<PAGE>
SEMI-ANNUAL REPORT
MAY 31 1999
STATE FARM
GROWTH FUND, INC.
STATE FARM
BALANCED FUND, INC.
STATE FARM
INTERIM FUND, INC.
STATE FARM
MUNICIPAL BOND FUND, INC.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
State Farm Growth Fund, Inc.
Message from the portfolio managers 2
Portfolio of investments 3
Financial statements 7
Financial highlights 10
State Farm Balanced Fund, Inc.
Message from the portfolio managers 11
Portfolio of investments 12
Financial statements 17
Financial highlights 20
State Farm Interim Fund, Inc.
Message from the portfolio managers 21
Portfolio of investments 22
Financial statements 24
Financial highlights 27
State Farm Municipal Bond Fund, Inc.
Message from the portfolio managers 28
Portfolio of investments 29
Financial statements 37
Financial highlights 40
Notes to Financial Statements 41
</TABLE>
This report is not authorized for distribution unless preceded or accompanied by
a State Farm Mutual Funds prospectus.
Distributor: State Farm Investment Management Corp., member NASD.
1 -------
<PAGE>
STATE FARM GROWTH FUND, INC.
Dear Shareowner:
The U.S. stock market has generated strong returns over the past six and twelve
month periods. The S&P 500 index produced total returns of 12.6% and 21.0% for
the six and twelve months ended May 31, 1999. The Growth Fund had total returns
of 11.2% and 17.5% for the same periods.*
Returns earned by U.S. common stocks have been extraordinary over the past 4 1/2
years. In our opinion, returns of this magnitude are not sustainable over long
periods of time. Historical studies indicate that the average annual return of
the U.S. stock market was approximately 11% from 1926-98. Obviously, returns
have fluctuated significantly from this average over shorter time periods.
Business conditions are quite favorable in the United States and Europe, while
economic activity has been weak in Japan and most of the emerging markets of the
world. There is some evidence of modest improvement in Japan and the emerging
markets from the difficult conditions of the last two years. Increasingly,
economic activity and financial markets are linked globally.
We are confident that common stock investments in growing companies with fine
managements will produce satisfactory long-term results. Your fund manages risk
through fundamental analysis and broad diversification.
When measured by virtually all general standards, U.S. common stocks are selling
at the high end of historical valuation levels. We encourage a disciplined
long-term program of periodic investments in the Growth Fund. Such an investment
program allows shareholders to capture the benefits of dollar cost averaging and
to participate in any long-term appreciation of common stock prices.
The directors have declared a semi-annual income dividend of $.31 per share
which was paid on June 21, 1999. It was used to purchase additional shares for
your account unless you have elected to receive payment directly by check.
Sincerely,
<TABLE>
<S> <C> <C>
[SIG] [SIG] [SIG]
Paul N. Eckley John Concklin James Freytag
Vice President Vice President Vice President
</TABLE>
* Growth Fund's average annual total return for the 1-year, 5-year and 10-year
periods ended June 30, 1999 was 21.74%, 24.44% and 17.52%, respectively. The
Standard & Poor's 500 Stock Index is a market-weighted index, with dividends
reinvested, of 500 large U.S. companies. Past performance does not guarantee
future results. The investment return and principal value of an investment in
the Fund will fluctuate so that your Fund shares, when redeemed, may be worth
more or less than their original cost.
- ---------
2
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Shares Value
- ----------- --------------
<C> <S> <C>
COMMON STOCKS (97.6%)
Agriculture, Foods, & Beverage (5.4%)
3,003,997 Archer-Daniels-Midland Company $ 45,059,955
92,000 Campbell Soup Company 4,059,500
930,000 Kellogg Company 32,259,375
291,000 Pioneer Hi-Bred International Inc. 10,912,500
208,000 Sara Lee Corporation 4,992,000
81,600 Sysco Corporation 2,422,500
573,800 The Coca-Cola Company 39,197,712
--------------
138,903,542
--------------
Banks (9.6%)
172,361 ABN Amro Holding NV (a) 3,819,434
181,237 Amsouth Bancorporation 5,142,600
382,168 Bank of America Corporation 24,721,492
715,322 Bank One Corporation 40,460,401
90,000 First Security Corporation 1,704,375
43,500 First Virginia Banks Inc. 2,161,406
61,300 Golden West Financial Corporation 5,815,837
47,700 J.P. Morgan & Co. Incorporated 6,645,206
6,200 M&T Bank Corporation 3,267,400
809,800 National Commerce Bancorporation 18,979,687
72,000 Northern Trust Corporation 6,507,000
640,074 Pacific Century Financial Corporation 12,801,480
830,316 Popular Inc. 25,272,743
345,000 Southtrust Corporation 13,433,438
74,900 SunTrust Banks Inc. 5,055,750
62,000 TCF Financial Corporation 1,720,500
238,900 Wachovia Corporation 21,082,925
1,220,000 Wells Fargo & Company 48,800,000
67,950 US Bancorp 2,208,375
--------------
249,600,049
--------------
Building Materials & Construction (1.8%)
1,039,200 Vulcan Materials Company 46,958,850
--------------
Chemicals (6.5%)
830,000 Air Products & Chemicals Inc. 34,030,000
331,900 E.I. du Pont de Nemours and Company 21,718,706
588,300 Great Lakes Chemical Corporation 26,583,806
561,000 International Flavors & Fragrances Inc. 23,071,125
45,200 Praxair Inc. 2,206,325
203,600 Raychem Corporation 7,075,100
1,410,300 Sigma-Aldrich Corporation 45,129,600
81,000 The Dow Chemical Company 9,841,500
--------------
169,656,162
--------------
Computer Software and Services (4.2%)
61,100 AutoDesk Inc. 1,687,887
124,000 Automatic Data Processing Inc. 5,107,250
30,800 Electronic Data Systems Corporation 1,732,500
</TABLE>
3 -------
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Shares Value
- ----------- --------------
<C> <S> <C>
1,135,600 Microsoft Corporation (a) $ 91,628,725
344,700 Oracle Corporation (a) 8,552,869
--------------
108,709,231
--------------
Computers (7.8%)
322,200 Compaq Computer Corporation 7,632,112
1,437,000 Hewlett-Packard Company 135,527,062
496,400 International Business Machines
Corporation 57,737,525
--------------
200,896,699
--------------
Consumer & Marketing (5.4%)
91,900 Colgate-Palmolive Company 9,178,512
1,439,200 Hon Industries Inc. 35,080,500
284,400 McDonald's Corporation 10,949,400
464,308 Newell Rubbermaid Inc. 18,804,474
500,000 The Gillette Company 25,500,000
339,400 The Procter & Gamble Company 31,691,475
125,446 Unilever NV 8,193,192
--------------
139,397,553
--------------
Electronic/Electrical Mfg. (6.6%)
146,000 ABB AB Sponsored ADR 1,998,375
14,000 ABB AG Sponsored ADR 1,979,446
82,300 Applied Materials Inc. (a) 4,521,356
91,900 Diebold Inc. 2,584,687
109,400 Emerson Electric Co. 6,987,925
771,200 General Electric Company 78,421,400
967,200 Intel Corporation 52,289,250
52,700 KLA Tencor Corporation (a) 2,397,850
351,600 Linear Technology Corp. 18,634,800
--------------
169,815,089
--------------
Financial Services (2.1%)
281,200 Citigroup Inc. 18,629,500
121,700 Federal Home Loan Mortgage 7,096,631
172,800 Federal National Mortgage Association 11,750,400
558,450 MBNA Corporation 15,427,181
36,400 The Finova Group Inc. 1,740,375
--------------
54,644,087
--------------
Health Care (15.5%)
105,600 Abbott Laboratories 4,771,800
716,100 Ballard Medical Products 17,007,375
1,550,000 Biomet Inc. 61,903,125
59,600 Boston Scientific Corporation (a) 2,261,075
107,050 Covance Inc. (a) 2,268,122
947,200 Eli Lilly & Co. 67,665,600
1,240,800 Johnson & Johnson 114,929,100
40,000 Medtronic Inc. 2,840,000
364,000 Merck & Co. Inc. 24,570,000
960,000 Pfizer Inc. 102,720,000
--------------
400,936,197
--------------
</TABLE>
- ---------
4
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Shares Value
- ----------- --------------
<C> <S> <C>
Machinery & Manufacturing (3.4%)
133,800 AlliedSignal Inc. $ 7,768,762
370,000 Caterpillar Inc. 20,303,750
428,200 Corning Incorporated 23,390,425
50,000 Cummins Engine Inc. 2,531,250
57,800 Deere & Company 2,200,013
70,000 Illinois Tool Works Inc. 5,372,500
173,200 Minnesota Mining & Manufacturing Co. 14,851,900
337,500 Osmonics Inc. (a) 3,965,625
425,000 Pall Corporation 8,526,563
--------------
88,910,788
--------------
Media & Broadcasting (3.9%)
155,433 Reuters Group PLC ADR 12,920,368
360,181 Scandinavian Broadcasting System SA (a) 11,705,883
2,619,540 The Walt Disney Company 76,294,103
--------------
100,920,354
--------------
Mining & Metals (.9%)
36,700 Newmont Mining Corporation 653,719
195,000 Nucor Corporation 9,725,625
185,000 Rio Tinto PLC ADR 10,845,625
81,250 Steel Dynamics Inc. (a) 1,386,328
--------------
22,611,297
--------------
Oil, Gas, & Other Energy (6.5%)
440,400 Barrett Resources Corporation (a) 14,891,025
161,446 BP Amoco PLC 17,294,903
530,000 Chevron Corporation 49,124,375
612,200 Exxon Corporation 48,899,475
116,700 KN Energy Inc. 2,501,756
237,100 PennzEnergy Co. 3,660,231
237,100 Pennzoil-Quaker State Co. 3,289,763
516,300 Royal Dutch Petroleum Company 29,203,219
--------------
168,864,747
--------------
Retailers (1.7%)
1,063,200 Wal-Mart Stores Inc. 45,318,900
--------------
Telecom & Telecom Equipment (14.5%)
450,000 ADC Telecommunications Inc. (a) 21,993,750
86,000 Airtouch Communications Inc. (a) 8,643,000
232,000 Ameritech Corporation 15,268,500
600,000 AT&T Corp. 33,300,000
338,100 Cisco Systems Inc. (a) 36,810,638
575,000 LM Ericsson Telephone Company ADR 15,489,063
518,532 Lucent Technologies Inc. 29,491,508
1,023,729 MCI Worldcom Inc. (a) 88,424,592
264,000 Motorola Inc. 21,862,500
</TABLE>
5 -------
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Shares or
Principal
Amount Value
- ----------- --------------
129,800 Nokia Corporation ADR $ 9,215,800
<C> <S> <C>
173,300 Nortel Networks Corp. 12,997,500
1,192,200 SBC Communications Inc. 60,951,225
173,700 Tele Danmark AS 8,891,269
136,200 US West Inc. 7,363,313
57,700 Nextlink Communications Inc. (Class A)
(a) 4,414,050
--------------
375,116,708
--------------
Utilities & Energy (1.8%)
112,400 AES Corporation (a) 5,591,900
74,900 CMS Energy Corporation 3,482,850
132,000 Duke Energy Corporation 7,961,250
88,500 FPL Group Inc. 5,149,594
390,900 Pacificorp 7,109,494
288,000 Southern Company 8,172,000
166,000 Teco Energy Inc. 3,849,125
98,500 Texas Utilities Company (Holding Co.) 4,432,500
--------------
45,748,713
--------------
Total common stocks
(cost $1,026,652,552) 2,527,008,966
--------------
SHORT-TERM INVESTMENTS (2.6%)
$46,625,000 Ford Motor Credit Co., 4.750% and
4.830%, June, 1999 46,649,441
6,000,000 General Electric Capital Corp., 4.900%,
June, 1999 6,000,817
3,628,372 Chase Vista Treasury Plus Money Market
Fund, 4.610%, June, 1999 3,628,372
10,000,000 U.S. Treasury Bills, 4.230%, July, 1999 9,955,400
--------------
Total short-term investments
(cost $66,231,369) 66,234,030
TOTAL INVESTMENTS (100.2%)
(cost $1,092,883,921) 2,593,242,996
LIABILITIES, LESS CASH AND OTHER ASSETS (-0.2%) (4,890,847)
--------------
NET ASSETS (100.0%) $2,588,352,149
--------------
--------------
</TABLE>
Notes:
(a) Non-income producing security.
At May 31, 1999, net unrealized appreciation of $1,500,359,075 consisted of
gross unrealized appreciation of $1,518,525,686 and gross unrealized
depreciation of $18,166,611 based on cost of $1,092,883,921 for federal income
tax purposes.
See accompanying notes to financial statements.
- ---------
6
<PAGE>
STATE FARM GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
(Unaudited)
<TABLE>
<S> <C> <C>
Assets
Investments, at value (cost
$1,092,883,921) $2,593,242,996
Cash 3,565
Receivable for:
Dividends and interest $4,861,214
Shares of the Fund sold 611,472
Sundry 11,178 5,483,864
----------
Prepaid expenses 45,448
--------------
Total assets 2,598,775,873
Liabilities and Net Assets
Payable for:
Shares of the Fund redeemed 3,698,457
Securities purchased 6,000,000
Other (including $681,550 to
Manager) 725,267
----------
10,423,724
--------------
Total liabilities 10,423,724
--------------
Net assets applicable to 52,495,249
shares outstanding of
$0.50 par value common stock
(100,000,000 shares authorized) $2,588,352,149
--------------
--------------
Net asset value, offering price and
redemption price per share $ 49.31
--------------
--------------
Analysis of Net Assets
Excess of amounts received from sales
of shares over amounts paid on
redemptions of shares on account of
capital $1,055,542,735
Accumulated net realized gain on sales
of investments 10,789,530
Net unrealized appreciation of
investments 1,500,359,075
Undistributed net investment income 21,660,809
--------------
Net assets applicable to shares
outstanding $2,588,352,149
--------------
--------------
</TABLE>
See accompanying notes to financial statements.
7 -------
<PAGE>
STATE FARM GROWTH FUND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months
ended
May 31, 1999 Year ended
(Unaudited) November 30, 1998
------------ -----------------
<S> <C> <C>
Investment income:
Dividends $16,965,021 29,997,754
Interest 1,047,158 3,413,231
------------ -----------------
18,012,179 33,410,985
Less: foreign withholding taxes 409,012 297,805
------------ -----------------
Total investment income 17,603,167 33,113,180
Expenses:
Investment advisory and management
fees 1,295,373 2,221,492
Professional fees 49,016 55,382
ICI dues 24,350 44,841
Registration fees 11,736 61,281
Custodian fees 10,460 26,161
Reports to shareowners 9,259 21,287
Franchise taxes 8,651 17,495
Directors' fees 7,085 16,259
Fidelity bond expense 3,989 8,367
Security valuation fees 1,522 3,237
Proxy and related expense -- 31,777
Other -- 10,745
------------ -----------------
Total expenses 1,421,441 2,518,324
------------ -----------------
Net investment income 16,181,726 30,594,856
Realized and unrealized gain on
investments:
Net realized gain on sales of
investments 10,789,530 2,197,936
Change in net unrealized appreciation 229,862,376 306,511,650
------------ -----------------
Net realized and unrealized gain on
investments 240,651,906 308,709,586
------------ -----------------
Net change in net assets resulting from
operations $256,833,632 339,304,442
------------ -----------------
------------ -----------------
</TABLE>
See accompanying notes to financial statements.
- ---------
8
<PAGE>
STATE FARM GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six months
ended
May 31, 1999 Year ended
(Unaudited) November 30, 1998
-------------- -----------------
<S> <C> <C>
From operations:
Net investment income $ 16,181,726 30,594,856
Net realized gain on sales of
investments 10,789,530 2,197,936
Change in net unrealized appreciation 229,862,376 306,511,650
-------------- -----------------
Net change in net assets resulting from
operations 256,833,632 339,304,442
Undistributed net investment income
included in price of shares issued and
redeemed 222,667 789,317
Distributions to shareowners from:
Net investment income (per share $.28
in 1999, and $.64 in 1998) (14,439,886) (31,134,862)
Net realized gain (per share $.045 in
1999, and $1.130 in 1998) (2,197,936) (52,131,683)
-------------- -----------------
Total distributions to shareowners (16,637,822) (83,266,545)
From Fund share transactions:
Proceeds from shares sold 171,241,227 334,952,191
Reinvestment of ordinary income
dividends and capital gain
distributions 16,046,065 80,862,911
-------------- -----------------
187,287,292 415,815,102
Less payments for shares redeemed 124,842,372 208,248,185
-------------- -----------------
Net increase in net assets from Fund
share transactions 62,444,920 207,566,917
-------------- -----------------
Total increase in net assets 302,863,397 464,394,131
Net assets:
Beginning of period 2,285,488,752 1,821,094,621
-------------- -----------------
End of period (including undistributed
net investment income of $21,660,809
in 1999,
and $19,696,302 in 1998) $2,588,352,149 2,285,488,752
-------------- -----------------
-------------- -----------------
</TABLE>
See accompanying notes to financial statements.
9 -------
<PAGE>
STATE FARM GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
Per Share Income and Capital Changes (For a share outstanding throughout the
period)
<TABLE>
<CAPTION>
Period
ended
May 31, Year ended November 30,
1999 -----------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
--------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 44.65 39.48 34.55 29.40 22.63 22.21
Income from Investment
Operations
Net investment income 0.30 0.61 0.62 0.63 0.50 0.44
Net gain on
investments (both
realized and
unrealized) 4.69 6.33 7.23 5.17 6.97 0.43
--------- --------- --------- --------- ------- -------
Total from investment
operations 4.99 6.94 7.85 5.80 7.47 0.87
--------- --------- --------- --------- ------- -------
Less Distributions
Net investment income (0.28) (0.64) (0.61) (0.53) (0.52) (0.45)
Capital gains (0.05) (1.13) (2.31) (0.12) (0.18) --
--------- --------- --------- --------- ------- -------
Total distributions (0.33) (1.77) (2.92) (0.65) (0.70) (0.45)
--------- --------- --------- --------- ------- -------
Net asset value, end of
period $ 49.31 44.65 39.48 34.55 29.40 22.63
--------- --------- --------- --------- ------- -------
--------- --------- --------- --------- ------- -------
Total Return 11.23% 18.17% 24.80% 20.09% 33.67% 4.02%
Ratios/Supplemental
Data
Net assets, end of year
(millions) $2,588.4 2,285.5 1,821.1 1,362.9 1,068.6 771.7
Ratio of expenses to
average net assets 0.11%(a) 0.12% 0.12% 0.13% 0.14%(b) 0.14%
Ratio of net investment
income to average net
assets 1.30%(a) 1.47% 1.78% 1.88% 1.95% 2.00%
Portfolio turnover rate 4%(a) 1% 6% 16% 3% 3%
</TABLE>
- ----------
(a) Determined on an annualized basis.
(b) The ratio based on net custodian expenses would have been .13% in 1995.
- ---------
10
<PAGE>
STATE FARM BALANCED FUND, INC.
Dear Shareowner:
The U.S. stock market has generated strong returns over the past six and twelve
month periods. The S&P 500 index produced total returns of 12.6% and 21.0% for
the six and twelve months ended May 31, 1999. The Balanced Fund, which has
approximately two-thirds of its assets invested in common stocks, had total
returns of 7.0% and 11.2% for the same periods.*
The portion of your Fund that is not invested in common stocks holds high
quality fixed-income securities. Over the past six months yields on the bonds
held by the Fund have increased about 100 basis points (a basis point is .01%).
Consequently their values have fallen, and results of the Fund have been
hindered by returns of fixed-income investments during this time.
Returns earned by U.S. common stocks have been extraordinary over the past 4 1/2
years. In our opinion, returns of this magnitude are not sustainable over long
periods of time. Historical studies indicate that the average annual return of
the U.S. stock market was approximately 11% from 1926-98. Obviously, returns
have fluctuated significantly from this average over shorter time periods.
Business conditions are quite favorable in the United States and Europe, while
economic activity has been weak in Japan and most of the emerging markets of the
world. There is some evidence of modest improvement in Japan and the emerging
markets from the difficult conditions of the last two years. Increasingly,
economic activity and financial markets are linked globally.
We are confident that common stock investments in growing companies with fine
managements will produce satisfactory long-term results. Your Fund manages risk
through fundamental analysis and broad diversification. Most of the time fixed
income investments held by the Fund should serve to provide shareowners higher
levels of income and smaller changes in net asset values than is likely from a
portfolio that contains only common stocks.
Returns to shareowners depend primarily on results achieved by the Fund's common
stock portfolio. When measured by virtually all general standards, U.S. common
stocks are selling at the high end of historical valuation levels. We encourage
a disciplined long-term program of periodic investments in the Balanced Fund.
Such an investment program allows shareholders to capture the benefits of dollar
cost averaging and to participate in any long-term appreciation of common stock
prices.
The directors have declared a semi-annual income dividend of $.74 per share
which was paid on June 21, 1999. It was used to purchase additional shares for
your account unless you have elected to receive payment directly by check.
Sincerely,
<TABLE>
<S> <C>
[SIG] [SIG]
Paul N. Eckley Kurt G. Moser
Vice President Vice President
</TABLE>
* Balanced Fund's average annual total return for the 1-year, 5-year and
10-year periods ended June 30, 1999 was 13.32%, 17.29% and 15.07%,
respectively. The Standard & Poor's 500 Stock Index is a market-weighted
index, with dividends reinvested, of 500 large U.S. companies. Past
performance does not guarantee future results. The investment return and
principal value of an investment in the Fund will fluctuate so that your Fund
shares, when redeemed, may be worth more or less than their original cost.
11-------
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Shares Value
- ------------- --------------
<C> <S> <C> <C> <C>
COMMON STOCKS (66.8%)
Agriculture, Foods, & Beverage (4.2%)
812,494 Archer-Daniels-Midland Company $ 12,187,410
26,000 Campbell Soup Company 1,147,250
310,000 Kellogg Company 10,753,125
81,000 Pioneer Hi-Bred International
Inc. 3,037,500
58,000 Sara Lee Corporation 1,392,000
190,000 The Coca-Cola Company 12,979,375
--------------
41,496,660
--------------
Banks (6.1%)
48,666 ABN Amro Holding NV (a) 1,078,414
52,312 Amsouth Bancorporation 1,484,353
36,700 Bank of America Corporation 2,374,031
184,100 Bank One Corporation 10,413,156
25,650 First Security Corporation 485,747
12,300 First Virginia Banks Inc. 611,156
17,700 Golden West Financial
Corporation 1,679,287
10,900 J.P. Morgan & Co. Incorporated 1,518,506
1,900 M&T Bank Corporation 1,001,300
20,500 Northern Trust Corporation 1,852,687
180,960 Pacific Century Financial
Corporation 3,619,200
166,924 Popular Inc. 5,080,749
99,000 Southtrust Corporation 3,854,813
21,400 SunTrust Banks Inc. 1,444,500
17,600 TCF Financial Corporation 488,400
19,251 US Bancorp 625,657
75,700 Wachovia Corporation 6,680,525
373,800 Wells Fargo & Company 14,952,000
--------------
59,244,481
--------------
Building Materials & Construction (.8%)
160,200 Vulcan Materials Company 7,239,037
--------------
Chemicals (4.5%)
230,000 Air Products & Chemicals Inc. 9,430,000
63,000 E.I. du Pont de Nemours and
Company 4,122,562
141,400 Great Lakes Chemical
Corporation 6,389,512
120,000 International Flavors &
Fragrances Inc. 4,935,000
11,800 Praxair Inc. 575,987
220,000 Raychem Corporation 7,645,000
245,500 Sigma-Aldrich Corporation 7,856,000
23,000 The Dow Chemical Company 2,794,500
--------------
43,748,561
--------------
Computer Software and Services (1.2%)
15,500 AutoDesk Inc. 428,188
8,800 Electronic Data Systems
Corporation 495,000
126,000 Microsoft Corporation (a) 10,166,625
--------------
11,089,813
--------------
Computers (5.3%)
377,000 Hewlett-Packard Company 35,555,813
137,200 International Business
Machines Corporation 15,958,075
--------------
51,513,888
--------------
</TABLE>
- ---------
12
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Shares Value
- ------------- --------------
<C> <S> <C> <C> <C>
Consumer & Marketing (3.5%)
160,000 Hon Industries Inc. $ 3,900,000
33,800 McDonald's Corporation 1,301,300
136,218 Newell Rubbermaid Inc. 5,516,829
300,000 The Gillette Company 15,300,000
68,000 The Procter & Gamble Company 6,349,500
22,857 Unilever NV 1,492,848
--------------
33,860,477
--------------
Electronic/Electrical Mfg. (3.6%)
10,400 Applied Materials Inc. (a) 571,350
10,100 Diebold Inc. 284,063
31,200 Emerson Electric Co. 1,992,900
159,900 General Electric Company 16,259,831
251,400 Intel Corporation 13,591,313
40,800 Linear Technology Corp. 2,162,400
--------------
34,861,857
--------------
Financial Services (.8%)
44,500 Citigroup Inc. 2,948,125
160,650 MBNA Corporation 4,437,956
9,900 The Finova Group Inc. 473,344
--------------
7,859,425
--------------
Health Care (10.8%)
38,700 Allergan Inc. 3,599,100
400,851 Ballard Medical Products 9,520,211
405,000 Biomet Inc. 16,174,688
31,025 Covance Inc. (a) 657,342
212,000 Eli Lilly & Co. 15,144,750
198,000 Johnson & Johnson 18,339,750
10,800 Medtronic Inc. 766,800
100,000 Merck & Co. Inc. 6,750,000
320,000 Pfizer Inc. 34,240,000
--------------
105,192,641
--------------
Machinery & Manufacturing (2.2%)
34,600 AlliedSignal Inc. 2,008,963
100,000 Caterpillar Inc. 5,487,500
124,100 Corning Incorporated 6,778,963
14,700 Deere & Company 559,519
20,000 Illinois Tool Works Inc. 1,535,000
47,700 Minnesota Mining &
Manufacturing Co. 4,090,275
84,375 Osmonics Inc. (a) 991,406
--------------
21,451,626
--------------
Media & Broadcasting (4.7%)
42,000 Lee Enterprises Incorporated
(Class A) 1,218,000
42,000 Lee Enterprises Incorporated
(Class B) 1,218,000
173,333 Reuters Group PLC ADR 14,408,306
993,495 The Walt Disney Company 28,935,542
--------------
45,779,848
--------------
</TABLE>
13-------
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Shares Value
- ------------- --------------
<C> <S> <C> <C> <C>
Mining & Metals (1.2%)
29,200 Newmont Mining Corporation $ 520,125
160,000 Nucor Corporation 7,980,000
50,000 Rio Tinto PLC ADR 2,931,250
18,750 Steel Dynamics Inc. (a) 319,922
--------------
11,751,297
--------------
Oil, Gas, & Other Energy (5.0%)
44,993 BP Amoco PLC 4,819,875
144,000 Chevron Corporation 13,347,000
152,000 Exxon Corporation 12,141,000
270,000 KN Energy Inc. 5,788,125
65,220 PennzEnergy Co. 1,006,834
65,220 Pennzoil-Quaker State Co. 904,928
188,700 Royal Dutch Petroleum Company 10,673,344
--------------
48,681,106
--------------
Retailers (.4%)
94,000 Wal-Mart Stores Inc. 4,006,750
--------------
Telecom & Telecom Equipment (11.2%)
258,200 ADC Telecommunications Inc.
(a) 12,619,525
24,000 Airtouch Communications Inc.
(a) 2,412,000
64,000 Ameritech Corporation 4,212,000
255,000 AT&T Corp. 14,152,500
136,000 LM Ericsson Telephone Company
ADR 3,663,500
220,376 Lucent Technologies Inc. 12,533,885
324,657 MCI Worldcom Inc. (a) 28,042,248
64,000 Motorola Inc. 5,300,000
14,900 Nextlink Communications Inc.
(Class A) (a) 1,139,850
44,600 Nortel Networks Corp. 3,345,000
385,800 SBC Communications Inc. 19,724,025
23,100 US West Inc. 1,248,844
--------------
108,393,377
--------------
Utilities & Energy (1.3%)
30,200 AES Corporation (a) 1,502,450
20,800 CMS Energy Corporation 967,200
36,000 Duke Energy Corporation 2,171,250
25,200 FPL Group Inc. 1,466,325
85,000 Pacificorp 1,545,938
80,000 Southern Company 2,270,000
47,300 Teco Energy Inc. 1,096,769
28,000 Texas Utilities Company
(Holding Co.) 1,260,000
--------------
12,279,932
--------------
Total common stocks
(cost $250,263,869) 648,450,776
--------------
</TABLE>
- ---------
14
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Principal Coupon Maturity
amount Rate date Value
- ------------- -------- ------------------- --------------
CORPORATE BONDS (4.3%)
<C> <S> <C> <C> <C>
Agriculture, Foods, & Beverage (.9%)
$ 2,950,000 Archer-Daniels-Midland Company 5.870% November 15, 2010 $ 2,950,708
3,000,000 Dean Foods Company 6.625% May 15, 2009 2,968,440
3,000,000 Pioneer Hi-Bred International
Inc. 5.750% January 15, 2009 2,815,860
--------------
8,735,008
--------------
Automotive (.3%)
3,000,000 Ford Motor Credit Co. 5.800% January 12, 2009 2,796,270
--------------
Building Materials & Construction (.3%)
3,000,000 Vulcan Materials Company 6.000% April 1, 2009 2,868,660
--------------
Computers (.3%)
3,000,000 International Business
Machines Corporation 5.375% February 1, 2009 2,766,060
--------------
Containers & Packaging (.5%)
5,000,000 Avery Dennison Corp. 5.900% December 1, 2008 4,748,400
--------------
Electronic/Electrical Mfg. (.3%)
3,000,000 Emerson Electric Co. 5.850% March 15, 2009 2,865,990
--------------
Machinery & Manufacturing (.3%)
3,000,000 Illinois Tool Works Inc. 5.750% March 1, 2009 2,851,110
--------------
Media & Broadcasting (.3%)
3,000,000 The Washington Post Company 5.500% February 15, 2009 2,798,190
--------------
Oil, Gas, & Other Energy (.3%)
3,000,000 Texaco Capital 5.500% January 15, 2009 2,775,270
--------------
Telecom & Telecom Equipment (.8%)
3,000,000 AT&T Corp. 6.000% March 15, 2009 2,864,880
1,000,000 New England Telephone &
Telegraph Co. 5.875% April 15, 2009 943,680
5,000,000 US West Communications 5.625% November 15, 2008 4,587,950
--------------
8,396,510
--------------
Total corporate bonds
(cost $43,730,500) 41,601,468
--------------
LONG-TERM U.S. TREASURY OBLIGATIONS (23.8%)
625,000 U.S. Treasury Bonds 13.125% May 15, 2001 712,869
680,000 U.S. Treasury Bonds 13.375% August 15, 2001 790,024
2,570,000 U.S. Treasury Bonds 11.625% November 15, 2002 3,040,233
3,000,000 U.S. Treasury Bonds 10.750% May 15, 2003 3,525,750
5,500,000 U.S. Treasury Bonds 11.875% November 15, 2003 6,805,975
1,500,000 U.S. Treasury Bonds 11.625% November 15, 2004 1,904,310
1,785,000 U.S. Treasury Bonds 8.250% May 15, 2005 1,832,909
4,800,000 U.S. Treasury Bonds 10.750% August 15, 2005 6,019,200
11,500,000 U.S. Treasury Bonds 9.375% February 15, 2006 13,759,750
1,000,000 U.S. Treasury Bonds 10.375% November 15, 2009 1,205,660
7,000,000 U.S. Treasury Bonds 10.000% May 15, 2010 8,416,730
5,000,000 U.S. Treasury Bonds 14.250% February 15, 2002 6,077,900
3,000,000 U.S. Treasury Notes 6.375% July 15, 1999 3,006,420
3,000,000 U.S. Treasury Notes 7.125% September 30, 1999 3,022,290
1,500,000 U.S. Treasury Notes 6.000% October 15, 1999 1,506,165
</TABLE>
15-------
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Principal Coupon Maturity
amount Rate date Value
- ------------- -------- ------------------- --------------
<C> <S> <C> <C> <C>
$ 2,500,000 U.S. Treasury Notes 7.875% November 15, 1999 $ 2,532,850
3,000,000 U.S. Treasury Notes 6.375% January 15, 2000 3,024,690
2,000,000 U.S. Treasury Notes 8.500% February 15, 2000 2,047,580
3,000,000 U.S. Treasury Notes 6.875% March 31, 2000 3,043,620
3,000,000 U.S. Treasury Notes 5.500% April 15, 2000 3,008,730
5,000,000 U.S. Treasury Notes 6.250% May 31, 2000 5,051,700
3,000,000 U.S. Treasury Notes 8.750% August 15, 2000 3,120,330
3,000,000 U.S. Treasury Notes 8.500% November 15, 2000 3,131,490
4,200,000 U.S. Treasury Notes 7.750% February 15, 2001 4,359,096
5,000,000 U.S. Treasury Notes 6.375% March 31, 2001 5,082,750
2,000,000 U.S. Treasury Notes 8.000% May 15, 2001 2,093,740
4,000,000 U.S. Treasury Notes 7.875% August 15, 2001 4,196,240
5,500,000 U.S. Treasury Notes 7.500% November 15, 2001 5,737,985
2,000,000 U.S. Treasury Notes 7.500% May 15, 2002 2,103,720
5,000,000 U.S. Treasury Notes 6.000% July 31, 2002 5,057,350
7,500,000 U.S. Treasury Notes 6.375% August 15, 2002 7,664,250
5,000,000 U.S. Treasury Notes 6.250% February 15, 2003 5,099,100
9,000,000 U.S. Treasury Notes 5.750% August 15, 2003 9,020,880
9,000,000 U.S. Treasury Notes 5.875% February 15, 2004 9,071,910
9,000,000 U.S. Treasury Notes 7.250% May 15, 2004 9,591,930
6,000,000 U.S. Treasury Notes 7.250% August 15, 2004 6,405,780
5,000,000 U.S. Treasury Notes 7.500% February 15, 2005 5,418,600
7,500,000 U.S. Treasury Notes 6.500% May 15, 2005 7,777,650
6,000,000 U.S. Treasury Notes 5.875% November 15, 2005 6,030,780
6,000,000 U.S. Treasury Notes 6.875% May 15, 2006 6,367,620
3,000,000 U.S. Treasury Notes 7.000% July 15, 2006 3,204,900
4,000,000 U.S. Treasury Notes 6.500% October 15, 2006 4,162,360
10,000,000 U.S. Treasury Notes 6.250% February 15, 2007 10,274,500
11,000,000 U.S. Treasury Notes 6.625% May 15, 2007 11,567,600
4,000,000 U.S. Treasury Notes 6.125% August 15, 2007 4,082,000
10,000,000 U.S. Treasury Notes 5.500% February 15, 2008 9,844,400
--------------
Total long-term U.S. treasury obligations
(cost $230,828,881) 230,802,316
--------------
SHORT-TERM INVESTMENTS (5.0%)
24,430,000 Ford Motor Credit Co., 4.750%
and 4.830%, June, 1999 24,442,775
5,000,000 General Electric Capital
Corp., 4.900%, June, 1999 5,000,680
2,124,012 Chase Vista Treasury Plus
Money Market Fund, 4.610%,
June, 1999 2,124,012
17,000,000 U.S. Treasury Bills, 4.480%
and 4.490%, June, 1999 and
August, 1999 16,934,180
--------------
Total short-term investments
(cost $48,493,902) 48,501,647
--------------
TOTAL INVESTMENTS (99.9%)
(cost $573,317,152) 969,356,207
CASH AND OTHER ASSETS, LESS LIABILITIES (0.1%) 1,327,959
--------------
NET ASSETS (100.0%) $ 970,684,166
--------------
--------------
</TABLE>
Notes:
(a) Non-income producing security.
At May 31, 1999, net unrealized appreciation of $396,039,055 consisted of gross
unrealized appreciation of $967,218,739 and gross unrealized depreciation of
$571,179,684 based on cost of $573,317,152 for federal income tax purposes.
See accompanying notes to financial statements.
- ---------
16
<PAGE>
STATE FARM BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
(Unaudited)
<TABLE>
<S> <C> <C>
Assets
Investments, at value (cost
$573,317,152) $969,356,207
Cash 4,090
Receivable for:
Dividends and interest $4,796,799
Shares of the Fund sold 389,968
Securities sold 3,001,150
Sundry 5,129 8,193,046
----------
Prepaid expenses 31,323
------------
Total assets 977,584,666
Liabilities and Net Assets
Payable for:
Shares of the Fund redeemed 1,592,953
Securities purchased 5,000,000
Other (including $279,462 to
Manager) 307,547
----------
6,900,500
------------
Total liabilities 6,900,500
------------
Net assets applicable to 18,595,611
shares outstanding of
$1.00 par value common stock
(40,000,000 shares authorized) $970,684,166
------------
------------
Net asset value, offering price and
redemption price per share $ 52.20
------------
------------
Analysis of Net Assets
Excess of amounts received from sales
of shares over amounts paid on
redemptions of shares on account of
capital $546,520,844
Accumulated net realized gain on sales
of investments 2,824,411
Net unrealized appreciation of
investments 396,039,055
Undistributed net investment income 25,299,856
------------
Net assets applicable to shares
outstanding $970,684,166
------------
------------
</TABLE>
See accompanying notes to financial statements.
17-------
<PAGE>
STATE FARM BALANCED FUND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months
ended
May 31, 1999 Year ended
(Unaudited) November 30, 1998
------------- -----------------
<S> <C> <C>
Investment income:
Dividends $ 4,445,716 9,838,359
Interest 9,952,202 19,172,814
------------- --------
14,397,918 29,011,173
Less: foreign withholding taxes 100,330 113,470
------------- --------
Total investment income 14,297,588 28,897,703
Expenses:
Investment advisory and management
fees 538,627 980,972
Professional fees 25,309 33,191
Custodian fees 10,348 17,454
ICI dues 9,776 20,048
Franchise taxes 9,132 17,229
Registration fees 7,893 20,140
Reports to shareowners 5,031 11,907
Directors' fees 3,543 8,129
Fidelity bond expense 2,439 4,827
Security valuation fees 2,014 4,893
Proxy and related expense -- 14,077
Other -- 140
------------- --------
Total expenses 614,112 1,133,007
------------- --------
Net investment income 13,683,476 27,764,696
Realized and unrealized gain on
investments:
Net realized gain on sales of
investments 2,824,411 446,940
Change in net unrealized appreciation 46,103,847 70,040,582
------------- --------
Net realized and unrealized gain on
investments 48,928,258 70,487,522
------------- --------
Net change in net assets resulting from
operations $62,611,734 98,252,218
------------- --------
------------- --------
</TABLE>
See accompanying notes to financial statements.
- ---------
18
<PAGE>
STATE FARM BALANCED FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six months
ended
May 31, 1999 Year ended
(Unaudited) November 30, 1998
------------ -----------------
<S> <C> <C>
From operations:
Net investment income $13,683,476 27,764,696
Net realized gain on sales of
investments 2,824,411 446,940
Change in net unrealized appreciation 46,103,847 70,040,582
------------ -----------------
Net change in net assets resulting from
operations 62,611,734 98,252,218
Undistributed net investment income
included in price of shares issued and
redeemed 195,120 714,370
Distributions to shareowners from:
Net investment income (per share $.73
in 1999, and $1.54 in 1998) (13,257,663 ) (26,507,020)
Net realized gain (per share $.023 in
1999, and $.690 in 1998) (382,353 ) (11,354,841)
------------ -----------------
Total distributions to shareowners (13,640,016 ) (37,861,861)
From Fund share transactions:
Proceeds from shares sold 68,367,537 143,691,069
Reinvestment of ordinary income
dividends and capital gain
distributions 13,052,057 36,429,240
------------ -----------------
81,419,594 180,120,309
Less payments for shares redeemed 53,103,634 110,302,865
------------ -----------------
Net increase in net assets from Fund
share transactions 28,315,960 69,817,444
------------ -----------------
Total increase in net assets 77,482,798 130,922,171
Net assets:
Beginning of period 893,201,368 762,279,197
------------ -----------------
End of period (including undistributed
net investment income of $25,299,856
in 1999,
and $24,614,336 in 1998) $970,684,166 893,201,368
------------ -----------------
------------ -----------------
</TABLE>
See accompanying notes to financial statements.
19-------
<PAGE>
STATE FARM BALANCED FUND, INC.
FINANCIAL HIGHLIGHTS
Per Share Income and Capital Changes (For a share outstanding throughout the
period)
<TABLE>
<CAPTION>
Period
ended
May 31, Year ended November 30,
1999 -----------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
--------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 49.54 46.09 42.04 37.76 31.12 30.88
Income from Investment
Operations
Net investment income 0.73 1.54 1.40 1.39 1.25 1.03
Net gain on
investments (both
realized and
unrealized) 2.68 4.14 5.45 4.38 6.77 0.17
--------- --- --- --- ------- -------
Total from investment
operations 3.41 5.68 6.85 5.77 8.02 1.20
--------- --- --- --- ------- -------
Less Distributions
Net investment income (0.73) (1.54) (1.47) (1.30) (1.19) (0.89)
Capital gains (0.02) (0.69) (1.33) (0.19) (0.19) (0.07)
--------- --- --- --- ------- -------
Total distributions (0.75) (2.23) (2.80) (1.49) (1.38) (0.96)
--------- --- --- --- ------- -------
Net asset value, end of
period $ 52.20 49.54 46.09 42.04 37.76 31.12
--------- --- --- --- ------- -------
--------- --- --- --- ------- -------
Total Return 6.97% 12.72% 17.33% 15.78% 26.53% 3.98%
Ratios/Supplemental
Data
Net assets, end of year
(millions) $ 970.7 893.2 762.3 626.1 499.7 370.5
Ratio of expenses to
average net assets 0.13%(a) 0.14% 0.14% 0.15% 0.17%(b) 0.17%
Ratio of net investment
income to average net
assets 2.89%(a) 3.34% 3.42% 3.63% 3.66% 3.36%
Portfolio turnover rate 6%(a) 2% 6% 9% 6% 4%
</TABLE>
- ----------
(a) Determined on an annualized basis.
(b) The ratio based on net custodian expenses would have been .16% in 1995.
- ---------
20
<PAGE>
STATE FARM INTERIM FUND, INC.
Dear Shareowner:
Sentiments in the money and capital markets have shifted markedly since the end
of your Fund's fiscal year last November. Fears of a global economic meltdown
and heavy demands for safety and liquidity have faded. Presently, investors are
focusing on the strong U.S. economy and any economic data that suggests
inflationary pressures may be building. There is also evidence that several
foreign economies are improving somewhat. Reflecting this major change in market
psychology, interest rates on the U.S. Treasury securities which dominate the
investments of the Interim Fund have jumped nearly 100 basis points (a basis
point is .01%) over the past six months.
The significant increase in market interest rates caused the net asset value of
the Fund to fall to $9.64 from $9.98, a 3.4% decrease, over the last six months.
Interest income derived from the Fund's portfolios did not offset the decline in
net asset value during the period. Consequently, the total return, which
includes the reinvestment of dividends and the change in net asset value, for
the six months was negative 0.25%. Total return for the twelve months ended May
31, 1999 was 4.51%.*
The U. S. economy remains very healthy. The latest revision of real GDP for the
first quarter of 1999 puts growth at a 4.3% annual rate during the period. That
performance followed a heady 6.0% increase during the fourth quarter of 1998.
The pace of general economic activity appears to be slowing in the present
quarter but continues to be quite encouraging.
The Open Market Committee of the Federal Reserve has reacted to the strength in
our economy and the potential for a pickup in inflation by recently announcing a
tightening bias for monetary policy. Most financial market observers are now
expecting that the central bank will raise short-term interest rates by at least
25 basis points before too long. The rise in market interest rates over the last
couple months indicates such a move is anticipated.
We feel the best news on inflation is probably over for this business cycle,
which is heading into its ninth year. However, few signs presently point to
dramatic increases in domestic inflation. With current U.S. interest rates being
among the highest in the developed world, fixed-income investors in our country
now seem to be adequately compensated for any expected inflation.
As you know the Fund declares a dividend each day from its net investment income
which is payable on the last day of the calendar quarter. All dividends are
automatically invested in shares of the Fund unless you have advised State Farm
Investment Management Corp. otherwise in writing.
Sincerely,
<TABLE>
<S> <C>
[SIG] [SIG]
Kurt G. Moser Donald E. Heltner
Vice President Vice President
</TABLE>
* Interim Fund's average annual total return for the 1-year, 5-year and 10-year
periods ended June 30, 1999 was 4.22%, 6.32% and 6.88%, respectively. Past
performance does not guarantee future results. The investment return and
principal value of an investment in the Fund will fluctuate so that your Fund
shares, when redeemed, may be worth more or less than their original cost.
21-------
<PAGE>
STATE FARM INTERIM FUND, INC.
PORTFOLIO OF INVESTMENTS
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Principal Coupon Maturity
amount Rate Date Value
- ------------- -------- ------------------- --------------
<C> <S> <C> <C> <C>
LONG-TERM U.S. TREASURY OBLIGATIONS (97.6%)
$ 4,000,000 U.S. Treasury Bonds 11.625% November 15, 2002 $ 4,731,880
2,000,000 U.S. Treasury Bonds 10.750% May 15, 2003 2,350,500
2,000,000 U.S. Treasury Bonds 11.125% August 15, 2003 2,397,620
1,000,000 U.S. Treasury Bonds 11.875% November 15, 2003 1,237,450
4,000,000 U.S. Treasury Bonds 14.250% February 15, 2002 4,862,320
4,000,000 U.S. Treasury Notes 6.375% July 15, 1999 4,008,560
1,000,000 U.S. Treasury Notes 5.750% September 30, 1999 1,003,010
4,000,000 U.S. Treasury Notes 6.000% October 15, 1999 4,016,440
2,000,000 U.S. Treasury Notes 6.375% January 15, 2000 2,016,460
2,000,000 U.S. Treasury Notes 8.500% February 15, 2000 2,047,580
1,000,000 U.S. Treasury Notes 6.875% March 31, 2000 1,014,540
6,250,000 U.S. Treasury Notes 5.500% April 15, 2000 6,268,187
1,000,000 U.S. Treasury Notes 6.750% April 30, 2000 1,014,040
1,000,000 U.S. Treasury Notes 8.875% May 15, 2000 1,034,610
1,000,000 U.S. Treasury Notes 6.250% May 31, 2000 1,010,340
4,000,000 U.S. Treasury Notes 8.750% August 15, 2000 4,160,440
3,750,000 U.S. Treasury Notes 8.500% November 15, 2000 3,914,363
3,000,000 U.S. Treasury Notes 5.500% December 31, 2000 3,005,760
1,000,000 U.S. Treasury Notes 5.250% January 31, 2001 998,280
4,000,000 U.S. Treasury Notes 7.750% February 15, 2001 4,151,520
4,000,000 U.S. Treasury Notes 5.625% February 28, 2001 4,015,280
5,000,000 U.S. Treasury Notes 8.000% May 15, 2001 5,234,350
4,000,000 U.S. Treasury Notes 7.875% August 15, 2001 4,196,240
3,000,000 U.S. Treasury Notes 6.375% September 30, 2001 3,056,940
4,000,000 U.S. Treasury Notes 7.500% November 15, 2001 4,173,080
4,000,000 U.S. Treasury Notes 7.500% May 15, 2002 4,207,440
8,000,000 U.S. Treasury Notes 6.375% August 15, 2002 8,175,200
5,000,000 U.S. Treasury Notes 5.750% November 30, 2002 5,016,800
6,000,000 U.S. Treasury Notes 6.250% February 15, 2003 6,118,920
7,000,000 U.S. Treasury Notes 5.750% April 30, 2003 7,019,530
7,000,000 U.S. Treasury Notes 5.750% August 15, 2003 7,016,240
3,000,000 U.S. Treasury Notes 5.875% February 15, 2004 3,023,970
8,000,000 U.S. Treasury Notes 7.250% May 15, 2004 8,526,160
5,000,000 U.S. Treasury Notes 7.250% August 15, 2004 5,338,150
8,000,000 U.S. Treasury Notes 7.875% November 15, 2004 8,787,680
4,000,000 U.S. Treasury Notes 7.500% February 15, 2005 4,334,880
4,000,000 U.S. Treasury Notes 6.500% May 15, 2005 4,148,080
3,000,000 U.S. Treasury Notes 6.500% August 15, 2005 3,111,840
4,000,000 U.S. Treasury Notes 5.875% November 15, 2005 4,020,520
--------------
Total long-term U.S. treasury obligations
(cost $159,030,937) 154,765,200
--------------
</TABLE>
- ---------
22
<PAGE>
STATE FARM INTERIM FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Principal
amount Value
- ------------- --------------
SHORT-TERM INVESTMENTS (2.4%)
<C> <S> <C> <C> <C>
$ 1,020,000 Ford Motor Credit Co., 4.750%,
June, 1999 $ 1,020,539
1,722,106 Chase Vista Treasury Plus
Money Market Fund, 4.610%,
June, 1999 1,722,106
1,000,000 U.S. Treasury Bills, 4.455%,
August, 1999 991,030
--------------
Total short-term investments
(cost $3,733,257) 3,733,675
--------------
TOTAL INVESTMENTS (100.0%)
(cost $162,764,194) 158,498,875
CASH AND OTHER ASSETS, LESS LIABILITIES (0.0%) 30,922
--------------
NET ASSETS (100.0%) $ 158,529,797
--------------
--------------
</TABLE>
Notes:
At May 31, 1999, net unrealized depreciation of $4,265,319 consisted of gross
unrealized appreciation of $321,423 and gross unrealized depreciation of
$4,586,742 based on cost of $162,764,194 for federal income tax purposes.
See accompanying notes to financial statements.
23-------
<PAGE>
STATE FARM INTERIM FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
(Unaudited)
<TABLE>
<S> <C> <C>
Assets
Investments, at value (cost
$162,764,194) $158,498,875
Receivable for:
Interest $1,977,111
Shares of the Fund sold 24,465
Sundry 3,544 2,005,120
----------
Prepaid expenses 18,118
------------
Total assets 160,522,113
Liabilities and Net Assets
Dividends payable to shareowners 1,635,456
Payable for:
Shares of the Fund redeemed 286,572
Other (including $58,523 to Manager) 70,288
----------
356,860
------------
Total liabilities 1,992,316
------------
Net assets applicable to 16,437,229
shares outstanding of
$1.00 par value common stock
(40,000,000 shares authorized) $158,529,797
------------
------------
Net asset value, offering price and
redemption price per share $ 9.64
------------
------------
Analysis of Net Assets
Excess of amounts received from sales
of shares over amounts paid on
redemptions of shares on account of
capital $166,516,758
Accumulated net realized loss on sales
of investments (3,721,642)
Net unrealized depreciation of
investments (4,265,319)
------------
Net assets applicable to shares
outstanding $158,529,797
------------
------------
</TABLE>
See accompanying notes to financial statements.
- ---------
24
<PAGE>
STATE FARM INTERIM FUND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months
ended
May 31, 1999 Year ended
(Unaudited) November 30, 1998
------------- -----------------
<S> <C> <C>
Investment income:
Interest $ 5,165,153 8,742,391
Expenses:
Investment advisory and management
fees 113,447 199,209
Professional fees 13,551 19,501
Custodian fees 7,017 6,112
Franchise taxes 4,570 12,547
Registration fees 1,783 12,266
Reports to shareowners 1,677 2,713
ICI dues 1,356 3,283
Fidelity bond expense 1,300 2,638
Directors' fees 1,181 2,709
Security valuation fees 505 1,862
Proxy and related expense -- 2,950
Other -- 140
------------- --------
Total expenses 146,387 265,930
------------- --------
Net investment income 5,018,766 8,476,461
Realized and unrealized gain (loss) on
investments:
Net realized loss on sales of
investments (506,394) (994,996)
Change in net unrealized appreciation
or depreciation (4,786,645) 2,484,327
------------- --------
Net realized and unrealized gain (loss)
on investments (5,293,039) 1,489,331
------------- --------
Net change in net assets resulting from
operations $ (274,273) 9,965,792
------------- --------
------------- --------
</TABLE>
See accompanying notes to financial statements.
25-------
<PAGE>
STATE FARM INTERIM FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six months
ended
May 31, 1999 Year ended
(Unaudited) November 30, 1998
------------ -----------------
<S> <C> <C>
From operations:
Net investment income $ 5,018,766 8,476,461
Net realized loss on sales of
investments (506,394 ) (994,996)
Change in net unrealized appreciation
or depreciation (4,786,645 ) 2,484,327
------------ -----------------
Net change in net assets resulting from
operations (274,273 ) 9,965,792
Distributions to shareowners from:
Net investment income (per share $.32
in 1999, and $.68 in 1998) (5,018,766 ) (8,476,461)
------------ -----------------
Total distributions to shareowners (5,018,766 ) (8,476,461)
From Fund share transactions:
Proceeds from shares sold 46,712,039 100,294,008
Reinvestment of ordinary income
dividends 4,558,447 7,418,955
------------ -----------------
51,270,486 107,712,963
Less payments for shares redeemed 41,592,216 67,903,936
------------ -----------------
Net increase in net assets from Fund
share transactions 9,678,270 39,809,027
------------ -----------------
Total increase in net assets 4,385,231 41,298,358
Net assets:
Beginning of period 154,144,566 112,846,208
------------ -----------------
End of period $158,529,797 154,144,566
------------ -----------------
------------ -----------------
</TABLE>
See accompanying notes to financial statements.
- ---------
26
<PAGE>
STATE FARM INTERIM FUND, INC.
FINANCIAL HIGHLIGHTS
Per Share Income and Capital Changes (For a share outstanding throughout the
period)
<TABLE>
<CAPTION>
Period
ended
May 31, Year ended November 30,
1999 -----------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
--------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.98 9.85 9.98 10.15 9.72 10.52
Income from Investment
Operations
Net investment income 0.32 0.68 0.69 0.70 0.70 0.71
Net gain or loss on
investments (both
realized and
unrealized) (0.34) 0.13 (0.13) (0.17) 0.43 (0.80)
--------- --- --- --- ------- -------
Total from investment
operations (0.02) 0.81 0.56 0.53 1.13 (0.09)
--------- --- --- --- ------- -------
Less Distributions
Net investment income (0.32) (0.68) (0.69) (0.70) (0.70) (0.71)
--------- --- --- --- ------- -------
Total distributions (0.32) (0.68) (0.69) (0.70) (0.70) (0.71)
--------- --- --- --- ------- -------
Net asset value, end of
period $ 9.64 9.98 9.85 9.98 10.15 9.72
--------- --- --- --- ------- -------
--------- --- --- --- ------- -------
Total Return (0.25)% 8.31% 5.87% 5.44% 11.91% (0.85)%
Ratios/Supplemental
Data
Net assets, end of year
(millions) $ 158.5 154.1 112.8 107.6 104.7 94.3
Ratio of expenses to
average net assets 0.19%(a) 0.21% 0.22% 0.23%(b) 0.25%(b) 0.22%
Ratio of net investment
income to average net
assets 6.42%(a) 6.80% 7.03% 7.03% 7.00% 7.00%
Portfolio turnover rate 12%(a) 14% 15% 17% 17% 15%
</TABLE>
- ----------
(a) Determined on an annualized basis.
(b) The ratio based on net custodian expenses would have been .22% in 1996 and
.24% in 1995.
27-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
Dear Shareowner:
Sentiments in the money and capital markets have shifted markedly since the end
of your Fund's fiscal year last November. Fears of a global economic meltdown
and desires for safety and liquidity have faded. Presently, investors are
focusing on the strong U.S. economy, evidence that several foreign economies are
improving somewhat and any economic data that suggests inflationary pressures
may be building. Reflecting this major change in market psychology, interest
rates on good quality taxable bonds have jumped nearly 100 basis points (a basis
point is .01%) over the past six months.
Interest rates on municipal securities have not risen as much as those of their
taxable counterparts. Yields of the bonds held by your Fund are now about 35
basis points higher than they were at the end of November. Movements in the
interest rates on municipal and taxable bonds over the last six months or so
have brought the relative attractiveness of municipal securities more or less in
line with average relationships that have existed during the last fifteen years.
As should be expected when interest rates rise, prices of the municipal bonds
held by your Fund declined over the last six months causing the net asset value
to fall to $8.40 from $8.55, a 1.8% decrease. The Fund's total return, which
includes the reinvestment of dividends and the change in net asset value, for
the six months was 0.75%. Total return for the twelve months ended May 31, 1999
was 4.10%.*
Some significant changes in the demand and supply dynamics of the municipal bond
market are surfacing this year. Owners of municipal bonds who are more
interested in total return than receiving tax-exempt income are now unwinding
those positions because municipal bonds no longer appear noticeably "attractive"
when compared to good quality taxable bonds. Net demand for municipal securities
by open-end municipal bond funds and casualty insurance companies is also
waning. For the time being, the aforementioned gap in demand is being filled by
direct retail investors who are attracted by the higher yields which are now
available. On the supply side, new municipal bond issuance for the first five
months of 1999 is 24% below last year's volume for the same period.
As always, we encourage you to view your investment in the Fund as a genuinely
long-term commitment and to accept market volatility as an inevitable
consequence of owning a municipal bond fund. The high quality investments of the
Fund should provide a dependable flow of dividend income through all types of
markets.
The Fund declares a dividend each day from its net investment income which is
payable on the last day of the calendar quarter. All dividends are automatically
invested in shares of the Fund unless you have advised State Farm Investment
Management Corp. otherwise in writing.
Sincerely,
<TABLE>
<S> <C>
[SIG] [SIG]
Julian R. Bucher Kurt G. Moser
Vice President Vice President
</TABLE>
* Municipal Bond Fund's average annual total return for the 1-year, 5-year and
10-year periods ended June 30, 1999 was 2.41%, 5.80% and 6.58%, respectively.
Past performance does not guarantee future results. The investment return and
principal value of an investment in the Fund will fluctuate so that your Fund
shares, when redeemed, may be worth more or less than their original cost.
- ---------
28
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Rating
Principal Coupon Maturity (Moody's
amount Rate Date or S&P) Value
- ------------- -------- ------------------- --------- --------------
<C> <S> <C> <C> <C> <C>
LONG-TERM MUNICIPAL BONDS (97.8%)
Alabama (1.7%)
$ 2,165,000 Huntsville, Alabama, General
Obligation Warrants, Series
1998A 4.600% November 1, 2013 Aa2 $ 2,081,409
2,465,000 Limestone County Board of
Education, Alabama, Capital
Outlay Tax Antic Warrants,
Series 1998 4.900% July 1, 2015 Aaa 2,380,229
2,200,000 The Water Works and Sewer
Board, Birmingham, Alabama,
Water and Sewer Revenue
Bonds, Series 1994
(Prerefunded to 1-1-2004 @
102) 4.750% January 1, 2005 Aa3 2,292,906
--------------
6,754,544
--------------
Alaska (1.6%)
1,505,000 Anchorage, Alaska, General
Obligation General Purpose
Refunding Bonds 4.600% February 1, 2003 Aaa 1,533,535
1,565,000 Matanuska-Susitna Borough,
Alaska, General Obligation
School Bonds, 1999 Series A 5.000% March 1, 2015 Aaa 1,541,415
1,500,000 Municipality of Anchorage,
Alaska, 1993 General
Obligation Refunding School
Bonds, Series B 4.900% September 1, 2003 Aaa 1,549,320
1,100,000 Municipality of Anchorage,
Alaska, 1994 General
Obligation School Bonds 5.400% July 1, 2005 Aaa 1,165,890
--------------
5,790,160
--------------
Arizona (5.9%)
2,340,000 City of Phoenix, Arizona,
General Obligation Refunding
Bonds, Series 1993 A 5.300% July 1, 2006 Aa1 2,484,565
2,000,000 Deer Valley Unified School
District No. 97 of Maricopa
County, Arizona, School
Improvement Bonds, Project
of 1992, Series A (1993) 5.125% July 1, 2004 Aaa 2,092,340
1,000,000 Maricopa County, Arizona,
Unified School District No.
69, Paradise Valley School
Improvement Bonds, Series
1990A 7.100% July 1, 2004 A1 1,131,110
1,000,000 Maricopa County, Arizona,
Unified School District No.
69, Paradise Valley School
Improvement Bonds, Series
1994A 7.100% July 1, 2008 A1 1,179,670
1,200,000 Maricopa County, Arizona,
Unified School District No.
69, Paradise Valley School
Improvement Bonds, Series
1994A 7.000% July 1, 2009 A1 1,416,528
2,500,000 Maricopa County, Arizona,
Unified School District No.
69, Paradise Valley School
Improvement Bonds, Series
1994A 7.000% July 1, 2010 A1 2,970,975
4,250,000 Mesa Unified School District
No. 4 of Maricopa County,
Arizona, School Improvement
Bonds, Project of 1995,
Series D (1997) 4.750% July 1, 2010 Aaa 4,255,482
1,000,000 Pima County, Arizona, General
Obligation Refunding Bonds,
Series 1992 6.300% July 1, 2002 A1 1,069,100
2,250,000 Pima County, Arizona, Unified
School District No. 1,
Tucson School Improvement
Bonds, Series 1990 B
(Prerefunded to 7-1-2000 @
101) 6.900% July 1, 2002 A2 2,356,020
3,000,000 Tempe Union High School
District No. 213, Maricopa
County, Arizona, School
Improvement General
Obligation Bonds, Project of
1989, Series 1992B
(Prerefunded to 7-1-2001 @
101) 5.875% July 1, 2002 A+ 3,154,740
--------------
22,110,530
--------------
California (5.0%)
3,000,000 City of Los Angeles,
California, Department of
Water and Power, Electric
Plant Refunding Revenue
Bonds, Second Issue of 1993 4.800% November 15, 2004 Aa3 3,119,700
3,500,000 City of Los Angeles,
California, Wastewater
System Revenue Bonds, Series
1990 B (Prerefunded to
6-1-2000 @ 102) 6.900% June 1, 2004 Aaa 3,696,840
2,830,000 Sacramento County, California,
Sanitary District Financing
Authority Revenue Bonds,
1995 5.000% December 1, 2007 Aa3 2,971,953
1,500,000 Sacramento County, California,
Sanitary District Financing
Authority Revenue Bonds,
1995 5.000% December 1, 2008 Aa3 1,566,540
</TABLE>
29-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Rating
Principal Coupon Maturity (Moody's
amount Rate Date or S&P) Value
- ------------- -------- ------------------- --------- --------------
<C> <S> <C> <C> <C> <C>
$ 1,400,000 San Diego County, California,
Water Authority Water
Revenue Certificates of
Participation, Series 1991A 6.000% May 1, 2001 Aa3 $ 1,461,824
400,000 State of California, General
Obligation Veterans Bonds,
Series AL 9.600% April 1, 2001 Aa3 441,636
3,000,000 State of California, Various
Purpose General Obligation
Bonds 5.900% February 1, 2000 Aa3 3,055,140
2,000,000 State of California, Various
Purpose General Obligation
Bonds 6.000% October 1, 2006 Aa3 2,226,620
--------------
18,540,253
--------------
Colorado (3.4%)
2,000,000 Arapahoe County School
District # 6, Colorado,
Littleton Public Schools
General Obligation
Improvement Bonds, Series
1995A 5.000% December 1, 2007 Aa2 2,090,180
2,620,000 Cherry Creek School District
No. 5, Arapahoe County,
Colorado, General Obligation
Improvement Bonds, Series
1990 (Prerefunded to
12-15-2000 @ 101) 7.000% December 15, 2003 Aa2 2,783,383
2,000,000 Jefferson County, Colorado,
School District No. R-1
General Obligation Bonds,
Series 1992 (Prerefunded to
12-15-2002 @ 101) 5.750% December 15, 2003 Aaa 2,142,980
2,540,000 Mesa County Valley School
District No. 51, County of
Mesa, State of Colorado,
General Obligation Bonds,
Series 1996 5.300% December 1, 2010 Aaa 2,642,235
3,135,000 St. Vrain School District #
R3-1J, Colorado, General
Obligation, Series 1997 5.000% December 15, 2012 Aaa 3,153,841
--------------
12,812,619
--------------
Delaware (.7%)
1,125,000 The State of Delaware, General
Obligation Bonds, Series
1994B (Prerefunded to
12-1-2004 @ 100) 6.000% December 1, 2011 Aa1 1,228,275
1,125,000 The State of Delaware, General
Obligation Bonds, Series
1994B (Prerefunded to
12-1-2004 @ 100) 6.000% December 1, 2012 Aa1 1,228,275
--------------
2,456,550
--------------
Florida (3.4%)
2,000,000 Alachua County School
District, Alachua County,
Florida, General Obligation
Refunding Bonds, Series 1994 4.500% July 1, 2004 Aaa 2,042,820
3,000,000 City of Lakeland, Florida,
Electric and Water Revenue,
Series 1989 (Prerefunded to
10-1-1999 @ 102) 6.900% October 1, 2003 A1 3,095,460
500,000 Orlando Utilities Commission,
Florida, Water and Electric
Revenue, Series 1982
(Escrowed to maturity) 9.600% October 1, 1999 Aaa 510,600
2,000,000 School District of Leon
County, Florida, General
Obligation Refunding Bonds,
Series 1991 5.850% July 1, 2001 A1 2,083,500
3,000,000 State of Florida, State Board
of Education Capital Outlay,
1999 Series A 4.750% January 1, 2015 Aa2 2,909,850
2,000,000 State of Florida, State Board
of Education, Public
Education Capital Outlay
Refunding Bonds, 1995 Series
C 5.125% June 1, 2008 Aa2 2,079,280
--------------
12,721,510
--------------
Georgia (8.0%)
2,100,000 Cherokee County School
Systems, Georgia, General
Obligation School, Series
1993 4.900% February 1, 2004 A2 2,169,804
1,055,000 Columbia County, Georgia,
General Obligation Bonds
(Courthouse/Detention Center
Projects), Series 1998 4.700% February 1, 2013 A+ 1,015,554
1,195,000 Columbia County, Georgia,
General Obligation Bonds
(Courthouse/Detention Center
Projects), Series 1998 4.800% February 1, 2014 A+ 1,155,792
1,205,000 DeKalb County School District,
Georgia, General Obligation
Refunding Bonds, Series 1993 5.100% July 1, 2004 Aa2 1,262,647
</TABLE>
- ---------
30
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Rating
Principal Coupon Maturity (Moody's
amount Rate Date or S&P) Value
- ------------- -------- ------------------- --------- --------------
<C> <S> <C> <C> <C> <C>
$ 2,500,000 Fayette County School
District, Georgia, General
Obligation Refunding School
Bonds, Series 1999 (a) 4.750% March 1, 2015 Aa3 $ 2,416,350
3,215,000 Forsyth County School
District, Georgia, General
Obligation Bonds, Series
1995 (Prerefunded to
7-1-2005 @ 102) 5.050% July 1, 2007 Aaa 3,408,543
4,000,000 Gwinnett County Water & Sewer
Authority, Georgia, Revenue
Series 1998 5.000% August 1, 2011 Aaa 4,092,640
1,500,000 Municipal Electric Authority
of Georgia, General Power
Revenue Bonds, Series 1993A 5.000% January 1, 2004 A3 1,542,645
3,000,000 State of Georgia, General
Obligation Bonds, Series
1994B 6.250% April 1, 2012 Aaa 3,431,790
3,000,000 State of Georgia, General
Obligation Bonds, Series
1995B 5.750% March 1, 2012 Aaa 3,287,340
2,000,000 State of Georgia, General
Obligation Bonds, Series
1995C 5.700% July 1, 2011 Aaa 2,186,660
3,590,000 State of Georgia, General
Obligation Bonds, Series
1996C 6.250% August 1, 2009 Aaa 4,104,411
--------------
30,074,176
--------------
Hawaii (2.7%)
1,775,000 City and County of Honolulu,
Hawaii, General Obligation
Bonds, 1996 Series A 5.400% September 1, 2009 Aaa 1,873,814
2,225,000 City and County of Honolulu,
Hawaii, General Obligation
Bonds, 1996 Series A
(Prerefunded to 9-1-2006 @
102) 5.400% September 1, 2009 Aaa 2,376,834
2,200,000 City and County of Honolulu,
Hawaii, General Obligation
Refunding Bonds, Series 1 5.600% June 1, 2001 Aa3 2,274,888
3,000,000 State of Hawaii, General
Obligation Bonds of 1992,
Series BW 6.375% March 1, 2011 A1 3,397,410
--------------
9,922,946
--------------
Idaho (.4%)
1,540,000 Joint School District No. 2,
Ada & Canyon Counties,
Idaho, General Obligation
School Bonds, Series 1994 5.000% July 30, 2004 Aa2 1,604,649
--------------
Illinois (5.1%)
200,000 Charleston, Illinois, Water
Works Improvement Bonds 8.000% January 1, 2000 A 205,298
2,195,000 Community Unit School District
Number 200, DuPage County,
Illinois
(Wheaton-Warrenville),
General Obligation School
Building Bonds, Series 1999
(a) 5.050% February 1, 2015 Aaa 2,172,830
2,025,000 County of DuPage, Illinois,
General Obligation Refunding
Bonds (Alternate Rev. Source
- Stormwater Project) 5.100% January 1, 2004 Aaa 2,106,324
3,785,000 DuPage County Forest Preserve
District, Illinois, General
Obligation, Series 1997 4.900% October 1, 2013 Aaa 3,781,669
2,500,000 DuPage Water Commission,
Illinois, General Obligation
Water Refunding Bonds,
Series 1992 5.850% March 1, 2000 Aaa 2,548,975
2,000,000 Lake County, Illinois, Forest
Preserve District General
Obligation Refunding Bonds,
Series 1992B 5.700% February 1, 2003 Aa2 2,113,880
4,000,000 State of Illinois, General
Obligation Bonds, Series
September 1996 5.450% September 1, 2009 Aaa 4,230,200
2,000,000 State of Illinois, General
Obligation Refunding Bonds,
Series of June 1993 5.000% June 1, 2003 Aa2 2,069,640
--------------
19,228,816
--------------
Indiana (2.9%)
2,325,000 Eagle-Union Community Schools
Building Corporation, Boone
County, Indiana, 1st
Mortgage Refunding Bonds,
Series 1999 4.875% July 5, 2015 Aaa 2,240,695
2,300,000 Indianapolis, Indiana, Local
Public Improvement Bond Bank
Refunding Bonds, Series 1993
B 4.700% February 15, 2004 Aaa 2,356,879
2,000,000 Indianapolis, Indiana, Local
Public Improvement Bond
Bank, Series 1993A Bonds 5.250% January 10, 2004 Aaa 2,095,760
900,000 Monroe County Jail, Indiana,
First Mortgage Refunding
Bonds, Series 1993 4.900% January 1, 2002 A1 918,387
</TABLE>
31-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Rating
Principal Coupon Maturity (Moody's
amount Rate Date or S&P) Value
- ------------- -------- ------------------- --------- --------------
<C> <S> <C> <C> <C> <C>
$ 925,000 Monroe County Jail, Indiana,
First Mortgage Refunding
Bonds, Series 1993 4.900% July 1, 2002 A1 $ 947,329
2,125,000 Southwest Allen, Indiana, High
School Building Corp., 1st
Mortgage Refunding Bonds,
Series 1996B 4.850% July 15, 2006 Aaa 2,185,499
--------------
10,744,549
--------------
Iowa (1.1%)
2,000,000 City of Des Moines, Iowa,
Sewer Revenue Bonds, Series
1992D 6.000% June 1, 2003 Aaa 2,110,580
2,045,000 City of Iowa City, Johnson
County, Iowa, Sewer Revenue
Bonds 5.875% July 1, 2004 Aaa 2,147,495
--------------
4,258,075
--------------
Kansas (.1%)
400,000 Johnson County Water District
No. 1, Kansas, Water
Revenue, Series 1982A
(Escrowed to maturity) 10.250% August 1, 2002 Aaa 442,884
--------------
Kentucky (.9%)
1,665,000 Jefferson County, Kentucky,
General Obligation Refunding
Bonds, Series 1998A 4.600% December 1, 2013 Aa2 1,605,510
1,745,000 Jefferson County, Kentucky,
General Obligation Refunding
Bonds, Series 1998A 4.700% December 1, 2014 Aa2 1,691,900
--------------
3,297,410
--------------
Louisiana (1.4%)
5,000,000 State of Louisiana, General
Obligation Bonds, Series
1997A 5.375% April 15, 2011 Aaa 5,191,900
--------------
Maryland (2.9%)
2,000,000 Howard County, Maryland,
Consolidated Public
Improvement Refunding Bonds,
Series 1991B 5.800% August 15, 2001 Aaa 2,091,400
5,750,000 Montgomery County, Maryland,
General Obligation
Consolidated Public
Improvement, 1998 Series A 4.875% May 1, 2013 Aaa 5,771,562
3,000,000 Washington Suburban Sanitary
District, Maryland, Water
Supply Refunding Bonds of
1991 6.000% November 1, 1999 Aa1 3,034,860
--------------
10,897,822
--------------
Michigan (2.4%)
1,400,000 Avondale School District,
Oakland County, Michigan,
1999 Refunding Bonds
(Unlimited Tax General
Obligation) 4.850% May 1, 2015 Aaa 1,365,070
1,400,000 Avondale School District,
Oakland County, Michigan,
1999 Refunding Bonds
(Unlimited Tax General
Obligation) 4.900% May 1, 2016 Aaa 1,363,810
2,465,000 Clarkston Community Schools,
County of Oakland, State of
Michigan, 1998 Refunding
Bonds (General Obligation -
Unlimited Tax) 4.850% May 1, 2012 Aaa 2,450,876
3,800,000 Northville Public Schools,
Michigan, 1997 General
Obligation School Building &
Site & Refunding 5.100% May 1, 2011 Aaa 3,859,242
--------------
9,038,998
--------------
Minnesota (4.6%)
1,885,000 Anoka County, Minnesota,
General Obligation Capital
Improvement Refunding Bonds,
Series 1992C 5.200% February 1, 2001 A1 1,931,239
3,000,000 Becker, Minnesota, Pollution
Control Revenue Refunding
Bonds, Series 1989A,
(Northern States Power Co. -
Sherburne County Gen.
Station Units 1 & 2 Project) 6.800% April 1, 2007 A1 3,066,060
1,500,000 County of Ramsey, Minnesota,
General Obligation Capital
Improvement Refunding Bonds,
Series 1992C 5.400% December 1, 2002 Aaa 1,577,520
</TABLE>
- ---------
32
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Rating
Principal Coupon Maturity (Moody's
amount Rate Date or S&P) Value
- ------------- -------- ------------------- --------- --------------
<C> <S> <C> <C> <C> <C>
$ 2,300,000 Osseo Independent School
District #279, Minnesota,
General Obligation Refunding
Bonds, Series 1993B 4.600% February 1, 2004 A1 $ 2,352,486
1,710,000 Southern Minnesota Municipal
Power Agency, Power Supply
System Revenue Bonds, Series
1993 4.600% January 1, 2004 A2 1,730,400
3,215,000 State of Minnesota, General
Obligation State Refunding
Bonds of 1983 5.125% August 1, 2004 Aaa 3,352,634
3,000,000 Wayzata Independent School
District #284, Minnesota,
General Obligation School
Building Refunding, Series
1998A 5.000% February 1, 2012 Aa1 3,038,850
--------------
17,049,189
--------------
Mississippi (1.1%)
2,000,000 City of Jackson, Mississippi,
Water and Sewer System
Revenue Refunding Bonds,
Series 1993-A 4.850% September 1, 2004 Aaa 2,067,320
2,100,000 Jackson Public School
District, Mississippi,
General Obligation School
Bonds, Series 1992 5.800% July 1, 2002 A1 2,213,190
--------------
4,280,510
--------------
Nebraska (4.4%)
2,850,000 City of Lincoln, Nebraska,
Electric System Revenue
Refunding Bonds, 1993 Series
A 4.700% September 1, 2003 Aa2 2,925,440
2,000,000 City of Lincoln, Nebraska,
Water Revenue and Refunding
Bonds, Series 1993 4.900% August 15, 2003 Aa2 2,070,620
3,000,000 Omaha Public Power District of
Nebraska, Electric System
Revenue, Series A
(Prerefunded to 2-1-2000 @
101.5) 6.700% February 1, 2005 AA 3,112,740
6,000,000 Omaha Public Power District,
Nebraska, Electric System
Revenue Bonds, 1992 Series B
(Escrowed to maturity) 6.150% February 1, 2012 Aa2 6,717,060
1,500,000 Omaha, Nebraska, Public Power
District Electric System
Revenue Bonds, 1993 Series B 5.100% February 1, 2005 Aa2 1,565,910
--------------
16,391,770
--------------
Nevada (.6%)
2,110,000 State of Nevada, General
Obligation (Limited Tax)
Hoover Uprating Refunding
Bonds, Series 1992 6.000% October 1, 2001 Aa2 2,214,867
--------------
New Mexico (.7%)
2,500,000 City of Albuquerque, New
Mexico, Joint Water and
Sewer Refunding Revenue
Bonds, Series 1990B 7.000% July 1, 2003 Aa3 2,639,000
--------------
New York (.3%)
1,250,000 State of New York, Power
Authority General Purpose
Bonds, Series Z (Escrowed to
maturity) 6.000% January 1, 2001 Aaa 1,294,588
--------------
North Carolina (3.1%)
1,600,000 County of Buncombe, North
Carolina, Refunding Bonds,
Series 1993 5.100% March 1, 2004 Aa2 1,673,360
4,000,000 County of Wake, North
Carolina, General Obligation
School Bonds, Series 1997 4.900% March 1, 2009 Aaa 4,126,240
3,000,000 State of North Carolina,
Public School Building
General Obligation Bonds,
Series 1999 4.600% April 1, 2016 Aaa 2,855,760
1,325,000 Winston-Salem, North Carolina,
Water and Sewer System
Revenue Bonds, Series 1995B 5.000% June 1, 2007 Aa2 1,379,073
1,665,000 Winston-Salem, North Carolina,
Water and Sewer System
Revenue Bonds, Series 1995B 5.100% June 1, 2008 Aa2 1,734,963
--------------
11,769,396
--------------
</TABLE>
33-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Rating
Principal Coupon Maturity (Moody's
amount Rate Date or S&P) Value
- ------------- -------- ------------------- --------- --------------
<C> <S> <C> <C> <C> <C>
North Dakota (.6%)
$ 2,000,000 Fargo, North Dakota, Water
Revenue of 1993 (Escrowed to
maturity) 5.000% January 1, 2004 Aaa $ 2,074,560
--------------
Ohio (2.3%)
1,535,000 Columbus, Ohio, Sewer
Improvement No. 27 Refunding
Bonds, Series 1991
(Unlimited Tax General
Obligation Bonds) 5.900% February 15, 2002 Aaa 1,616,386
1,970,000 Delaware County, Ohio, General
Obligation, Limited Tax,
Sewer District Improvement
Bonds, Series 1999 4.900% December 1, 2015 Aaa 1,941,061
5,000,000 State of Ohio, Full Faith &
Credit General Obligation
Infrastructure Improvement
Bonds, Series 1997 5.350% August 1, 2012 Aa1 5,194,300
--------------
8,751,747
--------------
Oklahoma (1.6%)
1,500,000 City of Tulsa, Oklahoma,
General Obligation Refunding
Bonds of 1993 5.050% June 1, 2002 Aa2 1,550,670
1,050,000 Oklahoma City, Oklahoma,
General Obligation Bonds,
Series 1993 5.150% May 1, 2003 Aa2 1,094,594
1,050,000 Oklahoma City, Oklahoma,
General Obligation Bonds,
Series 1993 5.250% May 1, 2004 Aa2 1,093,722
2,000,000 Oklahoma City, Oklahoma,
General Obligation Refunding
Bonds, Series 1993 5.300% August 1, 2005 Aa2 2,118,460
--------------
5,857,446
--------------
Oregon (1.6%)
4,000,000 Portland, Oregon, Sewer System
Revenue Refunding Bonds,
1997 Series A 5.000% June 1, 2011 Aaa 4,052,640
2,000,000 Washington and Clackamas
Counties School District
#23J (Tigard-Tualatin),
Oregon, General Obligation
Bonds, Series 1995 5.550% June 1, 2011 A1 2,110,280
--------------
6,162,920
--------------
Pennsylvania (1.1%)
1,645,000 City of Lancaster, Lancaster
County, Pennsylvania,
General Obligation Bonds,
Series A of 1998 4.650% May 1, 2013 Aaa 1,591,209
2,695,000 City of Lancaster, Lancaster
County, Pennsylvania,
General Obligation Bonds,
Series A of 1998 4.750% May 1, 2014 Aaa 2,619,109
--------------
4,210,318
--------------
South Carolina (1.4%)
1,625,000 Charleston County, South
Carolina, General Obligation
Bonds of 1994 (ULT) 5.400% June 1, 2005 Aa3 1,729,195
1,700,000 State of South Carolina,
General Obligation State
Highway Bonds, Series 1995 5.100% August 1, 2008 Aaa 1,780,869
1,700,000 State of South Carolina,
General Obligation State
Highway Bonds, Series 1995 5.250% August 1, 2009 Aaa 1,789,862
--------------
5,299,926
--------------
Tennessee (3.9%)
2,000,000 Nashville & Davidson County,
Tennessee, Electric System
Revenue Bonds, 1992 Series B 5.500% May 15, 2002 Aa3 2,089,280
2,000,000 Nashville & Davidson County,
Tennessee, General
Obligation Refunding Bonds
of 1993 5.000% May 15, 2003 Aa2 2,074,840
1,800,000 Nashville & Davidson County,
Tennessee, General
Obligation Refunding Bonds
of 1993 5.000% May 15, 2005 Aa2 1,875,240
1,500,000 Nashville & Davidson County,
Tennessee, Water and Sewer
Revenue Refunding Bonds,
Series 1993 4.900% January 1, 2004 Aaa 1,549,065
4,500,000 Nashville & Davidson County,
Tennessee, Water and Sewer
Revenue Refunding Bonds,
Series 1996 5.250% January 1, 2008 Aaa 4,731,570
1,200,000 Shelby County, Tennessee,
General Obligation Refunding
Bonds, 1992 Series B 5.200% March 1, 2001 Aa3 1,230,360
1,000,000 Williamson County, Tennessee,
Public Works Refunding
Bonds, Series 1992 5.650% March 1, 2002 Aa1 1,046,030
--------------
14,596,385
--------------
</TABLE>
- ---------
34
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Rating
Principal Coupon Maturity (Moody's
amount Rate Date or S&P) Value
- ------------- -------- ------------------- --------- --------------
<C> <S> <C> <C> <C> <C>
Texas (5.8%)
$ 2,500,000 Austin Independent School
District, Texas, Unlimited
Tax Refunding Bonds, Series
1991 6.200% August 1, 1999 Aaa $ 2,512,450
2,355,000 Carrollton-Farmers Branch
Independent School District
(Dallas and Denton Counties,
Texas) School Building
Unlimited Tax Bonds, Series
1996 5.200% February 15, 2008 Aaa 2,443,925
1,840,000 City of Dallas, Texas,
Waterworks and Sewer System
Revenue Bonds, Series 1994A
(Prerefunded to 10-1-2001 @
101.5) 6.375% October 1, 2012 Aa2 1,972,940
2,000,000 City of Dallas, Texas,
Waterworks and Sewer System
Revenue Refunding Bonds,
Series 1993 4.900% April 1, 2004 Aa2 2,053,360
2,000,000 Harris County, Texas, Road and
Refunding Bonds, Series 1993 4.700% October 1, 2004 Aa2 2,054,440
2,250,000 Round Rock Independent School
District, Williamson and
Travis Counties, Texas,
Unlimited Tax School
Building and Refunding
Bonds, Series 1999 4.750% August 1, 2015 Aaa 2,166,210
1,000,000 State of Texas, Public Finance
Authority General Obligation
Bonds, Series 1990A 7.000% October 1, 1999 Aa2 1,012,460
1,000,000 State of Texas, Public Finance
Authority General Obligation
Bonds, Series 1990A
(Prerefunded to 10-1-1999 @
100) 7.000% October 1, 2000 AA 1,012,390
3,000,000 State of Texas, Public Finance
Authority, General
Obligation Refunding Bonds,
Series 1996B 5.400% October 1, 2008 Aa2 3,164,730
1,000,000 State of Texas, Veterans' Land
Board General Obligation
Bonds, Series 1984 9.000% December 1, 2000 Aa2 1,027,390
2,000,000 Texas Public Finance
Authority, State of Texas,
General Obligation Refunding
Bonds, Series 1992A 5.700% October 1, 2003 Aa2 2,133,660
--------------
21,553,955
--------------
Utah (1.3%)
2,000,000 Davis County School District,
Davis County, Utah, General
Obligation Refunding Bonds,
Series 1993A 4.500% June 1, 2004 Aaa 2,034,980
2,780,000 Salt Lake County, Utah,
General Obligation Jail
Bonds, Series 1995 5.000% December 15, 2007 Aaa 2,883,527
--------------
4,918,507
--------------
Virginia (.5%)
1,685,000 Hampton Roads Sanitation
District, Virginia,
Wastewater Refunding and
Capital Improvement Revenue
Bonds, Series 1993 4.700% October 1, 2004 Aa3 1,734,118
--------------
Washington (7.5%)
2,000,000 City of Seattle, Washington,
Unlimited Tax General
Obligation Refunding Bonds
of 1993 4.800% December 1, 2004 Aaa 2,048,600
2,000,000 City of Vancouver, Washington,
Water and Sewer Revenue
Refunding Bonds, 1998 4.600% June 1, 2013 Aaa 1,915,820
2,605,000 City of Vancouver, Washington,
Water and Sewer Revenue
Refunding Bonds, 1998 4.650% June 1, 2014 Aaa 2,491,500
2,520,000 Federal Way School District
No. 210, King County,
Washington, Unlimited Tax
General Obligation and
Refunding Bonds, Series 1993 5.250% December 1, 2003 Aaa 2,646,630
2,495,000 Seattle, Washington, Water
System Revenue 1998 5.000% October 1, 2013 Aa2 2,496,971
4,500,000 State of Washington, General
Obligation Bonds, Series
1993A 5.750% October 1, 2012 Aa1 4,903,380
3,000,000 State of Washington, Variable
Purpose General Obligation
Refunding Bonds, Series
R-99A 4.750% January 1, 2015 Aa1 2,884,740
2,600,000 Washington Public Power Supply
System Nuclear Project No.
1, Revenue Refunding Bonds,
Series 1989A (Prerefunded to
7-1-1999 @ 102) 7.500% July 1, 2007 Aaa 2,661,360
1,000,000 Washington Public Power Supply
System Nuclear Project No.
1, Revenue Refunding Bonds,
Series 1990C 7.700% July 1, 2002 Aa1 1,102,960
</TABLE>
35-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (Continued)
May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Rating
Principal Coupon Maturity (Moody's
amount Rate Date or S&P) Value
- ------------- -------- ------------------- --------- --------------
<C> <S> <C> <C> <C> <C>
$ 1,500,000 Washington Public Power Supply
System Nuclear Project No.
2, Revenue Refunding Bonds,
Series 1990A (Prerefunded to
7-1-2000 @ 102) 7.625% July 1, 2008 Aaa $ 1,595,865
1,250,000 Washington Public Power Supply
System Nuclear Project No.
3, Refunding Revenue Bonds,
Series 1991A 6.250% July 1, 2000 Aa1 1,286,588
2,000,000 Washington Public Power Supply
System Nuclear Project No.
3, Refunding Revenue Bonds,
Series 1993C 4.800% July 1, 2003 Aa1 2,048,380
--------------
28,082,794
--------------
West Virginia (.7%)
2,540,000 State of West Virginia, State
Road General Obligation
Bonds, Series 1998 5.000% June 1, 2013 Aaa 2,548,534
--------------
Wisconsin (4.6%)
2,180,000 Dane County, Wisconsin,
General Obligation Refunding
Bonds, Series 1998B 4.800% March 1, 2012 Aaa 2,171,215
2,220,000 Dane County, Wisconsin,
General Obligation Refunding
Bonds, Series 1998B 4.800% March 1, 2013 Aaa 2,200,886
3,500,000 Milwaukee, Wisconsin,
Metropolitan Sewerage
District General Obligation
Capital Purpose Bonds,
Series 1990A (Escrowed to
maturity) 6.700% October 1, 2002 Aa1 3,804,045
2,000,000 State of Wisconsin, General
Obligation Bonds of 1995,
Series A (Prerefunded to
5-1-2005 @ 100) 6.000% May 1, 2008 Aaa 2,185,940
2,000,000 State of Wisconsin, General
Obligation Refunding Bonds
of 1993, Series 1 5.300% November 1, 2003 Aa2 2,104,420
2,500,000 State of Wisconsin, General
Obligation Refunding Bonds
of 1993, Series 2 5.125% November 1, 2010 Aa2 2,597,500
2,000,000 State of Wisconsin, General
Obligation Refunding Bonds
of 1993, Series 3 4.750% November 1, 2003 Aa2 2,060,220
--------------
17,124,226
--------------
Wyoming (.5%)
1,600,000 Natrona County, Wyoming,
School District No. 1
General Obligation Bonds,
Series 1994 5.450% July 1, 2006 Aaa 1,679,840
--------------
Total long-term municipal bonds
(cost $351,688,984) 366,122,987
--------------
SHORT-TERM INVESTMENTS (2.8%)
3,250,000 General Motors Acceptance
Corp., 4.810%, June, 1999 3,251,738
1,073,615 Chase Vista Treasury Plus
Money Market Fund, 4.610%,
June, 1999 1,073,615
6,000,000 U.S. Treasury Bills, 4.455%
and 4.490%, June, 1999 and
August, 1999 5,963,680
--------------
Total short-term investments
(cost $10,286,717) 10,289,033
--------------
TOTAL INVESTMENTS (100.6%)
(cost $361,975,701) 376,412,020
LIABILITIES, LESS CASH AND OTHER ASSETS (-0.6%) (2,267,677)
--------------
NET ASSETS (100.0%) $ 374,144,343
--------------
--------------
</TABLE>
Notes:
(a) Purchased on a 'when-issued' basis.
At May 31, 1999, net unrealized appreciation of $14,436,319 consisted of gross
unrealized appreciation of $375,336,667 and gross unrealized depreciation of
$360,900,348 based on cost of $361,975,701 for federal income tax purposes.
See accompanying notes to financial statements.
- ---------
36
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
(Unaudited)
<TABLE>
<S> <C> <C>
Assets
Investments, at value (cost
$361,975,701) $376,412,020
Receivable for:
Interest $5,823,613
Shares of the Fund sold 21,500
Sundry 5,316 5,850,429
----------
Prepaid expenses 28,310
------------
Total assets 382,290,759
Liabilities and Net Assets
Dividends payable to shareowners 3,006,678
Payable for:
Shares of the Fund redeemed 386,327
Securities purchased 4,622,150
Other (including $113,934 to
Manager) 131,261
----------
5,139,738
------------
Total liabilities 8,146,416
------------
Net assets applicable to 44,554,220
shares outstanding of
$1.00 par value common stock
(100,000,000 shares authorized) $374,144,343
------------
------------
Net asset value, offering price and
redemption price per share $ 8.40
------------
------------
Analysis of Net Assets
Excess of amounts received from sales
of shares over amounts paid on
redemptions of shares on account of
capital $359,770,846
Accumulated net realized loss on sales
of investments (62,822)
Net unrealized appreciation of
investments 14,436,319
------------
Net assets applicable to shares
outstanding $374,144,343
------------
------------
</TABLE>
See accompanying notes to financial statements.
37-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months
ended
May 31, 1999 Year ended
(Unaudited) November 30, 1998
------------- -----------------
<S> <C> <C>
Investment income:
Taxable interest $ 253,968 548,684
Tax-exempt interest 9,340,323 18,524,272
------------- --------
Total investment income 9,594,291 19,072,956
Expenses:
Investment advisory and management
fees 218,744 425,519
Professional fees 17,582 27,144
Security valuation fees 9,765 19,711
Franchise taxes 9,306 19,353
Custodian fees 7,997 10,425
ICI dues 4,064 9,948
Registration fees 4,016 7,226
Directors' fees 2,362 5,420
Reports to shareowners 1,974 3,591
Fidelity bond expense 1,690 3,768
Proxy and related expense -- 3,710
Other -- 140
------------- --------
Total expenses 277,500 535,955
------------- --------
Net investment income 9,316,791 18,537,001
Realized and unrealized gain (loss) on
investments:
Net realized gain (loss) on sales of
investments 39 (62,861)
Change in net unrealized appreciation
or depreciation (7,005,880) 5,100,703
------------- --------
Net realized and unrealized gain (loss)
on investments (7,005,841) 5,037,842
------------- --------
Net change in net assets resulting from
operations $ 2,310,950 23,574,843
------------- --------
------------- --------
</TABLE>
See accompanying notes to financial statements.
- ---------
38
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six months
ended
May 31, 1999 Year ended
(Unaudited) November 30, 1998
------------ -----------------
<S> <C> <C>
From operations:
Net investment income $ 9,316,791 18,537,001
Net realized gain (loss) on sales of
investments 39 (62,861)
Change in net unrealized appreciation
or depreciation (7,005,880 ) 5,100,703
------------ -----------------
Net change in net assets resulting from
operations 2,310,950 23,574,843
Distributions to shareowners from:
Net investment income (per share $.21
in 1999, and $.45 in 1998) (9,316,791 ) (18,537,001)
------------ -----------------
Total distributions to shareowners (9,316,791 ) (18,537,001)
From Fund share transactions:
Proceeds from shares sold 25,488,296 38,871,460
Reinvestment of ordinary income
dividends 7,103,885 13,564,060
------------ -----------------
32,592,181 52,435,520
Less payments for shares redeemed 14,533,566 30,744,422
------------ -----------------
Net increase in net assets from Fund
share transactions 18,058,615 21,691,098
------------ -----------------
Total increase in net assets 11,052,774 26,728,940
Net assets:
Beginning of period 363,091,569 336,362,629
------------ -----------------
End of period $374,144,343 363,091,569
------------ -----------------
------------ -----------------
</TABLE>
See accompanying notes to financial statements.
39-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Per Share Income and Capital Changes (For a share outstanding throughout the
period)
<TABLE>
<CAPTION>
Period
ended
May 31, Year ended November 30,
1999 -----------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
--------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 8.55 8.43 8.44 8.50 7.88 8.59
Income from Investment
Operations
Net investment income 0.21 0.45 0.47 0.48 0.48 0.48
Net gain or loss on
investments (both
realized and
unrealized) (0.15) 0.12 (0.01) (0.06) 0.62 (0.69)
--------- --- --- --- ------- -------
Total from investment
operations 0.06 0.57 0.46 0.42 1.10 (0.21)
--------- --- --- --- ------- -------
Less Distributions
Net investment income (0.21) (0.45) (0.47) (0.48) (0.48) (0.48)
Capital gains (a) -- -- -- -- -- (0.02)
--------- --- --- --- ------- -------
Total distributions (0.21) (0.45) (0.47) (0.48) (0.48) (0.50)
--------- --- --- --- ------- -------
Net asset value, end of
period $ 8.40 8.55 8.43 8.44 8.50 7.88
--------- --- --- --- ------- -------
--------- --- --- --- ------- -------
Total Return 0.75% 6.82% 5.68% 5.21% 14.25% (2.55)%
Ratios/Supplemental
Data
Net assets, end of year
(millions) $ 374.1 363.1 336.4 321.1 307.4 269.9
Ratio of expenses to
average net assets 0.15%(b) 0.15% 0.15% 0.16% 0.17%(c) 0.16%
Ratio of net investment
income to average net
assets 5.02%(b) 5.29% 5.61% 5.76% 5.80% 5.80%
Portfolio turnover rate 10%(b) 6% 6% 6% 7% 8%
</TABLE>
- ----------
(a) Distributions representing less than $.01 were made in 1997 and 1996.
(b) Determined on an annualized basis.
(c) The ratio based on net custodian expenses would have been .16% in 1995.
- ---------
40
<PAGE>
STATE FARM MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
1. Objective
The investment objective of the State Farm Growth Fund, Inc. (Growth Fund) is
long-term growth of capital and income. The Fund seeks to achieve this objective
by investing most of its assets in common stocks and other income producing
equity securities that are believed to have potential for long-term growth of
capital or income, or both.
The investment objective of the State Farm Balanced Fund, Inc. (Balanced Fund)
is to provide its shareowners income and some long-term growth of both principal
and income. The Fund seeks to achieve its objective by distributing its
investments among common stocks, preferred stocks and bonds in varying
proportions according to prevailing market conditions and the judgment of the
Manager.
The investment objective of the State Farm Interim Fund, Inc. (Interim Fund) is
the realization over a period of years of the highest yield consistent with
relative price stability (relatively low volatility). The Fund seeks to achieve
its investment objective through investment in high quality debt securities with
primarily short-term (less than five years) and intermediate-term (five to
fifteen years) maturities.
The investment objective of the State Farm Municipal Bond Fund, Inc. (Municipal
Bond Fund) is to provide its shareowners with as high a rate of income exempt
from federal income taxes as is consistent with prudent investment management.
The Fund seeks to achieve its investment objective through investment primarily
in a diversified portfolio of Municipal Bonds with maturities of 1-17 years.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
2. Significant accounting policies
SECURITIES 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 last reported bid price for the day. Long-term debt
securities and U.S. Treasury bills are valued using quotations provided by an
independent pricing service. Short-term debt securities, other than U.S.
Treasury bills, are valued at amortized cost which approximates market value.
Any securities not valued as described above are valued at fair value as
determined in good faith by the Boards of Directors or their delegate.
SECURITIES 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. Premiums and original issue
discounts on tax-exempt securities in the Municipal Bond Fund are amortized.
Realized gains and losses from security transactions are reported on an
identified cost basis.
SECURITIES PURCHASED ON A 'WHEN-ISSUED' BASIS
The Municipal Bond Fund may purchase municipal bonds on a 'when-issued' basis.
Delivery and payment for these securities may be a month or more after the
purchase date, during which time such securities are subject to market
fluctuations. It is possible that the securities will never be issued and the
commitment cancelled. At May 31, 1999, there were commitments of $4,622,150 for
such securities.
FUND SHARE VALUATION
Fund shares are sold and redeemed on a continuous basis at net asset value. The
net asset value per share is determined daily on each day the New York Stock
Exchange is open, except that a 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 values for the Growth Fund, Balanced Fund, and Interim Fund are determined
as of the close of regular session trading on the New York Stock Exchange
(usually 3:00 p.m. Bloomington, Illinois time, but sometimes earlier). The net
asset value for the Municipal Bond Fund is determined as of 1:00 p.m.
Bloomington, Illinois time. The net asset value per share is computed by
dividing the total value of a 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 each 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 taxable income, as well as any net realized gain on
sales of investments reportable for federal income tax purposes. Each Fund has
complied with this policy and, accordingly, no provision for federal income
taxes is required.
41-------
<PAGE>
STATE FARM MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
The Interim Fund and Municipal Bond Fund declare dividends daily equal to each
Fund's respective net investment income, and distributions of such amounts are
made at the end of each calendar quarter.
Net realized gains on sales of investments, if any, are distributed annually
after the close of a Fund's fiscal year. Dividends and distributions payable to
shareowners are recorded by the respective Fund on the ex-dividend date.
On June 18, 1999, the Growth Fund declared an ordinary income dividend of $.31
per share to shareowners of record on June 18, 1999 (reinvestment date June 21,
1999).
On June 18, 1999, the Balanced Fund declared an ordinary income dividend of $.74
per share to shareowners of record on June 18, 1999 (reinvestment date June 21,
1999).
The accumulated net realized loss on sales of investments at November 30, 1998
for the Interim Fund, amounting to $3,215,248, is available to offset future
taxable gains. If not applied, the capital loss carryover expires as follows:
$92,150 in 1999, $22,669 in 2000, $162,716 in 2001, $335,277 in 2002, $321,293
in 2003, $363,957 in 2004, $922,190 in 2005, and $994,996 in 2006.
The accumulated net realized loss on sales of investments at November 30, 1998
for the Municipal Bond Fund, amounting to $62,861, is available to offset future
taxable gains. If not applied, the capital loss carryover expires in 2006.
EQUALIZATION ACCOUNTING
A portion of proceeds from sales and payments on redemptions of Fund shares is
credited or charged to undistributed net investment income for the Growth Fund
and Balanced Fund. As a result, undistributed net investment income per share is
unaffected by sales or redemptions of shares.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
3. Transactions with affiliates
Each Fund has an investment advisory and management services agreement with
State Farm Investment Management Corp. (Manager) pursuant to which each Fund
pays the Manager an annual fee (computed on a daily basis and paid quarterly) at
the following rates:
<TABLE>
<S> <C>
State Farm Growth Fund, Inc. .20% of the first $100 million of average net
assets
.15% of the next $100 million of average net
assets
.10% of the average net assets in excess of $200
million
State Farm Balanced Fund, Inc. .20% of the first $100 million of average net
assets
.15% of the next $100 million of average net
assets
.10% of the average net assets in excess of $200
million
State Farm Interim Fund, Inc. .20% of the first $50 million of average net
assets
.15% of the next $50 million of average net assets
.10% of the average net assets in excess of $100
million
State Farm Municipal Bond Fund, Inc. .20% of the first $50 million of average net
assets
.15% of the next $50 million of average net assets
.10% of the average net assets in excess of $100
million
</TABLE>
The Manager guarantees that all operating expenses of each 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 each Fund's average net assets
annually.
- ---------
42
<PAGE>
STATE FARM MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
Under the terms of these agreements, the Funds incurred the following fees:
<TABLE>
<CAPTION>
Six months
ended Year ended
May 31, 1999 November 30,
(Unaudited) 1998
------------- ------------
<S> <C> <C>
State Farm Growth Fund, Inc. $1,295,373 2,221,492
State Farm Balanced Fund, Inc. 538,627 980,972
State Farm Interim Fund, Inc. 113,447 199,209
State Farm Municipal Bond Fund, Inc. 218,744 425,519
</TABLE>
The Funds do not pay any discount, commission or other compensation for transfer
agent or underwriting services provided by the Manager.
Certain officers and/or directors of each Fund are also officers and/or
directors of the Manager. The Funds made no payments to its officers or
directors except for the following directors' fees paid to the Funds'
independent directors:
<TABLE>
<CAPTION>
Six months
ended Year ended
May 31, 1999 November 30,
(Unaudited) 1998
------------- ------------
<S> <C> <C>
State Farm Growth Fund, Inc. $7,200 15,300
State Farm Balanced Fund, Inc. 3,600 7,650
State Farm Interim Fund, Inc. 1,200 2,550
State Farm Municipal Bond Fund, Inc. 2,400 5,100
</TABLE>
4. Investment transactions
Investment transactions (exclusive of short-term instruments) were as follows:
<TABLE>
<CAPTION>
Six months
ended Year ended
May 31, 1999 November 30,
(Unaudited) 1998
------------- -------------
<S> <C> <C>
State Farm Growth Fund, Inc.
Purchases $89,546,138 309,663,058
Proceeds from sales 48,186,511 14,874,459
State Farm Balanced Fund, Inc.
Purchases 58,168,888 92,615,420
Proceeds from sales 25,270,378 17,698,918
State Farm Interim Fund, Inc.
Purchases 21,598,672 52,146,094
Proceeds from sales 8,750,000 16,756,328
State Farm Municipal Bond Fund, Inc.
Purchases 33,994,595 48,047,861
Proceeds from sales 17,740,564 20,915,700
</TABLE>
5. Fund share transactions
Proceeds and payments on Fund shares as shown in each Fund's statement of
changes in net assets are in respect of the following number of shares:
<TABLE>
<CAPTION>
Six months
ended Year ended
May 31, 1999 November 30,
(Unaudited) 1998
------------ ------------
<S> <C> <C>
State Farm Growth Fund, Inc.
Shares sold 3,568,432 8,122,332
Shares issued in reinvestment of
ordinary income dividends and
capital gain distributions 355,329 2,034,859
------------ ------------
3,923,761 10,157,191
Less shares redeemed 2,612,133 5,105,810
------------ ------------
Net increase in shares outstanding 1,311,628 5,051,381
------------ ------------
------------ ------------
State Farm Balanced Fund, Inc.
Shares sold 1,340,512 3,094,918
Shares issued in reinvestment of
ordinary income dividends and
capital gain distributions 264,706 785,967
------------ ------------
1,605,218 3,880,885
Less shares redeemed 1,037,867 2,390,819
------------ ------------
Net increase in shares outstanding 567,351 1,490,066
------------ ------------
------------ ------------
State Farm Interim Fund, Inc.
Shares sold 4,748,122 10,094,227
Shares issued in reinvestment of
ordinary income dividends 461,905 748,608
------------ ------------
5,210,027 10,842,835
Less shares redeemed 4,223,778 6,846,009
------------ ------------
Net increase in shares outstanding 986,249 3,996,826
------------ ------------
------------ ------------
State Farm Municipal Bond Fund, Inc.
Shares sold 2,981,259 4,573,153
Shares issued in reinvestment of
ordinary income dividends 832,858 1,593,850
------------ ------------
3,814,117 6,167,003
Less shares redeemed 1,703,490 3,616,812
------------ ------------
Net increase in shares outstanding 2,110,627 2,550,191
------------ ------------
------------ ------------
</TABLE>
43-------
<PAGE>
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<PAGE>
Bulk Rate
U.S. Postage
Paid
Permit 439
Elk Grove, IL
STATE FARM MUTUAL FUNDS
ONE STATE FARM PLAZA, BLOOMINGTON, IL 61710
(309) 766-2029 (800) 447-0740
- -------------------------------------------------------------------------------
190-4059-CH 07-1999 Printed in U.S.A.
