<PAGE>
SEMI-ANNUAL REPORT
MAY 31 2000
STATE FARM
GROWTH FUND, INC.
STATE FARM
BALANCED FUND, INC.
STATE FARM
INTERIM FUND, INC.
STATE FARM
MUNICIPAL BOND FUND, INC.
[LOGO]STATE FARM
MUTUAL
FUNDS
<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 18
Financial highlights 21
State Farm Interim Fund, Inc.
Message from the portfolio managers 22
Portfolio of investments 23
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 S&P 500 index produced total returns of 2.9% and 10.4% for the six and
twelve months ended May 31, 2000. The Growth Fund had total returns of 8.0% and
14.5% for the same periods.*
After five consecutive years of strong gains, the U.S. stock market has been
generally flat so far in the year 2000. In our reports to you in the recent
past, we have cautioned investors not to expect returns of the magnitude of
1995-99 over the long term. Interestingly, the return of the S&P 500 for the 5
year period from 1995-99 was the highest of any rolling 5 year period since the
end of the Great Depression in the 1930's.
A period in which the stock market is generally flat while corporate profits
increase is favorable for valuation. Such a period could bring price/earnings
ratios back to lower levels which are more in line with the longer term
historical experience.
There has been a noticeable decline in speculative activity in the U.S. stock
market so far in the year 2000. Examples include:
(1) The NASDAQ index, which is oriented toward technology stocks with high
valuations, has declined markedly in 2000.
(2) The number of initial public offerings (which are usually formative
stage firms) has declined in 2000.
(3) Speculative stocks, particularly those associated with internet
technology, have declined substantially.
The decline in speculative activity and the flat stock market is attributable
partly to the rise in U.S. interest rates.
Business conditions remain quite favorable in the United States and Europe. Most
of the emerging markets of the world seem to be recovering. Economic activity in
Japan continues to be weak. Generally, economic activity is a function of the
availability of money, creative management talent, and business opportunities.
To cope with the inevitable uncertainties of financial markets, we encourage a
disciplined long-term program of periodic investments in the Growth Fund. Such
an investment program cannot ensure a profit, but it should allow shareowners to
capture the benefits of dollar cost averaging and to participate in any
long-term appreciation of common stock prices. We strive to invest the Fund's
assets in growing companies with fine managements and are confident that these
investments will produce satisfactory long-term results. Risk is managed, but
not eliminated, through broad diversification in globally competitive firms in
essential businesses.
The directors have declared a semi-annual income dividend of $.32 per share
which was paid on June 19, 2000. It was used to purchase additional shares for
your account unless you have elected to receive payments directly by check.
Sincerely,
<TABLE>
<S> <C>
/s/ PAUL N. ECKLEY /s/ JOHN S. CONCKLIN
Paul N. Eckley John S. Concklin
Vice President Vice President
</TABLE>
* The Growth Fund's average annual total return for the 1-year, 5-year and
10-year periods ended June 30, 2000 was 13.19%, 21.26% and 16.20%,
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 Growth 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, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<C> <S> <C>
COMMON STOCKS (97.5%)
AGRICULTURE, FOODS, & BEVERAGE (4.1%)
3,154,196 Archer-Daniels-Midland Company $ 37,653,215
92,000 Campbell Soup Company 2,852,000
930,000 Kellogg Company 28,248,750
214,300 McCormick & Company Inc. 6,964,750
208,000 Sara Lee Corporation 3,744,000
167,600 Sysco Corporation 7,028,725
710,900 The Coca-Cola Company 37,944,287
--------------
124,435,727
--------------
BANKS (7.1%)
180,791 ABN Amro Holding NV 4,151,657
333,637 AmSouth Bancorporation 6,026,318
421,268 Bank of America Corporation 23,406,703
715,322 Bank One Corporation 23,650,334
47,700 JP Morgan & Co. Incorporated 6,141,375
6,200 M&T Bank Corporation 2,681,500
809,800 National Commerce Bancorporation 15,386,200
144,000 Northern Trust Corporation 9,477,000
640,074 Pacific Century Financial Corporation 14,401,665
830,316 Popular Inc. 18,993,478
345,000 SouthTrust Corporation 9,336,563
211,800 SunTrust Banks Inc. 12,655,050
238,900 Wachovia Corporation 16,513,962
1,220,000 Wells Fargo & Company 55,205,000
--------------
218,026,805
--------------
BUILDING MATERIALS & CONSTRUCTION (1.6%)
1,039,200 Vulcan Materials Company 48,582,600
--------------
CHEMICALS (4.7%)
830,000 Air Products & Chemicals Inc. 28,738,750
496,104 EI du Pont de Nemours and Company 24,309,096
588,300 Great Lakes Chemical Corporation 16,325,325
561,000 International Flavors & Fragrances Inc. 19,074,000
1,410,300 Sigma-Aldrich Corporation 47,068,762
81,000 The Dow Chemical Company 8,672,062
--------------
144,187,995
--------------
COMPUTER SOFTWARE AND SERVICES (7.1%)
124,000 Automatic Data Processing Inc. 6,812,250
18,000 Check Point Software Technologies
Ltd. (a) 3,381,750
1,439,400 Cisco Systems Inc. (a) 82,045,800
30,800 Electronic Data Systems Corporation 1,980,825
1,197,500 Microsoft Corporation (a) 74,918,594
689,400 Oracle Corporation (a) 49,550,625
--------------
218,689,844
--------------
</TABLE>
3 -------
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<C> <S> <C>
COMPUTERS (7.7%)
322,200 Compaq Computer Corporation $ 8,457,750
1,437,000 Hewlett-Packard Company 172,619,625
496,400 International Business Machines
Corporation 53,269,925
--------------
234,347,300
--------------
CONSUMER & MARKETING (4.7%)
63,600 Clorox Co. 2,520,150
183,800 Colgate-Palmolive Company 9,672,475
1,439,200 Hon Industries Inc. 35,890,050
317,876 Kimberly Clark Corp. 19,231,498
499,600 McDonald's Corporation 17,891,925
464,308 Newell Rubbermaid Inc. 12,188,085
565,100 The Gillette Company 18,860,212
339,400 The Procter & Gamble Company 22,570,100
125,446 Unilever NV 6,374,225
--------------
145,198,720
--------------
ELECTRONIC/ELECTRICAL MFG. (10.4%)
46,043 ABB Ltd. 5,742,269
164,600 Applied Materials Inc. (a) 13,744,100
109,400 Emerson Electric Co. 6,454,600
2,313,600 General Electric Company 121,753,200
967,200 Intel Corporation 120,537,300
183,200 KLA Tencor Corporation (a) 9,079,850
703,200 Linear Technology Corp. 41,532,750
--------------
318,844,069
--------------
FINANCIAL SERVICES (2.6%)
115,950 Charles Schwab Corp. 3,333,562
590,500 Citigroup Inc. 36,721,719
167,400 Federal Home Loan Mortgage Corp. 7,449,300
250,800 Federal National Mortgage Association 15,079,350
558,450 MBNA Corporation 15,566,794
--------------
78,150,725
--------------
HEALTH CARE (14.4%)
294,500 Abbott Laboratories 11,982,469
1,550,000 Biomet Inc. 55,896,875
59,600 Boston Scientific Corporation (a) 1,527,250
253,800 Bristol-Myers Squibb Company 13,974,862
947,200 Eli Lilly & Co. 72,105,600
1,240,800 Johnson & Johnson 111,051,600
80,000 Medtronic Inc. 4,130,000
567,300 Merck & Co. Inc. 42,334,762
2,880,000 Pfizer Inc. 128,340,000
--------------
441,343,418
--------------
MACHINERY & MANUFACTURING (4.5%)
190,800 AptarGroup Inc. 5,068,125
370,000 Caterpillar Inc. 14,152,500
428,200 Corning Incorporated 82,829,937
</TABLE>
---------
4
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<C> <S> <C>
MACHINERY & MANUFACTURING (CONT.)
57,800 Deere & Company $ 2,402,312
226,500 Honeywell International Inc. 12,386,719
70,000 Illinois Tool Works Inc. 4,064,375
173,200 Minnesota Mining & Manufacturing Co. 14,851,900
337,500 Osmonics Inc. (a) 3,037,500
--------------
138,793,368
--------------
MEDIA & BROADCASTING (4.5%)
155,433 Reuters Group PLC ADR 13,814,108
360,181 SBS Broadcasting SA (a) 13,506,787
2,619,540 The Walt Disney Company 110,511,844
--------------
137,832,739
--------------
MINING & METALS (.7%)
36,700 Newmont Mining Corporation 846,394
132,800 Nucor Corporation 5,162,600
226,800 Rio Tinto PLC ADR 13,934,025
81,250 Steel Dynamics Inc. (a) 756,641
--------------
20,699,660
--------------
OIL & GAS (6.3%)
440,400 Barrett Resources Corporation (a) 17,423,325
322,892 BP Amoco PLC ADR 17,557,253
530,000 Chevron Corporation 48,991,875
106,102 Devon Energy Corporation 6,346,226
797,200 Exxon Mobil Corporation 66,416,725
237,100 Pennzoil-Quaker State Company 2,608,100
516,300 Royal Dutch Petroleum Company ADR 32,236,481
--------------
191,579,985
--------------
RETAILERS (2.1%)
91,300 Home Depot Inc. 4,456,581
1,063,200 Wal-Mart Stores Inc. 61,266,900
--------------
65,723,481
--------------
TELECOM & TELECOM EQUIPMENT (14.4%)
900,000 ADC Telecommunications Inc. (a) 60,468,750
600,000 AT&T Corp. 20,812,500
101,900 Bell Atlantic Corp. 5,387,963
133,900 Bellsouth Corp. 6,251,456
58,100 Extreme Networks Inc. (a) 2,839,638
2,300,000 LM Ericsson Telephone Company ADR 47,150,000
745,632 Lucent Technologies Inc. 42,780,636
264,000 Motorola Inc. 24,750,000
115,400 Nextlink Communications Inc. (Class
A) (a) 8,085,213
519,200 Nokia Corporation ADR 26,998,400
693,200 Nortel Networks Corp. 37,649,425
1,497,512 SBC Communications Inc. 65,422,556
347,400 Tele Danmark AS ADR 12,224,138
49,300 Tellabs Inc. (a) 3,201,419
136,200 US West Inc. 9,806,400
215,000 Vodafone AirTouch PLC-Sp ADR 9,849,688
</TABLE>
5 -------
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<C> <S> <C>
TELECOM & TELECOM EQUIPMENT (CONT.)
1,535,593 WorldCom Inc. (a) $ 57,776,687
--------------
441,454,869
--------------
UTILITIES & ENERGY (.6%)
132,000 Duke Energy Corporation 7,689,000
112,400 The AES Corporation (a) 9,806,900
--------------
17,495,900
--------------
TOTAL COMMON STOCKS
(cost $1,135,245,362) 2,985,387,205
--------------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
---------------------------------------------------------------------
SHORT-TERM INVESTMENTS (2.5%)
<C> <S> <C>
$64,400,000 Ford Motor Credit Company, 6.488% to
6.622%, June, 2000 64,400,000
9,000,000 U.S. Treasury Bills, 5.720%, June, 2000 8,966,070
2,055,488 Chase Vista Treasury Plus Money Market
Fund 2,055,488
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $75,415,043) 75,421,558
--------------
TOTAL INVESTMENTS (100.0%)
(cost $1,210,660,405) 3,060,808,763
OTHER ASSETS, NET OF LIABILITIES (0.0%) 593,868
--------------
NET ASSETS (100.0%) $3,061,402,631
==============
</TABLE>
Notes:
(a) Non-income producing security.
At May 31, 2000, net unrealized appreciation of $1,850,148,358 consisted of
gross unrealized appreciation of $1,885,681,234 and gross unrealized
depreciation of $35,532,876 based on cost of $1,210,660,405 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, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value
(cost $1,210,660,405) $3,060,808,763
Receivable for:
Dividends and interest $4,524,868
Shares of the Fund sold 206,565 4,731,433
----------
Prepaid expenses 35,064
--------------
Total assets 3,065,575,260
LIABILITIES AND NET ASSETS
Payable for:
Shares of the Fund redeemed 3,275,315
Manager 847,044 4,122,359
----------
Accrued liabilities 50,270
--------------
Total liabilities 4,172,629
--------------
Net assets applicable to 55,153,764
shares outstanding of $0.50 par value
common stock (100,000,000 shares
authorized) $3,061,402,631
==============
Net asset value, offering price and
redemption price per share $ 55.51
==============
ANALYSIS OF NET ASSETS
Excess of amounts received from sales
of shares over amounts paid on
redemptions of shares on account of
capital $1,192,497,830
Accumulated net realized loss on sales
of investments (4,714,359)
Net unrealized appreciation of
investments 1,850,148,358
Undistributed net investment income 23,470,802
--------------
Net assets applicable to shares
outstanding $3,061,402,631
==============
</TABLE>
See accompanying notes to financial statements.
7 -------
<PAGE>
STATE FARM GROWTH FUND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, 2000 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1999
------------ -----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $18,109,885 33,916,255
Interest 1,414,403 2,390,006
------------ --------------
19,524,288 36,306,261
Less: foreign withholding taxes 266,678 547,592
------------ --------------
Total investment income 19,257,610 35,758,669
EXPENSES:
Investment advisory and management
fees 1,551,088 2,740,037
Reports to shareowners 48,391 81,541
ICI dues 26,081 55,835
Professional fees 22,473 96,955
Registration fees 21,966 27,350
Franchise taxes 9,932 18,148
Directors' fees 7,200 14,400
Custodian fees 6,548 21,037
Fidelity bond expense 5,040 8,803
Security evaluation fees 1,578 3,128
Other 39 131
------------ --------------
Total expenses 1,700,336 3,067,365
------------ --------------
Net investment income 17,557,274 32,691,304
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Accumulated net realized gain (loss)
on sales of investments (4,714,359) 13,478,727
Net unrealized appreciation on
investments 211,001,879 368,649,780
------------ --------------
Net realized and unrealized gain on
investments 206,287,520 382,128,507
------------ --------------
Net change in net assets resulting from
operations $223,844,794 414,819,811
============ ==============
</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, 2000 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1999
-------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 17,557,274 32,691,304
Net realized gain (loss) on sales of
investments (4,714,359) 13,478,727
Change in net unrealized appreciation 211,001,879 368,649,780
-------------- ---------------
Net change in net assets resulting from
operations 223,844,794 414,819,811
Undistributed net investment income
included in price of shares issued and
redeemed 155,364 666,112
DISTRIBUTIONS TO SHAREOWNERS FROM:
Net investment income (17,880,332) (30,736,945)
Net realized gain (12,157,004) (2,197,936)
-------------- ---------------
Total distributions to shareowners (30,037,336) (32,934,881)
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 423,844,930 313,280,990
Reinvestment of ordinary income
dividends and capital gain
distributions 28,965,728 31,660,456
-------------- ---------------
452,810,658 344,941,446
Less payments for shares redeemed 371,810,280 226,541,809
-------------- ---------------
Net increase in net assets from Fund
share transactions 81,000,378 118,399,637
-------------- ---------------
Total increase in net assets 274,963,200 500,950,679
NET ASSETS:
Beginning of period 2,786,439,431 2,285,488,752
-------------- ---------------
End of period (including undistributed
net investment income of $23,470,802
in 2000, and $22,316,773 in 1999) $3,061,402,631 2,786,439,431
============== ===============
</TABLE>
See accompanying notes to financial statements.
9 -------
<PAGE>
STATE FARM GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance of the Fund for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions).
PER SHARE INCOME AND CAPITAL CHANGES (For a share outstanding throughout each
period):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 2000 ----------------------------------------------------------
(UNAUDITED) 1999 1998 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 51.96 44.65 39.48 34.55
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.34 0.62 0.61 0.62
Net gain (loss) on investments
(both realized and unrealized) 3.77 7.33 6.33 7.23
----------------- ----------------- ----------------- -----------------
Total from investment operations 4.11 7.95 6.94 7.85
----------------- ----------------- ----------------- -----------------
LESS DISTRIBUTIONS
Net investment income (0.33) (0.59) (0.64) (0.61)
Net realized gain (0.23) (0.05) (1.13) (2.31)
----------------- ----------------- ----------------- -----------------
Total distributions (0.56) (0.64) (1.77) (2.92)
----------------- ----------------- ----------------- -----------------
Net asset value, end of period $ 55.51 51.96 44.65 39.48
================= ================= ================= =================
TOTAL RETURN 7.97% 17.93% 18.17% 24.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions) $ 3,061.4 2,786.4 2,285.5 1,821.1
Ratio of expenses to average net
assets 0.12%(a) 0.12% 0.12% 0.12%
Ratio of net investment income to
average net assets 1.19%(a) 1.27% 1.47% 1.78%
Portfolio turnover rate 4%(a) 2% 1% 6%
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------
1996 1995
------------------ ------------------
<S> <C> <C>
Net asset value, beginning of
period 29.40 22.63
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.63 0.50
Net gain (loss) on investments
(both realized and unrealized) 5.17 6.97
----------------- -----------------
Total from investment operations 5.80 7.47
----------------- -----------------
LESS DISTRIBUTIONS
Net investment income (0.53) (0.52)
Net realized gain (0.12) (0.18)
----------------- -----------------
Total distributions (0.65) (0.70)
----------------- -----------------
Net asset value, end of period 34.55 29.40
================= =================
TOTAL RETURN 20.09% 33.67%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(millions) 1,362.9 1,068.6
Ratio of expenses to average net
assets 0.13% 0.14%(b)
Ratio of net investment income to
average net assets 1.88% 1.95%
Portfolio turnover rate 16% 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 S&P 500 index produced total returns of 2.9% and 10.4% for the six and
twelve months ended May 31, 2000. The Balanced Fund had total returns of 6.7%
and 9.5% for the same periods.*
After five consecutive years of strong gains, the U.S. stock market has been
generally flat so far in the year 2000. In our reports to you in the recent
past, we have cautioned investors not to expect returns of the magnitude of
1995-99 over the long term. Interestingly, the return of the S&P 500 for the 5
year period from 1995-99 was the highest of any rolling 5 year period since the
end of the Great Depression in the 1930's.
A period in which the stock market is generally flat while corporate profits
increase is favorable for valuation. Such a period could bring price/earnings
ratios back to lower levels which are more in line with the longer term
historical experience.
There has been a noticeable decline in speculative activity in the U.S. stock
market so far in the year 2000. Examples include:
(1) The NASDAQ index, which is oriented toward technology stocks with high
valuations, has declined markedly in 2000.
(2) The number of initial public offerings (which are usually formative
stage firms) has declined in 2000.
(3) Speculative stocks, particularly those associated with internet
technology, have declined substantially.
The decline in speculative activity and the flat stock market is attributable
partly to the rise in U.S. interest rates.
The increase in interest rates, which has been occurring since the beginning of
1999, has also affected returns of the fixed-income securities held by your
Fund. Over the past six months yields on many of the bonds held by the Fund have
risen around 50 basis points (a basis point is .01%). Consequently, values of
the bonds have fallen, and results of the Fund have been held back by returns of
the fixed-income investments over this time.
Business conditions remain quite favorable in the United States and Europe. Most
of the emerging markets of the world seem to be recovering. Economic activity in
Japan continues to be weak. Generally, economic activity is a function of the
availability of money, creative management talent, and business opportunities.
To cope with the inevitable uncertainties of financial markets, we encourage a
disciplined long-term program of periodic investments in the Balanced Fund. Such
an investment program cannot ensure a profit, but it should allow shareowners to
capture the benefits of dollar cost averaging and to participate in any
long-term appreciation of common stock prices. Dependable income should be
derived from bond holdings. We strive to invest the Fund's assets in growing
companies with fine managements and good quality bonds. We are confident that
these investments will produce satisfactory long-term results. Risk is managed,
but not eliminated, through broad diversification in globally competitive firms
in essential businesses.
The directors have declared a semi-annual income dividend of $.77 per share
which was paid on June 19, 2000. It was used to purchase additional shares for
your account unless you have elected to receive payments directly by check.
Sincerely,
<TABLE>
<S> <C>
[SIG] [SIG]
Paul N. Eckley Kurt G. Moser
Vice President Vice President
</TABLE>
* The Balanced Fund's average annual total return for the 1-year, 5-year and
10-year periods ended June 30, 2000 was 11.11%, 15.32% and 14.10%,
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 Balanced 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, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<C> <S> <C> <C> <C>
COMMON STOCKS (72.1%)
AGRICULTURE, FOODS, & BEVERAGE (3.1%)
853,118 Archer-Daniels-Midland Company $ 10,184,096
26,000 Campbell Soup Company 806,000
310,000 Kellogg Company 9,416,250
58,000 Sara Lee Corporation 1,044,000
190,000 The Coca-Cola Company 10,141,250
--------------
31,591,596
--------------
BANKS (4.9%)
51,046 ABN Amro Holding NV 1,172,213
52,312 AmSouth Bancorporation 944,886
44,900 Bank of America Corporation 2,494,756
184,100 Bank One Corporation 6,086,806
10,900 JP Morgan & Co. Incorporated 1,403,375
1,900 M&T Bank Corporation 821,750
41,000 Northern Trust Corporation 2,698,312
180,960 Pacific Century Financial
Corporation 4,071,600
166,924 Popular Inc. 3,818,386
99,000 SouthTrust Corporation 2,679,188
21,400 SunTrust Banks Inc. 1,278,650
75,700 Wachovia Corporation 5,232,762
373,800 Wells Fargo & Company 16,914,450
--------------
49,617,134
--------------
BUILDING MATERIALS & CONSTRUCTION (.7%)
160,200 Vulcan Materials Company 7,489,350
--------------
CHEMICALS (3.2%)
230,000 Air Products & Chemicals Inc. 7,963,750
108,705 EI du Pont de Nemours and
Company 5,326,545
141,400 Great Lakes Chemical
Corporation 3,923,850
120,000 International Flavors &
Fragrances Inc. 4,080,000
245,500 Sigma-Aldrich Corporation 8,193,562
23,000 The Dow Chemical Company 2,462,437
--------------
31,950,144
--------------
COMPUTER SOFTWARE AND SERVICES (1.9%)
135,400 Cisco Systems Inc. (a) 7,717,800
8,800 Electronic Data Systems
Corporation 565,950
168,600 Microsoft Corporation (a) 10,548,037
--------------
18,831,787
--------------
COMPUTERS (6.0%)
377,000 Hewlett-Packard Company 45,287,125
137,200 International Business
Machines Corporation 14,723,275
--------------
60,010,400
--------------
</TABLE>
---------
12
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<C> <S> <C> <C> <C>
CONSUMER & MARKETING (3.9%)
22,200 Clorox Co. $ 879,675
160,000 Hon Industries Inc. 3,990,000
177,937 Kimberly Clark Corp. 10,765,189
96,700 McDonald's Corporation 3,463,069
136,218 Newell Rubbermaid Inc. 3,575,722
300,000 The Gillette Company 10,012,500
81,600 The Procter & Gamble Company 5,426,400
22,857 Unilever NV 1,161,421
--------------
39,273,976
--------------
ELECTRONIC/ELECTRICAL MFG. (6.9%)
57,200 Applied Materials Inc. (a) 4,776,200
31,200 Emerson Electric Co. 1,840,800
479,700 General Electric Company 25,244,212
251,400 Intel Corporation 31,330,725
37,400 KLA Tencor Corporation (a) 1,853,637
81,600 Linear Technology Corp. 4,819,500
--------------
69,865,074
--------------
FINANCIAL SERVICES (.9%)
66,750 Citigroup Inc. 4,151,016
160,650 MBNA Corporation 4,478,119
--------------
8,629,135
--------------
HEALTH CARE (10.8%)
77,400 Allergan Inc. 5,316,413
405,000 Biomet Inc. 14,605,313
36,100 Bristol-Myers Squibb Company 1,987,756
212,000 Eli Lilly & Co. 16,138,500
198,000 Johnson & Johnson 17,721,000
21,600 Medtronic Inc. 1,115,100
123,400 Merck & Co. Inc. 9,208,725
960,000 Pfizer Inc. 42,780,000
--------------
108,872,807
--------------
MACHINERY & MANUFACTURING (3.8%)
45,900 AptarGroup Inc. 1,219,219
100,000 Caterpillar Inc. 3,825,000
124,100 Corning Incorporated 24,005,594
14,700 Deere & Company 610,969
44,600 Honeywell International Inc. 2,439,063
20,000 Illinois Tool Works Inc. 1,161,250
47,700 Minnesota Mining &
Manufacturing Co. 4,090,275
84,375 Osmonics Inc. (a) 759,375
--------------
38,110,745
--------------
MEDIA & BROADCASTING (5.9%)
42,000 Lee Enterprises Incorporated 918,750
42,000 Lee Enterprises Incorporated
(Class B) 918,750
173,333 Reuters Group PLC ADR 15,404,970
993,495 The Walt Disney Company 41,913,070
--------------
59,155,540
--------------
</TABLE>
13-------
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<C> <S> <C> <C> <C>
MINING & METALS (.8%)
29,200 Newmont Mining Corporation $ 673,425
109,200 Nucor Corporation 4,245,150
50,000 Rio Tinto PLC ADR 3,071,875
18,750 Steel Dynamics Inc. (a) 174,609
--------------
8,165,059
--------------
OIL & GAS (4.6%)
89,986 BP Amoco PLC ADR 4,892,989
144,000 Chevron Corporation 13,311,000
29,185 Devon Energy Corporation 1,745,628
171,600 Exxon Mobil Corporation 14,296,425
65,220 Pennzoil-Quaker State Company 717,420
188,700 Royal Dutch Petroleum Company
ADR 11,781,956
--------------
46,745,418
--------------
RETAILERS (1.0%)
32,800 Home Depot Inc. 1,601,050
149,600 Wal-Mart Stores Inc. 8,620,700
--------------
10,221,750
--------------
TELECOM & TELECOM EQUIPMENT (13.2%)
516,400 ADC Telecommunications
Inc. (a) 34,695,625
255,000 AT&T Corp. 8,845,313
544,000 LM Ericsson Telephone Company
ADR 11,152,000
220,376 Lucent Technologies Inc. 12,644,073
64,000 Motorola Inc. 6,000,000
29,800 Nextlink Communications Inc.
(Class A) (a) 2,087,863
88,400 Nokia Corporation ADR 4,596,800
178,400 Nortel Networks Corp. 9,689,350
470,024 SBC Communications Inc. 20,534,174
23,100 US West Inc. 1,663,200
60,000 Vodafone AirTouch PLC-Sp ADR 2,748,750
486,985 WorldCom Inc. (a) 18,322,811
--------------
132,979,959
--------------
UTILITIES & ENERGY (.5%)
36,000 Duke Energy Corporation 2,097,000
30,200 The AES Corporation (a) 2,634,950
--------------
4,731,950
--------------
TOTAL COMMON STOCKS
(cost $259,588,827) 726,241,824
--------------
</TABLE>
---------
14
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY
AMOUNT RATE DATE VALUE
----------- -------- ------------------------------ --------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (10.0%)
AGRICULTURE, FOODS, & BEVERAGE (.8%)
$ 3,000,000 Pioneer Hi-Bred International
Inc. 5.750% January 15, 2009 $ 2,642,970
3,000,000 Dean Foods Company 6.625% May 15, 2009 2,709,390
2,950,000 Archer-Daniels-Midland Company 5.870% November 15, 2010 2,521,483
--------------
7,873,843
--------------
AUTOMOTIVE (.8%)
3,000,000 Daimler Chrysler North America 6.900% September 1, 2004 2,909,130
3,000,000 Ford Motor Credit Company 5.800% January 12, 2009 2,571,180
3,000,000 General Motors Acceptance
Corp. 7.750% January 19, 2010 2,918,370
--------------
8,398,680
--------------
BUILDING MATERIALS & CONSTRUCTION (.6%)
3,000,000 Leggett & Platt Inc. 7.650% February 15, 2005 2,983,500
3,000,000 Vulcan Materials Company 6.000% April 1, 2009 2,638,560
--------------
5,622,060
--------------
CHEMICALS (.6%)
3,000,000 PPG Industries Inc. 6.750% August 15, 2004 2,918,640
3,250,000 EI du Pont de Nemours and
Company 6.750% October 15, 2004 3,157,732
--------------
6,076,372
--------------
COMPUTERS (.3%)
3,000,000 International Business
Machines Corporation 5.375% February 1, 2009 2,588,490
--------------
CONSUMER & MARKETING (.5%)
2,000,000 Hasbro Inc. 5.600% November 1, 2005 1,769,340
3,000,000 The Procter & Gamble Company 6.875% September 15, 2009 2,852,460
--------------
4,621,800
--------------
CONTAINERS & PACKAGING (.4%)
5,000,000 Avery Dennison Corp. 5.900% December 1, 2008 4,369,600
--------------
ELECTRONIC/ELECTRICAL MFG. (.3%)
3,000,000 Emerson Electric Co. 5.850% March 15, 2009 2,655,120
--------------
FINANCIAL SERVICES (.8%)
3,000,000 Household Finance Corp. 7.200% July 15, 2006 2,827,440
2,000,000 General Electric Capital Corp. 7.375% January 19, 2010 1,970,560
3,000,000 Bellsouth Capital Funding
Corp. 7.750% February 15, 2010 2,945,280
--------------
7,743,280
--------------
HEALTH CARE (.6%)
3,000,000 Johnson & Johnson 6.625% September 1, 2009 2,826,510
3,000,000 Becton Dickinson & Co. 7.150% October 1, 2009 2,841,390
--------------
5,667,900
--------------
</TABLE>
15-------
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY
AMOUNT RATE DATE VALUE
----------- -------- ------------------------------ --------------
<C> <S> <C> <C> <C>
MACHINERY & MANUFACTURING (1.4%)
$ 3,000,000 United Technologies Corp. 7.000% September 15, 2006 $ 2,899,110
3,000,000 Illinois Tool Works Inc. 5.750% March 1, 2009 2,626,950
3,000,000 Caterpillar Inc. 7.250% September 15, 2009 2,846,250
3,000,000 Honeywell International Inc. 7.500% March 1, 2010 2,960,580
3,000,000 Deere & Company 7.850% May 15, 2010 2,944,590
--------------
14,277,480
--------------
MEDIA & BROADCASTING (.2%)
3,000,000 The Washington Post Company 5.500% February 15, 2009 2,581,470
--------------
OIL & GAS (.2%)
3,000,000 Texaco Capital 5.500% January 15, 2009 2,582,730
--------------
RETAILERS (.6%)
3,000,000 Albertsons Inc. 6.950% August 1, 2009 2,761,050
3,000,000 Wal-Mart Stores Inc. 6.875% August 10, 2009 2,859,240
--------------
5,620,290
--------------
TELECOM & TELECOM EQUIPMENT (1.3%)
3,000,000 Vodafone AirTouch PLC 7.625% February 15, 2005 2,964,420
3,000,000 WorldCom Inc. 7.750% April 1, 2007 2,957,280
5,000,000 US West Communications 5.625% November 15, 2008 4,196,050
3,000,000 AT&T Corp. 6.000% March 15, 2009 2,624,310
1,000,000 New England Telephone &
Telegraph Co. 5.875% April 15, 2009 861,590
--------------
13,603,650
--------------
UTILITIES & ENERGY (.6%)
3,000,000 Alabama Power Company 7.125% August 15, 2004 2,903,640
3,000,000 Duke Energy Corporation 7.375% March 1, 2010 2,837,310
--------------
5,740,950
--------------
TOTAL CORPORATE BONDS
(cost $107,595,405) 100,023,715
--------------
U.S. TREASURY OBLIGATIONS (15.7%)
1,200,000 U.S. Treasury Notes 7.750% February 15, 2001 1,208,076
5,000,000 U.S. Treasury Notes 6.375% March 31, 2001 4,983,000
625,000 U.S. Treasury Bonds 13.125% May 15, 2001 661,000
2,000,000 U.S. Treasury Notes 8.000% May 15, 2001 2,022,220
680,000 U.S. Treasury Bonds 13.375% August 15, 2001 730,633
2,500,000 U.S. Treasury Notes 7.500% November 15, 2001 2,523,150
1,000,000 U.S. Treasury Bonds 14.250% February 15, 2002 1,117,950
2,000,000 U.S. Treasury Notes 7.500% May 15, 2002 2,026,780
5,000,000 U.S. Treasury Notes 6.000% July 31, 2002 4,927,050
7,500,000 U.S. Treasury Notes 6.375% August 15, 2002 7,444,650
2,570,000 U.S. Treasury Bonds 11.625% November 15, 2002 2,846,198
5,000,000 U.S. Treasury Notes 6.250% February 15, 2003 4,938,450
3,000,000 U.S. Treasury Bonds 10.750% May 15, 2003 3,317,010
9,000,000 U.S. Treasury Notes 5.750% August 15, 2003 8,761,950
5,500,000 U.S. Treasury Bonds 11.875% November 15, 2003 6,358,220
2,000,000 U.S. Treasury Notes 5.875% February 15, 2004 1,951,020
9,000,000 U.S. Treasury Notes 7.250% May 15, 2004 9,179,370
6,000,000 U.S. Treasury Notes 7.250% August 15, 2004 6,132,180
1,500,000 U.S. Treasury Bonds 11.625% November 15, 2004 1,782,015
5,000,000 U.S. Treasury Notes 7.500% February 15, 2005 5,175,350
</TABLE>
---------
16
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY
AMOUNT RATE DATE VALUE
----------- -------- ------------------------------ --------------
<C> <S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (CONT.)
$ 7,500,000 U.S. Treasury Notes 6.500% May 15, 2005 $ 7,478,775
6,000,000 U.S. Treasury Notes 5.875% November 15, 2005 5,811,660
11,500,000 U.S. Treasury Bonds 9.375% February 15, 2006 13,004,545
6,000,000 U.S. Treasury Notes 6.875% May 15, 2006 6,089,280
3,000,000 U.S. Treasury Notes 7.000% July 15, 2006 3,063,780
4,000,000 U.S. Treasury Notes 6.500% October 15, 2006 3,986,880
10,000,000 U.S. Treasury Notes 6.250% February 15, 2007 9,858,800
8,000,000 U.S. Treasury Notes 6.625% May 15, 2007 8,047,200
4,000,000 U.S. Treasury Notes 6.125% August 15, 2007 3,914,160
10,000,000 U.S. Treasury Notes 5.500% February 15, 2008 9,421,900
1,000,000 U.S. Treasury Bonds 10.375% November 15, 2009 1,134,280
7,000,000 U.S. Treasury Bonds 10.000% May 15, 2010 7,932,120
--------------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $162,944,510) 157,829,652
--------------
GOVERNMENT AGENCY SECURITIES (1.4%)
5,000,000 Federal Home Loan Mortgage
Corp. 7.375% May 15, 2003 4,993,700
10,000,000 Federal National Mortgage
Association 6.000% May 15, 2008 9,084,200
--------------
TOTAL GOVERNMENT AGENCY SECURITIES
(cost $14,515,088) 14,077,900
--------------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
-----------------------------------------------------
SHORT-TERM INVESTMENTS (.5%)
<C> <S> <C> <C> <C>
2,100,000 Ford Motor Credit Company,
6.594% to, 6.622%, June,
2000 2,100,000
1,000,000 U.S. Treasury Bills, 5.720%,
June, 2000 996,230
2,208,086 Chase Vista Treasury Plus
Money Market Fund 2,208,086
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $5,303,652) 5,304,316
--------------
TOTAL INVESTMENTS (99.7%)
(cost $549,947,482) 1,003,477,407
OTHER ASSETS, NET OF LIABILITIES (0.3%) 3,396,593
--------------
NET ASSETS (100.0%) $1,006,874,000
==============
</TABLE>
Notes:
(a) Non-income producing security.
At May 31, 2000, net unrealized appreciation of $453,529,925 consisted of gross
unrealized appreciation of $474,601,653 and gross unrealized depreciation of
$21,071,728 based on cost of $549,947,482 for federal income tax purposes.
See accompanying notes to financial statements.
17-------
<PAGE>
STATE FARM BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (cost
$549,947,482) $1,003,477,407
Receivable for:
Dividends and interest $4,871,757
Shares of the Fund sold 7,049 4,878,806
----------
Prepaid expenses 21,640
--------------
Total assets 1,008,377,853
--------------
LIABILITIES AND NET ASSETS
Payable for:
Shares of the Fund redeemed 1,171,564
Manager 309,245 1,480,809
----------
Accrued liabilities 23,044
--------------
Total liabilities 1,503,853
--------------
Net assets applicable to 18,336,089
shares outstanding of
$1.00 par value common stock
(40,000,000 shares authorized) $1,006,874,000
==============
Net asset value, offering price and
redemption price per share $ 54.91
==============
ANALYSIS OF NET ASSETS
Excess of amounts received from sales
of shares over amounts paid on
redemptions of shares on account of
capital $ 532,299,085
Accumulated net realized loss on sales
of investments (4,477,674)
Net unrealized appreciation of
investments 453,529,925
Undistributed net investment income 25,522,664
--------------
Net assets applicable to shares
outstanding $1,006,874,000
==============
</TABLE>
See accompanying notes to financial statements.
---------
18
<PAGE>
STATE FARM BALANCED FUND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, 2000 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1999
------------ -----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 4,456,349 8,844,759
Interest 10,337,731 21,001,785
----------- --------------
14,794,080 29,846,544
Less: foreign withholding taxes 73,569 144,691
----------- --------------
Total investment income 14,720,511 29,701,853
EXPENSES:
Investment advisory and management
fees 574,535 1,113,753
Reports to shareowners 18,488 32,580
Professional fees 15,301 61,649
ICI dues 9,589 23,365
Franchise taxes 9,052 17,600
Custodian fees 5,241 17,895
Directors' fees 3,600 7,200
Security evaluation fees 3,141 4,571
Fidelity bond expense 2,976 5,377
Registration fees 411 8,879
Other 20 131
----------- --------------
Total expenses 642,354 1,293,000
----------- --------------
Net investment income 14,078,157 28,408,853
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Accumulated net realized gain (loss)
on sales of investments (4,477,674) 10,843,298
Net unrealized appreciation on
investments 55,320,709 48,274,008
----------- --------------
Net realized and unrealized gain on
investments 50,843,035 59,117,306
----------- --------------
Net change in net assets resulting from
operations $64,921,192 87,526,159
=========== ==============
</TABLE>
See accompanying notes to financial statements.
19-------
<PAGE>
STATE FARM BALANCED FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, 2000 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1999
-------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 14,078,157 28,408,853
Net realized gain (loss) on sales of
investments (4,477,674) 10,843,298
Change in net unrealized appreciation 55,320,709 48,274,008
-------------- --------------
Net change in net assets resulting from
operations 64,921,192 87,526,159
Undistributed net investment income
(loss) included in price of shares
issued and redeemed (229,308) 270,649
DISTRIBUTIONS TO SHAREOWNERS FROM:
Net investment income (14,964,559) (27,062,617)
Net realized gain (10,500,732) (382,353)
-------------- --------------
Total distributions to shareowners (25,465,291) (27,444,970)
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 125,077,476 112,775,656
Reinvestment of ordinary income
dividends and capital gain
distributions 24,386,513 26,064,784
-------------- --------------
149,463,989 138,840,440
Less payments for shares redeemed 172,540,484 101,669,744
-------------- --------------
Net increase (decrease) in net assets
from Fund share transactions (23,076,495) 37,170,696
-------------- --------------
Total increase in net assets 16,150,098 97,522,534
NET ASSETS:
Beginning of period 990,723,902 893,201,368
-------------- --------------
End of period (including undistributed
net investment income of $25,522,664
in 2000, and $26,295,808 in 1999) $1,006,874,000 990,723,902
============== ==============
</TABLE>
See accompanying notes to financial statements.
---------
20
<PAGE>
STATE FARM BALANCED FUND, INC.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance of the Fund for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions).
PER SHARE INCOME AND CAPITAL CHANGES (For a share outstanding throughout each
period):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 2000 ---------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 52.79 49.54 46.09 42.04 37.76 31.12
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.78 1.51 1.54 1.40 1.39 1.25
Net gain (loss) on investments (both
realized and unrealized) 2.70 3.23 4.14 5.45 4.38 6.77
-------- -------- -------- -------- -------- --------
Total from investment operations 3.48 4.74 5.68 6.85 5.77 8.02
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Net investment income (0.79) (1.47) (1.54) (1.47) (1.30) (1.19)
Net realized gain (0.57) (0.02) (0.69) (1.33) (0.19) (0.19)
-------- -------- -------- -------- -------- --------
Total distributions (1.36) (1.49) (2.23) (2.80) (1.49) (1.38)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 54.91 52.79 49.54 46.09 42.04 37.76
======== ======== ======== ======== ======== ========
TOTAL RETURN 6.73% 9.72% 12.72% 17.33% 15.78% 26.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions) $1,006.9 990.7 893.2 762.3 626.1 499.7
Ratio of expenses to average net assets 0.13%(a) 0.13% 0.14% 0.14% 0.15% 0.17%(b)
Ratio of net investment income to average net
assets 2.82%(a) 2.96% 3.34% 3.42% 3.63% 3.66%
Portfolio turnover rate 7%(a) 5% 2% 6% 9% 6%
</TABLE>
----------
(a) Determined on an annualized basis.
(b) The ratio based on net custodian expenses would have been .16% in 1995.
21-------
<PAGE>
STATE FARM INTERIM FUND, INC.
Dear Shareowner:
The increase in interest rates which has been occurring since the beginning of
1999 continued over the last six months. Yields on the U.S. Treasury securities
that dominate investments of the Interim Fund have risen around 50 basis points
(a basis point is .01%) over the last six months.
This upward movement of interest rates caused the net asset value of the Fund to
fall to $9.32 from $9.47, a 1.6% decrease, over the last six months. The Fund's
total return, which includes the reinvestment of dividends and the change in net
asset value, for the six months was 1.82%. Total return for the twelve months
ended May 31, 2000 was 3.43%.*
The U.S. economy remains quite healthy. The latest calculation of real GDP for
the first quarter of 2000 puts growth at a 5.4% annual rate during the period.
That performance followed an unsustainable 7.3% increase during the fourth
quarter of 1999. The pace of general economic activity appears to be slowing
some more in the present quarter as increasing interest rates, higher energy
prices, a stronger dollar, tighter bank lending standards and a struggling stock
market are affecting conditions. However, the economy still shows substantial
underlying vitality.
Demands for capital created by the strong economy have been exerting upward
pressure on interest rates. Furthermore, the Open Market Committee of the
Federal Reserve continues to tighten monetary policy showing that it is
concerned that the economy is growing in excess of its non-inflationary
potential. The target federal funds rate and discount rate were most recently
raised by 50 basis points in May. The increase in May marked the sixth
tightening since last June and brought the total increase in the federal funds
target rate over that period to 175 basis points.
Times when interest rates are rising can be unsettling for investors in bonds or
mutual funds which invest in bonds. The relatively short maturity structure of
the Interim Fund tends to mitigate fluctuations in its net asset value. Its
laddered maturity structure provides a natural mechanism for the portfolio to be
reinvested at prevailing interest rates when investments mature. However, as is
obvious by occurrences of the past 18 months, these characteristics do not
prevent portfolio bond values from going down when interest rates increase. We
believe shareholders should look to the dependable flow of dividend income
provided by its high quality investments as the main attraction of the Fund.
That feature should endure while interest rates inevitably fluctuate cyclically
over the years.
As you know the Fund declares a dividend each day from its net investment income
which is payable on the last day off 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>
* The Interim Fund's average annual total return for the 1-year, 5-year and
10-year periods ended June 30, 2000 was 4.62%, 5.55% and 6.59%, respectively.
Past performance does not guarantee future results. The investment return and
principal value of an investment in the Interim Fund will fluctuate so that
your Fund shares, when redeemed, may be worth more or less than their
original cost.
---------
22
<PAGE>
STATE FARM INTERIM FUND, INC.
PORTFOLIO OF INVESTMENTS
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL COUPON MATURITY
AMOUNT RATE DATE VALUE
------------ ------- ------------------- -------------
<C> <S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (98.8%)
$ 3,000,000 U.S. Treasury Notes 5.500% December 31, 2000 $ 2,980,350
1,000,000 U.S. Treasury Notes 5.250% January 31, 2001 990,920
4,000,000 U.S. Treasury Notes 7.750% February 15, 2001 4,026,920
4,000,000 U.S. Treasury Notes 5.625% February 28, 2001 3,968,240
5,000,000 U.S. Treasury Notes 8.000% May 15, 2001 5,055,550
4,000,000 U.S. Treasury Notes 7.875% August 15, 2001 4,048,040
3,000,000 U.S. Treasury Notes 6.375% September 30, 2001 2,983,110
4,000,000 U.S. Treasury Notes 7.500% November 15, 2001 4,037,040
4,000,000 U.S. Treasury Notes 7.500% May 15, 2002 4,053,560
8,000,000 U.S. Treasury Notes 6.375% August 15, 2002 7,940,960
4,000,000 U.S. Treasury Bonds 11.625% November 15, 2002 4,429,880
5,000,000 U.S. Treasury Notes 5.750% November 30, 2002 4,887,400
6,000,000 U.S. Treasury Notes 6.250% February 15, 2003 5,926,140
7,000,000 U.S. Treasury Notes 5.750% April 30, 2003 6,825,070
2,000,000 U.S. Treasury Bonds 10.750% May 15, 2003 2,211,340
2,000,000 U.S. Treasury Bonds 11.125% August 15, 2003 2,248,220
7,000,000 U.S. Treasury Notes 5.750% August 15, 2003 6,814,850
1,000,000 U.S. Treasury Bonds 11.875% November 15, 2003 1,156,040
3,000,000 U.S. Treasury Notes 5.875% February 15, 2004 2,926,530
8,000,000 U.S. Treasury Notes 7.250% May 15, 2004 8,159,440
5,000,000 U.S. Treasury Notes 7.250% August 15, 2004 5,110,150
8,000,000 U.S. Treasury Notes 7.875% November 15, 2004 8,372,560
4,000,000 U.S. Treasury Notes 7.500% February 15, 2005 4,140,280
4,000,000 U.S. Treasury Notes 6.500% May 15, 2005 3,988,680
8,000,000 U.S. Treasury Notes 6.500% August 15, 2005 7,970,160
4,000,000 U.S. Treasury Notes 5.875% November 15, 2005 3,874,440
------------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $126,254,922) 119,125,870
------------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
-----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (1.1%)
<C> <S> <C> <C> <C>
1,000,000 U.S. Treasury Bills, 5.710%,
July, 2000 991,700
359,273 Chase Vista Treasury Plus
Money Market Fund 359,273
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,350,367) 1,350,973
------------
TOTAL INVESTMENTS (99.9%)
(cost $127,605,289) 120,476,843
OTHER ASSETS, NET OF LIABILITIES (0.1%) 151,768
------------
NET ASSETS (100.0%) $120,628,611
============
</TABLE>
Notes:
At May 31, 2000, net unrealized depreciation of $7,128,446 consisted of gross
unrealized appreciation of $606 and gross unrealized depreciation of $7,129,052
based on cost of $127,605,289 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, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value
(cost $127,605,289) $120,476,843
Receivable for:
Interest $1,407,210
Shares of the Fund sold 449,923 1,857,133
---------
Prepaid expenses 10,590
-----------
Total assets 122,344,566
-----------
LIABILITIES AND NET ASSETS
Dividends to shareowners 1,353,543
Payable for:
Shares of the Fund redeemed 295,635
Manager 53,943 349,578
---------
Accrued liabilities 12,834
-----------
Total liabilities 1,715,955
-----------
Net assets applicable to 12,941,464
shares outstanding of
$1.00 par value common stock
(40,000,000 shares authorized) $120,628,611
===========
Net asset value, offering price and
redemption price per share $ 9.32
===========
ANALYSIS OF NET ASSETS
Excess of amounts received from sales
of shares over amounts paid on
redemptions of shares on account of
capital $133,576,318
Accumulated net realized loss on sales
of investments (5,819,261)
Net unrealized depreciation of
investments (7,128,446)
-----------
Net assets applicable to shares
outstanding $120,628,611
===========
</TABLE>
See accompanying notes to financial statements.
---------
24
<PAGE>
STATE FARM INTERIM FUND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MAY 31, 2000 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1999
------------ -----------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 4,724,332 10,570,203
EXPENSES:
Investment advisory and management
fees 104,879 230,126
Professional fees 11,535 41,759
Franchise taxes 5,048 8,323
Reports to shareowners 2,900 5,533
Custodian fees 2,139 10,256
ICI dues 1,546 6,174
Fidelity bond expense 1,430 2,709
Directors' fees 1,200 2,400
Security evaluation fees 368 963
Registration fees -- 145
Other 6 131
----------- --------------
Total expenses 131,051 308,519
----------- --------------
Net investment income 4,593,281 10,261,684
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Accumulated net realized loss on sales
of investments (1,811,630) (884,533)
Net unrealized depreciation on
investments (482,754) (7,167,018)
----------- --------------
Net realized and unrealized loss on
investments (2,294,384) (8,051,551)
----------- --------------
Net change in net assets resulting from
operations $ 2,298,897 2,210,133
=========== ==============
</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, 2000 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1999
------------ -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 4,593,281 10,261,684
Net realized loss on sales of
investments (1,811,630) (884,533)
Change in net unrealized depreciation (482,754) (7,167,018)
------------ --------------
Net change in net assets resulting from
operations 2,298,897 2,210,133
DISTRIBUTIONS TO SHAREOWNERS FROM:
Net investment income (4,593,281) (10,261,684)
------------ --------------
Total distributions to shareowners (4,593,281) (10,261,684)
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 31,302,464 75,116,757
Reinvestment of ordinary income
dividends 4,273,844 9,326,141
------------ --------------
35,576,308 84,442,898
Less payments for shares redeemed 64,221,540 78,967,686
------------ --------------
Net increase (decrease) in net assets
from Fund share transactions (28,645,232) 5,475,212
------------ --------------
Total decrease in net assets (30,939,616) (2,576,339)
NET ASSETS:
Beginning of period 151,568,227 154,144,566
------------ --------------
End of period $120,628,611 151,568,227
============ ==============
</TABLE>
See accompanying notes to financial statements.
---------
26
<PAGE>
STATE FARM INTERIM FUND, INC.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance of the Fund for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions).
PER SHARE INCOME AND CAPITAL CHANGES (For a share outstanding throughout each
period):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 2000 --------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------- -------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.47 9.98 9.85 9.98 10.15 9.72
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.32 0.64 0.68 0.69 0.70 0.70
Net gain (loss) on
investments (both
realized and
unrealized) (0.15) (0.51) 0.13 (0.13) (0.17) 0.43
------- ------- ------- ------- ------ -----
Total from investment
operations 0.17 0.13 0.81 0.56 0.53 1.13
------- ------- ------- ------- ------ -----
LESS DISTRIBUTIONS
Net investment income (0.32) (0.64) (0.68) (0.69) (0.70) (0.70)
------- ------- ------- ------- ------ -----
Total distributions (0.32) (0.64) (0.68) (0.69) (0.70) (0.70)
------- ------- ------- ------- ------ -----
Net asset value, end of
period $ 9.32 9.47 9.98 9.85 9.98 10.15
======= ======= ======= ======= ====== =====
TOTAL RETURN 1.82% 1.35% 8.31% 5.87% 5.44% 11.91%
RATIOS/SUPPLEMENTAL
DATA
Net assets, end of
period (millions) $ 120.6 151.6 154.1 112.8 107.6 104.7
Ratio of expenses to
average net assets 0.20%(a) 0.20% 0.21% 0.22% 0.23%(b) 0.25%(b)
Ratio of net investment
income to average net
assets 6.85%(a) 6.63% 6.80% 7.03% 7.03% 7.00%
Portfolio turnover rate 0%(a) 12% 14% 15% 17% 17%
</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:
The increase in interest rates which has been occurring since the beginning of
1999 continued over the last six months. Yields on the municipal securities
owned by the Municipal Bond Fund have risen around 30 basis points (a basis
point is .01%) over the last six months.
This upward movement of interest rates caused the net asset value of the Fund to
fall to $7.96 from $8.12, a 2.0% decrease, over the last six months. The Fund's
total return, which includes the reinvestment of dividends and the change in net
asset value, for the six months was 0.66%. Total return for the twelve months
ended May 31, 2000 was a negative 0.10%.*
The U.S. economy remains quite healthy. The latest calculation of real GDP for
the first quarter of 2000 puts growth at a 5.4% annual rate during the period.
That performance followed an unsustainable 7.3% increase during the fourth
quarter of 1999. The pace of general economic activity appears to be slowing
some more in the present quarter as increasing interest rates, higher energy
prices, a stronger dollar, tighter bank lending standards and a struggling stock
market are affecting conditions. However, the economy still shows substantial
underlying vitality.
Demands for capital created by the strong economy have been exerting upward
pressure on interest rates. Furthermore, the Open Market Committee of the
Federal Reserve continues to tighten monetary policy showing that it is
concerned that the economy is growing in excess of its non-inflationary
potential. The target federal funds rate and discount rate were most recently
raised by 50 basis points in May. The increase in May marked the sixth
tightening since last June and brought the total increase in the federal funds
target rate over that period to 175 basis points.
Times when interest rates are rising can be unsettling for investors in bonds or
mutual funds which invest in bonds. When contemplating such circumstances, we
strongly encourage you to view your investment in the Fund as a genuinely
long-term commitment. Volatility of net asset value is an inevitable consequence
of owning a municipal bond fund while interest rates fluctuate cyclically over
the years. Most importantly for investors, the good quality investments of the
Fund should provide a dependable flow of dividend income, which is almost
totally exempt from federal income taxes, through different interest rate and
economic environments.
As you know the Fund declares a dividend each day from its net investment income
which is payable on the last day off 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>
/s/ KURT G. MOSER /s/ JULIAN R. BUCHER
Kurt G. Moser Julian R. Bucher
Vice President Vice President
</TABLE>
* The Municipal Bond Fund's average annual total return for the 1-year, 5-year
and 10-year periods ended June 30, 2000 was 3.89%, 5.04% and 6.32%,
respectively. Past performance does not guarantee future results. The
investment return and principal value of an investment in the Municipal Bond
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, 2000
(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 (100.0%)
ALABAMA (1.9%)
$ 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 $ 2,209,548
2,165,000 Huntsville, Alabama, General
Obligation Warrants, Series
1998A 4.600% November 1, 2013 Aa2 1,890,824
2,465,000 Limestone County Board of
Education, Alabama, Capital
Outlay Tax Antic Warrants,
Series 1998 4.900% July 1, 2015 Aaa 2,207,260
------------
6,307,632
------------
ALASKA (1.6%)
1,505,000 Anchorage, Alaska, General
Obligation General Purpose
Refunding Bonds 4.600% February 1, 2003 Aaa 1,479,310
1,500,000 Municipality of Anchorage,
Alaska, 1993 General
Obligation Refunding School
Bonds, Series B 4.900% September 1, 2003 Aaa 1,487,820
1,100,000 Municipality of Anchorage,
Alaska, 1994 General
Obligation School Bonds 5.400% July 1, 2005 Aaa 1,108,195
1,565,000 Matanuska-Susitna Borough,
Alaska, General Obligation
School Bonds, 1999 Series A 5.000% March 1, 2015 Aaa 1,423,070
------------
5,498,395
------------
ARIZONA (6.2%)
1,000,000 Pima County, Arizona, General
Obligation Refunding Bonds,
Series 1992 6.300% July 1, 2002 A1 1,025,290
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 2,276,685
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+ 3,065,190
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 2,001,740
1,000,000 Maricopa County, Arizona,
Unified School District No.
69, Paradise Valley School
Improvement Bonds, Series
1990A 7.100% July 1, 2004 A1 1,064,050
2,340,000 City of Phoenix, Arizona,
General Obligation Refunding
Bonds, Series 1993 A 5.300% July 1, 2006 Aa1 2,362,885
1,000,000 Maricopa County, Arizona,
Unified School District No.
69, Paradise Valley School
Improvement Bonds, Series
1994A 7.100% July 1, 2008 A1 1,107,000
1,200,000 Maricopa County, Arizona,
Unified School District No.
69, Paradise Valley School
Improvement Bonds, Series
1994A 7.000% July 1, 2009 A1 1,328,172
2,500,000 Maricopa County, Arizona,
Unified School District No.
69, Paradise Valley School
Improvement Bonds, Series
1994A 7.000% July 1, 2010 A1 2,797,400
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 3,980,550
------------
21,008,962
------------
CALIFORNIA (4.4%)
400,000 State of California, General
Obligation Veterans Bonds,
Series AL 9.600% April 1, 2001 Aa3 416,664
1,400,000 San Diego County, California,
Water Authority Water
Revenue Certificates of
Participation, Series 1991A 6.000% May 1, 2001 Aa3 1,421,238
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 3,570,000
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 3,001,110
2,000,000 State of California, Various
Purpose General Obligation
Bonds 6.000% October 1, 2006 Aa3 2,121,740
</TABLE>
29-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING
PRINCIPAL COUPON MATURITY (MOODY'S
AMOUNT RATE DATE OR S&P) VALUE
------------ ------- ------------------- --------- -------------
<C> <S> <C> <C> <C> <C>
CALIFORNIA (CONT.)
$ 2,830,000 Sacramento County, California,
Sanitary District Financing
Authority Revenue Bonds,
1995 5.000% December 1, 2007 Aa3 $ 2,847,574
1,500,000 Sacramento County, California,
Sanitary District Financing
Authority Revenue Bonds,
1995 5.000% December 1, 2008 Aa3 1,500,930
------------
14,879,256
------------
COLORADO (4.7%)
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 2,678,583
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 2,053,420
2,000,000 Arapahoe County School
District # 6, Colorado,
Littleton Public Schools
General Obligation
Improvement Bonds, Series
1995A 5.000% December 1, 2007 Aa2 1,976,640
2,000,000 Cherry Creek School District
No. 5 (Arapahoe County,
Colorado), General
Obligation Bonds, Series
1999 5.500% December 15, 2009 Aa2 2,025,120
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 2,517,445
3,135,000 St. Vrain School District #
R3-1J, Colorado, General
Obligation, Series 1997 5.000% December 15, 2012 Aaa 2,937,526
1,855,000 City of Boulder, Colorado,
Open Space Acquisition
Refunding Bonds, Series 1999 5.000% August 15, 2013 Aa1 1,732,218
------------
15,920,952
------------
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 Aaa 1,165,714
1,125,000 The State of Delaware, General
Obligation Bonds, Series
1994B (Prerefunded to
12-1-2004 @ 100) 6.000% December 1, 2012 Aaa 1,165,714
------------
2,331,428
------------
FLORIDA (2.0%)
2,000,000 School District of Leon
County, Florida, General
Obligation Refunding Bonds,
Series 1991 5.850% July 1, 2001 A1 2,024,560
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 1,978,700
3,000,000 State of Florida, State Board
of Education Capital Outlay,
1999 Series A 4.750% January 1, 2015 Aa2 2,649,450
------------
6,652,710
------------
GEORGIA (7.8%)
1,500,000 Municipal Electric Authority
of Georgia, General Power
Revenue Bonds, Series 1993A 5.000% January 1, 2004 A3 1,476,315
1,205,000 DeKalb County School District,
Georgia, General Obligation
Refunding Bonds, Series 1993 5.100% July 1, 2004 Aa2 1,205,386
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 3,253,194
3,590,000 State of Georgia, General
Obligation Bonds, Series
1996C 6.250% August 1, 2009 Aaa 3,832,110
2,000,000 State of Georgia, General
Obligation Bonds, Series
1995C 5.700% July 1, 2011 Aaa 2,055,840
4,000,000 Gwinnett County Water & Sewer
Authority, Georgia, Revenue
Series 1998 5.000% August 1, 2011 Aaa 3,844,120
3,000,000 State of Georgia, General
Obligation Bonds, Series
1995B 5.750% March 1, 2012 Aaa 3,084,930
3,000,000 State of Georgia, General
Obligation Bonds, Series
1994B 6.250% April 1, 2012 Aaa 3,220,590
</TABLE>
---------
30
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING
PRINCIPAL COUPON MATURITY (MOODY'S
AMOUNT RATE DATE OR S&P) VALUE
------------ ------- ------------------- --------- -------------
<C> <S> <C> <C> <C> <C>
GEORGIA (CONT.)
$ 1,055,000 Columbia County, Georgia,
General Obligation Bonds
(Courthouse/Detention Center
Projects), Series 1998 4.700% February 1, 2013 A+ $ 933,580
1,195,000 Columbia County, Georgia,
General Obligation Bonds
(Courthouse/Detention Center
Projects), Series 1998 4.800% February 1, 2014 A+ 1,060,192
2,500,000 Fayette County School
District, Georgia, General
Obligation Refunding School
Bonds, Series 1999 4.750% March 1, 2015 Aa3 2,203,425
------------
26,169,682
------------
HAWAII (2.8%)
2,200,000 City and County of Honolulu,
Hawaii, General Obligation
Refunding Bonds, Series 1 5.600% June 1, 2001 Aa3 2,217,600
1,775,000 City and County of Honolulu,
Hawaii, General Obligation
Bonds, 1996 Series A 5.400% September 1, 2009 Aaa 1,771,006
2,225,000 City and County of Honolulu,
Hawaii, General Obligation
Bonds, 1996 Series A
(Prerefunded to 9-1-2008 @
100) 5.400% September 1, 2009 Aaa 2,242,466
3,000,000 State of Hawaii, General
Obligation Bonds of 1992,
Series BW 6.375% March 1, 2011 A1 3,199,290
------------
9,430,362
------------
IDAHO (.5%)
1,540,000 Joint School District No. 2,
Ada & Canyon Counties,
Idaho, General Obligation
School Bonds, Series 1994 5.000% July 30, 2004 Aa2 1,533,039
------------
ILLINOIS (5.3%)
2,000,000 Lake County, Illinois, Forest
Preserve District General
Obligation Refunding Bonds,
Series 1992B 5.700% February 1, 2003 Aa1 2,029,400
2,000,000 State of Illinois, General
Obligation Refunding Bonds,
Series of June 1993 5.000% June 1, 2003 Aa2 1,993,960
2,025,000 County of DuPage, Illinois,
General Obligation Refunding
Bonds (Alternate Rev. Source
- Stormwater Project) 5.100% January 1, 2004 Aaa 2,021,638
4,000,000 State of Illinois, General
Obligation Bonds, Series
September 1996 5.450% September 1, 2009 Aaa 4,010,160
2,500,000 Forest Preserve District of
Kane County, Kane County,
Illinois, General Obligation
Bonds, Series 1999 5.000% December 30, 2011 Aa3 2,361,075
3,785,000 DuPage County Forest Preserve
District, Illinois, General
Obligation, Series 1997 4.900% October 1, 2013 Aaa 3,437,991
2,195,000 Community Unit School District
Number 200, DuPage County,
Illinois,
(Wheaton-Warrenville),
General Obligation School
Building Bonds, Series 1999 5.050% February 1, 2015 Aaa 2,017,622
------------
17,871,846
------------
INDIANA (2.4%)
900,000 Monroe County Jail, Indiana,
First Mortgage Refunding
Bonds, Series 1993 4.900% January 1, 2002 A1 897,174
925,000 Monroe County Jail, Indiana,
First Mortgage Refunding
Bonds, Series 1993 4.900% July 1, 2002 A1 920,874
2,000,000 Indianapolis, Indiana, Local
Public Improvement Bond
Bank, Series 1993A Bonds 5.250% January 10, 2004 Aaa 2,006,400
2,125,000 Southwest Allen, Indiana, High
School Building Corp., 1st
Mortgage Refunding Bonds,
Series 1996B 4.850% July 15, 2006 Aaa 2,063,545
2,325,000 Eagle-Union Community Schools
Building Corporation, Boone
County, Indiana, 1st
Mortgage Refunding Bonds,
Series 1999 4.875% July 5, 2015 Aaa 2,046,465
------------
7,934,458
------------
</TABLE>
31-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING
PRINCIPAL COUPON MATURITY (MOODY'S
AMOUNT RATE DATE OR S&P) VALUE
------------ ------- ------------------- --------- -------------
<C> <S> <C> <C> <C> <C>
IOWA (1.2%)
$ 2,000,000 City of Des Moines, Iowa,
Sewer Revenue Bonds, Series
1992D 6.000% June 1, 2003 Aaa $ 2,033,060
2,045,000 City of Iowa City, Johnson
County, Iowa, Sewer Revenue
Bonds 5.875% July 1, 2004 Aaa 2,067,802
------------
4,100,862
------------
KANSAS (.1%)
315,000 Johnson County Water District
No. 1, Kansas, Water
Revenue, Series 1982A
(Escrowed to maturity) 10.250% August 1, 2002 Aaa 334,048
------------
KENTUCKY (1.7%)
2,720,000 Louisville and Jefferson
County Metropolitan Sewer
District (Commonwealth of
Kentucky), Sewer and
Drainage System Revenue
Bonds, Series 1999A 5.500% May 15, 2009 Aaa 2,744,806
1,665,000 Jefferson County, Kentucky,
General Obligation Refunding
Bonds, Series 1998A 4.600% December 1, 2013 Aa2 1,464,617
1,745,000 Jefferson County, Kentucky,
General Obligation Refunding
Bonds, Series 1998A 4.700% December 1, 2014 Aa2 1,538,793
------------
5,748,216
------------
LOUISIANA (1.5%)
5,000,000 State of Louisiana, General
Obligation Bonds, Series
1997A 5.375% April 15, 2011 Aaa 4,920,950
------------
MARYLAND (2.2%)
2,000,000 Howard County, Maryland,
Consolidated Public
Improvement Refunding Bonds,
Series 1991B 5.800% August 15, 2001 Aaa 2,024,860
5,750,000 Montgomery County, Maryland,
General Obligation
Consolidated Public
Improvement, 1998 Series A 4.875% May 1, 2013 Aaa 5,326,628
------------
7,351,488
------------
MICHIGAN (4.2%)
3,140,000 State of Michigan, General
Obligation Bonds, Clean
Michigan Initiative Program,
Series 1999A 5.500% November 1, 2009 Aa1 3,183,615
2,500,000 Lake Orion Community School
District, County of Oakland,
State of Michigan, 2000
School Building and Site
Bonds, (General Obligation -
Unlimited Tax), Series A (a) 5.550% May 1, 2011 Aaa 2,505,550
3,800,000 Northville Public Schools,
Michigan, 1997 General
Obligation School Building &
Site & Refunding 5.100% May 1, 2011 Aaa 3,656,094
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 2,263,807
1,400,000 Avondale School District,
Oakland County, Michigan,
1999 Refunding Bonds
(Unlimited Tax General
Obligation) 4.850% May 1, 2015 Aaa 1,244,474
1,400,000 Avondale School District,
Oakland County, Michigan,
1999 Refunding Bonds
(Unlimited Tax General
Obligation) 4.900% May 1, 2016 Aaa 1,242,108
------------
14,095,648
------------
MINNESOTA (2.8%)
1,885,000 Anoka County, Minnesota,
General Obligation Capital
Improvement Refunding Bonds,
Series 1992C 5.200% February 1, 2001 A1 1,892,125
1,500,000 County of Ramsey, Minnesota,
General Obligation Capital
Improvement Refunding Bonds,
Series 1992C 5.400% December 1, 2002 Aaa 1,517,730
3,215,000 State of Minnesota, General
Obligation State Refunding
Bonds of 1983 5.125% August 1, 2004 Aaa 3,224,549
</TABLE>
---------
32
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING
PRINCIPAL COUPON MATURITY (MOODY'S
AMOUNT RATE DATE OR S&P) VALUE
------------ ------- ------------------- --------- -------------
<C> <S> <C> <C> <C> <C>
MINNESOTA (CONT.)
$ 3,000,000 Wayzata Independent School
District #284, Minnesota,
General Obligation School
Building Refunding, Series
1998A 5.000% February 1, 2012 Aa1 $ 2,842,170
------------
9,476,574
------------
MISSISSIPPI (1.2%)
2,100,000 Jackson Public School
District, Mississippi,
General Obligation School
Bonds, Series 1992 5.800% July 1, 2002 A1 2,131,920
2,000,000 City of Jackson, Mississippi,
Water and Sewer System
Revenue Refunding Bonds,
Series 1993-A 4.850% September 1, 2004 Aaa 1,973,000
------------
4,104,920
------------
MISSOURI (.4%)
1,375,000 The School District of St.
Joseph, (St. Joseph,
Missouri), General
Obligation School Building
Bonds, Series 2000,
(Missouri Direct Deposit
Program) (a) 5.450% March 1, 2011 AA+ 1,374,876
------------
NEBRASKA (2.9%)
2,000,000 City of Lincoln, Nebraska,
Water Revenue and Refunding
Bonds, Series 1993 4.900% August 15, 2003 Aa2 1,987,580
1,500,000 Omaha, Nebraska, Public Power
District Electric System
Revenue Bonds, 1993 Series B 5.100% February 1, 2005 Aa2 1,494,975
6,000,000 Omaha Public Power District,
Nebraska, Electric System
Revenue Bonds, 1992 Series B
(Escrowed to maturity) 6.150% February 1, 2012 Aa2 6,295,800
------------
9,778,355
------------
NEVADA (.6%)
2,110,000 State of Nevada, General
Obligation (Limited Tax)
Hoover Uprating Refunding
Bonds, Series 1992 6.000% October 1, 2001 Aa2 2,139,857
------------
NEW MEXICO (.8%)
2,500,000 City of Albuquerque, New
Mexico, Joint Water and
Sewer Refunding Revenue
Bonds, Series 1990B
(Prerefunded to 7-1-2000 @
102) 7.000% July 1, 2003 Aa3 2,554,725
------------
NEW YORK (.4%)
1,250,000 State of New York, Power
Authority General Purpose
Bonds, Series Z (Escrowed to
maturity) 6.000% January 1, 2001 Aaa 1,259,613
------------
NORTH CAROLINA (3.3%)
1,600,000 County of Buncombe, North
Carolina, Refunding Bonds,
Series 1993 5.100% March 1, 2004 Aa2 1,603,120
1,325,000 Winston-Salem, North Carolina,
Water and Sewer System
Revenue Bonds, Series 1995B 5.000% June 1, 2007 Aa2 1,304,277
1,665,000 Winston-Salem, North Carolina,
Water and Sewer System
Revenue Bonds, Series 1995B 5.100% June 1, 2008 Aa2 1,641,923
4,000,000 County of Wake, North
Carolina, General Obligation
School Bonds, Series 1997 4.900% March 1, 2009 Aaa 3,864,360
3,000,000 State of North Carolina,
Public School Building
Bonds, General Obligation,
Series 1999 4.600% April 1, 2016 Aaa 2,580,930
------------
10,994,610
------------
NORTH DAKOTA (.6%)
2,000,000 Fargo, North Dakota, Water
Revenue of 1993 (Escrowed to
maturity) 5.000% January 1, 2004 Aaa 1,994,080
------------
</TABLE>
33-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING
PRINCIPAL COUPON MATURITY (MOODY'S
AMOUNT RATE DATE OR S&P) VALUE
------------ ------- ------------------- --------- -------------
<C> <S> <C> <C> <C> <C>
OHIO (3.6%)
$ 1,535,000 Columbus, Ohio, Sewer
Improvement No. 27 Refunding
Bonds, Series 1991(Unlimited
Tax General Obligation
Bonds) 5.900% February 15, 2002 Aaa $ 1,559,268
2,000,000 Hilliard City School District,
Ohio, General Obligation
(Unlimited Tax) School
Improvement Bonds, Series
2000 5.300% December 1, 2010 Aa2 1,972,480
2,000,000 State of Ohio, Higher
Education Capital
Facilities, General
Obligation Bonds, Series
2000A 5.250% February 1, 2011 Aa1 1,969,400
5,000,000 State of Ohio, Full Faith &
Credit General Obligation
Infrastructure Improvement
Bonds, Series 1997 5.350% August 1, 2012 Aa1 4,935,450
1,970,000 Delaware County, Ohio, General
Obligation, Limited Tax,
Sewer District Improvement
Bonds, Series 1999 4.900% December 1, 2015 Aaa 1,766,144
------------
12,202,742
------------
OKLAHOMA (2.2%)
1,500,000 City of Tulsa, Oklahoma,
General Obligation Refunding
Bonds of 1993 5.050% June 1, 2002 Aa2 1,502,265
1,050,000 Oklahoma City, Oklahoma,
General Obligation Bonds,
Series 1993 5.150% May 1, 2003 Aa2 1,051,638
1,050,000 Oklahoma City, Oklahoma,
General Obligation Bonds,
Series 1993 5.250% May 1, 2004 Aa2 1,053,045
2,000,000 Oklahoma City, Oklahoma,
General Obligation Refunding
Bonds, Series 1993 5.300% August 1, 2005 Aa2 2,010,600
1,680,000 City of Tulsa, Oklahoma,
General Obligation Bonds,
Series 1999 5.250% December 1, 2009 Aa2 1,663,922
------------
7,281,470
------------
OREGON (1.7%)
4,000,000 Portland, Oregon, Sewer System
Revenue Refunding Bonds,
1997 Series A 5.000% June 1, 2011 Aaa 3,833,400
2,000,000 Washington and Clackamas
Counties School District
#23J (Tigard-Tualatin),
Oregon, General Obligation
Bonds, Series 1995 5.550% June 1, 2011 A1 2,008,500
------------
5,841,900
------------
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 1,447,271
2,695,000 City of Lancaster, Lancaster
County, Pennsylvania,
General Obligation Bonds,
Series A of 1998 4.750% May 1, 2014 Aaa 2,380,035
------------
3,827,306
------------
SOUTH CAROLINA (2.8%)
1,625,000 Charleston County, South
Carolina, General Obligation
Bonds of 1994 (ULT)
(Escrowed to maturity) 5.400% June 1, 2005 Aa2 1,641,283
1,700,000 State of South Carolina,
General Obligation State
Highway Bonds, Series 1995 5.100% August 1, 2008 Aaa 1,687,573
1,700,000 State of South Carolina,
General Obligation State
Highway Bonds, Series 1995 5.250% August 1, 2009 Aaa 1,698,640
2,675,000 City of Columbia, South
Carolina, Waterworks and
Sewer System Revenue Bonds,
Series 1999 5.500% February 1, 2010 Aa2 2,690,729
1,800,000 School District No. 1 of
Richland County, South
Carolina, General Obligation
Bonds, Series 1999 5.500% March 1, 2010 Aa1 1,818,774
------------
9,536,999
------------
TENNESSEE (4.2%)
1,200,000 Shelby County, Tennessee,
General Obligation Refunding
Bonds, 1992 Series B 5.200% March 1, 2001 Aa3 1,205,100
1,000,000 Williamson County, Tennessee,
Public Works Refunding
Bonds, Series 1992 5.650% March 1, 2002 Aa1 1,011,390
2,000,000 Nashville & Davidson County,
Tennessee, Electric System
Revenue Bonds, 1992 Series B 5.500% May 15, 2002 Aa3 2,018,720
</TABLE>
---------
34
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING
PRINCIPAL COUPON MATURITY (MOODY'S
AMOUNT RATE DATE OR S&P) VALUE
------------ ------- ------------------- --------- -------------
<C> <S> <C> <C> <C> <C>
TENNESSEE (CONT.)
$ 2,000,000 Nashville & Davidson County,
Tennessee, General
Obligation Refunding Bonds
of 1993 5.000% May 15, 2003 Aa2 $ 1,996,700
1,500,000 Nashville & Davidson County,
Tennessee, Water and Sewer
Revenue Refunding Bonds,
Series 1993 4.900% January 1, 2004 Aaa 1,486,455
1,800,000 Nashville & Davidson County,
Tennessee, General
Obligation Refunding Bonds
of 1993 5.000% May 15, 2005 Aa2 1,788,282
4,500,000 Nashville & Davidson County,
Tennessee, Water and Sewer
Revenue Refunding Bonds,
Series 1996 5.250% January 1, 2008 Aaa 4,477,545
------------
13,984,192
------------
TEXAS (5.9%)
2,000,000 Texas Public Finance
Authority, State of Texas,
General Obligation Refunding
Bonds, Series 1992A 5.700% October 1, 2003 Aa1 2,037,420
2,000,000 City of Dallas, Texas,
Waterworks and Sewer System
Revenue Refunding Bonds,
Series 1993 4.900% April 1, 2004 Aa2 1,980,060
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 2,328,648
1,000,000 Carrollton-Farmers Branch
Independent School District
(Dallas County, Texas)
School Building Unlimited
Tax Bonds, Series 1999 5.375% February 15, 2008 Aaa 1,001,480
3,000,000 State of Texas, Public Finance
Authority, General
Obligation Refunding Bonds,
Series 1996B 5.400% October 1, 2008 Aa1 3,010,920
2,455,000 Carrollton-Farmers Branch
Independent School District
(Dallas County, Texas)
School Building Unlimited
Tax Bonds, Series 1999 5.500% February 15, 2009 Aaa 2,471,645
3,000,000 Fort Worth Independent School
District (Tarrant County,
Texas), School Building
Unlimited Tax Bonds, Series
2000 5.500% February 15, 2010 Aaa 3,008,670
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 1,902,026
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 1,960,110
------------
19,700,979
------------
UTAH (1.2%)
2,780,000 Salt Lake County, Utah,
General Obligation Jail
Bonds, Series 1995 5.000% December 15, 2007 Aaa 2,740,524
1,300,000 City of Provo, Utah County,
Utah, General Obligation
Library Bonds, Series 1999 5.250% March 1, 2009 Aaa 1,290,003
------------
4,030,527
------------
WASHINGTON (7.7%)
1,250,000 Washington Public Power Supply
System Nuclear Project No.
3, Refunding Revenue Bonds,
Series 1991A 6.250% July 1, 2000 Aa1 1,251,450
1,000,000 Washington Public Power Supply
System Nuclear Project No.
1, Revenue Refunding Bonds,
Series 1990C 7.700% July 1, 2002 Aa1 1,048,210
2,000,000 Washington Public Power Supply
System Nuclear Project No.
3, Refunding Revenue Bonds,
Series 1993C 4.800% July 1, 2003 Aa1 1,969,140
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 2,532,776
2,000,000 City of Seattle, Washington,
Unlimited Tax General
Obligation Refunding Bonds
of 1993 4.800% December 1, 2004 Aaa 1,966,380
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 1,533,570
</TABLE>
35-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING
PRINCIPAL COUPON MATURITY (MOODY'S
AMOUNT RATE DATE OR S&P) VALUE
------------ ------- ------------------- --------- -------------
<C> <S> <C> <C> <C> <C>
WASHINGTON (CONT.)
$ 2,035,000 Lakewood School District No.
306, Snohomish County,
Washington, Unlimited Tax
General Obligation Bonds,
2000 5.550% December 1, 2010 Aa1 $ 2,046,254
4,500,000 State of Washington, General
Obligation Bonds, Series
1993A 5.750% October 1, 2012 Aa1 4,591,305
2,000,000 City of Vancouver, Washington,
Water and Sewer Revenue
Refunding Bonds, 1998 4.600% June 1, 2013 Aaa 1,738,260
2,495,000 Seattle, Washington, Water
System Revenue 1998 5.000% October 1, 2013 Aa2 2,309,048
2,605,000 City of Vancouver, Washington,
Water and Sewer Revenue
Refunding Bonds, 1998 4.650% June 1, 2014 Aaa 2,254,107
3,000,000 State of Washington, Variable
Purpose General Obligation
Refunding Bonds, Series
R-99A 4.750% January 1, 2015 Aa1 2,622,870
------------
25,863,370
------------
WEST VIRGINIA (.7%)
2,540,000 State of West Virginia, State
Road General Obligation
Bonds, Series 1998 5.000% June 1, 2013 Aaa 2,362,835
------------
WISCONSIN (4.2%)
3,500,000 Milwaukee, Wisconsin,
Metropolitan Sewerage
District General Obligation
Capital Purpose Bonds,
Series 1990A (Escrowed to
maturity) 6.700% October 1, 2002 Aa1 3,629,990
2,000,000 State of Wisconsin, General
Obligation Refunding Bonds
of 1993, Series 1 5.300% November 1, 2003 Aa2 2,012,920
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 2,074,660
2,500,000 State of Wisconsin, General
Obligation Refunding Bonds
of 1993, Series 2 5.125% November 1, 2010 Aa2 2,436,150
2,180,000 Dane County, Wisconsin,
General Obligation Refunding
Bonds, Series 1998B 4.800% March 1, 2012 Aaa 2,014,146
2,220,000 Dane County, Wisconsin,
General Obligation Refunding
Bonds, Series 1998B 4.800% March 1, 2013 Aaa 2,025,439
------------
14,193,305
------------
WYOMING (.5%)
1,600,000 Natrona County, Wyoming,
School District No. 1
General Obligation Bonds,
Series 1994 (Prerefunded to
7-1-2004 @ 100) 5.450% July 1, 2006 Aaa 1,620,336
------------
TOTAL LONG-TERM MUNICIPAL BONDS
(cost $341,062,450) 336,213,505
------------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
----------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (1.0%)
<C> <S> <C> <C> <C> <C>
2,000,000 U.S. Treasury Bills, 5.710%,
July, 2000 1,983,400
1,321,000 Chase Vista Treasury Plus
Money Market Fund, 5.000% 1,321,000
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $3,303,188) 3,304,400
------------
TOTAL INVESTMENTS (101.0%)
(cost $344,365,638) 339,517,905
LIABILITIES, NET OF OTHER ASSETS (-1.0%) (3,405,704)
------------
NET ASSETS (100.0%) $336,112,201
============
</TABLE>
Notes:
(a) Purchased on a 'when-issued' basis.
At May 31, 2000, net unrealized depreciation of $4,847,733 consisted of gross
unrealized appreciation of $3,582,186 and gross unrealized depreciation of
$8,429,919 based on cost of $344,365,638 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, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments, at value (cost
$344,365,638) $339,517,905
Receivable for:
Interest $5,961,623
Shares of the Fund sold 17,694 5,979,317
----------
Prepaid expenses 17,707
------------
Total assets 345,514,929
LIABILITIES AND NET ASSETS
Dividends to shareowners 3,049,538
Payable for:
Shares of the Fund redeemed 320,318
Securities purchased 5,903,364
Manager 110,338 6,334,020
----------
Accrued liabilities 19,170
------------
Total liabilities 9,402,728
------------
Net assets applicable to 42,222,068
shares outstanding of
$1.00 par value common stock
(100,000,000 shares authorized) $336,112,201
============
Net asset value, offering price and
redemption price per share $ 7.96
============
ANALYSIS OF NET ASSETS
Excess of amounts received from sales
of shares over amounts paid on
redemptions of shares on account of
capital $341,038,554
Accumulated net realized loss on sales
of investments (78,620)
Net unrealized depreciation of
investments (4,847,733)
------------
Net assets applicable to shares
outstanding $336,112,201
============
</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, 2000 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1999
------------ -----------------
<S> <C> <C>
INVESTMENT INCOME:
Taxable interest $ 127,488 458,646
Tax-exempt interest 9,383,968 19,158,717
----------- --------------
Total investment income 9,511,456 19,617,363
EXPENSES:
Investment advisory and management
fees 210,730 442,211
Professional fees 14,510 54,134
Security evaluation fees 10,035 21,288
Franchise taxes 9,024 17,420
ICI dues 3,629 12,972
Custodian fees 3,400 12,456
Reports to shareowners 3,260 6,310
Directors' fees 2,400 4,800
Fidelity bond expense 1,787 3,453
Registration fees 165 2,879
Other 13 131
----------- --------------
Total expenses 258,953 578,054
----------- --------------
Net investment income 9,252,503 19,039,309
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Accumulated net realized gain (loss)
on sales of investments (37,244) 21,485
Net unrealized depreciation on
investments (6,818,026) (19,471,906)
----------- --------------
Net realized and unrealized loss on
investments (6,855,270) (19,450,421)
----------- --------------
Net change in net assets resulting from
operations $ 2,397,233 (411,112)
=========== ==============
</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, 2000 YEAR ENDED
(UNAUDITED) NOVEMBER 30, 1999
------------ -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 9,252,503 19,039,309
Net realized gain (loss) on sales of
investments (37,244) 21,485
Change in net unrealized depreciation (6,818,026) (19,471,906)
------------ --------------
Net change in net assets resulting from
operations 2,397,233 (411,112)
DISTRIBUTIONS TO SHAREOWNERS FROM:
Net investment income (9,252,503) (19,039,309)
------------ --------------
Total distributions to shareowners (9,252,503) (19,039,309)
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold 12,226,738 39,488,742
Reinvestment of ordinary income
dividends 6,983,226 14,382,411
------------ --------------
19,209,964 53,871,153
Less payments for shares redeemed 34,796,190 38,958,604
------------ --------------
Net increase (decrease) in net assets
from Fund share transactions (15,586,226) 14,912,549
------------ --------------
Total decrease in net assets (22,441,496) (4,537,872)
NET ASSETS:
Beginning of period 358,553,697 363,091,569
------------ --------------
End of period $336,112,201 358,553,697
============ ==============
</TABLE>
See accompanying notes to financial statements.
39-------
<PAGE>
STATE FARM MUNICIPAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance of the Fund for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions).
PER SHARE INCOME AND CAPITAL CHANGES (For a share outstanding throughout each
period):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 2000 --------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 8.12 8.55 8.43 8.44 8.50 7.88
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.21 0.43 0.45 0.47 0.48 0.48
Net gain (loss) on
investments (both
realized and
unrealized) (0.16) (0.43) 0.12 (0.01) (0.06) 0.62
------- ------- ------- ------- ----- -----
Total from investment
operations 0.05 -- 0.57 0.46 0.42 1.10
LESS DISTRIBUTIONS
Net investment
income (0.21) (0.43) (0.45) (0.47) (0.48) (0.48)
Net realized gain
(a) -- -- -- -- -- --
------- ------- ------- ------- ----- -----
Total distributions (0.21) (0.43) (0.45) (0.47) (0.48) (0.48)
------- ------- ------- ------- ----- -----
Net asset value, end of
period $ 7.96 8.12 8.55 8.43 8.44 8.50
======= ======= ======= ======= ===== =====
TOTAL RETURN 0.66% 0.04% 6.82% 5.68% 5.21% 14.25%
RATIOS/SUPPLEMENTAL
DATA
Net assets, end of
period (millions) $ 336.1 358.6 363.1 336.4 321.1 307.4
Ratio of expenses to
average net assets 0.15%(b) 0.16% 0.15% 0.15% 0.16% 0.17%(c)
Ratio of net investment
income to average net
assets 5.34%(b) 5.20% 5.29% 5.61% 5.76% 5.80%
Portfolio turnover rate 10%(b) 10% 6% 6% 6% 7%
</TABLE>
----------
(a) Distributions representing less than $.01 per share 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, 2000, there were commitments of $3,856,860 for
such securities, included in the investment portfolio.
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). 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 16, 2000, the Growth Fund declared an ordinary income dividend of $.32
per share to shareowners of record on June 16, 2000 (reinvestment date June 19,
2000).
On June 16, 2000, the Balanced Fund declared an ordinary income dividend of $.77
per share to shareowners of record on June 16, 2000 (reinvestment date June 19,
2000).
The accumulated net realized loss on sales of investments at November 30, 1999
for the Interim Fund, amounting to $4,007,631, is available to offset future
taxable gains. If not applied, the capital loss carryover expires as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C> <C>
2000 $ 22,669
2001 162,716
2002 335,277
2003 321,293
2004 363,957
2005 922,190
2006 994,996
2007 884,533
</TABLE>
The accumulated net realized loss on sales of investments at November 30, 1999
for the Municipal Bond Fund, amounting to $41,376, 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>
Under the terms of these agreements, the Funds incurred the following fees:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, 2000 NOVEMBER 30,
(UNAUDITED) 1999
------------ ------------
<S> <C> <C>
State Farm Growth Fund, Inc. $1,551,088 2,740,037
State Farm Balanced Fund, Inc. 574,535 1,113,753
State Farm Interim Fund, Inc. 104,879 230,126
State Farm Municipal Bond Fund, Inc. 210,730 442,211
</TABLE>
---------
42
<PAGE>
STATE FARM MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 their officers or
directors except for the following directors' fees paid to the Funds'
independent directors:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, 2000 NOVEMBER 30,
(UNAUDITED) 1999
------------ ------------
<S> <C> <C>
State Farm Growth Fund, Inc. $7,200 14,400
State Farm Balanced Fund, Inc. 3,600 7,200
State Farm Interim Fund, Inc. 1,200 2,400
State Farm Municipal Bond Fund, Inc. 2,400 4,800
</TABLE>
4. INVESTMENT TRANSACTIONS
Investment transactions (exclusive of short-term instruments) were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, 2000 NOVEMBER 30,
(UNAUDITED) 1999
------------ -------------
<S> <C> <C>
STATE FARM GROWTH FUND, INC.
Purchases $93,391,006 166,759,514
Proceeds from sales 57,224,843 50,948,078
STATE FARM BALANCED FUND, INC.
Purchases 36,350,683 121,270,812
Proceeds from sales 66,194,146 42,344,646
STATE FARM INTERIM FUND, INC.
Purchases -- 26,673,672
Proceeds from sales 26,660,528 17,750,000
STATE FARM MUNICIPAL BOND FUND, INC.
Purchases 17,764,522 48,533,279
Proceeds from sales 25,644,896 35,579,660
</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, 2000 NOVEMBER 30,
(UNAUDITED) 1999
------------ ------------
<S> <C> <C>
STATE FARM GROWTH FUND, INC.
Shares sold 7,881,152 6,423,670
Shares issued in reinvestment of
ordinary income dividends and
capital gain distributions 549,113 666,008
----------- -----------
8,430,265 7,089,678
Less shares redeemed 6,903,214 4,646,586
----------- -----------
Net increase in shares outstanding 1,527,051 2,443,092
=========== ===========
STATE FARM BALANCED FUND, INC.
Shares sold 2,367,955 2,212,658
Shares issued in reinvestment of
ordinary income dividends and
capital gain distributions 467,816 518,187
----------- -----------
2,835,771 2,730,845
Less shares redeemed 3,266,495 1,992,292
----------- -----------
Net increase (decrease) in shares
outstanding (430,724) 738,553
=========== ===========
STATE FARM INTERIM FUND, INC.
Shares sold 3,339,149 7,721,510
Shares issued in reinvestment of
ordinary income dividends 454,897 959,304
----------- -----------
3,794,046 8,680,814
Less shares redeemed 6,851,649 8,132,727
----------- -----------
Net increase (decrease) in shares
outstanding (3,057,603) 548,087
=========== ===========
STATE FARM MUNICIPAL BOND FUND, INC.
Shares sold 1,523,680 4,692,572
Shares issued in reinvestment of
ordinary income dividends 864,374 1,721,081
----------- -----------
2,388,054 6,413,653
Less shares redeemed 4,337,702 4,685,530
----------- -----------
Net increase (decrease) in shares
outstanding (1,949,648) 1,728,123
=========== ===========
</TABLE>
43-------
<PAGE>
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<PAGE>
--------------
State Farm Mutual Funds BULK RATE
One State Farm Plaza, D-3 U.S. POSTAGE
Bloomington, IL 61710-0001 PAID
FORWARDING SERVICE REQUESTED PERMIT 439
ELK GROVE, IL
--------------
[LOGO]STATE FARM
MUTUAL
FUNDS
1-309-766-2029 1-800-447-0740
------------------------------------------------------------------------------
190-4059.1-CH 07-2000 PRINTED IN U.S.A.
