PARAGON PORTFOLIO, N-30D, 1995-07-25

PARAGON PORTFOLIO
N-30D, 1995-07-25

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<PAGE>

PARAGON PORTFOLIO

LETTER TO SHAREHOLDERS
FELLOW SHAREHOLDERS:

The staff of Premier Investment Advisors, L.L.C. welcomes you as a
shareholder of the Paragon Power Variable Annuity. The Power Portfolios began
operations on January 13, 1995. This letter covers the economic environment
and investment results as of May 31, 1995.

THE ECONOMY

Investors have been waiting for the "soft landing" in the U.S. economy and
it appears to be here. A good indication is the rate of employment growth,
which is settling in at 150,000-200,000 new jobs each month. This is
consistent with a 2% rate of Gross Domestic Product growth. This slower rate
of growth through the year should help keep a lid on inflation, which is
running around 3% based on consumer prices. Due to the economic environment,
the Federal Reserve has lowered the Federal Funds Rate from 6% to 5.75%. This
was the first rate cut in three years and does not appear to be the last in
1995.

The slowing in economic activity was preordained by rising short-term and
long-term interest rates in 1994. Long-term interest rates approached 8.2%
last November, creating a 5% real return over inflation, which investors
eventually viewed as a major buying opportunity. Yields have since dropped
below 7%. Our analysis suggests that every one percentage point drop in yields
adds a full percentage point in economic activity one year later. That means
that 1996 should exhibit stronger economic activity aided by increased
domestic and foreign demand for goods and services. With unemployment below 6%
and the nation's capacity utilization already at high levels, inflation
pressure may ensue, forcing the Federal Reserve into another round of credit
tightening late next year.

THE STOCK MARKET

For the six months ended May 31, 1995, the Dow Jones Industrial Average
increased 21.1% while the broader S&P 500 Index achieved a 19.2% return. The
Russell 2000 Index, a proxy for small-capitalization stocks, is up 11.7%.
International stocks, as measured by the Europe Asia Far East ("EAFE") Index,
have risen 5.3% during the last six months. Clearly, U.S. stocks have been
stellar performers so far this year. What kind of stocks have been rewarding
investors? Believing that the economy is slowing to a sustainable growth rate,
investors are attracted to stocks of well-known companies with consistent
earnings patterns. Investors also have been seeking large multinational
companies with exposure to the economic recovery in Europe. These investment
characteristics help explain why large-company stocks have outperformed
smaller stocks by a considerable margin this year.

Equities continue to be supported by a belief that the U.S. economy is
executing a soft landing. Furthermore, the end of the Federal Reserve's
tightening and a drop in bond yields below 7% are strong props under stock
prices. A major negative continues to be the low average dividend yield, but
we believe this is an indication that companies have found more productive
uses for their cash. They are expanding their businesses, buying other
businesses or buying back their own shares. These activities have helped boost
share prices to record levels.

FIXED INCOME MARKET

For the six months ended May 31, 1995, bonds have rallied strongly as short-
term and long-term interest rates have plummeted. The Lehman Brothers
Aggregate Bond Index has earned a cumulative total return of 11.4% during the
last six months. This Index measures the performance of the bond market as a
whole, both short and long-term maturities. Even the Lehman Brothers Mutual
Fund Short (1-3) Government Index, a high-quality short-term index, achieved
an impressive return of 6.2% for the six month period. Our longer term view of
the bond market remains positive.

SUMMARY

The rise in short-term interest rates since February 1994 has had its
desired affect of slowing economic activity. Thus, further increases in short-
term interest rates are not likely in the near term. Stock valuations appear
high with the S&P 500 price to earnings (based on 1995 earnings projections)
ratio at nearly 16 times, but when compared to interest rates and inflation,
stocks appear slightly undervalued. Demand for U.S. securities from domestic
investors appears strong, yet sentiment does not seem alarmingly high. Demand
from foreign investors could rise once the dollar has stabilized. Though a 5%-
10% technical correction could occur, the trend in U.S. stock prices for 1995
appears to be upward.

With this overview of the economy and financial markets, let us turn to the
events that shaped each Power Portfolio's first months of operations.

PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO

For the period since inception (January 13, 1995) through May 31, 1995, the
Portfolio reported a total return of 9.69% based on net asset value ("NAV").
This compares with the Lehman Brothers Mutual Fund Intermediate
Government/Corporate Bond Index return of 8.46% for the same time period.

1
<PAGE>

PARAGON PORTFOLIO

LETTER TO SHAREHOLDERS--(CONTINUED)

The Portfolio's duration, average maturity, coupon, and percent of holdings
with the exception of mortgage backed securities are all at their desired
levels. Mortgage backed securities will be added as the Portfolio grows and
size limitations can be overcome. It will take several months to achieve the
desired ratios, but up to this point, this has neither hurt nor helped the
Portfolio since the total return on mortgage backed securities is in line with
the other sectors of the Portfolio.

The timing in creating this Portfolio could not have been more opportune,
given the rapid appreciation in the bond market since inception.

PARAGON POWER VALUE GROWTH PORTFOLIO

The Portfolio reported a total return of 8.51% for the period since
inception (January 13, 1995) through May 31, 1995 based on NAV. This compares
to a total return of 16.81% for the S&P 500 and a total return of 13.91% for
the Lipper Growth and Income Fund Index for the same period.

The Portfolio benefited from its exposure to several well-performing
economic sectors of the market. Most notably, the 11.6% weighting in the
Technology Sector showed a 37.4% return for the period. Standout performers
were semiconductor stocks: Intel Corp. up 65% and Texas Instruments, Inc. up
54%. These stocks led all issues in the Portfolio for the stated time frame.
The Financial sector turned in impressive results due to decreasing interest
rates. A total of 8.2% of the net assets of the Portfolio were invested in
this sector, which showed a 21.8% return. Federal National Mortgage
Association was the greatest beneficiary, with a return of 32.8%. Dow Chemical
Co. (up 10.7%) and Du Pont (E.I.) de Nemours & Co. (up 22.9%) outperformed the
other issues held in the Basic Materials & Natural Resources sector. These
stocks benefited from the focus on large-capitalization companies. The
Utilities sector was also a beneficiary of the decrease in interest rates
during the period. These income-producing stocks had a return of 17.9% for the
group for this time frame.

The areas of sub-par performance were found almost exclusively in the
Consumer Cyclical sector and focused clearly on the retail stocks. Especially
damaging was the poor performance of the specialty retailer Sports and
Recreation, Inc., 4.25% Convertible Bond due 11/01/00. Other disappointing
performers included Heilig Meyers, a furniture retailer and the home
improvement company Home Depot, Inc. Consumer cyclical stocks remain under the
cloud of decreased spending by consumers.

PARAGON POWER VALUE EQUITY INCOME PORTFOLIO

For the period since inception on January 13, 1995 through May 31, 1995, the
Portfolio achieved a total return of 14.04% based on NAV. The S&P 500 Index
earned a 16.81% total return over the same period while the Lipper Equity
Income Mutual Fund Index earned a 13.01% total return.

Several reasons for the Portfolio's results being slightly behind the S&P
500 Index can be cited. We stated earlier that the stock market has been most
kind to the largest U.S. companies. Though the Portfolio does invest in large
companies, the average capitalization of its holdings is smaller than the
average capitalization of companies in the S&P 500 Index. More specific
reasons for the relative results include the following:

1. Over the period measured, the Portfolio held between 14%-17% of its net
assets in convertible securities, which tend to perform relatively well
in a flat to down stock market, but tend to lag in a strong market such
as the one we have had this year.

2. The Portfolio has maintained an overweighted position in Basic Materials
& Natural Resources stocks such as Dow Chemical Co., Du Pont (E.I.) de
Nemours & Co. and International Paper Co., though the weighting in this
sector was reduced somewhat by the end of the period. This sector of the
stock market underperformed the S&P 500 by over 3% as investors begin to
discount a slowing economy, which could reduce earnings expectations for
these economically sensitive stocks.

3. The Portfolio maintained an underweighted but growing position in
financial stocks during the period. This sector outperformed the market,
rising almost 24% due to the dramatic drop in interest rates. Portfolio
holdings include Reliastar Financial Corp., Merrill Lynch & Co., Inc.
and Federal National Mortgage Association. On average, this segment of
the Portfolio almost doubled the S&P 500 results during the period.
However, we did not anticipate the dramatic interest rate declines
during this period and were not sufficiently weighted in this sector to
match the S&P 500's performance.

Several factors had a beneficial effect on the Portfolio's results:

1. The Portfolio's Capital Equipment & Services sector performed extremely
well. The main contributors were Lockheed Martin Corp., gaining 27%, and
Deere & Co., which increased 24% in value.

2
<PAGE>

PARAGON PORTFOLIO

LETTER TO SHAREHOLDERS--(CONTINUED)

2. We correctly reduced the Portfolio's exposure to consumer cyclical
stocks from two-thirds to about one-half of the S&P 500's weighting.
This market sector, which includes automobiles, retailers and other
consumer discretionary items, underperformed the S&P 500 by
approximately 5% as investors forecasted the slowing in consumer
spending as the economy decelerated.

3. The Portfolio maintained a market weighting in the Technology sector,
which was the strongest market sector since the rally began in January.
We were successful in our stock selection in this sector as well. Issues
that contributed strongly to the Portfolio's gain were Intel Corp. and
Texas Instruments, Inc., up 65% and 54%, respectively.

The significant changes in the Portfolio since inception include the
purchase of shares of Baxter International, Inc., a leading hospital supply
company; Exxon Corp., a major integrated oil company; and International
Business Machines Corp. ("IBM") the leading mainframe computer manufacturer.
Additional purchases included shares in Paccar, Inc., a manufacturer of heavy-
duty trucks. Sales during the period include all shares in General Electric
Co. and Johnson & Johnson, which were sold in order to capture significant
profits. In addition, a portion of our holdings in Texas Instruments, Inc.
were sold for the same reason.

The Portfolio retains a strong value orientation maintaining a lower average
price to earnings ratio as compared to the S&P 500 Index.

PARAGON POWER GULF SOUTH GROWTH PORTFOLIO

For the period since inception on January 13, 1995 through May 31, 1995, the
Portfolio achieved a total return of 6.94% based on NAV. The Russell 2000
Index, a popular small-capitalization stock index, earned a 10.34% total
return, the Lipper Small-Company Growth Fund Index, an index of a group of
mutual funds with similar investment objectives, rose 9.47% and the S&P 500
Index earned a 16.81% total return, for the same time period.

The primary reason for the Portfolio's underperformance versus the S&P 500
lies with the median capitalization of the Portfolio versus the S&P 500 Index
capitalization. As stated earlier in this letter, large-capitalization stocks
have outperformed small capitalization stocks by a wide margin as exhibited by
the S&P 500 Index return being approximately 6% above the Russell 2000 Index
return.

Several specific reasons can be cited for the results trailing the Russell
2000 Index and the Lipper Small Company Growth Index:

1. In April 1995, Health Maintenance Organization ("HMO") stocks declined
significantly following an announcement of price cuts by a small HMO in
the Midwest. The Portfolio's holdings of HMO stocks, which make up over
3% of net assets declined in price between 16% and 42% during the last
two months of this period.

2. Basic Material & Natural Resources stocks such as Georgia Gulf Corp.,
Nucor Corp. and Image Industries, Inc. declined during the period an
average of 12.2% while the market indices rose. These three stocks made
up of over 6% of Portfolio assets as of May 31, 1995. Investors were
concerned about pricing pressure and earnings sustainability in a
slowing economy. The Portfolio continues to hold these stocks since we
believe they have excellent growth potential.

3. The Portfolio's holdings of consumer cyclical stocks declined 17% during
the period, led by Sports and Recreation, Inc., Michaels Stores, Inc.,
and Heilig Meyers Co. We continue to have confidence in the investment
merits of these stocks.

Several events had beneficial effects on the Portfolio's performance during
the period:

1. Portfolio holdings in the Energy sector, which comprises almost 10% of
net assets, had large gains during the period. Benton Oil & Gas Co., a
small exploration and production company, rose 40% in price, while
Input/Output, Inc., a seismic equipment company, rose 49% during the
period. In addition, shares of Landmark Graphics Corp., a company that
develops software to analyze seismic data for oil and gas exploration,
rose 25% during the period.

2. Financial stocks, which make up almost 20% of net assets, gained an
average of 33%. Holdings include Regional Acceptance Corp., up 46%;
United Companies Financial Corp. up 71%; and Stewart Enterprises, Inc.
up 21%.

Important changes made in the Portfolio's holdings during the period include
the following:

1. The Technology sector was increased from 6.9% to 11.1% of net assets
through the purchase of DSC Communications Corp., a Texas-based
manufacturer of telecommunications switching equipment, and Acxiom
Corp., an Arkansas-based company that maintains target marketing data-
bases for use by Fortune 1000 companies.

3
<PAGE>

PARAGON PORTFOLIO

LETTER TO SHAREHOLDERS--(CONTINUED)

Financial stocks were increased by over 4% to 19.7% of net assets by
purchasing Bankers First Corp., a High Point, North Carolina-based savings and
loan, and Medaphis Corp., a company that performs accounts receivable
management and office management for hospitals and medical practices.

Asset sales for the period included all shares of Tech Data Corp., a
personal computer products distributor which was sold at a 39% loss following
an interruption in earnings momentum in the company due to internal inventory
management problems. In addition, PMT Services, a company that provides credit
card transaction-processing services to small businesses, was sold to capture
an 80% gain.

In conclusion, we appreciate your support of the Paragon Power Portfolio
Variable Annuity and look forward to helping you meet your investment
objectives.

/s/ Donald E. Allred

Donald E. Allred
President and Chief Investment Officer
Premier Investment Advisors, L.L.C.
July 7, 1995

4
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- ----------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--35.8%
Federal Farm Credit Bank
$100,000 5.81% 11/10/03 $ 95,503
Federal Home Loan Bank
100,000 7.61 09/23/04 105,380
Federal Home Loan Mortgage Corp.
100,000 7.13 07/21/99 103,306
Federal National Mortgage Assn.
100,000 6.80 01/10/03 101,524
Tennessee Valley Authority 1989 Series D
100,000 8.38 10/01/99 107,550
----------
Total U.S. Government Agency Obligations
(Cost $485,217).............................. $ 513,263
----------
U.S. TREASURY OBLIGATIONS--34.3%
United States Treasury Bond
$100,000 9.38% 02/15/06 $ 123,073
United States Treasury Notes
95,000 7.38 11/15/97 98,112
100,000 8.00 05/15/01 109,302
150,000 7.50 05/15/02 161,132
----------
Total U.S. Treasury Obligations
(Cost $459,143).............................. $ 491,619
----------
CORPORATE OBLIGATIONS--21.5%
Anheuser Busch Companies, Inc.
$100,000 6.90% 10/01/02 $ 100,885
Ford Motor Credit Corp.
100,000 7.50 06/15/04 102,781
NationsBank Corp.
100,000 7.75 08/15/04 105,101
----------
Total Corporate Obligations (Cost $287,283)... $ 308,767
----------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- ----------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS--7.7%
State Street Bank & Trust Company, dated
05/31/95, repurchase price $110,017
(U.S. Treasury Note: $110,000, 6.63%,
03/31/97)
$110,000 5.50% 06/01/95 $ 110,000
----------
Total Repurchase Agreements (Cost $110,000)... $ 110,000
----------
Total Investments (Cost $1,341,643(a))........ $1,423,649
==========
</TABLE>

<TABLE>
- ----------------------------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost.............................................. $ 82,006
Gross unrealized loss for investments in which cost exceeds
value..................................................... 0
----------
Net unrealized gain........................................ $ 82,006
==========
- ----------------------------------------------------------------------------------------------------
</TABLE>

(a) The cost stated also represents aggregate cost for federal income tax
purposes.

The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.

The accompanying notes are an integral part of these financial statements.

5
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER VALUE GROWTH PORTFOLIO
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--80.8%
BASIC MATERIALS & NATURAL RESOURCES--8.8%
800 Dow Chemical Co. $ 58,700
500 Du Pont (E.I.) de Nemours & Co. 33,937
400 International Paper Co. 31,450
600 Nucor Corp. 28,650
----------
152,737
----------
CAPITAL EQUIPMENT & SERVICES--9.0%
1,100 Allied Signal, Inc. 44,412
600 General Electric Co. 34,800
500 Grainger (W.W.), Inc.(a) 29,938
800 Johnson Controls, Inc. 45,800
----------
154,950
----------
CONSUMER CYCLICAL--14.2%
1,400 Autozone, Inc.(b) 32,550
500 Chrysler Corp.(a) 21,813
400 Dayton Hudson Corp. 28,350
1,100 Heilig Meyers Co. 26,263
800 Home Depot, Inc. 33,300
1,300 Michaels Stores, Inc.(b) 29,412
700 Minnesota Mining & Manufacturing Co. 41,913
1,300 Office Depot, Inc.(b) 31,200
----------
244,801
----------
CONSUMER NONCYCLICAL--11.5%
300 Darden Restaurants, Inc.(b) 3,300
1,000 Duracell International, Inc. 43,250
1,300 Foundation Health Corp.(b) 36,562
500 General Mills, Inc. 25,937
900 Healthcare Compare Corp.(b) 28,125
600 Proctor & Gamble Co. 43,125
500 United Healthcare Corp. 18,625
----------
198,924
----------
ENERGY--5.4%
800 Amoco Corp. 54,700
1,200 Sun Co., Inc. 37,800
----------
92,500
----------
</TABLE>

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
FINANCE--8.2%
700 CCB Financial Corp.(a) $ 28,875
500 Federal National Mortgage Assn. 46,500
1,000 First American Corp. of Tennessee 34,688
1,500 Southtrust Corp. 32,063
----------
142,126
----------
TECHNOLOGY--11.6%
800 AMP, Inc.(a) 34,100
1,200 Compaq Computer Corp.(b) 46,950
500 Intel Corp. 56,125
300 Texas Instruments, Inc. 34,687
250 Xerox Corp. 28,344
----------
200,206
----------
TRANSPORTATION--1.6%
1,800 Skywest, Inc. 27,675
----------
UTILITIES--10.5%
700 AT&T Corp. 35,525
500 BellSouth Corp. 30,687
1,000 Enron Corp. 36,500
1,600 Peco Energy Co. 45,000
1,300 WorldCom, Inc.(b) 33,800
----------
181,512
----------
Total Common Stocks (Cost $1,295,915)......... $1,395,431
----------
PREFERRED STOCKS--4.1%
300 Ashland Oil Co., Convertible Preferred, 3.13% $ 17,700
500 Corning Delaware LP, Convertible Preferred, 6.00% 24,875
300 Ford Motor Co., Convertible Preferred, 4.20% 28,650
----------
Total Preferred Stocks (Cost $68,293)......... $ 71,225
----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

6
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER VALUE GROWTH PORTFOLIO--(CONTINUED)
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- ----------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS--2.2%
Avnet, Inc.
$ 20,000 6.00% 04/15/12 $ 22,125
Sports & Recreation, Inc.
20,000 4.25 11/01/00 15,225
----------
Total Corporate Obligations
(Cost $41,541)....................... $ 37,350
----------
REPURCHASE AGREEMENTS--16.5%
State Street Bank & Trust Company, dated
05/31/95, repurchase price $285,044
(U.S. Treasury Note: $285,000, 6.63%,
03/31/97)
$285,000 5.50% 06/01/95 $ 285,000
----------
Total Repurchase Agreements
(Cost $285,000)...................... $ 285,000
----------
Total Investments
(Cost $1,690,749(c))................. $1,789,006
==========
</TABLE>

<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds cost.... $136,370
Gross unrealized loss for investments in which cost exceeds value.... (38,113)
--------
Net unrealized gain.................................................. $ 98,257
========
- --------------------------------------------------------------------------------
</TABLE>

(a) There are common stock rights attached to these securities.
(b) Non-income producing security.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.

The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.

The accompanying notes are an integral part of these financial statements.

7
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER VALUE EQUITY INCOME PORTFOLIO
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--80.4%
BASIC MATERIALS & NATURAL RESOURCES--10.4%
900 Birmingham Steel Corp. $ 16,875
600 Dow Chemical Co. 44,025
700 Du Pont (E.I.) de Nemours & Co. 47,513
250 International Paper Co. 19,656
200 Mead Corp. 10,775
----------
138,844
----------
CAPITAL EQUIPMENT & SERVICES--8.9%
200 Deere & Co. 17,300
200 ITT Corp. 22,375
200 Johnson Controls, Inc. 11,450
900 Lockheed Martin Corp. 53,550
300 Paccar, Inc.(a) 14,437
----------
119,112
----------
CONSUMER CYCLICAL--7.4%
500 Chrysler Corp.(a) 21,812
800 Fleetwood Enterprises, Inc. 16,600
500 Reebok International Ltd. 16,750
400 Sears Roebuck & Co. 22,550
400 VF Corp. 21,300
----------
99,012
----------
CONSUMER NONCYCLICAL--17.4%
1,100 Baxter International, Inc. 38,363
250 Bristol-Myers Squibb Co. 16,594
400 Conagra, Inc. 13,350
1,200 IBP, Inc. 45,000
700 Phillip Morris Companies, Inc. 51,013
900 Premark International, Inc. 44,888
300 Schering Plough Corp.(a) 23,625
----------
232,833
----------
ENERGY--7.5%
200 Exxon Corp. 14,275
600 Mobil Corp.(a) 60,225
200 Royal Dutch Petroleum Co. ADR 25,350
----------
99,850
----------
FINANCE--6.7%
400 Federal National Mortgage Assn. 37,200
400 Merrill Lynch & Co., Inc. 18,800
900 Reliastar Financial Corp. 33,412
----------
89,412
----------
</TABLE>

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
TECHNOLOGY--12.4%
400 Compaq Computer Corp.(b) $ 15,650
300 Intel Corp. 33,675
400 International Business Machines Corp. 37,300
600 Morgan Stanley Group, Inc. (Cisco Systems, Inc.--PERQS) 21,675
200 Texas Instruments, Inc. 23,125
300 Xerox Corp. 34,012
----------
165,437
----------
TRANSPORTATION--3.5%
900 Atlantic Southeast Airlines, Inc. 21,713
200 British Airways ADR 13,150
500 Consolidated Freightways, Inc. 11,875
----------
46,738
----------
UTILITIES--6.2%
400 BellSouth Corp. 24,550
400 Entergy Corp. 9,900
800 Peco Energy Co. 22,500
800 Sprint Corp. 26,800
----------
83,750
----------
Total Common Stocks (Cost $956,811)................. $1,074,988
----------
PREFERRED STOCKS--8.4%
300 Citicorp, Convertible Preferred, 5.38% $ 43,500
400 Ford Motor Co., Convertible Preferred, 4.20% 38,200
500 General Motors Corp., Convertible Preferred, 3.25% 31,000
----------
Total Preferred Stocks (Cost $101,401).............. $ 112,700
----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

8
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER VALUE EQUITY INCOME PORTFOLIO--(CONTINUED)
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- ----------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS--6.2%
Avnet, Inc.
$30,000 6.00% 04/15/12 $ 33,187
Healthsouth Rehabilitation
10,000 5.00 04/01/01 10,850
Pennzoil Co.
20,000 6.50 01/15/03 23,600
Sports & Recreation, Inc.
20,000 4.25 11/01/00 15,225
----------
Total Corporate Obligations
(Cost $83,429)............................... $ 82,862
----------
REPURCHASE AGREEMENTS--15.0%
State Street Bank & Trust Company, dated
05/31/95, repurchase price $200,031
(U.S. Treasury Note: $200,000, 6.63%,
03/31/97)
$200,000 5.50% 06/01/95 $ 200,000
----------
Total Repurchase Agreements
(Cost $200,000).............................. $ 200,000
----------
Total Investments
(Cost $1,341,641(c))......................... $1,470,550
==========
</TABLE>

<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost..................................... $ 144,014
Gross unrealized loss for investments in which cost exceeds
value............................................ (15,105)
----------
Net unrealized gain............................... $ 128,909
==========
- ---------------------------------------------------------------------------------------------------
</TABLE>

(a) There are common stock rights attached to these securities.
(b) Non-income producing security.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.

The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.

ADR--American Depository Receipt
PERQS--Performance Equity-Linked Quarterly-Pay Security

The accompanying notes are an integral part of these financial statements.

9
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER GULF SOUTH GROWTH PORTFOLIO
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--95.2%
BASIC MATERIALS & NATURAL RESOURCES--8.3%
1,400 Albemarle Corp. $ 21,525
1,000 Clayton Homes, Inc. 17,375
1,200 Georgia Gulf Corp. 36,450
1,200 Image Industries, Inc.(b) 12,600
1,100 Nucor Corp. 52,525
----------
140,475
----------
CAPITAL EQUIPMENT & SERVICES--3.6%
2,300 Union Switch & Signal, Inc.(b) 35,794
800 Wolverine Tube, Inc.(b) 25,800
----------
61,594
----------
CONSUMER CYCLICAL--16.9%
2,400 Autozone, Inc.(b) 55,800
1,200 Books-A-Million, Inc.(b) 16,800
1,700 Cameron Ashley, Inc.(b) 19,125
2,000 Heilig Meyers Co. 47,750
800 Michaels Stores, Inc.(b) 18,100
2,800 Office Depot, Inc.(b) 67,200
2,800 River Oaks Furniture, Inc.(b) 35,000
2,400 Sports & Recreation, Inc.(b) 27,600
----------
287,375
----------
CONSUMER NONCYCLICAL--13.5%
2,300 Apple South, Inc. 39,962
700 Coastal Physician Group, Inc.(b) 10,937
1,200 Coventry Corp.(b) 24,750
1,800 Cracker Barrel Old Country Store 43,875
800 HealthWise of America, Inc.(b) 23,400
800 Healthcare Compare Corp.(b) 25,000
1,200 Inphynet Medical Management, Inc.(b) 19,500
1,600 Isolyser Company, Inc.(b) 42,400
----------
229,824
----------
ENERGY--9.8%
2,300 Benton Oil & Gas Co.(b) 30,188
800 Global Industries, Inc.(b) 19,600
2,100 Input/Output, Inc.(b) 71,400
1,900 Landmark Graphics Corp.(b) 44,888
----------
166,076
----------
</TABLE>

<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
FINANCE--19.7%
1,500 American Federal Bank, FSB $ 21,000
900 Bankers First Corp. 24,300
900 First Financial Management Corp. 63,900
1,100 Medaphis Corp.(b) 66,275
2,700 Regional Acceptance Corp.(b) 42,525
1,700 Stewart Enterprises, Inc. 51,000
1,500 United Companies Financial Corp. 66,375
----------
335,375
----------
TECHNOLOGY--11.1%
1,200 Acxiom Corp.(b) 23,400
1,000 DSC Communications Corp.(a)(b) 37,000
1,200 Dallas Semiconductor Corp. 22,050
2,500 Mobile Telecommunications Technology Corp.(b) 56,250
2,400 SCI Systems, Inc.(b) 49,800
----------
188,500
----------
TRANSPORTATION--5.2%
1,900 Atlantic Southeast Airlines, Inc. 45,838
2,300 Miller Industries, Inc.(b) 42,262
----------
88,100
----------
UTILITIES--7.1%
2,400 Communications Central, Inc.(b) 19,800
1,600 Equalnet Holding Corp.(b) 26,200
2,900 WorldCom, Inc.(b) 75,400
----------
121,400
----------
Total Common Stocks
(Cost $1,540,762)......................... $1,618,719
----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

10
<PAGE>

PARAGON PORTFOLIO

STATEMENT OF INVESTMENTS

PARAGON POWER GULF SOUTH GROWTH PORTFOLIO--(CONTINUED)
MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------- -------- -------- ----------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS--17.4%
State Street Bank & Trust Company, dated
05/31/95, repurchase price $295,045
(U.S. Treasury Note $295,000, 6.63%,
03/31/97)
$295,000 5.50% 06/01/95 $ 295,000
----------
Total Repurchase Agreements
(Cost $295,000).............................. $ 295,000
----------
Total Investments
(Cost $1,835,762(c))......................... $1,913,719
==========
</TABLE>

<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost..................................... $ 173,032
Gross unrealized loss for investments in which cost exceeds
value............................................ (95,075)
----------
Net unrealized gain............................... $ 77,957
==========
- ---------------------------------------------------------------------------------------------------
</TABLE>

(a) There are common stock rights attached to these securities.
(b) Non-income producing security.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.

The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.

The accompanying notes are an integral part of these financial statements.

11
<PAGE>

PARAGON PORTFOLIO

STATEMENTS OF ASSETS AND LIABILITIES

MAY 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
PARAGON PARAGON PARAGON PARAGON
POWER POWER POWER POWER
INTERMEDIATE- VALUE VALUE EQUITY GULF SOUTH
TERM BOND GROWTH INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities,
at value
(cost $1,341,643;
$1,690,749; $1,341,641 and
$1,835,762, respectively)... $1,423,649 $1,789,006 $1,470,550 $1,913,719
Cash........................ 4,292 1,369 2,017 396
Receivables:
Investment securities sold.. -- 18,569 -- --
Interest.................... 19,274 257 906 45
Dividends................... -- 4,832 3,532 235
Fund shares sold............ 13 1,641 7 24
Deferred organization
expenses, net............... 12,703 12,703 12,703 12,703
Other....................... 4,017 3,979 4,325 4,204
---------- ---------- ---------- ----------
Total assets............... 1,463,948 1,832,356 1,494,040 1,931,326
---------- ---------- ---------- ----------
LIABILITIES:
Payables:
Investment securities
purchased................... -- 75,608 125,801 200,436
Fund shares redeemed........ 13 24 7 24
Dividends and distributions. 333 -- -- --
Advisory fees............... 572 871 694 883
Administration fees......... 171 201 160 204
Accrued expenses and other
liabilities................. 28,801 29,266 30,437 30,193
---------- ---------- ---------- ----------
Total liabilities.......... 29,890 105,970 157,099 231,740
---------- ---------- ---------- ----------
NET ASSETS:
Paid-in capital............. 1,352,081 1,633,072 1,198,784 1,613,049
Accumulated undistributed
net investment income....... -- 7 9 1,248
Accumulated net realized
gain (loss) on investment
transactions................ (29) (4,950) 9,239 7,332
Net unrealized gain on
investments................. 82,006 98,257 128,909 77,957
---------- ---------- ---------- ----------
Net assets................. $1,434,058 $1,726,386 $1,336,941 $1,699,586
========== ========== ========== ==========
Net asset value per share
(net assets/shares
outstanding)................ $ 10.23 $ 14.59 $ 12.81 $ 16.02
========== ========== ========== ==========
SHARES OUTSTANDING:
Shares of beneficial
interest outstanding, ($0.01
par value),
unlimited number of shares
authorized.................. 140,213 118,291 104,334 106,096
========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

12
<PAGE>

PARAGON PORTFOLIO

STATEMENTS OF OPERATIONS

FOR THE PERIOD ENDED MAY 31, 1995(a)
(UNAUDITED)

<TABLE>
<CAPTION>
PARAGON PARAGON PARAGON PARAGON
POWER POWER POWER POWER
INTERMEDIATE- VALUE VALUE EQUITY GULF SOUTH
TERM BOND GROWTH INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- --------- ------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest...................... $ 32,340 $ 4,614 $ 3,515 $ 5,304
Dividends(b) ................. -- 11,092 11,854 974
-------- -------- -------- -------
Total income................. 32,340 15,706 15,369 6,278
-------- -------- -------- -------
EXPENSES:
Advisory fees................. 2,185 3,145 2,747 3,270
Administration fees........... 656 726 634 755
Transfer agent fees........... 432 432 432 432
Custodian fees................ 3,237 3,453 3,885 3,885
Professional fees............. 10,144 10,144 10,144 10,144
Trustee fees.................. 136 136 136 136
Registration fees............. 595 894 1,489 1,489
Amortization of deferred
organization expenses......... 1,047 1,047 1,047 1,047
Other......................... 2,936 2,936 2,936 2,936
-------- -------- -------- -------
Total expenses............... 21,368 22,913 23,450 24,094
Less--Expenses reimbursable
by Advisor.................... 18,090 18,074 19,224 19,064
-------- -------- -------- -------
Net expenses................. 3,278 4,839 4,226 5,030
-------- -------- -------- -------
Net investment income....... 29,062 10,867 11,143 1,248
-------- -------- -------- -------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investment transactions....... (29) (4,950) 9,239 7,332
Net change in unrealized gain
on investments................ 82,006 98,257 128,909 77,957
-------- -------- -------- -------
Net realized and unrealized
gain on investments........... 81,977 93,307 138,148 85,289
-------- -------- -------- -------
Net increase in net assets
resulting from operations..... $111,039 $104,174 $149,291 $86,537
======== ======== ======== =======
</TABLE>
- -----
(a) For the period from commencement of operations (January 13, 1995) to May
31, 1995.
(b) For the Paragon Power Value Equity Income Portfolio, amount is net of $94
in foreign withholding taxes.

The accompanying notes are an integral part of these financial statements.

13
<PAGE>

PARAGON PORTFOLIO

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE PERIOD ENDED MAY 31, 1995(a)
(UNAUDITED)

<TABLE>
<CAPTION>
PARAGON PARAGON PARAGON PARAGON
POWER POWER POWER POWER
INTERMEDIATE- VALUE VALUE EQUITY GULF SOUTH
TERM BOND GROWTH INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income...... $ 29,062 $ 10,867 $ 11,143 $ 1,248
Net realized gain (loss) on
investment transactions.... (29) (4,950) 9,239 7,332
Net change in unrealized
gain on investments........ 82,006 98,257 128,909 77,957
---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations. 111,039 104,174 149,291 86,537
---------- ---------- ---------- ----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income. (29,062) (10,860) (11,134) --
---------- ---------- ---------- ----------
Total distributions to
shareholders.............. (29,062) (10,860) (11,134) --
---------- ---------- ---------- ----------
FROM SHARE TRANSACTIONS:
Proceeds from sale of
shares..................... 1,327,435 1,634,786 1,191,063 1,614,846
Reinvestment of dividends
and distributions.......... 25,542 8,548 8,006 --
Cost of shares redeemed.... (896) (10,262) (285) (1,797)
---------- ---------- ---------- ----------
Net increase in net assets
resulting from share
transactions.............. 1,352,081 1,633,072 1,198,784 1,613,049
---------- ---------- ---------- ----------
Total increase............ 1,434,058 1,726,386 1,336,941 1,699,586
---------- ---------- ---------- ----------
NET ASSETS:
Beginning of period........ -- -- -- --
---------- ---------- ---------- ----------
End of period.............. $1,434,058 $1,726,386 $1,336,941 $1,699,586
========== ========== ========== ==========
ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME....... $ -- $ 7 $ 9 $ 1,248
========== ========== ========== ==========
SUMMARY OF SHARE
TRANSACTIONS:
Sold....................... 137,731 118,422 103,705 106,210
Issued on reinvestment of
dividends and
distributions.............. 2,572 597 652 --
Redeemed................... (90) (728) (23) (114)
---------- ---------- ---------- ----------
Increase in shares out-
standing................... 140,213 118,291 104,334 106,096
========== ========== ========== ==========
</TABLE>
- -----
(a) For the period from commencement of operations (January 13, 1995) to May
31, 1995.

The accompanying notes are an integral part of these financial statements.

14
<PAGE>

PARAGON PORTFOLIO

FINANCIAL HIGHLIGHTS

SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIOD ENDED MAY 31, 1995(a)
(UNAUDITED)

<TABLE>
<CAPTION>
DISTRIBUTIONS TO
INCOME FROM INVESTMENT OPERATIONS SHAREHOLDERS
------------------------------------ ------------------------
TOTAL NET NET
NET ASSET NET REALIZED INCOME TOTAL INCREASE ASSET
VALUE, NET AND UNREALIZED FROM FROM NET DISTRIBUTIONS IN NET VALUE,
BEGINNING INVESTMENT GAIN ON INVESTMENT INVESTMENT TO ASSET END OF TOTAL
OF PERIOD INCOME INVESTMENTS(d) OPERATIONS INCOME SHAREHOLDERS VALUE PERIOD RETURN(b)
--------- ---------- -------------- ---------- ---------- ------------- -------- ------ ---------

PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period ended: 5/31/95 $ 9.56 $0.25 $0.67 $0.92 $(0.25) $(0.25) $0.67 $10.23 9.69%

PARAGON POWER VALUE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 5/31/95 13.56 0.12 1.03 1.15 (0.12) (0.12) 1.03 14.59 8.51

PARAGON POWER VALUE EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 5/31/95 11.35 0.12 1.46 1.58 (0.12) (0.12) 1.46 12.81 14.04

PARAGON POWER GULF SOUTH GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 5/31/95 14.98 0.01 1.03 1.04 0.00 0.00 1.04 16.02 6.94

<CAPTION>
RATIOS ASSUMING
NO EXPENSE
REIMBURSEMENTS
RATIO --------------------------
RATIO OF NET RATIO
OF NET INVESTMENT OF NET
EXPENSES INCOME NET ASSETS RATIO INVESTMENT
TO AVERAGE TO AVERAGE PORTFOLIO AT END OF EXPENSES INCOME (LOSS)
NET NET TURNOVER OF PERIOD TO AVERAGE TO AVERAGE
ASSETS(c) ASSETS(c) RATE (IN 000'S) NET ASSETS(c) NET ASSETS(c)
---------- ---------- --------- ---------- ------------- -------------

PARAGON POWER INTERMEDIATE-TERM BOND PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Period ended: 5/31/95 0.75% 6.65% 0% $1,434 4.89% 2.51%

</TABLE>
(a) For the period from commencement of operations (January 13, 1995) to May
31, 1995.
(b) Assumes investment at the net asset value at inception (January 13, 1995),
reinvestment of all dividends and distributions and a complete redemption
of the investment at the net asset value at the end of the period.
(c) Annualized.
(d) Includes the balancing effect of calculating per share amounts.

The accompanying notes are an integral part of these financial statements.

<PAGE>

PARAGON PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

MAY 31, 1995
(UNAUDITED)

NOTE 1. ORGANIZATION

Paragon Portfolio (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Trust consists of eleven portfolios four of
which (the "Portfolios") are contained within: Paragon Power Intermediate-Term
Bond Portfolio ("Intermediate-Term Bond Portfolio"), Paragon Power Value
Growth Portfolio ("Value Growth Portfolio"), Paragon Power Value Equity Income
Portfolio ("Value Equity Income Portfolio"), and Paragon Power Gulf South
Growth Portfolio ("Gulf South Growth Portfolio"). Gulf South Growth Portfolio
is a non-diversified portfolio; all other Portfolios are diversified. The
Portfolios commenced operations on January 13, 1995.

Shares of the Portfolios are offered to separate accounts of Great Northern
Insured Annuity Corporation ("GNA") and its affiliates and may also be offered
to the separate accounts of unaffiliated insurance companies. Shares of the
Portfolios may serve as the underlying investments for both variable annuity
and variable life insurance contracts.

At May 31, 1995, Great Northern Insured Annuity Corporation owned seed money
shares in the Portfolios.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by
the Portfolios which are in conformity with those generally accepted in the
investment company industry.

Investment Valuation. Equity securities traded on a national securities
exchange or the National Association of Securities Dealers NASDAQ System
("NASDAQ") are valued at their last sale price on the principal exchange on
which they are traded or NASDAQ (if NASDAQ is the principal market for such
securities) on the valuation day or, if no sale occurs, at the mean between
the closing bid and asked prices. Unlisted equity securities for which market
quotations are available are valued at the mean between the most recent bid
and asked prices. Fixed-income securities are valued at prices supplied by an
independent pricing service which reflect broker/dealer-supplied valuations
and electronic data processing techniques. Short-term debt obligations
maturing in sixty days or less are valued at amortized cost. Other assets and
assets whose market values, in the investment adviser's opinion, do not
reflect fair value are valued at fair value using methods determined in good
faith by the Board of Trustees.

Securities Transactions and Investment Income. Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on
the ex-dividend date and interest income is recorded on the accrual basis.

Premiums and Discounts on Debt Securities Owned. Intermediate-Term Bond
Portfolio accretes discounts on long-term debt securities on a straight-line
basis and does not amortize premiums. Value Growth, Value Equity Income and
Gulf South Growth Portfolios accrete discounts on long-term debt securities on
a straight-line basis and amortize premiums on a straight-line basis. Original
issue discounts on debt securities are amortized to interest income over the
life of the security with a corresponding increase in the cost basis of that
security. Intermediate-Term Bond Portfolio may invest in mortgage-backed
securities. Certain mortgage security paydown gains and losses are taxable as
ordinary income. Such paydown gains and losses increase or decrease taxable
ordinary income available for distributions and are classified as interest
income in the accompanying Statements of Operations.

Federal Taxes. The Trust's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute each year substantially all of the investment company taxable
income to the shareholders of each Portfolio. Accordingly, no federal tax
provisions are required. The characterization of distributions to shareholders
for financial reporting purposes is determined in accordance with income tax
rules.

Deferred Organization Costs. Organization-related costs are being amortized
on a straight-line basis over a period of five years beginning with the
commencement of each of the Portfolios' operations.

16
<PAGE>

PARAGON PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

MAY 31, 1995
(UNAUDITED)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Expenses. Expenses incurred by the Trust which do not specifically relate to
an individual Portfolio are allocated to the Portfolios based on each
Portfolio's relative average net assets for the period.

Dividends and Distributions to Shareholders. Dividends from net investment
income are declared daily and paid monthly by the Intermediate-Term Bond
Portfolio; declared and paid monthly by the Value Growth and Value Equity
Income Portfolios; declared and paid semi-annually by the Gulf South Growth
Portfolio. Each Portfolio's net realized capital gains (including net short-
term capital gains), if any, are declared and distributed at least annually.
Distributions to shareholders are recorded on the ex-dividend date.

NOTE 3. AGREEMENTS

The Portfolios have entered into Investment Advisory Agreements with Premier
Investment Advisors, L.L.C., ("Premier"). Pursuant to the terms of the
Investment Advisory Agreements, Premier manages the investments and makes
investment decisions for each Portfolio. For these services, each Portfolio
pays Premier a monthly fee at the following annual rate of the corresponding
Portfolio's average daily net assets:

<TABLE>
<S> <C>
Intermediate-Term Bond Portfolio.................................... .50%
Value Growth Portfolio.............................................. .65%
Value Equity Income Portfolio....................................... .65%
Gulf South Growth Portfolio......................................... .65%
</TABLE>

For the period from commencement of operations to May 31, 1995, Premier has
voluntarily agreed to reimburse expenses (excluding interest, taxes, and
extraordinary expenses) to the extent that such expenses exceed, on an
annualized basis, .75%, 1.00%, 1.00% and 1.00% for the Intermediate-Term Bond,
Value Growth, Value Equity Income and Gulf South Growth Portfolios,
respectively. The effect of these reimbursements by Premier for the period
ended May 31, 1995 was to reduce expenses by approximately $18,100, $18,100,
$19,200 and $19,100 for the Intermediate-Term Bond, Value Growth, Value Equity
Income and Gulf South Growth Portfolios, respectively. The amounts
reimbursable to the Intermediate-Term Bond, Value Growth, Value Equity Income
and Gulf South Growth Portfolios were approximately $4,000, $4,000, $4,300 and
$4,200, respectively, and are reflected in "Other Assets" in the accompanying
Statement of Assets and Liabilities.

Goldman Sachs Asset Management, ("GSAM"), a separate operating division of
Goldman, Sachs and Co., serves as the Trust's administrator pursuant to an
Administration Agreement. Under the Administration Agreement, GSAM administers
the Trust's business affairs. As compensation for services rendered under the
Administration Agreement, each Portfolio pays GSAM a fee, computed daily and
payable monthly, at the annual rate of .15% of the average daily net assets of
the corresponding Portfolio.

Goldman Sachs serves as the Distributor of shares of the Portfolios pursuant
to a Distribution Agreement with the Trust. Goldman Sachs receives no
compensation for this service.

State Street Bank and Trust Co. serves as Custodian and Transfer Agent of
the Portfolios for a fee.

NOTE 4. REPURCHASE AGREEMENTS

During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the
value of the repurchase agreement. The underlying securities for all
repurchase agreements are held in safekeeping in the customer-only account of
State Street Bank & Trust Co., the Portfolios' custodian, at the Federal
Reserve Bank of Boston, or at sub-custodians. The market values of the
underlying securities are monitored by pricing them daily.

In connection with transactions in repurchase agreements, if the seller
defaults and the value of the collateral declines, or if the seller enters an
insolvency proceeding, realization of the collateral by the Trust may be
delayed or limited.

17
<PAGE>

PARAGON PORTFOLIO

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

MAY 31, 1995
(UNAUDITED)

NOTE 5. INVESTMENT TRANSACTIONS

Purchases and proceeds of sales or maturities of long-term investments for
the period ended May 31, 1995 were as follows:
INTERMEDIATE-TERM BOND PORTFOLIO
<TABLE>
<S> <C>
Purchases (excluding U.S. Government and Agency Obligations)........ $ 287,283
Sales (excluding U.S. Government and Agency Obligations)............ --
Purchases of U.S. Government and Agency Obligations................. 948,207
Sales of U.S. Government and Agency Obligations..................... 4,950
VALUE GROWTH PORTFOLIO
Purchases (excluding U.S. Government and Agency Obligations)........ $1,479,595
Sales (excluding U.S. Government and Agency Obligations)............ 68,822
Purchases of U.S. Government and Agency Obligations................. --
Sales of U.S. Government and Agency Obligations..................... --
VALUE EQUITY INCOME PORTFOLIO
Purchases (excluding U.S. Government and Agency Obligations)........ $1,286,682
Sales (excluding U.S. Government and Agency Obligations)............ 154,133
Purchases of U.S. Government and Agency Obligations................. --
Sales of U.S. Government and Agency Obligations..................... --
GULF SOUTH GROWTH PORTFOLIO
Purchases (excluding U.S. Government and Agency Obligations)........ $1,673,987
Sales (excluding U.S. Government and Agency Obligations)............ 140,550
Purchases of U.S. Government and Agency Obligations................. --
Sales of U.S. Government and Agency Obligations..................... --
</TABLE>

18
<PAGE>

PARAGON PORTFOLIO

------------------------

TRUSTEES
Paul C. Nagel, Jr.,
Chairman
Bruce C. Gottwald, Jr.
Ernest E. Howard III

OFFICERS
Paul W. Klug
President
Marcia L. Beck
Vice President
John W. Mosior
Vice President
Nancy L. Mucker
Vice President
Pauline Taylor
Vice President
Scott M. Gilman
Treasurer
Michael J. Richman
Secretary
Howard B. Surloff
Assistant Secretary
This Semiannual Report is authorized for distribution to prospective
investors only when preceded or accompanied by a Paragon Portfolio Prospectus
which contains facts concerning Paragon Portfolio's objectives and policies,
management, expenses and other information.
<PAGE>

PARAGON PORTFOLIO

----------------------------------------

PARAGON POWER PORTFOLIO
VARIABLE ANNUITY

----------------------------------

Paragon Power Intermediate-Term Bond Portfolio

Paragon Power Value Growth Portfolio

Paragon Power Value Equity Income Portfolio

Paragon Power Gulf South Growth Portfolio

Semiannual Report

-----------

May 31, 1995

LOGO
PARAGON PORTFOLIO
4900 Sears Tower
Chicago, Illinois 60606

INVESTMENT ADVISER
Premier Investment Advisors, L.L.C.
451 Florida Street
Baton Rouge, Louisiana 70801

ADMINISTRATOR
Goldman Sachs Asset Management
One New York Plaza
New York, New York 10004

DISTRIBUTOR
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004

CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110

TRANSFER AGENT
State Street Bank & Trust Company
P.O. Box 1978
Boston, Massachusetts 02105

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036

LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109

PWR-SEM95