LARGE CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 2000
(Unaudited)
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS-- 99.6%
--------------------------------------------------------------------------------
CAPITAL GOODS-- 9.5%
--------------------------------------------------------------------------------
Emerson Electronics Co. 89,025 $ 4,885,247
General Electric Co. 24,725 3,888,006
Honeywell, Inc. 90,275 5,055,400
United Technologies Corp. 69,940 4,349,394
-------------
18,178,047
-------------
COMMUNICATION
EQUIPMENT & SERVICES-- 13.8%
--------------------------------------------------------------------------------
AT&T Corp. 128,600 6,004,013
Alltel Corp. 47,500 3,164,688
Bell Atlantic Corp. 55,900 3,312,075
Bellsouth Corp. 76,000 3,700,250
SBC Communications, Inc. 138,500 6,068,030
Sprint Corp. 70,000 4,305,000
-------------
26,554,056
-------------
CONSUMER CYCLICALS-- 2.4%
--------------------------------------------------------------------------------
McGraw Hill
Companies, Inc. 89,000 4,672,500
-------------
CONSUMER STAPLES-- 6.7%
--------------------------------------------------------------------------------
Kimberly-Clark Corp. 112,775 6,547,998
PepsiCo, Inc. 173,125 6,351,523
-------------
12,899,521
-------------
ENERGY-- 14.8%
--------------------------------------------------------------------------------
BP Amoco plc, ADR 122,700 6,257,700
Chevron Corp. 72,000 6,129,000
Conoco Inc., Class A 154,300 3,674,269
El Paso Energy Corp. 50,000 2,125,000
Exxon Corp. 87,900 6,828,731
Halliburton Co. 74,200 3,278,713
-------------
28,293,413
-------------
FINANCE-- 20.5%
--------------------------------------------------------------------------------
Bank of America Corp. 106,400 5,213,600
Chase Manhattan Corp. 73,500 5,296,594
Chubb Corp. 89,000 5,662,625
Hartford Financial
Services Group 111,800 5,834,563
Marsh & McLennan
Companies, Inc. 65,875 6,492,805
Mellon Bank Corp. 192,900 6,196,913
Merrill Lynch & Co, Inc. 44,900 4,576,992
-------------
39,274,092
-------------
HEALTHCARE-- 8.6%
--------------------------------------------------------------------------------
American Home
Products Corp. 97,900 5,500,756
Bristol-Myers Squibb Co. 96,250 5,047,109
Pharmacia & Upjohn, Inc. 120,000 5,992,500
-------------
16,540,365
-------------
RAW & INTERMEDIATE MATERIALS-- 8.2%
--------------------------------------------------------------------------------
Alcoa Inc. 76,700 4,975,912
Dow Chemical Co. 29,675 3,353,275
E. I. du Pont de
Nemours & Co. 60,918 2,889,798
International Paper Co. 123,650 4,544,138
-------------
15,763,123
-------------
TECHNOLOGY-- 4.2%
--------------------------------------------------------------------------------
Pitney Bowes Inc. 138,500 5,661,188
Xerox Corp. 92,000 2,432,250
-------------
8,093,438
-------------
TRANSPORTATION-- 1.7%
--------------------------------------------------------------------------------
Union Pacific Corp. 79,140 3,333,773
-------------
UTILITIES-- 9.2%
--------------------------------------------------------------------------------
Duke Energy Co 100,005 5,750,288
Unicom Corp. 138,100 5,489,475
Williams Companies Inc. 170,350 6,356,184
-------------
17,595,947
-------------
TOTAL INVESTMENTS
(Identified Cost
$201,471,830) 99.6% 191,198,275
OTHER ASSETS,
LESS LIABILITIES 0.4% 706,510
---- -------------
NET ASSETS 100% $191,904,785
==== =============
ADR's-- American Depositary Receipts
See notes to financial statements
15
<PAGE>
LARGE CAP VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (Unaudited)
================================================================================
ASSETS:
Investments at value (Note 1A) (Identified Cost, $201,471,830) $191,198,275
Cash 681,273
Dividends receivable 349,102
--------------------------------------------------------------------------------
Total assets 192,228,650
--------------------------------------------------------------------------------
LIABILITIES:
Payable to affiliates-- Management fees (Note 2) 99,610
Accrued expenses and other liabilities 224,255
--------------------------------------------------------------------------------
Total liabilities 323,865
--------------------------------------------------------------------------------
NET ASSETS $191,904,785
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $191,904,785
================================================================================
LARGE CAP VALUE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (Unaudited)
================================================================================
INVESTMENT INCOME: (Note 1B)
Dividend income (net of foreign
Withholding tax of $8,267) $2,529,075
Interest income 12,383
--------------------------------------------------------------------------------
$ 2,541,458
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 696,966
Custody and fund accounting fees 122,678
Audit fees 21,700
Legal fees 20,048
Trustees fees 8,239
Other 1,132
--------------------------------------------------------------------------------
Total expenses 870,763
--------------------------------------------------------------------------------
Net investment income 1,670,695
--------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net unrealized depreciation of investments (11,015,119)
Net realized gain from investment transactions 2,643,058
--------------------------------------------------------------------------------
Net realized and unrealized loss on investments (8,372,061)
--------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(6,701,366)
================================================================================
See notes to financial statements
16
<PAGE>
LARGE CAP VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED
APRIL 30, 2000 YEAR ENDED
(Unaudited) OCTOBER 31, 1999
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 1,670,695 $ 2,045,703
Net realized gain (loss)
on investment transactions 2,643,058 (9,875,483)
Net unrealized appreciation
(depreciation) of investments (11,015,119) 2,601,041
--------------------------------------------------------------------------------
Net decrease in net assets resulting
from operations (6,701,366) (5,228,739)
--------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions (Note 1) 9,165,472 249,127,874
Value of withdrawals (86,378,409) (97,340,274)
--------------------------------------------------------------------------------
Net increase(decrease) in net assets
from capital transactions (77,212,937) 151,787,600
--------------------------------------------------------------------------------
NET INCREASE (DECREASE)IN NET ASSETS: (83,914,303) 146,558,861
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 275,819,088 129,260,227
--------------------------------------------------------------------------------
End of period $191,904,785 $275,819,088
================================================================================
LARGE CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS NOVEMBER 1, 1997
ENDED (COMMENCEMENT
APRIL 30, 2000 YEAR ENDED OF OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1999 OCTOBER 31, 1998
===========================================================================================
<S> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $191,905 $275,819 $129,260
Ratio of expenses to average net assets 0.75%* 0.75% 0.78%
Ratio of net investment income to
average net assets 1.43%* 1.34% 1.20%
Portfolio turnover 8% 74% 61%
---------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
See notes to financial statements
17
<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 August 1, 1999, Growth & Income Portfolio and Balanced Portfolio
transferred all or a portion of their investable assets in the amounts of
$83,477,271 and $142,169,402 including $783,244 and $4,538,654, 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
Year Ended October 31, 1999 "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 sale price are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations maturing in sixty days or less), are valued on the basis
of valuations furnished by pricing services approved by the Board of Trustees
which take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, and other market data, without exclusive reliance on quoted prices or
exchange or over-the-counter prices. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which constitutes fair value as
determined by the Trustees. Securities, if any, for which there are no such
valuations or quotations are valued at fair value as determined in good faith by
or under guidelines established by the Trustees.
B. INCOME Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for U.S. federal income tax purposes. Dividend income is recorded
on the ex-dividend date.
C. U.S. FEDERAL INCOME TAXES The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
D. REPURCHASE AGREEMENTS It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
18
<PAGE>
LARGE CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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
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 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 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 SSBCiti Fund Management LLC
(the "Subadviser"), an affiliate of Citibank. Citibank is a wholly-owned
subsidiary of Citigroup Inc.
The management fees paid to Citibank amounted to $314,240 for the six months
ended April 30, 2000. Citibank management fees are computed at the annual rate
of 0.60% of the Portfolio's average daily net assets less the aggregate amount
payable by the Portfolio's 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. SSB Citi Fund Management LLC, 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 paid to the Subadvisers
amounted to $382,726 for SSB Citi Fund Management LLC for the six months ended
April 30, 2000.
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 $19,155,624 and $91,620,395,
respectively, for the six months ended April 30, 2000.
19
<PAGE>
LARGE 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, 2000, as
computed on a federal income tax basis, are as follows:
Aggregate cost $ 201,471,830
================================================================================
Gross unrealized appreciation $ 9,614,584
Gross unrealized depreciation (19,888,139)
--------------------------------------------------------------------------------
Net unrealized depreciation $ (10,273,555)
================================================================================
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,
2000, the commitment fee allocated to the Portfolio was $338. Since the line of
credit was established, there have been no borrowings.
20
<PAGE>
SMALL CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 2000
(Unaudited)
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS-- 97.4%
--------------------------------------------------------------------------------
COMMERCIAL SERVICES-- 2.2%
--------------------------------------------------------------------------------
Reynolds & Reynolds Co. 46,500 $ 1,104,375
-------------
CONSUMER DURABLE GOODS-- 4.4%
--------------------------------------------------------------------------------
D.R. Horton Inc. 82,500 1,067,344
Engle Homes Inc. 28,200 269,662
Flexsteel Industries Inc. 27,400 363,050
La-Z-Boy Inc. 34,900 547,494
--------------------------------------------------------------------------------
2,247,550
-------------
CONSUMER NON-DURABLES-- 8.7%
--------------------------------------------------------------------------------
Block Drug Inc. 7,500 213,750
Dimon Inc. 135,000 320,625
Standard
Commercial Corp. 306,900 939,881
Timberland Co.* 10,000 693,750
Tropical Sportswear
International Corp.* 45,800 807,225
Wolverine World
Wide Inc. 122,900 1,474,800
-------------
4,450,031
CONSUMER SERVICES-- 1.8%
--------------------------------------------------------------------------------
Aztar Corp.* 75,600 902,475
-------------
ELECTRONIC TECHNOLOGY-- 4.2%
--------------------------------------------------------------------------------
Diebold Inc. 43,000 1,241,625
ESCO Electronics
Corp.* 30,700 500,794
Spacehab Inc.* 76,100 390,013
-------------
2,132,432
-------------
ENERGY MINERALS-- 1.4%
--------------------------------------------------------------------------------
Nuevo Energy Co.* 40,600 710,500
-------------
FINANCE-- 18.5%
--------------------------------------------------------------------------------
Acceptance
Insurance Co.* 53,300 236,519
American National
Insurance Co. 27,800 1,435,175
Harleysville
Group Inc. 58,500 939,656
Matrix Bancorp * 52,900 396,750
PBOC Holdings Inc.* 54,600 477,750
PMI Group Inc. 15,850 767,734
Penn-America
Group Inc. 63,300 565,744
Presidential
Life Corp. 148,200 2,359,622
Professionals
Group Inc.* 98,120 1,735,497
Reinsurance Group
of America Inc. 2,600 64,675
Stancorp Financial
Group Inc. 18,900 550,463
-------------
9,529,585
-------------
HEALTH TECHNOLOGY-- 2.8%
--------------------------------------------------------------------------------
SkyePharma PLC 12,773 204,368
West Pharmaceutical
Services Inc. 50,800 1,241,425
-------------
1,445,793
-------------
INDUSTRIAL SERVICES-- 9.9%
--------------------------------------------------------------------------------
Atwood
Oceanics Inc.* 16,400 994,250
ENSCO
International Inc. 36,500 1,211,344
R&B Falcon Corp.* 53,100 1,101,825
Rowan Companies Inc.* 38,400 1,072,800
Santa Fe
International Corp. 19,700 677,188
-------------
5,057,407
-------------
NON-ENERGY MINERALS-- 3.9%
--------------------------------------------------------------------------------
LTV Corp. 317,300 1,130,381
Lone Star
Technologies Inc.* 18,800 867,150
-------------
1,997,531
PROCESS INDUSTRIES-- 4.4%
--------------------------------------------------------------------------------
Lancaster
Colony Corp. 42,000 1,102,500
RPM Inc. 77,200 781,650
Tuscarora Inc. 30,700 389,506
-------------
2,273,656
-------------
PRODUCER MANUFACTURING-- 23.7%
--------------------------------------------------------------------------------
Baldor Electric Co. 40,900 759,206
Circor International Inc. 21,550 246,478
Commonwealth
Industries Inc. 79,600 597,000
Graco Inc. 5,000 169,375
JLG Industries Inc. 208,600 1,981,700
Kaydon Corp. 40,500 946,688
Myers Industries Inc. 85,130 1,191,820
Patrick Industries Inc. 35,200 261,800
Superior Industries
International Inc. 33,000 1,062,187
14
<PAGE>
SMALL CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 2000
(Unaudited)
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
Teleflex Inc. 37,600 $ 1,299,550
Timken Co. 91,100 1,685,350
Tower Automotive Inc.* 70,800 1,106,250
Watts Industries Inc. 51,900 694,163
Woodhead Industries 9,800 164,150
-------------
12,165,717
-------------
Retail Trade-- 2.7%
--------------------------------------------------------------------------------
Schultz Sav-O Stores Inc. 85,550 973,131
Syms Corp.* 102,000 408,000
-------------
1,381,131
TECHNOLOGY SERVICES-- 2.1%
--------------------------------------------------------------------------------
Ultrak Inc.* 120,000 1,080,000
-------------
TRANSPORTATION-- 6.7%
--------------------------------------------------------------------------------
Atlantic Coast
Airlines Holdings * 25,600 764,800
Kenan Transport Co. 55,200 1,104,000
Midwest Express
Holdings Inc.* 21,000 531,562
Motor Cargo
Industries Inc.* 53,100 242,269
Tidewater Inc. 26,300 782,425
-------------
3,425,056
-------------
TOTAL COMMON STOCKS
(Identified Cost
$59,695,557) 49,903,239
-------------
SHORT-TERM OBLIGATIONS-- 1.1%
--------------------------------------------------------------------------------
Federal Home Loan
Bank Consumer
Discount Note
5.50% due 5/01/00 542,000
-------------
TOTAL INVESTMENTS
(Identified Cost
$60,237,557) 98.5% 50,445,239
OTHER ASSETS,
LESS LIABILITIES 1.5% 772,949
----- -------------
Net Assets 100.0% $51,218,188
===== =============
* Non-income producing
See notes to financial statements
15
<PAGE>
SMALL CAP VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $60,237,557) $50,445,239
Cash 327
Receivable for investments sold 858,339
Dividend and interest receivable 27,222
--------------------------------------------------------------------------------
Total assets 51,331,127
--------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 1,535
Payable to affiliates-- Management fees (Note 2) 7,803
Accrued expenses and other liabilities 103,601
--------------------------------------------------------------------------------
Total liabilities 112,939
--------------------------------------------------------------------------------
NET ASSETS $51,218,188
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $51,218,188
================================================================================
SMALL CAP VALUE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (Unaudited)
================================================================================
Dividend income $ 455,467
Interest income 19,133
--------------------------------------------------------------------------------
$ 474,600
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 242,696
Audit fees 14,645
Legal fees 7,317
Custody and fund accounting fees 6,265
Trustee fees 3,505
Other 589
--------------------------------------------------------------------------------
Total expenses 275,017
--------------------------------------------------------------------------------
Net investment income 199,583
--------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Unrealized appreciation of investments 4,656,122
Net realized loss from investment transactions (1,359,626)
--------------------------------------------------------------------------------
Net realized and unrealized gain on investments 3,296,496
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,496,079
================================================================================
See notes to financial statements
16
<PAGE>
SMALL CAP VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
APRIL 30, 2000 YEAR ENDED
(Unaudited) OCTOBER 31, 1999
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
Net investment income $ 199,583 $ 408,347
Net realized loss on investment transactions (1,359,626) (32,586,180)
Unrealized appreciation of investments 4,656,122 30,267,299
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 3,496,079 (1,910,534)
--------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 436,610 11,738,321
Value of withdrawals (37,141,916) (96,265,899)
--------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions (36,705,306) (84,527,578)
--------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS: (33,209,227) (86,438,112)
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 84,427,415 170,865,527
--------------------------------------------------------------------------------
End of period $ 51,218,188 $ 84,427,415
================================================================================
SMALL CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED
APRIL 30, 2000 YEAR ENDED
(Unaudited) OCTOBER 31, 1999
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted) $51,218 $84,427
Ratio of expenses to average net assets 0.85%* 0.86%
Ratio of net investment income
to average net assets 0.62%* 0.31%
Portfolio Turnover 7% 37%
================================================================================
* Annualized
See notes to financial statements
17
<PAGE>
SMALL CAP VALUE PORTFOLIO
Notes to Financial Statements (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Small Cap Value 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.
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.
D. EXPENSES The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
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
18
<PAGE>
SMALL CAP VALUE PORTFOLIO
Notes to Financial Statements (Unaudited)
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 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 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 Citigroup Inc.
The management fees paid to Citibank, amounted to $63,789 for the six months
ended April 30, 2000. 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 $178,907 for the six
months ended April 30, 2000.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $4,187,802 and $39,996,184 respectively,
for the six months ended April 30, 2000.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 2000, as
computed on a federal income tax basis, are as follows:
Aggregate Cost $ 60,237,557
================================================================================
Gross unrealized appreciation $ 7,058,767
Gross unrealized depreciation (16,851,085)
--------------------------------------------------------------------------------
Net unrealized depreciation $ (9,792,318)
================================================================================
19
<PAGE>
SMALL CAP VALUE 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
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,
2000, the commitment fee allocated to the Portfolio was $94. Since the line of
credit was established, there have been no borrowings.
20
<PAGE>
FOREIGN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 2000
(Unaudited)
PRINCIPAL
ISSUER CURRENCY AMOUNT VALUE
-----------------------------------------------------------------------
FIXED INCOME -- 107.3%
-----------------------------------------------------------------------
CANADA -- 5.1%
-----------------------------------------------------------------------
Canadian Government
Bonds
1.90% due 3/23/09 JPY 186,000,000 $ 1,752,720
-------------
DENMARK -- 1.4%
-----------------------------------------------------------------------
Nykredit
5.00% due 10/01/29 DKK 2,028,000 217,196
Unikredit Realkred
5.00% due 10/01/29 DKK 2,488,000 266,400
-------------
483,596
-------------
FINLAND -- 0.4%
-----------------------------------------------------------------------
Finnish Export Credit Corp.
6.625% due 5/15/00 $ 120,000 120,000
-------------
FRANCE -- 6.7%
-----------------------------------------------------------------------
Government of France
3.00% due 7/25/09 EURO 966,071 832,674
5.50% due 4/25/29 EURO 1,630,000 1,445,825
-------------
2,278,499
-------------
GERMANY -- 11.2%
-----------------------------------------------------------------------
Bundesrepublik
Deutschland
4.25% due 11/26/04 EURO 4,120,000 3,635,566
Republic of Germany
5.625% due 1/04/28 EURO 240,000 215,958
-------------
3,851,524
-------------
GREAT BRITAIN -- 17.9%
-----------------------------------------------------------------------
Abbey National Treasury
Services
6.25% due 6/30/00 $ 437,000 436,694
8.50% due 7/17/00 $ 1,000,000 1,002,389
Euro Investment Bank
7.00% due 12/08/03 GBP 3,000,000 4,703,782
-------------
6,142,865
-------------
GREECE -- 2.9%
-----------------------------------------------------------------------
Republic of Greece
10.18% due 6/17/03 GRD 64,800,000 181,162
10.24% due 10/23/03 GRD 294,000,000 828,298
-------------
1,009,460
-------------
ITALY -- 0.3%
-----------------------------------------------------------------------
SCCR Limited
3.50% due 5/15/00 EURO 200,000,000 93,890
-------------
JAPAN -- 27.2%
-----------------------------------------------------------------------
Government of Japan
4.10% due 6/21/04 JPY 182,000,000 1,896,244
International Bank
Reconstruction and
Development
4.75% due 12/20/04 JPY 330,000,000 3,579,392
Nippon Telephone and
Telegraph
2.50% due 7/25/07 JPY 240,000,000 2,353,229
Oest Kontrollbank
1.80% due 3/22/10 JPY 159,000,000 1,475,330
-------------
9,304,195
-------------
NETHERLANDS -- 5.6%
-----------------------------------------------------------------------
Bank Netherlands
Gemeenten
6.00% due 5/12/00 $ 375,000 375,056
Kingdom of Netherlands
6.00% due 1/15/06 EURO 1,620,000 1,527,970
-------------
1,903,026
-------------
POLAND -- 6.2%
-----------------------------------------------------------------------
Commerzbank AG
13.75% due 1/18/02 PLN 10,000,000 2,129,754
-------------
PORTUGAL -- 2.9%
-----------------------------------------------------------------------
Republic of Portugal
6.50% due 5/08/00 $ 1,000,000 1,000,200
-------------
SPAIN -- 1.9%
-----------------------------------------------------------------------
Government of Spain
6.00% due 1/31/29 EURO 685,982 639,964
-------------
UNITED STATES -- 17.6%
-----------------------------------------------------------------------
Banc One Auto Grantor
Trust
6.27% due 11/20/03 $ 171,948 171,197
Chase Manhattan Grantor
Trust
6.61% due 9/15/02 $ 120,285 119,945
Federal National
Mortgage Association
7.25% due 1/15/10 $ 260,000 259,228
Government National
Mortgage Association
6.125% due 4/20/25 $ 457,418 461,137
6.75% due 9/20/26 $ 435,957 439,501
6.75% due 9/20/26 $ 246,798 247,679
7.125% due 12/20/25 $ 117,146 118,116
7.125% due 12/20/26 $ 757,986 764,027
32
<PAGE>
FOREIGN BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) April 30, 2000
(Unaudited)
PRINCIPAL
ISSUER CURRENCY AMOUNT VALUE
-----------------------------------------------------------------------
Inter American
Development Bank
7.375% due 1/15/10 $ 250,000 $ 251,079
KFW International
Finance
5.875% due 6/28/00 $ 180,000 179,766
United States Treasury
Inflationary Index Notes
6.50% due 2/28/02 $ 3,040,000 3,028,600
-------------
6,040,275
-------------
TOTAL FIXED INCOME
(Identified cost $39,318,701) 36,749,968
-------------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST-- 11.8%
-----------------------------------------------------------------------
Deustche Australia Limited
Commercial Paper,
Zero Coupon due 5/24/00 1,992,234
First Union National Bank
Repurchase Agreement
5.84% due 5/01/00
proceeds at maturity
$2,052,999 (collateralized
by $2,100,000 Federal
National Mortgage
Association 5.72% due
3/08/01; valued at $2,097,375) 2,052,000
-------------
TOTAL SHORT-TERM
OBLIGATIONS
(Identified cost $4,044,234) 4,044,234
-------------
TOTAL INVESTMENTS
(Identified cost
$43,362,935) 119.1% $ 40,794,202
OTHER ASSETS,
LESS LIABILITIES (19.1) (6,556,989)
----- -------------
NET ASSETS 100.0% $ 34,237,213
===== =============
See notes to financial statements
-----------------------------------------------------------------------
FOREIGN CURRENCY LEGEND
-----------------------------------------------------------------------
SYMBOL COUNTRY
-----------------------------------------------------------------------
DKK Denmark
EURO Europe
GRD Greece
JPY Japan
PLN Poland
GBP United Kingdom
$ United States
33
<PAGE>
FOREIGN BOND PORTFOLIO
FORWARD CURRENCY CONTRACTS WHICH WERE OPEN AT APRIL 30, 2000 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) .. Canada $ 1,891,416 $ 1,911,843 May 2000 $ (20,427)
Dollar (Sell) . Canada 1,891,395 1,900,295 May 2000 8,900
Dollar (Buy) .. Singapore 1,485,548 1,480,216 May 2000 5,332
Drachma (Buy) . Greece 1,274,591 1,343,010 May 2000 (68,419)
Euro (Buy) .... United States 217,577 229,625 May 2000 (12,048)
Euro (Sell) ... United States 5,623,174 5,909,216 May 2000 286,042
Euro (Buy) .... United States 555,117 588,497 May 2000 (33,380)
Euro (Sell) ... United States 1,860,000 1,800,311 May 2000 59,689
Krone (Sell) .. Denmark 402,035 422,511 May 2000 20,476
Krona (Buy) ... Sweden 880,889 909,021 May 2000 (28,132)
Pound (Sell) .. Great Britain 4,976,184 5,106,041 May 2000 129,857
Franc (Buy) ... Switzerland 865,376 920,000 May 2000 (54,624)
Yen (Buy) ..... Japan 1,068,721 1,110,000 May 2000 (41,279)
Yen (Sell) .... Japan 11,365,124 11,707,045 May 2000 341,921
Zloty (Sell) .. Poland 1,689,445 1,782,108 May 2000 92,663
----------
$686,571
==========
</TABLE>
34
<PAGE>
FOREIGN BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (Unaudited)
================================================================================
ASSETS:
Investments, at value (Note1A) (Identified Cost, $43,362,935) $40,794,202
Foreign currency at value (Cost $84,377) 82,742
Cash 896
Interest receivable 838,960
Receivable for investments sold 723,253
Receivable for forward contracts 944,994
--------------------------------------------------------------------------------
Total assets 43,385,047
--------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 8,761,419
Payable for forward contracts 258,423
Payable to affiliates--Management fees (Note 2) 15,995
Accrued expenses 111,997
--------------------------------------------------------------------------------
Total liabilities 9,147,834
--------------------------------------------------------------------------------
NET ASSETS $34,237,213
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interest $34,237,213
================================================================================
FOREIGN BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (Unaudited)
================================================================================
INCOME:
Interest (Note 1B) (net of foreign tax of $19,802) $ 1,117,977
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) $121,869
Audit fees 18,300
Legal fees 10,252
Custody and fund accounting fees 3,999
Trustees fees 2,308
Other 601
--------------------------------------------------------------------------------
Total expenses 157,329
--------------------------------------------------------------------------------
Net investment income 960,648
--------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Unrealized appreciation of investments, forward
currency contracts, foreign currency, futures
written, options and other assets and liabilities 298,055
Net realized loss from investments and futures
contracts (364,127)
Net realized loss from forward currency contracts
and foreign currency transactions (258,890)
--------------------------------------------------------------------------------
Net realized and unrealized loss on investments
and foreign currency (324,962)
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 635,686
================================================================================
See notes to financial statements
35
<PAGE>
FOREIGN BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED
APRIL 30, 2000 YEAR ENDED
(Unaudited) OCTOBER 31, 1999
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 960,648 $ 6,050,189
Unrealized appreciation (depreciation) of
investments, forward currency contracts,
foreign currency, futures, written options
and other assets and liabilities 298,055 (17,308,962)
Net realized gain (loss) from investments,
forward currency contracts, futures and
foreign currency transactions (623,017) 5,951,109
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 635,686 (5,307,664)
--------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Proceeds from contributions 196,465 18,302,383
Value of withdrawals (21,783,037) (240,072,098)
--------------------------------------------------------------------------------
Net decrease in net assets from
capital transactions (21,586,572) (221,769,715)
--------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS (20,950,886) (227,077,379)
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 55,188,099 282,265,478
--------------------------------------------------------------------------------
End of period $34,237,213 $ 55,188,099
================================================================================
FOREIGN BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS NOVEMBER 1, 1997
ENDED (COMMENCEMENT
APRIL 30, 2000 YEAR ENDED OF OPERATIONS) TO
(Unaudited) OCTOBER 31, 1999 OCTOBER 31, 1998
================================================================================================
<S> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $34,237 $55,188 $282,265
Ratio of expenses to average net assets 0.71%* 0.72% 0.74%
Ratio of net investment income to
average net assets 4.34%* 3.97% 4.55%
Portfolio turnover 110% 646% 693%
================================================================================================
</TABLE>
* Annualized
See notes to financial statements
36
<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.
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.
B. INCOME Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or accretion of original issue discount and
market 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
37
<PAGE>
FOREIGN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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 include 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
and sales of securities, or to hedge the U.S. dollar value of portfolio
securities denominated in a particular currency. The Portfolio could be exposed
to risks if the counterparties 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 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
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. FUTURES CONTRACTS The Portfolio may engage in futures transactions. The
Portfolio may use futures contracts in order to protect the Portfolio from
fluctuation in interest rates without actually buying or selling debt
securities, or to manage the effective maturity or duration of fixed income
securities in the Portfolio in an effort to reduce potential losses or enhance
potential gains. Buying futures contracts tends to increase the Portfolio's
exposure to the underlying instrument. Selling futures contracts tends to either
decrease the Portfolio's exposure to the underlying instrument, or to hedge
other portfolio investments.
Upon entering into a futures contract, the Portfolio is required to deposit
with the broker an amount of cash or cash equivalents equal to a certain
percentage of the contract amount. This is known as the "initial margin".
Subsequent payments ("variation margin") are made or received by the Portfolio
each day, depending on the daily fluctuation of the value of the contract. The
daily changes in contract value are recorded as unrealized gains or losses and
the Portfolio recognizes a realized gain or loss when the contract is closed or
expires. Futures contracts are
38
<PAGE>
FOREIGN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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, for example, an exchange of floating rate payments for
fixed rate payments with respect to a notional amount of principal. Interest
rate swaps are marked to market daily. Unrealized gains or losses are reported
as an asset or a liability in the Statement of Assets and Liabilities. The cash
paid or received on a swap is recognized as a realized loss or gain when such a
payment is paid or received.
Entering into swap agreements involves, to varying degrees, elements of
credit risk, market risk, and interest rate risk in excess of the amount
recognized in the Statement of Assets and Liabilities. Such risks involve the
possibility that there is not a liquid market for these agreements, that the
counterparty to the agreements
39
<PAGE>
FOREIGN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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 they are
principally traded. If an option expires on its stipulated expiration date, or
if the Portfolio enters into a closing purchase transaction, the Portfolio
realizes a 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 relinquishes 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
contract 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 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 Salomon Brothers Asset
Management Limited (the "Subadviser"), an affiliate of Citibank. Citibank is a
wholly-owned subsidiary of Citigroup Inc.
The management fee paid to Citibank amounted to $55,058 for the six months
ended April 30, 2000. 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
40
<PAGE>
FOREIGN BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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 the
first $200 million and 0.25% on the remaining assets.
The fees paid to the Subadviser amounted to $66,811 for the six months ended
April 30, 2000.
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 $54,014,039 and $50,860,826,
respectively, for the six months ended April 30, 2000.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 2000, as
computed on a federal income tax basis, are as follows:
Aggregate Cost $43,362,935
================================================================================
Gross unrealized appreciation $ 180,135
Gross unrealized depreciation (2,748,868)
--------------------------------------------------------------------------------
Net unrealized depreciation $(2,568,733)
================================================================================
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 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, 2000,
the commitment fee allocated to the Portfolio was $62. Since the line of credit
was established, there have been no borrowings.
41
<PAGE>
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 2000
(Unaudited)
PRINCIPAL
ISSUER AMOUNT VALUE
-----------------------------------------------------------------
FIXED INCOME -- 96.3%
-----------------------------------------------------------------
DOMESTIC CORPORATIONS -- 96.3%
-----------------------------------------------------------------
AEROSPACE -- 2.4%
-----------------------------------------------------------------
Hexcel Corp.
9.75% due 1/15/09+ $1,000,000 $ 840,000
Sequa Corp.
9.00% due 8/01/09 430,000 398,825
-------------
1,238,825
-------------
AUTOMOTIVE -- 2.7%
-----------------------------------------------------------------
J.L. French Automotive
Castings
11.50% due 6/01/09+ 1,000,000 965,000
Lear Corp.
8.11% due 5/15/09+ 500,000 445,793
-------------
1,410,793
-------------
CABLE & OTHER MEDIA -- 14.9%
-----------------------------------------------------------------
CSC Holdings Inc.
9.875% due 2/15/13+ 500,000 507,500
Charter Communications
Holdings
9.92% due 4/01/11+ 1,750,000 962,500
Federal Mogul Corp.
7.50% due 1/15/09 500,000 381,005
Frontiervision Holdings LP
11.875% due 9/15/07 2,250,000 1,985,625
Heafner JH Inc.
10.00% due 5/15/08 1,375,000 1,100,000
NTL Inc.
Zero coupon due 4/01/08+ 2,000,000 1,265,000
Owens Illinois Inc.
7.50% due 5/15/10 500,000 436,995
Telewest plc
Zero coupon due 10/01/07 850,000 801,125
Telewest Communications
Zero coupon due 04/15/09+ 375,000 211,875
-------------
7,651,625
-------------
CAPITAL GOODS/BUILDING PRODUCTS -- 2.9%
-----------------------------------------------------------------
Jordan Industries Inc. -
Series D
10.375% due 8/01/07 1,125,000 1,046,250
Packard Bioscience Inc. -
Series B
9.375% due 3/01/07 500,000 450,000
-------------
1,496,250
-------------
CHEMICALS -- 1.4%
-----------------------------------------------------------------
Lyondell Chemical Co.
9.875% due 5/01/07 500,000 491,250
Radnor Holdings Corp.
10.00% due 12/01/03 250,000 220,000
-------------
711,250
-------------
CONSUMER PRODUCTS/TOBACCO -- 13.2%
-----------------------------------------------------------------
French Fragrances Inc.
10.375% due 5/15/07 770,000 735,350
Global Crossing Holdings Ltd
9.50% due 11/15/09 125,000 121,875
Home Interiors Gifts Inc.
10.125% due 6/01/08 710,000 560,900
Mail Well Corp.
8.75% due 12/15/08+ 1,000,000 870,000
Revlon Consumer Products
Corp.
9.00% due 11/01/06 1,000,000 720,000
8.625% due 2/01/08 500,000 242,500
Simmons Co.
10.25% due 3/15/09+ 125,000 105,312
Triarc Consumer Products
Group
10.25% due 2/15/09+ 1,000,000 925,000
United Industries Corp.
9.875% due 4/01/09+ 1,000,000 705,000
United International
Holdings Inc.
10.75% due 2/15/08 2,000,000 1,320,000
Windmere-Durable
Holdings Inc.
10.00% due 7/31/08 500,000 482,500
-------------
6,788,437
-------------
ENERGY -- 7.1%
-----------------------------------------------------------------
Bellwether Exploration Co.
10.875% due 4/01/07 475,000 427,500
Canadian First Oil Ltd
8.75% due 9/15/07 1,000,000 935,000
Key Energy Services Inc.
14.00% due 1/15/09 300,000 327,750
Lomak Petroleum Inc.
8.75% due 1/15/07 500,000 428,750
Polaroid Corp.
11.50% due 2/15/06 250,000 255,625
Synder Oil Corp.
8.75% due 6/15/07 250,000 247,500
Western Gas Resources
10.00% due 6/15/09+ 1,000,000 1,010,000
-------------
3,632,125
-------------
42
<PAGE>
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) April 30, 2000
(Unaudited)
PRINCIPAL
ISSUER AMOUNT VALUE
-----------------------------------------------------------------
FINANCIAL -- 3.8%
-----------------------------------------------------------------
Avis Group Holdings Inc.
11.00% due 5/01/09+ $1,000,000 $ 1,042,500
Contifinancial Corp.
8.375% due 8/15/03 2,000,000 200,000
Derby Cycle Corp.
Lyon Investments
10.00% due 5/15/08 500,000 306,250
Plains Resources Inc.
10.25% due 3/15/06+ 430,000 413,337
-------------
1,962,087
-------------
FOOD/BEVERAGE/BOTTLING -- 1.5%
-----------------------------------------------------------------
B & G Foods Indications
Corp.
9.625% due 8/01/07 1,000,000 785,000
-------------
GAMING -- 5.4%
-----------------------------------------------------------------
Majestic Star Casino LLC.
10.875% due 7/01/06+ 1,000,000 930,000
Sun International Ltd.
9.00% due 3/15/07 1,000,000 902,500
Waterford Gaming Finance
Corp. , LLC
9.50% due 3/15/10+ 981,000 936,855
-------------
2,769,355
-------------
HEALTHCARE -- 2.8%
-----------------------------------------------------------------
Alaris Medical Systems Inc.
9.75% due 12/01/06 375,000 300,000
Frensenuis Medical Care
Capital Trust
9.00% due 12/01/06 1,000,000 940,000
Harrahs Operations Inc.
7.875% due 12/15/05 225,000 209,250
-------------
1,449,250
-------------
HOUSING RELATED -- 1.7%
-----------------------------------------------------------------
CB Richards Ellis Services Inc.
8.875% due 6/01/06 1,000,000 875,000
-------------
LODGING LEISURE -- 3.8%
-----------------------------------------------------------------
HMH Properties Inc. -
Series C
8.45% due 12/01/08 1,000,000 892,500
LTVCorp.
11.75% due 11/15/09+ 500,000 492,500
Moll Industries Inc.
10.50% due 6/01/08 750,000 240,000
Psinet Inc.
11.50% due 11/01/08 375,000 337,500
-------------
1,962,500
-------------
METALS/MINING/STEEL -- 0.9%
-----------------------------------------------------------------
P&L Coal Holdings Corp.
8.875% due 5/15/08 500,000 450,000
-------------
PAPER/FOREST PRODUCTS -- 1.0%
-----------------------------------------------------------------
Tembec Finance Corp.
9.875% due 9/30/05 500,000 505,000
-------------
PUBLISHING/PRINTING -- 1.9%
-----------------------------------------------------------------
Hollinger International
Publishing Inc.
9.25% due 3/15/07 1,000,000 965,000
-------------
RETAIL -- 4.3%
-----------------------------------------------------------------
Acetex
9.75% due 10/01/03 250,000 227,500
Advance Stores Inc.
10.25% due 4/15/08 875,000 695,625
Cole National Group Inc.
8.625% due 8/15/07 500,000 346,250
Finlay Fine Jewelry Corp.
8.375% due 5/01/08 1,000,000 900,000
Key Plastics Inc.
10.25% due 3/15/07++ 500,000 20,000
-------------
2,189,375
-------------
SERVICES/OTHER -- 3.3%
-----------------------------------------------------------------
Allied Waste North
American Inc.
10.00% due 8/01/09+ 1,000,000 687,500
Integrated Electrical Service
9.375% due 2/01/09+ 590,000 460,200
Pierce Leahy Command Co.
8.125% due 5/15/08 500,000 431,250
Safety Kleen Services Inc.
9.25% due 6/01/08 1,000,000 112,500
-------------
1,691,450
-------------
TELECOMMUNICATIONS -- 11.7%
-----------------------------------------------------------------
Energis plc
9.75% due 6/15/09+ 1,000,000 990,000
Intermedia
Communications Inc.
9.50% due 3/01/09+ 1,000,000 950,000
Leap Wireless
International Inc.
12.50% due 4/15/10+ 250,000 241,250
Nextel Communications Inc.
Zero coupon
due 10/31/07 1,500,000 1,072,500
Orange plc
9.00% due 6/01/09+ 1,000,000 995,000
43
<PAGE>
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) April 30, 2000
(Unaudited)
PRINCIPAL
ISSUER AMOUNT VALUE
-----------------------------------------------------------------
Price Communications
Wireless Inc. - Series B
9.125% due 12/15/06 $ 750,000 $ 740,625
Rogers Cantel
9.375% due 6/01/08 1,000,000 995,000
-------------
5,984,375
-------------
TRANSPORTATION -- 3.4%
-----------------------------------------------------------------
Continental Airlines Inc.
8.00% due 12/15/05 1,000,000 884,180
Holt Group Inc.
9.75% due 1/15/06+ 1,000,000 450,000
ICG Holdings Inc.
Zero coupon due 5/01/06 500,000 400,000
-------------
1,734,180
-------------
UTILITIES -- 3.0%
-----------------------------------------------------------------
Azurix Corp.
10.75% due 2/15/10+ 500,000 502,500
Calpine Corp.
7.875% due 4/01/08 1,000,000 941,250
Laidlaw
6.65% due 10/01/04+ 250,000 95,000
-------------
1,538,750
-------------
MORTGAGE OBLIGATIONS -- 3.2%
-----------------------------------------------------------------
MORTGAGE BACKED
SECURITIES/PASSTHROUGHS -- 3.2%
-----------------------------------------------------------------
Airplane Trust
10.875% due 3/15/19 2,000,000 1,658,072
-------------
TOTAL FIXED INCOME
(Identified Cost $58,329,729) 49,448,699
-------------
SHORT-TERM OBLIGATIONS -- 1.0%
-----------------------------------------------------------------
Federal Home Loan Bank
Consumer Discount Note
5.55% due 5/01/00 537,000
-----------------------------------------------------------------
TOTAL INVESTMENTS
(Identified Cost
$58,866,729) 97.3% 49,985,699
OTHER ASSETS,
LESS LIABILITIES 2.7 1,387,312
----- -------------
NET ASSETS 100.0% $51,373,011
===== =============
+ Rule 144A - Security exempt from registration under Rule 144A of the
Securities Act of 1933. As of April 30, 2000 the amount of securities
classified as 144A amounted to 35.0% of the total net assets. These
securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers.
++ Bond is in default.
See notes to financial statements
44
<PAGE>
HIGH YIELD PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (Unaudited)
================================================================================
ASSETS:
Investments at value (Note 1A) (Identified Cost, $58,866,729) $49,985,699
Cash 1,196
Interest receivable 1,431,413
--------------------------------------------------------------------------------
Total assets 51,418,308
--------------------------------------------------------------------------------
LIABILITIES:
Payable to affiliates--Management fees (Note 2) 28,470
Accrued expenses and other liabilities 16,827
--------------------------------------------------------------------------------
Total liabilities 45,297
--------------------------------------------------------------------------------
NET ASSETS $51,373,011
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $51,373,011
================================================================================
HIGH YIELD PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (Unaudited)
================================================================================
INVESTMENT INCOME:
Interest Income (Note 1B) $3,586,255
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) $ 212,316
Custody and fund accounting fees 39,697
Legal fees 10,252
Audit fees 7,400
Trustees fees 3,402
Other 586
--------------------------------------------------------------------------------
Total expenses 273,653
Less aggregate amounts waived by the Manager (Note 2) (44,997)
--------------------------------------------------------------------------------
Net expenses 228,656
--------------------------------------------------------------------------------
Net investment income 3,357,599
--------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Unrealized depreciation of investments (986,767)
Net realized loss from investment transactions (4,188,648)
--------------------------------------------------------------------------------
Net realized and unrealized loss on investments (5,175,415)
--------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(1,817,816)
================================================================================
See notes to financial statements
45
<PAGE>
HIGH YIELD PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
MAY 3, 1999
SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS)
APRIL 30, 2000 TO
(Unaudited) OCTOBER 31, 1999
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 3,357,599 $ 4,122,024
Net realized loss on investment transactions (4,188,648) (568,901)
Unrealized depreciation of investments (986,767) (7,894,262)
--------------------------------------------------------------------------------
Net decrease in net assets resulting from
operations (1,817,816) (4,341,139)
--------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 250,534 137,682,126
Value of withdrawals (27,212,264) (53,188,430)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital transactions (26,961,730) 84,493,696
--------------------------------------------------------------------------------
NET INCREASE (DECREASE)IN NET ASSETS (28,779,546) 80,152,557
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 80,152,557 --
--------------------------------------------------------------------------------
End of period $ 51,373,011 $80,152,557
================================================================================
HIGH YIELD PORTFOLIO
FINANCIAL HIGHLIGHTS
================================================================================
FOR THE PERIOD
MAY 3, 1999
SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS)
APRIL 30, 2000 TO
(Unaudited) OCTOBER 31, 1999
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $51,373 $80,153
Ratio of expenses to average net assets 0.70%* 0.70%*
Ratio of net investment income to average
net assets 10.28%* 8.42%*
Portfolio turnover 28% 41%
Note: If agents of the Portfolio had not voluntarily waived a portion of their
fees during the period indicated, the ratios would have been as follows:
RATIOS:
Expenses to average net assets 0.84%* 0.79%*
Net investment income to average net assets 10.14%* 8.33%*
================================================================================
*Annualized
See notes to financial statements
46
<PAGE>
HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES High Yield Portfolio (the "Portfolio"), a
separate series of The Premium 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.
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 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 adjusted for
amortization of premium or accretion of original issue discount and market
discount on long-term debt securities when required for U.S. federal income tax
purposes. The Portfolio may place a debt obligation on non-accrual status and
reduce related interest income by ceasing current accruals and writing off
interest receivables when the collection of all or a portion of interest has
become doubtful based on consistently applied procedures. A debt obligation is
removed from non-accrual status when the issuer resumes interest payments or
when collectibility of interest is reasonably assured.
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.
47
<PAGE>
HIGH YIELD 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
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 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 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
delegated the daily management of the Portfolio to Salomon Brothers Assets
Management Inc. (the "Subadviser") an affiliate of Citibank. Citibank is a
wholly-owned subsidiary of Citigroup Inc.
The mangement fee paid to Citibank, amounted to $64,570 of which $44,997 was
voluntarily waived for the six months ended April 30, 2000. Citibank management
fees are computed at the annual rate of 0.65% 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 0.45% on first $100 million, 0.40% on
remaining assets.
The fees paid to the Subadviser amount to $147,746 for the six months ended
April 30, 2000.
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.
48
<PAGE>
HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
3. PURCHASES AND SALES OF INVESTMENTS Purchases and Sales of Investments, other
than short-term obligations, aggregated $18,085,982 and $40,353,466
respectively, for the six months ended April 30, 2000.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 2000, as
computed on a federal income tax basis, are as follows:
Aggregate cost $58,866,729
================================================================================
Gross unrealized appreciation $ 95,754
Gross unrealized depreciation (8,976,784)
--------------------------------------------------------------------------------
Net unrealized depreciation $(8,881,030)
================================================================================
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, 2000,
the commitment fee allocated to the Portfolio was $92. Since the line of credit
was established, there have been no borrowings.
49
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 2000
(Unaudited)
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS-- 99.1%
--------------------------------------------------------------------------------
AUSTRIA -- 0.9%
Boehler-Uddeholm 16,313 $ 635,620
-----------
AUSTRALIA -- 1.7%
--------------------------------------------------------------------------------
Australia & New Zealand
Banking Group 182,870 1,264,465
-----------
CANADA -- 2.1%
--------------------------------------------------------------------------------
Manulife Financial Corp. 98,329 1,543,757
-----------
FINLAND-- 1.0%
--------------------------------------------------------------------------------
UPM-Kymmene Oy 28,173 729,944
-----------
FRANCE -- 9.7%
--------------------------------------------------------------------------------
Aventis 30,614 1,683,787
BIC 22,036 877,442
BQE National Paris 21,110 1,706,089
Pernod-Ricard 17,289 781,942
Total 12,674 1,923,011
-----------
6,972,271
GERMANY -- 4.9%
--------------------------------------------------------------------------------
Depfadeutsche Pfandbriefban 450 45,205
Draegerwerk 75,819 654,807
Dyckerhoff 30,595 667,534
SGL Carbon * 5,633 435,230
Veba AG 23,403 1,174,417
Vossloh AG 35,189 537,437
-----------
3,514,630
-----------
GREAT BRITAIN -- 29.8%
--------------------------------------------------------------------------------
Allied Domecq 187,145 916,376
Allied Zurich 58,684 583,842
BAA 227,787 1,478,904
British Aerospace 302,758 1,861,948
British American
Tobacco plc 136,564 850,494
British
Telecommunications 56,962 1,019,901
CGU 55,318 793,233
Celltech Group 47,690 787,060
Cookson Group 299,615 881,658
Hanson 209,499 1,534,675
Lex Service 107,160 678,216
Lloyds TSB Group 62,572 610,833
Reckitt & Colman 95,814 985,692
Reed International 170,060 1,183,545
Royal Bank 63,002 982,872
Safeway 154,036 519,224
TI Group 198,805 1,080,259
Tomkins 294,737 905,163
Unilever 191,096 1,148,455
United News & Media 100,345 1,304,539
Williams 244,255 1,377,612
-----------
21,484,501
-----------
HONG KONG -- 4.5%
--------------------------------------------------------------------------------
Henderson Land
Development 164,000 717,969
Hong Kong Electric 390,000 1,219,188
New World
Development Co. 434,790 588,897
South China
Morning Post 695,486 741,095
-----------
3,267,149
-----------
IRELAND -- 3.7%
--------------------------------------------------------------------------------
Allied Irish Banks 122,074 1,218,533
Greencore Group 278,560 772,379
Jefferson Smurfit Group 318,760 695,483
-----------
2,686,395
-----------
ITALY -- 2.2%
--------------------------------------------------------------------------------
Telecom Italia SPA 112,000 1,565,979
-----------
JAPAN -- 10.9%
--------------------------------------------------------------------------------
Canon Inc. 33,000 1,509,235
Circle Japan Co. 19,100 744,443
Komatsu 273,000 1,314,262
Nintendo Co. 13,100 2,183,030
Promise Co. 13,500 1,093,598
Sanyo Shipan Financial 27,500 840,161
Yodogawa Steel Works 65,000 166,690
-----------
7,851,419
-----------
NETHERLANDS -- 8.2%
--------------------------------------------------------------------------------
ABN-Amro Holdings 31,562 649,897
Akzo Nobel 30,658 1,255,040
ING Groep 21,128 1,152,832
KPN 12,716 1,281,439
Philips Electronics 35,068 1,564,367
-----------
5,903,575
-----------
NEW ZEALAND -- 2.2%
--------------------------------------------------------------------------------
Telecom Corp. 379,972 1,605,275
-----------
PORTUGAL -- 1.8%
--------------------------------------------------------------------------------
Portugal
Telecommunications 113,881 1,270,303
-----------
16
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 2000
(Unaudited)
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
SINGAPORE -- 4.6%
--------------------------------------------------------------------------------
Creative Technology Ltd. 68,988 $ 1,888,547
United Overseas Bank 209,000 1,457,427
-----------
3,345,974
-----------
SPAIN -- 3.5%
--------------------------------------------------------------------------------
Respol 58,690 1,200,489
Telefonica S.A.* 58,242 1,296,162
-----------
2,496,651
-----------
SWEDEN -- 1.9%
--------------------------------------------------------------------------------
Electrolux AB 45,330 765,949
Getinge Industrier 67,065 620,834
-----------
1,386,783
-----------
SWITZERLAND -- 5.5%
--------------------------------------------------------------------------------
Forbo Holdings 539 194,403
Geberit 4,286 1,389,275
Novartis 846 1,181,765
Schweizerische Industrie-
Gesellschaft Holding 1,284 644,029
Sulzer 843 539,661
-----------
3,949,133
-----------
TOTAL INVESTMENTS
(Identified Cost
$68,125,796) 99.1% 71,473,824
OTHER ASSETS,
LESS LIABILITIES 0.9 649,559
----- -----------
NET ASSETS 100.0% $72,123,383
-----------
* Non income producing securities
See notes to financial statements
17
<PAGE>
INTERNATIONAL PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (Unaudited)
================================================================================
ASSETS:
Investments at value (Note 1A) (Identified Cost, $68,125,796) $71,473,824
Cash 531,700
Foreign currency, at value (cost $17,779) 17,383
Dividends receivable 559,644
Receivable for foreign currency sold 125,734
--------------------------------------------------------------------------------
Total assets 72,708,285
--------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 312,248
Payable for foreign currency purchased 127,891
Payable to affiliates--management fees (Note 2) 49,545
Accrued expenses and other liabilities 95,218
--------------------------------------------------------------------------------
Total liabilities 584,902
--------------------------------------------------------------------------------
NET ASSETS $72,123,383
--------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $72,123,383
================================================================================
See notes to financial statements
18
<PAGE>
INTERNATIONAL PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (Unaudited)
================================================================================
INVESTMENT INCOME: (Note 1B)
Dividend income (net of foreign
withholding tax of $162,695) $986,184
Interest income 80,620
--------------------------------------------------------------------------------
Total investment income $ 1,066,804
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 364,053
Custody and fund accounting fees 99,463
Legal fees 8,858
Audit fees 8,645
Trustees fees 4,515
Other 674
--------------------------------------------------------------------------------
Total expenses 486,208
Less aggregate amount waived by the Manager (Note 2) (44,882)
--------------------------------------------------------------------------------
Net expenses 441,326
--------------------------------------------------------------------------------
Net investment income 625,478
--------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investment transactions 4,715,904
Net realized gain on foreign currency transactions 20,577
--------------------------------------------------------------------------------
Net realized gain on investment transactions
and foreign currency transactions 4,736,481
--------------------------------------------------------------------------------
Unrealized appreciation of investments, forward currency
contracts, foreign currency transactions 1,379,907
--------------------------------------------------------------------------------
Net realized and unrealized gain of investments and
foreign currency transactions 6,116,388
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,741,866
================================================================================
See notes to financial statements
19
<PAGE>
INTERNATIONAL PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31,
(UNAUDITED) 1999
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 625,478 $ 2,325,499
Net realized gain on investment transactions and
foreign currency transactions 4,736,481 17,581,494
Unrealized appreciation (depreciation) of
investments, forward currency contracts,
foreign currency transactions 1,379,907 9,962,721
--------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 6,741,866 29,869,714
--------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 4,420,282 9,449,606
Value of withdrawals (44,332,170) (164,972,221)
--------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions (39,911,888) (155,522,615)
--------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS: (33,170,022) (125,652,901)
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 105,293,405 230,946,306
--------------------------------------------------------------------------------
End of period $ 72,123,383 $105,293,405
================================================================================
INTERNATIONAL PORTFOLIO
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31,
(UNAUDITED) 1999
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $ 72,123 $105,293
Ratio of expenses to average net assets 0.97%* 0.95%
Ratio of net investment income to
average net assets 1.37%* 1.41%
Portfolio turnover 26% 26%
Note: If Agents of the Portfolio had not voluntarily waived a portion of
their fees during the period indicated the ratios would be as follows:
RATIOS:
Expenses to average net assets 1.07%* 0.98%
Net investment income to
average net assets 1.27%* 1.38%
================================================================================
*Annualized.
See notes to financial statements
20
<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.
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 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
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INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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, or 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 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 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.
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INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Citibank has delegated the daily management of the Portfolio to Hotchkis and
Wiley (the "Subadviser"). Citibank is a wholly-owned subsidiary of Citigroup
Inc.
The management fee paid to Citibank, amounted to $130,833, of which $44,882
was voluntarily waived for the six months ended April 30, 2000. 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 $233,220 for the six
months ended April 30, 2000.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $22,670,392 and $60,195,470
respectively, for the six months ended April 30, 2000.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 2000, as
computed on a federal income tax basis, are as follows:
Aggregate cost $68,125,796
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Gross unrealized appreciation $ 8,966,164
Gross unrealized depreciation (5,618,136)
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Net unrealized appreciation $ 3,348,028
================================================================================
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 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, 2000
the commitment fee allocated to the Portfolio was $132. Since the line of credit
was established, there have been no borrowings.
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