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 Minnesota 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 as of February 16, 1995, between SBM Company, the former 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 "Sale Transaction"). The Sale Transaction was
completed on June 14, 1995. As part of the Sale Transaction, ARM Advisors, a
subsidiary of ARM, assumed the responsibilities of SBM as manager of the State
Bond group of mutual funds. In addition, ARM acquired all of the outstanding
stock of SBM Financial Services, Inc., the Distributor of the Funds (the
"Distributor").
The new Investment Advisory and Management Agreements between the Funds and
ARM Advisors became effective upon the closing of the Sale Transaction. The
Agreements contain the same material terms and conditions (including the fees
payable to ARM Advisors) as were contained in each Fund's Investment Advisory
and Management Agreement with SBM.
Mr. Keith O. Martens will remain as the principal portfolio manager of each
of the State Bond Common Stock Fund, State Bond Diversified Fund, State Bond Tax
Exempt Fund, State Bond Minnesota Tax-Free Income Fund, and State Bond U.S.
Government and Agency Securities Fund.
The Boards of Directors of the Funds, at a meeting held on March 24, 1995,
also approved new Underwriting Agreements between the Distributor and the Funds,
effective upon the closing of the Sale Transaction. The new Agreements contain
the same material terms and conditions as the former Agreements.
The Distributor has assumed the responsibilities of SBM as transfer agent
for the Funds.
ARM Advisors, the 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., Morgan Stanley Capital Partners III,
L.P., Morgan Stanley Capital Investors, L.P., and MSCP III 892 Investors, L.P.,
investment funds sponsored by subsidiaries of Morgan Stanley Group Inc., (Morgan
Stanley), own approximately 91% of the outstanding shares of voting stock of
ARM.
June 20, 1995
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