Registration Nos.
Securities Act - 2-58160
Investment Company Act - 811-2726
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 27
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 26
State Farm Interim Fund, Inc.
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(Exact Name of Registrant as Specified in Charter)
One State Farm Plaza, Bloomington, Illinois 61710
- ---------------------------------------------------- ----------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (800) 447-0740
Janet Olsen
Bell, Boyd & Lloyd
Roger Joslin 3 First National Plaza
One State Farm Plaza Suite 3300, 70 West Madison
Bloomington, Illinois 61710 Chicago, Illinois 60602
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(Names and addresses of agents for service)
__________
X It is proposed that this filing will become effective on
April 1, 1998 pursuant to Rule 485 (b)
__________
Amending the revised prospectus, Statement of Additional Information and Part
C and Exhibits
Total Number of Pages ________
(including attachments and exhibits)
Exhibit Index is on Page _______
<PAGE>
STATE FARM INTERIM FUND, INC.
-----------------------------
CROSS REFERENCE SHEET
Pursuant to Rule 404(a) of Regulation C
Item Number Location or Caption*
----------- --------------------
Part A (Prospectus)
-------------------
1 . . . . . . . .Front Cover
2 (a) . . . . . .Fee Table
2 (b), (c). . . .Not Applicable
3 (a) . . . . . .Financial Highlights
3 (b), (c). . . .Not Applicable
3 (d) . . . . . .Financial Highlights
4 (a) . . . . . .The Fund;
Investment Objective and Policies;
Organization and Capital Stock
4 (b) . . . . . .Investment Objective and Policies;
Investment Restrictions
4 (c) . . . . . .Investment Risks
5 (a) . . . . . .Management of the Fund
5 (b), (c). . . .Management of the Fund;
Fee Table
5 (d) . . . . . .Management of the Fund
5 (e), (f). . . .Management of the Fund; Fee Table;
Financial Highlights
5 (g) . . . . . .Not Applicable
5A . . . . . . .The information called for is contained in
Registrant's annual report to shareowners
6 (a) . . . . . .Organization and Capital Stock
6 (b), (c), (d) .Not Applicable
6 (e) . . . . . .Cover Page
6 (f), (g). . . .Dividends, Distributions and Taxes
6 (h) . . . . . .Not Applicable
7 . . . . . . . .Purchase of Fund Shares; Retirement Plans
7 (a) . . . . . .Management of the Fund
<PAGE>
STATE FARM INTERIM FUND, INC.
-----------------------------
CROSS REFERENCE SHEET
Pursuant to Rule 404(a) of Regulation C
(Continued)
Item Number Location or Caption*
----------- --------------------
7 (b) . . . . . .Determination of Net Asset Value;
Purchase of Fund Shares
7 (c) . . . . . .Not Applicable
7 (d) . . . . . .Purchase of Fund Shares
7 (e), (f), (g) .Not Applicable
8 (a) . . . . . .Redemption of Fund Shares;
Signature Guarantee;
Systematic Withdrawal Program; Exchange of
Fund Shares
8 (b), (c). . . .Not Applicable
8 (d) . . . . . .Redemption of Fund Shares
9 . . . . . . . .Not Applicable
Part B (Statement of Additional Information)
--------------------------------------------
10 (a), (b). . . .Front Cover
11 . . . . . . . .Table of Contents
12 . . . . . . . .Not Applicable
13 (a) . . . . . .Investment Objective and Policies
13 (b), (c). . . .Investment Restrictions
13 (d) . . . . . .Not Applicable
14 (a), (b), (c) .Directors and Officers
15 (a) . . . . . .Not Applicable
15 (b) . . . . . .General Information - Ownership of Shares
<PAGE>
STATE FARM INTERIM FUND, INC.
-----------------------------
CROSS REFERENCE SHEET
Pursuant to Rule 404(a) of Regulation C
(Continued)
Item Number Location or Caption*
- ----------- --------------------
15 (c) . . . . . .Directors and Officers
16 (a)(i). . . . .Investment Advisory and Other Services;
Part A - Management of the Fund
16 (a)(ii) . . . .Directors and Officers
16 (a)(iii), (b) .Management Services Agreement; Part A - Management
of the Fund
16 (c) . . . . . .Not Applicable
16 (d), (e). . . .Management Services Agreement; Service Agreement
16 (f), (g). . . .Not Applicable
16 (h) . . . . . .General Information - Custody of Assets;
General Information - Independent Auditors
16 (i) . . . . . .Transfer Agent Agreement
17 (a) . . . . . .Portfolio Transactions
17 (b) . . . . . .Not Applicable
17 (c), (d). . . .Portfolio Transactions
17 (e) . . . . . .Not Applicable
18 (a), (b). . . .Not Applicable
19 (a) . . . . . .Purchase and Redemption of Fund Shares
19 (b) . . . . . .Determination of Net Asset Value
19 (c) . . . . . .Not Applicable
20 . . . . . . . .Additional Tax Considerations
21 (a) . . . . . .Underwriting Agreement
21 (b), (c). . . .Not Applicable
22 (a) . . . . . .Not Applicable
22 (b) . . . . . .Performance Information
23 . . . . . . . .Financial Information
<PAGE>
STATE FARM INTERIM FUND, INC.
-----------------------------
CROSS REFERENCE SHEET
Pursuant to Rule 404(a) of Regulation C
(Continued)
Item Number Location or Caption*
- ----------- --------------------
Part C (Other Information)
--------------------------
24 . . . . . . . .Financial Statements and Exhibits
25 . . . . . . . .Persons Controlled by or Under Common Control with
Registrant
26 . . . . . . . .Number of Security Holders
27 . . . . . . . .Indemnification
28 . . . . . . . .Business and Other Connections of Investment
Adviser
29 . . . . . . . .Principal Underwriters
30 . . . . . . . .Location of Accounts and Records
31 . . . . . . . .Management Services
32 . . . . . . . .Undertakings
* References are to the captions in the part of the registration statement
indicated unless noted otherwise.
<PAGE>
PROSPECTUS - APRIL 1, 1998
State Farm Interim Fund, Inc.
ONE STATE FARM PLAZA, BLOOMINGTON, ILLINOIS 61710
For Account Information and Shareowner
Services: (309) 766-2029
(800) 447-0740
Offered to the Agents and Employees of
the State Farm Insurance Companies and their families
The investment objective of the Fund is the realization over a period of years
of the highest yield consistent with relative price stability (relatively low
volatility). The Fund seeks to achieve its investment objective through
investment in high quality debt securities with primarily short-term (less
than five years) and intermediate-term (five to fifteen years) maturities.
Shares of the Fund are offered at their net asset value. There is no sales
charge. The Fund is not a "money market" fund, and the purchase and redemption
price of its shares changes from day to day.
----------------------------
This prospectus contains information you should know before investing in the
Fund. Please read it and keep it for future reference. A Statement of
Additional Information dated April 1, 1998 containing further information
about the Fund, which is incorporated herein by reference, has been filed with
the Securities and Exchange Commission. You can obtain a copy without charge
by writing to State Farm Investment Management Corp., One State Farm Plaza,
Bloomington, Illinois 61710 or by calling the shareowner services numbers
stated above.
----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
The Fund is 100% no-load; you pay no fees to purchase, exchange or
redeem shares, nor any ongoing marketing ("12b- 1") expenses. Lower expenses
benefit you by increasing the Fund's investment return.
Shown below are all expenses the Fund incurred during its 1997 fiscal
year. Expenses are expressed as a percentage of fiscal 1997 average net
assets.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES ANNUAL FUND OPERATING EXPENSES
Sales load "charge" on purchases NONE Management fee 0.17%
Sales load "charge" on reinvested dividends NONE Distribution ("12b-1") fees NONE
Redemption fees NONE Other expenses 0.05%
Exchange fees NONE TOTAL FUND EXPENSES 0.22%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example
You would pay the following expenses on a $1,000 investment,
assuming(1) 5% annual return and (2) redemption at the end of each 1 year 3 years 5 years 10 years
time period $2 $7 $12 $28
</TABLE>
The purpose of this table is to help you understand the various costs
and expenses that an investor in the Fund will bear directly or indirectly.
(See "Management of the Fund").
THIS IS AN ILLUSTRATION ONLY. The figures in the example are not
necessarily representative of past or future expenses and actual expenses and
performance may be greater or less than that shown.
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FINANCIAL HIGHLIGHTS
PER SHARE INCOME AND CAPITAL CHANGES (for a share outstanding throughout the
period)
The following information has been audited by Ernst & Young LLP,
independent auditors, whose report thereon is unqualified. The audited
financial statements of the Fund, the auditor's report thereon and additional
performance information are contained in the Fund's annual report dated
November 30, 1997, which may be obtained from the Fund upon request at no
cost.
<TABLE>
<CAPTION>
Year ended November 30,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.98 10.15 9.72 10.52 10.46 10.50 10.16 10.17 9.86 9.99
Income from Investment Operations
---------------------------------
Net investment income .69 .70 .70 .71 .74 .78 .78 .82 .81 .78
Net gain or loss on securities (both
realized and unrealized) (.13) (.17) .43 (.80) .06 (.04) .34 (.01) .31 (.13)
------------------------------------------------------------------------------
Total from investment operations .56 .53 1.13 (.09) .80 .74 1.12 .81 1.12 .65
Less Distributions
------------------
Dividends (from net investment income) (.69) (.70) (.70) (.71) (.74) (.78) (.78) (.82) (.81) (.78)
Distributions (from capital gain) - - - - - - - - - -
------------------------------------------------------------------------------
Total distributions (.69) (.70) (.70) (.71) (.74) (.78) (.78) (.82) (.81) (.78)
Net asset value, end of period $ 9.85 9.98 10.15 9.72 10.52 10.46 10.50 10.16 10.17 9.86
==============================================================================
Total Return 5.87% 5.44% 11.91% (.85%) 7.82% 7.19% 11.41% 8.27% 11.82% 6.67%
- ------------
Ratios/Supplemental Data
- ------------------------
Net assets, end of period (millions) $112.8 107.6 104.7 94.3 103.7 85.9 66.8 52.7 42.2 32.9
Ratio of expenses to average net assets .22% .23% .25% .22% .25% .27% .28% .30% .31% .36%
Ratio of net investment income to average net
assets 7.03% 7.03% 7.00% 7.00% 7.00% 7.30% 7.65% 8.12% 8.16% 7.85%
Portfolio turnover rate 15% 17% 17% 15% 15% 15% 14% 14% 17% 15%
Number of shares outstanding at end of
period (millions) 11.5 10.8 10.3 9.7 9.9 8.2 6.4 5.2 4.2 3.3
</TABLE>
Note: (a) The ratio based on net custodian expenses would have been .22% in
1996 and .24% in 1995
-2-
<PAGE>
THE FUND
The Fund is a no-load, open-end, diversified, management investment
company (mutual fund). The Fund is a no-load fund, which means that it imposes
no sales charges or commissions. The Fund is "open-end" because it
continuously offers its shares for sale and redeems its shares upon request of
the shareowners.
The Fund makes available to investors an investment portfolio of
short-term and intermediate-term high quality debt securities under the
continuous supervision of experienced investment management. By combining
individual shareowner investments into a pool of assets, the Fund is able to
invest in securities which require sizable minimum purchases, but often
provide investors with higher yields than securities purchasable in smaller
amounts. Through ownership of shares of the Fund, as contrasted with ownership
of a number of individual securities, shareowners are relieved of many details
in the selection and management of their investments and the safeguarding of
securities, and their bookkeeping and income tax records are greatly
simplified. In addition, the Fund provides its shareowners with liquidity, as
shares can normally be redeemed at any time at their net asset value. However,
ownership of shares of the Fund does not constitute a complete financial
program. The Fund is intended to serve primarily as an interim investment
medium, pending the shareowner's commitment of the funds to longer-term
investments or to other uses.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is the realization over a period
of years of the highest yield consistent with relative price stability
(relatively low volatility). The Fund seeks to achieve its investment
objective through investment in high quality debt securities with short-term
and intermediate-term maturities
In attempting to achieve this objective, the Fund may invest its
assets in the following types of investments
(1) Obligations of or guaranteed by the U.S. Government, its agencies
or instrumentalities ("U.S. Government obligations") which may be supported by
the full faith and credit of the U.S. Treasury or may be supported only by the
credit of the particular agency or instrumentality;
(2) Corporate debt securities which are either rated A or better by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S & P"), or deemed by the Fund's investment manager, State Farm Investment
Management Corp. ("Manager"), to be of comparable quality (see "Appendix,
Description of Ratings" in the Statement of Additional Information);
(3) Commercial paper and other money market instruments rated as
Prime-1, Prime-2 or Prime-3 by Moody's (see "Appendix, Description of Ratings"
in the Statement of Additional Information).
Cash may be accumulated in an interest-bearing demand bank savings
account as a temporary measure pending investment in securities.
Subsequent to its purchase by the Fund, a security may no longer be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither occurrence will automatically require the elimination of the
security from the Fund's portfolio, but the Manager will consider the reasons
for the change in determining whether to retain the security in the portfolio.
The Fund's investments will typically be distributed in varying
amounts among securities maturing in up to six or seven years from the time of
purchase, but occasionally may extend to securities maturing in no more than
fiften years from the time of purchase. The average maturity of all
investments owned by the Fund will be changed from time to time on the basis
of the Manager's judgment as to prospective yields and price changes among
securities of different qualities, rates of interest and maturities
-3-
<PAGE>
Yields on securities of comparable quality are usually higher for
issues with longer maturities than for those with shorter maturities. An
increase in interest rates will usually reduce the value of the Fund's
investments and a decline in interest rates will usually increase their value.
In seeking to achieve relative price stability over time, the Manager may
choose to forego the higher yields available on securities with longer
maturities in favor of the more limited price volatility of securities with
shorter maturities.
At certain times, yields available from securities with shorter
maturities may exceed those on securities of comparable quality but longer
maturities. When these bond market conditions prevail, the Manager may choose
to forego the higher yield and greater price stability of short-term
securities if in its judgment a higher average yield over time will result
from investing in issues with longer maturities.
The Fund's investment objective as set forth in the first paragraph of
"Investment Objective and Policies" may not be changed without the approval of
the shareowners. However, the investment policies following in seeking that
investment objective may be altered from time to time without shareowners'
approval.
INVESTMENT RISKS
Risks are inherent in all security investments, including mutual
funds. The Fund seeks to achieve relative price stability by investing in high
quality debt securities with primarily short-term and intermediate-term
maturities. However, inherent in the ownership of debt securities is the risk
that the issuer may be unable to make interest and principal payments when
due. The net asset value per share of the Fund may decrease if prevailing
interest rates rise in relation to the interest rates on the Fund's portfolio
securities. There can be no assurance that the objective of the Fund will be
achieved
INVESTMENT RESTRICTIONS
The Fund will not:
(1) Invest more than 5% of the value of its total assets in securities
of any one issuer except U.S. Government obligations, which may be purchased
without limitation;
(2) Purchase more than 10% of any class of securities of any one
issuer except U.S. Government obligations;
(3) Invest more than 5% of its total assets (at the time of the
investment) in securities of companies with records of less than three years
continuous operation, including that of predecessors.
(4) Invest more than 25% of the value of its total assets in any one
industry except that the Fund may invest more than 25% of the value of the
Fund's total assets in certificates of deposit or bankers' acceptances of U.S.
commercial banks when deemed advisable in view of yield differentials and
money market conditions (this restriction is not applicable to securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities).
The policies described in the above paragraph, which cannot be changed
without the approval of a majority of the outstanding shares (as defined in
the Investment Company Act of 1940), are some of the important restrictions
upon investments of the Fund. All of the Fund's investment restrictions are
set forth in the Statement of Additional Information.
PURCHASE OF FUND SHARES
Shares of the Fund may be purchased by agents and employees of the
State Farm Insurance Companies and members of their families.
To open an account eligible investors should complete and sign the
Application furnished with this prospectus and mail it to the Manager together
with either a check (minimum $50) made payable to State Farm Investment
Management Corp., or a compensation deduction authorization, or both.
-4-
<PAGE>
Agents and employees may authorize a compensation deduction (minimum $20)
through the State Farm Insurance Companies by completing the Compensation
Deduction Authorization section of the Application.
Subsequent investments (minimum $50) may be made at any time by
mailing to the Manager a check accompanied by the detachable purchase form at
the bottom of the confirmation. The Fund will accept investments by letter
from a shareowner which provides clear instructions and indicates the account
registration and account number. Similarly, agents and employees may
authorize, change or cancel a compensation deduction by completing and signing
the reverse side of the detachable purchase form and mailing it to the
Manager. The Fund will accept compensation deduction changes by letter or
facsimile from a shareowner which provides clear instructions and indicates
the account registration and account number.
The Fund will invest the entire dollar amount of each purchase in full
and fractional shares of the Fund at the net asset value next determined after
the order to purchase is received and accepted by the Manager. Unless
otherwise instructed, all income dividends and capital gain distributions will
be reinvested in full and fractional shares. However, a shareowner may request
that income dividends and capital gain distributions be paid in cash. Stock
certificates will not be issued unless the shareowner requests a certificate
in writing. Certificates will be issued for full shares only.
A confirmation of each transaction, except purchases by compensation
deduction, will be mailed to the shareowner by the Manager. A confirmation of
purchases by compensation deduction will be mailed to each shareowner promptly
after the end of each calendar quarter.
The Fund reserves the right, in its sole discretion, to reject
purchases when, in the judgment of management, the purchase would not be in
the best interest of the Fund. No order to purchase shares is binding on the
Fund until it has been confirmed in writing and payment has been received by
the Fund
SYSTEMATIC WITHDRAWAL PROGRAM
A shareowner owning $5,000 or more of the Fund's shares at the current
net asset value may provide for the payment of a specified dollar amount from
the shareowner's account to the shareowner or a designated payee monthly,
quarterly or annually.
A shareowner who has a systematic withdrawal program is not permitted
to participate in the compensation deduction plan. The Fund reserves the right
to amend the systematic withdrawal program on 30 days' notice. The program may
be terminated at any time by the shareowner or the Fund. Additional
information may be obtained by contacting State Farm Investment Management
Corp., One State Farm Plaza, Bloomington, Illinois 61710.
RETIREMENT PLANS
INDIVIDUAL RETIREMENT ACCOUNT PLANS - Prototype regular and Roth
Individual Retirement Account ("IRA") Plans are available through which
investors may invest in the Fund and certain other State Farm funds. Eligible
investors who wish to establish an IRA may request copies of the prototype
plans and related documents, including disclosure statements which the
Internal Revenue Service requires to be furnished to individuals who are
considering adopting an IRA, from State Farm Investment Management Corp., One
State Farm Plaza, Bloomington, Illinois 61710. Commerce Bank acts as custodian
of the Plans.
Shares of the Fund and other State Farm mutual funds may be used as an
investment in other IRAs, SEP-IRAs, or other retirement plans (including Keogh
plans, corporate profit-sharing and money purchase plans, and 401(k) plans)
established by or for the benefit of individuals eligible to buy shares of the
Fund. Arrangements for establishment of a retirement plan must be made
directly with the investor's selected trustee or custodian. The Fund does not
offer prototypes of these plans.
-5-
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined as of 3:00
p.m. Bloomington, Illinois time on Monday through Friday exclusive of the
following federal holidays: New Year's Day; Martin Luther King, Jr. Day;
Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor Day;
Thanksgiving Day; and Christmas Day. The net asset value will not be
calculated on the Friday following Thanksgiving or on December 24, 1998. The
Fund need not compute a net asset value on any day when no purchase or
redemption order has been received by the Manager or the Fund. The net asset
value per share is computed by dividing the value of the Fund's portfolio
securities, plus any cash and other assets of the Fund, less all liabilities
of the Fund, by the number of shares outstanding. Interest earned on portfolio
securities and expenses, including fees payable to the Manager, are accrued
daily.
In determining the net asset value per share of the Fund, long-term
debt securities and U.S. Treasury bills are valued at a fair market value by a
pricing service approved by the Board of Directors. Short-term debt
securities, other than U.S. Treasury bills, are valued at amortized cost which
approximates market value. Securities for which the Board of Directors
believes the value obtained by the above procedures does not reflect a fair
value, and all other assets, are valued at a fair value determined in good
faith by the Board of Directors.
REDEMPTION OF FUND SHARES
The Fund will redeem shares from a shareowner's account at the net
asset value next determined after receipt by the Fund of a proper request for
redemption.
Requests for redemption of shares in the Fund may be made in writing,
facsimile, or by telephone if the shareowner has so indicated on the
application or previously completed a Telephone Redemption Authorization Form.
These redemption methods are explained in detail below
BY WRITTEN REQUEST. Shareowners may redeem all or any portion of their
shares by sending a written request to: State Farm Investment Management
Corp., One State Farm Plaza, Bloomington, Illinois 61710. A redemption request
must clearly identify the exact name(s) in which the account is registered,
the account number and the number of shares or dollar amount to be redeemed.
Also, any stock certificates representing the shares to be redeemed must be
returned, in proper form for cancellation, along with the redemption request.
It is suggested that stock certificates returned for cancellation be sent by
certified mail, return receipt requested. The request must be properly signed
by each shareowner of record, including each joint holder of a joint account.
The Fund reserves the right to require further documentation in order to
verify the validity of the redemption request.
On a redemption of $50,000 or more, the signature of the registered
shareowner must be guaranteed as described below in the section entitled
Signature Guarantee, unless the proceeds are to be electronically transferred
to a pre-designated bank account.
Proceeds of redemption by written request normally will be sent by
check to the registered shareowner's address of record. However, upon specific
instructions included in the redemption request, proceeds may be sent to
another payee or to an address other than the address of record.
BY TELEPHONE. Shareowners can redeem by telephone at (309) 766-2029 or
(800) 447-0740 up to $50,000 of their uncertificated shares if the proceeds
are to be sent to the address of record, or they can redeem up to the entire
value of their uncertificated shares if the proceeds are to be electronically
transferred to a pre-designated bank account. Shareowners cannot redeem shares
by telephone if stock certificates are held for those shares. Shareowners may
not utilize this method of redemption unless they have so elected on the
application or until a completed Authorization Form for Telephone Redemption
and Exchange Privileges ("Authorization Form") has been filed.
-6-
<PAGE>
When this election is made by submitting an Authorization Form, the signature
of the shareowner must be guaranteed (see "Signature Guarantee"). Further
documentation may be required from corporations, partnerships, trusts and
other entities. Telephone redemption is not available for IRA accounts.
If elected by the shareowner, proceeds of telephone redemptions will
be electronically transferred to a bank as directed in the Telephone
Redemption election. A charge for receiving an electronic transfer may be
assessed by the shareowner's bank. In order to change the bank or account
designated to receive proceeds, a written request must be sent to State Farm
Investment Management Corp., One State Farm Plaza, Bloomington, Illinois
61710. Such requests must be signed by each shareowner, with each signature
guaranteed as described in the section entitled Signature Guarantee.
Telephone redemption proceeds of up to $50,000 by shareowners not
electing electronic transfer will be sent by check to the registered
shareowner at the address of record.
During periods of volatile economic and market conditions, a
shareowner may have difficulty making a redemption request by telephone, in
which case redemption requests would have to be made in writing or by
facsimile.
By electing the Telephone Redemption Privilege, the shareowner
authorizes the Manager to act upon an instruction by telephone to redeem
shares from any account for which such services have been elected. The Manager
and the Fund will employ reasonable procedures, including tape recording of
telephone instructions and providing written confirmation of each resulting
transaction, to confirm that telephone instructions are genuine. If the
Manager and the Fund fail to employ such procedures, they may be liable for
any losses due to unauthorized or fraudulent instructions. However, the Fund,
the Manager and their respective officers, directors, employees and agents
will not be liable for acting upon instructions given under the authorization
when reasonably believed to be genuine. In such case, the shareowner will bear
the risk of loss in the event of a fraudulent telephone redemption
transaction. To reduce that risk, proceeds of telephone redemptions will be
sent only by check payable to the shareowner of record to the shareowner's
address of record or electronically transferred to a pre-designated bank
account.
Although the Authorization Form authorizes the Fund and the Manager to
tape-record all telephone instructions, the Fund may not honor telephone
instructions unless permission to record is confirmed by the caller.
Once the Telephone Redemption Privilege with a State Farm mutual fund
has been established by a shareowner, it may be established at the request of
the shareowner in any identically registered new account in any other State
Farm mutual fund offering the Telephone Redemption Privilege by the exchange
of shares of the first fund for those of the second fund by use of the
Exchange Privilege.
BY FACSIMILE. Shareowners can redeem by facsimile at (309) 766-2579 up
to $50,000 of their uncertificated shares if the proceeds are to be sent to
the address of record, or they can redeem up to the entire value of their
uncertificated shares if the proceeds are to be electronically transferred to
a pre-designated bank account. A redemption request sent by facsimile must
clearly identify the exact name(s) in which the account is registered, the
account number and the number of shares or dollar amount to be redeemed, and
must show the signature(s) of the registered shareowner(s). Shareowners cannot
redeem shares by facsimile if stock certificates are held for those shares.
Facsimile redemption is not available for IRA accounts.
Facsimile redemption proceeds up to $50,000 by shareowners not
electing electronic transfer will be sent by check to the registered
shareowner at the address of record. However, upon specific written
instruction (which may not be sent by facsimile) accompanied by a signature
guarantee received at least one day prior to the redemption, proceeds may be
sent to another payee or to another address other than the address of record
-7-
<PAGE>
If elected by the shareowner, proceeds of facsimile redemptions will
be electronically transferred to a bank previously designated in writing in a
document on file with the Manager. A charge for receiving an electronic
transfer may be assessed by the shareowner's bank. In order to change the bank
or account designated to receive the proceeds, a written request (not to
include facsimile transmission), signed by each shareowner with each signature
guaranteed as described in this prospectus under "Signature Guarantee" must be
sent to State Farm Investment Management Corp., One State Farm Plaza,
Bloomington, IL 61710.
REDEMPTION GENERALLY. The Fund will generally redeem shares in cash
(by check or electronic transfer). Redemptions of more than $500,000 during
any 90-day period by one shareowner will normally be paid in cash, but may be
paid wholly or partly by a distribution in kind of securities. If a redemption
is paid in kind, the redeeming shareowner may incur brokerage fees in selling
the securities received.
Payment for shares redeemed will be sent or electronically transferred
within seven days after the Fund receives a redemption request, in writing,
facsimile, or by telephone, in proper form (including stock certificates, if
any). However, if the Fund is requested to redeem shares within several days
after they have been purchased, the Fund may delay sending the redemption
proceeds until it can verify that payment of the purchase price for the shares
has been, or will be, collected. If the shareowner requests payment by
electronic transfer, a charge for receiving the transfer may be assessed by
the shareowner's bank.
A redemption is treated as a sale for federal income tax purposes. A
shareowner's redemption proceeds may be more or less than the shareowner's
cost depending upon the net asset value at the time of the redemption and, as
a result, the shareowner may realize a capital gain or loss. Gain or loss is
computed on the difference between the fair market value of the shares
redeemed and their cost basis. If shares of the Fund are purchased during the
30 days before or after redemption, the Internal Revenue Code wash sale rules
might apply.
Although it is not anticipated that the Fund will impose a redemption
fee, the Fund reserves the right to charge a redemption fee not to exceed one
percent of the redemption price.
The Fund may suspend the right of redemption or postpone a redemption
payment more than seven days during any period when (a) the New York Stock
Exchange is closed for other than customary weekend and holiday closings, (b)
trading on that Exchange is restricted, (c) an emergency exists making
disposal of securities owned by the Fund or valuation of its assets not
reasonably practicable, or (d) the Securities and Exchange Commission has by
order permitted such suspension for the protection of shareowners of the Fund;
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether any condition prescribed in (b) through
(d) exists.
SIGNATURE GUARANTEE
A signature guarantee is a written representation, signed by an
officer or authorized employee of the guarantor, that the signature of the
shareowner is genuine. The guarantor must be an institution authorized to
guarantee signatures by applicable state law. Such institutions include banks,
broker-dealers, savings and loan associations and credit unions.
The signature guarantee must appear, together with the signature of
each registered owner, either: (1) on the written request for redemption,
which clearly identifies the exact name(s) in which the account is registered,
the account number and the number of shares or the dollar amount to be
redeemed; (2) on a separate "stock power", an instrument of assignment
which should specify the total number of shares to be redeemed (this stock
power may be obtained from most banks and stockbrokers); (3) on the back of
each stock certificate tendered for redemption; or (4) on the Telephone
Redemption and Exchange Privileges Authorization Form
-8-
<PAGE>
EXCHANGE OF FUND SHARES
GENERAL. - A shareowner may redeem part or all of the shares in the
shareowner's account and purchase shares of another State Farm mutual fund
without charge by meeting the established redemption procedures and minimum
subscription requirements of that fund. A written exchange request must be
accompanied by a properly completed application for the fund being purchased
if an account in the new fund has not previously been established. A telephone
exchange request can be transacted as described under "Telephone Exchange
Privilege".
An exchange transaction is a sale and purchase of shares for federal
tax purposes, and may result in capital gain or loss. Before making an
exchange, a shareowner should obtain the prospectus for the fund to be
purchased from the Manager at One State Farm Plaza, Bloomington, Illinois
61710, and read it carefully.
TELEPHONE EXCHANGE PRIVILEGE. - Shareowners who wish to use the
Telephone Exchange Privilege, which permits them to exchange by telephone
shares of the Fund for those of another fund managed by State Farm Investment
Management Corp., must so elect on the application or complete the
Authorization Form, have their signatures guaranteed and mail the form to the
Fund.
Once the Telephone Exchange Privilege has been granted by the Fund,
the shareowner may telephone the Fund and request an exchange for any amount
meeting or exceeding the applicable minimum investment of the fund being
purchased. The shareowner must identify the existing account by designating
the Fund's name, registration of the account and account number, and must
specify the dollar amount or number of shares to be exchanged and the fund to
which the exchange should be made. The registration of the account to which an
exchange is made must be exactly the same as that of the Fund account from
which an exchange is made. If the shareowner has not established an account in
the fund to which the exchange is to be made, a new account will be opened
automatically and will carry the same registration as the Fund account from
which the exchange is made; accordingly, the Telephone Exchange Privilege will
also apply to the fund being purchased. The Manager's records of such
instructions are binding.
The Manager and the Fund will employ reasonable procedures, including
tape recording of telephone instructions and providing written confirmation of
each resulting transaction, to confirm that telephonic instructions are
genuine. If the Manager and the Fund fail to employ such procedures, they may
be liable for any losses due to unauthorized or fraudulent instructions.
However, the Fund, its transfer agent, and their respective officers,
directors, employees and agents will not be liable for acting upon
instructions given by any person under the Telephone Exchange Privilege when
reasonably believed to be genuine. In such case, the shareowner will bear the
risk of loss in the event of a fraudulent telephone exchange transaction. To
reduce the risk of loss, the registration of the account into which shares are
exchanged must be identical with the registration of the originating account.
The Telephone Exchange Privilege is not available for shares
represented by a certificate or if good payment for shares being redeemed has
not been received. (The other funds into which exchanges may be made have
adopted similar policies.)
During periods of volatile economic and market conditions, a
shareowner may have difficulty making an exchange request by telephone, in
which case exchange requests would have to be made in writing or by facsimile.
The Fund reserves the right at any time to suspend, limit, modify or terminate
the telephone exchange privilege, but will not do so without giving
shareowners at least 30 days' prior written notice.
MANAGEMENT OF THE FUND
The Board of Directors has overall management responsibilities for the
Fund. However, the Fund has engaged State Farm Investment
-9-
<PAGE>
Management Corp., One State Farm Plaza, Bloomington, Illinois 61710, as
Manager to provide professional investment management for the Fund.
The Fund's portfolio is managed by a team consisting of Kurt Moser and
Donald Heltner. Mr. Moser has participated in the Fund's portfolio management
since 1988. Mr. Heltner became part of the Fund's portfolio management team in
1998.
Mr. Moser is a Director and a Senior Vice President of the Manager and
Vice President of the Fund and the other State Farm mutual funds. In addition,
Mr. Moser has also held the following positions during the past five years:
Director or State Farm Life Insurance Company and State Farm Fire and Casualty
Company; Vice President of State Farm Life Insurance Company, and Vice
President - Investments of State Farm Mutual Automobile Insurance Company and
State Farm Fire and Casualty Company.
Mr. Heltner is an Investment Officer of the Manager, and Vice
President of the Fund and of State Farm Balanced Fund, Inc. In addition to his
office with the Manager, Mr. Heltner has also held the following positions
during the last five years: Vice President - Taxable Fixed Income, State Farm
Life Insurance Company, State Farm Mutual Automobile Insurance Company and
State Farm Fire and Casualty Company since 1998; and Vice President, Century
Investment Management Co. from 1989 through 1998.
Since its inception in 1967, the Manager's sole business has been to
act as investment adviser, principal underwriter, transfer agent and dividend
disbursing agent for the State Farm mutual funds.
The Manager is wholly-owned by State Farm Mutual Automobile Insurance
Company
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund declares a dividend each day from its net investment income,
distributable at the end of each calendar quarter. Shares begin to earn
dividends on the day following the date of purchase. Net realized capital
gains, if any, are distributed annually. All distributions are automatically
reinvested in shares of the Fund at the net asset value on the payment date,
except that any shareowner may elect to receive dividends and capital gains
distributions in cash, upon signed written request received by the Manager. If
the entire amount in a shareowner's account is redeemed, dividends credited to
that account through the day of redemption are paid with the proceeds of
redemption.
Distributions from net investment income and from short-term capital
gains, if any, are taxable to shareowners as ordinary income, whether received
in cash or additional shares.
Distributions of long-term capital gains are taxable to shareowners as
long-term capital gains, whether received in cash or additional shares and
regardless of the period of time the shares have been held.
If a shareowner is not subject to tax on its income, it will not be
required to pay tax on amounts distributed to it. Shareowners must provide
their social security or tax identification number and furnish appropriate
certification. Otherwise, IRS regulations require the Fund to withhold 31%
from taxable distributions payable to accounts whose owners have not complied.
Information concerning the tax status of dividends and distributions will be
mailed to shareowners annually.
Because this section is not intended to be a full discussion,
shareowners may wish to consult their tax advisers regarding the tax
consequences of investments in the Fund.
-10-
<PAGE>
ORGANIZATION AND CAPITAL STOCK
The Fund is a Maryland corporation, organized on November 10, 1976,
with 40,000,000 shares of authorized common stock, $1 par value. Holders of
shares are entitled to share pro rata in dividends and other distributions on
shares when and as declared by the Board of Directors, to one vote per share
in elections of directors and other matters presented to shareowners, and to
equal rights per share in the event of liquidation. The shares are
nonassessable, have no pre-emptive, subscription or conversion rights and have
no sinking fund provisions. The shares are transferable, and are redeemable
upon request of the holder. Shares redeemed by the Fund may be reissued.
-11-
<PAGE>
PROSPECTUS
April 1, 1998
STATE
FARM
INTERIM
FUND, INC.
ONE STATE FARM PLAZA
BLOOMINGTON, ILLINOIS 61710
TELEPHONE (309) 766-2029
(800) 447-0740
<PAGE>
STATE FARM INTERIM FUND, INC.
ONE STATE FARM PLAZA, BLOOMINGTON, ILLINOIS 61710
TELEPHONE: (309) 766-2029
(800) 447-0740
STATEMENT OF ADDITIONAL INFORMATION - APRIL 1, 1998
- -----------------------------------------------------------------------------
This Statement of Additional Information is not the Fund's prospectus
but contains information in addition to and more detailed than that set forth
in the prospectus. It should be read in conjunction with the prospectus.
The Fund's prospectus dated April 1, 1998, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge by contacting the Fund at the address or telephone numbers
shown above.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
Financial Information 2
Investment Objective and Policies 2
Investment Restrictions 3
Purchase and Redemption of Fund Shares 4
Determination of Net Asset Value 4
Investment Advisory and Other Services 4
Management Services Agreement 4
Service Agreement 5
Underwriting Agreement 5
Transfer Agent Agreement 6
Performance Information 6
Portfolio Transactions 6
Additional Tax Considerations 7
Directors and Officers 7
General Information 9
Appendix 11
<PAGE>
FINANCIAL INFORMATION
Please refer to the financial statements (including Financial
Highlights), notes thereto and Report of Independent Auditors (all of which
are "Financial Information") contained in the Fund's annual report for the
fiscal year ended November 30, 1997, a copy of which accompanies this
Statement of Additional Information. This Financial Information (but no other
material from the annual report) is incorporated by reference in this
Statement of Additional Information. Additional copies of the annual report
may be obtained at no charge by writing or telephoning the Fund, (309)
766-2029 or (800) 447-0740.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is the realization over a period
of years of the highest yield consistent with relative price stability
(relatively low volatility), from high quality debt securities with short-term
and intermediate term maturities.
(1) Obligations of or guaranteed by the U.S. Government, its agencies
or instrumentalities ("U.S. Government obligations") which may be supported by
the full faith and credit of the U.S. Treasury or may be supported only by the
credit of the particular agency or instrumentality;
(2) Corporate debt securities which are either rated A or better by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S & P") or deemed by the Fund's investment manager, State Farm Investment
Management Corp. ("Manager"), to be of comparable quality (see "Appendix,
Description of Ratings"); and
(3) Commercial paper and other money market instruments rated as
Prime-1, Prime-2, or Prime-3 by Moody's (see Appendix, Description of
Ratings").
Cash may be accumulated in an interest-bearing demand bank savings
account as a temporary measure pending investment in securities.
Subsequent to its purchase by the Fund an issue may no longer be rated
or its rating may be reduced below the minimum required for purchase by the
Fund. Neither occurrence will automatically require the elimination of the
issue from the Fund's portfolio, but the Manager will consider the reasons for
the change in determining whether to retain the issue in the portfolio.
The Fund's investments will typically be distributed in varying
amounts among issues maturing in up to six or seven years from the time of
purchase, but occasionally may extend to issues maturing in no more than
fifteen years from the time of purchase. The average maturity of all
investments owned by the Fund will be changed from time to time on the basis
of the Manager's judgment as to prospective yields and price changes among
issues of different qualities, rates of interest and maturities.
Yield on securities of comparable quality are usually higher for
issues with longer maturities than for those with shorter maturities. An
increase in interest rates will usually reduce the value of the Fund's
investments and a decline in interest rates will usually increase their value.
In seeking to achieve relative price stability over time, the Manager may
choose to forego the higher yields available on issues with longer maturities
in favor of the more limited price volatility of issues with shorter
maturities
At certain times, yields available from issues with shorter maturities
may exceed those on issues of comparable quality but longer maturities. When
these bond market conditions previal, the Manager may choose to forego the
higher yield and greater price stability of short-term issues if, in its
judgment, a higher average yield, over time, will result from investing in
issues with longer maturities.
The Fund expects that its annual portfolio turnover rate will usually
be less than 100%, but the rate of turnover will not be a limiting factor when
the Manager considers it advisable to sell or purchase securities. The annual
portfolio turnover rate would be 100%, for example, if an amount of securities
equal to the average value of all portfolio securities during the year were
sold and reinvested, exclusive in both cases of all securities with maturities
at time of acquisition of one year or less. Historical portfolio turnover rate
information is set forth in the Fund's prospectus in the Financial Highlights
table which is incorporated herein by reference.
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<PAGE>
The Fund's investment objective may not be changed without the
approval of the shareowners. However, the investment policies followed in
seeking that investment objective may be altered from time to time without
shareowner's approval.
INVESTMENT RESTRICTIONS
The Fund is subject to certain restrictions upon its investments which
provide that the Fund may not:
(1) Invest more than 5% of the value of the Fund's total assets in
securities of any one issuer except securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, which may be purchased
without limitation;
(2) Borrow money, except from banks for temporary or emergency
procedures and not for investment purposes, and then only in an amount not
exceeding 5% of the value of the Fund's total assets at the time of borrowing;
(3) Pledge, mortgage or hypothecate the Fund's assets, except that, to
secure borrowings permitted by subparagraph (2) above, the Fund may pledge
securities having a market value not exceeding 10% of the Fund's net asset
value;
(4) Underwrite any securities issued by other persons;
(5) Purchase or sell real estate, but the Fund may invest in
securities secured by real estate or interests therein;
(6) Purchase or sell commodities or commodities contracts, or
interests in oil, gas or other mineral exploration or development programs;
(7) Make loans to others (except to the extent that the purchase of
debt securities may be deemed the making of a loan);
(8) Make short sales of securities or purchase any securities on
margin, except for such short- term credits as are necessary for the clearance
of transactions, or purchase or sell any put or call options or combinations
thereof;
(9) Purchase or retain for the portfolio of the Fund the securities of
any issuer, if, to the Fund's knowledge, those directors and officers of the
Fund who individually own more than 1/2 of 1% of the outstanding securities of
such issuer together own more than 5% of such outstanding securities;
(10) Purchase more than 10% of any class of securities of any one
issuer (for this purpose all indebtedness of an issuer shall be deemed a
single class) except U.S. Government obligations;
(11) Purchase securities subject to restrictions on disposition under
the Securities Act of 1933;
(12) Purchase securities of other investment companies or investment
trusts, except by purchases in the open market involving no commission or
profit (other than the customary broker's commission) to a sponsor or dealer,
and then only in an amount up to 5% of the value of the Fund's total assets,
or except as a part of a plan of merger or consolidation;
(13) Invest in the securities of a company for the purpose of
exercising management or control;
(14) Invest more than 5% of the market value of the Fund's total
assets (at the time of the investment) in securities of companies with records
of less than three years' continuous operation, including that of
predecessors;
(15) Invest more than 25% of the value of the Fund's total assets in
any one industry except that the Fund may invest more than 25% of the value of
the Fund's total assets in certificates of deposit or bankers' acceptances of
U.S. commercial banks when deemed advisable in view of yield differentials and
money market conditions (this restriction is not applicable to securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities).
For purposes of restrictions numbered 1, 9 and 10 above, the Fund will
classify the issuer or issuers of a security according to the entity or
entities which constitute the source of payment of interest and principal on
the security.
Other than for purposes of restriction number 3 above, if a percentage
restriction is not violated at the time of investment or borrowing, a change
in the value of the Fund's net assets or in the outstanding securities of an
issuer will not result in a violation of the restriction.
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<PAGE>
These investment restrictions have been adopted by the Fund and may
not be changed without the consent of the shareowners holding a majority of
the shares. A majority of the shares, as used in this Statement of Additional
Information and in the Prospectus, means the vote of (i) 67% or more of the
shares present and entitled to vote at a meeting, if the holders of more than
50% of the shares are present or represented by proxy, or (ii) more than 50%
of the shares, whichever is less.
PURCHASE AND REDEMPTION OF FUND SHARES
Purchases and redemptions of Fund shares are discussed in the
prospectus under the headings "Purchase of Fund Shares", "Systematic
Withdrawal Program", "Retirement Plans", "Redemption of Fund Shares" and
"Exchange of Fund Shares"and that information is incorporated herein by
reference.
DETERMINATION OF NET ASSET VALUE
Determination of net asset value is set forth in the prospectus under
the heading "Determination of Net Asset Value" and that information is
incorporated herein by reference.
INVESTMENT ADVISORY AND
OTHER SERVICES
The Fund has an Investment Advisory and Management Services Agreement,
a Transfer Agent Agreement and an Underwriting Agreement with State Farm
Investment Management Corp., One State Farm Plaza, Bloomington, Illinois
61710. There is a separate Service Agreement among the Fund, the Manager and
State Farm Mutual Automobile Insurance Company ("Auto Company"). Each of these
four agreements may be continued beyond its current term only so long as such
continuance is specifically approved at least annually by the Board of
Directors of the Fund including a majority of the directors who are not
interested parties to such agreement or by vote of a majority of the
outstanding shares of the Fund and, in either case, by vote of a majority of
the directors who are not interested persons of any party to such agreement,
except in their capacity as directors of the Fund, cast in person at a meeting
called for the purpose of voting on such approval. Each agreement may be
terminated upon 60 days' written notice by any of the parties to the
agreement, or by a majority vote of the outstanding shares, and will terminate
automatically upon its assignment by any party.
The Manager is also the investment manager, transfer agent, dividend
disbursing agent and underwriter for State Farm Growth Fund, Inc., State Farm
Balanced Fund, Inc. and State Farm Municipal Bond Fund, Inc. There are similar
agreements among those funds, the Manager and the Auto Company, except that
the Investment Advisory and Management Services Agreements with State Farm
Growth Fund, Inc. and State Farm Balanced Fund, Inc. provide for investment
advisory fees at annual rates different from those applicable to the Fund.
Since its inception in 1967, the Manager's sole business has been to
act as investment adviser, principal underwriter, transfer agent and dividend
disbursing agent for the State Farm mutual funds.
The Manager is wholly-owned by State Farm Mutual Automobile Insurance
Company, which is an Illinois mutual insurance company.
Messrs. Rust, Joslin, Grimes, Moser, Tipsord, Chevalier and Ms. Dysart
are directors and/or officers of the Fund, the Manager and the other State
Farm mutual funds (see "Directors and Officers").
MANAGEMENT SERVICES AGREEMENT
Pursuant to an Investment Advisory and Management Services Agreement,
the Manager: (1) acts as the Fund's investment adviser; (2) manages the Fund's
investments; (3) administers the Fund's business affairs; (4) provides
clerical personnel, suitable office space, necessary facilities and equipment
and administrative services; and (5) permits its officers and employees to
serve as directors, officers and agents of the Fund, without compensation from
the Fund, if duly elected or appointed.
-4-
<PAGE>
The agreement requires the Fund to pay: (1) the fees and expenses of
independent auditors, legal counsel, the custodian, the transfer agent, the
registrar, the dividend disbursing agent and directors who are not affiliated
with the Manager; and (2) the cost of preparing and distributing stock
certificates, proxy materials, reports and notices to shareowners, brokerage
commissions, interest, taxes, federal securities registration fees and
membership dues in the Investment Company Institute or any similar
organization. The Manager is required to pay all other Fund expenses.
As compensation for the services and facilities furnished, the Fund
pays a management fee (computed on a daily basis and paid quarterly) at the
annual rate of 0.20% of the first $50 million of average net assets, 0.15% of
the next $50 million of average net assets and 0.10% of the average net assets
in excess of $100 million. However, the management fee will be reduced, or the
Manager will reimburse the Fund, by any amount necessary to prevent the Fund's
total expenses (excluding taxes, interest, extraordinary litigation expenses,
brokerage commissions and other portfolio transaction costs) from exceeding
0.40% of the average net assets of the Fund on an annual basis.
For the fiscal years ended November 30, 1997, 1996 and 1995, the
Manager earned $184,551, $177,555 and $170,812, respectively, for its services
as investment adviser to the Fund. Neither the Manager nor any affiliated
company receives any brokerage commissions from the Fund as such business is
transacted with non-affiliated broker-dealers.
Some affiliated companies of the Manager (including Auto Company) and
the other State Farm funds managed by the Manager carry on extensive
investment programs. Securities considered as investments for the Fund may
also be appropriate for the accounts of one or more of such companies.
Although investment decisions for the Fund are made independently from those
for such other companies, securities of the same issuer may be acquired, held
or disposed of by the Fund and one or more of such other companies at or about
the same time, if consistent with the investment objectives and policies of
the respective parties. When both the Fund and one or more of such other
companies are concurrently engaged in the purchase or sale of the same
securities, the transactions are allocated as to amount and price in a manner
considered equitable to the Fund. In some cases this procedure may affect the
price or amount of the securities as far as each party is concerned. It is the
opinion of the Directors of the Fund, however, that the benefits available to
the Fund outweigh any possible disadvantages that may arise from such
concurrent transactions.
The obligation of performance under the management agreement between
the Manager and the Fund is solely that of the Manager, for which the Auto
Company assumes no responsibility.
SERVICE AGREEMENT
Under the Service Agreement, the Auto Company makes available to the
Manager the services, on a part-time basis, of employees of the Auto Company
engaged in its investment operations, and also certain other personnel,
services and facilities to enable the Manager to perform its obligations to
the Fund. The Manager reimburses the Auto Company for such costs, direct and
indirect, as are fairly attributable to the services performed and the
facilities provided by the Auto Company under the Service Agreement.
Accordingly, the Fund makes no payment to the Auto Company under the Service
Agreement.
UNDERWRITING AGREEMENT
Pursuant to the Underwriting Agreement, the Manager: (1) is the
underwriter of the Fund's shares; (2) acts as agent of the Fund in the
continuous sale of its shares; (3) prepares and distributes literature
relating to the Fund and its investment performance; (4) distributes and pays
for the printing of the Fund's Prospectus; (5) circulates advertising and
public relations materials; and (6) pays the cost of qualifying and
maintaining the qualification of the Fund's shares for sale under the
securities laws of the various states.
The Manager receives no discount, commission or other compensation as
underwriter.
-5-
<PAGE>
TRANSFER AGENT AGREEMENT
The Transfer Agent Agreement appoints the Manager as the Fund's
transfer agent and dividend disbursing agent. Under the terms of the
agreement, the Manager: (1) maintains all shareowner account records; (2)
prepares and mails transaction confirmations, annual records of investments
and tax information statements; (3) effects transfers of Fund shares; (4)
arranges for the issuance and cancellation of stock certificates; (5) prepares
annual shareowner meeting lists; (6) prepares, mails and tabulates proxies;
(7) mails shareowner reports; and (8) disburses dividend and capital gains
distributions. These services are performed by the Manager at no charge to the
Fund.
PERFORMANCE INFORMATION
The Fund provides information on its "Average Annual Total Return" in
its annual reports to shareowners and in advertising and sales literature.
"Average Annual Total Return" is the average annual compounded rate of change
in value represented by the percentage change in value during a period of an
investment in shares of the Fund, including the value of shares acquired
through reinvestment of all dividends and capital gains distributions for the
period.
Average Annual Total Return is computed as follows:
ERV=P(1 + T)n
Where: P = the amount of an assumed initial investment in shares of
the Fund
T = average annual total return
n = number of years from initial investment to the end of the
period
ERV = ending redeemable value of shares held at the end of
the period
For example, as of November 30, 1997 the Average Annual Total Return
on a $1,000 investment in the Fund for the following periods was:
Average Annual
Total Return
--------------
1 year 5.87%
5 years 5.94
10 years 7.48
The Fund imposes no sales charges and pays no distribution expenses.
Income taxes are not taken into account. Performance figures quoted by the
Fund are not necessarily indicative of future results. The Fund's performance
is a function of conditions in the securities markets, portfolio management
and operating expenses. Although information about past performance is useful
in reviewing the Fund's performance and in providing some basis for comparison
with other investment alternatives, it should not be used for comparison with
other investments using different reinvestment assumptions or time periods.
The Fund's performance may be compared with movements of market
indexes, including the Lehman Brothers Three-Year Index. Indexes are unmanaged
and do not include transaction costs.
PORTFOLIO TRANSACTIONS
To date all purchases and sales of portfolio securities for the Fund
have been made on a net basis without brokerage commissions, in transactions
with securities dealers who buy and sell those securities as market makers.
Marker makers earn the spread between the bid and asked prices at which they
buy and sell. The Fund may occasionally purchase new issues of securities
offered by underwriters, at prices which are marked up from the discounted
prices at which the underwriters purchase for resale. For the fiscal year
ended November 30, 1997, 1996 and 1995, the Fund paid no brokerage
commissions.
-6-
<PAGE>
The Manager's primary consideration in selecting dealers or brokers to
execute transactions is the best net price consistent with competent
execution. Among the factors considered in evaluating quality of execution
are: (1) skill, knowledge and effort required in executing particular
transactions; (2) trading and operational capability; (3) financial condition
and stability; (4) confidentiality; and (5) reliability and integrity.
The Manager and the Auto Company perform extensive investment
research, which is used in making investment decisions for the Fund in the
performance of the Investment Advisory and Management Services Agreement, for
the State Farm Companies, and for the other State Farm mutual funds. The
availability of additional information from a diversity of sources, some of
which have in-depth knowledge of specialized subjects, and have proven insight
and acumen in economic, financial, political and investment matters, may tend
to reduce the Manager's costs by some indeterminable amount, but more
importantly is believed to provide a quantity and range of information greater
than could be generated solely within a single advisory organization, even for
a larger advisory fee. While the State Farm Companies and the other State Farm
mutual funds, as well as the Fund, may benefit from information obtained for
the Fund with the Fund's transactions, the Fund may also realize a benefit
from information obtained for the State Farm Companies and for other State
Farm mutual funds with their transactions.
ADDITIONAL TAX CONSIDERATIONS
The Fund intends to continue to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. A 4% excise tax is
imposed on the excess of the required distribution for a calendar year over
the distributed amount for such calendar year. Generally, the required
distribution is the sum of 98% of the Fund's net investment income for the
calendar year plus 98% of its capital gain net income for the one year period
ending November 30. The Fund intends to declare or distribute dividends during
the calendar year in an amount sufficient to prevent imposition of the 4%
excise tax.
Because capital gain distributions reduce net asset value, if you
purchase shares shortly before a record date for such a distribution you will,
in effect, receive a return of a portion of your investment although the
distribution will be taxable to you. This is true even if the net asset value
of your shares was reduced below your cost. However, for federal income tax
purposes your original cost would continue as your tax basis. Any loss
recognized on the disposition of Fund shares acquired which have been held by
the shareowner for six months or less will be treated as long-term capital
loss to the extent the shareowner received a long-term capital gain
distribution with respect to those Fund shares.
Distributions of long-term capital gains are taxable to shareowners as
long-term capital gains, whether received in cash or additional shares and
regardless of the period of time the shares have been held. Dividends and
capital gains are taxed to shareholders at the same rates. However, the
distinction between ordinary income or loss and capital gain or loss remains
important for certain tax purposes, such as a taxpayer's ability to offset
losses against income.
DIRECTORS AND OFFICERS
The directors and officers of the Fund, their principal occupations
for the last five years and their affiliations, if any, with State Farm
Investment Management Corp., the Fund's investment adviser and principal
underwriter, are listed below. Unless otherwise noted, the address of each is
One State Farm Plaza, Bloomington, Illinois 61710.
Edward B. Rust, Jr., President and Director*
President and Chairman of the Board, State Farm Mutual Automobile
Insurance Company and Director of certain wholly owned insurance
subsidiaries and affiliates. President and Director, State Farm
Investment Management Corp. Age 47.
-7-
<PAGE>
Roger S. Joslin, Vice President, Treasurer and Director*
Senior Vice President and Treasurer, State Farm Mutual Automobile
Insurance Company and certain wholly owned insurance subsidiaries and
affiliates. Chairman of the Board, State Farm Fire and Casualty
Company. Vice President, Treasurer and Director, State Farm Investment
Management Corp. Age 61.
Albert H. Hoopes, Director
Attorney at Law. Address: 1001 North Main Street, Bloomington,
Illinois 61701. Age 83.
Thomas M. Mengler, Director
Dean, University of Illinois College of Law since August 1993;
Assistant Dean prior to August, 1993. Address: 202 Law Building, 504
East Pennsylvania Avenue, Champaign, Illinois 61820. Age 44.
Davis U. Merwin, Director
Investor. Address: P.O. Box 8, Bloomington, Illinois 61702. Age 69.
James A. Shirk, Director
Director and President, Beer Nuts, Inc. Address: 103 N. Robinson,
Bloomington, Illinois 61701. Age 54.
David R. Grimes, Assistant Vice President and Secretary
Assistant Vice President of Accounting, State Farm Mutual Automobile
Insurance Company. Secretary, State Farm Investment Management Corp.;
since 1994, Assistant Vice President and Secretary, State Farm
Investment Management Corp. Age 55.
Kurt G. Moser, Vice President
Director of State Farm Life Insurance Company and State Farm Fire and
Casualty Company; Vice President of State Farm Life Insurance Company,
and Vice President-Investments of State Farm Mutual Automobile
Insurance Company and State Farm Fire and Casualty Company. Director
and Senior Vice President, State Farm Investment Management Corp. Age
53.
John S. Concklin, Vice President
Vice President-Common Stock, State Farm Life Insurance Company, State
Farm Mutual Automobile Insurance Company and State Farm Fire and
Casualty Company since 1997; Vice President- Fixed Income, State Farm
Life Insurance Company, State Farm Mutual Automobile Insurance Company
and State Farm Fire and Casualty Company since 1995; Investment
Officer for State Farm Life Insurance Company, State Farm Mutual
Automobile Insurance Company and State Farm Fire and Casualty Company
from 1986-1995. Since 1995, Investment Officer, State Farm Investment
Management Corp. Age 51.
Donald E. Heltner, Vice President
Vice President-Taxable Fixed Income, State Farm Life Insurance
Company, State Farm Mutual Automobile Insurance Company and State Farm
Fire and Casualty Company since 1998; Vice President, Century
Investment Management Co. from 1989-1998. Since 1998, Investment
Officer, State Farm Investment Management Corp. Age 50.
Michael L. Tipsord, Assistant Secretary
Executive Assistant-Operations, State Farm Mutual Automobile Insurance
Company since 1997. Assistant Controller from 1996-1997; Director of
Accounting from 1995-1996; Staff Associate in the Controllers'
Department from 1991-1995. Assistant Secretary, State Farm Investment
Management Corp. Age 38.
Jerel S. Chevalier, Assistant Secretary-Treasurer
Director-Mutual Funds, State Farm Mutual Automobile Insurance Company.
Assistant Treasurer, State Farm Investment Management Corp.; since
1994, Assistant Secretary-Treasurer, State Farm Investment Management
Corp. Age 59.
Patricia L. Dysart, Assistant Secretary
Assistant Tax Counsel, State Farm Mutual Automobile Insurance Company.
Since 1995, Assistant Secretary, State Farm Investment Management
Corp. Age 34.
*Director who is an "interested person" of the Fund or the Manager, as defined
in the Investment Company Act of 1940.
The directors and officers as a group owned less than one percent of
the Fund's outstanding shares on February 28, 1998.
The directors and officers of the Fund, excluding John S. Concklin and
Donald E. Heltner, hold identical positions with State
-8-
<PAGE>
Farm Growth Fund, Inc., State Farm Balanced Fund, Inc., and State Farm
Municipal Bond Fund, Inc. Mr. Concklin holds an identical position with State
Farm Growth Fund, Inc. and State Farm Balanced Fund, Inc. Mr. Heltner holds
an identical position with State Farm Balanced Fund, Inc. Messrs. Rust and
Joslin are members of the Executive Committee which has authority during
intervals between meetings of the board of directors to exercise the powers of
the board with certain exceptions.
Directors or officers who are interested persons of the Fund do not receive
any compensation from the Fund for their services to the Fund. The Directors
who are not interested persons of the Fund received a fee of $100 for each
meeting of the Board of Directors attended during the first quarter of 1997,
and $150 for each meeting attended since the second quarter of 1997. Such fees
totaled $1,650 during the year ended November 30, 1997 for the board meetings
held during the year.
Directors and officers of the Fund do not receive any benefits from the Fund
upon retirement nor does the Fund accrue any expenses for pension or
retirement benefits.
<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION THE FUND AND OTHER STATE
NAME OF PERSON FROM THE FUND FARM FUNDS*
<S> <C> <C>
- -----------------------------------------------------------------------------
Edward B. Rust, Jr. $ 0 $ 0
- -----------------------------------------------------------------------------
Albert H. Hoopes $ 550 $12,000
- -----------------------------------------------------------------------------
Roger S. Joslin $ 0 $ 0
- -----------------------------------------------------------------------------
Thomas M. Mengler** $ 0 $ 0
- -----------------------------------------------------------------------------
Davis U. Merwin $ 550 $12,000
- -----------------------------------------------------------------------------
James A. Shirk $ 550 $12,000
- -----------------------------------------------------------------------------
</TABLE>
* The State Farm Funds are the Fund, State Farm Growth Fund, Inc., State Farm
Balanced Fund, Inc., State Farm Municipal Bond Fund, Inc. and State Farm
Variable Product Trust.
** Did not serve as a Director of the Fund or as a director of the other State
Farm Funds during 1997.
GENERAL INFORMATION
OWNERSHIP OF SHARES
As of February 28, 1998, Continental Trust Company, 231 South LaSalle
Street, Chicago, Illinois 60692, as trustee for numerous trusts created in
connection with Self-Employed Individuals Retirement Plans for State Farm
Independent Contractor Agents, owned of record in the aggregate approximately
1,974,058 shares (17% of the Fund's outstanding shares), as to which it has
sole right to vote and shared right of disposition.
CUSTODY OF ASSETS
The securities and cash of the Fund are held by The Bank of New York
("BONY"), One Wall Street, New York, New York 10286, as custodian. BONY
delivers and receives payment for securities sold, receives and pays for
securities purchased, collects income from investments and performs other
duties, all as directed by persons duly authorized by the Board of Directors.
Cash of the Fund is also held by Commerce Bank ("Commerce"), 120 S. Center
Street, Bloomington, Illinois 61701, as custodian. Commerce receives payments
from the Manager for sale of the Fund's shares and performs other duties, as
directed by persons duly authorized by the Board of Directors.
-9-
<PAGE>
INDEPENDENT AUDITORS
The Fund's independent auditors are Ernst & Young LLP, 233 South
Wacker Drive, Chicago, Illinois 60606. The firm audits the Fund's annual
financial statements, reviews certain regulatory reports and the Fund's
federal income tax returns, and performs other professional accounting,
auditing, tax and advisory services when engaged to do so by the Fund.
CODE OF ETHICS
The Manager intends that: all of its activities function exclusively
for the benefit of the owners or beneficiaries of the assets it manages;
assets under management or knowledge as to current or prospective transactions
in managed assets are not utilized for personal advantage or for the advantage
of anyone other than the owners or beneficiaries of those assets; persons
associated with the Manager and the Fund avoid situations involving actual or
potential conflicts of interest with the owners or beneficiaries of managed
assets; and, situations appearing to involve actual or potential conflicts of
interest or impairment of objectivity are avoided whenever doing so does not
run counter to the interests of the owners or beneficiaries of the managed
assets. The Board of Directors of the Fund has adopted a Code of Ethics which
imposes certain prohibitions, restrictions, preclearance requirements and
reporting rules on the personal securities transactions of subscribers to the
Code, who include the Fund's officers and directors and employees of the
Manager. The Board of Directors believes that the provisions of the Code are
reasonably designed to prevent subscribers from engaging in conduct that
violates these principles.
OTHER INFORMATION
Like other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the Manager and other service providers do not
properly process and calculate date-related information from and after January
1, 2000. The Manager is taking steps that it believes are reasonably designed
to address this problem in the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Fund's other major service providers. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact on
the Fund.
-10-
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS
(AS PUBLISHED BY THE RATING COMPANIES)
STANDARD & POOR'S BOND RATINGS
AAA. Bonds rated AAA are highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Marketwise they
move with interest rates, and hence provide the maximum safety on all counts.
AA. Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
A. Bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from adverse
effects of changes in economic and trade conditions. Interest and principal
are regarded as safe. They predominantly reflect money rates in their market
behavior, but to some extent also respond to economic conditions.
MOODY'S BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt-edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat greater than in Aaa
securities.
A. Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
MOODY'S COMMERICAL PAPER RATINGS
PRIME-1. Commercial Paper issuers rated Prime-1 are judged to be of
the best quality. Their short-term debt obligations carry the smallest degree
of investment risk. Margins of support for current indebtedness are large or
stable with cash flow and asset protection well assured. Current liquidity
provides ample coverage of near-term liabilities and unused alternative
financing arrangements are generally available. While protective elements may
change over the intermediate or longer term, such changes are most unlikely to
impair the fundamentally strong position of short-term obligations.
PRIME-2. Issuers in the Commercial Paper market rated Prime-2 are of
high quality. Protection for short-term note holders is assured, with
liquidity and value of current assets as well as cash generation in sound
relationship to current indebtedness. They are rated lower than the best
commercial papers issuers because margins of protection may not be as large or
because fluctuations of protective elements over the near or intermediate term
may be of greater amplitude. Temporary increases in relative short term and
overall debt load may occur. Alternative means of financing remain assured.
PRIME-3. Commercial Paper issuers rated Prime-3 possess favorable
investment attributes for short-term commitment. Liquidity considerations and
cash generation provide satisfactory support for short-term debt repayment.
While near-term investors are well-protected, elements may be present which
suggest improvement or deterioration in support at some time in the future.
Alternative financing strategies have been outlined.
Issuers rated in all three Prime categories are judged by Moody's to
be investment grade.
-11-
<PAGE>
STATE FARM INTERIM FUND, INC.
PART C OF THE REGISTRATION STATEMENT
------------------------------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Financial Statements included in Part A of this amendment,
Financial Highlights
Financial statements included in Part B of this amendment:
Statement of assets and liabilities - November 30, 1997*
Statement of operations for each of the two years in the
period ended November 30, 1997*
Statement of changes in net assets for each of the two years
in the period ended November 30, 1997*
Portfolio of investments - November 30, 1997*
Notes to financial statements*
Report of independent auditors*
Schedule I has been omitted as the required information is
presented in the portfolio of investments at November 30,
1997.
Schedules II, III, IV and V are omitted as the required
information is not present.
*Incorporated by reference to the Annual Report of registrant
for the fiscal year ended November 30, 1997. A copy of that
Annual Report is attached hereto, but, except for those
portions incorporated by reference, the Annual Report is
furnished for the information of the Commission and is not
deemed to be filed as part of this amendment.
(b) Exhibits
Note: As used herein the term "Registration Statement" refers
to registration statement of registrant on Form S-5, N-1 or
N-1A no. 2-58160.
1. Amended and restated articles of incorporation of
registrant*
2. By-laws of registrant (as amended and restated
March 13, 1998)
3. None
4(a). Form of stock certificate*
5(a). Investment advisory and management services
agreement between registrant and State Farm
Investment Management Corp. dated October 1, 1978*
5(b). Service agreement among registrant, State Farm
Investment Management Corp. and State Farm Mutual
Automobile Insurance Company, as amended, dated
September 9, 1977*
<PAGE>
STATE FARM INTERIM FUND, INC.
6. Underwriting agreement between registrant and State
Farm Investment Management Corp., as amended, dated
September 9, 1977*
7. None
8(a). Custodian agreement between registrant and Morgan
Guaranty Trust Company of New York dated November 1,
1990*
8(b). Custodian agreement between registrant and The
Peoples Bank dated October 1, 1991*
9. Transfer agent agreement between registrant and
State Farm Investment Management Corp. dated
April 1, 1992*
10. Opinion of Bell, Boyd & Lloyd dated March 8, 1996*
11. Consent of Independent Auditors dated March 20, 1998
12. None
13. None
14(a)(1). State Farm Funds Individual Retirement Account
Plan
14(a)(2). State Farm Funds Individual Retirement Account Plan
Disclosure Statement
14(a)(3). State Farm Funds Individual Retirement Account Plan
Custodial Account Agreement
14(b)(1). State Farm Funds Roth Individual Retirement Account
Plan Disclosure Statement
14(b)(2). State Farm Funds Roth Individual Retirement Account
Plan Custodial Account Agreement
15. None
16. Schedule for Computation of Performance Quotations
27. Financial Data Schedule
* Incorporated by reference to post-effective
amendment no. 24.
<PAGE>
STATE FARM INTERIM FUND, INC.
Item 25. Persons controlled by or under Common Control with Registrant
The registrant does not consider that there are any persons directly
or indirectly controlling, controlled by, or under common control
with, the registrant within the meaning of this item. The
information in the Statement of Additional Information under the
caption "Directors and Officers" and "General Information -
Ownership of Shares" and in the first two paragraphs under the
caption "Investment Advisory and Other Services" is incorporated
herein by reference.
Item 26. Number of Security Holders
Number of record holders
Title of Class at December 31, 1997
-------------- ------------------------
Common Stock, $1 par 3,218
Item 27. Indemnification
Section 2-418 of the Maryland General Corporation Law authorizes the
registrant to indemnify its directors and officers under specified
circumstances.
Article XVII of the by-laws of the registrant, as amended, provides
that the registrant shall indemnify its directors and officers under
specified circumstances.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of
any action suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
<PAGE>
STATE FARM INTERIM FUND, INC.
Item 28. Business and Other Connections of Investment Adviser
The information in the prospectus under the caption "Management of
the Fund" is incorporated herein by reference. Neither State Farm
Investment Management Corp., nor any of its directors or officers,
has at any time during the past two years engaged in any other
business, profession, vocation or employment of a substantial nature
either for its own account or in the capacity of director, officer,
employee, partner or trustee.
Directors and Officers of Investment Adviser -
Edward B. Rust, Jr., Director and President *
Roger Joslin, Director, Vice President and Treasurer *
Kurt Moser, Director and Senior Vice President *
John J. Killian, Director - Vice President and Controller, State
Farm Mutual Automobile Insurance Company and holds a similar
position with certain subsidiaries and affiliates.
Vincent J. Trosino, Director - Executive Vice President, State Farm
Mutual Automobile Insurance Company.
Paul N. Eckley, Senior Vice President *
David R. Grimes, Assistant Vice President and Secretary *
Michael L. Tipsord, Assistant Secretary *
Jerel S. Chevalier, Assistant Secretary-Treasurer *
Patricia L. Dysart, Assistant Secretary *
* Information in the Statement of Additional Information under the
caption "Directors and Officers" is incorporated herein by
reference.
Item 29. Principal Underwriters
(a) Information under the caption "Investment Advisory and Other
Services" in the Statement of Additional Information is
incorporated herein by reference.
(b) Registrant's principal underwriter is also registrant's
investment adviser. Accordingly, the information in Item 28
hereof is incorporated herein by reference.
(c) Not applicable.
<PAGE>
STATE FARM INTERIM FUND, INC.
Item 30. Location of Accounts and Records
Jerel S. Chevalier, State Farm Investment Management Corp., One
State Farm Plaza, Bloomington, Illinois 61710 maintains physical
possession of each account, book, or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder.
Item 31. Management Services
None
Item 32. Undertakings
(a) Not applicable
(b) Not applicable
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareowners, upon request and without charge.
<PAGE>
ANNUAL REPORT
State Farm Interim Fund, Inc.
ONE STATE FARM PLAZA - BLOOMINGTON, ILLINOIS 61710
For Account Information and Shareowner
Services: (309) 766-2029
(800) 447-0740
November 30,1997
This report is not to be distributed unless preceded or accompanied by a
prospectus.
<PAGE>
STATE FARM INTERIM FUND, INC.
Dear Shareowner:
General movements of interest rates over the course of the Interim Fund's
fiscal year fell rather distinctly into two periods. Interest rates rose
during the first half of the year as the Federal Reserve nudged short-term
interest rates a little higher and investors worried that the rapid pace of
general U.S. economic growth might lead to higher inflation. The last half of
1997 produced declining interest rates while investors contemplated
developments in international markets and observed moderate levels of actual
inflation.
At the end of the year, yields on the U.S. Treasury securities held by
your Fund were slightly higher than they were one year ago. This rise in
yields helped cause the net asset value of the Fund to fall to $9.85 from
$9.98, a 1.3% decline. The Fund's total return, which considers the
reinvestment of dividends and the change in net asset value, for the year was
5.9%.
The following graph compares a $10,000 investment in the Interim Fund
over the last ten years to theoretical investments of the same amount in the
Lehman Brothers Intermediate Treasury Index and the Lehman Brothers Three-year
Treasury Index:
INTERIM LEHMAN LEHMAN
FUND INTERMEDIATE 3-YR TR
1987 10,000 10,000 10,000
1988 10,667 10,717 10,646
1989 11,925 12,052 11,837
1990 12,913 13,048 12,835
1991 14,383 14,728 14,447
1992 15,419 15,933 15,558
1993 16,615 17,397 16,761
1994 16,472 17,103 16,980
1995 18,429 19,435 19,109
1996 19,432 20,523 20,166
1997 20,573 21,804 21,406
* The Lehman Brothers Intermediate Treasury Index contains approximately
130 U.S. Treasury Securities with maturities ranging from one to ten
years.
** The Lehman Brothers Three-Year Index contains the U.S. Treasury issue with
approximately a three year maturity which has been issued most recently.
The Lehman Brothers indeces represent unmanaged groups of notes and bonds that
differ from the composition of the Interim Fund. Unlike an investment in the
Interim Fund, theoretical investments in the indeces do not reflect expenses.
2
<PAGE>
A major factor affecting money and capital markets since July has been
the currency turmoil in Asian countries. As the currencies of developing Asian
countries have plunged, stock markets in several of the countries have
plummeted 50-60% this year in U.S. dollar terms. Bond markets in these
countries have also suffered substantial declines while interest rates rose
and financial difficulties intensified. The turbulence in the world's
financial markets has caused an increased demand for U.S. Treasury securities
as investors seek safety.
The present situation suggests that our U.S. money and capital markets
are, and will continue to be, affected to a great extent by global financial
circumstances. The U.S. economy remains quite strong, and typically this
strength would be putting upward pressure on U.S. interest rates. However, the
Asian difficulties reduce somewhat the prospects for future domestic economic
growth and will have a dampening impact on future inflation. Consequently, the
Federal Reserve appears content to leave short-term interest rates at present
levels for awhile, and the consensus among investors seems to be that interest
rates on bonds can decline further. As you well know, expectations for markets
will change in unpredictable ways as new information is processed by
investors.
Leaders in many parts of the world are struggling as they attempt to
develop open market-based economies with a global orientation. Flexibility and
adaptability are the strengths of market-based systems, so the efforts should
be worthwhile. However, we caution against paying much attention to those who
proclaim to know how the Asian difficulties will play out and adjusting the
composition of investment portfolios in response to a specific scenario.
Ultimate effects of the Asian situation on financial markets, financial
institutions and general economic conditions are probably obvious only with
benefit of hindsight. In our opinion, the primary challenge for any investor
is development of a long-term investment program which makes one comfortable
regardless of what short-term direction markets might take.
The general composition of the Fund's portfolio changed very little over
the year with primary investments consisting of U.S. Treasury issues which
mature regularly over the next six years. The weighted average maturity of the
portfolio presently stands at three years, which is unchanged from a year ago.
The relatively short maturity structure of the portfolio tends to mitigate
fluctuations in the Fund's net asset value. The high quality investments
provide a dependable flow of dividend income.
As you know, the Fund declares a dividend each day from its net
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,
/s/ Kurt G. Moser /s/ John S. Concklin
Kurt G. Moser John S. Concklin
Vice President Vice President
December 17, 1997
3
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareowners
State Farm Interim Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of State Farm Interim Fund, Inc., as
of November 30, 1997, the related statements of operations and changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the fiscal years since 1988. 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 audits.
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 investments
owned as of November 30, 1997, 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
State Farm Interim Fund, Inc. at November 30, 1997, the results of its
operations and changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the fiscal years
since 1988, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 12, 1997
4
<PAGE>
STATE FARM INTERIM FUND, INC.
PORTFOLIO OF INVESTMENTS
November 30, 1997
PRINCIPAL
AMOUNT VALUE
LONG-TERM INVESTMENTS - U.S. TREASURY
OBLIGATIONS (97.8%):
$3,000,000 7.875%, due January 15, 1998 $ 3,009,720
1,000,000 8.125%, due February 15, 1998 1,005,240
4,000,000 7.875%, due April 15, 1998 4,034,840
750,000 5.125%, due June 30,1998 748,350
3,000,000 8.250%, due July 15, 1998 3,048,210
1,000,000 4.750%, due September 30, 1998 992,670
4,000,000 7.125%, due October 15, 1998 4,049,800
4,000,000 6.375%, due January 15,1999 4,029,080
1,000,000 5.875%, due March 31, 1999 1,001,980
3,750,000 7.000%, due April 15, 1999 3,812,025
4,000,000 6.375%, due July 15, 1999 4,038,120
1,000,000 5.750%, due September 30, 1999 999,890
4,000,000 6.000%, due October 15, 1999 4,020,640
2,000,000 6.375%, due January 15, 2000 2,024,680
2,000,000 8.500%, due February 15, 2000 2,111,520
1,000,000 6.875%, due March 31, 2000 1,023,610
2,000,000 5.500%, due April 15, 2000 1,988,200
1,000,000 6.750%, due April 30, 2000 1,021,490
1,000,000 8.875%, due May 15, 2000 1,070,960
1,000,000 6.250%, due May 31, 2000 1,010,830
4,000,000 8.750%, due August 15,2000 4,292,480
3,750,000 8.500%, due November 15, 2000 4,022,063
4,000,000 7.750%, due February 15, 2001 4,222,640
5,000,000 8.000%, due May 15, 2001 5,335,500
4,000,000 7.875%, due August 15, 2001 4,266,760
4,000,000 7.500%, due November 15, 2001 4,230,240
4,000,000 14.250%, due February 15, 2002 5,250,960
4,000,000 7.500%, due May 15, 2002 4,257,200
5,000,000 6.375%, due August 15, 2002 5,108,200
4,000,000 11.625%, due November 15, 2002 4,980,080
6,000,000 6.250%, due February 15, 2003 6,107,820
2,000,000 10.750%, due May 15, 2003 2,449,980
2,000,000 11.125%, due August 15,2003 2,502,420
7,000,000 5.750%, due August 15, 2003 6,965,070
1,000,000 11.875%, due November 15, 2003 1,297,360
---------------
110,330,628
Total long-term investments (cost: $112,293,672)
5
<PAGE>
STATE FARM INTERIM FUND, INC.
PORTFOLIO OF INVESTMENTS
November 30, 1997
PRINCIPAL
AMOUNT VALUE
$1,200,000 U.S. Treasury bills, 4.92% to 4.96%
effective yield, due December,
1997 to January, 1998 $ 1,193,880
1,000,000 General Motors Acceptance Corp.,
5.60%, due December, 1997 1,000,311
---------------
Total short-term investments
(cost: $2,194,148) 2,194,191
TOTAL INVESTMENTS (99.7%) (cost: $114,487,820) 112,524,819
CASH AND OTHER ASSETS, LESS LIABILITIES (0.3%) 321,389
---------------
NET ASSETS (100.00%) $ 112,846,208
===============
Note: At November 30, 1997, net unrealized depreciation of $1,963,001
consisted of gross unrealized appreciation of $485,752 and gross
unrealized depreciation of $2,448,753 based on cost of $1,114,487,820
for federal income tax purposes.
6
<PAGE>
STATE FARM INTERIM FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997
ASSETS
Investments, at value (cost $114,487,820) $112,524,819
Cash 812,162
Receivable for:
Interest $ 1,596,511
Shares of the Fund sold 76,516
Sundry 3,544 1,676,571
-----------
Prepaid expenses 8,342
------------
Total assets 115,021,894
LIABILITIES AND NET ASSETS
Payable for:
Dividends to shareowners 1,196,972
Shares of the Fund redeemed 923,623
Other accounts payable (including $50,137
to Manager) 55,091
-----------
Total liabilities 2,175,686
------------
Net assets applicable to 11,454,154 shares outstanding
of $1 par value common stock (40,000,000
shares authorized) $112,846,208
============
Net assets value, offering price and redemption price
per share $ 9.85
============
ANALYSIS OF NET ASSETS
Excess of amounts received from sales of shares
over amounts paid on redemptions of shares
on account of capital $117,070,033
Accumulated net realized loss on sales of investments (2,260,824)
Net unrealized depreciation of investments (1,963,001)
------------
Net assets applicable to shares outstanding $112,846,208
============
See accompanying notes to financial statements.
7
<PAGE>
STATE FARM INTERIM FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED NOVEMBER 30,
1997 1996
INTEREST INCOME: $ 7,939,168 7,436,515
EXPENSES:
Investment advisory and management fees 184,551 177,555
Audit fees 17,405 16,242
Legal fees 588 1,106
Fidelity bond expense 2,912 3,103
Directors' fees 1,650 1,500
Reports to shareowners 2,207 3,471
Securities evaluation fees 2,094 2,288
Franchise taxes 9,391 7,235
Custodian fees 10,745 21,035
Other 6,752 6,205
--------------------------
Total expenses 238,295 239,740
Less: custodian fees paid indirectly - 17,978
--------------------------
Net expenses 238,295 221,762
--------------------------
Net investment income 7,700,873 7,214,753
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on sales of investments (922,190) (363,957)
Change in net unrealized depreciation (453,800) (1,331,541)
--------------------------
Net realized and unrealized loss on
investments (1,375,990) (1,695,498)
--------------------------
Net change in net assets resulting from
operations $ 6,324,883 5,519,255
==========================
See accompanying notes to financial statements.
8
<PAGE>
STATE FARM INTERIM FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30,
1997 1996
From operations:
Net investment income $ 7,700,873 7,214,753
Net realized loss on sales of investments (922,190) (363,957)
Change in net unrealized depreciation (453,800) (1,331,541)
--------------------------
Net change in net assets resulting from operations 6,324,883 5,519,255
Dividends to shareowners from net investment
income (per share $.69 in 1997 and $.70 in 1996) (7,700,873) (7,214,753)
From Fund share transactions:
Proceeds from shares sold 57,531,569 36,298,430
Reinvestment of ordinary income dividends 7,150,343 6,439,866
--------------------------
64,681,912 42,738,296
Less payments for shares redeemed 58,104,026 38,097,084
--------------------------
Net increase in net assets from Fund share
transactions 6,577,886 4,641,212
--------------------------
Total increase in net assets 5,201,896 2,945,714
Net assets:
Beginning of year 107,644,312 104,698,598
--------------------------
End of year $112,846,208 107,644,312
==========================
See accompanying notes to financial statements.
9
<PAGE>
STATE FARM INTERIM FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. OBJECTIVE
The investment objective of the State Farm Interim Fund, Inc. (the Fund)
is the realization over a period of years of the highest yield consistent with
relative price stability (relatively low volatility). The Fund seeks to
achieve its investment objective through investment in high quality debt
securities with primarily short- term (less than five years) and
intermediate-term (five to fifteen years) maturities.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION -
Long-term debt securities and U.S. Treasury bills are valued using
quotations provided by an independent pricing service. Short-term debt
securities, other than U.S. Treasury bills, are valued at amortized cost which
approximates market value. 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 INVESTMENT 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. Net asset value per share is determined as of 3:00 p.m. Bloomington,
Illinois time on each business day other than 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.
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,
1997, amounting to $2,260,824, is available to offset future taxable gains. If
not applied, the capital loss carryover expires as follows: $40,572 in 1998,
$92,150 in 1999, $22,669 in 2000, $162,716 in 2001, $335,277 in 2002, $321,293
in 2003, $363,957 in 2004, and $922,190 in 2005.
A capital loss carryover of $55,654 expired in 1997 and was re-classified
from Accumulated net realized loss on sales of investments to Excess of
amounts received from sales of shares over amounts paid on redemptions of
shares on account of capital.
CUSTODIAN FEES - For the period ended November 30, 1997, the Fund no
longer receives fee reductions for balances maintained with the custodian, as
interest on cash balances ($15,052) is reflected as income rather than an
offset to custodian fees. Custodian fees for the year ended November 30, 1996
were reduced based on the Fund's cash balances maintained with the custodian.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
10
<PAGE>
STATE FARM INTERIM FUND, INC.
NOTES TO FINANCIAL STATEMENTS
3. 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 franchise
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 $184,551,
for 1997 and $177,555 for 1996. The Fund does not pay any discount, commission
or other compensation for 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 two years ended November 30, 1997, except for directors'
fees of $1,650 for 1997 and $1,500 for 1996, paid to the Fund's independent
directors.
4. INVESTMENT TRANSACTIONS
Investment transactions (exclusive of short-term investments) for each of
the two years ended November 30 were as follows:
1997 1996
Purchases $25,775,703 19,122,109
Proceeds from maturities 15,750,000 15,750,000
5. 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:
YEAR ENDED NOVEMBER 30,
1997 1996
Shares sold 5,855,197 3,641,452
Shares issued in reinvestment of
ordinary income dividends 728,582 644,965
-----------------------
6,583,779 4,286,417
Less shares redeemed 5,913,858 3,815,161
-----------------------
Net increase in shares outstanding 669,921 471,256
=======================
11
<PAGE>
STATE FARM INTERIM FUND, INC.
FINANCIAL HIGHLIGHTS
Per Share Income and Capital Changes (For a share outstanding throughout each
period)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $9.98 10.15 9.72 10.52 10.46 10.50 10.16 10.17 9.86 9.99
Income from Investment
----------------------
Operations
----------
Net investment Income .69 .70 .70 .71 .74 .78 .78 .82 .81 .78
Net gain or loss on
securities (both realized
and unrealized) (.13) (.17) .43 (.80) .06 (.04) .34 (.01) .31 (.13)
---------------------------------------------------------------------------------------
Total from investment
operations .56 .53 1.13 (.09) .80 .74 1.12 .81 1.12 .65
Less Distributions
------------------
Net investment income (.69) (.70) (.70) (.71) (.74) (.78) (.78) (.82) (.81) (.78)
Capital gain - - - - - - - - - -
---------------------------------------------------------------------------------------
Total distributions (.69) (.70) (.70) (.71) (.74) (.78) (.78) (.82) (.81) (.78)
Net asset value, end of year $9.85 9.98 10.15 9.72 10.52 10.46 10.50 10.16 10.17 9.86
=======================================================================================
Total Return 5.87% 5.44% 11.91% (.85%) 7.82% 7.19% 11.41% 8.27% 11.82% 6.67%
- ------------
Ratios/Supplemental Data
- ------------------------
Net assets, end of period
(millions) $112.8 107.6 104.7 94.3 103.7 85.9 66.8 52.7 42.2 32.9
Ratio of expenses to
average net assets .22% .23%(a) .25%(a) .22% .25% .27% .28% .30% .31% .36%
Ratio of net investment
income to average
net assets 7.03% 7.03% 7.00% 7.00% 7.00% 7.30% 7.65% 8.12% 8.16% 7.85%
Portfolio turnover rate 15% 17% 17% 15% 15% 15% 14% 14% 17% 15%
Number of shares
outstanding at end
of period (millions) 11.5 10.8 10.3 9.7 9.9 8.2 6.4 5.2 4.2 3.3
</TABLE>
Note: (a) The ratio based on net custodian expenses would have been .22%
in 1996 and .24% in 1995
----------------
STATE FARM INTERIM FUND, INC.
TAX INFORMATION
The Fund paid ordinary income dividends in March, June, September and
December. The dividends paid to you will be included on the Form 1099-DIV
to be sent in January 1998.
Since the Fund's investment income was derived from interest, none of the
Fund's distributions are eligible for the dividend received deduction for
corporations.
NOTE: Dividends paid to you must be included in your federal income tax return
and must be reported by the Fund to the Internal Revenue Service in
accordance with provisions of the Internal Revenue Code.
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bloomington, and State
of Illinois on the 13th day of March, 1998.
STATE FARM INTERIM FUND, INC.
By: /s/ Edward B. Rust, Jr.
------------------------------
Edward B. Rust, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
/s/ Edward B. Rust, Jr. Director
- ----------------------------------- and President
Edward B. Rust, Jr. (Principal Executive
Officer)
/s/ Roger Joslin Director, Vice President,
- ----------------------------------- and Treasurer
Roger Joslin (Principal financial
and accounting officer)
/s/ Albert H. Hoopes Director March 13, 1998
- ----------------------------------- --------------
Albert H. Hoopes
/s/ Thomas M. Mengler Director
- -----------------------------------
Thomas M. Mengler
/s/ Davis U. Merwin Director
- -----------------------------------
Davis U. Merwin
/s/ James A. Shirk Director
- -----------------------------------
James A. Shirk
<PAGE>
INDEX FOR EXHIBITS
FILED WITH THIS AMENDMENT
-------------------------
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
2 Amended and restated bylaws of
registrant dated March 13, 1998
11 Consent of Independent Auditors
dated March 20, 1998
14(a)(1) State Farm Funds Individual
Retirement Account Plan
14(a)(2) State Farm Funds Individual
Retirement Account Plan Disclosure
Statement
14(a)(3) State Farm Funds Individual
Retirement Account Plan Custodial
Account Agreement
14(b)(1) State Farm Funds Roth Individual
Retirement Account Plan Disclosure
Statement
14(b)(2) State Farm Funds Roth Individual
Retirement Account Plan Custodial
Account Agreement
16 Schedule for computation of
performance quotations
27 Financial Data Schedule
BYLAWS
------
STATE FARM INTERIM FUND, INC.
(as amended and restated March 13, 1998)
ARTICLE I
OFFICES
Section 1.01. Principal office. The principal office of the
corporation in the State of Maryland shall be located in the City of
Baltimore.
Section 1.02. Other offices. The corporation may also have offices
at such other places both within and without the State of Maryland as the
board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. Place of meetings. All meetings of the stockholders
shall be held in the City of Bloomington, State of Illinois, or at such other
place in the United States as shall be designated from time to time by the
board of directors, at such time and place, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2.02. Annual meeting. As long as the corporation is registered as an
investment company under the Investment Company Act of 1940, the corporation
shall not be required to hold an annual meeting of stockholders during any
year in which none of the following is required to be acted on by stockholders
under that Act: (1) an election of directors; (2) approval of an investment
advisory agreement; (3) ratification of a selection of independent public
accountants; and (4) approval of a distribution agreement. If there is to be
an annual meeting, it shall be held on the first Friday after the second
Monday of March if not a legal holiday, and if a legal holiday, then on the
next secular day following, at 10:00 a.m., or at such other date and time
within the month of March as shall be designated from time to time by the
board of directors and stated in the notice of the meeting, at which they
shall elect a board of directors and transact such other business as may
properly be brought before the meeting.
<PAGE>
Section 2.03. Special meetings. Special meetings of stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
articles of incorporation, may be called at any time by the president or the
board of directors. Special meetings of stockholders shall be called by the
secretary upon the written request of stockholders entitled to cast at least
25 percent of all the votes entitled to be cast at such meeting, provided that
(a) such request shall state the purpose or purposes of the meeting and the
matters proposed to be acted on at it; and (b) the stockholders requesting the
meeting shall have paid to the corporation the reasonably estimated cost of
preparing and mailing the notice thereof, which the secretary shall determine
and specify to such stockholders. Upon payment of these costs to the
corporation, the secretary shall notify each stockholder entitled to notice of
the meeting. Unless requested by stockholders entitled to cast a majority of
all the votes entitled to be cast at the meeting, a special meeting need not
be called to consider any matter which is substantially the same as a matter
voted on at any special meeting of stockholders held during the preceding
twelve months.
Section 2.04. Stockholders entitled to vote; number of votes. If a
record date has been fixed for the determination of stockholders entitled to
notice of or to vote at any meeting of stockholders, each stockholder of the
corporation shall be entitled to vote, in person or by proxy, each share of
stock (or fraction thereof) registered in his name on the books of the
corporation outstanding at the close of business on such record date, with one
vote (or fraction of a vote) for each share (or fraction thereof) so
outstanding.
Section 2.05. Notice of meetings. Written notice of each meeting of
stockholders stating the place, date and hour of the meeting and, in the case
of a special meeting or if otherwise required by law, the purpose or purposes
for which the meeting is called, shall be given, not less than 10 nor more
than 90 days before the date of the meeting, to each stockholder entitled to
vote at such meeting.
Section 2.06. Quorum; adjournment. The holders of a majority of the
stock entitled to vote at a meeting of stockholders, present in person or
represented by proxy, shall constitute a quorum at the meeting for the
transaction of business except as otherwise provided by statute or by the
articles of incorporation. If, however, such quorum shall not be present or
represented at any meeting of stockholders, the stockholders entitled to vote
thereat present in person or represented by proxy shall have the power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At any
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than 120 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder entitled to
vote at the meeting.
Section 2.07. Voting. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy and voting on the question shall decide any
question brought before such meeting, unless the question is one upon
<PAGE>
which, by express provision of any statute or the charter or these bylaws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 2.08. Proxies. No proxy shall be valid more than eleven
months after its date, unless it provides for a longer period.
Section 2.09. Action without meeting. Any action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting if a unanimous written consent which sets forth the action is signed
by each stockholder entitled to vote on the matter is filed with the record of
stockholders' meetings.
Section 2.10. Stock ledger. The secretary of the corporation shall
cause an original or duplicate stock ledger to be maintained at the office of
the corporation's transfer agent. The stock ledger shall contain the name and
address of each stockholder and the number of shares of stock which the
stockholder holds.
ARTICLE III
DIRECTORS AND COMMITTEES
Section 3.01. Function and powers. The business and affairs of the
corporation shall be managed under the direction of its board of directors.
All powers of the corporation may be exercised by or under the authority of
the board of directors except as conferred on or reserved to the stockholders
by statute or the charter or these bylaws.
Section 3.02. Number. The number of directors which shall constitute
the entire board of directors shall be not less than three nor more than
fifteen. Within such limits the number of directors may be changed by
resolution, or by amendment to these bylaws, adopted by a majority of the
entire board of directors, but no such action shall affect the tenure of
office of any director.
Section 3.03. Election and term of office. The directors shall be
elected at the annual meeting of the stockholders (if any such meeting is
held), except as provided in Section 3.04 of this article, and each director
elected shall hold office until his successor is elected and qualifies or
until his earlier resignation or removal. Directors need not be stockholders
of the corporation.
Section 3.04. Vacancies. Any vacancy occurring in the board of
directors for any cause other than by reason of an increase in the number of
directors may be filled by a majority of the remaining members of the board of
directors, although such majority is less than a quorum; provided,
<PAGE>
however, that no vacancy shall be so filled unless immediately thereafter at
least two-thirds of the directors then holding office shall have been elected
to such office by the stockholders, and provided further that if at any time
less than a majority of the directors holding office at that time were elected
by the stockholders, a meeting of the stockholders shall be held promptly and
in any event within 60 days for the purpose of electing directors to fill any
existing vacancy in the board of directors, unless the Securities and Exchange
Commission shall by order extend such period under the authority granted by
section 16(a) of the Investment Company Act of 1940. A director elected to
fill a vacancy shall be elected to hold office until the next annual meeting
of stockholders or until his successor is elected and qualifies.
Section 3.05. Regular meetings. The board of directors from time to
time may provide for the holding of regular meetings of the board and fix
their time and place.
Section 3.06. Special meetings. Special meetings of the board may be
called by the president on 24 hours notice to each director, either
personally, by mail, by telegram or by facsimile transmission. Special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of a majority of the directors or a
majority of the members of the executive committee.
Section 3.07. Quorum and voting. At all meetings of the board a
majority of the directors in office shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or the
articles of incorporation or these bylaws. If a quorum shall not be present
at any meeting of the board of directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
Section 3.08. Telephone meetings. Members of the board of directors
or any committee thereof may participate in a meeting of such board or
committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time, and participation by such means shall constitute
presence in person at the meeting.
Section 3.09. Action without meeting. Unless otherwise restricted by
statute or the articles of incorporation or these bylaws, any action required
or permitted to be taken at any meeting of the board of directors or of any
committee thereof may be taken without a meeting if a unanimous written
consent which sets forth the action is signed by each member of the board or
committee, as the case may be, and filed with the minutes of proceedings of
the board or committee.
<PAGE>
Section 3.10. Committees. The board of directors may, by resolution
passed by a majority of the entire board, designate an executive committee and
other committees, each committee to consist of two or more directors of the
corporation. In the absence of a member of a committee, the members thereof
present at any meeting, whether or not they constitute a quorum, may appoint
another member of the board of directors to act at the meeting in the place of
any such absent member.
Section 3.11. Executive committee. Unless otherwise provided by
resolution of the board of directors, the executive committee shall have and
may exercise all powers of the board of directors in the management of the
business and affairs of the corporation that may lawfully be exercised by an
executive committee, except the power to: (i) declare dividends or
distributions on stock; (ii) issue stock; (iii) recommend to the stockholders
any action which requires stockholder approval; (iv) amend the bylaws; or (v)
approve any merger or share exchange which does not require stockholder
approval.
Section 3.12. Other committees. To the extent provided by resolution
of the board of directors, other committees of the board shall have and may
exercise any of the powers that may lawfully be granted to the executive
committee.
Section 3.13. Minutes of committee meetings. Each committee shall
keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 3.14. Expenses and compensation of directors. Directors
shall not receive any stated salary for their services as directors, but, by
resolution of the board of directors, a fixed sum, and expenses of attendance,
if any, may be allowed to directors for attendance at each regular or special
meeting of the board of directors, or of any committee thereof, but nothing
herein contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
NOTICES
Section 4.01. Type of notice. Whenever, under the provisions of any
statute or the articles of incorporation or these bylaws, notice is required
to be given to any director or stockholder, such notice may be given in
writing, by personal delivery, or by mail, addressed to such director or
stockholder, at his or her address as it appears on the records of the
corporation, with postage thereon
<PAGE>
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Notice to directors may also be
given by telegram or by facsimile transmission.
Section 4.02. Waiver of notice. Whenever the provisions of any
statute or the articles of incorporation or these bylaws require notice of the
time, place or purpose of a meeting of the board of directors or a committee
of the board, or of stockholders, each person who is entitled to the notice
waives notice if: (a) before or after the meeting he or she signs a waiver of
notice which is filed with the records of the meeting; or (b) he or she is
present at the meeting or, in the case of a stockholders' meeting, is
represented by proxy.
ARTICLE V
OFFICERS
Section 5.01. Offices. The officers of the corporation shall be
elected by the board of directors and shall be a president, one or more vice
presidents, a secretary and a treasurer. The board of directors may also
appoint a chairperson of the board, assistant secretaries and assistant
treasurers. Any number of offices may be held by the same person, unless the
articles of incorporation or these bylaws otherwise provide, except that no
one may serve concurrently as both president and vice president. A person who
holds more than one office may not act in more than one capacity to execute,
acknowledge or verify an instrument required by law to be executed,
acknowledged or verified by more than one officer.
Section 5.02. Annual election. The board of directors annually shall
elect a president one or more vice presidents, a secretary and a treasurer.
The board of directors may elect one of its members to serve as chairperson of
the board.
Section 5.03. Other officers and agents. The board of directors may
appoint such other officers and agents as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the board.
Section 5.04. Term of office; removal; vacancies. The officers of
the corporation shall hold office until their respective successors are chosen
and qualify. Any officer elected or appointed by the board of directors may
be removed at any time by the affirmative vote of a majority of the board of
directors, when the board in its judgment finds that the best interests of the
corporation will be served by such action. The removal of an officer or agent
does not prejudice his contract rights, if any. Any vacancy occurring in any
office of the corporation shall be filled by the board of directors.
<PAGE>
Section 5.05. The chairperson of the board of directors. The
chairperson of the board of directors, if one shall be elected, shall preside
at all meetings of the directors and stockholders, and shall perform such
other duties as the board of directors may prescribe.
Section 5.06. The president. The president shall be the chief
executive officer of the corporation and shall have general management of the
business of the corporation, and shall see that all orders and resolutions of
the board of directors are carried into effect. In the absence of a
chairperson of the board of directors, or if a chairperson is not elected, the
president shall preside at all meetings of the directors and stockholders. The
president may execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by law
to be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the board of directors to some other
officer or agent of the corporation.
Section 5.07. The vice presidents. In the absence of the president
or in the event of the president's inability or refusal to act, the vice
president (or in the event there be more than one vice president, the vice
presidents in the order designated, or in the absence of any designation, then
in the order of their election) shall perform the duties of the president, and
when so acting shall have all the powers of and be subject to all the
restrictions upon the president. The vice presidents shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
Section 5.08. The secretary. The secretary shall record all votes
and proceedings of meetings of directors and stockholders in the corporation
records. The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and meetings of the board of directors when
notice thereof is required. The secretary shall have custody of the seal of
the corporation and may affix the same to any instrument requiring the
corporate seal and attest to the same with his or her signature. The
secretary shall perform such other duties as the board of directors may
prescribe.
Section 5.09. The assistant secretary. The assistant secretary, or
if there be more than one, the assistant secretaries in the order determined
by the board of directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the secretary or in the
event of the secretary's inability or refusal to act, perform the duties and
exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
Section 5.10. The treasurer. The treasurer: (a) shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; (b) shall deposit with the corporation's
<PAGE>
custodian all moneys and other valuable effects in the name and to the credit
of the corporation; (c) shall direct the custodian to make such disbursements
of the funds of the corporation as may be ordered by the board of directors,
taking proper vouchers for such disbursements; and (d) shall render to the
president and the board of directors, at its regular meetings, or when the
board of directors so requires, an account of all his or her transactions as
treasurer and financial statements of the corporation.
Section 5.11. The assistant treasurer. The assistant treasurer, or
if there shall be more than one, the assistant treasurers in the order
determined by the board of directors (or if there be no such determination,
then in the order of their election), shall, in the absence of the treasurer
or in the event of the treasurer's inability or refusal to act, perform the
duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
ARTICLE VI
CAPITAL STOCK
Section 6.01. Certificates of stock. Every holder of stock in the
corporation shall be entitled, upon request, to have a certificate or
certificates, signed by, or in the name of the corporation by, the president
or a vice president and countersigned by the treasurer, an assistant
treasurer, the secretary or an assistant secretary of the corporation,
certifying the number of full shares owned by him in the corporation. No
certificates shall be issued for fractional shares. Where a certificate is
countersigned by a transfer agent other than the corporation or its employee,
any other signature on the certificate may be facsimile. In case any officer
or transfer agent who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer or transfer agent
before such certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer or transfer agent at the date of
issue.
Section 6.02. Lost certificates. The board of directors may direct a
new certificate or certificates be issued in place of any certificate or
certificates previously issued by the corporation which are alleged to be
lost, mutilated or destroyed, upon such terms and upon such conditions as the
board of directors may prescribe.
Section 6.03. Transfers of stock. The shares of stock of the
corporation shall be transferable on the books of the corporation at the
request of the record holder thereof in person or by a duly authorized
attorney, upon presentation to the corporation or its transfer agent of a duly
executed assignment or authority to transfer, or proper evidence of
succession, and, if the shares are represented by a certificate, a duly
endorsed certificate or certificates of stock surrendered for cancellation,
and with such proof of the authenticity of the signatures as the corporation
or its transfer agent may reasonably
<PAGE>
require. The transfer shall be recorded on the books of the corporation, the
old certificates, if any, shall be cancelled, and the new record holder, upon
request, shall be entitled to a new certificate or certificates.
Section 6.04. Fixing of record date. The board of directors may fix
in advance a date as a record date for the determination of the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other
lawful action, provided that such record date shall not be a date more than 90
days, and in the case of a meeting of stockholders not less than 10 days,
prior to the date on which the particular action requiring such determination
of stockholders is to be taken. In such case only such stockholders as shall
be stockholders of record on the record date so fixed shall be entitled to
such notice of, and to vote at, such meeting or adjournment, or to give such
consent, or to receive payment of such dividend or other distribution, or to
receive such allotment of rights, or to exercise such rights, or to take such
other action, as the case may be, notwithstanding any transfer of any shares
on the books of the corporation after any such record date.
Section 6.05. Registered stockholders. The corporation shall be
entitled to treat the holder of record of shares as the holder in fact thereof
and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
statute.
ARTICLE VII
CUSTODIAN
Section 7.01. Qualifications. The corporation shall at all times
employ, pursuant to a written contract, one or more banks or trust companies,
each having an aggregate capital, surplus and undivided profits (as shown in
its last published report) of at least $2,000,000, as custodian to hold the
funds and securities of the corporation.
Section 7.02. Contract. Such contract shall be upon such terms and
conditions and may provide for such compensation as the board of directors
deems necessary or appropriate, provided such contract shall further provide
that the custodian shall deliver securities owned by the corporation only upon
sale of such securities for the account of the corporation and receipt of
payment therefor by the custodian or when such securities may be called,
redeemed, retired or otherwise become payable. Such limitation shall not,
however, prevent:
<PAGE>
(a) the delivery of securities for examination to the broker
selling the same in accord with the "street delivery" custom whereby such
securities are delivered to such broker in exchange for a delivery receipt
exchanged on the same day for an uncertified check of such broker to be
presented on the same day for certification;
(b) the delivery of securities of an issuer in exchange for or
conversion into other securities alone or cash and other securities pursuant
to any plan of merger, consolidation, reorganization, recapitalization or
readjustment of the securities of such issuer;
(c) the conversion by the custodian of securities owned by the
corporation pursuant to the provisions of such securities into other
securities;
(d) the surrender by the custodian of warrants, rights or similar
securities owned by the corporation in the exercise of such warrants, rights
or similar securities, or the surrender of Municipal Bond receipts or
temporary securities for definitive securities;
(e) the delivery of securities owned by the corporation as a
redemption in kind of securities issued by the corporation.
The custodian shall deliver funds of the corporation only upon the purchase of
securities for the portfolio of the corporation and the delivery of such
securities to the custodian, but such limitation shall not prevent the release
of funds by the custodian for redemption of shares issued by the corporation,
for payment of interest, dividend disbursements, taxes and management fees,
for payments in connection with the conversion, exchange or surrender of
securities owned by the corporation as set forth in sub-paragraphs (b), (c)
and (d) above, for operating expenses of the corporation and for any other
purpose authorized by the board of directors.
Section 7.03. Termination of contract. The contract of employment of
the custodian shall be terminable by either party on 60 days' written notice
to the other party. Upon any termination, the board of directors shall use
its best efforts to obtain a successor custodian, but lacking success in the
appointment of a successor custodian, the question of whether the corporation
shall be liquidated or shall function without a custodian shall be submitted
to the stockholders before delivery of any funds or securities of the
corporation to any person other than a successor custodian, including a
temporary successor selected by the retiring custodian. If a successor
custodian is found, the retiring custodian shall deliver funds and securities
owned by the corporation directly to the successor custodian.
<PAGE>
Section 7.04. Agents of custodian. The provisions of any other
section of these bylaws to the contrary notwithstanding, any contract of
employment of a custodian to hold the funds and securities of the corporation
may authorize the custodian, upon approval of the board of directors, to
appoint other banks or trust compan ies meeting the requirements of this
article, domestic and foreign (including domestic and foreign branches), to
perform all or a part of the duties of the custodian under its contract with
the corporation.
Section 7.05. Negotiable instruments. All checks and drafts for the
payment of money shall be signed in the name of the corporation by such
officer or officers or such other person or persons as the board of directors
may designate, and all requisitions or orders for the payment of money by the
custodian or for the issue of checks and drafts therefor, all promissory
notes, all assignments of shares or securities standing in the name of the
corporation, and all requisitions or orders for the assignment of shares or
securities standing in the name of the custodian or its nominee, or for the
execution of powers to transfer the same, shall be signed in the name of the
corporation by not less than two of its officers. Promissory notes, checks or
drafts payable to the corporation may be endorsed only to the order of the
custodian or its agent.
ARTICLE VIII
TRANSACTIONS WITH OFFICERS AND DIRECTORS
Section 8.01. Purchase and sale of securities. The corporation shall
not purchase any securities (other than shares issued by the corporation)
from, or sell any securities (other than shares issued by the corporation and
securities paid in satisfaction of shares deposited for redemption during a
period during which the corporation is redeeming its shares principally in
kind) to, any director or officer of the corporation, or any director, officer
or partner of any firm which acts as investment adviser or principal
underwriter for the corporation acting as principal, except to the extent
permitted to do so under the Investment Company Act of 1940 or the rules or
regulations thereunder or by appropriate order or written advice of the
Securities and Exchange Commission.
Section 8.02. Concentration in any one issuer. The corporation shall
not purchase or retain securities of a company if all of the directors and
officers of the corporation and of its investment adviser who individually own
beneficially more than 1/2% of the securities of the company collectively own
more than 5% of such securities.
<PAGE>
Section 8.03. Transactions in shares of the corporation. No director
or officer of the corporation or of its investment adviser shall take a long
or short position in the capital stock of the corporation, except that
officers or directors may purchase shares of the corporation for investment
purposes at the same price as that available to the public at the time of
purchase.
ARTICLE IX
INDEMNIFICATION
Section 9.01. Indemnification. Each person who is or was a director
or officer of the corporation, and each person who serves or served at the
request of the corporation as a director or officer of another corporation
(and their respective heirs, executors and administrators), shall be
indemnified by the corporation in accordance with, and to the fullest extent
authorized by, the General Corporation Law of the State of Maryland as it may
be in effect from time to time, provided that (unless otherwise permitted by
the Investment Company Act of 1940, the rules and regulations thereunder or
the Securities and Exchange Commission):
(a) this provision shall not protect any person against any
liability to the corporation or to its stockholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office;
(b) if there is neither a final court determination on the merits
that the person seeking indemnification is not liable nor a court
determination that he was not guilty of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, no indemnification shall be permitted unless a determination that the
person was not guilty of any such misconduct has been made by (i) the vote of
a majority of a quorum of directors who are neither "interested persons" of
the corporation as defined in section 2(a)(19) of the Investment Company Act
of 1940 nor parties to the proceedings ("disinterested, non-party directors")
or (ii) an independent legal counsel (not including a counsel who does work
for either the corporation, its investment adviser or principal underwriter,
or any person affiliated with any of these persons); and
(c) before the final disposition of a proceeding, the corporation
may pay the expenses, including attorneys' fees, incurred by any such person
in defending a civil or criminal action, suit or proceeding, only if:
(i) authorized in the specific case, by a majority of the
disinterested, non- party directors, or if there are no disinterested,
non-party directors, by the board of directors;
<PAGE>
(ii) any advances are limited to amounts used, or to be
used, for the preparation and/or presentation of a defense to the action
(including costs connected with preparation of a settlement);
(iii) any advances are accompanied by a written promise by,
or on behalf of, the recipient to repay that amount of the advance which
exceeds the amount which it is ultimately determined that the recipient is
entitled to receive from the corporation by reason of indemnification;
(iv) such promise is secured by (1) a surety bond or other
security provided by the recipient of the advance or (2) other suitable
insurance, unless a majority of a quorum of the disinterested, non-party
directors, or an independent legal counsel in a written opinion, has
determined, based on a review of readily available facts, that there is reason
to believe that the recipient of the advance ultimately will be found entitled
to indemnification.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Dividends.
(a) The board of directors, from time to time as they may deem
advisable, may declare and pay dividends in cash or other property of the
corporation, out of any source available for dividends, to the stockholders
according to their respective rights and interests and in accordance with the
applicable provisions of the charter.
(b) The board of directors may prescribe from time to time that
dividends declared are payable at the election of any of the stockholders,
either in cash or in shares of the corporation.
(c) The board of directors shall cause any dividend payment to be
accompanied by a written statement if paid wholly or partly from any source
other than:
(i) the corporation's accumulated undistributed net income
(determined in accordance with generally accepted accounting principles and
the rules and regulations of the Securities
<PAGE>
and Exchange Commission then in effect) and not including profits or losses
realized upon the sale of securities or other properties; or
(ii) the corporation's net income so determined for the
current or preceding fiscal year.
Such statement shall adequately disclose the source or sources of such payment
and the basis of calculation, and shall be in such form as the Securities and
Exchange Commission may prescribe.
Section 10.02. Fiscal year. The fiscal year of the corporation shall
end on November 30.
Section 10.03. Seal. The corporate seal shall have inscribed thereon
the name of the corporation and shall be in such form and contain such other
words and figures as the directors shall determine or the law require. The
seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or by placing the word "seal" adjacent to the signature
of the authorized officer of the corporation. Any officer or director of the
corporation shall have authority to affix the corporate seal of the
corporation to any document requiring the same.
ARTICLE XI
AMENDMENTS
Section 11.01. General. These bylaws may be altered, amended or
repealed, and new bylaws may be adopted solely by the board of directors, at
any meeting of the board of directors.
Exhibit 11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights," "Financial Information" and "Independent Auditors," and to the
use of our reports dated December 12, 1997 for the State Farm Interim Fund,
Inc. in the Registration Statement (Form N-1A) of the State Farm Interim Fund,
Inc. and their incorporation by reference in the related Prospectus and
Statement of Additional Information filed with the Securities and Exchange
Commission in this Post-Effective Amendment No. 27 to the Registration
Statement under the Securities Act of 1933 (File No. 2-58160) and in this
Amendment No. 26 to the Registration Statement under the Investment Company
Act of 1940 (File No. 811-2726).
ERNST & YOUNG LLP
Chicago, Illinois
March 27, 1998
STATE FARM FUNDS
INDIVIDUAL RETIREMENT ACCOUNT PLAN
This prototype Individual Retirement Account Plan is for the use of Agents
and Employees of the State Farm Insurance Companies and members of their
families.
SECTION I
DEFINITIONS
1.1 Participant means the individual who signs the Application and makes
contributions in the manner prescribed herein.
1.2 Custodial Account Agreement means the State Farm Funds Individual
Retirement Account Plan Custodial Account Agreement as described in Section
VIII.
1.3 Custodian means Commerce Bank, Bloomington, Illinois, and any
successor thereto as herein provided.
1.4 State Farm Fund or State Farm Funds means the Investment Company or
Companies specified in the Application in which assets of the Plan may be
invested; provided that no Investment Company will be deemed available for
investment hereunder (i) prior to the date the prospectus for such Investment
Company discloses such availability, or (ii) with respect to any Participant
who resides in any state with respect to which shares of the Investment
Company are not available for sale.
1.5 Shares means shares of common stock of the State Farm Funds.
1.6 Compensation means wages, salaries, professional fees or other amounts
derived from personal services actually rendered (including, but not limited
to, commissions, tips, and bonuses) and includes earned income (as defined in
section 401(c) (2) of the Internal Revenue Code) reduced by the deduction a
self-employed individual takes for contributions made to a Keogh plan. For
purposes of this definition, section 401(c) (2) shall be applied as if the
term trade or business for purposes of section 1402 of the Internal Revenue
Code included service described in subsection (c) (6). Compensation does not
include amounts derived from or received as earnings or profits from property
(including, but not limited to, interest and dividends) or amounts not
includable in gross income. The term "compensation" does not include any
amount received as a pension or annuity and does not include any amount
received as deferred compensation. The term "compensation" shall include any
amount includible in the individual's gross income under Section 71 of the
Internal Revenue Code with respect to a divorce or separation instrument
described in subparagraph (A) of section 71 (b)(2) of the Internal Revenue
Code.
1.7 Plan means the State Farm Funds Individual Retirement Account Plan.
1.8 Plan Sponsor means State Farm Interim Fund, Inc.
1.9 Beneficiary means any individual designated as a beneficiary pursuant
to paragraph 4.7.
1.10 Required Beginning Date means April 1 of the calendar year following
the calendar year in which the Participant attains age 70 1/2.
SECTION II ELIGIBILITY
2.1 Participation in this Plan is limited to Agents and Employees of the
State Farm Insurance Companies and members of their families.
SECTION III CONTRIBUTIONS
3.1 RESTRICTIONS ON CONTRIBUTIONS. No contributions may be made by or on
behalf of a Participant (i) for any taxable year of the Participant during
which such Participant has attained or will attain the age of 70 1/2 (except
Rollover Contributions), and (ii) during any period of time during which
Participant is ineligible to purchase Shares of the State Farm Funds under
eligibility rules established from time to time by such Funds. Contributions
(other than certain rollover contributions as described in paragraph 5.3 of
the Plan) made under a SIMPLE IRA Plan by or on behalf of a Participant may
not be deposited into this (non-SIMPLE IRA) Plan. This is not a SIMPLE IRA
Plan and is not a Roth IRAPlan.
3.2 AMOUNTS OF CONTRIBUTIONS. Except as provided in Sections V and VII
hereof, the aggregate amount of contributions by the Participant for each
taxable year of the Participant shall not be more than an amount equal to the
lesser of the Compensation of the Participant within such taxable year or
$2,000. The Participant may not contribute more than $2,000 annually to all of
the Participant's IRAs, including any regular IRA and any Roth IRA, but
excluding any Education IRA. Contributions for a given taxable year may be
made during such year or not later than the time prescribed by law for filing
Participant's Federal income tax return for such taxable year (not including
extensions of time for filing). All contributions (except Rollover
Contributions as described in Section V) must be made by check or compensation
deduction and are subject to the minimum investment requirements established
by the State Farm Funds.
3.3 PARTICIPANT'S INTEREST IN PLAN. All contributions made by or on behalf
of a Participant and all investments made with such contributions, and the
earnings and losses thereon shall be deposited in a Custodial Account
established for such Participant in accordance with Section VIII herein. A
Participant's interest in the balance of his/her Custodial Account shall at
all times be nonforfeitable, but subject to the fees, expenses and charges
described in Article VII of the Custodial Account Agreement.
SECTION IV PAYMENT OF BENEFITS
4.1 DISTRIBUTIONS. The entire interest of the Participant in the Custodial
Account must be, or commence to be, distributed not later than the
Participant's Required Beginning Date. Not later than such time, the
Participant may elect, on a form and at such time as may be acceptable to the
Custodian, to have the balance in the Custodial Account distributed:
(A) In a single sum payment in Shares or cash (consisting of the
entire balance or a portion of the balance in the Custodial Account with
further distributions to be made pursuant to options B or C of this paragraph
4.1) to be paid not later than the Participant's Required Beginning Date;
<PAGE>
(B) In substantially equal annual or more frequent installments
commencing not later than the Participant's Required Beginning Date and
continuing over a period not to exceed the life expectancy of the Participant
(if payments are to be made solely to the Participant) or life expectancy of
such Participant and a beneficiary (if payments are to be made to the
Participant while living and upon the Participant's death any remaining
payments are to be made to the surviving beneficiary); or
(C) By purchase from an insurance company and delivery of an
immediate or deferred annuity contract for the life of the Participant, or if
the Participant so elects, for the lives of the Participant and a beneficiary
(and the survivor thereof); provided, however, such contract must commence
payments not later than the Participant's Required Beginning Date. The annuity
contract must be selected by Participant and must satisfy the requirements of
sections 408(b) (1), (2), (3) and (4) of the Internal Revenue Code.
Except for payment of a life annuity, the life expectancy of the
Participant and the Participant's spouse shall be redetermined annually. Life
expectancy and joint and last survivor expectancy are computed by use of the
return multiples contained in Tables V and VI of section 1.72-9 of the Income
Tax Regulations.
Even though distributions may have commenced pursuant to one of the
above options, the Participant may, at any time, request a distribution of
part or all of the balance in his/her Custodial Account or request the
distribution method be changed to another option allowed by this paragraph
4.1, subject to the minimum distribution requirements of paragraph 4.2. The
request shall be made to the Custodian in writing and in a form acceptable to
the Custodian.
4.2 MINIMUM DISTRIBUTIONS. If payments are made under option B of
paragraph 4.1, payments made in calendar years beginning with the year in
which the Participant reaches age 70 1/2 shall be subject to the following:
(i) The minimum annual payment shall be calculated by dividing the
Participant's entire interest in the Custodial Account at the beginning of
each year by the lesser of (1) the applicable life expectancy or (2) if the
Participant's spouse is not the Beneficiary, the applicable divisor determined
from the table set forth in Q&A-4 or Q&A-5, as applicable, of section 1.401
(a) (9)-2 of the Proposed Income Tax Regulations. Distributions after the
death of the Participant shall be distributed using the applicable life
expectancy as the relevant divisor without regard to proposed regulations
section 1.401 (a) (9)-2. For purposes of this section, the life expectancy of
the Participant and the Participant's spouse shall be redetermined annually.
(ii) The minimum monthly payment shall be calculated by dividing
the result in (i) above by 12.
(iii) The minimum quarterly payment shall be calculated by dividing
the result in (i) above by 4.
For the year in which the Participant attains age 70 1/2, the minimum
distribution must be made by April 1 of the following calendar year. For all
years following the year in which the Participant attains age 70 1/2, the
minimum distribution must be made by December 31 of such years.
Notwithstanding any provision of this agreement to the contrary, the
distribution of a Participant's or Beneficiary's interest shall be made in
accordance with the minimum distribution requirements of section 408(a)(6) or
408(b)(3) of the Internal Revenue Code and the regulations thereunder,
including the incidental death benefit provisions of section 1.401(a)(9)-2 of
the proposed regulations, all of which are herein incorporated by reference.
Furthermore, a Participant or Beneficiary may satisfy the minimum
distribution requirements under sections 408(a)(6) and 408(b)(3) of the
Internal Revenue Code by receiving a distribution from one IRA that is equal
to the amount required to satisfy the minimum distribution requirements for
two or more IRAs. For this purpose, the owner of two or more IRAs may use the
alternative method described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above.
4.3 FAILURE TO ELECT OPTION. If the Participant fails to elect one of the
described methods of distribution on or before April 1 of the calendar year
following the calendar year in which the Participant attains age 70 1/2,
distribution to the Participant will be made not later than that time pursuant
to subparagraph 4.2(i); provided, however, that the Custodian shall have no
liability to the Participant for any tax penalty or other damages resulting
from any inadvertent failure by the Custodian to make such distribution.
4.4 PREMATURE DISTRIBUTIONS. Premature distributions from the Custodial
Account may be subject to a penalty under section 72(t) of the Internal
Revenue Code; the Custodian assumes no responsibility for the tax treatment of
any distribution from the Custodial Account; such responsibility is solely
that of the Participant ordering the distribution.
4.5 WITHDRAWAL OF EXCESS CONTRIBUTIONS. The Participant may elect to
withdraw any excess contributions (as described in section 408(d)(4) of the
Internal Revenue Code) made to the Custodial Account and, if withdrawn
pursuant to section 408(d)(4) of the Internal Revenue Code, the net income
attributable thereto. Participant must furnish Custodian a written notice (in
a manner acceptable to Custodian) of his/her election to make such a
withdrawal.
4.6 DISTRIBUTION ON DEATH.
1. Beneficiary Designated
(a) If the Participant dies on or after his/her Required
Beginning Date and if distribution of his/her interest had previously
commenced in accordance with Option B in paragraph 4.1, any remaining portion
of such interest, at the election of the Beneficiary in accordance with
procedures established by the Custodian, may be distributed either --
(i) in an immediate single sum payment, or
(ii) in installments paid at least as rapidly as
under the method of distribution being used as of the date of the
Participant's death.
<PAGE>
(b) If the Participant dies before reaching his/her
Required Beginning Date and any portion of the Participant's interest is
payable to or for the benefit of a Beneficiary, such portion, at the election
of the Beneficiary in accordance with procedures established by the Custodian,
may be distributed either --
(i) in a single sum payment, made not later than
December 31 of the year containing the fifth anniversary of the Participant's
death,
(ii) in installments commencing not later than
December 31 of the year following the year of the Participant's death, and
paid over a period not extending beyond the life expectancy of such
Beneficiary; provided, the Beneficiary may accelerate such payments at any
time, or
(iii) if the Beneficiary is the Participant's
surviving spouse, in a single sum or installments, commencing by the later of
1) December 31 of the year following the year of the Participant's death, and
2) December 31 of the calendar year in which the Participant would have
attained age 70 1/2, and paid over a period not exceeding the life expectancy
of such spouse Beneficiary. The surviving spouse may change the frequency or
amount of such payments, subject to the limit of the preceding sentence.
(c) If the Beneficiary is the Participant's surviving
spouse, the spouse may, in lieu of the above distribution options in (a) and
(b), elect to treat the Participant's account as his/her own individual
retirement arrangement (IRA). This election will be deemed to have been made
if such surviving spouse makes a regular IRA contribution to the account,
makes a rollover contribution to the account, or fails to elect any of the
above distribution options.
For purposes of the above, payments will be calculated by use of the
return multiples specified in Tables V and VI of section 1.72-9 of the Income
Tax Regulations. Life expectancy of a surviving spouse shall be recalculated
annually. In the case of any other designated beneficiary, life expectancy
will be calculated at the time payment first commences and payments for any
twelve-consecutive month period will be based on such life expectancy minus
the number of whole years passed since distribution first commenced.
For purposes of this requirement, any amount paid to a child of the
Participant will be treated as if it has been paid to the surviving spouse if
the remainder of the interest becomes payable to the surviving spouse when the
child reaches the age of majority.
2. No Designated Beneficiary
(a) If the Participant dies on or after his/her Required
Beginning Date and if distribution of his/her interest has commenced in
accordance with option B in paragraph 4.1, and no Beneficiary has been
designated or the designated Beneficiary and all secondary Beneficiaries have
either predeceased the Participant or cannot, after diligent effort, be found,
the remaining portion of such interest, at the election of the recipient in
accordance with procedures established by the Custodian, may be distributed --
(i) in an immediate single sum payment, or
(ii) in installments paid at least as rapidly as
under the method of distribution being used as of the date of the
Participant's death; provided that the entire remaining interest must be
distributed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
(b) If the Participant dies before reaching his/her
Required Beginning Date and no Beneficiary has been designated, or the
designated Beneficiary and all secondary Beneficiaries have predeceased the
Participant or cannot, after diligent effort, be found, the entire interest of
the Participant shall be distributed not later than December 31 of the
calendar year containing the fifth anniversary of the Participant's death. In
accordance with procedures established by the Custodian, the recipient of the
distribution may elect to receive the distribution -
(i) in a single sum payment, or
(ii) in installment payments for a period not
extending beyond December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
3. Failure to Elect Option
If any Beneficiary (other than a surviving spouse Beneficiary)
under subparagraph (1) above or any recipient under subparagraph (2) above has
the right to elect a method of distribution described in the respective
subparagraphs and fails to do so within the time allowed by law, the Custodian
has the right to make a single sum distribution at such time in cash or
Shares; provided however, that the Custodian shall have no liability to any
Beneficiary or recipient for any tax penalty or other damages resulting from
any inadvertent failure by the Custodian to make such distribution.
4.7 DESIGNATION OF BENEFICIARY. A Participant shall have the right by
written notice to the Custodian to designate, or to change, his/her
Beneficiary to receive any amount to which Participant may be entitled in the
event of his/her death before the complete distribution of such benefits. Such
designation shall be on the Designation of Beneficiary Form or on a form
permitted by the Custodian and shall be effective only when filed with, and
acknowledged by, the Custodian before the death of the Participant. Such
designation may include secondary Beneficiaries. If no such designation is in
effect on the Participant's death, or if the designated Beneficiary and all
secondary Beneficiaries have predeceased the Participant, his/her Custodial
Account shall be distributed to his/her estate. Unless the Participant (in
writing filed with the Custodian) makes an election described in subparagraph
4.6 (1) (a), the Beneficiary may elect one of the methods of distribution of
benefits under paragraph 4.6. Such election shall be made in accordance with
procedures established by the Custodian. If the Beneficiary fails, or is
unable, to elect a method of payment, the Beneficiary's interest shall be
distributed to him/her in cash in a single sum. The Custodian shall be
responsible for determining the identity of the person or persons who qualify
as the Beneficiary or Beneficiaries designated by a Participant pursuant to
the terms of this paragraph 4.7, or who qualify as the executor or
administrator of such Participant's estate in the case of a distribution
required hereunder to be made to such Participant's estate. If any person to
whom all or a portion of the Participant's interest is payable is a minor,
payment of such minor's interest shall be made on behalf of such minor to the
person designated by the Participant in the Designation of Beneficiary Form to
receive such minor's interest as a custodian under the Illinois Uniform Gifts
to Minors Act or similar statute. If any person to whom all or a portion of
the Participant's interest is payable is a minor and if the Participant has
not so designated a person to receive the minor's interest on behalf of such
minor, the Custodian may in its sole discretion:
<PAGE>
(i) distribute the interest to the legal guardian of such minor;
or
(ii) designate an adult member of the minor's family, a guardian or
a trust company (including the Custodian), as those terms are defined in the
Illinois Uniform Gifts to Minors Act, as custodian for such minor under the
Illinois Uniform Gifts to Minors Act or similar statute and distribute such
minor's interest to the person so designated.
The receipt by the guardian or the person designated as custodian
under the Illinois Uniform Gifts to Minors Act or similar statute shall be a
full discharge of the Custodian.
4.8 PAYMENT ON DISABILITY. If a Participant becomes disabled (as defined
in section 72(m)(7) of the Internal Revenue Code), the amount credited to his
account may be distributed to him in accordance with paragraph 4.1. Before
making any distribution, however, the Custodian shall be furnished with proof
of such disability.
SECTION V ROLLOVER CONTRIBUTIONS
5.1 Regular Rollover Contribution means a rollover contribution to this
Plan from an eligible retirement plan as defined in section 402(c)(5) of the
Internal Revenue Code other than a Special Rollover Contribution. A
Participant who satisfies the eligibility requirements of Section II may make
a regular Rollover Contribution in any amount in cash or Shares. The
Participant shall execute such forms as the Custodian may require describing
the source of the rollover contribution.
5.2 Special Rollover Contribution means (i) a rollover contribution to
this Plan in a manner described in sections 402(c), 403(a)(4) or 403(b)(8) of
the Internal Revenue Code, or (ii) a rollover contribution to this Plan from
an Individual Retirement Account as defined in section 408(a) of the Internal
Revenue Code and the amount rolled over was previously rolled over as
described in sections 402(c), 403(a)(4) or 403(b)(8) of the Internal Revenue
Code. A person who satisfies the eligibility requirements of Section II may
adopt the Plan for the sole purpose of making a Special Rollover Contribution.
The Custodian shall accept the Special Rollover Contribution in any amount in
cash or Shares and establish a Custodial Account for the Participant,
provided, however, that the Custodial Account shall consist only of the
Special Rollover Contribution and the earnings thereon. The Participant shall
execute such forms as the Custodian may require describing the source of the
Special Rollover Contribution. A person adopting this Plan for the sole
purpose of making a Special Rollover Contribution shall be treated as a
Participant under the Plan for all purposes.
5.3 Notwithstanding anything in the Plan to the contrary, no transfer or
rollover of funds from a Participant's SIMPLE IRA will be accepted by this
Plan prior to the expiration of the 2-year period beginning on the date the
Participant first participated in the SIMPLE IRA Plan.
SECTION VI TRANSFER OF ASSETS
6.1 The Custodian, in its sole discretion, may accept a transfer of cash
or Shares from a custodian of a custodial account (or a trustee of a trust)
maintained as an Individual Retirement Account, or a trustee of a trust
associated with a qualified retirement or profit-sharing plan. The Custodian,
by accepting a direct transfer of such assets, does not accept the
responsibility for the tax results of the transfer, the responsibility for
which rests with the individual who directs or consents to such transfer. The
individual for whom the assets are transferred shall become the Participant
for purposes of this Plan.
SECTION VII SPOUSAL IRA CONTRIBUTIONS
7.1 A spouse who satisfies the eligibility requirements of Section II may
adopt this Plan. Such spouse must execute an Application and establish his/her
own Custodial Account.
7.2 For any taxable year for which contributions are made to multiple
individual retirement accounts by or on behalf of an individual and by or on
behalf of his/her spouse, the aggregate annual amount of such contributions to
all such plans shall not exceed the lesser of the combined Compensation of the
individual and his/her spouse within the taxable year or $4,000. The
limitations contained in paragraphs 3.1 and 3.2 remain applicable to each
account. It shall be the sole responsibility of the individual and his/her
spouse to comply with these requirements.
SECTION VIII CUSTODIAL ACCOUNT AND INVESTMENT OF PLAN ASSETS
8.1 CUSTODIAL ACCOUNT AGREEMENT. Concurrently with the adoption of this
Plan, the Participant and Custodian shall execute the Custodial Account
Agreement. Such Agreement shall constitute a part of this Plan. If any
provisions of the Plan are inconsistent with the provisions of the Custodial
Account Agreement, the latter shall control.
8.2 INVESTMENT OF CONTRIBUTIONS. The Custodian shall invest all
contributions solely in Shares of State Farm Funds as directed by Participant.
Participant (or a Beneficiary of a deceased Participant) may change the State
Farm Funds in which his/her account is invested as provided in paragraph 5.2
of the Custodial Account Agreement.
8.3 REGISTRATION AND OWNERSHIP OF SHARES. Shares acquired by the Custodian
shall be registered in the name of the Custodian or its nominee. The
Participant for whom such Shares are acquired shall be the beneficial owner of
such Shares.
<PAGE>
SECTION IX AMENDMENT AND TERMINATION
9.1 AMENDMENT OF PLAN. The Plan Sponsor may, at any time, amend this Plan
in any respect, by delivering to Participant and the Custodian a signed copy
of such amendment provided that: (i) no amendment shall be made at any time
under which any part of the Custodial Account may be diverted to purposes
other than for the exclusive benefit of Participant and his/her Beneficiaries;
and (ii) no amendment shall be made retroactively in a manner so as to deprive
any Participant of any benefit to which he/she was entitled under this Plan by
reason of contributions made before the Amendment unless such Amendment is
necessary to conform the Plan or Custodial Account Agreement to, or satisfy
the requirements of, the Internal Revenue Code or other applicable law.
9.2 TERMINATION OF PLAN. The Participant may elect to terminate this Plan,
provided such election is made concurrently with Participant's election to
terminate the Custodial Account pursuant to paragraph 11.2 of the Custodial
Account Agreement. Participant shall give written notice of his/her election
to terminate the Plan to Custodian by registered or certified mail.
SECTION X MISCELLANEOUS
10.1 RIGHTS OF PARTICIPANT. Neither the establishment of the Plan,
including the execution of the Custodial Account Agreement nor any
modification or amendment thereof, nor the payment of any benefits shall be
construed as giving to the Participant any legal or equitable right against
State Farm Funds, the Custodian, or State Farm Investment Management Corp.
except as provided herein.
10.2 ADMINISTRATION. The Plan shall be administered by the Participant, who
shall have sole responsibility for the operation of the Plan in accordance
with its terms; shall determine all questions arising out of the
administration, except as is otherwise expressly provided in the Plan. The
Participant shall have sole authority and responsibility to determine the
amount of contributions and distributions to be made under the Plan and
neither the Custodian nor any other person shall be responsible therefor, or
for any consequences to the Participant resulting from the making of excess
contributions, or the failure to make required distributions, except as is
otherwise expressly provided in the Plan. Separate records will be maintained
for the interest of each Participant.
10.3 PAYMENT OF TAXES AND EXPENSES. Any income taxes or other taxes of any
kind whatsoever that may be levied upon or assessed against or in respect of
assets of the Plan, or on income arising therefrom, and any transfer taxes,
and any administrative expenses, maintenance fees, or other charges incurred
in connection with the Plan or Custodial Account shall be paid from the assets
of the Custodial Account as provided in the Custodial Account Agreement.
10.4 OTHER CONDITIONS. It is a condition of the Plan and the Custodial
Account Agreement that a Participant, by participating in the Plan, expressly
agrees that he/she shall look solely to the assets of the Custodial Account
for the payment of any benefits to which he/she is entitled under the Plan.
The benefits provided under the Plan shall not be subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind, and any
attempt to cause such benefits to be so subjected shall not be recognized,
except by the Custodian for its fees and expenses under the Custodial Account
Agreement, and except to such extent as may be required by law. The Plan,
Custodial Account Agreement, any forms provided by the Custodian, including
the Designation of Beneficiary Form filed pursuant to Section IV and all
property rights of Participant under the Plan, shall be construed,
administered, and enforced according to the laws of the state of Illinois,
other than its laws with respect to choice of laws.
10.5 INSTALLMENT PAYMENTS LESS THAN A MINIMUM AMOUNT. Notwithstanding any
language to the contrary contained herein, if any installment payment under
sections 4.1 and 4.6 is less than a minimum amount that may be established
from time to time by the Custodian, then at the option of the Custodian, such
installment payment may be paid less frequently, but not less frequently than
annually, or the value of the Custodial Account with respect to such
installments remaining unpaid may be paid in one sum to the person then
entitled to receive such payment, the contingent interest of any other person
notwithstanding.
STATE FARM FUNDS
INDIVIDUAL RETIREMENT ACCOUNT PLAN
DISCLOSURE STATEMENT
The following information is provided to you in accordance with the
requirements of the Internal Revenue Service regulations. You should read this
Disclosure Statement together with the Individual Retirement Account Plan, the
Custodial Account Agreement and the State Farm Funds prospectuses. This is not
a comprehensive discussion of the applicable law; nor is it intended to serve
as a substitute for the advice of your lawyer, accountant or other personal
tax or financial adviser.
1. Irrevocability of Account
The Internal Revenue Service requires that you receive this Disclosure
Statement at least 7 days prior to the establishment of your Individual
Retirement Account (IRA). Because of this, your Application will not be
accepted by the Custodian and your account will not be established until at
least 7 days after the date you receive this Disclosure Statement. Once your
Application for a State Farm Funds IRA is received and accepted by the
Custodian, it cannot be revoked by you.
2. Internal Revenue Service Approval
The State Farm Funds Individual Retirement Account Plan and Custodial
Account Agreement have been approved as to form by the Internal Revenue
Service. Their approval is a determination only as to form and not to the
merits of the account.
3. Eligibility
Participation in the State Farm Funds IRA Plan is limited to Agents and
Employees of the State Farm Insurance Companies and members of their families.
4. General Information
An IRA must be a United States trust or custodial account created for the
exclusive benefit of an individual and his/her beneficiary. The trustee or
custodian must be either a bank or such other person who has been approved by
the Secretary of the Treasury. No part of the contributions may be invested in
either life insurance contracts or collectibles (such as art works, antiques,
stamps, coins, etc.) as defined in section 408(m) of the Internal Revenue
Code. The assets of the IRA can not be commingled with other property except
in a common trust fund or common investment fund. In addition, an individual's
right to the entire balance in his/her account must at all times be
nonforfeitable.
As with most laws which provide special tax treatment, there are certain
restrictions and limitations. The pertinent Federal tax laws include
requirements relating to contributions, use of account assets, and when and
how distributions can be made to you and your beneficiary.
5. Contributions
You may make contributions to your IRA for a taxable year if you receive
compensation during such year. Compensation includes your wages and salary as
an employee and earnings from self-employment, such as professional fees and
other amounts for your personal services. However, only a limited amount of
contributions can be made each year to your IRA.
Limitations - Regular Contributions. Your contributions to your IRA are
limited to the lesser of 100% of your compensation or $2,000 annually. If both
you and your spouse had compensation during the taxable year, then you may
each establish a separate IRA and each of you may make contributions to your
separate IRAs up to the lesser of 100% of your respective compensations or
$2,000 annually.
Limitations - Spousal Contributions. If you had compensation during the
taxable year greater than your spouse (regardless of whether your spouse had
any compensation) and you file a joint tax return, you may make contributions
to your IRA and to a separate IRA owned by your spouse. Under such an
arrangement, you may make a contribution to the spousal IRA up to the lesser
of the combined compensation of you and your spouse for the taxable year
reduced by any deduction allowed for contributions to regular IRAs of the
spouse with higher compensation and by the amount of the contributions by the
higher compensated spouse to Roth IRAs or $2,000, annually.
Deductibility of Contributions. Contributions (other than Rollover
Contributions) to your IRA may be deductible from your gross income on your
Federal income tax return depending upon your adjusted gross income and
whether or not you are an active participant in a retirement plan qualified
under section 401(a) of the Code, an annuity contract under section 403(b) of
the Code, a simplified employee pension under section 408(k) of the Code or a
plan established for its employees by the United States, by a State or
political subdivision or by an agency or instrumentality of a State or
political subdivision. In general, you are permitted to make deductible IRA
contributions up to the lesser of $2,000 or 100% of compensation if you are
not an active participant in any of the above-mentioned employer-maintained
retirement plans for any part of the plan year ending with or within your
taxable year. In general, if you are married and file a joint return, you and
your spouse are each permitted to make deductible IRAcontributions up to the
lesser of $2,000 or 100% of compensation if neither you nor your spouse is an
active participant in any of the above-mentioned employer-maintained
retirement plans for any part of the plan year ending with or within your or
your spouse's taxable year.
If you are married and file a joint return and your spouse is an active
participant in any of the above-mentioned employer-maintained retirement
plans, but you are not, you are permitted to make deductible IRA contributions
up to the lesser of $2,000 or 100% of compensation if you and your spouse have
combined adjusted gross income that does not exceed $150,000. If your and your
spouse's combined adjusted gross income exceeds $150,000, you may make
deductible contributions; however, the IRA deduction limit is reduced by an
amount that bears the same ratio to the applicable dollar limit (in general,
the lesser of $2,000 or 100% of compensation) as your and your spouse's
combined adjusted gross income in excess of $150,000 bears to $10,000.
Accordingly, you may not make deductible IRA contributions if your and your
spouse's combined adjusted gross income is $160,000 or more. The same
statements are true for your spouse if you are active participant but your
spouse is not.
<PAGE>
Even though you are an active participant in an employer-maintained plan, you
are permitted to make deductible IRAcontributions up to the lesser of $2,000
or 100% of compensation if you (or you and your spouse if a joint return is
filed) have adjusted gross income that does not exceed an applicable dollar
amount. The applicable dollar amount for 1998 is (1) $30,000 in the case of an
individual, (2) $50,000 in the case of a married couple filing a joint return,
and (3) $0 in the case of a married couple filing separately. The applicable
dollar amounts are set to increase for taxable years beginning after 1998 as
follows:
<TABLE>
Single Filers Joint Filers
Year Applicable $ Year Applicable $
<S> <C> <C> <C>
1999 31,000 1999 51,000
2000 32,000 2000 52,000
2001 33,000 2001 53,000
2002 34,000 2002 54,000
2003 40,000 2003 60,000
2004 45,000 2004 65,000
2005 and
thereafter 50,000 2005 70,000
2006 75,000
2007 and
thereafter 80,000
</TABLE>
If your adjusted gross income exceeds the applicable dollar amount (and you
are an active participant in one of the above plans), you may make deductible
contributions; however, the IRA deduction limit is reduced by an amount that
bears the same ratio to the applicable dollar limit as your adjusted gross
income in excess of the applicable dollar amount bears to $10,000.
Accordingly, you may not make deductible IRA contributions if your adjusted
gross income for 1998 is (1) $40,000 or more, in the case of an individual,
(2) $60,000 or more in the case of a married couple filing a joint return, and
(3) $10,000 or more in the case of a married couple filing separately. For
taxable years after 1998, you may not make deductible IRA contributions if
your adjusted gross income is equal to or greater than the following amounts
for each year:
<TABLE>
Single Filers Joint Filers Married filing
separately
Year Applicable $ Year Applicable $ All years after 1998
<S> <C> <C> <C> <C>
1999 41,000 1999 61,000 10,000
2000 42,000 2000 62,000
2001 43,000 2001 63,000
2002 44,000 2002 64,000
2003 50,000 2003 70,000
2004 55,000 2004 75,000
2005 and
thereafter 60,000 2005 80,000
2006 85,000
2007 and
thereafter 100,000
</TABLE>
For each individual on a joint return for taxable years beginning after
December 31, 2006, the IRA deduction limit is reduced by an amount that bears
the same ratio to the applicable dollar limit as your adjusted gross income in
excess of the applicable dollar amount bears to $20,000.
To qualify as a deductible contribution your contribution must be made no
later than the due date for filing your Federal income tax return (not
including any extensions). No deduction for contributions is allowed for any
year in which you are age 70 1/2 or older. Similarly, no deduction is allowed
for a contribution to your spouse's IRAin any year in which he/she is age
70 1/2 or older.
You may also make designated nondeductible IRA contributions to the extent
that deductible contributions are not allowed. Thus, you may make
nondeductible contributions to the extent of the excess of (1) the lesser of
$2,000 or 100% of compensation over (2) your IRA deduction limit.
Additionally, you may elect to treat deductible IRA contributions as
nondeductible. Nondeductible IRA contributions must be designated as such on
your tax return in the manner prescribed by the Secretary of the Treasury.
Nondeductible contributions may be made no later than the due date for filing
your Federal income tax return (not including extensions).
Excess Contributions. Any contributions to your IRA (including spousal
contributions to your spouse's IRA) which exceed the maximum allowable
contribution are excess contributions. Any excess contributions which are not
withdrawn or eliminated prior to the due date for filing your Federal income
tax return (including any extensions) will be subject to a 6% penalty tax
under section 4973 of the Internal Revenue Code. SIMPLE IRA Contributions. The
State Farm Funds IRAPlan is a non-SIMPLE IRA Plan. Contributions (other than
certain rollover contributions as described in paragraph 5.3 of the Plan) made
under a SIMPLE IRA Plan by or on behalf of a Participant may not be deposited
into the non-SIMPLE State Farm Funds IRAPlan.
Total Contributions to Regular and Roth IRAs. You may not make more than a
$2,000 annual contribution to all of your IRAs combined which include
deductible and nondeductible contributions to your regular IRAs and
nondeductible contributions to your Roth IRAs. This $2,000 contribution
limitation does not apply to Education IRAs.
6. Rollover Contributions
<PAGE>
All or a portion of certain distributions from qualified employer plans or
tax-sheltered annuities and distributions from certain other IRAplans may be
"rolled-over" tax-free to an IRA, if the rollover (transfer) is made within 60
days after receipt of the distribution. No transfer or rollover of funds from
a Participant's SIMPLE IRA will be accepted by the State Farm Funds IRA Plan
prior to the expiration of the 2-year period beginning on the date the
Participant first participated in the SIMPLE IRA Plan. Rollovers from
qualified employer plans and tax-sheltered annuities will be retained in a
Special IRA and under certain conditions, may be subsequently "rolled-over"
tax-free to another qualified employer plan or tax-sheltered annuity.
Strict limitations set forth in section 408(d)(3) of the Internal Revenue
Code apply to rollovers. You should seek competent tax advice in order to
ensure compliance with the rules governing tax-free rollovers.
7. Distributions
Income Tax Treatment. Federal income tax on your deductible IRA
contributions, earnings on such contributions as well as earnings on your
nondeductible contributions, generally, is deferred until you begin to receive
distributions from your account. Such distributions are taxed as ordinary
income regardless of their original source. On the other hand, the
distributions of your nondeductible contributions are generally not subject to
income tax at the time of the distributions since such contributions were
previously subject to the income tax.
Normal Distributions. The entire interest in your account must be
distributed to you, or begin to be distributed to you, no later than April 1
of the calendar year following the calendar year in which you reach age 70 1/2.
Distributions may be in single sum payments; substantially equal or unequal
installment payments over a period which can not exceed your life expectancy
or the joint life expectancy of you and your beneficiary; or by purchase of an
immediate or deferred annuity.
Minimum Distributions. In calendar years after the calendar year in which
you reach age 70 1/2, the law requires you to receive at least a minimum
distribution from your account each year. A 50% penalty tax may be imposed on
any deficiency between the distributions received by you and minimum required
distributions under section 4974 of the Internal Revenue Code.
Distributions after Death. If you die before the distribution from your
account has begun, the portion of your account balance which is payable to a
designated beneficiary must be distributed to the beneficiary over a period
not to exceed the life expectancy of such beneficiary; any portion not payable
to a designated beneficiary must be distributed by December 31 of the calendar
year containing the fifth anniversary of your death. Additionally, if your
designated beneficiary is your surviving spouse, such spouse may elect, within
the five-year period commencing with your death, to receive substantially
equal payments over a period not to exceed the life expectancy of such spouse
beginning by the later of 1) December 31 of the calendar year following the
date of your death, or 2) December 31 of the calendar year in which you would
have reached age 70 1/2. The surviving spouse could change the frequency or
amount of these payments (subject to the limits of the proceding sentence) at
any time.
Alternatively, your surviving spouse designated beneficiary may elect to
treat the account as his/her own IRA; this election will be deemed to have
been made if your spouse makes a regular or rollover contribution to the
account or if your spouse fails to elect any other distribution option. For
the purposes of this paragraph, any amount paid to your child will be treated
as if it had been paid to your spouse if the remainder of the interest becomes
payable to your surviving spouse when the child reaches the age of majority.
If you die after the distribution from your account has begun, but before
the entire interest has been distributed, the remaining balance of your
account must be distributed to the designated beneficiary at least as rapidly
as under the method of distribution being used on the date of your death; any
portion not payable to a designated beneficiary must be distributed at least
as rapidly as under the method of distribution being used on the date of your
death, but in no event over a period beyond December 31 of the calendar year
containing the fifth anniversary of your death.
Premature Distributions. An IRA is intended as a savings plan to accumulate
funds for retirement. Accordingly, section 72(t) of the Internal Revenue Code
imposes a penalty on certain premature distributions. Generally, if you
receive a distribution from your account before you reach age 591/2, to the
extent that such distribution will be taxable as ordinary income, it will also
be subject to an additional 10% penalty tax. The additional 10% penalty tax
does not apply when distributions are made:1) because of your total and
permanent disability, 2) because of your death, 3) to the extent such
distributions do not exceed the amount you pay for medical insurance during
the taxable year if you have separated from employment, have received
unemployment compensation for twelve consecutive weeks under any Federal or
State unemployment compensation law (or would have received such compensation
but for the fact you were self- employed) and your IRA distribution is made
during the year such unemployment compensation is paid or the succeeding year,
4) to the extent such distributions do not exceed the amount of the
unreimbursed medical expenses you pay during the year that are in excess of
7.5% of your adjusted gross income for the year, 5) which are part of a series
of substantially equal periodic (not less frequently than annually) payments
made for your life (or life expectancy) or the joint lives (or joint life
expectancies) of you and your designated beneficiary, 6) as part of a
qualifying rollover distribution, 7) as part of a transfer incident to a
divorce, 8) which are timely withdrawn excess contributions, 9) to the extent
such distributions do not exceed the amount of the qualified higher education
expenses (as defined in Section 72(t)(7) of the Code) you pay for such
eligible individuals during the year, or 10) which are qualified first-time
home buyer distributions as defined in Section 72(t)(8) of the Code.
8. Prohibited Transactions
If you or your beneficiary were to engage in any prohibited transactions
(described in section 4975(c) of the Internal Revenue Code) with respect to
your IRA (such as any sale, exchange or leasing of any property between you
and the account; or any other interference with the independent status of the
account) then the account would lose its tax-exempt status by reason of
section 408(e) (2)(A) of the Internal Revenue Code and the entire account
balance would be treated as having been distributed to you in the year during
which the prohibited transactions occurred. The value of the entire account
would be included in your gross income and taxed as ordinary income. In
addition, if you are under age 591/2, the "distribution" would also be
subject to the additional 10% penalty tax imposed on premature distributions.
9. Prohibited Transactions -- Loans
You are not permitted to pledge or otherwise use any portion of your IRA as
collateral for a loan. If you do use a portion of your account as collateral,
the portion used will be deemed to have been distributed to you by reason of
section 408(e)(4) of the Internal Revenue Code. The value of the portion
"distributed" would be included in your gross income and taxed as ordinary
income. In addition, if you are under age 591/2, the portion "distributed"
would also be subject to the additional 10% penalty tax imposed on premature
distributions.
<PAGE>
10.Federal Estate and Gift Taxes
Transfers of IRA amounts are generally subject to estate and gift taxes in
the absence of any applicable exclusion (such as the unlimited marital
deduction or the unified estate and gift tax credit).
11. Reports to the Internal Revenue Service
You must file Form 5329 with the Internal Revenue Service for each taxable
year that you owe penalty taxes on excess contributions, premature
distributions, prohibited transactions and underdistributions.
12. Investment of Contributions
Contributions to your IRA and the earnings thereon, will be invested in
shares of the State Farm Funds selected by you. The assets in your IRA will be
held in a custodial account exclusively for your benefit and the benefit of
your designated beneficiary. The balance in your IRA represents a separate
account which is clearly identified as your property. Your right to the entire
balance in your account is nonforfeitable.
13. Financial Information
Growth in value of the mutual fund shares held in your account cannot be
guaranteed or projected. The earnings on your account will be derived from the
dividends and capital gain distributions (if any) received on the shares of
the State Farm Funds in your account and will be used to purchase additional
shares. The income and operating expenses of the mutual fund you select, as
well as any increase or decrease in the market value of the underlying assets
of the mutual fund, affects the value of its shares, and therefore the value
of the shares in your account. Additional information regarding each of the
State Farm Funds available for investment in your IRA may be obtained from
each Fund's prospectus. Fees and other expenses of maintaining your account
may be charged to your account or directly to you by the Custodian.
14. Additional Information
Further information concerning IRAs can be obtained from any district
office of the Internal Revenue Service.
STATE FARM FUNDS
INDIVIDUAL RETIREMENT ACCOUNT PLAN
CUSTODIAL ACCOUNT AGREEMENT
INTRODUCTION
The Participant and Commerce Bank, Bloomington, Illinois (hereinafter
referred to as "Custodian"), by signing the Application have created this
Custodial Account Agreement (hereinafter referred to as the "Agreement"). The
Application is hereby made a part of this Agreement.
This Agreement has been established in accordance with the State Farm Funds
Individual Retirement Account Plan (hereinafter referred to as the "Plan"). In
the event of any conflict between the provisions of the Plan and those of this
Agreement, the latter shall prevail.
Participation in the Plan is limited to individuals who qualify to purchase
shares in the State Farm Funds, i.e. Agents and Employees of the State Farm
Insurance Companies and their family members. In the event the Participant
becomes ineligible to purchase shares in the State Farm Funds, no additional
contributions may be made to the Custodial Account established under this
Agreement until the Participant again becomes eligible to purchase such
shares.
The Custodial Account is intended to qualify as an "individual retirement
account" within the meaning of section 408 of the Internal Revenue Code of
1986, as amended or any successor statute. The Participant has made an initial
contribution (or authorized a compensation deduction) to the Custodial Account
as indicated on the Application. The Participant and Custodian agree that the
terms and conditions of the Custodial Account are as set forth in this
Agreement.
ARTICLE I DEFINITIONS
1.1 Participant means the individual who has signed the Application and
makes contributions in the manner prescribed herein.
1.2 Custodian means Commerce Bank, Bloomington, Illinois, and any
successor thereto as herein provided.
1.3 State Farm Fund or State Farm Funds means the Investment Company or
Companies specified in the Application, in which assets of the Plan may be
invested; provided that no Investment Company will be deemed available for
investment hereunder (i) prior to the date the prospectus for such Investment
Company discloses such availability, or (ii) with respect to any Participant
who resides in any state with respect to which shares of the Investment
Company are not available for sale.
1.4 Shares means shares of common stock of the State Farm Funds.
1.5 Plan means the State Farm Funds Individual Retirement Account Plan and
any amendments thereof.
1.6 Plan Sponsor means State Farm Interim Fund, Inc.
ARTICLE II ESTABLISHMENT OF PARTICIPANT'S CUSTODIAL ACCOUNT
2.1 The Custodian shall establish and maintain a Custodial Account for the
sole benefit of Participant and his/her Beneficiaries. The Custodial Account
shall be kept in a manner which will permit an accurate determination of the
contributions and any other transactions made by the Participant. The
Participant shall promptly notify the Custodian in writing of any change in
Participant's name or address.
ARTICLE III CONTRIBUTIONS
3.1 ACCEPTANCE OF CONTRIBUTIONS. The Custodian may accept contributions by
check or compensation deduction as deposits to the Custodial Account from or
on behalf of Participant, except as limited by paragraphs 3.2 and 3.3 of this
Article and paragraph 3.1 of the Plan.
3.2 AMOUNTS OF CONTRIBUTIONS. Except in the case of a Rollover
Contribution, the Custodian will not accept contributions from or on behalf of
the Participant in excess of $2,000 for any taxable year of the Participant.
Contributions for a given taxable year may be made during such year or not
later than the time prescribed by law for filing Participant's Federal income
tax return for such taxable year (not including extensions of time for
filing). All contributions (except Rollover Contributions as described in
Section V of the Plan) must be made by check or compensation deduction and are
subject to the minimum investment requirements established by the State Farm
Funds. Contributions shall be invested pursuant to written instructions on a
form provided (or permitted) by the Custodian specifying the State Farm Fund
in which they are to be invested. If the Participant becomes ineligible to
purchase Shares of the State Farm Funds in accordance with eligibility rules
established from time to time by the State Farm Funds, the Custodian shall not
accept contributions to the Custodial Account during the period of such
ineligibility.
3.3 ROLLOVER CONTRIBUTIONS. The Custodian may accept Rollover
Contributions as a deposit to the Custodial Account, as described in Section V
of the Plan. The Participant shall execute such forms as the Custodian may
require describing the source of the Rollover Contribution. The Custodian may
not accept certain Rollover Contributions as described in paragraph 5.3 of the
Plan.
ARTICLE IV NONFORFEITABLE
4.1 The interest of the Participant in the balance in the Custodial
Account shall at all times be nonforfeitable, but shall be subject to the
fees, expenses and charges described in Article VII.
ARTICLE V INVESTMENT OF ASSETS OF CUSTODIAL ACCOUNT
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5.1 INVESTMENT OF CONTRIBUTIONS. The Custodian shall invest all
contributions in Shares of the State Farm Funds as directed by Participant on
a form provided or permitted by the Custodian. If such directions are not
received by Custodian; or are received but are, in the opinion of the
Custodian, unclear; or if the accompanying contribution exceeds $2,000 and is
not identified as a Rollover Contribution; or if the Participant is ineligible
to purchase Shares; the Custodian may hold or return all of the contribution
uninvested without liability for loss of income or appreciation and without
liability for interest pending receipt of proper instructions or
clarification.
5.2 CHANGE OF INVESTMENT. A Participant (or a Beneficiary of a deceased
Participant) may change the State Farm Fund in which his/her account is
invested by filing with the Custodian directions on such form as is provided
or permitted by the Custodian at such times as the Participant (or a
Beneficiary of a deceased Participant) shall deem appropriate. No such change
of investment shall be effective until received by the Custodian and, once
effective, shall remain in effect until properly changed.
5.3 DIVIDENDS AND DISTRIBUTIONS. All income dividends and capital gain
distributions received in respect of Shares held in the Custodial Account
shall be reinvested in Shares of the State Farm Funds from which they were
received and such Shares shall be credited to the Custodial Account. Such
reinvestment shall be made on the date specified by the State Farm Funds for
reinvestment of the distributions. If any distributions may be received at the
election of the shareowner in additional Shares or in cash, the Custodian
shall elect to receive such distributions in additional Shares.
5.4 REGISTRATION AND OWNERSHIP OF SHARES. Shares acquired by the Custodian
shall be registered in the name of the Custodian or its nominee. The Custodian
shall deliver, or cause to be delivered, to Participant all prospectuses,
confirmations, notices, reports or other material as may be required under
applicable securities laws. The Custodian shall not vote any such Shares
except in accordance with written instructions received from Participant.
5.5 MISCELLANEOUS
(a) The Custodian does not undertake to render any investment advice
to the Participant. The responsibility of the Custodian to invest in Shares is
not an endorsement of any State Farm Fund.
(b) Anything to the contrary notwithstanding, no part of the assets of
the Custodial Account shall be invested in life insurance contracts; nor may
the assets of the Custodial Account be invested in collectibles as defined in
Section 408(m) of the Internal Revenue Code; nor may the assets of the
Custodial Account be commingled with other property except in a common trust
fund or common investment fund (within the meaning of section 408(a) (5) of
the Internal Revenue Code).
ARTICLE VI PAYMENT OF BENEFITS
6.1 DISTRIBUTIONS. The entire interest of the Participant in the Custodial
Account must be, or commence to be, distributed no later than April 1 of the
calendar year following the calendar year in which the Participant attains age
70 1/2. Not later than such time, the Participant may elect, in a form and at
such time as may be acceptable to the Custodian, to have his/her interest in
the Custodial Account distributed in the manner provided in Section IV of the
Plan. If the Participant fails or is unable to elect one of the methods of
distribution described in Section IV of the Plan on or before April 1 of the
calendar year following the calendar year in which Participant attains age
70 1/2, then the Custodian shall make such distribution of benefits pursuant to
subparagraph 4.2(i) of the Plan.
6.2 PAYMENT ON DISABILITY. If the Participant becomes disabled (as defined
in section 72(m)(7) of the Internal Revenue Code or any successor provision),
the Custodian shall distribute the Participant's interest in the Custodial
Account in the manner provided in paragraph 4.8 of the Plan.
6.3 PAYMENT ON DEATH. If Participant dies before distribution of his/her
interest has begun, or if Participant dies after distribution has commenced
but before the entire interest has been distributed, the Custodian shall
distribute the remaining interest in the Custodial Account in the manner
provided in paragraph 4.6 of the Plan.
6.4 PREMATURE DISTRIBUTION. Premature distributions from the Custodial
Account may be subject to a penalty under section 72(t) of the Internal
Revenue Code; the Custodian assumes no responsibility for the tax treatment of
any distribution from the Custodial Account; such responsibility is solely
that of the Participant ordering the distribution.
6.5 EXCESS CONTRIBUTIONS. Anything herein to the contrary notwithstanding,
if the Custodian should at any time receive written notice from the
Participant that any contribution made by or on behalf of the Participant was
an Excess Contribution (as described in section 408(d)(4) of the Internal
Revenue Code) and Participant directs that such Excess Contribution should be
distributed to him/her, the Custodian shall distribute to the Participant from
the Custodial Account the amount of such Excess Contribution and, if withdrawn
pursuant to section 408(d)(4) of the Internal Revenue Code, the net income
attributable thereto in Shares or cash, in the sole discretion of the
Custodian.
6.6 LOSS OF EXEMPTION. On written notice from the Participant or the
Internal Revenue Service to the Custodian that for any taxable year the
Participant's account has lost its exemption, including loss of exemption as
provided in section 408(e)(2) of the Internal Revenue Code, the Custodian
shall, on or before the close of the ninety-day period beginning with the date
of the receipt of such notice, distribute to such Participant the
Participant's entire interest in the Custodial Account in Shares or cash in
the sole discretion of the Custodian. The Custodian is authorized, however, to
reserve funds as described in paragraph 10.1.
6.7 CONFIRMATIONS. The Custodian will confirm to the Participant the
redemption of Shares made pursuant to any distribution from the Custodial
Account.
ARTICLE VII CUSTODIAN FEES AND EXPENSES OF THE ACCOUNT
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7.1 ANNUAL MAINTENANCE FEE. With the consent in writing of the Plan
Sponsor, the Custodian may impose an Annual Maintenance Fee from time to time
on at least forty-five (45) days' notice in writing to the Participant.
7.2 PAYMENT OF FEES AND EXPENSES. Any income, gift, estate, inheritance
taxes and other taxes of any kind whatsoever that may be levied upon or
assessed against or in respect of the Custodial Account, the Annual
Maintenance Fee, and all administrative expenses incurred by the Custodian in
the performance of its duties, including fees for legal services rendered to
the Custodian, shall be paid from the assets of the Custodial Account. The
Custodian may, at its option, collect any amounts so charged from the amount
of any contribution or distribution from the Custodial Account or by sale or
liquidation of the Shares credited to the Custodial Account and, if the assets
of the Custodial Account are insufficient to satisfy such charges, the
Participant shall pay any deficit therein to the Custodian.
ARTICLE VIII REPORTING AND DISCLOSURE
8.1 INFORMATION. The Participant agrees to provide information to the
Custodian at such time and in such manner and containing such information as
may be necessary for the Custodian to prepare any reports required by the
Internal Revenue Service.
8.2 REPORTS. The Custodian agrees to submit reports to the Internal
Revenue Service and the Participant at such time and in such manner and
containing such information as is prescribed by the Internal Revenue Service.
ARTICLE IX ADDITIONAL PROVISIONS REGARDING THE CUSTODIAN
9.1 CUSTODIAL ACCOUNT STATEMENTS. The Custodian shall keep accurate and
detailed records of all transactions it is required to perform hereunder.
Within sixty (60) days after the close of each calendar year (or after the
Custodian's resignation or removal pursuant to Article X hereof), the
Custodian shall deliver to the Participant a written statement of the
transactions effected by the Custodian during such year (or period ending with
such resignation or removal) and the fair market value of the assets of the
Custodial Account as of the close of such year. Upon expiration of the sixty
(60) day period following the date on which the foregoing statement is
delivered by the Custodian, the Custodian shall (to the extent permitted by
applicable law) be forever released and discharged from all liability and
accountability to anyone with respect to its acts in transactions shown on or
reflected by such statement, except with respect to any such acts or
transactions as to which the Participant has filed written objections with the
Custodian within the sixty (60) day period. Nothing herein contained shall be
deemed to preclude the Custodian from its right to have its accounts
judicially settled by a court of competent jurisdiction.
9.2 MISCELLANEOUS
The Custodian shall not be liable and assumes no responsibility for
the collection of contributions provided for under the Plan, the deductibility
of any contributions, the purpose or propriety of any distribution made
pursuant to Article VI hereof, or any other action taken at a Participant's
direction, nor shall the Custodian have any duty or responsibility to
determine whether information furnished by a Participant is correct. To the
extent permitted by Federal law, nothing contained in the Plan, either
expressly or by implication, shall be deemed to impose any powers, duties or
responsibilities on the Custodian other than those set forth in this
Agreement.
The Custodian shall be indemnified and saved harmless by the
Participant from any and all liability whatsoever which may arise in
connection with this Agreement, except the obligation of the Custodian to
perform in accordance with the Agreement and with the applicable Federal law.
The Custodian shall be under no duty to take any action other than as
herein specified with respect to the Custodial Account unless the Participant
shall furnish the Custodian with instructions in proper form and such
instructions shall have been specifically agreed to by the Custodian. The
Custodian shall be under no duties to defend or engage in any suit with
respect to the Custodial Account unless the Custodian shall have first agreed
in writing to do so and shall have been fully indemnified to the satisfaction
of the Custodian. The Custodian shall be protected in acting upon any written
order or direction from a Participant or any other notice, request, consent,
certificate or any other instrument believed by it to be genuine and to have
been properly executed and, so long as it acts in good faith, in taking or
omitting to take any other action.
Before making any distribution in the case of the death of the
Participant, the Custodian shall be furnished with such certified death
certificates, inheritance tax releases, indemnity agreements and other
documents as may be required by the Custodian. Before making any distribution
in the case of the disability of a Participant, the Custodian shall be
furnished with proof of disability.
The Custodian shall be an agent for the Participant to receive and
invest contributions as directed by the Participant, hold and distribute such
investments, and keep adequate records and report thereon, all in accordance
with this Agreement. The parties do not intend to confer any fiduciary duties
on the Custodian, and none shall be implied. The Custodian may perform any of
its duties through other persons designated by the Custodian from time to
time, and the Custodian intends initially to delegate all such duties to State
Farm Investment Management Corp. No such delegation or future change therein
shall be considered as an amendment to this Agreement.
ARTICLE X RESIGNATION OF OR REMOVAL OF CUSTODIAN
10.1 The Custodian may resign at any time upon at least thirty (30) days'
notice in writing to the Participant and to the Plan Sponsor, and Custodian
and Participant agree that the Plan Sponsor may remove the Custodian at any
time upon at least thirty (30) days' notice in writing to the Custodian and
Participant. Upon such resignation or removal, the Plan Sponsor shall appoint
a Successor Custodian. Upon receipt by the Custodian of a written acceptance
of such appointment by a Successor Custodian, the Custodian shall transfer to
such Successor the assets of the Custodial Account and all records pertaining
thereto. The Custodian is authorized, however, to reserve such a portion of
such assets as it may deem advisable for payment of all its fees,
compensation, costs and expenses or for payment of any other liabilities
constituting a charge on or against the assets of the Custodial Account or on
or against the Custodian, with any balance of such reserve remaining after the
payment of all such items to be paid over to the Successor Custodian. The
Successor Custodian shall hold the assets paid over to it under the terms of
this Agreement.
<PAGE>
10.2 The Custodian shall not be liable for the acts or omissions of any
Successor Custodian.
10.3 The Custodian and every Successor Custodian appointed to serve under
this Agreement, must be a bank as defined in section 408(n) of the Internal
Revenue Code or such other person who demonstrates to the satisfaction of the
Secretary of the Treasury or his delegate that the manner in which such other
person will administer the Custodial Account will be consistent with the
requirements of section 408 of the Internal Revenue Code.
10.4 After the Custodian has transferred the Custodial Account assets
(including any reserve balance as contemplated above) to the Successor
Custodian, the Custodian shall be relieved of all further liability with
respect to this Agreement, the Custodial Account and the assets thereof.
ARTICLE XI TERMINATION OF CUSTODIAL ACCOUNT
11.1 TERMINATION BY CUSTODIAN. The Custodian may elect to terminate the
Custodial Account if, within sixty (60) days after its resignation or removal
pursuant to Article X, the Plan Sponsor has not appointed a Successor
Custodian which has accepted such appointment. Termination of the Custodial
Account shall be effected by distributing to Participant all assets of the
Custodial Account in a lump-sum payment in cash or Shares, at the sole
discretion of Custodian, subject to Custodian's right to reserve funds as
described in paragraph 10.1.
11.2 TERMINATION BY PARTICIPANT. The Participant may elect to terminate the
Custodial Account at any time, provided such election is made concurrently
with Participant's election to terminate the Plan pursuant to paragraph 9.2 of
the Plan. Participant shall give written notice of his/her election to
terminate the Custodial Account to the Custodian by registered or certified
mail. After receipt of such notice,the Custodian shall terminate the Custodial
Account and distribute all assets in the Custodial Account pursuant to
directions furnished by Participant and agreed to by Custodian. If Participant
fails or is unable to furnish such directions, the Custodian shall distribute
to Participant all assets of the Custodial Account in a lump-sum payment in
cash or Shares, at the sole discretion of Custodian, subject to Custodian's
right to reserve funds as described in paragraph 10.1.
11.3 TERMINATION OF AGREEMENT. Upon distribution of all assets of the
Custodial Account in accordance with the provisions of paragraphs 11.1 or
11.2, this Agreement shall terminate and have no further force and effect. The
Custodian shall be relieved from all further liability with respect to this
Agreement, the Custodial Account and all assets thereof so distributed.
ARTICLE XII AMENDMENT
12.1 Subject to the provisions of paragraphs 12.2, 12.3, and 12.4, the
Participant and Custodian agree that the Plan Sponsor may, at any time,
unilaterally amend this Agreement in any respect (including retroactive
amendments). Any such Amendment shall be effective on a stated date which
shall be at least sixty (60) days after giving written notice of the Amendment
(including its exact terms) to Participant and Custodian. The Participant and
Custodian shall be deemed to have consented to such Amendment unless, within
thirty (30) days after the notice to Participant and Custodian is mailed,
either (i) Participant elects to terminate the Custodial Account as provided
under Article XI, or (ii) Custodian elects to resign as provided in Article X.
12.2 No amendment shall be made at any time under which any part of the
Custodial Account may be diverted to purposes other than for the exclusive
benefit of Participant and his/her Beneficiaries.
12.3 No amendment shall be made retroactively in a manner so as to deprive
any Participant of any benefit to which he/she was entitled under this
Agreement by reason of contributions made before the Amendment, unless such
Amendment is necessary to conform the Plan or Agreement to, or satisfy the
requirements of, the Internal Revenue Code or other applicable law.
12.4 No amendment shall place any greater burden on the Custodian without
its written consent.
12.5 This Article XII shall not be construed to restrict the freedom of the
Custodian to impose an Annual Maintenance Fee in the manner provided in
Article VII, and no such change shall be deemed an Amendment of this
Agreement.
ARTICLE XIII MISCELLANEOUS
13.1 Not withstanding any other paragraphs of this Agreement, paragraphs
3.1, 3.2, 3.3 and 5.5(b) and this sentence shall be controlling. Furthermore,
any provision of this Agreement shall be wholly invalid if it is inconsistent,
in whole or in part, with section 408(a) of the Internal Revenue Code and the
regulations thereunder.
13.2 Any notice, report or material required to be delivered by the
Custodian to the Participant shall be deemed delivered and effective on the
date mailed by the Custodian to the Participant at the Participant's last
address of record filed by the Participant with the Custodian.
13.3 This Agreement and Beneficiary Designations, and all property rights,
including rights to distributions after the death of the Participant, under
the Plan, shall be construed in accordance with the laws of the State of
Illinois, other than its laws with respect to the choice of laws.
STATE FARM FUNDS
ROTH INDIVIDUAL RETIREMENT ACCOUNT PLAN
DISCLOSURE STATEMENT
The following information is provided to you in accordance with the
requirements of the Internal Revenue Service (IRS) regulations. You should
read this Disclosure Statement together with the Custodial Account Agreement
and the State Farm Funds prospectuses. We are waiting for further IRS
guidance regarding Roth Individual Retirement Accounts in order to draft and
submit the State Farm Funds Roth Individual Retirement Account Plan for formal
IRS approval. This is not a comprehensive discussion of the applicable law;
nor is it intended to serve as a substitute for the advice of your lawyer,
accountant or other personal tax or financial adviser.
1. Irrevocability of Account
The IRS requires that you receive this Disclosure Statement at least
seven (7) days prior to the establishment of your Roth Individual Retirement
Account (Roth IRA). Because of this, your Application will not be accepted by
the Custodian and your account will not be established until at least seven
(7) days after the date you receive this Disclosure Statement. Once your
Application for a State Farm Funds Roth IRA is received and accepted by the
Custodian, it cannot be revoked by you.
2. IRS Approval
As noted above, the State Farm Funds Roth IRA Plan has not yet been
drafted and submitted for formal approval by the IRS. The Custodial Account
Agreement is a model document that has been approved by the IRS.
3. Eligibility
Participation in the State Farm Funds Roth IRA Plan is limited to
Agents and Employees of the State Farm Insurance Companies and members of
their families.
4. General Information
A Roth IRA must be a United States trust or custodial account created
for the exclusive benefit of an individual and his/her beneficiary. The
trustee or custodian must be either a bank or such other person who has been
approved by the Secretary of the Treasury. No part of the contributions may
be invested in either life insurance contracts or collectibles (such as art
works, antiques, stamps, coins, etc.) as defined in section 408(m) of the
Internal Revenue Code of 1986, as amended (Code). The assets of the Roth IRA
cannot be commingled with other property except in a common trust fund or
common investment fund. In addition, an individual's right to the entire
balance in his/her account must at all times be nonforfeitable.
As with most laws which provide special tax treatment, there are
certain restrictions and limitations. The pertinent Federal tax laws include
requirements relating to contributions, use of account assets, and when and
how distributions can be made to you and your beneficiary.
5. Contributions
You may make contributions to your Roth IRA for a taxable year if you
receive compensation during such year. Compensation includes your wages and
salary as an employee and earnings from self-employment, such as professional
fees and other amounts for your personal services. However, only a limited
amount of contributions can be made each year to your Roth IRA.
Limitations - Regular Contributions. Your contributions to your Roth
IRA are limited to the lesser of 100% of your compensation or $2,000 annually
if you (or you and your spouse if a joint return is filed) have adjusted gross
income that does not exceed an applicable dollar amount. The applicable
dollar amount is (1) $95,000 in the case of an individual, (2) $150,000 in the
case of a married couple filing a joint return, and (3) $0 in the case of a
married couple filing separately. If your adjusted gross income exceeds the
applicable dollar amount, you may still be able to make Roth IRA
contributions; however, the Roth IRA contribution limit (including the spousal
Roth IRA contribution limit) is reduced by an amount that bears the same ratio
to the applicable contribution limit as your adjusted gross income in excess
of the applicable dollar amount bears to $15,000 ($10,000 in the case of a
joint return or a married individual filing a separate return). Accordingly,
you may not make Roth IRA contributions if your adjusted gross income is (1)
$110,000 or more in the case of an individual, (2) $160,000 or more in the
case of a married couple filing a joint return, and (3) $10,000 or more in the
case of a married couple filing separately. To qualify as a Roth IRA
contribution, your contribution must be made no later than the due date for
filing your Federal income tax return (not including any extensions). If both
you and your spouse had compensation during the taxable year, then you may
each establish a separate Roth IRA and each of you may make contributions to
your separate Roth IRA up to the lesser of 100% of your respective
compensation or $2,000 annually.
Limitations - Spousal Contributions. If you had compensation during
the taxable year greater than your spouse (regardless of whether your spouse
had any compensation) and you file a joint tax return, you may make
contributions to your Roth IRA and to a separate Roth IRA owned by your
spouse. Under such an arrangement, you may make a contribution to the spousal
Roth IRA up to the lesser of the combined compensation of you and your spouse
for the taxable year reduced by any deduction allowed for contributions to
regular IRAs of the spouse with higher compensation and by the amount of the
contributions by the higher compensated spouse to Roth IRAs or $2,000,
annually.
Total Contributions to Regular and Roth IRAs. You may not make more
than a $2,000 annual contribution to all of your IRAs combined which include
deductible and nondeductible contributions to your regular IRAs and
nondeductible contributions to your Roth IRAs. This $2,000 contribution
limitation does not apply to Education IRAs.
Deductibility of Contributions. Contributions to your Roth IRA (or
your spouse's Roth IRA) are not deductible from your gross income on your
Federal income tax return.
Excess Contributions. Any contributions to your Roth IRA (including
spousal contributions to your spouse's Roth IRA) which exceed the maximum
allowable contribution are excess contributions. Any excess contributions
which are not withdrawn or eliminated prior to the due date for filing your
Federal income tax return (including any extensions) will be subject to a 6%
penalty tax under section 4973 of the Code.
<PAGE>
6. Rollovers/Conversions
Regular IRAs to Roth IRAs. Distributions from a regular IRA may be
rolled over/converted to a Roth IRA without any penalty that would otherwise
apply to a distribution from a regular IRA if the distribution meets the
requirements for a qualified rollover contribution under Code Sec. 408(d)(3).
However, you are eligible to make a qualified rollover contribution to a Roth
IRA from a regular IRA during the tax year only if your adjusted gross income
is not more than $100,000 in a tax year. You may not make a rollover
contribution to a Roth IRA from a regular IRA if you are married and file a
separate return. Amounts rolled over/converted are not counted towards the
$2,000 annual limit.
On a rollover distribution/conversion from a regular IRA to a Roth
IRA, there is included in your gross income any amount which would be included
if it were not part of a qualified rollover distribution. However, if all or
any part of a regular IRA is converted into a Roth IRA after December 31, 1997
and before January 1, 1999, the amount that would have been includible in
gross income if you had withdrawn the converted amount is included in gross
income ratably over the four (4) tax-year period beginning with the tax year
in which the conversion is made.
Roth IRAs to Roth IRAs. You are permitted to rollover a Roth IRA into
another Roth IRA. It is not clear currently what rules regarding the
satisfaction of the five (5) year holding period apply. We are waiting for
further IRS guidance.
It is not clear from current IRS guidance if you can rollover a SIMPLE
IRA or SEP-IRA to a Roth IRA. We are waiting for further guidance from the
IRS on this subject and have decided not to allow such rollovers until we
receive such guidance. Strict limitations set forth in Code Sec. 408(d)(3)
apply to rollovers. You should seek competent tax advice in order to ensure
compliance with the rules governing rollovers.
7. Distributions
Income Tax Treatment. Distributions from a Roth IRA aren't includible
in income if the distribution is a "qualified distribution." A qualified
distribution is a distribution that is made after the five (5) tax-year period
beginning with the first tax year in which you made a contribution to the Roth
IRA (or in the case of conversions from regular IRAs to Roth IRAs, the five
(5) tax-year period beginning with the tax year in which the conversion took
place), and which is made:
on or after you become 59 1/2
after your death,
on account of your becoming disabled, or
for a "qualified special purpose distribution," i.e., a distribution
for first-time home buyer expenses under Code Sec. 72(t)(2)(F).
Roth IRAs are not subject to the minimum distribution rules before
death or to the incidental death benefit rules of Code Sec. 401(a).
Distributions that do not meet the requirements for qualified
distributions are includible in income to the extent of earnings on
contributions. Distributions from a Roth IRA are currently treated as made
from contributions first. However, the Technical Corrections Bill, which may
be passed sometime this year, provides for a potential 20% penalty on
withdrawals from a conversion Roth IRA during the five (5) year holding
period. Specifically, under the bill, if converted amounts are withdrawn
before the five (5) year holding period is satisfied, then to the extent
attributable to amounts includible in income due to the conversion, the amount
withdrawn would be subject to the 10% early withdrawal tax (unless an
exception applied) and for conversions during 1998, an additional 10% tax to
compensate for the four (4) year income inclusion rule. Any withdrawal from a
Roth IRA containing converted funds before the five (5) year holding period is
satisfied would be treated as coming first from amounts that were includible
in income because of the conversion. This means that by putting annual
contributions with conversion funds in the same Roth IRA, you could be
subjecting the annual contributions to a 20% penalty tax that would not apply
if they were kept in a separate Roth IRA. In the case of annual contributions
kept in a separate Roth IRA, you would not be subject to the 20% penalty tax
on withdrawals and would most likely be able to withdraw amounts tax-free up
to the amount of the contributions to the Roth IRA. In light of this
possibility, the IRS has suggested that companies require separate accounts to
address this issue, and we have decided to follow the suggestion.
Furthermore, where a Roth IRA contains conversion contributions and
other contributions, or conversion contributions from more than one year, the
five (5) year holding period would begin with the most recent tax year for
which a conversion contribution was made. This has led the IRS to suggest
companies provide for the creation of separate Roth IRAs for conversion
amounts for each year in which a conversion is made, and we have decided to
follow the suggestion.
Distributions After Death.
THE TAXPAYER RELIEF ACT OF 1997 DID NOT PROVIDE DETAILS HOW POST-
DEATH DISTRIBUTIONS ARE TO BE MADE TO ROTH IRA BENEFICIARIES. THE IRS-ISSUED
MODEL ROTH IRA FORMS EXPLAIN THESE RULES.
If you die before your entire interest is distributed to you and your
surviving spouse is not the sole beneficiary, the entire remaining interest
will, at the election of you or, if you have not so elected, at the election
of the beneficiary or beneficiaries, either:
(a) Be distributed by December 31 of the year containing the fifth
anniversary of your death, or
(b) Be distributed over the life expectancy of the designated
beneficiary starting no later than December 31 of the year following the year
of your death.
<PAGE>
If distributions do not begin by the date described in (b),
distribution method (a) will apply.
In the case of distribution method (b) above, to determine the minimum
annual payment for each year, divide your entire interest in the account as of
the close of business on December 31 of the preceding year by the life
expectancy of the designated beneficiary using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence and subtract one (1) for each
subsequent year.
The model forms provide that if your spouse is the sole beneficiary on
your date of death, such spouse will then be treated as the account owner. We
have used the model form and adopted this approach.
Premature Distributions. A Roth IRA is intended as a savings plan to
accumulate funds for retirement. Accordingly, Code Sec. 72(t) imposes a
penalty on certain premature distributions. Generally, if you receive a
distribution from your account before you reach age 59 1/2, to the extent that
such distribution will be taxable as ordinary income, it will also be subject
to an additional 10% penalty tax. The additional 10% penalty tax does not
apply when distributions are made: 1) because of your total and permanent
disability, 2) because of your death, 3) to the extent such distributions do
not exceed the amount you pay for medical insurance during the taxable year if
you have separated from employment, have received unemployment compensation
for twelve (12) consecutive weeks under any Federal or State unemployment
compensation law (or would have received such compensation but for the fact
you were self-employed) and your Roth IRA distribution is made during the year
such unemployment compensation is paid or the succeeding year, 4) to the
extent such distributions do not exceed the amount of the unreimbursed medical
expenses you pay during the year that are in excess of 7.5% of your adjusted
gross income for the year, 5) which are part of a series of substantially
equal periodic (not less frequently than annually) payments made for your life
(or life expectancy) or the joint lives (or joint life expectancies) of you
and your designated beneficiary, 6) as part of a qualifying rollover
distribution, 7) as part of a transfer incident to a divorce, 8) which are
timely withdrawn excess contributions, 9) to the extent such distributions do
not exceed the amount of the qualified higher education expenses (as defined
in Section 72(t)(7) of the Code) you pay for such eligible individuals during
the year, or 10) which are qualified first-time home buyer distributions as
defined in Section 72(t)(8) of the Code.
8. Prohibited Transactions
If you or your beneficiary were to engage in any prohibited
transactions (described in section 4975(c) of the Code) with respect to a
regular IRA (such as any sale, exchange or leasing of any property between you
and the account; or any other interference with the independent status of the
account) then the account would lose its tax-exempt status by reason of
section 408(e)(2)(A) of the Code and the entire account balance would be
treated as having been distributed to you in the year during which the
prohibited transactions occurred. The value of the entire account would be
included in your gross income and taxed as ordinary income. In addition, if
you are under age 59 1/2, the "distribution" would also be subject to the
additional 10% penalty tax imposed on premature distributions. These same
rules may apply to Roth IRAs. We are waiting for guidance from the IRS.
9. Prohibited Transactions - Loans
You are not permitted to pledge or otherwise use any portion of a
regular IRA as collateral for a loan. If you do use a portion of your account
as collateral, the portion used will be deemed to have been distributed to you
by reason of section 408(e)(4) of the Code. The value of the portion
"distributed" would be included in your gross income and taxed as ordinary
income. In addition, if you are under age 59 1/2, the portion "distributed"
would also be subject to the additional 10% penalty tax imposed on premature
distributions. These same rules may apply to Roth IRAs. We are waiting for
guidance from the IRS.
10. Federal Estate and Gift Taxes
Transfers of regular IRA amounts are generally subject to estate and
gift taxes in the absence of any applicable exclusion (such as the unlimited
marital deduction or the unified estate and gift tax credit). These same
rules may apply to Roth IRAs. We are waiting for guidance from the IRS.
11. Reports to the IRS
You must file Form 5329 with the IRS for each taxable year that you
owe penalty taxes on excess contributions, premature distributions, and
prohibited transactions.
12. Investment of Contributions
Contributions to your Roth IRA and the earnings thereon, will be
invested in shares of the State Farm Funds selected by you. The assets in
your Roth IRA will be held in a custodial account exclusively for your benefit
and the benefit of your designated beneficiary. The balance in your Roth IRA
represents a separate account which is clearly identified as your property.
Your right to the entire balance in your account is nonforfeitable.
13. Financial Information
Growth in value of the mutual fund shares held in your account cannot
be guaranteed or projected. The earnings on your account will be derived from
the dividends and capital gain distributions (if any) received on the shares
of the State Farm Funds in your account and will be used to purchase
additional shares. The income and operating expenses of the mutual fund you
select, as well as any increase or decrease in the market value of the
underlying assets of the mutual fund, affects the value of its shares, and
therefore the value of the shares in your account. Additional information
regarding each of the State Farm Funds available for investment in your Roth
IRA may be obtained from each Fund's prospectus.
Fees and other expenses of maintaining your account may be charged to
your account or directly to you by the Custodian.
14. Additional Information
Further information concerning Roth IRAs can be obtained from any
district office of the IRS and by consulting IRS Publication No. 590,
Individual Retirement Arrangements (IRAs).
STATE FARM FUNDS
ROTH INDIVIDUAL RETIREMENT ACCOUNT PLAN
CUSTODIAL ACCOUNT AGREEMENT
Article IX
INTRODUCTION
SECTION 1 BACKGROUND
The Depositor and Custodian, by signing the Application have created this
Custodial Account Agreement (hereinafter referred to as the "Agreement"). The
Application is hereby made a part of this Agreement.
This Agreement is established in accordance with interim IRS guidance
regarding Roth IRAs and will be established in accordance with the State Farm
Funds Roth Individual Retirement Account Plan which will be drafted and
submitted to the IRS for formal approval once more complete IRS guidance is
provided (hereinafter referred to as the "Plan").
Participation in the Plan is limited to individuals who qualify to purchase
shares in the State Farm Funds, i.e. Agents and Employees of the State Farm
Insurance Companies and their family members. In the event the Depositor
becomes ineligible to purchase shares in the State Farm Funds, no additional
contributions may be made to the Custodial Account established under this
Agreement until the Depositor again becomes eligible to purchase such shares.
The Agreement is intended to qualify as a "Roth individual retirement
account" within the meaning of section 408A of the Internal Revenue Code of
1986, as amended (Code). The Depositor has made an initial contribution (or
authorized a compensation deduction) to the Custodial Account as indicated on
the Application. The Depositor and Custodian agree that the terms and
conditions of the Custodial Account are as set forth in this Agreement.
SECTION 2 DEFINITIONS
a. Depositor means the individual who has signed the Application and
makes contributions in the manner prescribed herein.
b. Custodian means Commerce Bank, Bloomington, Illinois, and any
successor thereto as herein provided.
c. State Farm Fund or State Farm Funds means the Investment Company or
Companies specified in the Application, in which assets of the Plan may be
invested; provided that no Investment Company will be deemed available for
investment hereunder (i) prior to the date the prospectus for such Investment
Company discloses such availability, or (ii) with respect to any Depositor who
resides in any state with respect to which shares of the Investment Company
are not available for sale.
d. Shares means shares of common stock of the State Farm Funds.
e. Plan means the State Farm Funds Roth Individual Retirement Account
Plan and any amendments thereof.
f. Plan Sponsor means State Farm Interim Fund, Inc.
SECTION 3 ESTABLISHMENT OF DEPOSITOR'S CUSTODIAL ACCOUNT
The Custodian shall establish and maintain a Custodial Account for the sole
benefit of Depositor and his/her Beneficiaries. The Custodial Account shall
be kept in a manner which will permit an accurate determination of the
contributions and any other transactions made by the Depositor. The Depositor
shall promptly notify the Custodian in writing of any change in Depositor's
name or address.
SECTION 4 CONTRIBUTIONS
a. ACCEPTANCE OF CONTRIBUTIONS. The Custodian may accept contributions
by check or compensation deduction as deposits to the Custodial Account from
or on behalf of Depositor, except as limited herein.
b. AMOUNTS OF CONTRIBUTIONS. Contributions for a given taxable year may
be made during such year or not later than the time prescribed by law for
filing Depositor's Federal income tax return for such taxable year (not
including extensions of time for filing). All contributions (except Rollover
Contributions) must be made by check or compensation deduction and are subject
to the minimum investment requirements established by the State Farm Funds.
Contributions shall be invested pursuant to written instructions on a form
provided (or permitted) by the Custodian specifying the State Farm Fund in
which they are to be invested. If the Depositor becomes ineligible to
purchase Shares of the State Farm Funds in accordance with eligibility rules
established from time to time by the State Farm Funds, the Custodian shall not
accept contributions to the Custodial Account during the period of such
ineligibility.
c. ROLLOVER CONTRIBUTIONS. The Depositor shall execute such forms as the
Custodian may require describing the source of the Rollover Contribution.
<PAGE>
SECTION 5 INVESTMENT OF ASSETS OF CUSTODIAL ACCOUNT
a. INVESTMENT OF CONTRIBUTIONS. The Custodian shall invest all
contributions in Shares of the State Farm Funds as directed by Depositor on a
form provided or permitted by the Custodian. If such directions are not
received by Custodian; or are received but are, in the opinion of the
Custodian, unclear; or if the accompanying contribution exceeds $2,000 and is
not identified as a Rollover Contribution; or if the Depositor is ineligible
to purchase Shares; the Custodian may hold or return all of the contribution
uninvested without liability for loss of income or appreciation and without
liability for interest pending receipt of proper instructions or
clarification.
b. CHANGE OF INVESTMENT. A Depositor (or a Beneficiary of a deceased
Depositor) may change the State Farm Fund in which his/her account is invested
by filing with the Custodian directions on such form as is provided or
permitted by the Custodian at such times as the Depositor (or a Beneficiary of
a deceased Depositor) shall deem appropriate. No such change of investment
shall be effective until received by the Custodian and, once effective, shall
remain in effect until properly changed.
c. DIVIDENDS AND DISTRIBUTIONS. All income dividends and capital gain
distributions received in respect of Shares held in the Custodial Account
shall be reinvested in Shares of the State Farm Funds from which they were
received and such Shares shall be credited to the Custodial Account. Such
reinvestment shall be made on the date specified by the State Farm Funds for
reinvestment of the distributions. If any distributions may be received at
the election of the shareowner in additional Shares or in cash, the Custodian
shall elect to receive such distributions in additional Shares.
d. REGISTRATION AND OWNERSHIP OF SHARES. Shares acquired by the
Custodian shall be registered in the name of the Custodian or its nominee. The
Custodian shall deliver, or cause to be delivered, to Depositor all
prospectuses, confirmations, notices, reports or other material as may be
required under applicable securities laws. The Custodian shall not vote any
such Shares except in accordance with written instructions received from
Depositor.
e. MISCELLANEOUS. The Custodian does not undertake to render any
investment advice to the Depositor. The responsibility of the Custodian to
invest in Shares is not an endorsement of any State Farm Fund.
SECTION 6 PAYMENT OF BENEFITS
a. EXCESS CONTRIBUTIONS. Anything herein to the contrary
notwithstanding, if the Custodian should at any time receive written notice
from the Depositor that any contribution made by or on behalf of the Depositor
was an Excess Contribution (as described in section 408(d)(4) of the Code) and
Depositor directs that such Excess Contribution should be distributed to
him/her, the Custodian shall distribute to the Depositor from the Custodial
Account the amount of such Excess Contribution and, if withdrawn pursuant to
section 408(d)(4) of the Code, the net income attributable thereto in Shares
or cash, in the sole discretion of the Custodian.
b. LOSS OF EXEMPTION. On written notice from the Depositor or the IRS to
the Custodian that for any taxable year the Depositor's account has lost its
exemption, including loss of exemption as provided in section 408(e)(2) of the
Code, the Custodian shall, on or before the close of the ninety (90) day
period beginning with the date of the receipt of such notice, distribute to
such Depositor the Depositor's entire interest in the Custodial Account in
Shares or cash in the sole discretion of the Custodian. The Custodian is
authorized, however, to reserve funds as described in Section 9.a.
c. CONFIRMATIONS. The Custodian will confirm to the Depositor the
redemption of Shares made pursuant to any distribution from the Custodial
Account.
SECTION 7 CUSTODIAN FEES AND EXPENSES OF THE ACCOUNT
a. ANNUAL MAINTENANCE FEE. With the consent in writing of the Plan
Sponsor, the Custodian may impose an Annual Maintenance Fee from time to time
on at least forty-five (45) days' notice in writing to the Depositor.
b. PAYMENT OF FEES AND EXPENSES. Any income, gift, estate, inheritance
taxes and other taxes of any kind whatsoever that may be levied upon or
assessed against or in respect of the Custodial Account, the Annual
Maintenance Fee, and all administrative expenses incurred by the Custodian in
the performance of its duties, including fees for legal services rendered to
the Custodian, shall be paid from the assets of the Custodial Account. The
Custodian may, at its option, collect any amounts so charged from the amount
of any contribution or distribution from the Custodial Account or by sale or
liquidation of the Shares credited to the Custodial Account and, if the assets
of the Custodial Account are insufficient to satisfy such charges, the
Depositor shall pay any deficit therein to the Custodian.
SECTION 8 ADDITIONAL PROVISIONS REGARDING THE CUSTODIAN
a. CUSTODIAL ACCOUNT STATEMENTS. The Custodian shall keep accurate and
detailed records of all transactions it is required to perform hereunder.
Within sixty (60) days after the close of each calendar year (or after the
Custodian's resignation or removal pursuant to Section 9 hereof), the
Custodian shall deliver to the Depositor a written statement of the
transactions effected by the Custodian during such year (or period ending with
such resignation or removal) and the fair market value of the assets of the
Custodial Account as of the close of such year. Upon expiration of the sixty
(60) day period following the date on which the foregoing statement is
delivered by the Custodian, the Custodian shall (to the extent permitted by
applicable law) be forever released and discharged from all liability and
accountability to anyone with respect to its acts in transactions shown on or
reflected by such statement, except with respect to any such acts or
transactions as to which the Depositor has filed written objections with the
Custodian, within the sixty (60) day period. Nothing herein contained shall be
deemed to preclude the Custodian from its right to have its accounts
judicially settled by a court of competent jurisdiction.
<PAGE>
b. MISCELLANEOUS. The Custodian shall not be liable and assumes no
responsibility for any action taken at a Depositor's direction, nor shall the
Custodian have any duty or responsibility to determine whether information
furnished by a Depositor is correct. To the extent permitted by Federal law,
nothing contained in the Plan, either expressly or by implication, shall be
deemed to impose any powers, duties or responsibilities on the Custodian other
than those set forth in this Agreement.
The Custodian shall be indemnified and saved harmless by the Depositor from
any and all liability whatsoever which may arise in connection with this
Agreement, except the obligation of the Custodian to perform in accordance
with the Agreement and with the applicable Federal law.
The Custodian shall be under no duty to take any action other than as
herein specified with respect to the Custodial Account unless the Depositor
shall furnish the Custodian with instructions in proper form and such
instructions shall have been specifically agreed to by the Custodian. The
Custodian shall be under no duties to defend or engage in any suit with
respect to the Custodial Account unless the Custodian shall have first agreed
in writing to do so and shall have been fully indemnified to the satisfaction
of the Custodian. The Custodian shall be protected in acting upon any written
order or direction from a Depositor or any other notice, request, consent,
certificate or any other instrument believed by it to be genuine and to have
been properly executed and, so long as it acts in good faith, in taking or
omitting to take any other action.
Before making any distribution in the case of the death of the
Depositor, the Custodian shall be furnished with such certified death
certificates, inheritance tax releases, indemnity agreements and other
documents as may be required by the Custodian. Before making any distribution
in the case of the disability of a Depositor, the Custodian shall be furnished
with proof of disability.
The Custodian shall be an agent for the Depositor to receive and
invest contributions as directed by the Depositor, hold and distribute such
investments, and keep adequate records and report thereon, all in accordance
with this Agreement. The parties do not intend to confer any fiduciary duties
on the Custodian, and none shall be implied. The Custodian may perform any of
its duties through other persons designated by the Custodian from time to
time, and the Custodian intends initially to delegate all such duties to State
Farm Investment Management Corp. No such delegation or future change therein
shall be considered as an amendment to this Agreement.
SECTION 9 RESIGNATION OF OR REMOVAL OF CUSTODIAN
a. The Custodian may resign at any time upon at least thirty (30) days'
notice in writing to the Depositor and to the Plan Sponsor, and Custodian and
Depositor agree that the Plan Sponsor may remove the Custodian at any time
upon at last thirty (30) days' notice in writing to the Custodian and
Depositor. Upon such resignation or removal, the Plan Sponsor shall appoint a
Successor Custodian. Upon receipt by the Custodian of a written acceptance of
such appointment by a Successor Custodian, the Custodian shall transfer to
such Successor the assets of the Custodial Account and all records pertaining
thereto. The Custodian is authorized, however, to reserve such a portion of
such assets as it may deem advisable for payment of all its fees,
compensation, costs and expenses or for payment of any other liabilities
constituting a charge on or against the assets of the Custodial Account or on
or against the Custodian, with any balance of such reserve remaining after the
payment of all such items to be paid over to the Successor Custodian. The
Successor Custodian shall hold the assets paid over to it under the terms of
this Agreement.
b. The Custodian shall not be liable for the acts or omissions of any
Successor Custodian.
c. The Custodian and every Successor Custodian appointed to serve under
this Agreement must be a bank as defined in section 408(n) of the Code or such
other person who demonstrates to the satisfaction of the Secretary of the
Treasury or his delegate that the manner in which such other person will
administer the Custodial Account will be consistent with the requirements of
section 408A of the Code.
d. After the Custodian has transferred the Custodial Account assets
(including any reserve balance as contemplated above) to the Successor
Custodian, the Custodian shall be relieved of all further liability with
respect to this Agreement, the Custodial Account and the assets thereof.
SECTION 10 TERMINATION OF CUSTODIAL ACCOUNT
a. TERMINATION BY CUSTODIAN. The Custodian may elect to terminate the
Custodial Account if, within sixty (60) days after its resignation or removal
pursuant to Section 9, the Plan Sponsor has not appointed a Successor
Custodian which has accepted such appointment. Termination of the Custodial
Account shall be effected by distributing to Depositor all assets of the
Custodial Account in a lump-sum payment in cash or Shares, at the sole
discretion of Custodian, subject to Custodian's right to reserve funds as
described in Section 9.a.
b. TERMINATION BY DEPOSITOR. The Depositor may elect to terminate the
Custodial Account at any time. Depositor shall give written notice of his/her
election to terminate the Custodial Account to the Custodian by registered or
certified mail. After receipt of such notice, the Custodian shall terminate
the Custodial Account and distribute all assets in the Custodial Account
pursuant to directions furnished by Depositor and agreed to by Custodian. If
Depositor fails or is unable to furnish such directions, the Custodian shall
distribute to Depositor all assets of the Custodial Account in a lump-sum
payment in cash or in Shares, at the sole discretion of Custodian, subject to
Custodian's right to reserve funds as described in Section 9.a.
c. TERMINATION OF AGREEMENT. Upon distribution of all assets of the
Custodial Account in accordance with the provisions herein, this Agreement
shall terminate and have no further force and effect. The Custodian shall be
relieved from all further liability with respect to this Agreement, the
Custodial Account and all assets thereof so distributed.
SECTION 11 AMENDMENT
a. Subject to the provisions of paragraphs (b), (c), and (d) herein, the
Depositor and Custodian agree that the Plan Sponsor may, at any time,
unilaterally amend this Agreement in any respect (including retroactive
amendments). Any such Amendment shall be effective on a stated date which
shall be at least sixty (60) days after giving written notice of the Amendment
(including its exact terms) to Depositor and Custodian. The Depositor and
<PAGE>
Custodian shall be deemed to have consented to such Amendment unless, within
thirty (30) days after the notice to Depositor and Custodian is mailed, either
(i) Depositor elects to terminate the Custodial Account as provided under
Section 10, or (ii) Custodian elects to resign as provided in Section 9.
b. No amendment shall be made at any time under which any part of the
Custodial Account may be diverted to purposes other than for the exclusive
benefit of Depositor and his/her Beneficiaries.
c. No amendment shall be made retroactively in a manner so as to deprive
any Depositor of any benefit to which he/she was entitled under this Agreement
by reason of contributions made before the Amendment, unless such Amendment is
necessary to conform the Plan or Agreement to, or satisfy the requirements of,
the Code or other applicable law.
d. No amendment shall place any greater burden on the Custodian without
its written consent.
e. This Section 11 shall not be construed to restrict the freedom of the
Custodian to impose an Annual Maintenance Fee in the manner provided in
Section 7.a and no such change shall be deemed an Amendment of this Agreement.
SECTION 12 MISCELLANEOUS
a. Any notice, report or material required to be delivered by the
Custodian to the Depositor shall be deemed delivered and effective on the date
mailed by the Custodian to the Depositor at the Depositor's last address of
record filed by the Depositor with the Custodian.
b. This Agreement and Beneficiary Designations, and all property rights,
including rights to distributions after the death of the Depositor, under the
Plan, shall be construed in accordance with the laws of the State of Illinois,
other than its laws with respect to the choice of laws.
STATE FARM INTERIM FUND
INVESTMENT RECORD - ALL DIVIDENDS AND CAPITAL GAINS REINVESTED
1, 5, AND IO YEAR AVERAGE RETURNS
30-Nov-97
1 Month(s)
NET ASSET VALUES FOR VALUATION: ACCRUED DIVIDEND
AT VALUATION DATE
30-Nov-97 $ 9.85 0.1067088450
30-Nov-96 $ 9.98
30-Nov-92 $10.46
30-Nov-87 $ 9.99
<TABLE>
<CAPTION>
QUARTER C.G. DIV REINV. INVESTMENT C.G. DIV SHARES SHARES
ENDED ACTION RATE RATE PRICE AMOUNT AMOUNT AMOUNT ACQUIRED OWNED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Nov-87 INITIAL INVEST. N/A N/A $ 9.99 $1,000.00 N/A N/A 100.100 100.100
31-Dec-87 DIVIDEND* N/A 0.193415340 $10.00 $0.00 6.45 0.645 100.745
31-Mar-88 DIVIDEND N/A 0.192715762 $10.09 $0.00 19.42 1.925 102.670
30-Jun-88 DIVIDEND N/A 0.194529093 $ 9.99 $0.00 19.97 1.999 104.669
30-Sep-88 DIVIDEND N/A 0.197331562 $ 9.93 $0.00 20.65 2.080 106.748
31-Dec-88 DIVIDEND N/A 0.198679640 $ 9.80 $0.00 21.21 2.164 108.913
31-Mar-89 DIVIDEND N/A 0.204275555 $ 9.70 $0.00 22.25 2.294 111.206
30-Jun-89 DIVIDEND N/A 0.204113066 $10.11 $0.00 22.70 2.245 113.452
30-Sep-89 DIVIDEND N/A 0.201380119 $10.03 $0.00 22.85 2.278 115.730
31-Dec-89 DIVIDEND N/A 0.201321103 $10.13 $0.00 23.30 2.300 118.030
31-Mar-90 DIVIDEND N/A 0.205864654 $ 9.95 $0.00 24.30 2.442 120.472
30-Jun-90 DIVIDEND N/A 0.204671441 $10.03 $0.00 24.66 2.459 122.931
30-Sep-90 DIVIDEND N/A 0.200545314 $10.04 $0.00 24.65 2.455 125.386
31-Dec-90 DIVIDEND N/A 0.207894291 $10.22 $0.00 26.07 2.551 127.937
31-Mar-91 DIVIDEND N/A 0.191817917 $10.22 $0.00 24.54 2.401 130.338
30-Jun-91 DIVIDEND N/A 0.198125027 $10.19 $0.00 25.82 2.534 132.872
30-Sep-91 DIVIDEND N/A 0.200333698 $10.40 $0.00 26.62 2.560 135.431
31-Dec-91 DIVIDEND N/A 0.195151602 $10.64 $0.00 26.43 2.484 137.915
31-Mar-92 DIVIDEND N/A 0.195850026 $10.38 $0.00 27.01 2.602 140.518
30-Jun-92 DIVIDEND N/A 0.197869216 $10.53 $0.00 27.80 2.640 143.158
30-Sep-92 DIVIDEND N/A 0.188460749 $10.74 $0.00 26.98 2.512 145.670
31-Dec-92 DIVIDEND N/A 0.187530792 $10.52 $0.00 27.32 2.597 148.267
31-Mar-93 DIVIDEND N/A 0.190245882 $10.67 $0.00 28.21 2.644 150.911
30-Jun-93 DIVIDEND N/A 0.183791300 $10.65 $0.00 27.74 2.605 153.515
30-Sep-93 DIVIDEND N/A 0.179591191 $10.66 $0.00 27.57 2.586 156.102
31-Dec-93 DIVIDEND N/A 0.185744392 $10.49 $0.00 28.99 2.764 158.865
31-Mar-94 DIVIDEND N/A 0.173664594 $10.19 $0.00 27.59 2.708 161.573
30-Jun-94 DIVIDEND N/A 0.173958386 $ 9.99 $0.00 28.11 2.814 164.387
30-Sep-94 DIVIDEND N/A 0.184906839 $ 9.88 $0.00 30.40 3.077 167.463
31-Dec-94 DIVIDEND N/A 0.174067659 $ 9.70 $0.00 29.15 3.005 170.469
31-Mar-95 DIVIDEND N/A 0.177197259 $ 9.88 $0.00 30.21 3.058 173.526
30-Jun-95 DIVIDEND N/A 0.174759945 $10.09 $0.00 30.33 3.006 176.532
30-Sep-95 DIVIDEND N/A 0.171724346 $10.06 $0.00 30.31 3.013 179.545
31-Dec-95 DIVIDEND N/A 0.171720075 $10.19 $0.00 30.83 3.026 182.571
31-Mar-96 DIVIDEND N/A 0.170423758 $ 9.99 $0.00 31.11 3.114 185.685
30-Jun-96 DIVIDEND N/A 0.170983768 $ 9.89 $0.00 31.75 3.210 188.895
30-Sep-96 DIVIDEND N/A 0,177327380 $ 9.88 $0.00 33.50 3.391 192.286
31-Dec-96 DIVIDEND N/A 0,188877841 $ 9.89 $0.00 36.32 3.672 195.958
31-Mar-97 DIVIDEND N/A 0.172183157 $ 9.73 $0.00 33.74 3.468 199.426
30-Jun-97 DIVIDEND N/A 0.175108669 $ 9.79 $0.00 34.92 3.567 202.993
30-Sep-97 DIVIDEND N/A 0.175956815 $ 9.84 $0.00 35.72 3.630 206.623
ACCRUED DIVIDEND / PER SHARE 0.106708845
SHARES OWNED 206,623
NAV 30-Nov-97 $ 9.85
ACCOUNT VALUE - 10 YEAR INVESTMENT $ 2,057.28
ONE YEAR AVERAGE RETURN 5.87%
FIVE YEAR AVERAGE RETURN 5.94%
TEN YEAR AVERAGE RETURN 7.48%
</TABLE>
<PAGE>
STATE FARM INTERIM FUND
1 Month(s)
<TABLE>
<CAPTION>
5 YEAR
QUARTER CALCULATION DIVIDEND DIVIDEND REIN. SHARES SHARES
ENDED ORIGINAL INV. RATE AMOUNT PRICE ACQUIRED OWNED
<S> <C> <C> <C> <C> <C> <C> <C>
30-Nov-92 INITIAL INVEST. $1,000.00 $10.46 95.602 95.602
31-Dec-92 DIVIDEND* 0.187530792 5.98 $10.52 0.568 96.170
31-Mar-93 DIVIDEND 0.190245882 18.30 $10.67 1.715 97.885
30-Jun-93 DIVIDEND 0.183791300 17.99 $10.65 1.689 99.574
30-Sep-93 DIVIDEND 0.179591191 17.88 $10.66 1.677 101.251
31-Dec-93 DIVIDEND 0.185744392 18.81 $10.49 1.793 103.044
31-Mar-94 DIVIDEND 0.173664594 17.90 $10.19 1.757 104.801
30-Jun-94 DIVIDEND 0.173958386 18.23 $ 9.99 1.825 106.626
30-Sep-94 DIVIDEND 0.184906839 19.72 $ 9.88 1.996 108.622
31-Dec-94 DIVIDEND 0.174067659 18.91 $ 9.70 1.949 110.571
31-Mar-95 DIVIDEND 0.177197259 19.59 $ 9.88 1.983 112.554
30-Jun-95 DIVIDEND 0.174759945 19.67 $10.09 1.949 114.503
30-Sep-95 DIVIDEND 0.171724346 19.66 $10.06 1.954 116.457
31-Dec-95 DIVIDEND 0.171720075 20.00 $10.19 1.963 118.420
31-Mar-96 DIVIDEND 0.170423758 20.18 $ 9.99 2.020 120.440
30-Jun-96 DIVIDEND 0.170983768 20.59 $ 9.89 2.082 122.522
30-Sep-96 DIVIDEND 0.177327380 21.73 $ 9.88 2.199 124.721
31-Dec-96 DIVIDEND 0.188877841 23.56 $ 9.89 2.382 127.103
31-Mar-97 DIVIDEND 0.172183157 21.88 $ 9.73 2.249 129.352
30-Jun-97 DIVIDEND 0.175108669 22.65 $ 9.79 2.314 131.666
30-Sep-97 DIVIDEND 0.175956815 23.17 $ 9.84 2.355 134.021
SHARES OWNED 134,021
NAV 30-Nov-97 $ 9.85
ACCRUED DIVIDEND 0.106708845
ACCOUNT VALUE - 5 YEAR INVESTMENT $ 1,334.41
</TABLE>
<TABLE>
<CAPTION>
1 YEAR
QUARTER CALCULATION DIVIDEND DIVIDEND REIN. SHARES SHARES
ENDED ORIGINAL INV. RATE AMOUNT PRICE ACQUIRED OWNED
<S> <C> <C> <C> <C> <C> <C> <C>
30-Nov-96 INITIAL INVEST. $1,000.00 $ 9.98 100.200 100.200
31-Dec-96 DIVIDEND 0.188877841 6.31 $ 9.89 0.638 100.838
31-Mar-97 DIVIDEND 0.172183157 17.36 $ 9.73 1.784 102.622
30-Jun-97 DIVIDEND 0.175108669 17.97 $ 9.79 1.836 104.458
30-Sep-97 DIVIDEND 0.175956815 18.38 $ 9.84 1.868 106.326
SHARES OWNED 106.326
NAV 30-Nov-97 $ 9.85
ACCRUED DIVIDEND 0.106708845
ACCOUNT VALUE - 1 YEAR INVESTMENT $ 1,058.66
</TABLE>
*Dividend amount = rate *# of months/3, representing the number
of months the amount was invested for the quarter
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000205925
<NAME> STATE FARM INTERIM FUND, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 114,487,820
<INVESTMENTS-AT-VALUE> 112,524,819
<RECEIVABLES> 1,676,571
<ASSETS-OTHER> 820,504
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 115,021,894
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,175,686
<TOTAL-LIABILITIES> 2,175,686
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 117,070,033
<SHARES-COMMON-STOCK> 11,454,154
<SHARES-COMMON-PRIOR> 10,784,233
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,260,824)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,963,001)
<NET-ASSETS> 112,846,208
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,939,168
<OTHER-INCOME> 0
<EXPENSES-NET> 238,295
<NET-INVESTMENT-INCOME> 7,700,873
<REALIZED-GAINS-CURRENT> (922,190)
<APPREC-INCREASE-CURRENT> (453,800)
<NET-CHANGE-FROM-OPS> 6,324,883
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,700,873)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,855,197
<NUMBER-OF-SHARES-REDEEMED> 5,913,858
<SHARES-REINVESTED> 728,582
<NET-CHANGE-IN-ASSETS> 5,201,896
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 184,551
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 238,295
<AVERAGE-NET-ASSETS> 109,560,407
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> .69
<PER-SHARE-GAIN-APPREC> (.13)
<PER-SHARE-DIVIDEND> (.69)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.85
<EXPENSE-RATIO> .22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Per share $.69
</FN>
</TABLE>
