<PAGE>
SEMI-ANNUAL REPORT
STATE FARM INTERIM FUND, INC.
ONE STATE FARM PLAZA . BLOOMINGTON, ILLINOIS 61710
For Account Information and Shareowner
Services: (309) 766-2029
For Price Information ONLY:
1-800/447-0740
May 31, 1995
This report is not to be distributed unless preceded or accompanied by a
prospectus.
<PAGE>
STATE FARM INTERIM FUND, INC.
Dear Shareowner:
The sharp rise in market interest rates which occurred in 1994 has been
quickly reversed over the past six months. Yields on the U. S. Treasury
securities held by your Fund have dropped nearly 175 basis points (a basis
point is .01%) since November causing the values of the securities to increase
markedly. Correspondingly, the net asset value of the Interim Fund rose to
$10.09 from $9.72, a 3.8% improvement.
Somewhat surprisingly, this decline in market interest rates has taken place
in a period where short-term interest rates which are established by the
Federal Reserve Board actually increased in February and have remained stable
since then. Market psychology has changed. Expectations of an abrupt slowdown
in U.S. economic growth have caused many market participants to conclude that
the Federal Reserve is likely done with its current phase of monetary
tightening, and its next move will be to reduce short-term interest rates.
Virtually all the economic data which has been released over the past couple
months or so indicates that a slowdown of some sort is now in progress. Nobody
really knows whether this is a pause in a long expansion or a pause which
presages a serious general decline. Since many of the telltale signs of
identifiable problems or excesses which typically accompany major declines in
the economy are not presently evident, we tend to believe the slowdown will be
moderate and short.
The present general economic environment suggests that the Federal Reserve
will not push short-term rates higher soon. However, interest rates
established in the market place may be another matter. Price movements in
modern capital markets tend to be much more sudden and anticipatory than in
the past. Consequently, changes in market yields tend to quickly reflect
expectations about the future direction of the economy, either upward or
downward.
As you know, the Fund declares a dividend each day from its investment
income which is payable on the last day of the calendar quarter. All dividends
are automatically invested in shares of the Fund unless you have advised State
Farm Investment Management Corp. otherwise in writing.
Sincerely,
Kurt G. Moser
June 16, 1995
1
<PAGE>
STATE FARM INTERIM FUND, INC.
PORTFOLIO OF INVESTMENTS
MAY 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
LONG-TERM INVESTMENTS -- U.S. TREASURY
OBLIGATIONS (95.5%):
<C> <S> <C>
$1,750,000 8 7/8%, due July 15, 1995....................... $1,755,740
1,000,000 4 5/8%, due August 15, 1995..................... 997,500
1,000,000 3 7/8%, due August 31, 1995..................... 995,000
5,000,000 9 1/2%, due November 15, 1995................... 5,078,100
2,000,000 8 7/8%, due February 15, 1996................... 2,040,940
1,000,000 7 1/2%, due February 29, 1996................... 1,011,560
1,000,000 7 5/8%, due April 30, 1996...................... 1,014,840
1,000,000 4 1/4%, due May 15, 1996........................ 985,000
1,000,000 7 3/8%, due May 15, 1996........................ 1,013,440
1,250,000 7 7/8%, due July 15, 1996....................... 1,276,562
1,000,000 7 7/8%, due July 31, 1996....................... 1,021,870
1,000,000 7%, due September 30, 1996...................... 1,014,370
6,500,000 8%, due October 15, 1996........................ 6,678,750
2,000,000 8%, due January 15, 1997........................ 2,065,320
1,000,000 6 3/4%, due February 28, 1997................... 1,014,690
1,000,000 6 7/8%, due March 31, 1997...................... 1,017,810
1,000,000 8 1/2%, due April 15,1997....................... 1,046,090
1,500,000 8 1/2%, due May 15, 1997........................ 1,572,180
1,000,000 6 3/8%, due June 30, 1997....................... 1,009,840
2,000,000 8 1/2%, due July 15, 1997....................... 2,103,440
1,750,000 8 5/8%, due August 15, 1997..................... 1,847,895
1,000,000 5 1/2%, due September 30, 1997.................. 991,560
3,500,000 8 3/4%, due October 15, 1997.................... 3,716,545
3,000,000 7 7/8%, due January 15, 1998.................... 3,139,680
1,000,000 8 1/8%, due February 15, 1998................... 1,054,060
3,000,000 7 7/8%, due April 15, 1998...................... 3,150,480
750,000 5 1/8%, due June 30, 1998....................... 732,540
3,000,000 8 1/4%, due July 15, 1998....................... 3,193,110
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
STATE FARM INTERIM FUND, INC.
PORTFOLIO OF INVESTMENTS
MAY 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
LONG-TERM INVESTMENTS -- U.S. TREASURY
OBLIGATIONS (95.5%): (CONTINUED)
<C> <S> <C>
$1,000,000 4 3/4%, due September 30, 1998......................... $ 962,660
4,000,000 7 1/8%, due October 15, 1998........................... 4,143,120
4,000,000 6 3/8%, due January 15, 1999........................... 4,048,760
3,750,000 7%, due April 15, 1999................................. 3,877,163
4,000,000 6 3/8%, due July 15, 1999.............................. 4,048,760
4,000,000 6%, due October 15, 1999............................... 3,992,480
2,000,000 6 3/8%, due January 15, 2000........................... 2,025,000
2,000,000 8 1/2%, due February 15, 2000.......................... 2,197,820
2,000,000 5 1/2%, due April 15, 2000............................. 1,955,320
1,000,000 6 3/4%, due April 30, 2000............................. 1,028,280
1,000,000 8 7/8%, due May 15, 2000............................... 1,120,470
4,000,000 8 3/4%, due August 15, 2000............................ 4,471,880
3,750,000 8 1/2%, due November 15, 2000.......................... 4,166,588
1,000,000 7 3/4%, due February 15, 2001.......................... 1,078,910
1,000,000 7 7/8%, due August 15, 2001............................ 1,087,810
-----------
Total long-term investments (cost: $93,636,680).......... 92,743,933
SHORT-TERM INVESTMENTS (3.8%):
2,600,000 U.S. Treasury bills, due June to August 1995........... 2,583,931
370,000 Ford Motor Credit Co., 5.95%, 6-6-1995................. 370,122
330,000 General Motors Acceptance Corp., 6.03%, 6-6-1995....... 330,055
400,000 General Motors Acceptance Corp., 6%, 6-8-1995.......... 400,602
-----------
Total short-term investments (cost: $3,684,710).......... 3,684,710
-----------
TOTAL INVESTMENTS (99.3%)(cost:$97,321,390)................ 96,428,643
CASH AND OTHER ASSETS, LESS LIABILITIES (.7%) 656,383
-----------
NET ASSETS (100.0%)........................................ $97,085,026
===========
</TABLE>
Note: At May 31, 1995, net unrealized depreciation of $892,747 consisted of
gross unrealized appreciation of $758,766 and gross unrealized
depreciation of $1,651,513 based on cost of $97,321,390 for federal
income tax purposes.
See accompanying notes to financial statements.
3
<PAGE>
STATE FARM INTERIM FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
Investments, at value (cost: $97,321,390)................. $96,428,643
Cash...................................................... 511,257
Receivable for:
Interest............................................... $1,438,477
Shares of the Fund sold................................ 1,000
Sundry................................................. 3,544 1,443,021
----------
Prepaid expenses.......................................... 22,481
-----------
Total assets......................................... 98,405,402
LIABILITIES AND NET ASSETS
Payable for:
Dividends to shareowners............................... 1,102,934
Shares of the Fund redeemed............................ 173,193
Other accounts payable (including $41,852 to
Manager).............................................. 44,249
----------
Total liabilities.................................... 1,320,376
-----------
Net assets applicable to 9,622,781 shares outstanding of
$1 par value common stock (40,000,000 shares
authorized)............................................. $97,085,026
===========
Net asset value, offering price and redemption price per
share................................................... $ 10.09
===========
ANALYSIS OF NET ASSETS
Excess of amounts received from sales of shares over
amounts paid on redemptions of shares on account of
capital................................................. $98,966,282
Accumulated net realized loss on
sales of investments.................................... (988,509)
Unrealized depreciation of investments.................... (892,747)
-----------
Net assets applicable to shares outstanding............... $97,085,026
===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
STATE FARM INTERIM FUND, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
MAY 31, NOVEMBER 30,
1995 1994
(UNAUDITED)
<S> <C> <C>
INTEREST INCOME.............................. $3,454,259 7,308,531
EXPENSES:
Investment advisory and management fees.... 82,836 176,259
Audit fees................................. 8,132 16,113
Legal fees................................. 1,226 2,026
Fidelity bond expense...................... 1,774 3,653
Directors' fees............................ 600 1,100
Reports to shareowners..................... 2,472 2,959
Securities evaluation fees................. 1,234 3,237
Taxes...................................... 3,809 6,161
Other...................................... 9,624 13,517
---------- ----------
Total expenses........................... 111,707 225,025
---------- ----------
Net investment income........................ 3,342,552 7,083,506
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on sales
of investments........................... (262,699) (335,277)
Net change in unrealized
appreciation/depreciation................ 3,745,722 (7,628,065)
---------- ----------
Net realized and unrealized gain (loss) on
investments................................ 3,483,023 (7,963,342)
---------- ----------
Net change in net assets
resulting from operations.................. $6,825,575 (879,836)
========== ==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
STATE FARM INTERIM FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
1995 1994 1993
(UNAUDITED)
<S> <C> <C> <C>
From operations:
Net investment income......................... $ 3,342,552 7,083,506 6,500,995
Net realized loss on sales
of investments.............................. (262,699) (335,277) (162,716)
Net change in unrealized
appreciation/depreciation................... 3,745,722 (7,628,065) 342,723
----------- ------------------------
Net change in net assets resulting
from operations............................. 6,825,575 (879,836) 6,681,002
Distributions to shareowners from
net investment income (per share
$.35 in 1995, $.71 in 1994 and
$.74 in 1993)................................. (3,342,552) (7,083,506) (6,500,995)
From Fund share transactions:
Proceeds from shares sold..................... 10,979,756 30,546,445 39,107,717
Reinvestment of ordinary income
dividends................................... 3,024,805 6,479,922 5,773,872
----------- ------------------------
14,004,561 37,026,367 44,881,589
Less payments for shares
redeemed.................................... 14,660,422 38,546,040 27,258,922
----------- ------------------------
Net increase in net assets from Fund
share transactions.......................... (655,861) (1,519,673) 17,622,667
----------- ------------------------
Total increase (decrease) in net assets......... 2,827,162 (9,483,015) 17,802,674
Net assets:
Beginning of period........................... 94,257,864 103,740,879 85,938,205
----------- ------------------------
End of period................................. $97,085,026 94,257,864 103,740,879
=========== ========================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
STATE FARM INTERIM FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION --
Debt securities are valued using quotations provided by an independent
pricing service, except short-term debt securities having a maturity of 60
days or less from the valuation date are valued on an amortized cost basis.
Any securities not valued as described above are valued at fair value as
determined in good faith by the Board of Directors or its delegate.
SECURITY TRANSACTIONS AND INTEREST INCOME --
Security transactions are accounted for on the trade date (date the order
to buy or sell is executed). Interest income is recorded on the accrual basis.
Realized gains and losses from security transactions are reported on an
identified cost basis.
FUND SHARE VALUATION, DIVIDENDS AND DISTRIBUTIONS TO SHAREOWNERS --
Fund shares are sold and redeemed on a continuous basis at net asset
value. The net asset value per share is determined as of 3:00 p.m. Bloomington,
Illinois time on each business day other than customary weekend and holiday
closings, except that the Fund need not compute a net asset value on any day
when no purchase or redemption order has been received by the Fund. The net
asset value per share is computed by dividing the value of the Fund's
investments and other assets, less liabilities, by the number of Fund shares
outstanding. The Fund declares a daily dividend equal to its net investment
income, and distributions of such amounts are made at the end of each calendar
quarter. Net realized gains on sales of investments, if any, are distributed
annually after the close of the Fund's fiscal year.
Dividends and distributions payable to its shareowners are recorded by the
Fund on the ex-dividend date.
FEDERAL INCOME TAXES --
It is the Fund's policy to comply with the special provisions of the
Internal Revenue Code available to investment companies and, in the manner
provided therein, to distribute all of its taxable income, as well as any net
realized gain on sales of investments reportable for federal income tax
purposes. The Fund has complied with this policy and, accordingly, no
provision for federal income taxes is required.
The accumulated net realized loss on sales of investments at November 30,
1994, amounting to $725,810, is available to offset future taxable gains. If
not applied, the carryover expires as follows: $2,235 in 1995, $14,537 in
1996, $55,654 in 1997, $40,572 in 1998, $92,150 in 1999, $22,669 in 2000,
$162,716 in 2001, and $335,277 in 2002.
7
<PAGE>
STATE FARM INTERIM FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
2. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory and management services agreement with
State Farm Investment Management Corp. (Manager) pursuant to which the Fund pays
the Manager an annual fee (computed on a daily basis and paid quarterly) of .20%
of the first $50 million of average net assets, .15% of the next $50 million of
average net assets and .10% of average net assets in excess of $100 million. The
Manager guarantees that all operating expenses of the Fund, including the
compensation of the Manager but excluding taxes, interest, extraordinary
litigation expenses, brokerage commissions and other portfolio transaction
costs, shall not exceed .40% of average net assets annually.
Under the terms of this agreement, the Fund incurred fees of $82,836 for
the six months ended May 31, 1995 and $176,259 for the year ended November 30,
1994. The Fund does not pay any discount, commission or other compensation for
transfer agent or underwriting services provided by the Manager.
Certain officers and/or directors of the Fund are also officers and/or
directors of the Manager. The Fund made no payments to its officers or directors
during the six months ended May 31, 1995 and the year ended November 30, 1994,
except for director's fees of $600 and $1,100, respectively, paid to the Fund's
independent directors.
3. INVESTMENT TRANSACTIONS
Investment transactions (exclusive of money market instruments) are as
follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
MAY 31, NOVEMBER 30,
1995 1994
<S> <C> <C>
Purchases....................................... $5,071,953 14,830,156
Proceeds from sales............................. 7,000,313 15,750,000
========== ==========
</TABLE>
8
<PAGE>
STATE FARM INTERIM FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
4. FUND SHARE TRANSACTIONS
Proceeds and payments on Fund shares as shown in the statement of changes
in net assets are in respect of the following number of shares:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
1995 1994 1993
<S> <C> <C> <C>
Shares sold................................ 1,112,772 3,002,212 3,679,339
Shares issued in reinvestment of
ordinary income dividends................. 308,973 639,513 543,360
--------- --------------------------
1,421,745 3,641,725 4,222,699
Less shares redeemed....................... 1,493,258 3,811,808 2,570,430
--------- --------------------------
Net increase in shares
outstanding............................... (71,513) (170,083) 1,652,269
========= ==========================
</TABLE>
9
<PAGE>
STATE FARM INTERIM FUND, INC.
FINANCIAL HIGHLIGHTS
PER SHARE INCOME AND CAPITAL CHANGES (For a share outstanding throughout the
period)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1995 1994 1993 1992 1991 1990
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period........ $ 9.72 10.52 10.46 10.50 10.16 10.17
Income from Investment
Operations
Net Investment Income....... .35 .71 .74 .78 .78 .82
Net Gains or Losses
on Securities
(both realized and
unrealized)................ .37 (.80) .06 (.04) .34 (.01)
------------------------------------------------------------------------
Total from Investment
Operations................. .72 (.09) .80 .74 1.12 .81
Less Distributions
Dividends (from net
investment income)......... (.35) (.71) (.74) (.78) (.78) (.82)
Net Asset Value, End of
Period..................... $10.09 9.72 10.52 10.46 10.50 10.16
========================================================================
Total Return................. 7.52% (.85%) 7.82% 7.19% 11.41% 8.27%
Ratios/Supplemental Data
Net assets, end of period
(millions)................. $ 97.1 94.3 103.7 85.9 66.8 52.7
Ratio of expenses to average
net assets................. .24% (a) .22% .25% .27% .28% .30%
Ratio of net investment
income to average net
assets..................... 7.13% (a) 7.00% 7.00% 7.30% 7.65% 8.12%
Portfolio turnover rate...... 11% (a) 15% 15% 15% 14% 14%
Number of shares out-
standing at end of period
(millions)................. 9.6 9.7 9.9 8.2 6.4 5.2
</TABLE>
Notes: (a) Determined on an annualized basis.
10
<PAGE>
SEMI-ANNUAL
REPORT
MAY 31, 1995
STATE
FARM
INTERIM
FUND, INC.
ONE STATE FARM PLAZA
BLOOMINGTON, ILLINOIS 61710
TELEPHONE (309) 766-2029
G 4101.35
