At SM&R we take the matter of your trust in us very seriously. We believe that it is our responsibility to shareholders to be responsive to corporate governance issues. The following policies summarize our positions on a variety of issues and should provide shareholders with an indication of how we will vote shares on behalf of each of the Funds.

SM&R Mutual Funds proxy voting record is available by calling our Investor Services Department at (800) 231-4639.

The Proxy Voting Policy for Fred Alger Management, Inc., the sub-advisor for the SM&R Alger Funds, can be viewed by visiting their website at http://public.alger.com/Algerpub/jsp/home.jsp .

In evaluating proxy issues, information from various sources may be considered including information from company management, shareholder groups, independent proxy research services and others. SM&R’s Investment Committee will vote any proxy or other beneficial interest in an equity security prudently and solely in the best long-term economic interest of its advisory clients and their beneficiaries, considering all relevant factors and without undue influence from individuals or groups who may have an economic interest in the outcome of a proxy vote.

The Committee will update and revise the voting policies ("Policies") as new issues arise. The Committee will, when necessary, discuss and determine the votes for issues that do not fall into one of the categories defined in the Policies, by applying the general principle noted above. For issues that do not fall within pre-determined voting guidelines, the Committee may consult with the Portfolio Manager of the account holding the relevant security to determine how to cast the vote.

Good governance starts with an independent board, without significant ties to management, all of whose members are elected annually. Key board committees should be entirely independent.

• We will generally vote FOR

• the election of directors that result in a board made up of a majority of independent directors.

• efforts to declassify existing boards unless a company’s charter or governing corporate law allows shareholders, by written consent, to remove a majority of directors at any time, with or without cause, and will vote against efforts to adopt classified board structures.

• We will generally vote AGAINST non-independent directors who serve on audit, compensation, and/or nominating committees of the board.

• We will hold directors accountable for the actions of the committees on which they serve. For example, we will generally vote AGAINST nominees who serve on the compensation committee if they approve excessive compensation arrangements or propose equity-based compensation plans that unduly dilute the ownership interests of stockholders.

• We will evaluate on a case-by-case basis–

• proposals requiring that the positions of chairman and CEO be held separately.
• proposals on director and officer indemnification and liability protections.
• votes in contested elections of directors.
• proposals that establish or amend director qualifications.

The relationship between a company and its auditors should be limited primarily to the audit process, although it may include certain closely related activities that do not raise any appearance of impaired independence.

• We will generally vote FOR proposals that ratify the selection of auditors and ask for reasonable audit firm rotation.

• We will vote AGAINST proposed auditors where non-audit fees comprise more than 50% of the total fees paid by the company to the audit firm.

• We will evaluate on a case-by-case basis instances in which the audit firm has a substantial non-audit relationship with the company to determine whether independence has been compromised.

Appropriately designed equity-based compensation plans, approved by shareholders, can be an effective tool to align the interests of shareholders and management, employees, and directors. We are opposed to plans that substantially dilute shareholder ownership interests in the company, provide excessive rewards, or have objectionable structures.

• We will generally vote AGAINST plans

• where total potential dilution in aggregate exceeds 15% of shares outstanding.

• if annual option grants have exceeded 2% of shares outstanding.

• featuring structures such as the ability to re-price underwater options, the ability to issue options with an exercise price below the stock’s current market price, the ability to issue reload options, and automatic share replenishment.

• that authorize the board of directors or its compensation committee to materially amend a plan without shareholder approval.

• We will generally vote FOR

• measures intended to increase long-term stock ownership by executives including requiring senior executives to hold a minimum amount of stock in the company (frequently expressed as a multiple of salary), requiring minimum holding periods for stock acquired through option exercise, and using restricted stock grants in lieu of options.

• the use of employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than 85% of their market value.

• Total and annual dilution thresholds are viewed as guidelines, not ceilings, and when assessing shareholder impact we will consider other factors such as the nature of the industry and size of the company

Shareholders should have voting power equal to their equity interest in the company and should be able to approve or reject changes to the corporation’s by-laws by a simple majority vote.

• We will generally vote FOR proposals --

• to remove super-majority (typically 66.7%-80%) voting requirements.

• requiring voting be confidential.

• to lower barriers to shareholder action such as limited rights to call special meetings, and limited rights to act by written consent.

• to subject shareholder rights plans (poison pills) to a shareholder vote. In evaluating these plans we will generally support arrangements with short-term (under 3 years) sunset provisions, qualified bid/permitted offer provisions (chewable pills), and/or mandatory review by a committee of independent directors at least every three years (TIDE provisions).

• increases in authorized common stock, provided the issuance is not deemed to be a takeover defense, and the increase is not greater than three times the number of shares outstanding and reserved for issuance.

• We will generally vote AGAINST proposals –

• to impose super-majority requirements.

• for a separate class of stock with disparate voting rights.

• for golden parachute accelerated employment compensation contracts that protect executive compensation in case of a merger or other corporate event.

• that authorize preferred stock offerings or stock purchase rights that are deemed to be for the purpose of takeover defense.

• We generally vote FOR proposals

• to amend bylaws or charters for housekeeping changes.
• for re-incorporation.

• We will evaluate on a case-by-case basis proposals to change a company’s state of incorporation.

Ordinary business matters are primarily the responsibility of management and should be approved solely by the board of directors. Proposals in this category, initiated primarily by shareholders, typically request the company disclose or amend certain business practices.

• We generally vote AGAINST these types of proposals, though exceptions are made in instances where we believe a proposal has substantial economic implications.

SM&R recognizes that conflicts of interest exist, or may appear to exist, in certain circumstances when voting proxies. To address potential conflicts of interest between SM&R and its advisory clients, SM&R will use any of the following methods:

• Adopt a policy of disclosing the conflict to clients and obtaining their consent before voting;

• Base the proxy vote on pre-determined voting guidelines if the application of the guidelines to the matter presented to clients involved little discretion on the part of SM&R, or

• Use the recommendations of an independent third party.

Presently, material conflicts of interest are minimized by using pre-determined voting guidelines and using the recommendations of an independent third party.

SM&R retains the following records:

• Proxy voting policies and procedures;
• Proxy statements;
• Records of votes cast on behalf of clients;
• Records of clients’ request for proxy voting information; and
• Any documents prepared by or on behalf of SM&R that were material in making the decision on how to vote.

SM&R may rely on proxy statements filed on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system in lieu of maintaining its own statement files. SM&R may also rely on a third party for retention of proxy statements and records of votes cast.

SM&R will retain the above mentioned records for a minimum of five years.