[CitiFunds]
TO: Securities and Exchange Commission
Division of Investment Management
Judiciary Plaza
450 Fifth Street, N.W.
Washington D.C. 20549
FROM: Citi International Trust
CitiFunds International Growth & Income Portfolio
(CIK No. 0000866747)
(CCC No. *ugaee7z)
(Registration File Nos. 33-36556; 811-6154)
DATE: June 29, 1999
On behalf of the above-noted registrant, transmitted herewith for filing
pursuant to Rule 30b2-1 are the semi-annual financial statements for the period
ended April 30, 1999.
Please call Linda T. Gibson of the CFBDS, Inc. at (617) 423-0800 with any
comments or questions relating to this report.
<PAGE>
SEMI-ANNUAL REPORT O APRIL 30, 1999
CITIFUNDS SM
- -------------
International
Growth & Income
Portfolio
INTERNATIONAL STOCKS
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INVESTMENT PRODUCTS:
NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
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<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
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Portfolio Environment and Outlook 2
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Fund Facts 3
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Portfolio Highlights 4
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Fund Performance 5
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CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
Statement of Assets and Liabilities 6
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Statement of Operations 7
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Statement of Changes in Net Assets 8
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Financial Highlights 9
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Notes to Financial Statements 11
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INTERNATIONAL PORTFOLIO
Portfolio of Investments 14
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Statement of Assets and Liabilities 16
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Statement of Operations 16
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Statement of Changes in Net Assets 17
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Financial Highlights 17
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Notes to Financial Statements 18
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<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
This semi-annual report covers the period from November 1, 1998 through April
30, 1999, for CitiFundsSM International Growth & Income Portfolio. Inside, we
discuss the market conditions faced by the Portfolio's subadviser, Hotchkis and
Wiley, the strategies it employed and its outlook for the future.
The reporting period saw improvements in many of the world's economies. Lower
short-term interest rates adopted by central banks worldwide in the fall of 1998
appear to have helped many nations prevent further economic deterioration. This
was especially evident in Japan, Asia, Latin America and Eastern Europe, which
had previously borne the brunt of the global currency and credit crisis. While
economic growth was moderate in the industrialized economies of Western Europe,
the overall trend there remained positive.
These economic conditions produced mixed results for international stocks and
the Portfolio over the past six months. Some markets, such as Korea, were up
sharply. Others, such as Brazil, suffered steep declines. In a market
environment characterized by disparate performance, managers of international
equity funds such as CitiFunds International Growth & Income Portfolio faced a
doubly difficult challenge: first choosing the right markets, and then,
selecting the right stocks within those markets.
Thank you for your continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
- ----------------------
Philip W. Coolidge
President
May 20, 1999
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
WHEN THE REPORTING PERIOD BEGAN IN NOVEMBER 1998, much of the world was in
the midst of an economic crisis. The currency and credit crunch that began in
Asia in 1997 spread to Russia and parts of Latin America during the third
quarter of 1998. The world's emerging markets were threatened by a powerful
combination of economic instability and market illiquidity as investors rushed
to shift their assets from those regions to the relative safe haven of U.S.
government bonds. This situation was made worse by the failure of several major
U.S. hedge funds that were forced to sell highly leveraged investments into
markets with few buyers.
As a result, the first half of the reporting period saw poor performance in
many international stock markets. Market declines were broad-based, affecting
many different industries and market sectors. Companies that are sensitive to
economic cycles such as energy and commodities producers were particularly hard
hit. Conversely, only relatively recession-resistant market sectors, such as the
telecommunications and pharmaceutical industries, recorded gains.
Toward the end of January 1999, however, evidence of economic improvement
began to emerge. Less restrictive monetary policies adopted by many central
banks, including the Federal Reserve Board, helped stimulate economic growth
worldwide and stop the spread of the global financial crisis. Moreover, the
Japanese government announced its intention to implement long-awaited reforms of
their banking system, and that improved investor sentiment throughout Asia. The
result: a gradual return of capital to previously illiquid markets, and higher
stock prices in Japan and most emerging markets. In Europe, the manufacturing
sector weakened during the last half of 1998 due to the situation in Asia and
other emerging markets, whereas the consumer sector was robust.
In these market conditions, we maintained our emphasis on select European
companies. Many companies in Europe are restructuring their operations to cut
costs and improve productivity, which we believe should be reflected in higher
stock prices as profitability improves. Within Europe, we have emphasized
companies in the Netherlands and the United Kingdom, where we have found
particularly attractive values in cyclical stocks and larger mid-cap names.
Conversely, we have had very little exposure to stocks of Japanese issuers.
Despite the recent announcement of banking reforms, we believe that Japan's
economy remains mired in recession and that any recovery could be weak. We have
also had very little exposure to emerging markets in Asia and Latin America,
areas not represented in the Portfolio's benchmark, the MSCI EAFE Index.*
IN OUR VIEW, THE INTERNATIONAL MARKETS' WEAKNESS IN THE THIRD AND FOURTH
QUARTERS of 1998 provided opportunities to acquire well-managed companies at
attractive prices. Accordingly, we added a number of new stocks to the
Portfolio, especially in Europe's technology and telecommunications industries.
Many of these companies have traditionally been considered growth companies, but
temporary market declines reduced their prices to levels that we considered good
values. Many of these stocks have rebounded strongly since we bought them,
making positive contributions to performance during the reporting period. The
2
<PAGE>
Portfolio's performance was also helped in April when the prices of energy
stocks began to rise in response to higher oil prices after a long period of
lackluster returns.
Looking forward, while we expect the world's major developed and emerging
economies to continue to improve, the world's financial markets could remain
highly volatile. Accordingly, we expect to adhere to CitiFunds International
Growth & Income Portfolio's longstanding investment approach, which is to
evaluate opportunities on a company-by-company basis and to identify those that
we believe have the greatest likelihood of long-term gains. And while no
guarantee can be made, we believe that our investment approach may be a
particularly effective way to participate in long-term market gains while
helping to weather short-term volatility.
FUND FACTS
FUND OBJECTIVE
Current income and long-term growth of income accompanied by growth of capital.
INVESTMENT MANAGER DIVIDENDS
Citibank, N.A. Paid semi-annually, if any
PORTFOLIO SUBADVISER CAPITAL GAINS
Hotchkis & Wiley Distributed annually, if any
COMMENCEMENT OF OPERATIONS BENCHMARKS
March 2, 1998 o MSCI EAFE Index*
NET ASSETS AS OF 4/30/99 o Lipper International Equity Funds
Class A Shares $14.6 million Average
Class B Shares $64,355
* The MSCI EAFE Index is an unmanaged index of equity securities in 21 countries
listed on the exchanges of Europe, Australia, New Zealand and countries in the
Far East.
Investments in non-U.S. securities involve risks relating to political, social
and economic developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. issuers and markets are
subject.
3
<PAGE>
PORTFOLIO HIGHLIGHTS
================================================================================
INDUSTRIES AS A % OF THE PORTFOLIO AS OF APRIL 30, 1999 (Unaudited)
INDUSTRY % OF NET ASSETS
Banking 11.4%
Multi-Industry 7.9%
Electronics Comp. & Instruments 7.6%
Building Materials 7.5%
Health & Personal Care 6.4%
Energy Source 5.0%
Chemicals 4.8%
Telecommunications 4.3%
Financial Services 4.1%
Machinery & Engineering 4.0%
Beverage & Tobacco 4.0%
Insurance 3.7%
Forest Products 3.2%
Recreation 3.0%
Appliances & Household Durables 3.0%
Metals 2.9%
Food & Household Non-Durables 2.4%
Real Estate 2.2%
Broadcasting 2.1%
Utilities - Electrical & Gas 1.7%
Business & Public Services 1.6%
Merchandising 0.8%
Textiles & Apparel 0.6%
Miscellaneous 0.3%
PORTFOLIO COMPOSITION AS OF APRIL 30, 1999 (Unaudited)
Great Britain 27%
Switzerland 8%
Netherlands 8%
France 10%
Germany 9%
Japan 8%
Hong Kong 4%
Other 26%
4
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
<TABLE>
<CAPTION>
SINCE
SIX ONE 3/2/98
ALL PERIODS ENDED APRIL 30, 1999 (Unaudited) MONTHS** YEAR (INCEPTION)*
================================================================================
<S> <C> <C> <C>
CitiFunds International Growth & Income Portfolio
(Class A) without sales charge (14.90)% (2.38)% 3.32%
Lipper International Equity Funds Average 15.12% 3.24% 8.26%+
MSCI EAFE Index 15.44% 9.81% 11.99%+
CitiFunds International Growth & Income Portfolio
(Class A) with maximum sales charge of 5.00% 9.16% (7.26)% (1.14)%
CitiFunds International Growth & Income Portfolio
(Class B) without deferred sales charge -- -- 6.03%#**
Lipper International Equity Funds Average -- -- 6.23%++**
MSCI EAFE Index -- -- 5.60%++**
CitiFunds International Growth &Income Portfolio
(Class B) with a maximum deferred sales
charge of 5.00% -- -- 0.73%#**
</TABLE>
* Average Annual Total Return
** Not Annualized
+ From 2/28/98
++ From 12/31/98
# Commencement of Operations 1/4/99
GROWTH OF A $10,000 INVESTMENT
A $10,000 investment in the Fund made on inception date would have been worth
$9,868 with sales charge (as of 4/30/99). The graph shows how the Fund compares
to its benchmarks over the same period.
[The following table represents a chart in the printed piece]
Date MSCI EAFE Index Lipper International CitiFunds International
Equity Funds Avg. Growth & Income Portfolio
2/28/98 10000 10000 9500.00
3/31/98 10310 10510.95 9975.00
4/30/98 10393.51 10654.82 10108.00
5/31/98 10345.7 10665.4 10022.50
6/30/98 10426.4 10583.41 9813.50
7/31/98 10534.83 10736.8 9623.50
8/31/98 9231.67 9203.43 8227.00
9/30/98 8951.03 8871.26 7837.50
10/31/98 9886.41 9529.25 8588.00
11/30/98 10395.56 10021.69 8939.50
12/31/98 10808.27 10329.53 9105.82
1/31/99 10779.08 10409.92 8691.04
2/28/99 10524.7 10134.88 8691.04
3/31/99 10966.74 10488.73 9086.53
4/30/99 11413.08 10970.06 9867.85
The graph includes the initial charge on the Fund (no comparable charge exists
for the other indices) and assumes all dividends and distributions from the Fund
are reinvested at Net Asset Value.
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures "with sales charge" are provided in accordance with SEC
guidelines for comparative purposes for prospective investors and reflect
certain voluntary fee waivers which may be terminated at anytime. If the waivers
were not in place, the fund's returns would have been lower. The maximum sales
charge of 5.00% went into effect on January 4, 1999. Investors may not invest
directly in an index.
5
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (Unaudited)
================================================================================
ASSETS:
Investment in International Portfolio, at value (Note 1A) $14,786,524
Receivable for shares of beneficial interest sold 250
Receivables from Sub-Administrator 37,765
Other assets 46,386
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Total assets 14,870,925
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LIABILITIES:
Payable for shares of beneficial interest repurchased 133,014
Accrued expenses and other liabilities 32,208
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Total liabilities 165,222
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NET ASSETS $14,705,703
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $15,550,240
Unrealized depreciation (1,861,288)
Accumulated net realized gain 1,064,806
Undistributed net investment loss (48,055)
- --------------------------------------------------------------------------------
Total $14,705,703
================================================================================
COMPUTATION OF
CLASS A SHARES:
Net Asset Value per share ($14,641,348/1,431,485 shares outstanding) $10.23
Offering price per share (10.2330.95) $10.77**
================================================================================
CLASS B SHARES:
Net Asset Value per share and offering price
($64,355/6,310 shares outstanding) $10.20*
================================================================================
* Redemption price per share is equal to net asset value less any applicable
deferred contingent sales charge.
** Based upon single purchases of less than $25,000.
See notes to financial statements
6
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
================================================================================
INVESTMENT INCOME (Note 1B):
Dividend Income from International Portfolio $185,431
(net of foreign withholding tax of ($20,463))
Interest Income from International Portfolio 1,147
Foreign Tax reclaims 5,674
Allocated Expenses from International Portfolio (75,398)
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$ 116,854
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EXPENSES:
Management fees (Note 2) 19,661
Service fees Class A (Note 3) 19,622
Service fees Class B (Note 3) 153
Transfer agent fees 11,396
Legal fees 11,201
Shareholder reports 11,120
Custody and fund accounting fees 9,865
Audit fees 7,360
Trustees fees 3,221
Other 18,348
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Total expenses 111,947
Less expenses assumed by the Sub-Administrator
(Note 6) (37,765)
Less aggregate amount waived by the Manager (Note 2) (19,661)
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Net expenses 54,521
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Net investment income 62,333
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NET REALIZED AND UNREALIZED GAIN FROM
INTERNATIONAL PORTFOLIO:
Net realized gain 508,549
Unrealized appreciation 1,533,433
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Net realized and unrealized gain
from International Portfolio: 2,041,982
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,104,315
================================================================================
See notes to financial statements
7
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS MARCH 2, 1998
ENDED (COMMENCEMENT OF
APRIL 30, 1999 OPERATIONS) TO
(Unaudited) OCTOBER 31, 1998
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 62,333 $ 216,322
Net realized gain 508,549 490,577
Unrealized appreciation (depreciation) 1,533,433 (3,394,721)
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Net increase (decrease) in net assets resulting
from operations 2,104,315 (2,687,822)
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (261,030) --
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TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 5):
CLASS A
Net proceeds from sale of shares 611,021 28,257,432
Net asset value of shares issued to shareholders
from reinvestment of distributions 261,030 --
Cost of shares repurchased (5,256,317) (8,383,403)
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Total Class A (4,384,266) 19,874,029
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CLASS B*
Net proceeds from sale of shares 60,568 --
Net asset value of shares issued to
shareholders from reinvestment of distributions -- --
Cost of shares repurchased (91) --
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Total Class B 60,477 --
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Net increase (decrease) in net assets from
transactions in shares of beneficial interest (4,323,789) 19,874,029
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NET INCREASE (DECREASE) IN NET ASSETS (2,480,504) 17,186,207
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NET ASSETS:
Beginning of period 17,186,207 --
- --------------------------------------------------------------------------------
End of period (including undistributed
net investment (loss) and income of
($48,055) and $150,642) $14,705,703 $17,186,207
================================================================================
* January 4, 1999 (Commencement of Operations) to April 30, 1999.
See notes to financial statements
8
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
CLASS A
---------------------------------
FOR THE PERIOD
MARCH 2, 1998
SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS) TO
APRIL 30, 1999 OCTOBER 31,
(Unaudited) 1998
================================================================================
Net Asset Value, beginning of perid $9.04 $10.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.108 0.079
Net realized and unrealized gain
(loss) on investments 1.224 (1.039)
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Total from operations 1.332 (0.960)
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Less Distributions From:
Net investment income (0.142) --
- --------------------------------------------------------------------------------
Net Asset Value, end of period $10.23 $9.04
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $14,641 $17,186
Ratio of expenses to average net assets (A) 1.65%* 1.66%*
Ratio of net investment income to
average net assets 0.79%* 1.76%*
Total return 14.90%** (9.60)%**
Note: If Agents of the Fund for the periods indicated had not voluntarily waived
a portion of their fees, the net investment income per share and the ratios
would have been as follows:
Net investment income per share $0.095 $0.061
RATIOS:
Expenses to average net assets (A) 1.90%* 2.06%*
Net investment income to average net assets 0.54%* 1.36%*
================================================================================
*Annualized.
**Not Annualized.
(A)Includes the Fund's share of International Portfolio allocated expenses for
the period indicated.
See notes to financial statements
9
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS (Continued)
CLASS B
---------------------
JANUARY 4, 1999
(COMMENCEMENT OF
OPERATIONS) TO
APRIL 30, 1999
(Unaudited)
================================================================================
Net Asset Value, beginning of period $10.00
Income From Operations:
Net investment income 0.022
Net realized and unrealized gain on investments 0.178
- --------------------------------------------------------------------------------
Total from operations 0.200
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income --
- --------------------------------------------------------------------------------
Net Asset Value, end of period $10.20
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $64
Ratio of expenses to average net assets (A) 2.40%*
Ratio of net investment income to average net assets 0.89%*
Total return 6.03%**
Note: If Agents of the Fund for the periods indicated had not voluntarily waived
a portion of their fees, the net investment income per share and the ratios
would have been as follows:
Net investment income per share $0.008
RATIOS:
Expenses to average net assets (A) 2.65%*
Net investment income to average net assets 0.64%*
================================================================================
* Annualized.
** Not Annualized.
(A) Includes the Fund's share of International Portfolio allocated expenses for
the period indicated.
See notes to financial statements
10
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds International Growth & Income
Portfolio (the "Fund") is a separate diversified series of CitiFunds
International Trust (the "Trust"), a Massachusetts business trust. The Fund
commenced operations on March 2, 1998. The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Fund currently invests all of its investable assets in
International Portfolio (the "Portfolio"), a management investment company for
which Citibank, N.A. ("Citibank") serves as Investment Manager. The value of
such investment reflects the Fund's proportionate interest (9.1% at April 30,
1999) in the net assets of the Portfolio. CFBDS, Inc. ("CFBDS") acts as the
Fund's Sub-Administrator and Distributor.
The Fund offers Class A and Class B shares. The Fund commenced its public
offering of Class B shares on January 4, 1999. Class A shares have a front-end,
or initial, sales charge effective January 4, 1999. This sales charge may be
reduced or eliminated in certain circumstances. Class B shares have no front end
sales charge, pay a higher ongoing distribution fee than Class A, but are
subject to a deferred sales charge if sold within five years of purchases. Class
B shares automatically convert into Class A shares after eight years. Expenses
of the Fund are borne pro-rata by the holders of each class of shares, except
that each class bears expenses unique to that class (including the Rule 12b-1
service and distribution fees applicable to such class), and votes as a class
only with respect to its own Rule 12b-1 plan. Shares of each class would receive
their pro-rata share of the net assets of the Fund, if the Fund were liquidated.
Class A shares have a lower expense ratio than Class B.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
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 Fund are as
follows:
A. INVESTMENT VALUATION Valuation of securities by the Portfolio is discussed
in Note 1A of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
B. INVESTMENT INCOME The Fund earns income, net of Portfolio expenses, daily
based on its investment in the Portfolio.
C. FEDERAL TAXES The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. At October 31, 1998, the Fund, for federal income tax
purposes, had a capital loss carryover of $575,213 all of which will expire on
October 31, 2006. Such capital loss carryover will reduce the Fund's taxable
income arising from
11
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
future net realized gain on investment transactions, if any,
to the extent permitted by the Internal Revenue Code, and thus will reduce the
amount of the distributions to shareholders which would otherwise be necessary
to relieve the Fund of any liability for federal income or excise tax.
D. EXPENSES The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund. The Fund's share of the Portfolio's expenses are
charged against and reduce the amount of the Fund's investment in the Portfolio.
E. DISTRIBUTIONS Distributions to shareholders are recorded on ex-dividend
date. The amount and character of income and net realized gains to be
distributed are determined in accordance with income tax rules and regulations,
which may differ from generally accepted accounting principles. These
differences are attributable to permanent book and tax accounting differences.
Reclassifications are made to the Fund's capital accounts to reflect income and
net realized gains available for distribution (or available capital loss
carryovers) under income tax rules and regulations.
F. OTHER All the net investment income, realized and unrealized gain and loss
of the Portfolio is allocated pro rata, based on respective ownership interests,
among the Fund and the other investors in the Portfolio at the time of such
determination. Investment transactions are accounted for on the trade date
basis. Realized gains and losses are determined on the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the Fund's
business affairs, and has a Management Agreement with the Fund. Citibank also
provides certain administrative services to the Fund. These administrative
services include providing general office facilities and supervising the overall
administration of the Fund. CFBDS acts as Sub-Administrator and performs certain
duties and receives compensation from Citibank as from time to time is agreed to
by Citibank and CFBDS. Citibank is a wholly-owned subsidiary of Citicorp, which
in turn, is a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was
formed as a result of the merger of Citicorp and Travelers Group, Inc. which was
completed on October 8, 1998.
The management fees paid to Citibank are accrued daily and payable monthly.
The management fee is computed at the annual rate of 0.25% of the Fund's average
daily net assets. The management fee amounted to $19,661, all of which was
voluntarily waived for the six months ended April 30, 1999.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Sub-Administrator, all of whom receive remuneration
for their services to the Trust from the Sub-Administrator or its affiliates.
12
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
3. SERVICE FEES The Fund maintains separate Service Plans for Class A and Class
B shares, which have been adopted in accordance with Rule 12b-1 under the 1940
Act. Under the Class A Service Plan, the Fund may pay monthly fees at an annual
rate not to exceed 0.25% of the average daily net assets represented by Class A
shares of the Fund, The Service Fees for Class A shares amounted to $19,622 for
the six months ended April 30, 1999. Under the Class B Service Plan, the Fund
may pay a combined monthly distribution and service fee at an annual rate not to
exceed 1.00% of the average daily net assets represented by Class B shares of
the Fund. The Service Fees for Class B shares amounted to $153 for the period
ended April 30, 1999. These fees may be used to make payments to the Distributor
for distribution services and to others as compensation for the sale of shares
of the applicable class of the Fund, for advertising, marketing or other
promotional activity, and for preparation, printing and distribution of
prospectuses, statements of additional information and reports for recipients
other than regulators and existing shareholders. The Fund may also make payments
to the Distributor and others for providing personal service or the maintenance
of shareholder accounts.
4. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio for the six months ended April 30, 1999 aggregated $698,073 and
$5,227,542, respectively.
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest (without par value). Transactions in shares of beneficial interest were
as follows:
SIX MONTHS MARCH 2, 1998
ENDED (COMMENCEMENT OF
APRIL 30, 1999 OPERATIONS) TO
(Unaudited) OCTOBER 31, 1998
- --------------------------------------------------------------------------------
CLASS A
Shares sold 65,553 2.743,688
Shares issued to shareholders from reinvestment
of distributions 28,250 --
Shares repurchased (564,384) (841,622)
- --------------------------------------------------------------------------------
Net increase (decrease) (470,581) 1,902,066
================================================================================
CLASS B*
Shares sold 6,310 --
Shares issued to shareholders from reinvestment
of distributions -- --
Shares repurchased -- --
- --------------------------------------------------------------------------------
Net increase 6,310 --
================================================================================
* January 4, 1999 (Commencement of Operations) to April 30, 1999.
6. ASSUMPTIONS OF EXPENSE CFBDS has voluntarily agreed to pay a portion of the
unwaived expenses of the Fund for the six months ended April 30, 1999, which
amounted to $37,765.
13
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
ISSUER SHARES VALUE
- ----------------------------------------------------------------------------
COMMON STOCKS -- 94.5%
- --------------------------------------------------------------------------------
AUSTRIA -- 0.8%
Boehler-Uddeholm 23,753 $ 1,396,156
-----------
AUSTRALIA -- 2.5%
- ----------------------------------------------------------------------------
Australia & New Zealand
Banking Group 331,185 2,623,365
-----------
Pioneer International,
Ltd. 570,036 1,391,946
-----------
4,015,311
-----------
CANADA -- 2.5%
- ----------------------------------------------------------------------------
Imasco, Ltd. 104,752 2,306,110
Noranda, Inc. 131,960 1,764,776
-----------
4,070,886
FINLAND -- 1.3%
- ----------------------------------------------------------------------------
UPM-Kymmene Oy 71,398 2,160,922
-----------
FRANCE -- 10.3%
- ----------------------------------------------------------------------------
BIC 27,141 1,522,470
BQE National Paris 20,135 1,668,680
Elf Aquitaine 20,330 3,157,062
La Farge Coppee 25,431 2,471,609
Pernod-Ricard 40,374 2,723,273
Societe Generale 14,480 2,591,257
Total 18,636 2,551,445
-----------
16,685,796
-----------
GERMANY -- 8.5%
- ----------------------------------------------------------------------------
Buderus AG 4,965 1,683,654
Commerzbank AG 66,477 2,148,925
Draegerwerk AG 115,560 1,587,009
Dyckerhoff AG 7,241 1,988,842
Hoechst AG 42,419 2,009,793
SGL Carbon 9,476 521,044
Veba AG 52,031 2,852,712
Vossloh AG 39,304 1,071,235
-----------
13,863,214
-----------
GREAT BRITAIN -- 27.3%
- ----------------------------------------------------------------------------
Allied Domecq 281,855 2,194,553
Allied Zurich 159,284 2,111,419
B.A.T. Industries 191,264 1,612,277
BOC Group 135,471 2,140,094
CGU 161,598 2,524,238
Coats Viyella 1,427,046 1,044,538
Cookson Group 985,055 2,773,151
Elementis 1,412,738 2,272,671
Hanson 273,789 2,721,946
Hillsdown Holdings 1,337,938 1,764,919
Invensys 392,770 1,996,643
Lex Service 271,060 2,561,818
Lloyds TSB Group 167,528 2,700,413
Medeva 694,500 1,296,001
National Westminister
Bank 89,421 2,150,581
Reckitt & Colman 30,594 363,218
Safeway 332,496 1,385,355
TI Group 386,755 3,235,298
Tomkins 896,837 3,808,838
United News & Media 165,455 2,012,226
Williams 239,508 1,656,775
-----------
44,326,972
-----------
HONG KONG -- 3.5%
- ----------------------------------------------------------------------------
Hang Lung
Development Co. 1,274,635 1,644,478
New World
Development Co. 800,790 1,983,637
South China
Morning Post 2,187,486 1,319,378
Swire Pacific 140,500 788,511
-----------
5,736,004
IRELAND -- 2.9%
- ----------------------------------------------------------------------------
Greencore Group 463,790 1,763,812
Jefferson Smurfit Group 1,107,420 3,018,287
-----------
4,782,099
-----------
ITALY -- 3.6%
- ----------------------------------------------------------------------------
Eni Spa 370,300 2,437,082
Telecom Italia SPA 80,727 434,075
Telecom Italia 273,300 2,907,352
-----------
5,778,509
-----------
JAPAN -- 8.0%
- ----------------------------------------------------------------------------
Kyocera Corp. 43,100 2,558,860
Nichicon Corp. 196,000 2,584,994
Nintendo Co. 35,300 3,289,977
Promise Co. 53,000 3,017,920
Yodogawa Steel Works 351,000 1,478,421
-----------
12,930,172
-----------
14
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) April 30, 1999
(Unaudited)
ISSUER SHARES VALUE
- ----------------------------------------------------------------------------
NETHERLANDS -- 7.8%
- ----------------------------------------------------------------------------
ABN Amro Holdings NV 92,202 $ 2,196,420
Akzo Nobel NV 74,648 3,371,186
ING Groep NV 58,523 3,604,322
Koninklijke PTT 25,211 1,052,000
Philips Electrics NV 27,863 2,398,910
-----------
12,622,838
-----------
SPAIN -- 3.0%
- ----------------------------------------------------------------------------
Banco Santander SA 108,460 2,355,706
Telefonica Rights 52,490 48,796
Telefonica SA 52,490 2,459,227
-----------
4,863,729
-----------
SWEDEN -- 3.0%
- ----------------------------------------------------------------------------
Electrolux AB 118,560 2,402,958
Getinge Industrier1 54,559 2,399,814
-----------
4,802,772
-----------
SWITZERLAND -- 8.0%
- ----------------------------------------------------------------------------
Forbo Holdings AG 4,505 1,874,992
Novartis AG 2,122 3,105,739
Saurer AG 4,044 2,366,974
Schweizerische
Rueckversicherungs-
Gesellschaft AG 634 1,387,096
Schweizerische Industrie-
Gesellschaft Holding AG 3,743 2,372,341
Sulzer AG 2,889 1,834,857
-----------
12,941,999
-----------
UNITED STATES -- 1.5%
- ----------------------------------------------------------------------------
Creative Technology Ltd.* 193,186 2,438,973
- ----------------------------------------------------------------------------
TOTAL COMMON STOCK
(Identified Cost
$144,306,326) 153,416,352
-----------
WARRANTS -- 0.0%
- ----------------------------------------------------------------------------
Bolton Properties*
Exp. 9/15/06 23,750 3,206
-----------
(Identified Cost $6,808)
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST -- 4.0%
- ----------------------------------------------------------------------------
State Street Repurchase
Agreement 4.00% due 5/03/99
proceeds at maturity
$6,511,170 (collateralized by
$6,585,000 Federal Home Loan
Mortgage 5.25% due 2/16/01,
valued at $6,640,242) $6,509,000
-----------
TOTAL INVESTMENTS
(Identified Cost
$150,822,134) 98.5% 159,928,558
OTHER ASSETS,
LESS LIABILITIES 1.5 2,412,291
----- ------------
NET ASSETS 100.0% $162,340,849
===== ============
* Non income producing
See notes to financial statements
15
<PAGE>
INTERNATIONAL PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (Unaudited)
================================================================================
ASSETS:
Investments at value (Note 1A) (Identified Cost, $150,822,134) $159,928,558
Foreign currency, at value (Cost $59,151) 60,908
Cash 570
Dividends and interest receivable 1,007,744
Receivable for investments sold 3,403,617
- --------------------------------------------------------------------------------
Total assets 164,401,397
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 1,813,889
Payable to affiliates--Management fees (Note 2) 43,041
Accrued expenses and other liabilities 203,618
- --------------------------------------------------------------------------------
Total liabilities 2,060,548
- --------------------------------------------------------------------------------
NET ASSETS $162,340,849
- --------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $162,340,849
================================================================================
INTERNATIONAL PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
================================================================================
INVESTMENT INCOME: (Note 1B)
Dividend income (net of foreign
withholding tax of $239,930) $2,278,141
Interest income 14,400
- --------------------------------------------------------------------------------
Total investment income $ 2,292,541
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 800,204
Custody and fund accounting fees 123,367
Audit fees 17,685
Shareholder reports 5,000
Trustees fees 4,047
Legal fees 3,336
Other 1,191
- --------------------------------------------------------------------------------
Total expenses 954,830
- --------------------------------------------------------------------------------
Net investment income 1,337,711
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 7,036,401
Net realized loss on foreign currency & transactions (394,435)
- --------------------------------------------------------------------------------
Net realized gain on investment transactions
and foreign currency transactions 6,641,966
- --------------------------------------------------------------------------------
Unrealized appreciation of investments, forward currency
contracts, foreign currency transactions 17,104,589
- --------------------------------------------------------------------------------
Net realized and unrealized gain of investments 23,746,555
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $25,084,266
================================================================================
See notes to financial statements
16
<PAGE>
INTERNATIONAL PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
NOVEMBER 1, 1998
SIX MONTHS (COMMENCEMENT OF
ENDED OPERATIONS) TO
APRIL 30, 1999 OCTOBER 31,
(Unaudited) 1998
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 1,337,711 $ 4,310,814
Net realized gain on investment transactions
and foreign currency transactions 6,641,966 4,002,173
Unrealized appreciation (depreciation) of
investments, forward currency contracts,
foreign currency transactions 17,104,589 (20,091,760)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 25,084,266 (11,778,773)
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions (Note 1) 6,724,223 593,863,296
Value of withdrawals (100,413,946) (351,138,217)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital transactions (93,689,723) 242,725,079
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS: (68,605,457) 230,946,306
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 230,946,306 --
- --------------------------------------------------------------------------------
End of period $162,340,849 $230,946,306
================================================================================
INTERNATIONAL PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD
SIX MONTHS NOVEMBER 1, 1998
ENDED (COMMENCEMENT
APRIL 30, 1999 OF OPERATIONS) TO
(Unaudited) OCTOBER 31, 1998
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $162,341 $230,946
Ratio of expenses to average net assets 0.95%* 0.97%
Ratio of net investment income to
average net assets 1.33%* 1.72%
Portfolio turnover 9% 43%
================================================================================
*Annualized
See notes to financial statements
17
<PAGE>
INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES International Portfolio (the "Portfolio"), a
separate series of Asset Allocation Portfolios (the "Portfolio Trust"), is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York. The Declaration of Trust permits
the Trustees to issue beneficial interests in the Portfolio. The Investment
Manager of the Portfolio is Citibank, N.A. ("Citibank"). Signature Financial
Group (Grand Cayman), Ltd. ("SFG") acts as the Portfolio's Sub-Administrator.
On November 1, 1997 (Commencement of Operations) CitiSelect Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400 and CitiSelect Folio 500 each
transferred a portion of their investable assets in the amount of $13,468,512,
$45,037,659, $115,488,801 and $69,902,939 including $657,730, $2,460,410,
$6,297,679 and $2,672,891, respectively, of unrealized appreciation to the
Portfolio in exchange for an interest in the Portfolio. The total investable
assets along with the year's contributions are included in the November 1, 1997
(Commencement of Operations) to October 31, 1998 "Proceeds from contributions"
in the Statement of Changes in Net Assets.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. INVESTMENT SECURITY VALUATIONS Equity securities are valued at the last
sale price on the exchange on which they are primarily traded, or at the quoted
bid price for securities in which there were no sales during the day, or for
unlisted securities not reported on the NASDAQ system. Securities listed on a
foreign exchange are valued at the last quoted sale price available. Bonds and
other fixed income securities (other than short-term obligations maturing in
sixty days or less) are valued on the basis of valuations furnished by a pricing
service, the use of which has been approved by the Board of Trustees. In making
such valuations, the pricing service utilizes both dealer-supplied valuations
and electronic data processing techniques which take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon quoted prices or
exchanges or over-the-counter prices. Short-term obligations maturing in sixty
days or less are valued at amortized cost which constitutes fair value as
determined by the Trustees. Portfolio securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith by
or under guidelines established by the Trustees. Trading in securities on most
foreign exchanges and over-the-counter markets is normally completed before the
close of the New York Stock Exchange and may also take place on days on which
the New York Stock Exchange is closed. If events materially affecting the value
of foreign securities occur between the time when the
18
<PAGE>
exchange on which they are traded closes and the time when the Portfolio's net
asset value is calculated, such securities may be valued at fair value in
accordance with procedures established by and under the general supervision of
the Trustees.
B. INCOME Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on debt securities when
required for U.S. federal income tax purposes. Dividend income and other
distributions from investments are recorded on the ex-dividend date. Dividend
and interest income is recorded net of foreign taxes withheld. Reclaims of
recoverable foreign taxes are the responsibility of the qualified investors.
C. FOREIGN CURRENCY TRANSLATION The accounting records of the Portfolio are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange to determine the value of investments,
assets and liabilities. Purchases and sales of securities, as well as income and
expenses, are translated at the prevailing rate of exchange on the respective
dates of such transactions. The Portfolio does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuation arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Translations of foreign currency
includes net exchange gains and losses, disposition of foreign currency and the
difference between the amount of investment income and expenses recorded and the
amount actually received or paid.
D. FORWARD FOREIGN CURRENCY CONTRACTS The Portfolio may enter into forward
foreign currency contracts ("contracts") in connection with planned purchases or
sales of securities, to hedge the U.S. dollar value of portfolio securities
denominated in a particular currency. The Portfolio could be exposed to risks if
the counter-parties to the contracts are unable to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purposes as unrealized gains or
losses until the contract settlement date.
E. U.S. FEDERAL TAXES The Portfolio is considered a partnership under the
U.S. Internal Revenue Code. Accordingly, no provision for federal income or
excise tax is necessary.
F. EXPENSES The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
G. OTHER Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
19
<PAGE>
INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs certain duties and receives compensation from
Citibank as from time to time are agreed to by Citibank and SFG.
Citibank has delegated the daily management of the Portfolio to Hotchkis &
Wiley (the "Subadviser"). Citibank is a wholly-owned subsidiary of Citicorp,
which in turn, is a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was
formed as a result of the merger of Citicorp and Travelers Group, Inc. which was
completed on October 8, 1998.
The management fee paid to Citibank, amounted to $348,733 for the six months
ended April 30, 1999. Management fees are computed at the annual rate of 0.80%
of the Portfolio's average daily net assets less the aggregate amount, if any,
payable by the Portfolio Trust pursuant to the Sub-management Agreement with the
Subadviser. The Portfolio pays the Subadviser the following fees, which are
accrued daily and payable monthly and are at the annual rates equal to a
percentage of the aggregate assets of the Portfolio allocated to the Subadviser:
0.60% on first $10 million, 0.55% on next $40 million, 0.45% on next $100
million, 0.35% on next $150 million, 0.30% on remaining assets.
The management fees paid to the Subadviser amounted to $451,471 for the six
months ended April 30, 1999.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $18,643,940 and $107,868,973
respectively, for the six months ended April 30, 1999.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1999, as
computed on a federal income tax basis, are as follows:
Aggregate cost $150,822,134
================================================================================
Gross unrealized appreciation $ 23,153,957
Gross unrealized depreciation (14,047,533)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 9,106,424
================================================================================
5. LINE OF CREDIT The Portfolio, along with various other Portfolios in the
CitiFunds Family, entered into an ongoing agreement with a bank which allows the
Funds collectively to borrow up to $75 million for temporary or emergency
purposes. Interest on the borrowings, if any, is charged to the specific fund
executing the borrowing at the base rate of the bank. The line of credit
requires a quarterly payment of a commitment fee based on the average daily
unused portion of the line of credit. For the six months ended April 30, 1999,
the commitment fee allocated to the Portfolio was $223. Since the line of credit
was established, there have been no borrowings.
20
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, PRESIDENT
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Heath B. McLendon**
C. Oscar Morong Jr.
E. Kirby Warren
William S. Woods, Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*AFFILIATED PERSON OF SUB-ADMINISTRATOR AND DISTRIBUTOR
**AFFILIATED PERSON OF INVESTMENT MANAGER
INVESTMENT MANAGER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
DISTRIBUTOR
CFBDS, Inc.
21 Milk Street, 5th Floor
Boston, MA 02109
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street,Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
LARGE CAP STOCKS
o CitiFunds Growth & Income Portfolio
o CitiFunds Large Cap Growth Portfolio
SMALL CAP STOCKS
o CitiFunds Small Cap Growth Portfolio
o CitiFunds Small Cap Value Portfolio
INTERNATIONAL STOCKS
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
GROWTH WITH INCOME
o CitiFunds Balanced Portfolio
BONDS
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
MONEY MARKETS
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds New York Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
For more information contact your Service Agent or call 1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as distributor.
(C)1999 Citicorp R Printed on recycled paper CFS/IGI/499
