<PAGE>
[LOGO OF STATE BOND]
STATE BOND
Cash Management Fund
State Bond
Cash Management
Fund
Annual
Report
July 31, 1996
<PAGE>
State Bond Cash Management Fund
AUGUST 23, 1996
TO THE SHAREHOLDERS:
On July 31, 1996, the State Bond Cash Management Fund (the "Fund") completed
fourteen years of operations. We welcome the new shareholders who joined us
during the year and thank all of our shareholders for their interest and
support.
The Fund's investment objectives continue to be current income, preservation of
principal, and liquidity. The Fund seeks to achieve these objectives through
diversification and strong credit quality investments. At July 31, 1996, the
portfolio held investments in fourteen different companies and U.S. Treasury
Bills. The Fund's commercial paper holdings are all ranked in the top rating
category by two or more of the following nationally recognized rating services:
Moody's Investor Services, Inc., Standard & Poor's Corporation, Fitch Investor
Service, and Duff & Phelps Credit Rating Company.
During the Fund's fiscal year ended July 31, 1996, the Federal Reserve reversed
its position of the previous year and became more accommodative, with reductions
of .25% in December 1995 and January 1996 to the Federal Funds discount rate.
These reductions in the Federal Funds discount rate also had the effect of
reducing interest rates received on the Fund's investments.
Many investors have a portion of their assets in a money market fund because it
offers good current yields, liquidity, and a number of shareholder services. We
appreciate your investment in the Fund and look forward to continuing to serve
your investment needs. Should you desire additional information, we welcome
your inquiries.
Sincerely,
/s/ Keith O. Martens
- -----------------------------------------
Keith O. Martens
Vice President
<PAGE>
State Bond Cash Management Fund
Schedule of Investments
July 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------------
<S> <C> <C>
COMMERCIAL PAPER (63.5%)
American Express Credit Corporation, 5.30%, due 8/7/96 $ 122,000 $ 121,892
Associates Corporation of North America, 5.27%, due 8/9/96 161,000 160,811
Beneficial Corporation, 5.28%, due 8/6/96 143,000 142,895
CIT Group Holdings, Inc., 5.25%, due 8/2/96 119,000 118,983
Chevron Oil Finance Corporation, 5.28%, due 8/19/96 161,000 160,575
Deere and Company, 5.36%, due 8/5/96 140,000 139,916
Ford Motor Credit Company, 5.35%, due 8/6/96 156,000 155,884
General Electric Capital Corporation, 5.27%, due 8/9/96 160,000 159,813
GMAC, 5.52%, due 11/18/96 175,000 172,075
Household Finance Corporation, 5.32%, due 8/20/96 108,000 107,697
IBM Corporation, 5.12%, due 8/1/96 160,000 160,000
Norwest Financial, 5.34%, due 8/14/96 148,000 147,715
Prudential Funding, 5.33%, due 8/26/96 145,000 144,463
Sears, 5.35%, due 8/12/96 161,000 160,737
-------------
TOTAL COMMERCIAL PAPER (Cost $2,053,456) 2,053,456
U.S. TREASURY BILLS (36.5%)
4.86%, due 8/8/96 500,000 499,527
5.02%, due 8/22/96 135,000 134,605
4.91%, due 8/29/96 550,000 547,900
-------------
TOTAL U.S. TREASURY BILLS (Cost $1,182,032) 1,182,032
-------------
TOTAL INVESTMENTS (100%) (Cost $3,235,488) $ 3,235,488
=============
</TABLE>
See accompanying notes.
2
<PAGE>
State Bond Cash Management Fund
Statement of Assets and Liabilities
July 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investment in securities, at amortized cost -
see accompanying schedule $3,235,488
Cash 3,085
Receivable for reimbursable expenses 6,333
----------
TOTAL ASSETS 3,244,906
LIABILITIES
Payable to affiliates 1,645
Accrued expenses 24,493
----------
TOTAL LIABILITIES 26,138
----------
NET ASSETS, for 3,218,768 shares outstanding $3,218,768
==========
NET ASSET VALUE, offering and redemption price per
share $ 1.00
==========
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
State Bond Cash Management Fund
Statement of Operations
Year Ended July 31, 1996
<S> <C>
INVESTMENT INCOME
Interest $ 158,922
EXPENSES
Investment advisory and management fees, net of Rule 12b-1
plan fees 11,817
Rule 12b-1 plan fees 5,908
Professional fees 12,131
Printing expenses 10,924
Transfer agent fees 24,262
Custodian fees 17,198
Directors' fees and expenses 4,774
Registration fees 18,369
---------
Total expenses before reimbursement 105,383
Less: expense reimbursement (81,687)
---------
Net expenses 23,696
---------
Net investment income 135,226
---------
Net increase in net assets resulting from operations $ 135,226
=========
</TABLE>
See accompanying notes.
4
<PAGE>
State Bond Cash Management Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1996 1995
---------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 135,226 $ 109,688
Distributions to shareholders from:
Net investment income (135,226) (109,688)
Capital share transactions at net
asset value of $1.00 per share:
Proceeds from sales of shares 4,963,558 5,107,717
Proceeds from reinvested distributions 165,074 98,558
Cost of shares redeemed (4,627,488) (4,508,194)
---------------------------
Net increase in net assets resulting
from share transactions 501,144 698,081
---------------------------
Total increase in net assets 501,144 698,081
NET ASSETS
Beginning of year 2,717,624 2,019,543
---------------------------
End of year $3,218,768 $2,717,624
===========================
</TABLE>
See accompanying notes.
5
<PAGE>
State Bond Cash Management Fund
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1996 1995 1994 1993 1992
--------------------------------------------
<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 .05 .04 .03 .02 .04
Less distributions:
From net investment income (.05) (.04) (.03) (.02) (.04)
-----------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
=========================================
TOTAL RETURN 4.72% 4.51% 2.54% 2.40% 3.74%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) $3,219 $2,718 $2,020 $3,657 $4,770
Ratio of expenses to average net assets .80% .80% .80% .80% .90%
Ratio of net investment income to average net assets 4.58% 4.49% 2.55% 2.38% 3.71%
Ratio of expenses to average net assets before
voluntary expense reimbursement 3.57% 3.83% 3.38% 2.54% 1.99%
Ratio of net investment income to average net
assets before voluntary expense reimbursement 1.81% 1.46% (.01%) .64% 2.91%
</TABLE>
See accompanying notes.
6
<PAGE>
State Bond Cash Management Fund
Notes to Financial Statements
July 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The State Bond Cash Management Fund (the "Fund") is the only investment
portfolio of 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.
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
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
<PAGE>
State Bond Cash Management Fund
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAX STATUS AND RELATED MATTERS
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 the fiscal years ended 1996, 1995, 1994, and 1993
and .90% for the fiscal year ended 1992, 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, ARM Transfer Agency, and SBM Financial Services.
3. CAPITAL SHARES
At July 31, 1996, the Fund had authority to issue twenty billion shares of
common stock, each with a par value of $.00001.
8
<PAGE>
4. SUBSEQUENT EVENT
On August 26, 1996, the Board of Directors of the Fund approved a proposal to
reorganize the Fund. The reorganization will involve the sale of the Fund's
assets, subject to certain liabilities, to Automated Cash Management Trust (the
"Federated Fund"), a mutual fund advised by Federated Investors. Shares of the
Fund would be exchanged at net asset value for shares of equivalent value of the
Federated Fund. The reorganization transaction is subject to approval by Fund
shareholders and to certain other conditions prior to closing, including the
receipt of an opinion as to the tax-free nature of the reorganization for the
Fund, the Federated Fund and their respective shareholders. No sales charges
would be imposed on the proposed reorganization.
9
<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, 1996 and the related statements of operations for the year then
ended and changes in net assets and financial highlights for each of the two
years in the period 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 financial highlights for each of the three years in the
period 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 audits 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,
1996, by correspondence with the custodian. 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
audits provide 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, 1996, and the results of its
operations for the year then ended, and changes in its net assets and financial
highlights for each of the two years in the period then ended in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
Kansas City, Missouri
August 28, 1996
10
<PAGE>
BOARD OF DIRECTORS
William B. Faulkner
President, William Faulkner & Associates, 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 #001979
