ANNUAL REPORT
State Farm Municipal Bond 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 MUNICIPAL BOND FUND, INC.
Dear Shareowner:
General movements of interest rates over the course of your 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 municipal securities held by
your Fund were slightly lower than they were one year ago. The net asset value
of the Fund stands at $8.43 versus $8.44 when the 1996 fiscal year closed.
The Fund's total return, which considers the reinvestment of dividends and the
change in net asset value, for the year was 5.7%. Typically, one would expect
the net asset value to rise somewhat when yields decline. However, that was
not the case this year because we choose to manage the portfolio in a way
which emphasizes the receipt of tax-exempt investment income rather than
capital appreciation. We believe that most shareholders own the Municipal Bond
Fund primarily to receive the benefits of a dependable flow of tax-exempt
dividend income so have decided to manage the assets accordingly.
The following graph compares a $10,000 investment in the Municipal
Bond Fund over the past ten years to a theoretical investment of the same
amount in the Lehman Brothers Municipal Bond Index:
Lehman Municipal
Municipal Bond Fund Bond Index*
1987 10,000 10,000
1988 11,011 11,063
1989 12,158 12,281
1990 13,104 13,227
1991 14,315 14,584
1992 15,603 16,046
1993 17,031 17,826
1994 16,593 16,890
1995 18,951 20,082
1996 19,940 21,263
1997 21,072 22,884
* The Lehman Brothers Municipal Bond Index includes approximately 21,000
municipal bonds which are selected to be representative of the market. To
be included in the Index, a municipal bond must meet the following
criteria: have a minimum credit rating of Baa; have been issued as part of
an issue of least $50 million; have an amount outstanding of least $3
million; have been issued within the last five years; and have a maturity
of at least one year.
The Lehman Brothers Index represents unmanaged groups of bonds that
differ from the composition of the Municipal Bond Fund. Unlike an
investment in the Municipal Bond Fund, a theoretical investment in the
Index does 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.
Despite municipal securities trading only in U.S. markets, the
international situation has affected the municipal market indirectly.
Municipal bonds are regularly compared to U.S. Treasury securities to judge
their relative attractiveness as an investment. The demand for U.S. Treasury
securities has resulted in their yields recently declining more than those of
municipal bonds. Consequently, the yield of a high quality municipal bond
maturing in 20 years is now around 85% of that of a U.S. Treasury bond having
a comparable maturity. This ratio had been hovering around the 80% level for
most of 1996 and 1997. Over the last couple of years property and casualty
insurance companies had been the principal buyers of municipal bonds, but we
are now seeing an increase in demand from other investors. The higher relative
yield of municipal bonds available presently is surely a part of the reason
for the heightened demand.
The composition of your Fund's investments has not changed much since
last November. Municipal bonds purchased over the last year had maturities
ranging from 12-15 years. Good quality bonds dominate the portfolio. About 82%
of the long-term assets are rated AA or better, and another 6% are not rated
but are considered to be of equivalent quality since those issues are backed
by U.S. Treasury securities. The entire portfolio of the Fund falls into the
top three rating categories when the aforementioned issues are included at
appropriate equivalent ratings. The average weighted maturity of the Fund's
portfolio is approximately 7.25 years with all maturities spread out over the
next 15 years.
An intermediate maturity structure has been the orientation of the
Fund's portfolio for several years. Such a structure seems particularly
appropriate at the moment since bonds with an intermediate maturity provide
about 80-85% of the yield available from bonds with long maturities.
As always, we encourage you to view your investment in the Fund as a
genuinely long-term commitment and to accept market volatility as an
inevitable consequence of owning a municipal bond fund. The high quality
investments of the Fund should provide a dependable flow of dividend income
through all types of markets.
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/ Julian R. Bucher
Kurt G. Moser Julian R. Bucher
Vice President Vice President
December 18, 1997
3
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareowners
State Farm Municipal Bond Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of State Farm Municipal Bond 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 Municipal Bond 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 MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
RATING
PRINCIPAL (MOODY'S
AMOUNT ISSUER OR S & P) VALUE
LONG-TERM MUNICIPAL BONDS (96.4%):
SECURED BY U.S. TREASURY OBLIGATIONS (17.4%):
<S> <C> <C> <C>
$ 45,000 San Antonio, Texas Water System Rev. Refunding Bonds, Ser. 1992, 5.80%,
5-15-1999 (Escrowed to maturity) Aaa $ 46,151
500,000 Orlando Utilities Commission, Florida Water and Electric Rev., Ser. 1983,
9.60%, 10-1-1999 (Escrowed to maturity) Aaa 548,975
2,000,000 State of Washington Motor Vehicle Fuel Tax General Obligation Bonds
(State Route 90), Ser. CC-8, 7.10%, 3-1-2000 (Prerefunded to 3-1-1999
@ 100) Aaa 2,077,860
1,000,000 State of Texas Public Finance Authority General Obligation Bonds, Ser.
1990A, 7.00%, 10-1-2000 (Prerefunded to 10-1-1999 @ 100) AA 1,051,380
2,840,000 Washington Suburban Sanitary District of Maryland, General Obligation
Bonds, 7.00%, 12-1-2001 (Prerefunded to 12-1-1998 @ 102) Aaa 2,982,880
2,250,000 Pima County, Arizona Unified School District No. 1, Tucson School
Improvement Bonds, Ser. 1990 B, 6.90%, 7-1-2002 (Prerefunded
to 7-1-2000 @ 101) A 2,422,688
3,000,000 Tempe Union High School District No. 213, Maricopa County, Arizona
School Improvement General Obligation Bonds, Project of 1989, Ser.
1992B, 5.875%, 7-1-2002 (Prerefunded to 7-1-2001 @ 101) A+ 3,186,690
475,000 Johnson County Water District No. 1, Kansas Water Rev., Ser. 1982A,
10.25%, 8-1-2002 (Escrowed to maturity) Aaa 586,102
3,500,000 Milwaukee, Wisconsin Metropolitan Sewerage District General Obligation
Capital Purpose Bonds, Ser. 1990A, 6.70%, 10-1-2002 (Escrowed to
Maturity) NR 3,857,315
1,885,000 Federal Way School District No. 210, King County, Washington Unlimited
Tax General Obligation Refunding Bonds, Series 1987, 6.75%, 12-1-2002
(Prerefunded to 12-1-97 @ 100) A1 1,885,754
900,000 Metropolitan Government of Nashville and Davidson County, Tennessee
Water and Sewer Rev., Ser. 1982, 10.50%, 12-1-2002 (Prerefunded
to 12-1-1997 @ 100) Aaa 900,810
3,000,000 City of Lakeland, Florida Electric and Water Rev., Ser. 1989, 6.90%,
10-1-2003 (Prerefunded to 10-1-1999 @ 102) Aa 3,207,330
2,620,000 Cherry Creek School District No. 5, Arapahoe County,
Colorado General Obligation Improvement Bonds, Ser. 1990, 7.00%,
12-15-2003 (Prerefunded to 12-15-2000 @ 101) Aa2 2,857,424
2,000,000 Jefferson County, Colorado School District No. R-1 General Obligation Bonds,
Ser., 1992, 5.75%, 12-15-2003 (Prerefunded to 12-15-2002 @ 101) Aaa 2,148,420
2,000,000 Fargo, North Dakota Water Revenue of 1993, 5.00%, 1-1-2004
(Escrowed to Maturity) Aaa 2,065,640
2,000,000 City of Grand Rapids, Michigan Water Supply System Improvement Rev.
Bonds, Ser. 1988, 7.70%, 1-1-2004 (Prerefunded to 1-1-1998 @ 102) Aaa 2,047,300
2,000,000 Jackson, Mississippi General Obligation Bonds, Ser. 1988, 7.50%, 5-1-2004
(Prerefunded to 5-1-1998 @ 100) NR 2,030,680
3,500,000 City of Los Angeles, California Wastewater System Rev. Bonds, Ser. 1990 B,
6.90%, 6-1-2004 (Prerefunded to 6-1-2000 @ 102) Aaa 3,803,800
5
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
RATING
PRINCIPAL (MOODY'S
AMOUNT ISSUER OR S & P) VALUE
SECURED BY U.S. TREASURY OBLIGATIONS (Continued)
$ 3,000,000 Omaha Public Power District of Nebraska, Electric Systems Rev., Ser. A,
6.70%, 2-1-2005 (Prerefunded to 2-1-2000 @ 101.5) AA $ 3,200,790
2,500,000 King County, Washington, Health Care Capital Improvement Bonds
(Harborview Project), Ser. 1988 B, 7.30%, 12-1-2005 (Prerefunded to
12-1-1998 @ 100) NR 2,582,400
1,900,000 Fort Worth Independent School District, Texas School Building Unlimited
Tax Bonds, Ser. 1989, 6.75%, 2-15-2006 (Prerefunded to
2-15-1999 @ 100) AAA 1,963,745
2,600,000 Washington Public Power Supply System Nuclear Project No. 1,
Rev. Refunding Bonds, Ser. 1989A, 7.50%, 7-1-2007
(Prerefunded to 7-1-1999 @ 102) Aaa 2,784,756
2,000,000 State of Texas Public Financial Authority General Obligation Bonds, Ser.
1988A, 6.50%, 10-1-2007 (Prerefunded to 10-1-1998 @ 100) AA 2,043,260
1,500,000 Washington Public Power Supply System Nuclear Project No. 2, Rev.
Refunding Bonds, Ser. 1990 A, 7.625%, 7-1-2008 (Prerefunded to
7-1-2000 @ 102) Aaa 1,653,180
6,000,000 Omaha Public Power District, Nebraska Electric System Revenue Bonds,
1992, Series B, 6.15%, 2-1-2012 (Escrowed to Maturity) Aa2 6,686,640
--------------
58,621,970
GENERAL OBLIGATIONS (58.9%):
1,100,000 Stillwater, Minnesota Independent School District #834, General
Obligation School Building Bonds, Ser. 1991, 6.25%, 2-1-1998 Aaa 1,104,752
3,000,000 Scottsdale Unified School District No. 48 of Maricopa County, Arizona
Refunding Bonds, Ser. 1991, 6.75%, 7-1-1998 Aa2 3,051,750
1,350,000 Stillwater, Minnesota Independent School District #834, General
Obligation School Building Bonds, Ser. 1991, 6.25%, 2-1-1999 Aaa 1,386,234
400,000 State of California, Variable Purpose General Obligation Bonds, 9.00%,
4-1-1999 A1 426,104
150,000 Oregon Veterans' Welfare General Obligation Bonds, Ser. LXIV, 9.00%,
4-1-1999 Aa2 159,810
2,500,000 Austin Independent School District, Texas Unlimited Tax Refunding
Bonds, Ser. 1991, 6.20%, 8-1-1999 Aaa 2,590,000
1,000,000 State of Texas Public Finance Authority General Obligation Bonds, Ser.
1990A, 7.00%, 10-1-1999 Aa2 1,053,390
3,000,000 Washington Suburban Sanitary District, Maryland Water Supply Refunding
Bonds of 1991, 6.00%, 11-1-1999 Aa1 3,113,130
200,000 Charleston, Illinois Water Works Improvement Bonds, 8.00%, 1-1-2000 A 214,718
3,000,000 State of California Various Purpose General Obligation Bonds, 5.90%, 2-1-2000 A1 3,114,510
2,500,000 DuPage Water Commission, Illinois General Obligation Water Refunding
Bonds, Ser. 1992, 5.85%, 3-1-2000 Aaa 2,592,400
1,000,000 State of Texas Veterans' Land Board General Obligation Bonds, Ser. 1984,
9.00%, 12-1-2000 Aa2 1,095,210
1,885,000 Anoka County, Minnesota General Obligation Capital Improvement
Refunding Bonds, Ser. 1992C, 5.20%, 2-1-2001 A1 1,941,022
6
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
RATING
PRINCIPAL (MOODY'S
AMOUNT ISSUER OR S & P) VALUE
GENERAL OBLIGATIONS (Continued)
$ 1,200,000 Shelby County, Tennessee General Obligation Refunding Bonds, 1992
Ser. B, 5.20%, 3-1-2001 Aa2 $ 1,238,016
400,000 State of California General Obligation Veterans Bonds, Ser. AL, 9.60%,
4-1-2001 A1 467,056
2,200,000 City and County of Honolulu, Hawaii General Obligation Refunding
Bonds, 1992 Ser. 1, 5.60%, 6-1-2001 Aa2 2,296,712
2,000,000 School District of Leon County, Florida General Obligation Refunding
Bonds, Ser. 1991, 5.85%, 7-1-2001 A1 2,114,500
2,000,000 Howard County, Maryland Consolidated Public Improvement Refunding
Bonds, Ser. 1991B, 5.80%, 8-15-2001 Aaa 2,116,760
2,110,000 State of Nevada General Obligation (Limited Tax) Hoover Uprating
Refunding Bonds, Ser. 1992, 6.00%, 10-1-2001 Aa2 2,246,580
900,000 Monroe County Jail, Indiana, First Mortgage Refunding Bonds, Series
1993, 4.90%, 1-1-2002 A1 916,668
1,535,000 Columbus, Ohio Sewer Improvement No. 27 Refunding Bonds, Ser. 1991,
5.90%, 2-15-2002 Aaa 1,635,435
1,000,000 Williamson County, Tennessee Public Works Refunding Bonds, Ser. 1992,
5.65%, 3-1-2002 Aa1 1,054,400
1,500,000 City of Tulsa, Oklahoma General Obligation Refunding Bonds of 1993,
5.05%, 6-1-2002 Aa2 1,550,055
925,000 Monroe County Jail, Indiana First Mortgage Refunding Bonds, Series 1993,
4.90%, 7-1-2002 A1 944,018
2,100,000 Jackson Public School District, Mississippi General Obligation School
Bonds, Ser. 1992, 5.80%, 7-1-2002 A1 2,228,247
1,000,000 Pima County, Arizona General Obligation Refunding Bonds, Ser. 1992,
6.30%, 7-1-2002 Aa 1,086,050
1,500,000 County of Ramsey, Minnesota General Obligation Capital Improvement
Refunding Bonds, Ser. 1992C, 5.40%, 12-1-2002 Aaa 1,577,835
1,505,000 Anchorage, Alaska General Obligation General Purpose Refunding Bonds,
4.60%, 2-1-2003 Aaa 1,517,341
2,000,000 Lake County, Illinois Forest Preserve District General Obligation
Refunding Bonds, Ser. 1992B, 5.70%, 2-1-2003 Aa2 2,122,940
1,050,000 Oklahoma City, Oklahoma General Obligation Bonds, Series 1993, 5.15%,
5-1-2003 Aa2 1,091,234
2,000,000 Nashville and Davidson County, Tennessee General Obligation Refunding
Bonds of 1993, 5.00%, 5-15-2003 Aa2 2,062,640
2,000,000 State of Illinois General Obligation Refunding Bonds, Series of June 1993,
5.00%, 6-1-2003 Aa3 2,057,180
1,500,000 Municipality of Anchorage, Alaska 1993 General Obligation Refunding
School Bonds, Series B, 4.90%, 9-1-2003 Aaa 1,538,490
2,000,000 Texas Public Finance Authority, State of Texas General Obligation
Refunding Bonds, Ser. 1992A, 5.70%, 10-1-2003 Aa2 2,141,140
2,000,000 State of Wisconsin General Obligation Refunding Bonds of 1993, Series 1,
5.30%, 11-1-2003 Aa2 2,098,320
2,000,000 State of Wisconsin General Obligation Refunding Bonds of 1993, Series 3,
4.75%, 11-1-2003 Aa2 2,041,360
7
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
RATING
PRINCIPAL (MOODY'S
AMOUNT ISSUER OR S & P) VALUE
GENERAL OBLIGATIONS (Continued)
$ 2,520,000 Federal Way School District No. 210, King County, Washington Unlimited
Tax General Obligation and Refunding Bonds, Series 1993, 5.25%, 12-1-2003 Aaa $ 2,633,450
2,025,000 County of DuPage, Illinois General Obligation Refunding Bonds (Alternate
Rev. Source - Stormwater Project), 5.10%, 1-1-2004 Aaa 2,095,612
2,000,000 Indianapolis, Indiana Local Public Improvement Bond Bank, Series 1993A
Bonds, 5.25%, 1-10-2004 Aaa 2,082,640
2,100,000 Cherokee County School Systems, Georgia General Obligation School
Series 1993, 4.90%, 2-1-2004 A1 2,153,865
2,300,000 Osseo Area Schools, Minnesota, General Obligation Refunding Bonds,
Series 1993, 4.60%, 2-1-2004 A1 2,324,518
2,300,000 Indianapolis, Indiana Local Public Improvement Bond Bank Refunding
Bonds, Series 1993 B, 4.70%, 2-15-2004 Aaa 2,322,080
1,600,000 County of Buncombe, North Carolina Refunding Bonds, Series 1993,
5.10%, 3-1-2004 Aa2 1,663,296
1,050,000 Oklahoma City, Oklahoma General Obligation Bonds, Series 1993, 5.25%,
5-1-2004 Aa2 1,093,176
2,000,000 Davis County School District, Davis County, Utah General Obligation
Refunding Bonds, Series 1993A, 4.50%, 6-1-2004 Aaa 2,007,840
2,000,000 Alachua County School District, Alachua County, Florida General
Obligation Refunding Bonds, Series 1994, 4.50%, 7-1-2004 Aaa 2,015,820
2,000,000 Deer Valley Unified School District No. 97 of Maricopa County, Arizona
School Improvement Bonds, Project of 1992, Series A (1993), 5.125%,
7-1-2004 Aaa 2,085,660
1,205,000 DeKalb County School District, Georgia General Obligation Refunding
Bonds, Series 1993, 5.10%, 7-1-2004 Aa 1,252,091
1,000,000 Maricopa County, Arizona Unified School District No. 69, Paradise Valley
School Improvement Bonds, Ser. 1990A, 7.10%, 7-1-2004 A1 1,150,320
1,540,000 Joint School District No. 2, Ada and Canyon Counties, Idaho, General
Obligation School Bonds, Series 1994, 5.00%, 7-30-2004 Aa 1,597,381
3,215,000 State of Minnesota General Obligation State Refunding Bonds, 5.125%,
8-1-2004 Aaa 3,332,476
2,000,000 Harris County, Texas Road and Refunding Bonds, Series 1993, 4.70%,
10-1-2004 Aa2 2,035,040
2,000,000 City of Seattle, Washington Unlimited Tax General Obligation Refunding
Bonds, 1993, 4.80%, 12-1-2004 Aa1 2,034,740
1,800,000 Nashville and Davidson County, Tennessee General Obligation Refunding
Bonds of 1993, 5.00%, 5-15-2005 Aa2 1,858,842
1,625,000 Charleston County, South Carolina General Obligation Bonds of 1994
(ULT), 5.40%, 6-1-2005 Aa3 1,721,606
1,100,000 Municipality of Anchorage, Alaska 1994 General Obligation School Bonds,
5.40%, 7-1-2005 Aaa 1,159,444
2,000,000 Oklahoma City, Oklahoma General Obligation Refunding Bonds, Series
1993, 5.30%, 8-1-2005 Aa2 2,108,120
1,600,000 Natrona County, Wyoming School District No. 1 General Obligation
Bonds, Ser. 1994, 5.45%, 7-1-2006 Aaa 1,677,488
2,340,000 City of Phoenix, Arizona General Obligation Refunding Bonds, Ser. 1993 A,
5.30%, 7-1-2006 Aa1 2,472,140
2,125,000 Southwest Allen, Indiana High School Building Corp., 1st Mortgage
Refunding Bonds, Series 1996B, 4.85%, 7-15-2006 Aaa 2,154,835
2,000,000 State of California Various Purpose General Obligation Bonds, 6.00%,
10-1-2006 A1 2,218,360
8
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
RATING
PRINCIPAL (MOODY'S
AMOUNT ISSUER OR S & P) VALUE
GENERAL OBLIGATIONS (Continued)
$ 3,215,000 Forsyth County School District, Georgia, General Obligation Bonds, Series
1995, 5.05%, 7-1-2007 Aaa $ 3,323,571
2,000,000 Arapahoe County School District #6, Colorado, Littleton Public Schools
General Obligation Improvement Bonds, Series 1995A, 5.00%, 12-1-2007 Aa 2,066,860
2,780,000 Salt Lake County, Utah General Obligation Jail Bonds, Series 1995, 5.00%,
12-15-2007 Aaa 2,865,374
2,355,000 Carrollton-Farmers Branch Independent School District (Dallas and
Denton Counties, Texas) School Building Unlimited Tax Bonds, Series
1996, 5.20%, 2-15-2008 Aaa 2,423,978
2,000,000 State of Wisconsin General Obligation Bonds of 1995, Series A, 6.00%,
5-1-2008 Aa2 2,154,900
2,000,000 State of Florida, State Board of Education, Public Education Capital Outlay
Refunding Bonds, 1995 Series C, 5.125%, 6-1-2008 Aa2 2,059,060
1,000,000 Maricopa County, Arizona Unified School District No. 69, Paradise Valley
School Improvement Bonds, Ser. 1994A, 7.10%, 7-1-2008 A1 1,196,610
1,700,000 State of South Carolina General Obligation State Highway Bonds, Series
1995, 5.10%, 8-1-2008 Aaa 1,760,316
3,000,000 State of Texas Public Finance Authority General Obligation Refunding
Bonds, Series 1996B, 5.40%, 10-1-2008 Aa2 3,145,950
4,000,000 County of Wake, North Carolina, General Obligation School Bonds,
Series 1997, 4.90%, 3-1-2009 Aaa 4,049,480
1,200,000 Maricopa County, Arizona Unified School District No. 69, Paradise Valley
School Improvement Bonds, Ser. 1994A, 7.00%, 7-1-2009 A1 1,431,444
3,590,000 State of Georgia, General Obligation Bonds, 1996 C, 6.25%, 8-1-2009 Aaa 4,075,117
1,700,000 State of South Carolina General Obligation State Highway Bonds, Series
1995, 5.25%, 8-1-2009 Aaa 1,766,572
4,000,000 City and County of Honolulu, Hawaii, General Obligation Bonds,
Series 1996A, 5.40%, 9-1-2009 Aaa 4,168,840
4,000,000 State of Illinois, General Obligation Bonds, Series September 1996,
5.45%, 9-1-2009 Aaa 4,185,400
4,250,000 Mesa Unified School District No. 4 of Maricopa County, Arizona,
School Improvement Bonds, Project of 1995, Series D (1997),
4.75%, 7-1-2010 Aaa 4,190,415
2,500,000 Maricopa County, Arizona Unified School District No. 69, Paradise Valley
School Improvement Bonds, Ser. 1994A, 7.00%, 7-1-2010 A1 2,989,000
2,500,000 State of Wisconsin General Obligation Refunding Bonds of 1993, Ser. 2,
5.125%, 11-1-2010 Aa2 2,565,375
2,540,000 Mesa County Valley School District No. 51, County of Mesa, State of Colorado,
General Obligation Bonds, Series 1996, 5.30%, 12-1-2010 Aaa 2,620,035
3,000,000 State of Hawaii General Obligation Bonds of 1992, Series BW, 6.375%, 3-1-2011 Aa3 3,421,290
5,000,000 State of Louisiana, General Obligation Bonds, Series 1997A, 5.375%, 4-15-2011 Aaa 5,156,600
3,800,000 Northville Public Schools, Michigan, 1997 Sch. Bldg. & Site & Ref., 5.10%,
5-1-2011 Aaa 3,810,564
2,000,000 Washington and Clackamas Counties School District #23J (Tigard-Tualatin),
Oregon, General Obligation Bonds, Series 1995, 5.55%, 6-1-2011 A1 2,065,700
2,000,000 State of Georgia, General Obligation Bonds, Series 1995C, 5.70%, 7-1-2011 Aaa 2,161,500
1,125,000 The State of Delaware General Obligation Bonds, Series 1994B, 6.00%,12-1-2011 Aa1 1,199,756
3,000,000 State of Georgia General Obligation Bonds, Series 1995B, 5.75%, 3-1-2012 Aaa 3,249,600
3,000,000 State of Georgia, General Obligation Bonds, 1997A, 6.25%, 4-1-2012 Aaa 3,403,620
5,000,000 State of Ohio, Full Faith & Credit General Obligation Infrastructure
Improvement Bonds, Series 1997, 5.35%, 8-1-2012 Aa1 5,153,100
4,500,000 State of Washington General Obligation Bonds, Series 1993A, 5.75%, 10-1-2012 Aa1 4,865,175
1,125,000 The State of Delaware General Obligation Bonds, Series 1994B, 6.00%, 12-1-2012 Aa1 1,205,280
--------------
9 197,967,329
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
RATING
PRINCIPAL (MOODY'S
AMOUNT ISSUER OR S & P) VALUE
MUNICIPAL REVENUE (19.2%):
$ 2,000,000 City of St. Petersburg, Florida Public Utility Refunding
Rev. Bonds, Ser. 1991, 6.10%, 10-1-1998 Aa $ 2,037,380
3,000,000 City of Colorado Springs, Colorado Utilities System Refunding Rev., Ser
1991A, 6.10%, 11-15-1998 Aa2 3,063,870
1,445,000 San Antonio, Texas Water System Rev. Refunding Bonds, Ser. 1992, 5.80%,
5-15-1999 Aaa 1,481,747
1,250,000 Washington Public Power Supply System Nuclear Project No.3, Refunding
Rev. Bonds, Ser. 1991A, 6.25%, 7-1-2000 Aa1 1,310,800
1,250,000 State of New York Power Authority General Purpose Bonds, Ser. Z, 6.00%,
1-1-2001 Aa2 1,316,875
1,400,000 San Diego County Water Authority Water Rev. Certificates of Participation,
Ser. 1991A, 6.00%, 5-1-2001 Aa 1,482,432
2,000,000 Nashville and Davidson County, Tennessee Electric System Rev. Bonds,
1992 Series B, 5.50%, 5-15-2002 Aa 2,100,760
1,000,000 Washington Public Power Supply System Nuclear Project No.1, Rev. Refunding
Bonds, Ser. 199OC, 7.70%, 7-1-2002 Aa1 1,133,050
1,080,000 Charleston, South Carolina Waterworks and Sewer Systems Rev. Refunding Bonds,
Ser. 1986A, 6.90%, 1-1-2003 A1 1,098,878
2,000,000 City of Des Moines, Iowa Sewer Rev. Bonds, Ser. 1992D, 6.00%, 6-1-2003 Aaa 2,130,540
2,500,000 City of Albuquerque, New Mexico Joint Water and Sewer Refunding Rev. Bonds,
Ser. 1990B, 7.00%, 7-1-2003 Aa3 2,715,300
2,000,000 Washington Public Power Supply System, Nuclear Project No.3 Refunding
Revenue Bonds, Series 1993C, 4.80%, 7-1-2003 Aa1 2,026,360
2,000,000 City of Lincoln, Nebraska, Water Revenue and Refunding Bonds, Series 1993,
4.90%, 8-15-2003 Aa2 2,056,060
2,850,000 City of Lincoln, Nebraska, Electric System Revenue Refunding Bonds,
1993 Series A, 4.70%, 9-1-2003 Aa 2,900,189
1,500,000 Nashville and Davidson County, Tennessee Water and Sewer Revenue
Refunding Bonds, Series 1993, 4.90%, 1-1-2004 Aaa 1,540,470
1,710,000 Southern Minnesota Municipal Power Agency, Power Supply System
Revenue Bonds, Series 1993 B, 4.60%, 1-1-2004 A2 1,708,136
1,500,000 Municipal Electric Authority of Georgia General Power Rev. Bonds,
1993A Series, 5.00%, 1-1-2004 A3 1,529,925
2,000,000 City of Dallas, Texas Waterworks and Sewer System Rev. Refunding Bonds,
Series 1993, 4.90%, 4-1-2004 Aa2 2,042,300
2,045,000 City of Iowa City, Johnson County, Iowa Sewer Rev. Bonds, 5.875%, 7-1-2004 Aaa 2,165,287
2,000,000 City of Jackson, Mississippi Water and Sewer System Rev. Refunding Bonds,
Series 1993-A, 4.85%, 9-1-2004 Aaa 2,046,160
1,685,000 Hampton Roads Sanitation District, Virginia Wastewater Refunding and
Capital Improvement Revenue Bonds, Series 1993, 4.70%, 10-1-2004 Aa 1,714,521
3,000,000 City of Los Angeles Department of Water and Power, Electric Plant
Refunding Revenue Bonds, Second Issue of 1993, 4.80%, 11-15-2004 Aa3 3,071,310
2,200,000 The Water Works and Sewer Board, Birmingham, Alabama Water and
Sewer Revenue Bonds, Series 1994, 4.75%, 1-1-2005 Aa 2,231,680
1,500,000 Omaha, Nebraska Public Power District Electric System Rev. Bonds, 1993,
Series B, 5.10%, 2-1-2005 Aa2 1,557,405
1,325,000 Winston-Salem, North Carolina Water & Sewer System Revenue Bonds,
Series 1995B, 5.00%, 6-1-2007 Aa2 1,365,452
10
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
RATING
PRINCIPAL (MOODY'S
AMOUNT ISSUER OR S & P) VALUE
MUNICIPAL REVENUE (Continued)
$ 2,830,000 Sacramento County, California Sanitary District Financing Authority
Revenue Bonds, 1995, 5.00%, 12-1-2007 Aa3 $ 2,922,286
4,500,000 Nashville and Davidson County, Tennessee Water & Sewer Revenue
Refunding Bonds, Series 1996, 5.25%, 1-1-2008 Aaa 4,711,680
1,665,000 Winston-Salem, North Carolina Water & Sewer System Revenue Bonds,
Series 1995B, 5.10%, 6-1-2008 Aa2 1,714,068
1,500,000 Sacramento County, California Sanitary District Financing Authority
Revenue Bonds, 1995, 5.00%, 12-1-2008 Aa3 1,534,395
4,000,000 City of Portland, Oregon, Sewer System Revenue Refunding Bonds,
1997 Series A, 5.00%, 6-1-2011 Aaa 4,012,000
1,840,000 City of Dallas, Texas Waterworks and Sewer System Revenue Bonds, Series
1994A, 6.375%, 10-1-2012 Aa2 1,972,958
--------------
64,694,274
INDUSTRIAL REVENUE - UTILITIES (0.9%):
3,000,000 Becker, Minnesota Pollution Control Rev. Refunding Bonds, Ser 1989A,
6.80%, 4-1-2007 (Northern States Power Co. - Sherburne Cnty. Gen. Sta. Units
1 & 2 Proj.) A2 3,155,730
--------------
Total long-term municipal bonds (cost: $308,098,819) 324,439,303
SHORT-TERM INVESTMENTS (2.8%):
6,000,000 U.S. Treasury bills, 4.92% to 5.19% effective yield, due December, 1997 to
February, 1998 5,963,320
3,300,000 General Motors Acceptance Corp., 5.60%, due December, 1997 3,301,027
--------------
Total short-term investments (cost: $9,263,335) 9,264,347
--------------
TOTAL INVESTMENTS (99.2%) (cost: $317,362,154) 333,703,650
CASH AND OTHER ASSETS, LESS LIABILITIES (0.8%) 2,658,979
--------------
NET ASSETS (100.0%) $ 336,362,629
==============
</TABLE>
Note: (a) At November 30, 1997, net unrealized appreciation of $16,341,496
consisted entirely of gross unrealized appreciation based on
cost of $317,362,154 for federal income tax purposes.
(b) Ratings are unaudited. NR denotes no rating available.
11
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments, at value (cost $317,362,154) $ 333,703,650
Cash 338,833
Receivable for:
Interest $ 5,508,590
Shares of the Fund sold 70,608
Sundry 5,316 5,584,514
-------------
Prepaid expenses 15,773
-------------
Total assets 339,642,770
LIABILITIES AND NET ASSETS
Payable for:
Dividends to shareowners 2,778,489
Shares of the Fund redeemed 384,783
Other accounts payable (including $106,948 to Manager) 116,869
-------------
Total liabilities 3,280,141
-------------
Net assets applicable to 39,893,402 shares outstanding
of $1.00 par value common stock (100,000,000
shares authorized) $ 336,362,629
=============
Net asset value, offering price and redemption
price per share $ 8.43
=============
ANALYSIS OF NET ASSETS
Excess of amounts received from sales of shares
over amounts paid on redemptions of shares
on account of capital $ 320,021,133
Net unrealized appreciation of investments 16,341,496
-------------
Net assets applicable to shares outstanding $ 336,362,629
=============
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
STATEMENTS OF OPERATIONS
Year ended November 30,
1997 1996
INVESTMENT INCOME:
Tax-exempt interest $ 18,341,212 17,621,142
Taxable interest 450,856 735,320
--------------------------
Total investment income 18,792,068 18,356,462
EXPENSES:
Investment advisory and management fees 400,859 385,258
Audit fees 22,724 21,106
Legal fees 1,984 3,006
Fidelity bond expense 4,158 4,433
Directors' fees 3,300 3,000
Reports to shareowners 3,204 5,141
Securities evaluation fees 18,314 19,874
Franchise taxes 17,859 16,602
Custodian fees 13,387 24,936
Other 17,873 18,775
--------------------------
Total expenses 503,662 502,131
Less: Custodian fees paid indirectly - 18,709
--------------------------
Net expenses 503,662 483,422
--------------------------
Net investment income 18,288,406 17,873,040
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments - 121,825
Change in net unrealized appreciation (222,358) (1,805,995)
--------------------------
Net realized and unrealized gain on investments (222,358) (1,684,170)
--------------------------
Net change in net assets resulting from operations $ 18,066,048 16,188,870
==========================
See accompanying notes to financial statements
13
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30,
1997 1996
From operations:
Net investment income $ 18,288,406 17,873,040
Net realized gain on sales of investments - 121,825
Change in net unrealized appreciation (222,358) (1,805,995)
--------------------------
Net change in net assets resulting from operations 18,066,048 16,188,870
Dividends to shareowners from:
Net investment income (per share $.47
in 1997, and $.48 in 1996) (18,288,406) (17,873,040)
Net realized gain (per share $.003 in 1997
and $.006 in 1996) (121,825) (214,926)
--------------------------
Total distributions to shareowners (18,410,231) (18,087,966)
From Fund share transactions:
Proceeds from shares sold 27,490,904 27,900,088
Reinvestment of ordinary income dividends
and capital gain distributions 14,256,886 13,618,482
--------------------------
41,747,790 41,518,570
Less payments for shares redeemed 26,190,599 25,886,170
--------------------------
Net increase in net assets from Fund
share transactions 15,557,191 15,632,400
--------------------------
Total increase in net assets 15,213,008 13,733,304
--------------------------
Net assets:
Beginning of year 321,149,621 307,416,317
--------------------------
End of year $336,362,629 321,149,621
==========================
See accompanying notes to financial statements
14
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. OBJECTIVE
The investment objective of the State Farm Municipal Bond Fund, Inc.
(the Fund) is to provide its shareowners with as high a rate of income exempt
from federal income taxes as is consistent with prudent investment management.
The Fund seeks to achieve its investment objective through investment
primarily in a diversified portfolio of long-term Municipal Bonds, including
industrial revenue bonds.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITIES 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 INTEREST INCOME -
Security transactions are accounted for on the trade date (date the
order to buy or sell is executed). Interest income is recorded on the accrual
basis; premiums and original issue discounts on tax-exempt securities are
amortized. Realized gains and losses from security transactions are reported
on an identified cost basis.
SECURITIES PURCHASED ON A `WHEN-ISSUED' BASIS -
The Fund may purchase municipal bonds on a `when-issued' basis.
Delivery and payment for these securities may be a month or more after the
purchase date, during which time such securities are subject to market
fluctuations. It is possible that the securities will never be issued and the
commitment cancelled.
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 1:00 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.
Net realized gain on sales of investments, if any, are distributed annually
after the close of the Fund's fiscal year. Distributions of net realized gains
payable to its shareowners are recorded by the Fund on the ex-dividend date.
FEDERAL INCOME TAXES -
It is the Fund's policy to comply with the special provisions of the
Internal Revenue Code available to investment companies and, in the manner
provided therein, to distribute all of its 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.
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 ($12,539) 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.
15
<PAGE>
STATE FARM MUNICIPAL BOND 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 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 $400,859
for 1997 and $385,258 for 1996. The Fund pays no fees for transfer agent
services provided by the Manager. 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 $3,300 for 1997 and $3,000 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 $ 28,925,145 30,463,407
Proceeds from sales and maturities 17,572,918 17,540,000
============================
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 3,283,948 3,324,581
Shares issued in reinvestment of ordinary
income dividends and capital gain distributions 1,706,790 1,626,301
------------------------
4,990,738 4,950,882
Less shares redeemed 3,132,346 3,088,643
------------------------
Net increase in shares outstanding 1,858,392 1,862,239
========================
16
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
<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 $ 8.44 8.50 7.88 8.59 8.34 8.15 7.98 7.96 7.76 7.58
Income from Investment
----------------------
Operations
----------
Net investment Income .47 .48 .48 .48 .50 .53 .54 .58 .58 .57
Net gain or losses on
securities (both realized
and unrealized) (.01) (.06) .62 (.69) .25 .19 .17 .02 .20 .18
-----------------------------------------------------------------------
Total from investment
operations .46 .42 1.10 (.21) .75 .72 .71 .60 .78 .75
Less Distributions
------------------
Net investment income (.47) (.48) (.48) (.48) (.50) (.53) (.54) (.58) (.58) (.57)
Capital gain (a) - - - (.02) - - - - - -
-----------------------------------------------------------------------
Total distributions (.47) (.48) (.48) (.50) (.50) (.53) (.54) (.58) (.58) (.57)
Net asset value, end of period $ 8.43 8.44 8.50 7.88 8.59 8.34 8.15 7.98 7.96 7.76
=======================================================================
Total Return 5.68% 5.21% 14.25% (2.55)% 9.17% 9.05% 9.17% 7.78% 10.44% 10.14%
- ------------
Ratios/Supplemental Data
- ------------------------
Net assets, end of year
(millions) $336.4 321.1 307.4 269.9 276.4 211.3 167.2 132.8 110.0 85.2
Ratio of expenses to
average net assets .15% .16% .17%(b) .16% .18% .19% .21% .23% .25% .29%
Ratio of net investment
income to average
net assets 5.61% 5.76% 5.80% 5.80% 5.84% 6.36% 6.75% 7.30% 7.42% 7.36%
Portfolio turnover rate 6% 6% 7% 8% 5% 4% 2% 8% 7% 2%
Number of shares
outstanding at end
of year (millions) 39.9 38.0 36.2 34.3 32.2 25.3 20.5 16.6 13.8 11.0
</TABLE>
Notes: (a) Distributions representing less than $.01 were made in 1997, 1996,
1993 and 1992.
(b) The ratio based on net custodian expenses would have been .16% in
1995.
STATE FARM MUNICIPAL BOND FUND, INC.
TAX INFORMATION
The Fund paid ordinary income dividends in March, June, September and
December 1997. Of those dividends, 98% in March, 98% in June, 97% in September
and 98% in December are designated as exempt-interest dividends. The taxable
portion of 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 taxable portion of the Fund's distributions are eligible for the dividend
received deduction for corporations.
NOTE: The taxable portion of the dividends distribution 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. The tax- exempt status of dividends derived from interest
on municipal bonds for federal income tax purposes does not necessarily
result in exemption from any state or local income taxes or other
taxes.
17
<PAGE>
(This page intentionally left blank.)
18
<PAGE>
(This page intentionally left blank.)
19
<PAGE>
ANNUAL
REPORT
November 30, 1997
STATE
FARM
MUNICIPAL
BOND
FUND, INC.
ONE STATE FARM PLAZA
BLOOMINGTON, ILLINOIS 61710
Telephone (309) 766-2029
(800) 447-0740
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000205926
<NAME> STATE FARM MUNICIPAL BOND FUND, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 317362154
<INVESTMENTS-AT-VALUE> 333703650
<RECEIVABLES> 5584514
<ASSETS-OTHER> 354606
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 339642770
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3280141
<TOTAL-LIABILITIES> 3280141
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 320021133
<SHARES-COMMON-STOCK> 39893402
<SHARES-COMMON-PRIOR> 38035010
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16341496
<NET-ASSETS> 336362629
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18792068
<OTHER-INCOME> 0
<EXPENSES-NET> 503662
<NET-INVESTMENT-INCOME> 18288406
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (222358)
<NET-CHANGE-FROM-OPS> 18066048
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (18288406)<F1>
<DISTRIBUTIONS-OF-GAINS> (121825)<F2>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3283948
<NUMBER-OF-SHARES-REDEEMED> 3132346
<SHARES-REINVESTED> 1706790
<NET-CHANGE-IN-ASSETS> 15213008
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 121825
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 400859
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 503662
<AVERAGE-NET-ASSETS> 325887586
<PER-SHARE-NAV-BEGIN> 8.44
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> (.01)
<PER-SHARE-DIVIDEND> (.47)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.43
<EXPENSE-RATIO> .15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Per share $.47
<F2>Per share $.003
</FN>
</TABLE>
