STRATUS FUND, INC.
EQUITY INCOME
GOVERNMENT SECURITIES
CAPITAL APPRECIATION
INTERMEDIATE GOVERNMENT BOND
ANNUAL REPORT
JUNE 30, 1995
<PAGE>
TABLE OF CONTENTS
Shareholder Letter..................... 1
Comparison Graphs
Equity Income Portfolio............. 3
Government Securities Portfolio..... 3
Capital Appreciation Portfolio...... 4
Intermediate Government Bond Portfolio 4
Independent Auditors' Report........... 5
Schedule of Investments
Equity Income Portfolio............. 6
Government Securities Portfolio..... 10
Capital Appreciation Portfolio...... 11
Intermediate Government Bond Portfolio 13
Statement of Assets and Liabilities.... 14
Statement of Operations................ 15
Statements of Changes in Net Assets
Equity Income Portfolio............. 16
Government Securities Portfolio..... 16
Capital Appreciation Portfolio...... 17
Intermediate Government Bond Portfolio 17
Financial Highlights
Equity Income Portfolio............. 18
Government Securities Portfolio..... 18
Capital Appreciation Portfolio...... 19
Intermediate Government Bond Portfolio 20
Notes to Financial Statements.......... 21
<PAGE>
Stratus Fund, Inc.
Dear Shareholders:
The stock and bond markets both have shown substantial improvement since
the beginning of 1995. This is in contrast to the very difficult conditions
existing for financial markets in 1994.
The bond market began its current rally back in mid-November when
long-term interest rates started receding from their peak of 8.15%. Interest
rate declines were continual and substantial through the first six months of
1995. The 30-year U.S. Treasury Bond ended the fiscal year yielding 6.62% on
June 30.
The stock market rally began in mid-December of 1994, benefiting from the
declining interest rate environment, and the improvement in demand for domestic
stocks. Greater demand was caused to a certain extent by Mexico's currency
de-valuation and the withdrawal of investment funds from the Mexican market and
other foreign markets around the world. Good corporate profitability with low
inflation joined favorable demand patterns to keep the stock market moving
steadily upward throughout the first six months of 1995. The Dow Jones
Industrial Average closed the June 30 fiscal year at 4556, up more than 700
points from the end of 1994.
The two bond funds, managed by Stratus, participated in the bond market
rally over this recent time period. The Stratus Government Securities Fund
achieved a total rate of return of 9.02% this past fiscal year, while the
Stratus Intermediate Government Bond Portfolio appreciated 7.85%. For comparison
purposes, the Merrill Lynch U.S. Treasury Intermediate Term Index grew by 9.79%
during the recently completed fiscal year.
<PAGE>
The strategy employed by the Intermediate Government Bond Portfolio is to
buy only U.S. Treasury Obligations or money market instruments that invest
exclusively in U.S. Treasury Obligations. As a normal operating practice, the
Intermediate Government Bond Portfolio invests in a 5-6 year ladder of
maturities. The strategy for the Government Securities Portfolio is essentially
the same but with a 5-8 year ladder and the ability to invest in non-U.S.
Government Obligations.
The two Stratus funds investing in common stocks completed a very
successful fiscal year which also ended June 30, 1995. The sizable rally in the
stock market allowed each fund to post results reminiscent of some of the best
years of the 1980's. The buoyant stock market allowed each of the stock funds to
achieve returns in excess of 20%.
The Equity Income Fund provided a total return of 20.33% for the fiscal
year. The strategy employed in this fund is to invest primarily in large
capitalization stocks with an emphasis on growth companies. The transition
toward a greater portion of stocks demonstrating steady, consistent growth is
causing above-average turnover at this time and may continue for a while.
The Capital Appreciation Fund invests in smaller capitalized stocks
demonstrating favorable stock price momentum. The most recently completed
quarter was an excellent one for the type of stocks used in this fund. As a
result, the performance of this fund has improved significantly. The 16.50%
quarterly gain contributed substantially to the fund out pacing the market over
the past year. This stock fund, with its higher beta, should remain the more
volatile of our two Stratus stock funds.
We value highly your continued relationship with the Stratus Family of
Funds. Please call us with any questions or comments you may have.
July 13, 1995
<PAGE>
GRAPH
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
EQUITY INCOME PORTFOLIO AND THE S&P 500 INDEX
AVG. ANNUAL RETURN 06/30/95 VALUE
1 YEAR 20.33% EQUITY INCOME $12,029.22
INCEPTION 11.30% S&P 500 $12,415.34
GRAPH
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
GOVERNMENT SECURITIES PORTFOLIO AND THE MERRILL
LYNCH U.S. TREASURY INTER-TERM INDEX
AVG. ANNUAL RETURN 06/30/95 VALUE
1 YEAR 9.02% GOVERNMENT SECURITIES $10,529.01
INCEPTION 3.03% MERRILL LYNCH U.S. TREASURY
INTER-TERM BOND $10,672.61
Past performance is not predictive of future performance. Equity Income
Portfolio for the period October 8, 1993 (inception) through June 30, 1995.
Government Securities Portfolio for the period October 8, 1993 (inception)
through June 30, 1995.
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CAPITAL APPRECIATION PORTFOLIO AND THE S&P 500 INDEX
AVG. ANNUAL RETURN 06/30/95 VALUE
1 YEAR 28.55% CAPITAL APPRECIATION $11,505.41
INCEPTION 5.81% S&P 500 $13,408.24
GRAPH
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
INTERMEDIATE GOVERNMENT BOND PORTFOLIO AND THE MERRILL
LYNCH U.S. TREASURY INTER-TERM INDEX
AVG. ANNUAL RETURN
06/30/95 VALUE
1 YEAR 7.85% INTERMEDIATE GOVERNMENT BOND $12,994.73
INCEPTION 6.55% MERRILL LYNCH U.S. TREASURY
INTER-TERM BOND $13,702.14
Past performance is not predictive of future performance. Capital Appreciation
Portfolio for the period January 4, 1993 (inception) through June 30, 1995.
Intermediate Government Bond Portfolio for the period May 15, 1991 (inception)
through June 30, 1995.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
SMITH HAYES Trust, Inc.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of SMITH HAYES Trust, Inc. (comprised respectively
of the Asset Allocation, Balanced, Convertible, Small Cap, Value, and
Government/Quality Bond Portfolios) as of June 30, 1995, and the related
statements of operations and changes in net assets, and the financial highlights
for the year then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended June 30, 1994
and the financial highlights for the period July 1, 1990, (except for the Small
Cap Portfolio, which commenced operations July 1, 1992) to June 30, 1994 were
audited by other auditors whose report dated July 22, 1994, expressed an
unqualified opinion on such statements and such financial highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1995 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
aforementioned portfolios constituting SMITH HAYES Trust, Inc. as of June 30,
1995, the results of its operations, the changes in its net assets, and the
financial highlights for the year then ended, in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Lincoln, Nebraska
July 21, 1995
<PAGE>
STRATUS FUND, INC.
Schedule of Investments
June 30, 1995
EQUITY INCOME PORTFOLIO
Percent
of Net Market
Shares Common Stock 94.27% Assets Value
- --------- ---------------------------- --------- --------
Aerospace/Defense 2.44%
----------------- -----
5,000 Boeing Company $ 313,125
----------
Auto/Truck 2.93%
---------- -----
12,600 Ford Motor Company 374,850
----------
Beverages 5.26%
--------- -----
7,000 Coca Cola Company 446,250
5,000 Pepsico, Inc. 228,125
----------
674,375
----------
Broadcasting/Media 1.85%
------------------ -----
2,200 Capital Cities/ABC, Inc. 237,600
----------
Chemicals 2.20%
--------- -----
4,100 Dupont (E.I.) De Nemours & Company 281,875
----------
Computers 4.56%
--------- -----
1,000 International Business Machines Corporation 96,000
5,400 Microsoft Corporation* 488,025
----------
584,025
----------
Cosmetics/Personal Care 1.39%
----------------------- -----
4,000 Gillette Company 178,500
----------
Electrical Equipment 2.68%
-------------------- -----
4,800 Emerson Electric Company 343,200
----------
Electronics 10.20%
----------- ------
10,000 General Electric Company 563,750
7,500 Intel Corporation 474,844
4,000 Motorola Incorporated 268,500
----------
1,307,094
----------
* Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
Schedule of Investments (Continued)
EQUITY INCOME PORTFOLIO
Percent
of Net Market
Shares Common Stock (Continued) Assets Value
- --------- ---------------------------- --------- --------
Entertainment/Leisure 1.22%
--------------------- -----
2,800 The Walt Disney Company $155,750
-------
Environmental Control 1.77%
--------------------- -----
8,000 Wmx Technologies, Inc. 227,000
-------
Financial Services 6.99%
------------------ -----
6,800 Federal Home Loan Mortgage Corporation 467,500
5,780 Hawkeye Bancorp 127,160
6,000 Reuters Holdings PLC (ADR) 300,750
-------
895,410
-------
Food Processing 4.72%
--------------- -----
4,000 General Mills, Inc. 205,500
14,000 Sara Lee Corporation 399,000
-------
604,500
-------
Forest Products/Paper 1.87%
--------------------- -----
4,000 Kimberly-Clark Corporation 239,500
-------
Household Products/Wares 2.80%
------------------------ -----
5,000 Procter & Gamble Company 359,375
-------
Insurance 1.67%
--------- -----
1,600 General Re Corporation 214,200
-------
Iron/Steel 0.42%
---------- -----
1,000 Nucor Corporation 53,500
--------
Manufacturing 2.32%
5,200 Minnesota Mining & Manufacturing Company 297,700
--------
<PAGE>
STRATUS FUND, INC.
Schedule of Investments (Continued)
EQUITY INCOME PORTFOLIO
Percent
of Net Market
Shares Common Stock (Continued) Assets Value
- --------- ---------------------------- --------- --------
Mining 0.39%
------ -----
2,000 Barrick Gold Corporation $ 50,500
----------
Oil/Gas 11.23%
------- ------
4,300 Atlantic Richfield Company 471,925
6,300 Exxon Corporation 444,937
1,000 Mobil Corporation 96,000
3,500 Royal Dutch Petroleum-NY SHR ADR 426,563
----------
1,439,425
----------
Pharmaceutical/Medical 8.97%
---------------------- -----
5,000 Abbott Laboratories 202,500
3,800 American Home Products Corporation 294,025
4,000 Bristol-Myers Squibb Company 272,500
4,000 Merck & Company, Inc. 196,000
2,000 Pfizer, Inc. 184,750
----------
1,149,775
----------
Restaurant/Food Service 0.34%
----------------------- -----
4,000 Darden Restaurants, Inc.* 43,500
----------
Transportation 2.16%
-------------- -----
5,000 Union Pacific Corporation 276,875
----------
Utilities 4.49%
--------- -----
12,500 Allegheny Power System 293,750
10,000 Wisconsin Energy Corporation 280,000
----------
573,750
----------
* Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
Schedule of Investments (Continued)
EQUITY INCOME PORTFOLIO
Percent
of Net Market
Shares Common Stock (Continued) Assets Value
- --------- ---------------------------- --------- --------
Utilities - Telecommunications 9.40%
------------------------------ -----
4,600 Airtouch Telecommunications, Inc. * $ 131,100
8,000 American Telephone & Telegraph Corporation 425,000
8,000 GTE Corporation 273,000
6,000 SBC Communications, Inc. 285,750
3,000 Telefonos De Mexico-CL L ADR 88,875
----------
1,203,725
----------
Total Investments 94.27% 12,079,129
Cash Equivalents 5.57% 714,025
Net Receivables/(Payables) 0.16% 20,198
------- ----------
TOTAL NET ASSETS 100.00% $12,813,352
======= ==========
* Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
Schedule of Investments
June 30, 1995
GOVERNMENT SECURITIES PORTFOLIO
Percent of
Principal Net Assets Market
Amount U.S. Government Securities 92.73% Value
- --------- ---------------------------- --------- --------
300,000 Federal Home Loan Bank, 7.70%, due 8/26/96 $ 305,438
1,000,000 Federal Home Loan Bank, 8.22%, due 12/22/97 1,010,156
405,000 Federal National Mortgage Assn., 8.50%,
due 6/10/96 414,909
250,000 Federal National Mortgage Assn., 6.05%,
due 1/12/98 250,195
250,000 Federal National Mortgage Assn., 7.55%,
due 4/22/02 266,614
500,000 Federal National Mortgage Assn., 6.38%,
due 6/25/03 490,224
700,000 United States Treasury Note, 7.25%, due 11/15/96 712,906
100,000 United States Treasury Note, 8.00%, due 1/15/97 103,125
250,000 United States Treasury Note, 6.375%, due 6/30/97 252,539
50,000 United States Treasury Note, 5.50%, due 9/30/97 49,609
500,000 United States Treasury Note, 8.75%, due 10/15/97 530,156
2,100,000 United States Treasury Note, 7.125%, due 10/15/98 2,175,469
400,000 United States Treasury Note, 6.375%, due 7/15/99 405,313
1,050,000 United States Treasury Note, 6.00%, due 10/15/99 1,050,984
1,000,000 United States Treasury Note, 7.75%, due 11/30/99 1,066,875
1,900,000 United States Treasury Note, 6.375%, due 1/15/00 1,929,094
500,000 United States Treasury Note, 7.75%, due 1/31/00 534,375
250,000 United States Treasury Note, 7.75%, due 2/15/012 70,156
750,000 United States Treasury Note, 7.50%, due 11/15/01 804,844
250,000 United States Treasury Note, 6.375%, due 8/15/02 252,892
---------
Total Investments 92.73% 12,875,873
Cash Equivalents 5.89% 817,457
Net Receivables/(Payables) 1.38% 191,874
-------- ------------
TOTAL NET ASSETS 100.00% $13,885,204
======= ==========
<PAGE>
STRATUS FUND, INC.
Schedule of Investments
June 30, 1995
CAPITAL APPRECIATION PORTFOLIO
Percent
of Net Market
Shares Common Stock 85.59% Assets Value
- --------- ---------------------------- --------- --------
Auto/Truck/Parts 2.43%
---------------- -----
500 Stewart & Stevenson Services, Inc. $ 18,187
--------
Computers 15.41%
--------- ------
700 Cadence Design Systems, Inc. * 22,663
600 EMC Corp./Mass. * 14,550
300 International Business Machines Corporation 28,800
800 Seagate Technology, Inc.* 31,400
450 Silicon Graphics, Inc. * 17,944
--------
115,357
--------
Electronics 16.01%
----------- ------
100 Hewlett-Packard Company 7,450
200 Nokia Corporation, PFD 11,925
650 Teradyne, Inc. * 42,494
500 Varian Association, Inc. 27,625
840 Vishay Intertechnology, Inc. * 30,345
--------
119,839
--------
Electronics/Semiconductors 16.88%
-------------------------- ------
700 Advanced Micro Devices, Inc.* 25,463
975 Analog Devices, Inc. * 33,150
300 Cypress Semiconductor Corporation * 12,150
1,000 LSI Logic Corporation * 39,125
300 Micron Technology, Inc. 16,462
--------
126,350
--------
* Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
Schedule of Investments (Continued)
CAPITAL APPRECIATION PORTFOLIO
Percent
of Net Market
Shares Common Stock (Continued) Assets Value
- --------- ---------------------------- --------- --------
Forest Products/Paper 14.15%
--------------------- ------
750 Boise Cascade Corporation $ 30,375
650 Bowater, Inc. 29,169
550 Champion International Corporation 28,669
500 Federal Paper Board Company 17,687
--------
105,900
--------
Insurance 1.99%
--------- -----
400 American Re Corporation 14,900
--------
Metals/Mining 4.48%
600 Potash Corporation of Saskatchewan, Inc. 33,525
--------
Pharmaceutical/Medical 3.61%
---------------------- -----
350 Medtronic, Inc. 26,993
--------
Retail/Apparel 4.52%
-------------- -----
500 Barnes & Noble, Inc. * 17,000
600 Tommy Hilfiger Corporation* 16,800
--------
33,800
--------
Telecommunications 2.67%
------------------ -----
550 Northern Telecom Ltd. 20,075
--------
Transportation 3.44%
-------------- -----
350 Delta Airlines, Inc. 25,813
--------
Total Investments 85.59% 640,739
Cash Equivalents 14.40% 107,783
Net Receivables/(Payables) 0.01% 66
------- ---------
TOTAL NET ASSETS 100.00% $748,588
======= =======
* Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
Schedule of Investments
June 30, 1995
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
Percent of
Principal Net Assets Market
Amount U.S. Government Securities 95.45% Value
- --------- ---------------------------- --------- --------
100,000 United States Treasury Note, 4.375%, due 8/15/96 $ 98,484
400,000 United States Treasury Note, 7.00%, due 9/30/96 405,687
100,000 United States Treasury Note, 7.25%, due 11/15/96 101,844
300,000 United States Treasury Note, 6.125%, due 12/31/96 301,406
600,000 United States Treasury Note, 8.00%, due 1/15/97 618,750
100,000 United States Treasury Note, 6.25%, due 1/31/97 100,609
250,000 United States Treasury Note, 7.375%, due 11/15/97 258,047
200,000 United States Treasury Note, 7.875%, due 4/15/98 210,094
950,000 United States Treasury Note, 7.125%, due 10/15/98 984,141
700,000 United States Treasury Note, 6.375%, due 1/15/99 709,406
550,000 United States Treasury Note, 6.00%, due 10/15/99 550,516
400,000 United States Treasury Note, 6.375%, due 1/15/00 406,125
500,000 United States Treasury Note, 7.125%, due 2/29/00 522,500
----------
Total Investments 95.45% 5,267,609
Cash Equivalents 2.59% 142,801
Net Receivables/(Payables) 1.96% 108,021
------- ----------
TOTAL NET ASSETS 100.00% $5,518,431
======= =========
<PAGE>
STRATUS FUND, INC.
Statement of Assets and Liabilities
June 30, 1995
Intermediate
Equity Government Capital Government
Income Securities Appreciati Bond
Portfolio Portfolio Portfolio Portfolio
---------- --------- --------- --------
Assets:
Investments in securities,
at market value (note 4) $12,079,129 12,875,873 640,739 5,267,609
Cash equivalents 714,025 817,457 107,783 142,801
Accrued interest and dividends
receivable 32,553 207,207 1,342 114,672
------ ------- ----- -------
Total assets 12,825,707 13,900,537 749,864 5,525,082
Liability:
Accrued expenses, including investment
management and service fees payable to
adviser/administrator (note 3) 12,355 15,333 1,276 6,651
------ ------ ----- -----
Net assets applicable to
outstanding capital $12,813,352 13,885,204 748,588 5,518,431
=========== ========== ======= =========
stock
Net assets are represented by:
Capital stock outstanding, at
par (note 6) 1,117 1,422 67 523
Additional paid-in capital 11,178,769 14,117,685 649,783 5,585,585
Accumulated undistributed net
investment income (loss) 6,194 9,368 (22,234) 3,922
Accumulated undistributed net
realized loss (124,061) (309,473) (50,218) (117,831)
Unrealized appreciation (note 5) 1,751,333 66,202 171,190 46,232
--------- ------ ------- ------
Total amount representing net asset
applicable to shares outstanding $12,813,352 13,885,204 748,588 5,518,431
========== =========== ======= =========
Net asset value per share of
outstanding capital stock $11.47 9.77 11.23 10.56
====== ==== ===== =====
See accompanying notes to financial statements.
<PAGE>
STRATUS FUND, INC.
Statements of Operations
Year ended June 30, 1995
Intermediate
Equity Government Capital Government
Income Securities Appreciatio Bond
Portfolio Portfolio Portfolio Portfolio
---------- --------- ---------- ----------
Investment income:
Dividends $340,818 - 5,857 -
Interest 9,619 726,635 1,537 366,676
----- ------- ----- -------
Total investment income 350,437 726,635 7,394 366,676
------- ------- ----- -------
Expenses (note 3):
Investment advisory fees 59,231 64,563 2,292 40,177
Administration fees 11,846 12,918 672 6,139
Auditing 5,326 5,660 5,928 6,138
Custodial fees - - 5,460 7,425
Legal fees 4,818 5,201 273 3,247
Securities pricing 4,056 897 4,064 -
Other operating expenses 11,309 14,660 (635) 5,258
------ ------ ----- -----
Total expenses 96,586 103,899 18,054 68,384
------ ------- ------ ------
Net investment income (loss) 253,851 622,736 (10,660) 298,292
------- ------- -------- -------
Realized and unrealized gain on
investments (note 5):
Net realized loss (17,840) (295,308) (13,631) (125,724)
Net unrealized appreciation
(depreciation):
Beginning of period (214,239) (748,012) (27,001) (205,275)
End of period 1,751,333 66,202 171,190 46,232
--------- ------ ------- ------
Net unrealized appreciation 1,965,572 814,214 198,191 251,507
--------- ------- ------- -------
Net realized and unrealized
gain
on investments 1,947,732 518,906 184,560 125,783
--------- ------- ------- -------
Net increase in net assets
resulting from operations $2,201,583 1,141,642 173,900 424,075
========== ========= ======= =======
See accompanying notes to financial statements.
<PAGE>
STRATUS FUND, INC.
Statements of Changes in Net Assets
Year ended June 30, 1995 and for the period from
October 8, 1993 (commencement of operations) to June 30, 1994
Equity Government
Income Securities
Portfolio Portfolio
1995 1994 1995 1994
--------- --------- -------- ---------
Operations:
Net investment income $253,851 228,358 622,736 340,567
Net realized gain (loss)
on investments (17,840) 12,157 (295,308) (14,165)
Unrealized appreciation
(depreciation) 1,965,572 (214,239) 814,214 (748,012)
--------- --------- ------- ---------
Net increase (decrease) in
net assets resulting
from operations 2,201,583 26,276 1,141,642 (421,610)
--------- ------ --------- ---------
Distributions to shareholders from:
Net investment income 250,201 226,441 619,027 334,908
Net realized gains 118,377 - - -
--------- -------- ------- --------
Total distributions 368,578 226,441 619,027 334,908
------- ------- ------- -------
Capital share transactions:
Proceeds from sales 2,041,506 17,199,279 2,059,923 15,029,933
Payment for redemptions (4,313,318)(4,306,733)(1,782,550)(2,130,635)
Reinvestment of net investment
income and net realized gain
distributions at net
asset value 359,998 199,780 607,699 334,737
------- ------- ------- -------
Total increase (decrease)
from capital share
transactions (1,911,814)13,092,326 885,072 13,234,035
---------- ---------- ------- ---------
Total increase (decrease)
in net assets (78,809)12,892,161 1,407,687 12,477,517
Net assets:
Beginning of period 12,892,161 - 12,477,517 -
---------- --------- ---------- ---------
End of period $12,813,352 12,892,161 13,885,204 12,477,517
=========== ========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
STRATUS FUND, INC.
Statements of Changes in Net Assets
Years ended June 30, 1995 and 1994
Intermediate
Capital Government
Appreciation Bond
Portfolio Portfolio
1995 1994 1995 1994
------ ------ ------- -------
Operations:
Net investment income (loss) ($10,660) (9,240) 298,292 351,468
Net realized gain (loss) on (13,631) (18,103) (125,724) 7,889
investments
Unrealized appreciation 198,191 (5,385) 251,507 (439,644)
------- ------- ------- ---------
(depreciation)
Net increase (decrease) in
net assets
resulting from operations 173,900 (32,728) 424,075 (80,287)
------- -------- ------- --------
Distributions to shareholders from:
Net investment income - - 301,006 350,048
Net realized gains 15,412 - - -
------ ---------- ------- -------
Total distributions 15,412 - 301,006 350,048
------ ---------- ------- -------
Capital share transactions:
Proceeds from sales 3,759 295,460 400,683 3,397,148
Payment for redemptions (82,828) (192,378)(3,045,991)(2,259,113)
Reinvestment of net investment income
and net realized gain distributions
at net asset value 15,412 - 265,902 319,349
------ ---------- ------- -------
Total increase (decrease)
from capital
share transactions (63,657) 103,082 (2,379,406) 1,457,384
------- ------- --------- ---------
Total increase (decrease)
in net assets 94,831 70,354 (2,256,337) 1,027,049
Net assets:
Beginning of period 653,757 583,403 7,774,768 6,747,719
------- ------- --------- ---------
End of period $748,588 653,757 5,518,431 7,774,768
======== ======= ========= =========
See accompanying notes to financial statements.
<PAGE>
STRATUS FUND, INC.
Financial Highlights
Year ended June 30, 1995 and the period from October 8,
1993 (commencement of operations) to June 30, 1994
Equity Government
Income Securities
Portfolio Portfolio
1995 1994 1995 1994
------- ----- ----- -----
Net asset value:
Beginning of period $9.84 10.00 9.40 10.00
----- ----- ---- -----
Income (loss) from investment operations:
Net investment income 0.22 0.19 0.45 0.27
Net realized and unrealized gain
(loss)on investments 1.72 (0.16) 0.37 (0.60)
---- ------ ---- ------
Total income (loss) from
investment operations 1.94 0.03 0.82 (0.33)
---- ---- ---- ------
Less distributions:
Dividends from net investment income(0.22) (0.19) (0.45) (0.27)
Distributions from capital gains (0.09) - - -
-----
Total distributions (0.31) (0.19) (0.45) (0.27)
------ ------ ------ ------
End of period $11.47 9.84 9.77 9.40
====== ==== ==== ====
Total return 20.3% (.03%)* 9.0% (3.4%)*
===== ====== ==== ======
Ratios/Supplemental data:
Net assets, end of period $12,813,352 12,892,161 13,885,204 12,477,517
Ratio of expenses to average net 0.82% 0.76%** 0.80% 0.74%**
assets
Ratio of net income to average net 2.14% 2.38%** 4.82% 3.89%**
assets
Portfolio turnover rate 19.89% 10.05% 33.88% 17.36%
*Total return is not annualized.
**Annualized for those periods less than twelve months in duration.
See accompanying notes to financial statements.
<PAGE>
STRATUS FUND, INC.
Financial Highlights
Years ended June 30, 1995 and 1994 and for the period from January 4,
1993 (commencement of operations) to June 30, 1993
Capital
Appreciation
Portfolio
1995 1994 1993
---- ---- ----
Net asset value:
Beginning of period $8.95 9.40 10.00
----- ---- -----
Income (loss) from investment operations:
Net investment loss (0.15) (0.12) (0.04)
Net realized and unrealized gain (loss) 2.62 (0.33) (0.56)
---- ------ ------
on investments
Total Income (loss) from investment 2.47 (0.45) (0.60)
---- ------ ------
operations
Less distributions from capital gains (0.19) - -
------ ----- -----
End of period $11.23 8.95 9.40
====== ==== ====
Total return 28.6% (4.8%) (6.0%)*
===== ====== ======
Ratios/Supplemental data:
Net assets, end of period $748,588 653,757 583,403
Ratio of expenses to average net assets 2.69% 2.13% 2.41%**
Ratio of net loss to average net assets (1.59%) (1.27%) (1.04%)**
Portfolio turnover rate 214.47% 9.09% 4.42%
*Total return is not annualized.
**Annualized for those periods less than twelve months in duration.
See accompanying notes to financial statements.
<PAGE>
STRATUS FUND, INC.
Financial Highlights
Years ended June 30, 1995, 1994, 1993, and 1992 and for the
period from May 15, 1991 (commencement of operations) to June 30, 1991
Intermediate
Government Bond
Portfolio
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Net asset value:
Beginning of period $10.29 10.84 10.72 10.02 10.00
------ ----- ----- ----- -----
Income (loss) from
investment operations:
Net investment income 0.50 0.47 0.38 0.94 0.07
Net realized and
unrealized gain
(loss) on investments 0.27 (0.55) 0.34 0.70 (0.05)
---- ------ ---- ---- ------
Total income (loss) from
investment operations 0.77 (0.08) 0.72 1.64 0.02
---- ------ ---- ---- ----
Less distributions:
Dividends from
net investment income (0.50) (0.47) (0.38) (0.94) -
Distributions from
capital gains - - (0.22) - -
----- ----- ------ ----- ------
Total distributions (0.50) (0.47) (0.60) (0.94) -
------ ------ ------ ------ -----
End of period $10.56 10.29 10.84 10.72 10.02
====== ===== ===== ===== =====
Total return 7.9% (0.8%) 8.9% 11.4% 1.6%*
==== ======== ==== ===== ====
Ratios/Supplemental data:
Net assets, end of period $5,518,431 7,774,768 6,747,719 4,680,585 2,230,413
Ratio of expenses to
average net assets 1.11% 1.05% 1.12% 1.04% 1.46% **
Ratio of net income to
average net assets 4.84% 4.41% 4.58% 5.31% 7.41% **
Portfolio turnover rate 27.67% 21.02% 32.39% 205.89% -
*Total return is not annualized.
**Annualized for those periods less than twelve months in duration.
See accompanying notes to financial statements.
<PAGE>
STRATUS FUND, INC.
Notes to Financial Statements
June 30, 1995
1. Organization
Stratus Fund, Inc. (the Fund) is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment
company. The Fund issues its shares in series, each series representing a
distinct portfolio with its own investment objectives and policies. At June
30, 1995, the following series are presently authorized and have shares
outstanding.
Equity Income Portfolio Capital Appreciation Portfolio
Government Intermediate Government
Securities Portfolio Bond Portfolio
2. Summary of Significant Account Policies
The following is a summary of significant accounting policies employed by
the Fund in preparing its financial statements.
Valuation of Investments
Investment securities are carried at market determined using the following
valuation methods:
o Securities traded on a national or regional stock exchange or included
in the NASDAQ National Market System are valued at the last quoted sales
price.
o Securities not listed on an exchange or securities for which the latest
quoted sales price is not readily available and securities traded
over-the-counter but not included in the NASDAQ National Market System
are valued at the mean of the closing bid and asked prices.
o Securities including bonds or other assets for which reliable recent
market quotations are not readily available are valued at fair market
value as determined in good faith or under the direction of the Board of
Directors. Determination of fair value involves, among other things,
reference to market indices, matrices and data from independent brokers
and pricing services.
All securities are valued in accordance with the above noted policies at the
close of each business day.
The Equity Income and Capital Appreciation Portfolios are authorized to
engage in the purchase of exchange-traded put and call options. When a call
option is purchased, an amount equal to the premium received by the Portfolio
is included by the Portfolio in the Portfolio's statement of assets and
liabilities as a liability.
<PAGE>
STRATUS FUND, INC.
Notes to Financial Statements
2. Continued
The amount of the liability is subsequently marked to market to reflect the
current value of the option written. The current market value of the traded
option is the last sales price on the principal exchange on which such
options are traded, or in the absence of such a sale, at the latest ask
quotation. When an option expires on its stipulated expiration date or the
Portfolio enters into a closing purchase transaction, the Portfolio realizes
a gain (or loss if the cost of a closing transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. When an option is exercised, the Portfolio realizes a gain or
loss from the sale of the underlying security and the proceeds from such
sale are increased by the premium originally received.
When a put option is purchased, an amount equal to the premium paid by the
Portfolio is included by the Portfolio in the Portfolio's statement of
assets and liabilities as an asset. The amount of the asset is subsequently
marked to market to reflect the value of the option written. The current
market value of a traded option is the last sales price on the principal
exchange on which such options are traded, or in the absence of such a sale,
at the latest ask quotation. When an option expires on its stipulated
expiration date or the Portfolio enters into a closing sales transaction,
the Portfolio realized a gain (or loss if the cost of a closing transaction
is lower than the premium paid when the option was sold) without regard to
any unrealized gain or loss on the underlying security, and the asset
related to such option is extinguished. When an option is exercised, the
Portfolio realizes a gain or loss from the sale of the underlying security
and the proceeds from such sale are increased by the premium originally
paid.
At June 30, 1995, the Equity Income and Capital Appreciation Portfolios had
no such option contracts outstanding nor were any written during the period
June 30, 1995.
At June 30, 1995, the cost of investment securities is identical for
financial reporting and income tax purposes.
Security Transactions
Security transactions are accounted for on the date securities are purchased
or sold (trade date). Dividend income is recognized on the ex-dividend date
and interest income, including amortization of premium and discount, is
accrued daily on the straight-line basis.
Realized investment gains and losses are determined by specifically
identifying the issue sold.
<PAGE>
STRATUS FUND, INC.
Notes to Financial Statements
2. Continued
Federal Income Taxes
It is the policy of each Portfolio to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute virtually all of the taxable income generated by the Portfolios
to their shareholders within the time period allowed by the Federal law.
Consequently, no liability for Federal income taxes is required. Each
Portfolio is treated as a separate entity for tax purposes, and on a
calendar basis, will distribute substantially all of its net investment
income and realized gains, if any, to avoid payment of any Federal excise
tax. There will be no net realized gain distributions until the net realized
loss carry forwards have been offset or expired. The losses will expire in 8
years. Each Portfolio prepares its tax return on an accrual basis.
Distribution to Shareholders
Dividends to shareholders are recorded on the ex-dividend date. In
accordance with resolutions enacted by the Board of Directors, the
Government Securities and Intermediate Government Bond Portfolios declare
dividends monthly and the Equity Income and Capital Appreciation Portfolios
declare dividends semi-annually. The dividends declared become payable
immediately.
Cash Equivalents
The Fund considers investments with an original maturity of three months or
less when purchased to be cash equivalents.
3. Fees, Expenses and Related Party Transactions
---------------------------------------------
The Fund and each of its Portfolios have retained Union Bank and Trust
Company (UBATCO) as their exclusive investment adviser and custodian of the
Fund's assets (hereinafter, the Adviser). The agreement provides that the
Capital Appreciation Portfolio will compensate the Adviser on a performance
based scale, whereby the Portfolio will pay a fee which may be increased or
decreased by up to 1.40% of the average daily net assets during the latest
12 months (a rolling average method), depending upon the performance of
this Portfolio relative to the S&P 500. The performance based scale became
effective January 1, 1994. Prior to January 1, 1994, the fee was equal to
1.40%. For the year ended June 30, 1995, the annualized fee ranged from
zero to .16%.
Equity Income and Government Securities Portfolios will pay the Adviser a
fee equal to .50% per annum of its average daily net assets. The
Intermediate Government Bond Portfolio will pay an advisory fee of .65% per
annum of its average daily net assets. These Portfolios do not participate
in performance based compensation scales.
<PAGE>
STRATUS FUND, INC.
Notes to Financial Statements
3. Continued
The Fund and each of its Portfolios have retained UBATCO as the custodian of
the Fund's investments. The agreement provides that the portfolios (except
Equity Income and Government Securities Portfolios, which pay no fee), will
pay the custodian an annual fee which is calculated and billed quarterly.
The fee calculation does not include cash equivalents. The fee consists of
an investment transaction charge of $12 for each transaction, the fee of
$100 per account, plus an additional fee calculated in accordance with the
following table.
Net assets of:
$0 - $10 million 11 basis points
$10 - $20 million 6 basis points
Over $20 million 2.5 basis points
The Fund and each of its Portfolios have retained Lancaster Administrative
Services, Inc. (the Administrator) to act as their transfer agent and
administrator to provide all necessary recordkeeping and share transfer
services for the Fund. The agreement provides that each Portfolio will pay
an administrative fee to the Administrator equal to .10% per annum of
average daily net assets.
Under the terms of the advisory, custodian and administrative agreements
outlined above, the Portfolios collectively incurred $210,723 for such
services.
At June 30, 1995, the following accrued investment advisory, custodial and
administrative fees were payable to the Adviser and Administrator.
Payable to Payable to
Adviser Administrator Total
Equity Income Portfolio $5,097 $1,020 $6,117
Government Securities Portfolio 5,655 1,131 6,786
Capital Appreciation Portfolio 932 60 992
Intermediate Government
Bond Portfolio 3,002 462 3,464
===== ====== =====
Under the terms of the advisory agreement, the Adviser may be obligated to
reimburse a Portfolio up to the amount of the Adviser's fee paid to the
Adviser if during any year the expenses of the Portfolio, including the
Adviser's fee, exceed certain limitations. At June 30, 1995, no expense
reimbursement was required.
<PAGE>
STRATUS FUND, INC.
Notes to Financial Statements
3. Continued
In addition to the amounts paid by the Portfolios under advisory, custodian,
and administration agreements, the Portfolios primarily used SMITH HAYES
Financial Services Corporation (SMITH HAYES), a company related through
common ownership and management, to affect security trades on their behalf.
As is customary in the industry, the investment adviser evaluates the
pricing and ability to execute the transaction in selecting brokers to
affect trades. SMITH HAYES was paid commissions in the amount of $34,209 for
their brokerage services during the period ended June 30, 1995.
4. Investments
Cost of investment securities held at June 30, 1995 was as follows for each
Portfolio:
Equity Income Portfolio $10,327,796
Government Securities Portfolio 12,809,671
Capital Appreciation Portfolio 469,549
Intermediate Government Bond Portfolio 5,221,377
===========
5. Securities Transactions
Purchases of securities and proceeds from sales were as follows for each
Portfolio:
Purchases of Proceeds
Securities from Sales
----------- -----------
Equity Income Portfolio $2,331,630 $4,752,162
Government Securities Portfolio 4,498,784 4,207,082
Capital Appreciation Portfolio 1,391,086 1,578,635
Intermediate Government Bond Portfolio 1,662,092 3,981,283
========= ==========
At June 30, 1995, the aggregate gross unrealized appreciation and the
aggregate gross unrealized depreciation of securities in each Portfolio were
as follows:
Aggregate Gross
Unrealized
Appreciation Depreciation
------------ ------------
Equity Income Portfolio $1,993,940 $242,607
Government Securities Portfolio 253,464 187,262
Capital Appreciation Portfolio 172,232 1,042
Intermediate Government Bond Portfolio 61,642 15,410
========= =======
<PAGE>
STRATUS FUND, INC.
Notes to Financial Statements
6. Capital Share Transactions
The Fund is authorized to issue a total of 1 billion shares of common stock
in series with a par value of $.001 per share. The following summarizes the
shares of each Portfolio as of the close of business of the New York Stock
Exchange at June 30, 1995:
Authorized Outstanding
---------- -----------
Equity Income Portfolio 20,000,000 1,117,154.599
Government Securities Portfolio 10,000,000 1,421,842.934
Capital Appreciation Portfolio 10,000,000 66,647.538
Intermediate Government Bond Portfolio 10,000,000 522,762.320
========== =============
Transactions in the capital stock of each Portfolio for the period ended
June 30, 1995 were as follows:
Government
Equity Income Securities
Portfolio Portfolio
---------- ----------
Transactions in shares:
Shares sold 193,257.095 218,690.759
Shares redeemed (420,126.992) (188,635.340)
Reinvested dividends 34,358.294 64,445.828
--------- ------------
Net increase (decrease) (192,511.603) 94,501.247
========== ============
Intermediate
Capital Government
Appreciation Bond
Portfolio Portfolio
Transactions in shares:
Shares sold 411.863 39,151.437
Shares redeemed (8,525.348) (298,027.816)
Reinvested dividends 1,725.813 25,929.587
--------- ------------
Net decrease (6,387.672) (232,946.792)
========== ============
At June 30, 1995, directors, officers and employees of the Fund, the Adviser
and Administrator and their immediate families held the following in each
Portfolio:
Shares Value
---------- --------
Equity Income Portfolio 21,124.881 $242,302
Government Securities Portfolio 33,804.737 330,272
Capital Appreciation Portfolio 6,424.988 72,153
---------- -------
Intermediate Government Bond Portfolio 12,132.689 128,121
========== =======
<PAGE>
STRATUS FUND, INC.
Notes to Financial Statements
6. Continued
At June 30, 1995, UBATCO held, in nominee name, the following in each
Portfolio:
Shares Value
-------- ---------
Equity Income Portfolio 1,111,113.345 $12,744,470
Government Securities Portfolio 1,421,880.119 13,891,769
Capital Appreciation Portfolio 66,647.538 748,452
Intermediate Government Bond Portfolio 518,745.088 5,477,948
============= ==========
7. Business Changes
In July of 1995, the Board of Directors of the Fund approved the appointment
of Lancaster Administrative Services, Inc. successor to the transfer agent
and administrative services functions of SMITH HAYES Portfolio Management,
Inc.
