--------------------------------------------------------------------------------
April 30, 2000
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Farmers
Mutual Fund
Portfolios
Annual 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 (TM)
FINANCIAL SERVICES
<PAGE>
Farmers Mutual Fund Portfolios
<TABLE>
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Date of Portfolios' Inception: 3/9/99
<S> <C>
Income Portfolio Total Net Assets as of 4/30/00: $ 106,712
Income with Growth Portfolio Total Net Assets as of 4/30/00: $ 870,103
Balanced Portfolio Total Net Assets as of 4/30/00: $1,363,832
Growth with Income Portfolio Total Net Assets as of 4/30/00: $1,084,360
Growth Portfolio Total Net Assets as of 4/30/00: $2,463,887
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</TABLE>
o In recent months, the market environment has been characterized by high levels
of volatility and rapid rotations among growth stocks, value stocks, and bonds.
In this environment, the importance of diversification has increased
significantly.
o The Portfolio management team continues to utilize a strategy that emphasizes
a long-term investment horizon and diversification among a wide variety of asset
classes. Table of Contents
Table of Contents
Letter from the President ...................................... 3
Portfolio Management Discussion ................................ 4
Glossary of Investment Terms ................................... 29
Farmers Income Portfolio
Portfolio Highlights ........................................... 9
Performance Update ............................................. 10
Portfolio Summary .............................................. 12
Investment Portfolio ........................................... 30
Financial Highlights ........................................... 45
Farmers Income with Growth Portfolio
Portfolio Highlights ........................................... 13
Performance Update ............................................. 14
Portfolio Summary .............................................. 16
Investment Portfolio ........................................... 31
Financial Highlights ........................................... 47
1
<PAGE>
Farmers Balanced Portfolio
Portfolio Highlights ........................................... 17
Performance Update ............................................. 18
Portfolio Summary .............................................. 20
Investment Portfolio ........................................... 32
Financial Highlights ........................................... 49
Farmers Growth with Income Portfolio
Portfolio Highlights ........................................... 21
Performance Update ............................................. 22
Portfolio Summary .............................................. 24
Investment Portfolio ........................................... 33
Financial Highlights ........................................... 51
Farmers Growth Portfolio
Portfolio Highlights ........................................... 25
Performance Update ............................................. 26
Portfolio Summary .............................................. 28
Investment Portfolio ........................................... 34
Financial Highlights ........................................... 53
All Portfolios
Financial Statements ........................................... 35
Notes to Financial Statements .................................. 55
Report of Independent Accountants .............................. 58
Tax Information ................................................ 59
Officers and Trustees .......................................... 60
2
<PAGE>
Letter from the President
Dear Shareholders,
Over the past several months, the financial markets have experienced unusual
gyrations. Growth stocks embarked on a powerful rally from October through
mid-March, only to fall significantly amid the volatility that characterized the
market environment over the final six weeks of the period. At the same time,
value stocks -- which had posted meager returns for much of 1999 and early 2000
-- staged a rebound as investors rotated assets out of growth stocks to
investments that they believed to have less risk. Even bonds, which are
considered relatively conservative investments, have been experiencing unusual
fluctuations. However, on many days bond prices have moved in the opposite
direction of stocks, providing a cushion to investors who have exposure to both
areas. We believe that these events demonstrate that the value of
diversification has rarely been stronger than it is at present.
The Farmers Investment Trust management team emphasizes diversification in
managing the Portfolios. Utilizing a long-term view and an emphasis on
risk-adjusted returns, management seeks 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 applicable benchmark indices. Partnering with Scudder
Kemper Investments, Inc., one of the world's leading investment management
organizations, Farmers Investment Trust offers five portfolios that invest in
established stocks, bonds, 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.
We believe that these Portfolios will be able to help patient, long-term
investors achieve their goals, whether they are looking for steady income,
growth of principal, or both.
Thank you for your investment in the Farmers Mutual Fund Portfolios. For more
information on the recent market environment, please turn to the Portfolio
Management Discussion with lead portfolio manager Shahram Tajbakhsh that begins
on page 4. We have also provided a synopsis on each of the individual
Portfolios, explaining how our choice of investments has impacted performance
over the last twelve months. If you have any questions about your investment,
please contact your Farmers agent.
Sincerely,
/s/Brian Cohen
Brian Cohen
President,
Farmers Investment Trust
3
<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 strategy for the twelve months ended April 30, 2000.
Q: For most of the past year, growth stocks led all other areas of the market by
a wide margin. What factors fueled the rally in this group?
A: The U.S. market has been on an incredible ride during the past twelve months,
with most of the fireworks occurring in the six months since we last issued a
report on the Farmers Portfolios. Starting in mid-October, the Nasdaq average --
which is heavily weighted in growth stocks, particularly those in the technology
sector -- staged a monumental rally, rising from 2688 on October 19 to 5048 by
March 10, a total return of almost 88%. Investors plowed cash into stocks with
the most attractive growth characteristics, almost without regard for
valuations. At the same time, however, the majority of stocks in the market
actually fell as cash flowed out of "old economy" sectors -- such as
manufacturing, food, retail, and financial stocks -- and into those more
representative of the "new," technology-driven economy.
One of the most important causes for the divergence between growth stocks and
the rest of the market was rising interest rates. The powerful growth of the
U.S. economy raised fears that tight labor markets and high levels of consumer
confidence would cause the demand for goods and services to outstrip the
available supply, which in turn would spark an increase in inflation. The U.S.
Federal Reserve raised short-term interest rates five times from June of 1999 to
April of 2000 in order to counteract this process, but the continued strength of
the economy fueled expectations that several more increases will be necessary to
dampen potential inflation pressures. Fearing that higher rates will eventually
bring about a slowdown in the economic growth, investors moved into stocks whose
earnings are less dependent on the performance of the economy. As a result,
cutting-edge companies believed to be poised for rapid profit growth attracted
more buyers than traditional companies whose earnings tend to fluctuate with the
economy.
Q: After their tremendous rally, growth stocks suddenly collapsed beginning in
mid-March, and value stocks began to outperform. Why did this change come about?
A: In the final weeks of the reporting period, the stock market experienced
enormous volatility. The Nasdaq, in particular, experienced large fluctuations,
4
<PAGE>
with daily moves of 4-6% becoming relatively commonplace. From mid-March to
mid-April, the Nasdaq fell from 5000 to 3650, rallied all the way back to 4500,
then plunged to 3300 before rallying once again to close the period near 3800,
down over 23% from its high. At the same time as growth stocks were losing
ground, long-dormant segments of the value group staged a sharp rally. All of
the sectors that had lagged for several quarters -- such as manufacturing
stocks, financials, and producers of consumer staples -- began to show signs of
life. On several days when technology stocks were down as much as 5%, many value
stocks were flat or even up. It is difficult to say whether the move in value
stocks is sustainable, or whether it is just a case of investors seeking
temporary shelter from the turbulence in growth stocks. However, the high levels
of volatility and rapid rotation between growth and value demonstrates the
continued importance of diversification.
Q: How have bonds performed in this environment?
A: The booming U.S. economy, while a positive for businesses and consumers, has
been a distinct negative for bonds. In an environment where confidence is high,
energy prices are rising, and gross domestic product is climbing at an annual
pace of 7.3% (as it did in the fourth quarter of 1999), it is natural that bond
prices -- which tend to thrive when the economy is slowing -- would experience
weakness. These factors were reflected in the performance of the 30-year
Treasury bond yield, which rose from 6.16% on October 31, 1999, to a high of
6.75% by January 18, 2000. (Bond yields move inversely to their prices.)
The upward climb in bond yields was interrupted in early February when the U.S.
Treasury announced plans to buy back existing bonds and curtail new issuance in
order to reduce the national debt. Believing that the Treasury would focus its
efforts on longer-term bonds, investors rushed into that sector of the market to
capitalize on a potential imbalance of supply and demand. In addition,
volatility in the stock market prompted investors to move money to the relative
safety of bonds. These factors caused the yield on the 30-year bond to fall to
5.96% by April 28, the final day of the reporting period. The most notable
aspect of the bond market's unusual fluctuations was the "inversion" of the
yield curve. While longer-term bonds ordinarily carry higher yields to
compensate investors for the risk of lending money over a longer period, the
yields on shorter-term bonds moved significantly higher than those with more
extended maturities beginning in February. While other sectors of the bond
market -- such as corporates and mortgage-backed securities -- were disrupted by
this anomaly, the bond market remained an effective means of portfolio
diversification during the period.
5
<PAGE>
Q: In your view, how should investors cope with this unsettled environment?
A: Volatility is a natural event in the financial markets. Even though it may be
tempting to time the stock market, such an approach can be more risky than
simply holding on to a position when the market is falling. The primary reason
for this is that when the market rebounds, it tends to do so quickly and
unexpectedly. Missing even as many as one or two large moves throughout the
course of the year can make it nearly impossible to outperform the market. It is
natural for investors to be swept up in a mania (such as the recent rally in
tech stocks), or to be influenced by the unsettled feeling that can develop when
the market is off 6-10% in a single day. While such emotions are part of human
nature, they can make it extremely difficult to make wise investment decisions.
Over time, investors who make a long-term commitment to the market, invest
regularly, and use declines as buying opportunities are more likely to be
successful than those who try to achieve large gains by trading in and out of
the market.
Diversification is also paramount in this environment. Although investors have
always been advised to diversify their portfolios, this concept began to seem
less important as technology stocks roared higher day after day during the first
two months of the year. However, the subsequent decline in techs hurt investors
who had concentrated their portfolios in that area. Conversely, those who had
diversified into value stocks and bonds generally experienced less volatility
and smaller declines in their portfolios. In this way, recent market events have
shown that even though diversification can seem ineffective for several weeks --
or even months -- at a time, over the long term it still pays for investors to
maintain balanced exposure among growth stocks, value stocks, and bonds.
Q: The diversification of the Farmers Portfolios has helped them to withstand
the volatility of recent months. What selection process do you use to achieve
this high level of diversification?
A: Our goal in managing the Farmers Portfolios is to deliver stronger returns
than our benchmark indices, with lower levels of risk. To this end, we invest in
a select group of mutual funds that offer 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 minimize risk by measuring how the
individual mutual funds we hold in the Portfolios have performed in relation to
one another in a variety of market conditions. If two funds tend to respond in
different ways to a similar
6
<PAGE>
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 our investment objectives. Since we allocate the Portfolios' 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.
Q: What is your outlook for the months ahead?
A: We believe that the recent correction could be a healthy development for the
market. While the valuations of the U.S. market remain above average on a
historical basis, the recent price declines have likely removed a substantial
amount of risk from the most richly valued stocks. With valuations at more
reasonable levels and the economy still strong, our long-term outlook for the
markets has improved. Even though volatility should remain a factor in the
months ahead, we encourage investors to consider the positive trends that are
supporting the U.S market, and to remain focused on the ongoing importance of
diversification and a long-term horizon. As long-term investors ourselves, we
recognize that no trend is permanent, and that sectors which are out of favor
one month may come roaring back the next. We therefore intend to keep the
Farmers Portfolios widely diversified among a variety of investments, and we
encourage investors to do the same with their own portfolios.
7
<PAGE>
Farmers Mutual Fund Portfolios:
A Team Approach to Investing
Each portfolio is managed by a team of Scudder Kemper Investments, Inc. (the
"Adviser") investment professionals, each of whom plays an important role in the
portfolio's management process. Team members work together to develop investment
strategies and select underlying funds for each portfolio. They are supported by
the Adviser's large staff of economists, research analysts, traders, and other
investment specialists who work in the Adviser's offices across the United
States and abroad. The Adviser believes that its team approach benefits
portfolio investors by bringing together many disciplines and leveraging its
extensive resources.
Lead portfolio manager Shahram Tajbakhsh, who joined the Adviser in 1996, is
responsible for each portfolio's day-to-day management and overall investment
strategies. Mr. Tajbakhsh has over seven years of industry experience as a lead
project manager, including work in developing quantitative databases and
quantitative models.
Portfolio manager Josephine W. K. Chu joined the Adviser in 1997. Ms. Chu has
three years of industry experience.
8
<PAGE>
Portfolio Highlights
Farmers Income Portfolio
In pursuit of risk-adjusted returns that are competitive with those of the
Portfolio's benchmark -- the Lehman Brothers Aggregate Bond Index -- we invest
in five bond funds that each focuses on a different sector of the market. While
we expect this high level of diversification to add value over the long term, it
did not prove beneficial to performance during the past year. However, our
ability to shift money into more conservative funds allowed the Portfolio to
post more attractive returns in the latter part of the period. For the twelve
months ended April 30, 2000, the Income Portfolio -- Class A Shares returned
-0.87% (unadjusted for any sales charge), versus a return of 1.25% for the
benchmark.
As the period progressed, we adopted a more conservative approach in order to
better position the Portfolio for an environment of rising interest rates. When
rates are climbing, portfolios with long durations -- or high interest rate
sensitivity -- tend to perform the worst, while those that have shorter
durations tend to perform the best. For that reason, we increased the
Portfolio's position in PIMCO Low Duration Fund over the latter half of the
period, bringing its weighting to 19% of net assets from 5% on October 31. We
also raised our weighting in Kemper Government Securities Fund, which enabled
the Portfolio to take advantage of the rally in government bonds, the best
performing sector of the bond market. The Portfolio continues to have exposure
to corporate bonds through Scudder Income Fund, which holds a heavy weighting in
the sector. Although corporates were disrupted by the inversion of the Treasury
yield curve (please see the Portfolio Management Discussion for more details),
we believe that the sector remains an essential component of a diversified
portfolio due to its attractive yields and reasonable valuations. Areas where we
trimmed the Portfolio's exposure are in the high yield sector -- as represented
by Kemper High Yield Fund -- and in international bonds, which we hold through
PIMCO Foreign Bond Fund. Since both sectors tend to be higher risk, our decision
to trim our holdings in these areas is consistent with our goal of constructing
a more conservative portfolio.
In this way, we are able to take advantage of our flexibility to adjust the
Portfolio to long-term shifts in the economic environment. Going forward, we
intend to maintain a conservative approach until it becomes apparent that the
Federal Reserve is finished raising interest rates.
9
<PAGE>
Performance Update
Farmers Income Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Farmers Income Portfolio --
Class A (Adjusted for Maximum Lehman Brothers
Sales Charge) Aggregate 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
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Year ended 4/30/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Income Portfolio -- Class A (Adjusted for Maximum Sales Charge)
--------------------------------------------------------------------------------
1 Year $ 9,419 -5.81% -5.81%
Life of Fund** $ 9,583 -4.17% -3.64%
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index*
--------------------------------------------------------------------------------
1 Year $ 10,125 1.25% 1.25%
Life of Fund** $ 10,157 1.57% 1.45%
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See Notes to the Performance Update.
10
<PAGE>
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
Farmers Income Portfolio -- Class B
(Adjusted for Maximum Contingent Lehman Brothers
Deferred Sales Charge) Aggregate 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
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Year ended 4/30/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Income Portfolio -- Class B (Adjusted for Maximum Contingent Deferred
Sales Charge)
--------------------------------------------------------------------------------
1 Year $ 9,567 -4.33% -4.33%
Life of Fund** $ 9,726 -2.74% -2.39%
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index*
--------------------------------------------------------------------------------
1 Year $ 10,125 1.25% 1.25%
Life of Fund** $ 10,157 1.57% 1.45%
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Money Market 4% Manangement seeks to
Fixed Income 96% invest 100% of the
----- Portfolio's assets in bond
100% 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 29% During the reporting
Kemper U.S. Government Securities Fund -- period, the largest
Class I 24% portfolio shift has been
PIMCO Low Duration Fund -- the increased allocation
Institutional Shares 19% in Kemper Government
PIMCO Foreign Bond Fund -- Securities Fund, which
Institutional Shares 15% made up 15% of net assets
Kemper High Yield Fund -- Class I 9% on October 31, 1999.
Zurich Money Market Fund 4%
-----
100%
=====
12
<PAGE>
Portfolio Highlights
Farmers Income with Growth Portfolio
In managing the Portfolio, we seek to achieve returns competitive with those of
the unmanaged benchmark -- which is a blend of the Lehman Brothers Aggregate
Bond Index (70%) and the S&P 500 Index (30%) -- while maintaining a lower level
of risk. During the past year, the Portfolio has been well positioned to fulfill
this objective through its focus on growth stocks and conservatively managed
bond funds. In the twelve-months ended April 30, 2000, the Income with Growth
Portfolio -- Class A Shares returned 7.54% (unadjusted for any sales charge),
versus a return of 4.10% for its benchmark.
In the equity portion of the Portfolio, we held a heavy weighting in Janus
Twenty Fund for much of the year. This proved beneficial to performance, since
the fund tends to focus on the types of growth stocks that performed well during
1999 and the early part of 2000. Despite the fund's strong returns, we trimmed
our holdings in recent months as the high valuations of growth stocks had made
the sector's risk profile less attractive. We redeployed the proceeds into
Scudder Growth and Income Fund, which invests with a value orientation. In
conjunction with our holdings in Kemper-Dreman High Return Equity Fund, our
increased weighting in Scudder Growth and Income Fund enabled the Portfolio to
benefit from the resurgence in value stocks in the latter part of the period.
Believing that volatility will continue in the months ahead, we intend to
maintain the higher weighting in value stocks.
On the fixed income side, we sought to achieve a more conservative profile by
adding to our positions in funds with lower levels of risk exposure, and
reducing our holdings in those that tend to be more volatile. In the past six
months we significantly reduced the Portfolio's holdings in PIMCO Foreign Bond
Fund, which is vulnerable in an environment of rising interest rates. We
redeployed the proceeds into Scudder Income Fund, which holds a large position
in corporate bonds, and Kemper Government Securities Fund, which invests in
bonds of the highest possible quality. In addition, we maintained a position in
PIMCO Low Duration Fund, which is less susceptible to higher rates. (The phrase
"low duration" denotes a low level of interest rate sensitivity.) This decision
proved beneficial to performance amid a difficult environment for bonds. Going
forward, we intend to maintain a conservative positioning until it becomes
evident that the Federal Reserve is approaching the end of its series of
interest rate hikes.
13
<PAGE>
Performance Update
Farmers Income with Growth Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Farmers Income with Growth Lehman Brothers
Portfolio -- Class A Aggregate Bond Index (70%),
(Adjusted for Maximum Lehman Brothers S&P 500 Composite
Sales Charge) Aggregate Bond Index* Price Stock Index (30%)*
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
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Fund Index Comparison
-----------------------------------------------------------------------------------
Total Return
Growth of Average
Year ended 4/30/2000 $10,000 Cumulative Annual
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Farmers Income with Growth Portfolio -- Class A (Adjusted for Maximum Sales Charge)
-----------------------------------------------------------------------------------
1 Year $ 10,192 1.92% 1.92%
Life of Fund** $ 10,474 4.74% 4.12%
-----------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (70%), S&P 500 Composite Price
Stock Index (30%)*
-----------------------------------------------------------------------------------
1 Year $ 10,410 4.10% 4.10%
Life of Fund** $ 10,554 5.54% 5.10%
-----------------------------------------------------------------------------------
</TABLE>
See Notes to the Performance Update.
14
<PAGE>
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
<TABLE>
Farmers Income with Growth Lehman Brothers
Portfolio -- Class B (Adjusted Aggregate Bond Index (70%),
for Maximum Contingent Lehman Brothers S&P 500 Composite
Deferred Sales Charge) Aggregate Bond Index* Price Stock 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
</TABLE>
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Year ended 4/30/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Income with Growth Portfolio-- Class B (Adjusted for Maximum Contingent
Deferred Sales Charge)
--------------------------------------------------------------------------------
1 Year $ 10,367 3.67% 3.67%
Life of Fund** $ 10,651 6.51% 5.65%
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (70%), S&P 500 Composite Price Stock Index
(30%)*
--------------------------------------------------------------------------------
1 Year $ 10,410 4.10% 4.10%
Life of Fund** $ 10,554 5.54% 5.10%
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Money Market 1% During the last six
Fixed Income 64% months, management has
Equity 35% slightly increased the
---- Portfolio's stake in
100% equity funds and
==== marginally reduced its
position in bonds.
--------------------------------------------------------------------------------
Asset Class Ranges
--------------------------------------------------------------------------------
Money Market 0-15% Asset class allocations
Fixed Income 60-80% are derived from the risk
Equity 20-40% profile of the Portfolio;
changes are expected to
be modest and infrequent.
--------------------------------------------------------------------------------
Portfolio Holdings
--------------------------------------------------------------------------------
Scudder Income Fund 21% The Portfolio's high
Kemper U.S. Government Securities Fund -- level of diversification
Class I 20% helped provide a cushion
Janus Twenty Fund 19% amid a volatile market
PIMCO Low Duration Fund -- environment.
Institutional Shares 16%
Scudder Growth and Income Fund "S" 9%
Kemper Dreman High Return Equity Fund --
Class I 7%
PIMCO Foreign Bond Fund --
Institutional Shares 7%
Zurich Money Market Fund 1%
----
100%
====
16
<PAGE>
Portfolio Highlights
Farmers Balanced Portfolio
As its name suggests, the Balanced Portfolio is divided equally between mutual
funds that invest in stocks and those that invest in fixed income securities.
Our goal in constructing this diversified portfolio is to provide shareholders
with returns that are competitive with those of the benchmark, which is
comprised of the Lehman Brothers Aggregate Bond Index (50%) and the S&P 500
Index (50%), with a lower level of risk. We believe that a portfolio that
provides exposure to both stocks and bonds -- as well as to a variety of sectors
within those two asset classes -- can help reduce risk, since not all areas of
the financial markets will be moving in the same direction at once. However,
such an approach can also cause the Portfolio to underperform when one sector of
the market is providing dominant performance, such as growth stocks have over
the past year. While we do have exposure to this area through the Janus Twenty
Fund, our position was small enough that we nevertheless underperformed the
benchmark. For the twelve-month period ended April 30, 2000, the Balanced
Portfolio -- Class A Shares returned 4.95% (unadjusted for any sales charge),
versus a return of 5.92% for the benchmark. We believe that the vast
outperformance of growth stocks was an anomaly, and that over time our focus on
diversification will add significant value.
While the Portfolio benefited from its position in Janus Twenty Fund, its
holdings in funds that focus on value stocks -- namely Kemper-Dreman High Return
Equity Fund and Scudder Growth and Income Fund -- dampened performance.
Nevertheless, our positions in these funds contributed to both returns and
overall Portfolio stability over the final six weeks of the period, when growth
stocks slumped. Believing that value stocks will continue to do well amid an
increasingly volatile environment, we added to our position in this sector
during the latter part of the period. On the fixed income side, performance was
helped by the Portfolio's weighting in funds that are more conservative, and
therefore less susceptible to rising interest rates. PIMCO Low Duration Fund and
Kemper Government Securities Fund, in particular, held up well amid the
downdraft in the bond market. Conversely, we reduced our holdings in PIMCO
Foreign Bond Fund, which tends to have a higher risk level. Similar to our
strategy in the equity portion of the Portfolio, we intend to keep this
conservative positioning as long as the environment of rising rates persists.
17
<PAGE>
Performance Update
Farmers Balanced Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
<TABLE>
Farmers Income with Growth Lehman Brothers
Portfolio -- Class B (Adjusted Aggregate Bond Index (70%),
for Maximum Contingent Lehman Brothers S&P 500 Composite S&P 500 Composite
Deferred Sales Charge) Aggregate Bond Index* Price Index Price Stock Index (30%)*
<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
</TABLE>
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Year ended 4/30/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Balanced Portfolio -- Class A (Adjusted for Maximum Sales Charge)
--------------------------------------------------------------------------------
1 Year $ 9,892 -1.08% -1.08%
Life of Fund** $ 10,265 2.65% 2.30%
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (50%), S&P 500 Composite Price
Stock Index (50%)*
--------------------------------------------------------------------------------
1 Year $ 10,592 5.92% 5.92%
Life of Fund** $ 10,814 8.14% 7.48%
--------------------------------------------------------------------------------
See Notes to the Performance Update.
18
<PAGE>
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
<TABLE>
Farmers Income with Growth Lehman Brothers
Portfolio -- Class B (Adjusted Aggregate Bond Index (70%),
for Maximum Contingent Lehman Brothers S&P 500 Composite S&P 500 Composite
Deferred Sales Charge) Aggregate Bond Index* Price Index Price Stock Index (30%)*
<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
</TABLE>
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Year ended 4/30/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Balanced Portfolio -- Class B (Adjusted for Maximum Contingent Deferred
Sales Charge)
--------------------------------------------------------------------------------
1 Year $ 10,106 1.06% 1.06%
Life of Fund** $ 10,487 4.87% 4.24%
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (50%), S&P 500 Composite Price
Stock Index (50%)*
--------------------------------------------------------------------------------
1 Year $ 10,592 5.92% 5.92%
Life of Fund** $ 10,814 8.14% 7.48%
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Money Market 1% The Portfolio's weighting
Fixed Income 48% in equity funds has
Equity 51% declined slightly since
---- October 31, 1999.
100%
====
--------------------------------------------------------------------------------
Asset Class Ranges
--------------------------------------------------------------------------------
Money Market 0-10% Asset class allocations
Fixed Income 40-60% are derived from the risk
Equity 40-60% profile of the Portfolio;
changes are expected to
be modest and infrequent.
--------------------------------------------------------------------------------
Portfolio Holdings
--------------------------------------------------------------------------------
Janus Twenty Fund 22% The Portfolio achieved
Kemper U.S. Government Securities Fund -- strong performance from
Class I 16% its weighting in Janus
Scudder Growth and Income Fund "S" 16% Twenty Fund, which
Scudder Income Fund 16% invests in large company
Kemper-Dreman High Return Equity Fund -- growth stocks.
Class I 13%
PIMCO Low Duration Fund 11%
PIMCO Foreign Bond Fund --
Institutional Shares 5%
Zurich Money Market Fund 1%
----
100%
====
20
<PAGE>
Portfolio Highlights
Farmers Growth with Income Portfolio
During the past twelve months, investors who sought to diversify their holdings
away from high-flying growth stocks generally found that their portfolios
underperformed the market. For the Growth with Income Portfolio, which seeks to
provide 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%) -- a focus on diversification did indeed contribute to
underperformance. For the twelve-month period ended April 30, 2000, the Growth
with Income Portfolio -- Class A Shares returned 1.30% (unadjusted for any sales
charge), which trailed the 7.66% return of its benchmark. Despite this
short-term underperformance, we remain committed to our strategy. Although the
powerful rally in growth stocks lasted for many months, we believe that it is
important for long-term investors to maintain exposure to value stocks and
bonds. This became evident during the final six weeks of the period, when the
Portfolio's positions in these sectors helped it produce favorable returns even
as growth stocks were flagging.
The best performing fund in the Portfolio was Janus Twenty Fund, which focuses
on growth stocks and was therefore well-positioned for the market environment of
the past year. On the down side, our holdings in two value oriented funds --
Scudder Growth and Income Fund and Kemper-Dreman High Return Equity Fund --
dampened Portfolio performance over most of the period. Still, we are encouraged
by the fact that the two funds performed well during March and April, when value
stocks began to rebound. We will continue to hold large positions in these two
funds, on the belief that value stocks will benefit amid what should be a
volatile market environment in the coming months.
The Portfolio's fixed income holdings did not provide strong absolute returns
during the period, which was characterized by rising interest rates and
disruptions that were brought about by the inverted yield curve (please see the
Portfolio Management Discussion for more details). Nevertheless, our holdings in
bond funds contributed to overall Portfolio stability and diversification. The
best performers were PIMCO Low Duration Fund and Kemper Government Securities
Fund, both of which are conservatively positioned. Feeling that the bond market
will remain under pressure as long as the threat of higher interest rates is
looming, we intend to maintain our positions in these areas.
21
<PAGE>
Performance Update
Farmers Growth with Income Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
<TABLE>
Farmers Growth with Income S&P 500 Composite Stock Price
Portfolio -- Class A (Adjusted S&P 500 Composite Index (70%), Lehman Brothers
for Maximum Sales Charge) Stock Price Index 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
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Fund Index Comparison
-----------------------------------------------------------------------------------
Total Return
Growth of Average
Year ended 4/30/2000 $10,000 Cumulative Annual
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Farmers Growth with Income Portfolio -- Class A (Adjusted for Maximum Sales Charge)
-----------------------------------------------------------------------------------
1 Year $ 9,548 -4.52% -4.52%
Life of Fund** $ 10,051 .51% .44%
-----------------------------------------------------------------------------------
S&P 500 Composite Stock Price Index (70%), Lehman Brothers Aggregate Bond
Index (30%)*
-----------------------------------------------------------------------------------
1 Year $ 10,766 7.66% 7.66%
Life of Fund** $ 11,068 10.68% 9.81%
-----------------------------------------------------------------------------------
</TABLE>
See Notes to the Performance Update.
22
<PAGE>
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
<TABLE>
Farmers Growth with Income S&P 500 Composite S&P 500 Composite Stock
Portfolio -- Class B (Adjusted Stock Price Index* Price Index (70%), Lehman
for Maximum Contingent Brothers Aggregate Bond Index (30%)*
Deferred Sales Charge)
<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
</TABLE>
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Year ended 4/30/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Growth with Income Portfolio (Adjusted for Maximum Contingent Deferred
Sales Charge)
--------------------------------------------------------------------------------
1 Year $ 9,764 -2.36% -2.36%
Life of Fund** $ 10,282 2.82% 2.45%
--------------------------------------------------------------------------------
S&P 500 Composite Stock Price Index (70%), Lehman Brothers Aggregate
Bond Index (30%)*
--------------------------------------------------------------------------------
1 Year $ 10,766 7.66% 7.66%
Life of Fund** $ 11,068 10.68% 9.81%
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Money Market 1% The Portfolio's weighting
Fixed Income 28% in equity funds has
Equity 71% increased from 70% of net
---- assets on
100% October 31, 1999.
====
--------------------------------------------------------------------------------
Asset Class Ranges
--------------------------------------------------------------------------------
Money Market 0-10% Asset class allocations
Fixed Income 20-40% are derived from the risk
Equity 60-80% profile of the Portfolio;
changes are expected to
be modest and
infrequent.
--------------------------------------------------------------------------------
Portfolio Holdings
--------------------------------------------------------------------------------
Janus Twenty Fund 30% The Portfolio's
Scudder Growth and Income Fund "S" 22% diversified approach
Kemper-Dreman High Return Equity Fund -- enabled it to benefit
Class I 16% from the strong
Scudder Income Fund 10% performance of stocks and
Kemper U.S. Government Securities Fund -- the relative stability of
Class I 9% bonds.
PIMCO Low Duration Fund --
Institutional Shares 9%
Scudder International Fund --
International Shares 3%
Zurich Money Market Fund 1%
----
100%
====
24
<PAGE>
Portfolio Highlights
Farmers Growth Portfolio
In striving to achieve long-term growth of capital with a lower level of risk
than the Portfolio's benchmark, we invest in five equity funds that provide
exposure to both large and small companies within the U.S., international
stocks, and the growth and value investment styles. For most of the year this
approach proved to be a negative, since growth stocks dominated market
performance at the expense of virtually all other sectors. However, the
Portfolio produced strong relative performance amid the volatility of March and
April, demonstrating the ongoing value of diversification. We believe that the
significant outperformance of growth stocks was a short-term anomaly, and that
over time, diversification will remain a crucial component of our strategy that
seeks strong risk-adjusted returns over the long term. For the twelve months
ended April 30, 2000, the Growth Portfolio -- Class A Shares posted a total
return of 3.02% (unadjusted for any sales charge), trailing the 10.14% return of
its benchmark, the S&P 500 Index.
The Portfolio derived the best performance from Janus Twenty Fund, which focuses
on large-cap stocks with strong, steady earnings growth. The fund, which holds a
significant position in the technology sector, was ideally positioned for the
recent market environment. We also benefited from a smaller holding in Scudder
International Fund, which holds a large position in the types of technology and
telecommunications stocks that performed so well on a global basis over the past
year. On the down side, our significant holdings in value-oriented funds
hindered Portfolio performance. Both Kemper-Dreman High Return Equity Fund and
Scudder Growth and Income Fund are concentrated in the types of "Old Economy"
stocks that were out of favor for most of the period. Believing that the
environment for value stocks will improve as market volatility continues, we
added to our holdings in these sectors during the final two months of the
period.
Although the Portfolio underperformed its benchmark over much of the past year,
the value of its diversified strategy was revealed in the final six weeks of the
period, when value stocks began to recover as growth stocks slumped. This
dynamic helped cushion the overall performance of the Portfolio amid a difficult
environment for funds that were concentrated in growth stocks in general, and in
technology shares in particular. In our view, these market shifts illustrate the
fact that while diversification can hinder performance in the short term, it
remains critical for portfolios that are constructed for the long term.
25
<PAGE>
Performance Update
Farmers Growth Portfolio
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Farmers Growth Portfolio -- Class A S&P 500 Composite
(Adjusted for Maximum Sales Charge) Price 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
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Year ended 4/30/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Growth Portfolio -- Class A (Adjusted for Maximum Sales Charge)
--------------------------------------------------------------------------------
1 Year $ 9,710 -2.90% -2.90%
Life of Fund** $ 10,358 3.58% 3.12%
--------------------------------------------------------------------------------
S&P 500 Composite Price Stock Index*
--------------------------------------------------------------------------------
1 Year $ 11,014 10.14% 10.14%
Life of Fund** $ 11,440 14.40% 13.21%
--------------------------------------------------------------------------------
See Notes to the Performance Update.
26
<PAGE>
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Farmers Growth Portfolio -- Class B
(Adjusted for Maximum Contingent S&P 500 Composite
Deferred Sales Charge) Price Stock Index*
10158 10000
10658 10387
10092 10371
10058 10673
10364 10952
10581 11441
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Year ended 4/30/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Farmers Growth Portfolio -- Class B (Adjusted for Maximum Contingent Deferred
Sales Charge)
--------------------------------------------------------------------------------
1 Year $ 9,909 -.91% -.91%
Life of Fund** $ 10,581 5.81% 5.05%
--------------------------------------------------------------------------------
S&P 500 Composite Price Stock Index*
--------------------------------------------------------------------------------
1 Year $ 11,014 10.14% 10.14%
Life of Fund** $ 11,440 14.40% 13.21%
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Money Market 1% Management seeks to remain
Equity 99% as close to fully invested
---- in equity funds as
100% 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 38% The Portfolio gained the
Scudder Growth and Income Fund "S" 31% strongest performance
Kemper-Dreman High Return Equity Fund -- from its holdings in
Class I 23% growth funds and
Scudder International Fund -- International international equities.
Shares 5%
Scudder Small Company Value Fund 2%
Zurich Money Market Fund 1%
----
100%
====
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 CAPITALIZATION The market value of a company's outstanding shares
of 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
(OVER/UNDER) terms of sectors, industries, or countries -- within
a portfolio relative to the portfolio's benchmark
index or investment universe.
(Sources: Scudder Kemper Investments, Inc., Barron's Dictionary of Finance and
Investment Terms)
29
<PAGE>
Investment Portfolio as of April 30, 2000
Farmers Income Portfolio
<TABLE>
<CAPTION>
Shares Value ($)
-----------------------------------------------------------------------------------
Money Market 3.6%
-----------------------------------------------------------------------------------
<S> <C> <C>
--------------
Zurich Money Market Fund (Cost $3,754) ............... 3,754 3,754
--------------
Fixed Income 96.4%
-----------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I .... 3,209 26,286
Kemper High Yield Fund -- Class I .................... 1,376 9,368
PIMCO Foreign Bond Fund -- Institutional Shares ...... 1,572 15,748
PIMCO Low Duration Fund -- Institutional Shares ...... 2,095 20,491
Scudder Income Fund .................................. 2,551 31,044
-----------------------------------------------------------------------------------
Total Fixed Income (Cost $105,569) 102,937
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $109,323) (a) 106,691
-----------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $111,730. At April 30, 2000,
net unrealized depreciation for all securities based on tax cost was
$5,039. This consisted of aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$5,039.
During the year ended April 30, 2000, purchases and sales of Underlying
Funds' shares (excluding money market investments) aggregated $87,831 and
$119,491, respectively.
30
<PAGE>
Investment Portfolio as of April 30, 2000
Farmers Income with Growth Portfolio
Shares Value ($)
-------------------------------------------------------------------------------
Money Market 0.7%
-------------------------------------------------------------------------------
---------
Zurich Money Market Fund (Cost $6,332) ................ 6,332 6,332
---------
Fixed Income 64.3%
-------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I ..... 21,621 177,075
PIMCO Foreign Bond -- Institutional Shares ............ 6,114 61,266
PIMCO Low Duration Fund -- Institutional Shares ....... 14,085 137,753
Scudder Income Fund ................................... 15,012 182,692
-------------------------------------------------------------------------------
Total Fixed Income (Cost $565,391) 558,786
-------------------------------------------------------------------------------
Equity 35.0%
-------------------------------------------------------------------------------
Janus Twenty Fund ..................................... 2,054 164,497
Kemper-Dreman High Return Equity Fund -- Class I ...... 2,399 61,345
Scudder Growth and Income Fund "S" .................... 2,947 78,264
-------------------------------------------------------------------------------
Total Equity (Cost $281,692) 304,106
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $853,415) (a) 869,224
-------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $855,993. At April 30,
2000, net unrealized appreciation for all securities based on tax cost
was $13,231. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over
tax cost of $22,912 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value
of $9,681.
During the year ended April 30, 2000, purchases and sales of Underlying
Funds' shares (excluding money market investments) aggregated $910,380
and $167,054, respectively.
31
<PAGE>
Investment Portfolio as of April 30, 2000
Farmers Balanced Portfolio
Shares Value ($)
--------------------------------------------------------------------------------
Money Market 1.3%
--------------------------------------------------------------------------------
---------
Zurich Money Market Fund (Cost $17,306) ................. 17,306 17,306
---------
Fixed Income 47.7%
--------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I ....... 26,678 218,492
PIMCO Foreign Bond Fund -- Institutional Shares ......... 6,985 69,994
PIMCO Low Duration Fund -- Institutional Shares ......... 14,482 141,636
Scudder Income Fund ..................................... 18,087 220,121
--------------------------------------------------------------------------------
Total Fixed Income (Cost $658,208) 650,243
--------------------------------------------------------------------------------
Equity 51.0%
--------------------------------------------------------------------------------
Janus Twenty Fund ....................................... 3,769 301,823
Kemper-Dreman High Return Equity Fund -- Class I ........ 6,812 174,171
Scudder Growth and Income Fund "S" ...................... 8,248 219,079
--------------------------------------------------------------------------------
Total Equity (Cost $669,993) 695,073
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,345,507) (a) 1,362,622
--------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $1,350,876. At April 30,
2000, net unrealized appreciation for all securities based on tax cost
was $11,746. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over
tax cost of $36,846 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value
of $25,100.
During the year ended April 30, 2000, purchases and sales of Underlying
Funds' shares (excluding money market investments) aggregated
$1,338,356 and $132,814, respectively.
32
<PAGE>
Investment Portfolio as of April 30, 2000
Farmers Growth with Income Portfolio
Shares Value ($)
--------------------------------------------------------------------------------
Money Market 1.0%
--------------------------------------------------------------------------------
---------
Zurich Money Market Fund (Cost $10,781) ................. 10,781 10,781
---------
Fixed Income 28.3%
--------------------------------------------------------------------------------
Kemper U.S. Government Securities Fund -- Class I ....... 12,699 104,001
PIMCO Foreign Bond -- Institutional Shares .............. 355 3,555
PIMCO Low Duration Fund -- Institutional Shares ......... 9,608 93,963
Scudder Income Fund ..................................... 8,652 105,297
--------------------------------------------------------------------------------
Total Fixed Income (Cost $310,113) 306,816
--------------------------------------------------------------------------------
Equity 70.7%
--------------------------------------------------------------------------------
Janus Twenty Fund ....................................... 4,000 320,324
Kemper-Dreman High Return Equity Fund -- Class I ........ 6,858 175,365
Scudder Growth and Income Fund "S" ...................... 9,090 241,419
Scudder International Fund -- International Shares ...... 477 30,744
--------------------------------------------------------------------------------
Total Equity (Cost $766,585) 767,852
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,087,479) (a) 1,085,449
--------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $1,091,660. At April 30,
2000, net unrealized depreciation for all securities based on tax cost
was $6,211. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over
tax cost of $20,996 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value
of $27,207.
During the year ended April 30, 2000, purchases and sales of Underlying
Funds' shares (excluding money market investments) aggregated
$1,041,325 and $297,704, respectively.
33
<PAGE>
Investment Portfolio as of April 30, 2000
Farmers Growth Portfolio
Shares Value ($)
--------------------------------------------------------------------------------
Money Market 1.3%
--------------------------------------------------------------------------------
---------
Zurich Money Market Fund (Cost $28,101) .................. 28,101 28,101
---------
Equity 98.7%
-------------------------------------------------------------------------------
Janus Twenty Fund ........................................ 10,802 865,168
Kemper-Dreman High Return Equity Fund -- Class I ......... 19,951 510,149
Scudder Growth and Income Fund "S" ....................... 26,141 694,311
Scudder International Fund -- International Shares ....... 1,663 107,289
Scudder Small Company Value Fund ......................... 2,465 41,019
--------------------------------------------------------------------------------
Total Equity (Cost $2,199,093) 2,217,936
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $2,227,194) (a) 2,246,037
--------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $2,252,043. At April 30,
2000, net unrealized depreciation for all securities based on tax cost
was $6,006. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over
tax cost of $75,743 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value
of $81,749.
During the year ended April 30, 2000, purchases and sales of Underlying
Funds' shares (excluding money market investments) aggregated
$2,376,011 and $293,877, respectively.
34
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of April 30, 2000
<TABLE>
<CAPTION>
Income with
Income Growth
Assets Portfolio Portfolio
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments in securities, at value (for
identified cost, see accompanying investment portfolios) ............ $ 106,691 $869,224
Cash ................................................................... -- --
Income receivable ...................................................... 191 1,007
Receivable for Portfolio shares sold ................................... -- 500
Receivable for investments sold ........................................ 3,000 --
Due from Adviser ....................................................... 150 --
Due from Transfer Agent ................................................ -- 1,637
Other assets ........................................................... 48 19
----------- ----------
Total assets ........................................................... 110,080 872,387
Liabilities
-------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 3,187 1,003
Accrued management fee ................................................. 110 813
Accrued distribution services fees ..................................... 71 297
Accrued administrative services fees ................................... -- 171
----------- ----------
Total liabilities ...................................................... 3,368 2,284
------------------------------------------------------------------------ -----------------------
Net assets, at value $ 106,712 $870,103
------------------------------------------------------------------------ -----------------------
Net Assets
-------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income (loss) ............................. 847 3,113
Net unrealized appreciation (depreciation) on
investments ......................................................... (2,632) 15,809
Accumulated net realized gain (loss) ................................... (7,706) 5,912
Paid-in capital ........................................................ 116,203 845,269
----------- ----------
Net assets, at value ................................................... $ 106,712 $870,103
----------- ----------
------------------------------------------------------------------------ -----------------------
Net Asset Value
-------------------------------------------------------------------------------------------------------
Class A
Net assets applicable to shares outstanding ............................ 54,106 543,003
Shares of beneficial interest outstanding .............................. 4,798 42,465
Net Asset Value, redemption price per share
(net assets / shares outstanding of beneficial
interest, $.01 par value, unlimited number of shares -----------------------
authorized) ......................................................... $ 11.28 $ 12.79
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) .............................................. $ 11.87 $ 13.50
-----------------------
Class B
Net assets applicable to shares outstanding ............................ 52,606 327,100
Shares of beneficial interest outstanding .............................. 4,666 25,642
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) ......................................................... $ 11.27 $ 12.76
-----------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
Growth with
Balanced Income Growth
Portfolio Portfolio Portfolio
-----------------------------------------------
$ 1,362,622 $ 1,085,449 $ 2,246,037
-- -- --
1,054 514 30
-- -- 218,667
3,000 4,000 15,000
1,069 -- --
1,944 391 1,715
258 130 --
---------------- -------------- --------------
1,369,947 1,090,484 2,481,449
-----------------------------------------------
4,036 4,505 15,000
1,141 845 1,608
748 432 553
190 342 401
---------------- -------------- --------------
6,115 6,124 17,562
---------------- -------------- --------------
$ 1,363,832 $ 1,084,360 $ 2,463,887
---------------- -------------- --------------
-----------------------------------------------
4,410 3,328 --
17,115 (2,030) 18,843
11,288 3,749 23,080
1,331,019 1,079,313 2,421,964
---------------- -------------- --------------
$ 1,363,832 $ 1,084,360 $ 2,463,887
---------------- -------------- --------------
-----------------------------------------------
756,427 487,145 1,561,727
59,560 38,901 120,270
---------------- -------------- --------------
$12.70 $12.52 $12.99
---------------- -------------- --------------
---------------- -------------- --------------
$13.46 $13.28 $13.78
---------------- -------------- --------------
607,405 597,215 902,160
47,917 47,704 69,592
---------------- -------------- --------------
$12.68 $12.52 $12.96
---------------- -------------- --------------
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
Financial Statements (continued)
Statement of Operations
year ended April 30, 2000
<TABLE>
<CAPTION>
Income with
Income Growth
Investment Income Portfolio Portfolio
----------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Income distributions from Underlying Funds ............ $ 10,581 $ 20,644
-------- ---------
Expenses:
Management fee ........................................ 1,082 3,062
Distribution services fees -- Class B ................. 383 1,523
Administrative services fees -- Class A ............... 239 521
Administrative services fees -- Class B ............... 127 526
Trustees' fees and expenses ........................... 5,737 5,737
-------- ---------
Total expenses, before expense reductions ............. 7,568 11,369
Expense reductions .................................... (5,737) (5,737)
-------- ---------
Total expenses, after expense reductions .............. 1,831 5,632
------------------------------------------------------- -------- ---------
Net investment income (loss) 8,750 15,012
------------------------------------------------------- -------- ---------
Realized and unrealized gain (loss) on investment transactions
-------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ........................................... (7,706) (3,660)
Capital gain distribution from Underlying
Funds .............................................. 580 11,385
-------- ---------
(7,126) 7,725
Net unrealized appreciation (depreciation)
during the period on investments ................... (3,658) 13,714
------------------------------------------------------- -------- ---------
Net gain (loss) on investment transactions (10,784) 21,439
------------------------------------------------------- -------- ---------
------------------------------------------------------- -------- ---------
Net increase (decrease) in net assets
resulting from operations $ (2,034) $ 36,451
------------------------------------------------------- -------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
Growth with
Balanced Income Growth
Portfolio Portfolio Portfolio
-----------------------------------------------
$ 24,482 $ 15,100 $ 12,118
---------------- -------------- --------------
4,558 3,644 6,504
2,554 1,802 3,150
669 615 1,116
849 598 1,059
5,737 5,737 5,737
---------------- -------------- --------------
14,367 12,396 17,566
(5,737) (5,737) (5,737)
---------------- -------------- --------------
8,630 6,659 11,829
---------------- -------------- --------------
15,852 8,441 289
---------------- -------------- --------------
-----------------------------------------------
(5,050) (11,816) (20,906)
19,652 18,618 55,643
---------------- -------------- --------------
14,602 6,802 34,737
13,814 (6,301) 11,783
---------------- -------------- --------------
28,416 501 46,520
---------------- -------------- --------------
---------------- -------------- --------------
$ 44,268 $ 8,942 $ 46,809
---------------- -------------- --------------
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
Financial Statements (continued)
Statements of Changes in Net Assets
Income Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Increase (Decrease) in Net Assets 2000 April 30, 1999
------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................... $ 8,750 $ 1,238
Net realized gain (loss) on investment
transactions ................................ (7,126) --
Net unrealized appreciation (depreciation) on
investment transactions during the period ... (3,658) 1,026
---------- --------
Net increase (decrease) in net assets
resulting from operations ................... (2,034) 2,264
---------- --------
Distributions to shareholders from:
Net investment income (Class A) ............... (6,505) --
Net investment income (Class B) ............... (3,217) --
---------- --------
(9,722) --
---------- --------
Portfolio share transactions:
Class A
Proceeds from shares sold ...................... 59,866 91,574
Reinvestment of distributions .................. 6,465 --
Cost of shares redeemed ........................ (107,456) --
---------- --------
Net increase (decrease) in net assets from
Class A share transactions .................. (41,125) 91,574
---------- --------
Class B
Proceeds from shares sold ...................... 2,503 40,075
Reinvestment of distributions .................. 3,177 --
---------- --------
Net increase (decrease) in net assets from
Class B share transactions .................. 5,680 40,075
Net increase (decrease) in net assets from
Portfolio share transactions ................ (35,445) 131,649
---------- --------
Increase (decrease) in net assets .............. (47,201) 133,913
Net assets at beginning of period .............. 153,913 20,000
---------- --------
Net assets at end of period (a) ................ $ 106,712 $153,913
---------- --------
Other Information
----------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ...... 8,439 833
---------- --------
Shares sold .................................... 5,297 7,606
Shares issued to shareholders in reinvestment
of distributions ............................ 563 --
Shares redeemed ................................ (9,501) --
---------- --------
Net increase (decrease) in Portfolio shares .... (3,641) 7,606
---------- --------
Shares outstanding at end of period ............ 4,798 8,439
Class B ---------- --------
Shares outstanding at beginning of period ...... 4,173 833
---------- --------
Shares sold .................................... 216 3,340
Shares issued to shareholders in reinvestment
of distributions ............................ 277 --
---------- --------
Net increase in Portfolio shares ............... 493 3,340
---------- --------
Shares outstanding at end of period ............ 4,666 4,173
---------- --------
(a) Includes undistributed net investment income $ 847 $ 1,238
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
Statements of Changes in Net Assets
Income with Growth Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Increase (Decrease) in Net Assets 2000 April 30, 1999
------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................... $ 15,012 $ 493
Net realized gain (loss) on investment
transactions ................................ 7,725 15
Net unrealized appreciation (depreciation) on
investment transactions during the period ... 13,714 2,095
--------- --------
Net increase in net assets resulting from
operations .................................. 36,451 2,603
--------- --------
Distributions to shareholders from:
Net investment income (Class A) ............... (8,350) --
Net investment income (Class B) ............... (5,871) --
--------- --------
(14,221) --
--------- --------
Portfolio share transactions:
Class A
Proceeds from shares sold ...................... 484,314 40,711
Reinvestment of distributions .................. 8,350 --
Cost of shares redeemed ........................ (11,981) --
--------- --------
Net increase (decrease) in net assets from
Class A share transactions .................. 480,683 40,711
--------- --------
Class B
Proceeds from shares sold ...................... 252,549 47,018
Reinvestment of distributions .................. 5,870 --
Cost of shares redeemed ........................ (1,561) --
--------- --------
Net increase (decrease) in net assets from
Class B share transactions .................. 256,858 47,018
--------- --------
Net increase in net assets from Portfolio
share transactions ......................... 737,541 87,729
--------- --------
Increase (decrease) in net assets .............. 759,771 90,332
Net assets at beginning of period .............. 110,332 20,000
--------- --------
Net assets at end of period (a) ................ $ 870,103 $110,332
--------- --------
Other Information
----------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ...... 4,223 833
--------- --------
Shares sold .................................... 38,512 3,390
Shares issued to shareholders in reinvestment
of distributions ............................ 653 --
Shares redeemed ................................ (923) --
--------- --------
Net increase in Portfolio shares ............... 38,242 3,390
--------- --------
Shares outstanding at end of period ............ 42,465 4,223
--------- --------
Class B
Shares outstanding at beginning of period ...... 4,730 833
--------- --------
Shares sold .................................... 20,572 3,897
Shares issued to shareholders in reinvestment
of distributions ............................ 463 --
Shares redeemed ................................ (123) --
--------- --------
Net increase in Portfolio shares ............... 20,912 3,897
--------- --------
Shares outstanding at end of period ............ 25,642 4,730
--------- --------
(a) Includes undistributed net investment income $ 3,113 $ 493
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
Financial Statements (continued)
Statements of Changes in Net Assets
Balanced Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Increase (Decrease) in Net Assets 2000 April 30, 1999
------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................... $ 15,852 $ 483
Net realized gain (loss) on investment
transactions ................................ 14,602 31
Net unrealized appreciation (depreciation) on
investment transactions during the period ... 13,814 3,301
----------- --------
Net increase in net assets resulting from
operations .................................. 44,268 3,815
----------- --------
Distributions to shareholders from:
Net investment income (Class A) ................ (7,712) --
Net investment income (Class B) ............... (7,557) --
----------- --------
(15,269) --
----------- --------
Portfolio share transactions:
Class A
Proceeds from shares sold ...................... 687,933 52,062
Reinvestment of distributions .................. 7,712 --
Cost of shares redeemed ........................ (23,369) --
----------- --------
Net increase (decrease) in net assets from
Class A share transactions .................. 672,276 52,062
----------- --------
Class B
Proceeds from shares sold ...................... 596,437 56,287
Reinvestment of distributions .................. 7,555 --
Cost of shares redeemed ........................ (73,599) --
----------- --------
Net increase (decrease) in net assets from
Class B share transactions .................. 530,393 56,287
----------- --------
Net increase (decrease) in net assets from
Portfolio share transactions ................ 1,202,669 108,349
----------- --------
Increase (decrease) in net assets .............. 1,231,668 112,164
Net assets at beginning of period .............. 132,164 20,000
----------- --------
Net assets at end of period (a) ................ $ 1,363,832 $132,164
----------- --------
Other Information
------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ...... 5,153 833
----------- --------
Shares sold .................................... 55,621 4,320
Shares issued to shareholders in reinvestment
of distributions ............................ 612 --
Shares redeemed ................................ (1,826) --
----------- --------
Net increase in Portfolio shares ............... 54,407 4,320
----------- --------
Shares outstanding at end of period ............ 59,560 5,153
Class B ........................................ -- --
Shares outstanding at beginning of period ...... 5,471 833
----------- --------
Shares sold .................................... 48,001 4,638
Shares issued to shareholders in reinvestment
of distributions ............................ 600 --
Shares redeemed ................................ (6,155) --
----------- --------
Net increase in Portfolio shares ............... 42,446 4,638
----------- --------
Shares outstanding at end of period ............ 47,917 5,471
----------- --------
(a) Includes undistributed net investment income $ 4,410 $ 483
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
Statements of Changes in Net Assets
Growth with Income Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Increase (Decrease) in Net Assets 2000 April 30, 1999
------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................... $ 8,441 $ 429
Net realized gain (loss) on investment
transactions ................................ 6,802 54
Net unrealized appreciation (depreciation) on
investment transactions during the period ... (6,301) 4,271
------------ --------
Net increase (decrease) in net assets
resulting from operations ................... 8,942 4,754
------------ --------
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 ...................... 451,235 285,996
Reinvestment of distributions .................. 4,456 --
Cost of shares redeemed ........................ (265,262) --
------------ --------
Net increase (decrease) in net assets from
Class A share transactions .................. 190,429 285,996
------------ --------
Class B
Proceeds from shares sold ...................... 577,824 42,074
Reinvestment of distributions .................. 4,191 --
Cost of shares redeemed ........................ (41,202) --
------------ --------
Net increase (decrease) in net assets from
Class B share transactions .................. 540,813 42,074
------------ --------
Net increase (decrease) in net assets
resulting from Portfolio share transactions . 731,242 328,070
------------ --------
Increase (decrease) in net assets .............. 731,536 332,824
Net assets at beginning of period .............. 352,824 20,000
------------ --------
Net assets at end of period (a) ................ $ 1,084,360 $352,824
------------ --------
Other Information
------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ...... 23,615 833
------------ --------
Shares sold .................................... 36,366 22,782
Shares issued to shareholders in reinvestment
of distributions ............................ 349 --
Shares redeemed ................................ (21,429) --
------------ --------
Net increase in Portfolio shares ............... 15,286 22,782
------------ --------
Shares outstanding at end of period ............ 38,901 23,615
Class B ........................................ -- --
Shares outstanding at beginning of period ...... 4,334 833
------------ --------
Shares sold .................................... 46,342 3,501
Shares issued to shareholders in reinvestment
of distributions ............................ 328 --
Shares redeemed ................................ (3,300) --
------------ --------
Net increase in Portfolio shares ............... 43,370 3,501
------------ --------
Shares outstanding at end of period ............ 47,704 4,334
------------ --------
(a) Includes undistributed net investment income $ 3,328 $ 429
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
Financial Statements (continued)
Statements of Changes in Net Assets
Growth Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Increase (Decrease) in Net Assets 2000 April 30, 1999
------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) .......................... $ 289 $ 99
Net realized gain (loss) on investment
transactions ....................................... 34,737 77
Net unrealized appreciation (depreciation) on
investment transactions during the period .......... 11,783 7,060
----------- --------
Net increase in net assets resulting from
operations ......................................... 46,809 7,236
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 ............................. 1,515,413 78,322
Reinvestment of distributions ......................... 7,780 --
Cost of shares redeemed ............................... (66,188) --
----------- --------
Net increase in net assets from Class A share
transactions ....................................... 1,457,005 78,322
Class B
Proceeds from shares sold ............................. 1,169,852 41,375
Reinvestment of distributions ......................... 4,584 --
Cost of shares redeemed ............................... (348,932) --
----------- --------
Net increase in net assets from Class B share
transactions ....................................... 825,504 41,375
----------- --------
Net increase in net assets from Portfolio
share transactions ................................. 2,282,509 119,697
----------- --------
Increase in net assets ................................ 2,316,954 126,933
Net assets at beginning of period ..................... 146,933 20,000
----------- --------
Net assets at end of period (a) ....................... $ 2,463,887 $146,933
----------- --------
Other Information
-------------------------------------------------------------------------------------
Class A
Shares outstanding at beginning of period ............. 7,200 833
----------- --------
Shares sold ........................................... 117,479 6,367
Shares issued to shareholders in reinvestment
of distributions ................................... 581 --
Shares redeemed ....................................... (4,990) --
----------- --------
Net increase in Portfolio shares ...................... 113,070 6,367
----------- --------
Shares outstanding at end of period ................... 120,270 7,200
Class B ............................................... -- --
Shares outstanding at beginning of period ............. 4,281 833
----------- --------
Shares sold ........................................... 91,029 3,448
Shares issued to shareholders in reinvestment
of distributions ................................... 342 --
Shares redeemed ....................................... (26,060) --
----------- --------
Net increase in Portfolio shares ...................... 65,311 3,448
----------- --------
Shares outstanding at end of period ................... 69,592 4,281
----------- --------
(a) Includes undistributed net investment income (loss) $ -- $ 99
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
This Page
intentionally
left blank.
44
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Income Portfolio
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Class A 2000 April 30, 1999
--------------------------------------------------------------------------------
---------------------------
Net asset value, beginning of period ............. $ 12.21 $ 12.00
Income (loss) from investment operations: ---------------------------
Net investment income (loss) (a) ................. .73 .11
Net realized and unrealized gain (loss) on
investment transactions ....................... (.84) .10
---------------------------
Total from investment operations ................. (.11) .21
---------------------------
Less distributions from net investment income .... (.82) --
---------------------------
Net asset value, end of period ................... $ 11.28 $ 12.21
---------------------------
--------------------------------------------------------------------------------
Total Return (%) (b) (c) ......................... (.87) 1.75**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ thousands) .......... 54 103
Ratio of expenses before expense reductions (%) .. 4.92 1.00*
Ratio of expenses after expense reductions (%) ... 1.00 1.00*
Ratio of net investment income (loss) (%) ........ 6.24 .93**
Portfolio turnover rate (%) ...................... 59 --
(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
45
<PAGE>
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Income Portfolio
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Class B 2000 April 30, 1999
--------------------------------------------------------------------------------
---------------------------
Net asset value, beginning of period ............. $ 12.19 $ 12.00
Income (loss) from investment operations: ---------------------------
Net investment income (loss) (a) ................. .64 .12
Net realized and unrealized gain (loss) on
investment transactions ....................... (.83) .07
---------------------------
Total from investment operations ................. (.19) .19
---------------------------
Less distributions from net investment income .... (.73) --
---------------------------
Net asset value, end of period ................... $ 11.27 $ 12.19
---------------------------
--------------------------------------------------------------------------------
Total Return (%) (b) (c) ......................... (1.56) 1.58**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ thousands) .......... 52 51
Ratio of expenses before expense reductions (%) .. 5.67 1.75*
Ratio of expenses after expense reductions (%) ... 1.75 1.75*
Ratio of net investment income (loss) (%) (b) .... 5.53 1.01**
Portfolio turnover rate (%) ...................... 59 --
(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>
Financial Highlights (continued)
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Income with Growth Portfolio
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Class A 2000 April 30, 1999
--------------------------------------------------------------------------------
---------------------------
Net asset value, beginning of period ............. $ 12.33 $ 12.00
Income (loss) from investment operations: ---------------------------
Net investment income (loss) (a) ................. .51 .07
Net realized and unrealized gain (loss) on
investment transactions ....................... .40 .26
---------------------------
Total from investment operations ................. .91 .33
---------------------------
Less distributions from net investment income .... (.45) --
---------------------------
Net asset value, end of period ................... $ 12.79 $ 12.33
---------------------------
--------------------------------------------------------------------------------
Total Return (%) (b) (c) ......................... 7.54 2.75**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ thousands) .......... 543 52
Ratio of expenses before expense reductions (%) .. 2.41 1.00*
Ratio of expenses after expense reductions (%) ... 1.00 1.00*
Ratio of net investment income (loss) (%) ........ 4.16 .55**
Portfolio turnover rate (%) ...................... 38 --
(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>
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Income with Growth Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Class B 2000 April 30, 1999
--------------------------------------------------------------------------------
---------------------------
<S> <C> <C>
Net asset value, beginning of period ............. $ 12.32 $ 12.00
Income (loss) from investment operations: ---------------------------
Net investment income (loss) (a) ................. .39 .05
Net realized and unrealized gain (loss) on
investment transactions ....................... .42 .27
---------------------------
Total from investment operations ................. .81 .32
---------------------------
Less distributions from net investment income .... (.37) --
---------------------------
Net asset value, end of period ................... $ 12.76 $ 12.32
---------------------------
--------------------------------------------------------------------------------
Total Return (%) (b) (c) ......................... 6.67 2.67**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ thousands) .......... 327 58
Ratio of expenses before expense reductions (%) .. 3.16 1.75*
Ratio of expenses after expense reductions (%) ... 1.75 1.75*
Ratio of net investment income (loss) (%) ........ 3.14 .44**
Portfolio turnover rate (%) ...................... 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
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
Financial Highlights (continued)
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Balanced Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Class A 2000 April 30, 1999
--------------------------------------------------------------------------------
---------------------------
<S> <C> <C>
Net asset value, beginning of period ............. $ 12.45 $ 12.00
Income (loss) from investment operations: ---------------------------
Net investment income (loss) (a) ................. .39 .06
Net realized and unrealized gain (loss) on
investment transactions ....................... .22 .39
---------------------------
Total from investment operations ................. .61 .45
---------------------------
Less distributions from net investment income .... (.36) --
---------------------------
Net asset value, end of period ................... $ 12.70 $ 12.45
---------------------------
--------------------------------------------------------------------------------
Total Return (%) (b) (c) ......................... 4.95 3.75**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ thousands) .......... 757 64
Ratio of expenses before expense reductions (%) .. 1.95 1.00*
Ratio of expenses after expense reductions (%) ... 1.00 1.00*
Ratio of net investment income (loss) (%) ........ 3.17 .52**
Portfolio turnover rate (%) ...................... 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
49
<PAGE>
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Balanced Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Class B 2000 April 30, 1999
--------------------------------------------------------------------------------
---------------------------
<S> <C> <C>
Net asset value, beginning of period ............. $ 12.43 $ 12.00
Income (loss) from investment operations: ---------------------------
Net investment income (loss) (a) ................. .27 .05
Net realized and unrealized gain (loss) on
investment transactions ....................... .24 .38
---------------------------
Total from investment operations ................. .51 .43
---------------------------
Less distributions from net investment income .... (.26) --
---------------------------
Net asset value, end of period ................... $ 12.68 $ 12.43
---------------------------
--------------------------------------------------------------------------------
Total Return (%) (b) (c) ......................... 4.06 3.58**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ thousands) .......... 607 68
Ratio of expenses before expense reductions (%) .. 2.70 1.75*
Ratio of expenses after expense reductions (%) ... 1.75 1.75*
Ratio of net investment income (loss) (%) (b) .... 2.15 .40**
Portfolio turnover rate (%) ...................... 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>
Financial Highlights (continued)
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Growth with Income Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Class A 2000 April 30, 1999
--------------------------------------------------------------------------------
---------------------------
<S> <C> <C>
Net asset value, beginning of period ............. $ 12.63 $ 12.00
Income (loss) from investment operations: ---------------------------
Net investment income (loss) (a) ................. .25 .04
Net realized and unrealized gain (loss) on
investment transactions ....................... (.08) .59
---------------------------
Total from investment operations ................. .17 .63
---------------------------
Less distributions from net investment income .... (.28) --
---------------------------
Net asset value, end of period ................... $ 12.52 $ 12.63
---------------------------
--------------------------------------------------------------------------------
Total Return (%) (b) (c) ......................... 1.30 5.25**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ thousands) .......... 487 298
Ratio of expenses before expense reductions (%) .. 2.18 1.00*
Ratio of expenses after expense reductions (%) ... 1.00 1.00*
Ratio of net investment income (loss) (%) ........ 1.98 .37**
Portfolio turnover rate (%) ...................... 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
51
<PAGE>
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Growth with Income Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Class B 2000 April 30, 1999
--------------------------------------------------------------------------------
---------------------------
<S> <C> <C>
Net asset value, beginning of period ............. $ 12.61 $ 12.00
Income (loss) from investment operations: ---------------------------
Net investment income (loss) (a) ................. .18 .04
Net realized and unrealized gain (loss) on
investment transactions ....................... (.09) .57
---------------------------
Total from investment operations ................. .09 .61
---------------------------
Less distributions from net investment income .... (.18) --
---------------------------
Net asset value, end of period ................... $ 12.52 $ 12.61
---------------------------
--------------------------------------------------------------------------------
Total Return (%) (b) (c) ......................... .62 5.08**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ thousands) .......... 597 55
Ratio of expenses before expense reductions (%) .. 2.93 1.75*
Ratio of expenses after expense reductions (%) ... 1.75 1.75*
Ratio of net investment income (loss) (%) ........ 1.46 .31**
Portfolio turnover rate (%) ...................... 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>
Financial Highlights (continued)
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Growth Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Class A 2000 April 30, 1999
--------------------------------------------------------------------------------
---------------------------
<S> <C> <C>
Net asset value, beginning of period ............. $ 12.80 $ 12.00
Income (loss) from investment operations: ---------------------------
Net investment (loss) income (a) ................. .05 .01
Net realized and unrealized gain (loss) on
investment transactions ....................... .35 .79
---------------------------
Total from investment operations ................. .40 .80
---------------------------
Less distributions from:
Net investment income ............................ (.17) --
Net realized gains on investment transactions .... (.04) --
---------------------------
Net asset value, end of period ................... $ 12.99 $ 12.80
---------------------------
--------------------------------------------------------------------------------
Total Return (%) (b) (c) ......................... 3.02 6.67**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ thousands) .......... 1,562 92
Ratio of expenses before expense reductions (%) .. 1.66 1.00*
Ratio of expenses after expense reductions (%) ... 1.00 1.00*
Ratio of net investment income (loss) (%) ........ .41 .12**
Portfolio turnover rate (%) ...................... 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
53
<PAGE>
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Growth Portfolio
<TABLE>
<CAPTION>
For the period
March 9, 1999
Year Ended (commencement of
April 30, operations) to
Class B 2000 April 30, 1999
--------------------------------------------------------------------------------
---------------------------
<S> <C> <C>
Net asset value, beginning of period ............. $ 12.79 $ 12.00
Income (loss) from investment operations: ---------------------------
Net investment income (loss) (a) ................. (.05) .01
Net realized and unrealized gain (loss) on
investment transactions ....................... .33 .78
---------------------------
Total from investment operations ................. .28 .79
---------------------------
Less distributions from:
Net investment income ............................ (.07) --
Net realized gains on investment transactions .... (.04) --
---------------------------
Net asset value, end of period ................... $ 12.96 $ 12.79
---------------------------
--------------------------------------------------------------------------------
Total Return (%) (b) (c) ......................... 2.09 6.58**
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ thousands) .......... 902 55
Ratio of expenses before expense reductions (%) .. 2.41 1.75*
Ratio of expenses after expense reductions (%) ... 1.75 1.75*
Ratio of net investment income (loss) (%) (b) .... (.39) .06**
Portfolio turnover rate (%) ...................... 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>
Notes to Financial Statements
A. Significant Accounting Policies
Farmers Investment Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end, diversified
management investment company organized as a Massachusetts business trust. The
Trust is composed of five separate diversified portfolios: Income, Income with
Growth, Balanced, Growth with Income and Growth Portfolios (the "Portfolios").
These Portfolios invest primarily in existing mutual funds (the "Underlying
Funds") that are either affiliated with Scudder Kemper Investments, Inc.
("Scudder Kemper" or the "Adviser") or are unaffiliated.
The Portfolios offer multiple classes of shares. Class A shares are offered to
investors subject to an initial sales charge. Class B shares are offered without
an initial sales charge but are subject to higher ongoing expenses than Class A
shares and a contingent deferred sales charge payable upon certain redemptions.
Class B shares automatically convert to Class A shares six years after issuance.
Investment income, realized and unrealized gains and losses, and certain
portfolio-level expenses and expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of all classes of shares, except
that each class bears certain expenses unique to that class. Class B shares
differ from Class A only with respect to the 12b-1 distribution expenses borne
by Class B shares. Differences in class expenses may result in payment of
different per share dividends by class. All shares of the Portfolio have equal
rights with respect to voting, subject to class specific arrangements.
The Portfolios' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the 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.
55
<PAGE>
Distribution of Income and Gains. Distributions from net investment income from
the Income, Income with Growth, and Balanced Portfolios are declared and paid
quarterly, and distributions of net realized gains are made annually.
Distributions of net investment income and net realized gains from the Growth
with Income and Growth Portfolio are made annually. Net realized gains from
investment transactions, in excess of available capital loss carryforwards,
would be taxable to the Fund if not distributed, and, therefore, will be
distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to certain securities sold at a loss. As a result,
net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Portfolios may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Portfolios.
Other. Investment security transactions are accounted for on a trade date basis.
Distributions of income and capital gains from the Underlying Funds and
distributions to shareholders are recorded on the ex-dividend date. Income is
recorded on the accrual basis.
B. Related Parties
Management Agreement. Under the Management Agreement (the "Agreement"), each
Portfolio pays the Adviser an annual fee of 0.75% of average daily net assets of
that Portfolio. The Agreements between each Portfolio and the Adviser require
that the Adviser provide investment management services and pay all ordinary
expenses of the Portfolios, except distribution fees, administrative fees,
interest, taxes, brokerage commissions, all compensation and expenses of
Trustees (other than those affiliated with the Adviser) and extraordinary
expenses. In addition, the Adviser has agreed to reimburse each Portfolio for
all compensation and expenses of Trustees, other than those being waived, until
such time that each Portfolio reaches $50,000,000 in assets. During the year
ended April 30, 2000, the Trustees fees were as follows:
Trustee fees
Trustee waived by Reimbursed by
Portfolio fees ($) Trustees ($) Adviser ($)
-----------------------------------------------------------------------
Income 5,737 3,200 2,537
Income with Growth 5,737 3,200 2,537
Balanced 5,737 3,200 2,537
Growth with Income 5,737 3,200 2,537
Growth 5,737 3,200 2,537
The Adviser also receives management fees from managing the affiliated
Underlying Funds in which each Portfolio invests. Each affiliated Underlying
Fund pays the
56
<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 April 30,
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 year ended
April 30, 2000, Farmers Growth Portfolio had $2,281 of CDSC incurred by Class B
shareholders and the distribution fees were as follows:
Distribution
fees
received by
Portfolio KDI ($)
-----------------------------------------------------------------------
Income 383
Income with Growth 1,523
Balanced 2,554
Growth with Income 1,802
Growth 3,150
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 year ended April 30, 2000, the administrative
service fees (ASF) were as follows:
ASF incurred
by the
Portfolio Portfolio ($)
-----------------------------------------------------------------------
Income 366
Income with Growth 1,047
Balanced 1,518
Growth with Income 1,213
Growth 2,175
Other Related Party Transactions: At April 30, 2000, Farmers Income Portfolio
and Farmers Income with Growth Portfolio had one shareholder, Scudder Kemper
Investments, Inc., who owned greater than 10% of each Portfolio's shares
outstanding.
57
<PAGE>
Report of Independent Accountants
To the Trustees and Shareholders of Farmers Investment Trust: Income, Income
with Growth, Balanced, Growth with Income, and Growth Portfolios:
In our opinion, the accompanying statements of assets and liabilities, including
the investment portfolios, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Farmers Investment Trust: Income,
Income with Growth, Balanced, Growth with Income, and Growth Portfolios (the
"Portfolios") at April 30, 2000, the results of their operations, the changes in
their net assets and their financial highlights for the periods indicated
therein, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Portfolios'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at April 30, 2000 by
correspondence with the transfer agents, provide a reasonable basis for the
opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
June 23, 2000
58
<PAGE>
Tax Information
The Growth Portfolio paid distributions of $0.010 per share from net long-term
capital gains during its year ended April 30, 2000, of which 100% represents 20%
rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Income with Growth
Portfolio designates $9,400 as capital gain dividends for its year ended April
30, 2000, of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Balanced Portfolio
designates $18,000 as capital gain dividends for its year ended April 30, 2000,
of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Growth with Income
Portfolio designates $8,700 as capital gain dividends for its year ended April
30, 2000, of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Growth Portfolio
designates $53,000 as capital gain dividends for its year ended April 30, 2000,
of which 100% represents 20% rate gains.
In addition, from November 1, 1999 through April 30, 2000, the Income Portfolio
incurred approximately $5,300 of net realized capital losses. As permitted by
tax regulations, the Fund intends to elect to defer these losses and treat them
as arising in the fiscal year ended April 30, 2001.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Investor Relations
Representative at 1-800-225-5163.
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
Ann M. McCreary*
Vice President
Shahram Tajbakhsh*
Vice President
John Millette*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
* Scudder Kemper Investments, Inc.
60
<PAGE>
This Page
intentionally
left blank.
61
<PAGE>
This Page
intentionally
left blank.
62
<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 [LOGO] F A R M E R S (R)
the federal securities laws. FINANCIAL SERVICES
<PAGE>
--------------------------------------------------------------------------------
April 30, 2000
Farmers
Money Market Portfolio:
Premium Reserve
Money Market Shares
Annual Report
A mutual fund seeking to provide maximum current income to the extent consistent
with stability of capital. The Fund invests exclusively in high quality money
market instruments. Premium Reserve Money Market Shares
[LOGO] FARMERS(R)
FINANCIAL SERVICES
<PAGE>
<PAGE>
Premium Reserve Money Market Shares
--------------------------------------------------------------------------------
Date of Inception: 1/22/99 Total Net Assets as of 4/30/00: $16,932 thousand
--------------------------------------------------------------------------------
Table of Contents
Letter to the Shareholders ................................................... 4
Investment Portfolio ......................................................... 5
Financial Statements .........................................................13
Financial Highlights .........................................................16
Notes to Financial Statements ................................................17
Report of Independent Accountants ............................................21
Officers and Trustees ........................................................22
3
<PAGE>
Letter to the Shareholders
Dear Shareholders,
We appreciate your decision to invest in the Money Market Portfolio: Premium
Reserve Money Market Shares. To provide you with an update of holdings, on the
following pages you'll find the Money Market Portfolio's annual report for the
year ended April 30, 2000. Included are the financial highlights for the Premium
Reserve Money Market Shares.
Briefly, for the year ending April 30, 2000 the Portfolio registered performance
and achieved its stated objective of providing maximum current income while
maintaining stability of principal.
Portfolio Results
As of April 30, 2000
--------------------------------------------------------------------------------
Annualized Net Yield
-----------------------------
12-Month SEC 7-Day
-----------------------------
Premium Reserve Money Market Shares 5.31% 5.71%
--------------------------------------------------------------------------------
Thank you for your investment. We look forward to serving your investment needs
for years to come.
/s/Frank Rachwalski
Frank Rachwalski
Vice President and Lead Portfolio Manager
April 30, 2000
Frank Rachwalski is a Managing Director of Scudder Kemper Investments, Inc. and
is Vice President and Lead Portfolio Manager of all Scudder Kemper Money Funds.
Mr. Rachwalski holds B.B.A. and M.B.A. degrees from Loyola University.
Notes
Yields are historical, may fluctuate, and do not guarantee future performance.
The Fund's net yield is the sum of the daily dividend rates for the period.
Like all money market funds, an investment in the Fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve your investment at $1.00 per share,
it is possible to lose money.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period stated above. The manager's views are subject to
change at any time, based on market and other conditions.
4
<PAGE>
Investment Portfolio as of April 30, 2000
Principal
Amount Value
--------------------------------------------------------------------------------
Corporate Obligations -- 83.3%
--------------------------------------------------------------------------------
Banking -- 4.8%
Allfirst Bank
6.10%*, 5/16/2000 $ 45,000,000 $ 44,990,582
--------------------------------------------------------------------------------
Banc One Australia
6.07%-6.22%, 6/7/2000-6/19/2000 35,000,000 34,740,936
--------------------------------------------------------------------------------
Bank One Corp.
6.18%-6.32%*, 5/4/2000-7/5/2000 35,000,000 34,994,422
--------------------------------------------------------------------------------
COFCO Capital Corp.
6.22%-6.23%, 6/19/2000-6/22/2000 70,000,000 69,396,163
--------------------------------------------------------------------------------
Comerica Bank
6.05%*, 5/14/2000 40,000,000 39,979,770
--------------------------------------------------------------------------------
Northern Rock PLC
6.13%*, 6/14/2000 40,000,000 39,997,581
--------------------------------------------------------------------------------
Wells Fargo & Co.
6.06%, 5/18/2000 50,000,000 49,857,625
--------------------------------------------------------------------------------
313,957,079
--------------------------------------------------------------------------------
Business Loans -- 26.8%
Associates First Capital
6.07%, 5/23/2000 50,000,000 49,815,750
--------------------------------------------------------------------------------
Corporate Asset Funding
6.09%, 5/25/2000 50,000,000 49,798,667
--------------------------------------------------------------------------------
Corporate Receivables Corp.
6.13%-6.16%, 6/7/2000-6/19/2000 100,000,000 99,274,292
--------------------------------------------------------------------------------
Delaware Funding Corp.
6.15%, 6/21/2000 40,000,000 39,656,033
--------------------------------------------------------------------------------
Eureka Securitization, Inc.
6.16%-6.20%, 5/24/2000-6/19/2000 70,000,000 69,505,556
--------------------------------------------------------------------------------
Falcon Asset Securitization Corp.
6.09%-6.11%, 5/16/2000-5/22/2000 98,040,000 97,742,332
--------------------------------------------------------------------------------
International Securitization Corp.
6.10%-6.39%, 5/24/2000-8/10/2000 86,107,000 85,262,514
--------------------------------------------------------------------------------
Intrepid Funding Corp.
6.21%-6.22%, 6/13/2000-6/19/2000 100,000,000 99,217,403
The accompanying notes are an integral part of the financial statement.
5
<PAGE>
Principal
Amount Value
--------------------------------------------------------------------------------
Kitty Hawk Funding Corp.
6.19%-6.33%, 6/1/2000-7/24/2000 $ 61,294,000 $ 60,771,830
--------------------------------------------------------------------------------
Monte Rosa Capital Corp.
6.08%, 5/12/2000 44,888,000 44,805,020
--------------------------------------------------------------------------------
Old Line Funding Corp.
6.14%-6.15%, 6/5/2000-6/9/2000 71,133,000 70,677,558
--------------------------------------------------------------------------------
Park Avenue Receivables
6.12%, 5/5/2000 40,000,000 39,972,978
--------------------------------------------------------------------------------
Preferred Receivables Funding Corp.
6.09%-6.11%, 5/11/2000-5/22/2000 100,000,000 99,739,375
--------------------------------------------------------------------------------
Quincy Capital Corp.
6.07%-6.14%, 5/8/2000-6/14/2000 96,121,000 95,852,000
--------------------------------------------------------------------------------
Receivables Capital Corp.
6.14%-6.15%, 6/14/2000-6/19/2000 100,000,000 99,214,597
--------------------------------------------------------------------------------
Sheffield Receivables Corp.
6.08%-6.13%, 5/1/2000-5/22/2000 113,875,000 113,666,184
--------------------------------------------------------------------------------
SMM Trust 1999-A
6.15%-6.40%*, 5/13/2000-7/15/2000 105,000,000 105,000,000
--------------------------------------------------------------------------------
Stellar Funding Group
6.08%-6.16%, 5/10/2000-6/5/2000 60,539,000 60,309,905
--------------------------------------------------------------------------------
Sweetwater Capital Corp.
6.10%-6.25%, 5/2/2000-5/30/2000 105,171,000 104,909,961
--------------------------------------------------------------------------------
Thunder Bay Funding, Inc.
6.08%-6.13%, 5/23/2000-6/5/2000 102,495,000 102,088,391
--------------------------------------------------------------------------------
WCP Funding, Inc.
6.14%, 6/7/2000 100,000,000 99,374,083
--------------------------------------------------------------------------------
Wood Street Funding Corp.
6.06%-6.07%, 5/1/2000-5/19/2000 67,342,000 67,250,938
--------------------------------------------------------------------------------
1,753,905,367
--------------------------------------------------------------------------------
Capital, Auto, and Equipment Lending -- 12.2%
Ace Overseas Corp.
6.11%-6.29%, 5/15/2000-7/17/2000 124,750,000 123,580,491
--------------------------------------------------------------------------------
American Honda Finance Corp.
6.14%, 6/19/2000 30,000,000 29,997,997
--------------------------------------------------------------------------------
Atlantis One Funding
6.08%-6.12%, 5/25/2000-5/26/2000 100,000,000 99,588,771
The accompanying notes are an integral part of the financial statement.
6
<PAGE>
Principal
Amount Value
--------------------------------------------------------------------------------
Bavaria Universal Funding
6.26%-6.50%, 7/17/2000-9/25/2000 $ 100,500,000 $ 98,793,099
--------------------------------------------------------------------------------
Chrysler Financing Company, LLC
6.09%*, 5/16/2000 13,000,000 13,008,589
--------------------------------------------------------------------------------
CIT Group Holdings, Inc.
6.11%*, 5/1/2000 43,000,000 42,973,152
--------------------------------------------------------------------------------
Ford Motor Credit Co.
6.06%-6.27%*, 5/18/2000-6/30/2000 65,000,000 64,991,405
--------------------------------------------------------------------------------
Fountain Square Commercial Funding Corp.
6.24%, 6/29/2000 17,566,000 17,389,233
--------------------------------------------------------------------------------
Scaldis Capital, LLC
6.08%-6.50%, 5/15/2000-9/20/2000 100,760,000 99,898,804
--------------------------------------------------------------------------------
Superior Funding Capital
6.10%-6.16%, 5/5/2000-6/1/2000 99,579,000 99,333,099
--------------------------------------------------------------------------------
Surrey Funding Corp.
6.05%, 5/9/2000 100,000,000 99,865,778
--------------------------------------------------------------------------------
Xerox Capital Corp.
6.07%*, 5/8/2000 10,000,000 9,997,777
--------------------------------------------------------------------------------
799,418,195
--------------------------------------------------------------------------------
Captive Business Lending -- 2.6%
California Pollution Control Financing Authrity
6.06%, 5/12/2000 34,750,000 34,750,000
--------------------------------------------------------------------------------
Capital One Funding Corp.
6.20%*, 5/3/2000-5/4/2000 83,882,000 83,882,000
--------------------------------------------------------------------------------
Pemex Capital Inc.
6.25%, 7/5/2000 50,000,000 49,444,792
--------------------------------------------------------------------------------
168,076,792
--------------------------------------------------------------------------------
Consumer Lending -- 2.3%
American Home Products Corp.
5.97%*, 5/10/2000 50,000,000 50,000,000
--------------------------------------------------------------------------------
GMAC Mortgage Corporation of Pennsylvania
6.21%, 5/2/2000 30,000,000 29,994,849
--------------------------------------------------------------------------------
Household Finance, Corp.
6.20%-6.34%*, 5/1/2000-5/4/2000 72,000,000 72,008,481
--------------------------------------------------------------------------------
152,003,330
The accompanying notes are an integral part of the financial statement.
7
<PAGE>
Principal
Amount Value
--------------------------------------------------------------------------------
Consumer Products and Services -- 2.5%
Anheuser-Busch Inc.
5.92%*, 5/16/2000 $ 40,000,000 $ 39,995,469
--------------------------------------------------------------------------------
China Merchandise Inc.
6.08%, 5/24/2000 35,000,000 34,864,715
--------------------------------------------------------------------------------
SBC Communications, Inc.
6.13%, 6/12/2000 50,000,000 49,645,917
--------------------------------------------------------------------------------
SK Global America
6.08%, 5/23/2000 40,000,000 39,852,111
--------------------------------------------------------------------------------
164,358,212
--------------------------------------------------------------------------------
Diversified Finance -- 16.8%
Alpine Securitization Corp.
6.08%-6.20%, 5/10/2000-6/13/2000 100,000,000 99,558,875
--------------------------------------------------------------------------------
Amsterdam Funding Corp.
6.29%, 6/6/2000 50,000,000 49,687,500
--------------------------------------------------------------------------------
Barton Capital Corp.
6.07%, 5/23/2000 60,000,000 59,778,533
--------------------------------------------------------------------------------
CXC, Inc.
6.09%, 5/24/2000 100,000,000 99,614,111
--------------------------------------------------------------------------------
Enterprise Capital Funding Corp.
6.09%, 5/17/2000 66,787,000 66,607,417
--------------------------------------------------------------------------------
Four Winds Funding Corp.
6.24%-6.25%, 6/27/2000 55,000,000 54,464,439
--------------------------------------------------------------------------------
Galaxy Funding
6.17%-6.26%, 5/17/2000-7/10/2000 111,000,000 110,596,031
--------------------------------------------------------------------------------
General Electric Capital Corp.
6.26%, 7/7/2000 50,000,000 49,427,243
--------------------------------------------------------------------------------
Giro Funding US Corp.
6.01%, 5/1/2000 24,366,000 24,366,000
--------------------------------------------------------------------------------
Knight Ridder Inc.
6.17%, 6/5/2000 25,915,000 25,761,562
--------------------------------------------------------------------------------
Moat Funding LLC
6.08%-6.24%, 5/24/2000-7/6/2000 75,307,000 74,794,465
--------------------------------------------------------------------------------
Norwest Financial Inc.
6.15%*, 5/7/2000 25,000,000 24,994,799
--------------------------------------------------------------------------------
Petrobras, Inc. Finance Co.
6.05%-6.30%, 5/12/2000-6/13/2000 80,000,000 79,697,149
The accompanying notes are an integral part of the financial statement.
8
<PAGE>
Principal
Amount Value
--------------------------------------------------------------------------------
Private Export Funding
6.25%, 7/10/2000 $ 30,000,000 $ 29,641,833
--------------------------------------------------------------------------------
Sinochem America Corp.
5.96%-6.16%, 5/4/2000-6/9/2000 49,300,000 49,157,709
--------------------------------------------------------------------------------
Toronto Dominion
6.14%, 6/19/2000 100,000,000 100,000,000
--------------------------------------------------------------------------------
Windmill Funding Corp.
6.07%-6.19%, 5/23/2000-6/19/2000 100,000,000 99,302,583
--------------------------------------------------------------------------------
1,097,450,249
--------------------------------------------------------------------------------
Financial Services -- 11.6%
Asset Portfolio Funding
6.21%-6.44%, 6/15/2000-9/19/2000 87,624,000 86,318,397
--------------------------------------------------------------------------------
Associates Corp.
6.03%*, 5/17/2000 75,000,000 74,947,758
--------------------------------------------------------------------------------
Forrestal Funding Master
6.12%, 5/23/2000 97,553,000 97,189,940
--------------------------------------------------------------------------------
Goldman Sachs Group, L.P.
6.13%*, 5/1/2000-5/3/2000 105,000,000 105,000,000
--------------------------------------------------------------------------------
Louis Dreyfus
6.14%, 5/10/2000 10,000,000 9,984,750
--------------------------------------------------------------------------------
Merrill Lynch & Co.
6.11%*-6.14%, 5/22/2000-5/30/2000 110,000,000 109,989,318
--------------------------------------------------------------------------------
National Rural Utility
6.14%-6.13%*, 5/2/2000-6/25/2000 35,000,000 34,999,267
--------------------------------------------------------------------------------
Salomon Smith Barney Holdings
6.09%, 5/26/2000 100,000,000 99,579,862
--------------------------------------------------------------------------------
Sigma Finance
5.97%-6.32%*, 5/1/2000-7/14/2000 125,500,000 124,983,850
--------------------------------------------------------------------------------
TransAmerica Finance Corp.
6.20%*, 6/1/2000 20,000,000 20,000,000
--------------------------------------------------------------------------------
762,993,142
--------------------------------------------------------------------------------
Metals and Mining -- 1.3%
Banco de Galicia Y Bueno
6.23%-6.28%, 7/12/2000-7/18/2000 85,000,000 83,924,000
--------------------------------------------------------------------------------
83,924,000
The accompanying notes are an integral part of the financial statement.
9
<PAGE>
Principal
Amount Value
--------------------------------------------------------------------------------
Municipal and State Obligations -- 1.1%
Oakland-Alameda County Coliseum, California
6.07%, 5/12/2000 $ 48,750,000 $ 48,750,000
--------------------------------------------------------------------------------
Texas, Veterans Housing Assistance, General Obligation
6.10%-6.15%*, 5/3/2000 19,755,000 19,755,000
--------------------------------------------------------------------------------
68,505,000
--------------------------------------------------------------------------------
Utilities -- 1.3%
Baltimore G & E
6.23%*, 5/14/2000 10,000,000 10,000,000
--------------------------------------------------------------------------------
Bell Atlantic Network
6.09%, 5/31/2000 41,500,000 41,290,771
--------------------------------------------------------------------------------
Brazos River Authority, Texas
6.08%, 5/23/2000 19,435,000 19,435,000
--------------------------------------------------------------------------------
Southern Cal Edison
6.24%*, 5/25/2000 15,000,000 15,000,000
--------------------------------------------------------------------------------
85,725,771
--------------------------------------------------------------------------------
Total Corporate Obligations (Cost $5,450,317,137) 5,450,317,137
--------------------------------------------------------------------------------
Bank Obligations -- 16.7%
--------------------------------------------------------------------------------
Certificates of Deposit and Bank Notes -- U.S. Banks -- 13.1%
Allfirst Bank
6.08%-6.18%*, 5/31/2000-6/6/2000 24,500,000 24,495,705
--------------------------------------------------------------------------------
American Express Centurian Bank
6.06%*, 5/24/2000 50,000,000 50,000,000
--------------------------------------------------------------------------------
Amsouth Bank
6.16%-6.22%*, 5/1/2000-6/11/2000 75,000,000 74,988,487
--------------------------------------------------------------------------------
Bank of America
6.17%*, 5/1/2000 75,000,000 75,000,000
--------------------------------------------------------------------------------
Comerica Bank
6.08%*, 5/14/2000 45,000,000 44,987,605
--------------------------------------------------------------------------------
CS First Boston, Inc.
6.22%*, 5/1/2000 60,000,000 60,000,000
--------------------------------------------------------------------------------
Dresdner US Finance, Inc.
6.11%*, 5/23/2000 60,000,000 59,994,633
--------------------------------------------------------------------------------
First National Bank of Maryland
6.09%*, 5/7/2000 25,500,000 25,491,012
The accompanying notes are an integral part of the financial statement.
10
<PAGE>
Principal
Amount Value
--------------------------------------------------------------------------------
First Union National Bank
6.18%*, 5/1/2000 $ 30,000,000 $ 30,000,000
--------------------------------------------------------------------------------
First USA Bank
6.15%*, 6/2/2000 24,500,000 24,508,513
--------------------------------------------------------------------------------
Fleet National Bank
6.27%*, 5/5/2000 30,000,000 30,000,459
--------------------------------------------------------------------------------
J.P. Morgan & Co., Inc.
6.12%*, 5/3/2000-5/17/2000 97,000,000 97,000,000
--------------------------------------------------------------------------------
Key Bank Corp.
6.12%*, 5/8/2000 35,000,000 34,989,041
--------------------------------------------------------------------------------
Mellon Bank
6.09%*, 5/31/2000 15,000,000 14,998,512
--------------------------------------------------------------------------------
Merita Bank
6.07%*, 5/3/2000 50,000,000 49,983,755
--------------------------------------------------------------------------------
National City Cleveland
6.06%-6.11%*, 5/14/2000-5/22/2000 50,000,000 49,984,263
--------------------------------------------------------------------------------
PNC Bank, N.A.
6.08%-6.13%*, 5/13/2000-5/26/2000 25,000,000 24,998,522
--------------------------------------------------------------------------------
U.S. Bank, N.A.
6.05%-6.24%*, 5/1/2000-5/21/2000 90,000,000 89,988,648
--------------------------------------------------------------------------------
861,409,155
--------------------------------------------------------------------------------
Certificates of Deposit -- Foreign Banks -- 3.6%
Barclays Bank PLC
6.14%*, 5/1/2000 25,000,000 24,999,547
--------------------------------------------------------------------------------
National Bank of Canada
6.08%*, 5/22/2000 10,000,000 9,997,261
--------------------------------------------------------------------------------
Royal Bank of Scotland
6.06%-6.11%*, 5/6/2000-5/10/2000 90,500,000 90,490,148
--------------------------------------------------------------------------------
Skandinav Enskilda Bank
6.19%-6.29%*, 5/24/2000-5/29/2000 60,000,000 59,994,089
--------------------------------------------------------------------------------
Westdeutsche Landesbank
6.22%, 7/6/2000 50,000,000 50,000,000
--------------------------------------------------------------------------------
235,481,045
--------------------------------------------------------------------------------
Total Bank Obligations (Cost $1,096,890,200) 1,096,890,200
--------------------------------------------------------------------------------
Total Investments -- 100% (Cost $6,547,207,337) $6,547,207,337
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statement.
11
<PAGE>
--------------------------------------------------------------------------------
Interest rates represent annualized yield to date of maturity, except for
variable rate demand securities described below.
(a) Cost for federal income tax purposes was $6,547,207,337.
* Variable rate securities. The rates shown are the current rates at April
30, 2000. The dates shown represent the demand date or the next interest
rate change date.
The accompanying notes are an integral part of the financial statement.
12
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of April 30, 2000
--------------------------------------------------------------------------------
Assets
--------------------------------------------------------------------------------
Investments in securities, at value (for cost, see accompanying portfolio of
investments):
--------------------------------------------------------------------------------
Short-term notes $6,547,207,337
--------------------------------------------------------------------------------
Cash 98,406,383
--------------------------------------------------------------------------------
Interest receivable 11,492,267
--------------------------------------------------------------------------------
Due from Adviser 3,056,158
--------------------------------------------------------------------------------
Other assets 14,300
--------------------------------------------------------------------------------
Total assets 6,660,176,445
--------------------------------------------------------------------------------
Liabilities
--------------------------------------------------------------------------------
Notes payable 60,450,000
--------------------------------------------------------------------------------
Dividends payable 1,951,406
--------------------------------------------------------------------------------
Interest payable 33,374
--------------------------------------------------------------------------------
Payable for Fund shares redeemed 62,800,208
--------------------------------------------------------------------------------
Accrued distribution services fee 913,585
--------------------------------------------------------------------------------
Other accrued expenses and payables 7,855,189
--------------------------------------------------------------------------------
Total liabilities 134,003,762
--------------------------------------------------------------------------------
Net assets, at value $6,526,172,683
--------------------------------------------------------------------------------
Institutional Shares
--------------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 182,974,482
--------------------------------------------------------------------------------
Shares outstanding of capital stock, $.01 par value, unlimited
number of shares authorized 182,974,482
--------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share (net
assets/shares outstanding) $ 1.00
--------------------------------------------------------------------------------
Premier Money Market Shares
--------------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 11,358,784
--------------------------------------------------------------------------------
Shares outstanding of capital stock, $.01 par value, unlimited
number of shares authorized 11,358,784
--------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share (net
assets/shares outstanding) $ 1.00
--------------------------------------------------------------------------------
Premium Reserve Money Market Shares
--------------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 16,932,129
--------------------------------------------------------------------------------
Shares outstanding of capital stock, $.01 par value, unlimited
number of shares authorized 16,932,129
--------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share (net
assets/shares outstanding) $ 1.00
--------------------------------------------------------------------------------
Service Shares
--------------------------------------------------------------------------------
Net assets applicable to shares outstanding $6,314,907,288
--------------------------------------------------------------------------------
Shares outstanding of capital stock, $.01 par value, unlimited
number of shares authorized 6,314,907,288
--------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share (net
assets/shares outstanding) $ 1.00
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statement.
13
<PAGE>
Statement of Operations
Year ended April 30, 2000
--------------------------------------------------------------------------------
Investment Income
--------------------------------------------------------------------------------
Interest $ 281,601,165
--------------------------------------------------------------------------------
Expenses:
--------------------------------------------------------------------------------
Management fee 8,142,641
--------------------------------------------------------------------------------
Services to shareholders 12,711,819
--------------------------------------------------------------------------------
Custodian fees 229,722
--------------------------------------------------------------------------------
Distribution services fees 28,610,580
--------------------------------------------------------------------------------
Administrative services fees 96,079
--------------------------------------------------------------------------------
Auditing 72,820
--------------------------------------------------------------------------------
Legal 70,000
--------------------------------------------------------------------------------
Trustees' fees and expenses 25,000
--------------------------------------------------------------------------------
Reports to shareholders 1,089,177
--------------------------------------------------------------------------------
Registration fees 1,103,997
--------------------------------------------------------------------------------
Interest expense 138,697
--------------------------------------------------------------------------------
Other 8,697
--------------------------------------------------------------------------------
Total expenses, before expense reductions 52,299,229
--------------------------------------------------------------------------------
Expense reductions (4,053,432)
--------------------------------------------------------------------------------
Total expenses, after expense reductions 48,245,797
--------------------------------------------------------------------------------
Net investment income 233,355,368
--------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 233,355,368
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statement.
14
<PAGE>
Statements of Changes in Net Assets
Years Ended April 30,
2000 1999
--------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
--------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------
Net investment income $ 233,355,368 $ 98,580,705
--------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 233,355,368 98,580,705
--------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (233,355,368) (98,580,705)
--------------------------------------------------------------------------------
Fund share transactions at net asset value of $1.00
per share:
Institutional Shares:
--------------------------------------------------------------------------------
Proceeds from shares sold 748,054,449 100,445
--------------------------------------------------------------------------------
Reinvestment of distributions 4,996,572 1,166
--------------------------------------------------------------------------------
Cost of shares redeemed (570,178,147) (8)
--------------------------------------------------------------------------------
182,872,874 101,603
--------------------------------------------------------------------------------
Premier Money Market Shares (a):
--------------------------------------------------------------------------------
Proceeds from shares sold 11,951,644 --
--------------------------------------------------------------------------------
Reinvestment of distributions 5,653 --
--------------------------------------------------------------------------------
Cost of shares redeemed (598,513) --
--------------------------------------------------------------------------------
11,358,784 --
--------------------------------------------------------------------------------
Premium Reserve Money Market Shares:
--------------------------------------------------------------------------------
Proceeds from shares sold 37,164,706 269,619
--------------------------------------------------------------------------------
Reinvestment of distributions 300,324 2,707
--------------------------------------------------------------------------------
Cost of shares redeemed (20,804,478) (750)
--------------------------------------------------------------------------------
16,660,552 271,576
--------------------------------------------------------------------------------
Service Shares:
--------------------------------------------------------------------------------
Proceeds from shares sold 46,591,548,249 21,381,309,146
--------------------------------------------------------------------------------
Reinvestment of distributions 199,345,248 96,946,180
--------------------------------------------------------------------------------
Cost of shares redeemed (43,819,371,616)(20,129,926,507)
--------------------------------------------------------------------------------
2,971,521,881 1,348,328,819
--------------------------------------------------------------------------------
Premier Money Market Shares (closed):
--------------------------------------------------------------------------------
Proceeds from shares sold 362 100,226
--------------------------------------------------------------------------------
Reinvestment of distributions 2,012 1,101
--------------------------------------------------------------------------------
Cost of shares redeemed (103,701) --
--------------------------------------------------------------------------------
(101,327) 101,327
--------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund
share transactions 3,182,312,764 1,348,803,325
--------------------------------------------------------------------------------
Increase (decrease) in net assets 3,182,312,764 1,348,803,325
--------------------------------------------------------------------------------
Net assets at beginning of period 3,343,859,919 1,995,056,594
--------------------------------------------------------------------------------
Net assets at end of period $6,526,172,683 $3,343,859,919
--------------------------------------------------------------------------------
(a) Premier Money Market Shares commenced operations on February 23, 2000.
The accompanying notes are an integral part of the financial statement.
15
<PAGE>
Financial Highlights
The following tables include selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements and market price data.
Years ended April 30, 2000 1999(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 1.00
--------------------------------------------------------------------------------
Net investment income .05 .01
--------------------------------------------------------------------------------
Less distributions from net investment income (.05) (.01)
--------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00
--------------------------------------------------------------------------------
Total Return (%) (b) 5.05 1.18**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ thousands) 16,932 272
--------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) .68 .67*
--------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .68 .67*
--------------------------------------------------------------------------------
Ratio of net investment income (%) 5.31 4.38*
--------------------------------------------------------------------------------
(a) For the period January 22, 1999 (commencement of operations) to April 30,
1999.
(b) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
16
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Cash Account Trust (the "Fund") is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company organized as a Massachusetts business trust currently offering three
portfolios: Money Market Portfolio, Government Securities Portfolio and
Tax-Exempt Portfolio (the "Portfolios"). Money Market Portfolio offers four
classes of shares: Institutional, Premier Money Market, Premium Reserve Money
Market and Service. Effective November 16, 1999, the Board terminated the then
existing Premier Money Market Class. The Retail shares were renamed the Premium
Reserve Money Market shares effective December 29, 1999. Effective February 23,
2000, the Board created a new class of shares, the Premier Money Market Class.
Government Securities Portfolio currently offers two classes of shares: Premier
Money Market (effective March 1, 2000) and Service. Tax-Exempt Portfolio
currently offers four classes of shares: Premier Money Market (effective March
7, 2000), Managed (effective November 17, 1999), Institutional (effective
November 17, 1999) and Service. This report contains financial statements and
financial highlights for the Premium Reserve Money Market shares of the Money
Market Portfolio.
Investment income, realized and unrealized gains and losses, and certain
fund-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 such as distribution
services, shareholder services, administrative services and certain other class
specific expenses. Differences in class expenses may result in payment of
different per share dividends by class. All shares of the Fund have equal rights
with respect to voting subject to class specific arrangements.
The Portfolio's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Portfolio in the
preparation of their financial statements.
Security Valuation. The Portfolio values all portfolio securities utilizing the
amortized cost method permitted in accordance with Rule 2a-7 under the 1940 Act
and pursuant to which the Portfolio must adhere to certain conditions. Under
this method, which does not take into account unrealized gains or losses on
securities, an instrument is initially valued at its cost and thereafter assumes
a constant accretion/amortization to maturity of any discount/premium. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board of Trustees.
Repurchase Agreements. The Portfolio may enter into repurchase agreements with
certain banks and broker/dealers whereby the Portfolio, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained
17
<PAGE>
at such a level that the market value is equal to at least the principal amount
of the repurchase price plus accrued interest.
Federal Income Taxes. The Portfolio's policy is to comply with the requirements
of the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable and tax-exempt income
to its shareholders. Accordingly, the Portfolio paid no federal income taxes and
no federal income tax provision was required.
Distribution of Income and Gains. All of the net investment income of the
Portfolio is declared as a daily dividend and is distributed to shareholders
monthly. Net investment income includes all realized gains (losses) on portfolio
securities.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Realized gains and losses from investment transactions are recorded on an
identified cost basis. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
Expenses. Expenses arising in connection with a specific portfolio are allocated
to that Portfolio. Other Fund expenses are allocated between the Portfolios in
proportion to their relative net assets.
2. Transactions with Affiliates
Management Agreement. The Fund has a management agreement with Scudder Kemper
Investments, Inc. (Scudder Kemper) and pays a monthly investment management fee
of 1/12 of the annual rate of 0.22% of the first $500 million of average daily
net assets declining to 0.15% of average daily net assets in excess of $3
billion. During the year ended April 30, 2000, the Portfolio incurred management
fees as follows:
Management
fees
--------------------------------------------------------------------------------
Money Market Portfolio $ 8,142,641
--------------------------------------------------------------------------------
Distribution Agreement. The Fund has a distribution agreement with Kemper
Distributors, Inc. (KDI). For its services as primary distributor, the Fund pays
KDI an annual fee of 0.60% of average daily net assets for the Service shares of
the Money Market Portfolio and 0.25% of average net assets for the Premier Money
Market shares
18
<PAGE>
pursuant to separate Rule 12b-1 plans for this Fund. For the year ended April
30, 2000, the Portfolio incurred distribution services fees as follows:
Distribution
services fees
--------------------------------------------------------------------------------
Money Market Portfolio (after $3,931,738 of expense waiver) 24,678,842
--------------------------------------------------------------------------------
The Fund has an administrative and shareholder services agreement with KDI for
providing information and administrative services to shareholders. The Premium
Reserve Money Market and Premier Money Market shares of the Portfolio pay KDI a
fee at an annual rate of up to 0.25% of average daily net assets. Institutional
shares of the Money Market Portfolio pay KDI a fee at an annual rate of up to
0.15% of average daily net assets. For the year ended April 30, 2000, the
Portfolio incurred administrative services fees as follows:
Administrative
services fees
--------------------------------------------------------------------------------
Money Market Portfolio (after $54,767 of expense waiver) $ 41,312
--------------------------------------------------------------------------------
Shareholder Services Agreement. Pursuant to a services agreement with the Fund's
transfer agent, Kemper Service Company (KSvC) is the shareholder service agent
of the Fund. Under the agreement, for the year ended April 30, 2000, KSvC
received shareholder services fees as follows:
Shareholder
service fees
--------------------------------------------------------------------------------
Money Market Portfolio $ 11,380,698
--------------------------------------------------------------------------------
Officers and Trustees. Certain officers or trustees of the Fund are also
officers or directors of Scudder Kemper. During the year ended April 30, 2000,
the Portfolio made no payments to their officers and incurred trustees' fees to
independent trustees as follows:
Trustees' fees
--------------------------------------------------------------------------------
Money Market Portfolio $ 25,000
--------------------------------------------------------------------------------
Expense Absorption. Scudder Kemper has agreed temporarily to limit the
Portfolio's operating expenses to the following percentages of average daily net
assets: Money Market Portfolio Institutional shares (0.25%), Premier Money
Market, Premium
19
<PAGE>
Reserve Money Market and Service shares (1.00%). For the year ended April 30,
2000, Scudder Kemper absorbed expenses as follows:
Expenses
absorbed by
Scudder Kemper
--------------------------------------------------------------------------------
Money Market Portfolio $ 3,986,505
--------------------------------------------------------------------------------
3. Expense Off-Set Arrangements
The Fund has entered into an arrangement with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Portfolio's expenses. During the period, the Money
Market Portfolio custody and transfer agent fees were reduced as follows:
Custodian Transfer Agent
--------------------------------------------------------------------------------
Money Market Portfolio $ 34,722 $ 32,205
--------------------------------------------------------------------------------
4. Line of Credit
The Fund and several Kemper Funds (the "Participants") share in a $750 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The Portfolio
may borrow up to a maximum of 33 percent of its net assets under the agreement.
5. Borrowings
At April 30, 2000, the weighted average outstanding daily balance of all loans
for the Money Market Portfolio (based on the number of days the loans were
outstanding) was approximately $13,940,678, with an average interest rate of
6.56%. Interest expense for the year ended April 30, 2000 is $138,697. The
maximum borrowings outstanding during the year ended April 30, 2000 is
$60,450,000.
20
<PAGE>
Report of Independent Auditors
The Board of Trustees and Shareholders
Cash Account Trust
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of Cash Account Trust -- Money Market Portfolio,
as of April 30, 2000, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the fiscal periods indicated
herein. These financial statements and financial highlights are the
responsibility of the Trusts' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of April 30, 2000, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Cash
Account Trust -- Money Market Portfolio at April 30, 2000, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for the
fiscal periods indicated herein, in conformity with accounting principles
generally accepted in the United States.
Chicago, Illinois /s/Ernst & Young LLP
June 2, 2000
21
<PAGE>
Officers and Trustees
Kathryn L. Quirk*
Chairperson, Assistant Secretary and Trustee
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
Brian Cohen
President, Farmers Investment Trust
Frank J. Rachwalski, Jr.*
Vice President
Ann M. McCreary*
Vice President
John Millette*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
* Scudder Kemper Investments, Inc.
22
<PAGE>
<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 is the adviser to Farmers Money Market Portfolio.
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 Money Market
Portfolio.
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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