<PAGE>
State Bond
Cash Management Fund
A Member of the ARM Financial Group
[LOGO APPEARS HERE]
State Bond
Cash Management
Fund
Annual
Report
July 31, 1995
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State Bond Cash Management Fund
TO THE SHAREHOLDERS:
On July 31, 1995, State Bond Cash Management Fund (the "Fund") completed
thirteen years of operations. We wish to welcome the new shareholders that
joined us during the year, and thank all of our shareholders for their
investment in the Fund.
The Fund continues its investment objective of generating current income
with preservation of principal and liquidity. As of July 31, 1995,
approximately 60% of the portfolio was invested in U.S. Treasury Bills. The
remainder of the portfolio is invested in high quality commercial paper. These
commercial paper issuers were evaluated and ranked in the top rating category
by two of the following nationally recognized rating services: Standard &
Poor's Corp., Moody's Investors Service, Inc., Fitch Investor Service, or Duff
and Phelps Credit Rating Company.
Since our last report of January 31, 1995, short-term interest rates
continue to be affected by the actions of the Federal Reserve (the "Fed"). In
February 1995, the Fed increased short-term rates for the seventh time in a
year, by 0.5%, as it continued its efforts to control inflation. The economy,
in reaction to these higher rates, began to give indications that it was
slowing. Home sales, retail sales, and other data suggested a rather anemic
economic environment. The Fed then reversed its trend of increasing rates with
a small decrease of .25% to short-term rates in early July. The net effect of
these actions was an increase in the Fund's seven-day annualized yield from
4.55% on January 31, 1995, to 4.93% on July 31, 1995.
We appreciate your investment in the Fund and look forward to helping you
meet your investment goals. Should you desire additional information, we would
welcome your inquiries.
Sincerely,
/s/ Keith O. Martens
Keith O. Martens
Vice President
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State Bond Cash Management Fund
Schedule of Investments
July 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
--------------------
COMMERCIAL PAPER (40.6%)
American Express Credit Corporation, 5.70%, due
8/15/95 $122,000 $ 121,730
American General Finance Corporation, 5.73%, due
8/14/95 125,000 124,741
Associates Corporation of North America, 5.70%, due
8/9/95 98,000 97,876
Beneficial Corporation, 5.74%, due 8/8/95 125,000 124,861
Chevron Oil Finance Corporation, 5.70%, due 8/2/95 130,000 129,979
Deere and Company, 5.71%, due 8/1/95 128,000 128,000
Ford Motor Credit Company, 5.73%, due 8/11/95 120,000 119,809
General Electric Capital Corporation, 5.72%, due
8/4/95 132,000 131,937
Household Finance Corporation, 5.72%, due 8/7/95 135,000 134,871
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TOTAL COMMERCIAL PAPER
(Cost $1,113,804) 1,113,804
U.S. TREASURY OBLIGATIONS (59.4%)
U.S. Treasury Bill, 5.30%, due 8/3/95 190,000 189,944
U.S. Treasury Bill, 5.30%, due 8/3/95 255,000 254,925
U.S. Treasury Bill, 5.31%, due 8/10/95 150,000 149,801
U.S. Treasury Bill, 5.35%, due 8/17/95 325,000 324,227
U.S. Treasury Bill, 5.29%, due 8/24/95 180,000 179,392
U.S. Treasury Bill, 5.32%, due 8/31/95 255,000 253,870
U.S. Treasury Bill, 5.35%, due 9/7/95 280,000 278,460
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TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,630,619) 1,630,619
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TOTAL INVESTMENTS (100.0%) (Cost $2,744,423) $2,744,423
==========
</TABLE>
See accompanying notes.
2
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State Bond Cash Management Fund
Statement of Assets and Liabilities
July 31, 1995
<TABLE>
<S> <C>
ASSETS
Investment in securities, at amortized cost (Note 1)-See
accompanying schedule $2,744,423
Cash 382
Receivable for reimbursable expenses (Note 2) 6,871
Prepaid expenses 160
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TOTAL ASSETS 2,751,836
LIABILITIES
Dividends payable 10,446
Accrued expenses 23,766
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TOTAL LIABILITIES 34,212
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NET ASSETS, for 2,717,624 shares outstanding $2,717,624
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NET ASSET VALUE, offering and redemption price per share $ 1.00
==========
</TABLE>
See accompanying notes.
3
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State Bond Cash Management Fund
Statement of Operations
Year Ended July 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $129,226
EXPENSES (Note 2)
Investment advisory and management fees, net of 12b-1 plan fees 9,769
12b-1 plan fees 4,885
Professional fees 12,500
Shareholders' reports 10,100
Transfer agent fees 21,000
Custodian fees 13,100
Registration fees 13,785
Directors' fees and expenses 5,000
Other expenses 3,415
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Total expenses before reimbursement 93,554
Less: expense reimbursement (74,016)
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Net expenses 19,538
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Net investment income 109,688
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Net increase in net assets resulting from operations $109,688
========
</TABLE>
See accompanying notes.
4
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State Bond Cash Management Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1995 1994
<S> <C> <C>
------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 109,688 $ 63,949
Distributions to shareholders from:
Net investment income (109,688) (63,949)
Capital share transactions at net asset value of
$1.00 per share:
Proceeds from sales of shares 5,107,717 5,642,187
Proceeds from reinvested dividends 98,558 45,253
Cost of shares redeemed (4,508,194) (7,325,191)
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Net increase (decrease) in net assets resulting
from share transactions 698,081 (1,637,751)
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Total increase (decrease) in net assets 698,081 (1,637,751)
NET ASSETS
Beginning of year 2,019,543 3,657,294
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End of year $ 2,717,624 $ 2,019,543
========================
</TABLE>
See accompanying notes.
5
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State Bond Cash Management Fund
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
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1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of
year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income .04 .03 .02 .04 .06
Less distributions:
From net investment income (.04) (.03) (.02) (.04) (.06)
---------------------------------------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=======================================
TOTAL RETURN 4.51% 2.54% 2.40% 3.74% 6.28%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in
thousands) $2,718 $2,020 $3,657 $4,770 $9,378
Ratio of expenses to average net
assets .80% .80% .80% .90% 1.00%
Ratio of net investment income
to average net assets 4.49% 2.55% 2.38% 3.71% 6.19%
Ratio of expenses to average net
assets before voluntary expense
reimbursements 3.83% 3.38% 2.54% 1.99% 1.54%
Ratio of net investment income
to average net assets before
voluntary expense
reimbursements 1.46% (.01%) .64% 2.91% 5.64%
</TABLE>
6
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State Bond Cash Management Fund
Notes to Financial Statements
July 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The State Bond Cash Management Fund (the "Fund") is the only investment
portfolio of the State Bond Money Funds, Inc., which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
diversified management investment company. The primary investment objective of
the Fund is to maximize current income, preserve capital, and maintain
liquidity. The Fund invests exclusively in money market instruments maturing
in twelve months or less.
On June 14, 1995, ARM Financial Group, Inc. ("ARM") completed the acquisition
of substantially all of the assets and business operations of SBM Company
("SBM"). As part of the 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 June 14, 1995, SBM Financial Services also
became the transfer agent for the Fund. Prior to the acquisition SBM
functioned as the transfer agent for the Fund.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for investment companies.
INVESTMENTS IN SECURITIES
The Fund uses the amortized cost method for valuing portfolio securities in
accordance with Rule 2a-7 of the 1940 Act. Security transactions are accounted
for as of the trade date. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as earned.
7
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State Bond Cash Management Fund
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Fund complied with the requirements of the Internal Revenue Code applicable
to regulated investment companies and distributed its taxable net investment
income. Therefore, no provision for federal or state income tax is required.
The aggregate cost of investments in securities is the same for book and tax
purposes.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and distributed
monthly. Dividends 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 .60% of average daily net assets of the
Fund. Included in the investment advisory fee is .20% of the average daily net
assets which ARM Capital Advisors pays to SBM Financial Services under a Rule
12b-1 plan of share distribution. ARM Capital Advisors has voluntarily
undertaken to reimburse the Fund for any expenses in excess of .80% of the
average daily net assets for fiscal years ended 1995, 1994, and 1993 and .90%
and 1.00% for fiscal years ended 1992 and 1991, respectively, despite the fact
that higher expenses may be permitted by state law.
Certain officers and directors of the Fund are also officers of ARM, ARM
Capital Advisors, and SBM Financial Services.
3. CAPITAL SHARES
At July 31, 1995, the Fund had authority to issue twenty billion shares of
common stock, each with a par value of $.00001.
8
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholders
State Bond Cash Management Fund
We have audited the accompanying statement of assets and liabilities including
the schedule of investments of the State Bond Cash Management Fund (the
"Fund") as of July 31, 1995 and the related statements of operations and
changes in net assets and financial highlights for the year then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The
statement of changes in net assets for the year ended July 31, 1994 and
financial highlights for the four years ended July 31, 1994 of the State Bond
Cash Management Fund were audited by other auditors whose report dated August
26, 1994 expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at July 31, 1995, by correspondence with the custodian. As to
uncompleted securities transactions, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
State Bond Cash Management Fund at July 31, 1995, and the results of its
operations, changes in its net assets and financial highlights for the year
then ended in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Kansas City, Missouri
September 14, 1995
9
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BOARD OF DIRECTORS
WILLIAM B. FAULKNER
PRESIDENT, WILLIAM FAULKNER & ASSOCIATES, INC.
DIRECTOR, STATE BOND MUTUAL FUNDS
PATRICK M. FINLEY
PRESIDENT, UNIVERSAL COOPERATIVES, INC.
DIRECTOR, STATE BOND MUTUAL FUNDS
ARTHUR J. GARTLAND
CO-FOUNDER AND PRESIDENT, BENEDETTO, GARTLAND & GREENE, 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.
PRESIDENT, STATE BOND AND MORTGAGE LIFE INSURANCE COMPANY
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
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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
FIRST BANK NATIONAL ASSOCIATION
ST. PAUL, MINNESOTA
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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.
