Registration No. 2-73969
File No. 811-3255
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 28 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ X ]
Amendment No. 27 [ X ]
PANORAMA SERIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
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(Address of Principal Office) (Zip Code)
(303) 987-5047
Registrant's Telephone Number
Andrew J. Donohue, Esq.
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] Immediately upon filing pursuant to paragraph (b) [ ] On _______________
pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1)
[ X ] On April 30, 1999 pursuant to paragraph (a)(1) [ ] 75 days after filing
pursuant to paragraph (a)(2) [ ] On _____________ pursuant to paragraph (a)(2)
of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
N1A\PANORAMA\N1ACOVER.99
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Panorama Series Fund, Inc. - International Equity Portfolio
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Prospectus dated April 30, 1999
The International Equity Portfolio (the "Portfolio") is a mutual fund that
seeks long-term capital appreciation to make your investment grow. It emphasizes
investments in common stocks and other equity securities of foreign companies.
The Portfolio is a series of Panorama Series Fund, Inc.
(referred to in this Prospectus as the "Company").
Shares of the Portfolio are offered as an investment vehicle for the
variable annuity or variable life insurance contracts offered through separate
accounts of insurance companies (these are referred to as "Accounts"). Shares of
the Portfolio cannot be purchased directly by investors. The term "shareholder"
in this Prospectus refers only to the insurance companies issuing the variable
contracts. The interests of contract owners with respect to shares of the
Portfolio held for their contracts are subject to the terms of the contract and
the prospectus for your insurance company's separate accounts, which you as a
contract holder or prospectus contract holder should read carefully.
This Prospectus contains important information about the Portfolio's
objective, its investment policies, strategies and risks. Please read this
Prospectus carefully before you invest and keep it for future reference about
your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Portfolio's securities nor has it determined that
this Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
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Contents
About the Portfolio
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The Portfolio's Objective and Investment Strategies
Main Risks of Investing in the Portfolio
About the Portfolio's Investments
How the Portfolio is Managed
About Your Account
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How to Buy Shares
How to Sell Shares
Dividends, Capital Gains and Taxes
Financial Highlights
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About the Portfolio
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The Portfolio's Objective and Investment Strategies
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What Is the Portfolio's Investment Objective? The Portfolio's objective is to
seek capital appreciation.
What Does the Portfolio Invest In? The Portfolio invests mainly in common stocks
of growth companies that are located anywhere in the world, and traded on a
stock market which is located outside the U.S. "Growth companies" are issuers
that the Portfolio's portfolio manager believes have favorable growth prospects.
They can include both smaller, less-well-known companies and larger, more
established companies that are believed to have growth of earnings of 15-20% per
year.
The Portfolio does not limit its investments to issuers within a specific
market capitalization range, although the portfolio manager does have a bias
toward mid-size companies. It can invest in emerging markets as well as
developed markets throughout the world, although it may place greater emphasis
on investing in one or more particular regions from time to time, such as Europe
or Latin American, for example.
The Portfolio can also buy preferred stocks, convertible securities and
other securities having equity features. The Portfolio can invest in debt
securities when the portfolio manager believes that it is appropriate to do so
in order to seek the Portfolio's objective. Those debt securities may be rated
as low as "C" or "D" by Moody's Investor Services, Inc. The Portfolio can also
use hedging instruments and certain derivative investments to try to manage
investment risks. These investments are more fully explained in "About the
Portfolio's Investments," below.
|X| How Does the Manager Decide What Securities to Buy or Sell? The
Manager employs a subadviser, Babson-Stewart Ivory International to invest the
Portfolio's assets. In selecting securities for the Portfolio, the Portfolio's
portfolio manager, employed by the subadviser, evaluates investment
opportunities on a company-by-company basis. The portfolio manager looks
primarily for foreign companies with high growth potential using a "bottom up"
investment approach - that is, looking at the investment performance of
individual stocks before considering the impact of economic trends. This
approach includes fundamental analysis of a company's financial statements and
management structure, and analysis of the company's operations and product
development, as well as the industry of which the issuer is part.
In seeking broad diversification of the Portfolio's portfolio, the
portfolio manager currently searches for: |_| Companies that enjoy a strong
competitive position and high demand for
their products,
|_| Companies that participate in markets with substantial barriers against
entry by potential competitors,
|_| Companies that are entering a growth cycle,
|_| Companies with accelerating earnings growth and cash flow and stocks
selling at attractive prices.
In applying these and other selection criteria, the portfolio manager
considers the potential effect of worldwide trends on the growth of particular
business sectors. The trends, or global "themes," currently employed include
retail, pharmaceutical, telecommunications/media expansion, capital market
development, health care, and efficiency enhancing technologies and services.
The Manager does not invest a fixed or specific amount of the Portfolio's assets
in any one sector, and the themes and security selection strategies used can
change over time.
Who Is the Portfolio Designed For? The Portfolio is designed primarily for
investors seeking capital growth in their investment over the long term. Those
investors should be willing to assume the greater risks of short-term share
price fluctuations that are typical for an aggressive growth Portfolio focusing
on stock investments, and the special risks of investing in both emerging and
developed foreign countries. The Portfolio does not seek current income and the
income from its investments will likely be small, so it is not designed for
investors needing income.
Main Risks of Investing in the Portfolio
All investments carry risks to some degree. The Portfolio's investments in
stocks are subject to changes in their value from a number of factors.
Investments in stocks can be volatile and are subject to changes in general
stock market movements (this is referred to as "market risk"). There may be
events or changes affecting particular industries that might be emphasized in
the Portfolio's portfolio (this is referred to as "industry risk") or the change
in value of a particular stock because of an event affecting the issuer.
Stocks of growth companies may provide greater opportunities for capital
appreciation but may be more volatile than other stocks. That volatility is
likely to be even greater for companies with lower capitalizations because their
securities may not be widely traded. The Portfolio can buy securities of issuers
in emerging or developed foreign markets that have special risks not associated
with investments in domestic securities, such as the effects of currency
fluctuations on relative prices.
These risks collectively form the risk profile of the Portfolio, and can
affect the value of the Portfolio's investments, its investment performance and
its price per share. These risks mean that you can lose money by investing in
the Portfolio. When you redeem your shares, they may be worth more or less than
what you paid for them.
The subadviser tries to reduce risks by carefully researching securities
before they are purchased. The Portfolio attempts to reduce its exposure to
market risks by diversifying its investments, that is, by not holding a
substantial amount of stock of any one company and by not investing too great a
percentage of the Portfolio's assets in any one company. Also, the Portfolio
does not concentrate 25% or more of its assets in investments in any one
industry. However, changes in the market prices of securities can occur at any
time.
The share price of the Portfolio will change daily based on changes in
market prices of securities and market conditions, and in response to other
economic events. There is no assurance that the Portfolio will achieve its
investment objective.
|X| Risks of Investing in Stocks. Because the Portfolio invests primarily
in common stocks of foreign companies, the value of the Portfolio's portfolio
will be affected by changes in the foreign stock markets and the special
economic and other factors that might primarily affect the prices of particular
foreign markets. Market risk will affect the Portfolio's net asset value per
share, which will fluctuate as the values of the Portfolio's portfolio
securities change. The prices of individual stocks do not all move in the same
direction uniformly or at the same time. Different stock markets may behave
differently from each other.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer or its
industry. To the extent that the Portfolio is emphasizing investments in a
particular industry, its share values can be expected to fluctuate in response
to events affecting that industry.
|X| Risks of Foreign Investing. The Portfolio may buy securities of
companies or governments in any country, including developed countries and
emerging markets. Under normal market conditions (when the Manager believes that
the stock markets are not in an unstable or volatile period) the Portfolio will
invest at least 90% of its total assets in equity securities of issuers located
anywhere in the world, the primary stock market of which is located outside the
U.S. While foreign securities offer special investment opportunities, there are
also special risks.
The change in value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in that
foreign currency. Foreign issuers are not subject to the same accounting and
disclosure requirements that U.S. companies are subject to. The value of foreign
investments may be affected by exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy in the U.S. or
abroad, or other political and economic factors.
There may be transaction costs and risks related to the conversion of
certain European currencies to the Euro that occurred in January 1999. For
example, brokers and the Portfolio's Custodian must convert their computer
systems and records to reflect the Euro values of securities, and if they are
not prepared, there could be delays in settlement and additional costs to the
Portfolio.
|_| Special Risks of Emerging Markets. Securities in emerging market
countries may be more difficult to sell at an acceptable price and their prices
may be more volatile than securities of companies in more developed markets.
Settlements of trades may be subject to greater delays so that the Portfolio may
not receive the proceeds of a sale of a security on a timely basis. Emerging
countries may have less developed trading markets and exchanges. They may have
less developed legal and accounting systems, and investments in those markets
may be subject to greater risks of government restrictions on withdrawing the
sales proceeds of securities from the country.
How Risky is the Portfolio Overall? The Portfolio focuses its investments on
foreign stocks for long-term growth, and in the short term, foreign stocks can
be volatile. The price of the Portfolio's shares can go up and down
substantially. The Portfolio generally does not use income-oriented investments
to help cushion the Portfolio's total return from changes in stock prices,
except for defensive or liquidity purposes. The Portfolio is generally an
aggressive investment vehicle, designed for investors willing to assume greater
risks in the hope of achieving long-term capital appreciation. It is likely to
be subject to greater fluctuations in its share prices than Portfolios that do
not invest in foreign securities (especially emerging market securities) or
Portfolios that focus on both stocks and bonds.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Portfolio's Past Performance
The bar chart and table below show one measure of the risks of investing in the
Portfolio, by showing changes in the Portfolio's performance from year to year
for the calendar years since the Portfolio's inception and by showing how the
average annual total returns of the Portfolio's shares compare to those of a
broad-based market index. The Portfolio's past investment performance is not
necessarily an indication of how the Portfolio will perform in the future.
Annual Total Returns (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]
Charges that apply to separate accounts investing in the Portfolio are not
included in the calculations of return in this bar chart, and if those charges
were included, the returns would be less than those shown. During the period
shown in the bar chart, the highest return (not annualized) for a calendar
quarter was ___% (__Q'__) and the lowest return for a calendar quarter was ___%
(__Q'__).
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Average Annual
Total Returns for
the periods ending 1 Year 5 Years Life of
December 31, 1998 Portfolio
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International
Equity Portfolio 19.40% 10.34% 10.21%
(inception:
5/13/92)
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MSCI EAFE Index
(from 4/30/92) % % %
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The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. Because the Portfolio invests primarily in foreign stocks, the
Portfolio's performance is compared to the Morgan Stanley Capital International
EAFE Index, an unmanaged index of equity securities listed on 20 of the
principal stock markets of Europe, Asia and Australia. However, it must be
remembered that the index performance reflects the reinvestment of income but
does not consider the effects of capital gains or transaction costs. Also, the
Portfolio may invest in markets other than those in the index.
About the Portfolio's Investments
The Portfolio's Principal Investment Policies. The composition of the
Portfolio's portfolio will vary over time based upon the evaluation of economic
and market trends by the Subadviser. The Portfolio might not always include all
of the different types of investments described below. Under normal market
conditions, |_| The Portfolio will invest at least 90% of its total assets in
equity
securities of issuers located anywhere in the world, the primary stock
market of which is outside the U.S.
|_| The Portfolio will emphasize investments in common stocks and other
equity securities of issuers that the Subadviser considers to be
"growth" companies.
The Statement of Additional Information contains more detailed information
about the Portfolio's investment policies and risks.
|X| Stock Investments. The Portfolio emphasizes investments in common
stocks of foreign companies that the Subadviser believes have growth potential.
Growth companies can be new or established companies that may be developing new
products or services that have relatively favorable prospects, or that are
expanding into new and growing markets. Current examples include companies in
the fields of telecommunications, biotechnology, computer software, and new
consumer products.
Growth companies may be applying new technology, new or improved
distribution techniques or developing new services that can enable them to
capture a dominant or important market position. They may have a special area of
expertise or the capability to take advantage of changes in demographic factors
in a more profitable way than competitors.
Growth companies tend to retain a large part of their earnings for
research, development or investment in capital assets. Therefore, they do not
tend to emphasize paying dividends, and may not pay any dividends for some time.
They are selected for the Portfolio's portfolio because the Subadviser believes
the price of the stock will increase over the long term. However, growth stocks
may be more volatile than other stock investments. They may lose favor with
investors if the issuer's business plans do not produce the expected results or
they may be subject to more volatility because of investor speculation about the
issuer's prospects.
|_| Convertible Securities. While the Portfolio emphasizes investments in
common stocks, it can also buy debt securities convertible into common stock.
The Subadviser considers convertible securities to be "equity equivalents"
because of the conversion feature and their rating has less impact on the
investment decision than in the case of other debt securities. Nevertheless,
convertible securities are subject to both "credit risk" (the risk that the
issuer will not pay interest or repay principal in a timely manner) and
"interest rate risk" (the risk that the prices of the securities will be
affected inversely by changes in prevailing interest rates).
The Portfolio can buy below-investment-grade convertible debt securities,
which are subject to greater risks of default than investment-grade securities.
To the extent the Portfolio buys debt securities, it will focus primarily on
investment-grade securities.
|X| Foreign Securities That the Portfolio Can Buy. The foreign securities
the Portfolio can buy include stocks and other equity securities of companies
organized under the laws of a foreign country or companies that have a
substantial portion of their operations or assets abroad, or derive a
substantial portion of their revenue or profits from businesses, investments or
sales outside the U.S. Foreign securities include securities traded primarily on
foreign securities exchanges or in foreign over-the-counter markets. Foreign
securities include securities of foreign issuers that are represented in the
U.S. securities markets by American Depository Receipts (ADRs) or similar
depository arrangements.
The Portfolio can invest up to 25% of its total assets in securities of
companies based in "emerging" markets. An issuer is considered by the Subadviser
to be located in an emerging country if the issuer is organized under the laws
of an emerging country; the issuer's principal securities trading market is in
an emerging market; or at least 50% of the issuer's non-current assets,
capitalization, gross revenue or profit is derived (directly or indirectly
through subadvisers) from assets or activities located in emerging markets.
The Portfolio can also invest up to 25% of its total assets in debt
securities issued by foreign governments, supranational organizations and
private issuers, including bonds denominated in the European Currency Unit.
Those debt securities may be rated or unrated. The Portfolio may invest up to
15% of its total assets in debt securities rated below investment grade. Those
lower-rated debt securities are commonly called "junk bonds." The Portfolio
currently does not intend to invest more than 5% of its total assets in junk
bonds.
|X| Can the Portfolio's Investment Objective and Policies Change? The
Portfolio's Board of Directors may change non-fundamental investment policies
without shareholder approval, although significant changes will be described in
amendments to this Prospectus. Fundamental policies are those that cannot be
changed without the approval of a majority of the Portfolio's outstanding voting
shares. The Portfolio's objective is a fundamental policy. Other investment
restrictions that are fundamental policies are listed in the Statement of
Additional Information. An investment policy is not fundamental unless this
Prospectus or the Statement of Additional Information says that it is.
|X| Portfolio Turnover. The Portfolio does not extensively engage in
short-term trading to try to achieve its objective and does not expect to have a
portfolio turnover rate in excess of 100% annually. Portfolio turnover affects
brokerage costs the Portfolio pays. If the Portfolio realizes capital gains when
it sells its portfolio investments, it must generally pay those gains out to
shareholders, increasing their taxable distributions. The Financial Highlights
table below shows the Portfolio's portfolio turnover rates during its first
fiscal period.
Other Investment Strategies. To seek its objective, the Portfolio may also use
the investment techniques and strategies described below. The Manager might not
always use all of the different types of techniques and investments described
below. These techniques involve certain risks, although some are designed to
help reduce investment or market risks.
|X| Investing in Special Situations. The Portfolio at times will use
aggressive investment techniques. These might include seeking to benefit from
what the portfolio manager perceives to be special situations, such as mergers,
reorganizations or other unusual events expected to affect a particular issuer.
However, there is a risk in investing in these special situations that the
change or event might not occur, which could have a negative impact on the price
of the security. The Portfolio's investment might not produce the expected gains
or could incur a loss for the portfolio.
|X| Cyclical Opportunities. The Portfolio might also seek to take
advantage of changes in the business cycle by investing in companies that are
sensitive to those changes if the portfolio manager believes they have growth
potential. For example, when the economy is expanding, companies in the consumer
durables and technology sectors might benefit and present long-term growth
opportunities. Other cyclical industries include insurance and forest products.
The Portfolio focuses on seeking growth over the long term but might seek to
take tactical advantage of short-term market movements or events affecting
particular issuers or industries. There is the risk that those securities can
lose value when the issuer or industry is out of phase in the business cycle.
|X| Investing in Domestic Securities. The Portfolio does not expect to
invest more than 10% of its assets under normal market conditions in
securities of U.S. issuers. However, it can hold common and preferred stocks
of U.S. companies as well as their debt securities, and can also invest in
U.S. debt securities for defensive and liquidity purposes.
|X| Illiquid and Restricted Securities. Investments may be illiquid
because of the absence of an active trading market. That may make it difficult
to value them or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual restriction on its resale or which cannot
be sold publicly until it is registered under the Securities Act of 1933. The
Portfolio will not invest more than 10% of its net assets in illiquid or
restricted securities. The Portfolio's Board of Directors can increase that
limit to 15%. Certain restricted securities that are eligible for resale to
qualified institutional purchasers may not be subject to that limit. The Manager
monitors holdings of illiquid securities on an ongoing basis to determine
whether to sell any holdings to maintain adequate liquidity.
|X| Derivative Investments. The Portfolio can use "derivative" investments
to seek increased returns or to try to hedge investment risks, although it does
not do so currently to a significant degree. In general terms, a derivative
investment is an investment contract whose value depends on (or is derived from)
the value of an underlying asset, interest rate or index. In the broadest sense,
exchange-traded options, futures contracts, forward contracts and other hedging
instruments the Portfolio might use can be considered "derivative" investments.
In addition to using derivatives for hedging, the Portfolio might use other
derivative investments because they offer the potential for increased value,
although it does not do so currently to a significant degree.
|_| There are Special Risks in Using Derivative Investments. Markets
underlying securities and indices may move in a direction not anticipated by the
Subadviser. Interest rate and stock market changes in the U.S. and abroad may
also influence the performance of derivatives. If the issuer of the derivative
does not pay the amount due, the Portfolio can lose money on the investment.
Also, the underlying security or investment on which the derivative is based,
and the derivative itself, may not perform the way the Manager expected it to
perform. If that happens, the Portfolio's share price could decline.
The Portfolio has limits on the amount of particular types of derivatives
it can hold. However, using derivatives can cause the Portfolio to lose money on
its investments and/or increase the volatility of its share prices. As a result
of these risks the Portfolio could realize less principal or income from the
investment than expected. Certain derivative investments held by the Portfolio
may be illiquid.
|X| Hedging. The Portfolio can buy and sell certain kinds of call options,
futures contracts, put and call options on such futures contracts, forward
contracts and options on futures and broadly-based securities indices. These are
all referred to as "hedging instruments." Although the Portfolio uses forward
contracts to hedge foreign currency risks when buying and selling securities, it
does not currently use other types of hedging extensively and does not use
hedging instruments for speculative purposes. It has limits on its use of
hedging. The Portfolio is not required to use hedging instruments in seeking its
goal and currently does not use them to a significant degree.
Some of these strategies would hedge the Portfolio's portfolio against
price fluctuations. Other hedging strategies, such as buying futures and call
options, would tend to increase the Portfolio's exposure to the securities
market. Forward contracts could be used to try to manage foreign currency risks
on the Portfolio's foreign investments. Foreign currency options could be used
to try to protect against declines in the dollar value of foreign securities the
Portfolio owns, or to protect against an increase in the dollar cost of buying
foreign securities.
Options trading involves the payment of premiums and has special tax
effects on the Portfolio. There are also special risks in particular hedging
strategies. If the Manager uses a hedging instrument at the wrong time or judges
market conditions incorrectly, the strategy could reduce the Portfolio's return.
The Portfolio could also experience losses if the price of its futures and
options positions were not correlated with its other investments or if it could
not close out a position because of an illiquid market.
Temporary Defensive Investments. In times of unstable or adverse market or
economic conditions, the Portfolio can invest up to 100% of its assets in
temporary defensive investments. Generally they would be cash equivalents (such
as commercial paper in the top two rating categories of national rating
organizations), money market instruments, short-term debt securities, U.S.
government securities, or repurchase agreements. They can also include other
investment grade debt securities. The Portfolio might also hold these types of
securities pending the investment of proceeds from the sale of Portfolio shares
or portfolio securities or to meet anticipated redemptions of Portfolio shares.
To the extent the Portfolio invests defensively in these securities, it might
not achieve its investment objective of capital appreciation.
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Portfolio invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Portfolio and
other investors. That failure could have a negative impact on handling
securities trades, pricing and accounting services. Data processing errors by
government issuers of securities could result in economic uncertainties, and
those issuers may incur substantial costs in attempting to prevent or fix such
errors, all of which could have a negative effect on the Portfolio's investments
and returns.
The Manager, the Distributor and the Transfer Agent have been working on
necessary changes to their computer systems to deal with the year 2000 and
expect that their systems will be adapted in time for that event, although there
cannot be assurance of success. Additionally, the services they provide depend
on the interaction of their computer systems with those of brokers, information
services, the Portfolio's Custodian and other parties. Therefore, any failure of
the computer systems of those parties to deal with the year 2000 may also have a
negative effect on the services they provide to the Portfolio. The extent of
that risk cannot be ascertained at this time.
How the Portfolio Is Managed
The Manager. The Portfolio's investment Manager, OppenheimerPortfolios, Inc.,
supervises the Portfolio's investment program and handles its day-to-day
business. The Manager carries out its duties, subject to the policies
established by the Portfolio's Board of Directors, under an Investment Advisory
Agreement that states the Manager's responsibilities. The Agreement sets forth
the fees paid by the Portfolio to the Manager and describes the expenses that
the Portfolio is responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, with assets of
more than $95 billion as of December 31, 1998, and with more than 4 million
shareholder accounts. The Manager is located at Two World Trade Center, 34th
Floor, New York, New York 10048-0203.
|X| The Subadviser. The Manager has engaged Babson-Stewart Ivory
International to provide day-to-day portfolio management services to the
Portfolio. Babson-Stewart is located at One Memorial Drive, Cambridge, MA 02142.
It was established in 1987 as a partnership. The general partners of
Babson-Stewart are David L. Babson & Co., which is an indirect subsidiary of
Massachusetts Mutual Life Insurance Company, and Stewart Ivory & Co., Ltd. As of
December 31, 1998, Babson-Stewart, together with its global affiliate, had
approximately $__ billion in assets under management.
The Subadviser is responsible for choosing the investments for the
Portfolio and its duties and responsibilities are set forth in its contract with
the Manager. The Manager, not the Portfolio, pays the subadviser.
|X| Portfolio Managers. The portfolio managers of the Portfolio are
James W. Burns and John G.L. Wright. They have been principally responsible
for the day-to-day management of the Portfolio since 1996. Each is a
Managing Director of Babson-Stewart.
|X| Advisory Fees. Under the Investment Advisory Agreement, the Portfolio
pays the Manager an advisory fee at an annual rate that declines on additional
assets as the Portfolio grows: 1.00% of the first $250 million of average daily
net assets of the Portfolio, and 0.90% of average daily net assets in excess of
$250 million. The Portfolio's management fee for the fiscal year ended December
31, 1998 was ___% of average annual net assets.
ABOUT YOUR ACCOUNT
How to Buy Shares
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Shares of the Portfolio are offered for purchase by insurance company
Accounts as an investment medium for variable life insurance policies and
variable annuity contracts, as described in the accompanying Account Prospectus.
Charges and deductions made from purchase payments for variable contracts are
stated in the current prospectus for those contracts. Shares of the Portfolio
are offered at offering price, which (as used in this Prospectus and the
Statement of Additional Information) is net asset value (without a sales
charge).
All purchase orders are processed at the offering price next determined
after receipt by the Company of a purchase order in proper form from an Account.
The offering price (and net asset value) is determined as of the close of The
New York Stock Exchange, which is normally 4:00 P.M., New York time, but may be
earlier on some days. Net asset value per share of the Portfolio is determined
by dividing the value of the Portfolio's net assets by the number of its shares
outstanding. The sale of Portfolio shares will be suspended during any period
when the determination of net asset value is suspended and may be suspended by
the Board of Directors whenever the Board judges it in the Portfolio's best
interest to do so. The Board of Directors has established procedures for valuing
the Portfolio's securities. In general, those valuations are based on market
value. Further details are in "About Your Account-How to Buy Shares" in the
Statement of Additional Information.
How to Sell Shares
Because shares of the Portfolio are held by insurance company Accounts, and
not directly by investors, you should refer to the prospectus of your insurance
company's Account for information on how to redeem shares of the Portfolio held
for your policy or contract. Payment for shares tendered by an Account for
redemption is made ordinarily in cash and forwarded within seven days after
receipt by the Company's transfer agent, OppenheimerFunds Services (the
"Transfer Agent"), of redemption instructions in proper form from an Account,
except under unusual circumstances as determined by the Securities and Exchange
Commission. The redemption price will be the net asset value next determined
after the receipt by the Transfer Agent of a request in proper form. The market
value of the securities in the Portfolio is subject to daily fluctuations and
the net asset value of the Portfolio's shares will fluctuate accordingly.
Therefore, the redemption value may be more or less than the original cost.
Dividends, Capital Gains and Taxes
|X| Dividends of the Portfolio.
<PAGE>
The Portfolio intends to pay out all of its net investment income and net
realized capital gains, if any, on an annual basis. The Portfolio distributes
its dividends, if any, each year on a date set by the Board of Directors.
Normally, net realized capital gains, if any, are distributed annually for the
Portfolio. Such income and capital gains are reinvested in additional shares of
the Portfolio. The Portfolio makes dividend and capital gain distributions on a
per-share basis. After every distribution from the Portfolio, its share price
drops by the amount of the distribution. Since dividends and capital gain
distributions are reinvested, the total value of an account will not be affected
by such distributions because, although the shares will have a lower price,
there will be correspondingly more of them.
|X| Tax Treatment to the Account as Shareholder. The portion of
distributions attributable to the excess of the Portfolio's net long-term
capital gain over its net short-term capital loss is generally characterized as
long-term capital gain. The tax treatment of such dividends and distributions to
an Account depends on the tax status of and the tax rules applicable to that
Account, concerning which you should consult the prospectus of your insurance
company's separate account. It is expected that shares of the Portfolio will be
held by life insurance company separate accounts that fund variable contracts.
Under current federal tax law, dividends and capital gains distributions paid by
the Portfolio to reserves for a variable contract are not currently taxable.
|X| Tax Status of the Portfolio. If the Portfolio qualifies as a "regulated
investment company" under the Internal Revenue Code, it will not be liable for
Federal income taxes on amounts paid as dividends and distributions in
accordance with the Code's requirements. The Portfolio did qualify during its
last fiscal year and the Company intends that it will qualify in current and
future years. The Portfolio also intends to follow certain portfolio
diversification requirements under the Internal Revenue Code so that Accounts
investing in the Portfolio may satisfy the tax diversification requirements to
which they are subject. The above discussion relates solely to Federal tax laws.
This discussion is not exhaustive and a qualified tax adviser should be
consulted if you have any questions about the tax effects of your investment
through a variable contract.
<PAGE>
Financial Highlights
The Financial Highlights Table is presented to help you understand the
Portfolio's financial performance since its inception. Certain information
reflects financial results for a single Portfolio share. The total returns in
the table represent the rate that an investor would have earned [or lost] on an
investment in the Portfolio (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP, the
Portfolio's independent auditors, whose report, along with the Portfolio's
financial statements, is included in the Statement of Additional Information,
which is available on request.
<PAGE>
For More Information about the International Equity Portfolio: The following
additional information about the Portfolio is available without charge upon
request:
Statement of Additional Information
This document includes additional information about the Portfolio's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Portfolio's investments and performance is
available in the Portfolio's Annual and Semi-Annual Reports to shareholders. The
Annual Report includes a discussion of market conditions and investment
strategies that significantly affected the Portfolio's performance during its
last fiscal year.
- ----------------------------------------------------------------------------
How to Get More Information:
- ----------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Portfolio or your
account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1-800-525-7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can read or down-load documents on the OppenheimerFunds web site:
http://www.oppenheimerfunds.com You can also obtain copies of the Statement of
Additional Information and other Portfolio documents and reports by visiting the
SEC's Public Reference Room in Washington, D.C. (Phone 1-800-SEC-0330) or the
SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon
payment of a duplicating fee by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-6009.
No one has been authorized to provide any information about the Portfolio or to
make any representations about the Portfolio other than what is contained in
this Prospectus. This Prospectus is not an offer to sell shares of the
Portfolio, nor a solicitation of an offer to buy shares of the Portfolio, to any
person in any state or other jurisdiction where it is unlawful to make such an
offer.
SEC File No. 811-3255
PR_____.0499 Printed on recycled paper.
<PAGE>
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Government Securities Portfolio
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- -------------------------------------------------------------------------------
A Series of Panorama Series Fund, Inc.
- -------------------------------------------------------------------------------
Prospectus dated April 30, 1999
Government Securities Portfolio (the "Portfolio") is a mutual fund that
seeks high current income with a high degree of safety of principal. The
Portfolio invests primarily in debt instruments issued or guaranteed by the U.S.
government or its agencies and instrumentalities, including mortgage-backed
securities.
Shares of the Portfolio are sold to provide benefits under variable life
insurance policies and variable annuity contracts and other insurance company
separate accounts. The investors in these insurance products determine whether,
and to what extent, their investment should be allocated in shares of the
Portfolio, or alternative investments. The prospectus for that insurance product
(which accompanies this Prospectus) explains how to increase or decrease your
indirect investment in the Portfolio.
This Prospectus contains important information about the Portfolio's
objective, its investment policies, strategies and risks. Please read this
Prospectus carefully before you invest and keep it for future reference about
your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Portfolio's securities nor has it determined that
this Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
<PAGE>
11
2
Contents
About the Fund
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The Portfolio's Objective and Investment Strategies
Main Risks of Investing in the Portfolio
The Portfolio's Past Performance
About the Portfolio's Investments
How the Portfolio is Managed
About Your Account
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How to Buy and Sell Shares
Dividends, Capital Gains and Taxes
Financial Highlights
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<PAGE>
About the Portfolio
- -------------------------------------------------------------------------------
The Portfolio's Objective and Investment Strategies
- -------------------------------------------------------------------------------
What Is the Portfolio's Investment Objective? The Portfolio's objective is to
seek high current income with a high degree of safety of principal.
- -------------------------------------------------------------------------------
What Does the Portfolio Invest In? The Portfolio invests mainly in U.S.
government securities. These include debt securities that are issued or
guaranteed by the United States Treasury, such as Treasury bills, bonds or
notes, and securities issued or guaranteed by agencies or entities that are
referred to as "instrumentalities" of the U.S. government. The Portfolio invests
significant amounts of its assets in mortgage-related derivative securities,
such as collateralized mortgage obligations and mortgage participation
certificates.
Not all of the U.S. government securities the Portfolio buys are backed
by the full faith and credit of the U.S. government as to payment of interest
and repayment of principal. Some are backed by the right of the entity to
borrow from the U.S. Treasury. Others are backed only by the credit of the
instrumentality. All of these different types of securities described above
are generally referred to as "U.S. government securities" in this prospectus.
The Portfolio can also buy securities issued by private issuers that do not
have any U. S. government guarantees.
The securities the Portfolio buys may pay interest at fixed or floating
rates, or may be "stripped" securities. They may have short, medium or long-term
maturities. The Portfolio can use hedging instruments and other derivative
investments to try to enhance income and to manage investment risks. These
investments are more fully explained in "About the Portfolio's Investments,"
below.
|X| How Does the Manager Decide What Securities to Buy or Sell? In
selecting securities for the Portfolio, the portfolio managers research the
universe of U.S. government securities and private mortgage related
securities and weigh yields and relative values against risks. While this
process and the inter-relationship of the factors used may change over time
and may vary in particular cases, in general, they look for:
|_| Sectors of the U.S. government debt market that they believe offer high
relative value,
|_| Securities that have high income potential to help cushion total return
against price volatility,
|_| Securities that are less sensitive to changes in interest rates,
|_| Different types of U.S. government and private issuer securities.
Who Is the Portfolio Designed For? The Portfolio is designed primarily for
investors seeking current income from a Portfolio that also has the goal of
preserving capital and invests mainly in U.S. government securities. However,
the Portfolio's share price and income levels will fluctuate. The Portfolio's
share price and distributions are not backed or guaranteed by the U.S.
government. The Portfolio is intended to be a long-term investment, not a
short-term trading vehicle. It may be appropriate for moderately conservative
investors seeking current income.
Main Risks of Investing in the Portfolio
All investments carry risks to some degree. The Portfolio's investments in
debt securities are subject to changes in their value from a number of factors.
They include changes in general bond market movements (this is referred to as
"market risk"), or the change in value of particular bonds because of an event
affecting the issuer (this is known as "credit risk"). Changes in interest rates
can also affect the prices of debt securities (this is known as "interest rate
risk"). Mortgage-related securities may also be subject to "prepayment risk,"
which can affect their yields and price volatility.
These risks collectively form the risk profile of the Portfolio, and can
affect the value of the Portfolio's investments, its investment performance and
its price per share. These risks mean that you can lose money by investing in
the Portfolio. When you redeem your shares, they may be worth more or less than
what you paid for them.
The Portfolio's investment Manager, OppenheimerFunds, Inc., tries to
reduce risks by carefully researching securities before they are purchased, and
in some cases by using hedging techniques. The Portfolio attempts to reduce its
exposure to market risks by not investing too great a percentage of the
Portfolio's assets in any one type or issue of debt security (other than direct
Treasury obligations, which have little credit risk). However, changes in the
overall market prices of securities and their yield can occur at any time. The
share price and yield of the Portfolio will change daily based on changes in
market prices of securities and market conditions, and in response to other
economic events. There is no assurance that the Portfolio will achieve its
investment objective.
|X| Interest Rate Risks. Debt securities are subject to changes in value
when prevailing interest rates change. When interest rates fall, the values of
outstanding debt securities generally rise, and the bonds may sell for more than
their face amount. When interest rates rise, the values of outstanding debt
securities generally fall, and the bonds may sell at a discount from their face
amount. The magnitude of these price changes is generally greater for bonds with
longer maturities. However, interest rate changes may have different effects on
the values of mortgage-related securities because of prepayment risks, discussed
below.
At times the Portfolio may buy longer-term debt securities to seek higher
income. When the average maturity of the Portfolio's portfolio is longer, its
share price may fluctuate more when interest rates change. The Portfolio may buy
zero-coupon or "stripped" securities, which are particularly sensitive to
interest rate changes and the rate of principal payments (and prepayments), and
have prices that may go up or down more than other types of debt securities in
response to those changes.
|X| Prepayment Risk. Prepayment risk occurs when the issuer of a security
can prepay the principal prior to the security's maturity. Securities subject to
prepayment risk, including the mortgage-related securities that the Portfolio
buys, generally offer less potential for gains when prevailing interest rates
decline, and have greater potential for loss when interest rates rise. The
impact of prepayments on the price of a security may be difficult to predict and
may increase the volatility of the price. Additionally, the Portfolio may buy
mortgage-related securities at a premium. Accelerated prepayments on those
securities could cause the Portfolio to lose a portion of its principal
investment represented by the premium the Portfolio paid.
If interest rates rise rapidly, prepayments may occur at slower rates than
expected, which could have the effect of lengthening the expected maturity of a
short or medium-term security. That could cause its value to fluctuate more
widely in response to changes in interest rates. In turn, this could cause the
value of the Portfolio's shares to fluctuate more.
|X| Credit Risk. Debt securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a security to make interest and
principal payments on the security as they become due. While securities directly
issued by the U.S. Treasury and certain agencies that are backed by the full
faith and credit of the U.S. government have little credit risk and securities
issued by other agencies of the U.S. government generally have low credit risks,
securities issued by private issuers may have greater credit risks. If the
issuer fails to pay interest, the Portfolio's income may be reduced and if the
issuer fails to repay principal, the value of that bond and of the Portfolio's
shares may be reduced.
|X| There are Special Risks in Using Derivative Investments. The Portfolio
may use derivatives to seek increased returns or to try to hedge investment
risks and preserve capital. In general terms, a derivative investment is an
investment contract whose value depends on (or is derived from) the value of an
underlying asset, interest rate or index. Options, futures, stripped securities,
collateralized mortgage obligations, and interest rate swaps are examples of
derivatives.
If the issuer of the derivative does not pay the amount due, the Portfolio
can lose money on the investment. Also, the underlying security or investment on
which the derivative is based, and the derivative itself, may not perform the
way the Manager expected it to perform. If that happens, the Portfolio's share
price could decline or the Portfolio could get less income than expected. The
Portfolio has limits on the amount of particular types of derivatives it can
hold. However, using derivatives can cause the Portfolio to lose money on its
investments and/or increase the volatility of its share prices.
How Risky is the Portfolio Overall? Although U.S. government securities that are
backed by the full faith and credit of the U.S. government have little credit
risk, they are subject to interest rate risks. Collateralized mortgage
obligations and other mortgage related securities in particular are subject to a
number of risks that can affect their values. These risks can cause the
Portfolio's share price to fluctuate and can affect its yield. The Portfolio is
generally less aggressive than other types of bond funds, particularly those
that invest in lower-grade securities. It is more risky than a money market
Portfolio or a Portfolio that invests only in U.S. Treasury securities.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Portfolio's Past Performance
The bar chart and table below show one measure of the risks of investing
in the Fund, by showing changes in the Portfolio's performance from year to year
since its inception and by showing how the average annual total returns of the
Portfolio's shares compare to those of a broad-based market index. The
Portfolio's past investment performance is not necessarily an indication of how
the Portfolio will perform in the future.
Annual Total Returns (as of 12/31 each year) [See appendix to
prospectus for data in bar chart showing annual total
returns]
Charges imposed by the separate accounts that invest in the Portfolio are not
included in the calculations of return in this bar chart, and if those charges
were included, the returns would be less than those shown. During the period
shown in the bar chart, the highest return (not annualized) for a calendar
quarter was ____% (_Q_) and the lowest return (not annualized) for a calendar
quarter was ____% (_Q_).
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Average Annual
Total Returns for
the periods
ending December Life of
31, 1998 Past 1 Year Past 5 Years Portfolio
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Government
Securities
Portfolio 8.14% 6.29% 7.39%*
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Merrill Lynch
Government Master
Index ____% ____% ____%*
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* Inception date of the Portfolio was 5/13/92. The index performance is
shown from 4/30/92.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. Because the Portfolio invests primarily in U.S. government securities,
the Portfolio's performance is compared to the Merrill Lynch Government Master
Index, an unmanaged composite index of both the Treasury and Agency Master
Indices. However, it must be remembered that the index performance reflects the
reinvestment of income but does not consider the effects of capital gains or
transaction costs, and the Portfolio's investments may vary from those in the
index.
About the Portfolio's Investments
The Portfolio's Principal Investment Policies. The composition of the
Portfolio's portfolio among the different types of permitted investments will
vary over time based upon the evaluation of economic and market trends by the
Manager. The Portfolio's portfolio might not always include all of the different
types of investments described in this Prospectus.
|_| Under normal market conditions, as a fundamental policy the
Portfolio invests at least 65% of its total assets in U.S. government
securities.
|_| U.S. government securities the Portfolio buys are issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
|_| The Portfolio can also buy some securities of private issuers that
have no government backing.
The Statement of Additional Information contains more detailed information
about the Portfolio's investment policies and risks.
U.S. Government Securities. These are securities issued or guaranteed by the
U.S. Treasury or U.S. government agencies or instrumentalities:
|X| U.S. Treasury Obligations. These include Treasury bills (having
maturities of one year or less when issued), Treasury notes (having maturities
of from one to ten years), and Treasury bonds (having maturities of more than
ten years). Treasury securities are backed by the full faith and credit of the
United States as to timely payments of interest and repayments of principal. The
Portfolio can buy U. S. Treasury securities that have been "stripped" of their
coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury securities
described below, and Treasury Inflation-Protection Securities ("TIPS").
|X| Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage related
securities that have different levels of credit support from the U.S.
government. Some are supported by the full faith and credit of the U.S.
government, such as Government National Mortgage Association (called "Ginnie
Mae") pass-through mortgage certificates. Some are supported by the right of the
issuer to borrow from the U.S. Treasury under certain circumstances, such as
Federal National Mortgage Association ("Fannie Mae") bonds. Others are supported
only by the credit of the entity that issued them, such as Federal Home Loan
Mortgage Corporation ("Freddie Mac") obligations.
|_| Mortgage-Related U.S. Government Securities. These include
interests in pools of residential or commercial mortgages, in the form of
collateralized mortgage obligations ("CMOs") and other "pass-through"
mortgage securities. CMOs that are U.S. government securities have collateral
to secure payment of interest and principal. They may be issued in different
series with different interest rates and maturities. The collateral is either
in the form of mortgage pass-through certificates issued or guaranteed by a
U.S. agency or instrumentality or mortgage loans insured by a U.S. government
agency. The Portfolio can have significant amounts of its assets invested in
mortgage related U.S. government securities.
The prices and yields of CMOs are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying mortgages.
Changes in interest rates may cause the rate of expected prepayments of those
mortgages to change. In general, prepayments increase when general interest
rates fall and decrease when interest rates rise.
If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO could be reduced
and the Portfolio may have to reinvest the prepayment proceeds at lower interest
rates, which could reduce its yield. When interest rates rise rapidly, if
prepayments occur more slowly than expected, a short- or medium-term CMO can in
effect become a long term security, subject to greater fluctuations in value.
These prepayment risks can make the prices of CMOs very volatile when interest
rates change. The prices of longer-term debt securities tend to fluctuate more
than those of shorter-term debt securities. That volatility will affect the
Portfolio's share prices.
CMOs issued by private issuers are not U.S. government securities, and
are subject to greater credit risks than CMOs that are U.S. government
securities.
|X| Can the Portfolio's Investment Objective and Policies Change? The
Portfolio's Board of Directors may change non-fundamental investment policies
without shareholder approval, although significant changes will be described in
amendments to this Prospectus. Fundamental policies are those that cannot be
changed without the approval of a majority of the Portfolio's outstanding voting
shares. The Portfolio's investment objective is a fundamental policy. Other
investment restrictions that are fundamental policies are listed in the
Statement of Additional Information. An investment policy is not fundamental
unless this Prospectus or the Statement of Additional Information says that it
is.
|X| Portfolio Turnover. The Portfolio may engage in some short-term
trading to try to achieve its objective. While portfolio turnover may affect
transaction costs the Portfolio pays, in most cases it does not pay brokerage
commissions on debt securities it buys. The Financial Highlights table below
shows the Portfolio's portfolio turnover rates during prior fiscal years.
Other Investment Strategies. To seek its objective, the Portfolio can also use
the investment techniques and strategies described below. The Manager might not
always use all of the different types of techniques and investments described
below. These techniques involve certain risks, although some are designed to
help reduce investment or market risks.
|X| Private-Issuer Securities. The Portfolio can invest a substantial
portion (up to 35%) of its assets in securities issued by private issuers, that
do not offer the credit backing of U.S. government securities. Primarily these
include mortgage-related securities of private issuers, such as multi-class debt
or pass-through certificates secured by mortgage loans. They may be issued by
banks, savings and loans, mortgage bankers and other non-governmental issuers.
The Portfolio can buy other types of asset-backed securities collateralized by
loans or other assets or receivables.
Private issuer securities are subject to the credit risks of the issuers.
There is the risk that the issuers may not make timely payment of interest or
repay principal when due, although in some cases they may be supported by
insurance or guarantees. The Portfolio limits its investments in private issuer
securities to securities rated within the four highest rating categories of
Moody's Investors Service, Inc. or Standard & Poor's Rating Service, or, if
unrated, assigned a comparable rating by the Manager. These are known as
"investment-grade" securities. A reduction in the rating of a security after its
purchase by the Portfolio will not automatically require the Portfolio to
dispose of that security. However, the Manager will evaluate those securities to
determine whether to keep them in the Portfolio's portfolio.
|X| Repurchase Agreements. In a repurchase agreement, the Portfolio buys a
security and simultaneously agrees to sell it back at a higher price in the
future. Delays or losses could occur if the other party to the agreement
defaults or becomes insolvent. These are used primarily for cash management and
liquidity purposes.
|X| Illiquid and Restricted Securities. Investments may be illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. A restricted security
is one that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933. The Portfolio
will not invest more than 15% of its net assets in illiquid or restricted
securities. Certain restricted securities that are eligible for resale to
qualified institutional purchasers are not subject to that limit. The Manager
monitors holdings of illiquid securities on an ongoing basis to determine
whether to sell any holdings to maintain adequate liquidity.
|X| Derivative Investments. The Portfolio can invest in a number of
different kinds of "derivative" investments. In the broadest sense,
collateralized mortgage obligations and other mortgage-related securities, as
well as exchange-traded options, futures contracts and other hedging instruments
the Portfolio can use may be considered "derivative investments." In addition to
using hedging instruments, the Portfolio can use other derivative investments
because they offer the potential for increased income, such as interest rate
swap agreements.
Markets underlying securities and indices may move in a direction not
anticipated by the Manager. Interest rate and stock market changes in the U.S.
and abroad may also influence the performance of derivatives. As a result of
these risks the Portfolio could realize less principal or income from the
investment than expected. Certain derivative investments held by the Portfolio
may be illiquid.
|X| Hedging. The Portfolio can buy and sell certain kinds of futures
contracts, call options, interest rate swaps and options on futures and debt
securities indices. These are all referred to as "hedging instruments." The
Portfolio does not use hedging instruments for speculative purposes, and has
limits on its use of them. The Portfolio is not required to use hedging
investments in seeking its goal.
The Portfolio could buy and sell options and futures for a number of
purposes. It might do so to try to manage its exposure to the possibility that
the prices of its portfolio securities may decline, or to establish a position
in the securities market as a temporary substitute for purchasing individual
securities. It might do so to try to manage its exposure to changing interest
rates.
Some of these strategies would hedge the Portfolio's portfolio against
price fluctuations. Other hedging strategies, such as buying futures and call
options, would tend to increase the Portfolio's exposure to the securities
market. Writing covered call options might also provide income to the Portfolio
for liquidity purposes or to raise cash to distribute to shareholders.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Portfolio is exercised
on an investment that has increased in value, the Portfolio will be required to
sell the investment at the call price and will not be able to realize any profit
if the investment has increased in value above the call price.
If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the Portfolio's return.
The Portfolio could also experience losses if the prices of its futures and
options positions were not correlated with its other investments or if it could
not close out a position because of an illiquid market.
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Portfolio invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Portfolio and
other investors. That failure could have a negative impact on handling
securities trades, pricing and accounting services. Data processing errors by
government issuers of securities could result in economic uncertainties, and
those issuers may incur substantial costs in attempting to prevent or fix such
errors, all of which could have a negative effect on the Portfolio's investments
and returns.
The Manager and the Transfer Agent have been working on necessary changes
to their computer systems to deal with the year 2000 and expect that their
systems will be adapted in time for that event, although there cannot be
assurance of success. Additionally, the services they provide depend on the
interaction of their computer systems with those of brokers, information
services, the Portfolio's Custodian and other parties. Therefore, any failure of
the computer systems of those parties to deal with the year 2000 may also have a
negative effect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.
How the Portfolio Is Managed
The Manager. The Portfolio's investment Manager, OppenheimerFunds, Inc., chooses
the Portfolio's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board of
Directors, under an Investment Advisory Agreement that states the Manager's
responsibilities. The Agreement sets forth the fees paid by the Portfolio to the
Manager and describes the expenses that the Portfolio is responsible to pay to
conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
mutual funds, with assets of more than $95 billion as of December 31, 1998, and
with more than 4 million shareholder accounts. The Manager is located at Two
World Trade Center, 34th Floor, New York, New York 10048-0203.
|X| Portfolio Managers. The Portfolio is managed by John Kowalik and David
Negri. Mr. Kowalik, who became a portfolio manager of the Portfolio on
October 27, 1998, is a Vice President of the Portfolio and a Senior Vice
President of the Manager. Prior to joining the Manager in July 1998, he was
Managing Director and senior portfolio manager for Prudential Investments
Global Fixed Income Group. Mr. Negri became a portfolio manager of the
Portfolio on January 1, 1999. Mr. Negri is a Vice President of the Portfolio
and a Senior Vice President of the Manager. Each is an officer and portfolio
manager of other mutual funds.
|X| Advisory Fees. Under the Investment Advisory Agreement, the Portfolio
pays the Manager an advisory fee at an annual rate that declines on additional
assets as the Portfolio grows: 0.525% of the first $300 million of average daily
net assets of the Fund, 0.500% of the next $100 million, and 0.450% of average
daily net assets in excess of $400 million. The Portfolio's management fee for
its last fiscal year ended December 31, 1998 was ____% of average daily net
assets.
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About Your Account
- -------------------------------------------------------------------------------
How to Buy and Sell Shares
Shares of the Portfolio are offered for purchase as an investment medium for
variable life insurance policies and variable annuity contracts and other
insurance company separate accounts, as described in the accompanying account
Prospectus. All the information you need on how to buy or sell shares through
your account investment are described in that prospectus. You cannot contact the
Portfolio or its transfer agent directly, as all the records that identify you
as an indirect investor are maintained by the insurance company sponsoring your
separate account investment, or its servicing agents. Dividends, Capital Gains
and Taxes
Dividends. The Portfolio intends to declare dividends separately for each
class of shares from net investment income on an annual basis.
Capital Gains. The Portfolio may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Portfolio may make
supplemental distributions of dividends and capital gains following the end of
its fiscal year. There can be no assurance that the Portfolio will pay any
capital gains distributions in a particular year.
Tax Treatment to the Account As Shareholder. Dividends paid by the Portfolio
from its ordinary income and distributions of its net realized short-term or
long-term capital gains are includable in gross income of the Accounts holding
such shares. The tax treatment of such dividends and distributions depends on
the tax status of that Account.
This information is only a summary of certain federal tax information about
your investment. You should consult with your tax adviser or the sponsor of your
separate account about the effect of an investment in the Portfolio on your
particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the
Portfolio's financial performance for the past 5 fiscal years. Certain
information reflects financial results for a single Portfolio share. The total
returns in the table represent the rate that an investor would have earned [or
lost] on an investment in the Portfolio (assuming reinvestment of all dividends
and distributions). This information has been audited by Deloitte & Touche LLP,
the Portfolio's independent auditors, whose report, along with the Portfolio's
financial statements, is included in the Statement of Additional Information,
which is available on request.
<PAGE>
For More Information about Government Securities Portfolio: The following
additional information about the Portfolio is available without charge upon
request:
Statement of Additional Information
This document includes additional information about the Portfolio's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Portfolio's investments and performance is
available in the Portfolio's Annual and Semi-Annual Reports to shareholders. The
Annual Report includes a discussion of market conditions and investment
strategies that significantly affected the Portfolio's performance during its
last fiscal year.
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How to Get More Information:
- ----------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Portfolio or your
account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1-800-525-7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can read or down-load documents on the OppenheimerFunds web site:
http://www.oppenheimerfunds.com You can also obtain copies of the Statement of
Additional Information and other Portfolio documents and reports by visiting the
SEC's Public Reference Room in Washington, D.C. (Phone 1-800-SEC-0330) or the
SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon
payment of a duplicating fee by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-6009.
No one has been authorized to provide any information about the Portfolio or to
make any representations about the Portfolio other than what is contained in
this Prospectus. This Prospectus is not an offer to sell shares of the
Portfolio, nor a solicitation of an offer to buy shares of the Portfolio, to any
person in any state or other jurisdiction where it is unlawful to make such an
offer.
SEC File No. 811-3255
PR0___.0499 Printed on recycled paper.
<PAGE>
Appendix to Prospectus of
Government Securities Portfolio
Graphic material included in the Prospectus of Government Securities
Portfolio: "Annual Total Returns (as of 12/31 each year)":
A bar chart will be included in the Prospectus of Government Securities
Portfolio (the "Fund") depicting the annual total returns of a hypothetical
investment in Class A shares of the Portfolio for each of the ten most recent
calendar years. Set forth below are the relevant data points that will appear in
the bar chart:
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Calendar Year Ended Annual Total Return
12/31
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1989 %
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1990 %
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- --------------------------------------------------
1991 %
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1992 %
- --------------------------------------------------
- --------------------------------------------------
1993 %
- --------------------------------------------------
- --------------------------------------------------
1994 %
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1995 %
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1996 %
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1997 %
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1998 %
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<PAGE>
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Growth Portfolio
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A Series of Panorama Series Fund, Inc.
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Prospectus dated April 30, 1999
Growth Portfolio (the "Portfolio") is a mutual fund that seeks long-term
growth of capital. It invests mainly in common stocks with low price-earnings
ratios and better-than-anticipated earnings.
Shares of the Portfolio are sold to provide benefits under variable life
insurance policies and variable annuity contracts and other insurance company
separate accounts. The investors in these insurance products determine whether,
and to what extent, their investment should be allocated in shares of the
Portfolio, or alternative investments. The prospectus for that insurance product
(which accompanies this Prospectus) explains how to increase or decrease your
indirect investment in the Portfolio.
This Prospectus contains important information about the Portfolio's
objective, its investment policies, strategies and risks. Please read this
Prospectus carefully before you invest and keep it for future reference about
your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Portfolio's securities nor has it determined that
this Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
<PAGE>
Contents
About the Portfolio
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The Portfolio's Objective and Investment Strategies
Main Risks of Investing in the Portfolio
The Portfolio's Past Performance
About the Portfolio's Investments
How the Portfolio is Managed
About Your Account
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How to Buy and Sell Shares
Dividends, Capital Gains and Taxes
Financial Highlights
<PAGE>
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About the Portfolio
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The Portfolio's Objective and Investment Strategies
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What Is the Portfolio's Investment Objective? The Portfolio's objective is to
seek long-term growth of capital by investing primarily in common stocks with
low price-earnings ratios and better-than-anticipated earnings. Realization
of current income is a secondary consideration.
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What Does the Portfolio Invest In? The Portfolio invests mainly in common
stocks. The Portfolio can buy other equity investments, including preferred
stocks, rights and warrants and convertible securities. The Portfolio can buy
securities of U.S. and foreign companies of different capitalization ranges,
although there are limits on the Portfolio's investments in foreign securities.
The Portfolio can also invest (normally, not more than 10% of its net
assets) in debt securities, such as U.S. government securities and corporate
debt obligations, including corporate bonds rated below investment grade. Under
normal market conditions the Portfolio can hold cash and cash equivalents for
liquidity purposes. The Portfolio can also use hedging instruments and certain
derivative investments to try to manage investment risks. These investments are
more fully explained in "About the Portfolio's Investments," below.
|X| How Does the Manager Decide What Securities to Buy or Sell? In
selecting securities for purchase or sale by the Portfolio, the portfolio
managers use an investment process that combines a disciplined value style with
growth strategies. While this process and the inter-relationship of the factors
used may change over time and its implementation may vary in particular cases,
in general the investment selection process includes the strategies described
below: |_| The portfolio managers use a quantitative valued-oriented investment
discipline to identify undervalued stocks or stocks out of favor in
the market in combination with "fundamental" analysis of an
issuer's financial condition to search for stocks that have growth
potential.
|_| In selecting stocks, they use value investing techniques to
identify a universe of stocks that are undervalued in the market,
focusing on stocks that have lower price/earnings (P/E) ratios
compared, for example, to the P/E ratio of the S&P 500 Index.
|_| The portfolio managers use quantitative tools, including internal
research and analysis by other market analysts, to identify
stocks within the selected universe that may provide growth
opportunities, for example, by selecting stocks of issuers that
have better earnings than analysts have expected ("positive
earnings surprise"). The expectation is that the stock will
increase in value when the market re-evaluates the issuer's
earnings expectations and price/earnings ratio.
|_| If the P/E ratio of a stock held by the Portfolio moves
significantly above the P/E ratio of the broad market benchmark the
portfolio managers use, or if the issuer reports a material
earnings disappointment, the portfolio managers will consider
selling the stock.
Who Is the Portfolio Designed For? The Portfolio is designed primarily for
investors seeking capital growth in their investment over the long term. Those
investors should be willing to assume the risks of short-term share price
fluctuations that are typical for a moderately aggressive fund focusing on stock
investments. Since the Portfolio's income level will fluctuate and will likely
be small, it is not designed for investors needing an assured level of current
income.
Main Risks of Investing in the Portfolio
All investments carry risks to some degree. The Portfolio's investments in
stocks are subject to changes in their value from a number of factors. They
include changes in general stock market movements (this is referred to as
"market risk"), or the change in value of particular stocks because of an event
affecting the issuer.
At times, the Portfolio may increase the emphasis of its investments in a
particular industry. Therefore, it may be subject to the risks that economic,
political or other events can have a negative effect on the values of issuers in
that particular industry (this is referred to as "industry risk"). The
Portfolio's value selection strategy might not produce the desired investment
results if the securities selected do not appreciate in value over time. Changes
in interest rates can also affect stock and bond prices (this is known as
"interest rate risk").
These risks collectively form the risk profile of the Portfolio and can
affect the value of the Portfolio's investments, its investment performance and
its price per share. These risks mean that you can lose money by investing in
the Fund. When you redeem your shares, they may be worth more or less than what
you paid for them.
The Portfolio's investment Manager, OppenheimerFunds, Inc., tries to
reduce risks by carefully researching securities before they are purchased. The
Portfolio attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial amount of stock of any one
company and by not investing too great a percentage of the Portfolio's assets in
any one company. Also, the Portfolio does not concentrate 25% or more of its
investments in any one industry. However, changes in the overall market prices
of securities and the income they pay can occur at any time.
The share price of the Portfolio will change daily based on changes in
market prices of securities and market conditions, and in response to other
economic events. There is no assurance that the Portfolio will achieve its
investment objective.
|X| Risks of Investing in Stocks. Stocks fluctuate in price, and their
short-term volatility at times may be great. Because the Portfolio currently
focuses its investments in stocks, the value of the Portfolio's portfolio will
be affected by changes in the stock markets. Market risk will affect the
Portfolio's net asset value per share, which will fluctuate as the values of the
Portfolio's portfolio securities change.
A variety of factors can affect the price of a particular stock and the
prices of individual stocks do not all move in the same direction uniformly or
at the same time. Different stock markets may behave differently from each
other. In particular, because the Portfolio currently emphasizes investments in
stocks of U.S. issuers, it will be primarily affected by changes in U.S.
stock markets.
Additionally, stocks of issuers in a particular industry may be affected
by changes in economic conditions that affect that industry more than others, or
by changes in government regulations, availability of basic resources or
supplies, or other events. To the extent that the Portfolio is emphasizing
investments in a particular industry, its share values may fluctuate in response
to events affecting that industry.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer. The Portfolio
can invest in securities of large companies but it can also buy stocks of small
and medium-size companies, which may have more volatile stock prices than stocks
of large companies.
How Risky is the Portfolio Overall? The Portfolio focuses its investments on
stocks for long-term growth. In the short term, the stock markets can be
volatile, and the price of the Portfolio's shares will go up and down. The
Portfolio's income-oriented investments may help cushion the Portfolio's total
return from changes in stock prices, but fixed-income securities have their own
risks and are not the primary focus of the Fund. The Portfolio is generally more
conservative than aggressive growth stock funds, but more aggressive than funds
that invest in stocks and bonds.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Portfolio's Past Performance
The bar chart and table below show one measure of the risks of investing in the
Portfolio, by showing changes in the Portfolio's performance from year to year
for the last ten calendar years and by showing how the average annual total
returns of the Portfolio's shares compare to those of a broad-based market
index. The Portfolio's past investment performance is not necessarily an
indication of how the Portfolio will perform in the future.
Annual Total Returns (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]
Charges imposed by the separate accounts that invest in the Portfolio are not
included in the calculations of return in this bar chart, and if those charges
were included, the returns would be less than those shown. During the period
shown in the bar chart, the highest return (not annualized) for a calendar
quarter was ____% (__Q'__) and the lowest return (not annualized) for a calendar
quarter was ____% (__Q'__).
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Average Annual
Total Returns
for the periods
ending December Past 1 Year Past 5 Years Past 10 Years
31, 1998
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Growth Portfolio % % %*
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S&P 500 Index % % %*
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The index performance is shown from 1/1/89 to compare to the performance of
Portfolio shares for 10 years.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. Because the Portfolio invests primarily in stocks, the Portfolio's
performance is compared to the S&P 500 Index, an unmanaged index of equity
securities that is a measure of the general domestic stock market. However, it
must be remembered that the index performance reflects the reinvestment of
income but does not consider the effects of capital gains or transaction costs.
Also, the Portfolio may have investments that vary from the index.
About the Portfolio's Investments
The Portfolio's Principal Investment Policies. The composition of the
Portfolio's portfolio among the different types of permitted investments will
vary over time based upon the evaluation of economic and market trends by the
Manager. The Portfolio's portfolio might not always include all of the different
types of investments described below. The Statement of Additional Information
contains more detailed information about the Portfolio's investment policies and
risks.
|X| Stock Investments. The Portfolio invests primarily in a diversified
portfolio of common stocks of issuers that may be of small, medium or large
capitalization, to seek capital growth. The Portfolio can invest in other equity
securities, including preferred stocks, rights and warrants, and securities
convertible into common stock. They can include securities issued by domestic or
foreign companies. However, the Portfolio currently emphasizes investments in
stocks of U.S. issuers.
The Portfolio's investments in convertible securities may include
securities rated as low as "B" by Moody's Investor Services, Inc. or Standard &
Poor's Rating Service or having comparable ratings by other national rating
organizations. Those ratings are below "investment grade" and the securities are
subject to greater risk of default by the issuer than investment grade
securities. However, the Manager considers convertible securities to be "equity
equivalents" because of the conversion feature, and their rating has less impact
on the investment decision than in the case of other debt securities.
|X| Can the Portfolio's Investment Objective and Policies Change? The
Portfolio's Board of Directors may change non-fundamental investment policies
without shareholder approval, although significant changes will be described in
amendments to this Prospectus. Fundamental policies are those that cannot be
changed without the approval of a majority of the Portfolio's outstanding voting
shares. The Portfolio's investment objective is not a fundamental policy, but
will not be changed by the Portfolio's Board of Directors without at least 30
days' advance notice to shareholders.
Investment restrictions that are fundamental policies are listed in the
Statement of Additional Information. An investment policy is not fundamental
unless this Prospectus or the Statement of Additional Information says that it
is.
|X| Portfolio Turnover. The Portfolio ordinarily does not engage in
short-term trading to try to achieve its objective. Portfolio turnover affects
brokerage costs the Portfolio pays. If the Portfolio realizes capital gains when
it sells its portfolio investments, it must generally pay those gains out to
shareholders, increasing their taxable distributions. The Financial Highlights
table below shows the Portfolio's portfolio turnover rates during prior fiscal
years.
Other Investment Strategies. To seek its objective, the Portfolio can also use
the investment techniques and strategies described below. The Manager might not
always use all of the different types of techniques and investments described
below. These techniques involve certain risks, although some are designed to
help reduce investment or market risks.
|X| Debt Securities. Under normal market conditions, the Portfolio can
invest in debt securities, such as securities issued or guaranteed by the U.S.
government or its agencies and instrumentalities, foreign government securities,
and foreign and domestic corporate bonds and debentures. Normally these
investments are limited to not more than 10% of the Portfolio's net assets.
The debt securities the Portfolio buys may be rated by nationally
recognized rating organizations or they may be unrated securities assigned an
equivalent rating by the Manager. The Portfolio's debt investments may be
"investment grade" (that is, in the four highest rating categories of a national
rating organization) or may be lower-grade securities (sometimes called "junk
bonds") rated as low as "B," as described above.
|_| Special Credit Risks of Lower-Grade Securities. All corporate
debt securities (whether foreign or domestic) are subject to some degree of
credit risk. Credit risk relates to the ability of the issuer to meet interest
or principal payments on a security as they become due. While investment grade
securities are subject to risks of non-payment of interest and principal,
generally, higher yielding lower-grade bonds, whether rated or unrated, have
greater risks than investment grade securities.
These securities may be subject to greater market fluctuations and risk of
loss of income and principal than investment grade securities. There may be less
of a market for them and therefore they may be harder to sell at an acceptable
price. There is a relatively greater possibility that the issuer's earnings may
be insufficient to make the payments of interest and principal due on the bonds.
These risks mean that the Portfolio's net asset value per share could be reduced
by declines in value of these securities.
|_| Interest Rate Risks. The values of debt securities are subject to
change when prevailing interest rates change. When interest rates fall, the
value of already-issued debt securities generally rise. When interest rates
rise, the values of already-issued debt securities generally fall. The magnitude
of these fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities. The Portfolio's share prices can go up or down
when interest rates change because of the effect of the changes on the value of
the Portfolio's investments in debt securities.
|X| Cash and Cash Equivalents. Under normal market conditions the
Portfolio can invest in cash and cash equivalents of the types described below
in "Temporary Defensive Investments." This strategy would be used primarily for
cash management or liquidity purposes. To the extent that the Portfolio uses
this strategy, it might reduce its opportunities to seek its objective of
long-term growth.
|X| Risks of Foreign Investing. The Portfolio can buy securities of
companies or governments in any country, developed or underdeveloped. As a
fundamental policy, the Portfolio cannot invest more than 10% of its total
assets in foreign securities. As an exception to that restriction the Portfolio
can invest up to 25% of its total assets in foreign equity or debt securities
that are:
|_| issued, assumed or guaranteed by foreign governments or their
political subdivisions or instrumentalities, |_| assumed or
guaranteed by domestic issuers (including Eurodollar securities), or
|_| issued, assumed or guaranteed by foreign issuers that have a
class of securities listed for trading on The New York Stock
Exchange.
While foreign securities offer special investment opportunities, there are
also special risks, such as foreign taxation, risks of delays in settlements of
securities transactions, and the effects of a change in value of a foreign
currency against the U.S. dollar, which will result in a change in the U.S.
dollar value of securities denominated in that foreign currency.
|X| Derivative Investments. The Portfolio can invest in a number of
different kinds of "derivative" investments. In general terms, a derivative
investment is an investment contract whose value depends on (or is derived from)
the value of an underlying asset, interest rate or index. In the broadest sense,
exchange-traded options, futures contracts, and other hedging instruments the
Portfolio might use may be considered "derivative investments." The Portfolio
has limits on the amount of particular types of derivatives it can hold.
Currently the Portfolio does not use those types of investments to a significant
degree.
|_| There are Special Risks in Using Derivative Investments. Markets
underlying securities and indices may move in a direction not anticipated by the
Manager. Interest rate and stock market changes in the U.S. and abroad may also
influence the performance of derivatives. As a result of these risks the
Portfolio could realize less principal or income from the investment than
expected. Certain derivative investments held by the Portfolio may be illiquid.
If the issuer of the derivative does not pay the amount due, the Portfolio can
lose money on the investment. If that happens, the Portfolio's share price could
decline or the Portfolio could get less income than expected. However, using
derivatives can cause the Portfolio to lose money on its investments and/or
increase the volatility of its share prices.
|X| Hedging. The Portfolio can write covered calls on securities, futures
and stock indices, and can buy and sell certain kinds of futures contracts and
forward contracts. These are all referred to as "hedging instruments." The
Portfolio does not use hedging instruments for speculative purposes, and has
limits on its use of them. The Portfolio is not required to use hedging
instruments in seeking its goal and currently does not use them to a significant
degree.
Options trading involves the payment of premiums and has special tax
effects on the Portfolio. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Portfolio is exercised
on an investment that has increased in value, the Portfolio will be required to
sell the investment at the call price and will not be able to realize any profit
if the investment has increased in value above the call price.
If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the Portfolio's return.
The Portfolio could also experience losses if the prices of its futures and
options positions were not correlated with its other investments or if it could
not close out a position because of an illiquid market.
|X| Temporary Defensive Investments. In times of unstable market or
economic conditions, the Portfolio can invest up to 100% of its assets in
temporary defensive investments. Generally they would be high-quality,
short-term money market instruments, such as U.S. government securities,
highly-rated commercial paper, short-term corporate debt obligations, bank
deposits or repurchase agreements. The Portfolio may also hold these types of
securities pending the investment of proceeds from the sale of Portfolio shares
or portfolio securities or to meet anticipated redemptions of Portfolio shares.
To the extent the Portfolio invests defensively in these securities, it may not
achieve its investment objective of capital growth.
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Portfolio invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Portfolio and
other investors. That failure could have a negative impact on handling
securities trades, pricing and accounting services. Data processing errors by
government issuers of securities could result in economic uncertainties, and
those issuers may incur substantial costs in attempting to prevent or fix such
errors, all of which could have a negative effect on the Portfolio's investments
and returns.
The Manager and the Transfer Agent have been working on necessary changes
to their computer systems to deal with the year 2000 and expect that their
systems will be adapted in time for that event, although there cannot be
assurance of success. Additionally, the services they provide depend on the
interaction of their computer systems with those of brokers, information
services, the Portfolio's Custodian and other parties. Therefore, any failure of
the computer systems of those parties to deal with the year 2000 may also have a
negative effect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.
How the Portfolio Is Managed
The Manager. The Portfolio's investment Manager, OppenheimerFunds, Inc., chooses
the Portfolio's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board of
Directors, under an Investment Advisory Agreement that states the Manager's
responsibilities. The Agreement sets forth the fees paid by the Portfolio to the
Manager and describes the expenses that the Portfolio is responsible to pay to
conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
mutual funds, with assets of more than $95 billion as of December 31, 1998, and
with more than 4 million shareholder accounts. The Manager is located at Two
World Trade Center, 34th Floor, New York, New York 10048-0203.
|X| Portfolio Managers. The Portfolio has a portfolio management team
consisting of three portfolio managers. The principal portfolio manager, Peter
M. Antos, is a Vice President of the Portfolio and a Senior Vice President of
the Manager. He has been the Portfolio's senior portfolio manager since 1989 and
is an officer and portfolio manager of other mutual funds. Prior to joining the
Manager in 1996, he was employed by the G.R. Phelps & Co., Inc., the Portfolio's
prior investment adviser.
Portfolio managers Michael C. Strathearn and Kenneth B. White are also
Vice Presidents of the Portfolio and the Manager and serve as officers and
portfolio managers of other mutual funds. Before joining the Manager in 1996,
each was employed by Connecticut Mutual Life Insurance Company, the then-parent
of G.R. Phelps. They have been portfolio managers of the Portfolio since 1988
and 1992, respectively.
|X| Advisory Fees. Under the Investment Advisory Agreement, the Portfolio
pays the Manager an advisory fee at an annual rate that declines on additional
assets as the Portfolio grows: 0.625% of the first $300 million of average daily
net assets of the Fund, 0.500% of the next $100 million, and 0.450% of average
daily net assets in excess of $400 million. The Portfolio's management fee for
its last fiscal year ended December 31, 1998, was ___% of average annual net
assets for each class of shares.
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About Your Account
- -------------------------------------------------------------------------------
How to Buy and Sell Shares
Shares of the Portfolio are offered for purchase as an investment medium for
variable life insurance policies and variable annuity contracts and other
insurance company separate accounts, as described in the accompanying account
Prospectus. All the information you need on how to buy or sell shares through
your account investment are described in that prospectus. You cannot contact the
Portfolio or its transfer agent directly, as all the records that identify you
as an indirect investor are maintained by the insurance company sponsoring your
separate account investment, or its servicing agents.
Dividends, Capital Gains and Taxes
Dividends. The Portfolio intends to declare dividends separately for each
class of shares from net investment income on an annual basis.
Capital Gains. The Portfolio may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Portfolio may make
supplemental distributions of dividends and capital gains following the end of
its fiscal year. There can be no assurance that the Portfolio will pay any
capital gains distributions in a particular year.
Tax Treatment to the Account As Shareholder. Dividends paid by the Portfolio
from its ordinary income and distributions of its net realized short-term or
long-term capital gains are includable in gross income of the Accounts holding
such shares. The tax treatment of such dividends and distributions depends on
the tax status of that Account.
This information is only a summary of certain federal tax information about
your investment. You should consult with your tax adviser or the sponsor of your
separate account about the effect of an investment in the Portfolio on your
particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the
Portfolio's financial performance for the past 5 fiscal years. Certain
information reflects financial results for a single Portfolio share. The total
returns in the table represent the rate that an investor would have earned [or
lost] on an investment in the Portfolio (assuming reinvestment of all dividends
and distributions). This information has been audited by Deloitte & Touche LLP,
the Portfolio's independent auditors, whose report, along with the Portfolio's
financial statements, is included in the Statement of Additional Information,
which is available on request.
<PAGE>
For More Information:
The following additional information about the Portfolio is available without
charge upon request:
Statement of Additional Information
This document includes additional information about the Portfolio's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Portfolio's investments and performance is
available in the Portfolio's Annual and Semi-Annual Reports to shareholders. The
Annual Report includes a discussion of market conditions and investment
strategies that significantly affected the Portfolio's performance during its
last fiscal year.
- ----------------------------------------------------------------------------
How to Get More Information:
- ----------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Portfolio or your
account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1-800-525-7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can read or down-load documents on the OppenheimerFunds web site:
http://www.oppenheimerfunds.com You can also obtain copies of the Statement of
Additional Information and other Portfolio documents and reports by visiting the
SEC's Public Reference Room in Washington, D.C. (Phone 1-800-SEC-0330) or the
SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon
payment of a duplicating fee by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-6009.
No one has been authorized to provide any information about the Portfolio or to
make any representations about the Portfolio other than what is contained in
this Prospectus. This Prospectus is not an offer to sell shares of the
Portfolio, nor a solicitation of an offer to buy shares of the Portfolio, to any
person in any state or other jurisdiction where it is unlawful to make such an
offer.
SEC File No. 811-3255
PR0___.0499 Printed on recycled paper.
<PAGE>
Appendix to Prospectus of
Panorama Series Fund, Inc. - Growth Portfolio
Graphic material included in the Prospectus of Growth Portfolio: "Annual
Total Returns (as of 12/31 each year)":
A bar chart will be included in the Prospectus of Growth Portfolio (the
"Fund") depicting the annual total returns of a hypothetical investment in Class
A shares of the Portfolio for each of the ten most recent calendar years. Set
forth below are the relevant data points that will appear in the bar chart:
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Calendar Year Ended Annual Total Return
12/31
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1989 %
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1990 %
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1991 %
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1992 %
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1993 %
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1994 %
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1995 %
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1996 %
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1997 %
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1998 %
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<PAGE>
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Total Return Portfolio
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A Series of Panorama Series Fund, Inc.
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Prospectus dated April 30, 1999
Total Return Portfolio (the "Portfolio") is a mutual fund that seeks to
maximize total investment return mainly by allocating its assets among
investments in stocks, corporate bonds, U.S. government securities and money
market instruments.
Shares of the Portfolio are sold to provide benefits under variable life
insurance policies and variable annuity contracts and other insurance company
separate accounts. The investors in these insurance products determine whether,
and to what extent, their investment should be allocated in shares of the
Portfolio, or alternative investments. The prospectus for that insurance product
(which accompanies this Prospectus) explains how to increase or decrease your
indirect investment in the Portfolio.
This Prospectus contains important information about the Portfolio's
objective, its investment policies, strategies and risks. Please read this
Prospectus carefully before you invest and keep it for future reference about
your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Portfolio's securities nor has it determined that
this Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
<PAGE>
Contents
About the Portfolio
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The Portfolio's Objective and Investment Strategies
Main Risks of Investing in the Portfolio
The Portfolio's Past Performance
About the Portfolio's Investments
How the Portfolio is Managed
About Your Account
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How to Buy and Sell Shares
Dividends, Capital Gains and Taxes
Financial Highlights
<PAGE>
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About the Portfolio
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The Portfolio's Objective and Investment Strategies
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What Is the Portfolio's Investment Objective? The Portfolio's objective is to
maximize total investment return (including capital appreciation and income)
principally by allocating its assets among stocks, corporate bonds, U.S.
government securities and money market instruments, according to changing
market conditions.
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What Does the Portfolio Invest In? The Portfolio invests mainly in stocks, bonds
and money market instruments. The Manager can allocate the Portfolio's
investments among these different types of securities in different amounts at
different times to seek the Portfolio's goal. That allocation is based on the
Manager's judgment of where the best opportunities are after evaluating market
and economic conditions.
At least 25% of the Portfolio's total assets will normally be invested in
fixed income senior securities. Otherwise, the Portfolio is not required to
allocate its investments among stocks, bonds and money market instruments in any
fixed proportion but may have some of its assets invested in each asset class in
relative proportions that change over time.
|_| Equity Securities. The Portfolio can buy a variety of domestic and
foreign equity investments, including common and preferred stocks, warrants and
convertible securities (which the Manager considers to be "equity substitutes").
The Portfolio can buy securities of companies of different capitalization
ranges. There are limits on the Portfolio's investments in foreign securities.
|_| Debt Securities. The Portfolio can also invest in a variety of debt
securities, including securities issued or guaranteed by the U.S. government and
its agencies and instumentalities, including mortgage-related securities and
collateralized mortgage obligations ("CMOs"). It can also buy municipal
securities, foreign government securities, and domestic and foreign corporate
debt obligations. The Portfolio can buy bonds rated below investment grade
(these are commonly called "junk bonds"), but has limits on these investments.
|_| Money Market Instruments. Under normal market conditions (when the
equity and debt securities markets are not unstable, in the Manager's view), the
Portfolio can hold money market instruments, such as short-term U.S.
government securities and commercial paper.
The Portfolio can also use hedging instruments and certain derivative
investments to try to manage investment risks. These investments are more fully
explained in "About the Portfolio's Investments," below.
|X| How Does the Manager Decide What Securities to Buy or Sell? In
selecting securities for purchase or sale by the Portfolio, the portfolio
managers use an investment process that uses quantitative tools to analyze
market dynamics and economic trends, to determine the allocation of the
Portfolio's portfolio over different asset classes. In selecting stocks for the
portfolio, the portfolio managers use a disciplined value investment style.
While this process and the inter-relationship of the factors used may change
over time and its implementation may vary in particular cases, in general the
investment selection process includes the strategies described below: |_| The
portfolio managers use a quantitative analysis of the equity and
debt securities markets to determine the asset allocation of the
Portfolio's portfolio. They analyze market trends, general economic
data and relative performance of the asset classes in which the
Portfolio can invest. For example, during periods of slowing
corporate growth rates, they may shift more assets to bonds and other
fixed-income securities.
|_| In selecting stocks, they use value investing techniques to identify
a universe of stocks that are undervalued in the market, focusing on
stocks that have lower price/earnings (P/E) ratios compared, for
example, to the P/E ratio of the S&P 500 Index.
|_| The portfolio managers use both quantitative and fundamental analytical
tools, including internal research and reports by other market
analysts, to identify stocks within the selected universe that may
provide growth opportunities, for example, by selecting stocks of
issuers that have better earnings than analysts have expected
("positive earnings surprise"). The expectation is that the these
stocks will increase in value when the market re-evaluates the
issuers and the price/earnings ratios of the stocks.
|_| If the P/E ratio of a stock held by the Portfolio moves significantly
above the P/E ratio of the broad market benchmark the portfolio
managers use, or if the issuer's business fundamentals decline, the
portfolio managers will consider selling the stock.
|_| In selecting bonds, the portfolio managers normally expect that
portion of the Portfolio's portfolio to have an average maturity
(measured on a dollar-weighted basis) of between 6 to 14 years.
Who Is the Portfolio Designed For? The Portfolio is designed primarily for
investors seeking total investment return over the long term from a portfolio
investing in different asset classes, including stocks and bonds. Because the
Portfolio invests a portion of its assets in stocks, those investors should be
willing to assume the risks of short-term share price fluctuations that are
typical for a Portfolio that can have substantial stock investments. Since the
Portfolio's income level will fluctuate and will likely be small, it is not
designed for investors needing an assured level of current income.
Main Risks of Investing in the Portfolio
All investments carry risks to some degree. The Portfolio's investments in
stocks and bonds are subject to changes in their value from a number of factors.
They include changes in general stock and bond market movements (this is
referred to as "market risk"), or the change in value of particular stocks and
bonds because of an event affecting the issuer (this is referred to as "credit
risk").
The Portfolio's value selection strategy might not produce the desired
investment results if the securities selected do not appreciate in value over
time. Changes in interest rates can also affect stock and bond prices (this is
known as "interest rate risk").
These risks collectively form the risk profile of the Portfolio and can
affect the value of the Portfolio's investments, its investment performance and
its price per share. These risks mean that you can lose money by investing in
the Fund. When you redeem your shares, they may be worth more or less than what
you paid for them.
The Portfolio's investment Manager, OppenheimerFunds, Inc., tries to
reduce risks by carefully researching securities before they are purchased. The
Portfolio attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial amount of stock of any one
company and by not investing too great a percentage of the Portfolio's assets in
any one company. Also, the Portfolio does not concentrate 25% or more of its
investments in any one industry. However, changes in the overall market prices
of securities and the income they pay can occur at any time.
The share price of the Portfolio will change daily based on changes in
market prices of securities and market conditions, and in response to other
economic events. There is no assurance that the Portfolio will achieve its
investment objective.
|X| Risks of Investing in Stocks. Stocks fluctuate in price, and their
short-term volatility at times may be great. Because the Portfolio currently has
substantial investments in stocks, the value of the Portfolio's portfolio will
be affected by changes in the stock markets. Market risk will affect the
Portfolio's net asset value per share, which will fluctuate as the values of the
Portfolio's portfolio securities change.
A variety of factors can affect the price of a particular stock and the
prices of individual stocks do not all move in the same direction uniformly or
at the same time. Different stock markets may behave differently from each
other. In particular, because the Portfolio currently emphasizes investments in
stocks of U.S. issuers, it will be primarily affected by changes in U.S.
stock markets.
Additionally, stocks of issuers in a particular industry may be affected
by changes in economic conditions that affect that industry more than others, or
by changes in government regulations, availability of basic resources or
supplies, or other events. To the extent that the Portfolio is emphasizing
investments in a particular industry, its share values may fluctuate in response
to events affecting that industry.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer. The Portfolio
can invest in securities of large companies but it can also buy stocks of small
and medium-size companies, which may have more volatile stock prices than stocks
of large companies.
|X| Credit Risk. Debt securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a security to make interest and
principal payments on the security as they become due. If the issuer fails to
pay interest, the Portfolio's income may be reduced and if the issuer fails to
repay principal, the value of that bond and of the Portfolio's shares may be
reduced. While the Portfolio's investments in U.S. government securities are
subject to little credit risk, the Portfolio's other investments in debt
securities, particularly high-yield lower-grade debt securities, are subject to
risks of default.
|X| Interest Rate Risks. The values of debt securities, including U.S.
government securities, are subject to change when prevailing interest rates
change. When interest rates fall, the values of already-issued debt securities
generally rise. When interest rates rise, the values of already-issued debt
securities generally fall. The magnitude of these fluctuations will often be
greater for longer-term debt securities than shorter-term debt securities. The
Portfolio's share prices can go up or down when interest rates change because of
the effect of the changes on the value of the Portfolio's investments in debt
securities.
|X| Prepayment Risk. Prepayment risk occurs when the issuer of a security
can prepay the principal prior to the security's maturity. Securities subject to
prepayment risk, including the CMOs and other mortgage-related securities that
the Portfolio can buy, generally offer less potential for gains when prevailing
interest rates decline, and have greater potential for loss when interest rates
rise. The impact of prepayments on the price of a security may be difficult to
predict and may increase the volatility of the price.
If interest rates rise rapidly, prepayments may occur at slower rates than
expected, which could have the effect of lengthening the expected maturity of a
short or medium-term security. That could cause its value to fluctuate more
widely in response to changes in interest rates. In turn, this could cause the
value of the Portfolio's shares to fluctuate more.
|X| There are Special Risks in Using Derivative Investments. The Portfolio
can use derivatives to seek increased returns or to try to hedge investment
risks. In general terms, a derivative investment is one whose value depends on
(or is derived from) the value of an underlying asset, interest rate or index.
Options, futures, mortgage-related securities and CMOs, asset-backed securities
and "stripped" securities are examples of derivatives the Portfolio can use.
If the issuer of the derivative does not pay the amount due, the Portfolio
can lose money on the investment. If that happens, the Portfolio's share price
could decline or the Portfolio could get less income than expected. The
Portfolio has limits on the amounts of particular types of derivatives it can
hold. However, using derivatives can cause the Portfolio to lose money on its
investments and/or increase the volatility of its share prices.
How Risky is the Portfolio Overall? The Portfolio's investments in stocks for
long-term growth expose the Portfolio to the risk that in the short term, the
stock markets can be volatile, and the price of the Portfolio's shares will go
up and down as a result. The Portfolio's income-oriented investments may help
cushion the Portfolio's total return from changes in stock prices, but
fixed-income securities have their own risks, such as the risk of default and
changes in value when interest rates change. The Portfolio seeks to reduce the
effects of these risks by diversifying its investments over different asset
classes and different types of securities. The Portfolio is generally more
conservative than aggressive growth stock funds, but more aggressive than funds
that invest solely in investment grade bonds.
An investment in the Portfolio is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Portfolio's Past Performance
The bar chart and table below show one measure of the risks of investing in the
Portfolio, by showing changes in the Portfolio's performance from year to year
for the last ten calendar years and by showing how the average annual total
returns of the Portfolio's shares compare to those of a broad-based market
index. The Portfolio's past investment performance is not necessarily an
indication of how the Portfolio will perform in the future.
Annual Total Returns (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]
Charges imposed by the separate accounts that invest in the Portfolio are not
included in the calculations of return in this bar chart, and if those charges
were included, the returns would be less than those shown. During the period
shown in the bar chart, the highest return (not annualized) for a calendar
quarter was ____% (__Q'__) and the lowest return (not annualized) for a calendar
quarter was ____% (__Q'__).
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Average Annual
Total Returns
for the periods
ending December Past 1 Year Past 5 Years Past 10 Years
31, 1998
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Total Return % % %*
Portfolio
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S&P 500 Index % % %*
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* The index performance is shown from 1/1/89 to compare to the performance of
Class A shares for 10 years.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. Because the Portfolio invests primarily in stocks, the Portfolio's
performance is compared to the S&P 500 Index, an unmanaged index of equity
securities that is a measure of the general domestic stock market. However, it
must be remembered that the index performance reflects the reinvestment of
income but does not consider the effects of capital gains or transaction costs.
Also, the Portfolio may have investments that vary from the index.
About the Portfolio's Investments
The Portfolio's Principal Investment Policies. The composition of the
Portfolio's portfolio among the different types of permitted investments will
vary over time based upon the evaluation of economic and market trends by the
Manager. The Portfolio's portfolio might not always include all of the different
types of investments described below. The Statement of Additional Information
contains more detailed information about the Portfolio's investment policies and
risks.
|X| Stock and Other Equity Investments. The Portfolio can invest in the
equity securities of issuers that may be of small, medium or large
capitalization, to seek total investment return. The Portfolio can invest in
common stock as well as other equity securities, including preferred stocks,
rights and warrants, and securities convertible into common stock. These can
include securities issued by domestic or foreign companies. However, the
Portfolio investments in stocks are currently focused on those of U.S.
issuers.
|_| Convertible Securities. Convertible securities are a form of debt
security, but the Manager regards them as "equity substitutes" because of their
feature allowing them to be converted into common stock. Therefore, their
ratings have less impact on the Manager's investment decision than in the case
of other debt securities. The Portfolio's investments in convertible securities
may include securities rated as low as "B" by Moody's Investor Services, Inc. or
Standard & Poor's Rating Service or having comparable ratings by other national
rating organizations (or, if they are unrated, assigned by the Manager). Those
ratings are below "investment grade" and the securities are subject to greater
risk of default by the issuer than investment grade securities.
|X| Debt Securities. The Portfolio can invest in a variety of debt
securities to seek its goal. The debt securities the Portfolio buys may be rated
by nationally recognized rating organizations or they may be unrated securities
assigned an equivalent rating by the Manager. The Portfolio's debt investments
may be "investment grade" (that is, in the four highest rating categories of a
national rating organization) or may be lower-grade securities (sometimes called
"junk bonds") rated as low as "B." The Portfolio does not invest more than 10%
of its total assets in unrated debt securities.
While the Portfolio can invest as much as 20% of its total assets in
lower-grade securities, currently it does not intend to invest more than 10% of
its total assets in these investments. While the Portfolio is not required to
sell a bond that falls below that rating after the Portfolio buys it, the
Manager will monitor the Portfolio's holdings to determine whether to sell these
securities.
|_| Special Credit Risks of Lower-Grade Securities. All corporate
debt securities (whether foreign or domestic) are subject to some degree of
credit risk. Credit risk relates to the ability of the issuer to meet interest
or principal payments on a security as they become due. Because the Portfolio
can invest in securities rated below investment grade to seek high income, the
Portfolio's credit risks are greater than those of Portfolios that buy only
investment grade bonds. Lower-grade debt securities may be subject to greater
market fluctuations and greater risks of loss of income and principal than
higher-rated debt securities.
Securities that are (or that have fallen) below investment grade are
exposed to a greater risk that the issuers of those securities might not meet
their debt obligations. While investment grade securities are subject to risks
of non-payment of interest and principal, generally, higher yielding lower-grade
bonds, whether rated or unrated, have greater risks than investment grade
securities. These securities may be subject to greater market fluctuations and
risk of loss of income and principal than investment grade securities. There may
be less of a market for them and therefore they may be harder to sell at an
acceptable price. There is a relatively greater possibility that the issuer's
earnings may be insufficient to make the payments of interest and principal due
on the bonds. These risks mean that the Portfolio's net asset value per share
could be reduced by declines in value of these securities, and it might not earn
the income it expects.
|_| U.S. Government Securities. The Portfolio can invest in
securities issued or guaranteed by the U.S. Treasury or other government
agencies or corporate entities referred to as "instrumentalities." These are
referred to as "U.S. government securities" in this Prospectus. They can include
CMOs and other mortgage-related securities. Mortgage-related securities are
subject to additional risks of unanticipated prepayments of the underlying
mortgages, which can affect the income stream to the Portfolio from those
securities as well as their values.
|_| U.S. Treasury Obligations. These include Treasury bills
(maturities of one year or less when issued), Treasury notes (maturities of from
one to ten years), and Treasury bonds (maturities of more than ten years).
Treasury securities are backed by the full faith and credit of the United States
as to timely payments of interest and repayments of principal. They also can
include U. S. Treasury securities that have been "stripped" by a Federal Reserve
Bank, zero-coupon U.S. Treasury securities described below, and Treasury
Inflation-Protection Securities ("TIPS"). Although not rated, Treasury
obligations have little credit risk but are subject to interest rate risk.
|_| Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association pass-through mortgage certificates
(called "Ginnie Maes"). Some are supported by the right of the issuer to borrow
from the U.S. Treasury under certain circumstances, such as Federal National
Mortgage Association bonds ("Fannie Maes"). Others are supported only by the
credit of the entity that issued them, such as Federal Home Loan Mortgage
Corporation obligations ("Freddie Macs"). These have relatively little credit
risk.
|_| Mortgage-Related U.S. Government Securities. These include
interests in pools of residential or commercial mortgages, in the form of
CMOs and other "pass-through" mortgage securities. CMOs that are U.S.
government securities have collateral to secure payment of interest and
principal. They may be issued in different series with different interest
rates and maturities. The collateral is either in the form of mortgage
pass-through certificates issued or guaranteed by a U.S. agency or
instrumentality or mortgage loans insured by a U.S. government agency. The
Portfolio can have significant amounts of its assets invested in
mortgage-related U.S. government securities.
The prices and yields of CMOs are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying mortgages.
Changes in interest rates may cause the rate of expected prepayments of those
mortgages to change. In general, prepayments increase when general interest
rates fall and decrease when interest rates rise.
If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO could be
reduced. Additionally, the Portfolio may have to reinvest the prepayment
proceeds in other securities paying interest at lower rates, which could reduce
the Portfolio's total return.
When interest rates rise rapidly, if prepayments occur more slowly than
expected, a short- or medium-term CMO can in effect become a long-term security,
subject to greater fluctuations in value. These prepayment risks can make the
prices of CMOs very volatile when interest rates change. The prices of
longer-term debt securities tend to fluctuate more than those of shorter-term
debt securities. That volatility will affect the Portfolio's share prices.
Additionally, the Portfolio may buy mortgage-related securities at a premium.
Accelerated prepayments on those securities could cause the Portfolio to lose a
portion of its principal investment represented by the premium the Portfolio
paid.
|_| Private-Issuer Mortgage-Backed Securities. The Portfolio can
invest a substantial portion of its assets in mortgage-backed securities issued
by private issuers, which do not offer the credit backing of U.S. government
securities. Private issuer securities are subject to the credit risks of the
issuers, although in some cases they may be supported by insurance or
guarantees. Primarily these include multi-class debt or pass-through
certificates secured by mortgage loans. They may be issued by banks, savings and
loans, mortgage bankers and other non-governmental issuers.
|_| Asset-Backed Securities. The Portfolio can buy other types of
asset-backed securities that are fractional interests in pools of loans
collateralized by loans or other assets or receivables. They are issued by
trusts and special purpose corporations, that pass the income from the
underlying pool to the buyer of the interest. These securities are subject to
the risk of default by the issuer as well as by the borrowers of the underlying
loans in the pool.
|X| Money Market Instruments and Short-Term Debt Securities. Under
normal market conditions the Portfolio can invest in a variety of short-term
debt obligations having a maturity of one year or less. These include:
|_| Money market instruments. Generally, these are debt obligations
having ratings in the top two rating categories of national rating organizations
(or equivalent ratings assigned by the Manager). Examples include commercial
paper of domestic issuers or foreign companies (foreign issuers must have assets
of $1 billion or more).
|_| Short-term debt obligations of the U.S. government or
corporations.
|_| Obligations of domestic or foreign banks or savings and loan
associations, such as certificates of deposit and bankers' acceptances.
Under normal market conditions this strategy would be used primarily for
cash management or liquidity purposes. The yields on shorter-term debt
obligations tend to be less than on longer-term debt. Therefore, to the extent
that the Portfolio uses this strategy, it might help preserve principal but
might reduce opportunities to seek growth of capital as part of its objective of
total return.
|X| Can the Portfolio's Investment Objective and Policies Change? The
Portfolio's Board of Directors may change non-fundamental investment policies
without shareholder approval, although significant changes will be described in
amendments to this Prospectus. Fundamental policies are those that cannot be
changed without the approval of a majority of the Portfolio's outstanding voting
shares. The Portfolio's investment objective is a not a fundamental policy, but
will not be changed by the Portfolio's Board of Directors without at least 30
days' advance notice to shareholders.
Investment restrictions that are fundamental policies are listed in the
Statement of Additional Information. An investment policy is not fundamental
unless this Prospectus or the Statement of Additional Information says that it
is.
|X| Portfolio Turnover. The Portfolio ordinarily does not engage in
short-term trading to try to achieve its objective. Portfolio turnover affects
brokerage costs the Portfolio pays. If the Portfolio realizes capital gains when
it sells its portfolio investments, it must generally pay those gains out to
shareholders, increasing their taxable distributions. The Financial Highlights
table below shows the Portfolio's portfolio turnover rates during prior fiscal
years.
Other Investment Strategies. To seek its objective, the Portfolio can also use
the investment techniques and strategies described below. The Manager might not
always use all of the different types of techniques and investments described
below. These techniques involve certain risks, although some are designed to
help reduce investment or market risks.
|X| Foreign Investing. The Portfolio can buy equity or debt securities of
companies and debt securities of governments in any country, developed or
underdeveloped. As a fundamental policy, the Portfolio cannot invest more than
10% of its total assets in foreign securities. As an exception to that
restriction the Portfolio can invest up to 25% of its total assets in foreign
equity or debt securities that are: |_| issued, assumed or guaranteed by foreign
governments or their political
subdivisions or instrumentalities,
|_| assumed or guaranteed by domestic issuers (including Eurodollar
securities), or
|_| issued, assumed or guaranteed by foreign issuers that have a class
of securities listed for trading on The New York Stock Exchange.
While foreign securities offer special investment opportunities, there are
also special risks, such as foreign taxation, risks of delays in settlements of
securities transactions, and the effects of a change in value of a foreign
currency against the U.S. dollar, which will result in a change in the U.S.
dollar value of securities denominated in that foreign currency.
|X| Derivative Investments. The Portfolio can invest in a number of
different kinds of "derivative" investments. In the broadest sense,
exchange-traded options, futures contracts, mortgage-related securities,
inverse floaters, CMOs and certain hedging instruments the Portfolio might
use may be considered "derivative investments."
Markets underlying securities and indices may move in a direction not
anticipated by the Manager. Interest rate and stock market changes in the U.S.
and abroad may also influence the performance of derivatives. As a result of
these risks the Portfolio could realize less principal or income from the
investment than expected. Certain derivative investments held by the Portfolio
may be illiquid.
|X| Zero-Coupon and "Stripped" Securities. Some of the U.S. government
debt securities the Portfolio buys are zero-coupon bonds that pay no interest.
They are issued at a substantial discount from their face value. "Stripped"
securities are the separate income or principal components of a debt security.
Some CMOs or other mortgage related securities may be stripped, with each
component having a different proportion of principal or interest payments. One
class might receive all the interest and the other all the principal payments.
Zero-coupon and stripped securities are subject to greater fluctuations in
price from interest rate changes than interest-bearing securities. The Portfolio
may have to pay out the imputed income on zero coupon securities without
receiving the actual cash currently. Stripped securities are particularly
sensitive to changes in interest rates.
The values of interest-only mortgage related securities are also very
sensitive to prepayments of underlying mortgages. When prepayments tend to fall,
the timing of the cash flows to principal-only securities increases, making them
more sensitive to changes in price. The market for some of these securities may
be limited, making it difficult for the Portfolio to dispose of its holdings at
an acceptable price.
|X| Hedging. The Portfolio can buy and sell certain kinds of futures
contracts, call options, forward contracts and options on futures and
broadly-based securities indices. These are all referred to as "hedging
instruments." The Portfolio does not use hedging instruments for speculative
purposes, and has limits on its use of them. The Portfolio is not required to
use hedging instruments in seeking its goal and currently does not use them to a
significant degree.
Options trading involves the payment of premiums and has special tax
effects on the Portfolio. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Portfolio is exercised
on an investment that has increased in value, the Portfolio will be required to
sell the investment at the call price and will not be able to realize any profit
if the investment has increased in value above the call price.
If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the Portfolio's return.
The Portfolio could also experience losses if the prices of its futures and
options positions were not correlated with its other investments or if it could
not close out a position because of an illiquid market.
|X| Temporary Defensive Investments. In times of unstable market or
economic conditions, the Portfolio can invest up to 100% of its assets in
temporary defensive investments. Generally they would be high-quality money
market instruments and short-term debt obligations of the types described above
under "Money Market Instruments and Short-Term Debt Obligations." To the extent
the Portfolio invests defensively in these securities, it may not achieve its
investment objective of maximizing total investment return, as discussed above.
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Portfolio invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Portfolio and
other investors. That failure could have a negative impact on handling
securities trades, pricing and accounting services. Data processing errors by
government issuers of securities could result in economic uncertainties, and
those issuers may incur substantial costs in attempting to prevent or fix such
errors, all of which could have a negative effect on the Portfolio's investments
and returns.
The Manager and the Transfer Agent have been working on necessary changes
to their computer systems to deal with the year 2000 and expect that their
systems will be adapted in time for that event, although there cannot be
assurance of success. Additionally, the services they provide depend on the
interaction of their computer systems with those of brokers, information
services, the Portfolio's Custodian and other parties. Therefore, any failure of
the computer systems of those parties to deal with the year 2000 may also have a
negative effect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.
How the Portfolio Is Managed
The Manager. The Portfolio's investment Manager, OppenheimerFunds, Inc., chooses
the Portfolio's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board of
Directors, under an Investment Advisory Agreement that states the Manager's
responsibilities. The Agreement sets forth the fees paid by the Portfolio to the
Manager and describes the expenses that the Portfolio is responsible to pay to
conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
mutual funds, with assets of more than $95 billion as of December 31, 1998, and
with more than 4 million shareholder accounts. The Manager is located at Two
World Trade Center, 34th Floor, New York, New York 10048-0203.
|X| Portfolio Managers. The Portfolio has a portfolio management team
consisting of five portfolio managers. The principal portfolio manager, Peter M.
Antos, is a Vice President of the Portfolio and a Senior Vice President of the
Manager. He has been the Portfolio's senior portfolio manager since 1989 and is
an officer and portfolio manager of other mutual funds. Prior to joining the
Manager in 1996, he was employed by the G.R. Phelps & Co., Inc., the Portfolio's
prior investment adviser, and its parent, Connecticut Mutual Life Insurance
Company.
Portfolio managers Stephen F. Libera, Michael C. Strathearn, Kenneth B.
White and Arthur J. Zimmer are also Vice Presidents of the Portfolio. Mr.
Zimmer is a Senior Vice President of the Manager. Messrs. Libera, Strathearn
and White are Vice Presidents of the Manager. Each serves as an officer and
portfolio manager of other mutual funds. Before joining the Manager in 1996,
Messrs. Libera, Strathearn and White were employed as portfolio managers by
Connecticut Mutual Life Insurance Company. Their tenure as portfolio
managers of the Portfolio is as follows: Mr. Libera since 1985, Mr.
Strathearn since 1988, Mr. White since 1992, and Mr. Zimmer since 1996.
|X| Advisory Fees. Under the Investment Advisory Agreement, the Portfolio
pays the Manager an advisory fee at an annual rate that declines on additional
assets as the Portfolio grows: 0.625% of the first $600 million of average daily
net assets of the Fund, and 0.450% of average daily net assets in excess of $600
million. The Portfolio's management fee for its last fiscal year ended December
31, 1998, was ___% of average annual net assets for each class of shares.
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About Your Account
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How to Buy and Sell Shares
Shares of the Portfolio are offered for purchase as an investment medium for
variable life insurance policies and variable annuity contracts and other
insurance company separate accounts, as described in the accompanying account
Prospectus. All the information you need on how to buy or sell shares through
your account investment are described in that prospectus. You cannot contact the
Portfolio or its transfer agent directly, as all the records that identify you
as an indirect investor are maintained by the insurance company sponsoring your
separate account investment, or its servicing agents.
Dividends, Capital Gains and Taxes
Dividends. The Portfolio intends to declare dividends separately for each
class of shares from net investment income on an annual basis.
Capital Gains. The Portfolio may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Portfolio may make
supplemental distributions of dividends and capital gains following the end of
its fiscal year. There can be no assurance that the Portfolio will pay any
capital gains distributions in a particular year.
Tax Treatment to the Account As Shareholder. Dividends paid by the Portfolio
from its ordinary income and distributions of its net realized short-term or
long-term capital gains are includable in gross income of the Accounts holding
such shares. The tax treatment of such dividends and distributions depends on
the tax status of that Account.
This information is only a summary of certain federal tax information about
your investment. You should consult with your tax adviser or the sponsor of your
separate account about the effect of an investment in the Portfolio on your
particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the
Portfolio's financial performance for the past 5 fiscal years. Certain
information reflects financial results for a single Portfolio share. The total
returns in the table represent the rate that an investor would have earned [or
lost] on an investment in the Portfolio (assuming reinvestment of all dividends
and distributions). This information has been audited by Deloitte & Touche LLP,
the Portfolio's independent auditors, whose report, along with the Portfolio's
financial statements, is included in the Statement of Additional Information,
which is available on request.
<PAGE>
For More Information:
The following additional information about the Portfolio is available without
charge upon request:
Statement of Additional Information
This document includes additional information about the Portfolio's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Portfolio's investments and performance is
available in the Portfolio's Annual and Semi-Annual Reports to shareholders. The
Annual Report includes a discussion of market conditions and investment
strategies that significantly affected the Portfolio's performance during its
last fiscal year.
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How to Get More Information:
- ----------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Portfolio or your
account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1-800-525-7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can read or down-load documents on the OppenheimerFunds web site:
http://www.oppenheimerfunds.com You can also obtain copies of the Statement of
Additional Information and other Portfolio documents and reports by visiting the
SEC's Public Reference Room in Washington, D.C. (Phone 1-800-SEC-0330) or the
SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon
payment of a duplicating fee by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-6009.
No one has been authorized to provide any information about the Portfolio or to
make any representations about the Portfolio other than what is contained in
this Prospectus. This Prospectus is not an offer to sell shares of the
Portfolio, nor a solicitation of an offer to buy shares of the Portfolio, to any
person in any state or other jurisdiction where it is unlawful to make such an
offer.
SEC File No. 811-3255
PR0___.0499 Printed on recycled paper.
<PAGE>
Appendix to Prospectus of
Total Return Portfolio
Graphic material included in the Prospectus of Total Return Portfolio:
"Annual Total Returns (as of 12/31 each year)":
A bar chart will be included in the Prospectus of Total Return Portfolio
(the "Portfolio") depicting the annual total returns of a hypothetical
investment in shares of the Portfolio for each of the ten most recent calendar
years. Set forth below are the relevant data points that will appear in the bar
chart:
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Calendar Year Ended Annual Total Return
12/31
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1989 %
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1990 %
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1991 %
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- --------------------------------------------------
1992 %
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- --------------------------------------------------
1993 %
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1994 %
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1995 %
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1996 %
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1997 %
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1998 %
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<PAGE>
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Panorama Series Fund, Inc.
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LifeSpan Capital Appreciation Portfolio
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LifeSpan Balanced Portfolio
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LifeSpan Diversified Income Portfolio
Prospectus dated April 30, 1999
LifeSpan Capital Appreciation Portfolio (the "Capital Appreciation
Portfolio") is a mutual fund that seeks capital appreciation to make your
investment grow. It emphasizes investments in common stocks and other equity
securities.
LifeSpan Balanced Portfolio (the "Balanced Portfolio") is a mutual fund
that seeks a blend of capital appreciation and income. It allocates its
investments among common stocks and bonds, with a slightly stronger emphasis on
common stocks.
LifeSpan Diversified Income Portfolio (the "Diversified Income Portfolio")
is a mutual fund that seeks high current income with opportunities for capital
appreciation. It emphasizes investments in bonds and other fixed income
securities.
Shares of the Portfolios are sold to provide benefits under variable life
insurance policies and variable annuity contracts and other insurance company
separate accounts. The investors in these insurance products determine whether,
and to what extent, their investment should be allocated in shares of the
Portfolios, or alternative investments. The prospectus for that insurance
product (which accompanies this prospectus) explains how to increase or decrease
your indirect investment in the Portfolios.
This Prospectus contains important information about each Portfolio's
objective, its investment policies, strategies and risks. Please read this
Prospectus carefully before you invest and keep it for future reference about
your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Portfolios' securities nor has it determined that
this Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
<PAGE>
Contents
About the Portfolios
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The Portfolios' Objectives and Investment Strategies
Main Risks of Investing in the Portfolios
The Portfolios' Past Performance
About the Portfolios' Investments
How the Portfolios are Managed
About Your Account
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How to Buy and Sell Shares
Dividends, Capital Gains and Taxes
Financial Highlights
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<PAGE>
About the Portfolios
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The Portfolios' Objectives and Investment Strategies
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What Is the Capital Appreciation Portfolio's Investment Objective? The
Portfolio's objective is capital appreciation.
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What Is the Balanced Portfolio's Investment Objective? The Portfolio's objective
is to seek a blend of capital appreciation and income.
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What Is the Diversified Income Portfolio's Investment Objective? The
Portfolio's objective is high current income, with opportunities for capital
appreciation.
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What Does each Portfolio Invest In? The Capital Appreciation Portfolio invests
mainly in equity securities, such as common stocks, but will also invest in
corporate bonds and notes, U.S. Government securities and asset-backed
securities.
The Balanced Portfolio invests in equity securities, such as common
stocks, and in bonds, with a slightly stronger emphasis on equity securities.
The Diversified Income Portfolio primarily invests in bonds.
Each Portfolio focuses its investments mainly on domestic companies, but
each can buy foreign securities as well. Each Portfolio may also use hedging
instruments and certain derivative investments to try to manage investment
risks. These investments are more fully explained in "About the Portfolios'
Investments," below.
The Manager will diversify each Portfolio's stock investments among four
distinct stock components: international stocks, value/growth stocks, growth and
income stocks and small-capitalization growth stocks ("small-cap stocks"). The
Manager has engaged Babson-Stewart Ivory International ("Babson-Stewart") to
manage the portion of the Portfolios' assets invested in international stocks.
The Manager has also engaged Pilgrim Baxter & Associates, Ltd. ("Pilgrim
Baxter") to manage the portion of the Portfolios' assets invested in small cap
stocks. The Manager manages the Portfolios' assets invested in the other two
stock components. Each stock component is also permitted to invest a portion of
its assets in bonds when the Manager or relevant Subadviser determines that the
increased flexibility in portfolio management is desirable to enhance the
potential for appreciation or income.
The Manager will diversify a Portfolio's bond investments among three bond
components: government and corporate bonds, high yield/high risk bonds (also
called "junk bonds") and short-term bonds. The Manager has engaged Credit Suisse
Asset Management ("Credit Suisse") (formerly called BEA Associates) to manage
the portion of the Portfolios' assets invested in high yield/high risk bonds.
The Manager manages the other two bond components.
There is no requirement that the Manager allocate a Portfolio's assets
among all stock or bond components at all times, and may not allocate a
Portfolio's assets to certain stock and/or bond components. These stock and bond
components have been selected because the Manager believes that this additional
level of asset diversification will provide each Portfolio with the potential
for high returns with lower overall volatility. Each Portfolio's normal
allocation and potential range of allocations are shown in the chart below.
Asset Capital Diversified
Classes and Appreciation Balanced Income
Components Portfolio Portfolio Portfolio
Normal Normal Normal
AllocationRange Allocation Range AllocationRange
Stocks 80% 70-90% 60% 50-70% 25%
15-35%
International 20% 15-25% 15% 5-20% 0%
0%
Value/Growth 20% 15-30% 15% 10-25% 0%
0%
Growth/Income 20% 15-30% 15% 10-25% 25%
15-35%
Small Cap 20% 15-25% 15% 5-20% 0%
0%
Bonds 20% 10-30% 40% 30-50% 75% 65-85%
Government/ 10% 5-15% 15% 10-25% 35%
30-45%
Corporate
High Yield/
High Risk
Bonds 10% 5-15% 15% 5-20% 15%
5-20%
Short Term
Bonds 0% 0% 10% 5-20% 25%
15-30%
All percentage limitations are applied at the time of purchase of a
security. The Manager may rebalance the asset allocations quarterly to realign
them in response to market conditions. Once the Manager has determined the
weighting of the stock and bond asset classes and the components of each
Portfolio, the Manager or the relevant Subadviser will then select the
individual securities to be included in each component.
|_| International Stock Component. Babson-Stewart will invest the assets
of the international components of the Capital Appreciation Portfolio and the
Balanced Portfolio in the equity securities of companies located outside of the
United States. This component may invest up to 25% of its assets in equity and
debt securities of companies based in emerging countries. A portion of the
assets allocated to this component may be invested in corporate bonds and
government securities of foreign issuers, and cash and short-term instruments.
|_| Value/Growth Stock Component. The Manager will invest the assets of
the value/growth stock components of the Capital Appreciation Portfolio and the
Balanced Portfolio in common stocks of issuers with low price-earnings ratios
and better than anticipated earnings. Up to 15% of this component's assets may
be invested in stocks of foreign issuers that generally have a substantial
portion of their business in the United States, and in American Depository
Receipts ("ADRs") for foreign stocks. A portion of the assets allocated to this
component may be invested in cash and short-term instruments.
|_| Growth/Income Stock Component. The Manager will invest the assets of
the growth/income stock components of each Portfolio in common stocks with low
price-earnings ratios, better-than-anticipated earnings and
better-than-market-average dividend yields. Up to 15% of this component's assets
may be invested in stocks of foreign issuers that generally have a substantial
portion of their business in the United States, and in ADRs. A portion of the
assets allocated to this component may be invested in investment grade or below
investment grade convertible securities, corporate bonds and U.S. government
securities, cash and short-term instruments.
|_| Small Cap Stock Component. Pilgrim Baxter will invest the assets of
the small cap stock component of the Capital Appreciation Portfolio and the
Balanced Portfolio in the equity securities of companies with relatively small
market capitalizations, typically between $250 million to $1.5 billion.
Capitalization is the aggregate value of a company's stock, or its price per
share times the number of shares outstanding. A portion of the assets allocated
to this component may be invested in cash and short-term instruments.
|_| Government/Corporate Bond Component. The Manager will invest the
assets of the government/corporate bond component of each Portfolio in
fixed-income debt securities, including investment grade corporate debt
obligations of foreign and U.S. issuers and securities issued by the U.S.
government and its agencies and instrumentalities or by foreign governments.
While the securities in this component can have long-term maturities (10 or more
years), intermediate term maturities (3 to 10 years) or short-term maturities (1
to 3 years), the Manager expects that normally this component will have an
intermediate average maturity and duration. A portion of the assets allocated to
this component may be invested in cash and short-term instruments.
|_| High Yield/High Risk Bond Component. Credit Suisse will invest the
assets of the high yield/high risk bond component of each Portfolio in bonds
rated "BB" or lower by Standard & Poor's or "Ba" or lower by Moody's Investor
Services, Inc., or comparable ratings from other rating organizations, or, if
not rated, that are deemed by Credit Suisse to be of comparable quality to rated
securities in those categories. These are commonly referred to as "junk bonds."
Credit Suisse may invest the assets allocated to this component in bonds that
are in default. Bonds in default are not making interest or principal payments
on the due date. A portion of the assets allocated to this component may be
invested in cash and short-term instruments.
|_| Short-Term Bond Component. The Manager will invest the assets of the
short-term bond components of the Balanced Portfolio and Diversified Income
Portfolio primarily in debt obligations of foreign and U.S. issuers and
securities issued by the U.S. government and its agencies and instrumentalities
and by foreign governments. Those securities will generally mature within five
years of the date of purchase, or have a prepayment or similar feature which, in
the view of the Manager, gives the instrument a remaining effective maturity of
up to five years. It is anticipated that the average dollar weighted maturity of
this component will generally range between two and three years. A portion of
the assets allocated to this component may be invested in cash and short-term
instruments.
|_| How Does the Manager or Subadvisers Decide What Securities to Buy or
Sell? In selecting securities for the international stock component of a
Portfolio, Babson-Stewart evaluates investment opportunities on a
company-by-company basis. Babson-Stewart looks primarily for foreign companies
with high growth potential using a "bottom up" investment approach, that is,
looking at the investment performance of individual stocks before considering
the impact of economic trends. This approach includes fundamental analysis of a
company's financial statements and management structure, and analysis of the
company's operations and product development, as well as the industry of which
the issuer is a part.
In seeking broad diversification of the international stock component of a
Portfolio, Babson-Stewart currently searches for: |_| Companies that enjoy a
strong competitive position and high demand for
their products;
|_| Companies that participate in markets with substantial barriers against
entry by potential competitors;
|_| Companies that are entering a growth cycle;
|_| Companies with accelerating earnings growth and cash flow and
stocks selling at attractive prices.
In selecting securities for the value/growth stock component, the Manager
uses an investment process that combines a disciplined value style with growth
strategies. While this process and the inter-relationship of the factors used
may change over time and its implementation may vary in particular cases, in
general the investment selection process includes the strategies described
below:
|_| The Manager uses a quantitative value-oriented investment
discipline to identify undervalued stocks or stocks out of favor
in the market in combination with "fundamental" analysis of an
issuer's financial condition to search for stocks that have
growth potential.
|_| In selecting stocks, the Manager uses value investing techniques
to identify a universe of stocks that are undervalued in the
market, focusing on stocks that have lower price/earnings (P/E)
ratios compared, for example, to the P/E ratio of the S&P 500
Index.
|_| The Manager uses quantitative tools, including internal research and
analysis by other market analysts, to identify stocks within
the selected universe that may provide growth opportunities,
for example, by selecting stocks of issuers that have better
earnings than analysts have expected ("positive earnings
surprise"). The expectation is that the stock will increase
in value when the market re-evaluates the issuer's earnings
expectations and P/E ratio.
|_| If the P/E ratio of a stock held by a Portfolio in this
component moves significantly above the P/E ratio of the broad
market benchmark the Manager uses, or if the issuer reports a
material earnings disappointment, the Manager will consider
selling the stock.
In selecting securities for the growth/income component, the Manager uses
an investment process that uses quantitative tools to analyze market dynamics
and economic trends, to determine the allocation of assets in this component
among stocks and bonds. In selecting stocks for this component, the Manager uses
a disciplined value investment style. While this process and the
inter-relationship of the factors used may change over time and its
implementation may vary in particular cases, in general the investment selection
process includes the strategies described below:
|_| The Manager uses a quantitative analysis of the equity and debt
securities markets to determine the sector allocation of the
assets in this component. The Manager analyzes market trends,
general economic data and relative performance of stocks and
bonds. For example, during periods of slowing corporate
growth rates, the Manager may shift more of the Portfolios'
assets invested in this component to bonds and other
fixed-income securities.
|_| In selecting stocks, the Manager uses value investing techniques
to identify a universe of stocks that are undervalued in the
market, focusing on stocks that have lower P/E ratios compared,
for example, to the P/E ratio of the S&P 500 Index.
|_| The Manager uses quantitative tools, including internal research
and reports by other market analysts, to identify stocks within
the selected universe that may provide growth opportunities, for
example, by selecting stocks of issuers that the Manager
believes will have a positive earnings surprise.
|_| If the P/E ratio of a stock held by a Portfolio in this
component moves significantly above the P/E ratio of the broad
market benchmark the Manager uses, or if the issuer reports a
material earnings disappointment, the Manager will consider
selling the stock.
|_| In selecting bonds, the Manager expects that a portion of the
component to have an average maturity (measured on a
dollar-weighted basis) of between 6 to 14 years.
In selecting securities for the small cap stock component, Pilgrim Baxter
looks for high-growth companies using fundamental analysis of a company's
financial statements, interviews with management and analysis of the company's
operations and product developments, as well as the industry of which the issuer
is part. Pilgrim Baxter also evaluates research on particular industries, market
trends and general economic conditions. In seeking broad diversification of the
investments in this component, Pilgrim Baxter focuses on the factors below,
which may vary in particular cases and may change over time: |_| Companies with
small capitalizations, primarily between $200 million and
$1.5 billion;
|_| Companies with management that has a proven ability to handle rapid
growth;
|_| Companies between their start-up and emerging growth phases; |_| Companies
with superior earnings and revenue growth.
In selecting securities for the government/corporate bond component, the
Manager researches the universe of corporate bonds and U.S. government
securities and weighs yields and relative values against risk. The Manager
considers a variety of factors that may change over time and may vary in
particular cases, and focuses on : |_| Sectors of the U.S. government debt
market that the Manager believes
offer good relative values; |_| Securities that have high income
potential.
In selecting securities for the high yield/high risk bond component,
Credit Suisse analyzes the overall investment opportunities and risks in
different market sectors, industries and countries. Credit Suisse employs a
strategy of diversifying the debt securities it purchases to help moderate the
special risks of investing in high yield debt instruments. Credit Suisse
utilizes a "bottom up" approach, focusing on the performance of individual
securities before considering industry trends. It first evaluates an issuer's
liquidity, financial strength and earnings power. Credit Suisse also considers
the factors below (which may vary in particular cases and may change over time),
looking for:
|_| Changes in the business cycle that might affect corporate profits; |_|
Corporate sectors that in its view are currently undervalued in the
marketplace;
|_| Issuers with earnings growth rates that are faster than the growth rate
of the overall economy;
|_| Securities or sectors that will help the overall diversification of the
component;
|_| Issuers with improvements in relative cash flows and liquidity
to help them meet their obligations.
In selecting securities for the short-term bond component, the Manager
researches the universe of U.S. government securities, and foreign government
debt securities, and debt securities of U.S. and foreign companies, and
weighs the relative values against risks. The Manager considers a variety of
factors that may change over time and may vary in particular cases, focusing
on:
|_| Sectors of the U.S. government and foreign government debt market that
the Manager believes offer good relative values; |_| Short-term
debt securities that are less sensitive to changes in
interest rates, and
|_| Securities generally maturing within five years of the date of
purchase, or with a prepayment feature that the Manager believes
gives the debt instrument an average life of five years.
Who Are the Portfolios Designed For? The Capital Appreciation Portfolio is
designed primarily for investors seeking capital appreciation in their
investment over the long term. Those investors should be willing to assume the
risks of short-term share price fluctuations that are typical for an aggressive
growth fund focusing on stock investments.
The Balanced Portfolio is designed primarily for investors seeking total
investment return over the long term from a portfolio investing in different
asset classes, including stocks and bonds. Because the Portfolio invests a large
portion of its assets in stocks, those investors should be willing to assume the
risks of short-term share price fluctuations that are typical for a Portfolio
that can have substantial stock investments.
The Diversified Income Portfolio is designed for investors with a lower
tolerance for risk that are seeking current income. However, the Portfolio's
share price and income levels will fluctuate and it is not designed for
investors needing an assured level of current income.
Main Risks of Investing in the Portfolios
All investments carry risks to some degree. The Portfolio's investments in
stocks and bonds are subject to changes in their value from a number of factors.
Investments in stocks can be volatile and are subject to changes in general
stock and bond market movements (this is referred to as "market risk"), or the
change in the value of particular stocks or bonds because of an event affecting
the issuer (in the case of bonds, this is known as "credit risk"). High-yield,
lower grade bonds (commonly called "junk bonds") are subject to greater credit
risks than investment grade securities. There may be events or changes affecting
particular industries that might be emphasized in a Portfolio's portfolio (this
is referred to as "industry risk").
Each Portfolio can also buy foreign securities. Therefore, the Portfolios
will be subject to the risks of economic, political or other events that can
affect the values of securities of issuers in particular foreign countries.
Changes in interest rates can also affect stock and bond prices (this is known
as "interest rate risk").
These risks collectively form the risk profile of the Fund, and can affect
the value of the Fund's investments, its investment performance and its price
per share. These risks mean that you can lose money by investing in the Fund.
When you redeem your shares, they may be worth more or less than what you paid
for them.
The Fund's investment Manager, OppenheimerFunds, Inc., and the Subadvisors
it employs, try to reduce risks by carefully researching securities before they
are purchased, and in some cases by using hedging techniques. Each Portfolio
attempts to reduce its exposure to market risks by diversifying its investments,
that is, by not holding a substantial amount of stock of any one company and by
not investing too great a percentage of the Portfolio's assets in any one
company. Also, each Portfolio does not concentrate 25% or more of its assets in
investments in any one industry. However, changes in the overall market prices
of securities can occur at any time.
The share price of each Portfolio will change daily based on changes in
market prices of securities and market conditions, and in response to other
economic events. There is no assurance that a Portfolio will achieve its
investment objective.
|X| Risks of Investing in Stocks. Stocks fluctuate in price, and their
short-term volatility at times may be great. Because the Capital Appreciation
Portfolio and the Balanced Portfolio invest a significant amount of their assets
in equity securities, the value of those Portfolios will be particularly
affected by changes in the stock markets. Market risk will affect those
Portfolios' net asset value per share, which will fluctuate as the values of
their portfolio securities change. The prices of individual stocks do not all
move in the same direction uniformly or at the same time. Different stock
markets may behave differently from each other.
Additionally, stocks of issuers in a particular industry may be affected
by changes in economic conditions, changes in government regulations,
availability of basic resources or supplies or other events that affect that
industry more than others. To the extent that a Portfolio is emphasizing
investments in a particular industry or sector, its share values might fluctuate
in response to events affecting that industry or sector.
Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against the
issuer, or changes in government regulations affecting the issuer or its
industry. The Capital Appreciation Portfolio and the Balanced Portfolio can
invest in securities of large companies and mid-size companies, but may also buy
stocks of small companies, which may have more volatile stock prices than large
companies.
|X| Risks of Foreign Investing. Each Portfolio can buy securities issued
by companies or governments in any country, including developed and
underdeveloped countries. While foreign securities offer special investment
opportunities, there are also special risks.
The change in value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in that
foreign currency. Foreign issuers are not subject to the same accounting and
disclosure requirements that U.S. companies are subject to. The value of foreign
investments may be affected by exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy in the U.S. or
abroad, or other political and economic factors.
There may be transaction costs and risks from the conversion of certain
European currencies to the euro that commenced in January 1999. For example,
brokers and the Portfolios' custodian bank must convert their computer systems
and records to reflect the euro values of securities. If they are not prepared,
there could be delays in settlement of securities trades and additional costs to
the Portfolios.
|_| Special Risks of Emerging and Developing Markets. Securities in
emerging and developing market countries may offer special investment
opportunities, but investments in these countries present risks not found in
more mature markets. Those securities may be more difficult to sell at an
acceptable price and their prices may be more volatile than securities of
issuers in more developed markets. Settlements of trades may be subject to
greater delays so that the Fund might not receive the proceeds of a sale of a
security on a timely basis.
Emerging markets might have less developed trading markets and exchanges.
Emerging countries may have less developed legal and accounting systems and
investments may be subject to greater risks of government restrictions on
withdrawing the sales proceeds of securities from the country. Economies of
developing countries may be more dependent on relatively few industries that may
be highly vulnerable to local and global changes. Governments may be more
unstable and present greater risks of nationalization or restrictions on foreign
ownership of stocks of local companies. These investments may be very
speculative.
|X| Credit Risk. Debt securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a security to make interest and
principal payments on the security as they become due. If the issuer fails to
pay interest, the Portfolio's income might be reduced and if the issuer fails to
repay principal, the value of that security and of the Portfolio's shares might
be reduced. While a Portfolio's investments in U.S. government securities are
subject to little credit risk, a Portfolio's other investments in debt
securities, particularly high-yield lower-grade debt securities, are subject to
risks of default.
|_| Special Risks of Lower-Grade Securities. Because each Portfolio
can invest a significant amount of its total assets in securities below rated
investment-grade to seek high income, the Portfolios' credit risks are greater
than those of funds that buy only investment-grade bonds. Lower-grade debt
securities (commonly called "junk bonds") may be subject to greater market
fluctuations and greater risks of loss of income and principal than
investment-grade debt securities. Securities that are (or that have fallen)
below investment grade are exposed to a greater risk that the issuers of those
securities might not meet their debt obligations. These risks can reduce a
Portfolio's share prices and the income it earns.
|X| Interest Rate Risks. The values of debt securities are subject to
change when prevailing interest rates change. When interest rates fall, the
values of already-issued debt securities generally rise. When interest rates
rise, the values of already-issued debt securities generally fall. The magnitude
of these fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities. The Portfolios' share prices can go up or down
when interest rates change because of the effect of the changes on the value of
the Portfolios' investments in debt securities.
|X| Prepayment Risk. Prepayment risk occurs when the issuer of a security
can prepay the principal prior to the security's maturity. Securities subject to
prepayment risk, including the CMOs and other mortgage-related securities that
the Portfolios can buy, generally offer less potential for gains when prevailing
interest rates decline, and have greater potential for loss when interest rates
rise. The impact of prepayments on the price of a security may be difficult to
predict and may increase the volatility of the price. Additionally, a Portfolio
might buy mortgage-related securities at a premium. Accelerated prepayments on
those securities could cause a Portfolio to lose a portion of its principal
investment represented by the premium it paid.
If interest rates rise rapidly, prepayments might occur at slower rates
than expected, which could have the effect of lengthening the expected maturity
of a short or medium-term security. That could cause its value to fluctuate more
widely in response to changes in interest rates. In turn, this could cause the
value of the Portfolios' shares to fluctuate more.
|X| There Are Special Risks in Using Derivative Investments. Each
Portfolio can use derivatives to seek increased returns or to try to hedge
investment risks. In general terms, a derivative investment is an investment
contract whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures, and forward contracts are
examples of derivatives. Currently the Portfolios do not use these types of
investments to a significant degree.
If the issuer of the derivative does not pay the amount due, the Portfolio
can lose money on the investment. Also, the underlying security or investment on
which the derivative is based, and the derivative itself, may not perform the
way the Manager or the Subadviser expected it to perform. If that happens, the
Portfolio's share price could decline. Each Portfolio has limits on the amount
of particular types of derivatives it can hold. However, using derivatives can
cause a Portfolio to lose money on its investment and/or increase the volatility
of its share prices.
How Risky are the Portfolios Overall? The Capital Appreciation Portfolio focuses
its investments on equity securities for long-term growth. In the short term,
the stock markets can be volatile, and the price of the Portfolio's shares can
go up and down substantially. The Capital Appreciation Portfolio generally does
not use income-oriented investments to help cushion the Fund's total return from
changes in stock prices, except for defensive purposes. The Portfolio is a
moderately aggressive investment vehicle. In the short-term it may be less
volatile than small-cap and emerging markets stock funds, but may be subject to
greater fluctuations in its share prices than funds that emphasize large
capitalization stocks or funds that focus on both stocks and bonds.
The Balanced Portfolio's investments in stocks for long-term growth expose
the Portfolio to the risk that in the short term, the stock markets can be
volatile, and the price of the Portfolio's shares will go up and down as a
result. The Portfolio's income-oriented investments may help cushion the
Portfolio's total return from changes in stock prices, but fixed-income
securities have their own risks, such as the risk of default and changes in
value when interest rates change. The Portfolio seeks to reduce the effects of
these risks by diversifying its investments over different asset classes and
different types of securities. The Portfolio is generally more conservative than
growth stock funds, but more aggressive than funds that invest solely in
investment grade bonds.
The Diversified Income Portfolio's investments in U.S. government
securities are backed by the full faith and credit of the U.S. government and
securities issued or guaranteed by the U.S. government agencies and
instrumentalities have little credit risk. However, like the corporate bonds the
Portfolio invests in, they are subject to interest rate risk. Collateralized
mortgage obligations and other mortgage-related securities in particular, are
subject to a number of risks that can affect their values and income payments.
These risks can cause the Portfolio's share price to fluctuate and can affect
its yield. The Portfolio is generally less aggressive than bond funds that
invest primarily in lower-rated fixed-income securities. It is more risky than a
fund that invests in short-term debt securities or a money market fund that
seeks a stable share price.
An investment in the Portfolios is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The Portfolios' Past Performance
The bar chart and table below show one measure of the risks of investing
in the Portfolios, by showing changes in each Portfolio's performance from year
to year for the calendar years since each Portfolio's inception and by showing
how the average annual total returns of the Portfolios' shares compare to those
of a relevant broad-based market index. The Portfolios' past investment
performance is not necessarily an indication of how they will perform in the
future.
Annual Total Returns (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]
Charges that apply to separate accounts investing in the Portfolios are not
included in the calculations of return in this bar chart, and if those charges
were included, the returns would be less than those shown. During the period
shown in the bar chart, the highest return (not annualized) for a calendar
quarter for Capital Appreciation Portfolio was ____% (__ Q,__) and the lowest
return (not annualized) for a calendar quarter was ____% (__ Q,__). The highest
return (not annualized) for a calendar quarter for Balanced Portfolio was ____%
(__ Q, __) and the lowest return for a calendar quarter was ____% (__ Q, __).
The highest return (not annualized) for a calendar quarter for Diversified
Income Portfolio was ____% (__ Q, __) and the lowest return for a calendar
quarter was ____% (__ Q, __).
---------------------------------------------------
Average Annual
Total Returns Past 5 Years
for the periods (or life of
ending December Past 1 Year Portfolio,
31, 1998 if less)
---------------------------------------------------
---------------------------------------------------
Capital
Appreciation
Portfolio
---------------------------------------------------
---------------------------------------------------
S&P 500 Index
---------------------------------------------------
---------------------------------------------------
Balanced
Portfolio
---------------------------------------------------
---------------------------------------------------
S&P 500 Index
---------------------------------------------------
---------------------------------------------------
Diversified
Income
Portfolio
---------------------------------------------------
---------------------------------------------------
Lehman Brothers
Intermediate
Government/Corporate
Bond Index
---------------------------------------------------
* Inception dates of Portfolios: 9/1//95. The index performance for the S&P
500 Index and the Lehman Brothers Intermediate Government/Corporate Bond
Index is shown from 8/31/95.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. Because the Capital Appreciation Portfolio and the Balanced Portfolio
invest primarily in stocks, their performance is compared to the S&P 500 Index,
an unmanaged index of equity securities that is a measure of the general
domestic stock market. Because the Diversified Income Portfolio invests
primarily in bonds, its performance is compared to the Lehman Brothers
Intermediate Government/Corporate Bond Index, an unmanaged index of fixed rate
debt issuers rated investment grade or higher by Moody's, S&P, or Fitch, in that
order. However, it must be remembered that the index performance reflects the
reinvestment of income but does not consider the effects of capital gains or
transaction costs.
About the Portfolios' Investments
The Portfolios' Principal Investment Policies. The composition of the securities
in each Portfolio will vary over time based upon the evaluation of economic and
market trends by the Manager or the Subadvisers. Each Portfolio's investment
portfolio might not always include all of the different types of investments
described below. The Statement of Additional Information contains more detailed
information about each Portfolio's investment policies and risks.
|X| Stock and Other Equity Investments. Each Portfolio can invest in the
equity securities of issuers that may be of small, medium or large
capitalization, to seek total investment return. The Portfolios can invest in
common stock as well as other equity securities, including preferred stocks,
rights and warrants, and securities convertible into common stock. These can
include securities issued by domestic or foreign companies.
The Portfolios' equity investments may be exchange traded on
over-the-counter securities. Over-the-counter securities may have less liquidity
than exchange-traded securities, and stocks of companies with smaller
capitalization have greater risk of volatility than stocks of larger companies.
|_| Preferred Stocks. Preferred stock, unlike common stock, has a
stated dividend rate payable from the corporation's earnings. Preferred
stock dividends may be cumulative or non-cumulative. "Cumulative" dividend
provisions require all or a portion of prior unpaid dividends to be paid
before dividends may be paid on common stock.
|_| Convertible Securities. Convertible securities are a form of debt
security, but the Manager regards them as "equity substitutes" because of their
feature allowing them to be converted into common stock. Therefore, their
ratings have less impact on the Manager's investment decision than in the case
of other debt securities.
|X| Debt Securities. Each Portfolio can invest in a variety of debt
securities to seek its goal. The debt securities each Portfolio buys may be
rated by nationally recognized rating organizations or they may be unrated
securities assigned an equivalent rating by the Manager or the relevant
Subadviser. Each Portfolio's debt investments may be "investment grade" (that
is, in the four highest rating categories of a national rating organization) or
may be lower-grade securities (sometimes called "junk bonds") rated as low as
"C" or "D" or which may be in default at the time a Portfolio buys them.
While the Balanced Portfolio and the Diversified Income Portfolio can
invest as much as 20% of their total assets in lower-grade securities and
Capital Appreciation Portfolio can invest as much as 15% of its total assets in
lower-grade securities, currently each Portfolio does not intend to invest more
than 10% of its total assets in these investments.
|_| Special Credit Risks of Lower-Grade Securities. All corporate
debt securities (whether foreign or domestic) are subject to some degree of
credit risk. Credit risk relates to the ability of the issuer to meet interest
or principal payments on a security as they become due. Because the Portfolio
can invest in securities rated below investment grade to seek high income, the
Portfolio's credit risks are greater than those of Portfolios that buy only
investment grade bonds. Lower-grade debt securities may be subject to greater
market fluctuations and greater risks of loss of income and principal than
higher-rated debt securities.
Securities that are (or that have fallen) below investment grade are
exposed to a greater risk that the issuers of those securities might not meet
their debt obligations. While investment grade securities are subject to risks
of non-payment of interest and principal, generally, higher yielding lower-grade
bonds, whether rated or unrated, have greater risks than investment grade
securities. These securities may be subject to greater market fluctuations and
risk of loss of income and principal than investment grade securities. There may
be less of a market for them and therefore they may be harder to sell at an
acceptable price. There is a relatively greater possibility that the issuer's
earnings may be insufficient to make the payments of interest and principal due
on the bonds. These risks mean that each Portfolio's net asset value per share
could be reduced by declines in value of these securities, and it might not earn
the income it expects.
|_| U.S. Government Securities. Each Portfolio can invest in
securities issued or guaranteed by the U.S. Treasury or other government
agencies or corporate entities referred to as "instrumentalities." These are
referred to as "U.S. government securities" in this Prospectus. They can include
CMOs and other mortgage-related securities. Mortgage-related securities are
subject to additional risks of unanticipated prepayments of the underlying
mortgages, which can affect the income stream to the Portfolio from those
securities as well as their values.
|_| U.S. Treasury Obligations. These include Treasury bills
(maturities of one year or less when issued), Treasury notes (maturities of from
one to ten years), and Treasury bonds (maturities of more than ten years).
Treasury securities are backed by the full faith and credit of the United States
as to timely payments of interest and repayments of principal. They also can
include U. S. Treasury securities that have been "stripped" by a Federal Reserve
Bank, zero-coupon U.S. Treasury securities described below, and Treasury
Inflation-Protection Securities ("TIPS"). Although not rated, Treasury
obligations have little credit risk but are subject to interest rate risk.
|_| Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association pass-through mortgage certificates
(called "Ginnie Maes"). Some are supported by the right of the issuer to borrow
from the U.S. Treasury under certain circumstances, such as Federal National
Mortgage Association bonds ("Fannie Maes"). Others are supported only by the
credit of the entity that issued them, such as Federal Home Loan Mortgage
Corporation obligations ("Freddie Macs"). These have relatively little credit
risk.
|_| Mortgage-Related U.S. Government Securities. These include
interests in pools of residential or commercial mortgages, in the form of
CMOs and other "pass-through" mortgage securities. CMOs that are U.S.
government securities have collateral to secure payment of interest and
principal. They may be issued in different series with different interest
rates and maturities. The collateral is either in the form of mortgage
pass-through certificates issued or guaranteed by a U.S. agency or
instrumentality or mortgage loans insured by a U.S. government agency. The
Portfolios can have significant amounts of their assets invested in
mortgage-related U.S. government securities.
The prices and yields of CMOs are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying mortgages.
Changes in interest rates may cause the rate of expected prepayments of those
mortgages to change. In general, prepayments increase when general interest
rates fall and decrease when interest rates rise.
If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO could be
reduced. Additionally, a Portfolio may have to reinvest the prepayment proceeds
in other securities paying interest at lower rates, which could reduce that
Portfolio's total return.
When interest rates rise rapidly, if prepayments occur more slowly than
expected, a short- or medium-term CMO can in effect become a long-term security,
subject to greater fluctuations in value. These prepayment risks can make the
prices of CMOs very volatile when interest rates change. The prices of
longer-term debt securities tend to fluctuate more than those of shorter-term
debt securities. That volatility will affect a Portfolio's share prices.
Additionally, each Portfolio may buy mortgage-related securities at a premium.
Accelerated prepayments on those securities could cause a Portfolio to lose a
portion of its principal investment represented by the premium that Portfolio
paid.
|_| Private-Issuer Mortgage-Backed Securities. Each Portfolio can
invest in mortgage-backed securities issued by private issuers, which do not
offer the credit backing of U.S. government securities. Private issuer
securities are subject to the credit risks of the issuers, although in some
cases they may be supported by insurance or guarantees. Primarily these include
multi-class debt or pass-through certificates secured by mortgage loans. They
may be issued by banks, savings and loans, mortgage bankers and other
non-governmental issuers.
|_| Asset-Backed Securities. Each Portfolio can buy other types of
asset-backed securities that are fractional interests in pools of loans
collateralized by loans or other assets or receivables. They are issued by
trusts and special purpose corporations, that pass the income from the
underlying pool to the buyer of the interest. These securities are subject to
the risk of default by the issuer as well as by the borrowers of the underlying
loans in the pool.
|X| Short-Term Debt Securities. Under normal market conditions the
Balanced Portfolio and the Diversified Income Portfolio can invest in a
variety of short-term debt obligations having a maturity of five years or
less. These include:
|_| Money market instruments. Generally, these are debt obligations
having ratings in the top two rating categories of national rating organizations
(or equivalent ratings assigned by the Manager). Examples include commercial
paper of domestic issuers or foreign companies (foreign issuers must have assets
of $1 billion or more).
|_| Short-term debt obligations of the U.S. government or
corporations.
|_| Obligations of domestic or foreign banks or savings and loan
associations, such as certificates of deposit and bankers' acceptances.
Under normal market conditions this strategy would be used primarily for
cash management or liquidity purposes. The yields on shorter-term debt
obligations tend to be less than on longer-term debt. Therefore, to the extent
that the Balanced Portfolio or the Diversified Income Portfolio uses this
strategy, it might help preserve principal but might reduce opportunities to
seek growth of capital.
|_| Foreign Debt Securities. The Portfolios can buy a variety of debt
securities issued by foreign governments and companies, as well as
"supra-national" entities, such as the World Bank. They can include bonds,
debentures, and notes, including derivative investments called "structured
notes." The Portfolios will not invest more than 25% of their total assets in
debt securities of any one foreign government. The Portfolios will buy foreign
currency only in connection with the purchase and sale of foreign securities and
not for speculation.
|X| Can the Portfolios' Investment Objective and Policies Change? The
Board of Directors of Panorama Series Fund, Inc. (the "Company") may change
non-fundamental investment policies without shareholder approval, although
significant changes will be described in amendments to this Prospectus.
Fundamental policies are those that cannot be changed without the approval of a
majority of a Portfolio's outstanding voting shares. Each Portfolio's objective
is a fundamental policy. Other investment restrictions that are fundamental
policies are listed in the Statement of Additional Information. An investment
policy is not fundamental unless this Prospectus or the Statement of Additional
Information says that it is.
|X| Portfolio Turnover. Each Portfolio might engage in short-term trading
to try to achieve its objective. Portfolio turnover affects brokerage costs each
Portfolio pays. If a Portfolio realizes capital gains when it sells its
portfolio investments, it must generally pay those gains out to shareholders,
increasing their taxable distributions. The Financial Highlights table at the
back of this Prospectus shows each Portfolio's portfolio turnover rates during
prior fiscal years.
Other Investment Strategies. To seek their objectives, the Portfolios can also
use the investment techniques and strategies described below. The Manager and
Subadvisers might not always use all of the different types of techniques and
investments described below. These techniques involve certain risks, although
some are designed to help reduce investment or market risks.
|X| Risks of Foreign Investing. Each Portfolio can buy securities of
companies or governments in any country, developed or underdeveloped. While
foreign securities offer special investment opportunities, there are also
special risks.
The change in value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in that
foreign currency. Foreign issuers are not subject to the same accounting and
disclosure requirements that U.S. companies are subject to. The value of foreign
investments may be affected by exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy in the U.S. or
abroad, or other political and economic factors.
|X| Illiquid and Restricted Securities. Investments may be illiquid
because of the absence of an active trading market. That may make it difficult
to value them or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual restriction on its resale or which cannot
be sold publicly until it is registered under the Securities Act of 1933. The
Portfolios will not invest more than 15% of their net assets in illiquid or
restricted securities. Certain restricted securities that are eligible for
resale to qualified institutional purchasers may not be subject to that limit.
The Manager monitors holdings of illiquid securities on an ongoing basis to
determine whether to sell any holdings to maintain adequate liquidity.
|X| Derivative Investments. Each Portfolio can invest in a number of
different kinds of "derivative" investments. In the broadest sense,
exchange-traded options, futures contracts, and other hedging instruments the
Portfolios might use may be considered "derivative" investments. In addition to
using derivatives for hedging, the Portfolios might use other derivative
investments because they offer the potential for increased value. The Portfolios
currently do not use derivatives to a significant degree.
Markets underlying securities and indices may move in a direction not
anticipated by the Manager or Subadvisers. Interest rate and stock market
changes in the U.S. and abroad may also influence the performance of
derivatives. As a result of these risks the Portfolios could realize less
principal or income from the investment than expected. Certain derivative
investments held by the Portfolios may be illiquid.
|X| Zero-Coupon and "Stripped" Securities. Some of the U.S. government
debt securities the Portfolios buy are zero-coupon bonds that pay no interest.
They are issued at a substantial discount from their face value. "Stripped"
securities are the separate income or principal components of a debt security.
Some CMOs or other mortgage related securities may be stripped, with each
component having a different proportion of principal or interest payments. One
class might receive all the interest and the other all the principal payments.
Zero-coupon and stripped securities are subject to greater fluctuations in
price from interest rate changes than interest-bearing securities. A Portfolio
may have to pay out the imputed income on zero coupon securities without
receiving the actual cash currently. Stripped securities are particularly
sensitive to changes in interest rates.
The values of interest-only mortgage related securities are also very
sensitive to prepayments of underlying mortgages. When prepayments tend to fall,
the timing of the cash flows to principal-only securities increases, making them
more sensitive to changes in price. The market for some of these securities may
be limited, making it difficult for a Portfolio to dispose of its holdings at an
acceptable price.
|X| Hedging. Each Portfolio can buy and sell certain kinds of put and call
options, futures and forward contracts and options on futures and broadly-based
securities indices and foreign currencies. These are all referred to as "hedging
instruments." The Portfolios do not currently use hedging extensively and do not
use hedging instruments for speculative purposes. They have limits on their use
of hedging instruments and are not required to use them in seeking their
objective.
Some of these strategies would hedge a Portfolio's portfolio against price
fluctuations. Other hedging strategies, such as buying futures and call options,
would tend to increase a Portfolio's exposure to the securities market. Forward
contracts could be used to try to manage foreign currency risks on a Portfolio's
foreign investments. Foreign currency options could be used to try to protect
against declines in the dollar value of foreign securities a Portfolio owns, or
to protect against an increase in the dollar cost of buying foreign securities.
Options trading involves the payment of premiums and has special tax
effects on the Portfolios. There are also special risks in particular hedging
strategies. If the Manager or a Subadviser used a hedging instrument at the
wrong time or judged market conditions incorrectly, the strategy could reduce a
Portfolio's return. A Portfolio could also experience losses if the prices of
its futures and options positions were not correlated with its other investments
or if it could not close out a position because of an illiquid market.
Temporary Defensive Investments. In times of unstable adverse market or economic
conditions, each Portfolio can invest up to 100% of its assets in temporary
defensive investments. Generally they would be cash equivalents (such as
commercial paper), money market instruments, short-term debt securities, U.S.
government securities, or repurchase agreements and may include other investment
grade debt securities. Each Portfolio could also hold these types of securities
pending the investment of proceeds from the sale of Portfolio shares or
portfolio securities or to meet anticipated redemptions of Portfolio shares. To
the extent a Portfolio invests defensively in these securities, it might not
achieve its investment objective of capital appreciation.
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Portfolios invest could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Portfolios and
other investors. That failure could have a negative impact on handling
securities trades, pricing and accounting services. Data processing errors by
government issuers of securities could result in economic uncertainties, and
those issuers may incur substantial costs in attempting to prevent or fix such
errors, all of which could have a negative effect on the Portfolios' investments
and returns.
The Manager and the Transfer Agent have been working on necessary changes
to their computer systems to deal with the year 2000 and expect that their
systems will be adapted in time for that event, although there cannot be
assurance of success. Additionally, the services they provide depend on the
interaction of their computer systems with those of brokers, information
services, the Portfolios' Custodian and other parties. Therefore, any failure of
the computer systems of those parties to deal with the year 2000 may also have a
negative effect on the services they provide to the Portfolios. The extent of
that risk cannot be ascertained at this time.
How the Portfolios are Managed
The Manager. Each Portfolio's investment Manager, OppenheimerFunds, Inc.,
handles the day-to-day business of each Portfolio and chooses the investments
for those stock and bond components it manages. The Manager carries out its
duties, subject to the policies established by the Company's Board of Directors,
under an Investment Advisory Agreement with each Portfolio that states the
Manager's responsibilities. The Agreements set forth the fees paid by the
Portfolio to the Manager and describes the expenses that the Portfolio is
responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
mutual funds, with assets of more than $95 billion as of December 31, 1998, and
with more than 4 million shareholder accounts. The Manager is located at Two
World Trade Center, 34th Floor, New York, New York 10048-0203.
The Subadvisers. The Manager has engaged three Subadvisers to provide
day-to-day portfolio management for certain components of the LifeSpan
Portfolios. The Manager has engaged Babson-Stewart Ivory International to
provide day-to-day portfolio management services to the international components
of the Capital Appreciation Portfolio and Balanced Portfolio. Babson-Stewart,
One Memorial Drive, Cambridge, MA 02142, was originally established in 1987. The
general partners of Babson-Stewart are David L. Babson & Co., which is an
indirect subsidiary of Massachusetts Mutual Life Insurance Company, and Stewart
Ivory & Co., Ltd. As of December 31, 1998, Babson-Stewart, together with its
Scottish affiliate, had approximately $4.6 billion in assets under management.
Credit Suisse Asset Management, One Citicorp Center, 153 East 53rd Street,
57th Floor, New York, NY 10022, the Subadviser to the high yield/high risk bond
component of the LifeSpan Portfolios, has been providing fixed-income and equity
management services to institutional clients since 1984. Credit Suisse is a
partnership between Credit Suisse Capital Corporation and CS Advisors Corp. As
of December 31, 1998, Credit Suisse, together with its global affiliate, had
$___ billion in assets under management.
Pilgrim Baxter, 825 Duportail Road, Wayne, PA 19087, the Subadviser to the
small cap component of the Capital Appreciation and Balanced Portfolios, was
established in 1982 to provide specialized equity management for institutional
investors including other investment companies. Pilgrim Baxter is a wholly-owned
subsidiary of United Asset Management Corporation. As of December 31, 1998,
Pilgrim Baxter had over $__ billion in assets under management.
Each Subadviser is responsible for choosing the investments of its
respective component for each Portfolio and its duties and responsibilities are
set forth in its respective contract with the Manager. Babson-Stewart is
responsible for choosing all investments for the International Equity Portfolio.
The Manager, not the Portfolios, pays the Subadvisers.
|X| Portfolio Managers. The Manager supervises each Portfolio's investment
program and regularly reviews the asset allocation among each Portfolio's
components. The Manager's personnel manage certain of the components. The
Portfolio Managers of each component are listed below.
The Components of the LifeSpan Portfolios
International Stock Component
(Babson-Stewart)
James W. Burns 1996 Managing Director, Babson-Stewart
(1993-present) and
Director, Stewart Ivory & Co., Ltd. (since
1990).
John G.L. Wright 1996 Managing Director, Babson-Stewart
(1987-present);
Director, Stewart Ivory & Co., Ltd. (since
1971).
Value/Growth Stock and Growth/Income Stock Components
(the Manager)
Peter M. Antos,
C.F.A. 1989 Principal Portfolio Manager of the
Portfolio; Senior
Vice President and Portfolio Manager of the
Portfolios
and of the Manager (since March, 1996); Senior
Vice
President of Harbour View; portfolio
Oppenheimer
funds; previously Vice President and Senior
Portfolio
Manager, Equities-G.R. Phelps, a subsidiary of
Connecticut Mutual Life Insurance Company
("CML")
(1989-1996).
Michael C. Strathearn,
C.F.A. 1988 Vice President and Portfolio Manager of
the Portfolio
and of the Manager (since March, 1996); Vice
President
of Harbour View; Portfolio Manager of other
Oppenheimer funds; previously a Portfolio
Manager,
Equities-Connecticut Mutual Life Insurance
Company
(1988-1996)
Kenneth B. White,
C.F.A. 1992 Vice President and Portfolio Manager of
the Portfolio
and the Manager since March, 1996; Vice
President
of Harbour View; Portfolio Manager of other
Oppenheimer funds; previously a Portfolio
Manager,
Equities-CML (1987-1996).
Small Cap Stock Component
(Pilgrim Baxter)
Gary L. Pilgrim,
C.F.A. 1995 Chief Investment Officer, Pilgrim Baxter
(1982-1997).
Peter J. Niedland 1998 Principal Portfolio Manager of the
Portfolio and
Analyst, Pilgrim Baxter (since 1993).
Government Securities/Corporate Bonds Component
(the Manager)
Stephen F. Libera,
C.F.A. 1985 Vice President and Portfolio Manager of
the Portfolio
and of the Manager (since March 1996); Vice
President
of HarbourView; Portfolio Manager of other
Oppenheimer funds; previously Vice President
and
Senior Portfolio Manager, Fixed IncomenG.R.
Phelps
1985-1996).
High Yield Bonds Component
(BEA Associates)
Richard J. Lindquist 1995 Executive Director and High Yield
Portfolio Manager,
BEA Associates (1995); CS First Boston
(1989-1995).
Short-Term Bond Component
(the Manager)
Stephen F. Libera,
C.F.A. 1985 Vice President and Portfolio Manager of
the Portfolio
and of the Manager (since March 1996); Vice
President
of HarbourView; Portfolio Manager of other
Oppenheimer funds; previously Vice President
and
Senior Portfolio Manager, Fixed IncomenG.R.
Phelps
1985-1996).
|X| Advisory Fees. Under separate Investment Advisory Agreements, the
Capital Appreciation Portfolio, Balanced Portfolio and Diversified Income
Portfolio pay the Manager a monthly fee equal to a percentage of the Portfolio's
average annual net assets equal to 0.85%, 0.85% and 0.75%, respectively, of the
Portfolio's average annual net asset value up to $250 million and 0.75%, 0.75%
and 0.65%, respectively on such assets over $250 million.
The management fee paid by Capital Appreciation Portfolio, Balanced
Portfolio and Diversified Income Portfolio for their last fiscal year ended
December 31, 1998 was ____%, ____% and ____%, respectively of their average
annual net assets.
Under its Investment Subadvisory Agreements with Babson-Stewart, the
Manager pays Babson-Stewart a monthly fee at the following annual rates, which
decline as the average daily net assets of that portion of Capital Appreciation
Portfolio and Balanced Portfolio allocated to Babson-Stewart grows: 0.75% of the
first $10 million of average daily net assets allocated to Babson-Stewart,
0.625% of the next $15 million, 0.50% of the next $25 million and 0.375% of such
assets in excess of $50 million. The portion of the net assets of all Portfolios
allocated to Babson-Stewart will not be aggregated in applying these
breakpoints.
Under its Investment Subadvisory Agreements with Credit Suisse, the
Manager pays Credit Suisse a quarterly fee which declines as the combined
average daily net assets of each Portfolio allocated to Credit Suisse grow at
the following annual rates: 0.45% of the first $25 million of combined average
daily net assets allocated to Credit Suisse, 0.40% of the next $25 million,
0.35% of the next $50 million and 0.25% of the such assets in excess of $100
million.
Under its Investment Subadvisory Agreements with Pilgrim Baxter, the
Manager pays Pilgrim Baxter a monthly fee at the annual rate of 0.60% of the
combined average daily net assets of the Portfolios allocated to Pilgrim Baxter.
- -------------------------------------------------------------------------------
About Your Account
- -------------------------------------------------------------------------------
How to Buy and Sell Shares
Shares of the Portfolios are offered for purchase as an investment medium
for variable life insurance policies and variable annuity contracts and other
insurance company separate accounts, as described in the accompanying account
Prospectus. All the information you need on how to buy or sell shares through
your account investment are described in that prospectus. You cannot contact the
Portfolios or their transfer agent directly, as all the records that identify
you as an indirect investor are maintained by the insurance company sponsoring
your separate account investment, or its servicing agents.
Dividends, Capital Gains and Taxes
Dividends. Each Portfolio intends to declare dividends from net investment
income on an annual basis.
Capital Gains. Each Portfolio may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. Each Portfolio may make
supplemental distributions of dividends and capital gains following the end of
its fiscal year. There can be no assurance that the Portfolios will pay any
capital gains distributions in a particular year.
Tax Treatment to the Account As Shareholder. Dividends paid by each Portfolio
from its ordinary income and distributions of its net realized short-term or
long-term capital gains are includable in gross income of the Accounts holding
such shares. The tax treatment of such dividends and distributions depends on
the tax status of that Account.
This information is only a summary of certain federal tax information about
your investment. You should consult with your tax adviser or the sponsor of your
separate account about the effect of an investment in the Portfolios on your
particular tax situation.
Financial Highlights
The Financial Highlights Tables are presented to help you understand each
Portfolio's financial performance since inception. Certain information reflects
financial results for a single Portfolio share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Portfolio (assuming reinvestment of all dividends and distributions).
This information has been audited by Deloitte & Touche LLP, the Portfolios'
independent auditors, whose report, along with the Portfolios' financial
statements, is included in the Statement of Additional Information, which is
available on request.
<PAGE>
For More Information on the LifeSpan Portfolios:
The following additional information about the Portfolios is available without
charge upon request:
Statement of Additional Information
This document includes additional information about the Portfolios' investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Portfolios' investments and performance is
available in the Portfolios' Annual and Semi-Annual Reports to shareholders. The
Annual Report includes a discussion of market conditions and investment
strategies that significantly affected the Portfolios' performance during their
last fiscal year.
- ----------------------------------------------------------------------------
How to Get More Information:
- ----------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Portfolios:
By Telephone:
Call OppenheimerFunds Services toll-free:
1-800-525-7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can read or down-load documents on the OppenheimerFunds web site:
http://www.oppenheimerfunds.com You can also obtain copies of the Statement of
Additional Information and other Portfolio documents and reports by visiting the
SEC's Public Reference Room in Washington, D.C. (Phone 1-800-SEC-0330) or the
SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon
payment of a duplicating fee by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-6009.
No one has been authorized to provide any information about the Portfolios or to
make any representations about the Portfolios other than what is contained in
this Prospectus. This Prospectus is not an offer to sell shares of the
Portfolios, nor a solicitation of an offer to buy shares of the Portfolios, to
any person in any state or other jurisdiction where it is unlawful to make such
an offer.
SEC File No. 811-____
Printed on recycled paper.
<PAGE>
- -------------------------------------------------------------------------------
Panorama Series Fund, Inc.
- -------------------------------------------------------------------------------
6803 S. Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated April 30, 1999
Panorama Series Fund, Inc. (referred to as the "Company") is an investment
company consisting of seven separate Portfolios (the "Portfolios"):
Total Return Portfolio
Growth Portfolio
International Equity Portfolio
Government Securities Portfolio
(collectively, these are referred to as the "Panorama Portfolios")
and
LifeSpan Capital Appreciation Portfolio ("Capital Appreciation
Portfolio")
LifeSpan Balanced Portfolio ("Balanced Portfolio")
LifeSpan Diversified Income Portfolio ("Diversified Income
Portfolio")
(collectively, these are referred to as the "LifeSpan Portfolios")
Shares of the Portfolios are sold to provide benefits under variable life
insurance policies and variable annuity contracts and other insurance company
separate accounts, as described in the Prospectus.
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Portfolios, and supplements
information in the Portfolios' Prospectuses dated April 30, 1999. It should be
read together with the Prospectuses. You can obtain a Prospectus by writing to
the Portfolios' Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270,
Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free number
shown above or by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
<PAGE>
Contents
Page
About the Portfolios
Additional Information About the Portfolios' Investment Policies and Risks
The Portfolios' Investment Policies.......................
Other Investment Techniques and Strategies................
Investment Restrictions...................................
How the Portfolios are Managed ..............................
Organization and History..................................
Directors and Officers of the Company.....................
The Manager, and Subadvisers and their Affiliates.........
Brokerage Policies of the Portfolios.........................
Performance of the Portfolios................................
About Your Account
How To Buy and Sell Shares...................................
Dividends, Capital Gains and Taxes...........................
Additional Information About the Portfolios..................
Financial Information About the Portfolios
Independent Auditors' Report.................................
Financial Statements.........................................
Appendix A: Ratings Definitions.............................. A-1
Appendix B: Industry Classifications......................... B-1
<PAGE>
- -------------------------------------------------------------------------------
ABOUT THE PORTFOLIOS
- -------------------------------------------------------------------------------
Additional Information About the Portfolios' Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Portfolios are described in the Prospectus. This Statement of
Additional Information contains supplemental information about those policies
and risks and the types of securities that the Portfolios' investment Manager,
OppenheimerFunds, Inc., or the Subadvisers retained by the Manager, can select
for the Portfolios. Additional information is also provided about the strategies
that each Fund may use to try to achieve its objective.
The Portfolios' Investment Policies. The composition of each Portfolio and the
techniques and strategies that the Manager or relevant subadviser uses in
selecting portfolio securities will vary over time. The Portfolios are not
required to use all of the investment techniques and strategies described below
at all times in seeking its goal. They may use some of the special investment
techniques and strategies at some times or not at all.
In selecting securities for each Portfolio, the Manager or relevant
subadviser evaluates the merits of particular securities primarily through the
exercise of its own investment analysis. That process may include, among other
things, evaluation of the issuer's historical operations, prospects for the
industry of which the issuer is part, the issuer's financial condition, its
pending product developments and business (and those of competitors), the effect
of general market and economic conditions on the issuer's business, and
legislative proposals that might affect the issuer.
For purposes of the following discussion, the Portfolios are categorized
by the primary types of investments they make. Total Return Portfolio, Growth
Portfolio, International Equity Portfolio, Capital Appreciation Portfolio and
Balanced Portfolio can be categorized as "Equity Funds." Diversified Income
Portfolio and Government Securities Portfolio can be categorized as "Fixed
Income Funds." However, irrespective of how a Portfolio may be categorized, the
following discussion of the types of investments may apply to any or all of the
Portfolios.
|X| Investments in Equity Securities. The Equity Funds and the stock
components of the LifeSpan Portfolios focus their investments in equity
securities, which include common stocks, preferred stocks, rights and warrants,
and securities convertible into common stock. Certain equity securities may be
selected not only for their appreciation possibilities but because they may
provide dividend income.
Small-cap growth companies may offer greater opportunities for capital
appreciation than securities of large, more established companies. However,
these securities also involve greater risks than securities of larger companies.
Securities of small capitalization issuers may be subject to greater price
volatility in general than securities of large-cap and mid-cap companies.
Therefore, to the degree that a Fund has investments in smaller capitalization
companies at times of market volatility, that Fund's share price may fluctuate
more. Those investments may be limited to the extent the Manager or relevant
subadviser believes that such investments would be inconsistent with the
Portfolio's investment objective.
|_| Growth Companies. The Equity Funds in particular may invest in
securities of "growth" companies. Growth companies are those companies that the
Manager or relevant subadviser believes are entering into a growth cycle in
their business, with the expectation that their stock will increase in value.
They may be established companies as well as newer companies in the development
stage. Growth companies may have a variety of characteristics that in the
Manager's view define them as "growth" issuers.
They may be generating or applying new technologies, new or improved
distribution techniques or new services. They may own or develop natural
resources. They may be companies that can benefit from changing consumer demands
or lifestyles, or companies that have projected earnings in excess of the
average for their sector or industry. In each case, they have prospects that the
Manager believes are favorable for the long term. The portfolio managers of the
Funds look for growth companies with strong, capable management sound financial
and accounting policies, successful product development and marketing and other
factors.
|_| Convertible Securities (All Portfolios except Government
Securities Portfolio). While convertible securities are a form of debt security,
in many cases their conversion feature (allowing conversion into equity
securities) causes them to be regarded more as "equity equivalents." As a
result, the rating assigned to the security has less impact on the Manager's or
relevant subadviser's investment decision with respect to convertible securities
than in the case of non-convertible fixed income securities. Convertible
securities are subject to the credit risks and interest rate risks described
below in "Debt Securities."
To determine whether convertible securities should be regarded as "equity
equivalents," the Manager or relevant subadviser examines the following factors:
(1) whether, at the option of the investor, the convertible security can be
exchanged for a fixed number of shares of common stock of the issuer,
(2) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis
(considering the effect of conversion of the convertible securities),
and
(3) the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any appreciation in
the price of the issuer's common stock.
|_| Rights and Warrants (All Portfolios except Government Securities
Portfolio). Warrants basically are options to purchase equity securities at
specific prices valid for a specific period of time. Their prices do not
necessarily move parallel to the prices of the underlying securities. Rights are
similar to warrants, but normally have a short duration and are distributed
directly by the issuer to its shareholders. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of
the issuer. A Portfolio may invest up to 5% of its total assets in warrants or
rights. That 5% limitation does not apply to warrants a Portfolio has acquired
as part of limits with other securities or that are attached to other
securities. No more than 2% of a Portfolio's total assets may be invested in
warrants that are not listed on either The New York Stock Exchange or The
American Stock Exchange.
Foreign Securities (All Portfolios except Government Securities Portfolio).
Consistent with any limitations a Portfolio may have on foreign investing set
forth in the Prospectus, each Portfolio and, in particular, the International
Equity Portfolio, may invest in foreign securities. The Portfolios may also
invest in debt and equity securities of corporate and governmental issuers of
countries with emerging economies or securities markets. The International
Equity Portfolio, Growth Portfolio and Total Return Portfolio are subject to
restrictions on the amount of its assets that may be invested in foreign
securities. See "Other Investment Restrictions," below.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers, such as the opportunity
to invest in foreign issuers that appear to offer growth potential, or in
foreign countries with economic policies or business cycles different from those
of the U.S., or to reduce fluctuations in portfolio value by taking advantage of
foreign stock or bond markets that do not move in a manner parallel to U.S.
markets. If a Portfolio's portfolio securities are held abroad, the countries in
which such securities may be held and the sub-custodians holding them must be
approved by the Portfolio's Board of Directors under applicable rules of the
Securities and Exchange Commission ("SEC"). In buying foreign securities, a
Portfolio may convert U.S. dollars into foreign currency, but only to effect
securities transactions on foreign securities exchanges and not to hold such
currency as an investment. A Portfolio may also engage in transactions by
purchasing and selling futures and forward contracts.
<PAGE>
-12-
"Foreign securities" include equity and debt securities of companies
organized under the laws of countries other than the United States and debt
securities of foreign governments that are traded primarily on foreign
securities exchanges or in the foreign over-the-counter markets. Securities of
foreign issuers that are represented by American depository receipts, or that
are primarily traded on a U.S. securities exchange, or are traded primarily in
the U.S. over-the-counter market are not considered "foreign securities" for
purposes of a Portfolio's investment allocations, because they are not subject
to many of the special considerations and risks (discussed below) that apply to
foreign securities traded and held abroad.
Risks of Foreign Investing. Investing in foreign securities, and in
particular in securities in emerging countries, involves special additional
risks and considerations not typically associated with investing in securities
of issuers traded in the U.S. These include: reduction of income by foreign
taxes; fluctuation in value of foreign portfolio investments due to changes in
currency rates and control regulations (e.g., currency blockage); transaction
charges for currency exchange; lack of public information about foreign issuers;
lack of uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic issuers; less volume on foreign
exchanges than on U.S. exchanges; greater volatility and less liquidity in some
foreign markets than in the U.S.; less regulation of foreign issuers, stock
exchanges and brokers than in the U.S.; greater difficulties in commencing
lawsuits against foreign issuers; higher brokerage commission rates than in the
U.S.; increased risks of delays in settlement of portfolio transactions or loss
of certificates for portfolio securities; possibilities in some countries, and
in particular emerging countries, of expropriation or nationalization of assets,
confiscatory taxation, political, financial or social instability or adverse
diplomatic developments; and unfavorable differences between the U.S. economy
and foreign economies. In the past, U.S. Government policies have discouraged
certain investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be re-imposed.
Because the Portfolios may invest in securities that are denominated or
quoted in foreign currencies, the strength or weakness of the U.S. dollar
against such currencies may account for part of a Portfolio's investment
performance. A decline in value of any particular currency against the U.S.
dollar will cause a decline in the U.S. dollar value of a Portfolio's holdings
of securities denominated in that currency, and therefore will cause an overall
decline in the Portfolio's net asset value and any net investment income (and
capital gains) to be distributed in U.S. dollars to shareholders of the
Portfolios.
A Portfolio's investment income or, in some cases, capital gains from
foreign issuers may be subject to foreign withholding or other foreign taxes,
thereby reducing a Portfolio's net investment income and/or net realized capital
gains.
|X| Investments in Bonds and Other Debt Securities. The Fixed Income Funds
and the bond components of the LifeSpan Portfolios can invest in bonds,
debentures and other debt securities to seek current income as part of its
investment objective. The Portfolios' debt investments can include
investment-grade and non-investment-grade bonds (commonly referred to as "junk
bonds"). Investment-grade bonds are bonds rated in one of the four highest
categories by Moody's Investors Service, Inc., Standard & Poor's Corporation,
Fitch IBCA, Inc., Duff & Phelps, Inc., or that have comparable ratings by
another nationally-recognized rating organization, or if unrated or split-rated,
determined by the Manager or relevant subadviser to be of comparable quality. In
making investments in debt securities, the Manager or relevant subadviser may
rely to some extent on the ratings of ratings organizations or it may use its
own research to evaluate a security's credit-worthiness.
|_| U.S. Government Securities (All Portfolios). U.S. Government
Securities are debt obligations issued or guaranteed by the U.S. Government or
one of its agencies or instrumentalities, and include "zero coupon" Treasury
securities. Some of these obligations, including U.S. Treasury notes and bonds,
and mortgage-backed securities guaranteed by the Government National Mortgage
Association ("GNMA"), are supported by the full faith and credit of the United
States, which means that the government pledges to use its taxing power to repay
the debt. Other U.S. Government Securities issued or guaranteed by Federal
agencies or government-sponsored enterprises are not supported by the full faith
and credit of the United States. They may include obligations supported by the
ability of the issuer to borrow from the U.S. Treasury. However, the Treasury is
not under a legal obligation to make a loan. Examples of these are obligations
of Federal Home Loan Mortgage Corporation ("FHLMC") Other obligations are
supported by the credit of the instrumentality, such as bonds issued by Federal
National Mortgage Association ("FNMA").
U.S. Treasury Obligations. These include Treasury Bills (which have
maturities of one year or less when issued), Treasury Notes (which have
maturities of one to ten years when issued) and Treasury Bonds (which have
maturities generally greater than ten years when issued). U.S. Treasury
obligations are backed by the full faith and credit of the United States.
|_| Mortgage-Backed Securities (All Portfolios except, Growth Portfolio
and International Equity Portfolio). These securities represent participation
interests in pools of residential mortgage loans which are guaranteed by
agencies or instrumentalities of the U.S. Government. Such securities differ
from conventional debt securities which generally provide for periodic payment
of interest in fixed or determinable amounts (usually semi-annually) with
principal payments at maturity or specified call dates. Some mortgage-backed
securities in which the Portfolios may invest may be backed by the full faith
and credit of the U.S. Treasury (e.g., GNMA direct pass-through certificates;
some are supported by the right of the issuer to borrower from the U.S.
Government (e.g., FHLMC obligations); and some are backed by only the credit of
the issuer itself. Those guarantees do not extend to the value of or yield of
the mortgage-backed securities themselves or to the net asset value of a
Portfolio's shares.
<PAGE>
The yield on mortgage-backed securities is based on the average expected
life of the underlying pool of mortgage loans. The actual life of any particular
pool will be shortened by any unscheduled or early payments of principal and
interest. Principal prepayments generally result from the sale of the underlying
property or the refinancing or foreclosure of underlying mortgages. The
occurrence of prepayments is affected by a wide range of economic, demographic
and social factors and, accordingly, it is not possible to predict accurately
the average life of a particular pool. Yield on such pools is usually computed
by using the historical record of prepayments for that pool, or, in the case of
newly issued mortgages, the prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the yield realized
by a Portfolio to differ from the yield calculated on the basis of the expected
average life of the pool.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. When prevailing interest rates rise, the value of a pass-through
security may decrease as do the values of other debt securities, but, when
prevailing interest rates decline, the value of a pass-through security is not
likely to rise to the extent that the value of other debt securities rise,
because of the prepayment feature of pass-through securities. A Portfolio's
reinvestment of scheduled principal payments and unscheduled prepayments it
receives may occur at times when available investments offer higher or lower
rates than the original investment, thus affecting the yield of such Portfolio.
Monthly interest payments received by a Portfolio have a compounding effect
which may increase the yield to the Portfolio more than debt obligations that
pay interest semi-annually. A Portfolio may purchase mortgage-backed securities
at par, at a premium or at a discount. Accelerated prepayments adversely affect
yields for pass-through securities purchased at a premium (i.e., at a price in
excess of their principal amount) and may involve additional risk of loss of
principal because the premium may not have been fully amortized at the time the
obligation is repaid. The opposite is true for pass-through securities purchased
at a discount.
As new types of mortgage-related securities are developed and offered to
investors, the Manager will, subject to the direction of the Board of Directors
and consistent with a Portfolio's investment objective and policies, consider
making investments in such new types of mortgage-related securities.
GNMA Certificates. GNMA certificates are mortgaged-backed securities of
GNMA that evidence an undivided interest in a pool or pools of mortgages ("GNMA
Certificates"). The GNMA Certificates that a Portfolio may purchase may be of
the "modified pass-through" type, which entitle the holder to receive timely
payment of all interest and principal payments due on the mortgage pool, net of
fees paid to the "issuer" and GNMA, regardless of whether the mortgagor actually
makes the payments.
The National Housing Act authorizes GNMA to guarantee the timely payment
of principal and interest on securities backed by a pool of mortgages insured by
the Federal Housing Administration ("FHA") or guaranteed by the Veterans
Administration ("VA"). The GNMA guarantee is backed by the full faith and credit
of the U.S. Government. GNMA is also empowered to borrow without limitation from
the U.S. Treasury if necessary to make any payments required under its
guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return of the principal investment long before the maturity of the
mortgages in the pool. Foreclosures impose no risk to principal investment
because of the GNMA guarantee, except to the extent that a Portfolio has
purchased the certificates at a premium in the secondary market.
<PAGE>
FNMA Securities. The Federal National Mortgage Association ("FNMA") was
established to create a secondary market in mortgages insured by the FHA. FNMA
issues guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA
Certificates resemble GNMA Certificates in that each FNMA Certificate represents
a pro rata share of all interest and principal payments made and owed on the
underlying pool. FNMA guarantees timely payment of interest and principal on
FNMA Certificates. The FNMA guarantee is not backed by the full faith and credit
of the U.S. Government.
FHLMC Securities. The Federal Home Loan Mortgage Corporation ("FHLMC") was
created to promote development of a nationwide secondary market for conventional
residential mortgages. FHLMC issues two types of mortgage pass-through
certificates ("FHLMC Certificates"): mortgage participation certificates ("PCs")
and guaranteed mortgage certificates ("GMCs"). PCs resemble GNMA Certificates in
that each PC represents a pro rata share of all interest and principal payments
made and owed on the underlying pool. FHLMC guarantees timely monthly payment of
interest on PCs and the ultimate payment of principal. The FHLMC guarantee is
not backed by the full faith and credit of the U.S. Government. GMCs also
represent a pro rata interest in a pool of mortgages. However, these instruments
pay interest semi-annually and return principal once a year in guaranteed
minimum payments. The expected average life of these securities is approximately
ten years. The FHLMC guarantee is not backed by the full faith and credit of the
U.S. Government.
Private-Issuer Mortgage-Backed Securities. Mortgage-backed securities may
also be issued by trusts or other entities formed or sponsored by private
originators of and institutional investors in mortgage loans and other foreign
or domestic non-governmental entities (or represent custodial arrangements
administered by such institutions). These private originators and institutions
include domestic and foreign savings and loan associations, mortgage bankers,
commercial banks, insurance companies, investment banks and special purpose
subsidiaries of the foregoing. Privately issued mortgage-backed securities are
generally backed by pools of conventional (i.e., non-government guaranteed or
insured) mortgage loans. Since such mortgage-backed securities are not
guaranteed by an entity having the credit standing of GNMA, FNMA or FHLMC, in
order to receive a high quality rating, they normally are structured with one or
more types of "credit enhancement." Such credit enhancements fall generally into
two categories; (1) liquidity protection and (2) protection against losses
resulting after default by a borrower and liquidation of the collateral.
Liquidity protection refers to the providing of cash advances to holders of
mortgage-backed securities when a borrower on an underlying mortgage fails to
make its monthly payment on time. Protection against losses resulting after
default and liquidation is designed to cover losses resulting when, for example,
the proceeds of a foreclosure sale are insufficient to cover the outstanding
amount on the mortgage. Such protection may be provided through guarantees,
insurance policies or letters of credit, through various means of structuring
the transaction or through a combination of such approaches.
<PAGE>
Collateralized Mortgage-Backed Obligations ("CMOs"). Total Return
Portfolio, and Government Securities Portfolio and each of the LifeSpan
Portfolios may invest in collateralized mortgage obligations ("CMOs"). CMOs are
fully-collateralized bonds that are the general obligations of the issuer
thereof, either the U.S. Government, a U.S. Government instrumentality, or a
private issuer, which may be a domestic or foreign corporation. Such bonds
generally are secured by an assignment to a trustee (under the indenture
pursuant to which the bonds are issued) of collateral consisting of a pool of
mortgages. Payments with respect to the underlying mortgages generally are made
to the trustee under the indenture. Payments of principal and interest on the
underlying mortgages are not passed through to the holders of the CMOs as such
(i.e., the character of payments of principal and interest is not passed
through, and therefore payments to holders of CMOs attributable to interest paid
and principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such payments
are dedicated to payment of interest on and repayment of principal of the CMOs.
CMOs often are issued in two or more classes with different characteristics such
as varying maturities and stated rates of interest. Because interest and
principal payments on the underlying mortgages are not passed through to holders
of CMOs, CMOs of varying maturities may be secured by the same pool of
mortgages, the payments on which are used to pay interest on each class and to
retire successive maturities in sequence. Unlike other mortgage-backed
securities (discussed above), CMOs are designed to be retired as the underlying
mortgages are repaid. In the event of prepayment on such mortgages, the class of
CMO first to mature generally will be paid down. Therefore, although in most
cases the issuer of CMOs will not supply additional collateral in the event of
such prepayment, there will be sufficient collateral to secure CMOs that remain
outstanding.
"Stripped" Mortgage-Backed Securities. The Total Return Portfolio, and
Government Securities Portfolio and each LifeSpan Portfolio may invest in
"stripped" mortgage-backed securities, in which the principal and interest
portions of the security are separated and sold. Stripped mortgage-backed
securities usually have at least two classes, each of which receives different
proportions of interest and principal distributions on the underlying pool of
mortgage assets. One common variety of stripped mortgage-backed security has one
class that receives some of the interest and most of the principal, while the
other class receives most of the interest and the remainder of the principal. In
some cases, one class will receive all of the interest (the "interest-only" or
"IO" class), while the other class will receive all of the principal (the
"principal-only" or "PO" class).
Interest only securities are extremely sensitive to interest rate changes,
and prepayments of principal on the underlying mortgage assets. An increase in
principal payments or prepayments will reduce the income available from the IO
security. The Manager or the relevant Subadviser will consider if certain
privately-issued fixed rate IOs and POs should be considered illiquid securities
for purposes of a Portfolio's limitation on investments in illiquid securities.
Unless the Manager or the relevant Subadviser, acting pursuant to guidelines and
standards established by the Board of Directors, determines that a particular
government-issued fixed rate IO or PO is liquid, they will consider these IOs
and POs to be illiquid. In other types of CMOs, the underlying principal
payments may apply to various classes in a particular order, and therefore the
value of certain classes or "tranches" of such securities may be more volatile
than the value of the pool as a whole, and losses may be more severe than on
other classes.
Custodial Receipts. In addition to stripped mortgage-backed securities,
each of the Portfolios may acquire U.S. Government Securities and their
unmatured interest coupons that have been separated (stripped) by their holder,
typically a custodian bank or investment brokerage firm. Having separated the
interest coupons from the underlying principal of the U.S. Government
Securities, the holder will resell the stripped securities in custodial receipt
programs with a number of different names, including Treasury Income Growth
Receipts (TIGRs) and Certificate of Accrual on Treasury Securities (CATS). The
stripped coupons are sold separately from the underlying principal, which is
usually sold at a deep discount because the buyer receives only the right to
receive a future fixed payment on the security and does not receive any rights
to periodic interest (cash) payments. The underlying U.S. Treasury bonds and
notes themselves are generally held in book-entry form at a Federal Reserve
Bank.
<PAGE>
Counsel to the underwriters of these certificates or other evidences of
ownership of U.S. Treasury securities have stated that, in their opinion,
purchasers of the stripped securities most likely will be deemed the beneficial
holders of the underlying U.S. Government Securities for federal tax and
securities purposes. In the case of CATS and TIGRs, the IRS has reached this
conclusion for the purpose of applying the tax diversification requirements
applicable to regulated investment companies such as the Portfolios. CATS and
TIGRs are not considered U.S. Government Securities by the staff of the SEC,
however. Further, the IRS' conclusion is contained only in a general counsel
memorandum, which is an internal document of no precedential value or binding
effect, and a private letter ruling, which also may not be relied upon by the
Portfolios. The Company is not aware of any binding legislative, judicial or
administrative authority on this issue.
|_| Asset-Backed Securities. (All Portfolios except, Growth Portfolio and
International Equity Portfolio). The value of an asset-backed security is
affected by changes in the market's perception of the asset backing the
security, the creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing any credit
enhancement, and is also affected if any credit enhancement has been exhausted.
The risks of investing in asset-backed securities are ultimately dependent upon
payment of consumer loans by the individual borrowers. As a purchaser of an
asset-backed security, a Portfolio would generally have no recourse to the
entity that originated the loans in the event of default by a borrower. The
underlying loans are subject to prepayments, which shorten the weighted average
life of asset-backed securities and may lower their return, in the same manner
as described above for the prepayments of a pool of mortgage loans underlying
mortgage-backed securities.
|_| Mortgage Dollar Rolls. The Total Return Portfolio, and Government
Securities Portfolio may enter into "forward roll" transactions with respect to
mortgage-backed securities issued by GNMA, FNMA or FHLMC. In a forward roll
transaction, which is considered to be a "borrowing" by a Portfolio, a Portfolio
will sell a mortgage security to a bank or other permitted entity and
simultaneously agree to repurchase a similar security from the institution at a
later date at an agreed upon price. The mortgage securities that are repurchased
will bear the same interest rate as those sold, but generally will be
collateralized by different pools of mortgages with different prepayment
histories than those sold. Risks of mortgage-backed security rolls include: (i)
the risk of prepayment prior to maturity, (ii) the possibility that the proceeds
of the sale may have to be invested in money market instruments (typically
repurchase agreements) maturing not later than the expiration of the roll, and
(iii) the possibility that the market value of the securities sold by a
Portfolio may decline below the price at which the Portfolio is obligated to
purchase the securities. Upon entering into a mortgage-backed security roll, a
Portfolio will be required to segregate liquid assets in an amount equal to its
obligation under the roll.
|_| High Yield Securities (All Portfolios except Government Securities
Portfolio). A Portfolio may invest in high-yield/high risk securities
(commonly called "junk bonds").
<PAGE>
The Manager or relevant Subadviser does not rely solely on credit ratings
assigned by rating agencies in assessing investment opportunities in debt
securities. Ratings by credit agencies assess safety of principal and interest
payments and do not reflect market risks. In addition, ratings by credit
agencies may not be changed by the agencies in a timely manner to reflect
subsequent economic events. By carefully selecting individual issues and
diversifying portfolio holdings by industry sector and issuer, the Manager or
relevant Subadviser believes that the risk of the Portfolio holding defaulted
lower grade securities can be reduced. Emphasis on credit risk management
involves the Manager's or relevant Subadviser's own internal analysis to
determine the debt service capability, financial flexibility and liquidity of an
issuer, as well as the fundamental trends and outlook for the issuer and its
industry. The Manager's or relevant Subadviser's rating helps it determine the
attractiveness of specific issues relative to the valuation by the market place
of similarly rated credits.
Special Risks of Lower Rated Securities. High yield, lower-grade
securities, whether rated or unrated, often have speculative characteristics.
Lower-grade securities have special risks that make them riskier investments
than investment grade securities. They may be subject to limited liquidity and
secondary market support, as well as substantial market price volatility
resulting from changes in prevailing interest rates. They may be subordinated to
the prior claims of banks and other senior lenders. The operation of mandatory
sinking fund or call/redemption provisions during periods of declining interest
rates may cause the Portfolio to invest premature redemption proceeds in lower
yielding portfolio securities. There is a possibility that earnings of the
issuer may be insufficient to meet its debt service, and the issuer may have low
creditworthiness and potential for insolvency during periods of rising interest
rates and economic downturn. As a result of the limited liquidity of some high
yield securities, their prices have at times experienced significant and rapid
decline when a substantial number of holders decided to sell. A decline is also
likely in the high yield bond market during an economic downturn. An economic
downturn or an increase in interest rates could severely disrupt the market for
high yield bonds and adversely affect the value of outstanding bonds and the
ability of the issuers to repay principal and interest. In addition, there have
been several Congressional attempts to limit the use of tax and other advantages
of high yield bonds which, if enacted, could adversely affect the value of these
securities and the net asset value of a Portfolio. For example,
federally-insured savings and loan associations have been required to divest
their investments in high yield bonds.
|_| Zero Coupon Securities and Deferred Interest Bonds. The Portfolios may
invest in zero coupon securities and deferred interest bonds issued by the U.S.
Treasury or by private issuers such as domestic or foreign corporations. Zero
coupon U.S. Treasury securities include: (1) U.S. Treasury bills without
interest coupons, (2) U.S. Treasury notes and bonds that have been stripped of
their unmatured interest coupons and (3) receipts or certificates representing
interests in such stripped debt obligations or coupons. Zero coupon securities
and deferred interest bonds usually trade at a deep discount from their face or
par value and will be subject to greater fluctuations in market value in
response to changing interest rates than debt obligations of comparable
maturities that make current payments of interest. An additional risk of
private-issuer zero coupon securities and deferred interest bonds is the credit
risk that the issuer will be unable to make payment at maturity of the
obligation.
While zero coupon bonds do not require the periodic payment of interest,
deferred interest bonds generally provide for a period of delay before the
regular payment of interest begins. Although this period of delay is different
for each deferred interest bond, a typical period is approximately one-third of
the bond's term to maturity. Such investments benefit the issuer by mitigating
its initial need for cash to meet debt service, but some also provide a higher
rate of return to attract investors who are willing to defer receipt of such
cash. With zero coupon securities, however, the interest rate is "locked in" and
the investor avoids the risk of having to reinvest periodic interest payments in
securities having lower rates.
<PAGE>
Because a Portfolio accrues taxable income from zero coupon and deferred
interest securities without receiving cash and is required to distribute its net
investment income for each taxable year, including such accrued income, in order
to avoid liability for federal income tax, a Portfolio may be required to sell
portfolio securities in order to obtain cash necessary to pay dividends or
redemption proceeds for its shares, which require the payment of cash. This will
depend on several factors: the proportion of shareholders who elect to receive
dividends in cash rather than reinvesting dividends in additional shares of a
Portfolio, and the amount of cash a Portfolio receives from other investments
and the sale of shares.
|X| Short Term Debt Securities
|_| Commercial Paper (All Portfolios). Each Portfolio may purchase
commercial paper for temporary defensive purposes as described in the
Prospectus. In addition, a Portfolio may invest in floating rate notes as
follows:
Floating Rate/Variable Rate Notes. Each Portfolio may purchase floating
rate/variable rate notes. Some of the notes a Portfolio may purchase may have
variable or floating interest rates. Variable rates are adjustable at stated
periodic intervals; floating rates are automatically adjusted according to a
specified market rate for such investments, such as the percentage of the prime
rate of a bank, or the 91-day U.S. Treasury Bill rate. Such obligations may be
secured by bank letters of credit or other support arrangements. Any bank
providing such a bank letter, line of credit, guarantee or loan commitment will
meet a Portfolio's investment quality standards relating to investments in bank
obligations.
A Portfolio will invest in variable and floating rate instruments only
when the Manager or relevant Subadviser deems the investment to meet the
investment guidelines applicable to a Portfolio. The Manager or relevant
Subadviser will also continuously monitor the creditworthiness of issuers of
such instruments to determine whether a Portfolio should continue to hold the
investments.
The absence of an active secondary market for certain variable and
floating rate notes could make it difficult to dispose of the instruments, and a
Portfolio could suffer a loss if the issuer defaults or during periods in which
the Portfolio is not entitled to exercise its demand rights.
Variable and floating rate instruments held by a Portfolio may be subject
to the Portfolio's limitation on investments in illiquid securities if the
Manager or Subadviser determines them to be illiquid under the Board=s
procedures regarding illiquid securities as explained in the Prospectus.
Bank Obligations and Instruments Secured Thereby (All Portfolios). The
bank obligations a Portfolio may invest in include time deposits, certificates
of deposit, and bankers' acceptances if they are: (i) obligations of a domestic
bank with total assets of at least $1 billion or (ii) obligations of a foreign
bank with total assets of at least U.S. $1 billion. A Portfolio may also invest
in instruments secured by such obligations (e.g., debt which is guaranteed by
the bank). For purposes of this section, the term "bank" includes commercial
banks, savings banks, and savings and loan associations which may or may not be
members of the Federal Deposit Insurance Corporation.
Time deposits are non-negotiable deposits in a bank for a specified period
of time at a stated interest rate, whether or not subject to withdrawal
penalties. However, time deposits that are subject to withdrawal penalties,
other than those maturing in seven days or less, are subject to the limitation
on investments by a Portfolio in illiquid investments, set forth in the
Prospectus under "Illiquid and Restricted Securities."
<PAGE>
Banker's acceptances are marketable short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are deemed
"accepted" when a bank guarantees their payment at maturity.
|_| Preferred Stock (All Portfolios except Government Securities
Portfolio). Preferred stocks are equity securities, but possess certain
attributes of debt securities and are generally considered fixed income
securities. Holders of preferred stocks normally have the right to receive
dividends at a fixed rate when and as declared by the issuer's board of
directors, but do not participate in other amounts available for distribution by
the issuing corporation. Dividends on the preferred stock may be cumulative, and
all cumulative dividends usually must be paid prior to dividend payments to
common stockholders. Because of this preference, preferred stocks generally
entail less risk than common stocks. Upon liquidation, preferred stocks are
entitled to a specified liquidation preference, which is generally the same as
the par or stated value, and are senior in right of payment to common stocks.
However, preferred stocks are equity securities in that they do not represent a
liability of the issuer and therefore do not offer as great a degree of
protection of capital or assurance of continued income as investments in
corporate debt securities. In addition, preferred stocks are subordinated in
right of payment to all debt obligations and creditors of the issuer, and
convertible preferred stocks may be subordinated to other preferred stock of the
same issuer. Convertible preferred securities may be treated as equity
substitutes.
|_| Risks of Conversion to Euro. On January 1, 1999, eleven countries
in the European Union adopted the euro as their official currency. However,
their current currencies (for example, the franc, the mark, and the lira) will
also continue in use until January 1, 2002. After that date, it is expected that
only the euro will be used in those countries. A common currency is expected to
confer some benefits in those markets, by consolidating the government debt
market for those countries and reducing some currency risks and costs. But the
conversion to the new currency will affect the Portfolios operationally and also
has potential risks, some of which are listed below. Among other things, the
conversion will affect:
o issuers in which the Portfolios invest, because of changes in the
competitive environment from a consolidated currency market and greater
operational costs from converting to the new currency. This might depress
securities values. o vendors the Portfolios depend on to carry out its
business, such as its Custodian (which holds the foreign securities each
Portfolio buys), the Manager (which must price the Funds' investments to
deal with the conversion to the euro) and brokers, foreign markets and
securities depositories. If they are not prepared, there could be delays
in settlements and additional costs to the Portfolios. o exchange
contracts and derivatives that are outstanding during the transition to
the euro. The lack of currency rate calculations between the affected
currencies and the need to update the Fund's contracts could pose extra
costs to the Funds.
The Manager is upgrading (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Portfolios' Custodian has advised the
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The Portfolios' portfolio managers will also monitor the effects of the
conversion on the issuers in which each Portfolio invests. The possible effect
of these factors on the Portfolios' investments cannot be determined with
certainty at this time, but they may reduce the value of some of the Portfolios'
holdings and increase its operational costs.
|X| Portfolio Turnover. "Portfolio turnover" describes the rates at which
the Portfolios traded their portfolio securities during their last fiscal year.
For example, if a Portfolio sold all of its securities during the year, its
portfolio turnover rate would have been 100%. The Portfolios' portfolio turnover
rates will fluctuate from year to year, and each Portfolio may have a portfolio
turnover rate of more than 100% annually.
Other Investment Techniques and Strategies. In seeking their respective
objectives, each Portfolio may from time to time use the types of investment
strategies and investments described below. It is not required to use all of
these strategies at all times, and at times may not use them.
|X| Investing in Small, Unseasoned Companies. Each LifeSpan Portfolio may
invest no more than 5% of its total assets in securities of small, unseasoned
companies. These are companies that have been in operation for less than three
years, including the operations of any predecessors. Securities of these
companies may be subject to volatility in their prices. They may have a limited
trading market, which may adversely affect the Portfolios' ability to dispose of
them and can reduce the price the Portfolios might be able to obtain for them.
Other investors that own a security issued by a small, unseasoned issuer for
which there is limited liquidity might trade the security when the Portfolios
are attempting to dispose of their holdings of that security. In that case the
Portfolios might receive a lower price for its holdings than might otherwise be
obtained.
|X| When-Issued and Delayed-Delivery Transactions (All Portfolios). The
Portfolios may invest in securities on a "when-issued" basis and may purchase or
sell securities on a "delayed-delivery" or "forward commitment" basis.
When-issued and delayed-delivery are terms that refer to securities whose terms
and indenture are available and for which a market exists, but which are not
available for immediate delivery.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date (generally within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest
rates in a direction other than that expected by the Manager or relevant
Subadviser before settlement will affect the value of such securities and may
cause a loss to the Portfolios. During the period between purchase and
settlement, no payment is made by the Portfolios to the issuer and no interest
accrues to the Portfolios from the investment. No income begins to accrue to the
Portfolios on a when-issued security until the Portfolios receive the security
at settlement of the trade.
The Portfolios will engage in when-issued transactions to secure what the
Manager or relevant Subadviser considers to be an advantageous price and yield
at the time of entering into the obligation. When the Portfolios enter into a
when-issued or delayed-delivery transaction, it relies on the other party to
complete the transaction. Its failure to do so may cause the Portfolios to lose
the opportunity to obtain the security at a price and yield the Manager or
relevant Subadviser considers to be advantageous.
When the Portfolios engage in when-issued and delayed-delivery
transactions, they do so for the purpose of acquiring or selling securities
consistent with its investment objective and policies for its portfolio or for
delivery pursuant to options contracts it has entered into, and not for the
purpose of investment leverage. Although the Portfolios will enter into
delayed-delivery or when-issued purchase transactions to acquire securities, it
may dispose of a commitment prior to settlement. If the Portfolios choose to
dispose of the right to acquire a when-issued security prior to its acquisition
or to dispose of its right to delivery or receipt against a forward commitment,
it may incur a gain or loss.
At the time the Portfolios make the commitment to purchase or sell a
security on a when-issued or delayed delivery basis, they record the transaction
on their books and reflects the value of the security purchased in determining
the Portfolios' net asset value. In a sale transaction, they record the proceeds
to be received. The Portfolios will identify on their books liquid assets at
least equal in value to the value of the Portfolios' purchase commitments until
the Portfolios pay for the investment.
When-issued and delayed-delivery transactions can be used by the
Portfolios as a defensive technique to hedge against anticipated changes in
interest rates and prices. For instance, in periods of rising interest rates and
falling prices, the Portfolios might sell securities in their portfolio on a
forward commitment basis to attempt to limit its exposure to anticipated falling
prices. In periods of falling interest rates and rising prices, the Portfolios
might sell portfolio securities and purchase the same or similar securities on a
when-issued or delayed-delivery basis to obtain the benefit of currently higher
cash yields.
|X| Repurchase Agreements. Each Portfolio may acquire securities subject
to repurchase agreements. They may do so for liquidity purposes to meet
anticipated redemptions of Portfolio shares, or pending the investment of the
proceeds from sales of Portfolio shares, or pending the settlement of portfolio
securities transactions, or for temporary defensive purposes, as described
below.
In a repurchase transaction, the Portfolio buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-upon
future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Portfolios' Board of Directors from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Portfolios' limits on holding illiquid investments. No Portfolio will enter into
a repurchase agreement that causes more than 15% of its net assets to be subject
to repurchase agreements having a maturity beyond seven days. There is no limit
on the amount of a Fund's net assets that may be subject to repurchase
agreements having maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Portfolios' repurchase
agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price to
fully collateralize the repayment obligation. However, if the vendor fails to
pay the resale price on the delivery date, the Portfolio may incur costs in
disposing of the collateral and may experience losses if there is any delay in
its ability to do so. The Manager will monitor the vendor's creditworthiness to
confirm that the vendor is financially sound and will continuously monitor the
collateral's value.
|X| Illiquid and Restricted Securities. Under the policies and procedures
established by the Portfolio's Board of Directors, the Manager or relevant
Subadviser determines the liquidity of certain of the Portfolio's investments.
To enable a Portfolio to sell its holdings of a restricted security not
registered under the Securities Act of 1933, a Portfolio may have to cause those
securities to be registered. The expenses of registering restricted securities
may be negotiated by the Portfolio with the issuer at the time the Portfolio
buys the securities. When the Portfolio must arrange registration because the
Portfolio wishes to sell the security, a considerable period may elapse between
the time the decision is made to sell the security and the time the security is
registered so that the Portfolio could sell it. The Portfolio would bear the
risks of any downward price fluctuation during that period.
The Portfolios may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Portfolio's ability to dispose of the
securities and might lower the amount the Portfolio could realize upon the sale.
The Portfolios have limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid by the Manager under Board-approved
guidelines. Those guidelines take into account the trading activity for such
securities and the availability of reliable pricing information, among other
factors. If there is a lack of trading interest in a particular Rule 144A
security, the Portfolios' holdings of that security may be considered to be
illiquid.
Illiquid securities include repurchase agreements maturing in more than
seven days and participation interests that do not have puts exercisable within
seven days.
Loans of Portfolio Securities. Each Portfolio may lend its portfolio securities
(other than in repurchase transactions) to brokers, dealers and other financial
institutions up to 33 1/3% of the Portfolio's total assets. Under applicable
regulatory requirements (which are subject to change), the loan collateral must,
on each business day, at least equal the market value of the loaned securities
and must consist of cash, bank letters of credit, U.S. Government Securities, or
other cash equivalents in which the Portfolio is permitted to invest. To be
acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by the Portfolio if the demand meets the terms of the letter. The terms
of the letter of credit and the issuing bank both must be satisfactory to the
Portfolio.
When they lend securities, the Portfolios receive amounts equal to the
dividends or interest on the loaned securities. They also receive one or more of
(a) negotiated loan fees, (b) interest on securities used as collateral, and (c)
interest on any short-term debt securities purchased with such loan collateral.
Either type of interest may be shared with the borrower. The Portfolios may also
pay reasonable finder's, custodian and administrative fees in connection with
these loans. A Portfolio will not lend its portfolio securities to any officer,
director, employee or affiliate of the Company, the Manager or any Subadviser.
The terms of a Portfolio's loans must meet certain tests under the Internal
Revenue Code and permit the Portfolio to reacquire loaned securities on five
business days' notice or in time to vote on any important matter.
|X| Derivatives. The Portfolios can invest in a variety of derivative
investments for hedging purposes. Some derivative investments the Portfolios can
use are the hedging instruments described below in this Statement of Additional
Information. The Equity Funds do not use, and do not currently contemplate
using, derivatives or hedging instruments to a significant degree in the coming
year and they are not obligated to use them in seeking their objectives.
Other derivative investments the Fixed Income Funds can invest in include
"index-linked" notes. Principal and/or interest payments on these notes depend
on the performance of an underlying index. Currency-indexed securities are
another derivative the Portfolios may use. Typically, these are short-term or
intermediate-term debt securities. Their value at maturity or the rates at which
they pay income are determined by the change in value of the U.S. dollar against
one or more foreign currencies or an index. In some cases, these securities may
pay an amount at maturity based on a multiple of the amount of the relative
currency movements. This type of index security offers the potential for
increased income or principal payments but at a greater risk of loss than a
typical debt security of the same maturity and credit quality.
Other derivative investments the Fixed Income Funds can use include debt
exchangeable for common stock of an issuer or "equity-linked debt securities" of
an issuer. At maturity, the debt security is exchanged for common stock of the
issuer or it is payable in an amount based on the price of the issuer's common
stock at the time of maturity. Both alternatives present a risk that the amount
payable at maturity will be less than the principal amount of the debt because
the price of the issuer's common stock might not be as high as the Manager
expected.
|X| Hedging (All Portfolios). Although the Portfolios can use hedging
instruments, they are not obligated to use them in seeking their objective. To
attempt to protect against declines in the market value of the Portfolios, to
permit the Portfolios to retain unrealized gains in the value of portfolio
securities which have appreciated, or to facilitate selling securities for
investment reasons, the Portfolios could:
|_| sell futures contracts,
|_| buy puts on such futures (International Equity Portfolio and
Government Securities Portfolio only), or |_| write covered calls on
securities, indices and foreign currencies
for hedging or non- hedging purposes, and write covered
calls on futures for hedging purposes only. Covered
calls may also be used to increase the Portfolio's income, but the Manager
does not expect to engage extensively in that practice.
The Portfolios can use hedging to establish a position in the securities
market as a temporary substitute for purchasing particular securities. In that
case the Portfolios would normally seek to purchase the securities and then
terminate that hedging position. The Funds might also use this type of hedge to
attempt to protect against the possibility that its portfolio securities would
not be fully included in a rise in value of the market. To do so the Portfolios
could:
|_| buy futures, or
|_| buy calls on such futures or on securities.
Each Portfolio's strategy of hedging with futures and options on futures
will be incidental to the Portfolio's activities in the underlying cash market.
The particular hedging instruments the Portfolios can use are described below.
The Portfolios may employ new hedging instruments and
strategies when they are developed, if those investment methods are consistent
with the Portfolios' investment objectives and are permissible under applicable
regulations governing the Portfolios.
|_| Futures. The Portfolios can buy and sell future contracts that relate
to (1) broadly-based stock indices (these are referred to as "stock index
futures") and (2) foreign currencies (these are referred to as "forward
contracts"). The Total Return Portfolio, International Equity Portfolio,
Government Securities Portfolio, and each LifeSpan Portfolio may buy and sell
futures contracts that relate to debt securities (these are referred to as
"interest rate futures"). The Total Return Portfolio, International Equity
Portfolio and Government Securities Portfolio may buy and sell futures contracts
related to financial indices (these are referred to as "financial futures").
A broadly-based stock index is used as the basis for trading stock index
futures. They may in some cases be based on stocks of issuers in a particular
industry or group of industries. A stock index assigns relative values to the
common stocks included in the index and its value fluctuates in response to the
changes in value of the underlying stocks. A stock index cannot be purchased or
sold directly. Bond index futures are similar contracts based on the future
value of the basket of securities that comprise the index. These contracts
obligate the seller to deliver, and the purchaser to take, cash to settle the
futures transaction. There is no delivery made of the underlying securities to
settle the futures obligation. Either party may also settle the transaction by
entering into an offsetting contract.
An interest rate future obligates the seller to deliver (and the purchaser
to take) cash or a specified type of debt security to settle the futures
transaction. Either party could also enter into an offsetting contract to close
out the position.
No money is paid or received by the Portfolios on the purchase or sale of
a future. Upon entering into a futures transaction, the Portfolios will be
required to deposit an initial margin payment with the futures commission
merchant (the "futures broker"). Initial margin payments will be deposited with
the Portfolios' Custodian bank in an account registered in the futures broker's
name. However, the futures broker can gain access to that account only under
specified conditions. As the future is marked to market (that is, its value on
that Portfolio's books is changed) to reflect changes in its market value,
subsequent margin payments, called variation margin, will be paid to or by the
futures broker daily.
At any time prior to expiration of the future, the Portfolios may elect to
close out their position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to that Portfolio. Any loss or gain on the future is then
realized by that Portfolio for tax purposes. All futures transactions are
effected through a clearinghouse associated with the exchange on which the
contracts are traded.
|_| Call Options. The Portfolios can sell, and International Equity
Portfolio and Government Securities Portfolio can buy covered call options
("calls"). Such options may relate to securities, stock indices or currencies.
The Portfolios can buy and sell exchange-traded call options, and the
International Equity Portfolio and the international component of the LifeSpan
Portfolios may purchase options on currency in the over-the-counter market.
|_| Writing Covered Call Options. The Portfolios can write (that is, sell)
covered calls. If the Portfolios sell a call option, it must be covered. That
means the Portfolios must own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call may be covered by
segregating liquid assets to enable that Portfolio to satisfy its obligations if
the call is exercised. Up to 20% of each Portfolio's total assets may be subject
to calls the Portfolio writes.
Each LifeSpan Portfolio may not, as a non-fundamental policy, write
covered call or put options with respect to more than 25% of the value of their
respective total assets, invest more than 25% of their respective total assets
in protective put options or invest more than 5% of their respective total
assets in puts, calls, spreads or straddles, or any combination of them, other
than protective put options. The aggregate value of premiums paid on all
options, other than protective put options, held by a LifeSpan Portfolio at any
time will not exceed 20% of that Portfolio's total assets.
When a Portfolio writes a call on a security, it receives cash (a
premium). That Portfolio agrees to sell the underlying security to a purchaser
of a corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Portfolios share the risk
of loss that the price of the underlying security may decline during the call
period. That risk may be offset to some extent by the premium the Portfolios
receive. If the value of the investment does not rise above the call price, it
is likely that the call will lapse without being exercised. In that case the
Portfolios would keep the cash premium and the investment.
When the Portfolios write a call on an index, they receive cash (a
premium). If the buyer of the call exercises it, the Portfolios will pay an
amount of cash equal to the difference between the closing price of the call and
the exercise price, multiplied by a specified multiple that determines the total
value of the call for each point of difference. If the value of the underlying
investment does not rise above the call price, it is likely that the call will
lapse without being exercised. In that case the Portfolios would keep the cash
premium.
The Portfolios' Custodian, or a securities depository acting for the
Custodian, will act as the Portfolios' escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the investments on which the
Portfolios have written calls traded on exchanges or as to other acceptable
escrow securities. In that way, no margin will be required for such
transactions. OCC will release the securities on the expiration of the option or
when the Portfolios enter into a closing transaction.
When the Portfolios write an over-the-counter ("OTC") option, they will
enter into an arrangement with a primary U.S. government securities dealer which
will establish a formula price at which the Portfolios will have the absolute
right to repurchase that OTC option. The formula price will generally be based
on a multiple of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying security
(that is, the option is "in the money"). When the Portfolios write an OTC
option, they will treat as illiquid (for purposes of their restriction on
holding illiquid securities) the mark-to-market value of any OTC option they
hold, unless the option is subject to a buy-back agreement by the executing
broker.
To terminate its obligation on a call they have written, the Portfolios
may purchase a corresponding call in a "closing purchase transaction." The
Portfolios will then realize a profit or loss, depending upon whether the net of
the amount of the option transaction costs and the premium received on the call
the Portfolios wrote is more or less than the price of the call the Portfolios
purchase to close out the transaction. The Portfolios may realize a profit if
the call expires unexercised, because the Portfolios will retain the underlying
security and the premium they received when they wrote the call. Any such
profits are considered short-term capital gains for Federal income tax purposes,
as are the premiums on lapsed calls. When distributed by the Portfolios they are
taxable as ordinary income. If the Portfolios cannot effect a closing purchase
transaction due to the lack of a market, they will have to hold the callable
securities until the call expires or is exercised.
The Portfolios may also write calls on a futures contract without owning
the futures contract or securities deliverable under the contract. The
Portfolios may use call options on futures contracts solely for bona fide
hedging purposes. To do so, at the time the call is written, the Portfolios must
cover the call by segregating an equivalent dollar amount of liquid assets. The
Portfolios will segregate additional liquid assets if the value of the
segregated assets drops below 100% of the current value of the future. Because
of this segregation requirement, in no circumstances would the Portfolios'
receipt of an exercise notice as to that future require the Portfolios to
deliver a futures contract. It would simply put the Portfolios in a short
futures position, which is permitted by the Portfolios' hedging policies.
<PAGE>
|_| Purchasing Covered Calls. When a Portfolio purchases a call (other
than in a closing purchase transaction), it pays a premium and, except as to
calls on indices or futures, has the right to buy the underlying investment from
a seller of a corresponding call on the same investment during the call period
at a fixed exercise price. When a Portfolio purchases a call on a securities
index or future, it pays a premium, but settlement is in cash rather than by
delivery of the underlying investment to the Portfolio. In purchasing a call, a
Portfolio benefits only if the call is sold at a profit or if, during the call
period, the market price of the underlying investment is above the sum of the
exercise price, transaction costs and the premium paid, and the call is
exercised. If the call is neither exercised nor sold (whether or not at a
profit), it will become worthless at its expiration date and the Portfolio will
lose its premium payment and the right to purchase the underlying investment.
Calls on broadly-based indices or futures are similar to calls on
securities or futures contracts except that all settlements are in cash and gain
or loss depends on changes in the index in question (and thus on price movements
in the underlying market generally) rather than on price movements in individual
securities or futures contracts. When a Portfolio buys a call on an index or
future, it pays a premium. During the call period, upon exercise of a call by a
Portfolio, a seller of a corresponding call on the same investment will pay the
Portfolio an amount of cash to settle the call if the closing level of the index
or future upon which the call is based is greater than the exercise price of the
call. That cash payment is equal to the difference between the closing price of
the index and the exercise price of the call times a specified multiple (the
"multiplier"), which determines the total dollar value for each point of
difference.
An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no assurance that
a liquid secondary market will exist for any particular option. A Portfolio's
option activities may affect its turnover rate and brokerage commissions. A
Portfolio may pay a brokerage commission each time it buys a call, sells a call,
or buys or sells an underlying investment in connection with the exercise of a
call. Such commissions may be higher than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid for options are
small in relation to the market value of the related investments, and
consequently, call options offer large amounts of leverage. The leverage offered
by trading in options could result in a Portfolio's net asset value being more
sensitive to changes in the value of the underlying investments.
|_| Buying and Selling Options on Foreign Currencies. The Portfolios
can sell and the Government Securities Portfolio and International Equity
Portfolio can buy calls on foreign currencies. They include calls that trade on
a securities market or in the over-the-counter markets or are quoted by major
recognized dealers in such options. The Portfolios could use these calls to try
to protect against declines in the dollar value of foreign securities and
increases in the dollar cost of foreign securities the Portfolio wants to
acquire.
If the Manager anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of those securities may be partially offset by purchasing calls on that foreign
currency. If the Manager anticipates a decline in the dollar value of a foreign
currency, the decline in the dollar value of portfolio securities denominated in
that currency might be partially offset by writing calls on that foreign
currency. However, the currency rates could fluctuate in a direction adverse to
the Portfolios' position. The Portfolios will then have incurred option premium
payments and transaction costs without a corresponding benefit.
A call the Portfolios write on a foreign currency is "covered" if that
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or it can do so for additional cash consideration held in a
segregated account by its Custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
The Portfolios could write a call on a foreign currency to provide a hedge
against a decline in the U.S. dollar value of a security which the Portfolios
own or has the right to acquire and which is denominated in the currency
underlying the option. That decline might be one that occurs due to an expected
adverse change in the exchange rate. This is known as a "cross-hedging"
strategy. In those circumstances, the Portfolio covers the option by maintaining
cash, U.S. government securities or other liquid, high grade debt securities in
an amount equal to the exercise price of the option, in a segregated account
with the Portfolio's Custodian bank.
Forward Contracts. Each Portfolio (except the Government Securities
Portfolio) may enter into foreign currency exchange contracts ("Forward
Contracts") for hedging and non-hedging purposes. A forward currency exchange
contract generally has no deposit requirement, and no commissions are generally
charged at any stage for trades. A Forward Contract involves bilateral
obligations of one party to purchase, and another party to sell, a specific
currency at a future date (which may be any fixed number of days from the date
of the contract agreed upon by the parties), at a price set at the time the
contract is entered into. A Portfolio generally will not enter into a forward
currency exchange contract with a term of greater than one year. These contracts
are traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers.
<PAGE>
A Portfolio may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities a Portfolio
owns or intends to acquire, but it does fix a rate of exchange in advance. In
addition, although Forward Contracts limit the risk of loss due to a decline in
the value of the hedged currencies, at the same time they limit any potential
gain that might result should the value of the currencies increase.
A Portfolio may enter into Forward Contracts with respect to specific
transactions. For example, when a Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when it
anticipates receipt of dividend payments in a foreign currency, a Portfolio may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the purchase or sale of
the amount of foreign currency involved in the underlying transaction
("transaction hedge"). A Portfolio will thereby be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the currency exchange rates during the period between the date on which
the security is purchased or sold, or on which the payment is declared, and the
date on which such payments are made or received.
A Portfolio may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when a Portfolio believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward sale
contract to sell an amount of that foreign currency approximating the value of
some or all of a Portfolio's portfolio securities denominated in such foreign
currency, or when it believes that the U.S. dollar may suffer a substantial
decline against a foreign currency, it may enter into a forward purchase
contract to buy that foreign currency for a fixed dollar amount. In this
situation a Portfolio may, in the alternative, enter into a Forward Contract to
sell a different foreign currency for a fixed U.S. dollar amount where the
Portfolio believes that the U.S. dollar value of the currency to be sold
pursuant to the Forward Contract will fall whenever there is a decline in the
U.S. dollar value of the currency in which portfolio securities of the Portfolio
are denominated ("cross hedge").
A Portfolio will not enter into such Forward Contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Portfolio to deliver an amount of foreign currency in excess of the
value of the Portfolio's portfolio securities or other assets denominated in
that currency or another currency that is also the subject of the hedge.
However, in order to avoid excess transactions and transaction costs, a
Portfolio may maintain a net exposure to Forward Contracts in excess of the
value of the Portfolio's portfolio securities or other assets denominated in
those currencies provided the excess amount is "covered" by liquid, high-grade
debt securities, denominated in any currency, at least equal at all times to the
amount of such excess. As an alternative, a LifeSpan Portfolio may purchase a
call option permitting the Portfolio to purchase the amount of foreign currency
being hedged by a forward sale contract at a price no higher than the forward
contract price. A LifeSpan Portfolio may purchase a put option permitting the
Portfolio to sell the amount of foreign currency subject to a forward purchase
contract at a price as high as or higher than the forward contract price.
Unanticipated changes in currency prices may result in poorer overall
performance for a Portfolio than if it had not entered into such contracts.
<PAGE>
The precise matching of the Forward Contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for a
Portfolio to purchase additional foreign currency on the spot (i.e., cash)
market (and bear the expense of such purchase), if the market value of the
security is less than the amount of foreign currency a Portfolio is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency a Portfolio is obligated
to deliver. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing a Portfolio to sustain
losses on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring a Portfolio to
sell a currency, a Portfolio may either sell a portfolio security and use the
sale proceeds to make delivery of the currency or retain the security and offset
its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Portfolio will obtain, on the same maturity date,
the same amount of the currency that it is obligated to deliver. Similarly, a
Portfolio may close out a Forward Contract requiring it to purchase a specified
currency by entering into a second contract entitling it to sell the same amount
of the same currency on the maturity date of the first contract. The Portfolio
would realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate or
rates between the currencies involved moved between the execution dates of the
first contract and offsetting contract.
The cost to a Portfolio of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because Forward Contracts are usually
entered into on a principal basis, no fees or commissions are involved. Because
such contracts are not traded on an exchange, a Portfolio must evaluate the
credit and performance risk of each particular counter party under a Forward
Contract.
Although a Portfolio values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. A Portfolio may convert foreign currency from time to time,
and there are costs of currency conversion. Foreign exchange dealers do not
charge a fee for conversion, but they do seek to realize a profit based on the
difference between the prices at which they buy and sell various currencies.
Thus, a dealer may offer to sell a foreign currency to a Portfolio at one rate,
while offering a lesser rate of exchange should a Portfolio desire to resell
that currency to the dealer.
<PAGE>
Interest Rate Swap Transactions. Government Securities Portfolio and the
LifeSpan Portfolios may enter into swap transactions. A Portfolio will enter
into swap transactions with appropriate counterparties pursuant to master
netting agreements. A master netting agreement provides that all swaps done
between a Portfolio and that counterparty under that master agreement shall be
regarded as parts of an integral agreement. If on any date amounts are payable
in the same currency in respect of one or more swap transactions, the net amount
payable on that date in that currency shall be paid. In addition, the master
netting agreement may provide that if one party defaults generally or on one
swap, the counterparty may terminate the swaps with that party. Under such
agreements, if there is a default resulting in a loss to one party, the measure
of that party's damages is calculated by reference to the average cost of a
replacement swap with respect to each swap (i.e., the mark-to-market value at
the time of the termination of each swap). The gains and losses on all swaps are
then netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on termination
is generally referred to as "aggregation."
Swap agreements entail both interest rate risk and credit risk. There is a
risk that, based on movements of interest rates in the future, the payments made
by a Portfolio under a swap agreement will have been greater than those received
by them. Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, a Portfolio's
loss will consist of the net amount of contractual interest payments that the
Portfolio has not yet received. The Manager or relevant Subadviser will monitor
the creditworthiness of counterparties to a Portfolio's interest rate swap
transactions on an ongoing basis.
The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. As a result, the swap market
has become relatively liquid in comparison with the markets for other similar
instruments which are traded in the interbank market. However, the staff of the
SEC currently takes the position that swaps, caps and floors are illiquid
investments that are subject to a limitation on such investments by investment
companies.
|_| Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager or relevant Subadviser uses a hedging instrument at the wrong time or
judges market conditions incorrectly, hedging strategies may reduce the
Portfolio's return. The Portfolios could also experience losses if the prices of
their futures and options positions were not correlated with their other
investments.
The Portfolios' option activities could affect their portfolio turnover
rate and brokerage commissions. The exercise of calls written by the Portfolios
might cause a Portfolio to sell related portfolio securities, thus increasing
its turnover rate. The exercise by the Portfolio of puts on securities will
cause the sale of underlying investments, increasing portfolio turnover.
Although the decision whether to exercise a put it holds is within a Portfolio's
control, holding a put might cause that Portfolio to sell the related
investments for reasons that would not exist in the absence of the put.
The Portfolios could pay a brokerage commission each time they buy a call
or put, sell a call or put, or buy or sell an underlying investment in
connection with the exercise of a call or put. Those commissions could be higher
on a relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. Consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in options
could result in the Portfolios' net asset values being more sensitive to changes
in the value of the underlying investment.
If a covered call written by a Portfolio is exercised on an investment
that has increased in value, that Portfolio will be required to sell the
investment at the call price. It will not be able to realize any profit if the
investment has increased in value above the call price.
An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. The Portfolios
might experience losses if they could not close out a position because of an
illiquid market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of the Portfolio's portfolio securities. The risk is that the
prices of the futures or the applicable index will correlate imperfectly with
the behavior of the cash prices of the Portfolios' securities. For example, it
is possible that while the Portfolios have used hedging instruments in a short
hedge, the market might advance and the value of the securities held in the
Portfolios' portfolio might decline. If that occurred, the Portfolios would lose
money on the hedging instruments and also experience a decline in the value of
its portfolio securities. However, while this could occur for a very brief
period or to a very small degree, over time the value of a diversified portfolio
of securities will tend to move in the same direction as the indices upon which
the hedging instruments are based.
The risk of imperfect correlation increases as the composition of the
Portfolios' portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the price of
the portfolio securities being hedged and movements in the price of the hedging
instruments, the Portfolios may use hedging instruments in a greater dollar
amount than the dollar amount of portfolio securities being hedged. It might do
so if the historical volatility of the prices of the portfolio securities being
hedged is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Portfolios can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Portfolio
does so the market might decline. If the Portfolios then conclude not to invest
in securities because of concerns that the market might decline further or for
other reasons, the Portfolios will realize a loss on the hedging instruments
that is not offset by a reduction in the price of the securities purchased.
|_| Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Portfolios are required to operate within certain
guidelines and restrictions with respect to the use of futures as established by
the Commodities Futures Trading Commission (the "CFTC"). In particular, the
Portfolios are exempted from registration with the CFTC as a "commodity pool
operator" if the Portfolios comply with the requirements of Rule 4.5 adopted by
the CFTC. The Rule does not limit the percentage of the Portfolios' assets that
may be used for futures margin and related options premiums for a bona fide
hedging position. However, under the Rule, the Portfolios must limit their
aggregate initial futures margin and related options premiums to not more than
5% of the Portfolios' net assets for hedging strategies that are not considered
bona fide hedging strategies under the Rule. Under the Rule, the Portfolio must
also use short futures and options on futures solely for bona fide hedging
purposes within the meaning and intent of the applicable provisions of the
Commodity Exchange Act.
Transactions in options by the Portfolios are subject to limitations
established by the option exchanges. The exchanges limit the maximum number of
options that may be written or held by a single investor or group of investors
acting in concert. Those limits apply regardless of whether the options were
written or purchased on the same or different exchanges or are held in one or
more accounts or through one or more different exchanges or through one or more
brokers. Thus, the number of options that the Portfolios may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Portfolio (or an adviser
that is an affiliate of the Portfolios' adviser). The exchanges also impose
position limits on futures transactions. An exchange may order the liquidation
of positions found to be in violation of those limits and may impose certain
other sanctions.
Under the Investment Company Act, when the Portfolios purchase a future,
they must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future, less
the margin deposit applicable to it.
|_| Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts in which the Portfolios may invest are treated as "Section
1256 contracts" under the Internal Revenue Code. In general, gains or losses
relating to Section 1256 contracts are characterized as 60% long-term and 40%
short-term capital gains or losses under the Code. However, foreign currency
gains or losses arising from Section 1256 contracts that are forward contracts
generally are treated as ordinary income or loss. In addition, Section 1256
contracts held by the Portfolios at the end of each taxable year are
"marked-to-market," and unrealized gains or losses are treated as though they
were realized. These contracts also may be marked-to-market for purposes of
determining the excise tax applicable to investment company distributions and
for other purposes under rules prescribed pursuant to the Internal Revenue Code.
An election can be made by the Portfolios to exempt those transactions from this
marked-to-market treatment.
Certain forward contracts the Portfolios enter into may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character and timing of gains (or losses) recognized by the Portfolio on
straddle positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent that the loss exceeds any
unrecognized gain in the offsetting positions making up the straddle. Disallowed
loss is generally allowed at the point where there is no unrecognized gain in
the offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, the following gains or losses are treated
as ordinary income or loss: (1) gains or losses attributable to fluctuations in
exchange rates that
occur between the time the Portfolio accrues interest or other
receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the Portfolios actually collect such
receivables or pay such liabilities, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security denominated
in a foreign currency or foreign currency forward contracts and the date
of disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the amount
of the Portfolio's investment income available for distribution to its
shareholders.
|X| Temporary Defensive Investments. When market conditions are
unstable, or the Manager believes it is otherwise appropriate to reduce
holdings in stocks, the Portfolios can invest in a variety of debt securities
for defensive purposes. The Portfolios can also purchase these securities
for liquidity purposes to meet cash needs due to the redemption of Portfolio
shares, or to hold while waiting to reinvest cash received from the sale of
other portfolio securities. The Portfolios can buy:
|_| obligations issued or guaranteed by the U. S. government or its
instrumentalities or agencies,
|_| commercial paper (short-term, unsecured, promissory notes of domestic
or foreign companies) rated in the three top rating categories of a
nationally recognized rating organization,
|_| short-term debt obligations of corporate issuers, rated investment
grade (rated at least Baa by Moody's Investors Service, Inc. or at
least BBB by Standard & Poor's Corporation, or a comparable rating by
another rating organization), or unrated securities judged by the
Manager to have a comparable quality to rated securities in those
categories,
|_| certificates of deposit and bankers' acceptances of domestic and
foreign banks having total assets in excess of $1 billion, and
|_| repurchase agreements.
Short-term debt securities would normally be selected for defensive or
cash management purposes because they can normally be disposed of quickly, are
not generally subject to significant fluctuations in principal value and their
value will be less subject to interest rate risk than longer-term debt
securities.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that each Portfolio has adopted to govern its investments that can be
changed only by the vote of a "majority" of the Portfolio's outstanding voting
securities. Under the Investment Company Act, a "majority" vote is defined as
the vote of the holders of the lesser of:
|_| 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or |_| more than 50% of the
outstanding shares.
The Portfolios' investment objectives are fundamental policies. Other
policies described in the Prospectus or this Statement of Additional Information
are "fundamental" only if they are identified as such. The Portfolios' Board of
Directors can change non-fundamental policies without shareholder approval.
However, significant changes to investment policies will be described in
supplements or updates to the Prospectus or this Statement of Additional
Information, as appropriate. The Portfolios' most significant investment
policies are described in the Prospectus.
|X| Do the Portfolios Have Additional Fundamental Policies? The
following investment restrictions are fundamental policies of the
Portfolios. Each Portfolio cannot:
|_| The Fund cannot issue "senior securities," but this does not prohibit
certain investment activities for which assets of the Fund are designated as
segregated, or margin, collateral or escrow arrangements are established, to
cover the related obligations. Examples of those activities include borrowing
money, reverse repurchase agreements, delayed-delivery and when-issued
arrangements for portfolio securities transactions, and contracts to buy or sell
derivatives, hedging instruments, options or futures.
|_| (a) Invest more than 5% of its total assets (taken at market value at the
time of each investment) in the securities (other than U.S. Government agency
securities) of any one issuer (including repurchase agreements with any one
bank); and (b) purchase more than either (i) 10% of the principal amount of the
outstanding debt securities of an issuer, or (ii) 10% of the outstanding voting
securities of an issuer, except that such restrictions shall not apply to
securities issued or guaranteed by the U.S. Government or its agencies, bank
money instruments or bank repurchase agreements. (This restriction is not
applicable to the Government Securities Portfolio).
|_| Invest more than 25% of its total assets (taken at market value at the time
of each investment) in the securities of issuers primarily engaged in the same
industry. Utilities will be divided according to their services; for example,
gas, gas transmissions, electric and telephone each will be considered a
separate industry for purposes of this restriction; provided that this
limitation shall not apply to the purchase of obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, certificates of
deposit issued by domestic banks and bankers' acceptances. (This restriction is
not applicable to the International Equity Portfolio or the Government
Securities Portfolio).
|_| Alone, or together with any other Portfolio or Portfolios, make investments
for the purpose of exercising control over, or management of, any issuer.
|_| Purchase securities of other investment companies, except in connection with
a merger, consolidation, acquisition or reorganization, or by purchase in the
open market of securities of closed-end investment companies where no
underwriter or dealer's commission or profit, other than customary broker's
commission, is involved, and only if immediately thereafter not more than 10% of
such Portfolio's total assets, taken at market value, would be invested in such
securities.
|_| Purchase or sell interests in oil, gas or other mineral exploration or
development programs, commodities, commodity contracts or real estate, except
that the Total Return Portfolio, the International Equity Portfolio, the Growth
Portfolio, and the Government Securities Portfolio each may: (1) purchase
securities of issuers which invest or deal in any of the above and (2) invest
for hedging purposes in futures contracts on securities, financial instruments
and indices, and foreign currency, as are approved for trading on a registered
exchange. The International Equity Portfolio may also invest in options on
foreign futures contracts on securities, financial instruments and indices and
foreign currency.
<PAGE>
|_| Purchase any securities on margin (except that the Company may obtain such
short term credits as may be necessary for the clearance of purchases and sales
of portfolio securities) or make short sales of securities or maintain a short
position. The deposit or payment by a Portfolio of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin.
|_| Make loans, except that the Portfolio (1) may lend portfolio securities in
accordance with the Portfolio's investment policies up to 33 1/3% of the
Portfolio's total assets taken at market value, (2) enter into repurchase
agreements, and (3) purchase all or a portion of an issue of publicly
distributed debt securities, bank loan participation interests, bank
certificates of deposit, bankers' acceptances, debentures or other securities,
whether or not the purchase is made upon the original issuance of the
securities.
|_| Borrow amounts in excess of 10% of its total assets, taken at market value
at the time of the borrowing, and then only from banks as a temporary measure
for extraordinary or emergency purposes; or make investments in portfolio
securities while its outstanding borrowings exceed 5% of its total assets.
|_| Mortgage, pledge, hypothecate or in any manner transfer, as security for
indebtedness, any securities owned or held by such Portfolio except as may be
necessary in connection with borrowings mentioned in (8) above, and then such
mortgaging, pledging or hypothecating may not exceed 10% of such Portfolio's
total assets, taken at market value at the time thereof. The deposit of cash
equivalents and liquid debt securities in a segregated account with the
custodian and/or with a broker in connection with futures contracts or related
options transactions and the purchase of securities on a "when-issued" basis are
not deemed to be pledges.
|_| Underwrite securities of other issuers except insofar as the Portfolio may
be deemed an underwriter under the 1933 Act in selling portfolio securities.
|_| Write, purchase or sell puts, calls or combinations thereof, except that the
Total Return Portfolio, and the Growth Portfolio may write covered call options
and engage in closing purchase transactions. (This restriction is not applicable
to the International Equity Portfolio and the Government Securities Portfolio.)
|_| Invest in securities of foreign issuers if at the time of acquisition more
than 10% of its total assets, taken at market value at the time of the
investment, would be invested in such securities. However, up to 25% of the
total assets of such Portfolio may be invested in securities (i) issued, assumed
or guaranteed by foreign governments, or political subdivisions or
instrumentalities thereof, (ii) assumed or guaranteed by domestic issuers,
including Eurodollar securities, or (iii) issued, assumed or guaranteed by
foreign issuers having a class of securities listed for trading on The New York
Stock Exchange. (This restriction is not applicable to the International Equity
Portfolio.)
Each LifeSpan Portfolio may not:
<PAGE>
|_| Issue senior securities, except as permitted by paragraphs 2, 3, 6 and 7
below. For purposes of this restriction, the issuance of shares of common stock
in multiple classes or series, the purchase or sale of options, futures
contracts and options on futures contracts, forward commitments and repurchase
agreements entered into in accordance with the Portfolio's investment policies,
are not deemed to be senior securities.
|_| Purchase any securities on margin (except that the Company may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of portfolio securities) or make short sales of securities or maintain a short
position. The deposit or payment by a Portfolio of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin.
|_| Borrow money, except for emergency or extraordinary purposes including (i)
from banks for temporary or short-term purposes or for the clearance of
transactions in amounts not to exceed 33 1/3% of the value of the Portfolio's
total assets (including the amount borrowed) taken at market value, (ii) in
connection with the redemption of Portfolio shares or to finance failed
settlements of portfolio trades without immediately liquidating portfolio
securities or other assets; and (iii) in order to fulfill commitments or plans
to purchase additional securities pending the anticipated sale of other
portfolio securities or assets, but only if after each such borrowing there is
asset coverage of at least 300% as defined in the Investment Company Act. For
purposes of this investment restriction, reverse repurchase agreements, mortgage
dollar rolls, short sales, futures contracts, options on futures contracts,
securities or indices and forward commitment transactions shall not constitute
borrowing. |_| Act as an underwriter, except to the extent that in connection
with the disposition of portfolio securities, the Portfolio may be deemed to be
an underwriter for purposes of the 1933 Act.
|_| Purchase or sell real estate except that the Portfolio may (i) acquire or
lease office space for its own use, (ii) invest in securities of issuers that
invest in real estate or interests therein, (iii) invest in securities that are
secured by real estate or interests therein, (iv) purchase and sell
mortgage-related securities and (v) hold and sell real estate acquired by the
Portfolio as a result of the ownership of securities.
|_| Invest in commodities, except the Portfolio may purchase and sell options on
securities, securities indices and currency, futures contracts on securities,
securities indices and currency and options on such futures, forward foreign
currency exchange contracts, forward commitments, securities index put or call
options and repurchase agreements entered into in accordance with the
Portfolio's investment policies.
|_| Make loans, except that the Portfolio (1) may lend portfolio securities in
accordance with the Portfolio's investment policies up to 33 1/3% of the
Portfolio's total assets taken at market value, (2) enter into repurchase
agreements, and (3) purchase all or a portion of an issue of publicly
distributed bonds, debentures or other similar obligations.
|_| Purchase the securities of issuers conducting their principal activity in
the same industry if, immediately after such purchase, the value of its
investments in such industry would exceed 25% of its total assets taken at
market value at the time of such investment. This limitation does not apply to
investments in obligations of the U.S. Government or any of its agencies,
instrumentalities or authorities.
|_| With respect to 75% of total assets, purchase securities of an issuer (other
than the U.S. Government, its agencies, instrumentalities or authorities), if:
<PAGE>
(a) such purchase would cause more than 5% of the Portfolio's total
assets taken at market value to be invested in the securities of such
issuer; or
(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the
Portfolio.
Investment Restrictions That Are Non-Fundamental. The following
restrictions are non-fundamental and may be changed by the Board of Directors
without the approval of shareholders.
Each LifeSpan Portfolio may not:
|_| Pledge, mortgage or hypothecate its assets, except to secure permitted
borrowings and then only if such pledging, mortgaging or hypothecating does not
exceed 33 1/3% of the Portfolio's total assets taken at market value. Collateral
arrangements with respect to margin, option and other risk management and
when-issued and forward commitment transactions are not deemed to be pledges or
other encumbrances for purposes of this restriction.
|_| Participate on a joint or joint-and-several basis in any securities trading
account. The "bunching" of orders for the sale or purchase of marketable
portfolio securities with other accounts under the management of the Manager or
the relevant Subadvisers to save commissions or to average prices among them is
not deemed to result in a joint securities trading account.
|_| Purchase or retain securities of an issuer if one or more of the Directors
or officers of the Company or directors or officers of the Manager or any
Subadviser or any investment management subsidiary of the Manager or any
Subadviser individually owns beneficially more than 0.5% and together own
beneficially more than 5% of the securities of such issuer.
|_| Purchase a security if, as a result, (i) more than 10% of the Portfolio's
assets would be invested in securities of other investment companies, (ii) such
purchase would result in more than 3% of the total outstanding voting securities
of any one such investment company being held by the Portfolio or (iii) more
than 5% of the Portfolio's assets would be invested in any one such investment
company. The Portfolio will not purchase the securities of any open-end
investment company except when such purchase is part of a plan of merger,
consolidation, reorganization or purchase of substantially all of the assets of
any other investment company, or purchase the securities of any closed-end
investment company except in the open market where no commission or profit to a
sponsor or dealer results from the purchase, other than customary brokerage
fees. The Portfolio has no current intention of investing in other investment
companies.
|_| Invest more than 15% of total assets in restricted securities, including
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933.
|_| Invest more than 5% of total assets in securities of any issuer which,
together with its predecessors, has been in operation for less than three years.
<PAGE>
-40-
|_| Invest in securities which are illiquid if, as a result, more than 15% of
its net assets would consist of such securities, including repurchase agreements
maturing in more than seven days, securities that are not readily marketable,
certain restricted securities, purchased OTC options, certain assets used to
cover written OTC options, and privately issued stripped mortgage-backed
securities.
|_| Purchase securities while outstanding borrowings exceed 5% of the
Portfolio's total assets.
|_| Invest in real estate limited partnership interests.
|_| Purchase warrants of any issuer, if, as a result of such purchase, more than
2% of the value of the Portfolio's total assets would be invested in warrants
which are not listed on an exchange or more than 5% of the value of the total
assets of the Portfolio would be invested in warrants generally, whether or not
so listed. For these purposes, warrants are to be valued at the lesser of cost
or market, but warrants acquired by the Portfolio in units with or attached to
debt securities shall be deemed to be without value.
|_| Purchase interests in oil, gas, or other mineral exploration programs or
mineral leases; however, this policy will not prohibit the acquisition of
securities of companies engaged in the production or transmission of oil, gas,
or other minerals.
|_| Write covered call or put options with respect to more than 25% of the value
of its total assets, invest more than 25% of its total assets in protective put
options or invest more than 5% of its total assets in puts, calls, spreads or
straddles, or any combination thereof, other than protective put options. The
aggregate value of premiums paid on all options, other than protective put
options, held by the Portfolio at any time will not exceed 20% of the
Portfolio's total assets.
|_| Invest for the purpose of exercising control over or management of any
company.
For purposes of a Portfolios' policy not to concentrate their assets,
described above in Restriction (2) for the Panorama Portfolios and Restriction
(8) for the LifeSpan Portfolios, the Portfolios have adopted the industry
classifications set forth in Appendix B to this Statement of Additional
Information. This is not a fundamental policy.
The percentage restrictions described above and in the Prospectus are
applicable only at the time of investment and require no action by a Portfolio
as a result of subsequent changes in value of the investments or the size of a
Portfolio.
As a matter of non-fundamental policy, each Portfolio has undertaken to
limit its investments in illiquid securities to a stated percentage of net
assets.
|X| Meetings of Shareholders. As a series of a Maryland corporation, the
Portfolios are not required to hold, and does not plan to hold, regular annual
meetings of shareholders. The Portfolios will hold meetings when required to do
so by the Investment Company Act or other applicable law. They will also do so
when a shareholder meeting is called by the Directors or upon proper request of
the shareholders.
Directors and Officers of the Company. The Directors and officers of the
Company, and their principal occupations and business affiliations during the
past five years are listed below. Directors denoted with an asterisk (*) below
are deemed to be "interested persons" of the Company under the Investment
Company Act. All of the Directors are also trustees, directors or managing
general partners of the following Denver-based Oppenheimer funds1:
Oppenheimer Cash Reserves Oppenheimer Total Return Fund,
Inc.
Oppenheimer Champion Income Fund Oppenheimer Variable Account Funds
Oppenheimer Equity Income Fund Panorama Series Fund, Inc.
Oppenheimer High Yield Fund Centennial America Fund, L. P.
Oppenheimer International Bond Centennial California Tax Exempt
Fund Trust
Oppenheimer Integrity Funds Centennial Government Trust
Oppenheimer Limited-Term Centennial Money Market Trust
Government Fund
Oppenheimer Main Street Funds, Centennial New York Tax Exempt
Inc. Trust
Oppenheimer Municipal Fund Centennial Tax Exempt Trust
Oppenheimer Real Asset Fund The New York Tax-Exempt Income
Fund, Inc.
Oppenheimer Strategic Income
Fund
Ms. Macaskill and Messrs. Swain, Bowen, Bishop, Donohue, Farrar and Zack,
who are officers of the Company, respectively hold the same offices with the
other Denver-based Oppenheimer funds. As of April 2, 1999, the Directors and
officers of the Company as a group did not beneficially own any shares of the
Portfolios.
Robert G. Avis,* Director; Age: 67
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment adviser
and trust company, respectively).
William A. Baker, Director; Age: 84
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
George C. Bowen, Treasurer; Age: 62
6803 South Tucson Way, Englewood, Colorado 80112
Formerly Senior Vice President (from September, 1987 to April, 1999) and
Treasurer (from March, 1985 to April, 1999) of the Manager; Formerly Vice
President (from June, 1983 to April, 1999) and Treasurer (from March, 1985 to
April, 1999) of the Distributor; formerly Vice President (from October, 1989 to
April, 1999) and Treasurer (from April, 1986 to April, 1999) of HarbourView;
formerly Senior Vice President (from February, 1992 to April, 1999), Treasurer
(from July, 1991 to April, 1999) and a director (from December, 1991 to April,
1999) of Centennial; Formerly President, Treasurer and a director of Centennial
Capital Corporation (from June, 1989 to April, 1999); Formerly Vice President
and Treasurer (from August, 1978 to April, 1999) and Secretary (from April, 1981
to April, 1999) of SSI; formerly Vice President, Treasurer and Secretary of SFSI
(from November, 1989 to April, 1999); Formerly Assistant Treasurer of OAC (from
March 1998 to April, 1999); Formerly Treasurer of Oppenheimer Partnership
Holdings, Inc. (from November, 1989 to April, 1999); Formerly Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (from July, 1996 to April,
1999); Formerly Treasurer of OFIL and Oppenheimer Millennium Fund plc (from
October, 1997 to April, 1999).
Charles Conrad, Jr., Director; Age: 68
1501 Quail Street, Newport Beach, CA 92660
Chairman and CEO of Universal Space Lines, Inc. (a space services management
company); formerly Vice President of McDonnell Douglas Space Systems Co.
prior to which he was associated with the National Aeronautics and Space
Administration.
Jon S. Fossel, Director; Age: 56
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Formerly Chairman and a director of the Manager, President and a director of
Oppenheimer Acquisition Corp., Shareholder Services, Inc. and Shareholder
Financial Services, Inc.
Sam Freedman, Director; Age: 58
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of Shareholder Services,
Inc. and Shareholder Financial Services, Inc., Vice President and a director
of Oppenheimer Acquisition Corp. and a director of the Manager.
Raymond J. Kalinowski, Director; Age: 69
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products
training company).
C. Howard Kast, Director; Age: 76
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Director; Age: 77
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill,* President; Age: 50
Two World Trade Center, 34th Floor, New York, New York 10048
President (since June 1991), Chief Executive Officer (since September 1995) and
a director (since December 1994) of the Manager; President and a director (since
June 1991) of HarbourView Asset Management Corp.; Chairman and a director (since
August 1994) of Shareholder Services, Inc. and (since September 1995)
Shareholder Financial Services, Inc.; President (since September 1995) and a
director (since October 1990) of Oppenheimer Acquisition Corp.; President (since
September 1995) and a director (since November 1989) of Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc. (since July 1996); President and a
director (since October 1997) of OppenheimerFunds International Ltd., an
offshore fund management subsidiary of the Manager, and Oppenheimer Millennium
Funds plc; President and a director of other Oppenheimer funds; a director of
Hillsdown Holdings plc (a U.K. food company).
Ned M. Steel, Director; Age: 84
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting Nurse
Corporation of Colorado.
James C. Swain, Chairman, Chief Executive Officer and Director*; Age 65 6803
South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Manager (since
September 1988); formerly President and a director of Centennial Asset
Management Corporation, and Chairman of the Board of Shareholder Services, Inc.
Peter M. Antos, Vice President and Portfolio Manager; Age 52 One Financial
Plaza, 755 Main Street, Hartford, CT 06103-2603 Chartered Financial Analyst,
Vice President of the Company and Senior Vice President of the Manager and
HarbourView; portfolio manager of other Oppenheimer funds; previously Vice
President and Senior Portfolio Manager, EquitiesnConnecticut Mutual Life
Insurance Company - G.R. Phelps & Co. ("G.R.
Phelps") (1989-1996).
Michael C. Strathearn, Vice President and Portfolio Manager; Age 45 One
Financial Plaza, 755 Main Street, Hartford, CT 06103-2603 Chartered Financial
Analyst, Vice President of the Company and the Manager since March, 1996; Vice
President of HarbourView; portfolio manager of other Oppenheimer funds;
previously a Portfolio Manager, EquitiesnConnecticut Mutual Life Insurance
Company ("CML") (1988-1996).
Kenneth B. White, Vice President and Portfolio Manager; Age 46 One Financial
Plaza, 755 Main Street, Hartford, CT 06103-2603 Chartered Financial Analyst,
Vice President of the Company and the Manager since March, 1996; Vice President
of HarbourView; portfolio manager of other Oppenheimer funds; previously a
Portfolio Manager, EquitiesnCML (1982-1996); Senior Investment Officer,
EquitiesnCML (1987-1992).
Stephen F. Libera, Vice President and Portfolio Manager; Age 47 One Financial
Plaza, 755 Main Street, Hartford, CT 06103-2603 Chartered Financial Analyst,
Vice President of the Company and the Manager since March, 1996; Vice President
of HarbourView; portfolio manager of other Oppenheimer funds; previously a Vice
President and Senior Portfolio Manager, Fixed Income--G.R. Phelps (1985-1996).
David P. Negri, Vice President and High Income Fund, Bond Fund, Strategic Bond
Fund and Multiple Strategies Fund Portfolio Manager, Age: 45 Two World Trade
Center, 34th Floor, New York, New York 10048 Senior Vice President of the
Manager (since June 1989); an officer of other Oppenheimer funds.
Arthur J. Zimmer, Vice President and Money Fund Portfolio Manager, Age: 53 6803
South Tucson Way, Englewood, Colorado 80112 Senior Vice President of the Manager
(since June 1997); Vice President of Centennial (since September 1991); an
officer of other Oppenheimer funds; formerly Vice President of the Manager
(October 1990-June 1997).
John S. Kowalik, Vice President and Bond Fund Portfolio Manager, Age: 42
Two World Trade Center, 34th Floor, New York, New York 10048
Senior Vice President of the Manager (since July 1998); an officer of other
Oppenheimer funds; formerly Managing Director and Senior Portfolio Manager
at Prudential Global Advisors (1989-1998).
Andrew J. Donohue, Vice President and Secretary; Age: 48
Two World Trade Center, 34th Floor, New York, New York 10048
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President (since September 1993) and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView Asset Management Corp., Shareholder Services, Inc., Shareholder
Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc. (since
September 1995); President and a director of Centennial Asset Management Corp.
(since September 1995); President and a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); General Counsel (since May 1996) and
Secretary (since April 1997) of Oppenheimer Acquisition Corp.; Vice President
and a Director of OppenheimerFunds International Ltd. and Oppenheimer Millennium
Funds plc (since October 1997); an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 40
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund
Controller for the Manager.
Scott T. Farrar, Assistant Treasurer; Age: 33
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Robert G. Zack, Assistant Secretary; Age: 50
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Senior Vice
President (since May 1985) and Associate General Counsel (since May 1981) of the
Manager, Assistant Secretary of Shareholder Services, Inc. (since May 1985), and
Shareholder Financial Services, Inc. (since November 1989); Assistant Secretary
(since October 1997) of Oppenheimer Millennium Funds plc and OppenheimerFunds
International Ltd.; an officer of other Oppenheimer funds.
|X| Remuneration of Directors. The officers of the Company and one Director
of the Company (Mr. Swain) is affiliated with the Manager and receives no salary
or fee from the Company. The remaining Directors of the Company received the
compensation shown below. The compensation from the Portfolios was paid during
their fiscal year ended December 31, 1998. The compensation from all of the
Denver-based Oppenheimer funds includes the compensation from the Portfolios and
represents compensation received as a director, trustee, managing general
partner or member of a committee of the Board during the calendar year 1998.
- --------------------------------------------------------------------
Total Compensation
Director's Name and Aggregate From all
Other Positions Compensation Denver-Based
from Portfolios Oppenheimer Funds1
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Robert G. Avis $___ $67,998
- --------------------------------------------------------------------
- --------------------------------------------------------------------
$___ $69,998
William A. Baker
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Charles Conrad, Jr. $___ $67,998
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Jon. S. Fossel $___ $67,496.04
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Sam Freedman
Audit and Review $___ $73,998
Committee Member
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Raymond J. Kalinowski
Audit and Review
Committee Member $____ $73,998
- --------------------------------------------------------------------
- --------------------------------------------------------------------
C. Howard Kast $___ $76,998
Audit and Review
Committee Chairman
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Robert M. Kirchner $____ $67,998
- --------------------------------------------------------------------
1. For the 1998 calendar year.
|X| Deferred Compensation Plan. The Board of Directors has adopted a
Deferred Compensation Plan for disinterested Directors that enables them to
elect to defer receipt of all or a portion of the annual fees they are entitled
to receive from the Portfolios. Under the plan, the compensation deferred by a
Director is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Director.
The amount paid to the Director under the plan will be determined based upon the
performance of the selected funds.
Deferral of Director's fees under the plan will not materially affect the
Portfolios' assets, liabilities and net income per share. The plan will not
obligate the Portfolios to retain the services of any Director or to pay any
particular level of compensation to any Director. Pursuant to an Order issued by
the Securities and Exchange Commission, the Portfolios may invest in the funds
selected by the Director under the plan without shareholder approval for the
limited purpose of determining the value of the Director's deferred fee account.
Major Shareholders.
The Manager, the Subadvisers and Their Affiliates. The Manager is wholly-owned
by Oppenheimer Acquisition Corporation ("OAC"), a holding company controlled by
MML. OAC is also owned in part by certain of the Manager's directors and
officers, some of whom also serve as officers of the Portfolios, and one of whom
(Mr. Swain) serves as a Director of the Company.
The Manager and the Company have a Code of Ethics, as does each
Subadviser. The Codes of Ethics are designed to detect and prevent improper
personal trading by certain employees, including portfolio managers, that would
compete with or take advantage of a Portfolio's portfolio transactions.
Compliance with the respective Code of Ethics is carefully monitored and
strictly enforced by the Manager or the relevant Subadviser.
The Investment Advisory Agreements. Each Portfolio has entered into an
Investment Advisory Agreement with the Manager, effective March 1, 1996. The
investment advisory agreement between the Manager and each Portfolio requires
the Manager, at its expense, to provide each Portfolio with adequate office
space, facilities and equipment, and to provide and supervise the activities of
all administrative and clerical personnel required to provide effective
corporate administration for each Portfolio, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and registration
statements for the continuous public sale of shares of each Portfolio.
Expenses not expressly assumed by the Manager under an advisory agreement
are paid by the relevant Portfolio. The advisory agreement lists examples of
expenses to be paid by a Portfolio, the major categories of which relate to
interest, taxes, brokerage commissions, fees to certain Directors, legal, and
audit expenses, custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses, including
litigation.
The advisory fees paid by the Portfolios to G.R. Phelps, the Portfolios'
prior investment advisor (until March 1, 1996), and the management fees paid to
the Manager from March 1, 1996 to December 31, 1996 and for the fiscal years
ended December 31, 1997 and 1998 were as follows:
1996 1997 1998
---- ---- ----
Total Return Portfolio $ 5,817,245 $ 6,482,637 $
Growth Portfolio $ 2,801,667 $ 3,818,977 $
<PAGE>
International Equity Portfolio $ 569,471 $ 732,642
$
Life Span Capital Appreciation $ 281,564 $ 437,070 $
LifeSpan Balanced Portfolio $ 355,893 $ 504,390 $
LifeSpan Diversified Income $ 171,569 $ 213,594 $
Government Securities Portfolio $ 125,427 $ 120,922 $
Total All Portfolios $10,122,836 $12,310,232 $
=========== =========== =
The advisory agreements provide that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties, or
reckless disregard of its obligations and duties under the advisory agreement,
the Manager is not liable for any loss resulting from any good faith errors or
omissions in connection with any matters to which the agreement relates. Each
advisory agreement permits the Manager to act as investment adviser for any
other person, firm or corporation and to use the name "Oppenheimer" in
connection with its other investment activities.
The Investment Subadvisory Agreements. The advisory agreements permit the
Manager to hire one or more subadvisers to assist with the management of the
Portfolios. The Manager has done so for the International Equity Portfolio and
the LifeSpan Portfolios.
With respect to the International Equity Portfolio and the international
component for the LifeSpan Capital Appreciation Portfolio and LifeSpan Balanced
Portfolio, the Manager has entered into investment subadvisory agreements with
Babson-Stewart Ivory International ("Babson-Stewart"). With respect to the small
cap component of the LifeSpan Capital Appreciation and LifeSpan Balanced
Portfolios, the Manager has entered into investment subadvisory agreements with
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"). With respect to the high
yield/high risk bond component for each LifeSpan Portfolio, the Manager has
entered into investment subadvisory agreements with Credit Suisse Asset
Management.
Babson-Stewart, One Memorial Drive, Cambridge, Massachusetts 02142, is a
Massachusetts general partnership and a registered investment adviser and was
originally established in 1987. The general partners of Babson-Stewart are David
L. Babson & Co., which is an indirect subsidiary of Massachusetts Life Insurance
Company, and Stewart Ivory & Co. (International), Ltd. As of December 31, 1998,
Babson-Stewart had approximately $___ billion in assets under management.
Credit Suisse Asset Management, One Citicorp Center, 153 E. 53rd Street,
57th Floor, New York, NY 10022, is a partnership between Credit Suisse Capital
Corporation and CS Advisors Corp. BEA Associates has been providing domestic and
global fixed income and equity investment management services for institutional
clients and mutual funds since 1984 and, had $___ billion in assets under
management as of December 31, 1998.
Pilgrim Baxter, 825 Duportail Road, Wayne, Pennsylvania 19087, was
established in 1982 to provide specialized equity management for institutional
investors. Pilgrim Baxter is a Delaware corporation and a wholly owned
subsidiary of United Asset Management Corporation. As of December 31, 1998,
Pilgrim had over $__ billion in assets under management.
Under the respective investment subadvisory agreements, the corresponding
Subadviser, subject to the review of the Board of Directors and the overall
supervision of the Manager, is responsible for managing the investment
operations of the corresponding LifeSpan Portfolio component and the composition
of the component's portfolio and furnishing the LifeSpan Portfolio with advice
and recommendations with respect to investments and the purchase and sale of
securities for the respective component. The shareholders of the Portfolios
approved new subadvisory agreements with the relevant subadvisers effective
March 1, 1996. The Manager, not the Portfolios, pays the subadvisers. The
subadvisers are paid at the rate set forth in the Prospectus.
The investment subadvisory agreements with Babson-Stewart provide that in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard with respect to its obligations and duties under the agreements,
Babson-Stewart will not be subject to liability for any loss sustained by reason
of its good faith errors of omissions in connection with any matters to which
the agreements relate.
The investment subadvisory agreements with Pilgrim Baxter provide that in
the absence of willful misfeasance, bad faith, negligence, or reckless disregard
of the performance of its duties under the agreements, Pilgrim is not subject to
liability for any error of judgment or mistake of law or for any other action or
omission in the course of, or connected with, rendering services or for any
losses that may be sustained in the purchase, holding or sale of any security,
or otherwise.
The investment subadvisory agreements with Credit Suisse Asset Management
provide that in the absence of willful misfeasance, bad faith, negligence, or
reckless disregard of the performance of its duties under the agreement, Credit
Suisse Asset Management is not subject to liability for losses as a result of
its activities in connection with the adoption of any investment policy or the
purchase, sale or retention of securities on behalf of the LifeSpan Portfolios
subadvised by Credit Suisse Asset Management if such activities were made with
due care and in good faith.
For the period from June, 1996 through December, 1996 and for the fiscal
years ended December 31, 1997 and 1998, the Manager paid subadvisory fees to
Babson-Stewart totaling $251,772.80, $520,403.32 and $__________, respectively;
Pilgrim Baxter totaling $55,857.40, $116,743.77 and $__________, respectively;
and Credit Suisse Asset Management totaling $35,061.40, $78,164.82 and
$__________, respectively.
The Transfer Agent. OppenheimerFunds Services, a division of the
Manager, is each Portfolio's transfer agent, and is responsible for
maintaining each Portfolio's shareholder registry and shareholder accounting
records, and for shareholder servicing and administrative functions. It
provides these services "at cost."
Brokerage Policies Of The Portfolios
The Company has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to any policy
established by the Board of Directors, the Manager and the relevant Subadvisers
are primarily responsible for the investment decisions of each Portfolio or
Portfolio component and the placing of its portfolio transactions. It is the
policy of each Portfolio to obtain the most favorable net results, taking into
account various factors, including price, dealer spread or commission, if any,
size of the transaction and difficulty of execution. While the Manager and the
Subadvisers generally seek reasonably competitive spreads or commissions, the
Portfolios will not necessarily pay the lowest spread or commission available.
Brokerage Provisions of the Investment Advisory Agreements. One of the duties of
the Manager under each advisory agreement is to arrange the portfolio
transactions for each Portfolio. Each advisory agreement contains provisions
relating to the employment of broker-dealers ("brokers") to effect a Portfolio's
portfolio transactions. In doing so, the Manager is authorized by the advisory
agreement to employ such broker-dealers, including "affiliated" brokers, as that
term is defined in the Investment Company Act, as may, in its best judgment
based on all relevant factors, implement the policy of a Portfolio to obtain, at
reasonable expense, the "best execution" (prompt and reliable execution at the
most favorable price obtainable) of such transactions. The Manager need not seek
competitive commission bidding, but is expected to minimize the commissions paid
to the extent consistent with the interest and policies of a Portfolio as
established by its Board of Directors. Purchases of securities from underwriters
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price.
Under each advisory agreement, the Manager is authorized to select brokers
that provide brokerage and/or research services for a Portfolio and/or the other
accounts over which the Manager or its affiliates have investment discretion.
The commissions paid to such brokers may be higher than another qualified broker
would have charged, if a good faith determination is made by the Manager and the
commission is fair and reasonable in relation to the services provided. Subject
to the foregoing considerations, the Manager may also consider sales of shares
of a Portfolio and other investment companies managed by the Manager or its
affiliates as a factor in the selection of brokers for a Portfolio's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager and Subadvisers. Most
purchases of debt securities, commercial paper, and money market instruments
made by the Portfolios are principal transactions at net prices, and the
Portfolios incur little or no brokerage costs for these transactions.
Subject to the provisions of the advisory agreements and the subadvisory
agreements and the procedures and rules described above, allocations of
brokerage are generally made by the Manager's or the Subadviser's portfolio
traders based upon recommendations from the Manager's portfolio managers. In
certain instances, portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the advisory agreements and the
subadvisory agreements and the procedures and rules described above. In either
case, brokerage is allocated under the supervision of the Manager's or the
Subadviser's executive officers. Transactions in securities other than those for
which an exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities or for certain fixed income agency
transactions in the secondary market and otherwise only if it appears likely
that a better price or execution can be obtained.
When the Portfolios engage in an option transaction, ordinarily the same
broker will be used for the purchase or sale of the option and any transaction
in the securities to which the option relates. When possible, concurrent orders
to purchase or sell the same security by more than one of the accounts managed
by the Manager, the Subadvisers and their affiliates are combined. The
transactions effected pursuant to such combined orders are averaged as to price
and allocated in accordance with the purchase or sale orders actually placed for
each account.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates, or a
Subadviser, and investment research received for the commissions of those other
accounts may be useful both to the Portfolios and one or more of such other
accounts. Such research, which may be supplied by a third party at the instance
of a broker, includes information and analyses on particular companies and
industries as well as market or economic trends and portfolio strategy, receipt
of market quotations for portfolio evaluations, information systems, computer
hardware and similar products and services. If a research service also assists
the Manager in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that provides
assistance to the Manager (or Subadviser) in the investment decision-making
process may be paid in commission dollars. The Board of Directors permits the
Manager to use concessions on fixed price offerings to obtain research, in the
same manner as is permitted for agency transactions. The Board also permits the
Manager to use stated commissions on secondary fixed-income trades to obtain
research where the broker has represented to the Manager that (i) the trade is
not from the broker's own inventory, (ii) the trade was executed by the broker
on an agency basis at the stated commission, and (iii) the trade is not a
riskless principal transaction.
The research services provided by brokers broadens the scope and
supplements the research activities of the Manager and Subadvisers, by making
available additional views for consideration and comparisons, and enabling the
Manager and Subadvisers to obtain market information for the valuation of
securities held in a Portfolio's portfolio or being considered for purchase.
As most purchases made by Government Securities Portfolio are principal
transactions at net prices, that Portfolio incurs little or no brokerage costs.
Purchases of securities from underwriters include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers include a
spread between the bid and asked price. No principal transactions and, except
under unusual circumstances, no agency transactions for this Portfolio will be
handled by any affiliated securities dealer. In the unusual circumstance when
this Portfolio pays brokerage commissions, the above-described brokerage
practices and policies are followed. However, since brokerage commissions, if
any, are small, high portfolio turnover does not have an appreciable adverse
effect upon net asset value of the Portfolio.
During the Portfolios' fiscal years ended December 31, 1996, 1997 and
1998, total brokerage commissions paid by the Portfolios listed below were:
<PAGE>
1996 1997 1998
Brokerage Brokerage Brokerage
Portfolio Commissions Commissions
Commissions
Growth Portfolio $558,861 $1,587,706 $
Total Return Portfolio $802,877 $2,051,990 $
International Equity Portfolio $190,606 $ 224,663 $
LifeSpan Capital Appreciation Portfolio $ 29,204 $ 84,779 $
Lifespan Diversified Income Portfolio $ 2,766 $ 7,358 $
LifeSpan Balanced Portfolio $ 24,827 $ 70,620 $
Government Securities Portfolio $ 0 $ 0 $
Performance of the Portfolios
Yield and Total Return Information. From time to time, as set forth in the
Prospectus, the "standardized yield," "dividend yield," "average annual total
return," or "cumulative total return," as the case may be, of an investment in a
Portfolio may be advertised. An explanation of how yields and total returns are
calculated and the components of those calculations is set forth below.
A Portfolio's advertisement of its performance must, under applicable
rules of the SEC, include the average annual total returns for the Portfolio for
the 1, 5 and 10-year periods (or the life of the Portfolio, if less) as of the
most recently ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare a Portfolio's performance to
the performance of other funds for the same periods. However, a number of
factors should be considered before using such information as a basis for
comparison with other investments. The performance data for a Portfolio does not
reflect the effect of any charges or costs of the insurance company separate
account that invests in the Portfolio on behalf of the variable contracts of
contract owners. An investment in a Portfolio is not insured; its yields and
total returns and share prices are not guaranteed and normally will fluctuate on
a daily basis. When redeemed, shares may be worth more or less than their
original cost. Yields and total returns for any given past period are not a
prediction or representation by a Portfolio of future yields or rates of return
on its shares. The yields and total returns of a Portfolio are affected by
portfolio quality, the type of investments the Portfolio holds and its operating
expenses.
Yield Information.
Standardized Yield. The Astandardized yield@ (referred to as Ayield@) is
shown for a stated 30-day period. It is not based on actual distributions paid
by the Portfolios to shareholders in the 30-day period, but is a hypothetical
yield based upon the net investment income from the Portfolios= portfolio
investments for that period. It may therefore differ from the Adividend yield,@
as shown below. It is calculated using the following formula set forth in rules
adopted by the Securities and Exchange Commission designed to assure uniformity
in the way that all portfolios calculate their yields:
2 [( a-b + 1)6 - 1]
Standardized Yield = ( c d )
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = net expenses accrued for the period (expense reimbursements).
c = the average daily number of Portfolio shares outstanding during the
30-day period that were entitled to receive dividends.
d = the Portfolio's maximum offering price per share on the last day of
the period, adjusted for undistributed net investment income.
The standardized yield of a Portfolio for a 30-day period may differ from
its yield for any other period. The Securities and Exchange Commission formula
assumes that the standardized yield for a 30-day period occurs at a constant
rate for a six-month period and is annualized at the end of the six-month
period. For the 30 days ended December 31, 1997, the yield of Government
Securities Portfolio, calculated as described above was 5.47%.
Dividend Yield and Distribution Return. From time to time a Portfolio may
quote a Adividend yield@ or Adistribution return.@ Dividend yield is based on a
Portfolio=s dividends derived from net investment income during a stated period.
Distribution return includes dividends derived from net investment income and
from realized capital gains declared during a stated period. Under those
calculations, a Portfolio=s dividends and/or distributions declared during a
stated period of one year or less (for example, 30 days, are added together, and
the sum is divided by the Portfolio=s maximum offering price on the last day of
the period). When the result is annualized for a period of less than one year,
the Adividend yield@ is calculated as follows:
Dividend Yield = Dividends Divided by Number of Days
(accrual period) x 365
Maximum Offering Price
(last day of period)
For the 30-day period ended December 31, 1997, the dividend yield for
Government Securities Porfolio was 6.86%.
Total Return Information
Average Annual Total Returns. A Portfolio's "average annual total return"
is an average annual compounded rate of return for each year in a specified
number of years. It is the rate of return based on the change in value of a
hypothetical initial investment of $1,000 ("P" in the formula below) held for a
number of years ("n") to achieve an Ending Redeemable Value ("ERV") of that
investment according to the following formula:
(ERV)1/n - 1 = Average Annual Total Return
P
Cumulative Total Returns. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV-P = Total Return
P
Both formulas assume that all dividends and capital gains distributions during
the period are reinvested at net asset value per share, and that the investment
is redeemed at the end of the period. Set forth below is the "average annual
total return" and "total return" for each Fund (using the method described
above) during the periods indicated:
Average Annual Total Return by Portfolio:
Five Ten Cumulative
Fiscal Year Year Total Return
Year Period Period From
Ended Ended Ended Inception(1) Inception(1)
Portfolio 12/31/98 12/31/98 12/31/98 to 12/31/98 to 12/31/98
Total Return Portfolio % % % % %
Growth Portfolio % % % % %
International Equity % % % % %
LifeSpan Capital
Appreciation % % % % %
LifeSpan Balanced % % % % %
LifeSpan Diversified
Income % % % % %
Government Securities % % % % %
- --------------
(1)Inception dates are as follows: May 13, 1992 for International Equity
Portfolio and Government Securities Portfolio; September 1, 1995 for LifeSpan
Capital Appreciation Portfolio, LifeSpan Balanced Portfolio and LifeSpan
Diversified Income Portfolio; January 21, 1982 for Growth Portfolio; and
September 30, 1982 for Total Return Portfolio.
From time to time a Portfolio may also include in its advertisements and
sales literature performance information about a Portfolio or rankings of a
Portfolio's performance cited in newspapers or periodicals, such as The New York
Times or the Wall Street Journal. These articles may include quotations of
performance from other sources, such as Lipper Analytical Services, Inc.
or Morningstar, Inc.
Other Performance Comparisons. From time to time a Portfolio may publish the
ranking of its shares by Lipper Analytical Services, Inc. ("Lipper"), a
widely-recognized independent mutual fund monitoring service. Lipper monitors
the performance of regulated investment companies, including the Portfolios, and
ranks their performance for various periods based on categories relating to
investment objectives. The performance of the Portfolios is ranked against other
mutual funds offered under variable contracts. The Lipper performance rankings
are based on total returns that include the reinvestment of capital gain
distributions and income dividends but do not take taxes into consideration.
<PAGE>
From time to time a Portfolio may publish the star ranking of the
performance of its shares by Morningstar, Inc., an independent mutual fund
monitoring service that ranks mutual funds, including the Portfolios, in broad
investment categories (domestic stock, international stock, taxable bond,
municipal bond and hybrid) based on risk-adjusted investment return. Investment
return measures a fund's three, five and ten-year average annual total returns
(when available) in excess of 90-day U.S. Treasury bill returns after
considering expenses. Risk measures fund performance below 90-day U.S. Treasury
bill monthly returns. Risk and investment return are combined to produce star
rankings reflecting performance relative to the average fund in a fund's
category. Five stars is the "highest" ranking (top 10%), four stars is "above
average" (next 22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%). Morningstar may
rank the shares of the Portfolio in relation to other funds in their respective
categories. Rankings are subject to change monthly.
A Portfolio may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
From time to time, the Manager may publish rankings or ratings of the
Manager (or the Transfer Agent), by independent third-parties, on the investor
services provided by them to shareholders of the Oppenheimer funds, other than
the performance rankings of the Oppenheimer funds themselves. These ratings or
rankings of shareholder/investor services by third parties may compare the
Oppenheimer funds services to those of other mutual fund families selected by
the rating or ranking services, and may be based upon the opinions of the rating
or ranking service itself, using its own research or judgment, or based upon
surveys of investors, brokers, shareholders or others.
ABOUT YOUR ACCOUNT
How To Buy Shares
<PAGE>
Insurance Companies are the record holders and the owners of shares of
beneficial interest in each Portfolio of the Company. In accordance with any
limitations set forth in their variable contracts, contract holders may direct
their Insurance Companies to allocate amounts available for investment among the
Company's Portfolios. Instructions for any such allocation, or for the purpose
of redemption of shares of a Portfolio, must be made by the investor's Insurance
Company. The rights of Insurance Companies as record holders and owners of
shares of a Portfolio are different from the rights of variable contract
holders. The term "shareholder" in this Statement of Additional Information
refers only to Insurance Companies and not to contract holders. The Company
reserves the right to limit the types of separate accounts that may invest in
any Portfolio.
The sale of shares of the Portfolios is currently limited to Accounts as
explained on the cover page of this Statement of Additional Information and the
Prospectus. Such shares are sold at their respective offering prices (net asset
values without sales charges) and redeemed at their respective net asset values
as described in the Prospectus.
Determination of Net Asset Value Per Share. The net asset value per share of
each Portfolio is determined as of the close of business of The New York Stock
Exchange on each day the Exchange is open by dividing the value of a Portfolio's
net assets by the number of shares outstanding. The Exchange normally closes at
4:00 P.M., New York time, but may close earlier on some days (for example, in
case of weather emergencies or on days falling before or after a holiday). The
Exchange's most recent annual holiday schedule (which is subject to change)
states that it will close New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day; it may close on other days. Trading may
occur at times when the Exchange is closed (including weekends and holidays or
after 4:00 P.M., on a regular business day). Because the net asset values of a
Portfolio will not be calculated at such times, if securities held by a
Portfolio are traded at such time, the net asset values per share of a Portfolio
may be significantly affected on such days when shareholders do not have the
ability to purchase or redeem shares.
The Fund=s Board of Directors has established procedures for the valuation
of each Portfolio=s securities, generally as follows:
(i) equity securities traded on a U.S. securities exchange or on the
Automated Quotation System ("NASDAQ") of the Nasdaq Stock Market, Inc. for
which last sale information is regularly reported are valued at the last
reported sale price on the principal exchange for such security or NASDAQ
that day (the "Valuation Date") or, in the absence of sales that day, at
the last reported sale price preceding the Valuation Date if it is within
the spread of the closing "bid" and "asked" prices on the Valuation Date
or, if not, the closing "bid" price on the Valuation Date;
(ii) equity securities traded on a foreign securities exchange are valued
generally at the last sales price available to the pricing service
approved by the Fund's Board of Directors or to the Manager as reported by
the principal exchange on which the security is traded at its last trading
session on or immediately preceding the Valuation Date, or, if
unavailable, at the mean between "bid" and "asked" prices obtained from
the principal exchange or two active market makers in the security on the
basis of reasonable inquiry;
<PAGE>
(iii) a non-money market fund will value (x) debt instruments that had a
maturity of more than 397 days when issued, (y) debt instruments that had
a maturity of 397 days or less when issued and have a remaining maturity
in excess of 60 days, and (z) non-money market type debt instruments that
had a maturity of 397 days or less when issued and have a remaining
maturity of sixty days or less, at the mean between "bid" and "asked"
prices determined by a pricing service approved by the Fund's Board of
Trustees or, if unavailable, obtained by the Manager from two active
market makers in the security on the basis of reasonable inquiry;
(iv) money market-type debt securities held by a non-money market fund
that had a maturity of less than 397 days when issued and have a remaining
maturity of 60 days or less, and debt instruments held by a money market
fund that have a remaining maturity of 397 days or less, shall be valued
at cost, adjusted for amortization of premiums and accretion of discount;
and
(v) securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined
under the Board's procedures.
If the Manager is unable to locate two market makers willing to give
quotes (see (ii) and (iii) above), the security may be priced at the mean
between the "bid" and "asked" prices provided by a single active market
maker (which in certain cases may be the Abid@ price if no Aasked@ price
is available) provided that the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect the current
market value.
In the case of U.S. Government Securities and mortgage-backed securities,
corporate debt, and foreign securities, where last sale information is not
generally available, such pricing procedures may include "matrix" comparisons to
the prices for comparable instruments on the basis of quality, yield, maturity
and other special factors involved. The Manager may use pricing services
approved by the Board of Directors to price U.S. Government Securities,
corporate debt, and foreign securities or mortgage-backed securities for which
last sale information is not generally available. The Manager will monitor the
accuracy of such pricing services, which may include comparing prices used for
portfolio evaluation to actual sales prices of selected securities.
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange.
Events affecting the values of foreign securities traded in securities markets
that occur between the time their prices are determined and the close of the New
York Stock Exchange will not be reflected in the Portfolio's calculation of net
asset value unless the Board of Directors or the Manager, under procedures
established by the Board of Directors, determines that the particular event is
likely to effect a material change in the net asset value of a Portfolio's
share. Foreign currency, including forward contracts, will be valued at the
closing price in the London foreign exchange market that day as provided by a
reliable bank, dealer or pricing service. The values of securities denominated
in foreign currency will be converted to U.S. dollars at the closing price in
the London foreign exchange market that day as provided by a reliable bank,
dealer or pricing service.
<PAGE>
Puts, calls and Futures are valued at the last sales price on the
principal exchange on which they are traded or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Directors or by the
Manager. If there were no sales that day, value shall be the last sale price on
the preceding trading day if it is within the spread of the closing "bid" and
"ask" prices on the principal exchange or on NASDAQ on the valuation date, or,
if not, value shall be the closing "bid" price on the principal exchange or on
NASDAQ on the valuation date. If the put, call or future is not traded on an
exchange or on NASDAQ, it shall be valued at the mean between "bid" and "ask"
prices obtained by the Manager from two active market makers (which in certain
cases may be the "bid" price if no "ask" price is available). Dividends, Capital
Gains and Taxes
Dividends and Distributions. The Company intends for each Portfolio to qualify
and be treated as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") for each taxable year. By
so qualifying, the Portfolios will not be subject to Federal income taxes on
amounts paid by them as dividends and distributions, as described in the
Prospectus. Each Portfolio is treated as a separate entity for purposes of
determining Federal tax treatment. The Company will endeavor to ensure that each
Portfolio's assets are so invested so that all such requirements are satisfied,
but there can be no assurance that it will be successful in doing so.
In order to qualify as a regulated investment company under Subchapter M
of the Code, a Portfolio must, among other things, derive at least 90% of its
gross income for the taxable year from dividends, interest, gains from the sale
or other disposition of stock, securities or foreign currencies, fees from
certain securities loans or other income (including gains from options, futures
and forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "90% income test"), and satisfy certain
annual distribution and quarterly diversification requirements. For purposes of
the 90% income test, income that a Portfolio earns from equity interests in
certain entities that are not treated as corporations (e.g., are treated as
partnerships or trusts) for U.S. tax purposes will generally have the same
character for the Portfolio as in the hands of such entities; consequently, the
Portfolio may be required to limit its equity investments in such entities that
earn fee income, rental income, or other nonqualifying income.
<PAGE>
As noted in the Prospectus, each Portfolio must, and intends to, comply
with the diversification requirements imposed by Section 817(h) of the Code and
the regulations thereunder. These requirements, which are in addition to the
diversification requirements imposed on a Portfolio by the Investment Company
Act and Subchapter M of the Code, place certain limitations on the assets of
each separate account and, because Section 817(h) and those regulations treat
the assets of the Portfolio as assets of the related separate account, the
assets of a Portfolio, that may be invested in securities of a single issuer.
Specifically, the regulations provide that, except as permitted by the "safe
harbor" described below, as of the end of each calendar quarter or within 30
days thereafter no more than 55% of the total assets of a Portfolio may be
represented by any one investment, no more than 70% by any two investments, no
more than 80% by any three investments and no more than 90% by any four
investments. For this purpose, all securities of the same issuer are considered
a single investment, and each U.S. Government agency and instrumentality is
considered a separate issuer. Section 817(h) provides, as a safe harbor, that a
separate account will be treated as being adequately diversified if the
diversification requirements under Subchapter M are satisfied and no more than
55% of the value of the account's total assets are cash and cash items
(including receivables), U.S. Government securities and securities of other
regulated investment companies. Failure by a Portfolio to both qualify as a
regulated investment company and satisfy the Section 817(h) requirements would
generally result in treatment of the variable contract holders other than as
described in the applicable variable contract prospectus, including inclusion in
ordinary income of income accrued under the contracts for the current and all
prior taxable years. Any such failure may also result in adverse tax
consequences for the Portfolio and the insurance company issuing the contracts.
Foreign exchange gains and losses realized by a Portfolio in connection
with certain transactions involving foreign currency denominated debt
securities, certain options and futures contracts relating to foreign currency,
forward foreign currency contracts, foreign currencies, or payables or
receivables denominated in a foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders. If the net foreign exchange loss for a year were
to exceed the Portfolio's investment company taxable income (computed without
regard to such loss) the resulting overall ordinary loss for such year would not
be deductible by the Portfolio or its shareholders in future years.
Limitations imposed by the Code on regulated investment companies like the
Portfolios may restrict the Portfolios' ability to enter into futures, options
and currency forward transactions.
The Portfolios may be subject to withholding and other taxes imposed by
foreign countries with respect to their investments in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes.
The federal income tax rules applicable to mortgage dollar rolls and
interest rate swaps, caps, floors and collars are unclear in certain respects,
and the Portfolios may be required to account for these instruments under tax
rules in a manner that, under certain circumstances, may limit their
transactions in these instruments.
If a Portfolio acquires stock in certain non-U.S. corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, rents, royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), the Portfolio could be subject to Federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Portfolio is timely distributed to its
shareholders. The Portfolio would not be able to pass through to its
shareholders any credit or deduction for such a tax. Certain elections may, if
available, ameliorate these adverse tax consequences, but any such election
would require the Portfolio to recognize taxable income or gain without the
concurrent receipt of cash. Each Portfolio may limit and/or manage its stock
holdings in passive foreign investment companies to minimize its tax liability
or maximize its return from these investments.
<PAGE>
ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS
The Custodian. The Bank of New York is the Custodian of the Portfolios' assets.
The Custodian's responsibilities include safeguarding and controlling the
Portfolios' portfolio securities, collecting income on the portfolio securities
and handling the delivery of such securities to and from the Portfolios.
Independent Auditors. The independent auditors of the Portfolios are Deloitte &
Touche LLP. They audit the Portfolios' financial statements and perform other
related audit services. They also act as auditors for certain other funds
advised by the Manager and its affiliates.
<PAGE>
A-1
Appendix A
- -------------------------------------------------------------------------------
Industry Classifications
- -------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Technology
Electrical Equipment Telephone - Utility
Electronics Textile/Apparel
Energy Services & Producers Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
- ---------------------
*For purposes of a Portfolio's investment policy not to concentrate in
securities of issuers in the same industry, utilities are divided into
"industries" according to their services (e.g., gas utilities, gas transmission
utilities, electric utilities and telephone utilities are each considered a
separate industry).
<PAGE>
Panorama Series Fund, Inc.
6803 South Tucson Way
Englewood, Colorado 80112
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
90 Washington Street
New York, NY
Independent Auditors
Deloitte & Touche, LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
SAI99
- --------
1. Ms. Macaskill is not Trustee or Director of Oppenheimer Integrity Funds,
Oppenheimer Strategic Income Fund, Panorama Series Fund, Inc. or Oppenheimer
Variable Account Funds. Mr. Fossel and Mr. Bowen are not Trustees of
Centennial New York Tax Exempt Trust or Managing General Partners of
Centennial America Fund, L.P.
<PAGE>
PANORAMA SERIES FUND, INC.
FORM N-1A
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) (i) Amended and Restated Articles of Incorporation dated 5/8/95:
Previously filed with Registrant's Post-Effective Amendment No. 23, 3/1/96,
and incorporated herein by reference.
(ii) Articles Supplementary dated 8/29/96: Previously filed with
Registrant's Post-Effective Amendment No. 25, 4/25/97, and
incorporated herein by reference.
(b) By-Laws amended through 1/29/96: Previously filed with Registrant's
Post-Effective Amendment No. 23, 3/1/96, and incorporated herein by
reference.
(c) Not applicable.
(d) (i) Investment Advisory Agreement on behalf of Total Return Portfolio
dated 3/1/96: Previously filed with Post-Effective Amendment No. 24, 4/30/96,
and incorporated herein by reference.
(ii) Investment Advisory Agreement on behalf of Government Securities
Portfolio dated 3/1/96: To be filed by Post-Effective Amendment.
(iii) Investment Advisory Agreement on behalf of Growth Portfolio dated
3/1/96: To be filed by Post-Effective Amendment.
(iv) Investment Advisory Agreement on behalf of International Equity
Portfolio dated 3/1/96: To be filed by Post-Effective Amendment.
(v) Investment Advisory Agreement on behalf of LifeSpan Capital
Appreciation Portfolio dated 3/1/96: To be filed by Post-Effective Amendment.
(vi) Investment Advisory Agreement on behalf of LifeSpan Balanced
Portfolio dated 3/1/96: To be filed by Post-Effective Amendment.
(vii) Investment Advisory Agreement on behalf of LifeSpan Diversified
Income Portfolio dated 3/1/96: To be filed by Post-Effective Amendment.
(viii) Investment Subadvisory Agreement between OppenheimerFunds, Inc.
and Pilgrim, Baxter & Associates, Ltd. (for LifeSpan Balanced Portfolio) and
schedule of omitted substantially similar documents dated 3/1/96: Previously
filed with Registrant's Post-Effective Amendment No. 24, 4/30/96, and
incorporated herein by reference.
(ix) Investment Subadvisory Agreement between OppenheimerFunds, Inc. and
BEA Associates (for LifeSpan Capital Appreciation Portfolio) and schedule of
omitted substantially similar documents dated 3/1/96: Previously filed with
Registrant's Post-Effective Amendment No. 24, 4/30/96, and incorporated
herein by reference.
(x) Investment Subadvisory Agreement between OppenheimerFunds, Inc. and
Babson-Stewart Ivory International (for LifeSpan Balanced Portfolio) and
schedule of omitted substantially similar documents dated 3/1/96: Previously
filed with Registrant's Post-Effective Amendment No. 24, 4/30/96, and
incorporated herein by reference.
(e) Not applicable.
(f) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors: Filed with Post-Effective Amendment No. 40 to the
Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076),
10/27/98, and incorporated herein by reference.
(g) Custody Agreement on behalf of each series of the Registrant, and The
Bank of New York, dated 6/11/97: Previously filed with Registrant'
s
Post-Effective Amendment No. 27, 5/1/98, and incorporated herein by reference.
(h) Not applicable.
(i) Opinion and Consent of Counsel ,Previously filed with Registrant's
Post-Effective Amendment No. 25, 4/25/97, and incorporated herein by
reference.
(j) Independent Auditors Consent: To be filed by Post-Effective Amendment.
(k) Not applicable.
(l) Not applicable.
(m) Not applicable.
(n) (i) Financial Data Schedule for Total Return Portfolio: To be filed by
Post-Effective Amendment
(ii) Financial Data Schedule for Growth Portfolio: To be filed by
Post-Effective Amendment
(iii)Financial Data Schedule for International Equity Portfolio: To be
filed by Post-Effective Amendment
(iv) Financial Data Schedule for LifeSpan Capital Appreciation
Portfolio: To be filed by Post-Effective Amendment
(v) Financial Data Schedule for LifeSpan Balanced Portfolio: To be
filed by Post-Effective Amendment
(vi) Financial Data Schedule for LifeSpan Diversified Income Portfolio:
To be filed by Post-Effective Amendment
(vii)Financial Data Schedule for Government Securities Portfolio: To be
filed by Post-Effective Amendment
(o) Not applicable.
- -- Powers of Attorney (including Certified Board resolutions): Previously
filed with Registrant's Post-Effective Amendment No. 25, 4/25/97, and
incorporated herein by reference.
Item 24. Persons Controlled by or Under Common Control with the Fund
None.
Item 25. Indemnification
Reference is made to the provisions of Article Seven of Registrant's
Amended and Restated Declaration of Trust filed as Exhibit 23(a) to this
Registration Statement, and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
Item 26. Business and Other Connections of the Investment Adviser
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it
and certain subsidiaries and affiliates act in the same capacity to other
investment companies, including with limitation those described in Parts A
and B hereof and listed in Item 26(b) below.
Name and Current Position Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
Charles E. Albers,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds (since April 1998); a
Chartered Financial Analyst; formerly, a Vice
President and portfolio manager for Guardian
Investor Services, the investment management
subsidiary of The Guardian Life Insurance
Company (since 1972).
Edward Amberger,
Assistant Vice President Formerly Assistant Vice President, Securities
Analyst for Morgan Stanley Dean Witter (May
1997 - April 1998); and Research Analyst (July
1996 - May 1997), Portfolio Manager (February
1992 - July 1996) and Department Manager (June
1988 to February 1992) for The Bank of New York.
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset
Management, Inc. ("ORAMI"); formerly, Vice
President of Equity Derivatives at Salomon
Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial
Analyst; Senior Vice President of HarbourView
Asset Management Corporation ("HarbourView");
prior to March, 1996 he was the senior equity
portfolio manager for the Panorama Series Fund,
Inc. (the "Company") and other mutual funds and
pension funds managed by G.R. Phelps & Co. Inc.
("G.R. Phelps"), the Company's former
investment adviser, which was a subsidiary of
Connecticut Mutual Life Insurance Company; he
was also responsible for managing the common
stock department and common stock investments
of Connecticut Mutual Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds. Formerly, a Vice President
and Senior Portfolio Manager at First of
America Investment Corp.
George Batejan,
Executive Vice President,
Chief Information Officer Formerly Senior Vice President, Group
Executive, and Senior Systems Officer for
American International Group (October 1994 -
May, 1998).
John R. Blomfield,
Vice President Formerly Senior Product Manager (November, 1995
- August, 1997) of International Home Foods and
American Home Products (March, 1994 - October,
1996).
Connie Bechtolt,
Assistant Vice President None.
Kathleen Beichert,
Vice President None.
Rajeev Bhaman,
Vice President Formerly, Vice President (January 1992 -
February, 1996) of Asian Equities for Barclays
de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund Accounting (since
May 1996); an officer of other Oppenheimer
funds; formerly, an Assistant Vice President
of OFI/Mutual Fund Accounting (April 1994-May
1996), and a Fund Controller for OFI.
Chad Boll,
Assistant Vice President None
George C. Bowen,
Senior Vice President, Treasurer
and Director Vice President (since June 1983) and Treasurer
(since March 1985) of OppenheimerFunds
Distributor, Inc. (the "Distributor"); Vice
President (since October 1989) and Treasurer
(since April 1986) of HarbourView; Senior Vice
President (since February 1992), Treasurer
(since July 1991)and a director (since December
1991) of Centennial; President, Treasurer and
a director of Centennial Capital Corporation
(since June 1989); Vice President and
Treasurer (since August 1978) and Secretary
(since April 1981) of Shareholder Services,
Inc. ("SSI"); Vice President, Treasurer and
Secretary of Shareholder Financial Services,
Inc. ("SFSI") (since November 1989); Assistant
Treasurer of Oppenheimer Acquisition Corp.
("OAC") (since March, 1998); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since
November 1989); Vice President and Treasurer
of ORAMI (since July 1996); an officer of
other Oppenheimer funds.
Scott Brooks,
Vice President None.
Kevin Brosmith,
Vice President None.
Nancy Bush,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly, Assistant Vice President of Rochester
Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of Centennial.
John Cardillo,
Assistant Vice President None.
Mark Curry,
Assistant Vice President None.
H.C. Digby Clements,
Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Chief Executive Officer and Senior Manager of
HarbourView Asset Management Corporation;
Trustee (1993 - present) of Awhtolia College -
Greece.
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Craig P. Dinsell
Executive Vice President Formerly, Senior Vice President of Human
Resources for Fidelity Investments-Retail
Division (January, 1995 - January, 1996),
Fidelity Investments FMR Co. (January, 1996 -
June, 1997) and Fidelity Investments FTPG
(June, 1997 - January, 1998).
Robert Doll, Jr.,
Executive Vice President and
Chief Investment Officer and
Director An officer and/or portfolio manager of certain
Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since September
1993), and a director (since January 1992) of
the Distributor; Executive Vice President,
General Counsel and a director of HarbourView,
SSI, SFSI and Oppenheimer Partnership Holdings,
Inc. since (September 1995); President and a
director of Centennial (since September 1995);
President and a director of ORAMI (since July
1996); General Counsel (since May 1996) and
Secretary (since April 1997) of OAC; Vice
President and Director of OppenheimerFunds
International, Ltd. ("OFIL") and Oppenheimer
Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Patrick Dougherty, None.
Assistant Vice President
Bruce Dunbar, None.
Vice President
Daniel Engstrom,
Assistant Vice President None.
George Evans,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
George Fahey,
Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer Millennium
Funds plc (since October 1997); an officer of
other Oppenheimer funds; formerly, an
Assistant Vice President of OFI/Mutual Fund
Accounting (April 1994-May 1996), and a Fund
Controller for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the
Distributor; Secretary of HarbourView, and
Centennial; Secretary, Vice President and
Director of Centennial Capital Corporation;
Vice President and Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio manager
of certain Oppenheimer funds; Presently he
holds the following other positions: Director
(since 1995) of ICI Mutual Insurance Company;
Governor (since 1994) of St. John's College;
Director (since 1994 - present) of
International Museum of Photography at George
Eastman House. Formerly, he held the following
positions: formerly, Chairman of the Board and
Director of Rochester Fund Distributors, Inc.
("RFD"); President and Director of Fielding
Management Company, Inc. ("FMC"); President and
Director of Rochester Capital Advisors, Inc.
("RCAI"); Managing Partner of Rochester Capital
Advisors, L.P., President and Director of
Rochester Fund Services, Inc. ("RFS");
President and Director of Rochester Tax Managed
Fund, Inc.; Director (1993 - 1997) of VehiCare
Corp.; Director (1993 - 1996) of VoiceMode.
Patricia Foster,
Vice President Formerly, she held the following positions: An
officer of certain former Rochester funds (May,
1993 - January, 1996); Secretary of Rochester
Capital Advisors, Inc. and General Counsel
(June, 1993 - January 1996) of Rochester
Capital Advisors, L.P.
David Foxhoven,
Assistant Vice President Formerly Manager, Banking Operations Department
(July 1996-November 1998).
Jennifer Foxson,
Vice President None.
Erin Gardiner,
Assistant Vice President None.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly, Vice President (1987-1997) for
Schroder Capital Management International.
Jill Glazerman,
Vice President None.
Robyn Goldstein-Liebler
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Executive Vice President and
Chief Financial Officer Chief Financial Officer and Treasurer (since
March, 1998) of Oppenheimer Acquisition Corp.;
a Member and Fellow of the Institute of
Chartered Accountants; formerly, an accountant
for Arthur Young (London, U.K.).
Robert Grill,
Senior Vice President Formerly, Marketing Vice President for Bankers
Trust Company (1993-1996); Steering Committee
Member, Subcommittee Chairman for American
Savings Education Council (1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Elaine T. Hamann,
Vice President Formerly, Vice President (September, 1989 -
January, 1997) of Bankers Trust Company.
Robert Haley
Assistant Vice President Formerly, Vice President of Information
Services for Bankers Trust Company (January,
1991 - November, 1997).
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and Director of SFSI; President and
Chief executive Officer of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly, a Senior Vice President and Portfolio
Manager for Warburg, Pincus Counsellors, Inc.
(1993-1997), Co-manager of Warburg, Pincus
Emerging Markets Fund (12/94 - 10/97),
Co-manager Warburg, Pincus Institutional
Emerging Markets Fund - Emerging Markets
Portfolio (8/96 - 10/97), Warburg Pincus Japan
OTC Fund, Associate Portfolio Manager of
Warburg Pincus International Equity Fund,
Warburg Pincus Institutional Fund -
Intermediate Equity Portfolio, and Warburg
Pincus EAFE Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Vice President None.
Jane Ingalls,
Vice President None.
Kathleen T. Ives,
Vice President None.
Christopher Jacobs,
Assistant Vice President None.
William Jaume,
Vice President None.
Frank Jennings,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Susan Katz,
Vice President None.
Thomas W. Keffer,
Senior Vice President None.
Erica Klein,
Assistant Vice President None.
Avram Kornberg,
Vice President None.
John Kowalik,
Senior Vice President An officer and/or portfolio manager for certain
OppenheimerFunds; formerly, Managing Director
and Senior Portfolio Manager at Prudential
Global Advisors (1989 - 1998).
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Vice President None.
Shanquan Li,
Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for certain
Oppenheimer funds; a Chartered Financial
Analyst; a Vice President of HarbourView; prior
to March 1996, the senior bond portfolio
manager for Panorama Series Fund Inc., other
mutual funds and pension accounts managed by
G.R. Phelps; also responsible for managing the
public fixed-income securities department at
Connecticut Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
Dan Loughran,
Assistant Vice President:
Rochester Division None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September 1995);
President and director (since June 1991) of
HarbourView; Chairman and a director of SSI
(since August 1994), and SFSI (September 1995);
President (since September 1995) and a
director (since October 1990) of OAC;
President (since September 1995) and a
director (since November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding company
subsidiary of OFI; a director of ORAMI (since
July 1996) ; President and a director (since
October 1997) of OFIL, an offshore fund manager
subsidiary of OFI and Oppenheimer Millennium
Funds plc (since October 1997); President and
a director of other Oppenheimer funds; a
director of Hillsdown Holdings plc (a U.K. food
company); formerly, an Executive Vice President
of OFI.
Philip T. Masterson,
Vice President Formerly an Associate at Davis, Graham, &
Stubbs (January 1998-July 1998); Associate;
Myer, Swanson, Adams & Wolf, P.C. (May
1996-June 1998).
Loretta McCarthy,
Executive Vice President None.
Kelley A. McCarthy-Kane
Assistant Vice President Formerly, Product Manager, Assistant Vice
President (June 1995- October, 1997) of Merrill
Lynch Pierce Fenner & Smith.
Beth Michnowski,
Assistant Vice President Formerly Senior Marketing Manager May, 1996 -
June, 1997) and Director of Product Marketing
(August, 1992 - May, 1996) with Fidelity
Investments.
Lisa Migan,
Assistant Vice President None.
Denis R. Molleur,
Vice President None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio manager of
certain Oppenheimer funds (since April 1998); a
Certified Financial Analyst; formerly, a Vice
President and portfolio manager for Guardian
Investor Services, the management subsidiary of
The Guardian Life Insurance Company (since
1979).
Linda Moore,
Vice President Formerly, Marketing Manager (July 1995-November
1996) for Chase Investment Services Corp.
Kenneth Nadler,
Vice President None.
David Negri,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Ray Olson,
Assistant Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
James Phillips
Assistant Vice President None.
Stephen Puckett,
Vice President None.
Jane Putnam,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Michael Quinn,
Assistant Vice President Formerly, Assistant Vice President (April, 1995
- January, 1998) of Van Kampen American Capital.
Julie Radtke,
Vice President Formerly Assistant Vice President and Business
Analyst for Pershing, Jersey City (August
1997-November 1997); Senior Business
Consultant, American International Group
(January 1996-July 1997)
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset
Management, Inc. (since March, 1995).
Thomas Reedy,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; formerly, a Securities
Analyst for the Manager.
John Reinhardt,
Vice President: Rochester Division None
Ruxandra Risko,
Vice President None.
Michael S. Rosen,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President & Director None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Martha Shapiro,
Assistant Vice President None
Stephanie Seminara,
Vice President None.
Michelle Simone,
Assistant Vice President None.
Richard Soper,
Vice President None.
Cathleen Stahl,
Vice President Assistant Vice President & Manager of Women &
Investing Program
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of the New York-based
Oppenheimer Funds; formerly, Chairman of the
Manager and the Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of
Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
John Stoma,
Senior Vice President None.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial
Analyst; a Vice President of HarbourView.
Wayne Strauss,
Assistant Vice President: Rochester
Division Formerly Senior Editor, West Publishing Company
(January 1997-March 1997).
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or Managing
Partner of the Denver-based Oppenheimer Funds;
formerly, President and Director of OAMC, CAMC
and Chairman of the Board of SSI.
Susan Switzer,
Assistant Vice President None.
Anthony A. Tanner,
Vice President: Rochester Division None.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
James Turner,
Assistant Vice President None.
Maureen VanNorstrand,
Assistant Vice President None.
Ashwin Vasan,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds.
Annette Von Brandis,
Assistant Vice President None.
Teresa Ward,
Assistant Vice President None.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt fixed
income Oppenheimer funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial
Analyst; Vice President of HarbourView.
William L. Wilby,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of
HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of
Centennial; Vice President, Finance and
Accounting; Point of Contact: Finance
Supporters of Children; Member of the Oncology
Advisory Board of the Childrens Hospital.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since May 1985),
SFSI (since November 1989), OFIL (since 1998),
Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer Quest /Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Large Cap Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer Funds,
the Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset
Management Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer
Acquisition Corp. is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New
York 14625-2807.
Item 27. Principal Underwriter
Not applicable.
Item 28. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and rules promulgated thereunder are in the possession of OppenheimerFunds,
Inc. at its offices at 6803 South Tucson Way, Englewood, Colorado 80112.
Item 29. Management Services
Not applicable
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the County of Arapahoe and State of Colorado on
the 1st day of March, 1999.
PANORAMA SERIES FUND, INC.
By: /s/ James C. Swain
---------------------------------------------*
(James C. Swain, Chairman) (Denver)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
Signatures Title Date
/s/ James C. Swain* Chairman of the
- ------------------------- Board of Directors
James C. Swain and Principal Executive
Officer March 1, 1999
/s/ George C. Bowen* Chief Financial and
- -------------------------- Accounting Officer
George C. Bowen and Treasurer March 1, 1999
/s/ Bridget A. Macaskill* President March 1, 1999
- --------------------------
Bridget A. Macaskill
/s/ Robert G. Avis* Director March 1, 1999
- --------------------------
Robert G. Avis
/s/ William A. Baker* Director March 1, 1999
- --------------------------
William A. Baker
/s/ Charles Conrad, Jr.* Director March 1, 1999
- --------------------------
Charles Conrad, Jr.
/s/ Jon S. Fossel* Director March 1, 1999
- --------------------------
Jon S. Fossel
/s/ Sam Freedman* Director March 1, 1999
- --------------------------
Sam Freedman
/s/ Raymond J. Kalinowski Director March 1, 1999
- --------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Director March 1, 1999
- --------------------------
C. Howard Kast
/s/ Robert M. Kirchner* Director March 1, 1999
- --------------------------
Robert M. Kirchner
/s/ Ned M. Steel* Director March 1, 1999
- --------------------------
Ned M. Steel
*By:
/s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
N1A\PANORAMA\PARTC.99
