<PAGE>
SEMI-ANNUAL REPORT
APRIL 30, 1998
FOR
LARGE CAP GROWTH PORTFOLIO
LARGE CAP VALUE PORTFOLIO
SMALL CAP GROWTH PORTFOLIO
SMALL CAP VALUE PORTFOLIO
INTERMEDIATE INCOME PORTFOLIO
FOREIGN BOND PORTFOLIO
INTERNATIONAL PORTFOLIO
SHORT-TERM PORTFOLIO
PREPARED FOR
CITISELECT(R) PORTFOLIOS SHAREHOLDERS
<PAGE>
TABLE OF CONTENTS
LARGE CAP GROWTH PORTFOLIO
Portfolio of Investments 1
..............................................................................
Statement of Assets and Liabilities 3
..............................................................................
Statement of Operations 3
..............................................................................
Statement of Changes in Net Assets 4
..............................................................................
Financial Highlights 4
..............................................................................
Notes to Financial Statements 5
..............................................................................
LARGE CAP VALUE PORTFOLIO
Portfolio of Investments 8
..............................................................................
Statement of Assets and Liabilities 10
..............................................................................
Statement of Operations 10
..............................................................................
Statement of Changes in Net Assets 11
..............................................................................
Financial Highlights 11
..............................................................................
Notes to Financial Statements 12
..............................................................................
SMALL CAP GROWTH PORTFOLIO
Portfolio of Investments 15
..............................................................................
Statement of Assets and Liabilities 17
..............................................................................
Statement of Operations 17
..............................................................................
Statement of Changes in Net Assets 18
..............................................................................
Financial Highlights 18
..............................................................................
Notes to Financial Statements 19
..............................................................................
SMALL CAP VALUE PORTFOLIO
Portfolio of Investments 22
..............................................................................
Statement of Assets and Liabilities 24
..............................................................................
Statement of Operations 24
..............................................................................
Statement of Changes in Net Assets 25
..............................................................................
Financial Highlights 25
..............................................................................
Notes to Financial Statements 26
..............................................................................
INTERMEDIATE INCOME PORTFOLIO
Portfolio of Investments 29
..............................................................................
Statement of Assets and Liabilities 31
..............................................................................
Statement of Operations 31
..............................................................................
Statement of Changes in Net Assets 32
..............................................................................
Financial Highlights 32
..............................................................................
Notes to Financial Statements 33
..............................................................................
FOREIGN BOND PORTFOLIO
Portfolio of Investments 35
..............................................................................
Statement of Assets and Liabilities 40
..............................................................................
Statement of Operations 40
..............................................................................
Statement of Changes in Net Assets 41
..............................................................................
Financial Highlights 41
..............................................................................
Notes to Financial Statements 42
..............................................................................
INTERNATIONAL PORTFOLIO
Portfolio of Investments 47
..............................................................................
Statement of Assets and Liabilities 49
..............................................................................
Statement of Operations 49
..............................................................................
Statement of Changes in Net Assets 50
..............................................................................
Financial Highlights 50
..............................................................................
Notes to Financial Statements 51
..............................................................................
SHORT.TERM PORTFOLIO
Portfolio of Investments 55
..............................................................................
Statement of Assets and Liabilities 56
..............................................................................
Statement of Operations 56
..............................................................................
Statement of Changes in Net Assets 57
..............................................................................
Financial Highlights 57
..............................................................................
Notes to Financial Statements 58
..............................................................................
<PAGE>
LARGE CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 1998
(Unaudited)
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS--98.8%
- -------------------------------------------------------------------------------
BASIC INDUSTRIES -- 9.2%
- -------------------------------------------------------------------------------
AirProducts & Chemicals Inc. 5,600 $ 486,850
Cabot Corp. 22,300 801,406
Dow Chemical Co. 15,000 1,450,312
E. I. du Pont de Nemours & Co. 20,100 1,463,531
FMC Corp.* 15,700 1,217,731
Great Lakes Chemical Corp. 42,000 2,110,500
IMC Global Inc. 37,000 1,332,000
Inland Steel Industries Inc. 39,600 1,160,775
Lubrizol Corp. 20,700 763,313
Reynolds Metals Co. 3,300 217,800
Rohm & Haas Co. 16,200 1,746,563
Westvaco Corp. 20,900 633,531
------------
13,384,312
------------
CAPITAL GOODS -- 8.1%
- -------------------------------------------------------------------------------
Arrow Electronics Inc.* 37,800 1,032,413
Caterpillar Inc. 18,800 1,070,425
Cummins Engine Inc. 58,900 3,202,687
Deere & Co. 700 40,906
Harnischfeger Industries Inc. 61,800 1,745,850
Kennametal Inc. 34,700 1,849,944
Parker Hannifin Corp. 35,750 1,595,344
Tecumseh Products Co. 25,500 1,284,562
------------
11,822,131
------------
CONSUMER BASICS -- 8.4%
- -------------------------------------------------------------------------------
Columbia/HCA Healthcare Corp. 56,800 1,870,850
IBP Inc. 38,400 792,000
Mallinckrodt Inc. 32,200 1,038,450
Maxicare Health Plans Inc.* 30,000 315,000
Philip Morris Companies Inc. 72,500 2,705,156
RJR Nabisco Holdings Corp. 78,400 2,180,500
Tupperware Corp. 29,600 801,050
Universal Foods Corp. 34,300 1,734,294
Vencor Inc.* 29,800 808,325
------------
12,245,625
------------
CONSUMER DURABLES -- 11.8%
- -------------------------------------------------------------------------------
Chrysler Corp. 38,700 1,555,256
Dana Corp. 28,300 1,673,238
Eaton Corp. 10,000 923,750
Ford Motor Co. 112,600 5,158,487
General Motors Corp. 66,200 4,460,225
Goodyear Tire and Rubber 48,600 3,402,000
------------
17,172,956
------------
CONSUMER NON-DURABLES -- 9.1%
- -------------------------------------------------------------------------------
Dillards Inc. 45,900 1,681,088
Federated Department Stores Inc.* 28,700 1,411,681
Russell Corp. 31,100 839,700
Sears Roebuck & Co. 29,100 1,725,994
Springs Industries Inc. 24,500 1,349,031
Toys "R" Us Inc.* 99,800 2,750,737
V F Corp. 50,100 2,605,200
Woolworth Corp.* 36,700 844,100
------------
13,207,531
------------
CONSUMER SERVICES -- 2.1%
- -------------------------------------------------------------------------------
AMR Corp. * 10,600 1,615,175
Delta Airlines Inc. 12,500 1,453,125
------------
3,068,300
------------
ENERGY -- 8.0%
- -------------------------------------------------------------------------------
Amoco Corp. 18,200 805,350
Atlantic Richfield Co. 20,600 1,606,800
British Petroleum PLC 20,100 1,899,450
Nabors Industries Inc.* 34,800 876,525
Phillips Petroleum Co. 35,200 1,744,600
Repsol 31,100 1,700,781
Ultra Mar Diamond Shamrock 37,000 1,195,563
YPF Sociedad Anonima 52,200 1,820,475
------------
11,649,544
------------
FINANCE -- 21.7%
- -------------------------------------------------------------------------------
Allstate Corp. 23,200 2,233,000
American General Corp. 22,700 1,512,388
Associates First Capital Corp. 86 6,429
Case Corp. 63,800 4,055,287
Chase Manhattan Corp. 28,100 3,893,606
Chubb Corp. 12,300 970,931
Cigna Corp. 11,900 2,462,556
Crestar Financial Corp. 14,300 855,319
Everest Reinsurance Holdings 39,900 1,645,875
First Union Corp. 57,100 3,447,413
Foundation Health Systems* 62,990 1,822,773
Loews Corp. 10,600 1,060,662
Mellon Bank Corp. 5,000 360,000
Nationsbank Corp. 16,300 1,234,725
Old Republic International Corp. 35,000 1,583,750
Reliastar Financial Corp. 35,300 1,610,563
Republic NY Corp. 11,700 1,564,875
Transatlantic Holdings Inc. 16,750 1,286,609
------------
31,606,761
------------
GENERAL BUSINESS -- 1.3%
- -------------------------------------------------------------------------------
Olsten Corp. 86,500 1,183,969
Standard Register 16,400 654,975
------------
1,838,944
------------
Miscellaneous -- 5.5%
- -------------------------------------------------------------------------------
Aeroquip Vickers Inc. 58,900 3,743,831
Beckman Coulter Inc. 42,200 2,350,013
Hartford Financial Services Group 17,500 1,938,125
Raytheon Co. 85 4,691
------------
8,036,660
------------
SHELTER -- 1.9%
- -------------------------------------------------------------------------------
Owens Corning 65,100 2,705,719
------------
TECHNOLOGY -- 8.2%
- -------------------------------------------------------------------------------
Avnet Inc. 26,800 1,653,225
International Business Machines 39,100 4,530,712
Seagate Technology* 100 2,669
Stratus Computer Inc.* 53,900 2,348,019
Tektronix Inc. 48,900 2,102,700
TRW Inc. 24,300 1,283,344
------------
11,920,669
------------
TRANSPORTATION -- 0.8%
- -------------------------------------------------------------------------------
CSX Corp. 21,80 1,144,500
------------
UTILITIES -- 2.7%
- -------------------------------------------------------------------------------
Cinergy Corp. 16,400 571,950
DTE Energy Co. 26,500 1,038,469
Duke Power Co. 13,753 795,955
Entergy Corp. 27,200 676,600
GPU Inc. 22,800 903,450
------------
3,986,424
------------
TOTAL COMMON STOCKS 143,790,076
------------
SHORT TERM OBLIGATIONS -- 2.4%
- -------------------------------------------------------------------------------
State Street Bank & Trust Repurchase
Agreement 5.00% due 5/01/98 proceeds
at maturity $3,446,479 (collateralized
by $3,465,000 U.S. Treasury Notes 5.875%
due 2/15/00) $ 3,446,000
------------
TOTAL INVESTMENTS
(Identified Cost $125,610,932) 101.2% 147,236,076
OTHER ASSETS, LESS LIABILITIES (1.2)% (1,760,937)
----- ------------
NET ASSETS 100.0% $145,475,139
===== ============
* Non income producing
See notes to financial statements
<PAGE>
LARGE CAP VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $125,610,932) $147,236,076
Cash 719
Receivable for investments sold 533,208
Dividends and interest receivable 134,070
- -------------------------------------------------------------------------------
Total assets 147,904,073
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 2,294,876
Payable to affiliates--Management fee (Note 2) 72,041
Accrued expenses and other liabilities 62,017
- -------------------------------------------------------------------------------
Total liabilities 2,428,934
- -------------------------------------------------------------------------------
NET ASSETS $145,475,139
- -------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $145,475,139
- -------------------------------------------------------------------------------
LARGE CAP VALUE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS)
TO APRIL 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
INVESTMENT INCOME (Note 1B):
Dividend income $1,110,593
Interest income 55,129
- -------------------------------------------------------------------------------
Total investment income $ 1,165,722
- -------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 368,653
Custodian and Fund Accounting fees 83,967
Auditing fees 13,700
Legal fees 8,730
Trustee fees 2,426
Miscellaneous 1,592
- -------------------------------------------------------------------------------
Total expenses 479,068
- -------------------------------------------------------------------------------
Net investment income 686,654
- -------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net unrealized appreciation of investments 21,625,144
Less unrealized appreciation from contributed
assets (Note 1) 11,022,146
- -------------------------------------------------------------------------------
Unrealized appreciation of investments 10,602,998
Net realized gain from investment transactions 4,519,545
- -------------------------------------------------------------------------------
Net realized and unrealized gain on investments 15,122,543
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $15,809,197
- -------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
LARGE CAP VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998
(Unaudited)
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 686,654
Net realized gain on investment transactions 4,519,545
Unrealized appreciation of investments 10,602,998
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations 15,809,197
- -------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 263,527,408
Value of withdrawals (133,861,466)
- -------------------------------------------------------------------------------
Net increase in net assets from capital transactions 129,665,942
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS: 145,475,139
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- -------------------------------------------------------------------------------
End of period $145,475,139
- -------------------------------------------------------------------------------
LARGE CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998
(Unaudited)
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $145,475
Ratio of expenses to average net assets 0.78%*
Ratio of net investment income to average net assets 1.12%*
Portfolio turnover 15%
- -------------------------------------------------------------------------------
* Annualized
See notes to financial statements
<PAGE>
LARGE CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Large Cap Value Portfolio (the "Portfolio"),
a separate series of The Asset Allocation Portfolios (the "Trust"), is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York. The Declaration of Trust permits
the Trustees to issue beneficial interests in the Portfolio. The Investment
Manager of the Portfolio is Citibank, N.A. ("Citibank"). Signature Financial
Group (Grand Cayman), Ltd. ("SFG") acts as the Portfolio's Sub-Administrator. On
November 1, 1997 (Commencement of Operation) the CitiSelect Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400 and CitiSelect Folio 500 transferred
a portion of its investable assets in amount of $12,341,545, $34,373,886,
$39,082,974 and $16,297,323 including $1,229,530, $3,795,385, $4,553,306 and
$1,443,925, respectively of unrealized appreciation to the Portfolio in exchange
for an interest in the Portfolio.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. Investment Security Valuations Equity securities listed on securities
exchanges or reported through the NASDAQ system are valued at last sale prices.
Unlisted securities or listed securities for which last sales prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations maturing in sixty days or less), are valued on the basis
of valuations furnished by pricing services approved by Board of Trustees which
take into account appropriate factors such as institutional-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, and other market data, without exclusive reliance on quoted prices or
exchange or over-the-counter prices. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which constitutes fair value as
determined by the Trustees. Securities, if any, for which there are no such
valuations or quotations are valued at fair value as determined in good faith by
or under guidelines established by the Trustees.
B. Income Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for U.S. federal income tax purposes. Dividend income is recorded
on the ex-dividend date.
C. U.S. Federal Income Taxes The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
D. Repurchase Agreements It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreements.
Additionally, procedures have been established by the Portfolio to monitor, on a
daily basis, the market value of the repurchase agreement's underlying
investments to ensure the existence of a proper level of collateral.
E. Expenses The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
F. Other Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs such duties and receives such compensation
from Citibank as from time to time are agreed to by Citibank and SFG. Citibank
is a wholly-owned subsidiary of Citicorp. Citicorp recently announced its
intention to merge with The Travelers Group. Completion of the merger is subject
to the satisfaction of certain conditions.
The management fees paid to Citibank, amounted to $122,068 for the period
November 1, 1997 (Commencement of Operations) to April 30, 1998. The Management
fees are computed at the annual rate of 0.60% of the Portfolio's average daily
net assets. The Portfolio pays the Subadviser the following fees, which are
accrued daily and payable monthly and are at the annual rates equal to the
percentages of the aggregate assets of the Portfolio allocated to the
Subadvisor: 0.625% on the first $25 million; 0.375% on the next $75 million;
0.250% on the next $400 million; and 0.20% on assets in excess of $500 million.
The fees paid to the Subadviser amounted to $246,585 for the period November 1,
1997 (Commencement of Operations) to April 30, 1998. The Trust pays no
compensation directly to any Trustee or any other officer who is affiliated with
the Sub-Administrator, all of whom receive remuneration for their services to
the Trust from the Sub-Administrator or its affiliates.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $51,684,972 and $23,424,634
respectively, for the period ended April 30, 1998.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1998, as
computed on a federal income tax basis, are as follows:
Aggregate cost $125,610,932
- ------------------------------------------------------------------------------
Gross unrealized appreciation $ 24,403,389
Gross unrealized depreciation (2,778,245)
- ------------------------------------------------------------------------------
Net unrealized appreciation $ 21,625,144
- ------------------------------------------------------------------------------
5. LINE OF CREDIT The Portfolio, along with the other CitiFunds, entered into an
ongoing agreement with a bank which allows the Funds collectively to borrow up
to $60 million for temporary or emergency purposes. Interest on the borrowings,
if any, is charged to the specific fund executing the borrowing at the base rate
of the bank. The line of credit requires a quarterly payment of a commitment fee
based on the average daily unused portion of the line of credit. For the period
November 1, 1997 (Commencement of Operations) to April 30, 1998, the commitment
fee allocated to the Portfolio was $1,110. Since the line of credit was
established, there have been no borrowings.
<PAGE>
SMALL CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 1998
(Unaudited)
ISSUER SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS -- 97.9%
- -------------------------------------------------------------------------------
BASIC INDUSTRIES -- 8.0%
- -------------------------------------------------------------------------------
Atchison Casting Corp.* 161,900 $ 3,065,981
Carpenter Technology Corp. 19,900 1,155,444
Giant Cement Holdings Inc.* 7,900 223,175
Keystone Consolidated Industries Inc.* 250,800 2,962,575
LTV Corp. 476,000 6,188,000
Oil-Dri Corp. of America 205,600 3,276,750
Reliance Steel and Aluminum Co. 58,800 2,374,050
Tuscarora Inc. 12,900 206,400
------------
19,452,375
------------
CAPITAL GOODS -- 14.6%
- -------------------------------------------------------------------------------
American Buildings Co.* 75,600 2,627,100
Astro-Med Inc. 44,500 322,625
Commercial Intertech Corp. 155,900 3,361,594
D.R. Horton Inc. 188,300 3,471,781
ESCO Electronics Corp.* 187,600 3,447,150
Global Industrial Technologies Inc.* 215,800 3,870,912
JLG Industries Inc. 403,200 6,577,200
Perini Corp.* 62,900 625,069
Speedfam International Inc.* 86,500 2,508,500
Ultrak Inc.* 354,700 3,547,000
United Industrial Corp. 393,400 5,065,025
------------
35,423,956
------------
CONSUMER BASICS -- 15.5%
- -------------------------------------------------------------------------------
Cohr Inc.* 290,100 2,266,406
Dimon Inc. 332,900 4,868,663
Ekco Group Inc.* 611,100 4,468,669
MMI Companies Inc. 185,000 4,347,500
Matrix Pharmaceuticals, Inc.* 382,800 1,722,600
Nash Finch Co. 95,000 1,864,375
Orthologic Corp.* 362,000 2,172,000
RLI Corp. 50,700 2,750,475
Schultz Sav-O Stores Inc. 150,950 2,415,200
Schweitzer-Mauduit International Inc. 110,300 3,667,475
Standard Commercial Corp.* 438,400 5,808,800
ThermoTrex Corp.* 61,100 1,218,181
------------
37,570,344
------------
CONSUMER DURABLE GOODS -- 6.0%
- -------------------------------------------------------------------------------
Cavalier Homes Inc. 165,440 1,985,280
Coachmen Industries Inc. 186,500 4,639,187
Flexsteel Industries Inc. 127,700 1,779,819
Haskel International Inc. 150,600 1,524,825
Myers Industries Inc. 35,000 870,625
Republic Automotive Parts Inc.* 81,100 1,601,725
West Co. Inc. 76,600 2,365,025
------------
14,766,486
------------
CONSUMER NON-DURABLES -- 3.8%
- -------------------------------------------------------------------------------
Brookstone Inc.* 152,500 2,192,187
Haverty Furniture Companies Inc. 58,600 1,296,525
Little Switzerland Inc.* 300,000 2,400,000
Ridgeview Inc. 16,900 101,400
Syms Corp.* 218,700 3,239,494
------------
9,229,606
------------
CONSUMER SERVICES -- 3.1%
- -------------------------------------------------------------------------------
Aztar Corp.* 407,700 3,185,156
Cannondale Corp.* 266,400 4,229,100
------------
7,414,256
------------
ENERGY -- 1.6%
- -------------------------------------------------------------------------------
Atwood Oceanics Inc.* 33,100 1,810,157
Nuevo Energy Co. 57,400 2,029,635
------------
3,839,792
------------
FINANCE -- 13.4%
- -------------------------------------------------------------------------------
Allied Life Financial Corp. 119,600 2,870,400
Acceptance Insurance Co. 25,800 588,562
BankAtlantic Bancorp Inc. Class A 44,900 614,569
Centris Group Inc. 182,400 2,587,800
Downey Financial Corp. 97,674 3,388,067
FBL Financial Group Inc. Class A 85,600 2,461,000
Farm Family Holdings Inc.* 76,400 3,041,675
Flagstar Bancorp Inc. 138,200 3,878,238
GA Financial Inc. 86,400 1,706,400
Matrix Capital Corp.* 141,200 3,777,100
Ocwen Asset Investment Corp. 92,800 1,705,200
Penn-America Group Inc. 26,800 552,750
Presidential Life Corp. 28,600 582,725
Professionals Insurance Company Management Group* 27,300 1,126,125
Seibels Bruce Group Inc.* 343,400 2,747,200
Wilshire Financial Services Group Inc.* 37,500 904,688
------------
32,532,499
------------
GENERAL BUSINESS -- 1.7%
- -------------------------------------------------------------------------------
Ennis Business Forms Inc. 339,000 4,068,000
------------
MISCELLANEOUS -- 10.5%
- -------------------------------------------------------------------------------
Aehr Test Systems* 294,700 1,805,036
Commonwealth Industries Inc. 135,100 2,296,700
Duckwall-Alco Stores Inc.* 133,500 2,436,375
Flowserve Corp. 119,300 3,564,088
Kevco Inc.* 70,900 1,648,425
Ladish Inc.* 207,000 3,208,500
Manchester Equipment Inc.* 169,400 656,425
Rockshox Inc. 188,800 1,062,000
Rush Enterprises Inc.* 85,300 1,023,600
Spacehab Inc.* 233,000 2,592,125
Spectralink Corp.* 126,700 554,312
Symons International Group Inc. 84,400 1,582,500
Tropical Sportswear International Corp.* 111,300 1,892,100
Unisource Worldwide Inc. 88,500 1,122,844
------------
25,445,030
------------
SHELTER -- 9.3%
- -------------------------------------------------------------------------------
Ameron International Corp. 42,600 2,625,225
Beazer Homes USA Inc.* 186,000 4,533,750
Butler Manufacturing Co. 34,900 1,302,206
Engle Homes Inc. 33,300 511,988
Morgan Products Ltd.* 425,600 2,553,600
Patrick Industries Inc. 131,500 2,104,000
Ryland Group Inc. 153,300 3,209,719
Southern Energy Homes Inc.* 238,000 2,632,875
U.S. Home Corp.* 73,100 3,033,650
------------
22,507,013
------------
TECHNOLOGY -- 5.7%
- -------------------------------------------------------------------------------
Alliant Techsystems Inc.* 42,000 2,685,375
Interlink Computer Sciences Inc.* 176,600 916,112
Komag Inc.* 331,000 5,130,500
Radisys Corp.* 3,400 92,651
Read-Rite Corp.* 221,700 3,062,231
Trident Microsystems Inc.* 254,300 1,946,984
------------
13,833,853
------------
TRANSPORTATION -- 4.6%
- -------------------------------------------------------------------------------
Fritz Companies Inc.* 243,900 3,567,038
Kenan Transport Co. 70,200 2,316,600
Motor Cargo Industries Inc.* 253,000 3,162,500
Oshkosh Truck Corp. Class B 115,000 2,256,875
------------
11,303,013
------------
UTILITIES -- 0.1%
- -------------------------------------------------------------------------------
NRG Generating (U.S.) Inc.* 14,700 222,337
------------
TOTAL COMMON STOCKS 237,608,560
------------
SHORT-TERM -- 4.3%
- -------------------------------------------------------------------------------
State Street Bank Repurchase Agreement 5.00% due
05/01/98 proceeds at maturity $10,414,446
(collateralized by $6,755,000 U.S. Treasury
Bonds 11.25% due 2/15/15 valued at $10,622,427) 10,413,000
------------
TOTAL INVESTMENTS
(Identified Cost $210,661,984) 102.2% 248,021,560
OTHER ASSETS, LESS LIABILITIES (2.2) (5,457,170)
----- ------------
NET ASSETS 100.0% $242,564,390
===== ============
* Non income producing securities.
See notes to financial statements
<PAGE>
SMALL CAP VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $210,661,984) $248,021,560
Cash 555
Receivable for securities sold 96,797
Dividend and interest receivable 120,724
- --------------------------------------------------------------------------------
Total assets 248,239,636
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 5,441,013
Payable to affiliates-- Management fees (Note 2) 146,357
Accrued expenses and other liabilities 87,876
- --------------------------------------------------------------------------------
Total liabilities 5,675,246
- --------------------------------------------------------------------------------
NET ASSETS $242,564,390
- --------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $242,564,390
- --------------------------------------------------------------------------------
<TABLE>
SMALL CAP VALUE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998 (Unaudited)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income $ 828,770
Interest income 199,331
- ------------------------------------------------------------------------------------------
$ 1,028,101
- ------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 726,124
Custody and Fund Accounting fees 105,699
Audit fees 13,650
Legal fees 9,730
Trustees fees 2,548
Miscellaneous 3,916
- -------------------------------------------------------------------------------------------
Total expenses 861,667
- -------------------------------------------------------------------------------------------
Net investment income 166,434
- -------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net change in unrealized appreciation of investments 37,359,576
Less realized appreciation from contributed assets 30,313,261
- -------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 7,046,315
Net realized gain from investment transactions 7,176,125
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 14,222,440
- -------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $14,388,874
- -------------------------------------------------------------------------------------------
See notes to financial statements
</TABLE>
<PAGE>
SMALL CAP VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 166,434
Net realized gain on investment transactions 7,176,125
Net change in unrealized appreciation of investments 7,046,315
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 14,388,874
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 403,785,426
Value of withdrawals (175,609,910)
- --------------------------------------------------------------------------------
Net increase in net assets from capital transactions 228,175,516
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS: 242,564,390
NET ASSETS:
Beginning of period --
- --------------------------------------------------------------------------------
End of period $242,564,390
- --------------------------------------------------------------------------------
<PAGE>
SMALL CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted) $242,564
Ratio of expenses to average net assets 0.89%*
Ratio of net investment income to average net assets 0.17%*
Portfolio turnover 12%
- --------------------------------------------------------------------------------
* Annualized
See notes to financial statements
<PAGE>
SMALL CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Small Cap Value Portfolio (the "Portfolio"),
a separate series of The Asset Allocation Portfolios (the "Portfolio Trust"), is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York. The Declaration of Trust permits
the Trustees to issue beneficial interests in the Portfolio. The Investment
Manager of the Portfolio is Citibank N.A., ("Citibank"). Signature Financial
Group (Grand Cayman), Ltd. ("SFG") acts as the Portfolio's Sub-Administrator. On
November 1, 1997, the CitiSelect Folio 200, CitiSelect Folio 300, CitiSelect
Folio 400 and CitiSelect Folio 500 each transferred a portion of their
investable assets in the amount of $16,913,632, $42,092,855, $81,236,129 and
$40,503,947 including $2,712,350, $7,246,592, $14,228,135 and $6,126,184,
respectively of unrealized appreciation, to the Portfolio in exchange for an
interest in the Portfolio.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. Investment Security Valuations Equity securities listed on securities
exchanges or reported through the NASDAQ system are valued at last sale prices.
Unlisted securities or listed securities for which last sales prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations maturing in sixty days or less), are valued on the basis
of valuations furnished by pricing services approved by the Board of Trustees
which take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, and other market data, without exclusive reliance on quoted prices or
exchange or over-the-counter prices. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which constitutes fair value as
determined by the Trustees. Securities, if any, for which there are no such
valuations or quotations are valued at fair value as determined in good faith by
or under guidelines established by the Trustees.
B. Income Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for U.S. federal income tax purposes. Dividend income is recorded
on the ex-dividend date.
C. U.S. Federal Income Taxes The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
D. Expenses The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
E. Repurchase Agreements It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreements.
Additionally, procedures have been established by the Portfolio to monitor, on a
daily basis, the market value of the repurchase agreement's underlying
investments to ensure the existence of a proper level of collateral.
F. Other Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs such duties and receives such compensation
from Citibank as from time to time are agreed to by Citibank and SFG. Citibank
has delegated the daily management of the Portfolio to Franklin Advisory
Services, Inc. ("the Subadviser"). Citibank is a wholly owned subsidiary of
Citicorp. Citicorp recently announced its intention to merge with The Travelers
Group. Completion of the merger is subject to the satisfaction of certain
conditions.
The management fees paid to Citibank, amounted to $193,543 for the period
November 1, 1997 (Commencement of Operations) to April 30, 1998. Management fees
are computed at the annual rate of 0.75% of the Portfolio's average daily net
assets less the aggregate amount, if any, payable by the Portfolio pursuant to
the Sub-Management Agreement with the Subadviser. The Portfolio pays the
Subadviser the following fees, which are accrued daily and payable monthly and
are at the annual rates equal to the percentages of the aggregate assets of the
Portfolio allocated to the Subadviser: 0.55% on first $250 million and 0.50% on
remaining assets.
The management fees paid to the Subadviser amounted to $532,581 for the
period November 1, 1997 (Commencement of Operations) to April 30, 1998.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $70,683,982 and $23,879,792,
respectively, for the period November 1, 1997 (Commencement of Operations) to
April 30, 1998.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1998, as
computed on a federal income tax basis, are as follows:
Aggregate cost $210,661,984
- --------------------------------------------------------------------------------
Gross unrealized appreciation $ 46,745,403
Gross unrealized depreciation (9,385,827)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 37,359,576
- --------------------------------------------------------------------------------
5. LINE OF CREDIT The Portfolio, along with the other CitiFunds entered into an
ongoing agreement with a bank which allows the Funds collectively to borrow up
to $60 million for temporary or emergency purposes. Interest on the borrowings,
if any, is charged to the specific fund executing the borrowing at the base rate
of the bank. The line of credit requires a quarterly payment of a commitment fee
based on the average daily unused portion of the line of credit. For the period
November 1, 1997 (Commencement of Operations) to April 30, 1998, the commitment
fee allocated to the Portfolio was $110. Since the line of credit was
established, there have been no borrowings.
<PAGE>
INTERMEDIATE INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 1998
(Unaudited)
PRINCIPAL
ISSUER AMOUNT VALUE
- -------------------------------------------------------------------------------
FIXED INCOME -- 97.2%
- -------------------------------------------------------------------------------
ASSET BACKED -- 22.3%
- -------------------------------------------------------------------------------
Aames Mortgage Trust
6.59% due 6/15/24 $ 1,974,000 $ 1,986,574
Aesop Funding II LLC
6.14% due 5/20/06 3,600,000 3,585,938
Asset Securitization Corp.
6.50% due 2/14/41 3,193,318 3,225,251
6.85% due 2/14/41 1,600,000 1,649,750
California Infrastructure & Economic Development
6.38% due 9/25/08 1,225,000 1,240,264
6.42% due 9/25/08 1,000,000 1,015,650
Contimortgage Home Equity Loan Trust
6.28% due 1/15/13 2,000,000 1,996,860
6.87% due 3/15/24 1,740,000 1,748,317
GMAC Commercial Mortgage Securities Corp.
6.83% due 12/15/03 3,303,085 3,364,501
7.22% due 10/15/28 500,000 522,130
Green Tree Financial Corp.
7.65% due 4/15/27 3,000,000 3,078,750
J.P. Morgan Commercial Mortgage Finance Corp.
6.373% due 1/15/30 1,457,463 1,465,661
Money Store Residential Trust
6.42% due 4/15/06 2,202,529 2,204,269
Morgan Stanley Capital Inc.
6.44% due 1/15/28 1,800,000 1,812,094
6.55% due 12/15/07 1,500,000 1,514,766
Nissan Auto Receivables Grantor Trust
6.15% due 2/17/03 3,867,766 3,878,635
Nomura Asset Securitization Corp.
6.979% due 3/17/28 1,300,000 1,319,500
SLM Student Loan Trust
5.783% due 1/25/07 2,500,000 2,500,500
Structured Asset Securities Corp.
5.976 due 1/25/13 1,775,000 1,774,445
6.79% due 6/12/04 2,789,044 2,856,592
UCFC Loan Trust
6.80% due 2/15/12 4,000,000 4,018,560
------------
46,759,007
------------
CORPORATE BONDS -- 14.1%
- -------------------------------------------------------------------------------
Allied Signal Inc.
6.20% 2/01/08 1,780,000 1,768,323
Atlantic City Electric Co.
7.01% due 8/23/02 1,495,000 1,545,905
Commonwealth Edison Electric Co.
7.00% due 7/01/05 2,043,000 2,108,764
Computer Associates International Inc.
6.375% due 4/15/05 940,000 932,950
Credit Suisse First Boston
6.50% 5/01/08 1,315,000 1,311,581
Detroit Edison Co.
6.69% due 3/17/03 1,000,000 1,020,420
Equitable Life Assurance Co.
6.95% due 12/01/05 2,275,000 2,331,283
GTE Corp.
6.36% due 4/15/06 2,225,000 2,215,388
Jackson National Life Insurance Co.
8.15% due 3/15/27 1,890,000 2,071,969
Lehman Brothers Holdings Inc.
6.00% due 2/26/01 900,000 895,347
6.15% due 3/15/00 900,000 900,675
Lockheed Martin Corp.
7.20% due 5/01/36 1,390,000 1,512,918
Merrill Lynch & Co., Inc.
6.00% due 2/12/03 720,000 714,161
Occidental Petroleum Corp.
6.40% due 4/01/03 2,125,000 2,120,346
Petroleum Geographic Services
6.625% due 3/30/08 1,460,000 1,456,569
Philadelphia Electric Co.
7.125% due 9/01/02 700,000 720,706
Raytheon Co.
5.95% due 3/15/01 480,000 478,291
6.30% due 3/15/05 725,000 721,592
Sears Roebuck Corp.
6.00% due 3/20/03 1,860,000 1,842,776
Sony Corp.
6.125% due 3/04/03 1,100,000 1,096,656
Suntrust Banks Inc.
6.00% due 1/15/28 1,800,000 1,748,466
------------
29,515,086
------------
MORTGAGE BACKED -- 18.8%
- -------------------------------------------------------------------------------
CMC Securities Corp.
7.00% due 10/25/27 2,847,014 2,860,594
CWMBS Inc.
6.75% due 10/25/27 1,919,633 1,922,897
6.75% due 4/25/28 4,577,222 4,590,084
7.50% due 9/25/14 1,447,422 1,454,196
Federal Home Loan Mortgage Corp.
6.00% due 8/01/00 4,132,679 4,121,603
6.00% due 3/15/09 1,156,012 1,103,263
6.50% due 2/01/11 90,409 91,228
6.50% due 4/01/11 287,303 289,906
6.50% due 7/01/11 395,111 398,690
6.50% due 8/01/11 86,371 87,153
6.50% due 9/15/22 2,281,584 2,240,218
Federal National Mortgage Association
6.50% due 5/01/11 444,841 446,923
6.50% due 7/01/11 381,495 382,803
6.50% due 8/25/22 1,500,000 1,465,808
7.00% due 6/01/03 329,207 334,145
7.00% due 7/01/03 927,969 941,888
7.35% due 8/17/21 1,940,690 2,061,377
8.00% due 5/01/26 747,508 774,680
8.00% due 6/01/26 434,699 450,508
8.00% due 7/01/26 181,439 188,044
First Union Lehman Brothers Mortgage Trust
6.479% due 3/18/04 958,472 967,923
6.65% due 12/17/07 4,500,000 4,552,335
Government National Mortgage Association
7.25% due 10/16/22 703,097 709,249
Norwest Asset Securitization Corp.
6.75% due 2/25/13 5,138,628 5,155,362
Residential Fundings Mortgage Securitization Inc.
6.50% due 3/25/13 1,917,000 1,896,033
------------
39,486,910
------------
U. S. TREASURY OBLIGATIONS -- 41.2%
- -------------------------------------------------------------------------------
United States Treasury Bonds
6.875% due 8/15/25 975,000 1,083,625
6.50% due 11/15/26 250,000 266,055
6.625% due 2/15/27 1,000,000 1,082,340
6.125% due 11/15/27 2,000,000 2,046,240
------------
4,478,260
------------
United States Treasury Notes
6.00% due 5/31/98 4,040,000 4,043,151
6.375% due 5/15/99 12,145,000 12,238,031
5.875% due 11/15/99 3,316,000 3,329,463
5.625% due 4/30/00 2,000,000 2,001,880
6.50% due 5/31/01 21,225,000 21,735,674
6.25% due 1/31/02 5,084,000 5,181,714
6.50% due 5/31/02 4,890,000 5,034,402
6.25% due 6/30/02 14,300,000 14,597,154
5.875% due 9/30/02 2,800,000 2,820,552
5.50% due 3/31/03 5,400,000 5,364,576
6.875% due 5/15/06 3,770,000 4,036,237
6.50% due 10/15/06 1,400,000 1,466,934
------------
81,849,768
------------
YANKEE BONDS -- 0.8%
- -------------------------------------------------------------------------------
Embotelladora Andina SA
7.00% due 10/01/07 1,705,000 1,661,745
------------
TOTAL FIXED INCOME 203,750,776
------------
PREFERRED STOCKS -- 1.6%
- -------------------------------------------------------------------------------
SI Financing Trust 120,000 3,240,000
------------
SHORT-TERM OBLIGATIONS -- 0.0%
- -------------------------------------------------------------------------------
United States Treasury Bills
4.74% due 6/11/98 84,541
------------
TOTAL INVESTMENTS 98.8% 207,075,317
(Identified Cost $204,816,632)
OTHER ASSETS, LESS LIABILITIES 1.2 2,561,999
----- ------------
Net Assets 100.0% $209,637,316
===== ============
See notes to financial statements
<PAGE>
INTERMEDIATE INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $204,816,632) $207,075,317
Cash 532
Interest receivable 2,688,533
Receivable for investments sold 1,356,562
- -------------------------------------------------------------------------------
Total assets 211,120,944
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 1,311,581
Payable to affiliates--Management fees (Note 2) 76,492
Accrued expenses and other liabilities 95,555
- -------------------------------------------------------------------------------
Total liabilities 1,483,628
- -------------------------------------------------------------------------------
NET ASSETS $209,637,316
- -------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $209,637,316
- -------------------------------------------------------------------------------
INTERMEDIATE INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD
NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
INTEREST INCOME (NOTE 1B) $5,807,353
EXPENSES:
Management fees (Note 2) $ 418,451
Custodian and Fund Accounting fees 109,175
Audit fees 15,150
Legal fees 8,730
Trustees fees 2,546
Miscellaneous 3,782
- -------------------------------------------------------------------------------
Total expenses 557,834
- -------------------------------------------------------------------------------
Net investment income 5,249,519
- -------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net unrealized appreciation of investments 2,258,685
Less unrealized appreciation from contributed
assets (Note 1) 2,724,761
- -------------------------------------------------------------------------------
Unrealized depreciation on investments (466,076)
Net realized gain from investment transactions 568,594
- -------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 102,518
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,352,037
- -------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
INTERMEDIATE INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998
(Unaudited)
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 5,249,519
Net realized gain on investment transactions 568,594
Unrealized depreciation of investments (466,076)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations 5,352,037
- -------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 301,410,005
Value of withdrawals (97,124,726)
- -------------------------------------------------------------------------------
Net increase in net assets from capital transactions 204,285,279
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 209,637,316
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- -------------------------------------------------------------------------------
End of period $209,637,316
- -------------------------------------------------------------------------------
INTERMEDIATE INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998
(Unaudited)
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $ 209,637
Ratio of expenses to average net assets 0.60%*
Ratio of net investment income to average net assets 5.65%*
Portfolio turnover 35%
- -------------------------------------------------------------------------------
*Annualized
See notes to financial statements
<PAGE>
INTERMEDIATE INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Intermediate Income Portfolio (the
"Portfolio"), a separate Series of the Asset Allocation Portfolios (the
"Trust"), is registered under the U.S. Investment Company Act of 1940, as
amended, as a no-load, diversified, open-end management investment company which
was organized as a trust under the laws of the State of New York. The
Declaration of Trust permits the Trustees to issue beneficial interests in the
Portfolio. The Investment Manager of the Portfolio is Citibank, N.A.
("Citibank") Signature Financial Group (Grand Cayman), Ltd. ("SFG") acts as the
Portfolio's Sub-Administrator. On November 1, 1997 (Commencement of Operations)
the CitiSelect Folio 200, CitiSelect Folio 300 and CitiSelect Folio 400,
transferred a portion of its investable assets in the amount of $48,473,071,
$89,250,334 and $23,537,184 including $806,088, $1,513,679 and $404,994,
respectively of unrealized appreciation to the Portfolio in exchange for an
interest in the Portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. Investment Security Valuations Debt securities (other than short-term
obligations maturing in sixty days or less), are valued on the basis of
valuations furnished by pricing services approved by Board of Trustees which
take into account appropriate factors such as institutional-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, and other market data, without exclusive reliance on quoted prices or
exchange or over-the-counter prices. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which constitutes fair value as
determined by the Trustees. Securities, if any, for which there are no such
valuations or quotations are valued at fair value as determined in good faith by
or under guidelines established by the Trustees.
B. Income Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for U.S. federal income tax purposes.
C. U.S. Federal Income Taxes The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
D. Repurchase Agreements It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreements.
Additionally, procedures have been established by the Portfolio to monitor, on a
daily basis, the market value of the repurchase agreement's underlying
investments to ensure the existence of a proper level of collateral.
E. Expenses The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
F. Other Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs such duties and receives such compensation
from Citibank as from time to time are agreed to by Citibank and SFG. Citibank
is a wholly-owned subsidiary of Citicorp. Citicorp recently announced its
intention to merge with The Travelers Group. Completion of the merger is subject
to the satisfaction of certain conditions.
The management fees paid to Citibank, amounted to $418,451, for the period
November 1, 1997 (Commencement of Operations) to April 30, 1998. The investment
management fees are computed at the annual rate of 0.45% of the Portfolio's
average daily net assets.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Sub-Administrator, all of whom receive remuneration
for their services to the Trust from the Sub-Administrator or its affiliates.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $120,036,562 and $66,596,324
respectively, for the period November 1, 1997 (Commencement of Operations) to
April 30, 1998.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1998, as
computed on a federal income tax basis, are as follows:
Aggregate cost $204,816,632
- -------------------------------------------------------------------------------
Gross unrealized appreciation $ 2,452,888
Gross unrealized depreciation (194,203)
- -------------------------------------------------------------------------------
Net unrealized appreciation $ 2,258,685
- -------------------------------------------------------------------------------
5. LINE OF CREDIT The Portfolio, along with the other CitiFunds Funds, entered
into an ongoing agreement with a bank which allows the Funds collectively to
borrow up to $60 million for temporary or emergency purposes. Interest on the
borrowings, if any, is charged to the specific fund executing the borrowing at
the base rate of the bank. The line of credit requires a quarterly payment of a
commitment fee based on the average daily unused portion of the line of credit.
For the period November 1, 1997 (Commencement of Operations) to April 30, 1998,
the commitment fee allocated to the Portfolio was $174. Since the line of credit
was established, there have been no borrowings.
<PAGE>
FOREIGN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 1998
(Unaudited)
PRINCIPAL
ISSUER CURRENCY AMOUNT VALUE
- -------------------------------------------------------------------------------
FIXED INCOME -- 87.7%
- -------------------------------------------------------------------------------
AUSTRALIA -- 7.6%
Australia Government Bonds
13.00% due 7/15/00 AUD 9,490,000 $ 7,196,387
9.50% due 8/15/03 AUD 3,670,000 2,825,137
10.00% due 2/15/06 AUD 100,000 82,294
10.00% due 10/15/07 AUD 530,000 450,576
8.75% due 8/15/08 AUD 3,600,000 2,860,691
7.50% due 9/15/09 AUD 9,483,000 7,003,973
------------
20,419,058
------------
BELGIUM -- 0.2%
Kingdom of Belgium
9.00% due 3/28/03 BF 1,600,000 51,147
8.50% due 10/01/07 BF 12,800,000 431,798
------------
482,945
------------
CANADA -- 10.9%
Canadian Government Bonds
9.00% due 12/01/04 CAD 6,100,000 5,130,066
7.25% due 6/01/07 CAD 7,500,000 5,942,515
6.00% due 6/01/08 CAD 16,260,000 11,908,763
8.00% due 6/01/23 CAD 7,165,000 6,553,949
------------
29,535,293
------------
COLOMBIA -- 1.0%
Republic of Colombia
3.00% due 12/22/00 SPV 350,000,000 2,684,950
------------
CROATIA -- 1.0%
Republic of Croatia
6.50% due 7/31/06 $ 610,137 561,326
6.50% due 7/31/10 $ 2,280,000 2,026,464
------------
2,587,790
------------
DENMARK -- 2.5%
Kingdom of Denmark
6.00% due 11/15/02 DKK 22,000,000 3,353,777
8.00% due 5/15/03 DKK 12,950,000 2,139,173
8.00% due 3/15/06 DKK 6,210,000 1,068,463
------------
6,561,413
------------
FINLAND -- 2.5%
Republic of Finland
7.25% due 4/18/06 FIM 16,000,000 3,379,050
6.00% due 4/25/08 FIM 9,000,000 1,772,939
8.25% due 10/15/10 FIM 7,000,000 1,631,725
------------
6,783,714
------------
FRANCE -- 7.0%
Government of France
8.25% due 2/27/04 FRF 2,700,000 $ 528,232
7.75% due 10/25/05 FRF 14,510,000 2,841,170
5.50% due 10/25/07 FRF 20,000,000 3,443,687
5.25% due 4/25/08 FRF 71,000,000 12,057,361
------------
18,870,450
------------
GERMANY -- 6.1%
Bundesrepublik
6.50% due 7/04/27 DEM 18,452,000 11,588,088
------------
Republic of Germany
7.125% due 12/20/02 DEM 3,620,000 2,217,932
7.375% due 1/03/05 DEM 1,410,000 893,591
6.00% due 7/04/07 DEM 2,890,000 1,718,169
------------
16,417,780
------------
GREAT BRITAIN -- 10.0%
U. K. Treasury Bonds
8.00% due 12/07/00 GBP 900,000 1,563,765
6.75% due 11/26/04 GBP 200,000 349,803
8.50% due 12/07/05 GBP 8,455,000 16,356,887
7.25% due 12/07/07 GBP 4,757,000 8,814,899
------------
27,085,354
------------
GREECE -- 6.0%
Hellenic Republic
11.10% due 6/17/03 GRD 64,800,000 206,938
------------
Republic of Greece
11.00 due 10/23/03 GRD 294,000,000 943,093
8.80 due 6/19/07 GRD 4,469,800,000 14,974,448
------------
16,124,479
------------
ITALY -- 2.4%
Republic of Italy
7.25% due 11/01/26 ITL 9,595,000,000 6,607,921
------------
JAPAN -- 7.8%
Japan Government Bonds
4.80% due 6/21/99 JPY 50,000,000 396,290
4.50% due 6/20/03 JPY 337,000,000 2,968,167
4.10% due 12/22/03 JPY 816,000,000 7,117,340
2.60% due 9/20/07 JPY 1,323,900,000 10,775,070
------------
21,256,867
------------
NETHERLANDS -- 1.1%
Dutch Government Bonds
6.25% due 7/15/98 NLG 4,900,000 2,436,780
8.25% due 2/15/07 NLG 800,000 484,926
------------
2,921,706
------------
NEW ZEALAND -- 1.3%
New Zealand Government Bonds
10.00% due 3/15/02 NED 920,000 555,104
8.00% due 4/15/04 NED 4,880,000 2,824,717
------------
3,379,821
------------
PHILIPPINES -- 0.1%
International Bank Reconstruction
10.25% due 4/11/02 PHP 19,000,000 $ 378,580
------------
SPAIN -- 2.6%
Government of Spain
10.25% due 11/30/98 ESP 22,000,000 149,204
10.90% due 8/30/03 ESP 328,400,000 2,758,625
10.50% due 10/30/03 ESP 300,000,000 2,496,422
10.00% due 2/28/05 ESP 187,760,000 1,584,803
------------
6,989,054
------------
SWEDEN -- 7.0%
Kingdom of Sweden
10.25% due 5/05/00 SEK 94,600,000 13,431,440
13.00% due 6/15/01 SEK 7,000,000 1,107,613
8.00% due 5/15/07 SEK 900,000 138,460
9.00% due 4/20/09 SEK 24,800,000 4,135,373
------------
18,812,886
------------
UNITED STATES -- 10.6%
Federal Home Loan Mortgage Corp.
4.647% due 2/15/02 $ 5,000,000 4,849,100
------------
Government National Mortgage Association
7.00% due 7/20/25 $ 2,270,884 2,320,912
7.00% due 9/20/25 $ 1,081,668 1,105,498
United States Treasury Inflationary
Index Notes
3.625% due 7/15/02 $ 20,620,932 20,382,555
------------
28,658,065
------------
TOTAL FIXED INCOME $236,558,126
------------
SHORT-TERM OBLIGATIONS -- 72.6%
- -------------------------------------------------------------------------------
American Express Credit
5.49% due 5/15/98 $ 4,500,000 4,490,393
5.53% due 5/15/98 $ 3,000,000 2,993,548
------------
Ameritech Corp.
5.49% due 5/13/98 $ 8,500,000 8,484,445
5.49% due 5/14/98 $ 1,000,000 998,018
------------
Bellsouth Telecommunications Inc.
5.48% due 6/05/98 $ 1,300,000 1,293,074
------------
Caisse D. Amortissement
5.51% due 5/04/98 $ 13,000,000 12,994,031
------------
Canada Government
5.50% due 5/08/98 $ 3,100,000 3,096,685
------------
Coca Cola Co.
5.49% due 5/01/98 $ 6,000,000 6,000,000
------------
E I du Pont de Nemours & Co.
5.50% due 6/22/98 $ 8,000,000 $ 7,936,444
------------
Ford Motor Credit Co.
5.52% due 5/07/98 $ 10,000,000 9,990,800
------------
General Electric Capital Corp.
5.51% due 5/04/98 $ 4,000,000 3,998,163
5.51% due 5/11/98 $ 1,700,000 1,697,398
5.66% due 6/11/98 $ 6,000,000 5,961,323
------------
International Business Machines
5.51% due 5/06/98 $ 10,000,000 9,992,347
------------
KFW International Financing Inc.
5.49% due 5/06/98 $ 3,700,000 3,697,179
5.49% due 5/11/98 $ 2,700,000 2,695,883
5.48% due 6/10/98 $ 3,100,000 3,081,124
------------
Kingdom of Sweden
5.48% due 6/11/98 $ 6,100,000 6,061,929
------------
Motorola Inc.
5.47% due 6/22/98 $ 4,400,000 4,365,235
5.50% due 5/21/98 $ 7,000,000 6,978,611
------------
National Rural Utilities
Coop. Financing
5.47% due 6/05/98 $ 13,000,000 12,930,865
------------
New Center Asset Trust
5.50% due 6/19/98 $ 9,100,000 9,031,876
------------
Oesterreichische Kontrollbank
5.48% due 5/22/98 $ 13,000,000 12,958,443
------------
Proctor & Gamble Co.
5.51% due 5/12/98 $ 4,900,000 4,891,750
5.51% due 5/14/98 $ 7,800,000 7,784,480
------------
Province of British Columbia
5.48% due 6/08/98 $ 7,900,000 7,854,303
------------
Shell Oil Co.
5.48% due 5/15/98 $ 11,200,000 11,176,132
------------
Southwestern Bell Capital Corp.
5.48% due 6/12/98 $ 4,900,000 4,868,673
5.50% due 5/22/98 $ 8,100,000 8,074,013
------------
State Street Repurchase Agreement
5.50% due 5/01/98 $ 967,000 967,000
------------
Tampa Electric Co.
5.49% due 5/14/98 $ 6,300,000 6,287,510
------------
United States Treasury Bills
5.08% due 6/25/98 $ 70,000 69,457
4.975% due 7/23/98 $ 70,000 69,219
4.99% due 7/23/98 $ 420,000 415,313
------------
Wisconsin Electric Power Co.
5.49% due 5/13/98 $ 1,900,000 1,896,523
------------
TOTAL SHORT-TERM OBLIGATIONS 196,082,187
------------
TOTAL INVESTMENTS 160.3% 432,640,313
(Identified Cost $432,584,120)
OTHER ASSETS, LESS LIABILITIES (60.3) (162,795,635)
----- ------------
TOTAL NET ASSETS 100.0% $269,844,678
===== ============
See notes to financial statements
FOREIGN CURRENCY LEGEND
- -------------------------------------------------------------------------------
Symbol ...............................................................Country
AUD ................................................................Australia
BF ...................................................................Belgium
CAD ...................................................................Canada
SPV .................................................................Columbia
USD ..................................................................Croatia
DKK ..................................................................Denmark
FIM ..................................................................Finland
FRF ...................................................................France
DEM ..................................................................Germany
GBP ............................................................Great Britain
GRD ...................................................................Greece
ITL ....................................................................Italy
JPY ....................................................................Japan
NLG ..............................................................Netherlands
NED ..............................................................New Zealand
PHP ..............................................................Philippines
ESP ....................................................................Spain
SEK ...................................................................Sweden
<PAGE>
FOREIGN BOND PORTFOLIO
(Unaudited)
SWAP AGREEMENTS WHICH WERE OPEN AT APRIL 30, 1998 ARE AS FOLLOWS:
UNREALIZED
NOTIONAL COUNTER APPRECIATION/
AMOUNT CURRENCY DESCRIPTION PARTY (DEPRECIATION)
------- ------- ---------- ------- ------------
3,195,108,916 GRD To make or receive Lehman Bros. (513,219)
quarterly interest
payments in Greek Drachma
the difference between A)
a fixed rate of 13.77% over
through 3/13/2000 based on
B) the 6 month LIBOR RATE
FUTURES CONTRACTS WHICH WERE OPEN AT APRIL 30, 1998 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF FACE VALUE EXPIRATION UNREALIZED
CONTRACTS CONTRACTS CURRENCY OF CONTRACTS DATE GAIN/LOSS
--------- ---------- -------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Japan Government 10-Year Bond (Buy) 17 JPY 1,700,000,000 June 1998 $220,739
========
</TABLE>
FORWARD CURRENCY CONTRACTS WHICH WERE OPEN AT APRIL 30, 1998 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
UNREALIZED
MARKET AGGREGATE DELIVERY DATE APPRECIATION
CURRENCY COUNTRY VALUE FACE VALUE OF CONTRACTS (DEPRECIATION)
-------- --------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Baht (Buy) ......... Thailand $ 1,325,990 $ 1,318,463 July 1998 7,527
Deutsche Mark (Sell) Germany 11,486,245 11,164,807 May 1998 (321,438)
Deutsche Mark (Buy) Germany 4,458,946 4,398,021 May 1998 60,925
Deutsche Mark (Buy) Germany 21,732,554 21,604,332 June 1998 128,222
Deutsche Mark (Sell) Germany 15,201,591 15,192,972 June 1998 (8,619)
Deutsche Mark (Buy) Germany 20,300,407 20,043,619 July 1998 256,788
Deutsche Mark (Sell) Germany 7,050,508 7,049,739 July 1998 (769)
Dollar (Buy) ....... Australia 3,288,515 3,287,326 July 1998 1,189
Dollar (Buy) ....... Canada 21,939,046 22,105,238 June 1998 (166,192)
Dollar (Sell) ...... Canada 1,667,309 1,673,937 March 1998 6,628
Dollar (Sell) ...... New Zealand 2,917,547 2,975,023 May 1998 57,476
Dollar (Buy) ....... New Zealand 81,172 81,741 July 1998 (569)
Drachma (Sell) ..... Greece 1,623,679 1,588,117 May 1998 (35,562)
Drachma (Sell) ..... Greece 122,943 121,450 June 1998 (1,493)
Drachma (Sell) ..... Greece 1,572,617 1,562,222 August 1998 (10,395)
Franc (Buy) ........ Belgium 9,717,597 9,600,344 May 1998 117,253
Franc (Buy) ........ France 26,931,428 26,695,331 May 1998 236,097
Franc (Sell) ....... France 189,946 184,496 May 1998 (5,450)
Franc (Buy) ........ Switzerland 11,366,773 11,185,618 May 1998 181,155
Franc (Sell) ....... Switzerland 8,037,612 8,136,983 May 1998 99,371
Franc (Sell) ....... Switzerland 28,341,338 28,730,443 June 1998 389,105
Franc (Buy) ........ Switzerland 25,757,099 25,798,328 June 1998 (41,229)
Guilder (Buy) ...... Netherlands 4,050,669 4,000,342 May 1998 50,327
Guilder (Sell) ..... Netherlands 135,849 131,842 May 1998 (4,007)
Guilder (Buy) ...... Netherlands 7,330,517 7,182,689 June 1998 147,828
Krone (Buy) ........ Norway 7,700,850 7,547,642 May 1998 153,208
Krone (Buy) ........ Norway 5,979,531 5,918,183 June 1998 61,348
Krone (Buy) ........ Norway 2,210,453 2,216,822 July 1998 (6,369)
Krone (Buy) ........ Denmark 2,667,174 2,669,833 July 1998 (2,659)
Krone (Buy) ........ Sweden 5,710,484 5,528,786 May 1998 181,698
Lira (Buy) ......... Italy 26,270,109 26,262,370 January 1998 7,739
Markka (Sell) ...... Finland 3,235,313 3,180,833 May 1998 (54,480)
Markka (Buy) ....... Finland 444,562 445,461 July 1998 (899)
Markka (Sell) ...... Finland 1,948,873 1,948,330 August 1998 (543)
Peseta (Buy) ....... Spain 11,741,003 11,750,816 May 1998 (9,813)
Pound (Sell) ....... Great Britain 340,324 340,068 June 1998 (256)
Pound (Buy) ........ Great Britain 18,103,896 18,063,962 June 1998 39,934
Pound (Buy) ........ Great Britain 9,384,828 9,377,575 January 1998 7,253
Pound (Buy) ........ Ireland 1,466,779 1,471,565 July 1998 (4,786)
Schilling (Buy) .... Austria 3,547,699 3,559,286 July 1998 (11,587)
Won (Buy) .......... Korea 816,870 787,770 May 1998 29,100
Yen (Buy) .......... Japan 67,233,793 70,818,429 May 1998 (3,584,636)
Yen (Sell) ......... Japan 5,444,450 5,629,364 May 1998 184,914
Yen (Buy) .......... Japan 261,736 267,495 June 1998 (5,759)
Yen (Sell) ......... Japan 3,304,321 3,371,183 June 1998 66,862
Yen (Sell) ......... Japan 1,313,020 1,319,242 July 1998 6,222
-----------
$(1,799,341)
===========
</TABLE>
<PAGE>
FOREIGN BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (Unaudited)
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note1A) (Identified Cost, $432,584,120) $432,640,313
Foreign currency at value (Cost $1,666,442) 1,578,476
Cash 779
Receivable for securities sold 10,222,065
Receivable for forward contracts 2,478,169
Interest receivable 3,830,128
Receivable for daily variation on future contracts 77,175
Other assets 71,504
- ------------------------------------------------------------------------------
Total assets 450,898,609
- ------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 176,041,587
Payable for forward contracts 4,277,510
Swap agreements 513,219
Payable to affiliates--Management fees (Note 2) 46,449
Accrued expenses 175,166
- ------------------------------------------------------------------------------
Total liabilities 181,053,931
- ------------------------------------------------------------------------------
NET ASSETS $269,844,678
- ------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interest $269,844,678
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD NOVEMBER 1, 1997
(COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998 (Unaudited)
- ------------------------------------------------------------------------------
INCOME:
Interest (Note 1B) (net of foreign tax of $3,781) $ 6,626,391
- ------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) $ 670,653
Custody and Fund Accounting fees 196,985
Auditing services 17,300
Legal services 10,730
Trustees fees 2,594
Printing 2,264
Miscellaneous 1,695
- ------------------------------------------------------------------------------
Total expenses 902,221
- ------------------------------------------------------------------------------
Net investment income 5,724,170
- ------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net unrealized depreciation of investments,
forward currency contracts, foreign currency,
futures, written options and other assets and
liabilities (1,231,560)
Add unrealized depreciation from contributed
assets (Note 1) 2,101,991
- ------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 870,431
Net realized (loss) from investments, forward
currency contracts, foreign currency transactions,
futures and written options (6,969,449)
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency (6,099,018)
- ------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (374,848)
- ------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
FOREIGN BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD NOVEMBER 1, 1997
(COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998 (Unaudited)
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 5,724,170
Net change in unrealized appreciation of investments,
forward currency contracts, foreign currency, futures,
written options and other assets and liabilities 870,431
Net realized (loss) from investments, forward currency contracts,
foreign currency transactions, futures and written options (6,969,449)
- ------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (374,848)
- ------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Proceeds from contributions 314,811,760
Value of withdrawals (44,592,234)
- ------------------------------------------------------------------------------
Net increase in net assets from capital transactions 270,219,526
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
NET ASSETS:
Beginning of period --
- ------------------------------------------------------------------------------
End of period $269,844,678
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR THE PERIOD NOVEMBER 1, 1997
(COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998 (Unaudited)
- ------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $269,845
Ratio of expenses to average net assets 0.74%+
Ratio of net investment income to average net assets 4.69%+
Portfolio turnover 285%
- ------------------------------------------------------------------------------
+ Annualized
See notes to financial statements
<PAGE>
FOREIGN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Foreign Bond Portfolio (the "Portfolio"), a
separate series of Asset Allocation Portfolios (the "Trust") is registered under
the U.S. Investment Company Act of 1940, as amended, as an open-end, management
investment company which was organized as a trust under the laws of the State of
New York. The Declaration of the Trust permits the Trustees to issue beneficial
interests in the Portfolio. Citibank, N.A. ("Citibank" or the Manager) is the
Investment Manager of the Portfolio. Signature Financial Group (Grand Cayman),
Ltd. ("SFG") acts as the Portfolio's Sub-Administrator. On November 1, 1997
(Commencement of Operations) the CitiSelect Folio 200, CitiSelect Folio 300,
CitiSelect Folio 400 and CitiSelect Folio 500 transferred a portion of its
investable assets in amount of $37,806,736, $69,713,620, $91,158,260,
$19,592,443 including $(434,418), $(669,939), $(836,241), $(161,393) of
unrealized depreciation to the Portfolio in exchange for an interest in the
Portfolio.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio is
as follows:
A. Investment Security Valuations Equity securities are valued at the last
sale price on the exchange on which they are primarily traded, or at the quoted
bid price for securities in which there were no sales during the day, or for
unlisted securities not reported on the NASDAQ system. Securities listed on a
foreign exchange are valued at the last quoted sale price available. Bonds,
foreign bonds and other fixed income securities (other than short-term
obligations maturing in sixty days or less) are valued on the basis of
valuations furnished by a pricing service, the use of which has been approved by
the Trustees. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques which take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
quoted prices or exchanges or over-the-counter prices. Short-term obligations
maturing in sixty days or less are valued at amortized cost which constitutes
fair value as determined by the Trustees. Portfolio securities for which there
are no such quotations or valuations are valued at fair value as determined in
good faith by or under guidelines established by the Trustees. Trading in
securities on most foreign exchanges and over-the-counter markets is normally
completed before the close of the New York Stock Exchange and may also take
place on days on which the New York Stock Exchange is closed. If events
materially affecting the value of foreign securities occur between the time when
the exchange on which they are traded closes and the time when the Portfolio's
net asset value is calculated, such securities may be valued at fair value in
accordance with procedures established by and under the general supervision of
the Trustees.
B. Income Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on debt securities when
required for U.S. federal income tax purposes. Gain and loss from principal
paydowns are recorded as interest income. Dividend income and other
distributions from investments are recorded on the ex-dividend date. Dividend
and interest income is recorded net of foreign taxes withheld. Reclaims of
recoverable foreign taxes are the responsibility of the qualified investors.
C. Foreign Currency Translation The accounting records of the Portfolio is
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange to determine the value of investments,
assets and liabilities. Purchases and sales of securities, as well as income and
expenses are translated at the prevailing rate of exchange on the respective
dates of such transactions. The Portfolio does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuation arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Translations of foreign currency
includes net exchange gains and losses, disposition of foreign currency and the
difference between the amount of investment income and expenses recorded and the
amount actually received or paid.
D. Forward Foreign Currency Contracts The Portfolio may enter into forward
foreign currency contracts ("contracts") in connection with planned purchases or
sales of securities, to hedge the U.S. dollar value of portfolio securities
denominated in a particular currency. The Portfolio could be exposed to risks if
the counter-parties to the contracts are unable to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purposes as unrealized gains or
losses until the contract settlement date.
E. U.S. Federal Taxes The Portfolio is considered a partnership under the
U.S. Internal Revenue Code. Accordingly, no provision for federal income or
excise tax is necessary.
F. Expenses The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG.
G. Futures contracts The Portfolio may engage in futures transactions. The
Portfolio may use futures contracts in order to protect the Portfolio from
fluctuation in interest rates without actually buying or selling debt
securities, or to manage the effective maturity or duration of fixed income
securities in the Portfolio in an effort to reduce potential losses or enhance
potential gains. Buying futures contracts tends to increase the Portfolio's
exposure to the underlying instrument. Selling futures contracts tends to either
decrease the Portfolio's exposure to the underlying instrument, or to hedge
other portfolio investments.
Upon entering into a futures contract, the Portfolio is required to deposit
with the broker an amount of cash or cash equivalents equal to a certain
percentage of the contract amount. This is known as the "initial margin".
Subsequent payments ("variation margin") are made or received by the Portfolio
each day, depending on the daily fluctuation of the value of the contract. The
daily changes in contract value are recorded as unrealized gains or losses and
the Portfolio recognizes a realized gain or loss when the contract is closed or
expires. Futures contracts are valued at the settlement price established by the
board of trade or exchange on which they are traded.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in the value of futures contracts primarily
corresponds with the value of their underlying instruments, which may not
correlate with the change in the value of the hedged instruments. In addition,
there is the risk the Portfolio may not be able to enter into a closing
transaction because of an illiquid secondary market. Futures contracts involve,
to varying degrees, risk of loss in excess of the futures variation margin
reflected in the Statement of Assets and Liabilities.
H. Purchased Options The premium paid by the Portfolio for the purchase of a
call or a put option is included in the Portfolio's Statement of Assets and
Liabilities as an investment and subsequently marked-to market to reflect the
current market value of the option. When an option which the Portfolio has
purchased expires on the stipulated expiration date, the Portfolio will realize
a loss in the amount of the cost of the option. When the Portfolio enters into a
closing sale transaction, the Portfolio will realize a gain or loss, depending
on whether the sale proceeds from the closing sale transaction are greater or
less than the cost of the option. When the Portfolio exercises a put option, the
Portfolio will realize a gain or loss from sale of the underlying security and
the proceeds from such sale will be decreased by the premium originally paid.
When the Portfolio exercises a call option, the cost of the security which the
Portfolio purchases upon exercise will be increased by the premium originally
paid.
I. Swap Agreements To the extent permitted under their respective investment
policies, the Portfolio may invest in swap agreements which involve the exchange
of cash payments based on the specified terms and conditions of such agreements.
A swap is an agreement to exchange the return generated by one instrument for
the return generated by another instrument. The value of each swap is determined
by the counterparty to the swap agreement using a methodology which discounts
the expected future cash receipts or disbursements related to the swap. The
Portfolio may also enter into interest rate swap agreements which involve the
exchange by the Portfolio with another party of their respective commitments to
pay or receive interest, e.g., an exchange of floating rate payments for fixed
rate payments with respect to a notional amount of principal. Interest rate
swaps are marked to market daily. Unrealized gains or losses are reported as an
asset or a liability in the statement of Assets and Liabilities. The cash paid
or received on a swap is recognized as a realized loss or gain when such a
payment is paid or received.
Entering into swap agreements involves, to varying degrees, elements of
credit risk, market risk, and interest rate risk in excess of the amount
recognized in the Statement of Assets and Liabilities. Such risks involve the
possibility that there is not a liquid market for these agreements, that the
counterparty to the agreements may default on its obligation to perform and that
there may be unfavorable changes in market conditions or interest rates.
J. Written Options When a Portfolio writes an option, the premium received by
the Portfolio is presented in the Portfolio's Statement of Assets and
Liabilities as an asset with an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market value
of the option written. Written options are valued at the last sale price or, in
the absence of a sale, the last offering price on the market on which it is
principally traded. If an option expires on its stipulated expiration date, or
if the Portfolio enters into a closing purchase transaction, the Portfolio
realizes gain (or loss if the cost of a closing purchase transaction exceeds the
premium received when the option was written) without regard to any unrealized
gain or loss on the underlying security, and the liability related to such
option is extinguished. If a written call option is exercised, the Portfolio
realizes a gain or loss from the sale of the underlying security and the
proceeds of the sale are increased by the premium originally received. If a
written put option is exercised, the amount of the premium originally received
reduces the cost of the security which the portfolio purchases upon exercise of
the option.
The risk in writing a call option is that the Portfolio relinquished the
opportunity to profit if the market price of the underlying security increases
and the option is exercised. In writing a put option the Portfolio assumes the
risk of incurring a loss if the market price of the underlying security
decreases and the option is exercised. In addition, there is a risk the
Portfolio may not be able to enter into a closing transaction because of an
illiquid secondary market, or if the counterparties do not perform under the
contracts terms.
K. Other Investment transactions are accounted for on the trade date.
Realized gains and losses on investment transactions are determined on the
identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolios. SFG
acts as Sub-Administrator and performs such duties and receives such
compensation from Citibank as from time to time are agreed to by Citibank and
SFG. Citibank has delegated the daily management of the Portfolio to Pimco (the
"Sub-Adviser"). Citibank is a wholly-owned subsidiary of Citicorp. Citibank
recently announced its intention to merge with the Travelers Group. Completion
of the merger is subject to the satisfaction of certain conditions.
The management fee paid to Citibank, amounted to $255,253 for the period
November 1, 1997 (Commencement of Operations) to April 30, 1998. Citibank
management fees are computed at the annual rate of 0.55% of the Portfolio's
average daily net assets less the aggregate amount (if any) payable by the
Portfolio Trust pursuant to the Sub-management Agreement with the Subadviser.
The Portfolio pays the Subadviser the following fees, which are accrued daily
and payable monthly and are at the annual rates equal to the percentages
specified below of the aggregate assets of the Portfolio allocated to the
Subadviser 0.35% on first $200 million, 0.30% on remaining assets.
The fees paid to the Sub-adviser amount to $415,400 for the period ended
April 30, 1998.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Sub-Administrator, all of whom receive remuneration
for their services to the Trust from the Sub-Administrator or its affiliates.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of securities, other
than short-term obligations, aggregated $654,744,490 and $646,939,131
respectively for the six months ended April 30, 1998, were as follows:
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1998, as
computed on a federal income tax basis, are as follows:
Aggregate Cost $432,584,120
- -------------------------------------------------------------------------
Gross unrealized appreciation $ 3,282,807
Gross unrealized depreciation (3,206,614)
- -------------------------------------------------------------------------
Net unrealized appreciation $ 56,193
- -------------------------------------------------------------------------
5. LINE OF CREDIT The Portfolio, along with the CitiFunds/CitiSelect, entered
into a line of credit agreement with a bank which allows the Portfolios
collectively to borrow up to $60 million for temporary or emergency purposes.
Interest on borrowings, if any, is charged to the specific Portfolio executing
the borrowing at the base rate of the bank. The line of credit requires a
quarterly payment of a commitment fee based on the average daily unused portion
of the line of credit. For the six months ended April 30, 1998, the commitment
fee allocated to the Portfolio was $234. Since the line of credit was
established, there have been no borrowings.
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 1998
(Unaudited)
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--98.2%
- --------------------------------------------------------------------------------
AUSTRIA -- 0.8%
- --------------------------------------------------------------------------------
Bohler-Uddeholm 31,283 $ 2,306,615
------------
AUSTRALIA -- 2.8%
- --------------------------------------------------------------------------------
Australia & New Zealand Banking Group 658,440 4,596,592
Pioneer International, Ltd. 641,253 1,831,968
Quantas Airways 736,479 1,124,062
------------
7,552,622
------------
CANADA -- 3.9%
- --------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce 74,481 2,648,595
Imasco, Ltd. 97,661 3,677,783
Noranda, Inc. 194,180 4,005,951
------------
10,332,329
------------
FINLAND -- 3.0%
- --------------------------------------------------------------------------------
Metra AB 104,655 2,632,419
The Rauma Group Oy 71,693 1,342,615
UPM-Kymmene Oy 136,958 4,111,305
------------
8,086,339
------------
FRANCE -- 9.5%
- --------------------------------------------------------------------------------
Elf Aquitaine 27,480 3,607,007
La Farge 4,646 426,650
La Farge Coppee 55,760 5,268,953
Pernod-Ricard 51,516 3,556,669
SEITA 111,821 5,022,737
Societe Generale 25,055 5,218,576
Usinor Sacilor 149,563 2,239,340
------------
25,339,932
------------
GERMANY -- 4.6%
- --------------------------------------------------------------------------------
Commerzbank AG 115,367 4,448,690
Draegerwerk AG 124,818 2,879,533
Dyckerhoff AG 10,781 3,712,718
Vossloh AG 21,227 1,383,945
------------
12,424,886
------------
GREAT BRITAIN -- 24.6%
- --------------------------------------------------------------------------------
Abbey National 230,727 4,334,072
Allied Domecq PLC 451,470 4,644,318
BTR PLC 1,197,982 3,982,680
B.A.T. Industries 456,388 4,305,576
Coats Viyella 1,714,716 2,667,430
Commercial Union 280,488 5,250,036
Cookson Group 1,050,730 4,719,037
Elementis 411,878 1,047,201
Hanson 770,119 4,544,047
Hillsdown Holdings 1,618,438 4,845,817
Hyder 221,420 3,562,951
Lex Service 366,400 3,707,907
Mckenchnie 264,175 2,200,589
National Westminister Bank 83,836 1,678,582
Powergen 273,236 3,692,897
Safeway 501,006 2,987,586
Tate & Lyle 277,800 2,230,445
Tomkins 913,067 5,376,049
------------
65,777,220
------------
HONG KONG -- 7.0%
- --------------------------------------------------------------------------------
Clp Holdings, Ltd. 545,500 2,619,752
Dao Heng Bank Group, Ltd. 867,000 2,563,168
Dickson Concepts International, Ltd. 612,833 846,542
HSBC Holdings 62,716 1,789,341
Hang Lung Development Co. 1,602,635 2,089,674
Hong Kong Telecommunications 850,200 1,591,518
New World Development Co. 873,790 2,487,357
South China Morning Post 1,577,486 946,980
Swire Pacific 736,000 3,677,150
------------
18,611,482
------------
IRELAND -- 3.1%
- --------------------------------------------------------------------------------
Greencore Group 612,240 3,738,663
Jefferson Smurfit Group 1,243,360 4,625,387
------------
8,364,050
------------
ITALY -- 1.7%
- --------------------------------------------------------------------------------
Eni Spa 664,100 4,459,576
------------
JAPAN -- 10.9%
- --------------------------------------------------------------------------------
Koito Manufacturing Co. 405,000 2,081,004
Kyocera Corp. 79,700 4,179,523
MOS Food Services 194,000 2,470,077
NSK, Ltd. 536,000 1,927,883
Nichicon Corp. 255,000 2,774,671
Nintendo Co. 45,900 4,210,564
Promise Co. 76,000 3,859,151
Sekisui Chemical Co. 219,000 1,203,060
Sony Corp. 24,100 2,004,995
Suzuki Motor Corp. 304,000 2,614,115
Yodogawa Steel Works 456,000 1,929,575
------------
29,254,618
------------
MALAYSIA -- 0.8%
- --------------------------------------------------------------------------------
Genting Berhad 458,600 1,524,568
Malaysian International Shipping Berhad 316,000 550,670
------------
2,075,238
------------
NETHERLANDS -- 7.4%
- --------------------------------------------------------------------------------
ABN Amro Holdings NV 149,597 3,643,469
Akzo Nobel NV 23,337 4,748,036
Hollandsche Beton Groep 101,730 2,120,109
ING Groep NV 82,133 5,338,381
Koninklijke PTT 74,956 3,873,772
------------
19,723,767
------------
NEW ZEALAND -- 0.4%
- --------------------------------------------------------------------------------
Fletcher Challenge Building 608,789 1,230,984
------------
NORWAY -- 1.9%
- --------------------------------------------------------------------------------
Kvaerner ASA 40,737 1,808,336
Nycomed Amersham 101,706 3,300,836
------------
5,109,172
------------
SINGAPORE -- 0.4%
- --------------------------------------------------------------------------------
Fraser & Neave, Ltd. 225,000 1,009,479
------------
SPAIN -- 2.2%
- --------------------------------------------------------------------------------
Banco Santander SA 113,270 5,987,023
------------
Sweden -- 2.5%
- --------------------------------------------------------------------------------
Electrolux AB 45,130 4,197,055
Gettinge Industries 109,745 2,438,148
------------
6,635,203
------------
SWITZERLAND -- 9.9%
- --------------------------------------------------------------------------------
Forbo Holdings 8,564 4,394,722
Nestle SA 2,463 4,776,628
Saurer AG 3,500 3,533,822
Schweizerische Rueckversicherungs-Gesellschaft 2,317 5,111,143
Schweizerische Industrie-Gesellschaft Holding AG 7,048 5,861,982
Sulzer AG 3,764 2,696,634
------------
26,374,931
------------
UNITED STATES -- 0.8%
- --------------------------------------------------------------------------------
Jardine Matheson 492,000 2,076,240
------------
WARRANTS -- 0.0%
- --------------------------------------------------------------------------------
Bolton Properties* Exp. 9/15/01 23,750 1,464
------------
TOTAL COMMON STOCKS 262,733,170
------------
SHORT-TERM OBLIGATIONS -- 2.3%
- --------------------------------------------------------------------------------
State Street Repurchase Agreement 5.00% due 5/01/98
proceeds at maturity $6,192,860 (collateralized
by $6,170,000 U.S. Treasury Note 5.625% due
11/30/99, valued at $6,316,538) 6,192,000
------------
TOTAL INVESTMENTS (Identified Cost $226,173,839) 100.5% 268,925,170
OTHER ASSETS, LESS LIABILITIES (0.5) (1,436,005)
----- ------------
NET ASSETS 100.0% $267,489,165
===== ============
* Non income producing
See notes to financial statements
<PAGE>
INTERNATIONAL PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $226,173,839) $268,925,170
Foreign currency, at value (Cost $428,131) 424,078
Cash 382
Dividends and interest receivable 1,269,765
Receivable for investments sold 350,810
- --------------------------------------------------------------------------------
Total assets 270,970,205
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 3,067,271
Payable to affiliates--Management fees (Note 2) 173,906
Accrued expenses and other liabilities 239,863
- --------------------------------------------------------------------------------
Total liabilities 3,481,040
- --------------------------------------------------------------------------------
NET ASSETS $267,489,165
- --------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $267,489,165
- --------------------------------------------------------------------------------
<TABLE>
INTERNATIONAL PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998 (Unaudited)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME: (Note 1B)
Dividend income (net of foreign withholding tax of $449,557) $2,840,752
Interest income 175,511
- ----------------------------------------------------------------------------------------------
Total investment income $ 3,016,263
- ----------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 995,465
Custody and Fund Accounting fees 178,672
Audit fees 17,300
Legal fees 10,730
Trustees fees 2,602
Miscellaneous 2,232
- ----------------------------------------------------------------------------------------------
Total expenses 1,207,001
- ----------------------------------------------------------------------------------------------
Net investment income 1,809,262
- ----------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investment transactions (2,435,338)
Net realized gain (loss) on foreign exchange currency transactions (8,067)
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) (2,443,405)
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 42,747,278
Less: unrealized appreciation from contributed assets 12,088,710
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investments 30,658,568
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) of investments 28,215,163
- ----------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $30,024,425
- ----------------------------------------------------------------------------------------------
See notes to financial statements
</TABLE>
<PAGE>
INTERNATIONAL PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 1,809,262
Net realized gain on investment transactions (2,443,405)
Unrealized appreciation of investments 30,658,568
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 30,024,425
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 564,751,446
Value of withdrawals (327,286,706)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital transactions 237,464,740
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS: 267,489,165
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- --------------------------------------------------------------------------------
End of period $267,489,165
- --------------------------------------------------------------------------------
INTERNATIONAL PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $267,489
Ratio of expenses to average net assets 0.97%*
Ratio of net investment income to average net assets 1.45%*
Portfolio turnover 19%
- --------------------------------------------------------------------------------
* Annualized
See notes to financial statements
<PAGE>
INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES International Portfolio (the "Portfolio"), a
separate series of The Asset Allocation Portfolios (the "Portfolio Trust"), is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York. The Declaration of Trust permits
the Trustees to issue beneficial interests in the Portfolio. The Investment
Manager of the Portfolio is Citibank, N.A. ("Citibank"). Signature Financial
Group (Grand Cayman), Ltd. ("SFG") acts as the Portfolio's Sub-Administrator. On
November 1, 1997 (Commencement of Operations) the CitiSelect Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400 and CitiSelect Folio 500 each
transferred a portion of their investable assets in the amount of $13,468,512,
$45,037,659, $115,488,801 and $69,902,939 including $657,730, $2,460,410,
$6,297,679 and $2,672,891, respectively, of unrealized appreciation to the
Portfolio in exchange for an interest in the Portfolio.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. Investment Security Valuations Equity securities are valued at the last
sale price on the exchange on which they are primarily traded, or at the quoted
bid price for securities in which there were no sales during the day, or for
unlisted securities not reported on the NASDAQ system. Securities listed on a
foreign exchange are valued at the last quoted sale price available. Bonds,
foreign bonds and other fixed income securities (other than short-term
obligations maturing in sixty days or less) are valued on the basis of
valuations furnished by a pricing service, the use of which has been approved by
the Board of Trustees. In making such valuations, the pricing service utilizes
both dealer-supplied valuations and electronic data processing techniques which
take into account appropriate factors such as institutional-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data, without exclusive reliance
upon quoted prices or exchanges or over-the-counter prices. Short-term
obligations maturing in sixty days or less are valued at amortized cost which
constitutes fair value as determined by the Trustees. Portfolio securities for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or under guidelines established by the Trustees.
Trading in securities on most foreign exchanges and over-the-counter markets is
normally completed before the close of the New York Stock Exchange and may also
take place on days on which the New York Stock Exchange is closed. If events
materially affecting the value of foreign securities occur between the time when
the exchange on which they are traded closes and the time when the Portfolio's
net asset value is calculated, such securities may be valued at fair value in
accordance with procedures established by and under the general supervision of
the Trustees.
B. Income Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on debt securities when
required for U.S. federal income tax purposes. Gain and loss from principal
paydowns are recorded as interest income. Dividend income and other
distributions from investments are recorded on the ex-dividend date. Dividend
and interest income is recorded net of foreign taxes withheld. Reclaims of
recoverable foreign taxes are the responsibility of the qualified investors.
C. Foreign Currency Translation The accounting records of the Portfolio are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange to determine the value of investments,
assets and liabilities. Purchases and sales of securities, as well as income and
expenses are translated at the prevailing rate of exchange on the respective
dates of such transactions. The Portfolio does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuation arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Translations of foreign currency
includes net exchange gains and losses, disposition of foreign currency and the
difference between the amount of investment income and expenses recorded and the
amount actually received or paid.
D. Forward Foreign Currency Contracts The Portfolio may enter into forward
foreign currency contracts ("contracts") in connection with planned purchases or
sales of securities, to hedge the U.S. dollar value of portfolio securities
denominated in a particular currency. The Portfolio could be exposed to risks if
the counter-parties to the contracts are unable to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purposes as unrealized gains or
losses until the contract settlement date.
E. U.S. Federal Taxes The Portfolio is considered a partnership under the
U.S. Internal Revenue Code. Accordingly, no provision for federal income or
excise tax is necessary.
F. Expenses The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
G. Other Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs such duties and receives such compensation
from Citibank as from time to time are agreed to by Citibank and SFG.
Citibank has delegated the daily management of the Portfolio to Hotchkis and
Wiley (the "Subadviser"). Citibank is a wholly-owned subsidiary of Citicorp.
Citicorp recently announced its intention to merge with The Travelers Group.
Completion of the merger is subject to the satisfaction of certain conditions.
The management fee paid to Citibank, amounted to $458,183 for the period
November 1, 1997 (Commencement of Operations) to April 30, 1998. Management fees
are computed at the annual rate of 0.80% of the Portfolio's average daily net
assets less the aggregate amount (if any) payable by the Portfolio Trust
pursuant to the Sub-management Agreement with the Subadviser. The Portfolio pays
the Subadviser the following fees, which are accrued daily and payable monthly
and are at the annual rates equal to a percentage of the aggregate assets of the
Portfolio allocated to the Subadviser: 0.60% on first $10 million, 0.55% on next
$40 million, 0.45% on next $100 million, 0.35% on next $150 million, 0.30% on
remaining assets.
The management fees paid to the Subadviser amounted to $537,282 for the
period ended April 30, 1998.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $46,022,137 and $46,351,760,
respectively, for the period November 1, 1997 (Commencement of Operations) to
April 30, 1998.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1998, as
computed on a federal income tax basis, are as follows:
Aggregate cost $226,173,839
- --------------------------------------------------------------------------------
Gross unrealized appreciation $ 55,646,091
Gross unrealized depreciation (12,894,760)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 42,751,331
- --------------------------------------------------------------------------------
5. LINE OF CREDIT The Portfolio, along with other CitiFunds, entered into an
ongoing agreement with a bank which allows the Funds collectively to borrow up
to $60 million for temporary or emergency purposes. Interest on the borrowings,
if any, is charged to the specific fund executing the borrowing at the base rate
of the bank. The line of credit requires a quarterly payment of a commitment fee
based on the average daily unused portion of the line of credit. For the period
November 1, 1997 (Commencement of Operations) to April 30, 1998, the commitment
fee allocated to the Portfolio was $242. Since the line of credit was
established, there have been no borrowings.
<PAGE>
Short-Term Portfolio
PORTFOLIO OF INVESTMENTS April 30, 1998
(Unaudited)
PRINCIPAL
ISSUER AMOUNT VALUE
- -------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS -- 99.4%
- -------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (YANKEE) -- 15.8%
- -------------------------------------------------------------------------------
Bank of Nova Scotia
5.65% due 3/29/99 $ 4,000,000 $ 3,995,504
Bank of Tokyo Mitsubishi Ltd.
6.00% due 5/12/98 5,000,000 5,000,000
Deutsche Bank
5.85% due 10/20/98 2,000,000 2,000,359
Societe Generale Bank
5.75% due 4/06/99 4,000,000 3,998,682
------------
14,994,545
------------
COMMERCIAL PAPER -- 32.9%
- -------------------------------------------------------------------------------
Bankers Trust N.Y
5.97% due 10/27/98 3,000,000 3,002,103
Barclays Bank PLC
5.82% due 10/05/98 2,900,000 2,900,115
Barton Capital Corp.
5.52% due 6/12/98 4,000,000 3,974,240
Centric Capital Corp.
5.52% due 6/08/98 4,000,000 3,976,693
FCC National Bank
5.837% due 6/24/98 5,000,000 5,004,820
Goldman Sachs Group LP
5.62% due 6/12/98 4,000,000 3,973,773
Receivables Capital Corp.
5.53% due 5/18/98 4,000,000 3,989,554
Repeat Offering Securities
5.55% due 5/18/98 4,500,000 4,463,231
------------
31,284,529
------------
FLOATING RATE NOTES -- 31.1%
- -------------------------------------------------------------------------------
Abbey National Treasury Services PLC
5.54% due 1/20/99 4,000,000 3,991,988
Credit Agricole Indosuez N.Y.
5.70% due 1/07/99 3,000,000 2,998,700
J. P. Morgan & Co.
5.75% due 3/10/99 5,000,000 5,000,750
PNC Bank
5.57% due 1/29/99 4,500,000 4,496,872
Rabobank Nederland N.V.
5.78% due 10/05/98 3,000,000 3,000,330
Royal Bank Of Canada
5.54% due 2/16/99 5,000,000 4,990,006
Toyota Motor Corp.
5.73% due 3/10/99 5,000,000 4,998,750
------------
29,477,396
------------
REPURCHASE AGREEMENTS -- 15.4%
- -------------------------------------------------------------------------------
CIBC/Wood Gundy Repurchase Agreement 5.40%
due 5/01/98 proceeds at maturity
$5,000,750 (collateralized by $4,930,000
FNMA Notes 6.55% due 2/12/05, valued
at $5,133,222) $ 5,000,000 $ 5,000,000
HSBC Repurchase Agreement
5.62% due 5/01/98 proceeds at maturity
$4,652,685 (collateralized by $4,334,000
U.S. Treasury Bonds 6.75% due 8/15/26,
valued at $4,754,918) 4,652,000 4,652,000
Sanwa Repurchase Agreement
5.45% due 5/01/98 proceeds at maturity
$5,000,757 (collateralized by $11,252,000
U.S. Treasury Strip Zero coupon due
5/15/11, valued at $5,100,388) 5,000,000 5,000,000
------------
14,652,000
------------
UNITED STATES GOVERNMENT AGENCY -- 4.2%
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Discount
Notes 5.42% due 5/28/98 4,000,000 3,983,740
TOTAL INVESTMENTS 99.4% 94,392,210
(Identified Cost $94,408,006)
OTHER ASSETS, LESS LIABILITIES 0.6 608,909
----- ------------
NET ASSETS 100.0% $ 95,001,119
===== ============
See notes to financial statements
<PAGE>
SHORT-TERM PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost $94,408,006) $94,392,210
Cash 854
Interest receivable 704,324
- --------------------------------------------------------------------------------
Total assets 95,097,388
- --------------------------------------------------------------------------------
LIABILITIES:
Payable to affiliate--Management fee (Note 2) 18,261
Accrued expenses and other liabilities 78,008
- --------------------------------------------------------------------------------
Total liabilities 96,269
- --------------------------------------------------------------------------------
NET ASSETS $95,001,119
- --------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $95,001,119
- --------------------------------------------------------------------------------
SHORT-TERM PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998
(Unaudited)
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INTEREST INCOME (Note 1B): $ 2,578,777
Expenses:
Management fees (Note 2) $112,483
Custody and Fund Accounting fees 82,547
Auditing fees 10,600
Legal fees 8,730
Trustees' fees 2,473
Other 3,527
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Total expenses 220,360
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Net investment income 2,358,417
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net unrealized depreciation of investments (15,796)
Less unrealized appreciation from contributed assets
(Note 1) 7,254
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Unrealized appreciation (depreciation) of investments (23,050)
Net realized gain (loss) from investment transactions 14,294
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Net realized and unrealized gain (loss) on investments (8,756)
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,349,661
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See notes to financial statements
<PAGE>
SHORT-TERM PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
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FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998
(Unaudited)
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 2,358,417
Unrealized appreciation (depreciation) of investments (23,050)
Net realized gain on investment transactions 14,294
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Net increase in net assets resulting from operations 2,349,661
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CAPITAL TRANSACTIONS:
Proceeds from contributions 314,176,886
Value of withdrawals (221,525,428)
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Net increase in net assets from capital transactions 92,651,458
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NET INCREASE IN NET ASSETS 95,001,119
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NET ASSETS:
Beginning of period --
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End of period $ 95,001,119
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SHORT-TERM PORTFOLIO
FINANCIAL HIGHLIGHTS
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FOR THE PERIOD NOVEMBER 1, 1997 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1998
(Unaudited)
RATIOS/SUPPLEMENTAL DATA:
Net assets (000's omitted) $95,001
Ratio of expenses to average net assets 0.49% *
Ratio of net investment income to average net assets 5.24% *
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* Annualized
See notes to financial statements
<PAGE>
SHORT-TERM PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Short-Term Portfolio (the "Portfolio"), a
separate series of the Asset Allocation Portfolios (the "Trust"), is registered
under the U.S. Investment Company Act of 1940, as amended, as an open-end,
management investment company which was organized as a trust under the laws of
the State of New York. The Declaration of Trust permits the Trustees to issue
beneficial interests in the Portfolio. Citibank, N.A. ("Citibank") acts as the
Investment Manager. Signature Financial Group (Grand Cayman), Ltd. ("SFG") acts
as the Portfolio's Sub-Administrator. On November 1, 1997 (Commencement of
Operations) the CitiSelect Folio 200, CitiSelect Folio 300, CitiSelect Folio 400
and CitiSelect Folio 500 transferred a portion of its investable assets in the
amount of $37,516,585, $13,484,141, $17,666,426 and $8,038,078 including $1,369,
$2,238, $2,239 and $1,408, respectively of unrealized appreciation to the
Portfolio in exchange for an interest in the Portfolio.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. Investment Security Valuations Debt securities (other than short-term
obligations maturing in sixty days or less), are valued on the basis of
valuations furnished by pricing services approved by Board of Trustees which
take into account appropriate factors such as institutional-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, and other market data, without exclusive reliance on quoted prices or
exchange or over-the-counter prices. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which constitutes fair value as
determined by the Trustees. Securities, if any, for which there are no such
valuations or quotations are valued at fair value as determined in good faith by
or under guidelines established by the Trustees.
B. Income Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for U.S. federal income tax purposes.
C. U.S. Federal Income Taxes The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
D. Repurchase Agreements It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Portfolio to
monitor, on a daily basis, the market value of the repurchase agreement's
underlying investments to ensure the existence of a proper level of collateral.
E. Expenses The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
F. Other Purchases, maturities and sales of money market instruments are
accounted for on the date of the transaction.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs such duties and receives such compensation
from Citibank as from time to time are agreed to by Citibank an SFG. Citibank is
a wholly owned subsidiary of Citicorp. Citicorp recently announced its intention
to merge with The Travelers Group. Completion of the merger is subject to the
satisfaction of certain conditions.
The management fees paid to Citibank is accrued daily and payable monthly.
The management fees are computed at an annual rate of 0.25% of the Portfolio's
average daily net assets. The management fees paid to Citibank amounted to
$112,483 for the period November 1, 1997 (Commencement of Operations) to April
30, 1998. The Trust pays no compensation directly to any Trustee or any other
officer who is affiliated with the Sub-Administrator, all of whom receive
remuneration for their services to the Trust from the Sub-Administrator or its
affiliates.
3. PURCHASES AND SALES OF INVESTMENTS Purchases, maturities and sales of money
market instruments aggregated $2,027,993,797 and $1,934,400,227, respectively,
for the period November 1, 1997 (Commencement of Operations) to April 30, 1998.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1998, as
computed on a federal income tax basis, are as follows:
Aggregate cost $ 94,408,006
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Gross unrealized appreciation $ 4,283
Gross unrealized depreciation (20,079)
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Net unrealized appreciation $ (15,796)
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5. LINE OF CREDIT The Portfolio, along with other CitiFunds, entered into an
agreement with a bank which allows the Funds collectively to borrow up to $60
million for temporary or emergency purposes. Interest on borrowings, if any, is
charged to the specific fund executing the borrowing at the base rate of the
bank. The line of credit requires a quarterly payment of a commitment fee based
on the average daily unused portion of the line of credit. For the period ended
April 30, 1998, the commitment fee allocated to the Portfolio was $88. Since the
line of credit was established, there have been no borrowings.
