<PAGE>
[LOGO OF STATE BOND]
STATE BOND
Diversified Fund
State Bond
Diversified Fund
Semi-Annual Report
June 30, 1996
<PAGE>
State Bond Diversified Fund
JULY 12, 1996
TO THE SHAREHOLDERS:
At June 30, 1996, the State Bond Diversified Fund (the "Fund") had total net
assets of $47.9 million. The net asset value per share at June 30, 1996 was
$10.84, which compares to $10.18 at December 31, 1995. Additionally, the Fund
declared and paid a dividend of 5 cents per share in both March and June of
1996.
Investment decisions to sell selected securities from the Fund's portfolio
resulted in a net realized gain of approximately 44 cents per share for the
first half of the year. The portfolio also reflects an unrealized gain on
investments of $14 million.
The portfolio of investments, as shown in the "Schedule of Investments," shows
that as of June 30, 1996, the Fund held equity investments in 51 companies
representing 21 different industries. The emphasis of these equity investments
is in the energy, telecommunications and electronic equipment industries. The
Fund's five largest equity holdings are Eastman Kodak Company, Emerson Electric
Company, Colgate-Palmolive Company, Coca-Cola Company and Kimberly-Clark
Corporation. Of the total investments, equities represent 83.9% with the
remaining portfolio invested in commercial paper.
The equity market continued to set new records during the semi-annual reporting
period ended June 30, 1996. Fueled by record levels of cash flows into equity
mutual funds and relatively good first quarter corporate earnings reports, stock
prices generally marched upward. The economy during this period showed signs of
strength, specifically with regard to the creation of new non-farm jobs and the
low level of unemployment. This resulted in increased interest rate yields at
June 30, 1996 at all maturity levels, with the 30-year Treasury bond yield
increasing almost a full percent from its December 31, 1995 level. While the
Federal Reserve did not increase short-term interest rates at its July 1996
meeting, the expectation by many economists is that an increase could come soon.
Currently, higher interest rates coupled with the market's concern for second
quarter earnings reports have produced slightly lower equity prices than those
reported on June 30, 1996. Given the current volatility in the equity market,
the level of cash reserves in the Fund has been increased. The investment focus
remains on strong companies which are expected to produce increased earnings and
which ultimately could have higher stock prices.
We appreciate your investment in the Fund and look forward to continuing to help
you meet your investment goals. Should you desire additional information, we
welcome your inquiries.
Sincerely,
/s/ Keith O. Martens
Keith O. Martens
Vice President
<PAGE>
INVESTMENT RECORD
The chart below illustrates the annual changes in the value of an assumed
investment of $10,000 for the period from June 25, 1964 (inception date), to
June 30, 1996. This period was one of fluctuating common stock prices. The
results shown should not be considered as a representation of the distributions
from net investment income or net realized gain which may be realized from an
investment made in the Fund today.
[CHART APPEARS HERE]
[CAPTION]
<TABLE>
June 25, 1964 (Inception Date)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 9,523.81 $ 9,523.81 $ 9,523.81
$ 9,695.05 $ 9,600.00 $ 9,600.00
1965 $ 10,535.24 $10,174.54 $ 9,942.86
$ 9,599.57 $ 9,003.28 $ 8,685.71
$ 12,212.12 $11,142.62 $10,342.86
$ 14,752.43 $13,123.83 $11,600.00
$ 13,017.90 $11,227.45 $ 9,923.81
1970 $ 14,189.30 $11,766.19 $10,400.00
$ 15,506.63 $12,505.58 $10,933.33
$ 17,119.04 $13,460.45 $11,561.91
$ 14,721.33 $11,234.67 $ 9,238.10
$ 11,506.16 $ 8,395.22 $ 6,361.91
1975 $ 16,128.20 $11,298.01 $ 8,342.86
$ 20,981.27 $14,189.62 $10,190.48
$ 20,944.51 $13,628.98 $ 9,390.48
$ 21,567.39 $13,310.49 $ 8,800.00
$ 25,521.22 $15,074.80 $ 9,771.43
1980 $ 32,526.94 $18,331.45 $11,523.81
$ 30,840.56 $16,392.62 $ 9,980.95
$ 37,067.22 $18,511.96 $10,800.00
$ 44,222.20 $20,983.27 $12,019.05
$ 46,912.98 $21,231.32 $11,657.14
1985 $ 59,836.43 $25,995.35 $13,619.05
$ 71,791.85 $30,214.38 $14,133.33
$ 73,879.55 $30,064.50 $13,219.05
$ 85,118.89 $33,267.39 $14,076.19
$108,973.17 $40,836.31 $16,838.10
1990 $107,305.08 $38,607.59 $15,104.76
$140,896.50 $49,192.80 $18,438.10
$142,935.31 $48,665.90 $17,504.76
$156,657.89 $51,610.27 $17,600.00
$156,852.63 $50,412.73 $16,076.19
1995 $201,993.00 $63,448.00 $19,390.00
June 30, 1996 $217,087.00 $67,562.00 $20,648.00
Initial asset
value $9,525
</TABLE>
- -Total value assuming reinvestment of all dividends and distributions-$217,087
- -Total value assuming reinvestment of distributions from net realized gain-
$67,562 (an additional $26,219 received in cash dividends)
- -Value of original shares-$20,648
The chart above and the table on the following page assume the applicability of
the current maximum sales charge of 4.75% throughout the life of the Fund,
although the maximum sales charge was higher prior to March 1, 1990. Future
performance of the Fund will be affected by the establishment of a Rule 12b-1
plan, effective May 1, 1990, under which Fund assets may be used to pay
distribution costs. Initial net asset value is the amount received by the Fund
after deducting from the cost of investment the 4.75% sales charge described in
the prospectus. There is no sales charge on dividends and distributions. No
adjustment has been made for any income taxes payable by shareholders on
distributions received in shares.
THE AVERAGE ANNUAL TOTAL RETURN FOR THE ONE, FIVE, AND TEN YEAR PERIODS ENDED
JUNE 30, 1996, WAS 15.34%, 11.38%, AND 11.06%, RESPECTIVELY. The performance
data quoted represents only past performances which is not predictive of future
performance. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
2
<PAGE>
Investment Record (continued)
<TABLE>
<CAPTION>
RESULTS ASSUMING
REINVESTMENT OF NET REALIZED
PER SHARE DATA GAIN DISTRIBUTIONS ONLY (a)
--------------------------------------------------------------------------------
YEAR NET NET REALIZED
ENDED ASSET GAIN DIVIDEND NET REALIZED CASH
DECEMBER 31 VALUE DISTRIBUTION INCOME GAIN (b) DIVIDENDS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1964 $5.04 $ - $.050 $ - $ 95.24
1965 5.22 .120 .130 228.57 247.61
1966 4.56 .060 .140 116.95 272.87
1967 5.43 .210 .150 414.62 296.17
1968 6.09 .312 .150 640.24 307.80
1969 5.21 - .170 - 366.35
1970 5.64 - .200 - 431.00
1971 5.74 .063 .160 135.76 348.60
1972 6.07 .104 .150 226.58 332.63
1973 4.85 .264 .150 585.43 347.47
1974 3.34 .341 .170 802.20 414.70
1975 4.38 .091 .170 228.73 438.51
1976 5.35 .129 .180 332.75 477.41
1977 4.93 .212 .190 562.28 525.25
1978 4.62 .191 .250 528.02 720.26
1979 5.13 .094 .220 270.82 646.49
1980 6.05 .159 .260 467.23 787.80
1981 5.24 .187 .320 566.61 1,001.07
1982 5.67 .206 .320 644.44 1,044.76
1983 6.31 .106 .320 346.08 1,064.12
1984 6.12 .262 .280 871.25 971.37
1985 7.15 .289 .270 1,002.59 981.63
1986 7.42 .846 .250 3,163.90 949.12
1987 6.94 .440 .277 1,791.69 1,127.95
1988 7.39 .286 .305 1,250.95 1,337.56
1989 8.84 .229 .365 1,030.88 1,643.12
1990 7.93 .427 .342 1,972.52 1,579.86
1991 9.68 .415 .276 2,020.45 1,343.72
1992 9.19 .388 .237 1,971.78 1,204.40
1993 9.24 .508 .317 2,691.19 1,678.68
1994 8.44 .586 .225 3,270.88 1,256.75
1995 10.18 .442 .227 2,642.49 1,355.88
1996(c) 10.84 - .100 - 623.26
------------------------------
$30,777.88 $26,219.41
==============================
</TABLE>
(a) Based upon an investment of $10,000 on June 25, 1964 (inception date).
(b) This amount represents each year's net realized gain distribution, assuming
all previous capital gain distributions were reinvested.
(c) For the six months ended June 30, 1996.
If all dividends and distributions had been taken in cash, the value of the
account on June 30, 1996 would have been $20,648. A total of $13,945 in net
investment income and $15,176 in net realized gains would have been paid to the
shareholder.
3
<PAGE>
State Bond Diversified Fund
Schedule of Investments
June 30, 1996
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES
-------------------------
<S> <C> <C>
COMMON STOCKS (83.9%)
ADVERTISING (2.3%)
Omnicom Group, Inc. 24,000 $ 1,116,000
CHEMICALS AND ALLIED PRODUCTS (5.2%)
Dow Chemical Company 10,000 760,000
Eastman Chemical Company 10,000 608,750
Hercules, Inc. 20,000 1,105,000
----------
2,473,750
CONGLOMERATES (4.7%)
Hanson PLC 30,000 427,500
Tenneco, Inc. 13,000 664,625
United Technologies Corporation 10,000 1,150,000
----------
2,242,125
CONSUMER PRODUCTS (2.4%)
Coca-Cola Company 24,000 1,173,000
DEPOSITORY INSTITUTIONS (3.3%)
Chase Manhattan Bank 10,400 734,500
Fleet Financial Group, Inc. 20,000 870,000
----------
1,604,500
DRUGS AND PHARMACEUTICALS (4.3%)
Bristol-Myers Squibb Company 12,000 1,080,000
Merck & Company 15,000 969,375
----------
2,049,375
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------------------
COMMON STOCKS (CONTINUED)
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT (8.1%)
<S> <C> <C>
AMP, Inc. 24,000 $ 963,000
Emerson Electric 15,000 1,355,625
Maytag Corporation 35,000 730,625
Ohio Edison Company 15,000 328,125
Pitney-Bowes Incorporated 10,000 477,500
-----------
3,854,875
ENERGY (10.4%)
Consolidated Natural Gas Company 5,000 261,250
Enron Corporation 25,000 1,021,875
MCN Corporation 40,000 975,000
Repsol SA 15,000 521,250
Sonat, Inc. 20,000 900,000
Texaco, Inc. 10,000 838,750
YPF Sociedad Anonima 20,000 450,000
-----------
4,968,125
FINANCIAL SERVICES (4.0%)
Dean Witter Discover Company 15,000 858,750
MBNA Corporation 37,500 1,068,750
----------
1,927,500
FOOD AND KINDRED PRODUCTS (1.7%)
General Mills, Inc. 15,000 817,500
HOTELS AND OTHER LODGING PLACES (2.4%)
Hilton Hotels Corporation 10,000 1,125,000
HOUSEHOLD PRODUCTS (2.7%)
Colgate-Palmolive Corporation 15,000 1,271,250
INSURANCE CARRIERS (5.2%)
Allstate Corporation 15,000 684,375
American General Corporation 10,000 363,750
5
</TABLE>
<PAGE>
State Bond Diversified Fund
Schedule of Investments (Unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------------------------
COMMON STOCKS (CONTINUED)
<S> <C> <C>
INSURANCE CARRIERS (5.2%) (CONTINUED)
GCR Holdings Limited 25,000 $ 659,375
ITT Industries Incorporated 10,000 251,250
ITT Hartford Group 10,000 532,500
----------
2,491,250
LUMBER AND WOOD PRODUCTS (1.2%)
Weyerhaeuser Company 13,000 552,500
PAPER AND ALLIED PRODUCTS (3.3%)
Kimberly-Clark Corporation 15,000 1,158,750
Tambrands Incorporated 10,000 408,750
----------
1,567,500
PHOTOGRAPHY (2.9%)
Eastman Kodak Company 18,000 1,399,500
PRINTING AND PUBLISHING (4.1%)
Gannett Company 15,000 1,061,250
McGraw Hill, Inc. 20,000 915,000
----------
1,976,250
RETAIL (2.7%)
May Department Store Company 13,000 568,750
Sears Roebuck and Company 15,000 729,375
----------
1,298,125
TELECOMMUNICATIONS (8.7%)
Airtouch Communications (a) 25,000 706,250
ALLTEL Corporation 30,000 922,500
British Telecommunication PLC 8,000 430,000
GTE Corporation 25,000 1,118,750
SBC Communications, Inc. 20,000 985,000
----------
4,162,500
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
PRINCIPAL
AMOUNT VALUE
-----------------------------
COMMON STOCKS (CONTINUED)
<S> <C> <C>
TRANSPORTATION (2.1%)
Conrail, Inc. 15,000 $ 995,625
UTILITIES (2.2%)
Northeast Utilities 18,000 240,750
Peco Energy Company 20,000 520,000
Unicom Corporation 10,000 278,750
-----------
1,039,500
-----------
TOTAL COMMON STOCKS (Cost $26,122,987) 40,105,750
SHORT-TERM SECURITIES (16.1%)
American Express Credit Corporation, 5.32%,
due 07/05/96 $2,300,000 2,298,640
Chevron Oil Financing, 5.35%, due 07/02/96 2,200,000 2,199,673
Ford Motor Credit Company, 5.45%, due 07/03/96 2,065,000 2,064,375
General Electric Credit Corporation, 5.35%,
due 07/09/96 1,150,000 1,148,633
-----------
TOTAL SHORT-TERM SECURITIES
(Cost $7,711,321) 7,711,321
-----------
TOTAL INVESTMENTS (100%)
(Cost $33,834,308) (b) $47,817,071
===========
</TABLE>
(a) Non-income producing.
(b) Also represents cost for federal income tax purposes.
See accompanying notes.
7
<PAGE>
<TABLE>
<CAPTION>
State Bond Diversified Fund
Statement of Assets and Liabilities
June 30, 1996 (Unaudited)
<S> <C>
ASSETS
Investment in securities, at value (cost $33,834,308)
(Note 1) - See accompanying schedule $47,817,071
Dividends, interest and other receivables 102,263
-----------
TOTAL ASSETS 47,919,334
LIABILITIES
Payable to affiliates 30,177
Other payables and accrued expenses 28,494
-----------
TOTAL LIABILITIES 58,671
-----------
NET ASSETS $47,860,663
===========
Net Assets consist of:
Paid-in capital $31,881,672
Undistributed net investment income 55,371
Accumulated undistributed net realized gain on investments 1,940,857
Net unrealized appreciation on investment securities 13,982,763
-----------
NET ASSETS, for 4,415,336 shares outstanding $47,860,663
===========
NET ASSET VALUE and redemption price per share $ 10.84
===========
Maximum offering price per share (includes maximum sales
charge of 4.75% - reduced on purchases of $50,000 or more) $ 11.38
===========
</TABLE>
See accompanying notes.
8
<PAGE>
<TABLE>
<CAPTION>
State Bond Diversified Fund
Statement of Operations
Six Months Ended June 30, 1996 (Unaudited)
<S> <C>
INVESTMENT INCOME
Dividends $ 589,705
Interest 195,281
----------
Total investment income 784,986
EXPENSES
Investment advisory and management fees 152,976
Rule 12b-1 plan fees 58,837
Transfer agent fees 17,612
Professional fees 11,173
Printing expenses 17,612
Custodian fees 14,719
Other expenses 14,560
----------
Total expenses 287,489
----------
Net investment income 497,497
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 1,940,857
Change in unrealized appreciation on investment securities 923,656
----------
Net gain on investments 2,864,513
----------
Net increase in net assets resulting from operations $3,362,010
==========
</TABLE>
See accompanying notes.
9
<PAGE>
State Bond Diversified Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED
1996 DECEMBER 31,
(UNAUDITED) 1995
----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 497,497 $ 980,118
Net realized gain on investments 1,940,857 1,886,807
Change in net unrealized appreciation 923,656 7,672,815
----------------------------
Net increase in net assets resulting from
operations 3,362,010 10,539,740
Distributions to shareholders from:
Net investment income (442,126) (985,587)
Net realized gain - (1,887,050)
----------------------------
Total distributions to shareholders (442,126) (2,872,637)
Capital share transactions:
Proceeds from sales of shares 1,366,678 2,625,089
Proceeds from reinvested distributions 440,622 2,588,104
Cost of shares redeemed (2,303,317) (5,624,366)
----------------------------
Net decrease in net assets resulting from
share transactions (496,017) (411,173)
----------------------------
Total increase in net assets 2,423,867 7,255,930
NET ASSETS
Beginning of period 45,436,796 38,180,866
----------------------------
End of period (including undistributed net
investment income of $55,371 at June 30,
1996) $47,860,663 $45,436,796
============================
OTHER INFORMATION
Shares:
Sold 130,684 277,506
Issued through reinvestment of distributions 38,518 258,183
Redeemed (215,740) (595,251)
----------------------------
Net decrease (46,538) (59,562)
============================
</TABLE>
See accompanying notes.
10
<PAGE>
State Bond Diversified Fund
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1996 YEAR ENDED DECEMBER 31,
----------- --------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
----------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning
of period $10.18 $ 8.44 $ 9.24 $ 9.19 $ 9.68 $ 7.93
Income from investment
operations:
Net investment income .11 .23 .23 .32 .24 .27
Net realized and un-
realized gain (loss) .65 2.18 (.21) .56 (.10) 2.18
on investments ------ --------------------------------------------------
Total from investment
operations .76 2.41 .02 .88 .14 2.45
Less distributions:
From net investment
income (.10) (.23) (.23) (.32) (.24) (.28)
From net realized gain - (.44) (.59) (.51) (.39) (.42)
------ ---------------------------------------------------
Total distributions (.10) (.67) (.82) (.83) (.63) (.70)
------ --------------------------------------------------
Net asset value, end of
period $10.84 $10.18 $ 8.44 $ 9.24 $ 9.19 $ 9.68
====== ==================================================
TOTAL RETURN (A) 7.47% 28.78% 0.13% 9.60% 1.45% 31.31%
RATIOS AND SUPPLEMENTAL
DATA (B)
Net assets, end of period
(in thousands) $47,861 $45,437 $38,181 $38,210 $36,202 $31,316
Ratio of expenses to
average net assets 1.22% 1.17% 1.17% 1.20% 1.19% 1.22%
Ratio of net investment
income to average net
assets 2.11% 2.35% 2.46% 3.31% 2.55% 3.10%
Portfolio turnover rate 7% 9% 22% 24% 14% 15%
Average commission paid
per equity share traded $.0899(C)
</TABLE>
(A) Total returns do not consider the effects of the one time sales charge and
for periods of less than one year are not annualized.
(B) Data expressed as a percentage are annualized as appropriate.
(C) Disclosure required for years beginning after September 1, 1995.
11
<PAGE>
State Bond Diversified Fund
Notes to Financial Statements
June 30, 1996 (Unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The State Bond Diversified Fund (the "Fund") is the only investment portfolio of
State Bond Investment Funds, Inc. The Fund is registered under the Investment
Company Act of 1940, as amended, as a diversified open-end management investment
company. The Fund seeks to produce reasonable current income and long-term
capital value growth without exposing capital to undue risk.
ARM Financial Group, Inc. ("ARM") completed the acquisition of substantially all
of the assets and business operations of SBM Company ("SBM") on June 14, 1995.
As part of this acquisition, ARM Capital Advisors, Inc. ("ARM Capital
Advisors"), a subsidiary of ARM, assumed the responsibilities of SBM as manager
of the Fund. The Investment Advisory and Management Agreement between the Fund
and ARM Capital Advisors contains the same material terms and conditions
(including the fees payable to ARM Capital Advisors) as were contained in the
Fund's prior Investment Advisory and Management Agreement with SBM.
As part of the acquisition, ARM acquired all of the issued and outstanding
common stock of SBM Financial Services, Inc. ("SBM Financial Services"), the
Fund's distributor. Effective February 1, 1996, ARM Transfer Agency, Inc. ("ARM
Transfer Agency") replaced SBM Financial Services as transfer agent for the
Fund. ARM Transfer Agency assumed SBM Financial Services' responsibility
pursuant to a transfer agency agreement with the Fund. ARM Transfer Agency is a
wholly-owned subsidiary of ARM.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for investment companies.
INVESTMENTS IN SECURITIES
Securities listed on national securities exchanges are valued at closing market
quotations at the end of each day. Unlisted securities are valued at the mean
between bid and asked prices as quoted in the over-the-counter market. Short-
term securities are valued at cost plus accrued interest, which approximates
market value. Security transactions are
12
<PAGE>
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS IN SECURITIES (CONTINUED)
accounted for on the date the order to buy or sell is executed, and dividends
declared but not received are accrued on the ex-dividend date. Realized gains
or losses from security transactions are determined on the basis of specific
identification.
At June 30, 1996, net unrealized appreciation for federal income tax purposes
was $13,982,763, which is comprised of unrealized appreciation of $14,638,392
and unrealized depreciation of $655,629.
INCOME TAX STATUS
The Fund complied with the requirements of the Internal Revenue Code applicable
to regulated investment companies and distributed its taxable net investment
income and net realized gains. Therefore, no provision for federal or state
income tax is required.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income, if any, are paid
quarterly. The Fund distributes substantially all of its taxable net realized
gain on investment securities annually. Dividends and distributions are
recorded on the ex-dividend date.
2. INVESTMENT ADVISORY AGREEMENT AND PAYMENTS TO RELATED PARTIES
ARM Capital Advisors is the Fund's investment adviser. The investment advisory
fee is computed at the annual rate of .65% on the first $100 million of average
daily net assets of the Fund, .60% on the next $100 million of average daily net
assets of the Fund, and .55% of the average daily net assets of the Fund in
excess of $200 million. In addition, the Fund pays .25% of the average daily net
assets to SBM Financial Services under a Rule 12b-1 plan of share distribution.
ARM Capital Advisors has voluntarily agreed to reimburse the Fund for expenses
(including the advisory fee but excluding taxes) in excess of 1.5% of the first
$30,000,000 of the average daily net assets of the Fund and 1.0% of the average
daily net assets in excess of $30,000,000. No such reimbursements were required
during the six months ended June 30, 1996.
13
<PAGE>
State Bond Diversified Fund
Notes to Financial Statements (continued)
2. INVESTMENT ADVISORY AGREEMENT AND PAYMENTS TO RELATED PARTIES (CONTINUED)
Fees paid to SBM Financial Services for underwriting services in connection with
sales of the Fund's capital shares aggregated $45,425 for the six months ended
June 30, 1996. Such fees are not an expense of the Fund and are excluded from
the proceeds received by the Fund for sales of its capital shares as shown in
the accompanying statements of changes in net assets.
Certain officers and directors of the Fund are also officers of ARM, ARM Capital
Advisors, and SBM Financial Services.
3. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and proceeds from sales of securities, excluding short-term
investments during the six months ended June 30, 1996, amounted to $2,837,402
and $4,697,867, respectively.
4. CAPITAL SHARES
At June 30, 1996, the Fund had authority to issue ten billion shares of common
stock, each with a par value of $.00001.
14
<PAGE>
BOARD OF DIRECTORS
William B. Faulkner
President, William Faulkner & Associates, Inc.
Director, State Bond mutual funds
John Katz
Executive Vice President, Equitable Investment Corporation, retired 1991
Director, State Bond mutual funds
John R. Lindholm
Executive Vice President, ARM Financial Group, Inc.
Chairman, State Bond mutual funds
Chris L. Mahai
Senior Vice President, Strategic Integration, Star Tribune
Director, State Bond mutual funds
Theodore S. Rosky
Executive Vice President and Chief Financial Officer,
Providian Corporation, retired 1992
Director, State Bond mutual funds
-------------------------------
INVESTMENT ADVISER
ARM Capital Advisors, Inc.
GENERAL DISTRIBUTOR
SBM Financial Services, Inc.
100 North Minnesota Street
P.O. Box 69
New Ulm, Minnesota 56073-0069
1-800-328-4735
CUSTODIAN
Investors Fiduciary Trust Company
Kansas City, Missouri
-------------------------------
This report is intended for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless
accompanied or preceded by the offering prospectus of the Fund, which contains
details of sales commissions and other information.
Catalog #001902
