STRATUS FUND, INC.
GROWTH
GOVERNMENT SECURITIES
CAPITAL APPRECIATION
INTERMEDIATE GOVERNMENT BOND
INTERNATIONAL
ANNUAL REPORT
JUNE 30, 1998
<PAGE>
STRATUS FUND, INC.
Dear Fellow Shareholders:
The economy continues to perform well with above average growth and low
inflation. Gross Domestic Product has recorded uneven growth with considerable
variability from quarter to quarter. 1998's first quarter GDP rose at a 5.5%
pace while second quarter growth slowed significantly to 1.4%. Responsible for
the dramatic slowing has been the draw down of inventories built during the
first quarter, weaker demand by the industrial side of the economy, and, last
but not least, the Asian contagion. Weakness in Asia will not be easily resolved
and should last throughout 1998 at least. Therefore, economic growth in the
second half of the year is forecast to be 2 1/2% or lower.
The positive economic climate has helped stock and bond markets to perform
favorably through the first half or 1998. However, the big cap stocks have
performed significantly better than small caps allowing the Dow Jones
Industrials and the S & P 500 to perform much better than the Russell 2000 Small
Cap Index. International stocks also saw mixed performance. If most or all of
your holdings were in Europe, you were pleased with your positive returns.
Conversely, if most of your funds were invested in Southeast Asia, negative
returns were the rule rather than the exception.
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 1998 came on May 11th when the DJIA closed at 9211. This index
stood at 8952 on June 30, 1998.
The two bond funds, managed by Stratus, performed similarly to other bond funds
with the same investment objective. The Stratus Government Securities Portfolio
Institutional Class Shares achieved a total rate of return of 7.0% this past
fiscal year, while the Stratus Intermediate Government Bond Portfolio
Institutional Class Shares appreciated 6.3%. For comparison purposes, the
Merrill Lynch U.S. Treasury Intermediate Term Index grew by 8.8% during the
recently completed fiscal year.
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.
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.
1
<PAGE>
The two Stratus funds investing in domestic common stocks completed a successful
fiscal year which also ended June 30, 1998. With investors favoring large cap
stocks, the Stratus Growth Portfolio Institutional Class Shares provided a total
return of 22.3% 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 considerably as
technology stocks were in favor most of the year. Although the Growth Portfolio
did not match the performance of the S & P Index, it did better than the
majority of funds in its category. In the Wall Street Journal's Mutual Funds
Report for the second quarter of 1998, the Stratus Growth Portfolio earned a B
Ranking for one year performance versus comparable funds, and even more
importantly, an A ranking for the 3 years. This fund again grew significantly
during the past year.
The Capital Appreciation Portfolio Institutional Class Shares, which invests
primarily in smaller capitalization stocks showing strong earnings and price
momentum, returned 7.5% for the year ended June 30, 1998. Smaller stocks
continued to be out of favor in comparison with larger cap issues, a situation
exacerbated by inconsistent market leadership, which created an unfavorable
landscape for momentum investing. While keeping pace with the Russell 2000 Index
for the first half of calendar year 1998, annual results continue to reflect the
negative relative performance in the last quarter of 1997.
The Stratus International Portfolio Institutional Class Shares, launched
October, 1996, is showing good progress. During the past year, it has posted
gains of 6.3%, somewhat ahead of the EAFE International Index. This fund is
being sub-advised by Murray Johnstone International head-quartered 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, 1998
2
<PAGE>
GROWTH INSTITUTIONAL PORTFOLIO
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
GROWTH INSTITUTIONAL PORTFOLIO AND THE S&P 500 INDEX
AVG. ANNUAL RETURN 06/30/98 VALUE
- ----------------- ---------------------------
1 YEAR 22.29% GROWTH INSTITUTIONAL $23,931.24
INCEPTION 20.27% S&P 500 $27,429.00
- --------------------------------------------------------------------------------
GROWTH RETAIL PORTFOLIO
GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
GROWTH RETAIL PORTFOLIO AND THE S&P 500 INDEX
RETURN * 06/30/98 VALUE
- ----------------- ---------------------------
GROWTH RETAIL $11,163.20
INCEPTION 16.89% S&P 500 $11,771.00
- --------------------------------------------------------------------------------
* Not annualized, as it may not be representative of the total return for the
year.
Results for the Retail Shares reflect payment of a maximum sales charge of 4.5%
on the $10,000 investment with dividends and capital gains reinvested. Average
annual return does not include payment of a sales charge and assumes
reinvestment of dividends and capital gains.
Past performance is not predictive of future performance.
Growth Portfolio Institutional Shares for the period October 8, 1993 (inception)
through June 30, 1998
Growth Portfolio Retail Shares for the period January 7, 1998 (inception)
through June 30, 1998
3
<PAGE>
GOVERNMENT SECURITIES INSTITUTIONAL PORTFOLIO
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
GOVERNMENT SECURITIES INSTITUTIONAL PORTFOLIO AND THE
MERRILL LYNCH U.S. TREASURY INTER-TERM INDEX
AVG. ANNUAL RETURN 06/30/98 VALUE
- ------------------ -------------------------------------
1 YEAR 7.04% GOVERNMENT SECURITIES INSTITUTIONAL $12,417.95
INCEPTION 4.69% MERRILL LYNCH U.S. TREASURY
INTER-TERM BOND $12,983.05
- --------------------------------------------------------------------------------
GOVERNMENT SECURITIES RETAIL PORTFOLIO
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
GOVERNMENT SECURITIES RETAIL PORTFOLIO AND THE
MERRILL LYNCH U.S. TREASURY INTER-TERM INDEX
RETURN * 06/30/98 VALUE
- ------------------ -------------------------------------
GOVERNMENT SECURITIES RETAIL $9,853.47
INCEPTION 4.69% MERRILL LYNCH U.S. TREASURY
INTER-TERM BOND $10,340.00
* Not annualized, as it may not be representative of the total return for
the year.
Results for the Retail Shares reflect payment of a maximum sales charge of
3% on the $10,000 investment with dividends and capital gains reinvested.
Average annual return does not include payment of a sales charge and assumes
reinvestment of dividends and capital gains.
Past performance is not predictive of future performance.
Government Securities Portfolio Institutional Shares for the period
October 8, 1993 (inception) through June 30, 1998.
Government Securities Portfolio Retail Shares for the period
January 13, 1998 (inception) through June 30, 1998.
4
<PAGE>
CAPITAL APPRECIATION INSTITUTIONAL PORTFOLIO
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CAPITAL APPRECIATION INSTITUTIONAL PORTFOLIO AND THE RUSSELL 2000
AVG. ANNUAL RETURN 06/30/98 VALUE
- ------------------ ------------------------------------
1 YEAR 7.47%
5 YEAR 13.12% CAPITAL APPRECIATION INSTITUTIONAL $17,420.69
INCEPTION 10.64% RUSSELL 2000 $22,485.38
- --------------------------------------------------------------------------------
CAPITAL APPRECIATION RETAIL PORTFOLIO
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
CAPITAL APPRECIATION RETAIL PORTFOLIO AND THE RUSSELL 2000
RETURN * 06/30/98 VALUE
- ------------------ ------------------------------------
CAPITAL APPRECIATION RETAIL $10,403.07
INCEPTION 8.93% RUSSELL 2000 $10,527.00
* Not annualized, as it may not be representative of the total return for
the year.
Results for Retail Shares reflect payment of a maximum sales charge of 4.5%
on the $10,000 investment with dividends and capital gains reinvested.
Average annual return does not include payment of a sales charge and assumes
reinvestment of dividends and capital gains.
Past performance is not predictive of future performance.
Capital Appreciation Portfolio Institutional Shares for the period
January 4, 1993 (inception) through June 30, 1998.
Capital Appreciation Portfolio Retail Shares for the period
January 7, 1998 (inception) through June 30, 1998.
5
<PAGE>
INTERMEDIATE GOVERNMENT BOND INSTITUTIONAL PORTFOLIO
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
INTERMEDIATE GOVERNMENT BOND INSTITUTIONAL PORTFOLIO AND THE
MERRILL LYNCH U.S. TREASURY INTER-TERM INDEX
AVG. ANNUAL RETURN 06/30/98 VALUE
- ------------------ ------------------------------------------
1 YEAR 6.27% INTERMEDIATE GOVERNMENT BOND INSTIT. $15,183.76
5 YEAR 4.56% MERRILL LYNCH U.S. TREASURY
INCEPTION 6.03% INTER-TERM BOND $16,668.41
- --------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT BOND RETAIL PORTFOLIO
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
INTERMEDIATE GOVERNMENT BOND RETAIL PORTFOLIO AND THE
MERRILL LYNCH U.S. TREASURY INTER-TERM INDEX
RETURN * 06/30/98 VALUE
- ------------------ ------------------------------------------
INCEPTION 6.03% INTERMEDIATE GOVERNMENT BOND RETAIL $9,863.83
MERRILL LYNCH U.S. TREASURY
INTER-TERM BOND $10,340.00
* Not annualized, as it may not be representative of the total return for
the year.
Results for Retail Shares reflect payment of a maximum sales charge of 3% on
the $10,000 investment with dividends and capital gains reinvested.
Average annual return does not include payment of a sales charge and assumes
reinvestment of dividends and capital gains.
Past performance is not predictive of future performance.
Intermediate Government Bond Portfolio Institutional Shares for the period
May 15, 1991 (inception) through June 30, 1998.
Intermediate Government Bond Portfolio Retail Shares for the period
January 27, 1998 (inception) through June 30, 1998.
6
<PAGE>
INTERNATIONAL INSTITUTIONAL PORTFOLIO
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
INTERNATIONAL INSTITUTIONAL PORTFOLIO AND THE MORGAN STANLEY INTERNATIONAL
AVG. ANNUAL RETURN 06/30/98 VALUE
- ------------------ ------------------------------------------
1 YEAR 6.27% INTERNATIONAL INSTITUTIONAL PORTFOLIO $12,070.44
INCEPTION 11.39% MORGAN STANLEY INTERNATIONAL $11,675.15
- --------------------------------------------------------------------------------
INTERNATIONAL RETAIL PORTFOLIO
[GRAPHIC OMITTED]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
INTERNATIONAL RETAIL PORTFOLIO AND THE MORGAN STANLEY INTERNATIONAL
RETURN* 06/30/98 VALUE
- ------------------ ------------------------------------------
INTERNATIONAL RETAIL PORTFOLIO $10,875.80
INCEPTION 13.88% MORGAN STANLEY INTERNATIONAL $11,510.00
* Not annualized, as it may not be representative of the total return for
the year.
Results for Retail Shares reflect payment of a maximum sales charge of 4.5%
on the $10,000 investment with dividends and capital gains reinvested.
Average annual return does not include payment of a sales charge and
assumes reinvestment of dividends and capital gains.
Past performance is not predictive of future performance.
International Portfolio Institutional Shares for the period October 1, 1996
(inception) through June 30, 1998.
International Portfolio Retail Shares for the period January 7, 1998 (inception)
through June 30, 1998.
7
<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, 1998,
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,
for the International Portfolio) and financial highlights for each of the three
years in the period then ended. 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
and 1994 for the Intermediate Government Bond Portfolio, for the years ended
June 30, 1995 and 1994 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, 1998 by correspondence with the custodian. 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, 1998,
the results of their operations, the changes in their net assets for each of the
two years in the period then ended, and their financial highlights for each of
the three years in the period then ended in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Lincoln, Nebraska
July 24, 1998
8
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
GROWTH PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK - 95.79% ASSETS VALUE
------ --------------------- ------ -----
CHEMICALS 1.83%
---------
25,000 Praxair, Inc. $1,170,313
COMPUTER RELATED 10.95%
----------------
32,000 Compaq Computer Corp. 908,000
15,000 Cisco Systems, Inc.* 1,380,938
20,000 EMC Corp.* 896,250
15,000 International Business Machine Corp. 1,722,188
14,000 Keane, Inc* 784,000
12,000 Microsoft Corp.* 1,300,500
---------
6,991,876
COSMETICS/PERSONAL CARE
14,000 Gillette Co. 1.24%
793,625
ELECTRONICS 3.74%
-----------
15,000 Intel Corp. 1,111,875
15,000 Phillips Electronics N.V. 1,275,000
---------
2,386,875
ENTERTAINMENT/LEISURE 2.11%
---------------------
34,000 Carnival Corp. Class A 1,347,250
FINANCIAL SERVICES 5.70%
------------------
22,000 Nationsbank Corp. 1,683,000
40,000 SLM Holdings Corp. 1,960,000
---------
3,643,000
FUNERAL SERVICE/RELATED 1.68%
-----------------------
25,000 Service Corp. International 1,071,875
9
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK CONT'D ASSETS VALUE
------ --------------------- ------ -----
HOUSEHOLD PRODUCTS/WARES 1.93%
------------------------
14,000 Colgate-Palmolive Co. $1,232,000
INSURANCE 7.37%
---------
20,000 American General Corp. 1,423,750
20,000 Allstate Corp. 1,831,250
24,000 Travelers Group, Inc. 1,455,000
---------
4,710,000
MANUFACTURING 5.39%
-------------
24,000 General Electric Co. 2,184,000
20,000 Tyco International Ltd. 1,260,000
---------
3,444,000
MEDICAL SUPPLIES/SERVICE 7.91%
------------------------
19,000 Becton Dickinson Co. 1,474,875
16,000 Cardinal Health, Inc. 1,500,000
30,000 Warner-Lambert Co. 2,081,250
---------
5,056,125
OIL-FIELD SERVICES 3.79%
------------------
22,000 Enron Corp. 1,189,375
18,000 Schlumberger Ltd. 1,229,625
---------
2,419,000
OIL COMPANY- INTEGRATED 3.85%
-----------------------
15,000 Mobil Corp. 1,149,375
22,000 Texaco, Inc. 1,313,125
---------
2,462,500
OFFICE/BUSINESS 3.18%
---------------
20,000 Xerox Corp. 2,032,500
10
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK CONT'D ASSETS VALUE
------ --------------------- ------ -----
PACKAGING/CONTAINER 2.19%
-------------------
26,000 Avery Dennison Corp. $1,397,500
PHARMACEUTICAL/MEDICAL 5.56%
----------------------
20,000 Johnson & Johnson 1,475,000
15,000 Eli Lilly & Co. 990,938
10,000 Pfizer, Inc. 1,086,875
---------
3,552,813
PUBLISHING/PRINTING 1.78%
-------------------
16,000 Gannett Co. 1,137,000
RETAIL/APPAREL 3.81%
--------------
28,000 Dayton/Hudson Corp. 1,358,000
25,000 Ross Stores, Inc. 1,075,000
---------
2,433,000
RETAIL STORE 7.24%
------------
20,000 Costco Co., Inc.* 1,261,250
36,000 CVS Corp. 1,401,750
23,000 General Nutrition Co.* 715,875
24,000 Kohl's Corp.* 1,245,000
---------
4,623,875
TELECOMMUNICATIONS 3.96%
------------------
25,000 Airtouch Communications, Inc.* 1,460,938
22,000 Worldcom, Inc.* 1,065,625
---------
2,526,563
TRANSPORTATION 3.76%
--------------
10,000 Delta Air Lines, Inc. 1,292,500
37,500 Southwest Airlines Co. 1,110,935
---------
2,403,435
11
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK CONT'D ASSETS VALUE
----- ------------------------- ------- --------
UTILITIES/ELECTRIC 5.57%
------------------
40,000 Allegheny Energy, Inc. $1,205,000
30,000 CalEnergy Co., Inc.* 901,875
50,000 Kansas City Power & Light Co. 1,450,000
---------
3,556,875
UTILITIES-TELECOMMUNICATION 1.25%
---------------------------
20,000 SBC Communications, Inc. 800,000
-------
Total investment in securities (cost $46,944,834) 95.79% $61,192,000
Cash equivalents 4.21% 2,687,633
Other assets, less liabilities 0.00% 1,457
----- -----
NET ASSETS 100.00% $63,881,090
======= ===========
* Indicates non-income producing security.
12
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
GOVERNMENT SECURITIES PORTFOLIO
PERCENT
PRINCIPAL OF NET MARKET
AMOUNT U.S. GOVERNMENT SECURITIES ASSETS VALUE
- ----------- ---------------------------- -------- ------------
91.33%
$1,000,000 Federal National Mtg. Assn. 6.2% due 6/6/00 $1,009,399
2,000,000 Federal National Mtg. Assn. 6.35% due 6/10/05 2,061,178
2,000,000 Federal National Mtg. Assn. 6.055% due 10/15/02 1,999,039
3,000,000 U.S. Treasury Note 6.50% due 5/31/01 3,075,469
1,500,000 U.S. Treasury Bond 6.25% due 3/31/99 1,508,438
2,000,000 U.S. Treasury Bond 6.625% due 3/31/02 2,070,938
2,000,000 U.S. Treasury Bond 7.125% due 10/15/98 2,010,625
2,000,000 U.S. Treasury Bond 6.375% due 7/15/99 2,016,875
3,000,000 U.S. Treasury Bond 6.375% due 1/15/00 3,035,625
3,000,000 U.S. Treasury Bond 5.75% due 8/15/03 3,031,406
1,000,000 U.S. Treasury Bond 7.75% due 11/30/99 1,029,375
3,000,000 U.S. Treasury Bond 5.75% due 10/31/00 3,014,061
2,000,000 U.S. Treasury Bond 5.50% due 12/31/00 1,998,125
---------
Total investment in securities (cost $27,424,064) 91.33% $27,860,553
Cash equivalents 7.32% 2,233,067
Other assets, less liabilities 1.35% 413,226
------- ----------
NET ASSETS 100.00% $30,506,846
====== ==========
13
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
CAPITAL APPRECIATION PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK - 94.10% ASSETS VALUE
------ --------------------- ------ -----
AUTO/TRUCK/PARTS 6.84%
----------------
5,100 Federal-Mogul Corp. $344,250
7,500 Hayes Lemmerz International, Inc.* 298,125
-------
642,375
BUILDING RESIDENTIAL/COMMERCIAL 3.45%
-------------------------------
4,200 Lone Star Industries, Inc. 323,663
COMMERCIAL SERVICES 1.40%
-------------------
4,600 Manpower, Inc. 131,963
COMPUTER RELATED 18.73%
----------------
3,000 Affiliated Computer, Inc.* 115,500
4,700 Ceridian Corp.* 276,125
10,000 Ciber, Inc.* 380,000
11,000 Deanon Systems, Inc.* 101,750
6,700 Keane, Inc.* 375,200
5,900 Lexmark International Group, Inc.* 359,900
5,800 Symantec Corp.* 151,525
-------
1,760,000
CRUISE LINES 3.64%
------------
4,300 Royal Caribbean Cruises Ltd. 341,850
ELECTRICAL EQUIPMENT 2.53%
--------------------
4,100 C & D Tech, Inc. 237,800
DIRECT MARKETING 2.91%
----------------
10,600 Harte-Hanks, Inc. 273,613
14
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
CAPITAL APPRECIATION PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK (CONT'D) ASSETS VALUE
---------- -------------------------- ---------- --------
ELECTRONICS 0.83%
-----------
6,000 Innovex, Inc. $78,375
FINANCIAL SERVICES 8.32%
------------------
2,500 CMAC Investment Corp. 153,750
8,600 Downey Financial Corp. 281,113
12,400 Everen Capital Corp. 347,200
-------
782,063
FOOD/BERVERAGE/TOBACCO 3.33%
----------------------
5,600 The Earthgrains Co. 312,900
HOUSEHOLD PRODUCTS/WARES 3.84%
------------------------
11,800 Linens 'N Things, Inc.* 360,638
HUMAN RESOURCES 1.31%
---------------
7,000 SOS Staffing Services, Inc.* 122,938
INSURANCE 7.23%
---------
2,200 Allstate Corp. 201,438
1,200 First American Finance Co. 108,000
3,800 Fremont General Corp. 205,913
5,400 IPC Holdings, Inc. 163,688
-------
679,039
MACHINERY/EQUIPMENT 1.14%
-------------------
5,200 Agco Corp. 106,925
MANUFACTURING 6.88%
-------------
5,700 USG Corp.* 308,513
8,400 Ball Corp. 337,575
-------
646,088
15
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
CAPITAL APPRECIATION PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK (CONT'D) ASSETS VALUE
---------- -------------------------- ---------- --------
MEDICAL SUPPLIES/SERVICES 10.67%
-------------------------
1,000 Cardinal Health, Inc. $93,750
5,500 ESC Medical Systems Ltd.* 185,625
2,000 Immunex Corp.* 132,500
10,000 Mylan Labs, Inc. 300,625
8,000 Trigon Healthcare, Inc.* 289,500
-------
1,002,000
RETAIL/APPAREL 5.01%
--------------
2,600 Tommy Hilfiger Corp.* 162,500
9,700 Zale Corp.* 308,581
-------
471,081
TRANSPORTATION 3.80%
--------------
12,500 America West Airlines* 357,031
UTILITIES-ELECTRIC 2.24%
------------------
7,000 CalEnergy Co., Inc.* 210,433
-------
Total investment in securities (cost $8,126,584) 94.10% $8,840,775
Cash equivalents 6.17% 579,789
Other assets, less liabilities (0.27%) (25,777)
------- --------
NET ASSETS 100.00% $9,394,787
======= ==========
*Indicates non-income producing security
16
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STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
INTERMEDIATE GOVERNMENT
BOND PORTFOLIO
PERCENT
PRINCIPAL OF NET MARKET
AMOUNT GOVERNMENT AGENCY BONDS ASSETS VALUE
- ------------ -------------------------------------- ------------- --------
$500,000 U.S. Treasury Bond 6.25% due 1/31/02 96.93% $511,016
400,000 U.S. Treasury Bond 6.625% due 4/30/02 414,500
550,000 U.S. Treasury Bond 7.125% due 10/15/98 552,922
500,000 U.S. Treasury Bond 6.375% due 1/15/99 502,500
400,000 U.S. Treasury Bond 6.375% due 1/15/00 404,750
500,000 U.S. Treasury Bond 7.125% due 2/29/00 512,422
500,000 U.S. Treasury Bond 6.125% due 7/31/00 505,781
500,000 U.S. Treasury Bond 6.25% due 10/31/01 510,234
-------
Total investment in securities (cost $3,859,853) 96.93% $3,914,125
Cash equivalents 1.18% 47,477
Other assets, less liabilities 1.89% 76,338
----- ------
NET ASSETS 100.00% $4,037,940
======= ==========
17
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
INTERNATIONAL PORTFOLIO
PERCENT
OF NET MARKET
SHARES COMMON STOCK - 96.86% ASSETS VALUE
------ --------------------- ------ -----
AUTO/TRUCK/PARTS 8.16%
----------------
950 Bridgestone Corp. ADR $224,520
5,700 PSA Peugeot Citroen ADR 306,399
2,150 Volkswagon Ag ADR 415,222
-------
946,141
CHEMICALS 1.13%
---------
3,900 Quimica Minera Chili SA ADR 130,650
COMPUTER RELATED 1.32%
----------------
2,900 Fujitsu Limited ADR 152,538
CONTAINERS-PAPER/PLASTIC 2.00%
------------------------
9,000 N.V. Koninklijke ADR 232,275
DIVERSIFIED OPERATIONS 7.87%
----------------------
7,894 Barlow Ltd ADR 41,882
5,200 Vivendi Sp ADR 222,070
20,800 Kawasaki Industries Ltd ADR 167,856
8,800 Orkla ASA-ADR * 204,703
3,000 Telecom Italia ADR 220,500
14,700 Swire Pacific Ltd ADR 55,490
------
912,501
ELECTRONICS 1.08%
-----------
1,800 STMicroelectronics N.V.* 125,775
18
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
INTERNATIONAL PORTFOLIO
PERCENT
OF NET MARKET
SHARES ASSETS VALUE
--------- ------- --------
FINANCIAL SERVICES 22.11%
------------------
5,600 Allied Irish Banks ADR $480,550
2,500 Barclays Plc ADR 287,500
8,485 Banco Frances Del Rio De La Plata S.A. ADR 194,625
5,500 Banque National Paris ADR 449,386
3,900 Dresdner Bank ADR 210,661
2,800 Deutsche Bank ADR 236,716
7,000 Societe Generale ADR 291,067
3,000 Banco Santander SA ADR 152,063
1,500 Sumitomo Bank ADR 145,909
4,000 Uniao De Bancos S.A. 118,000
-------
2,566,477
FOOD/BEVERAGE/TOBACCO 3.35%
---------------------
6,300 Cadbury Schweppes ADR 388,238
HOLDING COMPANY 0.63%
---------------
3,500 South Africa Brewing ADR 72,496
INDEX SERIES 10.25%
------------
8,600 Webs-Italy Index Series* 224,675
20,500 Webs-Japan Index Series* 201,156
19,900 Webs-Belgium Index Series* 444,019
15,000 Webs-Switzerland Index Series* 283,125
8,000 Webs-Singapore Index Series* 35,500
------
1,188,475
INSURANCE 4.08%
---------
2,014 Aegon N.V. ADR 174,211
11,000 Liberty Life Association of Africa ADR 107,945
1,500 Zurich Versi ADR 191,454
-------
473,610
19
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
INTERNATIONAL PORTFOLIO
PERCENT
OF NET MARKET
SHARES ASSETS VALUE
---------- ------- --------
MANUFACTURING 2.52%
-------------
4,900 Fuji Photo Film ADR $169,356
14,200 Olympus Opitcal ADR 123,392
-------
292,748
MEDICAL SUPPLIES/SERVICES 0.86%
-------------------------
1,650 Smithkline Beecham ADR 99,825
OFFICE/BUSINESS 1.00%
---------------
2,200 Ricoh Company Ltd ADR 115,798
OIL-FIELD SERVICES 2.00%
------------------
7,600 Petroleum Geo ADR* 231,800
OIL EXPLORATION/PRODUCTION 1.13%
--------------------------
2,000 Total SA ADR 130,750
OIL/GAS DRILLING 2.20%
----------------
1,000 Eni Spa ADR 65,000
4,500 Shell Transport & Trading Company ADR 190,688
-------
255,688
OIL COMPANY-INTEGRATED 0.79%
----------------------
4,900 Petrolio Brasileiro ADR 91,085
PHARMACEUTICAL/MEDICAL 3.30%
----------------------
4,600 Novartis AG ADR 382,724
PUBLISHING/PRINTING 3.18%
-------------------
10,145 Vnu-Verenigde Nederlandse ADR 368,551
REAL ESTATE 0.50%
-----------
20,800 City Developments Ltd ADR 58,109
20
<PAGE>
STRATUS FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
INTERNATIONAL PORTFOLIO
PERCENT
OF NET MARKET
SHARES ASSETS VALUE
-------- -------- ---------
RECREATION 2.43%
----------
25,500 Ladbroke Group ADR $281,446
RETAIL STORE 3.86%
------------
12,884 Cifra S.A. ADR 188,685
8,000 Kingfisher Plc ADR 259,218
-------
447,903
TELECOMMUNICATIONS 4.98%
------------------
5,900 Cia de Telecommunications de Chile S.A. ADR 119,972
4,600 Nippon Telegraph & Telephone ADR 193,200
5,000 Portugal Telecom S.A. ADR 264,682
-------
577,854
UTLITIES-ELECTRIC 1.79%
-----------------
5,900 Scottishpower Plc ADR 207,975
UTLITIES/TELECOMMUNICATIONS 4.32%
---------------------------
3,600 Telefonica de Espana ADR 500,625
-------
Total investment in securities (cost $9,689,791) 96.84% $11,232,057
Cash equivalents 3.00% 347,624
Other assets, less liabilities 0.16% 19,248
----- ------
NET ASSETS 100.00% $11,598,929
====== ==========
* Indicates non-income producing security.
21
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
GOVERNMENT CAPITAL
GROWTH SECURITIES APPRECIATION
ASSETS: PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- ------------
Investments in securities, at market value
<S> <C> <C> <C>
(cost $46,944,834, $27,424,064 and $8,126,584) $61,192,000 $27,860,553 $8,840,775
Cash equivalents 2,687,633 2,233,067 579,789
Accrued interest and dividends receivable 60,369 451,640 4,257
Receivable for fund shares sold 11,112 7,400 4,408
------- ------ -----
Total assets 63,951,114 30,552,660 9,429,229
=========== =========== =========
LIABILITIES:
Accrued expenses, including investment
management and distribution expense payable to
adviser, administrator and distributor (note 3) 66,967 27,598 20,054
Payable for fund shares redeemed 3,057 18,216 14,388
------ ------- ------
Total liabilities 70,024 45,814 34,442
------- ------- ------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK 63,881,090 30,506,846 9,394,787
========== ========== =========
NET ASSETS ARE REPRESENTED BY:
Capital stock outstanding, at par (note 5) $3,448 $3,087 $653
Additional paid-in capital 44,505,959 30,503,775 8,656,813
Accumulated undistributed net investment income 1,246 2,899 248
Accumulated net realized gain/(loss)on investments 5,123,271 (439,404) 22,882
Unrealized appreciation (note 4) 14,247,166 436,489 714,191
----------- -------- -------
Total net assets applicable to
shares outstanding $63,881,090 $30,506,846 $9,394,787
============ ============ ==========
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Institutional Shares of Capital Stock Outstanding 3,405,541 3,073,084 637,538
Net Asset Value per share - Institutional Shares $18.53 $9.88 $14.39
====== ===== ======
Retail Shares of Capital Stock Outstanding 743,663 14,077 15,299
Net Asset Value per share - Retail Shares $18.52 $9.89 $14.39
====== ===== ======
See accompanying notes to financial statements.
</TABLE>
22
<PAGE>
STRATUS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
INTERMEDIATE
GOVERNMENT
BOND INTERNATIONAL
ASSETS: PORTFOLIO PORTFOLIO
---------- -------------
Investments in securities, at market value
(cost $3,859,853 and $9,689,791 respectively) $3,914,125 $11,232,057
Cash equivalents 47,477 347,624
Accrued interest and dividends receivable 82,446 37,237
Receivable for fund shares sold - 982
---------- ---
Total assets 4,044,048 11,617,900
========== ==========
LIABILITIES:
Accrued expenses, including investment
management and distribution expense payable to
adviser, administrator and distributor (note 3) 6,108 18,971
------- ------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK $4,037,940 $11,598,929
========= ==========
NET ASSETS ARE REPRESENTED BY:
Capital stock outstanding, at par (note 5) $381 $987
Additional paid-in capital 4,098,436 10,054,705
Accumulated undistributed net investment income 727 498
Accumulated net realized gain/(loss) on investments (115,876) 473
Unrealized appreciation (note 4) 54,272 1,542,266
------- ---------
Total net assets applicable to
shares outstanding $4,037,940 $11,598,929
========== ==========
SHARES OUTSTANDING AND NET ASSET VALUE PER SHARE
Institutional Shares of Capital Stock Outstanding 378,308 976,082
Net Asset Value per share - Institutional Shares $10.60 $11.75
====== ======
Retail Shares of Capital Stock Outstanding 2,760 10,652
Net Asset Value per share - Retail Shares $10.59 $11.75
====== ======
See accompanying notes to financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30 ,1998
INTERMEDIATE
GOVERNMENT CAPITAL GOVERNMENT
GROWTH SECURITIES APPRECIATION BOND INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- --------- ---------- ----------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Dividends $643,679 $ - $42,483 $ - $184,669
Interest 234,557 1,691,826 37,122 271,049 22,177
-------- ---------- ------- -------- ------
Total investment income 878,236 1,691,826 79,605 271,049 206,846
-------- ---------- ------- -------- -------
EXPENSES (NOTE 3):
Investment advisory fees 347,146 141,057 15,676 28,920 127,313
Administration Fees 137,584 70,529 21,173 11,159 27,751
Distribution Expenses - Retail Class 505 113 162 28 89
Legal Fees 3,586 1,941 554 235 12,416
Accounting 5,156 4,345 3,672 3,758 4,036
Custodial fees - - 11,397 4,512 -
Securities Pricing 4,788 - 2,933 - 5,987
Other operating expenses 24,417 13,926 8,644 3,226 5,818
------- ------- ------ ------ -----
Total expenses 523,182 231,911 64,211 51,838 183,410
-------- -------- ------- ------- -------
Net investment income 355,054 1,459,915 15,394 219,211 23,436
======== ========== ======= ======== ======
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 4):
Net realized gain 8,100,736 3,634 474,396 2,969 476
Net unrealized appreciation
(depreciation)
Beginning of period 11,608,175 (16,878) 748,896 3,965 902,570
End of period 14,247,166 436,489 714,191 54,272 1,542,266
----------- -------- -------- ------- ---------
Net unrealized appreciation
(depreciation) 2,638,991 453,367 (34,705) 50,307 639,696
--------- -------- -------- ------- -------
Net realized and unrealized
gain on investments 10,739,727 457,001 439,691 53,276 640,172
----------- -------- -------- ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $11,094,781 $1,916,916 $455,085 $272,487 $663,608
=========== ========== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 1998 AND 1997
GOVERNMENT
GROWTH SECURITIES
PORTFOLIO PORTFOLIO
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $355,054 $469,077 $1,459,915 $1,277,296
Net realized gain (loss) on investme8,100,736 2,814,809 3,634 (77,114)
Unrealized appreciation 2,638,991 6,226,081 453,367 265,658
---------- ---------- -------- -------
Net increase in net assets
resulting from operations 11,094,781 9,509,967 1,916,916 1,465,840
----------- ---------- ---------- ---------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -
Institutional Class 354,256 477,783 1,455,518 1,289,378
Net investment income - Retail Class 797 - 1,947 -
Net realized gains -
Institutional Class 5,694,496 1,270,098 - -
---------- ---------- ----------- ---------
Total Distribution 6,049,549 1,747,881 1,457,465 1,289,378
---------- ---------- ---------- ---------
CAPITAL SHARE TRANSACTIONS: (NOTE 5)
Proceeds from sales 12,330,363 12,534,379 6,597,334 9,004,815
Net assets from tax-free
exchange (note 6) - 6,102,448 - -
Payment for redemptions (4,620,192) (6,403,413) (4,417,351) (6,830,029)
Reinvestment of net investment
income and net realized gain
distributions at net asset value 4,936,588 1,565,616 1,333,543 1,139,458
---------- ---------- ---------- ---------
Total increase from capital
share transactions 12,646,759 13,799,030 3,513,526 3,314,244
----------- ----------- ---------- ---------
Total increase in net assets 17,691,991 21,561,116 3,972,977 3,490,706
NET ASSETS:
Beginning of period 46,189,099 24,627,983 26,533,869 23,043,163
----------- ----------- ----------- ----------
End of period $63,881,090 $46,189,099 $30,506,846 $26,533,869
============ ============ ============ ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 1998 AND 1997
INTERMEDIATE
CAPITAL GOVERNMENT
APPRECIATION BOND
PORTFOLIO PORTFOLIO
------------------------ -------------------------
1998 1997 1998 1997
----------- ----------- ------------ -----------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $15,394 $62,073 $219,211 $302,278
Net realized gain (loss)
on investments 474,396 35,730 2,969 (626)
Unrealized appreciation
(depreciation) (34,705) 560,860 50,307 18,789
-------- -------- ------- ------
Net increase in net assets
resulting from operations 455,085 658,663 272,487 320,441
-------- -------- -------- -------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -
Institutional Class 15,226 43,274 217,970 307,339
Net investment income - Retail Shares - - 511 -
Net realized gains - Institutional
Shares 461,511 165,941 - -
-------- -------- --------- --------
Total Distributions 476,737 209,215 218,481 307,339
-------- -------- -------- -------
CAPITAL SHARE TRANSACTIONS: (NOTE 5)
Proceeds from sales 3,781,440 4,546,087 240,311 199,716
Payment for redemptions (1,569,897) (942,467) (1,059,642) (3,096,495)
Reinvestment of net investment
income and net realized gain
distributions at net asset value 472,356 205,002 197,547 264,889
-------- -------- -------- -------
Total increase (decrease)
from capital
share transactions 2,683,899 3,808,622 (621,784) (2,631,890)
---------- ---------- --------- -----------
Total increase (decrease)
in net assets 2,662,247 4,258,070 (567,778) (2,618,788)
NET ASSETS:
Beginning of period 6,732,540 2,474,470 4,605,718 7,224,506
---------- ---------- ---------- ---------
End of period $9,394,787 $6,732,540 $4,037,940 $4,605,718
=========== =========== =========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
STRATUS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 1998 AND 1997
INTERNATIONAL
PORTFOLIO
------------------------------
1998 1997
-------------- ---------------
OPERATIONS:
Net investment income $23,436 $107,811
Net realized gain on investments 476 131,682
Unrealized appreciation 639,696 902,569
-------- -------
Net increase in net assets
resting from operations 663,608 1,142,062
-------- ---------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - Institutional Class 22,988 107,613
Net investment income - Retail Class 149 -
Net realized gains - Institutional Class 131,684 -
Total Distribution 154,821 107,613
-------- -------
CAPITAL SHARE TRANSACTIONS: (NOTE 5)
Proceeds from sales 2,588,389 9,586,087
Payment for redemptions (2,081,544) (294,866)
Reinvestment of net investment
income and net realized gain distributions
at net asset value 152,190 105,437
-------- -------
Total increase from capital
share transactions 659,035 9,396,658
-------- ---------
Total increase in net assets 1,167,822 10,431,107
NET ASSETS:
Beginning of period 10,431,107 -
----------- ----------
End of period $11,598,929 $10,431,107
============ ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
YEARS ENDED JUNE 30, 1998, 1997,
1996, 1995, AND THE PERIOD FROM
OCTOBER 8, 1993 (COMMENCEMENT OF
CLASS SHARES) TO JUNE 30, 1994
GROWTH PORTFOLIO- INSTITUTIONAL CLASS
-------------------------------------------------------
PERIOD ENDED
1998 1997 1996 1995 JUNE 1994
---- ---- ---- ---- -----------
NET ASSET VALUE:
<S> <C> <C> <C> <C> <C>
Beginning of period $17.07 $13.67 $11.47 $9.84 $10.00
------ ------ ------ ----- ------
Income from investment operations:
Net investment income 0.11 0.22 0.23 0.22 0.19
Net realized and unrealized
gain (loss) on investments 3.45 3.99 2.36 1.72 (0.16)
----- ----- ----- ----- ------
Total income from investment operations 3.56 4.21 2.59 1.94 0.03
----- ----- ----- ----- ----
Less distributions:
Dividends from net investment income (0.11) (0.22) (0.22) (0.22) (0.19)
Distribution from capital gains (1.99) (0.59) (0.17) (0.09) 0.00
------ ------ ------ ------ ----
Total distributions (2.10) (0.81) (0.39) (0.31) (0.19)
------ ------ ------ ------ ------
End of period $18.53 $17.07(a) $13.67 $11.47 $9.84
------ ------ ------ ------ -----
TOTAL RETURN: 22.29% 32.60(a) 22.60% 20.30% (0.03%)(b)
------ ----- ------ ------ ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $63,096,914 46,189,099 24,627,983 12,813,352 12,892,161
Ratio of expenses to average net assets 0.76% 0.72% 0.71% 0.82% 0.76%(c)
Ratio of net income to average net assets 0.18% 1.46% 1.78% 2.14% 2.38%(c)
Portfolio turnover rate 137.03% 88.53% 92.72% 19.89% 10.05%
(a) EXCLUDES MAXIMUM SALES LOAD OF 4%
(b) TOTAL RETURN IS NOT ANNUALIZED.
(c) ANNUALIZED FOR THOSE PERIODS LESS THAN TWELVE MONTHS IN DURATION.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
28
<PAGE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
JANUARY 7, 1998 (COMMENCEMENT OF CLASS SHARES) TO JUNE 30, 1998
GROWTH PORTFOLIO- RETAIL CLASS
PERIOD ENDED JUNE 1998
NET ASSET VALUE: -------------------------
Beginning of period $15.86
Income from investment operations: -----
Net investment income 0.04
Net realized and unrealized gain
on investments 2.66
----
Total income from investment operations 2.70
----
Less distributions:
Dividends from net investment income (0.04)
Distribution from capital gains 0.00
-----
Total distributions (0.04)
-----
End of period $18.52(a)
-----
TOTAL RETURN: 16.89%(a)(b)
-----
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $784,176
Ratio of expenses to average net assets 1.50%(c)
Ratio of net income to average net assets 0.13%(c)
Portfolio turnover rate 137.03%
(a) EXCLUDES MAXIMUM SALES LOAD OF 4%
(b) TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
(c) ANNUALIZED FOR THOSE PERIODS LESS THAN TWELVE MONTHS IN DURATION.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
YEARS ENDED JUNE 30, 1998,
1997, 1996, 1995, AND THE
PERIOD FROM OCTOBER 8, 1993
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1994
GOVERNMENT SECURITIES PORTFOLIO- INSTITUTIONAL CLASS
----------------------------------------------------
PERIOD ENDED
1998 1997 1996 1995 JUNE 1994
---- ---- ---- ---- ---------
NET ASSET VALUE:
<S> <C> <C> <C> <C> <C>
Beginning of period $9.72 $9.64 $9.77 $9.40 $10.00
----- ----- ----- ----- ------
Income (loss) from investment operations:
Net investment income 0.51 0.51 0.49 0.45 0.27
Net realized and unrealized gain (loss)
on investments 0.16 0.08 (0.13) 0.37 (0.60)
----- ----- ------ ----- ------
Total income (loss) from
investment operations 0.67 0.59 0.36 0.82 (0.33)
----- ----- ----- ----- ------
Less distributions from
net investment income (0.51) (0.51) (0.49) (0.45) (0.27)
------ ------ ------ ------ ------
End of period $9.88 $9.72(a) $9.64 $9.77 $9.40
----- ----- ----- ----- -----
TOTAL RETURN: 7.0% 6.3%(a) 3.7% 9.0% (3.4%(b)
---- ----- ---- ---- -----
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $30,367,682 26,533,869 23,043,163 13,885,204 12,477,517
Ratio of expenses to average net assets 0.82% 0.71% 0.69% 0.80% 0.74%(c)
Ratio of net income to average net assets 5.17% 5.21% 5.04% 4.82% 3.89%(c)
Portfolio turnover rate 2.07% 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>
30
<PAGE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
JANUARY 13, 1998 (COMMENCEMENT OF CLASS SHARES) TO JUNE 30, 1998
GOVERNMENT SECURITIES- RETAIL CLASS
PERIOD ENDED
JUNE 1998
NET ASSET VALUE: ----------------------------------
Beginning of period $9.97
Income from investment operations:
Net investment income 0.25
Net realized and unrealized gain (loss)
on investments (0.08)
----
Total income from investment operations 0.17
----
Less distributions:
Dividends from net investment income (0.25)
Distribution from capital gains 0.00
----
Total distributions (0.25)
----
End of period $9.89
----
TOTAL RETURN: 1.58% (a)(b)
----
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $139,164
Ratio of expenses to average net assets 1.21%(c)
Ratio of net income to average net assets 5.49%(c)
Portfolio turnover rate 2.07%
(a) EXCLUDES MAXIMUM SALES LOAD OF 4%
(b) TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
(c) ANNUALIZED FOR THOSE PERIODS LESS THAN TWELVE MONTHS IN DURATION.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
YEARS ENDED JUNE 30, 1998, 1997, 1996, 1995,AND 1994
CAPITAL APPRECIATION PORTFOLIO- INSTITUTIONAL CLASS
1998 1997 1996 1995 1994
NET ASSET VALUE:
<S> <C> <C> <C> <C> <C>
Beginning of period $14.25 $13.19 $11.23 $8.95 $9.40
------ ------ ------ ----- -----
Income (loss) from investment operations:
Net investment income (loss) 0.03 0.18 (0.19) (0.15) (0.12)
Net realized and unrealized
gain (loss) on investments 0.86 1.48 2.88 2.62 (0.33)
----- ----- ----- ----- ------
Total income (loss) from investment
operations 0.89 1.66 2.69 2.47 (0.45)
----- ----- ----- ----- ------
Less distributions from
net investment income (0.03) (0.12) 0.00 0.00 0.00
Less distributions from capital gains (0.72) (0.48) (0.73) (0.19) 0.00
------ ------ ------ ------ ----
Total Distributions (0.75) (0.60) (0.73) (0.19) 0.00
------ ------ ------ ------ ----
End of period $14.39 $14.25(a) $13.19 $11.23 $8.95
------ ----- ------ ------ -----
TOTAL RETURN: 7.5% 11.7%(a) 26.0% 28.6% (4.8%)
---- ----- ----- ----- ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $9,174,664 6,732,540 2,474,470 748,588 653,757
Ratio of expenses to average net assets 0.76% 0.91% 2.84% 2.69% 2.13%
Ratio of net income to average net asset 0.18% 1.31% (1.54%) (1.59%) (1.27%)
Portfolio turnover rate 277.31% 322.07% 179.06% 214.47% 9.09%
(a) Excludes maximum sales load of 4%
See accompanying notes to financial statements.
</TABLE>
32
<PAGE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
JANUARY 7, 1998 (COMMENCEMENT OF CLASS SHARES) TO JUNE 30, 1998
CAPITAL APPRECIATION- RETAIL CLASS
PERIOD ENDED JUNE 1998
NET ASSET VALUE: ----------------------------
Beginning of period $13.21
Income from investment operations: -----
Net investment income (0.03)
Net realized and unrealized gain (loss)
on investments 1.21
----
Total income from investment operations 1.18
----
Less distributions:
Dividends from net investment income 0.00
----
Distribution from capital gains 0.00
----
Total distributions 0.00
----
End of period $14.39(a)
TOTAL RETURN: 8.93%(a)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $220,123
Ratio of expenses to average net assets 1.25%(c)
Ratio of net income to average net assets (0.18%)(c)
Portfolio turnover rate 277.31%
(a) EXCLUDES MAXIMUM SALES LOAD OF 4%
(b) TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
(c) ANNUALIZED FOR THOSE PERIODS LESS THAN TWELVE MONTHS IN DURATION.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
YEARS ENDED JUNE 30, 1998, 1997, 1996, 1995, AND 1994
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
INSTITUTIONAL CLASS
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
NET ASSET VALUE:
<S> <C> <C> <C> <C> <C>
Beginning of period $10.48 $10.47 $10.56 $10.29 $10.84
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income 0.52 0.54 0.52 0.50 0.47
Net realized and unrealized
gain (loss) on investments 0.12 0.02 (0.09) 0.27 (0.55)
----- ----- ------ ----- ------
Total income (loss) from investment
operations 0.64 0.56 0.43 0.77 (0.08)
----- ----- ----- ----- ------
Less distributions:
Dividends from net
investment income (0.52) (0.55) (0.52) (0.50) (0.47)
Distributions from capital gains 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- ----
Total distributions (0.52) (0.55) (0.52) (0.50) (0.47)
End of period $10.60 $10.48(a) $10.47 $10.56 $10.29
------ ------ ------ ------ ------
TOTAL RETURN: 6.3% 5.6%(a) 4.1% 7.9% (0.8%)
---- ---- ---- ---- ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $4,008,700 4,605,718 7,224,506 5,518,431 7,774,768
Ratio of expenses to average net assets 1.17% 1.02% 1.03% 1.11% 1.05%
Ratio of net income to average net asset4.93% 5.14% 4.95% 4.84% 4.41%
Portfolio turnover rate 0.00% 26.88% 4.05% 27.67% 21.02%
(a) Excludes maximum sales load of 3%
See accompanying notes to financial statements.
</TABLE>
34
<PAGE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
JANUARY 27, 1998 (COMMENCEMENT OF CLASS SHARES) TO JUNE 30, 1998
INTERMEDIATE GOVERNMENT BOND- RETAIL CLASS
PERIOD ENDED JUNE 1998
NET ASSET VALUE: ----------------------------------
Beginning of period $10.63
Income from investment operations: -----
Net investment income 0.29
Net realized and unrealized loss
on investments (0.04)
-----
Total income from investment operations 0.25
----
Less distributions:
Dividends from net investment income 0.29
Distribution from capital gains 0.00
----
Total distributions 0.29
----
End of period $10.59(a)
-----
TOTAL RETURN: 1.69%(a)(b)
-----
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $29,240
Ratio of expenses to average net assets 1.63%(c)
Ratio of net income to average net assets 5.18%(c)
Portfolio turnover rate 0.00%
(a) EXCLUDES MAXIMUM SALES LOAD OF 4%
(b) TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
(c) ANNUALIZED FOR THOSE PERIODS LESS THAN TWELVE MONTHS IN DURATION.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
35
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
YEAR ENDED JUNE 30, 1998 AND THE
PERIOD FROM OCTOBER 1, 1996 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1997
INTERNATIONAL PORTFOLIO- INSTITUTIONAL CLASS
1998 PERIOD ENDED 1997
NET ASSET VALUE: ------- ---------------
Beginning of period $11.22 $10.00
------ ------
Income from investment operations:
Net investment income 0.02 0.15
Net realized and unrealized gain
on investments 0.64 1.22
----- ----
Total income from investment
operations 0.66 1.37
----- ----
Less distributions:
Dividends from net investment income (0.02) (0.15)
Distributions from capital gains (0.11) 0.00
------ ----
Total Distributions (0.13) (0.15)
------ ------
End of period $11.75 $11.22(a)
TOTAL RETURN: 6.3% 18.2%(a)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $11,473,772 10,431,107
Ratio of expenses to average net assets 1.65% 1.48%(b)
Ratio of net income to average net assets 0.21% 1.89%(b)
Portfolio turnover rate 52.92% 33.77%
(a) Excludes maximum sales load of 4%
(b) Annualized for those periods less than twelve months in duration.
See accompanying notes to financial statements.
36
<PAGE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
JANUARY 7, 1998 (COMMENCEMENT OF CLASS SHARES) TO JUNE 30, 1998
INTERNATIONAL - RETAIL CLASS
PERIOD ENDED JUNE 1998
NET ASSET VALUE: ------------------
Beginning of period $10.33
Income from investment operations: -----
Net investment income 0.03
Net realized and unrealized gain (loss)
on investments 1.42
----
Total income from investment operations 1.45
----
Less distributions:
Dividends from net investment income (0.03)
Distribution from capital gains 0.00
----
Total distributions (0.03)
----
End of period $11.75(a)
TOTAL RETURN: 13.88%(a)(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $125,157
Ratio of expenses to average net assets 1.94%(c)
Ratio of net income to average net assets 0.27%(c)
Portfolio turnover rate 52.92%
(a) EXCLUDES MAXIMUM SALES LOAD OF 4%
(b) TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL
RETURN FOR THE YEAR.
(c) ANNUALIZED FOR THOSE PERIODS LESS THAN TWELVE MONTHS IN DURATION.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
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, 1998, 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 ACCOUNTING 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.
38
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 purchase exchange-traded put and call options.
At June 30, 1998, the Growth, Capital Appreciation and International
Portfolios had no such exchange traded options nor were any purchased
during the year then ended.
The Fund may sell a security it does not own in anticipation of a decline
in the market value of that security (short-sale). When the fund makes a
short-sale, it must borrow the security sold short and deliver it to the
buyer. The proceeds from the short-sale will be retained by the
broker-dealer through which it made the short-sale as collateral for its
obligation to deliver the security upon conclusion of the sale. The Fund
may have to pay a fee to borrow the security and may be obligated to remit
any interest received on such borrowed securities. A gain or loss is
recognized upon the termination of the short sale, if the market price at
termination is less than or greater than the proceeds originally received.
At June 30, 1998, 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 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 (the 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
39
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
charged or credited to paid-in-capital or accumulated net realized gain, as
appropriate in the period that the differences arise. 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 $383,000 and $124,000 respectively,
available for federal income tax purposes at June 30, 1998. The losses
begin expiring in 2003 and 2005 for the Government Securities and
Intermediate Government Bond portfolios, respectively. For the purpose of
Code Section 852 (b)(3)(C), the Growth and Capital Appreciation Portfolios
hereby designate $5,215,009 and $268,252, respectively, as long-term
capital gain distributions paid during the taxable year.
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, Capital Appreciation, and International
Portfolios declare dividends semi-annually. The dividends declared
become payable immediately.
CASH EQUIVALENTS
Cash Equivalents consist of money market funds which declare dividends
daily. As of June 30, 1998, the average yield on such funds was
approximately 5.00%.
3. FEES, EXPENSES AND RELATED PARTY TRANSACTIONS
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 of 1.40% per annum of
daily average net assets. The fee may be increased or decreased by up to
1.00% 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 Russell 2000 Index. For the year ended June 30, 1998, the
annualized fee was 0.38%.
40
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
3. FEES, EXPENSES AND RELATED PARTY TRANSACTIONS (CONTINUED) The remaining
portfolios pay the following advisory fee rates per annum of their average
daily net asset values:
Portfolio Annual Fee Rate
Growth .75%
Government Securities .50%
Intermediate Government Bond .65%
International 1.15%
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 to .25% per annum of
average daily net assets. The Fund has also retained SMITH HAYES Financial
Services Corporation (the Distributor) to act as the underwriter and
distributor of the fund's shares. Pursuant to the shareholder approved
distribution plan under Rule 12b-1, Retail shares of each fund will
reimburse the distributor for shareholder-related expenses incurred in
connection with the distribution of the fund's shares, however, under no
circumstances shall such reimbursement exceed .50% per annum of the fund's
average daily net assets.
Under the terms of the advisory, custodian, administrative and distribution
agreements outlined above, the Portfolios collectively incurred $660,112,
$15,909, $268,196 and $897 for such services. Of the amount paid to the
Distributor, 100% was paid out to Union Bank & Trust Company under a Dealer
Service Agreement.
41
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
3. FEES, EXPENSES AND RELATED PARTY TRANSACTIONS (CONTINUED) At June 30, 1998,
the following accrued investment advisory and administrative fees were
payable to the Adviser and Administrator.
Payable to Payable to Payable
Adviser Administratorto Distributor Total
Growth Portfolio $38,013 $12,879 $169 $51,061
Government Securities Portfolio12,394 6,000 33 18,427
Capital Appreciation Portfolio 10,600 1,893 51 12,544
Intermediate Government
Bond Portfolio 2,153 831 7 2,992
International Portfolio 11,164 2,427 28 13,619
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, 1998, no expense
reimbursement was required.
In addition to the amounts paid by the Portfolios under advisory,
custodian, and administration agreements, the Portfolios 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 transactions in selecting brokers to affect trades.
SMITH HAYES was paid commissions in the amount of $60,612 for their
brokerage services during the year ended June 30, 1998.
The Portfolios also retained SMITH HAYES (the Distributor) to act as the
underwriter and distributor of the Fund's shares. The Distributor received
$65,780 and paid out $65,414 of this amount as commissions and dealer
allowances.
4. SECURITIES TRANSACTIONS
Purchases of securities and proceeds from sales were as follows for each
Portfolio:
Purchases of Proceeds
Securities from Sales
Growth Portfolio $77,110,333 $69,571,748
Government Securities Portfolio 3,001,016 503,516
Capital Appreciation Portfolio 24,167,636 22,028,070
Intermediate Government Bond Portfolio - 452,531
International Portfolio 6,149,879 5,746,181
42
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
4. SECURITIES TRANSACTIONS (CONTINUED)
At June 30, 1998, 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 $14,858,792 $611,626
Government Securities Portfolio 440,899 4,410
Capital Appreciation Portfolio 937,567 223,376
Intermediate Government Bond Portfolio 54,272 -
International Portfolio 2,567,171 1,024,905
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, 1998 were as follows:
Growth Growth
Portfolio Portfolio
Institutional Shares Retail Shares
Transactions in shares:
Shares sold 655,301.793 42,586.131
Shares redeemed (261,986.086) (294.286)
Reinvested dividends 306,597.702 43.496
------------ -------------
Net increase 699,913.409 42,335.341
=========== ==========
Government Government
Securities Portfolio Securities Portfolio
Institutional Shares Retail Shares
Transactions in shares:
Shares sold 653,502.120 14,114.834
Shares redeemed (446,850.694) (224.568)
Reinvested dividends 135,261.344 187.128
----------- -------
Net increase 341,912.770 14,077.394
=========== ==========
43
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
5. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Capital Appreciation Capital Appreciation
Portfolio Portfolio
Institutional Shares Retail Shares
Transactions in shares:
Shares sold 236,491.358 15,659.205
Shares redeemed (106,264.223) (360.263)
Reinvested dividends 34,768.974 .000
----------------------------
Net increase 164,996.109 15,298.942
=========== ==========
Intermediate Gov't Intermediate Gov't
Bond Portfolio Bond Portfolio
Institutional Shares Retail Shares
Transactions in shares:
Shares sold 19,916.718 2,824.965
Shares redeemed (99,682.887) (113.065)
Reinvested dividends 18,626.004 48.300
---------- -----------
Net increase (61,140.165) 2,760.200
============ =========
International International
Portfolio Portfolio
Institutional Shares Retail Shares
Transactions in shares:
Shares sold 219,734.169 10,723.702
Shares redeemed (187,499.890) (84.861)
Reinvested dividends 14,383.540 12.724
---------- -------------
Net increase (46,617.819 10,651.565
=========== ===========
At June 30, 1998, 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 Institutional Class 64,386 $1,193,076
Government Securities Portfolio Institutional Class41,081 405,877
Capital Appreciation Portfolio Institutional Class 11,840 170,385
Intermediate Gov't Bond Portfolio Institutional Class3,886 41,189
International Portfolio Institutional Class 4,006 47,068
47
<PAGE>
STRATUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
5. CAPITAL SHARE TRANSACTIONS (CONTINUED)
At June 30, 1998, UBATCO held, in nominee name, the following in each
Portfolio:
Shares Value
Growth Portfolio Institutional Class 3,381,344 $62,656,301
Growth Portfolio Retail Class 42,335 784,051
Government Securities Portfolio Institutional Class 3,073,084 30,362,072
Government Securities Portfolio Retail Class 14,077 139,225
Capital Appreciation Portfolio Institutional Class 632,559 9,102,521
Capital Appreciation Portfolio Retail Class 15,299 220,152
Intermediate Gov't Bond Portfolio Institutional Class 374,006 3,964,464
Intermediate Gov't Bond Portfolio Retail Class 2,760 29,231
International Portfolio Institutional Class 976,082 11,468,964
International Portfolio Retail Class 10,652 125,156
6. BUSINESS CHANGES
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.
Effective January 1, 1998, all shares of the portfolios were designated
Institutional Class shares and the issuance of Retail Class A shares of
each portfolio was authorized. Retail Class A shares bear a sales load of
1.5% to 4.5% on the purchase of shares and 12b-1 fees. Institutional class
shares do not bear a sales load and are not charged 12b-1 fees.
Effective January 1, 1998, the Growth Portfolio's advisory fee was changed
to an annual rate of .75% of average annual net assets, and the Capital
Appreciation Portfolio's performance-based advisory fee is computed at the
annual rate of 1.40% of its daily average net asset value. In addition, the
Capital Appreciation Portfolio pays the Adviser an incentive adjustment by
which the basic fee may be increased or decreased by up to 1.00% of average
daily net assets.
45
