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Government Securities Portfolio
A Series of Panorama Series Fund, Inc.
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Prospectus dated May 1, 2000
Government Securities 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 only as an underlying investment for
variable life insurance policies, variable annuity contracts and other insurance
company separate accounts. A prospectus for the insurance product you have
selected accompanies this Prospectus and explains how to select shares of the
Portfolio as an investment under that insurance product.
This Prospectus contains important information about the Portfolio's
objective, its investment policies, strategies and risks. Please read this
Prospectus (and your insurance product prospectus) carefully before you invest
and keep them for future reference about your investment.
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 Investment Objective and Strategies
Main Risks of Investing in the Portfolio
The Portfolio's Past Performance
About the Portfolio's Investments
How the Portfolio is Managed
Investing in the Portfolio
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How to Buy and Sell Shares
Dividends, Capital Gains and Taxes
Financial Highlights
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About the Portfolio
The Portfolio's Investment Objective and Strategies
What Is the Portfolio's Investment Objective? The Portfolio seeks a high level
of current income with a high degree of safety of principal, by investing
primarily (at least 65% of its total assets under normal market conditions) in
U.S. government securities and U.S. government-related securities.
What Does the Portfolio Mainly Invest In? U.S. government securities 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 federally-chartered corporate entities that are referred to as
"instrumentalities" of the U.S. government.
"U.S. government-related securities" are debt obligations that are fully
collateralized or secured by U.S. government securities. That means the U.S.
government securities are held to back the payments of interest and
repayments of principal. The Portfolio invests significant amounts of its
assets in U.S. government-related mortgage-backed securities, such as
collateralized mortgage obligations (called "CMO's") and mortgage
participation certificates. Some 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. Others are backed by
the right of the issuer 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 in this paragraph have some degree of credit support
from the U.S. government and are generally referred to as "U.S. government
securities" in this Prospectus.
The Portfolio can also invest up to 35% of its assets in
investment-grade debt obligations issued by private issuers, which do not
have any credit support from the U. S. government.
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 Do the Portfolio Managers 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-issuer mortgage-related
securities and weigh yields and relative values against investment 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 the
Portfolio's share price against volatility,
|_| Securities that are less sensitive to changes in interest rates, and
|_| Different types of U.S. government and private-issuer securities.
Who Is the Portfolio Designed For? The Portfolio's shares are available only as
an investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, 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. The
Fund is not a complete investment program.
Main Risks of Investing in the Portfolio
All investments carry risks to some degree. The Portfolio's investments
are subject to changes in their value from a number of factors described below.
There is also the risk that poor security selection by the Portfolio's
investment Manager, OppenheimerFunds, Inc., will cause the Portfolio to
underperform other funds having similar objectives.
|X| Interest Rate Risks. Debt securities, including U.S. government
securities prior to their maturity, 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 securities may sell for more
than their face amount. When interest rates rise, the values of outstanding debt
securities generally fall, and the securities may sell at a discount from their
face amount. The magnitude of these price changes is generally greater for
longer-term debt securities than for short-term debt securities. 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 can 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. The Portfolio's share prices can go up or down when
interest rates change because of the effect of interest rate changes on the
value of the Portfolio's investments in debt securities.
|X| Prepayment Risk. Prepayment risk occurs when the mortgages underlying
a mortgage-related security are prepaid at a rate faster than anticipated
(usually when interest rates fall) and the issuer of the security can prepay the
principal prior to the security's maturity. Mortgage-related securities that are
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 can 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 or instrumentalities 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 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.
|X| There are Special Risks in Using Derivative Investments. The Portfolio
can use derivatives to seek increased income 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 structured notes 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. 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? The risks described above 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.
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. Although U.S. government
securities that are backed by the full faith and credit of the U.S. government
have little credit risk, prior to their maturity, their values are subject to
interest rate risks. Collateralized mortgage obligations and other
mortgage-related securities are subject to a number of risks, especially
prepayment risks, that can reduce 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 fixed-income funds, particularly
those that invest in lower-grade securities. It has more risks than a money
market fund 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 Portfolio, by showing changes in the Portfolio's performance from year to
year for the full calendar years since its inception and by showing how the
average annual total returns of the Portfolio's shares compare to the returns 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]
For the period 1/1/00 through 3/31/00, the Portfolio's cumulative return (not
annualized) was 3.17%. 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 6.00% (2ndQTR95) and the lowest return (not
annualized) for a calendar quarter was -3.77% (1stQTR94).
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Average Annual
Total Returns for
the periods ended Life of
December 31, 1999 1 Year 5 Years Portfolio
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Government
Securities
Portfolio
(inception: -1.73% 6.99% 6.15%
5/13/92)
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Merrill Lynch
Master Government
Index -2.11% 7.46% 6.85%*
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* The "life-of-Portfolio" index performance is shown from 4/30/92.
The Portfolio's returns in the table measure the performance of a hypothetical
account without deducting charges imposed by the separate accounts that invest
in the Portfolio 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 Master Government 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.
The Portfolio's total returns should not be expected to be the same as the
returns of other Oppenheimer funds, even if funds have the same portfolio
managers and/or similar names.
About the Portfolio's Investments
The Portfolio's Principal Investment Policies. The allocation of the Portfolio's
investment holdings among different investments will vary over time based upon
the Manager's evaluation of economic and market trends. The Portfolio might not
always hold all of the different types of investments described in this
Prospectus.
The Manager 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).
o Under normal market conditions, the Portfolio invests at least 65% of
its total assets in U.S. government securities and U.S. government-related
securities.
o U.S. government securities the Portfolio buys are issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
o The Portfolio can also invest up to 35% of its total assets in
investment grade debt obligations of private issuers.
The Statement of Additional Information contains more detailed information
about the Portfolio's investment policies and risks.
U.S. Government Securities. The Portfolio can invest in a variety of long,
medium and short-term 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 when issued), and Treasury bonds (having maturities of
more than ten years when issued). 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 interest coupons 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.
|X| Obligations of U.S. Government Agencies or Instrumentalities. These
include direct obligations, such as notes, 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 might 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.
|X| Special Portfolio Diversification Requirements. To enable a variable
annuity or variable life insurance contract based on an insurance company
separate account to qualify for favorable tax treatment under the Internal
Revenue Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers. The Portfolio's investment program is managed
to meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.
Failure by the Portfolio to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate account
to be taxable income. Those diversification requirements might also limit, to
some degree, the Portfolio's investment decisions in a way that could reduce its
performance.
|X| Can the Portfolio's Investment Objective and Policies Change? The
Portfolio's Board of Directors can 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 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.
Other Investment Strategies. To seek its objective, the Portfolio can also use
the investment techniques and strategies described below. The Portfolio might
not always use all of them. These techniques involve certain risks, although
some are designed to help reduce overall investment or market risks.
|X| Private-Issuer Debt Securities. While the Portfolio can invest a
substantial portion of its assets in securities issued by private issuers,
currently it does not do so to a significant degree. These debt obligations must
be "investment-grade", which means that if they are rated, they must be rated
within the four highest rating categories of Moody's Investors Service, Inc. or
Standard & Poor's Rating Service or that have a comparable rating by another
rating organization. If they are unrated, the Portfolio can buy them only if
they are assigned a rating comparable to investment-grade by the Manager.
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.
|_| Private-Issuer Mortgage-Backed Securities. The 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 as well as the
interest rate risks and prepayment risks of CMO's, discussed above, 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. The Portfolio's investments in privately-issued
mortgage-related securities are limited to those rated in the two highest rating
categories of a national rating organization (or unrated securities having a
comparable rating assigned by the Manager).
|_| Asset-Backed Securities. The Portfolio can buy asset-backed
securities which 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 prepayment risks, and the risks
of default by the issuer as well as by the borrowers of the underlying loans in
the pool.
|X| Zero-Coupon and "Stripped" Securities. Some of the U.S. government and
corporate debt securities the Portfolio can 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 CMO's 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 other all the principal payments.
Zero-coupon and stripped securities are subject to greater fluctuations in
price from interest rate changes than conventional interest-bearing securities.
The Portfolio may have to pay out the imputed income on zero-coupon securities
without receiving the actual cash currently. Interest-only 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. Principal-only securities are
also sensitive to changes in interest rates. When prepayments tend to fall, the
timing of the cash flows to these securities increases, making them more
sensitive to changes in interest rates. 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| 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| 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.
Markets underlying securities and indices may move in a direction not
anticipated by the Manager. Interest rate and securities 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 and call options, including 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 Portfolio. There are also special risks in particular hedging
strategies. 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| Portfolio Turnover. The Portfolio can 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 at the
end of this Prospectus shows the Portfolio's portfolio turnover rates during
prior fiscal years.
How the Portfolio Is Managed
The Manager. The Manager 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 the fees the
Portfolio pays 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 January 1960. The
Manager (including subsidiaries and affiliates) managed more than $125 billion
in assets as of March 31, 2000, including other mutual funds, with more than 5
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 managers of the Portfolio are John
Kowalik and David Negri. Each of them is a Vice-President of Panorama Series
Fund, Inc. and a Senior Vice President of the Manager. Mr. Kowalik became a
portfolio manager of the Portfolio on October 27, 1998. 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 in March 1996. He has been a portfolio
manager for the Manager since July 1988. Each is also 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 over $400 million. The
Portfolio's management fee for its last fiscal year ended December 31,
1999 was 0.53% of average daily net assets.
|X| Possible Conflicts of Interest. The Portfolio offers its shares to
separate accounts of different insurance companies as an investment
for their variable annuity, variable life and other investment product
contracts. While the Portfolio does not foresee any disadvantages to
contract owners from these arrangements, it is possible that the
interests of owners of different contracts participating in the
Portfolio through different separate accounts might conflict. For
example, a conflict could arise because of differences in tax
treatment.
The Portfolio's Board has procedures to monitor the portfolio for possible
conflicts to determine what action should be taken. If an irreconcilable
conflict occurs, the Board might require one or more participating insurance
company separate accounts to withdraw their investments in the Portfolio. That
could force the Portfolio to sell securities at disadvantageous prices, and
orderly portfolio management could be disrupted. Also, the Board might refuse to
sell shares of the Portfolio to a particular separate account, or could
terminate the offering of the Portfolio's shares if required to do so by law or
if it would be in the best interests of the shareholders of the Portfolio to do
so.
Investing in the Portfolio
How to Buy and Sell Shares
How Are Shares Purchased? Shares of the Portfolio may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy shares
of the Portfolio directly. Please refer to the accompanying prospectus of the
participating insurance company for information on how to select the Portfolio
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That prospectus will indicate which class
of shares you are eligible to purchase. The Portfolio reserves the right to
refuse any purchase order when the Manager believes it would be in the
Portfolio's best interests to do so.
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Information about your investment in the Portfolio through your variable
annuity contract, variable life insurance policy or other plan can be
obtained only from your participating insurance company or its servicing
agent. The Portfolio's Transfer Agent does not hold or have access to those
records. Instructions for buying or selling shares of the Portfolio should be
given to your insurance company or its servicing agent, not directly to the
Portfolio or its Transfer Agent.
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|_| At What Price Are Shares Sold? Shares are sold at their offering
price, which is the net asset value per share. The Portfolio does not impose any
sales charge on purchases of its shares. If there are any charges imposed under
the variable annuity, variable life or other contract through which Portfolio
shares are purchased, they are described in the accompanying prospectus of the
participating insurance company.
The net asset value per share is determined as of the close of The New
York Stock Exchange on each day that the exchange is open for trading (referred
to in this Prospectus as a "regular business day"). The Exchange normally closes
at 4:00 P.M., New York time, but may close earlier on some days. All references
to time in this Prospectus mean New York time.
The net asset value per share is determined by dividing the value of the
Portfolio's net assets attributable to a class of shares by the number of shares
of that class that are outstanding. The Portfolio's Board of Directors has
established procedures to value the Portfolio's securities to determine the
Portfolio's net asset value, in general based on market values. The Board has
adopted special procedures for valuing illiquid and restricted securities and
securities for which market values cannot be readily obtained.
The offering price that applies to an order from a participating insurance
company is based on the next calculation of the net asset value per share that
is made after the insurance company (as the Portfolio's designated agent to
receive purchase orders) receives a purchase order from its contract owners to
purchase Portfolio shares on a regular business day, provided that the Portfolio
receives the order from the insurance company by 9:30 A.M. on the next regular
business day at the offices of its Transfer Agent in Colorado.
|X| Classes of Shares. The Portfolio may offer two different classes of
shares. The class of shares offered by this Prospectus has no "name"
designation. The other class is designated as Service shares. The different
classes of shares represent investments in the same portfolio of securities but
are expected to have different expenses and share prices.
This Prospectus may not be used to offer or sell Service shares. A
description of the distribution and service plans that affect only Service
shares of the Portfolio is contained in the Portfolio's prospectus that offers
Service shares. That prospectus may be obtained without charge by contacting any
participating insurance sponsor that offers Service shares of the Portfolio as
an investment for its separate accounts. You can also obtain a copy from
OppenheimerFunds Distributor, Inc., by calling toll-free 1.888.470.0861.
How Are Shares Redeemed? As with purchases, only the participating insurance
companies that hold Portfolio shares in their separate accounts for the benefit
of variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policyholders should not directly contact the Portfolio or its Transfer Agent to
request redemption of Portfolio shares. Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.
The share price that applies to a redemption order is the next net asset
value per share that is determined after the participating insurance company (as
the Portfolio's designated agent) receives a redemption request on a regular
business day from its contract or policy holder, provided that the Portfolio
receives the order from the insurance company by 9:30 A.M. the next regular
business day at the office of its Transfer Agent in Colorado. The Portfolio
normally sends payment by Federal Funds wire to the insurance company's account
the day after the Portfolio receives the order (and no later than 7 days after
the Portfolio's receipt of the order). Under unusual circumstances determined by
the Securities and Exchange Commission, payment may be delayed or suspended.
Dividends, Capital Gains and Taxes
Dividends. The Portfolio intends to declare dividends separately for each class
of shares from net investment income, if any, on an annual basis, and to pay
those dividends in March on a date selected by the Board of Directors. The
Portfolio has no fixed dividend rate and cannot guarantee that it will pay any
dividends.
All dividends (and any capital gains distributions) will be reinvested
automatically in additional Portfolio shares at net asset value for the account
of the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).
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 March 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.
Taxes. For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Portfolio may be
purchased only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Portfolio from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable, if
at all, to the participating insurance company.
This information is only a summary of certain federal income tax
information about an investment in Portfolio shares. You should consult with
your tax adviser or your participating insurance company representative about
the effect of an investment in the Portfolio under your contract or policy.
<PAGE>
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>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $1.13 $1.11 $1.09 $1.07 $0.95
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .07 .06 .07 .07 .06
Net realized and unrealized gain (loss) (.09) .03 .02 (.05) .12
- ------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (.02) .09 .09 .02 .18
- ------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders:
Dividends from net investment income (.06) (.07) (.07) --(2) (.06)
- ------------------------------------------------------------------------------------------------------------------------
Total dividends to shareholders (.06) (.07) (.07) -- (.06)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.05 $1.13 $1.11 $1.09 $1.07
===== ===== ===== ===== =====
========================================================================================================================
Total Return, at Net Asset Value(3) (1.73)% 8.14% 8.82% 1.93% 18.91%
========================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $20,150 $24,923 $23,719 $23,236 $24,309
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $22,683 $24,044 $23,034 $23,880 $23,157(4)
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(5)
Net investment income 5.80% 5.64% 5.96% 6.11% 6.08%
Expenses 0.70% 0.68%(6) 0.67%(6) 0.62%(6) 0.71%(6)
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 14% 43% 0% 6% 55%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund.
2. Less than $0.005 per share.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods of less than one full year. Total return
information does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would reduce
figures for all periods shown. 4. This information is not covered by the
auditors' opinion. 5. Annualized for periods less than one full year. 6. Expense
ratio has not been grossed up to reflect the effect of expenses paid indirectly.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $2,666,016 and $3,845,969, respectively.
Government Securities Portfolio
<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.
- ----------------------------------------------------------------------------
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:
By Telephone:
Call OppenheimerFunds Services toll-free:
1.888.470.0861
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
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 1.202.942.8090) or on the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained after payment of
a duplicating fee by electronic request at the SEC's e-mail address:
[email protected] or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
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
PR613.0500 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 depicting the annual total returns of a hypothetical investment in
Class A shares of the Portfolio for each of the calendar years since the
Portfolio's inception. Set forth below are the relevant data points that will
appear in the bar chart:
- ----------------------------------------
Calendar Year Ended Annual Total
12/31 Return
- ----------------------------------------
- ----------------------------------------
1993 10.98%
- ----------------------------------------
- ----------------------------------------
1994 -4.89%
- ----------------------------------------
- ----------------------------------------
1995 18.91%
- ----------------------------------------
- ----------------------------------------
1996 1.93%
- ----------------------------------------
- ----------------------------------------
1997 8.82%
- ----------------------------------------
- ----------------------------------------
1998 8.14%
- ----------------------------------------
- ----------------------------------------
1999 -1.73%
- ----------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
Growth Portfolio
A Series of Panorama Series Fund, Inc.
- -------------------------------------------------------------------------------
Prospectus dated May 1, 2000
Growth 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 only as the underlying investment for
variable life insurance policies, variable annuity contracts and other insurance
company separate accounts. A prospectus for the insurance product you have
selected accompanies this Prospectus and explains how to select shares of the
Portfolio as the investment under that insurance product.
This Prospectus contains important information about the Portfolio's
objective, its investment policies, strategies and risks. Please read this
Prospectus (and your insurance product Prospectus) carefully before you invest
and keep them for future reference about your investment.
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
- -------------------------------------------------------------------------------
The Portfolio's Investment Objective and Strategies
Main Risks of Investing in the Portfolio
The Portfolio's Past Performance
About the Portfolio's Investments
How the Portfolio is Managed
Investing in the Portfolio
- -------------------------------------------------------------------------------
How to Buy and Sell Shares
Dividends, Capital Gains and Taxes
Financial Highlights
<PAGE>
About the Portfolio
The Portfolio's Investment Objective and Strategies
What Is the Portfolio's Investment Objective? The Portfolio seeks 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.
What Does the Portfolio Mainly Invest In? The Portfolio currently invests mainly
in common stocks. The Portfolio can buy other equity investments, including
preferred stocks, rights and warrants and securities convertible into common
stocks. 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 amd convertible bonds rated below as
low as "B" by Moody's Investors Service, Inc. or Standard and Poor's Rating
Group or other rating services. 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 Do the Portfolio Managers Decide What Securities to Buy or Sell?
In selecting securities for purchase or sale by the Portfolio, the portfolio
managers use a disciplined value approach. 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 that they believe have potential for improved
performance. They then conduct "fundamental" analysis of an
issuer's business prospects and financial condition to search for
stocks that they believe have the best growth potential.
|_| First they use quantitative tools to identify a universe of stocks
that have low price/earnings (P/E) ratios compared, for example, to
the P/E ratio of the S&P 500 Index. Next they search that universe
for stocks having characteristics suggesting the potential for
improved price performance - for example, better-than-expected
earnings reports.
|_| The portfolio managers use internal research and analysis by other
market analysts to identify stocks within the selected universe
that may provide growth opportunities. 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 there is evidence that an issuer's
business prospects are deteriorating (for example, the issuer
reports a material earnings disappointment), the portfolio managers
will consider selling the stock.
Who Is the Portfolio Designed For? The Portfolio's shares are available only as
an investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, 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 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 current income. The Portfolio is not a complete investment program.
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, described
below. There is also the risk that poor security selection by the Fund's
investment Manager, OppenheimerFunds, Inc., will cause the Fund to underperform
other funds having a similar objective.
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 prices 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. 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 can be great. Because the Portfolio currently
focuses its investments in common stocks, the value of the Portfolio's
investment holdings 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 investments 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. In particular,
because the Portfolio currently emphasizes investments in stocks of U.S.
issuers, it will be affected by changes in U.S. stock markets.
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
invests mainly 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.
The Manager may increase the relative emphasis of the Fund's investments
in a particular industry from time to time. Stocks of issuers in a particular
industry may be affected by changes in economic conditions, government
regulations, availability of basic resources or supplies, or other events that
affect that industry more than others. To the extent that the Portfolio has
increased the relative emphasis of its investments in a particular industry, its
share values may fluctuate in response to events affecting that industry.
How Risky is the Portfolio Overall? In the short term, the stock markets can be
volatile, and the price of the Portfolio's shares will go up and down
substantially. Growth stocks may be more volatile than other equity securities.
The Portfolio does not typically invest to a great extent in income-oriented
investments to help cushion the Portfolio's total return from changes in stock
prices. The Portfolio generally may be less volatile than aggressive growth
stock funds, but its share price may be more volatile than funds that invest in
a mix of 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 compared 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]
For the period 1/1/00 through 3/31/00, the Portfolio's cumulative return (not
annualized) was ____%. 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 18.48% (4QTR98) and the lowest return (not
annualized) for a calendar quarter was -18.08% (3QTR90).
- --------------------------------------------------------------------
Average Annual
Total Returns
for the periods
ended December 1 Year 5 Years Life of
31, 1999 Portfolio
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Growth Portfolio
(inception date: -3.76% 16.70% 14.02%
1/21/82)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
S&P 500 Index
(from 12/31/89) 21.03% 28.54% 18.19%
- --------------------------------------------------------------------
The Portfolio's returns in the table measure the performance of a hypothetical
account without deducting charges imposed by the separate accounts that invest
in the Fund and assume that all dividends and capital gains distributions have
been reinvested in additional shares. Because the Portfolio invests primarily in
stocks, its performance is compared to the S&P 500 Index, an unmanaged index of
equity securities that is a measure of the domestic stock market. However, it
must be remembered that the index performance reflects the reinvestment of
income but does not consider the effects of transaction costs. Also, the
Portfolio may have investments that vary from the index.
The Portfolio's total returns should not be expected to be the same as the
returns of other Oppenheimer funds, even if funds have the same portfolio
managers and/or similar names.
About the Portfolio's Investments
The Portfolio's Principal Investment Policies. The allocation of the Portfolio's
investment holdings among the different investments will vary over time based
upon the Manager's evaluation of economic and market trends. The Portfolio's
holdings 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.
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 percentage of the stock of
any one company and by not investing too great a percentage of the Portfolio's
assets in any one issuer. 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.
Growth 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. Growth companies, for example, may
be developing new products or services, or they may be expanding into new
markets for their products. Newer 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. The Manager looks for stocks of growth
companies for the Portfolio that the Manager believes will increase in value
over time.
The Fund does not limit its investments to issuers in a particular market
capitalization range or ranges, although it currently focuses on large-cap
and mid-cap issuers. "Market capitalization" refers to the total market
value of an issuer's common stock. The stock prices of large-cap issuers
tend to be less volatile than the prices of mid-cap and small-cap companies
in the short term, but these companies may not afford the same growth
opportunities as mid-cap and small-cap companies.
Industry Focus. Stocks of issuers in a particular industry might be affected by
changes in economic conditions or by changes in government regulations,
availability of basic resources or supplies, or other events that affect
that industry more than others. To the extent that the Fund has a greater
emphasis on investments in a particular industry, its share values may
fluctuate in response to events affecting that industry.
|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. The Financial Highlights table at the end of
this Prospectus shows the Portfolio's portfolio turnover rates during prior
fiscal years.
|X| Special Portfolio Diversification Requirements. To enable a variable
annuity or variable life insurance contract based on an insurance company
separate account to qualify for favorable tax treatment under the Internal
Revenue Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers. The Portfolio's investment program is managed
to meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.
Failure by the Portfolio to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate account
to be taxable income. Those diversification requirements might also limit, to
some degree, the Portfolio's investment decisions in a way that could reduce its
performance.
|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 Board of Directors without 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.
Other Investment Strategies. To seek its objective, the Portfolio can also use
the investment techniques and strategies described below. The Portfolio 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 overall investment or market risks.
Other Equity Securities. While the Fund emphasizes investments in common
stocks, it can also buy preferred stocks and securities convertible into
common stock.
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 that have comparable ratings by other national rating
organizations. Securities rated below "Baa" by Moody's or "BBB" by Standard &
Poor's are below "investment grade" and are subject to greater risk of default
by the issuer than investment grade securities. However, although many
convertible securities are debt securities, the Manager considers some of them
to be "equity equivalents" because of the conversion feature, and in that case
their rating has less impact on the investment decision than in the case of
other debt securities. These investments are subject to the Fund's policy of
limiting its debt investments under normal circumstances to not more than 10% of
its assets.
|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 federally-chartered corporate entities referred
to as "instrumentalities." The Portfolio can also buy foreign government
securities, and foreign and domestic corporate bonds and debentures. Normally
these investments, including convertible debt securities, are limited to not
more than 10% of the Portfolio's net assets.
The Portfolio can buy debt securities of any maturity and typically holds
some short-term notes for liquidity purposes. The Portfolio can buy debt
securities that are rated by nationally- recognized rating organizations as well
as unrated debt 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
below-investment grade securities (sometimes called "junk bonds") rated as low
as "B" as described above in "Other Equity 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. U.S. government
securities are subject to little credit risk. 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 of
default 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 when the Portfolio wants to sell them. 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 prices 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 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| 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, they also
have special risks. The 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. Foreign issuers are not subject to the
same accounting and disclosure requirements to which U.S. companies are subject.
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| 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| 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 and is not required to use them in seeking its objective.
Derivatives have risks. 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. 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.
Using derivatives could increase the volatility of the Portfolio's share prices.
|X| Hedging. The Portfolio can write exchange-traded 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.
How the Portfolio Is Managed
The Manager. The Manager 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 the fees the
Portfolio pays to the Manager and describes the expenses that the Portfolio is
responsible to pay to conduct its business.
The Manager has been an investment adviser since January 1960. The Manager
(including subsidiaries and an affiliate) managed more than $125 billion in
assets as of March 31, 2000, including other Oppenheimer funds with more than 5
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 managers of the Portfolio are
Charles Albers and Nikolaos Monoyios, who are also Vice Presidents of the
Company. They are the persons primarily responsible for the day-to-day
management of the Portfolio's investments. Mr. Albers is a Senior Vice President
of the Manager and Mr. Monoyios is a Vice President of the Manager. Prior to
joining the Manager in April 1998, they were portfolio managers at Guardian
Investor Services (from 1972 and 1979, respectively), the investment management
subsidiary of The Guardian Life Insurance Company.
|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 Portfolio, 0.500% of the next $100 million, and 0.450% of
average daily net assets over $400 million. The Portfolio's management fee for
its last fiscal year ended December 31, 1999, was 0.52% of average annual net
assets.
|X| Possible Conflicts of Interest. The Portfolio offers its shares to
separate accounts of different insurance companies as an investment for their
variable annuity, variable life and other investment product contracts. While
the Portfolio does not foresee any disadvantages to contract owners from these
arrangements, it is possible that the interests of owners of different contracts
participating in the Portfolio through different separate accounts might
conflict. For example, a conflict could arise because of differences in tax
treatment.
The Portfolio's Board has procedures to monitor the portfolio for possible
conflicts to determine what action should be taken. If an irreconcilable
conflict occurs, the Board might require one or more participating insurance
company separate accounts to withdraw their investments in the Portfolio. That
could force the Portfolio to sell securities at disadvantageous prices, and
orderly portfolio management could be disrupted. Also, the Board might refuse to
sell shares of the Portfolio to a particular separate account, or could
terminate the offering of the Portfolio's shares if required to do so by law or
if it would be in the best interests of the shareholders of the Portfolio to do
so.
Investing in the Portfolio
How to Buy and Sell Shares
How Are Shares Purchased? Shares of the Portfolio may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy shares
of the Portfolio directly. Please refer to the accompanying prospectus of the
participating insurance company for information on how to select the Portfolio
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That prospectus will indicate which class
of shares you are eligible to purchase. The Portfolio reserves the right to
refuse any purchase order when the Manager believes it would be in the
Portfolio's best interests to do so.
- -------------------------------------------------------------------------------
Information about your investment in the Portfolio through your variable
annuity contract, variable life insurance policy or other plan can be
obtained only from your participating insurance company or its servicing
agent. The Portfolio's Transfer Agent does not hold or have access to those
records. Instructions for buying or selling shares of the Portfolio should be
given to your insurance company or its servicing agent, not directly to the
Portfolio or its Transfer Agent.
- -------------------------------------------------------------------------------
|X| At What Price Are Shares Sold? Shares are sold at their offering
price, which is the net asset value per share. The Portfolio does not impose any
sales charge on purchases of its shares. If there are any charges imposed under
the variable annuity, variable life or other contract through which Portfolio
shares are purchased, they are described in the accompanying prospectus of the
participating insurance company.
The net asset value per share is determined as of the close of The New
York Stock Exchange on each day that the exchange is open for trading (referred
to in this Prospectus as a "regular business day"). The Exchange normally closes
at 4:00 P.M., New York time, but may close earlier on some days. All references
to time in this Prospectus mean New York time.
The net asset value per share is determined by dividing the value of the
Portfolio's net assets attributable to a class of shares by the number of shares
of that class that are outstanding. The Portfolio's Board of Directors has
established procedures to value the Portfolio's securities to determine the
Portfolio's net asset value, in general based on market values. The Board has
adopted special procedures for valuing illiquid and restricted securities and
securities for which market values cannot be readily obtained. Because some
foreign securities trade in markets and on exchanges that operate on weekends
and U.S. holidays, the values of some of the Portfolio's foreign investments
might change significantly on days when shares of the Portfolio cannot be
purchased or redeemed.
The offering price that applies to an order from a participating insurance
company is based on the next calculation of the net asset value per share that
is made after the insurance company (as the Portfolio's designated agent to
receive purchase orders) receives a purchase order from its contract owners to
purchase Portfolio shares on a regular business day, provided that the Portfolio
receives the order from the insurance company by 9:30 A.M. on the next regular
business day at the offices of its Transfer Agent in Colorado.
|X| Classes of Shares. The Portfolio may offer two different classes of
shares. The class of shares offered by this Prospectus has no "name"
designation. The other class is designated as Service shares. The different
classes of shares represent investments in the same portfolio of securities but
are expected to have different expenses and share prices.
This Prospectus may not be used to offer or sell Service shares. A
description of the distribution and service plans that affect only Service
shares of the Portfolio is contained in the Portfolio's prospectus that offers
Service shares. That prospectus may be obtained without charge by contacting any
participating insurance sponsor that offers Service shares of the Portfolio as
an investment for its separate accounts. You can also obtain a copy from
OppenheimerFunds Distributor, Inc., by calling toll-free 1.888.470.0861.
How Are Shares Redeemed? As with purchases, only the participating insurance
companies that hold Portfolio shares in their separate accounts for the benefit
of variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policyholders should not directly contact the Portfolio or its Transfer Agent to
request a redemption of Portfolio shares. Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.
The share price that applies to a redemption order is the next net asset
value per share that is determined after the participating insurance company (as
the Portfolio's designated agent) receives a redemption request on a regular
business day from its contract or policy holder, provided that the Portfolio
receives the order from the insurance company by 9:30 A.M. the next regular
business day at the office of its Transfer Agent in Colorado. The Portfolio
normally sends payment by Federal Funds wire to the insurance company's account
the day after the Portfolio receives the order (and no later than 7 days after
the Portfolio's receipt of the order). Under unusual circumstances determined by
the Securities and Exchange Commission, payment may be delayed or suspended.
Dividends, Capital Gains and Taxes
Dividends. The Portfolio intends to declare dividends separately for each class
of shares from net investment income, if any, on an annual basis, and to pay
those dividends in March on a date selected by the Board of Directors. The
Portfolio has no fixed dividend rate and cannot guarantee that it will pay any
dividends.
All dividends (and any capital gains distributions) will be reinvested
automatically in additional Portfolio shares at net asset value for the account
of the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).
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 March 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.
Taxes. For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Portfolio may be
purchased only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Portfolio from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable, if
at all, to the participating insurance company.
This information is only a summary of certain federal income tax
information about an investment in Portfolio shares. You should consult with
your tax adviser or your participating insurance company representative about
the effect of an investment in the Portfolio under your contract or policy.
<PAGE>
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.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995
<S> <C> <C> <C> <C> <C>
================================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $3.27 $3.45 $2.98 $2.53 $1.97
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .05 .04 .04 .04 .04
Net realized and unrealized gain (loss) (.17) .26 .69 .43 .71
- --------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (.12) .30 .73 .47 .75
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.04) (.04) (.03) (.01) (.04)
Distributions from net realized gain (.12) (.44) (.23) (.01) (.15)
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.16) (.48) (.26) (.02) (.19)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $2.99 $3.27 $3.45 $2.98 $2.53
===== ===== ===== ===== =====
================================================================================================================================
Total Return, at Net Asset Value(2) (3.76)% 8.43% 26.37% 18.87% 38.06%
================================================================================================================================
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $668,139 $918,871 $831,371 $586,222 $405,935
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $808,715 $877,874 $721,555 $494,281 $303,193(3)
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 1.28% 1.16% 1.38% 1.63% 2.01%
Expenses 0.53% 0.53%(5) 0.54%(5) 0.58%(5) 0.66%(5)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 132% 98% 92% 83% 69%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund. 2. Assumes a $1,000 hypothetical initial investment on the business day
before the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods less than one full year. Total return
information does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would reduce the
total return figures for all periods shown. 3. This information is not covered
by the auditors' opinion. 4. Annualized for periods less than one full year. 5.
Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly. 6. The lesser of purchases or sales of portfolio securities for a
period, divided by the monthly average of the market value of portfolio
securities owned during the period. Securities with a maturity or expiration
date at the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding short-term
securities) for the period ended December 31, 1999, were $1,004,973,144 and
$1,207,551,336, respectively.
<PAGE>
For More Information on the Growth 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:
By Telephone:
Call OppenheimerFunds Services toll-free:
1.888.470.0861
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
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 1.202.942.8090) or the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained after payment of
a duplicating fee by electronic request at the SEC's e-mail address:
[email protected] or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
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
PR0608.0500 Printed on recycled paper.
<PAGE>
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
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:
- --------------------------------------------------
Calendar Year Ended Annual Total Return
12/31
- --------------------------------------------------
- --------------------------------------------------
1989 35.81%
- --------------------------------------------------
- --------------------------------------------------
1990 -7.90%
- --------------------------------------------------
- --------------------------------------------------
1991 37.53%
- --------------------------------------------------
- --------------------------------------------------
1992 12.36%
- --------------------------------------------------
- --------------------------------------------------
1993 21.22%
- --------------------------------------------------
- --------------------------------------------------
1994 -0.51%
- --------------------------------------------------
- --------------------------------------------------
1995 38.06%
- --------------------------------------------------
- --------------------------------------------------
1996 18.87%
- --------------------------------------------------
- --------------------------------------------------
1997 26.37%
- --------------------------------------------------
- --------------------------------------------------
1998 8.43%
- --------------------------------------------------
- --------------------------------------------------
1999 -3.76%
- --------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
Oppenheimer International Growth Fund/VA
A Series of Panorama Series Fund, Inc.
- -------------------------------------------------------------------------------
Prospectus dated May 1, 2000
Oppenheimer International Growth Fund/VA is a mutual fund that seeks
long-term growth of capital. It emphasizes investments in common stocks and
securities of foreign companies. Prior to October 1, 1999, the Fund was named
International Equity Portfolio.
Shares of the Fund are sold only as an underlying investment for variable
life insurance policies, variable annuity contracts and other insurance company
separate accounts. A prospectus for the insurance product you have selected
accompanies this Prospectus and explains how to select shares of the Fund as an
investment under that insurance product.
This Prospectus contains important information about the Fund's objective,
its investment policies, strategies and risks. Please read this Prospectus (and
your insurance product prospectus) carefully before you invest and keep them for
future reference about your investment.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund'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 Fund
- -------------------------------------------------------------------------------
The Fund's Investment Objective and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
About the Fund's Investments
How the Fund is Managed
Investing in the Fund
- -------------------------------------------------------------------------------
How to Buy and Sell Shares
Dividends, Capital Gains and Taxes
Financial Highlights
<PAGE>
About the Fund
The Fund's Investment Objective and Strategies
What Is the Fund's Investment Objective? The Fund seeks long-term growth of
capital by investing under normal circumstances, at least 90% of its assets in
equity securities of companies wherever located, the primary stock market of
which is outside the United States.
What Does the Fund Mainly Invest In? The Fund currently invests mainly in common
stocks of foreign growth companies listed on foreign stock exchanges. They can
include both smaller, less-well-known companies and larger, more established
companies that the portfolio managers believe have favorable prospects for
capital growth relative to the market.
The Fund does not limit its investments to issuers within a specific
market capitalization range. Although the Fund currently has an emphasis on
mid-size companies, the Fund's emphasis may change over time. It can invest up
to 25% of its total assets in emerging markets and can invest without limit in
developed markets throughout the world. The Fund may increase the relative
emphasis of its investments in one or more industries, countries, or regions
from time to time, such as Europe or Asia, for example.
The Fund can also buy preferred stocks, securities convertible into common
stocks and other securities having equity features. The Fund can invest up to
20% of its total assets in debt securities when the portfolio managers believe
that it is appropriate to do so in order to seek the Fund's objective. The Fund
typically does not invest in debt securities to a significant degree. The Fund
can also use hedging instruments and certain derivative investments to try to
manage investment risks. These investments are more fully explained in "About
the Fund's Investments," below.
|X| How Does the Portfolio Manager Decide What Securities to Buy or Sell?
In selecting securities for the Fund, the Fund's portfolio manager 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 general or industry 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 Fund's investment holdings, the
portfolio manager currently focuses on the factors below, which may vary in
particular cases and may change over time. The portfolio manager currently
searches for: |_| Companies that enjoy a strong competitive position and high
demand for
their products and services,
|_| Companies that participate in markets with substantial barriers against
entry by potential competitors,
|_| Well-financed companies that are entering a growth cycle, and |_| Companies
with accelerating earnings growth and cash flow.
In applying these and other selection criteria, the portfolio manager
considers the potential effect of worldwide trends on the growth of particular
business sectors and looks for companies that may benefit from global trends.
The trends, or "global themes," currently considered include
telecommunications/media expansion, emerging consumer markets, infrastructure
development, natural resources, corporate restructuring, capital market
development, health care and biotechnology, and efficiency enhancing
technologies and services. The portfolio manager does not invest a fixed amount
of the Fund's assets according to these themes and this strategy and the themes
that are considered may change over time.
Who Is the Fund Designed For? The Fund's shares are available only as an
investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, for investors seeking
capital growth in their investment over the long term from foreign stocks. Those
investors should be willing to assume the greater risks of short-term share
price fluctuations that are typical for an aggressive fund focusing on growth
stock investments, and the special risks of investing in both emerging and
developed foreign countries. The Fund does not seek current income and the
income from its investments will likely be small, so it is not designed for
investors needing income. However, the Fund is not a complete investment
program.
Main Risks of Investing in the Fund
All investments carry risks to some degree. The Fund's investments in
stocks are subject to changes in their value from a number of factors described
below. There is also the risk that poor security selection by the Fund's
investment Manager, OppenheimerFunds, Inc., will cause the Fund to underperform
other funds having similar objectives.
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 Fund 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.
However, changes in the market prices of securities can occur at any time.
The share price of the Fund 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 Fund 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 Fund invests primarily
in common stocks of foreign companies, the value of the Fund's investment
holdings will be affected by changes in the foreign stock markets and the
special economic and other factors that might primarily affect the prices of
securities in particular foreign markets. Market risk will affect the Fund's net
asset value per share, which will fluctuate as the values of the Fund's
investments 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.
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.
Additionally, stocks of issuers in a particular industry may be affected
by changes in economic conditions, government regulations, availability of basic
resources or supplies, or other events that affect that industry more than
others. To the extent that the Fund increases the relative emphasis of its
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. While foreign securities offer special
investment opportunities, there are also special risks. The Fund can 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 outside the U.S.
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. To the extent that the Fund
increases the relative emphasis of its investment holdings in companies in a
particular country or region, it will be subject to the risks of political or
economic events that affect that country or region.
! Special Risks of Emerging Markets. Securities of issuers in emerging
markets present
risks not found in more mature markets. They 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 Fund 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. 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. As a result of these risk
factors, these investments may be very speculative.
How Risky is the Fund Overall? The risks described above collectively form
the overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its price per share. Particular
investments and investment strategies also have risks. 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.
In the short term, foreign stocks can be volatile and the price of the Fund's
shares can go up and down substantially. The Fund generally does not use
income-oriented investments to help cushion the Fund's total return from changes
in stock prices, except for defensive or liquidity purposes. The Fund 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 funds
that do not invest in foreign securities (especially emerging market securities)
or funds that focus on both stocks and bonds.
An investment in the Fund 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 Fund'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 Fund's performance from year to year for the
full calendar years since the Fund's inception and by showing how the average
annual total returns of the Fund's shares compare to those of a broad-based
market index. The Fund's past investment performance is not necessarily an
indication of how the Fund 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]
For the period 1/1/00 through 3/31/00, the Portfolio's cumulative return (not
annualized) was 16.60%. Charges that apply to separate accounts investing in the
Fund 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 36.91% (4 QTR99) and the lowest return for a calendar
quarter was -12.90% (3QTR98).
- --------------------------------------------------------------------
Average Annual
Total Returns for
the periods ended 1 Year 5 Years Life of
December 31, 1999 Portfolio
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Oppenheimer
International
Growth Fund/VA 50.37% 19.38% 14.79%
(inception:
5/13/92)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
MSCI EAFE Index 27.30% 13.15% 13.55%*
- --------------------------------------------------------------------
* The "life-of-Fund" index performance is shown from 4/30/92. The Fund's returns
in the table measure the performance of a hypothetical account without deducting
charges imposed by the separate accounts that invest in the Fund and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. Because the Fund invests primarily in foreign stocks, the Fund's
performance is compared to the Morgan Stanley Capital International EAFE Index,
an unmanaged index of equity securities listed on 20 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 transaction costs. Also, the Fund may invest in markets other than
those in the index.
The Fund's total returns should not be expected to be the same as the returns of
other Oppenheimer funds, even if funds have the same portfolio managers and/or
similar names.
About the Fund's Investments
The Fund's Principal Investment Policies. The allocation of the Fund's
investment holdings among the different investments will vary over time based
upon the Manager's evaluation of economic and market trends. The Fund'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 Fund's investment policies and risks.
The Manager tries to reduce risks by carefully researching securities
before they are purchased. The Fund attempts to reduce its exposure to market
risks by diversifying its investments, that is, by not holding a large
percentage of the stock of any one company and by not investing too great a
percentage of the Fund's assets in any one company. Also, the Fund does not
concentrate 25% or more of its assets in investments in any one industry.
|X| Growth Stock Investments. The Fund emphasizes investments in common
stocks of foreign companies that the Manager 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, pharmaceuticals, computer software, and new
consumer products.
Growth companies may be applying new technology, new or improved
distribution techniques or developing new services that might 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 might not
emphasize paying dividends, and might not pay any dividends for some time. They
are selected for the Fund's portfolio because the Manager believes the price of
the stock will increase over the long term, relative to the overall stock
market. 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.
|X| Foreign Securities. The Fund can buy 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. The Fund considers securities of foreign issuers that are represented
in the U.S. securities markets by American Depository Receipts (ADRs) or similar
depository arrangements to be "foreign securities" for purposes of its
investment allocations. The Fund can also buy debt securities issued by foreign
companies, but they would primarily be convertible securities. It can buy debt
securities issued by foreign governments or their agencies, but these are not
expected to be a main investment strategy of the Fund.
The Fund can invest up to 25% of its total assets in securities of
companies based in "emerging" markets. An issuer is considered by the Fund to be
located in an emerging market if: o the issuer is organized under the law of an
emerging country; o the issuer's principal securities trading market is in an
emerging
market; or
o at least 50% of the issuer's non-current assets, capitalization, gross
revenue or profit is derived (directly or indirectly) from assets or
activities located in emerging markets.
|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. The Financial Highlights table at the end of
this Prospectus shows the Portfolio's portfolio turnover rates during prior
fiscal years.
|X| Special Fund Diversification Requirements. To enable a variable
annuity or variable life insurance contract based on an insurance company
separate account to qualify for favorable tax treatment under the Internal
Revenue Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers. The Fund's investment program is managed to
meet those requirements, in addition to other diversification requirements under
the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.
Failure by the Fund to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate account
to be taxable income. Those diversification requirements might also limit, to
some degree, the Fund's investment decisions in a way that could reduce its
performance.
|X| Can the Fund's Investment Objective and Policies Change? The Fund'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 Fund's outstanding voting
shares. The Fund's objective is not a fundamental policy, but will not be
changed by the Board of Directors without 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.
Other Investment Strategies. To seek its objective, the Fund can also use the
investment techniques and strategies described below. The Fund might not always
use all of them. These techniques have certain risks, although some are designed
to help reduce overall investment or market risks.
|X| Investing in Special Situations. At times the Fund might 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 special situations that the
change or event might not occur, which could have a negative impact on the price
of the issuer's security. The Fund's investment might not produce the expected
gains or could incur a loss for the portfolio.
|X| Cyclical Opportunities. The Fund 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. The
Fund focuses on seeking growth over the long term but on occasion 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 might
lose value when the issuer or industry is out of phase in the business cycle.
|X| Debt Securities. The Fund can also invest up to 20% of its total
assets in debt securities when the Manager believes that it is appropriate in
seeking the Fund's objective. The Fund can buy debt securities issued by foreign
governments, by supranational organizations such as the World Bank, or by
companies. Those debt securities may be rated or unrated. The Fund can invest up
to 15% of its total assets in debt securities that are below investment grade.
Those lower-rated debt securities are commonly called "junk bonds," and have
greater risks of default than investment-grade securities. The Fund currently
does not intend to invest more than 5% of its total assets in securities rated
below investment grade.
|_| Convertible Securities. While the Fund emphasizes investments in
common stocks, it can also buy securities convertible into common stock.
Although some convertible securities are debt securities, the Manager considers
some of them to be "equity equivalents" because of the conversion feature and in
those cases their rating has less impact on the investment decision than in the
case of other debt securities. Nevertheless, convertible debt securities, like
other debt 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 Fund does not expect that its holdings of convertible securities (or
other debt securities) will normally represent more than 5% of its total assets.
The Fund can buy below-investment-grade convertible debt securities, which are
subject to greater risks of default than investment-grade securities. To the
extent the Fund buys debt securities it will focus primarily on investment-grade
securities.
|X| Investing in Domestic Securities. The Fund does not expect to
invest more than 10% of its assets in securities of U.S. issuers as part of
its normal investment program. However, it can hold common and preferred
stocks as well as debt securities of U.S. companies, and can also invest in
U.S. corporate and government debt securities for defensive and liquidity
purposes.
|X| Illiquid and Restricted Securities. Investments may be illiquid
because there is no active trading market for them. That might 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
Fund 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 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| 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| Derivative Investments. The Fund can use a number of different kinds
of "derivative" investments, although it does not do so currently to a
significant degree and is not required to use them to seek its goal. 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 Fund might use can be considered
"derivative" investments. In addition to using derivatives for hedging, the Fund
might use other derivative investments because they offer the potential for
increased value.
|_| 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. If the issuer of the derivative does
not pay the amount due, the Fund 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 Fund's share price could decline.
The Fund has limits on the amount of particular types of derivatives it
can hold. However, using derivatives can cause the Fund to lose money on its
investments and/or increase the volatility of its share prices. As a result of
these risks the Fund could realize less return from the investment than
expected. Certain derivative investments held by the Fund may be illiquid.
|X| Hedging. The Fund can buy and sell certain kinds of futures contracts,
forward contracts, and exchange-traded call options, including call options on
futures contracts, foreign currencies and broadly-based securities indices.
These are all referred to as "hedging instruments." Although the Fund can use
forward contracts, options or futures to hedge foreign currency risks when
buying and selling securities, it does not currently use them or other types of
hedging extensively and does not use hedging instruments for speculative
purposes. It has limits on its use of hedging. The Fund is not required to use
hedging instruments in seeking its goal.
Some of these strategies would hedge the Fund's portfolio against price
fluctuations. Other hedging strategies, such as buying futures and call options,
would tend to increase the Fund's exposure to the securities market. Forward
contracts could be used to try to manage foreign currency risks on the Fund's
foreign investments. Foreign currency options could be used to try to protect
against declines in the dollar value of foreign securities the Fund 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 Fund. 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 Fund's return. The
Fund 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 Fund 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. or
foreign government securities, or repurchase agreements. They can also include
other investment grade debt securities. The Fund might also hold these types of
securities pending the investment of proceeds from the sale of Fund shares or
investment securities or to meet anticipated redemptions of Fund shares. To the
extent the Fund invests defensively in these securities, it might not achieve
its investment objective of capital growth.
How the Fund Is Managed
The Manager. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Fund's Board of Directors, under an investment advisory
agreement that states the Manager's responsibilities. The agreement sets the
fees the Fund pays to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment adviser since January 1960. The
Manager (including subsidiaries and affiliates) managed more than $125 billion
in assets as of March 31, 2000, including other investment companies, with more
than 5 million shareholder accounts. The Manager is located at Two World Trade
Center, 34th Floor, New York, New York 10048-0203.
Portfolio Manager. The portfolio manager of the Fund is George Evans. He has
been the person principally responsible for the day-to-day management of the
Fund's portfolio since October 1, 1999. He is a Vice President of the Fund and
of the Manager. He serves as an officer and portfolio manager of other
Oppenheimer funds, and has been employed by the Manager since 1990. Prior to
October 1, 1999, the Manager had engaged a sub-advisor to manage the Fund's
portfolio.
|X| Advisory Fees. Under the investment advisory agreement, the Fund pays
the Manager an advisory fee at an annual rate that declines on additional assets
as the Fund grows: 1.00% of the first $250 million of average daily net assets
of the Fund and 0.90% of average daily net assets in excess of $250 million. The
Fund's management fee for the fiscal year ended December 31, 1999, was 1.0% of
average annual net assets.
Possible Conflicts of Interest. The Fund offers its shares to separate accounts
of different insurance companies as an investment for their variable annuity,
variable life and other investment product contracts. While the Fund does not
foresee any disadvantages to contract owners from these arrangements, it is
possible that the interests of owners of different contracts participating in
the Fund through different separate accounts might conflict. For example, a
conflict could arise because of differences in tax treatment.
The Fund's Board has procedures to monitor the portfolio for possible
conflicts to determine what action should be taken. If an irreconcilable
conflict occurs, the Board might require one or more participating insurance
company separate accounts to withdraw their investments in the Fund. That could
force the Fund to sell securities at disadvantageous prices, and orderly
portfolio management could be disrupted. Also, the Board might refuse to sell
shares of the Fund to a particular separate account, or could terminate the
offering of the Fund's shares if required to do so by law or if it would be in
the best interests of the shareholders of the Fund to do so.
INVESTING IN THE FUND
How to Buy and Sell Shares
How Are Shares Purchased? Shares of the Fund may be purchased only by separate
investment accounts of participating insurance companies as an underlying
investment for variable life insurance policies, variable annuity contracts or
other investment products. Individual investors cannot buy shares of the Fund
directly. Please refer to the accompanying prospectus of the participating
insurance company for information on how to select the Fund as an investment
option for that variable life insurance policy, variable annuity or other
investment product. That prospectus will indicate which class of shares you are
eligible to purchase. The Fund reserves the right to refuse any purchase order
when the Manager believes it would be in the Fund's best interests to do so.
- -------------------------------------------------------------------------------
Information about your investment in the Fund through your variable annuity
contract, variable life insurance policy or other plan can be obtained only
from your participating insurance company or its servicing agent. The Fund's
Transfer Agent does not hold or have access to those records. Instructions
for buying or selling shares of the Fund should be given to your insurance
company or its servicing agent, not directly to the Fund or its Transfer
Agent.
- -------------------------------------------------------------------------------
|X| At What Price Are Shares Sold? Shares are sold at their offering
price, which is the net asset value per share. The Fund does not impose any
sales charge on purchases of its shares. If there are any charges imposed under
the variable annuity, variable life or other contract through which Fund shares
are purchased, they are described in the accompanying prospectus of the
participating insurance company.
The net asset value per share is determined as of the close of The New
York Stock Exchange on each day that the exchange is open for trading (referred
to in this Prospectus as a "regular business day"). The Exchange normally closes
at 4:00 P.M., New York time, but may close earlier on some days. All references
to time in this Prospectus mean New York time.
The net asset value per share is determined by dividing the value of the
Fund's net assets attributable to a class of shares by the number of shares of
that class that are outstanding. The Fund's Board of Directors has established
procedures to value the Fund's securities to determine the Fund's net asset
value, in general based on market values. The Board has adopted special
procedures for valuing illiquid and restricted securities and securities for
which market values cannot be readily obtained. Because some foreign securities
trade in markets and on exchanges that operate on weekends and U.S. holidays,
the values of some of the Fund's foreign investments might change significantly
on days when shares of the Fund cannot be purchased or redeemed.
The offering price that applies to an order from a participating insurance
company is based on the next calculation of the net asset value per share that
is made after the insurance company (as the Fund's designated agent to receive
purchase orders) receives a purchase order from its contract owners to purchase
Fund shares on a regular business day, provided that the Fund receives the order
from the insurance company by 9:30 A.M. on the next regular business day at the
offices of its Transfer Agent in Colorado.
|X| Classes of Shares. The Portfolio may offer two different classes of
shares. The class of shares offered by this Prospectus has no "name"
designation. The other class is designated as Service shares. The different
classes of shares represent investments in the same portfolio of securities but
are expected to have different expenses and share prices.
This Prospectus may not be used to offer or sell Service shares. A
description of the distribution and service plans that affect only Service
shares of the Portfolio is contained in the Portfolio's prospectus that offers
Service shares. That prospectus may be obtained without charge by contacting any
participating insurance sponsor that offers Service shares of the Portfolio as
an investment for its separate accounts. You can also obtain a copy from
OppenheimerFunds Distributor, Inc., by calling toll-free 1.888.470.0861.
How Are Shares Redeemed? As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other investment
products can place orders to redeem shares. Contract holders and policy holders
should not directly contact the Fund or its Transfer Agent to request a
redemption of Fund shares. Contract owners should refer to the withdrawal or
surrender instructions in the accompanying prospectus of the participating
insurance company.
The share price that applies to a redemption order is the next net asset
value per share that is determined after the participating insurance company (as
the Fund's designated agent) receives a redemption request on a regular business
day from its contract or policy holder, provided that the Fund receives the
order from the insurance company by 9:30 A.M. the next regular business day at
the office of its Transfer Agent in Colorado. The Fund normally sends payment by
Federal Funds wire to the insurance company's account the day after the Fund
receives the order (and no later than 7 days after the Fund's receipt of the
order). Under unusual circumstances determined by the Securities and Exchange
Commission, payment may be delayed or suspended.
Dividends, Capital Gains and Taxes
|X| Dividends. The Fund intends to declare dividends separately for each
class of shares from net investment income, if any, on an annual basis, and to
pay those dividends in March on a date selected by the Board of Directors. The
Fund has no fixed dividend rate and cannot guarantee that it will pay any
dividends.
All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to have
dividends or distributions paid in cash).
Capital Gains. The Fund 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 March of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Taxes. For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Fund may be purchased
only through insurance company separate accounts for variable annuity contracts,
variable life insurance policies or other investment products, dividends paid by
the Fund from net investment income and distributions (if any) of net realized
short-term and long-term capital gains will be taxable, if at all, to the
participating insurance company.
This information is only a summary of certain federal income tax
information about an investment in Fund shares. You should consult with your tax
adviser or your participating insurance company representative about the effect
of an investment in the Fund under your contract or policy.
<PAGE>
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance since its inception. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (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 Fund's financial statements,
is included in the Statement of Additional Information, which is available on
request.
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995
<S> <C> <C> <C> <C> <C>
================================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $1.57 $1.36 $1.29 $1.15 $1.09
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income --(2) .01 .01 .02 .03
Net realized and unrealized gain .77 .25 .09 .13 .08
- --------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations .77 .26 .10 .15 .11
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.01) (.01) (.01) (.01) (.04)
Distributions from net realized gain (.03) (.04) (.02) - (.01)
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.04) (.05) (.03) (.01) (.05)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $2.30 $1.57 $1.36 $1.29 $1.15
===== ===== ===== ===== =====
================================================================================================================================
Total Return, at Net Asset Value(3) 50.37% 19.40% 8.11% 13.26% 10.30%
================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $147,345 $103,404 $82,257 $62,585 $45,775
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $107,403 $ 94,651 $73,318 $56,893 $37,474(4)
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (5)
Net investment income 0.17% 0.68% 0.72% 0.76% 1.61%
Expenses 1.08% 1.09%(6) 1.12%(6) 1.21%(6) 1.26%(6)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 127% 48% 49% 54% 85%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund.
2. Less than $0.005 per share.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Total returns are not annualized for periods less than one
full year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of these
charges would reduce the total return figures for all periods shown. 4. This
information is not covered by the auditors' opinion. 5. Annualized for periods
less than one full year. 6. Expense ratio has not been grossed up to reflect the
effect of expenses paid indirectly. 7. The lesser of purchases or sales of
portfolio securities for a period, divided by the monthly average of the market
value of portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of investment securities
(excluding short-term securities) for the period ended December 31, 1999, were
$133,197,869 and $137,478,833, respectively.
Oppenheimer International Growth Fund/VA
<PAGE>
For More Information about Oppenheimer International Growth Fund/VA:
The following additional information about the Fund is available without charge
upon request:
Statement of Additional Information
This document includes additional information about the Fund'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 Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund'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 Fund:
By Telephone:
Call OppenheimerFunds Services toll-free:
1.888.470.0861
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Reference Room in
Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained after payment of
a duplicating fee by electronic request at the SEC's e-mail address:
[email protected] or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
SEC File No. 811-3255
PR616.0500 Printed on recycled paper.
<PAGE>
Appendix to Prospectus of
Oppenheimer International Growth Fund/VA
Graphic material included in the Prospectus of Oppenheimer International
Growth Fund/VA: "Annual Total Returns (as of 12/31 each year)":
A bar chart will be included in the Prospectus of Oppenheimer
International Growth Fund/VA depicting the annual total returns of a
hypothetical investment in shares of the Fund for each of the calendar years
since the Fund's inception. Set forth below are the relevant data points that
will appear in the bar chart:
- ----------------------------------------
Calendar Year Ended Annual Total
12/31 Return
- ----------------------------------------
- ----------------------------------------
1993 21.80%
- ----------------------------------------
- ----------------------------------------
1994 -1.44%
- ----------------------------------------
- ----------------------------------------
1995 10.30%
- ----------------------------------------
- ----------------------------------------
1996 13.26%
- ----------------------------------------
- ----------------------------------------
1997 8.11%
- ----------------------------------------
- ----------------------------------------
1998 19.40%
- ----------------------------------------
- ----------------------------------------
1999 50.37%
- ----------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
Total Return Portfolio
A Series of Panorama Series Fund, Inc.
- -------------------------------------------------------------------------------
Prospectus dated May 1, 2000
Total Return Portfolio is a mutual fund that seeks to maximize total
investment return by allocating its assets among investments in stocks,
corporate bonds, U.S. government securities and money market instruments.
Shares of the Portfolio are sold only as an underlying investment for
variable life insurance policies, variable annuity contracts and other insurance
company separate accounts. A prospectus for the insurance product you have
selected accompanies this Prospectus and explains how to select shares of the
Portfolio as an investment under that insurance product.
This Prospectus contains important information about the Portfolio's
objective, its investment policies, strategies and risks. Please read this
Prospectus (and your insurance product prospectus) carefully before you invest
and keep them for future reference about your investment.
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
- -------------------------------------------------------------------------------
The Portfolio's Investment Objective and Strategies
Main Risks of Investing in the Portfolio
The Portfolio's Past Performance
About the Portfolio's Investments
How the Portfolio is Managed
Investing in the Portfolio
- -------------------------------------------------------------------------------
How to Buy and Sell Shares
Dividends, Capital Gains and Taxes
Financial Highlights
<PAGE>
About the Portfolio
The Portfolio's Investment Objective and Strategies
What Is the Portfolio's Investment Objective? The Portfolio seeks 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.
What Does the Portfolio Invest In? The Portfolio invests mainly in common
stocks, corporate bonds, U.S. government securities (including mortgage-related
securities), and short-term notes. The Portfolio's investment Manager,
OppenheimerFunds, Inc., can allocate the Portfolio's investments among these
different types of securities in different proportions 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.
Normally, at least 25% of the Portfolio's total assets will be invested in
fixed income senior securities. Otherwise, the Portfolio is not required to
allocate its investments among stocks, corporate bonds, U.S. government
securities and money market instruments in any fixed proportion and the relative
weighting of those asset classes in the Portfolio's holdings will change over
time. Therefore, the Portfolio might have some of its assets invested in each
asset class or it might not invest in certain asset classes at times.
o Stocks. The Portfolio can buy a variety of domestic and foreign stocks
and other equity
investments, including common and preferred stocks, warrants and securities
convertible into common stock. The Portfolio can buy securities of companies of
different market capitalization ranges. There are limits on the Portfolio's
investments in foreign securities.
o Debt Securities. The Portfolio can invest in a variety of debt
securities, including
securities issued or guaranteed by the U.S. government and its agencies and
federally-chartered corporate entities referred to as "instumentalities." The
Portfolio can buy mortgage-related securities and collateralized mortgage
obligations ("CMOs") issued or guaranteed by the U.S. government or private
issuers. 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
currently limits these investments to not more than 5% of its assets.
o Money Market Instruments. The Portfolio can hold money market
instruments, such
as short-term U.S. government securities, commercial paper and bank instruments
as part of its normal investment program, or for cash management purposes or as
a defensive investment when the Manager believes that the securities markets are
unstable.
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 Do the Portfolio Managers Decide What Securities to Buy or Sell?
In selecting securities for purchase or sale by the Portfolio, the portfolio
managers follow an investment process that uses quantitative tools to analyze
market dynamics and economic trends to help determine the allocation of the
Portfolio's investments 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 help determine the allocation of the
Portfolio's investments among the asset classes. 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 might 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 (this
is called "positive earnings surprise") or other favorable
characteristics. The expectation is that these stocks will increase
in value when the market re-evaluates the issuers and the
price/earnings ratios of their 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 deteriorate,
the portfolio managers will consider selling the stock.
|_| In selecting bonds, the portfolio managers normally expect that
portion of the Portfolio's investment holdings to have an average
maturity (measured on a dollar-weighted basis) of between 6 and 14
years.
Who Is the Portfolio Designed For? The Portfolio's shares are available only as
an investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, for investors seeking
total investment return over the long term from a flexible portfolio investing
in different asset classes, including stocks, bonds and money market
instruments. 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 fund 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. The Portfolio is not a complete investment program.
Main Risks of Investing in the Portfolio
All investments carry risks to some degree. The Portfolio's investments
are subject to changes in their value from a number of factors described below.
There is also the risk that poor security selection by the Portfolio's
investment Manager, OppenheimerFunds, Inc., will cause the Portfolio to
underperform other funds having similar objectives.
|X| Risks of Investing in Stocks. Stocks fluctuate in price, and their
short-term volatility at times can be great. Because the Portfolio typically has
substantial investments in common stocks, the value of the Portfolio's
investment holdings 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 investments 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's stock investments are in U.S.
issuers, its share price will be affected by changes in U.S. stock markets.
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
invests 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.
Additionally, stocks of issuers in a particular industry may be affected
by changes in economic conditions, government regulations, availability of basic
resources or supplies, or other events that affect that industry more than
others. To the extent that the Portfolio increases the relative emphasis of its
investments in a particular industry, its share values can fluctuate in response
to events affecting that industry.
|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 prices 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 mortgages underlying
a mortgage-related security are prepaid at a rate faster than anticipated
(usually, when interest rates fall) and the issuer of the security can prepay
the principal prior to the security's maturity. Mortgage-related securities that
are 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 than
other debt securities 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. The Portfolio might have
to reinvest the proceeds of prepaid securities in new securities offering lower
yields. Additionally, the Portfolio can buy mortgage-related securities at a
premium. Accelerated prepayments on those securities could cause the Portfolio
to lose the 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| 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. Also, the underlying security or investment on
which the derivative is based, and the derivative itself, might 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 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 risks described above 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.
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. 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. The
Portfolio may be less volatile than funds that invest only in stocks but may be
more volatile 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 broad-based market
indices. 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]
For the period 1/1/00 through 3/31/00, the Portfolio's cumulative return (not
annualized) was ____%. 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 12.35% (4QTR98) and the lowest return (not
annualized) for a calendar quarter was 8.36% (3QTR90).
- --------------------------------------------------------------------
Average Annual
Total Returns
for the periods
ended December 1 Year 5 Years Life of
31, 1999 Portfolio
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Total Return
Portfolio -1.54% 12.24% 11.22%
(inception:
9/30/82)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
S&P 500 Index
(from: 12/31/89) 21.03% 28.54% 18.19%
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Merrill Lynch
Corporate/
Gov't Master -2.05% 7.61% 7.70%
Index (from:
12/31/89)
- --------------------------------------------------------------------
The Portfolio's returns in the table measure the performance of a hypothetical
account without deducting charges imposed by the separate accounts that invest
in the Portfolio and assume that all dividends and capital gains distributions
have been reinvested in additional shares. Because the Portfolio invests in
stocks and bonds, its 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 and to the Merrill Lynch Corporate and Government Master Index, a
broad-based index of debt securities. However, it must be remembered that the
index performance reflects the reinvestment of income but does not consider the
effects of transaction costs. Also, the Portfolio may have investments that vary
from the indices.
The Portfolio's total returns should not be expected to be the same as the
returns of other Oppenheimer funds, even if funds have the same portfolio
managers and/or similar names.
About the Portfolio's Investments
The Portfolio's Principal Investment Policies. The allocation of the Portfolio's
investment holdings among the different investments will vary over time based
upon the Manager's evaluation of economic and market trends. The Portfolio's
holdings 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.
The Manager 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 percentage of the stock of any one company and by not investing too
great a percentage of the Portfolio's assets in any one issuer. Also, the
Portfolio does not concentrate 25% or more of its investments in any one
industry.
|X| Stocks 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's stock
investments mainly are common stocks but it can also invest in other equity
securities, including preferred stocks, rights and warrants, and securities
convertible into common stock. The Portfolio can buy securities issued by
domestic or foreign companies. However, the Portfolio's investments in stocks
are currently focused on those of U.S. issuers.
|_| Convertible Securities. Many convertible securities are a form of
debt security, but the Manager regards some of them as "equity substitutes"
because of their conversion feature. In those cases, 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 that have 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| Corporate Bonds and U.S. Government Securities. The Portfolio can buy
debt securities that are rated by nationally-recognized rating organizations as
well as 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
securities that are below investment grade (sometimes called "junk bonds"),
rated as low as "B," as described above in "Convertible Securities." 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 debt
securities and preferred stocks rated below investment-grade, currently it does
not intend to invest more than 5% 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. While investment-grade securities are subject to risks of
non-payment of principal and interest, in general higher-yielding, lower-grade
bonds, whether rated or unrated, have greater risks of default than
investment-grade securities. U.S. government securities are subject to little
credit risk. 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.
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 securities may be subject to greater market
fluctuations 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 instrumentalities. These are referred to as "U.S. government
securities" in this Prospectus. They can include CMOs and other
mortgage-related securities.
o 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 when issued), and Treasury bonds (having maturities of more than ten
years when issued). 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 the interest coupons 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 prior to maturity are subject to interest rate risk.
o Obligations of 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.
o Mortgage-Related U.S. Government Securities. The Portfolio can buy
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 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.
|_| Private-Issuer Mortgage-Backed Securities. The 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 as well as the
interest rate risks and prepayment risks of CMOs, discussed above, 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 asset-backed
securities, which 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 prepayment risks, and 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. 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, which in general are debt obligations
rated in the top two rating categories of national rating organizations (or that
are unrated instruments that have equivalent ratings assigned by the Manager).
Examples include commercial paper of domestic issuers or foreign companies (if
the foreign issuers 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.
The yields on shorter-term debt obligations tend to be less than on
longer-term debt. Therefore, this strategy might help preserve principal but
might reduce opportunities to seek growth of capital as part of the Portfolio's
objective of total return. Under normal market conditions this strategy would be
used primarily for cash management or liquidity purposes. Under abnormal market
conditions, the Portfolio could invest up to 100% of its assets in those
instruments for defensive purposes.
|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. The Financial Highlights table at the end of
this Prospectus shows the Portfolio's portfolio turnover rates during prior
fiscal years.
|X| Special Portfolio Diversification Requirements. To enable a variable
annuity or variable life insurance contract based on an insurance company
separate account to qualify for favorable tax treatment under the Internal
Revenue Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers. The Portfolio's investment program is managed
to meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.
Failure by the Portfolio to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate account
to be taxable income. Those diversification requirements might also limit, to
some degree, the Portfolio's investment decisions in a way that could reduce its
performance.
|X| Can the Portfolio's Investment Objective and Policies Change? The
Portfolio's Board of Directors can 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 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.
Other Investment Strategies. To seek its objective, the Portfolio can also use
the investment techniques and strategies described below. The Portfolio might
not always use all of them. These techniques involve certain risks, although
some are designed to help reduce overall 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. 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, 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 there is no active trading market for them. That might 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
Fund 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 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| 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| 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 conventional 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 write exchange-traded covered call options
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.
How the Portfolio Is Managed
The Manager. The Manager 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 the fees the
Portfolio pays 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 January 1960. The
Manager (including subsidiaries and affiliates) managed more than $125 billion
in assets as of March 31, 2000, including other mutual funds, with more than 5
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 managers of the Portfolio are
Patrick Bisbey, David Dalzell and Stephen Libera. They are the persons
primarily responsible for the day-to-day management of the Portfolio's
investments. Messrs. Bisbey and Dalzell became portfolio managers on March
1, 2000, and Mr. Libera has been a portfolio manager of the Portfolio since
1982. Mr. Bisbey is a Managing Director and Manager of Trading and Portfolio
Operations (since June, 1992) of Trinity Investment Management Corporation
("Trinity"), a wholly-owned subsidiary of the Manager's immediate parent,
Oppenheimer Acquisition Corp. Mr. Dalzell is a research analyst and trader
with Trinity (since November, 1985), prior to which he was a financial
consultant with Merrill Lynch Pierce Fenner & Smith Incorporated and a trader
for First Chicago Trading Consultants. Mr. Libera has been a portfolio
manager of the Portfolio since 1982 and is a Vice President of the Manager.
Before joining the Manager in 1996, Mr. Libera was employed as a portfolio
manager by Connecticut Mutual Life Insurance Company. Each is a Vice
President of the Company.
|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, 1999, was 0.54% of average annual net assets for each class of shares.
|X| Possible Conflicts of Interest. The Portfolio offers its shares to
separate accounts of different insurance companies as an investment for their
variable annuity, variable life and other investment product contracts. While
the Portfolio does not foresee any disadvantages to contract owners from these
arrangements, it is possible that the interests of owners of different contracts
participating in the Portfolio through different separate accounts might
conflict. For example, a conflict could arise because of differences in tax
treatment.
The Portfolio's Board has procedures to monitor the portfolio for possible
conflicts to determine what action should be taken. If an irreconcilable
conflict occurs, the Board might require one or more participating insurance
company separate accounts to withdraw their investments in the Portfolio. That
could force the Portfolio to sell securities at disadvantageous prices, and
orderly portfolio management could be disrupted. Also, the Board might refuse to
sell shares of the Portfolio to a particular separate account, or could
terminate the offering of the Portfolio's shares if required to do so by law or
if it would be in the best interests of the shareholders of the Portfolio to do
so.
Investing In The Portfolio
How to Buy and Sell Shares
How Are Shares Purchased? Shares of the Portfolio may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy shares
of the Portfolio directly. Please refer to the accompanying prospectus of the
participating insurance company for information on how to select the Portfolio
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That prospectus will indicate which class
of shares you are eligible to purchase. The Portfolio reserves the right to
refuse any purchase order when the Manager believes it would be in the
Portfolio's best interests to do so.
- -------------------------------------------------------------------------------
Information about your investment in the Portfolio through your variable
annuity contract, variable life insurance policy or other plan can be
obtained only from your participating insurance company or its servicing
agent. The Portfolio's Transfer Agent does not hold or have access to those
records. Instructions for buying or selling shares of the Portfolio should be
given to your insurance company or its servicing agent, not directly to the
Portfolio or its Transfer Agent.
- -------------------------------------------------------------------------------
|X| At What Price Are Shares Sold? Shares are sold at their offering
price, which is the net asset value per share. The Portfolio does not impose any
sales charge on purchases of its shares. If there are any charges imposed under
the variable annuity, variable life or other contract through which Portfolio
shares are purchased, they are described in the accompanying prospectus of the
participating insurance company.
The net asset value per share is determined as of the close of The New
York Stock Exchange on each day that the exchange is open for trading (referred
to in this Prospectus as a "regular business day"). The Exchange normally closes
at 4:00 P.M., New York time, but may close earlier on some days. All references
to time in this Prospectus mean New York time.
The net asset value per share is determined by dividing the value of the
Portfolio's net assets attributable to a class of shares by the number of shares
of that class that are outstanding. The Portfolio's Board of Directors has
established procedures to value the Portfolio's securities to determine the
Portfolio's net asset value, in general based on market values. The Board has
adopted special procedures for valuing illiquid and restricted securities and
securities for which market values cannot be readily obtained. Because some
foreign securities trade in markets and on exchanges that operate on weekends
and U.S. holidays, the values of some of the Portfolio's foreign investments
might change significantly on days when shares of the Portfolio cannot be
purchased or redeemed.
The offering price that applies to an order from a participating insurance
company is based on the next calculation of the net asset value per share that
is made after the insurance company (as the Portfolio's designated agent to
receive purchase orders) receives a purchase order from its contract owners to
purchase Portfolio shares on a regular business day, provided that the Portfolio
receives the order from the insurance company by 9:30 A.M. on the next regular
business day at the offices of its Transfer Agent in Colorado.
|X| Classes of Shares. The Portfolio may offer two different classes of
shares. The class of shares offered by this Prospectus has no "name"
designation. The other class is designated as Service shares. The different
classes of shares represent investments in the same portfolio of securities but
are expected to have different expenses and share prices.
This Prospectus may not be used to offer or sell Service shares. A
description of the distribution and service plans that affect only Service
shares of the Portfolio is contained in the Portfolio's prospectus that offers
Service shares. That prospectus may be obtained without charge by contacting any
participating insurance sponsor that offers Service shares of the Portfolio as
an investment for its separate accounts. You can also obtain a copy from
OppenheimerFunds Distributor, Inc., by calling toll-free 1.888.470.0861.
How Are Shares Redeemed? As with purchases, only the participating insurance
companies that hold Portfolio shares in their separate accounts for the benefit
of variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Portfolio or its Transfer Agent
to request a redemption of Portfolio shares. Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.
The share price that applies to a redemption order is the next net asset
value per share that is determined after the participating insurance company (as
the Portfolio's designated agent) receives a redemption request on a regular
business day from its contract or policy holder, provided that the Portfolio
receives the order from the insurance company by 9:30 A.M. the next regular
business day at the office of its Transfer Agent in Colorado. The Portfolio
normally sends payment by Federal Funds wire to the insurance company's account
the day after the Portfolio receives the order (and no later than 7 days after
the Portfolio's receipt of the order). Under unusual circumstances determined by
the Securities and Exchange Commission, payment may be delayed or suspended.
Dividends, Capital Gains and Taxes
Dividends. The Portfolio intends to declare dividends separately for each class
of shares from net investment income, if any, on an annual basis, and to pay
those dividends in March on a date selected by the Board of Directors. The
Portfolio has no fixed dividend rate and cannot guarantee that it will pay any
dividends.
All dividends (and any capital gains distributions) will be reinvested
automatically in additional Portfolio shares at net asset value for the account
of the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).
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 March 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.
Taxes. For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Portfolio may be
purchased only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Portfolio from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable, if
at all, to the participating insurance company.
This information is only a summary of certain federal income tax
information about an investment in Portfolio shares. You should consult with
your tax adviser or your participating insurance company representative about
the effect of an investment in the Portfolio under your contract or policy.
<PAGE>
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.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995
<S> <C> <C> <C> <C> <C>
================================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $1.91 $2.00 $1.91 $1.75 $1.51
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .07 .06 .07 .07 .07
Net realized and unrealized gain (loss) (.10) .14 .25 .11 .30
- --------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (.03) .20 .32 .18 .37
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.06) (.07) (.07) (.01) (.07)
Distributions from net realized gain (.07) (.22) (.16) (.01) (.06)
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.13) (.29) (.23) (.02) (.13)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.75 $1.91 $2.00 $1.91 $1.75
===== ===== ===== ===== =====
================================================================================================================================
Total Return, at Net Asset Value(2) (1.54)% 10.90% 18.81% 10.14% 24.66%
================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,074 $1,344 $1,279 $1,122 $ 994
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,230 $1,299 $1,208 $1,058 $ 864(3)
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (4)
Net investment income 3.27% 3.30% 3.57% 4.12% 4.48%
Expenses 0.55% 0.55%(5) 0.55%(5) 0.55%(5) 0.59%(5)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 113% 93% 104% 104% 62%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund. 2. Assumes a $1,000 hypothetical initial investment on the business day
before the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods less than one full year. Total return
information does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would reduce the
total return figures for all periods shown. 3. This information is not covered
by the auditors' opinion. 4. Annualized for periods less than one full year. 5.
Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly. 6. The lesser of purchases or sales of portfolio securities for a
period, divided by the monthly average of the market value of portfolio
securities owned during the period. Securities with a maturity or expiration
date at the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding short-term
securities) for the period ended December 31, 1999, were $1,145,741,282 and
$1,277,170,856, respectively.
Total Return Portfolio
<PAGE>
For More Information on the Total Return 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:
By Telephone:
Call OppenheimerFunds Services toll-free:
1.888.470.0861
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
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 1.202.942.8090) the EDGAR database on the SEC's Internet
web site at http://www.sec.gov. Copies may be obtained after payment of a
duplicating fee by electronic request at the SEC's e-mail address:
[email protected] or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
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
PR0609.0500 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:
- --------------------------------------------------
Calendar Year Ended Annual Total Return
12/31
- --------------------------------------------------
- --------------------------------------------------
1989 22.98%
- --------------------------------------------------
- --------------------------------------------------
1990 0.50%
- --------------------------------------------------
- --------------------------------------------------
1991 28.79%
- --------------------------------------------------
- --------------------------------------------------
1992 10.21%
- --------------------------------------------------
- --------------------------------------------------
1993 16.28%
- --------------------------------------------------
- --------------------------------------------------
1994 -1.97%
- --------------------------------------------------
- --------------------------------------------------
1995 24.66%
- --------------------------------------------------
- --------------------------------------------------
1996 10.15%
- --------------------------------------------------
- --------------------------------------------------
1997 18.81%
- --------------------------------------------------
- --------------------------------------------------
1998 10.90%
- --------------------------------------------------
- --------------------------------------------------
1999 -1.54%
- --------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
Panorama Series Fund, Inc.
LifeSpan Capital Appreciation Portfolio
LifeSpan Balanced Portfolio
LifeSpan Diversified Income Portfolio
- -------------------------------------------------------------------------------
Prospectus dated May 1, 2000
- -------------------------------------------------------------------------------
The LifeSpan Funds are three mutual funds that use a strategic asset allocation
process to seek their goals, using two broad asset classes stocks and bonds.
LifeSpan Capital Appreciation Portfolio seeks capital appreciation to make
your investment grow. It emphasizes investments in common stocks, but holds some
bonds.
LifeSpan Balanced Portfolio 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 seeks high current income with
opportunities for capital appreciation. It emphasizes investments in bonds and
other fixed income securities, but holds some stocks.
Shares of the Portfolios are sold only as underlying investments for
variable life insurance policies, variable annuity contracts and other insurance
company separate accounts. A prospectus for the insurance product you have
selected accompanies this Prospectus and explains how to select shares of the
Portfolios as investments under that insurance product.
This Prospectus contains important information about the Portfolios'
objectives, their investment policies, strategies and risks. Please read this
Prospectus (and your insurance product prospectus) carefully before you invest
and keep them for future reference about your investment.
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
- -------------------------------------------------------------------------------
The Portfolios' Investment Objectives and Strategies
Main Risks of Investing in the Portfolios
The Portfolios' Past Performance
About the Portfolios' Investments
How the Portfolios are Managed
Investing in the Portfolios
- -------------------------------------------------------------------------------
How to Buy and Sell Shares
Dividends, Capital Gains and Taxes
Financial Highlights
<PAGE>
About the Portfolios
The Portfolios' Investment Objectives and Strategies
Each LifeSpan Portfolio seeks its objective by allocating its assets between two
broad asset classes - stocks and bonds - within specified ranges. The "stock"
class includes all types of equity securities, such as common stocks, preferred
stocks, warrants and other securities convertible into common stocks. The "bond"
class includes a variety of debt securities, such as long-term and short-term
corporate and government debt securities, mortgage-related obligations, and
notes.
- -------------------------------------------------------------------------------
What Is the Capital Appreciation Portfolio's Investment Objective? This
Portfolio seeks long-term capital appreciation by investing in a
strategically allocated portfolio consisting primarily of stocks. Current
income is not a primary consideration.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
What Is the Balanced Portfolio's Investment Objective? This Portfolio seeks
a blend of capital appreciation and income by investing in a strategically
allocated portfolio of stocks and bonds, with a slightly stronger emphasis on
stocks.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
What Is the Diversified Income Portfolio's Investment Objective? This
Portfolio seeks high current income, with opportunities for capital
appreciation, by investing in a strategically allocated portfolio consisting
primarily of bonds.
- -------------------------------------------------------------------------------
What does each Portfolio Invest In? The Portfolios allocate their assets among
four market components within their stock holdings and three components within
their bond holdings. The percentage range of assets of a Portfolio's allocation
to a particular component of the stock and bond classes is determined by the
Portfolios' investment Manager, OppenheimerFunds, Inc., and the ranges may vary
over time. These components have been selected by the Manager to provide each
Portfolio an additional level of asset diversification, to seek higher returns
and lower overall share price volatility.
The components include style-based characteristic (some assets are
invested using a "value" style, for example) and maturity characteristics
(short-term bonds, for example) as well as foreign and domestic characteristics.
These components of the Portfolios' investment holdings and the asset allocation
strategy they use are described below.
There is no requirement that the Manager allocate a Portfolio's assets
among all stock or bond components at all times. At times, some of the
Portfolios might not allocate any of their assets to a particular component,
depending on the Manager's judgment of where the best opportunities are for a
Portfolio to seek its objective. The asset allocation ranges are described more
completely below. In general, however,
o Capital Appreciation Portfolio currently invests mainly in domestic and
foreign common stocks, as well as some preferred stocks and other equity
securities, but also buys some corporate bonds and notes, U.S.
Government securities and lower-grade high-yield securities, sometimes
called "junk bonds."
o Balanced Portfolio currently invests predominantly in common stocks and
other equity securities, and normally holds a higher portion of its
assets in corporate and government bonds, including high-yield bonds,
than Capital Appreciation Portfolio.
o Diversified Income Portfolio currently emphasizes investments in bonds,
including U.S. government securities, mortgage-related and asset-backed
securities, and corporate bonds, including high-yield bonds, with some
common stocks.
Each 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 Portfolios' Investments," below.
|X| How Do the Portfolio Managers Decide Each Portfolio's Asset
Allocation? The Manager determines the weightings of each Portfolio's
investments in the different components of the stock and bond asset classes on
the basis of a percentage of the Portfolio's assets. There is a "normal"
allocation percentage as well as a percentage "range" within which the amount of
assets assigned to a particular component can be realigned periodically. The
portfolio managers of each Portfolio's stock component can also invest a portion
of that component's assets in bonds when the portfolio manager determines that
increased flexibility is desirable to enhance the potential for appreciation or
income.
The Manager periodically reviews the overall domestic and foreign stock
and bond markets, using economic and market research reports from a variety of
sources as well as its own research and analysis, to determine for each
Portfolio where the best opportunities may be to seek its goal. The Manager then
further refines that review, looking at the components of the stock and bond
classes to determine the percentage of each Portfolio's assets to assign to each
component. The Manager may or may not rebalance the asset allocations quarterly
to realign them in response to changes in market conditions.
The chart below shows the asset classes and their components, and the
percentage of assets of each Portfolio that the Manager has currently allocated
to each component, showing the normal allocation and the potential range of
allocations. These percentages apply at the time particular securities are
selected for a Portfolio.
- ----------------------------------------------------------------------
Capital Balanced Diversified
Asset Class Appreciation Portfolio Income Portfolio
and Components Portfolio
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Normal Normal Normal
AllocationRange Allocation Range AllocationRange
- ----------------------------------------------------------------------
Stocks 80% 70 - 90% 60% 50 - 25% 15 - 35%
70%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
International 20% 15 - 25% 15% 5 - 20% 0% 0%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Value/Growth 20% 15 - 30% 15% 10 - 0% 0%
25%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Growth/Income 20% 15 - 30% 15% 10 - 25% 15 - 35%
25%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Small Cap 20% 15 - 25% 15% 5 - 20% 0% 0%
- ----------------------------------------------------------------------
Bonds 20% 10 - 30% 40% 30 - 75% 65 - 85%
50%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Government/Corpora10% 5 - 15% 15% 10 - 35% 30 - 45%
25%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
High Yield 10% 5 - 15% 15% 5 - 20% 15% 5 - 20%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Short-Term 0% 0% 10% 5 - 20% 25% 15 - 30%
- ----------------------------------------------------------------------
Who Are the Portfolios Designed For? The shares of the Portfolios are available
only as investment options under certain variable annuity contracts, variable
life insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies. While each Portfolio is
a diversified fund using a broad asset allocation investment strategy, none of
the Portfolios is a complete investment program.
o 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 common stock investments. It is not likely to have a
substantial amount of current income.
o Balanced Portfolio is designed primarily for investors seeking total
investment return over the long term from capital growth and income,
from a portfolio investing mainly in common stocks but with a
substantial portion of its assets normally invested in bonds. While
this mix of assets is intended to reduce overall share price
volatility, those investors should be willing to assume the risks of
short-term share price fluctuations that are typical for a fund that
can have substantial stock investments, as well as credit risks that
affect bonds and the price fluctuations that can occur when interest
rates change.
o Diversified Income Portfolio is designed for investors seeking current
income and who have a lower tolerance for the risk of share price
volatility. 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. A Portfolio's investments are
subject to changes in their value from a number of factors, as described below.
There is also the risk that poor security selection by the Portfolios'
investment Manager, OppenheimerFunds, Inc., will cause the Portfolios to
underperform other funds having similar objectives.
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 bond prices (this is known as
"interest rate risk"). Small cap stocks are subject to greater price volatility
than stocks of larger issuers. For components employing a value investment
style, it is possible that the strategy will be unsuccessful and the stock price
will not increase.
|X| Risks of Investing in Stocks. Stocks fluctuate in price, and their
short-term volatility at times can be great. Because Capital Appreciation
Portfolio and Balanced Portfolio normally invest a substantial percentage of
their assets in common stocks, the share prices of those Portfolios will be
particularly affected by changes in the stock markets. Market risk will affect a
Portfolio's net asset value per share, which will fluctuate as the values of
their investment 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, government regulations, availability of basic
resources or supplies or other events that affect that industry more than
others. To the extent that a Portfolio has increased the relative emphasis of
its investments in a particular industry, its share values might 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 or its
industry. The Portfolios 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 foreign securities,
including securities of issuers in developed and underdeveloped countries. While
foreign securities offer special investment opportunities, there are also
special risks, which will be relatively greater for Capital Appreciation
Portfolio and Balanced Portfolio, because they normally buy foreign stocks.
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.
|_| Special Risks of Emerging Markets. Securities of issuers in
emerging markets present risks not found in more mature markets. They 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. These countries
may have less developed trading markets and exchanges. Settlements of trades may
be subject to greater delays so that a Portfolio might not receive the proceeds
of a sale of a security on a timely basis. 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, a 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 investments in U.S. government securities are subject to
little credit risk, other debt securities, particularly high-yield lower-grade
debt securities, are subject to risks of default that could reduce a Portfolio's
share price. That risk will be relatively greater for Diversified Income
Portfolio and Balanced Portfolio, because of their greater focus on debt
securities, than for Capital Appreciation Portfolio.
|_| Special Risks of Lower-Grade Securities. Because each Portfolio
invests a portion of its assets in securities rated below investment-grade, each
Portfolio's credit risks are greater than those of funds 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
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 prices 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 typically be greater for longer-term debt securities
than shorter-term debt securities. A Portfolio's share price 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. That risk will normally be
greater for Diversified Income Portfolio and Balanced Portfolio, because of
their greater focus on debt securities than Capital Appreciation Portfolio.
|X| Prepayment Risk. Prepayment risk occurs when the mortgages underlying
a mortgage-related security are prepaid at a rate faster than anticipated
(usually, when interest rates fall), and the issuer of the security can prepay
the principal prior to the security's maturity. Mortgage-related securities that
are subject to prepayment risk generally offer less potential for gains when
prevailing interest rates decline, and have greater potential for loss than
other debt securities 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. A Portfolio might have to
reinvest the proceeds of prepaid securities in new securities offering lower
yields. 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.
These risks will be relatively greater for Diversified Income Portfolio
and to some extent Balanced Portfolio, because they normally invest a larger
percentage of their assets in mortgage-related securities than Capital
Appreciation Portfolio.
|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 the Portfolios can use. The Portfolios are not required
to use them in seeking their goals and currently do not use these types of
investments to a substantial degree.
If the issuer of the derivative does not pay the amount due, a 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 portfolio manager of the Portfolio 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 risks described above
collectively form the risk profile of the Portfolios, and can affect the value
of a Portfolio's investments, its investment performance and its price per
share. These risks mean that you can lose money by investing in the Portfolios.
When you redeem your shares, they may be worth more or less than what you paid
for them.
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. The overall risks and relative risks of the three
Portfolios will vary over time as their asset allocations change.
o Capital Appreciation Portfolio focuses its investments on stocks for
long-term growth and in the short term, the stock markets can be
volatile. Therefore the price of the Portfolio's shares can go up and
down substantially. The Portfolio generally does not use
income-oriented investments to the same degree as Balanced Portfolio
or Diversified Income Portfolio to help cushion its share price from
stock market volatility, and generally is expected to be more volatile
in the short term than those other Portfolios while offering greater
opportunities for higher long-term total returns.
o Balanced Portfolio also invests in stocks, but to a lesser extent than
Capital Appreciation Portfolio, so that its exposure to risks of
short-term volatility from stock investments is expected to be
relatively less. The Portfolio's greater emphasis on income-oriented
investments may help cushion its 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 offers the opportunity for more moderate overall risks and
returns than Capital Appreciation Portfolio.
o Diversified Income Portfolio has greater exposure to interest rate risks
and credit risks than Capital Appreciation Portfolio or Balanced
Portfolio but less exposure to the potential short-term volatility of
stock prices. Its investments in U.S. government securities have
little credit risk. However, corporate and foreign government bonds
the Portfolio can invest in are subject to credit and interest rate
risk that can affect their values and the Portfolio's share prices.
The Portfolio is generally expected to be less volatile overall than
the other Portfolios, although its investments are not expected to
offer the same opportunity for high total returns.
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 charts and table below show one measure of the risks of investing in the
Portfolios, by showing changes in each Portfolio's performance (for Class 1
shares) from year to year for the full calendar years since each Portfolio's
inception and by showing how the average annual total returns of the Portfolios'
shares compare to those of relevant broad-based market indices. A Portfolio's
past investment performance is not necessarily an indication of how it 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]
For the period 1/1/00 through 3/31/00, the cumulative return (not annualized)
was ____% for Capital Appreciation Portfolio, ____% for Balanced Portfolio, and
____% for Diversified Income Portfolio. 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.
- -----------------------------------------------------
Highest/Lowest Quarterly Returns
Portfolio Since Inception (Not Annualized)
- -----------------------------------------------------
- -----------------------------------------------------
Highest Lowest
- -----------------------------------------------------
- -----------------------------------------------------
Capital 17.65% (4QTR99) -11.03% (3QTR98)
Appreciation
- -----------------------------------------------------
- -----------------------------------------------------
Balanced 13.39% (4QTR99) -8.59% (3QTR98)
- -----------------------------------------------------
- -----------------------------------------------------
Diversified Income 4.76% (2QTR97) -1.80% (3QTR99)
- -----------------------------------------------------
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Average Annual Total
Returns for the periods 1 Year Life of Portfolio*
ended December 31, 1999
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Capital Appreciation
Portfolio 20.34% 14.74%
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S&P 500 Index 21.03% 27.05%
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Wilshire 5000 Index 22.05% 23.13%
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Balanced Portfolio 16.11% 12.46%
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S&P 500 Index 21.03% 27.05%
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Lehman Bros. Corp/Gov't -2.15% 5.85%
Bond Index
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Diversified Income -0.85% 6.66%
Portfolio
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Lehman Brothers
Intermediate 0.39% 5.75%
Gov't/Corp. Bond Index
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* Inception date of each Portfolio: 9/1/95. The index performance for the
indices is shown from 8/31/95.
The returns of each Portfolio in the table measure the performance of a
hypothetical account without deducting charges imposed by the separate accounts
that invest in the Portfolio and assume that all dividends and capital gains
distributions have been reinvested in additional shares. Each Portfolio's
performance is compared to a primary and, in certain cases, a secondary,
broad-based market index that reflects the performance of the overall securities
market in which the Portfolio invests. However, it must be remembered that the
index performance reflects the reinvestment of income but does not consider the
effects of transaction costs, and that each Portfolio's investments vary from
those in the indices. The international stock component of the Capital
Appreciation Portfolio and the Balanced Portfolio was managed by a sub-advisor
until October 1999, and the small cap stock component of the Capital
Appreciation Portfolio and the Balanced Portfolio and the high yield bond
component of each Portfolio were managed by separate sub-advisors until January
2000. The Manager now manages all components of each Portfolio.
The Portfolio's total returns should not be expected to be the same as the
returns of other Oppenheimer funds, even if funds have the same portfolio
managers and/or similar names.
About the Portfolios' Investments
The Principal Investment Policies of the Portfolios. The allocation of each
Portfolio's investments between stocks and bonds and allocation ranges of each
component of the Portfolios has been described above. The particular securities
each Portfolio component holds will vary over time based upon the Manager's
evaluation of economic and market trends. A Portfolio might not always hold 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.
The Manager tries 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 percentage of the stock of
any one company and by not investing too great a percentage of the Portfolio's
assets in any one issuer. Also, each Portfolio does not concentrate 25% or more
of its assets in investments in any one industry.
How Do the Portfolio Managers Decide What Securities to Buy or Sell? The
portfolio managers use a variety of investment styles and disciplines in
selecting individual securities for the component of each Portfolio's assets
that they manage. In each case, the investment process and the interrelationship
of the factors used by the portfolio managers may change over time and its
implementation may vary in particular cases.
|X| International Stock Component. The Manager invests the assets of the
international components of Capital Appreciation Portfolio and Balanced
Portfolio in common stocks and other equity securities of companies located
outside the United States. The component will invest mainly in seasoned issuers
whose shares are listed on foreign stock exchanges. A portion of the assets
allocated to this component can be invested in corporate bonds and government
securities of foreign issuers, and cash and short-term instruments. The Manager
can invest up to 25% of the assets of this component in equity and debt
securities of companies based in emerging markets.
The Manager evaluates investment opportunities on a company-by-company
basis. It 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 overall market
and economic trends affecting entire markets. 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, the Manager currently searches for:
o Companies that enjoy a strong competitive position and high demand for
their products;
o Companies that participate in markets with substantial barriers against
entry by potential competitors;
o Well-financed companies that are entering a growth cycle; and
o Companies with consistent earnings growth and cash flow and stocks
selling at attractive prices.
|X| Value/Growth Stock Component. The Manager invests the assets of the
value/growth stock components of Capital Appreciation Portfolio and Balanced
Portfolio mainly in common stocks of issuers with low price-earnings ratios or
other characteristics indicating that the stocks are currently undervalued in
the market. 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 can be invested in cash and
short-term instruments.
o The portfolio managers use a quantitative value-oriented investment
discipline to identify undervalued stocks or stocks out of favor in the
market that they believe have potential for improved performance. They
then conduct "fundamental" analysis of an issuer's business prospects
and financial condition to search for stocks that they believe have the
best growth potential.
o In selecting stocks, they use quantitative tools to identify a universe
of stocks that have lower price/earnings (P/E) ratios compared, for
example, to the P/E ratio of the S&P 500 Index. Next they search that
universe for stocks having characteristics suggesting the potential for
improved price performance - for example, better-than-expected earnings
reports.
o They use internal research and analysis by other market analysts to
identify stocks within the selected universe that may provide growth
opportunities. The expectation is that the stock will increase in value
when the market re-evaluates the issuer's earnings expectations and P/E
ratio.
o If the P/E ratio of a stock held in this component moves significantly
above the P/E ratio of the broad market benchmark the portfolio managers
use, or if there is evidence that an issuer's business prospects are
deteriorating, the portfolio managers will consider selling the stock.
|X| Growth/Income Stock Component. The Manager invests the assets of the
growth/income stock components of each Portfolio in common stocks with low
price-earnings ratios 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 this component's assets can be invested in
investment-grade or below-investment-grade convertible securities, corporate
bonds and U.S. government securities, as well as cash and short-term debt
instruments.
o In selecting securities for the growth/income component, the portfolio
managers use a disciplined value investment style.
o In selecting stocks, the portfolio managers use quantitative tools 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.
o Next they use 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 they
believe will have better-than-expected earnings.
o If the P/E ratio of a stock held in this component moves significantly
above the P/E ratio of the broad market benchmark the portfolio managers
use, or if there is evidence that an issuer's business prospects are
deteriorating or the stock's dividend yield drops well below that of the
average stock, the portfolio managers will consider selling the stock.
|X| Small Cap Stock Component. The Manager invests the assets of the small
cap stock component of Capital Appreciation Portfolio and Balanced Portfolio
mainly in common stocks of companies with relatively small market
capitalization, typically between $250 million to $1.5 billion. Market
capitalization is the aggregate value of a company's stock, or its price per
share times the number of shares outstanding. A portion of this component's
assets can be invested in cash and short-term instruments.
The portfolio manager 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. The portfolio manager also evaluates
research on particular industries, market trends and general economic
conditions. In seeking broad diversification of the investments in this
component, the portfolio manager looks for: o Companies with a small
capitalization, primarily between $250 million
and $1.5 billion;
o Companies with management that has a proven ability to handle rapid
growth;
o Companies between their start-up and emerging growth phases; and o Companies
with superior earnings and revenue growth.
|X| Government/Corporate Bond Component. The Manager invests the assets of
the government/corporate bond component of each Portfolio in fixed-income debt
securities. These mainly include investment-grade corporate debt obligations of
U.S. issuers and securities issued by the U.S. government and its agencies and
federally-chartered corporate entities referred to as "instrumentalities." They
can include mortgage-related securities and collateralized mortgage obligations
(CMOs). They can also include foreign corporate and government debt securities.
The securities in this component can have long-term maturities (10 or more years
when issued), intermediate term maturities (3 - 10 years when issued) or
short-term maturities (1 - 3 years when issued). However, normally this
component will focus on securities having intermediate maturities. A portion of
this component's assets can be invested in cash and short-term instruments.
The portfolio managers research the universe of corporate bonds and
government securities and weigh yields and relative values against risk,
currently focusing on:
o Sectors of the U.S. government debt market that they believe offer good
relative values; and
o Securities that have high income potential.
|X| High Yield Bond Component. The Manager invests the assets of the high
yield bond component of each Portfolio primarily in bonds rated "BB" or lower by
Standard & Poor's Ratings Service or "Ba" or lower by Moody's Investors Service,
Inc., or that have comparable ratings from other rating organizations. The
Manager can also select unrated bonds that are deemed by the Manager to be of
comparable quality to rated securities in those categories. These are commonly
called "junk bonds." The Manager may invest in bonds that are in default of
timely interest or principal payments. A portion of this component's assets can
be invested in cash and short-term debt instruments.
The portfolio managers analyze the overall investment opportunities and
risks in different market sectors, industries and countries. The portfolio
managers employ a strategy of diversifying the debt securities it selects to
help moderate the special risks of investing in high yield debt instruments,
using a "bottom-up" approach, focusing on the performance of individual
securities before considering overall economic and industry trends. The
portfolio managers first evaluate an issuer's liquidity, financial strength and
earnings power, then considers the factors below, looking for: o Changes in the
business cycle that might affect corporate profits; o Corporate sectors that in
the portfolio managers' view are currently
undervalued in the marketplace;
o Issuers with earnings growth rates that are faster than the growth rate
of the overall economy;
o Securities or sectors that will help the overall diversification of the
component; and
o Issuers with improvements in relative cash flows and liquidity to help
them meet their obligations.
|X| Short-Term Bond Component. The Manager invests the assets of the
short-term bond components of 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. Generally these will be securities that mature
within five years of the date of purchase, or that have a prepayment feature or
similar feature that (in the portfolio manager's view) gives the instrument a
remaining effective maturity of not more than five years. The portfolio manager
expects that the dollar-weighted average maturity of the securities in this
component will generally range between two and three years. A portion of this
component's assets can be invested in cash and cash equivalents.
The portfolio manager researches the universe of U.S. government
securities, foreign government debt securities, and debt securities of U.S.
and foreign companies, and weigh the relative values against risks, focusing
on:
o Sectors of the U.S. government and foreign government debt market that
the Manager believes offer good relative values;
o Short-term debt securities that are less sensitive to changes in
interest rates, and o Securities maturing within five years of the date of
purchase, or
having a prepayment feature that gives the security a remaining maturity of not
more than five years.
Stocks and Other Equity Investments. Each Portfolio can invest in common stocks
and other equity securities of domestic and foreign issuers that may be of
small, medium or large capitalization, to seek its goal. The Portfolios
emphasize common stocks for their stock holdings but can invest in other equity
securities, including preferred stocks, rights and warrants, and securities
convertible into common stock.
|X| Convertible Securities. Some convertible securities are debt
securities, but in managing the components for which it is responsible, the
Manager regards them as "equity substitutes" because of their conversion
feature. In those cases, their ratings have less impact on the Manager's
investment decision than in the case of other debt securities.
Debt Securities. Each Portfolio can invest in a variety of debt securities to
seek its goal. The debt securities purchased for a particular component of a
Portfolio may be rated by nationally-recognized rating organizations or they may
be unrated securities assigned an equivalent rating by the Manager. Each
Portfolio can purchase debt investments that are "investment grade." That means
they are either rated in the four highest rating categories of a national rating
organization or, if unrated, are assigned a comparable rating by the portfolio
manager for that component.
|X| U.S. Government Securities. Each Portfolio can invest in
securities issued or guaranteed by the U.S. Treasury or other government
agencies or instrumentalities. These are referred to as "U.S. government
securities" in this Prospectus. They can include collateralized mortgage
obligations (CMOs) and other mortgage-related securities.
|_| 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 when issued), and Treasury bonds (having maturities of
more than ten years when issued). 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" of their interest coupons 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 prior to their maturity are subject to
interest rate risk.
|_| Obligations of 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, some are supported by
the right of the issuer to borrow from the U.S. Treasury under certain
circumstances, and others are supported only by the credit of the entity that
issued them. Securities of U.S. government agencies and instrumentalities
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. They may be issued in
different series with different interest rates and maturities. CMOs that are
U.S. government securities have collateral to secure payment of interest and
principal. 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 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. These prepayment risks can make the prices of CMOs
very volatile when interest rates change. That volatility will affect a
Portfolio's share prices.
The prices of longer-term debt securities tend to fluctuate more than
those of shorter-term debt securities. 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 a Portfolio's shares to
fluctuate more. Additionally, a Portfolio might buy mortgage-related securities
at a premium. Accelerated prepayments on those securities could cause a
Portfolio to lose the portion of its principal investment represented by the
premium that the Portfolio paid.
|_| Private-Issuer Mortgage-Backed Securities. Mortgage-backed
securities issued by private issuers 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. These securities
also may be subject to prepayment risks.
|_| Asset-Backed Securities. Asset-backed securities 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 prepayment risks and 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:
o Money market instruments. In generally, these debt obligations must
have ratings in the top two rating categories of national rating
organizations (or equivalent ratings assigned by the portfolio manager).
Examples include commercial paper of domestic issuers or foreign
companies (commercial paper of foreign issuers can be purchased only if
the issuer has assets of $1 billion or more).
o Debt obligations of the U.S. government or corporations.
o Bank obligations. These include bank obligations such as certificates of
deposit and bankers' acceptances, of domestic or foreign banks or
savings and loan associations.
o Repurchase Agreements. In a repurchase transaction, the Portfolio buys a
security and simultaneously agrees to resell it to the vendor at a
higher price in the future. While these are collateralized arrangements,
delays or losses could occur if either party to the agreement defaults
or becomes insolvent.
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 a
Portfolio uses this strategy, it might help preserve principal but might reduce
opportunities to seek higher income or growth of capital.
Foreign Securities. The Portfolios can buy a variety of equity securities issued
by foreign companies and debt securities issued by foreign governments and
companies, as well as "supra-national" entities, such as the World Bank. Foreign
debt securities the Portfolios can purchase include bonds, debentures, and
notes, including derivative investments called "structured notes." A Portfolio
cannot invest 25% or more of its 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| 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, in addition to the ones described above, that can affect the
values of a Portfolio's foreign investments.
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.
Emerging market countries might have less developed trading markets and
exchanges. They 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.
? Special Portfolio Diversification Requirements. To enable a variable
annuity or variable life insurance contract based on an insurance company
separate account to qualify for favorable tax treatment under the Internal
Revenue Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers. Each Portfolio's investment program is managed
to meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.
Failure by a Portfolio to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate account
to be taxable income. Those diversification requirements might also limit, to
some degree, the Portfolio's investment decisions in a way that could reduce its
performance.
|X| Can a Portfolio's Investment Objective and Policies Change? The Board
of Directors of Panorama Series Fund, Inc. can change non-fundamental investment
policies of a Portfolio 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. The objective of each Portfolio is not a
fundamental policy, but will not be changed by the Board of Directors without
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.
Other Investment Strategies. To seek their objectives, the Portfolios can also
use the investment techniques and strategies described below. A Portfolio might
not always use all of them. These techniques involve certain risks, although
some are designed to help reduce overall investment or market risks.
|X| Illiquid and Restricted Securities. Investments may be illiquid
because there is no active trading market for them. 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. A
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 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 a
Portfolio might use can 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 and/or income.
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 portfolio managers that selected a derivative investment.
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 a Portfolio could
realize less principal or income from the investment than expected. Certain
derivative investments held by a Portfolio may be illiquid.
|X| Zero-Coupon and "Stripped" Securities. Some of the U.S. government
debt securities the Portfolios can 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| 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| Hedging. Each Portfolio can buy and sell certain kinds of futures,
forward contracts and put and call options, including 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. Each
Portfolio has limits on its use of hedging instruments and is not required to
use them in seeking its objective.
Some of these strategies would hedge a Portfolio's investments 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. There are also special
risks in particular hedging strategies. If a hedging instrument was used at the
wrong time or the portfolio manager 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, the Manager could change the allocation of a Portfolio's components
so that each Portfolio could 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. To the extent a Portfolio invests defensively in these
securities, it might not achieve its investment objective.
|X| Portfolio Turnover. At times a Portfolio might engage in short-term
trading to try to achieve its objective. Portfolio turnover affects brokerage
and transaction costs a Portfolio pays. The Financial Highlights table at the
end of this Prospectus shows each Portfolio's portfolio turnover rates during
prior fiscal years.
How the Portfolios are Managed
The Manager. The Manager chooses each 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 of Panorama Series Fund, under an
investment advisory agreement with each Portfolio that states the Manager's
responsibilities. Each agreement sets the fees the Portfolio pays 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 January 1960. The
Manager (including subsidiaries and affiliates) managed more than $125 billion
in assets as of March 31, 2000, including other mutual funds, with more than 5
million shareholder accounts. The Manager is located at Two World Trade Center,
34th Floor, New York, New York 10048-0203.
|X| The Manager's Advisory Fees. Each Portfolio pays the Manager an
advisory fee on the Portfolio's assets at an annual rate that declines on
additional assets as the Portfolio grows. Capital Appreciation Portfolio and
Balanced Portfolio each pay the Manager a monthly fee equal to 0.85% of the
Portfolio's first $250 million of average daily net assets and 0.75% of average
daily net assets over $250 million. Diversified Income Portfolio pays a monthly
fee equal to 0.75% of the Portfolio's average daily net assets up to $250
million and 0.65% of net assets over $250 million.
The management fees paid by each Portfolio to the Manager for their last
fiscal year ended December 31, 1999, represented the following percentage of
that Portfolio's average annual net assets: 0.85% for Capital Appreciation
Portfolio, 0.85% for Balanced Portfolio and 0.75% for Diversified Income
Portfolio.
Portfolio Managers. The Manager's investment personnel manage each of the
components of each Portfolio. The portfolio managers of each component are
listed below.
- ----------------------------------------------------------------------
International Stock Component
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Year Became
Portfolio Manager Portfolio Manager Business Experience
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Vice President of the
Manager; Vice President of
Panorama Series Fund, Inc.;
an officer and portfolio
George Evans 1999 manager of other Oppenheimer
funds. He has been employed
as an analyst and portfolio
manager of the Manager since
1990.
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Value/Growth and Growth/Income Stock Components
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Year Became
Portfolio Managers Portfolio Manager Business Experience
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Chartered Financial Analyst;
Senior V.P. of the Manager;
V.P. of Panorama Series Fund;
an officer and portfolio
Peter M. Antos 1995 manager of other Oppenheimer
funds; until 3/1/96, a senior
portfolio manager for G.R.
Phelps & Co., the prior
investment advisor
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Chartered Financial Analyst;
V.P. of the Manager and
Panorama Series Fund; an
officer and portfolio manager
Michael C. 1995 of other Oppenheimer funds;
Strathearn until 3/1/96, portfolio manager for
MassMutual, the Manager's parent company.
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Chartered Financial Analyst;
V.P. of the Manager and
Panorama Series Fund; an
Kenneth B. White 1995 officer and portfolio manager
of other Oppenheimer funds;
until 3/1/96, a portfolio
manager for MassMutual.
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Small Cap Stock Component
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Year Became a
Portfolio Manager Portfolio Manager Business Experience
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Vice President of the Manager
and of Panorama Series Fund,
Inc.; an officer and
Alan Gilston 2000 portfolio manager of other
Oppenheimer funds; he has
been employed as a portfolio
manager by the Manager since
----.
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Short-Term Bonds and Government/Corporate Bonds Components
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Year Became
Portfolio Manager Portfolio Manager Business Experience
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Chartered Financial Analyst;
V.P. of the Manager and
Panorama Series Fund, Inc.;
Stephen F. Libera 1995 an officer and portfolio
manager of other Oppenheimer
funds; until 3/1/96, a senior
portfolio manager for G.R.
Phelps & Co.
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
High Yield Bonds Component
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Year Became
Portfolio Managers Portfolio Manager Business Experience
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Senior Vice President of the
Manager; Vice President of
Panorama Series Fund, Inc.;
an officer and portfolio
David Negri 2000 manager of other Oppenheimer
funds; he has been employed
as an analyst and portfolio
manager by the Manager since
1989.
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Vice President of the Manager
and of Panorama Series Fund,
Inc.; an officer and
portfolio manager of other
Thomas Reedy 2000 Oppenheimer funds; he has
been employed as an analyst
and portfolio manager by the
Manager since 1993.
- ----------------------------------------------------------------------
Possible Conflicts of Interest. The Portfolios offer their shares to separate
accounts of different insurance companies as investments for their variable
annuity, variable life and other investment product contracts. While the
Portfolios do not foresee any disadvantages to contract owners from these
arrangements, it is possible that the interests of owners of different contracts
participating in the Portfolios through different separate accounts might
conflict. For example, a conflict could arise because of differences in tax
treatment.
The Board of Directors has procedures to monitor the Portfolios for
possible conflicts to determine what action should be taken. If an
irreconcilable conflict occurs, the Board might require one or more
participating insurance company separate accounts to withdraw their investments
in a Portfolio. That could force the Portfolio to sell securities at
disadvantageous prices, and orderly portfolio management could be disrupted.
Also, the Board might refuse to sell shares of a Portfolio to a particular
separate account, or could terminate the offering of the Portfolio's shares if
required to do so by law or if it would be in the best interests of the
shareholders of the Portfolio to do so.
Investing in the Portfolios
How to Buy and Sell Shares
How Are Shares Purchased? Shares of the Portfolios may be purchased only by
separate investment accounts of participating insurance companies as underlying
investments for variable life insurance policies, variable annuity contracts or
other investment products. Individual investors cannot buy shares of the
Portfolios directly. Please refer to the accompanying prospectus of the
participating insurance company for information on how to select a Portfolio as
an investment option for that variable life insurance policy, variable annuity
or other investment product. That prospectus will indicate which class of shares
you are eligible to purchase. Each Portfolio reserves the right to refuse any
purchase order when the Manager believes it would be in the Portfolio's best
interests to do so.
- -------------------------------------------------------------------------------
Information about your investment in the Portfolios through your variable
annuity contract, variable life insurance policy or other plan can be
obtained only from your participating insurance company or its servicing
agent. The Portfolios' Transfer Agent does not hold or have access to those
records. Instructions for buying or selling shares of a Portfolio should be
given to your insurance company or its servicing agent, not directly to the
Portfolio or its Transfer Agent.
- -------------------------------------------------------------------------------
|X| At What Price Are Shares Sold? Shares are sold at their offering
price, which is the net asset value per share. The Portfolios do not impose any
sales charge on purchases of their shares. If there are any charges imposed
under the variable annuity, variable life or other contract through which
Portfolio shares are purchased, they are described in the accompanying
prospectus of the participating insurance company.
The net asset value per share of each Portfolio is determined as of the
close of The New York Stock Exchange on each day that the exchange is open for
trading (referred to in this Prospectus as a "regular business day"). The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some days. All references to time in this Prospectus mean New York time.
The net asset value per share of a Portfolio is determined by dividing the
value of the Portfolio's net assets by the number of shares that are
outstanding. The Portfolios' Board of Directors has established procedures to
value each Portfolio's securities to determine the Portfolio's net asset value,
in general based on market values. The Board has adopted special procedures for
valuing illiquid and restricted securities and securities for which market
values cannot be readily obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and U.S. holidays, the values
of some of a Portfolio's foreign investments might change significantly on days
when shares of the Portfolio cannot be purchased or redeemed.
The offering price that applies to an order from a participating insurance
company is based on the next calculation of the net asset value per share that
is made after the insurance company (as the Portfolios' designated agent to
receive purchase orders) receives a purchase order from its contract owners to
purchase a Portfolio's shares on a regular business day, provided that the
Portfolio receives the order from the insurance company by 9:30 A.M. on the next
regular business day at the offices of its Transfer Agent in Colorado.
|X| Classes of Shares. The Portfolios may offer two different classes of
shares. The class of shares offered by this Prospectus has no "name"
designation. The other class is designated as Service shares. The different
classes of shares represent investments in the same portfolio of securities but
are expected to have different expenses and share prices.
This Prospectus may not be used to offer or sell Service shares. A
description of the distribution and service plans that affect only Service
shares of the Portfolio is contained in the Portfolio's prospectus that offers
Service shares. That prospectus may be obtained without charge by contacting any
participating insurance sponsor that offers Service shares of the Portfolios as
an investment for its separate accounts. You can also obtain a copy from
OppenheimerFunds Distributor, Inc., by calling toll-free 1.888.470.0861.
How Are Shares Redeemed? As with purchases, only the participating insurance
companies that hold Portfolio shares in their separate accounts for the benefit
of variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policyholders should not directly contact the Portfolios or their Transfer Agent
to request a redemption of shares of a Portfolio. Contract owners should refer
to the withdrawal or surrender instructions in the accompanying prospectus of
the participating insurance company.
The share price that applies to a redemption order for shares of a
Portfolio is the next net asset value per share that is determined after the
participating insurance company (as the Portfolios' designated agent) receives a
redemption request on a regular business day from its contract or policy holder,
provided that the Portfolio receives the order from the insurance company by
9:30 A.M. the next regular business day at the office of its Transfer Agent in
Colorado. Each Portfolio normally sends payment by Federal Funds wire to the
insurance company's account the day after the Portfolio receives the order (and
no later than 7 days after the Portfolio's receipt of the order). Under unusual
circumstances determined by the Securities and Exchange Commission, payment may
be delayed or suspended.
Dividends, Capital Gains and Taxes
Dividends. Each Portfolio intends to declare dividends from net investment
income, if any, on an annual basis and to pay those dividends in March on a date
selected by the Board of Directors. The Portfolios have no fixed dividend rates
and cannot guarantee that they will pay any dividends.
All dividends (and any capital gains distributions) will be reinvested
automatically in additional shares of the respective Portfolio at net asset
value for the account of the participating insurance company (unless the
insurance company elects to have dividends or distributions paid in cash).
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 March 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.
Taxes. For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Portfolios may be
purchased only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by a Portfolio from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable, if
at all, to the participating insurance company.
This information is only a summary of certain federal income tax
information about an investment in Portfolio shares. You should consult with
your tax adviser or your participating insurance company representative about
the effect of an investment in a Portfolio under your contract or policy.
<PAGE>
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.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995(2)
<S> <C> <C> <C> <C> <C>
=========================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $1.17 $1.18 $1.10 $1.04 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .06 .06 .06 .06 .02
Net realized and unrealized gain (loss) (.07) -- .07 .01 .04
- -------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (.01) .06 .13 .07 .06
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.06) (.06) (.05) (.01) (.02)
Distributions from net realized gain (.01) (.01) --(3) -- --
- -------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.07) (.07) (.05) (.01) (.02)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.09 $1.17 $1.18 $1.10 $1.04
===== ===== ===== ===== =====
=========================================================================================================================
Total Return, at Net Asset Value(4) (0.85)% 4.88% 12.51% 6.93% 5.69%
=========================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $46,034 $43,679 $34,116 $25,274 $21,176
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $45,754 $38,422 $28,503 $22,854 $20,364(5)
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (6)
Net investment income 5.56% 5.62% 5.88% 5.84% 5.11%
Expenses 0.83% 0.84%(7) 0.86(7) 1.07%(7) 1.50%(7)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 22% 36% 34% 80% 41%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund. 2. For the period from September 1, 1995 (commencement of operations) to
December 31, 1995. 3. Less than $0.005 per share. 4. Assumes a $1,000
hypothetical initial investment on the business day before the first day of the
fiscal period (or commencement of operations), with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Total returns are not annualized for periods less than one full
year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of these
charges would reduce the total return figures for all periods shown. 5. This
information is not covered by the auditors' opinion. 6. Annualized for periods
less than one full year. 7. Expense ratio has not been grossed up to reflect the
effect of expenses paid indirectly. 8. The lesser of purchases or sales of
portfolio securities for a period, divided by the monthly average of the market
value of portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of investment securities
(excluding short-term securities) for the period December 31, 1999, were
$13,563,254 and $8,486,475, respectively.
LifeSpan Diversified Income Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995(2)
<S> <C> <C> <C> <C> <C>
==============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $1.28 $1.28 $1.18 $1.05 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04 .04 .04 .03 .01
Net realized and unrealized gain .16 .04 .10 .11 .05
- ------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations .20 .08 .14 .14 .06
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.04) (.04) (.03) (.01) (.01)
Distributions from net realized gain -- (.04) (.01) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.04) (.08) (.04) (.01) (.01)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.44 $1.28 $1.28 $1.18 $1.05
===== ===== ===== ===== =====
==============================================================================================================================
Total Return, at Net Asset Value(3) 16.11% 6.17% 12.20% 13.38% 6.08%
==============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $96,629 $85,873 $68,693 $51,336 $35,467
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $86,728 $76,384 $59,388 $41,847 $33,925(4)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (5)
Net investment income 3.28% 3.44% 3.44% 3.34% 3.08%
Expenses 0.91% 0.93%(6) 0.97%(6) 1.17%(6) 1.50%(6)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 73% 58% 57% 70% 40%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund. 2. For the period from September 1, 1995 (commencement of operations) to
December 31, 1995. 3. Assumes a $1,000 hypothetical initial investment on the
business day before the first day of the fiscal period (or commencement of
operations), with all dividends and distributions reinvested in additional
shares on the reinvestment date, and redemption at the net asset value
calculated on the last business day of the fiscal period. Total returns are not
annualized for periods of less than one full year. Total return information does
not reflect expenses that apply at the separate account level or to related
insurance products. Inclusion of these charges would reduce the total return
figures for all periods shown. 4. This information is not covered by the
auditors' opinion. 5. Annualized for periods less than one full year. 6. Expense
ratio has not been grossed up to reflect the effect of expenses paid indirectly.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999 were $58,110,807 and $57,401,150, respectively.
LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995(2)
<S> <C> <C> <C> <C> <C>
============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $1.36 $1.35 $1.24 $1.06 $1.00
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .03 .03 .03 .02 .01
Net realized and unrealized gain .24 .06 .12 .17 .06
- ----------------------------------------------------------------------------------------------------------------------------
Total income from investment operations .27 .09 .15 .19 .07
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.03) (.03) (.01) (.01) (.01)
Distributions from net realized gain -- (.05) (.03) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.03) (.08) (.04) (.01) (.01)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.60 $1.36 $1.35 $1.24 $1.06
===== ===== ===== ===== =====
============================================================================================================================
Total Return, at Net Asset Value(3) 20.34% 6.49% 12.53% 17.97% 6.65%
============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $80,563 $72,849 $61,379 $41,994 $26,768
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $72,433 $66,754 $51,473 $33,109 $25,460(4)
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (5)
Net investment income 2.16% 2.41% 2.36% 1.92% 1.73%
Expenses 0.93% 0.93%(6) 0.99%(6) 1.30%(6) 1.50%(6)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 87% 65% 66% 71% 39%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund. 2. For the period from September 1, 1995 (commencement of operations) to
December 31, 1995. 3. Assumes a $1,000 hypothetical initial investment on the
business day before the first day of the fiscal period, (or commencement of
operations), with all dividends and distributions reinvested in additional
shares on the reinvestment date, and redemption at the net asset value
calculated on the last business day of the fiscal period. Total returns are not
annualized for periods less than one full year. Total return information does
not reflect expenses that apply at the separate account level or to related
insurance products. Inclusion of these charges would reduce the total return
figures for all periods shown. 4. This information is not covered by the
auditors' opinion. 5. Annualized for periods less than one full year. 6. Expense
ratio has not been grossed up to reflect the effect of expenses paid indirectly.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $57,710,279 and $60,781,231, respectively.
LifeSpan Capital Appreciation Portfolio
<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:
1.888.470.0861
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
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 1.202.942.8090) the EDGAR database on the SEC's Internet
web site at http://www.sec.gov. Copies may be obtained after payment of a
duplicating fee by electronic request at the SEC's e-mail address:
[email protected] or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
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. 811-3255
PR0617/618/619.0500 Printed on recycled paper.
<PAGE>
Appendix to Prospectus of
LifeSpan Capital Appreciation Portfolio
LifeSpan Balanced Portfolio
LifeSpan Diversified Income Portfolio
Graphic material included in the Prospectus of LifeSpan Capital
Appreciation Portfolio, LifeSpan Balanced Portfolio and LifeSpan Diversified
Income Portfolio "Annual Total Returns (as of 12/31 each year)":
A bar chart will be included in the Prospectus of LifeSpan Capital
Appreciation Portfolio, LifeSpan Balanced Portfolio and LifeSpan Diversified
Income Portfolio depicting the annual total returns of a hypothetical investment
in shares of each Portfolio for each of the calendar years since each
Portfolio's inception. Set forth below are the relevant data points that will
appear in the bar chart:
LifeSpan Capital Appreciation Portfolio
- ----------------------------------------
Calendar Year Ended Annual Total
12/31 Return
- ----------------------------------------
- ----------------------------------------
1996 17.97%
- ----------------------------------------
- ----------------------------------------
1997 12.53%
- ----------------------------------------
- ----------------------------------------
1998 6.49%
- ----------------------------------------
- ----------------------------------------
1999 20.34%
- ----------------------------------------
LifeSpan Balanced Portfolio
- ----------------------------------------
Calendar Year Ended Annual Total
12/31 Return
- ----------------------------------------
- ----------------------------------------
1996 13.38%
- ----------------------------------------
- ----------------------------------------
1997 12.20%
- ----------------------------------------
- ----------------------------------------
1998 6.17%
- ----------------------------------------
- ----------------------------------------
1999 16.11%
- ----------------------------------------
LifeSpan Diversified Income Portfolio
- ----------------------------------------
Calendar Year Ended Annual Total
12/31 Return
- ----------------------------------------
- ----------------------------------------
1996 6.93%
- ----------------------------------------
- ----------------------------------------
1997 12.52%
- ----------------------------------------
- ----------------------------------------
1998 4.88%
- ----------------------------------------
- ----------------------------------------
1999 -0.85%
- ----------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
Panorama Series Fund, Inc.
- -------------------------------------------------------------------------------
6803 S. Tucson Way, Englewood, Colorado 80112
1.888.470.0861
Statement of Additional Information dated May 1, 2000
Panorama Series Fund, Inc. is an investment company with seven series,
referred to as "Portfolios" in this document. Each portfolio is a separate
mutual fund having its own objective, investments, strategies and risks. The
Portfolios are:
|_| Total Return Portfolio
|_| Growth Portfolio
|_| Oppenheimer International Growth Fund/VA
|_| Government Securities Portfolio
and three LifeSpan Portfolios:
|_| LifeSpan Capital Appreciation Portfolio
|_| LifeSpan Balanced Portfolio and
|_| LifeSpan Diversified Income Portfolio
- -------------------------------------------------------------------------------
Shares of the Portfolios are sold only as the underlying investments for
variable life insurance policies, variable annuity contracts and other
products for insurance company separate accounts. Shares are not available
for sale directly to investors.
- -------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Portfolios, and supplements
information in the Prospectuses dated May 1, 2000, of the Portfolios. This
document 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.
<PAGE>
Contents
Page
About the Portfolios
Additional Information About Investment Policies and Risks... 3
Investment Policies....................................... 3
Other Investment Techniques and Strategies................ 13
Investment Restrictions................................... 32
How the Portfolios are Managed .............................. 36
Organization and History.................................. 36
Directors and Officers of the Company..................... 37
The Manager............................................... 43
Brokerage Policies of the Portfolios......................... 45
Performance of the Portfolios................................ 47
Investing In the Portfolios
How To Buy and Sell Shares................................... 52
Dividends, Capital Gains and Taxes........................... 55
Additional Information About the Portfolios.................. 57
Financial Information About the Portfolios
Independent Auditors' Report................................. 58
Financial Statements......................................... 59
Appendix A: Ratings Definitions.............................. A-1
Appendix B: Industry Classifications......................... B-1
<PAGE>
- -------------------------------------------------------------------------------
A B O U T T H E P O R T F O L I O S
- -------------------------------------------------------------------------------
Additional Information About Investment Policies and Risks
The investment objectives, the principal investment policies and the main
risks of each Portfolio are described in the Prospectus for that Portfolio. 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., can select for the Portfolios.
Additional information is also provided about the strategies that each Portfolio
may use to try to achieve its objective.
Investment Policies. The composition of the investment portfolio of each
Portfolio and the techniques and strategies that the Manager uses in selecting
investment 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 their goal. They may use some of the special investment techniques
and strategies at some times or not at all.
In the discussion of the investment strategies of the Portfolios below,
the Portfolios are categorized according to the types of investments they
primarily make. Total Return Portfolio, Growth Portfolio, Oppenheimer
International Growth Fund/VA, LifeSpan Capital Appreciation Portfolio and
LifeSpan Balanced Portfolio are referred to as "Equity Portfolios," because they
invest mainly or substantially in common stocks and other equity securities.
LifeSpan Diversified Income Portfolio and Government Securities Portfolio are
referred to as "Fixed Income Portfolios," because the main emphasis of their
investment program is debt securities. However a Portfolio is referred to in
general, the discussion below of particular investments and strategies indicates
which Portfolios can use that investment or technique as part of their
investment program. For example, some investments can be held by only some of
the Portfolios and some can be held by all. Please refer to the Prospectus of a
particular Portfolio for an explanation of its principal investment policies and
risks.
|X| Equity Securities. The Equity Portfolios and the stock components of
the LifeSpan Portfolios invest in equity securities, which include common
stocks, preferred stocks, rights and warrants, and securities convertible into
common stock. Certain equity securities may be selected for some of the
Portfolios not only for their appreciation possibilities but because they may
provide dividend income.
The capitalization ranges of the issuers of equity securities that
particular Portfolios invest in are discussed in the Prospectuses. Some of the
Portfolios may emphasize securities of issuers in one or more capitalization
ranges, such as mid-cap and large-cap issuers. "Capitalization" refers to the
market capitalization of a company, which, in general terms, is the value of a
company determined by the total market value of its issued and outstanding
common stock. There are no fixed dollar amounts for particular capitalization
ranges, and the ranges currently used by the Portfolios may change over time as
investors change their views as to what a "small-cap" company is in relation to
"mid-cap" and "large-cap" as the stock market changes. Different Portfolios may
also have different definitions of what constitutes a small-, mid- or large-cap
issuer.
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 Portfolio has investments in smaller
capitalization companies at times of market volatility, that Portfolio's share
price may fluctuate more. Those investments may be limited to the extent the
Manager believes that such investments would be inconsistent with the
Portfolio's investment objective.
|_| Growth Companies (All Equity Portfolios). The Equity Portfolios can
invest in securities of "growth" companies. Growth companies are those companies
that the Manager 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 view of the
portfolio manager of a Portfolio defines them as "growth" issuers.
Growth companies may include companies that are 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 portfolio manager believes are favorable for the
long term.
|_| Preferred Stocks (All Portfolios except Government Securities
Portfolio). 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, participating, or auction rate. "Cumulative"
dividend provisions require all or a portion of prior unpaid dividends to be
paid before dividends can be paid on the issuer's common stock. Preferred stock
may be "participating" stock, which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases.
If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as provisions allowing calls
or redemptions prior to maturity, which also have a negative impact on prices
when interest rates decline. The rights of preferred stock on distribution of a
corporation's assets in the event of a liquidation are generally subordinate to
the rights associated with a corporation's debt securities. Preferred stock
generally has a preference over common stock on the distribution of a
corporation's assets in the event of liquidation of the corporation.
|_| Convertible Securities (All Portfolios except Government Securities
Portfolio). While some convertible securities are a form of debt security, in
some cases their conversion feature (allowing conversion into the issuer's
common stock) may cause a portfolio manager to regard them as "equity
equivalents." In those cases, the rating assigned to the security has less
impact on the portfolio manager's investment decision with respect to
convertible securities than in the case of non-convertible fixed income
securities. Convertible debt securities are subject to the credit risks and
interest rate risks described below in "Debt Securities."
The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security and the
security's price will likely increase when interest rates fall and decrease when
interest rates rise. If the conversion value exceeds the investment value, the
security will behave more like an equity security. In that case, it will likely
sell at a premium over its conversion value and its price will tend to fluctuate
directly with the price of the underlying security.
To determine whether convertible securities should be regarded as "equity
equivalents," the portfolio managers typically examine 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 units 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.
|X| Foreign Securities (All Portfolios except Government Securities
Portfolio). Each Portfolio can invest in foreign securities, consistent with any
limitations a Portfolio may have on foreign investing set forth in its
Prospectus or this Statement of Additional Information. These may include debt
and equity securities issued by companies or governmental issuers in developed
countries or emerging market countries. Growth Portfolio and Total Return
Portfolio have fundamental policies, described in "Investment Restrictions,"
below, that limit the percentage of their assets that can be invested in foreign
securities. LifeSpan Diversified Income Portfolio normally does not buy foreign
equity securities.
The Portfolios can invest in obligations of foreign branches of U.S.
banks and U.S. branches of foreign banks. These investments are subject to
some of the risks of foreign securities and do not offer the protection of
Federal Deposit Insurance Corporation insurance.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in foreign issuers that appear to offer growth or income
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. 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 use currency for
speculative purposes or to hold it as an investment.
Securities of foreign issuers that are represented by American Depository
Receipts (ADRs), or that are listed on a U.S. securities exchange or traded in
the U.S. over-the-counter markets are not considered "foreign securities" for
the purposes of a Portfolio's investment allocations. That is because they are
not subject to many of the special considerations and risks, discussed below,
that apply to foreign securities traded and held abroad.
Because the Portfolios can purchase securities denominated in foreign
currencies, a change in the value of a foreign currency against the U.S. dollar
could result in a change in the amount of income a Portfolio has available for
distribution. Because a portion of the Portfolio's investment income may be
received in foreign currencies, the Portfolio will be required to compute its
income in U.S. dollars for distribution to shareholders, and therefore will
absorb the cost of currency fluctuations. After the Portfolio has distributed
income, subsequent foreign currency losses may result in the Portfolios having
distributed more income in a particular fiscal period than was available from
investment income, which could result in a return of capital to shareholders.
|_| Risks of Foreign Investing. Investments in foreign securities may
offer special opportunities for investing but also present special additional
risks and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards in
foreign countries comparable to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the
U.S.;
o less governmental regulation of foreign issuers, securities exchanges
and brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or
loss of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic
developments; and
o 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.
|_| Special Risks of Emerging Markets. Emerging and developing markets
abroad may also offer special opportunities for investing but have greater risks
than more developed foreign markets, such as those in Europe, Canada, Australia,
New Zealand and Japan. There may be even less liquidity in their securities
markets, and settlements of purchases and sales of securities may be subject to
additional delays. They are subject to greater risks of limitations on the
repatriation of income and profits because of currency restrictions imposed by
local governments. Those countries may also be subject to the risk of greater
political and economic instability, which can greatly affect the volatility of
prices of securities in those countries. The portfolio managers will consider
these factors when evaluating securities in these markets, and the Portfolios
currently do not expect to invest a substantial portion of their assets in
emerging markets.
|X| Debt Securities. The Portfolios can invest in debt securities to
seek their objectives. Foreign debt securities are subject to the risks of
foreign securities described above. In general, debt securities are also
subject to two additional types of risk: credit risk and interest rate risk.
|_| Credit Risk. Credit risk relates to the ability of the issuer to
meet interest or principal payments or both as they become due. In general,
lower-grade, higher-yield bonds are subject to credit risk to a greater extent
than lower-yield, higher-quality bonds.
The portfolios can buy rated and unrated debt securities. In making
investments in debt securities, the portfolio managers may rely to some extent
on the ratings of ratings organizations or it may use their own research to
evaluate a security's credit-worthiness. If a Portfolio buys unrated debt
securities, to consider them part of the Portfolio's holdings of
investment-grade securities, they must be judged by the Manager to be of a
quality comparable to securities rated as investment grade by a rating
organization.
U.S. government securities, although unrated, are generally considered to
be equivalent to securities in the highest rating categories. Investment-grade
securities are securities that are rated at least "Baa" by Moody's Investors
Service, Inc., or at least "BBB" by Standard & Poor's Ratings Service or Duff &
Phelps, Inc., or that have comparable ratings by another nationally-recognized
rating organization. The Portfolios other than Government Securities Portfolio
can also buy non-investment-grade debt securities (commonly referred to as "junk
bonds").
|_| Interest Rate Risk. Interest rate risk refers to the fluctuations in
value of debt securities resulting from the inverse relationship between price
and yield. For example, an increase in general interest rates will tend to
reduce the market value of already-issued debt securities, and a decline in
general interest rates will tend to increase their value. In addition, debt
securities having longer maturities tend to offer higher yields, but are subject
to potentially greater fluctuations in value from changes in interest rates than
obligations having shorter maturities.
Fluctuations in the market value of debt securities after a Portfolio buys
them will not affect the interest income payable on those securities (unless the
security pays interest at a variable rate pegged to interest rate changes).
However, those price fluctuations will be reflected in the valuations of the
securities, and therefore the Portfolio's net asset values will be affected by
those fluctuations.
|_| Lower-Grade Securities (All Portfolios except Government Securities
Portfolio). Because lower-grade securities tend to offer higher yields than
investment-grade securities, a Portfolio might invest in lower-grade securities
to seek higher income.
"Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than "BBB"
by Standard & Poor's or Duff & Phelps, or similar ratings by other rating
organizations. If they are unrated, and are determined by the Manager to be of
comparable quality to debt securities rated below investment grade, they are
considered part of the Portfolio's holdings of lower-grade securities.
Some of the special credit risks of lower-grade securities are discussed
below. There is a greater risk that the issuer may default on its obligation to
pay interest or to repay principal than in the case of investment-grade
securities. The issuer's low creditworthiness may increase the potential for its
insolvency. An overall decline in values in the high yield bond market is also
more likely during a period of a general economic downturn. An economic downturn
or an increase in interest rates could severely disrupt the market for high
yield bonds, adversely affecting the values of outstanding bonds as well as the
ability of issuers to pay interest or repay principal. In the case of foreign
high yield bonds, these risks are in addition to the special risks of foreign
investing discussed above.
To the extent they can be converted into stock, convertible securities may
be less subject to some of the risks of volatility than non-convertible high
yield bonds, since stock may be more liquid and less affected by some of these
risk factors.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks and have some speculative
characteristics. Definitions of the debt security ratings categories of Moody's,
Standard & Poor's, Fitch/IBCA and Duff & Phelps are included in Appendix A to
this Statement of Additional Information.
|_| Mortgage-Related Securities (All Portfolios except Growth Portfolio
and Oppenheimer International Growth Fund/VA). Mortgage-related securities are a
form of derivative investment collateralized by pools of commercial or
residential mortgages. Pools of mortgage loans are assembled as securities for
sale to investors by government agencies or entities or by private issuers.
These securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real
estate-related securities.
Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. government, discussed below under "U.S. Government
Securities," have relatively little credit risk (depending on the nature of the
issuer) but are subject to interest rate risks and prepayment risks.
As with other debt securities, the prices of mortgage-related securities
tend to move inversely to changes in interest rates. Some mortgage-related
securities pay interest at rates that move inversely to changes in general
interest rates, based on a multiple of a specific index. Although the value of a
mortgage-related security may decline when interest rates rise, the converse is
not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages. Therefore, it is not
possible to predict accurately the security's yield. The principal that is
returned earlier than expected may have to be reinvested in other investments
having a lower yield than the prepaid security. Therefore, these securities may
be less effective as a means of "locking in" attractive long-term interest
rates, and they may have less potential for appreciation during periods of
declining interest rates, than conventional bonds with comparable stated
maturities.
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of a Portfolio's
shares. If a mortgage-related security has been purchased at a premium, all or
part of the premium the Portfolio paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than
were anticipated, the Portfolio may fail to recoup its initial investment on the
security.
During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate
more widely in responses to changes in interest rates. If the prepayments on a
Portfolio's mortgage-related securities were to decrease broadly, the
sensitivity of the Portfolio's share price to interest rate changes would
increase.
As with other debt securities, the values of mortgage-related securities
may be affected by changes in the market's perception of the creditworthiness of
the entity issuing the securities or guaranteeing them. Their values may also be
affected by changes in government regulations and tax policies.
o Collateralized Mortgage Obligations. Collateralized mortgage
obligations or "CMOs," are multi-class bonds that are backed by pools of
mortgage loans or mortgage pass-through certificates. They may be
collateralized by:
(1) pass-through certificates issued or guaranteed by Government National
Mortgage Association (Ginnie Mae), Federal National Mortgage
Association (Fannie Mae), or Federal Home Loan Mortgage Corporation
(Freddie Mac),
(2) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of Veterans' Affairs,
(3) unsecuritized conventional mortgages, (4) other mortgage-related securities,
or
(5) any combination of the securities mentioned above.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in different ways. One or more tranches may have coupon
rates that reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the reverse direction to an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.
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 will be reduced.
Additionally, a Portfolio might have to reinvest the prepayment proceeds in
other securities paying interest at lower rates, which could reduce the
Portfolio's income.
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 are the prepayment risks
described above and 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.
o Mortgage-Related U.S. Government Securities. These include
interests in pools of residential or commercial mortgages, in the form of
collateralized mortgage obligations 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.
o Commercial (Privately-Issued) Mortgage Related Securities. Some
mortgage-related securities are issued by private entities. Generally these are
multi-class debt or pass-through certificates secured by mortgage loans on
commercial properties. They are subject to the credit risk of the issuer. These
securities typically are structured to provide protection to investors in senior
classes from possible losses on the underlying loans. They do so by having
holders of subordinated classes take the first loss if there are defaults on the
underlying loans. They may also be protected to some extent by guarantees,
reserve funds or additional collateralization mechanisms.
o "Stripped" Mortgage-Related Securities. These are mortgage-related
securities that are created by segregating the cash flows from underlying
mortgage loans or mortgage securities to create two or more new securities. Each
has a specified percentage of the underlying security's principal or interest
payments. They are a form of derivative investment.
Mortgage securities may be partially stripped so that each class receives
some interest and some principal. However, they may be completely stripped. In
that case all of the interest is distributed to holders of one type of security,
known as an "interest-only" security, or "I/O," and all of the principal is
distributed to holders of another type of security, known as a "principal-only"
security or "P/O." Strips can be created for pass through certificates or CMOs.
The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, a Portfolio might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially.
|_| U.S. Government Securities (All Portfolios). These are securities
issued or guaranteed by the U.S. Treasury or other U.S. government agencies or
federally-chartered corporate entities referred to as "instrumentalities." The
obligations of U.S. government agencies or instrumentalities in which the Fund
can invest may or may not be guaranteed or supported by the "full faith and
credit" of the United States. "Full faith and credit" means generally that the
taxing power of the U.S. government is pledged to the payment of interest and
repayment of principal on a security. If a security is not backed by the full
faith and credit of the United States, the owner of the security must look
principally to the agency issuing the obligation for repayment. The owner might
not be able to assert a claim against the United States if the issuing agency or
instrumentality does not meet its commitment.
o U.S. Treasury Obligations. These include Treasury bills (which have
maturities of one year or less when issued), Treasury notes (which have
maturities of from one to ten years when issued), and Treasury bonds (which have
maturities of more than ten years when issued). Treasury securities are backed
by the full faith and credit of the United States as to timely payments of
interest and repayments of principal. Other U.S. Treasury obligations the
Portfolios can buy 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").
o Obligations of 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.
Others are supported only by the credit of the entity that issued them, such as
Federal Home Loan Mortgage Corporation obligations.
|X| Money Market Instruments (All Portfolios). The following is a
brief description of the types of the money market securities the Portfolios
can invest in. Money market securities are high-quality, short-term debt
instruments that may be issued by the U.S. government, corporations, banks or
other entities. They may have fixed, variable or floating interest rates.
|_| U.S. Government Securities. These include obligations issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, described above.
|_| Bank Obligations. "Banks" include commercial banks, savings banks
and savings and loan associations, which may or may not be members of the
Federal Deposit Insurance Corporation. The Portfolios can buy time deposits,
certificates of deposit and bankers' acceptances. They must be:
o obligations issued or guaranteed by a domestic bank (including a
foreign branch of a domestic bank) having total assets of at
least U.S. $1 billion, or
o obligations of a foreign bank with total assets of at least U.S. $1
billion.
|_| Commercial Paper. The Portfolios can invest in commercial paper if
it is rated within the top three rating categories of Standard & Poor's and
Moody's or other rating organizations. If the paper is not rated, it may be
purchased if the Manager determines that it is comparable to rated commercial
paper in the top three rating categories of national rating organizations.
The Portfolios can buy commercial paper, including U.S. dollar-denominated
securities of foreign branches of U.S. banks, issued by other entities if the
commercial paper is guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or commercial paper may
otherwise be purchased by the Portfolios.
|_| Variable Amount Master Demand Notes. Master demand notes are
corporate obligations that permit the investment of fluctuating amounts at
varying rates of interest under direct arrangements between a Portfolio, as
lender, and the borrower. They permit daily changes in the amounts borrowed. The
Portfolio has the right to increase the amount under the note at any time up to
the full amount provided by the note agreement, or to decrease the amount. The
borrower may prepay up to the full amount of the note without penalty. These
notes may or may not be backed by bank letters of credit.
Because these notes are direct lending arrangements between the lender and
borrower, it is not expected that there will be a trading market for them. There
is no secondary market for these notes, although they are redeemable (and thus
are immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. Accordingly, a Portfolio's right to redeem such notes is
dependent upon the ability of the borrower to pay principal and interest on
demand.
The Portfolios have no limitations on the type of issuer from whom these
notes will be purchased. However, in connection with such purchases and on an
ongoing basis, the portfolio manager will consider the earning power, cash flow
and other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
made demand simultaneously. Investments in master demand notes are subject to
the limitation on investments by the Portfolios in illiquid securities.
Currently, the Portfolios do not intend that their investments in variable
amount master demand notes will exceed 5% of a Portfolio's total assets.
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. A Portfolio is not required to use
all of these strategies at all times, and at times may not use them.
|X| Forward Rolls (Total Return Portfolio and Government Securities
Portfolio). In a "forward roll" transaction with respect to mortgage-related
securities, a Portfolio sells a mortgage-related security to a buyer and
simultaneously agrees to repurchase a similar security (the same type of
security, and having the same coupon and maturity) at a later date at a set
price. The securities that are repurchased will have the same interest rate as
the securities that are sold, but typically will be collateralized by different
pools of mortgages (with different prepayment histories) than the securities
that have been sold. Proceeds from the sale are invested in short-term
instruments, such as repurchase agreements. The income from those investments,
plus the fees from the forward roll transaction, are expected to generate income
to the Portfolio in excess of the yield on the securities that have been sold.
A Portfolio will only enter into "covered" rolls. To assure its future
payment of the purchase price, the Portfolio will identify on its books liquid
assets in an amount equal to the payment obligation under the roll.
These transactions have risks. During the period between the sale and the
repurchase, the Portfolio will not be entitled to receive interest and principal
payments on the securities that have been sold. It is possible that the market
value of the securities the Portfolio sells might decline below the price at
which the Portfolio is obligated to repurchase securities.
|X| Asset-Backed Securities (All Portfolios except Growth Portfolio and
Oppenheimer International Growth Fund/VA). Asset-backed securities are
fractional interests in pools of assets, typically accounts receivable or
consumer loans. They are issued by trusts or special-purpose corporations. They
are similar to mortgage-backed securities, described above, and are backed by a
pool of assets that consist of obligations of individual borrowers. The income
from the pool is passed through to the holders of participation interest in the
pools. The pools may offer a credit enhancement, such as a bank letter of
credit, to try to reduce the risks that the underlying debtors will not pay
their obligations when due.
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 related to 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 may shorten the weighted average life of asset-backed
securities and may lower their return, in the same manner as in the case of
mortgage-backed securities and CMOs, described above.
|X| Zero-Coupon Securities (All Portfolios). The Portfolios can buy
zero-coupon and delayed-interest securities, and "stripped" securities. Stripped
securities are debt securities whose interest coupons are separated from the
security and sold separately. They can include, among others, foreign debt
securities and U.S. Treasury notes or bonds that have been stripped of their
interest coupons, U.S. Treasury bills issued without interest coupons, and
certificates representing interests in stripped securities.
Zero-coupon securities do not make periodic interest payments and are sold
at a deep discount from their face value. The buyer recognizes a rate of return
determined by the gradual appreciation of the security, which is redeemed at
face value on a specified maturity date. This discount depends on the time
remaining until maturity, as well as prevailing interest rates, the liquidity of
the security and the credit quality of the issuer. In the absence of threats to
the issuer's credit quality, the discount typically decreases as the maturity
date approaches. Some zero-coupon securities are convertible, in that they are
zero-coupon securities until a predetermined date, at which time they convert to
a security with a specified coupon rate.
Because zero-coupon securities pay no interest and compound semi-annually
at the rate fixed at the time of their issuance, their value is generally more
volatile than the value of other debt securities. Their value may fall more
dramatically than the value of interest-bearing securities when interest rates
rise. When prevailing interest rates fall, zero-coupon securities tend to rise
more rapidly in value because they have a fixed rate of return.
A Portfolio's investment in zero-coupon securities may cause the Portfolio
to recognize income and make distributions to shareholders before it receives
any cash payments on the zero-coupon investment. To generate cash to satisfy
those distribution requirements, the Portfolio might have to sell portfolio
securities that it otherwise might have continued to hold or to use cash flows
from other sources such as the sale of Portfolio shares.
|X| "When-Issued" and "Delayed-Delivery" Transactions (All Portfolios).
The Portfolios can invest in securities on a "when-issued" basis and can
purchase or sell securities on a "delayed-delivery" 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 these 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. 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 portfolio manager of a Portfolio before settlement will affect the value of
such securities and may cause a loss to the Portfolio. During the period between
purchase and settlement, no payment is made by the Portfolio to the issuer and
no interest accrues to the Portfolio from the investment until it receives the
security at settlement.
A Portfolio might engage in when-issued transactions to secure what the
portfolio manager considers to be an advantageous price and yield at the time
the obligation is entered into. When a Portfolio enters 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 Portfolio to lose the
opportunity to obtain the security at a price and yield the portfolio manager
considers to be advantageous.
When a Portfolio engages in when-issued and delayed-delivery transactions,
it does so for the purpose of acquiring or selling securities consistent with
its investment objective and policies or for delivery pursuant to options
contracts it has entered into, and not for the purpose of investment leverage.
Although a Portfolio enters into delayed-delivery or when-issued purchase
transactions to acquire securities, it may dispose of a commitment prior to
settlement. If a Portfolio chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or to dispose of its right to
delivery or receive against a forward commitment, it may incur a gain or loss.
At the time a Portfolio makes the commitment to purchase or sell a
security on a when-issued or delayed-delivery basis, it records the transaction
on its books and reflects the value of the security purchased in determining the
Portfolio's net asset value. In a sale transaction, it records the proceeds to
be received. The Portfolio will identify on its books liquid assets at least
equal in value to the value of the Portfolio's purchase commitments until it
pays for the investment. The Portfolios anticipate that a Portfolio's
commitments to purchase when-issued securities and forward commitments will not
exceed 33% of that Portfolio's total assets under normal market conditions.
When-issued and delayed-delivery transactions can be used by a Portfolio
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, a Portfolio might sell securities in its 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, a Portfolio 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 (all Portfolios). A Portfolio can acquire
securities subject to repurchase agreements. It might do so for liquidity
purposes to meet anticipated redemptions of shares, or pending the investment of
the proceeds from sales of shares, or pending the settlement of portfolio
securities transactions, or for temporary defensive purposes.
In a repurchase transaction, a 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 a
Portfolio's limits on holding illiquid investments. A Portfolio will not 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 Portfolio'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, a 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 (All Portfolios). Under the
policies and procedures established by the Board of Directors, the Manager
determines the liquidity of certain of a Portfolio's investments. To enable a
Portfolio to sell its holdings of a restricted security not registered under the
Securities Act of 1933, the 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 it 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 a Portfolio's ability to dispose of the
securities and might lower the amount the Portfolio could realize upon the sale.
Each Portfolio has limitations that apply to purchases of restricted
securities, as stated in its Prospectus. Except in the case of the LifeSpan
Portfolios, 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, a Portfolio's
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.
|X| Municipal Securities (Total Return Portfolio). These are debt
obligations issued by the governments of states and their agencies,
instrumentalities and authorities, as well as their political subdivisions
(cities towns and counties, for example), that are used to finance a variety of
public and private purposes. Those purposes include financing state or local
governments and financing specific public projects and facilities. The Portfolio
can invest in them because the portfolio managers believe they offer attractive
yields relative to the yields and risks of other debt securities, rather than to
seek tax-exempt interest income for distribution to shareholders.
|X| Floating Rate and Variable Rate Obligations (All Portfolios). The
interest rate on a floating rate note is adjusted automatically according to a
stated prevailing market rate, such as a bank's prime rate, the 91-day U.S.
Treasury Bill rate, or some other standard. The instrument's rate is adjusted
automatically each time the base rate is adjusted. The interest rate on a
variable rate note is also based on a stated prevailing market rate but is
adjusted automatically at specified intervals. Generally, the changes in the
interest rate on such securities reduce the fluctuation in their market value.
As interest rates decrease or increase, the potential for capital appreciation
or depreciation is less than that for fixed-rate obligations of the same
maturity. The portfolio manager of a Portfolio may determine that an unrated
floating rate or variable rate obligation meets the Portfolio's quality
standards by reason of being backed by a letter of credit or guarantee issued by
a bank that meets those quality standards.
Floating rate and variable rate demand notes that have a stated maturity
in excess of one year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one year and upon no more than 30 days' notice. The tender may be at par value
plus accrued interest, according to the terms of the obligations. The issuer of
that type of note normally has a corresponding right in its discretion, after a
given period, to prepay the outstanding principal amount of the note plus
accrued interest. Generally the issuer must provide a specified number of days'
notice to the holder.
Step-coupon bonds have a coupon interest rate that changes periodically
during the life of the security on predetermined dates that are set when the
security is issued.
|X| "Structured" Notes (All Portfolios except Growth Portfolio and
Oppenheimer International Growth Fund/VA). "Structured" notes are
specially-designed derivative debt investments with principal payments or
interest payments that are linked to the value of an index (such as a currency
or securities index) or commodity. The terms of the instrument may be
"structured" by the purchaser (the Portfolio) and the borrower issuing the note.
The principal and/or interest payments depend on the performance of one or
more other securities or indices, and the values of these notes will therefore
fall or rise in response to the changes in the values of the underlying security
or index. They are subject to both credit and interest rate risks and therefore
a Portfolio could receive more or less than it originally invested when the
notes mature, or it might receive less interest than the stated coupon payment
if the underlying investment or index does not perform as anticipated. Their
values may be very volatile and they may have a limited trading market, making
it difficult for a Portfolio to sell its investment at an acceptable price.
|X| Inverse Floaters (All Portfolios except Growth Portfolio and
Oppenheimer International Growth Fund/VA). "Inverse floaters" are debt
obligations on which the interest rates typically fall as market rates increase
and increase as market rates fall. Changes in market interest rates or the
floating rate of the security inversely affect the residual interest rate of an
inverse floater. As a result, the price of an inverse floater will be
considerably more volatile than that of a fixed-rate obligation when interest
rates change.
To provide investment leverage, an issuer might decide to issue two
variable rate obligations instead of a single long-term, fixed-rate bond. The
interest rate on one obligation reflects short-term interest rates. The interest
rate on the other instrument, the inverse floater, reflects the approximate rate
the issuer would have paid on a fixed-rate bond, multiplied by a factor of two,
minus the rate paid on the short-term instrument. The two portions may be
recombined to create a fixed-rate bond. A Portfolio might acquire both portions
of that type of offering, to reduce the effect of the volatility of the
individual securities. This provides a flexible portfolio management tool to
vary the degree of investment leverage efficiently under different market
conditions.
Inverse floaters may offer relatively high current income, reflecting the
spread between short-term and long-term tax-exempt interest rates. As long as
the yield curve remains relatively steep and short term rates remain relatively
low, owners of inverse floaters will have the opportunity to earn interest at
above-market rates because they receive interest at the higher long-term rates
but have paid for bonds with lower short-term rates. If the yield curve flattens
and shifts upward, an inverse floater will lose value more quickly than a
conventional long-term bond. A Portfolio might invest in inverse floaters to
seek higher yields than are available from fixed-rate bonds that have comparable
maturities and credit ratings. In some cases, the holder of an inverse floater
may have an option to convert the floater to a fixed-rate bond, pursuant to a
"rate-lock" option.
Some inverse floaters have a feature known as an interest rate "cap" as
part of the terms of the investment. Investing in inverse floaters that have
interest rate caps might be part of a portfolio strategy to try to maintain a
high current yield for a Portfolio when the Portfolio has invested in inverse
floaters that expose the Portfolio to the risk of short-term interest rate
fluctuations. "Embedded" caps might be used to hedge a portion of a Portfolio's
exposure to rising interest rates. When interest rates exceed a pre-determined
rate, the cap generates additional cash flows that offset the decline in
interest rates on the inverse floater, and the hedge is successful. However, the
Portfolio bears the risk that if interest rates do not rise above the
pre-determined rate, the cap (which is purchased for additional cost) will not
provide additional cash flows and will expire worthless.
Inverse floaters are a form of derivative investment. Certain derivatives,
can be used to increase or decrease a Portfolio's exposure to changing security
prices, interest rates or other factors that affect the value of securities.
However, these techniques could result in losses to a Portfolio if the portfolio
manager judges market conditions incorrectly or employs a strategy that does not
correlate well with the Portfolio's other investments. These techniques can
cause losses if the counterparty does not perform its promises. An additional
risk of investing in securities that are derivative investments is that their
market value could be expected to vary to a much greater extent than the market
value of securities that are not derivative investments but have similar credit
quality, redemption provisions and maturities.
|X| Investing in Small, Unseasoned Companies (LifeSpan Portfolios Only).
Each LifeSpan Portfolio may invest up to 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. These
securities may be more volatile in their prices than securities of more
established companies. They may have a limited trading market, which may make it
difficult for a Portfolio to dispose of them at an acceptable price when it
wants to do so. If other investors that own a security for which there is
limited liquidity trade the security when a Portfolio is attempting to dispose
of its holdings of that security, the Portfolio might receive a lower price for
its holdings than it expected.
|X| Reverse Repurchase Agreements (LifeSpan Portfolios Only). The LifeSpan
Portfolios can use reverse repurchase agreements as a cash management tool, but
not as a source of leverage for investing. They do not currently use reverse
repurchase agreements, but may do so in the future. When a Portfolio enters into
a reverse repurchase agreement, it segregates on its books an amount of cash or
U.S. government securities equal in value to the purchase price of the
securities it has committed to buy, plus accrued interest, until the payment is
made to the seller. Before a Portfolio enters into a reverse repurchase
agreement, the Manager must evaluate the creditworthiness of the seller,
typically a bank or broker-dealer and will monitor it during the transaction.
|X| Loans of Portfolio Securities (All Portfolios). Besides using
repurchase transactions, each Portfolio can lend its portfolio securities in
amounts up to 10% of the Portfolio's total assets. Loans can be made to brokers,
dealers and other types of financial institutions approved by the Board of
Directors. The Portfolios currently do not use this strategy, but if they do so
they expect to limit such loans to not more than 5% of their total assets.
There are some risks in connection with securities lending. A Portfolio
might experience a delay in receiving additional collateral to secure a loan, or
a delay in recovery of the loaned securities if the borrower defaults. A
Portfolio must receive collateral for a loan. Under current applicable
regulatory requirements (which are subject to change), on each business day the
loan collateral must be at least equal to the value of the loaned securities. It
must consist of cash, bank letters of credit or securities of the U.S.
government or its agencies or instrumentalities, 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 it lends securities, a Portfolio receives amounts equal to the
dividends or interest on loaned securities. It also receives 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. A Portfolio may also
pay reasonable finder's, custodian and administrative fees in connection with
these loans. The terms of these loans must meet applicable tests under the
Internal Revenue Code and must permit a Portfolio to reacquire loaned securities
on five days' notice or in time to vote on any important matter.
|X| Hedging (All Portfolios). Although the Portfolios can use certain
hedging instruments and techniques, they are not obligated to use them in
seeking their objectives. A 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 each Portfolios can
use are described below.
|_| Call and Put Options. The Portfolios have different policies and
restrictions regarding the purchase and sale of call and put options.
o All Portfolios can write (sell) exchange-traded covered call options on
securities, currencies and securities indices.
o The LifeSpan Portfolios can buy call options that are either
exchange-traded or over-the-counter (OTC) options on securities,
currencies or securities indices.
o Oppenheimer International Growth Fund/VA and Government Securities
Portfolio can buy exchange-traded call options on securities,
currencies and securities indices.
o Oppenheimer International Growth Fund/VA and the LifeSpan Portfolios can
purchase options on currency in the over-the-counter markets.
o A LifeSpan Portfolio may not write covered call or put options with
respect to more than 25% of the value of its total assets.
o A LifeSpan Portfolio may not invest more than 25% of its total assets in
protective put options.
o A LifeSpan Portfolio may not invest more than 5% of its total
assets in puts, calls, spreads or straddles, or any combination of
them, other than protective put options.
o The aggregate value of premiums paid on all options, other than
protective put options, held by a LifeSpan Portfolio at any time
may not exceed 20% of that Portfolio's total assets.
Call options can be used as a hedge against possible decreases in the
prices of investment securities held by a Portfolio or against an increase in
price of a security the Portfolio contemplates buying. Covered call options can
be used to generate income.
|_| Writing Covered Call Options (All Portfolios). The Portfolios can
write (that is, sell) covered calls. If a Portfolio sells a call option, it must
be covered. That means the Portfolio must own the security subject to the call
while the call is outstanding, or, for certain calls on indices and currencies,
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.
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 Portfolio shares 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 Portfolio
receives. 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
Portfolio would keep the cash premium and the investment.
When a Portfolio writes a call on an index, it receives cash (a premium).
If the buyer of the call exercises it, the Portfolio 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 Portfolio would keep the cash premium.
The Portfolios' custodian bank, 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 a
Portfolio has 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 a LifeSpan Portfolio writes an over-the-counter ("OTC") option, it
will enter into an arrangement with a primary U.S. government securities dealer
that will establish a formula price at which the Portfolio 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 a LifeSpan Portfolio
writes an OTC option, it will treat as illiquid (for purposes of its restriction
on holding illiquid securities) the mark-to-market value of any OTC option it
holds, unless the option is subject to a buy-back agreement by the executing
broker.
To terminate its obligation on a call it has written, a Portfolio may
purchase a corresponding call in a "closing purchase transaction." The Portfolio
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
Portfolio wrote is more or less than the price of the call the Portfolio
purchases to close out the transaction. The Portfolio may realize a profit if
the call expires unexercised, because the Portfolio will retain the underlying
security and the premium it received when it wrote the call. Any such profits
are considered short-term capital gains for federal income tax purposes, as are
the premiums on lapsed calls. If a Portfolio cannot effect a closing purchase
transaction due to the lack of a market, it 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 on its books an equivalent dollar amount of liquid
assets. A Portfolio 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 a Portfolio's receipt
of an exercise notice as to that future require the Portfolios to deliver a
futures contract. It would simply put the Portfolio in a short futures position,
which is permitted by the Portfolios' hedging policies.
|_| Writing Put Options. The LifeSpan Portfolios can sell put options
on securities, securities indices, foreign currencies and futures. Oppenheimer
International Growth Fund/VA can also sell put options on futures. A put option
on securities gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying investment at the exercise price during the
option period.
If a LifeSpan Portfolio writes a put, the put must be covered by liquid
assets identified on the Portfolio's books. The premium the Portfolio receives
from writing a put represents a profit, as long as the price of the underlying
investment remains equal to or above the exercise price of the put. However, the
Portfolio also assumes the obligation during the option period to buy the
underlying investment from the buyer of the put at the exercise price, even if
the value of the investment falls below the exercise price.
If a put a Portfolio has written expires unexercised, the Portfolio
realizes a gain in the amount of the premium less the transaction costs
incurred. If the put is exercised, the Portfolio must fulfill its obligation to
purchase the underlying investment at the exercise price. That price will
usually exceed the market value of the investment at that time. In that case,
the Portfolio may incur a loss if it sells the underlying investment. That loss
will be equal to the sum of the sale price of the underlying investment and the
premium received minus the sum of the exercise price and any transaction costs
the Portfolio incurred.
When writing a put option on a security, to secure its obligation to pay
for the underlying security a Portfolio will identify on its books liquid assets
with a value equal to or greater than the exercise price of the underlying
securities. The Portfolio therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets.
As long as a Portfolio's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was sold.
That notice will require the Portfolio to take delivery of the underlying
security and pay the exercise price. The Portfolio has no control over when it
may be required to purchase the underlying security, since it may be assigned an
exercise notice at any time prior to the termination of its obligation as the
writer of the put. That obligation terminates upon expiration of the put. It may
also terminate if, before it receives an exercise notice, the Portfolio effects
a closing purchase transaction by purchasing a put of the same series as it
sold. Once the Portfolio has been assigned an exercise notice, it cannot effect
a closing purchase transaction.
A Portfolio may decide to effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent the
underlying security from being put. Effecting a closing purchase transaction
will also permit the Portfolio to write another put option on the security, or
to sell the security and use the proceeds from the sale for other investments.
The Portfolio will realize a profit or loss from a closing purchase transaction
depending on whether the cost of the transaction is less or more than the
premium received from writing the put option. Any profits from writing puts are
considered short-term capital gains for federal tax purposes.
|_| Purchasing Calls and Puts. The Oppenheimer International Growth
Fund/VA, Government Securities Portfolio and LifeSpan Portfolios can purchase
calls on securities, securities indices, and foreign currencies. Oppenheimer
International Growth Fund/VA and the LifeSpan Portfolios can also buy put and
call options on futures. A Portfolio might do so to protect against the
possibility that its investment portfolio will not participate in an anticipated
rise in the securities market. When a Portfolio buys a call (other than in a
closing purchase transaction), it pays a premium. The Portfolio then 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.
The Portfolio benefits only if it sells the call at a profit or if, during
the call period, the market price of the underlying investment is above the sum
of the call price plus the transaction costs and the premium paid for the call
and the Portfolio exercises the call. If the Portfolio does not exercise the
call or sell it (whether or not at a profit), the call will become worthless at
its expiration date. In that case the Portfolio will have paid the premium but
lost the right to purchase the underlying investment.
The LifeSpan Portfolios can buy puts on securities, broadly-based
securities indices, foreign currencies and futures, whether or not they own the
underlying investment. When a Portfolio purchases a put, it pays a premium and,
except as to puts on indices, has the right to sell the underlying investment to
a seller of a put on a corresponding investment during the put period at a fixed
exercise price.
Buying a put on securities or futures a Portfolio owns enables the
Portfolio to attempt to protect itself during the put period against a decline
in the value of the underlying investment below the exercise price by selling
the underlying investment at the exercise price to a seller of a corresponding
put. If the market price of the underlying investment is equal to or above the
exercise price and, as a result, the put is not exercised or resold, the put
will become worthless at its expiration date. In that case the Portfolio will
have paid the premium but lost the right to sell the underlying investment.
However, the Portfolio may sell the put prior to its expiration. That sale may
or may not be at a profit.
Buying a put on an investment a Portfolio does not own (such as an index
or future) permits the Portfolio either to resell the put or to buy the
underlying investment and sell it at the exercise price. The resale price will
vary inversely to the price of the underlying investment. If the market price of
the underlying investment is above the exercise price and, as a result, the put
is not exercised, the put will become worthless on its expiration date.
When a Portfolio purchases a call or put on an index or future, it pays a
premium, but settlement is in cash rather than by delivery of the underlying
investment to the Portfolio. Gain or loss depends on changes in the index in
question (and thus on price movements in the securities market generally) rather
than on price movements in individual securities or futures contracts.
|_| Buying and Selling Options on Foreign Currencies. All Portfolios
can sell exchange-traded call options on foreign currencies. Government
Securities Portfolio, the LifeSpan Portfolios and Oppenheimer International
Growth Fund/VA can also buy exchange-traded calls on foreign currencies.
Oppenheimer International Growth Fund/VA and the LifeSpan Portfolios can buy
call options on currencies in the OTC markets. The LifeSpan Portfolios can also
buy and sell put options on foreign currencies. A Portfolio 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 a portfolio 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 portfolio 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 Portfolio will then have incurred
option premium payments and transaction costs without a corresponding benefit.
A call written on a foreign currency is "covered" if the 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.
A Portfolio 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 Portfolio
owns 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 identifying
liquid assets on its books in an amount equal to the exercise price of the
option.
|_| Futures. The Portfolios have different policies and limitations
on the purchase and sale of futures contracts:
o Each Portfolio can buy and sell future contracts on stock indices.
o Total Return Portfolio, Oppenheimer International Growth Fund/VA,
Government Securities Portfolio, and each LifeSpan Portfolio may
buy and sell interest rate futures contracts.
o Each portfolio that can invest in securities denominated in foreign
currency can purchase and sell futures on foreign currencies.
o Total Return Portfolio, Oppenheimer International Growth Fund/VA and
Government Securities Portfolio can buy and sell futures
contracts related to financial indices.
A broadly-based stock index is used as the basis for trading stock index
futures. In some cases, these futures may 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 a Portfolio on the purchase or sale of a
future. Upon entering into a futures transaction, the Portfolio 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
Portfolio's 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, a Portfolio may elect to
close out its 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.
|_| Forward Contracts (All Portfolios except Government Securities
Portfolio). Forward contracts are foreign currency exchange contracts. They are
used to buy or sell foreign currency for future delivery at a fixed price. A
Portfolio can use them to "lock in" the U.S. dollar price of a security
denominated in a foreign currency that the Portfolio has bought or sold, or to
protect against possible losses from changes in the relative values of the U.S.
dollar and a foreign currency. A Portfolio may also use "cross-hedging" where
the Portfolio hedges against changes in currencies other than the currency in
which a security it holds is denominated.
Under a forward contract, one party agrees to purchase, and another party
agrees to sell, a specific currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by the parties. The
transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among currency
traders (usually large commercial banks) and their customers.
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 the risk of fluctuations in the prices of the underlying securities
the Portfolio owns or intends to acquire, but it does fix a rate of exchange in
advance. Although forward contracts may reduce the risk of loss from a decline
in the value of the hedged currency, at the same time they limit any potential
gain if the value of the hedged currency increases.
When a Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Portfolio might desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent of the
dividend payments. To do so, the Portfolio could enter into a forward contract
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction, in a fixed amount of U.S. dollars per unit of the
foreign currency. This is called a "transaction hedge." The transaction hedge
will protect the Portfolio against a loss from an adverse change in 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 the
payments are made or received.
A Portfolio could also use forward contracts to lock in the U.S. dollar
value of portfolio positions. This is called a "position hedge." When a
portfolio manager believes that foreign currency might suffer a substantial
decline against the U.S. dollar, the Portfolio could enter into a forward
contract to sell an amount of that foreign currency approximating the value of
some or all of the Portfolio's investment securities denominated in that foreign
currency. When a portfolio manager believes that the U.S. dollar might suffer a
substantial decline against a foreign currency, the Portfolio could enter into a
forward contract to buy that foreign currency for a fixed dollar amount.
Alternatively, a Portfolio could enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount if the portfolio
manager believes that the U.S. dollar value of the foreign currency to be sold
pursuant to its forward contract will fall whenever there is a decline in the
U.S. dollar value of the currency in which securities of the Portfolio are
denominated. That is referred to as a "cross hedge."
A Portfolio will cover its short positions in these cases by identifying
on its books liquid assets having a value equal to the aggregate amount of the
Portfolio's commitment under forward contracts. A Portfolio will not enter into
forward contracts or maintain a net exposure to such contracts if the
consummation of the contracts would obligate the Portfolio to deliver an amount
of foreign currency in excess of the value of its portfolio securities or other
assets denominated in that currency or another currency that is the subject of
the hedge.
However, to avoid excess transactions and transaction costs, a Portfolio
may maintain a net exposure to forward contracts in excess of the value of its
portfolio securities or other assets denominated in foreign currencies if the
excess amount is "covered" by liquid securities denominated in any currency. The
cover must be at least equal at all times to the amount of that excess. As one
alternative, the Portfolio may purchase a call option permitting it to purchase
the amount of foreign currency being hedged by a forward sale contract at a
price no higher than the forward contract price. As another alternative, the
Portfolio may purchase a put option permitting it to sell the amount of foreign
currency subject to a forward purchase contract at a price as high or higher
than the forward contract price.
The precise matching of the amounts under forward contracts and the value
of the securities involved generally will not be possible because the future
value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases the portfolio manager might decide
to sell the security and deliver foreign currency to settle the original
purchase obligation. If the market value of the security is less than the amount
of foreign currency the Portfolio is obligated to deliver, the Portfolio might
have to purchase additional foreign currency on the "spot" (that is, cash)
market to settle the security trade. If the market value of the security instead
exceeds the amount of foreign currency the Portfolio is obligated to deliver to
settle the trade, the Portfolio might have to sell on the spot market some of
the foreign currency received upon the sale of the security. There will be
additional transaction costs on the spot market in those cases.
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 to pay additional transactions costs. The use of
forward contracts in this manner might reduce a Portfolio's performance if there
are unanticipated changes in currency prices to a greater degree than if the
Portfolio had not entered into such contracts.
At or before the maturity of a forward contract requiring a Portfolio to
sell a currency, the Portfolio might sell a portfolio security and use the sale
proceeds to make delivery of the currency. In the alternative it might retain
the security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract the Portfolio will obtain, on
the same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Portfolio might 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. The
gain or loss will depend on the extent to which the exchange rate or rates
between the currencies involved moved between the execution dates of the first
contract and offsetting contract.
The costs 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 brokerage fees or commissions are
involved. Because these contracts are not traded on an exchange, the Fund must
evaluate the credit and performance risk of the counterparty under each forward
contract.
Although each 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 will incur costs in doing so. 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
might offer to sell a foreign currency to a Portfolio at one rate, while
offering a lesser rate of exchange if the Portfolio desires to resell that
currency to the dealer.
|_| Interest Rate Swap Transactions (Government Securities Portfolio and
the LifeSpan Portfolios). In an interest rate swap, a Portfolio and another
party exchange their right to receive or their obligation to pay interest on a
security. For example, they might swap the right to receive floating rate
payments for fixed rate payments. A Portfolio can enter into swaps only on
securities that it owns and will not enter into swaps with respect to more than
25% of its total assets. Also, a Portfolio will identify on its books liquid
assets (such as cash or U.S. government securities) to cover any amounts it
could owe under swaps that exceed the amounts it is entitled to receive, and it
will adjust that amount daily, as needed.
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 be greater than the payments it
received. Credit risk arises from the possibility that the counterparty will
default. If the counterparty defaults, the Portfolio's loss will consist of the
net amount of contractual interest payments that the Portfolio has not yet
received. The Manager will monitor the creditworthiness of counterparties to a
Portfolio's interest rate swap transactions on an ongoing basis.
A Portfolio can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides that
all swaps done between the Portfolio and that counterparty shall be regarded as
parts of an integral agreement. If amounts are payable on a particular date in
the same currency in respect of one or more swap transactions, the amount
payable on that date in that currency shall be the net amount. In addition, the
master netting agreement may provide that if one party defaults generally or on
one swap, the counterparty may terminate all of the swaps with that party. Under
these agreements, if a default results 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 for each swap. It is measured by 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."
|_| 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 uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may 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.
A Portfolio's option activities could affect its portfolio turnover rate,
brokerage commissions and transaction costs. The exercise of calls written by a
Portfolio might cause the Portfolio to sell related portfolio securities, thus
increasing its turnover rate. The exercise by a 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 the
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.
A Portfolio 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 a Portfolio's net asset value 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. A Portfolio
might experience losses if it 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 a Portfolio's investment 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 Portfolio's securities. For example, it is
possible that while the Portfolio has used hedging instruments in a short hedge,
the market might advance and the value of the securities held by the Portfolio
might decline. If that occurred, the Portfolio would lose money on the hedging
instruments and also experience a decline in the value of its investment
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 a
Portfolio's investments diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the price of
the investments being hedged and movements in the price of the hedging
instruments, a Portfolio might 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.
A Portfolio 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 Portfolio then concludes not to invest
in securities because of concerns that the market might decline further or for
other reasons, the Portfolio 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, each
Portfolio is exempted from registration with the CFTC as a "commodity pool
operator" if the Portfolio complies with the requirements of Rule 4.5 adopted by
the CFTC. The Rule does not limit the percentage of the Portfolio's assets that
may be used for futures margin and related options premiums for a bona fide
hedging position. However, under the Rule, a Portfolio must limit their
aggregate initial futures margin and related options premiums to not more than
5% of the Portfolio's 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 a Portfolio 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 Portfolio's investment advisor). 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 a Portfolio purchases a future, it
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. 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 a 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 a Portfolio accrues interest or other receivables
or accrues expenses or other liabilities denominated in a foreign
currency and the time the Portfolio actually collects 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 a 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 U.S. $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 not fundamental policies, but
will not be changed by the Board of Directors without advance notice to
shareholders. Other policies described in the Prospectus or this Statement of
Additional Information are "fundamental" only if they are identified as such.
The 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 Total Return
Portfolio, Growth Portfolio, Government Securities Portfolio and Oppenheimer
International Growth Fund/VA.
|_| A Portfolio cannot issue "senior securities."
|_| A Portfolio cannot invest more than 5% of its total assets (taken at
market value at the time of each investment) in the securities of any
one issuer other than the U.S. government. That limit applies to
repurchase agreements with any one bank. A Portfolio cannot purchase
more than either (1) 10% of the principal amount of the outstanding
debt securities of an issuer or (2) 10% of the outstanding voting
securities of an issuer. This restriction does not apply to
securities issued or guaranteed by the U.S. government or its
agencies, bank money instruments or bank repurchase agreements. (This
restriction also does not apply to Government Securities Portfolio).
|_| A Portfolio cannot 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. For the purpose of
interpreting this restriction, utilities are divided according to
their services. For example, gas, gas transmissions, electric and
telephone each are considered to be a separate industry. However,
this limitation does 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 does not apply to
Oppenheimer International Growth Fund/VA or Government Securities
Portfolio).
|_| A Portfolio cannot, by itself or together with any other Portfolio or
Portfolios, make investments for the purpose of exercising control
over, or management of, any issuer.
|_| A Portfolio cannot purchase securities of other investment companies,
except in connection with a merger, consolidation, acquisition or
reorganization. Another exception is purchase in the open market of
securities of closed-end investment companies if no underwriter or
dealer's commission or profit, other than customary broker's
commission, is involved, but only if immediately after the purchase
not more than 10% of the Portfolio's total assets, taken at market
value, would be invested in such securities.
|_| A Portfolio cannot purchase or sell interests in oil, gas or other
mineral exploration or development programs, commodities, commodity
contracts or real estate. However, Total Return Portfolio,
Oppenheimer International Growth Fund/VA, Growth Portfolio, and
Government Securities Portfolio each may purchase securities of
issuers that invest or deal in any of the above and may 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 Oppenheimer International
Growth Fund/VA may also invest in options on foreign futures
contracts on securities, financial instruments and indices and
foreign currency.
|_| A Portfolio cannot purchase any securities on margin, however Panorama
Series Fund may obtain such short term credits as may be necessary
for the clearance of purchases and sales of portfolio securities. A
Portfolio cannot 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.
|_| A Portfolio cannot make loans, except that a Portfolio (1) may lend
portfolio securities in accordance with the Portfolio's investment
policies in amounts up to 33 1/3% of the Portfolio's total assets
taken at market value, (2) can enter into repurchase agreements, and
(3) can 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.
|_| A Portfolio cannot borrow amounts in excess of 10% of its total assets,
taken at market value at the time of the borrowing. It can borrow only
from banks as a temporary measure for extraordinary or emergency
purposes. A Portfolio cannot make investments in portfolio securities
while its outstanding borrowings exceed 5% of its total assets.
|_| A Portfolio cannot mortgage, pledge, hypothecate or in any manner
transfer, as security for indebtedness, any securities owned or held
by such Portfolio. An exception is made as may be necessary in
connection with borrowings mentioned in the preceding restriction.
In that case such mortgaging, pledging or hypothecating may not
exceed 10% of the Portfolio's total assets, taken at market value at
the time of the transaction. The deposit of cash equivalents and
liquid debt securities in a segregated account with the Portfolio's
custodian bank 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.
|_| A Portfolio cannot underwrite securities of other issuers. A permitted
exception is if the Portfolio is deemed to be an underwriter under the
1933 Act in selling its investment securities.
|_| A Portfolio cannot write, purchase or sell puts, calls or combinations
thereof. However, Total Return Portfolio and Growth Portfolio may write
covered call options and engage in closing purchase transactions. (This
restriction does not apply to Oppenheimer International Growth Fund/VA
and Government Securities Portfolio.)
|_| A Portfolio cannot invest in securities of foreign issuers if at the
time of acquisition more than 10% of its total assets, taken at
market value, would be invested in those securities. However, a
Portfolio can invest up to 25% of its total assets 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 does not apply to Oppenheimer International Growth
Fund/VA.)
|X| Do the LifeSpan Portfolios Have Restrictions That Are Fundamental
Policies? The LifeSpan Portfolios also have restrictions that are fundamental
policies.
|_| Each LifeSpan Portfolio cannot issue senior securities, except as
permitted by its policies as to margin, borrowing money, commodities
and lending 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 a Portfolio's investment policies, are not deemed to
be senior securities.
|_| A LifeSpan Portfolio cannot purchase any securities on margin. However,
Panorama Series Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of portfolio
securities. A LifeSpan Portfolio cannot 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.
|_| A LifeSpan Portfolio cannot borrow money, except for emergency or
extraordinary purposes. Those purposes include (1) borrowing 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, (2) borrowing 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 (3) borrowing in order to fulfill commitments or plans to
purchase additional securities pending the anticipated sale of other
portfolio securities or assets. After each such borrowing there must
be 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 do not constitute borrowing.
|_| A LifeSpan Portfolio cannot act as an underwriter. A permitted
exception is to the extent that a Portfolio may be deemed to be an
underwriter for purposes of the Securities Act of 1933 in connection
with the disposition of its investment securities.
|_| A LifeSpan Portfolio cannot purchase or sell real estate. However, a
Portfolio may (1) acquire or lease office space for its own use, (2)
invest in securities of issuers that invest in real estate or interests
in real estate, (3) invest in securities that are secured by real
estate or interests in real estate, (4) purchase and sell
mortgage-related securities and (5) hold and sell real estate acquired
by the Portfolio as a result of the ownership of securities.
|_| A LifeSpan Portfolio cannot invest in commodities. However a 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.
|_| A LifeSpan Portfolio cannot make loans. However, a Portfolio may (1)
lend its portfolio securities in accordance with the Portfolio's
investment policies in amounts 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.
|_| A LifeSpan Portfolio cannot purchase the securities of issuers
conducting their principal activity in the same industry if,
immediately after such purchase, the value of its investments in that
industry would exceed 25% of its total assets taken at market value at
the time of the 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, a LifeSpan Portfolio cannot
purchase securities of an issuer (other than the U.S. government, its
agencies, instrumentalities or authorities), if:
(a) that 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) that purchase would result in the Portfolio holding more than 10% of
the outstanding voting securities of that issuer.
|X| Do the LifeSpan Portfolios Have any Other Investment Restrictions That
Are Non-Fundamental? The following restrictions of the Life Span Portfolios are
not fundamental policies and can be changed by the Board of Directors without
the approval of shareholders.
|_| A LifeSpan Portfolio cannot pledge, mortgage or hypothecate its assets,
except to secure permitted borrowings. In that case the pledge,
mortgage or hypothecation must 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.
|_| A LifeSpan Portfolio cannot 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 to save commissions or to
average prices among them is not deemed to result in a joint securities
trading account.
|_| A LifeSpan Portfolio cannot 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 any investment management subsidiary of the
Manager individually owns beneficially more than 0.5% and together own
beneficially more than 5% of the securities of such issuer.
|_| A LifeSpan Portfolio cannot purchase a security if, as a result, (1)
more than 10% of the Portfolio's assets would be invested in securities
of other investment companies, (2) the purchase would result in the
Portfolio holding more than 3% of the total outstanding voting
securities of any one investment company, or (3) more than 5% of the
Portfolio's assets would be invested in any one such investment
company.
|_| A LifeSpan Portfolio will not purchase the securities of any open-end
investment company except when the purchase is part of a plan of
merger, consolidation, reorganization or purchase of substantially all
of the assets of any other investment company.
|_| A LifeSpan Portfolio will not 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 Portfolios have no current intention of
investing in other investment companies.
|_| A LifeSpan Portfolio will not purchase securities while outstanding
borrowings exceed 5% of the Portfolio's total assets.
|_| A LifeSpan Portfolio will not invest in real estate limited partnership
interests.
|_| A LifeSpan Portfolio will not purchase interests in oil, gas, or other
mineral exploration programs or mineral leases. However, this policy
does not prohibit the acquisition of securities of companies engaged in
the production or transmission of oil, gas, or other minerals.
|_| A LifeSpan Portfolio will not invest for the purpose of exercising
control over or management of any company.
For purposes of each Portfolio's policy not to concentrate its assets, the
Portfolios apply the policy to 25% or more of their total assets and have
adopted the industry classifications set forth in Appendix B to this Statement
of Additional Information. This is not a fundamental policy.
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.
The percentage restrictions described above and in the Prospectus apply
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.
How the Portfolios Are Managed
Organization and History. Panorama Series Fund, Inc., the investment company of
which each Portfolio is a series, was incorporated in Maryland on August 17,
1981. It is referred to as the "Company" in this Statement of Additional
Information. Prior to May 1, 1996, the Company was named Connecticut Mutual
Financial Services Series Fund I, Inc.
The Company is governed by a Board of Directors, which is responsible for
protecting the interests of shareholders under Maryland law. The Directors meet
periodically throughout the year to oversee the activities of the Company and
the Portfolios, review their performance, and review the actions of the Manager.
|X| Meetings of Shareholders. As series of a Maryland corporation, the
Portfolios are not required to hold, and do not plan to hold, regular annual
meetings of shareholders. The Portfolios will hold meetings from time to time on
important matters and 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 Senior Floating Rate
Oppenheimer Cash Reserves Fund
Oppenheimer Champion Income Fund Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund,
Oppenheimer Capital Income Fund Inc.
Oppenheimer High Yield Fund Oppenheimer Variable Account Funds
Oppenheimer International Bond
Fund Panorama Series Fund, Inc.
Oppenheimer Integrity Funds Centennial America Fund, L. P.
Oppenheimer Limited-Term Centennial California Tax Exempt
Government Fund Trust
Oppenheimer Main Street Funds,
Inc. Centennial Government Trust
Oppenheimer Main Street Small
Cap Fund. Centennial Money Market Trust
Centennial New York Tax Exempt
Oppenheimer Municipal Fund Trust
Oppenheimer Real Asset Fund Centennial Tax Exempt Trust
Ms. Macaskill and Messrs. Swain, Wixted, 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, 2000, the Directors and
officers of the Company as a group did not beneficially own any shares of the
Portfolios.
William L. Armstrong, Director,2 Age: 63
11 Carriage Lane, Littleton, Colorado 80121
Chairman of the following private mortgage banking companies: Cherry Creek
Mortgage Company (since 1991), Centennial State Mortgage Company (since 1994),
The El Paso Mortgage Company (since 1993), Transland Financial Services, Inc.
(since 1997), and Ambassador Media Corporation (since 1984); Chairman of the
following private companies: Frontier Real Estate, Inc. (residential real estate
brokerage) (since 1994), Frontier Title (title insurance agency) (since 1995)
and Great Frontier Insurance (insurance agency) (since 1995); Director of the
following public companies: Storage Technology Corporation (computer equipment
company) (since 1991), Helmerich & Payne, Inc. (oil and gas drilling/production
company) (since 1992), UNUMProvident (insurance company) (since 1991); formerly
Director of the following public companies: International Family Entertainment
(television channel) (1991 - 1997) and Natec Resources, Inc. (air pollution
control equipment and services company) (1991 - 1995); formerly U.S. Senator
(January 1979 - January 1991).
Robert G. Avis*, Director, Age: 68
One North Jefferson Ave., St. Louis, Missouri 63103
Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc.
(general partnership of private equity funds), Director of A.G. Edwards &
Sons, Inc. (a broker-dealer) and Director of A.G. Edwards Trust Companies
(trust companies), formerly, Vice Chairman of A.G. Edwards & Sons, Inc. and
A.G. Edwards, Inc. (its parent holding company) and Chairman of A.G.E. Asset
Management (an investment advisor).
William A. Baker, Director, Age: 85
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Jon S. Fossel, Director, Age: 58 3
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., the Manager's parent holding company, and
Shareholder Services, Inc. and Shareholder Financial Services, Inc., transfer
agent subsidiaries of the Manager.
Sam Freedman, Director, Age: 59
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.,
Chairman, Chief Executive Officer and director of Shareholder Financial
Services, Inc., Vice President and director of Oppenheimer Acquisition Corp.
and a director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Director, Age: 70
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products
training company), self-employed consultant (securities matters).
C. Howard Kast, Director, Age: 78
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Director, Age: 78
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill*, President, Age: 51
Two World Trade Center, New York, New York 10048-0203
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corporation, an investment adviser
subsidiary of the Manager; Chairman and a director of Shareholder Services, Inc.
(since August 1994) and Shareholder Financial Services, Inc. (since September
1995), transfer agent subsidiaries of the Manager; President (since September
1995) and a director (since October 1990) of Oppenheimer Acquisition Corp., the
Manager's parent holding company; 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 of Oppenheimer Millennium Funds plc; President and
a director of other Oppenheimer funds; a director of Prudential Corporation plc
(a U.K. financial service 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.
- ------------------------
* Director who is an "interested person" of the Fund and of the Manager.
James C. Swain*, Chairman, Chief Executive Officer and Director, Age: 66 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, an investment adviser subsidiary of the Manager and
Chairman of the Board of Shareholder Services, Inc.
Charles Albers, Vice President and Portfolio Manager of Growth Portfolio,
Age: 59
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since April 1998); a Certified 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).
Peter M. Antos, Vice President and Portfolio Manager of the Value/Growth and
Growth/Income stock components of the LifeSpan Portfolios; 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).
Patrick Bisbey, Vice President and Portfolio Manager of Total Return
Portfolio, Age: 41
301 North Spring Street, Bellefonte, PA 16823
Managing Director and Manager of Trading and Portfolio Operations (since June,
1992) of Trinity Investment Management Corporation ("Trinity"), a wholly-owned
subsidiary of OppenheimerFunds, Inc's immediate parent, Oppenheimer Acquisition
Corp.
David Dalzell, Vice President and Portfolio Manager of Total Return
Portfolio, Age: 33
301 North Spring Street, Bellefonte, PA 16823
Research analyst and trader with Trinity (since November, 1995), prior to which
he was a financial consultant with Merrill Lynch Pierce Fenner & Smith
Incorporated and a trader for First Chicago Trading Consultants.
George Evans, Vice President and Portfolio Manager of International Growth
Fund/VA and international stock component of LifeSpan Capital Appreciation
Portfolio and LifeSpan Balanced Portfolio, Age: 40
Vice President of the Manager (since joining the Manager in September 1990) and
HarbourView Asset Management Corporation (since July 1994); an officer of other
Oppenheimer funds.
- ------------------------
* Director who is an "interested person" of the Fund and of the Manager.
Alan Gilston, Vice President and Portfolio Manager of Small Cap Stock
component of LifeSpan Capital Appreciation Portfolio and LifeSpan Balanced
Portfolio; Age: 41
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since September 1997); prior to joining the
Manager in September 1997, he was a Vice President and portfolio manager at
Schroder Capital Management International, Inc. (from August 1987 - September
1997). He is portfolio manager of small cap stock and international stock
components of LifeSpan Funds.
John S. Kowalik, Vice President and Portfolio Manager of Government
Securities
Portfolio; 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).
Stephen F. Libera, Vice President and Portfolio Manager of Total Return
Portfolio, and the Short-Term Bonds and Government/Corporate Bonds components of
the LifeSpan Portfolios; 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).
Nikolaos D. Monoyios, Vice President and Portfolio Manager of Growth
Portfolio, Age: 50
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since April 1998); a Certified Financial Analyst;
formerly a Vice President and portfolio manager for Guardian Investor Services,
the investment management subsidiary of The Guardian Life Insurance Company
(since 1979).
David P. Negri, Vice President and Portfolio Manager of Government
Securities Portfolio and co-Portfolio Manager of High Yield Bond component of
LifeSpan Funds; 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.
Thomas P. Reedy, Vice President and Co-Portfolio Manager of High Yield Bond
component of LifeSpan Funds; Age: 37 Two World Trade Center, New York, New York
10048-0203 Vice President of the Manager (since June 1993); an officer of other
Oppenheimer funds. He is co-portfolio manager of High Yield Bond Component of
LifeSpan Funds.
Michael C. Strathearn, Vice President and Portfolio Manager of the Value/Growth
and Growth/Income stock components of the LifeSpan Portfolios; 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 of the Value/Growth and
Growth/Income stock components of the LifeSpan Portfolios; 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).
Andrew J. Donohue, Vice President and Secretary, Age: 49
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corporation, Shareholder Services,
Inc., Shareholder Financial Services, Inc. and (since September 1995)
Oppenheimer Partnership Holdings, Inc.; President and a director of Centennial
Asset Management Corporation (since September 1995); President, General Counsel
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: 41
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: 34
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.
Brian W. Wixted, Treasurer, Principal Financial, and Accounting Officer, Age:
40
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert G. Zack, Assistant Secretary, Age: 51
Two World Trade Center, 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 of OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since October 1997); an officer of other
Oppenheimer funds.
|X| Remuneration of Directors. The officers of the Company and one
Director of the Company (Mr. Swain) are affiliated with the Manager and receive
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, 1999. 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
1999.
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Total Compensation
Director's Name and Aggregate From all
Other Positions Compensation Denver-Based
from the Company Oppenheimer Funds
(38 Funds)1
- --------------------------------------------------------------------
- --------------------------------------------------------------------
William H. Armstrong $1,190 $14,542
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- --------------------------------------------------------------------
Robert G. Avis $5,560 $67,998
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- --------------------------------------------------------------------
William A. Baker $5,560 $67,998
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Jon. S. Fossel $5,446 $66,586
Review Committee
Member
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Sam Freedman
Review Committee $6,052 $73,998
Member
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Raymond J. Kalinowski
Review Committee $5,990 $73,248
Member
- --------------------------------------------------------------------
- --------------------------------------------------------------------
C. Howard Kast
Review Committee $6,452 $78,873
Chairman
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Robert M. Kirchner $5,663 $69,248
Review Committee
Member
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Ned M. Steel $5,560 $67,998
- --------------------------------------------------------------------
1. For the 1999 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.
|X| Major Shareholders. As of April 1, 2000, all of the outstanding shares
of each Portfolio were held by separate investment accounts of Massachusetts
Mutual Life Insurance Company, 1295 State Street, Springfield, MA 01111, for
variable annuity contracts, variable life insurance policies and other
investment products owned by its customers.
The Manager. OppenheimerFunds, Inc., the Manager, is wholly-owned by
Oppenheimer Acquisition Corporation, a holding company controlled by
Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics. The Fund, the Manager and the Distributor have a Code
of Ethics. It is designed to detect and prevent improper personal trading by
certain employees, including portfolio managers, that would compete with or take
advantage of the Fund's portfolio transactions. Covered persons include persons
with knowledge of the investments and investment intentions of the Fund and
other funds advised by the Manager. The Code of Ethics does permit personnel
subject to the Code to invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of restrictions and controls.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
|X| The Investment Advisory Agreement. The Manager provides investment
management services to each Portfolio under an investment advisory agreement
between the Manager and the respective Portfolio. The investment advisory
agreements require the Manager, at its expense, to provide each Portfolio with
adequate office space, facilities and equipment. The agreements also require the
Manager to provide and supervise the activities of all administrative and
clerical personnel necessary to provide effective corporate administration for
each Portfolio. Those responsibilities include 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 the Portfolio.
Expenses not expressly assumed by the Manager under an advisory agreement
are paid by the relevant Portfolio. The advisory agreements list examples of
expenses to be paid by a Portfolio. The major categories 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 management fees paid by a Portfolio to the Manager are
calculated at the rates listed in the Portfolio's Prospectus, which are applied
to the assets of the Portfolio as a whole.
- ----------------------------------------------------------------------
Management Fees Paid to OppenheimerFunds,
Portfolio Inc. in the Fiscal Years Ended:
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
12/31/97 12/31/98 12/31/99
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Total Return Portfolio $ 6,482,637 $6,893,133 $ 6,587,018
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Growth Portfolio $3,818,977 $4,523,009 $ 4,214,611
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Oppenheimer $732,642 $945,935 $ 1,072,824
International Growth
Fund/VA
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
LifeSpan Capital
Appreciation Portfolio $437,070 $567,142 $ 615,493
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- ----------------------------------------------------------------------
LifeSpan Balanced $504,390 $648,865 $ 736,934
Portfolio
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
LifeSpan Diversified
Income Portfolio $213,594 $287,965 $ 343,103
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Government Securities
Portfolio $120,922 $126,912 $ 119,156
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- ----------------------------------------------------------------------
Total (All Portfolios) $12,310,232 $13,992,961 $13,689,139
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The advisory agreements state 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.
The Sub-Advisors. Prior to January 1, 2000, the Manager had retained
sub-advisors to manage Oppenheimer International Growth Fund/VA and certain
components of the LifeSpan Portfolios. The Manager retained Babson-Stewart Ivory
International until October 1, 1999 as Sub-Advisor for Oppenheimer International
Growth Fund/VA and the international component of LifeSpan Capital Appreciation
Portfolio and LifeSpan Balanced Portfolio, Pilgrim Baxter & Associates, Ltd.
until December 31, 1999 as Sub-Advisor for the small cap component of LifeSpan
Capital Appreciation Portfolio and LifeSpan Balanced Portfolio, and Credit
Suisse Asset Management until December 31, 1999 as Sub-Advisor for the high
yield/high risk bond component for each LifeSpan Portfolio.
- ----------------------------------------------------------------------
Sub-Advisory Fees Paid by OppenheimerFunds, Inc. to the
Sub-Advisors
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Sub-Advisor Year Ended Year Ended Year Ended
12/31/97 12/31/98 12/31/99
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Babson-Stewart
Ivory $520,403 $644,927 $576,967
International,
Ltd.
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Pilgrim Baxter &
Associates, Inc. $116,744 $135,302 $161,093
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Credit Suisse
Asset Management $78,165 $103,619 $114,816
- ----------------------------------------------------------------------
Brokerage Policies of the Portfolios
Brokerage Provisions of the Investment Advisory Agreements. One of the duties of
the Manager under each advisory agreement is to arrange the investment
securities transactions for each Portfolio. Each advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to effect a
Portfolio's portfolio transactions. The Manager is authorized by the advisory
agreements to employ broker-dealers, including "affiliated" brokers, as that
term is defined in the Investment Company Act. The Manager may employ
broker-dealers that it thinks, in its best judgment based on all relevant
factors, will implement the policy of each Portfolio to obtain, at reasonable
expense, the "best execution" of a Portfolio's transactions. "Best execution"
means prompt and reliable execution at the most favorable price obtainable. The
Manager need not seek competitive commission bidding. However, it is expected to
be aware of the current rates of eligible brokers and to minimize the
commissions paid to the extent consistent with the interest and policies of a
Portfolio as established by the Board of Directors.
Under each advisory agreement, the Manager may select brokers (other than
affiliates) 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 charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to the those considerations, as a factor in the
selection of brokers for a Portfolio's portfolio transactions, the Manager may
also consider sales of shares of a Portfolio and other investment companies for
which the Manager or an affiliate serves as investment advisor.
Subject to any policy established by the Board of Directors, the Manager
is primarily responsible for the investment decisions of each Portfolio and for
placing its portfolio transactions. While the Manager generally seeks reasonably
competitive spreads or commissions, the Portfolios will not necessarily pay the
lowest spread or commission available.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the advisory agreements and the procedures and rules described
above, generally the Manager's portfolio traders allocate brokerage based upon
recommendations from the portfolio managers. In certain instances, portfolio
managers may directly place trades and allocate brokerage. In either case, the
Manager's executive officers supervise the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, a Portfolio may be required to pay fixed
brokerage commissions and would not have the benefit of negotiated commissions
available in U.S. markets. Brokerage commissions are paid primarily for
effecting transactions in listed securities or for certain fixed income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, ordinarily a Portfolio uses the same broker
for the purchase or sale of the option and any transaction in the securities to
which the option relates.
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.
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.
Other funds advised by the Manager have investment policies similar to
those of the Portfolios. Those other funds may purchase or sell the same
securities as the Portfolios at the same time as the Portfolios, which could
affect the supply and price of the securities. If two or more funds advised by
the Manager purchase the same security on the same day from the same dealer, the
transactions under those combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each account.
The investment advisory agreements permit the Manager to allocate
brokerage for research services. 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. Investment research received for the commissions of those
other accounts may be useful both to the Portfolios and one or more of the other
accounts. Investment research may be supplied by a third party at the instance
of a broker through which trades are placed.
Investment research services include information and analyses on
particular companies and industries as well as market or economic trends and
portfolio strategy, 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 in the investment decision-making process may
be paid in commission dollars.
The Board of Directors permits the Manager to use stated commissions on
secondary fixed-income trades to obtain research if the broker represents 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 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 research services provided by brokers broadens the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons, and helps the Manager obtain market
information for the valuation of securities held in a Portfolio's investment
portfolio or are being considered for purchase. The Manager provides information
to the Board about the commissions paid to brokers for furnishing these
services, together with the Manager's representation that the amount of those
commissions was reasonably related to the value or benefit of those services.
No principal transactions and, except under unusual circumstances, no
agency transactions for Government Securities Portfolio will be handled by any
affiliated securities dealer. In the unusual circumstance when that Portfolio
pays brokerage commissions, the above-described brokerage practices and policies
are followed.
- ----------------------------------------------------------------------
Total Brokerage Commissions Paid by the Portfolios1
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Fiscal Year Fiscal Year Fiscal
Portfolio Ended Ended Year Ended
12/31/97 12/31/98 12/31/992
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Growth Portfolio $1,587,706 $2,264,377 $2,617,343
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Total Return Portfolio $2,051,990 $1,992,347 $2,702,290
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Oppenheimer International $224,663 $234,709 $657,301
Growth Fund/VA
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
LifeSpan Capital Appreciation $84,779 $99,109 $111,431
Portfolio
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
LifeSpan Diversified Income $7,358 $8,738 $ 12,788
Portfolio
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
LifeSpan Balanced Portfolio $72,620 $87,735 $101,959
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Government Securities None None $ 560
Portfolio
- ----------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions on a
net trade basis.
2. In the fiscal year ended 12/31/99, the amount of transactions directed to
brokers for research services and the amount of the commissions paid to
broker-dealers for those serves were as follows:
Portfolio Amount of Transactions Amount of Commissions
Growth $1,410,573,508 $1,750,884
Total Return $1,475,406,911 $1,800,985
International
Growth Fund/VA$ 100,313,646 $ 245,213
LifeSpan Balanced $ 29,870,966 $ 36,513
LifeSpan Capital
Appreciation $ 32,502,456 $ 39,684
Diversified Income $ 6,573,362 $ 7,800
Government Securities $ 0
$ 0
Distribution and Service Plans (Service Shares Only)
Under its General Distributor's Agreements with the Portfolios,
OppenheimerFunds Distributor, Inc. will only act as the principal underwriter
of the Portfolios' Service shares.
Each Portfolio has adopted a Distribution and Service Plan (the "Plan")
for its Service shares under Rule 12b-1 of the Investment Company Act, pursuant
to which each Portfolio will make payments to the Distributor in connection with
the distribution and/or servicing of Service shares. The Distributor will pay
insurance company separate account sponsors and other entities that offer and/or
provide services to Service shares, as described in the Prospectus. Each Plan
has been approved by a vote of (i) the Board of Directors of the Company,
including a majority of the Independent Directors, cast in person at a meeting
called for the purpose of voting on that Plan, and (ii) the Manager as the
then-sole initial holder of such shares. Prior to May 1, 2000, no Service shares
have been issued and therefore no payments have been made prior to that date.
Under the Plans, no payment will be made to any insurance company separate
account sponsor or affiliate thereof under a Portfolio's Plan (each is referred
to as a "Recipient") in any quarter if the aggregate net assets of a Portfolio's
Service shares held by the Recipient for itself and its customers did not exceed
a minimum amount, if any, that may be determined from time to time by a majority
of the Company's Independent Directors. Initially, the Board of Directors has
set the fee at 0.15% of average annual net assets and set no minimum amount.
Under the Plans, the Manager and the Distributor may make payments to
affiliates and, in their sole discretion, from time to time may use their own
resources (which, as to the Manager, may include profits derived from the
advisory fee it receives from each respective Portfolio) to make payments to
Recipients for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or decrease
the amount of distribution assistance payments they make to Recipients from
their own assets.
Unless terminated as described below, each Plan continues in effect from
year to year but only as long as such continuance is specifically approved at
least annually by the Company's Board of Directors and its Independent Directors
by a vote cast in person at a meeting called for the purpose of voting on such
continuance. Any Plan may be terminated at any time by the vote of a majority of
the Independent Directors or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding Service shares. For
purposes of voting with respect to the Plans, Account owners are considered to
be shareholders of a Portfolio's shares. No Plan may be amended to increase
materially the amount of payments to be made unless such amendment is approved
by Account owners of the class affected by the amendment. All material
amendments must be approved by the Board and a majority of the Independent
Directors.
While the plans are in effect and Service shares are outstanding, the
Treasurer of the Company must provide separate written reports to the Company's
Board of Directors at least quarterly describing the amount of payments made
pursuant to each Plan. These reports are subject to the review and approval of
the Independent Directors.
Performance of the Portfolios
Explanation of Performance Terminology. The Portfolios use a variety of terms to
illustrate their performance. These terms include "standardized yield" and
"dividend yield" for the Government Securities Portfolio and "average annual
total return" and "cumulative total return" for all Portfolios. An explanation
of how yields and total returns are calculated is set forth below. The charts
below show the performance of the Portfolios as of the most recent fiscal year
end. You can obtain current performance information by calling the Transfer
Agent at 1-800-470-0861.
The illustrations of performance data in advertisements must comply with
rules of the Securities and Exchange Commission. Those rules describe the types
of performance data that may be used and how it is to be calculated. In general,
any advertisement by a Portfolio of its performance data must include the
average annual total returns for the Portfolio. Those returns must be shown for
the 1- 5 and 10-year periods (or the life of the class, if less) ending as of
the most recently ended calendar quarter prior to the publication of the
advertisement (or its submission for publication). Certain types of yields may
also be shown, provided that they are accompanied by standardized average annual
total returns.
No performance information is presented for any Portfolio's Service
shares, which were not offered prior to May 1, 2000. Because Service shares are
subject to an additional fee, the performance is expected to be lower for any
given period.
The Portfolios are not sold directly to members of the public but are
available only as the underlying investments for variable annuities, variable
life insurance policies and other investment products through separate
investment accounts of different insurance companies that may impose charges and
fees. A Portfolio's investment results, when shown alone, do not deduct those
charges and fees. If those fees and charges were included, the Portfolio's
performance results would be less.
Use of standardized performance calculations 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 a
Portfolio's performance information as a basis for comparison with other
investments:
|_| Yields and total returns measure the performance of a hypothetical
account in the Portfolio over various periods and do not show the performance of
each investor's account under their respective annuity contract, variable life
insurance policy or other product. Your account's performance will vary from the
model performance data also if you bought or sold shares during the period, or
you bought your shares at a different time and price than the shares used in the
model.
|_| An investment in a Portfolio is not insured by the FDIC or any other
government agency.
|_| The principal value of a Portfolio's shares, and its yields and/or
total returns are not guaranteed and normally will fluctuate on a daily basis.
|_| When an investor's shares are redeemed, they may be worth more or less
than their original cost.
|_| Yields and total returns for any given past period represent
historical performance information and are not, and should not be considered, a
prediction of future yields or returns.
|X| Yields. The Government Securities Portfolio uses a variety of
different yields to illustrate its current returns.
|_| Standardized Yield. The "standardized yield" (sometimes referred to
just as "yield") is shown for a stated 30-day period. It is not based on actual
distributions paid by the Portfolio in the 30-day period, but is a hypothetical
yield based upon the net investment income from the Portfolio's investments for
that period. It may therefore differ from the "dividend yield" for the same
class of shares, described below.
Standardized yield 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 funds calculate their yields:
Standardized Yield = 2[(a-b 6
--- + 1) - 1]
cd
The symbols above represent the following factors:
a =dividends and interest earned during the 30-day period.
b =expenses accrued for the period (net of any expense assumptions).
c =the average daily number of shares outstanding during the 30-day
period that were entitled to receive dividends.
d =the maximum offering price per share on the last day of the period,
adjusted for undistributed net investment income.
The standardized yield for a particular 30-day period may differ from the
yield for other periods. The SEC 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.
|_| Dividend Yield. The Government Securities Portfolio may quote a
"dividend yield" for its shares. Dividend yield is based on the dividends paid
during the actual dividend period. To calculate dividend yield, the dividends
declared during a stated period are added together, and the sum is multiplied by
12 (to annualize the yield) and divided by the maximum offering price on the
last day of the dividend period. The formula is shown below:
Dividend Yield = dividends paid x 12/maximum offering price (payment date)
------------------------------------------------------------------
Yields for the 30-Day Period Ended 12/31/99
------------------------------------------------------------------
------------------------------------------------------------------
Portfolio Standardized Yield Dividend Yield
------------------------------------------------------------------
------------------------------------------------------------------
Government Securities 5.98% 5.75%
Portfolio
------------------------------------------------------------------
|X| Total Return Information. There are different types of "total returns"
to measure a Portfolio's performance. Total return is the change in value of a
hypothetical investment in the Portfolio over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. The cumulative
total return measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate of return for
each year in a period that would produce the cumulative total return over the
entire period. However, average annual total returns do not show actual
year-by-year performance. A Portfolio uses standardized calculations for its
total returns as prescribed by the SEC.
The methodology is discussed below.
1/n
ERV
--- - 1 = Average Annual Total Return
P
|_| Average Annual Total Return. The "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" in the formula) to achieve an Ending Redeemable Value ("ERV" in the
formula) of that investment, according to the following formula:
|_| Cumulative Total Return. 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
- ---------------------------------------------------------------------
Total Returns for the Periods Ended 12/31/99
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Cumulative
Total
Returns
(10 years
or Life
Portfolio of Class) Average Annual Total Returns
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
5-Year 10-Year
(or (or
1-Year life-of-clalife-of-class)
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Growth Portfolio1 271.48% - 3.76% 16.70% 14.02%
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Total Return 189.65% - 1.54% 12.24% 11.22%
Portfolio2
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Oppenheimer
International Growth 186.64% 50.37% 19.38% 14.79%
Fund/VA3
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Government Securities 57.74% - 1.73% 6.99% 6.15%
Portfolio3
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
LifeSpan Capital
Appreciation 81.43% 20.34% 14.74% N/A
Portfolio4
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
LifeSpan Balanced 66.35% 16.11% 12.46% N/A
Portfolio4
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
LifeSpan Diversified 32.22% - 0.85% 6.66% N/A
Income Portfolio4
- ---------------------------------------------------------------------
1. Inception: 1/21/82.
2. Inception: 9/30/82.
3. Inception: 5/13/92.
4. Inception: 9/1/95. Sub-advisors managed certain components of the
LifeSpan Portfolios until January 1, 2000.
5. Babson-Stewart Ivory International was sub-advisor for the Fund and
principally responsible for the day-to-day investment of the Fund's assets
until October 1, 1999.
Other Performance Comparisons. Each Portfolio compares its performance annually
to that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. A Portfolio may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time a Portfolio may publish the ranking
of the performance of its shares by Lipper, Inc. Lipper is 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 in categories based on investment styles. The
Lipper performance rankings are based on total returns that include the
reinvestment of capital gain distributions and income dividends but do not take
sales charges or taxes into consideration. Lipper also publishes "peer-group"
indices of the performance of all mutual funds in a category that it monitors
and averages of the performance of the funds in particular categories.
|X| Morningstar Ratings and Rankings. From time to time a Portfolio may
publish the star ranking and/or star rating of the performance of its shares by
Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
rates and ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds and municipal bond funds.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures a fund's (or class's) one-,
three-, five- and ten-year average annual total returns (depending on the
inception of the fund or class) in excess of 90-day U.S. Treasury bill returns
after considering the fund's sales charges and expenses. Risk is measured by a
fund's (or class's) performance below 90-day U.S. Treasury bill returns. Risk
and investment return are combined to produce star ratings reflecting
performance relative to the other funds in the fund's category. Five stars is
the "highest" ranking (top 10% of funds in a category), 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%). The current star
rating is the fund's (or class's) overall rating, which is the 3-year rating or
its combined 3- and 5-year rating (weighted 60%/40% respectively), or its
combined 3-, 5-, and 10-year rating (weighted 40%, 30% and 30%, respectively),
depending on the inception date of the fund (or class). Rankings are subject to
change monthly.
A Portfolio may also compare its total return ranking to that of other
funds in its Morningstar category, in addition to its star ratings. Those total
return rankings are percentages from one percent to one hundred percent and are
not risk-adjusted. For example, if a fund is in the 94th percentile, that means
that 94% of the funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time a Portfolio may include in its advertisements
and sales literature performance information about the Portfolio cited in
newspapers and other periodicals such as The New York Times, The Wall Street
Journal, Barron's, or similar publications. That information may include
performance quotations from other sources, including Lipper and Morningstar. The
performance of the Portfolio's shares may be compared in publications to the
performance of various market indices or other investments, and averages,
performance rankings or other benchmarks prepared by recognized mutual fund
statistical services.
Investors may also wish to compare the returns on a Portfolio's shares to
the return on fixed-income investments available from banks and thrift
institutions. Those include certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, a
Portfolio's returns and share price are not guaranteed or insured by the FDIC or
any other agency and will fluctuate daily, while bank depository obligations may
be insured by the FDIC and may provide fixed rates of return. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S. government.
From time to time, a portfolio may publish rankings or ratings of the
Manager or Transfer Agent, and of the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder and
investor services by third parties may include comparisons of their services to
those provided by other mutual fund families selected by the rating or ranking
services. They may be based upon the opinions of the rating or ranking service
itself, using its research or judgment, or based upon surveys of investors,
brokers, shareholders or others.
I N V E S T I N G I N T H E P O R T F O L I O S
How To Buy and Sell Shares
Insurance companies that hold shares of the Portfolios in their separate
accounts for the benefit of their customers' variable annuities, variable life
insurance policies and other investment products are the record holders and the
owners of shares of beneficial interest in the Portfolios. The right of those
customers of the insurance companies to give directions to the insurance company
for the purchase or redemption of shares is determined under the contract
between the customer and the insurance company. Those customers are not
"shareholders" of the Portfolios. The rights of those insurance companies as
record holders and owners of shares of a Portfolio are different from the rights
of their customers. The term "shareholder" in this Statement of Additional
Information refers only to the insurance companies whose separate accounts hold
shares of the Portfolios, and not to contract holders.
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. The Company reserves the right to limit the
types of separate accounts that may invest in any Portfolio.
Determination of Net Asset Values 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. The calculation is done 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.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M., on a regular business day. The Portfolios' net
asset values will not be calculated on those days and the values of some of a
Portfolio's investment securities may change significantly on those days, when
shareholders cannot purchase or redeem shares. Additionally, trading on European
and Asian stock exchanges and over-the-counter markets normally is completed
before the close of The New York Stock Exchange.
|X| Securities Valuation. The Board of Directors has established
procedures for the valuation of each Portfolio's securities. In general
those procedures are as follows:
|_| Equity securities traded on a U.S. securities exchange or on
Nasdaq are valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which they
are traded or on Nasdaq, as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they
are valued 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, at the closing "bid" price
on the valuation date.
|_| Equity securities traded on a foreign securities exchange
generally are valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by the
Board of Directors, or
(2) at the last sale price obtained by the Manager from the report of
the principal exchange on which the security is traded at its last
trading session on or immediately before the valuation date, or
(3) at the mean between the "bid" and "asked" prices obtained from the
principal exchange on which the security is traded or, on the basis
of reasonable inquiry, from two market makers in the security.
|_| Long-term debt securities having a remaining maturity in excess of
60 days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Board of Directors or
obtained by the Manager from two active market makers in the security on the
basis of reasonable inquiry.
|_| The following securities are valued at the mean between the "bid"
and "asked" prices determined by a pricing service approved by the Board of
Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry: (1) debt instruments that have a
maturity of more than 397 days when issued, (2) debt instruments that had a
maturity of 397 days or less when issued and
have a remaining maturity of more than 60 days, and (3) non-money market
debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or
less.
|_| The following securities are valued at cost, adjusted for
amortization of premiums and accretion of discounts:
(1) money market debt securities held by a non-money market fund that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining
maturity of 397 days or less. |_| 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, a 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 "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Directors. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield, maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale 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, they shall be valued at the last sale
price on the preceding trading day if it is within the spread of the closing
"bid" and "asked" prices on the principal exchange or on Nasdaq on the valuation
date. If not, the 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 by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" price is available.
When a Portfolio writes an option, an amount equal to the premium received
is included in the Portfolio's Statement of Assets and Liabilities as an asset.
An equivalent credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the option.
In determining the Portfolio's gain on investments, if a call or put written by
the Portfolio is exercised, the proceeds are increased by the premium received.
If a call or put written by the Portfolio expires, the Portfolio has a gain in
the amount of the premium. If the Portfolio enters into a closing purchase
transaction, it will have a gain or loss, depending on whether the premium
received was more or less than the cost of the closing transaction. If the
Portfolio exercises a put it holds, the amount the Portfolio receives on its
sale of the underlying investment is reduced by the amount of premium paid by
the Portfolio.
Dividends, Capital Gains and Taxes
Dividends and Distributions. The Portfolios have no fixed dividend and there can
be no assurance as to the payment of any dividends or the realization of any
capital gains. The dividends and distributions paid by a Portfolio will vary
from time to time depending on market conditions, the composition of the
Portfolio's investment portfolio, and expenses borne by the Portfolio.
Tax Status of the Portfolios' Dividends and Distributions. The Company intends
that each Portfolio shall qualify and be treated as a "regulated investment
company" under Subchapter M of the Internal Revenue 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
respective Prospectuses. 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 invested so that all requirements of
Subchapter M are satisfied, but there can be no assurance that it will be
successful in doing so.
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 (this is referred to as the "90% income test").
The Portfolio must also 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., they 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.
As noted in the Prospectuses, each Portfolio must, and intends to, comply
with the diversification requirements imposed by Section 817(h) of the Code and
the regulations under that section. Those 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. Additionally, because Section 817(h) and those
regulations treat the assets of a Portfolio as assets of the related separate
account, there are restrictions on the amount of its assets a Portfolio may
invest 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 after a calendar quarter, 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.
Additional Information About the Portfolios
The Transfer Agent. OppenheimerFunds Services, a division of the Manager, is
each Portfolio's transfer agent. It is responsible for maintaining each
Portfolio's shareholder registry and shareholder accounting records, and for
paying dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It provides these services "at cost." It
also acts as transfer agent for other funds managed by the Manager.
- -------------------------------------------------------------------------------
Investors under variable annuity contacts, variable life insurance policies
and other investment products offered by the insurance companies that offer
shares of the Portfolios as investments for those products should direct
questions about their accounts to the servicing agent for their insurance
company, because OppenheimerFunds Services does not maintain the records for
those annuities, policies or other products.
- -------------------------------------------------------------------------------
The Custodian Bank. The Bank of New York is the custodian bank for the
Portfolios' assets. The custodian bank'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.
It will be the practice of the Portfolios to deal with the custodian bank
in a manner uninfluenced by any banking relationship the custodian bank may have
with the Manager and its affiliates. The Portfolios' cash balances with the
custodian bank in excess of $100,000 are not protected by Federal deposit
insurance. Those uninsured balances at times may be substantial.
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 the Manager of certain
other funds advised by the Manager and its affiliates.
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Directors and Shareholders of Growth Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Growth Portfolio (which is a series of Panorama
Series Fund, Inc.) as of December 31, 1999, the related statement of operations
for the year then ended, the statements of changes in net assets for the years
ended December 31, 1999 and 1998, and the financial highlights for the period
January 1, 1996 to December 31, 1999. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for the period January 1, 1995 to
December 31, 1995, were audited by other auditors whose report dated February
15, 1996, expressed an unqualified opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Growth
Portfolio as of December 31, 1999, the results of its operations, the changes in
its net assets, and the financial highlights for the respective stated periods,
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> Market Value
Shares Note 1
<S> <C> <C>
========================================================================================================================
Common Stocks--94.2%
- ------------------------------------------------------------------------------------------------------------------------
Basic Materials--4.0%
- ------------------------------------------------------------------------------------------------------------------------
Chemicals--1.8%
- ------------------------------------------------------------------------------------------------------------------------
Dow Chemical Co. 61,500 $ 8,217,937
- ------------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co. 100,700 4,097,231
-----------
12,315,168
- ------------------------------------------------------------------------------------------------------------------------
Paper--2.2%
Georgia Pacific Group 79,200 4,019,400
- ------------------------------------------------------------------------------------------------------------------------
Georgia Pacific Group/Timber Group 58,500 1,440,562
- ------------------------------------------------------------------------------------------------------------------------
Louisiana-Pacific Corp. 168,100 2,395,425
- ------------------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co. 99,500 7,145,344
-----------
15,000,731
- ------------------------------------------------------------------------------------------------------------------------
Capital Goods--14.5%
- ------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--1.8%
General Dynamics Corp. 174,100 9,183,775
- ------------------------------------------------------------------------------------------------------------------------
Northrop Grumman Corp. 49,400 2,670,687
-----------
11,854,462
- ------------------------------------------------------------------------------------------------------------------------
Electrical Equipment--2.2%
Integrated Device Technology, Inc.(1) 61,600 1,786,400
- ------------------------------------------------------------------------------------------------------------------------
Rockwell International Corp. 56,600 2,709,725
- ------------------------------------------------------------------------------------------------------------------------
SPX Corp.(1) 122,000 9,859,125
-----------
14,355,250
- ------------------------------------------------------------------------------------------------------------------------
Industrial Services--0.4%
Valassis Communications, Inc.(1) 70,800 2,991,300
- ------------------------------------------------------------------------------------------------------------------------
Manufacturing--10.1%
Avery-Dennison Corp. 37,700 2,747,387
- ------------------------------------------------------------------------------------------------------------------------
Ball Corp. 52,700 2,075,062
- ------------------------------------------------------------------------------------------------------------------------
Briggs & Stratton Corp. 78,700 4,220,287
- ------------------------------------------------------------------------------------------------------------------------
Cooper Industries, Inc. 94,000 3,801,125
- ------------------------------------------------------------------------------------------------------------------------
Crane Co. 92,100 1,830,487
- ------------------------------------------------------------------------------------------------------------------------
Dover Corp. 150,000 6,806,250
- ------------------------------------------------------------------------------------------------------------------------
Eaton Corp. 29,200 2,120,650
- ------------------------------------------------------------------------------------------------------------------------
Honeywell International, Inc. 198,800 11,468,275
- ------------------------------------------------------------------------------------------------------------------------
Miller (Herman), Inc. 84,500 1,943,500
- ------------------------------------------------------------------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 113,100 11,069,662
- ------------------------------------------------------------------------------------------------------------------------
Parker-Hannifin Corp. 75,600 3,879,225
- ------------------------------------------------------------------------------------------------------------------------
Textron, Inc. 52,300 4,010,756
- ------------------------------------------------------------------------------------------------------------------------
United Technologies Corp. 178,500 11,602,500
-----------
67,575,166
</TABLE>
4 Growth Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Communication Services--6.3%
- ------------------------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--4.7%
ADC Telecommunications, Inc.(1) 54,700 $ 3,969,169
- ------------------------------------------------------------------------------------------------------------------------
ALLTELL Corp. 196,500 16,248,094
- ------------------------------------------------------------------------------------------------------------------------
AT&T Corp. 177,300 8,997,975
- ------------------------------------------------------------------------------------------------------------------------
L-3 Communications Holdings, Inc.(1) 58,600 2,439,225
-----------
31,654,463
- ------------------------------------------------------------------------------------------------------------------------
Telephone Utilities--1.6%
BellSouth Corp. 223,200 10,448,550
- ------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--13.7%
- ------------------------------------------------------------------------------------------------------------------------
Autos & Housing--3.3%
Cooper Tire & Rubber Co. 111,300 1,732,106
- ------------------------------------------------------------------------------------------------------------------------
Ethan Allen Interiors, Inc. 77,300 2,478,431
- ------------------------------------------------------------------------------------------------------------------------
Fortune Brands, Inc. 59,400 1,963,912
- ------------------------------------------------------------------------------------------------------------------------
Genuine Parts Co. 180,400 4,476,175
- ------------------------------------------------------------------------------------------------------------------------
Masco Corp. 130,500 3,311,437
- ------------------------------------------------------------------------------------------------------------------------
Stanley Works (The) 83,600 2,518,450
- ------------------------------------------------------------------------------------------------------------------------
USG Corp. 63,500 2,992,437
- ------------------------------------------------------------------------------------------------------------------------
Vulcan Materials Co. 67,900 2,711,756
-----------
22,184,704
- ------------------------------------------------------------------------------------------------------------------------
Consumer Services--0.8%
Harte-Hanks, Inc. 73,600 1,600,800
- ------------------------------------------------------------------------------------------------------------------------
Young & Rubicam, Inc. 51,200 3,622,400
-----------
5,223,200
- ------------------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--0.9%
MGM Grand, Inc. 53,800 2,706,812
- ------------------------------------------------------------------------------------------------------------------------
Mirage Resorts, Inc.(1) 202,200 3,096,188
-----------
5,803,000
- ------------------------------------------------------------------------------------------------------------------------
Media--2.7%
Central Newspapers, Inc., Cl. A 46,400 1,827,000
- ------------------------------------------------------------------------------------------------------------------------
Deluxe Corp. 68,800 1,887,700
- ------------------------------------------------------------------------------------------------------------------------
Gannett Co., Inc. 125,700 10,252,406
- ------------------------------------------------------------------------------------------------------------------------
Knight-Ridder, Inc. 73,400 4,367,300
-----------
18,334,406
- ------------------------------------------------------------------------------------------------------------------------
Retail: General--1.8%
Family Dollar Stores, Inc. 91,600 1,494,225
- ------------------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc.(1) 124,800 6,310,200
- ------------------------------------------------------------------------------------------------------------------------
May Department Stores Co. 51,500 1,660,875
- ------------------------------------------------------------------------------------------------------------------------
Nordstrom, Inc. 87,600 2,294,025
-----------
11,759,325
</TABLE>
Growth Portfolio 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Retail: Specialty--2.6%
- ------------------------------------------------------------------------------------------------------------------------
Circuit City Stores-Circuit City Group 107,800 $ 4,857,738
- ------------------------------------------------------------------------------------------------------------------------
Gap, Inc. 149,600 6,881,600
- ------------------------------------------------------------------------------------------------------------------------
Ross Stores, Inc. 124,200 2,227,838
- ------------------------------------------------------------------------------------------------------------------------
Sherwin-Williams Co. 91,600 1,923,600
- ------------------------------------------------------------------------------------------------------------------------
TJX Cos., Inc. 86,200 1,761,713
-----------
17,652,489
- ------------------------------------------------------------------------------------------------------------------------
Textile/Apparel & Home Furnishings--1.6%
Jones Apparel Group, Inc.(1) 158,400 4,296,600
- ------------------------------------------------------------------------------------------------------------------------
Liz Claiborne, Inc. 53,900 2,027,988
- ------------------------------------------------------------------------------------------------------------------------
Shaw Industries, Inc. 184,200 2,843,588
- ------------------------------------------------------------------------------------------------------------------------
WestPoint Stevens, Inc. 79,200 1,386,000
-----------
10,554,176
- ------------------------------------------------------------------------------------------------------------------------
Consumer Staples--7.4%
- ------------------------------------------------------------------------------------------------------------------------
Beverages--2.0%
Adolph Coors Co., Cl. B 64,300 3,375,750
- ------------------------------------------------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 139,900 9,915,413
-----------
13,291,163
- ------------------------------------------------------------------------------------------------------------------------
Entertainment--0.5%
Brinker International, Inc.(1) 83,200 1,996,800
- ------------------------------------------------------------------------------------------------------------------------
Darden Restaurants, Inc. 79,800 1,446,375
-----------
3,443,175
- ------------------------------------------------------------------------------------------------------------------------
Food--1.9%
Flowers Industries, Inc. 80,800 1,287,750
- ------------------------------------------------------------------------------------------------------------------------
Hormel Foods Corp. 38,600 1,568,125
- ------------------------------------------------------------------------------------------------------------------------
IBP, Inc. 212,900 3,832,200
- ------------------------------------------------------------------------------------------------------------------------
International Home Foods, Inc.(1) 110,400 1,918,200
- ------------------------------------------------------------------------------------------------------------------------
Keebler Foods Co.(1) 68,200 1,918,125
- ------------------------------------------------------------------------------------------------------------------------
Sara Lee Corp. 103,600 2,285,675
-----------
12,810,075
- ------------------------------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.9%
Albertson's, Inc. 96,200 3,102,450
- ------------------------------------------------------------------------------------------------------------------------
SUPERVALU, Inc. 137,200 2,744,000
-----------
5,846,450
</TABLE>
6 Growth Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Household Goods--1.7%
Kimberly-Clark Corp. 169,100 $11,033,775
- ------------------------------------------------------------------------------------------------------------------------
Tobacco--0.4%
UST, Inc. 115,500 2,909,156
- ------------------------------------------------------------------------------------------------------------------------
Energy--9.0%
- ------------------------------------------------------------------------------------------------------------------------
Energy Services--1.1%
Anadarko Petroleum Corp. 53,600 1,829,100
- ------------------------------------------------------------------------------------------------------------------------
ENSCO International, Inc. 129,000 2,950,875
- ------------------------------------------------------------------------------------------------------------------------
Global Marine, Inc.(1) 161,000 2,676,625
-----------
7,456,600
- ------------------------------------------------------------------------------------------------------------------------
Oil: Domestic--4.6%
Apache Corp. 67,100 2,478,506
- ------------------------------------------------------------------------------------------------------------------------
Burlington Resources, Inc. 53,700 1,775,456
- ------------------------------------------------------------------------------------------------------------------------
Conoco, Inc., Cl. A 112,700 2,789,325
- ------------------------------------------------------------------------------------------------------------------------
Exxon Mobil Corp. 217,588 17,529,433
- ------------------------------------------------------------------------------------------------------------------------
Murphy Oil Corp. 37,600 2,157,300
- ------------------------------------------------------------------------------------------------------------------------
Texaco, Inc. 71,500 3,883,344
-----------
30,613,364
- ------------------------------------------------------------------------------------------------------------------------
Oil: International--3.3%
BP Amoco plc, ADR 160,400 9,513,725
- ------------------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares 132,800 8,026,100
- ------------------------------------------------------------------------------------------------------------------------
Total Fina SA, Sponsored ADR 62,100 4,300,425
-----------
21,840,250
- ------------------------------------------------------------------------------------------------------------------------
Financial--18.4%
- ------------------------------------------------------------------------------------------------------------------------
Banks--1.9%
Chase Manhattan Corp. 41,000 3,185,188
- ------------------------------------------------------------------------------------------------------------------------
Roslyn Bancorp, Inc. 48,100 889,850
- ------------------------------------------------------------------------------------------------------------------------
UnionBanCal Corp. 61,400 2,421,463
- ------------------------------------------------------------------------------------------------------------------------
Wachovia Corp. 50,700 3,447,600
- ------------------------------------------------------------------------------------------------------------------------
Wells Fargo Co. 67,200 2,717,400
-----------
12,661,501
- ------------------------------------------------------------------------------------------------------------------------
Diversified Financial--3.6%
AMBAC Financial Group, Inc. 74,400 3,882,750
- -------------------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 141,300 7,850,981
- ------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 28,300 2,665,506
- ------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 29,800 4,253,950
- ------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc., Cl. A 103,500 2,891,531
- ------------------------------------------------------------------------------------------------------------------------
PMI Group, Inc. (The) 53,900 2,630,994
-----------
24,175,712
</TABLE>
Growth Portfolio 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Insurance--12.7%
ACE Ltd. 167,700 $ 2,798,494
- ------------------------------------------------------------------------------------------------------------------------
Allstate Corp. 136,100 3,266,400
- ------------------------------------------------------------------------------------------------------------------------
American General Corp. 53,600 4,066,900
- ------------------------------------------------------------------------------------------------------------------------
American International Group, Inc. 65,175 7,047,047
- ------------------------------------------------------------------------------------------------------------------------
AXA Financial, Inc. 227,700 7,713,338
- ------------------------------------------------------------------------------------------------------------------------
Chubb Corp. 82,800 4,662,675
- ------------------------------------------------------------------------------------------------------------------------
Cigna Corp. 108,900 8,773,256
- ------------------------------------------------------------------------------------------------------------------------
Conseco, Inc. 123,200 2,202,200
- ------------------------------------------------------------------------------------------------------------------------
Hartford Life, Inc., Cl. A 66,600 2,930,400
- ------------------------------------------------------------------------------------------------------------------------
Jefferson-Pilot Corp. 144,500 9,862,125
- ------------------------------------------------------------------------------------------------------------------------
Lincoln National Corp. 175,100 7,004,000
- ------------------------------------------------------------------------------------------------------------------------
Manulife Financial Corp.(1) 136,400 1,730,575
- ------------------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc. 38,000 3,636,125
- ------------------------------------------------------------------------------------------------------------------------
Radian Group, Inc. 53,900 2,573,725
- ------------------------------------------------------------------------------------------------------------------------
St. Paul Cos., Inc. 106,000 3,570,875
- ------------------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl. A 182,600 6,254,050
- ------------------------------------------------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 134,900 6,997,938
-----------
85,090,123
- ------------------------------------------------------------------------------------------------------------------------
Savings & Loans--0.2%
Greenpoint Financial Corp. 53,000 1,262,063
- ------------------------------------------------------------------------------------------------------------------------
Healthcare--1.3%
- ------------------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.3%
United Healthcare Corp. 78,300 4,159,688
- ------------------------------------------------------------------------------------------------------------------------
WellPoint Health Networks, Inc.(1) 67,600 4,457,375
-----------
8,617,063
- ------------------------------------------------------------------------------------------------------------------------
Technology--12.4%
- ------------------------------------------------------------------------------------------------------------------------
Computer Hardware--5.7%
Apple Computer, Inc.(1) 76,400 7,854,875
- ------------------------------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 45,900 5,229,731
- ------------------------------------------------------------------------------------------------------------------------
International Business Machines Corp. 120,100 12,970,800
Lexmark International Group, Inc., Cl. A(1) 130,600 11,819,300
-----------
37,874,706
- ------------------------------------------------------------------------------------------------------------------------
Computer Services--1.2%
First Data Corp. 164,800 8,126,700
- ------------------------------------------------------------------------------------------------------------------------
Computer Software--0.5%
Synopsys, Inc.(1) 44,900 2,997,075
- ------------------------------------------------------------------------------------------------------------------------
Communications Equipment--0.5%
BISYS Group, Inc. (The)(1) 50,500 3,295,125
- ------------------------------------------------------------------------------------------------------------------------
Electronics--4.5%
Cypress Semiconductor Corp.(1) 187,900 6,083,263
- ------------------------------------------------------------------------------------------------------------------------
Dallas Semiconductor Corp. 65,900 4,246,431
- ------------------------------------------------------------------------------------------------------------------------
Intel Corp. 51,100 4,206,169
- ------------------------------------------------------------------------------------------------------------------------
National Semiconductor Corp.(1) 148,900 6,374,781
- ------------------------------------------------------------------------------------------------------------------------
Teradyne, Inc.(1) 136,400 9,002,400
-----------
29,913,044
</TABLE>
8 Growth Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Transportation--1.1%
- ------------------------------------------------------------------------------------------------------------------------
Air Transportation--0.5%
Delta Air Lines, Inc. 68,200 $ 3,397,213
- ------------------------------------------------------------------------------------------------------------------------
Railroads & Truckers--0.6%
Union Pacific Corp. 98,800 4,310,150
- ------------------------------------------------------------------------------------------------------------------------
Utilities--6.1%
- ------------------------------------------------------------------------------------------------------------------------
Electric Utilities--5.2%
Carolina Power & Light Co. 59,700 1,817,119
- ------------------------------------------------------------------------------------------------------------------------
Conectiv, Inc. 110,900 1,864,506
- ------------------------------------------------------------------------------------------------------------------------
Duke Energy Corp. 133,600 6,696,700
- ------------------------------------------------------------------------------------------------------------------------
FPL Group, Inc. 80,400 3,442,125
- ------------------------------------------------------------------------------------------------------------------------
Montana Power Co. 185,800 6,700,413
Potomac Electric Power Co. 88,600 2,032,263
- ------------------------------------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 100,500 3,498,656
- ------------------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc. 232,800 5,325,300
- ------------------------------------------------------------------------------------------------------------------------
Texas Utilities Co. 88,500 3,147,281
------------
34,524,363
- ------------------------------------------------------------------------------------------------------------------------
Gas Utilities--0.9%
El Paso Energy Corp. 115,800 4,494,488
- ------------------------------------------------------------------------------------------------------------------------
NICOR, Inc. 46,800 1,521,000
------------
6,015,488
------------
Total Common Stocks (Cost $604,761,408) 629,210,724
Principal
Amount
========================================================================================================================
Short-Term Notes--2.2%(2)
- ------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.75%, 1/11/00 $ 5,000,000 4,992,014
- ------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.64%, 1/6/00 5,000,000 4,996,083
- ------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.64%, 1/7/00 5,000,000 4,995,300
------------
Total Short-Term Notes (Cost $14,983,397) 14,983,397
========================================================================================================================
Repurchase Agreements--3.3%
- ------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated 12/31/99,
to be repurchased at $21,804,996 on 1/3/00, collateralized by U.S. Treasury Bonds,
5.25%-12%, 2/15/01-11/15/28, with a value of $8,556,275 and U.S. Treasury Nts.,
5%-7.50%, 12/31/00-2/15/07, with a value of $13,692,377 (Cost $21,800,000) 21,800,000 21,800,000
- ------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $641,544,805) 99.7% 665,994,121
- ------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.3 2,144,704
----------- ------------
Net Assets 100.0% $668,138,825
=========== ============
</TABLE>
1. Non-income producing security.
2. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
Growth Portfolio 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
============================================================================================================
Assets
Investments, at value (cost $641,544,805)--see accompanying statement $665,994,121
- ------------------------------------------------------------------------------------------------------------
Cash 1,060,023
- ------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 3,501,797
Interest and dividends 763,235
Shares of capital stock sold 91,498
Other 6,996
-------------
Total assets 671,417,670
============================================================================================================
Liabilities Payables and other liabilities:
Shares of capital stock redeemed 2,251,183
Investments purchased 963,109
Transfer and shareholder servicing agent fees 186
Directors' compensation 158
Other 64,209
------------
Total liabilities 3,278,845
============================================================================================================
Net Assets $668,138,825
============
============================================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 223,515
- ------------------------------------------------------------------------------------------------------------
Additional paid-in capital 515,604,860
- ------------------------------------------------------------------------------------------------------------
Undistributed net investment income 10,353,236
- ------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 117,507,898
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 24,449,316
------------
Net assets--applicable to 223,515,253 shares of capital stock outstanding $668,138,825
============
============================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $2.99
</TABLE>
See accompanying Notes to Financial Statements.
10 Growth Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
============================================================================================================
Investment Income
Dividends (net of foreign withholding taxes of $14,452) $ 12,206,173
- ------------------------------------------------------------------------------------------------------------
Interest 2,449,699
-------------
Total income 14,655,872
============================================================================================================
Expenses
Management fees 4,214,611
- ------------------------------------------------------------------------------------------------------------
Accounting service fees 15,000
- ------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 12,291
- ------------------------------------------------------------------------------------------------------------
Directors' compensation 3,916
- ------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,107
- ------------------------------------------------------------------------------------------------------------
Other 65,248
-------------
Total expenses 4,313,173
Less expenses paid indirectly (11,885)
-------------
Net expenses 4,301,288
============================================================================================================
Net Investment Income 10,354,584
============================================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain on investments 117,643,744
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (159,810,957)
-------------
Net realized and unrealized loss (42,167,213)
============================================================================================================
Net Decrease in Net Assets Resulting from Operations $ (31,812,629)
=============
</TABLE>
See accompanying Notes to Financial Statements.
Growth Portfolio 11
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
========================================================================================================================
Operations
Net investment income $ 10,354,584 $ 10,211,556
- ------------------------------------------------------------------------------------------------------------------------
Net realized gain 117,643,744 33,310,716
- ------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (159,810,957) 24,320,298
------------- -------------
Net increase (decrease) in net assets resulting from operations (31,812,629) 67,842,570
========================================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (10,168,122) (9,799,624)
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (33,413,443) (107,624,371)
========================================================================================================================
Capital Stock Transactions
Net increase (decrease) in net assets resulting from capital stock transactions (175,338,440) 137,081,544
========================================================================================================================
Net Assets
Total increase (decrease) (250,732,634) 87,500,119
- ------------------------------------------------------------------------------------------------------------------------
Beginning of period 918,871,459 831,371,340
------------- -------------
End of period (including undistributed net investment income
of $10,353,236 and $10,166,774, respectively) $ 668,138,825 $ 918,871,459
============= =============
</TABLE>
See accompanying Notes to Financial Statements.
12 Growth Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995
<S> <C> <C> <C> <C> <C>
================================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $3.27 $3.45 $2.98 $2.53 $1.97
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .05 .04 .04 .04 .04
Net realized and unrealized gain (loss) (.17) .26 .69 .43 .71
- --------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (.12) .30 .73 .47 .75
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.04) (.04) (.03) (.01) (.04)
Distributions from net realized gain (.12) (.44) (.23) (.01) (.15)
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.16) (.48) (.26) (.02) (.19)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $2.99 $3.27 $3.45 $2.98 $2.53
===== ===== ===== ===== =====
================================================================================================================================
Total Return, at Net Asset Value(2) (3.76)% 8.43% 26.37% 18.87% 38.06%
================================================================================================================================
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $668,139 $918,871 $831,371 $586,222 $405,935
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $808,715 $877,874 $721,555 $494,281 $303,193(3)
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment income 1.28% 1.16% 1.38% 1.63% 2.01%
Expenses 0.53% 0.53%(5) 0.54%(5) 0.58%(5) 0.66%(5)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 132% 98% 92% 83% 69%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period.
Total returns are not annualized for periods less than one full year. Total
return information does not reflect expenses that apply at the separate account
level or to related insurance products. Inclusion of these charges would reduce
the total return figures for all periods shown.
3. This information is not covered by the auditors' opinion.
4. Annualized for periods less than one full year.
5. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $1,004,973,144 and $1,207,551,336, respectively.
See accompanying Notes to Financial Statements.
Growth Portfolio 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Growth Portfolio (the Fund) is a series of Panorama Series Fund, Inc. (the
Company) which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The Fund's
investment objective is to seek long-term growth of capital by investing
primarily in common stocks with low price-earnings ratios and
better-than-anticipated earnings. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). Shares of the Fund are sold only to
separate accounts of life insurance companies, a majority of such shares are
held by separate accounts of Massachusetts Mutual Life Insurance Co., an
affiliate of the investment advisor. The following is a summary of significant
accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers to shareholders.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Capital Stock
The Fund has authorized 950 million shares of $0.001 par value capital stock.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
----------------------------------- ---------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Sold 16,664,490 $ 52,051,244 47,037,578 $ 152,546,029
Dividends and/or distributions reinvested 14,289,038 43,581,565 35,262,461 117,423,995
Redeemed (88,197,706) (270,971,249) (42,207,549) (132,888,480)
----------- ------------- ----------- -------------
Net increase (decrease) (57,244,178) $(175,338,440) 40,092,490 $ 137,081,544
=========== ============= =========== =============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$24,449,316 was composed of gross appreciation of $70,528,029, and gross
depreciation of $46,078,713.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.625%
of the first $300 million of average daily net assets of the Fund, 0.50% of the
next $100 million and 0.45% of average daily net assets over $400 million. The
Fund's management fee for the year ended December 31, 1999 was 0.52% of average
annual net assets.
- --------------------------------------------------------------------------------
Accounting Fees. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000, plus out-of-pocket costs and expenses reasonably
incurred.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer agent for the Fund and is responsible for maintaining the
shareholder registry and shareholder accounting records for the Fund. OFS
provides these services for cost.
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Directors and Shareholders of Total Return Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Total Return Portfolio (which is a series of
Panorama Series Fund, Inc.) as of December 31, 1999, the related statement of
operations for the year then ended, the statements of changes in net assets for
the years ended December 31, 1999 and 1998 and the financial highlights for the
period January 1, 1996 to December 31, 1999. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the
period January 1, 1995 to December 31, 1995, were audited by other auditors
whose report dated February 15, 1996, expressed an unqualified opinion on this
information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Total Return
Portfolio as of December 31, 1999, the results of its operations, the changes in
its net assets, and the financial highlights for the respective stated periods,
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
============================================================================================================
Common Stocks--54.5%
- ------------------------------------------------------------------------------------------------------------
Basic Materials--2.4%
- ------------------------------------------------------------------------------------------------------------
Chemicals--1.0%
Dow Chemical Co. 51,900 $ 6,935,137
- ------------------------------------------------------------------------------------------------------------
Rohm & Haas Co. 105,300 4,284,394
-----------
11,219,531
- ------------------------------------------------------------------------------------------------------------
Paper--1.4%
Georgia Pacific Group 84,700 4,298,525
- ------------------------------------------------------------------------------------------------------------
Georgia Pacific Group/Timber Group 62,700 1,543,987
- ------------------------------------------------------------------------------------------------------------
Louisiana-Pacific Corp. 129,800 1,849,650
- ------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co. 104,200 7,482,862
-----------
15,175,024
- ------------------------------------------------------------------------------------------------------------
Capital Goods--8.3%
- ------------------------------------------------------------------------------------------------------------
Aerospace/Defense--1.0%
- ------------------------------------------------------------------------------------------------------------
General Dynamics Corp. 154,700 8,160,425
- ------------------------------------------------------------------------------------------------------------
Northrop Grumman Corp. 51,100 2,762,594
-----------
10,923,019
- ------------------------------------------------------------------------------------------------------------
Electrical Equipment--1.3%
Integrated Device Technology, Inc.(1) 57,800 1,676,200
- ------------------------------------------------------------------------------------------------------------
Rockwell International Corp. 38,500 1,843,187
- ------------------------------------------------------------------------------------------------------------
SPX Corp.(1) 123,900 10,012,669
-----------
13,532,056
- ------------------------------------------------------------------------------------------------------------
Industrial Services--0.3%
Valassis Communications, Inc.(1) 68,100 2,877,225
- ------------------------------------------------------------------------------------------------------------
Manufacturing--5.7%
Avery-Dennison Corp. 37,400 2,725,525
- ------------------------------------------------------------------------------------------------------------
Ball Corp. 57,500 2,264,062
- ------------------------------------------------------------------------------------------------------------
Briggs & Stratton Corp. 49,200 2,638,350
- ------------------------------------------------------------------------------------------------------------
Cooper Industries, Inc. 92,900 3,756,644
- ------------------------------------------------------------------------------------------------------------
Crane Co. 86,500 1,719,187
- ------------------------------------------------------------------------------------------------------------
Dover Corp. 152,300 6,910,612
- ------------------------------------------------------------------------------------------------------------
Eaton Corp. 23,700 1,721,212
- ------------------------------------------------------------------------------------------------------------
Honeywell International, Inc. 196,775 11,351,458
- ------------------------------------------------------------------------------------------------------------
Miller (Herman), Inc. 90,200 2,074,600
- ------------------------------------------------------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 120,300 11,774,362
- ------------------------------------------------------------------------------------------------------------
Parker-Hannifin Corp. 69,800 3,581,612
- ------------------------------------------------------------------------------------------------------------
Textron, Inc. 41,200 3,159,525
- ------------------------------------------------------------------------------------------------------------
United Technologies Corp. 119,500 7,767,500
-----------
61,444,649
</TABLE>
4 Total Return Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Communication Services--3.2%
- ------------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--2.5%
ADC Telecommunications, Inc.(1) 59,100 $ 4,288,444
- ------------------------------------------------------------------------------------------------------------
ALLTELL Corp. 174,500 14,428,969
- ------------------------------------------------------------------------------------------------------------
AT&T Corp. 118,250 6,001,187
- ------------------------------------------------------------------------------------------------------------
L-3 Communications Holdings, Inc.(1) 62,400 2,597,400
-----------
27,316,000
- ------------------------------------------------------------------------------------------------------------
Telephone Utilities--0.7%
BellSouth Corp. 157,000 7,349,562
- ------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--8.2%
- ------------------------------------------------------------------------------------------------------------
Autos & Housing--2.0%
Cooper Tire & Rubber Co. 90,800 1,413,075
- ------------------------------------------------------------------------------------------------------------
Ethan Allen Interiors, Inc. 86,600 2,776,612
- ------------------------------------------------------------------------------------------------------------
Fortune Brands, Inc. 54,100 1,788,681
- ------------------------------------------------------------------------------------------------------------
Genuine Parts Co. 173,000 4,292,562
- ------------------------------------------------------------------------------------------------------------
Masco Corp. 127,000 3,222,625
- ------------------------------------------------------------------------------------------------------------
Stanley Works (The) 82,700 2,491,337
- ------------------------------------------------------------------------------------------------------------
USG Corp. 57,500 2,709,687
- ------------------------------------------------------------------------------------------------------------
Vulcan Materials Co. 69,500 2,775,656
-----------
21,470,235
- ------------------------------------------------------------------------------------------------------------
Consumer Services--0.5%
Harte-Hanks, Inc. 60,200 1,309,350
- ------------------------------------------------------------------------------------------------------------
Young & Rubicam, Inc. 50,600 3,579,950
-----------
4,889,300
- ------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--0.5%
MGM Grand, Inc. 47,900 2,409,969
- ------------------------------------------------------------------------------------------------------------
Mirage Resorts, Inc.(1) 200,000 3,062,500
-----------
5,472,469
- ------------------------------------------------------------------------------------------------------------
Media--1.6%
Central Newspapers, Inc., Cl. A 50,200 1,976,625
- ------------------------------------------------------------------------------------------------------------
Deluxe Corp. 61,400 1,684,662
- ------------------------------------------------------------------------------------------------------------
Gannett Co., Inc. 122,300 9,975,094
- ------------------------------------------------------------------------------------------------------------
Knight-Ridder, Inc. 68,200 4,057,900
-----------
17,694,281
- ------------------------------------------------------------------------------------------------------------
Retail: General--1.1%
Family Dollar Stores, Inc. 90,700 1,479,544
- ------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc.(1) 128,800 6,512,450
- ------------------------------------------------------------------------------------------------------------
May Department Stores Co. 37,100 1,196,475
- ------------------------------------------------------------------------------------------------------------
Nordstrom, Inc. 86,700 2,270,456
-----------
11,458,925
</TABLE>
Total Return Portfolio 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Retail: Specialty--1.5%
Circuit City Stores-Circuit City Group 107,200 $ 4,830,700
- ------------------------------------------------------------------------------------------------------------
Gap, Inc. 145,100 6,674,600
- ------------------------------------------------------------------------------------------------------------
Ross Stores, Inc. 94,000 1,686,125
- ------------------------------------------------------------------------------------------------------------
Sherwin-Williams Co. 90,700 1,904,700
- ------------------------------------------------------------------------------------------------------------
TJX Cos., Inc. 55,200 1,128,150
-----------
16,224,275
- ------------------------------------------------------------------------------------------------------------
Textile/Apparel & Home Furnishings--1.0%
Jones Apparel Group, Inc.(1) 169,300 4,592,262
- ------------------------------------------------------------------------------------------------------------
Liz Claiborne, Inc. 53,300 2,005,412
- ------------------------------------------------------------------------------------------------------------
Shaw Industries, Inc. 135,400 2,090,237
- ------------------------------------------------------------------------------------------------------------
WestPoint Stevens, Inc. 86,000 1,505,000
-----------
10,192,911
- ------------------------------------------------------------------------------------------------------------
Consumer Staples--4.2%
- ------------------------------------------------------------------------------------------------------------
Beverages--1.1%
Adolph Coors Co., Cl. B 47,000 2,467,500
- ------------------------------------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 132,000 9,355,500
-----------
11,823,000
- ------------------------------------------------------------------------------------------------------------
Entertainment--0.3%
Brinker International, Inc.(1) 68,700 1,648,800
- ------------------------------------------------------------------------------------------------------------
Darden Restaurants, Inc. 72,400 1,312,250
-----------
2,961,050
- ------------------------------------------------------------------------------------------------------------
Food--1.2%
Flowers Industries, Inc. 87,200 1,389,750
- ------------------------------------------------------------------------------------------------------------
Hormel Foods Corp. 26,700 1,084,687
- ------------------------------------------------------------------------------------------------------------
IBP, Inc. 179,700 3,234,600
- ------------------------------------------------------------------------------------------------------------
International Home Foods, Inc.(1) 103,600 1,800,050
- ------------------------------------------------------------------------------------------------------------
Keebler Foods Co.(1) 73,800 2,075,625
- ------------------------------------------------------------------------------------------------------------
Sara Lee Corp. 130,600 2,881,362
-----------
12,466,074
- ------------------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.4%
Albertson's, Inc. 56,100 1,809,225
- ------------------------------------------------------------------------------------------------------------
SUPERVALU, Inc. 108,200 2,164,000
-----------
3,973,225
- ------------------------------------------------------------------------------------------------------------
Household Goods--0.9%
Kimberly-Clark Corp. 146,800 9,578,700
- ------------------------------------------------------------------------------------------------------------
Tobacco--0.3%
- ------------------------------------------------------------------------------------------------------------
UST, Inc. 137,200 3,455,725
- ------------------------------------------------------------------------------------------------------------
Energy--4.5%
- ------------------------------------------------------------------------------------------------------------
Energy Services--0.6%
Anadarko Petroleum Corp. 47,300 1,614,113
- ------------------------------------------------------------------------------------------------------------
ENSCO International, Inc. 115,100 2,632,913
- ------------------------------------------------------------------------------------------------------------
Global Marine, Inc.(1) 143,900 2,392,338
-----------
6,639,364
</TABLE>
6 Total Return Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Oil: Domestic--2.3%
Apache Corp. 60,000 $ 2,216,250
- ------------------------------------------------------------------------------------------------------------
Burlington Resources, Inc. 47,900 1,583,694
- ------------------------------------------------------------------------------------------------------------
Conoco, Inc., Cl. A 113,500 2,809,125
- ------------------------------------------------------------------------------------------------------------
Exxon Mobil Corp. 157,333 12,675,140
- ------------------------------------------------------------------------------------------------------------
Murphy Oil Corp. 37,400 2,145,825
- ------------------------------------------------------------------------------------------------------------
Texaco, Inc. 58,400 3,171,850
----------
24,601,884
- ------------------------------------------------------------------------------------------------------------
Oil: International--1.6%
BP Amoco plc, ADR 115,800 6,868,388
- ------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares 120,400 7,276,675
- ------------------------------------------------------------------------------------------------------------
Total Fina SA, Sponsored ADR 51,200 3,545,600
-----------
17,690,663
- ------------------------------------------------------------------------------------------------------------
Financial--11.4%
- ------------------------------------------------------------------------------------------------------------
Banks--1.2%
Chase Manhattan Corp. 40,500 3,146,344
- ------------------------------------------------------------------------------------------------------------
Roslyn Bancorp, Inc. 45,900 849,150
- ------------------------------------------------------------------------------------------------------------
UnionBanCal Corp. 59,700 2,354,419
- ------------------------------------------------------------------------------------------------------------
Wachovia Corp. 59,200 4,025,600
- ------------------------------------------------------------------------------------------------------------
Wells Fargo Co. 57,600 2,329,200
-----------
12,704,713
- ------------------------------------------------------------------------------------------------------------
Diversified Financial--2.4%
AMBAC Financial Group, Inc. 62,900 3,282,594
- ------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 148,000 8,223,250
- ------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 54,600 5,142,638
- ------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 28,400 4,054,100
- ------------------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc., Cl. A 83,000 2,318,813
- ------------------------------------------------------------------------------------------------------------
PMI Group, Inc. (The) 53,500 2,611,469
-----------
25,632,864
- ------------------------------------------------------------------------------------------------------------
Insurance--7.7%
ACE Ltd. 119,600 1,995,825
- ------------------------------------------------------------------------------------------------------------
Allstate Corp. 125,500 3,012,000
- ------------------------------------------------------------------------------------------------------------
American General Corp. 53,300 4,044,138
- ------------------------------------------------------------------------------------------------------------
American International Group, Inc. 69,325 7,495,766
- ------------------------------------------------------------------------------------------------------------
AXA Financial, Inc. 253,800 8,597,475
- ------------------------------------------------------------------------------------------------------------
Chubb Corp. 96,800 5,451,050
- ------------------------------------------------------------------------------------------------------------
Cigna Corp. 77,300 6,227,481
- ------------------------------------------------------------------------------------------------------------
Conseco, Inc. 134,900 2,411,338
- ------------------------------------------------------------------------------------------------------------
Hartford Life, Inc., Cl. A 85,300 3,753,200
</TABLE>
Total Return Portfolio 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Insurance (continued)
Jefferson-Pilot Corp. 135,900 $ 9,275,175
- ------------------------------------------------------------------------------------------------------------
Lincoln National Corp. 196,800 7,872,000
- ------------------------------------------------------------------------------------------------------------
Manulife Financial Corp.(1) 147,600 1,872,675
- ------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc. 27,500 2,631,406
- ------------------------------------------------------------------------------------------------------------
Radian Group, Inc. 53,300 2,545,075
- ------------------------------------------------------------------------------------------------------------
St. Paul Cos., Inc. 105,300 3,547,294
- ------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl. A 161,900 5,545,075
- ------------------------------------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 133,800 6,940,875
-----------
83,217,848
- ------------------------------------------------------------------------------------------------------------
Savings & Loans--0.1%
Greenpoint Financial Corp. 39,000 928,688
- ------------------------------------------------------------------------------------------------------------
Healthcare--0.8%
- ------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--0.8%
United Healthcare Corp. 76,000 4,037,500
- ------------------------------------------------------------------------------------------------------------
WellPoint Health Networks, Inc.(1) 64,400 4,246,375
-----------
8,283,875
- ------------------------------------------------------------------------------------------------------------
Technology--7.8%
- ------------------------------------------------------------------------------------------------------------
Computer Hardware--3.7%
Apple Computer, Inc.(1) 95,900 9,859,719
- ------------------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 28,300 3,224,431
- ------------------------------------------------------------------------------------------------------------
International Business Machines Corp. 133,200 14,385,600
- ------------------------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A(1) 132,500 11,991,250
-----------
39,461,000
- ------------------------------------------------------------------------------------------------------------
Computer Services--0.6%
First Data Corp. 139,100 6,859,369
- ------------------------------------------------------------------------------------------------------------
Computer Software--0.3%
Synopsys, Inc.(1) 48,000 3,204,000
- ------------------------------------------------------------------------------------------------------------
Communications Equipment--0.3%
BISYS Group, Inc. (The)(1) 52,700 3,438,675
- ------------------------------------------------------------------------------------------------------------
Electronics--2.9%
Cypress Semiconductor Corp.(1) 183,100 5,927,863
- ------------------------------------------------------------------------------------------------------------
Dallas Semiconductor Corp. 69,400 4,471,963
- ------------------------------------------------------------------------------------------------------------
Intel Corp. 55,100 4,535,419
- ------------------------------------------------------------------------------------------------------------
National Semiconductor Corp.(1) 154,900 6,631,656
- ------------------------------------------------------------------------------------------------------------
Teradyne, Inc.(1) 147,700 9,748,200
-----------
31,315,101
- ------------------------------------------------------------------------------------------------------------
Transportation--0.6%
- ------------------------------------------------------------------------------------------------------------
Air Transportation--0.2%
Delta Air Lines, Inc. 53,400 2,659,988
- ------------------------------------------------------------------------------------------------------------
Railroads & Truckers--0.4%
Union Pacific Corp. 93,300 4,070,213
</TABLE>
8 Total Return Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Utilities--3.1%
- ------------------------------------------------------------------------------------------------------------
Electric Utilities--2.7%
Carolina Power & Light Co. 53,300 $ 1,622,319
- ------------------------------------------------------------------------------------------------------------
Conectiv, Inc. 91,000 1,529,938
- ------------------------------------------------------------------------------------------------------------
Duke Energy Corp. 130,700 6,551,338
- ------------------------------------------------------------------------------------------------------------
FPL Group, Inc. 38,900 1,665,406
- ------------------------------------------------------------------------------------------------------------
Montana Power Co. 170,800 6,159,475
- ------------------------------------------------------------------------------------------------------------
Potomac Electric Power Co. 73,100 1,676,731
- ------------------------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 78,000 2,715,375
- ------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc. 188,500 4,311,938
- ------------------------------------------------------------------------------------------------------------
Texas Utilities Co. 67,200 2,389,800
------------
28,622,320
- ------------------------------------------------------------------------------------------------------------
Gas Utilities--0.4%
El Paso Energy Corp. 95,600 3,710,475
- ------------------------------------------------------------------------------------------------------------
NICOR, Inc. 29,400 955,500
------------
4,665,975
------------
Total Common Stocks (Cost $578,948,668) 585,493,776
============================================================================================================
Other Securities--0.4%
- ------------------------------------------------------------------------------------------------------------
Ingersoll-Rand International Finance Corp. I, 6.22% Preferred Redeemable
Increased Dividend Equity Securities (Cost $4,250,000) 170,000 4,207,500
Principal
Amount
============================================================================================================
Asset-Backed Securities--0.6%
IROQUOIS Trust, Asset-Backed Amortizing Nts.,
Series 1997-2, Cl. A, 6.752%, 6/25/07(2) $3,107,709 3,045,313
- ------------------------------------------------------------------------------------------------------------
Olympic Automobile Receivables Trust, Automobile Receivables-Backed Nts.,
Series 1997-A, Cl. A-5, 6.80%, 2/15/05 4,050,000 4,028,484
------------
Total Asset-Backed Securities (Cost $7,152,749) 7,073,797
============================================================================================================
Mortgage-Backed Obligations--5.0%
- ------------------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., Commercial Mtg.
Obligations, Series 1996-1, Cl. A2, 7.60%, 3/18/06 6,000,000 6,012,188
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Participation
Certificates:
6%, 3/1/09 2,284,344 2,201,491
Series 1843, Cl. VB, 7%, 4/15/03 3,578,600 3,578,600
Series 1849, Cl. VA, 6%, 12/15/10 2,871,575 2,838,351
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1583, Cl. IC, 11.336%, 1/15/20(3) 4,898,638 411,780
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%, 12/1/03 1,422,190 1,395,667
6.50%, 4/1/24-4/1/26 2,418,527 2,295,419
7%, 4/1/00 79,080 78,977
7.50%, 5/1/07-12/1/08 765,396 770,104
8%, 3/1/17-6/1/17 135,638 137,700
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates, Trust 1992-15, Cl.
KZ, 7%, 2/25/22 2,591,418 2,367,908
</TABLE>
Total Return Portfolio 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
============================================================================================================
Mortgage-Backed Obligations (continued)
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Trust 1993-190, Cl. Z, 5.85%, 7/25/08 $ 606,810 $ 601,877
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed
Security, Trust 1993-223, Cl. PM, 10.979%, 10/25/23(3) 4,736,666 612,783
- ------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Collateralized Mtg. Obligations,
Series 1998-12, Cl. A3, 6.50%, 4/25/29 2,500,000 2,218,750
- ------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Series 1994-7,
Cl. A18, 6%, 2/25/09 4,707,789 4,150,199
- ------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
6.50%, 4/15/26 3,694,440 3,491,247
7%, 11/15/08-1/15/24 1,701,941 1,670,323
7.50%, 1/15/09-6/15/24 3,578,408 3,572,200
8%, 5/15/17 610,304 621,363
- ------------------------------------------------------------------------------------------------------------
IMC Home Equity Trust, Asset-Backed Home Equity Securities,
Series 1998-3, Cl. A5, 6.36%, 8/20/22(4) 3,400,000 3,314,469
- ------------------------------------------------------------------------------------------------------------
Norwest Asset Securities Corp., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates, Series 1999-18,
Cl. A2, 6%, 7/25/29 4,000,000 3,713,125
- ------------------------------------------------------------------------------------------------------------
Norwest Asset Securities Corp., Collateralized Mtg. Obligations,
Series 1999-16, Cl. A3, 6%, 6/25/29 2,000,000 1,896,875
- ------------------------------------------------------------------------------------------------------------
Prudential Home Mortgage Securities Co., Sub. Fixed Rate Mtg.
Securities, Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Series 1993-L, Cl. 1B2, 6.641%, 12/25/23(2)(4) 1,225,677 1,214,761
- ------------------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc., Mtg. Asset-Backed Pass-Through
Certificates, Series 1999-QS12, Cl. M1, 7%, 9/25/14 785,865 2,643,960
- ------------------------------------------------------------------------------------------------------------
Residential Funding Mortgage Securities I, Inc., Mtg. Pass-Through
Certificates, Series 1998-S4, Cl. M1, 6.50%, 2/25/13 948,657 1,828,075
-----------
Total Mortgage-Backed Obligations (Cost $55,008,262) 53,638,192
============================================================================================================
U.S. Government Obligations--5.8%
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
6%, 2/15/26(5) 37,750,000 34,541,250
STRIPS, 5.68%, 11/15/18(6) 73,500,000 20,477,614
STRIPS, 7.83%, 5/15/15(6) 2,250,000 789,885
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.625%, 5/15/08 5,200,000 4,892,878
6.125%, 8/15/07 1,350,000 1,316,250
-----------
Total U.S. Government Obligations (Cost $73,732,148) 62,017,877
============================================================================================================
Foreign Government Obligations--0.2%
- ------------------------------------------------------------------------------------------------------------
United Mexican States Bonds, 6.97%, 8/12/00 (Cost $1,742,914) 1,750,000 1,754,375
============================================================================================================
Non-Convertible Corporate Bonds and Notes--20.5%
- ------------------------------------------------------------------------------------------------------------
Basic Materials--0.6%
- ------------------------------------------------------------------------------------------------------------
Chemicals--0.4%
PPG Industries, Inc., 9% Debs., 5/1/21 1,190,000 1,332,830
- ------------------------------------------------------------------------------------------------------------
Rohm & Haas Co., 7.85% Unsec. Debs., 7/15/29 3,000,000 3,023,724
-----------
4,356,554
</TABLE>
10 Total Return Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Metals--0.0%
Alcan Aluminum Ltd., 9.625% Debs., 7/15/19(2) $ 500,000 $ 505,000
- ------------------------------------------------------------------------------------------------------------
Paper--0.2%
Donohue Forest Products, Inc., 7.625% Gtd. Sr. Nts., 5/15/07 2,500,000 2,426,080
- ------------------------------------------------------------------------------------------------------------
Capital Goods--2.7%
- ------------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.2%
Raytheon Co., 6.45% Nts., 8/15/02 2,500,000 2,444,890
- ------------------------------------------------------------------------------------------------------------
Industrial Services--2.2%
Fred Meyer, Inc., 7.375% Sr. Nts., 3/1/05 6,750,000 6,668,689
- ------------------------------------------------------------------------------------------------------------
Interface, Inc., 7.30% Sr. Nts., 4/1/08 2,000,000 1,547,500
- ------------------------------------------------------------------------------------------------------------
Norse CBO Ltd., 6.515% Collateralized Bond Obligations, Series 1A,
Cl. A3, 8/13/10(2) 4,000,000 3,710,000
- ------------------------------------------------------------------------------------------------------------
Owens-Illinois, Inc., 7.15% Sr. Nts., 5/15/05 5,000,000 4,646,950
- ------------------------------------------------------------------------------------------------------------
Sun Co., Inc., 7.95% Debs., 12/15/01 4,000,000 4,038,880
- ------------------------------------------------------------------------------------------------------------
USI American Holdings, Inc., 7.25% Sr. Nts., Series B, 12/1/06 2,860,000 2,700,318
-----------
23,312,337
- ------------------------------------------------------------------------------------------------------------
Manufacturing--0.3%
Federal-Mogul Corp., 7.50% Nts., 7/1/04 2,150,000 2,037,385
- ------------------------------------------------------------------------------------------------------------
Norsk Hydro AS, 8.75% Bonds, 10/23/01 1,500,000 1,540,125
-----------
3,577,510
- ------------------------------------------------------------------------------------------------------------
Communication Services--0.5%
- ------------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--0.3%
AT&T Capital Corp., 6.25% Medium-Term Nts., Series F, 5/15/01 3,800,000 3,761,354
- ------------------------------------------------------------------------------------------------------------
Telephone Utilities--0.2%
Liberty Media Group, 8.50% Nts., 7/15/29(7) 2,000,000 2,030,788
- ------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--1.4%
- ------------------------------------------------------------------------------------------------------------
Autos & Housing--0.7%
Black & Decker Corp., 6.625% Nts., 11/15/00 2,700,000 2,693,455
- ------------------------------------------------------------------------------------------------------------
Ford Motor Co., 6.375% Sr. Unsec. Unsub. Nts., 2/1/29 4,000,000 3,374,736
- ------------------------------------------------------------------------------------------------------------
Lear Corp., 7.96% Sr. Nts., 5/15/05(7) 2,000,000 1,927,548
-----------
7,995,739
- ------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--0.4%
Felcor Suites LP, 7.375% Sr. Nts., 10/1/04 2,000,000 1,818,312
- ------------------------------------------------------------------------------------------------------------
Park Place Entertainment Corp., 8.50% Sr. Nts., 11/15/06 2,175,000 2,147,103
-----------
3,965,415
- ------------------------------------------------------------------------------------------------------------
Media--0.1%
Reed Elsevier, Inc., 6.625% Nts., 10/15/23(7) 1,600,000 1,318,864
- ------------------------------------------------------------------------------------------------------------
Retail: General--0.2%
Price/Costco Cos., Inc., 7.125% Sr. Nts., 6/15/05 2,000,000 1,982,826
- ------------------------------------------------------------------------------------------------------------
Consumer Staples--4.3%
- ------------------------------------------------------------------------------------------------------------
Broadcasting--0.5%
British Sky Broadcasting Group plc, 8.20% Nts., 7/15/09(7) 1,600,000 1,540,843
- ------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18 4,000,000 3,740,000
-----------
5,280,843
</TABLE>
Total Return Portfolio 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Entertainment--1.0%
Tricon Global Restaurants, Inc., 7.45% Sr. Unsec. Nts., 5/15/05 $4,650,000 $ 4,475,751
- ------------------------------------------------------------------------------------------------------------
Viacom, Inc.:
6.75% Sr. Unsec. Nts., 1/15/03 1,500,000 1,478,056
7.50% Sr. Nts., 1/15/02 4,250,000 4,277,000
-----------
10,230,807
- ------------------------------------------------------------------------------------------------------------
Food--1.5%
CPC International, Inc., 6.15% Unsec. Nts., Series C, 1/15/06 2,000,000 1,890,444
- ------------------------------------------------------------------------------------------------------------
Dole Food Co., 6.75% Nts., 7/15/00 3,500,000 3,479,532
- ------------------------------------------------------------------------------------------------------------
Grand Metro Inventory Corp., 7.125% Nts., 9/15/04 6,115,000 6,091,072
- ------------------------------------------------------------------------------------------------------------
RACERS-Kellogg-98-1, 5.75% Nts., 2/2/01(7) 5,000,000 4,957,095
-----------
16,418,143
- ------------------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.4%
Albertson's, Inc., 7.45% Unsec. Debs., 8/1/29 4,000,000 3,810,820
- ------------------------------------------------------------------------------------------------------------
Household Goods--0.9%
Dial Corp. (The), 5.89% Medium-Term Nts., Series A, 10/22/01 3,250,000 3,162,799
- ------------------------------------------------------------------------------------------------------------
Fort James Corp.:
6.234% Nts., 3/15/01 1,750,000 1,735,375
6.875% Sr. Nts., 9/15/07 5,000,000 4,743,375
-----------
9,641,549
- ------------------------------------------------------------------------------------------------------------
Energy--2.4%
- ------------------------------------------------------------------------------------------------------------
Energy Services--1.9%
Coastal Corp., 8.125% Sr. Nts., 9/15/02 3,190,000 3,265,482
- ------------------------------------------------------------------------------------------------------------
Colorado Interstate Gas Corp., 10% Sr. Debs., 6/15/05 455,000 502,911
- ------------------------------------------------------------------------------------------------------------
Columbia Gas System, Inc., 6.80% Nts., Series C, 11/28/05 2,000,000 1,933,222
- ------------------------------------------------------------------------------------------------------------
Gulf Canada Resources Ltd., 8.25% Sr. Nts., 3/15/17 2,000,000 1,745,980
- ------------------------------------------------------------------------------------------------------------
HNG Internorth/Enron Corp., 9.625% Debs., 3/15/06 700,000 755,182
- ------------------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co., 7.65% Debs., 12/1/23 4,000,000 3,777,292
- ------------------------------------------------------------------------------------------------------------
Petroleum Geo-Services ASA, 7.50% Nts., 3/31/07 3,600,000 3,519,191
- ------------------------------------------------------------------------------------------------------------
Petroliam Nasional Berhad, 6.875% Nts., 7/1/03(7) 2,500,000 2,434,935
- ------------------------------------------------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21 2,250,000 2,619,090
-----------
20,553,285
- ------------------------------------------------------------------------------------------------------------
Oil: Domestic--0.5%
Norcen Energy Resources Ltd., 6.80% Debs., 7/2/02 4,500,000 4,375,210
- ------------------------------------------------------------------------------------------------------------
Texaco Capital, Inc., 8.875% Gtd. Debs., 9/1/21 500,000 556,443
-----------
4,931,653
- ------------------------------------------------------------------------------------------------------------
Financial--5.0%
- ------------------------------------------------------------------------------------------------------------
Banks--1.1%
BankAmerica Corp., 7.75% Sub. Nts., 7/15/02 1,250,000 1,269,807
- ------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp., 10.125% Sub. Nts., 11/1/00 1,000,000 1,026,735
- ------------------------------------------------------------------------------------------------------------
Fleet Mtg./Norstar Group, Inc., 9.90% Sub. Nts., 6/15/01 750,000 778,593
- ------------------------------------------------------------------------------------------------------------
Greenpoint Bank (Brooklyn New York), 6.70% Sr. Medium-Term Bank Nts.,
7/15/02 5,000,000 4,893,275
- ------------------------------------------------------------------------------------------------------------
People's Bank of Bridgeport (Connecticut), 7.20% Sub. Nts., 12/1/06 4,000,000 3,852,304
-----------
11,820,714
</TABLE>
12 Total Return Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Diversified Financial--1.6%
American General Finance Corp., 5.875% Sr. Nts., 7/1/00 $1,500,000 $ 1,497,154
- ------------------------------------------------------------------------------------------------------------
American General Institutional Capital B, 8.125% Bonds, Series B, 3/15/46(7) 2,750,000 2,753,768
- ------------------------------------------------------------------------------------------------------------
Capital One Financial Corp., 7.25% Nts., 12/1/03 4,830,000 4,727,498
- ------------------------------------------------------------------------------------------------------------
Conseco Financing Trust III, 8.796% Bonds, 4/1/27 2,750,000 2,497,443
- ------------------------------------------------------------------------------------------------------------
Finova Capital Corp., 7.625% Sr. Nts., 9/21/09 3,250,000 3,201,552
- ------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.625% Nts., 2/15/01 1,200,000 1,183,565
- ------------------------------------------------------------------------------------------------------------
PHH Corp., 6.50% Nts., 2/1/00 1,250,000 1,250,659
-----------
17,111,639
- ------------------------------------------------------------------------------------------------------------
Insurance--1.2%
Conseco, Inc., 6.40% Nts., 6/15/01 3,000,000 2,926,650
- ------------------------------------------------------------------------------------------------------------
Equitable Life Assurance Society (U.S.A.), 6.95% Surplus Nts., 12/1/05(7) 2,000,000 1,942,106
- ------------------------------------------------------------------------------------------------------------
GenAmerica Capital I, 8.525% Nts., 6/30/27(2) 3,250,000 2,684,666
- ------------------------------------------------------------------------------------------------------------
Life Re Capital Trust I, 8.72% Nts., 6/15/27(7) 2,500,000 2,450,828
- ------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 6.75% Sr. Unsec. Nts., 11/15/06 3,500,000 3,333,358
-----------
13,337,608
- ------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts--1.1%
Chelsea GCA Realty Partner, Inc., 7.75% Unsec. Nts., 1/26/01 5,520,000 5,531,504
- ------------------------------------------------------------------------------------------------------------
First Industrial LP, 7.15% Bonds, 5/15/27 3,000,000 2,943,180
- ------------------------------------------------------------------------------------------------------------
Simon DeBartolo Group LP, 6.625% Unsec. Nts., 6/15/03 3,000,000 2,864,340
-----------
11,339,024
- ------------------------------------------------------------------------------------------------------------
Healthcare--0.3%
- ------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--0.3%
Tenet Healthcare Corp.:
8% Sr. Nts., 1/15/05 1,500,000 1,443,750
8.625% Sr. Unsec. Nts., 12/1/03 2,000,000 1,975,712
-----------
3,419,462
- ------------------------------------------------------------------------------------------------------------
Technology--0.2%
- ------------------------------------------------------------------------------------------------------------
Computer Software--0.2%
Electric Data Systems Corp., 7.125% Nts., 5/15/05(7) 2,000,000 1,985,036
- ------------------------------------------------------------------------------------------------------------
Transportation--0.8%
- ------------------------------------------------------------------------------------------------------------
Air Transportation--0.4%
Northwest Airlines Corp., 8.375% Unsec. Nts., 3/15/04 4,250,000 3,990,019
- ------------------------------------------------------------------------------------------------------------
Railroads & Truckers--0.4%
Union Pacific Corp.:
7% Nts., 6/15/00 2,030,000 2,036,541
7.60% Nts., 5/1/05 2,000,000 2,002,352
-----------
4,038,893
- ------------------------------------------------------------------------------------------------------------
Utilities--2.3%
- ------------------------------------------------------------------------------------------------------------
Electric Utilities--1.1%
Cleveland Electric Illumination, Inc., 6.86% First Mtg. Nts., 10/1/08 4,000,000 3,676,220
- ------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 8.25% First Mtg. Bonds, Series C, 2/1/03 3,278,000 3,325,957
- ------------------------------------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc., 6.31% Medium-Term Nts.,
Series B, 2/19/02 5,000,000 4,872,545
-----------
11,874,722
</TABLE>
Total Return Portfolio 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Gas Utilities--1.2%
Northern Illinois Gas Co., 6.45% First Mtg. Bonds, 8/1/01 $ 2,000,000 $ 1,980,304
- ------------------------------------------------------------------------------------------------------------
Southern California Gas Co., 6.38% Medium-Term Nts., 10/29/01 2,500,000 2,468,740
- ------------------------------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 3,800,000 3,591,920
- ------------------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The), 6.20% Nts., 8/1/02 4,675,000 4,561,552
--------------
12,602,516
--------------
Total Non-Convertible Corporate Bonds and Notes (Cost $229,771,078) 220,064,090
============================================================================================================
Short-Term Notes--8.6%(8)
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank:
1.50%, 1/3/00 2,400,000 2,399,827
5.72%, 1/12/00 15,000,000 14,973,783
5.75%, 1/11/00 5,000,000 4,992,014
5.80%, 1/19/00 10,000,000 9,971,000
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
5.53%, 1/10/00 10,000,000 9,985,875
5.72%, 1/25/00 20,000,000 19,923,733
5.76%, 1/28/00 10,000,000 9,956,800
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.64%, 1/6/00-1/7/00 20,000,000 19,982,767
--------------
Total Short-Term Notes (Cost $92,185,799) 92,185,799
============================================================================================================
Repurchase Agreements--4.1%
- ------------------------------------------------------------------------------------------------------------
Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated
12/31/99, to be repurchased at $44,110,106 on 1/3/00, collateralized
by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value
of $17,308,796 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07,
with a value of $27,698,799 (Cost $44,100,000) 44,100,000 44,100,000
- ------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $1,086,891,618) 99.7% 1,070,535,406
- ------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.3 3,501,457
---------- --------------
Net Assets 100.0% $1,074,036,863
========== ==============
</TABLE>
1. Non-income-producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
3. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
4. Represents the current interest rate for a variable rate security.
5. Securities with an aggregate market value of $14,148,760 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
6. For zero coupon bonds, the interest rate shown is the effective yield on
the date of purchase.
7. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $23,341,811 or 2.17% of the Fund's net
assets as of December 31, 1999.
8. Short-term notes are generally traded on a discount basis; the interest
rate is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
14 Total Return Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
============================================================================================================
<S> <C>
Assets
Investments, at value (cost $1,086,891,618)--see accompanying statement $1,070,535,406
- ------------------------------------------------------------------------------------------------------------
Cash 1,093,330
- ------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 6,449,422
Shares of capital stock sold 121,428
Daily variation on futures contracts 43,550
Other 10,882
--------------
Total assets 1,078,254,018
============================================================================================================
Liabilities
Payables and other liabilities:
Shares of capital stock redeemed 3,232,545
Investments purchased 918,689
Directors' compensation 2,426
Transfer and shareholder servicing agent fees 186
Other 63,309
--------------
Total liabilities 4,217,155
============================================================================================================
Net Assets $1,074,036,863
==============
============================================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 611,998
- ------------------------------------------------------------------------------------------------------------
Additional paid-in capital 953,683,472
- ------------------------------------------------------------------------------------------------------------
Undistributed net investment income 40,223,973
- ------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 89,114,712
- ------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments (9,597,292)
--------------
Net assets--applicable to 611,998,349 shares of capital stock outstanding $1,074,036,863
==============
============================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $1.75
</TABLE>
See accompanying Notes to Financial Statements.
Total Return Portfolio 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
============================================================================================================
<S> <C>
Investment Income
Interest $ 36,275,924
- ------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $12,828) 10,709,009
-------------
Total income 46,984,933
============================================================================================================
Expenses
Management fees 6,587,018
- ------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 39,584
- ------------------------------------------------------------------------------------------------------------
Directors' compensation 30,912
- ------------------------------------------------------------------------------------------------------------
Accounting service fees 15,000
- ------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,121
- ------------------------------------------------------------------------------------------------------------
Other 82,621
-------------
Total expenses 6,757,256
Less expenses paid indirectly (22,093)
-------------
Net expenses 6,735,163
============================================================================================================
Net Investment Income 40,249,770
============================================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain on:
Investments 81,084,492
Closing of futures contracts 18,569,988
-------------
Net realized gain 99,654,480
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (156,341,136)
-------------
Net realized and unrealized loss (56,686,656)
============================================================================================================
Net Decrease in Net Assets Resulting from Operations $ (16,436,886)
=============
</TABLE>
See accompanying Notes to Financial Statements.
16 Total Return Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
============================================================================================================
Operations
Net investment income $ 40,249,770 $ 42,915,282
- ------------------------------------------------------------------------------------------------------------
Net realized gain 99,654,480 38,137,346
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (156,341,136) 54,372,054
-------------- --------------
Net increase (decrease) in net assets resulting from operations (16,436,886) 135,424,682
============================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (43,060,498) (42,620,811)
- ------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (47,469,898) (144,299,156)
============================================================================================================
Capital Stock Transactions
Net increase (decrease) in net assets resulting from
capital stock transactions (162,878,234) 116,654,347
============================================================================================================
Net Assets
Total increase (decrease) (269,845,516) 65,159,062
- ------------------------------------------------------------------------------------------------------------
Beginning of period 1,343,882,379 1,278,723,317
-------------- --------------
End of period (including undistributed net investment
income of $40,223,973 and $42,986,942, respectively) $1,074,036,863 $1,343,882,379
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
Total Return Portfolio 17
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995
<S> <C> <C> <C> <C> <C>
================================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $1.91 $2.00 $1.91 $1.75 $1.51
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .07 .06 .07 .07 .07
Net realized and unrealized gain (loss) (.10) .14 .25 .11 .30
- --------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (.03) .20 .32 .18 .37
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.06) (.07) (.07) (.01) (.07)
Distributions from net realized gain (.07) (.22) (.16) (.01) (.06)
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.13) (.29) (.23) (.02) (.13)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.75 $1.91 $2.00 $1.91 $1.75
===== ===== ===== ===== =====
================================================================================================================================
Total Return, at Net Asset Value(2) (1.54)% 10.90% 18.81% 10.14% 24.66%
================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,074 $1,344 $1,279 $1,122 $ 994
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,230 $1,299 $1,208 $1,058 $ 864(3)
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (4)
Net investment income 3.27% 3.30% 3.57% 4.12% 4.48%
Expenses 0.55% 0.55%(5) 0.55%(5) 0.55%(5) 0.59%(5)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 113% 93% 104% 104% 62%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor
to the Fund.
2. Assumes a $1,000 hypothetical initial investment on the business
day before the first day of the fiscal period, with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Total returns are not annualized for periods less than one full
year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of these
charges would reduce the total return figures for all periods shown.
3. This information is not covered by the auditors' opinion.
4. Annualized for periods less than one full year.
5. Expense ratio has not been grossed up to reflect the effect of expenses
paid indirectly.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $1,145,741,282 and $1,277,170,856, respectively.
See accompanying Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Total Return Portfolio (the Fund) is a series of Panorama Series Fund, Inc. (the
Company) which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The Fund's
investment objective is to seek maximum 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. The Fund's investment
advisor is OppenheimerFunds, Inc. (the Manager). Shares of the Fund are sold
only to separate accounts of life insurance companies, a majority of such shares
are held by separate accounts of Massachusetts Mutual Life Insurance Co., an
affiliate of the investment advisor. The following is a summary of significant
accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of exchange.
Amounts related to the purchase and sale of foreign securities and investment
income are translated at the rates of exchange prevailing on the respective
dates of such transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers to shareholders.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
Total Return Portfolio 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect an
increase in undistributed net investment income of $47,759. Accumulated net
realized gain on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Capital Stock
The Fund has authorized 1,950 million shares of $0.001 par value capital stock.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
---------------------------------- ---------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Sold 39,107,889 $ 70,396,179 69,325,992 $ 127,905,490
Dividends and/or distributions reinvested 51,437,725 90,530,396 102,703,278 186,919,967
Redeemed (182,957,660) (323,804,809) (108,494,837) (198,171,110)
------------ ------------- ------------ -------------
Net increase (decrease) (92,412,046) $(162,878,234) 63,534,433 $ 116,654,347
============ ============= ============ =============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized depreciation on securities of
$16,356,212 was composed of gross appreciation of $50,502,787, and gross
depreciation of $66,858,999.
20 Total Return Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund. The annual fees are 0.625% of the
first $600 million of average daily net assets of the Fund and 0.45% of average
daily net assets in excess of $600 million. The Fund's management fee for the
year ended December 31, 1999, was 0.54% of average annual net assets.
- --------------------------------------------------------------------------------
Accounting Fees. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000 plus out-of-pocket costs and expenses reasonably incurred.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer agent for the Fund and is responsible for maintaining the
shareholder registry and shareholder accounting records for the Fund. OFS
provides these services for cost.
================================================================================
5. Futures Contracts
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to protect against changes in interest rates. The Fund may also buy or
write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases
in interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund may recognize a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include
the possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the value of
the underlying securities.
As of December 31, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Expiration Number of Valuation as of Unrealized
Contract Description Date Contracts December 31, 1999 Appreciation
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Contracts to Purchase
- ----------------------
NASDAQ 100 3/16/00 100 $37,250,000 $4,881,212
Standard &Poor's 500 3/16/00 163 60,481,150 1,877,708
----------
$6,758,920
==========
</TABLE>
================================================================================
6. Illiquid or Restricted Securities
As of December 31, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Directors as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no more
than 15% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of December 31, 1999, was $11,159,740,
which represents 1.04% of the Fund's net assets.
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Directors and Shareholders of Government Securities Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Government Securities Portfolio (which is a
series of Panorama Series Fund, Inc.) as of December 31, 1999, the related
statement of operations for the year then ended, the statements of changes in
net assets for the years ended December 31, 1999 and 1998, and the financial
highlights for the period January 1, 1996 to December 31, 1999. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the period January 1, 1995 to December 31, 1995, were audited by
other auditors whose report dated February 15, 1996, expressed an unqualified
opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Government
Securities Portfolio as of December 31, 1999, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
====================================================================================================================
<S> <C> <C>
Mortgage-Backed Obligations--23.5%
- --------------------------------------------------------------------------------------------------------------------
Government Agency--23.5%
- --------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored--9.5%
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates, 10.50%, 10/1/20 $ 80,894 $ 86,430
- --------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6.50%, 2/1/09-8/1/28 1,799,749 1,706,650
7.50%, 9/1/22 125,241 124,459
-----------
1,917,539
- --------------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed--14.0%
Government National Mortgage Assn.:
6.50%, 7/15/28 1,128,297 1,058,829
7%, 10/15/23-3/15/26 1,811,269 1,758,389
-----------
2,817,218
-----------
Total Mortgage-Backed Obligations (Cost $4,953,048) 4,734,757
====================================================================================================================
U.S. Government Obligations--54.6%
- --------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
7.50%, 11/15/16(1) 2,175,000 2,327,250
8.125%, 8/15/19 500,000 569,844
9.25%, 2/15/16 1,200,000 1,482,376
- --------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.75%, 8/15/03 500,000 489,687
7.50%, 11/15/01-2/15/05 3,405,000 3,544,300
7.875%, 11/15/04 2,255,000 2,386,072
8.50%, 2/15/00 200,000 200,937
-----------
Total U.S. Government Obligations (Cost $11,083,757) 11,000,466
====================================================================================================================
Short-Term Notes--12.3%
- --------------------------------------------------------------------------------------------------------------------
Federal Farm Credit Bank, Medium-Term Nts., 6.37%, 9/1/00(2) 1,000,000 1,000,160
- --------------------------------------------------------------------------------------------------------------------
Tennessee Valley Authority, 5.67%, 1/28/00(2) 1,500,000 1,493,621
-----------
Total Short-Term Notes (Cost $2,494,402) 2,493,781
====================================================================================================================
Repurchase Agreement--3.0%
- --------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated 12/31/99,
to be repurchased at $600,138 on 1/3/00, collateralized by U.S. Treasury Bonds,
5.25%-12%, 2/15/01-11/15/28, with a value of $235,494 and U.S. Treasury Nts.,
5%-7.50%, 12/31/00-2/15/07, with a value of $376,855 (Cost $600,000) 600,000 600,000
- --------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $19,131,207) 93.4% 18,829,004
- --------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 6.6 1,321,435
---------- -----------
Net Assets 100.0% $20,150,439
========== ===========
</TABLE>
1. Securities with an aggregate market value of $42,936 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
2. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
4 Government Securities Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
===========================================================================================
Assets
Investments, at value (cost $19,131,207)--see accompanying statement $18,829,004
- -------------------------------------------------------------------------------------------
Cash 1,091,399
- -------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and principal paydowns 259,450
Shares of capital stock sold 117
Other 1,281
-----------
Total assets 20,181,251
===========================================================================================
Liabilities
Payables and other liabilities:
Shares of capital stock redeemed 9,276
Legal, auditing and other professional fees 6,456
Shareholder reports 6,275
Daily variation on futures contracts 6,000
Accounting service fees 1,311
Directors' compensation 325
Transfer and shareholder servicing agent fees 184
Other 985
-----------
Total liabilities 30,812
===========================================================================================
Net Assets $20,150,439
===========
===========================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 19,278
- -------------------------------------------------------------------------------------------
Additional paid-in capital 20,074,450
- -------------------------------------------------------------------------------------------
Undistributed net investment income 1,306,007
- -------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (924,781)
- -------------------------------------------------------------------------------------------
Net unrealized depreciation on investments (324,515)
-----------
Net assets--applicable to 19,277,681 shares of capital stock outstanding $20,150,439
===========
===========================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $1.05
</TABLE>
See accompanying Notes to Financial Statements.
Government Securities Portfolio 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
=================================================================================
Investment Income
Interest $ 1,471,760
=================================================================================
Expenses
Management fees 119,156
- ---------------------------------------------------------------------------------
Accounting service fees 15,000
- ---------------------------------------------------------------------------------
Shareholder reports 8,971
- ---------------------------------------------------------------------------------
Legal, auditing and other professional fees 7,831
- ---------------------------------------------------------------------------------
Custodian fees and expenses 2,549
- ---------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,104
- ---------------------------------------------------------------------------------
Directors' compensation 1,302
- ---------------------------------------------------------------------------------
Other 1,886
-----------
Total expenses 158,799
Less expenses paid indirectly (2,545)
-----------
Net expenses 156,254
=================================================================================
Net Investment Income 1,315,506
=================================================================================
Realized and Unrealized Loss
Net realized loss on:
Investments (92,263)
Closing of futures contracts (229,865)
-----------
Net realized loss (322,128)
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (1,564,589)
-----------
Net realized and unrealized loss (1,886,717)
=================================================================================
Net Decrease in Net Assets Resulting from Operations $ (571,211)
===========
</TABLE>
See accompanying Notes to Financial Statements.
6 Government Securities Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
====================================================================================================================
<S> <C> <C>
Operations
Net investment income $ 1,315,506 $ 1,356,876
- --------------------------------------------------------------------------------------------------------------------
Net realized loss (322,128) (140,127)
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (1,564,589) 627,658
----------- -----------
Net increase (decrease) in net assets resulting from operations (571,211) 1,844,407
====================================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (1,340,571) (1,367,579)
====================================================================================================================
Capital Stock Transactions
Net increase (decrease) in net assets resulting from capital stock transactions (2,860,658) 727,031
====================================================================================================================
Net Assets
Total increase (decrease) (4,772,440) 1,203,859
- --------------------------------------------------------------------------------------------------------------------
Beginning of period 24,922,879 23,719,020
----------- -----------
End of period (including undistributed net investment
income of $1,306,007 and $1,337,809, respectively) $20,150,439 $24,922,879
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
Government Securities Portfolio 7
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $1.13 $1.11 $1.09 $1.07 $0.95
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .07 .06 .07 .07 .06
Net realized and unrealized gain (loss) (.09) .03 .02 (.05) .12
- ------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (.02) .09 .09 .02 .18
- ------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders:
Dividends from net investment income (.06) (.07) (.07) --(2) (.06)
- ------------------------------------------------------------------------------------------------------------------------
Total dividends to shareholders (.06) (.07) (.07) -- (.06)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.05 $1.13 $1.11 $1.09 $1.07
===== ===== ===== ===== =====
========================================================================================================================
Total Return, at Net Asset Value(3) (1.73)% 8.14% 8.82% 1.93% 18.91%
========================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $20,150 $24,923 $23,719 $23,236 $24,309
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $22,683 $24,044 $23,034 $23,880 $23,157(4)
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(5)
Net investment income 5.80% 5.64% 5.96% 6.11% 6.08%
Expenses 0.70% 0.68%(6) 0.67%(6) 0.62%(6) 0.71%(6)
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 14% 43% 0% 6% 55%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund.
2. Less than $0.005 per share.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods of less than one full year. Total return
information does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would reduce
figures for all periods shown.
4. This information is not covered by the auditors' opinion.
5. Annualized for periods less than one full year.
6. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $2,666,016 and $3,845,969, respectively.
See accompanying Notes to Financial Statements.
8 Government Securities Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Government Securities Portfolio (the Fund) is a series of Panorama Series Fund,
Inc. (the Company) which is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company. The Fund's
investment objective is to seek a high level of current income with a high
degree of safety of principal by investing primarily (at least 65% of its total
assets under normal market conditions) in U.S. government securities and U.S.
government-related securities. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). Shares of the Fund are sold only to
separate accounts of life insurance companies, a majority of such shares are
held by separate accounts of Massachusetts Mutual Life Insurance Co., an
affiliate of the investment advisor. The following is a summary of significant
accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers to shareholders. As of December 31,
1999, the Fund had available for federal income tax purposes an unused capital
loss carryover of approximately $862,000, which expires between 2002 and 2007.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
Government Securities Portfolio 9
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect a
decrease in undistributed net investment income of $6,737. Accumulated net
realized loss on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with federal
income tax requirements. Realized gains and losses on investments and options
written and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at
the current market value of the underlying security. Interest on payment-in-kind
debt instruments is accrued as income at the coupon rate and a market adjustment
is made periodically.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Capital Stock
The Fund has authorized 200 million shares of $0.001 par value capital stock.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
------------------------------ -----------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 2,089,799 $ 2,246,159 4,843,177 $ 5,379,324
Dividends and/or distributions reinvested 1,264,689 1,340,571 1,290,169 1,367,579
Redeemed (6,090,812) (6,447,388) (5,441,013) (6,019,872)
---------- ----------- ---------- -----------
Net increase (decrease) (2,736,324) $(2,860,658) 692,333 $ 727,031
========== =========== ========== ===========
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized depreciation on securities of $302,203
was composed of gross appreciation of $168,529, and gross depreciation of
$470,732.
10 Government Securities Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management Fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.525%
of the first $300 million average daily net assets of the Fund, 0.50% of the
next $100 million and 0.45% of average daily net assets over $400 million. The
Fund's management fee for the year ended December 31, 1999, was 0.525% of
average annual net assets.
- --------------------------------------------------------------------------------
Accounting Fees. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000, plus out-of-pocket costs and expenses reasonably
incurred.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer agent for the Fund and is responsible for maintaining the
shareholder registry and shareholder accounting records for the Fund. OFS
provides these services for cost.
================================================================================
5. Futures Contracts
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to protect against changes in interest rates. The Fund may also buy or
write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases
in interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund may recognize a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include
the possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the value of
the underlying securities.
As of December 31, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Expiration Number of Valuation as of Unrealized
Contract Description Date Contracts December 31, 1999 Depreciation
- --------------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds, 20 yr. 3/22/00 12 $1,091,250 $22,312
=======
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Directors and Shareholders of Oppenheimer International
Growth Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer International Growth Fund/VA (which
is a series of Panorama Series Fund, Inc.) as of December 31, 1999, the related
statement of operations for the year then ended, the statements of changes in
net assets for the years ended December 31, 1999 and 1998, and the financial
highlights for the period January 1, 1996 to December 31, 1999. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the period January 1, 1995 to December 31, 1995, were audited by
other auditors whose report dated February 15, 1996, expressed an unqualified
opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
International Growth Fund/VA as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
===================================================================================================
Common Stocks--99.3%
- ---------------------------------------------------------------------------------------------------
Capital Goods--7.6%
- ---------------------------------------------------------------------------------------------------
Aerospace/Defense--1.0%
Embraer-Empresa Brasileira de Aeronautica SA, Preference 310,000 $ 1,398,561
- ---------------------------------------------------------------------------------------------------
Electrical Equipment--2.6%
Halma plc 580,000 1,096,279
- ---------------------------------------------------------------------------------------------------
Toshiba Corp. 364,000 2,777,267
-----------
3,873,546
- ---------------------------------------------------------------------------------------------------
Industrial Services--2.1%
Aegis Group plc 862,300 3,134,355
- ---------------------------------------------------------------------------------------------------
Manufacturing--1.9%
Sidel SA 27,500 2,836,789
- ---------------------------------------------------------------------------------------------------
Communication Services--19.9%
- ---------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--12.5%
Altran Technologies SA 9,276 5,601,218
- ---------------------------------------------------------------------------------------------------
Ericsson LM, B Shares 35,000 2,249,574
- ---------------------------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. 140 2,396,557
- ---------------------------------------------------------------------------------------------------
Nokia Oyj 16,000 2,898,431
- ---------------------------------------------------------------------------------------------------
Sonera Corp. 50,000 3,424,275
- ---------------------------------------------------------------------------------------------------
Tandberg Television ASA(1) 130,000 1,796,295
-----------
18,366,350
- ---------------------------------------------------------------------------------------------------
Telephone Utilities--3.7%
DDI Corp.(1) 100 1,369,461
- ---------------------------------------------------------------------------------------------------
Telefonica SA(1) 95,508 2,383,757
- ---------------------------------------------------------------------------------------------------
Videsh Sanchar Nigam Ltd., GDR(2) 70,000 1,736,000
-----------
5,489,218
- ---------------------------------------------------------------------------------------------------
Telecommunications: Wireless--3.7%
NTT Mobile Communications Network, Inc. 92 3,536,731
- ---------------------------------------------------------------------------------------------------
Telecom Italia Mobile SpA 170,000 1,897,365
-----------
5,434,096
- ---------------------------------------------------------------------------------------------------
Consumer Cyclicals--7.7%
- ---------------------------------------------------------------------------------------------------
Autos & Housing--2.1%
Aucnet, Inc. 16,500 989,387
- ---------------------------------------------------------------------------------------------------
Ducati Motor Holding SpA(1) 400,000 1,036,592
- ---------------------------------------------------------------------------------------------------
Porsche AG, Preference 380 1,001,972
-----------
3,027,951
- ---------------------------------------------------------------------------------------------------
Leisure & Entertainment--0.9%
Granada Group plc 130,000 1,317,845
- ---------------------------------------------------------------------------------------------------
Media--3.5%
Lusomundo SGPS SA(1) 80,000 1,127,168
- ---------------------------------------------------------------------------------------------------
Reed International plc 360,000 2,695,625
- ---------------------------------------------------------------------------------------------------
Singapore Press Holdings Ltd. 60,000 1,300,510
-----------
5,123,303
Oppenheimer International Growth Fund/VA 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<CAPTION>
Market Value
Shares Note 1
- ---------------------------------------------------------------------------------------------------
Textile/Apparel & Home Furnishings--1.2%
Gucci Group NV, NY Registered Shares 15,000 $ 1,717,500
- ---------------------------------------------------------------------------------------------------
Consumer Staples--14.2%
- ---------------------------------------------------------------------------------------------------
Broadcasting--7.3%
Canal Plus 30,000 4,362,743
- ---------------------------------------------------------------------------------------------------
Grupo Televisa SA, Sponsored GDR(1) 50,000 3,412,500
- ---------------------------------------------------------------------------------------------------
ProSieben Media AG, Preference 50,000 2,843,079
- ---------------------------------------------------------------------------------------------------
PT MULTIMEDIA--Servicos de Telecomunicacoes e Multimedia SGP(1) 3,100 176,177
-----------
10,794,499
- ---------------------------------------------------------------------------------------------------
Entertainment--4.8%
Imagineer Co. Ltd. 30,000 498,875
- ---------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 27,400 4,551,032
- ---------------------------------------------------------------------------------------------------
Village Roadshow Ltd., Cl. A, Preference 1,230,000 2,093,005
-----------
7,142,912
- ---------------------------------------------------------------------------------------------------
Household Goods--1.2%
Wella AG, Preference 80,000 1,755,161
- ---------------------------------------------------------------------------------------------------
Tobacco--0.9%
Cie Financiere Richemont AG, A Units 550 1,314,218
- ---------------------------------------------------------------------------------------------------
Financial--4.1%
- ---------------------------------------------------------------------------------------------------
Banks--3.2%
Espirito Santo Financial Group, ADR 100,000 1,575,000
- ---------------------------------------------------------------------------------------------------
Julius Baer Holding AG, Cl. B 350 1,058,605
- ---------------------------------------------------------------------------------------------------
Unibanco-Uniao de Bancos Brasileiros SA, Sponsored GDR 70,000 2,108,750
-----------
4,742,355
- ---------------------------------------------------------------------------------------------------
Insurance--0.9%
AXA SA 10,000 1,392,857
- ---------------------------------------------------------------------------------------------------
Healthcare--15.8%
- ---------------------------------------------------------------------------------------------------
Healthcare/Drugs--8.2%
Biocompatibles International plc(1) 500,000 2,540,375
- ---------------------------------------------------------------------------------------------------
Eisai Co. Ltd. 68,500 1,316,663
- ---------------------------------------------------------------------------------------------------
Elan Corp. plc, ADR(1) 60,000 1,770,000
- ---------------------------------------------------------------------------------------------------
Fresenius AG, Preference 7,000 1,282,153
- ---------------------------------------------------------------------------------------------------
Genset, Sponsored ADR(1) 60,000 1,143,750
- ---------------------------------------------------------------------------------------------------
Nicox SA(1) 26,000 1,229,820
- ---------------------------------------------------------------------------------------------------
Pliva d.d., Sponsored GDR(2) 100,000 1,305,000
- ---------------------------------------------------------------------------------------------------
QIAGEN NV(1) 20,000 1,539,792
-----------
12,127,553
6 Oppenheimer International Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<CAPTION>
Market Value
Shares Note 1
- ---------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--7.6%
Nichii Gakkan Co. 18,750 $ 3,666,365
- ---------------------------------------------------------------------------------------------------
Novogen Ltd.(1) 610,000 1,226,356
- ---------------------------------------------------------------------------------------------------
Ortivus AB, Cl. B(1) 251,300 1,237,233
- ---------------------------------------------------------------------------------------------------
PowderJect Pharmaceuticals plc(1) 160,000 2,122,122
- ---------------------------------------------------------------------------------------------------
Seton School Healthcare Group plc 70,000 886,870
- ---------------------------------------------------------------------------------------------------
SkyePharma plc(1) 2,600,000 2,037,147
------------
11,176,093
- ---------------------------------------------------------------------------------------------------
Technology--30.0%
- ---------------------------------------------------------------------------------------------------
Computer Services--11.0%
Cap Gemini SA 10,000 2,536,127
- ---------------------------------------------------------------------------------------------------
Computer Services Solutions Holding NV 50,000 1,298,256
- ---------------------------------------------------------------------------------------------------
Equant NV, NY Registered Shares(1) 10,000 1,120,000
- ---------------------------------------------------------------------------------------------------
Getronics NV 100,000 7,970,686
- ---------------------------------------------------------------------------------------------------
Icon Medialab International AB(1) 50,000 1,739,028
- ---------------------------------------------------------------------------------------------------
Unit 4(1) 60,000 1,536,772
------------
16,200,869
- ---------------------------------------------------------------------------------------------------
Computer Software--7.9%
Misys plc 350,000 5,456,355
- ---------------------------------------------------------------------------------------------------
Psion plc 80,000 3,489,482
- ---------------------------------------------------------------------------------------------------
Solution 6 Holdings Ltd.(1) 240,000 2,617,488
------------
11,563,325
- ---------------------------------------------------------------------------------------------------
Communications Equipment--1.7%
Vodafone Group plc 500,000 2,477,775
- ---------------------------------------------------------------------------------------------------
Electronics--9.4%
Hoya Corp. 15,000 1,181,160
- ---------------------------------------------------------------------------------------------------
Racal Electronic plc 150,300 1,347,594
- ---------------------------------------------------------------------------------------------------
Sharp Corp. 62,000 1,585,934
- ---------------------------------------------------------------------------------------------------
Sony Corp. 23,000 6,816,981
- ---------------------------------------------------------------------------------------------------
STMicroelectronics NV, NY Registered Shares 10,000 1,514,375
- ---------------------------------------------------------------------------------------------------
Thomson Multimedia(1) 26,200 1,410,671
------------
13,856,715
- ---------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $101,857,730) 99.3% 146,263,846
- ---------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.7 1,081,145
--------- ------------
Net Assets 100.0% $147,344,991
========= ============
</TABLE>
Oppenheimer International Growth Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution of investments representing geographic diversification, as a
percentage of total investments at value, is as follows:
<TABLE>
<CAPTION>
Geographical Diversification Market Value Percent
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
Japan $ 30,686,414 20.9%
Great Britain 28,601,824 19.6
France 22,028,350 15.1
The Netherlands 13,465,505 9.2
Germany 6,882,365 4.7
Finland 6,322,706 4.3
Australia 5,936,849 4.1
Sweden 5,225,835 3.6
Italy 4,651,457 3.2
Brazil 3,507,311 2.4
Mexico 3,412,500 2.3
Portugal 2,878,345 2.0
Spain 2,383,757 1.6
Switzerland 2,372,823 1.6
Norway 1,796,295 1.2
Ireland 1,770,000 1.2
India 1,736,000 1.2
Croatia 1,305,000 0.9
Singapore 1,300,510 0.9
------------ -----
Total $146,263,846 100.0%
============ =====
</TABLE>
1. Non-income producing security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $3,041,000 or 2.06% of the Fund's net
assets as of December 31, 1999.
See accompanying Notes to Financial Statements.
8 Oppenheimer International Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
===================================================================================================
Assets
Investments, at value (cost $101,857,730)--see accompanying statement $146,263,846
- ---------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 3,612,376
Shares of capital stock sold 123,379
Interest and dividends 120,364
Other 3,017
------------
Total assets 150,122,982
===================================================================================================
Liabilities
Bank overdraft 1,780,977
- ---------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 564,840
Shares of capital stock redeemed 402,030
Directors' fees 3,100
Transfer and shareholder servicing agent fees 180
Other 26,864
------------
Total liabilities 2,777,991
===================================================================================================
Net Assets $147,344,991
============
===================================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 63,953
- ---------------------------------------------------------------------------------------------------
Additional paid-in capital 73,104,886
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 1,769,047
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 27,990,292
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 44,416,813
------------
Net assets--applicable to 63,952,533 shares of capital stock outstanding $147,344,991
============
===================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $2.30
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer International Growth Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
===================================================================================================
Investment Income
Dividends (net of foreign withholding taxes of $136,054) $ 1,150,247
- ---------------------------------------------------------------------------------------------------
Interest 183,035
-----------
Total income 1,333,282
===================================================================================================
Expenses
Management fees 1,072,824
- ---------------------------------------------------------------------------------------------------
Custodian fees and expenses 32,615
- ---------------------------------------------------------------------------------------------------
Accounting service fees 15,000
- ---------------------------------------------------------------------------------------------------
Directors' compensation 5,665
- ---------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,114
- ---------------------------------------------------------------------------------------------------
Other 27,064
-----------
Total expenses 1,155,282
Less expenses paid indirectly (3,380)
-----------
Net expenses 1,151,902
===================================================================================================
Net Investment Income 181,380
===================================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain on:
Investments 31,159,683
Foreign currency transactions 197,604
-----------
Net realized gain 31,357,287
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 21,423,634
Translation of assets and liabilities denominated in foreign currencies (2,902,013)
-----------
Net change 18,521,621
-----------
Net realized and unrealized gain 49,878,908
===================================================================================================
Net Increase in Net Assets Resulting from Operations $50,060,288
===========
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer International Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
===================================================================================================
Operations
Net investment income $ 181,380 $ 646,134
- ---------------------------------------------------------------------------------------------------
Net realized gain 31,357,287 228,469
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 18,521,621 14,941,247
------------ ------------
Net increase in net assets resulting from operations 50,060,288 15,815,850
===================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (580,211) (404,500)
- ---------------------------------------------------------------------------------------------------
Distributions from net realized gain (1,992,059) (2,680,566)
===================================================================================================
Capital Stock Transactions
Net increase (decrease) in net assets resulting from
capital stock transactions (3,546,775) 8,415,516
===================================================================================================
Net Assets
Total increase 43,941,243 21,146,300
- ---------------------------------------------------------------------------------------------------
Beginning of period 103,403,748 82,257,448
------------ ------------
End of period (including undistributed net investment
income of $1,769,047 and $576,688, respectively) $147,344,991 $103,403,748
============ ============
See accompanying Notes to Financial Statements.
</TABLE>
Oppenheimer International Growth Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995
<S> <C> <C> <C> <C> <C>
================================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $1.57 $1.36 $1.29 $1.15 $1.09
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income --(2) .01 .01 .02 .03
Net realized and unrealized gain .77 .25 .09 .13 .08
- --------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations .77 .26 .10 .15 .11
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.01) (.01) (.01) (.01) (.04)
Distributions from net realized gain (.03) (.04) (.02) - (.01)
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.04) (.05) (.03) (.01) (.05)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $2.30 $1.57 $1.36 $1.29 $1.15
===== ===== ===== ===== =====
================================================================================================================================
Total Return, at Net Asset Value(3) 50.37% 19.40% 8.11% 13.26% 10.30%
================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $147,345 $103,404 $82,257 $62,585 $45,775
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $107,403 $ 94,651 $73,318 $56,893 $37,474(4)
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (5)
Net investment income 0.17% 0.68% 0.72% 0.76% 1.61%
Expenses 1.08% 1.09%(6) 1.12%(6) 1.21%(6) 1.26%(6)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 127% 48% 49% 54% 85%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund.
2. Less than $0.005 per share.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Total returns are not annualized for periods less than one
full year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of these
charges would reduce the total return figures for all periods shown.
4. This information is not covered by the auditors' opinion.
5. Annualized for periods less than one full year.
6. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $133,197,869 and $137,478,833, respectively.
See accompanying Notes to Financial Statements.
12 Oppenheimer International Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer International Growth Fund/VA (the Fund) is a series of Panorama
Series Fund, Inc. (the Company) which is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. The Fund operated under the name of International Equity Portfolio
through September 30, 1999. The Fund's investment objective is to seek long-term
growth of capital by investing, under normal circumstances, at least 90% of its
assets in equity securities of companies wherever located, the primary stock
market of which is outside the United States. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). Shares of the Fund are sold only to
separate accounts of life insurance companies, a majority of such shares are
held by separate accounts of Massachusetts Mutual Life Insurance Co., an
affiliate of the investment advisor. The following is a summary of significant
accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers to shareholders.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
Oppenheimer International Growth Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect an
increase in undistributed net investment income of $1,591,190. Accumulated net
realized gain on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Capital Stock
The Fund has authorized 200 million shares of $0.001 par value capital stock.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
----------------------------------- --------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Sold 23,276,935 $ 41,294,941 13,905,772 $ 20,648,894
Dividends and/or distributions reinvested 1,703,490 2,572,270 2,070,514 3,085,066
Redeemed (26,922,819) (47,413,986) (10,459,749) (15,318,444)
----------- ------------ ----------- ------------
Net increase (decrease) (1,942,394) $ (3,546,775) 5,516,537 $ 8,415,516
=========== ============ =========== ============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$44,406,116 was composed of gross appreciation of $46,637,060, and gross
depreciation of $2,230,944.
14 Oppenheimer International Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund. The annual fees are 1.00% of the
first $250 million of average daily net assets of the Fund and 0.90% of average
daily net assets in excess of $250 million. The Fund's management fee for the
year ended December 31, 1999, was 1.00% of the average annual net assets of the
Fund.
- --------------------------------------------------------------------------------
Accounting Fees. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000, plus out-of-pocket costs and expenses reasonably
incurred.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer agent for the Fund and is responsible for maintaining the
shareholder registry and shareholder accounting records for the Fund. OFS
provides these services for cost.
================================================================================
5. Foreign Currency Contracts
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the forward transaction. Realized gains and losses are reported with all other
foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To The Board of Directors and Shareholders of LifeSpan Diversified Income
Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of LifeSpan Diversified Income Portfolio (which is
a series of Panorama Series Fund, Inc.) as of December 31, 1999, the related
statement of operations for the year then ended, the statements of changes in
net assets for the years ended December 31, 1999 and 1998 and the financial
highlights for the period January 1, 1996 to December 31, 1999. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the period September 1, 1995 to December 31, 1995 were audited by
other auditors whose report dated February 15, 1996, expressed an unqualified
opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of LifeSpan
Diversified Income Portfolio as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Treasury--23.4%
U.S. Treasury Bonds:
6%, 2/15/26 $1,025,000 $ 937,875
7.50%, 11/15/16 1,465,000 1,567,550
STRIPS, 5.75%, 11/15/18(4) 2,300,000 640,796
- -------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.625%, 2/15/06 550,000 526,453
5.625%, 5/15/08 625,000 588,086
5.75%, 8/15/03 1,750,000 1,713,906
6.125%, 8/15/07 450,000 438,750
6.50%, 8/15/05 1,375,000 1,375,430
7.50%, 11/15/01 2,925,000 2,989,900
-----------
10,778,746
-----------
Total U.S. Government Obligations (Cost $14,707,406) 13,927,173
===================================================================================================================
Corporate Bonds and Notes--29.0%
- -------------------------------------------------------------------------------------------------------------------
Chemicals--0.8%
Laroche Industries, Inc., 9.50% Sr. Sub. Nts., Series B, 9/15/07 50,000 13,750
- -------------------------------------------------------------------------------------------------------------------
PPG Industries, Inc., 9% Debs., 5/1/21 75,000 84,002
- -------------------------------------------------------------------------------------------------------------------
Rexene Corp., 11.75% Sr. Nts., 12/1/04 75,000 78,750
- -------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co., 7.85% Unsec. Debs., 7/15/29 150,000 151,186
- -------------------------------------------------------------------------------------------------------------------
Texas Petrochemical Corp., 11.125% Sr. Sub. Nts., Series B, 7/1/06 50,000 44,250
-----------
371,938
- -------------------------------------------------------------------------------------------------------------------
Consumer Durables--0.3%
Black & Decker Corp., 6.625% Nts., 11/15/00 155,000 154,624
- -------------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--0.3%
Kimberly-Clark Corp., 7.875% Debs., 2/1/23 75,000 73,703
- -------------------------------------------------------------------------------------------------------------------
Revlon Consumer Products Corp., 8.625% Sr. Unsec. Sub. Nts., 2/1/08 50,000 25,250
- -------------------------------------------------------------------------------------------------------------------
William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 50,000 45,250
-----------
144,203
- -------------------------------------------------------------------------------------------------------------------
Energy--1.5%
Abraxas Petroleum Corp./Canadian Abraxas Petroleum Ltd.,
11.50% Sr. Unsec. Nts., 11/1/04 35,000 32,025
- -------------------------------------------------------------------------------------------------------------------
Coastal Corp., 8.125% Sr. Nts., 9/15/02 95,000 97,248
- -------------------------------------------------------------------------------------------------------------------
Crown Central Petroleum Corp., 10.875% Sr. Nts., 2/1/05 50,000 38,000
- -------------------------------------------------------------------------------------------------------------------
Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 50,000 49,500
- -------------------------------------------------------------------------------------------------------------------
Gulf Canada Resources Ltd., 8.25% Sr. Nts., 3/15/17 125,000 109,124
- -------------------------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co., 7.65% Debs., 12/1/23 75,000 70,824
- -------------------------------------------------------------------------------------------------------------------
Norcen Energy Resources Ltd., 6.80% Debs., 7/2/02 100,000 97,227
- -------------------------------------------------------------------------------------------------------------------
Petroleum Geo-Services ASA, 7.50% Nts., 3/31/07 75,000 73,316
- -------------------------------------------------------------------------------------------------------------------
RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 50,000 23,250
- -------------------------------------------------------------------------------------------------------------------
Southwest Royalties, Inc., 10.50% Sr. Nts., Series B, 10/15/04 50,000 28,250
- -------------------------------------------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc., 6.25% Sr. Unsec. Debs., 2/1/06 75,000 69,761
-----------
688,525
</TABLE>
LifeSpan Diversified Income Portfolio 3
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Financial--5.6%
Aetna Industries, Inc., 11.875% Sr. Nts., 10/1/06 $ 50,000 $ 48,812
- -------------------------------------------------------------------------------------------------------------------
American General Institutional Capital B, 8.125%
Bonds, Series B, 3/15/46(5) 75,000 75,103
- -------------------------------------------------------------------------------------------------------------------
Capital One Financial Corp., 7.25% Nts., 12/1/03 90,000 88,090
- -------------------------------------------------------------------------------------------------------------------
Chelsea GCA Realty Partner, Inc., 7.75% Unsec. Nts., 1/26/01 310,000 310,646
- -------------------------------------------------------------------------------------------------------------------
Conseco Financing Trust III, 8.796% Bonds, 4/1/27 150,000 136,224
- -------------------------------------------------------------------------------------------------------------------
Conseco, Inc., 6.40% Nts., 6/15/01 250,000 243,887
- -------------------------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.05% Medium-Term Nts., Series D, 3/1/01 250,000 247,420
- -------------------------------------------------------------------------------------------------------------------
First Industrial LP, 7.15% Bonds, 5/15/27 125,000 122,632
- -------------------------------------------------------------------------------------------------------------------
Fleet Mtg./Norstar Group, Inc., 9.90% Sub. Nts., 6/15/01 145,000 150,528
- -------------------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.77% Nts., Series A, 8/27/01 225,000 221,783
- -------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.625% Nts., 2/15/01 250,000 246,576
- -------------------------------------------------------------------------------------------------------------------
GS Escrow Corp., 6.75% Sr. Unsec. Nts., 8/1/01 225,000 216,942
- -------------------------------------------------------------------------------------------------------------------
Integra Financial Corp., 6.50% Sub. Nts., 4/15/00 125,000 125,026
- -------------------------------------------------------------------------------------------------------------------
Olympic Financial Ltd., Units (each unit consists of $1,000 principal
amount of 11.50% sr. nts., 3/15/07 and one warrant to purchase 6.84
shares of common stock)(1)(6) 50,000 52,000
- -------------------------------------------------------------------------------------------------------------------
Simon DeBartolo Group LP, 6.625% Unsec. Nts., 6/15/03 250,000 238,695
- -------------------------------------------------------------------------------------------------------------------
Sovereign Bankcorp, 10.50% Sr. Unsec. Nts., 11/15/06 50,000 51,250
----------
2,575,614
- -------------------------------------------------------------------------------------------------------------------
Food & Drug--0.5%
Jitney-Jungle Stores of America, Inc., 10.375% Sr. Sub. Nts., 9/15/07(1)(7) 50,000 500
- -------------------------------------------------------------------------------------------------------------------
Pathmark Stores, Inc., 9.625% Sr. Sub. Nts., 5/1/03 50,000 37,750
- -------------------------------------------------------------------------------------------------------------------
Stater Brothers Holdings, Inc., 10.75% Sr. Nts., 8/15/06 50,000 50,875
- -------------------------------------------------------------------------------------------------------------------
Tricon Global Restaurants, Inc., 7.45% Sr. Unsec. Nts., 5/15/05 150,000 144,379
----------
233,504
- -------------------------------------------------------------------------------------------------------------------
Food/Tobacco--1.1%
AmeriServe Food Distribution, Inc., 8.875% Sr. Nts., 10/15/06 50,000 27,750
- -------------------------------------------------------------------------------------------------------------------
Dole Food Co., 6.75% Nts., 7/15/00 150,000 149,123
- -------------------------------------------------------------------------------------------------------------------
Eagle Family Foods, Inc., 8.75% Sr. Sub. Nts., 1/15/08 50,000 38,750
- -------------------------------------------------------------------------------------------------------------------
Grand Metro Inventory Corp., 7.125% Nts., 9/15/04 225,000 224,120
- -------------------------------------------------------------------------------------------------------------------
Premier International Foods plc, 12% Sr. Nts., 9/1/09(5) 50,000 49,250
----------
488,993
- -------------------------------------------------------------------------------------------------------------------
Forest Products/Containers--0.4%
Ainsworth Lumber, Inc., 12.50% Sr. Nts., 7/15/07(8) 50,000 55,000
- -------------------------------------------------------------------------------------------------------------------
Portola Packaging, Inc., 10.75% Sr. Nts., 10/1/05 75,000 75,375
- -------------------------------------------------------------------------------------------------------------------
Stone Container Corp., 9.875% Sr. Nts., 2/1/01 75,000 75,562
----------
205,937
- -------------------------------------------------------------------------------------------------------------------
Gaming/Leisure--2.7%
American Skiing Corp., 12% Sr. Sub. Nts., Series B, 7/15/06 50,000 45,875
- -------------------------------------------------------------------------------------------------------------------
Ameristar Casinos, Inc., 10.50% Sr. Sub. Nts., Series B, 8/1/04 50,000 51,000
- -------------------------------------------------------------------------------------------------------------------
Bally Total Fitness Holding Corp., 9.875% Sr. Unsec. Sub. Nts.,
Series D, 10/15/07 50,000 48,750
</TABLE>
4 LifeSpan Diversified Income Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Gaming/Leisure (continued)
Booth Creek Ski Holdings, Inc., 12.50% Gtd. Sr. Exchangeable Nts., 3/15/07 $ 50,000 $ 36,375
- -------------------------------------------------------------------------------------------------------------------
Casino Magic of Louisiana Corp., 13% First Mtg. Nts., Series B, 8/15/03 75,000 85,031
- -------------------------------------------------------------------------------------------------------------------
Colorado Gaming & Entertainment Co., 12% Sr. Sec. Nts., 6/1/03 50,000 35,250
- -------------------------------------------------------------------------------------------------------------------
Florida Panthers Holdings, Inc., 9.875% Sr. Sub. Nts., 4/15/09 50,000 48,750
- -------------------------------------------------------------------------------------------------------------------
Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05 50,000 35,750
- -------------------------------------------------------------------------------------------------------------------
Harveys Casino Resorts, 10.625% Sr. Unsec. Sub. Nts., 6/1/06 50,000 51,875
- -------------------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 7.875% Sr. Nts., Series A, 8/1/05 50,000 46,500
- -------------------------------------------------------------------------------------------------------------------
Hollywood Park, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 2/15/07 50,000 49,812
- -------------------------------------------------------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 50,000 50,000
- -------------------------------------------------------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts., 8/15/08 50,000 49,250
- -------------------------------------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc., 8.75% Sr. Unsec. Nts., 4/15/09 50,000 46,250
- -------------------------------------------------------------------------------------------------------------------
Lady Luck Gaming Corp., 11.875% First Mtg. Nts., 3/1/01 50,000 50,625
- -------------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 8.125% Sr. Nts., 1/1/06 75,000 73,125
- -------------------------------------------------------------------------------------------------------------------
Park Place Entertainment Corp.:
7.875% Sr. Unsec. Sub. Nts., 12/15/05 50,000 48,125
8.50% Sr. Nts., 11/15/06 150,000 148,076
- -------------------------------------------------------------------------------------------------------------------
Players International, Inc., 10.875% Sr. Nts., 4/15/05(1) 50,000 52,750
- -------------------------------------------------------------------------------------------------------------------
Prime Hospitality Corp., 9.75% Sr. Sub. Nts., 4/1/07 75,000 74,625
- -------------------------------------------------------------------------------------------------------------------
Santa Fe Hotel, Inc., 11% Gtd. First Mtg. Nts., 12/15/00 50,000 48,750
- -------------------------------------------------------------------------------------------------------------------
Station Casinos, Inc., 9.75% Sr. Sub. Nts., 4/15/07 50,000 50,500
----------
1,227,044
- -------------------------------------------------------------------------------------------------------------------
Healthcare--0.7%
Columbia/HCA Healthcare Corp., 6.875% Nts., 7/15/01 145,000 141,186
- -------------------------------------------------------------------------------------------------------------------
Dade International, Inc., 11.125% Sr. Sub. Nts., 5/1/06 50,000 49,000
- -------------------------------------------------------------------------------------------------------------------
ICN Pharmaceuticals, Inc., 8.75% Sr. Nts., 11/15/08(5) 50,000 48,000
- -------------------------------------------------------------------------------------------------------------------
Paracelsus Healthcare Corp., 10% Sr. Unsec. Sub. Nts., 8/15/06 50,000 27,750
- -------------------------------------------------------------------------------------------------------------------
Playtex Products, Inc., 8.875% Sr. Nts., 7/15/04 50,000 50,375
----------
316,311
- -------------------------------------------------------------------------------------------------------------------
Information Technology--0.1%
Fisher Scientific International, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/08 50,000 48,187
- -------------------------------------------------------------------------------------------------------------------
Manufacturing--0.9%
Jackson Products, Inc., 9.50% Sr. Unsec. Sub. Nts., 4/15/05 50,000 46,250
- -------------------------------------------------------------------------------------------------------------------
Jordan Industries, Inc., 10.375% Sr. Nts., Series B, 8/1/07(1) 50,000 50,250
- -------------------------------------------------------------------------------------------------------------------
Titan Wheel International, Inc., 8.75% Sr. Sub. Nts., 4/1/07 50,000 41,312
- -------------------------------------------------------------------------------------------------------------------
U.S. Industries, Inc./USIAmerican Holdings, Inc./
USI Global Corp., 7.125% Sr. Unsec. Nts., 10/15/03 275,000 267,777
----------
405,589
- -------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Broadcasting--0.5%
Allbritton Communications Co., 8.875% Sr. Sub. Nts., Series B, 2/1/08 50,000 48,250
- -------------------------------------------------------------------------------------------------------------------
Interepublic National Radio Sales Corp., 10% Sr. Unsec. Sub. Nts., Series B, 7/1/08 75,000 72,188
- -------------------------------------------------------------------------------------------------------------------
RCN Corp., 0%/11.125% Sr. Unsec. Nts., 10/15/07(9) 50,000 35,375
- -------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 75,000 74,625
----------
230,438
</TABLE>
LifeSpan Diversified Income Portfolio 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Cable/Wireless Video--1.4%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 $ 50,000 $ 45,125
10.50% Sr. Unsec. Nts., Series B, 7/15/04 50,000 52,125
- -------------------------------------------------------------------------------------------------------------------
Century Communications Corp., Zero Coupon Sr. Disc. Nts., Series B, 8.50%, 1/15/08(4) 50,000 22,188
- -------------------------------------------------------------------------------------------------------------------
Charter Communication Holdings LLC/Charter Communication
Holdings Capital Corp.:
0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11(9) 50,000 29,563
8.625% Sr. Unsec. Nts., 4/1/09 50,000 46,438
- -------------------------------------------------------------------------------------------------------------------
Classic Cable, Inc., 9.375% Sr. Sub. Nts., Series B, 8/1/09 50,000 49,375
- -------------------------------------------------------------------------------------------------------------------
Comcast Corp., 9.125% Sr. Sub. Debs., 10/15/06 75,000 78,281
- -------------------------------------------------------------------------------------------------------------------
Diva Systems Corp., 0%/12.625% Sr. Disc. Nts., Series B, 3/1/08(9) 100,000 39,500
- -------------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 50,000 50,500
- -------------------------------------------------------------------------------------------------------------------
Falcon Holding Group LP, 0%/9.285% Sr. Disc. Debs., Series B, 4/15/10(9) 150,000 113,063
- -------------------------------------------------------------------------------------------------------------------
James Cable Partners LP, 10.75% Sr. Nts., Series B, 8/15/04 50,000 50,875
- -------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts., Series B, 2/15/08(9) 100,000 64,500
--------
641,533
- -------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Diversified Media--0.4%
Hollinger International Publishing, Inc., 9.25% Gtd. Sr. Sub. Nts., 3/15/07 50,000 49,750
- -------------------------------------------------------------------------------------------------------------------
Lamar Advertising Co., 8.625% Sr. Sub. Nts., 9/15/07(1) 50,000 49,250
- -------------------------------------------------------------------------------------------------------------------
MDC Communications Corp., 10.50% Sr. Sub. Nts., 12/1/06(1) 50,000 49,625
- -------------------------------------------------------------------------------------------------------------------
TV Guide, Inc., 8.125% Sr. Unsec. Sub. Nts., 3/1/09 50,000 50,125
--------
198,750
- -------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications--4.0%
Advanstar Communications, Inc., 9.25% Sr. Sub. Nts., 5/1/08 100,000 94,625
- -------------------------------------------------------------------------------------------------------------------
AT&T Capital Corp., 6.25% Medium-Term Nts., Series F, 5/15/01 225,000 222,712
- -------------------------------------------------------------------------------------------------------------------
CapRock Communications Corp., 11.50% Sr. Unsec. Nts., 5/1/09 50,000 51,313
- -------------------------------------------------------------------------------------------------------------------
Coaxial Communications, Inc., 10% Sr. Unsec. Nts., 8/15/06 50,000 49,250
- -------------------------------------------------------------------------------------------------------------------
Comcast UK Cable Partner Ltd., 0%/11.20% Sr. Disc. Debs., 11/15/07(9) 75,000 71,813
- -------------------------------------------------------------------------------------------------------------------
Diamond Cable Communications plc, 0%/10.75% Sr. Disc. Nts., 2/15/07(9) 50,000 41,250
- -------------------------------------------------------------------------------------------------------------------
e.spire Communications, Inc., 0%/13% Sr. Disc. Nts., 11/1/05(9) 50,000 26,813
- -------------------------------------------------------------------------------------------------------------------
Exodus Communications, Inc., 11.25% Sr. Nts., 7/1/08 50,000 51,875
- -------------------------------------------------------------------------------------------------------------------
Galaxy Telecom LP, 12.375% Sr. Sub. Nts., 10/1/05 75,000 79,875
- -------------------------------------------------------------------------------------------------------------------
Global Crossing Holdings Ltd., 9.125% Sr. Nts., 11/15/06(5) 50,000 49,688
- -------------------------------------------------------------------------------------------------------------------
Globix Corp., 13% Sr. Unsec. Nts., 5/1/05 50,000 50,750
- -------------------------------------------------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Gtd. Sr. Disc. Nts., 12/15/05(9) 50,000 37,250
- -------------------------------------------------------------------------------------------------------------------
Hermes Europe Railtel BV, 10.375% Sr. Unsec. Nts., 1/15/09 50,000 49,625
- -------------------------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 0%/11.625% Sr. Disc. Nts., 3/15/07(9) 75,000 49,125
- -------------------------------------------------------------------------------------------------------------------
International CableTel, Inc., 0%/11.50% Sr. Deferred Coupon Nts., Series B, 2/1/06(9) 100,000 91,000
- -------------------------------------------------------------------------------------------------------------------
IXC Communications, Inc., 9% Sr. Sub. Nts., 4/15/08(1) 50,000 50,750
- -------------------------------------------------------------------------------------------------------------------
Level 3 Communications, Inc., 9.125% Sr. Unsec. Nts., 5/1/08 50,000 47,375
- -------------------------------------------------------------------------------------------------------------------
Metromedia Fiber Network, Inc., 10% Sr. Unsec. Nts., Series B, 11/15/08 50,000 51,375
- -------------------------------------------------------------------------------------------------------------------
PSINet, Inc., 11.50% Sr. Unsec. Nts., 11/1/08 50,000 52,500
- -------------------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc., 0%/9.47% Sr. Disc. Nts., 10/15/07(9) 50,000 40,750
- -------------------------------------------------------------------------------------------------------------------
RSL Communications plc, 9.125% Sr. Unsec. Nts., 3/1/08 50,000 44,000
</TABLE>
6 LifeSpan Diversified Income Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications (continued)
Telewest Communications plc:
0%/11% Sr. Disc. Debs., 10/1/07(9) $ 50,000 $ 46,875
9.625% Sr. Debs., 10/1/06 50,000 50,750
- -------------------------------------------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/07 50,000 48,500
- -------------------------------------------------------------------------------------------------------------------
Time Warner Telecom LLC, 9.75% Sr. Nts., 7/15/08 50,000 51,750
- -------------------------------------------------------------------------------------------------------------------
US West Capital Funding, Inc., 6.125% Nts., 7/15/02 225,000 219,446
- -------------------------------------------------------------------------------------------------------------------
Winstar Communications, Inc., 0%/14% Sr. Disc. Nts., 10/15/05(9) 50,000 48,750
- -------------------------------------------------------------------------------------------------------------------
Worldwide Fiber, Inc., 12% Sr. Nts., 8/1/09(5) 50,000 51,750
----------
1,821,535
- -------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Wireless Communications--0.7%
Clearnet Communications, Inc., 0%/14.75% Sr. Disc. Nts., 12/15/05(9) 50,000 49,313
- -------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc., 0%/14% Sr. Disc. Nts., Series B, 6/1/06(9) 50,000 44,375
- -------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 9.75% Sr. Disc. Nts., 8/15/04 50,000 51,750
- -------------------------------------------------------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 50,000 51,375
- -------------------------------------------------------------------------------------------------------------------
Sprint Spectrum LP/Sprint Spectrum Finance Corp., 11% Sr. Nts., 8/15/06 50,000 55,282
- -------------------------------------------------------------------------------------------------------------------
Western Wireless Corp., 10.50% Sr. Sub. Nts., 2/1/07 50,000 52,750
----------
304,845
- -------------------------------------------------------------------------------------------------------------------
Metals/Minerals--0.5%
Alcan Aluminum Ltd., 9.625% Debs., 7/15/19(1) 35,000 35,350
- -------------------------------------------------------------------------------------------------------------------
Algoma Steel, Inc., 12.375% First Mtg. Nts., 7/15/05 50,000 47,250
- -------------------------------------------------------------------------------------------------------------------
Gulf States Steel, Inc. (Alabama), 13.50% First Mtg. Nts., Series B, 4/15/03(7)(10) 50,000 5,250
- -------------------------------------------------------------------------------------------------------------------
International Utility Structures, Inc., 10.75% Sr. Sub. Nts., 2/1/08 50,000 42,250
- -------------------------------------------------------------------------------------------------------------------
National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09 75,000 77,625
- -------------------------------------------------------------------------------------------------------------------
WCI Steel, Inc., 10% Sr. Nts., Series B, 12/1/04 25,000 25,500
----------
233,225
- -------------------------------------------------------------------------------------------------------------------
Retail--0.9%
Federated Department Stores, Inc., 6.125% Cv. Sub. Nts., 9/1/01(3) 225,000 220,494
- -------------------------------------------------------------------------------------------------------------------
K Mart Corp., 7.75% Debs., 10/1/12 50,000 44,489
- -------------------------------------------------------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 50,000 48,750
- -------------------------------------------------------------------------------------------------------------------
Price/Costco Cos., Inc., 7.125% Sr. Nts., 6/15/05 100,000 99,141
----------
412,874
- -------------------------------------------------------------------------------------------------------------------
Service--3.0%
Advance Holding Corp., 0%/12.875% Sr. Disc. Nts., 4/15/09(9) 100,000 53,000
- -------------------------------------------------------------------------------------------------------------------
Advance Stores Co., Inc., 10.25% Sr. Unsec. Sub. Nts., Series B, 4/15/08 50,000 43,750
- -------------------------------------------------------------------------------------------------------------------
Applied Extrusion Technologies, Inc., 11.50% Sr. Nts., Series B, 4/1/02 50,000 51,500
- -------------------------------------------------------------------------------------------------------------------
Carrier1 International SA, 13.25% Sr. Nts., Series B, 2/15/09 50,000 50,250
- -------------------------------------------------------------------------------------------------------------------
Coinstar, Inc., 13% Sr. Disc. Nts., 10/1/06 50,000 50,313
- -------------------------------------------------------------------------------------------------------------------
Employee Solutions, Inc., 10% Sr. Unsec. Nts., Series B, 10/15/04 50,000 30,250
- -------------------------------------------------------------------------------------------------------------------
Grove Holdings LLC/Grove Holdings Capital, Inc., 0%/11.625% Sr. Unsec.
Disc. Debs., 5/1/09(9) 100,000 10,000
- -------------------------------------------------------------------------------------------------------------------
Jordan Telecommunication Products, Inc., 9.875% Sr. Nts., Series B, 8/1/07(1) 50,000 54,250
- -------------------------------------------------------------------------------------------------------------------
KSL Recreation Group, Inc., 10.25% Sr. Sub. Nts., 5/1/07(1) 50,000 49,250
- -------------------------------------------------------------------------------------------------------------------
Logix Communications Enterprises, Inc., 12.25% Sr. Unsec. Nts., 6/15/08(1) 50,000 36,250
- -------------------------------------------------------------------------------------------------------------------
Maxim Group, Inc. (The), 9.25% Sr. Sub. Nts., Series B, 10/15/07(1) 50,000 40,125
</TABLE>
LifeSpan Diversified Income Portfolio 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Service (continued)
Mrs. Fields Holding Co., Units (each unit consists of $1,000 principal
amount of 0%/14% sr. sec. discount nts., 12/1/05 and warrants to purchase shares
of common stock)(1)(6)(9) $100,000 $ 56,500
- -------------------------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 8.375% Sr. Unsec. Sub. Nts., Series B, 7/1/08 75,000 72,375
- -------------------------------------------------------------------------------------------------------------------
Production Resource Group, LLC/PRG Finance Corp., 11.50% Sr.
Unsec. Sub. Nts., 1/15/08 50,000 44,750
- -------------------------------------------------------------------------------------------------------------------
Safety-Kleen Corp., 9.25% Sr. Unsec. Nts., 5/15/09 50,000 48,625
- -------------------------------------------------------------------------------------------------------------------
Scotia Pacific Co. LLC, 6.55% Timber Collaterized Nts., Series B, Cl. A-1, 1/20/07 213,539 201,312
- -------------------------------------------------------------------------------------------------------------------
Simonds Industries, Inc., 10.25% Sr. Unsec. Sub. Nts., 7/1/08 75,000 60,375
- -------------------------------------------------------------------------------------------------------------------
Sun Co., Inc., 7.95% Debs., 12/15/01 75,000 75,729
- -------------------------------------------------------------------------------------------------------------------
Thermadyne Holdings Corp., 0%/12.50% Sr. Disc. Debs., 6/1/08(9) 100,000 46,250
- -------------------------------------------------------------------------------------------------------------------
Tyco International Group SA, 6.125% Unsec. Nts., 6/15/01 250,000 245,780
- -------------------------------------------------------------------------------------------------------------------
USI American Holdings, Inc., 7.25% Sr. Nts., Series B, 12/1/06 70,000 66,092
-----------
1,386,726
- -------------------------------------------------------------------------------------------------------------------
Transportation--1.3%
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., Series B, 7/15/07 50,000 19,625
- -------------------------------------------------------------------------------------------------------------------
Canadian Airlines Corp., 12.25%, Sr. Nts., 8/1/06 50,000 27,250
- -------------------------------------------------------------------------------------------------------------------
Collins & Aikman Floorcoverings, Inc., 10% Sr. Sub. Nts., Series B, 1/15/07 50,000 49,250
- -------------------------------------------------------------------------------------------------------------------
CSX Corp., 7.05% Debs., 5/1/02 85,000 84,607
- -------------------------------------------------------------------------------------------------------------------
Federal-Mogul Corp., 7.50% Nts., 7/1/04 150,000 142,143
- -------------------------------------------------------------------------------------------------------------------
Norfolk Southern Corp., 7.35% Nts., 5/15/07 75,000 73,428
- -------------------------------------------------------------------------------------------------------------------
Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., Series D, 6/15/07(1) 50,000 47,250
- -------------------------------------------------------------------------------------------------------------------
Trans World Airlines, Inc., 11.375% Unsec. Nts., 3/1/06 50,000 20,500
- -------------------------------------------------------------------------------------------------------------------
Union Pacific Corp., 7% Nts., 6/15/00 145,000 145,467
-----------
609,520
- -------------------------------------------------------------------------------------------------------------------
Utility--1.4%
AES Corp. (The), 8.50% Sr. Sub. Nts., 11/1/07 50,000 47,000
- -------------------------------------------------------------------------------------------------------------------
Northern Illinois Gas Co., 6.45% First Mtg. Bonds, 8/1/01 240,000 237,636
- -------------------------------------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 100,000 94,524
- -------------------------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The), 6.20% Nts., 8/1/02 275,000 268,327
-----------
647,487
-----------
Total Corporate Bonds and Notes (Cost $14,223,794) 13,347,402
Shares
===================================================================================================================
Preferred Stocks--0.1%
- -------------------------------------------------------------------------------------------------------------------
PRIMEDIA, Inc., 10% Cum., Series D, Non-Vtg.(1) (Cost $50,000) 500 48,625
===================================================================================================================
Common Stocks--19.0%
- -------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--1.0%
General Dynamics Corp. 6,500 342,875
- -------------------------------------------------------------------------------------------------------------------
Northrop Grumman Corp. 1,800 97,312
-----------
440,187
</TABLE>
8 LifeSpan Diversified Income Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Chemicals--0.5%
Dexter Corp. 3,900 $ 155,025
- -------------------------------------------------------------------------------------------------------------------
Ethyl Corp. 12,200 48,037
- -------------------------------------------------------------------------------------------------------------------
IMC Global, Inc. 2,834 46,407
----------
249,469
- -------------------------------------------------------------------------------------------------------------------
Consumer Durables--0.3%
Stanley Works (The) 4,900 147,612
- -------------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--0.3%
Kimberly-Clark Corp. 2,200 143,550
- -------------------------------------------------------------------------------------------------------------------
Energy--3.2%
Abraxas Petroleum Corp.(10) 2,980 2,794
- -------------------------------------------------------------------------------------------------------------------
Atlantic Richfield Co. 2,500 216,250
- -------------------------------------------------------------------------------------------------------------------
BP Amoco plc, ADR 4,440 263,347
- -------------------------------------------------------------------------------------------------------------------
Chevron Corp. 2,500 216,562
- -------------------------------------------------------------------------------------------------------------------
Exxon Mobil Corp. 5,884 474,030
- -------------------------------------------------------------------------------------------------------------------
Murphy Oil Corp. 2,300 131,962
- -------------------------------------------------------------------------------------------------------------------
Occidental Petroleum Corp. 4,700 101,637
- -------------------------------------------------------------------------------------------------------------------
Texaco, Inc. 1,000 54,312
----------
1,460,894
- -------------------------------------------------------------------------------------------------------------------
Financial--4.6%
Aegon NV 2,082 198,831
- -------------------------------------------------------------------------------------------------------------------
American General Corp. 2,000 151,750
- -------------------------------------------------------------------------------------------------------------------
Camden Property Trust 4,800 131,400
- -------------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 1,600 124,300
- -------------------------------------------------------------------------------------------------------------------
Chubb Corp. 1,100 61,944
- -------------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 3,000 166,687
- -------------------------------------------------------------------------------------------------------------------
Cornerstone Properties, Inc. 8,400 122,850
- -------------------------------------------------------------------------------------------------------------------
First Union Corp. 1,000 32,812
- -------------------------------------------------------------------------------------------------------------------
Greenpoint Financial Corp. 600 14,287
- -------------------------------------------------------------------------------------------------------------------
Healthcare Realty Trust, Inc. 4,684 73,187
- -------------------------------------------------------------------------------------------------------------------
HRPT Properties Trust 6,400 57,600
- -------------------------------------------------------------------------------------------------------------------
HSB Group, Inc. 3,750 126,797
- -------------------------------------------------------------------------------------------------------------------
Jefferson-Pilot Corp. 1,500 102,375
- -------------------------------------------------------------------------------------------------------------------
Lincoln National Corp. 4,200 168,000
- -------------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc. 200 19,138
- -------------------------------------------------------------------------------------------------------------------
Meditrust Corp., Paired Stock 3,724 20,482
- -------------------------------------------------------------------------------------------------------------------
Reckson Associates Realty Corp., Cl. B 2,817 64,087
- -------------------------------------------------------------------------------------------------------------------
Roslyn Bancorp, Inc. 700 12,950
- -------------------------------------------------------------------------------------------------------------------
Senior Housing Properties Trust 640 7,960
- -------------------------------------------------------------------------------------------------------------------
St. Paul Cos., Inc. 1,100 37,056
- -------------------------------------------------------------------------------------------------------------------
UnionBanCal Corp. 3,200 126,200
- -------------------------------------------------------------------------------------------------------------------
Wachovia Corp. 700 47,600
- -------------------------------------------------------------------------------------------------------------------
Wells Fargo Co. 3,100 125,356
- -------------------------------------------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 2,600 134,875
----------
2,128,524
</TABLE>
LifeSpan Diversified Income Portfolio 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Food & Drug--0.2%
Piccadilly Cafeterias, Inc. 7,000 $ 28,000
- -------------------------------------------------------------------------------------------------------------------
SUPERVALU, Inc. 3,200 64,000
--------
92,000
- -------------------------------------------------------------------------------------------------------------------
Food/Tobacco--0.5%
Anheuser-Busch Cos., Inc. 600 42,525
- -------------------------------------------------------------------------------------------------------------------
Flowers Industries, Inc. 1,400 22,313
- -------------------------------------------------------------------------------------------------------------------
Heinz (H.J.) Co. 1,400 55,738
- -------------------------------------------------------------------------------------------------------------------
Sara Lee Corp. 2,200 48,538
- -------------------------------------------------------------------------------------------------------------------
UST, Inc. 2,100 52,894
--------
222,008
- -------------------------------------------------------------------------------------------------------------------
Forest Products/Containers--0.4%
Georgia Pacific Group/Timber Group 1,000 24,625
- -------------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co. 2,200 157,988
--------
182,613
- -------------------------------------------------------------------------------------------------------------------
Manufacturing--0.6%
Minnesota Mining & Manufacturing Co. 1,500 146,813
- -------------------------------------------------------------------------------------------------------------------
New England Business Service, Inc. 4,700 114,856
- -------------------------------------------------------------------------------------------------------------------
ROHN Industries, Inc.(10) 12,000 34,500
--------
296,169
- -------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Diversified Media--0.2%
Deluxe Corp. 3,400 93,288
- -------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications--0.9%
ALLTELL Corp. 4,000 330,750
- -------------------------------------------------------------------------------------------------------------------
AT&T Corp. 1,300 65,975
- -------------------------------------------------------------------------------------------------------------------
Globix Corp., Restricted(10) 176 8,844
- -------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc., Cl. B(10) 429 14,103
--------
419,672
- -------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Wireless Communications--0.4%
Price Communications Corp. 6,180 171,881
- -------------------------------------------------------------------------------------------------------------------
Metals/Minerals--0.2%
Carpenter Technology Corp. 3,100 85,056
- -------------------------------------------------------------------------------------------------------------------
Retail--0.6%
Brown Shoe Co., Inc. 6,400 90,400
- -------------------------------------------------------------------------------------------------------------------
Genuine Parts Co. 1,500 37,219
- -------------------------------------------------------------------------------------------------------------------
May Department Stores Co. 700 22,575
- -------------------------------------------------------------------------------------------------------------------
Sherwin-Williams Co. 5,800 121,800
--------
271,994
- -------------------------------------------------------------------------------------------------------------------
Transportation--0.6%
GATXCorp. 8,200 276,750
</TABLE>
10 LifeSpan Diversified Income Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Utilities--4.5%
BellSouth Corp. 2,600 $ 121,713
- -------------------------------------------------------------------------------------------------------------------
Carolina Power & Light Co. 900 27,394
- -------------------------------------------------------------------------------------------------------------------
Conectiv, Inc. 5,400 90,788
- -------------------------------------------------------------------------------------------------------------------
Duke Energy Corp. 5,186 259,948
- -------------------------------------------------------------------------------------------------------------------
El Paso Energy Corp. 11,700 454,106
- -------------------------------------------------------------------------------------------------------------------
FPL Group, Inc. 3,900 166,969
- -------------------------------------------------------------------------------------------------------------------
Kansas City Power & Light Co. 5,000 110,313
- -------------------------------------------------------------------------------------------------------------------
Montana Power Co. 3,200 115,400
- -------------------------------------------------------------------------------------------------------------------
National Fuel Gas Co. 3,700 172,050
- -------------------------------------------------------------------------------------------------------------------
NICOR, Inc. 700 22,750
- -------------------------------------------------------------------------------------------------------------------
Peco Energy Co. 2,700 93,825
- -------------------------------------------------------------------------------------------------------------------
Potomac Electric Power Co. 1,300 29,819
- -------------------------------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 1,600 55,700
- -------------------------------------------------------------------------------------------------------------------
Questar Corp. 7,000 105,000
- -------------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc. 3,400 77,775
- -------------------------------------------------------------------------------------------------------------------
Texas Utilities Co. 1,400 49,788
- -------------------------------------------------------------------------------------------------------------------
Unicom Corp. 1,500 50,250
- -------------------------------------------------------------------------------------------------------------------
Western Resources, Inc. 3,900 66,300
----------
2,069,888
----------
Total Common Stocks (Cost $8,456,190) 8,751,555
Units
===================================================================================================================
Rights, Warrants and Certificates--0.0%
- -------------------------------------------------------------------------------------------------------------------
Abraxas Petroleum Corp. Wts., Exp. 11/1/04 2,980 447
- -------------------------------------------------------------------------------------------------------------------
Carrier1 International SAWts., Exp. 2/15/09(1) 50 250
- -------------------------------------------------------------------------------------------------------------------
Diva Systems Corp. Wts., Exp. 3/1/08(1) 300 2,400
- -------------------------------------------------------------------------------------------------------------------
Primestar, Inc., Share ARP Rts., Exp. 5/30/00(1) 390 1,953
----------
Total Rights, Warrants and Certificates (Cost $447) 5,050
</TABLE>
LifeSpan Diversified Income Portfolio 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
====================================================================================================================
Repurchase Agreements--15.2%
- --------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Zion First National Bank, 3%, dated
12/31/99, to be repurchased at $6,982,745 on 1/3/00, collateralized by
U.S. Treasury Nts., 7.25%, 8/15/04, with a value of $7,124,837
(Cost $6,981,000) $6,981,000 $ 6,981,000
- --------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $47,087,854) 99.2% 45,679,692
- --------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.8 354,131
---------- -----------
Net Assets 100.0% $46,033,823
========== ===========
</TABLE>
1. Identifies issues considered to be illiquid or restricted--See Note 5 of
Notes to Financial Statements.
2. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
3. Represents the current interest rate for a variable or increasing rate
security.
4. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
5. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $273,791 or 0.59% of the Fund's net assets
as of December 31, 1999.
6. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, principal amount disclosed represents total
underlying principal.
7. Issuer is in default.
8. Interest or dividend is paid-in-kind.
9. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
10. Non-income producing security.
See accompanying Notes to Financial Statements.
12 LifeSpan Diversified Income Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
========================================================================================
Assets
Investments, at value (including repurchase agreement of $6,981,000)
(cost $47,087,854)--see accompanying statement $45,679,692
- ----------------------------------------------------------------------------------------
Cash 1,139
- ----------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 574,167
Other 1,967
- ----------------------------------------------------------------------------------------
Total assets 46,256,965
========================================================================================
Liabilities
Payables and other liabilities:
Shares of capital stock redeemed 201,101
Shareholder reports 10,487
Directors' compensation 223
Transfer and shareholder servicing agent fees 184
Other 11,147
-----------
Total liabilities 223,142
========================================================================================
Net Assets $46,033,823
===========
========================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 42,061
- ----------------------------------------------------------------------------------------
Additional paid-in capital 44,713,178
- ----------------------------------------------------------------------------------------
Undistributed net investment income 2,536,271
- ----------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 108,043
- ----------------------------------------------------------------------------------------
Net unrealized depreciation on investments (1,365,730)
-----------
Net assets--applicable to 42,060,419 shares of capital
stock outstanding $46,033,823
===========
========================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $1.09
</TABLE>
See accompanying Notes to Financial Statements.
LifeSpan Diversified Income Portfolio 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
========================================================================================
Investment Income
Interest $ 2,613,203
- ----------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $727) 308,401
-----------
Total income 2,921,604
========================================================================================
Expenses
Management fees 343,103
- ----------------------------------------------------------------------------------------
Accounting service fees 15,000
- ----------------------------------------------------------------------------------------
Directors' compensation 2,342
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,103
- ----------------------------------------------------------------------------------------
Other 18,443
-----------
Total expenses 380,991
Less expenses paid indirectly (1,971)
-----------
Net expenses 379,020
========================================================================================
Net Investment Income 2,542,584
========================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain on investments 116,628
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (2,769,970)
-----------
Net realized and unrealized loss (2,653,342)
========================================================================================
Net Decrease in Net Assets Resulting from Operations $ (110,758)
===========
</TABLE>
See accompanying Notes to Financial Statements.
14 LifeSpan Diversified Income Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
================================================================================================
Operations
Net investment income $ 2,542,584 $ 2,160,036
- ------------------------------------------------------------------------------------------------
Net realized gain 116,628 570,917
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (2,769,970) (928,198)
----------- -----------
Net increase (decrease) in net assets resulting from operations (110,758) 1,802,755
================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (2,157,524) (1,661,998)
- ------------------------------------------------------------------------------------------------
Distributions from net realized gain (562,664) (294,680)
================================================================================================
Capital Stock Transactions
Net increase in net assets resulting from
capital stock transactions 5,185,688 9,717,189
================================================================================================
Net Assets
Total increase 2,354,742 9,563,266
- ------------------------------------------------------------------------------------------------
Beginning of period 43,679,081 34,115,815
----------- -----------
End of period (including undistributed net investment
income of $2,536,271 and $2,150,194, respectively) $46,033,823 $43,679,081
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
LifeSpan Diversified Income Portfolio 15
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995(2)
<S> <C> <C> <C> <C> <C>
=========================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $1.17 $1.18 $1.10 $1.04 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .06 .06 .06 .06 .02
Net realized and unrealized gain (loss) (.07) -- .07 .01 .04
- -------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (.01) .06 .13 .07 .06
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.06) (.06) (.05) (.01) (.02)
Distributions from net realized gain (.01) (.01) --(3) -- --
- -------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.07) (.07) (.05) (.01) (.02)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.09 $1.17 $1.18 $1.10 $1.04
===== ===== ===== ===== =====
=========================================================================================================================
Total Return, at Net Asset Value(4) (0.85)% 4.88% 12.51% 6.93% 5.69%
=========================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $46,034 $43,679 $34,116 $25,274 $21,176
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $45,754 $38,422 $28,503 $22,854 $20,364(5)
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (6)
Net investment income 5.56% 5.62% 5.88% 5.84% 5.11%
Expenses 0.83% 0.84%(7) 0.86(7) 1.07%(7) 1.50%(7)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 22% 36% 34% 80% 41%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund.
2. For the period from September 1, 1995 (commencement of operations) to
December 31, 1995.
3. Less than $0.005 per share.
4. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Total returns are not annualized for periods less than one
full year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of these
charges would reduce the total return figures for all periods shown.
5. This information is not covered by the auditors' opinion.
6. Annualized for periods less than one full year.
7. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
8. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
December 31, 1999, were $13,563,254 and $8,486,475, respectively.
See accompanying Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
LifeSpan Diversified Income Portfolio (the Fund) is a series of Panorama Series
Fund, Inc. (the Company) which is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company. The
Fund's investment objective is to seek high current income, with opportunities
for capital appreciation, by investing in a strategically allocated portfolio
consisting primarily of bonds. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). Shares of the Fund are sold only to
separate accounts of life insurance companies, a majority of such shares are
held by separate accounts of Massachusetts Mutual Life Insurance Co., an
affiliate of the investment advisor. The following is a summary of significant
accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
Security Credit Risk. The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose of securities
whose issuers subsequently default. As of December 31, 1999, securities with an
aggregate market value of $5,750, representing 0.01% of the Fund's net assets,
were in default.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
LifeSpan Diversified Income Portfolio 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers to shareholders.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect an
increase in undistributed net investment income of $1,017. Accumulated net
realized gain on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with federal
income tax requirements. Realized gains and losses on investments and options
written and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at
the current market value of the underlying security. Interest on payment-in-kind
debt instruments is accrued as income at the coupon rate and a market adjustment
is made periodically.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Capital Stock
The Fund has authorized 250 million shares of $0.001 par value of capital stock.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
------------------------------- -----------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 6,696,528 $ 7,490,719 8,117,360 $ 9,373,119
Dividends and/or distributions reinvested 2,495,585 2,720,188 1,701,459 1,956,678
Redeemed (4,547,129) (5,025,219) (1,391,118) (1,612,608)
--------- ----------- --------- -----------
Net increase 4,644,984 $ 5,185,688 8,427,701 $ 9,717,189
========= =========== ========= ===========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized depreciation on securities of $1,408,162
was composed of gross appreciation of $1,486,284, and gross depreciation of
$2,894,446.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund. The annual fees are 0.75% of the
Fund's average daily net assets up to $250 million and 0.65% on net assets over
$250 million. The Fund's management fee for the year ended December 31, 1999 was
0.75% of average annual net assets.
- --------------------------------------------------------------------------------
Accounting Fees. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000, plus out-of-pocket costs and expenses reasonably
incurred.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer agent for the Fund and is responsible for maintaining the
shareholder registry and shareholder accounting records for the Fund. OFS
provides these services for cost.
================================================================================
5. Illiquid or Restricted Securities
As of December 31, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Directors as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no more
than 15% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of December 31, 1999 was $795,757,
which represents 1.73% of the Fund's net assets.
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Directors and Shareholders of LifeSpan Balanced Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of LifeSpan Balanced Portfolio (which is a series
of Panorama Series Fund, Inc.) as of December 31, 1999, the related statement of
operations for the year then ended, the statements of changes in net assets for
the years ended December 31, 1999 and 1998 and the financial highlights for the
period January 1, 1996 to December 31, 1999. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the
period September 1, 1995, to December 31, 1995, were audited by other auditors
whose report dated February 15, 1996, expressed an unqualified opinion on this
information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of LifeSpan
Balanced Portfolio as of December 31, 1999, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
====================================================================================================================
Common Stocks--60.0%
- --------------------------------------------------------------------------------------------------------------------
Basic Materials--1.7%
- --------------------------------------------------------------------------------------------------------------------
Chemicals--0.7%
Dexter Corp. 4,700 $186,825
- --------------------------------------------------------------------------------------------------------------------
Dow Chemical Co. 1,100 146,987
- --------------------------------------------------------------------------------------------------------------------
Ethyl Corp. 14,400 56,700
- --------------------------------------------------------------------------------------------------------------------
Fuji Photo Film Co. 4,000 145,945
- --------------------------------------------------------------------------------------------------------------------
IMC Global, Inc. 2,834 46,407
- --------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co. 2,100 85,444
--------
668,308
- --------------------------------------------------------------------------------------------------------------------
Metals--0.3%
Broken Hill Proprietary Co. Ltd.(1) 14,000 183,969
- --------------------------------------------------------------------------------------------------------------------
Carpenter Technology Corp. 3,600 98,775
--------
282,744
- --------------------------------------------------------------------------------------------------------------------
Paper--0.7%
Buhrmann NV 10,000 150,457
- --------------------------------------------------------------------------------------------------------------------
Georgia Pacific Group 1,500 76,125
- --------------------------------------------------------------------------------------------------------------------
Georgia Pacific Group/Timber Group 2,300 56,637
- --------------------------------------------------------------------------------------------------------------------
Louisiana-Pacific Corp. 2,600 37,050
- --------------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co. 4,400 315,975
--------
636,244
- --------------------------------------------------------------------------------------------------------------------
Capital Goods--7.9%
- --------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.7%
General Dynamics Corp. 10,600 559,150
- --------------------------------------------------------------------------------------------------------------------
Northrop Grumman Corp. 3,000 162,187
--------
721,337
- --------------------------------------------------------------------------------------------------------------------
Electrical Equipment--0.9%
Amphenol Corp., Cl. A(1) 2,300 153,094
- --------------------------------------------------------------------------------------------------------------------
Integrated Device Technology, Inc.(1) 1,400 40,600
- --------------------------------------------------------------------------------------------------------------------
Kemet Corp.(1) 4,300 193,769
- --------------------------------------------------------------------------------------------------------------------
Power Integrations, Inc.(1) 4,400 210,925
- --------------------------------------------------------------------------------------------------------------------
Rockwell International Corp. 800 38,300
- --------------------------------------------------------------------------------------------------------------------
SPX Corp.(1) 2,300 185,869
--------
822,557
- --------------------------------------------------------------------------------------------------------------------
Industrial Services--2.8%
Capita Group plc 16,000 290,790
- --------------------------------------------------------------------------------------------------------------------
Forrester Research, Inc.(1) 3,400 234,175
- --------------------------------------------------------------------------------------------------------------------
Hays plc 20,000 318,577
- --------------------------------------------------------------------------------------------------------------------
Mobile Mini, Inc.(1) 5,000 107,500
- --------------------------------------------------------------------------------------------------------------------
New England Business Service, Inc. 5,300 129,519
- --------------------------------------------------------------------------------------------------------------------
Professional Detailing, Inc.(1) 4,100 122,744
- --------------------------------------------------------------------------------------------------------------------
Quanta Services, Inc.(1) 3,100 87,575
- --------------------------------------------------------------------------------------------------------------------
Secom Co. Ltd. 4,000 440,184
- --------------------------------------------------------------------------------------------------------------------
Securitas AB, B Shares 8,950 161,953
</TABLE>
2 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Industrial Services (continued)
Source Information Management Co. (The)(1) 6,300 $ 105,525
- -----------------------------------------------------------------------------------------------------------------------
Tetra Tech, Inc.(1) 7,508 115,435
- -----------------------------------------------------------------------------------------------------------------------
United Rentals, Inc.(1) 5,000 85,625
- -----------------------------------------------------------------------------------------------------------------------
Valassis Communications, Inc.(1) 1,200 50,700
- -----------------------------------------------------------------------------------------------------------------------
Waste Connections, Inc.(1) 5,500 79,406
- -----------------------------------------------------------------------------------------------------------------------
Whittman-Hart, Inc.(1) 4,100 219,862
- -----------------------------------------------------------------------------------------------------------------------
Zomax, Inc.(1) 3,800 171,950
----------
2,721,520
- -----------------------------------------------------------------------------------------------------------------------
Manufacturing--3.5%
Asyst Technologies, Inc.(1) 4,700 308,144
- -----------------------------------------------------------------------------------------------------------------------
Atlas Copco AB, B Shares 5,142 146,215
- -----------------------------------------------------------------------------------------------------------------------
Avery-Dennison Corp. 800 58,300
- -----------------------------------------------------------------------------------------------------------------------
Ball Corp. 800 31,500
- -----------------------------------------------------------------------------------------------------------------------
BBA Group plc 21,000 169,628
- -----------------------------------------------------------------------------------------------------------------------
Brambles Industries Ltd. 5,000 138,374
- -----------------------------------------------------------------------------------------------------------------------
Briggs & Stratton Corp. 1,800 96,525
- -----------------------------------------------------------------------------------------------------------------------
Cooper Industries, Inc. 1,700 68,744
- -----------------------------------------------------------------------------------------------------------------------
Crane Co. 2,200 43,725
- -----------------------------------------------------------------------------------------------------------------------
Dover Corp. 2,400 108,900
- -----------------------------------------------------------------------------------------------------------------------
Eaton Corp. 500 36,312
- -----------------------------------------------------------------------------------------------------------------------
Honeywell International, Inc. 4,237 244,422
- -----------------------------------------------------------------------------------------------------------------------
Mannesmann AG 1,950 474,920
- -----------------------------------------------------------------------------------------------------------------------
Miller (Herman), Inc. 1,900 43,700
- -----------------------------------------------------------------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 3,700 362,137
- -----------------------------------------------------------------------------------------------------------------------
NetOptix Corp.(1) 3,800 253,650
- -----------------------------------------------------------------------------------------------------------------------
Parker-Hannifin Corp. 1,300 66,706
- -----------------------------------------------------------------------------------------------------------------------
PRI Automation, Inc.(1) 4,000 268,500
- -----------------------------------------------------------------------------------------------------------------------
RadiSys Corp.(1) 4,200 214,200
- -----------------------------------------------------------------------------------------------------------------------
ROHN Industries, Inc.(1) 12,000 34,500
- -----------------------------------------------------------------------------------------------------------------------
Textron, Inc. 900 69,019
- -----------------------------------------------------------------------------------------------------------------------
United Technologies Corp. 2,800 182,000
----------
3,420,121
- -----------------------------------------------------------------------------------------------------------------------
Communication Services--5.8%
- -----------------------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--3.6%
ADC Telecommunications, Inc.(1) 1,000 72,562
- -----------------------------------------------------------------------------------------------------------------------
ALLTELL Corp. 7,100 587,081
- -----------------------------------------------------------------------------------------------------------------------
Asia Satellite Telecommunications Holdings Ltd. 60,000 189,490
- -----------------------------------------------------------------------------------------------------------------------
AT&T Corp. 4,300 218,225
- -----------------------------------------------------------------------------------------------------------------------
China Telecom (Hong Kong) Ltd.(1) 50,000 312,600
- -----------------------------------------------------------------------------------------------------------------------
Ericsson LM, B Shares 6,000 385,641
- -----------------------------------------------------------------------------------------------------------------------
Globix Corp., Restricted(1) 352 17,688
- -----------------------------------------------------------------------------------------------------------------------
KPN NV 2,700 263,304
- -----------------------------------------------------------------------------------------------------------------------
L-3 Communications Holdings, Inc.(1) 1,300 54,112
</TABLE>
LifeSpan Balanced Portfolio 3
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance (continued)
Matsushita Communication Industrial Co. 2,000 $ 528,221
- -----------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc., Cl. B(1) 1,072 35,242
- -----------------------------------------------------------------------------------------------------------------------
Nippon Comsys Corp. 9,000 186,638
- -----------------------------------------------------------------------------------------------------------------------
Nokia Oyj 2,400 434,765
- -----------------------------------------------------------------------------------------------------------------------
Tut Systems, Inc.(1) 2,800 150,150
----------
3,435,719
- -----------------------------------------------------------------------------------------------------------------------
Telephone Utilities--1.1%
BellSouth Corp. 6,000 280,875
- -----------------------------------------------------------------------------------------------------------------------
Energis plc(1) 5,000 240,225
- -----------------------------------------------------------------------------------------------------------------------
Hellenic Telecommunication Organization SA 6,400 152,088
- -----------------------------------------------------------------------------------------------------------------------
Telefonica SA(1) 14,323 357,484
----------
1,030,672
- -----------------------------------------------------------------------------------------------------------------------
Telecommunications: Wireless--1.1%
NTT Mobile Communications Network, Inc. 12 461,313
- -----------------------------------------------------------------------------------------------------------------------
Price Communications Corp. 12,360 343,762
- -----------------------------------------------------------------------------------------------------------------------
Proxim, Inc.(1) 2,500 275,000
----------
1,080,075
- -----------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--5.7%
- -----------------------------------------------------------------------------------------------------------------------
Autos & Housing--1.2%
Bridgestone Corp. 7,000 154,064
- -----------------------------------------------------------------------------------------------------------------------
Cheung Kong (Holdings) Ltd.(1) 11,000 139,738
- -----------------------------------------------------------------------------------------------------------------------
Cooper Tire & Rubber Co. 1,800 28,012
- -----------------------------------------------------------------------------------------------------------------------
Ethan Allen Interiors, Inc. 1,500 48,094
- -----------------------------------------------------------------------------------------------------------------------
Fortune Brands, Inc. 1,200 39,675
- -----------------------------------------------------------------------------------------------------------------------
Genuine Parts Co. 5,600 138,950
- -----------------------------------------------------------------------------------------------------------------------
Lafarge SA 1,700 197,778
- -----------------------------------------------------------------------------------------------------------------------
Masco Corp. 2,900 73,587
- -----------------------------------------------------------------------------------------------------------------------
Overseas Union Enterprise Ltd. 17,500 58,841
- -----------------------------------------------------------------------------------------------------------------------
Stanley Works (The) 7,000 210,875
- -----------------------------------------------------------------------------------------------------------------------
USG Corp. 800 37,700
- -----------------------------------------------------------------------------------------------------------------------
Vulcan Materials Co. 1,400 55,912
----------
1,183,226
- -----------------------------------------------------------------------------------------------------------------------
Consumer Services--0.1%
Harte-Hanks, Inc. 1,200 26,100
- -----------------------------------------------------------------------------------------------------------------------
Young & Rubicam, Inc. 1,100 77,825
----------
103,925
- -----------------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--0.1%
MGM Grand, Inc. 800 40,250
- -----------------------------------------------------------------------------------------------------------------------
Mirage Resorts, Inc.(1) 4,400 67,375
----------
107,625
</TABLE>
4 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Media--1.2%
Central Newspapers, Inc., Cl. A 900 $ 35,437
- -----------------------------------------------------------------------------------------------------------------------
Deluxe Corp. 4,800 131,700
- -----------------------------------------------------------------------------------------------------------------------
Gannett Co., Inc. 2,200 179,437
- -----------------------------------------------------------------------------------------------------------------------
Knight-Ridder, Inc. 1,300 77,350
- -----------------------------------------------------------------------------------------------------------------------
Modern Times Group, Cl. B(1) 3,500 173,550
- -----------------------------------------------------------------------------------------------------------------------
Tweeter Home Entertainment Group, Inc. 7,000 248,500
- -----------------------------------------------------------------------------------------------------------------------
VNU-Verenigde Nederlandse Uitgeverbedrijven Verenigd Bezit 5,000 262,570
----------
1,108,544
- -----------------------------------------------------------------------------------------------------------------------
Retail: General--0.8%
Family Dollar Stores, Inc. 2,000 32,625
- -----------------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc.(1) 2,600 131,462
- -----------------------------------------------------------------------------------------------------------------------
Ito-Yokado Co. Ltd. 2,000 217,157
- -----------------------------------------------------------------------------------------------------------------------
May Department Stores Co. 1,200 38,700
- -----------------------------------------------------------------------------------------------------------------------
Nordstrom, Inc. 1,800 47,137
- -----------------------------------------------------------------------------------------------------------------------
Pinault-Printemps-Redoute SA 1,000 263,677
----------
730,758
- -----------------------------------------------------------------------------------------------------------------------
Retail: Specialty--1.9%
Ann Taylor Stores Corp.(1) 2,800 96,425
- -----------------------------------------------------------------------------------------------------------------------
Brown Shoe Co., Inc. 7,900 111,587
- -----------------------------------------------------------------------------------------------------------------------
Circuit City Stores-Circuit City Group 2,300 103,644
- -----------------------------------------------------------------------------------------------------------------------
Gap, Inc. 3,200 147,200
- -----------------------------------------------------------------------------------------------------------------------
Insight Enterprises, Inc.(1) 6,362 258,456
- -----------------------------------------------------------------------------------------------------------------------
Kingfisher plc 14,000 155,379
- -----------------------------------------------------------------------------------------------------------------------
Pacific Sunware of California, Inc(1) 4,000 127,500
- -----------------------------------------------------------------------------------------------------------------------
PC Connection, Inc.(1) 6,700 231,150
- -----------------------------------------------------------------------------------------------------------------------
Ross Stores, Inc. 1,900 34,081
- -----------------------------------------------------------------------------------------------------------------------
Sherwin-Williams Co. 8,000 168,000
- -----------------------------------------------------------------------------------------------------------------------
TJX Cos., Inc. 1,000 20,437
- -----------------------------------------------------------------------------------------------------------------------
Urban Outfitters, Inc.(1) 5,200 151,450
- -----------------------------------------------------------------------------------------------------------------------
Whitehall Jewellers, Inc. 5,400 199,125
----------
1,804,434
- -----------------------------------------------------------------------------------------------------------------------
Textile/Apparel & Home Furnishings--0.4%
bebe stores, inc.(1) 4,400 118,800
- -----------------------------------------------------------------------------------------------------------------------
Jones Apparel Group, Inc.(1) 3,100 84,087
- -----------------------------------------------------------------------------------------------------------------------
Liz Claiborne, Inc. 1,100 41,387
- -----------------------------------------------------------------------------------------------------------------------
Shaw Industries, Inc. 4,600 71,012
- -----------------------------------------------------------------------------------------------------------------------
WestPoint Stevens, Inc. 1,300 22,750
----------
338,036
- -----------------------------------------------------------------------------------------------------------------------
Consumer Staples--2.8%
- -----------------------------------------------------------------------------------------------------------------------
Beverages--0.3%
Adolph Coors Co., Cl. B 1,000 52,500
- -----------------------------------------------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 2,800 198,450
----------
250,950
</TABLE>
LifeSpan Balanced Portfolio 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Broadcasting--0.2%
Citadel Communications Corp.(1) 3,600 $233,550
- --------------------------------------------------------------------------------------------------------------------
Entertainment--0.3%
Brinker International, Inc.(1) 1,400 33,600
- --------------------------------------------------------------------------------------------------------------------
Darden Restaurants, Inc. 1,300 23,562
- --------------------------------------------------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc.(1) 6,600 164,175
- --------------------------------------------------------------------------------------------------------------------
Piccadilly Cafeterias, Inc. 8,000 32,000
- --------------------------------------------------------------------------------------------------------------------
Shaw Brothers (Hong Kong) Ltd. 65,000 75,674
--------
329,011
- --------------------------------------------------------------------------------------------------------------------
Food--0.5%
Flowers Industries, Inc. 2,900 46,219
- --------------------------------------------------------------------------------------------------------------------
Heinz (H.J.) Co. 1,400 55,737
- --------------------------------------------------------------------------------------------------------------------
Hormel Foods Corp. 300 12,187
- --------------------------------------------------------------------------------------------------------------------
IBP, Inc. 3,600 64,800
- --------------------------------------------------------------------------------------------------------------------
International Home Foods, Inc.(1) 2,500 43,437
- --------------------------------------------------------------------------------------------------------------------
Keebler Foods Co.(1) 1,300 36,562
- --------------------------------------------------------------------------------------------------------------------
Kerry Group plc, Cl. A 9,000 107,785
- --------------------------------------------------------------------------------------------------------------------
Sara Lee Corp. 4,800 105,900
--------
472,627
- --------------------------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.8%
Albertson's, Inc. 1,700 54,825
- --------------------------------------------------------------------------------------------------------------------
Colruyt NV 3,000 172,094
- --------------------------------------------------------------------------------------------------------------------
Express Scripts, Inc., Cl. A(1) 2,500 160,000
- --------------------------------------------------------------------------------------------------------------------
Koninklijke Ahold NV 6,000 177,469
- --------------------------------------------------------------------------------------------------------------------
SUPERVALU, Inc. 5,600 112,000
- --------------------------------------------------------------------------------------------------------------------
William Morrison Supermarkets plc 66,000 141,809
--------
818,197
- --------------------------------------------------------------------------------------------------------------------
Household Goods--0.6%
Blyth Industries, Inc.(1) 3,600 88,425
- --------------------------------------------------------------------------------------------------------------------
Kimberly-Clark Corp. 6,000 391,500
- --------------------------------------------------------------------------------------------------------------------
L'OREAL 150 120,240
--------
600,165
- --------------------------------------------------------------------------------------------------------------------
Tobacco--0.1%
UST, Inc. 4,700 118,381
- --------------------------------------------------------------------------------------------------------------------
Energy--3.2%
- --------------------------------------------------------------------------------------------------------------------
Energy Services--0.1%
Anadarko Petroleum Corp. 800 27,300
- --------------------------------------------------------------------------------------------------------------------
ENSCO International, Inc. 2,300 52,612
- --------------------------------------------------------------------------------------------------------------------
Global Marine, Inc.(1) 2,800 46,550
--------
126,462
</TABLE>
6 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Oil: Domestic--1.9%
Apache Corp. 1,200 $ 44,325
- -----------------------------------------------------------------------------------------------------------------------
Atlantic Richfield Co. 2,800 242,200
- -----------------------------------------------------------------------------------------------------------------------
Burlington Resources, Inc. 1,000 33,063
- -----------------------------------------------------------------------------------------------------------------------
Chevron Corp. 2,800 242,550
- -----------------------------------------------------------------------------------------------------------------------
Conoco, Inc., Cl. A 2,300 56,925
- -----------------------------------------------------------------------------------------------------------------------
Exxon Mobil Corp. 10,092 813,037
- -----------------------------------------------------------------------------------------------------------------------
Murphy Oil Corp. 3,100 177,863
- -----------------------------------------------------------------------------------------------------------------------
Occidental Petroleum Corp. 5,400 116,775
- -----------------------------------------------------------------------------------------------------------------------
Texaco, Inc. 2,200 119,488
----------
1,846,226
- -----------------------------------------------------------------------------------------------------------------------
Oil: International--1.2%
Abraxas Petroleum Corp.(1) 5,961 5,588
- -----------------------------------------------------------------------------------------------------------------------
BP Amoco plc, ADR 7,770 460,858
- -----------------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares 2,400 145,050
- -----------------------------------------------------------------------------------------------------------------------
Shell Transport & Trading Co. plc 34,000 282,600
- -----------------------------------------------------------------------------------------------------------------------
Total Fina SA, Sponsored ADR 1,100 76,175
- -----------------------------------------------------------------------------------------------------------------------
Total SA, B Shares 1,700 226,692
----------
1,196,963
- -----------------------------------------------------------------------------------------------------------------------
Financial--8.3%
- -----------------------------------------------------------------------------------------------------------------------
Banks--2.6%
Argentaria SA 6,000 140,876
- -----------------------------------------------------------------------------------------------------------------------
Banca Poplare di Brescia 3,000 265,237
- -----------------------------------------------------------------------------------------------------------------------
Banco Popular Espanol SA 1,800 117,296
- -----------------------------------------------------------------------------------------------------------------------
Bank of Scotland 13,000 151,001
- -----------------------------------------------------------------------------------------------------------------------
Banque Nationale de Paris 1,800 165,935
- -----------------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 2,500 194,219
- -----------------------------------------------------------------------------------------------------------------------
DePfa Deutsche Pfandbriefbank AG (DePfa-Bank) 2,200 162,203
- -----------------------------------------------------------------------------------------------------------------------
First Union Corp. 1,200 39,375
- -----------------------------------------------------------------------------------------------------------------------
Fuji Bank Ltd. (The) 16,000 155,414
- -----------------------------------------------------------------------------------------------------------------------
Lloyds TSB Group plc 14,000 175,169
- -----------------------------------------------------------------------------------------------------------------------
Nordbanken Holding AB(1) 25,000 142,154
- -----------------------------------------------------------------------------------------------------------------------
Overseas Union Bank Ltd. 18,272 106,966
- -----------------------------------------------------------------------------------------------------------------------
Roslyn Bancorp, Inc. 1,600 29,600
- -----------------------------------------------------------------------------------------------------------------------
Sanwa Bank Ltd. (The) 11,000 133,747
- -----------------------------------------------------------------------------------------------------------------------
UnionBanCal Corp. 4,700 185,356
- -----------------------------------------------------------------------------------------------------------------------
Wachovia Corp. 1,900 129,200
- -----------------------------------------------------------------------------------------------------------------------
Wells Fargo Co. 4,400 177,925
----------
2,471,673
- -----------------------------------------------------------------------------------------------------------------------
Diversified Financial--2.1%
AMBAC Financial Group, Inc. 1,500 78,281
- -----------------------------------------------------------------------------------------------------------------------
Cattles plc 30,000 158,481
- -----------------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 5,800 322,263
- -----------------------------------------------------------------------------------------------------------------------
Credit Saison Co. Ltd. 6,700 116,659
</TABLE>
LifeSpan Balanced Portfolio 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Diversified Financial (continued)
Goldman Sachs Group, Inc. (The) 600 $ 56,513
- -----------------------------------------------------------------------------------------------------------------------
ING Groep NV 2,500 150,809
- -----------------------------------------------------------------------------------------------------------------------
Lend Lease Corp. Ltd. 11,000 154,224
- -----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 600 85,650
- -----------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc., Cl. A 1,800 50,288
- -----------------------------------------------------------------------------------------------------------------------
NCO Group, Inc.(1) 3,900 117,488
- -----------------------------------------------------------------------------------------------------------------------
Nomura Securities Co. Ltd.(1) 14,000 252,666
- -----------------------------------------------------------------------------------------------------------------------
PMI Group, Inc. (The) 1,100 53,694
- -----------------------------------------------------------------------------------------------------------------------
Promise Co. Ltd. 3,400 172,943
- -----------------------------------------------------------------------------------------------------------------------
Reckson Associates Realty Corp., Cl. B 3,211 73,050
- -----------------------------------------------------------------------------------------------------------------------
Senior Housing Properties Trust 730 9,079
- -----------------------------------------------------------------------------------------------------------------------
Swire Pacific Ltd., Cl. B 200,000 176,240
----------
2,028,328
- -----------------------------------------------------------------------------------------------------------------------
Insurance--3.1%
ACE Ltd. 2,900 48,394
- -----------------------------------------------------------------------------------------------------------------------
Advance Paradigm, Inc.(1) 6,200 133,688
- -----------------------------------------------------------------------------------------------------------------------
Aegon NV 2,010 191,955
- -----------------------------------------------------------------------------------------------------------------------
AEGON NV 1,600 154,422
- -----------------------------------------------------------------------------------------------------------------------
Allstate Corp. 2,200 52,800
- -----------------------------------------------------------------------------------------------------------------------
American General Corp. 3,200 242,800
- -----------------------------------------------------------------------------------------------------------------------
American International Group, Inc. 875 94,609
- -----------------------------------------------------------------------------------------------------------------------
AXA Financial, Inc. 4,800 162,600
- -----------------------------------------------------------------------------------------------------------------------
AXA SA 1,300 181,071
- -----------------------------------------------------------------------------------------------------------------------
Chubb Corp. 2,500 140,781
- -----------------------------------------------------------------------------------------------------------------------
Cigna Corp. 1,700 136,956
- -----------------------------------------------------------------------------------------------------------------------
Conseco, Inc. 2,300 41,113
- -----------------------------------------------------------------------------------------------------------------------
Hartford Life, Inc., Cl. A 900 39,600
- -----------------------------------------------------------------------------------------------------------------------
HSB Group, Inc. 3,750 126,797
- -----------------------------------------------------------------------------------------------------------------------
Irish Life & Permanent plc 9,127 86,343
- -----------------------------------------------------------------------------------------------------------------------
Jefferson-Pilot Corp. 4,300 293,475
- -----------------------------------------------------------------------------------------------------------------------
Lincoln National Corp. 7,500 300,000
- -----------------------------------------------------------------------------------------------------------------------
Manulife Financial Corp.(1) 2,700 34,256
- -----------------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc. 500 47,844
- -----------------------------------------------------------------------------------------------------------------------
Radian Group, Inc. 1,200 57,300
- -----------------------------------------------------------------------------------------------------------------------
St. Paul Cos., Inc. 2,400 80,850
- -----------------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl. A 2,550 87,338
- -----------------------------------------------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 5,600 290,500
----------
3,025,492
- -----------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts--0.5%
Camden Property Trust 5,400 147,825
- -----------------------------------------------------------------------------------------------------------------------
Cornerstone Properties, Inc. 9,500 138,938
</TABLE>
8 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts (continued)
Healthcare Realty Trust, Inc. 5,366 $ 83,844
- -----------------------------------------------------------------------------------------------------------------------
HRPT Properties Trust 7,300 65,700
- -----------------------------------------------------------------------------------------------------------------------
Meditrust Corp., Paired Stock 4,325 23,788
----------
460,095
- -----------------------------------------------------------------------------------------------------------------------
Savings & Loans--0.0%
Greenpoint Financial Corp. 1,100 26,194
- -----------------------------------------------------------------------------------------------------------------------
Healthcare--4.0%
- -----------------------------------------------------------------------------------------------------------------------
Healthcare/Drugs--2.4%
Celgene Corp.(1) 3,700 259,000
- -----------------------------------------------------------------------------------------------------------------------
Fresenius AG, Preference 800 146,532
- -----------------------------------------------------------------------------------------------------------------------
Gedeon Richter Ltd., GDR(3) 2,000 131,000
- -----------------------------------------------------------------------------------------------------------------------
Glaxo Wellcome plc 5,000 141,356
- -----------------------------------------------------------------------------------------------------------------------
Invitrogen Corp.(1) 2,200 132,000
- -----------------------------------------------------------------------------------------------------------------------
Jones Pharma, Inc. 4,650 201,984
- -----------------------------------------------------------------------------------------------------------------------
King Pharmaceuticals, Inc.(1) 7,150 400,847
- -----------------------------------------------------------------------------------------------------------------------
Novartis AG 100 147,016
- -----------------------------------------------------------------------------------------------------------------------
Noven Pharmaceuticals, Inc.(1) 7,800 141,375
- -----------------------------------------------------------------------------------------------------------------------
Sanofi-Synthelabo SA(1) 4,800 199,702
- -----------------------------------------------------------------------------------------------------------------------
Schering AG 1,000 121,623
- -----------------------------------------------------------------------------------------------------------------------
SmithKline Beecham plc 15,000 191,437
- -----------------------------------------------------------------------------------------------------------------------
Takeda Chemical Industries Ltd. 3,000 148,195
----------
2,362,067
- -----------------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.6%
ArthroCare Corp.(1) 5,900 359,900
- -----------------------------------------------------------------------------------------------------------------------
Luxottica Group SpA, Sponsored ADR 10,000 175,625
- -----------------------------------------------------------------------------------------------------------------------
Molecular Devices Corp.(1) 4,300 223,600
- -----------------------------------------------------------------------------------------------------------------------
Seton School Healthcare Group plc 14,000 177,374
- -----------------------------------------------------------------------------------------------------------------------
Terumo Corp. 9,000 240,340
- -----------------------------------------------------------------------------------------------------------------------
United Healthcare Corp. 1,800 95,625
- -----------------------------------------------------------------------------------------------------------------------
WellPoint Health Networks, Inc.(1) 1,500 98,906
- -----------------------------------------------------------------------------------------------------------------------
Zoll Medical Corp.(1) 4,000 152,750
----------
1,524,120
- -----------------------------------------------------------------------------------------------------------------------
Technology--16.7%
- -----------------------------------------------------------------------------------------------------------------------
Computer Hardware--1.4%
Apple Computer, Inc.(1) 1,600 164,500
- -----------------------------------------------------------------------------------------------------------------------
Digital Lightwave, Inc.(1) 2,600 166,400
- -----------------------------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 500 56,969
- -----------------------------------------------------------------------------------------------------------------------
International Business Machines Corp. 2,200 237,600
- -----------------------------------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A(1) 2,800 253,400
- -----------------------------------------------------------------------------------------------------------------------
SanDisk Corp.(1) 3,000 288,750
- -----------------------------------------------------------------------------------------------------------------------
Silicon Storage Technology, Inc.(1) 5,000 206,250
----------
1,373,869
</TABLE>
LifeSpan Balanced Portfolio 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Computer Services--3.7%
Applied Micro Circuits Corp.(1) 1,800 $ 229,050
- -----------------------------------------------------------------------------------------------------------------------
Crossroads Systems, Inc. (1) 1,200 101,400
- -----------------------------------------------------------------------------------------------------------------------
Diamond Technology Partners, Inc. (1) 5,300 455,469
- -----------------------------------------------------------------------------------------------------------------------
Emulex Corp. (1) 2,800 315,000
- -----------------------------------------------------------------------------------------------------------------------
First Data Corp. 3,600 177,525
- -----------------------------------------------------------------------------------------------------------------------
Getronics NV 4,000 318,827
- -----------------------------------------------------------------------------------------------------------------------
Intraware, Inc. (1) 4,400 351,725
- -----------------------------------------------------------------------------------------------------------------------
MedQuist, Inc. (1) 4,900 126,481
- -----------------------------------------------------------------------------------------------------------------------
Proxicom, Inc. (1) 2,400 298,350
- -----------------------------------------------------------------------------------------------------------------------
QRS Corp. (1) 2,100 220,500
- -----------------------------------------------------------------------------------------------------------------------
Titan Corp. (The) (1) 4,000 188,500
- -----------------------------------------------------------------------------------------------------------------------
USinternetworking, Inc. (1) 3,000 209,625
- -----------------------------------------------------------------------------------------------------------------------
USWeb Corp. (1) 2,700 119,981
- -----------------------------------------------------------------------------------------------------------------------
Viant Corp. (1) 2,500 247,500
- -----------------------------------------------------------------------------------------------------------------------
WebTrends Corp. (1) 2,300 186,300
----------
3,546,233
- -----------------------------------------------------------------------------------------------------------------------
Computer Software--4.3%
Actuate Corp. (1) 8,400 360,150
- -----------------------------------------------------------------------------------------------------------------------
Advanced Digital Information Corp. (1) 4,300 209,088
- -----------------------------------------------------------------------------------------------------------------------
Advent Software, Inc. (1) 3,650 235,197
- -----------------------------------------------------------------------------------------------------------------------
Allaire Corp. (1) 1,600 234,100
- -----------------------------------------------------------------------------------------------------------------------
Bluestone Software, Inc. (1) 1,700 195,500
- -----------------------------------------------------------------------------------------------------------------------
Brio Technology, Inc. (1) 2,300 96,600
- -----------------------------------------------------------------------------------------------------------------------
Broadbase Software, Inc. (1) 1,600 180,000
- -----------------------------------------------------------------------------------------------------------------------
Cysive, Inc. (1) 2,700 194,569
- -----------------------------------------------------------------------------------------------------------------------
Dendrite International, Inc. (1) 11,400 386,175
- -----------------------------------------------------------------------------------------------------------------------
Exchange Applications, Inc. (1) 4,000 223,500
- -----------------------------------------------------------------------------------------------------------------------
Great Plains Software, Inc. (1) 2,800 209,300
- -----------------------------------------------------------------------------------------------------------------------
Logica plc 16,000 412,793
- -----------------------------------------------------------------------------------------------------------------------
Macromedia, Inc. (1) 2,800 204,750
- -----------------------------------------------------------------------------------------------------------------------
Mercury Interactive Corp. (1) 2,600 280,638
- -----------------------------------------------------------------------------------------------------------------------
Micromuse, Inc. (1) 1,600 272,000
- -----------------------------------------------------------------------------------------------------------------------
PC-Tel, Inc. (1) 3,000 157,500
- -----------------------------------------------------------------------------------------------------------------------
Rare Medium Group, Inc. (1) 3,100 105,788
- -----------------------------------------------------------------------------------------------------------------------
RAVISENT Technologies, Inc. (1) 3,400 130,688
- -----------------------------------------------------------------------------------------------------------------------
Synopsys, Inc. (1) 1,000 66,750
----------
4,155,086
</TABLE>
10 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Communications Equipment--1.2%
Audiocodes Ltd.(1) 2,700 $ 248,400
- -----------------------------------------------------------------------------------------------------------------------
BISYS Group, Inc. (The)(1) 900 58,725
- -----------------------------------------------------------------------------------------------------------------------
Ditech Communications Corp.(1) 1,500 140,250
- -----------------------------------------------------------------------------------------------------------------------
Extreme Networks, Inc.(1) 2,000 167,000
- -----------------------------------------------------------------------------------------------------------------------
Polycom, Inc.(1) 3,400 216,538
- -----------------------------------------------------------------------------------------------------------------------
Vodafone Group plc 70,000 346,888
----------
1,177,801
- -----------------------------------------------------------------------------------------------------------------------
Electronics--6.1%
ACT Manufacturing, Inc.(1) 4,200 157,500
- -----------------------------------------------------------------------------------------------------------------------
Advanced Energy Industries, Inc.(1) 4,400 216,700
- -----------------------------------------------------------------------------------------------------------------------
ANADIGICS, Inc.(1) 4,900 231,219
- -----------------------------------------------------------------------------------------------------------------------
Anaren Microwave, Inc.(1) 4,600 248,975
- -----------------------------------------------------------------------------------------------------------------------
Bowthorpe plc 18,000 316,380
- -----------------------------------------------------------------------------------------------------------------------
Cognex Corp.(1) 5,000 195,000
- -----------------------------------------------------------------------------------------------------------------------
Credence Systems Corp.(1) 3,500 302,750
- -----------------------------------------------------------------------------------------------------------------------
Cree, Inc.(1) 4,300 367,113
- -----------------------------------------------------------------------------------------------------------------------
CTS Corp. 2,500 188,438
- -----------------------------------------------------------------------------------------------------------------------
Cymer, Inc.(1) 4,700 216,200
- -----------------------------------------------------------------------------------------------------------------------
Cypress Semiconductor Corp.(1) 4,000 129,500
- -----------------------------------------------------------------------------------------------------------------------
Dallas Semiconductor Corp. 1,500 96,656
- -----------------------------------------------------------------------------------------------------------------------
DSP Group(1) 3,400 316,200
- -----------------------------------------------------------------------------------------------------------------------
Electrocomponents plc 20,000 221,485
- -----------------------------------------------------------------------------------------------------------------------
Hoshiden Corp. 10,000 641,690
- -----------------------------------------------------------------------------------------------------------------------
Hoya Corp. 4,000 314,976
- -----------------------------------------------------------------------------------------------------------------------
Intel Corp. 900 74,081
- -----------------------------------------------------------------------------------------------------------------------
MKS Instruments, Inc.(1) 3,800 137,275
- -----------------------------------------------------------------------------------------------------------------------
National Semiconductor Corp.(1) 3,100 132,719
- -----------------------------------------------------------------------------------------------------------------------
NVIDIA Corp.(1) 4,200 197,138
- -----------------------------------------------------------------------------------------------------------------------
RF Micro Devices, Inc.(1) 4,600 314,813
- -----------------------------------------------------------------------------------------------------------------------
Sony Corp. 1,400 414,947
- -----------------------------------------------------------------------------------------------------------------------
Teradyne, Inc. (1) 2,600 171,600
- -----------------------------------------------------------------------------------------------------------------------
TranSwitch Corp. (1) 3,500 253,969
----------
5,857,324
- -----------------------------------------------------------------------------------------------------------------------
Transportation--0.7%
- -----------------------------------------------------------------------------------------------------------------------
Air Transportation--0.3%
AHL Services, Inc. (1) 5,800 121,075
- -----------------------------------------------------------------------------------------------------------------------
Delta Air Lines, Inc. 1,000 49,813
- -----------------------------------------------------------------------------------------------------------------------
Japan Airport Terminal Co. Ltd. 13,000 120,806
----------
291,694
- -----------------------------------------------------------------------------------------------------------------------
Railroads & Truckers--0.4%
GATX Corp. 8,600 290,250
- -----------------------------------------------------------------------------------------------------------------------
Union Pacific Corp. 1,500 65,438
----------
355,688
</TABLE>
LifeSpan Balanced Portfolio 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Utilities--3.2%
- -----------------------------------------------------------------------------------------------------------------------
Electric Utilities--2.1%
Carolina Power & Light Co. 1,900 $ 57,831
- -----------------------------------------------------------------------------------------------------------------------
CLP Holdings Ltd. 30,000 138,162
- -----------------------------------------------------------------------------------------------------------------------
Conectiv, Inc. 7,600 127,775
- -----------------------------------------------------------------------------------------------------------------------
Duke Energy Corp. 7,717 386,815
- -----------------------------------------------------------------------------------------------------------------------
FPL Group, Inc. 5,800 248,313
- -----------------------------------------------------------------------------------------------------------------------
Kansas City Power & Light Co. 5,600 123,550
- -----------------------------------------------------------------------------------------------------------------------
Montana Power Co. 6,600 238,013
- -----------------------------------------------------------------------------------------------------------------------
Peco Energy Co. 3,100 107,725
- -----------------------------------------------------------------------------------------------------------------------
Potomac Electric Power Co. 2,800 64,225
- -----------------------------------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 3,900 135,769
- -----------------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc. 8,000 183,000
- -----------------------------------------------------------------------------------------------------------------------
Texas Utilities Co. 3,500 124,469
- -----------------------------------------------------------------------------------------------------------------------
Unicom Corp. 1,600 53,600
- -----------------------------------------------------------------------------------------------------------------------
Western Resources, Inc. 4,400 74,800
-----------
2,064,047
- -----------------------------------------------------------------------------------------------------------------------
Gas Utilities--1.1%
El Paso Energy Corp. 13,800 535,613
- -----------------------------------------------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. 108,000 147,964
- -----------------------------------------------------------------------------------------------------------------------
National Fuel Gas Co. 4,400 204,600
- -----------------------------------------------------------------------------------------------------------------------
NICOR, Inc. 1,500 48,750
- -----------------------------------------------------------------------------------------------------------------------
Questar Corp. 8,200 123,000
-----------
1,059,927
-----------
Total Common Stocks (Cost $42,300,110) 57,968,015
=======================================================================================================================
Preferred Stocks--0.1%
- -----------------------------------------------------------------------------------------------------------------------
PRIMEDIA, Inc., 10% Cum., Series D, Non-Vtg.(2) (Cost $100,000) 1,000 97,250
Units
=======================================================================================================================
Rights, Warrants and Certificates--0.0%
- -----------------------------------------------------------------------------------------------------------------------
Abraxas Petroleum Corp. Wts., Exp. 11/1/04 5,961 894
- -----------------------------------------------------------------------------------------------------------------------
Diva Systems Corp. Wts., Exp. 3/1/08(2) 600 4,800
- -----------------------------------------------------------------------------------------------------------------------
Primestar, Inc., Share APP Rts., Exp. 5/30/00(2) 976 4,882
-----------
Total Rights, Warrants and Certificates (Cost $894) 10,576
Principal
Amount
=======================================================================================================================
Asset-Backed Securities--0.6%
- -----------------------------------------------------------------------------------------------------------------------
Arcadia Automobile Receivables Trust, Automobile Receivables-Backed Nts.,
Series 1998-B, Cl. A3, 5.95%, 11/15/02 $175,000 173,907
- -----------------------------------------------------------------------------------------------------------------------
Dayton Hudson Credit Card Master Trust, Asset-Backed Certificates,
Series 1997-1, Cl. A, 6.25%, 8/25/05 125,000 121,796
- -----------------------------------------------------------------------------------------------------------------------
IROQUOIS Trust, Asset-Backed Amortizing Nts.,
Series 1997-2, Cl. A, 6.752%, 6/25/07(2) 120,855 118,429
- -----------------------------------------------------------------------------------------------------------------------
Olympic Automobile Receivables Trust, Automobile Receivables-Backed Nts.,
Series 1997-A, Cl. A-5, 6.80%, 2/15/05 150,000 149,203
-----------
Total Asset-Backed Securities (Cost $570,475) 563,335
</TABLE>
12 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
=======================================================================================================================
Mortgage-Backed Obligations--1.9%
- -----------------------------------------------------------------------------------------------------------------------
Countrywide Funding Corp., Mtg. Pass-Through Certificates,
Series 1994-10, Cl. A3, 6%, 5/25/09 $ 350,000 $ 341,250
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg.
Participation Certificates:
6%, 3/1/09 125,351 120,805
Series 1843, Cl. VB, 7%, 4/15/03 50,000 50,000
Series 1849, Cl. VA, 6%, 12/15/10 85,299 84,312
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security:
Series 1542, Cl. QC, 10.90%, 10/15/20(4) 882,452 85,210
Series 1583, Cl. IC, 11.374%-33.853%, 1/15/20(4) 587,000 49,344
Series 1661, Cl. PK, 19.792%-20.665%, 11/15/06(4) 366,274 10,988
- -----------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%, 12/1/03 86,782 85,164
6.50%, 4/1/26 138,138 131,016
7%, 4/1/00 11,883 11,868
- -----------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Trust 1993-190, Cl. Z, 5.85%, 7/25/08 77,843 77,210
- -----------------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Series 1994-7, Cl. A18, 6%, 2/25/09 248,607 219,162
- -----------------------------------------------------------------------------------------------------------------------
IMC Home Equity Trust, Asset-Backed Home Equity Securities,
Series 1998-3, Cl. A5, 6.36%, 8/20/22(5) 350,000 341,195
- -----------------------------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc., Mtg. Asset-Backed Pass-Through Certificates,
Series 1999-QS12, Cl. M1, 7%, 9/25/14 247,702 235,085
----------
Total Mortgage-Backed Obligations (Cost $1,892,593) 1,842,609
=======================================================================================================================
U.S. Government Obligations--9.6%
- -----------------------------------------------------------------------------------------------------------------------
Agency--2.2%
Federal Farm Credit Bank, Medium-Term Nts., 5.24%, 10/1/08 175,000 154,064
- -----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.57%, 8/17/00 350,000 348,358
- -----------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.125%, 2/13/04 1,750,000 1,645,280
----------
2,147,702
- -----------------------------------------------------------------------------------------------------------------------
Treasury--7.4%
U.S. Treasury Bonds:
6%, 2/15/26 575,000 526,125
7.50%, 11/15/16 1,310,000 1,401,700
STRIPS, 5.67%, 11/15/18(6) 1,500,000 417,910
- -----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.625%, 2/15/06 500,000 478,594
5.625%, 5/15/08 250,000 235,235
5.75%, 8/15/03 1,000,000 979,375
6.125%, 8/15/07 350,000 341,250
6.50%, 8/15/05 945,000 945,296
7.50%, 11/15/01 1,775,000 1,814,384
----------
7,139,869
----------
Total U.S. Government Obligations (Cost $9,791,489) 9,287,571
</TABLE>
LifeSpan Balanced Portfolio 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
=================================================================================================================
Non-Convertible Corporate Bonds and Notes--17.5%
- -----------------------------------------------------------------------------------------------------------------
Basic Materials--1.1%
- -----------------------------------------------------------------------------------------------------------------
Chemicals--0.5%
Laroche Industries, Inc., 9.50% Sr. Sub. Nts., Series B, 9/15/07 $125,000 $ 34,375
- -----------------------------------------------------------------------------------------------------------------
PPG Industries, Inc., 9% Debs., 5/1/21 50,000 56,001
- -----------------------------------------------------------------------------------------------------------------
Rexene Corp., 11.75% Sr. Nts., 12/1/04 125,000 131,250
- -----------------------------------------------------------------------------------------------------------------
Rohm & Haas Co., 7.85% Unsec. Debs., 7/15/29 125,000 125,988
- -----------------------------------------------------------------------------------------------------------------
Sterling Chemicals Holdings, Inc., 0%/13.50% Sr. Disc. Nts., 8/15/08(7) 125,000 32,187
- -----------------------------------------------------------------------------------------------------------------
Texas Petrochemical Corp., 11.125% Sr. Sub. Nts., Series B, 7/1/06 125,000 110,625
--------
490,426
- -----------------------------------------------------------------------------------------------------------------
Metals--0.3%
Alcan Aluminum Ltd., 9.625% Debs., 7/15/19(2) 15,000 15,150
- -----------------------------------------------------------------------------------------------------------------
Algoma Steel, Inc., 12.375% First Mtg. Nts., 7/15/05 100,000 94,500
- -----------------------------------------------------------------------------------------------------------------
Gulf States Steel, Inc. (Alabama), 13.50% First Mtg. Nts., Series B, 4/15/03(1)(10) 125,000 13,125
- -----------------------------------------------------------------------------------------------------------------
International Utility Structures, Inc., 10.75% Sr. Sub. Nts., 2/1/08 100,000 84,500
- -----------------------------------------------------------------------------------------------------------------
National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09 50,000 51,750
- -----------------------------------------------------------------------------------------------------------------
WCI Steel, Inc., 10% Sr. Nts., Series B, 12/1/04 75,000 76,500
--------
335,525
- -----------------------------------------------------------------------------------------------------------------
Paper--0.3%
Ainsworth Lumber, Inc., 12.50% Sr. Nts., 7/15/07(8) 125,000 137,500
- -----------------------------------------------------------------------------------------------------------------
Stone Container Corp., 9.875% Sr. Nts., 2/1/01 125,000 125,937
--------
263,437
- -----------------------------------------------------------------------------------------------------------------
Capital Goods--2.5%
- -----------------------------------------------------------------------------------------------------------------
Industrial Services--1.8%
Advance Holding Corp., 0%/12.875% Sr. Disc. Nts., 4/15/09(7) 100,000 53,000
- -----------------------------------------------------------------------------------------------------------------
Advance Stores Co., Inc., 10.25% Sr. Unsec. Sub. Nts., Series B, 4/15/08 125,000 109,375
- -----------------------------------------------------------------------------------------------------------------
Applied Extrusion Technologies, Inc., 11.50% Sr. Nts., Series B, 4/1/02 75,000 77,250
- -----------------------------------------------------------------------------------------------------------------
Armco, Inc., 9% Sr. Unsec. Nts., 9/15/07 50,000 50,812
- -----------------------------------------------------------------------------------------------------------------
Coinstar, Inc., 13% Sr. Disc. Nts., 10/1/06 50,000 50,312
- -----------------------------------------------------------------------------------------------------------------
Employee Solutions, Inc., 10% Sr. Unsec. Nts., Series B, 10/15/04 125,000 75,625
- -----------------------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 8.25% Sr. Unsec. Sub. Nts., 7/1/11 50,000 45,625
- -----------------------------------------------------------------------------------------------------------------
Jordan Telecommunication Products, Inc., 9.875% Sr. Nts., Series B, 8/1/07(2) 50,000 54,250
- -----------------------------------------------------------------------------------------------------------------
KSL Recreation Group, Inc., 10.25% Sr. Sub. Nts., 5/1/07(2) 100,000 98,500
- -----------------------------------------------------------------------------------------------------------------
Logix Communications Enterprises, Inc., 12.25% Sr. Unsec. Nts., 6/15/08(2) 100,000 72,500
- -----------------------------------------------------------------------------------------------------------------
Maxim Group, Inc. (The), 9.25% Sr. Sub. Nts., Series B, 10/15/07(2) 50,000 40,125
- -----------------------------------------------------------------------------------------------------------------
Mrs. Fields Holding Co., Units (each unit consists of $1,000 principal amount of 0%/14%
sr. sec. disc. nts., 12/1/05 and warrants to purchase shares of common stock)(2)(7)(9) 150,000 84,750
- -----------------------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 8.375% Sr. Unsec. Sub. Nts., Series B, 7/1/08 125,000 120,625
- -----------------------------------------------------------------------------------------------------------------
Production Resource Group LLC/PRG Finance Corp., 11.50% Sr. Unsec. Sub. Nts., 1/15/08 75,000 67,125
- -----------------------------------------------------------------------------------------------------------------
Scotia Pacific Co. LLC, 6.55% Timber Collaterized Nts., Series B, Cl. A-1, 1/20/07 189,813 178,944
- -----------------------------------------------------------------------------------------------------------------
Simonds Industries, Inc., 10.25% Sr. Unsec. Sub. Nts., 7/1/08 125,000 100,625
- -----------------------------------------------------------------------------------------------------------------
Sun Co., Inc., 7.95% Debs., 12/15/01 125,000 126,215
</TABLE>
14 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Industrial Services (continued)
Thermadyne Holdings Corp., 0%/12.50% Sr. Disc. Debs., 6/1/08(7) $ 50,000 $ 23,125
- -------------------------------------------------------------------------------------------------------------------
Tyco International Group SA, 6.125% Unsec. Nts., 6/15/01 175,000 172,046
- -------------------------------------------------------------------------------------------------------------------
USI American Holdings, Inc., 7.25% Sr. Nts., Series B, 12/1/06 120,000 113,300
----------
1,714,129
- -------------------------------------------------------------------------------------------------------------------
Manufacturing--0.7%
Federal-Mogul Corp., 7.50% Nts., 7/1/04 125,000 118,453
- -------------------------------------------------------------------------------------------------------------------
Jordan Industries, Inc., 10.375% Sr. Nts., Series B, 8/1/07(2) 125,000 125,625
- -------------------------------------------------------------------------------------------------------------------
Portola Packaging, Inc., 10.75% Sr. Nts., 10/1/05 125,000 125,625
- -------------------------------------------------------------------------------------------------------------------
Titan Wheel International, Inc., 8.75% Sr. Sub. Nts., 4/1/07 100,000 82,625
- -------------------------------------------------------------------------------------------------------------------
U.S. Industries, Inc./USI American Holdings, Inc./USI Global Corp., 7.125%
Sr. Unsec. Nts., 10/15/03 225,000 219,090
----------
671,418
- -------------------------------------------------------------------------------------------------------------------
Communication Services--3.3%
- -------------------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--2.7%
AT&T Capital Corp., 6.25% Medium-Term Nts., Series F, 5/15/01 175,000 173,220
- -------------------------------------------------------------------------------------------------------------------
Coaxial Communications, Inc., 10% Sr. Unsec. Nts., 8/15/06 125,000 123,125
- -------------------------------------------------------------------------------------------------------------------
Comcast UK Cable Partner Ltd., 0%/11.20% Sr. Disc. Debs., 11/15/07(7) 125,000 119,687
- -------------------------------------------------------------------------------------------------------------------
Diamond Cable Communications plc, 0%/10.75% Sr. Disc. Nts., 2/15/07(7) 125,000 103,125
- -------------------------------------------------------------------------------------------------------------------
e.spire Communications, Inc., 0%/13% Sr. Disc. Nts., 11/1/05(7) 100,000 53,625
- -------------------------------------------------------------------------------------------------------------------
Exodus Communications, Inc., 11.25% Sr. Nts., 7/1/08 125,000 129,687
- -------------------------------------------------------------------------------------------------------------------
Galaxy Telecom LP, 12.375% Sr. Sub. Nts., 10/1/05 100,000 106,500
- -------------------------------------------------------------------------------------------------------------------
Global Crossing Holdings Ltd., 9.125% Sr. Nts., 11/15/06(3) 50,000 49,687
- -------------------------------------------------------------------------------------------------------------------
Globix Corp., 13% Sr. Unsec. Nts., 5/1/05 100,000 101,500
- -------------------------------------------------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Gtd. Sr. Disc. Nts., 12/15/05(7) 125,000 93,125
- -------------------------------------------------------------------------------------------------------------------
Hermes Europe Railtel BV, 10.375% Sr. Unsec. Nts., 1/15/09 125,000 124,062
- -------------------------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 0%/11.625% Sr. Disc. Nts., 3/15/07(7) 125,000 81,875
- -------------------------------------------------------------------------------------------------------------------
International CableTel, Inc., 0%/11.50% Sr. Deferred Coupon Nts., Series B, 2/1/06(7) 200,000 182,000
- -------------------------------------------------------------------------------------------------------------------
IXC Communications, Inc., 9% Sr. Sub. Nts., 4/15/08(2) 50,000 50,750
- -------------------------------------------------------------------------------------------------------------------
Level 3 Communications, Inc., 9.125% Sr. Unsec. Nts., 5/1/08 125,000 118,437
- -------------------------------------------------------------------------------------------------------------------
Metromedia Fiber Network, Inc., 10% Sr. Nts., 12/15/09 50,000 51,500
- -------------------------------------------------------------------------------------------------------------------
PSINet, Inc., 11.50% Sr. Unsec. Nts., 11/1/08 100,000 105,000
- -------------------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc., 0%/9.47% Sr. Disc. Nts., 10/15/07(7) 125,000 101,875
- -------------------------------------------------------------------------------------------------------------------
RSL Communications plc, 9.125% Sr. Unsec. Nts., 3/1/08 100,000 88,000
- -------------------------------------------------------------------------------------------------------------------
Telewest Communications plc:
0%/11% Sr. Disc. Debs., 10/1/07(7) 75,000 70,313
9.625% Sr. Debs., 10/1/06 75,000 76,125
- -------------------------------------------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/07 125,000 121,250
- -------------------------------------------------------------------------------------------------------------------
Time Warner Telecom LLC, 9.75% Sr. Nts., 7/15/08 50,000 51,750
- -------------------------------------------------------------------------------------------------------------------
US West Capital Funding, Inc., 6.125% Nts., 7/15/02 200,000 195,063
- -------------------------------------------------------------------------------------------------------------------
Winstar Communications, Inc., 0%/14% Sr. Disc. Nts., 10/15/05(7) 50,000 48,750
- -------------------------------------------------------------------------------------------------------------------
Worldwide Fiber, Inc., 12% Sr. Nts., 8/1/09(3) 100,000 103,500
----------
2,623,531
</TABLE>
LifeSpan Balanced Portfolio 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Telecommunications: Wireless--0.6%
Clearnet Communications, Inc., 0%/14.75% Sr. Disc. Nts., 12/15/05(7) $ 50,000 $ 49,313
- -------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc., 0%/14% Sr. Disc. Nts., Series B, 6/1/06(7) 125,000 110,938
- -------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 9.75% Sr. Disc. Nts., 8/15/04 150,000 155,250
- -------------------------------------------------------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 100,000 102,750
- -------------------------------------------------------------------------------------------------------------------
Sprint Spectrum LP/Sprint Spectrum Finance Corp., 11% Sr. Nts., 8/15/06 100,000 110,564
- -------------------------------------------------------------------------------------------------------------------
Western Wireless Corp., 10.50% Sr. Sub. Nts., 2/1/07 50,000 52,750
----------
581,565
- -------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--3.4%
- -------------------------------------------------------------------------------------------------------------------
Autos & Housing--0.3%
Black & Decker Corp., 6.625% Nts., 11/15/00 85,000 84,794
- -------------------------------------------------------------------------------------------------------------------
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., Series B, 7/15/07 125,000 49,063
- -------------------------------------------------------------------------------------------------------------------
Collins & Aikman Floorcoverings, Inc., 10% Sr. Sub. Nts., Series B, 1/15/07 50,000 49,250
- -------------------------------------------------------------------------------------------------------------------
Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., Series D, 6/15/07(2) 125,000 118,125
----------
301,232
- -------------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--2.0%
American Skiing Corp., 12% Sr. Sub. Nts., Series B, 7/15/06 100,000 91,750
- -------------------------------------------------------------------------------------------------------------------
Ameristar Casinos, Inc., 10.50% Sr. Sub. Nts., Series B, 8/1/04 50,000 51,000
- -------------------------------------------------------------------------------------------------------------------
Bally Total Fitness Holding Corp., 9.875% Sr. Unsec. Sub. Nts., Series D, 10/15/07 125,000 121,875
- -------------------------------------------------------------------------------------------------------------------
Casino Magic of Louisiana Corp., 13% First Mtg. Nts., Series B, 8/15/03 200,000 226,750
- -------------------------------------------------------------------------------------------------------------------
Colorado Gaming & Entertainment Co., 12% Sr. Sec. Nts., 6/1/03 125,000 88,125
- -------------------------------------------------------------------------------------------------------------------
Florida Panthers Holdings, Inc., 9.875% Sr. Sub. Nts., 4/15/09 50,000 48,750
- -------------------------------------------------------------------------------------------------------------------
Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05 100,000 71,500
- -------------------------------------------------------------------------------------------------------------------
Harveys Casino Resorts, 10.625% Sr. Unsec. Sub. Nts., 6/1/06 100,000 103,750
- -------------------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 7.875% Sr. Nts., Series A, 8/1/05 125,000 116,250
- -------------------------------------------------------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 50,000 50,000
- -------------------------------------------------------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts., 8/15/08 100,000 98,500
- -------------------------------------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc., 8.75% Sr. Unsec. Nts., 4/15/09 100,000 92,500
- -------------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 8.125% Sr. Nts., 1/1/06 125,000 121,875
- -------------------------------------------------------------------------------------------------------------------
Park Place Entertainment Corp., 7.875% Sr. Unsec. Sub. Nts., 12/15/05 100,000 96,250
- -------------------------------------------------------------------------------------------------------------------
Park Place Entertainment Corp., 8.50% Sr. Nts., 11/15/06 125,000 123,397
- -------------------------------------------------------------------------------------------------------------------
Players International, Inc., 10.875% Sr. Nts., 4/15/05(2) 125,000 131,875
- -------------------------------------------------------------------------------------------------------------------
Prime Hospitality Corp., 9.75% Sr. Sub. Nts., 4/1/07 125,000 124,375
- -------------------------------------------------------------------------------------------------------------------
Santa Fe Hotel, Inc., 11% Gtd. First Mtg. Nts., 12/15/00 100,000 97,500
- -------------------------------------------------------------------------------------------------------------------
Station Casinos, Inc., 9.75% Sr. Sub. Nts., 4/15/07 125,000 126,250
----------
1,982,272
- -------------------------------------------------------------------------------------------------------------------
Media--0.4%
Hollinger International Publishing, Inc., 9.25% Gtd. Sr. Sub. Nts., 3/15/07 125,000 124,375
- -------------------------------------------------------------------------------------------------------------------
Lamar Advertising Co., 8.625% Sr. Sub. Nts., 9/15/07(2) 100,000 98,500
- -------------------------------------------------------------------------------------------------------------------
MDC Communications Corp., 10.50% Sr. Sub. Nts., 12/1/06(2) 125,000 124,063
- -------------------------------------------------------------------------------------------------------------------
TV Guide, Inc., 8.125% Sr. Unsec. Sub. Nts., 3/1/09 50,000 50,125
----------
397,063
</TABLE>
16 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Retail: General--0.3%
Federated Department Stores, Inc., 6.125% Cv. Sub. Nts., 9/1/01(5) $200,000 $ 195,995
- -------------------------------------------------------------------------------------------------------------------
Price/Costco Cos., Inc., 7.125% Sr. Nts., 6/15/05 90,000 89,227
----------
285,222
- -------------------------------------------------------------------------------------------------------------------
Retail: Specialty--0.3%
K Mart Corp., 7.75% Debs., 10/1/12 125,000 111,224
- -------------------------------------------------------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 150,000 146,250
----------
257,474
- -------------------------------------------------------------------------------------------------------------------
Textile/Apparel & Home Furnishings--0.1%
William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 125,000 113,125
- -------------------------------------------------------------------------------------------------------------------
Consumer Staples--2.5%
- -------------------------------------------------------------------------------------------------------------------
Broadcasting--1.7%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 50,000 45,125
10.50% Sr. Unsec. Nts., Series B, 7/15/04 125,000 130,313
- -------------------------------------------------------------------------------------------------------------------
Allbritton Communications Co., 8.875% Sr. Sub. Nts., Series B, 2/1/08 125,000 120,625
- -------------------------------------------------------------------------------------------------------------------
Century Communications Corp.:
9.75% Sr. Nts., 2/15/02 100,000 101,000
Zero Coupon Sr. Disc. Nts., Series B, 8.50%, 1/15/08(6) 50,000 22,188
- -------------------------------------------------------------------------------------------------------------------
Charter Communication Holdings LLC/Charter Communication Holdings Capital Corp.:
0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11(7) 50,000 29,563
8.625% Sr. Unsec. Nts., 4/1/09 100,000 92,875
- -------------------------------------------------------------------------------------------------------------------
Classic Cable, Inc., 9.375% Sr. Sub. Nts., Series B, 8/1/09 100,000 98,750
- -------------------------------------------------------------------------------------------------------------------
Comcast Corp., 9.125% Sr. Sub. Debs., 10/15/06 125,000 130,469
- -------------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 9.875% Sr. Sub. Nts., 5/15/06 50,000 53,000
- -------------------------------------------------------------------------------------------------------------------
Diva Systems Corp., 0%/12.625% Sr. Disc. Nts., Series B, 3/1/08(7) 200,000 79,000
- -------------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 125,000 126,250
- -------------------------------------------------------------------------------------------------------------------
Falcon Holding Group LP, 0%/9.285% Sr. Disc. Debs., Series B, 4/15/10(7) 175,000 131,906
- -------------------------------------------------------------------------------------------------------------------
Interepublic National Radio Sales Corp., 10% Sr. Unsec. Sub. Nts., Series B, 7/1/08 125,000 120,313
- -------------------------------------------------------------------------------------------------------------------
James Cable Partners LP, 10.75% Sr. Nts., Series B, 8/15/04 100,000 101,750
- -------------------------------------------------------------------------------------------------------------------
RCN Corp., 0%/11.125% Sr. Unsec. Nts., 10/15/07(7) 50,000 35,375
- -------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 125,000 124,375
- -------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts., Series B, 2/15/08(7) 100,000 64,500
----------
1,607,377
- -------------------------------------------------------------------------------------------------------------------
Entertainment--0.1%
Tricon Global Restaurants, Inc., 7.45% Sr. Unsec. Nts., 5/15/05 125,000 120,316
- -------------------------------------------------------------------------------------------------------------------
Food--0.5%
AmeriServe Food Distribution, Inc., 8.875% Sr. Nts., 10/15/06 125,000 69,375
- -------------------------------------------------------------------------------------------------------------------
Dole Food Co., 6.75% Nts., 7/15/00 115,000 114,327
- -------------------------------------------------------------------------------------------------------------------
Eagle Family Foods, Inc., 8.75% Sr. Sub. Nts., 1/15/08 50,000 38,750
- -------------------------------------------------------------------------------------------------------------------
Grand Metro Inventory Corp., 7.125% Nts., 9/15/04 175,000 174,315
- -------------------------------------------------------------------------------------------------------------------
Premier International Foods plc, 12% Sr. Nts., 9/1/09(3) 50,000 49,250
----------
446,017
</TABLE>
LifeSpan Balanced Portfolio 17
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.1%
Jitney-Jungle Stores of America, Inc., 10.375% Sr. Sub. Nts., 9/15/07(2)(10) $ 50,000 $ 500
- -----------------------------------------------------------------------------------------------------------------------
Pathmark Stores, Inc., 9.625% Sr. Sub. Nts., 5/1/03 50,000 37,750
- -----------------------------------------------------------------------------------------------------------------------
Stater Brothers Holdings, Inc., 10.75% Sr. Nts., 8/15/06 100,000 101,750
----------
140,000
- -----------------------------------------------------------------------------------------------------------------------
Household Goods--0.1%
Kimberly-Clark Corp., 7.875% Debs., 2/1/23 50,000 49,136
- -----------------------------------------------------------------------------------------------------------------------
Revlon Consumer Products Corp., 8.625% Sr. Unsec. Sub. Nts., 2/1/08 125,000 63,125
----------
112,261
- -----------------------------------------------------------------------------------------------------------------------
Energy--0.7%
- -----------------------------------------------------------------------------------------------------------------------
Energy Services--0.5%
Coastal Corp., 8.125% Sr. Nts., 9/15/02 50,000 51,183
- -----------------------------------------------------------------------------------------------------------------------
Crown Central Petroleum Corp., 10.875% Sr. Nts., 2/1/05 50,000 38,000
- -----------------------------------------------------------------------------------------------------------------------
Gulf Canada Resources Ltd., 8.25% Sr. Nts., 3/15/17 75,000 65,474
- -----------------------------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co., 7.65% Debs., 12/1/23 50,000 47,216
- -----------------------------------------------------------------------------------------------------------------------
Petroleum Geo-Services ASA, 7.50% Nts., 3/31/07 125,000 122,194
- -----------------------------------------------------------------------------------------------------------------------
RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 75,000 34,875
- -----------------------------------------------------------------------------------------------------------------------
Southwest Royalties, Inc., 10.50% Sr. Nts., Series B, 10/15/04 125,000 70,625
- -----------------------------------------------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc., 6.25% Sr. Unsec. Debs., 2/1/06 50,000 46,507
----------
476,074
- -----------------------------------------------------------------------------------------------------------------------
Oil: Domestic--0.1%
Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 50,000 49,500
- -----------------------------------------------------------------------------------------------------------------------
Norcen Energy Resources Ltd., 6.80% Debs., 7/2/02 50,000 48,613
----------
98,113
- -----------------------------------------------------------------------------------------------------------------------
Oil: International--0.1%
Abraxas Petroleum Corp./Canadian Abraxas Petroleum Ltd., 11.50% Sr. Unsec. Nts., 11/1/04 70,000 64,050
- -----------------------------------------------------------------------------------------------------------------------
Financial--2.2%
- -----------------------------------------------------------------------------------------------------------------------
Banks--0.2%
Fleet Mtg./Norstar Group, Inc., 9.90% Sub. Nts., 6/15/01 85,000 88,241
- -----------------------------------------------------------------------------------------------------------------------
Integra Financial Corp., 6.50% Sub. Nts., 4/15/00 105,000 105,022
- -----------------------------------------------------------------------------------------------------------------------
Sovereign Bankcorp, 10.50% Sr. Unsec. Nts., 11/15/06 50,000 51,250
----------
244,513
- -----------------------------------------------------------------------------------------------------------------------
Diversified Financial--1.2%
American General Institutional Capital B, 8.125% Bonds, Series B, 3/15/46(3) 125,000 125,171
- -----------------------------------------------------------------------------------------------------------------------
Capital One Financial Corp., 7.25% Nts., 12/1/03 40,000 39,151
- -----------------------------------------------------------------------------------------------------------------------
Conseco Financing Trust III, 8.796% Bonds, 4/1/27 100,000 90,816
- -----------------------------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.05% Medium-Term Nts., Series D, 3/1/01 220,000 217,730
- -----------------------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.77% Nts., Series A, 8/27/01 200,000 197,141
- -----------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.625% Nts., 2/15/01 175,000 172,603
- -----------------------------------------------------------------------------------------------------------------------
GS Escrow Corp., 6.75% Sr. Unsec. Nts., 8/1/01 200,000 192,837
- -----------------------------------------------------------------------------------------------------------------------
Olympic Financial Ltd., Units (each unit consists of $1,000 principal amount of 11.50%
sr. nts., 3/15/07 and one warrant to purchase 6.84 shares of common stock)(2)(9) 125,000 130,000
----------
1,165,449
</TABLE>
18 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Insurance--0.3%
Aetna Industries, Inc., 11.875% Sr. Nts., 10/1/06 $100,000 $ 97,625
- --------------------------------------------------------------------------------------------------------------------
Conseco, Inc., 6.40% Nts., 6/15/01 175,000 170,721
-----------
268,346
- --------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts--0.5%
Chelsea GCA Realty Partner, Inc., 7.75% Unsec. Nts., 1/26/01 280,000 280,584
- --------------------------------------------------------------------------------------------------------------------
First Industrial LP, 7.15% Bonds, 5/15/27 60,000 58,864
- --------------------------------------------------------------------------------------------------------------------
Simon DeBartolo Group LP, 6.625% Unsec. Nts., 6/15/03 175,000 167,087
-----------
506,535
- --------------------------------------------------------------------------------------------------------------------
Healthcare--0.6%
- --------------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--0.6%
Columbia/HCA Healthcare Corp., 6.875% Nts., 7/15/01 145,000 141,186
- --------------------------------------------------------------------------------------------------------------------
Dade International, Inc., 11.125% Sr. Sub. Nts., 5/1/06 100,000 98,000
- --------------------------------------------------------------------------------------------------------------------
ICN Pharmaceutical, Inc., 8.75% Sr. Nts., 11/15/08(3) 125,000 120,000
- --------------------------------------------------------------------------------------------------------------------
Paracelsus Healthcare Corp., 10% Sr. Unsec. Sub. Nts., 8/15/06 100,000 55,500
- --------------------------------------------------------------------------------------------------------------------
Playtex Products, Inc., 8.875% Sr. Nts., 7/15/04 75,000 75,563
- --------------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp., 8% Sr. Nts., 1/15/05 75,000 72,188
-----------
562,437
- --------------------------------------------------------------------------------------------------------------------
Technology--0.1%
- --------------------------------------------------------------------------------------------------------------------
Computer Services--0.1%
Fisher Scientific International, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/08 100,000 96,375
- --------------------------------------------------------------------------------------------------------------------
Transportation--0.4%
- --------------------------------------------------------------------------------------------------------------------
Air Transportation--0.1%
Canadian Airlines Corp., 12.25% Sr. Nts., 8/1/06 75,000 40,875
- --------------------------------------------------------------------------------------------------------------------
Trans World Airlines, Inc., 11.375% Unsec. Nts., 3/1/06 125,000 51,250
-----------
92,125
- --------------------------------------------------------------------------------------------------------------------
Railroads & Truckers--0.3%
CSX Corp., 7.05% Debs., 5/1/02 70,000 69,676
- --------------------------------------------------------------------------------------------------------------------
Norfolk Southern Corp., 7.35% Nts., 5/15/07 75,000 73,428
- --------------------------------------------------------------------------------------------------------------------
Union Pacific Corp., 7% Nts., 6/15/00 105,000 105,338
-----------
248,442
- --------------------------------------------------------------------------------------------------------------------
Utilities--0.7%
- --------------------------------------------------------------------------------------------------------------------
Electric Utilities--0.1%
AES Corp. (The), 8% Sr. Nts., 12/31/08 100,000 92,000
- --------------------------------------------------------------------------------------------------------------------
Gas Utilities--0.6%
Northern Illinois Gas Co., 6.45% First Mtg. Bonds, 8/1/01 200,000 198,030
- --------------------------------------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 125,000 118,155
- --------------------------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The), 6.20% Nts., 8/1/02 225,000 219,540
-----------
535,725
-----------
Total Non-Convertible Corporate Bonds and Notes (Cost $18,265,485) 16,892,574
</TABLE>
LifeSpan Balanced Portfolio 19
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
=======================================================================================================================
Repurchase Agreements--9.4%
- -----------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Zion First National Bank, 3%, dated 12/31/99, to be
repurchased at $9,139,284 on 1/3/00, collateralized by U.S. Treasury Nts.,
7.25%, 8/15/04, with a value of $9,325,259 (Cost $9,137,000) $9,137,000 $ 9,137,000
- -----------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $82,058,046) 99.1% 95,798,930
- -----------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.9 830,164
---------- -----------
Net Assets 100.0% $96,629,094
========== ===========
</TABLE>
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
3. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $578,608 or 0.60% of the Fund's net assets
as of December 31, 1999.
4. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
5. Represents the current interest rate for a variable or increasing rate
security.
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
8. Interest or dividend is paid-in-kind.
9. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, principal amount disclosed represents total
underlying principal.
10. Issuer is in default.
See accompanying Notes to Financial Statements.
20 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
=======================================================================================
Assets
Investments, at value (cost $82,058,046)--see accompanying statement $95,798,930
- ---------------------------------------------------------------------------------------
Receivables and other assets:
Interest dividends and principal paydowns 641,313
Investments sold 452,155
Other 2,773
-----------
Total assets 96,895,171
=======================================================================================
Liabilities
Bank overdraft 5,382
- ---------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of capital stock redeemed 210,900
Investments purchased 20,534
Shareholder reports 15,202
Directors' compensation 1,353
Transfer and shareholder servicing agent fees 185
Other 12,521
-----------
Total liabilities 266,077
=======================================================================================
Net Assets $96,629,094
===========
=======================================================================================
Composition of Net Assets
- ---------------------------------------------------------------------------------------
Par value of shares of capital stock $ 66,979
- ---------------------------------------------------------------------------------------
Additional paid-in capital 73,569,452
- ---------------------------------------------------------------------------------------
Undistributed net investment income 2,937,258
- ---------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 6,266,683
- ---------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 13,788,722
-----------
Net assets--applicable to 66,978,661 shares of capital stock outstanding $96,629,094
===========
=======================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $1.44
</TABLE>
See accompanying Notes to Financial Statements.
LifeSpan Balanced Portfolio 21
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
========================================================================================
Investment Income
Interest $ 2,919,491
- ----------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $14,978) 711,600
-----------
Total income 3,631,091
========================================================================================
Expenses
Management fees 736,934
- ----------------------------------------------------------------------------------------
Accounting service fees 15,000
- ----------------------------------------------------------------------------------------
Custodian fees and expenses 3,947
- ----------------------------------------------------------------------------------------
Directors' compensation 3,918
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,119
- ----------------------------------------------------------------------------------------
Other 27,315
-----------
Total expenses 789,233
Less expenses paid indirectly (3,216)
-----------
Net expenses 786,017
========================================================================================
Net Investment Income 2,845,074
========================================================================================
Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investments 7,378,289
Foreign currency transactions (59,198)
-----------
Net realized gain 7,319,091
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 3,779,741
Translation of assets and liabilities denominated in foreign currencies (224,762)
-----------
Net change 3,554,979
-----------
Net realized and unrealized gain 10,874,070
========================================================================================
Net Increase in Net Assets Resulting from Operations $13,719,144
===========
</TABLE>
See accompanying Notes to Financial Statements.
22 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
================================================================================================================
Operations
Net investment income $ 2,845,074 $ 2,627,566
- ----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 7,319,091 (948,884)
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 3,554,979 2,762,286
----------- -----------
Net increase in net assets resulting from operations 13,719,144 4,440,968
================================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (2,600,510) (1,965,841)
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain -- (2,467,048)
================================================================================================================
Capital Stock Transactions
Net increase (decrease) in net assets resulting from capital stock transactions (362,950) 17,172,548
================================================================================================================
Net Assets
Total increase 10,755,684 17,180,627
- ----------------------------------------------------------------------------------------------------------------
Beginning of period 85,873,410 68,692,783
----------- -----------
End of period (including undistributed net investment
income of $2,937,258 and $2,595,467, respectively) $96,629,094 $85,873,410
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
LifeSpan Balanced Portfolio 23
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995(2)
<S> <C> <C> <C> <C> <C>
==============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $1.28 $1.28 $1.18 $1.05 $1.00
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04 .04 .04 .03 .01
Net realized and unrealized gain .16 .04 .10 .11 .05
- ------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations .20 .08 .14 .14 .06
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.04) (.04) (.03) (.01) (.01)
Distributions from net realized gain -- (.04) (.01) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.04) (.08) (.04) (.01) (.01)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.44 $1.28 $1.28 $1.18 $1.05
===== ===== ===== ===== =====
==============================================================================================================================
Total Return, at Net Asset Value(3) 16.11% 6.17% 12.20% 13.38% 6.08%
==============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $96,629 $85,873 $68,693 $51,336 $35,467
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $86,728 $76,384 $59,388 $41,847 $33,925(4)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (5)
Net investment income 3.28% 3.44% 3.44% 3.34% 3.08%
Expenses 0.91% 0.93%(6) 0.97%(6) 1.17%(6) 1.50%(6)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 73% 58% 57% 70% 40%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund.
2. For the period from September 1, 1995 (commencement of operations) to
December 31, 1995.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Total returns are not annualized for periods of less than
one full year. Total return information does not reflect expenses that apply at
the separate account level or to related insurance products. Inclusion of these
charges would reduce the total return figures for all periods shown.
4. This information is not covered by the auditors' opinion.
5. Annualized for periods less than one full year.
6. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999 were $58,110,807 and $57,401,150, respectively.
See accompanying Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
LifeSpan Balanced Portfolio (the Fund) is a series of Panorama Series Fund, Inc.
(the Company) which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The Fund's
investment objective is to seek a blend of capital appreciation and income by
investing in a strategically allocated portfolio of stocks and bonds, with a
slightly stronger emphasis on stocks. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). Shares of the Fund are sold only to
separate accounts of life insurance companies, a majority of such shares are
held by separate accounts of Massachusetts Mutual Life Insurance Co., an
affiliate of the investment advisor. The following is a summary of significant
accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
Security Credit Risk. The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose of securities
whose issuers subsequently default. As of December 31, 1999, securities with an
aggregate market value of $13,625, representing 0.01% of the Fund's net assets,
were in default.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers to shareholders.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect an
increase in undistributed net investment income of $97,227. Accumulated net
realized gain on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Capital Stock
The Fund has authorized 250 million shares of $0.001 par value capital stock.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
-------------------------------- -------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Sold 5,787,975 $ 7,373,964 14,229,457 $17,733,908
Dividends and/or distributions reinvested 2,131,566 2,600,510 3,436,348 4,432,889
Redeemed (8,095,447) (10,337,424) (4,001,987) (4,994,249)
---------- ----------- ---------- -----------
Net increase (decrease) (175,906) $ (362,950) 13,663,818 $17,172,548
========== =========== ========== ===========
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$13,740,884 was composed of gross appreciation of $18,486,337, and gross
depreciation of $4,745,453.
26 LifeSpan Balanced Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund. The annual fees are 0.85% of the
Fund's first $250 million of average daily net assets and 0.75% of average daily
net assets over $250 million. The Fund's management fee for the year ended
December 31, 1999, was 0.85% of average annual net assets.
- --------------------------------------------------------------------------------
Accounting Fees. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000, plus out-of-pocket costs and expenses reasonably
incurred.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer agent for the Fund and is responsible for maintaining the
shareholder registry and shareholder accounting records for the Fund. OFS
provides these services for cost.
================================================================================
5. Foreign Currency Contracts
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the foreign currency transactions. Realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
================================================================================
6. Illiquid or Restricted Securities
As of December 31, 1999, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 15% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. Certain
restricted securities, eligible for resale to qualified institutional investors,
are not subject to that limit. The aggregate value of illiquid or restricted
securities subject to this limitation as of December 31, 1999, was $1,370,074,
which represents 1.42% of the Fund's net assets.
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Directors and Shareholders of LifeSpan Capital Appreciation
Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of LifeSpan Capital Appreciation Portfolio (which
is a series of Panorama Series Fund, Inc.) as of December 31, 1999, the related
statement of operations for the year then ended, the statements of changes in
net assets for the years ended December 31, 1999 and 1998, and the financial
highlights for the period January 1, 1996 to December 31, 1999. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the period September 1, 1995 to December 31, 1995, were audited
by other auditors whose report dated February 15, 1996, expressed an unqualified
opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of LifeSpan
Capital Appreciation Portfolio as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
==============================================================================
Common Stocks--77.8%
- ------------------------------------------------------------------------------
Basic Materials--2.1%
- ------------------------------------------------------------------------------
Chemicals--0.9%
Dexter Corp. 6,000 $238,500
- ------------------------------------------------------------------------------
Dow Chemical Co. 1,300 173,712
- ------------------------------------------------------------------------------
Ethyl Corp. 16,200 63,787
- ------------------------------------------------------------------------------
Fuji Photo Film Co. 4,000 145,945
- ------------------------------------------------------------------------------
IMC Global, Inc. 2,834 46,407
- ------------------------------------------------------------------------------
Rohm & Haas Co. 2,300 93,581
--------
761,932
- ------------------------------------------------------------------------------
Metals--0.4%
Broken Hill Proprietary Co. Ltd.(1) 15,000 197,110
- ------------------------------------------------------------------------------
Carpenter Technology Corp. 4,300 117,981
--------
315,091
- ------------------------------------------------------------------------------
Paper--0.8%
Buhrmann NV 10,000 150,457
- ------------------------------------------------------------------------------
Georgia Pacific Group 1,600 81,200
- ------------------------------------------------------------------------------
Georgia Pacific Group/Timber Group 2,300 56,637
- ------------------------------------------------------------------------------
Louisiana-Pacific Corp. 2,800 39,900
- ------------------------------------------------------------------------------
Weyerhaeuser Co. 4,700 337,519
--------
665,713
- ------------------------------------------------------------------------------
Capital Goods--10.1%
- ------------------------------------------------------------------------------
Aerospace/Defense--1.0%
General Dynamics Corp. 11,700 617,175
- ------------------------------------------------------------------------------
Northrop Grumman Corp. 3,200 173,000
--------
790,175
- ------------------------------------------------------------------------------
Electrical Equipment--1.1%
Amphenol Corp., Cl. A(1) 2,400 159,750
- ------------------------------------------------------------------------------
Integrated Device Technology, Inc.(1) 1,500 43,500
- ------------------------------------------------------------------------------
Kemet Corp.(1) 4,500 202,781
- ------------------------------------------------------------------------------
Power Integrations, Inc.(1) 4,600 220,512
- ------------------------------------------------------------------------------
Rockwell International Corp. 800 38,300
- ------------------------------------------------------------------------------
SPX Corp.(1) 2,400 193,950
--------
858,793
</TABLE>
6 LifeSpan Capital Appreciation Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------
Industrial Services--3.5%
Capita Group plc 16,000 $ 290,790
- --------------------------------------------------------------------------------
Forrester Research, Inc.(1) 3,700 254,837
- --------------------------------------------------------------------------------
Hays plc 19,000 302,648
- --------------------------------------------------------------------------------
Mobile Mini, Inc.(1) 5,400 116,100
- --------------------------------------------------------------------------------
New England Business Service, Inc. 6,300 153,956
- --------------------------------------------------------------------------------
Professional Detailing, Inc.(1) 4,500 134,719
- --------------------------------------------------------------------------------
Quanta Services, Inc.(1) 3,400 96,050
- --------------------------------------------------------------------------------
Secom Co. Ltd. 4,000 440,184
- --------------------------------------------------------------------------------
Securitas AB, B Shares 8,950 161,953
- --------------------------------------------------------------------------------
Source Information Management Co. (The)(1) 6,700 112,225
- --------------------------------------------------------------------------------
Tetra Tech, Inc.(1) 8,143 125,199
- --------------------------------------------------------------------------------
United Rentals, Inc.(1) 5,300 90,762
- --------------------------------------------------------------------------------
Valassis Communications, Inc.(1) 1,200 50,700
- --------------------------------------------------------------------------------
Waste Connections, Inc.(1) 6,000 86,625
- --------------------------------------------------------------------------------
Whittman-Hart, Inc.(1) 4,400 235,950
- --------------------------------------------------------------------------------
Zomax, Inc.(1) 4,200 190,050
----------
2,842,748
- --------------------------------------------------------------------------------
Manufacturing--4.5%
Asyst Technologies, Inc.(1) 5,000 327,812
- --------------------------------------------------------------------------------
Atlas Copco AB, B Shares 5,142 146,215
- --------------------------------------------------------------------------------
Avery-Dennison Corp. 800 58,300
- --------------------------------------------------------------------------------
Ball Corp. 1,100 43,312
- --------------------------------------------------------------------------------
BBA Group plc 21,000 169,628
- --------------------------------------------------------------------------------
Brambles Industries Ltd. 6,000 166,049
- --------------------------------------------------------------------------------
Briggs & Stratton Corp. 1,900 101,887
- --------------------------------------------------------------------------------
Cooper Industries, Inc. 1,900 76,831
- --------------------------------------------------------------------------------
Crane Co. 2,300 45,712
- --------------------------------------------------------------------------------
Dover Corp. 2,700 122,512
- --------------------------------------------------------------------------------
Eaton Corp. 500 36,312
- --------------------------------------------------------------------------------
Honeywell International, Inc. 4,525 261,036
- --------------------------------------------------------------------------------
Mannesmann AG 2,000 487,097
- --------------------------------------------------------------------------------
Miller (Herman), Inc. 1,800 41,400
- --------------------------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 3,900 381,712
- --------------------------------------------------------------------------------
NetOptix Corp.(1) 4,000 267,000
- --------------------------------------------------------------------------------
Parker-Hannifin Corp. 1,600 82,100
- --------------------------------------------------------------------------------
PRI Automation, Inc.(1) 4,300 288,637
- --------------------------------------------------------------------------------
RadiSys Corp.(1) 4,500 229,500
- --------------------------------------------------------------------------------
ROHN Industries, Inc.(1) 12,000 34,500
- --------------------------------------------------------------------------------
Textron, Inc. 900 69,019
- --------------------------------------------------------------------------------
United Technologies Corp. 3,300 214,500
----------
3,651,071
</TABLE>
LifeSpan Capital Appreciation Portfolio 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------
Communication Services--7.2%
- --------------------------------------------------------------------------------
Telecommunications: Long Distance--4.6%
ADC Telecommunications, Inc.(1) 1,200 $ 87,075
- --------------------------------------------------------------------------------
ALLTELL Corp. 8,400 694,575
- --------------------------------------------------------------------------------
Asia Satellite Telecommunications Holdings Ltd. 64,000 202,123
- --------------------------------------------------------------------------------
AT&T Corp. 4,900 248,675
- --------------------------------------------------------------------------------
China Telecom (Hong Kong) Ltd.(1) 52,000 325,105
- --------------------------------------------------------------------------------
e.spire Communications, Inc.(1) 1,416 8,230
- --------------------------------------------------------------------------------
Ericsson LM, B Shares 7,000 449,915
- --------------------------------------------------------------------------------
KPN NV 3,000 292,560
- --------------------------------------------------------------------------------
L-3 Communications Holdings, Inc.(1) 1,400 58,275
- --------------------------------------------------------------------------------
Matsushita Communication Industrial Co. 2,000 528,221
- --------------------------------------------------------------------------------
Microcell Telecommunications, Inc., Cl. B(1) 429 14,103
- --------------------------------------------------------------------------------
Nippon Comsys Corp. 9,000 186,638
- --------------------------------------------------------------------------------
Nokia Oyj 2,400 434,765
- --------------------------------------------------------------------------------
Tut Systems, Inc.(1) 3,000 160,875
----------
3,691,135
- --------------------------------------------------------------------------------
Telephone Utilities--1.4%
BellSouth Corp. 6,600 308,962
- --------------------------------------------------------------------------------
Energis plc(1) 5,000 240,225
- --------------------------------------------------------------------------------
Hellenic Telecommunication Organization SA 6,900 163,970
- --------------------------------------------------------------------------------
Telefonica SA(1) 15,627 390,030
----------
1,103,187
- --------------------------------------------------------------------------------
Telecommunications: Wireless--1.2%
NTT Mobile Communications Network, Inc. 12 461,313
- --------------------------------------------------------------------------------
Price Communications Corp. 6,731 187,206
- --------------------------------------------------------------------------------
Proxim, Inc.(1) 2,700 297,000
----------
945,519
- --------------------------------------------------------------------------------
Consumer Cyclicals--7.2%
- --------------------------------------------------------------------------------
Autos & Housing--1.6%
Bridgestone Corp. 7,000 154,064
- --------------------------------------------------------------------------------
Cheung Kong (Holdings) Ltd.(1) 12,000 152,441
- --------------------------------------------------------------------------------
Cooper Tire & Rubber Co. 2,000 31,125
- --------------------------------------------------------------------------------
Ethan Allen Interiors, Inc. 1,600 51,300
- --------------------------------------------------------------------------------
Fortune Brands, Inc. 1,300 42,981
- --------------------------------------------------------------------------------
Genuine Parts Co. 5,800 143,912
- --------------------------------------------------------------------------------
Lafarge SA 1,700 197,778
- --------------------------------------------------------------------------------
Masco Corp. 3,200 81,200
- --------------------------------------------------------------------------------
Overseas Union Enterprise Ltd. 20,000 67,247
- --------------------------------------------------------------------------------
Stanley Works (The) 7,500 225,937
- --------------------------------------------------------------------------------
USG Corp. 1,100 51,837
- --------------------------------------------------------------------------------
Vulcan Materials Co. 1,500 59,906
----------
1,259,728
</TABLE>
8 LifeSpan Capital Appreciation Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------
Consumer Services--0.1%
Harte-Hanks, Inc. 1,300 $ 28,275
- --------------------------------------------------------------------------------
Young & Rubicam, Inc. 1,200 84,900
----------
113,175
- --------------------------------------------------------------------------------
Leisure & Entertainment--0.2%
MGM Grand, Inc. 1,100 55,344
- --------------------------------------------------------------------------------
Mirage Resorts, Inc.(1) 4,600 70,437
----------
125,781
- --------------------------------------------------------------------------------
Media--1.5%
Central Newspapers, Inc., Cl. A 900 35,437
- --------------------------------------------------------------------------------
Deluxe Corp. 5,300 145,419
- --------------------------------------------------------------------------------
Gannett Co., Inc. 2,500 203,906
- --------------------------------------------------------------------------------
Knight-Ridder, Inc. 1,500 89,250
- --------------------------------------------------------------------------------
Modern Times Group, Cl. B(1) 4,000 198,343
- --------------------------------------------------------------------------------
Tweeter Home Entertainment Group, Inc. 7,400 262,700
- --------------------------------------------------------------------------------
VNU-Verenigde Nederlandse
Uitgeverbedrijven Verenigd Bezit 5,000 262,570
----------
1,197,625
- --------------------------------------------------------------------------------
Retail: General--0.9%
Family Dollar Stores, Inc. 2,100 34,256
- --------------------------------------------------------------------------------
Federated Department Stores, Inc.(1) 2,800 141,575
- --------------------------------------------------------------------------------
Ito-Yokado Co. Ltd. 2,000 217,157
- --------------------------------------------------------------------------------
May Department Stores Co. 1,600 51,600
- --------------------------------------------------------------------------------
Nordstrom, Inc. 2,000 52,375
- --------------------------------------------------------------------------------
Pinault-Printemps-Redoute SA 1,000 263,677
----------
760,640
- --------------------------------------------------------------------------------
Retail: Specialty--2.4%
Ann Taylor Stores Corp.(1) 3,200 110,200
- --------------------------------------------------------------------------------
Brown Shoe Co., Inc. 9,700 137,012
- --------------------------------------------------------------------------------
Circuit City Stores-Circuit City Group 2,400 108,150
- --------------------------------------------------------------------------------
Gap, Inc. 3,400 156,400
- --------------------------------------------------------------------------------
Insight Enterprises, Inc.(1) 6,950 282,344
- --------------------------------------------------------------------------------
Kingfisher plc 15,000 166,477
- --------------------------------------------------------------------------------
Pacific Sunware of California, Inc.(1) 4,200 133,875
- --------------------------------------------------------------------------------
PC Connection, Inc.(1) 7,100 244,950
- --------------------------------------------------------------------------------
Ross Stores, Inc. 1,800 32,287
- --------------------------------------------------------------------------------
Sherwin-Williams Co. 8,500 178,500
- --------------------------------------------------------------------------------
TJX Cos., Inc. 1,100 22,481
- --------------------------------------------------------------------------------
Urban Outfitters, Inc.(1) 5,600 163,100
- --------------------------------------------------------------------------------
Whitehall Jewellers, Inc. 5,700 210,187
----------
1,945,963
</TABLE>
LifeSpan Capital Appreciation Portfolio 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------
Textile/Apparel & Home Furnishings--0.5%
bebe stores, inc.(1) 4,700 $126,900
- --------------------------------------------------------------------------------
Jones Apparel Group, Inc.(1) 3,300 89,512
- --------------------------------------------------------------------------------
Liz Claiborne, Inc. 1,200 45,150
- --------------------------------------------------------------------------------
Shaw Industries, Inc. 5,000 77,187
- --------------------------------------------------------------------------------
WestPoint Stevens, Inc. 1,600 28,000
--------
366,749
- --------------------------------------------------------------------------------
Consumer Staples--3.8%
- --------------------------------------------------------------------------------
Beverages--0.3%
Adolph Coors Co., Cl. B 1,100 57,750
- --------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 2,700 191,362
--------
249,112
- --------------------------------------------------------------------------------
Broadcasting--0.3%
Citadel Communications Corp.(1) 3,800 246,525
- --------------------------------------------------------------------------------
Entertainment--0.5%
Brinker International, Inc.(1) 1,500 36,000
- --------------------------------------------------------------------------------
Darden Restaurants, Inc. 1,400 25,375
- --------------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc.(1) 7,100 176,612
- --------------------------------------------------------------------------------
Piccadilly Cafeterias, Inc. 9,300 37,200
- --------------------------------------------------------------------------------
Shaw Brothers (Hong Kong) Ltd. 76,000 88,480
--------
363,667
- --------------------------------------------------------------------------------
Food--0.7%
Flowers Industries, Inc. 3,300 52,594
- --------------------------------------------------------------------------------
Heinz (H.J.) Co. 1,600 63,700
- --------------------------------------------------------------------------------
Hormel Foods Corp. 400 16,250
- --------------------------------------------------------------------------------
IBP, Inc. 4,200 75,600
- --------------------------------------------------------------------------------
International Home Foods, Inc.(1) 2,700 46,912
- --------------------------------------------------------------------------------
Keebler Foods Co.(1) 1,400 39,375
- --------------------------------------------------------------------------------
Kerry Group plc, Cl. A 10,000 119,762
- --------------------------------------------------------------------------------
Sara Lee Corp. 5,200 114,725
--------
528,918
- --------------------------------------------------------------------------------
Food & Drug Retailers--1.0%
Albertson's, Inc. 1,300 41,925
- --------------------------------------------------------------------------------
Colruyt NV 3,000 172,094
- --------------------------------------------------------------------------------
Express Scripts, Inc., Cl. A(1) 2,700 172,800
- --------------------------------------------------------------------------------
Koninklijke Ahold NV 6,000 177,469
- --------------------------------------------------------------------------------
SUPERVALU, Inc. 6,000 120,000
- --------------------------------------------------------------------------------
William Morrison Supermarkets plc 68,000 146,106
--------
830,394
</TABLE>
10 LifeSpan Capital Appreciation Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------
Household Goods--0.8%
Blyth Industries, Inc.(1) 4,100 $ 100,706
- --------------------------------------------------------------------------------
Kimberly-Clark Corp. 6,400 417,600
- --------------------------------------------------------------------------------
L'OREAL 200 160,319
----------
678,625
- --------------------------------------------------------------------------------
Tobacco--0.2%
UST, Inc. 5,100 128,456
- --------------------------------------------------------------------------------
Energy--4.5%
- --------------------------------------------------------------------------------
Energy Services--0.2%
Anadarko Petroleum Corp. 1,000 34,125
- --------------------------------------------------------------------------------
ENSCO International, Inc. 2,500 57,187
- --------------------------------------------------------------------------------
Global Marine, Inc.(1) 3,000 49,875
----------
141,187
- --------------------------------------------------------------------------------
Oil: Domestic--2.7%
Apache Corp. 1,200 44,325
- --------------------------------------------------------------------------------
Atlantic Richfield Co. 3,700 320,050
- --------------------------------------------------------------------------------
Burlington Resources, Inc. 1,000 33,062
- --------------------------------------------------------------------------------
Chevron Corp. 3,300 285,862
- --------------------------------------------------------------------------------
Conoco, Inc., Cl. A 2,500 61,875
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 11,520 928,080
- --------------------------------------------------------------------------------
Murphy Oil Corp. 3,700 212,288
- --------------------------------------------------------------------------------
Occidental Petroleum Corp. 6,200 134,075
- --------------------------------------------------------------------------------
Texaco, Inc. 2,300 124,919
----------
2,144,536
- --------------------------------------------------------------------------------
Oil: International--1.6%
Abraxas Petroleum Corp.(1) 2,980 2,794
- --------------------------------------------------------------------------------
BP Amoco plc, ADR 9,228 547,336
- --------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares 2,600 157,138
- --------------------------------------------------------------------------------
Shell Transport & Trading Co. plc 30,000 249,353
- --------------------------------------------------------------------------------
Total Fina SA, Sponsored ADR 1,100 76,175
- --------------------------------------------------------------------------------
Total SA, B Shares 1,800 240,026
----------
1,272,822
</TABLE>
LifeSpan Capital Appreciation Portfolio 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------
Financial--10.8%
- --------------------------------------------------------------------------------
Banks--3.3%
Argentaria SA 6,000 $ 140,876
- --------------------------------------------------------------------------------
Banca Poplare di Brescia 3,000 265,237
- --------------------------------------------------------------------------------
Banco Popular Espanol SA 2,400 156,395
- --------------------------------------------------------------------------------
Bank of Scotland 15,000 174,232
- --------------------------------------------------------------------------------
Banque Nationale de Paris 1,800 165,935
- --------------------------------------------------------------------------------
Chase Manhattan Corp. 2,700 209,756
- --------------------------------------------------------------------------------
DePfa Deutsche Pfandbriefbank AG (DePfa-Bank) 2,200 162,203
- --------------------------------------------------------------------------------
First Union Corp. 1,500 49,219
- --------------------------------------------------------------------------------
Fuji Bank Ltd. (The) 17,000 165,128
- --------------------------------------------------------------------------------
Lloyds TSB Group plc 16,000 200,193
- --------------------------------------------------------------------------------
Nordbanken Holding AB(1) 28,000 159,212
- --------------------------------------------------------------------------------
Overseas Union Bank Ltd. 19,414 113,651
- --------------------------------------------------------------------------------
Roslyn Bancorp, Inc. 1,600 29,600
- --------------------------------------------------------------------------------
Sanwa Bank Ltd. (The) 13,000 158,065
- --------------------------------------------------------------------------------
UnionBanCal Corp. 5,200 205,075
- --------------------------------------------------------------------------------
Wachovia Corp. 1,900 129,200
- --------------------------------------------------------------------------------
Wells Fargo Co. 4,700 190,056
----------
2,674,033
- --------------------------------------------------------------------------------
Diversified Financial--2.7%
AMBAC Financial Group, Inc. 1,600 83,500
- --------------------------------------------------------------------------------
Cattles plc 30,000 158,481
- --------------------------------------------------------------------------------
Citigroup, Inc. 6,300 350,044
- --------------------------------------------------------------------------------
Credit Saison Co. Ltd. 7,300 127,106
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 600 56,513
- --------------------------------------------------------------------------------
ING Groep NV 3,000 180,971
- --------------------------------------------------------------------------------
Lend Lease Corp. Ltd. 12,000 168,245
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 700 99,925
- --------------------------------------------------------------------------------
Nationwide Financial Services, Inc., Cl. A 2,100 58,669
- --------------------------------------------------------------------------------
NCO Group, Inc.(1) 4,200 126,525
- --------------------------------------------------------------------------------
Nomura Securities Co. Ltd.(1) 15,000 270,713
- --------------------------------------------------------------------------------
PMI Group, Inc. (The) 1,200 58,575
- --------------------------------------------------------------------------------
Promise Co. Ltd. 3,700 188,203
- --------------------------------------------------------------------------------
Reckson Associates Realty Corp., Cl. B 3,662 83,311
- --------------------------------------------------------------------------------
Senior Housing Properties Trust 920 11,443
- --------------------------------------------------------------------------------
Swire Pacific Ltd., Cl. B 210,000 185,052
----------
2,207,276
</TABLE>
12 LifeSpan Capital Appreciation Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------
Insurance--4.1%
ACE Ltd. 3,100 $ 51,731
- --------------------------------------------------------------------------------
Advance Paradigm, Inc.(1) 6,800 146,625
- --------------------------------------------------------------------------------
Aegon NV 2,298 219,459
- --------------------------------------------------------------------------------
AEGON NV 1,800 173,725
- --------------------------------------------------------------------------------
Allstate Corp. 2,800 67,200
- --------------------------------------------------------------------------------
American General Corp. 3,500 265,563
- --------------------------------------------------------------------------------
American International Group, Inc. 1,125 121,641
- --------------------------------------------------------------------------------
AXA Financial, Inc. 5,400 182,925
- --------------------------------------------------------------------------------
AXA SA 1,400 195,000
- --------------------------------------------------------------------------------
Chubb Corp. 2,600 146,413
- --------------------------------------------------------------------------------
Cigna Corp. 2,000 161,125
- --------------------------------------------------------------------------------
Conseco, Inc. 2,500 44,688
- --------------------------------------------------------------------------------
Hartford Life, Inc., Cl. A 1,000 44,000
- --------------------------------------------------------------------------------
HSB Group, Inc. 3,750 126,797
- --------------------------------------------------------------------------------
Irish Life & Permanent plc 9,127 86,343
- --------------------------------------------------------------------------------
Jefferson-Pilot Corp. 4,600 313,950
- --------------------------------------------------------------------------------
Lincoln National Corp. 8,400 336,000
- --------------------------------------------------------------------------------
Manulife Financial Corp.(1) 2,800 35,525
- --------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc. 400 38,275
- --------------------------------------------------------------------------------
Radian Group, Inc. 1,200 57,300
- --------------------------------------------------------------------------------
St. Paul Cos., Inc. 2,600 87,588
- --------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl. A 2,650 90,763
- --------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 6,600 342,375
----------
3,335,011
- --------------------------------------------------------------------------------
Real Estate Investment Trusts--0.7%
Camden Property Trust 7,200 197,100
- --------------------------------------------------------------------------------
Cornerstone Properties, Inc. 11,400 166,725
- --------------------------------------------------------------------------------
Healthcare Realty Trust, Inc. 6,814 106,469
- --------------------------------------------------------------------------------
HRPT Properties Trust 9,200 82,800
- --------------------------------------------------------------------------------
Meditrust Corp., Paired Stock 5,407 29,739
----------
582,833
- --------------------------------------------------------------------------------
Savings & Loans--0.0%
Greenpoint Financial Corp. 1,500 35,719
</TABLE>
LifeSpan Capital Appreciation Portfolio 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------
Healthcare--5.4%
- --------------------------------------------------------------------------------
Healthcare/Drugs--3.3%
Celgene Corp.(1) 4,000 $ 280,000
- --------------------------------------------------------------------------------
Fresenius AG, Preference 900 164,848
- --------------------------------------------------------------------------------
Gedeon Richter Ltd., GDR(3) 2,400 157,200
- --------------------------------------------------------------------------------
Glaxo Wellcome plc 6,000 169,628
- --------------------------------------------------------------------------------
Invitrogen Corp.(1) 2,300 138,000
- --------------------------------------------------------------------------------
Jones Pharma, Inc. 5,250 228,047
- --------------------------------------------------------------------------------
King Pharmaceuticals, Inc.(1) 7,650 428,878
- --------------------------------------------------------------------------------
Novartis AG 100 147,016
- --------------------------------------------------------------------------------
Noven Pharmaceuticals, Inc.(1) 8,300 150,438
- --------------------------------------------------------------------------------
Sanofi-Synthelabo SA(1) 6,000 249,627
- --------------------------------------------------------------------------------
Schering AG 1,200 145,948
- --------------------------------------------------------------------------------
SmithKline Beecham plc 17,000 216,962
- --------------------------------------------------------------------------------
Takeda Chemical Industries Ltd. 3,000 148,195
----------
2,624,787
- --------------------------------------------------------------------------------
Healthcare/Supplies & Services--2.1%
ArthroCare Corp.(1) 6,300 384,300
- --------------------------------------------------------------------------------
Luxottica Group SpA, Sponsored ADR 12,000 210,750
- --------------------------------------------------------------------------------
Molecular Devices Corp.(1) 4,700 244,400
- --------------------------------------------------------------------------------
Seton School Healthcare Group plc 14,000 177,374
- --------------------------------------------------------------------------------
Terumo Corp. 10,000 267,045
- --------------------------------------------------------------------------------
United Healthcare Corp. 1,900 100,938
- --------------------------------------------------------------------------------
WellPoint Health Networks, Inc.(1) 1,600 105,500
- --------------------------------------------------------------------------------
Zoll Medical Corp.(1) 4,300 164,206
----------
1,654,513
- --------------------------------------------------------------------------------
Technology--21.3%
- --------------------------------------------------------------------------------
Computer Hardware--1.8%
Apple Computer, Inc.(1) 1,900 195,344
- --------------------------------------------------------------------------------
Digital Lightwave, Inc.(1) 2,700 172,800
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 600 68,363
- --------------------------------------------------------------------------------
International Business Machines Corp. 2,300 248,400
- --------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A(1) 3,000 271,500
- --------------------------------------------------------------------------------
SanDisk Corp.(1) 3,200 308,000
- --------------------------------------------------------------------------------
Silicon Storage Technology, Inc.(1) 5,300 218,625
----------
1,483,032
</TABLE>
14 LifeSpan Capital Appreciation Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------
Computer Services--4.6%
Applied Micro Circuits Corp.(1) 1,900 $ 241,775
- --------------------------------------------------------------------------------
Crossroads Systems, Inc.(1) 1,300 109,850
- --------------------------------------------------------------------------------
Diamond Technology Partners, Inc.(1) 5,600 481,250
- --------------------------------------------------------------------------------
Emulex Corp.(1) 3,000 337,500
- --------------------------------------------------------------------------------
First Data Corp. 3,500 172,594
- --------------------------------------------------------------------------------
Getronics NV 4,000 318,827
- --------------------------------------------------------------------------------
Intraware, Inc.(1) 4,600 367,713
- --------------------------------------------------------------------------------
MedQuist, Inc.(1) 5,200 134,225
- --------------------------------------------------------------------------------
Proxicom, Inc.(1) 2,500 310,781
- --------------------------------------------------------------------------------
QRS Corp.(1) 2,250 236,250
- --------------------------------------------------------------------------------
Titan Corp. (The)(1) 4,200 197,925
- --------------------------------------------------------------------------------
USinternetworking, Inc.(1) 3,150 220,106
- --------------------------------------------------------------------------------
USWeb Corp.(1) 2,900 128,869
- --------------------------------------------------------------------------------
Viant Corp.(1) 2,600 257,400
- --------------------------------------------------------------------------------
WebTrends Corp.(1) 2,400 194,400
----------
3,709,465
- --------------------------------------------------------------------------------
Computer Software--5.6%
Actuate Corp.(1) 9,200 394,450
- --------------------------------------------------------------------------------
Advanced Digital Information Corp.(1) 4,700 228,538
- --------------------------------------------------------------------------------
Advent Software, Inc.(1) 3,850 248,084
- --------------------------------------------------------------------------------
Allaire Corp.(1) 1,700 248,731
- --------------------------------------------------------------------------------
Bluestone Software, Inc.(1) 1,800 207,000
- --------------------------------------------------------------------------------
Brio Technology, Inc.(1) 2,400 100,800
- --------------------------------------------------------------------------------
Broadbase Software, Inc.(1) 1,700 191,250
- --------------------------------------------------------------------------------
Cysive, Inc.(1) 2,900 208,981
- --------------------------------------------------------------------------------
Dendrite International, Inc.(1) 12,600 426,825
- --------------------------------------------------------------------------------
Exchange Applications, Inc.(1) 4,300 240,263
- --------------------------------------------------------------------------------
Great Plains Software, Inc.(1) 3,100 231,725
- --------------------------------------------------------------------------------
Logica plc 18,000 464,392
- --------------------------------------------------------------------------------
Macromedia, Inc.(1) 3,000 219,375
- --------------------------------------------------------------------------------
Mercury Interactive Corp.(1) 2,800 302,225
- --------------------------------------------------------------------------------
Micromuse, Inc.(1) 1,700 289,000
- --------------------------------------------------------------------------------
PC-Tel, Inc.(1) 3,200 168,000
- --------------------------------------------------------------------------------
Rare Medium Group, Inc.(1) 3,400 116,025
- --------------------------------------------------------------------------------
RAVISENT Technologies, Inc.(1) 3,600 138,375
- --------------------------------------------------------------------------------
Synopsys, Inc.(1) 1,000 66,750
----------
4,490,789
</TABLE>
LifeSpan Capital Appreciation Portfolio 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------
Communications Equipment--1.5%
Audiocodes Ltd.(1) 2,900 $ 266,800
- --------------------------------------------------------------------------------
BISYS Group, Inc. (The)(1) 1,000 65,250
- --------------------------------------------------------------------------------
Ditech Communications Corp.(1) 1,600 149,600
- --------------------------------------------------------------------------------
Extreme Networks, Inc.(1) 2,100 175,350
- --------------------------------------------------------------------------------
Polycom, Inc.(1) 3,700 235,644
- --------------------------------------------------------------------------------
Vodafone Group plc 70,000 346,888
----------
1,239,532
- --------------------------------------------------------------------------------
Electronics--7.8%
ACT Manufacturing, Inc.(1) 4,500 168,750
- --------------------------------------------------------------------------------
Advanced Energy Industries, Inc.(1) 4,700 231,475
- --------------------------------------------------------------------------------
ANADIGICS, Inc.(1) 5,200 245,375
- --------------------------------------------------------------------------------
Anaren Microwave, Inc.(1) 4,900 265,213
- --------------------------------------------------------------------------------
Bowthorpe plc 21,000 369,110
- --------------------------------------------------------------------------------
Cognex Corp.(1) 5,400 210,600
- --------------------------------------------------------------------------------
Credence Systems Corp.(1) 3,700 320,050
- --------------------------------------------------------------------------------
Cree, Inc.(1) 4,600 392,725
- --------------------------------------------------------------------------------
CTS Corp. 2,600 195,975
- --------------------------------------------------------------------------------
Cymer, Inc.(1) 5,200 239,200
- --------------------------------------------------------------------------------
Cypress Semiconductor Corp.(1) 4,400 142,450
- --------------------------------------------------------------------------------
Dallas Semiconductor Corp. 1,500 96,656
- --------------------------------------------------------------------------------
DSP Group(1) 3,600 334,800
- --------------------------------------------------------------------------------
Electrocomponents plc 23,000 254,708
- --------------------------------------------------------------------------------
Hoshiden Corp. 11,000 705,859
- --------------------------------------------------------------------------------
Hoya Corp. 4,000 314,976
- --------------------------------------------------------------------------------
Intel Corp. 1,000 82,313
- --------------------------------------------------------------------------------
MKS Instruments, Inc.(1) 4,000 144,500
- --------------------------------------------------------------------------------
National Semiconductor Corp.(1) 3,200 137,000
- --------------------------------------------------------------------------------
NVIDIA Corp.(1) 4,400 206,525
- --------------------------------------------------------------------------------
RF Micro Devices, Inc.(1) 4,900 335,344
- --------------------------------------------------------------------------------
Sony Corp. 1,600 474,225
- --------------------------------------------------------------------------------
Teradyne, Inc.(1) 2,800 184,800
- --------------------------------------------------------------------------------
TranSwitch Corp.(1) 3,700 268,481
----------
6,321,110
- --------------------------------------------------------------------------------
Transportation--0.9%
- --------------------------------------------------------------------------------
Air Transportation--0.4%
AHL Services, Inc.(1) 6,200 129,425
- --------------------------------------------------------------------------------
Delta Air Lines, Inc. 1,100 54,794
- --------------------------------------------------------------------------------
Japan Airport Terminal Co. Ltd. 14,000 130,099
----------
314,318
- --------------------------------------------------------------------------------
Railroads & Truckers--0.5%
GATX Corp. 10,400 351,000
- --------------------------------------------------------------------------------
Union Pacific Corp. 1,500 65,438
----------
416,438
</TABLE>
16 LifeSpan Capital Appreciation Portfolio
<PAGE>
Statement of Investments (Continued)
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------
Utilities--4.5%
- --------------------------------------------------------------------------------
Electric Utilities--2.9%
Carolina Power & Light Co. 2,100 $ 63,919
- --------------------------------------------------------------------------------
CLP Holdings Ltd. 33,000 151,978
- --------------------------------------------------------------------------------
Conectiv, Inc. 7,900 132,819
- --------------------------------------------------------------------------------
Duke Energy Corp. 8,748 438,494
- --------------------------------------------------------------------------------
FPL Group, Inc. 6,700 286,844
- --------------------------------------------------------------------------------
Kansas City Power & Light Co. 6,600 145,613
- --------------------------------------------------------------------------------
Montana Power Co. 8,000 288,500
- --------------------------------------------------------------------------------
Peco Energy Co. 3,600 125,100
- --------------------------------------------------------------------------------
Potomac Electric Power Co. 3,100 71,106
- --------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 4,200 146,213
- --------------------------------------------------------------------------------
Reliant Energy, Inc. 8,900 203,588
- --------------------------------------------------------------------------------
Texas Utilities Co. 3,800 135,138
- --------------------------------------------------------------------------------
Unicom Corp. 1,700 56,950
- --------------------------------------------------------------------------------
Western Resources, Inc. 5,200 88,400
-----------
2,334,662
- --------------------------------------------------------------------------------
Gas Utilities--1.6%
El Paso Energy Corp. 16,400 636,526
- --------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. 117,000 160,295
- --------------------------------------------------------------------------------
National Fuel Gas Co. 5,600 260,400
- --------------------------------------------------------------------------------
NICOR, Inc. 1,700 55,250
- --------------------------------------------------------------------------------
Questar Corp. 10,800 162,000
-----------
1,274,471
-----------
Total Common Stocks (Cost $46,135,160) 62,677,256
================================================================================
Preferred Stocks--0.0%
- --------------------------------------------------------------------------------
PRIMEDIA, Inc., 10% Cum., Series D, Non-Vtg.(2)
(Cost $50,000) 500 48,625
<CAPTION>
Units
================================================================================
<S> <C> <C>
Rights, Warrants and Certificates--0.0%
- --------------------------------------------------------------------------------
Abraxas Petroleum Corp. Wts., Exp. 11/1/04 2,980 447
- --------------------------------------------------------------------------------
Australis Holdings PTY Ltd./Australia Media Ltd. Wts.,
Exp. 10/30/01(2) 100 1
- --------------------------------------------------------------------------------
Diva Systems Corp. Wts., Exp. 3/1/08(2) 300 2,400
- --------------------------------------------------------------------------------
Primestar, Inc., Share APP Rts., Exp. 5/30/00(2) 390 1,953
-----------
Total Rights, Warrants and Certificates (Cost $447) 4,801
<CAPTION>
Principal
Amount
================================================================================
<S> <C> <C>
Asset-Backed Securities--0.2%
- --------------------------------------------------------------------------------
Arcadia Automobile Receivables Trust, Automobile
Receivables-Backed Nts., Series 1998-B,
Cl. A3, 5.95%, 11/15/02 $75,000 74,531
- --------------------------------------------------------------------------------
IROQUOIS Trust, Asset-Backed Amortizing Nts.,
Series 1997-2, Cl. A, 6.752%, 6/25/07(2) 34,530 33,837
- --------------------------------------------------------------------------------
Olympic Automobile Receivables Trust, Automobile
Receivables-Backed Nts., Series 1997-A, Cl. A-5,
6.80%, 2/15/05 50,000 49,734
-----------
Total Asset-Backed Securities (Cost $159,449) 158,102
</TABLE>
LifeSpan Capital Appreciation Portfolio 17
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
============================================================================================================
Mortgage-Backed Obligations--0.7%
- ------------------------------------------------------------------------------------------------------------
Countrywide Funding Corp., Mtg. Pass-Through Certificates, Series 1994-10,
Cl. A3, 6%, 5/25/09 $100,000 $ 97,500
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Participation Certificates:
6%, 3/1/09 10,700 10,312
Series 1843, Cl. VB, 7%, 4/15/03 15,000 15,000
Series 1849, Cl. VA, 6%, 12/15/10 15,052 14,879
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security:
Series 1542, Cl. QC, 10.90%, 10/15/20(4) 294,150 28,403
Series 1583, Cl. IC, 11.374%, 1/15/20(4) 146,750 12,336
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%, 12/1/03 22,019 21,609
6.50%, 4/1/26 34,534 32,754
7%, 4/1/00 4,527 4,521
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd.
Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Trust 1993-190, Cl. Z, 5.85%, 7/25/08 15,559 15,433
- ------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Series 1994-7, Cl. A18, 6%, 2/25/09 99,442 87,665
- ------------------------------------------------------------------------------------------------------------
IMC Home Equity Trust, Asset-Backed Home Equity Securities, Series 1998-3,
Cl. A5, 6.36%, 8/20/22(5) 125,000 121,855
- ------------------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc., Mtg. Asset-Backed Pass-Through Certificates,
Series 1999-QS12, Cl. M1, 7%, 9/25/14 99,080 94,034
----------
Total Mortgage-Backed Obligations (Cost $571,202) 556,301
============================================================================================================
U.S. Government Obligations--3.5%
- ------------------------------------------------------------------------------------------------------------
Federal Farm Credit Bank, Medium-Term Nts., 5.24%, 10/1/08 100,000 88,037
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.125%, 2/13/04 300,000 282,048
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
6%, 2/15/26 400,000 366,000
7.50%, 11/15/16 660,000 706,200
STRIPS, 2.67%, 11/15/18(6) 700,000 195,025
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.625%, 2/15/06-5/15/08 350,000 332,984
6.125%, 8/15/07 200,000 195,000
6.50%, 8/15/05 625,000 625,196
----------
Total U.S. Government Obligations (Cost $2,974,397) 2,790,490
============================================================================================================
Non-Convertible Corporate Bonds and Notes--9.7%
- ------------------------------------------------------------------------------------------------------------
Basic Materials--0.7%
- ------------------------------------------------------------------------------------------------------------
Chemicals--0.3%
Laroche Industries, Inc., 9.50% Sr. Sub. Nts., Series B, 9/15/07 75,000 20,625
- ------------------------------------------------------------------------------------------------------------
PPG Industries, Inc., 9% Debs., 5/1/21 35,000 39,201
- ------------------------------------------------------------------------------------------------------------
Rexene Corp., 11.75% Sr. Nts., 12/1/04 50,000 52,500
- ------------------------------------------------------------------------------------------------------------
Rohm & Haas Co., 7.85% Unsec. Debs., 7/15/29 75,000 75,593
- ------------------------------------------------------------------------------------------------------------
Sterling Chemicals Holdings, Inc., 0%/13.50% Sr. Disc. Nts., 8/15/08(7) 75,000 19,312
- ------------------------------------------------------------------------------------------------------------
Texas Petrochemical Corp., 11.125% Sr. Sub. Nts., Series B, 7/1/06 75,000 66,375
----------
273,606
</TABLE>
18 LifeSpan Capital Appreciation Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Metals--0.2%
Alcan Aluminum Ltd., 9.625% Debs., 7/15/19(2) $ 10,000 $ 10,100
- --------------------------------------------------------------------------------------------------------
Gulf States Steel, Inc. (Alabama), 13.50% First Mtg. Nts.,
Series B, 4/15/03(1)(10) 75,000 7,875
- --------------------------------------------------------------------------------------------------------
International Utility Structures, Inc., 10.75% Sr. Sub. Nts., 2/1/08 50,000 42,250
- --------------------------------------------------------------------------------------------------------
WCI Steel, Inc., 10% Sr. Nts., Series B, 12/1/04 75,000 76,500
--------
136,725
- --------------------------------------------------------------------------------------------------------
Paper--0.2%
Ainsworth Lumber, Inc., 12.50% Sr. Nts., 7/15/07(8) 75,000 82,500
- --------------------------------------------------------------------------------------------------------
Stone Container Corp., 9.875% Sr. Nts., 2/1/01 50,000 50,375
--------
132,875
- --------------------------------------------------------------------------------------------------------
Capital Goods--1.5%
- --------------------------------------------------------------------------------------------------------
Industrial Services--1.2%
Advance Holding Corp., 0%/12.875% Sr. Disc. Nts., 4/15/09(7) 50,000 26,500
- --------------------------------------------------------------------------------------------------------
Advance Stores Co., Inc., 10.25% Sr. Unsec. Sub. Nts., Series B, 4/15/08 25,000 21,875
- --------------------------------------------------------------------------------------------------------
Applied Extrusion Technologies, Inc., 11.50% Sr. Nts., Series B, 4/1/02 125,000 128,750
- --------------------------------------------------------------------------------------------------------
Coinstar, Inc., 13% Sr. Disc. Nts., 10/1/06 50,000 50,312
- --------------------------------------------------------------------------------------------------------
Employee Solutions, Inc., 10% Sr. Unsec. Nts., Series B, 10/15/04 75,000 45,375
- --------------------------------------------------------------------------------------------------------
Jordan Telecommunication Products, Inc., 9.875% Sr. Nts., Series B, 8/1/07(2) 50,000 54,250
- --------------------------------------------------------------------------------------------------------
KSL Recreation Group, Inc., 10.25% Sr. Sub. Nts., 5/1/07(2) 50,000 49,250
- --------------------------------------------------------------------------------------------------------
Logix Communications Enterprises, Inc., 12.25% Sr. Unsec. Nts., 6/15/08(2) 50,000 36,250
- --------------------------------------------------------------------------------------------------------
Maxim Group, Inc. (The), 9.25% Sr. Sub. Nts., Series B, 10/15/07(2) 50,000 40,125
- --------------------------------------------------------------------------------------------------------
Mrs. Fields Holding Co., Units (each unit consists of $1,000 principal amount
of 0%/14% sr. sec. disc. nts., 12/1/05 and warrants to purchase shares of
common stock)(2)(7)(9) 100,000 56,500
- --------------------------------------------------------------------------------------------------------
Ocean Energy, Inc., 8.375% Sr. Unsec. Sub. Nts., Series B, 7/1/08 50,000 48,250
- --------------------------------------------------------------------------------------------------------
Production Resource Group LLC/PRG Finance Corp., 11.50% Sr.
Unsec. Sub. Nts., 1/15/08 75,000 67,125
- --------------------------------------------------------------------------------------------------------
Scotia Pacific Co. LLC, 6.55% Timber Collaterized Nts.,
Series B, Cl. A-1, 1/20/07 71,179 67,104
- --------------------------------------------------------------------------------------------------------
Simonds Industries, Inc., 10.25% Sr. Unsec. Sub. Nts., 7/1/08 50,000 40,250
- --------------------------------------------------------------------------------------------------------
Sun Co., Inc., 7.95% Debs., 12/15/01 50,000 50,486
- --------------------------------------------------------------------------------------------------------
Thermadyne Holdings Corp., 0%/12.50% Sr. Disc. Debs., 6/1/08(7) 75,000 34,687
- --------------------------------------------------------------------------------------------------------
Tyco International Group SA, 6.125% Unsec. Nts., 6/15/01 75,000 73,734
- --------------------------------------------------------------------------------------------------------
USI American Holdings, Inc., 7.25% Sr. Nts., Series B, 12/1/06 40,000 37,767
- --------------------------------------------------------------------------------------------------------
928,590
- --------------------------------------------------------------------------------------------------------
Manufacturing--0.3%
Federal-Mogul Corp., 7.50% Nts., 7/1/04 75,000 71,072
- --------------------------------------------------------------------------------------------------------
Jordan Industries, Inc., 10.375% Sr. Nts., Series B, 8/1/07(2) 75,000 75,375
- --------------------------------------------------------------------------------------------------------
Portola Packaging, Inc., 10.75% Sr. Nts., 10/1/05 50,000 50,250
- --------------------------------------------------------------------------------------------------------
Titan Wheel International, Inc., 8.75% Sr. Sub. Nts., 4/1/07 50,000 41,312
--------
238,009
</TABLE>
LifeSpan Capital Appreciation Portfolio 19
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Communication Services--2.0%
- --------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--1.7%
AT&T Capital Corp., 6.25% Medium-Term Nts., Series F, 5/15/01 $ 75,000 $ 74,237
- --------------------------------------------------------------------------------------------------------
Coaxial Communications, Inc., 10% Sr. Unsec. Nts., 8/15/06 75,000 73,875
- --------------------------------------------------------------------------------------------------------
Comcast UK Cable Partner Ltd., 0%/11.20% Sr. Disc. Debs., 11/15/07(7) 50,000 47,875
- --------------------------------------------------------------------------------------------------------
Diamond Cable Communications plc, 0%/10.75% Sr. Disc. Nts., 2/15/07(7) 75,000 61,875
- --------------------------------------------------------------------------------------------------------
e.spire Communications, Inc., 0%/13% Sr. Disc. Nts., 11/1/05(7) 100,000 53,625
- --------------------------------------------------------------------------------------------------------
Exodus Communications, Inc., 11.25% Sr. Nts., 7/1/08 75,000 77,812
- --------------------------------------------------------------------------------------------------------
Galaxy Telecom LP, 12.375% Sr. Sub. Nts., 10/1/05 75,000 79,875
- --------------------------------------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Gtd. Sr. Disc. Nts., 12/15/05(7) 75,000 55,875
- --------------------------------------------------------------------------------------------------------
Hermes Europe Railtel BV, 10.375% Sr. Unsec. Nts., 1/15/09 75,000 74,437
- --------------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 0%/11.625% Sr. Disc. Nts., 3/15/07(7) 100,000 65,500
- --------------------------------------------------------------------------------------------------------
International CableTel, Inc., 0%/11.50% Sr. Deferred Coupon Nts.,
Series B, 2/1/06(7) 150,000 136,500
- --------------------------------------------------------------------------------------------------------
IXC Communications, Inc., 9% Sr. Sub. Nts., 4/15/08(2) 50,000 50,750
- --------------------------------------------------------------------------------------------------------
Level 3 Communications, Inc., 9.125% Sr. Unsec. Nts., 5/1/08 75,000 71,062
- --------------------------------------------------------------------------------------------------------
PSINet, Inc., 11.50% Sr. Unsec. Nts., 11/1/08 50,000 52,500
- --------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc., 0%/9.47% Sr. Disc. Nts., 10/15/07(7) 75,000 61,125
- --------------------------------------------------------------------------------------------------------
RSL Communications plc, 9.125% Sr. Unsec. Nts., 3/1/08 50,000 44,000
- --------------------------------------------------------------------------------------------------------
Telewest Communications plc:
0%/11% Sr. Disc. Debs., 10/1/07(7) 25,000 23,437
9.625% Sr. Debs., 10/1/06 25,000 25,375
- --------------------------------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/07 75,000 72,750
- --------------------------------------------------------------------------------------------------------
US West Capital Funding, Inc., 6.125% Nts., 7/15/02 75,000 73,149
- --------------------------------------------------------------------------------------------------------
Winstar Communications, Inc., 0%/14% Sr. Disc. Nts., 10/15/05(7) 50,000 48,750
- --------------------------------------------------------------------------------------------------------
Worldwide Fiber, Inc., 12% Sr. Nts., 8/1/09(3) 50,000 51,750
----------
1,376,134
- --------------------------------------------------------------------------------------------------------
Telecommunications: Wireless--0.3%
Microcell Telecommunications, Inc., 0%/14% Sr. Disc. Nts., Series B, 6/1/06(7) 50,000 44,375
- --------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 9.75% Sr. Disc. Nts., 8/15/04 50,000 51,750
- --------------------------------------------------------------------------------------------------------
Sprint Spectrum LP/Sprint Spectrum Finance Corp., 11% Sr. Nts., 8/15/06 75,000 82,923
- --------------------------------------------------------------------------------------------------------
Western Wireless Corp., 10.50% Sr. Sub. Nts., 2/1/07 50,000 52,750
----------
231,798
- --------------------------------------------------------------------------------------------------------
Consumer Cyclicals--1.8%
- --------------------------------------------------------------------------------------------------------
Autos & Housing--0.2%
Black & Decker Corp., 6.625% Nts., 11/15/00 15,000 14,964
- --------------------------------------------------------------------------------------------------------
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., Series B, 7/15/07 75,000 29,437
- --------------------------------------------------------------------------------------------------------
Collins & Aikman Floorcoverings, Inc., 10% Sr. Sub. Nts., Series B, 1/15/07 50,000 49,250
- --------------------------------------------------------------------------------------------------------
Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., Series D, 6/15/07(2) 75,000 70,875
----------
164,526
</TABLE>
20 LifeSpan Capital Appreciation Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--1.0%
American Skiing Corp., 12% Sr. Sub. Nts., Series B, 7/15/06 $50,000 $ 45,875
- -----------------------------------------------------------------------------------------------------------
Ameristar Casinos, Inc., 10.50% Sr. Sub. Nts., Series B, 8/1/04 50,000 51,000
- -----------------------------------------------------------------------------------------------------------
Bally Total Fitness Holding Corp., 9.875% Sr. Unsec. Sub. Nts., Series D, 10/15/07 75,000 73,125
- -----------------------------------------------------------------------------------------------------------
Casino Magic of Louisiana Corp., 13% First Mtg. Nts., Series B, 8/15/03 50,000 56,687
- -----------------------------------------------------------------------------------------------------------
Colorado Gaming & Entertainment Co., 12% Sr. Sec. Nts., 6/1/03 75,000 52,875
- -----------------------------------------------------------------------------------------------------------
Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05 50,000 35,750
- -----------------------------------------------------------------------------------------------------------
Harveys Casino Resorts, 10.625% Sr. Unsec. Sub. Nts., 6/1/06 50,000 51,875
- -----------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 7.875% Sr. Nts., Series A, 8/1/05 75,000 69,750
- -----------------------------------------------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 50,000 50,000
- -----------------------------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc., 8.75% Sr. Unsec. Nts., 4/15/09 50,000 46,250
- -----------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 8.75% Sr. Unsec. Sub. Nts., 1/1/09 50,000 49,500
- -----------------------------------------------------------------------------------------------------------
Park Place Entertainment Corp., 8.50% Sr. Nts., 11/15/06 50,000 49,359
- -----------------------------------------------------------------------------------------------------------
Players International, Inc., 10.875% Sr. Nts., 4/15/05(2) 75,000 79,125
- -----------------------------------------------------------------------------------------------------------
Santa Fe Hotel, Inc., 11% Gtd. First Mtg. Nts., 12/15/00 50,000 48,750
- -----------------------------------------------------------------------------------------------------------
Station Casinos, Inc., 9.75% Sr. Sub. Nts., 4/15/07 75,000 75,750
--------
835,671
- -----------------------------------------------------------------------------------------------------------
Media--0.3%
Hollinger International Publishing, Inc., 9.25% Gtd. Sr. Sub. Nts., 3/15/07 75,000 74,625
- -----------------------------------------------------------------------------------------------------------
Lamar Advertising Co., 8.625% Sr. Sub. Nts., 9/15/07(2) 75,000 73,875
- -----------------------------------------------------------------------------------------------------------
MDC Communications Corp., 10.50% Sr. Sub. Nts., 12/1/06(2) 75,000 74,437
--------
222,937
- -----------------------------------------------------------------------------------------------------------
Retail: General--0.1%
Federated Department Stores, Inc., 6.125% Cv. Sub. Nts., 9/1/01(5) 75,000 73,498
- -----------------------------------------------------------------------------------------------------------
Price/Costco Cos., Inc., 7.125% Sr. Nts., 6/15/05 40,000 39,657
--------
113,155
- -----------------------------------------------------------------------------------------------------------
Retail: Specialty--0.1%
K Mart Corp., 7.75% Debs., 10/1/12 50,000 44,489
- -----------------------------------------------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 75,000 73,125
--------
117,614
- -----------------------------------------------------------------------------------------------------------
Textile/Apparel & Home Furnishings--0.1%
William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 75,000 67,875
</TABLE>
LifeSpan Capital Appreciation Portfolio 21
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Consumer Staples--1.5%
- ---------------------------------------------------------------------------------------------------------------------------
Broadcasting--1.1%
Adelphia Communications Corp., 10.50% Sr. Unsec. Nts., Series B, 7/15/04 $ 75,000 $ 78,187
- ---------------------------------------------------------------------------------------------------------------------------
Allbritton Communications Co., 8.875% Sr. Sub. Nts., Series B, 2/1/08 75,000 72,375
- ---------------------------------------------------------------------------------------------------------------------------
Australis Holdings PTY Ltd., 0%/15% Sr. Sec. Disc. Nts., 11/1/02(2)(7) 100,000 1,000
- ---------------------------------------------------------------------------------------------------------------------------
Century Communications Corp.:
9.75% Sr. Nts., 2/15/02 50,000 50,500
Zero Coupon Sr. Disc. Nts., Series B, 8.50%, 1/15/08(6) 50,000 22,188
- ---------------------------------------------------------------------------------------------------------------------------
Charter Communication Holdings LLC/Charter Communication Holdings Capital Corp.:
0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11(7) 50,000 29,563
8.625% Sr. Unsec. Nts., 4/1/09 75,000 69,656
- ---------------------------------------------------------------------------------------------------------------------------
Classic Cable, Inc., 9.375% Sr. Sub. Nts., Series B, 8/1/09 50,000 49,375
- ---------------------------------------------------------------------------------------------------------------------------
Comcast Corp., 9.125% Sr. Sub. Debs., 10/15/06 50,000 52,188
- ---------------------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 9.875% Sr. Sub. Nts., 5/15/06 50,000 53,000
- ---------------------------------------------------------------------------------------------------------------------------
Diva Systems Corp., 0%/12.625% Sr. Disc. Nts., Series B, 3/1/08(7) 100,000 39,500
- ---------------------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 75,000 75,750
- ---------------------------------------------------------------------------------------------------------------------------
Falcon Holding Group LP, 0%/9.285% Sr. Disc. Debs., Series B, 4/15/10(7) 100,000 75,375
- ---------------------------------------------------------------------------------------------------------------------------
Interepublic National Radio Sales Corp., 10% Sr. Unsec. Sub. Nts.,
Series B, 7/1/08 50,000 48,125
- ---------------------------------------------------------------------------------------------------------------------------
James Cable Partners LP, 10.75% Sr. Nts., Series B, 8/15/04 50,000 50,875
- ---------------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 50,000 49,750
- ---------------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts.,
Series B, 2/15/08(7) 100,000 64,500
--------
881,907
- ---------------------------------------------------------------------------------------------------------------------------
Entertainment--0.1%
Tricon Global Restaurants, Inc., 7.45% Sr. Unsec. Nts., 5/15/05 75,000 72,190
- ---------------------------------------------------------------------------------------------------------------------------
Food--0.2%
AmeriServe Food Distribution, Inc., 8.875% Sr. Nts., 10/15/06 75,000 41,625
- ---------------------------------------------------------------------------------------------------------------------------
Dole Food Co., 6.75% Nts., 7/15/00 40,000 39,766
- ---------------------------------------------------------------------------------------------------------------------------
Grand Metro Inventory Corp., 7.125% Nts., 9/15/04 100,000 99,609
--------
181,000
- ---------------------------------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.0%
Jitney-Jungle Stores of America, Inc., 10.375% Sr. Sub. Nts., 9/15/07(2)(10) 50,000 500
- ---------------------------------------------------------------------------------------------------------------------------
Household Goods--0.1%
Kimberly-Clark Corp., 7.875% Debs., 2/1/23 35,000 34,395
- ---------------------------------------------------------------------------------------------------------------------------
Revlon Consumer Products Corp., 8.625% Sr. Unsec. Sub. Nts., 2/1/08 75,000 37,875
--------
72,270
- ---------------------------------------------------------------------------------------------------------------------------
Energy--0.4%
- ---------------------------------------------------------------------------------------------------------------------------
Energy Services--0.3%
Coastal Corp., 8.125% Sr. Nts., 9/15/02 15,000 15,355
- ---------------------------------------------------------------------------------------------------------------------------
Gulf Canada Resources Ltd., 8.25% Sr. Nts., 3/15/17 50,000 43,650
- ---------------------------------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co., 7.65% Debs., 12/1/23 35,000 33,051
- ---------------------------------------------------------------------------------------------------------------------------
Petroleum Geo-Services ASA, 7.50% Nts., 3/31/07 50,000 48,878
- ---------------------------------------------------------------------------------------------------------------------------
RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 75,000 34,875
- ---------------------------------------------------------------------------------------------------------------------------
Southwest Royalties, Inc., 10.50% Sr. Nts., Series B, 10/15/04 75,000 42,375
- ---------------------------------------------------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc., 6.25% Sr. Unsec. Debs., 2/1/06 25,000 23,254
--------
241,438
</TABLE>
22 LifeSpan Capital Appreciation Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
Oil: Domestic--0.1%
Norcen Energy Resources Ltd., 6.80% Debs., 7/2/02 $50,000 $ 48,613
- -------------------------------------------------------------------------------------------------------
Oil: International--0.0%
Abraxas Petroleum Corp./Canadian Abraxas Petroleum Ltd., 11.50% Sr.
Unsec. Nts., 11/1/04 35,000 32,025
- -------------------------------------------------------------------------------------------------------
Financial--0.9%
- -------------------------------------------------------------------------------------------------------
Banks--0.0%
Fleet Mtg./Norstar Group, Inc., 9.90% Sub. Nts., 6/15/01 15,000 15,572
- -------------------------------------------------------------------------------------------------------
Integra Financial Corp., 6.50% Sub. Nts., 4/15/00 15,000 15,003
--------
30,575
- -------------------------------------------------------------------------------------------------------
Diversified Financial--0.6%
American General Institutional Capital B, 8.125% Bonds, Series B, 3/15/46(3) 50,000 50,069
- -------------------------------------------------------------------------------------------------------
Capital One Financial Corp., 7.25% Nts., 12/1/03 40,000 39,151
- -------------------------------------------------------------------------------------------------------
Conseco Financing Trust III, 8.796% Bonds, 4/1/27 50,000 45,408
- -------------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.05% Medium-Term Nts., Series D, 3/1/01 90,000 89,071
- -------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.77% Nts., Series A, 8/27/01 75,000 73,928
- -------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.625% Nts., 2/15/01 25,000 24,658
- -------------------------------------------------------------------------------------------------------
GS Escrow Corp., 6.75% Sr. Unsec. Nts., 8/1/01 75,000 72,314
- -------------------------------------------------------------------------------------------------------
Olympic Financial Ltd., Units (each unit consists of $1,000 principal
amount of 11.50% sr. nts., 3/15/07 and one warrant to purchase 6.84 shares
of common stock)(2)(9) 75,000 78,000
--------
472,599
- -------------------------------------------------------------------------------------------------------
Insurance--0.1%
Conseco, Inc., 6.40% Nts., 6/15/01 75,000 73,166
- -------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts--0.2%
Chelsea GCA Realty Partner, Inc., 7.75% Unsec. Nts., 1/26/01 80,000 80,167
- -------------------------------------------------------------------------------------------------------
First Industrial LP, 7.15% Bonds, 5/15/27 50,000 49,053
- -------------------------------------------------------------------------------------------------------
Simon DeBartolo Group LP, 6.625% Unsec. Nts., 6/15/03 75,000 71,609
--------
200,829
- -------------------------------------------------------------------------------------------------------
Healthcare--0.3%
- -------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--0.3%
- -------------------------------------------------------------------------------------------------------
Columbia/HCA Healthcare Corp., 6.875% Nts., 7/15/01 30,000 29,211
- -------------------------------------------------------------------------------------------------------
Dade International, Inc., 11.125% Sr. Sub. Nts., 5/1/06 25,000 24,500
- -------------------------------------------------------------------------------------------------------
ICN Pharmaceutical, Inc., 8.75% Sr. Nts., 11/15/08(3) 75,000 72,000
- -------------------------------------------------------------------------------------------------------
Paracelsus Healthcare Corp., 10% Sr. Unsec. Sub. Nts., 8/15/06 50,000 27,750
- -------------------------------------------------------------------------------------------------------
Playtex Products, Inc., 8.875% Sr. Nts., 7/15/04 50,000 50,375
- -------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp., 8% Sr. Nts., 1/15/05 50,000 48,125
--------
251,961
</TABLE>
LifeSpan Capital Appreciation Portfolio 23
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
Transportation--0.3%
- ---------------------------------------------------------------------------------------------------
Air Transportation--0.1%
Canadian Airlines Corp., 12.25% Sr. Nts., 8/1/06 $ 75,000 $ 40,875
- ---------------------------------------------------------------------------------------------------
Trans World Airlines, Inc., 11.375% Unsec. Nts., 3/1/06 75,000 30,750
-----------
71,625
- ---------------------------------------------------------------------------------------------------
Railroads & Truckers--0.2%
CSX Corp., 7.05% Debs., 5/1/02 75,000 74,653
- ---------------------------------------------------------------------------------------------------
Norfolk Southern Corp., 7.35% Nts., 5/15/07 50,000 48,952
- ---------------------------------------------------------------------------------------------------
Union Pacific Corp., 7% Nts., 6/15/00 15,000 15,048
-----------
138,653
- ---------------------------------------------------------------------------------------------------
Utilities--0.3%
- ---------------------------------------------------------------------------------------------------
Electric Utilities--0.1%
AES Corp. (The), 8% Sr. Nts., 12/31/08 50,000 46,000
- ---------------------------------------------------------------------------------------------------
Gas Utilities--0.2%
Northern Illinois Gas Co., 6.45% First Mtg. Bonds, 8/1/01 50,000 49,508
- ---------------------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 50,000 47,262
- ---------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The), 6.20% Nts., 8/1/02 75,000 73,180
-----------
169,950
-----------
Total Non-Convertible Corporate Bonds and Notes (Cost $8,772,625) 7,824,816
===================================================================================================
Repurchase Agreements--7.5%
- ---------------------------------------------------------------------------------------------------
Repurchase agreement with Zion First National Bank, 3%, dated
12/31/99, to be repurchased at $6,038,509 on 1/3/00, collateralized
by U.S. Treasury Nts., 7.25%, 8/15/04, with a value of $6,161,387
(Cost $6,037,000) 6,037,000 6,037,000
- ---------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $64,700,280) 99.4% 80,097,391
- ---------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.6 465,507
--------- -----------
Net Assets 100.0% $80,562,898
========= ===========
</TABLE>
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
3. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $331,019 or 0.41% of the Fund's net assets
as of December 31, 1999.
4. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
5. Represents the current interest rate for a variable or increasing rate
security.
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
8. Interest or dividend is paid in kind.
9. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, principal amount disclosed represents total
underlying principal.
10. Issuer is in default.
See accompanying Notes to Financial Statements.
24 LifeSpan Capital Appreciation Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
===================================================================================================
Assets
Investments, at value (cost $64,700,280)--see accompanying statement $80,097,391
- ---------------------------------------------------------------------------------------------------
Cash 151,482
- ---------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 497,036
Interest, dividends and principal paydowns 309,176
Other 2,368
-----------
Total assets 81,057,453
===================================================================================================
Liabilities
Payables and other liabilities:
Shares of capital stock redeemed 439,871
Investments purchased 26,685
Shareholder reports 15,338
Directors' compensation 262
Transfer and shareholder servicing agent fees 185
Other 12,214
-----------
Total liabilities 494,555
===================================================================================================
Net Assets $80,562,898
===========
===================================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 50,220
- ---------------------------------------------------------------------------------------------------
Additional paid-in capital 56,244,440
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 1,698,832
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 7,117,454
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies 15,451,952
-----------
Net assets--applicable to 50,220,157 shares of capital stock outstanding $80,562,898
===========
===================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $1.60
</TABLE>
See accompanying Notes to Financial Statements.
LifeSpan Capital Appreciation Portfolio 25
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
=======================================================================================
Investment Income
Interest $ 1,431,088
- ---------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $16,037) 798,930
-----------
Total income 2,230,018
=======================================================================================
Expenses
Management fees 615,493
- ---------------------------------------------------------------------------------------
Accounting service fees 15,000
- ---------------------------------------------------------------------------------------
Custodian fees and expenses 10,276
- ---------------------------------------------------------------------------------------
Directors' compensation 2,804
- ---------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,103
- ---------------------------------------------------------------------------------------
Other 26,029
-----------
Total expenses 671,705
Less expenses paid indirectly (2,760)
-----------
Net expenses 668,945
=======================================================================================
Net Investment Income 1,561,073
=======================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 8,498,370
Foreign currency transactions (51,679)
-----------
Net realized gain 8,446,691
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 4,563,358
Translation of assets and liabilities denominated in foreign currencies (255,156)
-----------
Net change 4,308,202
-----------
Net realized and unrealized gain 12,754,893
=======================================================================================
Net Increase in Net Assets Resulting from Operations $14,315,966
===========
</TABLE>
See accompanying Notes to Financial Statements.
26 LifeSpan Capital Appreciation Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
======================================================================================
Operations
Net investment income $ 1,561,073 $ 1,606,354
- --------------------------------------------------------------------------------------
Net realized gain (loss) 8,446,691 (1,177,781)
- --------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 4,308,202 3,371,596
----------- -----------
Net increase in net assets resulting from operations 14,315,966 3,800,169
======================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (1,572,323) (1,183,734)
- --------------------------------------------------------------------------------------
Distributions from net realized gain -- (2,498,475)
======================================================================================
Capital Stock Transactions
Net increase (decrease) in net assets resulting from
capital stock transactions (5,029,898) 11,351,711
======================================================================================
Net Assets
Total increase 7,713,745 11,469,671
- --------------------------------------------------------------------------------------
Beginning of period 72,849,153 61,379,482
----------- -----------
End of period (including undistributed net investment
income of $1,698,832 and $1,570,493, respectively) $80,562,898 $72,849,153
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
LifeSpan Capital Appreciation Portfolio 27
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996(1) 1995(2)
<S> <C> <C> <C> <C> <C>
============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $1.36 $1.35 $1.24 $1.06 $1.00
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .03 .03 .03 .02 .01
Net realized and unrealized gain .24 .06 .12 .17 .06
- ----------------------------------------------------------------------------------------------------------------------------
Total income from investment operations .27 .09 .15 .19 .07
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.03) (.03) (.01) (.01) (.01)
Distributions from net realized gain -- (.05) (.03) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.03) (.08) (.04) (.01) (.01)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.60 $1.36 $1.35 $1.24 $1.06
===== ===== ===== ===== =====
============================================================================================================================
Total Return, at Net Asset Value(3) 20.34% 6.49% 12.53% 17.97% 6.65%
============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $80,563 $72,849 $61,379 $41,994 $26,768
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $72,433 $66,754 $51,473 $33,109 $25,460(4)
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (5)
Net investment income 2.16% 2.41% 2.36% 1.92% 1.73%
Expenses 0.93% 0.93%(6) 0.99%(6) 1.30%(6) 1.50%(6)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 87% 65% 66% 71% 39%
</TABLE>
1. On March 1, 1996, OppenheimerFunds, Inc. became the investment advisor to the
Fund.
2. For the period from September 1, 1995 (commencement of operations) to
December 31, 1995.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Total returns are not annualized for periods less than one
full year. Total return information does not reflect expenses that apply at the
separate account level or to related insurance products. Inclusion of these
charges would reduce the total return figures for all periods shown.
4. This information is not covered by the auditors' opinion.
5. Annualized for periods less than one full year.
6. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $57,710,279 and $60,781,231, respectively.
See accompanying Notes to Financial Statements.
28 LifeSpan Capital Appreciation Portfolio
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
LifeSpan Capital Appreciation Portfolio (the Fund) is a series of Panorama
Series Fund, Inc. (the Company) which is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. The Fund's investment objective is to seek long-term capital
appreciation by investing in a strategically allocated portfolio consisting
primarily of stocks. The Fund's investment advisor is OppenheimerFunds, Inc.
(the Manager). Shares of the Fund are sold only to separate accounts of life
insurance companies, a majority of such shares are held by separate accounts of
Massachusetts Mutual Life Insurance Co., an affiliate of the investment advisor.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
Security Credit Risk. The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose of securities
whose issuers subsequently default. As of December 31, 1999, securities with an
aggregate market value of $8,375, representing 0.01% of the Fund's net assets,
were in default.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers to shareholders.
LifeSpan Capital Appreciation Portfolio 29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
Dividend and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect an
increase in undistributed net investment income of $139,589. Accumulated net
realized gain on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Capital Stock
The Fund has authorized 250 million shares of $0.001 par value capital stock.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
---------------------------- ----------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 2,992,840 $ 4,099,694 8,700,602 $11,570,097
Dividends and/or distributions reinvested 1,209,480 1,572,323 2,668,268 3,682,209
Redeemed (7,744,976) (10,701,915) (2,957,241) (3,900,595)
---------- ------------ ---------- -----------
Net increase (decrease) (3,542,656) $ (5,029,898) 8,411,629 $11,351,711
========== ============ ========== ===========
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$15,397,111 was composed of gross appreciation of $19,540,595, and gross
depreciation of $4,143,484.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund. The annual fees are 0.85% of the
Fund's first $250 million of average daily net assets and 0.75% on average daily
net assets over $250 million. The Fund's management fee for the year ended
December 31, 1999, was 0.85% of the average annual net assets for the Fund.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Accounting Fees. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000, plus out-of-pocket costs and expenses reasonably
incurred.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer agent for the Fund and is responsible for maintaining the
shareholder registry and shareholder accounting records for the Fund. OFS
provides these services for cost.
================================================================================
5. Foreign Currency Contracts
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the foreign currency transactions. Realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
================================================================================
6. Illiquid or Restricted Securities
As of December 31, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Directors as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no more
than 15% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of December 31, 1999, was $837,228,
which represents 1.04% of the Fund's net assets.
<PAGE>
Appendix A
- -------------------------------------------------------------------------------
RATINGS DEFINITIONS
- -------------------------------------------------------------------------------
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
- -------------------------------------------------------------------------------
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as with Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than those of Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium grade obligations; that is, they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds rated B generally lack characteristics of desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing and may be in default or there may
be present elements of danger with respect to principal or interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high
degree and are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category.
Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to repay punctually senior debt
obligations having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage, while sound, may be subject to
variation. Capitalization characteristics, while appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Ratings Services
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Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being
made on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the
due date. The rating may also be used if a bankruptcy petition has been filed
or similar actions jeopardize payments on the obligation.
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Fitch IBCA, Inc.
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of
some kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and
are extremely speculative. "DDD" designates the highest potential for
recovery of amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for
meeting financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
D: Default. Denotes actual or imminent payment default.
Duff & Phelps Credit Rating Co. Ratings
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free
U.S. Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
Appendix B
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Industry Classifications
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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).
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<PAGE>
Panorama Series Fund, Inc.
- -------------------------------------------------------------------------------
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-888-470-0861
Custodian Bank
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
PX.2000
- --------
1. Mr. Fossel is not a Trustee of Centennial New York Tax Exempt Trust or
Managing General Partner of Centennial America Fund, L.P. Mr. Armstrong is not a
Trustee, Director or Managing General Partner of Centennial New York Tax Exempt
Trust, Centennial California Tax Exempt Trust, Centennial America Fund, L.P.,
Centennial Money Market Trust, Centennial Government Trust, Centennial Tax
Exempt Trust, Oppenheimer Main Street Funds, Inc., Oppenheimer Cash Reserves and
Oppenheimer Champion Income Fund.
2 Not a Trustee of Centennial Tax Exempt Trust, Centennial New York Tax Exempt
Trust, Centennial Money Market Trust, Centennial Government Trust, Centennial
California Tax Exempt Trust, Centennial America Fund, L.P., Oppenheimer Main
Street Funds, Inc., Oppenheimer Cash Reserves, or Oppenheimer Champion Income
Fund.
3Not a Trustee of Centennial New York Tax-Exempt Trust nor a Managing General
Partner of Centennial America Fund, L.P.
* Director who is an "interested person" of the Fund and of the Manager.
