Mgr Updates 2

Saratoga Capital Management
Capital Markets Overview
For
The Quarter Ended June 30, 2010

THE SARATOGA TECHNOLOGY & COMMUNICATIONS FUND - We are pleased to announce that the Saratoga Technology & Communications Fund (Class I shares) has been ranked a Five Star Fund by Morningstar® in the Morningstar Technology Funds category (overall Morningstar® rating out of 186 funds in the category as of 5/31/2010 based on risk-adjusted return). Please see the enclosed insert on the fund for additional information.

ECONOMIC OVERVIEW - As measured by the Gross Domestic Product (GDP), the United States (U.S.) economy advanced by an annualized rate of 2.7% during the first quarter of 2010. Many current economic statistics have turned modestly higher. Comparing some major components of the GDP from 1970 to the present reveals some interesting trends. The GDP is primarily made up of consumption of goods and services, investment in nonresidential and residential fields, and government investment and consumption in Defense and Nondefense. Currently, Personal Consumption Expenditures (PCE) makes up about 71% of the GDP, up from its 1970 level of nearly 63%. The main components of PCE are Goods and Services. In 1970 Goods and Services were both about 50% of PCE. Currently Services constitutes just over 67% of PCE and Goods makes up nearly 33% of PCE. Next, Gross Private Domestic Investment (GPDI) currently makes up approximately 12% of the GDP, down from its 1970 level of nearly 15%. In 1970, nonresidential investment made up about 70% of GPDI and currently makes up to over 80%; in the meantime, residential investment in 1970 was roughly 25% of GPDI and is now down to nearly 20% of GPDI, with inventories rounding out the difference. The largest contributing factor to GPDI is the Equipment and Software sector (ES). Presently ES to GPDI is up to roughly 55%, from 45% in 1970. Exports and Imports in 1970 were both just over 5% of the GDP, and now Exports are nearly 12% of the GDP and Imports are almost 15% of the GDP. These statistics nearly cancel each-other out; Exports are a positive to the calculation of the GDP, and Imports are subtracted from it. Today, however, both have a greater statistical significance relative to the GDP than in 1970. Finally, Government Consumption Expenditures and Gross Investment (GCE&GI) added up to a little over 22% of the GDP in 1970, and currently it is a tad above 20% of the GDP. In 1970 National defense made up approximately 36% of GCE&GI while Nondefense was virtually 11% of GCE&GI, and currently National defense is down to about 27% of GCE&GI and Nondefense is up slightly to nearly 12% of GCE&GI. The State and local relationship to GCE&GI is presently up to just over 60% from about 50% in 1970. These facts demonstrate that the U.S. economy is firmly rooted in service consumption. Service consumption in the U.S. is up to over 6 trillion dollars. However, the Goods producing sector in the U.S. economy is now above 3.2 trillion dollars, which is nearly equal to the total GDP of the third largest economy in the world, Germany. Lastly, the U.S. Durable Goods producing sector in the first quarter of 2010 increased at an annual rate of around 11%; by comparison, the Nondurable Goods sector increased at an annual rate of about 3.8%. This is a good start, and we are hopeful that the U.S. production sector of our economy will continue to do well.

Information contained herein was obtained from recognized statistical services and other sources believed to be reliable and we therefore cannot make any representation as to its completeness or accuracy. Any statements not of factual nature constitute opinions which are subject to change without notice.

M.D. Sass Investors Services, Inc.
Saratoga Advantage Trust
Large Cap Value Portfolio
Quarter Ended June 30, 2010

Loomis, Sayles & Company L.P.
Saratoga Advantage Trust
Large Cap Growth Portfolio
Quarter Ended June 30, 2010

The second quarter of 2010 was a difficult quarter for most stock markets as widely publicized issues such as sovereign credit in Southern Europe and a slowing Chinese economy weighed on investors' minds.

The top contributors to the Portfolio’s performance during the quarter were Salesforce.com, Neflix and Apple. Shares of Salesforce.com were up after the company announced it was acquiring lead generation startup Jigsaw. Netflix rose significantly after the company reported a 44% increase in quarterly profit. The movie subscription company is growing its subscriber base and expanding digital offerings for its online services. Shares of Apple were also up after the company reported a strong quarter, significantly beating expectations. The strong results were driven, in part, by robust demand for its iPhone, with particular strength in Europe and Asia. Additionally, the release of the company's new iPad and iPhone 4 were received positively and early sales indications were very strong.

The largest detractors from the Portfolio’s performance were priceline.com, Amazon.com and Visa. Priceline.com declined, despite reporting a very strong quarter. The online travel company issued earnings projections that fell short of expectations and also unexpectedly forecasted a slowdown in international bookings growth. Amazon.com declined during the month after the company suffered a service disruption that prevented its website from displaying products. Visa fell during the month after new financial services regulations currently under debate in the U.S. were inserted that could potentially cap the interchange fee charged in debit transactions.

During the quarter, we made some changes to the Portfolio's positioning. Information technology and consumer discretionary remain the most overweighted sectors, and we added to the Portfolio’s exposure in these areas. Finally, we reduced the Portfolio’s energy exposure during the quarter.

Vaughan Nelson Investment Management, L.P.
Saratoga Advantage Trust
Mid Capitalization Portfolio
Quarter Ended June 30, 2010

The stock market turned down in the second quarter of 2010, reversing much of the first quarter’s gains. While earnings reports from the first quarter continued to be generally quite positive and real Gross Domestic Product for the first quarter continued its positive recovery trend, many investors grew more anxious regarding the sovereign debt situation in Europe, a potential slowdown in China and uncertainties regarding financial regulatory reform. The May unemployment report was disappointing as well, as private job growth was positive but lackluster and consumer confidence declined. With all of these concerns, risk aversion grew and many investors fled stocks for the safety of U.S. Treasuries.

In contrast to the first quarter, all sectors in the Portfolio declined in the second quarter with the exception of telecommunications. On a relative basis, positive selection in the energy, healthcare and telecommunications sectors was offset by under performance in the more cyclical financial, materials and consumer discretionary sectors.

Overall, we remain focused on companies with strong or improving balance sheets and returns on capital. Given the heightened uncertainties discussed above, during the quarter reductions were made in the exposure to the consumer discretionary, technology and materials sectors, with proceeds from sales in these sectors redeployed into the consumer staples and utilities sectors, where we have higher confidence in their ability to grow earnings. While we expect the economy to continue to grow, the rate of growth appears to have slowed and more clarity on the concerns discussed , among other things, is needed to improve investor confidence in the economy and markets.

Fox Asset Management L.L.C.
Saratoga Advantage Trust
Small Cap Portfolio
Quarter Ended June 30, 2010

In the second quarter of 2010, stock markets generally produced negative returns, and the small-cap segment was no exception. Lagging sectors were lead by consumer discretionary over concerns for sluggish consumer spending amid a still weak job market. The material and energy sectors were also relative underperformers due in large part to slowing global economic growth and the potential impact from the Gulf of Mexico tragedy. Relative outperforming sectors included utilities, telecom and consumer staples as many investors rotated towards a more defensive posture.

During the quarter, sector allocation contributed to the Portoflio’s performance, while overall stock selection detracted from performance. The strongest contribution to performance came from stock selection in the consumer discretionary sector; the Portfolio’s underweight position in this underperforming sector was also a contributor to relative performance. The Portfolio’s holdings in consumer staples and materials performed relatively well, due to positive stock selection and, to a lesser effect, sector allocation. Negative contributions were led by stock selection in industrials and healthcare.

Our expectations last quarter for an end to the general rise of low quality stocks and the lagging performance of many conservative, high quality stocks proved to be prescient during the second quarter of 2010. We expect more market volatility accompanied by a return to reliance on fundamentals as the main driver of relative performance over the near-term. This should be an ideal environment for a focus on companies with strong balance sheets, sustainable cash flows, proven track records and reasonable valuations. We continue to expect 2010 to be a favorable year for high quality companies and for our strategy.

After four consecutive quarters of strong gains, international markets retreated due largely to European sovereign debt issues and concerns about a China slowdown. Relative strength in Asia helped offset weakness in Europe.

Stock selection and an underweight in Japan were the largest contributors to the Portfolio’s performance during the second quarter of 2010. Santen Pharmaceutical Co., the optical pharmaceutical solutions and equipment maker, was the top performing name in the Portfolio; the company continues to benefit from Japan’s aging population. Shiseido Co., a Japanese cosmetics company, was also a top performer for the quarter after management raised its full year earnings guidance based largely on strong sales growth in China. Holdings from the United Kingdom also contributed to performance. ICAP Plc., a wholesale financial brokerage firm, performed well during the quarter following an earnings upgrade from Goldman Sachs.

From a sector perspective, stock selection and an underweight in financials contributed to performance as sovereign debt issues weighed especially heavy on banks. Vienna Insurance Group and China Everbright Ltd. joined the aforementioned ICAP as top performers in the Portfolio from the Financial sector. Both Vienna Insurance and China Everbright were added to the Portfolio in June as we believe valuations became more attractive due to contagion fears in both regions. Vienna Insurance is the market leader in Central Europe for both life and non-life insurance. China Everbright is a diversified Financial based in Hong Kong and China with a robust asset management business.

History tells us that dividend payers often begin to outperform their non-paying counterparts when the pace of benchmark returns slows. We believe that the income component of total return coupled with bottom up stock selection will continue to lead to positive relative performance.

During the second quarter of 2010, the market swooned on economic worries triggered largely by events in Europe. In general, health care stocks did not hold up as well as they often do in times of stress, declining about in line with the broader stock market, perhaps due to concerns about the impact of the falling Euro on companies’ results. Another potential explanation is the unusually high correlation that exists right now between market sectors due to a focus on macro issues.

Our conservative positioning paid off in the quarter. The Portfolio tried to take advantage of the weakness in certain areas by adding to stocks that sold off for what we believe are short-term reasons. An example is the European pharmaceuticals. Many of these stocks have been hit hard as Europe struggles with its fiscal issues, but their correction appears overdone. Our sense is that some forced selling in Europe (selling necessitated by the need to raise capital) has contributed to this.

With expectations for a slowdown in economic growth, health care stocks may continue to gain attention from investors. As always, our focus remains on the long-term, and while turnover remains low, we retain an ability to act quickly when opportunities present themselves.

Many technology stocks saw declines during the second quarter of 2010. The spigot for IT spending appears to have remained open, albeit cautiously. In this environment the Portfolio has been positioned with ideas where our research identified a sustainable secular shift, as opposed to cyclical momentum. While we continue to focus on secular themes and technology companies benefiting from emerging market growth, we have, of course, evaluated our exposures to risks emanating from Europe’s woes and made what we believe are appropriate adjustments.

The themes the Portfolio is positioning around include the Digital Consumer (smartphones/netbooks, video downloading), Virtualization/Cloud Computing (management of the cloud infrastructure, cloud PAAS [platform as a service]), Internet Commerce Enablers, Corporate Workforce Productivity Enablers (business execution software, application delivery software, offshore IT services), Healthcare Technology (DNA analysis enablers, advanced surgery technologies: robotics, catheter) and Green Technology (LED and EV).

The second quarter of 2010 was a very challenging period. After a first quarter rally, the stock market generally began to drop in May with concerns about sovereign risks in Greece and Spain, the May 6 'Flash Crash', Financial Regulatory Reform, and fears about a double dip recession. During the second quarter, the top contributors to the Portfolio’s performance were Jefferies Group and ACE Ltd. A key detractor was Visa, which was suddenly derailed by last minute debit interchange regulation. Jefferies, the largest independent non-bank Wall Street firm, performed well as it continued to expand aggressively and diversify. We believe that Jefferies is not as affected by the regulatory reform, and it has been able to add headcount and grow internationally as a primary dealer. ACE performed relatively well as a safe-haven P&C company, with limited exposure to the European and regulatory macro concerns. In the second quarter, we continued to add to stocks that we believe have earnings leverage to credit improvement, including American Express and Fifth Third Bank. The stock market appears to remain skittish, but we believe additional credit healing will be seen in coming quarters, which should benefit the Portfolio.

Questions about the economic recovery in the U.S., Europe and China all weighed on the stock market and economically sensitive energy and materials stocks in the second quarter of 2010. Recent economic indicators in the U.S. potentially point to a slower domestic recovery. The sovereign debt crisis in Europe and resultant austerity measures could lead to slower growth abroad. A property bubble in China has led authorities to reign in the growth of that important economy. All of the foregoing points raise questions about the pace of global economic growth. If the global recovery is materially less than forecast, the price of oil and natural resources may come under pressure. The price of crude fell in the quarter.

Another event which weighed on energy names was the BP disaster at the Macondo well in the Gulf of Mexico. Holdings in the Portfolio that were negatively effected include Transocean Ltd, the rig operator, and Anadarko Petroleum, that has a 25% interest in the well. We believe that the liability for these two companies should be limited. If the well is plugged, which we think will happen by mid-August if not sooner, many of the names impacted by the blow-out should rally. We continue to hold Anadarko and Transocean, believing that the potential upside from here is substantial.

We haven't given up on the notion that the U.S. economy is recovering, although the day-to-day news may not always be as positive as one had hoped. Europe seems to be sorting outs its problems, and China's growth should still be around 8%. We see oil trading somewhere in the $70-$80 range, which generally should be favorable for energy. If the Gulf of Mexico well is plugged, many energy names should get a lift.

During the second quarter of 2010, the capital markets revisited the turbulent times seen in 2008, with fresh concerns about creditworthiness, generally falling stock prices, and a pronounced flight-to-quality into U.S. government-backed securities. The Saratoga Investment Quality Bond Portfolio posted a positive return during the quarter. Across the yield curve the level of interest rates dropped dramatically during the quarter as U.S. Treasuries generally shot up in price and down in yield. Ten-year yields dropped 90 basis points (bp)(0.90%) in the quarter and two-year yields fell 42 bp. The Federal Reserve (the “Fed”) did not change its target on the Federal Funds rate, which remains very close to zero. Throughout the quarter the Fed continued to state that the Federal Funds rate will remain “exceptionally low” for “an extended period.”

For the first quarter in a year, credit generally underperformed as corporate bond spreads widened significantly. This was witnessed globally. According to the Bank of America Merrill Lynch Global Broad Corporate Index, spreads widened over a third to over 200 bp. The last time this index widened this much was following the bankruptcy of Lehman Brothers.
We continue to hold corporate bonds for a number of reasons. Most prominently, we believe the fundamentals are still generally strong and that corporations’ cash balances are very high historically, as is their profitability. In addition, the spreads are attractive to us both on an absolute basis as well as in proportion to today’s low Treasury yields.

Fox Asset Management L.L.C.
Saratoga Advantage Trust
Municipal Bond Portfolio
Quarter Ended June 30, 2010

In general, the municipal bond market performed in a similar fashion to the taxable fixed income market with strong absolute returns fueled principally by a flight-to-quality bid as more credit sensitive capital market sectors generally underperformed. Clearly, this was very apparent in the stock markets where major indices were generally down for the quarter, but it was also seen in the global corporate bond markets. For example, in the Bank of America Merrill Lynch Global Broad Corporate Index spreads widened over a third to over 200 bp (2.0%); the last time this index widened this much was following the bankruptcy of Lehman Brothers.

The Saratoga Municipal Bond Portfolio produced a positive return during the second quarter of 2010 and continues, in our opinion, to be conservatively positioned, as we remain cautious on many municipal credits. Interestingly, according to Barclays Capital, municipal bonds have posted the best returns on an after-tax basis of any fixed income asset class and all major stock indices over the past ten years ended May 31, 2010, assuming the highest tax rates. Moreover, if income taxes rise, as seems likely to be the case for the next few years at least, the tax deduction advantage provided by munis should become even more beneficial.

As we noted above, in our opinion, the Portfolio continues to be conservatively positioned, as we remain cautious on many municipal credits. The increased sensitivity to creditworthiness by many investors during the second quarter was rewarded and, in our view, will continue.

During the second quarter of 2010, the Federal Reserve maintained its stance of keeping short-term interest rates near zero for an “extended period.” We anticipate that this stance will continue until there are signs of significant improvement in both housing and employment statistics

Investors should carefully consider the investment objectives, risks, charges and expenses of the Saratoga Funds. This and other information about the Saratoga Funds is contained in the prospectus, which can be obtained by calling (800) 807-FUND and should be read carefully before investing. The Funds of the Saratoga Advantage Trust are distributed by Northern Lights Distributors, LLC.

01048-NLD–7/21/2010