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Semiannual Report June 30, 1999
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Government
Securities Portfolio
A Series of Panorama Series Fund, Inc.
[logo]
OppenheimerFunds(R)
THE RIGHT WAY TO INVEST
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Panorama Series Fund, Inc.--Government Securities Portfolio
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Objective
Panorama Series Fund, Inc.--Government Securities Portfolio seeks a high level
of current income with a high degree of safety of principal by investing
primarily in U.S. government securities and U.S. government-related securities.
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Narrative by David Negri and John Kowalik, Portfolio Managers
The Government Securities Portfolio provided a cumulative total return of -2.67%
for the six-month period that ended June 30, 1999.(1) Although the Portfolio
faced a generally unfavorable investment environment for U.S. government
securities,we believe that we limited volatility by taking the portfolio
management steps described below.
Both our management strategy and the Portfolio's performance should
first be viewed in light of the investment climate preceding and during the
recent six-month period. During the last several months of 1998, U.S. Treasury
securities performed exceptionally well compared to other fixed income
instruments. At that time, investors feared the global impact of the Asian
crisis, and sought the safest and most liquid investments available, thereby
driving the prices of Treasuries to historically high levels compared to other
types of bonds. Those fears eased during November and December after a cut in
interest rates by the Federal Reserve Board renewed investors' faith in the
continued strength in the U.S. economy. As a result, Treasury prices started
falling toward more historically typical levels. Still, at the beginning of
1999, Treasuries were selling at relatively high prices compared to higher
yielding instruments, including the mortgage-backed and corporate securities in
which the Fund may invest a portion of its assets.
During the first few months of 1999, evidence mounted that the U.S.
economy was continuing to grow, driven by high levels of consumer confidence and
demand for products. The economy's unexpectedly robust growth created a
problematic environment for most fixed income investments. Ever sensitive to
interest rates, bonds respond negatively to the slightest hint of inflation.
Accordingly, most bond prices fell sharply during the first quarter of 1999.
However, as investors continued to shift their focus away from Treasuries toward
sectors offering greater yields, instruments such as high yield corporate bonds
remained relatively strong.
In light of this shift of investor sentiments, we began increasing the
Portfolio's exposure to mortgage-backed securities in late 1998, and continued
to do so throughout this year. Typically, mortgage-backed securities offered
higher yields than Treasury bonds. In addition, we added a small number of
high-grade, investment quality corporate bonds to the portfolio. These
investments performed relatively strong during the period, helping to cushion
the impact of declines among Treasury securities with little added risk.
We also took steps to actively manage the portfolio's duration.
Duration is a measure of a bond's sensitivity to changes in interest rates. The
shorter a portfolio's average duration, the better it is likely to perform in an
environment of rising interest rates. By slightly shortening the Fund's average
duration, we positioned it to better withstand growing concerns that the U.S.
economy might overheat. These concerns were heightened by the Federal Reserve
Board's announcement in late May that it was leaning toward a tighter monetary
policy, and was therefore more inclined to raise interest rates later in the
year.
The Fund's performance may from time to time be subject to substantial
short-term changes, particularly during periods of market or interest rate
volatility. For updates on the Fund's performance, please contact your financial
advisor, call us at 1-800-525-7048 or visit our website,
www.oppenheimerfunds.com.
1. Includes changes in net asset value per share and does not include the
charges associated with the separate account products which offer this Fund.
Such performance is not annualized and would have been lower if such charges
were taken into account.
2 Government Securities Portfolio
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Panorama Series Fund, Inc.--Government Securities Portfolio
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Looking ahead, we believe that the rate of U.S. economic growth is likely to
slow during the remainder of 1999, providing a more hospitable environment for
bonds. We also believe that, despite recent declines in the prices of Treasury
bonds, their prices remain somewhat elevated by historical standards when
compared to the prices of higher yielding fixed income instruments. Therefore,
we expect that Treasury prices will continue to fall relative to other bonds,
though for how long and to what degree will depend on the market's reaction to a
wide range of economic developments. Accordingly, we will continue to seek to
meet our goal of providing an attractive, steady yield. At the same time, we
will closely monitor developments to determine how best to minimize risks and
volatility in an ever changing economic environment.
As always, we appreciate the trust you have placed in us. We will
continue to pursue the Portfolio's stated investment objectives so that Panorama
Series Fund, Inc.--Government Securities Portfolio remains an effective
instrument in helping you meet your financial goals...part of The Right Way to
Invest.
Government Securities Portfolio 3
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Statement of Investments June 30, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
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<S> <C> <C>
Mortgage-Backed Obligations--23.5%
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Government Agency--23.5%
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FHLMC/FNMA/Sponsored--9.6%
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates, 10.50%, 10/1/20 $ 97,099 $ 104,555
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Federal National Mortgage Assn., 6.50%, 2/1/09-8/1/28 1,881,262 1,822,369
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Federal National Mortgage Assn., 7.50%, 9/1/22 200,310 202,626
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2,129,550
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GNMA/Guaranteed--13.9%
Government National Mortgage Assn.:
6.50%, 7/15/28 1,145,285 1,102,246
7%, 10/15/23-3/15/26 1,988,223 1,967,796
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3,070,042
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Total Mortgage-Backed Obligations (Cost $5,321,287) 5,199,592
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U.S. Government Obligations--52.6%
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U.S. Treasury Bonds, 7.50%, 11/15/16(1) 2,175,000 2,445,516
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U.S. Treasury Bonds, 8.125%, 8/15/19 500,000 602,656
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U.S. Treasury Bonds, 9.25%, 2/15/16 1,200,000 1,560,000
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U.S. Treasury Nts., 5.75%, 8/15/03 500,000 500,157
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U.S. Treasury Nts., 7.25%, 8/15/04 2,700,000 2,868,750
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U.S. Treasury Nts., 7.50%, 11/15/01-2/15/05 905,000 960,553
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U.S. Treasury Nts., 7.875%, 11/15/04 2,255,000 2,462,884
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U.S. Treasury Nts., 8.50%, 2/15/00 200,000 204,125
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Total U.S. Government Obligations (Cost $11,300,993) 11,604,641
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Short-Term Notes--18.6%(2)
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Federal Farm Credit Bank, Medium-Term Nts., 6.37%, 9/1/00 1,000,000 1,008,750
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Federal Home Loan Bank, 4.60%, 7/1/99 600,000 600,000
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Federal Home Loan Mortgage Corp., Mtg.-Backed Certificates, 7.125%, 7/21/99 1,000,000 1,000,901
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Tennessee Valley Authority, 4.88%, 7/20/99 1,500,000 1,496,137
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Total Short-Term Notes (Cost $4,144,187) 4,105,788
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Repurchase Agreements--4.1%
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Repurchase agreement with PaineWebber, Inc., 4.80%, dated 6/30/99, to be
repurchased at $900,120 on 7/1/99, collateralized by U.S. Treasury Nts.,
4.625%-9.25%, 11/30/00-2/15/16, with a value of $920,144 (Cost $900,000) 900,000 900,000
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Total Investments, at Value (Cost $21,666,467) 98.8% 21,810,021
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Other Assets Net of Liabilities 1.2 262,234
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Net Assets 100.0% $22,072,255
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</TABLE>
1. Securities with an aggregate market value of $44,700 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
2. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
4 Government Securities Portfolio
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Statement of Assets and Liabilities June 30, 1999 (Unaudited)
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<TABLE>
<S> <C>
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Assets
Investments, at value (cost $21,666,467)--see accompanying statement $21,810,021
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Cash 20,358
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Receivables and other assets:
Interest and principal paydowns 293,080
Daily variation on futures contracts--Note 5 12,250
Shares of capital stock sold 4,306
Investments sold 4,049
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Total assets 22,144,064
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Liabilities
Payables and other liabilities:
Shares of capital stock redeemed 60,292
Shareholder reports 6,110
Legal, auditing and other professional fees 4,535
Custodian fees 320
Transfer and shareholder servicing agent fees 180
Other 372
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Total liabilities 71,809
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Net Assets $22,072,255
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Composition of Net Assets
Par value of shares of capital stock $ 21,135
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Additional paid-in capital 22,025,172
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Undistributed net investment income 673,643
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Accumulated net realized loss on investment transactions (771,694)
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Net unrealized appreciation on investments--Notes 3 and 5 123,999
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Net assets--applicable to 21,135,411 shares of capital stock outstanding $22,072,255
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Net Asset Value, Redemption Price Per Share and Offering Price Per Share $1.04
</TABLE>
See accompanying Notes to Financial Statements.
Government Securities Portfolio 5
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Statement of Operations For the Six Months Ended June 30, 1999 (Unaudited)
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<TABLE>
<S> <C>
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Investment Income
Interest $ 755,858
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Expenses
Management fees--Note 4 62,319
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Accounting service fees--Note 4 7,503
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Legal, auditing and other professional fees 3,510
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Shareholder reports 3,086
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Transfer and shareholder servicing agent fees--Note 4 1,050
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Custodian fees and expenses 750
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Insurance expenses 626
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Directors' compensation 625
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Other 735
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Total expenses 80,204
Less expenses paid indirectly--Note 1 (751)
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Net expenses 79,453
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Net Investment Income 676,405
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Realized and Unrealized Loss
Net realized loss on:
Investments (3,352)
Closing of futures contracts (158,952)
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Net realized loss (162,304)
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Net change in unrealized appreciation or depreciation on investments (1,116,075)
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Net realized and unrealized loss (1,278,379)
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Net Decrease in Net Assets Resulting from Operations $ (601,974)
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</TABLE>
See accompanying Notes to Financial Statements.
6 Government Securities Portfolio
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Statement of Changes in Net Assets
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<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31,
(Unaudited) 1998
<S> <C> <C>
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Operations
Net investment income $ 676,405 $ 1,356,876
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Net realized loss (162,304) (140,127)
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Net change in unrealized appreciation or depreciation (1,116,075) 627,658
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Net increase (decrease) in net assets resulting from operations (601,974) 1,844,407
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Dividends to Shareholders
Dividends from net investment income (1,340,571) (1,367,579)
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Capital Stock Transactions
Net increase (decrease) in net assets resulting from capital stock transactions--Note 2 (908,079) 727,031
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Net Assets
Total increase (decrease) (2,850,624) 1,203,859
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Beginning of period 24,922,879 23,719,020
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End of period (including undistributed net investment income of $673,643
and $1,337,809, respectively) $22,072,255 $24,922,879
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</TABLE>
See accompanying Notes to Financial Statements.
Government Securities Portfolio 7
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Financial Highlights
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<TABLE>
<CAPTION>
Six Months
Ended
June 30,1999 Year Ended December 31,
(Unaudited) 1998 1997 1996(1) 1995 1994
<S> <C> <C> <C> <C> <C> <C>
=================================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $1.13 $1.11 $1.09 $1.07 $0.95 $1.06
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Income (loss) from investment operations:
Net investment income .03 .06 .07 .07 .06 .06
Net realized and unrealized gain (loss) (.06) .03 .02 (.05) .12 (.11)
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Total income (loss) from investment operations (.03) .09 .09 .02 .18 (.05)
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Dividends to shareholders:
Dividends from net investment income (.06) (.07) (.07) --(2) (.06) (.06)
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Total dividends to shareholders (.06) (.07) (.07) -- (.06) (.06)
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Net asset value, end of period $1.04 $1.13 $1.11 $1.09 $1.07 $0.95
===== ===== ===== ===== ===== =====
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Total Return, at Net Asset Value(3) (2.67)% 8.14% 8.82% 1.93% 18.91% (4.89)%
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Ratios/Supplemental Data
Net assets, end of period (in thousands) $22,072 $24,923 $23,719 $23,236 $24,309 $18,784
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Average net assets (in thousands) $23,922 $24,044 $23,034 $23,880 $23,157(4) $17,589(4)
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Ratios to average net assets:(5)
Net investment income 5.70% 5.64% 5.96% 6.11% 6.08% 6.04%
Expenses(6) 0.67% 0.68% 0.67% 0.62% 0.71% 0.85%
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Portfolio turnover rate(7) 0% 43% 0% 6% 55% 102%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund.
2. Less than $0.005 per share.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods of less than one full year. Total return
information does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would reduce
figures for all periods shown.
4. This information is not covered by the auditors' opinion.
5. Annualized for periods less than one full year.
6. Beginning in fiscal 1995, the expense ratio reflects the effect of expenses
paid indirectly by the Fund. Prior year expense ratios have not been adjusted.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation.
See accompanying Notes to Financial Statements.
8 Government Securities Portfolio
<PAGE>
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Notes to Financial Statements (Unaudited)
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1. Significant Accounting Policies
Government Securities Portfolio (the Fund) is a series of Panorama Series Fund,
Inc. (the Company) which is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company. The Fund's
investment objective is to seek a high level of current income with a high
degree of safety of principal, by investing primarily in U.S. government
securities and U.S. government-related securities. The Fund's investment advisor
is OppenheimerFunds, Inc. (the Manager). Shares of the Fund are sold only to
separate accounts of life insurance companies, a majority of such shares are
held by separate accounts of Massachusetts Mutual Life Insurance Co., an
affiliate of the investment advisor. The following is a summary of significant
accounting policies consistently followed by the Fund.
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Securities Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount.
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Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
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Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. As of December 31,
1998, the Fund had available for federal income tax purposes an unused capital
loss carryover of approximately $526,000, which expires between 2002 and 2006.
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Distributions to Shareholders. Distributions to shareholders, which are
determined in accordance with income tax regulations, are recorded on the
ex-dividend date.
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Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
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Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
Government Securities Portfolio 9
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Notes to Financial Statements (Unaudited) (Continued)
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1. Significant Accounting Policies (continued)
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with federal
income tax requirements. Realized gains and losses on investments and options
written and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at
the current market value of the underlying security. Interest on payment-in-kind
debt instruments is accrued as income at the coupon rate and a market adjustment
is made periodically.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
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2. Shares of Capital Stock
The Fund has authorized 200 million shares of $0.001 par value capital stock.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999 Year Ended December 31, 1998
----------------------------------- -------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C>
Sold 1,087,607 $ 1,196,468 4,843,177 $ 5,379,324
Dividends reinvested 1,264,690 1,340,572 1,290,169 1,367,579
Redeemed (3,230,891) (3,445,119) (5,441,013) (6,019,872)
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Net increase (decrease) (878,594) $ (908,079) 692,333 $ 727,031
========== =========== ========== ===========
</TABLE>
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3. Unrealized Gains and Losses on Securities
As of June 30, 1999, net unrealized appreciation on investments of $143,554 was
composed of gross appreciation of $422,623 and gross depreciation of $279,069.
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4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.525% of the first
$300 million of average daily net assets of the Fund, 0.50% of the next $100
million and 0.45% of average daily net assets over $400 million. The Fund's
management fee for the six months ended June 30, 1999, was 0.53% of average
annual net assets.
The Manager acts as the accounting agent for the Fund at an annual fee
of $15,000, plus out-of-pocket costs and expenses reasonably incurred.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer agent for the Fund and is responsible for maintaining the shareholder
registry and shareholder accounting records for the Fund. OFS provides these
services at cost.
10 Government Securities Portfolio
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Notes to Financial Statements (Unaudited) (Continued)
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5. Futures Contracts
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to protect against changes in interest rates. The Fund may also buy or
write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases
in interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund may recognize a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include
the possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the value of
the underlying securities.
As of June 30, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Expiration Number of Valuation as of Unrealized
Contract Description Date Contracts June 30, 1999 Depreciation
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contracts to Purchase
- ---------------------
U.S. Treasury Bonds, 20 yr. 9/21/99 14 $1,622,688 $19,555
=======
</TABLE>
Government Securities Portfolio 11
<PAGE>
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Government Securities Portfolio
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A Series of Panorama Series Fund, Inc.
<TABLE>
================================================================================================================================
<S> <C>
Officers and Directors James C. Swain, Chairman of the Board of Directors
Bridget A. Macaskill, President
Robert G. Avis, Director
William A. Baker, Director
Jon S. Fossel, Director
Sam Freedman, Director
Raymond J. Kalinowski, Director
C. Howard Kast, Director
Robert M. Kirchner, Director
Ned M. Steel, Director
Peter M. Antos, Vice President
John S. Kowalik, Vice President
Stephen F. Libera, Vice President
David P. Negri, Vice President
Michael C. Strathearn, Vice President
Kenneth B. White, Vice President
Arthur J. Zimmer, Vice President
Andrew J. Donohue, Vice President and Secretary
Brian W. Wixted, Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
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Investment Advisor OppenheimerFunds, Inc.
================================================================================================================================
Transfer Agent OppenheimerFunds Services
================================================================================================================================
Custodian of Portfolio Securities The Bank of New York
================================================================================================================================
Independent Auditors Deloitte & Touche LLP
================================================================================================================================
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
The financial statements included herein have been taken from the records of the Fund
without examination of the independent auditors.
This is a copy of a report to shareholders of Government Securities Portfolio. This
report must be preceded or accompanied by a Prospectus of Government Securities
Portfolio. For material information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the FDIC or any other agency, and
involve investment risks, including the possible loss of the principal amount
invested.
</TABLE>
12 Government Securities Portfolio
