<PAGE>
SEMI-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
May 31, 1996
This report is not to be distributed unless preceded or accompanied
by a prospectus.
<PAGE>
STATE FARM BALANCED FUND, INC.
Dear Shareowner:
The powerful rally in general common stock prices which occurred in 1995
has carried over into 1996. The S&P 500 Index has produced a total return of
28.4% for the twelve months ended May 31, 1996, while the Balanced Fund yielded
18.5%. Fortunately the common stock portfolio of your Fund has kept pace with
the S&P 500 Index over the last twelve months. However, in this period of robust
equity markets, the total return of the entire Fund has been pulled down by
results of its fixed income portfolio. Obviously, returns of this magnitude are
very satisfying but are not sustainable over long periods of time.
In more recent months the stock market has been led higher by the shares of
small capitalization companies and firms which tend to possess risky financial
characteristics. It is not too surprising that the Fund's more conservative
equity portfolio lags general market returns during times such as this when
speculative securities are quite popular with investors.
The increase in speculative investment activity is bothersome to us because
it often is a forerunner of general market difficulties. Speculative conditions
often last much longer than one would expect, but market forces seem to
eventually discipline the last of the speculators by handing them significant
losses on many risky securities as prices return to more rational levels. We try
to avoid knowingly investing the Fund's assets in highly speculative securities.
Consequently, the main vulnerability of the Fund's portfolio if a setback of the
market occurs should be any spillover effects from the general speculative
market behavior on the prices of stocks held by the Fund. Philosophically, we
feel shareowners are well served by our focus of avoiding financial risk and
seeking competitive long-term investment results by investing in the shares of
companies with relatively stable financial and operating characteristics.
The fundamental underpinnings for financial markets are becoming more
complex. Undoubtedly, U.S. stock prices are being supported by an economy which
has bounced back smartly from last winter's weakness. Most sectors of the
economy are showing improvement at the moment. In this environment, corporate
profits are still rising at a healthy, but declining pace. In reaction to the
improving economy, market interest rates have risen significantly over the past
four months, even though the Federal Reserve Board has kept short term interest
rates stable. The U.S. and Russia are facing elections. It seems that more than
the typical amount of confusion now exists among investors regarding the
prospects for the global economy, interest rates, inflation, and the stability
of political situations throughout the world. Therefore, markets are likely to
become more volatile as conflicting points of view work their way through the
prices of securities.
Volatility of securities prices can be unnerving, but it is not something
that we focus on much as we manage the Fund's investment portfolio. Rather, we
spend our time attempting to build and maintain an equity portfolio of companies
which we believe are growing satisfactorily and have prospects for earning
reasonable returns. The share prices of these companies have and will fluctuate
widely under varying market conditions. Good quality bonds with maturities which
seem reasonable in given investment environments are emphasized in the fixed
income component. Our approach to investing has been consistent and has produced
competitive returns for long-term investors over the years. To profit fully from
our orientation to investing, we suggest that shareowners be patient and avoid
having undue expectations for investment results over short periods of time.
-2-
<PAGE>
The directors have declared a semi-annual dividend of $.64 per Balanced
Fund share which will be used to purchase additional shares for your account at
the net asset value at the close of business on June 28, 1996 unless you have
elected to receive payment directly by check.
Sincerely,
Paul N. Eckley John S. Concklin Kurt G. Moser
Vice President Vice President Vice President
June 21, 1996
-3-
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS (59.7%)
<S> <C> <C>
AGRICULTURAL PRODUCTS (4.5%):
701,864 Archer-Daniels-Midland Company....................................... $ 13,686,348
155,000 Kellogg Company...................................................... 11,276,250
-----------
24,962,598
BANKS (5.8%):
137,280 Bancorp Hawaii, Inc. ................................................ 4,993,560
118,481 Banponce Corporation................................................. 5,583,417
212,000 Norwest Corporation.................................................. 7,393,500
155,000 PNC Bank Corp........................................................ 4,708,125
229,000 Wachovia Corporation ................................................ 9,818,375
-----------
32,496,977
CHEMICALS (5.4%):
185,000 Air Products and Chemicals, Inc. .................................... 11,007,500
120,000 Great Lakes Chemical Corporation..................................... 7,740,000
120,000 International Flavors & Fragrances Inc............................... 5,835,000
103,500 Sigma-Aldrich Corporation............................................ 5,796,000
-----------
30,378,500
COMMUNICATIONS (6.1%):
170,000 AT&T Corp............................................................ 10,603,750
42,000 Lee Enterprises, Incorporated........................................ 981,750
42,000 Lee Enterprises, Incorporated, Class B............................... 981,750
261,000 MCI Communications Corporation....................................... 7,601,625
200,000 Reuters Holdings PLC (ADR)........................................... 13,925,000
-----------
34,093,875
COMPUTERS AND OTHER OFFICE
EQUIPMENT (5.1%):
200,000 Hewlett-Packard Company.............................................. 21,350,000
80,000 Hon Industries Inc................................................... 2,240,000
48,300 International Business Machines Corporation.......................... 5,156,025
-----------
28,746,025
CONSUMER PRODUCTS (5.9%):
168,100 Corning Incorporated................................................. 6,429,825
185,000 Jostens, Inc......................................................... 4,185,625
172,800 Rubbermaid Incorporated.............................................. 4,838,400
190,000 The Coca-Cola Company................................................ 8,740,000
150,000 The Gillette Company................................................. 8,868,750
-----------
33,062,600
DRUGS AND MEDICAL SUPPLIES (9.3%):
157,700 Allergan, Inc. ...................................................... 6,071,450
427,751 Ballard Medical Products............................................. 8,501,551
405,000 Biomet, Inc.......................................................... 5,670,000
99,000 Johnson & Johnson.................................................... 9,640,125
106,000 Eli Lilly and Company................................................ 6,810,500
112,500 Medaphis Corporation................................................. 4,246,875
160,000 Pfizer Inc........................................................... 11,320,000
-----------
52,260,501
</TABLE>
-4-
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
ENTERTAINMENT (3.6%):
331,165 The Walt Disney Company ............................................. $ 20,118,274
HOUSING AND CONSTRUCTION (.6%):
53,400 Vulcan Materials Company............................................. 3,070,500
MACHINERY AND EQUIPMENT (3.5%):
258,200 ADC Telecommunications, Inc.......................................... 11,877,200
50,000 Caterpillar Inc...................................................... 3,281,250
64,000 Motorola, Inc........................................................ 4,272,000
------------
19,430,450
MINING AND METALS (2.1%):
160,000 Nucor Corporation.................................................... 8,800,000
50,000 The RTZ Corporation PLC (ADR)........................................ 3,162,500
------------
11,962,500
OIL AND GAS (3.2%):
144,000 Chevron Corporation.................................................. 8,604,000
76,000 Exxon Corporation.................................................... 6,441,000
72,220 Pennzoil Company..................................................... 3,123,515
------------
18,168,515
UTILITIES (2.8%):
180,000 KN Energy, Inc....................................................... 6,075,000
192,900 SBC Communications Inc............................................... 9,524,438
------------
15,599,438
MISCELLANEOUS (1.8%):
84,375 Osmonics, Inc........................................................ 2,003,906
110,000 Raychem Corporation.................................................. 8,222,500
------------
10,226,406
------------
Total common stocks (cost: $162,836,539)........................... 34,577,159
LONG-TERM U.S. GOVERNMENT OBLIGATIONS (28.9%)
3,000,000 U.S. Treasury notes, 8%, 1996........................................ 3,027,750
2,500,000 U.S. Treasury notes, 6 1/2%, 1996.................................... 2,512,475
2,000,000 U.S. Treasury notes, 8%, 1997........................................ 2,028,760
3,000,000 U.S. Treasury notes, 8 1/2%, 1997.................................... 3,073,080
4,000,000 U.S. Treasury notes, 8 5/8%, 1997.................................... 4,120,440
3,000,000 U.S. Treasury notes, 8 3/4%, 1997.................................... 3,104,790
4,000,000 U.S. Treasury notes, 8 1/8%, 1998.................................... 4,122,320
2,000,000 U.S. Treasury notes, 7 7/8%, 1998.................................... 2,056,860
2,500,000 U.S. Treasury notes, 9%, 1998........................................ 2,624,125
</TABLE>
-5-
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL
AMOUNT VALUE
LONG-TERM U.S. GOVERNMENT OBLIGATIONS (CONTINUED)
$ 3,000,000 U.S. Treasury notes, 9 1/4%, 1998.................................... $ 3,177,840
2,500,000 U.S. Treasury notes, 7 1/8%, 1998.................................... 2,542,850
3,000,000 U.S. Treasury notes, 8 7/8%, 1999.................................... 3,179,700
2,000,000 U.S. Treasury notes, 7%, 1999........................................ 2,029,360
2,000,000 U.S. Treasury notes, 9 1/8%, 1999.................................... 2,141,160
3,000,000 U.S. Treasury notes, 6 3/8%, 1999.................................... 2,992,170
1,500,000 U.S. Treasury notes, 6%, 1999........................................ 1,479,300
2,500,000 U.S. Treasury notes, 7 7/8%, 1999.................................... 2,601,750
3,000,000 U.S. Treasury notes, 6 3/8%, 2000.................................... 2,983,470
2,000,000 U.S. Treasury notes, 8 1/2%, 2000.................................... 2,125,440
3,000,000 U.S. Treasury notes, 5 1/2%, 2000.................................... 2,894,040
3,000,000 U.S. Treasury notes, 8 3/4%, 2000.................................... 3,232,380
3,000,000 U.S. Treasury notes, 8 1/2%, 2000.................................... 3,214,650
4,200,000 U.S. Treasury notes, 7 3/4%, 2001.................................... 4,386,774
625,000 U.S. Treasury bonds, 13 1/8%, 2001................................... 794,806
2,000,000 U.S. Treasury notes, 8%, 2001........................................ 2,112,640
680,000 U.S. Treasury bonds, 13 3/8%, 2001................................... 877,221
1,000,000 U.S. Treasury notes, 7 7/8%, 2001.................................... 1,052,170
5,500,000 U.S. Treasury notes, 7 1/2%, 2001.................................... 5,699,815
2,000,000 U.S. Treasury bonds, 14 1/4%, 2002................................... 2,707,260
2,000,000 U.S. Treasury notes, 7 1/2%, 2002.................................... 2,077,900
7,500,000 U.S. Treasury notes, 6 3/8%, 2002.................................... 7,370,700
2,570,000 U.S. Treasury bonds, 11 5/8%, 2002................................... 3,217,383
5,000,000 U.S. Treasury notes, 6 1/4%, 2003.................................... 4,862,950
3,000,000 U.S. Treasury bonds, 10 3/4%, 2003................................... 3,644,850
3,500,000 U.S. Treasury notes, 5 3/4%, 2003.................................... 3,293,255
2,500,000 U.S. Treasury bonds, 11 7/8%, 2003................................... 3,224,100
5,000,000 U.S. Treasury notes, 5 7/8%, 2004.................................... 4,717,350
2,000,000 U.S. Treasury notes, 7 1/4%, 2004.................................... 2,049,500
6,000,000 U.S. Treasury notes, 7 1/4%, 2004.................................... 6,147,180
1,500,000 U.S. Treasury bonds, 11 5/8%, 2004................................... 1,951,605
2,000,000 U.S. Treasury notes, 7 1/2%, 2005.................................... 2,080,980
1,785,000 U.S. Treasury bonds, 8 1/4%, 2005.................................... 1,871,001
3,500,000 U.S. Treasury notes, 6 1/2%, 2005.................................... 3,414,320
4,800,000 U.S. Treasury bonds, 10 3/4%, 2005................................... 6,039,648
2,000,000 U.S. Treasury notes, 5 7/8%, 2005.................................... 1,862,920
11,500,000 U.S. Treasury bonds, 9 3/8%, 2006.................................... 13,519,975
2,000,000 U.S. Treasury notes, 6 7/8%, 2006.................................... 2,002,740
1,000,000 U.S. Treasury bonds, 10 3/8%, 2009................................... 1,212,760
7,000,000 U.S. Treasury bonds, 10%, 2010....................................... 8,372,280
-----------
Total long-term U.S. Government obligations (cost: $163,160,170) 161,828,793
</TABLE>
-6-
<PAGE>
STATE FARM BALANCED FUND, INC.
PORTFOLIO OF INVESTMENTS
MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
SHARES OR
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (11.1%)
$27,000,000 U.S. Treasury bills, 4.81% to 4.99% effective yield, due June to
August, 1996....................................................... $ 26,841,780
19,700,000 General Motors Acceptance Corp., 5.22%, 6-4-1996..................... 19,731,472
620,000 General Motors Acceptance Corp., 5.24%, 6-4-1996..................... 620,271
11,320,000 Ford Motor Credit Company, 5.23%, 6-4-1996........................... 11,326,582
2,245,000 Ford Motor Credit Company, 5.3%, 6-4-1996............................ 2,245,330
1,000,000 Ford Motor Credit Company, 5.25%, 6-4-1996........................... 1,001,460
235,000 Ford Motor Credit Company, 5.27%, 6-4-1996........................... 235,069
--------------
Total short-term investments (cost: $61,994,533)................... 62,001,964
--------------
TOTAL INVESTMENTS (99.7%)(cost: $387,991,242)........................ 558,407,916
CASH AND OTHER ASSETS, LESS LIABILITIES (.3%)........................ 1,935,662
--------------
NET ASSETS (100.0%).................................................. $ 560,343,578
==============
</TABLE>
Note: At May 31, 1996, net unrealized appreciation of $170,416,674 consisted
of gross unrealized appreciation of $176,591,474 and gross unrealized
depreciation of $6,174,800 based on cost of $387,991,242 for federal
income tax purposes.
See accompanying notes to financial statements.
-7-
<PAGE>
<TABLE>
<CAPTION>
STATE FARM BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996
(UNAUDITED)
ASSETS
<S> <C> <C>
Investments, at value (cost $387,991,242).................................. $ 558,407,916
Cash....................................................................... 948,200
Receivable for:
Dividends and interest................................................... $ 3,129,093
Shares of the Fund sold.................................................. 115,689
Sundry................................................................... 4,725
Securities sold.......................................................... 7,003,005
------------ 10,252,512
Prepaid expenses........................................................... 29,912
-------------
Total assets........................................................... 569,638,540
LIABILITIES AND NET ASSETS
Payable for:
Shares of the Fund redeemed.............................................. 888,309
Securities purchased..................................................... 8,210,516
Other accounts payable (including $175,630 to Manager)................... 196,137
----------
Total liabilities...................................................... 9,294,962
Net assets applicable to 14,372,943 shares outstanding of $1.00
par value common stock (40,000,000 shares authorized).................... $ 560,343,578
=============
Net asset value, offering price and redemption price per share............. $ 38.99
=============
ANALYSIS OF NET ASSETS
Excess of amounts received from sales of
shares over amounts paid on redemptions
of shares on account of capital.......................................... $ 362,561,540
Accumulated net realized gain on sales of investments 7,665,743
Unrealized appreciation of investments..................................... 170,416,674
Undistributed net investment income........................................ 19,699,621
-------------
Net assets applicable to shares outstanding................................ $ 560,343,578
=============
</TABLE>
See accompanying notes to financial statements.
-8-
<PAGE>
STATE FARM BALANCED FUND, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six months ended Year ended
May 31, 1996 November 30, 1995
(Unaudited)
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$32,609 in 1996 and $51,552 in 1995).......................... $ 2,602,891 4,786,907
Interest....................................................... 7,189,695 11,685,903
------------ ------------
Total investment income...................................... 9,792,586 16,472,810
EXPENSES:
Investment advisory and management fee.......................... 337,810 580,820
Audit fees...................................................... 9,922 19,684
Legal fees...................................................... 3,605 6,559
Fidelity bond expense........................................... 2,544 5,077
Directors' fees................................................. 2,700 3,300
Reports to shareowners.......................................... 5,817 24,442
Franchise Taxes................................................. 7,278 11,706
Custodian Fees.................................................. 16,153 35,265
Other........................................................... 26,015 37,755
----------- ------------
Total expenses................................................ 411,844 724,608
Less: custodian fees paid indirectly.......................... 11,304 28,581
----------- ------------
Net expenses.................................................. 400,540 696,027
----------- ------------
Net investment income............................................ 9,392,046 15,776,783
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on sales of investments...................... 7,665,743 3,027,922
Change in net unrealized appreciation.......................... 11,697,663 82,375,184
----------- -----------
Net realized and unrealized gain on investments.................. 19,363,406 85,403,106
----------- -----------
Net change in net assets
resulting from operations...................................... $28,755,452 101,179,889
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-9-
<PAGE>
STATE FARM BALANCED FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1996 1995 1994
(UNAUDITED)
<S> <C> <C> <C>
From operations:
Net investment income................................ $ 9,392,046 15,776,783 11,763,463
Net realized gain on sales of investments............ 7,665,743 3,027,922 2,185,924
Net change in unrealized appreciation................ 11,697,663 82,375,184 (388,583)
------------ ----------- -----------
Net change in net assets resulting from operations... 28,755,452 101,179,889 13,560,804
Undistributed net investment income included in
price of shares issued and redeemed................ 690,247 1,310,468 1,242,837
Distributions to shareowners from:
Net investment income (per share $.66 in 1996,
$1.19 in 1995 and $.89 in 1994).................. (8,242,738) (14,601,565) (9,815,245)
Net realized gain (per share $.19 in 1996, $.19
in 1995 and $.065 in 1994)....................... (3,027,922) (2,185,924) (653,671)
------------ ----------- -----------
Total distributions to shareowners................... (11,270,660) (16,787,489) (10,468,916)
From Fund share transactions:
Proceeds from shares sold............................ 59,763,642 71,322,157 68,882,327
Reinvestment of ordinary income dividends and
capital gain distributions......................... 10,928,262 15,888,903 9,876,936
------------ ----------- -----------
70,691,904 87,211,060 78,759,263
Less payments for shares redeemed.................... 28,272,839 43,678,734 40,409,762
------------ ----------- -----------
Net increase in net assets from Fund share
transactions....................................... 42,419,065 43,532,326 38,349,501
------------ ----------- -----------
Total increase in net assets........................... 60,594,104 129,235,194 42,684,226
Net assets:
Beginning of period.................................. 499,749,474 370,514,280 327,830,054
------------ ----------- -----------
End of period (including undistributed net
investment income of $19,699,621 in 1996,
$17,860,066 in 1995 and $15,374,380 in 1994)....... $560,343,578 499,749,474 370,514,280
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
-10-
<PAGE>
STATE FARM BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION -- Investments are stated at value. Stocks traded on
securities exchanges, or in the over-the-counter market in which transaction
prices are reported, are valued at the last sales prices on the day of valuation
or, if there are no reported sales on that day, at the mean of the last bid and
asked quotations. Other stocks traded over-the-counter are valued at the mean of
the last bid and asked prices. Long-term debt securities and U.S. Treasury
bills, are valued using quotations provided by an independent pricing service.
Short-term debt securities, other than U.S. Treasury bills, are valued on an
amortized cost basis. Any securities not valued as described above are valued at
fair value as determined in good faith by the Board of Directors or its
delegate.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis. Realized gains and losses from security transactions are
reported on an identified cost basis.
FUND SHARE VALUATION -- Fund shares are sold and redeemed on a continuous
basis at net asset value. Net asset value per share is determined daily as of
3:00 p.m. Bloomington, Illinois time on each business day other than 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 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 June 14, 1996 an ordinary income dividend of $.64 per share was
declared, payable June 28, 1996 (reinvestment date June 28, 1996) to shareowners
of record on June 14, 1996.
Dividends and distributions payable to its shareowners are recorded by the
Fund on the ex-dividend date.
EQUALIZATION ACCOUNTING -- A portion of proceeds from sales and payments on
redemptions of Fund shares is credited or charged to undistributed net
investment income. As a result, undistributed net investment income per share is
unaffected by sales or redemptions of 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.
-11-
<PAGE>
STATE FARM BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 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 $337,810 for
the six months ended May 31, 1996 and $580,820 for the year ended November 30,
1995. The Fund does not pay any discount, commission or other compensation for
transfer agent or 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 six months ended May 31, 1996 and the year ended November 30, 1995,
except for directors' fees of $2,700 for the six months ended May 31, 1996 and
$3,300 for the year ended November 30, 1995 paid to the Fund's independent
directors.
3. INVESTMENT TRANSACTIONS
Investment transactions (exclusive of short-term instruments) are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1996 1995 1994
Purchases......................................... $ 55,410,306 50,802,670 42,467,647
Proceeds from sales............................... 14,151,931 21,538,464 13,166,268
============ ========== ==========
</TABLE>
-12-
<PAGE>
STATE FARM BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
4. FUND SHARE TRANSACTIONS
Proceeds and payments on Fund shares as shown in the statement of changes
in net assets are in respect of the following number of shares:
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1996 1995 1994
Shares sold.......................................... 1,596,965 2,152,790 2,304,826
Shares issued in reinvestment of ordinary
income dividends and capital gain
distributions...................................... 293,534 501,082 335,084
--------- --------- ---------
1,890,499 2,653,872 2,639,910
Less shares redeemed................................. 752,085 1,326,997 1,350,157
--------- --------- ---------
Net increase in shares outstanding................... 1,138,414 1,326,875 1,289,753
========== ========= =========
</TABLE>
-13-
<PAGE>
STATE FARM BALANCED FUND, INC.
FINANCIAL HIGHLIGHTS
Per Share Income and Capital Changes (For a share outstanding throughout the
period)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1996 1995 1994 1993 1992 1991
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............... $ 37.85 31.12 30.88 31.24 27.98 22.72
Income From Investment Operations
_________________________________
Net Investment Income.......................... .68 1.25 1.03 .98 .98 .94
Net Gains or Losses on Securities
(both realized and unrealized) ............... 1.31 6.86 .17 (.09) 3.29 5.81
--------------------------------------------------------------
Total from Investment Operations................. 1.99 8.11 1.20 .89 4.27 6.75
Less Distributions
__________________
Dividends (from net investment income)......... (.66) (1.19) (.89) (1.01) (.89) (1.03)
Distributions (from capital gains)............. (.19) (.19) (.07) (.24) (.12) (.46)
--------------------------------------------------------------
Total Distributions.............................. (.85) (1.38) (.96) (1.25) (1.01) (1.49)
Net Asset Value, End of Period................... $ 38.99 37.85 31.12 30.88 31.24 27.98
==============================================================
Total Return 5.62% 26.53% 3.98% 2.91% 15.43% 31.09%
____________
Ratios/Supplemental Data
________________________
Net assets, end of period (millions)............. $ 560.3 499.7 370.5 327.8 259.7 173.5
Ratio of expenses to average net assets.......... .15%(a) .17% .17% .19% .22% .26%
Ratio of net investment income to average
net assets...................................... 3.57%(a) 3.66% 3.36% 3.20% 3.29% 3.66%
Portfolio turnover rate.......................... 6%(a) 6% 4% 4% 4% 1%
Number of shares outstanding at end
of year (millions).............................. 14.4 13.2 11.9 10.6 8.3 6.2
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Average commission rate paid per share on stock transactions for the six months
ended May 31, 1996 was $.06.
(a)Determined on an annualized basis.
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SEMI-ANNUAL
REPORT
MAY 31, 1996
STATE
FARM
BALANCED
FUND, INC.
ONE STATE FARM PLAZA
BLOOMINGTON, ILLINOIS 61710
TELEPHONE (309) 766-2029
