ANNUAL REPORT o OCTOBER 31, 1999
CitiFunds(SM)
International
Growth & Income Portfolio
INTERNATIONAL STOCKS
INVESTMENT PRODUCTS:
NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
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Portfolio Environment and Outlook 2
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Fund Facts 4
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Portfolio Highlights 5
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Fund Performance 6
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CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
Statement of Assets and Liabilities 7
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Statement of Operations 8
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Statement of Changes in Net Assets 9
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Financial Highlights 10
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Notes to Financial Statements 12
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Independent Auditors' Report 16
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INTERNATIONAL PORTFOLIO
Portfolio of Investments 17
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Statement of Assets and Liabilities 19
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Statement of Operations 19
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Statement of Changes in Net Assets 20
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Financial Highlights 20
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Notes to Financial Statements 21
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Independent Auditors' Report 24
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<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
Over the past year, the international stock markets have produced generally
positive results. Challenging market conditions early in the 12-month reporting
period ended October 31, 1999 gave way to recovery during the second and third
quarters of 1999. However, many international markets experienced additional
volatility as the fourth quarter began.
Expectations on the health of the global economy varied widely during the
reporting period. Initially investors were worried that a major slowdown in
economic growth would result from the financial crisis in the emerging markets
of Asia, Latin America, and Eastern Europe. These concerns were dispelled early
in 1999 by continued strength in both the United States and the United Kingdom
and by signs of recovery in Asia, particularly in Japan, and improving
conditions in Europe.
As these expectations developed, investors' desire to own companies with
visible earnings growth was replaced by a desire to own companies with more
exposure to the recovering global economy.
Throughout the reporting period, the Fund's subadviser, Hotchkis and Wiley,
continued to manage CitiFundsSM International Growth & Income Portfolio with the
goal of achieving its investment objective of providing current income and
long-term growth of income accompanied by growth of capital.
This report reviews the Fund's investment activities and performance during
the 12 months ended October 31, 1999, and provides a summary of the subadviser's
perspective on and outlook for the international stock markets. On behalf of the
Board of Trustees, I want to thank you for your continued confidence and
participation.
Sincerely,
/s/Philip W. Coolidge
- ---------------------
Philip W. Coolidge
President
November 15, 1999
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
WHILE THE 12-MONTH PERIOD ENDED OCTOBER 31, 1999 WAS A VOLATILE TIME FOR
MOST NON-U.S. STOCKS, THE INTERNATIONAL STOCK MARKETS AS MEASURED BY THE MSCI
EAFE INDEX PROVIDED SIMILAR RETURNS TO U.S. STOCKS AS MEASURED BY THE S&P 500.
This marks the first time in several years that international stocks have kept
pace with U.S.
stocks.
When the reporting period began, the U.S. Federal Reserve Board (the "Fed")
and other nations' central banks were in the midst of a series of interest rate
cuts intended to stimulate global economic growth, which had been threatened by
the spread of an international currency and credit crisis. In fact, economies in
Japan and throughout Southeast Asia were mired in recession, and many investment
professionals became concerned that a slowdown might spread to Europe and the
United States.
IN LIGHT OF UNCERTAIN MARKET CONDITIONS, INVESTORS FLOCKED TO THE RELATIVE
SAFETY OF INVESTMENTS THAT THEY CONSIDERED TO BE EXTREMELY HIGH QUALITY,
PARTICULARLY U.S. TREASURY SECURITIES AND A HANDFUL OF WELL ESTABLISHED, LARGE
CAP EUROPEAN GROWTH STOCKS IN THE PHARMACEUTICAL AND TELECOMMUNICATIONS
INDUSTRIES. Conversely, investors stayed away from many other types of company
stocks, including the value-oriented stocks in which the Portfolio primarily
invests. (Growth investing consists of investing in companies with historically
strong and relatively predictable earnings growth rates. Value investing
consists of identifying securities of companies that are believed to be
undervalued but have good longer term business prospects.) As a result, prices
of these value-oriented stocks declined sharply during the final months of 1998.
The central banks' stimulus strategy was apparently effective because many
international economies showed signs of recovery in early 1999, while European
and U.S. economies continued to grow. As a result, investors were now willing to
invest in markets and industries they previously avoided, and they appeared to
be particularly attracted to stocks in Japan and Southeast Asia. In addition,
investors also seemed to favor cyclical companies that were sensitive to changes
in the economic cycle, including manufacturers of basic materials such as paper,
chemicals and building materials. This more broadly based rally continued
through August 1999.
By the end of the second quarter of 1999, the Portfolio's management began
to adjust the geographic and industry distribution of the Portfolio to gain
exposure to areas that had been overlooked in the markets' enthusiasm for
cyclical exposure.
In particular, management reduced the Portfolio's holdings of stocks in the
United Kingdom, which had grown to as high as 30% of net assets as a result of
substantial market appreciation. In fact, U.K. stocks, spurred higher by
positive results from engineering and chemical companies and an increase in
merger activity, were a primary driver of the Portfolio's performance during the
reporting period. Management has since locked in gains from some U.K. stocks,
and has reduced the Portfolio's U.K. holdings to approximately 25% of the
Portfolio's assets as of October 31, 1999.
2
<PAGE>
From an industry standpoint, the Portfolio's management focused primarily on
economically sensitive companies such as basic materials producers during the
first half of the Portfolio's reporting period. After the international stock
markets rallied and cyclical stocks became less attractively valued, management
shifted its focus toward undervalued telecommunications stocks by adding
positions in telephone companies in the U.K., Portugal and New Zealand. The
Portfolio purchased these stocks when they were out of favor and believes they
represent good investment opportunities.
Going forward, the Portfolio's management is optimistic about the prospects
for the international equity markets. Although heightened market volatility is
likely to continue through the end of 1999, economic conditions should be
positive for many international stocks after the new year begins. In Japan,
progress toward economic recovery and the cost-cutting benefits of corporate
restructuring should help the market recover even further. In Europe, continued
economic growth and the benefits of the EMU should help support stock prices. In
the opinion of management, international stocks may represent an excellent
opportunity for U.S. investors to participate in markets that have the potential
to provide higher returns than U.S. stocks over time.
Please note that international investing involves certain risks, such as
currency fluctuation, differing accounting and financial disclosure standards
and the potential for adverse political developments.
3
<PAGE>
FUND FACTS
FUND OBJECTIVE
Current income and long-term growth of income accompanied by growth of capital.
INVESTMENT MANAGER, DIVIDENDS
International Portfolio Paid semi-annually, if any
Citibank, N.A.
PORTFOLIO SUBADVISER CAPITAL GAINS
Hotchkis and Wiley Distributed annually, if any
COMMENCEMENT OF OPERATIONS BENCHMARKS
March 2, 1998 o MSCI EAFE Index*
o Lipper International Equity Funds
NET ASSETS AS OF 10/31/99 Average**
Class A Shares
$12.3 million
Class B Shares
$106,199
* 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.
** The Lipper International Equity Funds Average reflects the performance
(excluding sales charges) of mutual funds with similar objectives.
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.
4
<PAGE>
PORTFOLIO HIGHLIGHTS
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INDUSTRIES AS A % OF THE PORTFOLIO AS OF OCTOBER 31, 1999
INDUSTRY % OF COMMON STOCKS
Banks ........................................................... 11.2%
Telecommunication Services ...................................... 8.0%
Chemicals ....................................................... 5.2%
Petroleum ....................................................... 4.9%
Machinery ....................................................... 4.5%
Insurance - Property & Casualty ................................. 4.1%
Industrial Manufacturing ........................................ 4.1%
Engineering & Business Service .................................. 3.6%
Entertainment & Recreation ...................................... 3.5%
Pharmaceuticals ................................................. 3.2%
Building Materials .............................................. 3.1%
Beverages ....................................................... 2.8%
Household Durables .............................................. 2.5%
Tobacco ......................................................... 2.4%
Steel ........................................................... 2.0%
Health Care ..................................................... 2.0%
Industrial Manufacturing ........................................ 2.0%
Communications .................................................. 1.9%
Insurance - Life ................................................ 1.9%
Publishing ...................................................... 1.9%
Property ........................................................ 1.8%
Utilities ....................................................... 1.8%
Miscellaneous ................................................... 1.7%
Computer Peripherals ............................................ 1.5%
Paper Products .................................................. 1.5%
Financial Services .............................................. 1.4%
Household Durables .............................................. 1.4%
Forest Products ................................................. 1.4%
Non-Residential Construction .................................... 1.3%
Household Products .............................................. 1.3%
Consumer Electronics Materials .................................. 1.2%
Broadcasting .................................................... 1.2%
Motor Vehicles .................................................. 1.1%
Food Processing Equipment ....................................... 1.1%
Mining .......................................................... 1.1%
Transportation - Air ............................................ 1.0%
Textiles ........................................................ 1.0%
Electrical Equipment ............................................ 0.8%
Rubber & Miscellaneous .......................................... 0.8%
Retailers - Specialty ........................................... 0.7%
Private Placement ............................................... 0.1%
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 1999
[The following table represents a chart in the printed material]
Great Britain 25%
Switzerland 9%
Netherlands 9%
France 10%
Germany 10%
Japan 7%
Canada 4%
Hong Kong 3%
Ireland 4%
Italy 3%
Other 16%
5
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
FUND PERFORMANCE
TOTAL RETURNS
<TABLE>
<CAPTION>
SINCE
ONE 3/2/98
ALL PERIODS ENDED OCTOBER 31, 1999 YEAR (INCEPTION)*
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CitiFunds International Growth & Income Portfolio (Class A)
without sales charge 18.50% 4.22%
Lipper International Equity Funds Average 25.56% 11.22%+
MSCI EAFE Index 23.37% 12.62%+
CitiFunds International Growth &Income Portfolio (Class A)
with maximum sales charge of 5.00% 12.57% 1.06%
CitiFunds International Growth & Income Portfolio (Class B)
without deferred sales charge -- 8.94%#**
Lipper International Equity Funds Average -- 15.94%++**
MSCI EAFE Index -- 12.85%++**
CitiFunds International Growth &Income Portfolio (Class B)
with maximum deferred sales charge of 5.00% -- 3.49%#**
</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
[The following table represents a chart in the printed material]
CitiFunds
International Lipper
Growth & Income International MSCI
Portfolio Equity Funds EAFE
(Class A) Average Index
February 28, 1998 10,000 10,000 10,000
March 31, 1998 9,975 10,511 10,310
April 30, 1998 10,108 10,655 10,394
May 31, 1998 10,022 10,666 10,346
June 30, 1998 9,813 10,584 10,426
July 31, 1998 9,623 10,737 10,535
August 31, 1998 8,227 9,204 9,232
September 30, 1998 7,837 8,871 8,951
October 31, 1998 8,588 9,530 9,886
November 30, 1998 8,939 10,022 10,396
December 31, 1998 9,106 10,330 10,808
January 31, 1999 8,691 10,411 10,779
February 28, 1999 8,691 10,136 10,525
March 31, 1999 9,087 10,490 10,967
April 30, 1999 9,868 10,971 11,413
May 31, 1999 9,636 10,520 10,828
June 30, 1999 9,974 11,074 11,252
July 31, 1999 10,254 11,359 11,590
August 31, 1999 10,447 11,459 11,635
September 30, 1999 10,254 11,503 11,755
October 31, 1999 10,177 11,946 12,198
A $10,000 investment in the Fund made on inception date would have been worth
$10,177 with sales charge (as of 10/31/99). The graph shows how the Fund
compares to its benchmarks over the same period.
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 any time. 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.
6
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
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ASSETS:
Investment in International Portfolio, at value (Note 1A) $12,271,569
Receivables from Sub-Administrator 123,250
Other assets 63,420
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Total assets 12,458,239
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LIABILITIES:
Payable for shares of beneficial interest repurchased 15,495
Accrued expenses and other liabilities 56,503
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Total liabilities 71,998
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NET ASSETS $12,386,241
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NET ASSETS CONSIST OF:
Paid-in capital $12,770,062
Unrealized depreciation (2,641,665)
Accumulated net realized gain 2,133,529
Accumulated net investment income 124,315
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Total $12,386,241
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COMPUTATION OF
CLASS A SHARES:
Net Asset Value per share ($12,280,042/1,164,359
shares outstanding) $10.55
Offering price per share (10.55/0.95) $11.11*
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CLASS B SHARES:
Net Asset Value per share and offering price
($106,199/10,134 shares outstanding) $10.48**
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* Based upon single purchases of less than $25,000.
** Redemption price per share is equal to net asset value less any applicable
deferred contingent sales charge.
See notes to financial statements
7
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1999
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<S> <C> <C>
INVESTMENT INCOME (Note 1B):
Dividend Income from International Portfolio $349,776
(net of foreign withholding tax of $53,529)
Interest Income from International Portfolio 4,949
Foreign Tax reclaims 27,027
Allocated Expenses from International Portfolio (141,202)
- ------------------------------------------------------------------------------------------------------------------
$ 240,550
EXPENSES:
Management fees (Note 2) 36,936
Service fees Class A (Note 3) 36,789
Service fees Class B (Note 3) 588
Legal fees 48,389
Transfer agent fees 42,261
Shareholder reports 29,494
Custody and fund accounting fees 25,804
Audit fees 18,160
Blue sky fees 16,428
Trustees fees 5,304
Other 3,110
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Total expenses 263,263
Less expenses assumed by the Sub-Administrator (Note 6) (123,250)
Less aggregate amount waived by the Manager (Note 2) (36,936)
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Net expenses 103,077
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Net investment income 137,473
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NET REALIZED AND UNREALIZED GAIN FROM
INTERNATIONAL PORTFOLIO:
Net realized gain 1,674,502
Unrealized appreciation 753,056
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Net realized and unrealized gain
from International Portfolio: 2,427,558
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,565,031
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</TABLE>
See notes to financial statements
8
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 2, 1998
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
OCTOBER 31, OCTOBER 31,
1999 1998
- ----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
<S> <C> <C>
Net investment income $ 137,473 $ 216,322
Net realized gain 1,674,502 490,577
Unrealized appreciation (depreciation) 753,056 (3,394,721)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 2,565,031 (2,687,822)
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (Class A) (261,030) --
- ----------------------------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 5):
CLASS A
Net proceeds from sale of shares 871,769 28,257,432
Net asset value of shares issued to shareholders
from reinvestment of distributions 261,030 --
Cost of shares repurchased (8,337,578) (8,383,403)
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Total Class A (7,204,779) 19,874,029
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CLASS B*
Net proceeds from sale of shares 100,903 --
Net asset value of shares issued to
shareholders from reinvestment of distributions -- --
Cost of shares repurchased (91) --
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Total Class B 100,812 --
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Net increase (decrease) in net assets from transactions
in shares of beneficial interest (7,103,967) 19,874,029
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NET INCREASE (DECREASE) IN NET ASSETS (4,799,966) 17,186,207
- ----------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 17,186,207 --
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End of period (including undistributed
net investment income of
$124,315 and $150,642, respectively) $12,386,241 $17,186,207
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</TABLE>
* January 4, 1999 (Commencement of Operations) to October 31, 1999
See notes to financial statements
9
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------
FOR THE PERIOD
MARCH 2, 1998
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
OCTOBER 31, OCTOBER 31,
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning of period $9.04 $10.00
- ---------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.091+ 0.079
Net realized and unrealized gain (loss) on investments 1.561 (1.039)
- ---------------------------------------------------------------------------------------------------------------
Total from operations 1.652 (0.960)
- ---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.142) --
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $10.55 $9.04
- ---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $12,280 $17,186
Ratio of expenses to average net assets (A) 1.65% 1.66%*
Ratio of net investment income to average net assets 0.93% 1.76%*
Total return 18.50% (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 (loss) per share $(0.015)+ $0.061
RATIOS:
Expenses to average net assets (A) 2.73% 2.06%*
Net investment income to average net assets (0.15)% 1.36%*
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
+ The per share amounts were computed using monthly average of shares during
the period.
(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
FINANCIAL HIGHLIGHTS
CLASS B
--------------------
FOR THE PERIOD
JANUARY 4, 1999
(COMMENCEMENT OF
OPERATIONS) TO
OCTOBER 31, 1999
- --------------------------------------------------------------------------------
Net Asset Value, beginning of period $ 9.62
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.027+
Net realized and unrealized gain on investments 0.833
- --------------------------------------------------------------------------------
Total from operations 0.860
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income --
- --------------------------------------------------------------------------------
Net Asset Value, end of period $10.48
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $106
Ratio of expenses to average net assets (A) 2.40%*
Ratio of net investment income to average net assets 0.18%*
Total return 8.94%**
Note: If Agents of the Fund for the periods indicated had not voluntarily waived
a portion of their fees, the net investment loss per share and the ratios would
have been as follows:
Net investment loss per share $(0.085)+
RATIOS:
Expenses to average net assets (A) 3.48%*
Net investment income to average net assets (0.90)%*
- --------------------------------------------------------------------------------
* Annualized.
** Not Annualized.
+ The per share amounts were computed using monthly average of shares during
the period. (A) Includes the Fund's share of International Portfolio
allocated expenses for the period indicated.
See notes to financial statements
11
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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 (11.7% at October 31,
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 shares, and 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 shares. For the period
ended October 31, 1999, CFBDS, acting as the distributor received $2,914 from
sales of Class A and $7 in deferred sales charges from redemptions of Class B
shares.
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
12
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
tax is necessary. At October 31, 1999, the Fund, for federal income tax
purposes, had a capital loss carryover of $1,400,807 of which $575,213 will
expire on October 31, 2006 and of which $825,594 will expire on October 31,
2007. Such capital loss carryover will reduce the Fund's taxable income arising
from 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 the
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. For the period
ended October 31, 1999, the Fund reclassified $79,708 from undistributed net
investment income to accumulated net gain on investments.
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 aver-
13
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Continued)
age daily net assets. The management fee amounted to $36,936, all of which was
voluntarily waived for the year ended October 31, 1999.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Sub-Administrator, all of whom receive remuneration
for their services to the Trust from the Sub-Administrator or its affiliates.
3. 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 $36,789 for
the year ended October 31, 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 $588 for the period
ended October 31, 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 year ended October 31, 1999 aggregated $1,002,472 and
$8,538,943, 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:
FOR THE PERIOD
MARCH 2, 1998
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
OCTOBER 31, OCTOBER 31,
1999 1998
- --------------------------------------------------------------------------------
CLASS A
Shares sold 90,447 2,743,688
Shares issued to shareholders
from reinvestment of distributions 28,250 --
Shares repurchased (856,404) (841,622)
- --------------------------------------------------------------------------------
Net increase (decrease) (737,707) 1,902,066
- --------------------------------------------------------------------------------
14
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD
MARCH 2, 1998
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
OCTOBER 31, OCTOBER 31,
1999 1998
- --------------------------------------------------------------------------------
CLASS B*
Shares sold 10,144 --
Shares issued to shareholders
from reinvestment of distributions -- --
Shares repurchased (10) --
--
- --------------------------------------------------------------------------------
Net increase 10,134 --
- --------------------------------------------------------------------------------
* January 4, 1999 (Commencement of Operations) to October 31, 1999.
6. ASSUMPTIONS OF EXPENSE CFBDS has voluntarily agreed to pay a portion of the
unwaived expenses of the Fund for the year ended October 31, 1999, which
amounted to $123,250.
15
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS OF CITIFUNDS INTERNATIONAL TRUST (THE "TRUST"):
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
CitiFunds International Growth & Income Portfolio (the "Fund"), a series of
CitiFunds International Trust, at October 31, 1999, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated in conformity with accounting principles generally accepted in
the United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments owned at October 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 14, 1999
16
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTSOctober 31, 1999
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.7%
- --------------------------------------------------------------------------------
AUSTRIA -- 1.0%
Boehler-Uddeholm 23,753 $ 994,387
------------
AUSTRALIA -- 2.0%
- --------------------------------------------------------------------------------
Australia & New Zealand
Banking Group 180,725 1,192,705
Pioneer International,
Ltd 421,090 921,054
------------
2,113,759
------------
CANADA -- 4.2%
- --------------------------------------------------------------------------------
Imasco, Ltd. 57,162 1,534,003
Manulife Financial Corp. 144,681 1,739,829
Noranda, Inc. 83,370 1,098,837
------------
4,372,669
FINLAND -- 1.3%
- --------------------------------------------------------------------------------
UPM-Kymmene Oy 44,913 1,417,252
------------
FRANCE -- 9.8%
- --------------------------------------------------------------------------------
BIC 26,491 1,295,702
BQE National Paris 33,660 2,956,340
LaFarge 9,556 919,710
Pernod-Ricard 25,639 1,731,370
Total 25,404 3,433,674
------------
10,336,796
------------
GERMANY -- 10.1%
- --------------------------------------------------------------------------------
Buderus AG 64,246 1,081,234
Celanese AG * 5,134 81,003
Commerzbank AG 36,272 1,383,035
Draegerwerk AG 102,551 1,089,469
Dyckerhoff AG 46,150 1,383,472
Hoechst AG 51,341 2,260,027
SGL Carbon * 12,467 797,951
Veba AG 33,039 1,786,256
Vossloh AG 39,304 814,436
------------
10,676,883
------------
GREAT BRITAIN -- 25.4%
- --------------------------------------------------------------------------------
Allied Domecq 206,225 1,155,542
Allied Zurich 86,924 1,056,967
BAA 145,340 1,062,760
British American
Tobacco p.l.c 136,414 905,587
British
Telecommunications 78,192 1,418,475
CGU 88,188 1,285,356
Coats Viyella 1,335,566 1,025,976
Cookson Group 477,685 1,466,880
Elementis 770,938 1,304,809
Hanson 162,899 1,268,782
Invensys 198,990 977,671
Lex Service 147,920 1,130,238
Lloyds TSB Group 91,422 1,264,891
Medeva 515,530 1,313,034
National Westminster
Bank 80,021 1,806,679
Reckitt & Colman 113,494 1,376,320
Reed International 98,590 578,351
Safeway 237,916 750,611
TI Group 211,045 1,421,835
Thames Water 4,412 63,798
Tomkins 430,627 1,457,244
United News & Media 138,995 1,332,693
Williams 262,194 1,314,053
------------
26,738,552
------------
HONG KONG -- 2.9%
- --------------------------------------------------------------------------------
Hang Lung
Development Co. 880,635 946,554
New World
Development Co. 482,790 913,563
South China Morning
Post 1,651,486 1,222,378
------------
3,082,495
------------
IRELAND -- 4.1%
- --------------------------------------------------------------------------------
Allied Irish Banks 134,945 1,689,108
Greencore Group 392,880 1,128,175
Jefferson Smurfit Group 587,230 1,525,664
------------
4,342,947
------------
ITALY -- 3.3%
- --------------------------------------------------------------------------------
Eni Spa 281,000 1,643,368
Telecom Italia SPA 73,884 362,928
Telecom Italia SPA 175,400 1,514,700
------------
3,520,996
------------
JAPAN -- 7.0%
- --------------------------------------------------------------------------------
Nichicon Corp. 58,000 1,257,121
Nintendo Co. 22,500 3,571,257
Promise Co. 21,600 1,450,081
Yodogawa Steel Works 265,000 1,092,836
------------
7,371,295
------------
17
<PAGE>
INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)October 31, 1999
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
NETHERLANDS -- 8.8%
- --------------------------------------------------------------------------------
ABN-Amro Holdings NV 50,317 $1,216,767
Akzo Nobel NV 40,738 1,754,290
Fortis NL 54,180 1,865,257
ING Groep NV 33,683 1,986,884
Koninklijke PTT 20,276 1,040,559
Philips Electronics NV 13,987 1,434,442
------------
9,298,199
------------
NEW ZEALAND -- 1.7%
- --------------------------------------------------------------------------------
Telecom Corp. 444,385 1,788,554
------------
PORTUGAL -- 2.0%
- --------------------------------------------------------------------------------
Portugal
Telecommunications 46,244 2,062,410
------------
SPAIN -- 1.9%
- --------------------------------------------------------------------------------
Telefonica S.A.* 121,037 1,991,171
------------
SWEDEN -- 2.2%
- --------------------------------------------------------------------------------
Electrolux AB 64,700 1,290,224
Getinge Industrier 89,472 979,144
------------
2,269,368
------------
SWITZERLAND -- 8.5%
- --------------------------------------------------------------------------------
Forbo Holdings AG 3,003 1,335,717
Geberit 6,834 2,013,033
Novartis AG 1,348 2,016,296
Saurer AG 2,567 1,077,793
Schweizerische
Industrie-Gesellschaft
Holding AG 2,047 1,208,620
Sulzer AG 1,837 1,289,503
------------
8,940,962
------------
UNITED STATES -- 1.5%
- --------------------------------------------------------------------------------
Creative Technology Ltd.* 131,246 1,574,952
------------
TOTAL COMMON STOCK
(Identified cost
$100,934,970) 102,893,647
------------
SHORT-TERM OBLIGATIONS -- 1.9%
- --------------------------------------------------------------------------------
State Street Bank & Trust Repurchase
Agreement 4.25% due 11/01/99 proceeds at
maturity $1,955,000 (collateralized by
$1,995,000 Federal National Mortgage
Association 5.12% due 05/12/00,
valued at $1,994,792) 1,955,000
------------
TOTAL INVESTMENTS
(Identified Cost
$102,889,970) 99.6% $104,848,647
OTHER ASSETS,
LESS LIABILITIES 0.4 444,758
----- ------------
NET ASSETS 100.0% $105,293,405
----- ------------
* Non income producing securities
See notes to financial statements
18
<PAGE>
INTERNATIONAL PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
ASSETS:
<S> <C> <C>
Investments at value (Note 1A) (Identified Cost, $102,889,970) $104,848,647
Dividends and interest receivable 229,041
Receivable for investments sold 864,138
- --------------------------------------------------------------------------------------------------------------
Total assets 105,941,826
- --------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 484,340
Payable to the custodian 73,669
Accrued expenses and other liabilities 90,412
- --------------------------------------------------------------------------------------------------------------
Total liabilities 648,421
- --------------------------------------------------------------------------------------------------------------
NET ASSETS $105,293,405
- --------------------------------------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $105,293,405
- --------------------------------------------------------------------------------------------------------------
INTERNATIONAL PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1999
- --------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME: (Note 1B)
Dividend income (net of foreign withholding tax of $557,288) $3,846,132
Interest income 49,915
- --------------------------------------------------------------------------------------------------------------
Total investment income $ 3,896,047
EXPENSES:
Management fees (Note 2) 1,317,234
Custody and fund accounting fees 245,106
Audit fees 35,890
Legal fees 9,371
Trustees fees 5,714
Other 3,388
- --------------------------------------------------------------------------------------------------------------
Total expenses 1,616,703
Less aggregate amount waived by the Manager (Note 2) (46,155)
- --------------------------------------------------------------------------------------------------------------
Net expenses 1,570,548
- --------------------------------------------------------------------------------------------------------------
Net investment income 2,325,499
- --------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investment transactions 17,944,018
Net realized loss on foreign currency transactions (362,524)
- --------------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions
and foreign currency transactions 17,581,494
- --------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments, forward currency
contracts, foreign currency transactions 9,962,721
- --------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain of Investments and
Foreign Currency Transactions 27,544,215
- --------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $29,869,714
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
19
<PAGE>
INTERNATIONAL PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 1, 1997
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
OCTOBER 31, OCTOBER 31,
1999 1998
- ----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
<S> <C> <C>
Net investment income $ 2,325,499 $ 4,310,814
Net realized gain on investment transactions and
foreign currency transactions 17,581,494 4,002,173
Unrealized appreciation (depreciation) of
investments, forward currency contracts,
foreign currency transactions 9,962,721 (20,091,760)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 29,869,714 (11,778,773)
- ----------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions (Note 1) 9,449,606 593,863,296
Value of withdrawals (164,972,221) (351,138,217)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital transactions (155,522,615) 242,725,079
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS: (125,652,901) 230,946,306
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 230,946,306 --
- ----------------------------------------------------------------------------------------------------------------
End of period $ 105,293,405 $ 230,946,306
- ----------------------------------------------------------------------------------------------------------------
INTERNATIONAL PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD
NOVEMBER 1, 1997
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
OCTOBER 31, 1999 OCTOBER 31, 1998
- ----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $105,293 $230,946
Ratio of expenses to average net assets 0.95% 0.97%
Ratio of net investment income to
average net assets 1.41% 1.72%
Portfolio turnover 26% 43%
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 0.98% 0.97%
Net investment income to
average net assets 1.38% 1.72%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
20
<PAGE>
INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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 amounts 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
21
<PAGE>
INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Continued)
exchange on which they are traded closes and the time when the Portfolio's net
asset value is calculated, such securities may be valued at fair value in
accordance with procedures established by and under the general supervision of
the Trustees.
B. Income Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on debt securities when
required for U.S. federal income tax purposes. Dividend income and other
distributions from investments are recorded on the ex-dividend date. Dividend
and interest income is recorded net of foreign taxes withheld. Reclaims of
recoverable foreign taxes are the responsibility of the qualified investors.
C. Foreign Currency Translation The accounting records of the Portfolio are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange to determine the value of investments,
assets and liabilities. Purchases and sales of securities, as well as income and
expenses, are translated at the prevailing rate of exchange on the respective
dates of such transactions. The Portfolio does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuation arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Translations of foreign currency
includes net exchange gains and losses, disposition of foreign currency and the
difference between the amount of investment income and expenses recorded and the
amount actually received or paid.
D. Forward Foreign Currency Contracts The Portfolio may enter into forward
foreign currency contracts ("contracts") in connection with planned purchases or
sales of securities, 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.
22
<PAGE>
INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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 and
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 $547,248, of which $46,155
was voluntarily waived for the year ended October 31, 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 $769,986 for the year
ended October 31, 1999.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $42,039,018 and $192,579,269
respectively, for the year ended October 31, 1999.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at October 31, 1999,
as computed on a federal income tax basis, are as follows:
Aggregate cos $103,766,202
- -------------------------------------------------------------------------------
Gross unrealized appreciation $ 12,582,480
Gross unrealized depreciation (11,520,035)
- -------------------------------------------------------------------------------
Net unrealized appreciation $ 1,062,445
- -------------------------------------------------------------------------------
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 year ended October 31, 1999, the
commitment fee allocated to the Portfolio was $389. Since the line of credit was
established, there have been no borrowings.
23
<PAGE>
INTERNATIONAL PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE INVESTORS OF ASSET ALLOCATION PORTFOLIOS (THE "TRUST"),
WITH RESPECT TO ITS SERIES, INTERNATIONAL PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of International Portfolio (the
"Portfolio"), a series of Asset Allocation Portfolios, as at October 31, 1999,
and the related statements of operations and of changes in net assets and the
financial highlights for the periods indicated. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments owned as
at October 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Portfolio as at October 31, 1999, the
results of its operations and the changes in its net assets and the financial
highlights for the periods indicated, in accordance with U.S. generally accepted
accounting principles.
PricewaterhouseCoopers LLP
Chartered Accountants
Toronto, Ontario
December 14, 1999
24
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, PRESIDENT
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
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
INVESTMENT MANAGER
(of International Portfolio)
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 of CitiFunds
International Growth & Income Portfolio. It is authorized for distribution to
prospective investors only when preceded or accompanied by an effective
prospectus of CitiFunds International Growth & Income Portfolio.
For more information about any of the CitiFunds listed above, ask for a
prospectus (except for CitiFunds International Growth & Income Portfolio which
preceded or accompanies this report) containing more complete information,
including all sales charges (if any), fees and expenses. Please read the
prospectus carefully before you invest or send money.
Although each money market fund seeks to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the funds.
Mutual fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency.
CitiFunds are made available by CFBDS, Inc. as distributor. For more information
contact your Service Agent or call 1-800-625-4554
(C)1999 Citicorp (R)Printed on recycled paper CFA/IGI/1099
