STRATUS FUND, INC.
GROWTH
GOVERNMENT SECURITIES
CAPITAL APPRECIATION
INTERMEDIATE GOVERNMENT BOND
INTERNATIONAL
ANNUAL REPORT
JUNE 30, 1997
<PAGE>
TABLE OF CONTENTS
Shareholder Letter..................... 1
Comparison Graphs
Growth Portfolio.................... 3
Government Securities Portfolio..... 3
Capital Appreciation Portfolio...... 4
Intermediate Government Bond Portfolio 4
International Portfolio............. 5
Independent Auditors' Report........... 6
Schedule of Investments
Growth Portfolio.................... 7
Government Securities Portfolio..... 12
Capital Appreciation Portfolio...... 13
Intermediate Government Bond Portfolio 16
International Portfolio............. 17
Statement of Assets and Liabilities.... 22
Statement of Operations................ 24
Statements of Changes in Net Assets
Growth Portfolio.................... 25
Government Securities Portfolio..... 25
Capital Appreciation Portfolio...... 26
Intermediate Government Bond Portfolio 26
International Portfolio............. 27
Financial Highlights
Growth Portfolio.................... 28
Government Securities Portfolio..... 29
Capital Appreciation Portfolio...... 30
Intermediate Government Bond Portfolio 31
International Portfolio............. 32
Notes to Financial Statements.......... 33
<PAGE>
STRATUS FUND, INC.
DEAR FELLOW SHAREHOLDERS:
The economy continues to perform at an almost optimal rate with solid growth
accompanied by low inflation. Gross Domestic Product has recorded uneven growth
with considerable variability from quarter to quarter. 1997's first quarter GDP
rose at a 4.9% pace (recently revised downward), while second quarter growth
amounted to 2.2%. This slowdown marks a return to the growth pattern favored by
the Federal Reserve Board in their quest to facilitate sustainable growth with
low inflation. The expected growth rate for the economy in the second half of
1997 is in the neighborhood of 3%.
Due to the favorable economic environment, stock and bond markets have performed
well. Regarding the stock market this would be an understatement. Stocks,
especially the senior indices represented by large caps, have performed
spectacularly. The 17.4% total return for the Standard & Poor's 500 Index for
the quarter just ended is the best gain recorded in 10 years and the fourth best
ever. The S&P 500 has now achieved positive rates of return for 10 consecutive
quarters.
During the second quarter the Dow Jones Industrial Index established a series of
new highs as money continued to pour into equity mutual funds. The high for the
first half of 1997 came on June 20 when the DJIA closed at 7796.
This index stood at 7673 on June 30, 1997.
Interest rates experienced some volatility during the first two quarters of 1997
but rates on June 30, 1997 were not too far from their close on December 31,
1996. In fact, the three months Treasury Bill showed no movement standing at
5.17%. The 30-year Treasury Bond moved down from 6.89% to 6.80%. As a result,
bond funds produced positive but unspectacular gains.
The two bond funds, managed by Stratus, performed similarly to other bond funds
with the same investment objective. The Stratus Government Securities Portfolio
achieved a total rate of return of 6.3% this past fiscal year, while the Stratus
Intermediate Government Bond Portfolio appreciated 5.6%. For comparison
purposes, the Merrill Lynch U.S. Treasury Intermediate Term Index grew by 6.9%
during the recently completed fiscal.
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 1-5 year ladder of
maturities.
<PAGE>
The strategy for the Government Securities Portfolio is essentially the same
regarding the use of high quality government securities. It differs in that
bonds as long as ten years may be used and the average maturity will generally
be greater. Emphasis will be on a total return as opposed to income generation
and the average maturity will vary with existing and anticipated interest rates.
The two Stratus funds investing in domestic common stocks completed a very
successful fiscal year which also ended June 30, 1997. With investors favoring
large cap stocks, the Stratus Growth Portfolio provided a total return of 32.6%
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 over
weighting in technology helped performance considerable as technology stocks
were in favor most of the year. Although the Growth fund did not quite match the
performance of the S&P Index, it did much better than the 24.4% achieved by
comparable stock funds. This fund also grew significantly during the past year,
almost doubling in size.
The Capital Appreciation Portfolio invests primarily in smaller capitalized
stocks demonstrating favorable price momentum. The first quarter of 1997 was
especially difficult for the stocks of smaller companies, given the market's
larger cap focus. While smaller stocks rebounded nicely in the most recently
completed quarter, the fund's annual return of 11.7% reflects the negative first
quarter results and the difficulty encountered investing in this segment of the
market.
The Stratus International Portfolio, launched last October, has not yet
completed a full year but is showing good progress. It has posted gains of
approximately 12.2% since inception. This new fund is being sub-advised by
Murray Johnstone International headquartered in Glasgow, Scotland.
We value highly your continued relationship with the Stratus Family of Mutual
Funds and the confidence placed in us. We would welcome any questions or
comments you may have.
July 31, 1997
<PAGE>
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
GROWTH PORTFOLIO AND THE S&P 500 INDEX
AVG. ANNUAL RETURN 06/30/97 VALUE
- ----------------- ---------------------------
1 YEAR 27.33% GROWTH $18,787.05
INCEPTION 18.42% S&P 500 $21,074.60
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
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 06/30/97 VALUE
- ------------------ -------------------------------------
1 YEAR 3.05% GOVERNMENT SECURITIES $11,253.21
INCEPTION 3.22% MERRILL LYNCH U.S. TREASURY
INTER-TERM BOND $11,971.91
Results reflect payment of a maximum sales charge of 4% for the Growth Portfolio
and 3% for the Government Securities Portfolio on the $10,000 investment with
dividends reinvested.
Past performance is not predictive of future performance.
Growth Portfolio for the period October 8, 1993 (inception) through June 30,
1997.
Government Securities Portfolio for the period October 8, 1993 (inception)
through June 30, 1997.
<PAGE>
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CAPITAL APPRECIATION PORTFOLIO AND THE S&P 500 INDEX
AVG. ANNUAL RETURN 06/30/97 VALUE
- ------------------ ------------------------------------
1 YEAR 7.24% CAPITAL APPRECIATION $15,561.91
INCEPTION 10.35% S&P 500 $22,760.02
[GRAPHIC OMITTED]
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 06/30/97 VALUE
- ------------------ ------------------------------------------
1 YEAR 2.44% INTERMEDIATE GOVERNMENT BOND $13,858.77
5 YEAR 4.60% MERRILL LYNCH U.S. TREASURY
INCEPTION 5.46% INTER-TERM BOND $15,370.26
Results reflect payment of a maximum sales charge of 4% for the Capital
Appreciation Portfolio and 3% for the Intermediate Government Bond Portfolio on
the $10,000 investment with dividends reinvested.
Past performance is not predictive of future performance.
Capital Appreciation Portfolio for the period January 4, 1993 (inception)
through June 30, 1997.
Intermediate Government Bond Portfolio for the period May 15, 1991 (inception)
through June 30, 1997.
<PAGE>
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
INTERNATIONAL PORTFOLIO AND THE MORGAN STANLEY INTERNATIONAL
AVG. ANNUAL RETURN 06/30/97 VALUE
- ------------------ ------------------------------------------
1 YEAR - % INTERNATIONAL PORTFOLIO $10,904.36
INCEPTION 12.27 % MORGAN STANLEY INTERNATIONAL $11,166.32
Results reflect payment of a maximum sales charge of 4% on the $10,000
investment with dividends reinvested.
Past performance is not predictive of future performance.
International Portfolio for the period October 1, 1996 (inception) through
June 30, 1997.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Stratus Fund, Inc.
We have audited the accompanying statements of assets and liabilities including
the schedule of investments in securities of Stratus Fund, Inc. (comprised
respectively of the Growth, Government Securities, Capital Appreciation,
Intermediate Government Bond, and International Portfolios) as of June 30, 1997,
and the related statement of operations for the year then ended, and the
statements of changes in net assets and financial highlights for each of the two
years in the period then ended (period from October 1, 1996, commencement of
operations, to June 30, 1997 for the International Portfolio). These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the years ended June 30, 1995, 1994, and 1993 for the
Intermediate Government Bond Portfolio, for the years ended June 30, 1995 and
1994 and the period from January 4, 1993 (commencement of operations) to June
30, 1993 for the Capital Appreciation Portfolio, for the year ended June 30,
1995 and the period from October 8, 1993 (commencement of operations) to June
30, 1994 for the Growth and Government Securities Portfolios were audited by
other auditors whose report dated July 21, 1995, expressed an unqualified
opinion on such financial highlights.
We conducted our audits 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, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
aforementioned portfolios constituting Stratus Fund, Inc. as of June 30, 1997,
and the results of their operations for the year then ended, and the changes in
their net assets and their financial highlights for each of the two years in the
period then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Lincoln, Nebraska
July 25, 1997
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1997
GROWTH PORTFOLIO
PERCENT
OF NET
ASSETS MARKET
SHARES COMMON STOCK - 92.91% VALUE
------ --------------------- ----- --------
CHEMICALS 5.34%
--------- -----
17,000 Great Lakes Chemical Corporation $890,375
20,000 Hercules Inc. 957,500
16,000 Nalco Chemical Company 618,000
---------
2,465,875
---------
COMPUTERS 8.70%
--------- -----
30,000 Reynolds & Reynolds Company 472,500
17,000 Electronic Data Systems Corporation 697,000
25,000 First Data Corporation 1,098,438
8,000 Microsoft Corporation * 1,011,000
20,000 Sun Microsystems Inc.* 744,376
---------
4,023,314
---------
COSMETICS/PERSONAL CARE 1.64%
----------------------- -----
8,000 Gillette Company 758,000
---------
ELECTRICAL EQUIPMENT 2.15%
-------------------- -----
18,000 Emerson Electric Company 991,125
---------
ELECTRONICS 5.40%
----------- -----
14,000 Hewlett-Packard Company 784,000
7,000 Intel Corporation 992,688
10,000 Philips Electronics N.V. 718,750
---------
2,495,438
---------
*Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK (CONTINUED) ASSETS VALUE
------ --------------------------- -------- ----------
ENTERTAINMENT/LEISURE 1.52%
--------------------- -----
17,000 Carnival Corporation Class A $701,250
--------
FINANCIAL SERVICES 7.65%
------------------ -----
20,000 Barnett Banks Inc. 1,050,000
10,000 Chase Manhattan Corporation 970,625
10,000 Mercantile Bancorporation 607,500
14,000 Bankamerica Corporation 903,875
---------
3,532,000
---------
FOOD/BEVERAGE/TABACCO 3.84%
--------------------- -----
20,000 Pepsico Inc. 751,250
28,000 Sysco Corporation 1,022,000
---------
1,773,250
---------
FOOD PROCESSING 4.30%
--------------- -----
30,000 Archer-Daniels-Midland Company 705,000
20,000 ConAgra Inc. 1,282,500
---------
1,987,500
---------
FOREST PRODUCTS/PAPER 2.15%
--------------------- -----
20,000 Kimberly Clark Corporation 995,000
-------
GAS - DISTRIBUTION 1.75%
------------------ -----
20,000 Questar Corporation 807,500
-------
HOUSEHOLD PRODUCTS/WARE 2.26%
----------------------- -----
16,000 Colgate-Palmolive Company 1,044,000
---------
*Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK (CONTINUED) ASSETS VALUE
INSURANCE 6.98%
--------- -----
8,000 American International Group $1,195,000
14,000 Allstate Corporation 1,022,000
16,000 Travelers Group Inc. 1,009,000
---------
3,226,000
---------
MACHINE/TOOLS 2.13%
------------- -----
16,000 Dover Corporation 984,000
-------
MANUFACTURING 7.06%
------------- -----
21,000 General Electric Company 1,372,875
25,000 Mattel Inc 846,875
15,000 Tyco International Ltd. 1,043,438
---------
3,263,188
---------
OIL-FIELD SERVICES 2.17%
------------------ -----
8,000 Schlumberger Ltd. 1,000,000
---------
MEDICAL SUPPLIES/SERVICES 1.26%
------------------------- -----
30,000 Olsten Corporation 583,125
-------
OFFICE/BUSINESS 3.80%
--------------- -----
15,000 Xerox Corporation 1,183,125
30,000 Viking Office Products Inc.* 570,000
---------
1,753,125
---------
*Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK (CONTINUED) ASSETS VALUE
- ----------- ------------------------------- --------- ------------
OIL COMPANY - INTEGRATED 6.98%
------------------------ -----
10,000 Texaco Inc. $1,087,500
15,000 Mobil Corporation 1,048,125
20,000 Royal Dutch Petroleum ADR 1,087,500
---------
3,223,125
---------
PACKAGING/CONTAINER 1.74%
------------------- -----
20,000 Avery Dennison Corporation 802,500
-------
PHARMACEUTICAL/MEDICAL 6.85%
---------------------- -----
8,000 Pfizer, Inc 956,000
15,000 Johnson & Johnson 965,625
12,000 Merck & Company, Incorporated 1,242,000
---------
3,163,625
---------
RETAIL/RETAIL STORE 1.67%
------------------- -----
22,000 Toys R Us Incorporated* 770,000
-------
TELECOMMUNICATIONS 2.02%
------------------ -----
34,000 Airtouch Communications, Incorporated* 930,750
-------
TELECOMMUNICATION EQUIP 0.91%
----------------------- -----
15,000 Andrew Corporation* 421,875
-------
TRANSPORTATION 1.40%
-------------- -----
25,000 Southwest Airlines Company 646,875
-------
*Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK (CONTINUED) ASSETS VALUE
- ----------- ---------------------------------- ---------- --------
UTILITIES/ELECTRIC/TELECOMMUN 1.24%
----------------------------- -----
20,000 Kansas City Power & Light Company $571,249
--------
Total Investment in Securities (Cost $31,305,514) 92.91% 42,913,689
Cash Equivalents 6.95% 3,211,327
Other Assets, less Liabilities 0.14% 64,083
---------- -------------
NET ASSETS 100.00% $46,189,099
========== =============
*Indicates nonincome-producing security.
See accompanying notes to financial statements.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1997
GOVERNMENT SECURITIES PORTFOLIO
PERCENT
OF NET
PRINCIPAL ASSETS MARKET
AMOUNT U.S. GOVERNMENT SECURITIES 93.94% VALUE
- ------------ -------------------------------------- --------- ----------
1,000,000 Federal National Mgt. Assn. 6.20%, due 6/06/00 $997,285
2,000,000 Federal National Mgt. Assn. 6.35%, due 6/10/05 1,959,817
2,000,000 U.S. Treasury Note 6.25%, due 03/31/99 2,006,875
2,000,000 U.S. Treasury Note 7.125%, due 10/15/98 2,029,375
2,000,000 U.S. Treasury Note 6.375%, due 7/15/99 2,011,563
1,000,000 U.S. Treasury Note 7.75%, due 11/30/99 1,034,844
3,000,000 U.S. Treasury Note 6.375%, due 1/15/00 3,015,938
3,000,000 U.S. Treasury Note 5.75%, due 10/31/00 2,952,656
2,000,000 U.S. Treasury Note 5.50%, due 12/31/00 1,950,000
3,000,000 U.S. Treasury Note 6.50%, due 5/31/01 3,017,813
2,000,000 U.S. Treasury Note 5.75%, due 8/15/03 1,932,188
2,000,000 U.S. Treasury Note 6.625%, due 3/31/02 2,018,747
---------
Total Investment in Securities (cost $24,943,979) 93.94% 24,927,101
Cash Equivalents 4.58% 1,213,822
Other Assets, less Liabilities 1.48% 392,946
------- -----------
NET ASSETS 100.00% $26,533,869
======= ===========
See accompanying notes to financial statements.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1997
CAPITAL APPRECIATION PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK - 93.00% ASSETS VALUE
- ---------- ------------------------------- ---------- ------------
Aerospace/Defense 2.81%
---------------------- ------
2,700 Thiokol Corporation $189,000
--------
Auto, Truck & Parts 3.45%
---------------------- ------
4,300 Borg-Warner Auto 232,469
--------
5,200 Building Materials/Cons 3.37%
---------------------- ------
Southdown Inc. 226,850
--------
Commercial Services 1.72%
---------------------- ------
2,600 Manpower, Inc. 115,700
--------
Computer Related 6.37%
---------------------- ------
8,700 Data General Corporation* 226,200
3,900 Keane Inc.* 202,800
--------
429,000
--------
Diversified Operations 3.06%
---------------------- ------
3,700 Corning Inc. 205,813
--------
Financial Services 4.72%
---------------------- ------
1,200 First Union Corporation 111,000
5,100 Lehman Brothers Holding 206,550
--------
317,550
--------
Food, Beverage & Tobacco 6.60%
---------------------- ------
5,000 Dean Foods Company 201,875
4,700 Coca-Cola FEMSA-ADR 242,638
--------
444,513
--------
*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 3.30%
---------------------- ------
6,000 James River Corporation $222,000
--------
Household Products/Ware 6.47%
---------------------- ------
4,000 Ethan Allen Interiors Inc. 228,000
5,500 Sunbeam Corporation 207,625
--------
435,625
--------
Insurance 3.91%
---------------------- ------
1,900 Allstate Corporation 138,700
3,100 Fremont General Corporation 124,775
--------
263,475
--------
Machinary/Tools 3.27%
---------------------- ------
3,400 SPX Corporation 220,363
--------
Medical Supplies/Service 1.57%
---------------------- ------
3,800 Genzyme Corporation* 105,450
--------
Metals/Mining 2.23%
---------------------- ------
2,000 Potash Corp of Saskatchewan 150,125
--------
Oil & Gas Drilling 3.77%
---------------------- ------
4,400 Falcon Drilling Company* 253,550
--------
Oil Field Machinary & Equipment 10.33%
---------------------- ------
4,200 National-Oilwell* 241,500
4,900 Cooper Cameron Corporation* 229,075
3,700 Smith International Inc.* 224,775
--------
695,350
--------
*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
- ---------- ------------------------------- ------- ----------
Retail Store/Apparel 6.61%
---------------------- ------
4,100 Tommy Hilfiger Corporation* $164,769
3,000 Barnes & Noble Inc.* 129,000
2,200 Home Depot Inc. 151,663
--------
445,432
--------
Telecommunications 6.29%
---------------------- ------
5,100 Mastec Inc.* 241,294
1,200 Telecomunicacoes Brasileiras S/A ADR 182,100
--------
423,394
--------
Telecommunication Equip 6.62%
---------------------- ------
7,600 Boston Technology* 224,675
3,000 OY Nokia AB 221,250
--------
445,925
--------
Transporation 6.53%
---------------------- ------
5,500 Airborne Freight Corporation 230,313
6,500 CMF Transportation 209,622
--------
439,935
--------
Total Investment in Securities (Cost $5,512,623) 93.00% 6,261,519
Cash Equivalents 9.73% 654,880
Other Assets, less Liabilities 2.73% (183,859)
------- ----------
NET ASSETS 100.00% $6,732,540
======= ==========
*Indicates nonincome-producing security.
See accompanying notes to financial statements.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1997
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PERCENT
OF NET
PRINCIPAL ASSETS MARKET
AMOUNT U.S. GOVERNMENT SECURITIES 93.88% VALUE
- ------------ ------------------------------- -------- ----------
200,000 U.S. Treasury Note 7.875%, due 4/15/98 203,219
550,000 U.S. Treasury Note 7.125%, due 10/15/98 558,078
500,000 U.S. Treasury Note 6.375%, due 1/15/99 502,734
400,000 U.S. Treasury Note 6.375%, due 1/15/00 402,125
500,000 U.S. Treasury Note 7.125%, due 2/29/00 511,016
750,000 U.S. Treasury Note 6.125%, due 7/31/00 747,539
500,000 U.S. Treasury Note 6.25%, due 10/31/01 497,813
500,000 U.S. Treasury Note 6.25%, due 1/31/02 497,422
400,000 U.S. Treasury Note 6.625%, due 4/30/02 403,874
--------
Total Investments in Securities (cost $4,319,855) 93.88% 4,323,820
Short-Term Investments 4.22% 194,411
Other Assets, less Liabilities 1.90% 87,487
------- ----------
NET ASSETS 100.00% $4,605,718
======= ==========
See accompanying notes to financial statements.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1997
INTERNATIONAL PORTFOLIO
PERCENT
OF NET
ASSETS MARKET
SHARES COMMON STOCK - 87.62% VALUE
------ --------------------- ------- -----
AUTO/TRUCK/PARTS 2.88%
---------------- -----
10,300 Nissan Motor Company ADR $162,225
5,700 PSA Peugeot Citroen ADR 137,865
-------
300,090
-------
BROADCASTING/MEDIA 2.97%
------------------ -----
4,300 Carlton Communications PLC ADR 184,900
6,500 News Corp Ltd ADR 125,125
-------
310,025
-------
BUILDING MATERIALS/CONSTRUCTION 2.07%
------------------------------- -----
13,400 Williams Holdings ADR 216,102
-------
CHEMICALS 4.76%
--------- -----
4,400 Norsk Hydro ASA ADR 238,425
3,900 Quimica Minera Chile SA ADR 257,888
-------
496,313
-------
DIVERSIFIED OPERATIONS 8.10%
---------------------- -----
7,600 Barlow Ltd - ADR 82,693
2,300 Hutchison Whampoa Ltd ADR 99,454
5,200 Cie Generale des Eaux ADR 133,389
6,800 Stet Societa Finanziaria Telefonica S.p.A. ADR 396,950
14,700 Swire Pacific Ltd ADR 132,346
-------
844,832
-------
*Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
INTERNATIONAL PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK (CONTINUED) ASSETS VALUE
- -------- ---------------------------------- ------ --------
ELECTRONICS 4.05%
----------- -----
1,400 Hitachi Ltd ADR $158,200
3,300 SGS-Thomson Microelectronics N.V.* 264,000
-------
422,200
-------
INTERNATIONAL PORTFOLIO 2.51%
----------------------- -----
5,600 Allied Irish Banks ADR 261,450
-------
FINANCIAL SERVICES 14.40%
------------------ ------
6,400 Australia & New Zealand Banking Group Ltd ADR 236,000
2,100 Barclays PLC - ADR 166,425
8,485 Banco Frances Del Rio de la Plata S.A. ADR 275,763
5,500 Banque National Paris ADR 226,897
4,800 Commonwealth Bank of Australia 172,603
1,300 National Westminster Bank PLC 105,463
900 Sanwa Bank Ltd ADR 133,706
6,000 Banco Santander SA ADR 185,625
-------
1,502,482
---------
FOOD/FLOUR & GRAIN 1.77%
------------------ -----
4,700 Grand Metro Politar PLC ADR 184,181
-------
INSURANCE 1.93%
--------- -----
1,500 Zurich Versi ADR 119,560
6,000 Liberty Life Association of Africa ADR 81,357
-------
200,917
-------
IRON/STEEL 1.53%
---------- -----
4,900 Kawasaki Steel Corporation ADR 159,722
-------
*Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
INTERNATIONAL PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK (CONTINUED) ASSETS VALUE
- ----------- ----------------------------------- ------ ---------
MANUFACTURING 1.48%
------------- -----
6,200 Continental AG ADR $154,063
--------
MEDICAL SUPPLIES/SERVICES 1.22%
------------------------- -----
6,700 Eisai Co LTD ADR 127,055
-------
OFFICE/BUSINESS 1.38%
--------------- -----
2,200 Ricoh Company Ltd ADR 144,193
-------
OIL/GAS 3.61%
------- -----
3,300 ENI S.P.A. ADR 187,688
1,500 Shell Transport & Trading Company ADR 188,625
-------
376,313
-------
PHARMACEUTICAL/MEDICAL 3.53%
---------------------- -----
4,600 Novartis AG-ADR 368,227
-------
PUBLISHING/PRINTING 2.80%
------------------- -----
2,000 Elsevier NV ADR 67,625
10,145 VNU-Verenigde Nederlandse ADR 224,717
-------
292,342
-------
REAL ESTATE 5.63%
----------- -----
20,800 City Developments Ltd ADR 203,657
20,000 Cheung Kong Holdings Ltd ADR 197,488
14,000 Hong Kong Land Holdings ADR 186,200
-------
587,345
-------
*Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
INTERNATIONAL PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK (CONTINUED) ASSETS VALUE
RECREATION 0.75%
---------- -----
5,200 Resorts World BHD ADR $78,288
-------
RETAIL STORE 2.03%
------------ -----
115,400 Cifra SA de CV 211,805
-------
TELECOMMUNICATIONS 10.38%
------------------ ------
9,500 Deutsche Telekom ADR 229,188
5,900 Cia de Telecommunications de Chile S.A. ADR 194,700
1,500 Philippine Long Distance Telephone Company ADR 96,375
5,400 Telecom Corporation of New Zealand 220,050
5,000 Portugal Telecom S.A. ADR 200,625
1,800 Telecom Argentina Stet ADR 94,500
1,000 Telefonos de Mexico ADR 47,750
------
1,083,188
---------
TELECOMMUNICATIONS EQUIP 2.26%
------------------------ -----
3,200 OY Nokia AB-ADR 236,000
-------
TRANSPORTATION 0.90%
-------------- -----
8,500 Keppel Corporation Ltd ADR 75,497
2,125 Keppel Corporation Ltd ADR Bonus Shares 18,428
------
93,925
------
UTILITIES - ELECTRIC 0.72%
-------------------- -----
4,000 Korea Electric Power Corporation ADR 74,750
------
UTILITIES - TELECOMMUNICATIONS 2.98%
------------------------------ -----
3,600 Telefonica de Espana ADR 310,500
-------
*Indicates nonincome-producing security.
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
INTERNATIONAL PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK (CONTINUED) ASSETS VALUE
- ---------- --------------------------------- ---------- ---------
WHOLESALE SPECIAL LINE 0.98%
---------------------- -----
1,900 Itochu Corporation ADR 102,443
-------
Total Common Stock 9,138,751
---------
REGISTERED INVESTMENT COMPANY - 10.06%
8,600 Webs - Italy Index Series 144,050
20,500 Webs - Japan Index Series* 289,563
9,300 Webs - Belgium Index Series* 162,750
15,000 Webs - Switzerland Index Series* 232,500
8,000 Webs - Singapore Index Series* 88,000
10,300 Webs - Malaysia Index Series 132,613
-------
1,049,476
---------
Total Investment in Securities (Cost $9,285,658) 97.68% 10,188,227
Cash Equivalents 2.02% 210,993
Other Assets, less Liabilities 0.30% 31,887
------- -------------
NET ASSETS 100.00% $10,431,107
======= =============
*Indicates nonincome-producing security.
See accompanying notes to financial statements.
<PAGE>
<TABLE>
STRATUS FUND, INC.
Statement of Assets and Liabilities
June 30, 1997
<CAPTION>
Government Capital
Growth Securities Appreciation
Assets: Portfolio Portfolio Portfolio
----------- ---------- --------------
<S> <C> <C> <C>
Investments in securities, at market value
(cost $31,305,514, 24,943,979, and 5,512,623) $42,913,689 $24,927,101 $6,261,519
Cash equivalents 3,211,327 1,213,822 654,880
Accrued interest and dividends receivable 61,945 410,697 6,575
Receivable for securities sold - - 1,172,443
Receivable for fund shares sold 41,149 2,320 3,715
---------- ---------- ----------
Total assets 46,228,110 26,553,940 8,099,132
---------- ---------- ----------
Liabilities:
Accrued expenses, including investment
management and service fees payable to
adviser, administrator and distributor (note 3) 32,197 17,835 11,987
Payable for securities purchased - - 1,331,932
Payable for fund shares redeemed 6,814 2,236 22,673
---------- ---------- ----------
Total liabilities 39,011 20,071 1,366,592
---------- ---------- ----------
Net assets applicable to outstanding
capital stock $46,189,099 $26,533,869 $6,732,540
========== ========== ==========
Net assets are represented by:
Capital stock outstanding, at par (note 5) $2,706 $2,731 $473
Additional paid-in capital 31,859,941 26,990,604 5,973,094
Accumulated undistributed net
investment income (loss) 1,244 449 18,799
Accumulated undistributed net realized
gain (loss) on investments 2,717,033 (443,037) (8,722)
Unrealized appreciation (depreciation) (note 4) 11,608,175 (16,878) 748,896
---------- ---------- ----------
Total net assets applicable
to shares outstanding $46,189,099 $26,533,869 $6,732,540
========== ========== ==========
Shares outstanding and net asset value per share
Shares of capital stock outstanding: 2,705,627,
2,731,171, and 472,542 respectively (note 5) $17.07 $9.72 $14.25
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STRATUS FUND, INC.
Statement of Assets and Liabilities
June 30, 1997
Intermediate
Government
Bond International
Assets: Portfolio Portfolio
-------------- ---------------
Investments in securities, at market value
(cost $4,319,855 and 9,285,658) $4,323,820 $10,188,227
Cash equivalents 194,411 210,993
Accrued interest and dividends receivable 92,785 41,628
Receivable for fund shares sold - 7,668
--------- ----------
Total assets 4,611,016 10,448,516
--------- ----------
Liabilities:
Accrued expenses, including investment
management and service fees payable to
adviser, administrator and distributor (note 3) 5,298 17,391
Payable for fund shares redeemed - 18
--------- ----------
Total liabilities 5,298 17,409
--------- ----------
Net assets applicable to outstanding capital stock $4,605,718 $10,431,107
========= ==========
Net assets are represented by:
Capital stock outstanding, at par (note 5) $439 $929
Additional paid-in capital 4,720,161 9,395,729
Accumulated undistributed net
investment income (loss) (1) 199
Accumulated undistributed net realized
gain (loss) on investments (118,846) 131,681
Unrealized appreciation (note 4) 3,965 902,569
--------- ----------
Total net assets applicable
to shares outstanding $4,605,718 $10,431,107
========= ==========
Shares outstanding and net asset value per share
Shares of capital stock outstanding: 439,448
and 929,464 respectively (note 5) $10.48 $11.22
========= ==========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
STRATUS FUND, INC.
Statement of Operations
Year Ended June 30, 1997
<CAPTION>
Intermediate
Government Capital Government
Growth Securities Appreciation Bond International
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ---------- ---------- ---------- -----------
Investment income:
<S> <C> <C> <C> <C> <C>
Dividends $548,821 $ - $81,021 $ - $159,265
Interest 151,638 1,450,603 24,104 362,179 32,920
------------ ---------- ---------- ---------- -----------
Total investment income 700,459 1,450,603 105,125 362,179 192,185
------------ ---------- ---------- ---------- -----------
Expenses (note 3):
Investment advisory fees 160,343 122,584 17,500 38,269 64,660
Administration fees 80,173 61,292 11,855 14,719 14,057
Legal fees 15,430 8,476 1,405 2,316 3,440
Accounting 4,837 4,553 3,022 3,452 439
Custodial fees - - 9,243 7,815 -
Securities pricing 3,950 825 3,385 - 2,986
Other operating expenses 14,752 12,352 3,755 2,161 7,226
------------ ---------- ---------- ---------- -----------
Total expenses 279,485 210,082 50,165 68,732 92,808
Less fee waiver (note 3) (48,103) (36,775) (7,113) (8,831) (8,434)
------------ ---------- ---------- ---------- -----------
Net expenses 231,382 173,307 43,052 59,901 84,374
------------ ---------- ---------- ---------- -----------
Net investment income 469,077 1,277,296 62,073 302,278 107,811
------------ ---------- ---------- ---------- -----------
Realized and unrealized gain on
investments (note 4):
Net realized gain (loss) 2,814,809 (77,114) 35,730 (626) 131,682
Net unrealized appreciation
(depreciation):
Beginning of period 3,519,739 (282,536) 188,036 (14,824) -
Unrealized appreciation of
securities received in
tax-free exchange (note 6) 1,862,355 - - - -
End of period 11,608,175 (16,878) 748,896 3,965 902,569
------------ ---------- ---------- ---------- -----------
Net unrealized appreciation 6,226,081 265,658 560,860 18,789 902,569
------------ ---------- ---------- ---------- -----------
Net realized and unrealized
gain on investments 9,040,890 188,544 596,590 18,163 1,034,251
------------ ---------- ---------- ---------- -----------
Net increase in net assets
resulting from operations $9,509,967 $1,465,840 $658,663 $320,441 $1,142,062
============ ========== ========== ========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STRATUS FUND, INC.
Statements of Changes in Net Assets
Years ended June 30, 1997 and 1996
<CAPTION>
Government
Growth Securities
Portfolio Portfolio
---------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- -------------- ----------------- -------------
Operations:
<S> <C> <C> <C> <C>
Net investment income $469,077 $331,555 $1,277,296 $952,369
Net realized gain (loss)
on investments 2,814,809 1,539,268 (77,114) (56,450)
Unrealized appreciation (depreciation)6,226,081 1,768,406 265,658 (348,738)
--------- --------- --------- ---------
Net increase in net assets
resulting from operations 9,509,967 3,639,229 1,465,840 547,181
--------- --------- --------- ---------
Distributions to shareholders from:
Net investment income 477,783 327,797 1,289,378 949,207
Net realized gains 1,270,098 242,886 - -
--------- --------- --------- ---------
Total distributions 1,747,881 570,683 1,289,378 949,207
--------- --------- --------- ---------
Capital share transactions:
Proceeds from sales 12,534,379 11,764,925 9,004,815 14,607,453
Net assets from
tax-free exchange (note 6) 6,102,448 - - -
Payment for redemptions (6,403,413) (3,553,648) (6,830,029) (5,841,352)
Reinvestment of net investment income
and net realized gain
distributions at net asset value 1,565,616 534,808 1,139,458 793,884
---------- ---------- ---------- ----------
Total increase from capital
share transactions 13,799,030 8,746,085 3,314,244 9,559,985
---------- ---------- ---------- ----------
Total increase in net assets 21,561,116 11,814,631 3,490,706 9,157,959
Net assets:
Beginning of period 24,627,983 12,813,352 23,043,163 13,885,204
---------- ---------- ---------- ----------
End of period $46,189,099 $24,627,983 $26,533,869 $23,043,163
========== ========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STRATUS FUND, INC.
Statements of Changes in Net Assets
Years ended June 30, 1997 and 1996
<CAPTION>
Intermediate
Capital Government
Appreciation Bond
Portfolio Portfolio
------------------------------ -----------------------------
Year Ended Year Ended Year Ended Year Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
-------------- -------------- -------------- ---------------
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $62,073 ($18,720) $302,278 $326,734
Net realized gain (loss) on
investments 35,730 262,607 (626) (388)
Unrealized appreciation
(depreciation) 560,860 16,846 18,789 (61,056)
--------- --------- --------- ---------
Net increase in net assets
resulting from operations 658,663 260,733 320,441 265,290
--------- --------- --------- ---------
Distributions to shareholders from:
Net investment income 43,274 - 307,339 325,597
Net realized gains 165,941 72,180 - -
--------- --------- --------- ---------
Total distributions 209,215 72,180 307,339 325,597
--------- --------- --------- ---------
Capital share transactions:
Proceeds from sales 4,546,087 1,536,363 199,716 3,719,234
Payment for redemptions (942,467) (55,095) (3,096,495) (2,213,866)
Reinvestment of net investment income
and net realized gain
distributions at
net asset value 205,002 56,061 264,889 261,014
--------- --------- --------- ---------
Total increase (decrease)
from capital share
transactions 3,808,622 1,537,329 (2,631,890) 1,766,382
--------- --------- --------- ---------
Total increase (decrease)in net assets 4,258,070 1,725,882 (2,618,788) 1,706,075
Net assets:
Beginning of period 2,474,470 748,588 7,224,506 5,518,431
--------- --------- --------- ---------
End of period $6,732,540 $2,474,470 $4,605,718 $7,224,506
========= ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
STRATUS FUND, INC.
Statements of Changes in Net Assets
The Period from October 1, 1996 (commencement of operations) to
June 30, 1997
International
Portfolio
-------------
Period Ended
June 30, 1997
--------------
Operations:
Net investment income $107,811
Net realized gain on investments 131,682
Unrealized appreciation 902,569
Net increase in net assets ---------
resulting from operations 1,142,062
---------
Distributions to shareholders from:
Net investment income 107,613
Net realized gains -
---------
Total distributions 107,613
---------
Capital share transactions:
Proceeds from sales 9,586,087
Payment for redemptions (294,866)
Reinvestment of net investment income
and net realized gain distributions at
net asset value 105,437
---------
Total increase from capital
share transactions 9,396,658
---------
Total increase in net assets 10,431,107
Net assets:
Beginning of period -
----------
End of period $10,431,107
==========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS YEARS ENDED JUNE 30,
1997, 1996 AND 1995 AND THE PERIOD FROM OCTOBER 8, 1993
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1994
<CAPTION>
GROWTH
PORTFOLIO
----------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
NET ASSET VALUE:
<S> <C> <C> <C> <C>
Beginning of period $13.67 $11.47 $9.84 $10.00
------ ------ ----- ------
Income from investment operations:
Net investment income 0.22 0.23 0.22 0.19
Net realized and unrealized gain (loss)
on investments 3.99 2.36 1.72 (0.16)
---- ---- ---- ------
Total income from
investment operations 4.21 2.59 1.94 0.03
---- ---- ---- ----
Less distributions:
Dividends from net investment income (0.22) (0.22) (0.22) (0.19)
Distributions from capital gains (0.59) (0.17) (0.09) 0.00
------ ------ ------ ----
Total distributions (0.81) (0.39) (0.31) (0.19)
------ ------ ------ ------
End of period $17.07(a) $13.67 $11.47 $9.84
====== ====== ====== ====
TOTAL RETURN 32.6%(a) 22.6% 20.3% (.03%)(b)
====== ===== ===== ====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $46,189,099 $24,627,983 $12,813,352 $12,892,161
Ratio of expenses to average net assets 0.72% 0.71% 0.82% 0.76%(c)
Ratio of net income to average net assets 1.46% 1.78% 2.14% 2.38%(c)
Portfolio turnover rate 88.53% 92.72% 19.89% 10.05%
Average Commission Rate (d) $0.0948 N/A N/A N/A
(a) Excludes maximum sales load of 4%.
(b) Total return is not annualized.
(c) Annualized for those periods less than twelve months in duration.
(d) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
See Accompanying Notes To Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
YEARS ENDED JUNE 30, 1997, 1996 AND 1995 AND THE PERIOD FROM
OCTOBER 8, 1993 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1994
<CAPTION>
GOVERNMENT SECURITIES
PORTFOLIO
----------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
NET ASSET VALUE:
<S> <C> <C> <C> <C>
Beginning of period $9.64 $9.77 $9.40 $10.00
----- ----- ----- ------
Income (loss) from investment operations:
Net investment income 0.51 0.49 0.45 0.27
Net realized and unrealized gain (loss)
on investments 0.08 (0.13) 0.37 (0.60)
---- ------ ---- ------
Total income (loss) from
investment operations 0.59 0.36 0.82 (0.33)
---- ---- ---- ------
Less distributions from
net investment income (0.51) (0.49) (0.45) (0.27)
------ ------ ------ ------
End of period $9.72(a) $9.64 $9.77 $9.40
===== ===== ===== =====
TOTAL RETURN 6.3%(a) 3.7% 9.0% (3.4%)(b)
==== ==== ==== =====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $26,533,869 $23,043,163 $13,885,204 $12,477,517
Ratio of expenses to average net assets 0.71% 0.69% 0.80% 0.74%(c)
Ratio of net income to average net assets 5.21% 5.04% 4.82% 3.89%(c)
Portfolio turnover rate 27.20% 40.61% 33.88% 17.36%
(a) Excludes maximum sales load of 3%.
(b) Total return is not annualized.
(c) Annualized for those periods less than twelve months in duration.
See Accompanying Notes To Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
YEARS ENDED JUNE 30, 1997, 1996, 1995 AND 1994 AND THE PERIOD FROM
JANUARY 4, 1993 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1993
<CAPTION>
CAPITAL APPRECIATION PORTFOLIO
-----------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30,1996 JUNE 30,1995 JUNE 30,1994 JUNE 30,1993
NET ASSET VALUE:
<S> <C> <C> <C> <C> <C>
Beginning of period $13.19 $11.23 $8.95 $9.40 $10.00
------ ------ ----- ----- ------
Income (loss) from investment operations:
Net investment income (loss) 0.18 (0.19) (0.15) (0.12) (0.04)
Net realized and unrealized
gain (loss) on investments 1.48 2.88 2.62 (0.33) (0.56)
---- ---- ---- ------ ------
Total Income (loss) from
Investment Operations 1.66 2.69 2.47 (0.45) (0.60)
---- ---- ---- ------ ------
Less distributions from
net investment income (0.12) - - - -
Less distributions from capital gains (0.48) (0.73) (0.19) - -
----- ----- ----- ----- ------
End of period $14.25(a) $13.19 $11.23 $8.95 $9.40
====== ====== ====== ===== =====
TOTAL RETURN 11.7%(a) 26.0% 28.6% (4.8%) (6.0%)(b)
===== ===== ===== ====== =====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $6,732,540 $2,474,470 $748,588 $653,757 $583,403
Ratio of expenses to average net assets 0.91% 2.84% 2.69% 2.13% 2.41%(c)
Ratio of net income (loss)
to average net assets 1.31% (1.54%) (1.59%) (1.27%) (1.04%)(c)
Portfolio turnover rate 322.07% 179.06% 214.47% 9.09% 4.42%
Average Commission Rate (d) $0.0689 N/A N/A N/A N/A
(a) Excludes maximum sales load of 4%.
(b) Total return is not annualized.
(c) Annualized for those periods less than twelve months in duration.
(d) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was
a commission charged.
See Accompanying Notes To Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
YEARS ENDED JUNE 30, 1997, 1996, 1995, 1994 AND 1993
<CAPTION>
INTERMEDIATE GOVERNMENT BOND
PORTFOLIO
-----------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993
NET ASSET VALUE:
<S> <C> <C> <C> <C> <C>
Beginning of period $10.47 $10.56 $10.29 $10.84 $10.72
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income 0.54 0.52 0.50 0.47 0.38
Net realized and unrealized
gain (loss) on investments 0.02 (0.09) 0.27 (0.55) 0.34
---- ------ ---- ------ ----
Total income (loss) from
investment operations 0.56 0.43 0.77 (0.08) 0.72
---- ---- ---- ------ ----
Less distributions:
Dividends from net
investment income (0.55) (0.52) (0.50) (0.47) (0.38)
Distributions from capital gains - - - - (0.22)
------- ------ ------ ------ -----
Total distributions (0.55) (0.52) (0.50) (0.47) (0.60)
------- ------- ------ ------ -----
End of period $10.48 (a) $10.47 $10.56 $10.29 $10.84
======= ====== ====== ====== ======
TOTAL RETURN 5.6%(a) 4.1% 7.9% (0.8%) 8.9%
==== ==== ==== ====== ====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $4,605,718 $7,224,506 $5,518,431 $7,774,768 $6,747,719
Ratio of expenses to
average net assets 1.02% 1.03% 1.11% 1.05% 1.12%
Ratio of net income to
average net assets 5.14% 4.95% 4.84% 4.41% 4.58%
Portfolio turnover rate 26.88% 4.05% 27.67% 21.02% 32.39%
(a) Excludes maximum sales load of 3%.
See Accompanying Notes To Financial Statements.
</TABLE>
<PAGE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
PERIOD FROM OCTOBER 1, 1996
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1997
INTERNATIONAL
PORTFOLIO
--------------------
PERIOD ENDED
JUNE 30, 1997
--------------------
NET ASSET VALUE:
Beginning of period $10.00
-----
Income from investment operations:
Net investment income 0.15
Net realized and unrealized gain
on investments 1.22
Total income from -----
investment operations 1.37
-----
Less distributions from net investment income (0.15)
------
End of period $11.22(a)
TOTAL RETURN 18.2%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $10,431,107
Ratio of expenses to average net assets 1.48%(b)
Ratio of net income to average net assets 1.89%(b)
Portfolio turnover rate 33.77%
Average Commission Rate (c) $0.0809
(a) Excludes maximum sales load of 4%.
(b) Annualized for those periods less than twelve months in duration.
(c) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was
a commission charged.
See Accompanying Notes To Financial Statements.
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
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, 1997, the following series are presently authorized and have shares
outstanding.
Growth Portfolio Capital Appreciation
Portfolio
Government Intermediate Government
Securities Portfolio Bond Portfolio
International 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.
USE OF ESTIMATES: In preparing the financial statements in accordance with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the
date of the financial statements and changes in net assets for the period.
Actual results could differ from those estimates.
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.
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
2. CONTINUED
All securities are valued in accordance with the above noted policies at
the close of each business day.
The Growth, Capital Appreciation, and International 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.
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 realizes 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 decreased by the premium originally
paid.
At June 30, 1997, the Growth, Capital Appreciation and International
Portfolios had no such option contracts outstanding nor were any written
during the year then ended.
At June 30, 1997, the cost of investment securities is identical for
financial reporting and income tax purposes.
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
2. CONTINUED
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 is accrued daily. Amortization of
premium and discount is accrued daily using both the constant yield and the
straight-line methods. Realized investment gains and losses are determined
by specifically identifying the issue sold.
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. Internal
Revenue Code requirements regarding distributions may differ from amounts
determined under generally accepted accounting principles. These book/tax
differences are either temporary or permanent in nature. To the extent
these differences are permanent, they are charged or credited to
paid-in-capital or accumulated net realized gain, as appropriate in the
period that the differences arise. Accordingly, the Capital Appreciation
portfolio differences as of June 30, 1997, primarily attributable to
certain net operating losses which for tax purposes are not allowable to
offset future income, and short-term capital gains offset against net
investment losses, have been reclassified to accurate net realized gain and
to paid-in-capital in the amount of $18,720 and $22,234, respectively. 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. The Government Securities and Intermediate Government Bond
Portfolios have unused capital loss carry forwards of approximately
$330,000 and $1,000 respectively, available for federal income tax purposes
at June 30, 1997. The losses begin expiring in 2003 and 2005 for the
Government Securities and Intermediate Government Bond portfolios,
respectively.
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 Growth and Capital Appreciation Portfolios
declare dividends semi-annually. The dividends declared become payable
immediately.
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
3. FEES, EXPENSES AND RELATED PARTY TRANSACTIONS
CASH EQUIVALENTS
The Fund considers investments with an original maturity of three months or
less when purchased to be cash equivalents.
The Fund and each of its Portfolios have retained Union Bank & 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, 1997, the annualized fee ranged from
0.0% to 1.44%.
Growth 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. The International Portfolio will pay the Adviser
a fee equal to 1.15% per annum of its average daily net assets. These
Portfolios do not participate in performance based compensation scales.
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 the Growth, Government Securities, and International Portfolios,
which pay no fee), will pay the custodian an annual fee which is calculated
and billed monthly. The fee calculation does not include cash equivalents.
The fee consists of an investment transaction charge of $12 for each
transaction, a 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 record keeping and share transfer
services for the Fund. The agreement provides that each Portfolio will pay
an administrative fee to the Administrator equal
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
3. CONTINUED
to .25% per annum of average daily net assets. From July 1, 1996 to June
30, 1997 the Administrator waived .15% of its .25% administrative fee.
Under the terms of the advisory, custodian and administrative agreements
outlined above, the Portfolios collectively incurred $403,356, $17,058 and
$182,096 for such services.
At June 30, 1997, the following accrued investment advisory and
administrative fees were payable to the Adviser and Administrator.
Payable to Payable to
Adviser Administrator Total
---------- -------------- -------
Growth Portfolio $18,617 $3,723 $22,340
Government Securities Portfolio 10,868 2,174 13,042
Capital Appreciation Portfolio 7,457 533 7,990
Intermediate Government
Bond Portfolio 2,459 378 2,837
International Portfolio 9,467 823 10,290
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, 1997, no expense
reimbursement was required.
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 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 $50,410 for their
brokerage services during the year ended June 30, 1997.
The Portfolios also retained SMITH HAYES (the Distributor) to act as the
underwriter and distributor of the Fund's shares. The Distributor received
$8,086 and paid out 100% of this amount as commissions and dealer
allowances.
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
4. SECURITIES TRANSACTIONS
Purchases of securities and proceeds from sales were as follows for each
Portfolio:
Purchases of Proceeds
Securities from Sales
------------ -----------
Growth Portfolio $32,402,884 $27,748,929
Government Securities Portfolio 11,613,217 6,377,494
Capital Appreciation Portfolio 17,045,887 13,536,689
Intermediate Government Bond Portfolio 1,498,199 3,411,477
International Portfolio 11,370,406 2,216,430
At June 30, 1997, the aggregate gross unrealized appreciation and the
aggregate gross unrealized depreciation of securities in each Portfolio
were as follows:
Aggregate Gross
Unrealized
Appreciation Depreciation
------------- -------------
Growth Portfolio $11,984,549 $376,374
Government Securities Portfolio 122,101 138,979
Capital Appreciation Portfolio 761,664 12,768
Intermediate Government Bond Portfolio 22,114 18,149
International Portfolio 1,218,869 316,300
5. 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 Board of Directors have
authorized twenty million shares to be issued in the Growth Portfolio and
ten million each in the Government Securities Portfolio, Capital
Appreciation Portfolio, Intermediate Government Bond Portfolio, and the
International Portfolio.
Transactions in the capital stock of each Portfolio for the year ended June
30, 1997 were as follows:
Government
Growth Securities
Portfolio Portfolio
Transactions in shares: ---------- -----------
Shares sold 830,467.729 928,734.961
Shares issued in exchange 417,404.084 -
Shares redeemed (450,355.998) (705,032.162)
Reinvested dividends 105,895.566 117,693.640
------------ -------------
Net increase 903,411.381 341,396.439
=========== =============
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
5. CONTINUED
Intermediate
Capital Government
Appreciation Bond
Portfolio Portfolio
Transactions in shares: ----------- --------------
Shares sold 339,054.700 18,972.031
Shares redeemed (68,563.284) (294,653.747)
Reinvested dividends 14,500.865 25,288.792
------------- ------------
Net increase (decrease) 284,992.281 (250,392.924)
=========== =============
International
Portfolio
Transactions in shares: -------------
Shares sold 948,482.170
Shares redeemed (28,756.197)
Reinvested dividends 9,738.229
-------------
Net increase 929,464.202
===========
At June 30, 1997, directors, officers and employees of the Fund, the
Adviser and Administrator and their immediate families held the following
in each Portfolio:
Shares Value
---------- --------
Growth Portfolio 51,644.529 $881,572
Government Securities 35,960.009 349,531
Capital Appreciation Portfolio 16,807.709 239,510
International Portfolio 11,874.499 133,232
At June 30, 1997, UBATCO held, in nominee name, the following in each
Portfolio:
Shares Value
------------- ----------
Growth Portfolio 2,698,662.456 46,070,206
Government Securities Portfolio 2,731,171.452 26,533,869
Capital Appreciation Portfolio 472,541.823 6,732,540
Intermediate Government Bond Portfolio 435,353.848 4,562,809
International Portfolio 929,464.202 10,431,107
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
6. BUSINESS CHANGES
The International Portfolio commenced operations on October 1, 1996.
On December 27, 1996, the net assets of Union Bank's Common Trust Equity
Fund were transferred into the Growth Portfolio with a corresponding
purchase of shares. The transaction was accounted for as a tax free
exchange. The market value of the assets received by the Growth Portfolio
was $6,102,448 with unrealized appreciation of $1,862,355.
