--------------------------------------------------------------------------------
October 31, 2000
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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
Total Net Assets
Date of Portfolios' Inception: 3/9/99 as of 10/31/00
Income Portfolio $415,830
Income with Growth Portfolio $1,083,131
Balanced Portfolio $2,157,601
Growth with Income Portfolio $2,468,675
Growth Portfolio $5,003,560
o During the past six months, growth stocks have come under significant pressure
as the technology, media, and telecommunication sectors have sold off sharply.
However, value stocks rallied as investors' focus returned to fundamentals,
while lower-risk bonds produced gains due to the rising likelihood of a slowdown
in the U.S economy.
o Believing that there has been little fundamental change to the investment
backdrop, management made no significant changes to the Portfolios' holdings
during the period.
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 ...................................................... 30
Financial Highlights ...................................................... 46
2
<PAGE>
Farmers Income with Growth Portfolio
Portfolio Highlights ...................................................... 13
Performance Update ........................................................ 14
Portfolio Summary ......................................................... 16
Investment Portfolio ...................................................... 31
Financial Highlights ...................................................... 48
Farmers Balanced Portfolio
Portfolio Highlights ...................................................... 17
Performance Update ........................................................ 18
Portfolio Summary ......................................................... 20
Investment Portfolio ...................................................... 32
Financial Highlights ...................................................... 50
Farmers Growth with Income Portfolio
Portfolio Highlights ...................................................... 21
Performance Update ........................................................ 22
Portfolio Summary ......................................................... 24
Investment Portfolio ...................................................... 33
Financial Highlights ...................................................... 52
Farmers Growth Portfolio
Portfolio Highlights ...................................................... 25
Performance Update ........................................................ 26
Portfolio Summary ......................................................... 28
Investment Portfolio ...................................................... 34
Financial Highlights ...................................................... 54
All Portfolios
Financial Statements ...................................................... 36
Notes to Financial Statements ............................................. 56
Officers and Trustees ..................................................... 60
3
<PAGE>
Letter from the President
Dear Shareholders,
[PHOTO]
Brian Cohen
President
Farmers Investment
Trust
Although the events of the past several years -- during which growth stocks
vastly outperformed other sectors of the financial markets -- seemed to diminish
the importance of portfolio diversification, the past six months have
demonstrated the importance of maintaining exposure to growth stocks, value
stocks, and bonds at all times. As the technology, media, and telecommunications
sectors have collapsed, investors who loaded up on these formerly "hot" growth
sectors have watched the values of their portfolios diminish significantly.
However, those who remained invested in bonds and value stocks have benefited as
these sectors have rebounded during 2000.
These events illustrate why the Farmers management team has emphasized
diversification in deciding on the allocation of the Portfolios. Utilizing a
long-term view and an emphasis on risk-adjusted returns, management has sought
to build positions in a wide range of asset classes in order to achieve
consistent long-term performance with a lower level of risk than the Portfolios'
benchmark indices. Partnering with Scudder Kemper Investments Inc., one of the
world's leading investment management organizations, the five Farmers Portfolios
invest in established stock, bond, and money market mutual funds from several
top money management firms. By utilizing a disciplined methodology to invest in
a wide range of diversified funds, we strive to construct balanced portfolios
that are positioned to provide strong risk-adjusted returns in both up and down
markets.
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 lead portfolio manager Shahram Tajbakhsh that begins
on page 6. 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/ Brian Cohen
Brian Cohen
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' investment strategies during the six-month period ended October 31,
2000.
Q: During the past year, the stock market has been extremely volatile. What has
been the cause of this trend?
A: The past six months have brought a litany of worries for investors. Concerns
over higher interest rates roiled the markets in the first half of the period,
before finally dissipating in late July. However, jitters over rising energy
prices, the falling euro (the European common currency), and the outlook for
corporate earnings led to a downdraft in the global markets during September and
October.
When the reporting period began, the market was under pressure due to rising
short-term interest rates. The combination of continued strong growth and
increased wage pressures had compelled the Federal Reserve to take aggressive
action to slow the economy to a more manageable pace by hiking rates by a
quarter-point on each of February 2 and March 21, and by a half-point on May 16.
Of greater concern to the markets was the possibility that continued strength in
the economy would require the Fed to raise rates several more times before the
end of the year. This fear was the key driving force behind the market's spring
sell-off.
By mid-summer, however, evidence had emerged which suggested that the Fed's rate
increases were finally beginning to have an effect. A series of economic reports
showed cooling growth and little evidence of widespread inflation, meaning that
the Fed would not have to be as aggressive as the markets had anticipated.
Instead of bracing for an indefinite string of rate increases, investors began
to position their portfolios for a "soft landing." This term refers to a slowing
of growth -- brought about by Fed rate hikes -- that allows the economy to
continue growing at a more reasonable pace, but without the threat of inflation
that could arise during a period of rapid growth.
The improved outlook for interest rates sparked a rally in equities during
August. In contrast to the surge of late 1999 and early 2000, a broad range of
stocks participated in the rally. This phase was marked by a stronger
performance from value stocks and an upturn in the extent to which advancing
stocks outnumbered decliners. Financials, oils, utilities, and
5
<PAGE>
selected cyclicals -- all groups that have performed poorly over the past two
years -- attracted buyers. At the same time, the unrestrained optimism of
earlier this year -- in which many stocks with virtually any connection to
technology or communications soared to incredible valuations -- calmed
significantly.
The August rally proved short-lived, however, as fresh concerns began to rattle
the markets during the final two months of the period. With interest rates no
longer a primary concern, investors turned their attention to corporate
earnings, which appeared to be under pressure on a variety of fronts. First,
fears arose that growth was in fact slowing too rapidly, which could hurt
companies whose businesses are sensitive to the direction of the economy. In
addition, the price of oil rose sharply, threatening to crimp the profit margins
of companies in a wide range of sectors. Finally, evidence began to mount that
the collapsing euro would cut into the profits of global companies that generate
a large percentage of their sales in Europe. In combination, these issues
dampened the earnings outlook for the third and fourth quarters, and caused
investors to question the market's still-lofty valuation. As numerous
high-profile technology stocks issued negative earnings preannouncements, stocks
staged a sharp sell-off before recovering in the final weeks of the period.
Q: How have these developments affected growth stocks, compared to value stocks?
A: Growth stocks, particularly those in the technology and biotech sectors,
suffered the brunt of the spring market correction. Stocks in these groups had
risen extremely quickly throughout the winter months, and had reached valuation
levels that left them very vulnerable to negative developments, such as rising
interest rates. In general, investors found a measure of safety in stocks with
stronger earnings growth, on the basis that such companies would be better
equipped to survive in a slowing economy. But as worries about the
sustainability of corporate earnings began to creep into the market during
September and October, stocks with higher valuations were most vulnerable to
selling pressure. Conversely, more reasonably valued stocks in more conservative
industries became increasingly attractive, even if they offered slower earnings
growth. In this environment, utilities, financials, consumer staples, and energy
stocks were prime beneficiaries. It is important to note that in a period
characterized by violent sector rotations, those who had exposure to both growth
and value often benefited from lower overall portfolio volatility. In our view,
this demonstrates that despite the strong relative performance in the growth
area during recent years, value stocks remain an essential component of a
diversified portfolio.
6
<PAGE>
Q: What factors have impacted the performance of stocks overseas?
A: International equities also produced an uneven performance during the period
due to region-specific issues. In Europe, for instance, the benchmark indices in
the U.K., France, and Germany were flat to slightly down, reflecting the
expectations for additional rate increases by the European Central Bank and the
decline of the euro from $.912 at the beginning of the period to $.849 by
October 31. Meanwhile, Japan's market was pressured by the lack of a strong
economic recovery, concerns surrounding the Bank of Japan's interest rate
policy, and fears about the health of the country's corporations. Despite the
spotty performance of international equities in recent months, we believe that
the important themes unfolding in the overseas economies -- namely
consolidation, restructuring, and less government intervention in free market
processes -- will serve as the basis for strong returns in these areas in the
years ahead.
Q: How have rising interest rates affected the bond market?
A: As an asset class, bonds have performed well over both the trailing six- and
twelve-month periods. Government bonds, in particular, produced exceptional
performance in the wake of the Treasury's buyback program, which has reduced the
supply of outstanding issues. Bond market performance was especially impressive
during the summer months, when investors' fears of an indefinite series of
interest rate hikes began to dissipate. Corporate bonds were supported early on
by sound economic growth, robust corporate profits, positive sector
fundamentals, and attractive valuations, but concerns over the health of
corporate earnings took a toll in the latter part of the period. In a period of
high volatility in the stock market, bonds proved to be a valuable addition to
investors' portfolios by providing favorable returns and helping to reduce
overall volatility.
Q: The diversification of the Farmers Portfolios has been a positive amid the
recent market volatility. What method do you use to achieve this high level of
diversification?
A: Our goal in managing the Farmers Portfolios is to deliver stronger returns
than the Portfolios' benchmark indices, with lower levels of risk. To this end,
we invest in a select group of mutual funds that offer strong track records,
style consistency, and above-average long-term performance. To determine what
weightings we give each fund within the Portfolios, we use a computer model to
calculate the optimal combination of investments. The purpose of this model is
to manage risk by measuring how the individual mutual funds we hold in the
Portfolios have performed in relation to one other in a variety
7
<PAGE>
of market conditions. If two funds tend to respond in different ways to a
similar investment environment, the overall volatility of the Portfolio may
decrease if a portion of assets is invested in each one.
We review the computer model on a regular basis to ensure that it is helping us
meet the Portfolios' investment objectives. Since we allocate the Portfolio's
assets with an extended time horizon in mind, our adjustments, which are usually
minor, reflect the evolution of our long-term outlook rather than a response to
the short-term fluctuations of the financial markets. This approach is designed
to meet the needs of long-term investors who are seeking diversification and
professional risk management.(1)
Q: What is your outlook for the financial markets from here?
A: We believe that it is important for investors to realize that the last five
years have been an extraordinary time for the stock market. Led by growth
stocks, the S&P 500 Index produced returns of over 20% annually from 1995-1999.
Many investors have become used to returns of this magnitude, but it is
important to note that this type of performance is far above the market's
long-term average. Similarly, it is unusual for growth to outperform other
sectors by as wide a margin as it has in recent years. Although many of the
pillars that have supported the bull market remain in place -- such as improving
productivity, the growing influence of technology, and a strong economy -- it is
likely that stock market returns will be more subdued in the coming years. In
addition, it is likely that the performance of growth stocks in relation to
other asset classes will ultimately return to a level closer to the historical
norm.
For this reason, we believe that now, more than ever, investors should take a
long-term view when assessing their investment strategies. Volatility can be
nerve-wracking, and it can lead undisciplined investors to make ill-advised
decisions when the market is falling. However, we believe that those who
establish long-term goals, ensure that their investments are appropriately
diversified, and ignore the short-term movements of the markets are creating the
foundation for a sound financial future. In managing the Farmers Portfolios, we
seek to help you achieve these goals through our long-term approach and focus on
diversification among multiple asset classes. Even if growth stocks slow from
their torrid pace of the last 2-3 years, we feel that the Portfolios will be
positioned to prosper by virtue of their exposure to bonds, value stocks, and
international equities.
The opinions expressed are those of the portfolio management team as of October
31, 2000, and may not actually come to pass.
(1) Diversification does not eliminate the risk of potential loss.
8
<PAGE>
Portfolio Highlights
Farmers Income Portfolio
The Income Portfolio remains diversified among five fixed income mutual funds
that each invests in a different sector of the bond market. Our goal in taking
this approach is to outperform the Portfolio's benchmark over the long term, and
at the same time provide a lower level of risk. However, during the six months
ended October 31, 2000, the Income Portfolio -- Class A Shares returned 3.90%,
versus a return of 5.80% for the benchmark.
The Portfolio gained its best return from Scudder Income Fund, which holds a
large weighting in higher-grade corporate bonds. In a period in which investors'
fears about corporate earnings led to a surge of buying in bonds perceived to
have the lowest levels of risk, the fund's focus on quality boosted its
performance. The Portfolio's returns also benefited from its position in Kemper
U.S. Government Securities Fund, which enjoyed similar gains from its positions
in bonds that are guaranteed by the government (and are therefore free of the
credit risk that hurt certain sectors of the bond market). Conversely, the
Portfolio's position in Kemper High Yield Fund, which invests in securities that
possess a greater degree of risk, was its worst performer. PIMCO Low Duration
Fund and PIMCO Foreign Bond Fund both produced positive returns, but trailed the
Portfolio's benchmark. Although the Portfolio's return trailed that of its
benchmark during the most recent reporting period, the extensive diversification
of the fund helped mitigate volatility in an environment that was unfriendly to
shorter-maturity assets and most corporate bonds.
The Portfolio's weightings in its underlying funds were virtually unchanged
during the period. In the report we issued to shareholders six months ago, we
stated that we were positioning the Portfolio to weather a more unstable
investment backdrop. The markets have indeed been highly volatile, but we
believe that their fluctuations belie the fact that there has been little
fundamental change in the broader economic environment. As a result, we kept the
Portfolio's positions stable throughout the reporting period. Believing that
volatility will continue, we intend to remain conservatively positioned and
broadly diversified among multiple sectors of the bond market in the months
ahead.
9
<PAGE>
Performance Update
Farmers Income Portfolio
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Growth of a $10,000 Investment
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[Below is a tabular representation of a line chart in the printed material.]
Farmers Income Portfolio -- Class A Lehman Brothers Aggregate
(Adjusted for Maximum Sales Charge) Bond Index*
3/99 9496 10000
4/99 9590 10032
7/99 9369 9869
10/99 9359 10016
1/00 9375 9934
4/00 9507 10157
7/00 9710 10457
10/00 9881 10746
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Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Income Portfolio -- Class A (Adjusted for Maximum Sales Charge)
--------------------------------------------------------------------------------
1 Year $10,030 .30% .30%
Life of Fund** $ 9,957 -.43% -.26%
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Lehman Brothers Aggregate Bond Index*
--------------------------------------------------------------------------------
1 Year $10,730 7.30% 7.30%
Life of Fund** $10,746 7.46% 4.63%
--------------------------------------------------------------------------------
See Notes to the Performance Update.
10
<PAGE>
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
[Below is a tabular representation of a line chart in the printed material.]
Farmers Income Portfolio -- Class B
(Adjusted for Maximum Contingent Lehman Brothers Aggregate
Deferred Sales Charge) Bond Index*
3/99 10067 10000
4/99 10167 10032
7/99 9517 9869
10/99 9500 10016
1/00 9504 9934
4/00 9726 10157
7/00 9907 10457
10/00 10063 10746
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Income Portfolio-- Class B (Adjusted for Maximum Contingent
Deferred Sales Charge)
--------------------------------------------------------------------------------
1 Year $10,178 1.78% 1.78%
Life of Fund** $10,067 .67% .41%
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index*
--------------------------------------------------------------------------------
1 Year $10,730 7.30% 7.30%
Life of Fund** $10,746 7.46% 4.63%
--------------------------------------------------------------------------------
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 for
Class B shares, adjusted for the applicable contingent deferred sales
charge (CDSC). The maximum CDSC for Class B shares is 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
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Asset Allocation
--------------------------------------------------------------------------------
[Below is a tabular representation of a pie chart in the printed material.]
Money Market 4% Management seeks to
Fixed Income 96% invest 100% of the
---- Portfolio's assets
100% in bond funds and
==== money market funds.
--------------------------------------------------------------------------------
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 -- Class S 33% The portfolio gained its
Kemper U.S. Government Securities Fund -- best return from Scudder
Class I 33% Income Fund, which
PIMCO Low Duration Fund -- holds a large weighting
Institutional Shares 21% in higher-grade
PIMCO Foreign Bond Fund -- corporate bonds.
Institutional Shares 6%
Zurich Money Market Fund 5%
Kemper High Yield Fund -- Class I 2%
----
100%
====
12
<PAGE>
Portfolio Highlights
Farmers Income with Growth Portfolio
In managing the Income with Growth Portfolio, we invest in a diverse array of
mutual funds that provide exposure to stocks, bonds, and international equities.
Our goal in investing in such a wide range of securities is to provide investors
with risk-adjusted returns that, over time, will compare favorably with those of
the Portfolio's unmanaged benchmark -- which is a blend of the Lehman Brothers
Aggregate Bond Index (70%) and the S&P 500 (30%). During the six-month period
ended October 31, 2000, the Portfolio's Class A Shares slightly underperformed,
returning 3.42% versus a gain of 3.75% for its benchmark. However, we are
pleased to report that the Portfolio's extensive diversification helped mitigate
risk in a volatile market environment.
The value of our approach is illustrated in the performance of the Portfolio's
component funds during the most recent period. Since the inception of the
Portfolio, growth stocks (as an asset class) have been performing very well in
relation to value. As a result, our top growth-oriented holding -- Janus Twenty
Fund -- posted outstanding returns, at the same time our value-oriented
positions -- such as Kemper-Dreman High Return Equity Fund -- were struggling.
During the past six months, however, value stocks have staged a comeback while
growth shares have been pulled down by the flagging technology sector. As a
result, Kemper-Dreman High Return Equity has rebounded sharply, while the Janus
Twenty Fund lost ground. We believe that this illustrates the importance of
investing in both growth and value, rather than trying to time the market by
focusing on one or the other.
The Portfolio also gained attractive returns and relative stability from its
fixed income position, which is concentrated in funds that focus on the areas of
the bond market that offer the greatest degree of safety, and have therefore
provided the best performance in a period marked by uncertainty.
The Portfolio's weightings in its underlying funds were virtually unchanged
during the period. In the report we issued to shareholders six months ago, we
stated that we were positioning the Portfolio to weather a more unstable
investment backdrop. The markets have indeed been highly volatile, but we
believe that their fluctuations belie the fact that there has been little
fundamental change in the broader economic environment. As a result, we kept the
Portfolio's positions stable throughout the reporting period. Believing that
volatility will continue, we intend to remain conservatively positioned and
broadly diversified among multiple sectors of the financial markets.
13
<PAGE>
Performance Update
Farmers Income with Growth Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
[Below is a tabular representation of a line chart in the printed material.]
<TABLE>
<CAPTION>
Farmers Income with Growth Lehman Brothers Aggregate Lehman Brothers Aggregate
Portfolio -- Class A Bond Index* Bond Index (70%), S&P 500
(Adjusted for Maximum Composite Price Stock
Sales Charge) Index (30%)*
<S> <C> <C> <C>
3/99 9638 10000 10000
4/99 9685 10032 10139
7/99 9465 9869 10023
10/99 9832 10016 10219
1/00 10166 9934 10247
4/00 10417 10157 10555
7/00 10530 10457 10734
10/00 10776 10746 10953
</TABLE>
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Income with Growth Portfolio -- Class A (Adjusted for Maximum
Sales Charge)
--------------------------------------------------------------------------------
1 Year $10,382 3.82% 3.82%
Life of Fund** $10,831 8.31% 4.96%
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (70%), S&P 500 Composite Price
Stock Index (30%)*
--------------------------------------------------------------------------------
1 Year $10,718 7.18% 7.18%
Life of Fund** $10,953 9.53% 5.90%
--------------------------------------------------------------------------------
See Notes to the Performance Update.
14
<PAGE>
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
[Below is a tabular representation of a line chart in the printed material.]
<TABLE>
<CAPTION>
Farmers Income with Growth Lehman Brothers Aggregate Lehman Brothers Aggregate
Portfolio -- Class B Bond Index* Bond Index (70%), S&P 500
(Adjusted for Maximum Composite Price Stock
Sales Charge) Index (30%)*
<S> <C> <C> <C>
3/99 10218 10000 10000
4/99 10267 10032 10139
7/99 9611 9869 10023
10/99 9983 10016 10219
1/00 10315 9934 10247
4/00 10651 10157 10555
7/00 10745 10457 10734
10/00 10977 10746 10953
</TABLE>
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Income with Growth Portfolio -- Class B (Adjusted for Maximum
Sales Charge)
--------------------------------------------------------------------------------
1 Year $10,567 5.67% 5.67%
Life of Fund** $10,984 9.84% 5.85%
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (70%), S&P 500 Composite Price
Stock Index (30%)*
--------------------------------------------------------------------------------
1 Year $10,718 7.18% 7.18%
Life of Fund** $10,953 9.53% 5.90%
--------------------------------------------------------------------------------
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 for
Class B shares, adjusted for the applicable contingent deferred sales
charge (CDSC). The maximum CDSC for Class B shares is 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 and for Class B shares, adjusted for the applicable
contingent deferred sales charge (CDSC).
15
<PAGE>
Portfolio Summary
Farmers Income with Growth Portfolio
--------------------------------------------------------------------------------
Asset Allocation
--------------------------------------------------------------------------------
[Below is a tabular representation of a pie chart in the printed material.]
Money Market 3% The fund invests in a
Fixed Income 66% diverse array of mutual
Equity 31% funds that provide
---- exposure to stocks,
100% bonds, and international
==== equities.
--------------------------------------------------------------------------------
Asset Class Ranges
--------------------------------------------------------------------------------
Money Market 0--15% Asset class allocations are
Fixed Income 60--80% derived from the risk
Equity 20--40% profile of the Portfolio;
changes are expected
to be modest and
infrequent.
--------------------------------------------------------------------------------
Portfolio Holdings
--------------------------------------------------------------------------------
Scudder Income Fund -- Class S 24% We believe the recent
Kemper U.S. Government Securities Fund -- flip-flopping of
Class I 23% performance by growth
PIMCO Low Duration Fund -- and value stocks illustrates
Institutional Shares 16% the importance of investing
Janus Twenty Fund 14% in both categories.
Scudder Growth and Income Fund -- Class S 9%
Kemper-Dreman High Return Equity Fund --
Class I 8%
PIMCO Foreign Bond Fund --
Institutional Shares 3%
Zurich Money Market Fund 3%
----
100%
====
16
<PAGE>
Portfolio Highlights
Farmers Balanced Portfolio
In a difficult investment environment, the Balanced Portfolio provided investors
with a favorable performance in relation to its benchmark, which is comprised of
the Lehman Brothers Aggregate Bond Index (50%) and the S&P 500 Index (50%).
During the six months ended October 31, 2000, the Portfolio's Class A Shares
returned 3.88%, versus 2.38% for the benchmark.
The Portfolio holds 50% of its net assets in stock funds, 48% in fixed income
funds, and 2% in cash, an allocation that is unchanged from six months ago.
Within the stock position, performance was helped by the Portfolio's extensive
diversification. We hold 30% of the Portfolio's net assets in two value-oriented
mutual funds: Scudder Growth and Income Fund, and Kemper-Dreman High Return
Equity Fund. While these funds lagged during 1998 and 1999 as growth stocks far
outperformed value, their presence in the portfolio greatly aided performance
during the past six months. Conversely, our position in the growth-oriented
Janus Twenty Fund, which had performed very well for us since the fund's
inception, was the worst performer in the Portfolio. We believe that this turn
of events illustrates the ongoing importance of holding both growth and value
within a diversified portfolio.
Similarly, the Portfolio's risk-adjusted performance was helped by its large
position in fixed income funds. While bonds have trailed the stock market in
recent years, their significance was reaffirmed during 2000 as stocks became
increasingly volatile. In this environment, the presence of bonds helped
stabilize the portfolio and provide steady returns. In particular, the Portfolio
was helped by its position in funds that focused on higher quality issues, such
as PIMCO Low Duration Fund and Kemper U.S. Government Securities Fund. Scudder
Income Fund also benefited from a focus on corporate bonds with stable
businesses and higher credit ratings.
The Portfolio's weightings in its underlying funds were virtually unchanged
during the period. In the report we issued to shareholders six months ago, we
stated that we were positioning the Portfolio to weather a more unstable
investment backdrop. The markets have indeed been highly volatile, but we
believe that their fluctuations belie the fact that there has been little
fundamental change in the broader economic environment. As a result, we kept the
Portfolio's positions stable throughout the reporting period. Believing that
volatility will continue, we intend to remain conservatively positioned and
broadly diversified among multiple sectors of the financial markets.
17
<PAGE>
Performance Update
Farmers Balanced Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
[Below is a tabular representation of a line chart in the printed material.]
<TABLE>
<CAPTION>
Farmers Balanced Lehman Brothers Aggregate S&P 500 Composite Lehman Brothers Aggregate
Portfolio -- Class A Bond Index* Price Stock Index* Bond Index (50%), S&P 500
(Adjusted for Maximum Composite Price Stock
Sales Charge) Index (50%)*
<S> <C> <C> <C> <C>
3/99 9640 10000 10000 10000
4/99 9781 10032 10387 10210
7/99 9465 9869 10371 10124
10/99 9697 10016 10673 10352
1/00 10060 9934 10952 10452
4/00 10265 10157 11441 10814
7/00 10373 10457 11304 10908
10/00 10667 10746 11324 11076
</TABLE>
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Balanced Portfolio -- Class A (Adjusted for Maximum Sales Charge)
--------------------------------------------------------------------------------
1 Year $10,359 3.59% 3.59%
Life of Fund** $10,654 6.54% 3.91%
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (50%), S&P 500 Composite Price
Stock Index (50%)*
--------------------------------------------------------------------------------
1 Year $10,699 6.99% 6.99%
Life of Fund** $11,076 10.76% 6.64%
--------------------------------------------------------------------------------
See Notes to the Performance Update.
18
<PAGE>
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
[Below is a tabular representation of a line chart in the printed material.]
<TABLE>
<CAPTION>
Farmers Balanced Lehman Brothers Aggregate S&P 500 Composite Lehman Brothers Aggregate
Portfolio -- Class B Bond Index* Price Stock Index* Bond Index (50%), S&P 500
(Adjusted for Maximum Composite Price Stock
Sales Charge) Index (50%)*
<S> <C> <C> <C> <C>
3/99 10228 10000 10000 10000
4/99 10367 10032 10387 10210
7/99 9569 9869 10371 10124
10/99 9793 10016 10673 10352
1/00 10148 9934 10952 10452
4/00 10487 10157 11441 10814
7/00 10567 10457 11304 10908
10/00 10838 10746 11324 11076
</TABLE>
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Balanced Portfolio -- Class B (Adjusted for Maximum Sales Charge)
--------------------------------------------------------------------------------
1 Year $10,635 6.35% 6.35%
Life of Fund** $10,846 8.46% 5.04%
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (50%), S&P 500 Composite Price
Stock Index (50%)*
--------------------------------------------------------------------------------
1 Year $10,699 6.99% 6.99%
Life of Fund** $11,076 10.76% 6.64%
--------------------------------------------------------------------------------
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 for
Class B shares, adjusted for the applicable contingent deferred sales
charge (CDSC). The maximum CDSC for Class B shares is 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
--------------------------------------------------------------------------------
[Below is a tabular representation of a pie chart in the printed material.]
Money Market 2% The Portfolio's
Fixed Income 48% risk-adjusted performance
Equity 50% during the period was
---- helped by its large
100% position in fixed
==== income funds.
--------------------------------------------------------------------------------
Asset Class Ranges
--------------------------------------------------------------------------------
Money Market 0--10% Asset class allocations are
Fixed Income 40--60% derived from the risk
Equity 40--60% profile of the Portfolio;
changes are expected
to be modest and
infrequent.
--------------------------------------------------------------------------------
Portfolio Holdings
--------------------------------------------------------------------------------
Janus Twenty Fund 20% The presence of two
Scudder Growth and Income Fund -- Class S 18% value-oriented
Scudder Income Fund -- Class S 18% mutual funds in the
Kemper U.S. Government Securities Fund -- portfolio -- Scudder
Class I 17% Growth and Income Fund
Kemper-Dreman High Return Equity Fund -- and Kemper-Dreman
Class I 12% High Return Equity
PIMCO Low Duration Fund 11% Fund -- greatly aided
PIMCO Foreign Bond Fund -- performance over
Institutional Shares 3% the period.
Zurich Money Market Fund 1%
----
100%
====
20
<PAGE>
Portfolio Highlights
Farmers Growth with Income Portfolio
During the six-month period ended October 31, 2000, the Growth with Income
Portfolio succeeded in its goal of providing competitive risk-adjusted returns
in relation to its benchmark -- which is a blend of the S&P 500 Index (70%) and
the Lehman Brothers Aggregate Bond Index (30%). In this time, the Portfolio's
Class A Shares returned 2.88%, versus a gain of 1.01% for the benchmark. The
Portfolio currently holds 70% in stock funds, 29% in bond funds, and 1% in cash.
We attribute the Portfolio's outperformance to our substantial weighting in
mutual funds that invest primarily in value stocks. These funds -- Scudder
Growth and Income Fund and Kemper-Dreman High Return Equity Fund -- provided
strong performance in a period that was dominated by value. We increased this
position earlier in 2000, based on our belief that value stocks had fallen to
levels that provided a compelling opportunity in an environment that was likely
to be volatile. On the negative side, performance was hurt by our weighting in
Janus Twenty Fund, a growth-oriented fund that declined during the period. We
feel that this disparity demonstrates the ongoing importance of holding both
growth and value within a diversified portfolio. Since it is very difficult to
predict which asset class will outperform in any given period, it is prudent for
long-term investors to hold a position in both.
The Portfolio's risk-adjusted performance was helped by its position in fixed
income funds, which helped provide stability and steady returns in a period of
high stock market volatility. In particular, we benefited from our position in
funds that focused on higher quality issues, such as PIMCO Low Duration Fund and
Kemper U.S. Government Securities Fund. Scudder Income Fund was also aided by a
focus on corporate bonds with stable businesses and higher credit ratings.
The Portfolio's weightings in its underlying funds were virtually unchanged
during the period. In the report we issued to shareholders six months ago, we
stated that we were positioning the Portfolio to weather a more unstable
investment backdrop. The markets have indeed been highly volatile, but we
believe that their fluctuations belie the fact that there has been little
fundamental change in the broader economic environment. As a result, we kept the
Portfolio's positions stable throughout the reporting period. Believing that
volatility will continue, we intend to remain conservatively positioned and
broadly diversified among multiple sectors of the financial markets.
21
<PAGE>
Performance Update
Farmers Growth with Income Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
[Below is a tabular representation of a line chart in the printed material.]
<TABLE>
<CAPTION>
Farmers Growth with Income S&P 500 Composite S&P 500 Composite
Portfolio -- Class A (Adjusted Stock Price Index* Stock Price Index (70%),
for Maximum Sales Charge) Lehman Brothers Aggregate
Bond Index (30%)*
<S> <C> <C> <C>
3/99 9612 10000 10000
4/99 9926 10387 10280
7/99 9588 10371 10224
10/99 9682 10673 10482
1/00 9951 10952 10655
4/00 10056 11441 11068
7/00 10073 11304 11073
10/00 10346 11324 11185
</TABLE>
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Growth with Income Portfolio -- Class A (Adjusted for Maximum
Sales Charge)
--------------------------------------------------------------------------------
1 Year $10,071 .71% .71%
Life of Fund** $10,340 3.40% 2.04%
--------------------------------------------------------------------------------
S&P 500 Composite Stock Price Index (70%), Lehman Brothers Aggregate
Bond Index (30%)*
--------------------------------------------------------------------------------
1 Year $10,670 6.70% 6.70%
Life of Fund** $11,185 11.85% 7.30%
--------------------------------------------------------------------------------
See Notes to the Performance Update.
22
<PAGE>
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
[Below is a tabular representation of a line chart in the printed material.]
<TABLE>
<CAPTION>
Farmers Growth with Income S&P 500 Composite S&P 500 Composite
Portfolio -- Class B (Adjusted Stock Price Index* Stock Price Index (70%),
for Maximum Sales Charge) Lehman Brothers Aggregate
Bond Index (30%)*
<S> <C> <C> <C>
3/99 10198 10000 10000
4/99 10517 10387 10280
7/99 9750 10371 10224
10/99 9825 10673 10482
1/00 10089 10952 10655
4/00 10282 11441 11068
7/00 10282 11304 11073
10/00 10529 11324 11185
</TABLE>
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Growth with Income Portfolio -- Class B (Adjusted for Maximum
Sales Charge)
--------------------------------------------------------------------------------
1 Year $10,297 2.97% 2.97%
Life of Fund** $10,535 5.35% 3.21%
--------------------------------------------------------------------------------
S&P 500 Composite Stock Price Index (70%), Lehman Brothers Aggregate
Bond Index (30%)*
--------------------------------------------------------------------------------
1 Year $10,670 6.70% 6.70%
Life of Fund** $11,185 11.85% 7.30%
--------------------------------------------------------------------------------
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 for
Class B shares, adjusted for the applicable contingent deferred sales
charge (CDSC). The maximum CDSC for Class B shares is 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
--------------------------------------------------------------------------------
[Below is a tabular representation of a pie chart in the printed material.]
Money Market 1% The Portfolio's allocation
Fixed Income 29% in equity funds declined
Equity 70% slightly from 71% on
---- April 30, 2000.
100%
====
--------------------------------------------------------------------------------
Asset Class Ranges
--------------------------------------------------------------------------------
Money Market 0--10% Asset class allocations
Fixed Income 20--40% are derived from the
Equity 60--80% risk profile of the
Portfolio; changes are
expected to be modest
and infrequent.
--------------------------------------------------------------------------------
Portfolio Holdings
--------------------------------------------------------------------------------
Janus Twenty Fund 28% The Portfolio's position
Scudder Growth and Income Fund -- Class S 23% in fixed-income funds
Kemper-Dreman High Return Equity Fund -- such as PIMCO Low
Class I 15% Duration Fund helped
Scudder Income Fund -- Class S 10% provide stability and
Kemper U.S. Government Securities Fund -- steady returns in a
Class I 10% period of high stock
PIMCO Low Duration Fund -- market volatility.
Institutional Shares 9%
Scudder International Fund -- Class S 3%
Zurich Money Market Fund 2%
----
100%
====
24
<PAGE>
Portfolio Highlights
Farmers Growth Portfolio
We are pleased to report that the Growth Portfolio (Class A Shares) returned
2.69% during the six-month period ended October 31, 2000, well ahead of the
-1.04% return of its benchmark, the S&P 500 Index. The primary reason for the
Portfolio's outperformance was our focus on two funds that invest in value
stocks: Scudder Growth and Income Fund and Kemper-Dreman High Return Equity
Fund. We held 56% of net assets in the two funds, which gave the Portfolio a
heavier weighting in value stocks than is held by the S&P 500 Index.
We adopted this position in the spring based on our belief that the disparity in
performance between growth stocks and value stocks was so significant that value
had become extremely attractive on a relative basis. Further, we felt that in a
volatile market environment, investors would be more inclined to take advantage
of opportunities among value stocks, an asset class that is viewed by investors
as having lower levels of risk. This positioning proved beneficial to Portfolio
returns, as value stocks did indeed outperform over the six-month period.
Conversely, our position in the growth-oriented Janus Twenty Fund -- which had
produced strong returns since the Portfolio's inception -- was the worst
performer among the four stock funds we hold. We believe that this disparity
illustrates the ongoing importance of holding both growth and value within a
diversified portfolio.
We continue to hold a 5% position in overseas stocks through our weighting in
Scudder International Fund. Although this position lost ground during the
period, we continue to believe that international equities are a key component
of a diversified portfolio.
The Portfolio's weightings in its underlying funds were virtually unchanged
during the period. In the report we issued to shareholders six months ago, we
stated that we were positioning the Portfolio to weather a more unstable
investment backdrop. The markets have indeed been highly volatile, but we
believe that their fluctuations belie the fact that there has been little
fundamental change in the broader economic environment. As a result, we kept the
Portfolio's positions stable throughout the reporting period. Believing that
volatility will continue, we intend to remain conservatively positioned and
broadly diversified among multiple sectors of the equity market in the months
ahead.
25
<PAGE>
Performance Update
Farmers Growth Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
[Below is a tabular representation of a line chart in the printed material.]
Farmers Growth Portfolio -- Class A S&P 500 Composite Price
(Adjusted for Maximum Sales Charge) Stock Index*
3/99 9574 10000
4/99 10061 10387
7/99 9927 10371
10/99 9911 10673
1/00 10228 10952
4/00 10363 11441
7/00 10305 11304
10/00 10640 11324
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Growth Portfolio -- Class A (Adjusted for Maximum Sales Charge)
--------------------------------------------------------------------------------
1 Year $10,121 1.21% 1.21%
Life of Fund** $10,637 6.37% 3.81%
--------------------------------------------------------------------------------
S&P 500 Composite Price Stock Index*
--------------------------------------------------------------------------------
1 Year $10,610 6.10% 6.10%
Life of Fund** $11,324 13.24% 8.14%
--------------------------------------------------------------------------------
See Notes to the Performance Update.
26
<PAGE>
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
[Below is a tabular representation of a line chart in the printed material.]
Farmers Growth Portfolio -- Class B S&P 500 Composite Price
(Adjusted for Maximum Sales Charge) Stock Index*
3/99 10158 10000
4/99 10658 10387
7/99 10092 10371
10/99 10058 10673
1/00 10364 10952
4/00 10581 11441
7/00 10513 11304
10/00 10840 11324
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 10/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Growth Portfolio -- Class B (Adjusted for Maximum Contingent Deferred
Sales Charge)
--------------------------------------------------------------------------------
1 Year $10,361 3.61% 3.61%
Life of Fund** $10,850 8.50% 5.07%
--------------------------------------------------------------------------------
S&P 500 Composite Price Stock Index*
--------------------------------------------------------------------------------
1 Year $10,610 6.10% 6.10%
Life of Fund** $11,324 13.24% 8.14%
--------------------------------------------------------------------------------
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 for
Class B shares, adjusted for the applicable contingent deferred sales
charge (CDSC). The maximum CDSC for Class B shares is 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
--------------------------------------------------------------------------------
[Below is a tabular representation of a pie chart in the printed material.]
Money Market 2% Management seeks to
Equity 98% remain as close to fully
---- invested in equity funds
100% as possible.
====
--------------------------------------------------------------------------------
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 35% The Portfolio's
Scudder Growth and Income Fund -- Class S 34% outperformance
Kemper-Dreman High Return Equity Fund -- compared with its
Class I 22% benchmark rested on
Scudder International Fund -- Class S 5% Scudder Growth and
Scudder Small Company Value Fund -- Class S 2% Income Fund and
Zurich Money Market Fund 2% Kemper-Dreman High
---- Return Equity Fund, two
100% value-oriented funds.
====
28
<PAGE>
Glossary of Investment Terms
DIVERSIFICATION The spreading of risk by investing in several asset
categories, industry sectors, or individual securities.
An investor with a broadly diversified portfolio will
likely receive some protection from the price declines
of an individual asset class.
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.
MARKET The market value of a company's outstanding shares of
CAPITALIZATION common stock, determined by multiplying the number of
shares outstanding by the share price (shares x price =
market capitalization). The universe of publicly traded
companies is frequently divided into large-, mid-, and
small-capitalization. "Large-cap" stocks tend to be more
liquid.
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 terms
(OVER/UNDER) 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>
Investment Portfolio as of October 31, 2000 (Unaudited)
Farmers Income Portfolio
Shares Value ($)
--------------------------------------------------------------------------------
Money Market 4.5%
--------------------------------------------------------------------------------
Zurich Money Market Fund (Cost $18,618) ............... 18,618 18,618
Fixed Income 95.5%
--------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I ..... 16,693 139,220
Kemper High Yield Fund -- Class I ..................... 1,130 6,847
PIMCO Foreign Bond Fund -- Institutional Shares ....... 2,506 25,260
PIMCO Low Duration Fund -- Institutional Shares ....... 8,824 86,564
Scudder Income Fund -- Class S ........................ 11,284 138,569
Total Fixed Income (Cost $397,021) .................... 396,459
--------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $415,639) (a) 415,078
(a) The cost for federal income tax purposes was $418,046. At October
31, 2000, gross and net unrealized depreciation for all securities
in which there was an excess of tax cost over value was $2,968.
During the six months ended October 31, 2000, purchases and sales of
Underlying Funds' shares (excluding money market investments)
aggregated $319,313 and $26,000, respectively.
30
<PAGE>
Investment Portfolio as of October 31, 2000 (Unaudited)
Farmers Income with Growth Portfolio
Shares Value ($)
-------------------------------------------------------------------------------
Money Market 2.5%
-------------------------------------------------------------------------------
Zurich Money Market Fund (Cost $27,759) .................. 27,759 27,759
Fixed Income 66.6%
-------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I ........ 29,412 245,297
PIMCO Foreign Bond Fund -- Institutional Shares .......... 4,264 42,980
PIMCO Low Duration Fund -- Institutional Shares .......... 17,276 169,475
Scudder Income Fund -- Class S ........................... 21,308 261,668
Total Fixed Income (Cost $719,438) ....................... 719,420
Equity 30.9%
-------------------------------------------------------------------------------
Janus Twenty Fund ........................................ 2,056 146,088
Kemper-Dreman High Return Equity Fund .................... 2,683 90,860
Scudder Growth and Income Fund -- Class S ................ 3,516 96,579
Total Equity (Cost $302,961) ............................. 333,527
-------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,050,158) (a) 1,080,706
(a) The cost for federal income tax purposes was $1,052,737. At October
31, 2000, net unrealized appreciation for all securities based on
tax cost was $27,969. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of
value over tax cost of $30,887 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $2,918.
During the six months ended October 31, 2000, purchases and sales of
Underlying Funds' shares (excluding money market investments)
aggregated $206,324 and $30,000, respectively.
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
Investment Portfolio as of October 31, 2000 (Unaudited)
Farmers Balanced Portfolio
Shares Value ($)
-------------------------------------------------------------------------------
Money Market 1.5%
-------------------------------------------------------------------------------
Zurich Money Market Fund (Cost $31,911) .................. 31,911 31,911
Fixed Income 48.2%
-------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I ........ 44,649 372,371
PIMCO Foreign Bond Fund -- Institutional Shares .......... 6,053 61,015
PIMCO Low Duration Fund -- Institutional Shares .......... 24,057 235,996
Scudder Income Fund -- Class S ........................... 30,201 370,871
Total Fixed Income (Cost $1,038,078) ..................... 1,040,253
Equity 50.3%
-------------------------------------------------------------------------------
Janus Twenty Fund ........................................ 6,173 438,742
Kemper-Dreman High Return Equity Fund-- Class I .......... 7,809 264,486
Scudder Growth and Income Fund -- Class S ................ 13,843 380,278
Total Equity (Cost $1,022,387) ........................... 1,083,506
-------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $2,092,376) (a) 2,155,670
(a) The cost for federal income tax purposes was $2,097,745. At October
31, 2000, net unrealized appreciation for all securities based on
tax cost was $57,925. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of
value over tax cost of $63,578 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $5,653.
During the six months ended October 31, 2000, purchases and sales of
Underlying Funds' shares (excluding money market investments)
aggregated $930,194 and $187,000, respectively.
32
<PAGE>
Investment Portfolio as of October 31, 2000 (Unaudited)
Farmers Growth with Income Portfolio
Shares Value ($)
--------------------------------------------------------------------------------
Money Market 1.4%
--------------------------------------------------------------------------------
Zurich Money Market Fund (Cost $34,520) .................. 34,520 34,520
Fixed Income 29.1%
--------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I ........ 29,585 246,736
PIMCO Foreign Bond Fund -- Institutional Shares .......... 58 582
PIMCO Low Duration Fund -- Institutional Shares .......... 22,636 222,064
Scudder Income Fund -- Class S ........................... 19,932 244,760
Total Fixed Income (Cost $713,265) ....................... 714,142
Equity 69.5%
--------------------------------------------------------------------------------
Janus Twenty Fund ........................................ 9,576 680,542
Kemper-Dreman High Return Equity Fund -- Class I ......... 11,240 380,702
Scudder Growth and Income Fund -- Class S ................ 21,004 576,966
Scudder International Fund -- Class S .................... 1,338 70,805
Total Equity (Cost $1,676,807) ........................... 1,709,015
--------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $2,424,592) (a) 2,457,677
(a) The cost for federal income tax purposes was $2,428,773. At October
31, 2000, net unrealized appreciation for all securities based on
tax cost was $28,904. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of
value over tax cost of $74,699 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $45,795.
During the six months ended October 31, 2000, purchases and sales of
Underlying Funds' shares (excluding money market investments)
aggregated $1,391,355 and $73,000, respectively.
33
<PAGE>
Investment Portfolio as of October 31, 2000 (Unaudited)
Farmers Growth Portfolio
Shares Value ($)
--------------------------------------------------------------------------------
Money Market 1.7%
--------------------------------------------------------------------------------
Zurich Money Market Fund (Cost $76,511) .................. 76,511 76,511
Fixed Equity 98.3%
--------------------------------------------------------------------------------
Janus Twenty Fund ........................................ 24,871 1,767,556
Kemper-Dreman High Return Equity Fund -- Class I ......... 32,977 1,116,928
Scudder Growth and Income Fund -- Class S ................ 62,091 1,705,636
Scudder International Fund -- Class S .................... 4,677 247,496
Scudder Small Company Value Fund -- Class S .............. 4,491 79,576
Total Fixed Equity (Cost $4,797,098) (a) ................. 4,917,192
--------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $4,880,609) (a) 4,993,703
(a) The cost for federal income tax purposes was $4,905,458. At October
31, 2000, net unrealized appreciation for all securities based on
tax cost was $88,245. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of
value over tax cost of $211,564 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $123,319.
During the six months ended October 31, 2000, purchases and sales of
Underlying Funds' shares (excluding money market investments)
aggregated $2,617,760 and $10,000, respectively.
34
<PAGE>
This page
intentionally
left blank.
35
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Income with
Income Growth
Assets Portfolio Portfolio
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments in securities, at value (for identified cost,
see accompanying investment portfolios) ........................... $ 415,078 $1,080,706
Dividends receivable ................................................. 1,918 3,859
Receivable for investments sold ...................................... -- --
Receivable for Portfolio shares sold ................................. -- 2,013
---------- ----------
Total assets ......................................................... 416,996 1,086,578
Liabilities
--------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................... 681 1,366
Accrued management fee ............................................... 286 1,226
Accrued distribution services fees ................................... 60 393
Accrued administrative services fees ................................. 139 462
---------- ----------
Total liabilities .................................................... 1,166 3,447
Net assets, at value ................................................. $ 415,830 $1,083,131
Net Assets
--------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .................................. 1,822 2,996
Net unrealized appreciation (depreciation) on
investments ....................................................... (562) 30,548
Accumulated net realized gain (loss) ................................. (9,567) 4,904
Paid-in capital ...................................................... 424,137 1,044,683
Net assets, at value ................................................. $ 415,830 $1,083,131
Net Asset Value
--------------------------------------------------------------------------------------------------------
Class A
Net assets applicable to shares outstanding .......................... $ 344,170 $ 624,420
Shares of beneficial interest outstanding ............................ 30,299 48,172
Net Asset Value, redemption price per share (net
assets / shares outstanding of beneficial interest, $.01
par value, unlimited number of shares authorized) ................. $ 11.36 $ 12.96
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) ............................................ $ 11.96 $ 13.68
Class B
Net assets applicable to shares outstanding .......................... $ 71,660 $ 458,711
Shares of beneficial interest outstanding ............................ 6,312 35,470
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) ................. $ 11.35 $ 12.93
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
Growth with
Balanced Income Growth
Portfolio Portfolio Portfolio
--------------------------------------
$ 2,155,670 $ 2,457,677 $ 4,993,703
5,395 3,563 106
-- 14,000 7,000
2,071 12,203 16,505
----------- ----------- -----------
2,163,136 2,487,443 5,017,314
--------------------------------------
1,885 15,218 7,000
1,750 1,696 3,581
1,459 1,133 1,647
441 721 1,526
----------- ----------- -----------
5,535 18,768 13,754
$ 2,157,601 $ 2,468,675 $ 5,003,560
--------------------------------------
3,410 17,240 4,657
63,294 33,085 113,094
359 (1,232) 20,325
2,090,538 2,419,582 4,865,484
$ 2,157,601 $ 2,468,675 $ 5,003,560
$ 923,202 $ 1,211,992 $ 2,870,294
71,142 94,074 215,152
$ 12.98 $ 12.88 $ 13.34
$ 13.77 $ 13.67 $ 14.15
$ 1,234,399 $ 1,256,683 $ 2,133,266
95,284 97,993 160,676
$ 12.95 $ 12.82 $ 13.28
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
Financial Statements (continued)
Statement of Operations
six months ended October 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Income with
Income Growth
Investment Income Portfolio Portfolio
--------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Income distributions from Underlying Funds ................. $ 8,173 $ 24,303
-------- --------
Expenses:
Management fee ............................................. 856 3,621
Distribution services fees -- Class B ...................... 237 1,428
Administrative services fees -- Class A .................... 206 731
Administrative services fees -- Class B .................... 79 476
Trustees' fees and expenses ................................ 8,400 8,400
-------- --------
Total expenses, before expense reductions .................. 9,778 14,656
Expense reductions ......................................... (8,400) (8,400)
-------- --------
Total expenses, after expense reductions ................... 1,378 6,256
Net investment income (loss) ............................... 6,795 18,047
Realized and unrealized gain (loss) on investment transactions
------------------------------------------------------------------------------------------
Net realized gain (loss) from investments .................. (1,861) (1,008)
Net unrealized appreciation (depreciation) during the
period on investments ................................... 2,070 14,739
Net gain (loss) on investment transactions ................. 209 13,731
Net increase (decrease) in net assets resulting from
operations ................................................. $ 7,004 $ 31,778
</TABLE>
38
<PAGE>
Growth with
Balanced Income Growth
Portfolio Portfolio Portfolio
--------------------------------------
$ 33,571 $ 25,511 $ 28,038
-------- -------- --------
6,256 6,125 13,776
3,122 3,433 5,013
1,045 897 2,916
1,032 1,144 1,676
8,400 8,400 8,400
-------- -------- --------
19,855 19,999 31,781
(8,400) (8,400) (8,400)
-------- -------- --------
11,455 11,599 23,381
22,116 13,912 4,657
-------- -------- --------
(10,930) (4,981) (2,755)
46,179 35,115 94,251
35,249 30,134 91,496
$ 57,365 $ 44,046 $ 96,153
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
Financial Statements (continued)
Statements of Changes in Net Assets
Income Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
October 31,
2000 Year Ended
Increase (Decrease) in Net Assets (Unaudited) April 30, 2000
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................................. $ 6,795 $ 8,750
Net realized gain (loss) on investment transactions .......... (1,861) (7,126)
Net unrealized appreciation (depreciation) on investment
transactions during the period ............................. 2,070 (3,658)
--------- ---------
Net increase (decrease) in net assets resulting from
operations ................................................. 7,004 (2,034)
--------- ---------
Distributions to shareholders from:
Net investment income (Class A) ............................. (4,181) (6,505)
Net investment income (Class B) ............................. (1,639) (3,217)
--------- ---------
(5,820) (9,722)
--------- ---------
Portfolio share transactions:
Class A
Proceeds from shares sold .................................... 285,275 59,866
Reinvestment of distributions ................................ 4,140 6,465
Cost of shares redeemed ...................................... -- (107,456)
--------- ---------
Net increase (decrease) in net assets from Class A share
transactions ............................................... 289,415 (41,125)
--------- ---------
Class B
Proceeds from shares sold .................................... 35,201 2,503
Reinvestment of distributions ................................ 1,602 3,177
Cost of shares redeemed ...................................... (18,284) --
--------- ---------
Net increase (decrease) in net assets from Class B share
transactions ............................................... 18,519 5,680
Net increase (decrease) in net assets from Portfolio share
transactions ............................................ 307,934 (35,445)
--------- ---------
Increase (decrease) in net assets ............................ 309,118 (47,201)
Net assets at beginning of period ............................ 106,712 153,913
Net assets at end of period (a) .............................. $ 415,830 $ 106,712
Other Information
-------------------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period .................... 4,798 8,439
--------- ---------
Shares sold .................................................. 25,135 5,297
Shares issued to shareholders in reinvestment of distributions 366 563
Shares redeemed .............................................. -- (9,501)
--------- ---------
Net increase (decrease) in Portfolio shares .................. 25,501 (3,641)
Shares outstanding at end of period .......................... 30,299 4,798
Class B
Shares outstanding at beginning of period .................... 4,666 4,173
--------- ---------
Shares sold .................................................. 3,137 216
Shares issued to shareholders in reinvestment of distributions 142 277
Shares redeemed .............................................. (1,633) --
--------- ---------
Net increase in Portfolio shares ............................. 1,646 493
Shares outstanding at end of period .......................... 6,312 4,666
(a)Includes undistributed net investment income .............. $ 1,822 $ 847
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
Statements of Changes in Net Assets
Income with Growth Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
October 31,
2000 Year Ended
Increase (Decrease) in Net Assets (Unaudited) April 30, 2000
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) .................................. $ 18,047 $ 15,012
Net realized gain (loss) on investment transactions ........... (1,008) 7,725
Net unrealized appreciation (depreciation) on investment
transactions during the period .............................. 14,739 13,714
--------- ---------
Net increase (decrease) in net assets resulting from operations 31,778 36,451
--------- ---------
Distributions to shareholders from:
Net investment income (Class A) .............................. (11,888) (8,350)
Net investment income (Class B) .............................. (6,276) (5,871)
--------- ---------
(18,164) (14,221)
--------- ---------
Portfolio share transactions:
Class A
Proceeds from shares sold ..................................... 67,749 484,314
Reinvestment of distributions ................................. 11,803 8,350
Cost of shares redeemed ....................................... (5,771) (11,981)
--------- ---------
Net increase (decrease) in net assets from Class A share
transactions ................................................ 73,781 480,683
--------- ---------
Class B
Proceeds from shares sold ..................................... 120,398 252,549
Reinvestment of distributions ................................. 6,275 5,870
Cost of shares redeemed ....................................... (1,040) (1,561)
--------- ---------
Net increase (decrease) in net assets from Class B share
transactions ................................................ 125,633 256,858
--------- ---------
Net increase in net assets from Portfolio
share transactions .......................................... 199,414 737,541
--------- ---------
Increase (decrease) in net assets ............................. 212,928 759,771
Net assets at beginning of period ............................. 870,103 110,332
Net assets at end of period (a) ............................... $ 1,083,031 $ 870,103
Other Information
------------------------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ..................... 42,465 4,223
--------- ---------
Shares sold ................................................... 5,233 38,512
Shares issued to shareholders in reinvestment of distributions 913 653
Shares redeemed ............................................... (439) (923)
--------- ---------
Net increase (decrease) in Portfolio shares ................... 5,707 38,242
Shares outstanding at end of period ........................... 48,172 42,465
Class B
Shares outstanding at beginning of period ..................... 25,642 4,730
--------- ---------
Shares sold ................................................... 9,421 20,572
Shares issued to shareholders in reinvestment of distributions 487 463
Shares redeemed ............................................... (80) (123)
--------- ---------
Net increase (decrease) in Portfolio shares ................... 9,828 20,912
Shares outstanding at end of period ........................... 35,470 25,642
(a)Includes undistributed net investment income ............... $ 2,996 $ 3,113
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
Financial Statements (continued)
Statements of Changes in Net Assets
Balanced Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
October 31,
2000 Year Ended
Increase (Decrease) in Net Assets (Unaudited) April 30, 2000
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) .................................. $ 22,116 $ 15,852
Net realized gain (loss) on investment transactions ........... (10,929) 14,602
Net unrealized appreciation (depreciation) on investment
transactions during the period .............................. 46,179 13,814
--------- ---------
Net increase (decrease) in net assets resulting from operations 57,366 44,268
--------- ---------
Distributions to shareholders from:
Net investment income (Class A) ............................... (13,063) (7,712)
Net investment income (Class B) .............................. (10,053) (7,557)
--------- ---------
(23,116) (15,269)
--------- ---------
Portfolio share transactions:
Class A
Proceeds from shares sold ..................................... 367,135 687,933
Reinvestment of distributions ................................. 12,529 7,712
Cost of shares redeemed ....................................... (233,956) (23,369)
--------- ---------
Net increase (decrease) in net assets from Class A share
transactions ................................................ 145,708 672,276
--------- ---------
Class B
Proceeds from shares sold ..................................... 668,647 596,437
Reinvestment of distributions ................................. 10,053 7,555
Cost of shares redeemed ....................................... (64,889) (73,599)
--------- ---------
Net increase (decrease) in net assets from Class B share
transactions ................................................ 613,811 530,393
--------- ---------
Net increase (decrease) in net assets from Portfolio share
transactions ................................................ 759,519 1,202,669
--------- ---------
Increase (decrease) in net assets ............................. 793,769 1,231,668
Net assets at beginning of period ............................. 1,363,832 132,164
Net assets at end of period (a) ............................... $ 2,157,601 $ 1,363,832
Other Information
------------------------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ..................... 59,560 5,153
--------- ---------
Shares sold ................................................... 28,659 55,621
Shares issued to shareholders in reinvestment of distributions 978 612
Shares redeemed ............................................... (18,055) (1,826)
--------- ---------
Net increase in Portfolio shares .............................. 11,582 54,407
Shares outstanding at end of period ........................... 71,142 59,560
Class B
Shares outstanding at beginning of period ..................... 47,917 5,471
--------- ---------
Shares sold ................................................... 51,616 48,001
Shares issued to shareholders in reinvestment of distributions 784 600
Shares redeemed ............................................... (5,033) (6,155)
--------- ---------
Net increase in Portfolio shares .............................. 47,367 42,446
Shares outstanding at end of period ........................... 95,284 47,917
(a)Includes undistributed net investment income ............... $ 3,410 $ 4,410
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
Statements of Changes in Net Assets
Growth with Income Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
October 31,
2000 Year Ended
Increase (Decrease) in Net Assets (Unaudited) April 30, 2000
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) .................................. $ 13,912 $ 8,441
Net realized gain (loss) on investment transactions ........... (4,981) 6,802
Net unrealized appreciation (depreciation) on investment
transactions during the period .............................. 35,115 (6,301)
----------- -----------
Net increase (decrease) in net assets resulting from operations 44,046 8,942
----------- -----------
Distributions to shareholders from:
Net investment income (Class A) .............................. -- (4,457)
Net investment income (Class B) .............................. -- (4,191)
----------- -----------
-- (8,648)
----------- -----------
Portfolio share transactions:
Class A
Proceeds from shares sold ..................................... 745,049 451,235
Reinvestment of distributions ................................. -- 4,456
Cost of shares redeemed ....................................... (41,608) (265,262)
----------- -----------
Net increase (decrease) in net assets from Class A share
transactions ................................................ 703,441 190,429
----------- -----------
Class B
Proceeds from shares sold ..................................... 672,612 577,824
Reinvestment of distributions ................................. -- 4,191
Cost of shares redeemed ....................................... (35,784) (41,202)
----------- -----------
Net increase (decrease) in net assets from Class B share
transactions ................................................ 636,828 540,813
----------- -----------
Net increase (decrease) in net assets resulting from
Portfolio share transactions ............................. 1,340,269 731,242
----------- -----------
Increase (decrease) in net assets ............................. 1,384,315 731,536
Net assets at beginning of period ............................. 1,084,360 352,824
Net assets at end of period (a) ............................... $ 2,468,675 $ 1,084,360
Other Information
-------------------------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ..................... 38,901 23,615
----------- -----------
Shares sold ................................................... 58,433 36,366
Shares issued to shareholders in reinvestment of distributions -- 349
Shares redeemed ............................................... (3,260) (21,429)
----------- -----------
Net increase in Portfolio shares .............................. 55,173 15,286
Shares outstanding at end of period ........................... 94,074 38,901
Class B
Shares outstanding at beginning of period ..................... 47,704 4,334
----------- -----------
Shares sold ................................................... 53,201 46,342
Shares issued to shareholders in reinvestment of distributions -- 328
Shares redeemed ............................................... (2,732) (3,300)
----------- -----------
Net increase in Portfolio shares .............................. 50,289 43,370
Shares outstanding at end of period ........................... 97,993 47,704
(a)Includes undistributed net investment income ............... $ 17,240 $ 3,328
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
Financial Statements (continued)
Statements of Changes in Net Assets
Growth Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
October 31,
2000 Year Ended
Increase (Decrease) in Net Assets (Unaudited) April 30, 2000
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ...................................... $ 4,657 $ 289
Net realized gain (loss) on investment transactions ............... (2,755) 34,737
Net unrealized appreciation (depreciation) on investment
transactions during the period .................................. 94,251 11,783
----------- -----------
Net increase (decrease) in net assets resulting from operations ... 96,153 46,809
Distributions to shareholders from:
Net investment income (Class A) ................................... -- (6,432)
Net investment income (Class B) ................................... -- (3,009)
Net realized gains (Class A) ...................................... -- (1,348)
Net realized gains (Class B) ...................................... -- (1,575)
----------- -----------
-- (12,364)
----------- -----------
Portfolio share transactions:
Class A
Proceeds from shares sold ......................................... 1,512,712 1,515,413
Reinvestment of distributions ..................................... -- 7,780
Cost of shares redeemed ........................................... (75,086) (66,188)
----------- -----------
Net increase in net assets from Class A share transactions ........ 1,437,626 1,457,005
Class B
Proceeds from shares sold ......................................... 1,097,623 1,169,852
Reinvestment of distributions ..................................... -- 4,584
Cost of shares redeemed ........................................... (91,729) (348,932)
----------- -----------
Net increase in net assets from Class B share transactions ........ 1,005,894 825,504
----------- -----------
Net increase in net assets from Portfolio share transactions ...... 2,443,520 2,282,509
----------- -----------
Increase in net assets ............................................ 2,539,673 2,316,954
Net assets at beginning of period ................................. 2,463,887 146,933
Net assets at end of period (a) ................................... $ 5,003,560 $ 2,463,887
Other Information
-------------------------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ......................... 120,270 7,200
----------- -----------
Shares sold ....................................................... 100,399 117,479
Shares issued to shareholders in reinvestment of distributions .... -- 581
Shares redeemed ................................................... (5,517) (4,990)
----------- -----------
Net increase in Portfolio shares .................................. 94,882 113,070
Shares outstanding at end of period ............................... 215,152 120,270
Class B
Shares outstanding at beginning of period ......................... 69,592 4,281
----------- -----------
Shares sold ....................................................... 97,817 91,029
Shares issued to shareholders in reinvestment of distributions .... -- 342
Shares redeemed ................................................... (6,733) (26,060)
----------- -----------
Net increase in Portfolio shares .................................. 91,084 65,311
Shares outstanding at end of period ............................... 160,676 69,592
(a)Includes undistributed net investment income (loss) ............ $ 4,657 $ --
</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 throughout
each 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, Year Ended (commencement
2000 April 30, of operations) to
Class A (Unaudited) 2000 April 30, 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .... $ 11.28 $ 12.21 $ 12.00
Income (loss) from investment
operations:
Net investment income (loss) (a) ........ .34 .73 .11
Net realized and unrealized gain (loss)
on investment transactions ............ .09 (.84) .10
Total from investment operations ........ .43 (.11) .21
Less distributions from net investment
income ................................ (.35) (.82) --
Net asset value, end of period .......... $ 11.36 $ 11.28 $ 12.21
----------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) ................ 3.90** (.87) 1.75**
Ratios to Average Net Assets and
Supplemental Data
Net assets, end of period ($ thousands) . 344 54 103
Ratio of expenses before expense
reductions (%) ........................ 8.34* 4.92 1.00*
Ratio of expenses after expense
reductions (%) ........................ 1.00* 1.00 1.00*
Ratio of net investment income (loss)
(%) ................................... 6.09* 6.24 .93*
Portfolio turnover rate (%) ............. 24* 59 --
</TABLE>
(a) Based on daily 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 throughout
each 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, Year Ended (commencement
2000 April 30, of operations) to
Class B (Unaudited) 2000 April 30, 1999
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .. $11.27 $12.19 $12.00
Income (loss) from investment
operations:
Net investment income (loss) (a) ...... .33 .64 .12
Net realized and unrealized gain (loss)
on investment transactions .......... .06 (.83) .07
Total from investment operations ...... .39 (.19) .19
Less distributions from net investment
income .............................. (.31) (.73) --
Net asset value, end of period ........ $11.35 $11.27 $12.19
------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) .............. 3.43** (1.56) 1.58**
Ratios to Average Net Assets and
Supplemental Data
Net assets, end of period ($ thousands) 72 52 51
Ratio of expenses before expense
reductions (%) ...................... 9.09* 5.67 1.75*
Ratio of expenses after expense
reductions (%) ...................... 1.75* 1.75 1.75*
Ratio of net investment income (loss)
(%) (b) ............................. 5.53* 5.53 1.01*
Portfolio turnover rate (%) ........... 24* 59 --
</TABLE>
(a) Based on daily 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 throughout
each 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, Year Ended (commencement
2000 April 30, of operations) to
Class A (Unaudited) 2000 April 30, 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ........ $ 12.79 $ 12.33 $ 12.00
Income (loss) from investment
operations:
Net investment income (loss) (a) ............ .26 .51 .07
Net realized and unrealized gain (loss)
on investment transactions ................ .18 .40 .26
Total from investment operations ............ .44 .91 .33
Less distributions from net investment
income .................................... (.27) (.45) --
Net asset value, end of period .............. $ 12.96 $ 12.79 $ 12.33
-------------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) .................... 3.42** 7.54 2.75**
Ratios to Average Net Assets and
Supplemental Data
Net assets, end of period ($ thousands) ..... 624 543 52
Ratio of expenses before expense
reductions (%) ............................ 2.74* 2.41 1.00*
Ratio of expenses after expense
reductions (%) ............................ 1.00* 1.00 1.00*
Ratio of net investment income (loss)
(%) ....................................... 4.02* 4.16 .55*
Portfolio turnover rate (%) ................. 5* 38 --
</TABLE>
(a) Based on daily 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 throughout
each 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, Year Ended (commencement
2000 April 30, of operations) to
Class B (Unaudited) 2000 April 30, 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ........ $ 12.76 $ 12.32 $ 12.00
Income (loss) from investment
operations:
Net investment income (loss) (a) ............ .21 .39 .05
Net realized and unrealized gain (loss)
on investment transactions ................ .18 .42 .27
Total from investment operations ............ .39 .81 .32
Less distributions from net investment
income .................................... (.22) (.37) --
Net asset value, end of period .............. $ 12.93 $ 12.76 $ 12.32
-------------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) .................... 3.04** 6.67 2.67**
Ratios to Average Net Assets and
Supplemental Data
Net assets, end of period ($ thousands) ..... 459 327 58
Ratio of expenses before expense
reductions (%) ............................ 3.49* 3.16 1.75*
Ratio of expenses after expense
reductions (%) ............................ 1.75* 1.75 1.75*
Ratio of net investment income (loss)
(%) ....................................... 3.30* 3.14 .44*
Portfolio turnover rate (%) ................. 5* 38 --
</TABLE>
(a) Based on daily 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 throughout
each 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, Year Ended (commencement
2000 April 30, of operations) to
Class A (Unaudited) 2000 April 30, 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .. $ 12.70 $ 12.45 $ 12.00
Income (loss) from investment
operations:
Net investment income (loss) (a) ...... .19 .39 .06
Net realized and unrealized gain (loss)
on investment transactions .......... .29 .22 .39
Total from investment operations ...... .48 .61 .45
Less distributions from net investment
income .............................. (.20) (.36) --
Net asset value, end of period ........ $ 12.98 $ 12.70 $ 12.45
--------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) .............. 3.88** 4.95 3.75**
Ratios to Average Net Assets and
Supplemental Data
Net assets, end of period ($ thousands) 923 757 64
Ratio of expenses before expense
reductions (%) ...................... 2.00* 1.95 1.00*
Ratio of expenses after expense
reductions (%) ...................... 1.00* 1.00 1.00*
Ratio of net investment income (loss)
(%) ................................. 2.98* 3.17 .52*
Portfolio turnover rate (%) ........... 23* 20 --
</TABLE>
(a) Based on daily 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 throughout
each 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, Year Ended (commencement
2000 April 30, of operations) to
Class B (Unaudited) 2000 April 30, 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .. $ 12.68 $ 12.43 $ 12.00
Income (loss) from investment
operations:
Net investment income (loss) (a) ...... .15 .27 .05
Net realized and unrealized gain (loss)
on investment transactions .......... .27 .24 .38
Total from investment operations ...... .42 .51 .43
Less distributions from net investment
income .............................. (.15) (.26) --
Net asset value, end of period ........ $ 12.95 $ 12.68 $ 12.43
--------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) .............. 3.32** 4.06 3.58**
Ratios to Average Net Assets and
Supplemental Data
Net assets, end of period ($ thousands) 1,234 607 68
Ratio of expenses before expense
reductions (%) ...................... 2.75* 2.70 1.75*
Ratio of expenses after expense
reductions (%) ...................... 1.75* 1.75 1.75*
Ratio of net investment income (loss)
(%) (b) ............................. 2.31* 2.15 .40*
Portfolio turnover rate (%) ........... 23* 20 --
</TABLE>
(a) Based on daily 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 throughout
each 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, Year Ended (commencement
2000 April 30, of operations) to
Class A (Unaudited) 2000 April 30, 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .. $ 12.52 $ 12.63 $ 12.00
Income (loss) from investment
operations:
Net investment income (loss) (a) ...... .13 .25 .04
Net realized and unrealized gain (loss)
on investment transactions .......... .23 (.08) .59
Total from investment operations ...... .36 .17 .63
Less distributions from net investment
income .............................. -- (.28) --
Net asset value, end of period ........ $ 12.88 $ 12.52 $ 12.63
--------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) .............. 2.88** 1.30 5.25**
Ratios to Average Net Assets and
Supplemental Data
Net assets, end of period ($ thousands) 1,212 487 298
Ratio of expenses before expense
reductions (%) ...................... 2.03* 2.18 1.00*
Ratio of expenses after expense
reductions (%) ...................... 1.00* 1.00 1.00*
Ratio of net investment income (loss)
(%) ................................. 2.08* 1.98 .37*
Portfolio turnover rate (%) ........... 9* 56 --
</TABLE>
(a) Based on daily 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 throughout
each 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, Year Ended (commencement
2000 April 30, of operations) to
Class B (Unaudited) 2000 April 30, 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .. $ 12.52 $ 12.61 $ 12.00
Income (loss) from investment
operations:
Net investment income (loss) (a) ...... .09 .18 .04
Net realized and unrealized gain (loss)
on investment transactions .......... .21 (.09) .57
Total from investment operations ...... .30 .09 .61
Less distributions from net investment
income .............................. -- (.18) --
Net asset value, end of period ........ $ 12.82 $ 12.52 $ 12.61
--------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) .............. 2.40** .62 5.08**
Ratios to Average Net Assets and
Supplemental Data
Net assets, end of period ($ thousands) 1,257 597 55
Ratio of expenses before expense
reductions (%) ...................... 2.77* 2.93 1.75*
Ratio of expenses after expense
reductions (%) ...................... 1.75* 1.75 1.75*
Ratio of net investment income (loss)
(%) ................................. 1.42* 1.46 .31*
Portfolio turnover rate (%) ........... 9* 56 --
</TABLE>
(a) Based on daily 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 throughout
each 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, Year Ended (commencement
2000 April 30, of operations) to
Class A (Unaudited) 2000 April 30, 1999
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .. $ 12.99 $ 12.80 $ 12.00
Income (loss) from investment
operations:
Net investment income (loss) (a) ...... .04 .05 .01
Net realized and unrealized gain (loss)
on investment transactions .......... .31 .35 .79
Total from investment operations ...... .35 .40 .80
Less distributions from:
Net investment income ................. -- (.17) --
Net realized gains on investment
transactions ........................ -- (.04) --
Total distributions ................... -- (.21) --
Net asset value, end of period ........ $ 13.34 $ 12.99 $ 12.80
------------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) .............. 2.69** 3.02 6.67**
Ratios to Average Net Assets and
Supplemental Data
Net assets, end of period ($ thousands) 2,870 1,562 92
Ratio of expenses before expense
reductions (%) ...................... 1.45* 1.66 1.00*
Ratio of expenses after expense
reductions (%) ...................... 1.00* 1.00 1.00*
Ratio of net investment income (loss)
(%) ................................. .54* .41 .12*
Portfolio turnover rate (%) ........... 1* 31 --
</TABLE>
(a) Based on daily 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 throughout
each 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, Year Ended (commencement
2000 April 30, of operations) to
Class B (Unaudited) 2000 April 30, 1999
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .. $ 12.96 $ 12.79 $ 12.00
Income (loss) from investment
operations:
Net investment income (loss) (a) ...... (.01) (.05) .01
Net realized and unrealized gain (loss)
on investment transactions .......... .33 .33 .78
Total from investment operations ...... .32 .28 .79
Less distributions from:
Net investment income ................. -- (.07) --
Net realized gains on investment
transactions ........................ -- (.04) --
Total distributions ................... -- (.11) --
Net asset value, end of period ........ $ 13.28 $ 12.96 $ 12.79
------------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) .............. 2.47** 2.09 6.58**
Ratios to Average Net Assets and
Supplemental Data
Net assets, end of period ($ thousands) 2,133 902 55
Ratio of expenses before expense
reductions (%) ...................... 2.20* 2.41 1.75*
Ratio of expenses after expense
reductions (%) ...................... 1.75* 1.75 1.75*
Ratio of net investment income (loss)
(%) (b) ............................. (.23)* (.39) .06*
Portfolio turnover rate (%) ........... 1* 31 --
</TABLE>
(a) Based on daily 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 two 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 accounting
principles generally accepted in the United States of America which require the
use of management estimates. The policies described below are followed
consistently by the Portfolios in the preparation of their 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, 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 accounting principles generally accepted in the United
States of America. 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 their 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 Trustees, other than those being waived, until
such time that each Portfolio reaches $50,000,000 in assets. During the six
months ended October 31, 2000, the Trustees fees were as follows:
Trustees fees
Trustees waived by Reimbursed
Portfolio fees ($) Trustees ($) by Adviser ($)
--------------------------------------------------------------------
Income 8,400 4,400 4,000
Income with Growth 8,400 4,400 4,000
Balanced 8,400 4,400 4,000
Growth with Income 8,400 4,400 4,000
Growth 8,400 4,400 4,000
The Adviser also receives management fees from managing the affiliated
Underlying Funds in which each Portfolio invests. Each affiliated Underlying
Fund pays the
57
<PAGE>
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, 2000, 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 six months
ended October 31, 2000, CDSC fees incurred by Class B shareholders and the
distribution fees were as follows:
Distribution
fees received CDSC
Portfolio by KDI ($) fees ($)
--------------------------------------------------------------
Income 237 10
Income with Growth 1,428 40
Balanced 3,122 1,664
Growth with Income 3,433 1,231
Growth 5,013 665
Administrative Service Fees. The Trust has an administrative services agreement
with KDI. For providing information and administrative services to Class A and
Class 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 six months ended October 31, 2000, the
administrative service fees (ASF) were as follows:
ASF incurred
by the
Portfolio Portfolio ($)
--------------------------------------------------------------
Income 285
Income with Growth 1,207
Balanced 2,077
Growth with Income 2,041
Growth 4,592
58
<PAGE>
C. Plan of Reorganization
On November 9, 2000 the Board of each Farmers Portfolio (identified in the chart
below under the heading "Acquired Portfolio") approved an Agreement and Plan of
Reorganization (the "Reorganization") between each Farmers Portfolio and the
Scudder Pathway Series Acquiring Portfolio identified in the chart below,
pursuant to which Scudder Pathway series Acquiring Portfolio would acquire all
or substantially all of the assets and liabilities of the Farmers Portfolio in
exchange for shares of the corresponding Acquiring Portfolio. Each
Reorganization can be consummated only if, among other things, it is approved by
a majority vote of the shareholders of the applicable Farmers Portfolio. A
special meeting of the shareholders of each Farmers Portfolio to approve the
Reorganization will be held on or about March 14, 2001.
As a result of the Reorganization, each shareholder of the Farmers Portfolio
will become a shareholder of the corresponding Acquiring Fund and would hold,
immediately after the closing of the Reorganization (the "Closing"), that number
of full and fractional voting shares of the Acquiring Fund having an aggregate
net asset value equal to the aggregate net asset value of such shareholder's
shares held in the applicable Farmers Portfolio as of the close of business on
the business day preceding the Closing. The Closing is expected to take place
during the second quarter of 2001. In the event the shareholders of the Farmers
Portfolio fail to approve the Reorganization, the Farmers Portfolio will
continue to operate and the Portfolio's Trustees may resubmit the Plan for
shareholder approval or consider other proposals.
<TABLE>
<CAPTION>
Proposed
Acquired Portfolio Acquiring Portfolio Reorganization Date
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Income Portfolio Pathway Conservative Portfolio April 6, 2001
Income with Growth Portfolio Pathway Balanced Portfolio (to be renamed April 6, 2001
Pathway Moderate Portfolio)
Balanced Pathway Balanced Portfolio (to be renamed April 6, 2001
Pathway Moderate Portfolio)
Growth with Income Portfolio Pathway Balanced Portfolio (to be renamed April 6, 2001
Pathway Moderate Portfolio)
Growth Portfolio Pathway Growth Portfolio April 6, 2001
</TABLE>
59
<PAGE>
Officers and Trustees
Dr. Rosita P. Chang
Trustee; Professor of Finance,
University of Hawaii
Edgar R. Fiedler
Trustee; Senior Fellow and Economic Counsellor,
The Conference Board, Inc.
Dr. J. D. Hammond
Trustee; Dean Emeritus, Smeal College of Business Administration,
Pennsylvania State University
Richard M. Hunt
Trustee; University Marshal and Senior Lecturer,
Harvard University
Kathryn L. Quirk*
Trustee, Vice President and Assistant Secretary
Brian Cohen
President, Farmers Investment Trust
Shahram Tajbakhsh*
Vice President
John Millette*
Vice President and Secretary
John R. Hebble*
Treasurer
Brenda Lyons*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
* Scudder Kemper Investments, Inc.
60
<PAGE>
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intentionally
left blank.
61
<PAGE>
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intentionally
left blank.
62
<PAGE>
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intentionally
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63
<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
Farmers Financial Solutions, LLC.
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.
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