- --------------------------------------------------------------------------------
October 31, 1999
- --------------------------------------------------------------------------------
Farmers
Mutual Fund
Portfolios
Semiannual Report
Includes reports for:
Income Portfolio
Income with Growth Portfolio
Balanced Portfolio
Growth with Income Portfolio
Growth Portfolio
Offering a broad range of investment opportunities by investing in a select mix
of established mutual funds.
[LOGO] FARMERS(R)
FINANCIAL SERVICES
<PAGE>
Farmers Mutual Fund Portfolios
Date of Portfolios' Inception: 3/9/99
Income Portfolio Total Net Assets as of 10/31/99: $151,562
Income with Growth Portfolio Total Net Assets as of 10/31/99: $377,136
Balanced Portfolio Total Net Assets as of 10/31/99: $545,830
Growth with Income Portfolio Total Net Assets as of 10/31/99: $351,787
Growth Portfolio Total Net Assets as of 10/31/99: $842,550
o Over the last six months, continued strength in the U.S. economy has put
investors on the lookout for signs of inflation, and has prompted the Federal
Reserve to raise interest rates twice. Although short-term bonds and large
company growth stocks outperformed over the period, the environment was
generally unfavorable for financial assets.
o Across all of the Portfolios, management employs a steady strategy that
emphasizes risk control and asset allocation. Adjustments that are made to the
Portfolio allocations are usually indicative of shifts in management's long-term
outlook.
Table of Contents
Letter from the President .................................................. 4
Portfolio Management Discussion ............................................ 5
Glossary of Investment Terms ............................................... 29
Farmers Income Portfolio
Portfolio Highlights ....................................................... 9
Performance Update ......................................................... 10
Portfolio Summary .......................................................... 12
Investment Portfolio ....................................................... 31
Financial Highlights ....................................................... 46
2
<PAGE>
Farmers Income with Growth Portfolio
Portfolio Highlights ....................................................... 13
Performance Update ......................................................... 14
Portfolio Summary .......................................................... 16
Investment Portfolio ....................................................... 32
Financial Highlights ....................................................... 48
Farmers Balanced Portfolio
Portfolio Highlights ....................................................... 17
Performance Update ......................................................... 18
Portfolio Summary .......................................................... 20
Investment Portfolio ....................................................... 33
Financial Highlights ....................................................... 50
Farmers Growth with Income Portfolio
Portfolio Highlights ....................................................... 21
Performance Update ......................................................... 22
Portfolio Summary .......................................................... 24
Investment Portfolio ....................................................... 34
Financial Highlights ....................................................... 52
Farmers Growth Portfolio
Portfolio Highlights ....................................................... 25
Performance Update ......................................................... 26
Portfolio Summary .......................................................... 28
Investment Portfolio ....................................................... 35
Financial Highlights ....................................................... 54
All Portfolios
Financial Statements ....................................................... 36
Notes to Financial Statements .............................................. 56
Officers and Trustees ...................................................... 59
3
<PAGE>
Letter from the President
[PHOTO]
Paul Secord
President,
Farmers Investment Trust
Dear Shareholders,
We are pleased to present the semi-annual report for the Farmers Mutual Fund
Portfolios, a key ingredient in the Financial Solutions Program offered by
Farmers, Scudder Kemper Investments, Inc., and Investors Brokerage Services,
Inc. The Program was created to help you navigate the potentially challenging
task of investing in mutual funds. Everyone faces evolving situations, changing
goals, and tough decisions, and with thousands of mutual funds to choose from,
the process of building a portfolio can be very confusing. What's more, it's
hard to stay on top of your investments if you have neither the time nor the
expertise to research, monitor, and adjust your portfolio.
That's why the Farmers Portfolios were created. Farmers can help you make many
of these important decisions with a group of mutual fund portfolios that were
created exclusively for people like you. Partnering with Scudder Kemper
Investments, Inc., one of the world's leading investment management
organizations, we offer five portfolios that invest in established stock, bond,
and money market mutual funds from several top money management firms. By using
a disciplined methodology to invest in a wide range of diversified funds, we
strive to construct balanced portfolios that can provide strong risk-adjusted
returns in both up and down markets. We believe that these portfolios will
assist you in achieving your long-term investment goals, whether you are looking
for steady income, growth of principal, or both.
Thank you for your investment in the Farmers Mutual Fund Portfolios. For more
information on the recent market environment, please turn to the Portfolio
Management Discussion with portfolio manager Shahram Tajbakhsh that begins on
page 5. We have also provided a synopsis on each of the individual portfolios,
explaining how our choice of investments has impacted performance over the last
six months. If you have any questions about your investment, please contact your
Farmers agent.
Sincerely,
/s/ Paul Secord
Paul Secord
President,
Farmers Investment Trust
4
<PAGE>
Portfolio Management Discussion
In the following interview, Shahram Tajbakhsh, portfolio manager of the Farmers
Mutual Fund Portfolios, discusses the recent market environment and the
Portfolios' current investment strategies.
Q: Over the six-month period ended October 31, 1999, the stock market has
experienced very high levels of volatility. What factors have brought this
about?
A: The unusually high volatility is indicative of a rapidly shifting market
environment. Triple digit moves on the Dow Jones Industrial Average have become
increasingly common as investors have struggled to balance the countervailing
forces of strong corporate earnings and higher interest rates. The market's
primary focus throughout this period was on the policy of the U.S. Federal
Reserve, which seeks to maintain economic stability by raising or lowering
short-term interest rates. Stronger growth prompted the Fed to raise rates by a
quarter-point on two separate occasions, which had a negative impact on the
performance of both stocks and bonds. Although a half-percent move is not
particularly large by historical standards, investors remained skittish due to
the expectation that the economy's continued strength would lead to additional
increases.
The reason for the Fed's increased vigilance has been the fact that growth both
here and abroad has exceeded expectations by a wide margin so far in 1999. In
the United States, Gross Domestic Product continues to power ahead, the labor
markets are extremely tight, and consumer spending has been roaring. Rising real
estate values and the continued high level of stock prices have also fueled
optimism among consumers. Overseas, the recoveries of the economies of Europe
and Asia have sparked concerns that a possible increase in global demand would
create price pressures. The weakening of the dollar and the surge in oil prices
are also viewed as potential drivers of inflation. As a result, the markets have
become increasingly sensitive to economic developments and investors are
scrambling to find new evidence that shows whether the upturn in growth is a
sustainable trend, or merely a short-term anomaly.
On a more positive note, fears of higher interest rates have been balanced by
strong corporate earnings growth, which has helped prop up the market even when
interest rate fears have been at their peak. Second quarter earnings came in at
10.7% above last year's level -- their first double-digit rise since 1997 -- due
in part to the explosive earnings growth in the technology sector.
5
<PAGE>
While an official number for third quarter earnings is as yet unavailable, we
expect that earnings growth for the companies in the S&P 500 will exceed 20%,
and analysts are projecting that the fourth quarter will bring a gain of 18%. We
believe the positive earnings outlook is one of the primary reasons that the
stock market has been able to bounce back from even its steepest declines during
the period.
Q: A narrow group of large-cap stocks once again outperformed all other sectors
of the domestic market. Why is this?
A: When the markets appear vulnerable to unfavorable economic developments, as
they have in the last six months, investors tend to gravitate to companies that
have demonstrated the ability to deliver earnings growth on a consistent basis.
Value stocks and smaller companies, whose outlooks often tend to be more
uncertain, generally suffer in such an environment. Growth stocks, on the other
hand, are often viewed as a "safe haven" since their earnings are often
perceived to be less affected by external factors.
This year has therefore been very inhospitable to any investment style that
didn't focus solely on large-cap growth stocks. While value stocks and smaller
companies performed well during April and May -- at which time investors were
encouraged by a resurgence in global growth -- the market grew nervous during
the summer when it became apparent that growth was strong enough to raise the
specter of higher interest rates. The focus on large growth stocks grew even
more narrow than it was in the wake of last year's crisis, as technology stocks
powered ahead to the virtual exclusion of all of other sectors. Incredibly, the
entire year-to-date return of the S&P 500 through September 30 was accounted for
by only eleven of its component stocks. While this divergence has been
underpinned to some degree by the strong earnings and high returns on equity of
large-cap growth stocks, the valuation disparity between growth and value, as
well as between large caps and small caps, has climbed to record levels.
Consequently, we intend to keep the portfolios widely diversified in order to
capture the opportunities that exist outside of the large-cap growth area. We
believe that this diversification will be more, not less, important to
maintaining long-term investment results going forward.
Q: How have bonds performed in this environment?
A: Bonds fared poorly throughout the period in a slump that has extended across
all sectors. Bonds generally thrive in an environment where growth is slow, or
even negative, since such a scenario is thought to reduce the
6
<PAGE>
probability of inflation and, by extension, higher interest rates. Coming into
the year, concerns over a possible global recession had driven bond yields to
historical lows (as their prices rose). Bond yields began to creep upward again
as the recession scenario grew more remote throughout the first quarter, then
accelerated through the spring as investors began to price in the Fed's interest
rate hikes. The yield on the bellwether 30-year Treasury bond rose to a high of
6.39% on October 26 before closing the period at 6.16%, well above its 5.66%
level of April 30, 1999. Corporate issues also posted poor performance, as
supply and demand factors drove down prices in all non-Treasury sectors. In an
environment where global fixed income supply is expected to top $5 trillion for
the second straight year, concerns over heavy corporate issuance ahead of the
Year 2000 deadline kept many investors away from the corporate sector.
Mortgage-backed securities also experienced weakness, but generally weathered
the difficult period better than other classes of fixed income securities.
Q: As a group, the underlying funds in the Farmers Portfolios have exposure to
both large and small company stocks, as well as the growth and value styles.
They also hold both corporate and government bonds. What selection process do
you use to achieve this high level of diversification?
A: Our primary goal is to deliver stronger returns than our benchmark indices,
while maintaining lower levels of risk. In order to achieve this objective, we
have diversified the Portfolios among a select group of well-established funds
that offer strong track records, style consistency, and above-average long-term
performance. To determine what percentage of total Portfolio assets we will
invest in each fund, we use a computer model that calculates the optimal
combination of investments. The purpose of this model is to minimize risk by
determining how the funds the Portfolios hold have performed in relation to one
another in a variety of market conditions. If, for example, two funds exhibit
different performance characteristics under similar conditions, we may be able
to lower the overall volatility of the Portfolio by investing a portion of
assets in each one.
We continually review our models to ensure that it is helping us to meet our
investment objectives. Since the Portfolios' asset allocations are designed to
be long-term in nature, we intend to make changes only on a quarterly basis, and
any changes we do make are likely to be incremental. We feel that this approach
is well-suited to meeting the needs of investors who are seeking diversification
and professional risk management over a long-term time horizon.
7
<PAGE>
Q: What would you tell investors who have become unsettled by the recent market
volatility?
A: We understand that in a rapidly shifting market environment such as the one
we are now experiencing, it can be difficult to stay focused on your investment
objectives. Even those who have established a specific time horizon for their
investments may become rattled when an unfavorable economic report sends the
markets into an unexpected swoon. However, we believe that the events of the
past year, which include rapid shifts in market leadership among sectors, asset
classes, and geographic areas, substantiates the value of a strategy that
emphasizes diversification and a long-term point of view. For evidence, consider
the historical returns of the stock market: through September 30, domestic
equities had averaged gains of 11.3% per year since 1926, and 20.1% since July
of 1982. Throughout both of these time periods, stocks have experienced sharp
dips due to war, recession, inflation, and a litany of other difficulties, but
the long-term numbers demonstrate the value of holding on when volatility
strikes. Although past performance is not an indication of future results, we
urge investors to keep this in mind at the times when the market falls for
several weeks or longer. Believing that a diversified, long-term strategy will
benefit shareholders over time, we intend to maintain a consistent approach to
managing the Farmer's Portfolios, and we encourage shareholders to do the same
with their own investments.
8
<PAGE>
Portfolio Highlights
Farmers Income Portfolio
In managing the Income Portfolio, we seek to provide a high level of current
income by dividing the Portfolio's assets among five funds that invest in a
variety of sectors of the bond market. Since each individual sector tends to
react differently to changes in the broader economic environment, the rise in
one sector may offset the loss in another, thereby reducing overall portfolio
risk. In the most recent reporting period, this strategy produced a return below
that of the benchmark. For the six months ended October 31, 1999, the Income
Portfolio -- Class A Shares posted a return of -2.41% versus a -0.16% return for
the benchmark.
The Portfolio's holdings in lower-risk funds that invest in government bonds,
mortgage-backed securities, and higher quality corporates generally performed
better than those that focus on international bonds and high yield issues.
Performance was boosted by the Portfolio's position in Pimco Low Duration Fund,
where it held 5% of total assets. In a period where interest rates were rising,
low duration assets (in other words, those with a low degree of interest rate
sensitivity) provided a degree of shelter.
The Portfolio's significant position in international bonds proved to be a
negative. In many of the developed markets overseas, most notably France,
Germany, and Japan, a long period of stagnation is giving away to more rapid
growth. As a result, interest rates have risen and foreign bond markets have
performed poorly. While in this case our decision to diversify overseas was
detrimental to returns, we believe that international investments remain a key
component of a diversified portfolio. Over the long term, the factors that
affect the overseas economies can often be very different than those that are at
work in the United States.
Our position in the high yield sector, which has been under pressure in an
environment of rising interest rates, was also a source of weakness. However, we
believe that the long-term return potential of high yield bonds is significant,
and is worth the added risk.
Going forward, we will continue to employ a strategy that emphasizes
diversification and gives careful attention to the importance of prudent
portfolio construction. We believe that over time, such an approach will result
in both high current income and overall portfolio stability.
9
<PAGE>
Performance Update
Farmers Income Portfolio
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART DATA:
Farmers Income
Portfolio - Class A Lehman Brothers
(Adjusted for Maximum Aggregate Bond
Sales Charge) Index*
9500 10000
4/99 9594 10032
5/99 9469 9944
6/99 9406 9912
7/99 9374 9869
8/99 9318 9864
9/99 9356 9979
10/99 9363 10016
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Growth of Total Return
Period ended 10/31/1999 $10,000 Cumulative
- --------------------------------------------------------------------------------
Farmers Income Portfolio -- Class A (Adjusted for Maximum Sales Charge)
- --------------------------------------------------------------------------------
Life of Fund $ 9,435 -5.65%
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index*
- --------------------------------------------------------------------------------
Life of Fund $ 10,016 .16%
- --------------------------------------------------------------------------------
See Notes to the Performance Update.
10
<PAGE>
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART DATA:
Farmers Income
Portfolio - Class B
(Adjusted for Maximum Lehman Brothers
Contingent Deferred Aggregate Bond
Sales Charge) Index*
3/99** 9500 10000
4/99 9594 10032
5/99 9469 9944
6/99 9406 9912
9/99 9374 9869
8/99 9318 9864
9/99 9356 9979
10/99 9363 10016
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Growth of Total Return
Period ended 10/31/1999 $10,000 Cumulative
- --------------------------------------------------------------------------------
Farmers Income Portfolio -- Class B (Adjusted for Maximum Contingent Deferred
Sales Charge)
- --------------------------------------------------------------------------------
Life of Fund $ 9,500 -5.00%
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index*
- --------------------------------------------------------------------------------
Life of Fund $ 10,016 .16%
- --------------------------------------------------------------------------------
Notes to the Performance Update:
* The Lehman Brothers Aggregate Bond (LBAB) Index is an unmanaged market
value-weighted measure of treasury issues, agency issues, corporate bond
issues and mortgage securities. Index returns assume reinvested dividends
and, unlike Portfolio returns, do not reflect any fees or expenses.
** The Portfolio commenced operations on March 9, 1999. Index comparisons
begin March 31, 1999.
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Performance is
adjusted for the maximum sales charge for Class A Shares (5.00%) and the
contingent deferred sales charge in effect at the end of the period for
Class B Shares (4%). Total return and principal value will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than when
purchased. If the adviser to this Portfolio and the advisers of some of
the Underlying Funds had not maintained some of the expenses, the total
return for the Portfolio would have been lower.
11
<PAGE>
Portfolio Summary
Farmers Income Portfolio
- --------------------------------------------------------------------------------
Asset Allocation
- --------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material.]
Money Market 5% Management seeks to remain
Fixed Income 95% fully invested in bond funds
---- and money market funds.
100%
====
- --------------------------------------------------------------------------------
Asset Class Ranges
- --------------------------------------------------------------------------------
Money Market 0-20% Asset class allocations
Fixed Income 80-100% are derived from the risk
profile of the Portfolio;
changes are expected to be
modest and infrequent.
- --------------------------------------------------------------------------------
Portfolio Holdings
- --------------------------------------------------------------------------------
Scudder Income Fund 25% The Portfolio's current
PIMCO Foreign Bond Fund -- weightings are unchanged
Institutional Shares 25% from April 30, 1999.
Kemper High Yield Fund -- Class I 25%
Kemper U.S. Government Securities Fund --
Class I 15%
PIMCO Low Duration Fund --
Institutional Shares 5%
Zurich Money Market Fund 5%
----
100%
====
12
<PAGE>
Portfolio Highlights
Farmers Income with Growth Portfolio
In managing the Income with Growth Portfolio, we strive to provide higher
returns than our unmanaged benchmark, which is comprised of the Lehman Brothers
Aggregate Bond Index (70%), and the S&P 500 Index (30%). At the same time, we
also look to achieve a lower level of risk through extensive diversification
among five fixed income funds and two equity funds, each of which focuses on a
specific sector of the financial markets. Over time, each of the individual
sectors represented in these funds tends to respond differently to changes in
the broader economic environment, meaning that strength in certain asset classes
will often offset the weakness in others. For the six months ended October 31,
1999, the Income with Growth Portfolio -- Class A shares rose 1.59%, beating the
0.80% return of its benchmark.
We made no changes to the Portfolio's asset allocation during the period.
However, our weightings in certain sectors did change somewhat due to market
movements. As of October 31, our position in equities had increased to 33% of
total assets (from 27%) and our fixed income holdings had slipped to 66% of
assets from 73%.
Performance was helped by the Portfolio's substantial position in Janus Twenty
Fund, which focuses on the types of large-cap growth stocks that have
outperformed in 1999. Portfolio returns were also helped by our position in
PIMCO Low Duration Fund, in which 25% of the Portfolio's total assets were held.
In a period where interest rates were rising, exposure to low duration assets
(those with a low degree of interest rate sensitivity) provided a boost to
performance.
On the negative side, our position in international bonds dampened returns. In
many of the developed markets overseas, an improved economic backdrop has
prompted central banks to raise interest rates, which in turn has caused bond
prices to tumble. While our diversification into the foreign bond markets hurt
performance in this period, we believe that international investments remain a
key component of a diversified portfolio. Performance was also hampered by the
poor showing of value stocks, which are represented in the Portfolio through its
position in Scudder Growth and Income Fund. Similar to our views regarding
foreign bonds, we believe that value stocks will ultimately come back into
favor, and we intend for the Portfolio to hold on to its position in this
sector.
13
<PAGE>
Performance Update
- --------------------------------------------------------------------------------
Farmers Income with Growth Portfolio
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART DATA:
Lehman Brothers
Farmers Income Aggregate Bond
with Growth Index (70%),
Portfolio - Class A Lehman Brothers S&P 500 Composite
(Adjusted for Maximum Aggregate Bond Price Stock
Sales Charge) Index* Index (30%)*
3/99** 9475 10000 10000
4/99 9521 10032 10138
5/99 9328 9944 10004
6/99 9382 9912 10148
7/99 9304 9869 10022
8/99 9320 9864 10004
9/99 9413 9979 10003
10/99 9665 10016 10220
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Growth of Total Return
Period ended 10/31/1999 $10,000 Cumulative
- --------------------------------------------------------------------------------
Farmers Income with Growth Portfolio -- Class A (Adjusted for Maximum Sales
Charge)
- --------------------------------------------------------------------------------
Life of Fund $ 9,886 -1.14%
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (70%), S&P 500 Composite Price Stock Index
(30%)*
- --------------------------------------------------------------------------------
Life of Fund $10,220 2.20%
- --------------------------------------------------------------------------------
See Notes to the Performance Update.
14
<PAGE>
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART DATA:
Farmers Income Lehman Brothers
with Growth Aggregate Bond
Portfolio - Class B Index (70%),
(Adjusted for Maximum Lehman Brothers S&P 500 Composite
Contingent Deferred Aggregate Bond Price Stock
Sales Charge) Index* Index (30%)*
3/99** 10000 10000 10000
4/99 10049 10032 10138
5/99 9829 9944 10004
6/99 9886 9912 10148
7/99 9795 9869 10022
8/99 9804 9864 10004
9/99 9906 9979 10003
10/99 9763 10016 10220
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Growth of Total Return
Period ended 10/31/1999 $10,000 Cumulative
- --------------------------------------------------------------------------------
Farmers Income with Growth Portfolio -- Class B (Adjusted for Maximum Contingent
Deferred Sales Charge)
- --------------------------------------------------------------------------------
Life of Fund $ 9,983 -.17%
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (70%), S&P 500 Composite Price Stock Index
(30%)*
- --------------------------------------------------------------------------------
Life of Fund $10,220 2.20%
- --------------------------------------------------------------------------------
Notes to the Performance Update:
* The Lehman Brothers Aggregate Bond (LBAB) Index is an unmanaged market
value-weighted measure of treasury issues, agency issues, corporate bond
issues and mortgage securities. The Standard & Poor's 500 Index is a
capitalization-weighted index of 500 stocks which is designed to measure
performance of the broad domestic economy through changes in the aggregate
market value of 500 stocks representing all major industries. Index
returns assume reinvested dividends and, unlike Portfolio returns, do not
reflect any fees or expenses.
** The Portfolio commenced operations on March 9, 1999. Index comparisons
begin March 31, 1999.
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Performance is
adjusted for the maximum sales charge for Class A Shares (5.25%) and the
contingent deferred sales charge in effect at the end of the period for
Class B Shares (4%). Total return and principal value will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than when
purchased. If the adviser to this Portfolio and the advisers of some of
the Underlying Funds had not maintained some of the expenses, the total
return for the Portfolio would have been lower.
15
<PAGE>
Portfolio Summary
Farmers Income with Growth Portfolio
- --------------------------------------------------------------------------------
Asset Allocation
- --------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material.]
Money Market 1% The Portfolio's weighting
Fixed Income 66% in equity funds has
Equity 33% increased from 27% of net
---- assets on April 30, 1999.
100%
====
- --------------------------------------------------------------------------------
Asset Class Ranges
- --------------------------------------------------------------------------------
Money Market 0-15% Asset class allocations
Fixed Income 60-80% are derived from the risk
Equity 20-40% profile of the Portfolio;
changes are expected to
be modest and infrequent.
- --------------------------------------------------------------------------------
Portfolio Holdings
- --------------------------------------------------------------------------------
PIMCO Low Duration Fund -- Holdings in PIMCO Low
Institutional Shares 24% Duration Fund and Janus
PIMCO Foreign Bond Fund -- Twenty Fund provided a
Institutional Shares 24% boost to Portfolio
Janus Twenty Fund 23% performance.
Kemper U.S. Government Securities Fund --
Class I 18%
Scudder Growth and Income Fund "S" 10%
Zurich Money Market Fund 1%
----
100%
====
16
<PAGE>
Portfolio Highlights
Farmers Balanced Portfolio
The objective of the Balanced Portfolio is to provide a balance of current
income and long-term growth of capital. We seek to achieve this goal by
spreading the Portfolio's assets among several mutual funds that, as a group,
invest in both stocks and bonds. While over the long term a strategy that
emphasizes diversification and risk control is likely to produce strong
risk-adjusted returns, the Portfolio underperformed in the most recent period.
For the six months ended October 31, 1999, the Balanced Portfolio -- Class A
Shares posted a total return of -0.86% versus 1.40% for the benchmark.
During the past six months, growth stocks have outperformed value stocks by a
wide margin. This trend helped boost the performance of the Portfolio's holdings
in Janus Twenty Fund, but it proved to be a negative for its holdings in
value-oriented equity funds. Viewing this disparity as an opportunity, we took
advantage of the weakness in value stocks by adding to the Portfolio's position
in Scudder Growth and Income Fund. Going forward, we intend to hold a
significant positions in both growth and value-oriented funds since the market's
preference between the two tends to alternate over time.
The Portfolio's largest position among its fixed income holdings was Kemper U.S.
Government Securities Fund, which held up well in a difficult environment. A new
addition to the Portfolio is PIMCO Low Duration Fund, which we believe will
provide the Portfolio with exposure to a sector that is likely to outperform
when interest rates are rising. (The term "low duration" denotes a low level of
interest rate sensitivity.)
On the downside, returns were dampened by the Portfolio's position in foreign
bonds. In many of the developed markets overseas, a long period of stagnation is
giving way to more rapid growth. As a result, interest rates have risen and
foreign bond prices have weakened. While diversification into the overseas bond
markets hindered performance over this brief six-month period, we believe that
international investments will remain a key component of a diversified portfolio
over the long term.
Given the long-term benefits of diversification, we urge investors to look past
the Portfolio's short-term underperformance. Instead, we encourage its
shareholders to focus on the advantages of an investment that can capitalize on
both the growth potential of stocks and the steady income of bonds.
17
<PAGE>
Performance Update
Farmers Balanced Portfolio
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART DATA:
Lehman Brothers
Aggregate Bond
Farmers Balanced Index (50%),
Portfolio - Class A Lehman Brothers S&P 500 S&P 500
(Adjusted for Maximum Aggregate Bond Composite Price Composite Price
Sales Charge) Index* Stock Index* Stock Index (50%)*
3/99* 9425 10000 10000 10000
4/99 9562 10032 10387 10210
5/99 9349 9944 10142 10045
6/99 9464 9912 10706 10308
7/99 9254 9869 10371 10124
8/99 9193 9864 10320 10097
9/99 9208 9979 10037 10017
10/99 9481 10016 10672 10352
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Growth of Total Return
Period ended 10/31/1999 $10,000 Cumulative
- --------------------------------------------------------------------------------
Farmers Balanced Portfolio -- Class A (Adjusted for Maximum Sales Charge)
- --------------------------------------------------------------------------------
Life of Fund $ 9,696 -3.04%
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (50%), S&P 500 Composite Price Stock Index
(50%)*
- --------------------------------------------------------------------------------
Life of Fund $10,352 3.52%
- --------------------------------------------------------------------------------
See Notes to the Performance Update.
18
<PAGE>
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART DATA:
Lehman Brothers
Farmers Balanced Aggregate Bond
Portfolio - Class B Index (50%),
(Adjusted for Maximum Lehman Brothers S&P 500 S&P 500
Contingent Deferred Aggregate Bond Composite Price Composite Price
Sales Charge) Index* Stock Index* Stock Index (50%)*
3/99* 10000 10000 10000 10000
4/99 10139 10032 10387 10210
5/99 9861 9944 10142 10045
6/99 9976 9912 10706 10308
7/99 9746 9869 10371 10124
8/99 9672 9864 10320 10097
9/99 9680 9979 10037 10017
10/99 9969 10016 10672 10352
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Growth of Total Return
Period ended 10/31/1999 $10,000 Cumulative
- --------------------------------------------------------------------------------
Farmers Balanced Portfolio -- Class B (Adjusted for Maximum Contingent Deferred
Sales Charge)
- --------------------------------------------------------------------------------
Life of Fund $ 9,793 -2.07%
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (50%), S&P 500 Composite Price Stock Index
(50%)*
- --------------------------------------------------------------------------------
Life of Fund $10,352 3.52%
- --------------------------------------------------------------------------------
Notes to the Performance Update:
* The Lehman Brothers Aggregate Bond (LBAB) Index is an unmanaged market
value-weighted measure of treasury issues, agency issues, corporate bond
issues and mortgage securities. The Standard & Poor's 500 Index is a
capitalization-weighted index of 500 stocks which is designed to measure
performance of the broad domestic economy through changes in the aggregate
market value of 500 stocks representing all major industries. Index
returns assume reinvested dividends and, unlike Portfolio returns, do not
reflect any fees or expenses.
** The Portfolio commenced operations on March 9, 1999. Index comparisons
begin March 31, 1999.
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Performance is
adjusted for the maximum sales charge for Class A Shares (5.75%) and the
contingent deferred sales charge in effect at the end of the period for
Class B Shares (4%). If the adviser to this Portfolio and the advisers of
some of the Underlying Funds had not maintained some of the expenses, the
total return for the Portfolio would have been lower.
19
<PAGE>
Portfolio Summary
Farmers Balanced Portfolio
- --------------------------------------------------------------------------------
Asset Allocation
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[The following table was depicted as a pie chart in the printed material.]
Money Market 1% The Portfolio's equity
Fixed Income 47% exposure has increased
Equity 52% from 46% of net assets on
---- April 30, 1999.
100%
====
- --------------------------------------------------------------------------------
Asset Class Ranges
- --------------------------------------------------------------------------------
Money Market 0-10% Asset class allocations
Fixed Income 40-60% are derived from the risk
Equity 40-60% profile of the Portfolio;
changes are expected to be
modest and infrequent.
- --------------------------------------------------------------------------------
Portfolio Holdings
- --------------------------------------------------------------------------------
Janus Twenty Fund 27% The Portfolio remains
Kemper U.S. Government Securities Fund -- widely diversified among
Class I 23% multiple asset classes.
PIMCO Foreign Bond Fund --
Institutional Shares 18%
Scudder Growth and Income Fund "S" 15%
Kemper-Dreman High Return Equity Fund--
Class I 10%
Scudder Income Fund 5%
Zurich Money Market Fund 1%
PIMCO Low Duration Fund 1%
----
100%
====
20
<PAGE>
Portfolio Highlights
Farmers Growth with Income Portfolio
In managing the Growth with Income Portfolio, we strive to produce higher
returns and a lower level of risk than our benchmark index, which is a blend of
the S&P 500 Index (70%) and the Lehman Brothers Aggregate Bond Index (30%). To
accomplish this, we invested 70% of the Portfolio's total assets in three equity
funds, (an increase from the 63% level of March 31, 1999) and placed 29% of
assets in three bond funds, down from 36% at the end of March. While we believe
that over the long term a strategy that emphasizes diversification is likely to
produce favorable risk-adjusted returns, the Portfolio underperformed in the
most recent reporting period. For the six months ended October 31, 1999, the
Growth with Income Portfolio posted a total return of -2.45% versus the 1.96%
return of its benchmark. Despite the Portfolio's short-term underperformance, we
encourage investors to maintain a focus on the potential long-term benefits of
diversification and professional asset management.
The primary reason for the recent underperformance was our large position in
funds that employ the value style of investing. Although the market's preference
between value and growth tends to move in cycles, growth stocks have
outperformed by a wide margin in 1999. While this provided a positive backdrop
for the Janus Twenty Fund -- in which we hold 25% of Portfolio assets -- it was
detrimental to our larger weighting in value funds (which stood at 43% as of
October 31). We used this downdraft as an opportunity to boost our holdings in
Scudder Growth and Income Fund, which should better position the Portfolio for
what we believe will be the inevitable shift in favor of value.
Among our fixed income holdings, the strongest performance came from PIMCO Low
Duration Fund, a holding that we recently added to the Portfolio to provide
balance at times when interest rates are on the rise. (The term "low duration"
denotes a low level of interest rate sensitivity.) Kemper U.S. Government
Securities Fund also provided ballast in a volatile environment, since
government bonds generally outperformed riskier corporate issues. On the
downside, performance was hurt by our position in foreign bonds, which were hurt
by the revival of growth in Europe and Japan. Although the sector has not
performed well over much of 1999, we continue to believe that it is an essential
component of a diversified portfolio.
21
<PAGE>
Performance Update
Farmers Growth with Income Portfolio
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART DATA:
S&P 500
Composite
Farmers Stock Price
Growth with Income S&P 500 Index (70%),
Portfolio - Class A Composite Lehman Brothers
(Adjusted for Maximum Stock Price Aggregate Bond
Sales Charge) Index* Index (30%)*
3/99** 9425 10000 10000
4/99 9730 10387 10280
5/99 9517 10142 10083
6/99 9663 10706 10466
7/99 9401 10371 10223
8/99 9325 10320 10186
9/99 9224 10037 10026
10/99 9494 10672 10482
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Growth of Total Return
Period ended 10/31/1999 $10,000 Cumulative
- --------------------------------------------------------------------------------
Farmers Growth with Income Portfolio -- Class A (Adjusted for Maximum Sales
Charge)
- --------------------------------------------------------------------------------
Life of Fund $ 9,678 -3.22%
- --------------------------------------------------------------------------------
S&P 500 Composite Stock Price Index (70%), Lehman Brothers Aggregate Bond Index
(30%)*
- --------------------------------------------------------------------------------
Life of Fund $10,482 4.82%
- --------------------------------------------------------------------------------
See Notes to the Performance Update.
22
<PAGE>
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART DATA:
S&P 500
Farmers Composite
Growth with Income Stock Price
Portfolio - Class B S&P 500 Index (70%),
(Adjusted for Maximum Composite Lehman Brothers
Contingent Deferred Stock Price Aggregate Bond
Sales Charge) Index* Index (30%)*
3/99** 10000 10000 10000
4/99 10319 10387 10280
5/99 10082 10142 10083
6/99 10237 10706 10466
7/99 9959 10371 10223
8/99 9861 10320 10186
9/99 9755 10037 10026
10/99 9632 10672 10482
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Growth of Total Return
Period ended 10/31/1999 $10,000 Cumulative
- --------------------------------------------------------------------------------
Farmers Growth with Income Portfolio (Adjusted for Maximum Contingent Deferred
Sales Charge)
- --------------------------------------------------------------------------------
Life of Fund $ 9,825 -1.75%
- --------------------------------------------------------------------------------
S&P 500 Composite Stock Price Index (70%), Lehman Brothers Aggregate Bond Index
(30%)*
- --------------------------------------------------------------------------------
Life of Fund $10,482 4.82%
- --------------------------------------------------------------------------------
Notes to the Performance Update:
* The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks which is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks
representing all major industries. The Lehman Brothers Aggregate Bond
(LBAB) Index is an unmanaged market value-weighted measure of treasury
issues, agency issues, corporate bond issues and mortgage securities.
Index returns assume reinvested dividends and, unlike Portfolio returns,
do not reflect any fees or expenses.
** The Portfolio commenced operations on March 9, 1999. Index comparisons
begin March 31, 1999.
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Performance is
adjusted for the maximum sales charge for Class A Shares (5.75%) and the
contingent deferred sales charge in effect at the end of the period for
Class B Shares (4%). Total return and principal value will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than when
purchased. If the adviser to this Portfolio and the advisers of some of
the Underlying Funds had not maintained some of the expenses, the total
return for the Portfolio would have been lower.
23
<PAGE>
Portfolio Summary
Farmers Growth with Income Portfolio
- --------------------------------------------------------------------------------
Asset Allocation
- --------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material.]
Money Market 1% The Portfolio's current
Fixed Income 29% weighting in stock funds
Equity 70% marks an increase from the
---- 63% of net assets it held
100% in equities on April 30,
==== 1999.
- --------------------------------------------------------------------------------
Asset Class Ranges
- --------------------------------------------------------------------------------
Money Market 0-10% Asset class allocations
Fixed Income 20-40% are derived from the risk
Equity 60-80% profile of the Portfolio;
changes are expected to be
modest and infrequent.
- --------------------------------------------------------------------------------
Portfolio Holdings
- --------------------------------------------------------------------------------
Janus Twenty Fund 27% The strong performance of
Scudder Growth and Income Fund "S" 22% Janus Twenty Fund helped
Kemper-Dreman High Return Equity Fund-- offset the weaker returns
Class I 21% posted by value stocks.
PIMCO Foreign Bond Fund --
Institutional Shares 17%
Kemper U.S. Government Securities Fund --
Class I 11%
PIMCO Low Duration Fund --
Institutional Shares 1%
Zurich Money Market Fund 1%
----
100%
====
24
<PAGE>
Portfolio Highlights
Farmers Growth Portfolio
In managing the Growth Portfolio, we seek to produce long-term growth of capital
by dividing the Portfolio's assets among funds that employ different investment
styles and invest in distinct sectors of the market. Over the six-month
reporting period, the Portfolio maintained a steady exposure to large caps,
small caps, and international stocks, as well as to both the growth and value
investment styles. This strategy produced a performance that was roughly in line
with the benchmark index. During the six months ended October 31, 1999, the
Growth Portfolio posted a total return of -1.48% versus a gain of 2.75% for the
S&P 500.
The top performing fund in the Portfolio was Janus Twenty Fund, which focuses on
large company stocks with strong, consistent earnings growth. By placing a
premium on quality over valuation, the fund was well-positioned to benefit from
a market environment that favored the strongest growers. Performance was also
helped by the Portfolio's small position in Scudder International Fund, which
capitalized on the many positive trends taking place in the foreign markets:
namely merger activity, stronger economic growth, and consolidation.
On the downside, the Portfolio held 59% of total assets in value-oriented funds
that did not perform as well in this environment. More than any other group,
value stocks were victimized by the high level of uncertainty in the global
economy. When the markets appear vulnerable to unfavorable economic developments
(such as inflation or recession), investors tend to gravitate toward the stocks
that have demonstrated the ability to deliver consistent earnings growth quarter
after quarter. Value stocks, which often tend to have more uncertain short-term
outlooks, generally suffer in such an environment. Nevertheless, we believe that
value stocks offer a highly attractive opportunity at their current levels, and
we are confident that they will come back into favor in due course. We therefore
intend to maintain the Portfolio's positions in the three value funds in which
it is currently invested in order to take advantage of what we believe will be
their inevitable upturn.
We feel that a broad allocation across a variety of sectors within the stock
market is likely to produce competitive long-term total returns and at the same
time minimize risk. In our view, this is a more important consideration than the
Portfolio's short-term performance numbers.
25
<PAGE>
Performance Update
Farmers Growth Portfolio
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART DATA:
Farmers Growth
Portfolio - Class A S&P 500
(Adjusted for Maximum Composite Price
Sales Charge) Stock Index*
3/99** 9425 10000
4/99 9905 10387
5/99 9743 10142
6/99 10129 10706
7/99 9774 10371
8/99 9587 10320
9/99 9401 10037
10/99 9758 10672
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Growth of Total Return
Period ended 10/31/1999 $10,000 Cumulative
- --------------------------------------------------------------------------------
Farmers Growth Portfolio -- Class A (Adjusted for Maximum Sales Charge)
- --------------------------------------------------------------------------------
Life of Fund $ 9,906 -.94%
- --------------------------------------------------------------------------------
S&P 500 Composite Price Stock Index*
- --------------------------------------------------------------------------------
Life of Fund $10,672 6.72%
- --------------------------------------------------------------------------------
See Notes to the Performance Update.
26
<PAGE>
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART DATA:
Farmers Growth
Portfolio - Class B
(Adjusted for Maximum S&P 500
Contingent Deferred Composite Price
Sales Charge) Stock Index*
3/99** 10000 10000
4/99 10501 10387
5/99 10320 10142
6/99 10773 10706
7/99 10337 10371
8/99 10140 10320
9/99 9934 10037
10/99 9904 10672
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
Growth of Total Return
Period ended 10/31/1999 $10,000 Cumulative
- --------------------------------------------------------------------------------
Farmers Growth Portfolio -- Class B (Adjusted for Maximum Contingent Deferred
Sales Charge)
- --------------------------------------------------------------------------------
Life of Fund $10,058 .58%
- --------------------------------------------------------------------------------
S&P 500 Composite Price Stock Index*
- --------------------------------------------------------------------------------
Life of Fund $10,672 6.72%
- --------------------------------------------------------------------------------
Notes to the Performance Update:
* The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks which is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks
representing all major industries. Index returns assume reinvested
dividends and, unlike Portfolio returns, do not reflect any fees or
expenses.
** The Portfolio commenced operations on March 9, 1999. Index comparisons
begin March 31, 1999.
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Performance is
adjusted for the maximum sales charge for Class A Shares (5.75%) and the
contingent deferred sales charge in effect at the end of the period for
Class B Shares (4%). Total return and principal value will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than when
purchased. If the adviser to this Portfolio and the advisers of some of
the Underlying Funds had not maintained some of the expenses, the total
return for the Portfolio would have been lower.
27
<PAGE>
Portfolio Summary
Farmers Growth Portfolio
- --------------------------------------------------------------------------------
Asset Allocation
- --------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material.]
Money Market 1% Consistent with a focus on
Equity 99% long-term growth of
---- capital, management seeks
100% to remain fully invested
==== in stocks.
- --------------------------------------------------------------------------------
Asset Class Ranges
- --------------------------------------------------------------------------------
Money Market 0-5% Asset class allocations
Equity 95-100% are derived from the risk
profile of the Portfolio;
changes are expected to be
modest and infrequent.
- --------------------------------------------------------------------------------
Portfolio Holdings
- --------------------------------------------------------------------------------
Janus Twenty Fund 31% The Portfolio's
Kemper-Dreman High Return Equity Fund -- growth-oriented holdings
Class I 30% provided the strongest
Scudder Growth and Income Fund "S" 29% performance, while those
Scudder International Fund -- International that utilize a value style
Shares 5% posted weaker returns.
Scudder Small Company Value Fund 4%
Zurich Money Market Fund 1%
----
100%
====
28
<PAGE>
Glossary of Investment Terms
GROWTH FUND A fund that invests primarily in companies that
have displayed above average earnings growth and
are expected to continue to increase profits faster
than the overall market. Stocks of such companies
usually trade at higher valuations and experience
more price volatility than the market as a whole.
LEHMAN BROTHERS The Lehman Brothers Aggregate Bond Index is a
AGGREGATE BOND market value-weighted measure of Treasury Issues,
INDEX Agency Issues, corporate bond issues, and
mortgage-backed securities. The Index is commonly
used as a performance benchmark for bond funds.
STANDARD & The Standard and Poor's Composite Price Stocks
POOR'S COMPOSITE Index is a capitalization-weighted index of 500
PRICE STOCKS stocks. The Index is designed to measure the
INDEX performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks
representing all major industries. It is commonly
used as a performance benchmark for stock funds.
VALUE FUND A fund that invests primarily in companies whose
stock prices do not fully reflect their intrinsic
value, as indicated by price/earnings ratio,
price/book value ratio, dividend yield, or some
other valuation measure, relative to their
industries or the market overall. Value stocks tend
to display less price volatility and may carry
higher dividend yields.
WEIGHTING Refers to the allocation of assets -- usually in
(OVER/UNDER) terms of sectors, industries, or countries --
within a portfolio relative to the portfolio's
benchmark index or investment universe.
(Sources: Scudder Kemper Investments, Inc., Barron's Dictionary of Finance and
Investment Terms)
29
<PAGE>
This Page
intentionally
left balnk.
30
<PAGE>
Investment Portfolio as of October 31, 1999 (Unaudited)
Farmers Income Portfolio
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Money Market 4.9%
-------
Zurich Money Market Fund (Cost $7,460) ................ 7,460 7,460
-------
Fixed Income 95.1%
- --------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I ..... 2,738 22,948
Kemper High Yield Fund -- Class I ..................... 5,264 37,429
PIMCO Foreign Bond Fund -- Institutional Shares ....... 3,738 37,867
PIMCO Low Duration Fund -- Institutional Shares ....... 816 8,067
Scudder Income Fund ................................... 3,045 37,968
- --------------------------------------------------------------------------------
Total Fixed Income (Cost $151,733) 144,279
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investment Portfolio -- 100% (Cost $159,193)(a) 151,739
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $159,193. At October
31, 1999, net unrealized depreciation for all securities based on
tax cost was $7,454. This consisted of aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over market value of $7,454.
During the six months ended October 31, 1999, purchases and sales of
Underlying Funds' shares (excluding money market investments)
aggregated $9,414 and $2,491, respectively.
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
Investment Portfolio as of October 31, 1999 (Unaudited)
Farmers Income with Growth Portfolio
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Money Market 1.0%
-------
Zurich Money Market Fund (Cost $3,712) ................ 3,712 3,712
-------
Fixed Income 66.3%
- --------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I ..... 8,340 69,890
PIMCO Foreign Bond -- Institutional Shares ............ 8,729 88,429
PIMCO Low Duration Fund -- Institutional Shares ....... 9,199 90,977
- --------------------------------------------------------------------------------
Total Fixed Income (Cost $249,419) 249,296
- --------------------------------------------------------------------------------
Equity 32.7%
- --------------------------------------------------------------------------------
Janus Twenty Fund ..................................... 1,237 86,231
Scudder Growth & Income Fund "S" ...................... 1,372 36,718
- --------------------------------------------------------------------------------
Total Equity (Cost $113,478) 122,949
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investment Portfolio -- 100% (Cost $366,609)(a) 375,957
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $366,609. At October
31, 1999, net unrealized appreciation for all securities based on
tax cost was $9,348. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of
market value over tax cost of $9,684 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over market value of $336.
During the six months ended October 31, 1999, purchases and sales of
Underlying Funds' shares (excluding money market investments)
aggregated $395,493 and $137,054, respectively.
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
Investment Portfolio as of October 31, 1999 (Unaudited)
Farmers Balanced Portfolio
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Money Market 0.9%
-------
Zurich Money Market Fund (Cost $5,147) ................ 5,147 5,147
-------
Fixed Income 47.2%
- --------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I ..... 15,276 128,016
PIMCO Foreign Bond Fund -- Institutional Shares ....... 9,738 98,645
PIMCO Low Duration Fund -- Institutional Shares ....... 456 4,509
Scudder Income Fund ................................... 2,124 26,484
- --------------------------------------------------------------------------------
Total Fixed Income (Cost $259,890) 257,654
- --------------------------------------------------------------------------------
Equity 51.9%
- --------------------------------------------------------------------------------
Janus Twenty Fund ..................................... 2,090 145,713
Kemper Dreman High Return Equity Fund -- Class I ...... 1,785 54,576
Scudder Growth & Income Fund "S" ...................... 3,090 82,686
- --------------------------------------------------------------------------------
Total Equity (Cost $272,126) 282,975
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investment Portfolio -- 100% (Cost $537,163)(a) 545,776
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $537,163. At October
31, 1999, net unrealized appreciation for all securities based on
tax cost was $8,613. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of
market value over tax cost of $17,946 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over market value of $9,333.
During the six months ended October 31, 1999, purchases and sales of
Underlying Funds' shares (excluding money market investments)
aggregated $483,062 and $74,813, respectively.
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
Investment Portfolio as of October 31, 1999 (Unaudited)
Farmers Growth with Income Portfolio
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Money Market .5%
-------
Zurich Money Market Fund (Cost $1,608) ................ 1,608 1,608
-------
Fixed Income 28.8%
- --------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I ..... 4,561 38,217
PIMCO Foreign Bond -- Institutional Shares ............ 6,034 61,127
PIMCO Low Duration Fund -- Institutional Shares ....... 203 2,007
- --------------------------------------------------------------------------------
Total Fixed Income (Cost $103,449) 101,351
- --------------------------------------------------------------------------------
Equity 70.7%
- --------------------------------------------------------------------------------
Janus Twenty Fund ..................................... 1,359 94,715
Kemper-Dreman High Return Equity Fund -- Class I ...... 2,469 75,481
Scudder Growth & Income Fund "S" ...................... 2,940 78,666
- --------------------------------------------------------------------------------
Total Equity (Cost $244,123) 248,862
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investment Portfolio -- 100% (Cost $349,180)(a) 351,821
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $349,180. At October
31, 1999, net unrealized appreciation for all securities based on
tax cost was $2,641. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of
market value over tax cost of $11,656 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over market value of $9,015.
During the six months ended October 31, 1999, purchases and sales of
Underlying Funds' shares (excluding money market investments)
aggregated $245,413 and $233,704, respectively.
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
Investment Portfolio as of October 31, 1999 (Unaudited)
Farmers Growth Portfolio
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Money Market .9%
-------
Zurich Money Market Fund (Cost $7,326) ................ 7,326 7,326
-------
Equity 99.1%
- --------------------------------------------------------------------------------
Janus Twenty Fund ..................................... 3,756 261,831
Kemper-Dreman High Return Equity Fund -- Class I ...... 8,187 250,280
Scudder Growth & Income Fund .......................... 9,198 246,152
Scudder International Fund -- International Shares .... 709 41,414
Scudder Small Company Value Fund ...................... 2,083 35,510
- --------------------------------------------------------------------------------
Total Equity (Cost $836,664) 835,187
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investment Portfolio -- 100% (Cost $843,990)(a) 842,513
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $843,990. At October
31, 1999, net unrealized depreciation for all securities based on
tax cost was $1,477. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of
market value over tax cost of $34,783 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over market value of $36,260.
During the six months ended October 31, 1999, purchases and sales of
Underlying Funds' shares (excluding money market investments)
aggregated $801,710 and $103,878, respectively.
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Income with
Income Growth
Assets Portfolio Portfolio
- --------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (for identified cost, see
accompanying investment portfolios) .......... $ 151,739 $ 375,957
Income receivable .............................. 6 3
Receivable for Portfolio shares sold ........... -- 1,637
--------- ---------
Total assets ................................... 151,745 377,597
Liabilities
- --------------------------------------------------------------------------------
Accrued management fee ......................... 109 230
Accrued distribution services fee .............. 38 172
Accrued administrative services fee ............ 36 59
--------- ---------
Total liabilities .............................. 183 461
------------------------------------------------ --------- ---------
Net assets, at market value $ 151,562 $ 377,136
------------------------------------------------ --------- ---------
Net Assets
- --------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ............ 621 911
Net unrealized appreciation (depreciation)
on investments .............................. (7,454) 9,348
Accumulated net realized gain (loss) ........... (125) (2,944)
Paid-in capital ................................ 158,520 369,821
------------------------------------------------ --------- ---------
Net assets, at market value $ 151,562 $ 377,136
------------------------------------------------ --------- ---------
Net Asset Value
- --------------------------------------------------------------------------------
Class A
Net assets applicable to shares outstanding .... 101,112 111,962
Shares of beneficial interest outstanding ...... 8,807 9,099
Net Asset Value, redemption price per share
(net assets / shares outstanding of beneficial
interest, $.01 par value, unlimited number --------- ---------
of shares authorized) ........................ $ 11.48 $ 12.30
--------- ---------
Maximum offering price per share (net asset
value plus 5.26% of net asset value or
5.00% of offering price for Income
Portfolio, 5.54% of net asset value or
5.25% of offering price for Income with
Growth Portfolio, and 6.10% of net asset
value or 5.75% of offering price for
Balanced, Growth with Income, --------- ---------
and Growth Portfolios) ....................... $ 12.08 $ 12.98
--------- ---------
Class B
Net assets applicable to shares outstanding .... 50,450 265,174
Shares of beneficial interest outstanding ...... 4,398 21,598
Net Asset Value, offering and redemption
price (subject to contingent deferred
sales charge) per share (net assets / shares
outstanding of beneficial interest, $.01 par --------- ---------
value, unlimited number of shares authorized) $ 11.47 $ 12.28
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
<TABLE>
<CAPTION>
Growth with
Balanced Income Growth
Assets Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investments, at market (for identified cost, see
accompanying investment portfolios) .......... $ 545,776 $ 351,821 $ 842,513
Income receivable .............................. -- -- 7
Receivable for Portfolio shares sold ........... 684 390 941
--------- --------- ---------
Total assets ................................... 546,460 352,211 843,461
Liabilities
- ------------------------------------------------------------------------------------------
Accrued management fee ......................... 345 227 497
Accrued distribution services fee .............. 134 147 250
Accrued administrative services fee ............ 151 50 164
--------- --------- ---------
Total liabilities .............................. 630 424 911
------------------------------------------------ --------- --------- ---------
Net assets, at market value $ 545,830 $ 351,787 $ 842,550
------------------------------------------------ --------- --------- ---------
Net Assets
- ------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ............ 560 3,610 323
Net unrealized appreciation (depreciation)
on investments .............................. 8,613 2,641 (1,477)
Accumulated net realized gain (loss) ........... (3,911) (8,975) 1,650
Paid-in capital ................................ 540,568 354,511 842,054
------------------------------------------------ --------- --------- ---------
Net assets, at market value $ 545,830 $ 351,787 $ 842,550
------------------------------------------------ --------- --------- ---------
Net Asset Value
- ------------------------------------------------------------------------------------------
Class A
Net assets applicable to shares outstanding .... 272,660 157,931 401,937
Shares of beneficial interest outstanding ...... 22,399 12,819 31,863
Net Asset Value, redemption price per share
(net assets / shares outstanding of beneficial
interest, $.01 par value, unlimited number --------- --------- ---------
of shares authorized) ........................ $ 12.17 $ 12.32 $ 12.61
--------- --------- ---------
Maximum offering price per share (net asset
value plus 5.26% of net asset value or
5.00% of offering price for Income
Portfolio, 5.54% of net asset value or
5.25% of offering price for Income with
Growth Portfolio, and 6.10% of net asset
value or 5.75% of offering price for
Balanced, Growth with Income, --------- --------- ---------
and Growth Portfolios) ....................... $ 12.91 $ 13.07 $ 13.38
--------- --------- ---------
Class B
Net assets applicable to shares outstanding .... 273,170 193,856 440,613
Shares of beneficial interest outstanding ...... 22,564 15,800 35,099
Net Asset Value, offering and redemption
price (subject to contingent deferred
sales charge) per share (net assets / shares
outstanding of beneficial interest, $.01 par --------- --------- ---------
value, unlimited number of shares authorized) $ 12.11 $ 12.27 $ 12.55
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
Financial Statements (continued)
Statement of Operations
six months ended October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Income with
Income Growth
Investment Income Portfolio Portfolio
- --------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Income distributions from Underlying Funds ............ $ 5,588 $ 4,353
--------- ---------
Expenses:
Management fee ........................................ 570 680
Distribution fees -- Class B .......................... 190 388
Administrative fees -- Class A ........................ 127 97
Administrative fees -- Class B ........................ 63 130
Trustee fees .......................................... 6,399 6,995
--------- ---------
Total expenses before reductions ...................... 7,349 8,290
Expense reductions .................................... (6,399) (6,995)
--------- ---------
Expenses net .......................................... 950 1,295
------------------------------------------------------- --------- ---------
Net investment income 4,638 3,058
------------------------------------------------------- --------- ---------
Realized and unrealized gain (loss) on investment transactions
- --------------------------------------------------------------------------------
Net realized gain (loss)
Investments ........................................... (125) (2,959)
Capital gain distribution from Underlying Funds ....... -- --
--------- ---------
(125) (2,959)
--------- ---------
Net unrealized appreciation (depreciation)
on investments during the period ................... (8,478) 7,253
------------------------------------------------------- --------- ---------
Net gain (loss) on investments (8,603) 4,294
------------------------------------------------------- --------- ---------
------------------------------------------------------- --------- ---------
Net increase (decrease) in net assets
resulting from operations $ (3,965) $ 7,352
------------------------------------------------------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
<TABLE>
<CAPTION>
Growth with
Balanced Income Growth
Investment Income Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Income distributions from Underlying Funds ............ $ 6,298 $ 5,350 $ 3,410
--------- --------- ---------
Expenses:
Management fee ........................................ 1,204 1,325 1,744
Distribution fees -- Class B .......................... 682 402 860
Administrative fees -- Class A ........................ 174 308 295
Administrative fees -- Class B ........................ 228 134 287
Trustee fees .......................................... 7,440 6,929 8,227
--------- --------- ---------
Total expenses before reductions ...................... 9,728 9,098 11,413
Expense reductions .................................... (7,440) (6,929) (8,227)
--------- --------- ---------
Expenses net .......................................... 2,288 2,169 3,186
------------------------------------------------------- --------- --------- ---------
Net investment income 4,010 3,181 224
------------------------------------------------------- --------- --------- ---------
Realized and unrealized gain (loss) on investment transactions
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss)
Investments ........................................... (3,942) (9,029) 966
Capital gain distribution from Underlying Funds ....... -- -- 607
--------- --------- ---------
(3,942) (9,029) 1,573
--------- --------- ---------
Net unrealized appreciation (depreciation)
on investments during the period ................... 5,312 (1,630) (8,538)
------------------------------------------------------- --------- --------- ---------
Net gain (loss) on investments 1,370 (10,659) (6,965)
------------------------------------------------------- --------- --------- ---------
------------------------------------------------------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from operations $ 5,380 $ (7,478) $ (6,741)
------------------------------------------------------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
Financial Statements (continued)
Statement of Changes in Net Assets
Income Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Increase (Decrease) in Net Assets (Unaudited) April 30, 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................... $ 4,638 $ 1,238
Net realized gain (loss) ............................ (125) --
Net unrealized appreciation (depreciation) on
investments during the period ..................... (8,478) 1,026
--------- ---------
Net increase (decrease) in net assets
resulting from operations ......................... (3,965) 2,264
--------- ---------
Distributions to shareholders from net
investment income (Class A) ....................... (3,639) --
--------- ---------
Distributions to shareholders from net
investment income (Class B) ....................... (1,615) --
--------- ---------
Portfolio share transactions:
Class A
Proceeds from shares sold ........................... 614 91,574
Net asset value of shares issued to
shareholders in reinvestment of distributions ..... 3,639 --
--------- ---------
Net increase in net assets from Class A share
transactions ...................................... 4,253 91,574
--------- ---------
Class B
Proceeds from shares sold ........................... 1,000 40,075
Net asset value of shares issued to
shareholders in reinvestment of distributions ..... 1,615 --
--------- ---------
Net increase in net assets from Class B share
transactions ...................................... 2,615 40,075
--------- ---------
Increase (decrease) in net assets ................... (2,351) 133,913
Net assets at beginning of period ................... 153,913 20,000
--------- ---------
Net assets at end of period (a) ..................... $ 151,562 $ 153,913
--------- ---------
Other Information
- -------------------------------------------------------------------------------------
Increase (decrease) in Portfolio shares
Class A
Shares outstanding at beginning of period ........... 8,439 833
--------- ---------
Shares sold ......................................... 54 7,606
Shares issued to shareholders in reinvestment
of distributions .................................. 314 --
Shares redeemed ..................................... -- --
--------- ---------
Net increase in Portfolio shares .................... 368 7,606
--------- ---------
Shares outstanding at end of period ................. 8,807 8,439
--------- ---------
Class B
Shares outstanding at beginning of period ........... 4,173 833
--------- ---------
Shares sold ......................................... 86 3,340
Shares issued to shareholders in reinvestment
of distributions .................................. 139 --
Shares redeemed ..................................... -- --
--------- ---------
Net increase in Portfolio shares .................... 225 3,340
--------- ---------
Shares outstanding at end of period ................. 4,398 4,173
--------- ---------
(a) Includes undistributed net investment income .... $ 621 $ 1,238
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
Statement of Changes in Net Assets
Income with Growth Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Increase (Decrease) in Net Assets (Unaudited) April 30, 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................... $ 3,058 $ 493
Net realized gain (loss) ............................ (2,959) 15
Net unrealized appreciation (depreciation) on
investments during the period .................... 7,253 2,095
--------- ---------
Net increase in net assets resulting from
operations ....................................... 7,352 2,603
--------- ---------
Distribution to shareholders from net
investment income (Class A) ...................... (1,324) --
--------- ---------
Distribution to shareholders from net
investment income (Class B) ...................... (1,316) --
--------- ---------
Portfolio share transactions:
Class A
Proceeds from shares sold ........................... 58,159 40,711
Net asset value of shares issued to
shareholders in reinvestment of distributions ..... 1,324 --
Cost of shares redeemed ............................. (2,263) --
--------- ---------
Net increase (decrease) in net assets from
Class A share transactions ....................... 57,220 40,711
--------- ---------
Class B
Proceeds from shares sold ........................... 203,556 47,018
Net asset value of shares issued to
shareholders in reinvestment of distributions ..... 1,316 --
Cost of shares redeemed ............................. -- --
--------- ---------
Net increase in net assets from Class B share
transactions ..................................... 204,872 47,018
--------- ---------
Increase (decrease) in net assets ................... 266,804 90,332
Net assets at beginning of period ................... 110,332 20,000
--------- ---------
Net assets at end of period (a) ..................... $ 377,136 $ 110,332
--------- ---------
Other Information
- -------------------------------------------------------------------------------------
Increase (decrease) in Portfolio shares
Class A
Shares outstanding at beginning of period ........... 4,223 833
--------- ---------
Shares sold ......................................... 4,932 3,390
Shares issued to shareholders in reinvestment
of distributions ................................. 110 --
Shares redeemed ..................................... (166) --
--------- ---------
Net increase in Portfolio shares .................... 4,876 3,390
--------- ---------
Shares outstanding at end of period ................. 9,099 4,223
--------- ---------
Class B
Shares outstanding at beginning of period ........... 4,730 833
--------- ---------
Shares sold ......................................... 16,759 3,897
Shares issued to shareholders in reinvestment
of distributions .................................. 109 --
Shares redeemed ..................................... -- --
--------- ---------
Net increase in Portfolio shares .................... 16,868 3,897
--------- ---------
Shares outstanding at end of period ................. 21,598 4,730
--------- ---------
(a) Includes undistributed net investment income .... $ 911 $ 493
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
Financial Statements (continued)
Statement of Changes in Net Assets
Balanced Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Increase (Decrease) in Net Assets (Unaudited) April 30, 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................... $ 4,010 $ 483
Net realized gain (loss) ............................ (3,942) 31
Net unrealized appreciation (depreciation) on
investments during the period .................... 5,312 3,301
--------- ---------
Net increase in net assets resulting from
operations ....................................... 5,380 3,815
--------- ---------
Distributions to shareholders from net
investment income (Class A) ...................... (2,287) --
--------- ---------
Distributions to shareholders from net
investment income (Class B) ..................... (1,646) --
--------- ---------
Portfolio share transactions:
Class A
Proceeds from shares sold ........................... 202,363 52,062
Net asset value of shares issued to
shareholders in reinvestment of
distributions .................................... 2,287 --
Cost of shares redeemed ............................. (121) --
--------- ---------
Net increase in net assets from Class A share
transactions ..................................... 204,529 52,062
--------- ---------
Class B
Proceeds from shares sold ........................... 277,697 56,287
Net asset value of shares issued to
shareholders in reinvestment of
distributions .................................... 1,646 --
Cost of shares redeemed ............................. (71,653) --
--------- ---------
Net increase in net assets from Class B share
transactions ..................................... 207,690 56,287
--------- ---------
Increase (decrease) in net assets ................... 413,666 112,164
Net assets at beginning of period ................... 132,164 20,000
--------- ---------
Net assets at end of period (a) ..................... $ 545,830 $ 132,164
--------- ---------
Other Information
- ----------------------------------------------------------------------- ---------
Increase (decrease) in Portfolio shares
Class A
Shares outstanding at beginning of period ........... 5,153 833
--------- ---------
Shares sold ......................................... 17,054 4,320
Shares issued to shareholders in reinvestment
of distributions ................................. 192 --
Shares redeemed ..................................... -- --
--------- ---------
Net increase in Portfolio shares .................... 17,246 4,320
--------- ---------
Shares outstanding at end of period ................. 22,399 5,153
--------- ---------
Class B
Shares outstanding at beginning of period ........... 5,471 833
--------- ---------
Shares sold ......................................... 22,960 4,638
Shares issued to shareholders in reinvestment
of distributions ................................. 138 --
Shares redeemed ..................................... (6,005) --
--------- ---------
Net increase in Portfolio shares .................... 17,093 4,638
--------- ---------
Shares outstanding at end of period ................. 22,564 5,471
--------- ---------
(a) Includes undistributed net investment income .... $ 560 $ 483
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
Statement of Changes in Net Assets
Growth with Income Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Increase (Decrease) in Net Assets (Unaudited) April 30, 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................... $ 3,181 $ 429
Net realized gain (loss) ............................ (9,029) 54
Net unrealized appreciation (depreciation) on
investments during the period .................... (1,630) 4,271
--------- ---------
Net increase (decrease) in net assets
resulting from operations ........................ (7,478) 4,754
--------- ---------
Portfolio share transactions:
Class A
Proceeds from shares sold ........................... 80,361 285,996
Net asset value of shares issued to
shareholders in reinvestment of
distributions .................................... -- --
Cost of shares redeemed ............................. (213,734) --
--------- ---------
Net increase (decrease) in net assets from
Class A share transactions ....................... (133,373) 285,996
--------- ---------
Class B
Proceeds from shares sold ........................... 139,814 42,074
Net asset value of shares issued to
shareholders in reinvestment of
distributions .................................... -- --
Cost of shares redeemed ............................. -- --
--------- ---------
Net increase (decrease) in net assets from
Class B share transactions ....................... 139,814 42,074
--------- ---------
Increase (decrease) in net assets ................... (1,037) 332,824
Net assets at beginning of period ................... 352,824 20,000
--------- ---------
Net assets at end of period (a) ..................... $ 351,787 $ 352,824
--------- ---------
Other Information
- -------------------------------------------------------------------------------------
Increase (decrease) in Portfolio shares
Class A
Shares outstanding at beginning of period ........... 23,615 833
--------- ---------
Shares sold ......................................... 6,551 22,782
Shares issued to shareholders in reinvestment
of distributions ................................. -- --
Shares redeemed ..................................... (17,347) --
--------- ---------
Net increase in Portfolio shares .................... (10,796) 22,782
--------- ---------
Shares outstanding at end of period ................. 12,819 23,615
--------- ---------
Class B
Shares outstanding at beginning of period ........... 4,334 833
--------- ---------
Shares sold ......................................... 11,466 3,501
Shares issued to shareholders in reinvestment
of distributions ................................. -- --
Shares redeemed ..................................... -- --
--------- ---------
Net increase in Portfolio shares .................... 11,466 3,501
--------- ---------
Shares outstanding at end of period ................. 15,800 4,334
--------- ---------
(a) Includes undistributed net investment income .... $ 3,610 $ 429
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
Financial Statements (continued)
Statement of Changes in Net Assets
Growth Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Increase (Decrease) in Net Assets (Unaudited) April 30, 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................... $ 224 $ 99
Net realized gain (loss) ............................ 1,573 77
Net unrealized appreciation (depreciation) on
investments during the period .................... (8,538) 7,060
--------- ---------
Net increase (decrease) in net assets
resulting from operations ........................ (6,741) 7,236
--------- ---------
Portfolio share transactions:
Class A
Proceeds from shares sold ........................... 317,322 78,322
Net asset value of shares issued to
shareholders in reinvestment of
distributions .................................... -- --
Cost of shares redeemed ............................. (1,514) --
--------- ---------
Net increase in net assets from Class A share
transactions ..................................... 315,808 78,322
--------- ---------
Class B
Proceeds from shares sold ........................... 490,123 41,375
Net asset value of shares issued to
shareholders in reinvestment of
distributions .................................... -- --
Cost of shares redeemed ............................. (103,573) --
--------- ---------
Net increase in net assets from Class B share
transactions ..................................... 386,550 41,375
--------- ---------
Increase in net assets .............................. 695,617 126,933
Net assets at beginning of period ................... 146,933 20,000
--------- ---------
Net assets at end of period (a) ..................... $ 842,550 $ 146,933
--------- ---------
Other Information
- -------------------------------------------------------------------------------------
Increase (decrease) in Portfolio shares
Class A
Shares outstanding at beginning of period ........... 7,200 833
--------- ---------
Shares sold ......................................... 24,765 6,367
Shares issued to shareholders in reinvestment
of distributions ................................. -- --
Shares redeemed ..................................... (102) --
--------- ---------
Net increase in Portfolio shares .................... 24,663 6,367
--------- ---------
Shares outstanding at end of period ................. 31,863 7,200
--------- ---------
Class B
Shares outstanding at beginning of period ........... 4,281 833
--------- ---------
Shares sold ......................................... 38,731 3,448
Shares issued to shareholders in reinvestment
of distributions ................................. -- --
Shares redeemed ..................................... (7,913) --
--------- ---------
Net increase in Portfolio shares .................... 30,818 3,448
--------- ---------
Shares outstanding at end of period ................. 35,099 4,281
--------- ---------
(a) Includes undistributed net investment income .... $ 323 $ 99
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
This Page
intentionally
left blank.
45
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
Income Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Class A (Unaudited) April 30, 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ................ $ 12.21 $ 12.00
-----------------------------
Income from investment operations:
Net investment income ............................... .38 .11
Net realized and unrealized gain (loss) on
investment transactions .......................... (.68) .10
-----------------------------
Total from investment operations .................... (.30) .21
-----------------------------
Less distributions from net investment income ....... (.43) --
-----------------------------
Net asset value, end of period ...................... $ 11.48 $ 12.21
- --------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................ (2.41)** 1.75**
Ratios and Supplemental Data
Net assets, end of period ($ thousands) ............. 101 103
Ratio of operating expenses to average daily net
assets (%) ....................................... 1.00* 1.00*
Ratio of operating expenses before expense
adjustment to average net assets (%) ............. 9.40* 1.00*
Ratio of net investment income to average daily
net assets (%) ................................... 3.20** .93**
Portfolio turnover rate (%) ......................... 3.5* --
</TABLE>
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower if the investment adviser to this
Portfolio and the investment adviser to some of the Underlying Funds had
not maintained some of the expenses.
(c) Total return does not reflect the effect of any sales charge.
* Annualized
** Not annualized
46
<PAGE>
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
Income Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Class B (Unaudited) April 30, 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ................ $ 12.19 $ 12.00
-----------------------------
Income from investment operations:
Net investment income ............................... .33 .12
Net realized and unrealized gain (loss) on
investment transactions .......................... (.67) .07
-----------------------------
Total from investment operations .................... (.34) .19
-----------------------------
Less distributions from net investment income ....... (.38) --
-----------------------------
Net asset value, end of period ...................... $ 11.47 $ 12.19
- --------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................ (2.80)** 1.58**
Ratios and Supplemental Data
Net assets, end of period ($ thousands) ............. 51 51
Ratio of operating expenses to average daily net
assets (%) ....................................... 1.75* 1.75*
Ratio of operating expenses before expense
adjustment to average net assets (%) ............. 10.15* 1.75*
Ratio of net investment income to average daily
net assets (%) ................................... 2.82** 1.01**
Portfolio turnover rate (%) ......................... 3.5* --
</TABLE>
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower if the investment adviser to this
Portfolio and the investment adviser to some of the Underlying Funds had
not maintained some of the expenses.
(c) Total return does not reflect the effect of any sales charge.
* Annualized
** Not annualized
47
<PAGE>
Financial Highlights (continued)
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
Income with Growth Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Class A (Unaudited) April 30, 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ................ $ 12.32 $ 12.00
-----------------------------
Income from investment operations:
Net investment income ............................... .24 .07
Net realized and unrealized gain (loss) on
investment transactions .......................... (.05) .26
-----------------------------
Total from investment operations .................... (.19) .33
-----------------------------
Less distributions from net investment income ....... (.21) --
-----------------------------
Net asset value, end of period ...................... $ 12.30 $ 12.33
- --------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................ 1.59** 2.75**
Ratios and Supplemental Data
Net assets, end of period ($ thousands) ............. 112 52
Ratio of operating expenses to average daily net
assets (%) ....................................... 1.00* 1.00*
Ratio of operating expenses before expense
adjustment to average net assets (%) ............. 8.71* 1.00*
Ratio of net investment income to average daily
net assets (%) ................................... 1.93** .55**
Portfolio turnover rate (%) ......................... 144.2* --
</TABLE>
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower if the investment adviser to this
Portfolio and the investment adviser to some of the Underlying Funds had
not maintained some of the expenses.
(c) Total return does not reflect the effect of any sales charge.
* Annualized
** Not annualized
48
<PAGE>
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
Income with Growth Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Class B (Unaudited) April 30, 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ................ $ 12.33 $ 12.00
-----------------------------
Income from investment operations:
Net investment income ............................... .16 .05
Net realized and unrealized gain (loss) on
investment transactions .......................... (.03) .27
-----------------------------
Total from investment operations .................... (.13) .32
-----------------------------
Less distributions from net investment income ....... (.18) --
-----------------------------
Net asset value, end of period ...................... $ 12.28 $ 12.32
- --------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................ 1.05** 2.67**
Ratios and Supplemental Data
Net assets, end of period ($ thousands) ............. 265 58
Ratio of operating expenses to average daily net
assets (%) ....................................... 1.75* 1.75*
Ratio of operating expenses before expense
adjustment to average net assets (%) ............. 9.46* 1.75*
Ratio of net investment income to average daily
net assets (%) ................................... 1.53** .44**
Portfolio turnover rate (%) ......................... 144.2* --
</TABLE>
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower if the investment adviser to this
Portfolio and the investment adviser to some of the Underlying Funds had
not maintained some of the expenses.
(c) Total return does not reflect the effect of any sales charge.
* Annualized
** Not annualized
49
<PAGE>
Financial Highlights (continued)
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
Balanced Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Class A (Unaudited) April 30, 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ................ $ 12.45 $ 12.00
-----------------------------
Income from investment operations:
Net investment income ............................... .18 .06
Net realized and unrealized gain (loss) on
investment transactions .......................... (.29) .39
-----------------------------
Total from investment operations .................... (.11) .45
-----------------------------
Less distributions from net investment income ....... (.17) --
-----------------------------
Net asset value, end of period ...................... $ 12.17 $ 12.45
- --------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................ (.86)** 3.75**
Ratios and Supplemental Data
Net assets, end of period ($ thousands) ............. 273 64
Ratio of operating expenses to average daily net
assets (%) ....................................... 1.00* 1.00*
Ratio of operating expenses before expense
adjustment to average net assets (%) ............. 5.63* 1.00*
Ratio of net investment income to average daily
net assets (%) ................................... 1.56** .52**
Portfolio turnover rate (%) ......................... 46.5* --
</TABLE>
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower if the investment adviser to this
Portfolio and the investment adviser to some of the Underlying Funds had
not maintained some of the expenses.
(c) Total return does not reflect the effect of any sales charge.
* Annualized
** Not annualized
50
<PAGE>
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
Balanced Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Class B (Unaudited) April 30, 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ................ $ 12.43 $ 12.00
-----------------------------
Income from investment operations:
Net investment income ............................... .12 .05
Net realized and unrealized gain (loss) on
investment transactions .......................... (.32) .38
-----------------------------
Total from investment operations .................... (.20) .43
-----------------------------
Less distributions from net investment income ....... (.12) --
-----------------------------
Net asset value, end of period ...................... $ 12.11 $ 12.43
- --------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................ (1.60)* 3.58**
Ratios and Supplemental Data
Net assets, end of period ($ thousands) ............. 273 68
Ratio of operating expenses to average daily net
assets (%) ....................................... 1.75* 1.75*
Ratio of operating expenses before expense
adjustment to average net assets (%) ............. 6.38* 1.75*
Ratio of net investment income to average daily
net assets (%) ................................... 1.03** .40**
Portfolio turnover rate (%) ......................... 46.5* --
</TABLE>
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower if the investment adviser to this
Portfolio and the investment adviser to some of the Underlying Funds had
not maintained some of the expenses.
(c) Total return does not reflect the effect of any sales charge.
* Annualized
** Not annualized
51
<PAGE>
Financial Highlights (continued)
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
Growth with Income Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Class A (Unaudited) April 30, 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ................ $ 12.63 $ 12.00
-----------------------------
Income from investment operations:
Net investment income ............................... .13 .04
Net realized and unrealized gain (loss) on
investment transactions .......................... (.44) .59
-----------------------------
Total from investment operations .................... (.31) .63
-----------------------------
-----------------------------
Net asset value, end of period ...................... $ 12.32 $ 12.63
- --------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................ (2.45)* 5.25**
Ratios and Supplemental Data
Net assets, end of period ($ thousands) ............. 158 298
Ratio of operating expenses to average daily net
assets (%) ....................................... 1.00* 1.00*
Ratio of operating expenses before expense
adjustment to average net assets (%) ............. 4.91* 1.00*
Ratio of net investment income to average daily
net assets (%) ................................... .98** .37**
Portfolio turnover rate (%) ......................... 140.1* --
</TABLE>
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower if the investment adviser to this
Portfolio and the investment adviser to some of the Underlying Funds had
not maintained some of the expenses.
(c) Total return does not reflect the effect of any sales charge.
* Annualized
** Not annualized
52
<PAGE>
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
Growth with Income Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Class B (Unaudited) April 30, 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ................ $ 12.61 $ 12.00
-----------------------------
Income from investment operations:
Net investment income ............................... .09 .04
Net realized and unrealized gain (loss) on
investment transactions .......................... (.43) .57
-----------------------------
Total from investment operations .................... (.34) .61
-----------------------------
-----------------------------
Net asset value, end of period ...................... $ 12.27 $ 12.61
- --------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................ (2.70)* 5.08**
Ratios and Supplemental Data
Net assets, end of period ($ thousands) ............. 194 55
Ratio of operating expenses to average daily net
assets (%) ....................................... 1.75* 1.75*
Ratio of operating expenses before expense
adjustment to average net assets (%) ............. 5.66* 1.75*
Ratio of net investment income to average daily
net assets (%) ................................... .73** .31**
Portfolio turnover rate (%) ......................... 140.1* --
</TABLE>
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower if the investment adviser to this
Portfolio and the investment adviser to some of the Underlying Funds had
not maintained some of the expenses.
(c) Total return does not reflect the effect of any sales charge.
* Annualized
** Not annualized
53
<PAGE>
Financial Highlights (continued)
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
Growth Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Class A (Unaudited) April 30, 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ................ $ 12.80 $ 12.00
-----------------------------
Income from investment operations:
Net investment income ............................... .01 .01
Net realized and unrealized gain (loss) on
investment transactions .......................... (.20) .79
-----------------------------
Total from investment operations .................... (.19) .80
-----------------------------
-----------------------------
Net asset value, end of period ...................... $ 12.61 $ 12.80
- --------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................ (1.48)* 6.67**
Ratios and Supplemental Data
Net assets, end of period ($ thousands) ............. 402 92
Ratio of operating expenses to average daily net
assets (%) ....................................... 1.00* 1.00*
Ratio of operating expenses before expense
adjustment to average net assets (%) ............. 4.53* 1.00*
Ratio of net investment income to average daily
net assets (%) ................................... .12** .12**
Portfolio turnover rate (%) ......................... 45.8* --
</TABLE>
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower if the investment adviser to this
Portfolio and the investment adviser to some of the Underlying Funds had
not maintained some of the expenses.
(c) Total return does not reflect the effect of any sales charge.
* Annualized
** Not annualized
54
<PAGE>
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
Growth Portfolio
<TABLE>
<CAPTION>
Six Months For the period
Ended March 9, 1999
October 31, (commencement of
1999 operations) to
Class B (Unaudited) April 30, 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ................ $ 12.79 $ 12.00
-----------------------------
Income from investment operations:
Net investment income ............................... (.00) .01
Net realized and unrealized gain (loss) on
investment transactions .......................... (.24) .78
-----------------------------
Total from investment operations .................... (.24) .79
-----------------------------
-----------------------------
Net asset value, end of period ...................... $ 12.55 $ 12.79
- --------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................ (1.88)* 6.58**
Ratios and Supplemental Data
Net assets, end of period ($ thousands) ............. 441 55
Ratio of operating expenses to average daily net
assets (%) ....................................... 1.75* 1.75*
Ratio of operating expenses before expense
adjustment to average net assets (%) ............. 5.28* 1.75*
Ratio of net investment income to average daily
net assets (%) ................................... (.03)** .06**
Portfolio turnover rate (%) ......................... 45.8* --
</TABLE>
(a) Based on average shares outstanding during the period.
(b) Total return would have been lower if the investment adviser to this
Portfolio and the investment adviser to some of the Underlying Funds had
not maintained some of the expenses.
(c) Total return does not reflect the effect of any sales charge.
* Annualized
** Not annualized
55
<PAGE>
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
Farmers Investment Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end, diversified
management investment company organized as a Massachusetts business trust. The
Trust is composed of five separate diversified portfolios: Income, Income with
Growth, Balanced, Growth with Income and Growth Portfolios (the "Portfolios").
These Portfolios invest primarily in existing mutual funds (the "Underlying
Funds") that are either affiliated with Scudder Kemper Investments, Inc.
("Scudder Kemper" or the "Adviser") or are unaffiliated.
The Portfolios offer multiple classes of shares. Class A shares are offered to
investors subject to an initial sales charge. Class B shares are offered without
an initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Investment income, realized and unrealized gains and losses, and certain
portfolio-level expenses and expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of all classes of shares except
that each class bears certain expenses unique to that class. Class B shares
differ from Class A only with respect to the 12b-1 distribution expenses borne
by Class B shares. Differences in class expenses may result in payment of
different per share dividends by class. All shares of the Portfolio have equal
rights with respect to voting subject to class specific arrangements.
The Portfolios' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Investments in the Underlying Funds are valued at the net
asset value per share of each Underlying Fund as of the close of regular trading
on the New York Stock Exchange. Short-term securities purchased with an original
maturity of sixty days or less are valued at amortized cost.
Federal Income Taxes. Each Portfolio is treated as a single corporate taxpayer,
as provided for in the Internal Revenue Code of 1986, as amended. It is each
Portfolio's policy to comply with the requirements of the Internal Revenue Code
which are applicable to regulated investment companies and to distribute all of
its taxable income to its shareholders. Accordingly, the Portfolios paid no
federal income taxes and no provision for federal income taxes was required.
56
<PAGE>
Distribution of Income and Gains. Distributions from net investment income from
the Income, Income with Growth, and Balanced Portfolios are declared and paid
quarterly and distributions of net realized gains are made annually.
Distributions of net investment income and net realized gains from the Growth
with Income and Growth Portfolio are made annually. Net realized gains from
investment transactions, in excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed, and, therefore, will be
distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to certain securities sold at a loss. As a result,
net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Portfolios may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Portfolios.
Other. Investment security transactions are accounted for on a trade date basis.
Distributions of income and capital gains from the Underlying Funds and
distributions to shareholders are recorded on the ex-dividend date. Income is
recorded on the accrual basis.
B. Related Parties
Management Agreement. Under the Management Agreement (the "Agreement"), each
Portfolio pays the Adviser an annual fee of 0.75% of average daily net assets of
that Portfolio. The Agreements between each Portfolio and the Adviser require
that the Adviser provide investment management services and pay all ordinary
expenses of the Portfolios, except distribution fees, administrative fees,
interest, taxes, brokerage commissions, all compensation and expenses of
Trustees (other than those affiliated with the Adviser) and extraordinary
expenses. In addition the Adviser has agreed to reimburse each Portfolio for all
compensation and expenses of Trustee, other than those being deferred or waived,
until such time that each Portfolio reaches $50,000,000 in assets. During the
period ended October 31, 1999, the Trustees fees were as follows:
Trustee
fees waived
Trustee by Trustees Reimbursed by
Portfolio fees ($) ($) Adviser ($)
-----------------------------------------------------------------------
Income 6,399 1,600 4,799
Income with Growth 6,995 1,600 5,395
Balanced 7,440 1,600 5,840
Growth with Income 6,929 1,600 5,329
Growth 8,227 1,600 6,627
57
<PAGE>
The Adviser also receives management fees from managing the affiliated
Underlying Funds in which each Portfolio invests. Each affiliated Underlying
Fund pays the Adviser a management fee as determined by the Investment Agreement
between each Underlying Fund and the Adviser.
The Portfolios do not invest in the Underlying Funds for the purpose of
exercising management or control; however, investments within the set limits may
represent a significant portion of an Underlying Fund's net assets. At October
31, 1999, none of the Portfolios held more than 5% of an Underlying Fund's
outstanding shares.
Distribution Service Agreement: In accordance with Rule 12b-1 under the
Investment Act of 1940, as amended, Kemper Distributors, Inc. ("KDI"), a
subsidiary of the Adviser, receives a fee of 0.75% of average daily net assets
of Class B. Pursuant to the agreement, KDI enters into related selling group
agreements with various firms at various rates for sales of Class B shares of
each Portfolio. In addition, KDI receives any contingent deferred sales charge
(CDSC) from redemptions of Class B shares of each Portfolio. For the period
ended October 31, 1999, there was no CDSC incurred by Class B shareholders of
each Portfolio payable to KDI and the distribution fees were as follows:
Distribution
fees received by
Portfolio KDI ($)
---------------------------------------------------------------
Income 190
Income with Growth 388
Balanced 682
Growth with Income 402
Growth 860
Administrative Service Fees: The Trust has an administrative services agreement
with KDI. For providing information and administrative services to Classes A and
B shareholders, each Portfolio pays KDI a fee at an annual rate of up to 0.25%
of average daily net assets for each such class. KDI in turn has various
agreements with other firms to provide these services and pays each such firm a
fee based upon the assets for Class A and Class B shares maintained and serviced
by the firm. Firms to which service fees may be paid include broker-dealers
affiliated with KDI. During the period ended October 31, 1999, the
administrative service fees (ASF) were as follows:
ASF incurred
by the
Portfolio Portfolio ($)
---------------------------------------------------------------
Income 190
Income with Growth 227
Balanced 402
Growth with Income 442
Growth 582
58
<PAGE>
Officers and Trustees
Kathryn L. Quirk*
Chairperson, Assistant Secretary and Trustee
Dr. Rosita P. Chang
Trustee; Professor of Finance,
University of Rhode Island
Edgar R. Fiedler
Trustee; Senior Fellow and Economic Counsellor,
The Conference Board, Inc.
Dr. J. D. Hammond
Trustee; Dean, Smeal College of Business Administration,
Pennsylvania State University
Richard M. Hunt
Trustee; University Marshal and Senior Lecturer,
Harvard University
Paul Secord
President, Farmers Investment Trust
Philip Fortuna*
Vice President
Ann M. McCreary*
Vice President
John Millette*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
* Scudder Kemper Investments, Inc.
59
<PAGE>
Farmers Financial Solutions -- helping you get to where you want to be.
Working with your Farmers agent* to better understand your financial needs,
clarify your goals, and develop steps you can take towards those goals.
*The securities are offered through your agent, a registered representative of
Investors Brokerage Services, Inc.
Scudder Kemper Investments, Inc. is the adviser to Farmers Mutual Fund
Portfolios. Scudder Kemper Investments has over 80 years of money management
experience and offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined
long-term investment strategies. Scudder Kemper Investments manages more than
$290 billion in assets globally for mutual fund investors, retirement and
pension plans, institutional and corporate clients, insurance companies, and
private family and individual accounts.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Kemper Distributors, Inc. is the principal underwriter of Farmers Mutual Fund
Portfolios.
Farmers Financial Services is not a separate entity and neither it nor Farmers
is engaged in the business of providing investment advice and is not registered
as an investment adviser or broker/dealer under the federal securities laws.
[LOGO] FARMERS(R)
FINANCIAL SERVICES
