Registration Nos.
Securities Act - 2-27058
Investment Company Act - 811-1519
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 40
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 18
State Farm Growth Fund, Inc.
____________________________________________________________________
(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 (309) 766-2029
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
____________________________________________________________________
(Names and addresses of agents for service)
__________
X It is proposed that this filing will become effective on
April 1, 1997 pursuant to Rule 485 (b)
__________
Amending the revised prospectus, Statement of Additional Information and Part C
and filing Exhibits.
Registrant has elected to register an indefinite number of securities pursuant
to Rule 24f-2. On January 23, 1997, Registrant filed its Rule 24f-2 Notice for
the year ended November 30, 1996.
Total Number of Pages ________
(including attachments and exhibits)
Exhibit Index is on Page _______
<PAGE>
STATE FARM GROWTH 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), (b), (c) . Management of the Fund; Fee Table
5 (d), (e), (f) . Management of the Fund; Financial Highlights;
Fee Table
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
7 (b) . . . . . . Determination of Net Asset Value;
Purchase of Fund Shares
<PAGE>
STATE FARM GROWTH FUND, INC.
----------------------------
CROSS REFERENCE SHEET
Pursuant to Rule 404(a) of Regulation C
(Continued)
Item Number Location or Caption*
- ----------- --------------------
7 (c) . . . . . . Not Applicable
7 (d) . . . . . . Purchase of Fund Shares
7 (e), (f). . . . 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). . . . Directors and Officers
14 (c) . . . . . . Not Applicable
15 (a) . . . . . . Not Applicable
15 (b) . . . . . . General Information - Ownership of Shares
15 (c) . . . . . . Directors and Officers
<PAGE>
STATE FARM GROWTH FUND, INC.
----------------------------
CROSS REFERENCE SHEET
Pursuant to Rule 404(a) of Regulation C
(Continued)
Item Number Location or Caption*
- ----------- --------------------
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 GROWTH 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, 1997
STATE FARM GROWTH 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 long-term growth of capital and
income. The Fund seeks to achieve this objective by investing most of
its assets in income producing equity-type securities that are believed
collectively to have potential for long-term growth of capital and
income.
Shares of the Fund are offered at their net asset value. There is no
sales charge.
-------------------------------------------------
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, 1997 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 1996 fiscal year.
Expenses are expressed as a percentage of fiscal 1996 average net
assets.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES ANNUAL FUND OPERATING EXPENSES
Sales load "charge" on purchases NONE Management fee 0.11%
Sales load "charge" on reinvested dividends NONE Distribution ("12b-1") fees NONE
Redemption fees NONE Other expenses 0.02%
Exchange fees NONE
TOTAL FUND EXPENSES 0.13%
</TABLE>
Example
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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 .......................................................... ------ ------- ------- --------
$1 $4 $7 $17
</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.
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, 1996, which may be obtained from the Fund upon
request at no cost.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 29.40 22.63 22.21 23.05 20.33 16.77 16.90 13.34 11.96 13.50
Income from Investment Operations
---------------------------------
Net investment income .63 .50 .44 .45 .43 .42 .47 .41 .43 .38
Net gain or loss on securities (both
realized and unrealized) 5.17 6.97 .43 (.60) 2.70 4.32 .26 3.57 1.62 (.61)
-------------------------------------------------------------------------------------
Total from investment operations 5.80 7.47 .87 (.15) 3.13 4.74 .73 3.98 2.05 (.23)
Less Distributions
------------------
Dividends (from net investment income) (.53) (.52) (.45) (.45) (.41) (.54) (.40) (.42) (.39) (.38)
Distributions (from capital gain) (.12) (.18) -- (.24) -- (.64) (.46) -- (.28) (.93)
-------------------------------------------------------------------------------------
Total distributions (.65) (.70) (.45) (.69) (.41) (1.18) (.86) (.42) (.67) (1.31)
Net asset value, end of period $34.55 29.40 22.63 22.21 23.05 20.33 16.77 16.90 13.34 11.96
=====================================================================================
Total Return 20.09% 33.67% 4.02% (.65%) 15.42% 29.79% 4.27% 30.51% 17.45% (1.83%)
------------
Ratios/Supplemental Data
------------------------
Net assets, end of period (millions) $1,362.9 1,068.6 771.7 725.1 696.1 558.4 414.3 383.0 295.5 253.6
Ratio of expenses to average net assets .13% .14%(a) .14% .14% .16% .19% .21% .21% .24% .26%
Ratio of net investment income to average
net assets 1.88% 1.95% 2.00% 2.05% 1.99% 2.22% 2.84% 2.69% 3.32% 2.75%
Portfolio turnover rate 16% 3% 3% 2% 2% 1% 16% 9% 5% 12%
Number of shares outstanding at end of
period (millions) 39.5 36.4 34.1 32.7 30.2 27.5 24.7 22.7 22.1 21.2
</TABLE>
The average commission rate paid per share on stock transactions for the
year ended November 30, 1996 was $.0599.
Note: (a) The ratio based on net custodian expenses would have been .13%
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 program under the
continuous supervision of experienced investment management. By
combining individual shareowner investments into a pool of assets, the
Fund is able to provide investors a diversified investment portfolio
drawn from a broad cross-section of business. 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
as the common stock portion of an investor's overall investment program.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term growth of capital and
income.
The Fund seeks to achieve its objective by investing most of its assets
in income-producing equity-type securities that are believed
collectively to have potential for long-term growth of capital and
income. The dual objective of capital and income growth is conceived of
on an overall basis of the portfolio as a whole, though not of
individual securities or components of the portfolio, in which
investment might be made wholly or primarily in a belief of favorable
prospects of capital growth or of income growth.
As a general rule, substantially all of the Fund's assets other than
cash and cash equivalents will be invested as described above. At other
times, varying proportions of assets -- though under ordinary conditions
not the greater part -- may be invested in fixed income investments such
as United States Government obligations, in investment grade bonds and
debentures, in preferred stocks, and in foreign securities not publicly
traded in the United States.
The Fund's investment objective as set forth in the opening paragraph of
this section may not be changed without the approval of the shareowners.
However, the investment methods and techniques employed in pursuing the
objective may be changed from time to time without approval of
shareowners.
INVESTMENT RISKS
Risks are inherent in all security investments, including mutual funds.
The value of the Fund's portfolio will fluctuate based on market
conditions. Securities values of smaller companies may fluctuate more
erratically because of the factors which generally affect security
values such as earnings, changes in technology and product markets and
general economic and political conditions. Although the Fund attempts to
reduce its overall exposure to investment and market risks by investing
in securities diversified among both issuers and industries, such
diversification does not eliminate all risks.
Foreign securities may involve more risk (including risk related to
foreign exchange rate fluctuations, tax provisions or expropriation of
assets) than do securities of domestic issuers.
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 its assets (valued at the time of
investment) in the securities of any one issuer, except that it may
invest an aggregate of up to 25% of its assets (valued at the time of
the investment) without subjection to that restriction, and excluding
from such restriction investments in obligations of the U.S. Government;
(2) Purchase more than 10% of the voting securities, more than 10% of
the aggregate long-term debt, or more than 10% of any other class of
security of any issuer;
-3-
<PAGE>
(3) Invest more than 5% of the market value 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.
The policies described in the above paragraph, which cannot be changed
without the approval of a majority of the outstanding shares of the Fund
(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, an eligible investor should complete and sign the
Application furnished with this prospectus and mail it to State Farm
Investment Management Corp. ("Manager") together with either a check
(minimum $50) made payable to State Farm Investment Management Corp., or
a compensation deduction authorization, or both. 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. 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 investments and compensation
deduction changes by letter 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 judgement 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
purchase shares by compensation deduction. 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 -- A prototype Individual Retirement
Account Plan ("IRA") is available through which investors may invest in
the Fund or certain other State Farm funds. Eligible investors who wish
to establish an IRA may request copies of the plan and related
documents, including a disclosure statement which the Internal Revenue
Service requires to be furnished to individuals who are considering
adopting an IRA, from State Farm
-4-
<PAGE>
Investment Management Corp., One State Farm Plaza, Bloomington, Illinois
61710. The Commerce Bank acts as custodian of the plans. The custodian
currently assesses each IRA account a fee of $1.00 per year.
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.
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, President's 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 26, 1997. 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 difference between the value of
the Fund's assets and liabilities 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, securities
owned for which market quotations are readily available are valued at
market, using as a price the last sale of the day at the close of the
New York Stock Exchange or, if no sale, at the last reported bid price
for the day. 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 on an amortized cost basis. Securities for which
market quotations are not readily available and all other assets are
valued at a fair value as determined by or at the direction of 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 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. 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 mailed to the address of record, or they can redeem
up to the entire value of their uncertificated
-5-
<PAGE>
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. 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.
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
mailed 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
-6-
<PAGE>
be sent to another payee or to another address other than the address of
record.
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, D-3, Bloomington, IL
61710.
REDEMPTION GENERALLY. The Fund generally will 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 mailed or electronically transferred
within seven days after the Fund receives a redemption request, either
written 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 mailing
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; or (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); or (3) on the back of each stock certificate tendered for
redemption; or (4) on the Authorization Form for Telephone Redemption
and Exchange Privileges.
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
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<PAGE>
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
telephone 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 share 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. 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. The Fund has engaged State Farm Investment 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, Paul
Eckley, Steve Miller and James Freytag. Mr. Moser and Mr. Eckley have
been members of the Fund's portfolio management team since 1988. Mr.
Miller became part of the Fund's portfolio management team in 1991. Mr.
Freytag became part of the Fund's portfolio management team in 1994.
Mr. Moser is a Director and a Vice President of the Manager. In addition
to his offices with the Manager, Mr. Moser has also held the following
positions during the past five years: Vice President of the Fund
-8-
<PAGE>
and each of the other State Farm mutual funds; 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.
Mr. Eckley 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. Eckley has also held the following positions
during the past five years: Vice President -- Common Stocks, State Farm
Life Insurance Company, State Farm Mutual Automobile Insurance Company
and State Farm Fire and Casualty Company since 1995; and Investment
Officer for State Farm Life Insurance Company, State Farm Mutual
Automobile Insurance Company and State Farm Fire and Casualty Company
from 1990 through 1995.
Mr. Miller is an Investment Officer of the Manager. In addition to his
office with the Manager, Mr. Miller has also held the following
positions during the past five years: Investment Officer of State Farm
Life Insurance Company, State Farm Mutual Automobile Insurance Company
and State Farm Fire and Casualty Company.
Mr. Freytag is an Investment Officer of the Manager. In addition to his
office with the Manager, Mr. Freytag has also held the following
positions during the past five years: Investment Officer of State Farm
Life Insurance Company, State Farm Mutual Automobile Insurance Company
and State Farm Fire and Casualty Company.
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 distributes to shareowners substantially all net investment
income and any net capital gain realized from sales of the Fund's
portfolio securities.
Dividends are ordinarily paid semi-annually in June and December, and
capital gain distributions, if any, are paid annually in December. All
dividends and capital gain distributions are automatically reinvested in
shares of the Fund on the reinvestment date, except that any shareowner
may elect to receive dividends and distributions in cash, upon signed
written request received by the Manager.
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.
ORGANIZATION AND CAPITAL STOCK
The Fund is a Maryland corporation, organized on December 9, 1966, with
100,000,000 shares of authorized common stock, $.50 par value.
Holders of shares are entitled to share pro rata in dividends and other
distributions on shares 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 non-assessable, 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.
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PROSPECTUS
April 1, 1997
STATE
FARM
GROWTH
FUND, INC.
ONE STATE FARM PLAZA
BLOOMINGTON, ILLINOIS 61710
TELEPHONE (309) 766-2029
(800) 447-0740
G 4019.29A
<PAGE>
STATE FARM GROWTH FUND, INC.
ONE STATE FARM PLAZA, BLOOMINGTON, ILLINOIS 61710
Telephone: (309) 766-2029
(800) 447-0740
STATEMENT OF ADDITIONAL INFORMATION -- APRIL 1, 1997
- -----------------------------------------------------------------------
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, 1997, 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 ............................ 5
Performance Information ............................. 6
Portfolio Transactions .............................. 6
Additional Tax Considerations ....................... 7
Directors and Officers .............................. 7
General Information ................................. 9
<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, 1996, a copy of which accompanies
this Statement of Additional Information. This Financial Information
(but no other material from the annual report) is hereby incorporated by
reference in this Statement of Additional Information. Additional copies
of the annual report may be obtained by writing or telephoning the Fund,
(309) 766-2029 or (800) 447-0740.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term growth of capital and
income. There can be no assurance that the Fund will achieve this
objective.
The Fund seeks to achieve its objective by investing most of its assets
in income-producing equity-type securities that are believed
collectively to have potential for long-term growth of capital and
income. As a general rule, substantially all of its assets other than
cash and cash equivalents are so invested. At other times, varying
proportions of assets -- though under ordinary conditions not the
greater part -- may be invested in fixed income investments such as
United States Government obligations, in investment grade bonds and
debentures, in preferred stocks and in foreign securities which are not
publicly traded in the United States.
The Fund does not intend to invest with the objective of obtaining
short-term trading profits and, accordingly, expects that its annual
portfolio turnover rate will be less than 50%. A 50% turnover rate would
occur, for example, if securities representing half of the average value
of the Fund's portfolio were replaced in a period of one year.
Historical portfolio turnover rate information is set forth in the
Fund's prospectus in the Financial Highlights table which is
incorporated herein by reference.
As a diversified investment company, it is the policy of the Fund to
diversify its investments among both issuers and industries.
Accordingly, the Fund will not invest more than 5% of its assets (valued
at the time of investment) in the securities of any one issuer (other
than obligations of the U.S. Government), except that it may invest an
aggregate of up to 25% of its assets (valued at time of investment)
without subjection to that restriction, nor will it purchase more than
10% of the securities of any class of any issuer. Further, the Fund does
not intend to concentrate its investments in any particular industry and
will not purchase a security if, as a result of such purchase, more than
25% of its assets taken at market value would be invested in a
particular industry.
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
shareowners' approval.
FOREIGN SECURITIES. The Fund may invest up to 25% of its assets in
foreign securities not publicly traded in the United States, which may
entail a greater degree of risk (including risks relating to exchange
rate fluctuations, tax provisions, or expropriation of assets) than does
investment in securities of domestic issuers. For this purpose, foreign
securities do not include American Depositary Receipts (ADRs) or
securities guaranteed by a United States person. ADRs are receipts
typically issued by an American bank or trust company evidencing
ownership of the underlying securities.
As of November 30, 1996, the Fund had no investments in foreign
securities.
With respect to portfolio securities that are issued by foreign issuers
or denominated in foreign currencies, the Fund's investment performance
is affected by the strength or weakness of the U.S. dollar against those
currencies. For example, if the dollar falls in value relative to the
Japanese yen, the dollar value of a yen-denominated stock held in the
portfolio will rise even though the price of the stock remains
unchanged. Conversely, if the dollar rises in value relative to the yen,
the dollar value of the yen-denominated stock will fall.
Shareowners should understand and consider carefully the risks involved
in foreign investing. Investing in foreign securities, positions in
which are generally denominated in foreign currencies, involve certain
considerations comprising both risks and opportunities not typically
associated with investing in U.S. securities. These considerations
include: fluctuations in exchange rates of foreign currencies; possible
imposition of exchange control regulation or currency restrictions that
would prevent cash from being brought back into the United States; less
public information with respect to issuers of securities; less
governmental supervision of
-2-
<PAGE>
stock exchanges, securities brokers, and issuers of securities; lack of
uniform accounting, auditing, and financial reporting standards; lack of
uniform settlement periods and trading practices; less liquidity and
frequently greater price volatility in foreign markets than in the
United States; possible imposition of foreign taxes; possible investment
in securities of companies in developing as well as developed countries;
and sometimes less advantageous legal, operational, and financial
protections applicable to foreign sub-custodial arrangements.
Although the Fund will try to invest in companies and governments of
countries having stable political environments, there is the possibility
of expropriation or confiscatory taxation, seizure or nationalization of
foreign bank deposits or other assets, establishment of exchange
controls, the adoption of foreign government restrictions, or other
adverse political, social or diplomatic developments that could affect
investment in these nations.
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 market value of its assets (valued at the
time of investment) in the securities of any one issuer, except that it
may invest an aggregate of up to 25% of its assets (valued at time of
investment) without subjection to that restriction, and excluding from
such restriction investments in obligations of the U.S. Government, and
may not purchase more than 10% of the voting securities, more than 10%
of the aggregate long-term debt, or more than 10% of any other class of
security, of any issuer.
(2) Invest more than 5% of the market value 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.
(3) Make loans except by the purchase of bonds or other obligations of
types commonly distributed publicly or privately to financial
institutions.
(4) Borrow money from any source in excess of 10% of its gross assets
(taken at cost), and then only as a temporary measure for extraordinary
or emergency purposes, or mortgage, pledge or hypothecate in excess of
15% of its gross assets (taken at cost). [The Fund has never borrowed
and has no present intention to do so. However, if any such borrowings
were made by the Fund, the Fund would be required by the Investment
Company Act of 1940 to maintain 300% asset coverage.]
(5) Purchase or retain the securities of any issuer if those officers
and directors of the Fund or the investment adviser owning individually
more than 1/2 of 1% of the securities of such issuer together own more
than 5% of the securities of such issuer.
(6) Purchase securities on margin, sell securities short, or engage in
puts or calls or any combination thereof.
(7) Act as a securities underwriter or invest in real estate,
commodities or commodity contracts.
(8) Purchase the securities of any other investment company or
investment trust, except by purchases in the open market involving no
commission or profit (other than the customary broker's commission) to a
sponsor or dealer, or except as a part of a plan of merger or
consolidation.
(9) Invest in the securities of a company for the purpose of exercising
management or control.
(10) Concentrate its investments in any one industry. [However, the
proportions of the Fund's assets invested in a particular industry or
group of industries may shift from time to time depending upon
management's appraisal of market and business conditions.]
The preceding investment restrictions have been adopted by the Fund and
may not be changed without the consent of the shareowners holding a
majority of its shares. A majority of the shares, as used in this
Statement of Additional Information, 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.
The Fund has also adopted the following investment restrictions which,
while there is no present intention to do so, may be changed without
approval of the shareowners. Under these restrictions the Fund may not:
(a) Invest in restricted securities or in securities for which a quoted
price is not readily available.
(b) Invest more than 25% of the market value of its total assets (at the
time of the investment) in foreign securities which are not publicly
traded in the United States.
(c) Invest in oil, gas or other mineral exploration or development
programs, provided, however, this shall not prohibit the Fund from
purchasing publicly traded securities of companies engaging in whole or
in part in such activities.
(d) Mortgage, pledge or hypothecate in excess of 10% of its net assets
(taken at market value).
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<PAGE>
In addition, the Fund has agreed that as long as Fund shares are
qualified for sale in Texas, the Fund will not invest in excess of 5% of
its net assets in warrants, nor more than 2% of its net assets in
warrants not listed on a recognized stock exchange (taken at the lower
of cost or market value).
Other than for purposes of restriction (d) 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.
PURCHASE AND REDEMPTION OF FUND SHARES
Purchases and redemptions of Fund shares are discussed fully 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. ("Manager"). 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 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 principal underwriter for State Farm Municipal Bond
Fund, Inc., State Farm Balanced Fund, Inc. and State Farm Interim 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 Municipal Bond Fund, Inc. and State
Farm Interim 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.
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, reports, notices and proxy materials 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.
-4-
<PAGE>
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 .20% of the first $100 million of average net assets,
.15% of the next $100 million of average net assets and .10% of the
average net assets in excess of $200 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 .40% of the average
net assets of the Fund on an annual basis.
For the fiscal years ended November 30, 1996, 1995 and 1994, the Manager
earned $1,325,421, $1,068,973 and $892,798, 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
principal 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.
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.
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<PAGE>
PERFORMANCE INFORMATION
The Fund provides information on its "Average Annual Total Return" in
its annual reports to shareholders 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, 1996 the Average Annual Total Return on
a $1,000 investment in the Fund for the following periods was:
Average Annual
Total Return
--------------
1 year ............................... 20.09%
5 years .............................. 13.89
10 years ............................. 14.57
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 S&P 500 Index.
PORTFOLIO TRANSACTIONS
The Fund's portfolio purchases and sales are placed by the Manager with
securities brokers and dealers that the Manager believes will provide
the best values to the Fund in transaction and information services. In
evaluating the quality of transaction services, the dominant
consideration is a broker-dealer's skill in executing transactions, of
which the major determinant is the best price to the Fund (highest net
proceeds of sale or lowest overall cost of purchase) rather than the
lowest commission or transaction charge considered in isolation. Many of
the Fund's transactions are fairly large, and require special attention
and careful timing and handling to minimize the impact of the
transactions upon market prices. The willingness of a broker-dealer to
devise a trading tactic for the transaction in consultation with the
Manager, to expend time and effort, to overcome difficulties and to
assume risks, are characteristics of high quality execution. A
broker-dealer's knowledge of particular companies, industries, regions
and markets is important in the skillful trading of many securities. The
Manager is convinced that the net prices obtainable in skillful
executions by broker-dealers justify the payment of higher transaction
costs than those charged by others. Other considerations are the breadth
of the broker-dealer's financially-related services that are useful to
the Fund, the reliability of its clearing, settlement and operational
services, and its reputation and financial condition. Selection of a
broker-dealer for a particular transaction requires a largely
qualitative judgment by the Manager, including retrospective evaluation
of the quality of execution of past transactions by the broker-dealers
under consideration.
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<PAGE>
A wide variety of useful investment research and analysis, economic,
financial and statistical data, and other information, are available
from many brokers. The Manager gives recognition to the value of such
information in placing the Fund's portfolio transactions, and may cause
the Fund to pay to a broker commissions that are higher than those
obtainable from other brokers. When specific recommendations or
information provided by a broker result in securities transactions by
the Fund, the Manager places the transactions through that broker if the
Manager believes that the broker can provide good execution.
The Manager and the Auto Company perform extensive investment research,
which is used in making investment decisions for the Fund, for the other
State Farm funds and for other State Farm companies. 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. Although the
other State Farm funds and other State Farm companies benefit from
information obtained for the Fund with the Fund's transactions, the Fund
also benefits from information obtained for the other State Farm funds
and other State Farm companies with their transactions. Adequate
compensation of broker-dealers for their transaction and information
services is considered important to assure good execution of
transactions and the continuing receipt of information in the future.
When the Fund purchases or sells a security over-the-counter, the
transaction takes place directly with a principal market-maker, without
the use of a broker, except in those circumstances where, in the opinion
of the Manager, better price or execution can be achieved through the
use of a broker.
During the fiscal years ended November 30, 1996, 1995 and 1994,
brokerage commissions paid by the Fund totaled $342,724, $111,498 and
$71,170, respectively, all of which was paid to brokers which provided
research and other information to the Fund.
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.
A portion of the Fund's ordinary dividend may be eligible for the 70%
corporate dividends received deduction.
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.
-7-
<PAGE>
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.
Albert H. Hoopes, Director
Attorney at Law. Address: 102 S. East Street, Suite 350, Bloomington,
Illinois 61701.
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.
Davis U. Merwin, Director
Investor. Address: P.O. Box 8, Bloomington, Illinois 61702.
James A. Shirk, Director
Director and President, Beer Nuts, Inc. Address: 103 N. Robinson,
Bloomington, Illinois 61701.
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.
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 Vice President, State Farm Investment Management Corp.
Paul N. Eckley, Vice President
Vice President-Common Stocks, 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 1990-1995. Since 1994,
Investment Officer, State Farm Investment Management Corp.
Michael L. Tipsord, Assistant Secretary
Assistant Controller, State Farm Mutual Automobile Insurance Company.
Assistant Secretary, State Farm Investment Management Corp.
Jerel S. Chevalier, Assistant Secretary-Treasurer
Director-Mutual Funds, State Farm Mutual Automobile Insurance Company.
Since 1992, Assistant Treasurer, State Farm Investment Management
Corp.; since 1994, Assistant Secretary-Treasurer, State Farm
Investment Management Corp.
Patricia L. Dysart, Assistant Secretary
Assistant Tax Counsel, State Farm Mutual Automobile Insurance Company.
Since 1995, Assistant Secretary, State Farm Investment Management
Corp.
* 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 January 31, 1997.
The directors and officers of the Fund, excluding Paul N. Eckley, hold
identical positions with State Farm Municipal Bond Fund, Inc., State
Farm Balanced Fund, Inc., and State Farm Interim Fund, Inc. Mr. Eckley
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.
-8-
<PAGE>
GENERAL INFORMATION
OWNERSHIP OF SHARES
As of February 28, 1997, 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 6,445,532 shares (15% 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.
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.
-9-
<PAGE>
(This page intentionally left blank.)
-10-
<PAGE>
ANNUAL REPORT
STATE FARM GROWTH FUND, INC.
ONE STATE FARM PLAZA - BLOOMINGTON, ILLINOIS 61710
For Account Information and Shareowner
Services:(309) 766-2029
For Price Information ONLY:
1-800/447-0740
November 30, 1996
This report is not to be distributed unless preceded or accompanied by a
prospectus.
<PAGE>
STATE FARM GROWTH FUND, INC.
Dear Shareowner:
Another good year has passed for owners of common stocks and investors in
the Growth Fund. Your Fund produced a total return of 20.1% over its past
fiscal year, while the S&P 500, which tends to be the most widely followed of
the broadly based stock market indices, yielded 27.9%. We again observe that
returns earned by common stocks over the last two years are very satisfying but
are not sustainable over long periods of time.
The following graph compares a $10,000 investment in the Growth Fund over
the last ten years to a theoretical investment of the same amount in the S&P
500 Index:
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT FOR THE YEARS
ENDED NOVEMBER 30
Fund's Avg Annual Total Return
1 YEAR 5 YEAR 10 YEAR
20.09% 13.89% 14.57%
GROWTH
FUND S&P 500*
- ---------------------------------------------------
1986 $10,000 $10,000
1987 9,806 9,541
1988 11,517 11,755
1989 15,031 15,373
1990 15,674 14,830
1991 20,343 17,851
1992 23,493 21,140
1993 23,340 23,271
1994 24,277 23,521
1995 32,452 32,202
1996 38,971 41,172
Past performance is not predictive of future performance.
* The S&P 500 Index is a capitalization - weighted measure of 500
widely held common stocks listed on the New York and American Stock
Exchanges and traded in the Over-The-Counter Market.
The S&P 500 Index represents an unmanaged group of stocks that differs from
the composition of the Growth Fund. Unlike an investment in the Growth Fund,
a theoretical investment in the Index does not reflect any expenses.
The investment portfolio of the Fund has more or less been carried upward
in value by the same factors which have pulled general common stock prices
higher over the course of the year. These factors include a reasonably healthy
domestic economy, numerous corporate mergers, good growth in corporate profits
and strong demand for common stocks generated by record flows of monies into
equity mutual funds. Towards the end of the year, common stock prices sprinted
ahead as a positive spin was put on election results and market interest rates
declined.
The shares of companies generally classified in the financial, computer,
pharmaceutical, consumer product, energy and telecommunication supplier sectors
tended to perform most strongly over the past twelve months. The stocks of
telephone, utility, metals and construction companies did not do as well.
The general composition of the Fund's portfolio was changed somewhat over
the last twelve months. A discussion of alterations which we consider most
significant follows. Early in the year, the Fund received approximately equal
amounts of cash and Disney stock when Capital Cities/ABC was merged into Disney,
2
<PAGE>
and the cash was redeployed in the shares of companies which we feel are quite
sensitive to general global economic growth. In a move to make the portfolio
more diversified, all or portions of nine holdings were sold later in the year
with proceeds from the sales used to establish new investment positions in
shares of 23 different companies. Some of the sales involved companies that are
not meeting our expectations, while in other instances holdings were reduced as
we reacted to high market valuations placed on the stocks or to portfolio
weightings which had grown to uncomfortable levels. Additions to the portfolio
include stocks of companies which we feel are growing satisfactorily and have
prospects for earning good long-term returns.
The general mood of investors is quite upbeat at the moment. We must admit
that we are bothered by the rapid rise of stock prices after some market
difficulties in the middle of the year. Again, investors have seen
reinforcement of the belief that any indigestion in the market merely presents
an opportunity to pour money into stocks. Times like these remind us that
market dynamics change over time, but the basic human characteristics of greed
and fear, which tend to drive securities markets to extremes in both
directions, are timeless. Investor perceptions will ultimately change, we just
don't know when or what will cause the change.
As always we encourage you to view your investment in the Fund as a truly
long term commitment. Its assets are invested in good quality securities which
over time should provide you with satisfactory investment results.
The directors have declared a capital gain distribution of $2.305 per
Growth Fund share which will be paid on December 31, 1996. A semi-annual income
dividend of $.290 per share will also be paid on December 31, 1996. Both will
be used to purchase additional shares for your account unless you have elected
to receive payments directly by check.
Sincerely,
Paul N. Eckley Kurt G. Moser
Vice President Vice President
December 17, 1996
3
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareowners
State Farm Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of State Farm Growth Fund, Inc.
as of November 30, 1996, 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
1987. 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, 1996, 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 Growth Fund, Inc. at November 30, 1996,
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 1987, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 13, 1996
4
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS
November 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS (93.6%)
AGRICULTURE & FOOD (9.0%):
<C> <S> <C>
2,724,715 Archer-Daniels-Midland Company $ 59,943,730
46,000 Campbell Soup Company 3,800,750
320,000 The Coca-Cola Company 16,360,000
465,000 Kellogg Company 31,561,875
97,000 Pioneer Hi-Bred International, Inc. 6,765,750
104,000 Sara Lee Corporation 4,082,000
------------
122,514,105
BANKS (11.4%):
382,537 Bancorp Hawaii, Inc. 16,688,177
1,058,058 Banponce Corporation 34,386,885
74,000 J.P. Morgan & Co. Incorporated 6,983,750
349,850 National Commerce Bancorporation 12,769,525
490,000 Norwest Corporation 22,907,500
810,000 Wachovia Corporation 48,600,000
48,200 Wells Fargo & Company 13,718,925
------------
156,054,762
CHEMICALS (8.8%):
415,000 Air Products and Chemicals, Inc. 28,842,500
81,000 The Dow Chemical Company 6,783,750
364,300 Great Lakes Chemical Corporation 19,535,587
561,000 International Flavors & Fragrances Inc. 25,525,500
630,600 Sigma-Aldrich Corporation 39,412,500
------------
120,099,837
COMPUTERS AND SOFTWARE (7.7%):
1,437,000 Hewlett-Packard Company 77,418,375
124,100 International Business Machines Corporation 19,778,438
47,000 (a) Microsoft Corporation 7,373,125
------------
104,569,938
CONSUMERS AND MARKETING (5.4%):
719,600 Hon Industries Inc. 22,307,600
177,728 Jostens, Inc. 3,776,720
173,200 Minnesota Mining and Manufacturing Company 14,505,500
589,000 Rubbermaid Incorporated 14,136,000
250,000 The Gillette Company 18,437,500
------------
73,163,320
ELECTRONIC MANUFACTURING (2.3%):
68,000 AMP Incorporated 2,601,000
140,100 General Electric Company 14,570,400
111,000 Intel Corporation 14,083,125
------------
31,254,525
HEALTH CARE (15.5%):
820,000 Ballard Medical Products 15,375,000
1,550,000 Biomet, Inc. 25,575,000
1,240,800 Johnson & Johnson 65,917,500
473,600 Eli Lilly and Company 36,230,400
166,000 Medaphis Corporation 1,722,250
20,000 Medtronic, Inc. 1,322,500
182,000 Merck & Co., Inc. 15,106,000
480,000 Pfizer Inc. 43,020,000
89,794 Rhone-Poulenc Rorer Inc. 6,678,429
------------
210,947,079
</TABLE>
5
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS
November 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
MEDIA (6.0%):
<C> <S> <C>
873,180 The Walt Disney Company $ 64,397,025
153,500 Reuters Holdings PLC (ADR) 11,147,937
360,181 (a) Scandinavian Broadcasting System SA 6,258,145
------------
81,803,107
MINING AND METALS (1.7%):
195,000 Nucor Corporation 10,603,125
185,000 The RTZ Corporation PLC (ADR) 12,510,625
------------
23,113,750
NON-ELECTRIC MANUFACTURING (1.3%):
185,000 Caterpillar Inc. 14,638,125
35,000 Illinois Tool Works Inc. 3,001,250
------------
17,639,375
OIL AND GAS (8.3%):
122,000 Amoco Corporation 9,470,250
440,400 (a) Barrett Resources Corporation 17,946,300
530,000 Chevron Corporation 35,510,000
290,000 Exxon Corporation 27,441,250
237,100 Pennzoil Company 13,336,875
59,000 Royal Dutch Petroleum Company (ADR) 10,022,625
------------
113,727,300
RETAILING (.3%):
169,000 Wal-Mart Stores, Inc. 4,309,500
TELECOMMUNICATIONS & EQUIPMENT(9.7%):
450,000 (a) ADC Telecommunications, Inc. 16,312,500
400,000 AT&T Corp. 15,700,000
86,000 (a) Airtouch Communications, Inc. 2,203,750
116,000 Ameritech Corporation 6,829,500
290,200 Deutsche Telekom (ADR) 6,203,025
246,000 LM Ericsson Telephone Company (ADR) 7,595,250
129,633 Lucent Technologies Inc. 6,643,691
823,000 MCI Communications Corporation 25,101,500
264,000 Motorola, Inc. 14,619,000
596,100 SBC Communications Inc. 31,369,762
------------
132,577,978
UTILITIES - ELECTRIC (1.9%):
248,000 Central and South West Corporation 6,634,000
132,000 Duke Power Company 6,121,500
305,000 Pacificorp 6,405,000
288,000 Southern Company 6,408,000
------------
25,568,500
</TABLE>
6
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS
November 30, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
MISCELLANEOUS (4.3%):
<C> <S> <C>
428,200 Corning Incorporated $ 17,342,100
337,500 (a) Osmonics, Inc. 7,171,875
425,000 Pall Corporation 11,103,125
346,400 Vulcan Materials Company 21,563,400
81,250 Other 1,482,813
--------------
58,663,313
--------------
Total common stocks (cost: $582,264,846) 1,276,006,389
SHORT-TERM INVESTMENTS (6.3%)
$30,000,000 U.S. Treasury bills, 5.005% to 5.155% effective yield,
due 12-1996 to 2-1997 29,823,300
6,515,000 Ford Motor Credit Co., 5.40%, 12-3-1996 6,517,933
19,545,000 General Electric Capital Corp., 5.25%, 12-3-1996 19,576,404
1,470,000 General Motors Acceptance Corp., 5.30%, 12-3-1996 1,471,083
330,000 General Motors Acceptance Corp., 5.28%, 12-3-1996 330,485
27,805,000 General Motors Acceptance Corp., 5.31%, 12-10-1996 27,821,414
--------------
Total short-term investments (cost: $85,529,481) 85,540,619
--------------
TOTAL INVESTMENTS (99.9%)(cost: $667,794,327) 1,361,547,008
CASH AND OTHER ASSETS, LESS
LIABILITIES (.1%) 1,362,246
--------------
NET ASSETS (100.0%) $1,362,909,254
==============
</TABLE>
Notes: (a) Non-income producing security.
(b) At November 30, 1996, net unrealized appreciation of $693,752,681
consisted of gross unrealized appreciation of $697,539,352 and
gross unrealized depreciation of $3,786,671 based on cost of
$667,794,327 for federal income tax purposes.
See accompanying notes to financial statements.
7
<PAGE>
STATE FARM GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments, at value (cost: $667,794,327) $1,361,547,008
Cash 1,245,069
Receivable for:
Dividends $2,830,970
Securities sold 228,726
Shares of the Fund sold 103,035
Sundry 8,859 3,171,590
----------
Prepaid expenses 47,586
--------------
Total assets 1,366,011,253
LIABILITIES AND NET ASSETS
Payable for:
Shares of the Fund redeemed 2,657,982
Other accounts payable (including $406,313 to Manager) 444,017
----------
Total liabilities 3,101,999
--------------
Net assets applicable to 39,451,935 shares outstanding of
$.50 par value common stock (100,000,000 shares
authorized) $1,362,909,254
==============
Net asset value, offering price and redemption price per share $ 34.55
==============
ANALYSIS OF NET ASSETS
Excess of amounts received from sales of shares over amounts
paid on redemptions of shares on account of capital $ 562,315,130
Undistributed net realized gain on sales of investments 90,788,938
Net unrealized appreciation of investments 693,752,681
Undistributed net investment income 16,052,505
--------------
Net assets applicable to shares outstanding $1,362,909,254
==============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
STATE FARM GROWTH FUND, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$83,607 in 1996 and $104,425 in 1995) $ 18,232,750 $ 15,895,757
Interest 5,377,917 3,218,409
----------------------------
Total investment income 23,610,667 19,114,166
EXPENSES:
Investment advisory and management fee 1,325,421 1,068,973
Professional fees 35,869 39,104
ICI dues 41,711 39,917
Registration fees 30,249 17,758
Fidelity bond expense 7,951 7,334
Directors' fees 9,000 6,600
Reports to shareowners 21,876 47,298
Franchise taxes 10,078 9,876
Custodian fees 32,062 35,212
Other 1,933 276
----------------------------
Total expenses 1,516,150 1,272,348
Less: custodian fees paid indirectly 31,713 35,064
----------------------------
Net expenses 1,484,437 1,237,284
----------------------------
Net investment income 22,126,230 17,876,882
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on sales of investments 90,788,938 6,015,663
Change in net unrealized appreciation 111,162,700 238,933,861
----------------------------
Net realized and unrealized gain on investments 201,951,638 244,949,524
----------------------------
Net change in net assets resulting from operations $224,077,868 262,826,406
============================
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
STATE FARM GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995
<S> <C> <C>
From operations:
Net investment income $ 22,126,230 17,876,882
Net realized gain on sales of investments 90,788,938 6,015,663
Change in net unrealized appreciation 111,162,700 238,933,861
----------------------------------
Net change in net assets resulting
from operations 224,077,868 262,826,406
Undistributed net investment income included in
price of shares issued and redeemed 718,903 407,527
Distributions to shareowners from:
Net investment income (per share $.53 in 1996 and
$.52 in 1995) (18,174,400) (18,125,076)
Net realized gain (per share $.12 in 1996 and
$.175 in 1995) (6,015,663) (5,860,346)
----------------------------------
Total distributions to shareowners (24,190,063) (23,985,422)
From Fund share transactions:
Proceeds from shares sold 177,516,771 110,543,974
Reinvestment of ordinary income dividends
and capital gain distributions 23,554,851 23,301,462
----------------------------------
201,071,622 133,845,436
Less payments for shares redeemed 107,416,790 76,138,727
----------------------------------
Net increase in net assets from Fund share
transactions 93,654,832 57,706,709
----------------------------------
Total increase in net assets 294,261,540 296,955,220
Net assets:
Beginning of year 1,068,647,714 771,692,494
----------------------------------
End of year (including undistributed net
investment income of $16,052,505 in 1996
and $11,381,772 in 1995) $1,362,909,254 1,068,647,714
==================================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
STATE FARM GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION -- Investments are stated at value. Stocks traded
on securities exchanges, or in the over-the-counter market in which
transaction prices are reported, are valued at the last sales prices on
the day of valuation or, if there are no reported sales on that day, at
the mean of the last bid and asked quotations. Other stocks traded
over-the-counter are valued at the mean of the last bid and asked
prices. 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 on an
amortized cost basis. Any securities not valued as described above are
valued at fair value as determined in good faith by the Board of
Directors or its delegate.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date (date the order to buy or sell is
executed) and dividend income is recorded on the ex-dividend date.
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 -- 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 customary weekend and holiday closings, except that the
Fund need not compute a net asset value on any day when no purchase or
redemption order has been received by the Fund. The net asset value per
share is computed by dividing the total value of the Fund's investments
and other assets, less liabilities, by the number of Fund shares
outstanding.
FEDERAL INCOME TAXES, DIVIDENDS AND DISTRIBUTIONS TO SHAREOWNERS -- 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.
On December 13, 1996, an ordinary income dividend of $.29 per share and
a capital gain distribution of $2.305 per share were declared, payable
December 31, 1996 (reinvestment date December 31, 1996) to shareowners
of record December 13, 1996.
Dividends and distributions payable to its shareowners are recorded by
the Fund on the ex-dividend date.
EQUALIZATION ACCOUNTING -- A portion of proceeds from sales and payments
on redemptions of Fund shares is credited or charged to undistributed
net investment income. As a result, undistributed net investment income
per share is unaffected by sales or redemptions of Fund shares.
RECLASSIFICATION -- Certain reclassifications have been made to the
Statement of Operations for 1995 to conform with 1996 presentation.
2. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory and management services agreement
with State Farm Investment Management Corp. (Manager) pursuant to which
the Fund pays the Manager an annual fee (computed on a daily basis and
paid quarterly) of .20% of the first $100 million of average net assets,
.15% of the next $100 million of average net assets and .10% of the
average net assets in excess of $200 million. The Manager guarantees
that all 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.
11
<PAGE>
STATE FARM GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Under the terms of this agreement, the Fund incurred fees of
$1,325,421 for 1996 and $1,068,973 for 1995. 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, 1996,
except for directors' fees of $9,000 for 1996 and $6,600 for 1995, paid
to the Fund's independent directors.
3. INVESTMENT TRANSACTIONS
Investment transactions (exclusive of short-term investments) for
each of the two years ended November 30 were as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Purchases $255,225,023 46,164,857
Proceeds from sales 172,902,528 22,290,487
============================
</TABLE>
4. FUND SHARE TRANSACTIONS
Proceeds and payments on Fund shares as shown in the statement of
changes in net assets are in respect of the following number of shares:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995
<S> <C> <C>
Shares sold 5,839,467 4,289,306
Shares issued in reinvestment of ordinary income
dividends and capital gain distributions 788,486 966,452
-------------------------
6,627,953 5,255,758
Less shares redeemed 3,526,507 3,008,177
-------------------------
Net increase in shares outstanding 3,101,446 2,247,581
=========================
</TABLE>
12
<PAGE>
STATE FARM GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
Per Share Income and Capital Changes (For a share outstanding throughout each
year)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 29.40 22.63 22.21 23.05 20.33 16.77 16.90 13.34 11.96 13.50
Income from Invest-
ment Operations
Net investment
income .63 .50 .44 .45 .43 .42 .47 .41 .43 .38
Net gain or loss on
securities (both
realized and
unrealized) 5.17 6.97 .43 (.60) 2.70 4.32 .26 3.57 1.62 (.61)
---------------------------------------------------------------------------------------------------
Total from investment
operations 5.80 7.47 .87 (.15) 3.13 4.74 .73 3.98 2.05 (.23)
Less Distributions
Net investment
income (.53) (.52) (.45) (.45) (.41) (.54) (.40) (.42) (.39) (.38)
Capital gain (.12) (.18) -- (.24) -- (.64) (.46) -- (.28) (.93)
---------------------------------------------------------------------------------------------------
Total distributions (.65) (.70) (.45) (.69) (.41) (1.18) (.86) (.42) (.67) (1.31)
Net asset value, end of
year $ 34.55 29.40 22.63 22.21 23.05 20.33 16.77 16.90 13.34 11.96
===================================================================================================
Total Return 20.09% 33.67% 4.02% (.65%) 15.42% 29.79% 4.27% 30.51% 17.45% (1.83%)
Ratios/Supplemental Data
Net assets, end of year
(millions) $1,362.9 1,068.6 771.7 725.1 696.1 558.4 414.3 383.0 295.5 253.6
Ratio of expenses to
average net assets .13% .14%(a) .14% .14% .16% .19% .21% .21% .24% .26%
Ratio of net investment
income to average
net assets 1.88% 1.95% 2.00% 2.05% 1.99% 2.22% 2.84% 2.69% 3.32% 2.75%
Portfolio turnover rate 16% 3% 3% 2% 2% 1% 16% 9% 5% 12%
Number of shares out-
standing at end of
year (millions) 39.5 36.4 34.1 32.7 30.2 27.5 24.7 22.7 22.1 21.2
</TABLE>
Average commission rate paid per share on stock transactions for the year ended
November 30, 1996 was $.0599.
Note: (a) The ratio based on net custodian expenses would have been .13%
in 1995.
_________________________
STATE FARM GROWTH FUND, INC.
TAX INFORMATION
The Fund paid ordinary income dividends of $.265 per share in June
1996 and $.29 per share in December 1996. Of these dividends, 73%
qualifies for the 70% deduction for dividends received by corporations
as provided by the Internal Revenue Code.
In December 1996, the Fund made a capital gain distribution of $2.305
per share, 100% of which was paid from long-term capital gain and is
designated as a capital gain dividend.
NOTE: Dividends and distributions 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 the provisions of the
Internal Revenue Code.
13
<PAGE>
(This page intentionally left blank.)
14
<PAGE>
(This page intentionally left blank.)
15
<PAGE>
ANNUAL
REPORT
November 30, 1996
STATE
FARM
GROWTH
FUND, INC.
ONE STATE FARM PLAZA
BLOOMINGTON, ILLINOIS 61710
TELEPHONE (309) 766-2029
G 4031.06
<PAGE>
STATE FARM GROWTH FUND, INC.
PART C OF THE REGISTRATION STATEMENT
------------------------------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Financial statements included in Part B of this amendment:
Statement of assets and liabilities - November 30, 1996*
Statement of operations for each of the two years in the
period ended November 30, 1996*
Statement of changes in net assets for each of the two years
in the period ended November 30, 1996*
Portfolio of investments - November 30, 1996*
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, 1996.
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, 1996. 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.
2-27058.
1. Amended and restated articles of incorporation of
registrant*
2. By-laws of registrant (as amended and restated March
12, 1993)*
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 April 1, 1987*
<PAGE>
STATE FARM GROWTH FUND, INC.
5(b). Service agreement among registrant, State Farm
Investment Management Corp. and State Farm Mutual
Automobile Insurance Company, as amended, dated March
17, 1976*
6. Underwriting agreement between registrant and State
Farm Investment Management Corp., dated April 1,
1972*
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 14, 1997
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
15. None
16. Schedule for Computation of Performance Quotations
27. Financial Data Schedule
* Incorporated by reference to post-effective
amendment No. 39.
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
<PAGE>
STATE FARM GROWTH FUND, INC.
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, 1996
-------------- --------------------
Common Stock, $.50 par 41,135
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.
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 -<PAGE>
Edward B. Rust, Jr., Director and President *
Roger Joslin, Director, Vice President and Treasurer *
<PAGE>
STATE FARM GROWTH FUND, INC.
Kurt Moser, Director and 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.
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.
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>
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 14th day of March, 1997.
STATE FARM GROWTH FUND, INC.
By: _____________________________
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.
___________________________________ Director
Edward B. Rust, Jr. and President
(Principal Executive
Officer)
___________________________________ Director, Vice President,
Roger Joslin and Treasurer
(Principal financial
and accounting officer)
___________________________________ Director March 14, 1997
Albert H. Hoopes --------------
___________________________________ Director
Davis U. Merwin
___________________________________ Director
James A. Shirk
<PAGE>
INDEX FOR EXHIBITS
FILED WITH THIS AMENDMENT
-------------------------
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
11 Consent of Independent Auditors
dated March 14, 1997
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
16 Schedule for computation of
performance quotations
27 Financial Data Schedule
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Financial Information" and to the use of our report dated
December 13, 1996 in the Registration Statement (Form N-1A) and its
incorporation by reference in the related Prospectus and Statement of Additional
Information of State Farm Growth Fund, Inc., filed with the Securities and
Exchange Commission in this Post-Effective Amendment No. 40 to the Registration
Statement under the Securities Act of 1933 (File No. 2-27058) and in this
Amendment No. 18 to the Registration Statement under the Investment Company Act
of 1940 (File No. 811-1519).
ERNST & YOUNG LLP
Chicago, Illinois
March 14, 1997
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 includible 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.
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. 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 Section 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. Before any distribution is made from the Custodial
Account, except in the case of the Participant's death or disability (as
defined in section 72(m) (7) of the Internal Revenue Code) or attainment of
age 59 1/2, the Participant must furnish the Custodian with a declaration
of his intentions as to the disposition of the amount to be distributed;
however, 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 Participants 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
<PAGE>
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:
(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(a)(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.
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 payments
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 or your spouse had compensation
during the taxable year 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 and your spouse may make total contributions to both
accounts up to the lesser of the combined compensation of you and your spouse
for the taxable year or $4,000, annually. To qualify for the maximum
contribution, both you and your spouse must establish an IRA. You may not
contribute more than $2,000, annually, to either account.
Deductibility of Contributions. Contributions (other than Rollover
Contributions) to your IRA (or your spouse's 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 Internal Revenue Code, an annuity
plan under section 403(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 an instrumentality of a State or political
subdivision. 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
(or, if you are married and file a joint return, 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
taxable year.
Even though you are an active participant in an employer-maintained plan, you
are permitted to make deductible IRA contributions 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 is (1) $25,000 in the case of an individual, (2)
$40,000 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 (and you are an active participant in one
of the above plans), you may make deductible contributions; however, the IRA
deduction limit (including the spousal 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 limit bears to $10,000.
Accordingly, you may not make deductible IRA contributions if your adjusted
gross income is (1) $35,000 or more, in the case of an individual, (2) $50,000
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
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 IRA in any year in which he/she is age 70 1/2 or older.
<PAGE>
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.
6. ROLLOVER CONTRIBUTIONS
All or a portion of certain distributions from qualified employer plans or
tax-sheltered annuities, and distributions from other IRA plans may be
``rolled-over'' tax-free to an IRA, if the rollover (transfer) is made within 60
days after receipt of the distribution. 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 preceding 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 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
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, or 8) which are timely withdrawn excess contributions.
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.
<PAGE>
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.
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 59 1/2, the portion ``distributed''
would also be subject to the additional 10% penalty tax imposed on premature
distributions.
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. The Custodian's annual maintenance
fee is $1.00.
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.
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.
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.
-1-
<PAGE>
ARTICLE V INVESTMENT OF ASSETS OF CUSTODIAL ACCOUNT
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 Section IV paragraph 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. Before any distribution is made from the Plan to a
Participant who has not attained age 59 1/2 (except in the case of the
Participant's death or disability as defined in section 72(m)(7) of the
Internal Revenue Code), the Participant must furnish the Custodian with a
declaration of his/her intentions as to the disposition of the amount to be
distributed.
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.
-2-
<PAGE>
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
7.1 ANNUAL MAINTENANCE FEE. For maintaining this Custodial Account, the
Participant shall pay the Custodian an Annual Maintenance Fee of $1.00.
With the consent in writing of the Plan Sponsor, the Custodian may change
the 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.
-3-
<PAGE>
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.
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 change the Annual Maintenance Fee in the manner provided in
Article VII, and no such change shall be deemed an Amendment of this
Agreement.
-4-
<PAGE>
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.
-5-
STATE FARM GROWTH FUND
INVESTMENT RECORD - ALL DIVIDENDS AND CAPITAL GAINS REINVESTED
SEC TOTAL RETURN FIGURES FOR 1, 5, AND 10 YEAR PERIODS
30-Nov-96
30-Nov-86 price $13.50
30-Nov-91 price $20.33
30-Nov-95 price $29.40
30-Nov-96 price $34.55
<TABLE>
<CAPTION>
VALUATION
REINV. C.G. DIV. REINV. INVESTMENT C.G. DIV SHARES SHARES VALUATION DATE ACCOUNT
DATE ACTION RATE RATE PRICE AMOUNT AMOUNT AMOUNT ACQUIRED OWNED DATE NAV VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Nov-86 10 YEAR VALUATION $13.50 $1,000.00 74.074 74.074 30-Nov-86 $13.50 $1,000.00
31-Dec-86 DIVIDENDS 0.925 0.190 $12.01* $68.52 $14.07 6.877 80.951
30-Jun-87 DIVIDENDS 0.185 $14.40 $14.98 1.040 81.991
31-Dec-87 DIVIDENDS 0.275 0.215 $12.35 $22.55 $17.63 3.253 85.244
30-Jun-88 DIVIDENDS 0.170 $13.30 $14.49 1.090 86.334
30-Dec-88 DIVIDENDS 0.255 $13.37 $22.02 1.647 87.980
30-Jun-89 DIVIDENDS 0.165 $15.12 $14.52 0.960 88.940
31-Dec-89 DIVIDENDS 0.455 0.275 $16.72 $40.47 $24.46 3.883 92.824
30-Jun-90 DIVIDENDS 0.125 $18.23 $11.60 0.636 93.460
31-Dec-90 DIVIDENDS 0.635 0.330 $16.36 $59.35 $30.84 5.513 98.973
28-Jun-91 DIVIDENDS 0.205 $18.66 $20.29 1.087 100.060
30-Nov-91 5 YEAR VALUATION 100.060 30-Nov-91 $20.33 $2,033.72
31-Dec-91 DIVIDENDS 0.230 $22.73 $23.01 1.012 101.073
30-Jun-92 DIVIDENDS 0.180 $21.48 $18.19 0.847 101.920
31-Dec-92 DIVIDENDS 0.24 0.250 $22.53 $24.46 $25.48 2.217 104.136
30-Jun-93 DIVIDENDS 0.200 $22.00 $20.83 0.947 105.083
31-Dec-93 DIVIDENDS 0.00 0.240 $22.21 $25.22 1.136 106.218
30-Jun-94 DIVIDENDS 0.210 $21.11 $22.31 1.057 107.275
31-Dec-94 DIVIDENDS 0.175 0.240 $22.90 $18.77 $25.75 1.944 109.219
30-Jun-95 DIVIDENDS 0.280 $26.43 $30.58 1.157 110.376
30-Nov-95 1 YEAR VALUATION 110.376 30-Nov-95 $29.40 $3,245.06
30-Dec-95 DIVIDENDS 0.12 0.265 $29.23 $13.25 $29.25 1.454 111.830
30-Jun-96 DIVIDENDS 0.265 $30.81 $29.63 0.962 112.792
30-Nov-96 $34.55 $3,896.96
</TABLE>
ONE YEAR AVERAGE RETURN 20.09%
FIVE YEAR AVERAGE RETURN 13.89%
TEN YEAR AVERAGE RETURN 14.57%
* Represents a weighted average of the separate reinvestments of the capital
gain on December 31, 1986 and the income dividend on January 5, 1987
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000093715
<NAME> STATE FARM GROWTH FUND, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 667,794,327
<INVESTMENTS-AT-VALUE> 1,361,547,008
<RECEIVABLES> 3,171,590
<ASSETS-OTHER> 1,292,655
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,366,011,253
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,101,999
<TOTAL-LIABILITIES> 3,101,999
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 562,315,130
<SHARES-COMMON-STOCK> 39,451,935
<SHARES-COMMON-PRIOR> 36,350,489
<ACCUMULATED-NII-CURRENT> 16,052,505
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 90,788,938
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 693,752,681
<NET-ASSETS> 1,362,909,254
<DIVIDEND-INCOME> 18,232,750<F1>
<INTEREST-INCOME> 5,377,917
<OTHER-INCOME> 0
<EXPENSES-NET> 1,484,437
<NET-INVESTMENT-INCOME> 22,126,230
<REALIZED-GAINS-CURRENT> 90,788,938
<APPREC-INCREASE-CURRENT> 111,162,700
<NET-CHANGE-FROM-OPS> 224,077,868
<EQUALIZATION> 718,903
<DISTRIBUTIONS-OF-INCOME> 18,174,400<F2>
<DISTRIBUTIONS-OF-GAINS> 6,015,663<F3>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,839,467
<NUMBER-OF-SHARES-REDEEMED> 3,526,507
<SHARES-REINVESTED> 788,486
<NET-CHANGE-IN-ASSETS> 294,261,540
<ACCUMULATED-NII-PRIOR> 11,381,772
<ACCUMULATED-GAINS-PRIOR> 6,015,663
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,325,421
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,516,150
<AVERAGE-NET-ASSETS> 1,177,404,315
<PER-SHARE-NAV-BEGIN> 29.40
<PER-SHARE-NII> .63
<PER-SHARE-GAIN-APPREC> 5.17
<PER-SHARE-DIVIDEND> .53
<PER-SHARE-DISTRIBUTIONS> .12
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 34.55
<EXPENSE-RATIO> .13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>NET OF FOREIGN WITHHOLDING TAXES OF $83,607
<F2>$.53 PER SHARE IN 1996
<F3>$.12 PER SHARE IN 1996
</FN>
</TABLE>
