Large Cap Value Portfolio
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
Issuer Shares Value
- -------------------------------------------------------------------------------
COMMON STOCKS -- 99.1%
- -------------------------------------------------------------------------------
Capital Goods -- 7.2%
- -------------------------------------------------------------------------------
Emerson Electronics Co. 25,000 $ 1,612,500
General Electric Co. 23,000 2,426,500
Raytheon Co. 40,085 2,773,381
-----------
6,812,381
-----------
Consumer Cyclicals -- 9.5%
- -------------------------------------------------------------------------------
Ford Motor Co. 35,000 2,237,812
General Motors Corp. 22,000 1,956,625
Masco Corp. 105,000 3,084,375
McGraw Hill Companies Inc. 32,000 1,768,000
----------
9,046,812
----------
Consumer Staples -- 6.8%
- -------------------------------------------------------------------------------
Avon Products Inc. 48,000 2,607,000
Heinz Co. 35,000 1,634,062
Pepsico Inc. 60,000 2,216,250
-----------
6,457,312
-----------
Energy -- 11.2%
- -------------------------------------------------------------------------------
BP Amoco PLC 15,000 1,697,813
Chevron Corp. 20,000 1,995,000
Conoco Inc. 68,000 1,844,500
Exxon Corp. 30,000 2,491,875
Mobil Corp. 25,000 2,618,750
-----------
10,647,938
-----------
Finance -- 19.4%
- -------------------------------------------------------------------------------
Banc One Corp. 38,200 2,253,800
BankAmerica Corp. 30,000 2,160,000
Chase Manhattan Corp. 35,000 2,896,250
Cigna Corp. 25,000 2,179,687
Hartford Financial
Services Group 42,000 2,475,375
Marsh & McLenman
Companies Inc. 30,000 2,296,875
Mellon Bank Corp. 42,000 3,121,125
Unum Corp. 20,000 1,092,500
-----------
18,475,612
-----------
Healthcare -- 12.7%
- -------------------------------------------------------------------------------
Abbott Labs 48,000 2,325,000
American Home
Products Corp. 46,000 2,806,000
Baxter International Inc. 35,000 2,205,000
Bristol Myers Squibb Co. 40,000 2,542,500
Pharmacia & Upjohn Inc. 40,000 2,240,000
-----------
12,118,500
-----------
- -------------------------------------------------------------------------------
Raw & Intermediate Materials -- 3.7%
- -------------------------------------------------------------------------------
E. I. du Pont
de Nemours & Co. 30,000 2,118,750
International Paper Co. 27,000 1,439,438
-----------
3,558,188
-----------
Technology -- 6.7%
- -------------------------------------------------------------------------------
Pitney Bowes Inc. 47,000 3,287,062
Xerox Corp. 53,000 3,113,750
-----------
6,400,812
-----------
Utilities -- 21.9%
- -------------------------------------------------------------------------------
Ameritech Corp. 35,000 2,395,313
AT&T Corp. 55,500 2,802,750
Duke Power Co. 40,005 2,240,280
Enron Corp. 45,000 3,386,250
GTE Corp. 34,800 2,329,425
Sprint Corp. 20,000 2,051,250
Unicom Corp. 60,000 2,328,750
Williams Companies Inc. 70,000 3,307,500
-----------
20,841,518
-----------
Total Common Stocks
(Identified Cost
$83,580,684) 94,359,073
-----------
SHORT-TERM OBLIGATIONS AT
AMORTIZED COST -- 2.2%
- -------------------------------------------------------------------------------
State Street Bank & Trust
Repurchase Agreement
4.00% due 5/03/99
proceeds at maturity $2,095,698
(collateralized by $2,130,000
FNMA 5.80% due 3/15/02,
valued at $2,141,410) 2,095,000
-----------
Total Investments
(Identified Cost
$85,675,684) 101.3% 96,454,073
Other Assets,
Less Liabilities (1.3) (1,224,462)
----- -----------
Net Assets 100.0% $95,229,611
===== ===========
See notes to financial statements
1
<PAGE>
Large Cap Value Portfolio
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
================================================================================
Assets:
Investments at value (Note 1A) (Identified Cost, $85,675,684) $96,454,073
Cash 654
Receivable for investments sold 698,777
Dividends and interest receivable 152,220
- --------------------------------------------------------------------------------
Total assets 97,305,724
- --------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,915,880
Payable to affiliates--Management fee (Note 2) 47,105
Accrued expenses and other liabilities 113,128
- --------------------------------------------------------------------------------
Total liabilities 2,076,113
- --------------------------------------------------------------------------------
Net Assets $95,229,611
================================================================================
Represented by:
Paid-in capital for beneficial interests $95,229,611
================================================================================
Large Cap Value Portfolio
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1999 (Unaudited)
================================================================================
Investment Income (Note 1B):
Dividend income $1,205,604
Interest income 37,428
- --------------------------------------------------------------------------------
Total investment income $ 1,243,032
- --------------------------------------------------------------------------------
Expenses:
Management fees (Note 2) 344,489
Custody and fund accounting fees 49,528
Legal fees 14,335
Audit fees 13,835
Trustees fees 3,375
Other 13,073
- --------------------------------------------------------------------------------
Total expenses 438,635
- --------------------------------------------------------------------------------
Net investment income 804,397
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments:
Net unrealized appreciation
of investments 17,959,765
Net realized loss from
investment transactions (8,417,842)
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 9,541,923
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $10,346,320
================================================================================
See notes to financial statements
2
<PAGE>
Large Cap Value Portfolio
STATEMENT OF CHANGES IN NET ASSETS
For the period
Six Months November 1, 1997
Ended (Commencement
April 30, 1999 of Operations) to
(Unaudited) October 31, 1998
================================================================================
Increase (Decrease) in Net Assets
from Operations:
Net investment income $ 804,397 $ 1,551,855
Net realized gain (loss) on
investment transactions (8,417,842) 8,655,223
Unrealized appreciation
(depreciation) of investments 17,959,765 (18,203,522)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 10,346,320 (7,996,444)
- --------------------------------------------------------------------------------
Capital Transactions:
Proceeds from contributions (Note 1) 3,421,769 279,612,949
Value of withdrawals (47,798,705) (142,356,278)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital transactions (44,376,936) 137,256,671
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets: (34,030,616) 129,260,227
- --------------------------------------------------------------------------------
Net Assets:
Beginning of period 129,260,227 __
- --------------------------------------------------------------------------------
End of period $ 95,229,611 $129,260,227
================================================================================
Large Cap Value Portfolio
FINANCIAL HIGHLIGHTS
For the period
Six Months November 1, 1997
Ended (Commencement
April 30, 1999 of Operations) to
(Unaudited) October 31, 1998
================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) $95,230 $129,260
Ratio of expenses to average net assets 0.76%* 0.78%*
Ratio of net investment income to average
net assets 1.40%* 1.20%*
Portfolio turnover 79% 61%
================================================================================
*Annualized
See notes to financial statements
3
<PAGE>
Large Cap Value Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. Significant Accounting Policies Large Cap Value Portfolio (the "Portfolio"),
a separate series of 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) CitiSelect Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400 and CitiSelect Folio 500 transferred
a portion of their investable assets in the amounts 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 total investable assets and
contributions, are included in the November 1, 1997 (Commencement of Operations)
to October 31, 1998, "Proceeds from contributions" on the Statement of Changes
in Net Assets.
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.
4
<PAGE>
Large Cap Value Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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 certain duties and receives compensation from
Citibank as from time to time are agreed to by Citibank and SFG. Citibank had
delegated the daily management of the Portfolio to Miller Anderson & Sherrerd
LLP, but effective January 22, 1999 Citibank delegated the daily management of
the Portfolio to SSBC Fund Management, Inc., (the "Subadviser"), an affiliate of
Citibank. Citibank is a wholly-owned subsidiary of Citicorp, which in turn, is a
wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was formed as a result
of the merger of Citicorp and Travelers Group, Inc. which was completed on
October 8, 1998.
The management fee paid to Citibank amounted to $126,883 for the six months
ended April 30, 1999. Citibank management fees are computed at the annual rate
of 0.60% 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 fee, which
is accrued daily and payable monthly and is at the annual rates equal to the
percentages of the aggregate assets of the Portfolio allocated to the
Subadvisers. Miller Anderson & Sherrerd LLP fee structure was: 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, and for SSBC Fund
Management, Inc. the fee structure is: 0.65% on the first $10 million; 0.50% on
the next $10 million; 0.40% on the next $10 million; and 0.30% on assets in
excess of $30 million. The fees
5
<PAGE>
Large Cap Value Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
paid to the Subadviser amounted to $217,606 of which $116,277 was paid to Miller
Anderson & Sherrerd LLP and $101,329 to SSBC Fund Management, Inc. for the six
months ended April 30, 1999.
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 $88,425,320 and $129,423,878
respectively, for the six months ended April 30, 1999.
4. Federal Income Tax Basis Of Investments The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1999, as
computed on a federal income tax basis, are as follows:
Aggregate cost $85,675,684
================================================================================
Gross unrealized appreciation $12,038,982
Gross unrealized depreciation (1,260,593)
- --------------------------------------------------------------------------------
Net unrealized appreciation $10,778,389
================================================================================
5. Line of Credit The Portfolio, along with various other portfolios in the
CitiFunds Family, entered into an ongoing agreement with a bank which allows the
Portfolios collectively to borrow up to $75 million for temporary or emergency
purposes. Interest on the 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,
1999, the commitment fee allocated to the Portfolio was $130. Since the line of
credit was established, there have been no borrowings.
6
<PAGE>
Small Cap Value Portfolio
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
Issuer Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 87.7%
- --------------------------------------------------------------------------------
Commercial Services -- 2.9%
- --------------------------------------------------------------------------------
Nash Finch Co. 72,500 $ 688,750
Reynolds & Reynolds Co. 74,800 1,706,375
Unisource Worldwide
Inc. 184,000 1,495,000
----------
3,890,125
----------
Consumer Durable Goods -- 3.4%
- --------------------------------------------------------------------------------
Cannondale Corp.* 66,000 627,000
Coachmen Industries Inc. 37,500 594,562
D.R. Horton Inc. 48,500 936,656
Engle Homes Inc. 55,500 645,187
Flexsteel Industries Inc. 89,200 1,165,175
Rockshox Inc.* 124,900 175,641
TBC Corp.* 70,000 542,500
----------
4,686,721
----------
Consumer Non-Durables -- 9.9%
- --------------------------------------------------------------------------------
Dimon Inc. 200,000 875,000
Scweitzer-Mauduit
International Inc. 90,800 1,503,875
Sola International Inc.* 89,700 1,334,288
Standard Commercial
Corp. 479,000 2,125,563
Timberland Co.* 43,400 3,005,450
Tropical Sportswear
International Corp.* 109,500 2,402,156
Wolverine World
Wide Inc. 226,000 2,712,000
----------
13,958,332
----------
Consumer Services -- 2.0%
- --------------------------------------------------------------------------------
Aztar Corp.* 407,700 2,828,419
----------
Electronic Technology -- 5.1%
- --------------------------------------------------------------------------------
Aehr Test Systems* 260,000 1,170,000
Cordant Technologies Inc. 13,000 599,625
ESCO Electronics Corp.* 129,200 1,251,625
Flir Systems Inc.* 35,500 488,125
Ladish Inc.* 249,000 1,665,187
Spacehab Inc.* 233,000 1,281,500
United Industrial Corp. 58,900 692,075
----------
7,148,137
----------
Energy Minerals -- 1.8%
- --------------------------------------------------------------------------------
Nuevo Energy Co.* 163,000 2,587,625
----------
Finance -- 13.4%
- --------------------------------------------------------------------------------
Acceptance Insurance
Co.* 96,500 1,357,031
Centris Group Inc. 170,900 1,943,988
Executive Risk Inc. 8,200 588,350
HCC Holdings 86,000 1,816,750
MMI Companies Inc. 128,400 1,990,200
Matrix Capital Corp 116,400 1,746,000
PBOC Holdings Inc.* 85,000 743,750
PMI Group Inc. 17,500 976,719
Penn-America
Group Inc. 112,100 1,177,050
Presidential Life Corp. 113,800 2,041,288
Professionals Group* 59,200 1,505,900
Seibels Bruce
Group Inc.* 276,300 1,139,738
Stancorp Financial
Group Inc.* 45,000 1,082,813
Symons International
Group Inc.* 110,600 622,125
----------
18,731,702
----------
Health Technology -- 2.8%
- --------------------------------------------------------------------------------
Orthologic Corp.* 357,800 1,073,400
Skyepharma 15,301 154,923
West Pharmaceutical
Services Inc. 83,200 2,750,800
----------
3,979,123
----------
Industrial Services -- 8.4%
- --------------------------------------------------------------------------------
Atwood Oceanics Inc.* 82,900 2,891,138
ENSCO International Inc. 138,400 2,569,050
Perini Corp.* 123,800 603,525
R&B Falcon Corp.* 139,140 1,391,400
Rowan Companies Inc.* 181,600 2,905,600
Santa Fe International
Corp. 69,100 1,485,650
----------
11,846,363
----------
Non-Energy Minerals -- 4.1%
- --------------------------------------------------------------------------------
Carpenter Technology
Corp. 50,400 1,578,150
LTV Corp. 410,100 2,614,388
Lone Star Technologies
Inc.* 92,100 1,582,967
----------
5,775,505
----------
Process Industries -- 1.3%
- --------------------------------------------------------------------------------
RPM Inc. 90,400 1,271,250
Tuscarora Inc. 48,000 606,000
----------
1,877,250
----------
7
<PAGE>
Small Cap Value Portfolio
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
Issuer Shares Value
- --------------------------------------------------------------------------------
Producer Manufacturing -- 19.5%
- --------------------------------------------------------------------------------
Baldor Electric Co. 88,700 $ 1,713,019
Commercial Intertech
Corp. 115,800 1,483,687
Commonwealth
Industries Inc. 136,500 1,313,813
Easco, Inc. 190,400 1,428,000
Global Industrial
Technologies Inc.* 307,600 4,056,475
Holophane Corp.* 75,800 1,956,587
JLG Industries Inc. 292,500 4,698,281
Keystone Consolidated
Industries Inc.* 181,400 1,235,787
Myers Industries Inc. 92,900 2,101,863
Patrick Industries Inc. 93,100 1,187,025
Superior Industries
International Inc. 69,300 1,732,500
Timken Co. 133,000 2,967,562
Watts Industries Inc. 97,900 1,505,212
----------
27,379,811
----------
Retail Trade -- 3.7%
- --------------------------------------------------------------------------------
Duckwall-Alco
Stores Inc.* 65,400 600,863
Little Switzerland Inc.* 83,800 78,562
Schultz Sav-O Stores Inc. 150,950 2,415,200
Syms Corp.* 250,000 2,015,625
------------
5,110,250
------------
Technology Services -- 1.4%
- --------------------------------------------------------------------------------
Ultrak Inc.* 326,200 1,916,425
------------
Transportation -- 8.0%
- --------------------------------------------------------------------------------
Air Express International
Corp. 48,600 1,063,125
Conrad Industries Inc.* 28,200 169,200
Fritz Companies Inc.* 269,600 2,729,700
Kenan Transport Co. 83,200 2,600,000
Midwest Express
Holdings Inc.* 51,300 1,603,125
Motor Cargo
Industries Inc.* 192,600 1,083,375
Tidewater Inc. 75,000 1,987,500
------------
11,236,025
------------
Total Common Stocks
(Identified Cost
$143,399,069) 122,951,813
------------
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST -- 11.4%
- --------------------------------------------------------------------------------
State Street Bank
Repurchase Agreement
4.00% due 5/03/99
proceeds at maturity
$16,042,346 (collateralized by
$16,120,000 Federal National
Mortgage Association
5.30% due 1/08/01;
valued at $16,358,386) 16,037,000
------------
Total Investments
(Identified Cost
$159,436,069) 99.1% 138,988,813
Other Assets,
Less Liabilities 0.9% 1,269,576
----- ------------
Net Assets 100.0% $140,258,389
===== ============
* Non income producing securities.
See notes to financial statements
8
<PAGE>
Small Cap Growth Portfolio
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
================================================================================
Assets:
Investments at value (Note 1A)
(Identified Cost, $159,436,069) $138,988,813
Cash 55,868
Receivable for securities sold 1,416,319
Dividend and interest receivable 49,785
- --------------------------------------------------------------------------------
Total assets 140,510,785
- --------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 21,600
Payable to affiliates -- Management fees (Note 2) 23,190
Accrued expenses and other liabilities 207,606
- --------------------------------------------------------------------------------
Total liabilities 252,396
- --------------------------------------------------------------------------------
Net Assets $140,258,389
================================================================================
Represented by:
Paid-in capital for beneficial interests $140,258,389
================================================================================
Small Cap Value Portfolio
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1999 (Unaudited)
================================================================================
Dividend income $861,930
Interest income 67,785
- --------------------------------------------------------------------------------
$ 929,715
- --------------------------------------------------------------------------------
Expenses:
Management fees (Note 2) 597,726
Custody and fund accounting fees 26,693
Audit fees 13,835
Legal fees 11,336
Trustees fees 3,594
Other 41,871
- --------------------------------------------------------------------------------
Total expenses 695,055
- --------------------------------------------------------------------------------
Net investment income 234,660
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments:
Unrealized appreciation of investments 24,268,482
Net realized loss from investment transactions (22,928,761)
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1,339,721
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $1,574,381
================================================================================
See notes to financial statements
9
<PAGE>
Small Cap Value Portfolio
STATEMENT OF CHANGES IN NET ASSETS
For the Period
Six Months November 1, 1997
Ended (Commencement
April 30, 1999 of Operations) to
(Unaudited) October 31, 1998
================================================================================
Increase (Decrease) in Net Assets from:
Net investment income $ 234,660 $ 433,451
Net realized gain (loss) on investment
transactions (22,928,761) 12,366,831
Unrealized appreciation (depreciation)
of investments 24,268,482 (75,028,999)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1,574,381 (62,228,717)
- --------------------------------------------------------------------------------
Capital Transactions:
Proceeds from contributions (Note 1) 3,708,766 434,934,898
Value of withdrawals (35,890,285) (201,840,654)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital transactions (32,181,519) 233,094,244
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets: (30,607,138) 170,865,527
- --------------------------------------------------------------------------------
Net Assets:
Beginning of period 170,865,527 --
- --------------------------------------------------------------------------------
End of period $140,258,389 $170,865,527
================================================================================
Small Cap Value Portfolio
FINANCIAL HIGHLIGHTS
For the Period
Six Months November 1, 1997
Ended (Commencement
April 30, 1999 of Operations) to
(Unaudited) October 31, 1998
================================================================================
Ratios/Supplemental Data:
Net Assets, end of period (000's omitted) $140,258 $170,866
Ratio of expenses to average net assets 0.87%* 0.89%
Ratio of net investment income
to average net assets 0.29%* 0.22%
Portfolio turnover 21% 47%
================================================================================
*Annualized
See notes to financial statements
10
<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, CitiSelect Folio 200, CitiSelect Folio 300,
CitiSelect Folio 400 and CitiSelect Folio 500 each transferred a portion of
their investable assets in the amounts 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 total investable assets and contributions are
included in the period November 1, 1997 (Commencement of Operations) to October
31, 1998. "Proceeds from contributions" in the Statement of Changes in Net
Assets.
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 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.
11
<PAGE>
Small Cap Value Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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 certain duties and receives 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,
LLC ("the Subadviser"). Citibank is a wholly owned subsidiary of Citicorp, which
in turn, is a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was
formed as a result of the merger of Citicorp and Travelers Group, Inc. which was
completed on October 8, 1998.
The management fees paid to Citibank, amounted to $159,394 for the six
months ended April 30, 1999. 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 $438,332 for the
six months ended April 30, 1999.
3. Purchases And Sales Of Investments Purchases and sales of investments, other
than short-term obligations, aggregated $32,104,029 and $76,752,225,
respectively, for the six months ended April 30, 1999.
12
<PAGE>
Small Cap Value Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
4. Federal Income Tax Basis Of Investments The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1999, as
computed on a federal income tax basis, are as follows:
Aggregate Cost $159,436,069
================================================================================
Gross unrealized appreciation $ 12,285,702
Gross unrealized depreciation (32,732,958)
- --------------------------------------------------------------------------------
Net unrealized depreciation $(20,447,256)
================================================================================
5. Line of Credit The Portfolio, along with various other Portfolios in the
CitiFunds Family, entered into an ongoing agreement with a bank which allows the
Portfolios collectively to borrow up to $75 million for temporary or emergency
purposes. Interest on the 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,
1999, the commitment fee allocated to the Portfolio was $674. Since the line of
credit was established, there have been no borrowings.
13
<PAGE>
Foreign Bond Portfolio
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
Principal
Issuer Currency Amount Value
- ------------------------------------------------------------------
FIXED INCOME--65.7%
- ------------------------------------------------------------------
Belgium -- 0.0%
Kingdom of Belgium
9.00% due 3/28/03 EUR 39,662 $ 50,819
------------
Canada -- 1.3%
Canadian Government Bonds
5.25% due 9/01/03 CAD 2,960,000 2,050,543
------------
Denmark-- 0.7%
Nykredit
5.00% due 10/01/29 DKK 4,074,000 540,579
Unikredit Realkred
5.00% due 10/01/29 DKK 4,537,000 605,883
------------
1,146,462
------------
France -- 9.0%
Government of France
7.75% due 10/25/05 EUR 10,100,000 13,283,703
3.00% due 7/25/09 EUR 950,221 1,026,399
------------
14,310,102
------------
Germany -- 0.8%
Republic of Germany
5.625% due 1/04/28 EUR 1,114,842 1,316,690
------------
Greece-- 4.3%
Hellenic Republic
12.80% due 6/17/03 GRD 64,800,000 216,981
Republic of Greece
7.60% due 1/22/02 GRD 1,712,000,000 5,610,383
13.10% due 10/23/03 GRD 294,000,000 992,083
------------
6,819,447
------------
Italy -- 9.2%
Republic of Italy
4.75% due 5/01/03 EUR 8,578,237 9,597,618
6.50% due 11/01/27 EUR 3,910,000 5,010,326
SCCR Limited
3.109% due 5/15/00 EUR 200,000,000 108,983
------------
14,716,927
------------
Japan -- 14.9%
Government of Japan
4.50% due 6/20/03 JPY 10,900,000 105,678
4.10% due 12/22/03 JPY 2,459,000,000 23,778,707
------------
23,884,385
------------
Spain -- 1.7%
Government of Spain
6.00% due 1/31/29 EUR 2,245,982 2,729,007
------------
Sweden -- 5.0%
Kingdom of Sweden
10.25% due 5/05/00 SEK 52,100,000 $ 6,612,507
13.00% due 6/15/01 SEK 7,000,000 995,621
6.50% due 5/05/08 SEK 2,700,000 377,524
------------
7,985,652
------------
United States -- 18.8%
Associates Corp. of
North America
5.103% due 8/27/01 $2,700,000 2,698,264
Banc One Auto
Grantor Trust
6.27% due 11/20/03 $ 360,319 363,785
Chase Manhattan
Grantor Trust
6.61% due 9/15/02 $ 315,275 318,034
Daimler Benz
North America
5.23% due 6/10/00 $1,530,000 1,526,894
Emergent Home
Equity Loan Trust
6.745% due 5/15/12 $1,260,468 1,263,833
Euro Investment Bank
7.00% due 12/08/03 GBP 3,000,000 5,140,761
Federal National
Mortgage Association
5.50% due 2/25/05 $ 235,516 234,739
6.875% due 6/07/02 GBP 2,150,000 3,605,008
Government National
Mortgage Association
6.125% due 12/20/25 $ 149,829 152,826
6.125% due 11/20/26 $1,035,879 1,055,624
6.125% due 12/20/26 $1,128,811 1,150,856
6.625% due 9/20/25 $ 587,550 596,822
6.625% due 9/20/26 $ 335,516 341,877
6.875% due 4/20/25 $ 610,164 617,126
Student Loan
Marketing Association
4.967% due 10/25/04 $ 33,611 33,533
5.026% due 4/25/07 $4,760,083 4,750,421
5.057% due 4/25/06 $ 230,447 229,297
TCI Communications Inc.
5.675% due 4/01/02 $5,800,000 5,904,748
United States Treasury
Inflationary Index Notes
3.625% due 7/15/02 $ 102,709 102,324
------------
30,086,772
------------
Total Fixed Income
(Identified cost $107,008,244) $105,096,806
------------
14
<PAGE>
Foreign Bond Portfolio
PORTFOLIO OF INVESTMENTS (Continued) April 30, 1999
(Unaudited)
Principal
Issuer Currency Amount Value
- ------------------------------------------------------------------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST -- 52.3%
- ------------------------------------------------------------------
E.I. du Pont de
Nemours & Co.
4.83% due 5/04/99 $ 6,000,000 5,997,585
State Street Bank &
Trust Repurchase
Agreement
4.00% due 5/03/99
proceeds at maturity
$77,753,909 77,728,000
(Collateralized by $77,070,000
U.S. Treasury Note, 7.125%
due 2/29/00, valued at $79,285,763)
United States Treasury Bills
4.42% due 6/24/99 $ 40,000 39,735
------------
Total Short-Term
Obligations 83,765,320
------------
Total Investments
(Identified Cost
$190,773,564) 118.0% 188,862,126
Other Assets,
Less Liabilities (18.0) (28,819,025)
----- ------------
Net Assets 100.0% $160,043,101
===== ============
See notes to financial statements
- -----------------------------------------
Foreign Currency Legend
- -----------------------------------------
Symbol Country
- ------ -------
CAD................................Canada
DKK...............................Denmark
EUR................................Europe
GRD................................Greece
JPY.................................Japan
SEK................................Sweden
GBP........................United Kingdom
15
<PAGE>
Foreign Bond Portfolio
(Unaudited)
Forward foreign currency contracts which were open at April 30, 1999 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>
Dollar (Buy) Australia $ 3,071,873 $ 3,000,217 May 1999 $ 71,656
Dollar (Buy) Australia 11,801,634 11,574,687 May 1999 226,947
Dollar (Sell) Australia 6,929,173 6,900,000 May 1999 (29,173)
Dollar (Sell) Canada 1,936,231 1,913,820 May 1999 (22,411)
Drachma (Buy) Greece 808,636 817,899 May 1999 (9,263)
Drachma (Sell) Greece 3,393,967 3,397,760 May 1999 3,793
Euro (Sell) Europe 20,319,137 20,522,880 May 1999 203,743
Euro (Sell) Europe 4,233,154 4,227,372 May 1999 (5,782)
Euro (Buy) Europe 3,386,523 3,397,760 May 1999 (11,237)
Krona (Sell) Sweden 8,035,621 8,117,506 May 1999 81,885
Krone (Sell) Denmark 6,819,409 6,873,744 May 1999 54,335
Krone (Buy) Denmark 5,551,179 5,607,477 May 1999 (56,298)
Peso (Sell) Argentina 4,252,033 4,244,348 May 1999 (7,685)
Peso (Buy) Argentina 2,138,377 2,080,292 May 1999 58,085
Pound (Sell) Great Britain 9,423,995 9,499,060 May 1999 75,065
Yen (Sell) Japan 10,323,685 10,356,577 May 1999 32,892
Yen (Buy) Japan 4,231,711 4,227,372 May 1999 4,339
--------
$670,891
========
</TABLE>
16
<PAGE>
Foreign Bond Portfolio
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
================================================================================
Assets:
Investments, at value (Note1A) (Identified Cost, $190,773,564) $188,862,126
Foreign currency at value (Cost $1,139,278) 1,166,033
Cash 25
Receivable for securities sold 38,410,214
Interest receivable 2,093,420
Receivable for forward contracts 812,740
Receivable for daily variation on future contracts 45,541
Other assets 4,049
- --------------------------------------------------------------------------------
Total assets 231,394,148
- --------------------------------------------------------------------------------
Liabilities:
Payable for securities purchased 70,885,776
Payable for forward contracts 141,849
Payable to affiliates--Management fees (Note 2) 37,694
Accrued expenses 285,728
- --------------------------------------------------------------------------------
Total liabilities 71,351,047
- --------------------------------------------------------------------------------
Net Assets $160,043,101
================================================================================
Represented by:
Paid-in capital for beneficial interest $160,043,101
================================================================================
Foreign Bond Portfolio
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1999 (Unaudited)
================================================================================
<TABLE>
<S> <C> <C>
Income:
Interest (Note 1B) (net of foreign tax of $61,634) $5,372,732
Expenses:
Management fees (Note 2) $639,344
Custody and fund accounting fees 140,079
Shareholder report 35,227
Audit fees 18,190
Trustees fees 3,954
Legal fees 2,336
Other 2,628
- --------------------------------------------------------------------------------------------------
Total expenses 841,758
- --------------------------------------------------------------------------------------------------
Net investment income 4,530,974
- --------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions
Unrealized depreciation of investments (16,223,414)
Net realized gain from investments and futures contracts 11,525,948
Net realized loss from forward currency contracts and
foreign currency transactions (2,120,656)
- --------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and foreign currency (6,818,122)
- --------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations ($2,287,148)
==================================================================================================
</TABLE>
See notes to financial statements
17
<PAGE>
Foreign Bond Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
Six Months November 1, 1997
Ended (Commencement
April 30, 1999 of Operations) to
(Unaudited) October 31, 1998
===========================================================================================================
<S> <C> <C>
Increase (Decrease) in Net Assets from
Operations:
Net investment income $4,530,974 $12,127,813
Net change in unrealized appreciation (depreciation) of investments,
forward currency contracts, foreign currency, futures,
written options and other assets and liabilities (16,223,414) 17,490,716
Net realized gain from investments, forward currency contracts,
foreign currency transactions, futures and written options 9,405,292 319,290
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (2,287,148) 29,937,819
- -----------------------------------------------------------------------------------------------------------
Capital Transactions
Proceeds from contributions (Note 1) 12,060,736 355,866,842
Value of withdrawals (131,995,965) (103,539,183)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital transactions (119,935,229) 252,327,659
- -----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets (122,222,377) 282,265,478
- -----------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of period 282,265,478 --
- -----------------------------------------------------------------------------------------------------------
End of period $160,043,101 $282,265,478
===========================================================================================================
</TABLE>
Foreign Bond Portfolio
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Period
Six Months November 1, 1997
Ended (Commencement
April 30, 1999 of Operations) to
(Unaudited) October 31, 1998
============================================================================================
<S> <C> <C>
Ratios/Supplemental Data:
Net assets , end of period (000's omitted) $160,043 $282,265
Ratio of expenses to average net assets 0.72%* 0.74%
Ratio of net investment income to average net assets 3.87%* 4.55%
Portfolio turnover 350% 693%
============================================================================================
</TABLE>
*Annualized
See notes to financial statements
18
<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 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") 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) CitiSelect Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400 and CitiSelect Folio 500 transferred
a portion of their investable assets in the amount of $37,806,736, $69,713,620,
$91,158,260, and $19,592,443 including $(434,418), $(669,939), $(836,241), and
$(161,393), respectively, of unrealized depreciation to the Portfolio in
exchange for an interest in the Portfolio. The total investable assets and
contributions, are included in the November 1, 1997 (Commencement of Operations)
to October 31, 1998, "Proceeds from Contributions" on the Statement of Changes
in Net Assets.
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 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.
19
<PAGE>
Foreign Bond Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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.
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.
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
20
<PAGE>
Foreign Bond Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
("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 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.
21
<PAGE>
Foreign Bond Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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 certain
compensation from Citibank as from time to time are agreed to by Citibank and
SFG. Citibank had delegated the daily management of the Portfolio to Pacific
Investment Management Company, ("PIMCO"), but effective March 1, 1999 Citibank
had delegated the daily management of the Portfolio to Salomon Brothers Asset
Management Limited (the "Subadviser"). Citibank is a wholly-owned subsidiary of
Citicorp, which in turn,
22
<PAGE>
Foreign Bond Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
is a wholly-owned subsidiary of Citicorp, which in turn, is a wholly-owned
subsidiary of Citigroup Inc. Citigroup Inc. was formed as a result of the merger
of Citicorp and Travelers Group, Inc. which was completed on October 8, 1998.
The management fee paid to Citibank amounted to $257,904 for the six months
ended April 30, 1999. 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 its Sub-Management Agreement
with the Subadviser. The Portfolio pays the Subadviser a fee which is accrued
daily and payable monthly at an annual rate equal to a percentage of the
aggregate assets of the Portfolio allocated to the Subadviser of 0.30% on first
$200 million, 0.25% on remaining assets.
The fees paid to the Subadviser amounted to $381,440 of which $284,399 was
paid to PIMCO and $97,041 to Salomon Brothers Asset Management Limited for the
six months ended April 30, 1999.
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 $845,463,915 and $993,736,477
respectively for the six months ended April 30, 1999.
4. Federal Income Tax Basis of Investments The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1999, as
computed on a federal income tax basis, are as follows:
Aggregate Cost $190,773,564
================================================================================
Gross unrealized appreciation $597,028
Gross unrealized depreciation (2,508,466)
- --------------------------------------------------------------------------------
Net unrealized depreciation ($1,911,438)
================================================================================
5. Line of Credit The Portfolio, along with various other Portfolios in the
CitiFunds Family, entered into a line of credit agreement with a bank which
allows the Portfolios collectively to borrow up to $75 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,
1999, the commitment fee allocated to the Portfolio was $263. Since the line of
credit was established, there have been no borrowings.
23
<PAGE>
International Portfolio
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
Issuer Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 94.5%
- --------------------------------------------------------------------------------
Austria -- 0.8%
- --------------------------------------------------------------------------------
Boehler-Uddeholm 23,753 $ 1,396,156
------------
Australia -- 2.5%
- --------------------------------------------------------------------------------
Australia & New Zealand
Banking Group 331,185 2,623,365
Pioneer International,
Ltd. 570,036 1,391,946
------------
4,015,311
------------
Canada -- 2.5%
- --------------------------------------------------------------------------------
Imasco, Ltd. 104,752 2,306,110
Noranda, Inc. 131,960 1,764,776
------------
4,070,886
------------
Finland -- 1.3%
- --------------------------------------------------------------------------------
UPM-Kymmene Oy 71,398 2,160,922
------------
France -- 10.3%
- --------------------------------------------------------------------------------
BIC 27,141 1,522,470
BQE National Paris 20,135 1,668,680
Elf Aquitaine 20,330 3,157,062
La Farge Coppee 25,431 2,471,609
Pernod-Ricard 40,374 2,723,273
Societe Generale 14,480 2,591,257
Total 18,636 2,551,445
------------
16,685,796
------------
Germany -- 8.5%
- --------------------------------------------------------------------------------
Buderus AG 4,965 1,683,654
Commerzbank AG 66,477 2,148,925
Draegerwerk AG 115,560 1,587,009
Dyckerhoff AG 7,241 1,988,842
Hoechst AG 42,419 2,009,793
SGL Carbon 9,476 521,044
Veba AG 52,031 2,852,712
Vossloh AG 39,304 1,071,235
------------
13,863,214
------------
Great Britain -- 27.3%
- --------------------------------------------------------------------------------
Allied Domecq 281,855 2,194,553
Allied Zurich 159,284 2,111,419
B.A.T. Industries 191,264 1,612,277
BOC Group 135,471 2,140,094
CGU 161,598 2,524,238
Coats Viyella 1,427,046 1,044,538
Cookson Group 985,055 2,773,151
Elementis 1,412,738 2,272,671
Hanson 273,789 2,721,946
Hillsdown Holdings 1,337,938 1,764,919
Invensys 392,770 1,996,643
Lex Service 271,060 2,561,818
Lloyds TSB Group 167,528 2,700,413
Medeva 694,500 1,296,001
National Westminister
Bank 89,421 2,150,581
Reckitt & Colman 30,594 363,218
Safeway 332,496 1,385,355
TI Group 386,755 3,235,298
Tomkins 896,837 3,808,838
United News & Media 165,455 2,012,226
Williams 239,508 1,656,775
------------
44,326,972
------------
Hong Kong -- 3.5%
- --------------------------------------------------------------------------------
Hang Lung
Development Co. 1,274,635 1,644,478
New World
Development Co. 800,790 1,983,637
South China
Morning Post 2,187,486 1,319,378
Swire Pacific 140,500 788,511
------------
5,736,004
------------
Ireland -- 2.9%
- --------------------------------------------------------------------------------
Greencore Group 463,790 1,763,812
Jefferson Smurfit Group 1,107,420 3,018,287
------------
4,782,099
------------
Italy -- 3.6%
- --------------------------------------------------------------------------------
Eni Spa 370,300 2,437,082
Telecom Italia SPA 80,727 434,075
Telecom Italia 273,300 2,907,352
------------
5,778,509
------------
Japan -- 8.0%
- --------------------------------------------------------------------------------
Kyocera Corp. 43,100 2,558,860
Nichicon Corp. 196,000 2,584,994
Nintendo Co. 35,300 3,289,977
Promise Co. 53,000 3,017,920
Yodogawa Steel Works 351,000 1,478,421
------------
12,930,172
------------
24
<PAGE>
International Portfolio
PORTFOLIO OF INVESTMENTS (Continued) April 30, 1999
(Unaudited)
Issuer Shares Value
- --------------------------------------------------------------------------------
Netherlands -- 7.8%
- --------------------------------------------------------------------------------
ABN Amro Holdings NV 92,202 $ 2,196,420
Akzo Nobel NV 74,648 3,371,186
ING Groep NV 58,523 3,604,322
Koninklijke PTT 25,211 1,052,000
Philips Electrics NV 27,863 2,398,910
------------
12,622,838
------------
Spain -- 3.0%
- --------------------------------------------------------------------------------
Banco Santander SA 108,460 2,355,706
Telefonica Rights 52,490 48,796
Telefonica SA 52,490 2,459,227
------------
4,863,729
------------
Sweden -- 3.0%
- --------------------------------------------------------------------------------
Electrolux AB 118,560 2,402,958
Getinge Industrier 154,559 2,399,814
------------
4,802,772
------------
Switzerland -- 8.0%
- --------------------------------------------------------------------------------
Forbo Holdings AG 4,505 1,874,992
Novartis AG 2,122 3,105,739
Saurer AG 4,044 2,366,974
Schweizerische
Rueckversicherungs-
Gesellschaft AG 634 1,387,096
Schweizerische Industrie-
Gesellschaft Holding AG 3,743 2,372,341
Sulzer AG 2,889 1,834,857
------------
12,941,999
------------
United States -- 1.5%
- --------------------------------------------------------------------------------
Creative Technology Ltd.* 193,186 2,438,973
------------
Total Common Stock
(Identified Cost
$144,306,326) 153,416,352
------------
WARRANTS -- 0.0%
- --------------------------------------------------------------------------------
Bolton Properties*
Exp. 9/15/06 23,750 3,206
------------
(Identified Cost $6,808)
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST -- 4.0%
- --------------------------------------------------------------------------------
State Street Repurchase Agreement
4.00% due 5/03/99 proceeds at
maturity $6,511,170
(collateralized by $6,585,000
Federal Home Loan Mortgage
5.25% due 2/16/01, valued
at $6,640,242) $ 6,509,000
------------
Total Investments
(Identified Cost
$150,822,134) 98.5% 159,928,558
Other Assets,
Less Liabilities 1.5 2,412,291
----- ------------
Net Assets 100.0% $162,340,849
===== ============
* Non income producing
See notes to financial statements
25
<PAGE>
International Portfolio
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
================================================================================
Assets:
Investments at value (Note 1A) (Identified Cost, $150,822,134) $159,928,558
Foreign currency, at value (Cost $59,151) 60,908
Cash 570
Dividends and interest receivable 1,007,744
Receivable for investments sold 3,403,617
- --------------------------------------------------------------------------------
Total assets 164,401,397
- --------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,813,889
Payable to affiliates--Management fees (Note 2) 43,041
Accrued expenses and other liabilities 203,618
- --------------------------------------------------------------------------------
Total liabilities 2,060,548
- --------------------------------------------------------------------------------
Net Assets $162,340,849
- --------------------------------------------------------------------------------
Represented by:
Paid-in capital for beneficial interests $162,340,849
================================================================================
International Portfolio
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1999 (Unaudited)
================================================================================
<TABLE>
<S> <C> <C>
Investment Income: (Note 1B)
Dividend income (net of foreign withholding tax of $239,930) $2,278,141
Interest income 14,400
- --------------------------------------------------------------------------------------------------------------------------
Total investment income $ 2,292,541
- --------------------------------------------------------------------------------------------------------------------------
Expenses:
Management fees (Note 2) 800,204
Custody and fund accounting fees 123,367
Audit fees 17,685
Shareholder reports 5,000
Trustees fees 4,047
Legal fees 3,336
Other 1,191
- --------------------------------------------------------------------------------------------------------------------------
Total expenses 954,830
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 1,337,711
- --------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investment transactions 7,036,401
Net realized loss on foreign currency & transactions (394,435)
- --------------------------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions
and foreign currency transactions 6,641,966
- --------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments, forward currency
contracts, foreign currency transactions 17,104,589
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain of investments 23,746,555
- --------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $25,084,266
==========================================================================================================================
</TABLE>
See notes to financial statements
26
<PAGE>
International Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
November 1, 1998
Six Months (Commencement of
Ended Operations) to
April 30, 1999 October 31,
(Unaudited) 1998
===================================================================================================
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations:
Net investment income $ 1,337,711 $ 4,310,814
Net realized gain on investment transactions and
foreign currency transactions 6,641,966 4,002,173
Unrealized appreciation (depreciation) of
investments, forward currency contracts,
foreign currency transactions 17,104,589 (20,091,760)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 25,084,266 (11,778,773)
- ---------------------------------------------------------------------------------------------------
Capital Transactions:
Proceeds from contributions (Note 1) 6,724,223 593,863,296
Value of withdrawals (100,413,946) (351,138,217)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital transactions (93,689,723) 242,725,079
- ---------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets: (68,605,457) 230,946,306
- ---------------------------------------------------------------------------------------------------
Net Assets:
Beginning of period 230,946,306 --
- ---------------------------------------------------------------------------------------------------
End of period $162,340,849 $230,946,306
===================================================================================================
</TABLE>
International Portfolio
FINANCIAL HIGHLIGHTS
For the Period
Six Months November 1, 1998
Ended (Commencement
April 30, 1999 of Operations) to
(Unaudited) October 31, 1998
================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) $162,341 $230,946
Ratio of expenses to average net assets 0.95%* 0.97%
Ratio of net investment income to
average net assets 1.33%* 1.72%
Portfolio turnover 9% 43%
================================================================================
*Annualized
See notes to financial statements
27
<PAGE>
International Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. Significant Accounting Policies International Portfolio (the "Portfolio"), a
separate series of 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) 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 total investable
assets along with the year's contributions are included in the November 1, 1997
(Commencement of Operations) to October 31, 1998 "Proceeds from contributions"
in the Statement of Changes in Net Assets.
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 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
28
<PAGE>
International Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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. 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.
29
<PAGE>
International Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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 certain duties and receives 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 &
Wiley (the "Subadviser"). Citibank is a wholly-owned subsidiary of Citicorp,
which in turn, is a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was
formed as a result of the merger of Citicorp and Travelers Group, Inc. which was
completed on October 8, 1998.
The management fee paid to Citibank, amounted to $348,733 for the six months
ended April 30, 1999. 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 $451,471 for the six
months ended April 30, 1999.
3. Purchases And Sales Of Investments Purchases and sales of investments, other
than short-term obligations, aggregated $18,643,940 and $107,868,973
respectively, for the six months ended April 30, 1999.
4. Federal Income Tax Basis Of Investments The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1999, as
computed on a federal income tax basis, are as follows:
Aggregate cost $150,822,134
================================================================================
Gross unrealized appreciation $ 23,153,957
Gross unrealized depreciation (14,047,533)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 9,106,424
================================================================================
5. Line of Credit The Portfolio, along with various other Portfolios in the
CitiFunds Family, entered into an ongoing agreement with a bank which allows the
Funds collectively to borrow up to $75 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 six months ended April 30, 1999,
the commitment fee allocated to the Portfolio was $223. Since the line of credit
was established, there have been no borrowings.
30
<PAGE>
Short-Term Portfolio
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
Principal
Issuer Amount Value
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST--98.9%
- --------------------------------------------------------------------------------
Bank Notes- 4.8%
- --------------------------------------------------------------------------------
Bank of New York
5.75% due 5/14/99 $2,000,000 $ 1,999,966
-----------
Certificates of Deposit (Yankee) -- 22 8%
- --------------------------------------------------------------------------------
Credit Suisse First Boston
5.69% due 7/06/99 3,000,000 3,003,277
Deutsche Bank
5.645% due 8/09/99 2,000,000 2,002,914
National Westminster
Bank PLC
5.655 % due 7/30/99 1,500,000 1,502,419
Toronto Dominion
5.65% due 7/26/99 3,000,000 3,004,148
-----------
9,512,758
-----------
Commercial Paper -- 18.8%
- --------------------------------------------------------------------------------
Caisse d' Amortissement
4.735% due 10/8/99 4,000,000 3,916,611
Repsol International Financial
4.785% due 7/15/99 4,000,000 3,961,391
-----------
7,878,002
-----------
United States Government Agency -- 9.6%
- --------------------------------------------------------------------------------
Federal Home Loan Banks
5.63% due 6/15/99 4,000,000 3,999,867
-----------
Repurchase Agreements -- 42.9%
- --------------------------------------------------------------------------------
Dresdner Bank,
4.85% due 5/03/99
proceeds at maturity
$4,490,814 (collateralized
by $ 4,500,000
U.S. Treasury Note
7.875% due 8/15/01
valued at $ 4,772,925). 4,489,000
Principal
First Union National
Bank PL & Co.
4.92% due 5/03/99
proceeds at maturity
$4,488,840 (collateralized
by $ 4,610,000
Federal Home Loan
Mortgage Corp.,
4.71% due 6/04/99
valued at $ 4,596,731). 4,487,000
State Street Bank
& Trust Co.,
4.92% due 5/03/99
proceeds at maturity
$4,488,840 (collateralized
by $ 4,515,000
Federal National
Mortgage Association
5.30% due 1/12/01
valued at $ 4,505,358). 4,487,000
Westdeutche Landesbank,
4.85% due 5/03/99
proceeds at maturity
$4,488,814 (collateralized
by $ 4,250,000
U.S. Treasury Note
6.50% due 10/15/06
valued at $ 4,487,000) 4,487,000
-----------
17,950,000
-----------
Total Investments
(Identified Cost
$41,327,513) 98.9% 41,340,593
Other Assets,
Less Liabilities 1.1 459,178
----- -----------
Net Assets 100.0% $41,799,771
===== ===========
See notes to financial statements
31
<PAGE>
Short-Term Portfolio
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
================================================================================
Assets:
Investments at value (Note 1A) (Identified Cost $41,327,513) $41,340,593
Cash 782
Interest receivable 622,567
- --------------------------------------------------------------------------------
Total assets 41,963,942
- --------------------------------------------------------------------------------
Liabilities:
Payable to affiliate-Management fee (Note 2) 11,247
Accrued expenses and other liabilities 152,924
- --------------------------------------------------------------------------------
Total liabilities 164,171
- --------------------------------------------------------------------------------
Net Assets $41,799,771
================================================================================
Represented by:
Paid-in capital for beneficial interests $41,799,771
================================================================================
Short-Term Portfolio
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1999 (Unaudited)
================================================================================
<TABLE>
<S> <C> <C>
Interest Income (Note 1B): $1,990,326
Expenses:
Management fees (Note 2) $ 95,237
Custody and fund accounting fees 50,874
Audit fees 10,600
Legal fees 5,448
Shareholder reports 5,000
Trustees fees 2,458
Other 1,358
- ---------------------------------------------------------------------------------------------------
Total expenses 170,975
- ---------------------------------------------------------------------------------------------------
Net investment income 1,819,351
- ---------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments:
Unrealized depreciation of investments (86,862)
Net realized gain from investment transactions 2,692
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (84,170)
- ---------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations $1,735,181
===================================================================================================
</TABLE>
See notes to financial statements
32
<PAGE>
Short-Term Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the period
Six Months November 1, 1997
Ended (Commencement
April 30, 1999 of Operations) to
(Unaudited) October 31, 1998
=======================================================================================================
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 1,819,351 $ 4,831,834
Unrealized appreciation (depreciation) of investments (86,862) 40,471
Net realized gain on investment transactions 2,692 92,687
- -------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,735,181 4,964,992
- -------------------------------------------------------------------------------------------------------
Capital Transactions:
Proceeds from contributions (Note 1) 15,198,492 476,612,362
Value of withdrawals (57,483,097) (399,228,159)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital transactions (42,284,605) 77,384,203
- -------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets (40,549,424) 82,349,195
- -------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of period 82,349,195 --
- -------------------------------------------------------------------------------------------------------
End of period $41,799,771 $ 82,349,195
=======================================================================================================
</TABLE>
Short-Term Portfolio
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the period
Six Months November 1, 1997
Ended (Commencement
April 30, 1999 of Operations) to
(Unaudited) October 31, 1998
============================================================================================
<S> <C> <C>
Ratios/Supplemental Data:
Net assets (000's omitted) $41,800 $82,349
Ratio of expenses to average net assets 0.45%* 0.49%
Ratio of net investment income to average net assets 4.78%* 5.19%
============================================================================================
</TABLE>
* Annualized
See notes to financial statements
33
<PAGE>
Short-Term Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. Significant Accounting Policies Short-Term Portfolio (the "Portfolio"), a
separate series of Asset Allocation Portfolios (the "Trust"), is registered
under the 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) CitiSelect Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400 and CitiSelect Folio 500 transferred
a portion of their investable assets in the amounts 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 total investable assets and contributions are
included in the November 1, 1997 (Commencement of Operations) to October 31,
1998, "Proceeds from contributions" on the Statement of Changes in Net Assets.
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.
34
<PAGE>
Short-Term Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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. 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 certain duties and receives compensation from
Citibank as from time to time are agreed to by Citibank and SFG. Citibank is a
wholly owned subsidiary of Citicorp, which in turn, is a wholly-owned subsidiary
of Citigroup Inc. Citigroup Inc. was formed as a result of the merger of
Citicorp and Travelers Group, Inc. which was completed on October 8, 1998.
The management fees paid to Citibank are 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
$95,237 for the six months ended April 30, 1999. 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 $690,396,449 and $732,027,039, respectively, for
the six months ended April 30, 1999.
35
<PAGE>
4. Federal Income Tax Basis Of Investments The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1999, as
computed on a federal income tax basis, are as follows:
Aggregate cost $41,327,513
================================================================================
Gross unrealized appreciation $ 13,080
Gross unrealized depreciation 0
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 13,080
================================================================================
5. Line of Credit The Portfolio, along with various other Portfolios in the
CitiFunds Family, entered into an agreement with a bank which allows the
Portfolios collectively to borrow up to $75 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, 1999,
the commitment fee allocated to the Portfolio was $90. Since the line of credit
was established, there have been no borrowings.
6. Subsequent Event Effective May 1, 1999, the Portfolio was terminated and each
investor's respective interest was distributed to that investor.
36
<PAGE>
Intermediate Income Portfolio
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
Principal
Issuer Amount Value
- --------------------------------------------------------------------------------
FIXED INCOME -- 104.0%
- --------------------------------------------------------------------------------
Asset Backed -- 34.4%
- --------------------------------------------------------------------------------
Aames Mortgage Trust
6.59% due 6/15/24 $1,974,000 $ 1,996,760
Aircraft Financial Trust
8.00% due 5/15/24 2,200,000 2,169,062
Amresco Residential
Securities Mortgage
Loan Trust
6.245% due 4/25/22 3,000,000 3,012,330
Asset Securitization Corp.
6.50% due 2/14/41 2,758,757 2,791,724
6.85% due 2/14/41 1,600,000 1,641,216
7.10% due 8/13/29 1,133,871 1,180,892
Chase Mortgage Financial
Corp.
6.50% due 9/25/13 2,058,687 2,030,359
Commercial Mortgage
Acceptance Corp.
5.80% due 3/15/06 1,374,106 1,347,105
7.239% due 10/15/08 2,400,000 2,353,488
Contimortgage Home
Equity Loan Trust
6.13% due 3/15/13 2,400,000 2,398,488
Crim Mae Acceptance
7.00% due 11/02/11 900,000 708,469
First Union Lehman Brothers
Commercial Mortgage
Trust
6.479% due 3/18/04 855,651 861,041
GMAC Commercial
Mortgage
Securities Corp.
6.83% due 12/15/03 2,438,584 2,475,260
6.42% due 8/15/08 2,460,000 2,457,269
General Motors
Acceptance Corp.
6.15% due 4/05/07 1,555,000 1,541,363
Green Tree Financial
Corp
6.71% due 8/15/29 2,250,000 2,208,532
8.41% due 12/01/30 3,000,000 2,978,490
IMC Home Equity Loan
Trust
6.34% due 8/20/29 3,600,000 3,570,624
J.P. Morgan Commercial
Mortgage Finance
Corp.
6.373% due 1/15/30 1,300,495 1,305,840
Money Store Residential
Trust
6.42% due 4/15/06 425,132 424,843
Morgan Stanley Capital Inc.
6.44% due 1/15/28 1,800,000 1,816,866
6.55% due 12/15/07 1,500,000 1,505,505
Nissan Auto Receivables
Grantor Trust
6.15% due 2/17/03 1,942,352 1,949,014
PECO Energy Trust
6.05% due 3/01/09 1,750,000 1,734,688
Sears Credit Account
Master Trust
5.25% due 10/16/08 2,270,000 2,206,849
Structured Asset Securities
Corp.
6.79% due 6/12/04 2,723,373 2,794,181
TPSA Financial
7.75% due 12/10/08 1,240,000 1,261,540
------------
52,721,798
------------
Corporate Bonds -- 32.1%
- --------------------------------------------------------------------------------
Allstate Corp.
6.75% due 5/15/18 1,920,000 1,905,120
American Financial Group
Inc.
7.125% due 4/15/09 1,470,000 1,425,665
Associates Corp. N. A
6.95% due 11/01/18 1,555,000 1,561,935
BB&T Corp.
6.375% due 6/30/05 2,320,000 2,317,054
Bank One Corp.
5.625% due 2/17/04 1,720,000 1,684,792
Century Telephone
Enterprises Inc.
6.30% due 1/15/08 1,765,000 1,745,938
Conoco Inc.
5.90% due 4/15/04 1,490,000 1,477,141
Conseco Inc. Medium
Term Notes
6.40% due 6/15/01 1,710,000 1,690,420
Corporacion Andina
de Fomento
7.75% due 3/01/04 1,720,000 1,721,073
Dayton Hudson Corp.
6.65% due 8/01/28 1,635,000 1,576,532
Equitable Life Assurance
Co.
6.95% due 12/01/05 1,725,000 1,766,797
Federal National Mortgage
Association Medium
Term Notes
6.50% due 12/01/99 1,500,000 1,504,455
Ford Motor Co.
6.625% due 10/01/28 2,060,000 1,977,415
37
<PAGE>
Intermediate Income Portfolio
PORTFOLIO OF INVESTMENTS (Continued) April 30, 1999
(Unaudited)
Principal
Issuer Amount Value
- --------------------------------------------------------------------------------
Household Financial Corp.
6.50% due 11/15/08 $1,920,000 $ 1,909,997
Knight Ridder Inc.
6.875% due 3/15/29 1,235,000 1,207,403
Korea Development Bank
7.125% due 4/22/04 1,490,000 1,469,541
Lehman Brothers Holdings
Inc.
6.40% due 8/30/00 1,535,000 1,544,809
6.375% due 3/15/01 1,370,000 1,375,905
MCI Communications
Corp.
6.50% due 4/15/10 2,040,000 2,052,036
Manitoba Province
of Canada
5.50% due 10/01/08 1,910,000 1,842,080
Mattel Inc.
6.00% due 7/15/03 1,240,000 1,231,950
May Department Stores
Co.
5.95% due 11/01/08 1,060,000 1,039,415
Merita Bank
6.50% due 4/01/09 1,650,000 1,626,999
Morgan Stanley Group Inc.
5.625% due 1/20/04 1,720,000 1,694,716
National Rural Utilities
6.20% due 2/01/08 2,195,000 2,197,019
Nordstorm Inc.
5.625% due 1/15/09 1,210,000 1,143,462
Norfolk Southern Corp.
7.35% due 5/15/07 700,000 745,430
Petroleum Geographic
Services
6.625% due 3/30/08 1,460,000 1,429,442
Popular Inc.
6.20% due 4/30/01 1,075,000 1,072,237
Raytheon Co.
6.30% due 3/15/05 1,735,000 1,750,407
Union Carbide Corp.
6.70% due 4/01/09 1,535,000 1,523,022
------------
49,210,207
------------
Mortgage Backed -- 22.6%
- --------------------------------------------------------------------------------
CMC Securities Corp.
7.00% due 10/25/27 1,169,744 1,176,306
CWMBS Inc.
6.50% due 7/25/13 2,221,012 2,191,606
6.75% due 10/25/27 517,454 518,178
Federal Home Loan
Mortgage Corp.
6.00% due 8/01/00 2,682,010 2,687,159
6.25% due 6/15/24 2,045,000 2,032,310
6.50% due 9/15/22 1,138,929 1,128,246
6.50% due 2/01/11 77,311 78,108
6.50% due 4/01/11 247,613 250,166
6.50% due 7/01/11 314,207 317,446
6.50% due 8/01/11 68,226 68,929
Federal National
Mortgage Association
TBA 6.50%
due 12/01/29* 5,655,000 5,617,847
6.50% due 5/01/11 367,079 370,518
6.50% due 7/01/11 325,429 328,479
7.00% due 6/01/03 194,222 195,741
7.00% due 7/01/03 397,688 400,798
8.00% due 5/01/26 380,497 395,834
8.00% due 6/01/26 210,155 218,627
8.00% due 7/01/26 104,747 108,970
Government National
Mortgage Association
TBA 6.50%
due 12/15/29* 1,325,000 1,313,194
TBA 7.00%
due 12/31/29* 6,450,000 6,524,562
TBA 7.50%
due 12/31/29* 4,000,000 4,112,520
7.25% due 10/16/22 248,365 249,607
7.00% due 2/15/24 1,959,071 1,991,533
Norwest Asset
Securitization Corp.
6.75% due 2/25/13 2,312,177 2,330,582
PNC Mortgage Securities
Corp.
6.392% due 10/25/13 4,001 3,882
Residential Fundings
Mortgage
Securitization Inc.
6.50% due 3/25/13 13,084 12,916
------------
34,624,064
------------
U. S. Treasury Obligations -- 14.9%
- --------------------------------------------------------------------------------
United States Treasury Bonds -- 5.2%
- --------------------------------------------------------------------------------
3.625% due 4/15/28 2,369,657 2,271,174
5.25% due 2/15/29 6,000,000 5,632,500
------------
7,903,674
------------
38
<PAGE>
Intermediate Income Portfolio
PORTFOLIO OF INVESTMENTS (Continued) April 30, 1999
(Unaudited)
Principal
Amount/
Issuer Shares Value
- --------------------------------------------------------------------------------
United States Treasury Notes -- 9.7%
- --------------------------------------------------------------------------------
6.50% due 5/31/01 $5,200,000 $ 5,340,556
6.25% due 1/31/02 2,559,000 2,628,170
6.50% due 5/31/02 1,805,000 1,870,431
6.25% due 6/30/02 105,000 108,084
5.75% due 11/30/02 325,000 330,587
5.50% due 3/31/03 50,000 50,446
7.875% due 11/15/04 1,500,000 1,680,930
3.875% due 1/15/09 2,855,000 2,851,431
------------
14,860,635
------------
Total Fixed Income
(Identified Cost $160,351,825) 159,320,378
------------
PREFERRED STOCKS -- 1.9%
- --------------------------------------------------------------------------------
Comed Financing I
(Identified Cost
$2,941,579) 114,928 2,952,213
------------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST -- 6.2%
- --------------------------------------------------------------------------------
State Street Repurchase
Agreement
4.92% due 5/3/99
proceeds at maturity
$9,298,811 (collateralized
by $9,145,000 Federal
National Mortgage
Association
5.86% due 11/7/00;
valued at $9,481,646) 9,295,000 9,295,000
United States Treasury Bills
4.19% due 6/24/99 20,000 19,874
4.23% due 6/24/99 130,000 129,175
4.36% due 6/24/99 80,000 79,477
------------
Total Short-Term Obligations 9,523,526
------------
Total Investments
(Identified Cost
$172,816,930) 112.1% 171,796,117
Other Assets,
Less Liabilities (12.1) (18,517,788)
----- ------------
Net Assets 100.0% $153,278,329
===== ============
FUTURES CONTRACTS
- --------------------------------------------------------------------------------
Futures contracts which were open at
April 30, 1999 are as follows :
Description/ Number of Aggregate Expiration Unrealized
Position Contracts Face Value Date Gain/(Loss)
- --------------------------------------------------------------------------------
U.S. Treasury
2 Year Note June
(Buy) 60 6,000,000 1999 $(15,000)
U.S. Treasury
10-Year Note June
(Sell) 30 (3,000,000) 1999 $32,813
-------
$17,813
=======
* TBA's are mortgaged backed securities traded under delayed delivery
commitments settling after April 30,1999. Although the unit price for the
trade has been established, the principal value has not been finalized.
However, the amount of the commitment will not fluctuate more than 2% from
the principal amount. Income on TBA's is not earned until the settlement
date.
See notes to financial statements
39
<PAGE>
Intermediate Income Portfolio
STATEMENT OF ASSETS AND LIABILITIES
April 30,1999 (Unaudited)
================================================================================
Assets:
Investments at value (Note 1A) (Identified Cost, $172,816,930) $171,796,117
Cash 633
Interest receivable 1,549,025
Receivable for margin variation 40,013
- --------------------------------------------------------------------------------
Total assets 173,385,788
- --------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 19,850,455
Payable to affiliates--Management fees (Note 2) 57,665
Accrued expenses and other liabilities 199,339
- --------------------------------------------------------------------------------
Total liabilities 20,107,459
- --------------------------------------------------------------------------------
Net Assets $153,278,329
================================================================================
Represented by:
Paid-in capital for beneficial interests $153,278,329
================================================================================
Intermediate Income Portfolio
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1999 (Unaudited)
================================================================================
<TABLE>
<S> <C> <C>
Investment Income:
Interest Income $5,534,083
Dividend Income 121,823
- -------------------------------------------------------------------------------------------
Total Income $5,655,906
- -------------------------------------------------------------------------------------------
Expenses:
Management fees (Note 2) 416,303
Custody and fund accounting fees 93,537
Audit fees 16,308
Legal fees 5,336
Trustees fees 3,452
Shareholder reports 2,500
Other 1,497
- -------------------------------------------------------------------------------------------
Total expenses 538,933
- -------------------------------------------------------------------------------------------
Net investment income 5,116,973
- -------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments:
Unrealized depreciation of investments and futures contracts (6,671,267)
Net realized gain from investment transactions and
futures contracts 2,970,118
- -------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and
futures contracts (3,701,149)
- -------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $1,415,824
===========================================================================================
</TABLE>
See notes to financial statements
40
<PAGE>
Intermediate Income Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
November 1, 1997
Six Months (Commencement
Ended of Operations)
April 30, 1999 to
(Unaudited) October 31, 1998
============================================================================================
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations:
Net investment income $5,116,973 $11,487,280
Net realized gain on investment transactions
and futures contracts 2,970,118 2,491,094
Unrealized appreciation (depreciation) of investments (6,671,267) 2,940,400
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,415,824 16,918,774
- --------------------------------------------------------------------------------------------
Capital Transactions:
Proceeds from contributions 6,100,736 347,139,773
Value of withdrawals (65,223,961) (153,072,817)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital
transactions (59,123,225) 194,066,956
- --------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets (57,707,401) 210,985,730
- --------------------------------------------------------------------------------------------
Net Assets:
Beginning of period 210,985,730 --
- --------------------------------------------------------------------------------------------
End of period $153,278,329 $210,985,730
============================================================================================
</TABLE>
Intermediate Income Portfolio
FINANCIAL HIGHLIGHTS
================================================================================
<TABLE>
<CAPTION>
For the Period
November 1, 1997
Six Months (Commencement
Ended of Operations)
April 30, 1999 to
(Unaudited) October 31, 1998
===========================================================================================
<S> <C> <C>
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) $153,278 $210,986
Ratio of expenses to average net assets 0.58%* 0.60%
Ratio of net investment income to average net assets 5.49%* 5.55%
Portfolio turnover 80% 98%
===========================================================================================
</TABLE>
*Annualized
See notes to financial statements
41
<PAGE>
Intermediate Income Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. Significant Accounting Policies Intermediate Income Portfolio (the
"Portfolio"), a separate series of Asset Allocation Portfolios (the "Trust"), is
registered under the 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) CitiSelect Folio 200,
CitiSelect Folio 300 and CitiSelect Folio 400, transferred a portion of their
investable assets in the amounts of $48,473,071, $89,250,334 and $23,537,184
including $808,525, $1,515,914 and $405,634, respectively, of unrealized
appreciation, to the Portfolio in exchange for an interest in the Portfolio. The
total investable assets and contributions, are included in the November 1,1997
(Commencement of Operations) to October 31,1998 "Proceeds from contributions" in
the Statement of Changes in Net Assets.
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.
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.
42
<PAGE>
Intermediate Income Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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. Futures Contracts The Portfolio may engage in futures transactions. The
Portfolio may use futures contracts in order to protect the Portfolio from
fluctuations 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 fund 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.
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.
F. TBA Purchase Commitments The Portfolio enters into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed unit price at a future
date beyond customary settlement time. Although the unit price has been
established, the principal value has not been finalized. However, the amount of
the commitment will not fluctuate more than 2.0% from the principal amount. The
Portfolio holds, and maintains until the settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price. TBA
purchase commitments may be considered securities in themselves, and involve a
risk of loss if the value of the security to be purchased declines prior to the
settlement date, which risk is in addition to the risk of decline in the value
of the Portfolio's other assets. Unsettled TBA purchase commitments are valued
at the current market value of the underlying securities, generally according to
the procedure described under Note 1A.
43
<PAGE>
Intermediate Income Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
Although the Portfolio will generally enter TBA purchase commitments with the
intention of acquiring securities for its portfolio, the Portfolio may dispose
of a commitment prior to settlement if the Portfolio's Adviser deems it
appropriate to do so.
G. 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.
H. 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 certain duties and receives compensation from
Citibank as from time to time are agreed to by Citibank and SFG. Citibank is a
wholly-owned subsidiary of Citicorp, which in turn, is a wholly-owned subsidiary
of Citigroup Inc. Citigroup Inc. was formed as a result of the merger of
Citicorp and Travelers Group, Inc. which was completed on October 8, 1998.
The management fees paid to Citibank amounted to $416,303 for the six months
ended April 30, 1999. 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 $151,034,731 and $181,699,571
respectively, for the six months ended April 30, 1999.
4. Federal Income Tax Basis Of Investments The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1999, as
computed on a federal income tax basis, are as follows:
Aggregate cost $172,816,930
================================================================================
Gross unrealized appreciation $541,237
Gross unrealized depreciation (1,562,050)
- --------------------------------------------------------------------------------
Net unrealized depreciation ($1,020,813)
================================================================================
44
<PAGE>
Intermediate Income Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
5. Line of Credit The Portfolio, along with various other Portfolios in the
CitiFunds Family, entered into an ongoing agreement with a bank which allows the
Funds collectively to borrow up to $75 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 six months ended April 30, 1999,
the commitment fee allocated to the Portfolio was $215. Since the line of credit
was established, there have been no borrowings.
45
