<PAGE>
ANNUAL REPORT
State Farm Balanced 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 BALANCED FUND, INC.
Dear Shareowner:
The fiscal year has been a spectacular period for financial markets and
investors in the Balanced Fund. The S&P 500 Index, which tends to be the most
widely followed of the broadly based stock market indices, produced a total
return of 36.9% for the past twelve months. Fortunately the common stock
portfolio of your Fund has virtually kept pace with the S&P 500 Index. The value
of the Fund's fixed income portfolio also improved significantly over the course
of the fiscal year, but, as should be expected, not as much as the stock
portfolio. The total return for the entire Fund has been 26.5% since last
November.
The following graph compares a $10,000 investment in the Balanced 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]
X Axis Balanced
Year Fund S&P 500
------ -------- -------
1985 10,000 10,000
1986 12,287 12,737
1987 12,323 12,152
1988 14,262 14,971
1989 17,841 19,580
1990 19,319 18,889
1991 25,290 22,736
1992 29,234 26,926
1993 30,084 29,639
1994 31,282 29,958
1995 39,580 41,014
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 10% 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.
-2-
<PAGE>
The common stock 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. 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.
U.S. Treasury bonds continue to dominate the fixed income portfolio of the
Fund. The overall maturity structure has not changed much over the course of the
year with maturities or likely calls spread over the next eleven years.
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 good quality bonds and the
stocks of companies which we feel 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 $.19 per Balanced
Fund share which will be paid on December 29, 1995. A semi-annual income
dividend of $.66 per share will 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 Balanced Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of State Farm Balanced 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 Balanced 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 BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS
November 30, 1995
Shares Value
COMMON STOCKS (59.9%)
AGRICULTURAL PRODUCTS (4.8%):
701,864 Archer-Daniels-Midland Company..................... $12,107,154
155,000 Kellogg Company.................................... 11,838,125
-----------
23,945,279
BANKS (6.3%):
137,280 Bancorp Hawaii, Inc................................ 5,045,040
118,481 Banponce Corporation............................... 4,531,898
212,000 Norwest Corporation................................ 6,996,000
155,000 PNC Bank Corp...................................... 4,533,750
229,000 Wachovia Corporation............................... 10,305,000
-----------
31,411,688
CHEMICALS (6.0%):
185,000 Air Products and Chemicals, Inc.................... 10,267,500
120,000 Great Lakes Chemical Corporation................... 8,535,000
120,000 International Flavors & Fragrances Inc............. 6,135,000
103,500 Sigma-Aldrich Corporation.......................... 5,097,375
-----------
30,034,875
COMMUNICATIONS (9.3%):
170,000 AT&T Corp.......................................... 11,220,000
125,000 Capital Cities/ABC, Inc............................ 15,453,125
21,000 Lee Enterprises, Incorporated...................... 874,125
21,000 Lee Enterprises, Incorporated, Class B............. 874,125
261,000 MCI Communications Corporation..................... 6,981,750
200,000 Reuters Holdings PLC (ADR)......................... 11,275,000
-----------
46,678,125
COMPUTERS AND OTHER OFFICE EQUIPMENT (4.7%):
200,000 Hewlett-Packard Company............................ 16,575,000
80,000 Hon Industries Inc................................. 2,240,000
48,300 International Business Machines Corporation........ 4,666,988
-----------
23,481,988
CONSUMER PRODUCTS (5.8%):
168,100 Corning Incorporated............................... 5,064,013
185,000 Jostens, Inc....................................... 4,578,750
150,000 Rubbermaid Incorporated............................ 4,125,000
95,000 The Coca-Cola Company.............................. 7,196,250
150,000 The Gillette Company............................... 7,781,250
-----------
28,745,263
-5-
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS
November 30, 1995
Shares Value
DRUGS AND MEDICAL SUPPLIES (9.3%):
157,700 Allergan, Inc...................................... $ 4,888,700
427,751 Ballard Medical Products........................... 7,325,236
405,000 (a) Biomet, Inc........................................ 7,492,500
99,000 Johnson & Johnson.................................. 8,575,875
53,000 Eli Lilly and Company.............................. 5,273,500
112,500 (a) Medaphis Corporation............................... 3,656,250
160,000 Pfizer Inc......................................... 9,280,000
------------
46,492,061
ENTERTAINMENT (2.4%):
200,000 The Walt Disney Company............................ 12,025,000
HOUSING AND CONSTRUCTION (.6%):
53,400 Vulcan Materials Company........................... 3,030,450
MACHINERY AND EQUIPMENT (3.1%):
258,200 (a) ADC Telecommunications, Inc........................ 11,748,100
64,000 Motorola, Inc...................................... 3,920,000
------------
15,668,100
MINING AND METALS (1.6%):
160,000 Nucor Corporation.................................. 7,980,000
OIL AND GAS (2.0%):
144,000 Chevron Corporation................................ 7,110,000
72,220 Pennzoil Company................................... 2,861,717
------------
9,971,717
UTILITIES (2.5%):
180,000 KN Energy, Inc..................................... 5,242,500
132,900 SBC Communications Inc............................. 7,176,600
------------
12,419,100
MISCELLANEOUS (1.5%):
84,375 (a) Osmonics, Inc...................................... 1,518,750
110,000 Raychem Corporation................................ 5,720,000
------------
7,238,750
------------
Total common stocks (cost: $146,582,116)......... 299,122,396
-6-
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS
November 30, 1995
<TABLE>
<CAPTION>
Principal
amount Value
<C> <S> <C>
LONG-TERM U.S. TREASURY OBLIGATIONS (27.3%)
$ 1,000,000 U.S. Treasury notes, 7 7/8%, due 2-15-1996............................ $ 1,004,530
1,000,000 U.S. Treasury notes, 7 3/8%, due 5-15-1996............................ 1,008,440
3,000,000 U.S. Treasury notes, 8%, due 10-15-1996............................... 3,064,230
2,500,000 U.S. Treasury notes, 6 1/2%, due 11-30-1996........................... 2,525,400
2,000,000 U.S. Treasury notes, 8%, due 1-15-1997................................ 2,055,320
3,000,000 U.S. Treasury notes, 8 1/2%, due 5-15-1997............................ 3,128,430
4,000,000 U.S. Treasury notes, 8 5/8%, due 8-15-1997............................ 4,208,760
3,000,000 U.S. Treasury notes, 8 3/4%, due 10-15-1997........................... 3,176,730
2,000,000 U.S. Treasury notes, 8 1/8%, due 2-15-1998............................ 2,111,880
2,000,000 U.S. Treasury notes, 7 7/8%, due 4-15-1998............................ 2,108,120
2,500,000 U.S. Treasury notes, 9%, due 5-15-1998................................ 2,703,525
3,000,000 U.S. Treasury notes, 9 1/4%, due 8-15-1998............................ 3,285,000
2,500,000 U.S. Treasury notes, 7 1/8%, due 10-15-1998........................... 2,611,725
3,000,000 U.S. Treasury notes, 8 7/8%, due 2-15-1999............................ 3,295,320
2,000,000 U.S. Treasury notes, 7%, due 4-15-1999................................ 2,092,180
3,000,000 U.S. Treasury notes, 6 3/8%, due 7-15-1999............................ 3,085,770
1,500,000 U.S. Treasury notes, 6%, due 10-15-1999............................... 1,526,715
2,500,000 U.S. Treasury notes, 7 7/8%, due 11-15-1999........................... 2,706,650
3,000,000 U.S. Treasury notes, 6 3/8%, due 1-15-2000............................ 3,092,820
3,000,000 U.S. Treasury notes, 5 1/2%, due 4-15-2000............................ 3,002,340
3,000,000 U.S. Treasury notes, 8 3/4%, due 8-15-2000............................ 3,392,820
2,000,000 U.S. Treasury notes, 8 1/2%, due 11-15-2000........................... 2,252,500
2,200,000 U.S. Treasury notes, 7 3/4%, due 2-15-2001............................ 2,414,148
625,000 U.S. Treasury bonds, 13 1/8%, due 5-15-2001........................... 845,700
2,000,000 U.S. Treasury notes, 8%, due 5-15-2001................................ 2,224,680
680,000 U.S. Treasury bonds, 13 3/8%, due 8-15-2001........................... 934,041
5,500,000 U.S. Treasury notes, 7 1/2%, due 11-15-2001........................... 6,017,330
2,000,000 U.S. Treasury bonds, 14 1/4%, due 2-15-2002........................... 2,889,060
2,000,000 U.S. Treasury notes, 7 1/2%, due 5-15-2002............................ 2,198,740
7,500,000 U.S. Treasury notes, 6 3/8%, due 8-15-2002............................ 7,794,150
570,000 U.S. Treasury bonds, 11 5/8%, due 11-15-2002.......................... 762,107
5,000,000 U.S. Treasury notes, 6 1/4%, due 2-15-2003............................ 5,164,850
3,000,000 U.S. Treasury bonds, 10 3/4%, due 5-15-2003........................... 3,903,750
3,500,000 U.S. Treasury notes, 5 3/4%, due 8-15-2003............................ 3,504,935
500,000 U.S. Treasury bonds, 11 7/8%, due 11-15-2003.......................... 692,500
5,000,000 U.S. Treasury notes, 5 7/8%, due 2-15-2004............................ 5,039,850
6,000,000 U.S. Treasury notes, 7 1/4%, due 8-15-2004............................ 6,594,360
1,500,000 U.S. Treasury bonds, 11 5/8%, due 11-15-2004.......................... 2,103,510
2,000,000 U.S. Treasury notes, 7 1/2%, due 2-15-2005............................ 2,240,000
1,785,000 U.S. Treasury bonds, 8 1/4%, due 5-15-2005............................ 1,954,575
4,800,000 U.S. Treasury bonds, 10 3/4%, due 8-15-2005........................... 6,527,232
4,000,000 U.S. Treasury bonds, 9 3/8%, due 2-15-2006............................ 5,083,120
1,000,000 U.S. Treasury bonds, 10 3/8%, due 11-15-2009.......................... 1,307,030
7,000,000 U.S. Treasury bonds, 10%, due 5-15-2010............................... 9,034,340
------------
Total long-term U.S. Treasury obligations (cost: $130,490,482)...... 136,669,213
</TABLE>
-7-
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS
November 30, 1995
<TABLE>
<CAPTION>
Principal
amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS (12.3%)
$ 35,725,000 U.S. Treasury bills, 5.14% to 5.385% effective yield, due 12-1995 to 2-1996.. $ 35,480,539
13,000,000 General Motors Acceptance Corp., 5.78%, 12-5-1995............................ 13,006,269
885,000 General Motors Acceptance Corp., 5.79%, 12-12-1995........................... 885,142
12,100,000 Ford Motor Credit Company, 5.75%, 12-12-1995................................. 12,105,811
------------
Total short-term investments (cost: $61,477,761)........................... 61,477,761
------------
TOTAL INVESTMENTS (99.5%)(cost: $338,550,359)................................ 497,269,370
CASH AND OTHER ASSETS, LESS LIABILITIES (.5%)................................ 2,480,104
------------
NET ASSETS (100.0%).......................................................... $499,749,474
============
</TABLE>
Notes:(a) Non-income producing security.
(b) At November 30, 1995, net unrealized appreciation of $158,719,011
consisted of gross unrealized appreciation of $161,441,652 and gross
unrealized depreciation of $2,722,641 based on cost of $338,550,359
for federal income tax purposes.
See accompanying notes to financial statements.
-8-
<PAGE>
STATE FARM BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1995
ASSETS
<TABLE>
<S> <C> <C>
Investments, at value (cost: $338,550,359).................... $497,269,370
Cash.......................................................... 565,696
Receivable for:
Dividends and interest...................................... $2,479,380
Shares of the Fund sold..................................... 75,293
Sundry...................................................... 4,725 2,559,398
----------
Prepaid expenses.............................................. 9,579
------------
Total assets.............................................. 500,404,043
LIABILITIES AND NET ASSETS
Payable for:
Shares of the Fund redeemed................................. 474,284
Other accounts payable (including $157,084 to Manager)...... 180,285
----------
Total liabilities......................................... 654,569
------------
Net assets applicable to 13,234,529 shares outstanding of
$1.00 par value common stock (40,000,000 shares authorized). $499,749,474
============
Net asset value, offering price and redemption price per share $37.76
============
ANALYSIS OF NET ASSETS
Excess of amounts received from sales of shares over amounts
paid on redemptions of shares on account of capital.......... $320,142,475
Undistributed net realized gain on sales of investments....... 3,027,922
Net unrealized appreciation of investments.................... 158,719,011
Undistributed net investment income........................... 17,860,066
------------
Net assets applicable to shares outstanding................... $499,749,474
============
</TABLE>
See accompanying notes to financial statements.
-9-
<PAGE>
STATE FARM BALANCED FUND, INC.
STATEMENT OF OPERATIONS
Year ended November 30,
1995 1994
Investment income:
Dividends (net of foreign withholding taxes of
$51,552 in 1995 and $51,120 in 1994)............ $ 4,786,907 4,003,374
Interest.......................................... 11,685,903 8,347,097
-------------------------
Total investment income......................... 16,472,810 12,350,471
Expenses:
Investment advisory and management fee............ 580,820 499,786
Audit fees........................................ 19,684 19,459
Legal fees........................................ 6,559 8,043
Fidelity bond expense............................. 5,077 5,289
Directors' fees................................... 3,300 3,300
Reports to shareowners............................ 24,442 9,763
Franchise taxes................................... 11,706 8,904
Custodian fees.................................... 35,265 --
Other............................................. 37,755 32,464
-------------------------
Total expenses.................................. 724,608 587,008
Less:custodian fees paid indirectly............. 28,581 --
-------------------------
Net expenses.................................... 696,027 587,008
-------------------------
Net investment income............................... 15,776,783 11,763,463
Realized and unrealized gain on investments:
Net realized gain on sales of investments......... 3,027,922 2,185,924
Change in net unrealized appreciation............. 82,375,184 (388,583)
-------------------------
Net realized and unrealized gain on investments..... 85,403,106 1,797,341
-------------------------
Net change in net assets resulting from operations.. $101,179,889 13,560,804
=========================
See accompanying notes to financial statements.
-10-
<PAGE>
STATE FARM BALANCED FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended November 30,
1995 1994
<S> <C> <C>
From operations:
Net investment income................................ $ 15,776,783 11,763,463
Net realized gain on sales of investments............ 3,027,922 2,185,924
Change in net unrealized appreciation................ 82,375,184 (388,583)
---------------------------
Net change in net assets resulting
from operations.................................... 101,179,889 13,560,804
Undistributed net investment income included in
price of shares issued and redeemed.................. 1,310,468 1,242,837
Distributions to shareowners from:
Net investment income (per share $1.19 in 1995 and
$.89 in 1994)...................................... (14,601,565) (9,815,245)
Net realized gain (per share $.185 in 1995 and
$.065 in 1994)..................................... (2,185,924) (653,671)
---------------------------
Total distributions to shareowners................... (16,787,489) (10,468,916)
From Fund share transactions:
Proceeds from shares sold............................ 71,322,157 68,882,327
Reinvestment of ordinary income dividends
and capital gain distributions..................... 15,888,903 9,876,936
---------------------------
87,211,060 78,759,263
Less payments for shares redeemed.................... 43,678,734 40,409,762
---------------------------
Net increase in net assets from Fund share
transactions....................................... 43,532,326 38,349,501
---------------------------
Total increase in net assets........................... 129,235,194 42,684,226
Net assets:
Beginning of year.................................... 370,514,280 327,830,054
---------------------------
End of year (including undistributed net
investment income of $17,860,066 in 1995 and
$15,374,380 in 1994)............................... $499,749,474 370,514,280
===========================
</TABLE>
See accompanying notes to financial statements.
-11-
<PAGE>
STATE FARM BALANCED 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 $.66 per share and a
capital gain distribution of $.19 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.
-12-
<PAGE>
STATE FARM BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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.
Under the terms of this agreement, the Fund incurred fees of $580,820 for
1995 and $499,786 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
$3,300 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....................................... $50,802,670 42,467,647
Proceeds from sales............................. 21,538,464 13,166,268
========================
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........................................ 2,152,790 2,304,826
Shares issued in reinvestment of ordinary income
dividends and capital gain distributions......... 501,082 335,084
----------------------
2,653,872 2,639,910
Less shares redeemed............................... 1,326,997 1,350,157
----------------------
Net increase in shares outstanding................. 1,326,875 1,289,753
======================
-13-
<PAGE>
STATE FARM BALANCED 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 $31.12 30.88 31.24 27.98 22.72 22.27 18.81 17.32 18.69 16.21
Income From Investment
----------------------
Operations
----------
Net investment income......... 1.25 1.03 .98 .98 .94 1.06 .92 .89 .81 .74
Net gain or loss on
securities (both realized
and unrealized)............. 6.86 .17 (.09) 3.29 5.81 .74 3.61 1.76 (.72) 2.84
----------------------------------------------------------------------------------------------
Total from investment
operations.................... 8.11 1.20 .89 4.27 6.75 1.80 4.53 2.65 .09 3.58
Less Distributions
------------------
Dividends (from net
investment income).......... (1.19) (.89) (1.01) (.89) (1.03) (.92) (.86) (.83) (.74) (.74)
Distributions (from
capital gain)............... (.19) (.07) (.24) (.12) (.46) (.43) (.21) (.33) (.72) (.36)
----------------------------------------------------------------------------------------------
Total Distributions............. (1.38) (.96) (1.25) (1.01) (1.49) (1.35) (1.07) (1.16) (1.46) (1.10)
Net asset value, end of year...... $37.85 31.12 30.88 31.24 27.98 22.72 22.27 18.81 17.32 18.69
==============================================================================================
Total Return 26.53% 3.98% 2.91% 15.43% 31.09% 8.29% 25.09% 15.73% .38% 22.87%
- ------------
Ratios/Supplemental Data
- ------------------------
Net assets, end of year
(millions)...................... $499.7 370.5 327.8 259.7 173.5 108.8 88.7 63.8 50.9 45.4
Ratio of expenses to average
net assets...................... .17%(a) .17% .19% .22% .26% .27% .29% .31% .38% .50%
Ratio of net investment income
to average net assets........... 3.66% 3.36% 3.20% 3.29% 3.66% 4.87% 4.50% 4.86% 4.24% 4.18%
Portfolio turnover rate........... 6% 4% 4% 4% 1% 10% 10% 7% 12% 13%
Number of shares outstanding
at end of year (millions)....... 13.2 11.9 10.6 8.3 6.2 4.8 4.0 3.4 2.9 2.4
</TABLE>
Note:(a) The ratio based on net custodian expenses would have been .16%.
_________________________
STATE FARM BALANCED FUND, INC.
TAX INFORMATION
The Fund paid ordinary income dividends of $.605 per share in June 1995 and
$.66 per share in December 1995. Of these dividends, 28% qualifies for the 70%
deduction for dividends received by corporations as provided by the Internal
Revenue Code. The remaining amounts of each dividend should be reported as
income from non-qualifying dividends.
In December 1995, the Fund made a capital gain distribution of $.19 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.
-14-
<PAGE>
(This page intentionally left blank.)
-15-
<PAGE>
ANNUAL
REPORT
November 30, 1995
STATE
FARM
BALANCED
FUND, INC.
ONE STATE FARM PLAZA
BLOOMINGTON, ILLINOIS 61710
TELEPHONE (309) 766-2029
