<PAGE>
ANNUAL REPORT
State Farm Growth Fund, Inc.
ONE STATE FARM PLAZA . BLOOMINGTON, ILLINOIS 61710
For Account Information and Shareowner
Services: (309) 766-2029
For Price Information ONLY:
1-800/447-0740
November 30, 1995
This report is not to be distributed unless preceded or accompanied by a
prospectus.
<PAGE>
STATE FARM GROWTH FUND, INC.
Dear Shareowner:
The past twelve months has been a spectacular period for general stock prices
and investors in the Growth Fund. Your Fund produced a total return of 33.7%
since last November while the S&P 500, which tends to be the most widely
followed of the broadly based stock market indices, yielded 36.9%.
The following graph compares a $10,000 investment in the Growth Fund over the
last ten years to a theoretical investment of the same amount in the S&P 500
Index:
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT FOR THE YEARS
ENDED NOVEMBER 30
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
Growth
- ------
<CAPTION>
X Axis GROWTH S&P
Year FUND 500
- ------ ---------- -------
<S> <C> <C>
1985 10,000 10,000
1986 12,173 12,737
1987 11,937 12,152
1988 14,020 14,971
1989 18,298 19,580
1990 19,080 18,889
1991 24,873 22,736
1992 28,598 26,926
1993 28,411 29,639
1994 29,552 29,958
1995 39,503 41,014
</TABLE>
As you can observe from the above presentation, average annual returns of the
Fund over the last five and ten year periods have been in the area of 15%.
Annual returns of this magnitude are significantly above the 10% level which has
been achieved by broadly based common stock indexes since 1926 according to
studies done regularly by Ibbotson Associates. We refer to the longer term
history to provide the basis for cautioning you against extrapolating regular
15% annual returns into the future. Additionally, results from the past year
serve as a reminder that returns of equity-oriented portfolios tend to occur
unevenly. Periods which provide particularly good returns are inevitably offset
to some degree by times when lesser or negative results occur.
As managers of your Fund, we truly have a long-term perspective. An annual
portfolio turnover rate below 5% for the past five years provides evidence of
such an approach to investing. Consequently, in most years, including the 1995
fiscal year, the basic composition of the common stock portfolio does not
substantially change.
The investment portfolio of the Fund has more or less been carried upward in
value by the same factors which have pulled general stock prices higher over the
course of the year. These factors include the significant reduction of long term
interest rates, numerous corporate mergers, and the flow of foreign capital into
the U. S. financial markets.
-2-
<PAGE>
Very importantly, valuations of the shares of specific companies held in the
portfolio have risen recently based on growth in their earnings and growing
evidence that many of the companies have strong competitive positions in global
markets. The shares of companies generally categorized in the computer,
technology, drugs and medical, bank, international consumer product and
communication sectors tended to do the best over the past twelve months. The
stocks of oil and gas, mining and metal, and construction-related firms were
among those producing lower or negative returns.
The prevailing mood in U. S. financial markets is quite optimistic at the
moment. Many investors seem to be convinced that the Federal Reserve Board has
done its job well and the twin perils of inflation and recession will be avoided
for a long time leaving room for further drops in interest rates. Stock prices
are expected to rise further in this environment. Such a view is comforting and
may well prove to be correct, but we caution you, as investors, against
believing the future is predictable. Markets are always vulnerable to
unanticipated surprises and changes in investors' perceptions, and vulnerability
along these lines tends to be greatest when optimism is rampant. We cope with
the uncertainty by investing the Fund's assets in the stocks of companies which
we believe are growing satisfactorily and have prospects for earning reasonable
returns. This consistent investment approach has produced competitive returns
over the years.
The directors have declared a capital gain distribution of $.12 per Growth
Fund share which will be paid on December 29, 1995. A semi-annual income
dividend of $.265 per share will also be paid on December 29, 1995. Both will be
used to purchase additional shares for your account unless you have elected to
receive payments directly by check.
Sincerely,
/s/ Kurt G. Moser /s/ Paul N. Eckley
Kurt G. Moser Paul N. Eckley
Vice President Vice President
December 19, 1995
-3-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareowners
State Farm Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of State Farm Growth Fund, Inc. as of November 30,
1995, the related statements of operations and changes in net assets for each of
the two years in the period then ended, and the financial highlights for each of
the fiscal years since 1986. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
November 30, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of State
Farm Growth Fund, Inc. at November 30, 1995, the results of its operations and
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the fiscal years since 1986, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 15, 1995
-4-
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS
November 30, 1995
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS (92.8%)
AGRICULTURAL PRODUCTS (7.5%):
2,594,967 Archer-Daniels-Midland Company.................... $ 44,763,181
465,000 Kellogg Company................................... 35,514,375
------------
80,277,556
BANKS (10.4%):
382,537 Bancorp Hawaii, Inc. ............................. 14,058,235
529,029 Banponce Corporation.............................. 20,235,359
349,850 National Commerce Bancorporation.................. 9,008,638
490,000 Norwest Corporation............................... 16,170,000
530,000 PNC Bank Corp. ................................... 15,502,500
810,000 Wachovia Corporation.............................. 36,450,000
------------
111,424,732
CHEMICALS (13.6%):
540,000 Air Products and Chemicals, Inc. ................. 29,970,000
777,300 Great Lakes Chemical Corporation.................. 55,285,462
561,000 International Flavors & Fragrances Inc. .......... 28,681,125
630,600 Sigma-Aldrich Corporation......................... 31,057,050
------------
144,993,637
COMMUNICATIONS (11.0%):
400,000 AT&T Corp. ....................................... 26,400,000
470,000 Capital Cities/ABC, Inc. ......................... 58,103,750
823,000 MCI Communications Corporation.................... 22,015,250
50,000 Reuters Holdings PLC (ADR)........................ 2,818,750
360,181 (a) Scandinavian Broadcasting System SA............... 8,509,276
------------
117,847,026
COMPUTERS AND OTHER OFFICE
EQUIPMENT (10.4%):
800,000 Hewlett-Packard Company........................... 66,300,000
719,600 Hon Industries Inc. .............................. 20,148,800
255,100 International Business Machines Corporation....... 24,649,038
------------
111,097,838
CONSUMER PRODUCTS (6.3%):
593,200 Corning Incorporated.............................. 17,870,150
414,728 Jostens, Inc. .................................... 10,264,518
497,600 Rubbermaid Incorporated........................... 13,684,000
160,000 The Coca-Cola Company............................. 12,120,000
250,000 The Gillette Company.............................. 12,968,750
------------
66,907,418
DRUGS AND MEDICAL SUPPLIES (16.2%):
820,000 Ballard Medical Products.......................... 14,042,500
1,550,000 (a) Biomet, Inc. ..................................... 28,675,000
620,400 Johnson & Johnson................................. 53,742,150
236,800 Eli Lilly and Company............................. 23,561,600
375,000 (a) Medaphis Corporation.............................. 12,187,500
480,000 Pfizer Inc. ...................................... 27,840,000
266,794 Rhone-Poulenc Rorer Inc. ......................... 12,772,763
------------
172,821,513
ENTERTAINMENT (2.1%):
380,000 The Walt Disney Company........................... 22,847,500
</TABLE>
-5-
<PAGE>
STATE FARM GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS
November 30, 1995
<TABLE>
<CAPTION>
Shares or
principal
amount Value
<S> <C> <C>
HOUSING AND CONSTRUCTION (1.8%):
346,400 Vulcan Materials Company..................... $ 19,658,200
MACHINERY AND EQUIPMENT (3.4%):
450,000 (a) ADC Telecommunications, Inc. ................ 20,475,000
264,000 Motorola, Inc. .............................. 16,170,000
--------------
36,645,000
MINING AND METALS (1.6%):
169,622 Mine Safety Appliances Company............... 7,442,165
195,000 Nucor Corporation............................ 9,725,625
--------------
17,167,790
OIL AND GAS (4.9%):
440,400 (a) Barrett Resources Corporation................ 10,899,900
530,000 Chevron Corporation.......................... 26,168,750
394,100 Pennzoil Company............................. 15,616,212
--------------
52,684,862
UTILITIES (1.9%):
366,100 SBC Communications Inc. ..................... 19,769,400
MISCELLANEOUS (1.7%):
337,500 (a) Osmonics, Inc. .............................. 6,075,000
425,000 Pall Corporation............................. 11,528,125
--------------
17,603,125
--------------
Total common stocks (cost: $409,155,616)... 991,745,597
SHORT-TERM INVESTMENTS (7.0%)
$14,000,000 U.S. Treasury bills, 5.245% to 5.385%
effective yield, due 12-1995 to 2-1996..... 13,899,772
28,320,000 General Motors Acceptance Corp., 5.78%,
12-5-1995.................................. 28,365,572
2,660,000 General Motors Acceptance Corp., 5.79%,
12-5-1995.................................. 2,660,428
300,000 General Motors Acceptance Corp., 5.77%,
12-5-1995.................................. 300,096
28,500,000 Ford Motor Credit Co., 5.75%, 12-12-1995..... 28,513,687
1,000,000 General Motors Acceptance Corp., 5.76%,
12-14-1995................................. 1,000,481
--------------
Total short-term investments (cost:
$74,740,036)............................. 74,740,036
--------------
TOTAL INVESTMENTS (99.8%)(cost: $483,895,652) 1,066,485,633
CASH AND OTHER ASSETS, LESS
LIABILITIES (.2%).......................... 2,162,081
==============
NET ASSETS (100.0%).......................... $1,068,647,714
</TABLE>
Notes: (a) Non-income producing security.
(b) At November 30, 1995, net unrealized appreciation of $582,589,981
consisted of gross unrealized appreciation of $588,149,545 and gross
unrealized depreciation of $5,559,564 based on cost of $483,895,652
for federal income tax purposes.
See accompanying notes to financial statements.
-6-
<PAGE>
STATE FARM GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments, at value (cost: $483,895,652)........ $1,066,485,633
Cash.............................................. 884,501
Receivable for:
Dividends....................................... $2,195,937
Shares of the Fund sold......................... 130,866
Sundry.......................................... 8,859 2,335,662
----------
Prepaid expenses.................................. 13,204
--------------
Total assets.................................. 1,069,719,000
LIABILITIES AND NET ASSETS
Payable for:
Shares of the Fund redeemed..................... 739,568
Securities purchased............................ 2,406
Other accounts payable (including $297,260 to
Manager)...................................... 329,312
----------
Total liabilities............................. 1,071,286
--------------
Net assets applicable to 36,350,489 shares
outstanding of $.50 par value common stock
(100,000,000 shares authorized)................. $1,068,647,714
==============
Net asset value, offering price and redemption
price per share................................. $ 29.40
==============
ANALYSIS OF NET ASSETS
Excess of amounts received from sales of shares
over amounts paid on redemptions of shares on
account of capital.............................. $ 468,660,298
Undistributed net realized gain on sales of
investments..................................... 6,015,663
Net unrealized appreciation of investments........ 582,589,981
Undistributed net investment income............... 11,381,772
--------------
Net assets applicable to shares outstanding....... $1,068,647,714
==============
</TABLE>
See accompanying notes to financial statements.
-7-
<PAGE>
STATE FARM GROWTH FUND, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year ended November 30,
1995 1994
<S> <C> <C>
Investment income:
Dividends (net of foreign withholding taxes of
$104,425 in 1995 and $128,357 in 1994)........ $ 15,895,757 14,162,426
Interest........................................ 3,218,409 1,731,471
--------------------------
Total investment income....................... 19,114,166 15,893,897
Expenses:
Investment advisory and management fee.......... 1,068,973 892,798
Audit fees...................................... 25,817 25,657
Legal fees...................................... 13,287 14,544
Fidelity bond expense........................... 7,334 6,798
Directors' fees................................. 6,600 6,600
Reports to shareowners.......................... 47,298 31,679
Franchise taxes................................. 9,876 8,730
Custodian fees.................................. 35,212 --
Other........................................... 57,951 53,638
--------------------------
Total expenses................................ 1,272,348 1,040,444
Less: custodian fees paid indirectly.......... 35,064 --
--------------------------
Net expenses.................................. 1,237,284 1,040,444
--------------------------
Net investment income............................. 17,876,882 14,853,453
Realized and unrealized gain on investments:
Net realized gain on sales of investments....... 6,015,663 7,117,419
Change in net unrealized appreciation........... 238,933,861 7,405,430
--------------------------
Net realized and unrealized gain on investments... 244,949,524 14,522,849
--------------------------
Net change in net assets resulting from operations $262,826,406 29,376,302
==========================
</TABLE>
See accompanying notes to financial statements.
-8-
<PAGE>
STATE FARM GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Year ended November 30,
1995 1994
From operations:
Net investment income........................ $ 17,876,882 14,853,453
Net realized gain on sales of
investments................................ 6,015,663 7,117,419
Change in net unrealized
appreciation............................... 238,933,861 7,405,430
-----------------------------
Net change in net assets resulting
from operations............................ 262,826,406 29,376,302
Undistributed net investment income included
in price of shares issued and redeemed....... 407,527 294,170
Distributions to shareowners from:
Net investment income (per share $.52 in
1995 and $.45 in 1994)..................... (18,125,076) (14,871,521)
Net realized gain (per share $.175 in 1995).. (5,860,346) --
-----------------------------
Total distributions to shareowners........... (23,985,422) (14,871,521)
From Fund share transactions:
Proceeds from shares sold.................... 110,543,974 98,159,876
Reinvestment of ordinary income dividends
and capital gain distributions............. 23,301,462 14,438,092
-----------------------------
133,845,436 112,597,968
Less payments for shares redeemed............ 76,138,727 80,845,641
----------------------------
Net increase in net assets from Fund share
transactions............................... 57,706,709 31,752,327
-----------------------------
Total increase in net assets................... 296,955,220 46,551,278
Net assets:
Beginning of year............................ 771,692,494 725,141,216
-----------------------------
End of year (including undistributed net
investment income of $11,381,772 in 1995
and $11,222,439 in 1994)................... $1,068,647,714 771,692,494
=============================
See accompanying notes to financial statements.
-9-
<PAGE>
STATE FARM GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -- Investments are stated at value. Stocks traded on
securities exchanges, or in the over-the-counter market in which transaction
prices are reported, are valued at the last sales prices on the day of valuation
or, if there are no reported sales on that day, at the mean of the last bid and
asked quotations. Other stocks traded over-the-counter are valued at the mean of
the last bid and asked prices. Debt securities are valued using quotations
provided by an independent pricing service, except short-term debt securities
having a maturity of 60 days or less from the valuation date are valued on an
amortized cost basis. Any securities not valued as described above are valued at
fair value as determined in good faith by the Board of Directors or its
delegate.
Security transactions and investment income -- Security transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis. Realized gains and losses from security transactions are
reported on an identified cost basis.
Fund share valuation -- Fund shares are sold and redeemed on a continuous
basis at net asset value. Net asset value per share is determined as of 3:00
p.m. Bloomington, Illinois time on each business day other than customary
weekend and holiday closings, except that the Fund need not compute a net asset
value on any day when no purchase or redemption order has been received by the
Fund. The net asset value per share is computed by dividing the total value of
the Fund's investments and other assets, less liabilities, by the number of Fund
shares outstanding.
Federal income taxes, dividends and distributions to shareowners -- It is
the Fund's policy to comply with the special provisions of the Internal Revenue
Code available to investment companies and, in the manner provided therein, to
distribute all of its taxable income, as well as any net realized gain on sales
of investments reportable for federal income tax purposes. The Fund has complied
with this policy and, accordingly, no provision for federal income taxes is
required.
On December 15, 1995, an ordinary income dividend of $.265 per share and a
capital gain distribution of $.12 per share were declared, payable December 29,
1995 (reinvestment date December 29, 1995) to shareowners of record December 15,
1995.
Dividends and distributions payable to its shareowners are recorded by the
Fund on the ex-dividend date.
Equalization accounting -- A portion of proceeds from sales and payments on
redemptions of Fund shares is credited or charged to undistributed net
investment income. As a result, undistributed net investment income per share is
unaffected by sales or redemptions of Fund shares.
Custodian fees -- Custodian fees are reduced based on the Fund's cash
balances maintained with the custodian. Beginning in 1995, in accordance with
changes in the requirements of the Securities and Exchange Commission, both
gross custodian fees and the amount by which such fees are reduced, are
disclosed separately in the statement of operations. This presentation does not
affect the determination of net investment income.
2. Transactions with affiliates
The Fund has an investment advisory and management services agreement with
State Farm Investment Management Corp. (Manager) pursuant to which the Fund pays
the Manager an annual fee (computed on a daily basis and paid quarterly) of .20%
of the first $100 million of average net assets, .15% of the next $100 million
of average net assets and .10% of the average net assets in excess of $200
million. The Manager guarantees that all expenses of the Fund, including the
compensation of the Manager but excluding franchise taxes, interest,
extraordinary litigation expenses, brokerage commissions and other portfolio
transaction costs, shall not exceed .40% of average net assets annually.
-10-
<PAGE>
STATE FARM GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Under the terms of this agreement, the Fund incurred fees of $1,068,973 for
1995 and $892,798 for 1994. The Fund pays no fees for transfer agent services
provided by the Manager. The Fund does not pay any discount, commission or other
compensation for underwriting services provided by the Manager.
Certain officers and/or directors of the Fund are also officers and/or
directors of the Manager. The Fund made no payments to its officers or directors
during the two years ended November 30, 1995 except for directors' fees of
$6,600 for 1995 and 1994, respectively, paid to the Fund's independent
directors.
3. Investment transactions
Investment transactions (exclusive of short-term instruments) for each of
the two years ended November 30 are as follows:
1995 1994
Purchases................................ $46,164,857 49,125,581
Proceeds from sales...................... 22,290,487 20,805,090
========================
4. Fund share transactions
Proceeds and payments on Fund shares as shown in the statement of changes
in net assets are in respect of the following number of shares:
Year ended November 30,
1995 1994
Shares sold................................... 4,289,306 4,460,689
Shares issued in reinvestment of ordinary
income dividends and capital gain
distributions............................... 966,452 670,054
----------------------
5,255,758 5,130,743
Less shares redeemed.......................... 3,008,177 3,678,175
----------------------
Net increase in shares outstanding............ 2,247,581 1,452,568
======================
-11-
<PAGE>
STATE FARM GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
Per Share Income and Capital Changes (For a share outstanding throughout each
year)
<TABLE>
<CAPTION>
Year ended November 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year................... $ 22.63 22.21 23.05 20.33 16.77 16.90 13.34 11.96 13.50 11.60
Income from Invest-
-------------------
ment Operations
---------------
Net investment
income.............. .50 .44 .45 .43 .42 .47 .41 .43 .38 .34
Net gain or loss on
securities (both
realized and
unrealized)......... 6.97 .43 (.60) 2.70 4.32 .26 3.57 1.62 (.61) 2.12
---------------------------------------------------------------------------------------------------
Total from investment
operations............ 7.47 .87 (.15) 3.13 4.74 .73 3.98 2.05 (.23) 2.46
Less Distributions
------------------
Dividends (from net
investment income).. (.52) (.45) (.45) (.41) (.54) (.40) (.42) (.39) (.38) (.34)
Distributions (from
capital gain)....... (.18) -- (.24) -- (.64) (.46) -- (.28) (.93) (.22)
---------------------------------------------------------------------------------------------------
Total distributions..... (.70) (.45) (.69) (.41) (1.18) (.86) (.42) (.67) (1.31) (.56)
Net asset value, end of
year...................... $ 29.40 22.63 22.21 23.05 20.33 16.77 16.90 13.34 11.96 13.50
===================================================================================================
Total Return................ 33.67% 4.02% (.65%) 15.42% 29.79% 4.27% 30.51% 17.45% (1.83%) 21.73%
- ------------
Ratios/Supplemental Data
- ------------------------
Net assets, end of year
(millions)................ $1,068.6 771.7 725.1 696.1 558.4 414.3 383.0 295.5 253.6 262.4
Ratio of expenses to
average net assets........ .14%(a) .14% .14% .16% .19% .21% .21% .24% .26% .33%
Ratio of net investment
income to average
net assets................ 1.95% 2.00% 2.05% 1.99% 2.22% 2.84% 2.69% 3.32% 2.75% 2.71%
Portfolio turnover rate..... 3% 3% 2% 2% 1% 16% 9% 5% 12% 14%
Number of shares out-
standing at end of
year (millions)........... 36.4 34.1 32.7 30.2 27.5 24.7 22.7 22.1 21.2 19.4
Note: (a) The ratio based on net custodian expenses would have been .13%.
</TABLE>
________________________
STATE FARM GROWTH FUND, INC.
TAX INFORMATION
The Fund paid ordinary income dividends of $.28 per share in June 1995 and
$.265 per share in December 1995. Of these dividends, 78% qualifies for the 70%
deduction for dividends received by corporations as provided by the Internal
Revenue Code.
In December 1995, the Fund made a capital gain distribution of $.12 per
share, 100% of which was paid from long-term capital gain and is designated as a
capital gain dividend.
NOTE: Dividends and distributions paid to you must be included in your federal
income tax return and must be reported by the Fund to the Internal
Revenue Service in accordance with the provisions of the Internal Revenue
Code.
