SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
[AMENDMENT NO. ]
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
STATE FARM MUNICIPAL BOND FUND, INC.
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(Name of Registrant as Specified in Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:________________________________________________
2) Form Schedule or Registration Statement No.:___________________________
3) Filing Party:__________________________________________________________
4) Date Filed:____________________________________________________________
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STATE FARM MUNICIPAL BOND FUND, INC.
ONE STATE FARM PLAZA - BLOOMINGTON, ILLINOIS 61710
NOTICE OF SPECIAL MEETING OF SHAREOWNERS
MARCH 13, 1998
To the Shareowners of
STATE FARM MUNICIPAL BOND FUND, INC.:
Notice is hereby given that a Special Meeting of Shareowners of State
Farm Municipal Bond Fund, Inc., a Maryland corporation, will be held at One
State Farm Plaza, Bloomington, Illinois, on Friday, March 13, 1998, at 10:00
a.m. for the following purpose:
(1) to elect a Board of Directors;
(2) to approve or disapprove a proposed bylaw amendment that would
permit the board of directors to adopt further amendments
without shareowner approval; and
(3) to transact such other business as may properly come before
the meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on January 30,
1998 as the record date for determination of shareowners entitled to notice of
and to vote at such meeting and any adjournment thereof.
PLEASE PROMPTLY RETURN YOUR PROXY. It may be revoked by a later proxy
or you may vote your shares in person if you attend the meeting. No postage is
required if mailed in the United States.
Bloomington, Illinois By order of the Board of Directors
February 6, 1998 David R. Grimes
Secretary
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
ONE STATE FARM PLAZA, BLOOMINGTON, ILLINOIS 61710
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation
by the Board of Directors of State Farm Municipal Bond Fund, Inc., hereinafter
called the "Fund", of proxies to be voted at the Special Meeting of
Shareowners of the Fund to be held on Friday, March 13, 1998, and at any and
all adjournments of such meeting. If the enclosed form of proxy is executed
and returned, it will be voted at the meeting in accordance with the
instructions thereon, if any, and if no specification is made the proxy will
be voted for the election of each nominee for director and in favor of
proposal No. 2. Shareowners who execute proxies may revoke them at any time
before they are voted, either by writing the Fund or in person at the time of
the meeting. This proxy statement is first being mailed on or about February
6, 1998. Those persons who were shareowners of record at the close of business
on January 30, 1998, will be entitled to one vote for each share held. At
January 30, 1998, there were issued and outstanding 40,223,501 shares of
common stock of the Fund.
PROPOSAL NO. 1: TO ELECT A BOARD OF DIRECTORS.
It is intended that the proxies will be voted for the election of the
six nominees listed below as Directors of the Fund to serve until the next
meeting of shareowners called for this purpose and until their successors
shall be elected and qualified. The nominees were selected by the Board of
Directors, which does not have a separate nominating committee. In case any
nominee shall be unable to stand for election by virtue of an unexpected
occurrence, the proxies will be voted for such other person as shall be
determined by the persons acting under the proxies in their discretion.
NOMINEES FOR DIRECTORS
EDWARD B. RUST, JR.*+ - age 47
One State Farm Plaza, Bloomington, Illinois 61710
President and Director of the Fund since 1990
President and Chairman of the Board, State Farm Mutual Automobile
Insurance Company; President and Director, State Farm Investment Management
Corp. and, since 1997, State Farm VP Management Corp.
ROGER S. JOSLIN*+ - age 61
One State Farm Plaza, Bloomington, Illinois 61710
Vice President and Treasurer since 1977, and Director since 1985 of the Fund
Director, Sr. 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.
and, since 1997, State Farm VP Management Corp
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ALBERT H. HOOPES + - age 82
120 S. East Street, #350, Bloomington, Illinois 61701
Director of the Fund since 1977
Attorney at Law.
DAVIS U. MERWIN + - age 69
P.O. Box 8, Bloomington, Illinois 61702-0008
Director of the Fund since 1977
Private Investor, Vice Chairman of the Board, Bloomington Broadcasting
Company.
JAMES A. SHIRK + - age 53
P.O. Box 1549, Bloomington, Illinois 61702-1549
Director of the Fund since 1987
Director & President, Beer Nuts, Inc.
THOMAS M. MENGLER - age 47
202 Law Building, 504 East Pennsylvania Avenue, Champaign, Illinois 61820
Dean, University of Illinois College of Law since August, 1993;
Assistant Dean prior to August, 1993.
_____________________
* Nominee is an "interested person" of the Fund or its investment
adviser, as defined in the Investment Company Act of 1940, as an officer of
the Fund and as an officer and director of the investment adviser.
+ Nominees are also directors, and in the cases of Mr. Rust and Mr.
Joslin, are officers, of State Farm Growth Fund, Inc., State Farm Balanced
Fund, Inc. and State Farm Interim Fund, Inc. Nominees are also trustees, and
in the cases of Mr. Rust and Mr. Joslin, are officers, of the State Farm
Variable Product Trust.
The only compensation paid to the officers and directors of the Fund
for their services as such consists of directors' attendance fees paid to
directors other than Mr. Rust or Mr. Joslin. These directors received a fee of
$200 for each meeting of the Board of Directors attended during the first
quarter of 1997, and $300 for each meeting attended since the second quarter
of 1997. Such fees totalled $3,300 during the year ended November 30, 1997 for
the board meetings held during the year. The Board of Directors does not have
a separate compensation committee. During the fiscal year of the Fund ended
November 30, 1997, there were four meetings of the Board of Directors. All of
the directors attended every board meeting.
Beer Nuts, Inc., of which Mr. Shirk is a shareholder, director and
president, leases warehouse space to State Farm Mutual Automobile Insurance
Company ("Auto Company") at an annual cost of approximately $60,000.
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The management of Auto Company believes the terms of such transactions are
competitive with the terms offered by other independent parties for similar
transactions.
The following table provides information concerning the compensation
of each of the Fund's directors for services rendered during the Fund's fiscal
year ended November 30, 1997:
<TABLE>
<CAPTION>
COMPENSATION TABLE
TOTAL
COMPENSATION
AGGREGATE FROM STATE
COMPENSATION FARM FUNDS*
NAME OF PERSON FROM FUND PAID TO DIRECTORS
<S> <C> <C>
Edward B. Rust, Jr. $ -0- $ -0-
Roger S. Joslin $ -0- $ -0-
Albert H. Hoopes $ 1,100 $ 6,600
Davis U. Merwin $ 1,100 $ 6,600
James A. Shirk $ 1,100 $ 6,600
____________________________
</TABLE>
* The State Farm Funds are the Fund, State Farm Growth Fund, Inc., State Farm
Balanced Fund, Inc. and State Farm Interim Fund, Inc.
The following table contains information as of December 31, 1997 on
the number of shares of the Fund as to which each director, all directors and
executive officers as a group, had power to vote or to dispose or to direct
the voting or disposition:
PERCENT OF
NUMBER OF NATURE OF OUTSTANDING
NAME SHARES THE POWER SHARES
Edward B. Rust, Jr. 273,848 + Sole power to vote .680
and dispose of shares
Albert H. Hoopes 178,883 Sole power to vote .444
and dispose of shares
Roger S. Joslin 150,461 + Sole power to vote .374
and dispose of shares
Davis U. Merwin 168,139 Sole power to vote .418
and dispose of shares
James A. Shirk 70,525 Sole power to vote .175
and dispose of shares
Thomas M. Mengler - 0 - - -
All directors and
officers as a group
(12 persons) 862,313 + 2.143
____________________________
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+ Does not include 1,111,273 shares of the Fund owned outright by State
Farm Mutual Automobile Insurance Company, of which Mr. Rust is Chairman of the
Board and President and a member of the investment committee and Mr. Joslin is
Director, Senior Vice President and Treasurer and a member of the investment
committee.
PROPOSAL NO. 2: TO AMEND THE BYLAWS OF THE FUND TO REQUIRE ONLY DIRECTOR
APPROVAL OF CHANGES TO THE BYLAWS.
BACKGROUND. The board of directors has approved, and recommends that
shareowners of the Fund approve, a proposal to amend the bylaws of the Fund to
allow the directors to approve any changes to the bylaws without seeking
shareowner approval. Currently, shareowner approval is required to amend
certain provisions of the Fund's bylaws. If the shareowners vote in favor of
this proposal, the directors intend to adopt changes to section 3.04 of
article III of the bylaws which provides for filling vacancies on the board of
directors and to article VIII which prohibits certain transactions between the
Fund and its officers and directors. No other changes to the bylaws are
currently planned.
In the past, certain state securities authorities required that
various operational and investment restrictions be included in a charter or
bylaw provision which may be amended only by shareowner vote. These state
securities requirements have been eliminated. In addition to containing
requirements formerly required by state authorities, the Fund's bylaws also
contain provisions that essentially restate provisions of law or regulations
applicable to the Fund. The directors believe that the Fund will be able to
respond to changing conditions more rapidly, and without the expense of a
special shareowner meeting, if the directors have the power to amend the
bylaws without shareowner approval.
Current section 11.01 of article XI of the Fund's bylaws allows
amendments to the bylaws by a majority vote of the directors. However, section
11.02 of article XI provides that any amendment which changes or affects
sections 2.06 and 2.07 of article II, section 3.04 of article III, article
VIII and article XI must be approved by vote of a "majority of the outstanding
voting securities" of the Fund, as defined in the Investment Company Act. The
proposed amendment of article XI eliminates the requirement for a shareowner
vote to amend sections 2.06 and 2.07 of article II, section 3.04 of article
III, article VIII and article XI.
Current section 2.06 provides that the holders of a majority of the
stock entitled to vote at a shareowner meeting, who vote in person or are
represented by proxy, constitute a quorum for the transaction of business.
Current section 2.07 provides that when a quorum is present at any meeting, a
majority vote, in person or by proxy, by the holders of the stock having
voting power shall decide any question brought before the meeting, unless a
different vote is required by law, the Fund's charter or the Fund's bylaws.
These provisions are similar to the current default provisions of Maryland
corporation law. The board does not currently intend to make any change to
sections 2.06 or 2.07 of the bylaws.
Current section 3.04 allows the board of directors to fill vacancies
on the board caused by anything other than an increase in the number of
directors, unless immediately thereafter less than two-thirds of the directors
then holding office were elected by the shareowners. In such a situation or if
at any time less than a majority of the directors holding office were elected
by the shareowners, the bylaws require a shareowner meeting to be held within
60 days to fill the existing vacancies. Most of section 3.04 of the bylaws
restates requirements imposed on the Fund by the Investment Company Act of
1940. However, under the Investment Company Act
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<PAGE>
and current Maryland law, a majority of the board of directors, without
shareowner approval, may act to fill even a vacancy resulting from an increase
in the number of directors. If the proposal to amend the bylaws is approved by
the shareowners, the directors intend to amend section 3.04 to give the board
the ability to fill vacancies on the board, including vacancies resulting from
an increase in the number of directors, subject to the limitations imposed by
the Investment Company Act and Maryland law.
Current article VIII contains provisions which prohibit certain
transactions between the Fund and its officers and directors. Section 8.01
prohibits the sale of securities to and purchase of securities from directors
and officers of the Fund except to the extent permitted under the Investment
Company Act or by order or advice of the Securities and Exchange Commission.
The Investment Company Act includes a number of restrictions and prohibitions
on transactions between a mutual fund and its affiliates, including its
officers and directors. Section 8.01 essentially restates one of those
prohibitions. Section 8.02 prohibits the purchase or retention of securities
of any corporation if all of the officers and directors and investment adviser
of the Fund who individually own more than 1/2 percent of the securities of
the corporation collectively own more than 5 percent of such securities. That
section was formerly required by a state securities authority. Section 8.03
prohibits directors and officers from taking a long or short position in the
capital stock of the Fund, except that they may purchase shares of the Fund
for investment purposes at the same price as that available to the public at
the time of the purchase. Section 8.03 essentially restates prohibitions
imposed by the Securities and Exchange Act of 1934 and the Investment Company
Act. If the proposal to amend the bylaws is approved by the shareowners, the
directors intend to amend the bylaws to delete article VIII. However, the
substantive provisions of sections 8.01 and 8.03 would continue to apply to
the Fund even though they would not be included in the bylaws.
AMENDMENT TO THE BYLAWS. If the proposal is approved, article XI of
the Fund's bylaws will be amended as follows: (material to be deleted is
bracketed)
Section 11.01. General. [Except as provided in section 11.02,] 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.
[Section 11.02. Amendment by stockholders only. Sections 2.06 and 2.07
of article II, section 3.04 of article III, article VIII, and article
XI of these bylaws may be altered, amended or repealed only with the
approval of the holders of a "majority of the outstanding voting
securities" of the corporation, as that term is defined in section
2(a)(42) of the Investment Company Act of 1940.]
RECOMMENDATION. The board of directors has concluded that the proposal
will benefit the Fund and its shareowners by increasing the flexibility
available to the board of directors and reducing the circumstances in which
the Fund would be required to incur the expense of a meeting of shareowners.
The directors recommend voting FOR the proposal. Upon shareowner approval, the
directors will adopt the amended bylaw. If the proposal is not approved by
shareowners of the Fund, the bylaws will remain unchanged.
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<PAGE>
OTHER INFORMATION
THE MANAGER. State Farm Investment Management Corp. (the "Manager") is the
Fund's investment adviser and distributor. The Manager is a wholly-owned
subsidiary of State Farm Mutual Automobile Insurance Company. The Manager's
address is One State Farm Plaza, Bloomington, Illinois 61710.
PROXY SOLICITATION; VOTING; ADJOURNMENT
The cost of preparing, printing and mailing this proxy statement, the
accompanying notice and the enclosed proxy, and all the other costs in
connection with solicitation of proxies, will be paid by the Fund. Additional
solicitation may be made by letter, telephone or telegraph by officers of the
Fund, or by officers, agents or employees of the Manager or the State Farm
Insurance Companies. A copy of the Annual Report of the Fund, including
financial statements for the fiscal year ended November 30, 1997, has
previously been mailed to all shareowners who were such on the record date.
THE FUND WILL FURNISH A COPY OF ITS MOST RECENT ANNUAL REPORT TO A SHAREOWNER
UPON REQUEST, WITHOUT CHARGE. TO REQUEST A COPY OF THE ANNUAL REPORT, WRITE TO
THE FUND AT ONE STATE FARM PLAZA, BLOOMINGTON, ILLINOIS 61710, OR CALL
1-800-447-0740.
Management does not intend to present and does not have reason to
believe that others will present any other items of business at the meeting.
However, if other matters are properly presented to the meeting for a vote,
the proxies will be voted upon such matters in accordance with the judgment of
the persons acting under the proxies.
A list of shareowners entitled to be present and vote at the meeting
will be available at the offices of the Fund for inspection by any shareowner
during regular business hours from March 3, 1998 to the date of the meeting.
Proxies are tabulated by the Manager. Under the bylaws of the Fund, a
majority of the shares outstanding on the record date must be present at the
meeting in person or by proxy to constitute a quorum for the transaction of
business. A shareowner who abstains, or whose proxy is signed and returned but
marked to withhold authority, is counted as "present" for purposes of
determining the existence of a quorum. The election of directors is determined
by a plurality of the votes cast, if a quorum is present. Approval of Proposal
2 (amendment of the bylaws) requires the affirmative vote of the lesser of (a)
two-thirds or more of the voting shares of the Fund present at the meeting, if
the holders of more than 50% of the shares are present or represented by
proxy, or (b) more than 50% of the outstanding shares of the Fund. "Broker
non-votes" (proxies from brokers or nominees indicating that such persons have
not received instructions from the beneficial owner or other persons entitled
to vote shares on a particular matter with respect to which the broker or
nominee does not have discretionary power to vote) will be deemed to be
abstentions. An abstention does not have any effect (that is, will not be
counted as a vote "for" or "against") on the vote for a nominee as a director
(provided that a quorum is present). Abstentions have the practical effect of
a "no" vote if the vote on Proposal 2 is determined pursuant to item (a),
above, and have no effect on the outcome of the vote if the vote is determined
under (b).
Any decision to adjourn the meeting would be made by vote of the
shares present at the meeting, in person or by proxy. Proxies would be voted
in favor of adjournment if there were not enough shares present at the meeting
to constitute a quorum. If sufficient shares were present to constitute a
quorum, but insufficient votes had been cast in favor of an item to approve
it, proxies would be voted in favor of adjournment only if the board of
directors determined that adjournment and additional solicitation was
reasonable and in the best interest of the shareowners of the Fund, taking
into account the nature of the proposal, the percentage of votes actually
cast, the percentage of negative votes, the nature of any further solicitation
that might be made and the information provided to shareowners about the
reasons for additional solicitation.
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<PAGE>
SHAREOWNER PROPOSALS
The Fund does not intend to hold regular annual or special meetings of
shareowners after the meeting to which this proxy statement relates unless
required by the Investment Company Act. Therefore, the date of the next
shareowners meeting, if any, is not known.
PLEASE PROMPTLY RETURN YOUR PROXY. It may be revoked by a later proxy
or you may vote your shares in person if you attend. If a quorum is not
present, the meeting will have to be adjourned, thereby subjecting the Fund to
additional expense. No postage is required if your proxy is mailed in the
United States.
Bloomington, Illinois By order of the Board of Directors
February 6, 1998 David R. Grimes
Secretary
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<PAGE>
STATE FARM MUNICIPAL FUND INC. PROXY THIS PROXY IS SOLICITED ON
SPECIAL MEETING OF SHAREOWNERS BEHALF OF THE BOARD OF DIRECTORS
March 13, 1998
Edward B. Rust, Jr. and Roger S. Joslin and each of them, with full power of
substitution in each, are hereby authorized to represent and vote as indicated
the stock of the undersigned at the Special Meeting of Shareholders or any
adjournment thereof:
account number: shares outstanding:
Please sign as your name appears above. If shares are held jointly, EACH
owner must sign. If signing for an estate, trust or corporation, title or
capacity should be stated.
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Date Owners signature Joint owners signature
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE PROXY WILL BE VOTED FOR THE ELECTION OF EACH
DIRECTOR AND IN FAVOR OF ALL PROPOSALS.
The management recommends a vote for each nominee and all proposals. Please
indicate your vote by marking the appropriate box:
1. The election of a Board of Directors - for or not
for each of the nominees listed below.
FOR NOT FOR ABSTAIN
Edward B. Rust, Jr. [ ] [ ]
Albert H. Hoopes [ ] [ ]
Roger S. Joslin [ ] [ ]
Davis U. Merwin [ ] [ ]
James A. Shirk [ ] [ ]
Thomas M. Mengler [ ] [ ]
2.The proposed amendment to the
bylaws [ ] [ ] [ ]
3.In their discretion upon any
other matter that may properly
come before the meeting and any
adjournment thereof.
