THE SARATOGA ADVANTAGE TRUST
SEMI ANNUAL REPORT
AS OF FEBRUARY 28, 1999
TABLE OF CONTENTS
President's
Letter Page 1
Investment
Review Page 3
Schedules of
Investments Page 10
Statements of Assets and
Liabilities Page 31
Statements of
Operations Page 32
Statements of Changes in Net
Assets Page 33
Notes to Financial
Statements Page 35
Financial
Highlights Page 39
This report is authorized for distribution only
to shareholders and to others who have
received a copy of the prospectus.
<PAGE>
TRUSTEES AND OFFICERS
Bruce E. Ventimiglia Trustee, Chairman, President & CEO
Patrick H. McCollough Trustee
Udo W. Koopmann Trustee
Floyd E. Seal Trustee
Scott C. Kane Vice President & Secretary
Stephen Ventimiglia Vice President
William 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
Transfer and Shareholder Servicing Agent Custodian
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 8514 P.O. Box 351
Boston, MA 02266 Boston, MA 02101
<PAGE>
3
THE SARATOGA ADVANTAGE TRUST
Semi-Annual Report to Shareholders
April 17, 1999
Dear Shareholder:
We are pleased to provide you with this semi-annual report on the investment
strategies and performance of the portfolios in the Saratoga Advantage Trust
(the "Trust").
This report covers the six months from September 1, 1998 through February 28,
1999, a period of positive domestic stock and bond investment returns. During
this period of time, the portfolios in the Trust all reported positive returns.
On March 29, 1999, the Dow Jones Industrial Average made history by closing
above 10,000 for the first time since it was launched by Charles Dow nearly 103
years ago at 40.94 points. While this is an important historic milestone for the
Dow, 1998 proved to be a year in which taking the performance of indicies at
face value could be very misleading. For example, the NASDAQ Index (a
capitalization weighted index of 4,600 stocks) was up 40% in 1998. On the
surface, it appears as though these stocks performed exceptionally well.
However, when you peel the cover off of this index you discover that 20 large
capitalization technology stocks (including Microsoft, Cisco and Dell Computer)
accounted for 85% of the NASDAQ's gain. If you remove the top 20 stocks from the
NASDAQ Index and calculate an unweighted average for the remaining 4,580 stocks
you actually come up with a loss of 4% for the year! The same was true, to a
lesser degree, of the S&P 500. The wide variance in performance in the S&P 500
was exacerbated by the wide divergence between the value and growth styles of
money management. In 1998, the S&P 500 Index gained 28.6%; again, on the surface
all appears well. However, beneath the surface of the S&P 500 you find one of
the largest performance divergences ever between the value and growth styles. In
1998, the S&P/Barra Value Index gained 14.9% while the S&P/Barra Growth Index
nearly tripled the value index, returning 42.4%. While unpredictable short-term
divergences abound and styles over short time horizons can go in and out of
favor, nothing has occurred on the investment horizon that should alter a sound
long-term strategy.
Stay Focused On Your Long-Term Investment Goals
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. We are
proud to be able to offer you the ability to access multiple investment asset
classes through the Trust's portfolios. These portfolios are managed by some of
the world's leading institutional investment advisory firms. Each of the
advisors has been selected on the basis of their: investment philosophy,
research capabilities, long-term investment performance, organizational
stability and other key factors. This diversity of portfolio structure is
designed to give you the opportunity to efficiently implement your asset
allocation strategy to create a balanced portfolio in accordance with your
investment goals and objectives.
When reviewing the performance of the institutional investment advisory firms
that manage the portfolios of the Trust, and the performance of money managers
in general, please remember that it is not unusual for managers' returns to vary
significantly from their benchmark indices over short-term measurement periods
such as several quarters. In fact, the more volatile the style of management the
more likely it is to have significant deviations from the index it is being
measured against over short-term measurement periods.
Following you will find specific information on the investment strategy and
performance of each of the portfolios. Please speak with your financial advisor
if you have any questions about your investment in the Saratoga Advantage Trust
or your allocation of assets among the portfolios.
We remain dedicated to serving your investment needs. Thank you for investing
with us.
Best wishes,
Bruce E. Ventimiglia
Chairman, President and
Chief Executive Officer
<PAGE>
LARGE CAPITALIZATION VALUE PORTFOLIO
Advised by:
OpCap Advisors
New York, New York
Objective: Seeks total return consisting of capital appreciation and dividend
income by investing 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>
Total Aggregate Large Capitalization Lipper Capital
Return for the Period Ended February Value Appreciation Funds
28, 1999 Portfolio ( Index1
Class I )
- ---------------------------------------- ---------------------- --------------------
9/1/94 (inception) - 2/28/99* 19.8% 18.2%
3/1/98 - 2/28/99 2.8% 11.1%
9/1/98 - 2/28/99 14.7% 29.5%
*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. The strong
contributors to the portfolio performance for six months ended February 28, 1999
included Rockwell International Corporation, WPP Group PLC, McDonalds
Corporation, AFLAC Inc., and Freddie Mac.
The Portfolio owned the common stocks of 38 companies as of February 28, 1999.
The five largest holdings included XL Capital (formerly known as EXEL Ltd.,) a
strongly capitalized specialty insurance company; Dover Corporation, a major
manufacturer of elevators and elevator products; Textron Inc., a major
manufacturer of aircraft and utility vehicle products; Wells Fargo & Co., one of
the largest commercial banking institutions; and AlliedSignal Inc., a major
manufacturer of aerospace and automotive products.
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, levaraging, purchasing unregistered
securities, purchasing options, etc. (the funds may take large cash
positions).
Past performance is not predictive of future performance.
<PAGE>
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>
Total Aggregate Large Capitalization
Return for the Period Growth Lipper Growth
Ended February 28, 1999 Portfolio ( Funds Index1
Class I )
- ---------------------------------------- ---------------------- -------------------
9/1/94 (inception) - 2/28/99* 25.5% 22.0%
3/1/98 - 2/28/99 31.3% 17.5%
9/1/98 - 2/28/99 49.0% 31.9%
*Annualized performance for periods greater than one year
</TABLE>
At various times during 1998, the volatility of the financial markets was enough
to make an investor dizzy. Sixty-two times during the year the Dow Jones
Industrial Average moved up or down by more than 100 points. Despite the
volatility, the year ended on a positive note, with stock market indices closing
at all-time highs and U.S. Treasury prices also near record levels.
While Harris Bretall forecasts a somewhat weaker economy in 1999 relative to
1998, we do not expect a dramatic reduction in the growth rate of corporate
earnings. The key fundamentals for investors to focus on remain sustainable
economic growth, dormant inflation, accommodative monetary policy, continued
earnings growth, stable interest rates and liquidity driven demand for financial
assets.
This economic environment has been called the "virtuous cycle," but for many
companies it has been a tough environment --- witnessed by the fact that
corporate profits were up only 5%. Harris Bretall believes that those companies,
which have been able to prosper during the past several years, will continue to
do well in 1999. With the projection of continued growth through the remainder
of the decade and the Dow reaching the 10,000 level, the portfolio for the
future should focus on large U.S. multinational companies with a concentration
in consumer franchises, high technology, health care and financial services. As
of February 1999, the Portfolio was invested in 44 stocks. The combination of
stocks in the Saratoga Advantage Trust Large Capitalization Portfolio Harris
Bretall believes is an example of a portfolio prepared to lead the market's
charge upward.
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.
Past performance is not predictive of future performance.
<PAGE>
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>
Total Aggregate Small Lipper Small
Return for the Period Capitalization Cap Funds Index1
Ended February 28, 1999 Portfolio
( Class I )
- ---------------------------------------- --------------------- ---------------------
9/1/94 (inception) - 2/28/99* 6.3% 11.0%
3/1/98 -2/28/99 -30.5% -13.2%
9/1/98-2/28/99 14.5% 15.9%
*Annualized performance for periods greater than one year
</TABLE>
While the long awaited bull market in small cap stocks has not yet materialized,
their absolute return has turned positive, as have the results of your
Portfolio. However, the potential major relative move, which we believe could be
of historic proportion, is still ahead of us.
During the last six months, the stand out sectors of your Portfolio were the
Consumer Discretionary, Producer Staples, Producer Durables and Technology
sectors. Within the Consumer Discretionary category, Toro is a leading
manufacturer and distributor of consumer mowing and turf maintenance equipment,
as well as irrigation systems for golf courses. In the Producer Staples sector,
Ball Corporation is a major producer of metal and plastic packaging products for
beverages and foods. Ball Corp. has recently acquired the majority of Reynolds
Metals global beverage can businesses. In the Producer Durable sector, Teleflex
is a manufacturer of high technology hardware in the commercial, medical and
aerospace industries. Teleflex is recognized as a particularly well managed
company with a long history of superior results. In 1998 the company produced
its twenty fourth consecutive record year with a 25% increase in revenue and an
18% increase in net income. In the Technology sector, Sterling Software develops
and markets software and related services. The company has been an aggressive
acquirer of software businesses including the 1997 acquisition of Texas
Instruments software division. These and the other smaller stocks, with strong
fundamentals and the lowest valuations in the past twenty years, portend a
return to the superior historical performance of the smaller cap companies and
of your Portfolio.
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.
Past performance is not predictive of future performance.
<PAGE>
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>
International Morgan Stanley
Total Aggregate Equity EAFE Index
Return for the Period Portfolio (U.S. Dollars)1
Ended February 28, 1999 ( Class I )
- ---------------------------------------- ------------------- --------------------
9/1/94 (inception) - 2/28/99* 4.7% 6.8%
3/1/98 - 2/28/99 2.8% 5.0%
9/1/98 - 2/28/99 8.7% 13.8%
*Annualized performance for periods greater than one year
</TABLE>
Over the past six months global stockmarkets have provided strong returns.
Monetary easing has provided some reassurance that a serious economic downturn
can be avoided in the West. The U.S. economy continues to grow strongly and
there are some tentative signs in the Far East that the pace of deterioration is
starting to slow down. Against this backdrop the Far East stockmarkets have
provided strong performance boosted by lower interest rates and a strengthening
yen. The yen appreciated sharply against all major currencies, reflecting lower
interest rates in the U.S. and Europe, and Japan's rising current account
surplus.
Global economic growth is expected to improve in 2000, after bottoming in 1999.
Equity market prospects depend upon whether the benign conditions of low
inflation with reasonable economic growth can be maintained. If they can be -
and we believe this is the most likely scenario - equity returns will be
reasonable, but will depend much more on earnings growth. We still favor
Continental European equities because the medium term earnings prospects remain
relatively good. We remain cautious on Japanese equities, with policy makers
still suggesting that they have little will to resolve the deep-seated problems.
The recent rise in the yen does not help the case.
As of February,1999 the major weightings in the Portfolio were as follows: 60.6%
in Continental Europe, 24.1% in the United Kingdom, 5.4% in Japan and 3.9% in
the Far East (ex-Japan).
Recent Portfolio additions include: Pohang Iron & Steel, the second largest and
most efficient steel producer in the world and the only fully integrated steel
producer in South Korea; and Vodafone, a leading provider of mobile
telecommunication services in the UK.
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.
<PAGE>
INVESTMENT QUALITY BOND PORTFOLIO
Advised by:
Fox Asset Management, Inc.
Little Silver, New Jersey
Objective: Seeks current income and reasonable stability of principal through
investment in a diversified portfolio of high quality, actively managed fixed
income securities.
<TABLE>
<S> <C> <C> <C>
Lipper
Investment Quality Short-Intermediate
Total Aggregate Bond Investment Grade
Return for the Period Portfolio Debt Funds
Ended February 28, 1999 ( Class I ) Index1
- ---------------------------------------- -------------------- --------------------
9/1/94 (inception) - 2/28/99* 5.7% 6.6%
3/1/98 - 2/28/99 4.5% 5.3%
9/1/98 - 2/28/99 1.1% 1.5%
*Annualized performance for periods greater than one year
</TABLE>
The Portfolio seeks to provide high income by investing primarily in investment
grade bonds with maturities between 2 and 10 years. In the 12 months ended
February 28, 1999, the Portfolio distributed dividends of $.49 per share.
Investments are normally divided approximately evenly between U.S. Treasury
securities and Corporate and Government Agency securities. Due to the
historically large yield advantage of Government Agency and Corporate bonds over
Treasuries, Corporate and Government Agency securities comprise approximately 75
% of the Portfolio at this time.
Fox will continue to focus on those instruments that offer improving credit
quality, liquidity, and the highest possible total return. Due to the challenge
of trying to preserve principal in the current volatile market environment, Fox
is maintaining a conservative investment posture with an average maturity of 3.8
years, and an average duration of 3.2 years in the Portfolio.
Other Portfolio statistics as of February 28, 1999 are as follows: Average
weighted yield-to-maturity was 6.4%, average weighted coupon was 6.5%, and the
average Moody's Rating was A1 with 33 fixed income issues held.
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.
Past performance is not predictive of future performance.
<PAGE>
MUNICIPAL BOND PORTFOLIO
Advised by:
OpCap Advisors
New York, New York
Objective: Seeks a high level of interest income exempt from federal income
taxation consistent with prudent investment management and the preservation of
capital.
<TABLE>
<S> <C> <C> <C>
Lipper General
Total Aggregate Municipal Bond Municipal Debt
Return for the Period Portfolio ( Class Funds Index1
Ended February 28, 1999 I )
- ---------------------------------------- -------------------- --------------------
9/1/94 (inception) - 2/28/99* 6.1% 7.2%
3/1/98-2/28/99 5.2% 5.2%
9/1/98-2/28/99 1.7% 1.9%
*Annualized performance for periods greater than one year
</TABLE>
Though the markets were extremely volatile over the past six months, yields on
longer term municipal bonds were little changed from the end of August to the
end of February. During the six month span, the Federal Reserve lowered short
term rates three times in response to global economic panic exacerbated by
Russian devaluations and bond defaults as well as Latin America and Asian
financial upheaval. The long treasury bond yield moved to 4.75% as world money
poured into the safe haven of treasuries. Municipals, as well as spread fixed
income securities, underperformed during this period as treasuries took center
stage. Municipal long term yields were at parity with treasury yields before
factoring in the considerable tax advantages. As fears abated after the new
year, and it appeared that the domestic economy would continue to steamroll, the
bond market sold off rather dramatically and the long treasury bond yield rose
to 5.64% at February month end. At this time of bond market weakness, municipals
outperformed treasuries as they had become so cheap to treasuries during the
flight to quality. They are still historically inexpensive, but are more in line
than they were at the time of global panic.
Despite the volatility, we continued to be constructive on the bond market as
inflation remained on a downward spiral. We maintained a duration of 8 years
which is slightly longer than the major municipal bond indicies. The average
maturity of the Portfolio is 18 years. We continued to overweight the general
obligation and insured sectors of the municipal market. General obligations
credit standing is strong due to the healthy economy, and the insured segment of
the market holds value due to the oversupply of insured bonds and the compressed
credit spreads in the market. Currently, 69% of the Portfolio is rated AAA.
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.
Past performance is not predictive of future performance.
<PAGE>
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
Advised by:
Sterling Capital Management
Charlotte, North Carolina
Objective: Seeks maximum current income, consistent with the maintenance of
liquidity and the preservation of capital. The Portfolio invests exclusively in
short-term securities issued by the United States Government, its agencies and
instrumentalities and related repurchase agreements.
<TABLE>
<S> <C> <C> <C>
U.S. Government Money 90 Day T-Bills
7-Day Market Portfolio Average Discount
Compound Yield Yield
- ---------------------------------------- ------------------------ -----------------------
2/28/99 4.2% 4.7%
Total Aggregate U.S. Government Money Lipper U.S. Treasury
Return for the Period Market Portfolio ( Money
Ended February 28, 1999 Class I ) Market Index1
- ---------------------------------------- ------------------------ -----------------------
9/1/94 (inception) - 2/28/99* 4.7% 4.9%
3/1/98 - 2/28/99 4.4% 4.6%
9/1/98 - 2/28/99 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
February 28, 1999 due to the higher yields versus Treasury Bills. The average
dollar-weighted Portfolio maturity was 69 days compared with a maximum allowable
average maturity of 90 days. The Fed Funds rate has fallen from 5.50% to 4.75%
over the last six months. In an environment of low inflation and strong economic
growth, the average maturity of the Portfolio has remained in a range of 56 to
76 days since last fall.
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 indicative of future results.
<PAGE>
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February 28, 1999
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SCHEDULES OF INVESTMENTS
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LARGE CAPITALIZATION VALUE PORTFOLIO
Principal
Amount Value
- ----------- --------------
- ----------- --------------
SHORT-TERM CORPORATE/GOVERNMENT NOTES - 19.37%
Federal Home Loan Bank Discount Notes - 2.15%
185,000 4.73% due 03/05/99 $ 184,903
1,265,000 4.68% due 03/24/99 1,261,217
1,446,120
Miscellaneous Financial Services - 17.22%
Ford Motor Credit Company,
935,000 4.80% due 03/02/99 934,875
Chevron USA Inc.,
2,200,000 4.80% due 03/04/99 2,199,120
General Electric Capital Corporation,
2,500,000 4.81% due 03/09/99 2,497,329
American Express Credit Corp.,
3,000,000 4.80% due 03/10/99 2,996,400
John Deere Capital Corporation,
2,936,000 4.81% due 03/17/99 2,929,723
11,557,447
Total Short-Term Corporate/Government Notes
(Cost-$13,003,567) $ 13,003,567
Shares
- -----------
- -----------
COMMON STOCKS - 89.72%
Advertising - 2.85%
24,000 WPP Group PLC $ 1,911,000
Aerospace - 5.67%
54,000 AlliedSignal, Inc 2,234,250
26,000 General Dynamics Corporation 1,571,375
3,805,625
Airlines 2.48%
30,000 AMR, Corp* 1,663,125
Banking - 8.44%
23,000 BankBoston Corporation 930,063
37,000 Citigroup, Inc 2,173,750
69,660 Wells Fargo Company 2,560,004
5,663,817
Chemicals - 1.48%
19,400 E.I. du Pont de Nemours and Company 995,463
10
February 28, 1999
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SCHEDULES OF INVESTMENTS (continued)
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LARGE CAPITALIZATION VALUE PORTFOLIO (cont'd)
Shares Value
- -------------- ---------------
- -------------- ---------------
Computer Software - 2.81%
45,000 Computer Associates International, Inc $ 1,890,000
Electronics - 5.41%
21,000 Motorola, Inc 1,475,250
48,500 Rockwell International Corporation 2,155,218
3,630,468
Financial Services - 2.85%
17,200 Countrywide Credit Industries, Inc 651,450
21,400 Federal Home Loan Mortgage Corp 1,259,925
1,911,375
Healthcare - 0.92%
31,250 Tenet Healthcare Corporation* 615,234
Insurance - 29.19%
32,100 Ace, Ltd 874,725
23,900 AFLAC, Inc 1,054,587
4,837 American International Group, Inc 551,116
150,000 Chubb Corp 8,962,500
45,576 Conseco, Inc 1,364,432
53,000 Everest Reinsurance Holdings, Inc 1,758,937
6,000 Nac Re Corp 324,375
41,000 PartnerRe Ltd 1,773,250
47,792 XL Capital Ltd Class A 2,927,260
19,591,182
Leisure - 1.46%
22,000 Carnival Corporation 979,000
Machinery/Equipment - 5.45%
17,600 Caterpillar, Inc 801,900
84,000 Dover Corporation 2,856,000
3,657,900
Manufacturing - 3.95%
34,000 Textron, Inc 2,652,000
Medical Products -0.87%
17,360 Becton, Dickinson and Company 581,560
Metals/Mining - 2.09%
19,000 Minnesota Mining & Manufacturing Company 1,407,188
11
February 28, 1999
(Unaudited)
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SCHEDULES OF INVESTMENTS (continued)
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LARGE CAPITALIZATION VALUE PORTFOLIO (cont'd)
Shares Value
--------------- ---------------
--------------- ---------------
Office Supplies - 3.12%
39,000 Avery Denison Corporation $ 2,093,812
Paper Products - 1.78%
40,000 Fort James Corporation 1,195,000
Restaurants - 2.28%
18,000 McDonalds Corporation 1,530,000
Retail - 1.65%
18,650 May Department Stores Company 1,105,013
Telecommunications - 3.09%
8,000 Sprint Corporation 686,500
26,000 US West, Inc 1,386,125
2,072,625
Textiles 0.38%
21,000 Unifi, Inc 253,313
Transportation - 1.50%
29,000 Canadian Pacific Limited 538,313
12,000 Sabre Group Holdings, Inc.* 471,000
1,009,313
Total Common Stocks (Cost-$52,384,123) $ 60,214,011
Total Investments (Cost-$65,387,690) 109.09% $ 73,217,580
Other Liabilities in Excess of Other Assets (9.09%) (6,098,134)
Total Net Assets 100.00% $ 67,119,446
* Non-income producing security.
See accompanying notes to financial statements.
12
February 28, 1999
(Unaudited)
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SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
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LARGE CAPITALIZATION GROWTH PORTFOLIO
Shares Value
- ------------- ------------------
- ------------- ------------------
COMMON STOCKS - 99.57%
Advertising - 2.31%
32,000 Interpublic Group of Companies, Inc $ 2,394,000
Banking - 6.72%
33,000 BankAmerica Corporation 2,155,313
41,000 Citigroup, Inc 2,408,750
65,000 Wells Fargo Company 2,388,750
6,952,813
Computer Hardware - 9.13%
28,000 Cisco Systems, Inc.* 2,738,750
53,000 Compaq Computer Corporation 1,868,250
26,000 Dell Computer Corporation* 2,083,250
27,000 EMC Corporation 2,764,125
9,454,375
Computer Software - 5.91%
30,000 America Online, Inc.* 2,668,125
23,000 Microsoft Corporation* 3,452,875
6,121,000
Cosmetics/Toiletries - 6.99%
25,000 Colgate-Palmolive Company 2,121,875
47,000 Gillette Company 2,520,375
29,000 Procter & Gamble Company 2,595,500
7,237,750
Data Processing - 2.34%
61,000 Automatic Data Processing, Inc 2,424,750
Electronics - 4.48%
37,000 Applied Materials, Inc* 2,058,125
21,500 Intel Corporation 2,578,655
4,636,780
Financial Services - 7.78%
38,000 Charles Schwab Corporation 2,833,375
35,000 Merrill Lynch & Company, Inc 2,686,250
28,000 Morgan Stanley Dean Witter & Company 2,534,000
8,053,625
Insurance - 2.53%
23,000 American International Group, Inc 2,620,563
13
February 28, 1999
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SCHEDULES OF INVESTMENTS (continued)
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LARGE CAPITALIZATION GROWTH PORTFOLIO (cont'd)
Shares Value
------------- ------------------
------------- ------------------
Manufacturing - 8.13%
34,000 General Electric Company $ 3,410,625
37,000 Illinois Tool Works, Inc 2,543,750
33,000 Tyco International 2,456,437
8,410,812
Medical Supplies - 2.18%
32,000 Medtronic, Inc 2,260,000
Multimedia - 5.14%
75,000 The Walt Disney Company 2,639,063
41,600 Time Warner, Inc 2,683,200
5,322,263
Pharmaceuticals - 14.48%
50,000 Abbott Laboratories 2,321,875
18,500 Bristol-Myers Squibb Company 2,329,844
31,000 Johnson & Johnson 2,646,625
29,000 Merck & Company, Inc 2,370,750
20,000 Pfizer, Inc 2,638,750
48,000 Schering-Plough Corporation 2,685,000
14,992,844
Retail - 15.50%
45,000 Dayton Hudson Corporation 2,815,312
46,000 Home Depot, Inc 2,745,625
42,000 Kroger Company 2,716,875
45,000 Safeway, Inc.* 2,598,750
52,000 Starbucks Corporation* 2,749,500
28,000 Wal-Mart Stores, Inc 2,418,500
16,044,562
Telecommunications - 4.57%
23,000 Lucent Technologies, Inc 2,335,938
29,000 MCI WorldCom, Inc.* 2,392,500
4,728,438
Toys - 1.38%
54,000 Mattel, Inc 1,424,250
Total Investments (Cost-$62,409,660) 99.57% $ 103,078,825
------------------
------------------
Other Assets in Excess of Other Liabilities 0.43% 441,591
Total Net Assets 100.00% $ 103,520,416
*Non - income producing security.
See accompanying notes to financial statements.
14
February 28, 1999
(Unaudited)
- -------------------------------------------------------------------
- -------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- -------------------------------------------------------------------
SMALL CAPITALIZATION PORTFOLIO
Shares Value
- -------------- ----------------
- -------------- ----------------
COMMON STOCKS - 96.62%
Banking - 2.65%
38,000 Commercial Federation Corporation $ 828,875
Beverages - 4.61%
27,000 Canadaigua Brands, Inc.* 1,441,125
Building & Construction - 8.65%
125,000 American Homestar Corp* 921,875
25,000 Champion Enterprises, Inc.* 492,187
80,000 Oakwood Homes Corporation 1,290,000
2,704,062
Computer Hardware - 4.91%
161,000 Sequent Computer Systems* 1,534,531
Data Processing - 1.31%
16,000 Sterling Software, Inc 408,000
Electronics - 18.14%
34,000 Etec Systems, Inc.* 1,506,625
36,500 Harman International Industries, Inc 1,396,125
100,000 Silicon Valley Group, Inc.* 1,331,250
111,000 Vishay Intertechnology, Inc.* 1,436,062
5,670,062
Food-Wholesale/Distribution -
3.57%
47,000 Richfood Holdings, Inc 1,116,250
Funeral Services - 2.88%
60,000 Stewart Enterprises, Inc 900,000
Garden Products - 4.40%
46,000 Toro Company 1,374,250
Machinery - 4.48%
71,321 Albany International, Corp 1,399,675
Manufacturing - 5.57%
4,300 Ball Corporation 180,063
10,000 Harsco Corporation 280,625
18,000 Teleflex Incorporated 640,125
20,000 Varian Associates, Inc 640,000
1,740,813
15
February 28, 1999
(Unaudited)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SMALL CAPITALIZATION PORTFOLIO (cont'd)
Shares Value
-------------- ----------------
-------------- ----------------
Medical Supplies - 4.34%
41,000 West Pharmaceutical Services, Inc $ 1,355,563
Multimedia -1.76%
11,000 Media General, Inc 550,000
Musical Instruments - 2.50%
34,500 Steinway Musical Instruments, Inc.* 782,719
Oil/Gas - 9.31%
76,666 EEX Corporation 464,787
28,000 Helmerich & Payne, Inc 456,750
56,000 Marine Drilling Companies, Inc.* 357,000
108,000 Oceaneering International, Inc.* 1,080,000
110,000 Pride International, Inc.* 550,000
2,908,537
Restaurants - 9.09%
62,500 Foodmaker, Inc.* 1,437,500
32,000 Outback Steakhouse, Inc.* 1,404,000
2,841,500
Retail -1.96%
19,500 ShopKo Stores, Inc.* 614,250
Scientific Instruments - 0.85%
10,000 EG&G, Inc 265,000
Steel - 2.97%
97,000 Oregon Steel Mills, Inc 927,563
Transportation - 2.67%
35,500 Coach USA, Inc.* 834,250
Total Common Stocks (Cost-$36,473,796) $ 30,197,023
----------------
----------------
Principal
Amount
--------------
--------------
Repurchase Agreement - 4.17%
Repurchase Agreement dated 2/28/99,
maturing 3/1/99 with State Street Bank
& Trust Company, collateralized by
$975,000 U.S. Treasury Bonds, 9.25%
due 2/15/16; proceeds $1,302,000
$1,302,000 (Cost-$1,302,000) $ 1,302,000
16
February 28, 1999
(Unaudited)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SMALL CAPITALIZATION PORTFOLIO (cont'd)
Value
----------------
----------------
Total Investments
(Cost-$37,775,797) 100.79% $ 31,499,025
Other Liabilities in Excess of Other
Assets (0.79%) (247,927)
Total Net Assets - 100% 100.00% $ 31,251,098
* Non-income producing security.
See accompanying notes to financial statements.
17
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
Shares Value
- ------------ -------------
- ------------ -------------
COMMON STOCKS - 94.11%
DENMARK - 3.09%
Telecommunications
12,100 Tele Danmark A/S Sponsored ADR $ 729,025
FINLAND - 3.68%
Telecommunications
6,400 Nokia Oyj Sponsored ADR 868,000
FRANCE - 14.41%
Banking - 2.85%
22,900 Societe Generale Sponsored ADR 672,177
Food Products - 2.22%
10,500 Groupe Danone Sponsored ADR 524,344
Pharmaceuticals - 2.86%
14,700 Rhoune-Poulenc SA Sponsored ADR 676,200
Oil/Gas - 1.79%
8,200 Elf Aquitaine SA Sponsored ADR 423,325
Telecommunications - 4.69%
24,500 Alcatel SA ADR 531,344
6,300 France Telecom S.A. Sponsored ADR 575,269
1,106,613
GERMANY - 5.20%
Banking - 1.76%
8,000 Deutsche Bank AG Sponsored ADR 416,250
Machinery - 3.44%
6,000 Mannesmann AG Sponsored ADR 811,425
Ireland - 3.09%
Pharmaceuticals
9,500 Elan Corporation PLC Sponsored ADR* 728,531
ITALY - 7.69%
Oil/Gas - 2.60%
10,400 ENI Sponsored ADR 613,600
Telecommunications- 5.09%
11,400 Telecom Italia SpA Sponsored ADR 1,202,700
JAPAN - 5.44%
Manufacturing -1.71%
1,800 Bridgestone Corporation Unsponsored ADR 402,781
18
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO (cont'd)
Shares Value
- ------------- --------------
- ------------- --------------
Office Equipment - 1.72%
18,800 Canon, Inc. Sponsored ADR $ 406,550
Telecommunications - 2.01%
Nippon Telegraph & Telephone
11,700 Corporation Sponsored ADR 474,581
NETHERLANDS - 9.43%
Banking- 3.08%
13,000 ING Groep N.V. Sponsored ADR 727,188
Food-Retail - 3.11%
19,000 Koninklijke Ahold NV Sponsored ADR 733,875
Multimedia - 3.24%
18,600 VNU NV Sponsored ADR 764,629
PORTUGAL -2.63%
Telecommunications
12,700 Portugal Telecom SA Sponsored ADR 622,300
SOUTH KOREA - 1.59%
Steel
24,000 Pohang Iron & Steel Company Ltd Sponsored ADR 375,000
SPAIN - 2.91%
Telecommunications
5,000 Telefonica S.A. Sponsored ADR 687,500
SWITZERLAND - 5.65%
Food Products - 2.76%
6,900 Nestle SA Sponsored ADR 651,163
Pharmaceuticals - 2.89%
7,800 Novartis ADR 684,154
UNITED KINGDOM - 24.06%
Airport Management - 1.68%
35,100 BAA PLC Sponsored ADR 397,546
Banking - 2.01%
3,800 National Westminster Bank PLC Sponsored ADR 475,000
Insurance - 3.68%
8,626 Allied Zurich AG PLC Sponsored ADR* 254,679
9,000 Prudential Corporation PLC Sponsored ADR 614,207
868,886
Manufacturing - 1.93%
55,600 General Electric Company PLC Unsponsored ADR 454,708
19
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO (cont'd)
Shares Value
- -------------- ---------------
- -------------- ---------------
Oil/Gas - 3.24%
10,500 BG PLC Sponsored ADR $ 301,801
13,800 Shell Transport & Trading Company ADR 463,163
764,963
Pharmaceuticals - 3.42%
12,600 Glaxo Wellcome PLC Sponsored ADR 807,188
Retail - 2.10%
15,400 Boots Company PLC Unsponsored ADR 496,376
Telecommunications - 5.32%
5,850 British Telecommunications PLC Sponsored ADR 1,027,406
1,250 Vodafone Group PLC Sponsored ADR 227,734
1,255,140
Tobacco - 0.68%
8,627 British American Tobacco PLC Sponsored ADR 160,671
UNITED STATES - 5.24%
Closed End Funds
35,700 WEBS-Belgium, WEBS-World Equity Benchmark Shares 691,688
62,900 WEBS-Hong Kong, WEBS-World Equity Benchmark Shares 546,444
1,238,131
Total Investments (Cost-$20,444,144) 94.11% $ 22,220,520
Other Assets in Excess of Other Liabilities 5.89% 1,391,575
Total Net Assets 100.00% $ 23,612,095
ADR - American Depositary Receipt
* Non-income producing security.
See accompanying notes to financial statements.
20
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT QUALITY BOND PORTFOLIO
Principal
Amount Value
- --------------- ---------------
- --------------- ---------------
U.S. GOVERNMENT NOTES - 43.02%
U.S. Treasury Notes - 22.49%
$ 7,400,000 6.50% due 08/31/01 $ 7,619,706
800,000 5.75% due 10/31/02 812,813
400,000 5.75% due 08/15/03 406,812
8,839,331
Federal Home Loan Bank - 15.42%
6,200,000 5.125% due 09/15/03 6,061,492
Federal National Mortgage Association - 5.11%
2,000,000 5.625% due 03/15/01 2,009,380
Total U.S. Government Notes (Cost-$17,044,029) $ 16,910,203
---------------
---------------
CORPORATE NOTES & BONDS - 55.82%
Aerospace - 3.85%
$ 1,500,000 Raytheon Co., 6.50% due 07/15/05 $ 1,514,474
Automotive - 3.68%
1,500,000 TRW, Inc., 6.05% due 01/15/05 1,446,075
Banking - 5.32%
600,000 NationsBank Corp., 5.375% due 04/15/00 597,845
1,500,000 ICI Wilmington, 6.95% due 09/15/04 1,493,565
2,091,410
Broadcasting - 3.61%
250,000 Cox Communications Inc., 6.375% due 06/15/00 251,898
1,055,000 EZ Communications CBS 9.75% due 12/01/05 1,165,775
1,417,673
Financial Services - 13.94%
350,000 Bear Stearns Companies 7.625% due 09/15/99 353,325
225,000 Ford Motor Credit, 7.75% due 10/01/99 228,170
350,000 Associates Corporate N. America, 6.25% due 09/15/00 352,933
1,000,000 Bear Stearns Companies, 5.75% due 02/15/01 993,570
250,000 Morgan Stanley MTN, 5.75% due 02/15/01 249,443
750,000 BHP Finance USA, 7.875% due 12/01/02 781,755
1,500,000 Merrill Lynch, 6.00% due 02/12/03 1,498,785
1,000,000 Associates Corp N. America, 6.625% due 06/15/05 1,023,260
5,481,241
Healthcare - 3.11%
1,200,000 Tenet Healthcare Corp., 8.825% due 12/01/03 1,221,000
21
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT QUALITY BOND PORTFOLIO (cont'd)
Principal
Amount Value
- --------------- ----------------
- --------------- ----------------
Manufacturing - 0.33%
$ 125,000 ADT Operations 8.25% due 08/01/00 $ 129,038
Metals/Mining - 2.75%
1,200,000 Cyprus Minerals, Inc., 6.625% due 10/15/05 1,080,768
Multimedia - 5.64%
1,137,000 Time Warner, Inc., 7.95% due 02/01/00 1,160,252
1,000,000 Westinghouse Electric CBS, 8.375% due 06/15/02 1,058,130
2,218,382
Oil/Gas - 0.73%
275,000 Amoco Canada Petro Company LTD, 7.25% due 12/01/02 287,268
Pharmaceuticals - 3.29%
1,000,000 American Home Products 7.9% due 02/15/05 1,091,830
200,000 Rhone-Poulenc, 6.75% due 10/15/99 201,010
1,292,840
Power/Utility - 1.79%
700,000 Southern CA Edison, 5.875% due 01/15/01 702,744
Telecommunications - 1.29%
500,000 Worldcom, Inc., 6.40% due 08/15/05 505,410
Transportation - 3.25%
1,300,000 Union Pacific Corp., 6.12% due 02/01/04 1,279,200
Waste Disposal - 3.24%
500,000 WMX Technologies, 6.70% due 05/01/01 506,995
750,000 WMX Technologies, 7.125% due 06/15/01 767,505
1,274,500
Total Corporate Notes & Bonds (Cost-$22,065,672) $ 21,942,021
----------------
----------------
Total Investments (Cost-$39,109,701) 98.84% $ 38,852,226
Other Assets in Excess of Other Liabilities 1.16% 456,442
Total Net Assets 100.00% $ 39,308,668
MTN - Medium Term Note
See accompanying notes to financial statements.
22
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO
Principal
Amount Value
- ------------ -------------
- ------------ -------------
MUNICIPAL NOTES - 0.14%
NEW YORK - 0.14%
Education
New York State Job Development Authority,
$ 15,000 FRN due 03/01/05 Ser B-1 B-21 $ 15,000
Total Municipal Notes (Cost - $15,000) $ 15,000
MUNICIPAL BONDS - 98.68%
ARIZONA - 4.42%
Water/Sewer
Sedona Arizona Wastewater,
$ 500,000 4.75% due 07/01/27 $ 480,400
CALIFORNIA - 6.65%
Education - 2.92%
California State Public Works Board Lease Revenue Various
California State University Projects,
50,000 6.00% due 09/01/15 56,325
California State Public Works Board Lease Revenue Various
California State University Projects,
250,000 5.375% due 10/01/17 260,745
317,070
Housing - 3.73%
California Housing Finance Agency Single Family Mortgage,
400,000 5.30% due 08/01/18 405,284
COLORADO - 1.50%
Health/Hospitals
Denver Colorado City & County Hospital,
150,000 6.00% due 10/01/15\ 163,389
FLORIDA - 0.35%
Education
Dade County Florida School Board Ser. A,
35,000 5.75% due 05/01/12 38,485
GEORGIA - 7.27%
Airport - 2.94%
Atlanta Georgia Airport Facilities Revenue,
305,000 6.25% due 01/01/21 319,512
23
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO (cont'd)
Principal
Amount Value
- ------------- --------------
- ------------- --------------
EDUCATION - 2.22%
Jackson County Georgia School District,
$ 215,000 6.00% due 07/01/14 $ 240,865
General Obligation - 2.11%
Georgia State Ser. B,
200,000 6.25% due 04/01/07 229,218
HAWAII - 4.49%
General Obligation
Hawaii State Ser CR,
505,000 4.75% due 04/01/18 487,748
ILLINOIS - 4.51%
Health/Hospitals
Illinois Health Facilities Authority Northwestern Medical
Facility Foundation,
500,000 5.00% due 11/15/18 490,740
IOWA - 0.51%
Water/Sewer
West Des Moines Iowa Water Revenue,
50,000 6.80% due 12/01/13 55,526
KENTUCKY - 0.98%
Turnpike/Toll
Kentucky State Turnpike Authority Economic Development,
100,000 5.625% due 07/01/15 106,319
LOUISIANA - 1.53%
General Obligation
New Orleans Louisiana,
150,000 6.125% due 10/1/16 166,706
MARYLAND - 3.05%
Resource Recovery
Maryland State Energy Financing Administration Solid Waste
Disposal Revenue Wheelabrator Water Projects,
300,000 6.30% due 12/01/10 331,767
MASSACHUSETTS - 2.63%
Transportation - 0.51%
Massachusetts Bay Transportation Authority Ser. B,
50,000 5.90% due 03/01/24 55,435
24
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO (cont'd)
Principal
Amount Value
- ------------- --------------
- ------------- --------------
Water/Sewer - 2.12%
Massachusetts State Water Authority,
$ 250,000 4.50% due 08/01/22 $ 230,902
MISSOURI - 0.44%
Housing
Missouri State Housing Development Commission
GNMA Backed Sec-C,
45,000 6.90% due 07/01/18 47,614
NEBRASKA - 0.40%
Power/Utility
Omaha Nebraska Public Power Distribution,
40,000 5.50% due 02/01/14 43,449
NEVADA - 1.96%
General Obligation - 0.50%
Clark County Nevada Ser. B,
50,000 6.00% due 06/01/16 53,534
Housing -1.46%
Nevada Housing Division - Single Family Ser. A,
150,000 6.15% due 04/01/17 158,988
NEW YORK - 9.93%
Education - 1.29%
New York State Dorm Authority City University,
125,000 5.75% due 07/01/09 140,224
General Obligation - 5.22%
New York, New York Ser. H,
300,000 6.50% due 03/15/05 337,728
New York, New York Ser. A,
200,000 6.50% due 07/15/06 230,450
568,178
Housing - 0.74%
New York State Mortgage Agency Ser. 54,
75,000 6.10% due 10/1/15 80,513
Industrial Development - 1.27%
New York City Industrial Development Agency,
150,000 4.50% due 07/01/23 138,308
25
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO (cont'd)
Principal
Amount Value
- -------------- ---------------
- -------------- ---------------
Pollution Control - 0.40%
New York State Environmental Facilities Corp. Pollution
Control,
$ 40,000 5.875% due 06/15/14 $ 43,555
Transportation - 1.01%
Metropolitan Transportation Authority New York,
100,000 5.50% due 07/01/08 109,554
NORTH DAKOTA - 6.04%
Housing
North Dakota State Housing Finance Agency Ser. A,
250,000 5.25% due 07/01/18 251,833
North Dakota State Housing Finance Agency Ser. C,
400,000 5.50% due 07/01/18 405,024
656,857
OHIO - 5.16%
General Obligation - 4.61%
Akron Ohio,
500,000 5.00% due 12/01/18 500,730
Health & Hospitals - 0.55%
Lorain County Ohio Hospital Medical Center,
50,000 7.75% due 11/01/13 60,380
PENNSYLANIA - 5.53%
Education - 1.44%
Pennsylvania State of Higher Education Series A,
150,000 5.75% due 01/01/17 156,450
General Obligation - 2.85%
Pennsylvania State Second Series,
300,000 5.00% due 11/15/12 309,773
Tax Allocation - 0.74%
Philadelphia Pennsylvania Municipal Authority Series A,
75,000 5.625% due 11/15/14 80,526
Water/Sewer - 0.50%
Pittsburgh Pennsylvania Water & Sewer Authority Series B,
50,000 5.60% due 09/01/15 54,728
PUERTO RICO - 0.65%
Power/Utility
Puerto Rico Electric Power Authority,
65,000 6.00% due 07/01/15 70,331
26
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO (cont'd)
Principal
Amount Value
- ----------- ------------
- ----------- ------------
SOUTH CAROLINA - 6.87%
Health & Hospitals - 2.31%
Spartanburg County South Carolina Health Services Series B,
250,000 5.125% 4/15/17 251,160
Power/Utility - 4.56%
Piedmont Municipal Power Agency South Carolina
Electric Revenue Ser A,
500,000 5.00% due 01/01/18 495,149
TENNESSEE - 3.58%
Health & Hospitals
Metropolitan Government Nashville & Davidson County
Tennessee H & E Facilities Board,
400,000 5.00% due 11/01/19 388,920
TEXAS - 1.46%
General Obligation - 0.98%
Houston Texas Ser. C,
75,000 5.25% due 04/01/14 77,805
San Antonio Texas Certificates of Obligation,
25,000 6.625% due 08/01/14 28,344
106,149
Power/Utility - 0.48%
Brazos River Authority Texas Revenue,
50,000 5.80% due 08/01/15 52,388
UTAH - 6.56%
General Obligation - 3.60%
Clearfield City Utah,
400,000 5.00% due 02/01/23 391,248
Power/Utility - 2.96%
Intermountain Power Agency Utah Power Supply,
300,000 6.00% due 07/01/02 321,519
WASHINGTON - 0.44%
Power/Utility
Seattle Washington Light & Power Series A,
35,000 5.75% due 08/01/11 37,590
Washington State Public Power Supply Nuclear Project
No. 1 Series B,
10,000 7.25% due 07/01/12 10,709
48,299
27
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MUNICIPAL BOND PORTFOLIO (cont'd)
Principal
Amount Value
-------------- ---------------
-------------- ----------------
WASHINGTON DC - 2.15%
Public Facilities
Washington DC Convention Center Authority Dedicated
Tax Revenue Senior Lien,
$ 250,000 4.75% due 10/01/28 $ 233,444
WISCONSIN - 9.37%
Health & Hospitals - 6.45%
Wisconsin State Health & Educational Facilities Authority
Series A,
400,000 5.25% due 08/15/19 403,260
Wisconsin State Health & Educational Facilities,
300,000 5.25% due 08/15/27 298,239
701,499
Housing - 2.92%
Wisconsin Housing & Economic Development Home Ownership,
300,000 6.20% due 3/1/27 317,214
WYOMING - 0.25%
Housing
Wyoming Community Development Authority Housing,
25,000 6.65% due 12/1/06 26,861
Total Municipal Bonds (Cost - $10,375,744) $ 10,726,908
Total Investments (Cost-$10,390,744) 98.82% $ 10,741,908
Other Assets in Excess of Other Liabilities 1.18% 128,032
Total Net Assets 100.00% $ 10,869,940
FRN - Floating Rate Note
See accompanying notes to financial statements.
28
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
Principal
Amount Value
- ------------- --------------
- ------------- --------------
U.S. Government Notes - 98.64%
Federal Farm Credit Bank - 3.74%
$ 10,000 4.69% due 04/27/99 $ 9,926
415,000 4.63% due 05/07/99 411,424
450,000 4.72% due 05/24/99 445,044
1,000,000 5.55% due 07/01/99 1,000,007
Total Federal Farm Credit Bank (Cost-$1,866,401) $ 1,866,401
Federal Home Loan Bank Discount Notes - 11.30%
$2,175,000 4.72% due 05/26/99 $ 2,150,475
2,120,000 4.71% due 05/28/99 2,095,592
240,000 4.67% due 08/06/99 235,081
1,190,000 4.58% due 09/16/99 1,159,873
Total Federal Home Loan Bank Discount Notes $ 5,641,021
(Cost-$5,641,021)
Federal Home Loan Mortgage Discount Notes - 77.83%
$ 60,000 4.70% due 03/01/99 $ 60,000
2,385,000 4.66% due 03/02/99 2,384,690
1,605,000 4.95% due 03/02/99 1,604,779
580,000 4.68% due 03/08/99 579,472
2,205,000 4.95% due 03/08/99 2,202,878
280,000 4.97% due 03/08/99 279,729
1,060,000 4.57% due 03/12/99 1,058,520
1,745,000 4.66% due 03/12/99 1,742,515
35,000 4.97% due 03/12/99 34,947
1,975,000 4.69% due 03/15/99 1,971,398
140,000 4.77% due 03/15/99 139,740
75,000 4.74% due 03/19/99 74,822
95,000 4.64% due 03/31/99 94,633
4,000,000 4.69% due 03/31/99 3,984,367
80,000 4.73% due 04/06/99 79,622
125,000 4.73% due 04/08/99 124,376
155,000 4.90% due 04/09/99 154,177
1,975,000 4.77% due 04/14/99 1,963,486
3,730,000 4.67% due 04/30/99 3,700,968
2,065,000 4.75% due 04/30/99 2,048,652
210,000 4.82% due 05/04/99 208,201
2,420,000 4.71% due 05/14/99 2,396,570
3,690,000 4.72% due 05/19/99 3,651,780
975,000 4.78% due 05/25/99 963,996
470,000 4.80% due 05/28/99 464,485
29
February 28, 1999
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY MARKET PORTFOLIO (cont'd)
Principal
Amount Value
------------- ----------------
------------- ----------------
$1,100,000 4.78% due 06/04/99 $ 1,086,125
1,210,000 4.69% due 06/10/99 1,194,079
3,000,000 4.69% due 06/15/99 2,958,572
30,000 4.70% due 06/15/99 29,585
240,000 4.59% due 07/06/99 236,114
1,390,000 4.60% due 07/22/99 1,364,602
Total Federal Home Loan Mortgage Discount Notes $38,837,880
(Cost-$38,837,880)
Federal National Mortgage Association - 5.77%
$ 80,000 4.65% due 03/01/99 $ 80,000
80,000 4.73% due 03/16/99 79,842
1,285,000 4.70% due 06/16/99 1,267,049
1,490,000 4.80% due 09/09/99 1,451,856
Total Federal National Mortgage Association (Cost-$2,878,747) $ 2,878,747
Total Investments (Cost-$49,224,049) 98.64% $ 49,224,049
Other Assets in Excess of Other Liabilities 1.36% 676,197
Total Net Assets 100.00% $ 49,900,246
See accompanying notes to financial statements.
30
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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--$65,387,690;
$62,409,660; $37,775,797; $20,444,144;
$39,109,701; $10,390,744 and
$49,224,049, respectively) $73,217,580 $103,078,825 $31,499,025 $22,220,520 $38,852,226 $10,741,908 $49,224,049
Cash 62,255 0 873 1,392,178 77,307 45,488 5,011
Receivable for shares of
beneficial interest sold 303,018 348,883 89,658 98,891 141,300 4,973 1,169,378
Receivable for investments sold 1,424,370 20,081 817,500
Deferred organization expenses 6,425 6,425 6,425 6,425 4,862 6,425 6,425
Interest receivable 380 767,540 136,820 8,788
Dividends receivable 73,208 43,120 6,325 12,615
Foreign taxes receivable 8,558
Prepaid expenses and other assets 16,866 19,104 16,008 12,901 13,407 16,640 16,168
------------- ------------- ------------- ------------- ------------- ------------- --------------
Total Assets 73,679,352 104,920,727 31,618,694 23,772,169 40,674,142 10,952,254 50,429,819
------------- ------------- ------------- ------------- ------------- ------------- --------------
Liabilities
Payable to manager 32,067 54,039 16,184 13,496 17,326 4,718 17,267
Administration fee payable 6,887 9,686 4,406 2,746 6,226 2,125 4,176
Payable for shares of beneficial
interest redeemed 248,520 1,268,565 110,429 111,941 473,930 53,325 466,598
Payable for investments purchased 6,221,717 190,625 828,188
Other payables and accrued 50,715 68,021 45,952 31,891 39,804 22,146 41,532
expenses
------------- ------------- ------------- ------------- ------------- ------------- --------------
Total Liabilities 6,559,906 1,400,311 367,596 160,074 1,365,474 82,314 529,573
------------- ------------- ------------- ------------- ------------- ------------- --------------
Net Assets
Shares of beneficial interest at 34,050 39,674 36,479 20,063 38,876 10,210 499,026
par value.
57,657,335 59,700,700 39,787,075 22,023,318 39,426,691 10,441,712 49,403,462
Paid-in-surplus
Accumulated undistributed net
investment
income (loss) (238,991) (449,579) (701,063) 59,534 (3,131) (11,632) 0
Accumulated net realized gain (loss) on
investments and foreign 1,837,162 3,560,456 (1,594,621) (267,196) 103,707 78,486 (2,242)
currency transactions
Net unrealized appreciation
(depreciation)
on investments 7,829,890 40,669,165 (6,276,772) 1,776,376 (257,475) 351,164 0
------------- ------------- ------------- ------------- ------------- ------------- --------------
Total Net Assets $67,119,446 $103,520,416 $31,251,098 $23,612,095 $39,308,668 $10,869,940 $49,900,246
============ ============= ============= ============= ============= ============= ==============
Net Asset Value per Share
Class I
Net Assets 66,938,794 103,553,759 31,248,073 23,598,675 39,563,419 10,833,585 49,893,242
Shares of beneficial interest
outstanding 3,396,093 3,968,482 3,647,459 2,004,622 3,912,678 1,017,556 49,893,242
------------- ------------- ------------- ------------- ------------- ------------- --------------
Net asset value and offering
price per share $19.71 $26.09 $8.57 $11.77 $10.11 $10.65 $1.00
============= ============= ============= ============= ============= ============= ==============
</TABLE>
See accompanying notes to financial statements.
Six Months Ended February 28, 1999 (Unaudited)
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------- ----------- ------------- ------------- ------------- ------------- -------------
Large Large U.S.
apitalization Capitalization Small International Investment Municipal Government
Value Growth Capitalization Equity Quality Bond Bond Money Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------- ----------- ------------- ------------- ------------- ------------- -------------
Investment Income
Dividends $338,443 (1) $291,260 $82,520 $197,939 (1) -- -- --
Interest 248,164 27,752 18,334 -- $1,151,852 $269,310 $1,083,913
------------- ----------- ------------- ------------- ------------- ------------- -------------
Total investment income 586,607 319,012 100,854 197,939 1,151,852 269,310 1,083,913
------------- ----------- ------------- ------------- ------------- ------------- -------------
Operating Expenses
Management fees (note 2a) 172,594 294,141 94,265 79,252 109,805 29,107 100,845
Administration fees (note 2c) 18,901 29,557 10,767 7,551 15,836 4,630 14,361
Transfer and dividend 51,332 78,894 17,904 23,208 36,920 7,123 29,002
disbursing agent fees
Custodian fees (note 2a) 30,349 27,227 15,244 32,353 20,936 27,710 25,596
Registration fees 9,125 13,150 8,159 7,213 8,768 6,502 10,294
Amortization of deferred
organization
expenses (note 1c) 6,322 6,322 6,322 6,322 5,429 6,322 6,322
Auditing fees 7,117 7,117 7,117 9,117 7,117 7,117 7,117
Reports and notices to 6,437 11,808 6,538 2,500 5,390 1,767 6,536
shareholders
Legal fees 15,163 16,506 7,344 3,082 5,170 1,917 7,224
Trustees' fees 4,635 9,224 4,983 501 3,776 744 4,983
12b-1 fees 25 46 3 6 0 0 1
Miscellaneous 2,081 4,702 2,046 1,155 1,595 866 1,623
------------- ----------- ------------- ------------- ------------- ------------- -------------
Total operating expenses 324,081 498,694 180,692 172,260 220,742 93,805 213,904
Less: Management fees waived
and/or expenses assumed
(note 2a) (13,870) 0 (16,915) (9,226) (2,080) (30,256) (8,750)
Expense offset
arrangement (note 2a) (1,584) (17,471) (303) (29,101) (10,331) (618) (753)
------------- ----------- ------------- ------------- ------------- ------------- -------------
Net operating expenses 308,627 481,223 163,474 133,933 208,331 62,931 204,401
------------- ----------- ------------- ------------- ------------- ------------- -------------
Net investment income 277,980 (162,211) (62,620) 64,006 943,521 206,379 879,512
(loss)
------------- ----------- ------------- ------------- ------------- ------------- -------------
Realized and Unrealized
Gain(Loss) on Investments-Net
Net realized gain (loss) on 1,374,721 3,552,307 (1,168,179) 49,597 219,577 81,207 0
securities
Net change in unrealized
appreciation (depreciation)
on investments 4,821,614 31,653,034 4,386,110 1,615,655 (768,372) (112,140) 0
------------- ----------- ------------- ------------- ------------- ------------- -------------
Net realized gain (loss) and
change in unrealized appreciation
(depreciation)on investments 6,196,335 35,205,341 3,217,931 1,665,252 (548,795) (30,933) 0
-------------- ----------- ------------- ------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations $6,474,315 $35,043,130 $3,155,311 $1,729,258 $394,726 $175,446 $879,512
============== =========== ============= ============= ============= ============= =============
</TABLE>
(1) Net of foreign withholding taxes of $4,000 and $3,919 for Large
Capitalization Value and International Equity, respectively.
See accompanying notes to financial statements.
(Unaudited)
- --------------------------------------------------------------------------------
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
----------------------------- ------------------------------ -----------------------------
(Unaudited) (Unaudited) (Unaudited)
Year Ended Six Months Year Ended Six Months Year Ended Six Months
Ended Ended Ended
August 31,1998 February 28, August 31,1998 February 28, August 31,1998 February
1999 1999 28, 1999
----------------------------- ------------------------------ -----------------------------
Operations
Net investment income (loss) $265,441 $277,980 ($208,165) ($162,211) ($212,917) ($62,620)
Net realized gain (loss) on investments 2,725,132 1,374,721 1,988,666 3,552,307 6,233,807 (1,168,179)
Net change in unrealized appreciation
(depreciation) on investments (4,379,851) 4,821,614 (3,046,018) 31,653,034 (16,209,040) 4,386,110
------------- -------------- -------------- -------------- -------------- -------------
Net increase (decrease) in net assets
resulting from operations (1,389,278) 6,474,315 (1,265,517) 35,043,130 (10,188,150) 3,155,311
------------- -------------- -------------- -------------- -------------- -------------
Dividends and Distributions to
Shareholders
Net investment income
Class I (644,832) (238,346) 0 0 0 0
Class B 0 0 0 0 0 0
Class C 0 0 0 0 0 0
Net realized gain
Class I (403,394) (2,604,268) (2,127,182) (1,644,127) (1,999,133) (6,885,615)
Class B 0 0 0 0 0 0
Class C 0 0 0 0 0 0
Total dividends and distributions
to shareholders (1,048,226) (2,842,614) (2,127,182) (1,644,127) (1,999,133) (6,885,615)
------------- -------------- -------------- -------------- -------------- -------------
Share Transactions of
Beneficial Interest
Net proceeds from shares sold
Class I 22,550,001 25,077,018 38,698,508 26,230,322 27,403,860 9,284,519
Class B 0 357 0 400 0 203
Class C 0 179,177 0 329,293 0 23,408
Reinvestment of dividends and
distributions
Class I 1,033,971 2,809,932 2,098,815 1,911,481 1,991,614 6,833,242
Class B 0 0 0 0 0 0
Class C 0 0 0 0 0 0
Cost of shares redeemed
Class I (8,181,548) (7,219,476) (18,066,310) (24,886,890) (22,754,879) (4,394,686)
Class B 0 0 0 0 0 0
Class C 0 0 0 0 0 0
Net increase in net assets from share
transactions of beneficial interest 15,402,424 20,847,008 22,731,013 3,584,606 6,640,595 11,746,686
------------- -------------- -------------- -------------- -------------- -------------
Total increase in net assets 12,964,920 24,478,709 19,338,314 36,983,609 (5,546,688) 8,016,382
Net Assets
Beginning of period 29,675,817 42,640,737 47,198,493 66,536,807 28,781,404 23,234,716
------------- -------------- -------------- -------------- -------------- -------------
End of period (including undistributed
(overdistributed) net investment income of
$240,241, ($238,991); $1,896,
($479,579); $1,896,
($701,063); $117,534, $59,534; $1,896,
($3,131);
$1,896, ($11,632); $1,896 and $0,
respectively) $42,640,737 $67,119,446 $66,536,807 $103,520,416 $23,234,716 $31,251,098
============= ============== ============== ============== ============== =============
</TABLE>
See accompanying notes to financial statements.
(Unaudited)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------- -----------------------------
International Investment Quality Bond Municipal Bond U.S.
Equity Government
Money Market
Portfolio Portfolio Portfolio Portfolio
- ------------------------------- ----------------------------- ----------------------------- -----------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Year Ended Six Months Year Ended Six Months Year Ended Six Months Year Ended Six Months
Ended Ended Ended Ended
August 31,1998 February 28, August 31,1998 February August 31,1998 February August 31,1998 February 28,
1999 28, 1999 28, 1999 1999
- ------------------------------- ----------------------------- ----------------------------- -----------------------------
$169,244 $64,006 $1,347,436 $943,521 $340,545 $206,379 $1,361,390 $879,512
(261,415) 49,597 171,095 219,577 38,175 81,207 (2,092) 0
(725,764) 1,615,655 392,011 (768,372) 281,588 (112,140) 0 0
- --------------- -------------- -------------- ------------- -------------- ------------- -------------- --------------
(817,935) 1,729,258 1,910,542 394,726 660,308 175,446 1,359,298 879,512
- --------------- -------------- -------------- ------------- -------------- ------------- -------------- --------------
(45,288) (173,213) (1,347,402) (943,515) (352,177) (306,377) (1,361,390) (879,497)
0 0 0 (3) 0 (1) 0 (2)
0 0 0 (3) 0 (1) 0 (13)
0 (160,696) (33,855) (245,800) (10,602) (43,266) 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
(45,288) (333,909) (1,381,257) (1,189,321) (362,779) (349,645) (1,361,390) (879,512)
- --------------- -------------- -------------- ------------- -------------- ------------- -------------- --------------
12,655,895 7,538,554 19,032,965 14,216,356 4,305,933 3,387,434 45,684,586 29,429,382
0 260 0 400 0 150 0 300
0 42,142 0 400 0 150 0 6,704
44,303 171,234 1,403,653 1,145,694 359,150 246,975 1,324,090 861,806
0 0 0 3 0 1 0 1
0 0 0 3 0 1 0 13
(3,258,982) (4,502,344) (7,749,618) (10,983,194) (2,391,818) (2,384,538) (37,085,981) (18,890,333)
0 0 0 (49) 0 (1) 0 0
0 0 0 (49) 0 (1) 0 0
9,441,216 3,249,846 12,687,000 4,379,564 2,273,265 1,250,171 9,922,695 11,407,873
- --------------- -------------- -------------- ------------- -------------- ------------- -------------- --------------
8,577,993 4,645,195 13,216,285 3,584,969 2,570,794 1,075,972 9,920,603 11,407,873
10,388,907 18,966,900 22,507,414 35,723,699 7,223,174 9,793,968 28,571,770 38,492,373
- --------------- -------------- -------------- ------------- -------------- ------------- -------------- --------------
$18,966,900 $23,612,095 $35,723,699 $39,308,668 $9,793,968 $10,869,940 $38,492,373 $49,900,246
=============== ============== ============== ============= ============== ============= ============== ==============
</TABLE>
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 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 six 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.
These financial statements include activity for Class I shares. Activity for
Class B and C shares is not included herein. 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 annually annually
Capitalization Value
Large annually annually
Capitalization Growth
Small annually annually
Capitalization
International annually annually
Equity
Investment daily * annually
Quality Bond
Municipal Bond daily * annually
U.S. Government daily * annually
Money Market
* paid
monthly
35
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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) Purchased Put Option Accounting Policy
When a Portfolio purchases a put option, it pays a premium and an amount equal
to the premium is recorded as an investment. The option is subsequently
marked-to-market to reflect its current market value. The Portfolio, as
purchaser of an option, has control over whether the option is exercised. If an
option expires, the Portfolio realizes a loss in the amount of the premium paid.
If an option is exercised, the premium paid is an adjustment to the proceeds
from the sale in determining whether the Portfolio has realized a gain or loss.
If a Portfolio enters into a closing sale transaction, the difference between
the premium paid and the amount received from the sale is the realized gain or
loss.
When a Portfolio purchases a put option, it is generally to hedge against
adverse movements in the value of Portfolio holdings. The risk of buying an
option is that the Portfolio will pay a premium whether or not the option is
exercised. The Portfolio also has the additional risk of not being able to enter
into a closing securities transaction if an illiquid market exists or the
counter parties develop the inability to meet the terms of their contracts. No
options were outstanding as of February 28, 1999.
(g) Allocation of Expenses
Expenses specifically identifiable to a particular Portfolio are borne by that
Portfolio. Other expenses are allocated to each Portfolio based on its net
assets in relation to the total net assets of all the applicable Portfolios or
another reasonable basis. Actual results could differ from those estimates.
(h) 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 these 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 six months ended February 28, 1999, the Manager voluntarily waived all
of its management fees and assumed $1,149 in other operating expenses for
Municipal Bond . The Manager also voluntary waived $13,870; $16,915; $9,226;
$2,080; $30,256 and $8,750 in management fees for Large Capitalization Value,
Small Capitalization, International Equity, Investment Quality Bond and U.S.
Government Money Market, respectively, for the six months ended February 28,
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 six months ended February 28, 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.
3. PURCHASES AND SALES OF SECURITIES
For the six months ended February 28, 1999 purchases and sales of investment
securities, other than short-term securities were as follows:
Purchases Sales
--------------------------
Large $48,652,083 $25,104,936
Capitalization Value
Large 23,840,485 21,681,746
Capitalization Growth
Small 7,965,117 3,715,264
Capitalization
International 9,016,893 6,115,298
Equity
Investment
Quality Bond 13,335,961 8,377,066
Municipal Bond 3,145,170 2,000,196
36
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
4. UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL INCOME TAX PURPOSES
At February 28, 1999, the composition of unrealized appreciation (depreciation)
of investment securities were as follows:
Appreciation (Depreciation) Net
---------------------------------------
Large $9,747,518 ($1,917,628) $7,829,890
Capitalization Value
Large 40,844,455 (175,290) 40,669,165
Capitalization Growth
Small 2,756,655 (9,033,427) (6,276,772)
Capitalization
International 3,177,039 (1,400,663) 1,776,376
Equity
Investment
Quality Bond 247,826 (505,301) (257,475)
Municipal Bond 371,030 (19,866) 351,164
For U.S. federal income tax, the cost of securities owned at February 28, 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:
(Audited) (Unaudited)
Year Ended Six Months Ended
August 31, 1998 February 28, 1999
----------------------------------------------------
Large Capitalization Value
Issued 797,161 1,277,860
Redeemed (496,095) (366,567)
Reinvested from Dividends 32,655 144,908
------------- -------------
Net Increase in Shares 333,721 1,056,201
------------- -------------
Large Capitalization Growth
Issued 1,172,529 1,184,637
Redeemed (1,112,030) (1,018,883)
Reinvested from Dividends - 80,611
------------- -------------
NetIncrease in Shares 60,499 246,365
------------- -------------
Small Capitalization
Issued 671,535 856,124
Redeemed (492,311) (440,887)
Reinvested from Dividends 107,862 795,468
------------- -------------
Net Increase in Shares 287,086 1,210,705
------------- -------------
International Equity
Issued 456,093 647,438
Redeemed (219,913) (388,589)
Reinvested from Dividends 15,919 14,968
------------- -------------
Net Increase in Shares 252,099 273,817
------------- -------------
Investment Quality Bond
Issued 1,132,061 1,405,439
Redeemed (705,446) (1,069,131)
Reinvested from Dividends 101,660 111,101
------------- -------------
Net Increase in Shares 528,275 447,409
------------- -------------
Municipal Bond
Issued 407,955 306,740
Redeemed (227,322) (222,642)
Reinvested from Dividends 34,043 23,022
------------- -------------
Net Increase in Shares 214,676 107,120
------------- -------------
U.S. Government Money Market
Issued 45,684,586 29,257,421
Redeemed (37,085,981) (18,890,333)
Reinvested from Dividends 1,324,090 861,806
------------- -------------
Net Increase in Shares 9,922,695 11,228,894
------------- -------------
37
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
6. CAPITAL LOSS CARRYFORWARDS
At August 31, 1998, 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:
Name of Portfolio Total 2003 2004 2005 2006
International Equity Portfolio $270,290 -- -- $8,875 $261,415
U.S. Government Money Market $219 -- -- $32 $187
Portfolio
- --------------------------------------------------------------------------------
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 DISTRIBUTIONS
OPERATIONS RATIOS
-------------------------------------------------- ----------------------------
-------------------------------------------------- ----------------------------
Distributions
Net to
Realized
and Dividends Shareholders Net Net Ratio of Ratio of
to Net Net
Net UnrealizedTotal Shareholders from Net Asset Assets Operating Investment
Asset
Value, Net Gain(Loss) from from Net Realized Value, End of Expenses Income(Loss)Portfolio
Gains
Beginning Investment on InvestmInvestment on End Total Period to Average to Turnover
of Average
of Income(LoInvestmentOperationIncome Investments PerioReturn*(000's) Net Net Assets Rate
Period Assets
International Equity
Portfolio
Year Ended August 31,
1998 $10.74 $0.13 $0.09 $0.22 ($0.04) -- $10.922.08% $18,967 1.40% (1) 1.14% (1) 58%
Year Ended August 31,
1997 9.59 0.23 1.12 1.35 (0.20) -- 10.7414.39% 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 10.00 (3) 0.05 (0.71) (0.66) (0.01) -- 9.33 2,907 0.38% (1,4) 1.03% (1,4)36%
31, 1995 (6.61%)
(1) During the fiscal year ended August 31,1998 and the fiscal year ended 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
1.96% 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
8.96% and (7.53%), annualized, respectively, for the period September 2, 1994
(commencement of operations) to August 31, 1995.
Investment Quality Bond
Portfolio
Year Ended August 31,
1998 $10.09 $0.50 $0.21 $0.71 ($0.50) ($0.01) $10.297.21% $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 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%
31, 1995
(1) During the fiscal year ended August 31,1998 and the fiscal year ended 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
1.37% 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.
Municipal Bond
Portfolio
Year Ended August 31,
1998 $10.33 $0.43 $0.42 $0.85 ($0.44) ($0.02) $10.728.42% $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 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%
31, 1995
(1) During the fiscal year ended August 31,1998 and the fiscal year ended August 31,1997, Saratoga Capital Management
waived all 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
2.15% 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (For a share outstanding throughout each
period)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INCOME FROM DIVIDENDS AND
INVESTMENT DISTRIBUTIONS
OPERATIONS RATIOS
-------------------------------------------------- ----------------------------
-------------------------------------------------- ----------------------------
Distributions
Net to
Realized
and Dividends Shareholders Net Net Ratio of Ratio of
to Net Net
Net UnrealizedTotal Shareholders from Net Asset Assets Operating Investment
Asset
Value, Net Gain(Loss) from from Net Realized Value, End of Expenses Income(Loss)Portfolio
Gains
Beginning Investment on InvestmInvestment on End Total Period to Average to Turnover
of Average
of Income(LoInvestmentOperationIncome Investments PerioReturn*(000's)Net Net Assets Rate
Period Assets
Large Capitalization
Value Portfolio
Year Ended August 31,
1998 $18.57 $0.14 $0.07 $0.21 ($0.39) ($0.24) $18.150.96% $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) 18.5731.37% 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) 14.4519.73% 18,274 1.28% (1) 0.97% (1) 26%
September 2,
1994 (2)
to August 10.00 (3) 0.15 2.20 2.35 (0.05) -- 12.3023.60% 5,515 0.40% (1,4) 2.29% (1,4)33%
31, 1995
(1) During the fiscal year ended August 31,1998 and the fiscal year ended 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
1.39% 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
Year Ended August 31,
1998 $17.87 ($0.07) $0.81 $0.74 -- ($0.78) $17.833.91% $66,537 1.18% (1) (0.34%) (1) 45%
Year Ended August 31,
1997 13.16 (0.02) 4.73 4.71 -- -- 17.8735.79% 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 10.00 (3) 0.02 2.85 2.87 (0.01) -- 12.8628.77% 11,107 0.51% (1,4) 0.32% (1,4)23%
31, 1995
(1) During the fiscal year ended August 31,1998 and the fiscal year ended 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
1.25% 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.
Small Capitalization
Portfolio
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) 15.0518.07% 28,781 1.30% (1) (0.70%) (1) 162%
Year Ended August 31,
1996 12.62 (0.09) 1.44 1.35 ($0.00) (0.39) 13.5811.03% 22,071 1.25% (1) (0.83%) (1) 95%
September 2,
1994 (2)
to August 10.00 (3) 0.02 2.61 2.63 (0.01) -- 12.6226.38% 15,103 0.42% (1,4) 0.07% (1,4111%
31, 1995
(1) During the fiscal year ended August 31,1998 and the fiscal year ended 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
1.44% 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (For a share outstanding throughout each
period)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INCOME FROM DIVIDENDS AND
INVESTMENT DISTRIBUTIONS
OPERATIONS RATIOS
-------------------------------------------------- ----------------------------
-------------------------------------------------- ----------------------------
Distributions
Net to
Realized
and Dividends Shareholders Net Net Ratio of Ratio of
to Net Net
Net UnrealizedTotal Shareholders from Net Asset Assets Operating Investment
Asset
Value, Net Gain(Loss) from from Net Realized Value, End of Expenses Income(Loss)Portfolio
Gains
Beginning Investment on InvestmInvestment on End Total Period to Average to Turnover
of Average
of Income(LoInvestmentOperationIncome Investments PerioReturn*(000's)Net Net Assets Rate
Period Assets
U.S. Government Money Market
Portfolio
Year Ended August 31,
1998 $1.000 $0.045 $0.000 0.045 ($0.045) -- $1.0004.59% $38,492 1.12% (1) 4.41% (1) --
Year Ended August 31,
1997 1.000 0.043 0.000 0.043 (0.043) -- 1.000 4.41% 28,572 1.12% (1) 4.31% (1) --
Year Ended August 31,
1996 1.000 0.044 0.000 0.044 (0.044) -- 1.000 4.47% 22,906 1.13% (1) 4.30% (1) --
September 2,
1994 (2)
to August 1.000 (3) 0.052 0.000 0.052 (0.052) -- 1.000 5.36% 5,072 0.40% (1,4) 5.38% (1,4)--
31, 1995
(1) During the fiscal year ended August 31,1998 and the fiscal year ended 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
1.30% 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.
</TABLE>
- -----------------------------------------------------
- -----------------------------------------------------
(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.
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND
LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------
Large Large U.S.
CapitalizatioCapitalization 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--$65,387,690;
$62,409,660; $37,775,797;
$20,444,144;
$39,109,701; $10,390,744 and
$49,224,049, respectively) $73,217,580 $103,078,825 $31,499,025 $22,220,520 $38,852,226 $10,741,908 $49,224,049
Cash 62,255 0 873 1,392,178 77,307 45,488 5,011
Receivable for shares of
beneficial
interest sold 303,018 348,883 89,658 98,891 141,300 4,973 1,169,378
Receivable for investments sold 1,424,370 20,081 817,500
Deferred organization expenses 6,425 6,425 6,425 6,425 4,862 6,425 6,425
Interest receivable 380 767,540 136,820 8,788
Dividends receivable 73,208 43,120 6,325 12,615
Foreign taxes receivable 8,558
Prepaid expenses and other assets 16,866 19,104 16,008 12,901 13,407 16,640 16,168
--------------------------------------------------------------------------------------------
Total Assets 73,679,352 104,920,727 31,618,694 23,772,169 40,674,142 10,952,254 50,429,819
--------------------------------------------------------------------------------------------
Liabilities
Payable to manager 32,067 54,039 16,184 13,496 17,326 4,718 17,267
Administration fee payable 6,887 9,686 4,406 2,746 6,226 2,125 4,176
Payable for shares of beneficial
interest redeemed 248,520 1,268,565 110,429 111,941 473,930 53,325 466,598
Payable for investments purchased 6,221,717 190,625 828,188
Other payables and accrued 50,715 68,021 45,952 31,891 39,804 22,146 41,532
expenses
--------------------------------------------------------------------------------------------
Total Liabilities 6,559,906 1,400,311 367,596 160,074 1,365,474 82,314 529,573
--------------------------------------------------------------------------------------------
Net Assets
Shares of beneficial interest at 34,050 39,674 36,479 20,063 38,876 10,210 499,026
par value
57,657,335 59,700,700 39,787,075 22,023,318 39,426,691 10,441,712 49,403,462
Paid-in-surplus
Accumulated undistributed net investment
income (loss) (238,991) (449,579) (701,063) 59,534 (3,131) (11,632) 0
Accumulated net realized gain (loss) on
investments and foreign 1,837,162 3,560,456 (1,594,621) (267,196) 103,707 78,486 (2,242)
currency transactions
Net unrealized appreciation (depreciation)
on investments 7,829,890 40,669,165 (6,276,772) 1,776,376 (257,475) 351,164 0
--------------------------------------------------------------------------------------------
Total Net $67,119,446 $103,520,416 $31,251,098 $23,612,095 $39,308,668 $10,869,940 $49,900,246
Assets
============================================================================================
Net Asset Value per Share
Class B
Net Assets 350 402 186 249 346 149 301
Shares of beneficial interest 18 15 22 21 34 14 301
outstanding
--------------------------------------------------------------------------------------------
Net asset value and offering $19.74 $26.05 $8.58 $11.77 $10.11 $10.64 $1.00
price per
share
============================================================================================
See accompanying notes to financial statements.
</TABLE>
February 28, 1999 (Unaudited)
--------------------------------------------------------------------------
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 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. These
financial statements include activity for Class B shares. Activity for
Class I and C shares is not included herein.
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 annually annually
Capitalization Value
Large annually annually
Capitalization Growth
Small annually annually
Capitalization
International annually annually
Equity
Investment daily * annually
Quality Bond
Municipal Bond daily * annually
U.S. Government daily * annually
Money Market
* paid
monthly
35
February 28, 1999 (Unaudited)
--------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------
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) Purchased Put Option Accounting Policy
When a Portfolio purchases a put option, it pays a premium and an
amount equal to the premium is recorded as an investment. The option is
subsequently marked-to-market to reflect its current market value. The
Portfolio, as purchaser of an option, has control over whether the option
is exercised. If an option expires, the Portfolio realizes a loss in the
amount of the premium paid. If an option is exercised, the premium paid is
an adjustment to the proceeds from the sale in determining whether the
Portfolio has realized a gain or loss. If a Portfolio enters into a
closing sale transaction, the difference between the premium paid and the
amount received from the sale is the realized gain or loss.
When a Portfolio purchases a put option, it is generally to hedge
against adverse movements in the value of Portfolio holdings. The risk of
buying an option is that the Portfolio will pay a premium whether or not
the option is exercised. The Portfolio also has the additional risk of not
being able to enter into a closing securities transaction if an illiquid
market exists or the counter parties develop the inability to meet the
terms of their contracts. No options were outstanding as of February 28,
1999.
(g) Allocation of Expenses
Expenses specifically identifiable to a particular Portfolio are
borne by that Portfolio. Other expenses are allocated to each Portfolio
based on its net assets in relation to the total net assets of all the
applicable Portfolios or another reasonable basis. Actual results could
differ from those estimates.
(h) 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 these
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 six months ended February 28, 1999, the Manager voluntarily
waived most of its management fees and assumed $1,149 in other operating
expenses for Municipal Bond . The Manager also voluntary waived $13,870;
$16,915; $9,226; $2,080; $30,256 and $8,750 in management fees for Large
Capitalization Value, Large Capitalization Growth, Small Capitalization,
International Equity, Investment Quality Bond and U.S. Government Money
Market, respectively, for the six months ended February 28, 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 six months ended
February 28, 1999 was accrued at an annual rate of the lesser of .12% of
each Portfolio's average daily net assets or $414,000 (exclusive of out of
pocket administration fees) for the Trust. Unified Fund Services, Inc.
(the "Distributor") is the distributor of each Portfolio's shares, which
are sold without a front end sales load. Each Portfolio offers the
following classes of shares: Class I, Class B and Class C Shares. Class B
and C
Shares are subject to a Service Plan adopted pursuant to Rule 12b-1 under
the Act. Other differences between the classes include the services
offered to and the expenses borne by each class and certain voting rights.
3. PURCHASES AND SALES OF SECURITIES
For the six months ended February 28, 1999 purchases and sales of
investment securities, other than short-term securities were as follows:
Purchases Sales
--------------------------
Large $48,652,083 $25,104,936
Capitalization Value
Large 23,840,485 21,681,746
Capitalization Growth
Small 7,965,117 3,715,264
Capitalization
International 9,016,893 6,115,298
Equity
Investment
Quality Bond 13,335,961 8,377,066
Municipal Bond 3,145,170 2,000,196
36
February 28, 1999 (Unaudited)
------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
------------------------------------------------------------------------------
4. UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL INCOME TAX PURPOSES
At February 28, 1999, the composition of unrealized appreciation
(depreciation) of investment securities were as follows:
Appreciation (Depreciation) Net
---------------------------------------
Large $9,747,518 ($1,917,628) $7,829,890
Capitalization Value
Large 40,844,455 (175,290) 40,669,165
Capitalization Growth
Small 2,756,655 (9,033,427) (6,276,772)
Capitalization
International 3,177,039 (1,400,663) 1,776,376
Equity
Investment
Quality Bond 247,826 (505,301) (257,475)
Municipal Bond 371,030 (19,866) 351,164
For U.S. federal income tax, the cost of securities owned at February 28,
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 C shares of beneficial interest
authorized with $.001 par value per share. Transactions in capital stock
for the Class B shares were as follows for the period indicated:
(Unaudited)
Period from January 4,
1999 *
to February 28, 1999
--------------------------
Large
Capitalization Value
Issued
350
Redeemed
-
Reinvested from Dividends -
-------------
Net
Increase in Shares 350
-------------
Large
Capitalization Growth
Issued
402
Redeemed
-
Reinvested from Dividends -
-------------
-------------
Net
Increase in Shares 402
-------------
Small
Capitalization
Issued
186
Redeemed
-
Reinvested from Dividends -
-------------
Net
Increase in Shares 186
-------------
International
Equity
Issued
249
Redeemed
-
Reinvested from Dividends -
-------------
Net
Increase in Shares 249
-------------
Investment
Quality Bond
Issued
346
Redeemed
-
Reinvested from Dividends -
-------------
Net
Increase in Shares 346
-------------
Municipal Bond
Issued
149
Redeemed
-
Reinvested from Dividends -
-------------
Net
Increase in Shares 149
-------------
U.S. Government
Money Market
Issued
301
Redeemed
-
Reinvested from Dividends -
-------------
Net
Increase in Shares 301
-------------
* Commencement of offering
37
February 28, 1999 (Unaudited)
------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
------------------------------------------------------------------------------
6. CAPITAL LOSS CARRYFORWARDS
At August 31, 1998, 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> <C>
Name of Portfolio Total 2003 2004 2005 2006
----------------- ----- ---- ---- ---- ----
International Equity Portfolio $270,290 -- -- $8,875 $261,415
U.S. Government Money Market $219 -- -- $32 $187
Portfolio
</TABLE>
- --------------------------------------------------------------------------------
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>
INCOME FROM DIVIDENDS AND
INVESTMENT OPERATIONS DISTRIBUTIONS
RATIOS
-------------------------------------------------- ---------------------------
Distributions
Net to
Realized
and Dividends ShareholderNet Net Ratio Ratio
to of Net of Net
Net UnrealizTotal Shareholderfrom Net Asset Assets Operating Investment
Asset
Value, Net Gain(Losfrom from Net Realized Value, End of Expenses Income(LossPortfolio
Gains
BeginninInvestmenton InvestInvestment on End of TotalPeriod to to Turnover
Average Average
of Income(LInvestmeOperatiIncome InvestmentPeriod Retur(000's) Net Net Rate
Period Assets Assets
International Equity Portfolio
(Class B)
January 4, 1999 (1)
to February 28, 1999 $12.29 $- $(0.52) $(0.52) $- $- $11.77 (3.58%) $- # 1.30% (2) 1.11% (2) 30%
(Unaudited)
Investment Quality Bond Portfolio (Class B)
January 4, 1999 (1)
to February 28, 1999 $10.29 $0.08 $(0.18) $(0.10) $(0.08) $ - $10.11 (0.33%) $- # 0.91% (2) 5.08% (2) 21%
(Unaudited)
Municipal Bond Portfolio (Class B)
January 4, 1999 (1)
to February 28, 1999 $10.66 $0.07 $(0.02) $0.05 $(0.07) $ - $10.64 0.61% $- # 0.33% (2) 4.50% (2) 19%
(Unaudited)
Large Capitalization Value Portfolio (Class
B)
January 4, 1999 (1)
to February 28, 1999 $20.21 $- $(0.47) $(0.47) $- $- $19.74 (0.25%) $- # 1.11% (2) 1.11% (2) 44%
(Unaudited)
Large Capitalization Growth Portfolio
(Class B)
January 4, 1999 (1)
to February 28, 1999 $24.74 $- $1.31 $1.31 $- $- $26.05 12.05% $- # 0.91% (2) 0.26% (2) 23%
(Unaudited)
Small Capitalization Portfolio
(Class B)
January 4, 1999 (1)
to February 28, 1999 $9.33 $- $(0.75) $(0.75) $- $- $8.58 (5.47%) $- # 0.59% (2) 0.00% (2) 12%
(Unaudited)
U.S. Government Money Market Portfolio
(Class B)
January 4, 1999 (1)
to February 28, 1999 $1.00 $0.010 $- $0.010 $(0.010 $- $1.00 0.76% $- # 1.17% (2) 3.58% (2) n/a
(Unaudited)
</TABLE>
(1) Commencement of
offering.
(2) Annualized.
# Rounds to less than
$1,000
* Assumes reinvestment of all dividends and distributions. Aggregate (not
annualized) total return is shown for any period shorter than one year.
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND
LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------
Large Large U.S.
CapitalizatioCapitalization 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--$65,387,690;
$62,409,660; $37,775,797;
$20,444,144;
$39,109,701; $10,390,744 and
$49,224,049, respectively) $73,217,580 $103,078,825 $31,499,025 $22,220,520 $38,852,226 $10,741,908 $49,224,049
Cash 62,255 0 873 1,392,178 77,307 45,488 5,011
Receivable for shares of
beneficial
interest sold 303,018 348,883 89,658 98,891 141,300 4,973 1,169,378
Receivable for investments sold 1,424,370 20,081 817,500
Deferred organization expenses 6,425 6,425 6,425 6,425 4,862 6,425 6,425
Interest receivable 380 767,540 136,820 8,788
Dividends receivable 73,208 43,120 6,325 12,615
Foreign taxes receivable 8,558
Prepaid expenses and other assets 16,866 19,104 16,008 12,901 13,407 16,640 16,168
--------------------------------------------------------------------------------------------
Total Assets 73,679,352 104,920,727 31,618,694 23,772,169 40,674,142 10,952,254 50,429,819
--------------------------------------------------------------------------------------------
Liabilities
Payable to manager 32,067 54,039 16,184 13,496 17,326 4,718 17,267
Administration fee payable 6,887 9,686 4,406 2,746 6,226 2,125 4,176
Payable for shares of beneficial
interest redeemed 248,520 1,268,565 110,429 111,941 473,930 53,325 466,598
Payable for investments purchased 6,221,717 190,625 828,188
Other payables and accrued 50,715 68,021 45,952 31,891 39,804 22,146 41,532
expenses
--------------------------------------------------------------------------------------------
Total Liabilities 6,559,906 1,400,311 367,596 160,074 1,365,474 82,314 529,573
--------------------------------------------------------------------------------------------
Net Assets
Shares of beneficial interest at 34,050 39,674 36,479 20,063 38,876 10,210 499,026
par value
57,657,335 59,700,700 39,787,075 22,023,318 39,426,691 10,441,712 49,403,462
Paid-in-surplus
Accumulated undistributed net
investment
income (loss) (238,991) (449,579) (701,063) 59,534 (3,131) (11,632) 0
Accumulated net realized gain
(loss) on
investments and foreign 1,837,162 3,560,456 (1,594,621) (267,196) 103,707 78,486 (2,242)
currency transactions
Net unrealized appreciation
(depreciation)
on investments 7,829,890 40,669,165 (6,276,772) 1,776,376 (257,475) 351,164 0
--------------------------------------------------------------------------------------------
Total Net $67,119,446 $103,520,416 $31,251,098 $23,612,095 $39,308,668 $10,869,940 $49,900,246
Assets
============================================================================================
Net Asset Value per Share
Class C
Net Assets 177,090 332,175 21,440 40,706 346 149 6,704
Shares of beneficial interest 8,968 12,752 2,500 3,457 34 14 6,704
outstanding
--------------------------------------------------------------------------------------------
Net asset value and offering $19.75 $26.05 $8.58 $11.77 $10.11 $10.64 $1.00
price per
share
============================================================================================
See accompanying notes to financial statements.
</TABLE>
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 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. These
financial statements include activity for Class C shares. Activity for
Class I and B shares is not included herein.
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 annually annually
Capitalization Value
Large annually annually
Capitalization Growth
Small annually annually
Capitalization
International annually annually
Equity
Investment daily * annually
Quality Bond
Municipal Bond daily * annually
U.S. Government daily * annually
Money Market
* paid
monthly
35
February 28, 1999 (Unaudited)
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
-------------------------------------------------------------------------------
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) Purchased Put Option Accounting Policy
When a Portfolio purchases a put option, it pays a premium and an
amount equal to the premium is recorded as an investment. The option is
subsequently marked-to-market to reflect its current market value. The
Portfolio, as purchaser of an option, has control over whether the option
is exercised. If an option expires, the Portfolio realizes a loss in the
amount of the premium paid. If an option is exercised, the premium paid is
an adjustment to the proceeds from the sale in determining whether the
Portfolio has realized a gain or loss. If a Portfolio enters into a
closing sale transaction, the difference between the premium paid and the
amount received from the sale is the realized gain or loss.
When a Portfolio purchases a put option, it is generally to hedge
against adverse movements in the value of Portfolio holdings. The risk of
buying an option is that the Portfolio will pay a premium whether or not
the option is exercised. The Portfolio also has the additional risk of not
being able to enter into a closing securities transaction if an illiquid
market exists or the counter parties develop the inability to meet the
terms of their contracts. No options were outstanding as of February 28,
1999.
(g) Allocation of Expenses
Expenses specifically identifiable to a particular Portfolio are
borne by that Portfolio. Other expenses are allocated to each Portfolio
based on its net assets in relation to the total net assets of all the
applicable Portfolios or another reasonable basis. Actual results could
differ from those estimates.
(h) 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 these
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 six months ended February 28, 1999, the Manager voluntarily
waived most of its management fees and assumed $1,149 in other operating
expenses for Municipal Bond . The Manager also voluntary waived $13,870;
$16,915; $9,226; $2,080; $30,256 and $8,750 in management fees for Large
Capitalization Value, Large Capitalization Growth, Small Capitalization,
International Equity, Investment Quality Bond and U.S. Government Money
Market, respectively, for the six months ended February 28, 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 six months ended
February 28, 1999 was accrued at an annual rate of the lesser of .12% of
each Portfolio's average daily net assets or $414,000 (exclusive of out of
pocket administration fees) for the Trust. Unified Fund Services, Inc.
(the "Distributor") is the distributor of each Portfolio's shares, which
are sold without a front end sales load. Each Portfolio offers the
following classes of shares: Class I, Class B and Class C Shares. Class B
and C
Shares are subject to a Service Plan adopted pursuant to Rule 12b-1 under
the Act. Other differences between the classes include the services
offered to and the expenses borne by each class and certain voting rights.
3. PURCHASES AND SALES OF SECURITIES
For the six months ended February 28, 1999 purchases and sales of
investment securities, other than short-term securities were as follows:
Purchases Sales
--------------------------
Large $48,652,083 $25,104,936
Capitalization Value
Large 23,840,485 21,681,746
Capitalization Growth
Small 7,965,117 3,715,264
Capitalization
International 9,016,893 6,115,298
Equity
Investment
Quality Bond 13,335,961 8,377,066
Municipal Bond 3,145,170 2,000,196
36
February 28, 1999 (Unaudited)
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
-------------------------------------------------------------------------------
4. UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL INCOME TAX PURPOSES
At February 28, 1999, the composition of unrealized appreciation
(depreciation) of investment securities were as follows:
Appreciation (Depreciation) Net
---------------------------------------
Large $9,747,518 ($1,917,628) $7,829,890
Capitalization Value
Large 40,844,455 (175,290) 40,669,165
Capitalization Growth
Small 2,756,655 (9,033,427) (6,276,772)
Capitalization
International 3,177,039 (1,400,663) 1,776,376
Equity
Investment
Quality Bond 247,826 (505,301) (257,475)
Municipal Bond 371,030 (19,866) 351,164
For U.S. federal income tax, the cost of securities owned at February 28,
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 C shares of beneficial interest
authorized with $.001 par value per share. Transactions in capital stock
for the Class C shares were as follows for the period indicated:
(Unaudited)
Period from January 4,
1999 *
to February 28, 1999
--------------------------
Large
Capitalization Value
Issued
9,130
Redeemed
-
Reinvested from Dividends -
-------------
Net
Increase in Shares 9,130
-------------
Large
Capitalization Growth
Issued
12,907
Redeemed
-
Reinvested from Dividends -
-------------
-------------
Net
Increase in Shares 12,907
-------------
Small
Capitalization
Issued
2,616
Redeemed
-
Reinvested from Dividends -
-------------
Net
Increase in Shares 2,616
-------------
International
Equity
Issued
3,610
Redeemed
-
Reinvested from Dividends -
-------------
Net
Increase in Shares 3,610
-------------
Investment
Quality Bond
Issued
39
Redeemed
(5)
Reinvested from Dividends -
-------------
Net
Increase in Shares 34
-------------
Municipal Bond
Issued
14
Redeemed
-
Reinvested from Dividends -
-------------
Net
Increase in Shares 14
-------------
U.S. Government
Money Market
Issued
6,704
Redeemed
(1)
Reinvested from Dividends 13
-------------
Net
Increase in Shares 6,716
-------------
* Commencement of offering
37
February 28, 1999 (Unaudited)
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
-------------------------------------------------------------------------------
6. CAPITAL LOSS CARRYFORWARDS
At August 31, 1998, 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> <C>
Name of Portfolio Total 2003 2004 2005 2006
----------------- ----- ---- ---- ---- ----
International Equity Portfolio $270,290 -- -- $8,875 $261,415
U.S. Government Money Market $219 -- -- $32 $187
Portfolio
</TABLE>
- --------------------------------------------------------------------------------
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>
INCOME FROM
INVESTMENT OPERATIONS
RATIOS
------------------------------------------------ ---------------------------
Distributions
Net Realized to
and DividendShareholders Net Net Ratio Ratio
to of Net of
Net
Net Unrealized Total Shareholdfrom Net Asset Assets Operating Investment
Asset
Value, Net Gain(Loss) from from Realized Value, End of Expenses Income(LosPortfolio
Net Gains
BeginniInvestment on InvestInvestment on End of TotalPeriod to to Turnover
Average Average
of Income(LInvestments OperatIncome Investments Period Retur(000's)Net Net Rate
Period Assets Assets
Large Capitalization Value Portfolio
(Class C)
January 4, 1999 (1)
to February 28, 1999 $20.21 $- $(0.46) $ (0.46) $- $ - $19.75 (1.05%) $ 177 1.(2) 1.30% (2) 44%
(Unaudited)
Large Capitalization Growth Portfolio
(Class C)
January 4, 1999 (1)
to February 28, 1999 $24.74 $- $1.31 $ 1.31 $ - $ - $26.05 12.09% $332 1.56% (2) 1.24% (2) 23%
(Unaudited)
Small Capitalization Portfolio (Class C)
January 4, 1999 (1)
to February 28, 1999 $9.33 $(0.51)$(0.24) $(0.75) $ - $- $8.58 (5.36%) $21 1.69% (2) 1.17% (2) 12%
(Unaudited)
International Equity Portfolio (Class C)
January 4, 1999 (1)
to February 28, 1999 $12.29 $ - $(0.52) $(0.52) $ - $ - $11.77 (3.58%) $41 2.02% (2) 1.76% (2) 30%
(Unaudited)
Investment Quality Bond Portfolio (Class C)
January 4, 1999 (1)
to February 28, 1999 $10.29 $0.08 $(0.18) $(0.10) $(0.08) $ - $10.11(0.32%) $- 0.91% (2) 5.08% (2) 21%
(Unaudited)
Municipal Bond Portfolio (Class C)
January 4, 1999 (1)
to February 28, 1999 $10.66 $0.07 $(0.02) $0.05 $(0.07) $ - $10.64 0.45% $ - 0.33% (2) 4.50% (2) 19%
(Unaudited)
U.S. Government Money Market Portfolio (Class C)
January 4, 1999 (1)
to February 28, 1999 $1.00 $0.010 $ - $0.010 $(0.010) $ - $1.00 0.72% $ 7 1.30% (23.45% (2) n/a
(Unaudited)
</TABLE>
- -------------------------------------------------------------
(1) Commencement of
offering.
(2) Annualized
# Rounds to less than
$1,000
* Assumes reinvestment of all dividends and distributions. Aggregate (not
annualized) total return is shown for any period shorter than one year.
