<PAGE>
A Message To Our Contract Owners:
We are pleased to forward this combined Semiannual Report of the segment of
Massachusetts Mutual Variable Annuity Separate Account 2 ("Separate Account 2")
pertaining to Flex Extra (Non-Qualified) (the "Segment"), the MML Series
Investment Fund, and the three Funds of the Oppenheimer Variable Account Funds
available to owners of Flex Extra Contracts. These reports are for the period
ended June 30, 1996.
The Semiannual Report for the Segment begins on page 3. The Segment has net
assets of $737,349,336 as of June 30, 1996. Net asset values per accumulation
unit for the MML Equity, MML Money Market, MML Managed Bond, MML Blend,
Oppenheimer Capital Appreciation, Oppenheimer Global Securities and Oppenheimer
Strategic Bond Divisions as of June 30, 1996 are shown in detail in the table on
page 3.
The Semiannual Report for the MML Series Investment Fund begins on page 11. This
report contains a detailed description of the financial results of the MML
Equity Fund, MML Money Market Fund, MML Managed Bond Fund and MML Blend Fund for
the period ended June 30, 1996.
The Semiannual Report for the Oppenheimer Variable Account Funds begins on page
38. This report contains a detailed description of the financial results of the
Oppenheimer Capital Appreciation Fund, Oppenheimer Global Securities Fund and
Oppenheimer Strategic Bond Fund for the period ended June 30, 1996.
We appreciate the interest and confidence you have shown in Separate Account 2.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
/s/Thomas B. Wheeler
Thomas B. Wheeler
Chairman and Chief Executive Officer
August 1, 1996
1
<PAGE>
Table of Contents
Massachusetts Mutual Variable Annuity Separate Account 2
Flex Extra (Non-Qualified)
Statement of Assets and Liabilities as of June 30, 1996.......... 3
Statement of Operations For the Six Months Ended June 30, 1996.. 4
Statement of Changes in Net Assets For the Six Months
Ended June 30, 1996 and 1995.................................... 5-6
Notes to Financial Statements.................................... 7-10
MML Series Investment Fund
To Our Shareholders.............................................. 11-15
Statement of Assets and Liabilities as of June 30, 1996.......... 16
Statement of Operations For the Six Months Ended June 30,1996.... 17
Statement of Changes in Net Assets For the Six Months
Ended June 30, 1996 and For the Year Ended December 31, 1995... 18
Financial Highlights............................................. 19-21
Schedule of Investments as of June 30, 1996
MML Equity Fund................................................ 22-24
MML Money Market Fund.......................................... 25
MML Managed Bond Fund.......................................... 26-28
MML Blend Fund................................................. 29-34
Notes to Financial Statements.................................... 35-37
Oppenheimer Variable Account Fund
Oppenheimer Fund Managers' Message............................... 38-40
Statement of Assets and Liabilities as of June 30, 1996.......... 41
Statement of Operations For the Six Months Ended June 30, 1996... 42
Statement of Changes in Net Assets For the Six Months Ended
June 30, 1996 and for the Year Ended December 31, 1995.......... 43
Financial Highlights............................................. 44-46
Schedule of Investments as of June 30, 1996
Oppenheimer Capital Appreciation Fund......................... 47-49
Oppenheimer Global Securities Fund............................ 50-52
Oppenheimer Strategic Bond Fund............................... 53-59
Notes to Financial Statements.................................... 60-69
2
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 2 - Flex Extra (Non-
Qualified)
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
Equity Market Bond Blend Appreciation Securities Bond
Division Division Division Division Division Division Division
------------ ----------- ----------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment
Number of shares (Note 2)..... 8,828,424 25,341,776 3,099,330 15,568,978 1,182,337 1,827,823 3,666,874
============ =========== =========== ============ =========== =========== ===========
Identified cost (Note 3B)..... $193,386,690 $25,341,776 $37,886,833 $283,862,267 $38,879,919 $28,046,129 $17,719,377
============ =========== =========== ============ =========== =========== ===========
Value (Note 3A)............... $248,460,487 $25,341,776 $37,288,217 $334,007,134 $45,271,685 $29,683,840 $18,041,018
Dividends receivable........... -- 97,896 -- -- -- -- --
Receivable for accumulation
units sold.................... 291,714 215,221 149,120 360,253 350,566 29,617 33,665
Divisional transfers pending
settlement.................... 96,871 (203,991) (2,293) 42,036 51,002 20,526 (4,151)
Other assets................... 1,954 -- 15 851 -- -- --
------------ ----------- ----------- ------------ ----------- ----------- -----------
Total assets............. 248,851,026 25,450,902 37,435,059 334,410,274 45,673,253 29,733,983 18,070,532
------------ ----------- ----------- ------------ ----------- ----------- -----------
LIABILITIES
Redemptions pending settlement. 3,994 739 37 8,898 45 -- --
Annuitant mortality
fluctuation reserve (Note 3D). 6,544 1,616 665 7,551 494 -- --
Payable to Massachusetts
Mutual
Life Insurance Company........ 741,968 294,755 115,853 885,605 99,313 60,595 47,021
------------ ----------- ----------- ------------ ----------- ----------- -----------
Total liabilities........ 752,506 297,110 116,555 902,054 99,852 60,595 47,021
------------ ----------- ----------- ------------ ----------- ----------- -----------
NET ASSETS..................... $248,098,520 $25,153,792 $37,318,504 $333,508,220 $45,573,401 $29,673,388 $18,023,511
============ =========== =========== ============ =========== =========== ===========
Net assets consist of:
Accumulation units - value..... $247,880,380 $25,099,919 $37,296,339 $333,256,501 $45,556,941 $29,673,388 $18,023,511
Annuity reserves (Note 3E)..... 218,140 53,873 22,165 251,719 16,460 -- --
------------ ----------- ----------- ------------ ----------- ----------- -----------
Net assets............... $248,098,520 $25,153,792 $37,318,504 $333,508,220 $45,573,401 $29,673,388 $18,023,511
============ =========== =========== ============ =========== =========== ===========
Accumulation units (Note 7)
Contract owners............... 93,725,552 16,798,681 19,510,027 141,323,381 29,264,512 30,397,417 15,602,598
Massachusetts Mutual Life
Insurance Company............. -- -- -- -- 5,000 5,000 5,000
------------ ----------- ----------- ------------ ----------- ----------- -------------
Total units.................. 93,725,552 16,798,681 19,510,027 141,323,381 29,269,512 30,402,417 15,607,598
============ =========== =========== ============ =========== =========== =============
NET ASSET VALUE PER ACCUMULATION UNIT
June 30, 1996................. $2.64 $1.49 $1.91 $2.36 $1.56 $ 0.98 $1.15
June 30, 1995................. 2.18 1.44 1.85 2.06 1.13 0.91 1.05
June 30, 1994................. 1.83 1.39 1.66 1.80 -- -- --
June 30, 1993................. 1.78 1.36 1.71 1.77 -- -- --
June 30, 1992................. 1.61 1.34 1.53 1.61 -- -- --
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 2 - Flex Extra (Non-
Qualified)
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
Equity Market Bond Blend Appreciation Securities Bond
Division Division Division Division Division Division Division
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income
Dividends (Note 3B)............ $ 4,012 $ 561,982 $ 568,968 $ 2,990,873 $ 1,681,676 $ -- $ 618,453
Expenses
Mortality and expense risk
fees and administrative
expenses (Note 4)............. 1,465,583 148,917 231,102 2,042,997 203,706 154,811 96,044
------------ ---------- ----------- ------------ ----------- ---------- -----------
Net investment income (loss)
(Note 3C)..................... (1,461,571) 413,065 337,866 947,876 1,477,970 (154,811) 522,409
------------ ---------- ----------- ------------ ----------- ---------- -----------
Net realized and unrealized
gain (loss) on investments
Net realized gain (loss) on
investments
(Notes 3B, 3C and 6).......... 914,757 -- 2,806 1,443,417 78,550 (4,721) 60,787
Change in net unrealized
appreciation/depreciation of
investments... 17,225,425 -- (1,199,128) 12,488,497 3,168,602 1,810,879 (64,415)
------------ ---------- ----------- ------------ ----------- ---------- -----------
Net gain (loss) on investments. 18,140,182 -- (1,196,322) 13,931,914 3,247,152 1,806,158 (3,628)
------------ ---------- ----------- ------------ ----------- ---------- -----------
Net increase (decrease) in
net assets resulting from
operations.................... $ 16,678,611 $ 413,065 $ (858,456) $ 14,879,790 $ 4,725,122 $1,651,347 $ 518,781
============ ========== =========== ============ =========== ========== ===========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 2 - Flex Extra (Non-
Qualified)
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
Equity Market Bond Blend Appreciation Securities Bond
Division Division Division Division Division Division Division
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income (loss).. $ (1,461,571) $ 413,065 $ 337,866 $ 947,876 $ 1,477,970 $ (154,811) $ 522,409
Net realized gain (loss)
on investments............... 914,757 -- 2,806 1,443,417 78,550 (4,721) 60,787
Change in net unrealized
appreciation/depreciation
of investments............... 17,225,425 -- (1,199,128) 12,488,497 3,168,602 1,810,879 (64,415)
----------- ---------- ---------- ----------- ----------- ---------- ----------
Net increase (decrease) in
net assets resulting from
operations.... 16,678,611 413,065 (858,456) 14,879,790 4,725,122 1,651,347 518,781
----------- ---------- ---------- ----------- ----------- ---------- ----------
Capital transactions: (Note 7)
Net contract payments
(Note 5)..................... 30,049,273 11,533,020 5,057,281 33,245,635 13,670,283 7,111,605 5,910,343
Transfer to Guaranteed
Principal Account............ (124,865) (508,591) (127,840) (291,573) (23,119) (14,359) (68,638)
Withdrawal of funds........... (3,920,596) (393,680) (982,009) (8,633,933) (506,616) (301,576) (170,194)
Reimbursement (payment) of
accumulation unit value
fluctuation.................. 36,518 (231,354) (1,238) 254,678 72,902 30,871 4,498
Net charge (credit) to
annuitant mortality
fluctuation reserve
(Note 3D).................... (3,855) 422 78 366 (69) -- --
Annuity benefit payments...... (12,493) (3,093) (877) (8,773) (552) -- --
Withdrawal due to
administrative and contingent
deferred sales charges
(Note 5)..................... (187,735) (15,999) (74,914) (337,315) (14,321) (10,350) (1,584)
Divisional transfers.......... 1,924,988 (7,309,242) (997,234) (2,134,314) 6,604,415 2,477,857 (566,470)
----------- ---------- ---------- ----------- ----------- ---------- ----------
Net increase in net assets
resulting from capital
transactions................. 27,761,235 3,071,483 2,873,247 22,094,771 19,802,923 9,294,048 5,107,955
----------- ---------- ---------- ----------- ----------- ---------- ----------
Total increase................. 44,439,846 3,484,548 2,014,791 36,974,561 24,528,045 10,945,395 5,626,736
NET ASSETS, at beginning of
the year...................... 203,658,674 21,669,244 35,303,713 296,533,659 21,045,356 18,727,993 12,396,775
----------- ---------- ---------- ----------- ---------- ---------- ----------
NET ASSETS, at end of the
period........................ $248,098,520 $25,153,792 $37,318,504 $333,508,220 $45,573,401 $29,673,388 $18,023,511
=========== ========== ========== =========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 2 - Flex Extra
(Non-Qualified)
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
Equity Market Bond Blend Appreciation Securities Bond
Division Division Division Division Division Division Division
------------ ----------- ----------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income (loss).. $ (904,445) $ 308,665 $ 270,844 $ 890,972 $ (9,092) $ 167,892 $ 176,486
Net realized gain (loss)
on investments............... 595,429 -- (62,194) 1,056,708 8,036 (19,131) (39,458)
Change in net unrealized
appreciation/depreciation
of investments............... 20,321,470 -- 2,587,528 24,418,046 947,376 32,817 210,328
------------ ---------- ----------- ------------ ----------- ----------- -----------
Net increase in net assets
resulting from operations.... 20,012,454 308,665 2,796,178 26,365,726 946,320 181,578 347,356
------------ ---------- ----------- ------------ ----------- ----------- -----------
Capital transactions: (Note 7)
Net contract payments (Note 5) 14,584,325 3,751,568 2,696,032 15,155,478 3,618,551 3,824,150 4,184,812
Transfer to Guaranteed
Principal Account............. (706,196) (196,988) (189,377) (883,620) (9) (17) (41,246)
Withdrawal of funds........... (2,759,773) (150,546) (574,948) (5,537,610) (45,360) (56,131) (34,398)
Reimbursement (payment) of
accumulation unit value
fluctuation................... 15,060 (3,727) (1,979) 54,869 1,085 1,701 5,960
Net charge (credit) to
annuitant mortality fluctuation
reserve (Note 3D)............. (13,349) 343 (16) (11,460) (5,658) -- --
Annuity benefit payments...... (9,679) (3,090) (834) (9,386) (140) -- --
Withdrawal due to
administrative and contingent
deferred sales charges
(Note 5)...................... (163,007) (6,187) (67,084) (310,949) (1,700) (1,754) (392)
Divisional transfers.......... 1,680,527 (2,832,461) (40,931) (2,262,998) 1,040,167 1,861,789 553,907
------------ ----------- ----------- ------------ ----------- ----------- -----------
Net increase in net assets
resulting from capital
transactions.................. 12,627,908 558,912 1,820,863 6,194,324 4,606,936 5,629,738 4,668,643
------------ ----------- ----------- ------------ ----------- ----------- -----------
Total increase................. 32,640,362 867,577 4,617,041 32,560,050 5,553,256 5,811,316 5,015,999
NET ASSETS, at beginning of
the year...................... 125,116,005 14,677,390 24,633,394 222,070,809 4,277,112 6,205,254 1,589,236
------------ ----------- ----------- ------------ ----------- ----------- -----------
NET ASSETS, at end of the
period........................ $157,756,367 $15,544,967 $29,250,435 $254,630,859 $ 9,830,368 $12,016,570 $ 6,605,235
============ =========== =========== ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Massachusetts Mutual Variable Annuity Separate Account 2 - Flex Extra
(Non-Qualified)
Notes To Financial Statements
1. HISTORY
Massachusetts Mutual Variable Annuity Separate Account 2 ("Separate Account
2") is a separate investment account established on October 14, 1981 by
Massachusetts Mutual Life Insurance Company ("MassMutual"). Separate Account
2 operates as a registered unit investment trust pursuant to the Investment
Company Act of 1940 and the rules promulgated thereunder.
MassMutual maintains two segments within Separate Account 2. The segments are
Flex-Annuity IV (Non-Qualified), and Flex Extra (Non-Qualified). These notes
and the financial statements presented herein, with the exception of Note 8,
describe and consist only of the Flex Extra (Non-Qualified) segment, (the
"Segment").
On September 13, 1994, MassMutual paid $15,000 to provide the initial capital
for the Segment's three new divisions: 1,516 shares were purchased in the
management investment company described in Note 2 supporting the three new
Oppenheimer divisions of the Segment.
2. INVESTMENT OF THE SEGMENT'S ASSETS
The Segment maintains seven divisions. The MML Equity Division invests in
shares of MML Equity Fund, the MML Money Market Division invests in shares of
MML Money Market Fund, the MML Managed Bond Division invests in shares of MML
Managed Bond Fund, the MML Blend Division invests in shares of MML Blend
Fund, the Oppenheimer Capital Appreciation Division invests in shares of
Oppenheimer Capital Appreciation Fund, the Oppenheimer Global Securities
Division invests in shares of Oppenheimer Global Securities Fund and the
Oppenheimer Strategic Bond Division invests in shares of Oppenheimer
Strategic Bond Fund.
MML Equity Fund, MML Money Market Fund, MML Managed Bond Fund and MML Blend
Fund are the four series of shares of MML Series Investment Fund (the "MML
Trust"). The MML Trust is a no-load, registered, open-end, diversified
management investment company for which MassMutual acts as investment
manager. Concert Capital Management Company, Inc. ("Concert Capital"), a
wholly-owned subsidiary of DLB Acquisition Corporation, which is a controlled
subsidiary of MassMutual, serves as investment sub-advisor to the MML Equity
Fund and the equity sector of the MML Blend Fund.
Oppenheimer Capital Appreciation Fund, Oppenheimer Global Securities Fund and
Oppenheimer Strategic Bond Fund (the "Oppenheimer Funds") are part of the
Oppenheimer Variable Account Funds (the "Oppenheimer Trust"). The Oppenheimer
Trust is a registered, open-end, diversified management investment company,
for which OppenheimerFunds, Inc. ("OFI") acts as investment advisor. (Prior
to January 5, 1996, OFI was known as Oppenheimer Management Corporation.)
In addition to the seven divisions of the Segment, a contractowner may also
allocate funds to the Guaranteed Principal Account, which is part of
MassMutual's general account. Because of exemptive and exclusionary
provisions, interests in the Guaranteed Principal Account, which is part of
MassMutual's general account, are not registered under the Securities Act of
1933 and the general account is not registered as an investment company under
the Investment Company Act of 1940.
3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Segment in preparation of the financial statements in
conformity with generally accepted accounting principles.
A. Investment Valuation
The investments in MML Trust and Oppenheimer Trust are each stated at market
value which is the net asset value of each of the respective underlying
funds.
B. Accounting for Investments
Investment transactions are accounted for on trade date and identified cost
is the basis followed in determining the cost of investments sold for
financial statement purposes. Dividend income is recorded on the ex-dividend
date.
7
<PAGE>
Notes To Financial Statements (Continued)
C. Federal Income Taxes
Operations of the Segment form a part of the total operations of MassMutual,
and the Segment is not taxed separately. MassMutual is taxed as a life
insurance company under the provisions of the 1986 Internal Revenue Code, as
amended. The Segment will not be taxed as a "regulated investment company"
under Subchapter M of the Internal Revenue Code. Under existing federal law,
no taxes are payable on investment income and realized capital gains
attributable to contracts which depend on the Segment's investment
performance (the "Contracts"). Accordingly, no provision for federal income
tax has been made. MassMutual may, however, make such a charge in the future
if an unanticipated change of current law results in a company tax liability
attributable to the Segment.
D. Annuitant Mortality Fluctuation Reserve
The Segment maintains a reserve as required by regulatory authorities to
provide for mortality losses incurred. The reserve is increased quarterly for
mortality gains and its proportionate share of any increases in value. The
reserve is charged quarterly for mortality losses and its proportionate share
of any decreases in value. Transfers to or from MassMutual are then made
quarterly to adjust the Segment. Net transfers from the Segment to MassMutual
totaled $2,958 and $27,367 for the six months ended June 30, 1996 and 1995,
respectively. The reserve is subject to a maximum of 3% of the Segment's
annuity reserves. Any mortality losses in excess of this reserve will be
assumed by MassMutual. The reserve is not available to owners of Contracts
except to the extent necessary to cover mortality losses under the Contracts.
E. Annuity Reserves
Annuity reserves are developed by using accepted actuarial methods and are
computed using the 1971 Individual Annuity Mortality Table, as modified.
F. Estimates
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
4. CHARGES FOR MORTALITY AND EXPENSE RISKS AND ADMINISTRATIVE EXPENSES
Daily charges are made which are equivalent on an annual basis to 1.30% of
the net asset value of the Segment (the "Net Asset Value"). The mortality and
expense risk part of this charge is made daily at an annual rate which is
currently equal to 1.15%, and will not exceed 1.25% of the Net Asset Value.
The administrative expense part of this charge is made daily at an annual
rate of 0.15% of the Net Asset Value.
5. CHARGES/DEDUCTIONS FOR ADMINISTRATIVE CHARGES, CONTINGENT DEFERRED SALES
CHARGES AND PREMIUM TAXES
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For the Six Months Equity Market Bond Blend Appreciation Securities Bond
Ended June 30, 1996 Division Division Division Division Division Division Division
- ------------------- ----------- ----------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross contract payments................ $30,056,967 $11,535,973 $5,058,576 $33,254,147 $13,673,783 $7,113,426 $5,911,856
Less deduction for premium taxes 7,694 2,953 1,295 8,512 3,500 1,821 1,513
----------- ----------- ---------- ----------- ----------- ---------- ----------
Net contract payments.................. $30,049,273 $11,533,020 $5,057,281 $33,245,635 $13,670,283 $7,111,605 $5,910,343
=========== =========== ========== =========== =========== ========== ==========
Administrative and contingent
deferred sales charges............... $ 187,735 $ 15,999 $ 74,914 $ 337,315 $ 14,321 $ 10,350 $ 1,584
=========== =========== ========== =========== =========== ========== ==========
</TABLE>
8
<PAGE>
Notes To Financial Statements (Continued)
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For the Six Months Equity Market Bond Blend Appreciation Securities Bond
Ended June 30, 1995 Division Division Division Division Division Division Division
- ------------------- ----------- ----------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross contract
payments............................ $14,610,731 $ 3,758,361 $2,700,913 $15,182,919 $ 3,625,102 $3,831,074 $4,192,389
Less deduction for premium taxes..... 26,406 6,793 4,881 27,441 6,551 6,924 7,577
----------- ----------- ---------- ----------- ----------- ---------- ----------
Net contract payments................ $14,584,325 $ 3,751,568 $2,696,032 $15,155,478 $ 3,618,551 $3,824,150 $4,184,812
=========== =========== ========== =========== =========== ========== ==========
Administrative and contingent
deferred sales charges.............. $ 163,007 $ 6,187 $ 67,084 $ 310,949 $ 1,700 $ 1,754 $ 392
=========== =========== ========== =========== =========== ========== ==========
</TABLE>
6. PURCHASES AND SALES OF INVESTMENTS
<TABLE>
<CAPTION>
For the Period Cost of Proceeds
Ended June 30, 1996 Purchases from Sales
- ------------------- ----------- ----------
<S> <C> <C>
MML Equity Fund................................................................... $36,593,819 $2,217,911
MML Money Market Fund............................................................. 13,007,057 9,146,692
MML Managed Bond Fund............................................................. 5,180,638 1,253,220
MML Blend Fund.................................................................... 36,943,454 4,755,030
Oppenheimer Capital Appreciation Fund............................................. 21,329,841 311,836
Oppenheimer Global Securities Fund................................................ 9,269,466 104,967
Oppenheimer Strategic Bond Fund................................................... 6,575,362 822,450
</TABLE>
7. NET INCREASE (DECREASE) IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For the Six Months Equity Market Bond Blend Appreciation Securities Bond
Ended June 30, 1996 Division Division Division Division Division Division Division
- ------------------- ----------- ----------- ----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased................... 11,634,306 7,627,786 2,644,612 14,455,592 9,331,383 7,482,853 5,204,727
Units withdrawn and transferred to
Guaranteed Principal Account..... (1,634,520) (621,918) (620,527) (4,002,575) (391,790) (342,030) (211,494)
Units transferred
between divisions................ 746,390 (4,934,763) (524,158) (904,815) 4,360,586 2,614,186 (498,669)
----------- ----------- ----------- ------------ ------------- ------------ ------------
Net Increase...................... 10,746,176 2,071,105 1,499,927 9,548,202 13,300,179 9,755,009 4,494,564
Units, at beginning of the year... 82,979,376 14,727,576 18,010,100 131,775,179 15,969,333 20,647,408 11,113,034
----------- ----------- ----------- ------------ ------------- ------------ ------------
Units, at end of the period....... 93,725,552 16,798,681 19,510,027 141,323,381 29,269,512 30,402,417 15,607,598
=========== =========== =========== ============ ============= ============ ============
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
For the Six Months Equity Market Bond Blend Appreciation Securities Bond
Ended June 30, 1995 Division Division Division Division Division Division Division
- ------------------- ----------- ----------- ----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Units purchased................... 7,089,415 2,638,216 1,523,811 7,725,268 3,510,209 4,326,211 4,191,140
Units withdrawn and transferred to
Guaranteed Principal Account..... (1,771,367) (250,618) (476,160) (3,446,076) (44,234) (65,053) (76,694)
Units transferred
between divisions................ 849,989 (1,998,831) (32,493) (1,151,596) 1,012,130 2,101,381 558,597
Units transferred
to annuity reserves.............. (16,118) -- -- (16,904) (16,363) -- --
----------- ----------- ----------- ------------ ------------- ------------ ------------
Net increase....................... 6,151,919 388,767 1,015,158 3,110,692 4,461,742 6,362,539 4,673,043
Units, at beginning of the year... 66,002,110 10,382,571 14,779,667 120,091,837 4,250,795 6,903,141 1,621,487
----------- ----------- ----------- ------------ ------------- ------------ ------------
Units, at end of the period....... 72,154,029 10,771,338 15,794,825 123,202,529 8,712,537 13,265,680 6,294,530
=========== =========== =========== ============ ============= ============ ============
</TABLE>
9
<PAGE>
Notes To Financial Statements (Continued)
8. CONSOLIDATED MASSACHUSETTS MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT 2
As discussed in Note 1, the financial statements only represent activity of
the Flex Extra (Non-Qualified) segment of Separate Account 2. The combined
net assets as of June 30, 1996 for Separate Account 2, including the segments
pertaining to Flex-Annuity IV (Non-Qualified) and Flex Extra (Non-Qualified),
are as follows:
<TABLE>
<CAPTION>
MML MML Oppenheimer Oppenheimer Oppenheimer
MML Money Managed MML Capital Global Strategic
Equity Market Bond Blend Appreciation Securities Bond
Division Division Division Division Division Division Division
------------ ----------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets............... $261,090,016 $30,762,544 $39,372,144 $362,467,330 $45,673,253 $29,733,983 $18,070,532
Total liabilities.......... 794,150 313,948 127,363 996,872 99,852 60,595 47,021
----------- ---------- ---------- ----------- ---------- ---------- ----------
Net assets................. $260,295,866 $30,448,596 $39,244,781 $361,470,458 $45,573,401 $29,673,388 $18,023,511
=========== ========== ========== =========== ========== ========== ==========
Net assets consist of:
Accumulation units-value... $259,934,310 $30,379,674 $39,170,401 $361,032,603 $45,556,941 $29,673,388 $18,023,511
Annuity reserve............ 361,556 68,922 74,380 437,855 16,460 -- --
----------- ---------- ---------- ----------- ---------- ---------- ----------
Net assets................. $260,295,866 $30,448,596 $39,244,781 $361,470,458 $45,573,401 $29,673,388 $18,023,511
=========== ========== ========== =========== ========== ========== ==========
</TABLE>
9. DISTRIBUTION AGREEMENT
MML Distributors, Inc. ("MML Distributors"), a wholly-owned subsidiary of
MassMutual, acts as principal underwriter (as defined in the Investment
Company Act of 1940, as amended) of the contracts.
MML Investors Services, Inc. ("MMLISI"), a wholly-owned subsidiary of
MassMutual, acts as co-underwriter of the contracts. Registered
representatives of MMLISI who are licensed and appointed as insurance agents
of MassMutual sell the contracts.
10
<PAGE>
MML Series Investment Fund
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
To Our Shareholders................................................. 2-6
Statement of Assets and Liabilities as of June 30, 1996............. 7
MML Equity Fund
MML Money Market Fund
MML Managed Bond Fund
MML Blend Fund
Statement of Operations For the Six Months Ended June 30, 1996...... 8
MML Equity Fund
MML Money Market Fund
MML Managed Bond Fund
MML Blend Fund
Statement of Changes in Net Assets For the Six Months Ended
June 30, 1996 and For the Year Ended December 31, 1995.............. 9
MML Equity Fund
MML Money Market Fund
MML Managed Bond Fund
MML Blend Fund
Financial Highlights
MML Equity Fund.................................................. 10
MML Money Market Fund............................................ 10
MML Managed Bond Fund............................................ 11
MML Blend Fund................................................... 12
Schedule of Investments as of June 30, 1996
MML Equity Fund.................................................. 13-15
MML Money Market Fund............................................ 16
MML Managed Bond Fund............................................ 17-19
MML Blend Fund................................................... 20-25
Notes to Financial Statements....................................... 26-28
</TABLE>
1
<PAGE>
MML Series Investment Fund
To Our Shareholders
Low Interest Rates Defined Markets Through Year-End
To put the first six months of 1996 in perspective, it's helpful to look back
for a moment. Throughout 1995, concern over how quickly the domestic economic
growth rate was slowing prompted the Federal Reserve to cut interest rates. The
Fed reduced rates in an effort to prolong the period of expansion at a slower,
but more sustainable rate, thus staving off the possibility of a recession.
Lower interest rates strongly benefited both the stock and bond markets during
1995. Stocks did well because lower rates both increased corporate
profitability and encouraged consumer spending, especially on goods that had to
be financed. Bonds reacted favorably to declining rates because as new bonds
are issued at lower current rates, investors are willing to pay more for the
higher income of existing bonds.
Interest Rates Change Direction On Reports Of Faster Growth
In contrast to last year, when slowing growth was a concern, economic data in
early 1996 suggested that growth had again picked up. While growth in and of
itself is good, at this point in the economic cycle, it could create
inflationary pressures, causing prices of goods and services to increase and
consequently investments to lose their relative value.
Beginning with reports of an increase in non-farm payroll for the month of
February, which was especially surprising considering the difficult winter most
of the country suffered, rapid economic growth became a concern. This fact
started the investment community discussing not when the Fed might cut rates
further, but rather how far rates might be increased in order to preempt an
inflationary GDP growth rate.
The Stock Market, While Still Positive, Becomes Volatile
Reacting to both increasing interest rates and persistent concerns over whether
reports of faster growth were accurate, the domestic stock market became
volatile over the first half. Investors alternately focused on the types of
companies that should be able to grow faster than the overall economy, and on
stocks of companies that would benefit from the increased consumer demand that
seemed to be reflected by improving economic statistics.
Smaller company stocks and stocks in traditional growth sectors of the market
performed well at various times, as did cyclical stocks - those of companies
whose prospects are tied to the strength of the economy.
The Bond Market Is Less Resilient
As interest rates climbed over the past six months, the bullish bond market of
1995 dissipated. Bonds with the most exposure to interest rate changes fared
most poorly. Long-term Treasuries reported negative price performance for the
period, and the yield curve steepened dramatically.
Bonds with shorter maturities, and bonds that are influenced by other factors
than interest rates - such as corporate bonds, which were buoyed somewhat by
continued corporate profitability - performed somewhat better.
Value Investing During Volatile Markets
Both the stock and bond markets have been decidedly more volatile during 1996,
and we expect that to continue. Price fluctuations have received a great deal
of attention in the financial press, and caused some discomfort for investors in
both markets. However, it is during times of market volatility that value
investors like us have an advantage. When prices are moving steadily higher,
value strategies tend to underperform because they rely heavily on buying
securities when they're selling at discounted prices. In a market with price
fluctuations, astute value investors have the opportunity to purchase securities
they think will perform well at temporarily reduced prices and then profit as
the securities return to favor in the market.
2
<PAGE>
An Optimistic Outlook Regardless of Market Uncertainty
Regardless of the volatility in the U.S. markets in recent months, we think
there are compelling reasons to believe the economy is in good shape. The
economy grew at a real rate of more than three percent during the first half of
1996, which is well above what had been forecasted. So even with a potentially
slower second half, growth will have continued at an impressive rate. And
though threats of inflation are a large factor in the markets' volatility, the
core rate of inflation, minus increases in the food and energy sectors, is still
quite low at approximately 2.7 percent.
The current debate in the markets concerns how the Federal Reserve will react to
this data, and consequently whether rates will be increased. We expect that if
the Fed does move to tighten money supply, its move will not be a large one. In
any event, we intend to focus more on inherent strengths and long-term value.
It is in an environment like this that we'd expect our portfolio strategies to
perform well.
/s/ Stuart Reese
Stuart H. Reese
President
MML Series Investment Fund
August 1, 1996
3
<PAGE>
MML EQUITY
How has the Fund performed over the past six months?
The Fund's performance has been very good, though it has slightly lagged broad
market indices for the period. In the sixth year of an economic growth cycle,
investors tended to focus more on traditional high growth sectors of the market
than the lower-risk area where we invest. Still, due to good stocks selection,
our performance was sound in an absolute sense and it built a solid foundation
for full year results.
Has the fact that market leadership has moved away from large stocks impacted
the portfolio?
Not greatly. One place where investors reached for higher returns in the first
half was smaller company stocks, in contrast to last year, when large company
stocks were runaway leaders. Still, solid companies with recognized competitive
strengths and sustainable earnings have remained in favor regardless of their
size. Ours is a portfolio of very high quality companies, and we have not been
disadvantaged by the shift in market interest towards smaller companies.
What types of companies performed best for you over the period?
Because of faster than expected economic growth in the first half, many cyclical
(or economically-sensitive) stocks performed very well. As value investors, we
had purchased a number of cyclical names at the end of 1995, when fears about
the economy's weakness made cyclicals one of the few real values within a strong
bull market. This positioning became advantageous this year. Some of our best
performers included machinery manufacturers Parker-Hannifin Corporation, Dover
Corporation and Harsco Corporation, electrical equipment firms such as General
Electric Company, Honeywell Inc. and General Signal Corporation, and retailers
including The May Department Stores Company, Sears Roebuck and Co., Albertson's,
Inc. and American Stores Company.
How are you currently positioning the portfolio?
Recently, we've been working to reduce our total number of portfolio holdings,
anticipating continued selectivity in the market. We are both eliminating
smaller holdings that we believe don't merit being brought up to full position
size, and adding to those we feel confident are positioned for growth, but that
are still selling for reasonable prices. For example, we've recently increased
our insurance holdings, adding strong companies like Marsh & McLennan Companies,
Inc., where we see good cash flows being generated, a healthy dividend and
strong prospects for future dividend growth.
What is your outlook for the portfolio?
We believe the Fund will continue to do well, especially in light of increased
market volatility. While volatility can be uncomfortable for market watchers,
it is precisely this type of environment that creates opportunity for value
investors. Price fluctuations both allow us to buy stocks we want to own at
temporarily reduced prices and to sell stocks when they reach our target sell
price. Our value-oriented investment approach is one that has been very
successful over time, and we expect it to help us continue to provide superior
returns going forward.
MML MONEY MARKET
How has the Fund performed over the past six months?
We're very pleased with the Fund's performance for the period. While we
continued to offer investors a safe and highly liquid income vehicle, we also
benefited from yields that were higher this year than last as a result of
increases in interest rates.
How was the Fund positioned in this market and why?
During 1995, when interest rates were declining, we had lengthened the average
maturity of our portfolio in an effort to take advantage of higher rates for as
long as possible. In contrast, during the first half of this year, we kept
average maturity shorter. Shorter-term securities must be replaced with new
issues more often, and since we were able to do so on favorable terms as the
yield curve steepened, the Fund benefited.
What changes are you currently making to the portfolio?
Our assets have grown by approximately 11 percent over the past six months, and
as we've been investing this money, we're working to remain well-diversified
among issuers and securities.
At this time, most of the newly issued securities in our market are extremely
short in maturity. We're looking for ways to extend our average maturity
slightly - its June 30th length was 43 days - but longer-maturity issues are
currently in short supply.
As we always do, we're evaluating and researching all of our investment
opportunities in an effort to capture the most income we can in this environment
without taking on unnecessary risk.
4
<PAGE>
What is your outlook for the Fund?
We believe the outlook remains favorable. U.S. economic growth appears to be
strong. That fact has given rise to the possibility of a tightening of the
money supply, or an increase in interest rates, in an effort to counteract any
upward move in inflation. If the Federal Reserve should increase rates later in
the year, extremely short-term income vehicles like this one are one of the few
types of investments that would benefit. Since the income we pay relates
directly to prevailing interest rates, a higher rate environment would allow us
to pay a higher yield without taking on additional risk.
MML MANAGED BOND
How has the Fund performed over the past six months?
While the general bond market has been weak this year as a result of increasing
interest rates, the Fund's performance has been relatively favorable. Due to
portfolio allocation decisions, it finished the six months ended June 30th
slightly ahead of the Lehman Government/Corporate Index.
What effect did this year's rise in interest rates have on the market?
Bond prices, especially in longer-term maturities, were hurt as interest rates
edged up. Treasuries, which had rallied most on last year's rate declines,
suffered most in the first half of this year. In addition, the yield curve
significantly steepened so that in contrast to last year's market, moving
farther out in maturity made a large difference in the amount of yield available
in the Treasury market.
How was the portfolio positioned in light of these changes?
As always, the portfolio was well-diversified, with a focus on providing a high
rate of total return without taking on undue risk to principal. One of the
moves we made was to increase our allocation to mortgage-backed securities over
the period. Mortgages tend to pay higher income than Treasuries, and because
interest rates had risen, the prepayment risk associated with them in last
year's market had declined. Our focus was on well-seasoned and call-protected
securities, where we felt the income we were buying was fairly reliable.
Additionally, we were consistent in our allocation to corporate bonds over the
period, and they performed well regardless of increasing rates. Corporate
America weathered the economic slowdown at the end of 1995 well, and now that
growth appears to have picked up somewhat, these bonds remain in demand.
How are you currently positioning the portfolio and why?
At this time we're looking for areas of the market where we can add value for
the portfolio. We're holding on to the corporate bonds we own and selectively
adding to our allocation there. In this economic environment, however, we are
conducting a tremendous amount of research into individual corporate credits
before buying. Beyond corporate bonds, we're still building our position in
well-structured mortgage securities. In the Treasury market, we're considering
making investments into the three year maturity range, where the yield curve is
exceptionally steep. We would also consider adding to long bonds if the yield
differential between 10 and 30 year bonds were to increase further. We don't
make bets on the direction of interest rates, so the decisions we're making now
reflect our beliefs about what sectors of the market offer the best potential
value relative to the rest of the market.
What is your outlook for the Fund?
Our outlook is optimistic. This is a Fund that was designed to perform well in
many markets through its diversification over various categories of bonds, its
neutral duration strategy, and its total return focus. While current economic
data suggests the likelihood of the Federal Reserve's increasing interest rates
later this year, we expect our portfolio positioning to help us to continue to
be able to provide a competitive rate of return without undue risk to principal.
MML BLEND
How has the Fund performed over the past six months?
The Fund has performed well, benefiting from the strength in the stock market
and from having avoided some of the difficulties of the fixed income market.
While our performance has lagged that of pure equity investments over the
period, we believe our portfolio diversification will be a plus, allowing us
exposure to the growth potential of stocks, but tempering any dramatic price
swings.
Did your allocation between stocks, bonds and cash change over the period?
Yes. While remaining underweighted in both stocks and bonds, we did slightly
increase our allocation over the last six months, and consequently reduced our
cash position. Though both markets have been volatile, we believe they offer
significant reward
5
<PAGE>
potential over the long term. As of June 30th, our equity holdings represented
55 percent of the portfolio, and our bond position was 19 percent. The remaining
26 percent was invested in money market securities.
Within your allocations, what investment decisions benefited the portfolio over
the period?
Because of faster than expected economic growth in the first half, many cyclical
(or economically-sensitive) stocks performed very well. As value investors, we
had purchased a number of cyclical names at the end of 1995, when fears about
the economy's weakness made cyclicals one of the few real values within a strong
bull market. This positioning became advantageous this year.
On the fixed income side, we benefited from having increased our allocation to
mortgage-backed securities over the period. Mortgages tend to pay higher income
than Treasuries, and because interest rates had risen, the prepayment risk
associated with them in last year's market had declined. Additionally, our
allocation to strong performing corporate bonds helped us over the period.
Where are you currently finding the greatest potential value in the markets?
On the equity side, we've been working to reduce our total number of portfolio
holdings, anticipating continued selectivity in the market. We are both
eliminating smaller holdings that we believe don't merit being brought up to
full position size, and adding to those we feel confident are positioned for
growth, but that are still selling for reasonable prices.
In bonds, we're looking for areas of the market where we can add value for the
portfolio. We're holding on to the corporate bonds we own and selectively adding
to our holdings there. In this economic environment, however, we are conducting
a tremendous amount of research into individual corporate credits before buying.
Beyond corporate bonds, we're still building our position in well-structured
mortgage securities.
What is your outlook for the Fund?
Our outlook is positive. With the increased volatility we've seen in both the
stock and bond markets recently, we believe the potential benefits of a
relatively conservative balanced strategy like ours are compelling. With
exposure to stocks, bonds and money market securities, we're positioned to
capture appreciation and income, but with less price volatility than an
investment in either stocks or bonds.
6
<PAGE>
MML Series Investment Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
Fund Fund Fund Fund
------- ------ -------- -------
<S> <C> <C> <C> <C>
ASSETS
Investments at value (See Schedule of Investments)
(Notes 2A, 2B and 5)
Equities (Identified cost: $914,035,124;
$659,848,392 respectively).................................. $1,365,957,086 $ -- $ -- $1,101,017,076
Bonds and notes (Identified cost: $160,743,652;
$377,282,273 respectively).................................. -- -- 159,309,502 375,347,298
Short-term investments (Identified cost: $158,535,275;
$121,197,672; $4,514,278; $534,271,816 respectively).......... 158,520,790 121,197,672 4,514,278 534,080,467
-------------- -------------- -------------- --------------
Total investments........................................... 1,524,477,876 121,197,672 163,823,780 2,010,444,841
Cash.......................................................... 2,130,827 4,006 1,573 (587,733)
Interest and dividends receivable............................. 2,658,858 -- 2,190,138 7,714,192
Receivable for investments sold............................... 2,592,785 -- 10,628 3,811,245
Receivable for settlement of investments
purchased on a forward commitment basis (Note 2D)............ -- -- -- 109,550
Prepaid trustees' fees........................................ 440 280 280 280
-------------- -------------- -------------- --------------
Total assets................................................ 1,531,860,786 121,201,958 166,026,399 2,021,492,375
-------------- -------------- -------------- --------------
LIABILITIES
Payable for investments purchased............................. 5,347,640 -- -- 1,886,523
Dividends payable (Note 2C)................................... -- 470,335 -- --
Investment management fee payable (Note 4).................... 1,394,733 143,563 194,445 1,838,742
Accrued liabilities........................................... 10,817 7,240 6,932 4,015
-------------- -------------- -------------- --------------
Total liabilities........................................... 6,753,190 621,138 201,377 3,729,280
-------------- -------------- -------------- --------------
NET ASSETS.................................................... $1,525,107,596 $ 120,580,820 $ 165,825,022 $2,017,763,095
============== ============== =============== ==============
Net assets consist of:
Series shares (par value $.01 per share; an unlimited number
authorized) (Note 6)........................................ $ 541,909 $ 1,205,808 $ 137,831 $ 940,534
Additional paid-in capital.................................... 1,040,001,460 119,375,012 165,610,676 1,536,766,548
Undistributed net investment income (Note 2C)................. 18,599,104 9,946 2,714,866 18,881,505
Undistributed net realized gain (loss) on investments and
forward commitments (Notes 2D and 3)......................... 14,057,646 (9,946) (1,204,201) 22,022,598
Net unrealized appreciation (depreciation) on:
Investments (Note 2A)........................................ 451,907,477 -- (1,434,150) 439,042,360
Forward commitments (Note 2D)................................. -- -- -- 109,550
-------------- -------------- -------------- --------------
NET ASSETS.................................................... $1,525,107,596 $ 120,580,820 $ 165,825,022 $2,017,763,095
============== ============== =============== ==============
Outstanding series shares..................................... 54,190,898 120,580,820 13,783,081 94,053,405
============== ============== =============== ==============
Net asset value per share..................................... $ 28.14 $ 1.00 $ 12.03 $ 21.45
============== ============== =============== ==============
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
MML Series Investment Fund
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
MML MML
MML Money Managed MML
Equity Market Bond Blend
Fund Fund Fund Fund
------- ------ -------- -------
<S> <C> <C> <C> <C>
Investment income (Note 2B)
Dividends......................................................... $ 16,673,885 $ -- $ -- $ 14,065,376
Interest.......................................................... 4,671,970 3,091,110 5,716,624 27,010,792
-------------- -------------- ------------ --------------
Total income................................................... 21,345,855 3,091,110 5,716,624 41,076,168
-------------- -------------- ------------ --------------
Expenses
Investment management fee (Note 4)................................ 2,701,607 280,866 389,313 3,635,657
Trustees' fees.................................................... 9,181 7,376 7,376 7,093
Audit fees........................................................ 14,156 9,733 12,724 15,197
Other............................................................. 546 488 365 378
-------------- -------------- ------------ --------------
Total expenses................................................. 2,725,490 298,463 409,778 3,658,325
-------------- -------------- ------------ --------------
Net investment income (Note 2C)................................... 18,620,365 2,792,647 5,306,846 37,417,843
-------------- -------------- ------------ --------------
Net realized and unrealized gain (loss) on investments and
forward commitments (Notes 2A, 2B and 2D)
Net realized gain (loss) on:
Investments (Notes 2B and 2C).................................... 14,069,458 (212) (353,181) 25,325,060
Forward commitments (Note 2D).................................... -- -- -- (2,601,828)
-------------- -------------- ------------ --------------
Net realized gain (loss)........................................ 14,069,458 (212) (353,181) 22,723,232
-------------- -------------- ------------ --------------
Change in net unrealized appreciation/depreciation on:
Investments (Note 2A)............................................ 81,554,753 -- (7,864,043) 46,307,305
Forward commitments (Note 2D).................................... -- -- -- (1,278,822)
-------------- -------------- ------------ --------------
Total change in net unrealized appreciation/depreciation........ 81,554,753 -- (7,864,043) 45,028,483
-------------- -------------- ------------ --------------
Net gain (loss)................................................... 95,624,211 (212) (8,217,224) 67,751,715
-------------- -------------- ------------ --------------
Net increase (decrease) in net assets resulting from operations... $ 114,244,576 $ 2,792,435 $ (2,910,378) $ 105,169,558
============== ============== ============ ==============
</TABLE>
8
<PAGE>
MML Series Investment Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1996
-------------------------------------------------------
(Unaudited)
MML MML
MML Money Managed MML
Equity Market Bond Blend
Fund Fund Fund Fund
----- ---- ---- ----
<S> <C> <C> <C> <C>
Increase (decrease)
in net assets
Operations:
Net investment income......... $ 18,620,365 $ 2,792,647 $ 5,306,846 $ 37,417,843
Net realized gain (loss)
on investments and
forward commitments.......... 14,069,458 (212) (353,181) 22,723,232
Change in net unrealized
appreciation/depreciation on
investments and forward
commitments.................. 81,554,753 -- (7,864,043) 45,028,483
-------------- ------------ ------------ --------------
Net increase (decrease) in
net assets resulting from
operations................... 114,244,576 2,792,435 (2,910,378) 105,169,558
Dividends to shareholders
from: (Note 2C)
Distribution of net
investment income.......... (25,000) (2,792,435) (2,593,548) (18,540,796)
Distribution of net
realized gains............. -- -- -- --
Net increase in capital
share transactions (Note 6) 161,989,014 11,660,619 12,630,810 107,993,403
-------------- ------------ ------------ --------------
Total increase.............. 276,208,590 11,660,619 7,126,884 194,622,165
NET ASSETS, at beginning
of the year.................. 1,248,899,006 108,920,201 158,698,138 1,823,140,930
-------------- ------------ ------------ --------------
NET ASSETS, at end
of the period/year.......... $1,525,107,596 $120,580,820 $165,825,022 $2,017,763,095
============== ============ ============ ==============
(Overdistributed)
undistributed net
investment income included
in net assets at end
of the period/year.......... $ 18,599,104 $ 9,946 $ 2,714,866 $ 18,881,505
============== ============ ============ ==============
Rate per share of dividends
to shareholders from:
Net investment income....... $ .001 $ .024 $ .193 $ .200
Net realized gains.......... -- -- -- --
<CAPTION>
For the Year Ended December 31, 1995
-----------------------------------------------------
MML MML
MML Money Managed MML
Equity Market Bond Blend
Fund Fund Fund Fund
---- ---- ---- ----
<S> <C> <C> <C> <C>
Increase (decrease)
in net assets
Operations:
Net investment income......... $ 30,576,154 $ 5,460,140 $ 9,299,421 $ 70,293,462
Net realized gain (loss)
on investments and
forward commitments.......... 16,898,835 (841) 1,319,095 35,795,663
Change in net unrealized
appreciation/depreciation on
investments and forward
commitments.................. 237,559,436 -- 13,704,932 243,603,590
-------------- -------------- ------------- ---------------
Net increase (decrease) in
net assets resulting from
operations................... 285,034,425 5,459,299 24,323,448 349,692,715
Dividends to shareholders
from: (Note 2C)
Distribution of net
investment income.......... (30,563,214) (5,459,299) (9,294,583) (70,291,011)
Distribution of net
realized gains............. (16,854,045) -- -- (35,463,987)
Net increase in capital
share transactions (Note 6) 190,498,822 17,134,168 22,459,621 134,942,076
-------------- -------------- ------------- ---------------
Total increase.............. 428,115,988 17,134,168 37,488,486 378,879,793
NET ASSETS, at beginning
of the year.................. 820,783,018 91,786,033 121,209,652 1,444,261,137
-------------- -------------- ------------- ---------------
NET ASSETS, at end
of the period/year.......... $1,248,899,006 $ 108,920,201 $ 158,698,138 $ 1,823,140,930
============== ============== ============= ===============
(Overdistributed)
undistributed net
investment income included
in net assets at end
of the period/year.......... $ 3,739 $ 9,734 $ (72,567) $ (7,094)
============== ============== ============= ===============
Rate per share of dividends
to shareholders from:
Net investment income....... $ .634 $ .054 $ .782 $ .811
Net realized gains.......... .350 -- -- .399
</TABLE>
See Notes to Financial Statement
9
<PAGE>
MML Series Investment Fund
FINANCIAL HIGHLIGHTS
Selected per share data for each series share outstanding throughout:
MML EQUITY FUND
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, ------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year......... $ 25.924 $ 20.520 $ 20.510 $ 19.862 $ 18.735 $ 15.659 $ 16.764 $ 14.929 $ 13.828 $ 15.591
--------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income...... .344 .634 .594 .524 .543 .563 .636 .694 .646 .525
Net realized and unrealized
gain (loss) on investments 1.876 5.754 .248 1.365 1.420 3.440 (.722) 2.746 1.660 (.066)
--------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations................ 2.220 6.388 .842 1.889 1.963 4.003 (.086) 3.440 2.306 .459
--------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income......... (.001) (.634) (.594) (.524) (.543) (.562) (.665) (.711) (.639) (.988)
Distribution from net
realized gains............ -- (.350) (.238) (.717) (.288) (.365) (.354) (.894) (.566) (1.234)
Distribution in excess of
net realized gains........ -- -- -- -- (.005) -- -- -- -- --
--------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions........ (.001) (.984) (.832) (1.241) (.836) (.927) (1.019) (1.605) (1.205) (2.222)
--------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value:
End of period/year........ $ 28.143 $ 25.924 $ 20.520 $ 20.510 $ 19.862 $ 18.735 $ 15.659 $ 16.764 $ 14.929 $ 13.828
========= ========= ======== ======== ======== ======== ======== ======== ======== ========
Total return............... 8.56%* 31.13% 4.10% 9.52% 10.48% 25.56% (.51%) 23.04% 16.68% 2.10%
Net assets (in millions):
End of period/year........ $1,525.11 $1,248.90 $820.78 $663.09 $490.62 $355.04 $235.45 $226.41 $172.80 $150.41
Ratio of expenses to
average net assets........ .19%* .41% .43% .44% .46% .48% .49% .50% .50% .51%
Ratio of net investment
income to average net
assets.................... 1.31%* 2.89% 3.04% 3.23% 3.09% 3.43% 4.09% 4.30% 4.05% 3.44%
Portfolio turnover rate.... 5.83%* 11.72% 9.99% 11.28% 9.07% 9.37% 13.50% 15.71% 15.97% 15.73%
</TABLE>
MML MONEY MARKET FUND
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, --------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
----------- ---- ---- ---- ---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year.............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income........... .024 .054 .038 .027 .034 .059 .078 .088 .072 .063
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income.............. (.024) (.054) (.038) (.027) (.034) (.059) (.078) (.088) (.072) (.063)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value:
End of period/year............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return.................... 2.44%* 5.58% 3.84% 2.75% 3.48% 6.01% 8.12% 9.16% 7.39% 6.49%
Net assets (in millions):
End of period/year............. $ 120.58 $108.92 $ 91.79 $ 73.66 $ 84.56 $ 94.41 $ 114.59 $ 70.16 $ 66.35 $ 52.35
Ratio of expenses to
average net assets............. .26%* .54% .55% .54% .53% .52% .54% .54% .55% .57%
Ratio of net investment
income to average net assets... 2.44%* 5.43% 3.81% 2.71% 3.42% 5.91% 7.80% 8.79% 7.20% 6.35%
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
MML Series Investment
FINANCIAL HIGHLIGHTS (Continued)
MML MANAGED BOND FUND
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, -----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year........... $ 12.448 $ 11.141 $ 12.405 $ 12.041 $ 12.219 $ 11.318 $ 11.354 $ 10.919 $ 11.052 $ 12.541
--------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income........ .396 .782 .792 .785 .870 .903 .943 .918 .906 .969
Net realized and unrealized
gain (loss) on investments
and forward commitments..... (.620) 1.307 (1.264) .618 .001 .916 (.036) .454 (.133) (.673)
--------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations.................. (.224) 2.089 (.472) 1.403 .871 1.819 .907 1.372 .773 .296
--------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income........... (.193) (.782) (.792) (.784) (.869) (.902) (.943) (.918) (.906) (1.229)
Distribution from net
realized gains.............. -- -- -- (.255) (.158) (.016) -- (.019) -- (.556)
Distribution in excess of
net realized gains.......... -- -- -- -- (.022) -- -- -- -- --
--------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions.......... (.193) (.782) (.792) (1.039) (1.049) (.918) (.943) (.937) (.906) (1.785)
--------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value:
End of period/year.......... $ 12.031 $ 12.448 $ 11.141 $ 12.405 $ 12.041 $ 12.219 $ 11.318 $ 11.354 $ 10.919 $ 11.052
========= ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return (1.78%)* 19.14% (3.76%) 11.81% 7.31% 16.66% 8.38% 12.83% 7.13% 2.60%
Net assets (in millions):
End of period/year.......... $ 165.83 $ 158.70 $121.21 $129.11 $ 88.15 $ 66.98 $ 43.07 $ 40.03 $ 31.35 $ 26.16
Ratio of expenses to average
net assets.................. .25%* .52% .52% .54% .56% .57% .57% .59% .61% .60%
Ratio of net investment
income to
average net assets.......... 3.25%* 6.63% 6.69% 6.37% 7.28% 7.96% 8.40% 8.35% 8.25% 8.24%
Portfolio turnover rate...... 24.02%* 70.00% 32.77% 58.81% 39.51% 61.85% 69.93% 64.77% 74.92% 55.60%
</TABLE>
See Notes to Financial Statements
11
<PAGE>
MML Series Investment Fund
FINANCIAL HIGHLIGHTS (Continued)
MML BLEND FUND
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1996
----------
(Unaudited)
<S> <C>
Net asset value:
Beginning of year............... $ 20.519
----------
Income from investment
operations:
Net investment income............ .401
Net realized and unrealized
gain (loss) on investments
and forward commitments......... .733
----------
Total from investment
operations...................... 1.134
----------
Less distributions:
Dividends from net
investment income............... (.200)
Distribution from net
realized gains.................. --
Distribution in excess of
net realized gains.............. --
----------
Total distributions.............. (.200)
----------
Net asset value:
End of period/year.............. $ 21.453
==========
Total return..................... 5.55%*
Net assets (in millions):
End of period/year.............. $2,017.76
Ratio of expenses to
average net assets.............. .19%*
Ratio of net investment
income to
average net assets.............. 1.92%*
Portfolio turnover rate.......... 12.06%*
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year........ $ 17.672 $ 18.305 $ 17.846 $ 17.307 $ 14.839 $ 15.428 $ 13.876 $ 13.095 $ 13.774
--------- --------- --------- --------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income..... .811 .707 .655 .707 .736 .792 .823 .734 .624
Net realized and unrealized
gain (loss) on investments
and forward commitments.. 3.246 (.271) 1.057 .880 2.771 (.445) 1.921 1.000 (.148)
--------- --------- --------- --------- -------- -------- -------- -------- --------
Total from investment
operations............... 4.057 .436 1.712 1.587 3.507 .347 2.744 1.734 .476
--------- --------- --------- --------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income........ (.811) (.707) (.655) (.707) (.736) (.811) (.835) (.728) (.747)
Distribution from net
realized gains........... (.399) (.359) (.598) (.326) (.303) (.125) (.357) (.225) (.408)
Distribution in excess of
net realized gains....... -- (.003) -- (.015) -- -- -- -- --
--------- --------- --------- --------- -------- -------- -------- -------- --------
Total distributions....... (1.210) (1.069) (1.253) (1.048) (1.039) (.936) (1.192) (.953) (1.155)
--------- --------- --------- --------- -------- -------- -------- -------- --------
Net asset value:
End of period/year....... $ 20.519 $ 17.672 $ 18.305 $ 17.846 $ 17.307 $ 14.839 $ 15.428 $ 13.876 $ 13.095
========= ========= ========= ========= ======== ======== ======== ======== ========
Total return.............. 23.28% 2.48% 9.70% 9.36% 24.00% 2.37% 19.96% 13.40% 3.12%
Net assets (in millions):
End of period/year....... $1,823.14 $1,444.26 $1,296.54 $1,013.28 $797.04 $574.15 $524.29 $401.22 $346.12
Ratio of expenses to
average net assets....... .38% .39% .40% .41% .42% .44% .45% .46% .48%
Ratio of net investment
income to
average net assets....... 4.19% 3.93% 3.60% 4.07% 4.54% 5.37% 5.57% 5.29% 4.77%
Portfolio turnover rate... 30.78% 26.59% 20.20% 25.43% 26.92% 24.55% 22.39% 25.70% 36.56%
</TABLE>
*Percentages represent results for the period and are not annualized.
Total return information shown in the Financial Highlights tables 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.
See Notes to Financial Statements.
12
<PAGE>
MML Equity Fund
SCHEDULE OF INVESTMENTS
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note 2A)
------ -----------
EQUITIES - 89.56%
<S> <C> <C>
Aerospace & Defense - 2.12%
Boeing Company................................... 202,500 $ 17,642,812
TRW, Inc......................................... 164,000 14,739,500
----------- -------------
366,500 32,382,312
----------- -------------
Agribusiness - .81%
Pioneer Hi-Bred International, Inc............... 235,000 12,425,625
----------- -------------
Apparel, Textiles, Shoes - .90%
VF Corporation................................... 230,000 13,713,750
----------- -------------
Automotive & Parts - 4.02%
Ford Motor Company............................... 595,000 19,263,125
Genuine Parts Company............................ 433,500 19,832,625
Goodyear Tire & Rubber Company................... 461,000 22,243,250
----------- -------------
1,489,500 61,339,000
----------- -------------
Banking, Savings & Loans - 5.65%
The Bank of New York Company, Incorporated....... 435,000 22,293,750
Comerica, Incorporated........................... 338,500 15,105,562
CoreStates Financial Corporation................. 585,500 22,541,750
Norwest Corporation.............................. 391,000 13,636,125
Wachovia Corporation............................. 288,200 12,608,750
----------- -------------
2,038,200 86,185,937
----------- -------------
Beverages - 1.88%
Brown-Forman Corporation (Class B)............... 337,300 13,492,000
Pepsico, Incorporated............................ 430,000 15,211,250
----------- -------------
767,300 28,703,250
----------- -------------
Chemicals - 4.24%
Eastman Chemical Company......................... 210,000 12,783,750
E.I. du Pont de Nemours and Company.............. 166,500 13,174,312
The Lubrizol Corporation......................... 242,000 7,350,750
Nalco Chemical Company........................... 336,400 10,596,600
Rohm & Haas...................................... 330,000 20,707,500
----------- -------------
1,284,900 64,612,912
----------- -------------
Communications - 1.97%
AT&T Corporation................................. 441,000 27,342,000
GTE Corporation.................................. 62,000 2,774,500
----------- -------------
503,000 30,116,500
----------- -------------
Computers & Office Equipment - 6.72%
Hewlett-Packard Company.......................... 320,000 31,880,000
International Business Machines Corporation...... 245,000 24,255,000
Pitney Bowes, Inc................................ 452,000 21,583,000
Xerox Corporation................................ 465,000 24,877,500
----------- -------------
1,482,000 102,595,500
----------- -------------
Containers - 1.01%
Temple-Inland, Inc............................... 330,000 15,427,500
----------- -------------
Cosmetics & Personal Care - 1.82%
Kimberly-Clark Corporation....................... 360,000 27,810,000
----------- -------------
Electric Utilities - 1.28%
Niagara Mohawk Power Corporation................. 200 1,550
NIPSCO Industries, Inc........................... 208,000 8,372,000
SCANA Corporation................................ 394,000 11,081,250
----------- -------------
602,200 19,454,800
----------- -------------
<CAPTION>
Number Market
of Value
Shares (Note 2A)
------ --------------
EQUITIES (Continued)
<S> <C> <C>
Electrical Equipment & Electronics - 7.23%
AMP, Incorporated................................ 674,500 $ 27,064,312
General Electric Company......................... 488,500 42,255,250
General Signal Corporation....................... 248,600 9,415,725
Honeywell Inc.................................... 272,500 14,851,250
Hubbell, Incorporated (Class B).................. 252,072 16,699,770
----------- -------------
1,936,172 110,286,307
----------- -------------
Energy - 7.77%
Amoco Corporation................................ 387,500 28,045,313
Atlantic Richfield Company....................... 107,300 12,715,050
Chevron Corporation.............................. 378,000 22,302,000
Kerr-McGee Corporation........................... 226,000 13,757,750
Mobil Corporation................................ 180,000 20,182,500
Unocal Corporation............................... 432,100 14,583,375
USX Corporation - Marathon Group................. 343,200 6,906,900
----------- -------------
2,054,100 118,492,888
----------- -------------
Financial Services - 1.17%
American Express Company......................... 400,000 17,850,000
----------- -------------
Foods - 1.98%
ConAgra, Inc..................................... 202,300 9,179,363
CPC International, Inc........................... 291,500 20,988,000
----------- -------------
493,800 30,167,363
----------- -------------
Forest Products & Paper - 2.07%
Westvaco Corporation............................. 320,055 9,561,643
Weyerhaeuser Company............................. 519,500 22,078,750
----------- -------------
839,555 31,640,393
----------- -------------
Hardware & Tools - 1.23%
The Stanley Works................................ 631,000 18,772,250
----------- -------------
Healthcare - 7.78%
Becton, Dickinson and Company.................... 268,000 21,507,000
Bristol-Myers Squibb Company..................... 520,000 46,800,000
Pfizer, Incorporated............................. 400,000 28,550,000
Schering-Plough Corp............................. 347,500 21,805,625
----------- -------------
1,535,500 118,662,625
----------- -------------
Household Products - .93%
The Clorox Company............................... 159,500 14,135,688
----------- -------------
Industrial Distribution - 1.25%
W. W. Grainger, Inc.............................. 246,000 19,065,000
----------- -------------
Industrial Transportation - 1.37%
Norfolk Southern Corporation..................... 246,000 20,848,500
----------- -------------
Insurance - 6.69%
Allstate Corporation............................. 192,682 8,791,116
Jefferson-Pilot Corporation...................... 207,000 10,686,375
Marsh & McLennan Companies, Inc.................. 280,500 27,068,250
MBIA, Inc........................................ 268,000 20,870,500
SAFECO Corporation............................... 782,500 27,680,938
Unitrin, Inc..................................... 148,000 6,956,000
----------- -------------
1,878,682 102,053,179
----------- -------------
Machinery & Components - 1.66%
Dover Corporation................................ 325,000 14,990,625
Parker-Hannifin Corporation...................... 242,050 10,256,869
----------- -------------
567,050 25,247,494
----------- -------------
</TABLE>
13
<PAGE>
MML Equity Fund
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note 2A)
------ -----------
EQUITIES (Continued)
<S> <C> <C>
Miscellaneous - 2.36%
Harsco Corporation............................. 169,500 $ 11,398,875
Minnesota Mining &
Manufacturing Company......................... 356,000 24,564,000
----------- -------------
525,500 35,962,875
----------- -------------
Photography - 1.21%
Eastman Kodak Company.......................... 236,500 18,387,875
----------- -------------
Publishing & Printing - 3.19%
The Dun & Bradstreet Corporation............... 216,000 13,500,000
McGraw-Hill Companies, Inc..................... 466,000 21,319,500
R. R. Donnelley & Sons Company................. 397,000 13,845,375
----------- -------------
1,079,000 48,664,875
----------- -------------
Retail - 1.83%
The May Department Stores Company.............. 363,000 15,881,250
Sears Roebuck and Company...................... 246,000 11,961,750
----------- -------------
609,000 27,843,000
----------- -------------
Retail - Grocery - 1.78%
Albertson's, Inc............................... 492,000 20,356,500
American Stores Company........................ 164,800 6,798,000
----------- -------------
656,800 27,154,500
----------- -------------
Telephone Utilities - 2.90%
Ameritech Corporation.......................... 347,000 20,603,125
Frontier Corporation........................... 423,500 12,969,688
Southern New England
Telecommunications Corporation................ 252,000 10,584,000
----------- -------------
1,022,500 44,156,813
----------- -------------
Tobacco - 2.74%
American Brands, Inc........................... 463,000 21,008,625
UST, Inc....................................... 607,000 20,789,750
----------- -------------
1,070,000 41,798,375
----------- -------------
Total Equities
(Cost $914,035,124)............................ 1,365,957,086
-------------
<CAPTION>
Principal
Amount
------
SHORT-TERM INVESTMENTS - 10.40%
<S> <C> <C>
Commercial Paper
Aristar, Inc.
5.330% 7/19/96......................... $ 4,000,000 3,989,340
Aristar, Inc.
5.370% 7/25/96......................... 7,425,000 7,398,418
Central & Southwest Corp.
5.450% 7/17/96......................... 5,725,000 5,711,133
Central & Southwest Corp.
5.550% 8/19/96......................... 4,785,000 4,747,711
Central & Southwest Corp.
5.550% 8/2/96.......................... 3,700,000 3,681,747
Comdisco, Inc.
5.500% 7/3/96.......................... 4,865,000 4,863,435
Comdisco, Inc.
5.470% 7/15/96......................... 3,490,000 3,482,576
Comdisco, Inc.
5.450% 7/23/96......................... 5,000,000 4,982,754
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------ -----------
SHORT-TERM INVESTMENTS (Continued)
<S>
Commercial Paper (Continued)
Comdisco, Inc.
5.450% 7/1/96.......................... $ 4,000,000 $ 4,000,000
Comdisco, Inc.
5.510% 8/9/96.......................... 5,420,000 5,386,561
ConAgra, Inc.
5.550% 8/7/96.......................... 4,990,000 4,961,536
Countrywide Home Loans
5.420% 8/22/96......................... 5,080,000 5,036,588
Crown Cork & Seal Company Inc.
5.500% 7/8/96.......................... 3,830,000 3,825,759
Crown Cork & Seal Company Inc.
5.470% 7/10/96......................... 5,055,000 5,048,087
Crown Cork & Seal Company Inc.
5.450% 7/18/96......................... 3,900,000 3,889,356
Crown Cork & Seal Company Inc.
5.600% 8/16/96......................... 3,045,000 3,023,211
Dana Credit Corporation
5.460% 7/29/96......................... 4,000,000 3,982,441
Dana Credit Corporation
5.550% 8/12/96......................... 3,980,000 3,954,229
Dana Credit Corporation
5.630% 8/12/96......................... 260,000 258,292
Dominion Resources, Inc.
5.530% 8/5/96.......................... 7,100,000 7,061,828
Illinois Power Company
5.550% 8/15/96......................... 2,600,000 2,581,045
Illinois Power Company
5.630% 8/1/96.......................... 6,375,000 6,344,094
Kerr-McGee Credit Corporation
5.530% 7/12/96......................... 5,455,000 5,445,783
Mattel, Inc.
5.450% 7/11/96......................... 6,000,000 5,990,192
Mattel, Inc.
5.480% 8/8/96.......................... 3,045,000 3,026,018
Mattel, Inc.
5.470% 7/30/96......................... 4,825,000 4,803,739
ORIX Credit Alliance, Inc.
5.540% 7/9/96.......................... 4,565,000 4,559,223
ORIX Credit Alliance, Inc.
5.570% 8/21/96......................... 4,960,000 4,919,099
Praxair, Inc.
5.470% 7/2/96.......................... 4,400,000 4,399,304
Praxair, Inc.
5.480% 7/11/96......................... 3,795,000 3,788,929
Praxair, Inc.
5.450% 7/16/96......................... 5,000,000 4,988,646
Textron Financial Corporation
5.470% 7/22/96......................... 5,000,000 4,983,538
Textron Financial Corporation
5.450% 7/24/96......................... 4,670,000 4,652,880
Textron Financial Corporation
5.500% 7/31/96......................... 4,220,000 4,200,658
Tyson Foods, Inc.
5.470% 7/26/96......................... 4,570,000 4,552,640
------------ ------------
Total Short-Term Investments
(Cost $158,535,275)......................... $159,130,000 158,520,790
============ ------------
</TABLE>
14
<PAGE>
MML Equity Fund
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market
Value
(Note 2A)
-----------
<S> <C> <C>
Total Investments --
(Cost $1,072,570,399) (a) 99.96% $1,524,477,876
Other Assets -- .48 7,382,910
Liabilities -- (.44) (6,753,190)
-------- ---------------
Net Assets -- 100.00% $1,525,107,596
======= ===============
(a) Federal Income Tax Information: At
June 30, 1996 the net unrealized
appreciation on investments based
on cost of $1,072,582,274 for
federal income tax purposes is as
follows:
Aggregate gross unrealized
appreciation for all investments in
which there is an excess of market
value over tax cost................ $ 455,113,614
Aggregate gross unrealized
depreciation for all investments in
which there is an excess of tax cost
over market value.................. (3,218,012)
--------------
Net unrealized appreciation........ $ 451,895,602
==============
</TABLE>
See Notes to Financial Statements
15
<PAGE>
MML Money Market Fund
SCHEDULE OF INVESTMENTS
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------ -----------
SHORT-TERM INVESTMENTS - 100.51%
<S> <C> <C>
Commercial Paper - 91.71%
American Brands, Inc.
5.310% 8/9/96........................... $ 1,120,000 $ 1,113,557
American Brands, Inc.
5.280% 8/27/96.......................... 3,550,000 3,520,322
Anheuser-Busch Companies, Inc.
5.250% 7/8/96........................... 3,530,000 3,526,396
Aristar, Inc.
5.340% 8/12/96.......................... 2,300,000 2,285,671
Baltimore Gas & Electric Company
5.280% 8/2/96........................... 3,995,000 3,976,250
Bellsouth Telecommunications, Inc.
5.330% 8/6/96........................... 1,750,000 1,740,672
Bellsouth Telecommunications, Inc.
5.350% 8/21/96.......................... 3,030,000 3,007,035
Carolina Power & Light Company
5.250% 7/11/96.......................... 2,580,000 2,576,237
Carolina Power & Light Company
5.370% 9/17/96.......................... 1,900,000 1,877,893
Caterpillar Financial Services Corp.
5.280% 11/15/96......................... 2,120,000 2,077,402
Caterpillar Financial Services Corp.
5.280% 7/30/96.......................... 2,575,000 2,564,048
Coca Cola Company
5.300% 8/30/96.......................... 1,450,000 1,437,192
Coca Cola Financial Corporation
5.240% 7/25/96.......................... 2,595,000 2,585,935
Consolidated Natural Gas Company
5.350% 7/10/96.......................... 2,845,000 2,841,195
Dresser Industries, Inc.
5.280% 7/16/96.......................... 1,965,000 1,960,677
Dresser Industries, Inc.
5.350% 7/31/96.......................... 1,135,000 1,129,940
E.I. du Pont de Nemours and Company
5.290% 11/27/96......................... 1,670,000 1,633,436
E.I. du Pont de Nemours and Company
5.360% 9/18/96.......................... 3,170,000 3,132,714
Eli Lilly & Company
5.300% 7/19/96.......................... 2,900,000 2,892,315
Emerson Electric Company
5.270% 7/24/96.......................... 2,800,000 2,790,573
Ford Motor Credit Company
5.350% 7/22/96.......................... 4,000,000 3,987,516
General Electric Company
5.230% 7/31/96.......................... 2,155,000 2,145,608
General Electric Capital Corp.
5.250% 10/22/96......................... 2,250,000 2,212,922
General Motors Acceptance Corporation
5.500% 1/21/97.......................... 1,390,000 1,346,678
Goldman Sachs & Company
5.200% 9/20/96.......................... 2,400,000 2,371,920
Goldman Sachs & Company
5.270% 8/22/96.......................... 1,260,000 1,250,409
Hercules Incorporated
5.420% 7/18/96.......................... 2,295,000 2,289,126
The Home Depot
5.260% 7/3/96........................... 3,765,000 3,763,900
Monsanto Company
5.290% 7/9/96........................... 3,400,000 3,396,003
Motorola Incorporated
5.230% 7/23/96.......................... 3,200,000 3,189,773
<CAPTION>
Market
Principal Value
Amount (Note 2A)
SHORT-TERM INVESTMENTS (Continued)
<S> <C> <C>
Commercial Paper (Continued)
Motorola Incorporated
5.350% 9/20/96.......................... $ 1,500,000 $ 1,481,944
Northern Illinois Gas Company
5.390% 8/9/96........................... 2,430,000 2,415,811
Pepsico Inc.
5.300% 7/18/96.......................... 2,100,000 2,094,744
Pepsico Inc.
5.360% 9/25/96.......................... 1,255,000 1,238,930
Pepsico Inc.
5.380% 9/25/96.......................... 1,445,000 1,426,429
Philip Morris Companies, Inc.
5.280% 8/9/96........................... 415,000 412,626
Pitney Bowes Credit Corporation
5.250% 7/26/96.......................... 3,485,000 3,472,294
Proctor & Gamble Company
5.260% 7/29/96.......................... 4,770,000 4,750,485
Shell Oil Company
5.300% 8/28/96.......................... 2,400,000 2,379,507
Smithkline Beecham Corp.
5.300% 7/12/96.......................... 3,460,000 3,454,397
Southwestern Bell Telecommunications
5.340% 8/23/96.......................... 2,045,000 2,028,923
Unilever Capital Corporation
5.260% 7/15/96.......................... 3,295,000 3,288,260
Walt Disney Company
5.380% 10/21/96......................... 3,470,000 3,411,920
Weyerhaeuser Company
5.290% 7/17/96.......................... 2,975,000 2,968,005
Weyerhaeuser Company
5.350% 8/29/96.......................... 1,150,000 1,139,917
------------ -----------
Total Commercial Paper
(Cost $110,587,507) 111,290,000 110,587,507
------------ -----------
U.S. Treasury Bills - 8.8%
U.S. Treasury Bill
4.900% 9/19/96.......................... 3,950,000 3,906,989
U.S. Treasury Bill
4.915% 7/5/96........................... 2,840,000 2,838,449
U.S. Treasury Bill
4.905% 7/11/96.......................... 3,870,000 3,864,727
------------ -----------
Total U.S. Treasury Bills
(Cost $10,610,165) 10,660,000 10,610,165
------------ -----------
Total Short-Term Investments
(Cost $121,197,672) (a) $121,950,000 121,197,672
============ -----------
Total Investments -
(Cost $121,197,672) (a) 100.51% 121,197,672
Other Assets - .01 4,286
Liabilities - (.52) (621,138)
------ --------------
Net Assets - 100.00% $ 120,580,820
====== ==============
</TABLE>
(a) Federal Income Tax Information: The aggregate cost for investments for the
MML Money Market Fund as of June 30, 1996 is the same for financial
reporting and federal income tax purposes.
June 30, 1996 seven-day average yield for the portfolio: 4.89%
See Notes to Financial Statements.
16
<PAGE>
MML Managed Bond Fund
SCHEDULE OF INVESTMENTS
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ --------------
<S> <C> <C>
BONDS AND NOTES-96.07%
Asset Backed Securities-7.97%
Auto Receivables
Daimler-Benz Auto Grantor Trust 1995-A
5.850% 5/15/02............................ $ 2,241,893 $ 2,232,769
Daimler-Benz Vehicle Trust 1994-A
5.950% 12/15/00........................... 399,810 399,658
Ford Credit 1994-B Grantor Trust
7.300% 10/15/99........................... 733,208 741,222
Honda Auto Receivables 1992-A Grantor Trust
4.900% 6/15/98............................ 101,318 100,938
Jet Equipment Trust 1995-A
8.235% 5/1/15............................. 1,967,473 2,060,358
Nissan Auto Receivables 1994-A Grantor Trust
6.450% 9/15/99............................ 1,098,944 1,101,691
Railcar Trust No. 1992-1
7.750% 6/1/04............................. 1,642,140 1,699,615
World Omni 1996-A Automobile Lease Securitization
Trust
6.300% 6/25/02............................ 1,900,000 1,898,784
World Omni 1995-A Automobile Lease Securitization
Trust
6.050% 11/25/01........................... 3,000,000 2,983,110
------------ --------------
Total Asset Backed Securities
(Cost $13,298,441) 13,084,786 13,218,145
------------ --------------
Corporate Debt-51.55%
American Airlines, Inc.
9.780% 11/26/11........................... 2,000,000 2,231,240
AMR Corporation
9.000% 8/1/12............................. 1,000,000 1,081,200
Analog Devices, Inc.
6.625% 3/1/00............................. 1,000,000 977,010
Associates Corporation of North America
7.875% 9/30/01............................ 2,000,000 2,080,860
Atlantic Richfield Company
7.770% 2/13/02............................ 3,000,000 3,108,780
Bell Atlantic Financial Services, Inc.
6.610% 2/4/00............................. 2,000,000 1,995,080
Champion International Corporation
6.400% 2/15/26............................ 1,500,000 1,386,480
Charles Schwab Corporation
6.250% 1/23/03............................ 2,000,000 1,890,000
CITGO Petroleum Corporation
7.875% 5/15/06............................ 750,000 743,783
Columbia Gas System, Inc.
6.610% 11/28/02........................... 2,000,000 1,948,980
Commercial Credit Company
7.750% 3/1/05............................. 3,000,000 3,081,630
Continental Airlines, Inc. 1996-B 144A
7.820% 4/15/15............................ 1,500,000 1,465,245
Continental Airlines, Inc. 2B 144A
8.560% 7/2/14............................. 1,000,000 1,056,090
Corning Glass Works, Inc.
8.875% 3/15/16............................ 500,000 545,535
Dow Capital
7.125% 1/15/03............................ 4,000,000 3,924,320
English China Clays Delaware, Inc.
7.375% 10/1/02............................ 1,000,000 1,001,750
Equifax, Inc.
6.500% 6/15/03............................ 1,250,000 1,195,000
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ --------------
BONDS AND NOTES (Continued)
<S> <C> <C>
Corporate Debt (Continued)
ERAC USA Finance Company 144A
6.950% 1/15/06............................ $ 1,500,000 $ 1,397,475
FBG Finance Ltd. 144A
7.875% 6/1/16............................. 1,250,000 1,245,713
Fletcher Challenge Ltd.
7.750% 6/20/06............................ 1,500,000 1,521,120
Foster Wheeler Corporation
6.750% 11/15/05........................... 2,000,000 1,904,240
General American Transportation Corporation
6.750% 3/1/06............................. 2,000,000 1,902,160
General Electric Capital Corporation
8.750% 5/21/07............................ 1,000,000 1,113,830
General Motors Acceptance Corporation
6.300% 9/10/97............................ 2,500,000 2,506,300
Hercules Incorporated
6.625% 6/1/03............................. 2,000,000 1,942,140
IMCERA Group, Inc.
6.000% 10/15/03........................... 2,000,000 1,805,820
ITT Corporation (New)
7.375% 11/15/15........................... 3,500,000 3,290,525
Leucadia National Corporation
7.750% 8/15/13............................ 2,000,000 1,885,720
Lockheed Corporation
5.650% 4/1/97............................. 2,000,000 1,989,840
McDonnell Douglas Corporation
9.250% 4/1/02............................. 1,400,000 1,540,308
Newmont Mining Corporation
8.625% 4/1/02............................. 2,000,000 2,092,540
Penske Truck Leasing Co., L.P.
7.750% 5/15/99............................ 1,250,000 1,286,688
Polaroid Corporation
7.250% 1/15/97............................ 1,000,000 1,004,970
Polaroid Corporation
8.000% 3/15/99............................ 1,000,000 1,023,590
Ralston Purina Company
7.750% 10/1/15............................ 3,000,000 2,965,230
Rolls-Royce Capital Inc.
7.125% 7/29/03............................ 1,500,000 1,470,930
Service Corporation International
7.000% 6/1/15............................. 2,250,000 2,248,245
Tele-Communications, Inc.
8.650% 9/15/04............................ 890,000 907,132
Tele-Communications, Inc.
9.800% 2/12/12............................ 1,115,000 1,204,735
Textron Inc.
9.550% 3/19/01............................ 1,000,000 1,100,400
Thomas & Betts Corporation
8.250% 1/15/04............................ 1,500,000 1,536,495
Time Warner, Inc.
7.750% 6/15/05............................ 3,000,000 2,928,660
United Air Lines, Inc.
10.110% 2/19/06............................ 469,855 511,352
US Air, Inc. 144A
7.500% 10/15/09........................... 1,000,000 969,360
US West Capital Funding Corporation
8.375% 10/18/99........................... 3,000,000 3,146,580
Union Oil of California
8.750% 8/15/01............................ 1,500,000 1,612,110
Valassis Communications, Inc.
9.550% 12/1/03............................ 2,000,000 2,028,020
Westinghouse Electric Corporation
8.375% 6/15/02............................ 500,000 497,905
</TABLE>
17
<PAGE>
MML Managed Bond Fund
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ --------------
<S> <C> <C>
BONDS AND NOTES (Continued)
Corporate Debt (Continued)
W.R. Grace & Co.
7.750% 10/1/02............................ $ 2,100,000 $ 2,147,817
W.R. Grace & Co.
8.000% 8/15/04............................ 1,000,000 1,041,600
------------ --------------
Total Corporate Debt
(Cost $87,218,449) 85,224,855 85,482,533
------------ --------------
U.S. Government Agency Obligations -- 24.39%
Federal Home Loan Mortgage
Corporation (FHLMC) -- 3.77%
Collateralized Mortgage Obligations -- 3.64%
FHLMC Series 1322 Class G
7.500% 2/15/07............................ 2,000,000 2,039,360
FHLMC Series 1460 Class H
7.000% 5/15/07............................ 2,000,000 1,996,240
FHLMC Series 1080 Class D
7.000% 7/15/20............................ 2,000,000 2,009,360
------------ --------------
6,000,000 6,044,960
Pass-Through Securities -- .13%
FHLMC
9.000% 3/1/17............................. 199,340 209,369
------------ --------------
6,199,340 6,254,329
------------ --------------
Federal National Mortgage
Association (FNMA) -- 6.44%
Collateralized Mortgage Obligations -- 5.99%
FNMA Series 1993-175 Class PL
5.000% 10/25/02........................... 2,000,000 1,978,120
FNMA Series 1993-191 Class PD
5.400% 3/25/04............................ 1,500,000 1,469,520
FNMA Series 1993-221 Class D
6.000% 12/25/08........................... 1,000,000 934,060
FNMA Series 1993-134 Class GA
6.500% 2/25/07............................ 2,000,000 1,956,240
FNMA Series 1993-186 Class G
6.250% 3/25/08............................ 3,700,000 3,584,375
------------ --------------
10,200,000 9,922,315
Pass-Through Securities -- .45%
FNMA
9.000% 5/1/09............................. 715,774 752,228
------------ --------------
10,915,774 10,674,543
------------ --------------
Government National Mortgage
Association (GNMA) -- 11.80%
Collateralized Mortgage Obligations -- .53%
JHM Acceptance Corporation, Series E Class 5
8.960% 4/1/19............................. 845,242 872,179
------------ --------------
Pass-Through Securities - 11.27% GNMA
8.000% 12/15/03 - 4/15/08................. 7,305,497 7,492,737
GNMA
7.500% 3/15/17 - 7/15/17.................. 4,789,555 4,759,045
GNMA - ARMS
6.000% 7/20/25 - 12/20/25................. 6,399,184 6,444,272
------------ --------------
18,494,236 18,696,054
------------ --------------
19,339,478 19,568,233
------------ --------------
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ --------------
<S> <C> <C>
BONDS AND NOTES (Continued)
U.S. Government Guaranteed Notes -- 2.38%
1994-A Atlanta, GA
5.780% 8/1/98............................. $ 130,000 $ 128,396
1994-A Baxter Springs, KS
5.780% 8/1/98............................. 700,000 691,362
1994-A Boston, MA
5.780% 8/1/98............................. 745,000 735,807
1994-A Detroit, MI
5.780% 8/1/98............................. 385,000 380,249
1994-A Egg Harbor, NJ
5.780% 8/1/98............................. 260,000 256,791
1994-A Kansas City, MO
5.780% 8/1/98............................. 550,000 543,213
1994-A Mayaguez, PR
5.780% 8/1/98............................. 295,000 291,360
1994-A Rochester, NY
5.780% 8/1/98............................. 300,000 296,298
1994-A Sacramento, CA
5.780% 8/1/98............................. 55,000 54,321
1994-A Saginaw, MI
5.780% 8/1/98............................. 315,000 311,113
1994-A Youngstown, OH
5.780% 8/1/98............................. 265,000 261,730
------------ --------------
4,000,000 3,950,640
------------ --------------
Total U.S. Government Agency Obligations
(Cost $40,206,794) 40,454,592 40,447,745
------------ --------------
U.S. Treasury Obligations -- 12.16%
U.S. Treasury Bonds -- 3.62%
U.S. Treasury Bond
8.875% 8/15/17............................ 5,000,000 6,003,100
U.S. Treasury Notes -- 5.84%
U.S. Treasury Note
7.250% 5/15/04............................ 6,200,000 6,423,758
U.S. Treasury Note
6.375% 5/15/99............................ 3,250,000 3,257,118
------------ --------------
9,450,000 9,680,876
------------ --------------
U.S. Treasury Strips -- 2.70%
U.S. Treasury Strip -- Principal Only
0.000% 2/15/15............................ 16,700,000 4,477,103
------------ --------------
Total U.S. Treasury Obligations
(Cost $20,019,968) 31,150,000 20,161,079
------------ --------------
Total Bonds and Notes
(Cost $160,743,652) $169,914,233 159,309,502
============ ==============
</TABLE>
18
<PAGE>
MML Managed Bond Fund
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2A)
----------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 2.72%
Commercial Paper
Detroit Edison
5.500% 7/3/96................ $ 1,330,000 $ 1,329,594
Textron Financial Corporation
5.600% 7/2/96................ 2,030,000 2,029,684
Western Resources Inc.
5.530% 7/1/96................ 1,155,000 1,155,000
------------ ------------
Total Short-Term Investments
(Cost $4,514,278) $ 4,515,000 4,514,278
============ ------------
Total Investments
(Cost $165,257,930) (a) 98.79% 163,823,780
Other Assets -- 1.33 2,202,619
Liabilities -- (.12) (201,377)
------- ------------
Net Assets -- 100.00% $165,825,022
======= ============
</TABLE>
(a) Federal Income Tax Information: At
June 30, 1996 the net unrealized
depreciation on investments based on
cost of $165,428,751 for federal income
tax purposes is as follows:
Aggregate gross unrealized appreciation for
all investments and forward commitments in
which there is an excess of market value over
tax cost............................... $ 2,136,361
Aggregate gross unrealized depreciation for
all investments and forward commitments in
which there is an excess of tax cost over
market value........................... (3,741,332)
------------
Net unrealized depreciation......... $ (1,604,971)
============
See Notes to Financial Statements.
19
<PAGE>
MML Blend Fund
SCHEDULE OF INVESTMENTS
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note 2A)
------------ --------------
<S> <C> <C>
EQUITIES -- 54.57%
Aerospace & Defense -- 1.46%
Boeing Company................................ 190,000 $ 16,553,750
TRW, Inc...................................... 143,000 12,852,125
-------------- --------------
333,000 29,405,875
-------------- --------------
Agribusiness -- .52%
Pioneer Hi-Bred International, Inc............ 200,000 10,575,000
-------------- --------------
Apparel, Textiles, Shoes -- .59%
VF Corporation................................ 200,000 11,925,000
Automotive & Parts -- 1.65%
Ford Motor Company............................ 465,600 15,073,800
Genuine Parts Company......................... 397,000 18,162,750
-------------- --------------
862,600 33,236,550
-------------- --------------
Banking, Savings & Loans -- 3.23%
The Bank of New York Company, Incorporated.... 375,000 19,218,750
Comerica, Incorporated........................ 255,000 11,379,375
CoreStates Financial Corporation.............. 374,800 14,429,800
Norwest Corporation........................... 252,000 8,788,500
Wachovia Corporation.......................... 260,000 11,375,000
-------------- --------------
1,516,800 65,191,425
-------------- --------------
Beverages -- 1.24%
Brown-Forman Corporation (Class B)............ 300,000 12,000,000
Pepsico, Incorporated......................... 365,000 12,911,875
-------------- --------------
665,000 24,911,875
-------------- --------------
Chemicals -- 1.95%
Eastman Chemical Company...................... 168,475 10,255,916
E.I. du Pont de Nemours and Company........... 146,000 11,552,250
The Lubrizol Corporation...................... 208,000 6,318,000
Nalco Chemical Company........................ 295,800 9,317,700
Rohm & Haas................................... 30,000 1,882,500
-------------- --------------
848,275 39,326,366
-------------- --------------
Computers & Office Equipment -- 3.99%
Hewlett-Packard Company....................... 268,000 26,699,500
International Business Machines Corporation... 151,000 14,949,000
Pitney Bowes, Inc............................. 371,000 17,715,250
Xerox Corporation............................. 396,000 21,186,000
-------------- --------------
1,186,000 80,549,750
-------------- --------------
Containers -- .34%
Temple-Inland, Inc. 145,000 6,778,750
-------------- --------------
Cosmetic & Personal Care -- .81%
Kimberly-Clark Corporation.................... 211,000 16,299,750
-------------- --------------
Electric Utilities -- .81%
Niagara Mohawk Power Corporation.............. 200 1,550
NIPSCO Industries, Inc........................ 178,000 7,164,500
SCANA Corporation............................. 326,000 9,168,750
------------- --------------
504,200 16,334,800
------------- --------------
Electrical Equipment & Electronics -- 4.63%
AMP, Inc...................................... 530,000 21,266,250
General Electric Company...................... 420,000 36,330,000
General Signal Corporation.................... 217,000 8,218,875
Honeywell Inc................................. 243,000 13,243,500
Hubbell, Incorporated (Class B)............... 215,940 14,306,025
------------- --------------
1,625,940 93,364,650
------------- --------------
<CAPTION>
Number Market
of Value
Shares (Note 2A)
------------ --------------
<S> <C> <C>
EQUITIES (Continued)
Energy -- 4.80%
Amoco Corporation............................. 332,000 $ 24,028,500
Atlantic Richfield Company.................... 90,100 10,676,850
Chevron Corporation........................... 324,000 19,116,000
Kerr-McGee Corporation........................ 190,000 11,566,250
Mobil Corporation............................. 150,000 16,818,750
Unocal Corporation............................ 304,200 10,266,750
USX Corporation - Marathon Group.............. 219,900 4,425,488
------------- --------------
1,610,200 96,898,588
------------- --------------
Financial Services -- .77%
American Express Company...................... 346,000 15,440,250
------------- --------------
Foods -- 1.40%
ConAgra, Inc.................................. 170,300 7,727,363
CPC International, Inc........................ 285,000 20,520,000
------------- --------------
455,300 28,247,363
------------- --------------
Forest Products & Paper -- 1.28%
Westvaco Corporation.......................... 275,012 8,215,984
Weyerhaeuser Company.......................... 415,000 17,637,500
------------- --------------
690,012 25,853,484
------------- --------------
Hardware & Tools -- .79%
The Stanley Works 536,000 15,946,000
------------- --------------
Healthcare -- 5.04%
Becton, Dickinson and Company................. 234,000 18,778,500
Bristol-Myers Squibb Company.................. 450,000 40,500,000
Pfizer, Incorporated.......................... 322,000 22,982,750
Schering-Plough Corp.......................... 310,000 19,452,500
------------- --------------
1,316,000 101,713,750
------------- --------------
Household Products -- .62%
The Clorox Company............................ 140,000 12,407,500
------------- --------------
Industrial Distribution -- .80%
W. W. Grainger, Inc. 208,000 16,120,000
------------- --------------
Industrial Transportation -- .88%
Norfolk Southern Corporation.................. 210,000 17,797,500
------------- --------------
Insurance -- 4.08%
Allstate Corporation.......................... 165,501 7,550,983
Jefferson-Pilot Corporation................... 183,000 9,447,375
Marsh & McLennan Companies, Inc............... 186,900 18,035,850
MBIA, Inc..................................... 225,500 17,560,812
SAFECO Corporation............................ 668,000 23,630,500
Unitrin, Inc.................................. 129,500 6,086,500
------------- --------------
1,558,401 82,312,020
------------- --------------
Machinery & Components -- 1.09%
Dover Corporation............................. 286,000 13,191,750
Parker-Hannifin Corporation................... 208,750 8,845,781
------------- --------------
494,750 22,037,531
Miscellaneous -- 1.56%
Harsco Corporation............................ 156,050 10,494,362
Minnesota Mining &
Manufacturing Company........................ 305,000 21,045,000
------------- --------------
461,050 31,539,362
------------- --------------
Photography -- .76%
Eastman Kodak Company......................... 198,500 15,433,375
------------- --------------
</TABLE>
20
<PAGE>
MML Blend Fund
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Number Market
of Value
Shares (Note 2A)
------------ --------------
<S> <C> <C>
EQUITIES (Continued)
Publishing & Printing - 2.04%
The Dun & Bradstreet Corporation........... 182,000 $ 11,375,000
McGraw-Hill Companies, Inc................. 400,000 18,300,000
R.R. Donnelley & Sons Company.............. 326,500 11,386,687
-------------- --------------
908,500 41,061,687
-------------- --------------
Retail - 1.21%
The May Department Stores Company.......... 312,000 13,650,000
Sears Roebuck and Company.................. 220,000 10,697,500
-------------- --------------
532,000 24,347,500
-------------- --------------
Retail - Grocery - 1.18%
Albertson's, Inc........................... 440,000 18,205,000
American Stores Company.................... 138,200 5,700,750
-------------- --------------
578,200 23,905,750
-------------- --------------
Telephone Utilities - 2.39%
AT&T Company............................... 280,000 17,360,000
Ameritech Corporation...................... 176,000 10,450,000
Frontier Corporation....................... 371,000 11,361,875
Southern New England.......................
Telecommunications Corporation............ 216,000 9,072,000
-------------- --------------
1,043,000 48,243,875
-------------- --------------
Tire & Rubber - .93%
Goodyear Tire & Rubber Company............. 390,000 18,817,500
-------------- --------------
Tobacco - 1.73%
American Brands, Inc....................... 384,000 17,424,000
UST, Inc................................... 513,000 17,570,250
-------------- --------------
897,000 34,994,250
-------------- --------------
Total Equities
(Cost $659,848,392) 1,101,017,076
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
------------
<S> <C> <C>
BONDS AND NOTES - 18.60%
Asset Backed Securities - .86%
Auto Receivables
Daimler-Benz Auto Grantor Trust 1995-A
5.850% 5/15/02........................ $ 1,868,244 1,860,640
Daimler-Benz Vehicle Trust 1994-A
5.950% 12/15/00........................ 799,620 799,317
Ford Credit Auto Loan Master Trust,
Series 1992-1
6.875% 1/15/99......................... 1,500,000 1,507,500
Ford Credit 1994-B Grantor Trust
7.300% 10/15/99......................... 977,611 988,296
Honda Auto Receivables 1992-A Grantor Trust
4.900% 6/15/98......................... 101,318 100,938
Nissan Auto Receivables 1994-A Grantor Trust
6.450% 9/15/99......................... 2,967,149 2,974,567
Railcar Trust No. 1992-1
7.750% 6/1/04.......................... 1,486,137 1,538,151
World Omni 1995-A Automobile Lease
Securitization Trust
6.050% 11/25/01......................... 3,500,000 3,480,295
World Omni 1994-A Automobile Lease
Securitization Trust
6.300% 6/25/02......................... 4,200,000 4,197,312
-------------- --------------
Total Asset Backed Securities
(Cost $17,557,746) 17,400,079 17,447,016
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ --------------
<S> <C> <C>
BONDS AND NOTES (Continued)
Corporate Debt - 5.50%
American Airlines, Inc.
9.780% 11/26/11........................ $ 5,000,000 $ 5,578,100
American General Finance Corporation
7.750% 1/15/97......................... 2,000,000 2,018,280
AMR Corporation
9.000% 8/1/12.......................... 2,000,000 2,162,400
Analog Devices, Inc.
6.625% 3/1/00.......................... 1,500,000 1,465,515
Bell Atlantic Financial Services, Inc.
6.610% 2/4/00.......................... 1,000,000 997,540
Cardinal Distribution, Inc.
8.000% 3/1/97.......................... 2,000,000 2,023,780
Champion International Corporation
6.400% 2/15/26......................... 3,500,000 3,235,120
Charles Schwab Corporation
6.25% 1/23/03......................... 2,500,000 2,362,500
Chrysler Financial Corp.
6.620% 4/29/97......................... 2,000,000 2,007,700
CITGO Petroleum Corporation
7.875% 5/15/06......................... 1,000,000 991,710
Columbia Gas System, Inc.
6.610% 11/28/02........................ 3,000,000 2,923,470
Commercial Credit Company
7.750% 3/1/05.......................... 2,500,000 2,568,025
Continental Airlines, Inc. 1996-B 144A
7.820% 4/15/15......................... 2,000,000 1,953,660
Continental Airlines, Inc. 2B 144A
8.560% 7/2/14.......................... 1,750,000 1,848,157
Corning Glass Works, Inc.
8.875% 3/15/16......................... 500,000 545,535
Delta Air Lines, Inc.
8.540% 1/2/07.......................... 4,409,887 4,578,522
English China Clays Delaware, Inc.
7.375% 10/1/02......................... 1,000,000 1,001,750
ERAC USA Finance Company 144A
6.950% 1/15/06......................... 1,500,000 1,397,475
FBG Finance Ltd. 144A
7.875% 6/1/16.......................... 4,000,000 3,986,280
Fletcher Challenge Ltd.
7.750% 6/20/06......................... 2,000,000 2,028,160
Ford Motor Credit Company
8.450% 7/15/06......................... 1,500,000 1,507,455
Foster Wheeler Corporation
6.750% 11/15/05........................ 2,000,000 1,904,240
General American Transportation Corporation
6.750% 3/1/06.......................... 3,000,000 2,853,240
General Electric Capital Corporation
8.750% 5/21/07......................... 1,500,000 1,670,745
General Motors Corporation
9.125% 7/15/01......................... 1,500,000 1,630,935
Goldman Sachs Group, L.P. 144A
6.200% 2/15/01......................... 4,000,000 3,829,000
GTE Corporation
9.100% 6/1/03.......................... 1,000,000 1,104,870
ITT Corporation (New)
7.375% 11/15/15........................ 5,000,000 4,700,750
Leucadia National Corporation
7.750% 8/15/13......................... 3,000,000 2,828,580
McDonnell Douglas Corporation
9.250% 4/1/02.......................... 2,200,000 2,420,484
Newmont Mining Corporation
8.625% 4/1/02.......................... 5,000,000 5,231,350
</TABLE>
21
<PAGE>
MML Blend Fund
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ --------------
<S> <C> <C>
BONDS AND NOTES (Continued)
Corporate Debt (Continued)
North Finance (Bermuda) Limited 144A
7.000% 9/15/05......................... $ 4,000,000 $ 3,840,000
Polaroid Corporation
7.250% 1/15/97......................... 4,500,000 4,522,365
Ralston Purina Company
7.750% 10/1/15......................... 2,000,000 1,976,820
Rolls-Royce Capital Inc.
7.125% 7/29/03......................... 2,000,000 1,961,240
Service Corporation International
7.000% 6/1/15.......................... 4,500,000 4,496,490
TCI Communications, Inc.
7.550% 9/2/03.......................... 3,000,000 2,988,120
Tele-Communications, Inc.
8.650% 9/15/04......................... 715,000 728,764
Tele-Communications, Inc.
9.800% 2/12/12......................... 890,000 961,627
Thomas & Betts Corporation
8.250% 1/15/04......................... 1,000,000 1,024,330
Time Warner, Inc.
7.750% 6/15/05......................... 3,000,000 2,928,660
The Toro Company
11.000% 8/1/17.......................... 2,000,000 2,000,000
US Air, Inc. 144A
7.500% 10/15/09........................ 1,000,000 969,360
Valassis Communications, Inc.
9.550% 12/1/03......................... 2,000,000 2,028,020
W.R. Grace & Co.
8.000% 8/15/04......................... 5,000,000 5,208,000
------------ -------------
Total Corporate Debt
(Cost $111,373,250) 110,464,887 110,989,124
------------ -------------
U.S. Government Agency Obligations - 5.42%
Federal Home Loan Mortgage
Corporation (FHLMC) - 1.25%
Collateralized Mortgage Obligations - 1.22%
FHLMC Series 1322 Class G
7.500% 2/15/07......................... 5,000,000 5,098,400
FHLMC Series 1460 Class H
7.000% 5/15/07......................... 1,789,000 1,785,637
FHLMC Series 1080 Class D
7.000% 7/15/20......................... 5,000,000 5,023,400
FHLMC Series 1490 Class PG
6.300% 5/15/07......................... 5,000,000 4,881,250
FHLMC Series 1625 Class EA
5.750% 3/15/07......................... 5,000,000 4,856,250
FHLMC Series 1625 Class D
5.250% 7/15/04......................... 3,100,000 3,030,250
------------ -------------
24,889,000 24,675,187
Pass-Through Securities - .03%
FHLMC
9.000% 3/1/17.......................... 598,021 628,107
------------ -------------
25,487,021 25,303,294
------------ -------------
</TABLE>
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ --------------
<S> <C> <C>
BONDS AND NOTES (Continued)
Federal National Mortgage
Association (FNMA) - 1.53%
Collateralized Mortgage Obligations - .90%
FNMA Series 1993-134 Class GA
6.500% 2/25/07......................... $ 5,000,000 $ 4,890,600
FNMA Series 1993-71 Class PG
6.250% 7/25/07......................... 8,000,000 7,762,480
FNMA Series 1993-175 Class PL
5.000% 10/25/02........................ 4,130,000 4,084,818
FNMA Series 1993-191 Class PD
5.400% 3/25/04......................... 1,500,000 1,469,520
------------ -------------
18,630,000 18,207,418
Pass-Through Securities - .63%
FNMA
8.000% 5/1/13.......................... 2,985,593 3,060,054
FNMA
6.500% 6/25/08......................... 5,000,000 4,782,800
FNMA
6.250% 3/25/08......................... 5,000,000 4,843,750
------------ -------------
12,985,593 12,686,604
------------ -------------
31,615,593 30,894,022
------------ -------------
Government National Mortgage
Association (GNMA) - 1.61%
Collateralized Mortgage Obligations - .09%
JHM Acceptance Corporation, Series E Class 5
8.960% 4/1/19 1,690,483 1,744,359
Pass-Through Securities - 1.52%
GNMA
8.000% 1/15/04 - 5/15/08............... 8,063,756 8,270,430
GNMA
9.000% 8/15/08 - 9/15/09............... 2,382,796 2,525,763
GNMA
7.5 00% 9/15/16 - 10/15/17.............. 4,592,803 4,563,547
GNMA - ARMS
6.000% 7/20/25 - 12/20/25.............. 15,295,667 15,407,793
------------ -------------
30,335,022 30,767,533
------------ -------------
32,025,505 32,511,892
------------ -------------
</TABLE>
22
<PAGE>
MML Blend Fund
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ -------------
BONDS AND NOTES (Continued)
Government National Mortgage
Association (GNMA) (Continued)
U.S. Government Guaranteed Notes - 1.03%
<S> <C> <C>
1994-A Abilene, TX
5.780% 8/1/98.......................... $ 70,000 $ 69,136
1994-A Bakersfield, CA
5.780% 8/1/98.......................... 245,000 241,977
1994-A Barberton, OH
5.780% 8/1/98.......................... 75,000 74,074
1994-A Buffalo, NY
5.780% 8/1/98.......................... 375,000 370,373
1991-A Caguas, PR
8.740% 8/1/01.......................... 280,000 301,524
1991-A Council Bluffs, IA
8.740% 8/1/01.......................... 155,000 166,915
1994-A Cumberland, MD
5.780% 8/1/98.......................... 55,000 54,321
1994-A Elizabeth, NJ
5.780% 8/1/98.......................... 75,000 74,075
1994-A Erie, PA
5.780% 8/1/98.......................... 70,000 69,136
1994-A Euclid, OH
5.780% 8/1/98.......................... 105,000 103,704
1994-A Fairfax County, VA
5.780% 8/1/98.......................... 110,000 108,643
1991-A Fairfax County, VA
8.740% 8/1/01.......................... 85,000 91,534
1991-A Fajardo, PR
8.740% 8/1/01.......................... 210,000 226,143
1994-A Fort Myers, FL
5.040% 8/1/96.......................... 120,000 120,000
1994-A Fort Myers, FL
5.780% 8/1/98.......................... 135,000 133,334
1991-A Gasden, AL
8.740% 8/1/01.......................... 100,000 107,687
1994-A Jacksonville, FL
5.040% 8/1/96.......................... 200,000 200,000
1994-A Lawrence, MA
5.040% 8/1/96.......................... 35,000 35,000
1994-A Lawrence, MA
5.780% 8/1/98.......................... 40,000 39,506
1994-A Little Rock, AK
5.040% 8/1/96.......................... 310,000 310,000
1994-A Los Angeles County, CA
5.040% 8/1/96.......................... 145,000 145,000
1994-A Los Angeles County, CA
5.780% 8/1/98.......................... 175,000 172,840
1991-A Lorain, OH
8.740% 8/1/01.......................... 30,000 32,306
1994-A Macon, GA
5.040% 8/1/96.......................... 25,000 25,000
1994-A Mayaguez, PR
5.780% 8/1/98.......................... 65,000 64,198
1991-A Mayaguez, PR
8.740% 8/1/01.......................... 150,000 161,530
1994-A Mobile, AL
5.780% 8/1/98.......................... 205,000 202,470
1994-A Montgomery County, PA
5.040% 8/1/96.......................... 215,000 215,000
1994-A Montgomery County, PA
5.780% 8/1/98.......................... 230,000 227,162
1994-A New Orleans, LA
5.780% 8/1/98.......................... 175,000 172,841
</TABLE>
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ -------------
BONDS AND NOTES (Continued)
Government National Mortgage
Association (GNMA) (Continued)
U.S. Government Guaranteed Notes (Continued)
<S> <C> <C>
1994-A Ocean Shores, WA
5.780% 8/1/98.......................... $ 110,000 $ 108,643
1994-A Pasadena, CA
5.780% 8/1/98.......................... 140,000 138,272
1994-A Providence, RI
5.040% 8/1/96.......................... 40,000 40,000
1994-A Providence, RI
5.780% 8/1/98.......................... 50,000 49,383
1994-A Reading, PA
5.040% 8/1/96.......................... 15,000 15,000
1994-A Reading, PA
5.780% 8/1/98.......................... 65,000 64,198
1994-A Roanoke, VA
5.780% 8/1/98.......................... 210,000 207,409
1994-A Rochester, NY
5.040% 8/1/96.......................... 155,000 155,000
1994-A Rochester, NY
5.780% 8/1/98.......................... 165,000 162,964
1991-A Rochester, NY
8.650% 8/1/00.......................... 4,295,000 4,571,468
1994-A Sacramento, CA
5.040% 8/1/96.......................... 125,000 125,000
1994-A Sacramento, CA
5.780% 8/1/98.......................... 300,000 296,298
1994-A St. Joseph, MO
5.040% 8/1/96.......................... 70,000 70,000
1994-A Salt Lake City, UT
5.040% 8/1/96.......................... 135,000 135,000
1994-A Schaumburg, IL
5.040% 8/1/96.......................... 60,000 60,000
1994-A Syracuse, NY
5.040% 8/1/96.......................... 50,000 50,000
1994-A Syracuse, NY
5.780% 8/1/98.......................... 50,000 49,383
1994-A Tacoma, WA
5.040% 8/1/96.......................... 130,000 130,000
1994-A Tacoma, WA
5.780% 8/1/98.......................... 155,000 153,087
1994-A Trenton, NJ
5.040% 8/1/96.......................... 120,000 120,000
1994-A Trenton, NJ
5.780% 8/1/98.......................... 130,000 128,396
1994-A Virginia Beach, VA
5.780% 8/1/98.......................... 260,000 256,792
1994-A Waterford Township, MI
5.780% 8/1/98.......................... 55,000 54,321
1994-A Waterford Township, MI
5.040% 8/1/96.......................... 50,000 50,000
1994-A West Palm Beach, FL
5.780% 8/1/98.......................... 105,000 103,704
U.S. Department of Housing
and Urban Development, Series 1995-A
8.240% 8/1/02.......................... 8,475,000 9,114,439
------------ -------------
19,780,000 20,724,186
------------ -------------
Total U.S. Government Agency Obligations
(Cost $107,869,716) 108,908,119 109,433,394
------------ -------------
</TABLE>
23
<PAGE>
MML Blend Fund
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ --------------
<S> <C> <C>
BONDS AND NOTES (Continued)
U.S. Treasury Obligations - 6.82%
U.S. Treasury Bonds - 2.24%
U.S. Treasury Bond
8.750% 5/15/17........................... $ 34,500,000 $ 40,931,145
U.S. Treasury Bond
8.875% 8/15/17........................... 3,500,000 4,202,170
------------ --------------
38,000,000 45,133,315
------------ --------------
U.S. Treasury Notes - 4.41%
U.S. Treasury Note
7.250% 5/15/04........................... 15,400,000 15,955,786
U.S. Treasury Note
6.375% 5/15/99........................... 11,000,000 11,024,090
U.S. Treasury Note
6.375% 1/15/99........................... 22,500,000 22,573,800
U.S. Treasury Note
6.375% 8/15/02........................... 15,000,000 14,880,450
U.S. Treasury Note
6.125% 5/15/98........................... 20,000,000 20,000,000
U.S. Treasury Note
6.125% 3/31/98........................... 4,500,000 4,503,510
------------ --------------
88,400,000 88,937,636
------------ --------------
U.S. Treasury Strips - .17%
U.S. Treasury Strip - Principal only
0.000% 2/15/10........................... 8,750,000 3,406,813
------------ --------------
Total U.S. Treasury Obligations
(Cost $140,481,561)........................... 135,150,000 137,477,764
------------ --------------
Total Bonds and Notes
(Cost $377,282,273)........................... $371,923,085 375,347,298
============ ==============
SHORT-TERM INVESTMENTS - 26.47%
Commercial Paper
Aristar, Inc.
5.350% 7/1/96............................ $ 7,760,000 7,760,000
Baltimore Gas & Electric
5.250% 7/8/96............................ 12,355,000 12,341,319
Bausch & Lomb, Inc.
5.400% 7/15/96........................... 10,000,000 9,977,853
Boston Edison Company
5.470% 7/10/96........................... 3,530,000 3,524,891
Boston Edison Company
5.470% 7/24/96........................... 8,000,000 7,970,672
Carolina Power & Light Company
5.250% 7/11/96........................... 15,945,000 15,918,936
Caterpillar Service Corporation
5.320% 10/11/96.......................... 10,020,000 9,855,756
Caterpillar Service Corporation
5.280% 11/15/96.......................... 13,660,000 13,361,453
Central and South West Corporation
5.500% 7/9/96............................ 2,500,000 2,496,836
Central and South West Corporation
5.550% 7/29/96........................... 8,000,000 7,965,467
Central and South West Corporation
5.550% 8/27/96........................... 12,900,000 12,783,266
Central and South West Corporation
5.570% 8/23/96........................... 5,450,000 5,404,551
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ --------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (Continued)
Commercial Paper (Continued)
Coca Cola Company
5.230% 7/31/96........................... $ 7,960,000 $ 7,921,937
Comdisco, Inc.
5.470% 7/29/96........................... 6,620,000 6,590,939
Comdisco, Inc.
5.450% 8/2/96............................ 3,730,000 3,711,455
Comdisco, Inc.
5.490% 8/9/96............................ 4,340,000 4,313,224
Comdisco, Inc.
5.520% 8/5/96............................ 7,375,000 7,334,531
Comdisco, Inc.
5.550% 8/9/96............................ 1,185,000 1,177,875
Comdisco, Inc.
5.550% 8/22/96........................... 7,135,000 7,074,026
ConAgra, Inc.
5.460% 8/26/96........................... 8,545,000 8,469,302
ConAgra, Inc.
5.530% 8/30/96........................... 11,560,000 11,446,307
ConAgra, Inc.
5.540% 7/19/96........................... 525,000 523,546
ConAgra, Inc.
5.560% 7/23/96........................... 8,175,000 8,147,223
Countrywide Home Loans
5.350% 8/19/96........................... 12,350,000 12,253,757
Crown Cork & Seal Company, Inc.
5.470% 7/23/96........................... 1,620,000 1,614,412
Crown Cork & Seal Company, Inc.
5.440% 8/28/96........................... 16,185,000 16,033,486
Crown Cork & Seal Company, Inc.
5.580% 9/4/96............................ 9,000,000 8,904,460
Dana Corporation
5.570% 7/25/96........................... 7,600,000 7,571,779
Dana Credit Corporation
5.500% 7/9/96............................ 8,000,000 7,989,876
Dana Credit Corporation
5.520% 7/16/96........................... 1,365,000 1,361,819
Dana Credit Corporation
5.500% 7/16/96........................... 11,135,000 11,109,050
Dana Credit Corporation
5.500% 7/12/96........................... 7,095,000 7,082,654
Dana Credit Corporation
5.550% 8/12/96........................... 8,890,000 8,832,437
Dominion Resources, Inc.
5.490% 7/22/96........................... 13,265,000 13,221,327
Dominion Resources, Inc.
5.480% 8/13/96........................... 8,675,000 8,615,991
Dominion Resources, Inc.
5.530% 8/16/96........................... 10,000,000 9,927,232
E.I. du Pont de Nemours and Company
5.360% 9/18/96........................... 10,580,000 10,444,564
Illinois Power Company
5.500% 7/17/96........................... 10,000,000 9,974,727
Illinois Power Company
5.450% 8/6/96............................ 7,400,000 7,357,707
Kerr-McGee Credit Corporation
5.550% 8/14/96........................... 14,650,000 14,546,330
Lockheed Martin Corporation
5.450% 7/30/96........................... 11,835,000 11,781,191
Mattel, Inc.
5.480% 8/1/96............................ 11,450,000 11,392,496
</TABLE>
24
<PAGE>
MML Blend Fund
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market
Principal Value
Amount (Note 2A)
------------ --------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (Continued)
Commercial Paper (Continued)
Mattel, Inc.
5.480% 8/8/96............................ $ 11,430,000 $ 11,358,747
Mattel, Inc.
5.500% 7/25/96........................... 2,525,000 2,515,183
Monsanto Company
5.280% 7/18/96........................... 10,460,000 10,431,452
ORIX Credit Alliance, Inc.
5.530% 7/23/96........................... 2,945,000 2,934,842
ORIX Credit Alliance, Inc.
5.570% 8/21/96........................... 13,000,000 12,892,799
ORIX Credit Alliance, Inc.
5.660% 10/22/96.......................... 7,558,000 7,421,133
Pepsico, Inc.
5.380% 9/25/96........................... 10,105,000 9,964,602
Pitney Bowes Credit Corporation
5.260% 7/26/96........................... 10,445,000 10,402,014
Praxair, Inc.
5.470% 7/3/96............................ 9,800,000 9,796,848
Praxair, Inc.
5.470% 9/23/96........................... 8,240,000 8,128,087
Praxair, Inc.
5.450% 8/20/96........................... 8,000,000 7,936,384
Proctor & Gamble Company
5.350% 9/5/96............................ 14,785,000 14,625,741
Public Service Electric and Gas Company
5.520% 8/2/96............................ 5,445,000 5,418,283
Shell Oil Company
5.310% 8/29/96........................... 11,040,000 10,939,039
Texas Utilities Electric Company
5.550% 7/12/96........................... 7,900,000 7,886,603
Textron Financial Corporation
5.470% 7/10/96........................... 1,600,000 1,597,812
Textron Financial Corporation
5.520% 8/15/96........................... 8,840,000 8,774,974
Textron Financial Corporation
5.530% 8/29/96........................... 4,000,000 3,961,284
Textron Inc.
5.470% 7/19/96........................... 6,755,000 6,735,868
Textron Inc.
5.450% 7/10/96........................... 6,945,000 6,935,538
Tyson Foods, Inc.
5.430% 8/7/96............................ 6,495,000 6,456,212
VF Corporation
5.470% 8/12/96........................... 5,845,000 5,806,165
Weyerhaeuser Company
5.270% 7/2/96............................ 5,075,000 5,074,197
------------ --------------
Total Short-Term Investments
(Cost $534,271,816) $537,598,000 534,080,467
============ --------------
Total Investments -
(Cost $1,571,402,481) (a) 99.64% 2,010,444,841
Other Assets - .55 11,047,534
Liabilities - (.19) (3,729,280)
------- --------------
Net Assets - 100.00% $2,017,763,095
======= ==============
</TABLE>
Table of Open Forward Commitment Contracts
<TABLE>
<CAPTION>
Forward Aggregate Expiration
Commitment Face Value of of Unrealized
Contracts Contracts Contracts Appreciation
--------- --------- --------- ------------
<S> <C> <C> <C>
United States of America
6.875% due 5/15/06 $26,200,000 November 1996 $ 109,550
-------------
Total Forward Commitment
Contracts $ 109,550
=============
</TABLE>
(a) Federal Income Tax Information: At
June 30, 1996 the net unrealized
appreciation on investments and forward
commitment contracts based on cost of
$1,598,207,304 for federal income tax
purposes is as follows:
Aggregate gross unrealized appreciation for
all investments and forward commitments in
which there is an excess of market value
over tax cost..................................... $ 446,508,647
Aggregate gross unrealized depreciation for
all investments and forward commitments in
which there is an excess of tax cost over
market value...................................... (7,973,384)
-------------
Net unrealized appreciation................... $ 438,535,263
=============
See Notes to Financial Statements.
25
<PAGE>
MML Series Investment Fund
Notes To Financial Statements
(Unaudited)
1. HISTORY
MML Series Investment Fund (the ``MML Trust'') is registered under the
Investment Company Act of 1940 as a no-load, registered open end, diversified
management investment company. MML Equity Fund, MML Money Market Fund, MML
Managed Bond Fund and MML Blend Fund (the ``Funds'') are the four series of
shares of the MML Trust. The MML Trust is organized under the laws of the
Commonwealth of Massachusetts pursuant to an Agreement and Declaration of Trust.
The MML Trust was established by Massachusetts Mutual Life Insurance Company
("MassMutual") for the purpose of providing vehicles for the investment of
assets of various separate investment accounts established by MassMutual and by
life insurance companies which are subsidiaries of MassMutual. Shares of the MML
Trust are not offered to the general public. MassMutual at June 30, 1996, was
the beneficial owner of 1.1% of MML Blend Fund's shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by each Fund in the preparation of the financial statements in
conformity with generally accepted accounting principles.
A. Investment Valuation
Equity securities are valued on the basis of valuations furnished by a pricing
service, authorized by the Board of Trustees, which provides the last reported
sale price for securities listed on a national securities exchange, or on the
NASDAQ national market system. If securities are unlisted, or there is no
reported sale price, the bid price of the prior trade date will be used. Long-
term bonds are valued on the basis of valuations furnished by a pricing
service, authorized by the Board of Trustees, which determines valuations
taking into account appropriate factors such as institutional-size, trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data.
For MML Equity Fund, MML Managed Bond Fund, and MML Blend Fund, short-term
securities with more than sixty days to maturity from the date of purchase are
valued at market and short-term securities having a maturity from the date of
purchase of sixty days or less are valued at amortized cost. MML Money Market
Fund's portfolio securities are valued at amortized cost in accordance with a
rule of the Securities and Exchange Commission pursuant to which MML Money
Market Fund must adhere to certain conditions. It is the intention of MML
Money Market Fund to maintain a per share net asset value of $1.00.
B. Accounting For Investments
Investment transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. Premiums and discounts on short-term securities are amortized in
determining interest income.
The cost basis of long-term bonds is not adjusted for amortization of premium
or accrual of discount since MML Managed Bond Fund and MML Blend Fund do not
generally intend to hold such investments until maturity; however, the MML
Trust has elected to accrue for financial reporting purposes, certain
discounts which are required to be accrued for federal income tax purposes.
Realized gains and losses on investment transactions and unrealized
appreciation and depreciation of investments are reported for financial
statement and federal income tax purposes on the identified cost method.
C. Federal Income Tax
The MML Trust has established a policy for each of the Funds to comply with
the provisions of the Internal Revenue Code applicable to regulated investment
companies. As a result, the Funds will not be subject to federal income tax on
any net investment income and any net capital gains to the extent they are
distributed or are deemed to have been distributed to shareholders.
Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to the deferral of wash sale losses, and paydowns on certain
mortgage-backed securities. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Funds may periodically make reclassifications among certain of their capital
accounts without impacting the net asset value of the Funds.
26
<PAGE>
Notes To Financial Statements (Continued)
D. Forward Commitments
Each Fund may purchase or sell securities on a ``when issued'' or delayed
delivery or on a forward commitment basis. The Funds use forward commitments
to manage interest rate exposure or as a temporary substitute for purchasing
or selling particular debt securities. Forward commitments are not used for
purposes of trading. Settlement for securities purchased on a forward
commitment basis can take place a month or more after the date of the
transaction. The Fund generally does not take delivery on these forward
commitments, but such commitments are instead settled with offsetting
transactions. When a forward commitment contract is closed, the Funds record
a realized gain or loss. Forward commitments involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date.
The Funds could also be exposed to loss if they can not close out their
forward commitments because of an illiquid secondary market, or the inability
of counterparties to perform. The Fund monitors exposure to ensure
counterparties are credit worthy and concentration of exposure is minimized.
The Funds instruct the custodian to segregate liquid high quality assets in a
separate account with a current market value at least equal to the amount of
its forward purchase commitments. The price of the underlying security and
the date when the securities will be delivered and paid for are fixed at the
time the transaction is negotiated. The value of the forward commitment is
determined by management using a commonly accepted pricing model and
fluctuates based upon changes in the value of the underlying security and
market repo rates. Such rates equate the counterparty's cost to purchase and
finance the underlying security to the earnings received on the security and
forward delivery proceeds. The Funds record on a daily basis the unrealized
appreciation/depreciation based upon changes in the value of the forward
commitment. At June 30, 1996, the cost (value) of forward commitments to
purchase securities amounted to $26,188,176 ($26,297,726) for the MML Blend
Fund.
E. Estimates
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. CAPITAL LOSS CARRYFORWARD
The accumulated net realized loss on investments for the MML Money Market Fund
results in a capital loss carryforward of $9,734 which is available for federal
income tax purposes to offset future capital gains. Of the total carryforward,
$485 expires December 31, 1997, $1,639 expires December 31, 1998, $1,204 expires
December 31, 2000, $201 expires December 31, 2001, $5,364 expires December 31,
2002 and $841 expires December 31, 2003.
The accumulated net realized loss on investments for the MML Managed Bond Fund
results in a capital loss carryforward of $840,829 which is available for
federal income tax purposes to offset future capital gains. This carryforward
expires December 31, 2002.
4. INVESTMENT MANAGEMENT FEE
MassMutual provides all investment advisory, management and administrative
services needed by the Funds. For acting as such, MassMutual receives a
quarterly fee from each Fund at the annual rate of .50% of the first
$100,000,000 of the average daily net asset value of each Fund, .45% of the next
$200,000,000, .40% of the next $200,000,000, and .35% of any excess over
$500,000,000.
MassMutual has entered into an investment sub-advisory agreement with Concert
Capital Management, Inc. (``Concert''), a wholly-owned subsidiary of Babson
Acquisition Corporation which is a controlled subsidiary of MassMutual. The
agreement provides that Concert manage the assets of MML Equity Fund and the
assets of the Equity Sector of MML Blend Fund. MassMutual pays Concert a
quarterly fee equal to an annual rate of .13% of the average daily net asset
value of MML Equity Fund and the Equity Sector of MML Blend Fund.
MassMutual has agreed, at least through April 30, 1997, to bear the expenses of
the Funds to the extent that the aggregate expenses (excluding each Fund's
management fee, interest, taxes, brokerage commissions and extraordinary
expenses) incurred during each Fund's fiscal year exceed .11% of the average
daily net asset value of each Fund for such year. For the period ended June 30,
1996, MassMutual was not required to reimburse the Funds for any expenses.
27
<PAGE>
Notes To Financial Statements (Continued)
5. PURCHASES AND SALES OF INVESTMENTS AND FORWARD COMMITMENTS
<TABLE>
<CAPTION>
Proceeds
For the Six Months Acquisition from Sales
Ended June 30, 1996 Cost and Maturities
------------------- ----------- --------------
Investments
-----------
<S> <C> <C>
MML EQUITY FUND
Equities................................................ $ 188,494,689 $ 73,326,389
Short-term investments.................................. 616,310,817 608,686,076
MML MONEY MARKET FUND
Short-term investments.................................. 307,772,864 299,203,351
MML MANAGED BOND FUND
Bonds and notes......................................... 27,115,781 15,838,564
U.S. Government investments - long-term................. 25,311,866 21,500,472
Short-term investments.................................. 255,604,483 253,827,117
MML BLEND FUND
Equities................................................ 94,685,193 88,142,812
Bonds and notes......................................... 73,112,216 24,755,983
U.S. Government investments - long-term................. 196,089,735 162,087,556
Short-term investments.................................. 1,351,327,320 1,415,125,736
<CAPTION>
Cost
Forward Commitments of Contracts
------------------- ------------
<S> <C>
MML MANAGED BOND FUND
U.S. Treasury and GNMA Forward Commitment Contracts:
Contracts opened....................................... $ 1,579,688
Contracts closed....................................... 1,579,688
Outstanding at June 30, 1996 --
MML BLEND FUND
U.S. Treasury and GNMA Forward Commitment Contracts:
Contracts opened....................................... 80,489,254
Contracts closed....................................... 107,406,914
Outstanding at June 30, 1996.......................... 26,188,176
<CAPTION>
6. NET INCREASE FROM CAPITAL SHARE TRANSACTIONS
MML MML
MML Money Managed MML
For the Six Months Equity Market Bond Blend
Ended June 30, 1996 Fund Fund Fund Fund
------------------- -------- --------- --------- --------
<S> <C> <C> <C> <C>
Shares
Reinvestment of dividends 1,828,658 3,268,135 416,352 3,474,840
Sales of shares 5,050,175 49,324,064 1,317,783 3,841,746
Redemptions of shares (863,510) (40,931,580) (699,744) (2,114,653)
------------ ----------- ------------ ------------
Net increase 6,015,323 11,660,619 1,034,391 5,201,933
============ ============ ============ ============
Amount
Reinvestment of dividends $ 47,407,259 $ 3,268,135 $ 5,049,837 $ 72,037,801
Sales of shares 138,127,563 49,324,064 16,033,962 80,550,561
Redemptions of shares (23,545,808) (40,931,580) (8,452,989) (44,594,959)
------------ ------------ ------------ ------------
Net increase $161,989,014 $ 11,660,619 $ 12,630,810 $107,993,403
============ ============ ============ ============
<CAPTION>
MML MML
MML Money Managed MML
For the Year Ended Equity Market Bond Blend
December 31, 1995 Fund Fund Fund Fund
----------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares
Reinvestment of dividends 1,621,795 5,376,748 763,489 5,184,192
Sales of shares 8,464,024 92,327,266 2,219,273 6,885,480
Redemptions of shares (1,909,273) (80,569,846) (1,113,390) (4,944,135)
------------ ------------ ------------ ------------
Net increase 8,176,546 17,134,168 1,869,372 7,125,537
============ ============ =========== ============
Amount
Reinvestment of dividends $ 33,282,252 $ 5,376,748 $ 8,979,443 $ 96,495,329
Sales of shares 203,078,940 92,327,266 26,776,179 135,128,246
Redemptions of shares (45,862,370) (80,569,846) (13,296,001) (96,681,499)
------------ ------------ ------------ ------------
Net increase $190,498,822 $ 17,134,168 $ 22,459,621 $134,942,076
============ ============ ============ ============
</TABLE>
28
<PAGE>
Oppenheimer Capital Appreciation Fund
Objective
Oppenheimer Capital Appreciation Fund primarily seeks aggressive capital
appreciation through investments in the common stocks of "growth type"
companies. In addition, the Fund may selectively invest in some "special
situations" which management believes may provide opportunities for growth.
Narrative by Paul LaRocco, Fund Manager
The Capital Appreciation Fund has been an excellent investment over the past six
months. The results can be attributed to the strong performance of smaller
company growth stocks as well as the fact that we made some well-timed
investment decisions. We are pleased to report that the portfolio's total
return for the six months ended June 30, 1996 is 18.92%./1/
Small company stocks performed well over the period for two main reasons.
First, their profitability and growth potential are less dependent on the U.S.
dollar rising than are some larger companies, when the dollar rose early this
year, smaller company stocks were not as negatively impacted. Second, because
the current economic growth phase has been unexpectedly long - creating concern
among investors about companies' continuing profitability - investor demand
shifted to some of the same high growth areas of the market in which we tend to
focus on.
When we buy growth stocks for the portfolio, we look for companies with
extremely attractive earnings growth rates, new products, or strong gains in
market share. We think these are some of the attributes that companies will
need to continue to grow quickly over time.
In healthcare, we owned stocks in selected physician practice management stocks,
a growing part of the healthcare industry. Physician practice management
companies help doctors manage their practices thereby enabling the doctors to
spend more time with patients and less time doing administrative work. As for
technology, we focused on telecommunications and software firms, where companies
have profited from high demand both in the U.S. and abroad. In the business
services area, our successes were in the credit card transaction processing
area, and we've also done well with selected apparel and footwear
manufacturers./2/
We're generally very pleased with our performance over the period. We didn't
have many disappointments in the companies we owned, and we didn't miss many
opportunities. Looking back, the only area we weren't invested in but would
have liked to have been was in energy stocks. Energy companies performed
unexpectedly well as a result of high demand and price increases.
While the portfolio has performed exceptionally well, we are currently slightly
cautious in our approach to the market. We want to make sure that the companies
we own will be able to deliver consistent earnings in an environment of slower
growth than last year. As a hedge against slower future growth, we're carefully
watching for changes in stocks' price/earnings ratios, trying to avoid paying
too much for a company's growth potential. But beyond this vigilant posture,
we're optimistic.
Going forward, we expect to see moderate economic growth here in the U.S.
That's a situation that could benefit the portfolio, by keeping investors
focused on the types of stocks we normally own - companies with well-defined
business niches, great competitive strengths and the potential to grow quickly
even if the overall economic growth rate is only modest. In addition, we
believe smaller company stocks are still in an extended period of
outperformance. Taken together, these factors support our belief that the
portfolio will continue to help investors take advantage of the market's
tremendous growth potential over time.
We appreciate your confidence in Oppenheimer Capital Appreciation Fund. We look
forward to helping your reach your financial goals in the future.
- -------------------
/1/Based on the change in net asset value per share for the periods shown. Does
not reflect separate account expenses. Such performance would have been lower if
expenses were taken into account.
/2/The Fund's portfolio is subject to change.
<PAGE>
Oppenheimer Global Securities Fund
Objective
Oppenheimer Global Securities Fund seeks capital growth by investing in a
diversified portfolio of foreign and domestic stocks.
Narrative by William Wilby, Fund Manager
Oppenheimer Global Securities Fund has performed well over the past six months.
Using our theme-driven investment approach, we turned in results that were
better than most of our competitors. Even so, it was difficult for global funds
to compete with the outstanding returns from the U.S. market over the period.
As the domestic market has continued to evolve, however, we are beginning to see
evidence of a shift toward international stocks. The long-term potential for
growth may be greater in international stocks than it is in the U.S. market,
especially at current valuation levels.
Because of the strength in the domestic market and where we were positioned
within it, our U.S. holdings performed extremely well over the period. One of
our largest concentrations within domestic stocks was in the technology sector.
And just as technology led the U.S. market, our efficiency-enhancing technology
theme led the portfolio. Our Japanese technology companies performed
particularly well, as Japan began to climb out of a five year recession. In
fact, our Japanese technology stocks have appreciated to the point that we think
they're slightly expensive now. As a result, we've been selling Japanese and
buying U.S. technology again./1/
On the negative side, toward the end of 1995 and into 1996, we thought European
cyclicals companies - the economically sensitive chemical, automotive, and
industrial companies - had become overly discounted as a result of slow European
economic growth. We felt that their reduced prices would allow us to buy them
while they were good values and then participate in their gains as local
economies improved. However, western European growth has remained somewhat
subdued, so these companies have not yet returned to favor.
After the huge rally in U.S. stocks, we've cut back on our domestic holdings
slightly. While we believe the outlook for the U.S. market remains favorable,
we believe there may be better opportunities overseas at this time. As such,
we've reduced our domestic allocation to 43%, down from a high of 49%.
Recently, we've also been buying some gold stocks, both as part of our natural
resources theme and to help diversify the portfolio. Gold stocks look like a
good investment right now for several reasons. First, gold production worldwide
is below what is needed to meet current demand, particularly due to the
increased demand for jewelry from the emerging markets. And because gold may be
a good hedge against - both inflation and deflation - demand from investors
could increase.
We expect the remainder of the year will be good for us. Since our market
lagged somewhat during 1995, we've been able to buy what we believe are
excellent stocks at good prices, and that should give us an extra push when the
U.S. market returns to favor. We think the Fund's portfolio, invested as it is
in high growth potential stocks, continues to offer investors an outstanding
opportunity both for diversification and long-term appreciation potential.
We appreciate your confidence in Oppenheimer Global Securities Fund. We look
forward to helping you reach your financial goals in the future.
- -------------------
/1/The Fund's portfolio is subject to change.
<PAGE>
Oppenheimer Strategic Bond Fund
Objective
Oppenheimer Strategic Bond Fund seeks a high level of current income by
investing in three sectors: foreign fixed-income securities, lower-rated high
yield corporate bonds, and U.S. government issues.
Narrative by David Negri, Fund Manager
The Strategic Bond portfolio performed well over the past six months despite a
rise in domestic interest rates. Our investment strategy involves investing in
sectors of the bond market that offer high income and total return potential
separately, while also responding to broad market factors independently. By
diversifying our investments across high yield, lower rated corporate bonds,
U.S. government bonds, and foreign bonds, we were able to maintain strong
performance even as many other bond investments suffered.
While rising interest rates hurt domestic government bonds over the past six
months, both foreign bonds and high yield bonds performed very well, providing
the majority of our returns. While high yield bonds generally entail greater
risks than investment grade bonds, they also tend to be less sensitive to
interest rates, which helped them perform well. In addition, because payment of
interest and principal depends on an issuing company's profitability, high yield
bonds tend to follow upward moves in the stock market, like those we've seen so
far this year. We owned high yield bonds of companies in two categories - those
we expected to be able to grow faster than the economy as a whole, and those we
felt were temporarily undervalued. In particular, our holdings in the gaming
industry benefited us over the period./1/
Like high yield bonds, foreign bonds also offered higher yield and return
potential over the past six months than did domestic government securities. So,
by owning foreign bonds, the Fund was more than compensated for the currency
risk and added expense they entail.
In the U.S. government sector of the portfolio, a shift from Treasuries toward
the better-performing mortgage-backed securities area was another benefit. When
interest rates increase, mortgage-backed securities perform better than other
fixed-income securities because the risk of early prepayment declines. In
general, mortgage-backed securities also tend to offer higher yields than
comparable Treasuries.
Looking toward the remainder of the year, we expect to continue our current
approach to the market, taking advantage where we can of opportunities in
foreign bonds and high yield bonds while we wait for the domestic market to
improve. We will continue to focus on emerging markets' debt over developed
nations' debt, and to look for high yield bonds of companies we think are well-
positioned for the coming business environment. Mortgage-backed securities will
remain an important part of our U.S. government allocation, and where we are
invested in Treasuries, we plan to stay put in shorter-term bonds, since they
carry less interest rate risk.
Because of its strategic positioning, we think this portfolio will continue to
do well as the year plays out. Currently, we expect that economic growth in the
U.S. will continue, though it may not necessarily accelerate. With this view,
we will continue to position the portfolio around what we consider the best
income and return opportunities worldwide, while we avoid taking on unnecessary
interest rate risk. We are confident this portfolio should perform well in a
variety of market climates.
We appreciate your confidence in Oppenheimer Strategic Bond Fund. We look
forward to helping you reach your financial goals in the future.
- -------------------
/1/The Fund's portfolio is subject to change.
<PAGE>
Oppenheimer Variable Account Funds
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Global Strategic
Appreciation Securities Bond
Fund Fund Fund
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost *) (including repurchase
agreements **) - see accompanying statements.......... $496,438,966 $481,017,994 $78,632,872
Unrealized appreciation on forward foreign currency
exchange contracts - See applicable note.............. -- 2,092,219 34,104
Cash.................................................... 1,171,411 1,178,720 134,233
Receivables:
Closed forward foreign currency exchange contracts.... -- -- 18,995
Dividends and interest................................ 89,350 1,159,071 1,144,202
Shares of beneficial interest sold.................... 1,379,023 1,154,637 130,475
Investments sold...................................... 3,904,622 3,499,164 635,623
Other................................................... 6,546 6,374 2,460
------------ ------------ ------------
Total assets.......................................... 502,989,918 490,108,179 80,732,964
------------ ------------ ------------
LIABILITIES:
Options written, at value (premiums received ***)
- see accompanying statements and notes................ -- -- 53,826
Unrealized depreciation on forward foreign currency
exchange contracts - See applicable note............... -- 21,657 36,086
Payables and other liabilities:
Daily variation on futures contracts - See notes...... -- -- 3,094
Investments purchased (including those purchased
on a when-issued basis ****) - Note 1................. 16,011,339 8,584,203 1,999,087
Shares of beneficial interest redeemed................ 52,678 1,038 1,616
Custodian fees........................................ 9,821 108,084 2,328
Other................................................. 43,898 50,021 10,762
------------ ------------ ------------
Total liabilities..................................... 16,117,736 8,765,003 2,106,799
------------ ------------ ------------
NET ASSETS.............................................. $486,872,182 $481,343,176 $78,626,165
============ ============ ============
COMPOSITION OF NET ASSETS:
Paid-in capital......................................... $357,898,519 $450,940,815 $77,920,709
Undistributed net investment income..................... 98,398 3,185,134 652,100
Accumulated net realized gain (loss) from investments
and foreign currency transactions...................... 23,861,818 (25,451,676) (851,495)
Net unrealized appreciation on investments and
translation of assets and liabilities denominated
in foreign currencies.................................. 105,013,447 52,668,903 904,851
------------ ------------ ------------
NET ASSETS.............................................. $486,872,182 $481,343,176 $78,626,165
============ ============ ============
SHARES OF BENEFICIAL INTEREST OUTSTANDING............... 12,713,932 29,630,799 15,990,133
NET ASSET VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE................................ $38.29 $16.24 $4.92
*Cost................................................... $391,425,519 $430,416,694 $77,701,887
**Repurchase agreements................................. $ 87,800,000 $ 17,900,000 $ 4,500,000
***Premiums received.................................... $ -- $ -- $ 34,452
****When-issued basis................................... $ -- $ -- $ 1,244,208
</TABLE>
See Notes to Financial Statements.
<PAGE>
Oppenheimer Variable Account Funds
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Global Strategic
Appreciation Securities Bond
Fund Fund Fund
------------ ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of withholding taxes of *)...... $ 1,540,454 $ 1,229,932 $ 3,178,234
Dividends (net of withholding taxes of **).... 106,666 3,698,778 36,922
------------ ------------ -----------
Total income............................... 1,647,120 4,928,710 3,215,156
------------ ------------ -----------
EXPENSES:
Management fees - See applicable note......... 1,464,761 1,541,026 251,463
Custodian fees and expenses................... 24,420 152,700 21,499
Legal and auditing fees....................... 6,494 11,848 6,299
Insurance expenses............................ 2,099 3,529 --
Trustees' fees and expenses................... 2,433 2,328 458
Registration and filing fees.................. 30,591 29,472 6,516
Other......................................... 899 1,605 431
------------ ------------ -----------
Total expenses.............................. 1,531,697 1,742,508 286,666
------------ ------------ -----------
NET INVESTMENT INCOME......................... 115,423 3,186,202 2,928,490
------------ ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) from:
Investments:
Unaffiliated companies...................... 24,183,340 3,725,263 688,881
Affiliated companies........................ -- 20,580 --
Closing of futures contracts.................. -- -- 18,778
Closing and expiration of options............. -- -- (24,449)
written
Foreign currency transactions................. -- (3,023,567) 113,470
Net change in unrealized appreciation
or depreciation on:
Investments................................. 42,038,100 31,486,881 (903,801)
Translation of assets and liabilities
denominated in foreign currencies.......... -- (2,628,229) (32,399)
------------ ------------ -----------
Net realized and unrealized gain (loss)....... 66,221,440 29,580,928 (139,520)
------------ ------------ -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..................... $ 66,336,863 $ 32,767,130 $ 2,788,970
------------ ------------ -----------
*Interest..................................... $ -- $ -- $ 21,403
**Dividends................................... $ -- $ 228,319 $ --
</TABLE>
See Notes to Financial Statements.
<PAGE>
Oppenheimer Variable Account Funds
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 (Unaudited) and the Year Ended
December 31, 1995
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer Oppenheimer
Capital Global Strategic
Appreciation Securities Bond
Fund Fund Fund
------------------------------ ------------------------------ ---------------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income............ $ 115,423 $ 1,123,451 $ 3,186,202 $ 2,845,513 $ 2,928,490 $ 3,514,505
Net realized gain (loss)......... 24,183,340 22,379,477 722,276 (25,767,883) 796,680 (869,176)
Change in net unrealized
appreciation or depreciation.... 42,038,100 47,042,428 28,858,652 31,653,008 (936,200) 2,877,343
------------ ------------ ------------ ------------ ----------- -----------
Net increase in net assets
resulting from operations....... 66,336,863 70,545,356 32,767,130 8,730,638 2,788,970 5,522,672
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment
income.......................... (1,132,964) (719,183) -- -- (2,760,328) (3,151,540)
Distributions from net realized
gain............................ (21,289,430) (363,458) -- (8,174,158) -- --
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net
assets resulting from beneficial
interest transactions - Note 2.. 117,553,622 70,167,835 87,597,213 62,580,432 18,499,910 37,406,166
------------ ------------ ------------ ------------ ----------- -----------
Total increase................... 161,468,091 139,630,550 120,364,343 63,136,912 18,528,552 39,777,298
NET ASSETS:
Beginning of period.............. 325,404,091 185,773,541 360,978,833 297,841,921 60,097,613 20,320,315
------------ ------------ ------------ ------------ ----------- -----------
End of period.................... $486,872,182 $325,404,091 $481,343,176 $360,978,833 $78,626,165 $60,097,613
============ ============ ============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Capital Appreciation Fund
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1996 Year Ended December 31,
(Unaudited) 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $34.21 $25.95 $31.64 $26.04 $23.24 $15.24
Income (loss) from
investment operations:
Net investment income -- 0.11 0.10 0.05 0.06 0.08
Net realized and unrealized
gain (loss) 6.26 8.29 (2.22) 6.71 3.43 8.18
---------------------------------------------------------------------------------------
Total income (loss) from
investment operations 6.26 8.40 (2.12) 6.76 3.49 8.26
---------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (0.11) (0.09) (0.04) (0.06) (0.14) (0.26)
Distributions from net
realized gain (2.07) (0.05) (3.53) (1.10) (0.55) --
---------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (2.18) (0.14) (3.57) (1.16) (0.69) (0.26)
---------------------------------------------------------------------------------------
Net asset value, end of period $38.29 $34.21 $25.95 $31.64 $26.04 $23.24
=======================================================================================
TOTAL RETURN, AT NET ASSET VALUE/(1)/ 18.92% 32.52% (7.59)% 27.32% 15.42% 54.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $486,872 $325,404 $185,774 $136,885 $83,335 $49,371
Average net assets (in thousands) $402,843 $240,730 $153,832 $98,228 $56,371 $34,887
Ratios to average net assets:
Net investment income 0.06%/(2)/ 0.47% 0.50% 0.23% 0.30% 0.81%
Expenses 0.76%/(2)/ 0.78% 0.57% 0.47% 0.54% 0.63%
Portfolio turnover rate/(3)/ 54.60% 125.50% 96.50% 122.80% 78.90% 122.30%
Average brokerage commission rate/(4)/ $0.0677 $0.0577 -- -- -- --
</TABLE>
1. Assumes a 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 the total return figures for all periods shown.
2. Annualized.
3. 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 June 30, 1996 were $232,545,916 and
$191,854,268, respectively.
4. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period divided by the total of related shares
purchased and sold.
See accompanying Notes to Financial statements.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Global Securities Fund
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1996 Year Ended December 31,
(Unaudited) 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.00 $15.09 $16.30 $9.57 $10.38 $10.04
Income (loss) from investment operations:
Net investment income (loss) 0.11 0.12 0.04 (0.02) 0.07 0.04
Net realized and unrealized gain (loss) 1.13 0.19 (0.96) 6.75 (0.80) 0.30
---------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.24 0.31 (0.92) 6.73 (0.73) 0.34
---------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income -- -- (0.04) -- (0.04) --
Distributions from net realized gain -- (0.40) (0.25) -- (0.04) --
---------------------------------------------------------------------------------------
Total dividends and distributions to
shareholders -- (0.40) (0.29) -- (0.08) --
---------------------------------------------------------------------------------------
Net asset value, end of period $16.24 $15.00 $15.09 $16.30 $9.57 $10.38
=======================================================================================
TOTAL RETURN, AT NET ASSET VALUE/(1)/ 8.27% 2.24% (5.72)% 70.32% (7.11)% 3.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $481,343 $360,979 $297,842 $96,425 $13,537 $7,339
Average net assets (in thousands) $423,899 $332,336 $214,545 $31,696 $11,181 $3,990
Ratios to average net assets:
Net investment income 1.51%/(2)/ 0.86% 0.54% 0.72% 1.04% 0.75%
Expenses 0.83%/(2)/ 0.89% 0.91% 0.92% 1.06% 1.32%
Portfolio turnover rate/(3)/ 48.10% 131.30% 70.40% 65.10% 34.10% 29.50%
Average brokerage commission rate/(4)/ $0.0047 $0.0092 -- -- -- --
</TABLE>
1. Assumes a 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 the total return figures for all periods shown.
2. Annualized.
3. 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 June 30, 1996 were $289,298,449 and
$193,923,292, respectively.
4. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period divided by the total number of related
shares purchased and sold.
See Notes to Financial Statements.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Strategic Bond Fund
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1996 Year Ended December 31,
(Unaudited) 1995 1994 1993/(1)/
-------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $4.91 $4.60 $5.12 $5.00
Income (loss) from investment operations:
Net investment income 0.21 0.38 0.35 0.10
Net realized and unrealized gain (loss) (0.01) 0.30 (0.54) 0.11
Total income (loss) from investment operations 0.20 0.68 (0.19) 0.21
Dividends and distributions to shareholders:
Dividends from net investment income (0.19) (0.37) (0.32) (0.09)
Distributions from net realized gain -- -- -- --
Distributions in excess of net realized gain -- -- (0.01) --
-------------------------------------------------------------
Total dividends and distributions to shareholders (0.19) (0.37) (0.33) (0.09)
-------------------------------------------------------------
Net asset value, end of period $4.92 $4.91 $4.60 $5.12
=============================================================
TOTAL RETURN, AT NET ASSET VALUE/(2)/ 4.14% 15.33% (3.78)% 4.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $78,626 $60,098 $20,320 $9,887
Average net assets (in thousands) $67,533 $37,698 $15,389 $4,259
Ratios to average net assets:
Net investment income 8.67%/(3)/ 9.32% 8.36% 5.67%/(3)/
Expenses 0.85%/(3)/ 0.85% 0.87% 0.96%/(3)/
Portfolio turnover rate/(4)/ 46.10% 87.00% 136.60% 10.90%
</TABLE>
1. For the period from May 3, 1993 (commencement of operations) to December 31,
1993.
2. Assumes a 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 the total return figures for all periods shown.
3. Annualized.
4. 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 June 30, 1996 were $44,216,010 and
$25,961,308, respectively.
See Notes to Financial Statements.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Capital Appreciation Fund
STATEMENT OF INVESTMENTS
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Principal Market Value
Amount (Note 1)
------ ------------
<S> <C> <C>
Short-Term Notes -- 2.1%
Federal Home Loan Mortgage Corp.,
5.27%, 7/1/96 (Cost $10,000,000).................. $ 10,000,000 $ 10,000,000
-------------
Convertible Corporate Bonds
and Notes -- 0.6%
Danka Business Systems PLC, 6.75%
Cv. Sub. Nts., 4/1/02............................. 800,000 950,000
United Waste Systems, Inc., 4.50%
Cv. Sub. Nts., 6/1/01/(1)/........................ 2,000,000 2,187,500
-------------
Total Convertible Corporate Bonds and Notes
(Cost $2,800,000).................................. 3,137,500
-------------
<CAPTION>
Shares
------
<S> <C> <C>
Common Stocks -- 81.2%
Consumer Cyclicals -- 16.9%
Autos & Housing -- 1.2%
Alrenco, Inc./(2)/................................. 72,000 1,296,000
ITI Technologies, Inc./(2)/........................ 80,000 2,640,000
NHP, Inc./(2)/..................................... 100,000 2,062,500
-------------
5,998,500
Leisure & Entertainment -- 4.9%
Apple South, Inc................................... 121,100 3,239,425
Applebee's International, Inc...................... 75,000 2,409,375
CKE Restaurants, Inc............................... 185,000 4,717,500
Landry's Seafood Restaurants, Inc./(2)/............ 200,000 4,950,000
Longhorn Steaks, Inc./(2)/......................... 78,600 1,965,000
Quality Dining, Inc./(2)/.......................... 74,500 2,439,875
Regal Cinemas, Inc./(2)/........................... 56,600 2,589,450
Studio Plus Hotels, Inc./(2)/...................... 50,000 1,650,000
-------------
23,960,625
-------------
Media -- 2.0%
Chancellor Broadcasting Co., Cl. A/(2)/............ 58,900 1,840,625
Evergreen Media Corp., Cl. A/(2)/.................. 60,000 2,565,000
Infinity Broadcasting Corp., Cl. A/(2)/............ 90,000 2,700,000
SFX Broadcasting, Inc., Cl. A/(2)/................. 63,200 2,464,800
-------------
9,570,425
-------------
Retail: General -- 3.6%
Donna Karan International, Inc..................... 102,200 2,861,600
Fila Holding SpA, ADR.............................. 40,000 3,450,000
Nautica Enterprises, Inc./(2)/..................... 105,000 3,018,750
Polymer Group, Inc./(2)/........................... 100,000 1,750,000
Vans, Inc./(2)/.................................... 201,000 3,417,000
Wolverine World Wide, Inc.......................... 89,000 2,892,500
-------------
17,389,850
-------------
Retail: Specialty -- 5.2%
Boise Cascade Office Products Corp./(2)/........... 100,000 3,462,500
Copart, Inc./(2)/.................................. 78,100 1,288,650
Corporate Express, Inc./(2)/....................... 82,500 3,300,000
General Nutrition Cos., Inc./(2)/.................. 62,700 1,097,250
Gymboree Corp./(2)/................................ 75,000 2,287,500
Men's Wearhouse, Inc. (The)/(2)/................... 100,100 3,228,225
Moovies, Inc./(2)/................................. 99,600 784,350
MSC Industrial Direct Co., Inc., Cl. A/(2)/........ 35,000 1,128,750
Petco Animal Supplies, Inc./(2)/................... 120,000 3,450,000
Staples, Inc./(2)/................................. 101,250 1,974,375
Viking Office Products, Inc./(2)/.................. 110,000 3,451,250
-------------
25,452,850
-------------
Consumer Non-Cyclicals -- 21.7%
Food -- 1.0%
Safeway, Inc./(2)/................................. 150,000 4,950,000
-------------
<CAPTION>
Principal Market Value
Amount (Note 1)
------ --------------
<S> <C> <C>
Common Stocks (Continued)
Consumer Non-Cyclicals (Continued)
Healthcare/Drugs -- 8.1%
Agouron Pharmaceuticals, Inc./(2)/................. 40,000 1,560,000
Alpha-Beta Technology, Inc./(2)/................... 140,000 1,242,500
Apache Medical Systems, Inc........................ 100,000 1,225,000
BioChem Pharma, Inc./(2)/.......................... 105,000 3,937,500
CIMA Labs, Inc./(2)/............................... 82,500 618,750
Corvas International, Inc./(2)/.................... 112 546
Dura Pharmaceuticals, Inc./(2)/.................... 75,000 4,200,000
Elan Corp. PLC, ADR/(2)/........................... 45,000 2,570,625
Ethical Holdings PLC, Sponsored ADR/(2)/........... 50,000 487,500
Genome Therapeutics Corp./(2)/..................... 110,000 990,000
Genzyme Corp./(2)/................................. 50,000 587,500
Gilead Sciences, Inc./(2)/......................... 39,300 992,325
Guilford Pharmaceuticals, Inc./(2)/................ 63,400 1,505,750
Incyte Pharmaceuticals, Inc./(2)/.................. 40,000 1,542,500
Integra LifeSciences Corp./(2)/.................... 53,000 516,750
Martek Biosciences Corp./(2)/...................... 40,000 1,170,000
Matrix Pharmaceutical, Inc./(2)/................... 80,400 1,447,200
Mentor Corp........................................ 60,000 1,530,000
Millennium Pharmaceuticals, Inc./(2)/.............. 70,000 1,085,000
Nuerocrine Biosciences, Inc./(2)/.................. 105,000 931,875
Physician Support Systems, Inc./(2)/............... 180,000 4,072,500
Protein Design Labs, Inc./(2)/..................... 57,500 1,293,750
QIAGEN NV.......................................... 60,000 907,500
SangStat Medical Corp./(2)/........................ 190,000 3,230,000
Watson Pharmaceuticals, Inc./(2)/.................. 35,000 1,325,625
-------------
38,970,696
-------------
Healthcare/Supplies & Services -- 12.6%
Aksys Ltd./(2)/.................................... 42,375 646,219
AmeriSource Health Corp., Cl. A/(2)/............... 115,500 3,840,375
Cardiovascular Dynamics, Inc./(2)/................. 93,700 1,147,825
Compdent Corp./(2)/................................ 40,000 1,860,000
ESC Medical Systems Ltd./(2)/...................... 62,100 1,754,325
Guidant Corp....................................... 95,000 4,678,750
Gulf South Medical Supply, Inc./(2)/............... 108,400 4,227,600
HEALTHSOUTH Corp./(2)/............................. 135,000 4,860,000
Hologic, Inc./(2)/................................. 50,000 2,212,500
Impath, Inc./(2)/.................................. 100,000 1,800,000
Integ, Inc......................................... 150,000 1,443,750
Mariner Health Group, Inc./(2)/.................... 100,000 1,837,500
National Surgery Centers, Inc./(2)/................ 21,750 576,375
Novoste Corp./(2)/................................. 150,000 1,481,250
OccuSystems, Inc./(2)/............................. 45,000 1,681,875
Omnicare, Inc...................................... 153,600 4,070,400
Pediatrix Medical Group, Inc./(2)/................. 85,000 4,122,500
PhyCor, Inc./(2)/.................................. 127,500 4,845,000
Physician Reliance Network, Inc./(2)/.............. 100,000 2,225,000
Physicians Resource Group, Inc./(2)/............... 139,000 4,639,125
Renal Treatment Centers, Inc./(2)/................. 125,000 3,593,750
Total Renal Care Holdings, Inc./(2)/............... 87,600 3,701,100
-------------
61,245,219
-------------
Energy -- 2.7%
Energy Services & Producers -- 2.7%
Diamond Offshore Drilling, Inc./(2)/............... 86,900 4,975,025
Energy Ventures, Inc./(2)/......................... 100,200 3,256,500
Nabors Industries, Inc./(2)/....................... 150,000 2,437,500
NUMAR Corp./(2)/................................... 51,000 777,750
Weatherford Enterra, Inc./(2)/..................... 50,000 1,500,000
-------------
12,946,775
-------------
</TABLE>
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Capital Appreciation Fund
STATEMENT OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Principal Market Value
Amount (Note 1)
------ ------------
<S> <C> <C>
Common Stocks (Continued)
Financial -- 2.5%
Diversified Financial -- 1.2%
Advanta Corp., Cl. B............................... $ 40,000 $ 1,810,000
Associates First Capital Corp., Cl. A/(2)/......... 56,000 2,107,000
Green Tree Financial Corp.......................... 60,000 1,875,000
------------
5,792,000
------------
Insurance -- 1.3%
Berkley (W.R.) Corp................................ 50,000 2,087,500
CapMAC Holdings, Inc............................... 85,600 2,439,600
Executive Risk, Inc................................ 50,000 1,912,500
-------------
6,439,600
-------------
Industrial -- 11.2%
Electrical Equipment -- 0.4%
Honeywell, Inc..................................... 40,000 2,180,000
-------------
Industrial Materials -- 0.5%
BMC West Corp./(2)/................................ 128,000 2,192,000
-------------
Industrial Services -- 9.3%
Affiliated Computer Services, Inc., Cl. A/(2)/..... 48,000 2,256,000
CIBER, Inc./(2)/................................... 133,000 2,926,000
Computer Horizons Corp./(2)/....................... 62,500 2,468,750
CORT Business Services Corp./(2)/.................. 93,800 1,829,100
Danka Business Systems PLC,
Sponsored ADR..................................... 70,000 2,047,500
DecisionOne Holdings Corp./(2)/.................... 90,000 2,137,500
First USA Paymentech, Inc./(2)/.................... 88,100 3,524,000
Greenwich Air Services, Inc., B Shares/(2)/........ 125,000 2,437,500
Kent Electronics Corp./(2)/........................ 56,600 1,768,750
May & Speh, Inc./(2)/.............................. 74,900 1,179,675
NOVA Corp./(2)/.................................... 10,800 364,500
PMT Services, Inc./(2)/............................ 76,500 2,189,812
SITEL Corp./(2)/................................... 118,600 4,981,200
Transaction Network Services, Inc./(2)/............ 92,500 1,988,750
Transaction Systems Architects, Inc.,
Cl. A/(2)/........................................ 46,000 3,082,000
United Waste Systems, Inc./(2)/.................... 74,000 2,386,500
USA Waste Services, Inc./(2)/...................... 171,300 5,074,762
Walsh International, Inc./(2)/..................... 130,000 1,202,500
Whittman-Hart, Inc./(2)/........................... 42,300 1,522,800
-------------
45,367,599
-------------
Manufacturing -- 0.5%
U.S. Filter Corp./(2)/............................. 75,000 2,606,250
-------------
Transportation -- 0.5%
Airborne Freight Corp.............................. 100,000 2,600,000
-------------
Technology -- 25.8%
Computer Hardware -- 0.6%
Encad, Inc./(2)/................................... 160,000 2,720,000
-------------
Computer Software -- 12.1%
Adept Technology, Inc.............................. 137,700 1,927,800
America Online, Inc................................ 40,000 1,750,000
Aspen Technologies, Inc./(2)/...................... 70,000 3,850,000
Business Objects SA, Sponsored ADR/(2)/............ 70,000 2,817,500
Centennial Technologies, Inc./(2)/................. 90,000 2,688,750
Cylink Corp./(2)/.................................. 10,000 172,500
Enterprise Systems, Inc./(2)/...................... 104,100 2,862,750
FileNet Corp./(2)/................................. 60,000 2,190,000
First Data Corp.................................... 78,788 6,273,495
HBO & Co........................................... 70,000 4,742,500
Health Systems Design Corp./(2)/................... 71,000 1,047,250
IMNET Systems, Inc./(2)/........................... 106,300 3,242,150
Indus Group, Inc. (The)/(2)/....................... 75,000 1,518,750
Legato Systems, Inc./(2)/.......................... 20,000 1,100,000
Mecon, Inc./(2)/................................... 95,000 2,149,375
Open Text Corp./(2)/............................... 65,000 674,375
Oracle Corp./(2)/.................................. 97,500 3,845,156
PowerCerv Corp./(2)/............................... 70,000 857,500
Project Software & Development, Inc./(2)/.......... 49,500 2,320,313
Rational Software Corp./(2)/....................... 25,000 1,343,750
Software 2000, Inc./(2)/........................... 121,800 1,964,025
Summit Medical Systems, Inc./(2)/.................. 55,000 1,072,500
Sunquest Information Systems, Inc./(2)/............ 110,000 1,650,000
Transition Systems, Inc./(2)/...................... 100,000 2,850,000
Vantive Corp./(2)/................................. 35,000 1,172,500
Verilink Corp./(2)/................................ 120,000 3,060,000
-------------
59,142,939
-------------
Electronics -- 2.0%
Affinity Technology Group, Inc./(2)/............... 54,700 464,950
Itron, Inc./(2)/................................... 75,000 2,128,125
Sawtek, Inc./(2)/.................................. 95,100 3,280,950
SDL, Inc./(2)/..................................... 135,000 3,746,250
-------------
9,620,275
-------------
Telecommunications-Technology -- 11.1%
Arch Communications Group, Inc./(2)/............... 100,000 1,862,500
Cisco Systems, Inc./(2)/........................... 50,000 2,831,250
Comverse Technology, Inc./(2)/..................... 150,000 4,575,000
Davox Corp./(2)/................................... 60,000 1,770,000
Glenayre Technologies, Inc......................... 122,625 6,131,250
LCI International, Inc./(2)/....................... 132,600 4,160,325
MobileMedia Corp., Cl. A/(2)/...................... 125,000 1,515,625
Newbridge Networks Corp./(2)/...................... 105,000 6,877,500
Octel Communications Corp./(2)/.................... 100,000 1,975,000
PageMart Wireless, Inc., Cl. A/(2)/................ 103,100 1,031,000
Pairgain Technologies, Inc./(2)/................... 54,800 3,397,600
Periphonics Corp./(2)/............................. 100,400 3,413,600
ProNet, Inc./(2)/.................................. 50,000 612,500
Scientific-Atlanta, Inc............................ 80,000 1,240,000
Sterling Commerce, Inc./(2)/....................... 45,500 1,689,188
Tel-Save Holdings, Inc./(2)/....................... 100,000 2,125,000
Tellabs, Inc./(2)/................................. 75,000 5,015,625
Teltrend, Inc./(2)/................................ 100,000 3,875,000
-------------
54,097,963
-------------
Utilities -- 0.4%
Telephone Utilities -- 0.4%
ACC Corp., Cl. A/(2)/.............................. 38,800 1,886,650
-------------
Total Common Stocks
(Cost $290,205,869)................................ 395,130,216
-------------
<CAPTION>
Units
-----
<S> <C> <C>
Rights, Warrants and Certificates -- 0.0%
Windmere Corp. Wts., Exp. 1/98
(Cost $0)......................................... 381 --
-------------
<CAPTION>
Date Strike Contracts
---- ------ ---------
<S> <C> <C> <C> <C>
Put Options Purchased -- 0.1%
NASDAQ 100 Index Put. Opt.
(Cost $619,650).......................... 9/96 $630 300 371,250
-------------
</TABLE>
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Capital Appreciation Fund
Statement of Investments (continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Principal Market Value
Amount (Note 1)
------ ------------
<S> <C> <C>
Repurchase Agreement -- 18.0%
Repurchase agreement with J. P.
Morgan Securities, Inc., 5.45%, dated
6/28/96, to be repurchased at $87,839,876
on 7/1/96, collateralized by U.S. Treasury
Bonds, 11.25%, 2/15/15, with a value of
$81,980,431, and U.S. Treasury Nts., 8.50%,
5/15/97, with a value of $8,245,866
(Cost $87,800,000)........................... $ 87,800,000 $ 87,800,000
Total Investments, at Value
(Cost $391,425,519).......................... 102.0% 496,438,966
------- ------------
Liabilities in Excess of Other Assets.......... (2.0) (9,566,784)
------- ------------
Net Assets..................................... 100.0% $486,872,182
======= ============
</TABLE>
/(1)/ Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the Board
of Trustees. These securities amount to $2,187,500 or 0.45% of the Fund's
net assets, at June 30, 1996.
/(2)/ Non-income producing security.
See accompanying Notes to Financial Statements.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Global Securities Fund
STATEMENT OF INVESTMENTS
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Principal Market Value
Amount/(1)/ (Note 1)
----------- ------------
<S> <C> <C>
Foreign Government Obligations -- 0.9%
Bonos de la Tesoreria de la Federacion,
Zero Coupon, 36.916%, 4/3/97 (Cost
$4,362,431)/(2)/ MXP..................... $ 41,760,000 $ 4,379,166
------------
<CAPTION>
Shares
------
<S>........................................ <C>
Common Stocks -- 95.3%
Basic Materials -- 4.9%
Chemicals -- 1.1%
Hoechst AG............................... 50,000 1,688,413
Minerals Technologies, Inc............... 100,000 3,425,000
------------
5,113,413
------------
Gold -- 2.3%
Anglo American Corp. of South Africa
Ltd., ADR................................ 30,000 1,897,500
Free State Consolidated Gold Mines
Ltd., ADR................................ 174,000 1,609,500
Homestake Mining Co....................... 80,000 1,370,000
Newmont Mining Corp....................... 80,500 3,974,688
Placer Dome, Inc.......................... 100,000 2,387,500
------------
11,239,188
------------
Metals -- 1.5%
Companhia Vale Do Rio Doce,
Preference............................... 92,000 1,782,173
Compania de Minas Buenaventura SA,
Sponsored ADR/(3)/....................... 46,000 914,250
Freeport-McMoRan Copper & Gold,
Inc., Cl. B.............................. 107,000 3,410,625
Gencor Ltd., Unsponsored ADR.............. 250,000 923,700
------------
7,030,748
------------
Consumer Cyclicals -- 13.5%
Autos & Housing -- 2.4%
Autobacs Seven Co. Ltd.................... 23,000 2,222,800
IRSA Inversiones y Representaciones, SA... 1,028,807 3,502,904
Mahindra & Mahindra Ltd., GDR/(4)/........ 200,000 2,150,000
Volkswagen AG............................. 10,000 3,721,736
------------
11,597,440
------------
Leisure & Entertainment -- 0.7%
Lusomundo SGPS SA......................... 205,200 1,271,573
Resorts World Berhad...................... 350,000 2,005,821
------------
3,277,394
------------
Media -- 2.4%
Grupo Televisa SA, Sponsored ADR/(4)/..... 64,900 1,995,675
News Corp. Ltd., ADR...................... 150,000 3,525,000
Reuters Holdings PLC, Series B, ADR....... 20,000 1,450,000
Tele-Communications, Inc. (New), TCI
Group, Series A/(3)/..................... 162,000 2,936,250
Time Warner, Inc.......................... 45,000 1,766,250
------------
11,673,175
------------
Retail: General -- 0.2%
PT Matahari Putra Prima................... 439,500 802,550
Retail: Specialty -- 7.8%
adidas AG................................. 60,000 4,996,259
Benetton Group SpA........................ 194,500 2,512,214
Cifra SA de CV, Unsponsored ADR, B
Shares/(3)/.............................. 1,500,000 2,164,950
Circuit City Stores, Inc.................. 40,000 1,445,000
FamilyMart Co............................. 49,500 2,202,377
Giordano International Ltd................ 2,100,000 2,034,750
Jusco Co.................................. 85,000 2,782,147
COMMON STOCKS
CONSUMER CYCLICALS
RETAIL SPECIALTY
Reebok International Ltd.................. 124,600 4,189,675
Wella AG.................................. 19,000 11,103,125
Wolford AG................................ 16,400 4,011,083
------------
37,441,580
------------
Consumer Non-Cyclicals -- 16.3%
Beverages -- 2.7%
Allied Domecq PLC......................... 274,400 1,931,425
Buenos Aires Embotelladora SA,
Sponsored ADR............................ 100,300 1,328,975
Hellenic Bottling Co., SA................. 35,000 1,161,592
LVMH Moet Hennessy Louis Vuitton.......... 4,700 1,114,724
Panamerican Beverages, Inc., Cl. A........ 71,800 3,213,050
South African Breweries Ltd............... 150,000 4,399,182
------------
13,148,948
------------
Food -- 1.0%
Disco SA, ADR/(3)/........................ 93,200 2,062,050
Molinos Rio de la Plata SA, Cl. B......... 205,600 2,213,334
Universal Robina Corp..................... 833,300 445,289
------------
4,720,673
------------
Healthcare/Drugs -- 8.3%
Amgen, Inc./(3)/.......................... 100,000 5,400,000
Astra AB Free, Series A................... 200,000 8,831,321
BioChem Pharma, Inc./(3)/................. 50,000 1,875,000
Ciba-Geigy AG............................. 4,000 4,873,602
Eisai Co. Ltd............................. 100,000 1,887,283
Genzyme Corp./(3)/........................ 60,000 3,015,000
Glaxo Wellcome PLC, Sponsored ADR......... 150,000 4,012,500
Johnson & Johnson......................... 23,000 1,138,500
Plant Genetics Systems/(3)(5)/............ 89,104 996,496
Sanofi SA................................. 60,000 4,496,426
Taisho Pharmaceutical Co.................. 100,000 2,160,802
Takeda Chemical Industries Ltd............ 83,000 1,468,069
------------
40,154,999
------------
Healthcare/Supplies & Services -- 3.3%
Gehe AG................................... 6,999 4,754,471
Rhoen Klinikum AG, Preference, Non-vtg./(3)/ 17,920 2,066,145
United States Surgical Corp............... 300,000 9,300,000
------------
16,120,616
------------
Tobacco -- 1.0%
B.A.T. Industries PLC..................... 600,000 4,670,726
------------
Energy -- 6.5%
Energy Services & Producers -- 3.1%
Baker Hughes, Inc......................... 80,000 2,630,000
Coflexip SA, Sponsored ADR/(3)/........... 105,000 1,824,375
Global Marine, Inc./(3)/.................. 117,500 1,630,313
Transocean AS/(3)/........................ 292,360 7,583,150
Western Atlas, Inc./(3)/.................. 19,300 1,124,225
------------
14,792,063
------------
Oil-Integrated -- 3.4%
British Petroleum Co. PLC, ADR............ 25,000 2,671,875
Elf Acquitaine SA......................... 30,000 2,206,256
Gulf Canada Resources Ltd./(3)/........... 565,600 2,857,779
Norsk Hydro AS............................ 90,000 4,405,563
Total SA, B Shares........................ 30,000 2,224,903
Unocal Corp............................... 64,000 2,160,000
------------
16,526,376
------------
</TABLE>
<PAGE>
Oppenheimer Variable Account Funds -- Oppenheimer Global Securities Fund
Statement of Investments (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
------ ------------
<S> <C> <C>
Common Stocks (Continued)
Financial -- 14.5%
Banks -- 4.9%
Banco Bradesco SA, Preference................... 455,260,951 $ 3,718,063
Banco Frances del Rio de la Plata SA,
ADR............................................ 55,000 1,581,250
Banco Latinoamericano de
Exportaciones SA, Cl. E........................ 24,800 1,395,000
Chase Manhattan Corp. (New)..................... 52,000 3,672,500
Citicorp........................................ 45,000 3,718,125
HSBC Holdings PLC............................... 126,101 1,906,053
Korea Exchange Bank............................. 30,000 388,659
Northern Trust Corp............................. 18,700 1,079,925
PT Lippo Bank................................... 825,000 1,364,706
Standard Chartered Bank PLC/(3)/................ 203,000 2,021,853
Turkiye Garanti Bankasi (New), ADR/(4)/......... 389,250 2,653,011
------------
23,499,145
------------
Diversified Financial -- 3.9%
ABN Amro Holding NV............................. 70,000 3,756,350
American Express Co............................. 24,500 1,093,313
First NIS Regional Fund/(4)/.................... 180,000 1,890,000
ING Groep NV.................................... 89,062 2,655,723
MBNA Corp....................................... 105,000 2,992,500
Merrill Lynch & Co., Inc........................ 30,000 1,953,750
Societe Generale de Paris....................... 35,000 3,848,030
Taiwan Fund, Inc................................ 18,400 441,600
------------
18,631,266
------------
Insurance -- 5.7%
American International Group, Inc............... 35,000 3,451,875
Assicurazioni Generali SpA...................... 150,000 3,459,015
Mapfre Vida Seguros............................. 50,000 2,807,874
Marschollek, Lautenschlaeger und
Partner AG..................................... 5,587 5,872,788
National Mutual Asia Ltd........................ 2,634,000 2,313,957
Reinsurance Australia Corp. Ltd................. 2,283,000 6,648,318
Skandia Forsakrings AB.......................... 100,000 2,644,875
------------
27,198,702
------------
Industrial -- 15.8%
Electrical Equipment -- 1.1%
Ushio, Inc...................................... 100,000 1,221,719
Yokogawa Electric Corp.......................... 425,000 4,262,342
------------
5,484,061
------------
Industrial Services -- 5.9%
BIS SA.......................................... 35,925 3,754,335
Boskalis Westminster............................ 150,000 2,680,178
Cordiant PLC/(3)/............................... 1,700,000 2,905,608
IHC Caland NV................................... 80,000 3,936,786
PT Citra Marga Nusaphala Persada................ 1,165,500 1,777,726
VBH-Vereinigter Baubeschlag Handel AG........... 24,700 6,490,866
WMX Technologies, Inc........................... 80,000 2,620,000
WPP Group PLC................................... 1,200,000 4,008,807
------------
28,174,306
------------
Manufacturing -- 6.3%
Bic Corp........................................ 20,000 2,839,889
Bobst Bearers AG................................ 2,000 2,884,214
Bombardier, Inc., Cl. B......................... 250,000 3,743,720
Chargeurs International SA...................... 14,000 625,747
Consolidated Electric Power Asia Ltd., ADS...... 800,000 1,322,911
Komatsu Ltd..................................... 398,000 3,918,984
Measurex Corp................................... 63,800 1,866,150
Mitsubishi Heavy Industries Ltd................. 530,000 4,605,061
Pathe SA........................................ 14,000 3,285,102
Powerscreen International PLC................... 730,100 5,173,002
------------
30,264,780
------------
Transportation -- 2.5%
Brambles Industries Ltd......................... 180,000 2,504,718
East Japan Railway Co........................... 400 2,096,981
Guangshen Railway Co. Ltd., ADS/(3)/............ 180,000 3,442,500
Kvaerner AS, Series B........................... 97,500 4,119,825
------------
12,164,024
------------
Technology -- 16.2%
Computer Hardware -- 1.9%
Canon, Inc...................................... 150,000 3,118,120
Digital Equipment Corp./(3)/.................... 90,000 4,050,000
International Business Machines Corp............ 20,000 1,980,000
------------
9,148,120
------------
Computer Software -- 6.4%
Baan Co. NV/(3)/................................ 60,000 2,040,000
First Data Corp................................. 87,118 6,936,771
Ines Corp....................................... 60,000 1,121,429
Microsoft Corp./(3)/............................ 35,000 4,204,375
Misys PLC....................................... 200,000 2,414,607
Nintendo Co. Ltd................................ 191,000 14,209,872
------------
30,927,054
------------
Electronics -- 4.6%
Advanced Semiconductor Engineering
GDR/(3)/....................................... 102,420 934,070
Advantest Corp.................................. 33,000 1,308,790
General Motors Corp., Cl. H..................... 40,000 2,405,000
Hewlett-Packard Co.............................. 20,000 1,992,500
Intel Corp...................................... 20,000 1,468,750
Keyence Corp.................................... 25,000 3,396,197
Rohm Co......................................... 45,000 2,970,419
SGS-Thomson Microelectronics NV/(3)/............ 129,400 4,642,225
Sony Corp./(3)/................................. 48,000 3,155,318
------------
22,273,269
------------
Telecommunications-Technology -- 3.3%
Airtouch Communications, Inc./(3)/.............. 70,000 1,977,500
Cisco Systems, Inc./(3)/........................ 34,600 1,959,225
Korea Mobile Telecommunications Corp............ 3,000 3,751,600
Millicom International Cellular SA/(3)/......... 90,000 4,286,250
Millicom, Inc./(3)/............................. 25,000 --
Petersburg Long Distance, Inc./(3)/............. 187,000 1,531,063
PT Telekomunikasi Indonesia, ADR................ 88,000 2,618,000
------------
16,123,638
------------
Utilities -- 7.6%
Electric Utilities -- 1.1%
Empresa Nacional de Electricidad SA............. 30,000 1,869,576
Veba AG......................................... 60,000 3,188,933
------------
5,058,509
------------
Telephone Utilities -- 6.5%
Compania de Telecommunicaciones de
Chile SA, Sponsored ADR........................ 31,500 3,090,938
CPT Telefonica del Peru SA, Cl. B............... 3,400,031 6,851,773
DDI Corp........................................ 600 5,229,688
Portugal Telecom SA............................. 144,000 3,761,396
Telecom Italia Mobile SpA....................... 2,000,000 4,468,506
Telecom Italia SpA.............................. 2,000,000 4,298,898
Telecomunicacoes Brasileiras SA,
Preference..................................... 52,548,000 3,668,738
------------
31,369,937
------------
Total Common Stocks
(Cost $408,154,263)............................. 458,626,700
------------
</TABLE>
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Global Securities Fund
STATEMENT OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market Value
Units (Note 1)
----- ------------
<S> <C> <C>
Rights, Warrants and Certificates--0.0%
American Satellite Network, Inc. Wts.,
Exp. 6/99............................. 6,250 $ --
Plant Genetics Systems Wts. Exp.
12/99/(5)/ ........................... 60,000 112,128
------------
Total Rights, Warrants and Certificates
(Cost $0) ............................ 112,128
------------
<CAPTION>
Principal Market Value
Amount (1) (Note 1)
---------- ------------
<S> <C> <C>
Repurchase Agreement - 3.7%
Repurchase agreement with Canadian Imperial
Bank of Commerce, 5.45%, dated 6/28/96, to
be repurchased at $17,908,130 on 7/1/96,
collateralized by U.S. Treasury Bonds, 9.125%
- -11.25%, 2/15/15-5/11/18, with a value of
$6,327,433, and U.S. Treasury Nts., 5.25%
- -8.50%, 1/11/97-11/15/04, with a value of
$11,958,003 (Cost $17,900,000)........... $ 17,900,000 $ 17,900,000
------------
Total Investments, at Value
(Cost $430,416,694)..................... 99.9% 481,017,994
------ ------------
Other Assets Net of Liabilities.......... 0.1 325,182
------ ------------
Net Assets............................... 100.0% $481,343,176
====== ============
</TABLE>
(1) Principal amount is reported in U.S. Dollars, except for those denoted in
the following currency:
MXP - Mexican Peso
(2) For zero coupon bonds, the interest rate shown is the effective yield on
the date of purchase.
(3) Non-income producing security.
(4) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the Board
of Trustees. These securities amount to $8,688,686 or 1.81% of the Fund's
net assets at June 30, 1996.
(5) Identifies issues considered to be illiquid - See applicable note of Notes
to Financial Statements.
Affiliated company. Represents ownership of at least 5% of the voting securities
of the issuer and is or was an affiliate, as defined in the Investment Company
Act of 1940, at or during the period ended June 30, 1996. There were no
affiliate securities held as of June 30, 1996. Transactions during the period in
which the issuer was an affiliate are as follows:
<TABLE>
<CAPTION>
Balance Balance
December 31, 1995 Gross Additions Gross Reductions June 30, 1996
----------------- --------------- ---------------- ------------- Dividend
Shares Cost Shares Cost Shares Cost Shares Cost Income
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pharmavit GDS 114,000 $1,401,000 -- $ -- 114,000 $1,401,000 -- $ -- $ --
</TABLE>
Distribution of investments by country of issue, as a percentage of total
investments at value, is as follows:
<TABLE>
<CAPTION>
Country Market Value Percent
- ------- ------------ -------
<S> <C> <C>
United States ........................... $ 207,640,602 43.2%
Japan ................................... 63,338,400 13.2
Germany ................................. 43,882,737 9.1
Great Britain ........................... 31,260,402 6.5
France .................................. 30,862,012 6.4
Italy ................................... 14,738,633 3.1
Australia ............................... 12,678,036 2.6
Mexico .................................. 11,752,841 2.4
Canada .................................. 10,863,999 2.3
Argentina ............................... 10,688,513 2.2
Brazil .................................. 9,168,974 1.9
Hong Kong ............................... 7,577,671 1.6
Indonesia ............................... 6,562,982 1.4
Korea, Republic of (South) .............. 4,140,259 0.9
Austria ................................. 4,011,083 0.8
China ................................... 3,442,500 0.7
Chile ................................... 3,090,935 0.6
India ................................... 2,150,000 0.5
Malaysia ................................ 2,005,823 0.4
Greece .................................. 1,161,592 0.2
------------- -----
Total.................................. $ 481,017,994 100.0%
============= =====
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Principal Market Value
Amount/1/ (Note 1)
--------- ------------
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS - 17.8%
GOVERNMENT AGENCY - 15.3%
FHLMC/FNMA/SPONSORED - 1.8%
Federal Home Loan Mortgage Corp.,
Gtd. Multiclass Mtg. Participation
Certificates, Series 178. Cl. F, 8.95%,
3/15/20........................................ $ 21,257 $ 21,377
Federal National Mortgage Assn.:
7.50%, 8/1/25................................... 1,094,148 1,080,209
Collateralized Mtg. Obligations, Gtd.
Real Estate Mtg. Investment Conduit
Pass-Through Certificates, 10.50%,
11/25/20....................................... 130,000 145,518
Series 1994-83, Cl. Z, 7.50%, 6/25/24........... 185,806 168,503
-----------
1,415,607
-----------
GNMA/GUARANTEED - 13.5%
Government National Mortgage Assn.
6%, 11/20/25.................................... 729,856 733,053
7.50%, 8/15/25.................................. 4,946,650 4,883,828
8%, 11/15/25-5/15/26............................ 4,946,550 4,996,016
-----------
10,612,897
-----------
PRIVATE - 2.5%
Commercial - 1.6%
FDIC Trust, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, Series 193-4C1, CA,2-G
8.70%, 8/25/25 /(2)/........................... 153,594 155,130
Merill Lynch Mortgage Investors, Inc.,
Mtg. Pass-Through Certificates, Series
1995-C2 Cl. D, 8.266%, 6/15/21 /(3)/............ 482,223 482,751
Morgan Stanley Capital I, Inc.
Commercial Mtg. Pass-Through
Certificates, Series 1996-C1,Cl. F,
7.51%, 2/1/28 /(2)//(3)/........................ 162,744 104,055
Resolution Trust Corp., Commercial Mtg.
Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%,
12/25/20........................................ 124,762 125,308
Series 1993-C1, Cl, D, 9.45%, 5/25/24............ 91,000 93,588
Series 1994-C2, E. 8%, 4/25/25................... 228,725 218,163
Structured Asset Securities Corp.,
Multiclass Pass-Through Certificates
Series 1995-C4, Cl. E, 8.663%,
6/25/28 /(2)//(3)/.............................. 46,290 37,625
-----------
1,216,640
-----------
MULTI-FAMILY - 0.1%
DIJ Mortgage Acceptance Corp.,
Benes 1996-CF1, Cl. B3, 8.268%,
3/13/28 /(2)/.................................. 100,000 78,719
Resolution Trust Corp., Commercial
Mtg. Pass-Through Certificates, /(2)/ Series
1991-M6, Cl. B4, 7.145%, 8/25/21............... 37,075 35,731
-----------
114,450
-----------
RESIDENTIAL -0.8%
Mortgage Capital Funding, Inc.
Multifamily Mortgage Pass-Through
Certificates, Series 1996-MC1, Cl. G,
7.15%, 6/15/06 /(2)//(4)/...................... 800,000 598,000
-----------
Total Mortgage-Backed Obligations
(Cost $13,909,362)............................. 13,957,594
-----------
U.S. GOVERNMENT OBLIGATIONS - 13.2%
U.S. Treasury Bonds:
11.625%, 11/15/02............................... 4,300,000 5,415,313
13.125%, 5/15/01................................ $ 2,800,000 $ 3,567,373
6.875%, 6/15/25................................. 1,200,000 1,187,624
8.125%, 8/15/19 /12/............................ 163,000 182,866
-----------
Total U.S. Government Obligations
(Cost $10,552,685).............................. 10,353,176
-----------
FOREIGN GOVERNMENT OBLIGATIONS - 26.3%
ARGENTINA - 0.2%
Banco Hipolecarto Nacional (Argentina)
Medium-Term Nts., 10.625%,
3/29/99 /(2)/................................... 150,000 151,876
AUSTRALIA -- 3.8%
Australia (Commonwealth of) Bonds, 10%,
10/15/07 AUD.................................. 675,000 569,698
Queensland Treasury Corp.:
Exchangeable Gtd. Nts., 8%,
6/14/01 AUD................................... 803,000 450,652
Gtd. Nts., 8%, 5/14/03 AUD..................... 610,000 456,971
Treasury Corp. of Victoria Gtd. Bonds:
10.25%, 11/15/06 AUD........................... 665,000 561,164
12.50%, 10/15/03 AUD........................... 485,000 452,748
Western Australia Treasury Corp. Gtd. Bonds,
10%, 7/15/05 AUD............................... 450,000 372,439
-----------
2,873,672
-----------
BRAZIL - 1.5%
Banco Estado Mines Gerais, 8.25%,
2/10/00........................................ 250,000 228,750
Brazil (Federal Republic of):
Capitalization Bonds, 8%, 4/15/14................ 1,407,159 870,680
Nts., Banco Estado Mines Gerais,
7.875%, 2/10/99................................. 30,000 27,787
Petroquirnica do Nordeste Sr. Unsec.
Unsub. Nts., 9.50%, 10/19/01.................... 50,000 48,828
-----------
1,176,045
-----------
BULGARIA - 0.8%
Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer
Bonds, Trancne A 2%, 7/28/12 /(3)/............ 905,000 301,761
Interest Arrears Bonds, 6.25%,
7/28/11 /(3)/.................................. 720,000 342,000
-----------
643,761
-----------
CANADA - 2.2%
Canada (Government of) Bonds:
10.25%, 12/1/98 CAD............................ 830,000 662,179
9%, 12/1/04 CAD................................ 660,000 543,618
Series A33, 11.50%, 9/1/00 CAD................. 610,000 521,566
-----------
1,727,363
-----------
COSTA RICA - 0.3%
Central Bank of Costa Rica Interest
Claim Bonds, Series B, 6.328%,
5/21/05 /(3)/.................................. 282,123 242,464
-----------
CZECH REPUBLIC - 0.5%
CEZ AS, Zero Coupon Disc. Promissory
Nts., 10.766%, 7/1/86 /(5)/ CZK............... 10,000,000 363,238
-----------
ECUADOR - 0.3%
Ecuador (Republic of):
Disc. Bonds, 6.083%, 2/28/25 /(3)/............. 190,000 107,625
Interest Equalization Bearer Bonds,
6.625%, 12/21/04 /(3)/......................... 185,000 135,512
-----------
243,337
-----------
</TABLE>
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Strategic Bond Fund
STATEMENT OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Principal Market Value
Amount /(1)/ (Note 1)
------------- -------------
<S> <C> <C>
Foreign Government Obligations (Continued)
Finland - 1.3%
Finland (Republic of) Bonds, 10%
9/15/01 FIN............................... $ 4,000,000 $ 1,003,035
Germany - 0.9%
Germany (Republic of) Bonds:
7.75%, 10/1/04 DEM........................... 480,000 338,429
Series 66, 6% 6/20/16 DEM................... 100,000 56,004
Series 94, 7.50%, 11/11/04 DEM.............. 240,000 167,985
Landeskraditbank Baden-Wurttemberg
Gtd. Bonds, 6%, 1/25/06 DEM.................. 180,000 112,567
-----------
676,985
-----------
Great Britain - 2.2%
United Kingdom Treasury:
Bonds, 10%, 9/8/03 GBP....................... 500,000 875,227
Debs., 8.5% 12/7/05 GBP...................... 75,000 121,524
Nts., 10%, 2/26/01 GBP....................... 210,000 360,254
Nts., 12.50% 11/21/05 GVP.................... 158,000 309,561
Nts., 8% 6/10/03 GBP........................ 60,000 95,209
-----------
1,761,775
-----------
Italy - 1.6%
Italy (Republic of) Treasury Bonds, Buoni del
Tesoro Poliennali:
11.50%, 3/1/03 ITL......................... 445,000,000 325,008
10.50% 4/1/00 ITL......................... 490,000,000 338,280
10.50% 7/15/00 ITL......................... 530,000,000 366,932
10.50% 7/15/98 ITL......................... 380,000,000 257,605
-----------
1,287,825
-----------
Japan - 1.0%
Japan (Government of) Bonds, Series
31m 3.50%, 3/21/16 JPY...................... 12,800,000 112,127
-----------
Jordan - 1.0%
Hashemite Kingdom of Jordan:
Disc. Bonds, 6.625%, 12/23/23 /(3)/......... 500,000 351,250
Interest Arrears Bonds, 6.625%
12/23/05 /(3)/............................. 500,000 403,750
-----------
755,000
-----------
Mexico - 1.4%
Banco Nacional de Comercio Exterior
SNC International Finance BV Gtd.
Bonds, 10.758% 6/23/97 /(2)/ /(3)/......... 250,000 258,750
Bonos de la Tesoreria de la Federacion,
Zero Coupon, 37.786%, 3/8/97 /(5)/ MXP.... 4,200,000 450,102
United Mexican States:
Bonds, 10.37%, 1/29/03 DEM.................. 425,000 285,215
Petroleos Mexicanos Gtd. Unsec. Unsub.
Nts., 7.875%, 3/2/99 CAD.................. 200,000 144,074
-----------
1,138,141
-----------
New Zealand - 1.5%
New Zealand (Republic of) Bonds:
10%, 3/15/02 NZD........................... 780,000 558,060
10%, 7/15/97 NZD........................... 1,045,000 719,166
-----------
1,277,226
-----------
Panama - 0.4%
Panama (Republic of):
Debs., 6.629%, 5/10/02 /(3)/............... 230,770 216,924
Past Due Interest Debs., 12/29/49 /(6)/...... 125,000 76,602
-----------
293,526
-----------
Poland - 0.9%
Poland (Republic of) Treasury bills,
Zero Coupon:
21.464%, 10/16/96 /(5)/ PLZ................ 500,000 173,205
Foreign Government Obligations (Continued)
Poland (Continued)
21.641%, 10/2/96 /(5)/ PLZ................ 720,000 251,334
21.463%, 8/12/96 /(5)/ PLZ................ 800,000 287,394
-----------
Spain - 1.7%................................... 711,933
-----------
Spain (Kingdom of):
Bonds, Bonos y Obligacion del Estado,
10.15%, 1/31/06 ESP........................ 114,000,000 959,236
Bonds, Bonos y Obligacion del Estado,
10.90%, 8/30/03 ESP........................ 26,600,000 231,995
Gld. Bonds, Bonos y Obligacion del
Estado, 11.45%, 08/30/98 ESP............... 22,000,000 181,124
-----------
1,372,355
-----------
Supernational - 0.7%
European Bank for Reconstruction &
Development Sr. Unsec. Medium-Term
Nts., 10%, 12/20/96 CZK.................... 10,000,000 357,940
International Bank for Reconstruction
& Development Bonds, 12.50%
7/25/97 NZD................................ 325,000 229,061
-----------
587,001
-----------
Sweden - 2.45
Sweden (Kingdom of) Bonds:
Series 1030, 13%, 6/15/01 SEK............. 5,500,000 1,013,511
Series 1033, 10.25%, 5/5/03 SEK........... 3,500,000 591,107
Series 1035, 6%, 2/9/06 SEK................ 2,100,000 274,332
-----------
1,878,950
-----------
Venezuela - 0.5%
Venezuela (Republic of):
Disc. Bonds, Series DL, 6.625%
12/18/07 /(3)/............................ 500,000 353,750
Front-Loaded Interest Reduction Bonds,
Series A, 6.375%, 3/31/07 /(3)/........... 100,000 72,375
-----------
426,125
-----------
Total Foreign Government Obligations
(Cost $20,411,350)........................ 20,703,759
-----------
Loan Participations - 2.8%
Algeria (Republic of) Reprofiled Debt
Loan Participation, Tranche A, 6.812%
9/4/06 /(3)//(6)/.......................... 1,300,000 775,937
Columbia (Republic of) 1989-1990
Integrated Loan Facility Bonds, 6.563%
7/1/01 /(3)//(6)/.......................... 235,740 219,627
Jamaica (Government of) 1990 Refinancing
Agreement Nts.:
Tranche A, 6.344%, 10/16/00 /(3)/ /(6)/...... 75,000 71,612
Tranche B, 6.312%, 11/15/04 /(3)/ /(6)/...... 160,000 117,375
Morocco (Kingdom of) Loan Participation
Agreement:
Tranche A, 6.437%, 1/1/09 /(3)/.............. 530,000 381,766
Tranche B, 6.437%, 1/1/04 /(3)/.............. 47,058 37,765
Pulsar International SA de CV, 11.80%
Nts., 9/19/96 /(6)/........................ 250,000 251,250
Trinidad & Tobago Loan Participation
Agreement, Tranche A, 1.772%
9/30/00 /(3)/ /(6)/ JPY................... 35,999,998 280,631
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A,
6.563%, 9/20/97 /(3)/ /(6)/................ 85,760 71,610
-----------
Total Loan Participations
(Cost $2,173,204).......................... 2,207,973
-----------
</TABLE>
<PAGE>
Oppenheimer Variable Account Funds -- Oppenheimer Strategic Bond Fund
STATEMENT OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Principal Market Value
Amount/(1)/ (Note 1)
---------- ------------
<S> <C> <C>
Corporate Bonds and Notes--28.9%
Basic Industry--2.4%
Chemicals--0.5%
NL Industries, Inc.:
0%/13% Sr. Sec. Disc. Nts.,
10/15/05/(7)/............................. $ 200,000 $ 157,000
11.75% Sr. Sec. Nts., 10/15/03............. 100,000 102,500
Texas Petrochemicals Corp., 11.125% Sr.
Sub. Nts., 7/1/06/(2)(4)/................. 100,000 102,031
----------
361,531
----------
Metals/Mining--0.0%
UCAR Global Enterprises, Inc., 12% Sr.
Sub. Nts., 1/15/05........................ 10,000 11,400
Paper--1.4%
Domiar, Inc., 11.25% Debs., 9/15/17........ 100,000 106,750
Florida Coast Paper Co. LLC/Florida
Coast Paper Finance Corp., 12.75%
First Mtg. Nts., 6/1/03/(2)/.............. 130,000 135,200
Indah Kiat International Finance Co.
BV, 12.50% Sr. Sec. Gtd. Nts., Series C,
6/15/06................................... 250,000 266,875
Riverwood International Corp., 10.25%
Sr. Nts., 4/1/06.......................... 400,000 399,000
Stone Container Corp., 10.75% First
Mtg. Nts., 10/1/02........................ 190,000 192,650
----------
1,100,675
----------
Steel--0.5%
Jorgensen (Earle M.) Co., 10.75% Sr.
Nts., 3/1/00.............................. 50,000 49,500
Republic Engineered Steels, Inc., 9.875%
First Mtg. Nts., 12/15/01................. 250,000 234,375
Wheel-Pittsburgh Corp., 9.375% Sr.
Nts., 11/15/03............................ 150,000 139,875
----------
423,750
----------
Consumer Related--6.1%
Consumer Products-1.0%
Coleman Holdings, Inc., Zero Coupon
Sr. Sec. Disc. Nts., Series B, 12.575%
5/27/98/(5)/.............................. 50,000 42,125
Harman International Industries, Inc.,
12% Sr. Sub. Nts., 8/1/02................. 150,000 164,250
International Semi-Tech
Microelectronics, Inc., 0%/11.50% Sr.
Sec. Disc. Nts., 8/15/03/(7)/............. 400,000 238,000
TAG Heuer International SA, 12% Sr.
Sub. Nts., 12/15/05/(2)/.................. 200,000 209,500
Williams (J.B.) Holdings, Inc., 12% Sr.
Nts., 3/1/04.............................. 100,000 98,750
----------
752,625
----------
Food/Beverages/Tobacco--0.8%
Dr. Pepper Bottling Holdings, Inc.,
0%/11.625% Sr. Disc. Nts., 2/15/03/(7)/.. 200,000 167,000
Unilever CR spol. s.r.o., guaranteed by
Unilever NV, Rotterdam, The
Netherlands, Zero Coupon Promissory
Nts., 11.184%, 10/11/96/(5)/CZK.......... 14,000,000 493,278
----------
660,278
----------
Healthcare--0.9%
Capstone Capital Corp., 10.50% Cv. Sub.
Debs., 4/1/02............................. 200,000 255,000
Icon Health & Fitness, Inc., 13% Sr.
Sub. Nts., 7/15/02........................ 200,000 223,000
Total Renal Care, Inc., 0%/12% Sr. Sub.
Disc. Nts., 6/15/04/(7)/.................. 205,500 200,900
----------
678,900
----------
Hotel/Gaming--2.1%
Grand Casinos, Inc., 10.125% Gtd. First
Mtg. Nts., 12/1/03........................ 250,000 258,750
HMC Acquisition Properties, Inc. 9%
Sr. Nts., 12/15/07........................ 150,000 138,375
Majestic Star Casino LLC (The),
12.75% Sr. Sec. Nts., 5/15/03/(2)/........ 100,000 108,500
Mohegan Tribal Gaming Authority,
13.50% Sr. Sec. Nts., 11/15/02/(2)/....... 100,000 126,000
Players International, Inc. 10.875% Sr.
Nts., 4/15/05............................. 150,000 152,625
Showboat Marina Casino
Partnership/Showboat Marina Finance
Corp., 13.50% First Mtg. Nts.,
3/15/03/(2)/.............................. 150,000 162,000
Station Casinos, Inc., 9.625% Sr. Sub.
Nts., 6/1/03.............................. 100,000 98,500
Trump Atlantic City Associates/Trump
Atlantic City Funding, Inc., 11.25%
First Mtg. Nts., 5/1/06................... 600,000 606,000
----------
1,650,750
----------
Restaurants--0.6%
Carrols Corp., 11.50% Sr. Nts., 8/15/03.... 100,000 102,000
Foodmaker Inc.:
9.25% Sr. Nts., 3/1/99..................... 100,000 98,750
9.75% Sr. Sub. Nts., 6/1/02................ 300,000 289,500
----------
490,250
----------
Textile/Apparel--0.7%
Clark-Schwebel, Inc., 10.50% Sr. Nts.,
4/15/06/(2)/.............................. 100,000 102,500
PT Polysindo Eka Perkasa, Zero Coupon
Promissory Nts.:
17.90%, 10/23/96/(5)/ IDR.................. 300,000,000 121,455
19.348%, 4/29/97/(5)/ IDR.................. 560,000,000 205,339
Synthetic Industries, Inc., 12.75% Sr.
Sub. Debs., 12/1/02....................... 100,000 106,250
----------
535,544
----------
Energy--1.9%
Chesapeake Energy Corp., 10.50% Sr.
Nts., 6/1/02.............................. 150,000 157,500
Falcon Drilling, Inc., 8.875% Sr. Nts.,
Series B, 3/15/03......................... 200,000 193,250
Mesa Operating Co., 10.625% Gtd. Sr.
Sub. Nts., 7/1/06/(4)/.................... 250,000 253,906
Petroleum Heat & Power Co., Inc.:
12.25% Sub. Debs., 2/1/05.................. 64,000 70,720
9.375% Sub. Debs., 2/1/06.................. 200,000 189,000
Plains Resources, Inc., 10.25% Sr. Sub.
Nts., 3/15/06/(2)/........................ 200,000 200,000
Triton Energy Corp., Zero Coupon Sr.
Sub. Disc. Nts., 10.493%, 11/1/97/(5)/.... 100,000 90,500
United Meridian Corp., 10.375% Sr. Sub.
Nts., 10/15/05............................ 200,000 205,750
Vintage Petroleum, Inc., 9% Sr. Sub.
Nts., 12/15/05............................ 100,000 94,500
----------
1,455,126
----------
</TABLE>
<PAGE>
Oppenheimer Variable Account funds - Oppenheimer Stategic Bond Fund
STATEMENT OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Principal Market Value
Amount/1/ (Note 1)
--------- ------------
<S> <C> <C>
Corporate Bonds and Notes (Continued)
Financial Services - 3.0%
Banks & Thrifts - 2.0%
Banco Bamerindus do Brasil SA:
10.50% Debs., 6/23/97........................ $ 100,000 $ 96,750
11% Sr. Unsub. Unsec. Bonds, 10/6/97......... 100,000 96,750
Banco Ganadero SA, Zero Coupon Nts.,
9.931%, 7/1/96 /(2)//(5)/................... 100,000 100,000
Banco Mexicano SA, 8% Sr. Unsub.
Unsec. Exchangeble Medium-Term Nts.,
11/4/98..................................... 200,000 190,000
First Nationwide (Parent) Holdings, Inc.,
12.50% Sr. Nts., 4/15/03.................... 200,000 209,500
PT Hutama Karya, Zero Coupon
Medium-Term Nts., 17.514%,
3/19/97 IDR................................. 400,000,000 152,578
PT Inti Indoryan Utama, Zero Coupon
Promissory Nts., 22.098%
2/12/97 /5/ IDR............................. 1,400,000,000 543,688
Transpower Finance Ltd., 8% Gtd. Unsec
Unsub. Bonds:
2/15/01 /6/ NZD............................. 125,000 80,952
3/15/02 NZD................................. 125,000 81,007
----------
1,551,225
----------
Diversified Financial - 0.9%
Banco del Atlantico SA, 7.875%
Eurobonds. 11/5/98.......................... 320,000 301,200
GPA Delaware, Inc., 8.75% Gld. Nts.,
12/15/98.................................... 300,000 300,000
Olympic Financial Ltd., 13% Sr. Nts.,
5/1/00...................................... 100,000 108,000
----------
709,200
----------
Insurance - 0.1%
Terra Nova Insurance (UK) Holdings
PLC 10.75% Sr. Nts., 7/1/05................. 100,000 111,500
----------
Housing Related - 0.5%
Building Materials - 0.1%
Pacific Lumber Co., 10.50% Sr. Nts.,
3/1/03...................................... 100,000 97,750
----------
Homebuilders/Real Estate - 0.4%
Saul (B.F.) Real Estate Investment
Trust, 11.625% Sr. Sec. Nts., Series B.
4/1/02...................................... 100,000 103,000
Tribasa Toll Road Trust, 10.5% Nts.,
Series 1993-A, 12/1/11 /(2)/................ 250,000 190,000
----------
293,000
----------
Manufacturing - 0.8%
Aerospace/Electronics/Computers - 0.5%
Communications & Power Industries,
Inc., 12% Sr. Sub. Nts., 8/1/05............. 200,000 212,500
Rohr, Inc., 11.625% Sr. Nts., 5/15/03........ 100,000 110,500
Unisys Corp., 15% Credit Sensitive Nts.,
7/1/97 /3/.................................. 50,000 53,375
----------
376,375
----------
Automotive - 0.3%
Foamex LP/Foamex Capital Corp.,
11.25% Sr. Nts., 10/1/02.................... 100,000 103,500
Penda Corp., 10.75% Sr. Nts., Series B,
3/1/04...................................... 150,000 140,250
----------
243,750
----------
Media - 5.6%
Broadcasting - 1.3%
Argie Television, Inc., 9.75% Sr. Sub.
Nts., 11/1/05............................... 100,000 94,250
New City Communications, Inc.,
11.375% Sr. Sub. Nts., 11/1/03.............. 50,000 55,250
Paxson Communications Corp., 11.625%
Sr. Sub. Nts., 10/1/02...................... 250,000 261,250
SFX Broadcasting, Inc., 10.75% Sr.
Sub. Nts., 5/15/06 /2/...................... 300,000 300,000
Sinclair Broadcast Group, Inc., 10% Sr.
Sub. Nts., 12/15/03......................... 100,000 96,500
Young Broadcasting, Inc., 9% Sr. Sub.
Nts., 1/15/06............................... 200,000 179,000
----------
986,250
----------
Cable Television - 3.1%
American Telecasting, Inc., 0%/14.50%
Sr. Disc. Nts., 6/15/04 /7/................. 322,737 225,916
Australis Media Ltd., Units (each unit
consists of $1,000 principal amount of
0%/14/% sr. sub. disc. nts., 5/15/03 and
one warrant to purchase 57.721
ordinary shares)/7//8/...................... 600,000 360,000
Bell Cablemedia PLC, 0%/11.95% Sr.
Disc. Nts., 7/15/04 /7/..................... 200,000 141,000
Cablevision Systems Corp., 10.75% Sr.
Sub. Debs., 4/1/04.......................... 100,000 103,500
Continental Cablevision, Inc., 11% Sr.
Sub. Debs., 6/1/07.......................... 300,000 339,955
EchoStar Communications Corp.,
0%/12.875% Sr. Disc. Nts., 6/1/04 /7/....... 200,000 146,000
Fundy Cable Ltd./Lte, 11% Sr. Sec.
Second Priority Nts., 11/15/05.............. 100,000 101,750
International CableTel, Inc., 0%/11.50%
Sr. Deferred Coupon Nts., Series A,
2/1/06 /7/.................................. 360,000 203,400
Marcus Cable Operating Co.
LP/Marcus Cable Capital Corp.,
0%/13.50% Sr. Sub. Gtd. Disc. Nts.,
Series II, 6/1/04 /7/....................... 200,000 144,000
Rogers Cablesystems Ltd., 10% Sr. Sec.
Second Priority Debs., 12/1/07.............. 300,000 293,250
TeleWest PLC, 0%/11% Sr. Disc. Debs,.
10/1/07 /7/................................. 200,000 119,000
United International Holdings, Inc. Zero
Coupon Sr. Sec. Disc. Nts., 12.544%,
11/15/99 /5/................................ 200,000 132,000
Videotron Holdings PLC, 0%/11% Sr.
Disc. Nts., 8/15/05 /7/..................... 150,000 98,250
----------
2,408,021
----------
Diversified Media - 1.0%
Ackerley Communications, Inc., 10.75% Sr.
Sec. Nts., Series A, 10/1/03................. 200,000 208,250
Lamar Advertising Co., 11% Sr. Sec.
Nts., 5/15/03............................... 150,000 154,125
Outdoor Systems, Inc., 10.75% Sr. Nts.,
8/15/03..................................... 100,000 104,000
Panamsat LP/Panamast Capital Corp.,
9.75% Sr. Sec. Nts., 8/1/00................. 150,000 156,000
Time Warner Entertainment LP/Time
Warner, Inc., 8.375% Sr. Debs., 3/15/23..... 200,000 194,726
----------
817,101
----------
</TABLE>
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Strategic Bond Fund
STATEMENT OF INVESTMENT (Continued)
June 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Principal Market Value
Amount/(1)/ (Note 1)
---------- ------------
<S> <C> <C>
Corporate Bonds and Notes (Continued)
Media (Continued)
Entertainment/Film -- 0.2%
Imax Corp. 7% Sr. Nts., 3/1/01 /(9)/............. $ 200,000 $ 196,000
------------
Other - 0.4%
Conglomerates - 0.3%
MacAndrews & Forbes Holdings, Inc.
13% Sub. Debs., 3/1/99.......................... 175,000 172,594
Talley Industries. Inc., 0% 12.25% Sr.
Disc. Debs., 10/15/05 /(7)/....................... 86,000 68,800
------------
241,394
------------
Services - 0.1%
Borg-Warner Security Corp., 9.125% Sr.
Sub. Nts. 5/1/03............................... 100,000 93,750
------------
Retail - 0.8%
Specialty Retailing - 0.2%
Eye Care Centers of America. Inc., 12%
Sr. Nts., 10/1/03.............................. 70,000 72,450
Finlay Fine Jewelry Corp., 10.625% Sr.
Nts., 5/1/03................................... 100,000 100,500
------------
172,950
------------
Supermarkets - 0.6%
Grand Union Co., 12% Sr. Nts., 9/1/04........... 200,000 187,750
Purity Supreme, Inc., 11.75% Sr. Sec.
Nts., Series B, 8/1/99......................... 100,000 108,125
Ralph's Grocery Co., 10.45% Sr. Nts.,
6/15/04 /(2)/................................. 200,000 192,500
------------
488,375
------------
Transportation - 0.6%
Air Transportation - 0.4%
American International Group, Inc.
11.70% Unsec. Unsub. Bonds, 12/4/01 ITL 90,000,000 65,756
Atlas Air, Inc., 12.25% Pass-Through
Certificates, 12/1/02.......................... 250,000 273,125
------------
338,881
------------
Railroads - 0.2%
Transtar Holdings LP/Transtar Capital
Corp., 0% 13.375% Sr. Disc. Nts.,
Series B, 12/15/03 /(7)/....................... 200,000 138,000
------------
Utilities - 6.8%
Electric Utilities - 1.0%
Beaver Valley II Funding Corp., 9%
Second Lease Obligation Bonds, 6/1/17.......... 199,000 161,688
El Paso Electric Co., 9.40% First Mtg.
Bonds, Series E, 5/1/11........................ 250,000 249,375
First PV Funding Corp., 10.30% Lease
Obligation Bonds, Series 1866A, 1/15/14........ 200,000 210,500
New Zealand Electric Corp., 10% Debs.,
10/15/01 NZD................................. 250,000 175,739
------------
797,302
------------
Telecommunications - 5.8%
A+ Network, Inc., 11.875% Sr. Sub. Nts.,
11/1/05........................................ 200,000 208,000
American Communications Services, Inc.,
0% 12.75% Sr. Disc. Nts., 4/1/06 /(7)/......... 300,000 157,500
Arch Communications Group, Inc.,
0%10.875% Sr. Disc. Nts., 3/15/08 /(7)/........ 200,000 104,000
Call-Net Enterprises, Inc., 0%/13.25% Sr.
Disc. Nts., 12/1/04 /(7)/...................... 200,000 148,500
Celcaribe SA 0%/13.50% Sr. Sec. Nts.,
3/15/04 /(7)/................................. 150,000 123,375
</TABLE>
<TABLE>
<CAPTION>
Principal Market Value
Amount/(1)/ (Note 1)
---------- ------------
<S> <C> <C>
Corporate Bonds and Notes (Continued)
Utilities (Continued)
Telecommunications (Continued)
Cellular Communications International,
Inc. Zero Coupon Sr. Disc. Nts.,
22.83%, 8/15/00 /(5)/.......................... $ 550,000 $ 343,750
Cellular, Inc., 0%/11.75% Sr. Sub. Disc.,
Nts., 9/1/13 /(7)/............................. 50,000 39,250
Communicacion Celular SA, 0%/13.125%
Sr. Deferred Coupon Bonds,
11/15/03 /(7)/................................. 200,000 129,000
Geotek Communications, Inc.,
0%/15% Sr. Sec. Disc. Nts., 7/15/05 /(7)/....... 250,000 159,375
12% Cv. Sr. Sub. Nts., 2/15/01.................. 250,000 350,000
GST Telecommunications, Inc.,
0%/13.875 Cv. Sr. Sub. Disc. Nts.,
12/15/05 /(2)//(7)/............................ 25,000 24,761
GST USA, Inc., 0%/13.875% Bonds,
12/15/05 /(7)/................................. 200,000 116,000
Horizon Cellular Telephone LP/Horizon
Finance Corp., 0%/11.375% Sr. Sub.
Disc. Nts., 10/1/00 /(7)/...................... 250,000 235,625
Hyperlon Telecommunications, Inc., Units
(each unit consists of $1,000 principal
amount of 0%/13% sr. disc. nts., 4/15/03
and one warrant to purchase 1.8645
shares of common stock)/(2)//(7)//(6)/......... 300,000 169,500
In-Flight Phone Corp., 0%/14% Sr. Disc.
Nts., 5/15/02 /(7)/............................ 200,000 71,500
IntelCom Group (USA), Inc.,
0%/12.50% gtd. Sr. Disc. Nts.,
5/1/06 /(2)//(7)/.............................. 370,000 202,575
0%/13.50% Sr. Disc. Nts.,9/15/05 /(7)/.......... 250,000 150,625
InterCel, Inc., 0%/12% Sr. Disc. Nts.,
5/1/06 /(7)/................................... 300,000 165,000
MFS Communications Co., Inc.,
0%/8.875% Sr. Disc. Nts., 1/15/06 /(7)/......... 550,000 334,125
0%/9.375% Sr. Disc. Nts., 1/15/04 /(7)/......... 200,000 152,000
NEXTLINK Communications
LLC/NEXTLINK Capital, Inc., 12.50%
Sr. Nts., 4/15/06 /(2)/........................ 200,000 200,000
Occidente y Caribe Celular SA, Units
(each unit consists of $1,000 principal
amount of 0%/14% sr. disc. nts.,
3/15/04 and one warrant to purchase
5.709 ordinary shares)/(2)//(7)//(8)/.......... 200,000 103,500
Petersburg Long Distance, Inc., Units
(each unit consists of $1,000 principal
amount of 0%/14% sr. disc. nts.,
6/1/04 and one warrant to purchase 34
ordinary shares)/(2)//(7)//(8)/................ 300,000 237,000
PriCellular Wireless Corp., 0%/14% Sr.
Sub. Disc. Nts., 11/15/01 /(7)/................ 300,000 273,000
Teleport Communications Group, Inc.,
0%/11.125% Sr. Disc. Nts., 7/1/07 /(4)//(7)/... 300,000 174,750
USA Mobile Communications, Inc. II,
14% Sr. Nts., 11/1/04.......................... 150,000 173,250
------------
4,545,981
------------
Total Corporate Bonds and Notes
(Cost $22,332,402).............................. 22,727,634
------------
</TABLE>
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Strategic Bond Fund
STATEMENT OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
------ ------------
<S> <C> <C>
Common Stocks - 0.8%
Celcaribe SA /2/ /10/........................ 24,390 $ 41,463
EchoStar Communications Corp., Cl. A /(10)/.. 1,750 49,438
El Paso Electric Co. /10/.................... 4,954 29,724
Gillett Holdings, Inc. /6/ /10/.............. 15,000 450,000
GST Telecommunications, Inc. /10/............ 2,800 36,750
IntelCom Group, Inc. /10/.................... 1,400 35,000
United International Holdings, Inc., CL
A /(10)/.................................... 1,000 13,750
------------
Total Common Stocks
(Cost $485,351) 656,125
------------
Preferred Stocks - 2.3%
BankAmerica Corp., 8.375%, Series K.......... 7,000 178,500
Cablevision Systems Corp., 8.50% Cum. Cv.,
Series I.................................... 6,000 156,000
California Federal Bank, 10.625% Non-Cum.,
Series B.................................... 2,000 219,000
Earthwatch, Inc., 12% Cv. Sr. Preferred
Stock, Series C /2/ /11/.................... 10,000 103,500
El Paso Electric Co., 11.40% Series A
Preferred Stock /10/ /11/................... 1,000 105,000
First Nationwide Bank, 11.50% Non-Cum........ 2,000 219,000
Glendale Federal Bank, F.S.B., 8.75%
Non-Cum. Cv., Series E...................... 1,000 48,000
Kelly Oil & Gas Corp., $2.625 Cv. ........... 1,000 22,250
Prime Retail, Inc., $19.00 Cv., Series B..... 6,000 108,000
SDW Holdings Corp., 15% Cum. Sr.
Exchangeable Preferred Stock /2/ /10/....... 3,750 118,125
Time Warner, Inc., 10.25% Cum., Series K,
Exchangeable Preferred Stock /2/ /11/....... 250 245,000
Walden Residential Properties, Inc., 9.16%
Cv., Series A............................... 10,000 247,500
------------
Total Preferred Stocks
(Cost $1,737,693)........................... 1,769,875
------------
<CAPTION>
Units
-----
<S> <C> <C>
Rights, Warrants and Certificates - 0.1%
American Telecasting, Inc., Wts., Exp. 6/99.. 1,500 9,000
Cellular Communications International,
Inc. Wts., Exp. 8/03........................ 300 4,500
Communication Cellular SA Wts., Exp.
11/03 /2/................................... 200 1,000
Eye Care Centers of America, Inc. Wts.,
Exp. 10/03 /2/.............................. 70 350
Geotek Communications, Inc. Wts., Exp.
7/05 /2/.................................... 7,500 52,500
Icon Health & Fitness, Inc. Wts., Exp.
11/99 /2/................................... 200 5,000
In-Flight Phone Corp. Wts., Exp. 8/02 /2/.... 200 -
IntelCom Group, Inc. Wts., Exp. 9/05 /2/..... 825 15,881
SDW Holdings Corp., Cl. B Wts., Exp.
12/06 /2/................................... 375 4,875
Terex Corp. Rts., Exp. 7/96 /2/.............. 36 2
United International Securities Ltd. Wts.,
Exp. 11/99.................................. 200 5,800
------------
Total Rights, Warrants and Certificates
(Cost $11,014).............................. 98,908
------------
<CAPTION>
Principal Market Value
Amount /1/ (Note 1)
------ ------------
<S> <C> <C>
Structured Instruments - 2.1%
Bayerische Landesbank Girozentrale,
New York Branch, 14% CD Linked NTS.,
12/17/96 (indexed to the cross
currency rates of Greek Drachma and
European Currency Unit).................... $ 650,000 $ 651,040
Bayerische Landesbank Girozentrale,
New York Branch, 5.60% CD Linked
Nts., 1/30/97 (indexed to the closing
Nikkei 225 Index on 1/23/97, 10 yr.
Japanese Yen swap rate and New
Zealand Dollar on 1/28/97) NZD............ 60,340 44,788
Canadian Imperial Bank of Commerce,
New York Branch, 14% CD Linked Nts.,
11/25/96 (indexed to the cross
currency rates of Greek Drachma and
European Currency Unit).................... 150,000 147,195
Goldman, Sachs & Co., Argentina Local
Market Securities Trust, 11.30%,
4/1/00 (representing debt of Argentina
(Republic of) Bonos del Tesoro Bonds,
Series 10, 5.469%, 4/1/00 and an
interest rate swap between Goldman
Sachs and the Trust) /6/................... 208,695 193,565
Swiss Bank Corp., New York Branch,
6.60% CD Linked Nts., 1/30/97
(indexed to the closing Nikkei 225
Index On 1/23/97) NZD..................... 362,428 273,240
United Mexican States Linked Nts.
(indexed to the greater of Cetes Option
Amount or USD LIBOR Option
Amount, 11/27/96) /2/...................... 300,000 348,000
------------
Total Structured Instruments
(Cost $1,588,826).......................... 1,657,828
------------
Repurchase Agreement - 5.7%
Repurchase agreement with First Chicago
Capital Markets, 5.45%, dated 6/28/96, to
be repurchased at $4,502,044 on 7/1/96,
collateralized by U.S. Treasury Bonds,
6.25%-11.25%, 2/15/07-8/15/23, with a
value of $3,016,773, and U.S. Treasury
Nts., 4.75%-7.875%, 9/30/97-2/15/05,
with a value of $1,574,324 (Cost
$4,500,000)................................ 4,500,000 4,500,000
------------
Total Investments at Value
(Cost $177,701,887)........................ 100.0% 78,632,872
------ ------------
Liabilities in Excess of Other Assets....... (0.0) (6,707)
----- ------------
Net Assets.................................. 100.0% $ 78,626,165
====== ============
</TABLE>
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Strategic Bond Fund
STATEMENT OF INVESTMENTS (Continued)
June 30, 1996
(Unaudited)
/(1)/ Principal amount is reported in U.S. Dollars, except for those denoted in
the following currencies:
AUD - Australian Dollar IDR - Indonesian Rupiah
CAD - Canadian Dollar ITL - Italian Lira
CZK - Czech Koruna JPY - Japanese Yen
DEM - German Deutsche Mark MXP - Mexican Peso
ESP - Spanish Paseta NZD - New Zealand dollar
FIM - Finnish Markka PLZ - Polish Zloty
GBP - British Pound Sterling SEK - Swedish Krona
/(2)/ Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the Board
of Trustees. These securities amount to $5,185,437 or 6.60% of the Fund's
net assets at June 30, 1996.
/(3)/ Represents the current interest rate for a variable rate security.
/(4)/ When-issued security to be delivered and settled after June 30, 1996.
/(5)/ For zero coupon bonds, the interest rate shown is the effective yield on
the date of purchase.
/(6)/ Identifies issues considered to be illiquid - See applicable note of Notes
to Financial Statements.
/(7)/ Denotes a step bond: a zero coupon bond that converts to a fixed rate of
interest at a designated future date.
/(8)/ 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.
/(9)/ Represents the current interest rate for an increasing rate security.
/(10)/ Non-income producing security.
/(11)/ Interest or dividend is paid in kind.
/(12)/ A sufficient amount of liquid assets has been designated to cover
outstanding written call options, as follows:
<TABLE>
<CAPTION>
Contracts/
Principal
Subject Expiration Exercise Premium Market Value
to Call Date Price Received (Note 1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Call option on Czech Koruna 1,200,000 9/6/96 28.357/CZK/ $ 16,080 $ 29,556
Call option on Mexican Peso 630,000 8/5/96 8.03/MXP/ 16,947 22,425
Call option on Morocco (Kingdom of) Loan
Participation Agreement, Tranche A
6.437%, 1/1/09 150,000 7/12/96 $71.25 1,425 1,845
-------- --------
$ 34,452 $53,826
-------- --------
</TABLE>
/(13)/ Securities with an aggregate market value of $182,866 are held in
collateralized accounts to cover initial margin requirements on open
futures sales contracts. See applicable note of Notes to Financial
Statements.
See accompanying Notes to Financial Statements.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Capital Appreciation Fund
Notes to Financial Statements
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Capital Appreciation Fund (the Fund), is a separate series of
Oppenheimer Variable Account Funds (the Trust), a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to achieve capital
appreciation by investing in "growth-type" companies.
The Trust's investment advisor is OppenheimerFunds, Inc. (the Manager). The
following is a summary of significant accounting policies consistently
followed by the Fund.
A. Investment 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 asked price 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 Trustees. Such
securities which cannot be valued by the 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 Trustees 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.
B. 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.
C. Federal Taxes.
The Trust intends for each Fund 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.
Therefore, no federal income or excise tax provision is required.
D. Distributions to Shareholders.
Dividends and distributions to shareholders are recorded on the ex-
dividend date.
E. 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 the distributions
made during the year from net investment income or net realized gains may
differ from their 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 year that the income
or realized gain (loss) was recorded by the Fund.
F. Other.
Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on 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.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Capital Appreciation Fund
Notes to Financial Statements (Continued)
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996 Year Ended December 31, 1995
--------------------------------------- ----------------------------------------
Shares Amount Shares Amount
----------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Sold 5,914,854 $217,106,599 8,882,212 $260,650,476
Dividends and distributions reinvested 643,582 22,422,394 40,594 1,082,642
Redeemed (3,357,155) (121,975,371) (6,567,729) (191,565,283)
----------------- -------------------- ----------------- --------------------
Net increase 3,201,281 $117,553,622 2,355,077 $70,167,835
================= ==================== ================= ====================
</TABLE>
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At June 30, 1996, net unrealized appreciation on investments of
$105,013,447, was composed of gross appreciation of $117,871,439, and gross
depreciation of $12,857,992.
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Trust. The annual fees are 0.75% of the first
$200 million of net assets, 0.72% of the next $200 million, 0.69% of the
next $200 million, 0.66% of the next $200 million and 0.60% of net assets in
excess of $800 million.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Global Securities Fund
Notes to Financial Statements
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Global Securities Fund (the Fund), is a separate series of
Oppenheimer Variable Account Funds (the Trust), a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek long-term
capital appreciation by investing a substantial portion of assets in
securities of foreign issuers, "growth-type" companies, cyclical industries
and special institutions which are considered to have appreciation
possibilities. The Trust's investment advisor is OppenheimerFunds, Inc. (the
Manager). The following is a summary of significant accounting policies
consistently followed by the Fund.
A. Investment 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 asked price 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 Trustees. Such
securities which cannot be valued by the 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 Trustees 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. Forward foreign currency exchange contracts
are valued based on the closing prices of the forward currency contract
rates in the London foreign exchange markets on a daily basis as provided
by a reliable bank or dealer.
B. Foreign Currency Translation.
The accounting records of the Fund are maintained in U.S. dollars. Prices
of securities purchased that are denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts
related to the purchase and sale of 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.
C. 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.
D. Federal Taxes.
The Trust intends for each Fund 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.
Therefore, no federal income or excise tax provision is required.
E. Distributions to Shareholders.
Dividends and distributions to shareholders are recorded on the ex-
dividend date.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Global Securities Fund
Notes to Financial Statements (Continued)
F. 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 the recognition
of certain foreign currency gains (losses) as ordinary income (loss) for
tax purposes. The character of the distributions made during the year
from net investment income or net realized gains may differ from their
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 year that the income or realized gain
(loss) was recorded by the Fund.
G. Other.
Investment transactions are accounted for on the date the investments are
purchased or sold (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 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 BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996 Year Ended December 31, 1995
--------------------------------------- ----------------------------------------
Shares Amount Shares Amount
----------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Sold 6,846,766 $107,662,261 11,235,722 $ 166,766,446
Dividends and distributions reinvested -- -- 585,961 8,174,158
Redeemed (1,283,788) (20,065,048) (7,497,205) (112,360,172)
----------------- -------------------- ----------------- --------------------
Net increase 5,562,978 $ 87,597,213 4,324,478 $ 62,580,432
</TABLE>
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At June 30, 1996, net unrealized appreciation on investments of $50,601,300
was composed of gross appreciation of $61,150,793, and gross depreciation of
$10,549,493.
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Trust. The annual fees are 0.75% of the first
$200 million of net assets, 0.72% of the next $200 million, 0.69% of the
next $200 million, 0.66% of the next $200 million and 0.60% of net assets in
excess of $800 million.
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a
commitment to purchase or sell a foreign currency at a future date, at a
negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency risks.
They may also be used to tactically shift portfolio currency risk. The Fund
generally enters into forward contracts as a hedge upon the purchase or sale
of a security denominated in a foreign currency. In addition, the Fund may
enter into such contracts as a hedge against changes in foreign currency
exchange rates on portfolio positions.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Global Securities Fund
Notes to Financial Statements (Continued)
Forward contracts are valued based on the closing prices of the forward
currency contract rates in the London foreign exchange markets on a daily
basis as provided by a reliable bank or dealer. The Fund will realize a gain
or loss upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure on outstanding
forward contracts are noted in the Statement of Investments where
applicable. Unrealized appreciation or depreciation on forward contracts is
reported in the Statement of Assets and Liabilities. Realized gains and
losses are reported with all other foreign currency gains and losses in the
Fund's Statement of Operations.
Risks include the potential inability of the counterparty to meet the terms
of the contract and unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
At June 30, 1996, the Fund had outstanding forward contracts to purchase and
sell foreign currencies as follows:
<TABLE>
<CAPTION>
Contract Amount Valuation as of Unrealized Unrealized
Contracts to Purchase Expiration Date (000's) June 30, 1996 Appreciation Depreciation
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Austrian Schilling (ATS) 7/8/96 10,939 ATS $ 1,021,486 $ 587 $ --
Indonesian Rupiah (IDR) 7/19/96 577,500 IDR 247,097 -- 14
Italian Lira (ITL) 7/4/96 641,785 ITL 418,477 -- 410
Japanese Yen (JPY) 7/1/96-7/3/96 120,146 JPY 1,095,678 -- 3,702
Norwegian Krone (NOK) 7/1/96-7/2/96 2,268 NOK 349,071 -- 399
South African Rand (ZAR) 7/1/96 15,406 ZAR 3,557,698 3,159 --
Swedish Krona (SEK) 7/1/96 3,726 SEK 561,597 -- 1,058
-------------- -------------- --------------
$ 7,251,104 3,746 5,583
-------------- -------------- --------------
Contracts to Sell
- -----------------
Argentine Peso (ARP) 7/1/96-7/2/96 267 ARP $ 267,003 -- 511
French Franc (FRF) 7/31/96 10,133 FRF 1,972,699 -- 15,563
German Deutsche Mark (DEM) 1/8/97 28,680 DEM 19,070,993 929,007 --
Japanese Yen (JPY) 9/30/96 1,475,100 JPY 13,646,090 12,244 --
Swiss Franc (CHF) 10/8/96 17,204 CHF 13,852,778 1,147,222 --
-------------- -------------- --------------
$ 48,809,563 2,088,473 16,074
-------------- -------------- --------------
Total Unrealized Appreciation and Depreciation $ 2,092,219 $ 21,657
-------------- --------------
</TABLE>
6. ILLIQUID AND RESTRICTED SECURITIES
At June 30, 1996, investments in securities included issues that are
illiquid or restricted. The 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 Trustees as reflecting fair value. A security may
also be considered illiquid if its valuation has not changed for a certain
period of time. The Fund intends to invest no more than 10% of its net
assets (determined at the time of purchase and reviewed from time to time)
in illiquid or restricted securities. The aggregate value of illiquid or
restricted securities subject to this 10% limitation at June 30, 1996 was
$1,108,624, which represents 0.23% of the Fund's net assets. Information
concerning these securities is as follows:
<TABLE>
<CAPTION>
Acquisition Cost Valuation Per Unit as of
Security Date Per Unit June 30, 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Plant Genetics Systems Common Stock 5/27/92-3/7/95 $13.77 $11.18
Plant Genetics Systems Wts., Exp. 12/99 3/7/95 $ 0.00 $ 1.87
</TABLE>
Pursuant to guidelines adopted by the Board of Trustees, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Strategic Bond Fund
Notes to Financial Statements
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Strategic Bond Fund (the Fund), is a separate series of
Oppenheimer Variable Account Funds (the Trust), a diversified, open-end
management investment company registered under the Investment Company Act
of 1940, as amended. The Fund's investment objective is to seek a high
level of current income principally derived from interest on debt
securities. The Trust's investment advisor is OppenheimerFunds, Inc. (the
Manager). The following is a summary of significant accounting policies
consistently followed by the Fund.
A. Investment 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 asked price 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 Trustees. Such securities which cannot be valued by the
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 Trustees 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. Forward foreign currency exchange contracts are
valued based on the closing prices of the forward 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 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 or asked price closest
to the last reported sale price is used.
B. Securities Purchased on a When-Issued Basis.
Delivery and payment for securities that have been purchased by the
Fund on a forward commitment or when-issued basis can take place a
month or more after the transaction date. During this period, such
securities do not earn interest, are subject to market fluctuation
and may increase or decrease in value prior to their delivery. The
Fund maintains, in a segregated account with its custodian, assets
with a market value equal to the amount of its purchase commitments.
The purchase of securities on a when-issued or forward commitment
basis may increase the volatility of the Fund's net asset value to
the extent the Fund makes such purchases while remaining
substantially fully invested. As of June 30, 1996, the Fund had
entered into outstanding when-issued or forward commitments of
$1,244,208.
In connection with its ability to purchase securities on a when-
issued or forward commitment basis, the Fund may enter into mortgage
"dollar-rolls" in which the Fund sells securities for delivery in the
current month and simultaneously contracts with the same counterparty
to repurchase similar (same type coupon and maturity) but not
identical securities on a specified future date. The Fund records
each dollar-roll as a sale and a new purchase transaction.
C. 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.
D. Foreign Currency Translation.
The accounting records of the Fund are maintained in U.S. dollars.
Prices of securities purchased that are denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing
on the respective dates of such transactions.
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Strategic Bond Fund
Notes to Financial Statements (Continued)
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.
E. 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.
F. Federal Taxes.
The Trust intends for each Fund 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. Therefore, no federal income or excise tax provision is
required.
G. Distributions to Shareholders.
Dividends and distributions to shareholders are recorded on the ex-
dividend date.
H. 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
the distributions made during the year from net investment income or
net realized gains may differ from their 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 year that the income or realized gain (loss) was
recorded by the Fund.
I. Other.
Investment transactions are accounted for on the date the investments
are purchased or sold (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
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 BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996 Year Ended December 31, 1995
--------------------------------------------- ------------------------------
Shares Amount Shares Amount
--------------------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Sold 5,018,279 $24,850,711 9,417,090 $ 44,897,472
Dividends and distributions reinvested 565,134 2,760,329 661,301 3,151,540
Redeemed (1,844,209) (9,111,130) (2,245,623) (10,642,846)
---------------------------------------------- ------------------------------
Net increase 3,739,204 $18,499,910 7,832,768 $ 37,406,166
---------------------------------------------- ------------------------------
</TABLE>
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Strategic Bond Fund
Notes to Financial Statements (Continued)
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At June 30, 1996, net unrealized appreciation on investments and options
written of $911,611 was composed of gross appreciation of $1,988,083, and
gross depreciation of $1,076,472.
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Trust. The annual fees are 0.75% of the first
$200 million of net assets, 0.72% of the next $200 million, 0.69% of the
next $200 million, 0.66% of the next $200 million, 0.60% of the next $200
million and 0.50% of net assets in excess of $1 billion. The Manager has
agreed to limit the management fee charged so that the ordinary operating
expenses of the Fund will not exceed 1.0% of its average net assets in any
fiscal year.
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a
commitment to purchase or sell a foreign currency at a future date, at a
negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency risks.
They may also be used to tactically shift portfolio currency risk. The Fund
generally enters into forward contracts as a hedge upon the purchase or
sale of a security denominated in a foreign currency. In addition, the Fund
may enter into such contracts as a hedge against changes in foreign
currency exchange rates on portfolio positions.
Forward contracts are valued based on the closing prices of the forward
currency contract rates in the London foreign exchange markets on a daily
basis as provided by a reliable bank or dealer. The Fund will realize a
gain or loss upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure on outstanding
forward contracts are noted in the Statement of Investments where
applicable. Unrealized appreciation or depreciation on forward contracts is
reported in the Statement of Assets and Liabilities. Realized gains and
losses are reported with all other foreign currency gains and losses in the
Fund's Statement of Operations.
Risks include the potential inability of the counterparty to meet the terms
of the contract and unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
At June 30, 1996, the Fund had outstanding forward contracts to purchase
and sell foreign currencies as follows:
<TABLE>
<CAPTION>
Contract Amount Valuation as of
Contracts to Purchase Expiration Date (000's) June 30, 1996
- ---------------------------------------------- --------------- --------- -------------
<S> <C> <C> <C> <C>
Japanese Yen (JPY) 7/5/96 12,467 JPY $ 113,774
------------
Contracts to Sell
- -----------------
Australian Dollar (AUD) 7/3/96 22 AUD $ 17,022
Finnish Markka (FIM) 8/4/96 4,679 FIM 1,012,159
Japanese Yen (JPY) 9/5/96-12/18/96 45,175 JPY 421,276
Swiss Franc (CHF) 7/8/96-8/28/96 3,316 CHF 2,656,791
------------
$ 4,107,248
------------
</TABLE>
<TABLE>
<CAPTION>
Unrealized Unrealized
Contracts to Purchase Appreciation Depreciation
- ---------------------------------------------- ------------ ------------
<S> <C> <C>
Japanese Yen (JPY) -- $ 1,713
------------ ------------
Contracts to Sell
- -----------------
Australian Dollar (AUD) -- 36
Finnish Markka (FIM) -- 12,146
Japanese Yen (JPY) 34,104 --
Swiss Franc (CHF) -- 22,191
------------ ------------
34,104 34,373
------------ ------------
Total Unrealized Appreciation and Depreciation $ 34,104 $ 36,086
============ ============
</TABLE>
<PAGE>
Oppenheimer Variable Account Funds - Oppenheimer Strategic Bond Fund
Notes to Financial Statements (Continued)
6. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or 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 in an amount (initial margin) 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 recognizes 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
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.
At June 30, 1996, the Fund had outstanding futures contracts to sell debt
securities as follows:
<TABLE>
<CAPTION>
Number of Valuation as of Unrealized
Expiration Date Futures Contracts June 30, 1996 Depreciation
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Nts. 9/96 6 $634,500 $6,750
</TABLE>
7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered
call options on portfolio securities in order to produce incremental
earnings or protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to
sell or purchase the underlying security at a fixed price, upon exercise of
the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is
exercised, the proceeds on sales for a written call option, the purchase
cost for a written put option, or the cost of the security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and market value are
detailed in a footnote to the Statement of Investments. Options written are
reported as a liability in the Statement of Assets and Liabilities. Gains
and losses are reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the opportunity
for profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a
loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium
whether or not the option is exercised. The Fund also has the additional
risk of not being able to enter into a closing transaction if a liquid
secondary market does not exist. The Fund may also write over-the-counter
options where the completion of the obligation is dependent upon the credit
standing of the counterparty.
<PAGE>
Oppenheimer Variable Account Funds -- Oppenheimer Strategic Bond Fund
Notes to Financial Statements (Continued)
Written option activity for the six months ended June 30, 1996 was as
follows:
<TABLE>
<CAPTION>
CALL OPTIONS
---------------------------------------
Number of Amount of
Options Premiums
---------------- ---------------------
<S> <C> <C>
Options outstanding at December 31, 1995 1,000 $ 14,299
Options written 4,625,262 66,992
Options canceled to closing transactions (1,150) (16,925)
Options expired prior to exercise (1,616,402) (21,688)
Options exercised (1,178,560) (8,226)
----------------- --------------------
Options outstanding at June 30, 1996 1,830,150 $ 34,452
----------------- --------------------
</TABLE>
8. ILLIQUID AND RESTRICTED SECURITIES
At June 30, 1996, investments in securities included issues that are
illiquid or restricted. The 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 Trustees as reflecting fair value. A security may also be considered
illiquid if its valuation has not changed for a cerrtain period of time. The
Fund intends to invest no more than 10% of its net assets (determined at the
time of purchase and reviewed from time to time) in illiquid or restricted
securities. The aggregate value of illiquid or restricted securities subject to
this 10% limitation at June 30, 1996 was $2,512,959 which represents 3.20% of
the Fund's net assets. Information concerning these securities is as follows:
<TABLE>
<CAPTION>
Valuation Per Unit
Acquisition Cost as of
Security Date Per Unit June 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Algeria (Republic of) Reprofiled Debt Loan Participation,
Tranche A, 6.812% 9/4/06 3/13/96-3/21/96 $ 55.04 $ 59.69
Colombia (Republic of) 1989-1990 Integrated Loan Facility
Bonds, 6.563%, 7/1/01 12/5/95 $ 92.00 $ 93.25
Gillett Holdings, Inc. Common Stock 1/18/96 $ 21.25 $ 30.00
Goldman, Sachs & Co., Argentina Local Market Securities
Trust, 11.30%, 4/1/00 8/24/94 $100.00 $ 92.75
Jamaica (Government of) 1990 Refinancing Agreement Nts.:
Tranche A, 6.344%, 10/16/00 6/15/95 $ 89.75 $ 95.75
Tranche B, 6.312%, 11/15/04 5/8/96 $ 75.88 $ 78.25
Pulsar International SA de CV, 11.80% Nts., 9/19/96 9/15/95 $100.00 $100.50
Transpower Finance Ltd., 8% Gtd. Unsec. Unsub. Bonds, 2/15/01 5/17/96 $ 66.17 $ 64.76
Trinidad & Tobago Loan Participation Agreement, Tranche A,
1.772%, 9/30/00 12/13/95-12/18/95 $ 0.84 $ 0.78
United Mexican States, Combined Facitity 3, Loan
Participation Agreement, Tranche A, 6.563%, 9/20/97 10/25/94 $ 89.00 $ 83.50
</TABLE>
Pursuant to guidelines adopted by the Board of Trustees, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above.
