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Exhibit (N) 3.
SM&R INVESTMENTS, INC.
(SM&R EQUITY FUNDS)
MULTIPLE CLASS PLAN
December 31, 2000
This Multiple Class Plan (the "Multi-Class Plan") is adopted by SM&R
Investments, Inc., a corporation organized under the laws of the State of
Maryland (the "Fund"), pursuant to Rule 18f-3 under the Investment Company Act
of 1940, as amended (the "1940 Act") for three of the Fund's series: the SM&R
Growth Fund, the SM&R Equity Income Fund, and the SM&R Balanced Fund
(individually and collectively, the "Series").
Each of the three Series currently has three classes of shares of
common stock (the "Shares"), designated as Class A Shares, Class B Shares, and
Class T Shares. These classes of Shares have different sales charges and
distribution and service ("12b-1") fee structures.
SECTION 1: DISTRIBUTION ARRANGEMENTS AND SERVICE FEES
(a) INTRODUCTION.
Each Class of Shares of the three Series will have the same relative
rights and privileges, except that, as set forth in this Plan, they shall differ
with respect to (i) sales, distribution and other charges and expenses as
initially provided for in Section 1 of this Plan and as subsequently provided
for in the Fund's prospectus and statement of additional information discussing
the Series, as the same may be amended from time to time (each a "Prospectus"
and "SAI," and collectively, the "Prospectus" and "SAI"); (ii) the exclusive
right of each Class of Shares to vote on matters submitted to shareholders that
relate solely to that Class or for which the interests of one Class differ from
the interests of another Class or Classes; (iii) such differences relating to
eligible investors as may be set forth in the Prospectus and SAI; (iv) the
designation of each Class of Shares; and (v) conversion features.
The board of directors of the Fund (the "Board") may determine in the
future that other distribution arrangements, allocations of expenses (whether
ordinary or extraordinary) or services to be provided to a Class of Shares are
appropriate and amend this Plan accordingly without the approval of shareholders
of any Class to the extent permitted by law.
(b) DISTRIBUTION FEES: As discussed below, the Class A and Class B
Shares (the "12b-1 Classes") shall be offered by each of the three Series
pursuant to a Distribution and Shareholder Servicing Plan, adopted pursuant to
Rule 12b-1 under the 1940 Act ("Rule 12b-1 Plan"), providing for a distribution
fee (the "Distribution Fee") and a shareholder services fee (the "Service Fee")
at annual rates computed based on the value of the average daily net assets of
the Series attributable to the relevant Classes of Shares. Such fee shall be
calculated daily and paid periodically by the Series. The Distribution Fee is
intended to compensate Securities Management and Research, Inc. ("SM&R"), or
enable SM&R to compensate other persons, including any distributor of Shares,
for services that are primarily intended to result in, or that are primarily
attributable to, the sale of Shares attributable to the relevant 12b-1 Class.
The Service Fee payable under the Plan is intended to compensate SM&R, or enable
SM&R to compensate other persons ("Service Providers"), for providing ongoing
servicing and/or maintenance of the accounts of shareholders of the applicable
Class of the Series ("Shareholder Services").
(c) ADMINISTRATIVE SERVICE FEE. As discussed below, all Classes of
Shares of the three Series shall be subject to an administrative service fee
(the "Administrative Fee") at an annual rate computed based on the value of the
average daily net assets of each Series. The Administrative Fee declines with
respect to higher asset levels, as set forth in the Prospectus and/or SAI (as
revised from time to time) and an administrative services agreement between the
Fund and SM&R (the "Administrative Agreement"). Pursuant to the Administrative
Agreement, SM&R has agreed to pay the Fund or reimburse the Fund for the
expenses attributable to all Classes (including the advisory fee and
Administrative Fee paid to SM&R and any other fees allocated to all Classes of
shares of the Fund based on average daily net assets, but exclusive of interest,
taxes, the Service Fee, the Distribution Fee, commissions and other expenses
incidental to portfolio transactions and any other Class Expenses, as defined
below) in excess of 1.25% per year of such Class's average daily net assets.
(d) CONTINGENT DEFERRED SALES CHARGE. As discussed below, some Class A
Shares and all Class B Shares shall be subject to a contingent deferred sales
charge ("CDSC") calculated as a specified percentage of the offering price of
the Shares of the relevant Class at the time of purchase. No CDSC shall be
imposed on Shares of
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a Class unless so provided in the Prospectus. No CDSC shall be imposed on
increases in the net asset value of the Shares being redeemed above the initial
purchase price. No CDSC shall be assessed on Shares derived from reinvestment of
dividends or capital gain distributions. SM&R, in its discretion, may waive a
CDSC otherwise due upon the redemption of Shares on terms disclosed in the
Prospectus or SAI and as allowed under Rule 6c-10 and other applicable rules of
the 1940 Act.
(e) EXCHANGE PRIVILEGES. Exchanges shall be permitted, without charge,
between each Class of Shares of a Series and corresponding classes of other
investment funds advised by SM&R, including the classes of the other Series of
the Fund, on terms described in the Prospectus. Exchanges shall also be
permitted, without charge, between (i) each Class of Shares, except Class B
Shares, and the corresponding class of SM&R Government Bond Fund and SM&R Tax
Free Fund, each a multi-class series of the Fund, and (ii) each Class and the
Fund's Primary Fund or Money Market Fund, on terms described in the Prospectus.
Each class or series of shares that may be exchanged for Shares of any of the
Classes is referred to herein as a "Portfolio."
(f) CLASS-SPECIFIC ARRANGEMENTS.
The Classes of Shares have the following distribution fee arrangements:
CLASS A SHARES. Class A Shares shall be sold subject to a front-end
sales charge as approved from time to time by the Board and set forth
in the Prospectus. The front-end sales charge is reduced for
investments made in amounts over certain levels, or "breakpoints," and
is eventually eliminated with respect to investments in Class A Shares
in an amount of One Million Dollars ($1,000,000.00) or more. The
currently proposed front-end sales charges and corresponding
breakpoints for the Class A Shares are as follows:
<TABLE>
<CAPTION>
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Amount Invested Sales Charge as a % of Offering Sales Charge as a % of Amount
Price Invested
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<S> <C> <C>
Less than $50,000 5.00% 5.30%
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$50,000 but less than $100,000 4.50% 4.70%
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$100,000 but less than $250,000 3.50% 3.60%
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$250,000 but less than $500,000 2.50% 2.60%
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$500,000 but less than $1,000,000 1.50% 1.50%
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$1,000,000 and over See below None
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</TABLE>
Shares that are not subject to a front-end sales charge because a
purchaser invests $1,000,000.00 or more in Class A Shares shall be
subject to a CDSC of 1% of the offering price if the shareholder
redeems such shares purchased within 13 months after such purchase.
Class A Shares also shall be (i) subject to a Distribution Fee of .25%
of the value of the average daily net assets attributable to Class A
Shares; and (ii) subject to an Administrative Fee at a maximum annual
rate of .25% of the value of the average daily net assets attributable
to Class A Shares. Class A Shares may be exchanged at their relative
net asset values for Class A shares of another Portfolio at their
relative net asset values, on terms described in the Prospectus.
CLASS B SHARES: Class B Shares shall be subject to a CDSC on Shares
redeemed as follows:
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE OF
CLASS B SHARES CDSC
-------------- ----
<S> <C>
Year 1 5%
Year 2 4%
Year 3 3%
</TABLE>
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<TABLE>
<S> <C>
Year 4 2%
Year 5 1%
Year 6+ 0%
</TABLE>
Class B Shares also shall be (i) subject to an Administrative Fee at a
maximum annual rate of .25% of the average daily net assets
attributable to Class B Shares; and (ii) subject to a Distribution Fee
of .50% of the value of the average daily net assets attributable to
Class B Shares; and (iii) subject to a Service Fee of .25% of the value
of the average daily net assets attributable to Class B Shares. Class B
Shares automatically convert to Class A Shares after eight years. Such
conversion will occur at the relative net asset value per Share of each
Class without the imposition of any sales charge, fee or other charge.
Class B Shares may be exchanged at their relative net asset values for
Class B Shares of another Portfolio at their relative net asset values,
on terms described in the Prospectus.
CLASS T SHARES (EXISTING SHAREHOLDERS AND DESIGNATED PERSONS). Class T
Shares shall be (i) offered only to existing shareholders (I.E.,
accounts in the Fund prior to the implementation of this Plan) and
certain other persons designated in the Prospectus ("Designated
Persons"); (ii) subject to an Administrative Fee at the maximum annual
rate of .25% of the value of the average daily net assets attributable
to Class T Shares; (iii) not subject to any Service Fee; and (iv) not
subject to any Distribution Fee. Class T Shares shall be subject to a
front-end sales charge that is reduced at certain breakpoints as set
forth below and is eventually eliminated with respect to investments in
the Fund in an amount of Five Hundred Thousand Dollars ($500,000.00):
<TABLE>
<CAPTION>
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Amount Invested Sales Charge as a % of Offering Sales Charge as a % of Amount
Price Invested
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<S> <C> <C>
Less than $50,000 5.75% 6.10%
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$50,000 but less than $100,000 4.50% 4.70%
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$100,000 but less than $250,000 3.50% 3.60%
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$250,000 but less than $500,000 2.50% 2.60%
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$500,000 and over None None
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</TABLE>
SECTION 2: ALLOCATION OF CLASS EXPENSES
Each Class of Shares of each Series represents interests in that
Series, and each has the same rights, preferences, voting powers, restrictions
and limitations, as the other Classes, except as follows:
(1) expenses related to the distribution of a Class of Shares or
to the services provided to shareholders of a Class of Shares
shall be borne solely by such Class;
(2) each Class will bear different Class Expenses (as defined
below);
(3) each Class will have exclusive voting rights with respect to
matters that exclusively affect such Class; and
(4) each Class will bear a different name or designation.
Expenses that are directly attributable to a particular Class of Shares
will be incurred by that Class of Shares. The Board, acting in its sole
discretion, has determined that the following expenses attributable to the
Shares of a particular Class ("Class Expenses") will be borne solely by the
Class to which they are attributable:
(1) asset-based distribution fees and shareholder service fees;
(2) transfer agency fees attributable to a particular Class;
(3) expenses related to preparing, printing, mailing and
distributing materials such as shareholder reports,
prospectuses and proxy statements to current shareholders of a
specific Class;
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(4) state and federal registration fees incurred by a specific
Class;
(5) litigation and other legal expenses relating to a particular
Class;
(6) directors' fees and expenses incurred as a result of issues
relating solely to a particular Class;
(7) accounting, audit and tax expenses relating to a specific
Class;
(8) the expenses of administrative personnel and services required
to support the shareholders of a specific Class; and
(9) fees and other payments made to entities performing services
for a particular Class, including account maintenance,
dividend disbursing or subaccounting services.
Class Expenses may be waived or reimbursed proportionately and on a pro
rata basis between Classes of a Series by SM&R, the Series' investment adviser
and distributor. Investment advisory fees, custodial fees, and other expenses
relating to the management of the Series' assets shall not be allocated on a
class-specific basis.
SECTION 3: ALLOCATION OF SERIES INCOME AND EXPENSES
Income, realized and unrealized capital gains and losses, and expenses
that are not allocated to a specific Class pursuant to Section 2 above, shall be
allocated to each Class of a Series on the basis of the proportionate net assets
of that Class in relation to the net assets of that Series. On a daily basis,
the total income, dividends, other income accrued and Series-level expenses
incurred are multiplied by the proportionate value of the Series' net assets
attributable to each Class to determine the income and expenses attributable to
that Class for the day. Expenses properly attributable to each Class are
recorded separately and charged to that Class. Net income for each Class is then
determined for the day and segregated on the Fund's general ledger. Dividends
are calculated in the same manner for each Class and declared and paid on all
Classes of Shares on the same days and at the same times.
SECTION 4: AMENDMENTS
This Multi-Class Plan may not be amended to change any material
provision unless such amendment is approved by a vote of the majority of the
Board, including a majority of the Directors who are not interested persons of
the Fund (as defined in Section 2(a)(19) of the 1940 Act) (the "Independent
Directors"), based on its finding that the amendment is in the best interest of
each Class individually and the relevant Series as a whole.
SECTION 5: TERMINATION
This Multi-Class Plan shall remain in effect until such time as the
Board terminates this Multi-Class Plan or makes a material change to this
Multi-Class Plan. Any material change to this Multi-Class Plan must be approved
by the Board, including a majority of the Independent Directors, as being in the
best interests of each Class of Shares and each Series as a whole.
SECTION 6: RECORD KEEPING
The Fund shall preserve copies of this Multi-Class Plan and any related
agreements for a period of not less than six years from the date of this
Multi-Class Plan or agreement, the first two years in an easily accessible
place, or for such other periods as may be required by applicable law.
SECTION 7: FILING
This Plan shall be filed as an exhibit to the Fund's Registration
Statement on Form N-1A with the U.S. Securities and Exchange Commission, with
the next amendment of such Registration Statement filed after the date hereof.
SECTION 8: INTERPRETATION; MEANING OF CERTAIN TERMS.
(a) This Plan shall be interpreted in accordance with the 1940 Act and
Rule 18f-3 thereunder.
(b) As used in this Plan, the term "interested person" shall have the
same meaning that such term has under the 1940 Act and the rules and regulations
under the 1940 Act, subject to any exemption that may be granted to the Fund
under the 1940 Act by the Securities and Exchange Commission.
(c) The provisions of this Plan are severable for each Class.
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SECTION 9. DATE OF EFFECTIVENESS.
This Plan will become effective with respect to each Class of Shares of
a Series on December 31, 2000 or on such other date as interests in that Class
are first offered to or held by the public, subject to approval by the Board as
required by Rule 18f-3 under the 1940 Act.
IN WITNESS WHEREOF, the Fund has executed this Multi-Class Plan on the day and
year set forth below.
Date: December 31, 2000
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SM&R INVESTMENTS, INC.
ATTEST: By: /s/ Michael W. McCroskey
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Michael W. McCroskey, President
/s/ Teresa Axelson
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Teresa E. Axelson, Secretary
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