<PAGE>
THE SARATOGA ADVANTAGE TRUST
ANNUAL REPORT
AS OF AUGUST 31, 1996
TABLE OF CONTENTS
President's Letter................................................... Page 1
Investment Review.................................................... Page 3
Schedules of Investments............................................. Page 17
Statements of Assets and Liabilities................................. Page 34
Statements of Operations............................................. Page 35
Statements of Changes in Net Assets.................................. Page 36
Notes to Financial Statements........................................ Page 38
Financial Highlights................................................. Page 41
Independent Auditor's Report......................................... Page 42
Tax Information...................................................... Page 43
This report is authorized for distribution only to shareholders
and to others who have received a copy of the prospectus.
<PAGE>
TRUSTEES AND OFFICERS
Joseph M. La Motta Trustee, Chairman
Bruce E. Ventimiglia Trustee, President
Lacy B. Herrmann Trustee
George Loft Trustee
Patrick H. McCollough Trustee
Scott C. Kane Vice President
Stephen Ventimiglia Vice President
Sheldon Siegel Treasurer
Deborah Kaback Secretary
Leslie Klein Assistant Treasurer
Thomas E. Duggan Assistant Secretary
Investment Manager Distributor
Saratoga Capital Management OCC Distributors
33 Maiden Lane Two World Financial Center
New York, NY 10038-4578 New York, NY 10080-6116
Transfer and Shareholder Servicing Agent Custodian
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 8514 P.O. Box 351
Boston, MA 02266 Boston, MA 02101
<PAGE>
THE SARATOGA ADVANTAGE TRUST
Annual Report to Shareholders
October 25, 1996
Dear Shareholder:
We are pleased to provide you with this annual report on the investment
strategies and performance of the portfolios in the Saratoga Advantage Trust.
This report covers the twelve months from September 1, 1995 through August 31,
1996, a period of positive domestic stock and bond investment returns. During
this period of time, U.S. stocks provided a total return of 18.7%, as measured
by the Standard & Poor's 500 Index, while the total return for bonds was 4.4%,
as gauged by the Lehman Intermediate Government/Corporate Bond Index.
International stocks also produced positive returns during the period, gaining
7.9% as reported by the Morgan Stanley Europe, Australia and Far East (EAFE)
Index.
The positive one year returns above were achieved despite the fact that July
1996 witnessed a 4.4% decline in U.S. stocks as measured by the Standard &
Poor's 500 Index and a 2.9% decline in international stocks, as measured by the
EAFE Index. These short-term returns in July might have persuaded some investors
to sell U.S. stocks and international stocks. This might not have been a good
strategy considering their positive returns for the one year period ended August
31, 1996. To try to achieve good long-term investment results, don't let
short-term stock and bond market fluctuations change your investment strategy.
<PAGE>
Professional Management
Each of the Saratoga Advantage Trust's portfolios is advised by a nationally
renowned institutional money management organization with a special expertise in
their particular investment discipline. These are the same managers who invest
the portfolios for some of the nation's largest corporations, pension funds and
foundations. Their collective years of experience, advanced research
capabilities and superior management skills are usually not available to most
investors.
As I stated in the February 29, 1996 semi-annual report, when reviewing the
performance of the institutional investment advisory firms that manage the
portfolios of the Trust, and the performance of money managers in general,
please remember that it is not unusual for managers' returns to vary
significantly from their benchmark indexes over short-term measurement periods
such as several quarters. In fact, the more volatile the style of management
(e.g., small cap, growth or international management), the more likely it is to
have significant deviations from the index it is being measured against over
short-term measurement periods.
Investors should primarily focus on longer term results over statistically
significant time periods such as three years or longer. Over statistically
significant periods of time, investors should expect a manager to be performing
much closer to the indexes being measured against. The bottom line is that
successful investing requires discipline and patience.
Following you will find specific information on the investment strategy and
performance of each of the portfolios. Please speak with your financial advisor
if you have any questions about your investment in the Saratoga Advantage Trust
or your allocation of assets among the portfolios.
We remain dedicated to serving your investment needs. Thank you for investing
with us.
Sincerely,
/s/ Bruce E. Ventimiglia
- ------------------------
Bruce E. Ventimiglia
President and Chief Executive Officer
2
<PAGE>
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
Advised by:
Sterling Capital Management
Charlotte, North Carolina
Objective: Seeks maximum current income, consistent with the maintenance of
liquidity and the preservation of capital. The Portfolio invests exclusively in
short-term securities and related repurchase agreements issued by the United
States Government, its agencies and instrumentalities.
U.S. Government Money 90 Day T-Bills
7-Day Market Portfolio Average Discount
Compound Yield Yield
- ------------------------- ---------------------- --------------------
8/31/96 4.3% 5.1%
Total Aggregate U.S. Government Money
Return for the Period Market Portfolio
Ended August 31, 1996 90 Day T-Bills
- ------------------------- ---------------------- --------------------
Since Inception (9/1/94)* 4.9% 5.5%
9/1/95 - 8/31/96 4.5% 5.2%
3/1/96 - 8/31/96 2.1% 2.5%
*Annualized performance for periods greater than one year
By taking advantage of changes in short-term interest rates and utilizing a
variety of sectors within the short-term government market, Sterling Capital
Management seeks to maximize the Portfolio's yield while maintaining a constant
net asset value of $1.00 per share.
The Portfolio was invested primarily in U.S. Government Agency Notes as of
August 31, 1996, due to the higher yields versus Treasury Bills. The average
dollar-weighted portfolio maturity was 54 days, compared with a maximum
allowable average maturity of 90 days.
As the Federal Reserve (Fed) lowered short-term rates by .50% between the summer
of 1995 and January of 1996, Sterling lengthened the average maturity of the
Portfolio from approximately 35 days to more than 50 days. As the economy gained
strength in 1996, the market anticipated no further easings and began to price
potential Fed tightenings into yields. As the yield curve steepened, the
Portfolio was invested in longer-term securities to take advantage of higher
yields while maintaining a greater allocation to short maturities. With stable
inflation rates and our expectation that the economy will moderate, we have
maintained an average maturity of approximately 50 days.
Shares of the U.S. Government Money Market Portfolio are not guaranteed or
insured by the U.S. Government. There can be no assurance that the U.S.
Government Money Market Portfolio will be able to maintain a constant net asset
value of $1.00 per share.
3
<PAGE>
INVESTMENT QUALITY BOND PORTFOLIO
Advised by:
Fox Asset Management, Inc.
Little Silver, New Jersey
Objective: Seeks current income and reasonable stability of principal through
investment in a diversified portfolio of investment quality, actively managed
fixed income securities.
Lehman
Intermediate
Government/
Total Aggregate Investment Quality Corporate Bond
Return Bond Portfolio Index(1)
- ------------------------- -------------------- ----------------
Since Inception (9/1/94)* 5.2% 6.9%
9/1/95 - 8/31/96 3.2% 4.4%
3/1/96 - 8/31/96 -0.1% 0.5%
*Annualized performance for periods greater than one year
The Portfolio seeks to provide high income by investing primarily in investment
grade bonds with maturities between 2 and 10 years. In the annual period ended
August 31, 1996, the Portfolio distributed dividends of $.484 per share.
Investments are normally divided approximately evenly between U.S. Government
and corporate securities. Due to the current phenomenon of tight supply and only
a slight yield advantage available in corporate securities, there is greater
emphasis on U.S. Government holdings at this time.
Fox Asset Management will continue to focus on those instruments that offer
improving credit quality and liquidity. Due to the challenge of trying to
preserve principal in the current volatile market environment, Fox is
maintaining a conservative investment posture with an average maturity of 4.0
years, and an average duration of 3.4 years in the Portfolio.
Other portfolio statistics as of August 31, 1996 are as follows: Average
yield-to-maturity was 6.8%, average coupon was 6.4%, and the average Moody's
Rating was Aa1 with 19 fixed income issues held.
4
<PAGE>
INVESTMENT QUALITY BOND PORTFOLIO
Advised by:
Fox Asset Management, Inc.
Little Silver, New Jersey
SARATOGA ADVANTAGE TRUST
INVESTMENT QUALITY BOND PORTFOLIO
VERSUS INDEX
[GRAPHIC OMITTED - NOT SUPPLIED]
Past performance is not predictive of future performance.
1. The Lehman Intermediate Government/Corporate Bond Index is composed of the
bonds in the Lehman Government/Corporate Bond Index that have maturities between
1 and 9.99 years. The Lehman Government/Corporate Bond Index consists of
approximately 5,400 issues. The securities must be investment grade (BAA or
higher) with amounts outstanding in excess of $1 million and have at least one
year to maturity. Total return comprises price appreciation/depreciation and
income as a percentage of the original investment. The indexes are rebalanced
monthly by market capitalization.
5
<PAGE>
MUNICIPAL BOND PORTFOLIO
Advised by:
OpCap Advisors
New York, New York
Objective: Seeks a high level of interest income exempt from federal income
taxation, consistent with prudent investment management and the preservation of
capital.
Total Aggregate Municipal Bond Lehman Municipal
Return Portfolio Bond Index(1)
- ------------------------- ----------------- -------------------
Since Inception (9/1/94)* 4.8% 7.0%
9/1/95 - 8/31/96 4.9% 5.2%
3/1/96 - 8/31/96 -0.2% 0.4%
*Annualized performance for periods greater than one year
With all of the volatility in the bond markets over the past year it is somewhat
surprising to note that 30 year AAA GO municipal yields are a few basis points
lower than a year ago; 5.7% as of 8/30/96 versus 5.9% as of 8/30/95. While 1995
was a banner year for bonds, 1996 has given back much of the gains of the
previous year as the economy has proven to be a lot healthier than expected. And
though consumer inflation is tame, there is evidence that wage inflation
pressures have been building. The municipal market, weakened by the specter of
tax reform, outperformed the taxable market during the first eight months of
1996 as tax reform fears subsided with the demise of the Forbes campaign.
Furthermore, new issue supply was not onerous and was met with adequate demand
from insurance companies and retail investors. Currently, the bond market is
waiting to see if the Federal Reserve will raise interest rates in order to slow
the economy to what they perceive as a non-inflationary level.
The Portfolio is invested in a diversified group of municipals with an average
weighted maturity of 15.5 years. As of August 31, 1996, 99% of the Portfolio's
investments were rated A or better by Standard & Poor's or Moody's indicating
the high quality of the Fund. The four largest sectors represented in the
Portfolio were: general obligations 26%, education 19%, power/utility 8% and
housing 7%. The largest holdings by state include: New York 18%, Texas 11%,
California 10% and Georgia 9%.
6
<PAGE>
MUNICIPAL BOND PORTFOLIO
Advised by:
OpCap Advisors
New York, New York
SARATOGA ADVANTAGE TRUST
MUNICIPAL BOND PORTFOLIO
VERSUS INDEX
[GRAPHIC OMITTED - NOT SUPPLIED]
Past performance is not predictive of future performance.
1. The Lehman Brothers Municipal Bond Index consists of approximately 25,000
municipal bonds which are selected to be representative of the long-term,
investment grade tax-exempt bond market. The bonds selected for the index have
the following characteristics: a minimum credit rating of at least Baa; an
original issue of at least $50 million; at least $3 million of the issue
outstanding; issued within the last five years; and a maturity of at least one
year.
7
<PAGE>
LARGE CAPITALIZATION VALUE PORTFOLIO
Advised by:
OpCap Advisors
New York, New York
Objective: Seeks total return consisting of capital appreciation and dividend
income by investing in a diversified portfolio of common stocks that are
believed to be undervalued in the market and offer above-average price
appreciation potential.
Total Aggregate Large Capitalization S & P 500 S & P/Barra Value
Return Value Portfolio Index(1) Index(2)
- ------------------------- -------------------- ---------- ------------------
Since Inception (9/1/94)* 21.7% 20.1% 18.4%
9/1/95 - 8/31/96 19.7% 18.7% 17.7%
3/1/96 - 8/31/96 4.9% 3.0% 2.8%
*Annualized performance for periods greater than one year
The Saratoga Large Capitalization Value Portfolio is designed for the long-term
investor who seeks to preserve capital and make it grow. We seek to invest in
superior companies at reasonable valuations and, by doing so, to minimize losses
in down markets and match or exceed the popular indexes when prices are rising.
Our approach has worked well through a variety of market conditions, providing
above-average returns with below-average risk.
For the fiscal year ended 8/31/96 the Portfolio outperformed the S&P 500 and the
S&P/Barra Value Index. Strong contributors to performance included: Becton,
Dickinson & Co., Federal Home Loan Mortgage Corp., EXEL Ltd., Ace Ltd., and
General Electric Co.
The Portfolio owned the common stocks of 37 companies as of 8/31/96. The five
largest holdings were: Ace Ltd., one of the leading providers of excess
liability insurance in the world; Wells Fargo & Co., the largest commercial bank
in the Western United States; May Department Stores Co., that operates 347
department stores in 30 states; Varity Corp., a manufacturer of engines and
automotive components; and Becton, Dickinson & Co., a manufacturer of a broad
line of medical, surgical, laboratory and diagnostic products.
8
<PAGE>
LARGE CAPITALIZATION VALUE PORTFOLIO
Advised by:
OpCap Advisors
New York, New York
SARATOGA ADVANTAGE TRUST
LARGE CAPITALIZATION VALUE PORTFOLIO
VERSUS INDICES
[GRAPHIC OMITTED - NOT SUPPLIED]
Past performance is not predictive of future performance.
1. The Standard & Poor's 500 is a capital weighted index representing the
aggregate market value of the common equity of 500 stocks primarily traded on
the NYSE. These 500 stocks are composed of 400 industrial, 40 utility, 40
financial, and 20 transportation companies. The weight of each stock in the
index is proportional to its price times its shares outstanding. The Standard &
Poor's 500 is an unmanaged index and includes the reinvestment of all dividends.
2. The S&P/Barra Value Index is constructed by dividing the stocks in the S&P
500 Index according to price-to-book ratios. This unmanaged Index contains
stocks with lower price-to-book ratios and is market capitalization weighted.
9
<PAGE>
LARGE CAPITALIZATION GROWTH PORTFOLIO
Advised by:
Harris Bretall Sullivan & Smith, Inc.
San Francisco, California
Objective: Seeks capital appreciation by investing in a diversified portfolio of
common stocks that, in the advisor's opinion, have faster earnings growth
potential than the Standard & Poor's 500.
Total Aggregate Large Capitalization S & P 500 S & P/Barra Growth
Return Growth Portfolio Index(1) Index(2)
- ------------------------- -------------------- --------- ------------------
Since Inception (9/1/94)* 14.9% 20.1% 21.7%
9/1/95 - 8/31/96 2.6% 18.7% 19.8%
3/1/96 - 8/31/96 -0.3% 3.0% 3.1%
*Annualized performance for periods greater than one year
Harris Bretall Sullivan & Smith, Inc. (HBSS) analyzes a universe of
approximately 300 established, high-quality, growth-oriented companies. The
Portfolio is invested in stocks that rank in the top one-fifth of this universe.
The HBSS Strategy Team, which meets four times a week, makes all the investment
decisions, sets the firm's economic framework and reviews specific holdings,
recent news announcements and company data.
Although the Portfolio has underperformed the S&P/Barra Growth Index, it has
provided a 14.9% average annualized return since its inception. The Portfolio's
underperformance versus the indexes has been due to HBSS maintaining its strong
commitment to technology-based stocks. HBSS feels that technology leadership is
the single most powerful force behind the newfound competitiveness of American
industry. Although technology stocks have not performed well recently, HBSS
feels that investors who are interested in earnings growth as a strategy for
appreciation must hold an important percentage of their assets in technology
related companies.
As of August 31, 1996, the Portfolio was invested in 43 stocks with
approximately one-quarter of the Portfolio invested in technology developers,
including: Microsoft Corp., Motorola, Inc. and Hewlett-Packard Co. Additionally,
the Portfolio has added U.S. based global franchise companies, such as: Abbott
Laboratories, Mattel, Inc., Johnson & Johnson, Interpublic Group of Companies,
Inc., Gillette Co., and Colgate-Palmolive Co.
10
<PAGE>
LARGE CAPITALIZATION GROWTH PORTFOLIO
Advised by:
Harris Bretall Sullivan & Smith, Inc.
San Francisco, California
SARATOGA ADVANTAGE TRUST
LARGE CAPITALIZATION GROWTH PORTFOLIO
VERSUS INDICES
[GRAPHIC OMITTED - NOT SUPPLIED]
Past performance is not predictive of future performance.
1. The Standard & Poor's 500 is a capital weighted index representing the
aggregate market value of the common equity of 500 stocks primarily traded on
the NYSE. These 500 stocks are composed of 400 industrial, 40 utility, 40
financial, and 20 transportation companies. The weight of each stock in the
index is proportional to its price times its shares outstanding. The Standard &
Poor's 500 is an unmanaged index and includes the reinvestment of all dividends.
2. The S&P/Barra Growth Index is constructed by dividing the stocks in the S&P
500 Index according to price-to-book ratios. This unmanaged Index contains
stocks with higher price-to-book ratios and is market capitalization weighted.
11
<PAGE>
SMALL CAPITALIZATION PORTFOLIO
Advised by:
Axe-Houghton Associates, Inc.
Rye Brook, New York
Objective: Seeks maximum capital appreciation by investing in a diversified
portfolio of common stocks of small capitalization growth companies.
Total Aggregate Small
Return Capitalization Russell 2000
Portfolio Index(1)
- ------------------------- -------------- ------------
Since Inception (9/1/94)* 18.4% 15.7%
9/1/95 - 8/31/96 11.0% 10.8%
3/1/96 - 8/31/96 11.0% 3.5%
*Annualized performance for periods greater than one year
Small-cap growth stocks, as measured by the Russell 2000 Index, out-performed
the broader market in six of the twelve months ended 8/31/96; the February-May
period was particularly strong. Over the entire year, however, the Russell 2000
Index lagged the broader market by nearly eight percentage points (rising 10.8%
versus 18.7% for the S&P 500). During this period, your Portfolio appreciated
11.0%. A $0.3935 per share capital-gains distribution was made in December,
1995.
Axe-Houghton invests in growth companies with stock market capitalizations of up
to $1 billion and holds existing positions up to a maximum value of $2 billion,
at which point profits are typically taken. The average market capitalization of
the current holdings is $515 million. Nearly three-quarters of the Portfolio is
invested in companies with a market cap under $1 billion of which almost 60% are
below $550 million. The Portfolio is usually fully-invested, with major
commitments in technology, consumer spending, services and healthcare; no one
issue represents more than 4% of total assets. Major holdings include:
Electronics for Imaging, Inc. (color copier components), Scholastic Corp.
(children's books and software), La Quinta Inns (hotel chain) and Teltrend, Inc.
(telecom equipment). Each of these companies is characterized by high rates of
growth, favorable returns on equity and the potential for continued reinvestment
of undistributed earnings to expand their respective businesses.
We believe that the current slow-growth, low inflation environment is
particularly attractive for companies with high unit-volume growth and products
which can command premium pricing. We expect small-cap growth stocks to
outperform the general market in the Portfolio's current fiscal year.
12
<PAGE>
SMALL CAPITALIZATION PORTFOLIO
Advised by:
Axe-Houghton Associates, Inc.
Rye Brook, New York
SARATOGA ADVANTAGE TRUST
SMALL CAPITALIZA PORTFOLIO
VERSUS INDEX
[GRAPHIC OMITTED - NOT SUPPLIED
Past performance is not predictive of future performance.
1. The Russell 2000 Index is comprised of the 2,000 smallest U.S. domiciled
publicly traded commons stocks which are included the Russell 3000 Index. The
common stocks included in the Russell 2000 Index represent approximately 10% of
the U.S. equity market as measured by market capitalization. The Russell 3000
Index is an unmanaged index of the 3,000 largest U.S. domiciled publicly traded
common stocks by market capitalization representing approximately 98% of the
U.S. publicly traded equity market. The Russell 2000 Index is an unmanaged index
whose performance reflects reinvested dividends.
13
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
Advised by:
Ivory & Sime Inc.
Edinburgh, Scotland
Objective: Seeks capital appreciation by investing primarily in a diversified
portfolio of securities of companies headquartered outside the United States.
Morgan Stanley
Total Aggregate International EAFE Index
Return Equity Portfolio (U.S. Dollars)(1)
- ------------------------- ----------------- ---------------
Since Inception (9/1/94)* -1.6% 4.1%
9/1/95 - 8/31/96 3.7% 7.9%
3/1/96 - 8/31/96 -0.2% 0.9%
*Annualized performance for periods greater than one year
International stock markets slowed between March and August of 1996 as fears
increased that U.S. interest rates may rise. While economic recovery has
continued in Japan, the recovery has not been robust enough to attract
investors. Therefore, our relatively high weighting in this region has not been
beneficial.
Elsewhere, the Portfolio has increased its weighting in Emerging Markets as
economic growth rates, combined with market valuations, make this area
relatively more attractive than the developed markets. The Portfolio has
continued to benefit from a currency hedge that protects the Portfolio from the
strengthening U.S. dollar against the Japanese yen.
Ivory & Sime focuses on areas of the world outside the United States that are
expected to experience superior economic growth. Individual stock selection is
based on detailed fundamental analysis and a strong emphasis on visiting the
companies in which investments are made.
As of August 31, 1996, major weightings in the portfolio were as follows: 34.8%
in Japan, 24.7% in Continental Europe, 12.3% in the UK, 12.9% in Asia (ex Japan)
and 5.4% in Latin America. Looking forward, we still find Emerging Markets to be
attractive at this stage in the cycle. In Continental Europe we are finding
selective opportunities in growth stocks.
The Portfolio recently acquired SGS Thomson Microelectronics N.V., a
semiconductor manufacturer. SGS was purchased following significant price
depreciation caused by worldwide concerns over semiconductor capacity exceeding
demand.
14
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
Advised by:
Ivory & Sime Inc.
Edinburgh, Scotland
SARATOGA ADVANTAGE TRUST
INTERNAL EQUITY PORTFOLIO
VERSUS INDEX
[GRAPHIC OMITTED - NOT SUPPLIED]
Past performance is not predictive of future performance.
1. The Europe, Australia, Far East Index (EAFE) is a widely recognized index
prepared by Morgan Stanley Capital International. This unmanaged index consists
of non-U.S. companies which are listed on one of twenty foreign markets and
assumes the reinvestment of dividends. The Gross Domestic Product (GDP) version
of the index is used above.
15
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16
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Value
------------------ ------------
<S> <C> <C>
Federal Farm Credit Bank - 4.9%
$ 95,000 5.16%, 9/20/96 ............................ $ 94,741
190,000 5.17%, 9/20/96 ............................ 189,482
10,000 5.22%, 9/25/96 ............................ 9,965
500,000 5.23%, 2/06/97 ............................ 488,523
200,000 5.36%, 9/03/96 (1) ........................ 200,000
135,000 5.50%, 5/01/97 ............................ 134,832
------------
Total Federal Farm Credit Bank
(cost--$1,117,543) ........................ $ 1,117,543
------------
Federal Home Loan Bank - 10.6%
$ 275,000 5.16%, 9/17/96 ............................ $ 274,370
650,000 5.28%, 1/07/97 ............................ 637,797
525,000 5.36%, 5/16/97 ............................ 504,911
500,000 5.41%, 3/14/97 ............................ 500,000
500,000 5.925%, 6/13/97 ........................... 499,717
------------
Total Federal Home Loan Bank
(cost--$2,416,795) ........................ $ 2,416,795
------------
Federal Home Loan Mortgage Corporation - 57.6%
$ 1,700,000 5.20%, 9/16/96 ............................ $ 1,696,317
2,035,000 5.20%, 9/20/96 ............................ 2,029,415
95,000 5.21%, 9/12/96 ............................ 94,849
2,045,000 5.21%, 9/20/96 ............................ 2,039,377
210,000 5.22%, 9/20/96 ............................ 209,421
2,030,000 5.25%, 9/09/96 ............................ 2,027,632
70,000 5.27%, 9/13/96 ............................ 69,879
115,000 5.27%, 9/16/96 ............................ 114,747
2,500,000 5.30%, 9/12/96 ............................ 2,495,951
2,430,000 5.30%, 9/23/96 ............................ 2,422,130
------------
Total Federal Home Loan Mortgage Corporation
(cost--$13,199,718) ....................... $ 13,199,718
------------
Federal National Mortgage Association - 19.0%
$ 75,000 5.20%, 9/03/96 ............................ $ 74,978
2,890,000 5.22%, 9/12/96 ............................ 2,885,391
1,385,000 5.31%, 9/27/96 ............................ 1,379,689
------------
Total Federal National Mortgage Association
(cost--$4,340,058) ........................ $ 4,340,058
------------
U.S. Treasury Bill - 4.2%
$ 1,000,000 5.19%, 4/03/97
(cost--$969,148) .......................... $ 969,148
------------
U.S. Treasury Note - 3.2%
$ 745,000 4.75%, 2/15/97
(cost--$743,731) .......................... $ 743,731
------------
Total Investments
(cost--$22,786,993) ........................................ 99.5% $ 22,786,993
Other Assets in Excess of
Other Liabilities .......................................... 0.5 119,307
------- ------------
Total Net Assets .............................................. 100.0% $ 22,906,300
======= ============
</TABLE>
- ----------
(1) Represents a floating interest rate note subject to change on
quarterly coupon dates, based on the current 90 day U.S. Treasury
Bill rate plus 20 basis points. Rate shown reflects the rate in
effect at 8/31/96.
17
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
INVESTMENT QUALITY BOND PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Value
------------------ ------------
<S> <C> <C>
U.S. TREASURY NOTES - 58.7%
$ 2,800,000 5.625%, 11/30/00 .......................... $ 2,691,052
4,900,000 6.125%, 9/30/00 ........................... 4,802,000
2,400,000 6.75%, 5/31/99 ............................ 2,414,616
------------
Total U.S. Treasury Notes
(cost--$10,036,599) ....................... $ 9,907,668
------------
CORPORATE NOTES & BONDS - 38.3%
Automotive - 3.8%
$ 225,000 Ford Motor Credit Corp.
7.75%, 10/01/99 ........................... $ 229,903
400,000 General Motors Acceptance Corp.
7.75%, 1/15/99 ............................ 407,356
------------
637,259
------------
Banking - 3.4%
600,000 Nationsbank Corp.
5.375%, 4/15/00 ........................... 565,908
------------
Chemicals - 3.4%
550,000 du Pont (E.I.) de Nemours & Co.
8.50%, 2/15/03 ............................ 574,590
------------
Computers - 2.3%
400,000 International Business Machines Corp.
6.375%, 6/15/00 ........................... 392,524
------------
Drugs & Medical Products - 2.1%
350,000 American Home Products Corp.
7.70%, 2/15/00 ............................ 357,669
------------
Entertainment - 2.9%
500,000 The Walt Disney Co.
6.375%, 3/30/01 ........................... 486,720
------------
Miscellaneous Financial Services - 10.5%
350,000 Associates Corp. of North America
6.25%, 9/15/00 ............................ 340,078
Bear Stearns & Co.
250,000 5.75%, 2/15/01 ............................ 235,700
350,000 7.625%, 9/15/99 ........................... 355,939
550,000 Dean Witter Discover & Co.
6.75%, 8/15/00 ............................ 543,867
50,000 Lehman Brothers, Inc.
9.875%, 10/15/00 .......................... 53,971
250,000 Morgan Stanley Group
5.75%, 2/15/01 ............................ 236,388
------------
1,765,943
------------
Oil/Gas - 1.6%
260,000 Amoco Canada Petroleum Co. Ltd.
7.25%, 12/01/02 ........................... 259,979
------------
Resource Recovery - 4.4%
750,000 WMX Technologies, Inc.
7.125%, 6/15/01 ........................... 749,220
------------
</TABLE>
18
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
INVESTMENT QUALITY BOND PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
------------------ ------------
<S> <C> <C>
Utility - 3.9%
$700,000 Southern California Edison Co.
5.875%, 1/15/01 ........................... $ 665,938
------------
Total Corporate Notes & Bonds
(cost--$6,593,467) ........................ $ 6,455,750
------------
Total Investments
(cost--$16,630,066) ........................................ 97.0% $ 16,363,418
Other Assets in Excess of
Other Liabilities .......................................... 3.0 500,631
------- ------------
Total Net Assets .............................................. 100.0% $ 16,864,049
======= ============
</TABLE>
19
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------ ------------------
<S> <C> <C>
MUNICIPAL NOTES & BONDS - 94.2%
CALIFORNIA - 10.0%
Education - 5.3%
$ 50,000 California State Public Works Board Lease Revenue
California State University Projects
6.00%, 9/01/15 ............................................. $ 49,442
200,000 Lafayette, California Elementary School District
5.90%, 5/15/18 ............................................. 199,980
-----------------
249,422
-----------------
Power/Utility - 3.1%
150,000 Southern California Public Power Authority
Power Project Revenue (Series A)
5.50%, 7/01/12 (AMBAC insured) ............................. 147,192
-----------------
Water/Sewer - 1.6%
75,000 San Francisco, California City & County Public Utilities
Community Water Revenue (Series A)
6.00%, 11/01/15 ............................................ 74,152
-----------------
470,766
-----------------
COLORADO - 3.2%
Health/Hospital
150,000 Denver, Colorado City & County Revenue
Childrens Hospital Association Project
6.00%, 10/01/15 ............................................ 149,991
-----------------
CONNECTICUT - 0.4%
Housing
20,000 Connecticut State Housing Finance Authority
Housing Mortgage Financing Program (Series B)
6.50%, 5/15/18 ............................................. 20,563
-----------------
FLORIDA - 4.9%
Education - 0.7%
35,000 Dade County, Florida School Board
Certificates of Participation (Series A)
5.75%, 5/01/12 (MBIA insured) .............................. 34,783
-----------------
General Obligation - 2.2%
Florida State Board of Education Capital Outlay
75,000 5.25%, 6/01/23 (Series D) .................................. 67,730
35,000 6.00%, 6/01/19 (Series A) .................................. 35,209
-----------------
102,939
-----------------
Power/Utility - 0.5%
25,000 Jacksonville, Florida Electric Authority Revenue
St. John's River Power
5.50%, 10/01/14 ............................................ 24,138
-----------------
Sales Tax - 1.1%
50,000 St. Petersburg, Florida Professional Sports Facilities
Sales Tax Revenue
5.60%, 10/01/15 (MBIA insured) ............................. 48,908
-----------------
Turnpike/Toll - 0.4%
20,000 Orlando & Orange County Expressway Authority
Florida Expressway Revenue (Series A)
5.00%, 7/01/17 (FGIC insured) .............................. 18,078
-----------------
228,846
-----------------
</TABLE>
20
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------ -----------------
<S> <C> <C>
GEORGIA - 9.3%
Education - 4.7%
$215,000 Jackson County, Georgia School District
6.00%, 7/01/14 (MBIA insured) .............................. $218,492
-----------------
General Obligation - 4.6%
200,000 Georgia State General Obligation Bonds (Series B)
6.25%, 4/01/07 ............................................. 218,112
-----------------
436,604
-----------------
IOWA - 1.2%
Water/Sewer
50,000 West Des Moines, Iowa Water Revenue
6.80%, 12/01/13 (AMBAC insured) ............................ 54,492
-----------------
KENTUCKY - 2.1%
Turnpike/Toll
100,000 Kentucky State Turnpike Authority
Economic Development Road Revenue
5.625%, 7/01/15 (AMBAC insured) ............................ 98,114
-----------------
LOUISIANA - 3.3%
General Obligation
150,000 New Orleans, Louisiana General Obligation Bonds
6.125%, 10/01/16 ........................................... 153,215
-----------------
MARYLAND - 6.5%
Resource Recovery
300,000 Maryland State Energy Financing Administration
Solid Waste Disposal Revenue Wheelabrator Water Projects
6.30%, 12/01/10 ............................................ 305,610
-----------------
MASSACHUSETTS - 2.1%
General Obligation - 1.1%
50,000 Lowell, Massachusetts General Obligation Bonds
6.05%, 4/01/11 ............................................. 51,270
-----------------
Transportation - 1.0%
50,000 Massachusetts Bay Transportation Authority
General Transportation System (Series B)
5.90%, 3/01/24 ............................................. 49,198
-----------------
100,468
-----------------
MICHIGAN - 2.5%
Pollution Control
125,000 Michigan State Environmental Protection Program
5.40%, 11/01/19 ............................................ 117,000
-----------------
MISSOURI - 1.0%
Housing
45,000 Missouri State Housing Development Community
Single Family Mortgage Revenue
6.90%, 7/01/18 ............................................. 47,072
-----------------
NEBRASKA - 0.8%
Power/Utility
40,000 Omaha Public Power Distribution (Series C)
5.50%, 2/01/14 ............................................. 39,338
-----------------
</TABLE>
21
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------ -----------------
<S> <C> <C>
NEVADA - 5.9%
General Obligation - 2.7%
$ 50,000 Clark County, Nevada General Obligation Bonds (Series B)
6.00%, 6/01/16 (AMBAC insured) ............................. $ 53,006
75,000 Nevada State General Obligation Bonds
Municipal Bond Bank (Series A)
5.50%, 11/01/20 ............................................ 72,371
-----------------
125,377
-----------------
Housing - 3.2%
150,000 Nevada Housing Division
Single Family Program (Series A1)
6.15%, 4/01/17 ............................................. 150,237
-----------------
275,614
-----------------
NEW HAMPSHIRE - 0.6%
Turnpike/Toll
30,000 New Hampshire State Turnpike Systems
6.00%, 4/01/13 ............................................. 30,016
-----------------
NEW YORK - 17.9%
Education - 4.9%
New York State Dormitory Authority Revenue
75,000 Albany Memorial Hospital
5.50%, 7/01/10 ............................................. 71,978
125,000 Consolidated City University System
5.75%, 7/01/09 ............................................. 128,187
30,000 Sarah Lawrence College
6.00%, 7/01/15 ............................................. 30,355
-----------------
230,520
-----------------
General Obligation - 5.1%
20,000 New York City General Obligation Bonds (Series B)
7.00%, 10/01/19 ............................................ 20,447
200,000 New York State General Obligation Bonds (Series A)
6.50%, 7/15/06 ............................................. 220,030
-----------------
240,477
-----------------
Housing - 2.0%
New York State Mortgage Agency Revenue
20,000 6.875%, 4/01/17 (Series A) ................................. 20,419
75,000 Homeowner Mortgage (Series 54)
6.10%, 10/01/15 ............................................ 73,997
-----------------
94,416
-----------------
Pollution Control - 0.8%
40,000 New York State Environmental Facilities Corp.
Pollution Control Revenue
5.875%, 6/15/14 ............................................ 40,040
-----------------
Sales Tax - 1.6%
75,000 New York State Local Government Assistance Corp. (Series A)
6.00%, 4/01/16 ............................................. 74,568
-----------------
Transportation - 2.2%
100,000 Metropolitan Transit Authority
5.50%, 7/01/08 (FGIC insured) .............................. 101,470
-----------------
Water/Sewer - 1.3%
65,000 New York City Municipal Water Finance Authority
Water and Sewer Systems Revenue (Series F)
5.50%, 6/15/15 (MBIA insured) .............................. 62,207
-----------------
843,698
-----------------
</TABLE>
22
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------ -----------------
<S> <C> <C>
OHIO - 1.2%
Health/Hospital
$ 50,000 Lorain County, Ohio Hospital Revenue
7.75%, 11/01/13 (AMBAC insured) ............................ $ 58,738
-----------------
PENNSYLVANIA - 5.7%
Education - 3.1%
150,000 Pennsylvania State Higher Educational Facilities Authority
Health Services Revenue University of Pennsylvania (Series B)
5.75%, 1/01/17 ............................................. 147,690
-----------------
Tax Allocation - 1.6%
75,000 Philadelphia, Pennsylvania Municipal Authority Revenue
5.625%, 11/15/14 (FGIC insured) ............................ 72,913
-----------------
Water/Sewer - 1.0%
50,000 Pittsburgh, Pennsylvania Water & Sewer Authority
Water & Sewer Systems Revenue (Series B)
5.60%, 9/01/15 ............................................. 48,189
-----------------
268,792
-----------------
PUERTO RICO - 1.4%
Power/Utility
65,000 Puerto Rico Electric Power Authority
Power Revenue (Series X)
6.00%, 7/01/15 ............................................. 64,487
-----------------
TENNESSEE - 2.1%
Airline/Airport
100,000 Metro Nashville Airport Special Facilities (1)
3.70%, 10/01/12 ............................................ 100,000
-----------------
TEXAS - 10.6%
Airline/Airport - 2.1%
100,000 Lone Star Texas Airport Improvement Authority (1)
3.70%, 12/01/14 ............................................ 100,000
-----------------
Education - 0.3%
15,000 University of Texas Revenue Bonds (Series B)
6.75%, 8/15/13 ............................................. 16,327
-----------------
General Obligation - 7.1%
75,000 Houston, Texas General Obligation Bonds (Series C)
5.25%, 4/01/14 ............................................. 70,486
25,000 San Antonio, Texas General Obligation Bonds
6.625%, 8/01/14 ............................................ 26,391
35,000 Texas State General Obligation Bonds (Series D)
6.00%, 8/01/12 ............................................. 35,832
200,000 Texas State Tax & Revenue Anticipation Notes
4.75%, 8/29/97 ............................................. 201,670
-----------------
334,379
-----------------
Power/Utility - 1.1%
50,000 Brazos River Authority Texas Revenue
Houston Light & Power Company
5.80%, 8/01/15 (MBIA insured) .............................. 49,432
-----------------
500,138
-----------------
</TABLE>
23
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------ -----------------
<S> <C> <C>
WASHINGTON - 1.0%
Power/Utility
$ 35,000 Seattle, Washington Municipal Light & Power Revenue
5.75%, 8/01/11 (Series A) .................................. $ 35,042
10,000 Washington State Public Power Supply Systems
Nuclear Project Revenue (Series B)
7.25%, 7/01/12 (FGIC insured) .............................. 10,934
-----------------
45,976
-----------------
WYOMING - 0.5%
Housing
25,000 Wyoming Community Development
Authority Housing Revenue (Series 1)
6.65%, 12/01/06 ............................................ 25,895
-----------------
Total Investments
(cost--$4,432,785).................................................... 94.2% $4,435,433
Other Assets in Excess of
Other Liabilities..................................................... 5.8 272,315
----------- -----------------
Total Net Assets......................................................... 100.0% $4,707,748
=========== =================
</TABLE>
- ----------
(1) Represents a variable rate demand note whose interest rate is subject to
change daily and payable on demand. Rate shown reflects the rate in effect
on 8/31/96.
24
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
LARGE CAPITALIZATION VALUE PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------- -----------------
<S> <C> <C>
SHORT-TERM CORPORATE NOTES - 15.8%
Computers - 3.9%
$713,000 International Business Machines Corp.
5.29%, 9/17/96 ............................................. $ 711,324
-----------------
Miscellaneous Financial Services - 8.6%
240,000 American Express Corp.
5.27%, 9/19/96 ............................................. 239,367
750,000 Beneficial Corp.
5.30%, 9/17/96 ............................................. 748,233
577,000 Ford Motor Credit Corp.
5.27%, 9/18/96 ............................................. 575,564
-----------------
1,563,164
-----------------
Oil/Gas - 3.3%
Chevron Oil Finance Co.
425,000 5.19%, 9/06/96 ............................................. 424,694
188,000 5.20%, 9/06/96 ............................................. 187,864
-----------------
612,558
-----------------
Total Short-Term Corporate Notes
(cost--$2,887,046).......................................... $2,887,046
-----------------
Shares
- ------------------
COMMON STOCKS - 82.9%
Aerospace - 6.0%
6,500 Lockheed Martin Corp. ........................................ $ 546,812
11,000 McDonnell Douglas Corp. ...................................... 551,375
-----------------
1,098,187
-----------------
Airlines - 2.7%
6,000 AMR Corp.*..................................................... 492,000
-----------------
Automotive - 3.5%
12,700 Varity Corp.*.................................................. 638,175
-----------------
Banking - 6.8%
6,300 Citicorp ...................................................... 524,475
2,866 Wells Fargo & Co. ............................................ 712,917
-----------------
1,237,392
-----------------
Chemicals - 3.1%
3,700 du Pont (E.I.) de Nemours & Co. .............................. 303,863
1,980 Hercules, Inc. ............................................... 98,505
5,250 Monsanto Co. ................................................. 168,656
-----------------
571,024
-----------------
Conglomerates - 3.5%
2,900 General Electric Co. ......................................... 241,063
8,000 Tenneco, Inc. ................................................ 398,000
-----------------
639,063
-----------------
Drugs & Medical Products - 3.3%
14,680 Becton, Dickinson & Co. ...................................... 600,045
-----------------
Electronics - 4.2%
8,000 Adaptec, Inc.*................................................. 399,000
8,080 Arrow Electronics, Inc.*....................................... 368,650
-----------------
767,650
-----------------
Healthcare Services - 4.7%
7,800 Columbia/HCA Healthcare Corp. ................................ 439,725
19,800 Tenet Healthcare Corp.*........................................ 415,800
-----------------
855,525
-----------------
</TABLE>
25
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
LARGE CAPITALIZATION VALUE PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Shares Value
- ------------------ -----------------
<S> <C> <C>
Insurance - 19.3%
18,700 Ace Ltd. ..................................................... $ 871,887
14,950 AFLAC, Inc. .................................................. 513,906
4,150 American International Group, Inc. ........................... 394,250
18,000 Everest Re Holdings, Inc. ................................... 438,750
15,620 EXEL Ltd. .................................................... 523,270
1,200 General Re Corp. ............................................. 173,850
4,180 Progressive Corp., Ohio ....................................... 227,287
13,000 RenaissanceRe Holdings Ltd. .................................. 386,750
-----------------
3,529,950
-----------------
Machinery/Engineering - 2.9%
7,800 Caterpillar, Inc. ............................................ 537,225
-----------------
Metals/Mining - 1.0%
6,000 Freeport McMoRan, Copper & Gold, Inc. (Class B) ............... 176,250
-----------------
Miscellaneous Financial Services - 5.8%
22,200 Countrywide Credit Industries, Inc. .......................... 535,575
5,850 Federal Home Loan Mortgage Corp. ............................. 516,994
-----------------
1,052,569
-----------------
Oil/Gas - 2.1%
8,500 Triton Energy Ltd. * .......................................... 389,938
-----------------
Printing/Publishing - 2.6%
14,500 R.R. Donnelley & Sons Co. .................................... 473,063
-----------------
Railroad - 2.5%
2,100 Norfolk Southern Corp. ....................................... 175,088
4,000 Union Pacific Corp. .......................................... 291,500
-----------------
466,588
-----------------
Retail - 3.6%
14,650 May Department Stores Co. .................................... 666,575
-----------------
Telecommunications - 3.5%
8,000 Sprint Corp. ................................................. 325,000
21,000 Tele-Communications, Inc.*..................................... 312,375
-----------------
637,375
-----------------
Textiles - 1.1%
13,000 Shaw Industries, Inc. ........................................ 195,000
-----------------
Toys/Games/Hobby - 0.7%
5,000 Mattel, Inc. ................................................. 131,875
-----------------
Total Common Stocks
(cost--$13,230,586) ........................................ $15,155,469
-----------------
Total Investments
(cost--$16,117,632) ................................................. 98.7% $18,042,515
Other Assets in Excess of
Other Liabilities ................................................... 1.3 231,944
----------- -----------------
Total Net Assets ....................................................... 100.0% $18,274,459
=========== =================
</TABLE>
- ----------
* Non-income producing security.
26
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
LARGE CAPITALIZATION GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Value
------------------ ------------
<S> <C> <C>
SHORT TERM CORPORATE NOTES - 6.5%
Conglomerate - 3.0%
$1,000,000 General Electric Capital Corp.
5.16%, 9/05/96 ............................ $ 1,000,000
------------
Miscellaneous Financial Services - 3.5%
500,000 Federal National Mortgage Association
5.26%, 9/12/96 ............................ 499,196
700,000 Prudential Funding Corp.
5.22%, 9/03/96 ............................ 700,000
------------
1,199,196
------------
Total Short-Term Corporate Notes
(cost--$2,199,196) ........................ $ 2,199,196
------------
Shares
------------------
COMMON STOCKS - 92.6%
Advertising - 2.2%
16,500 Interpublic Group of Companies, Inc. ......... $ 746,625
------------
Banking - 6.4%
9,050 BankAmerica Corp. ............................ 701,375
19,700 Norwest Corp. ................................ 741,212
3,000 Wells Fargo & Co. ............................ 746,250
------------
2,188,837
------------
Building & Construction - 2.3%
12,000 Fluor Corp. .................................. 768,000
------------
Chemicals - 4.4%
9,500 du Pont (E.I) de Nemours & Co. ............... 780,188
12,500 Great Lakes Chemical Corp. ................... 718,750
------------
1,498,938
------------
Computers - 2.3%
17,500 Hewlett - Packard Co. ........................ 765,625
------------
Computer Services - 6.7%
20,280 Automatic Data Processing, Inc. .............. 844,155
14,000 Cisco Systems, Inc.* ......................... 738,500
9,000 First Data Corp. ............................. 702,000
------------
2,284,655
------------
Computer Software - 4.0%
5,500 Microsoft Corp.* ............................. 673,750
19,000 Oracle Systems Corp.* ........................ 669,750
------------
1,343,500
------------
Conglomerate - 2.2%
9,000 General Electric Co. ......................... 748,125
------------
Cosmetics/Toiletries - 2.3%
12,000 Gillette Co. ................................. 765,000
------------
Drugs & Medical Products - 10.7%
15,300 Abbott Laboratories .......................... 690,413
12,500 American Home Products Corp. ................. 740,625
12,670 Amgen, Inc.* ................................. 738,028
14,500 Johnson & Johnson ............................ 714,125
11,500 Merck & Co., Inc. ............................ 754,688
------------
3,637,879
------------
</TABLE>
27
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
LARGE CAPITALIZATION GROWTH PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Shares Value
------------------ ------------
<S> <C> <C>
Electronics - 3.7%
20,000 Applied Materials, Inc.* .................. $ 485,000
9,620 Intel Corp. ............................... 767,796
------------
1,252,796
------------
Entertainment - 2.1%
12,500 The Walt Disney Co. ....................... 712,500
------------
Healthcare Services - 2.2%
19,000 United Healthcare Corp. ................... 733,875
------------
Household Products - 2.3%
9,500 Colgate-Palmolive Co. ..................... 771,875
------------
Insurance - 2.2%
8,000 American International Group, Inc. ........ 760,000
------------
Manufacturing - 4.3%
11,000 Illinois Tool Works, Inc. ................. 760,375
16,800 Tyco International Ltd. ................... 709,800
------------
1,470,175
------------
Metals/Mining - 2.3%
16,500 Nucor Corp. ............................... 771,375
------------
Miscellaneous Financial Services - 4.3%
14,500 Dean Witter Discover and Co. .............. 725,000
29,500 Schwab (Charles) Corp. .................... 737,500
------------
1,462,500
------------
Oil/Gas - 2.2%
9,000 Schlumberger, Ltd. ........................ 759,375
------------
Railroads - 2.2%
10,500 Union Pacific Corp. ....................... 765,187
------------
Retail - 6.5%
22,600 Circuit City Stores, Inc. ................. 711,900
14,000 Home Depot, Inc. .......................... 743,750
28,600 Wal-Mart Stores, Inc. ..................... 757,900
------------
2,213,550
------------
Telecommunications - 8.4%
23,000 General Instrument Corp.* ................. 629,625
21,000 Lucent Technologies, Inc. ................. 774,375
13,700 Motorola, Inc. ............................ 731,237
11,500 Tellabs, Inc.* ............................ 728,813
------------
2,864,050
------------
Tobacco/Beverages/Food Products - 4.2%
13,500 General Mills, Inc. ....................... 742,500
24,000 PepsiCo, Inc. ............................. 690,000
------------
1,432,500
------------
Toys/Games/Hobby - 2.2%
28,000 Mattel, Inc. .............................. 738,500
------------
Total Common Stocks
(cost--$29,012,984) ....................... $ 31,455,442
------------
Total Investments
(cost--$31,212,180) ........................................ 99.1% $ 33,654,638
Other Assets in Excess of
Other Liabilities .......................................... 0.9 307,558
------- ------------
Total Net Assets .............................................. 100.0% $ 33,962,196
======= ============
</TABLE>
- ----------
* Non-income producing security.
28
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
SMALL CAPITALIZATION PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------ -----------------
<S> <C> <C>
SHORT-TERM CORPORATE NOTE - 3.1%
Telecommunications
$680,000 A T & T Corp.
5.35%, 9/03/96
(cost -- $679,798) ......................................... $ 679,798
-----------------
Shares
- ------------------
COMMON STOCKS - 96.2%
Airlines - 2.7%
24,500 Comair Holdings, Inc. ........................................ $ 588,000
-----------------
Building & Construction - 3.3%
18,000 Cavalier Homes, Inc. ......................................... 346,500
30,000 Southern Energy Homes, Inc. * ................................. 390,000
-----------------
736,500
-----------------
Commercial Services - 10.6%
10,500 COREStaff, Inc. * ............................................ 441,000
13,300 Data Processing Resources Corp. * ............................ 246,050
14,500 F.Y.I., Inc.* ................................................ 282,750
16,500 RemedyTemp, Inc. * ........................................... 309,375
15,000 RTW, Inc. * ................................................... 423,750
13,400 TeleSpectrum Worldwide, Inc. * ............................... 236,175
21,000 Youth Services, Inc. * ....................................... 406,875
-----------------
2,345,975
-----------------
Computer Services - 1.4%
14,000 Transition Systems, Inc. * ................................... 316,750
-----------------
Computer Software - 7.2%
12,000 CBT Group Plc. Sponsored ADR * ............................... 537,000
11,000 Electronics for Imaging, Inc. * .............................. 695,750
8,000 Remedy Corp. * ................................................ 364,000
-----------------
1,596,750
-----------------
Correctional Facilities - 1.5%
14,000 Wackenhut Corrections Corp. * ................................ 341,250
-----------------
Drugs & Medical Products - 5.4%
7,050 Gelman Sciences, Inc. * ....................................... 204,450
26,500 Meridian Diagnostics, Inc. .................................. 374,313
26,000 Respironics, Inc. * ........................................... 611,000
-----------------
1,189,763
-----------------
Electronics - 8.0%
29,500 Methode Electronics, Inc. - Class A ........................... 560,500
15,500 Perceptron, Inc. * ............................................ 503,750
21,500 SDL, Inc. * ................................................... 413,875
19,500 Special Devices, Inc. * ....................................... 297,375
-----------------
1,775,500
-----------------
Entertainment - 1.9%
11,500 Regal Cinemas, Inc. * ........................................ 428,375
-----------------
Food Services - 2.6%
17,000 Lone Star Steakhouse & Saloon * .............................. 563,125
-----------------
Healthcare Services - 6.3%
12,050 Alternative Living Services, Inc. * .......................... 182,256
22,000 Omnicare, Inc. ............................................... 539,000
11,100 Orthodontic Centers of America, Inc. * ....................... 419,025
9,500 Sunrise Assisted Living, Inc. * .............................. 251,750
-----------------
1,392,031
-----------------
Insurance - 2.4%
13,500 United Dental Care, Inc. * .................................... 523,125
-----------------
</TABLE>
29
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
SMALL CAPITALIZATION PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Shares Value
- ------------------ -----------------
<S> <C> <C>
Leasing - 1.2%
12,000 Alrenco, Inc. * .............................................. $ 270,000
-----------------
Lodging - 5.0%
34,000 La Quinta Inns, Inc. ......................................... 650,250
19,500 Suburban Lodges of America, Inc. * ........................... 458,250
-----------------
1,108,500
-----------------
Manufacturing - 3.6%
15,500 Advanced Lighting Technologies, Inc. * ....................... 271,250
18,600 Chicago Miniature Lamp, Inc. * ............................... 520,800
-----------------
792,050
-----------------
Miscellaneous Financial Services - 1.4%
27,000 Jayhawk Acceptance Corp. * .................................... 300,375
-----------------
Oil/Gas - 1.9%
11,000 Carbo Ceramics, Inc. ......................................... 206,250
14,500 Drilex International, Inc. * ................................. 203,000
-----------------
409,250
-----------------
Printing & Publishing - 2.9%
9,500 Scholastic Corp. * ............................................ 643,625
-----------------
Retail - 8.5%
9,300 Barnett, Inc. * .............................................. 225,525
9,800 CompUSA, Inc. * ............................................... 393,225
14,000 Dollar Tree Stores, Inc. * .................................... 448,000
14,500 Gadzooks, Inc. * .............................................. 551,000
11,000 Marks Brothers Jewelers, Inc. * .............................. 264,000
-----------------
1,881,750
-----------------
Telecommunications - 11.3%
3,900 Century Telephone Enterprises ................................. 132,112
14,500 Davox Corp. * ................................................ 493,000
23,600 Harmonic Lightwaves, Inc. * ................................... 472,000
2,600 Periphonics Corp. * .......................................... 104,650
13,000 PictureTel Corp. * ............................................ 427,375
13,500 Teltrend, Inc. * .............................................. 632,813
19,150 TresCom International, Inc. * ................................. 225,012
-----------------
2,486,962
-----------------
Toys/Games/Hobby - 1.7%
14,200 Galoob (Lewis) Toys, Inc. * ................................... 372,750
-----------------
Transportation - 2.7%
17,000 Rural/Metro Corp. * ........................................... 586,500
-----------------
Other - 2.7%
17,500 Stewart Enterprises, Inc. .................................... 595,000
-----------------
Total Common Stocks
(cost--$17,250,419) ........................................ $21,243,906
-----------------
Total Investments
(cost--$17,930,217) .................................................. 99.3% $21,923,704
Other Assets in Excess of
Other Liabilities .................................................... 0.7 147,672
----------- -----------------
Total Net Assets ........................................................ 100.0% $22,071,376
=========== =================
</TABLE>
- ----------
* Non-income producing security.
30
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
Shares Value
------------------ ------------
<S> <C> <C>
COMMON STOCKS - 90.1%
ARGENTINA - 2.5%
Conglomerate - 1.3%
7,700 Perez Companc S.A. Sponsored ADR ............. $ 87,434
------------
Telecommunications - 1.2%
3,500 Telefonica de Argentina S.A.
Sponsored ADR ............................. 83,562
------------
170,996
------------
BRAZIL - 1.1%
Utilities
2,500 Cemig S.A. Sponsored ADR ..................... 75,258
------------
CHILE - 1.8%
Utilities
5,500 Chilgener S.A. Sponsored ADR ................. 127,875
------------
FRANCE - 8.3%
Automotive - 1.7%
4,000 Peugeot Citroen S.A. Sponsored ADR ........... 114,712
------------
Chemicals - 2.3%
6,136 Rhone-Poulenc S.A. Sponsored ADR ............. 161,837
------------
Electronics - 2.4%
4,000 SGS-Thomson Microelectronics N.V. * .......... 163,500
------------
Oil/Gas - 1.9%
3,500 Elf Aquitane S.A. Sponsored ADR .............. 127,750
------------
567,799
------------
GERMANY - 4.6%
Banking - 1.4%
2,000 Deutsche Bank AG Sponsored ADR ............... 98,917
------------
Chemicals - 1.6%
3,000 Hoechst AG ADR ............................... 106,500
------------
Machinery/Engineering - 1.6%
300 Mannesmann AG Sponsored ADR .................. 108,404
------------
313,821
------------
HONG KONG - 2.3%
Real Estate
5,100 Hong Kong Land Holdings, Ltd.
Sponsored ADR ............................. 57,885
10,000 Sun Hung Kai Properties Ltd.
Sponsored ADR ............................. 97,636
------------
155,521
------------
INDIA - 2.9%
Textiles - 1.0%
750 Century Textiles and Industries Ltd.
Sponsored GDR ............................. 69,750
------------
Utilities - 1.9%
6,650 BSES Ltd. GDR ................................ 128,013
------------
197,763
------------
ITALY - 3.4%
Drugs & Medical Products - 1.5%
5,700 De Rigo SpA Sponsored ADR * .................. 99,038
------------
Oil/Gas - 1.9%
3,000 ENI SpA Sponsored ADR ........................ 132,750
------------
231,788
------------
JAPAN - 34.8%
Automotive - 2.0%
2,800 Toyota Motor Corp. ADR ....................... 134,750
------------
</TABLE>
31
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Shares Value
------------------ ------------
<S> <C> <C>
JAPAN (cont'd)
Banking - 6.6%
7,000 Bank of Tokyo-Mitsubishi ADR .............. $ 144,375
900 Mitsubishi Trust & Banking Corp.
Sponsored ADR .......................... 135,083
930 Sumitomo Bank Ltd. Japan ADR .............. 170,414
------------
449,872
------------
Building & Construction - 1.7%
1,800 Taisei Corp. ADR .......................... 114,199
------------
Chemicals - 1.9%
2,000 Asahi Chemical Industry Co. Ltd. ADR ...... 134,438
------------
Conglomerate - 1.9%
6,000 Mitsubishi Corp. Sponsored ADR ............ 133,700
------------
Drugs & Medical Products - 1.9%
7,470 Eisai Co. Ltd. Sponsored ADR .............. 129,315
------------
Electronics - 8.0%
1,300 Hitachi Ltd. Sponsored ADR ................ 119,275
900 Kyocera Corp. Sponsored ADR ............... 122,400
850 Sharp Corp. ADR ........................... 134,622
2,700 Sony Corp. Sponsored ADR .................. 170,775
------------
547,072
------------
Manufacturing - 1.5%
650 Bridgestone Corp. ADR ..................... 106,538
------------
Metals/Mining - 2.3%
4,650 Kawasaki Steel Corp. Sponsored ADR ........ 156,284
------------
Miscellaneous Financial Services - 1.5%
600 Nomura Securities Co. Ltd. ADR ............ 104,420
------------
Photography - 1.7%
1,300 Canon, Inc. Sponsored ADR ................. 120,412
------------
Real Estate - 1.8%
1,000 Mitsubishi Estate Co. Ltd. ADR ............ 122,468
------------
Retail - 2.0%
640 Ito-Yokado Co. Ltd. Sponsored ADR ......... 134,720
------------
2,388,188
------------
MALAYSIA - 1.4%
Entertainment
13,000 Genting Berhad ADR ........................ 95,917
------------
NETHERLANDS - 2.1%
Printing/Publishing
8,200 VNU - Ver Ned Bezit Sponsored ADR ......... 142,555
------------
PHILIPPINES - 2.2%
Telecommunications
2,500 Philippine Long Distance Telephone Co.
Sponsored ADR .......................... 149,687
------------
SOUTH KOREA - 1.4%
Telecommunications
6,000 Korea Mobile Telecommunications ADR * ..... 96,000
------------
SWEDEN - 4.0%
Machinery/Engineering - 1.8%
5,500 Sandvik AB Sponsored ADR .................. 125,542
------------
</TABLE>
32
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Shares Value
------------------ ------------
<S> <C> <C>
SWEDEN (cont'd)
Telecommunications - 2.2%
6,500 Telefonaktiebolaget LM Ericsson
Sponsored ADR ............................. $ 149,906
------------
275,448
------------
SWITZERLAND - 2.3%
Drugs & Medical Products
2,500 Ciba-Geigy AG Sponsored ADR .................. 158,125
------------
THAILAND - 1.1%
Telecommunications
6,000 Advanced Info Services PCL Sponsored ADR ..... 78,719
------------
UNITED KINGDOM - 12.3%
Airports - 1.1%
10,000 BAA Plc. Sponsored ADR ....................... 75,179
------------
Banking - 2.5%
1,200 Barclays Plc. Sponsored ADR .................. 69,000
600 HSBC Holdings Plc. Sponsored ADR ............. 103,585
------------
172,585
------------
Building & Construction - 1.1%
11,000 Redland Plc. Sponsored ADR ................... 78,375
------------
Conglomerate - 0.4%
1,820 Rank Group Plc. Sponsored ADR ................ 26,390
------------
Drugs & Medical Products - 2.4%
3,000 Glaxo Wellcome Plc. Sponsored ADR ............ 85,500
5,000 Medeva Plc. Sponsored ADR .................... 76,875
------------
162,375
------------
Manufacturing - 0.8%
3,200 Tomkins Plc. Sponsored ADR ................... 52,000
------------
Media/Broadcasting - 1.1%
2,000 Carlton Communications Plc. Sponsored ADR .... 76,687
------------
Oil/Gas - 1.3%
1,000 Shell Transport & Trading Co. ADR ............ 87,500
------------
Tobacco/Beverages/Food Products - 1.6%
2,700 Bass Plc. Sponsored ADR ...................... 71,212
3,000 BAT Industries Plc. Sponsored ADR ............ 39,750
------------
110,962
------------
842,053
------------
UNITED STATES - 1.6%
Other
8,000 Foreign Fund, Inc.
(WEBS - Malaysian Index Series) ........... 112,000
------------
Total Common Stocks
(cost--$6,210,114) ........................ $ 6,179,513
------------
Contracts
------------------
PURCHASED PUT OPTION ON FOREIGN
CURRENCY - 0.7%
98 Philadelphia Stock Exchange Japanese Yen Put
expiring Dec. '96 @ $91.00
(cost--$61,585) ........................... $ 44,713
------------
Total Investments
(cost--$6,271,699) ......................................... 90.8% $ 6,224,226
Other Assets in Excess of
Other Liabilities .......................................... 9.2 632,712
------- ------------
Total Net Assets .............................................. 100.0% $ 6,856,938
======= ============
</TABLE>
- ----------
* Non-income producing security.
See accompanying notes to financial statements.
33
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------- ----------- ---------- -----------
U.S. Large
Government Investment Municipal Capitalization
Money Market Quality Bond Bond Value
Portfolio Portfolio Portfolio Portfolio
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Assets
Investments, at value (cost--$22,786,993;
$16,630,066; $4,432,785; $16,117,632;
$31,212,180; $17,930,217 and
$6,271,699, respectively) .............. $22,786,993 $16,363,418 $4,435,433 $18,042,515
Cash ..................................... 2,264 104,685 152,738 82,489
Receivable for shares of beneficial
interest sold .......................... 103,659 96,525 31,243 145,350
Deferred organization expenses ........... 38,246 38,246 38,246 38,246
Interest receivable ...................... 26,119 300,269 68,927 --
Receivable from manager .................. -- -- 3,900 --
Dividends receivable ..................... -- -- -- 21,955
Receivable for investments sold .......... -- -- -- --
Prepaid expenses and other assets ........ 660 607 403 663
----------- ----------- ---------- -----------
Total Assets .......................... 22,957,941 16,903,750 4,730,890 18,331,218
----------- ----------- ---------- -----------
Liabilities
Payable to manager ....................... 10,678 8,835 -- 9,064
Administration fee payable ............... 3,557 3,557 3,557 3,557
Payable for shares of beneficial
interest redeemed ...................... 2,509 65 -- 14,120
Dividends payable ........................ -- -- 1,244 --
Payable for investments purchased ........ -- -- -- --
Other payables and accrued expenses ...... 34,897 27,244 18,341 30,018
----------- ----------- ---------- -----------
Total Liabilities ................... 51,641 39,701 23,142 56,759
----------- ----------- ---------- -----------
Net Assets
Shares of beneficial interest at par value 22,906 1,702 471 1,265
Paid-in-surplus .......................... 22,883,426 17,114,514 4,716,454 15,948,727
Accumulated undistributed net investment
income (loss) .......................... -- -- -- 81,988
Accumulated net realized gain (loss)
on investments ......................... (32) (6,296) (11,825) 317,596
Accumulated net realized gain on foreign
currency transactions .................. -- 20,777 -- --
Net unrealized appreciation (depreciation)
on investments ......................... -- (266,648) 2,648 1,924,883
----------- ----------- ---------- -----------
Total Net Assets .................... $22,906,300 $16,864,049 $4,707,748 $18,274,459
=========== =========== ========== ===========
Shares of beneficial interest outstanding 22,906,332 1,701,884 470,817 1,264,513
----------- ----------- ---------- -----------
Net asset value and offering
price per share ....................... $ 1.00 $ 9.91 $ 10.00 $ 14.45
=========== =========== ========== ===========
<CAPTION>
----------- ----------- ----------
Large
Capitalization Small International
Growth Capitalization Equity
Portfolio Portfolio Portfolio
----------- ----------- ----------
<S> <C> <C> <C>
Assets
Investments, at value (cost--$22,786,993;
$16,630,066; $4,432,785; $16,117,632;
$31,212,180; $17,930,217 and
$6,271,699, respectively) .............. $33,654,638 $21,923,704 $6,224,226
Cash ..................................... 456,866 2,686 587,964
Receivable for shares of beneficial
interest sold .......................... 192,852 44,509 22,819
Deferred organization expenses ........... 38,246 38,246 38,246
Interest receivable ...................... 3,057 -- --
Receivable from manager .................. -- -- --
Dividends receivable ..................... 32,365 925 10,646
Receivable for investments sold .......... -- 237,471 --
Prepaid expenses and other assets ........ 826 768 2,835
----------- ----------- ----------
Total Assets .......................... 34,378,850 22,248,309 6,886,736
----------- ----------- ----------
Liabilities
Payable to manager ....................... 18,667 11,856 178
Administration fee payable ............... 3,557 3,557 3,557
Payable for shares of beneficial
interest redeemed ...................... 7,675 9,637 1,949
Dividends payable ........................ -- -- --
Payable for investments purchased ........ 343,584 119,283 --
Other payables and accrued expenses ...... 43,171 32,600 24,114
----------- ----------- ----------
Total Liabilities ................... 416,654 176,933 29,798
----------- ----------- ----------
Net Assets
Shares of beneficial interest at par value 2,581 1,626 715
Paid-in-surplus .......................... 32,506,732 17,785,924 6,840,435
Accumulated undistributed net investment
income (loss) .......................... (31,012) (151,486) 11,612
Accumulated net realized gain (loss)
on investments ......................... (958,563) 441,825 (13,965)
Accumulated net realized gain on foreign
currency transactions .................. -- -- 65,614
Net unrealized appreciation (depreciation)
on investments ......................... 2,442,458 3,993,487 (47,473)
----------- ----------- ----------
Total Net Assets .................... $33,962,196 $22,071,376 $6,856,938
=========== =========== ==========
Shares of beneficial interest outstanding 2,581,231 1,625,699 714,966
----------- ----------- ----------
Net asset value and offering
price per share ....................... $ 13.16 $ 13.58 $ 9.59
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
34
<PAGE>
Year Ended August 31, 1996
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------ ------------ --------- -------------------
U.S. Large
Government Investment Municipal Capitalization
Money Market Quality Bond Bond Value
Portfolio Portfolio Portfolio Portfolio
------------ ------------ --------- -------------------
<S> <C> <C> <C> <C>
Investment Income
Dividends .................................... -- -- -- $144,879 (1)
Interest ..................................... $797,041 $654,570 $159,494 114,247
-------- -------- -------- -------
Total investment income .................... 797,041 654,570 159,494 259,126
-------- -------- -------- -------
Operating Expenses
Management fees (note 2a) .................... 69,728 59,739 16,872 75,690
Administration fees (note 2c) ................ 42,000 42,000 42,000 42,000
Transfer and dividend disbursing agent fees .. 54,496 37,322 10,810 43,883
Custodian fees (note 2a) ..................... 45,875 44,832 53,928 47,613
Registration fees ............................ 20,085 18,435 14,598 17,249
Amortization of deferred organization
expenses (note 1c) ......................... 12,784 12,784 12,784 12,784
Auditing fees ................................ 7,300 7,300 8,200 7,300
Reports and notices to shareholders .......... 6,169 4,758 1,681 5,021
Legal fees ................................... 1,653 1,295 710 1,368
Trustees' fees ............................... -- -- -- --
Miscellaneous ................................ 1,970 1,921 1,700 1,975
-------- -------- -------- -------
Total operating expenses ................... 262,060 230,386 163,283 254,883
Less: Management fees waived and/or
expenses assumed (note 2a) ....... (96,550) (88,339) (125,675) (106,240)
Expense offset
arrangement (note 2a) ............ (364) (13,512) (1,774) (2,125)
-------- -------- -------- -------
Net operating expenses ................... 165,146 128,535 35,834 146,518
-------- -------- -------- -------
Net investment income (loss) ........... 631,895 526,035 123,660 112,608
-------- -------- -------- -------
Realized and Unrealized
Gain(Loss) on Investments-Net
Net realized gain (loss) on securities ....... (32) 1,585 (7,549) 317,589
Net realized gain on foreign currency
transactions ............................... -- 20,777 -- --
-------- -------- -------- -------
Net realized gain (loss) on investments .. (32) 22,362 (7,549) 317,589.
Net change in unrealized appreciation
(depreciation) on investments .............. -- (313,450) (20,197) 1,390,237
-------- -------- -------- -------
Net realized gain (loss) and change in
unrealized appreciation (depreciation)
on investments .......................... (32) (291,088) (27,746) 1,707,826
-------- -------- -------- -------
Net increase in net assets resulting from
operations ................................. $631,863 $234,947 $95,914 $1,820,434
======== ======== ======= ==========
<CAPTION>
---------------- -------------------- -----------------
Large
Capitalization Small International
Growth Capitalization Equity
Portfolio Portfolio Portfolio
---------------- -------------------- -----------------
<S> <C> <C> <C> <C>
Investment Income
Dividends .................................... $205,211 $24,143 $79,529 (1)
Interest ..................................... 39,115 51,448 --
--------- --------- -------
Total investment income .................... 244,326 75,591 79,529
--------- --------- -------
Operating Expenses
Management fees (note 2a) .................... 149,335 118,415 37,644
Administration fees (note 2c) ................ 42,000 42,000 42,000
Transfer and dividend disbursing agent fees .. 74,410 61,514 23,162
Custodian fees (note 2a) ..................... 54,219 64,488 49,436
Registration fees ............................ 22,607 15,317 15,417
Amortization of deferred organization
expenses (note 1c) ......................... 12,784 12,784 12,784
Auditing fees ................................ 7,300 7,300 11,100
Reports and notices to shareholders .......... 9,362 7,744 2,465
Legal fees ................................... 2,175 1,632 830
Trustees' fees ............................... 4,425 -- --
Miscellaneous ................................ 4,728 3,096 1,383
--------- --------- -------
Total operating expenses ................... 383,345 334,290 196,221
Less: Management fees waived and/or
expenses assumed (note 2a) ....... (75,686) (106,549) (113,174)
Expense offset
arrangement (note 2a) ............ (32,338) (685) (15,136)
--------- --------- -------
Net operating expenses ................... 275,321 227,056 67,911
--------- --------- -------
Net investment income (loss) ........... (30,995) (151,465) 11,618
--------- --------- -------
Realized and Unrealized
Gain(Loss) on Investments-Net
Net realized gain (loss) on securities ....... (958,517) 442,165 52,023
Net realized gain on foreign currency
transactions ............................... -- -- 65,614
--------- --------- -------
Net realized gain (loss) on investments .. (958,517) 442,165 117,637
Net change in unrealized appreciation
(depreciation) on investments .............. 1,243,929 1,684,758 (50,666)
--------- --------- -------
Net realized gain (loss) and change in
unrealized appreciation (depreciation)
on investments .......................... 285,412 2,126,923 66,971
--------- --------- -------
Net increase in net assets resulting from
operations ................................. $254,417 $1,975,458 $78,589
========= ========= =======
</TABLE>
(1) Net of foreign withholding taxes of $143 and $13,462 for Large
Capitalization Value and International Equity, respectively.
See accompanying notes to financial statements.
35
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------- --------------------------------
U.S. Government Money Market Investment Quality Bond
Portfolio Portfolio
-------------------------------- --------------------------------
September 2, 1994(1) September 2, 1994(1)
Year Ended to Year Ended to
August 31, 1996 August 31, 1995 August 31, 1996 August 31, 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations
Net investment income (loss) ................. $ 631,895 $ 101,762 $ 526,035 $ 91,743
Net realized gain (loss) on investments ...... (32) 1 22,362 (949)
Net change in unrealized appreciation
(depreciation) on investments ............. -- -- (313,450) 46,802
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ................ 631,863 101,763 234,947 137,596
------------ ------------ ------------ ------------
Dividends and Distributions to
Shareholders
Net investment income ........................ (631,896) (101,762) (526,035) (91,743)
Net realized gain ............................ -- -- (6,932) --
------------ ------------ ------------ ------------
Total dividends and distributions
to shareholders .......................... (631,896) (101,762) (532,967) (91,743)
------------ ------------ ------------ ------------
Share Transactions of
Beneficial Interest
Net proceeds from sales ...................... 24,971,593 5,475,388 14,478,935 4,973,274
Reinvestment of dividends and distributions .. 618,794 100,393 526,071 89,810
Cost of shares redeemed ...................... (7,756,080) (603,756) (2,345,771) (606,103)
------------ ------------ ------------ ------------
Net increase in net assets from share
transactions of beneficial interest ...... 17,834,307 4,972,025 12,659,235 4,456,981
------------ ------------ ------------ ------------
Total increase in net assets ........... 17,834,274 4,972,026 12,361,215 4,502,834
Net Assets
Beginning of period .......................... 5,072,026 100,000 4,502,834 0
------------ ------------ ------------ ------------
End of period (including undistributed net
investment income of $0, $0; $0, $0; $0, $0;
$81,988, $46,159; ($31,012), $8,991;
($151,486), $1,294; $11,612 and $13,971,
respectively) .............................. $ 22,906,300 $ 5,072,026 $ 16,864,049 $ 4,502,834
============ ============ ============ ============
Shares of Beneficial Interest
Issued and Redeemed
Issued ....................................... 24,971,593 5,475,388 1,435,999 499,131
Issued from reinvestment of dividends ........
and distributions .......................... 618,794 100,393 52,358 9,006
Redeemed ..................................... (7,756,080) (603,756) (233,347) (61,263)
------------ ------------ ------------ ------------
Net increase ............................... 17,834,307 4,972,025 1,255,010 446,874
============ ============ ============ ============
<CAPTION>
--------------------------------
Municipal Bond
Portfolio
--------------------------------
September 2, 1994(1)
Year Ended to
August 31, 1996 August 31, 19
------------ ------------
<S> <C> <C>
Operations
Net investment income (loss) ................. $ 123,660 $ 26,104
Net realized gain (loss) on investments ...... (7,549) (4,276)
Net change in unrealized appreciation
(depreciation) on investments ............. (20,197) 22,845
------------ ------------
Net increase (decrease) in net assets
resulting from operations ................ 95,914 44,673
------------ ------------
Dividends and Distributions to
Shareholders
Net investment income ........................ (123,660) (26,104)
Net realized gain ............................ -- --
------------ ------------
Total dividends and distributions
to shareholders .......................... (123,660) (26,104)
------------ ------------
Share Transactions of
Beneficial Interest
Net proceeds from sales ...................... 3,903,159 1,680,554
Reinvestment of dividends and distributions .. 121,243 25,671
Cost of shares redeemed ...................... (766,332) (247,370)
------------ ------------
Net increase in net assets from share
transactions of beneficial interest ...... 3,258,070 1,458,855
------------ ------------
Total increase in net assets ........... 3,230,324 1,477,424
Net Assets
Beginning of period .......................... 1,477,424 0
------------ ------------
End of period (including undistributed net
investment income of $0, $0; $0, $0; $0, $0;
$81,988, $46,159; ($31,012), $8,991;
($151,486), $1,294; $11,612 and $13,971,
respectively) .............................. $ 4,707,748 $ 1,477,424
============ ============
Shares of Beneficial Interest
Issued and Redeemed
Issued ....................................... 386,019 172,119
Issued from reinvestment of dividends ........
and distributions .......................... 12,042 2,624
Redeemed ..................................... (76,024) (25,963)
------------ ------------
Net increase ............................... 322,037 148,780
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------- --------------------------------
Large Capitalization Value Large Capitalization Growth
Portfolio Portfolio
------------------------------- --------------------------------
September 2, 1994(1) September 2, 1994(1)
Year Ended to Year Ended to
August 31, 1996 August 31, 1995 August 31, 1996 August 31, 1995
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Operations
Net investment income (loss) ................. $ 112,608 $ 52,804 ($ 30,995) $ 10,814
Net realized gain (loss) on investments ...... 317,589 85,960 (958,517) 30,050
Net change in unrealized appreciation
(depreciation) on investments ............. 1,390,237 534,646 1,243,929 1,198,529
------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations ................ 1,820,434 673,410 254,417 1,239,393
------------ ----------- ------------ ------------
Dividends and Distributions to
Shareholders
Net investment income ........................ (76,779) (6,645) (9,008) (1,823)
Net realized gain ............................ (85,953) -- (30,096) --
------------ ----------- ------------ ------------
Total dividends and distributions
to shareholders .......................... (162,732) (6,645) (39,104) (1,823)
------------ ----------- ------------ ------------
Share Transactions of
Beneficial Interest
Net proceeds from sales ...................... 13,591,164 6,169,560 27,913,201 11,032,593
Reinvestment of dividends and distributions .. 161,529 6,623 38,924 1,816
Cost of shares redeemed ...................... (2,650,626) (1,328,258) (5,312,493) (1,164,728)
------------ ----------- ------------ ------------
Net increase in net assets from share
transactions of beneficial interest ...... 11,102,067 4,847,925 22,639,632 9,869,681
------------ ----------- ------------ ------------
Total increase in net assets ........... 12,759,769 5,514,690 22,854,945 11,107,251
Net Assets
Beginning of period .......................... 5,514,690 0 11,107,251 0
------------ ----------- ------------ ------------
End of period (including undistributed net
investment income of $0, $0; $0, $0; $0, $0;
$81,988, $46,159; ($31,012), $8,991;
($151,486), $1,294; $11,612 and $13,971,
respectively) .............................. $ 18,274,459 $ 5,514,690 $ 33,962,196 $ 11,107,251
============ =========== ============ ============
Shares of Beneficial Interest
Issued and Redeemed
Issued ....................................... 996,818 568,685 2,115,299 968,006
Issued from reinvestment of dividends
and distributions .......................... 12,415 669 2,926 182
Redeemed ..................................... (193,154) (120,920) (400,706) (104,476)
------------ ----------- ------------ ------------
Net increase ............................... 816,079 448,434 1,717,519 863,712
============ =========== ============ ============
<CAPTION>
-------------------------------- ------------------------------
Small Capitalization International Equity
Portfolio Portfolio
-------------------------------- ------------------------------
September 2, 1994(1) September 2, 1994(1)
Year Ended to Year Ended to
August 31, 1996 August 31, 1995 August 31, 1996 August 31, 1995
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Operations
Net investment income (loss) ................. ($ 151,465) $ 4,428 $ 11,618 $ 15,086
Net realized gain (loss) on investments ...... 442,165 492,075 117,637 (44,732)
Net change in unrealized appreciation
(depreciation) on investments ............. 1,684,758 2,308,729 (50,666) 3,193
------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations ................ 1,975,458 2,805,232 78,589 (26,453)
------------ ------------ ----------- -----------
Dividends and Distributions to
Shareholders
Net investment income ........................ (1,315) (3,134) (13,977) (1,115)
Net realized gain ............................ (492,415) -- (21,256) --
------------ ------------ ----------- -----------
Total dividends and distributions
to shareholders .......................... (493,730) (3,134) (35,233) (1,115)
------------ ------------ ----------- -----------
Share Transactions of
Beneficial Interest
Net proceeds from sales ...................... 8,411,846 13,426,783 5,504,760 3,393,938
Reinvestment of dividends and distributions .. 493,046 2,991 34,444 1,113
Cost of shares redeemed ...................... (3,418,635) (1,128,481) (1,632,377) (460,728)
------------ ------------ ----------- -----------
Net increase in net assets from share
transactions of beneficial interest ...... 5,486,257 12,301,293 3,906,827 2,934,323
------------ ------------ ----------- -----------
Total increase in net assets ........... 6,967,985 15,103,391 3,950,183 2,906,755
Net Assets
Beginning of period .......................... 15,103,391 0 2,906,755 0
------------ ------------ ----------- -----------
End of period (including undistributed net
investment income of $0, $0; $0, $0; $0, $0;
$81,988, $46,159; ($31,012), $8,991;
($151,486), $1,294; $11,612 and $13,971,
respectively) .............................. $ 22,071,376 $ 15,103,391 $ 6,856,938 $ 2,906,755
============ ============ =========== ===========
Shares of Beneficial Interest
Issued and Redeemed
Issued ....................................... 654,637 1,300,430 567,890 361,971
Issued from reinvestment of dividends
and distributions .......................... 39,783 308 3,577 118
Redeemed ..................................... (265,931) (103,528) (168,151) (50,439)
------------ ------------ ----------- -----------
Net increase ............................... 428,489 1,197,210 403,316 311,650
============ ============ =========== ===========
</TABLE>
(1) Commencement of operations.
See accompanying notes to financial statements.
36 & 37
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Saratoga Advantage Trust (the "Trust") was organized on April 8, 1994
as a Delaware Business Trust and is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment company.
The Trust commenced investment operations on September 2, 1994. The Trust
consists of seven portfolios: the U.S. Government Money Market Portfolio; the
Investment Quality Bond Portfolio; the Municipal Bond Portfolio; the Large
Capitalization Value Portfolio; the Large Capitalization Growth Portfolio; the
Small Capitalization Portfolio and the International Equity Portfolio. Saratoga
Capital Management (the "Manager") serves as the Trusts' manager. Each of the
Portfolios are provided with discretionary advisory services of an Adviser
identified, retained, supervised and compensated by the Manager. The following
serve as Advisers (the "Advisers") to their respective portfolio(s): OpCap
Advisors (formerly Quest for Value Advisors): Municipal Bond and Large
Capitalization Value; Fox Asset Management Inc.: Investment Quality Bond; Harris
Bretall Sullivan and Smith, Inc.: Large Capitalization Growth; Axe-Houghton
Associates, Inc.: Small Capitalization; Sterling Capital Management Co.: U.S.
Government Money Market and Ivory & Sime International, Inc.: International
Equity. OpCap Advisors (the "Administrator") provides the Trust with
administrative services. OCC Distributors (formerly Quest for Value
Distributors) serves as the Trust's distributor. The Manager, Administrator and
Distributor are all affiliates of Oppenheimer Capital. On August 19, 1994, U.S.
Government Money Market issued 100,000 shares to the Manager for $100,000 to
provide initial capital for the Trust. The preparation of the financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. The following is a summary of
significant accounting policies consistently followed by each Portfolio:
(a) Valuation of Investments
Investment securities listed on a national securities exchange and
securities traded in the over-the-counter National Market System are valued at
the last reported sale price on the valuation date; if there are no such
reported sales, the securities are valued at the last quoted bid price. Other
securities traded over-the-counter and not part of the National Market System
are valued at the last quoted bid price. Investment debt securities (other than
short - term obligations) are valued each day by an independent pricing service
approved by the Board of Trustees using methods which include current market
quotations from a major market maker in the securities and trader-reviewed
"matrix" prices. Short-term debt securities having a remaining maturity of sixty
days or less are valued at amortized cost or amortized value, which approximates
market value. Any securities or other assets for which market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures established by the Board of Trustees. The ability of issuers of
debt securities held by the portfolios to meet their obligations may be affected
by economic or political developments in a specific state, industry or region.
U.S. Government Money Market values all of its securities on the basis of
amortized cost which approximates market value. Investments in countries in
which International Equity may invest may involve certain considerations and
risks not typically associated with domestic investments as a result of, among
others, the possibility of future political and economic developments and the
level of governmental supervision and regulation of foreign securities markets.
(b) Federal Income Tax
It is each Portfolio's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantally all of its taxable and tax-exempt income to
shareholders; accordingly, no Federal income tax provision is required.
(c) Deferred Organization Expenses
In connection with the Trust's organization, each Portfolio incurred
approximately $66,000 in costs. These costs have been deferred and are being
amortized to expense on a straight-line basis over sixty months from
commencement of operations.
(d) Security Transactions and Other Income
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold is
determined on the basis of identified cost. Dividend income is recorded on the
ex-dividend date and interest income is accrued as earned. Discounts or premiums
on debt securities purchased are accreted or amortized to interest income over
the lives of the respective securities.
(e) Dividends and Distributions
The following table summarizes each Portfolio's dividend and capital gain
declaration policy:
Income Short-Term Long-Term
Dividends Capital Gains Capital Gains
------------------------------------------
U.S. Government Money Market daily * annually annually
Investment Quality Bond daily * annually annually
Municipal Bond daily * annually annually
Large Capitalization Value annually annually annually
Large Capitalization Growth annually annually annually
Small Capitalization annually annually annually
International Equity annually annually annually
* paid monthly
Each Portfolio records dividends and distributions to its shareholders on
the ex-dividend date. The amount of dividends and distributions from net
investment income and net realized gains are determined in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles. These "book-tax" differences are either permanent or
temporary in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the net asset accounts based on their
federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment income
and net realized gains for financial reporting purposes but not for tax purposes
are reported as dividends in excess of net investment income or distributions in
excess of net realized gains, respectively. To the extent distributions exceed
current and accumulated earnings and profits for federal income tax purposes,
they are reported as distributions of paid-in-surplus or tax return of capital.
For the year ended August 31, 1996 there were no permanent book-tax differences
relating to shareholder distributions, therefore, net investment income, net
realized gain(loss) and net assets were not affected.
38
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(f) Purchased Put Option Accounting Policy
When a Portfolio purchases a put option, it pays a premium and an amount
equal to the premium is recorded as an investment. The option is subsequently
marked-to-market to reflect its current market value. The Portfolio, as
purchaser of an option, has control over whether the option is exercised. If an
option expires, the Portfolio realizes a loss in the amount of the premium paid.
If an option is exercised, the premium paid is an adjustment to the proceeds
from the sale in determining whether the Portfolio has realized a gain or loss.
If a Portfolio enters into a closing sale transaction, the difference between
the premium paid and the amount received from the sale is the realized gain or
loss.
The Portfolio, as a purchaser of an option, bears the risk of the potential
inability of the counter parties to meet the terms of their contracts.
(g) Allocation of Expenses
Expenses specifically identifiable to a particular Portfolio are borne by
that Portfolio. Other expenses are allocated to each Portfolio based on its net
assets in relation to the total net assets of all the applicable Portfolios or
another reasonable basis.
2. MANAGEMENT FEE, ADMINISTRATION FEE AND OTHER TRANSACTIONS WITH AFFILIATES
(a) The management fees are payable monthly to the Manager and are computed
daily at the following annual rates of each Portfolio's average daily net
assets: .475% for U.S. Government Money Market; .55% for Investment Quality Bond
and Municipal Bond; .65% for Large Capitalization Value, Large Capitalization
Growth and Small Capitalization and .75% for International Equity.
For the year ended August 31, 1996, the Manager voluntarily waived all of
its management fees and assumed $26,822; $28,600; $108,803; $30,550 and $75,530
in other operating expenses for U.S. Government Money Market, Investment Quality
Bond, Municipal Bond, Large Capitalization Value and International Equity,
respectively. The Manager also voluntarily waived $75,686 and $106,549 in
management fees for Large Capitalization Growth and Small Capitalization,
respectively, for the year ended August 31, 1996.
The Portfolios also benefit from a expense offset arrangement with their
custodian bank where uninvested cash balances earn credits that reduce monthly
fees. Had these cash balances been invested in income producing assets, they
would have generated income for their respective Portfolios.
(b) The Manager pays a portion of its management fees to the Advisers at
the following annual rates of each Portfolios' average daily net assets: .125%
for U.S. Government Money Market; .20% for Investment Quality Bond and Municipal
Bond; .30% for Large Capitalization Value, Large Capitalization Growth and Small
Capitalization and .40% for International Equity. For the year ended August 31,
1996, the Manager paid the Advisers $18,350; $21,723; $6,135; $34,934; $68,924;
$54,653 and $20,077 for U.S. Government Money Market, Investment Quality,
Municipal Bond, Large Capitalization Value, Large Capitalization Growth, Small
Capitalization and International Equity, respectively.
(c) The administration fee is accrued daily and payable monthly to the
Administrator at an annual rate of $42,000 for each Portfolio, provided that
each Portfolio's net assets do not exceed $80 million. In the event that a
Portfolio's net assets exceed $80 million, an additional fee of .05% of net
assets in excess of $80 million shall be payable by the Portfolio. For the year
ended August 31, 1996 each Portfolio accrued $42,000 in administrative fees.
(d) Total brokerage commissions paid by Investment Quality Bond, Large
Capitalization Value, Large Capitalization Growth, Small Capitalization and
International Equity were $965; $15,975; $50,200; $17,848 and $27,884,
respectively. Oppenheimer & Co., Inc., an affiliate of the Manager, received
$6,138 and $180 from Large Capitalization Value and Small Capitalization,
respectively; Hoeing & Co., Inc., an affiliate of Axe-Houghton Associates, Inc.,
received $500 and $40 from Investment Quality and Small Capitalization,
respectively, for the year ended August 31, 1996.
3. PURCHASES AND SALES OF SECURITIES
For the year ended August 31, 1996 purchases and sales of investment
securities, other than short-term securities were as follows:
Purchases Sales
------------------------------
Investment Quality Bond $18,163,985 $ 5,768,974
Municipal Bond 3,209,469 289,416
Large Capitalization Value 11,669,819 2,484,727
Large Capitalization Growth 31,783,341 10,699,865
Small Capitalization 21,304,759 16,564,650
International Equity 6,280,235 2,616,934
For the year ended August 31, 1996, U.S. Government Money Market had
purchases and sales/maturities of short-term securities of $170,835,597 and
$153,955,476, respectively.
4. UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR
FEDERAL INCOME TAX PURPOSES
At August 31, 1996, the composition of unrealized appreciation
(depreciation) of investment securities and the cost of investments for Federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Appreciation (Depreciation) Net Tax Cost
----------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Quality Bond $ 2,285 ($ 268,933) ($ 266,648) $16,630,066
Municipal Bond 37,583 (34,935) 2,648 4,432,785
Large Capitalization Value 2,085,761 (160,878) 1,924,883 16,117,632
Large Capitalization Growth 3,339,162 (902,437) 2,436,725 31,217,913
Small Capitalization 4,455,003 (461,516) 3,993,487 17,930,217
International Equity 382,648 (430,121) (47,473) 6,271,699
</TABLE>
39
<PAGE>
August 31, 1996
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
5. AUTHORIZED SHARES OF BENEFICIAL INTEREST AND PAR VALUE PER SHARE
Each Portfolio has unlimited shares of beneficial interest authorized with
$.001 par value per share.
6. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
When a Portfolio purchases a put option, it is generally to hedge against
adverse movements in the value of Portfolio holdings. The risk of buying an
option is that the Portfolio will pay a premium whether or not the option is
exercised. The Portfolio also has the additional risk of not being able to enter
into a closing transaction if an illiquid secondary market exists.
7. CAPITAL LOSS CARRYFOWARDS
At August 31, 1996, Municipal Bond and Large Capitalization Growth had net
capital loss carryfowards of $4,276 and $93,316, respectively, which will be
available to offset future net capital gains through the year 2004. Capital and
currency losses incurred after October 31, within the portfolio's taxable year
are deemed to arise on the first business day of the portfolio's next taxable
year. U.S. Government Money Market, Investment Quality, Municipal Bond and Large
Capitalization Growth incurred and elected to defer $32; $6,147; $7,549 and
$859,468, respectively, in net capital losses, during the year ended August 31,
1996. Additionally, during the year ended August 31, 1996, International Equity
incurred and elected to defer $12,996 in currency losses.
40
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM DIVIDENDS AND
INVESTMENT OPERATIONS DISTRIBUTIONS
----------------------------------------- -----------------------------------
Distributions
Net Realized to
and Dividends to Shareholders
Net Asset Unrealized Total Shareholders from Net
Value, Net Gain(Loss) from from Net Realized Gains
Beginning Investment on Investment Investment on
of Period Income(Loss) Investments Operations Income Investments
<S> <C> <C> <C> <C> <C> <C>
U.S. Government Money Market Portfolio
Year Ended August 31, 1996 $1.000 $0.044 $0.000 0.044 ($0.044) --
September 2, 1994 (3)
to August 31, 1995 1.000(4) 0.052 0.000 0.052 (0.052) --
<CAPTION>
RATIOS
-------------------------------------------------------------
Net Net Ratio of Net Ratio of Net
Asset Assets Operating Investment
Value, End of Expenses Income(Loss) Portfolio Average
End of Total Period to Average to Average Turnover Commission
Period Return* (000's) Net Assets Net Assets Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Money Market Portfolio
Year Ended August 31, 1996 $1.000 4.47% $22,906 1.13% (1,2,6) 4.30% (1,2) -- --
September 2, 1994 (3)
to August 31, 1995 1.000 5.36% 5,072 0.40% (1,5) 5.38% (1,5) -- --
(1) During the periods presented above, Saratoga Capital Management waived all of its fees and assumed a portion of the operating
expenses. Additionally, for the year ended August 31, 1996, the Portfolio benefited from an expense offset arrangement with its
custodian bank. If such waivers, assumptions and expense offsets had not been in effect for the respective periods, the ratios
of net operating expenses to average daily net assets and the ratios of net investment income (loss) to average daily net
assets would have been 1.79% and 3.64%, respectively, for the year ended August 31, 1996 and 6.69% and (0.91%), annualized,
respectively, for the period September 2, 1994 (commencement of operations) to August 31, 1995.
<CAPTION>
INCOME FROM DIVIDENDS AND
INVESTMENT OPERATIONS DISTRIBUTIONS
----------------------------------------- -----------------------------------
Distributions
Net Realized to
and Dividends to Shareholders
Net Asset Unrealized Total Shareholders from Net
Value, Net Gain(Loss) from from Net Realized Gains
Beginning Investment on Investment Investment on
of Period Income(Loss) Investments Operations Income Investments
<S> <C> <C> <C> <C> <C> <C>
Investment Quality Bond Portfolio
Year Ended August 31, 1996 $10.08 $0.48 ($0.16) $0.32 ($0.48) ($0.01)
September 2, 1994 (3)
to August 31, 1995 10.00(4) 0.60 0.08 0.68 (0.60) --
<CAPTION>
RATIOS
-------------------------------------------------------------
Net Net Ratio of Net Ratio of Net
Asset Assets Operating Investment
Value, End of Expenses Income(Loss) Portfolio Average
End of Total Period to Average to Average Turnover Commission
Period Return* (000's) Net Assets Net Assets Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Quality Bond Portfolio
Year Ended August 31, 1996 $9.91 3.23% $16,864 1.31%(1,2,6) 4.84%(1,2) 55% --
September 2, 1994 (3)
to August 31, 1995 10.08 7.12% 4,503 0.45%(1,5) 5.77%(1,5) 18% --
(1) During the periods presented above, Saratoga Capital Management waived all of its fees and assumed a portion of the operating
expenses. Additionally, for the year ended August 31, 1996, the Portfolio benefited from an expense offset arrangement with its
custodian bank. If such waivers, assumptions and expense offsets had not been in effect for the respective periods, the ratios
of net operating expenses to average daily net assets and the ratios of net investment income (loss) to average daily net
assets would have been 2.12% and 3.90%, respectively, for the year ended August 31, 1996 and 7.93% and (1.71%), annualized,
respectively, for the period September 2, 1994 (commencement of operations) to August 31, 1995.
<CAPTION>
INCOME FROM DIVIDENDS AND
INVESTMENT OPERATIONS DISTRIBUTIONS
----------------------------------------- -----------------------------------
Distributions
Net Realized to
and Dividends to Shareholders
Net Asset Unrealized Total Shareholders from Net
Value, Net Gain(Loss) from from Net Realized Gains
Beginning Investment on Investment Investment on
of Period Income(Loss) Investments Operations Income Investments
<S> <C> <C> <C> <C> <C> <C>
Municipal Bond Portfolio
Year Ended August 31,
1996 $9.93 $0.41 $0.07 $0.48 ($0.41) --
September 2, 1994 (3)
to August 31, 1995 10.00(4) 0.51 (0.07) 0.44 (0.51) --
<CAPTION>
RATIOS
-------------------------------------------------------------
Net Net Ratio of Net Ratio of Net
Asset Assets Operating Investment
Value, End of Expenses Income(Loss) Portfolio Average
End of Total Period to Average to Average Turnover Commission
Period Return* (000's) Net Assets Net Assets Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C>
Municipal Bond Portfolio
Year Ended August 31,
1996 $10.00 4.88% $4,708 1.23%(1,2,6) 4.03%(1,2) 12% --
September 2, 1994 (3)
to August 31, 1995 9.93 4.65% 1,477 0.37%(1,5) 4.79%(1,5) 27% --
(1) During the periods presented above, Saratoga Capital Management waived all of its fees and assumed a portion of the operating
expenses. Additionally, for the year ended August 31, 1996, the Portfolio benefited from an expense offset arrangement with its
custodian bank. If such waivers, assumptions and expense offsets had not been in effect for the respective periods, the ratios
of net operating expenses to average daily net assets and the ratios of net investment income (loss) to average daily net
assets would have been 5.32% and (0.12%), respectively, for the year ended August 31, 1996 and 20.15% and (14.99%), annualized,
respectively, for the period September 2, 1994 (commencement of operations) to August 31, 1995.
<CAPTION>
INCOME FROM DIVIDENDS AND
INVESTMENT OPERATIONS DISTRIBUTIONS
----------------------------------------- -----------------------------------
Distributions
Net Realized to
and Dividends to Shareholders
Net Asset Unrealized Total Shareholders from Net
Value, Net Gain(Loss) from from Net Realized Gains
Beginning Investment on Investment Investment on
of Period Income(Loss) Investments Operations Income Investments
<S> <C> <C> <C> <C> <C> <C>
Large Capitalization Value Portfolio
Year Ended August 31, 1996 $12.30 $0.07 $2.33 $2.40 ($0.11) ($0.14)
September 2, 1994 (3)
to August 31, 1995 10.00 (4) 0.15 2.20 2.35 (0.05) --
<CAPTION>
RATIOS
-------------------------------------------------------------
Net Net Ratio of Net Ratio of Net
Asset Assets Operating Investment
Value, End of Expenses Income(Loss) Portfolio Average
End of Total Period to Average to Average Turnover Commission
Period Return* (000's) Net Assets Net Assets Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C>
Large Capitalization Value Portfolio
Year Ended August 31, 1996 $14.45 19.73% $18,274 1.28%(1,2,6) 0.97%(1,2) 26% $0.06
September 2, 1994 (3)
to August 31, 1995 12.30 23.60% 5,515 0.40%(1,5) 2.29%(1,5) 33% --
(1) During the periods presented above, Saratoga Capital Management waived all of its fees and assumed a portion of the operating
expenses. Additionally, for the year ended August 31, 1996, the Portfolio benefited from an expense offset arrangement with its
custodian bank. If such waivers, assumptions and expense offsets had not been in effect for the respective periods, the ratios
of net operating expenses to average daily net assets and the ratios of net investment income (loss) to average daily net
assets would have been 2.19% and 0.04%, respectively, for the year ended August 31, 1996 and 6.54% and (3.85%), annualized,
respectively, for the period September 2, 1994 (commencement of operations) to August 31, 1995.
<CAPTION>
INCOME FROM DIVIDENDS AND
INVESTMENT OPERATIONS DISTRIBUTIONS
----------------------------------------- -----------------------------------
Distributions
Net Realized to
and Dividends to Shareholders
Net Asset Unrealized Total Shareholders from Net
Value, Net Gain(Loss) from from Net Realized Gains
Beginning Investment on Investment Investment on
of Period Income(Loss) Investments Operations Income Investments
<S> <C> <C> <C> <C> <C> <C>
Large Capitalization Growth Portfolio
Year Ended August 31, 1996 $12.86 ($0.02) $0.35 $0.33 ($0.01) ($0.02)
September 2, 1994 (3)
to August 31, 1995 10.00 (4) 0.02 2.85 2.87 (0.01) --
<CAPTION>
RATIOS
-------------------------------------------------------------
Net Net Ratio of Net Ratio of Net
Asset Assets Operating Investment
Value, End of Expenses Income(Loss) Portfolio Average
End of Total Period to Average to Average Turnover Commission
Period Return* (000's) Net Assets Net Assets Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C>
Large Capitalization Growth Portfolio
Year Ended August 31, 1996 $13.16 2.56% $33,962 1.34%(1,2,6) (0.13%)(1,2) 50% $0.07
September 2, 1994 (3)
to August 31, 1995 12.86 28.77% 11,107 0.51%(1,5) 0.32%(1,5) 23% --
(1) During the periods presented above, Saratoga Capital Management waived a portion or all of its fees and assumed a portion of
the operating expenses. Additionally, for the year ended August 31, 1996, the Portfolio benefited from an expense offset
arrangement with its custodian bank. If such waivers, assumptions and expense offsets had not been in effect for the respective
periods, the ratios of net operating expenses to average daily net assets and the ratios of net investment income (loss) to
average daily net assets would have been 1.67% and (0.60%), respectively, for the year ended August 31, 1996 and 5.00% and
(4.17%), annualized, respectively, for the period September 2, 1994 (commencement of operations) to August 31, 1995.
<CAPTION>
INCOME FROM DIVIDENDS AND
INVESTMENT OPERATIONS DISTRIBUTIONS
----------------------------------------- -----------------------------------
Distributions
Net Realized to
and Dividends to Shareholders
Net Asset Unrealized Total Shareholders from Net
Value, Net Gain(Loss) from from Net Realized Gains
Beginning Investment on Investment Investment on
of Period Income(Loss) Investments Operations Income Investments
<S> <C> <C> <C> <C> <C> <C>
Small Capitalization Portfolio
Year Ended August 31, 1996 $12.62 ($0.09) $1.44 $1.35 ($0.00) ($0.39)
September 2, 1994 (3)
to August 31, 1995 10.00(4) 0.02 2.61 2.63 (0.01) --
<CAPTION>
RATIOS
-------------------------------------------------------------
Net Net Ratio of Net Ratio of Net
Asset Assets Operating Investment
Value, End of Expenses Income(Loss) Portfolio Average
End of Total Period to Average to Average Turnover Commission
Period Return* (000's) Net Assets Net Assets Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C>
Small Capitalization Portfolio
Year Ended August 31, 1996 $13.58 11.03% $22,071 1.25%(1,2,6) (0.83%(1,2) 95% $0.06
September 2, 1994 (3)
to August 31, 1995 12.62 26.38% 15,103 0.42%(1,5) 0.07%(1,5) 111% --
(1) During the periods presented above, Saratoga Capital Management waived a portion or all of its fees and assumed a portion of
the operating expenses. Additionally, for the year ended August 31, 1996, the Portfolio benefited from an expense offset
arrangement with its custodian bank. If such waivers, assumptions and expense offsets had not been in effect for the respective
periods, the ratios of net operating expenses to average daily net assets and the ratios of net investment income (loss) to
average daily net assets would have been 1.84% and (1.42%), respectively, for the year ended August 31, 1996 and 3.57% and
(3.08%), annualized, respectively, for the period September 2, 1994 (commencement of operations) to August 31, 1995.
<CAPTION>
INCOME FROM DIVIDENDS AND
INVESTMENT OPERATIONS DISTRIBUTIONS
----------------------------------------- -----------------------------------
Distributions
Net Realized to
and Dividends to Shareholders
Net Asset Unrealized Total Shareholders from Net
Value, Net Gain(Loss) from from Net Realized Gains
Beginning Investment on Investment Investment on
of Period Income(Loss) Investments Operations Income Investments
<S> <C> <C> <C> <C> <C> <C>
International Equity Portfolio
Year Ended August 31, 1996 $9.33 $0.00 $0.34 $0.34 ($0.03) ($0.05)
September 2, 1994 (3)
to August 31, 1995 10.00(4) 0.05 (0.71) (0.66) (0.01) --
<CAPTION>
RATIOS
-------------------------------------------------------------
Net Net Ratio of Net Ratio of Net
Asset Assets Operating Investment
Value, End of Expenses Income(Loss) Portfolio Average
End of Total Period to Average to Average Turnover Commission
Period Return* (000's) Net Assets Net Assets Rate Rate
<S> <C> <C> <C> <C> <C> <C> <C>
International Equity Portfolio
Year Ended August 31, 1996 $9.59 3.68% $6,857 1.65%(1,2,6) 0.23%(1,2) 58% $0.09
September 2, 1994 (3)
to August 31, 1995 9.33 (6.61%) 2,907 0.38%(1,5) 1.03%(1,5) 36% --
(1) During the periods presented above, Saratoga Capital Management waived all of its fees and assumed a portion of the operating
expenses. Additionally, for the year ended August 31, 1996, the Portfolio benefited from an expense offset arrangement with its
custodian bank. If such waivers, assumptions and expense offsets had not been in effect for the respective periods, the ratios
of net operating expenses to average daily net assets and the ratios of net investment income (loss) to average daily net
assets would have been 3.91% and (2.33)%, respectively, for the year ended August 31, 1996 and 8.96% and (7.55%), annualized,
respectively, for the period September 2, 1994 (commencement of operations) to August 31, 1995.
</TABLE>
- ----------------
(2) Average daily net assets for the year ended August 31, 1996 were
$14,679,617; $10,861,629; $3,067,626; $11,644,595; $22,974,545; $18,217,666
and $5,019,160 for U.S. Government Money Market, Investment Quality Bond,
Municipal Bond, Large Capitalization Value, Large Capitalization Growth,
Small Capitalization and International Equity, respectively.
(3) Commencement of operations.
(4) Initial offering price.
(5) Annualized.
(6) Does not reflect expense offsets.
* Assumes reinvestment of all dividends and distributions. Aggregate (not
annualized) total return is shown for any period shorter than one year.
41
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
The Saratoga Advantage Trust:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of The Saratoga Advantage Trust (comprising,
respectively, the U.S. Government Money Market, Investment Quality Bond,
Municipal Bond, Large Capitalization Value, Large Capitalization Growth, Small
Capitalization and International Equity Portfolios) as of August 31, 1996, and
the related statements of operations, changes in net assets and financial
highlights for the year ended August 31, 1996 and for the period September 2,
1994 (commencement of operations) to August 31, 1995. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers. 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 provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting The Saratoga Advantage Trust as of
August 31, 1996, the results of their operations, the changes in their net
assets and the financial highlights for the year ended August 31, 1996 and for
the period September 2, 1994 (commencement of operations) to August 31, 1995, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
October 17, 1996
42
<PAGE>
- --------------------------------------------------------------------------------
TAX INFORMATION (unaudited)
- --------------------------------------------------------------------------------
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Trusts' fiscal year end (August 31,
1996) as to the Federal tax status of dividends and distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that
during the fiscal year ended August 31, 1996, the Portfolios paid per share
dividends and distributions to shareholders as follows:
<TABLE>
<CAPTION>
Taxable as Ordinary Income
------------------------------------------
Net Investment Short-term Long-term
Income Capital Gain Capital Gain
------------------- ------------------- -------------------
<S> <C> <C> <C>
U.S. Government Money Market Portfolio $0.04380 $ -- $ --
Investment Quality Bond Portfolio 0.48410 0.00890 --
Municipal Bond Portfolio * 0.41050 -- --
Large Capitalization Value Portfolio 0.11300 0.13520 --
Large Capitalization Growth Portfolio 0.00545 0.02350 --
Small Capitalization Portfolio 0.00095 0.39350 --
International Equity Portfolio 0.03245 0.03410 0.01720
</TABLE>
Since the period ended for each portfolio is not the calendar year, another
notification will be sent in respect to calendar year 1996. In January 1997, you
will be advised on IRS Form 1099 DIV as to the Federal tax status of the
dividends received by you in calendar 1996. The amounts that will be reported,
will be the amounts to use on your 1996 Federal income tax return and probably
will differ from the amounts which we are required to report for the Trusts'
fiscal year ended August 31, 1996. Shareholders are advised to consult with
their own advisers as to the Federal, state and local tax status of each
Portfolios' income dividends and realized gain distributions received.
* Substantially all dividends paid from net investment income during fiscal
year ended August 31, 1996 for the Muncipal Bond Portfolio were Federally
exempt interest dividends, although, the Portfolio did invest in securities
which paid interest subject to the Federal alternative minimum tax during
the fiscal year. Dividends paid from net investment income subject to such
tax amounted to 4.0%.
43
