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STATE BOND
Cash Management Fund
[LOGO]
State Bond
Cash Management
Fund
Semi-Annual
Report
January 31, 1996
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State Bond Cash Management Fund
FEBRUARY 23, 1996
TO THE SHAREHOLDERS:
We are pleased to present the semi-annual report for the State Bond Cash
Management Fund. We wish to welcome the new shareholders that joined us during
this six-month period, and thank all of our shareholders for their investment in
the Fund.
Since the last report in July 1995, the Federal Reserve Board continued its
moderating view on interest rates by reducing the Federal Funds rate .25% in
December. The Federal Reserve Board followed with an additional .25% reduction
in both the Federal Funds and the Discount Rates at the end of January 1996. The
reduction of these short-term rates was also reflected in the investments held
in the Fund's portfolio at the end of the semi-annual period. As of January 31,
1996, the SEC seven-day yield was 4.46%.
In pursuing its objectives of maximizing current income, preservation of
principal, and liquidity, the Fund seeks investments of high credit quality. As
of January 31, 1996, approximately 54.1% of the portfolio was invested in U.S.
Treasury Bills. The remainder of the portfolio was invested in short-term
commercial paper diversified across ten different companies, all of which were
rated in the highest quality category by at least two of the following
nationally recognized rating services: Standard & Poor's Corporation, Moody's
Investor Services, Inc., Fitch Investor Service, and Duff and Phelps Credit
Rating Company.
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 (Unaudited)
January 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------
<S> <C> <C>
COMMERCIAL PAPER (45.9%)
American Express Credit Corporation,
5.35%, due 2/2/96 $130,000 $ 129,981
American General Finance Corporation,
5.39%, due 2/7/96 144,000 143,871
Associates Corporation of North America,
5.35%, due 2/8/96 115,000 114,880
Beneficial Corporation, 5.43%, due 2/6/96 140,000 139,894
Chevron Oil Finance Corporation, 5.43%,
due 2/12/96 145,000 144,759
Ford Motor Credit Company, 5.44%,
due 2/8/96 134,000 133,858
General Electric Capital Corporation,
5.40%, due 2/13/96 146,000 145,737
Household Finance Corporation, 5.47%,
due 2/1/96 138,000 138,000
John Deere Capital Corporation, 5.40%,
due 2/5/96 142,000 141,915
Sears Credit Corporation, 5.45%,
due 2/9/96 135,000 134,837
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TOTAL COMMERCIAL PAPER (Cost $1,367,732) 1,367,732
U.S. TREASURY OBLIGATIONS (54.1%)
U.S. Treasury Bill, 4.95%, due 2/1/96 140,000 140,000
U.S. Treasury Bill, 4.85%, due 2/8/96 205,000 204,807
U.S. Treasury Bill, 5.05%, due 2/8/96 320,000 319,686
U.S. Treasury Bill, 4.90%, due 2/15/96 400,000 399,238
U.S. Treasury Bill, 4.85%, due 3/7/96 550,000 547,406
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TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,611,137) 1,611,137
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TOTAL INVESTMENTS (100%) (Cost $2,978,869) $2,978,869
==========
</TABLE>
See accompanying notes.
2
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State Bond Cash Management Fund
Statement of Assets and Liabilities
January 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investment in securities, at amortized cost
(Note 1)-See accompanying schedule $2,978,869
Cash 834
Receivable for reimbursable expenses 6,591
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TOTAL ASSETS 2,986,294
LIABILITIES
Payable to affiliates 4,151
Accrued expenses 7,629
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TOTAL LIABILITIES 11,780
NET ASSETS, for 2,974,514 shares outstanding $2,974,514
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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
Six Months Ended January 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest $ 79,929
EXPENSES
Investment advisory and management fees, net
of 12b-1 plan fees 5,770
12b-1 plan fees 2,885
Professional fees 8,473
Shareholders' reports 5,467
Transfer agent fees 12,134
Accounting and custodial fees 7,013
Registration fees 6,800
Directors' fees and expenses 2,500
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Total expenses before reimbursement 51,042
Less: expense reimbursement (39,498)
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Net expenses 11,544
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Net investment income 68,385
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Net increase in net assets resulting
from operations $ 68,385
========
</TABLE>
See accompanying notes.
4
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State Bond Cash Management Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JANUARY 31, YEAR ENDED,
1996 JULY 31,
(UNAUDITED) 1995
--------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 68,385 $ 109,688
Distributions to shareholders from:
Net investment income (68,385) (109,688)
Capital share transactions at net asset value of
$1.00 per share:
Proceeds from sales of shares 2,746,750 5,107,717
Proceeds from reinvested dividends 75,295 98,558
Cost of shares redeemed (2,565,155) (4,508,194)
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Net increase in net assets resulting from
share transactions 256,890 698,081
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Total increase in net assets 256,890 698,081
NET ASSETS
Beginning of period 2,717,624 2,019,543
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End of period $2,974,514 $ 2,717,624
==========================
</TABLE>
See accompanying notes.
5
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State Bond Cash Management Fund
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JANUARY 31,
1996 YEAR ENDED JULY 31,
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(UNAUDITED) 1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income .02 .04 .03 .02 .04 .06
Less distributions:
From net investment income (.02) (.04) (.03) (.02) (.04) (.06)
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Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===================================================
TOTAL RETURN (A) 2.42% 4.51% 2.54% 2.40% 3.74% 6.28%
RATIOS AND SUPPLEMENTAL
DATA (B)
Net assets, end of period
(in thousands) $2,975 $2,718 $2,020 $3,657 $4,770 $9,378
Ratio of expenses to average
net assets .80% .80% .80% .80% .90% 1.00%
Ratio of net investment
income to average net assets 4.74% 4.49% 2.55% 2.38% 3.71% 6.19%
Ratio of expenses to average
net assets before voluntary
expense reimbursements 3.54% 3.83% 3.38% 2.54% 1.99% 1.54%
Ratio of net investment
income to average net assets
before voluntary expense
reimbursements 2.00% 1.46% (.01)% .64% 2.91% 5.64%
</TABLE>
(A) Total returns for periods of less than one year are not annualized.
(B) Data expressed as a percentage are annualized as appropriate.
6
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State Bond Cash Management Fund
Notes to Financial Statements
January 31, 1996 (Unaudited)
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.
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.
INCOME TAXES
The Fund complied with the requirements of the Internal Revenue Code applicable
to regulated investment companies
INCOME TAXES (CONTINUED)
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 PAYMENT 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 the six months ended January 31, 1996 and the
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 January 31, 1996, the Fund had authority to issue twenty billion shares of
common stock, each with a par value of $.00001.
4. SUBSEQUENT EVENT
Effective February 1, 1996, ARM Transfer Agency, Inc. ("ARM Transfer Agency")
replaced SBM Financial Services as transfer agent for the Fund. ARM Transfer
Agency assumes all of SBM Financial Services' responsibility pursuant to an
agreement with the Fund. ARM Transfer Agency is a wholly owned subsidiary of
ARM.
7
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BOARD OF DIRECTORS
William B. Faulkner
President, William Faulkner & Associates, Inc.
Director, State Bond group of mutual funds
Patrick M. Finley
President, Universal Cooperatives, Inc.
Director, State Bond group of mutual funds
John Katz
Executive Vice President, Equitable Investment Corporation,
retired 1991
Director, State Bond group of mutual funds
John R. Lindholm
Executive Vice President, ARM Financial Group, Inc.
Chairman, State Bond group of mutual funds
Chris L. Mahai
Senior Vice President, Strategic Integration, Star Tribune
Director, State Bond group of mutual funds
Theodore S. Rosky
Executive Vice President and Chief Financial Officer
Providian Corporation, retired 1992
Director, State Bond group of 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 #001746
