beneficially more than 1/2 of 1% of the securities of such issuer and all such officers and Trustees together own beneficially more than 5% of such securities.
Real Estate (fundamental) A Fund may not purchase, hold or deal in real estate, although a Fund may purchase and sell securities that are secured by real estate or interests therein, securities of real estate investment trusts, and mortgage-related securities and may hold and sell real estate acquired by the Fund as a result of the ownership of securities.		Real Estate (fundamental) A Fund may not acquire, lease or hold real estate, except such as may be necessary or advisable for the maintenance of its offices, and provided that this limitation shall not prohibit the purchase of securities secured by real estate or interests therein.
Investing in Commodities (fundamental) A Fund may not invest in commodities or commodity contracts, except that a Fund may invest in currency and financial instruments and contracts that are commodities or commodity contracts.		Investing in Commodities (fundamental) (Caltrust Equity Income Fund only.) The Fund may not invest in commodities and commodity contracts, or interests in oil, gas, or other mineral exploration or development programs; provided, however, that the Fund may invest in futures contracts as described in its Prospectus and Statement of Additional Information. (U.S. Government Securities Fund and The United States Treasury Trust only.) A Fund may not invest in commodities and commodity contracts, puts, calls, straddles, spreads, or any combination thereof, or interests in oil, gas, or other mineral exploration or development programs, except that the U.S. Government Securities Fund may purchase, hold, and dispose of “obligations with puts attached” in accordance with its investment policies.
The SM&R Funds do not have a similar policy.		Invest for Control (fundamental) A Fund may not invest in companies for the purpose of exercising control or management.

Acquired SM&R Fund	will be reorganized into	Acquiring Caltrust Fund
SM&R Growth Fund		Equity Income Fund
SM&R Equity Income Fund		Equity Income Fund
SM&R Balanced Fund		Equity Income Fund
SM&R Government Bond Fund		U.S. Government Securities Fund
SM&R Money Market Fund		The United States Treasury Trust

If you own shares in:	You will receive shares of:
SM&R Growth Fund	Equity Income Fund
Class A Shares	Class A Shares
Class B Shares	Class B Shares
Class T Shares	Direct Shares
SM&R Equity Income Fund	Equity Income Fund
Class A Shares	Class A Shares
Class B Shares	Class B Shares
Class T Shares	Direct Shares
SM&R Balanced Fund	Equity Income Fund
Class A Shares	Class A Shares
Class B Shares	Class B Shares
Class T Shares	Direct Shares
SM&R Government Bond Fund	U.S. Government Securities Fund
Class A Shares	Class A Shares
Class B Shares	Class B Shares
Class T Shares	Direct Shares
SM&R Money Market Fund	The United States Treasury Trust
All Shares	Direct Shares

SM&R FUNDS		CALTRUST FUNDS
Securities issued or guaranteed (non-fundamental) (SM&R Government Bond Fund only.) Under normal circumstances the Fund invests at least 80% of the value of its assets in securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities.		The Caltrust Funds do not have a similar policy.
The SM&R Funds do not have a similar policy.		Short Selling (non-fundamental) (Caltrust Equity Income Fund only.) The Fund may not engage in short sales of securities.
The SM&R Funds do not have a similar policy.		Warrants (non-fundamental) (Caltrust Equity Income Fund only.) The Fund may not Invest in warrants, valued at the lower of cost or market, in excess of 5% of the value of a Fund’s net assets. Included in such amount, but not to exceed 2% of the value of the Fund’s net assets, may be warrants that are not listed on the New York Stock Exchange (the “NYSE”) or American Stock Exchange. Warrants acquired by a Fund in units or attached to securities may be deemed to be without value.
The SM&R Funds do not have a similar policy.		Investing in with less than three years continuous operation (non-fundamental) (Caltrust Equity Income Fund only.) The Fund may not invest more than 5% of its total assets in the securities of companies (including predecessors) that have been in continuous operation for a period of less than three years.
Investing in Put, Calls, Straddles or Spread Options (non-fundamental) The SM&R Balanced Fund may write covered call option contracts provided that the option is listed on a domestic securities exchange. No option will be written if, as a result, more than 25% of the Balanced Fund’s assets are subject to call options. The SM&R Balanced Fund does not currently write call options.		Investing in Put, Calls, Straddles or Spread Options (non-fundamental) (Caltrust Equity Income Fund only.) The Fund may not invest in puts, calls, straddles or spread options, or any combination thereof.

Shareholder Fees	SM&R Growth - Class A Shares	SM&R Growth - Class B Shares	SM&R Growth - Class T Shares	Equity Income- Class A Shares	Equity Income- Class B Shares	Equity Income- Direct Shares	Equity Income- Pro Forma Combined Class A Shares	Equity Income- Pro Forma Combined Class B Shares	Equity Income- Pro Forma Combined Direct Shares
Fees Paid directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.00(1)	None	5.75%(2)	5.00%(1)	None	None	5.00%(1)	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)	None(3)	5.00%(4)	None	None	5.00%(4)	None	None(3)	5.00%(4)	None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ( and other Distributions) (as a percentage of offering price)	None	None	None	None	None	None	None	None	None
Redemption Fee (as a percentage of amount redeemed, if applicable)	None	None	None	None	None	None	None	None	None
Exchange Fee	None	None	None	None	None	None	None	None	None
Annual Fund Operating Expenses (expenses you pay each year as a percentage of the value of your investment) (5)
Management Fee	0.75%	0.75%	0.75%	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%
Distribution (12b-1) Fee	0.25%	0.75%	None	0.25%	0.75%	None	0.25%	0.75%	None
Other Expenses	0.67%(6)	1.04%(6)	0.51%(6)	0.47%	0.47%	0.47%	0.45%	0.45%	0.45%
Total Annual Fund Operating Expenses	1.67% (7)	2.54% (7)	1.26%(8)	1.22%	1.72%	0.97%	1.20%	1.70%	0.95%
Fee Waivers and/or Expense Reimbursements*	0.31%	0.68%	0.01%	N/A	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements**	1.36%	1.86%	1.25%	1.22%	1.72%	0.97%	1.20%	1.70%	0.95%

Voluntary Expense Reimbursement of the Funds
	Total Expenses
Annual Fund Operating Expenses	after voluntary
SM&R Growth Fund	waivers, if any
Class A	1.36%
Class B	1.86%

	1 Year	3 Years	5 Years	10 Years
SM&R Growth, Class A Shares
Assuming redemption	$661	$1,000	$1,362	$2,377
Assuming no redemption	$661	$1,000	$1,362	$2,377
SM&R Growth , Class B Shares
Assuming redemption	$257	$791	$1,350	$2,662
Assuming no redemption	$757	$1,091	$1,450	$2662
SM&R Growth, Class T Shares
Assuming redemption	$696	$952	$1,227	$2,010
Assuming no redemption	$696	$952	$1,227	$2,010
Equity Income, Class A Shares
Assuming redemption	$618	$868	$1137	$1903
Assuming no redemption	$618	$868	$1137	$1903
Equity Income, Class B Shares
Assuming redemption	$175	$542	$933	$2030
Assuming no redemption	$675	$842	$1,033	$2030
Equity Income, Direct Shares
Assuming redemption	$99	$309	$536	$1,190
Assuming no redemption	$99	$309	$536	$1,190
Equity Income, Class A Shares Pro Forma Combined
Assuming redemption	$616	$862	$1,127	$1,882
Assuming no redemption	$616	$862	$1,127	$1,882
Equity Income, Class B Shares Pro Forma Combined
Assuming redemption	$173	$536	$923	$2,009
Assuming no redemption	$673	$836	$1023	$2,009
Equity Income, Direct Shares Pro Forma Combined
Assuming redemption	$97	$303	$525	$1,166
Assuming no redemption	$97	$303	$525	$1,166

Shareholder Fees	SM&R Equity Income - Class A Shares	SM&R Equity Income - Class B Shares	SM&R Equity Income - Class T Shares	Equity Income- Class A Shares	Equity Income- Class B Shares	Equity Income- Direct Shares	Equity Income- Pro Forma Combined Class A Shares	Equity Income- Pro Forma Combined Class B Shares	Equity Income- Pro Forma Combined Direct Shares
Fees Paid directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.00(1)	None	5.75%(2)	5.00%(1)	None	None	5.00%(1)	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)	None(3)	5.00%(4)	None	None3)	5.00%	None	None3)	5.00%(4)	None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ( and other Distributions) (as a percentage of offering price)	None	None	None	None	None	None	None	None	None
Redemption Fee (as a percentage of amount redeemed, if applicable)	None	None	None	None	None	None	None	None	None
Exchange Fee	None	None	None	None	None	None	None	None	None
Annual Fund Operating Expenses (expenses you pay each year as a percentage of the value of your investment) (5)
Management Fee	0.75%	0.75%	0.75%	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%
Distribution (12b-1) Fee	0.25%	0.75%	None	0.25%	0.75%	None	0.25%	0.75%	None
Other Expenses	0.59%(6)	0.76%(6)	0.49%(6)	0.47%	0.47%	0.47%	0.39%	0.39%	0.39%
Total Annual Fund Operating Expenses	1.59% (7)	2.26% (7)	1.24%	1.22%	1.72%	0.97%	1.14%	1.64%	0.89%
Fee Waivers and/or Expense Reimbursements*	0.33%	0.50%	N/A	N/A	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements**	1.26%	1.76%	1.24%	1.22%	1.72%	0.97%	1.14%	1.64%	0.89%

Shareholder Fees	SM&R Balanced - Class A Shares	SM&R Balanced - Class B Shares	SM&R Balanced - Class T Shares	Equity Income- Class A Shares	Equity Income- Class B Shares	Equity Income- Direct Shares	Equity Income- Pro Forma Combined Class A Shares	Equity Income- Pro Forma Combined Class B Shares	Equity Income- Pro Forma Combined Direct Shares
Fees Paid directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.00(1)	None	5.75%(2)	5.00%	None(1)	None	5.00%(1)	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)	None(3)	5.00%(4)	None	None(3)	5.00%(4)	None	None(3)	5.00%(4)	None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ( and other Distributions) (as a percentage of offering price)	None	None	None	None	None	None	None	None	None
Redemption Fee (as a percentage of amount redeemed, if applicable)	None	None	None	None	None	None	None	None	None
Exchange Fee	None	None	None	None	None	None	None	None	None
Annual Fund Operating Expenses (expenses you pay each year as a percentage of the value of your investment) (5)
Management Fee	0.75%	0.75%	0.75%	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%
Distribution (12b-1) Fee	0.25%	0.75%	None	0.25%	0.75%	None	0.25%	0.75%	None
Other Expenses	0.74%	0.98%	0.60%(6)	0.47%	0.47%	0.47%	0.45%	0.45%	0.45%
Total Annual Fund Operating Expenses	1.74% (7)	2.48% (7)	1.35%(8)	1.22%	1.72%	0.97%	1.20%	1.70%	0.95%
Fee Waivers and/or Expense Reimbursements*	0.44%	0.68%	0.10%	N/A	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements**	1.30%	1.80%	1.25%	1.22%	1.72%	0.97%	1.20%	1.70%	0.95%

Shareholder Fees	Equity Income- Pro Forma Combined Class A Shares	Equity Income- Pro Forma Combined Class B Shares	Equity Income- Pro Forma Combined Direct Shares
Fees Paid directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.00%(1)	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)	None(2)	5.00%(3)	None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ( and other Distributions) (as a percentage of offering price)	None	None	None
Redemption Fee (as a percentage of amount redeemed, if applicable)	None	None	None
Exchange Fee	None	None	None
Management Fee	0.50%	0.50%	0.50%
Distribution (12b-1) Fee	0.25%	0.75%	None
Other Expenses	0.40%	0.40%	0.40%
Total Annual Fund Operating Expenses	1.15%	1.65%	0.90%
Fee Waivers and/or Expense Reimbursements*	N/A	N/A	N/A
Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements**	1.15%	1.65%	0.90%

Shareholder Fees	SM&R Government Bond - Class A Shares	SM&R Government Bond - Class B Shares	SM&R Government Bond - Class T Shares	U.S. Gov’t Securities- Class A Shares	U.S. Gov’t Securities- Class B Shares	U.S. Gov’t Securities- Direct Shares	U.S. Gov’t Securities- Pro Forma Combined Class A Shares	U.S. Gov’t Securities- Pro Forma Combined Class B Shares	U.S. Gov’t Securities- Pro Forma Combined Direct Shares
Fees Paid directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	4.75% (1)	None	4.50%(2)	4.75% (1)	None	None	4.75 %	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)	None(3)	3.00%(4)	None	None(3)	3.00%(4)	None	None	3.00%	None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends ( and other Distributions) (as a percentage of offering price)	None	None	None	None	None	None	None	None	None
Redemption Fee (as a percentage of amount redeemed, if applicable)	None	None	None	None	None	None	None	None	None
Exchange Fee	None	None	None	None	None	None	None	None	None
Annual Fund Operating Expenses (expenses you pay each year as a percentage of the value of your investment) (5)
Management Fee	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%
Distribution (12b-1) Fee	0.25%	0.75%	None	0.25%	0.75%	None	0.25%	0.75%	None
Other Expenses	0.76%(6)	1.17%(6)	0.45%(6)	0.36%	0.36%	0.36%	0.35%	0.35%	0.35%
Total Annual Fund Operating Expenses	1.51%	2.42%	0.95%	1.11%	1.61%	0.86%	1.10%	1.60%	0.85%
Fee Waivers and/or Expense Reimbursements*	-0.78%	-1.19%	-0.22%	-0.12%	-0.12%	-0.12%	-0.11%	-0.11%	-0.11%
Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements**	0.73% (7)	1.23% (7)	0.73%	0.99%	1.49%	0.74%	0.99%	1.49%	0.74%

	Quarter Ended	Total Return
Best Quarter	September 30, 2009	14.96%
Worst Quarter	December 31, 2008	(21.17)%

Fund	Percentage of the Average Value of its Portfolio
SM&R Growth Fund	11.84%
SM&R Equity Income Fund	6.07%
SM&R Balanced Fund	10.71%
Equity Income Fund	27.02%
SM&R Government Bond Fund	0.00%
U.S. Government Securities Fund	82.33%
SM&R Money Market Fund	NA
The United States Treasury Trust	NA

SM&R Funds	Advisory Fee	Caltrust Funds	Advisory Fee
SM&R Growth Fund Class A Shares Class B Shares Class T Shares	0.75% 0.75% 0.75%	Equity Income Fund Class A Shares Class B Shares Direct Shares	0.50% 0.50% 0.50%
SM&R Equity Income Fund Class A Shares Class B Shares Class T Shares	0.75% 0.75% 0.75%	Equity Income Fund Class A Shares Class B Shares Direct Shares	0.50% 0.50% 0.50%
SM&R Balanced Fund Class A Shares Class B Shares Class T Shares	0.75% 0.75% 0.75%	Equity Income Fund Class A Shares Class B Shares Direct Shares	0.50% 0.50% 0.50%
SM&R Government Bond Fund Class A Shares Class B Shares Class T Shares	0.50% 0.50% 0.50%	U.S. Government Securities Fund Class A Shares Class B Shares Direct Shares	0.50% 0.50% 0.50%*
SM&R Money Market Fund	0.25%	The United States Treasury Trust Direct Shares	0.50%*

On the Portion of Each SM&R Fund’s Average Daily Net Assets	Administrative Service Fee Annual Rate
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%

On the Portion of Caltrust Registrant Average Daily Net Assets	Administrative Service Fee Annual Rate
$100 million in combined assets of the Caltrust Registrant	0.10%
Next $400 million in combined assets of the Caltrust Registrant	0.08%
Caltrust Registrant combined assets over $500 million	0.06%

Fund /Class	12b-1 Fee	Service Fee	Total 12b-1 and Service Fee
SM&R Growth Fund Class A Shares Class B Shares Class T Shares	0.25% 0.50% None	None 0.25% None	0.25% 0.75% None
SM&R Equity Income Fund Class A Shares Class B Shares Class T Shares	0.25% 0.50% None	None 0.25% None	0.25% 0.75% None
SM&R Balanced Fund Class A Shares Class B Shares Class T Shares	0.25% 0.50% None	None 0.25% None	0.25% 0.75% None
Equity Income Fund Class A Shares Class B Shares Direct Shares	0.25% 0.75% None	None 0.25% None	0.25% 0.75% None
SM&R Government Bond Fund Class A Shares Class B Shares Class T Shares	0.25% 0.50% None	None 0.25% None	0.25% 0.75% None
U.S. Government Securities Fund Class A Shares Class B Shares Direct Shares	0.25% 0.75% None	None 0.25% None	0.25% 0.75% None

SM&R Funds	Initial Investment Minimum	Subsequent Investment Minimum	Retirement Plan Initial Investment Minimum	Retirement Plan Subsequent Investment Minimum	Automatic Investment Plan Investment Initial/Subsequent Investment
Class A Shares	$100	$20	$100	$20	$100/$20
Class B Shares	$100	$20	$100	$20	$100/$20
Class T Shares	$100	$20	$100	$20	$100/$20
Money Market Fund	$1,000	$100	$100	$20	$100/$20
Caltrust Funds	Initial Investment Minimum	Subsequent Investment Minimum	Retirement Plan Initial Investment Minimum	Retirement Plan Subsequent Investment Minimum*	IRA Automatic Investment Plan Investment Initial/Subsequent Investment
Class A Shares	$1,000	$250	$1,000	$500	$500/$100
Class B Shares	$1,000	$250	$1,000	$500	$500/$100
Direct Shares	$1,000	$250	$1,000	$500	$500/$100
Money Market Fund	$1,000	$250	$1,000	$500	$500/$100

Amount Invested	Sales Charge as a Percentage of Public Offering Price	Sales Charges as a Percentage of Net Amount Invested
Less than $50,000	5.0%	5.3%
$50,000 but less than $100,000	4.5%	4.7%
$100,000 but less than $250,000	3.5%	3.6%
$250,000 but less than $500,000	2.5%	2.6%
$500,000 but less than $1 million	1.5%	1.5%
$1 million and over	See below*	None

Years Since Purchase	Contingent Deferred Sales Charge (as a % of offering price at the time of purchase)
Year 1	5.00%
Year 2	4.00%
Year 3	3.00%
Year 4	2.00%
Year 5	1.00%
Year 6+	None

Amount Invested	Sales Charge as a Percentage of Public Offering Price	Sales Charges as a Percentage of Net Amount Invested
Less than $50,000	5.75%	6.1%
$50,000 but less than $100,000	4.5%	4.7%
$100,000 but less than $250,000	3.5%	3.6%
$250,000 but less than $500,000	2.5%	2.6%
$500,000 and over	None	None

Fund	Total Net Assets			Shares Outstanding			Net Asset Value Per Share

SM&R Growth Fund - Class A Shares	$	2,715,730			899,420		$	3.02
Adjustments	$	(401	)		(692,774	)

SM&R Growth Fund - Class B Shares	$	785,784			266,753		$	2.95
Adjustments	$	(116	)		(206,961	)

SM&R Growth Fund - Class T Shares	$	61,079,643			19,783,519		$	3.09
Adjustments	$	(61,079,643	)		(19,783,519	)

Equity Income Fund - Direct Shares	$	14,723,793			1,120,958		$	13.14
Adjustments	$	61,068,458			4,649,290

Equity Income Fund - Class K Shares	$	4,447,437			340,350		$	13.07
Adjustments	$	(656	)
Equity Income Fund (Pro Forma Combined) - Class A Shares	$	2,715,329			206,646		$	13.14

Equity Income Fund (Pro Forma Combined) - Class B Shares	$	785,668			59,792		$	13.14

Equity Income Fund (Pro Forma Combined) - Direct Shares	$	75,792,251			5,770,248		$	13.14
Equity Income Fund (Pro Forma Combined) - Class K Shares	$	4,446,781			340,350		$	13.07

Equity Income Fund	$22,053
SM&R Growth Fund	$(6,297,494)
SM&R Equity Income Fund	$(8,584,756)
SM&R Balanced Fund	$(1,395,529)
U.S. Government Securities Fund	$(16,713)
SM&R Government Bond Fund	$1,382,903
The United States Treasury Trust
SM&R Money Market Fund

Equity Income Fund	$1,258,385
SM&R Growth Fund	$5,196,609
SM&R Balanced Fund	$845,956
SM&R Equity Fund	$3,537,981
U.S. Government Securities Fund	$512,217
SM&R Government Bond Fund	$449,739

CATEGORY	SM&R FUNDS	CALTRUST FUNDS
Preemptive Rights	None	Same
Preferences	None	Same
Appraisal Rights	None	Same
Conversion Rights	None	Same
Exchange Rights (other than the right to exchange for shares of other Caltrust Funds or SM&R Funds, as provided in the Funds’ prospectuses)	None	Same
Annual Meetings	Not required	Same
Right to Call Shareholder Meetings	Shall be called upon written request of at least 10% of all votes entitled to be cast at such meeting.	Shall be called for the purpose of electing or removing Trustees, upon the request of shareholders holding not less than ten percent of the Shares. For the purpose of taking action upon any matter requested by shareholders at the request of the shareholders holding not less than ten (10) percent of the shares; provided that, the Board, in its sole discretion, has approved the calling and holding of such meeting of shareholders requested by shareholders. No meeting shall be called upon the request of shareholders to consider any matter which is substantially the same as a matter voted upon at any meeting of the shareholders held during the preceding twelve (12) months, unless requested by the holders of a majority of all shares entitled to be voted at such meeting.
Notice of Meetings	Not less than 10, nor more than 90 days before the date of the meeting.	Not less than 10 nor more than 120 days before the date of the meeting.
Record Date For Meetings	Not more than 90 days, and in the case of meeting of shareholders, not less than 10 days prior to the date on which particular action requiring such determination of shareholders is to be taken.	Not more than 120 days nor less than 10 days before the date of any such meeting.
Quorum for Meetings	The presence in person or by proxy of the holders of one-third (1/3) of the shares of capital stock of the Corporations outstanding and entitled to vote thereat shall constitute a quorum.	A majority of the shares entitled to vote at a shareholders meeting, which are present in person or represented by proxy, shall constitute a quorum.

Name of Fund	Share Class	Outstanding Shares
SM&R Growth Fund	Class A Shares Class B Shares Class T Shares
SM&R Equity Income Fund	Class A Shares Class B Shares Class T Shares
SM&R Balanced Fund	Class A Shares Class B Shares Class T Shares
SM&R Government Bond Fund	Class A Shares Class B Shares Class T Shares
SM&R Money Market Fund

Name of Fund and Class	Name and Address of Beneficial Owner	Amount of Beneficial Ownership	Percent of Ownership
SM&R Growth Fund- Class A Shares
SM&R Growth Fund- Class B Shares
SM&R Growth Fund- Class T Shares
SM&R Equity Income- Fund Class A Shares
SM&R Equity Income- Fund Class B Shares
SM&R Equity Income- Fund Class T Shares
SM&R Balanced Fund– Class A Shares

SM&R Balanced Fund– Class B Shares
SM&R Balanced Fund– Class T Shares
SM&R Government Bond Fund- Class A Shares
SM&R Government Bond Fund- Class B Shares
SM&R Government Bond Fund- Class T Shares
SM&R Money Market Fund

FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the Years indicated.

SM&R GROWTH FUND	Class A Shares


	Year Ended August 31,
	2009			2008			2007			2006			2005

Net asset value, beginning of Year	$	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		(0.83	)		(0.64	)		0.67			0.23			0.30
Total from investment operations		(0.79	)		(0.60	)		0.69			0.24			0.34
Less distributions
Investment income - net		(0.04	)		(0.05	)		(0.02	)		(0.02	)		(0.04	)
Capital gains		(0.21	)		(0.12	)		(0.15	)		-			-
Total distributions		(0.25	)		(0.17	)		(0.17	)		(0.02	)		(0.04	)
Net asset value, end of Year	$	3.02		$	4.06		$	4.83		$	4.31		$	4.09
Total return (1)		(18.56	)%		(12.73	)%		16.16	%		6.00	%		9.05	%

RATIOS (in percentages)/Supplemental Data
Net assets, end of Year (000's omitted)	$	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	%
Ratio of expenses without reimbursement to average net assets		1.67	%		1.63	%		1.47	%		1.66	%		1.69	%
Ratio of net investment income to average net assets		1.22	%		1.03	%		0.34	%		0.52	%		1.03	%
Portfolio turnover rate		11.84	%		11.15	%		23.79	%		56.05	%		24.18	%

(a)	Less than $0.01 per share.
(b)	Calculated based upon average shares outstanding.

(b)	Calculated based upon average shares outstanding.
*	Includes Temporary Guarantee Program expense and negative yield waiver adjustment.