PROSPECTUS SUPPLEMENT
STATE BOND CASH MANAGEMENT FUND
(PROSPECTUS DATED OCTOBER 3, 1994)
STATE BOND COMMON STOCK FUND
(PROSPECTUS DATED MARCH 1, 1995)
STATE BOND DIVERSIFIED FUND
(PROSPECTUS DATED MARCH 1, 1995)
STATE BOND TAX EXEMPT FUND
(PROSPECTUS DATED SEPTEMBER 1, 1994)
STATE BOND TAX-FREE INCOME FUND
(PROSPECTUS DATED SEPTEMBER 1, 1994)
A joint special meeting of the shareholders of State Bond Cash Management Fund,
State Bond Common Stock Fund, State Bond Diversified Fund, State Bond Tax Exempt
Fund, State Bond Tax-Free Income Fund, and State Bond U.S. Government and Agency
Securities Fund (collectively the "Funds"), was held on May 15, 1995. At the
special meeting, the shareholders of the Funds approved a new Investment
Advisory and Management Agreement between each Fund and ARM Capital Advisors,
Inc. ("ARM Advisors").
Pursuant to an Amended and Restated Stock and Asset Purchase Agreement dated
February 16, 1995, between SBM Company, the manager of the State Bond group of
mutual funds ("SBM") and ARM Financial Group, Inc., a Delaware corporation
("ARM"), SBM agreed to sell substantially all of its business operations to ARM
(the "Proposed Transaction"). As part of the Proposed Transaction, ARM Advisors,
a subsidiary of ARM, will assume the responsibilities of SBM as manager of the
State Bond group of mutual funds. In addition, ARM will acquire all of the
outstanding stock of SBM Financial Services, Inc., the Distributor of the Funds
(the "Distributor"). The Proposed Transaction is subject to a number of
conditions, including the obtaining of applicable regulatory and shareholder
approvals.
The proposed new Investment Advisory and Management Agreements between the Funds
and ARM Advisors will become effective upon the closing of the Proposed
Transaction, which currently is anticipated to occur in the second quarter of
1995. The Agreements will contain the same material terms and conditions
(including the fees payable to ARM Advisors) as are contained in each Fund's
current Investment Advisory and Management Agreement with SBM.
The Boards of Directors of the Funds, at a meeting held on March 24, 1995,
approved new Underwriting Agreements between the Distributor and the Funds,
effective upon the closing of the Proposed Transaction. The proposed new
Agreements will contain the same material terms and conditions as the current
Agreements.
Effective upon closing, the Distributor will assume the responsibilities of SBM
as transfer agent for the Funds.
ARM Advisors, the proposed new Manager for the Funds, is a wholly-owned
subsidiary of ARM. ARM is a financial services company providing retail and
institutional products and services to the long-term savings and retirement
market. The Morgan Stanley Leveraged Equity Fund II, L.P. (MSLEF II), an
investment fund sponsored by Morgan Stanley & Co., Incorporated (Morgan Stanley
& Co.), owns approximately 86% of the outstanding shares of voting stock of ARM.
May 16, 1995
C:\STEWART\STICKER
PROSPECTUS SUPPLEMENT
STATE BOND U.S. GOVERNMENT AND AGENCY SECURITIES FUND
(PROSPECTUS DATED FEBRUARY 10, 1995)
A joint special meeting of the shareholders of State Bond Cash Management Fund,
State Bond Common Stock Fund, State Bond Diversified Fund, State Bond Tax Exempt
Fund, State Bond Tax-Free Income Fund, and State Bond U.S. Government and Agency
Securities Fund (collectively the "Funds"), was held on May 15, 1995. At the
special meeting, the shareholders of the Funds approved a new Investment
Advisory and Management Agreement between each Fund and ARM Capital Advisors,
Inc. ("ARM Advisors").
Pursuant to an Amended and Restated Stock and Asset Purchase Agreement dated
February 16, 1995, between SBM Company, the manager of the State Bond group of
mutual funds ("SBM") and ARM Financial Group, Inc., a Delaware corporation
("ARM"), SBM agreed to sell substantially all of its business operations to ARM
(the "Proposed Transaction"). As part of the Proposed Transaction, ARM Advisors,
a subsidiary of ARM, will assume the responsibilities of SBM as manager of the
State Bond group of mutual funds. In addition, ARM will acquire all of the
outstanding stock of SBM Financial Services, Inc., the Distributor of the Funds
(the "Distributor"). The Proposed Transaction is subject to a number of
conditions, including the obtaining of applicable regulatory and shareholder
approvals.
The proposed new Investment Advisory and Management Agreements between the Funds
and ARM Advisors will become effective upon the closing of the Proposed
Transaction, which currently is anticipated to occur in the second quarter of
1995. The Agreements will contain the same material terms and conditions
(including the fees payable to ARM Advisors) as are contained in each Fund's
current Investment Advisory and Management Agreement with SBM.
Effective upon closing of the Proposed Transaction, a new principal portfolio
manager, Mr. Thomas A. Goepfert, will be appointed replacing Mr. Keith O.
Martens. Mr. Goepfert is currently a senior portfolio manager with ARM Advisors.
Prior to his employment with ARM Advisors, Mr. Goepfert was a senior portfolio
manager and managing director of Kleinwort Benson Investment Management
Americas Inc. since 1993. Kleinwort Benson Investment Management Americas Inc.
was acquired by ARM Advisors in January of 1995. Prior to 1993, Mr. Goepfert was
a portfolio manager with Mitchell Hutchins Institutional Investors, Inc. from
1988 to 1993 and with Manufacturers Hanover Trust Company from 1972 to 1988. Mr.
Martens will remain as the principal portfolio manager of the State Bond Common
Stock Fund, State Bond Diversified Fund, State Bond Tax Exempt Fund, and State
Bond Minnesota Tax-Free Income Fund.
The Boards of Directors of the Funds, at a meeting held on March 24, 1995,
approved new Underwriting Agreements between the Distributor and the Funds,
effective upon the closing of the Proposed Transaction. The proposed new
Agreements will contain the same material terms and conditions as the current
Agreements.
Effective upon closing, the Distributor will assume the responsibilities of SBM
as transfer agent for the Funds.
ARM Advisors, the proposed new Manager for the Funds, is a wholly-owned
subsidiary of ARM. ARM is a financial services company providing retail and
institutional products and services to the long-term savings and retirement
market. The Morgan Stanley Leveraged Equity Fund II, L.P. (MSLEF II), an
investment fund sponsored by Morgan Stanley & Co., Incorporated (Morgan Stanley
& Co.), owns approximately 86% of the outstanding shares of voting stock of ARM.
May 16, 1995
C:\STEWART\STICKER
