THE SARATOGA ADVANTAGE TRUST
ANNUAL REPORT
AS OF AUGUST 31, 1999
CLASS I SHARES
TABLE OF CONTENTS
Chairman's Page 1
Letter....................................
Investment Page 3
Review.................................
Schedules of Page 17
Investments...........................
Statements of Assets and Page 38
Liabilities...........................
Statements of Page 39
Operations............................
Statements of Changes in Net Assets..... Page 40
Notes to Financial Page 42
Statements............................
Financial Page 47
Highlights...............................
Independent Auditor's Page 51
Report................................
Tax Information Page 52
This report is authorized for distribution only to shareholders
and to others who have received a copy of the prospectus.
THE SARATOGA ADVANTAGE TRUST
Annual Report to Shareholders
October 15, 1999
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
(the "Trust"). This report covers the twelve months from September 1, 1998
through August 31, 1999. During this period of time, U.S. stocks provided a
total return of 39.8%, as measured by the Standard and Poors 500 Index, while
the total return for bonds was 2.2%, as gauged by the Lehman Intermediate
Government/Corporate Bond Index. International stocks produced positive returns
during the period, gaining 25.7% as reported by the Morgan Stanley Europe,
Australia and Far East (EAFE) Index.
Can The Stock Market Reach 100,000?
The stock market, as measured by the Dow Jones Industrial Average (the "Dow")
closed at 10,286.61 on October 14, 1999. While it might be difficult to imagine
the Dow hitting 100,000, Roger Ibbotson, Professor of Finance at Yale University
and Chairman of Ibbotson Associates, sees stock market returns averaging
approximately 11.6% per year until the year 2024. That would put the Dow at over
120,000 in 2024. While this might seem far-fetched, according to data from
Ibbotson Associates, from January 1, 1926 to September 30, 1999 U.S. common
stocks have had an average rate of return of 11.2% per year. That is nearly the
same rate of return that Professor Ibbotson projects until the year 2024. It is
interesting to note that in 1974 with the Dow at 850 that Professor Ibbotson
predicted that the Dow would hit 10,000 before November 1999. As I reported in
the February 28, 1999 Semi-Annual Report, on March 29, 1999 the Dow made history
by closing above 10,000 for the first time since it was launched nearly 103
years ago.
Will Professor Ibbotson's prediction of Dow 100,000 prove correct? No one knows
for sure. Stocks can be volatile, and past performance is not a guarantee of
future results. If the stock market does end up experiencing the nice results
that Professor Ibbotson predicts, how can investors try to participate sensibly
in the stock market? One important ingredient will likely be for investors to
develop investment strategies with their financial advisors that they can be
comfortable with so that they stay invested
long-term.
Let me share with you some informative findings from Dalbar, Inc. that appeared
in their Quantitative Analysis of Investor Behavior Study:
1) Returns for mutual fund investors have trailed indexes because fund investors
themselves have not held onto their funds long enough.
2) Equity fund investors and fixed income fund investors are only holding their
funds for an average of three years. This finding of investor fund
holding period in 1997 was nearly the same in 1984.
3) The primary reason for low fund retention is investor behavior - investors
chasing the hot funds in search of better returns and trying to time
the market to gain from sectors or asset classes that are temporarily in
favor.
According to data from the study, over the 14 years from January 1, 1984 through
December 31, 1997, the stock market (as measured by the S&P 500 Index) returned
17% annually with reinvested dividends, while equity fund investors only
realized real returns of 6.71%. "Equity fund investors' real returns were so
much lower due to their behavior - specifically, investing too late to enjoy
much of the run-up in the market, and not remaining invested for the entire
period," the study said. The average return that investors received from fixed
income funds also lagged indices, due in great part to investor behavior.
"Investors try to time the market with fixed-income funds, as well as equity
funds, chasing interest rate changes and attempting to catch the 'hot' sectors
or asset classes, the study concluded.
Chasing "hot" funds in search of better returns is apparently not a formula for
success for many investors. Try to stay focused on your long-term investment
goals. Don't let short-term stock and bond market fluctuations change your
long-term investment strategy. The Saratoga Advantage Trust's portfolios are
managed by some of the world's leading institutional investment advisory firms.
Combining the strength of the Trust's performance with a well-designed asset
allocation plan can help you to achieve your long-term investment goals. 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 Trust's 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 are dedicated to serving your investment needs. Thank you for investing with
us.
Best wishes,
Bruce E. Ventimiglia
Chairman, President and
Chief Executive Officer
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 primarily in a diversified portfolio of common stocks that,
in the Advisor's opinion, are believed to be undervalued in the market and offer
above-average price appreciation potential.
<TABLE>
<S> <C> <C> <C> <C> <C>
Large
Capitalization Lipper Capital
Total Aggregate Value Portfolio Appreciation S & P/Barra
Return for the Period (Class I) Funds S &P 500 Value
Ended August 31, 1999 Index1 Index2 Index3
- ---------------------------------------- ------------------- ------------------- ------------------- -------------------
9/1/94 (inception) - 8/31/99* 18.7% 18.8% 25.1% 20.8%
9/1/98 - 8/31/99 19.8% 44.4% 39.8% 34.1%
3/1/99 - 8/31/99 4.5% 11.5% 7.3% 7.8%
*Annualized performance for periods greater than one year
</TABLE>
The Saratoga Large Capitalization Value Portfolio invests in a diverse group of
companies chosen for their superior business characteristics and reasonable
stock market valuations. We remain disciplined in our philosophy of buying
undervalued companies that are dominant in their industries, generate high
returns and use their free cash flow to increase shareholder value. Some of the
stocks that contributed to the positive performance for the year ended August
31, 1999 were: Rockwell International Corporation; WPP Group PLC; Dover
Corporation; Citigroup, Inc. ; and Computer Associates.
The Portfolio owned the common stocks of 44 companies as of August 31, 1999. The
five largest holdings were: Computer Associates, a designer of computer systems
software products:; Dover Corporation, a major manufacturer of elevators and
elevator products; XL Capital, a strongly capitalized specialty insurance
company; Textron Inc., a major manufacturer of aircraft and utility vehicle
products; and Wells Fargo & Co., one of the largest commercial banking
institutions.
LARGE CAPITALIZATION VALUE PORTFOLIO
Advised by:
OpCap Advisors
New York, New York
1. The Lipper Capital Appreciation Funds Index consists of the 30 largest mutual
funds that aim at maximum capital appreciation, frequently by means of 100% or
more portfolio turnover, leveraging, purchasing unregistered securities,
purchasing options, etc. (the funds may take large cash positions).
2. 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.
3. 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.
Past performance is not predictive of future performance.
LARGE CAPITALIZATION GROWTH PORTFOLIO
Advised by:
Harris Bretall Sullivan & Smith, L.L.C.
San Francisco, California
Objective: Seeks capital appreciation by investing primarily in a diversified
portfolio of common stocks that, in the Advisor's opinion, have faster earnings
growth potential than the Standard & Poor's 500.
<TABLE>
<S> <C> <C> <C> <C> <C>
Large
Total Aggregate Capitalization Lipper Growth S & P/Barra
Return for the Period Growth Portfolio Funds S & P 500 Growth
Ended August 31, 1999 (Class I) Index1 Index2 Index3
- --------------------------------------- ------------------- -------------------- ------------------- ------------------
9/1/94 (inception) -8/31/99* 23.5% 21.2% 25.1% 29.2%
9/1/98 - 8/31/99 54.0% 41.3% 39.8% 44.8%
3/1/99 - 8/31/99 3.4% 7.1% 7.3% 6.9%
*Annualized performance for periods greater than one year
</TABLE>
The Large Capitalization Growth Portfolio contains stocks of high quality U.S.
companies, each one carefully analyzed from the bottom up to determine if it is
in a position to continue strong, double-digit earnings growth for our clients.
We know from experience that earnings growth is the product of a competent,
responsible management; competitive advantage through superior products or
service; a business plan that supports future growth; and a strong financial
position.
The financial markets have been somewhat volatile as investors try to reach
consensus on the direction of interest rates and inflation. Despite this
volatility, Harris Bretall Sullivan & Smith , L.L.C. projects a continuation of
a strong U.S. large capitalization stock market. We would not be surprised to
see the Dow Jones Industrial Average reach 20,000 in the first half of the new
decade. The three powerful macro economic trends that have fueled the U.S. stock
market - demographics, the technology revolution and globalization - are still
firmly in place. The combination of stocks that are in the Large Capitalization
Growth Portfolio Harris Bretall believes is an example of a portfolio prepared
to lead the market's charge upward as we start a new millenium.
LARGE CAPITALIZATION GROWTH PORTFOLIO
Advised by:
Harris Bretall Sullivan & Smith, L.L.C.
San Francisco, California
1. The Lipper Growth Funds Index consists of the 30 largest mutual funds that
normally invest in companies whose long-term earnings are expected to grow
significantly faster than the earnings of the stocks represented in the major
unmanaged stock indices.
2. 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.
3. 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.
Past performance is not predictive of future performance.
SMALL CAPITALIZATION PORTFOLIO
Advised by:
Thorsell, Parker Partners, Inc.
Westport, Connecticut
Objective: Seeks maximum capital appreciation by investing in a diversified
portfolio of the common stocks of small capitalization companies.
<TABLE>
<S> <C> <C> <C> <C>
Small
Total Aggregate Capitalization Lipper Small
Return for the Period Portfolio Cap Funds Russell 2000
Ended August 31, 1999 (Class I) Index1 Index2
- --------------------------------------- -------------------- ---------------------- -----------------------
9/1/94 (inception) - 8/31/99* 9.2% 12.8% 12.3%
9/1/98 - 8/31/99 34.9% 32.7% 28.4%
3/1/99 - 8/31/99 17.9% 14.4% 9.9%
*Annualized performance for periods greater than one year
</TABLE>
Results for the fiscal year ended August 31, 1999 reflected the rebound of the
U.S. stock market in general and especially of smaller stocks. We believe that
the return to smaller stocks (versus larger stocks) is just beginning and that
this could be the most profitable investment theme of the next few years. Our
review of the price/earnings data for representative indices supports this
assessment. Smaller stocks have recovered only about half of their year-earlier
valuations and are still sharply underpriced relative to large cap stocks.
Momentum and investor sentiment appear to support the continued move toward
smaller stocks such as those in the Portfolio.
The Portfolio is always kept well diversified across various sectors and many of
them made a contribution to the strong results. Energy stocks were outstanding
performers over the last six months after a tough time last year. Another major
theme this year is the "discovery of value" reflected in buyouts. Several of the
Portfolio's stocks were targets of this "acceleration of discovery." As always,
we had more stocks fully researched and ready to replace those which were bought
out at premium prices. There were some soft spots, of course. Rising interest
rates dampened the manufactured housing stocks, our relatively small position in
finance (specialty thrift) was held to flat returns, and several special
situation investments are still quite undervalued.
Overall, we believe that the upside potential in the Portfolio remains excellent
based on our current target prices for each individual stock. As more of these
stocks become better recognized and approach their targets, we are constantly
working to research new prospects and are still finding plenty of undervalued
opportunities.
SMALL CAPITALIZATION PORTFOLIO
Advised by:
Thorsell,Parker Partners, Inc.
Westport, Connecticut
1. The Lipper Small Cap Funds Index consists of the 30 largest mutual funds that
by prospectus or portfolio practice invest primarily in companies with market
capitalizations less than $1 billion at the time of purchase.
2. The Russell 2000 Index is comprised of the 2,000 smallest U.S. domiciled
publicly traded common 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.
Past performance is not predictive of future performance.
INTERNATIONAL EQUITY PORTFOLIO
Advised by:
Friends Ivory & Sime plc
Edinburgh, Scotland
Objective: Seeks capital appreciation by investing primarily in a diversified
portfolio of the securities of companies domiciled outside of the United States.
<TABLE>
<S> <C> <C> <C>
Total Aggregate International Morgan Stanley
Return for the Period Equity Portfolio EAFE Index
Ended August 31, 1999 (Class I) (U.S. Dollars)1
- -------------------------------------- ------------------- --------------------
9/1/94 (inception) - 8/31/99 6.6% 8.2%
9/1/98 - 8/31/99 21.7% 25.7%
3/1/99 - 8/31/99 12.0% 10.4%
*Annualized performance for periods greater than one year
</TABLE>
International stockmarkets have recovered strongly from the lows of a year ago.
The Far Eastern stockmarkets have led the way, boosted by a significant
improvement in economic and financial conditions. The European stockmarkets have
lagged as economic growth has continued to disappoint and the Euro has weakened.
Global growth prospects remain favorable and while inflation has probably
troughed, upward pressure should remain slight. As such, the outlook for
international stockmarkets remains positive. Asia remains our favored area for
investment. Markets have recovered strongly, but we expect them to make further
progress given the prospect of excellent earnings growth supported by a recovery
in both domestic and external demand and corporate restructuring.
We are looking to rebuild our exposure in Japan where we remain underweight.
However, we do not wish to reduce our exposure to Europe at the current time as
an improving economic outlook in the months ahead should help boost stockmarket
returns and the Euro.
As of August 31, 1999, major weightings in the portfolio were as follows: Europe
68.1%, Japan 19.9%, and Asia 7.4%.
INTERNATIONAL EQUITY PORTFOLIO
Advised by:
Friends Ivory & Sime plc
Edinburgh, Scotland
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.
Past performance is not predictive of future performance.
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 high quality, actively managed fixed
income securities.
<TABLE>
<S> <C> <C> <C> <C>
Lipper Lehman
Short-Intermediate Intermediate
Total Aggregate Investment Quality Investment Government/
Return for the Period Bond Portfolio Grade Debt Funds Corporate
Ended August 31, 1999 (Class I) Index1 Bond Index2
- --------------------------------------- -------------------- -------------------- --------------------
9/1/94 (inception) - 8/31/99* 5.2% 6.1% 6.7%
9/1/98 - 8/31/99 1.3% 2.1% 2.2%
3/1/99 - 8/31/99 0.2% 0.6% 0.3%
*Annualized performance for periods greater than one year
</TABLE>
In the annual period ended August 31, 1999, the Portfolio distributed dividends
of $ 0.49 per share.
Investments are normally divided approximately evenly between U.S. Government
and Corporate securities. Due to the yield advantage available in Corporate
securities, there is greater emphasis on Corporate bond holdings in the
Portfolio at this time.
Fox Asset Management will continue to focus on those instruments that offer
improving credit quality and liquidity. Fox is maintaining a conservative
investment posture with an average maturity of 4.8 years, and an average
duration of 3.2 years in the Portfolio.
Other portfolio statistics as of August 31, 1999 are as follows: Average
yield-to-maturity was 6.7%, average coupon was 6.6% and the average Moody's
Rating was A1 with 40 fixed income issues held.
INVESTMENT QUALITY BOND PORTFOLIO
Advised by:
Fox Asset Management, Inc.
Little Silver, New Jersey
1. The Lipper Short-Intermediate Investment Grade Debt Funds Index consists of
the 30 largest mutual funds that invest at least 65% of their assets in
investment grade debt issues (rated in the top four grades) with dollar-weighted
average maturities of 1 to 5 years.
2. 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.
Past performance is not predictive of future performance.
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.
<TABLE>
<S> <C> <C> <C> <C>
Total Aggregate Municipal Bond Lipper General Lehman
Return for the Period Portfolio Municipal Municipal
Ended August 31, 1999 (Class I) Debt Funds Index1 Bond Index2
- -------------------------------------- -------------------- --------------------- -------------------
9/1/94 (inception) - 8/31/99 4.5% 5.8% 6.0%
9/1/98 - 8/31/99 (2.6%) (1.2%) 0.5%
3/1/99 - 8/31/99 (4.2)% (3.0)% (2.1)%
*Annualized performance for periods greater than one year
</TABLE>
The continued strength of the domestic economy as well as the growing strength
of global economies has forced the Federal Reserve's hand to raise the Federal
Funds rate twice over the summer to preempt inflation. This has eliminated all
but one of the easings that were instituted last year to enhance worldwide
liquidity in the face of a global economic crisis. Since the beginning of the
year, the flight to quality has abated, and bond prices have continually
weakened as fears of the Federal Reserve intervention were confirmed. The
thirty-year treasury bond yield has risen nearly one percentage point to end the
month of August at a 6.06% yield. We believe that at current tax-exempt yield
levels, the after-tax returns are historically very high and provide excellent
fixed income value. Eventually, institutional buyers should return to the
tax-exempt market as after-tax yields on municipals are too compelling to
ignore, and we can expect municipals to outperform at that time.
We continued to remain fully invested in municipals throughout the year in order
to provide a high level of tax-exempt income to shareholders. We have focused on
the twenty-year part of the yield curve which provides optimal value, and
currently the Portfolio's average maturity is 18 years. During the past quarter,
we have purchased municipals with higher original yields that are less
vulnerable to special income tax considerations as the market weakens. We
continue to find value in the general obligation, healthcare and housing sectors
of the municipal market, and these sectors comprise 35%, 17% and 15% of the
Portfolio respectively.
MUNICIPAL BOND PORTFOLIO
Advised by:
OpCap Advisors
New York, New York
1. The Lipper General Municipal Debt Funds Index consists of the 30 largest
mutual funds that invest at least 65% of their assets in municipal debt issues
in the top four credit ratings.
2. 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.
Past performance is not predictive of future performance.
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 issued by the United States Government, its agencies and
instrumentalities and related repurchase agreements.
<TABLE>
<S> <C> <C> <C> <C>
U.S. Government Money 90 Day T-Bills
7-Day Market Portfolio Average Discount
Compound Yield (Class I) Yield
- --------------------------------------- ------------------------ ------------------------
8/31/99 4.2% 4.7%
Total Aggregate U.S. Government Money Lipper U.S.
Return for the Period Market Portfolio Treasury Money
Ended August 31, 1999 (Class I) Market Index1 90 Day T-Bills
- --------------------------------------- ------------------------ ------------------------ --------------------
9/1/94 (inception) - 8/31/99* 4.6% 4.8% 5.0%
9/1/98 - 8/31/99 4.1% 4.3% 4.4%
3/1/99 - 8/31/99 2.0% 2.1% 2.2%
*Annualized performance for periods greater than one year
</TABLE>
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, 1999. The average dollar-weighted portfolio maturity was 51 days,
compared with a maximum allowable maturity of 90 days.
At August 31, 1999, the Federal funds rate was 5.25%. The Federal Reserve raised
short-term borrowing rates twice this year in response to a persistently strong
economy and potential inflation concerns. Moving forward, investors appear
confident that the pre-emptive moves by the Federal Reserve will combine with
technology-related productivity gains to keep pricing pressures low.
An investment in the U.S. government Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the U.S. Government Money Market Portfolio seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Portfolio.
1. The Lipper U.S. Treasury Money Market Funds Index consists of the 30 largest
mutual funds that invest principally in U.S. Treasury obligations with
dollar-weighted average maturities of less than 90 days. These funds intend to
keep a constant net asset value.
Past performance is not predictive of future performance.
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 primarily in a diversified portfolio of common stocks that,
in the Advisor's opinion, are believed to be undervalued in the market and offer
above-average price appreciation potential.
<TABLE>
<S> <C> <C> <C> <C> <C>
Large
Capitalization Lipper Capital
Total Aggregate Value Portfolio Appreciation S & P/Barra
Return for the Period (Class B) Funds S &P 500 Value
Ended August 31, 1999 Index1 Index2 Index3
- ---------------------------------------- ------------------- ------------------- ------------------- -------------------
1/4/99 (inception) - 8/31/99* 1.4% 11.5% 8.3% 7.7%
1/4/99 - 8/31/99 1.4% 11.5% 8.3% 7.7%
3/1/99 - 8/31/99 3.9% 11.5% 7.3% 7.8%
*Annualized performance for periods greater than one year
</TABLE>
The Saratoga Large Capitalization Value Portfolio invests in a diverse group of
companies chosen for their superior business characteristics and reasonable
stock market valuations. We remain disciplined in our philosophy of buying
undervalued companies that are dominant in their industries, generate high
returns and use their free cash flow to increase shareholder value. Some of the
stocks that contributed to the positive performance for the year ended August
31, 1999 were: Rockwell International Corporation; WPP Group PLC; Dover
Corporation; Citigroup, Inc. ; and Computer Associates.
The Portfolio owned the common stocks of 44 companies as of August 31, 1999. The
five largest holdings were: Computer Associates, a designer of computer systems
software products:; Dover Corporation, a major manufacturer of elevators and
elevator products; XL Capital, a strongly capitalized specialty insurance
company; Textron Inc., a major manufacturer of aircraft and utility vehicle
products; and Wells Fargo & Co., one of the largest commercial banking
institutions.
LARGE CAPITALIZATION GROWTH PORTFOLIO
Advised by:
Harris Bretall Sullivan & Smith, L.L.C.
San Francisco, California
Objective: Seeks capital appreciation by investing primarily in a diversified
portfolio of common stocks that, in the Advisor's opinion, have faster earnings
growth potential than the Standard & Poor's 500.
<TABLE>
<S> <C> <C> <C> <C> <C>
Large
Total Aggregate Capitalization Lipper Growth S & P/Barra
Return for the Period Growth Portfolio Funds S & P 500 Growth
Ended August 31, 1999 (Class B) Index1 Index2 Index3
- --------------------------------------- ------------------- -------------------- ------------------- ------------------
1/4/99 (inception) - 8/31/99* 8.1% 8.2% 8.3% 9.0%
1/4/99 - 8/31/99 8.1% 8.2% 8.3% 9.0%
3/1/99 - 8/31/99 2.7% 7.1% 7.3% 6.9%
*Annualized performance for periods greater than one year
</TABLE>
The Large Capitalization Growth Portfolio contains stocks of high quality U.S.
companies, each one carefully analyzed from the bottom up to determine if it is
in a position to continue strong, double-digit earnings growth for our clients.
We know from experience that earnings growth is the product of a competent,
responsible management; competitive advantage through superior products or
service; a business plan that supports future growth; and a strong financial
position.
The financial markets have been somewhat volatile as investors try to reach
consensus on the direction of interest rates and inflation. Despite this
volatility, Harris Bretall Sullivan & Smith , L.L.C. projects a continuation of
a strong U.S. large capitalization stock market. We would not be surprised to
see the Dow Jones Industrial Average reach 20,000 in the first half of the new
decade. The three powerful macro economic trends that have fueled the U.S. stock
market - demographics, the technology revolution and globalization - are still
firmly in place. The combination of stocks that are in the Large Capitalization
Growth Portfolio Harris Bretall believes is an example of a portfolio prepared
to lead the market's charge upward as we start a new millenium.
SMALL CAPITALIZATION PORTFOLIO
Advised by:
Thorsell, Parker Partners, Inc.
Westport, Connecticut
Objective: Seeks maximum capital appreciation by investing in a diversified
portfolio of the common stocks of small capitalization companies.
<TABLE>
<S> <C> <C> <C> <C>
Small
Total Aggregate Capitalization Lipper Small
Return for the Period Portfolio Cap Funds Russell 2000
Ended August 31, 1999 (Class B) Index1 Index2
- --------------------------------------- -------------------- ---------------------- -----------------------
1/4/99 (inception) - 8/31/99* 7.6% 7.0% 2.4%
1/4/99 - 8/31/99 7.6% 7.0% 2.4%
3/1/99 - 8/31/99 17.0% 14.4% 9.9%
*Annualized performance for periods greater than one year
</TABLE>
Results for the fiscal year ended August 31, 1999 reflected the rebound of the
U.S. stock market in general and especially of smaller stocks. We believe that
the return to smaller stocks (versus larger stocks) is just beginning and that
this could be the most profitable investment theme of the next few years. Our
review of the price/earnings data for representative indices supports this
assessment. Smaller stocks have recovered only about half of their year-earlier
valuations and are still sharply underpriced relative to large cap stocks.
Momentum and investor sentiment appear to support the continued move toward
smaller stocks such as those in the Portfolio.
The Portfolio is always kept well diversified across various sectors and many of
them made a contribution to the strong results. Energy stocks were outstanding
performers over the last six months after a tough time last year. Another major
theme this year is the "discovery of value" reflected in buyouts. Several of the
Portfolio's stocks were targets of this "acceleration of discovery." As always,
we had more stocks fully researched and ready to replace those which were bought
out at premium prices. There were some soft spots, of course. Rising interest
rates dampened the manufactured housing stocks, our relatively small position in
finance (specialty thrift) was held to flat returns, and several special
situation investments are still quite undervalued.
Overall, we believe that the upside potential in the Portfolio remains excellent
based on our current target prices for each individual stock. As more of these
stocks become better recognized and approach their targets, we are constantly
working to research new prospects and are still finding plenty of undervalued
opportunities.
INTERNATIONAL EQUITY PORTFOLIO
Advised by:
Friends Ivory & Sime plc
Edinburgh, Scotland
Objective: Seeks capital appreciation by investing primarily in a diversified
portfolio of the securities of companies domiciled outside of the United States.
<TABLE>
<S> <C> <C> <C>
Total Aggregate International Morgan Stanley
Return for the Period Equity Portfolio EAFE Index
Ended August 31, 1999 (Class B) (U.S. Dollars)1
--------------------------------------- -------------------- -------------------
1/4/99 (inception) - 8/31/99* 6.5% 7.5%
1/4/99 - 8/31/99 6.5% 7.5%
3/1/99 - 8/31/99 11.2% 10.4%
*Annualized performance for periods greater than one year
</TABLE>
International stockmarkets have recovered strongly from the lows of a year ago.
The Far Eastern stockmarkets have led the way, boosted by a significant
improvement in economic and financial conditions. The European stockmarkets have
lagged as economic growth has continued to disappoint and the Euro has weakened.
Global growth prospects remain favorable and while inflation has probably
troughed, upward pressure should remain slight. As such, the outlook for
international stockmarkets remains positive. Asia remains our favored area for
investment. Markets have recovered strongly, but we expect them to make further
progress given the prospect of excellent earnings growth supported by a recovery
in both domestic and external demand and corporate restructuring. We are looking
to rebuild our exposure in Japan where we remain underweight. However, we do not
wish to reduce our exposure to Europe at the current time as an improving
economic outlook in the months ahead should help boost stockmarket returns and
the Euro.
As of August 31, 1999, major weightings in the portfolio were as follows: Europe
68.1%, Japan 20.1%, and Asia 7.4%.
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 high quality, actively managed fixed
income securities.
<TABLE>
<S> <C> <C> <C> <C>
Lipper Lehman
Short-Intermediate Intermediate
Total Aggregate Investment Quality Investment Government/
Return for the Period Bond Portfolio Grade Debt Funds Corporate
Ended August 31, 1999 (Class B) Index1 Bond Index2
- --------------------------------------- -------------------- -------------------- --------------------
1/4/99 (inception) - 8/31/99* (1.3)% 0.0% (0.6)%
1/4/99 - 8/31/99 (1.3)% 0.0% (0.6)%
3/1/99 - 8/31/99 (0.4)% 0.6% 0.3%
*Annualized performance for periods greater than one year
</TABLE>
In the annual period ended August 31, 1999, the Portfolio distributed dividends
of $0.49 per share.
Investments are normally divided approximately evenly between U.S. Government
and Corporate securities. Due to the yield advantage available in Corporate
securities, there is greater emphasis on Corporate bond holdings in the
Portfolio at this time.
Fox Asset Management will continue to focus on those instruments that offer
improving credit quality and liquidity. Fox is maintaining a conservative
investment posture with an average maturity of 4.8 years, and an average
duration of 3.2 years in the Portfolio.
Other portfolio statistics as of August 31, 1999 are as follows: Average
yield-to-maturity was 6.7%, average coupon was 6.6% and the average Moody's
Rating was A1 with 40 fixed income issues held.
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.
<TABLE>
<S> <C> <C> <C> <C>
Total Aggregate Municipal Bond Lipper General Lehman
Return for the Period Portfolio Municipal Municipal
Ended August 31, 1999 (Class B) Debt Funds Index1 Bond Index2
- --------------------------------------- -------------------- --------------------- -------------------
1/4/99 (inception) - 8/31/99* (4.0)% (2.5)% (1.3)%
1/4/99 - 8/31/99 (4.0)% (2.5)% (1.3)%
3/1/99 - 8/31/99 (4.5)% (3.0)% (2.1)%
*Annualized performance for periods greater than one year
</TABLE>
The continued strength of the domestic economy as well as the growing strength
of global economies has forced the Federal Reserve's hand to raise the Federal
Funds rate twice over the summer to preempt inflation. This has eliminated all
but one of the easings that were instituted last year to enhance worldwide
liquidity in the face of a global economic crisis. Since the beginning of the
year, the flight to quality has abated, and bond prices have continually
weakened as fears of the Federal Reserve intervention were confirmed. The
thirty-year treasury bond yield has risen nearly one percentage point to end the
month of August at a 6.06% yield. We believe that at current tax-exempt yield
levels, the after-tax returns are historically very high and provide excellent
fixed income value. Eventually, institutional buyers should return to the
tax-exempt market as after-tax yields on municipals are too compelling to
ignore, and we can expect municipals to outperform at that time.
We continued to remain fully invested in municipals throughout the year in order
to provide a high level of tax-exempt income to shareholders. We have focused on
the twenty-year part of the yield curve which provides optimal value, and
currently the Portfolio's average maturity is 18 years. During the past quarter,
we have purchased municipals with higher original yields that are less
vulnerable to special income tax considerations as the market weakens. We
continue to find value in the general obligation, healthcare and housing sectors
of the municipal market, and these sectors comprise 35%, 17% and 15% of the
Portfolio respectively.
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 issued by the United States Government, its agencies and
instrumentalities and related repurchase agreements.
<TABLE>
<S> <C> <C> <C> <C>
U.S. Government Money 90 Day T-Bills
7-Day Market Portfolio Average Discount
Compound Yield (Class B) Yield
- --------------------------------------- ------------------------ ------------------------
8/31/99 3.3% 4.7%
Total Aggregate U.S. Government Money Lipper U.S.
Return for the Period Market Portfolio Treasury Money
Ended August 31, 1999 (Class B) Market Index1 90 Day T-Bills
- --------------------------------------- ------------------------ ------------------------ --------------------
1/4/99 (inception) - 8/31/99* 1.9% 2.8% 3.0%
1/4/99 - 8/31/99 1.9% 2.8% 3.0%
3/1/99 - 8/31/99 1.4% 2.1% 2.2%
*Annualized performance for periods greater than one year
</TABLE>
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, 1999. The average dollar-weighted portfolio maturity was 51 days,
compared with a maximum allowable maturity of 90 days.
At the year ending August 31, 1999, the Federal funds rate was 5.25%. The
Federal Reserve raised short-term borrowing rates twice this year in response to
a persistently strong economy and potential inflation concerns. Moving forward,
investors appear confident that the pre-emptive moves by the Federal Reserve
will combine with technology-related productivity gains to keep pricing
pressures low.
An investment in the U.S. government Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the U.S. Government Money Market Portfolio seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Portfolio.
1. The Lipper U.S. Treasury Money Market Funds Index consists of the 30 largest
mutual funds that invest principally in U.S. Treasury obligations with
dollar-weighted average maturities of less than 90 days. These funds intend to
keep a constant net asset value.
Past performance is not predictive of future performance.
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 primarily in a diversified portfolio of common stocks that,
in the Advisor's opinion, are believed to be undervalued in the market and offer
above-average price appreciation potential.
<TABLE>
<S> <C> <C> <C> <C> <C>
Large
Capitalization Lipper Capital
Total Aggregate Value Portfolio Appreciation S & P/Barra
Return for the Period (Class C) Funds S &P 500 Value
Ended August 31, 1999 Index1 Index2 Index3
- ---------------------------------------- ------------------- ------------------- ------------------- -------------------
1/4/99 (inception) - 8/31/99* 1.5% 11.5% 8.3% 7.7%
1/4/99 - 8/31/99 1.5% 11.5% 8.3% 7.7%
3/1/99 - 8/31/99 3.9% 11.5% 7.3% 7.8%
*Annualized performance for periods greater than one year
</TABLE>
The Saratoga Large Capitalization Value Portfolio invests in a diverse group of
companies chosen for their superior business characteristics and reasonable
stock market valuations. We remain disciplined in our philosophy of buying
undervalued companies that are dominant in their industries, generate high
returns and use their free cash flow to increase shareholder value. Some of the
stocks that contributed to the positive performance for the year ended August
31, 1999 were: Rockwell International Corporation; WPP Group PLC; Dover
Corporation; Citigroup, Inc. ; and Computer Associates.
The Portfolio owned the common stocks of 44 companies as of August 31, 1999. The
five largest holdings were: Computer Associates, a designer of computer systems
software products:; Dover Corporation, a major manufacturer of elevators and
elevator products; XL Capital, a strongly capitalized specialty insurance
company; Textron Inc., a major manufacturer of aircraft and utility vehicle
products; and Wells Fargo & Co., one of the largest commercial banking
institutions.
LARGE CAPITALIZATION GROWTH PORTFOLIO
Advised by:
Harris Bretall Sullivan & Smith, L.L.C.
San Francisco, California
Objective: Seeks capital appreciation by investing primarily in a diversified
portfolio of common stocks that, in the Advisor's opinion, have faster earnings
growth potential than the Standard & Poor's 500.
<TABLE>
<S> <C> <C> <C> <C> <C>
Large
Total Aggregate Capitalization Lipper Growth S & P/Barra
Return for the Period Growth Portfolio Funds S & P 500 Growth
Ended August 31, 1999 (Class C) Index1 Index2 Index3
- --------------------------------------- ------------------- -------------------- ------------------- -------------------
1/4/99 (inception) - 8/31/99* 8.3% 8.2% 8.3% 9.0%
1/4/99 - 8/31/99 8.3% 8.2% 8.3% 9.0%
3/1/99 - 8/31/99 2.8% 7.1% 7.3% 6.9%
*Annualized performance for periods greater than one year
</TABLE>
The Large Capitalization Growth Portfolio contains stocks of high quality U.S.
companies, each one carefully analyzed from the bottom up to determine if it is
in a position to continue strong, double-digit earnings growth for our clients.
We know from experience that earnings growth is the product of a competent,
responsible management; competitive advantage through superior products or
service; a business plan that supports future growth; and a strong financial
position.
The financial markets have been somewhat volatile as investors try to reach
consensus on the direction of interest rates and inflation. Despite this
volatility, Harris Bretall Sullivan & Smith , L.L.C. projects a continuation of
a strong U.S. large capitalization stock market. We would not be surprised to
see the Dow Jones Industrial Average reach 20,000 in the first half of the new
decade. The three powerful macro economic trends that have fueled the U.S. stock
market - demographics, the technology revolution and globalization - are still
firmly in place. The combination of stocks that are in the Large Capitalization
Growth Portfolio Harris Bretall believes is an example of a portfolio prepared
to lead the market's charge upward as we start a new millenium.
SMALL CAPITALIZATION PORTFOLIO
Advised by:
Thorsell, Parker Partners, Inc.
Westport, Connecticut
Objective: Seeks maximum capital appreciation by investing in a diversified
portfolio of the common stocks of small capitalization companies.
<TABLE>
<S> <C> <C> <C> <C>
Small
Total Aggregate Capitalization Lipper Small
Return for the Period Portfolio Cap Funds Russell 2000
Ended August 31, 1999 (Class C) Index1 Index2
- --------------------------------------- -------------------- ---------------------- -----------------------
1/4/99 (inception) - 8/31/99* 7.8% 7.0% 2.4%
1/4/99 - 8/31/99 7.8% 7.0% 2.4%
3/1/99 - 8/31/99 17.3% 14.4% 9.9%
*Annualized performance for periods greater than one year
</TABLE>
Results for the fiscal year ended August 31, 1999 reflected the rebound of the
U.S. stock market in general and especially of smaller stocks. We believe that
the return to smaller stocks (versus larger stocks) is just beginning and that
this could be the most profitable investment theme of the next few years. Our
review of the price/earnings data for representative indices supports this
assessment. Smaller stocks have recovered only about half of their year-earlier
valuations and are still sharply underpriced relative to large cap stocks.
Momentum and investor sentiment appear to support the continued move toward
smaller stocks such as those in the Portfolio.
The Portfolio is always kept well diversified across various sectors and many of
them made a contribution to the strong results. Energy stocks were outstanding
performers over the last six months after a tough time last year. Another major
theme this year is the "discovery of value" reflected in buyouts. Several of the
Portfolio's stocks were targets of this "acceleration of discovery." As always,
we had more stocks fully researched and ready to replace those which were bought
out at premium prices. There were some soft spots, of course. Rising interest
rates dampened the manufactured housing stocks, our relatively small position in
finance (specialty thrift) was held to flat returns, and several special
situation investments are still quite undervalued.
Overall, we believe that the upside potential in the Portfolio remains excellent
based on our current target prices for each individual stock. As more of these
stocks become better recognized and approach their targets, we are constantly
working to research new prospects and are still finding plenty of undervalued
opportunities.
INTERNATIONAL EQUITY PORTFOLIO
Advised by:
Friends Ivory & Sime plc
Edinburgh, Scotland
Objective: Seeks capital appreciation by investing primarily in a diversified
portfolio of the securities of companies domiciled outside of the United States.
<TABLE>
<S> <C> <C> <C>
Total Aggregate International Morgan Stanley
Return for the Period Equity Portfolio EAFE Index
Ended August 31, 1999 (Class C) (U.S. Dollars)1
--------------------------------------- -------------------- -------------------
1/4/99 (inception) - 8/31/99* 6.6% 7.5%
1/4/99 - 8/31/99 6.6% 7.5%
3/1/99 - 8/31/99 11.3% 10.4%
*Annualized performance for periods greater than one year
</TABLE>
International stockmarkets have recovered strongly from the lows of a year ago.
The Far Eastern stockmarkets have led the way, boosted by a significant
improvement in economic and financial conditions. The European stockmarkets have
lagged as economic growth has continued to disappoint and the Euro has weakened.
Global growth prospects remain favorable and while inflation has probably
troughed, upward pressure should remain slight. As such, the outlook for
international stockmarkets remains positive. Asia remains our favored area for
investment. Markets have recovered strongly, but we expect them to make further
progress given the prospect of excellent earnings growth supported by a recovery
in both domestic and external demand and corporate restructuring. We are looking
to rebuild our exposure in Japan where we remain underweight. However, we do not
wish to reduce our exposure to Europe at the current time as an improving
economic outlook in the months ahead should help boost stockmarket returns and
the Euro.
As of August 31, 1999, major weightings in the portfolio were as follows: Europe
68.1%, Japan 20.1%, and Asia 7.4%.
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 high quality, actively managed fixed
income securities.
<TABLE>
<S> <C> <C> <C> <C>
Lipper Lehman
Short-Intermediate Intermediate
Total Aggregate Investment Quality Investment Government/
Return for the Period Bond Portfolio Grade Debt Funds Corporate
Ended August 31, 1999 (Class C) Index1 Bond Index2
- --------------------------------------- -------------------- -------------------- --------------------
1/4/99 (inception) - 8/31/99* (1.2)% 0.0% (0.6)%
1/4/99 - 8/31/99 (1.2)% 0.0% (0.6)%
3/1/99 - 8/31/99 (0.2)% 0.6% 0.3%
*Annualized performance for periods greater than one year
</TABLE>
In the annual period ended August 31, 1999, the Portfolio distributed dividends
of $0.49 per share.
Investments are normally divided approximately evenly between U.S. Government
and Corporate securities. Due to the yield advantage available in Corporate
securities, there is greater emphasis on Corporate bond holdings in the
Portfolio at this time.
Fox Asset Management will continue to focus on those instruments that offer
improving credit quality and liquidity. Fox is maintaining a conservative
investment posture with an average maturity of 4.8 years, and an average
duration of 3.2 years in the Portfolio.
Other portfolio statistics as of August 31, 1999 are as follows: Average
yield-to-maturity was 6.7%, average coupon was 6.6% and the average Moody's
Rating was A1 with 40 fixed income issues held.
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.
<TABLE>
<S> <C> <C> <C> <C>
Total Aggregate Municipal Bond Lipper General Lehman
Return for the Period Portfolio Municipal Municipal
Ended August 31, 1999 (Class C) Debt Funds Index1 Bond Index2
- --------------------------------------- -------------------- --------------------- -------------------
1/4/99 (inception) - 8/31/99* (4.1)% (2.5)% (1.3)%
1/4/99 - 8/31/99 (4.1)% (2.5)% (1.3)%
3/1/99 - 8/31/99 (4.6)% (3.0)% (2.1)%
*Annualized performance for periods greater than one year
</TABLE>
The continued strength of the domestic economy as well as the growing strength
of global economies has forced the Federal Reserve's hand to raise the Federal
Funds rate twice over the summer to preempt inflation. This has eliminated all
but one of the easings that were instituted last year to enhance worldwide
liquidity in the face of a global economic crisis. Since the beginning of the
year, the flight to quality has abated, and bond prices have continually
weakened as fears of the Federal Reserve intervention were confirmed. The
thirty-year treasury bond yield has risen nearly one percentage point to end the
month of August at a 6.06% yield. We believe that at current tax-exempt yield
levels, the after-tax returns are historically very high and provide excellent
fixed income value. Eventually, institutional buyers should return to the
tax-exempt market as after-tax yields on municipals are too compelling to
ignore, and we can expect municipals to outperform at that time.
We continued to remain fully invested in municipals throughout the year in order
to provide a high level of tax-exempt income to shareholders. We have focused on
the twenty-year part of the yield curve which provides optimal value, and
currently the Portfolio's average maturity is 18 years. During the past quarter,
we have purchased municipals with higher original yields that are less
vulnerable to special income tax considerations as the market weakens. We
continue to find value in the general obligation, healthcare and housing sectors
of the municipal market, and these sectors comprise 35%, 17% and 15% of the
Portfolio respectively.
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 issued by the United States Government, its agencies and
instrumentalities and related repurchase agreements.
<TABLE>
<S> <C> <C> <C> <C>
U.S. Government Money 90 Day T-Bills
7-Day Market Portfolio Average Discount
Compound Yield (Class C) Yield
- --------------------------------------- ------------------------ ------------------------
8/31/99 3.3% 4.7%
Total Aggregate U.S. Government Money Lipper U.S.
Return for the Period Market Portfolio Treasury Money
Ended August 31, 1999 (Class C) Market Index1 90 Day T-Bills
- --------------------------------------- ------------------------ ------------------------ --------------------
1/4/99 (inception) - 8/31/99* 2.0% 2.8% 3.0%
1/4/99 - 8/31/99 2.0% 2.8% 3.0%
3/1/99 - 8/31/99 1.4% 2.1% 2.2%
*Annualized performance for periods greater than one year
</TABLE>
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, 1999. The average dollar-weighted portfolio maturity was 51 days,
compared with a maximum allowable maturity of 90 days.
At the year ending August 31, 1999, the Federal funds rate was 5.25%. The
Federal Reserve raised short-term borrowing rates twice this year in response to
a persistently strong economy and potential inflation concerns. Moving forward,
investors appear confident that the pre-emptive moves by the Federal Reserve
will combine with technology-related productivity gains to keep pricing
pressures low.
An investment in the U.S. government Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the U.S. Government Money Market Portfolio seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Portfolio.
1. The Lipper U.S. Treasury Money Market Funds Index consists of the 30 largest
mutual funds that invest principally in U.S. Treasury obligations with
dollar-weighted average maturities of less than 90 days. These funds intend to
keep a constant net asset value.
Past performance is not predictive of future performance.
August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LARGE CAPITALIZATION VALUE PORTFOLIO
<TABLE>
<S> <C> <C> <C> <C>
Principal
Amount Value
--------------- ----------------
--------------- ----------------
SHORT-TERM GOVERNMENT NOTES - 13.30%
Federal Home Loan Bank - 6.41%
$ 5,115,000 5.40% due 9/1/99 $ 5,115,000
----------------
----------------
Federal National Mortgage Association - 6.89%
3,500,000 5.05% due 9/8/99 3,496,563
2,000,000 5.00% due 9/10/99 1,997,500
----------------
----------------
5,494,063
----------------
----------------
Total Short-Term Government Notes (Cost-$10,609,063) $ 10,609,063
----------------
----------------
Shares
---------------
---------------
COMMON STOCKS - 85.38%
Advertising - 2.83%
24,000 WPP Group PLC Sponsored ADR $ 2,254,500
----------------
----------------
Aerospace - 3.73%
15,000 Raytheon Company Class B 1,021,875
31,000 General Dynamics Corporation 1,953,000
----------------
----------------
2,974,875
----------------
----------------
Airlines - 2.20%
30,000 AMR, Corp.* 1,758,750
----------------
----------------
Banking - 8.19%
38,000 BankBoston Corporation 1,764,625
49,500 Citigroup, Inc. 2,199,656
64,660 Wells Fargo Company 2,574,276
----------------
----------------
6,538,557
----------------
----------------
Beverages - 1.56%
30,000 Diageo PLC Sponsored ADR 1,243,125
----------------
----------------
Chemicals - 3.97%
34,400 E.I. du Pont de Nemours and Company 2,180,100
24,000 Monsanto Company 985,500
----------------
----------------
3,165,600
----------------
----------------
Computer Hardware - 1.48%
51,000 Compaq Computer Corporation 1,182,563
----------------
----------------
Computer Software - 5.49%
60,000 Cadence Design System, Inc.* 817,500
63,000 Computer Associates International, Inc. 3,559,500
----------------
4,377,000
----------------
18
Shares Value
--------------- ----------------
Electronics - 4.70%
23,000 Motorola, Inc. $ 2,121,750
27,500 Rockwell International Corporation 1,625,938
----------------
----------------
3,747,688
----------------
----------------
Financial Servcies - 5.52%
42,200 Countrywide Credit Industries, Inc. 1,355,675
31,400 Freddie Mac 1,617,100
38,000 Household International Inc. 1,434,500
----------------
----------------
4,407,275
----------------
----------------
Food Products - 2.11%
36,000 H.J. Heinz Company 1,680,750
----------------
----------------
Insurance - 12.18%
32,100 Ace, Ltd. 688,144
34,900 AFLAC, Inc.. 1,568,319
6,046 American International Group, Inc. 560,389
45,576 Conseco, Inc. 1,093,824
53,000 Everest Reinsurance Holdings, Inc. 1,470,750
41,000 PartnerRe Ltd. 1,506,750
56,282 XL Capital Ltd Class A 2,831,687
----------------
----------------
9,719,863
----------------
----------------
Leisure - 1.23%
22,000 Carnival Corporation 983,125
----------------
----------------
Machinery - 5.39%
22,600 Caterpillar, Inc. 1,279,725
78,000 Dover Corporation 3,017,625
----------------
----------------
4,297,350
----------------
----------------
Manufacturing - 3.54%
35,000 Textron, Inc. 2,826,250
----------------
----------------
Medical Products - 1.25%
35,360 Becton, Dickinson and Company 994,500
----------------
----------------
Metals/Mining - 3.08%
26,000 Minnesota Mining & Manufacturing Company 2,457,000
----------------
----------------
Multimedia - 2.15%
27,000 News Corporation Limited Sponsored ADR 713,813
36,000 The Walt Disney Company 999,000
----------------
----------------
1,712,813
----------------
----------------
Office Supplies - 1.79%
26,000 Avery Denison Corporation 1,426,750
----------------
----------------
19
Shares Value
--------------- ----------------
Printing - 1.61%
41,000 R.R. Donnelley & Sons Company $ 1,286,375
----------------
----------------
Radio - 1.85%
30,000 AMFM Inc.* 1,477,500
----------------
----------------
Retail - 4.34%
50,475 May Department Stores Company 1,971,680
36,000 McDonalds Corporation 1,489,500
----------------
----------------
3,461,180
----------------
----------------
Telecommunications - 0.89%
16,000 Sprint Corporation 710,000
----------------
----------------
Toys - 1.47%
55,000 Mattel, Inc. 1,172,187
----------------
----------------
Transportation - 1.69%
29,000 Canadian Pacific Limited 679,688
12,000 Sabre Group Holdings, Inc.* 672,000
----------------
----------------
1,351,688
----------------
----------------
Waste Disposal - 1.16%
42,500 Waste Management, Inc. 927,030
----------------
----------------
Total Common Stocks (Cost-$60,402,123) $ 68,134,294
----------------
----------------
Total Investments (Cost-$71,011,186) 98.68% $ 78,743,357
------------- ----------------
----------------
Other Assets in Excess of Other Liabilities 1.32%
1,050,205
------------- ----------------
Total Net Assets 100.00% $ 79,793,562
============= ================
</TABLE>
* Non-income producing security.
See accompanying notes to financial statements.
August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LARGE CAPITALIZATION GROWTH PORTFOLIO
<TABLE>
<S> <C> <C> <C> <C>
Principal
Amount Value
-------------- -----------------
-------------- -----------------
SHORT-TERM CORPORATE NOTES - 0.85%
Financial Services -
$ 1,000,000 General Electric Capital Corporation Commercial Paper, 5.31% due 9/7/99 $ 1,000,000
Total Short-Term Corporate Notes (Cost-$1,000,000) $ 1,000,000
-----------------
-----------------
Shares
--------------
--------------
COMMON STOCKS - 97.88%
Advertising - 2.15%
64,000 Interpublic Group of Companies, Inc. $ 2,536,000
-----------------
-----------------
Airlines - 0.89%
18,000 AMR, Corp.* 1,055,250
-----------------
-----------------
Banking - 6.20%
33,000 Bank of America Corporation 1,996,500
61,500 Citigroup, Inc. 2,732,906
65,000 Wells Fargo Company 2,587,813
-----------------
-----------------
7,317,219
-----------------
-----------------
Beverages - 1.01%
20,000 Coca-Cola Company 1,196,250
-----------------
-----------------
Computer Hardware - 12.36%
50,000 Cisco Systems, Inc.* 3,390,625
55,000 Dell Computer Corporation* 2,684,688
54,000 EMC Corporation* 3,240,000
20,000 IBM Corp 2,491,250
35,000 Sun Microsystems, Inc.* 2,782,500
-----------------
-----------------
14,589,063
-----------------
-----------------
Computer Software - 3.61%
46,000 Microsoft Corporation* 4,257,874
-----------------
-----------------
Cosmetics/Toiletries - 4.71%
50,000 Colgate-Palmolive Company 2,675,000
29,000 Procter & Gamble Company 2,878,250
-----------------
-----------------
5,553,250
-----------------
-----------------
Distribution - 1.58%
25,000 Costco Wholesale Corporation* 1,868,750
-----------------
-----------------
Electronics - 5.22%
37,000 Applied Materials, Inc* 2,629,313
43,000 Intel Corporation 3,534,062
-----------------
-----------------
6,163,375
-----------------
-----------------
21
Shares Value
-------------- -----------------
Financial Services - 6.36%
70,000 Charles Schwab Corporation $ 2,765,000
28,000 Morgan Stanley Dean Witter & Company 2,402,750
39,000 The Goldman Sachs Group, Inc. 2,332,688
-----------------
-----------------
7,500,438
-----------------
-----------------
Insurance - 2.26%
28,750 American International Group, Inc. 2,664,765
-----------------
-----------------
Internet - 4.20%
30,000 America Online, Inc.* 2,739,375
15,000 Yahoo!, Inc.* 2,212,500
-----------------
-----------------
4,951,875
-----------------
-----------------
Leisure - 1.89%
50,000 Carnival Corporation 2,234,375
-----------------
-----------------
Manufacturing - 8.51%
34,000 General Electric Company 3,818,625
37,000 Illinois Tool Works, Inc. 2,883,687
33,000 Tyco International 3,343,313
-----------------
-----------------
10,045,625
-----------------
-----------------
Medical Instruments - 2.25%
34,000 Medtronic, Inc. 2,660,500
-----------------
-----------------
Multimedia - 2.09%
41,600 Time Warner, Inc. 2,467,400
-----------------
-----------------
Pharmaceuticals - 14.50%
50,000 Abbott Laboratories 2,168,750
37,000 Bristol-Myers Squibb Company 2,603,875
13,000 Genentech, Inc.* 2,135,250
31,000 Johnson & Johnson 3,169,750
65,000 Pfizer, Inc. 2,453,750
48,000 Schering-Plough Corporation 2,523,000
31,000 Warner-Lambert Company 2,053,750
-----------------
-----------------
17,108,125
-----------------
-----------------
Retail - 11.89%
90,000 Kroger Company* 2,081,250
47,000 Safeway, Inc.* 2,188,438
45,000 Dayton Hudson Corporation 2,610,000
46,000 Home Depot, Inc. 2,811,750
56,000 Wal-Mart Stores, Inc. 2,481,500
80,000 Walgreen Company 1,855,000
-----------------
-----------------
14,027,938
-----------------
-----------------
Telecommunications - 6.19%
46,000 Lucent Technologies, Inc. 2,946,875
29,000 MCI WorldCom, Inc.* 2,196,750
45,000 SBS Communications Inc. 2,160,000
-----------------
7,303,625
-----------------
22
Value
-----------------
Total Common Stocks (Cost-$75,494,808) $ 115,501,697
-----------------
-----------------
Total Investments (Cost-$76,494,808) 98.73% $ 116,501,697
--------- -----------------
-----------------
Other Assets in Excess of Other Liabilities 1.27% 1,496,439
--------- -----------------
Total Net Assets 100.00% $ 117,998,136
========= =================
</TABLE>
* Non-income producing security.
See accompanying notes to financial statements.
August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SMALL CAPITALIZATION PORTFOLIO
<TABLE>
<S> <C> <C> <C> <C>
Shares Value
--------------- -----------------
--------------- -----------------
COMMON STOCKS - 97.79%
Banking - 2.29%
38,000 Commercial Federation Corporation $ 883,500
-----------------
-----------------
Beverages - 4.51%
30,000 Canandaigua Brands, Inc.* 1,736,250
-----------------
-----------------
Building & Construction - 3.54%
140,000 American Homestar Corp* 665,000
25,000 Champion Enterprises, Inc.* 212,500
80,000 Oakwood Homes Corporation 485,000
-----------------
-----------------
1,362,500
-----------------
-----------------
Computer Hardware - 7.87%
172,000 Sequent Computer Systems* 3,031,500
-----------------
-----------------
Data Processing - 3.66%
70,000 Sterling Software, Inc.* 1,408,750
-----------------
-----------------
Electronics - 24.74%
55,000 Etec Systems, Inc.* 2,420,000
36,500 Harman International Industries, Inc 1,551,250
125,000 Silicon Valley Group, Inc.* 1,484,375
82,000 Varian Semiconductor Equipment Associates, Inc.* 1,865,500
103,250 Vishay Intertechnology, Inc.* 2,213,422
-----------------
-----------------
9,534,547
-----------------
-----------------
Food-Wholesale/Distribution - 4.13%
87,000 Richfood Holdings, Inc. 1,593,187
-----------------
-----------------
Funeral Services - 1.05%
75,000 Stewart Enterprises, Inc. 405,469
-----------------
-----------------
Garden Products - 4.39%
46,000 Toro Company 1,690,500
-----------------
-----------------
Machinery - 3.06%
71,321 Albany International, Corp 1,181,254
-----------------
-----------------
Manufacturing - 3.29%
15,000 Harsco Corporation 415,313
5,000 Precision Castparts Corporation 177,500
20,000 Snap-on Incorporated 676,250
-----------------
-----------------
1,269,063
-----------------
-----------------
Medical-Products - 2.75%
49,000 Varian Medical Systems, Inc. 1,059,625
-----------------
24
Shares Value
--------------- -----------------
Musical Instruments - 2.14%
39,500 Steinway Musical Instruments, Inc.* $ 824,562
-----------------
-----------------
Oil/Gas - 16.43%
151,666 EEX Corporation* 720,414
100,000 Oceaneering International, Inc.* 2,006,250
15,000 Helmerich & Payne, Inc. 413,437
98,000 Marine Drilling Companies, Inc.* 1,555,750
110,000 Pride International, Inc.* 1,636,250
-----------------
-----------------
6,332,101
-----------------
-----------------
Publishing - 0.62%
5,000 Houghton Mifflin Company 238,750
-----------------
-----------------
Restaurants - 5.19%
67,500 Foodmaker, Inc.* 1,556,718
55,000 CKE Restaurants, Inc. 443,438
-----------------
-----------------
2,000,156
-----------------
-----------------
Retail - 1.82%
24,500 ShopKo Stores, Inc.* 701,313
-----------------
-----------------
Scientific Instruments - 3.00%
10,000 EG&G, Inc. 318,125
18,000 Teleflex Incorporated 837,000
-----------------
-----------------
1,155,125
-----------------
-----------------
Steel - 3.30%
116,100 Oregon Steel Mills, Inc. 1,269,844
-----------------
-----------------
Total Common Stocks (Cost-$39,890,358) $ 37,677,996
-----------------
-----------------
Principal
Amount
---------------
Repurchase Agreement - 5.70%
Repurchase Agreement dated 8/31/99 maturing 9/1/99 with State
Street Bank & Trust Company, collateralized by $2,230,000 U.S.
Treasury Notes, 5.875% due 2/15/00; proceeds $2,230,000
$ 2,194,000 (Cost-$2,194,000) $ 2,194,000
-----------------
-----------------
Total Investments (Cost-$42,084,358) 103.48% $ 39,871,996
----------- -----------------
-----------------
Other Liabilities in Excess of Other Assets (3.48%) (1,339,782)
----------- -----------------
-----------------
Total Net Assets 100.00% $ 38,532,214
=========== =================
=========== =================
</TABLE>
* Non-income producing security.
See accompanying notes to financial statements.
August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<S> <C> <C> <C> <C>
Shares Value
------------- ----------------
------------- ----------------
COMMON STOCKS - 95.04%
DENMARK - 2.33%
Telecommunications
24,200 Tele Danmark A/S Sponsored ADR $ 680,625
----------------
----------------
FINLAND - 3.16%
Telecommunications
11,100 Nokia Oyj Sponsored ADR 925,463
----------------
----------------
FRANCE - 13.24%
Banking - 2.28%
17,000 Societe Generale Sponsored ADR 665,441
----------------
----------------
Food Products -2.21%
13,000 Groupe Danone Sponsored ADR 645,125
----------------
----------------
Oil/Gas -2.47%
8,200 Elf Aquitaine SA Sponsored ADR 722,113
----------------
----------------
Pharmaceuticals - 2.01%
12,100 Rhoune-Poulenc SA Sponsored ADR 587,606
----------------
----------------
Telecommunications - 4.27%
24,500 Alcatel SA Sponsored ADR 757,969
6,300 France Telecom S.A. Sponsored ADR 494,550
----------------
----------------
1,252,519
----------------
----------------
GERMANY - 5.66%
Banking - 2.92%
12,800 Deutsche Bank AG Sponsored ADR 853,025
----------------
----------------
Machinery - 2.74%
5,300 Mannesmann AG Sponsored ADR 801,071
----------------
----------------
HONG KONG - 3.54%
Closed End Funds
87,900 WEBS-Hong Kong, WEBS-World Equity Benchmark Shares 1,038,319
----------------
----------------
IRELAND - 1.69%
Pharmaceuticals
15,400 Elan Corporation PLC Sponsored ADR* 493,763
----------------
----------------
ITALY - 4.83%
Oil/Gas -2.61%
12,600 ENI Sponsored ADR 762,300
----------------
----------------
Telecommunications - 2.22%
6,425 Telecom Italia SpA Sponsored ADR 648,925
----------------
----------------
26
Shares Value
------------- ----------------
JAPAN - 19.90%
Banking - 1.67%
31,331 Bank of Tokyo-Mitsubishi, Ltd. ADR $ 489,547
----------------
----------------
Computer Hardware - 2.85%
7,000 TDK Corporation Sponsored ADR 833,000
----------------
----------------
Cosmetics/Toiletries - 2.82%
2,909 Kao Corporation Unsponsored ADR 825,142
----------------
----------------
Manufacturing - 2.44%
2,520 Bridgestone Corporation Unsponsored ADR 712,503
----------------
----------------
Office Equipment - 2.69%
26,320 Canon, Inc. Sponsored ADR 786,310
----------------
----------------
Printing - 1.97%
9,031 Toppan Printing Co., Ltd. Unsponsored ADR 576,579
----------------
----------------
Retail - 3.20%
12,878 Seven-Eleven Japan Co., Ltd. Unsponsored ADR 936,120
----------------
----------------
Telecommunications - 2.26%
11,700 Nippon Telegraph & Telephone Corporation Sponsored ADR 661,050
----------------
----------------
NETHERLANDS - 9.53%
Banking - 2.43%
13,000 ING Groep N.V. Sponsored ADR 713,375
----------------
----------------
Electronics - 2.30%
6,532 Koninklijke (Royal) Philips Electronics N.V. 671,571
----------------
----------------
Food-Retail - 2.37%
19,380 Koninklijke Ahold NV Sponsored ADR 692,835
----------------
----------------
Multimedia - 2.43%
18,500 VNU NV Sponsored ADR 709,307
----------------
----------------
PORTUGAL - 1.78%
Telecommunications
12,500 Portugal Telecom SA Sponsored ADR 519,531
----------------
----------------
SOUTH KOREA - 3.80%
Power/Utility - 1.54%
25,000 Korea Electric Power Corporation Sponsored ADR 450,000
----------------
----------------
Steel - 2.26%
18,000 Pohang Iron & Steel Company Ltd Sponsored ADR 661,500
----------------
----------------
SPAIN - 2.52%
Telecommunications
15,300 Telefonica S.A. Sponsored ADR* 737,269
================
27
Shares Value
------------- ----------------
SWITZERLAND - 2.83%
Food Products
8,400 Nestle SA Sponsored ADR $ 828,882
----------------
----------------
UNITED KINGDOM - 20.04%
Airport Management - 1.26%
35,100 BAA PLC Sponsored ADR 368,841
----------------
----------------
Banking - 1.90%
4,525 National Westminster Bank PLC Sponsored ADR 556,575
----------------
----------------
Insurance - 3.04%
8,625 Allied Zurich AG PLC Sponsored ADR 214,276
9,000 Prudential Corporation PLC Sponsored ADR 674,034
----------------
----------------
888,310
----------------
----------------
Manufacturing - 1.92%
55,600 General Electric Company PLC Unsponsored ADR 560,570
----------------
----------------
Oil/Gas - 2.27%
13,800 Shell Transport & Trading Company Sponsored ADR 664,988
----------------
----------------
Pharmaceuticals - 2.28%
12,600 Glaxo Wellcome PLC Sponsored ADR 667,013
----------------
----------------
Retail - 1.63%
19,000 Boots Company PLC Sponsored ADR 476,305
----------------
----------------
Telecommunications - 4.37%
2,600 Vodafone Airtouch PLC Sponsored ADR 521,463
4,912 British Telecommunications PLC Sponsored ADR 757,062
----------------
----------------
1,278,525
----------------
----------------
Tobacco - 1.37%
23,227 British American Tobacco PLC Sponsored ADR 400,659
----------------
----------------
Total Investments (Cost-$23,792,994) 95.04% $ 27,742,602
-------------- ----------------
----------------
Other Assets in Excess of Other Liabilities 4.96% 1,447,193
-------------- ----------------
Total Net Assets 100.00% $ 29,189,795
============== ================
</TABLE>
ADR - American Depositary Receipt
* Non-income producing security.
See accompanying notes to financial statements.
August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT QUALITY BOND PORTFOLIO
<TABLE>
<S> <C> <C> <C> <C>
Principal
Amount Value
---------------- --------------
U.S. GOVERNMENT NOTES - 38.93%
U.S. Treasury Notes - 17.18%
$ 3,000,000 6.50% due 8/15/05 $ 3,055,320
4,248,491 3.375% due 1/15/07 4,062,619
--------------
7,117,939
--------------
Federal Home Loan Bank - 6.21%
2,700,000 5.125% due 9/15/03 2,571,318
--------------
Federal Home Loan Mortgage Corp - 2.61%
410,804 6.50% due 4/15/20 410,804
667,634 6.85% due 10/15/21 668,883
--------------
1,079,687
--------------
Federal National Mortgage Association - 12.72%
5,300,000 6.00% due 5/15/08 4,997,741
268,934 7.00% due 12/25/18 268,682
--------------
5,266,423
--------------
Government National Mortgage Association - 0.21%
88,204 GNMA Backed Trust, Ser. 2, Class B, 8.50% due 4/1/18 88,755
--------------
Total U.S. Government Notes (Cost-$16,595,193) $16,124,122
--------------
CORPORATE NOTES & BONDS - 57.91%
Aerospace - 3.51%
1,500,000 Raytheon Company, 6.50% due 7/15/05 $ 1,451,970
--------------
Automotive - 3.41%
1,500,000 TRW, Inc., 6.05% due 1/15/05 1,412,055
--------------
Banking - 1.44%
600,000 Nationsbank Corp., 5.375% due 4/15/00 597,168
--------------
Broadcasting - 3.38%
250,000 Cox Communications Inc., 6.375% due 6/15/00 249,565
1,055,000 EZ Communications CBS 9.75% due 12/01/05 1,149,950
--------------
1,399,515
--------------
Chemicals - 3.58%
1,500,000 ICI Wilmington, 6.95% due 9/15/04 1,482,554
--------------
Financial Services - 18.74%
350,000 Bear Stearns Companies, 7.625% due 9/15/99 350,175
225,000 Ford Motor Credit, 7.750% due 10/1/99 225,383
350,000 Associates Corporate N. America, 6.25% due 9/15/00 349,377
29
Principal
Amount Value
---------------- --------------
$ 250,000 Morgan Stanley MTN, 5.75% due 2/15/01 $ 246,948
1,000,000 Bear Stearns Companies, 5.75% due 2/15/01 986,170
750,000 BHP Finance USA, 7.875% due 12/01/02 765,495
430,207 National Auto Finance Ser 1996-1 A 6.33% due 12/21/02 430,475
1,500,000 Merrill Lynch, 6.00% due 2/12/03 1,459,440
510,000 Fleet Credit Card Master Trust, Ser. 1995-F, Class A1, 6.05% due 8/1/03 508,246
500,000 Prime Credit Card Master Trust 1996-1 Class A 6.70% due 7/15/04 500,935
1,000,000 Associates Corporate N. America, 6.625% due 6/15/05 977,660
Delta Funding Home Equity Loan Trust Series 1997-1 Class A2, 6.92% due 5/25/15
967,515 966,102
--------------
7,766,406
--------------
Healthcare - 2.85%
1,200,000 Tenet Healthcare Corp., 8.825% due 12/1/03 1,182,000
--------------
Manufacturing - 0.31%
125,000 ADT Operations 8.25% due 8/01/00 126,747
--------------
Metals/Mining - 2.63%
1,200,000 Cyprus Minerals, Inc., 6.625% due 10/15/05 1,090,680
--------------
Multimedia - 5.22%
1,137,000 Time Warner, Inc., 7.95% due 2/1/00 1,145,505
1,000,000 Westinghouse Electric CBS, 8.375% due 6/15/02 1,016,380
--------------
2,161,885
--------------
Oil/Gas - 0.67%
275,000 Amoco Canada Petro Company LTD, 7.25% due 12/01/02 275,949
--------------
Pharmaceuticals - 3.00%
200,000 Rhone-Poulenc, 6.750% due 10/15/99 200,382
1,000,000 American Home Products 7.9% due 2/15/05 1,042,230
--------------
1,242,612
--------------
Telecommunications - 1.16%
500,000 Worldcom, Inc., 6.40% due 8/15/05 480,380
--------------
Transportation - 3.02%
1,300,000 Union Pacific Corp., 6.12% due 2/1/04 1,250,431
--------------
Power/Utility - 2.05%
700,000 Southern California Edison, 5.875% due 1/15/01 693,931
150,000 Public Service Electric & Gas, 7.875% due 11/01/01 153,336
--------------
847,267
--------------
Waste Disposal - 2.94%
500,000 WMX Technologies, 6.70% due 5/1/01 486,185
750,000 WMX Technologies, 7.125% due 6/15/01 732,810
--------------
1,218,995
--------------
30
Value
--------------
Total Corporate Notes & Bonds (Cost-$24,598,104) $ 23,986,614
--------------
Total Investments (Cost-$41,193,297) 96.84% $40,110,736
----------- --------------
Other Assets in Excess of Other Liabilities 3.16% 1,307,609
----------- --------------
Total Net Assets 100.00% $41,418,345
=========== ==============
</TABLE>
MTN - Medium Term Note
See accompanying notes to financial statements.
August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO
<TABLE>
<S> <C> <C> <C> <C>
Principal
Amount Value
-------------- ---------------
-------------- ---------------
MUNICIPAL NOTES - 9.48%
DELAWARE - 0.86%
Power/Utility
Delaware State Economic Development Authority Revenue Various
$ 100,000 Gas Facilities DelMarva Power & Light, FRN due 10/1/29 $ 100,000
---------------
---------------
GEORGIA - 0.86%
Pollution Control
Burke County Georgia Development Authority Pollution Control,
100,000 FRN due 7/1/24 100,000
---------------
---------------
NEW YORK - 1.72%
Education - 0.86%
New York State Job Development Authority Ser A1 - A42, FRN
100,000 due 3/1/05 100,000
---------------
---------------
Pollution Control - 0.86%
New York State Energy Research & Development Authority Pollution
100,000 Control Revenue FRN due 10/1/29 100,000
---------------
---------------
TEXAS - 2.59%
Airport
Grapevine, TX Industrial Development Corporation Series A3, FRN
100,000 due 12/1/24 100,000
Grapevine, TX Industrial Development Corporation Series B3, FRN
100,000 due 12/1/24 100,000
Grapevine, TX Industrial Development Corporation Series A2, FRN
100,000 due 12/1/24 100,000
---------------
---------------
300,000
---------------
---------------
WYOMING - 3.45%
Pollution Control
400,000 Lincoln County Wyoming Pollution Control, FRN due 11/1/14 400,000
---------------
---------------
Total Municipal Notes (Cost-$1,100,000) $ 1,100,000
---------------
---------------
MUNICIPAL BONDS - 88.94%
ARIZONA - 3.71%
Water/Sewer
$ 500,000 Sedona Arizona Wastewater, 4.75% due 7/1/27 $ 431,575
---------------
---------------
CALIFORNIA -7.49%
Education - 2.59%
California State Public Works Board Lease Revenue Various California
250,000 State University Projects, 5.375% due 10/1/17 246,717
California State Public Works Board Lease Revenue Various California
50,000 State University Projects, 6.00% due 9/1/15 54,152
---------------
---------------
300,869
---------------
---------------
32
Principal
Amount Value
-------------- ---------------
Housing - 3.24%
California Housing Finance Agency Single Family Mortgage, 5.30%
$ 400,000 due 8/1/18 $ 375,876
---------------
---------------
Turnpike/Toll - 1.66%
Foothill/Eastern Corridor Agency California Toll Road Revenue
200,000 Refunding 5.75% due 1/15/40 192,124
---------------
---------------
COLORADO - 1.34%
Health/Hospitals
150,000 Denver Colorado City & County Hospital, 6.00% due 10/1/15 155,234
---------------
---------------
FLORIDA - 0.32%
Education
35,000 Dade County Florida School Board Ser. A, 5.75% due 5/1/12 37,211
---------------
---------------
GEORGIA - 6.60%
Airport - 2.71%
305,000 Atlanta Georgia Airport Facilities Revenue, 6.25% due 1/01/21 314,095
---------------
---------------
Education - 2.00%
215,000 Jackson County Georgia School District, 6.00% due 7/1/14 232,615
---------------
---------------
General Obligation - 1.89%
200,000 Georgia State Ser. B, 6.250% due 4/1/07 219,174
---------------
---------------
HAWAII - 3.87%
General Obligation
505,000 Hawaii State Ser CR, 4.75 due 4/01/18 448,834
---------------
---------------
ILLINOIS - 3.91%
Health/Hospitals
Illinois Health Facilities Authority Northwestern Medical Facility
500,000 Foundation, 5.00% due 11/15/18 453,455
---------------
---------------
IOWA - 0.46%
Water/Sewer
50,000 West Des Moines Iowa Water Revenue, 6.80% due 12/1/13 53,816
---------------
---------------
KENTUCKY - 0.87%
Turnpike/Toll
Kentucky State Turnpike Authority Economic Development, 5.625%
100,000 due 7/1/15 100,905
---------------
---------------
LOUISIANA - 1.35%
General Obligation
150,000 New Orleans Louisiana, 6.125% due 10/1/16 156,681
---------------
---------------
33
Principal
Amount Value
-------------- ---------------
MARYLAND - 2.73%
Resource Recovery
Maryland State Energy Financing Adiministration Solid Waste Disposal
$ 300,000 Revenue Wheelabrator Water Projects, 6.30% due 12/01/10 $ 316,964
---------------
---------------
MASSACHUSETTS - 2.23%
Transportation - 0.46%
50,000 Massachusetts Bay Transportation Authority Ser. B, 5.90% due 3/1/24 53,663
---------------
---------------
Water/Sewer - 1.77%
250,000 Massachusetts State Water Authority, 4.50% due 8/1/22 205,773
---------------
---------------
MISSOURI - 0.36%
Housing
Missouri State Housing Development Commission GNMA Backed
40,000 Sec-C, 6.90% due 7/1/18 41,634
---------------
---------------
NEBRASKA - 0.35%
Power/Utility
40,000 Omaha Nebraska Public Power Distribution, 5.50% due 2/1/14 40,676
---------------
---------------
NEVADA - 1.77%
General Obligation - 0.45%
50,000 Clark County Nevada Ser. B, 6.00% due 6/1/16 52,232
---------------
---------------
Housing - 1.32%
150,000 Nevada Housing Division - Single Family Ser. A, 6.15% due 4/1/17 153,399
---------------
---------------
NEW YORK - 8.83%
Education - 1.14%
125,000 New York State Dormitory Authority City University, 5.75% due 7/1/09 132,203
---------------
---------------
General Obligation - 4.70%
300,000 New York New York Ser. H, 6.50% due 3/15/05 324,996
200,000 New York New York Ser. A, 6.50% due 7/15/06 220,426
---------------
---------------
545,422
---------------
---------------
Housing - 0.66%
75,000 New York State Mortgage Agency Ser. 54, 6.10% due 10/1/15 76,958
---------------
---------------
Industrial Development - 1.08%
New York New York City Industrial Development Agency, 4.50%
150,000 due 7/1/23 124,806
---------------
---------------
Pollution Control - 0.35%
New York State Environmental Facilities Corporation Pollution
40,000 Control, 5.875% due 6/15/14 41,133
---------------
---------------
Transportation - 0.90%
100,000 Metropolitan Transportation Authority New York, 5.50% due 7/1/08 104,253
---------------
---------------
34
Principal
Amount Value
-------------- ---------------
NORTH DAKOTA - 5.33%
Housing
$ 250,000 North Dakota State Housing Finance Agency Ser. A, 5.25% due 7/1/18 $ 233,535
400,000 North Dakota State Housing Finance Agency Ser. C, 5.50% due 7/1/18 384,996
---------------
---------------
618,531
---------------
---------------
OHIO - 4.45%
General Obligation - 3.95%
500,000 Akron Ohio, 5.00% due 12/1/18 457,724
---------------
---------------
Health/Hospitals - 0.50%
50,000 Lorain County Ohio Hospital Medical Center, 7.75% due 11/1/13 57,463
---------------
---------------
PENNSYLVANIA - 4.86%
Education - 1.23%
150,000 Pennsylvania State of Higher Education Series A, 5.75% due 1/1/17 142,419
---------------
---------------
General Obligation - 2.53%
300,000 Pennsylvania State Second Series, 5.00% due 11/15/12 293,454
---------------
---------------
Tax Allocation - 0.65%
Philadelphia Pennsylvania Municipal Authority Series A, 5.625%
75,000 due 11/15/14 75,598
---------------
---------------
Water/Sewer - 0.45%
Pittsburgh Pennsylvania Water & Sewer Authority Series B, 5.60%
50,000 due 9/15/15 52,596
---------------
---------------
PUERTO RICO - 0.58%
Power/Utility
65,000 Puerto Rico Electric Power Authority, 6.00% due 7/1/15 66,791
---------------
---------------
SOUTH CAROLINA - 5.93%
Health/Hospitals - 2.01%
Spartanburg County South Carolina Health Services Series B, 5.125%
250,000 due 4/15/17 232,815
---------------
---------------
Power/Utility - 3.92%
Piedmont Municipal Power Agency South Carolina Electric Revenue
500,000 Ser A, 5.00% due 1/1/18 454,644
---------------
---------------
TEXAS - 5.18%
Education - 3.87%
500,000 Houston Texas Independent School District Ser. A, 5.00% due 2/15/24 448,655
---------------
---------------
General Obligation - 0.87%
75,000 Houston Texas Ser. C, 5.25% due 4/1/14 73,280
25,000 San Antonio Texas Certificates of Obligation, 6.625% due 8/1/14 27,295
---------------
---------------
100,575
---------------
---------------
35
Principal
Amount Value
-------------- ---------------
Power/Utility - 0.44%
$ 50,000 Brazos River Authority Texas Revenue, 5.800% due 8/01/15 $ 51,385
---------------
---------------
UTAH - 5.80%
General Obligation - 3.10%
400,000 Clearfield City Utah, 5.00% due 2/1/23 359,271
---------------
---------------
Power/Utility - 2.70%
300,000 Intermountain Power Agency Utah Power Supply, 6.000% due 7/1/02 313,284
---------------
---------------
WASHINGTON - 0.40%
Power/Utility
35,000 Seattle Washington Light & Power Series A, 5.75% due 8/1/11 36,192
Washington State Public Power Supply Nuclear Project No. 1 Series B,
10,000 7.25% due 7/1/12 10,477
---------------
---------------
46,669
---------------
---------------
WASHINGTON D.C. - 1.81%
Public Facilities
Washington DC Convention Center Authority Dedicated Tax Revenue
250,000 Senior Lien, 4.75% due 10/01/28 209,635
---------------
---------------
WISCONSIN - 8.19%
Education - 5.57%
Wisconsin State Health & Educational Facilities Authority Series A,
400,000 5.250% due 8/15/19 373,280
300,000 Wisconsin State Health & Educational Facilities, 5.25% due 8/15/27 273,063
---------------
---------------
646,343
---------------
---------------
Housing - 2.62%
Wisconsin Housing & Economic Development Home Ownership,
300,000 6.20% due 3/1/27 303,504
---------------
---------------
WYOMING - 0.22%
Housing
Wyoming Community Development Authority Housing, 6.65%
25,000 due 12/1/06 25,911
---------------
---------------
Total Municipal Bonds (Cost - $10,663,187) $10,318,847
---------------
---------------
Total Investments (Cost-$11,763,187) 98.42% $11,418,847
---------- ---------------
---------------
Other Assets in Excess of Other Liabilities 1.58%
183,292
---------- ---------------
---------------
Total Net Assets 100.00% $11,602,139
========== ===============
========== ===============
</TABLE>
FRN - Floating Rate Note
See accompanying notes to financial statements.
August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
<TABLE>
<S> <C> <C> <C> <C>
Principal
Amount Value
---------------- ----------------
U.S. GOVERNMENT NOTES - 99.80%
Federal Farm Credit Bank Discount Notes - 8.37%
$ 637,000 5.04% due 9/1/99 $ 637,000
394,000 5.10% due 9/17/99 393,107
12,000 5.02% due 9/24/99 11,962
3,060,000 4.75% due 11/3/99 3,034,563
----------------
Total Federal Farm Credit Bank (Cost-$4,076,632) $ 4,076,632
----------------
Federal Home Loan Bank Discount Notes - 6.54%
$ 1,190,000 4.58% due 9/16/99 $ 1,187,729
2,000,000 5.15% due 5/17/00 2,000,000
Total Federal Home Loan Bank Discount Notes
----------------
(Cost-$3,187,729) $ 3,187,729
----------------
Federal Home Loan Mortgage Discount Notes - 56.79%
$ 1,000,000 4.75% due 9/3/99 $ 999,736
95,000 4.70% due 9/8/99 94,913
1,410,000 4.97% due 9/9/99 1,408,443
150,000 4.70% due 9/10/99 149,824
64,000 5.12% due 9/10/99 63,918
3,679,000 4.91% due 9/13/99 3,672,979
2,055,000 4.97% due 9/15/99 2,051,028
2,230,000 5.00% due 9/15/99 2,225,664
219,000 5.10% due 9/15/99 218,566
455,000 5.04% due 9/20/99 453,790
144,000 5.10% due 9/20/99 143,612
155,000 5.05% due 9/23/99 154,522
80,000 4.69% due 9/24/99 79,760
248,000 5.05% due 9/29/99 247,026
1,780,000 4.72% due 10/8/99 1,771,365
52,000 5.02% due 10/12/99 51,703
25,000 5.20% due 10/14/99 24,845
4,054,000 5.23% due 10/14/99 4,028,674
141,000 5.07% due 10/22/99 139,987
575,000 5.05% due 11/4/99 569,838
3,259,000 5.22% due 11/15/99 3,223,558
3,425,000 5.21% due 11/24/99 3,383,363
1,277,000 5.24% due 11/24/99 1,261,387
99,000 5.25% due 11/24/99 97,787
169,000 5.26% due 11/24/99 166,926
1,000,000 5.10% due 12/14/99 985,267
Total Federal Home Loan Mortgage Discount Notes
----------------
(Cost-$27,668,481) $ 27,668,481
----------------
37
Principal
Amount Value
---------------- ----------------
Federal National Mortgage Association - 28.10%
$ 1,490,000 4.80% due 9/9/99 $ 1,488,411
54,000 4.90% due 9/27/99 53,806
3,883,000 5.02% due 10/5/99 3,864,590
2,500,000 5.03% due 10/7/99 2,487,425
45,000 5.07% due 10/15/99 44,721
3,210,000 5.06% due 11/17/99 3,175,258
85,000 5.05% due 9/13/99 84,857
2,500,000 4.95% due 9/16/99 2,494,844
----------------
Total Federal National Mortgage Association (Cost-$13,693,912) $ 13,693,912
----------------
Total Investments (Cost-$48,626,754) 99.80% $ 48,626,754
------------ ----------------
Other Assets in Excess of Other Liabilities 0.20% 97,509
------------ ----------------
Total Net Assets 100.00% $ 48,724,263
============ ================
</TABLE>
See accompanying notes to financial statements.
August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
-------------- -------------- --------------- -------------- -------------- ------------- --------------
Large Large U.S.
Capitalization Capitalization Small International Investment Municipal Government
Value Growth Capitalization Equity Quality Bond Bond Money Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- -------------- --------------- -------------- -------------- ------------- --------------
Assets
Investments, at value
(cost--$71,011,186;
$76,494,808; $42,084,358;
$23,792,994;
$41,193,297; $11,763,187 and
$48,626,754, respectively) $78,743,357 $116,501,697 $39,871,996 $27,742,602 $40,110,736 $11,418,847 $48,626,754
Cash 5,640 959,501 265 1,510,370 731,121 62,601 553
Receivable for shares of
beneficial interest sold 1,105,315 1,218,960 276,897 205,199 146,789 14,543 168,100
Receivable for investments sold - - - 444,975 - - -
Interest receivable 148 213 517,198 138,968 29,756
-
Dividends receivable 99,328 58,280 6,840 71,822 - - -
Foreign taxes receivable - - - 34,521 - - -
Prepaid expenses
and other assets 20,867 19,181 16,261 11,875 12,463 16,005 14,965
-------------- -------------- --------------- -------------- -------------- ------------- ---------------
Total Assets 79,974,507 118,757,767 40,172,472 30,021,364 41,518,307 11,650,964 48,840,128
-------------- -------------- --------------- -------------- -------------- ------------- ---------------
Liabilities
Payable to manager 43,646 63,417 30,675 18,067 19,214 5,264 19,382
Administration fee payable 5,780 12,722 3,978 3,231 5,727 2,657 3,114
Payable for shares of beneficial
interest redeemed 46,661 24,861 25,774 19,168 9,061 - 10,109
Payable for investments purchased - 530,913 1,485,589 737,505 - -
-
Other payables and accrued 84,858 127,718 94,242 53,598 65,960 40,904 83,260
expenses
-------------- -------------- --------------- -------------- -------------- ------------- ---------------
Total Liabilities 180,945 759,631 1,640,258 831,569 99,962 48,825 115,865
-------------- -------------- --------------- -------------- -------------- ------------- ---------------
Net Assets
Shares of beneficial interest
at par value 38,764 43,746 38,147 22,153 41,913 11,602 487,267
Paid-in-surplus 67,614,512 70,591,714 41,072,069 24,601,393 42,481,462 11,870,192 48,237,464
Accumulated undistributed net
investment income (loss) 553,292 1,896 11,254 182,952 1,896 2,047 1,895
Accumulated net realized gain
(loss) on
investments and foreign
currency 3,854,823 7,353,891 (376,894) 433,689 (24,365) 62,638 (2,363)
transactions
Net unrealized appreciation
(depreciation)
on investments 7,732,171 40,006,889 (2,212,362) 3,949,608 (1,082,561) (344,340) -
-------------- -------------- --------------- -------------- -------------- ------------- ---------------
Total Net Assets $79,793,562 $117,998,136 $38,632,214 $29,189,795 $41,418,345 $11,602,139 $48,724,263
============== ============== =============== ============== ============== ============= ===============
Net Asset Value per Share
Class I
Net Assets $78,484,011 $115,585,709 $38,203,329 $28,743,499 $41,070,021 $11,555,732 $48,358,335
Shares of beneficial
interest outstanding 3,812,403 4,284,446 3,783,268 2,181,071 4,155,976 1,155,576 48,360,698
-------------- -------------- --------------- -------------- -------------- ------------- ---------------
Net asset value and offering
price per share $20.59 $26.98 $10.10 $13.18 $9.88 $10.00 $1.00
============== ============== =============== ============== ============== ============= ===============
Net Asset Value per Share
Class B
Net Assets $171,529 $203,586 $73,058 $67,517 $64,002 $8,400 $70,470
Shares of beneficial 8,367 7,611 7,276 5,159 6,478 840 70,470
interest outstanding
-------------- -------------- --------------- -------------- -------------- ------------- ---------------
Net asset value and offering
price per Share $20.50 $26.75 $10.04 $13.09 $9.88 $10.00 $1.00
============== ============== =============== ============== ============== ============= ===============
Net Asset Value per Share
Class C
Net Assets $1,138,022 $2,208,841 $243,016 $378,779 $284,322 $38,007 $295,458
Shares of beneficial
interest outstanding 55,463 82,477 24,160 28,909 28,762 3,801 295,458
-------------- -------------- --------------- -------------- -------------- ------------- ---------------
Net asset value and
offering price per
Share $20.52 $26.78 $10.06 $13.10 $9.89 $10.00 $1.00
============== ============== =============== ============== ============== ============= ===============
See accompanying notes to financial statements.
</TABLE>
Year Ended August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
-------------- -------------- --------------- -------------- --------------- -------------- --------------
U.S.
Large Large Investment Government
Capitalization Capitalization Small International Quality Municipal Money Market
Value Growth Capitalization Equity Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- -------------- --------------- -------------- --------------- -------------- --------------
Investment Income
Dividends $850,489 (1) $632,641 $166,433 $538,033 (1) $0 $0 $ 0
Interest 415,560 45,590 34,838 2,378,129 561,130 2,274,367
-
Other Income 466 723 - 232 (39) 84 -
-------------- -------------- --------------- -------------- --------------- -------------- --------------
Total investment income 1,266,515 678,954 201,271 538,265 2,378,090 561,214 2,274,367
-------------- -------------- --------------- -------------- --------------- -------------- --------------
Operating Expenses
Management fees(note 2a) 427,693 672,927 214,400 179,794 222,428 60,077 216,249
Administration fees(note 2c) 43,226 72,939 22,662 17,017 30,006 9,230 30,261
Transfer and dividend
disbursing 112,046 173,417 53,669 51,665 70,041 15,551 79,787
agent fees
Custodian fees (note 2a) 56,032 39,157 60,648 35,650 40,663 58,192 52,807
Registration fees 24,510 24,246 20,102 17,497 22,139 15,789 23,858
Amortization of deferred
organization expenses 12,749 12,749 12,749 12,749 12,749 12,749 12,749
(note 1c)
Auditing fees 12,256 13,003 12,256 15,577 13,003 14,352 12,256
Reports and notices to
Shareholders 9,342 19,838 9,160 5,041 9,976 1,952 9,006
Legal fees 23,467 27,258 14,728 6,942 10,073 3,642 13,602
Trustees' fees 6,665 18,414 6,473 347 7,370 1,500 9,386
Distribution & Service Fees
(note 2d)
Class B 209 239 112 98 44 8 48
Class C 2,677 6,577 253 1,286 524 60 473
Miscellaneous 3,138 7,071 3,100 2,990 1,406 1,283 2,245
-------------- -------------- --------------- -------------- --------------- -------------- --------------
Total operating expenses 734,010 1,087,835 430,312 346,653 440,422 194,385 462,727
Less: Management fees
waived and/or expenses
assumed (note 2a) (17,055) - (32,279) (9,858) (2,113) (63,104) (8,784)
Expense offset
arrangement (note 2a) (1,837) (25,983) (341) (37,161) (12,893) (810) (827)
-------------- -------------- --------------- -------------- --------------- -------------- --------------
Net operating expenses 715,119 1,061,852 397,692 299,634 425,416 130,471 453,116
-------------- -------------- --------------- -------------- --------------- -------------- --------------
Net investment income
(loss) 551,396 (382,898) (196,421) 238,631 1,952,674 430,743 1,821,251
-------------- -------------- --------------- -------------- --------------- -------------- --------------
Realized and Unrealized
Gain(Loss) on Investments-Net
Net realized gain (loss) on
securities 3,911,254 7,636,240 538,422 703,979 94,374 78,058 (138)
Net change in unrealized
Appreciation
(depreciation) on
investments 4,723,895 30,990,758 8,450,520 3,788,888 (1,593,458) (807,644) -
-------------- -------------- --------------- -------------- --------------- -------------- --------------
Net realized gain (loss) and
change in unrealized
appreciation (depreciation)
on investments 8,635,149 38,626,998 8,988,942 4,492,867 (1,499,084) (729,586) (138)
Net increase (decrease) in
net assets resulting from
operations $9,186,546 $38,244,100 $8,792,521 $4,731,498 $453,590 ($298,843) $1,821,113
============== ============== =============== ============== =============== ============== ==============
(1) Net of foreign withholding taxes of $6,465 and $49,719 for Large
Capitalization Value and International Equity, respectively.
See accompanying notes to financial statements.
</TABLE>
ear Ended August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
------------------------------- -------------------------------- ----------------------------------
Large Capitalization Value Large Capitalization Growth Small Capitalization
Portfolio Portfolio Portfolio
------------------------------- -------------------------------- ----------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
August 31,1999 August 31,1998 August 31,1999 August 31,1998 August 31,1999 August 31,1998
Operations
Net investment income (loss) $551,397 $265,441 ($382,898) ($208,165) ($196,421) ($212,917)
Net realized gain (loss) on
investments 3,911,254 2,725,132 7,636,240 1,988,666 538,422 6,233,807
Net change in unrealized appreciation
(depreciation) on investments 4,723,895 (4,379,851) 30,990,758 (3,046,018) 8,450,520 (16,209,040)
--------------- --------------- ---------------- --------------- ----------------- ----------------
Net increase (decrease) in net assets
resulting from operations 9,186,546 (1,389,278) 38,244,100 (1,265,517) 8,792,521 (10,188,150)
--------------- --------------- ---------------- --------------- ----------------- ----------------
Dividends and Distributions to
Shareholders
Net investment income
Class I (238,346) (644,832) - - - -
Class B - - - - - -
Class C - - - - - -
Net realized gain
Class I (2,604,268) (403,394) (1,644,127) (2,127,182) (6,885,615) (1,999,133)
Class B - - - - - -
Class C - - - - - -
Total dividends and distributions
to shareholders (2,842,614) (1,048,226) (1,644,127) (2,127,182) (6,885,615) (1,999,133)
--------------- --------------- ---------------- --------------- ----------------- ----------------
Share Transactions of
Beneficial Interest
Net proceeds from shares sold
Class I 43,516,472 22,550,001 50,917,991 38,698,508 15,232,180 27,403,860
Class B 180,079 - 206,626 - 76,827 -
Class C 1,173,280 - 2,225,861 - 246,405 -
Reinvestment of dividends and
distributions
Class I 2,808,762 1,033,971 1,626,717 2,098,815 6,833,808 1,991,614
Class B - - - - - -
Class C - - - - - -
Cost of shares redeemed
Class I (16,842,950) (8,181,548) (40,089,419) (18,066,310) (8,991,933) (22,754,879)
Class B - - (11) - - -
Class C (26,750) - (26,409) - (6,695) -
Net increase in net assets from share
transactions of beneficial interest 30,808,893 15,402,424 14,861,356 22,731,013 13,390,592 6,640,595
---------------- --------------- ---------------- --------------- ----------------- ----------------
Total increase (decrease) in net 37,152,825 12,964,920 51,461,329 19,338,314 15,297,498 (5,546,688)
assets
Net Assets
Beginning of period 42,640,737 29,675,817 66,536,807 47,198,493 23,234,716 28,781,404
---------------- --------------- ---------------- --------------- ----------------- ----------------
End of period (including undistributed
(overdistributed) net investment
income of
$240,241, $553,292; $1,896, $1,896;
($20,273), $1,896; $117,534, $182,952;
$1,896, $11,254; $1,896, $2,047;
$1,896, $79,793,562 $42,640,737 $117,998,136 $66,536,807 $38,532,214 $23,234,716
and $1,895, respectively)
================ =============== ================ =============== ================= ================
See accompanying notes to financial statements.
</TABLE>
Year Ended August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------- -------------------------------- -------------------------------- ---------------------------
International Investment Quality Municipal Bond U.S. Government
Equity Portfolio Bond Portfolio Portfolio Money Market Portfolio
- --------------------------------- -------------------------------- -------------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
August 31,1999 August 31,1998 August 31,1999 August 31,1998 August 31,1999 August 31,1998 August 31,1999 August 31,1998
- -------------- --------------- -------------- --------------- ------------- ---------------- ------------- ---------------
- -------------- --------------- -------------- --------------- ------------- ---------------- ------------- ---------------
$238,631 $169,244 $1,952,674 $1,347,436 $430,743 $340,545 $1,821,251 $1,361,390
703,979 (261,415) 94,374 171,095 78,058 38,175 (138) (2,092)
3,788,888 (725,764) (1,593,458) 392,011 (807,644) 281,588 - -
- --------------- --------------- --------------- --------------- -------------- --------------- -------------- ---------------
- --------------- --------------- --------------- --------------- -------------- --------------- -------------- ---------------
4,731,498 (817,935) 453,590 1,910,542 (298,843) 660,308 1,821,113 1,359,298
- --------------- --------------- --------------- --------------- -------------- --------------- -------------- ---------------
- --------------- --------------- --------------- --------------- -------------- --------------- -------------- ---------------
(173,213) (45,288) (1,950,367) (1,347,402) (430,382) (352,177) (1,819,600) (1,361,390)
- - (159) - (24) - (142) -
- - (2,186) - (186) - (1,510) -
- - (225,023) (33,855) (43,266) (10,602) - -
- - - - - - - -
- - - - - - - -
(173,213) (45,288) (2,177,735) (1,381,257) (473,858) (362,779) (1,821,252) (1,361,390)
- ---------------- -------------- ---------------- -------------- ------------ ---------------- --------------- ---------------
- ---------------- -------------- ---------------- -------------- ------------ ---------------- --------------- ---------------
13,305,963 12,655,895 23,031,923 19,032,965 5,637,079 4,305,933 50,062,160 45,684,586
65,536 - 64,322 - 8,604 - 70,317 -
365,497 - 293,323 - 46,798 - 350,624 -
171,246 44,303 2,128,885 1,403,653 468,341 359,150 1,777,737 1,324,090
- - 177 - 29 - 153 -
- - 2,239 - 182 - 1,522 -
(8,226,685) (3,258,982) (18,093,662) (7,749,618) (3,571,865) (2,391,818) (41,973,797) (37,085,981)
- - (49) - - - - -
(16,947) - (8,367) - (8,296) - (56,687) -
5,664,610 9,441,216 7,418,791 12,687,000 2,580,872 2,273,265 10,232,029 9,922,695
- --------------- --------------- --------------- --------------- ------------- ---------------- --------------- ---------------
- --------------- --------------- --------------- --------------- ------------- ---------------- --------------- ---------------
10,222,895 8,577,993 5,694,646 13,216,285 1,808,171 2,570,794 10,231,890 9,920,603
18,966,900 10,388,907 35,723,699 22,507,414 9,793,968 7,223,174 38,492,373 28,571,770
- --------------- --------------- --------------- --------------- ------------- ---------------- --------------- ---------------
- --------------- --------------- --------------- --------------- ------------- ---------------- --------------- ---------------
$29,189,795 $18,966,900 $41,418,345 $35,723,699 $11,602,139 $9,793,968 $48,724,263 $38,492,373
=============== =============== ================ =============== =============== ================ =============== =============
=============== =============== ================ =============== =============== ================ =============== =============
</TABLE>
August 31, 1999
- --------------------------------------------------------------------------------
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; Thorsell, Parker
Partners, Inc.: Small Capitalization; Sterling Capital Management Co.: U.S.
Government Money Market and Friend Ivory & Sime plc: International Equity.
Unified Fund Services, Inc. (the "Administrator") provides the Trust with
administrative services. Unified Management Corporation ( the "Distributor")
serves as the Trust's distributor. 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.
Currently, each portfolio offers Class I, Class B and Class C shares. Each class
represents interest in the same assets of the applicable portfolio, and the
classes are identical except for differences in their sales charge structures,
ongoing service and distribution charges and certain transfer agency expenses.
In addition, Class B shares and all corresponding reinvested dividend shares
automatically convert to Class I shares approximately eight years after
issuance. All classes of shares have equal voting privileges except that each
class has exclusive voting rights with respect to its service and/or
distribution plan.
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
substantially 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 recorded 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 recorded on accrual basis. 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
Dividends Capital Gains
----------------------------
Large Capitalization Value annually annually
Large Capitalization Growth annually annually
Small Capitalization annually annually
International Equity annually annually
Investment Quality Bond daily * annually
Municipal Bond daily * annually
U.S. Government Money Market daily * 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. 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.
(f) 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.
(g) Other
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
2. MANAGEMENT FEE, ADMINISTRATION FEE AND OTHER TRANSACTIONS WITH AFFILIATES
(a) The management fees are payable monthly by the Portfolio to the Manager and
are computed daily at the following annual rates of each Portfolio's average
daily net assets: .65% for Large Capitalization Value, Large Capitalization
Growth and Small Capitalization; .75% for International Equity; .55% for
Investment Quality Bond and Municipal Bond and .475% for U.S. Government Money
Market.
For the year ended August 31, 1999, the Manager voluntarily waived its
management fees and assumed $3,027 in other Operating expenses for Municipal
Bond. The Manager also voluntary waived $17,055; $19,468; $9,858; $2,113 and
$8,784 in management fees for Large Capitalization Value, Small Capitalization,
International Equity, Investment Quality Bond and U.S. Government Money Market,
respectively, for the year ended August 31, 1999.
The Portfolios also benefit from an expense offset arrangement with their
custodian bank where uninvested cash balances earn credits that reduce monthly
fees.
(b) The Manager, not the Portfolios, pays a portion of its management fees to
the Advisers at the following annual rates of each Portfolios' average daily net
assets: .30% for Large Capitalization Value, Large Capitalization Growth and
Small Capitalization; .40% for International Equity; .20% for Investment Quality
Bond and Municipal Bond and .125% for U.S. Government Money Market.
(c) The administration fee is accrued daily and payable monthly to the
Administrator. The administration fee for the year ended August 31, 1999 was
accrued at an annual rate of the lesser of .12% of each Portfolio's average
daily net assets or $234,000 (exclusive of out of pocket administration fees)
for the Trust.
(d) The Portfolios have adopted a Plan of Distribution (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act with respect to the distribution of Class B and
Class C shares of the Portfolios. The Plan provides that each Portfolio will pay
the Distributor or other entities a fee, which is accrued daily and paid
monthly, at the annual rate of 1.0% of the average net assets of Class B and
Class C shares. Up to 0..25% of average daily net assets may be paid directly to
the Manager for support services. A portion of the fee payable pursuant to the
Plan, equal to 0.25% of the average daily net assets, is currently characterized
as a service fee. A service fee is a payment made for personal service and/or
the maintenance of shareholder accounts.
(e) The Trust and the Manager have entered into an Excess Expense Agreement (the
"Expense Agreement") effective January 1, 1999. In connection with the Expense
Agreement the Manager is currently waiving its management fees and/or assuming
certain other operating expenses of the Portfolios in order to maintain the
expense ratios of each class of the Portfolios at or below predetermined levels
(each an "Expense Cap"). Under the terms of the Expense Agreement, expenses
borne by the Manager are subject to reimbursement by the Portfolios up to five
years from the date the fee or expense was incurred, but no reimbursement will
be made by a Portfolio if it would result in the Portfolio exceeding its Expense
Cap. The Expense Agreement can be terminated by either party, without penalty,
upon 60 days prior notice. For the period ended August 31, 1999, no
reimbursement payments were made by the Portfolios to the Manager under the
terms of the Expense Agreement.
3. PURCHASES AND SALES OF SECURITIES
For the year ended August 31, 1999 purchases and sales of investment securities,
other than short-term securities were as follows:
Purchases Sales
----------------------------
Large Capitalization Value $77,146,293 $45,608,685
Large Capitalization Growth 45,460,421 35,250,740
Small Capitalization 16,413,119 9,038,806
International Equity 15,964,818 10,331,903
Investment Quality Bond
29,843,809 23,366,432
Municipal Bond 3,834,250 2,395,112
4. UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL INCOME TAX PURPOSES
At August 31, 1999, the composition of unrealized appreciation (depreciation) of
investment securities were as follows:
Appreciation (Depreciation) Net
-----------------------------------------
Large Capitalization Value $12,078,894 ($4,346,723) $7,732,171
Large Capitalization Growth 42,536,554 (2,529,665) 40,006,889
Small Capitalization 5,697,381 (7,909,743) (2,212,362)
International Equity 4,820,003 (870,394) 3,949,608
Investment Quality Bond 4,514 (1,087,075) (1,082,561)
Municipal Bond 131,773 (476,113) (344,340)
For U.S. federal income tax, the cost of securities owned at August 31, 1999 was
substantially the same as the cost of securities for financial statement
purposes.
5. AUTHORIZED SHARES OF BENEFICIAL INTEREST AND PAR VALUE PER SHARE
Each Portfolio has unlimited Class I shares of beneficial interest authorized
with $.001 par value per share. Transactions in capital stock for the I Class
were as follows for the periods indicated:
Year Ended Year Ended
August 31, 1999 August 31,
1998
---------------- ---------------
Large Capitalization Value
Issued
2,133,762 797,161
Redeemed
(815,931) (496,095)
Reinvested from
Dividends 144,855 32,655
---------------- ---------------
Net Increase in
Shares 1,462,686 333,721
---------------- ---------------
Large Capitalization Growth
Issued
2,054,585 1,172,529
Redeemed
(1,573,032) (1,112,030)
Reinvested from
Dividends 71,851 -
---------------- ---------------
---------------- ---------------
Net Increase in
Shares 553,404 60,499
---------------- ---------------
Small Capitalization
Issued
1,541,540 671,535
Redeemed
(919,820) (492,311)
Reinvested from
Dividends 795,518 107,862
---------------- ---------------
Net Increase in
Shares 1,417,238 287,086
---------------- ---------------
International Equity
Issued
1,115,375 456,093
Redeemed
(686,830) (219,913)
Reinvested from
Dividends 14,969 15,919
---------------- ---------------
Net Increase in
Shares 443,514 252,099
---------------- ---------------
Investment Quality Bond
Issued
2,250,732 1,132,061
Redeemed
(1,776,225) (705,446)
Reinvested from
Dividends 209,194 101,660
---------------- ---------------
Net Increase in
Shares 683,701 528,275
---------------- ---------------
Municipal Bond
Issued
534,305 407,955
Redeemed
(336,987) (227,322)
Reinvested from
Dividends 44,442 34,043
---------------- ---------------
Net Increase in
Shares 241,760 214,676
---------------- ---------------
U.S. Government Money Market
Issued
50,062,160 45,684,586
Redeemed (41,973,797)
(37,085,981)
Reinvested from
Dividends 1,777,737 1,324,090
---------------- ---------------
Net Increase in
Shares 9,866,100 9,922,695
---------------- ---------------
Each Portfolio has unlimited Class B and Class C shares of beneficial interest
authorized with $.001 par value per share. Transactions in capital stock for the
Class B and Class C shares were as follows for the period indicated:
Class B Class C
Period from Period from
January 4, 1999 * January 4, 1999 *
to August 31, 1999 to August 31, 1999
----------------- -----------------
Large Capitalization Value
Issued 8,367 56,675
Redeemed - (1,212)
Reinvested from Dividends - -
----------------- -----------------
Net Increase in Shares 8,367 55,463
----------------- -------------------
Large Capitalization Growth
Issued 7,611 83,457
Redeemed - (980)
Reinvested from Dividends - -
----------------- -------------------
Net Increase in Shares 7,611 82,477
----------------- -------------------
Small Capitalization
Issued 7,276 24,889
Redeemed - (729)
Reinvested from Dividends - -
----------------- -------------------
Net Increase in Shares 7,276 24,160
----------------- -------------------
International Equity
Issued 5,159 30,308
Redeemed - (1,399)
Reinvested from Dividends - -
----------------- -----------------
Net Increase in Shares 5,159 28,909
----------------- -------------------
Investment Quality Bond
Issued 6,465 29,380
Redeemed (5) (843)
Reinvested from Dividends 18 225
----------------- -----------------
Net Increase in Shares 6,478 28,762
----------------- -------------------
Municipal Bond
Issued 837 4,598
Redeemed - (815)
Reinvested from Dividends 3 18
----------------- -----------------
Net Increase in Shares 840 3,801
----------------- -------------------
U.S. Government Money Market
Issued 70,317 350,624
Redeemed - (56,688)
Reinvested from Dividends 153 1,522
----------------- -----------------
Net Increase in Shares 70,470 295,458
----------------- -------------------
* Commencement of offering
6. CAPITAL LOSS CARRYFORWARDS
At August 31, 1999, the following portfolios had, for Federal income tax
purposes, unused capital loss carryforwards available to offset Future capital
gains through the following fiscal years ended August 31:
<TABLE>
<S> <C> <C> <C> <C> <C>
Name of Portfolio Total 2005 2006 2007
U.S. Government Money Market Portfolio $2,309 $32 $187 $2,090
</TABLE>
In accordance with U.S. Treasury regulations, the following Portfolios have
incurred and will elect to defer realized capital losses Arising after October
31, 1998 ("Post-October losses"). Such losses are treated for tax purposes as
arising on the first business day of the Portfolio's next taxable year
(September 1, 1999).
Capital
Losses
------------------
Large Capitalization Value Portfolio $
-
Large Capitalization Growth Portfolio
-
Small Capitalization Portfolio
-
International Equity Portfolio
-
Investment Quality Bond Portfolio 24,365
Municipal Bond Portfolio
-
U.S. Government Money Market Portfolio 54
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME FROM DIVIDENDS AND
INVESTMENT OPERATIONS DISTRIBUTIONS RATIOS
--------------------------------------------------------------------- -----------------------------
Ratio
Distributions Ratio of Net
Net to of Net Investment
Realized Dividends Shareholders Operating Income
Net Asset And to from Net Net Net Expenses (Loss)
Value, Unrealized Total Shareholders Realized Asset Assets to to
Beginning Net Investment Gain(Loss) from Net Gains Value, End of Average Average Portfolio
of Income on Investment Investment on End of Total Period Net Net Turnover
Period (Loss) Investments Operations Income Investments Period Return* (000's) Assets Assets Rate
Large Capitalization Value Portfolio (Class I)
Year Ended August 31,
1999 $18.15 $0.13 $3.40 $3.53 ($0.09) ($1.00) $20.59 19.84% $78,484 1.10%(4) 0.84%(4) 67%
Year Ended August 31,
1998 18.57 0.14 0.07 0.21 (0.39) (0.24) 18.15 0.96% 42,641 1.30%(1) 0.69%(1) 54%
Year Ended August 31,
1997 14.45 0.09 4.37 4.46 (0.08) (0.26) 18.57 31.37% 29,676 1.31%(1) 0.60%(1) 25%
Year Ended August 31,
1996 12.30 0.07 2.33 2.40 (0.11) (0.14) 14.45 19.73% 18,274 1.28%(1) 0.97%(1) 26%
September 2, 1994 (2)
To August 31, 1995 10.00(3) 0.15 2.20 2.35 (0.05) -- 12.30 23.60% 5,515 0.40%(1,4)2.29%(1,4)33%
</TABLE>
(1) During the fiscal years ended August 31,1999, August 31, 1998 and August
31,1997, Saratoga Capital Management waived a portion of its management fees.
During all other time periods presented above, Saratoga Capital Management
waived all of its fees and assumed a portion of the operating expenses.
Additionally, for the periods presented above, 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 of net
investment income (loss) to average daily net assets would have been 1.12% and
0.86% respectively, for the year ended August 31, 1999, 1.39% and 0.60%,
respectively, for the year ended August 31,1998, 1.56% and 0.35%, respectively,
for the year ended August 31,1997, 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.
Large Capitalization Growth Portfolio (Class I)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended August 31,
1999 $17.83 ($0.09) $9.65 $9.56 -- $(0.41) $26.98 54.03% $115,586 1.02%(4) (0.36%)(4) 39%
Year Ended August 31,
1998
17.87 (0.07) 0.81 0.74 - (0.78) 17.83 3.91% 66,537 1.18%(1)(0.34%)(1) 45%
Year Ended August 31,
1997 13.16 (0.02) 4.73 4.71 -- -- 17.87 35.79% 47,197 1.36%(1) (0.12%)(1)53%
Year Ended August 31,
1996 12.86 (0.02) 0.35 0.33 (0.01) (0.02) 13.16 2.56% 33,962 1.34%(1) (0.13%)(1)50%
September 2, 1994 (2)
to August 31, 1995 10.00(3) 0.02 2.85 2.87 (0.01) -- 12.86 28.77% 11,107 0.51%(1,4) 0.32%(1,4)23%
</TABLE>
(1) During the fiscal years ended August 31,1999, August 31, 1998 and August
31,1997, Saratoga Capital Management waived a portion of its management fees.
During all other time periods presented above, Saratoga Capital Management
waived all of its fees and assumed a portion of the operating expenses.
Additionally, for the periods presented above, 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 of net
investment income (loss) to average daily net assets would have been 1.02% and
(0.36%) respectively, for the year ended August 31, 1999, 1.25% and (0.41%),
respectively, for the year ended August 31,1998, 1.36% and (0.20%),
respectively, for the year ended August 31,1997, 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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Capitalization Portfolio (Class I)
Year Ended August 31,
1999 $9.82 ($0.05) $3.02 $2.97 -- $ (2.69) $10.10 34.91% $38,225 1.21%(4) (0.60%)(4) 32%
Year Ended August 31,
1998 15.05 (0.10) (4.20) (4.30) -- (0.93) 9.82 (30.64%) 23,235 1.28%(1) (0.63%)(1) 96%
Year Ended August 31,
1997 13.58 (0.07) 2.37 2.30 -- (0.83) 15.05 18.07% 28,781 1.30%(1) (0.70%)(1) 162%
Year Ended August 31,
199 12.62 (0.09) 1.44 1.35 ($0.00) (0.39) 13.58 11.03% 22,071 1.25%(1) (0.83%)(1) 95%
September 2, 1994 (2)
to August 31, 1995 10.00(3) 0.02 2.61 2.63 (0.01) -- 12.62 26.38% 15,103 0.42%(1,4) 0.07%(1,4) 111%
</TABLE>
(1) During the fiscal years ended August 31,1999, August 31, 1998 and August
31,1997, Saratoga Capital Management waived a portion of its management fees.
During all other time periods presented above, Saratoga Capital Management
waived all of its fees and assumed a portion of the operating expenses.
Additionally, for the periods presented above, 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 of net
investment income (loss) to average daily net assets would have been 1.31% and
(0.70%), respectively, for the year ended August 31, 1999, 1.44% and 0.98%,
respectively, for the year ended August 31,1998, 1.64% and (1.04%),
respectively, for the year ended August 31,1997, 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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
International Equity Portfolio (Class I)
Year Ended August 31,
1999 $10.92 $0.11 $2.25 $2.36 ($0.10) -- $13.18 21.70% $28,743 1.45%(4) 1.00%(4) 46%
Year Ended August 31,
1998 10.74 0.13 0.09 0.22 (0.04) - 10.92 2.08% 18,967 1.40%(1) 1.14%(1) 58%
Year Ended August 31,
1997 9.59 0.23 1.12 1.35 (0.20) -- 10.74 14.39% 10,389 1.64%(1) 0.32%(1) 58%
Year Ended August 31,
1996 9.33 0.00 0.34 0.34 (0.03) (0.05) 9.59 3.68% 6,857 1.65%(1) 0.23%(1) 58%
September 2, 1994 (2)
to August 31, 1995 10.00(3) 0.05 (0.71) (0.66) (0.01) -- 9.33 (6.61%) 2,907 0.38%(1,4) 1.03%(1,4) 36%
</TABLE>
(1) During the fiscal years ended August 31,1997, August 31, 1998 and August 31,
1999, Saratoga Capital Management waived a portion of its management fees.
During all other time periods presented above, Saratoga Capital Management
waived all of its fees and assumed a portion of the operating expenses.
Additionally, for the periods presented above, 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 of net
investment income (loss) to average daily net assets would have been 1.49% and
1.04% respectively, for the year ended August 31, 1999, 1.96% and 0.59%,
respectively, for the year ended August 31,1998, 2.76% and (1.00%),
respectively, for the year ended August 31,1997, 3.91% and (2.33%),
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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Quality Bond Portfolio (Class I)
Year Ended August 31,
1999 $10.29 $0.49 ($0.35) $0.14 ($0.49) ($0.06) $9.88 1.33% $41,070 1.05%(4) 4.85%(4) 62%
Year Ended August 31,
1998 10.09 0.50 0.21 0.71 (0.50) (0.01) 10.29 7.21% 35,724 1.19%(1) 4.86%(1) 44%
Year Ended August 31,
1997 9.91 0.51 0.18 0.69 (0.51) 0.00 10.09 7.16% 22,507 1.28%(1) 5.03%(1) 30%
Year Ended August 31,
1996 10.08 0.48 (0.16) 0.32 (0.48) (0.01) 9.91 3.23% 16,864 1.31%(1) 4.84%(1) 55%
September 2, 1994 (2)
To August 31, 1995 10.00(3) 0.60 0.08 0.68 (0.60) -- 10.08 7.12% 4,503 0.45%(1,4) 5.77%(1,4)18%
</TABLE>
(1) During the fiscal years ended August 31,1999, August 31, 1998 and August
31,1997, Saratoga Capital Management waived a portion of its management fees.
During all other time periods presented above, Saratoga Capital Management
waived all of its fees and assumed a portion of the operating expenses.
Additionally, for the periods presented above, 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 of net
investment income (loss) to average daily net assets would have been 1.06% and
4.86%, respectively, for the year ended August 31, 1999, 1.37% and 4.69%,
respectively, for the year ended August 31,1998, 1.52% and 4.71%, respectively,
for the year ended August 31,1997, 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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Bond Portfolio (Class I)
Year Ended August 31,
1999 $10.72 $0.42 ($0.68) ($0.26) ($0.42) ($0.04) $10.00 (2.55%) $11,556 1.20%(4) 3.96%(4) 23%
Year Ended August 31,
1998 10.33 0.43 0.42 0.85 (0.44) (0.02) 10.72 8.42% 9,794 1.20%(1) 4.07%(1) 18%
Year Ended August 31,
1997 10.00 0.43 0.33 0.76 (0.43) -- 10.33 7.67% 7,223 1.21%(1) 4.19%(1) 20%
Year Ended August 31,
1996 9.93 0.41 0.07 0.48 (0.41) -- 10.00 4.88% 4,708 1.23%(1) 4.03%(1) 12%
September 2, 1994 (2)
To August 31, 1995 10.00 (3) 0.51 (0.07) 0.44 (0.51) -- 9.93 4.65% 1,477 0.37%(1,4)4.79%(1,4) 27%
</TABLE>
(1) During the fiscal years ended August 31,1999, August 31, 1998 and August
31,1997, Saratoga Capital Management waived a portion of its management fees.
During all other time periods presented above, Saratoga Capital Management
waived all of its fees and assumed a portion of the operating expenses.
Additionally, for the periods presented above, 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 of net
investment income (loss) to average daily net assets would have been 1.68% and
4.54% respectively, for the year ended August 31, 1999, 2.15% and 3.12%,
respectively, for the year ended August 31,1998, 2.96% and 2.43%, respectively,
for the year ended August 31,1997, 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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.Government Money Market Portfolio (Class I)
Year Ended August 31,
1999 $1.00 $0.044 $0.00 $0.044 $(0.044) $ - $1.000 4.11% $48,358 1.00%(4) 4.02%(4) n/a
-
Year Ended August 31,
1998
1.00 0.045 - 0.045 (0.045) 1.000 4.59% 38,492 1.12%(1) 4.41%(1) n/a
Year Ended August 31,
1997 1.00 0.043 0.000 0.043 (0.043) -- 1.000 4.41% 28,572 1.12%(1) 4.31%(1) n/a
Year Ended August 31,
1996 1.00 0.044 0.000 0.044 (0.044) -- 1.000 4.47% 22,906 1.13%(1) 4.30%(1) n/a
September 2, 1994 (2)
to August 31, 1995 1.00(3) 0.052 0.000 0.052 (0.052) -- 1.000 5.36% 5,072 0.40%(1,4) 5.38%(1,4) n/a
</TABLE>
(1) During the fiscal years ended August 31,1999, August 31, 1998 and August
31,1997, Saratoga Capital Management waived a portion of its management fees.
During all other time periods presented above, Saratoga Capital Management
waived all of its fees and assumed a portion of the operating expenses.
Additionally, for the periods presented above, 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 of net
investment income (loss) to average daily net assets would have been 1.02% and
4.04%, respectively, for the year ended August, 31 1999, 1.30% and 4.24%,
respectively, for the year ended August 31,1998, 1.35% and 4.08%, respectively,
for the year ended August 31,1997, 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.
- --------------------------------------------------------------------------------
(2) Commencement of operations.
(3) Initial offering price.
(4) Annualized.
* Assumes reinvestment of all dividends and distributions. Aggregate (not
annualized) total return is shown for any period shorter than one year.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME FROM DIVIDENDS AND
INVESTMENT OPERATIONS DISTRIBUTIONS RATIOS
--------------------------------------------------------------------- -----------------------------
Ratio
Distributions Ratio of Net
Net to of Net Investment
Realized Dividends Shareholders Operating Income
Net Asset And to from Net Net Net Expenses (Loss)
Value, Unrealized Total Shareholders Realized Asset Assets to to
Beginning Net Investment Gain(Loss) from Net Gains Value, End of Average Average Portfolio
of Income on Investment Investment on End of Total Period Net Net Turnover
Period (Loss) Investments Operations Income Investments Period Return* (000's) Assets Assets Rate
Large Capitalization Value Portfolio (Class B)
January 4, 1999 (1)
to August 31, 1999
$ 20.21 $ (0.02) $ 0.31 $0.29 $ - $ - $ 20.50 1.43% $ 172 1.72%(2) (0.53%)(2) 67%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 2.21% and 1.02% respectively, for the year ended August 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Large Capitalization Growth Portfolio (Class B)
January 4, 1999 (1)
to August 31, 1999
$ 24.74 $ (0.04) $ 2.05 $ 2.01 $ - $ - $ 26.75 8.12% $204 1.19%(2) (0.73%)(2) 39%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 3.31% and (2.86%) respectively, for the year ended August 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Capitalization Portfolio (Class B)
January 4, 1999 (1)
to August 31, 1999
$ 9.33 $ (0.02) $ 0.73 $ 0.71 $ - $ - $ 10.04 7.61% $73 1.42%(2) (1.02%)(2) 32%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 1.43% and (1.02%) respectively, for the year ended August 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
International Equity Portfolio (Class B)
January 4, 1999 (1)
to August 31, 1999
$ 12.29 $ (0.02) $ 0.82 $ 0.80 $ - $ - $ 13.09 6.51% $ 68 2.16%(2) (0.77%)(2) 46%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 2.84% and (1.45%) respectively, for the year ended August 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Quality Bond Portfolio (Class B)
January 4, 1999 (1)
to August 31, 1999
$ 10.29 $ 0.28 $ (0.41) $ (0.13) $ (0.28) $ - $9.88 (1.32%) $ 64 1.07%(2) 2.23% (2) 62%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 1.13% and 2.29 % respectively, for the year ended August 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Bond Portfolio (Class B)
January 4, 1999 (1)
to August 31, 1999
$ 10.66 $ 0.25 $ (0.66) $ (0.41) $(0.25) % - $ 10.00 (3.91%) $8 1.24%(2) 1.76%(2) 23%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 1.44% and 1.96 % respectively, for the year ended August 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Money Market Portfolio (Class B)
January 4, 1999 (1)
to August 31, 1999
$ 1.000 $ 0.022 $ - $ 0.022 $(0.022) $ - $1.000 1.94% $ 70 1.06%(2) 1.82%(2) N/a
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 1.10% and 1.86 % respectively, for the year ended August 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Commencement of offering.
(2) Not Annualized.
* Assumes reinvestment of all dividends and distributions. Aggregate (not
annualized) total return is shown for any period shorter than one year.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME FROM DIVIDENDS AND
INVESTMENT OPERATIONS DISTRIBUTIONS RATIOS
--------------------------------------------------------------------- -----------------------------
Ratio
Distributions Ratio of Net
Net to of Net Investment
Realized Dividends Shareholders Operating Income
Net Asset And to from Net Net Net Expenses (Loss)
Value, Unrealized Total Shareholders Realized Asset Assets to to
Beginning Net Investment Gain(Loss) from Net Gains Value, End of Average Average Portfolio
of Income on Investment Investment on End of Total Period Net Net Turnover
Period (Loss) Investments Operations Income Investments Period Return* (000's) Assets Assets Rate
Large Capitalization Value Portfolio (Class C)
January 4, 1999 (1)
to August 31, 1999
$ 20.21 $ 0.04 $ 0.27 $ 0.31 $ - $ - $ 20.52 1.53% $1,138 0.61%(2) 0.56%(2) 67%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 1.41% and 1.36 % respectively, for the year ended August 31, 1999.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Large Capitalization Growth Portfolio (Class C)
January 4, 1999 (1)
to August 31, 1999
$ 24.74 $ (0.10) $ 2.14 $ 2.04 $- $- $ 26.78 8.25% $2,209 1.22%(2) (0.82%)(2) 39%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 1.34% and 0.94 % respectively, for the year ended August 31, 1999.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Capitalization Portfolio (Class C)
January 4, 1999 (1)
to August 31, 1999
$ 9.33 $ (0.02) $ 0.75 $ 0.73 $ - $ - $ 10.06 13.72% $ 243 1.46%(2) (1.09%)(2) 32%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 1.56% and (1.19 %) respectively, for the year ended August 31, 1999.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
International Equity Portfolio (Class C)
January 4, 1999 (1)
to August 31, 1999
$ 12.29 $ 0.02 $ 0.79 $ 0.81 $ - $ - $ 13.10 6.59% $ 380 1.15%(2) 0.20%(2) 46%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 1.29% and 0.34 % respectively, for the year ended August 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Quality Bond Portfolio (Class C)
January 4, 1999 (1)
to August 31, 1999
$ 10.29 $ .28 $ (0.40) $ (0.12) $ (0.28) $ - $ 9.89 (1.21%) $ 284 1.26%(2) 2.69%(2) 62%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 1.30% and 2.73 % respectively, for the year ended August 31, 1999.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Bond Portfolio (Class C)
January 4, 1999 (1)
to August 31, 1999
$ 10.66 $ 0.25 $ (0.68) $ (0.43) $ (0.23) $ - $ 10.00 (4.12%) $ 38 0.68%(2) 2.64%(2) 23%
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 1.82% and 3.78 % respectively, for the year ended August 31, 1999.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Money Market Portfolio (Class C)
January 4, 1999 (1)
to August 31, 1999
$ 1.000 $ 0.022 $ - $ 0.022 $ (0.022) $ - $ 1.000 1.99% $ 295 1.22%(2) 2.03%(2) n/a
0.022 - 0.022 (0.022) -
</TABLE>
(1) During the fiscal year ended August 31,1999, Saratoga Capital Management
waived a portion of its management fees. During all other time periods presented
above, Saratoga Capital Management waived all of its fees and assumed a portion
of the operating expenses. Additionally, for the periods presented above, 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 of net investment income (loss) to average daily net assets would
have been 1.26% and 2.07 % respectively, for the year ended August 31, 1999.
- --------------------------------------------------------------------------------
(1) Commencement of offering.
(2) Not Annualized
* Assumes reinvestment of all dividends and distributions. Aggregate (not
annualized) total return is shown for any period shorter than one year.
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 (the "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, 1999,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for the years ended August 31, 1999 and 1998. 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. The financial
highlights for each of the two years in the period then ended, were audited by
other auditors whose report dated October 29, 1997, expressed an unqualified
opinion on the financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1999, 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 audited by us present fairly, in all material respects, the financial
position of each of the respective portfolios constituting The Saratoga
Advantage Trust at August 31, 1999, and the results of its operations for the
year then ended, and the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the two years in
the period then ended in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
October 15, 1999
- --------------------------------------------------------------------------------
TAX INFORMATION
- --------------------------------------------------------------------------------
We are required by subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of each portfolio's fiscal year end
(August 31, 1999) as to the federal tax status of distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that the
following distributions paid during the fiscal year by the Portfolios were
derived from the following sources:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net Long-Term Dividend*
Investment Short-Term Capital Gains Received
Income Capital Gains** (20% rate) Deduction
------------------- --------------------------------------------- ------------------
Large Capitalization Value Portfolio $ 238,346 $ 269,062 $ 2,335,206 56.05%
Large Capitalization Growth Portfolio - - 1,644,127
Small Capitalization Portfolio - 6,166,520 719,095 5.38%
International Equity Portfolio 173,213 - -
Investment Quality Bond Portfolio 1,952,712 128,391 96,632
Municipal Bond Portfolio*** 430,592 9,258 34,008
U.S. Government Money Market Portfolio 1,821,252 - -
</TABLE>
In addition, the Saratoga Advantage Trust - International Equity Portfolio
intends to make an election under Internal Revenue Code Section 853 to pass
through foreign taxes paid by the portfolio to its shareholders. The total
amount of foreign taxes paid that may be passed through to the shareholders for
the fiscal year August 31, 1999 is $49,719.
* Percentage of ordinary income dividends qualifying for the dividends
received deduction available to corporate shareholders.
** Taxable as ordinary income.
*** The Portfolio's net investment income is tax exempt.
Since each Portfolio's fiscal year is not the calendar year, another
notification will be sent with respect to the calendar year 1999. Such
notification, which will reflect the amount to be used by calendar year
taxpayers on their federal income tax returns, will be made in conjunction with
Form 1099 DIV and will be mailed in January 2000. Shareholders are advised to
consult their own tax advisers with respect to the tax consequences of their
investment in each of the Portfolios.
TRUSTEES AND OFFICERS
Bruce E. Ventimiglia Trustee, Chairman, President & CEO
Patrick H. McCollough Trustee
Udo W. Koopmann Trustee
Floyd E. Seal Trustee
Stephen Ventimiglia Vice President
Scott C. Kane Vice President & Secretary
William P. Marra Treasurer & Chief Financial Officer
Michael Durham Assistant Treasurer
Carol Highsmith Assistant Secretary
Investment Manager Distributor
Saratoga Capital Management Unified Management Corporation
1501 Franklin Avenue 431 North Pennsylvania Street
Mineola, NY 11501-4803 Indianapolis, IN 46204-1806
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
