STRATUS FUND, INC.
GROWTH
GOVERNMENT SECURITIES
CAPITAL APPRECIATION
INTERMEDIATE GOVERNMENT BOND
INTERNATIONAL
SEMI-ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
STRATUS FUND
Schedule of Investments
December 31, 1998
GROWTH PORTFOLIO
Percent
of Net Market
Shares Common Stock - 96.15% Assets Value
------ --------------------- ------ -----
Building Materials/Construction 1.47%
-------------------------------
15,000 Home Depot, Inc. $917,813
Computer Related 14.93%
----------------
12,000 America Online, Inc.* 1,737,000
40,000 Compaq Computer Corp. 1,677,500
18,000 International Business Machine Corp. 3,325,500
12,000 Microsoft Corp.* 1,664,250
18,000 Transaction Systems Architects, Inc.* 900,000
-------
9,304,250
Electronics 5.05%
-----------
15,000 Intel Corp. 1,778,438
16,000 Texas Instruments, Inc. 1,369,000
---------
3,147,438
Entertainment/Leisure 2.70%
---------------------
35,000 Carnival Corp. Class A 1,680,000
Financial Services 8.99%
------------------
20,000 BankAmerica Corp. 1,202,500
7,000 Merrill Lynch & Co., Inc. 467,250
30,000 Banc One Corp. 1,531,875
50,000 SLM Holdings Corp. 2,400,000
---------
5,601,625
Food/Beverage/Tobacco 3.44%
---------------------
30,000 International Home Foods, Inc.* 506,250
40,000 Pepsico, Inc. 1,637,500
---------
2,143,750
Funeral Service/Related 1.53%
-----------------------
25,000 Service Corp International 951,563
1
<PAGE>
STRATUS FUND
Schedule of Investments (Continued)
GROWTH PORTFOLIO
Percent
of Net Market
Shares Common Stock Cont'd Assets Value
- ---------- ----------------------------- ------ --------
Holding Companies 2.19%
-----------------
20,000 Chase Manhattan Corp $1,361,250
Household Products/Wares 1.01%
------------------------
20,000 Rubbermaid, Inc. 628,750
Industrial Services 1.74%
-------------------
30,000 Ecolab, Inc. 1,085,625
Insurance 3.13%
---------
25,000 American General Corp. 1,950,000
Manufacturing 2.66%
-------------
10,000 Honeywell, Inc. 753,125
12,000 Tyco International Ltd. 905,250
-------
1,658,375
Medical Supplies/Service 5.56%
------------------------
28,000 Becton Dickinson Co. 1,195,250
15,000 Cardinal Health, Inc. 1,138,125
15,000 Warner-Lambert Co.* 1,127,813
---------
3,461,188
Oil Company- Integrated 4.99%
-----------------------
15,000 Mobil Corp. 1,306,875
12,000 Texaco, Inc. 634,500
16,000 Exxon Corp. 1,170,000
---------
3,111,375
Office/Business 2.84%
---------------
15,000 Xerox Corp. 1,770,000
Packaging/Container 1.88%
-------------------
26,000 Avery Dennison Corp. 1,171,625
2
<PAGE>
STRATUS FUND
Schedule of Investments (Continued)
GROWTH PORTFOLIO
Percent
of Net Market
Shares Common Stock Cont'd Assets Value
- --------- ------------------------- --------- -------
Pharmaceutical/Medical 2.84%
----------------------
12,000 Merck & Company, Inc. $1,772,250
Publishing/Printing 2.12%
-------------------
20,000 Gannett Co. 1,323,750
Retail Store 6.81%
------------
15,000 Costco Co., Inc.* 1,082,811
20,000 CVS Corp. 1,100,000
20,000 Long's Drug Stores 750,000
30,000 Staples, Inc.* 1,310,625
---------
4,243,436
Telecommunications 6.38%
------------------
15,000 Airtouch Communications, Inc.* 1,081,875
22,000 Northern Telecom Limited 1,102,750
25,000 MCI Worldcom, Inc.* 1,793,750
---------
3,978,375
Transportation 5.68%
--------------
40,000 Burlington Northern Railroad 1,350,000
12,000 FDX Corp* 1,068,000
50,000 Southwest Airlines Co. 1,121,875
---------
3,539,875
Utilities 1.50%
---------
20,000 Texas Utilities 933,750
Utilities-Electric 4.13%
------------------
40,000 CalEnergy Co, Inc.* 1,387,500
40,000 Kansas City Power & Light Co. 1,185,000
---------
2,572,500
3
<PAGE>
STRATUS FUND
Schedule of Investments (Continued)
GROWTH PORTFOLIO
Percent
of Net Market
Shares Common Stock Cont'd Assets Value
------ ------------------- ------ -----
Utilities-Telecommunication 2.58%
---------------------------
30,000 SBC Communications, Inc. $1,608,750
----------
Total Investment in Securities (cost $43,982,452) 96.15% $59,917,313
Cash equivalents 3.82% 2,381,326
Other assets, less liabilities 0.03% 16,537
----- ------
TOTAL NET ASSETS 100.00% $62,315,176
======= ===========
* Indicates non-income producing security.
4
<PAGE>
STRATUS FUND
Schedule of Investments
December 31, 1998
GOVERNMENT SECURITIES PORTFOLIO
Percent
Principal of Net Market
Amount U.S. Government Securities Assets Value
$2,000,000 Federal Home Loan Bond 6.055% 10/15/02 97.63% $2,014,620
------
2,000,000 Federal Home Loan Bond 5.80% 8/24/01 2,009,660
1,000,000 Federal National Mtg. Assn. 6.2% due 6/6/00 1,017,590
2,000,000 Federal National Mtg. Assn. 6.35% due 6/10/05 2,136,120
1,000,000 Federal National Mtg. Assn. 5.10% due 11/29/00 999,929
3,000,000 U.S. Treasury Note 6.50% due 5/31/01 3,124,219
500,000 U.S. Treasury Bond 6.25% due 3/31/99 501,953
2,000,000 U.S. Treasury Bond 6.625% due 3/31/02 2,114,688
2,000,000 U.S. Treasury Bond 6.375% due 7/15/99 2,018,438
3,000,000 U.S. Treasury Bond 6.375% due 1/15/00 3,051,563
3,000,000 U.S. Treasury Bond 5.75% due 8/15/03 3,132,188
1,000,000 U.S. Treasury Bond 7.75% due 11/30/99 1,027,344
3,000,000 U.S. Treasury Bond 5.75% due 10/31/00 3,058,594
2,000,000 U.S. Treasury Bond 5.50% due 12/31/00 2,033,435
---------
Total investment in securities (cost $27,420,437) 97.63% $28,240,341
Cash equivalents 0.83% 240,801
Other assets, less liabilities 1.54% 443,278
------ ----------
TOTAL NET ASSETS 100.00% $28,924,420
======= ===========
5
<PAGE>
STRATUS FUND
Schedule of Investments
December 31, 1998
CAPITAL APPRECIATION PORTFOLIO
Percent
of Net Market
Shares COMMON STOCK - 95.44% Assets Value
------ --------------------- ------ -----
Auto/Truck/Parts 4.20%
----------------
5,500 Hertz Corporation Class A $250,938
4,500 Budget Group, Inc.* 71,438
------
322,376
Airlines 0.54%
--------
2,000 Mesaba Holdings, Inc. 41,250
Building Residential/Commercial 1.15%
-------------------------------
2,400 Lone Star Industries, Inc. 88,350
Commercial Services 3.18%
-------------------
5,600 Manpower, Inc. 141,050
9,000 Mail-Well, Inc.* 102,938
-------
243,988
Computer Related 21.37%
----------------
3,500 Affiliated Computer, Inc.* 157,500
3,500 Axent Technologies, Inc.* 106,969
9,000 Ciber, Inc.* 251,438
11,000 Deanon Systems, Inc.* 99,000
5,500 Keane, Inc.* 219,656
6,000 Pomeroy Computer Resources* 135,000
6,500 Sterling Software* 175,906
9,800 Symantec Corp.* 213,150
4,000 Transaction Systems* 200,000
9,000 Vanstar Corporation 83,250
------
1,641,869
Electrical Equipment 2.94%
--------------------
8,200 C & D Tech, Inc.* 225,500
6
<PAGE>
STRATUS FUND
Schedule of Investments (Continued)
CAPITAL APPRECIATION PORTFOLIO
Percent
of Net Market
Shares COMMON STOCK (Cont'd) Assets Value
- -------------- ------------------------- ---------- ------
Direct Marketing 3.19%
----------------
8,600 Harte-Hanks, Inc. $245,100
Electronics 1.75%
-----------
4,000 Innovex, Inc. 54,875
2,500 Technitrol, Inc. 79,688
------
134,563
Educational Services 1.99%
--------------------
5,000 Sylvan Learning Systems* 152,500
Financial Services 6.16%
------------------
2,500 CMAC Investment Corp. 114,844
11,900 Everen Capital Corp. 270,725
2,800 Oriental Financial Group 87,675
------
473,244
Food/Berverage/Tobacco 6.01%
----------------------
7,000 The Earthgrains Co. 216,563
5,000 U.S. Foodservice* 245,000
-------
461,563
Food Processing 1.19%
---------------
4,600 Pilgrims Pride Corp. 91,713
Household Products/Wares 5.21%
------------------------
5,000 Pillowtex Corp. 133,750
11,000 Shaw Industries, Inc. 266,750
-------
400,500
Insurance 6.97%
---------
5,600 First American Finance Co. 179,900
7,600 Fremont General Corp. 188,100
3,000 Landamerica Financial Corp. 167,438
-------
535,438
7
<PAGE>
STRATUS FUND
Schedule of Investments (Continued)
CAPITAL APPRECIATION PORTFOLIO
Percent
of Net Market
Shares COMMON STOCK (Cont'd) Assets Value
------ --------------------- ------ -----
Manufacturing 8.91%
-------------
4,500 Kaydon Corp. $180,281
3,200 Plantronics, Inc.* 275,200
4,500 USG Corp.* 229,219
-------
684,700
Medical Supplies/Services 0.89%
-------------------------
6,500 ESC Medical Systems Ltd.* 68,250
Pharmaceutical/Medical 1.91%
----------------------
4,200 Advance Paradigm, Inc.* 147,000
Retail/Apparel 5.68%
--------------
2,600 Tommy Hilfiger Corp.* 156,000
8,700 Zale Corp.* 280,575
-------
436,575
Retail Store 3.92%
------------
6,500 BJ's Wholesale Club* 301,027
Retirement/Aged Care 2.81%
--------------------
3,000 Assisted Living Concepts, Inc.* 39,375
3,400 Sunrise Assisted Living* 176,375
-------
215,750
Transportation 0.86%
--------------
1,500 Alaska Airgroup, Inc. 66,375
Utilities-Electric 4.61%
------------------
7,000 CalEnergy Co., Inc.* 242,813
4,500 Empire District Electric Co 111,375
-------
354,188
Total investment in securities (cost $6,874,545) 95.44% $7,331,819
Cash equivalents 5.02% 385,514
Other assets, less liabilities (0.45%) (34,839)
--------
NET ASSETS 100.00% $7,682,494
*Indicates nonincome-producing security
8
<PAGE>
STRATUS FUND
Schedule of Investments
December 31, 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 91.29% $522,266
400,000 U.S. Treasury Bond 6.625% due 4/30/02 423,438
500,000 U.S. Treasury Bond 6.375% due 1/15/99 500,234
400,000 U.S. Treasury Bond 6.375% due 1/15/00 406,875
500,000 U.S. Treasury Bond 7.125% due 2/29/00 513,516
500,000 U.S. Treasury Bond 6.125% due 7/31/00 511,094
500,000 U.S. Treasury Bond 6.25% due 10/31/01 521,093
-------
3,398,516
---------
Total investment in securities (cost $3,305,490) $91.29% $3,398,516
Cash equivalents 7.14% 265,689
Other assets, less liabilities 1.57% 58,431
------- ---------
TOTAL NET ASSETS 100.00% $3,722,636
9
<PAGE>
STRATUS FUND
Schedule of Investments
December 31, 1998
INTERNATIONAL PORTFOLIO
Percent
of Net Market
Shares Common Stock - 99.73% Assets Value
------ --------------------- ------ -----
Auto/Truck/Parts 7.49%
----------------
950 Bridgestone Corp. ADR $216,030
5,700 PSA Peugeot Citroen ADR 220,663
21,500 Volkswagon Ag ADR 343,377
-------
780,070
Chemicals 1.26%
---------
3,900 Quimica Minera Chili SA ADR 131,381
Comercial Services 1.12%
------------------
700 Secom Limited ADR 116,174
Computer Related 1.86%
----------------
2,900 Fujitsu Limited ADR 193,468
Diversified Operations 9.82%
----------------------
7,919 Barlow Ltd ADR 30,423
5,200 Vivendi Sp ADR 269,960
3,800 Hutchinson Whampoa Ltd ADR 134,278
20,800 Kawasaki Industries Ltd ADR* 195,466
8,800 Orkla ASA-ADR * 131,097
3,000 Telecom Italia ADR 261,000
-------
1,022,224
Financial Services 21.85%
------------------
4,000 Allied Irish Banks ADR 441,500
2,500 Barclays Plc ADR 225,000
8,485 Banco Frances Del Rio De La Plata S.A. ADR 176,064
4,000 Banque National Paris ADR 329,538
3,900 Dresdner Bank ADR 163,913
2,800 Deutsche Bank ADR 164,837
3,000 Istituto Bancario San Paolo-IMI ADR* 107,250
10
<PAGE>
STRATUS FUND
Schedule of Investments (Continued)
INTERNATIONAL PORTFOLIO
Percent
of Net Market
Shares Assets Value
------ ------ -----
Financial Services Cont'd
3,050 National Australia Bank Ltd ADR $227,034
7,000 Societe Generale ADR 226,817
1,500 Sumitomo Bank ADR 154,260
4,000 Uniao De Bancos S.A. 57,750
------
2,273,963
Food/Beverage/Tobacco 4.19%
---------------------
6,300 Cadbury Schweppes ADR 436,275
Holding Company 1.05%
---------------
6,500 South Africa Brewing ADR 109,500
Household Products 1.97%
------------------
3,300 Asahi Glass Company ADR 205,086
Index Series 2.72%
------------
8,600 Webs-Italy Index Series* 233,813
8,000 Webs-Singapore Index Series* 49,000
------
282,813
Insurance 3.10%
---------
2,024 Aegon N.V. ADR 247,434
11,000 Liberty Life Association of Africa ADR 75,732
------
323,166
Manufacturing 3.30%
-------------
4,900 Fuji Photo Film ADR 179,463
14,200 Olympus Opitcal ADR 163,531
-------
342,994
Medical Supplies/Services 1.10%
-------------------------
1,650 Smithkline Beecham ADR 114,675
Oil-Field Services 1.15%
------------------
7,600 Petroleum Geo ADR* 119,700
11
<PAGE>
STRATUS FUND
Schedule of Investments (Continued)
INTERNATIONAL PORTFOLIO
Percent
of Net Market
Shares Assets Value
------ ------ -----
Oil Exploration/Production 0.96%
--------------------------
2,000 Total SA Sponsor ADR $99,500
Oil/Gas Drilling 2.26%
----------------
1,000 Eni Spa ADR 67,750
4,500 Shell Transport & Trading Company ADR 167,344
-------
235,094
Oil Company-Integrated 1.30%
----------------------
11,900 Petrolio Brasileiro ADR 134,936
Pharmaceutical/Medical 4.34%
----------------------
4,600 Novartis AG ADR 452,136
Publishing/Printing 3.68%
-------------------
10,145 Vnu-Verenigde Nederlandse ADR 382,734
Real Estate 2.94%
-----------
20,800 City Developments Ltd ADR 90,135
2,400 Mitsubishi Estate Co ADR 215,538
-------
305,673
Recreation 1.96%
----------
25,500 Ladbroke Group ADR 203,651
Retail Store
12,884 Cifra SA ADR 3.69% 156,332
3,300 Ito-Yokado Co., Ltd ADR 227,700
-------
384,032
Telecommunications 10.90%
------------------
1,400 British Tele Plc ADR 212,363
3,200 China Telecommunications ADR* 111,200
5,900 Cia de Telecommunications de Chile Sa ADR 122,056
4,600 Nippon Telegraph & Telephone ADR 172,500
5,700 Telecom Corporation of New Zealand 203,419
5,000 Portugal Telecom sa ADR 223,125
5,900 Singapore Telecom Ltd ADR 90,111
------
1,134,774
12
<PAGE>
STRATUS FUND
Schedule of Investments (Continued)
INTERNATIONAL PORTFOLIO
Percent
of Net Market
Shares Assets Value
------ ------ -----
Utlities-Electric 2.34%
-----------------
5,900 Scottishpower Plc ADR $243,743
Utlities/Telecommunications 3.38%
---------------------------
2,600 Telefonica de Espana ADR 351,975
-------
Total investment in securities (cost $9,519,382) 99.73% $10,379,737
Cash equivalents 0.17% 18,978
Other Assets, less liabilities 0.10% 9,922
------ -----------
TOTAL NET ASSETS 100.00% $10,408,637
====== ===========
* Indicates non-income producing security.
13
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
Statement of Assets and Liabilities
December 31, 1998
(Unaudited)
Government Capital
Growth Securities Appreciation
Assets: Portfolio Portfolio Portfolio
------------ ------------ --------------
<S> <C> <C> <C>
Investments in securities, at market value
(cost $43,982,452, $27,420,437 and $6,874,545) $59,917,313 $28,240,341 $7,331,819
Cash equivalents 2,381,326 240,801 385,514
Accrued interest and dividends receivable 70,677 448,093 3,621
Receivable for fund shares sold 28,708 25,111 8,621
------- ------- -----
Total assets 62,398,025 28,954,346 7,729,575
=========== =========== =========
Liabilities:
Accrued expenses, including investment
management and distribution expense payable to
adviser, administrator and distributor 61,947 26,938 15,355
Commissions payable for fund shares sold 294 - 92
Payable for fund shares redeemed 20,608 2,988 31,634
Total liabilities 82,849 29,926 47,081
------- ------- ------
Net assets applicable to outstanding capital stock $62,315,176 $28,924,420 $7,682,494
============ ============ ==========
Net assets are represented by:
Capital stock outstanding $3,527 $2,892 $575
Additional paid-in capital 45,891,586 28,536,669 7,681,462
Accumulated undistributed net investment income(loss) 872 351 (10,853)
Accumulated net realized gain/(loss) on investments 484,329 (435,397) (445,964)
Unrealized appreciation 15,934,861 819,904 457,274
----------- -------- -------
Total net assets applicable to
shares outstanding $62,315,176 $28,924,420 $7,682,494
============ ============ ==========
Shares outstanding and net asset value per share
Institutional Shares of Capital Stock Outstanding 3,467,409 2,874,934 553,099
Net Asset Value per share - Institutional Shares $17.67 $10.00 $13.36
====== ====== ======
Retail Shares of Capital Stock Outstanding 59,156 17,484 21,925
Net Asset Value per share - Retail Shares $17.67 $10.00 $13.34
====== ====== ======
See accompanying notes to financial statements.
</TABLE>
14
<PAGE>
STRATUS FUND, INC.
Statement of Assets and Liabilities
December 31, 1998
(Unaudited)
Intermediate
Government
Bond International
Assets: Portfolio Portfolio
------------- --------------
Investments in securities, at market value
(cost $3,305,490 and $9,519,382 respectively) $3,398,516 $10,379,737
Cash equivalents 265,689 18,978
Accrued interest and dividends receivable 75,407 21,012
Receivable for fund shares sold - 11,699
----------- ----------
Total assets $3,739,611 $10,431,426
=========== ===========
Liabilities:
Accrued expenses, including investment
management and distribution expense payable to
adviser, administrator and distributor 4,060 18,401
Payable for commissions on shares sold - 44
Payable for fund shares redeemed 12,916 4,344
------- -----
Total liabilities 16,975 22,789
Net assets applicable to outstanding capital stock $3,722,636 $10,408,637
========= ==========
Net assets are represented by:
Capital stock outstanding, at par $348 $936
Additional paid-in capital 3,744,907 9,566,492
Accumulated undistributed net investment income 27 3
Accumulated net realized loss on investments (115,672) (19,149)
Unrealized appreciation 93,026 860,355
------- -------
Total net assets applicable to
shares outstanding $3,722,636 $10,408,637
========= ===========
Shares outstanding and net asset value per share
Institutional Shares of Capital Stock Outstanding 345,543 921,389
Net Asset Value per share - Institutional Shares $10.69 $11.12
====== ======
Retail Shares of Capital Stock Outstanding 2,595 14,693
Net Asset Value per share - Retail Shares $10.69 $11.11
====== ======
See accompanying notes to financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
Statement of Operations
Six Months Ended December 31, 1998
(Unaudited)
Intermediate
Government Capital Government
Growth Securities Appreciation Bond International
Portfolio Portfolio Portfolio Portfolio Portfolio
----------- ---------- ------------------------------
Investment income:
<S> <C> <C> <C> <C> <C>
Dividends $340,490 $ - $13,528 $ - $87,781
Interest 103,489 912,068 11,648 117,454 6,996
-------- -------- ------- -------- -----
Total investment income 443,979 912,068 25,176 117,454 94,777
-------- -------- ------- -------- ------
Expenses:
Investment advisory fees 228,048 77,481 18,641 12,943 60,823
Administration fees 75,808 38,923 9,461 4,978 13,223
Distribution expenses - Retail Class 1,329 251 352 43 213
Accounting 5,950 5,391 4,700 4,393 4,775
Custodial fees - - 6,258 2,064 -
Securities pricing 2,387 -1,831 3,412
Other operating expenses 12,384 4,527 188 (1,156) (2,261)
------- ------ ---- ------- -------
Total expenses 325,906 126,572 41,433 23,265 80,185
-------- -------- ------- ------- ------
Net investment income (loss) 118,073 785,496 (16,256) 94,189 14,592
======== ======== ======== ======= ======
Realized and unrealized gain (loss) on
investments:
Net realized gain (loss) 771,256 4,006 (439,576) 205 187,549
Net unrealized appreciation
(depreciation)
Beginning of period 14,247,166 436,489 714,191 54,272 1,542,266
End of period 15,934,861 819,904 457,274 93,026 860,355
----------- -------- -------- ------- -------
Net unrealized appreciation
(depreciation) 1,687,695 383,415 (256,917) 38,754 (681,911)
--------- -------- --------- ------- ---------
Net realized and unrealized
gain (loss)
on investments 2,458,951 387,421 (696,493) 38,959 (494,362)
---------- -------- --------- ------- ---------
Net increase (decrease) in net assets
resulting from operations $2,577,024 $1,172,917 ($712,749) $133,148 ($479,770)
=========== ========== ========== ======== ==========
See accompanying notes to financial statements.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
Statement of Changes in Net Assets
Six Months Ended December 31, 1998 and
the Year Ended June 30, 1998
Government
Growth Securities
Portfolio Portfolio
--------------------------- -------------------------
Period Ended Year Ended Period Ended Year Ended
Dec. 31, 1998 June 30, 1998 Dec. 31, 1998 June 30, 1998
------------------------------------------------------
(Unaudited) (Unaudited)
Operations:
<S> <C> <C> <C> <C>
Net investment income $118,073 $355,054 $785,496 $1,459,915
Net realized gain on investments 771,256 8,100,736 4,007 3,634
Unrealized appreciation 1,687,695 2,638,991 383,415 453,367
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 2,577,024 11,094,781 1,172,917 1,916,916
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income 118,446 355,053 788,043 1,457,465
Net realized gains 5,410,198 5,694,496 - -
------------ ------------ ------------ ------------
Total Distribution 5,528,645 6,049,549 788,043 1,457,465
------------ ------------ ------------ ------------
Capital share transactions:
Proceeds from sales 4,889,364 12,330,363 4,450,604 6,597,334
Payment for redemptions (8,093,876) (4,620,192) (7,139,427) (4,417,351)
Reinvestment of net investment
income and net realized gain
distributions
at net asset value 4,590,218 4,936,588 721,521 1,333,543
------------ ------------ ------------ ------------
Total increase/(decrease)
from capital
share transactions 1,385,707 12,646,759 (1,967,301) 3,513,526
------------ ------------ ------------ ------------
Total increase/(decrease)
in net assets (1,565,914) 17,691,991 (1,582,426) 3,972,977
Net Assets:
Beginning of period 63,881,090 46,189,099 30,506,846 26,533,869
------------ ------------ ------------ ------------
End of period $62,315,176 $63,881,090 $28,924,420 $30,506,846
============ ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
Statement of Changes in Net Assets
Six Months Ended December 31, 1998 and
the Year Ended June 30, 1998
Intermediate
Capital Government
Appreciation Bond
Portfolio Portfolio
-------------------------- ---------------------------
Period Ended Year Ended Period Ended Year Ended
Dec. 31, 1998 June 30, 1998 Dec. 31, 1998 June 30, 1998
--------------------------------------------------------
(Unaudited) (Unaudited)
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) ($16,256) $15,394 $94,189 $219,211
Net realized gain (loss) on
investments (439,576) 474,396 205 2,969
Unrealized appreciation
(depreciation (256,917) (34,705) 38,754 50,307
------------ ------------ ------------ -------------
Net increase (decrease)
in net assets
resulting from operations (712,749) 455,085 133,148 272,487
------------ ------------ ------------ -------------
Distributions to shareholders from:
Net investment income - 15,226 94,890 218,481
Net realized gains 24,115 461,511 - -
------------ ------------ ------------ -------------
Total Distribution 24,115 476,737 94,890 218,481
------------ ------------ ------------ -------------
Capital share transactions:
Proceeds from sales 1,077,904 3,781,440 25,237 240,311
Payment for redemptions (2,076,975) (1,569,897) (466,218) (1,059,642)
Reinvestment of net investment
income and net realized
gain distributions
at net asset value 23,641 472,356 87,420 197,547
------------ ------------ ------------ -------------
Total increase (decrease)
from capital
share transactions (975,429) 2,683,899 (353,561) (621,784)
------------ ------------ ------------ -------------
Total increase (decrease)
in net assets (1,712,293) 2,662,247 (315,304) (567,778)
Net Assets:
Beginning of period 9,394,787 6,732,540 4,037,940 4,605,718
------------ ------------ ------------ -------------
End of period $7,682,494 $9,394,787 $3,722,636 $4,037,940
============ ============ ============ =============
See accompanying notes to financial statements.
</TABLE>
18
<PAGE>
STRATUS FUND, INC.
Statement of Changes in Net Assets
Six Months Ended December 31, 1998 and
the Year Ended June 30, 1998
International
Portfolio
---------------------------
Period Ended Year Ended
---------------------------
(Unaudited)
Operations:
Net investment income $14,592 $23,436
Net realized gain on investments 187,549 476
Unrealized appreciation (depreciation) (681,911) 639,696
------------- ------------
Net increase (decrease) in net assets
resulting from operations (479,770) 663,608
------------- ------------
Distributions to shareholders from:
Net investment income 15,087 23,137
Net realized gains 207,171 131,684
------------- ------------
Total Distribution 222,258 154,821
------------- ------------
Capital share transactions:
Proceeds from sales 678,693 2,588,389
Payment for redemptions (1,379,356) (2,081,544)
Reinvestment of net investment
income and net realized gain distributions
at net asset value 212,399 152,190
------------- ------------
Total increase (decrease) from capital
share transactions (488,264) 659,035
------------- ------------
Total increase (decrease) in
net assets (1,190,292) 1,167,822
Net Assets:
Beginning of period 11,598,929 10,431,107
------------- ------------
End of period $10,408,637 $11,598,929
============= ============
See accompanying notes to financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
Six Months Ended December 31, 1998 and the
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 Period Ended
Dec. 31, 1998 1998 1997 1996 1995 June 30, 1994
--------------- ----- ----- ----- ----- -------------
(Unaudited)
-----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period $18.53 $17.07 $13.67 $11.47 $9.84 $10.00
------ ------ ------ ------ ----- ------
Income from investment operations:
Net investment income 0.03 0.11 0.22 0.23 0.22 0.19
Net realized and unrealized gain (loss)
on investments 0.70 3.45 3.99 2.36 1.72 (0.16)
----- ----- ----- ----- ----- ------
Total income from investment operations 0.73 3.56 4.21 2.59 1.94 0.03
----- ----- ----- ----- ----- ----
Less distributions:
Dividends from net investment income (0.03) (0.11) (0.22) (0.22) (0.22) (0.19)
Distribution from capital gains (1.56) (1.99) (0.59) (0.17) (0.09) 0.00
------ ------ ------ ------ ------ ----
Total distributions (1.59) (2.10) (0.81) (0.39) (0.31) (0.19)
------ ------ ------ ------ ------ ------
End of period $17.67 $18.53 $17.07 (a) $13.67 $11.47 $9.84
------ ------ ------ ------ ------ -----
Total return: 10.39% (c) 22.29% 32.60% (a) 22.60% 20.30% (0.03%)(b)
------ ------ ------ ------ ------ -------
Ratios/Supplemental data:
Net assets, end of period (000's omitted) $61,270 63,097 46,189 24,628 12,813 12,892
Ratio of expenses to average net assets 1.07% (c) 0.76% 0.72% 0.71% 0.82% 0.76% (c)
Ratio of net income to average net assets 0.39% (c) 0.18% 1.46% 1.78% 2.14% 2.38% (c)
Portfolio turnover rate 104.48% 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>
20
<PAGE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
Six Months Ended December 31, 1998 and the Period from January 7, 1998
(commencement of class shares) to June 30, 1998
Growth Portfolio- Retail Class
Period Ended Period Ended
Dec. 31, 1998 June 30, 1998
(Unaudited)
Net asset value:
Beginning of period $18.52 $15.86
------- ------
Income from investment operations:
Net investment income 0.01 0.04
Net realized and unrealized gain
on investments 0.70 2.66
----- ----
Total income from investment operations 0.71 2.70
----- ----
Less distributions:
Dividends from net investment income 0.00 (0.04)
Distribution from capital gains (1.56) 0.00
------ ----
Total distributions (1.56) (0.04)
------ ------
End of period $17.67 (a) $18.52 (a)
------ ------
Total return: 10.20% (a)(c) 16.89%(a)(b)
------ ------
Ratios/Supplemental data:
Net assets, end of period $1,045,288 $784,176
Ratio of expenses to average net assets 1.37% (c ) 1.50% (c)
Ratio of net income to average net assets 0.09% (c ) 0.13% (c)
Portfolio turnover rate 104.48% 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.
21
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
Six Months Ended December 31, 1998 and the
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 Period Ended
Dec. 31, 1998 1998 1997 1996 1995 June 30, 1994
------------- ---- ---- ---- ---- -------------
(Unaudited)
-----------
Net asset value:
<S> <C> <C> <C> <C> <C> <C>
Beginning of period $9.88 $9.72 $9.64 $9.77 $9.40 $10.00
----- ----- ----- ----- ----- ------
Income (loss) from investment operations:
Net investment income 0.26 0.51 0.51 0.49 0.45 0.27
Net realized and unrealized gain (loss)
on investments 0.12 0.16 0.08 (0.13) 0.37 (0.60)
----- ----- ----- ------ ----- ------
Total income (loss) from investment operations 0.38 0.67 0.59 0.36 0.82 (0.33)
----- ----- ----- ----- ----- ------
Less distributions from
net investment income (0.26) (0.51) (0.51) (0.49) (0.45) (0.27)
------ ------ ------ ------ ------ ------
End of period $10.00 $9.88 $9.72 (a) $9.64 $9.77 $9.40
------ ----- ----- ----- ----- -----
Total return: 7.7% (c) 7.0% 6.3% (a) 3.7% 9.0% (3.4%)(b)
---- ---- ---- ---- ---- ------
Ratios/Supplemental data:
Net assets, end of period (000's omitted) $28,750 30,368 26,534 23,043 13,885 12,478
Ratio of expenses to average net assets 0.82% (c) 0.82% 0.71% 0.69% 0.80% 0.74% (c)
Ratio of net income to average net assets 5.08% (c) 5.17% 5.21% 5.04% 4.82% 3.89% (c)
Portfolio turnover rate 12.46% 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>
22
<PAGE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
Six Months Ended December 31, 1998 and the Period from
January 13, 1998 (commencement of class shares) to June 30, 1998
Government Securities- Retail Class
Period Ended Period Ended
Dec. 31, 1998 June 30, 1998
(Unaudited)
Net asset value: -------------- --------------
Beginning of period $9.89 $9.97
------ -----
Income from investment operations:
Net investment income 0.24 0.25
Net realized and unrealized gain (loss)
on investments 0.12 (0.08)
----- ------
Total income from investment operations 0.36 0.17
----- ----
Less distributions:
Dividends from net investment income (0.25) (0.25)
End of period $10.00 $9.89
------ -----
Total return: 7.22%(a)(c) 1.58%(a)(b)
----- -----
Ratios/Supplemental data:
Net assets, end of period $174,854 $139,164
Ratio of expenses to average net assets 1.12% (c) 1.21% (c)
Ratio of net income to average net assets 4.78% (c) 5.49% (c)
Portfolio turnover rate 12.46% 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.
23
<PAGE>
<TABLE>
C
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
Six Months Ended December 31, 1998 and the
Years Ended June 30, 1998, 1997, 1996, 1995,and 1994
Capital Appreciation Portfolio-Institutional Class
Period Ended
Dec. 31, 1998 1998 1997 1996 1995 1994
------------ ----- ---- ---- ---- ----
(Unaudited)
-----------
Net asset value:
<S> <C> <C> <C> <C> <C> <C>
Beginning of period $14.39 $14.25 $13.19 $11.23 $8.95 $9.40
------ ------ ------ ------ ----- -----
Income (loss) from investment operations:
Net investment income (loss) (0.02) 0.03 0.18 (0.19) (0.15) (0.12)
Net realized and unrealized gain (loss)
on investments (0.97) 0.86 1.48 2.88 2.62 (0.33)
------ ----- ----- ----- ----- ------
Total income (loss) from investment
operations (0.99) 0.89 1.66 2.69 2.47 (0.45)
------ ----- ----- ----- ----- ------
Less distributions from
net investment income 0.00 (0.03) (0.12) 0.00 0.00 0.00
Less distributions from capital gains (0.04) (0.72) (0.48) (0.73) (0.19) 0.00
------ ------ ------ ------ ------ ----
Total Distributions (0.04) (0.75) (0.60) (0.73) (0.19) 0.00
------ ------ ------ ------ ------ ----
End of period $13.36 $14.39 $14.25 (a) $13.19 $11.23 $8.95
------ ------ ------ ------ ------ -----
Total return: (13.6%)(b) 7.5% 11.7% (a) 26.0% 28.6% (4.8%)
------- ---- ----- ----- ----- ------
Ratios/Supplemental data:
Net assets, end of period (000's omitted) $7,390 9,175 6,733 2,474 749 654
Ratio of expenses to average net assets 1.09% (b) 0.76% 0.91% 2.84% 2.69% 2.13%
Ratio of net income to average net assets (0.28%)(b) 0.18% 1.31% (1.54%) (1.59%) (1.27%)
Portfolio turnover rate 69.94% 277.31% 322.07% 179.06% 214.47% 9.09%
(a) Excludes maximum sales load of 4%
(b) Annualized for those periods less than twelve months in duration.
See accompanying notes to financial statements.
</TABLE>
24
<PAGE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
Six Months Ended December 31, 1998 and the Period from January 7, 1998
(commencement of class shares) to June 30, 1998
Capital Appreciation- Retail Class
Period Ended Period Ended
Dec. 31,1998 June 30, 1998
(Unaudited)
Net asset value: ------------- -------------
Beginning of period $14.39 $13.21
------- ------
Income (loss) from investment operations:
Net investment loss (0.04) (0.03)
Net realized and unrealized gain (loss)
on investments (0.97) 1.21
------ ----
Total income (loss) from investment operations (1.01) 1.18
------ ----
Less distributions:
Dividends from net investment income (0.04) 0.00
------ ----
End of period $13.34 (a) $14.39 (a)
------ ------
Total return: (13.83%)(a)(c) 8.93% (a)(b)
-------- -----
Ratios/Supplemental data:
Net assets, end of period $292,461 $220,123
Ratio of expenses to average net assets 1.39% (c) 1.25% (c)
Ratio of net income to average net assets (0.58%)(c) (0.18%)(c)
Portfolio turnover rate 69.94% 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.
25
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
Six Months Ended December 31, 1998 and the
Years Ended June 30, 1998, 1997, 1996, 1995, and 1994
Intermediate Government Bond Portfolio-Institutional Class
Period Ended
Dec. 31, 1998 1998 1997 1996 1995 1994
-------------- ----- ---- ---- ---- ----
(Unaudited)
-----------
Net asset value:
<S> <C> <C> <C> <C> <C> <C>
Beginning of period $10.60 $10.48 $10.47 $10.56 $10.29 $10.84
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income 0.26 0.52 0.54 0.52 0.50 0.47
Net realized and unrealized gain (loss)
on investments 0.09 0.12 0.02 (0.09) 0.27 (0.55)
----- ----- ----- ------ ----- ------
Total income (loss) from investment
operations 0.35 0.64 0.56 0.43 0.77 (0.08)
----- ----- ----- ----- ----- ------
Less distributions:
Dividends from net investment income (0.26) (0.52) (0.55) (0.52) (0.50) (0.47)
End of period $10.69 $10.60 $10.48 (a) $10.47 $10.56 $10.29
------ ------ ------ ------ ------ ------
Total return: 6.6% (b) 6.3% 5.6% (a) 4.1% 7.9% (0.8%)
---- ---- ---- ---- ---- ------
Ratios/Supplemental data:
Net assets, end of period (000's omitted) $3,695 4,009 4,606 7,225 5,518 7,775
Ratio of expenses to average net assets 1.17% (b) 1.17% 1.02% 1.03% 1.11% 1.05%
Ratio of net income to average net assets 4.73% (b) 4.93% 5.14% 4.95% 4.84% 4.41%
Portfolio turnover rate 0.00% 0.00% 26.88% 4.05% 27.67% 21.02%
(a) Excludes maximum sales load of 3%
(b) Annualized for those periods less than twelve months in duration.
See accompanying notes to financial statements.
</TABLE>
26
<PAGE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
Six Months Ended December 31, 1998 and the Period from
January 27, 1998 (commencement of class shares) to June 30, 1998
Intermediate Government
Bond Portfolio
Retail Class
Period Ended Period Ended
Dec. 31, 1998 June 30, 1998
(Unaudited)
Net asset value:
Beginning of period $10.59 $10.63
------- ------
Income from investment operations:
Net investment income 0.24 0.29
Net realized and unrealized gain (loss)
on investments 0.10 (0.04)
----- ------
Total income from investment operations 0.34 0.25
----- ----
Less distributions:
Dividends from net investment income (0.24) (0.29)
End of period $10.69 (a) $10.59 (a)
------ ------
Total return: 6.45% (a)(c) 1.69% (a)(b)
----- -----
Ratios/Supplemental data:
Net assets, end of period $27,751 $29,240
Ratio of expenses to average net assets 1.47% (c) 1.63% (c)
Ratio of net income to average net assets 4.44% (c) 5.18% (c)
Portfolio turnover rate 0.00% 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.
27
<PAGE>
<TABLE>
<CAPTION>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
Six Months ended December 31, 1998 and the Year ended June 30, 1998 and the
Period from October 1, 1996 (commencement of class shares) to June 30, 1997
International Portfolio- Institutional Class
Period Ended Period Ended
Dec. 31, 1998 1998 June 30, 1997
(Unaudited)
Net asset value: ------------ ------- ------------------
<S> <C> <C> <C>
Beginning of period $11.75 $11.22 $10.00
------ ------ ------
Income (loss) from investment operations:
Net investment income 0.02 0.02 0.15
Net realized and unrealized gain/(loss)
on investments (0.42) 0.64 1.22
------ ----- ----
Total income (loss) from
investment operations (0.40) 0.66 1.37
------ ----- ----
Less distributions:
Dividends from net investment income (0.02) (0.02) (0.15)
Distributions from capital gains (0.21) (0.11) 0.00
------ ------ ----
Total Distributions (0.23) (0.13) (0.15)
------ ------ ------
End of period $11.12 $11.75 $11.22 (a)
------ ------ ------
Total return: (6.5%)(b) 6.3% 18.2% (a)(b)
------ ---- -----
Ratios/Supplemental data:
Net assets, end of period (000's omitted) $10,245 11,474 10,431
Ratio of expenses to average net assets 1.51% (b) 1.65% 1.48% (b)
Ratio of net income to average net assets 0.28% (b) 0.21% 1.89% (b)
Portfolio turnover rate 17.66% 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.
</TABLE>
28
<PAGE>
STRATUS FUND, INC.
FINANCIAL HIGHLIGHTS
Six Months ended December 31, 1998 and the Period from January 7,
1998 (commencement of class shares) to June 30, 1998
International Portfolio - Retail Class
Period Ended Period Ended
Dec. 31, 1998 June 30, 1998
(Unaudited)
Net asset value: ---------- -------------
Beginning of period $11.75 $10.33
------- ------
Income (loss) from investment operations:
Net investment income 0.00 0.03
Net realized and unrealized gain (loss)
on investments (0.41) 1.42
------ ----
Total income (loss) from
investment operations (0.41) 1.45
------ ----
Less distributions:
Dividends from net investment income 0.00 (0.03)
Distribution from capital gains (0.23) 0.00
------ ----
Total distributions (0.23) (0.03)
------ ------
End of period $11.11 (a) $11.75 (a)
------ ------
Total return: (6.9%)(a)(c) 13.88%(a)(b)
------ ------
Ratios/Supplemental data:
Net assets, end of period $163,305 $125,157
Ratio of expenses to average net assets 1.81% (c) 1.94% (c)
Ratio of net income to average net assets (.02%)(c) 0.27% (c)
Portfolio turnover rate 17.66% 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.
29
<PAGE>
STRATUS FUND, INC.
Notes to Financial Statements
December 31, 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
December 31, 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.
30
<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 December 31, 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 December 31, 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
31
<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 December 31, 1998. 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, 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 December 31, 1998, the average yield on such funds was
approximately 4.50%.
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 six months ended December 31,
1998, the annualized fee was 0.49%.
32
<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%
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.
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.
33
<PAGE>
STRATUS FUND, INC.
Notes to Financial Statements
3. Fees, Expenses and Related Party Transactions (Continued)
Under the terms of the advisory, custodian, administrative and distribution
agreements outlined above, the Portfolios collectively incurred $397,936,
$8,322, $169,393 and $2,188 for such services. Of the amount paid to the
Distributor, 100% was paid out to Union Bank & Trust Company under a Dealer
Service Agreement.
At December 31, 1998, the following accrued investment advisory and
administrative fees were payable to the Adviser and Administrator.
Payable to Payable to Payable
Adviser Administrator to Distributor Total
-------- ------------ --------------- ------
Growth Portfolio $38,465 $5,129 $253 $43,847
Government Securities Portfolio 12,622 2,510 43 15,175
Capital Appreciation Portfolio 8,587 629 68 9,284
Intermediate Government
Bond Portfolio 2,083 323 7 2,413
International Portfolio 10,038 873 39 10,950
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 December 31, 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 $16,468 for their
brokerage services during the six months ended December 31, 1998.
The Portfolios also retained SMITH HAYES (the Distributor) to act as the
underwriter and distributor of the Fund's shares. The Distributor received
$10,250 and paid out $8,830 of this amount as commissions and dealer
allowances.
34
<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 $58,314,226 $61,620,273
Government Securities Portfolio 2,999,375 3,004,078
Capital Appreciation Portfolio 4,981,460 5,788,767
Intermediate Government Bond Portfolio - 550,328
International Portfolio 2,062,672 2,345,888
At December 31, 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 $16,152,311 $217,450
Government Securities Portfolio 819,904 -
Capital Appreciation Portfolio 896,991 439,717
Intermediate Government Bond Portfolio 93,026 -
International Portfolio 2,091,507 1,231,152
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 six months
ended December 31, 1998 were as follows:
Growth Growth
Portfolio Portfolio
Institutional Shares Retail Shares
Transactions in shares: -------------------- ---------------
Shares sold 260,378.639 14,591.466
Shares redeemed (480,634.870) (3,150.274)
Reinvested dividends 282,123.933 5,379.448
----------- -----------
Net increase 61,867.702 16,820.640
========== ==========
35
<PAGE>
STRATUS FUND, INC.
Notes to Financial Statements
5. Capital Share Transactions (Continued)
Government Government
Securities Portfolio Securities Portfolio
Institutional Shares Retail Shares
Transactions in shares: ---------------------- ----------------
Shares sold 442,634.088 3,692.238
Shares redeemed (712,609.866) (691.903)
Reinvested dividends 71,825.632 406.380
---------- -------
Net increase/(decrease) (198,150.146) 3,406.715
============= =========
Capital Appreciation Capital Appreciation
Portfolio Portfolio
Institutional Shares Retail Shares
Transactions in shares: ---------------------- ----------------
Shares sold 79,791.641 7,777.983
Shares redeemed (166,112.118) (1,222.615)
Reinvested dividends 1,881.201 71.132
------------ ------------
Net increase/(decrease) (84,439.276) 6,626.500
============ =========
Intermediate Gov't Intermediate Gov't
Bond Portfolio Bond Portfolio
Institutional Shares Retail Shares
Transactions in shares: ---------------------- ----------------
Shares sold 2,380.179 .000
Shares redeemed (43,262.841) (224.550)
Reinvested dividends 8,117.582 59.644
------------ ---------
Net increase/(decrease) (32,765.080) (164.906)
============ =========
International International
Portfolio Portfolio
Institutional Shares Retail Shares
Transactions in shares: ---------------------- ----------------
Shares sold 54,156.634 6,306.336
Shares redeemed (128,317.194) (2,547.495)
Reinvested dividends 19,467.158 282.225
---------- ------------
Net increase/(decrease) (54,693.402) 4,041.066
============ ===========
36
<PAGE>
STRATUS FUND, INC.
Notes to Financial Statements
5. Capital Share Transactions (Continued)
At December 31, 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 67,360 $1,190,254
Government Securities Portfolio Institutional Class 41,103 411,027
Capital Appreciation Portfolio Institutional Class 11,020 147,224
Intermediate Gov't Bond Portfolio Institutional Class 4,219 42,562
International Portfolio Institutional Class 4,219 46,913
At December 31, 1998, UBATCO held, in nominee name, the following in each
Portfolio:
Shares Value
------------ ---------
Growth Portfolio Institutional Class 3,456,215 $61,071,320
Growth Portfolio Retail Class 57,805 1,021,413
Government Securities Portfolio Institutional Class 2,867,629 28,676,287
Government Securities Portfolio Retail Class 14,723 147,226
Capital Appreciation Portfolio Institutional Class 553,018 7,388,320
Capital Appreciation Portfolio Retail Class 21,986 293,298
Intermediate Gov't Bond Portfolio Institutional Class 341,060 3,645,928
Intermediate Gov't Bond Portfolio Retail Class 2,595 27,744
International Portfolio Institutional Class 920,909 10,240,511
International Portfolio Retail Class 10,652 118,339
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.
37
